Taseko Mines is a Canadian copper gem
Deeply undervalued
Taseko Mines made headlines a few years ago when the Canadian Impact Assessment Act was invoked to deny a permit for the construction of a mine at the company’s massive Prosperity deposit and the company lost an appeal to the Supreme Court of Canada. First Nations were ecstatic, since they couldn’t cut themselves in for enough of the project and a few fish might have perished.
One wonders how the Trudeau Liberals are going to meet their “transition” goals without enough copper? Spoiler alert. They are not.
But Taseko has two other mines - Gibraltar which is in production and Florence which is advancing. I value mineral deposits as a call option on future commodity prices since valuations based on an assumed future price are unreliable and often abused.
Taseko owns 88% of the producing Gibraltar mine and I value that deposit at $6.00 per Taseko share.
Taseko also owns the Florence deposit in Arizona which received its final permit in 2023 and is under construction. I value that deposit at about $4.75 per Taseko share. You can’t add the value of these two deposits to get the value of Taseko in total since the company has debt. Adjusting for debt the consolidated company has a value of about $7.65 per share, and the shares are trading today at $3.20.
The outlook for copper is relatively robust since existing mines cannot conceivably supply all the copper needed for the combination of expansion of the grid and forecast production of electric vehicles which use about three times as much copper as internal combustion engine vehicles. Copper is often called “Dr. Copper” since it is tied to economic activity in general, and copper prices tend to be volatile. But it is my opinion that the odds favor an upward trend in copper prices over time and Taseko will be a major beneficiary unless it runs into unforeseen operating problems in Arizona.
The Prosperity project hasn’t gone away and a new Canadian government led by the Conservative Party may be more amenable to brokering a deal with the company and the indigenous peoples affected by the Prosperity mine to see it through to permitting, and this would make Taseko materially more valuable. In any event, the stock seems inexpensive to me.