This Miner Has a Rich Patina

Seeking stocks that others ignore, shun, or simply forget gives individual investors like you an edge over the professionals. Getting in before Wall Street discovers them -- or rediscovers them -- means you can stake a claim before they start taking off. 

Here we check out companies with minimal analyst coverage at best, then pair our list with the opinions of the Motley Fool CAPS community. A stock that garners CAPS' top ratings, but hasn't yet caught analysts' attention, could be your next home run investment.

On the surface, copper and molybdenum miner Taseko Mines (NYSE: TGB  ) looks like it could be that one. Certainly Wall Street likes it, as the two analysts on CAPS tracking it rate it to outperform the market averages, and the investment community is behind it as 98% of the nearly 2,000 members weighing in on it see it beating the Street. Let's see if that's enough to give you a head start.

Taseko Mines snapshot

Market Cap $626 million
Revenues, TTM $254 million
1-Yr. Stock Return (5.2%)
Return on Investment 1.7%
Est. 5-Yr EPS Growth 11.0%
Dividend & Yield NA/NA
Recent Price $3.28
CAPS Rating ****


But remember: Without much analyst support, you'll have to do more digging on your own to see whether it deserves a spot in your portfolio, so don't just buy or sell it based solely on its appearance here. 

Hiding in plain sight
Relying upon industrial metals as Taseko does requires a belief in economic expansion. Lately, that's meant deferring hope until sometime in the future, as the U.S. economy is barely breathing, Europe is wracked with crisis, and China is skidding more sharply than anticipated.

Yet, with the Fed about to initiate another round of quantitative easing, Europe poised to engage in a huge round of bond buying to prop up the eurozone, and China having announced yet another massive stimulus spending program, world governments have kicked the can of fiscal responsibility further down the road, even as they bolster short-term prospects for gain.

In response, copper prices have surged to a four-month high of $8,100 a tonne. Also, molybdenum has remained fairly weak, but if China follows through on its plans, we should see prices rise, as it's a key commodity in the production of steel. Thompson Creek Metals (NYSE: TC  ) jumped the other day when China announced the stimulus program, despite that its Mount Milligan project is still a long way from being ready, because traders are hopeful the trickle down effect will last long enough to benefit the miner.

Taseko's dealt with a number of problems this year, not least of which were timing issues that delayed copper shipments early on. The miner also shut down of one of its mills, had difficult "ore characteristics" affecting results, and fickle weather that made mining a challenge. But, second-quarter copper concentrate production was up both sequentially and year over year, while molybdenum had poor recoveries that caused production to fall from the first quarter even as it was up from 2011.

Pricing will be the linchpin for copper miners Taseko, Freeport-McMoRan (NYSE: FCX  ) , and Southern Copper (NYSE: SCCO  ) . London Metals Exchange pricing averaged 14% lower in the second quarter than in the same period as last year, but prices are now 7% higher than where they stood at the end of July.

On the molybdenum side, analysts think pricing could stabilize in the range of $14-$15 per pound, better than the $13 Freeport is modeling for the second half of the year. Rare-earth-metals miner Molycorp (NYSE: MCP  ) agrees, noting that it saw stabilization, or at least a much slower rate of decline in pricing, in the second quarter and expects that to continue for the rest of the year.

At seven times earnings estimates Taseko seems cheap, and while its capex spending plan has eaten away at performance, it should pay off down the road. Just about a year ago I rated the miner to outperform the markets on Motley Fool CAPS, believing its turnaround was under way. While the stock has advanced18% since then, the broad indexes have done better thus far, rising 26% in the same time period.

I'm still confident Taseko Mines ultimately will prove the better, but let me know in the comments box below if you see a reason to think the copper and molybdenum miner won't be able to dig its way out of the hole it's in.

Swing for the fences
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Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (4) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 14, 2012, at 3:54 PM, 7001ctc wrote:

    I have great confidenmce in TGB. Sooner or not much later, the Canadian bureaucrats will realise that British columbia needs the Prosperity mine and will cooperate in solving the enviornmental and tibal people issues.

  • Report this Comment On September 14, 2012, at 4:05 PM, Denverdude123 wrote:

    Does the author think Molycorp produces molybdenum? It does not.

  • Report this Comment On September 14, 2012, at 4:24 PM, BigBuckssss wrote:

    TGB is a serial disappointer. The management cant seem to get anything together.. Every Quarter they seem to leave tons of copper on the dock...unshipped. Theyve screwed up their flagship property , Gibraltar, by saling 20% of it to another miner. Their only hope is a property called Prosperity in British Columbia and they cant seem to convince the First Nation indians to let them get going....Totally mismanaged company whos only product is hope and disappointment.....BEWARE

  • Report this Comment On September 18, 2012, at 9:08 AM, labradorguy wrote:

    I work at Gibraltar. I would be very cautious buying this stock. You should read the Mining Watch Canada report that was just issued last week. I agree 100% with that report. If Taseko does not change their attitude with the First Nations, Prosperity will NEVER happen. Right now so much money has been sunk into that project, that if it does not go forward, this stock is going to nosedive. Gibraltar has it's own issues, like having the worst pit walls in Canada. Current blasting practices are not going to allow the mine to reach it's projected mine life. The walls will be coming down on the equipment (and men).

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