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.
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