UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F/A
Amendment No. 3 to Form 20-F

[   ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2006 (with information to March 30, 2007 except where noted)

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[   ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report _______________

Commission file number 0-19476

TASEKO MINES LIMITED
(Exact name of Registrant specified in its charter)

BRITISH COLUMBIA, CANADA
(Jurisdiction of incorporation or organization)

Suite 1020, 800 West Pender Street
Vancouver, British Columbia, Canada, V6C 2V6
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act

None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None

Number of outstanding shares of the only class of the capital stock of Taseko Mines Limited as on
September 30, 2006.

128,388,175 Common Shares without Par Value

Indicate by check mark if the Registrant is a well known seasoned issuer as defined in Rule 405 of the
Securities Act.

Yes [   ]        No [X]

If this report is an annual or transition report, indicate by check mark if the Registrant is not required to
file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Yes [   ]        No [X]

Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that Registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

Yes [X]       No [   ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or non-
accelerated filer. See definition of "accelerated filer" and "large accelerated filer" in Rule 12b 2 of the
Exchange Act.

[   ] Large Accelerated Filer         [X] Accelerated Filer         [   ] Non Accelerated Filer

Indicate by check mark which financial statement item Registrant has elected to follow:
Item 17 [X]       Item 18 [   ]

If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b 2 of the Exchange Act):

Yes [   ]        No [X]

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PAST FIVE YEARS)

Indicate by check mark whether Registrant has filed all documents and reports required to be filed by
Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.

NOT APPLICABLE

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EXPLANATORY NOTE

Explanation of amendment on Taseko Mines Limited Annual Report on Form 20-F/A Amendment No.1 for the fiscal year ended September 30, 2006:

The original Annual Report on Form 20-F filed on EDGAR on April 17, 2007 did not contain the attachment for the consolidated balance sheets as at September 30, 2006 and 2005; consolidated statements of operations and deficit, and cash flows for each of the years ended September 30, 2006, 2005 and 2004, together with Report of Independent Public Accounting Firm thereon. This has been included in the Annual Report on Form 20-F/A Amendment No.1

Explanation of amendment on Taseko Mines Limited Annual Report on Form 20-F/A Amendment No.3 for the fiscal year ended September 30, 2006:

This Amendment No. 3 addresses certain comments raised by the Securities and Exchange Commission in their comment letter to the Company datedSeptember 20, 2007.

Currency and Exchange Rates

On March 30, 2007, the Federal Reserve noon rate for Canadian Dollars was US$1.00: Cdn$1.1529, based on the rates posted on the Bank of Canada website (www.bankofcanada.ca). See Item 3A for further historical Exchange Rate Information.

NOTE REGARDING FORWARD LOOKING STATEMENTS

Except for statements of historical fact, certain information contained herein constitutes "forward-looking statements" including, without limitation, statements containing the words "believes," "anticipates," "intends," "expects" and words of similar import, as well as all projections of future results. Such forward-looking statements involved known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Taseko to be materially different from any future results, performance or achievements of Taseko expressed or implied by such forward-looking statements. Such risks are discussed in Item 3D "Risk Factors." The statements contained in Item 4B "Business Overview", Item 5 "Operating and Financial Review and Prospects" and Item 11 "Quantitative and Qualitative Disclosures About Market Risk" are inherently subject to a variety of risks and uncertainties that could cause actual results, performance or achievements to differ significantly.

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GENERAL

In this Annual Report on Form 20-F, all references to "Taseko" and the "Company" refer to Taseko Mines Limited and its consolidated subsidiaries.

The Company uses the Canadian dollar as its reporting currency. All references in this document to "dollars" or "$" are expressed in Canadian dollars, unless otherwise indicated. See also Item 3 - "Key Information" for more detailed currency and conversion information.

The Company's functional currency is the Canadian dollar. Although substantially all the Company's revenues are denominated in US dollars, the cash flows related to the Company's assets and liabilities are primarily in Canadian dollars. The Company's labour, material, and financing costs are primarily in Canadian dollars.

Except as noted, the information set forth in this Annual Report is as of March 30, 2007 and all information included in this document should only be considered correct as of such date.

References to this "Annual Report" mean references to this Annual Report on Form 20-F for the year ended September 30, 2006.

NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 20-F contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements appear in a number of different places in this Annual Report and can be identified by words such as "anticipates", "estimates", "projects", "expects", "intends", "believes", "plans", or their negatives or other comparable words. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements that may expressed or implied by such forward-looking statements. The statements, including the statements contained in Item 3D "Risk Factors", Item 4B "Business Overview", Item 5 "Operating and Financial Review and Prospects" and Item 11 "Quantitative and Qualitative Disclosures About Market Risk", are inherently subject to a variety of risks and uncertainties that could cause actual results, performance or achievements to differ significantly. Forward-looking statements include statements regarding the outlook for the Company's future operations, plans and timing for its exploration programs, statements about future market conditions, supply and demand conditions, forecasts of future costs and expenditures, the outcome of legal proceedings, and other expectations, intentions and plans that are not historical facts. You are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties. The Company's actual results may differ materially from those in the forward-looking statements due to risks facing the Company or due to actual facts differing from the assumptions underlying the Company's predictions. Some of these risks and assumptions include:

• general economic and business conditions, including changes in interest and exchange rates;

• prices of natural resources, costs associated with mineral exploration and other economic conditions;

• natural phenomena;

• actions by government authorities, including changes in government regulation;

• uncertainties associated with legal proceedings;

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• changes in the resources market;

• future decisions by management in response to changing conditions;

• the Company's ability to execute prospective business plans; and misjudgements in the course of preparing forward-looking statements.

The Company advises you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to the Company or persons acting on its behalf. You should carefully review the cautionary statements and risk factors contained in this and other documents that the Company files from time to time with the Securities and Exchange Commission.

GLOSSARY

In this Form 20-F, the following technical terms, abbreviations and units of measurement have been used:

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Conversion of metric units (used in Canada) into imperial (US) equivalents is as follows:

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ITEM 1           IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

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ITEM 2           OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

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ITEM 3           KEY INFORMATION

A.           Selected Financial Data

The following constitutes selected financial data for Taseko for the last five fiscal years ended September 30, 2006 based on Taseko’s financial statements presented in accordance with Canadian generally accepted accounting principles ("CDN GAAP") and reconciled to United States generally accepted accounting principles ("US GAAP").

The selected financial data at September 30, 2006 and 2005 and for the years ended September 30, 2006, 2005 and 2004 has been derived from Taseko’s consolidated financial statements included in this Annual Report. Taseko’s consolidated financial statements have been audited by KMPG LLP, an independent registered public accounting firm. Summary financial data at September 30, 2004, 2003 and 2002 and for the years ended September 30, 2003 and 2002 has been derived from our consolidated financial statements that are not included in this Annual Report. The following selected financial data should be read in conjunction with, and are qualified in their entirety by reference to, our consolidated financial statements and the notes thereto.

These figures are presented in thousands of Canadian dollars, except per-share amounts and number of common shares outstanding.

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Note 1. As discussed in Note 4 of the December 31, 2006 consolidated financial statements, prior years consolidated balance sheets have been amended to present the liability component and equity component separately on the balance sheet. The accretion charges that were previously recorded through deficit are now recorded as interest accretion on convertible debt in the consolidated statement of operations. For the year ended September 30, 2005 this amounted to $1,075,478 (2004 – $977,705; 2003 - $889,000; 2002 - $808,000).

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Exchange Rates

On March 30, 2007, the Federal Reserve noon rate for Canadian Dollars was US$1.00: Cdn$1.1529. The following table sets out the exchange rates, based on the rates posted on the Bank of Canada website (www.bankofcanada.ca).

Monthly Low and High Exchange Rates

B.           Capitalization and Indebtedness

Not applicable.

C.           Reasons for the Offer and Use of Proceeds

Not applicable.

D.           Risk Factors

An investment in Taseko’s common shares is highly speculative and subject to a number of risks. Only those persons who can bear the risk of the entire loss of their investment should participate. An investor should carefully consider the risks described below and the other information that Taseko files with the Securities and Exchange Commission and with Canadian securities regulators before investing in its common shares. The risks described below are not the only ones faced. Additional risks that Taseko is unaware of or that Taseko currently believes are immaterial may become important factors that affect Taseko’s business and financial condition. If any of the following risks occur, or if others occur, Taseko’s business, operating results and financial condition could be seriously harmed.

The principal risks affecting Taseko and the value of Taseko’s common shares are:

Metals Prices Taseko’s Gibraltar mine is a “swing producer” meaning it is a mine which is economic to operate only when copper prices are relatively high. This is because by world standards, Gibraltar mines low grade ore and hence operations become uneconomic when copper prices decline. Mineralization

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referred to herein as “reserves” at Gibraltar may lose that status if copper prices return to near historical lows (sub US$1.25/lb copper). Low metals prices will also adversely impact the likelihood that Prosperity or Harmony will achieve commercial mine development.

Limited Reserves The Company's ability to sustain or increase its current levels of copper and molybdenum production is dependent upon the successful identification of additional reserves at the Gibraltar mine. If the Company is unable to develop new ore bodies, it will not be able to sustain present production levels beyond the current planned life of the Gibraltar mine. Reduced production could have a material adverse impact on future years’ cash flows, results of operations and financial condition of the Company.

Taseko’s Prosperity and Harmony Properties Contain No Known Reserves of Ore Although there are known bodies of mineralization on the Prosperity and Harmony Properties, there are currently no known reserves or body of commercially viable ore. Additional work is required before Taseko can ascertain if any mineralization may be economic. Exploration for minerals is a speculative venture necessarily involving substantial risk. If the expenditures Taseko makes on these properties do not result in discoveries of commercial quantities of ore, the value of exploration and acquisition expenditures will be totally lost and the value of Taseko stock may be negatively impacted.

Exchange Rate Risk The Company is subject to currency exchange rate risk. The prices of copper and molybdenum oxide are denominated in United States dollars and, accordingly, the Company’s revenues will be received in United States dollars. The Company’s expenses are almost entirely paid for in Canadian dollars, which has recently shown strength against the United States dollar. The further strengthening in the Canadian dollar, if it continues, will negatively impact the profitability of the Company’s mining operations.

Uncertain Project Realization Values Taseko capitalizes acquisition costs incurred in connection with its projects. Due to the extended depressed price conditions in the metals markets at the time, and in accordance with the its accounting policy, the Company wrote down the acquisition costs of each of the Prosperity and Gibraltar projects to $1,000 during fiscal 2001. As a result of inactivity, the Company wrote down the Harmony Project to $1,000 in fiscal 2004.

General Mining Risks Mining is an inherently risky business with large capital expenditures and cyclical metals markets. Factors beyond the control of Taseko will affect the marketability of any substances discovered and mined. The mining industry in general is intensely competitive and there is no assurance that, even if commercial quantities of ore are discovered at Prosperity and Harmony, a profitable market will exist for the sale of minerals produced by Taseko. Factors beyond the control of Taseko may affect the marketability of any substances discovered. Metal prices, in particular copper, molybdenum and gold prices, have fluctuated widely in recent years. Prices are determined in international markets over which the Company has no influence.

The operations of Taseko may require licenses and permits from various governmental authorities. There can be no assurances that Taseko will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and operations at its projects.

Environmental concerns about mining in general are also a factor that may affect Taseko.

Taseko also competes with many companies possessing far greater financial resources and technical facilities than itself for the acquisition of mineral concessions, claims, leases and other mineral interests, as well as for the recruitment and retention of qualified employees.

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Additional mining risks include the following: reserves may not be as estimated, adverse ground conditions, adverse weather conditions, potential labor problems, and availability and cost of equipment and supplies.

Taseko’s Share Price is Volatile The market price of a publicly traded stock, especially a resource issuer like Taseko, is affected by many variables not directly related to the exploration results of Taseko, including the market for resource stocks, the strength of the economy generally, the availability and attractiveness of alternative investments, and the breadth of the public market for the stock. The effect of these and other factors on the market price of the common shares on the TSX and the American Stock Exchange suggests Taseko’s shares will continue to be volatile. Taseko shares have ranged between approximately $0.36 and $20.00 in the last 15 years.

Environmental Considerations The $38.6 million (in 2006 dollars) in existing reclamation liability related to the Gibraltar mine, and potential acid rock drainage issues at the Harmony and Prosperity projects, if developed, are the main environmental concerns relating to Taseko. Mining always entails risk of spills, pollution, reclamation, and other liabilities and obligations respecting which Taseko, like other mining companies, may be adversely affected. If these challenges are not properly assessed or if rules change that increase responsibility for such matters, Taseko could be materially adversely affected.

Labour Negotiations A significant portion of the Company's employees are unionized. In the event that, from time to time, labour agreements are not concluded with these employees, labour actions could occur, including strikes and/or lockouts. Consequently this could cause disruptions in operations.

Significant Potential Equity Dilution At March 30, 2007, Taseko had 128,658,125 common shares and 6,111,884 share purchase options outstanding. The resale of outstanding shares from the exercise of dilutive securities could have a depressing effect on the market for Taseko’s shares. At March 30, 2007, dilutive securities represented approximately 9.5% of Taseko’s currently issued shares. Certain of these dilutive securities are exercisable at prices below current market price and, accordingly, will result in dilution to existing shareholders if exercised.

Further, there is a risk of dilution to existing shareholders as a result of the potential conversion of (a) the Boliden convertible debentures (currently 3,476,483 potential shares), (b) the Gibraltar tracking preferred shares, and (c) the convertible bonds held by qualified institutional buyers (currently 8,955,244 potential shares).

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ITEM 4           INFORMATION ON THE COMPANY

A.           History and Development of the Company

Incorporation

Taseko Mines Limited was incorporated on April 15, 1966, pursuant to the Company Act of the Province of British Columbia (superseded in 2004 by the British Columbia Corporations Act).

Offices

The head office of Taseko is located at Suite 1020, 800 West Pender Street, Vancouver, British Columbia, Canada V6C 2V6. The telephone number for Taseko’s head office is (604) 684-6365 and its facsimile number is (604) 684-9203. Taseko also has field offices in Williams Lake, BC and at its Gibraltar mine site in McLeese Lake near Williams Lake, BC.

Corporate Organization

Taseko is based in Vancouver, British Columbia and its mining operations and two principal exploration stage properties are all located in British Columbia.

Taseko has one active wholly controlled subsidiary, Gibraltar Mines Ltd. (“Gibraltar”), and three non-material, inactive subsidiaries, Cuisson Lake Mines Ltd. (which is 70% owned), 688888 BC Ltd. (which is wholly owned) and Taseko Acquisitionsub Ltd. (which is wholly owned). Taseko owns 100% of the common shares of Gibraltar but none of Gibraltar’s issued preferred shares.

Taseko itself owns the Prosperity Project, and Gibraltar owns the Gibraltar Mine and the Harmony Gold Project. Both companies are British Columbia companies and all operations are in British Columbia.

Development

The principal business events in Taseko’s 40-year history are (most important matters first):

Capital Expenditures and Divestitures

For a discussion of Taseko’s capital expenditures see “Item 5B. Operating and Financial Review and Prospects – Liquidity and Capital Resources” and “Item 4(d) Property, Plant and Equipment.”

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B.           Business Overview

Taseko’s Business Strategy and Principal Activities

Taseko’s business is focused on enhancing production of copper and molybdenum from its Gibraltar mine and on acquiring and advancing development of large tonnage mineral deposits which, under metals price assumptions that fall within historical averages, are potentially capable of supporting a mine for 10 years and longer. Taseko endeavours to apply advanced mining and recovery techniques to these projects. Taseko’s operating Gibraltar mine as well as its undeveloped copper/gold projects, known as Prosperity and Harmony, each host such larger tonnage mineral deposits. The Gibraltar mine is a copper and molybdenum mine that restarted operations in October 2004 after being on standby for several years. The Prosperity and Harmony projects are advanced stage exploration projects although mineralization at Prosperity and Harmony has not at this time been determined to constitute a proven or probable reserve of ore.

After focusing on recommence of production at Gibraltar over fiscal 2005, fiscal 2006 saw the Company re-initiate environmental and economic assessments of the Prosperity project. Assessments and related work will continue because prevailing copper and gold prices suggest new opportunities for the Prosperity project. Taseko believes much of the investment value in its common shares is derived from the potential economic value that can be derived from the large amount of contained metals on its projects. Taseko management believes that there will continue to be relatively strong demand for copper, molybdenum and gold for the near future in any event and longer term there will be a continuing need to replace depleted reserves, ultimately causing value of the resources on Taseko’s projects to appreciate. Taseko’s management believes that metal prices are presently sufficient to warrant detailed reassessment of the development potential of Prosperity currently, and at the Harmony project at some future time.

Taseko and its subsidiaries own their mining projects outright. Mining operations are subject to extensive government regulations which affect the right to exploit ownership. In fiscal 2004, the Gibraltar mine obtained government permitting and re-started the mine in early October 2004; commercial production started on January 1, 2005. The Prosperity project is well advanced in the requisite preparatory engineering and analysis in order to initiate mine development permitting applications to the relevant government authorities. The capital costs of placing the Prosperity project into production are dependent on a final mining through–put decision which has not been determined. The Harmony project has not been significantly moved towards mine development permitting since a period of active exploration during the late 1990s further described herein.

The provincial government of British Columbia (“the Province”) and the federal government of Canada both have jurisdiction over a wide variety of activities and persons affected by mining including local communities, habitat users and others claiming to hold a stake in the outcome of mining activity. The Company’s management believes there is an improving level of public acceptance in British Columbia that responsible mining projects can make a positive contribution to the Province and the local communities where these projects are located. This has enabled the Company to have a positive dialogue with local communities and government agencies about moving Prosperity’s mine evaluation process forward.

The Gibraltar Mine

Taseko’s subsidiary, Gibraltar Mines Ltd., owns the Gibraltar open pit mine in south central British Columbia near the City of Williams Lake. During fiscal 2006, the mine was operated by Gibraltar’s partner, Ledcor CMI Ltd. (“Ledcor”). Gibraltar had an 85% interest in any residual profits of the operations (i.e. profits after payment of usage fees to the participants for contributed assets and services)

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and Ledcor had a 15% interest in any residual profits. Subsequent to fiscal year ended September 30, 2006, the operating agreement established with Ledcor was terminated upon Taseko’s notice of voluntary withdrawal. Commencing November 2006, the Company assumed responsibility for all operational matters, including the recruitment of personnel and maintenance of the equipment and facilities, in connection with the Gibraltar Mine.

The Gibraltar Mine is an open pit copper mine operation that utilizes drilling, blasting, cable shovel loading, and truck hauling to excavate the ore. A mill operation then crushes, grinds and processes mineralized material through froth flotation to create a concentrate. The concentrates contain approximately 30% copper and just under 1% of molybdenum respectively. The Gibraltar Mine began restart in 2004 and was brought back into production in 2005 after significant investments in mining equipment.

The Gibraltar Mine currently operates under a 21 year mine plan and produces and sells copper and molybdenum concentrates. During the year ended September 30, 2006, Gibraltar mined 38.4 million tons of ore and waste material (at a 2.4:1 stripping ratio), and milled approximately 10.9 million tonnes at a grade of 0.285% copper and 0.009% molybdenum. With copper recoveries of 79% and molybdenum recovery of 41%, the Gibraltar Mine produced 49.1 million pounds of copper in concentrate and 821 thousand pounds of molybdenum in concentrate, generating revenues of $140.3 million from copper concentrate sales and $21.6 million from molybdenum (at average sales prices of US$2.44 for copper and US$23.28 for molybdenum) in fiscal 2006. Cash operating costs were in the range of US$1.50 per pound of copper.

Undeveloped Gold/Copper Projects – “Prosperity” and “Harmony” Projects

Taseko owns 100% of two undeveloped projects in British Columbia. The Prosperity Project, located in south central British Columbia, hosts a large copper-gold porphyry deposit. Taseko expended approximately $41.5 million from 1991 to 2000 on the Prosperity Project, excluding $28.7 million in acquisition costs, but wrote-down the value of this project to $1,000 during the subsequent periods of low metal prices.

In November 2005, Taseko re-initiated feasibility work on the Prosperity Project, and re-entered the environmental assessment process. In January 2007, the Company announced the positive results of a pre-feasibility level study for the project.

An updated feasibility study for the Prosperity Project, being performed by Hatch Consultants, is progressing and is now scheduled for completion at the end of September 2007.

Environmental assessment activities are also underway. The Department of Fisheries and Oceans has recommended to the Federal Minister of Environment that the Project be referred to a Joint Panel Review. Taseko is actively engaged with federal and provincial regulatory agencies in the review of the Project.

The Harmony Property, located in the Queen Charlotte Islands (also known as Haida-Gwaii), hosts a large gold deposit. Gibraltar recorded acquisition costs in connection with the Harmony Property in the $29 million range but also wrote the property down to the nominal value of $1,000 in 2004.

In fiscal 2006, the Company was focused on the Gibraltar mine and the Prosperity project; therefore only maintenance activities were performed on the Harmony project. These activities will continue and assessments will be undertaken as new opportunities arise for the Harmony project. The Company anticipates continuing to focus its resources and its efforts on the Gibraltar mine and the Prosperity project in 2007.

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C.           Organizational Structure

Taseko operates directly and also through one principal subsidiary, Gibraltar Mines Ltd. ("Gibraltar”). Taseko itself owns the Prosperity Project, and Gibraltar owns the Gibraltar Mine and the Harmony Gold Project. All of the companies are British Columbia companies and all operations are in British Columbia. Taseko’s corporate organization is summarized in the diagram below:

D.           Property, Plant and Equipment

The Gibraltar Mine was acquired from Boliden Westmin (Canada) Limited in July 1999, approximately one year after commercial mining operations were suspended due to then-prevailing low copper prices. The Gibraltar Mine was acquired with mill and mining equipment and supplies valued at approximately $19 million.

During fiscal 2006, the Company exercised its right to acquire certain of Gibraltar’s mine haul trucks and a mining shovel previously held under capital leases, from a former partner, for approximately US$12.5 million.

The Company also completed the rehabilitation of Gibraltar’s SX/EW plant. Copper production from the SX/EW plant is expected to be 3.6 million pounds in 2007 with approximately 7 million pounds annually thereafter.

In the third quarter of 2006, the Company also initiated the expansion and upgrade to the concentrator facility at the Gibraltar mine. The expansion project is anticipated to be completed by 2008.

Neither the Prosperity Project nor the Harmony Gold Project have any mining plant or equipment located thereon, although both projects have field accommodation and miscellaneous exploration equipment, which is of little realizable value, on site.

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Location of Operations and Properties

The Gibraltar Mine

1999 Acquisition Terms

On July 21, 1999, Taseko’s subsidiary, Gibraltar Mines Ltd., purchased the Gibraltar mine from Boliden Westmin (Canada) Limited (“Boliden”) and certain of its affiliates, including all mineral interests, mining and processing equipment and facilities, and assumed responsibility for ongoing reclamation. Pursuant to the terms of the acquisition, Gibraltar acquired mining equipment, parts and supplies inventories valued at $19 million, an existing British Columbia Government environmental deposit of $8 million, and mineral interests valued at $3.3 million, and received $20.1 million in cash over 18 months from closing, of which $17 million was received pursuant to a 10-year non-interest bearing convertible debenture issued to Boliden. Gibraltar assumed the estimated reclamation liability pertaining to the Gibraltar mine of $32.7 million and Taseko guaranteed Gibraltar’s obligations to Boliden. The principal sum advanced

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under the debenture is convertible into Taseko common shares in the first year at $3.14 per Taseko share. The conversion price escalates $0.25 per Taseko share each year over the 10-year term of the debenture on each July 19th anniversary of closing. The conversion price at September 30, 2006 was $4.89 per Taseko share. The debenture is due on July 19, 2009. After five years, the debenture can be converted at Taseko’s option at then-prevailing market prices for Taseko shares or paid out in cash at Taseko’s election. Taseko retains certain rights of first refusal respecting any proposed sale of shares acquired by Boliden under the debenture. Taseko has initiated a lawsuit against the current owner of the Boliden debenture claiming a right of offset in the amount of approximately $3.5 million in connection with an alleged misrepresentation under the terms of the 1999 acquisition agreements.

Termination of 2004 Gibraltar-Ledcor Agreement

During the fiscal year, the Gibraltar Mine was operated under a Gibraltar – Ledcor Agreement (“Ledcor Agreement”) with Ledcor CMI Ltd. (“Ledcor”). Under the terms of the Ledcor Agreement, Ledcor would be the operator of the Gibraltar Mine for a term of 40 months effective October 1, 2004. The Ledcor Agreement was managed by a Management Committee consisting of five members, to direct and control overall policies, objectives, procedures, methods and actions at the mine. The Management Committee consisted of two members appointed by Gibraltar and two members appointed by Ledcor, together with an independent Chairperson.

Gibraltar had an 85% interest in any residual profits of the operations (i.e. profits after payment of usage fees to the participants for contributed assets and services) and Ledcor had a 15% interest in any residual profits. The Ledcor Agreement would have terminated on expiry of the 40 month term, unless terminated earlier by written agreement of the parties. In July 2006, Taseko provided a notice of voluntary withdrawal from the Ledcor Agreement. Under this notice and effective on November 2006, Taseko assumed responsibility for all matters in connection with the Gibraltar Mine and paid to Ledcor a termination fee of $3.5 million which was expensed in the year.

Location, Access and Infrastructure

The Gibraltar mine area consists of 222 mineral claims, 30 mining leases, and some ancillary fee simple real estate held by Gibraltar. The mine site covers approximately 109 square km, located at latitude 52°30’N and longitude 122°16’W in the Granite Mountain area, approximately 65 km north of the City of Williams Lake in south-central British Columbia, Canada. Access to the Gibraltar mine from Williams Lake is via Highway 97 to McLeese Lake. From McLeese Lake, a paved road provides access to the Gibraltar mine site. The total road distance from the City of Williams Lake to the Gibraltar mine is 65 km and motor vehicle travel time is approximately 45 minutes.

The Canadian National Railway has rail service to facilitate the shipping of copper concentrates through to the Pacific Ocean port of North Vancouver. A rail siding and storage shed for the shipment of concentrate is located 26 km from the mine site. Electricity is obtained from the British Columbia Hydro and Power Authority (“BC Hydro”). Natural gas is provided by Avista Energy and Terasen Gas (formerly BC Gas). The communities of Williams Lake and Quesnel are sufficiently close to the site to supply goods, services, and personnel to the Gibraltar mine.

The Gibraltar mine mineral claims cover an area of gentle topography; local relief is in the order of 200 m. The plant site is located at an elevation of approximately 1,100 m above sea level. The project area has a moderate continental climate with cold winters and warm summers. Ambient air temperature ranges from a winter minimum of -34° C to a summer maximum of 35°C. Average annual precipitation at the site averages 51 cm, of which about 17 cm falls as snow. Maximum snow depth is about 1 m, most of which falls in late February.

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History

The earliest record of work at the Gibraltar mine is found in the 1917 British Columbia Minister of Mines Annual Report, which describes the activities of Joseph Briand and partners exploring copper-bearing quartz veins just west of the current Pollyanna pit.

The early 1960s marked the entry of the major mining companies into the Granite Mountain area and the subsequent introduction of modern exploration techniques, which ultimately led to the discovery of the mineral deposits. In this environment, the most effective exploration tools were soon found to be Induced Polarization (“IP”) geophysics and diamond drilling.

Mine production began in March 1972 and the mine operated more or less continuously from 1972 to 1998. Production to the end of 1998 totalled 1.86 billion lb of copper and 19.7 million lb of molybdenum from 336 million tons milled. Reconciliation studies on a number of open pit stages demonstrated good correlation between reserve estimates and actual production. The Gibraltar mine also produced cathode copper by leaching both low grade dump material and leachable oxide material from the pits using sulphuric acid and natural bacteria, and processing by solvent extraction-electrowinning (SX/EW). Approximately 84.7 million lb of copper were recovered from 1986 to 1998.

From 1999 to 2004, Taseko geologists and engineers explored for additional mineralized material and to better define known resources. The on-site staff also completed on-going reclamation work and maintained the Gibraltar mine for re-start. Operating and environmental permits were kept in good standing. In August 2000, a property-scale IP survey was initiated. Interpretation of the results was completed in the spring of 2001, identifying deposit-scale anomalies. Some of these anomalies were followed up by drilling in 2003. Significant copper mineralization was encountered in the 98 Oxide Zone, indicating potential for a mineral resource in this area.

At October 1, 2004 when the mine re-opened, there were approximately 837 million tons of measured and indicated resources outlined at Gibraltar, including proven and probable sulphide reserves of 163.5 million tons grading 0.313% copper and 0.010% molybdenum at a 0.20% copper only cut-off and 16.5 million tons of oxide proven and probable reserves grading 0.148% Cu at a 0.10% acid soluble copper cut-off. Long term metals prices used in the 2004 reserve estimates were US$1.10 per pound for copper and US$5.00 per pound for molybdenum. Silver content, while it is calculated for revenue, was not a determining factor in estimating reserves. The Gibraltar re-start decision was based on the initial four years of the 12-year mine plan. Open pit pre-development work began in the Pollyanna pit area in June 2004 and exposed ore grade material allowing for continuous mill feed for 3.3 years.

A core drilling program, encompassing 40 holes (23,000 ft) for pit definition for the Granite Lake and PGE Connector deposits and property exploration at the 98 Oxide Zone, was carried out in September and October 2005. Ten holes of exploratory drilling did not expand the resources at the 98 Oxide Zone. However, drilling at the Granite Lake and PGE Connector Zones and a detailed review of the geological model, confirmation of pit wall locations established in previous mine optimization studies, and an analysis of price and mining cost projections allowed for expansion of the previously defined pits. Using long term metal prices of US$1.10/lb for copper and US$6.00/lb for molybdenum for the estimates, the overall mineral reserves, as of October 1, 2005, increased to 194 million tons grading 0.31% copper and 0.010% molybdenum. Additional measured and indicated resources were 610 million tons grading 0.28% copper and 0.008% molybdenum. Both estimates were done at a 0.20% copper cut-off.

Property Geology

The Gibraltar mine generally consists of seven separate mineralized zones. Six of these – Pollyanna, Granite Lake, Connector, Gibraltar East, Gibraltar West and Gibraltar West Extension – occur within the Granite Mountain batholith in a broad zone of shearing and alteration. A seventh copper mineralized

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body, the Sawmill zone, lies about six km to the south, along the southern edge of the batholith, within a complex contact zone between the batholith and Cache Creek Group rocks.

Two major structural orientations have been recognized at Gibraltar: the Sunset and Granite Creek mineralized systems. The Sunset system has a northwest strike with one set of structures dipping 35° to 45° to the south and a conjugate set, known as the Reverse Sunset, dipping 50° to 60° to the north. The Granite Creek system strikes east-west and dips 20° to 40° to the south with a subordinate set of structures dipping steeply in a northerly direction. Structures of the Sunset system that host mineralization are mainly shear zones, with minor development of stockwork and associated foliation lamellae. Host structures of the Granite Creek system are predominantly oriented stockwork zones.

The Granite Creek system provides the major structures that control mineralization of Pollyanna, Granite Lake and the Sawmill zones. These bodies have the characteristic large diffuse nature of porphyry copper type mineralization. The Gibraltar East deposit is essentially a system of interconnected Sunset zones, which create a large body of uniform grade. Gibraltar West and Gibraltar West Extension deposits are contained within a large complex shear zone.

Mineralization

Pyrite and chalcopyrite are the principal primary iron and copper sulphide minerals. Sixty percent of the copper occurs in fine-grained chalcopyrite. Coarser grained chalcopyrite also occurs, usually in quartz veins and shear zones. Small concentrations of bornite (a sulphide mineral of copper and iron), associated with magnetite and chalcopyrite, is present on the extremities of the Pollyanna and Sawmill deposits. Oxide copper mineralization is also present between the Gibraltar East and Pollyanna open pits in the Connector Zone. Molybdenite (molybdenum sulphide mineral) is a minor but economically important associate of chalcopyrite in the Pollyanna, Granite Lake and Sawmill deposits.

Sampling and Analytical Procedures

NQ sized core was drilled in 2006. All drill core was photographed, then logged and sampled by technical staff under the supervision of a qualified person. All exploration core was split into two pieces using a mechanical core splitter, with half of the core sent for analyses and the other half retained for audit purposes. All production core was whole core sampled for analyses. Average sample length is 3 m (10 ft).

Samples from the Gibraltar exploration project are stored at a secure facility at the Gibraltar Mine prior to being shipped to Vancouver laboratories for preparation and analysis. Assayers Canada prepared and analyzed 80% of the samples and ALS Chemex prepared and analyzed 20% of the samples. Sample preparation consisted of weighing, drying and crushing the entire sample to >70% passing -2 mm and then pulverizing a 250 g split to >85% passing 75 micron mesh. Total copper and molybdenum determinations are by reagent digestion followed by Atomic Absorption Spectroscopy (AAS) finish. Laboratory Quality Assurance/Quality Control (QAQC) is monitored using assay standards and blanks submitted by Taseko, and duplicate samples submitted to Acme Analytical Laboratories in Vancouver.

QA/QC Procedures

The following Quality Assurance/Quality Control Protocols were implemented for the 2005 and 2006 drilling programs to ensure that accurate, precise and reproducible analytical results are obtained.

• Every twentieth sample is re-split from the crushed drill core reject and analyzed at a second laboratory (Assayers Canada) to ensure accurate sampling. A table and chart of mainstream vs. re-split sample assays is maintained.

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• Two standards, known to the geologist, are randomly numbered and added to each sample batch of 33 drill core samples to test the laboratories ability to reproduce results. A table and chart of the standard assays is maintained.
• One randomly numbered silica blank sample is also added to each sample set submission (of 33 samples) to ensure that samples, solutions and apparatus are not contaminated.
• Reject assay pulps are placed in labeled bags and stored as sets corresponding to their diamond drill hole, for future reference. Each sample bag also contains an identification tag to ensure positive sample identification.
• Reject drill core pulps are stored in labeled bags as drill-hole sets for future reference. Each sample bag also contains an identification tag to ensure positive sample identification.

Security of Samples

At Gibraltar, a library of representative samples of the different rock types and mineralization is retained in a secured on-site core facility.

The Gibraltar mine site has restricted access. All core from the 2005 and 2006 program was drilled, transported, logged, and crushed on-site. For exploration samples (for 2005 this refers to the 98 Oxide drilling), the remaining half-core, pulps and rejects from half-core samples are retained in a secured on-site facility. For production core samples, the pulps and rejects are retained in a secured on-site facility.

Exploration in 2006

A 61,500 ft drilling program was carried out in 2006. The program was designed to define the mineral resources between the existing pits by tying together the extensive mineralization zones, and to test for additional mineralization at depth. The work successfully met these objectives and resulted in a reserve increase of 74 million tons (see Estimates of Mineralization below).

Development Projects in 2006

Solvent Extraction -Electrowinning (SX-EW) Plant Restart

Oxidized material, requiring treatment by the SX-EW plant, had been stockpiled since the restart of mining operations at Gibraltar in 2004.

Refurbishing activities began in April 2006, with commissioning in late December. The first 99.9% pure copper cathode was produced from the rehabilitated plant on January 26, 2007. The SX-EW plant is expected to add approximately 3.5 million pounds to copper production in 2007 and 7 million pounds, annually, in the future.

Mining Operations in 2006

The Gibraltar mine is a typical open pit operation that utilizes drilling, blasting, cable shovel loading and large-scale truck hauling to excavate rock. The mine is planned to enable excavation of sulphide mineralized material of sufficient grade that it can be economically mined, crushed, ground and processed to a saleable product by froth flotation. Tailings are pumped to a storage facility.

Rock containing lower grade sulphide mineralization or oxide mineralization is also mined but is not immediately processed. The lower grade sulphide material is stockpiled for later treatment in the mill. In addition, a portion of the low grade sulphide and all of the oxide material can be leached with sulphuric acid, which is naturally assisted by bacterial action, and the resultant copper sulphate solution can be

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processed to cathode copper in the Gibraltar mine’s SX/EW plant. The oxide material was stockpiled during the year.

The following table is a summary of the Gibraltar Mine operating statistics for the 2006 fiscal year compared to the previous year.

¹ Total tons mined includes sulphide ore, oxide ore, low grade stockpile material, overburden, and waste rock which were moved from within pit limit to outside pit limit during the period.
² The by-product credit is based on pounds of molybdenum and ounces of silver sold. Unit costs were lower in fiscal 2005 because molybdenum prices and pounds of copper produced were higher.

Year-end Reconciliation of Reserves

The reserves at fiscal 2006 year end were estimated by Gibraltar management. All mining in fiscal 2006 took place in the Pollyanna stage 4 pit. Approximately 11 million tons were mined.

Estimates of Mineralization

Drilling in 2006 resulted in a 40% increase in proven and probable sulphide mineral reserves, as tabulated below. The estimates used long term metal prices of US$1.50/lb for copper and US$8.00/lb for molybdenum and a foreign exchange of C$0.88 per US dollar.

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It is the opinion of the Company’s experts that the above reserves are reported in accordance with both 43-101 and SEC Guide 7. The reserves occur on the perimeter of existing open pits and have been integrated into the existing mine plan for the operation. Long term metal prices have been utilized for the estimates and permits are in place that would allow mining to proceed. The estimates used a 0.20% copper cut-off grade for the sulphide reserves. Sulphide copper recoveries for the course of the mine plan are based on the historic metallurgical performance of the concentrator on each mineral system to be treated. The average life of mine recovery for copper is 87.3% and for molybdenum is 40.6% .

The operating costs and cash flow are calculated on a constant Q4 2006 Canadian dollar basis. Major input parameters for the model are summarized as follows:

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The average life of mine unit operating costs are summarized below:

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Under present mine operating parameters of 36,000 tons milled per day, this addition to reserves extends the mine life to 21 years. Upon completion of the mill expansion in December 2007 to 46,000 tons per day, Gibraltar mine life would be approximately 15 years.

In addition to the above reserves, the mineral resources are estimated to be:

The resource and reserve estimation was completed by Gibraltar mine staff under the supervision of Ian S. Thompson, P. Eng., Superintendent of Engineering and a Qualified Person under National Instrument 43-101. A technical report containing additional resource and reserve particulars is filed on www.sedar.com.

There are also oxide reserves. These were not reviewed in the 2007 study, and at year end remained unchanged from previous estimates.

Environmental

There have been no material environmental non-compliances incidents since the mine re-opened.

A comprehensive mine closure report containing an assessment of reclamation and long term environmental costs is produced approximately every 5 years. The most recent reclamation plan and closure report, dated February 26, 2003, was approved by the BC Ministry of Energy and Mines (“MEM”) in 2004. This report states that the total closure costs, including covering rock piles with 1.0 m of till, would be $36.9 million. The Ministry of Mines agreed to consider Gibraltar’s request to reduce the thickness of the till cover to 0.5 m. If approved, this would reduce final closure costs to $32.9 million. The permit requires that the reclamation liability outlined in the final closure and reclamation report be covered by $18.5 million in a Reclamation Trust and a first charge on equipment owned by Gibraltar.

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During the fourth quarter of fiscal 2006, the Company contributed $13 million into its reclamation trust fund, fully funding its reclamation liability for the Gibraltar mine. The first charge on equipment owned by Gibraltar was released.

In 2002, Gibraltar and the Cariboo Regional District completed studies and agreed to develop a landfill site on waste dumps in an area that would not be needed for future operation of the mine. The landfill provides reclamation credits to the land it occupies, as well as revenues. Operations began in October 2003 and have continued through fiscal 2006.

Labour

There were no lost time accidents during the fourth quarter or over the fiscal year. The number of personnel at the end of the year was 282, compared to 281 at the end of the previous quarter and 248 at the end of fiscal 2005.

Effective November 5, 2006, Taseko assumed responsibility for all matters in connection with the Gibraltar Mine

Plans for 2007

Exploration

A second phase of drilling was initiated in the fall of 2006, targeting areas below and between the Granite Lake and Pollyanna Pits, and designed to further expand the mineral reserves at Gibraltar.

Concentrator Expansion and Upgrade Project

Expansion and upgrade of the concentrator facility at the Gibraltar mine commenced in the third quarter of fiscal 2006. The upgrade and expansion project will increase the copper production capacity of the Gibraltar mine to 100 million pounds of copper per year by 2008 by increasing throughput and improving metal recovery.

The expansion consists of the addition of a 34-foot semi-autogenous (SAG) mill, conversion of three rod mills to ball mills, and replacement of the 98 small-cell rougher flotation circuit with ten 160-cubic meter tank flotation cells. The major SAG mill components are being constructed in Europe and are on-schedule for delivery during the summer of 2007. By the end of January 2007, the construction of the foundations for the mill itself and the associated facility was 75% complete. One of the ten tank flotation cells is in place and operational, and installation of the next four tanks began in mid-February. The expansion is scheduled to be commissioned in December 2007.

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Prosperity Project

Location, Access, and Infrastructure

The Prosperity project consists of 118 mineral claims covering the mineral rights for approximately 85 square km of south-central British Columbia, Canada. The property is located at latitude 51° 28’ N and longitude 123° 37’ W in the Clinton Mining Division, approximately 125 km southwest of the City of Williams Lake.

Access from Williams Lake is via Highway #20 to Lee’s Corner, then via an all-weather main logging haulage road to the site, a total road distance of 192km. The Canadian National railway services Williams Lake and has rolling stock available to move copper concentrates by rail to points of sale in North America. The City of Williams Lake is sufficiently close and is capable of supplying goods, services, and personnel to a mine.

Multiple high-voltage transmission lines from the existing Peace River hydroelectric power grid are situated 118 km east of the Prosperity project, a natural gas transmission pipeline is situated 112 km northeast of the Prosperity project, and ample water is available nearby for a mining operation.

Exploration History

Prospectors discovered mineralization in the 1930’s. Exploration continued intermittently and by a variety of operators until about 1991, and included extensive IP, magnetic and soil geochemistry surveys, and 176 percussion and diamond drill holes, totaling approximately 27,200 m. This work helped define the Prosperity project mineralization to a depth of 200 m, and outlined a copper-gold mineralized zone approximately 850 m in diameter.

Taseko carried out ongoing and systematic exploration programs from 1991 – 1999, increasing drilling to 154,630 m in 452 holes, and including progressive engineering, metallurgical and environmental studies.

Historical engineering work is outlined in previous Annual Information Forms filed by Taseko. This work included:

• Comprehensive metallurgical tests by Melis Engineering Ltd.
• Detailed Project Pre-feasibility Study by Kilborn Engineering Pacific Ltd.
• Pilot plant metallurgical programs and bulk sample processing by Lakefield Research Limited
• Milling review by G&T Metallurgy
• Waste and tailings storage studies and design, pit dewatering and slope design by Knight Piesold Ltd.
• Construction parameters by Merit Consultants International
• Open pit mine design, plans, capital and operating costs by Nilsson Mine Services Ltd. and Gibraltar Mines Ltd.
• Concentrate salability by Butterfield Mineral Consultants Ltd.
• Environmental and socio-economic studies by Triton Environmental Consultants
• Transmission line design by Ian Hayward International Ltd.

From 2000-2005 work on Prosperity was put on hold as the Company turned its attention to re-starting the Gibraltar mine.

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Geology and Mineralization

The Prosperity project hosts a large porphyry gold-copper deposit. The deposit is predominantly hosted in Cretaceous andesitic volcaniclastic and volcanic rocks. In the western portion of the deposit, the host rocks have been intruded by the multi-phase, steeply dipping Fish Creek Stock. The stock is surrounded by an east-west trending, south dipping swarm of subparallel quartz-feldspar porphyritic dykes. The stock and dykes comprise the Late Cretaceous Fish Lake Intrusive Complex that is spatially and genetically related to the deposit. Post mineralization porphyritic diorite occurs as narrow dykes that cross-cut all host rocks. The central portion of the deposit is cut by two major faults, striking north-south and dipping steeply to the west.

Pyrite and chalcopyrite are the principal sulphide minerals in the deposit. They are uniformly distributed in disseminations, fracture fillings, veins and veinlets and may be accompanied by bornite and lesser molybdenite and tetrahedrite-tenantite. Native gold occurs as inclusions in and along microfractures with copper-bearing minerals and pyrite.

Sampling and Analysis

Since the current Taseko management group took over the project in 1991, 127,000 metres of HQ and NQ core has been drilled in 275 bore holes, and a single 200-metre percussion hole. Core recovery averaged 95.7%. Drill company personnel boxed all core and delivered it to Taseko’s logging compound at the Prosperity site twice daily. Taseko geological and engineering staff based at the Prosperity site supervised drilling, logging and sampling. A total of 57,778 core samples were taken, each sample was generally two metres in length.

In 1991-1994, drill core was mechanically split, one half of which was submitted for preparation and analysis. In 1996-97, 42% was subject to whole core sampling, 44% was sampled as sawn half-core, 5% of samples comprised the larger portion of core sawn 80:20. The remaining 9% was cored overburden, which was not generally sampled. Half of the core remaining after splitting is stored in core racks at site.

Samples were bagged and shipped by commercial surface transport to Vancouver area laboratories, where they were prepared. Samples were dried at temperatures less than 65° C. In 1991-1993, primary comminution to approximately 1/4 inch (6.4 mm) size by a jaw crusher with secondary roll crushing to obtain minus 15 mesh. In 1994-1997, samples were crushed in a single stage so that greater than 60% passed a 10 mesh screen and 500 gram assay splits were riffled out for crushing. Coarse rejects were retained until year 2000 in a warehouse in Port Kells, British Columbia. Ring and puck pulverization was used. In 1991-1993, approximately 95% of the sample passed a 120 mesh screen. In 1994-1997, greater than 90% of the sample passed a 150 mesh screen. Pulp rejects are retained indefinitely at the Port Kells warehouse.

All assays and analyses were performed by Assayers Canada (formerly Min-En Laboratories). Gold analysis was done by lead collection fire assay, using a 30 gram charge and an Atomic Absorption Spectroscopy (AAS) finish. Copper analysis was done by Aqua Regia digestion on a 2 gram sample, AAS finish. Mercury analysis was done by Cold Vapour AA. Multi-element analysis by Inductively Coupled Plasma Emission Spectroscopy (ICP-ES) was also done on all samples.

In order to assess quality control, duplicate and standard reference samples were submitted for assaying, representing more than 10% of the total assays. Random duplicates were derived from 5% of all rejects. Every twentieth sample was shipped to either Chemex Labs Ltd. (now ALS Chemex) or International Plasma Laboratories Ltd. for riffle splitting of the coarse reject, pulverization and analysis for gold and copper. In 1994-1997, project-based, bulk standard reference materials were created and submitted within the mainstream and duplicate analytical streams.

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Security of Samples

Drill core was stacked and stored on the property. Pulps and rejects from core samples were generally stored by the analytical facility for one year, then acquired by the Company and stored in a secured facility in Port Kells. All rejects have been discarded by the Company but all pulps acquired since 1991 remain in Port Kells.

Estimates of Mineralization

The Mineral Resources, as outlined by drilling to date, are tabulated below:

Current Engineering Details

In November 2005, work was re-initiated on the Prosperity Gold-Copper Project.

Since that time, Taseko technical staff and outside consultants have been reviewing previous feasibility studies and re-assessing the project economics based on new technologies, concepts, and innovative approaches to mine development. This has included re-examination of optimal mining rates and mining equipment size, analyzing the economics of constructing and operating a single line mill rather than multiple smaller lines, and realizing the potential improvements which could be realized with state-of-the-art metallurgical technologies such as large tank flotation circuits and expert computerized mill control systems. The Company has also reassessed major infrastructure plans such as the on-site facilities construction materials and techniques necessary to fully take advantage of further reduced capital and operating costs.

The Company retained the engineering firm SNC Lavalin to update the 2000 feasibility study, including a mill redesign and costing study. The initial focus of the overview study was to redesign the concentrator, in particular, utilizing a large diameter single SAG (semi-autogenous grinding) mill as opposed to multiple smaller SAG mills. In addition, identification and “scoping” of opportunities to further reduce capital and operating costs was completed.

Modifications incorporated during the review included:

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• one large SAG mill rather than two smaller units. In a SAG mill a rotating drum throws large rocks and steel balls in a cataracting motion which causes impact breakage of larger rocks and compressive grinding of finer particles. Attrition in the charge causes grinding of finer particles. SAG is an acronym for Semi Autogenous Grinding, and applies to mills that utilize steel balls in addition to large rocks for grinding;
• three larger ball mills rather than four smaller;
• five vertical stirred tower regrind mills rather than two regrind ball mills;
• the flotation cell sizes were increased and the overall number of cells reduced;
• the building costs were modified to reflect reduced building sizes due to changes in the grinding and flotation circuits;
• sprung structures will be utilized rather than girder and cladding buildings where practical;
• the concentrate thickener and single stock tank will be located outside the process building;
• the capacity of the coarse ore storage was reduced, including a reduction in the number of reclaim conveyors from two to one, and a reduction in the number of reclaim apron feeders from ten to five; and
• the concentrate dewatering filter size was increased from 84 square metres (m²) to 120 m².

Reviews were carried out to identify options for the handling of potentially acid generating material (PAG) waste rock and tailings. The current strategy is to store PAG sub-aqueously in the tailings basin. The revised base case estimate assumes that the tailings containment dams will be constructed using cycloned coarse tailings.

The review of the impact of escalation on the major areas of the capital costs estimate from 2000 depended on the mix of labour, materials and equipment. Escalation values between 15% and 40% have been experienced in construction projects in northern British Columbia. However, for the purposes of this scoping study, a flat rate of 28% was used to reflect Statistics Canada’s Construction Index Escalation between 2000 and 2006. New estimates were provided to a scoping study level of accuracy (+/- 35%) for portions of the project where changes were made (primarily in the process plant area), or where specific updated costs were provided (such as updated electrical power costs). Fourth quarter 2006 capital cost estimates were used for major mining equipment and escalated 2000 Feasibility Study costs were used in the remaining areas.

All operating costs were reviewed, updated, and compared to present and historical Gibraltar Mine costs for reasonableness. Further study and updating of optimum mine plan input parameters to a pre-feasibility level is nearing completion and a decision on whether to convert resources to reserves based on this work will be made in the near future.

Pre-feasibility Study

Results of a pre-feasibility level study were announced in early January 2007. The study was done using long term metal prices of US$1.50/lb for copper, US$500/oz for gold, and an exchange rate of US$0.80/C$ 1.00.

The mine plan in the study utilized mineralized material totaling 480 million tonnes grading 0.43 g/t gold and 0.22% copper at a cut-off grade of C$4.00 net smelter return (NSR) per tonne. An NSR cut-off was used because both copper and gold provide significant value in this deposit. The NSR of a tonne of rock is the net value of a milled tonne of rock based on the metal prices and exchange rate stated above after deducting milling losses (recovery) and all off-site costs (transportation, treatment and refining, and impurity penalties) but not deducting any on-site costs. This cut-off is a pit rim cut-off. Rock below this cut-off is waste while rock above this cut-off is ore. $4.00 represents the cost of on-site processing plus an allowance for rehandling any ore that is stockpiled. This type of cut-off is necessary because the ultimate pit is justified on the basis of optimizing net present value (NPV); but; however, having justified the

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mining of all rock within the optimized pit, when once the rock is actually mined and reaches the pit rim, then a decision is required as to whether to process it. According to Canadian standards, these would be considered proven and probable reserves; however, under US standards no reserve declaration is possible under a pre-feasibility study.

Scott Jones, P.Eng., General Manager of Project Development for Taseko and a Qualified Person under National Instrument 43-101, 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. He is also the author of a technical report that documents the study, which is filed at www.sedar.com.

Highlights of the study are summarized below:

• Pre-tax net present value of C$300 million at 7.5% discount rate

• Pre-tax internal rate of return of 14% with a 6 year payback

• 19 year mine life at a milling rate of 70,000 tonnes per day

• Life of mine strip ratio of 0.8:1

• Total pre-production capital cost of C$756 million in third quarter 2006 dollars

• Operating cost of C$5.78 per tonne milled over the life of mine

• Mine site production costs net of gold credits of US$0.48/lb Cu

Pre-Production and Mine Plan

The pre-feasibility level study incorporates activities during a pre-production period of two years, which include construction of the electricity transmission line; upgrading and extension of current road access and mine site clearing; development of site infrastructure, processing facilities, and a tailings starter dam; removal and storage of overburden; and pre-production waste development.

The mine plan utilizes a large-scale conventional truck shovel open pit mining and milling operation. Following a one year pre-strip period, total material moved over years 1 through 16 averages 145,000 tonnes/day at a strip ratio of 1.1:1. A declining net smelter return cut-off is applied to the mill feed which defers lower grade ore for later processing. The lower grade ore is recovered from stockpile for the final 3 years of the mine plan. The life of mine strip ratio including processing of lower grade ore is 0.77:1

Processing and Infrastructure

The Prosperity processing plant has been designed with a nominal capacity of 70,000 tonnes per day. The plant consists of a single 12-meter diameter semi-autogenous grinding (SAG) mill, three 7.3 -meter diameter ball mills, followed by processing steps that include bulk rougher flotation, regrinding, cleaner flotation, thickening and filtering to produce a copper-gold concentrate.

Expected metallurgical recovery is 88% for copper and 69% for gold, with annual production averaging 100 million pounds copper and 235,000 ounces gold over the 19 year mine life.

The copper-gold concentrate would be hauled with highway trucks to an expanded load-out facility at McLeese Lake for rail transport to various points of sale, but mostly through the Port of Vancouver for shipment to smelters/refineries around the world.

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Environmental Assessment

As described above, Taseko carried out extensive exploration, engineering, mine planning, environmental, and socio-economic studies on the Prosperity project prior to 2001. This also included two years in the British Columbia Environmental Assessment (BCEA) process. In 2005, Taseko was granted an extension order for the Prosperity Project Application under the BCEA process until April 30, 2007.

Field work for the Environmental Impact Assessment (EIA) was essentially concluded in 2006. The field teams were comprised of Taseko personnel, expert consultants, and First Nations representatives. The goal of the 2006 field work season was to complete and validate the background data work performed in the previous studies and to close any gaps that have occurred as a result of regulatory changes over the years that the project was idle. The determination of baseline is in progress with the impact assessment component to follow. The EIA is to be substantially complete, with the review process expected to begin during the middle of 2007.

Plans for 2007

An updated, detailed feasibility study is currently underway. The work is being performed by Hatch Associates, incorporating the 2000 SNC Lavalin feasibility study, 2006 SNC Lavalin Mill redesign, and a re-optimized pit plan that was commissioned by Taseko in October 2006. Completion is now scheduled for the end of September 2007.

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Harmony Project

Acquisition of Property

Gibraltar acquired the Harmony Gold Project in October 2001 through a transaction with Misty Mountain Gold Ltd. (now known as Continental Minerals Corporation) for consideration of $2.23 million in cash and the issuance of preferred shares in Taseko’s wholly-owned subsidiary Gibraltar Mines Ltd. and which preferred shares are exchangeable for Taseko shares in certain events at prices for the Taseko shares similar to the consideration price of the Boliden Debenture (see "Gibraltar Mine – Acquisition Term"). The tracking preferred shares are designed to track and capture the value of the Harmony Gold Property and will be redeemed for common shares of Taseko upon a realization event, such as a sale of the Harmony Gold Property to a third party or commercial production at the Harmony Gold Property, or at the option of Gibraltar, if a realization event has not occurred within ten years.

The tracking preferred shares are redeemable at specified prices per common share of Taseko starting at $3.39 and escalating by $0.25 per year ($4.64 at September 30, 2006). If a realization event does not occur on or before October 16, 2011, Gibraltar has the right to redeem the tracking preferred shares for Taseko common shares at a deemed price equal to the greater of the then average 20 day trading price of the common shares of Taseko and $10.00. The Taseko common shares to be issued to Continental upon a realization event will in turn be distributed pro-rata, after adjustment for any taxes, to the holders of redeemable preferred shares of Continental that were issued to Continental shareholders at the time of the Arrangement Agreement. In the event that a realization event occurs between March 31, 2007 and October 16, 2007 the conversion price would be $4.64 per share. The tracking preferred shares would be redeemed for 5,741,799 common shares of Taseko.

Management does not believe there has been a fundamental change in the nature of the Harmony Gold Property; however, during the 2004 fiscal year, the Harmony Gold Property was written down to a nominal value of $1,000. Accounting rules require that the Company must write down its investment in a property if it has not conducted significant exploration or development on the property in the last several years, unless there is persuasive evidence to the contrary.

Assessments will be undertaken over time as metal prices indicate new opportunities for the Harmony project.

Location, Access and Infrastructure

The Harmony Gold Project is located at latitude 53^o 31’ N and longitude 132^o 13’ W in the Skeena Mining Division, on Graham Island, Queen Charlotte Islands (also known as Haida Gwaii), on the northwestern coast of British Columbia, Canada. The Harmony Gold Property comprises of 59 mineral claims totalling 24,250 ha. The deposit-area claims are in good standing until June 29, 2009.

Exploration History

Prospectors discovered mineralization at Harmony in 1970. The project claims were optioned by various companies during the period 1970 to 1975, which carried out geological mapping, geochemical surveys and minor drilling. Consolidated Cinola Mines Ltd. acquired the ground in 1977 and with partners, carried out detailed drilling totalling 30,116 m in 231 holes by 1984. In 1981, 465 m of an underground drift and crosscuts were excavated for a metallurgical bulk sample. A 45 tonne per day pilot mill was established to treat about 5,200 tonnes of material and in 1982 a feasibility study for a 10,000-15,000 tonnes per day operation was completed. From 1986 to 1988, City Resources drilled 83 diamond drill holes and 64 reverse-circulation drill holes, totalling 13,356 m, and completed 117.6 m of underground development to obtain a bulk sample, conducted bench scale metallurgical testing, and developed open pit

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scenarios for the project. Barrack Gold acquired the project in 1989 and renamed the company to Misty Mountain Gold Ltd.

Additional drilling, metallurgical and engineering studies were carried out from 1989-1999. In 1997, preliminary mine planning was done by Independent Mining Consultants Inc. of Tucson, Arizona.

Geology and Mineralization

The Harmony property hosts the Specogna epithermal gold deposit, controlled by the Sandspit fault. Dacite dykes of Tertiary age have intruded along the fault. Contemporaneous, pervasive silicification, hydrothermal brecciation, stockwork and banded quartz veining and gold mineralization have developed along the hanging wall of the fault. This extends for a strike distance of at least 800 m, eastwards from the fault at least 200 m and to a depth of at least 240 m. Pyrite and marcasite are the dominant metallic minerals. Gold occurs as native gold and electrum, which are commonly visible. Silver is also present as an alloy with gold.

Sampling and Analysis

During the period from 1971 to 1989, previous operators sent either split or sawn half core samples for assaying. Samples were taken continuously over lengths ranging between 1.5 to 2.0 metres, and crossing lithologic boundaries in most instances. Early gold analyses included chemical extraction followed by gravimetric or Atomic Absorption (AA) finish. Check assaying procedures were included at various laboratories including Chemex, Bondar Clegg, General Testing and Bell-White Labs.

Drill core sample lengths chosen by Misty Mountain were varied to selectively isolate vein material and to avoid sampling across lithologic boundaries. Samples totalled 22,421 in number from 35,652 metres of core, and for the most part each sample was between 1.75 and 2.25 metres (actual range 0.06 – 6.10 metres) in length. Whole NQ2 core rather than half core was sampled to obtain maximum assay precision.

Sample preparation was carried out at Assayers Canada Vancouver, BC, where drill core was crushed to 60% passing 10 mesh and pulverized to 90% - 150 mesh. Prepared samples were sent to Chemex Labs Ltd. for mainstream assay and to CDN Laboratories for check assay. A one-assay ton charge was used for gold fire assay with an AA finish; a one-gram sample was assayed for silver using AA. All samples were sent for 32-element ICP analysis. A total of 23,690 prepared samples was analysed at Chemex and 1,132 prepared samples was analysed at CDN Laboratories using a similar assaying procedure.

Security of Samples

Sample pulps are stored in the Company’s warehouse at Port Kells, BC. Drill core is stored at site.

Estimates of Mineralization

In 1997, M. Nowak, P.Eng., estimated the resources in the deposit. The estimate was reviewed by Nowak et al in 2001 and the resources were classified in 2001. The measured resources are estimated to be 22 million tonnes grading 1.77 g/t gold and indicated resources are estimated to be 42 million tonnes grading 1.41 g/t gold, for a total of approximately 3 million ounces of contained gold. There are additional inferred resources of 21 million tonnes grading 1.04 g/t gold. The estimates were done at a 0.60 g/t gold

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cut-off and strip ratio of 0.82/1.0. The cut-off was established by an in-house scoping study based on a 10,000 tonnes per day operation with an operating cost of $12.94/tonne, and a gold price of US$375/oz.US$375/oz, and a CDN:US dollar exchange rate of 0.7.

Aboriginal (or “First Nations”) Issues

The Queen Charlotte Islands-Haida Gwaii, including the area surrounding the Harmony Gold Project, is subject to aboriginal peoples’ land claims. Aboriginal land claims are subject to the B.C. Treaty Commission Legislation and the B.C. Treaty Commission, both established in 1993. The British Columbia government has stated a policy that settlements will not adversely affect existing tenures in areas subject to legal settlements.

Plans for 2007

In 2007, Taseko anticipates continuing its focus on the Gibraltar mine and Prosperity project and accordingly no material work on Harmony is contemplated for the ensuing year.

Other Corporate Matters

In November 2006, Taseko launched a take-over bid offer for all (and at least 51%) of the outstanding shares of bcMetals Corporation (“bcMetals”) a public corporation listed on the TSX Venture Exchange. Taseko's amended and extended bid of $1.40 per share expired on February 8, 2007 as a consequence of a rival company making a $1.70 per shares bid. Taseko took up and purchased 1,316,300 shares under the bid and therefore currently holds an aggregate of 3,234,900 shares of bcMetals, having purchased the balance out of the market at approximately $1.01 per bcMetals share. Given that the Company's bid for control of bcMetals was not successful the Company effected the disposition of the bcMetals shares at $1.70 per share, in March 2007.

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ITEM 4A          UNRESOLVED STAFF COMMENTS

None

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ITEM 5           OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with the audited consolidated financial statements of Taseko and notes thereto, included elsewhere in this Annual Report, which have been prepared in accordance with Canadian GAAP, with material measurement differences reconciled to US GAAP, and with the discussion of certain risk factors set forth under “Item 3. Key Information—Risk Factors” that might materially affect the Company’s operating results and financial condition.

OVERVIEW

Taseko is a mining and mineral exploration company with three properties located in British Columbia, Canada. These are the Gibraltar copper-molybdenum mine and two exploration projects: the Prosperity copper-gold property and the Harmony gold property. In 2006, Taseko focused on production improvement at the Gibraltar mine and updating a feasibility study on the Prosperity project.

Gibraltar Mine

The Gibraltar mine reopened in early October 2004 with commercial production commencing on January 1, 2005. In fiscal 2006, Gibraltar produced 49.1 million pounds (2005 – 54.8 million pounds) of copper and 821,000 pounds (2005 – 427,000 pounds) of molybdenum.

Highlights for the 2006 fiscal year included the following:

• Gibraltar recorded revenues of $140.3 million (2005 - $71.9 million) from sales of copper concentrate and $21.6 million (2005 - $15.7 million) was realized from sales of molybdenum concentrate.

• Average sales prices for the year were US$2.44 (2005 - US$1.48) per pound for copper and US$23.28 (2005 - US$31.00) per pound for molybdenum.

• Copper production for the year was 49.1 million pounds of copper.

• Copper concentrate sales for the year were 90,230 wet metric tones (“WMT”) containing 51.0 million pounds of copper, an increase from the 77,695 WMT or 44.0 million pounds of copper sold during fiscal 2005.

• Copper concentrate inventory at September 30, 2006 was 13,396 WMT (8.4 million pounds of copper), a decrease in inventory from the 18,614 WMT of copper concentrate (10.6 million pounds of copper) at end of prior fiscal 2005.

• Molybdenum in concentrate production during the year was 821,000 pounds compared to 427,000 pounds in the previous year.

• Molybdenum in concentrate sales during the year were 789 WMT, containing 798,000 pounds, an increase from the 418,016 pounds sold in fiscal 2005.

Prosperity Project

In November 2005, work was re-initiated on the Prosperity Copper-Gold Project, located 125 kilometres southwest of the City of Williams Lake in south-central British Columbia.

Prior to 2001, Taseko carried out extensive exploration, engineering, mine planning, environmental, and socio-economic studies on the Prosperity project, including two years in the British Columbia Environmental Assessment ("BCEA") process.

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Parallel to the permitting and consultation process, Taseko is reviewing previous feasibility studies and re-assessing the project economics based on new technologies, concepts, and innovative approaches to mine development. This includes re-examining optimal mining rates and mining equipment size, analyzing the economics of constructing and operating a single line mill rather than multiple smaller lines, and evaluating the potential improvements which could be realized with state-of-the-art metallurgical technologies such as large tank flotation circuits and expert computerized mill control systems. The Company is also reassessing major infrastructure plans, such as the power-line route, to determine if there are synergies to be achieved with the other communities of interest in the area.

The positive results of a pre-feasibility level study were released in January 2007, indicating that the property hosts mineralized material of 480 million tonnes grading 0.43 g/t gold and 0.22% Cu at a C$4.00 net smelter return per tonne (NSR/t) cut-off. According to Canadian standards, these would be considered proven and probable reserves; however, under US standards no reserve declaration is possible under a pre-feasibility study.

An updated, detailed feasibility study is being performed by Hatch Associates, incorporating the 2000 SNC Lavalin feasibility study, 2006 SNC Lavalin Mill redesign, and a re-optimized pit plan. Work is currently in progress with completion anticipated at the end of September 2007.

An environmental assessment under the Canadian and British Columbia Environmental Assessment Acts is in progress. The Department of Fisheries and Oceans has recommended to the Federal Minister of Environment that the Project be referred to a Joint Panel Review. Taseko is actively engaged with federal and provincial regulatory agencies in the review of the Project.

Harmony Project

In 2006, the Company was focused on the Gibraltar mine and the Prosperity project; therefore only maintenance activities were performed on the Harmony project. These activities will continue and assessments will be undertaken over time as metal prices indicate new opportunities for the Harmony project. In 2007, Taseko anticipates continuing to focus its resources and its efforts on the Gibraltar mine and the Prosperity project.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's significant accounting policies are presented in note 3 of the accompanying audited financial statements for the year ended September 30, 2006. A reconciliation of material measurement differences between these principles and accounting principles generally accepted in the United States is shown in note 19. The preparation of consolidated financial statements in conformity with Canadian and US generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company evaluates its estimates on an ongoing basis and bases them on various assumptions that are believed to be reasonable under the circumstances. The Company's estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Such estimates and assumptions include the estimation of mineral resources and reserves, the carrying values of mineral properties, the carrying values of property, plant and equipment, the assumptions used in determining the reclamation obligation, and the valuation of stock-based compensation expense.

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Deferral of costs to remove overburden

For Canadian GAAP purposes, costs incurred to remove overburden is deferred based on a pit-by-pit analysis considering the development of each pit at each mine (currently there is only one mine). Capitalization of overburden removal ceases when the pit enters into the production stage.

As mining activity moves from one distinct pit to the next pit in sequence, the cost of removal of overburden material from the new pit is capitalized until that pit reaches the production stage. Currently, there is one developmental pit at the mine site, Granite East Pit (previously the Granite Lake East Pit), where overburden removal costs are being deferred.

Under US GAAP, the Company capitalizes overburden removal costs relating to economically mineable pits which have not yet entered the production stage. Once a pit enters the production stage, no further overburden removal costs are capitalized, and the amounts previously capitalized are amortized on a units of production basis over the expected life of the pit.

Mineral property interests

For Canadian GAAP purposes, exploration and development expenditures incurred subsequent to completing a feasibility study which either “increase production” or “extend the life of existing production” are capitalized.

An initial determination of whether a proposed expenditure program will increase or extend the life of existing production is done prior to the commencement of the expenditure program, to determine whether the expenditure program should commence in the first place.

If an expenditure program (for example, a drilling program designed to increase mineralized material to proven and probable reserves) results in, or is expected to result in, an increase in reserves which will be economically mineable in future periods, the costs of that expenditure program are capitalized until those newly-increased reserves are brought into production, at which point those capitalized costs will then start to be amortized on a units of production basis. For greater clarity, if an expenditure program does not result in, or is not expected to result in, an increase in economically mineable reserves, the costs of such a program are expensed in the period incurred.

For US GAAP purposes, the Company expenses exploration costs and capitalizes development costs.

During the year ended September 30, 2006, the Company deferred approximately $2.625 million (2005 – $nil; 2004 – $nil) related to the costs of an expansion drilling program in the vicinity of the existing pits designed to increase reserves at the Gibraltar Mine.

There were no differences between Canadian and United States GAAP for the Company for these costs during the year ended September 30, 2006.

The Company also tests for impairment of mineral property interests at least once a year.

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A.           Operating Results

Selected operating results, expressed in Canadian GAAP, for the fiscal years ended September 30, 2006 2005 and 2004 are presented below.

Effective October 1, 2005, the Company adopted the CICA’s Handbook Section 3860, “Financial Instruments – Disclosure and Presentation”. The standard requires that convertible debentures which may be settled in cash, or by a variable number of common shares of the Company at the Company's discretion, be presented as a liability. This change has been applied retroactively. The prior years’consolidated balance sheets have been amended to present the liability component and equity component separately on the balance sheet. The accretion charges that were previously recorded through deficit are now recorded as interest accretion on convertible debt in the consolidated statement of operations.

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Year ended September 30, 2006 (“ 2006”) versus Year ended September 30, 2005 (“2005”)

Earnings

The Company’s earnings for the year ended September 30, 2006 were $32.9 million (including $6.0 million of tax expenses), compared to $23.3 million (including $17.5 million of tax recoveries) in the prior year. The increase in earnings is mainly due to higher sales of copper and molybdenum and higher realized metal prices during the year.

Revenues

The Company recognized revenues of $161.9 million for the year ended September 30, 2006 compared to $87.6 million in fiscal 2005. Revenues were comprised of copper concentrate sales of $140.3 million (2005 - $71.9 million) and molybdenum concentrate sales of $21.6 million (2005 - $15.7 million). The following table is a summary of the commercial production for fiscal 2006 compared to fiscal 2005:

In late September 2006, the Company received funds of approximately $19.6 million from the sale of copper. The Company was unable to recognize the revenue from this sale as the copper was held in a storage facility at the dock as there were no ships available at that time to transport the copper to smelters in Asia. Consequently, the Company recorded this sale as deferred revenue for the year ended September 30, 2006 and recognized this sale as revenue upon shipment to the customer.

Cost of Sales

Cost of sales for 2006 was $103.6 million, compared to $71.3 million in 2005. Costs of sales for 2006 consists of total production cost of $92.5 million (2005 – $75.0 million), less a concentrate inventory addition of $2.0 million (2005 – $16.3 million), and silver credits of $1.2 million (2005 – $0.9 million). Also included in cost of sales are transportation and treatment costs of $14.3 million for 2006 compared to $13.5 million 2005. This increase in cost of sales for 2006 is due to higher sales quantities compared to the prior year.

Transportation costs are comprised of the trucking, rail, ocean freight and handling fees incurred to move concentrate from the mine to the smelters. Treatment costs are comprised of treatment charges and refining charges.

Depletion, depreciation and amortization

Depletion, depreciation and amortization relates to the commissioning of new equipment purchased and leased during re-start, and increased to $3.4 million compared to $2.7 million in fiscal 2005.

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Exploration

Exploration expenses increased to $3.5 million in fiscal 2006 compared to $0.5 million in fiscal 2005 due to a higher level of exploration activity, mainly at the Prosperity project, and focused on the initial stages of an environmental impact assessment and preparing an undated feasibility study. Exploration expenses of $2.6 million at Gibraltar were capitalized as a result of the increase in the mineral reserves.

General and Administrative

General and administrative costs increased to $5.3 million in 2006 from $2.4 million in 2005. The main increase was attributable to legal, tax and accounting fees (2006 – $1.7 million; 2005 – $0.4 million), which increased in 2006 due to higher corporate activities, professional fees relating to the Company’s continued efforts to comply with the reporting requirements under Sarbanes-Oxley and tax planning initiatives. Office and administration (2006 – $2.0 million; 2005 – $1.2 million), conference and travel (2006 – $0.4 million; 2005 – $0.1 million); and trust and filing (2006 – $0.3 million; 2005 – $0.1 million) all increased in 2006 due to higher staffing levels and an increase in corporate activities.

Interest Expense

Interest expense increased to $4.6 million in fiscal 2006 from $3.2 million in fiscal 2005 due to the issuance of the convertible bonds.

Stock-Based Compensation

The stock-based compensation costs increased to $3.2 million in fiscal 2006 from $1.1 million in fiscal 2005 as a result of a slight increase in the number of share purchase options granted and a higher fair value on the options granted during the year.

Non-Recurring Expenses

The Company recorded a one-time fee in 2006 of $3.5 million to Ledcor as a result of the Company voluntarily withdrawing from an agreement with Ledcor to operate the Gibraltar mine. The Company has assumed responsibility for all operational matters in connection with the Gibraltar Mine in November 2006. Other than Gibraltar mine restart expenses of $6.3 million, the Company did not have any significant non-recurring expenses in fiscal 2005.

Income Tax Expense

A current income tax provision of $4.4 million was recorded in 2006, compared to $4.1 million current income tax recovery in 2005. In addition, the Company had a future income tax expense of $1.6 million in 2006 compared to a recovery of $13.4 million in 2005. The increase in the income tax provision is due mainly to the depletion of tax pools as a result of the Company becoming more profitable.

The Company has accrued a tax provision of a subsidiary company of $21.1 million (2005 – $19.6 million) in the accompanying consolidated financial statements . This tax provision reflects an income tax expense recorded in 2004 which management believes is less than likely of ever becoming payable. The Company would exhaust all appeals if any taxes were actually assessed against the subsidiary. The amount represents a potential liability which has been recognized in a conservative manner in accordance with Canadian generally accepted accounting principles. It does not represent a payable amount based on any filed, or expected to be filed, tax return. No taxation authority has assessed the amount or any portion thereof as payable. Accordingly, there is no immediate impact on liquidity. The subsidiary will consider its current and past tax filing positions in addition to tax planning strategies which might be put in place prior to the Company's fiscal year ending on September 30, 2007.

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Year ended September 30, 2005 (“2005”) versus year ended September 30, 2004 (“2004”)

Earnings

The Company’s earnings for the year ended September 30, 2005 were $23.3 million, compared to a loss of $82.4 million in the prior year. The increase in earnings is due to the resumption of mining activities at the Gibraltar copper-molybdenum mine, and the recognition of tax loss carryforwards in the consolidated financial statements.

Revenues

The Company recognized revenues of $87.6 million for the year ended September 30, 2005 compared to $nil in fiscal 2004. In late September 2005, the Company sold and received funds of approximately $14.3 million from the sale of copper. The Company was unable to recognize the revenue from this sale as the copper was held in a storage facility at the dock as there were no ships available at that time to transport the copper to smelters in Asia. Consequently, the Company recorded this sale as deferred revenue for the year ended September 30, 2005 and recognized this sale as revenue upon shipment to the customer.

Cost of Sales

Cost of sales for 2005 was $71.3 million compared to $nil in 2004. Cost of sales for 2005 consisted of total production costs of $65.6 million (2004 - $nil) less a concentrate inventory addition of $7.8 million (2004 - $nil). Also included in cost of sales are transportation and treatment costs of $13.5 million (2004 - $nil).

Depletion, depreciation and amortization

Amortization expense increased to $2.7 million compared to $0.02 million in fiscal 2004 due to 2005’s commencement of production from the Gibraltar mine.

Exploration

Exploration expenses decreased to $0.5 million in fiscal 2005 from $4.6 million in fiscal 2004 due to a reduction in exploration activities and mine maintenance costs in fiscal 2005. These expenses consisted of $0.3 million of exploratory drilling at the Gibraltar mine site, $0.15 million on due diligence relating to potential new projects, $0.03 million on the Prosperity project and $0.02 million on the Harmony project.

General and Administrative

General and administrative costs decreased slightly to $2.4 million in fiscal 2005 from $2.7 million in 2004. This decrease was due to a significant reduction in shareholder communication expenses (2005 - $0.3 million; 2004 - $0.7 million).

Interest expense

Interest expense increased to $3.2 million in fiscal 2005 from $0.5 million in fiscal 2004 due to interest payments on the Company’s capital lease obligations.

Stock-Based Compensation

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Stock-based compensation decreased to $1.1 million in fiscal 2005 from $5.2 million in fiscal 2004 due to fewer options granted and lower volatility in fiscal 2005 compared to fiscal 2004.

Non-Recurring Expenses

Expenses relating to the restart project include costs for the mine, mill, site services, administration, warehouse, engineering and environmental matters. These expenses decreased in fiscal 2005 to $6,346,650 compared to $14,982,008 in fiscal 2004 since the restart activities for copper concentrate production ended in the first quarter of fiscal 2005 and commercial production commenced on January 1, 2005, and the restart activities for molybdenum concentrate production ended near the end of the second quarter of fiscal 2005.

Income Tax Recovery

The Company had a current income tax recovery of $4.1 million and future income tax recovery of $13.4 million in fiscal 2005 compared to a current income tax expense of $23.7 million in fiscal 2004. The increase in income tax recoveries is due to the recognition of the benefit of tax loss carryforwards in fiscal 2005 as their realization became more likely than not.

B.           Liquidity and Capital Resources

Liquidity

At September 30, 2006, Taseko had working capital of $101.6 million, as compared to a $6.2 million at September 30, 2005. The increase in cash was primarily a result of higher revenues from operations at the Gibraltar mine, the exercising of share purchase options and warrants and the issuance of US$30 million convertible bonds during the year.

Management anticipates that revenues from the sale of copper and molybdenum concentrate, along with current cash balances will be sufficient to cover operating costs, working capital and the Gibraltar mill expansion for fiscal 2007.

Cash Used in Operating Activities

Taseko generated $55.4 million from operating activities in fiscal 2006 as compared to $1.8 million used in operating activities in fiscal 2005. Taseko anticipates that it will continue to generate positive cash flow from operating activities in fiscal 2007.

Cash Used in Investing Activities

Taseko used $36.4 million in investing activities as compared to $8.2 million received in fiscal 2005. The increase in cash used in investing activities is mainly due to mill expansion at Gibraltar that began during fiscal 2006, the Company’s $13.0 million contribution to reclamation deposits that are invested in government backed securities, as well as the Company’s $11.5 million investment in September 2006 in a convertible promissory note of Continental Minerals Corporation (“Continental”). Continental, a company with certain directors in common with Taseko, holds a 100% interest in the Xietongmen copper-gold project in Tibet, China.

The Xietongmen property hosts a significant porphyry copper-gold deposit. Feasibility-level studies were initiated at Xietongmen in 2006, which are targeted for completion in 2007.

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Cash used in investing activities is expected to increase during fiscal 2007 as Gibraltar continues its mill expansion and drilling programs to expand the Gibraltar deposits.

Cash Generated by Financing Activities

In fiscal 2006, Taseko generated $48.6 million (2005 – $0.5 million) from financing activities, which consisted of the issuance of shares for cash of $31.9 million (2005 - $9.6 million), convertible bonds issued for net proceeds of $31.8 million (2005 - $Nil) less principal repayments under capital leases of $15.1 million (2005 - $7.3 million).

These share issuances were attributable to the issuance of 17,492,693 common shares from the exercise of warrants and 7,438,166 from the exercise of share purchase options.

The purpose of these financing activities was to provide working capital for the day to day operations of the Gibraltar mine and other corporate initiatives. There were no restrictions on the use of proceeds from these financing activities.

Investment in Continental

In August 2006, the Company invested $11.5 million of its surplus working capital in a Convertible Secured Promissory Note (the “Note”) of Continental Minerals Corporation (“Continental”), a public company with certain directors in common with the Company. The one year Note provides for interest at the rate of 16% per annum payable monthly and is payable in cash or, at the Company’s election, in Continental common shares. The Note is secured by an indirect pledge of Continental’s interest in a copper property located in China. The Company has the right to convert any or the entire principal then outstanding under the Note, plus a 5% premium, into Continental common shares at $2.05 per share if the conversion right is exercised within the first six months, or at $2.25 per share if exercised in the second six months.

In February 2007, the Company converted the entire principal outstanding under the Note. At March 30, 2007, the Company held 7,827,796 common shares of Continental, representing approximately 6.9% of Continental’s outstanding common shares.

Reclamation Deposits

In September 2006, the Company made a contribution of $13.0 million to a qualified environmental trust in relation to its site closure and reclamation obligations for the Gibraltar mine. The Company has reclamation deposits totaling approximately $31.8 million (including interest) to fund reclamation at the Gibraltar, Prosperity and Harmony properties.

US$30 million Bond Offering

On August 29, 2006, the Company issued US$30 million in principal amount of five year convertible bearer bonds due in 2011 (the "Bonds") to qualified institutional buyers in Europe. The Bonds constitute direct, unsubordinated, unsecured, general and unconditional obligations of the Company. The Bonds were issued at 100% and, if not converted, will be redeemed at maturity at 101%. The Bonds carry a coupon interest rate of 7.125% per annum. The Bonds are convertible at the holder’s option after 40 days from issuance until August 19, 2011 into 8,955,224 Common Shares at a conversion price of US$3.35 ($3.76), which represented a premium of approximately 40% over the trading price of the Common Shares at August 29, 2006. At any time after September 12, 2008, the Company will have the right to call for the conversion of the Bond into the number of shares as set out above, if the Company’s shares trade

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at least 50% above the conversion price for at least 20 business days in any period of 30 consecutive business days. On August 29, 2009, the Bondholders have a one time right to redeem the Bonds at 100.60% . Debt issuance costs of $1.4 million were incurred upon closing of the transaction. The Bonds contain certain anti-dilution provisions if the Company issues common shares below specified prices.

The Company had no commitments for material capital expenditures as of September 30, 2006 or March 30, 2007.

The Company has no lines of credit or other sources of financing.

C.           Research Expenditures

Taseko does not have a program of intellectual property development or patenting or licensing.

D.           Trend Information

As a natural resource exploration company, Taseko’s activities have been mainly event-driven, that is based on exploration successes and failures rather than seasonal, but it may be seen to be affected by the cyclic nature of metal prices. Trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on Taseko’s net sales or revenues, income from continuing operations, profitability, liquidity or capital resources are identified above under the heading “Operating Results” and below in this item.

Copper is a commodity metal used extensively in the housing and automotive industries and accordingly demand for copper varies directly with general economic conditions. Copper prices have been increasing since late 2003. Copper prices averaged US$1.30/lb in 2004 and US$1.59 in 2005. Copper prices have continued to increase in 2006, averaging US$3.03/lb to mid December. At March 30, 2007, the copper price was approximately US$3.14/lb.

Molybdenum prices increased from US$7.60/lb to US$34/lb in 2004. The average molybdenum price in 2005 was US$33/lb. Prices appear to have stabilized since January 2006, averaging US$25.53 to mid December. At March 30, 2007, molybdenum oxide price is approximatley US$29.00/lb.

Gold prices have been increasing over the past two years, and this uptrend has accelerated since September 2005. Overall, the gold price increased from US$410/oz in 2004 to US$445/oz in 2005. The gold price has also increased in 2006, averaging US$604/oz to mid December.

The Company is subject to currency exchange rate risk. The prices of copper and molybdenum oxide are denominated in United States dollars and, accordingly, the Company’s revenues will be received in United States dollars. The Company’s operations are almost entirely paid for in Canadian dollars, which has recently shown strength against the United States dollar. The further strengthening in the Canadian dollar, if it continues, will negatively impact the profitability of the Company’s mining operations.

E.           Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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F.           Tabular Disclosure of Contractual Obligations

⁽¹⁾ Note: The Company also has a convertible debenture in the face amounts of $17.0 million (see note 12 of the accompanying consolidated financial statements) which is not included in the above figures. The Company intends to settle this debt through the issuance of common shares of the Company.

The Company also has liabilities relating to a Reclamation Obligation in the amount of $49.4 million and a Royalty Obligation in the amount of $66.8 million.

G.           Safe Harbor

The safe harbor provided in Section 27A of the Securities Act and Section 21E of the Exchange Act applies to forward-looking information provided pursuant to Item 5.E and F above.

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