Taseko grows Gibraltar reserves

Vancouver – On the heels of a second expansion at the Gibraltar copper-molybdenum mine in central British Columbia, Taseko Mines (TKO-T) has boosted Gibraltar’s reserves by almost 30%.

Taseko has spent $250 million on Gibraltar over the last 24 months. Most of that investment went into a two-stage expansion that took the mill’s processing capacity from 30,000 to 55,000 tons daily. But during the expansion the company also conducted a 129-hole drill program and a new reserve estimate confirms that Gibraltar’s ore extends across a newly-acquiring piece of ground.

The Oakmont ground carries the Gibraltar extension, which has added 28% to the mine’s proven and probable reserves. Specifically, the Extension hosts 75.4 million proven tons grading 0.352% copper and 0.002% molybdenum plus 29.3 million probable tons grading 0.304% copper and 0.002% moly. The new tonnage brings Gibraltar’s total reserves to 472.4 million tons grading 0.315% copper and 0.008% molybdenum.

The reserves increase adds some 640 million lbs. of recoverable copper to Gibraltar’s reserve base of 2.1 billion lbs. The new reserves also extend Gibraltar’s mine life to 2035; if the reserves are mined out the now-separate pits grow into each other, creating an S-bend pit that would be one of the largest open pit copper mines in Canada.

The grades are not high but over the last two years Taseko has made Gibraltar into a mine designed for large tonnages at low grades. In the first phase of expansion, which was completed in the summer, the company installed a 34-foot diameter SAG mill and replaced 96 small flotation cells with ten large cells, to increase daily capacity to 46,000 tons.  In Phase Two, which should be complete by February, mill throughput is boosted to 55,000 tons daily by virtue of expanded and modernized regrind, cleaner flotation, and concentrate circuits.

Taseko managed the expansions without incurring any long-term debt. The mine should now remain a viable and profitable operation at copper prices as low as US$1.50 per lb. And in a time when low copper prices are forcing mine closures around the world, Taseko is happy to have upgraded Gibraltar when it did.

“With our newly-optimized mining plans, our access to efficient rail and port facilities combined with a skilled and motivated work force…we anticipate Gibraltar remaining operational during this period of financial turmoil and weakened copper prices,” said Taskeo president and CEO Russell Halbauer in a statement.

The downside of the upgrades for employees, however, is that the more-efficient mill now requires fewer people to run it. In mid-November the company announced plans to lay off 75 employees at Gibraltar. Some of those were people brought on during the now-complete expansion.

Taseko is trying to develop another major employer for the area – the company has already invested some $90 million on engineering, feasibility, and environmental studies for its Prosperity copper-gold project. While Gibraltar is 50 km north of Williams Lake, Prosperity sits some 140 km southwest of the city.

Gibraltar is currently awaiting the results of Prosperity’s environmental assessment. The federal and provincial environmental assessment offices decided in October that they would together conduct one environmental assessment for Prosperity. Results from that process are expected by October 2009. The biggest questions surround Taseko’s plan to use a lake for tailings; the company proposes digging an artificial lake just upstream to replace the one that will disappear.

Taseko’s feasibility study gave Prosperity a green light using US$1.50 per lb. copper and US$575 per oz. gold. To develop property would require just over $800 million, which is paid back in six years via a 12% internal rate of return. Prosperity is home to 487 million tons grading 0.43 gram gold per tonne and 0.22% copper, as proven and probable reserves.

In its 2008 financial statement, for the 12 months until the end of September, Taseko reported an operating profit of $68.5 million and net earnings of $43.2 million. The company sold 59.1 million lbs. copper over the year at an average price of US$3.42 per lb. as well as 661,000 lbs. molybdenum for an average price of US$33.04 per lb.

The copper production total for 2008 was 12% better than that for 2007; the increase can be attributed to Gibraltar’s expansion to 42,000 tons per day coming on line for the final three months of the year. Unfortunately, margins decreased during that time because of the strong Canadian dollar and expansion expenditures.

In the two days following news of the Gibraltar reserve expansion Taseko’s share price climbed 10¢ to 94¢. The company has a 52-week trading range of 69¢ to $6.31 and has 144 million shares issued.