Shares of Taseko Mines (NYSEMKT:TGB) sank more than 13% by 11:15 a.m. EDT on Friday. Driving the sell-off was the market's lukewarm reception to the company's third-quarter results.
Taseko Mines reported adjusted net income of 13.4 million Canadian dollars, or CA$0.06 per share, for the third quarter, which was in line with the consensus estimate. That said, earnings weren't as high as they could have been because wildfires in central British Columbia early in the quarter affected its operations. Despite that disruption, copper production from the company's main Gibraltar mine totaled 35.1 million pounds during the quarter, an increase of 2 million pounds from the year-ago quarter.
In commenting on Taseko's results, CEO Russell Halbauer stated:
The third quarter was another very good quarter for Taseko and despite being impacted by the wildfires in central British Columbia we still produced 35 million pounds of copper and generated CA$42 million of adjusted EBITDA.
However, he noted that:
Manpower levels at times were one quarter of normal levels which impacted mine sequencing and mill operations. Truck and rail shipments were also halted for an extended period which resulted in reduced sales volumes and an increase in copper concentrate inventory of approximately five million pounds, which reduced earnings for the quarter. We expect a significant reduction in concentrate inventory by year end.
The market seems concerned with that elevated inventory level. First of all, the company didn't make as much money in the third quarter as it could have because it couldn't get that copper to market. Because of that, there's a concern that Taseko might not fetch as high of a price for that inventory if copper prices slip in the fourth quarter.
Taseko remains very optimistic about the future, with the CEO noting that copper prices have risen 50% from their bottom in 2016, and that "the market is in the early stages of a major copper deficit." That could lead to even higher prices, which the company hopes to capture by developing its Florence Copper project that could come online by 2020. That said, despite this upside potential, which could be even greater after today's sell-off, Taseko is a high-risk copper stock given its small size and the massive capital outlay needed to make Florence a reality.