United. Committed. Open. Annual Report 2011 The Year in Review February 2011 > Gibraltar Development Plan 3 (GDP3) approved by the Taseko Board; annual copper and molybdenum production to increase to 180 million lbs and 3 million lbs, respectively April 2011 > Issues Senior Notes for total proceeds of US$200 million; due in 2019 and have an annual interest rate of 7.75% May 2011 > Gibraltar’s Proven and Probable Reserves increase by 80%, to 802 million tons (0.20% COG) > GDP3 construction commences June 2011 > Purchase put options on ~90% of the Company’s 2012 copper production, ensuring a minimum selling price of US$3.50 per pound November 2011 > New Prosperity enters into Federal Environmental Assessment process January 2012 > > 2011 gross profi t of $86.3 million and net earnings of $27.0 million 2011 production: 82.9 million lbs of copper and 1.3 million lbs of molybdenum (100% basis) February 2012 > Company commences a normal course issuer bid for up to 10 million common shares, which is approximately 5.1% of the Company’s issued shares March 2012 > Aley resources increased and upgraded to a Measured and Indicated Resource of 286 million tonnes with an average grade of 0.37% Nb2O5 (0.20% COG) April 2012 > Q1 2012 production: 20.8 million lbs of copper and 438,000 lbs of molybdenum (100% basis) May 2012 > Agreement reached with Tsay Keh Dene to support the exploration program and environmental studies at Aley 2011 production: 83 million lbs of copper and 1.3 million lbs of molybdenum (100% basis) President’s Message to Shareholders Year in Review 2011 was a building year for Taseko where we advanced our three key assets: Gibraltar production steadily increased and we commenced Gibraltar Development Plan 3 to increase capacity to 85,000 tons per day; New Prosperity re-entered the environmental assessment process aft er a year of additional engineering studies; and, at Aley, we completed a major drilling and exploration program. These initiatives are the cornerstone of ongoing growth for the Company and the subsequent increase in shareholder value. Employee health and safety is a core focus of management. At Gibraltar, our eff orts to improve in these areas are refl ected in our 2011 safety performance. The combined medical aid and lost time injury frequency rate has steadily improved since restarting the mine and in 2011 was reduced by nearly 40% over 2010. Financially, 2011 was another strong year for Taseko. Gross profi t for the year was $86.3 million, with net earnings of $27.0 million ($0.14 per share) from the sale of our share of 82.9 million pounds of copper and 1.3 million pounds of molybdenum. Additionally, we took advantage of a window in the high yield debt market to issue $200 million of eight year senior notes and ended the year with over $275 million cash. Gibraltar Production 2011 Copper and molybdenum production at Gibraltar was 82.9 million pounds and 1.3 million pounds, respectively. Copper production was slightly lower than the previous year as a result of mining lower grade ore and the loss of milling capacity associated with de-bottlenecking the SAG direct feed system. Molybdenum production, however, increased by over 40%, as compared to the prior year, as a result of signifi cant improvements in molybdenum metal recovery. Russell E. Hallbauer President and CEO industry norm. We have just completed a cost review with our lead engineering fi rm and the project remains on budget. As of today, GDP3 construction is nearly 40% complete and approximately 75% of the originally budgeted $325 million is now committed. The project is on time and expected to begin commissioning in December this year. GDP3 will have a substantial impact on Gibraltar’s production levels. The project includes the construction of a standalone 30,000 ton per day concentrator, built alongside the existing 55,000 ton per day facility. The additional capacity provided by GDP3 will increase Gibraltar’s annual copper production capacity by a further 60 million pounds, to 180 million pounds, at the life of mine average grade. Included in GDP3 will be the construction of a new molybdenum plant which will nearly triple annual production to three million pounds. New Prosperity Taseko’s wholly-owned New Prosperity Gold-Copper Project provides long-term value for the Company. for stakeholders, the Company’s We are actively working on this project, which holds exciting potential including shareholders and local communities. In November 2011, the project entered into a new federal review process that will examine Taseko’s revised plans. These revised plans address the environmental concerns identifi ed in the original environmental assessment process, and importantly, includes the preservation of Fish Lake. The process, being led by the Canadian Environmental Assessment Agency, will use information gathered in the previous review and is expected to be completed in November 2012. Gibraltar Development Plan 3 (GDP3) Aley A common theme in the mining industry over the past number of years has been capital cost overruns. It is true that it is much more expensive to build a mine today than, say, 10 years ago, but we believe capital costs increases of 20%, 40% and even much higher, are largely a function of improper cost management. These cost escalations should not be the The advancement of Taseko’s 100% owned Aley Niobium Project, located in northern British Columbia, has been given a high priority over the past year. In March 2012, we announced a 170% resource increase and upgrade at Aley. The new Measured and Indicated Resource is 286 million tonnes with an average grade of Initiatives implemented in 2011 were driven to create organic growth and deliver shareholder value 0.37% Nb205 (at a 0.2% Nb205 cutoff ) and contains 739 million kilograms of niobium. The confi rmation of a Measured and Indicated resource provides additional confi dence that the deposit will support a long life, low cost mine. Planned activities in 2012 include the construction of an access road, further metallurgical test work and completion of a feasibility study. We expect to make an investment decision in early 2013. Market Review The market price for copper is the primary driver of the Company’s profi tability and our ability to generate operating cash fl ow. During 2011, the average price of copper was roughly US$4.00 per pound, which is nearly 20% higher than the average price in 2010. Although copper pricing was strong in 2011, it remained volatile and declined in the last few months of the year, before rebounding again in early 2012. We believe it is prudent fi nancial management to ensure a minimum revenue stream. In order to minimize the impact of the copper price volatility, we implemented a hedging strategy in 2009 using put options to secure a minimum price. For 2012, put options were purchased for approximately 90% of our share of copper production, creating a US$3.50 per pound fl oor for the year. Looking into 2012 Taseko’s management team looks forward to unlocking shareholder value in 2012. Our near-term organic growth at Gibraltar is driven by a fully-funded mine development program, which will nearly double annual copper production and provide a three year payback and a 35% internal rate of return. In addition, we have a diversifi ed 100% owned gold, copper and niobium project pipeline providing the Company with strong mid-term growth potential. I would like to thank all of our employees for their continued hard work and commitment in 2011. It is their dedication that has brought the Company to the position it is at today. In addition, we have the opportunity to work with world class suppliers and partners. Together, the Board and Management of your Company look forward to 2012 as we continue to grow the Company and unlock shareholder value. Kind regards, Russell E. Hallbauer President and Chief Executive Offi cer Mineral Reserves & Resources Gibraltar Mineral Reserves @ 0.20% Cu Cut-Off (May 2011) Size (M Tonnes) Grade Cu (%) Grade Mo (%) Recoverable Metal Cu (B lbs) Contained Metal Cu (B lbs) P&P Reserves M&I Resources 802 950 0.30 0.30 0.008 0.008 4.3 - 4.8 5.7 Th e resource and reserve estimation was completed by Gibraltar mine staff under the supervision of Scott Jones, P.Eng., Vice President, Engineering and a Qualifi ed Person under National Instrument 43-101. Mr. Jones has verifi ed the methods used to determine grade and tonnage in the geological model, reviewed the long range mine plan, and directed the updated economic evaluation. Th e estimates used long term metal prices of US$2.25/lb for copper and US$14.00/lb for molybdenum and a foreign exchange of US$0.85/C$1.00. Mr. Jones has reviewed this release. A technical report will be fi led on www.sedar.com. New Prosperity Mineral Reserves @ C$5.50 NSR/t Cut-Off (November 2009) Size (M Tonnes) Grade Au (g/t) Grade Cu (%) Recoverable Metal Au (M oz) Recoverable Metal Cu (B lb) Contained Metal Au (M oz) Contained Metal Cu (B lb) P&P Reserves M&I Resources 830 1,011 0.41 0.41 0.23 0.24 7.7 - 3.6 - 11.0 13.3 4.2 5.3 Th e mineral resource and reserve estimations were completed by Taseko staff under the supervision of Scott Jones, P.Eng., Vice-President, Engineering and a Qualifi ed Person under National Instrument 43-101. Mr. Jones has verifi ed the methods used to determine grade and tonnage in the geological model, reviewed the long range mine plan, and directed the updated economic evaluation. Th e estimates for the reserves used long term metal prices of US$1.65/lb for copper and US$650/oz for gold and a foreign exchange of C$0.82 per US dollar. A technical report was fi led on www.sedar.com. Aley Mineral Reserves @ 0.20% Nb2O5 Cut-Off (March 2012) Size (M Tons) Grade Nb2O5 (%) Contained Metal Nb (M kgs) M&I Resources 286 0.37 739 Th e 0.20% Nb2O5 cut-off assumes a niobium price of US$50/kilogram and a 50% process recovery rate. G & A, processing and ore mining costs were assumed to be US$30/tonne milled plus waste mining costs of US$2.00/tonne. A 45° pit wall slope was generated to constrain the resource within the block model. Th e resource estimate was prepared by Ronald G. Simpson, P.Geo. with Geosim Services Inc., a Qualifi ed Person independent of Taseko. A technical report will be fi led on www.sedar.com. Two-Year Financial Highlights Consolidated Balance Sheets (Cdn$ in thousands) As at December 31, 2011 2010 ASSETS Current Assets Cash and Equivalents $ 277,792 $ 211,793 Accounts Receivable Other Financial Assets Inventories Current Tax Receivables Prepaids Other Financial Assets Property, Plant and Equipment Intangible Assets Prepaids LIABILITIES Current Liabilities 39,909 86,147 23,290 7,437 2,348 21,918 26,202 21,286 - 534 436,923 281,733 111,641 440,565 5,438 165 93,825 341,098 5,438 - $ 994,732 $ 722,094 Accounts Payable and Accrued Liabilities $ 36,289 $ 23,796 Current Portion of Long-term Debt Other Financial Liabilities Current Tax Liabilities Deferred Revenue - Royalty Obligation Long-Term Debt Other Financial Liabilities Provision for Environmental Rehabilitation Deferred Tax Liabilities Deferred Revenue - Royalty Obligation 13,753 10,797 - 175 61,014 218,502 45,980 96,022 76,091 306 10,315 7,248 24,528 175 66,062 28,018 54,144 53,129 59,518 481 EQUITY Share Capital Contributed Surplus Accumulated Other Comprehensive Income (Loss) Retained Earnings $ 497,915 $ 261,352 378,393 33,040 (1,398) 86,782 496,817 365,553 26,193 6,249 62,747 460,742 $ 994,732 $ 722,094 Consolidated Statements of Comprehensive Income (Cdn$ in thousands, except per share amounts) Year ended December 31, 2011 2010 Revenue $ 251,866 $ 278,460 Cost of Sales (165,565) (157,759) Gross Profi t $ 86,301 $ 120,701 General and Administrative Exploration and Evaluation Other Operating Income (Expenses) Gain (Loss) on Contribution to Joint Venture Finance Expenses Finance Income Earnings before Income Taxes (21,100) (10,411) 5,175 (3,987) (19,057) (10,090) (2,675) 98,157 $ 55,978 $ 187,036 (22,492) 17,270 50,756 (10,747) 19,572 195,861 Income Tax Expense (23,782) (46,504) Net Earnings for the Year $ 26,974 $ 149,357 Other Comprehensive Income (Loss) Unrealized Gain (Loss) on Available-for-sale Financial Assets, Net of Tax Realized Gains on Available-for-sale Financial Assets, Net of Tax Total Comprehensive Income (Loss) for the Year (2,401) 5,249 (5,246) (3,576) $ (7,647) $ 1,673 Total Other Comprehensive Income for the Year $ 19,327 $ 151,030 Earnings Per Share Basic Diluted $0.14 $0.14 $0.80 $0.74 Weighted-Average Shares Outstanding Basic Diluted 193,213 197,748 186,103 203,006 Corporate Information Head Offi ce 15th Floor - 1040 West Georgia St. Vancouver, BC V6E 4H1 Toll Free: (877) 441-4533 Main Phone: (778) 373-4533 Facsimile: (778) 373-4534 Website tasekomines.com Email investor@tasekomines.com Transfer Agent Computershare Investor Services Inc. Toll Free: (800) 564-6253 Annual General Meeting June 1st, 2012 Terminal City Club, Vancouver, BC Canada Shares Listed TSX: TKO NYSE Amex: TGB Senior Offi cers Russell Hallbauer President, CEO and Director John McManus Senior Vice President, Operations Peter Mitchell CFO Brian Battison Vice President, Corporate Aff airs Scott Jones Vice President, Engineering Dave Rouleau Vice President, Operations For Further Information Contact: Investor Relations 15th Floor, 1040 West Georgia St. Vancouver, BC V6E 4H1 778.373.4533 T 877.441.4533 TF investor@tasekomines.com E TSX: TKO / NYSE Amex: TGB tasekomines.com
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