EX-99.1 2 exhibit99-1.htm INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2012 Taseko Mines Limited: Exhibit 99.1 - Filed by newsfilecorp.com


Condensed Consolidated Interim Financial Statements
September 30, 2012
(unaudited)


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

          Three months ended     Nine months ended  
(Cdn$ in thousands,         September 30,     September 30,  
except per share amounts)   Note     2012     2011     2012     2011  
                               
Revenues   3   $  60,999   $  84,204   $  190,729   $  191,354  
Cost of sales   4     (49,259 )   (59,030 )   (145,856 )   (124,330 )
Gross profit         11,740     25,174     44,873     67,024  
                               
General and administrative         (3,695 )   (4,233 )   (13,103 )   (15,723 )
Exploration and evaluation         (6,789 )   (5,909 )   (15,970 )   (7,747 )
Other operating income (expenses)   5     (8,947 )   42,645     (25,118 )   30,884  
Loss on contribution to joint venture         -     (183 )   -     (3,987 )
          (7,691 )   57,494     (9,318 )   70,451  
                               
Finance expenses   6     (3,217 )   (5,479 )   (11,481 )   (11,372 )
Finance income   7     3,316     2,216     10,083     10,539  
Foreign exchange gain (loss)         469     (5,479 )   435     (9,666 )
Earnings (loss) before income taxes         (7,123 )   48,752     (10,281 )   59,952  
                               
Income tax recovery (expense)   8     3,272     (18,724 )   1,401     (25,284 )
Net earnings (loss) for the period       $  (3,851 ) $  30,028   $  (8,880 ) $  34,668  
                               
Other comprehensive income (loss):                              
    Unrealized gains (losses) on available-for-sale financial assets, net of tax       (218 )   (2,974 )   274     (918 )
    Realized gains on available-for-sale financial assets, net of tax         -     -     (767 )   (5,246 )
                               
Total other comprehensive loss for the period       $  (218 ) $  (2,974 ) $  (493 ) $  (6,164 )
                               
Total comprehensive income (loss) for the period   $  (4,069 ) $  27,054   $  (9,373 ) $  28,504  
                               
Earnings (loss) per share                              
   Basic       $  (0.02 ) $  0.15   $  (0.05 ) $  0.18  
   Diluted       $  (0.02 ) $  0.15   $  (0.05 ) $  0.18  
                               
Weighted average shares outstanding (thousands)                          
   Basic         190,882     195,349     193,240     192,351  
   Diluted         194,188     200,993     196,547     197,995  

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


TASEKO MINES LIMITED
Consolidated Statements of Cash Flows
(unaudited)

          Three months ended     Nine months ended  
          September 30,     September 30,  
(Cdn$ in thousands)   Note     2012     2011     2012     2011  
                               
Operating activities                              
Net earnings (loss) for the period     $ (3,851 ) $  30,028   $  (8,880 ) $  34,668  
   Adjustments for:                              
       Depreciation         5,109     4,804     13,950     10,458  
       Income tax expense (recovery)   8     (3,272 )   18,724     (1,401 )   25,284  
       Income tax paid         (450 )   (8,675 )   (1,855 )   (33,485 )
       Income tax received         -     -     5,402     -  
       Share-based compensation         807     1,451     3,787     6,651  
       Unrealized loss (gain) on derivatives   5     8,468     (48,320 )   22,482     (44,873 )
       Finance expenses         (2,260 )   2,916     11,967     10,757  
       Finance income         (246 )   (1,212 )   (9,992 )   (16,509 )
       Unrealized foreign exchange loss (gain)         (1,448 )   (2,638 )   (1,222 )   3,721  
       Other operating activities   16     565     1,113     3,373     8,304  
   Net change in non-cash working capital   16     26,676     (5,393 )   28,261     (2,422 )
Cash provided by (used for) operating activities         30,098     (7,202 )   65,872     2,554  
                               
Investing activities                              
   Purchase of property, plant and equipment         (56,892 )   (16,313 )   (129,900 )   (34,973 )
   Investment in financial assets         (5,255 )   (73,728 )   (22,627 )   (212,829 )
   Interest received         249     1,495     1,102     4,117  
   Proceeds from financial assets         904     89,232     54,377     100,884  
   Proceeds from sale of property, plant and                              
     equipment         76     -     203     -  
   Other investing activities   16     (320 )   (400 )   (1,145 )   (595 )
Cash used for investing activities         (61,238 )   286     (97,990 )   (143,396 )
                               
Financing activities                              
   Repayment of debt         (3,681 )   (2,746 )   (10,507 )   (7,829 )
   Interest paid         (621 )   (526 )   (9,491 )   (1,713 )
   Repurchase of common shares         (4,872 )   -     (20,897 )   -  
   Common shares issued for cash         326     151     1,182     7,347  
   Proceeds from debt issuance         -     -     -     192,020  
   Debt issuance cost         -     -     -     (6,052 )
Cash provided by (used for) financing activities         (8,848 )   (3,121 )   (39,713 )   183,773  
                               
Effect of exchange rate changes on                              
 cash and equivalents         (5,204 )   18,861     (5,207 )   13,359  
Increase (decrease) in cash and equivalents         (45,192 )   8,824     (77,038 )   56,290  
Cash and equivalents, beginning of period         245,946     259,259     277,792     211,793  
Cash and equivalents, end of period       $  200,754    $  268,083   $  200,754   $  268,083  

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


TASEKO MINES LIMITED
Consolidated Balance Sheets
(unaudited)

          September 30,      December 31,  
(Cdn$ in thousands)   Note     2012     2011  
                   
ASSETS                  
Current assets                  
 Cash and equivalents                           $  200,754   $  277,792  
 Accounts receivable         30,897     39,909  
 Other financial assets   9     17,051     86,147  
 Inventories   10     29,324     23,290  
 Current tax receivable         –     7,437  
 Prepaids         4,254     2,348  
          282,280     436,923  
                   
Other financial assets   9     117,244     111,641  
Property, plant and equipment   11     575,108     440,565  
Intangible assets         5,438     5,438  
Prepaids         –     165  
                            $  980,070   $  994,732  
                   
LIABILITIES                  
Current liabilities                  
 Accounts payable and accrued liabilities                         $  56,625   $  33,005  
 Current portion of long-term debt   13     15,132     13,753  
 Interest payable         6,985     3,284  
 Current tax payable         864     –  
 Other financial liabilities   12     8,284     10,797  
 Deferred revenue - royalty obligation         175     175  
          88,065     61,014  
                   
Long-term debt   13     217,409     218,502  
Other financial liabilities   12     37,392     45,980  
Provision for environmental rehabilitation         101,295     96,022  
Deferred tax liabilities         64,218     76,091  
Deferred revenue - royalty obligation         175     306  
          508,554     497,915  
                   
EQUITY                  
Share capital   14     367,435     378,393  
Contributed surplus         36,155     33,040  
Accumulated other comprehensive income (loss) ("AOCI")         (1,891 )   (1,398 )
Retained earnings         69,817     86,782  
          471,516     496,817  
                          $  980,070   $  994,732  
                   
Commitments and contingencies   15              
Subsequent events   19              

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


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

          Share     Contributed           Retained        
(Cdn$ in thousands)   Note     capital     surplus     AOCI     earnings     Total  
                                     
Balance at January 1, 2011                     $  365,553   $  26,193   $  6,249   $  60,409   $  458,404  
Exercise of options         2,705     (917 )   –     –     1,788  
Preferred shares redemption         (26,642 )   –     –     (2,939 )   (29,581 )
Shares issued         35,254     –     –     –     35,254  
Share-based compensation         –     6,651     –     –     6,651  
Total comprehensive income for the period       –     –     (6,164 )   34,668     28,504  
Balance at September 30, 2011                       $  376,870   $  31,927   $  85   $  92,138   $  501,020  
                                     
Balance at January 1, 2012                     $  378,393   $  33,040   $  (1,398 ) $  86,782   $  496,817  
Exercise of options         1,854     (672 )   –     –     1,182  
Share-based compensation         –     3,787     –     –     3,787  
Repurchase of common shares   14b     (12,812 )   –     –     (8,085 )   (20,897 )
Total comprehensive income for the period       –     –     (493 )   (8,880 )   (9,373 )
Balance at September 30, 2012                     $  367,435   $  36,155   $  (1,891 ) $  69,817   $  471,516  

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


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 September 30, 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

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 consolidated 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 Audit Committee on October 31, 2012.

3.

REVENUE

    Three months ended     Nine months ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
Copper concentrate $  55,900   $  76,535   $  173,591   $  173,142  
Copper cathode   2,391     3,314     4,268     4,737  
  $  58,291   $  79,849   $  177,859   $  177,879  
Molybdenum concentrate   1,919     3,192     10,473     10,878  
Silver contained in copper concentrate   789     1,163     2,397     2,597  
  $  60,999   $  84,204   $  190,729   $  191,354  

4.

COST OF SALES

    Three months ended     Nine months ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
Direct mining and processing costs $  41,564   $  30,105   $  117,128   $  92,364  
Depreciation   4,946     4,609     13,449     9,945  
Treatment and refining costs   2,940     4,085     9,530     8,659  
Transportation costs   3,421     4,325     10,490     9,708  
Changes in inventories of finished goods and work in process   (3,612 )   15,906     (4,741 )   3,654  
  $  49,259   $  59,030   $  145,856   $  124,330  


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

5.

OTHER OPERATING EXPENSES (INCOME)

    Three months ended     Nine months ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
Realized loss on copper derivative instruments $  784   $  1,820   $  3,378   $  10,509  
Unrealized loss (gain) on copper derivative instruments   8,468     (48,320 )   22,482     (44,873 )
(Gain) loss on sale of property, plant and equipment   (50 )   -     23     -  
Consulting expenses   -     4,043     -     4,043  
Management fee income   (255 )   (188 )   (765 )   (563 )
  $  8,947   $  (42,645 ) $  25,118   $  (30,884 )

6.

FINANCE EXPENSES

    Three months ended     Nine months ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
Interest expense $  2,690   $  4,752   $  9,836   $  9,760  
Accretion on provision for environmental rehabilitation (PER)   527     727     1,645     1,612  
  $  3,217   $  5,479   $  11,481   $  11,372  

7.

FINANCE INCOME

    Three months ended     Nine months ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
Interest income $  1,908   $  1,785   $  5,723   $  4,660  
Realized gain on dual currency deposits   1,365     1,899     3,173     1,284  
Unrealized gain (loss) on dual currency deposits   43     (1,468 )   310     (1,319 )
Dividend income   -     -     -     448  
Change in fair value of warrants   -     -     -     (529 )
Gain on sale of marketable securities   -     -     877     5,995  
  $  3,316   $  2,216   $  10,083   $  10,539  

8.

INCOME TAX

    Three months ended     Nine months ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
Current (recovery) expense $  (2,816 ) $  7,913   $  3,876   $  8,842  
Deferred (recovery) expense   (456 )   10,811     (5,277 )   16,442  
  $  (3,272 ) $  18,724   $  (1,401 ) $  25,284  


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

9.

OTHER FINANCIAL ASSETS

    September 30,     December 31,  
    2012     2011  
Current:            
 Copper put option contracts $  5,854   $  25,407  
 Promissory note   8,213     8,190  
 Marketable securities – available for sale   2,934     11,898  
 Short-term investments   50     50  
 Dual currency deposits > 3-month term   -     40,602  
  $  17,051   $  86,147  
Long-term:            
 Capped floating rate notes $  20,141   $  20,055  
 Subscription receipts 1   10,000     -  
 Reclamation deposits   25,661     24,962  
 Promissory note   61,442     66,624  
  $  117,244   $  111,641  

1 During the second quarter, the Company invested a total of $10,000 in subscription receipts of a private company which holds mineral property interests in a copper-molybdenum project. The subscription receipts will be convertible into units comprised of shares or shares and warrants.

10.

INVENTORIES

    September 30,     December 31,  
    2012     2011  
Work in process $  2,814   $  1,154  
Finished goods:            
 Copper concentrate   8,911     6,063  
 Copper cathode   417     179  
 Molybdenum concentrate   238     244  
Materials and supplies   16,944     15,650  
  $  29,324   $  23,290  


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   30     80     146,487     146,597  
 Capitalized interest   -     -     4,827     4,827  
 Disposals   -     (473 )   -     (473 )
 Rehabilitation cost asset2   3,820     -     -     3,820  
 New Mine Allowance credit   -     (6,526 )   -     (6,526 )
 Transfers between categories3   -     22,405     (22,405 )   -  
At September 30, 2012 $  147,155   $  319,158   $  179,614   $  645,927  
Accumulated depreciation and impairments                        
At December 31, 2011 $  17,783   $  39,334   $  -   $  57,117  
 Depreciation   3,221     10,729     -     13,950  
 Disposals   -     (248 )   -     (248 )
At September 30, 2012 $  21,004   $  49,815   $  -   $  70,819  
Carrying amounts                        
At December 31, 2011 $  125,522   $  264,338   $  50,705   $  440,565  
At September 30, 2012 $  126,151   $  269,343   $  179,614   $  575,108  

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. Represents movements 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

    September 30,     December 31,  
    2012     2011  
Current:            
 Royalty obligations $  8,213   $  8,190  
 Copper call option contracts   71     2,607  
  $  8,284   $  10,797  
Long-term:            
 Royalty obligations $  37,116   $  44,594  
 Income tax obligations   276     1,386  
  $  37,392   $  45,980  


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

13.

DEBT

    September 30,     December 31,  
    2012     2011  
Current:            
 Capital leases $  10,208   $  6,925  
 Secured equipment loans   4,924     6,828  
  $  15,132   $  13,753  
Long-term:            
 Senior notes $  191,478   $  197,409  
 Capital leases   21,411     14,862  
 Secured equipment loans   4,520     6,231  
  $  217,409   $  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 September 30, 2012, there were 190,534,455 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 September 30, 2012, 1,802,340 common shares have been repurchased for $4,872. As at September 30, 2012, a total of 6,644,440 common shares have been repurchased under the normal course issuer bid for $20,897.

15.

COMMITMENTS AND CONTINGENCIES

(a) Commitments

At September 30, 2012, capital commitments totaled $34,224and operating lease commitments totaled $7,269.

(b) Contingencies

The Company has guaranteed the full amount of certain debt entered into by the Gibraltar joint venture in which it holds a 75% interest. As at September 30, 2012, this debt totaled $42,159 on a 100% basis. The Company has also guaranteed its share of additional debt in the Gibraltar joint venture totaling $9,444 on 75% basis.


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

16.

SUPPLEMENTARY CASH FLOW INFORMATION

    Three months ended     Nine months ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
Change in non-cash working capital                        
Accounts receivable $  16,135   $ (12,383 ) $  9,012   $  (14,567 )
Inventories   (4,823 )   17,566     (6,034 )   869  
Prepaids   (2,536 )   (997 )   (1,906 )   (1,606 )
Accounts payable and accrued liabilities   14,246     257     23,619     5,566  
Interest payable   3,697     4,332     3,701     7,447  
Deferred revenue – royalty obligation   (43 )   (43 )   (131 )   (131 )
Deferred revenue – copper   -     (14,125 )   -     -  
  $  26,676   $  (5,393 ) $  28,261   $  (2,422 )
Operating cash flows – other items                        
Realized loss on copper derivative instruments $  784   $  1,820   $  3,378   $  10,509  
(Gain) loss on sale of property, plant and equipment   (50 )   -     23     -  
Reclamation expenditures   (169 )   (886 )   (193 )   (1,915 )
Long-term prepaids   -     179     165     (290 )
  $  565   $  1,113   $  3,373   $  8,304  
Investing cash flows – other items                        
Net cash reinvested in reclamation deposit $  (320 ) $  (400 ) $  (1,105 ) $  (583 )
Other   -     -     (40 )   (12 )
  $  (320 ) $  (400 ) $  (1,145 ) $  (595 )
                         
Non-cash investing and financing activities                        
Assets acquired under capital lease $  1,932   $  6,559   $  16,697   $  7,241  
Interest earned on promissory note $  (1,007 ) $  (1,067 ) $  (3,030 ) $  (3,188 )
Interest expense on royalty obligation $  245   $  284   $  735   $  851  
Royalty obligation settled by promissory note   -     -   $  (8,190 ) $  (7,248 )
Shares issued for preferred shares redemption   -     -     -   $  26,642  

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.


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

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

    Notional amount     Strike price1     Term to maturity     Fair value  
At September 30, 2012                        
Commodity contracts                        
 Copper put option contracts   17.2 million lbs     US$3.50     Q4 2012   $  1,360  
 Copper call option contracts   17.2 million lbs     US$5.02 to 5.12     Q4 2012   $  (71 )
 Copper put option contracts   33.1 million lbs     US$3.00     Q1-Q2 2013   $  2,450  
 Copper put option contracts   26.5 million lbs     US$2.75     Q3-Q4 2013   $  2,044  
Dual currency deposits                        
 USD/CAD (5% to 5.17%)   US$65 million     0.9785 to 0.9930     < 3 months   $  63,805  
Capped floating rate notes                        
 3-month BA rate + 25 bps   C$10 million     5.00%     Q4 2013   $  10,069  
 3-month BA rate + 45 bps   C$10 million     5.50%     Q4 2014   $  10,072  

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

18.

RELATED PARTIES

      Transaction value for the     Transaction value for  
      three months ended     the nine months ended  
      September 30,     September 30  
      2012     2011     2012     2011  
  Hunter Dickinson Services Inc.:                        
   General and administrative expenses $  324   $  526   $  1,218   $  1,432  
   Exploration and evaluation expenses   121     243     398     675  
   Prepaid rent   -     -     -     995  
    $  445   $  769   $  1,616   $  3,102  
  Gibraltar joint venture:                        
   Other operating income (management fee) $  255   $  188   $  765   $  563  
   Reimburseable compensation expenses   19     6     91     77  
    $  274   $  194   $  856   $  640  

    Balance due from (to) as at  
    September 30,     December 31,  
    2012     2011  
Hunter Dickinson Services Inc. $  (81 ) $  (44 )
Gibraltar joint venture   91     241  

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.

19.

SUBSEQUENT EVENTS

Subsequent to period end, the Company entered into purchase obligations totalling $16,385.