6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

As at December 14, 2005

Commission File Number: 001-31965

TASEKO MINES LTD.
(Translation of registrant's name into English)

800 West Pender Street, Suite 1020
Vancouver, British Columbia
Canada V6C 2V6
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

x Form 20-F   ¨ Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ¨ No x

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _________

SUBMITTED HEREWITH

Exhibits

99.1	Annual Financial Statements for the Fiscal Years ended September 30, 2005, 2004, and 2003
99.2	Management's Discussion and Analysis for the Fiscal Year Ended September 30, 2005

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Taseko Mines Ltd.
	(Registrant)
Date: December 14, 2005	By:	/s/ Jeffrey R. Mason
		Jeffrey R. Mason
	Title:	Director Chief Financial Officer and Secretary

EX-99.1

FINANCIAL STATEMENTS

YEARS ENDED

SEPTEMBER 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)

KPMG LLP
Chartered Accountants
PO Box 10426 777 Dunsmuir Street
Vancouver, BC V7Y 1K3
Canada Telephone     (604) 691-3000
Fax                  (604) 691-3031
Internet           www.kpmg.ca

AUDITORS' REPORT TO THE SHAREHOLDERS

We have audited the consolidated balance sheets of Taseko Mines Limited as at September 30, 2005 and 2004 and the consolidated statements of operations, deficit and cash flows for each of the years in the three year period ended September 30, 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at September 30, 2005 and 2004 and the results of its operations and its cash flows for each of the years in the three year period ended September 30, 2005 in accordance with Canadian generally accepted accounting principles.

KPMG LLP (signed)

Chartered Accountants

Vancouver, Canada
December 14, 2005

TASEKO MINES LIMITED

Consolidated Balance Sheets

(Expressed in Canadian Dollars)

		September 30			September 30
		2005			2004
					(restated - note 3(f))
Assets
Current assets
Cash and equivalents (note 3(a))	$	21,728,789		$	14,892,947
Accounts receivable		6,746,378			2,766,184
Advances to related parties (note 14)		–			194,857
Concentrate inventory		16,284,800			–
Supplies inventory		4,589,431			–
Prepaid expenses		1,914,214			210,015
Current portion of future income taxes (note 12)		4,479,000			–
Current portion of promissory note (note 5(f))		2,637,499			–
		58,380,111			18,064,003
Restricted cash (note 5(a))		5,000,000			–
Mineral properties, plant and equipment (note 6)		9,916,992			26,982,979
Assets under capital leases (note 7)		20,794,000			–
Reclamation deposits (note 3(f))		18,281,420			17,647,056
Promissory note (note 5(f))		69,680,355			68,172,380
Future income taxes (note 12)		8,944,000			–
	$	190,996,878		$	130,866,418
Liabilities and Shareholders' Equity
Current liabilities
Operating line of credit (note 9)	$	–		$	1,857,740
Accounts payable and accrued liabilities		12,580,463			14,578,172
Advances from related parties (note 14)		105,067			–
Current portion of vehicle loans (note 9)		214,715			–
Current portion of capital lease obligation (note 8)		2,092,334			–
Current portion of deferred revenue		14,748,000			175,000
Current portion of royalty obligation		2,637,499			–
Income taxes (note 12)		19,645,000			23,744,000
		52,023,078			40,354,912
Vehicle loans (note 9)		181,901			–
Capital lease obligation (note 8)		12,984,805			–
Royalty obligation (note 5(f))		66,153,298			67,357,000
Deferred revenue (note 5(f))		1,400,000			1,575,000
Site closure and reclamation costs (note 11)		17,314,000			15,740,000
		150,057,082			125,026,912
Shareholders' equity
Share capital (note 10)		160,829,442			150,481,429
Convertible debenture (note 10(c))		21,652,703			20,577,225
Tracking preferred shares (note 4)		26,641,948			26,641,948
Contributed surplus (note 10(f))		5,334,614			4,947,588
Deficit		(173,518,911	)		(196,808,684	)
		40,939,796			5,839,506
Nature of operations (note 1)
Commitments (notes 5, 6, 8 and 9)
Subsequent event (note 10(e))
	$	190,996,878		$	130,866,418

See accompanying notes to consolidated financial statements.

Approved by the Board of Directors
/s/ Russell E. Hallbauer	/s/ Jeffrey R. Mason
Russell E. Hallbauer	Jeffrey R. Mason
Director	Director

TASEKO MINES LIMITED

Consolidated Statements of Operations

(Expressed in Canadian Dollars)

		Years ended September 30
		2005			2004			2003
					(restated -			(restated -
					note 3(f))			note 3(f))
Revenue
Copper	$	71,945,925		$	–		$	–
Molybdenum		15,692,375			–			–
		87,638,300			–			–
Cost of sales		(57,799,558	)		–			–
Treatment and transportation		(13,548,560	)		–			–
Amortization		(2,657,165	)		(17,296	)		(42,564	)
		13,633,017			(17,296	)		(42,564	)
Expenses (income)
Accretion of reclamation obligation		1,574,000			1,431,000			1,300,000
Exploration		505,586			4,597,968			2,024,671
Foreign exchange		34,080			–			–
Loss (gain) on sale of equipment		2,160,992			–			(131,638	)
General and administration		2,411,688			2,693,067			1,057,588
Interest and other income		(10,547,609	)		(5,154,209	)		(721,480	)
Interest expense		3,175,353			–			–
Premium paid for acquisition of Gibraltar Reclamation
Trust Limited Partnership		–			5,095,249			–
Refinery project		–			–			500,000
Restart project		6,346,650			14,982,008			–
Stock-based compensation (note 10(d))		1,129,026			5,172,244			65,344
Write down of mineral property acquisition costs (note 5(c))		–			28,810,296			–
		6,789,766			57,627,623			4,094,485
Earnings (loss) before income taxes		6,843,251			(57,644,919	)		(4,137,049	)
Current income tax recovery (expense) (note 12)		4,099,000			(23,744,000	)		–
Future income tax recovery (expense) (note 12)		13,423,000			–			–
Earnings (loss) for the year	$	24,365,251		$	(81,388,919	)	$	(4,137,049	)
Earnings (loss) per share
Earnings (loss) per common share - basic (notes 3(j) and 10)	$	0.23		$	(1.09	)	$	(0.09	)
Earnings (loss) per common share - diluted (notes 3(j) and 10)	$	0.21		$	(1.09	)	$	(0.09	)
Weighted average number of common shares outstanding
Basic		100,021,655			75,113,426			46,984,378
Diluted		110,732,926			75,113,426			46,984,378
Consolidated Statements of Deficit
(Expressed in Canadian Dollars)
		Years ended September 30
		2005			2004			2003
Deficit, beginning of year
As originally reported	$	(202,711,632	)	$	(121,069,356	)	$	(116,670,020	)
Adjustment for asset retirement obligation (note 3(f))		5,902,948			6,627,296			7,253,832
As restated		(196,808,684	)		(114,442,060	)		(109,416,188	)
Earnings (loss) for the year		24,365,251			(81,388,919	)		(4,137,049	)
Accretion expense on convertible debenture		(1,075,478	)		(977,705	)		(888,823	)
Deficit, end of year	$	(173,518,911	)	$	(196,808,684	)	$	(114,442,060	)

See accompanying notes to consolidated financial statements.

TASEKO MINES LIMITED

Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

		Years ended September 30
		2005			2004			2003
					(restated -			(restated -
Cash provided by (used for)					note 3(f))			note 3(f))
Operating activities
Earnings (loss) for the period	$	24,365,251		$	(81,388,919	)	$	(4,137,049	)
Items not involving cash
Loss (gain) on sale of equipment		2,160,992			–			(131,638	)
Amortization and accretion		2,657,165			17,296			42,564
Accretion of reclamation obligation		1,574,000			1,431,000			1,300,000
Stock-based compensation		1,129,026			5,172,244			65,344
Future income taxes		(13,423,000	)		–			–
Write down of mineral property acquisition costs		–			28,810,296			–
Acquisition premium paid for
Gibraltar Engineering Services Limited Partnership		–			–			500,000
Gibraltar Reclamation Trust Limited Partnership		–			5,095,249			–
Shares issued for loan guarantee		–			450,000			–
Shares issued pursuant to farmout agreement		–			935,000			–
Changes in non-cash operating working capital
Accounts receivable		(3,980,194	)		(1,792,899	)		(743,422	)
Inventories		(20,874,231	)		–			–
Prepaids		(1,704,199	)		–			–
Accrued interest income on promissory note		(4,145,474	)		–			–
Accounts payable and accrued liabilities		(1,997,709	)		12,720,432			288,452
Deferred revenue		14,398,000			1,750,000			–
Accrued interest expense on royalty obligation		1,433,797			–			–
Income taxes		(4,099,000	)		23,744,000			–
		(2,505,576	)		(3,056,301	)		(2,815,749	)
Investing activities
Purchase of property, plant and equipment		(8,263,188	)		(26,928,697	)		(135,193	)
Proceeds received on sale of property, plant and equipment		22,067,711			–			160,000
Restricted cash		(5,000,000	)		–			–
Funds advanced on promissory note		–			(68,172,380	)		–
Reclamation deposits		–			(401,311	)		2,500,000
Accrued interest income on reclamation deposits		(634,364	)		(488,471	)		(680,750	)
		8,170,159			(95,990,859	)		1,844,057
Financing activities
Principal repayments under capital lease obligation		(7,273,554	)		–			–
Bank operating loan		(1,857,740	)		(135,656	)		(6,604	)
Vehicle loans		396,616			–			–
Advances from related parties		299,924			29,681			(3,693,706	)
Common shares issued for cash, net of issue costs		9,606,013			27,167,069			4,057,119
Proceeds on sale of royalty		–			67,357,000			–
Advances from Gibraltar Reclamation Trust Limited Partnership		–			17,097,792			–
Advances from Gibraltar Engineering Services Limited Partnership		–			–			3,000,000
		1,171,259			111,515,886			3,356,809
Increase in cash and equivalents		6,835,842			12,468,726			2,385,117
Cash and equivalents, beginning of year		14,892,947			2,424,221			39,104
Cash and equivalents, end of year	$	21,728,789		$	14,892,947		$	2,424,221

Supplementary cash flow disclosures (note 13)

See accompanying notes to consolidated financial statements.

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

1. Nature of operations

Taseko Mines Limited ("Taseko" or the "Company") is a public company incorporated under the laws of the Province of British Columbia. At September 30, 2005, the Company's principal business activities related to the operations of the Gibraltar Copper Mine, and exploration on the Company’s 100% owned Gibraltar-area exploration properties, the Prosperity Gold-Copper Property, and the Harmony Gold Property. The Gibraltar mine and the Prosperity gold property are located in south central British Columbia, Canada, near the City of Williams Lake. The Harmony gold property is located on Graham Island, Queen Charlotte Islands (also known as Haida Gwaii), British Columbia.

The recoverability of the amounts shown for the Gibraltar mine and related plant and equipment and supplies inventory is dependent upon the existence of economically recoverable mineral resources and future profitable production or proceeds from the disposition of the mine. The Company is exploring its Prosperity and Harmony mineral properties and has not yet determined the existence of economically recoverable reserves. The Company’s continuing operations are dependent upon the discovery and existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of its mineral property interests, and upon future profitable production or proceeds from the disposition of its mineral property interests.

2. Basis of presentation and principles of consolidation

These financial statements have been prepared in accordance with Canadian generally accepted accounting principles. These consolidated financial statements include the accounts of Taseko, its wholly-owned subsidiaries, Gibraltar Mines Ltd. (note 5(a)) and 688888 BC Ltd., and its 70% owned subsidiary Cuisson Lake Mines Ltd.

All material intercompany accounts and transactions have been eliminated.

3. Significant accounting policies

(a)	Cash and equivalents
	Cash and equivalents consist of cash and highly liquid investments, having maturity dates of three months or less from the date of acquisition, that are readily convertible to known amounts of cash.
(b)	Revenue recognition
	Revenue from the sales of metal in concentrate is recognized when persuasive evidence of a sales agreement exists, the title and risk is transferred to the customer, collection is reasonably assured, and the price is reasonably determinable. Revenue from the sales of metal may be subject to

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

	adjustment upon final settlement of shipment weights, assays and estimated metal prices. Adjustments to revenue for metal prices are recorded monthly and other adjustments are recorded on final settlement. Cash received in advance of meeting these revenue recognition criteria is recorded as deferred revenue.
(c)	Inventory
	Concentrate inventory is valued at the lower of cost and net realizable value.
	Supplies inventory is valued at the lower of average cost and replacement cost.
(d)	Property, plant and equipment
	Plant and equipment are stated at cost less accumulated amortization. Mining and milling assets are amortized using the units of production method based on tons mined and milled, respectively, divided by the estimated tonnage to be recovered in the mine plan. Amortization for all other assets is calculated using the declining balance method at rates ranging from 10% to 50% per annum.
	Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements which extend the useful life of the asset are capitalized.
	The costs of removing overburden and waste material to access mineral deposits, referred to as "stripping costs", are considered costs of the extracted minerals and recognized as a component of inventory to be recognized in costs of sales in the same period as the revenue from the sale of the inventory.
(e)	Mineral property interests
	The Company capitalizes mineral property acquisition costs on a property-by-property basis. Exploration expenditures and option payments incurred prior to the determination of the feasibility of mining operations are charged to operations as incurred. Development expenditures incurred subsequent to such determination, to increase production, or to extend the life of existing production are capitalized, except as noted below. Such acquisition costs and deferred development expenditures are amortized over the estimated life of the property, or written off to operations if the property is abandoned, allowed to lapse, or if there is little prospect of further work being carried out by the Company or its option or joint venture partners.
	All costs incurred by the Company during the standby care and maintenance period and restart at the Gibraltar mine were expensed as incurred, net of revenues earned during such period.
	Mineral property acquisition costs include the cash consideration and the fair market value of common shares, based on the trading price of the shares at the agreement and announcement date, issued for mineral property interests, pursuant to the terms of the relevant agreement. Payments

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

	relating to a property acquired under an option or joint venture agreement, where such payments are made at the sole discretion of the Company, are recorded in the accounts upon payment.
	Costs related to feasibility work and the development of processing technology are expensed as incurred. Costs incurred subsequent to the determination of the feasibility of the processing technology will be capitalized and amortized over the life of the related plant.
	Administrative expenditures are expensed as incurred.
	The amount presented for mineral property interests represents costs incurred to date and accumulated acquisition costs, less write-downs, and does not necessarily reflect present or future values.
(f)	Site closure and reclamation costs
	Effective October 1, 2004, the Company adopted the CICA’s Handbook Section 3110, "Asset Retirement Obligations" ("HB 3110"). HB 3110 requires the recognition of any statutory, contractual or other legal obligation related to the retirement of tangible long-lived assets when such obligations are incurred, if a reasonable estimate of fair value can be made.
	These obligations are measured initially at fair value and the resulting costs are capitalized to the carrying value of the related asset. In subsequent periods, the liability is adjusted for the accretion of the discount and any changes in the amount or timing of the underlying future cash flows. The asset retirement cost is amortized to operations over the life of the asset. Changes resulting from revisions to the timing or the amount of the original estimate of undiscounted cash flows are recognized as an increase or a decrease in the carrying amount of the liability, and the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset.
	The Company adopted HB 3110 retroactively, with restatement of prior periods presented. Adoption of HB 3110 resulted in a decrease in supplies inventory of $2,277,397, a decrease in property, plant and equipment of $8,779,655, a decrease in provision for site closure and reclamation of $16,960,000 and a decrease in opening deficit of $5,902,948 as of October 1, 2004. Net loss for the years ended September 30, 2004 and 2003 has been increased by $724,348 and $626,536 respectively.
	At September 30, 2005, the Company had cash reclamation deposits totalling $18,281,420 (2004 – $17,647,056) comprised of $18,091,078 (2004 – $17,456,714) for the Gibraltar mine, $15,342 (2004 – $15,342) for the Prosperity project, and $175,000 (2004 – $175,000) for the Harmony project.

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

(g)	Impairment of long-lived assets
	Long-lived assets, including mineral property, plant and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount and the fair value less costs to sell, and are no longer amortized.
(h)	Share capital
	The Company records proceeds from share issuances net of issue costs. Shares issued for consideration other than cash are valued at the quoted market price on the date the agreement to issue shares was reached.
	The proceeds, net of issue costs, from common shares issued pursuant to flow-through share financing agreements are credited to share capital and the tax benefits of these exploration expenditures are transferred to the purchaser of the shares.
(i)	Stock-based compensation
	The Company has a share option plan which is described in note 10(d). The Company records all stock-based payments granted on or after October 1, 2002 using the fair value method.
	Under the fair value method, stock-based payments are measured at the fair value of the consideration received or the fair value of the equity instruments issued or liabilities incurred, whichever is more reliably measurable, and are charged to operations over the vesting period. The offset is credited to contributed surplus.
	Consideration received on the exercise of stock options is recorded as share capital and the related contributed surplus is transferred to share capital.
(j)	Income taxes
	The Company uses the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are computed based on differences between the carrying amounts of assets and liabilities on the balance sheet and their corresponding tax values, generally using the substantively enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Future income tax assets also result from unused loss carry forwards, resource-related pools, and other deductions. Future tax assets are recognized to the extent that they are considered more likely

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

	than not to be realized. The valuation of future income tax assets is adjusted, if necessary, by the use of a valuation allowance to reflect the estimated realizable amount.
(k)	Earnings per common share
	Basic earnings (loss) per common share is based on the weighted average number of common shares outstanding during the period.
	Diluted earnings (loss) per share is calculated using the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding used for the calculation of diluted earnings per share includes the underlying common shares to the tracking preferred shares and convertible debenture on an if-converted basis and assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period.
	In periods of loss, under the treasury stock method, the basic and diluted loss per share are the same as the effect of common shares issuable upon the exercise of warrants, and stock options of the Company would be the same.
	Earnings (loss) per common share reflects the accretion expense on convertible debentures of $1,075,478 (2004 – $977,705; 2003 – $888,823), which is charged directly to deficit.
(l)	Variable interest entities
	Effective October 1, 2004, the Company adopted the Canadian Institute of Chartered Accountants ("CICA") Accounting Guideline 15, "Consolidation of Variable Interest Entities" ("AcG15") on a prospective basis. AcG15 prescribes the application of consolidation principles for entities that meet the definition of a variable interest entity ("VIE"). An enterprise holding other than a voting interest in a VIE could, subject to certain conditions, be required to consolidate the VIE if it is considered its primary beneficiary whereby it would absorb the majority of the VIE’s expected losses, receive the majority of its expected residual returns, or both. The adoption of this new standard had no effect on the consolidated financial statements as management has concluded the Company does not have any VIE’s.
(m)	Fair value of financial instruments
	The carrying amounts of cash and equivalents, accounts receivable, prepaid expenses, reclamation deposits, bank operating loan, and accounts payable and accrued liabilities approximate their fair values due to their short term nature.
	At September 30, 2005, the carrying values of the promissory note, capital lease obligations, restricted cash, vehicle loans, and the royalty obligation approximate their fair values.

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

	The fair values of the convertible debenture and the tracking preferred shares are not readily determinable with sufficient reliability due to the difficulty in obtaining appropriate market information. It is not practicable to determine the fair values of the advances due to/from related parties because of the related party nature of such amounts and the absence of a secondary market for such instruments. Details of the terms of these financial instruments are disclosed in these notes to the financial statements.
(n)	Use of estimates
	The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting year. Significant areas requiring the use of management estimates relate to the impairment of mineral property interests and plant and equipment, the balances of reclamation liability and capital lease obligation, income taxes, valuation allowances for future income tax assets, rates for amortization, the assumptions used in computing stock-based compensation, the fair value of the option to convert the debenture into common shares and future cash flows related thereto, receivables from sales of concentrate and valuation of concentrate inventory, and the determination of mineral reserves and mine life. Actual results could differ from these estimates.
(o)	Segment disclosures
	The Company operates in a single reportable operating segment, the exploration, development and operation of mineral property interests, within the geographic area of British Columbia, Canada.
(p)	Comparative figures
	Certain of the prior years' comparative figures have been restated to conform with the presentation adopted for the current year.

4. Arrangement agreement (tracking preferred shares and Harmony Gold Property)

In October 2001, the Company and its subsidiary Gibraltar Mines Ltd. ("Gibraltar") completed the acquisition of the Harmony Gold Property and related assets from Continental Minerals Corporation ("Continental"), a British Columbia company with certain directors in common with Taseko, for 12,483,916 series "A" non-voting tracking preferred shares of Gibraltar and $2.23 million cash. The tracking preferred shares are designed to track and capture the value of the Harmony Gold Property and will be redeemed for common shares of Taseko upon a realization event, such as a sale of the Harmony Gold Property to a third party or commercial production at the Harmony Gold Property, or at the option of Gibraltar, if a realization event has

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

not occurred within ten years. Accordingly, the tracking preferred shares have been classified within shareholders’ equity on the consolidated balance sheet.

As this acquisition was a related party transaction not in the normal course of business and did not result in the culmination of an earnings process, the acquisition was recorded by the Company at the net book value of the assets transferred, net of cash consideration, as follows:

Assets acquired		Amount
Property and equipment	$	8,488
Reclamation deposit		175,000
Mineral property interests		28,811,296
	$	28,994,784
Consideration given
Cash	$	2,230,000
12,483,916 tracking preferred shares of Gibraltar		26,641,948
114,800 common shares of the Company to a dissenting shareholder		122,836
	$	28,994,784

As previously noted, the Gibraltar tracking preferred shares are redeemable for common shares of Taseko upon the occurrence of certain value realization events for the Harmony Gold Property. The tracking preferred shares are redeemable at specified prices per common share of Taseko starting at $3.39 and escalating by $0.25 per year, currently at $4.64 (as of September 30, 2005). If a realization event does not occur on or before October 16, 2011, Gibraltar has the right to redeem the tracking preferred shares for Taseko common shares at a deemed price equal to the greater of the then average 20 day trading price of the common shares of Taseko and $10.00. The Taseko common shares to be issued to Continental upon a realization event will in turn be distributed pro-rata, after adjustment for any taxes, to the holders of redeemable preferred shares of Continental that were issued to Continental shareholders at the time of the Arrangement Agreement.

5. Mineral property interests

		September 30,		September 30,
		2005		2004
Gibraltar Copper Mine (note 5(a))	$	1,000	$	1,000
Prosperity Gold-Copper Property (note 5(b))		1,000		1,000
Harmony Gold Property (note 5(c))		1,000		1,000
	$	3,000	$	3,000

(a)

Gibraltar Copper Mine

In July 1999, the Company acquired a 100% interest in the Gibraltar Copper Mine mineral property, located near Williams Lake, British Columbia, Canada from Boliden Westmin (Canada) Limited ("BWCL") for $3.3 million. The acquisition of the Gibraltar mine, which had been on care and maintenance since 1998, included plant and equipment and supplies inventory of the Gibraltar mine, and $8 million of funds set aside for future reclamation. As part of its 1999 operating permits, the Company had agreed to incur a total of $4 million on reclamation and

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

	environmental programs during the six year period July 1999 to July 2005. The Gibraltar mine final reclamation and closure plan is updated every five years. The most recent reclamation plan and closure report was approved by the British Columbia Ministry of Energy and Mines in 2004. Pursuant to this approved closure plan, the Ministry agreed that the Company had satisfied the $4 million reclamation obligation required under the 1999 operating permits.
	The agreement contained certain indemnification clauses. The $8 million of funds set aside for future reclamation were considered a "Qualified Environmental Trust" for Canadian income tax purposes. During the year ended September 30, 2003, the Government of British Columbia released these funds from the Trust, which resulted in an income inclusion to the Company, and consequently resulted in the Company utilizing $3.57 million of tax pools otherwise available to it. The Company has made claim to BWCL for this estimated tax liability under the indemnification terms of the agreement. No amount has been recognized in these consolidated financial statements related to this claim.
	During fiscal 2001, the Company wrote down the accumulated mineral property interest acquisition costs related to the Gibraltar mine to a nominal amount of $1,000.
	Part of the Gibraltar mine consists of waste rock dumps which the Company has an obligation to reclaim. In November 2002, the Company entered into a Landfill Management Agreement and an associated Partnering Agreement with the Cariboo Regional District ("CRD"), whereby the CRD funded the Company to construct (which the Company completed), operate, manage and maintain, on an ongoing basis, a municipal landfill on certain of the waste rock dumps for the CRD for the life of the landfill, expected to be in excess of 80 years.
	During the year ended September 30, 2004, the Company commenced restart activities and entered into an agreement with Ledcor CMI Ltd. and Ledcor Mining Ltd. (together "Ledcor"), whereby Ledcor would finance certain equipment and commission, restart, and operate the Gibraltar mine. Ledcor’s primary responsibility was the commissioning and the operating of the mine in addition to other aspects of mine operations, including drilling, blasting, loading and hauling of ore and waste as well as the recruitment of personnel and the maintenance of equipment and facilities.
	Pursuant to the agreement, the Company is required to maintain a bank account with a balance of at least $5 million in a "product revenue account", for the purposes of providing a working capital reserve for operations and general administrative costs. The Company granted a general security agreement in favour of Ledcor in the amount of $5.8 million and a second charge on certain mine equipment with an appraised fair value of at least $5.8 million. Under certain circumstances, a fee of up to $7 million (reducing by $250,000 per month, commencing October 2005) is payable upon the termination of the agreement prior to February 1, 2008.
(b)	Prosperity Gold-Copper Property
	The Company owns 100% of the Prosperity Gold-Copper Property, consisting of 196 mineral claims covering the mineral rights for approximately 85 square km in the Clinton Mining Division in south central British Columbia, Canada. The $28.66 million cash and share

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

	consideration to acquire the Prosperity property was written down to a nominal $1,000 value in fiscal 2001, to reflect the extended depressed conditions in the metals markets.
	In May 2005, the Company entered into an option agreement with Amarc Resources Ltd ("Amarc"), a public company with certain directors in common with Taseko, for Amarc to earn a 50% interest in the Wasp and Anvil properties currently held by Taseko, which are located approximately 15 kilometers southeast of the Company's Prosperity project. Amarc will be the operator and can acquire its interest by incurring $150,000 of exploration expenditures over a two year period. To September 30, 2005, Amarc had incurred $nil of eligible exploration expenditures on these properties.
(c)	Harmony Gold Property
	Under the terms of an arrangement agreement (note 4), the Company acquired a 100% interest in the Harmony Gold Property in fiscal 2002.
	The Company does not believe there has been a fundamental change in the nature of the Harmony Gold Property; however, as the Company had not conducted significant exploration or development on the property in the last several years the Harmony Gold Property was written down to a nominal value of $1,000 during the year ended September 30, 2004.
(d)	Acquisition agreements
	Gibraltar Engineering Services Limited Partnership ("GESL Partnership")

In fiscal 2001, Gibraltar Mines Ltd., Gibraltar Engineering Services Limited Partnership (the "GESL Partnership"), and Cominco Engineering Services Ltd. concluded an agreement to jointly complete an evaluation for a potential hydrometallurgical copper refinery at the Gibraltar mine. In December 2001, the GESL Partnership completed a private placement of limited partnership units for aggregate proceeds of $1.85 million to partially fund the evaluation work. In February 2002, the Company issued 4,966,659 Taseko common shares at $0.44 per share to acquire Gibraltar Refinery (2002) Ltd., which had acquired certain of the private placement units of the GESL Partnership. A further $3 million of expenditures were incurred by the GESL Partnership, which were financed by a separate partnership, the GESL Refinery Process ("GRP") Partnership, for a total financing amount of $4.85 million. In December 2002, a general partnership interest in the GRP Partnership was acquired and financed by a third party for $3.0 million.

In April 2003, under a plan of arrangement, the Company issued 7,446,809 Taseko common shares for total consideration of $3.5 million to complete the acquisition of Gibraltar Engineering Services Limited ("GESL"), which had acquired the remaining business of the GESL Partnership.

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

Gibraltar Reclamation Trust Limited Partnership ("GRT Partnership")

In December 2003, the GRT Partnership completed a private placement of limited partnership units for aggregate proceeds of $18.6 million, and entered into a joint venture arrangement with Gibraltar Mines Ltd., with the purpose of restarting the Gibraltar mine with the funds raised. Gibraltar Mines Ltd., as its contribution to the joint venture, was to contribute the use of its mine assets and fund the start-up expenses of the Gibraltar mine, and the GRT Partnership funded a qualifying environmental trust ("QET"), which consequently allowed Gibraltar Mines Ltd. to access other funds then held by the Government of British Columbia as a security for the mine’s environmental reclamation obligations. Under the joint venture agreement, the GRT Partnership was to be entitled to certain revenues or production share from the Gibraltar mine following the resumption of production.

In March 2004, the Company issued 7,967,742 common shares at $2.79 per share for total consideration of $22.23 million to acquire all of the units of the GRT Partnership. In conjunction with this agreement, certain directors and officers of the Company personally guaranteed certain obligations to third parties on behalf of the Company to the extent of $4.5 million. In consideration for the guarantee, the Company issued 225,000 common shares at $2.00 per share to those directors and officers.

(e)	Farmout Agreement
	In December 2003, the Company entered into a Farmout Agreement (the "Agreement") with Northern Dynasty Minerals Ltd. ("Northern Dynasty") and Rockwell Ventures Inc. ("Rockwell"), each public companies with certain directors in common with the Company. Under the terms of the Agreement, the Company granted to Northern Dynasty, and to Rockwell, rights to earn joint venture working interests, subject to a maximum of $650,000 in the case of Northern Dynasty and $200,000 in the case of Rockwell, on certain exploration properties located in the vicinity of the Gibraltar mine property. For a period of 150 days after Northern Dynasty and Rockwell earned their working interests, the Company had the right to purchase their interests at 110% in cash or in common shares of the Company, at the Company's option. If the Company elected to issue common shares, the common shares to be issued were to have been valued at the weighted average ten-day trading price as traded on the TSX Venture Exchange.
	In December 2003, Northern Dynasty earned an interest in these properties to the extent of $650,000 and Rockwell earned an interest in these properties to the extent of $200,000. In March 2004, Taseko exercised its right to purchase the interests earned by Northern Dynasty and Rockwell by issuing 256,272 common shares to Northern Dynasty and 78,853 common shares to Rockwell.
(f)	Royalty Agreement (promissory note and royalty obligation)
	In September 2004, the Company entered into agreements with an unrelated investment partnership, Red Mile Resources No. 2 Limited Partnership ("Red Mile"). Gibraltar Mines Ltd. sold to Red Mile a royalty for $67.357 million cash, which cash was received on September 29,

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

2004. These funds were subsequently loaned to a trust company (and a promissory note received) and the Company pledged the promissory note along with interest earned and to be earned thereon for a total of $70.2 million to secure its royalty obligations under the agreements.

At September 30, 2005, the promissory note amounted to $72,317,854 (2004 – $68,172,380), of which $2,637,499 was current, while the royalty obligation amounted to $68,790,797 (2004 –$67,357,000) of which $2,637,499 was current.

Pursuant to the agreements, the Company received an aggregate of $10.5 million in fees and interest for services performed in relation to the Red Mile transaction, of which $5.25 million was received in each of September 2004 and December 2004, and included in interest and other income.

The amount of $5.25 million received in September 2004 included $1.75 million for indemnifying an affiliate of Red Mile from any claims relating to a breach by Gibraltar Mines Ltd. under the royalty agreement. The funds received in respect of the indemnification are presented as deferred revenue, and are recognized over the expected remaining life of the royalty agreement, with $1,575,000 (2004 – $1,750,000), of which $175,000 was current, remaining as deferred as at September 30, 2005.

Annual royalties will be payable by Gibraltar Mines Ltd. to Red Mile at rates ranging from $0.01 per pound to $0.14 per pound of copper produced during the period from the commencement of commercial production (as defined in the agreement) to the later of (i) December 2014 and (ii) five years after the end of commercial production from the mine. Gibraltar Mines Ltd. is entitled to have released to it funds held under the promissory note and interest thereon to fund its royalty obligations to the extent of its royalty payment obligations.

The Company has a pre-emptive option to effectively purchase ("call") the royalty interest by acquiring the Red Mile partnership units at a future date in consideration of a payment which is (i) approximately equal to the funds received by the Company less royalty payments to date, or (ii) fair value, whichever is lower. Under certain circumstances, the investors in Red Mile also have a right to sell ("put") their Red Mile partnership units to the Company at fair value; however such right is subject to the Company's pre-emptive right to exercise the "call" in advance of any "put" being exercised and completed.

The Company has granted to Red Mile a net profits interest ("NPI"), which survives any "put" or "call" of the Red Mile units. The NPI is applicable for the years 2011 to 2014 and is 2% if the price of copper averages US$2.50 to US$2.74 per pound, 3% if the price of copper averages US$2.75 to US$2.99 per pound and 4% if the price of copper averages US$3.00 per pound or greater for any year during that period. The US-dollar pricing amounts specified above are based upon an exchange rate of US$0.75 for Cdn$1.00, and shall be adjusted from time to time by any variation of such exchange rates. No NPI is payable until the Company reaches a pre-determined aggregate level of revenues less defined operating costs and expenditures. No NPI is payable at September 30, 2005.

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

6. Property, plant and equipment

Equipment - Prosperity and Harmony Properties
		September 30, 2005							September 30, 2004
				Accumulated		Net book					Accumulated		Net book
		Cost		amortization		value			Cost		amortization		value
Field	$	11,879	$	11,038	$	841		$	11,879	$	10,677	$	1,202
Computer and office		15,172		14,534		638			15,172		14,262		910
Total Prosperity and
Harmony Properties	$	27,051	$	25,572	$	1,479		$	27,051	$	24,939	$	2,112
Plant and equipment - Gibraltar Mine
		September 30, 2005							September 30, 2004
				Accumulated		Net book					Accumulated		Net book
		Cost		amortization		value			Cost		amortization		value
Buildings and equipment	$	6,059,655	$	929,212	$	5,130,443		$	5,931,580	$	492,030	$	5,439,550
Mine equipment (note 7)		11,259,369		3,237,581		8,021,788			32,458,793		2,544,160		29,914,633
Plant and equipment		4,407,039		961,242		3,445,797			975,493		666,369		309,124
Vehicles		916,288		311,281		605,007			198,519		115,426		83,093
Computer equipment		1,057,681		384,467		673,214			101,162		90,040		11,122
Total Gibraltar mine	$	23,700,032	$	5,823,783	$	17,876,249		$	39,665,547	$	3,908,025	$	35,757,522
Mineral property interests (note 5)					$	3,000						$	3,000
Net asset retirement obligation adjustment (note 3(f))					$	(7,963,736	)					$	(8,779,655	)
Mineral property, plant and equipment					$	9,916,992						$	26,982,979

In accordance with the Gibraltar mine permit, the Company has pledged the mine's plant and certain equipment which, when taken at market value and combined with reclamation deposits (approximately $18.1 million at September 30, 2005), provide the Government of British Columbia with the required security for the estimated reclamation liability on the Gibraltar mine.

7. Assets under capital leases

Gibraltar Mine

September 30, 2005

September 30, 2004

Accumulated

Net book

Accumulated

Net book

Cost

amortization

value

Cost

amortization

value

Mine equipment

$

22,350,693

$

1,556,693

$

20,794,000

$

–

$

–

$

–

In March 2004, the Company purchased a mining shovel for approximately $13.0 million and in May 2004, the Company purchased five mine haul trucks for approximately $10.7 million. Approximately $0.5 million was incurred installing the equipment at the Gibraltar mine.

In October 2004, the Company sold the mining shovel and the five haul trucks for approximately $22.0 million, of which approximately $17.5 million was received, net of a 20% down payment (approximately $4.5 million) which was funded by the Company. The purchaser leased the shovel and trucks to a subsidiary of Ledcor CMI Ltd. ("Ledcor"), and this equipment is used at the Gibraltar mine. The Company has accounted for this as a sale-leaseback transaction (note 8), and has recorded a loss on sale of approximately $2.2 million.

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

The assets under capital leases are being amortized on a units-of-production basis over tons mined. Amortization expense for assets under capital lease for the year ended September 30, 2005 amounted to $1,556,693 (2004 – $nil; 2003 – $nil).

8. Capital lease obligation

The Company has certain mining equipment which it acquired pursuant to a sale-leaseback arrangement in October 2004 (note 7). The associated capital leases are payable in US dollars at variable floating interest rates ranging from approximately 6% to 10%. These capital leases have terms of 48 months, and are secured by the mining equipment to which they relate. Minimum required payments, in US dollars, on these leases until extinguishment are as follows:

	Year ended		Year ended		Year ended
	September 30,		September 30,		September 30,
		2006		2007		2008		Total
Principal	US$	1,799,548	US$	1,894,677	US$	9,273,127	US$	12,967,352
Interest		626,302		531,173		430,738		1,588,213
Total	US$	2,425,850	US$	2,425,850	US$	9,703,865	US$	14,555,565

In Canadian dollars, the obligation is presented as:

		Year ended September 30
		2005			2004
Total capital lease obligation	$	15,077,139		$	–
Less: principal amounts due within one year		(2,092,334	)		–
Capital lease obligation – long term	$	12,984,805		$	–

A lease guarantee fee of approximately US$46,500 ($54,000) per month, until the earlier of October 2008 or the extinguishment of the leases, is payable in addition to the above amounts.

The Company has the right to acquire, and the lessor has the right to oblige the Company to acquire, this equipment for residual values totaling approximately US$7.3 million ($8.5 million) at the end of the lease term in September 2008.

9. Operating line of credit and vehicle loans

The Company had an unsecured $2 million operating line of credit with a Canadian chartered bank at an interest rate of prime, due on demand, with no fixed terms of repayment. All amounts owing were paid and the line of credit was cancelled during the year ended September 30, 2005.

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

The Company has a series of loans related to certain of the on-road vehicles used at the mine site, at interest rates ranging from 0% to 9.75% . Most of these loans have a term of 36 months, and are secured by the vehicles to which they relate. The required payments on these loans until extinguishment are as follows:

		Year ended		Year ended		Year ended
		September 30,		September 30,		September 30,
		2006		2007		2008		Total
Principal	$	214,715	$	132,965	$	48,936	$	396,616
Interest		20,267		9,663		978		30,908
Total	$	234,982	$	142,628	$	49,914	$	427,524

10. Share capital

(a)	Authorized
	Authorized share capital of the Company consists of 200,000,000 common shares without par value.

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

(b) Issued and outstanding

	Number
Common shares	of Shares		Amount
Balance, September 30, 2002	33,921,663	$	91,889,200
Issued during the year
Share purchase options at $0.50 per share	40,000		20,000
Private placement at $0.30 per share, net of issue costs	2,185,000		645,245
Private placement at $0.30 per share, net of issue costs	4,470,001		1,253,654
Private placement at $0.40 per share, net of issue costs	5,817,500		2,146,666
For acquisition of the remaining business of the GESL Partnership,
net of issue costs (note 5(d))	7,446,809		3,491,554
Balance, September 30, 2003	53,880,973		99,446,319
Issued during the year
Share purchase options at $0.50 per share	4,265,000		2,132,500
Share purchase options at $0.40 per share	152,500		61,000
Share purchase options at $0.25 per share	75,000		18,750
Share purchase options at $0.55 per share	380,000		209,000
Share purchase options at $0.65 per share	25,500		16,575
Fair value of stock options allocated to shares issued on exercise			290,000
Share purchase warrants at $0.58 per share	276,596		160,426
Share purchase warrants at $0.55 per share	414,850		228,168
Share purchase warrants at $0.40 per share	302,250		120,900
Share purchase warrants at $0.50 per share	7,393,751		3,696,876
Share purchase warrants at $0.75 per share	473,332		354,999
Private placement at $0.60 per share, net of issue costs	6,700,000		3,910,728
Private placement at $2.00 per share, net of issue costs	3,900,000		7,323,943
Private placement at $1.25 per share, net of issue costs	8,000,000		8,933,206
For acquisition of Gibraltar Reclamation Trust Limited Partnership	7,967,742		22,193,039
at $2.79 per share, net of issue costs (note 5(d))
Loan guarantee at $2.00 per share (note 10(d))	225,000		450,000
Farmout agreement at $2.79 per share (note 5(e))	335,125		935,000
Balance, September 30, 2004	94,767,619		150,481,429
Issued during the year
Share purchase options at $0.25 per share	50,000		12,500
Share purchase options at $0.30 per share	100,000		30,000
Share purchase options at $0.38 per share	20,000		7,600
Share purchase options at $0.40 per share	22,500		9,000
Share purchase options at $0.55 per share	610,000		335,500
Share purchase options at $0.81 per share	45,000		36,450
Share purchase options at $1.36 per share	270,000		367,200
Share purchase options at $1.40 per share	44,500		62,300
Share purchase options at $1.65 per share	10,000		16,500
Fair value of stock options allocated to shares issued on exercise			742,000
Share purchase warrants at $0.75 per share	2,313,336		1,735,002
Private placement at $1.45 per share, net of issue costs	5,204,361		6,993,961
Balance, September 30, 2005	103,457,316	$	160,829,442

(c)	Convertible debenture
	On July 21, 1999, in connection with the acquisition of the Gibraltar mine, the Company issued a $17 million interest-free debenture to BWCL, which is due on July 21, 2009, but is convertible into common shares of the Company over a 10 year period commencing at a price of $3.14 per

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

share in year one and escalating by $0.25 per share per year thereafter ($4.64 per share as at September 30, 2005). BWCL’s purchase of the convertible debenture was receivable as to $4,000,000 in July 1999, $1,000,000 on October 19, 1999, $3,500,000 on July 21, 2000, and $8,500,000 by December 31, 2000, all of which were received. BWCL has the right to convert, in part or in whole from time to time, the debenture into fully paid common shares of the Company from year one to year ten, but has not requested any conversions to date.

From the commencement of the sixth year to the tenth year, the Company has the right to automatically convert the debenture into common shares at the then-prevailing market price. Since the Company has the right and the intention to settle the convertible debenture through the issuance of common shares, notwithstanding the Company’s right to settle the debenture with cash, it has been included as a separate component of shareholders’ equity on the balance sheet. Commencing October 1, 2005, as a result of a new accounting standard which the Company will adopt on that date, the convertible debenture will be presented as a long term liability.

Accounting standards in Canada for compound financial instruments require the Company to allocate the proceeds received from the convertible debenture between (i) the estimated fair value of the option to convert the debenture into common shares and (ii) the estimated fair value of the future cash outflows related to the debenture. At issuance, the Company estimated the fair value of the conversion option by deducting the present value of the future cash outflows of the convertible debenture, calculated using a risk-adjusted discount rate of 10%, from the face value of the principal of the convertible debenture. The residual carrying value of the convertible debenture is required to be accreted to the face value of the convertible debenture over the life of the debenture by, in the Company’s case, a direct charge to deficit. The continuity of the convertible debenture is as follows:

		Year ended		Year ended
		September 30,		September 30,
		2005		2004
Present value of convertible debenture
Beginning of period	$	10,754,763	$	9,777,058
Accretion for the period		1,075,478		977,705
End of period		11,830,241		10,754,763
Conversion right		9,822,462		9,822,462
Convertible debenture	$	21,652,703	$	20,577,225
		June 30,		September 30,
		2005		2004
Summary of the convertible debenture terms
Principal amount of convertible debenture	$	17,000,000	$	17,000,000
Price per common share of the unexercised conversion right	$	4.64	$	4.39
Number of common shares potentially issuable under
unexercised conversion right		3,663,793		3,872,437

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

(d)	Share purchase option plan
	The Company has a share purchase option plan approved by the shareholders that allows it to grant a maximum of 10% of the issued and outstanding common shares of the Company at the time an option is granted, less common shares reserved or issued in the plan, subject to regulatory terms and approval, to its employees, officers, directors and consultants. The exercise price of each option may be set equal to or greater than the closing market price of the common shares on the TSX Venture Exchange on the day prior to the date of the grant of the option, less any allowable discounts. Options have a maximum term of ten years and terminate 30 to 90 days following the termination of the optionee’s employment or term of engagement, except in the case of retirement or death. Vesting of options is at the discretion of the Board of Directors at the time the options are granted.
	The continuity of share purchase options is as follows:

	2005			2004			2003
	Number		Average	Number		Average	Number		Average
	of shares		Price	of shares		Price	of shares		Price
Opening balance	8,627,500		$ 1.13	4,685,000		$ 0.48	4,145,000		$ 0.50
Granted during the period	2,040,000		1.15	8,855,500		1.12	770,000		0.41
Exercised during the period	(1,172,000	)	0.75	(4,898,000	)	0.50	(40,000	)	0.50
Expired/cancelled during period	(215,000	)	1.47	(15,000	)	1.36	(190,000	)	0.50
Closing balance	9,280,500		$ 1.17	8,627,500		$ 1.13	4,685,000		$ 0.48
Average contractual remaining life
(years)			1.69			1.93			1.03
Range of exercise prices	$0.55-$1.50			$0.25-$1.65			$0.25-$0.50

The following table summarizes information about share purchase options outstanding at September 30, 2005:

	Options outstanding			Options exercisable
	Number	Weighted	Weighted	Number	Weighted
	outstanding at	average	average	exercisable at	average
Range of exercise	September 30,	remaining	exercise	September 30,	exercise
prices	2005	contractual life	price	2005	price
$0.55 to $0.74	1,780,000	1.00 years	$ 0.55	1,780,000	$ 0.55
$0.75 to $0.99	–	–	–	–	–
$1.00 to $1.24	2,040,000	4.17 years	$ 1.15	813,334	$ 1.15
$1.25 to $1.50	5,460,500	0.98 years	$ 1.39	5,460,500	$ 1.39
	9,280,500	1.69 years	$ 1.17	8,053,834	$ 1.18

As at September 30, 2005, 8,053,834 of the options outstanding had vested with optionees and were exercisable.

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

The exercise prices of all share purchase options granted during the year were equal to the market price at the grant date. Using an option pricing model with the assumptions noted below, the estimated fair value of all options granted during the year have been reflected in the statement of operations as follows:

		Year ended		Year ended		Year ended
		September 30,		September 30,		September 30,
		2005		2004		2003
Compensation cost recognized in operations,
credited to contributed surplus	$	1,129,026	$	5,172,244	$	65,344

The grant date fair value of options granted during the year ended September 30, 2005 was $1,357,502 (2004 – $5,171,890; 2003 – $64,799).

The weighted average assumptions used to estimate the fair value of options during the years ended September 30, 2005, 2004, and 2003 were:

	Year ended	Year ended	Year ended
	September 30,	September 30,	September 30,
	2005	2004	2003
Risk free interest rate	3%	3%	3%
Expected life	2.75 years	2.4 years	2.5 years
Volatility	90%	95%	145%
Expected dividends	nil	nil	nil

(e)	Share purchase warrants
	The continuity of share purchase warrants during the year ended September 30, 2005 is as follows:

		Outstanding						Outstanding
	Exercise	September 30,						September 30,
Expiry dates	price	2004	Issued	Exercised		Expired		2005
January 8, 2006	$0.40	375,000	–	–		–		375,000
December 31, 2005	$0.75	6,226,668	–	(2,313,336	)	–		3,913,332(i)
March 10, 2005	$2.25	3,900,000	–	–		(3,900,000	)	–
September 28, 2006	$1.40	8,000,000	–	–		–		8,000,000(ii)
September 18, 2006	$1.66	–	5,204,361	–		–		5,204,361
		18,501,668	5,204,361	(2,313,336	)	(3,900,000	)	17,492,693

(i)	Subject to a 45-day accelerated expiry upon notice if, at any time after the regulatory four-month hold period, the closing price of the Company's common shares, as traded on the TSX Venture Exchange, is at least $1.50 for ten consecutive trading days. As at September 30, 2005, management had not given notice of this accelerated expiry.
(ii)	Subject to a 45-day accelerated expiry upon notice if, at any time after the regulatory four-month hold period, the closing price of the Company's common shares, as traded on the TSX Venture Exchange, is at least $2.80 for ten consecutive trading days.

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

Subsequent to the year ended September 30, 2005, a total of 1,320,000 warrants were exercised for gross proceeds of $990,000.

The continuity of share purchase warrants during the year ended September 30, 2004 is as follows:

		Outstanding				Outstanding
	Exercise	September 30,				September 30,
Expiry dates	price	2003	Issued	Exercised		2004
October 19, 2003	$0.58	276,596	–	(276,596	)	–
December 27, 2003	$0.55	414,850	–	(414,850	)	–
January 8, 2006	$0.40	375,000	–	–		375,000
December 31, 2003	$0.40	302,250	–	(302,250	)	–
December 31, 2004	$0.50	7,393,751	–	(7,393,751	)	–
December 31, 2005	$0.75	–	6,700,000	(473,332	)	6,226,668
March 10, 2005	$2.25	–	3,900,000	–		3,900,000
September 28, 2006	$1.40	–	8,000,000	–		8,000,000
		8,762,447	18,600,000	(8,860,779	)	18,501,668

The continuity of share purchase warrants during the year ended September 30, 2003 is as follows:

		Outstanding			Outstanding
	Exercise	September 30,			September 30,
Expiry dates	price	2002	Issued	Exercised	2003
October 19, 2003	$0.58	276,596	–	–	276,596
December 27, 2003	$0.55	414,850	–	–	414,850
January 8, 2006	$0.40	375,000	–	–	375,000
December 31, 2003	$0.40	–	302,250	–	302,250
December 31, 2004	$0.50	–	7,393,751	–	7,393,751
		1,066,446	7,696,001	–	8,762,447

(f) Contributed surplus

Balance, September 30, 2002	$	–
Non-cash stock-based compensation (note 10(d))		65,344
Contributed surplus, September 30, 2003	$	65,344
Changes during fiscal 2004:
Non-cash stock-based compensation (note 10(d))		5,172,244
Fair value of stock options allocated to shares issued on exercise		(290,000	)
Contributed surplus, September 30, 2004		4,947,588
Changes during fiscal 2005:
Non-cash stock-based compensation (note 10(d))		1,129,026
Fair value of stock options allocated to shares issued on exercise		(742,000	)
Contributed surplus, September 30, 2005	$	5,334,614

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

11. Site closure and reclamation obligations

The continuity of the provision for site closure and reclamation costs related to the Gibraltar mine is as follows:

		Year ended			Year ended			Year ended
		September 30,			September 30,			September 30,
		2005			2004			2003
Balance, beginning of period,
as previously reported	$	32,700,000		$	32,700,000		$	32,700,000
Impact of adoption of new accounting policy
(note 3(f))		(16,960,000	)		(18,391,000	)		(19,691,000	)
As restated		15,740,000			14,309,000			13,009,000
Accretion expense		1,574,000			1,431,000			1,300,000
Balance, end of period	$	17,314,000		$	15,740,000		$	14,309,000

The estimated amount of the reclamation costs, adjusted for estimated inflation at 2.5% per year, in 2017 dollars, is $49.4 million (September 30, 2004 – $32.7 million) and are expected to be spent over a period of approximately three years beginning in 2017. The credit-adjusted risk free rate at which the estimated future cash flows have been discounted is 10%, to arrive at a net present value of $17,314,000 (2004 – $15,740,000). The accretion of $1,574,000 (2004 –$1,431,000; 2003 – $1,300,000) is charged to the statement of operations.

In accordance with the Gibraltar mine permit, the Company has pledged the mine’s plant and certain equipment (note 6) which, when taken at market value and combined with reclamation deposits (approximately $18.3 million at September 30, 2005), provide the Government of British Columbia with the required security for the estimated reclamation liability for principally the Gibraltar mine and the reclamation obligations related to the Prosperity and Harmony properties, which are not significant as these projects are in the exploration stage.

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

12. Income taxes

Income tax expense (recovery) differs from the amount which would result from applying the statutory Canadian income tax rates (2005 – 39.5%, 2004 – 40.9%) for the following reasons:

		2005			2004
Earnings (loss) before income taxes	$	6,843,251		$	(58,350,872	)
Expected tax expense (recovery) based on statutory rates		2,703,000			(23,863,000	)
Permanent differences		446,000			5,080,000
Tax pools not recognized		–			17,536,000
Deductions allowable for tax purposes		(2,912,000	)		–
Income recognized for tax, but not for accounting		–			23,744,000
Recognition of previously unrecognized tax assets		(17,351,000	)		–
Other		(408,000	)		1,247,000
Tax expense (recovery) for the year	$	(17,522,000	)	$	23,744,000
Presented as:
Current income tax expense (recovery)	$	(4,099,000	)	$	23,744,000
Future income tax expense (recovery)		(13,423,000	)		–
	$	(17,522,000	)	$	23,744,000

As at September 30, 2005 and 2004, the estimated tax effect of the significant components within the Company’s future tax assets were as follows:

		2005			2004
Mineral properties	$	4,513,000		$	7,472,000
Loss carry forwards		154,000			1,412,000
Equipment		15,000			15,000
Royalty obligation		23,458,000			16,154,000
BC mining taxes		9,062,000			11,627,000
Other tax pools		2,373,000			740,000
		39,575,000			37,420,000
Valuation allowance		(23,709,000	)		(36,741,000	)
Future income tax assets		15,866,000			679,000
Lease equipment and related lease obligation		(1,949,000	)		–
Reclamation obligation		(494,000	)		(679,000	)
Net future income tax asset	$	13,423,000		$	–
Current portion	$	4,479,000		$	–
Long term portion		8,944,000			–
Net future income tax asset	$	13,423,000		$	–

At September 30, 2005 the Company's tax attributes included non capital losses in Canada totaling approximately $nil (2004 – $3.1 million), capital losses totaling approximately $0.9 million (2004 – $0.9 million) which are available indefinitely to offset future taxable capital

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

gains, and resource tax pools totaling approximately $13.3 million (2004 - $21.0 million) which are available indefinitely to offset future taxable income.

The Company has accrued a tax provision of a subsidiary company of approximately $19.6 million (2004 – $23.7 million). This provision reflects an amount which management believes is less than likely of ever becoming payable. In addition, the subsidiary would exhaust all appeals if any taxes in connection with this accrual were actually assessed against the subsidiary. The amount represents a potential liability which has been recognized in a conservative manner in accordance with Canadian generally accepted accounting principles. It does not represent a payable amount based on any filed, or expected to be filed, tax return nor has any taxation authority assessed the amount or any portion thereof as payable.

13. Supplementary cash flow disclosures

In addition to the non-cash operating, financing and investing activities primarily disclosed, the Company’s non-cash operating, financing and investing activities were as follows:

		September 30,			September 30,		September 30,
		2005			2004		2003
Issuance of common shares on acquisition of remaining
business of GESL Partnership (note 5(d))	$	–		$	–	$	3,500,000
Issuance of common shares on acquisition of Gibraltar
Reclamation Trust Limited Partnership (note 5(d))		–			22,230,000		–
Acquisition of assets under capital lease (note 7)		(22,350,693	)		–		–
Advances under capital lease (note 8)		22,350,693			–		–
Issuance of common shares for loan guarantee (note 5(d))		–			450,000		–
		September 30,			September 30,		September 30,
		2005			2004		2003
Supplemental cash flow information
Cash paid during the year for
Interest	$	1,046,568		$	49,294	$	101,942
Taxes	$	554		$	45,352	$	6,135

TASEKO MINES LIMITED

Notes to Consolidated Financial Statements

For the years ended September 30, 2005, 2004, and 2003

(Expressed in Canadian Dollars)
 

14. Related party transactions and advances

Related party transactions not disclosed elsewhere in these consolidated financial statements are as follows:

		Year ended			Year ended
		September 30,			September 30,
Transactions		2005			2004
Hunter Dickinson Inc.
Services rendered to the Company and its subsidiaries
and reimbursement of third party expenses (a)	$	1,222,603		$	806,970
Hunter Dickinson Group Inc.
Consulting services rendered to the Company (b)	$	12,800		$	12,800
		September 30,			September 30,
Advances		2005			2004
Advances to (from) (c)
Hunter Dickinson Inc. (a)	$	(105,067	)	$	198,281
Hunter Dickinson Group Inc. (b)		–			(3,424	)
Advances to related parties	$	(105,067	)	$	194,857

(a)	Hunter Dickinson Inc. ("HDI") is a private company owned equally by nine public companies, one of which is Taseko. HDI has certain directors in common with the Company and provides geological, corporate development, administrative and management services to, and incurs third party costs on behalf of, the Company and its subsidiaries on a full cost recovery basis pursuant to an agreement dated December 31, 1996.
(b)	Hunter Dickinson Group Inc. is a private company with certain directors in common that provides consulting services to the Company.
(c)	Advances are non-interest bearing and due on demand.

EX-99.2

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

T A B L E   O F   C O N T E N T S

1.1	Date	2
1.2	Overview	2
Gibraltar Mine		3
Prosperity Project		10
Harmony Project		11
Market Trends		11
1.3	Selected Annual Information	12
1.4	Results of Operations	13
1.5	Summary of Quarterly Results	14
1.6	Liquidity	15
1.7	Capital Resources	16
1.8	Off-Balance Sheet Arrangements	17
1.9	Transactions with Related Parties	17
1.10	Fourth Quarter	17
1.11	Proposed Transactions	18
1.12	Critical Accounting Estimates	18
1.13	Change in Accounting Policies including Initial Adoption	18
1.14	Financial Instruments and Other Instruments	19
1.15	Other MD&A Requirements	19
1.15.1	Additional Disclosure for Venture Issuers without Significant Revenue	19
1.15.2	Disclosure of Outstanding Share Data	19

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

1.1 Date

This Management Discussion and Analysis ("MD&A") should be read in conjunction with the audited financial statements of Taseko Mines Limited ("Taseko", or the "Company") for the year ended September 30, 2005.

This MD&A is prepared as of December 14, 2005. All dollar figures stated herein are expressed in Canadian dollars, unless otherwise specified.

This discussion includes certain statements that may be deemed "forward-looking statements". All statements in this discussion, other than statements of historical facts, that address future production, reserve potential, exploration drilling, exploitation activities and events or developments that the Company expects are forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, continued availability of capital and financing and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements.

1.2 Overview

Taseko is a mining and mineral exploration company with three properties located in British Columbia, Canada. These are the Gibraltar copper-molybdenum mine and two exploration projects: the Prosperity copper-gold property and the Harmony gold property.

Taseko had earnings of $24.4 million (including $17.5 million of tax recoveries) during the year ended September 30, 2005, compared to a loss of $81.4 million (including $23.7 million of tax expense) in fiscal 2004. Earnings increased because the Company commenced active production during the fiscal year and realized revenues from the sale of copper and molybdenum concentrate from the Gibraltar mine.

The Gibraltar mine reopened in early October 2004 as a copper producer with a 12-year mine plan. The first fiscal quarter was largely a restart period and commercial production commenced on January 1, 2005. After the completion of an upgrade to the molybdenum circuit near the end of the second quarter, the mine commenced molybdenum production. The mine produced 54.8 million pounds of copper and 427,000 pounds of molybdenum during the 2005 fiscal year.

A reserve update, completed subsequent to fiscal 2005 year end, increased the proven and probable reserves at Gibraltar by 30%, from 149 million tons to 194 million tons.

The Company has also re-initiated work on the Prosperity Project. The objective of this work is to advance the project through the final stages of permitting and toward a production decision.

No recent work has been done on the Harmony Project.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

Gibraltar Mine

2005 Fiscal Year Highlights

• For the 2005 fiscal year covering nine months of commercial production from January 1, 2005 to September 30, 2005, Gibraltar recorded revenues of $71.9 million from sales of copper concentrate and $15.7 million was realized from sales of molybdenum concentrate.

• Average sales prices for the year were US$1.48 per pound for copper and US$31 per pound for molybdenum.

• Copper concentrate production for the year was 96,208 wet metric tonnes (“WMT”), or 54.8 million pounds of copper (93% of the forecast revised at the end of the second quarter), of which 21,335 WMT, or 12.1 million pounds, relate to the pre-commercial-production period ending December 31, 2004 and which have been presented, to the extent they match to sales in the period, as an increase in Restart Project costs. The inventory build up of 13,210 WMT (7.4 million pounds of copper) was reported as concentrate inventory amounting to $8.5 million at December 31, 2004.

• Copper concentrate sales for the year were 77,695 WMT or 44.0 million pounds of copper, of which 8,103 WMT, or 4.8 million pounds, relate to the pre-commercial-production period ending December 31, 2004 and which have been presented as a reduction in Restart Project costs.

• An inventory of 18,614 WMT of copper concentrate (10.6 million pounds of copper) remained at year end, of which approximately 14,500 WMT was pre-sold and held in a storage facility at the shipping dock as there were no ships available at that time to transport it to smelters in Asia.

• Molybdenum in concentrate production during the year was 427,000 pounds (80% of the forecast revised at the end of the second quarter).

• Molybdenum in concentrate sales over the year were 418,016 gross pounds.

The copper circuit commenced initial operations in October 2004, and the first copper concentrate was shipped to a smelter in December 2004. A major upgrade to the molybdenum circuit was started in the first fiscal quarter, and the molybdenum circuit was commissioned in February 2005. The first molybdenum in concentrate was sold in March 2005.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

2005 Fiscal Year Production Results

As a result of the delay in commissioning the molybdenum circuit and lower than planned mill throughput, the Company updated its forecast metal production for the year at the end of the second quarter (March 31, 2005). The following table is a summary of the operating statistics for the year compared to the revised forecast.

Gibraltar Fiscal Year 2005 Production   October 1, 2004 to September 30, 2005
	Actual	Revised Forecast	Variance	Comments
Ore + waste mined (tons)	39,992,000	41,658,000	-4%	Mining rate adversely impacted by unscheduled maintenance on the shovel fleet, as well as truck availability.
Ore milled (tons)	11,484,000	11,913,000	-4%	Lower mill throughput due to poor crusher availability and grinding circuit productivity.
Stripping ratio	2.31	2.35	-2%
Copper grade (%)	0.314	0.306	+3%
Molybdenum grade (%MoS2)	0.017	0.016	+6%
Copper recovery (%)	76.2	80.4	-5%	Lower copper recovery due to ore variability and higher amounts of secondary mineralization than expected.
Molybdenum recovery (%)	23.1	35.2	-35%	Molybdenum recovery was low as the new circuit was established.
Copper production (lb)	54,785,347	58,600,000	-7%	Below forecast throughput and recovery.
Molybdenum production (lb)	427,059	541,000	-20%	Below forecast throughput and recovery.

Gibraltar Mine Commercial Production   January 1, 2005 to September 30, 2005
Copper production (lb)	42,675,438
Copper sales (lb)	39,584,722
Molybdenum production (lb)	427,059
Molybdenum sales (lb)	418,016
	Cdn$	US$*
Copper production costs, net of molybdenum, per lb of copper	$ 1.06	$ 0.87
Treatment and transportation cost per lb of copper	0.34	0.28
Total production cost per lb of copper	$ 1.40	$ 1.15

* Exchange rate of US$1.00 to Cdn$1.22

Year-end Tonnage and Grade Reconciliations

All mining in fiscal 2005 took place in the Pollyanna stage 4 pit: 12.4 million tons of ore grading 0.314% copper was mined with 0.9 million tons in live inventory at year end and 11.5 million tons processed; an additional 2.2 million tons of low grade sulphide material and 2.0 million tons of oxide ore were stockpiled for later processing. In addition, 23.4 million tons of waste rock was moved to rock piles.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

The geological model forecast 12.5 million tons of ore grading 0.313% copper; 2.9 million tons of low grade material and 1.9 million tons of oxide material. An independent review concluded that the geological model was predicting the mining tonnage and grade well within the accuracy of the model.

Fourth Quarter 2005 Highlights

• The average prices per pound for sales realized in the quarter were US$1.64 per pound for copper and US$31 per pound for molybdenum.

• Copper concentrate production during the quarter was 22,545 WMT, or 13.0 million pounds of copper (84% of revised forecast for the fourth quarter).

• Copper concentrate sales for the quarter were 21,990 WMT, or 12.8 million pounds of copper, an increase from the 21,108 WMT, or 11.7 million pounds of copper sold during the previous quarter.

• Copper concentrate inventory at September 30, 2005 was 18,614 WMT, or 10.6 million pounds of copper, of which 14,500 WMT of inventory, or 8.3 million pounds of copper, was in a storage facility at a dock in North Vancouver, BC. This inventory has been purchased by a smelter (and the corresponding cash has been received by the Company) but will not be credited to revenue until it has been loaded for shipping. This is an increase in inventory from the 6,837 WMT of concentrate, or 3.9 million pounds of copper, on hand at the end of the previous quarter.

• Molybdenum in concentrate production during the quarter was 108,170 pounds (61% of the revised forecast for the fourth quarter).

• Molybdenum in concentrate sales were 117,169 pounds, a decrease from the 223,187 pounds sold in the previous quarter, as a result of lower production in the fourth quarter.

• At the end of the fourth quarter, molybdenum in concentrate inventory was 9,043 pounds, a decrease from 18,042 pounds at the end of the previous quarter.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

Fourth Quarter Production Results

The following table is a summary of the operating statistics for the fourth quarter compared to the revised forecast.

	Actual	Revised Forecast	Variance	Comments
Ore + waste mined (tons)	10,503,900	11,040,000	-4.9%	Mining rate adversely impacted by unscheduled maintenance on the shovel fleet, as well as long haul distances.
Ore milled (tons)	2,976,800	3,293,600	-9.6%	Lower mill throughput as a result of reduced crusher availability, grinding circuit productivity and ore release sequence problems.
Stripping ratio	2.42	2.47	-3%
Copper grade (%)	0.281%	0.296%	-5.1%
Molybdenum grade (%mos2)	0.014%	0.015%	-6.7%
Copper recovery (%)	77.7%	82.1%	-5.4%	Lower copper recovery due to presence of secondary mineralization, and grinding circuit availability.
Molybdenum recovery (%)	20.3%	31.1%	-34.7%	Molybdenum recovery was low as bottlenecks affected circuit stability.
Copper production (lbs)	13,021,011	15,483,000	-15.9%	Below budget head grade, throughput and recovery.
Molybdenum production (lbs)	108, 170	178,100	-39.3%	Below budget head grade, throughput and recovery.

Mining operations achieved a daily mining rate of 110,530 tons per day in the quarter ended September 30, 2005. In the fourth quarter, the tons mined were 4.9% lower than forecast, as one of the three mine shovels was down for unscheduled maintenance for seven weeks. In addition, long haul distances affected truck productivity.

Copper produced in concentrate during the quarter was 13.0 million pounds, a decrease from 15.5 million pounds produced in the previous quarter. Molybdenum produced in concentrate during the quarter was 108,170 pounds, a decrease from 177,593 pounds produced in the third quarter. Copper production was 15.9 % lower than forecast because of a combination of lower mill throughput, head grade and recovery. Copper recovery was adversely affected by mining of some supergene ore (containing secondary copper mineralization that reacts differently to reagents). Molybdenum recovery continued to be a challenge. Operating procedures were still being established and new operators being trained on the new molybdenum circuit. New pumps were installed on the bulk thickener to reduce the variability of the feed returning to the molybdenum circuit. Different reagents were also introduced to optimize recoveries.

A long term, detailed mine plan has been put in place to sequentially develop the Pollyanna pit in the most productive and cost effective manner and, at the same time, provide consistent ore feed to the concentrator. This will allow the operation to deal with throughput and recovery variation in the copper and molybdenum circuits.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

Labour

There were no time loss accidents during the quarter or the year ended September 30, 2005.

Manpower at the end of the quarter was 248 personnel, compared to 247 at the end of the third quarter and the planned complement of 254.

The Christian Labour Association of Canada (“CLAC”) represents the unionized workers at Gibraltar. This representation was challenged in mid 2005 by the Canadian Auto Workers, but the majority of the unionized workers voted to retain CLAC. A three year contact is in place with CLAC that expires on May 31, 2008.

Mineral Reserves and Resources

A detailed review of the geological model, confirmation of pit wall locations established in previous mine optimization studies, and an analysis of current price and mining cost projections allowed for expansion of the previously defined pits, specifically, at the PGE Connector and Granite Lake deposits. Subsequent to year end, overall proven and probable reserves were increased by 30%, from 149 million tons remaining after production to September 30, 2005, to 194 million tons. The additional mine production and scheduling plans, although developed, have not yet been formalized and approved by the board of directors.

Long term metal prices of US$1.10/lb for copper and US$6.00/lb for molybdenum were used for the estimates that took place during the first fiscal quarter of 2006. Results are tabulated below:

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

Mineral Reserves at October 1, 2005
at 0.20% Copper cut-off
		Tons
Pit	Category	(millions)	Cu%	Mo%
Pollyanna	Proven	27.3	0.315	0.010
	Probable	2.9	0.288	0.010
	Subtotal	30.2	0.312	0.010
PGE Connector	Proven	35.9	0.296	0.010
	Probable	5.6	0.283	0.011
PGE Connector Additional	Proven	7.1	0.303	0.016
	Probable	7.7	0.275	0.016
	Subtotal	56.3	0.293	0.012
Granite Lake	Proven	70.7	0.322	0.009
	Probable	6.9	0.321	0.007
Granite Lake Additional	Proven	26.3	0.308	0.008
	Probable	3.6	0.310	0.005
	Subtotal	107.5	0.318	0.009
Total		194.0	0.310	0.010

There are also oxide reserves (see Taseko Annual Information Form for fiscal 2005), but these have not changed from previous estimates.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

In addition to the above reserves, the mineral resources are estimated to be:

Mineral Resources at October 1, 2005  at 0.20% Copper cut-off
Category	Tons (millions)	Cu%	Mo%
Measured Indicated	410 204	0.286 0.269	0.008 0.008
Total	614	0.280	0.008

The resource and reserve estimation was completed by Gibraltar mine staff under the supervision of John W. McManus, P.Eng., Vice President of Operations for Taseko and a Qualified Person under National Instrument 43-101. Mr. McManus has verified the methods used to determine grade and tonnage in the geological model, reviewed the long range mine plan, and directed the updated economic evaluation. A technical report will be filed on www.sedar.com.

2006 Production Forecast

The forecasted copper and molybdenum production for 2006 are 60.1 million pounds and 874,000 pounds, respectively. The forecast by quarter is as follows:

	Q1	Q2	Q3	Q4	Total 2006
Copper (millions lb)	13.4	15.2	15.7	15.8	60.1
Molybdenum (thousands lb)	200	220	227	227	874
Copper production costs, net of by product credits*, per lb of copper	US$1.03	US$0.81	US$0.81	US$0.80	US$0.83
OPC transport & treatment per lb of copper	US$0.30	US$0.34	US$0.34	US$0.34	US$0.34
Total cash costs of production per lb of copper	US$1.33	US$1.15	US$1.15	US$1.14	US$1.17

* Excludes mining equipment lease costs but includes contractor overhead costs Off Property Costs (“OPC”) are concentrate transportation, smelting and refining costs.

The forecast production cost for 2006 is based on a molybdenum price of US$20 per pound and a copper price of US$1.40 per pound; an increase in treatment costs of US$0.06 per pound as per the treatment contract schedule; re-scheduling of pit production including additional costs for stripping; as well as the higher estimated input costs.

The unit cost production forecast estimates reflect the increased costs of fuel, power, reagents, explosives, steel, tires and all material consumables that are used at the Gibraltar minesite. There are also significant costs that are included in the operating costs that are assigned to refurbishing the concentrator, the mining equipment, and other infrastructure such as the tailings system and the onsite power distribution system. Operational constraints that are limiting production rates are shortages of haulage truck tires, tradesmen, and technical personnel.

Further definition drilling and economic analysis will be undertaken in 2006 with the objective of upgrading resources into the reserve category. The drilling program will be focused on defining this

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

resource between the existing pits and tying together the extensive mineralization zones. In anticipation of a further increase in the mineral reserves, an engineering study has been initiated to evaluate the economics of expanding the concentrator production rate by 25%.

Refinery Update

Feasibility level studies were completed in 2002 to assess the viability of constructing a copper refinery at Gibraltar, based on a hydrometallurgical process developed by Cominco Engineering Services Ltd. A refinery located at Gibraltar would produce cathode copper from copper concentrate at the site rather than sending these concentrates to an overseas smelter for treatment, which would result in an estimated operating cost saving to Gibraltar of US$0.20/lb of copper produced.

With mining operations now underway at Gibraltar, mine technical personnel have been re-assessing the refinery project. An updated refinery feasibility study is expected to be completed in the near term, but the immediate focus is to increase the reserves and evaluate expanding the mill as these will affect the refinery project economics. The British Columbia Environmental Assessment (“BCEA”) Office has advised Taseko that the proposed refinery would not be reviewable under the BCEA Act because the refining process would be integrated with ore milling operations of the fully permitted Gibraltar mine.

Prosperity Project

In November and subsequent to year end, work was re-initiated on the Prosperity Copper-Gold Project, located 125 kilometres southwest of the City of Williams Lake in south-central British Columbia.

Taseko holds a 100% interest in the Prosperity property, which encompasses 196 mineral claims covering approximately 85 square kilometres. The property hosts a large porphyry copper-gold deposit amenable to large-scale open pit mining.

Taseko carried out extensive exploration, engineering, mine planning, environmental, and socio-economic studies on the Prosperity project prior to 2001, including two years in the British Columbia Environmental Assessment ("BCEA") process. In 2005, Taseko was granted an extension order for the Prosperity Project Application under the BCEA process until April 30, 2007.

Parallel to the permitting and consultation process, Taseko is reviewing previous feasibility studies and re-assessing the project economics based on new technologies, concepts, and innovative approaches to mine development. This includes re-examining optimal mining rates and mining equipment size, analyzing the economics of constructing and operating a single line mill rather than multiple smaller lines, and evaluating the potential improvements which could be realized with state-of-the-art metallurgical technologies such as large tank flotation circuits and expert computerized mill control systems. The Company is also reassessing major infrastructure plans, such as the power-line route, to determine if there are synergies to be achieved with the other communities of interest in the area.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

Harmony Project

In 2005, the Company was focused on the Gibraltar mine and to a modest extent on the Prosperity project; therefore only maintenance activities were performed on the Harmony project. These activities will continue and assessments will be undertaken over time as metal prices indicate new opportunities for the Harmony project. In 2006, Taseko anticipates continuing to focus its resources and its efforts on the Gibraltar mine and the Prosperity project.

Market Trends

Copper prices have been increasing since late 2003. Copper prices averaged US$1.30/lb in 2004 and have averaged US$1.58/lb over the 2005 calendar year to date.

Molybdenum prices increased from US$7.60/lb early in 2004 to US$34/lb by last year end. Molybdenum prices have averaged approximately US$33/lb over the 2005 calendar year to date.

Gold prices, although volatile earlier in the year, have been increasing steadily since September 2005. Overall, the gold price has increased from US$410/oz in 2004 to approximately US$444/oz over the 2005 calendar year to date.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

1.3 Selected Annual Information

The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles, and are expressed in Canadian dollars except common shares outstanding.

					As at			As at
		As at			September 30			September 30
		September 30			2004			2003
Balance Sheet		2005			(restated)			(restated)
Current assets	$	58,380,111		$	18,064,003		$	3,832,059
Mineral properties		3,000			3,000			28,813,296
Other assets		132,613,767			112,799,415			16,825,852
Total assets		190,996,878			130,866,418			49,471,207
Current liabilities		52,023,078			40,179,912			3,851,136
Other liabilities		98,034,004			84,847,000			14,309,000
Shareholders’ equity		40,939,796			5,839,506			31,311,071
Total shareholders’ equity & liabilities	$	190,996,878		$	130,866,418		$	49,471,207
					As at			As at
		Year ended			September 30			September 30
		September 30			2004			2003
Statement of operations		2005			(restated)			(restated)
Revenue	$	(87,638,300	)	$	–		$	–
Cost of production		57,799,558			–			–
Transportation and treatment		13,548,560			–			–
Amortization		2,657,165			17,296			42,564
Accretion of reclamation obligation		1,574,000			1,431,000			1,300,000
Exploration		505,586			4,456,901			2,024,671
Foreign exchange		34,080			–			–
Loss (gain) on sale of equipment		2,160,992			–			(131,638	)
General and administration		2,411,688			2,334,840			855,646
Interest and other income		(10,547,609	)		(5,154,209	)		(721,480	)
Interest expense		3,175,353			499,294			201,942
Premium paid for acquisition of Gibraltar Reclamation Trust LP		–			5,095,249			–
Refinery project		–			–			500,000
Restart project		6,346,650			14,982,008			–
Stock-based compensation		1,129,026			5,172,244			65,344
Write down of mineral property acquisition costs		–			28,810,296			–
Current income tax expense (recovery)		(4,099,000	)		23,744,000			–
Future income tax expense (recovery)		(13,423,000	)		–			–
Loss (earnings) for the year		(24,365,251	)		81,388,919			4,137,049
Accretion expense on convertible debenture		1,075,478			977,705			888,823
Basic earnings (loss) per share	$	0.23		$	(1.10	)	$	(0.11	)
Diluted earnings (loss) per share	$	0.21		$	(1.10	)	$	(0.11	)
Basic weighted average number of common shares outstanding		100,021,655			75,113,426			46,984,378
Diluted weighted average number of common shares outstanding		110,732,926			75,113,426			46,984,378

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

1.4 Results of Operations

The Company’s earnings for the year ended September 30, 2005 were $24.4 million, compared to a loss of $81.4 million in the prior year. The increase in earnings is due to the resumption of mining activities at the Gibraltar copper-molybdenum mine, and the recognition of tax loss carryforwards in the consolidated financial statements.

The Company recognized revenues of $87.6 million for the year ended September 30, 2005 compared to $nil in fiscal 2004. In late September 2005, the Company sold and received funds of approximately $14.3 million from the sale of copper. The Company was unable to recognize the revenue from this sale as the copper was held in a storage facility at the dock as there were no ships available at that time to transport the copper to smelters in Asia. Consequently, the Company recorded this sale as deferred revenue for the year ended September 30, 2005 and will recognize this sale as revenue upon shipment to the customer.

Total production costs for the year were $57.8 million compared to $nil in fiscal 2004. These costs include mining (2005 – $33.8 million; 2004 – $nil), milling (2005 – $23.4 million; 2004 – $nil), mine administration (2005 – $5.7 million; 2004 – $nil), royalties;(2005 - $0.3 million; 2004 – $nil) and molybdenum treatment expenses (2005 – $2.4 million; 2004 - $nil). This also includes a reduction of $7.8 million related to a buildup of copper concentrate inventory.

Transportation and treatment costs increased to $13.5 million for fiscal 2005 due to the Gibraltar mine restart compared to $nil in fiscal 2004. Amortization expense increased to $2.7 million compared to $0.02 million in fiscal 2004.

Exploration expenses decreased to $0.5 million in fiscal 2005 from $4.5 million in fiscal 2004 due to a reduction in exploration activities and mine maintenance costs in fiscal 2005. General and administrative costs increased slightly to $2.4 million in fiscal 2005 from $2.3 million in fiscal 2004 due to higher administrative costs incurred in the current year. Interest and other income increased to $10.5 million in fiscal 2005 from $5.2 million in fiscal 2004 due to higher cash and equivalent balances on hand. Interest expense increased to $3.2 million in fiscal 2005 from $0.5 million in fiscal 2004 due to interest payments on the Company’s capital lease obligations. Stock-based compensation decreased to $1.1 million in fiscal 2005 from $5.2 million in fiscal 2004 due to fewer options granted in fiscal 2005 compared to fiscal 2004.

The Company had a current income tax recovery of $4.1 million and future income tax recovery of $13.4 million in fiscal 2005 compared to a current income tax expense of $23.7 million in fiscal 2004. The increase in income tax recoveries is due to the recognition of tax loss carryforwards in fiscal 2005.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

1.5 Summary of Quarterly Results

The following summary is presented in Canadian dollars except common shares outstanding

			Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,
	Sep 30,		2005		2005		2004		2004		2004		2004		2003
	2005		(restated)		(restated)		(restated)		(restated)		(restated)		(restated)		(restated)
Current assets	58,380,111		50,973,406		31,423,939		24,552,573		18,064,003		19,733,394		28,903,882		10,104,482
Mineral properties	3,000		3,000		3,000		3,000		3,000		28,813,296		28,813,296		28,813,296
Other assets	132,613,767		120,521,937		118,945,024		115,055,389		112,799,415		28,493,334		19,884,305		16,937,023
Total assets	190,996,878		171,498,343		150,371,963		139,610,962		130,866,418		77,040,024		77,601,483		55,854,801
Current liabilities	52,023,078		46,801,857		41,968,895		40,893,737		40,179,912		3,625,687		1,411,538		3,786,070
Other liabilities	98,034,004		100,989,711		97,100,160		96,739,050		79,527,000		15,382,250		15,024,500		14,666,750
Shareholders’ equity	40,939,796		23,706,775		11,302,908		1,978,175		11,159,506		58,032,087		61,165,445		37,401,981
Total shareholders’ equity
and liabilities	190,996,878		171,498,343		150,371,963		139,610,962		130,866,418		77,040,024		77,601,483		55,854,801
Revenue	(27,698,995	)	(31,520,306	)	(28,418,999	)	–		–		–		–		–
Mine site operating costs	20,901,551		13,262,656		23,635,351		–		–		–		–		–
Transportation and treatment	4,400,743		5,300,114		3,847,703		–		–		–		–		–
Amortization	779,415		710,398		655,179		512,173		844		849		(179	)	15,782
Expenses:
Accretion of reclamation
obligation	393,500		393,500		393,500		393,500		357,750		357,750		357,750		357,750
Conference and travel	60,369		36,301		11,281		12,995		11,689		19,062		22,051		40,269
Consulting	101,736		82,694		65,944		63,760		56,450		94,875		(10,462	)	110,927
Corporation taxes	(6,825	)	–		–		554		14,184		20,000		11,168		–
Exploration	455,211		6,634		11,694		32,047		(1,892,174	)	3,959,724		980,197		1,409,154
Interest and finance charges	1,231,805		664,187		643,022		636,339		18,138		452,616		9,201		19,339
Legal, accounting and audit	176,167		74,022		79,317		97,146		325,567		92,940		22,913		16,818
Office and administration	527,896		236,954		236,804		164,316		88,512		199,224		189,976		121,738
Premium paid for GRTLP	–		–		–		–		–		–		5,095,249		–
Property investigation	–		–		–		–		4		–		–		141,063
Restart project	–		–		(1,214,796	)	7,561,446		14,982,008		–		–		–
Shareholder communications	90,326		44,641		112,241		52,822		34,142		18,694		530,704		73,802
Trust and filing	8,300		8,027		67,787		6,114		53,052		13,842		17,241		4,395
Interest and other (income)	(1,324,344	)	(1,552,559	)	(1,233,485	)	(6,437,221	)	(4,464,851	)	(228,670	)	(325,399	)	(135,289	)
Loss on sale of property plant
and equipment	–		–		(17,000	)	2,177,992		–		–		–		–
Income taxes	(17,522,000	)			–		–		23,744,000		–		–		–
Foreign exchange	324,275		194,365		(240,858	)	(243,702	)	–		–		–		–
Write down of mineral property
acquisition costs	–		–		–		–		28,810,296		–		–		–
Stock-based compensation	401,470		170,310		392,697		164,549		2,035,178		1,526,084		296,686		1,314,296
Earnings (loss) for the period	16,699,400		11,888,062		972,618		(5,194,830	)	(64,174,789	)	(6,526,990	)	(7,197,096	)	(3,490,044	)
Accretion expense on
convertible debenture	(269,975	)	(268,501	)	(267,027	)	(269,975	)	(245,431	)	(244,091	)	(242,752	)	(245,431	)
Basic and diluted loss per
share	0.14		0.12		0.01		(0.06	)	(0.85	)	(0.08	)	(0.11	)	(0.06	)

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

1.6 Liquidity

Historically, Taseko’s sole source of funding was the sale of equity securities for cash primarily through private placements to sophisticated investors and institutions. As a consequence of the acquisition of the Gibraltar mine in 1999, Taseko received funding pursuant to a $17 million non-interest-bearing convertible debenture financing by Boliden Westmin (Canada) Ltd. As Taseko has the right and the intention to convert the debenture into common shares, the $17 million debenture is classified as equity rather than as a liability on the Company’s balance sheet.

Reclamation deposits totaling approximately $18.3 million (including interest) and certain plant and equipment are secured to fund reclamation at the Gibraltar, Prosperity and Harmony properties. The $26.6 million liability shown as tracking preferred shares of the subsidiary, Gibraltar Mines Ltd, is the net book value of 12,483,916 shares issued as part of the cost to acquire the Harmony gold project. As Taseko has the right and the intention to settle these preferred shares with common shares of the Company, they have been included in shareholders’ equity in the balance sheet.

At September 30, 2005, Taseko had positive working capital of $6.4 million, as compared to a $22.1 million working capital deficit at the end of fiscal 2004. The increase in working capital from the end of the previous year was primarily a result of operations from the Gibraltar mine, and the recognition of tax loss carryforwards.

The Company has accrued a tax provision of a subsidiary company of $19.6 million in the consolidated financial statements. This provision is net of a $23.7 million income tax expense recorded in 2004 which management believes is less than likely of ever becoming payable. The subsidiary will consider its current and past tax filing positions in addition to tax planning strategies which might be put in place subsequent to the Company's financial reporting date. The Company would exhaust all appeals if any taxes were actually assessed against the subsidiary. The amount represents a potential liability which has been recognized in a conservative manner in accordance with Canadian generally accepted accounting principles. It does not represent a payable amount based on any filed, or expected to be filed, tax return. No taxation authority has assessed the amount or any portion thereof as payable. Accordingly there is no immediate impact on liquidity.

Management anticipates that revenues from copper and molybdenum, along with current cash balances will be sufficient to cover operating costs and working capital during fiscal 2006.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

1.7 Capital Resources

In March 2004, the Company purchased a mining shovel for approximately $13.0 million and in May 2004, the Company purchased five mine haul trucks for approximately $10.7 million.

In October 2004, the Company sold the mining shovel and the five haul trucks for approximately $22.0 million, of which approximately $17.5 million was received, net of a 20% down payment (approximately $4.5 million) which was funded by the Company and represented prepaid lease payments. The purchaser leased the shovel and trucks to a subsidiary of Ledcor CMI Ltd. ("Ledcor"), the Company's partner in the Gibraltar joint venture (“JV”), and this equipment forms part of Ledcor's contribution to the JV. The Company has accounted for this as a sale-leaseback transaction, and has recorded a loss on sale of approximately $2.2 million.

The associated capital leases are payable in US dollars at interest rates ranging from approximately 6% to 10%. These capital leases have terms of 48 months, and are secured by the mining equipment to which they relate. Minimum required payments on these leases until they are extinguished are as follows:

	Year ended		Year ended		Year ended
	September 30,		September 30,		September 30,
		2006		2007		2008		Total
Principal	US$	1,799,548	US$	1,894,677	US$	9,273,127	US$	12,967,352
Interest		626,302		531,173		430,738		1,588,213
Total	US$	2,425,850	US$	2,425,850	US$	9,703,865	US$	14,555,565

A lease guarantee fee of approximately US$46,500 ($54,000) per month, until the earlier of October 2008 or the extinguishment of the leases, is payable in addition to the above amounts.

The Company has the right and the obligation to acquire this equipment for residual values totaling approximately US$7.3 million ($8.5 million) at the end of the lease term in September 2008.

The Company had an unsecured $2 million operating line of credit with a Canadian chartered bank at an interest rate of prime, with no fixed terms of repayment. All amounts were paid off during the year and the line of credit was cancelled.

The Company has various loans on its on-road vehicles totaling $396,616, of which $214,715 is current.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

1.8 Off-Balance Sheet Arrangements

None

1.9 Transactions with Related Parties

Hunter Dickinson Inc. (“HDI”) carries out investor relations, geological, corporate development, administrative and other management activities for, and incurs third party costs on behalf of, the Company. Taseko reimburses HDI on a full cost-recovery basis.

Costs for services rendered by HDI to the Company during the year ended September 30, 2005 were $1,222,603, as compared to $806,970 in 2004.

1.10 Fourth Quarter

For the quarter ending September 30, 2005 the Company reported earnings of $16.7 million (including $17.5 million in tax recoveries) as compared to earnings of $11.9 million in the third quarter ended June 30, 2005. The decrease in operating earnings before taxes to a loss in the fourth quarter of $0.8 million is a result of (i) a copper production shortfall due to a combination of lower than expected mill throughput, head grade and recovery, (ii) molybdenum production in the quarter being 39% below forecast for the quarter (as revised at the end of the second fiscal quarter) due to lower than expected grade and recovery, (iii) a build up of concentrate inventory in the third quarter to 10.2 million pounds of copper (thus moving production costs to inventory in the third quarter), and increasing to increased to 10.6 million pounds of copper in the fourth quarter, and (iv) higher general expenses including exploration.

For the quarter ended September 30, 2005 revenue totaled $27.7 million as compared to $31.5 million in the previous quarter due to a decrease in molybdenum sales by 106,000 pounds.

Although the Company sold approximately $14.5 million of copper in late September, and received funds for the sale, the Company was unable to ship the product before the year end (there was a lack of available ocean vessels to transport the concentrate from the port to the smelter in Asia), and consequently was unable to recognize this revenue. The sale was recorded as deferred revenue and will be credited to revenue when the concentrate is shipped to the customer.

Total mine site production costs for the quarter were $20.9 million compared to $13.3 million in the previous quarter due to the capitalization of cost of production into concentrate inventory costs from quarter three to quarter four.

Total treatment, refining and transportation costs for the quarter were $4.4 million as compared to $5.3 million in the third quarter.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

1.11 Proposed Transactions

There are no proposed asset or business acquisitions or dispositions, other than those in the ordinary course, before the board of directors for consideration.

1.12 Critical Accounting Estimates

The Company's significant accounting policies are presented in note 3 of the accompanying financial statements. The preparation of consolidated financial statements in accordance with generally accepted accounting principles requires management to select accounting policies and make estimates. Such estimates may have a significant impact on the financial statements. These include:

• the estimation of mineral resources and reserves,
• the carrying values of mineral properties,
• the carrying values of property, plant and equipment,
• the assumptions used in determining the reclamation obligation, and
• the valuation of stock-based compensation expense.

Actual amounts could differ from the estimates used and, accordingly, affect the results of operations.

1.13 Change in Accounting Policies including Initial Adoption

Asset retirement obligations

Effective October 1, 2004, the Company adopted the CICA’s Handbook Section 3110, “Asset Retirement Obligations” (“HB 3110”). HB 3110 requires the recognition of any statutory, contractual or other legal obligation, related to the retirement of tangible long–lived assets when such obligations are incurred, if a reasonable estimate of fair value can be made. These obligations are measured initially at fair value and the resulting costs capitalized into the carrying value of the related asset. In subsequent periods, the liability is adjusted for the accretion of the discount and any changes in the amount or timing of the underlying future cash flows. The asset retirement cost is amortized to operations over the life of the asset.

Prior to adoption of HB 3110, a reserve for future site closure and mine reclamation costs was established based upon the estimated costs to comply with existing reclamation standards.

The Company adopted HB 3110 retroactively with restatement of prior periods presented.

TASEKO MINES LIMITED

YEAR ENDED SEPTEMBER 30, 2005

MANAGEMENT'S DISCUSSION AND ANALYSIS
 

Variable interest entities

Effective October 1, 2004, the Company adopted the Canadian Institute of Chartered Accountants ("CICA") Accounting Guideline 15, "Consolidation of Variable Interest Entities" ("AcG15") on a prospective basis. AcG15 prescribes the application of consolidation principles for entities that meet the definition of a variable interest entity ("VIE"). An enterprise holding other than a voting interest in a VIE could, subject to certain conditions, be required to consolidate the VIE if it is considered its primary beneficiary whereby it would absorb the majority of the VIE’s expected losses, receive the majority of its expected residual returns, or both. The adoption of this new standard had no effect on the consolidated financial statements as management has concluded the Company does not have any VIE’s.

1.14 Financial Instruments and Other Instruments

None.

1.15 Other MD&A Requirements

Additional information relating to the Company, including the Company's Annual Information Form, is available on SEDAR at www.sedar.com.

1.15.1 Additional Disclosure for Venture Issuers without Significant Revenue

Not applicable. The Company is not a Venture Issuer.

1.15.2 Disclosure of Outstanding Share Data

The following details the share capital structure as at December 14, 2005, the date of this MD&A. These figures may be subject to minor accounting adjustments prior to presentation in future consolidated financial statements.

		Exercise
	Expiry date	price	Number	Number
Common shares				103,442,316
Share purchase option	September 29, 2006	$ 0.55	1,780,000
	September 20, 2006	$ 1.40	3,490,500
	September 29, 2006	$ 1.36	1,970,000
	September 26, 2006	$ 1.50	10,000
	September 28, 2007	$ 1.15	1,125,000	8,375,500
Warrants	January 8, 2006	$ 0.40	375,000
	December 31, 2005	$ 0.75	2,593,331
	September 28, 2006	$ 1.40	8,000,000
	September 18, 2006	$ 1.66	5,204,361	16,172,692
Convertible Debenture,	July 21, 2009	$ 4.64	3,663,793	3,872,437
Boliden Westmin (Canada) Limited
Preferred shares redeemable into Taseko Mines Limited common shares				12,483,916