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 October 31, 2018

Commission File Number: 001-31965

TASEKO MINES LIMITED

(Translation of registrant’s name into English)

Suite 1500 – 1040 West Georgia St.

Vancouver, British Columbia

Canada V6E 4H1

(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.

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):  ☐

SUBMITTED HEREWITH

Exhibits

99.1	Condensed Consolidated Interim Financial Statements for the Period Ended September 30, 2018
99.2	Management’s Discussion and Analysis for the Period Ended September 30, 2018

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 Limited (Registrant)
Date: October 31, 2018	By:	/s/ Stuart McDonald
		Stuart McDonald
	Title:	Chief Financial Officer

EX-99.1

Exhibit 99.1

Condensed Consolidated Interim Financial Statements

September 30, 2018

(Unaudited)

TASEKO MINES LIMITED

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Cdn$ in thousands, except share and per share amounts)

(Unaudited)

			Three months ended September 30,				Nine months ended September 30,
	Note		2018		2017		2018		2017
Revenues		4		74,297		78,508		232,749		282,891
Cost of sales
Production costs		5		(40,555)		(33,375)		(149,196)		(137,871)
Depletion and amortization		5		(20,174)		(11,785)		(52,909)		(33,161)
Earnings from mining operations				13,568		33,348		30,644		111,859
General and administrative				(3,328)		(2,181)		(10,830)		(9,941)
Share-based compensation recovery (expense)		15b		428		(2,231)		1,223		(5,673)
Exploration and evaluation				154		(450)		(1,381)		(1,409)
Gain (loss) on derivatives		6		728		(1,151)		579		(8,466)
Other income (expenses)				547		(3,346)		1,206		(2,800)
Income before financing costs and income taxes				12,097		23,989		21,441		83,570
Finance expenses		7		(9,829)		(8,385)		(28,873)		(37,738)
Finance income				296		403		940		1,204
Foreign exchange gain (loss)				5,833		10,433		(9,759)		18,897
Income (loss) before income taxes				8,397		26,440		(16,251)		65,933
Income tax (expense) recovery		8		(1,299)		(6,304)		197		(24,071)
Net income (loss)				7,098		20,136		(16,054)		41,862
Other comprehensive income (loss):
Unrealized gain (loss) on financial assets		3b, 9		70		(297)		(1,335)		(731)
Foreign currency translation reserve				(2,563)		(4,355)		3,954		(8,267)
Total other comprehensive income (loss)				(2,493)		(4,652)		2,619		(8,998)
Total comprehensive income (loss)				4,605		15,484		(13,435)		32,864
Earnings (loss) per share
Basic				0.03		0.09		(0.07)		0.19
Diluted				0.03		0.09		(0.07)		0.18
Weighted average shares outstanding (thousands)
Basic				228,373		226,358		227,684		225,296
Diluted				229,780		229,859		227,684		228,305

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

TASEKO MINES LIMITED

Condensed Consolidated Statements of Cash Flows

(Cdn$ in thousands)

(Unaudited)

			Three months ended September 30,				Nine months ended September 30,
	Note		2018		2017		2018		2017
Operating activities
Net income (loss) for the period				7,098		20,136		(16,054)		41,862
Adjustments for:
Depletion and amortization				20,174		11,785		52,909		33,161
Income tax expense (recovery)		8		1,299		6,304		(197)		24,071
Share-based compensation expense (recovery)		15b		(386)		2,250		(994)		5,779
Loss (gain) on derivatives		6		(728)		1,151		(579)		8,466
Finance expenses, net				9,533		7,982		27,933		36,534
Unrealized foreign exchange (gain) loss				(5,244)		(10,299)		10,817		(19,225)
Write-down of mine equipment				-		3,551		-		3,551
Deferred revenue deposit		13		-		-		-		44,151
Amortization of deferred revenue		13		(937)		(296)		(2,809)		(1,026)
Deferred electricity repayments				-		(1,662)		(4,841)		(2,711)
Other operating activities				(205)		(1,294)		(205)		(1,846)
Net change in non-cash working capital		17		(12,551)		(2,484)		(16,022)		6,413
Cash provided by operating activities				18,053		37,124		49,958		179,180
Investing activities
Purchase of property, plant and equipment		11		(20,927)		(28,975)		(68,834)		(68,883)
Purchase of copper put options		6		-		(2,026)		(1,063)		(2,960)
Proceeds from copper put options		6		401		-		401		-
Investment in other financial assets				(253)		(1,395)		(253)		(1,395)
Other investing activities				153		222		495		509
Cash used for investing activities				(20,626)		(32,174)		(69,254)		(72,729)
Financing activities
Interest paid				(502)		(526)		(15,444)		(29,432)
Proceeds from equipment loan, net		12		-		-		8,943		-
Repayment of capital leases and equipment loans		12		(3,034)		(3,658)		(8,984)		(12,695)
Proceeds on exercise of options and warrants				50		223		322		2,517
Net proceeds from issuance of senior secured notes				-		(118)		-		317,596
Repayment of senior notes				-		-		-		(264,180)
Repayment of senior secured credit facility				-		-		-		(92,463)
Settlement of copper call option				-		-		-		(15,745)
Cash used for financing activities				(3,486)		(4,079)		(15,163)		(94,402)
Effect of exchange rate changes on cash and equivalents				(331)		(2,247)		(480)		(5,410)
Increase (decrease) in cash and equivalents				(6,390)		(1,376)		(34,939)		6,639
Cash and equivalents, beginning of period				51,682		97,045		80,231		89,030
Cash and equivalents, end of period				45,292		95,669		45,292		95,669
Supplementary cash flow disclosures		17

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

TASEKO MINES LIMITED

Condensed Consolidated Balance Sheets

(Cdn$ in thousands)

(Unaudited)

			September 30,		December 31,
	Note		2018		2017
ASSETS
Current assets
Cash and equivalents				45,292		80,231
Accounts receivable				15,499		21,618
Inventories		10		72,627		39,639
Other financial assets		9		2,867		2,774
Prepaids				2,256		1,474
				138,541		145,736
Property, plant and equipment		11		807,547		797,265
Other financial assets		9		40,657		40,537
Goodwill				5,337		5,172
				992,082		988,710
LIABILITIES
Current liabilities
Accounts payable and other liabilities				47,473		47,382
Advance payments on product sales				8,011		–
Current portion of long-term debt		12		10,850		11,270
Current portion of deferred revenue		13		3,836		1,312
Interest payable on senior secured notes				8,259		1,143
Current income tax payable				1,181		302
				79,610		61,409
Long-term debt		12		329,951		317,948
Provision for environmental rehabilitation ("PER")				100,820		107,874
Deferred and other tax liabilities				85,157		89,045
Deferred revenue		13		38,904		39,640
Other financial liabilities		14		2,375		5,714
				636,817		621,630
EQUITY
Share capital		15		423,422		422,091
Contributed surplus				48,814		47,478
Accumulated other comprehensive income ("AOCI")				3,008		389
Deficit				(119,979)		(102,878)
				355,265		367,080
				992,082		988,710
Commitments and contingencies				13,16

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

TASEKO MINES LIMITED

Condensed Consolidated Statements of Changes in Equity

(Cdn$ in thousands)

(Unaudited)

	Note		Share capital		Contributed surplus		AOCI		Deficit		Total
Balance at January 1, 2017				417,975		45,747		12,357		(137,140)		338,939
Issuance of warrants				-		1,876		-		-		1,876
Share-based compensation				-		2,765		-		-		2,765
Exercise of options and warrants				3,535		(1,017)		-		-		2,518
Settlement of performance share units				-		(1,876)		-		-		(1,876)
Total comprehensive income (loss) for the period				-		-		(8,998)		41,862		32,864
Balance at September 30, 2017				421,510		47,495		3,359		(95,278)		377,086
Balance at January 1, 2018				422,091		47,478		389		(102,878)		367,080
Adjustment on initial application of IFRS 15		3		-		-		-		(1,047)		(1,047)
Adjusted balance at January 1, 2018				422,091		47,478		389		(103,925)		366,033
Share-based compensation				-		2,345		-		-		2,345
Exercise of options and warrants				431		(109)		-		-		322
Settlement of performance share units				900		(900)		-		-		-
Total comprehensive income (loss) for the period				-		-		2,619		(16,054)		(13,435)
Balance at September 30, 2018				423,422		48,814		3,008		(119,979)		355,265

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

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

1. REPORTING ENTITY

Taseko Mines Limited (the “Company” or “Taseko”) is a corporation governed by the British Columbia Business Corporations Act. These unaudited condensed consolidated interim financial statements of the Company as at and for the three and nine month periods ended September 30, 2018 comprise the Company, its subsidiaries and its 75% interest in the Gibraltar joint venture since its formation on March 31, 2010. The Company is principally engaged in the production and sale of metals, as well as related activities including exploration and mine development, within the province of British Columbia, Canada and the State of Arizona, USA. Seasonality does not have a significant impact on the Company’s operations.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting and follow the same accounting policies and methods of application as the Company’s most recent annual financial statements, except as disclosed in Note 3. These condensed consolidated interim financial statements do not include all of the information required for full consolidated annual financial statements and should be read in conjunction with the consolidated financial statements of the Company as at and for the year ended December 31, 2017, prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

These condensed consolidated interim financial statements were authorized for issue by the Company’s Board of Directors on October 30, 2018.

(b) Use of judgments and estimates

In preparing these condensed consolidated interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at the year ended December 31, 2017, except for new judgments in the determination of the financing component with respect to the silver purchase and sale agreement presented as deferred revenue (Note 3) and in the determination of the amount of insurance recoverable (Note 5).

3. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

The Company has applied the following revised or new IFRS that were issued and effective January 1, 2018:

(a) IFRS 15, Revenue from Contracts with Customers

The Company has adopted IFRS 15 effective January 1, 2018 using the cumulative effect method. Accordingly, the comparative information presented for 2017 has not been restated and is accounted for under under IAS 18 Revenue.

1

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

Under IFRS 15, revenue is recognized when a customer obtains control of the goods or services and the Company has satisfied its performance obligation. Determining the timing of the transfer of control, at a point in time or over time, requires judgment. Cash received in advance of meeting these conditions is recorded as advance payments.

Under the terms of the Company’s concentrate sales contracts, the final sales amount is based on final assay results and quoted market prices which may be in a period subsequent to the date of sale. Revenues for these sales, net of treatment and refining charges are recorded when the customer obtains control of the concentrate, based on an estimate of metal contained using initial assay results and forward market prices for the expected date that final sales prices will be fixed. The period between provisional pricing and final settlement can be up to four months. This settlement receivable is recorded at fair value each reporting period by reference to forward market prices until the date of final pricing, with the changes in fair value recorded as an adjustment to revenue.

There have been no significant changes in the accounting for copper and molybdenum concentrate revenue as a result of the transition to IFRS 15.

Deferred revenue

Deferred revenue arose from an up-front payment received by the Company in consideration for future commitments as specified in its silver streaming arrangement. Revenue from the streaming arrangement is recognized when the customer obtains control of the silver metal and the Company has satisfied its performance obligations.

The Company identified a significant financing component related to its streaming arrangement resulting from a difference in the timing of the up-front consideration received and the expected future deliveries of metal. Interest expense on deferred revenue is recognized as a finance expense. The interest rate is determined based on the rate implicit in the streaming agreement at the date of inception. The deferred revenue continues to be amortized and recognized in revenue on a per unit basis using the number of silver ounces expected to be delivered over the life of the Gibraltar Mine. However on transition to IFRS 15, the revenue per silver ounce has changed due to the recognition of the financing component of the deferred revenue. The transitional adjustment for the recognition of the financing component is disclosed in Note 13.

The initial consideration received from the streaming arrangement is considered variable, subject to changes in the total silver ounces to be delivered. Changes to variable consideration will be reflected in revenue in the consolidated statement of income (loss) in the period the change is identified.

The following table summarizes the impact of transition to IFRS 15 on deficit at January 1, 2018:

Deficit, as at December 31, 2017	(102,878)
Deferred revenue adjustment, net of tax (Note 13)	(1,047)
Deficit after adoption of IFRS 15, as at January 1, 2018	(103,925)

2

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

The following table summarizes the impact of adopting IFRS 15 on the Company’s condensed consolidated interim balance sheet as at September 30, 2018:

	As reported		Adjustments		Amounts without Adoption of IFRS 15
Current portion of deferred revenue		3,836		2,634		1,202
Deferred revenue		38,904		(112)		39,016
Deferred tax liability		85,157		(681)		85,838
Deficit		(119,979)		(1,841)		(118,138)

The following table summarizes the impact of adopting IFRS 15 on the Company’s condensed consolidated interim statement of comprehensive income (loss) for the nine months ended September 30, 2018:

	As reported		Adjustments		Amounts without Adoption of IFRS 15
Revenue		232,749		2,075		230,674
Finance expenses		(28,873)		(3,162)		(25,711)
Income tax recovery		197		293		(96)
Net loss		(16,054)		(794)		(15,260)
Total comprehensive loss		(13,435)		(794)		(12,641)

(b) IFRS 9, Financial Instruments

The Company adopted IFRS 9 effective January 1, 2018. There have been no changes to the carrying value of any of the Company’s assets or liabilities as a result of this new accounting standard. The Company has not restated comparative information for prior periods with respect to the classification and measurement requirements of IFRS 9. Accordingly, the comparative information for 2017 is presented under IAS 39.

The adoption of IFRS 9 has not had a significant effect on the Company’s accounting policies related to financial liabilities and derivative financial instruments. The impact of IFRS 9 on the classification and measurement of financial assets is set out below.

Under IFRS 9, on initial recognition, a financial asset is classified as measured at: amortized cost; Fair Value through Other Comprehensive Income (FVOCI); or Fair Value from Profit or Loss (FVPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as FVPL:

- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

3

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset as FVPL if doing so significantly reduces an accounting mismatch that would otherwise arise.

The following accounting policies apply to the subsequent measurement of financial assets.

i) Financial assets at FVPL – These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

ii) Financial assets at amortized cost – These assets are subsequently measured at amortized cost using the effective interest method, and reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

iii) Equity investments at FVOCI – These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.

The following table explains the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Company’s financial assets as at January 1, 2018:

	Footnote	Original Classification under IAS 39	New Classification under IFRS 9
Financial assets
Cash and cash equivalents		Loans and receivables	Amortized cost
Accounts receivables		Loans and receivables	Amortized cost
Settlement receivables		Fair value – non-hedge derivative instrument	FVPL
Copper put option contracts		Fair value – non-hedge derivative instrument	FVPL
Marketable securities	(1)	Available-for-sale	FVOCI
Investment in subscription receipts	(1)	Available-for-sale	FVOCI
Reclamation deposits	(1)	Available-for-sale	FVOCI
Restricted cash		Loans and receivables	Amortized cost

(1) These equity related securities represent investments that the Company intends to hold for the long-term. As permitted by IFRS 9, the Company has designated these investments at the date of initial application as measured at FVOCI.

(c) IFRS 16, Leases

In January 2016, the IASB issued IFRS 16 Leases. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a lease contract. IFRS 16 is effective for annual periods beginning on or after January 1, 2019. A company can choose to apply IFRS 16 before that date

4

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

but only if it also applies IFRS 15 Revenue from Contracts with Customers. Upon adoption of IFRS 16, the Company anticipates it will record a material balance of lease assets and associated lease liabilities related to leases on the Consolidated Balance Sheet at January 1, 2019. The Company plans to apply IFRS 16 at the date it becomes effective and has not yet quantified the impact of this standard on its consolidated financial statements.

4. REVENUE

	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
Copper contained in concentrate		74,904		79,786		236,732		284,890
Molybdenum concentrate		8,044		3,052		17,892		15,988
Silver (Notes 3 and 13)		1,000		325		3,169		1,351
Price adjustments on settlement receivables		(3,617)		1,509		(7,725)		6,461
Total gross revenue		80,331		84,672		250,068		308,690
Less: Treatment and refining costs		(6,034)		(6,164)		(17,319)		(25,799)
Revenue		74,297		78,508		232,749		282,891

5. COST OF SALES

	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
Site operating costs		63,436		31,904		169,984		122,098
Transportation costs		5,149		4,498		12,507		15,207
Insurance recoverable		(3,875)		-		(7,875)		-
Changes in inventories of finished goods		(17,439)		(5,440)		(17,593)		(5,696)
Changes in inventories of ore stockpiles		(6,716)		2,413		(7,827)		6,262
Production costs		40,555		33,375		149,196		137,871
Depletion and amortization		20,174		11,785		52,909		33,161
Cost of sales		60,729		45,160		202,105		171,032

Cost of sales consists of site operating costs (which include personnel costs, mine site supervisory costs, non-capitalized stripping costs, repair and maintenance costs, consumables, operating supplies and external services), transportation costs, and depletion and amortization.

The Company has finalized an insurance claim related to the Cariboo region wildfires in July 2017 and the amount of the insurance claim is $7,875 (75% basis). In the three and nine month periods ended September 30, 2018, the Company has recorded an insurance recoverable of $3,875 and $7,875, respectively.

6. DERIVATIVE INSTRUMENTS

At September 30, 2018 the Company had options outstanding for 15 million pounds of copper with maturity dates spread evenly over the fourth quarter of 2018 with a strike price of US$2.80 per pound. The fair value of these outstanding options is $1,117.

5

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

The following table outlines the gains and losses associated with derivative instruments:

	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
Realized (gain) loss on copper put options		(194)		504		2,107		1,089
Unrealized (gain) loss on copper put options		(534)		647		(2,686)		1,072
Change in fair value of copper call option		-		-		-		6,305
		(728)		1,151		(579)		8,466

The copper call option was repurchased in June 2017 and is no longer outstanding.

7. FINANCE EXPENSES

	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
Interest expense		8,221		7,818		23,920		22,932
Finance expense – deferred revenue (Notes 3 and 13)		1,020		-		3,162		-
Accretion on PER		588		567		1,791		1,704
Loss on settlement of long-term debt		-		-		-		13,102
		9,829		8,385		28,873		37,738

8. INCOME TAX

	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
Current expense		280		420		770		1,396
Deferred expense (recovery)		1,019		5,884		(967)		22,675
		1,299		6,304		(197)		24,071

6

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

9. OTHER FINANCIAL ASSETS

	September 30, 2018		December 31, 2017
Current:
Marketable securities		1,750		2,444
Copper put option contracts (Note 6)		1,117		330
		2,867		2,774
Long-term:
Investment in subscription receipts		2,400		2,400
Reclamation deposits		30,757		30,637
Restricted cash		7,500		7,500
		40,657		40,537

10. INVENTORIES

	September 30, 2018		December 31, 2017
Ore stockpiles		21,078		9,332
Copper contained in concentrate		23,305		5,933
Molybdenum concentrate		438		217
Materials and supplies		27,806		24,157
		72,627		39,639

11. PROPERTY, PLANT & EQUIPMENT

During the three month period ended September 30, 2018, the Company capitalized stripping costs of $7,620 and incurred other capital expenditures for Gibraltar of $6,459. In addition, the Company capitalized development costs of $4,690 for the Florence Copper project and $1,870 for the Aley Niobium project. Additions to property, plant and equipment in the three month period also include $501 of non-cash depreciation on mining assets related to capitalized stripping.

During the nine month period ended September 30, 2018, the Company capitalized stripping costs of $29,957 and incurred other capital expenditures for Gibraltar of $11,684. In addition, the Company capitalized development costs of $31,436 for the Florence Copper project and $2,370 for the Aley Niobium project. Additions to property, plant and equipment in the nine month period also include $2,327 of non-cash depreciation on mining assets related to capitalized stripping.

7

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

12. DEBT

	September 30, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
Current:
Capital leases		7,278		7,159		9,651		9,697
Secured equipment loans		3,572		3,513		1,619		1,602
		10,850		10,672		11,270		11,299
Long-term:
Senior secured notes		313,696		329,120		302,085		322,306
Capital leases		9,069		8,920		14,110		14,178
Secured equipment loans		7,186		7,148		1,753		1,727
		329,951		345,188		317,948		338,211

In June 2018, the Company entered into a new equipment loan for $9,000. The equipment loan is repayable in monthly installments over a four year term and bears interest at an annual rate of 5.46%. The equipment loan is secured by equipment with a carrying value of $15,553.

13. DEFERRED REVENUE

On March 3, 2017, the Company entered into a silver stream purchase and sale agreement with Osisko Gold Royalties Ltd. (“Osisko”), whereby the Company received an upfront cash deposit payment of US$33 million for the sale of an equivalent amount of its 75% share of Gibraltar payable silver production until 5.9 million ounces of silver have been delivered to Osisko. After that threshold has been met, 35% of an equivalent amount of Taseko’s share of all future payable silver production from Gibraltar will be delivered to Osisko. In addition to the initial deposit, the Company receives cash payments of US$2.75 per ounce for all silver deliveries made under the agreement.

The Company recorded the initial deposit as deferred revenue and recognizes amounts in revenue as silver is delivered to Osisko. The amortization of deferred revenue is calculated on a per unit basis using the estimated total number of silver ounces expected to be delivered to Osisko over the life of the Gibraltar Mine. The current portion of deferred revenue is an estimate based on deliveries anticipated over the next twelve months.

The silver sale agreement has a minimum term of 50 years and automatically renews for successive 10-year periods as long as Gibraltar mining operations are active. If the initial deposit is not fully reduced through silver deliveries at current market prices at time of the deliveries, a cash payment for the remaining amount will be due to Osisko at the expiry date of the agreement. The Company’s obligations under the agreement are secured by a pledge of Taseko’s 75% interest in the Gibraltar Joint Venture.

8

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

The following table summarizes changes in deferred revenue:

Upfront cash deposit	44,151
Issuance of warrants	(1,876)
Amortization of deferred revenue	(1,323)
Balance at December 31, 2017	40,952
Transitional adjustment for IFRS 15 (Note 3)	1,435
Finance expense (Note 3, 7)	3,162
Amortization of deferred revenue	(2,809)
Balance at September 30, 2018	42,740

Deferred revenue is reflected in the condensed consolidated interim balance sheets as follows:

	September 30, 2018		December 31, 2017
Current		3,836		1,312
Non-current		38,904		39,640
		42,740		40,952

14. OTHER FINANCIAL LIABILITIES

	September 30, 2018		December 31, 2017
Long-term:
Deferred share units (Note 15b)		2,375		5,714

15. EQUITY

(a) Share capital

	Common shares (thousands)
Common shares outstanding at January 1, 2018		227,000
Settlement of performance share units		1,024
Exercise of share options		377
Common shares outstanding at September 30, 2018		228,401

The Company’s authorized share capital consists of an unlimited number of common shares with no par value.

9

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

(b) Share-Based Compensation

	Options (thousands)		Average price
Outstanding at January 1, 2018		9,281		1.40
Granted		1,724		2.84
Exercised		(377)		0.85
Cancelled/forfeited		(120)		2.24
Expired		(100)		2.02
Outstanding at September 30, 2018		10,408		1.64
Exercisable at September 30, 2018		8,778		1.52

During the nine month period ended September 30, 2018, the Company granted 1,724,500 (2017 – 1,910,500) share options to directors, executives and employees, exercisable at an average exercise price of $2.84 per common share over a three to five year period. The total fair value of options granted was $2,483 (2017 – $1,165) based on a weighted average grant-date fair value of $1.44 (2017 – $0.61) per option.

The fair value of options was measured at the grant date using the Black-Scholes formula. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the Black-Scholes formula are as follows:

	Nine months ended September 30, 2018
Expected term (years)		4.4
Forfeiture rate		0%
Volatility		64%
Dividend yield		0%
Risk-free interest rate		1.8%
Weighted-average fair value per option		$1.44

The Company has other share-based compensation plans in the form of Deferred Share Units (“DSUs”) and Performance Share Units (“PSUs”).

The continuity of DSUs and PSUs issued and outstanding is as follows:

	DSUs (thousands)		PSUs (thousands)
Outstanding at January 1, 2018		1,943		1,219
Granted		385		400
Settled		-		(409)
Outstanding at September 30, 2018		2,328		1,210

During the nine month period ended September 30, 2018, 385,000 DSUs were issued to directors (2017 – 620,000) and 400,000 PSUs to senior executives (2017 – 400,000). The fair value of DSUs and PSUs granted was $2,982 (2017 – $1,301), with a weighted average fair value at the grant date of $2.86 per unit for the DSUs (2017 – $1.27 per unit) and $4.70 per unit for the PSUs (2017 – $2.33 per unit).

10

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

For the three and nine month periods ended September 30, 2018, the Company recognized total share-based compensation recoveries of $386 and $994 respectively (2017: $2,250 and $5,779 expense).

(c) Share Purchase Warrants

At September 30, 2018, the Company had 3,000,000 share purchase warrants outstanding at an exercise price of $2.74 per share and with an expiry date of April 1, 2020. These warrants were issued in March, 2017 in connection with the silver stream purchase and sale agreement (Note 13).

16. COMMITMENTS AND CONTINGENCIES

(a) Commitments

As at September 30, 2018, the Company had commitments to incur capital expenditures of $304 (2017: $nil) for the Florence Copper project and $1,145 (2017: $3,162) for the Gibraltar joint venture, of which the Company’s share is $859.

The Company is a party to certain contracts relating to operating leases and service and supply agreements. Future minimum payments under these agreements as at September 30, 2018 are presented in the following table:

Remainder of 2018	1,614
2019	6,456
2020	2,034
2021	511
2022	241
2023 and thereafter	-
Total operating commitments	10,856

(b) Contingencies

The Company has guaranteed 100% of certain capital lease and equipment loans entered into by the Gibraltar joint venture in which it holds a 75% interest. As a result, the Company has guaranteed the joint venture partner’s 25% share of this debt which amounted to $9,035 as at September 30, 2018.

17. SUPPLEMENTARY CASH FLOW INFORMATION

	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
Change in non-cash working capital items
Accounts receivable		4,366		3,653		6,885		4,136
Inventories		(25,727)		(3,127)		(29,069)		696
Prepaids		223		423		(782)		(557)
Accounts payable and accrued liabilities		2,043		(3,363)		1,543		3,303
Advance payments on product sales		8,011		-		8,011		-
Interest payable		(88)		(70)		(64)		(90)
Income tax payable		(1,379)		-		(2,546)		(1,075)
		(12,551)		(2,484)		(16,022)		6,413

11

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

Non-cash financing activities
Share purchase warrants issued (Note 13)	-	-	-	1,876
Assets acquired under capital lease	-	12,019	-	13,059
Share purchase warrants exercised	-	-	-	(830)
	-	12,019	-	14,105

18. RELATED PARTIES

Related Party Transactions

	Transaction value for the three months ended September 30,				Transaction value for the nine months ended September 30
	2018		2017		2018		2017
Hunter Dickinson Services Inc.:
General and administrative expenses		276		285		982		1,008
Exploration and evaluation expenses		10		11		34		84
		286		296		1,016		1,092
Gibraltar joint venture:
Management fee income		293		291		875		875
Reimbursable compensation expenses and third party costs		81		(6)		127		33
		374		285		1,002		908
					Balance due (to) from as at September 30,
					2018		2017
Hunter Dickinson Services Inc. Gibraltar Joint Venture						(38) 189		(61) 285

Three directors of the Company are also principals of Hunter Dickinson Services Inc. (“HDSI”), a private company. HDSI invoices the Company for their executive services (director fees) and for other services provided by HDSI. For the three month period ended September 30, 2018, the Company incurred total costs of $286 (Q3 2017: $296) in transactions with HDSI. Of these, $108 (Q3 2017: $119) related to administrative, legal, exploration and tax services, $108 related to reimbursements of office rent costs (Q3 2017: $107), and $70 (Q3 2017: $70) related to director fees for two Taseko directors who are also principals of HDSI.

For the nine month period ended September 30, 2018, the Company incurred total costs of $1,016 (2017: $1,092) in transactions with HDSI. Of these, $388 (2017: $463) related to administrative, legal, exploration and tax services, $418 related to reimbursements of office rent costs (2017: $419), and $210 (2017: $140) related to director fees for two Taseko directors who are also principals of HDSI.

Under the terms of the joint venture operating agreement, the Gibraltar Joint Venture pays the Company a management fee for services rendered by the Company as operator of the Gibraltar Mine. In addition, the Company pays certain expenses on behalf of the Gibraltar Joint Venture and invoices the Joint Venture for these expenses.

12

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

19. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value, by reference to the reliability of the inputs used to estimate the fair values.

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Company has certain financial assets and liabilities that are measured at fair value on a recurring basis and uses the fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, with Level 1 inputs having the highest priority.

	Level 1		Level 2		Level 3		Total
September 30, 2018
Financial assets designated as FVPL
Copper put option contracts		-		1,117		-		1,117
Financial assets irrevocably designated as FVOCI
Marketable securities		1,750		-		-		1,750
Investment in subscription receipts		-		-		2,400		2,400
Reclamation deposits		30,757		-		-		30,757
		32,507		1,117		2,400		36,024
December 31, 2017
Financial assets designated as FVPL
Copper put option contracts		-		331		-		331
Financial assets irrevocably designated as FVOCI
Marketable securities		2,444		-		-		2,444
Investment in subscription receipts		-		-		2,400		2,400
Reclamation deposits		30,638		-		-		30,638
		33,082		331		2,400		35,813

There have been no transfers between fair value levels during the reporting period. The carrying value of cash and equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value as at September 30, 2018.

The fair value of the senior secured notes, a Level 1 instrument, is determined based upon publicly available information. The fair value of the capital leases and secured equipment loans, Level 2 instruments, are determined through discounting future cash flows at an interest rate of 5.46% based on the relevant loans effective interest rate.

13

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - unaudited)

The fair values of the Level 2 instruments are based on broker quotes. Similar contracts are traded in an active market and the broker quotes reflect the actual transactions in similar instruments.

The Company’s metal concentrate sales contracts are subject to provisional pricing with the selling price adjusted at the end of the quotational period. At each reporting date, the Company’s settlement receivable on these contracts are marked-to-market based on a quoted forward price for which there exists an active commodity market.

The subscription receipts, a Level 3 instrument, are valued based on a management estimate. As the subscription receipts are an investment in a private exploration and development company, there are no observable market data inputs. At September 30, 2018 the determination of the estimated fair value of the investment includes comparison to the market capitalization of comparable public companies.

Commodity Price Risk

The Company is exposed to the risk of fluctuations in prevailing market commodity prices on the metals it produces. To manage the Company’s operating margins effectively in volatile metals markets, the Company enters into copper option contracts. The amount and duration of the hedge position is based on an assessment of business-specific risk elements combined with the copper pricing outlook. Copper put option contracts are typically extended adding incremental quarters at established strike prices to provide the necessary price protection.

Provisional pricing mechanisms embedded within the Company’s sales arrangements have the character of a commodity derivative and are carried at fair value as part of accounts receivable. The table below summarizes the impact on revenue and receivables for changes in commodity prices on the provisionally invoiced sales volumes.

	As at September 30, 2018
Copper increase/decrease by US$0.26/lb.1		4,507

¹ The analysis is based on the assumption that the period end copper price increases 10% with all other variables held constant. At September 30, 2018, 13 million pounds of copper in concentrate were exposed to copper price movements. The closing exchange rate at September 30, 2018 of CAD/USD 1.2945 was used in the analysis.

The sensitivities in the above table have been determined with foreign currency exchange rates held constant. The relationship between commodity prices and foreign currencies is complex and movements in foreign exchange can impact commodity prices. The sensitivities should therefore be used with care.

14

EX-99.2

Exhibit 99.2

TASEKO MINES LIMITED

Management’s Discussion and Analysis

This management discussion and analysis (“MD&A”) is intended to help the reader understand Taseko Mines Limited (“Taseko”, “we”, “our” or the “Company”), our operations, financial performance, and current and future business environment. This MD&A is intended to supplement and complement the consolidated financial statements and notes thereto, prepared in accordance with IAS 34 of International Financial Reporting Standards (“IFRS”) for the three and nine months ended September 30, 2018 (the “Financial Statements”). You are encouraged to review the Financial Statements in conjunction with your review of this MD&A and the Company’s other public filings, which are available on the Canadian Securities Administrators’ website at www.sedar.com and on the EDGAR section of the United States Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

This MD&A is prepared as of October 30, 2018. All dollar figures stated herein are expressed in Canadian dollars, unless otherwise specified.

Cautionary Statement on Forward-Looking Information

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 we believe 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 actual results or developments may differ materially from those projected in the forward-looking statements. All of the forward-looking statements made in this MD&A are qualified by these cautionary statements. We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by applicable law. Further information concerning risks and uncertainties associated with these forward-looking statements and our business may be found in the Company’s other public filings with the SEC and Canadian provincial securities regulatory authorities.

1

TASEKO MINES LIMITED

Management’s Discussion and Analysis

CONTENTS
OVERVIEW	3
HIGHLIGHTS	3
REVIEW OF OPERATIONS	5
GIBRALTAR OUTLOOK	6
REVIEW OF PROJECTS	7
MARKET REVIEW	7
FINANCIAL PERFORMANCE	8
FINANCIAL CONDITION REVIEW	13
SUMMARY OF QUARTERLY RESULTS	16
CRITICAL ACCOUNTING POLICIES AND ESTIMATES	16
INTERNAL AND DISCLOSURE CONTROLS OVER FINANCIAL REPORTING	17
RELATED PARTY TRANSACTIONS	17
NON-GAAP PERFORMANCE MEASURES	19

2

TASEKO MINES LIMITED

Management’s Discussion and Analysis

OVERVIEW

Taseko Mines Limited (“Taseko” or “Company”) is a mining company that seeks to create shareholder value by acquiring, developing, and operating large tonnage mineral deposits which, under conservative forward metal price assumptions, are capable of supporting a mine for ten years or longer. The Company’s sole operating asset is the 75% owned Gibraltar Mine, a large copper mine located in central British Columbia. The Gibraltar Mine is one of the largest copper mines in North America. Taseko also owns the Florence Copper Project, which is advancing towards an expected construction decision by the end of 2019, as well as the Aley niobium, Harmony gold and New Prosperity gold-copper projects.

HIGHLIGHTS

Financial Data	Three months ended September 30,						Nine months ended September 30,
(Cdn$ in thousands, except for per share amounts)	2018		2017		Change		2018		2017		Change
Revenues		74,297		78,508		(4,211)		232,749		282,891		(50,142)
Earnings from mining operations before depletion and amortization*		33,742		45,133		(11,391)		83,553		145,020		(61,467)
Earnings from mining operations		13,568		33,348		(19,780)		30,644		111,859		(81,215)
Net income (loss)		7,098		20,136		(13,038)		(16,054)		41,862		(57,916)
Per share – basic (“EPS”)		0.03		0.09		(0.06)		(0.07)		0.19		(0.26)
Adjusted net income (loss)*		1,464		13,405		(11,941)		(7,198)		42,965		(50,163)
Per share – basic (“adjusted EPS”)*		0.01		0.06		(0.05)		(0.03)		0.19		(0.22)
EBITDA*		37,718		48,457		(10,739)		63,597		141,407		(77,810)
Adjusted EBITDA*		31,940		42,356		(10,416)		71,728		133,110		(61,382)
Cash flows provided by operations		18,053		37,124		(19,071)		49,958		179,180		(129,222)

Operating Data (Gibraltar – 100% basis)	Three months ended September 30,						Nine months ended September 30,
	2018		2017		Change		2018		2017		Change
Tons mined (millions)		29.0		23.3		5.7		83.1		66.2		16.9
Tons milled (millions)		8.0		7.2		0.8		22.9		22.0		0.9
Production (million pounds Cu)		43.0		35.1		7.9		99.4		115.7		(16.3)
Sales (million pounds Cu)		28.8		30.2		(1.4)		83.8		111.7		(27.9)

*Non-GAAP performance measure. See page 19 of this MD&A.

3

TASEKO MINES LIMITED

Management’s Discussion and Analysis

HIGHLIGHTS—CONTINUED

Third Quarter Highlights

• Copper production in the third quarter was 43.0 million pounds (100% basis), which represents a 28% increase over the previous quarter as a result of the higher head grades and increased mill throughput;

• Total copper sales for the quarter were 29.0 million pounds (100% basis), as concentrate shipments were delayed by poor rail service between the mine and the port terminal. As a result, inventories increased to 18.5 million pounds of copper (100% basis) at September 30, 2018. The lower sales affected the Company’s quarterly revenues by approximately $40 million and cash flow by approximately $30 million, based on current copper pricing. The excess inventory is expected to be sold in the fourth quarter;

• Third quarter earnings from mining operations before depletion and amortization* were $33.7 million;

• Net income was $7.1 million ($0.03 net earnings per share) and Adjusted net income* was $1.5 million ($0.01 per share);

• Site operating costs, net of by-product credits* were US$1.34 per pound produced and Total operating costs (C1)* were US$1.58 per pound produced, as unit costs were positively impacted by the higher grades and production;

• The Company has finalized an insurance claim of $7.9 million (75% basis) related to the Cariboo region wildfires in July 2017. Third quarter earnings include an insurance recovery of $3.9 million;

• Construction of the Production Test Facility (“PTF”) for the Florence Copper Project was completed in October, on time and on budget. The facility is operational and first copper cathode is expected by the end of this year;

• Cash flow from operations was $18.1 million, which was impacted by a $12.6 million working capital adjustment related to the increased inventories and the timing of customer payments;

• At September 30, 2018 the Company held put options for 15 million pounds of copper with scheduled maturities over the fourth quarter of 2018 at a strike price of US$2.80 per pound; and

• The Company’s cash balance at September 30, 2018 was $45 million, a reduction from the previous quarter mainly due to the build-up of unsold copper concentrate inventories.

*Non-GAAP performance measure. See page 19 of this MD&A.

4

TASEKO MINES LIMITED

Management’s Discussion and Analysis

REVIEW OF OPERATIONS

Gibraltar Mine (75% Owned)

Operating data (100% basis)	Q3 2018		Q2 2018		Q1 2018		Q4 2017		Q3 2017
Tons mined (millions)		29.0		27.4		26.7		26.9		23.3
Tons milled (millions)		8.0		7.5		7.5		7.9		7.2
Strip ratio		1.7		1.9		4.1		4.9		4.1
Site operating cost per ton milled (CAD$)*	$	10.60	$	10.31	$	8.68	$	7.68	$	5.93
Copper concentrate
Grade (%)		0.314		0.263		0.201		0.209		0.284
Recovery (%)		85.9		85.3		75.7		77.5		86.1
Production (million pounds Cu)		43.0		33.5		22.9		25.5		35.1
Sales (million pounds Cu)		28.8		32.2		22.8		32.0		30.2
Inventory (million pounds Cu)		18.5		4.2		2.9		2.7		9.3
Molybdenum concentrate
Production (thousand pounds Mo)		690		506		443		537		445
Sales (thousand pounds Mo)		709		424		433		589		403
Per unit data (US$ per pound produced)*
Site operating costs*	$	1.50	$	1.78	$	2.25	$	1.86	$	0.97
By-product credits*		(0.16)		(0.12)		(0.23)		(0.17)		(0.09)
Site operating costs, net of by-product credits*	$	1.34	$	1.66	$	2.02	$	1.69	$	0.88
Off-property costs		0.24		0.32		0.31		0.42		0.30
Total operating costs (C1)*	$	1.58	$	1.98	$	2.33	$	2.11	$	1.18

*Non-GAAP performance measure. See page 19 of this MD&A.

5

TASEKO MINES LIMITED

Management’s Discussion and Analysis

OPERATIONS ANALYSIS

Third quarter results

Copper production in the third quarter was 43.0 million pounds, significantly higher than previous quarters as a result of improved head grade and increased concentrator throughput. The improved head grade was mainly achieved by developing a very high grade ore zone near the bottom of the Granite pit pushback faster than planned. During bench development, geotechnical drilling and rock structure evaluations indicated that the high wall could be steepened and additional ore benches could be developed deeper into the Granite Pit. Steepening of the high wall and accelerated mining allowed access to the higher grade ore quicker than that anticipated in the 2018 mine plan.

A total of 29.0 million tons were mined during the period, an increase over previous quarters as haulage truck hours were increased to meet mine plan sequencing requirements. The strip ratio for the third quarter of 1.7 to 1 was lower than recent quarters as a total of 2.9 million tons of mined ore was added to the ore stockpile in the period.

Site operating cost per ton milled* was $10.60 in the third quarter of 2018, which is higher than recent quarters. The increased operating costs are due to the increased mining rate as well as a reduction in the proportion of the mining costs that are capitalized. Waste stripping costs of $7.6 million (75% basis) were capitalized in the third quarter.

Site operating costs per pound produced* decreased to US$1.50 from US$1.78 in the previous quarter, primarily due to higher copper production. Site operating costs per pound produced* does not take into account the insurance recoverable of $3.9 million that was recorded in the third quarter.

Molybdenum production increased to 0.7 million pounds in the third quarter due to improved molybdenum plant operating performance. Molybdenum sales volumes were in line with production levels as the product is delivered to the customer at the mine gate and not affected by rail transportation delays. By-product credits per pound of copper produced* increased to US$0.16 in the third quarter from US$0.12 in the previous quarter.

Off-property costs per pound produced* were US$0.24 for the third quarter of 2018, which is lower than recent quarters as a result of lower copper sales volume relative to copper production during the current period. Off-property costs are lower in periods where sales volumes are lower. Total operating costs (C1) per pound* decreased to US$1.58, a 20% decrease from the second quarter of 2018.

GIBRALTAR OUTLOOK

Fourth quarter 2018 copper production is expected to return to more normal levels, and total copper production is expected to be approximately 130 million pounds for the 2018 year. Inventories of copper in concentrate increased to 18.5 million pounds at September 30, 2018, and we expect that during the fourth quarter rail service will move most of the excess inventory to the port for shipping. Sales volumes in the fourth quarter could be approximately 45 million pounds of copper (100% basis), depending on vessel scheduling and berth availability.

The Company has finalized an insurance claim of $7.9 million (75% basis) related to the Cariboo region wildfires in July 2017. Cash settlement is expected in the fourth quarter.

*Non-GAAP performance measure. See page 19 of this MD&A

6

TASEKO MINES LIMITED

Management’s Discussion and Analysis

REVIEW OF PROJECTS

Taseko’s strategy has been to grow the Company by leveraging cash flow from the Gibraltar Mine to assemble and develop a pipeline of projects. We continue to believe this will generate the best, long-term returns for shareholders. Our development projects are located in British Columbia and Arizona and represent a diverse range of metals, including gold, copper, molybdenum and niobium. Our current focus is on the development of the Florence Copper Project.

Florence Copper Project

In September 2017, the Company announced that it was moving forward with the construction of the Production Test Facility (“PTF”) for the Florence Copper Project. The SX/EW Plant and the associated wellfield, comprised of 24 production, monitoring, observation and point of compliance wells.

Construction of the PTF progressed smoothly through the third quarter and has now been completed, on time and on budget. Total construction expenditures were $32.5 million (US$25.0 million) as at September 30, 2018. The wellfield and associated facilities are ready to commence leaching activities, and first copper production is expected by the end of the year. Construction expenditures on the PTF in the nine months ended September 30, 2018 were $27.3 million (US$20.8 million).

Successful operation of the in situ leaching process will allow permits to be amended for the full scale operation of 85 million pounds per year of copper cathode. It is anticipated that construction of the commercial scale operation could be commenced in the first half of 2020.

Aley Niobium Project

Environmental monitoring on the project continues and a number of product marketing initiatives are underway. A drill program was completed in the third quarter to collect samples for further metallurgical testing.

MARKET REVIEW

Copper                                                                  Molybdenum                                                         Canadian/US Dollar Exchange

Prices (USD per pound for Commodities)

(Source Data: London Metals Exchange, Platts Metals, and Bank of Canada)

Copper prices have continued to be very volatile over the last year. Changes in Chinese economic demand, copper supply disruptions, global trade policies, interest rate expectations and speculative investment activity have all contributed to the recent price volatility.

The average price of London Metals Exchange (“LME”) copper was US$2.77 per pound in the third quarter of 2018, which was 11% lower than the second quarter of 2018 and is approximately 4% lower than the third quarter of 2017. Despite the short-term volatility, management continues to believe that the copper market will benefit from tight mine supply going forward.

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

The average molybdenum price was US$11.83 per pound in the third quarter of 2018, which was 2% higher than the second quarter of 2018. The Company’s sales agreement specifies molybdenum pricing based on the published Platts Metals reports.

Approximately 80% of the Gibraltar Mine’s costs are Canadian dollar denominated and therefore, fluctuations in the Canadian/US dollar exchange rate can have a significant effect on the Company’s operating results and unit production costs, which are reported in US dollars. The Canadian dollar strengthened by approximately 2% during the third quarter of 2018.

FINANCIAL PERFORMANCE

Earnings

The Company’s net income was $7.1 million for the three months ended September 30, 2018, compared to a net income of $20.1 million for the same period in 2017. The decrease in net income was primarily due to the lower copper prices, higher depletion and amortization expense, and increased operating costs in the current period.

The Company’s net loss was $16.1 million for the nine months ended September 30, 2018, compared to a net income of $41.9 million for the same period in 2017. The decrease in net income was primarily due to the lower earnings from mining operations and unrealized foreign exchange differences on the Company’s US dollar denominated debt.

Earnings from mining operations before depletion and amortization* for the three and nine months ended September 30, 2018 was $33.7 million and $83.6 million, respectively, compared to earnings of $45.1 million and $145.0 million, respectively for the same periods in 2017. These decreases are a result of lower copper sales volumes and higher unit operating costs this year.

Included in net income (loss) are a number of items that management believes require adjustment in order to better measure the underlying performance of the business. The following items have been adjusted as management believes they are not indicative of a realized economic gain/loss or the underlying performance of the business in the period:

	Three months ended September 30,						Nine months ended September 30,
(Cdn$ in thousands)	2018		2017		Change		2018		2017		Change
Net earnings (loss)		7,098		20,136		(13,038)		(16,054)		41,862		(57,916)
Unrealized foreign exchange gain (loss)		(5,244)		(10,299)		5,055		10,817		(19,225)		30,042
Unrealized (gain) loss on copper put options		(534)		647		(1,181)		(2,686)		1,072		(3,758)
Loss on copper call option		-		-		-		-		6,305		(6,305)
Loss on settlement of long-term debt		-		-		-		-		13,102		(13,102)
Write-down of mine equipment		-		3,551		(3,551)		-		3,551		(3,551)
Estimated tax effect of adjustments		144		(630)		774		725		(3,702)		4,427
Adjusted net income (loss)*		1,464		13,405		(11,941)		(7,198)		42,965		(50,163)

*Non-GAAP performance measure. See page 19 of this MD&A

In the three month period ended September 30, 2018, the Canadian dollar strengthened in comparison to the US dollar by 2%, resulting in an unrealized foreign exchange gain of $5.2 million. In the nine month period ended

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

September 30, 2018, the Canadian dollar weakened in comparison to the US dollar by 3%, resulting in an unrealized foreign exchange loss of $10.8 million. The unrealized foreign exchange gains and losses were primarily related to the Company’s US dollar denominated long-term debt.

Revenues

	Three months ended September 30,						Nine months ended September 30,
(Cdn$ in thousands)	2018		2017		Change		2018		2017		Change
Copper in concentrate		74,904		79,786		(4,882)		236,732		284,890		(48,158)
Molybdenum concentrate		8,044		3,052		4,992		17,892		15,988		1,904
Silver		1,000		325		675		3,169		1,351		1,818
Price adjustments on settlement receivables		(3,617)		1,509		(5,126)		(7,725)		6,461		(14,186)
Total gross revenue		80,331		84,672		(4,341)		250,068		308,690		(58,622)
Less: treatment and refining costs		(6,034)		(6,164)		130		(17,319)		(25,799)		8,480
Revenue		74,297		78,508		(4,211)		232,749		282,891		(50,142)
Copper in concentrate (thousands of pounds)*		20,836		21,806		(970)		60,588		80,738		(20,150)
Average realized copper price (US$ per pound)		2.63		3.00		(0.37)		2.91		2.76		0.15
Average LME copper price (US$ per pound)		2.77		2.88		(0.11)		3.01		2.70		0.31
Average exchange rate (US$/CAD)		1.31		1.25		0.06		1.29		1.31		(0.02)

* This amount includes a net smelter payable deduction of approximately 3.5% to derive net payable pounds of copper sold.

Copper revenues for the three months ended September 30, 2018 decreased by $4.9 million, compared to the same period in 2017, primarily due to a decrease in copper prices in the current period.

Copper revenues for the nine months ended September 30, 2018 decreased by $48.2 million, compared to the same period in 2017, primarily due to a decrease in copper sales volumes, partially offset by higher copper prices in the current period.

During the three and nine months ended September 30, 2018, price adjustments of negative $3.7 million and negative $8.1 million, respectively, were recorded for provisionally priced copper concentrate. These adjustments resulted in US$0.14 and US$0.10 per pound decreases to the average realized copper price for the three and nine months ended September 30, 2018.

Molybdenum revenues for the three and nine months ended September 30, 2018 increased by $5.0 million and $1.9 million, compared to the same periods in 2017. The increase in the three months ended September 30, 2018 was due to higher sales volume and higher molybdenum prices in the current period. The increase in the nine month period was due to higher molybdenum prices, partially offset by lower sales volumes in the current year. During the three and nine months ended September 30, 2018, price adjustments of positive $0.1 million and positive $0.4 million, respectively, were recorded for provisionally priced molybdenum concentrate.

9

TASEKO MINES LIMITED

Management’s Discussion and Analysis

Cost of sales

	Three months ended September 30,						Nine months ended September 30,
(Cdn$ in thousands)	2018		2017		Change		2018		2017		Change
Site operating costs		63,436		31,904		31,532		169,984		122,098		47,886
Transportation costs		5,149		4,498		651		12,507		15,207		(2,700)
Insurance recoverable		(3,875)		-		(3,875)		(7,875)		-		(7,875)
Changes in inventories of finished goods		(17,439)		(5,440)		(11,999)		(17,593)		(5,696)		(11,897)
Changes in inventories of ore stockpiles		(6,716)		2,413		(9,129)		(7,827)		6,262		(14,089)
Production costs		40,555		33,375		7,180		149,196		137,871		11,325
Depletion and amortization		20,174		11,785		8,389		52,909		33,161		19,748
Cost of sales		60,729		45,160		15,569		202,105		171,032		31,073
Site operating costs per ton milled*		$10.60		$5.93		$4.67		$9.88		$7.41		$2.47

*Non-GAAP performance measure. See page 19 of this MD&A

Site operating costs for the three months and nine months ended September 30, 2018 increased by $31.5 million and $47.9 million, respectively. The cost increases are primarily a result of increased mining rates in the first nine months of 2018, and reduced allocations to capitalized stripping costs.

Site operating costs exclude costs that are allocated to capitalized stripping as a result of waste stripping in the Granite pit, in accordance with the mine plan. For the three and nine months ended September 30, 2018, $7.6 million and $30.0 million, respectively, was allocated to capitalized stripping, compared to $22.9 million and $51.6 million for the same periods in 2017.

The Company has finalized an insurance claim of $7.9 million (75% basis) related to the Cariboo region wildfires in July 2017. An insurance recovery of $3.9 million was recorded in the third quarter. During the first quarter of 2018, the Company recorded an insurance recoverable of $4 million. Cash settlement of the insurance claim is expected in the fourth quarter.

Cost of sales is also impacted by changes in ore stockpile and copper inventories. In the three months ended September 30, 2018, the ore stockpiles were increased by 2.9 million tons, resulting in an increase in inventories (decrease in cost of sales) of $6.7 million. In the third quarter of 2017, the ore stockpile inventory decreased by $2.4 million (increase in cost of sales) due to a decrease in the stockpiled tonnage.

In the three months ended September 30, 2018, the finished goods inventory was increased by 14.3 million pounds of copper, resulting in an increase in inventories (decrease in cost of sales) of $17.4 million.

Depletion and amortization for three and nine months ended September 30, 2018 increased by $8.4 million and $19.7 million, respectively, over the same periods in 2017. These differences are primarily due to increased amortization of capitalized stripping costs which has increased significantly in the current year as ore tons are now being mined from the new section of the Granite pit.

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

Other operating (income) expenses

	Three months ended September 30,						Nine months ended September 30,
(Cdn$ in thousands)	2018		2017		Change		2018		2017		Change
General and administrative		3,328		2,181		1,147		10,830		9,941		889
Share-based compensation expense (recovery)		(428)		2,231		(2,659)		(1,223)		5,673		(6,896)
Exploration and evaluation		(154)		450		(604)		1,381		1,409		(28)
Realized (gain) loss on copper put options		(194)		504		(698)		2,107		1,089		1,018
Unrealized (gain) loss on copper put options		(534)		647		(1,181)		(2,686)		1,072		(3,758)
Loss on copper call option		-		-		-		-		6,305		(6,305)
Write-down of mine equipment		-		3,551		(3,551)		-		3,551		(3,551)
Other income		(547)		(205)		(342)		(1,206)		(751)		(455)
		1,471		9,359		(7,888)		9,203		28,289		(19,086)

General and administrative costs have increased for the three and nine months ended September 30, 2018, compared to the same periods in 2017 primarily due to executive pension contributions during the third quarter.

Share-based compensation recovery for the three months and nine months ended September 30, 2018, was primarily due to the revaluation of the liability for deferred share units resulting from a decrease in the Company’s share price.

Exploration and evaluation costs for the three and nine months ended September 30, 2018, represent costs associated with the New Prosperity and Aley projects. During the three months ended September 30, 2018 the exploration and evaluation costs were offset by a $0.6 million tax credit related to the Aley project.

During the three and nine months ended September 30, 2018, the Company incurred a realized gain of $0.2 million and a realized loss of $2.1 million, respectively from copper put options that settled during the period. The unrealized gains of $0.5 million and $2.7 million, respectively relates to the fair value adjustment of copper put options.

A write-down of mine equipment of $3.6 million was recorded in the third quarter of 2017 to adjust the carrying value of certain Gibraltar Mine equipment to its estimated recoverable value. This mine equipment was replaced by equipment acquired under capital leases during the third quarter of 2017.

Finance expenses

	Three months ended September 30,						Nine months ended September 30,
(Cdn$ in thousands)	2018		2017		Change		2018		2017		Change
Interest expense		8,221		7,818		403		23,920		22,932		988
Finance expense – deferred revenue		1,020		-		1,020		3,162		-		3,162
Accretion of PER		588		567		21		1,791		1,704		87
Loss on settlement of long-term debt		-		-		-		-		13,102		(13,102)
		9,829		8,385		1,444		28,873		37,738		(8,865)

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

Interest expense for the three and nine months ended September 30, 2018 increased by $0.4 million and $1.0 million, respectively, compared to the same period in 2017. The Company’s total interest costs are lower in the three and nine months ended September 30, 2018 due to reduced long-term debt as a result of the June 2017 refinancing. However, interest expense recorded on the income statement is higher in 2018 primarily because no interest was capitalized in the current year, whereas $2.6 million of interest was capitalized in the nine months ended September 30, 2017.

Finance expense – deferred revenue represents the financing component of the upfront deposit from the silver streaming arrangement.

Loss on settlement of long-term debt of $13.1 million in 2017 relates to the write-off of deferred financing costs and additional interest expense incurred upon the settlement of the senior notes and the senior secured credit facility in June 2017.

Income tax

	Three months ended September 30,						Nine months ended September 30,
(Cdn$ in thousands)	2018		2017		Change		2018		2017		Change
Current income tax expense		280		420		(140)		770		1,396		(626)
Deferred income tax expense (recovery)		1,019		5,884		(4,865)		(967)		22,675		(23,642)
		1,299		6,304		(5,005)		(197)		24,071		(24,268)
Effective tax rate		15.4%		23.8%		(8.4)%		1.2%		36.5%		(35.3)%
Canadian statutory rate		27%		26%		1%		27%		26%		1%
B.C. Mineral tax rate		9.6%		9.6%		-		9.6%		9.6%		-

The income tax expense for the third quarter of 2018 decreased from the same quarter in 2017 mainly due to lower earnings resulting in lower estimated B.C. mineral taxes for the quarter. The deferred income tax expense is due in part to the reversal of certain deferred income tax assets in the quarter. The lower effective tax rate for the quarter is mainly impacted by items that are not included in income for tax purposes, such as the foreign exchange gain.

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

FINANCIAL CONDITION REVIEW

Balance sheet review

(Cdn$ in thousands)	As at September 30, 2018		As at December 31, 2017		Change
Cash and cash equivalents		45,292		80,231		(34,939)
Other current assets		93,249		65,505		27,744
Property, plant and equipment		807,547		797,265		10,282
Other assets		45,994		45,709		285
Total assets		992,082		988,710		3,372
Current liabilities		68,760		50,139		18,621
Debt:
Senior secured notes		313,696		302,085		11,611
Capital leases and secured equipment loans		27,105		27,133		(28)
Deferred revenue		38,904		39,640		(736)
Other liabilities		188,352		202,633		(14,281)
Total liabilities		636,817		621,630		15,187
Equity		355,265		367,080		(11,815)
Net debt (debt minus cash and equivalents)		295,509		248,987		46,522
Total common shares outstanding (millions)		228.4		227.0		1.4

The Company’s asset base is comprised principally of non-current assets, including property, plant and equipment, reflecting the capital intensive nature of the mining business. Other current assets include accounts receivable, other financial assets and inventories (concentrate inventories, ore stockpiles, and supplies), along with prepaid expenses and deposits. Concentrate inventories, accounts receivable and cash balances fluctuate in relation to shipping and cash settlement schedules.

Total long-term debt increased by $11.6 million for the nine months ended September 30, 2018, due primarily to the foreign exchange losses on the Company’s US dollar denominated debt and a new equipment loan for $9 million, partially offset by the payments on the Company’s capital leases and equipment loans. The Company’s net debt has increased by $46.5 million for the nine months ended September 30, 2018 which is due to capital expenditures at Florence and Gibraltar, as well as the build-up of inventories at Gibraltar.

Deferred revenue relates to the advance payment received in March 2017 from Osisko Gold Royalties Ltd. (“Osisko”) for the sale of future silver production from the Gibraltar Mine.

Other liabilities decreased by $14.3 million mainly due to the decrease in the provision for environmental rehabilitation (“PER”) and deferred tax liabilities.

The decrease in the PER is driven by an increase in the discount rates. At September 30, 2018, the Bank of Canada long-term benchmark bond rate used as a proxy for long-term discount rates was 2.41% compared to 2.26% at December 31, 2017. Given the long time frame over which environmental rehabilitation expenditures are expected to be incurred (over 100 years), the carrying value of the provision is very sensitive to changes in discount rates.

As at October 30, 2018, there were 228,400,834 common shares outstanding. In addition, there were 10,408,400 stock options and 3,000,000 warrants outstanding at October 30, 2018. More information on these instruments

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

and the terms of their exercise is set out in Notes 13 and 15 of the September 30, 2018 unaudited condensed consolidated interim financial statements.

Liquidity, cash flow and capital resources

Copper sales volumes were significantly lower than production volumes during the third quarter of 2018 due to poor rail service between the mine and the port terminal. Operating cash flows for the period were $18.1 million, and were reduced by a negative working capital adjustment of $12.6 million, which primarily relates to the increase in inventories offset by an $8.0 million advance payment received from a customer.

Inventories increased to 18.5 million pounds of copper (100% basis) during the period, and the lower sales affected the Company’s third quarter cash flow by approximately $30 million. The excess inventory is expected to be sold in the fourth quarter of 2018.

The Company used $20.9 million of cash for investing activities in the third quarter, which included $6.8 million of cash payments for construction of the PTF at Florence, $7.6 million for capitalized stripping costs, $3.7 million on other capital expenditures for Gibraltar, $2.8 million on other project costs at the Florence and Aley projects.

Cash used for financing activities during the three months ended September 30, 2018 includes $3.5 million of principal and interest payments for capital leases and equipment loans.

During the nine months ended September 30, 2018, the Company generated operating cash flow of $50.0 million and used $69.3 million for investing activities. Investing activities in the period included $23.0 million of cash payments for construction of the PTF at Florence, $30.0 million for capitalized stripping costs, $8.7 million on other capital expenditures for Gibraltar, $7.1 million on other project costs at the Florence and Aley projects, and $1.1 million for the purchase of copper put options.

During the nine months ended September 30, 2017 the Company generated $106 million of positive cash flow from operating and investing activities, as a result of strong operating results at the Gibraltar Mine and including $44 million of cash proceeds from the sale of a silver stream to Osisko.

At September 30, 2018, the Company had cash and equivalents of $45 million (December 31, 2017 – $80 million) and continues to maintain a strategy of retaining a significant cash balance to reflect the volatile and capital intensive nature of the copper mining business. The Company continues to make monthly principal repayments for capital leases and equipment loans, however, there are no principal payments required on the senior secured notes until the maturity date in June 2022.

Liquidity outlook

The Company has a pipeline of development stage projects, including the Florence Copper Project and Aley Niobium Project, and additional funding will be required to advance these projects to production. To address project funding requirements, the Company may seek to raise additional capital through debt or equity financings or asset sales (including royalties, sales of project interests, or joint ventures). The senior secured notes (due in June 2022) allow for up to US$100 million of first lien secured debt to be issued as well as up to US$50 million of debt for equipment financing, all subject to the terms of the note indenture. The Company may also redeem or repurchase senior secured notes on the market. From time to time, the Company evaluates these alternatives, based on a number of factors including the prevailing market prices of its common shares and senior secured notes, metal prices, liquidity requirements, covenant restrictions and other factors, in order to determine the

14

TASEKO MINES LIMITED

Management’s Discussion and Analysis

optimal mix of capital resources to address capital requirements, minimize the Company’s cost of capital, and maximize shareholder value.

Future changes in copper and molybdenum market prices could also impact the timing and amount of cash available for future investment in development projects, debt obligations, and other uses of capital. To partially mitigate commodity price risks, copper put options are entered into for a portion of Gibraltar copper production (see section below “Hedging Strategy”).

Hedging strategy

The Company’s hedging strategy is to secure a minimum price for a portion of copper production using put options that are either purchased outright or funded by the sale of call options that are significantly out of the money. The amount and duration of the hedge position is based on an assessment of business-specific risk elements combined with the copper pricing outlook. Copper price and quantity exposure are reviewed at least quarterly to ensure that adequate revenue protection is in place. Hedge positions are typically extended adding incremental quarters at established put strike prices to provide the necessary price protection. The Company’s hedging strategy is designed to mitigate short-term declines in copper price.

Considerations on the cost of the hedging program include an assessment of Gibraltar’s estimated production costs, anticipated copper prices and the Company’s capital requirements during the relevant period. During the second quarter of 2018, the Company spent $1.1 million to purchase copper put options that mature evenly over the third and fourth quarters of 2018. The following table shows the commodity contracts that were outstanding as at the date of this MD&A.

	Notional amount	Strike price	Term to maturity	Original cost
At October 30, 2018
Copper put options	15 million lbs	US$2.80 per lb	Q4 2018	$0.4 million

Commitments and contingencies

Commitments

	Payments due
($ in thousands)	Remainder of 2018		2019		2020		2021		2022		Thereafter		Total
Debt 1:
Repayment of principal		3,318		9,852		6,111		4,897		326,602		-		350,780
Interest		14,485		29,242		28,826		28,583		14,205		-		115,341
PER 2		-		-		-		-		-		100.820		100,820
Operating leases		793		2,395		1,421		189		-		-		4,798
Capital expenditures 3		1,162		-		-		-		-		-		1,162
Other expenditures 4		821		4,061		613		322		241		-		6,058

¹ As at September 30, 2018, debt is comprised of senior secured notes, capital leases and secured equipment loans.

² As at September 30, 2018, provision for environmental rehabilitation amounts presented in the table represents the expected cost of environmental rehabilitation for Gibraltar Mine.

³ Capital expenditure commitments include only those items where the Company has entered into binding commitments.

⁴ Other expenditure commitments include the purchase of goods and services and exploration activities.

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

The Company has guaranteed 100% of certain capital lease and equipment loans entered into by the Gibraltar joint venture in which it holds a 75% interest. As a result, the Company has guaranteed the joint venture partner’s 25% share of this debt which amounted to $9.0 million as at September 30, 2018.

SUMMARY OF QUARTERLY RESULTS

	2018						2017								2016
(Cdn$ in thousands, except per share amounts)	Q3		Q2		Q1		Q4		Q3		Q2		Q1		Q4
Revenues		74,297		94,273		64,179		95,408		78,508		99,994		104,389		94,628
Net earnings (loss)		7,098		(4,671)		(18,481)		(7,600)		20,136		5,247		16,479		5,113
Basic EPS		0.03		(0.02)		(0.08)		(0.03)		0.09		0.02		0.07		0.02
Adjusted net earnings (loss) *		1,464		2,337		(10,999)		(1,544)		13,405		14,305		15,254		16,404
Adjusted basic EPS *		0.01		0.01		(0.05)		(0.01)		0.06		0.06		0.07		0.07
EBITDA*		37,718		25,509		370		22,350		48,457		43,805		49,145		32,312
Adjusted EBITDA *		31,940		32,251		7,537		28,639		42,356		42,820		47,934		44,477
(US$ per pound, except where indicated)
Realized copper price *		2.63		3.13		2.98		3.30		3.00		2.61		2.72		2.54
Total operating costs *		1.58		1.98		2.33		2.11		1.18		1.31		1.33		1.48
Copper sales (million pounds)		21.6		24.2		17.1		24.0		22.6		30.5		30.6		30.3

*Non-GAAP performance measure. See page 19 of this MD&A.

Financial results for the last eight quarters reflect: volatile copper and molybdenum prices and foreign exchange rates that impact realized sale prices; and variability in the quarterly sales volumes due to copper grades and timing of shipments which impacts revenue recognition.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s significant accounting policies are presented in Note 2.4 of the 2017 annual consolidated financial statements and Notes 2 and 3 of the September 30, 2018 unaudited condensed consolidated interim financial statements. The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

In the process of applying the Company’s accounting policies, significant areas where judgment is required include the determination of a joint arrangement, recovery of other deferred tax assets, insurance recoverable, and deferred revenue and finance expense determination.

Other significant areas of estimation include reserve and resource estimation and asset valuations; ore stock piles and finished inventory quantities; plant and equipment lives; tax provisions; provisions for environmental rehabilitation; valuation of financial instruments and derivatives; deferred stripping costs and share-based compensation. Key estimates and assumptions made by management with respect to these areas have been disclosed in the notes to these consolidated financial statements as appropriate.

16

TASEKO MINES LIMITED

Management’s Discussion and Analysis

The accuracy of reserve and resource estimates is a function of the quantity and quality of available data and the assumptions made and judgment used in the engineering and geological interpretation, and may be subject to revision based on various factors. Changes in reserve and resource estimates may impact the carrying value of property, plant and equipment; the calculation of depreciation expense; the capitalization of stripping costs incurred during production; and the timing of cash flows related to the provision for environmental rehabilitation.

Changes in forecast prices of commodities, exchange rates, production costs and recovery rates may change the economic status of reserves and resources. Forecast prices of commodities, exchange rates, production costs and recovery rates, and discount rates assumptions, either individually or collectively, may impact the carrying value of derivative financial instruments, inventories, property, plant and equipment, and intangibles, as well as the measurement of impairment charges or reversals.

INTERNAL AND DISCLOSURE CONTROLS OVER FINANCIAL REPORTING

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting and disclosure controls and procedures.

The Company’s internal control system over financial reporting is designed to provide reasonable assurance to management and the Board of Directors regarding the preparation and fair presentation of published financial statements. Internal control over financial reporting includes those policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

The Company’s internal control system over disclosure controls and procedures is designed to provide reasonable assurance that material information relating to the Company is made known to management and disclosed to others and information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by us under securities legislation is recorded, processed, summarized and reported within the time periods specified in the securities legislation.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined effective can provide only reasonable assurance with respect to financial reporting and disclosure.

There have been no changes in our internal controls over financial reporting and disclosure controls and procedures during the period ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting and disclosure.

RELATED PARTY TRANSACTIONS

Key management personnel

Key management personnel include the members of the Board of Directors and executive officers of the Company.

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

The Company contributes to a post-employment defined contribution pension plan on the behalf of certain key management personnel. This retirement compensation arrangement (“RCA Trust”) was established to provide benefits to certain executive officers on or after retirement in recognition of their long service. Upon retirement, the participant is entitled to the distribution of the accumulated value of the contributions under the RCA Trust. Obligations for contributions to the defined contribution pension plan are recognized as compensation expense in the periods during which services are rendered by the executive officers.

Certain executive officers are entitled to termination and change in control benefits. In the event of termination without cause, other than a change in control, these executive officers are entitled to an amount ranging from 9-months’ to 18-months’ salary. In the event of a change in control, if a termination without cause or a resignation occurs within 12 months following the change of control, these executive officers are entitled to receive, among other things, an amount ranging from 24-months’ to 32-months’ salary and accrued bonus, and all stock options held by these individuals will fully vest.

Executive officers and directors also participate in the Company’s share-based option program (refer to Note 15 of the unaudited condensed consolidated interim financial statements).

Compensation for key management personnel (including all members of the Board of Directors and executive officers) is as follows:

	Three months ended September 30,				Nine months ended September 30,
(Cdn$ in thousands)	2018		2017		2018		2017
Salaries and benefits		1,291		697		5,168		4,169
Post-employment benefits		980		373		1,726		1,119
Share-based compensation expense (recovery)		(476)		2,210		(1,462)		5,560
		1,795		3,280		5,432		10,848

Other related parties

Three directors of the Company are also principals of Hunter Dickinson Services Inc. (“HDSI”), a private company. HDSI invoices the Company for their executive services (director fees) and for other services provided by HDSI. For the three month period ended September 30, 2018, the Company incurred total costs of $0.3 million (Q3 2017: $0.3 million) in transactions with HDSI. Of these, $0.1 million (Q3 2017: $0.1 million) related to administrative, legal, exploration and tax services, $0.1 million related to reimbursements of office rent costs (Q3 2017: $0.1 million), and $0.1 million (Q3 2017: $0.1 million) related to director fees for two Taseko directors who are also principals of HDSI.

For the nine month period ended September 30, 2018, the Company incurred total costs of $1.0 million (2017: $1.1 million) in transactions with HDSI. Of these, $0.4 million (2017: $0.5 million) related to administrative, legal, exploration and tax services, $0.4 million related to reimbursements of office rent costs (2017: $0.4 million), and $0.2 million (2017: $0.2 million) related to director fees for two Taseko directors who are also principals of HDSI.

Under the terms of the joint venture operating agreement, the Gibraltar Joint Venture pays the Company a management fee for services rendered by the Company as operator of the Gibraltar Mine. In addition, the Company pays certain expenses on behalf of the Gibraltar Joint Venture and invoices the Joint Venture for these expenses.

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

NON-GAAP PERFORMANCE MEASURES

This document includes certain non-GAAP performance measures that do not have a standardized meaning prescribed by IFRS. These measures may differ from those used by, and may not be comparable to such measures as reported by, other issuers. The Company believes that these measures are commonly used by certain investors, in conjunction with conventional IFRS measures, to enhance their understanding of the Company’s performance. These measures have been derived from the Company’s financial statements and applied on a consistent basis. The following tables below provide a reconciliation of these non-GAAP measures to the most directly comparable IFRS measure.

Total operating costs and site operating costs, net of by-product credits

Total costs of sales include all costs absorbed into inventory, as well as transportation costs and insurance recoverable. Site operating costs is calculated by removing net changes in inventory, depletion and amortization, insurance recoverable, and transportation costs from cost of sales. Site operating costs, net of by-product credits is calculated by removing by-product credits from the site operating costs. Site operating costs, net of by-product credits per pound are calculated by dividing the aggregate of the applicable costs by copper pounds produced. Total operating costs per pound is the sum of site operating costs, net of by-product credits and off-property costs divided by the copper pounds produced. By-product credits are calculated based on actual sales of molybdenum (net of treatment costs) and silver during the period divided by the total pounds of copper produced during the period. These measures are calculated on a consistent basis for the periods presented.

	Three months ended September 30,				Nine months ended September 30,
(Cdn$ in thousands, unless otherwise indicated) – 75% basis	2018		2017		2018		2017
Cost of sales		60,729		45,160		202,105		171,032
Less:
Depletion and amortization		(20,174)		(11,785)		(52,909)		(33,161)
Insurance recoverable		3,875		-		7,875		-
Net change in inventories of finished goods		17,439		5,440		17,593		5,696
Net change in inventories of ore stockpiles		6,716		(2,413)		7,827		(6,262)
Transportation costs		(5,149)		(4,498)		(12,507)		(15,207)
Site operating costs		63,436		31,904		169,984		122,098
Less by-product credits:
Molybdenum, net of treatment costs		(6,937)		(2,725)		(15,776)		(12,867)
Silver, excluding amortization of deferred revenue		42		(107)		(209)		(637)
Site operating costs, net of by-product credits		56,541		29,072		153,999		108,594
Total copper produced (thousand pounds)		32,251		26,306		74,516		86,780
Total costs per pound produced		1.75		1.11		2.07		1.25
Average exchange rate for the period (CAD/USD)		1.31		1.25		1.29		1.31
Site operating costs, net of by-product credits (US$ per pound)		1.34		0.88		1.61		0.96
Site operating costs, net of by-product credits		56,541		29,072		153,999		108,594
Add off-property costs:
Treatment and refining costs of copper concentrate		4,725		5,378		14,617		21,900
Transportation costs		5,149		4,498		12,507		15,207

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

Total operating costs	66,415	38,948	181,123	145,701
Total operating costs (C1) (US$ per pound)	1.58	1.18	1.89	1.28

Adjusted net income (loss)

Adjusted net income (loss) remove the effect of the following transactions from net income as reported under IFRS:

• Unrealized foreign currency gains/losses;

• Unrealized gain/loss on copper put options;

• Losses on settlement of long-term debt and copper call option; and

• Write-down of mine equipment.

Management believes these transactions do not reflect the underlying operating performance of our core mining business and are not necessarily indicative of future operating results. Furthermore, unrealized gains/losses on derivative instruments, changes in the fair value of financial instruments, and unrealized foreign currency gains/losses are not necessarily reflective of the underlying operating results for the reporting periods presented.

	Three months ended September 30,				Nine months ended September 30,
($ in thousands, except per share amounts)	2018		2017		2018		2017
Net income (loss)		7,098		20,136		(16,054)		41,862
Unrealized foreign exchange (gain) loss		(5,244)		(10,299)		10,817		(19,225)
Unrealized (gain) loss on copper put options		(534)		647		(2,686)		1,072
Loss on copper call option		-		-		-		6,305
Loss on settlement of long-term debt		-		-		-		13,102
Write-down of mine equipment		-		3,551		-		3,551
Estimated tax effect of adjustments		144		(630)		725		(3,702)
Adjusted net income (loss)		1,464		13,405		(7,198)		42,965
Adjusted EPS		0.01		0.06		(0.03)		0.19

EBITDA and Adjusted EBITDA

EBITDA represents net income before interest, income taxes, and depreciation. EBITDA is presented because it is an important supplemental measure of our performance and is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry, many of which present EBITDA when reporting their results. Issuers of “high yield” securities also present EBITDA because investors, analysts and rating agencies consider it useful in measuring the ability of those issuers to meet debt service obligations. The Company believes EBITDA is an appropriate supplemental measure of debt service capacity, because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense goes down as deductible interest expense goes up; depreciation is a non-cash charge.

Adjusted EBITDA is presented as a further supplemental measure of the Company’s performance and ability to service debt. Adjusted EBITDA is prepared by adjusting EBITDA to eliminate the impact of a number of items that are not considered indicative of ongoing operating performance.

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

Adjusted EBITDA is calculated by adding to EBITDA certain items of expense and deducting from EBITDA certain items of income that are not likely to recur or are not indicative of the Company’s future operating performance consisting of:

• Unrealized foreign exchange gains/losses;

• Unrealized gain/loss on copper put options;

• Losses on settlement of long-term debt and copper call option; and

• Write-down of mine equipment.

While some of the adjustments are recurring, other non-recurring expenses do not reflect the underlying performance of the Company’s core mining business and are not necessarily indicative of future results. Furthermore, unrealized gains/losses on derivative instruments, and unrealized foreign currency translation gains/losses are not necessarily reflective of the underlying operating results for the reporting periods presented.

	Three months ended September 30,				Nine months ended September 30,
($ in thousands)	2018		2017		2018		2017
Net income (loss)		7,098		20,136		(16,054)		41,862
Add:
Depletion and amortization		20,174		11,785		52,909		33,161
Amortization of share-based compensation expense (recovery)		(386)		2,250		(994)		5,779
Finance expense		9,829		8,385		28,873		37,738
Finance income		(296)		(403)		(940)		(1,204)
Income tax expense (recovery)		1,299		6,304		(197)		24,071
EBITDA		37,718		48,457		63,597		141,407
Adjustments:
Unrealized foreign exchange (gain) loss		(5,244)		(10,299)		10,817		(19,225)
Write-down of mine equipment		-		3,551		-		3,551
Unrealized (gain) loss on copper put options		(534)		647		(2,686)		1,072
Loss on copper call option		-		-		-		6,305
Adjusted EBITDA		31,940		42,356		71,728		133,110

Earnings from mining operations before depletion and amortization

Earnings from mining operations before depletion and amortization is earnings from mining operations with depletion and amortization added back. The Company discloses this measure, which has been derived from our financial statements and applied on a consistent basis, to provide assistance in understanding the results of the Company’s operations and financial position and it is meant to provide further information about the financial results to investors.

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TASEKO MINES LIMITED

Management’s Discussion and Analysis

	Three months ended September 30,				Nine months ended September 30,
(Cdn$ in thousands)	2018		2017		2018		2017
Earnings from mining operations		13,568		33,348		30,644		111,859
Add:
Depletion and amortization		20,174		11,785		52,909		33,161
Earnings from mining operations before depletion and amortization		33,742		45,133		83,553		145,020

Site operating costs per ton milled

	Three months ended September 30,				Nine months ended September 30,
(Cdn$ in thousands, except per ton milled amounts)	2018		2017		2018		2017
Site operating costs (included in cost of sales)		63,436		31,904		169,984		122,098
Tons milled (thousands) (75% basis)		5,983		5,380		17,208		16,480
Site operating costs per ton milled		$10.60		$5.93		$9.88		$7.41

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