EX-99.1 2 exhibit99-1.htm CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Taseko Mines Limited: Exhibit 99.1 - Filed by newsfilecorp.com


Condensed Consolidated Interim Financial Statements
March 31, 2012
(unaudited)

TASEKO MINES LIMITED
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)

          Three months ended March 31,  
(Cdn$ in thousands, except per share amounts)   Note     2012     2011  
                   
Revenues   3   $  55,353   $  58,801  
Cost of sales   4     (38,231 )   (33,575 )
Gross profit         17,122     25,226  
                   
General and administrative         (5,384 )   (6,622 )
Exploration and evaluation         (4,319 )   (372 )
Other operating expenses   5     (16,991 )   (727 )
          (9,572 )   17,505  
                   
Finance expenses   6     (4,373 )   (4,180 )
Finance income   7     3,869     (133 )
Earnings (loss) before income taxes         (10,076 )   13,192  
                   
Income tax recovery (expense)   8     1,732     (7,439 )
Net earnings (loss) for the period       $  (8,344 ) $  5,753  
                   
Other comprehensive income (loss):                  
   Unrealized gains (losses) on available-for-sale financial assets, net of tax       (1,135 )   4,957  
   Realized gains on available-for-sale financial assets, net of tax       (205 )   -  
Total other comprehensive income (loss) for the period       $  (1,340 ) $  4,957  
                   
Total comprehensive income (loss) for the period       $  (9,684 ) $  10,710  
                   
Earnings (loss) per share                  
Basic       $  (0.04 ) $  0.03  
Diluted       $  (0.04 ) $  0.03  
                   
Weighted-average shares outstanding (thousands)                  
Basic         196,029     188,319  
Diluted         199,905     201,951  

The accompanying notes are an integral part of these consolidated financial statements.

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TASEKO MINES LIMITED
Consolidated Statements of Cash Flows
(unaudited)

          Three months ended March 31,  
(Cdn$ in thousands)   Note     2012     2011  
                   
Operating activities                  
Net earnings (loss) for the period     $ (8,344 ) $  5,753  
 Adjustments for:                  
     Depreciation         3,863     2,594  
     Income tax (recovery) expense   8     (1,732 )   7,439  
     Income tax paid         (955 )   (24,390 )
     Share-based compensation         2,202     3,741  
     Unrealized loss (gain) on derivatives   5     15,484     (3,180 )
     Finance expenses         1,273     4,913  
     Finance income         (4,297 )   (610 )
     Other operating activities   16     1,755     4,051  
 Net change in non-cash working capital   16     42,706     (3,328 )
Cash provided by (used for) operating activities         51,955     (3,017 )
                   
Investing activities                  
 Purchase of property, plant and equipment         (41,472 )   (6,799 )
 Investment in financial assets         -     (9,082 )
 Interest received         2,103     610  
 Proceeds from sale of property, plant and equipment         170     -  
 Proceeds from financial assets         42,236     -  
 Other investing activities   16     (280 )   (675 )
Cash provided by (used for) investing activities         2,757     (15,946 )
                   
Financing activities                  
 Repayment of debt         (3,374 )   (2,551 )
 Interest paid         (1,596 )   (637 )
 Common shares issued for cash         507     6,913  
 Repurchase of common shares   14b     (7,538 )   -  
Cash (used for) provided by financing activities         (12,001 )   3,725  
                   
Effect of exchange rate changes on cash and equivalents         (2,196 )   (3,498 )
Increase (decrease) in cash and equivalents         40,515     (18,736 )
Cash and equivalents, beginning of period         277,792     211,793  
Cash and equivalents, end of period     $ 318,307   $  193,057  

The accompanying notes are an integral part of these consolidated financial statements.

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TASEKO MINES LIMITED
Consolidated Balance Sheets
(unaudited)

          March 31,     December 31,  
(Cdn$ in thousands)   Note     2012     2011  
                   
ASSETS                  
Current assets                  
 Cash and equivalents     $ 318,307   $  277,792  
 Accounts receivable         11,499     39,909  
 Other financial assets   9     18,748     86,147  
 Inventories   10     32,510     23,290  
 Current tax receivable         4,321     7,437  
 Prepaids         1,745     2,348  
          387,130     436,923  
                   
Other financial assets   9     109,994     111,641  
Property, plant and equipment   11     471,782     440,565  
Intangible assets         5,438     5,438  
Prepaids         44     165  
      $ 974,388   $  994,732  
                   
LIABILITIES                  
Current liabilities                  
 Accounts payable and accrued liabilities     $ 59,906   $  36,289  
 Current portion of long-term debt   13     14,640     13,753  
 Other financial liabilities   12     3,344     10,797  
 Deferred revenue - royalty obligation         175     175  
          78,065     61,014  
                   
Long-term debt   13     218,686     218,502  
Other financial liabilities   12     43,673     45,980  
Provision for environmental rehabilitation         81,300     96,022  
Deferred tax liabilities         70,097     76,091  
Deferred revenue - royalty obligation         263     306  
          492,084     497,915  
                   
EQUITY                  
Share capital   14     375,221     378,393  
Contributed surplus         34,930     33,040  
Accumulated other comprehensive income (loss) ("AOCI")         (2,738 )   (1,398 )
Retained earnings         74,891     86,782  
          482,304     496,817  
      $ 974,388   $  994,732  
                   
Commitments and contingencies   15              

The accompanying notes are an integral part of these consolidated financial statements.

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TASEKO MINES LIMITED
Consolidated Statements of Changes in Equity
(unaudited)

                            Retained        
          Share     Contributed           earnings        
(Cdn$ in thousands)   Note     capital     surplus     AOCI     (deficit)     Total  
                                     
Balance at January 1, 2011     $  365,553   $  26,193   $  6,249   $  62,747   $  460,742  
Exercise of options         2,259     (905 )   –     –     1,354  
Shares issued         5,673     –     –     –     5,673  
Share-based compensation         –     3,741     –     –     3,741  
Total comprehensive income for the period       –     –     4,957     5,753     10,710  
Balance at March 31, 2011       $ 373,485   $  29,029   $  11,206   $  68,500   $  482,220  
                                     
Balance at January 1, 2012     $  378,393   $  33,040   $  (1,398 ) $  86,782   $  496,817  
Exercise of options         819     (312 )   –     –     507  
Share-based compensation         –     2,202     –     –     2,202  
Repurchase of common shares   14b     (3,991 )   –     –     (3,547 )   (7,538 )
Total comprehensive income for the period       –     –     (1,340 )   (8,344 )   (9,684 )
Balance at March 31, 2012     $  375,221   $  34,930   $  (2,738 ) $  74,891   $  482,304  

The accompanying notes are an integral part of these consolidated financial statements.

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TASEKO MINES LIMITED
Notes to Consolidated Financial Statements
(Cdn$ in thousands - unaudited)
 

1.          REPORTING ENTITY

Taseko Mines Limited (the Company) is a corporation governed by the British Columbia Business Corporations Act. The consolidated financial statements of the Company as at and for the period ended March 31, 2012 comprise the Company, its subsidiaries and its 75% interest in the Gibraltar joint venture. The Company is principally engaged in the production and sale of metals, as well as related activities including exploration and mine development, within the province of British Columbia. Seasonality does not have a significant impact on the Company’s operations.

2.          SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting and follow the same accounting policies and methods of application as the Company’s most recent annual financial statements. These condensed consolidated interim financial statements do not include all of the information required for full consolidated annual financial statements and should be read in conjunction with the financial statements of the Company as at and for the year ended December 31, 2011 prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

These condensed interim consolidated financial statements were authorized for issue by the Board of Directors on May 8, 2012.

(b) Changes in estimates

During the quarter the Company updated certain cost estimates and other assumptions used in the valuation of the provision for environmental rehabilitation (PER) for new information that was available. In the three-month period ended March 31, 2012, the Company recorded a $15,311 decrease for changes in estimate of the PER. This adjustment was recorded with a corresponding adjustment to property, plant and equipment.

3.          REVENUE

    Three months ended March 31,  
    2012     2011  
Copper concentrate $  49,241   $  52,434  
Copper cathode   72     1,423  
    49,313     53,857  
Molybdenum concentrate   5,290     4,066  
Silver contained in copper concentrate   750     878  
  $  55,353   $  58,801  

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TASEKO MINES LIMITED
Notes to Consolidated Financial Statements
(Cdn$ in thousands - unaudited)
 

4.          COST OF SALES

    Three months ended March 31,  
    2012     2011  
Direct mining costs $  37,249   $  29,631  
Depreciation   3,696     2,400  
Treatment and refining costs   2,761     2,552  
Transportation costs   3,134     2,766  
Changes in inventories of finished goods and work in process   (8,609 )   (3,774 )
  $  38,231   $  33,575  

5.          OTHER OPERATING EXPENSES

    Three months ended March 31,  
    2012     2011  
Realized loss on copper derivative instruments $  1,689   $  4,095  
Unrealized loss (gain) on copper derivative instruments   15,484     (3,180 )
Loss on sale of property, plant and equipment   73     -  
Management fee income   (255 )   (188 )
  $  16,991   $  727  

6.          FINANCE EXPENSES

    Three months ended March 31,  
    2012     2011  
Interest expense $  3,777   $  955  
Accretion on PER   596     249  
Foreign exchange loss   -     2,976  
  $  4,373   $  4,180  

7.          FINANCE INCOME

    Three months ended March 31,  
    2012     2011  
Interest income $  1,901   $  1,440  
Change in fair value of warrants   -     (529 )
Gain on sale of marketable securities   235     -  
Realized gain (loss) on dual currency deposits   112     (408 )
Unrealized income (loss) on dual currency deposits   171     (636 )
Foreign exchange gain   1,450     -  
  $  3,869   $  (133 )

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TASEKO MINES LIMITED
Notes to Consolidated Financial Statements
(Cdn$ in thousands - unaudited)
 

8.          INCOME TAX

    Three months ended March 31,  
    2012     2011  
Current expense $  4,070   $  4,090  
Deferred expense (recovery)   (5,802 )   3,349  
  $  (1,732 ) $  7,439  

9.          OTHER FINANCIAL ASSETS

    March 31,     December 31,  
    2012     2011  
Current:            
 Dual currency deposits > 3-month term $  -   $  40,602  
 Copper put option contracts   6,421     25,407  
 Marketable securities – available for sale   9,725     11,898  
 Promissory note   2,552     8,190  
 Short-term investments   50     50  
  $  18,748   $  86,147  
Long-term:            
 Capped floating rate notes $  20,086   $  20,055  
 Reclamation deposits   24,810     24,962  
 Promissory note   65,098     66,624  
  $  109,994   $  111,641  

10.        INVENTORIES

    March 31,     December 31,  
    2012     2011  
Work in process $  2,691   $  1,154  
Finished goods            
 Copper concentrate   13,518     6,063  
 Copper cathode   595     179  
 Molybdenum concentrate   133     244  
Materials and supplies   15,573     15,650  
  $  32,510   $  23,290  

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TASEKO MINES LIMITED
Notes to Consolidated Financial Statements
(Cdn$ in thousands - unaudited)
 

11.        PROPERTY, PLANT & EQUIPMENT

    Mineral     Plant and              
    properties1     equipment     CIP3     Total  
Cost                        
At December 31, 2011 $  143,305   $  303,672   $  50,705   $  497,682  
 Additions   24     14     50,162     50,200  
 Capitalized interest   -     -     1,082     1,082  
 Disposals2   (15,311 )   (380 )   -     (15,691 )
 Transfers between categories3   -     10,728     (10,728 )   --  
At March 31, 2012 $  128,018   $  314,034   $  91,221   $  533,273  
Accumulated depreciation and impairments                        
At December 31, 2011 $  17,783   $  39,334   $  -   $  57,117  
 Depreciation   1,095     3,458     -     4,553  
 Disposals   -     (179 )   -     (179 )
At March 31, 2012 $  18,878   $  42,613   $  -   $  61,491  
Carrying amounts                        
At December 31, 2011 $  125,522   $  264,338   $  50,705   $  440,565  
At March 31, 2012 $  109,140   $  271,421   $  91,222   $  471,782  

1 Mineral properties consists of the cost of acquiring and developing mineral properties. Development costs include capitalized stripping costs, capitalized exploration and evaluation costs, capitalized interest, and rehabilitation cost asset.
2. Disposals in mineral properties includes a reduction in the rehabilitation cost asset as a result of changes in estimates during the period.
3. Construction in process (CIP) is transferred to the relevant category of property, plant and equipment once the asset is available for use.

12.        OTHER FINANCIAL LIABILITIES

    March 31,     December 31,  
    2012     2011  
Current:            
 Royalty obligations $  2,552   $  8,190  
 Copper call option contracts   792     2,607  
  $  3,344   $  10,797  
Long-term:            
 Royalty obligations $  42,287   $  44,594  
   Income tax obligations   1,386     1,386  
  $  43,673   $  45,980  

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TASEKO MINES LIMITED
Notes to Consolidated Financial Statements
(Cdn$ in thousands - unaudited)
 

13.        DEBT

    March 31,     December 31,  
    2012     2011  
Current:            
 Capital leases $  8,202   $  6,925  
 Secured equipment loans   6,438     6,828  
  $  14,640   $  13,753  
Long-term:            
 Senior notes $  193,773   $  197,409  
 Capital leases   19,582     14,862  
 Secured equipment loans   5,331     6,231  
  $  218,686   $  218,502  

14.        EQUITY

(a) Share capital

The Company’s authorized share capital consists of an unlimited number of common shares with no par value. As at March 31, 2012, there were 194,600,035 common shares issued and outstanding.

(b) Normal course issuer bid

Effective February 3, 2012, the Company commenced a normal course issuer bid for up to 10 million common shares of the Company. All shares will be purchased on the open market through the facilities of the Toronto Stock Exchange at the market price at the time of purchase. The Company’s normal course issuer bid will terminate on February 2, 2013 or earlier if the number of shares sought in the issuer bid has been obtained. The Company reserves the right to terminate the bid earlier at any time. Purchases under the normal course issuer bid are subject to the restricted payment limitations in the Company’s senior notes indenture.

During the three-month period ended March 31, 2012, a total of 2,069,860 common shares have been repurchased for $7,538.

(c) Share-based compensation

During the first quarter of 2012, the Company granted 2,105,000 share options to executives and directors. These options have an exercise price of $2.65, with a term of 5 years and vest in equal amounts over three years. The weighted-average fair value of the share option issues was estimated at $1.60 per share option.

The Company granted 519,000 share options to employees. These options have an weighted-average exercise price of $2.75, with a term of 3 years and vest in equal amounts over three years. The weighted-average fair value of the share option issues was estimated at $1.23 per share option.

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TASEKO MINES LIMITED
Notes to Consolidated Financial Statements
(Cdn$ in thousands - unaudited)
 

15.        COMMITMENTS AND CONTINGENCIES

(a) Commitments

At March 31, 2012, the capital commitments totaled $37,452 and operating lease commitments totaled $3,836.

(b) Contingencies

The Company has guaranteed 100% of certain debt entered into by the joint venture in which it holds a 75% interest. As at March 31, 2012, this debt totaled $40,927 on a 100% basis. The Company has also guaranteed its share of additional debt totaling $8,858 on 75% basis.

16.        SUPPLEMENTARY CASH FLOW INFORMATION

    Three months ended March 31,  
    2012     2011  
Change in non-cash working capital items            
 Accounts receivable $  28,206   $  5,995  
 Inventories   (9,220 )   (7,395 )
 Accounts payable and accrued liabilities   23,821     (94 )
 Other   (101 )   (1,834 )
  $  42,706   $  (3,328 )
Operating cash flows – other items            
 Realized loss on copper derivative instruments $  1,689   $  4,095  
 Reclamation expenditures   (7 )   (44 )
 Loss on sale of property, plant and equipment   73     -  
  $  1,755   $  4,051  
Investing cash flows – other items            
 Net cash reinvested in reclamation deposit $  (280 ) $  (124 )
 Other   -     (551 )
  $  (280 ) $  (675 )
Non-cash investing and financing activities            
 Assets acquired under capital lease $  8,081   $  682  

17.        FINANCIAL RISK MANAGEMENT

(a) Overview

In the normal course of business, the Company is inherently exposed to market, liquidity and credit risk through its use of financial instruments. The timeframe and manner in which the Company manages these risks varies based upon management’s assessment of the risk and available alternatives for mitigating risk. The Board approves and monitors risk management processes, including treasury policies, counterparty limits, and reporting structures.

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TASEKO MINES LIMITED
Notes to Consolidated Financial Statements
(Cdn$ in thousands - unaudited)
 

(b) Summary of derivatives and financial assets containing embedded derivatives

                Term to        
    Notional amount     Strike price1     maturity     Fair value  
At March 31, 2012                        
Commodity contracts                        
 Copper put option contracts   51.6 million lbs     US$3.50     Q2-Q4 2012   $  6,421  
 Copper call option contracts   51.6 million lbs     US$5.02 to 5.12     Q2-Q4 2012   $  (792 )
Dual currency deposits                        
 USD/CAD (2.92% to 4%)   US$90 million     1.000 to 1.0235     < 3 months   $  89,682  
Capped floating rate notes                        
 3-month BA rate + 25 bps   C$10 million     5.00%     Q4 2013   $  10,034  
 3-month BA rate + 45 bps   C$10 million     5.50%     Q4 2014   $  10,052  
Share purchase warrants                        
 Publicly-traded company   1 million shares   $1.20     Q2 2012     -  

1. For the floating rate notes, this value represents the cap level for the coupon rate.

18.        RELATED PARTIES

    Transaction value for three     Due to (from) related parties  
    months ended March 31,     as at March 31,  
    2012     2011     2012     2011  
Hunter Dickinson Services Inc.:                        
 General and administrative expenses $  391   $  495              
 Exploration and evaluation expenses   155     158              
 Prepaid rent   -     995              
  $  546   $  1,648   $  89   $  157  
Gibraltar joint venture:                        
 Other operating income $  255   $  188              
 Reimburseable compensation expenses   33     42              
  $  288   $  230   $  (37 ) $  1,680  

Hunter Dickinson Services Inc. (HDSI) employs some members of the executive management of the Company and invoices the Company for their executive services as well as other services.

Under the terms of the joint venture operating agreement, the Gibraltar joint venture pays the Company a management fee for services rendered by the Company as operator of the Gibraltar mine. In addition, the Company pays compensation expenses for certain individuals providing services to the Gibraltar joint venture and invoices the joint venture for these expenses.

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