Taseko Mines - Definitely On The Right Track

Oct. 8.13 | About: Taseko Mines (TGB)

The production Update

Taseko Mines (NYSEMKT:TGB) has just released its quarterly production numbers, and I think most investors will be relatively pleased. The copper production increased by a very respectable 30% compared to the previous quarter and reached an all-time high of 36.7 million pounds in the third quarter of this year. This production increase was mainly caused by an increased mill availability (up 5%), higher recoveries and a higher average ore grade. Whilst I would obviously like to see the head grade of the milled ore in Q3 first before making any assumptions, I'm cautiously optimistic about the production update at the Gibraltar mine.

My view on the results

I think this is the best possible evidence the company's expansion plans were the right decision to take, and shareholders are about to benefit from this. The financials will very likely not show any improvement yet, as Taseko had to deal with a delayed shipment at the end of the quarter, so the company only realized a sale of 26.7 million pounds of copper. The balance of the Q3 production will be sold in Q4, and that will obviously have a huge influence on the Q4 numbers as I'm expecting Taseko (who owns 75% of the project) to ship 35 million attributable pounds of copper in Q4 compared to 20 million pounds in Q3.

Long story short, the production increase is (at first sight) very encouraging (but I would like to see some grade numbers first), but this will not be reflected in the Q3 financial results yet, as a large part of the production will only be accounted for in Q4. So don't expect exciting Q3 financial numbers, but be prepared for a very bright late Christmas present.

Conclusion

I'm happy with the production results, and I'm surprised the company is still trading at 'just '$2.10/share. In a previous article I was talking about the possibility to write a P2 January 2014 for a premium of $0.25. This is still a trading possibility (if the share price doesn't increase with double-digit numbers on Tuesday). But I would like to emphasize again the company will probably remain at relatively low levels until it has received the decision on the Prosperity project, which I'm expecting in February of next year.

Disclosure: I am long TGB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.