Taseko Gains Mid-Tier Momentum on Gibraltar and Prosperity
By Jane Perry
18 Apr 2008 at 03:07 PM GMT-04:00
VANCOUVER (ResourceInvestor.com) -- Taseko Mines [AMEX:TGB; TSX:TKO] is right on target as it looks to vault itself into a comfortable mid-tier market position with its two-pronged approach to development.
Its flagship project is the Gibraltar Mine, currently a 36,700 tonnes per day copper and molybdenum producer with a long history. Its Prosperity gold/copper porphyry deposit is huge, with proven and probable reserves of half a billion tonnes yielding 4.5 million ounces of gold and 2 billion pounds of copper. Grades are estimated at approximately $20/tonne (at present prices).
Gibraltar
Gibraltar is located on the main highway north of Williams Lake, in south-central British Columbia.
Last year, Gibraltar produced 51.8 million pounds Cu and 580,000 pounds molybdenum, generating revenues of C$217 million. The company is in the middle of a two-phase expansion and modernisation project which will increase annual production of 120 million pounds Cu and 1.5 million pounds Mo with a 55,000 tonnes per day capacity.
The mine’s SX-EW plant underwent a C$3 million refurbishment and produced its first 99.9% cathode copper bars this January.
“The expansion project is scheduled for completion in 2008 - on budget and on schedule,” stated Russell Hallbauer, Taseko’s President and CEO, in a letter to shareholders featured in the company’s 2007 annual report, released April 11, 2008.
The company’s website claims that “this expansion will make Gibraltar the second largest open pit copper mine in Canada,” with Highland Valley Copper being the largest.
Prosperity
Prosperity is located 175 kilometres southwest of Gibraltar. As it stands, it’s the largest undeveloped gold/copper porphyry deposit in North America. In his letter, Hallbauer emphasized the project’s priority: “in particular, we see Prosperity as our most promising project.”
The project is currently in the permitting stage, with an environmental assessment to be submitted at the end of April. The company completed its in-house feasibility study last December.
Valuation
RI first brought you coverage of Taseko in May 2005 (click here to read Ben Abelson’s article) back when it was trading around C$1.30 and copper was in the US$1.70/pound range. Both the metal and the stock have come a long way since then!
With 12 consecutive quarters of positive earnings, Gibraltar provides excellent leverage for financing Prosperity. Although Prosperity has an estimated capital cost of $800 million, debt-financing should be a snap considering the quality of the project.
For example, the company could forward-sell $100 million worth of copper, and probably $100 million worth of gold as security. Taseko would also save around 70% on shipping costs by producing cathode copper instead of having to ship concentrate for further refining.
TKO has a focused asset portfolio with four 100%-owned projects (with no carried interests) in British Columbia. It’s worth noting that the company has an arrangement in which it shares management, technical and financial expertise with Hunter Dickinson, an international mining management company.
Its AMEX listing is also a big plus, enabling American investors to trade its shares without being forced to pay Canadian and American commissions.
Given all this, Brian Bergot, the company’s Manager of Investor Relations told RI that “we expect more and more value to be reflected in the share price.”
This is an interesting investment with very little downside risk and considerable upside potential. The value proposition is further strengthened by the management ability of the Hunter Dickinson group.
Capitalisation stands at 160.7 million shares fully diluted, giving it a market cap of $806.43 million. Cash on hand is $55 million as of December 2007.
