The Best Bargain in Miners Gets Better

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While countless junior miners will fall prey to the unavoidable consolidation trend within the metals mining sector, Taseko Mines (AMEX: TGB  ) continues to have a mine of its own.

For a mid-sized copper producer with a puny little market capitalization, Taseko Mines just made a giant leap towards finding its own path to production at the prolific Prosperity gold and copper project. Taseko recently signed a letter of intent with Japanese trading house Sojitz to sell a 25% stake in the Gibraltar mine or consideration of about $170 million.

This deal values the Gibraltar mine alone at $680 million, which is greater than the company's entire enterprise value of $638 million. This also confirms the notion that I have touted for some time (recently echoed by my Foolish colleague Chris Jones) that the market continues to value this miner as though the massive Prosperity project did not exist. Boasting 7.7 million ounces of recoverable gold reserves and 3.6 billion pounds of copper, I assure you that Prosperity is entirely real. With this injection of capital representing "a significant portion of the equity requirement for the construction of a new mine at the Prosperity property," the market can no longer treat this project like some figment of Taseko's imagination.

Although I still think that Yamana Gold (NYSE: AUY  ) may have missed a golden opportunity to improve geographical diversity by courting Taseko, this go-it-alone approach is an exciting prospect for long-term Taseko shareholders like myself. I suspect the company may yet have to ward off acquisitive advances, but it may enjoy boisterous shareholder support in doing so. Furthermore, since highly anticipated deals have yet to emerge for monster asset troves like those of Seabridge Gold (AMEX: SA  ) and Northern Dynasty Minerals (AMEX: NAK  ) , Taseko may just continue to fly under the radar of golden prowlers like Goldcorp (NYSE: GG  ) . Teck Resources (NYSE: TCK  ) has a large existing footprint in British Columbia, where all of Taseko's assets are located, but a recent near-death experience will surely keep Teck hibernating for a while.

Although I have repeatedly highlighted Silver Wheaton (NYSE: SLW  ) as this Fool's choice for the most attractive equity offering in metals, Taseko continues to take the valuation prize. The epic disconnect between recoverable gold and copper assets with a present market value of about $27 billion dollars and that laughable enterprise value point to the deepest value this Fool has identified in the sector. Consider for a moment that since Taseko shares peaked above $6 before the big commodities correction took hold last year, the company has commissioned a new SAG mill at Gibraltar and increased mineral reserves at Prosperity by 70%. Shares have promptly tripled since I asked Fools to take a fresh look at Taseko last October, but I believe that significant upside potential remains.

Do you have alternate picks for the greatest value among metal miners? Make your pitch using Motley Fool CAPS, and share your thoughts with our community of investors in the comments section below.

Fool contributor Christopher Barker is the commodore of copper and the Colonel Klink of zinc. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Northern Dynasty Minerals, Silver Wheaton, Taseko Mines, and Yamana Gold. The Motley Fool's disclosure policy is worth way more than $3.13 per pound.

Read/Post Comments (9) | Recommend This Article (52)

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  • Report this Comment On December 02, 2009, at 10:24 AM, waveonshore wrote:

    Excellent article! I also am a shareholder in Taseko. It appears investors are awaiting the outcome of the B.C. government review before investing even though shares are cheap even fully discounting Prosperity. I personally think the B.C. government has its hands tied with Prosperity and will be forced to approve development. Prosperity is such a large deposit that a refusal to allow it to proceed would severely impact investment in B.C. mine and forestry development for decades. These two industries are the life-blood of the province so they must tread carefully.

  • Report this Comment On December 02, 2009, at 11:18 AM, wrongdog wrote:

    Teck is hibernating? The best 6 month stock buy I've ever made, and it seems unstoppable. Thanks TCK for coming back strong, and thanks Tim Seymour for the rec.

  • Report this Comment On December 02, 2009, at 11:42 AM, silverminer wrote:

    By hibernating, I meant that they are not in a position to consider acquisitions until their debt situation improves.

  • Report this Comment On December 02, 2009, at 5:12 PM, TheHague wrote:

    I got lucky with this mine and began investing last summer! Since I was (and still am to some degree) leery of the Prosperity approval prospects I have been buying then selling when some profit was available! Now I am in and hoping there will be a dip so I can dive in further! The past week has shown me though that this little juggernaut is beyond "dipping" too far and maybe I better buy some more even though my AVCPS would rise! There will be a day when $4.00 per share will have been considered cheap!

    Here is to good trading!

  • Report this Comment On December 02, 2009, at 10:35 PM, jlanganki wrote:

    As it shows right on their website (thanks to Taseko for calculating this), the net present value of Prosperity is $1.6 billion if gold is priced at $900 an ounce averaged over the next 30 years. If you think Prosperity will be approved, and gold will hold its current level, then the Prosperity should be valued at $1.6 billion on top of the $680 million Gibraltar valuation. So at roughly a $2.2 billion total value, the stock price will go to at least $13-$15 if these assumptions hold (Prosperity gets approved and gold prices hold or increase).

  • Report this Comment On December 03, 2009, at 12:24 AM, kittyliquor wrote:

    Great article, I have several of the stocks mentioned. I purchased AUY @ $4.66, SLW @ $5.95 and TGB @ $1.56 and I've been happy with all of them. Thinking of picking up more TGB if there is a pullback before Prosperity gets approval.

  • Report this Comment On December 03, 2009, at 4:32 AM, TopCashMo wrote:

    Thanks Chris,

    Great article, and striaghtforward information about Taseko.

    This is such a valuable information about Taseko mines that many people have no clue, this stock is so cheap at the current price, article like your's will open up lots of eyes and minds to understand TGB, last three days run is like a trail run, more information like the best run mine companies for which the CEO got best CEO award, and now the news about actual value above 2.2billion is going to put the investors in hot seat to jump in when it is cheaper?

  • Report this Comment On December 03, 2009, at 12:33 PM, bruinjoe93 wrote:

    You continue to amaze me Christopher Barker. I got into Taseko two days ago. I was lucky. You, on the other hand, have known about this company for some time. Your knowledge of this sector is very impressive. Thanks for sharing your knowledge with us.

  • Report this Comment On December 03, 2009, at 12:33 PM, bruinjoe93 wrote:

    You continue to amaze me Christopher Barker. I got into Taseko two days ago. I was lucky. You, on the other hand, have known about this company for some time. Your knowledge of this sector is very impressive. Thanks for sharing your knowledge with us.

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