Annual Report 2017 Gibraltar Mine British Columbia ALEY CANADA MACKENZIE PRINCE GEORGE GIBRALTAR NEW PROSPERITY WILLIAMS LAKE VANCOUVER DIVERSIFIED ASSET BASE British Columbia ALEY CANADA UNITED STATES MACKENZIE PRINCE GEORGE GIBRALTAR NEW PROSPERITY WILLIAMS LAKE VANCOUVER Arizona PHOENIX FLORENCE PRINCIPAL ASSET DEVELOPMENT ASSETS Gibraltar Florence Copper Aley New Prosperity British Columbia, Canada Arizona, USA British Columbia, Canada British Columbia, Canada Copper - Molybdenum Second largest open pit copper mine in Canada Copper UNITED STATES Low cost in-situ copper recovery project Arizona Niobium Copper - Gold Third largest niobium deposit in the world 10th largest copper-gold development project globally Ownership: 75% (unincorporated JV) 667 million tons P&P reserves at a grade of 0.28% Cu Eq as of December 31, 2017, with additional resources expected to convert to reserves Expected avg. annual production (LOM): 140 million lbs Cu & 2.5 million lbs Mo Mine life: 21 years Ownership: 100% PHOENIX Ownership: 100% Ownership: 100% FLORENCE 345 million ton probable reserves at a grade of 0.36% Cu 84 million tonne P&P reserves at 0.50% Nb2O5 (286 million tonne M&I resource at 0.37% Nb2O5) 831 million tonnes P&P reserves at a grade of 0.23% Cu and 0.41 g/t Au 1.0 billion tonne ore body (P&P reserves plus M&I resources) Projected annual capacity: 85 million lbs Cu Projected avg. annual production (LOM): Option for 5 mm kgs Nb or 9 mmm kgs Nb 5.3 billion lbs of contained Cu and 13.3 million ounces of contained gold Estimated production life: 21 years Estimated mine life: 24+ years Estimated mine life: 20+ years HIGHLIGHTS OF THE YEAR January 2017 Taseko announces record quarterly copper and molybdenum production at Gibraltar, with 40.7 million pounds of copper produced and 0.8 million pounds of molybdenum and total 2016 production of 133.2 million pounds of copper and 0.9 million pounds of molybdenum (100%). March 2017 Taseko closes US$33 million streaming agreement with Osisko Gold Royalties Ltd for Taseko’s 75% share of payable silver production from the Gibraltar Mine. April 2017 Gibraltar signs a new, long-term agreement with unionized employees June 2017 Taseko completes debt refinancing, reducing overall debt and extending maturities to 2022. The US$250 million aggregate principal amount of 8.75% Senior Secured Notes are due 2022. The Company used the net proceeds of the offering, and a portion of its existing cash balance, to fund the redemption of its Senior Notes due 2019 and to repay its senior secured credit facility and the related copper call option. September 2017 Taseko announces that the Environmental Appeals Board (EAB) of the Environmental Protection Agency (EPA) issued an order denying any further review of the Underground Injection Control (UIC) Permit granted in 2016 for Taseko’s Florence Copper Project. September 2017 Taseko’s Board of Directors gives management approval to move forward with the construction of the Florence Copper Production Test Facility (PTF). Estimated remaining costs to construct the PTF are US$25 million. October 2017 Anu Dhir joins Taseko’s Board of Directors as an independent, non-executive director. December 2017 In 2017, Gibraltar produces 141 million pounds of copper and 2.6 million pounds of molybdenum, resulting in C$211 million of cash flow from operations and C$164 million of EBITDA. PRESIDENT’S MESSAGE TO SHAREHOLDERS Dear Shareholders; A year ago as I was writing the annual message to shareholders, our stock price and the price of copper were both up roughly 200% and 25%, respectively, from the previous six months. The long period of depressed copper prices and its impact on our equity appeared to be in the past. The copper price in a few short months had moved from US$2.20 per pound to US$2.70, however, many industry pundits were calling for the copper price to retreat. The feeling was that copper had moved too far, too fast and it was due for a significant correction. Not many predicted the price to climb up to US$3.30 per pound where it closed the year. With the tailwind from the increase in the copper price and Gibraltar’s strong copper production, our stock was one of the best performers on the TSX in 2017. In 2017, we produced 141 million pounds of copper and 2.6 million pounds of molybdenum. Gibraltar has only produced in excess of 140 million pounds once prior and for molybdenum, 2017 was a record year. The mine benefited both from higher grades and a focused effort on efficiencies which resulted in higher throughput and the increase in metal production. 2017, however, wasn’t without its challenges. The most significant being the major wildfires which impacted the entire Cariboo region of British Columbia. These fires forced the evacuation of more than 35,000 residents, including the two major communities in the region where most of our Gibraltar employees live. Residents were on evacuation alert for seven weeks in the summer. During this time, our Gibraltar management team maintained production with a greatly reduced workforce. It was an extremely challenging task given the magnitude of Gibraltar operations and the manpower required to operate the mine. The lengthy duration in which the wildfires impacted our employees came at a financial cost for the Company. Mine operations were preparing to transition into a new zone of our main ore pit when the fires struck. Based on our original mine plan, pre-stripping was to be completed in the fourth quarter of 2017. Waste stripping, however, was delayed and access to ore from the new zone was limited, so we had to supplement ore feed from the pit with ore from our low grade stockpiles. The use of stockpiled ore has continued through the early months of 2018 as we catch up on waste stripping and begin to once again access better grade ore from the pit. Stripping activities are now close to being caught up and we are seeing copper grades increase. While the impact from the wildfires was a short-term event, considering the mine has 21 years of life remaining, some shareholders have a shorter-term view and this resulted in our share price declining over the first few months of 2018. We believe with the lower than usual grade ore behind us and with metal production forecast to be increasing in the months ahead, operating cash flow will return to expectations. Taseko Share Price vs LME Copper Price $3.50 Taseko Share Price vs LME Copper Price $3.00 $2.50 $3.50 $2.00 $3.00 $1.50 $2.50 $1.00 $2.00 $0.50 $1.50 Oct-16 $1.00 $0.50 Jan-17 Apr-17 Jul-17 Oct-17 Taseko Share Price (C$) Copper Price (US$) Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Taseko Share Price (C$) Copper Price (US$) Gibraltar Copper Production 160 Gibraltar Copper Production 140 s d n u o P i l l i f o s d s n n u o o P M f o s n o i l l i M 120 160 100 140 80 120 60 100 40 80 20 60 0 40 20 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Taseko vs Indices (Relative Performance) Taseko S&P/TSX Global Base Metals Index S&P/TSX Global Mining Index S&P/TSX Small Cap Index S&P/TSX Composite Index PROJECTS I am very excited to update everyone on our Florence Copper Project; construction continues to advance on-time and on budget. A strong focus on spending and timelines is imperative for Taseko. Our track record for large capital projects is evidence of this, with the most recent example being our $325 million Gibraltar expansion which was delivered on- time and on budget. The wellfield development drilling was completed in April and aquifer characterization testing continues. We broke ground on the SX/EW plant construction in January and its completion timing coincides with the deposit pre- leaching in the third quarter. We continue to work with state and federal regulators to ensure a smooth transition from commissioning activities to cathode production, currently anticipated before the end of the year. Successful operation of the Florence Copper wellfield and processing plant will be a major milestone in advancing this important project. We have no doubt that the technical aspects of the project will be proven, as well as the integrity of the project from an environmental standpoint. In the 2017 Florence Copper technical report, the economics of the project were robust, with an after-tax net present value of US$680 million. An important item that shouldn’t be overlooked is the impact of the new US corporate tax rate. We believe the lower tax rate will add approximately US$80 million to the after-tax net present value of Florence Copper, increasing it to US$760 million. And as a reminder, these economics were run using a long-term copper price of US$3.00 per pound. For our Aley Niobium Project, we have completed three years of additional engineering work and are in the final stages of completing an updated technical report. This report will demonstrate improved economics at a lower long-term niobium price. The additional engineering work also provides us with confidence in the scalability of the project. If necessary to enter the market with a lower production profile, our engineering indicates that we can scale the project back in size and that the economics will remain strong. The market for specialty steels has rebounded in the past few years and there has been renewed interest in our Aley Project. We will continue to pursue a strategic off-take partner, which is the area that can create the greatest value for this project. Gibraltar Mine HEALTH AND SAFETY Our employees, the environment and communities in which we operate are very important aspects of our business. Health and safety have always been a high-level commitment for Taseko, Gibraltar and Florence management. With the credo that: “Nothing is more important to the Company than the safety, health and well-being of our workers and their families”. Taseko is committed to operational practices that result in improved efficiencies, safety performance and occupational health. Through a tremendous amount of effort and persistence by all of our workforce, a true culture of working safely has been established and maintained. Health and safety performance is an ongoing commitment. Our teams continually review their training and awareness programs in order to ensure that they are fresh and relevant. Gibraltar’s 2017 loss time frequency was 0.6 per 200,000 hours worked, well below the British Columbia mining industry average of 1.1. How Gibraltar performs on a health and safety basis compared to our peers is a very important aspect of our business and one we monitor very closely. BOARD OF DIRECTORS Two of our board members will not be standing for re- election in at our upcoming AGM. Both Bill Armstrong and Linda Thorstad will be stepping down after multiple years of serving on our Board. I would like to make special mention of Bill Armstrong, who has been one of our longstanding board members. Since joining our Board in 2006, Bill has contributed significantly in helping us grow Taseko into what it is a today. His technical knowledge proved invaluable and was instrumental in developing many health and safety policies, as the Chair of the Board’s Environment, Health and Safety Committee. I would like to thank him for his many years of service on the Taseko Board. As well, Linda being our first female Board member has done an excellent job overseeing our governance protocols as the Board continues to advance ever changing governance regiments. Linda also lead the Independent Committee during our proxy fight in 2016 and I would like to thank her on behalf of management for all that she did to see that through to a successful resolution. Finally, I would like to thank all of our shareholders for their continued support. 2017 was a great year and we believe that higher copper prices, strong production and project advancement will only create stronger equity returns for our holders in the months ahead. Sincerely, Russell E. Hallbauer President and Chief Executive Officer Florence Copper Project TWO-YEAR FINANCIAL HIGHLIGHTS CONSOLIDATED BALANCE SHEETS (CDN$ IN THOUSANDS) ASSETS Current assets Cash and equivalents Accounts receivable Other financial assets Inventories Prepaids Property, plant and equipment Other financial assets Goodwill LIABILITIES Current liabilities As at December 31, 2017 2016 $ 80,231 $ 21,618 2,774 39,639 1,474 89,030 12,905 1,574 60,550 1,268 $ 145,736 $ 165,327 797,265 40,537 5,172 730,208 48,368 5,536 $ 988,710 $ 949,439 Accounts payable and other liabilities $ 47,382 $ Current income tax payable Current portion of long-term debt Current portion of deferred revenue Interest payable on senior notes Long-term debt Provision for environmental rehabilitation Deferred and other tax liabilities Deferred revenue Other financial liabilities EQUITY Share capital Contributed surplus Accumulated other comprehensive income (“AOCI”) Deficit 302 11,270 1,312 1,143 61,409 317,948 107,874 89,045 39,640 5,714 33,416 889 16,157 – 4,336 54,798 373,133 98,454 62,202 – 21,913 $ 621,630 $ 610,500 422,091 47,478 389 (102,878) 367,080 417,975 45,747 12,357 (137,140) 338,939 $ 988,710 $ 949,439 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (CDN$ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) REVENUES Cost of sales Production Costs Depletion and amortization Earnings from mining operations General and administration Share-based compensation Exploration and evaluation Loss on derivatives Other income (expenses) Income (loss) before financing costs and income taxes Finance expense Finance income Foreign exchange gains Income (loss) before income taxes Income tax (expense) recovery Net income (loss) Other comprehensive income (loss): Unrealized loss on available-for-sale financial assets, before tax Tax recovery Foreign currency translation reserve Other comprehensive loss for the year As at December 31, 2017 2016 $ 378,299 $ 263,865 (200,583) (47,722) 129,994 (12,775) (6,983) (1,730) (10,082) (6,341) 92,083 (209,150) (52,939) 1,776 (11,299) (3,619) (2,087) (6,360) (4,072) (25,661) (46,430) (30,007) 935 16,852 63,440 (29,178) 34,262 (4,248) – (7,720) (11,968) 1,084 8,475 (46,109) 14,713 (31,396) (32) 516 (3,709) (3,225) Total comprehensive income (loss) 22,294 (34,621) Earnings (loss) per share Basic Diluted Weighted average shares outstanding (thousands) Basic Diluted 0.15 0.15 (0.14) (0.14) 225,682 232,039 221,828 221,828 MINERAL RESERVES & RESOURCES (AS AT DECEMBER 31, 2017) GIBRALTAR Category (at 0.15% Cu cut-off) Size (M Tons) Grade Recoverable Metal Contained Metal Cu (%) Mo (%) Cu (B lbs) Cu (B lbs) Proven Probable Total P&P Reserves Measured Indicated Total M&I Resources 527 140 667 755 256 1,011 0.26 0.23 0.255 0.26 0.24 0.25 0.008 0.008 0.008 0.008 0.007 0.008 2.4 0.6 3.0 – – – 2.7 0.7 3.4 3.9 1.2 5.2 The resource and reserve estimation was completed by Gibraltar mine staff under the supervision of Scott Jones, P.Eng., Vice President, Engineering of Taseko and a Qualified Person under National Instrument 43-101. Mr. Jones has verified the methods used to determine grade and tonnage in the geological model, reviewed the long range mine plan, and directed the updated economic evaluation. The estimates used long term metal prices of US$2.75/lb for copper and US$11.00/lb for molybdenum and 0.85 C$/US$ foreign exchange. Reserves and Resources were updated and are stated as of Dec 31/17. Mineral reserves are contained within the measured and indicated mineral resources. FLORENCE Category (at 0.05% TCu cut-off) Size (M Tons) Probable Reserves Measured Indicated M + I Resources Inferred 345 296 134 429 63 Grade (%TCu) 0.36 0.35 0.28 0.33 0.24 Recoverable Metal Contained Metal Cu (B lbs) Cu (B lbs) 1.7 – – – – 2.5 2.1 0.7 2.8 0.3 The resource and reserve estimation (effective date Jan 16 2017) was completed by Dan Johnson PE, Vice-President/General Manager for Florence Copper, Inc., and a Qualified Person under National Instrument 43-101. The updated Mineral Reserves are based on engineering performed by SRK Consulting incorporating the measured and indicated resources established in 2010, metallurgical work completed by SGS Inc. and T. McNulty and Associates, process facility designs by M3 Engineering as well as well field designs by Haley and Aldrich Inc. The study was done using a long term metal price of US$3.00/lb for copper. Mineral reserves are contained within the measured and indicated mineral resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability (Under US standards no reserve declaration is possible until a full feasibility study is completed and financing and permits are acquired.) ALEY Category Proven Probable Total P&P Reserves (at 0.30% Nb2O5 cut-off) Measured Indicated Total M&I Resources (at 0.20 Nb2O5 cut-off) Size (M Tonnes) Grade Recoverable Metal Contained Metal Nb205 (%) Nb (M kg) Nb (M kg) 44 40 84 113 173 286 0.52 0.48 0.50 0.41 0.35 0.37 102 86 188 – – – 160 134 294 323 423 746 The reserve estimation (effective date Sept 15 2014) was reviewed by Scott Jones, P.Eng., Vice-President Engineering for Taseko and a Qualified Person under National Instrument 43-101. Mr Jones has verified the methods used to determine grade and tonnage in the geological model, reviewed the long range mine plan, and directed the updated economic evaluation. The study was done using long term metal prices of US$45.00/kg for niobium and an exchange rate of US$0.90/C$1.00. The NI 43-101 compliant reserve estimate takes into consideration all geologic, mining, milling, and economic factors, and is stated according to Canadian standards. (Under US standards no reserve declaration is possible until a full feasibility study is completed and financing and permits are acquired.). Mineral reserves are contained within the measured and indicated mineral resources. NEW PROSPERITY Category Proven Probable Total P&P Reserves (at C$5.50 NSR/t cut-off.) Measured Indicated Total M&I Resources (at 0.14% Cu cut-off) Size (M Tonnes) 481 350 831 547 463 1,010 Grade Recoverable Metal Contained Metal Au (g/t) Cu (%) Au (M oz) Cu (B lb) Au (M oz) Cu (B lb) 0.46 0.35 0.41 0.46 0.34 0.41 0.26 0.18 0.23 0.27 0.21 0.24 5.0 2.7 7.7 – – – 2.4 1.2 3.6 – – – 7.1 3.9 11.0 8.1 5.2 13.3 2.8 1.4 4.2 3.2 2.1 5.3 The mineral resource and reserve estimations (effective date Nov. 2 2009) were completed by Taseko staff under the supervision of Scott Jones, P.Eng., Vice-President, Engineering of Taseko and a Qualified Person under National Instrument 43-101. Mr Jones has verified the methods used to determine grade and tonnage in the geological model, reviewed the long range mine plan, and directed the updated economic evaluation. The basis 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. The NI 43-101 compliant reserve estimate takes into consideration all geologic, mining, milling, and economic factors, and is stated according to Canadian standards. (Under US standards no reserve declaration is possible until a full feasibility study is completed and financing and permits are acquired.) Mineral reserves are contained within the measured and indicated mineral resources. Gibraltar Mine employees CORPORATE INFORMATION Senior Officers Russell Hallbauer President & CEO and Director Ron Thiessen Chairman John McManus Chief Operating Officer Stuart McDonald Chief Financial Officer Brian Battison Vice President, Corporate Affairs Scott Jones Vice President, Engineering Rob Rotzinger Vice President, Capital Projects Brian Bergot Vice President, Investor Relations Head Office 15th Floor - 1040 West Georgia Street Vancouver, British Columbia Canada V6E 4H1 Toll Free: (877) 441-4533 Main Phone: (778) 373-4533 Website tasekomines.com Email investor@tasekomines.com Transfer Agent Computershare Investor Services Inc. 3rd Floor, 510 Burrard Street Vancouver, British Columbia Canada V6C 3B9 (800) 564-6253 Annual General Meeting June 7th, 2018 at 2:00 pm McMillan LLP 1055 W Georgia St Royal Centre, Suite 1500 Vancouver BC Canada Shares Listed TSX – TKO NYSEAMERICAN – TGB