EX-99.1

EX-99.1 2 d925104dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

LOGO

Condensed Consolidated Interim Financial Statements

March 31, 2020

(Unaudited)

TASEKO MINES LIMITED

Condensed Consolidated Statements of Comprehensive Income (Loss)

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

(Unaudited)


			Three months ended March 31,
	Note		2020			2019
Revenues		3		62,084			70,274
Cost of sales
Production costs		4		(56,161	)		(54,545	)
Depletion and amortization		4		(27,148	)		(20,184	)

Loss from mining operations				(21,225	)		(4,455	)
General and administrative				(3,898	)		(4,473	)
Share-based compensation expense		14c		(184	)		(1,714	)
Project evaluation expenditures				(157	)		(469	)
Gain (loss) on derivatives		5		5,855			(843	)
Other income				395			565

Loss before financing costs and income taxes				(19,214	)		(11,389	)
Finance expenses		6		(10,771	)		(9,742	)
Finance income				150			308
Foreign exchange gain (loss)				(29,233	)		6,076

Loss before income taxes				(59,068	)		(14,747	)
Income tax recovery		7		10,118			6,816

Net loss				(48,950	)		(7,931	)

Other comprehensive income (loss):
Unrealized gain (loss) on financial assets		8		(194	)		1,114
Foreign currency translation reserve				16,686			(3,467	)

Total other comprehensive income (loss)				16,492			(2,353	)

Total comprehensive loss				(32,458	)		(10,284	)

Earnings (loss) per share
Basic				(0.20	)		(0.03	)
Diluted				(0.20	)		(0.03	)
Weighted average shares outstanding (thousands)
Basic				246,194			237,046
Diluted				246,194			237,046

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 March 31,
	Note		2020			2019
Operating activities
Net loss for the period				(48,950	)		(7,931	)
Adjustments for:
Depletion and amortization				27,148			20,184
Income tax recovery		7		(10,118	)		(6,816	)
Share-based compensation expense		14c		246			1,787
Loss (gain) on derivatives		5		(5,855	)		843
Finance expenses, net				10,621			9,434
Unrealized foreign exchange (gain) loss				29,747			(6,689	)
Amortization of deferred revenue		12		(1,140	)		(977	)
Deferred electricity repayments		13		1,324			—
Other operating activities				1,536			(377	)
Net change in non-cash working capital		16		13,112			(2,267	)

Cash provided by operating activities				17,671			7,191
Investing activities
Purchase of property, plant and equipment		10		(18,244	)		(13,378	)
Purchase of copper put and fuel call options		5		(988	)		(851	)
Proceeds from copper put options		5		2,868			241
Other investing activities				177			68

Cash used for investing activities				(16,187	)		(13,920	)
Financing activities
Interest paid				(994	)		(381	)
Repayment of leases and equipment financings				(4,341	)		(3,806	)
Proceeds on exercise of options				—			86

Cash used for financing activities				(5,335	)		(4,101	)
Effect of exchange rate changes on cash and equivalents				822			(306	)

Decrease in cash and equivalents				(3,029	)		(11,136	)
Cash and equivalents, beginning of period				53,198			45,665

Cash and equivalents, end of period				50,169			34,529

Supplementary cash flow disclosures		16

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

TASEKO MINES LIMITED

Condensed Consolidated Balance Sheets

(Cdn$ in thousands)

(Unaudited)


			March 31,			December 31,
	Note		2020			2019
ASSETS
Current assets
Cash and equivalents				50,169			53,198
Accounts receivable				4,477			13,791
Inventories		9		46,590			43,620
Other financial assets		8		4,510			730
Prepaids				1,545			2,513

				107,291			113,852
Property, plant and equipment		10		773,422			758,006
Other financial assets		8		6,885			6,783
Goodwill				5,850			5,355

			893,448			883,996

LIABILITIES
Current liabilities
Accounts payable and other liabilities				44,997			43,685
Current portion of long-term debt		11		13,697			16,460
Current portion of deferred revenue		12		11,375			4,558
Interest payable on senior secured notes				9,052			1,184
Current income tax payable				1,406			1,406

				80,527			67,293
Long-term debt		11		389,765			357,025
Provision for environmental rehabilitation (“PER”)				70,963			66,373
Deferred and other tax liabilities				40,468			50,703
Deferred revenue		12		39,444			39,433
Other financial liabilities		13		2,436			1,483

				623,603			582,310
EQUITY
Share capital		14		436,318			436,318
Contributed surplus				52,239			51,622
Accumulated other comprehensive income (“AOCI”)				23,319			6,827
Deficit				(242,031	)		(193,081	)

				269,845			301,686

				893,448			883,996

Commitments and contingencies		15
Subsequent event		19

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)


	Share		Contributed
	capital		surplus			AOCI			Deficit			Total
Balance at January 1, 2019		423,438		49,274			14,064			(139,699	)		347,077
Fair value of shares issued for Yellowhead acquisition		12,629		—			—			—			12,629
Share-based compensation		—		953			—			—			953
Exercise of options		120		(34	)		—			—			86
Settlement of performance share units		—		(377	)		—			—			(377	)
Total comprehensive loss for the period		—		—			(2,353	)		(7,931	)		(10,284	)

Balance at March 31, 2019		436,187		49,816			11,711			(147,630	)		350,084

Balance at January 1, 2020		436,318		51,622			6,827			(193,081	)		301,686
Share-based compensation		—		617			—			—			617
Total comprehensive income (loss) for the period		—		—			16,492			(48,950	)		(32,458	)

Balance at March 31, 2020		436,318		52,239			23,319			(242,031	)		269,845

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)

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 month period ended March 31, 2020 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 mine permitting and 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. 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, 2019, 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 Audit & Risk Committee on April 28, 2020.

(b) Use of judgments and estimates

In preparing these condensed consolidated interim financial statements, management has made judgments, 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 and for the year ended December 31, 2019.

On March 11, 2020, the World Health Organization declared the coronavirus (“COVID-19”) outbreak a pandemic creating an unprecedented global health and economic crisis. COVID-19’s impact on global markets has been significant through March 2020 and subsequent to the date of the financial statements. The situation continues to rapidly evolve. The duration and magnitude of COVID-19’s effects on the economy, the copper market, and on the Company’s financial and operational performance remains uncertain at this time. As of the date of these statements, there has not been any impact on Gibraltar operations as a result of COVID-19.

The Company will continue to closely monitor the potential impact of the COVID-19 on its business. Should the duration, spread or intensity of the COVID-19 pandemic further deteriorate in 2020, there could be a potentially material and negative impact on the Company’s operating plan, its liquidity and cash flows, and the valuation of its long-lived assets due to sustained decreases in metal prices, potential future decreases in revenue from the sale of its products and the profitability of its ongoing operations. Impacts from COVID-19 could also include a temporary cessation of mining operations at the Gibraltar Mine due to a localized outbreak amongst personnel at the mine site or in the Company’s supply chain. The Company’s access to financing to support its ongoing operations including the development of its other mineral properties could also be negatively impacted or delayed as a result of COVID-19.

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)

3. REVENUE


	Three months ended March 31,
	2020			2019
Copper contained in concentrate		75,928			64,646
Molybdenum concentrate		3,842			8,937
Silver (Note 12)		996			1,012
Price adjustments on settlement receivables		(12,960	)		1,207

Total gross revenue		67,806			75,802
Less: Treatment and refining costs		(5,722	)		(5,528	)

Revenue		62,084			70,274

4. COST OF SALES


	Three months ended March 31,
	2020			2019
Site operating costs		53,547			55,430
Transportation costs		4,519			3,288
Changes in inventories of finished goods		(1,302	)		(4,046	)
Changes in inventories of ore stockpiles		(603	)		(127	)

Production costs		56,161			54,545
Depletion and amortization		27,148			20,184

Cost of sales		83,309			74,729

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

5. DERIVATIVE INSTRUMENTS

During the three month period ended March 31, 2020, the Company purchased copper put option contracts for 27.5 million pounds of copper with maturity dates ranging from January 2020 to April 2020, at a strike price of US$2.60 per pound, at a total cost of $497. The Company recognized a realized gain of $2,507 on these settlements in the three month period ended March 31, 2020.

At March 31, 2020 the Company had copper put options outstanding for 7.5 million pounds of copper with maturity in April 2020 with a strike price of US$2.60 per pound. The fair value of the outstanding options at March 31, 2020 is $3,803.

During the three month period ended March 31, 2020, the Company purchased fuel call options for 17 million litres of diesel with maturity dates ranging from the second quarter to the fourth quarter of 2020, at a total cost of $491. The fuel call options outstanding had a fair value of $172.

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

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)


	Three months ended March 31,
	2020			2019
Realized (gain) loss on copper put options		(2,507	)		567
Unrealized (gain) loss on copper put options		(3,667	)		276
Unrealized loss on fuel call options		319			—

		(5,855	)		843

6. FINANCE EXPENSES


	Three months ended March 31,
	2020		2019
Interest expense		9,360		8,253
Finance expense – deferred revenue (Note 12)		1,056		1,039
Accretion on PER		355		450

		10,771		9,742

7. INCOME TAX


	Three months ended March 31,
	2020			2019
Current income tax expense		—			110
Deferred income tax recovery		(10,118	)		(6,926	)

		(10,118	)		(6,816	)

8. OTHER FINANCIAL ASSETS


	March 31, 2020		December 31, 2019
Current:
Marketable securities		535		730
Copper put option and fuel call options (Note 5)		3,975		—

		4,510		730

Long-term:
Investment in subscription receipts		2,400		2,400
Reclamation deposits		3,066		3,083
Restricted cash		1,419		1,300

		6,885		6,783

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)

9. INVENTORIES


	March 31, 2020		December 31, 2019
Ore stockpiles		8,410		6,657
Copper contained in concentrate		10,254		9,055
Molybdenum concentrate		343		230
Materials and supplies		27,583		27,678

		46,590		43,620

During the three months ended March 31, 2020, the Company recorded an impairment of $408 to adjust the carrying value of ore stockpiles to net realizable value, of which $174 is recorded in depletion and amortization and the balance in production costs.

10. PROPERTY, PLANT & EQUIPMENT

The following schedule shows the continuity of property, plant and equipment net book value for the three months ended March 31, 2020:


	Three Months Ended March 31, 2020
Net book value beginning of period		758,006
Additions:
Gibraltar capital expenditures (incl. capitalized stripping costs)		18,080
Florence Copper development costs		4,764
Aley development costs		610
Yellowhead development costs		151
Other items:
Right of use assets		1,763
Rehabilitation costs asset		4,347
Disposals		(185	)
Foreign exchange translation		16,260
Depletion and amortization		(30,374	)

Net book value at March 31, 2020		773,422

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)


Net book value	Gibraltar Mines (75%)			Florence Copper			Yellowhead		Aley		Other			Total
At December 31, 2019		539,747			188,512			16,240		12,766		741			758,006
Net additions		16,812			4,764			151		610		1,697			24,034
Changes in rehabilitation cost asset		4,347			—			—		—		—			4,347
Depletion and amortization		(29,111	)		(12	)		—		—		(102	)		(29,225	)
Foreign exchange translation		—			16,260			—		—		—			16,260

At March 31, 2020		531,795			209,524			16,391		13,376		2,336			773,422

During the three month period ended March 31, 2020, the Company capitalized stripping costs of $16,051 and incurred other capital expenditures for Gibraltar of $2,095. Non-cash additions to property, plant and equipment include $2,135 of non-cash depreciation on mining assets related to capitalized stripping.

Since its acquisition of the Florence Copper Project in November 2014, the Company has incurred and capitalized a total of $100.5 million in project development and other costs, including capitalized interest.

Prior to January 2020, Yellowhead was in the evaluation phase and project related expenditures were expensed. In January 2020, the Company announced the results of its technical studies on Yellowhead and filed a new NI 43-101 technical report and the project entered the development phase. Since January 1, 2020 development costs of $151 have been capitalized as mineral property, plant and equipment.

Depreciation related to the right of use assets for the three month period ended March 31, 2020 was $1,159.

11. DEBT


	March 31, 2020		December 31, 2019
Current:
Lease liabilities (b)		6,695		7,990
Secured equipment loans (c)		5,123		6,626
Lease related obligations (d)		1,879		1,844

		13,697		16,460

Long-term:
Senior secured notes (a)		348,338		317,728
Lease liabilities (b)		13,203		11,107
Secured equipment loans (c)		19,263		18,746
Lease related obligations (d)		8,961		9,444

		389,765		357,025

Total debt		403,462		373,485

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)

(a) Senior secured notes

In June 2017, the Company completed an offering of US$250,000 aggregate principal amount of senior secured notes (the “Notes”). The Notes mature on June 15, 2022 and bear interest at an annual rate of 8.750%, payable semi-annually on June 15 and December 15.

The Notes are secured by liens on the shares of Taseko’s wholly-owned subsidiary, Gibraltar Mines Ltd., and the subsidiary’s rights under the joint venture agreement relating to the Gibraltar Mine. The Notes are guaranteed by each of Taseko’s existing and future restricted subsidiaries, other than Yellowhead. The Company is able to incur limited amounts of additional secured and unsecured debt under certain conditions as defined in the Note indenture. The Company is also subject to certain restrictions on asset sales, issuance of preferred stock, dividends and other restricted payments. However, there are no maintenance covenants with respect to the Company’s financial performance.

The Company may redeem some or all of the Notes at any time on or after June 15, 2019, at redemption prices ranging from 104.375% to 100%, plus accrued and unpaid interest to the date of redemption. On a change of control, the Notes are redeemable at the option of the holder at a price of 101%.

(b) Lease liabilities

Lease liabilities includes the Company’s outstanding lease liabilities under IFRS 16.

(c) Secured equipment loans

The equipment loans are secured by existing mining equipment at the Gibraltar Mine and commenced between May and August of 2019 with monthly repayment terms ranging between 48 and 60 months and with interest rates ranging between 5.2% to 6.4%.

(d) Lease related obligations

Lease related obligations relate to a lease arising under a sale leaseback transaction on certain items of equipment at the Gibraltar mine. The lease commenced in June, 2019 and has a term of 54 months. At the end of the lease term, the Company has an option to renew the term, an option to purchase the equipment at fair market value or option to return the equipment. The lease contains a fixed price early buy-out option exercisable at the end of 48 months.

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)

(e) Debt continuity

The following schedule shows the continuity of total debt for the first three months of 2020:


Total debt as at January 1, 2020	373,485
Lease additions	2,974
Lease liabilities and equipment loans repayments	(4,341	)
Unrealized foreign exchange loss	30,689
Amortization of deferred financing charges	655

Total debt as at March 31, 2020	403,462

12. DEFERRED REVENUE


	March 31, 2020		December 31, 2019
Current:
Customer advance payments (a)		6,912		—
Osisko – silver stream agreement (b)		4,463		4,558

Current Portion of Deferred Revenue		11,375		4,558

(a) Customer advance payments

At March 31, 2020, the Company had received advance payments on copper concentrate finished goods inventory on 3.2 million pounds (100% basis).

(b) Silver stream purchase & sale agreement

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. 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.

On April 24, 2020, Taseko concluded an amendment to its silver stream with Osisko and received $8.5 million in exchange for reducing the delivery price of silver from US$2.75 per ounce to nil.

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)

The following table summarizes changes in the Osisko deferred revenue:


Balance at January 1, 2020	43,991
Finance expense (Note 6)	1,056
Amortization of deferred revenue	(1,140	)

Balance at March 31, 2020	43,907
Less: current portion	(4,463	)

Deferred Revenue – long term portion	39,444

13. OTHER FINANCIAL LIABILITIES


	March 31, 2020		December 31, 2019
Long-term:
Amounts payable to BC Hydro		1,324		—
Deferred share units (Note 14c)		1,112		1,483

		2,436		1,483

During the first quarter of 2020, the Company has deferred electricity payments for its March power usage of $1,324 under BC Hydro’s Tariff Supplement 99 deferral program for BC copper mines. Under the Company’s agreement with BC Hydro, effective April 9, 2020 the Gibraltar Mine will be able to defer up to a minimum of 50% (and up to a maximum 75% deferral of electricity payments based on copper prices) for the March through May 2020 billing periods. In addition, the Company remains eligible for Tariff Supplement 90 Mining Customer Payment Plan beyond May 2020 which defers payment up to 75% based on copper prices. The current deferral account balance is subject to interest at the prime rate plus 2.5% for the period March 27 through June 21, 2020, and prime plus 5.0% thereafter. Under the program repayments can be extended out to March, 2021 and amortizable over a 9 month period out to November, 2021.

14. EQUITY

(a) Share capital


	Common shares (thousands)
Common shares outstanding at January 1, 2020		246,194

Common shares outstanding at March 31, 2020		246,194

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

(b) Share purchase warrants

At March 31, 2020, the Company had 3,000,000 share purchase warrants outstanding at an exercise price of $2.74 per share. All of the outstanding share purchase warrants expired unexercised on April 1, 2020.

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)

(c) Share-based compensation


	Options (thousands)			Average price
Outstanding at January 1, 2020		10,756			1.12
Granted		1,096			0.72
Cancelled/forfeited		(7	)		0.78
Expired		(266	)		1.25

Outstanding at March 31, 2020		11,579			1.08

Exercisable at March 31, 2020		8,870			1.19

During the three month period ended March 31, 2020, the Company granted 1,096,000 (2019 – 3,226,500) share options to directors, executives and employees, exercisable at an average exercise price of $0.72 per common share (2019 – $0.78 per common share) over a five year period. The total fair value of options granted was $438 (2019 – $1,387) based on a weighted average grant-date fair value of $0.40 (2019 – $0.41) 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:


	Three months ended March 31, 2020
Expected term (years)		5.0
Forfeiture rate		0	%
Volatility		65	%
Dividend yield		0	%
Risk-free interest rate		1.5	%

Weighted-average fair value per option	$	0.40

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


	DSUs (thousands)		PSUs (thousands)
Outstanding at January 1, 2020		2,354		1,675
Granted		572		825
Settled		—		(400	)

Outstanding at March 31, 2020		2,926		2,100

During the three month period ended March 31, 2020, 572,000 DSUs were issued to directors (2019 – 682,000) and 825,000 PSUs to senior executives (2019 – 875,000). The fair value of DSUs and PSUs granted was $899 (2019 – $1,696), with a weighted average fair value at the grant date of $0.72 per unit for the DSUs (2019 – $0.78) per unit) and $0.59 per unit for the PSUs (2019 – $1.33 per unit).

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)

Share based compensation expense (recovery) is comprised as follows:


	Three months ended March 31,
	2020			2019
Share options – amortization		323			698
Performance share units – amortization		294			254
Change in fair value of deferred share units		(371	)		835

		246			1,787

15. COMMITMENTS AND CONTINGENCIES

(a) Commitments

The Company is a party to certain contracts relating to service and supply agreements. Future minimum payments under these agreements as at March 31, 2020 are presented in the following table:


Remainder of 2020			5,368
2021			5,746
2022			958
2023			—
2024			—
2025 and thereafter			—

Total commitments			12,072

As at March 31, 2020, the Company had no outstanding capital commitments.

(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 $16,457 as at March 31, 2020.

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)

16. SUPPLEMENTARY CASH FLOW INFORMATION


	For the three months ended March 31,
	2020			2019
Change in non-cash working capital items
Accounts receivable		9,314			6,840
Inventories		(2,970	)		(5,641	)
Prepaids		717			305
Accounts payable and accrued liabilities		(1,378	)		(3,785	)
Advance payment on product sales		6,912			—
Interest payable		517			14

		13,112			(2,267	)

Non-cash investing and financing activities
Assets acquired under capital lease		1,211			—
ROU assets		1,763			—

17. RELATED PARTIES

Gibraltar Joint Venture

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 Gibraltar. Net management fee income for the three month period ended March 31, 2020 was $301 (2019: $292). In addition, the Company pays certain expenses on behalf of the Gibraltar joint venture and invoices the joint venture for these expenses. For the three month period ended March 31, 2020, net reimbursable compensation expenses and third party costs of $171 (2019: $23) were charged to the joint venture.

18. 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 fair values of the senior secured notes are $177,338 and the carrying value is $348,338 at March 31, 2020. The fair value of all other financial assets and liabilities approximates their carrying value.

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.

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)


	Level 1		Level 2		Level 3		Total
March 31, 2020
Financial assets designated as FVPL
Derivative asset copper put options		3,804		—		—		3,804
Derivative asset fuel call options		171		—		—		171

		3,975		—		—		3,975

Financial assets designated as FVOCI
Marketable securities		535		—		—		535
Investment in subscription receipts		—		—		2,400		2,400

		535		—		2,400		2,935

December 31, 2019
Financial assets designated as FVOCI
Marketable securities		730		—		—		730
Investment in subscription receipts		—		—		2,400		2,400
Reclamation deposits		3,083		—		—		3,083

		3,813		—		2,400		6,213

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 March 31, 2020.

The fair value of the senior secured notes, a Level 1 instrument, is determined based upon publicly available information. The fair value of the lease liabilities 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.

The fair values of 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. At March 31, 2020 the Company had settlement payables of $5,930.

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.

Commodity Price Risk

The Company is exposed to the risk of fluctuations in prevailing market commodity prices on the metals it produces. The Company enters into copper put option contracts to reduce the risk of short-term copper price volatility. 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 put 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.

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands)

The table below summarizes the impact on revenue and receivables for changes in commodity prices on the provisionally invoiced sales volumes.


	As at March 31, 2020
Copper increase/decrease by US$0.21/lb.¹		5,270

The analysis is based on the assumption that the period end copper price increases 10% with all other variables held constant. At March 31, 2020, 18 million pounds of copper in concentrate were exposed to copper price movements. The closing exchange rate at March 31, 2020 of CAD/USD 1.4187 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.

19. SUBSEQUENT EVENT

On April 24, 2020, Taseko concluded an amendment to its silver stream with Osisko and received $8.5 million in exchange for reducing the delivery price of silver from US$2.75 per ounce to nil. The funds received are available for general working capital purposes.