Update: Taseko's Copper Hedges Make Sense, But Are Short-Term Oriented

| About: Taseko Mines (TGB)
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Taseko Mines just announced that it has hedged copper production at today's prices through June 2015.

I had not anticipated this in my recent analysis.

The company's actions make sense, but 6 months worth of hedging is minimal given Gibraltar's long mine life.

Taseko Mines (NYSEMKT:TGB) just announced an updated hedging program, whereby it is hedging 30 million pounds in each of the first two quarters of next year, at $3/lb. and $2.90/lb. in each respective quarter. This is nearly all of the company's production, which came in at ~35 million pounds in the third quarter. Note that the company's one producing mine - Gibraltar - also produces molybdenum, which has been performing very poorly as of late.

Considering Taseko's large debt load and its expenses relating to the development of its other projects, a hedging program makes sense. I particularly like it given that I am not especially bullish of copper. However, these hedges only go out 6 months, and hardly put a dent in the company's outlook longer-term. Further, it only really has an effect if we see a brief dip in copper prices, only to be followed by a sharp reversal.

The company's success and any reasonable investment thesis is currently contingent on the company getting another project into production, and as I pointed out recently, I'm not confident that this will take place. Taseko's development projects require permits that may be difficult to obtain, and in some cases, they require far more capital than the company can likely get its hands on. They are further highly leveraged to metal prices, which have been under a lot of pressure lately. Nevertheless, the stock has reacted to these risks, and as a result, it has fallen to the lowest level since the depths of the financial crisis. With this in mind, a speculative position may make sense for those investors who want upside copper leverage.

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