Make This Mine Yours (Now!)

Often, the most obscure musicians -- and not the overplayed crowd pleasers -- end up producing your favorite songs. In the investing world, with its impressive mineral reserves, Taseko Mines (AMEX: TGB  ) is among the most underappreciated companies in its industry.

The U2s of the world, like Freeport McMoRan Copper & Gold (NYSE: FCX  ) and BHP Billiton (NYSE: BHP  ) , will always have the undivided attention of investors and analysts. Compared to them, Taseko looks more like Procol Harum. Their combined copper production, for instance, of more than 1.5 billion pounds in the most recent fiscal quarter more than eclipses Taseko's 14 million, but Taseko sits atop a hit with chart-topping potential.

In its most recent quarter, Taseko spun a 30% reported revenue drop into an 80% year-over-year increase in operating profit, but its net earnings from continuing operations were cut from CAD 4.7 million to negative CAD 2.3 million after accounting for an unrealized loss on derivative instruments.

Taseko's average cash costs of production per pound of copper were on the high side at $1.86, partly due to an issue of surface soil instability at its Granite Pit mine, which was resolved as of October. Taseko's high unit costs are also related to its relative small size. Southern Copper (NYSE: PCU  ) , for example, averaged only $0.27 in costs per pound in its recent quarter.

Under the surface
Although Taseko lacks ability to exploit economies of scale, its Prosperity reserve base contains 3.6 billion pounds of recoverable copper and 7.7 million ounces of gold. Pending an environmental review by regulatory authorities, expected to end in early 2010, the Prosperity Project will make other Canadian gold mines seem like one-hit wonders.

Moreover, its enterprise value of about $641 million is barely a smidgen compared to its recoverable gold at the Prosperity mine alone; not to mention the billions of pounds of proven copper both there and at its profitable Gibraltar mine. Even when you ignore those and the potential resources at Harmony, Taseko's enterprise value is only 7% of the present market value of Prosperity's proven and probable gold reserves.

With that in mind, it's a wonder that companies like Yamana Gold (NYSE: AUY  ) , or even bigger players like Barrick Gold (NYSE: ABX  ) and Newmont Mining (NYSE: NEM  ) , aren't salivating over its valuation. Although, much of the valuation discrepancy between producing companies with high EV/MVPR ratios can relate to the lack of Taseko's mine development. Still, presuming management's confidence regarding the company passing its environmental review isn't off-base, even Biz Markie would say this stock "has got what you need."

Already own shares of Taseko or thinking about picking some up? Let us know what you think about the company in the comments below.

Fool contributor Chris Jones owns no shares of any company mentioned in this article. Never Rickroll The Motley Fool's disclosure policy.


Read/Post Comments (9) | Recommend This Article (56)

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 November 16, 2009, at 2:26 PM, ndfaninsb wrote:

    I love this stock, been loading up on it. I am surprised that its down the last couple days with gold and copper up, but its just taking a breather I think. The best thing Ive read about this company is that they have a cash cost projected of Negative $300 per oz on the prosperity project and thats assuming a much lower gold and copper price than todays prices.

  • Report this Comment On November 16, 2009, at 3:33 PM, precherkid wrote:

    I have owned this stock for 15 years and after enduring much of its downside the first dozen, loaded up on it the past couple of years at knockdown prices--including $.80/share this past spring.

    All the buying because everything I have read informs me that the management is serious about running their business and investing for the future.

  • Report this Comment On November 16, 2009, at 4:30 PM, jolaz wrote:

    I already have a stake in this and it seems like a slam dunk to me. The only issue with this thing right now is getting final approval over the objections of a Native Canadian group. I fully expect this issue to be resolved early next year, and when it formally is settled, Taseko will do well.

  • Report this Comment On November 16, 2009, at 4:32 PM, mainvien wrote:

    The Taseko management/board has demonstrated their willingness to keep in mind the best interest of the shareholder by buying back convertible debt that could have significantly diluted the common equity. They have also invested in improving mine thru put and they do a excellant job of keeping their stakeholders informed. I also like their relationship with Credit Suisse which is an excellant network entre for the best financial future of Taseko.

  • Report this Comment On November 16, 2009, at 7:27 PM, SpiderJack wrote:

    TGB has good prospects but Prosperity is no shoe in. The natives don't want Fish lake messed with.

    I would diversify some in NXG. They have already been throough what TGB is trying to do and have moved on with successul mines in Australia.

  • Report this Comment On November 17, 2009, at 11:52 AM, 7001ctc wrote:

    TGB is a real winner. Mgt. is managing for real long term results and will be profitable even if copper goes back to $2/lb.

    I loaded up at less than 0.80/share and I keep on buying on any weakness.

  • Report this Comment On November 17, 2009, at 12:50 PM, crm14210 wrote:

    I'm impressed with the management. The more I read the more I like TGB. Management is focused on making solid strategic and tactical moves to position the company for future growth. I too believe that if the Properity project is approved they will become an extremely attractive acquisition target. So be it. I bought back in April and have enjoyed a nice ride up.

  • Report this Comment On November 18, 2009, at 1:19 PM, TrafficDesign wrote:

    This stock is the best thing that ever happened to my portfolio. I bought back in april and have been adding to it ever since. This company is really top notch.

  • Report this Comment On November 20, 2009, at 12:22 PM, dr152 wrote:

    I think Rubicon (RBY) is ahead of this company, and their management looks great, too. They own their property outright, and have top grade gold coming out already. Their target is also projected to be higher by the analysts.

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