Taseko Mines Looks Like a Winner

After this month's changes in my mining portfolio, I have now decided that it's the right time to invest in precious metals again. I already bought (speculatively) DRD Gold at $0.78 and after the 10:1 reverse split, the stock kept going down. I consider $6.50 a critical level and decided to sell once that level was broken. At $6.42 my sell order was executed, while the stock ended above $6.50 again.

I am still quite convinced that DRD Gold will manage to get its act together, but I am also certain that it is not the best stock for short term profits.

Instead, I took a long position in gold at $662, knowing that there should be some resistance at $660 (61.8% being a retracement level), which was successfully tested and spot gold moved up to $665 today. Should gold move below $660, there is a high likelihood of a full retracing to $640 which for me would be a very bearish sign and possibly a reason to liquidate all my positions in precious metals and certainly a reason to reduce the mining share in my portfolio.

But, being the positive-minded chap that I am, I added a position in Taseko Mines Limited (TGB). I actually bought back shares in TGB. Previously, I bought TGB at $2.30 and sold at minor profits as there was little news to move the stock up. Now the situation is a lot more fruitful.

The company is one of the very few AMEX-listed precious metals miners that actually makes money. Taseko has successfully positioned itself as a copper & gold miner and has a good cash position with a positive cashflow. Taseko's Prosperity and Harmony mines alone should account for some 7.5 mio ounces of proven & probable gold reserves, which already makes the company's $600M market capitalization look reasonable.

Add to that the company's young & producing Gibraltar copper mine and you have a clearly undervalued stock despite its recent rise. This stock will go through the roof in two or three years from now as the Prosperity mine will get closer to production. I think we have a winner.

Full disclosure: The author bought TGB at $4.60 and closed his position in DROOD at $6.42.

TGB 1-yr. chart:

Comments

[DHS:]

I bought TGB at an average price of $1.31. I did not sell along the way for the reasons you stated. I am not a short tern trader, but an investor.

2007 Aug 01 10:44 AM