Vancouver- Taseko Mines (TKO-T, TGB-A) is eyeing a sharp increase in metal production at its flagship Gibraltar mine in British Columbia next year, but warned that its expansion plans good could be affected by global tire shortages.
The pledge came after the Vancouver company reported a profit of $32.9 million or 29 cents for the fiscal year ended Sept. 30, 2006, up from $23.3 million or 23 cents a year earlier.
Taseko said it expects the Gibraltar mine to produce 60-70 million pounds of copper in fiscal 2007, an increase of 20% to 40% from 49 million last year.
It attributed the expected rise to a combination of factors, including improved ore grades, increased mill throughput and additional cathode copper output from a rehabilitated SX/EW plant.
The higher ore grades and mill throughput will also drive Molybdenum production to one million pounds this year, an increase from 821,000 pounds in 2006, the company said.
However, during a conference call with analysts Dec. 19, Taseko chief executive officer Russell Hallbauer described the production forecast as “broad brush guidance.”
“This will provide investors with a little more comfort,” he said.
Like other resource extraction firms, Taseko is being impacted by a strike involving 15,000 Canadian and U.S. employees of Goodyear Tire & Rubber Co., which has further restricted the availability of tires for use on its ore haulage trucks.
Taseko has a fleet of 11 haulage trucks, which it uses to transport ore to the concentrator at Gibraltar. It uses between four and eight trucks at any one time.
Due to the lack of tire supply, tons mined at Gibraltar were lower in the fourth quarter of fiscal 2006, compared to the previous year.
As it waits for the two and a half month-old strike to end, Taseko is resigned to the fact that the shortage of tires my continue for at least another couple of years, a company spokesman said.
Meanwhile, Gibraltar will try to extend the life of its existing inventory of tires through a series of possible measures.
They include securing other sources of tires, purchasing lightweight truck boxes, and construction of an in-pit crusher and conveyor system capable of moving some of the ore that is currently transported by truck to the concentrator..
Taseko said it has $90 million in cash on hand and may try to lock in a guaranteed price for its copper production by hedging some of its output on the forward markets.
“We would love to hedge above US$3 a pound,” said Taseko chief financial officer Jeffrey Mason. However, he said the company will likely wait another month before making any final decision on whether or not to adopt a hedging strategy.
Taseko shares rose 35 cents to $3.25 in Toronto, Dec. 19.
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