Taseko Mines Ltd (TGB) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter and year-end 2007 Taseko Mines earnings conference call. My name is Millicent, and I will be your coordinator for today. (Operator Instructions). At this time, I would like to turn the program over to Mr. Brian Bergot, Investor Relations. Please go ahead, sir.

Thank you, Millicent. Good morning, ladies and gentlemen, and welcome to Taseko Mines' fourth quarter 2007 and fiscal year-end results conference call. My name is Brian Bergot, and I am the Investor Relations Manager for Taseko.

With me today in Vancouver is Russ Hallbauer, President and CEO of Taseko; Jeffrey Mason, Secretary, CFO and Director of Taseko; and John McManus, our Senior Vice President of Operations. After opening remarks by management, which will review fourth-quarter and annual business and operational results, we will open the phone lines to analysts and investors for a question-and-answer session.

I would also like to remind our listeners that our comments and answers to your questions may contain forward-looking information. This information by its nature is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome. Please refer to the bottom of our latest news release for more information.

I will now turn the call over to Russ for his remarks.

Thank you, Brian. Good morning, everyone. Thank you for joining us today to discuss Taseko's year-end and fourth-quarter results for 2007.

In 2007, the Company generated revenues of C$218 million, a C$57 million increase over 2006, as a result of the sale of 55.5 million pounds of copper in concentrate and cathode and 600,000 pounds of molybdenum. Operating profit of C$105.7 million is C$50.8 million over that achieved in 2006, with earnings before tax increasing from C$39 million in 2006 to C$87.9 million in 2007. Jeffrey Mason, our CFO, will discuss in further details our financial results later in the call.

My brief comments today will focus on the underlying intrinsic value of the Company, and how we are beginning to unlock that value. Each quarter of 2007 has been marked by operational improvement, as copper production on a quarter-by-quarter basis has increased from the 10.6 million pounds achieved in Q1 to the most recent 16.8 million pounds in Q4. This increase in production validates where we believe our cost structure and our production will be as we move forward with the finalization of our concentrator expansion program.

Our copper production costs, net of byproduct credits for the year, decreased from $1.25 in 2006 to $1.03 in 2007, and in the fourth quarter this year fell to $0.82 per pound. Correspondingly, our total production costs have decreased from $1.50 in 2006 to $1.38 in 2007, and were an impressive $1.21 per pound in the last quarter of 2007. This reduction is illustrative of our cost-containment initiatives and the growth in our quarterly copper production, and gives a clear indication of where we believe our cost structure will stabilize as our production grows in the coming months. Our costs are going down while 99% of the industry costs are going up.

We are nearing completion of our Phase One expansion. We have built a new state-of-the-art concentrator facility that, from start to finish, took approximately 16 months, and the final cost will be roughly C$73 million. I doubt if any mining company has achieved a 50% increase in production capacity in such a short time and for the capital cost we have done it for. We have accomplished this very technical and complex undertaking at the same time maintaining our copper production. And as a company, we are very pleased with the work and dedication of our employees and all the associated engineering and construction companies and their employees who have helped us in completing this task.

Our integration of the grinding circuit is going -- and changeover is going very well. Our first converted grinding line will accept SAG mill feed this weekend. Things are progressing well and according to our schedule. We are excited about our financial results for 2007, but we are equally excited about the underlying foundation we are building and have built inside this company over the last 12 months, which will allow us to grow and be a highly profitable organization as we move forward into 2008 as we continue to unlock the value of our assets through our continued production increases at Gibraltar and our work on our development projects.

2007 has been an exceptional year in many respects. We increased our Gibraltar reserves by 200 million tons. And since 2004, or in less than 36 months, we increased our recoverable copper reserves from 826 million pounds to 2.4 billion pounds, which at today's copper price has a value of over C$6 billion. And if you combine that with the Prosperity reserves, we now have the largest mineable reserves of any Canadian copper company.

We completed a feasibility study on our Prosperity property, confirming it as the largest undeveloped gold and copper reserve in Canada, with 4.5 million ounces of recoverable gold and 2 billion pounds of copper inside a 480 million ton ore body. Most mining companies can only dream of having an asset like Prosperity this advanced and nearing the final stages of permitting and fast-approaching a development decision. We have completed hundreds of hours of work doing environmental assessment, archeological studies, and coordinating this with all governments, regional, provincial and federal, along with first nations, in moving this project forward into the environmental assessment process.

This company is ready to build the first new copper mine in British Columbia in the last decade, a mine that will create economic returns for our shareholders and contribute significantly to the provincial economy. We have shown in the past 18 months that we have the team and the expertise to bring projects in on time and on budget.

We have completed our engineering design and have begun ordering equipment for our Phase Two expansion. We are in the midst of updating our engineering studies and moving our Harmony gold project forward, now that the provincial government has announced the new land use policy for the Queen Charlotte Islands.

We have acquired the Aley niobium project deposit, which we believe is the world's largest undeveloped niobium deposit outside of Brazil. Both Harmony and Aley will be fast-tracked on engineering and resource definitions, advancing to feasibility study level over the next 10 months.

We're a mine-building company, and we will aggressively pursue this purpose over the next year. We continue to attract high-quality people to our organization for the next phase of our growth. We are continuing to expand our technical and operational expertise at the Gibraltar mine site, while at the same time we are building our engineering and project management capabilities at our Vancouver office.

As a result of not only our financial success but our forward growth opportunities, we are able to attract -- we were able to attract a significant investment in our company in early October, which will further strengthen our financial capabilities, and Jeffrey will speak about this briefly.

As exciting as 2007 was, 2008 will be equally impressive, as our whole team and group is focused on moving forward with all our initiatives as quickly as possible.

I would now like to turn the call over to Jeffrey.

Good morning. Thank you very much, Russell, for summarizing the operations, as well as covering some of the financial aspects. Before we go to the specifics of the year and quarter, let's look at the bigger summary picture.

First, in the last two years, Taseko has generated a total of C$141 million of cash flow from operations. Since production commenced in '04, total assets have increased by C$246 million, from $C131 million to C$377 million. Shareholders equity has increased from -C$5 million to C$164 million at the latest reporting period. Capital development projects are on time and on budget. And as Russell mentioned, operating cash costs have decreased to $1.21 per pound of copper in Q4. On top of that, average sales price of copper realized in the year is $3.30 per pound, and Q4 was an impressive $3.63 per pound.

I am similarly excited about the future, as we can see the operations and the people develop, along with some recent additions of personnel, and, very soon, substantially higher levels of production and sales. And most importantly, a long-term platform of modern facilities, combined with existing Gibraltar long-life 22 years mine reserves, springboarding us into other projects, including Prosperity.

The strategic plan to significantly grow the enterprise value of Taseko is unfolding, and at an accelerated pace. Realizing that we continue to build our current base, let's start by reviewing the balance sheet, to which I will talk in millions of Canadian dollars.

The essence of the balance sheet is summarized by --

(1) Investment in the future by way of net property, plant and equipment purchases of C$129 million in 2007, following C$16 million in 2006. PP&E has increased from C$43 million in '06 to C$177 million in 2007.

(2) All capital additions financed out of operating cash flow and existing cash on hand, which remains strong at C$42 million at year end. And working capital is at C$50 million.

(3) The other asset classifications on the balance sheet remain relatively static or normal course; minor variations between the two years.

As to the liabilities, moving to the current liabilities on the balance sheet, they only decreased modestly from C$48 million to C$45 million year over year, while long-term liabilities increased from C$197 million to C$214 million, essentially due to long-term future income taxes, which I will explain later.

Moving to cash and cash flow, Taseko generated from operations cash inflow of C$86 million in '07, following C$55 million in '06, a 55% increase. Subsequent to the year-end, by November 8 '07 Taseko had completed a bond deal and a private placement equity share financing, no warrant, at C$5.20 per share, raising net proceeds of C$47 million for working capital purchases. Taseko received very professional and well-organized support from Raymond James, the lead underwriter, as well as Canaccord Capital Corporation and Paradigm Capital Inc., in completing this financing, and we thank them for all their valuable contributions.

As mentioned, Taseko's 100% owned mineral properties, plant and equipment increased by C$129 million in '07, the details of which are mill expansion, equipment purchases and (technical difficulty).

I will move to the first, mill expansion -- Phase One SAG mill and grind circuit. We spent C$16.5 million in Q4; the previous quarter, C$14.4 million. So far this year we spent C$54 million, and project to date, C$59 million. We have approximately C$15 million to complete the project on budget, on time.

Phase Two expansion, which commenced in Q2, is scheduled to complete in late '08 at a cost of C$40 million. It is well underway, focused on engineering and procurement, which would take the mill from 46,000 tons per day under Phase One to 55,000 tons in '08, or an additional 20% increase. Importantly, the construction team is ongoing and optimizing scheduling.

I think at this point, as Russ has mentioned, and I share that same view, it's worth emphasizing, Phase One capital project is on time and on budget, with a targeted completion date of all the aspects related to it by February '08. It's a true reflection of the skills and dedicated personnel working at Gibraltar. Quite frankly, the DNA is just right at Taseko. Furthermore, it bodes well for the 2008 Phase Two C$40 million expansion, which is only half of the project size of Phase One, which is scheduled to be completed in '08.

Moving to the second major item of capital expansion is mine site equipment. During the quarter we purchased C$9.5 million; previous quarter, C$2.1 million; year-to-date, C$33 million. In the quarter, the purchases were comprised of a P&H 4100 shovel deposit, C$4 million; tailings dam raise, normal course, C$1.7 million; a pit crusher, well under construction in our Granite pit, C$0.9 million; drill deposit, C$0.6 million; and some other for C$2.3 million. Both the shovel and crusher are expected to be operational in the second half of '08. We have other equipment purchases planned for the oncoming year, including production drills, ongoing tailings dam raise, fleet management systems, and the like.

Moving to the third category, mine operations included capitalized pre-stripping of the Granite pit that has an expected mine life of 12 years. Pre-stripping in the quarter amounted to C$11.4 million, compared to C$9.6 million last quarter. Project to date is C$33 million. The balance to expand is approximately C$8.5 million in Q1, which is the last fiscal quarter -- first fiscal quarter, last calendar quarter -- and then we will sequence through the east and west Granite pit development on an average of about C$3.9 million per quarter in '08.

The pre-stripping capitalized to date, including '08, represents a future non-cash amortized cost of about C$4.4 million per year, or about C$0.035 per pound of copper over the 12-year life of the Granite pit, which hosts approximately 1.5 billion pounds of copper. This pre-stripping cost has been financed out of current operating cash flows, and is now a (inaudible) cost, but will result in a long-term cash inflow, hence the capitalization and future amortization.

In '07 we also capitalized some exploration because it was utilized in order to expand the reserve base from 15 years to 22 years. In the quarter, we expended C$2.1 million, which compares to C$2.3 million last quarter. Year-to-date, we have spent C$7.4 million, and the project is winding down, with only C$0.4 million left to be spent.

Moving to investments on the balance sheet, investments on the balance sheet [that] total approximately C$18.5 million represent strategic investments in the corporations to which Taseko is monitoring and the projects as they develop. The current unrealized gains on an intrinsic basis, i.e., the current price less the cost of those investments, is about C$2.5 million, while the potential value -- the Black-Scholes, or underlying asset value -- could be considerably higher.

Let's move to the statement of operations. Operating profit is up 93% to C$106 million compared to '06, from unhedged sales totaling C$218 million from 55.5 million pounds sold at an average price of C$3.30. That's up impressively from last year at a C$2.44. During the year, quarterly copper sales prices progressed from quarter one through quarter four, and they go as follows -- C$2.77 per pound; C$3.13; C$3.53; and finally, in Q4, C$3.63 per pound. This unhedged strategy has continued to result in higher copper sales prices.

Total cash costs of production stood at C$1.21 in Q4, and overall they came in at C$1.38 for the year, compared to C$1.50 in '06. A very similar favorable trend occurred in the production of copper [running] from Q1 to Q4, moving from 10.6 million, 11.8 million, 12.6 million, and finally, 16.8 million pounds of copper production in '07. We all appreciate these very favorable trends.

Moving to total other net expenses in '08, they amounted to -- '07, excuse me -- amounted to C$18 million, compared to C$16 million in '06. The key differences and highlights are -- exploration, C$9 million, up from C$3.5 million in '06, consisting of C$7.8 million on engineering permitting at the Prosperity project, including a C$2 million feasibility study, and about C$1.2 million on geology and drilling at the Aley project.

Asset retirement obligation, which is the change in estimate, essentially because the mine life has been significantly expanded by the increase in reserves -- we adjusted the future liability. In essence, the future liability has now been pushed further out into the future. And when we discount that to the current value, it results in a lower number. That current liability, in present value dollar terms, is then (inaudible) expensed higher as we move forward and develop the Granite pits. It is a future liability in present-day dollars.

Finally on that statement of operations, interest and other income, which is an offset to expenses, are up due to higher average cash balances on hand during '07. This all ended in a result of earnings before taxes of C$88 million, up C$49 million, or 80%, from '06. After taxes, earnings in the year amounted to C$48 million, a continued improvement compared to C$33 million in '06, up 47%. Similarly, earnings per share has risen 28%, from C$0.29 to C$0.37 per share.

Let's move to income taxes. First off, let's deal with the cash income taxes. Those are the actual checks that we wrote to the authorities. In '06, Taseko did not pay any income taxes. In '07, Taseko has paid C$6.6 million in income taxes. We paid this post year-end. It reflects the 2007 income taxes. In '08, because of existing tax pools -- CCA, that is tax depreciation balances, ongoing '08 planned capital expenditures -- Taseko expects to pay about the same amount of taxes, around C$7 million, as it paid in '07. As to '09, '10, '11, 2012, Taseko could pay similar or lower taxes provided -- one, Prosperity expenditures commence on the project; other projects, such as acquisition targets, materialize; and we have a tax optimized structure which is maturing and could be put into place in '08 to defer taxes. As to the Canadian tax rates, they are scheduled to incrementally decrease, down from '07 tax rates of 34.6% down to 30.5% by January 1, 2011; thus, the deferral of potential taxes results in a true positive tax savings.

Now moving to the future income tax expense, a non-cash item, and a provision of C$35.6 million on the statement of operations.

First, this number estimates future long-term taxes payable due to timing difference between taxable and accounting income. It is a non-cash item. Some of these differences are temporary differences, such as deferred pre-stripping, which is deductible for tax purposes now -- thus shelter our taxable income -- whereas for accounting purposes, it is amortized over the life of the Granite pit. Some of the differences are permanent differences, such as certain tax pools, asset retirement obligation accounting, and accretion of debt. These timing differences, unfortunately, have driven the effective accounting tax rate on the income statement from 34.6%, which is the effective tax rate in Canada, to 45%.

But the key takeaway is that this is a future income tax liability. It's classified as a long-term liability on the balance sheet, and it could even continue to be delayed. (inaudible) way out in the future on lower tax rates. It is a non-cash item. And the FIT liability, future income tax liability, unlike asset retirement obligation accounting, has not been discounted to today's dollars, but rather, it is the actual dollar that you might pay in the future. Thus, I suggest cash flow per share of C$0.67 per share is likely one of the better metrics going forward as Taseko continues to grow and develop, and avoid paying income taxes.

On M&A activity, Taseko continues to actively investigate and monitor several potential strategic alliances with mining companies that will be accretive to Taseko's enterprise value and fundamentally sound to NPV and NAV transactions. [The] Taseko group meets regularly to assess these targets; also, importantly, to ensure benchmarking against our organic growth opportunities, particularly the rapidly advancing Prosperity project and any other additional expansion at Gibraltar. To-date organic projects, such as the development of Prosperity [or otherwise], shows the greatest potential for long-term shareholder wealth creation. But, as expansion expenditures decrease over time, as we have illustrated moving into '08, and higher production levels are accomplished to over 100 million pounds of copper per year, Taseko's goal is to be fully ready in advance to leverage off these higher net cash flows and accretive acquisitions, mining property development opportunities, and importantly, the potential unlocking of the substantial wealth at [the] Prosperity copper gold project, which, just to reiterate, has a reserve of 480 million tons -- that's the word reserve; has a completed feasibility study; conventional open pit mill process. It's projected to produce annually 247,000 ounces of gold and 108 million pounds of copper for 20 years. That is very similar to the Gibraltar timeframe of 22 years of reserves. It can be financed off the cash flow of Gibraltar, combined with standard debt equity ratios. And at C$2 copper, C$6.50 gold, the project has a net present value of about C$1 billion. Taseko has the projects in-house already to potentially double its value.

So, in conclusion, Taseko continues to invest in Gibraltar property, plant and equipment, with the very near-term of producing over 100 million pounds of copper per year from a modern, updated mill over a long mine life of 22 years. At September 30 '07, Taseko remained financially strong, with C$50 million in working capital, C$42 million of cash, reclamation liabilities that are funded with an additional C$33 million on deposit. And in addition, Taseko completed an equity financing in November for net proceeds of C$47 million. Gibraltar is turning into a strong long-life core asset that generates predictable, ongoing increasing cash inflows to springboard and finance future project developments, including Prosperity and other projects.

Thank you very much, Russ.

Thank you, Jeffrey. Operator, I'd now like to turn the -- open the phone lines to the question-and-answer period.

(Operator Instructions). Tom Meyer, Raymond James.

Can you give us a sense of what we should be looking for with respect to timing of whether it is a permitting -- a permit that you have to receive before you can make your decision to go ahead with Prosperity?

I think what we have to look at is the timeline for when we think we can start building Prosperity. So, if we assume that things go well, we enter the EA, we get our permit, we don't foresee that being a long, drawn out affair, now that -- with the background work we have done. Let's assume that we decide that we're going to start building it in the spring/summer of 2009; we would work back from that and say, should we begin engineering work on it? And I think we have come to the conclusion that we should begin detailed engineering work as a process of decreasing the timeline to completion of a buildout. Normally, you'd probably have to have 40% to 50% of your engineering work done before you started construction. So, we are now actively engaging engineering firms and looking at how we can do some detailed engineering that would not be too expensive, say, C$5 million to C$10 million, to advance the project engineering side of Prosperity. So, that's what we are going to be working on the next four or five months.

And then do you envision going EPC or EPCM at the end?

I've got some issues with the EPCM cost out there these days. And I think what we're going to do is probably look at what we can do internally as much as possible. I think that the way the competitiveness is for the major engineering houses, whether they be SNC Lavalin, [EMEC], or any of those other big groups, I think we have to look internally and say what can we do to ultimately reduce our costs of buildout, and certainly revert to the model that was very successful in the '60s and '70s, when there was a number of smaller engineering companies in Vancouver that built many of the great mines throughout the world. In particular, Wright Engineers was very successful in that, and it became Simons. So, I think, we are going to look at how we step outside the box to help reduce our costs on that side of the equation.

Certainly the springboard, as Jeffrey spoke about, will be the folks that we have now working for us at Gibraltar. And we think that as the Gibraltar construction winds down, Phase One, Phase Two, then we will be able to springboard with those applicable skills into the Prosperity project.

You've now added some niobium exposure. You've got the copper exposure, clearly; molybdenum; gold; the Prosperity. Are you looking at, what Jeffrey referred to, M&A ideas? Are you looking at any other metals or materials?

We've now got stuff organically that is 100% wholly owned. So, we can put our engineering and our operations group and our technical teams working on those. And then, as a side note, we are going to look at accretive initiatives that Jeffrey is working on with his team, and see how we -- and that may involve any number of nonferrous minerals and/or gold if we have the opportunity that presents itself, although gold valuations are pretty tough for us, and certainly the [entry] in the gold mining business is probably difficult. And why would we do it when we've got probably one of the largest deposits in Canada right now that just needs to be built?

The key there is that we keep looking at the opportunity cost of capital, the enterprise cost of capital. And what we're finding is, organically, we keep beating the potential project targets that we have outlined. We have taken very serious confidentiality agreements, even discussions of combinations or otherwise, with other enterprises. But, we have gone in there with the view that it has to be better than our existing. And so, sometimes those other enterprises, and today's escalating prices of projects, they can't stomach the kind of numbers that we have to purchase at in order to do better than our organic growth opportunities.

So, we keep trying because say somebody might need it. They may stumble on financing. They may stumble on the project or the feasibility study. They may just need a partner that has operations in which to use cash flow as a financing tool or otherwise. And so, we think there might be some out there, and we don't want to lose track of that, because there could be an acquisition target or otherwise. So, we do continue to be very vigorous at it.

But, I have to compliment our internal staff, because one of the other things that's really great about Prosperity is it's just down the road from where we are. It's the same in-pit crusher that we're building currently at Granite pit. It's the same type of shovel. A lot of the costs are what I like, predictable, far more known, less uncertainty. Optimization is more realizable because we are in that area. So, when I look at other projects, we have to put a contingency on finding those projects. They're either in another jurisdiction. They have unknowns. They have infrastructure support that has to be [billed] out, and it's harder to predict. So, we end up putting a contingency on it; makes the project less favorable. But we can't answer it otherwise because the certainty is unknown. So, I think, the process is we're going through it, and try to maximize the enterprise rate of return and growth perspective.

Tom Bishop, BI Research.

Most of us have never heard of niobium before, and I was wondering if you could give us all some perspective on why this is a good investment, and some measure of its value to Taseko's price today. How should shareholders look at that opportunity, and the size of the deposit and the value of it? That sort of thing.

It's tough for us to speak about the size of the deposit because of 43-101 constraints. Having said that, if you step back and look at -- Cominco, obviously, owned this property for nearly 30 years, 26 years, or something in that neighborhood. So, it must have had some intrinsic value to them. And it was fortunate for us that we were able to -- we knew the individuals that had [optioned] the property. We set about coming up with a strategic idea of how to unlock it.

Like you say, most people don't know about niobium. I was fortunate in my past career to know a little bit about it, and I understood a little bit about the market, and thought that the entry position, in terms of what we could purchase this property for to move it forward, would be very desirable.

And I think -- I'm not sure -- we bought the property for like pennies a pound. So, it's in a location that we think is accessible. We think the size of the deposit in terms of the resource could be somewhere between 25 to 35 million tons. And we are going to try and confirm that as we move forward this year. And it could be potentially -- have the potential ability to generate 10 to 12 million pounds of niobium metal a year. How we're going to evaluate it will be undertaken in the next six to 10 months.

You said that the resource might be 25 to 35 million tons, but that -- that's rock containing niobium, or niobium itself?

That's rock. Yes. That's the ore deposit inside that. And I think the press release was pretty illustrative of what we said we felt was what the resource could potentially be like. I've got to be careful in terms of what I talk about here. So, we need more drilling. Certainly, some of the intersections that we discovered with our drilling were well over 100-foot, 150-foot intersections of greater then 0.5% niobium. And that confirmed some of the numbers that Cominco had generated when they did their preliminary exploration 20 years ago.

You mentioned something about Harmony there, I thought. I know there was a ruling from the Supreme Court about land use rights up there. Did that affect Harmony?

, No. What it has done is the government has been working for a number of years on the Queen Charlotte. Queen Charlotte has come up with a land use plan. And the Premier and the Haida Nation just yesterday announced a formal resolution of all those issues that mostly revolves around the forestry and the annual allowable cut in that part of the province. But, part of that whole land use planning process designated certain mineral lands for mineral development, and our Harmony project is in that area. So, that means that the likelihood of us being able to develop it today is far greater then it was two days ago.

Certainly, that does not mean that that's a carte blanche. There's going to have to be discussions and undertakings with the Haida in terms of how we approach this issue in terms of mineral development in those areas. And we plan on looking at that in the next coming months as well in the new year. So, we will make overtures and go see the native leaders up there in the coming months.

We have, though, been working on the -- we knew that the government was going to release these numbers -- this land use plan. We have, though, been looking at the flow sheet. We have been reevaluating the engineering. We do think that there is an economic gold deposit there that, certainly at these prices, is more than economic. And we've got to work at coming up with a plan on how to do that.

Looking at the year ahead, what do you see the cost of production at per pound, with or without moly credits, however you look at it? I know -- because we have the new mill coming on here, I'm not quite sure what the latest expectation is for that due to the cost per pound of production.

I think, like I said in my opening remarks, you can see where we're heading totally. The last quarter (inaudible) we can get the volumes up, we did C$0.82 a pound. You had off-property costs. So, we think we're pretty consistent in our messaging, which we've indicated for the last, probably, 24 months, that we'll be in that sort of C$1.10 to C$1.20 range, depending on what happens with off-property costs, and that is a big issue now.

We are in the process of working on our -- tendering our concentrate offtake agreement. As you well know, it expires with Glencore probably in the fall of 2008. So, we've made overtures to, I believe, Jeffrey, 17 --?

19.

-- 19 smelter and trading groups to bid our concentrate, including Glencore. And we are out in the market right now testing the market. We have basically put out for tender over 1 million tons of our concentrate over the next six-year period. Once we get those bids in, we will be evaluating them to see what our best course of action will be. We believe, though, that we are in a very fortunate position with respect to where the concentrate market is right now, and that we should be able to have a new contract, either with Glencore or some other party, that is reflective of where the concentrate markets are at this time.

Just to move onto that point, because I think this raises a good point, we want to establish predictable cash flows at Gibraltar. And how we have done that is we've been very fortunate to establish a long-term employment agreement with our employees, which sets the wages so that they are content and we are content. But, more importantly, they are predictable as to our cost structure.

Number two, because of the modifications to Granite Pit, the crusher and the pit and likewise, less truck haul distances, less trucks to buy, we can predict far better what it will cost per ton to mine. And soon we'll know why (inaudible) ratcheting down on a descending basis our cost to mill.

Next, moving to the off-site costs, we have had a very favorable relationship with Glencore. We certainly are not averse to continuing that relationship with Glencore. But the market, similarly as in '04, when we signed our first contract, is very favorable to the miners, in that smelters are deficient in concentrate feed; consequently, there is a huge appetite for that. We would like to establish a longer-term fixed-price component of our off-site property costs, [thereby] adding to the predictability of our cash flow.

And so, what we're trying to do is we want to create less risk, more certainty, more predictability of cash flow, with a descending cost profile, at Gibraltar. Then we have less risk, by definition. We then take that springboard of cash flow and finance into another project. Our desirability is Prosperity. That would be a higher risk component than Gibraltar, but we think actually the risk component could be quite low, because we have had a lot of experience building only a couple hundred kilometers north of where Prosperity is going to be built with the same crusher, the same type of truck, same shovel-type aspects. So, we have a lot of in-house actual experience.

That's really what our plan is. And to the extent we can lock in these things -- we have tire contracts that have been renewed with fixed-price; we have established that; it's no longer a concern; it had been for a lot of miners; it's not for us now. We are locking down all these elements as we fund the operations, so we can move to the next major growth strategy.

(Operator Instructions). Chris Marvin, Oaktree Asset Management.

With regard to Prosperity, I've been reading through your feasibility study announcement on your Web site, but, do you have a timeline on when you think you will get fully permitted? You've talked about, if things fall into place, 2010 production. But, do you have a goal of being permitted by x date?

That's a good question; I wish we would know that. But, we certainly think that once you enter the EA process -- we have done a tremendous amount of work in the last year to get us to the position to enter the EA process. We believe that certainly the EA process, if it's functioning properly, should not take any more than six to seven to eight months, somewhere in that neighborhood, that we should have a decision whether we're going to go or not go.

We believe that there's certainly some issues that need to be addressed. There's the societal issues and there's the environmental issues. We believe that the process that we have put in place will address the environmental issues. I think moving forward, it's going to be dealing with the native groups and the communities of interest in the area. So, I think that certainly by the middle of next year, we will either have a decision one or another. And I'm confident that once we look at the whole picture with respect to the influence that it will have on the economies of the central interior, the influence it will have with respect to dealing with the native issues and the first nations in the area, that we can accommodate and support all those groups, and that we should get a permit that makes sense for British Columbia.

Now I'm going to raise the politically delicate topic, and that is just something that has come up in some meetings down here in New York in the past couple of weeks. And I am not trying to cast dispersions on anybody. But, in the wake of the big news out of British Columbia about three weeks ago, presumably you have had, and will have, some frank discussions with HATCH about the assumptions of C$800 million in costs. Nobody on our side of the ledger will be too shocked if it goes up to C$1 billion. Is that something where the focus has been refined over the past few weeks?

We came out with a feasibility study -- it's Chris?

Yes.

Chris, we came out with a feasibility study a number of months ago. And I can't speak for how other companies run their feasibility studies or do their background checks in terms of input costs. I can only speak for our company. And I think we have a very good handle on what our input costs are, particularly as they relate to the new construction of a mine that is in a totally different geographical situation as Galore was.

Obviously, you're not nearly as remote as that.

It's not as remote. It's not as inhospitable. It doesn't have 60 feet of snow. It's not in a valley canyon and you've got to access through a 4-kilometer tunnel. You don't have a 150-kilometer one-way road. We can drive there in the summertime in your car, maybe not in a sports car, but certainly in a normal car. You don't need a 4x4. Two feet of snow. Mild temperatures. Very similar operating conditions as we have at Gibraltar.

We know the cost of steel. We know the cost of concrete. We know our labor component. So, I am having a tough time with a lot of the input costs that people are seeing that is reflective of today's construction costs. I think we know what they are because we're just right in the process of doing C$100 million expenditures, and doing the same kind of things at Gibraltar as we will do at Prosperity.

Certainly, we view there's room for improvement. We believe that we can reduce the cost of our EPCM costs that I just spoke to you about before. I think we can reduce the costs of our predevelopment work. We can use our equipment from the mine site that we have at Gibraltar to do site preparation. We believe that we can -- that John spoke about earlier, the crusher that we have at the mine site at Gibraltar is an identical crusher that we're going to have at Prosperity, and that the engineering has already been done on that.

So, there's just all these attendant synergies and advantages that we have that a number of other companies would not have. I want the costs to go down; I don't want them to go up. And you said to C$1 billion? Well, that doesn't work for us. C$1 billion -- we're not going to head that way. We want to reduce the operating costs and the total cost of construction, and we think we can do it.

That is very encouraging to hear. Thank you.

Tom Bishop.

(technical difficulty) that you said is well underway. But, given that you are moving from one pit to another, what pit are you in with it?

It's John McManus here. In the Pollyanna pit is our main ore feed right now. It has been since start-up. But, we moved over to the Granite pit and began pre-stripping about a year ago. And within a month or so, the Granite pit becomes significant portion of the ore feed. And then by the end of February, March of 2008, Granite pit is our ore feed, and the Pollyanna pit is completed.

By when is that?

February of 2008. Three months.

But, I thought you said the in-pit crusher was being installed, and my question was in what pit, since --

The in-pit crusher is being installed in the granite pit. Now, we have done significant ore feed tests from the Granite pit, too. So, we've run about three weeks' worth of feed through the mill, so we understand that ore is not significantly different than what we have been dealing with before, other than handling issues. So, the crusher and conveyor system is being put into the Granite pit, because that will be our ore feed for the next 10 years.

And that will help reduce our unit costs, because if we didn't put that in, we'd have to have three or four more trucks.

Does this crusher just slowly drop as the pit floor drops? I'm trying to imagine it. Given that you [don't] really have a pit there yet, other than the stripping.

We've got a big hole there.

There's a big hole there already from previously mines, and the crusher will be installed about, I think, 300 feet below what the normal surface is. It's a large structure. The whole thing is about 10 stories high. It's quite an installation. It is movable.

It is very common to reduce (inaudible) costs and put the crusher close to where your mine faces are. (inaudible) has them; (inaudible) has them. There's all kinds of organized mining operations that have them.

It is movable, but we expect to move it maybe once every five years.

Okay. So then there's a conveyor as well that takes this to where?

That's right. We already have all of the conveyor hardware from previous operations at Gibraltar. That's already on site.

Very good. I was a little curious about SG&A. Do I understand it was C$6.5 million for the quarter, or was it for the year?

What was that comment? C$6.5 million for what?

For SG&A.

It was for the year, I think I mentioned, which was -- it was C$18 million for the entire year, which that includes a number of items. I just hit on the highlights. It's been quite consistent. There are a couple items that are up and down, but it has been quite consistent from year over year.

It says 6.5 on the income statement, and then you have just mentioned 18.

(inaudible)

(multiple speakers) there's this stock option cost that's even higher [than SG&A]. I know you guys are good, but (multiple speakers)

If you want to get down to the granule level of the statement of operations, Tom, no problem. Looking at the G&A, we have C$6.5 million last -- compares to last year at C$5.3 million. It is increased because of the activity of all the things that we're doing, which includes the expansion, the analysis, Prosperity, the M&A and activity. We've done the financing, so we got busy on that. And so, there was a lot of strategic initiatives that were undertaken. And so, at a senior level, we've tried to put that together.

Similarly, we have enhanced our expertise here. Now, one of the gentlemen mentioned that (inaudible) had a little problem with their cost estimates. As a consequence, there were some people let go in the market. We can benefit from that because those people are now -- we're entertaining to hire them. So, we are trying to staff up to meet our expectation as to expansion. So, yes; that one is slightly up. I expect it to be stable or down on that [figure] going forward.

On stock-based compensation, it is a non-cash item. I agree it is up. It is at C$6.7 million. It reflects, basically, the volatility of Taseko. Fortunately, the volatility of Taseko has been nothing but up. And consequently, when you issue or grant options, it reflects the time period of the options to which the Company needs to book. It's a Black-Scholes. You have no alternative. You have to go with the calculation. And so that's driven that number.

We have more people around, senior people. They need to be incentivized. I'm confident they are being incentivized. They are succeeding. They are performing. The DNA is right on these people. And so, that number is reflective of those people. And certainly it's getting through to the operational results. And so I'm happy to have that number there, knowing my results are coming up. So, will that number change much? I think it's about the same or down, because we've got those people on board. Is there any other questions on that? Otherwise I'll just move on.

No. I think I (technical difficulty). But you did mention an C$18 million figure and a C$6.5 million. Now, I can add 6 and 9 (technical difficulty) 6.7 and 6.5 and get 13. Then I am missing the other, but --

What we have really is the Company is really made up of op costs, which are C$110 million and revenue of C$218 million. And that's our gross profit. Then we have normal course operating-type expenses that are outside the mill, the mine and the like. They totaled in the year to C$18 million. That compares to last year at C$16 million. The stock-based compensation, the G&A and the like, are included in that C$18 million and last year of C$16 million.

I guess my question was what is and the like? Because I have the stock-based compensation and G&A, but [I'm just] missing what gets it up to 18.

There is exploration at Prosperity and Aley, which amount to about C$10 million. So, we are expensing that until we get a go-ahead on Prosperity. That is being somewhat conservative, because we believe the asset value is there. But, as we move towards the permit, we'll make more assessments on that. So we're expensing that out today.

$10 million did you say? Because that would take you well over 18.

We're at C$9 million there. Well, there's some offsets then, of course. We have interest income, and we've had higher cash balances on hand. Interest rates have been higher, and consequently they've offset it. I would love to go through some of the granular aspects of the statement of operations and certainly the expenses, and I would be delighted to take your call off-line on that. I can go through some of that granular detail and certainly, hopefully, can answer your questions.

That's fine. And the current share count, a basic, is roughly what?

We are sitting at about 140 million shares outstanding.

And the diluted number, the fully diluted number in Q4 itself?

I will just give you the fully diluted, including the most recent issuance and the like, including the convertible debenture and the like is 158 million.

The 140 million includes the most recent offering?

Correct.

Thanks for those questions, Tom. You can follow up with Jeffrey or myself later if you've got anymore. Operator, is there any other questions?

(Operator Instructions).

Okay, operator. Thanks very much. Look forward to chatting with everyone next quarter. Have a Merry Christmas. Bye bye.

Thank you, everyone, for your participation in today's program. You may disconnect at this time.