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Taseko Mines: A Good Contrarian Bet

Mar. 05, 2020 8:33 AM ETTaseko Mines Limited (TGB), TKO:CAFCX, SCCO25 Comments


  • Taseko Mines (TGB) risk of bankruptcy is relatively low but largely tied to successful commercialization of their Florence Mine project.
  • Company has some attractive “shots on goal” including the new “Florence” mine and a real option on higher copper prices.
  • Florence mine approval and copper prices are near term catalysts that could drive share prices much higher.
  • TGB is not without risk ,however, I believe the current concerns regarding financing of Florence project and 2022 Senior note maturities will be resolved in shareholders' favor.
  • A range of potential share price outcomes are presented based on conservative assumptions and an estimate provided by Taseko.

I love stocks that have limited downside and large potential upside. I believe this is a good description of Taseko Mines.

“We don’t feel the equity markets are valuing our assets right now, There’s a big gap right now between the Taseko valuation and the value of our assets.” Quote from Taseko president Stuart McDonald to Mining Journal explaining Taseko’s recent move from the Toronto Stock Exchange (TSX) to the London Stock Exchange (LSE).

I am in full agreement with Mr. McDonald and also agree with his further explanation of why the move makes sense.

“We have also seen the growth of passive investing and ETFs. It’s really had a big impact on the availability of funding in Canada for resource mining. Ten years ago, we had about $30 billion of resource funds in Canada. That number’s down below $3 billion now. That’s a dramatic change in a fairly short period. And we’ve got 1,200 mining companies on the Toronto exchange chasing that.”

The link to the Mining Journal article for the two above quotes is here: Mining Journal: Canada copper miner Taseko becomes the latest to join LSE

Regardless of where Taseko’s main stock exchange listing resides I strongly believe this is a highly undervalued stock particularly with the recent coronavirus inspired sell off.

Whenever I look at an investment I always look at the bankruptcy risk. I want to rule out or understand what the potential for bankruptcy is for any investment that I make. While Taseko does not have a fortress balance sheet I do believe the combination of cash on hand, cash flow, and access to financing make the risk relatively low. They also have hedged 100% of their copper production thru April 2020 at $2.60 (which is good given at time of writing the price of copper is $2.55). Below is snapshot of TGB’s balance

This article was written by

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Analyst’s Disclosure: I am/we are 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.

Please do your own research before making any investment decision. Opinion expressed is that of the author only.

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Comments (25)

2.50 copper is not good for TGB. Florence taking too long to unfold. Market retraction will last the rest of 2020, EV sales retracting....blablabla
Good article, don’t disagree with analysis totally, but leaning more towards outside stress hurting this company before it can get out of its own way...if Biden is elected, environmentalists will be emboldened and odds shrink incredibly.
Crowd Noise Fundamentals profile picture
Fair point regarding $2.50 copper and the current macro environment. It is a bit of a dilemma because this is an important project for them and they of course want to generate cash flow quickly. I do think that the macro trends long term for copper are bullish particularly with the lack of incentive to develop additional capacity under $3.00-$3.30 copper price. The positive tailwind to counter your valid concerns is if China and/or US decide to do fiscal stimulus via infrastructure which would drive more demand. I look at TGB as a long term option on Florence and Copper Prices. 2020 may not be the year that this pays off but if they can refinance their debt and get Florence commercialized I see a great return opportunity at some point in the next few years. Thank you for commenting and raising those issues.
Yes, good points, just curious and watchful if Trump/China “blow their wad” with expansionary and quantitative tricks too early out of media/market pressure window-jumping and throw us into global recession rather than just letting the fear subside and giving up a bad Qtr. Trump is more of a fiscal a Democrat than the Democrats would like to admit when it means keeping the market afloat. Hope it works out because I want conservative judges to continue to be put on the bench, and yes, if copper rebounds, I will look to re-enter TSK with you...eventually. I already lost 11k at a .63 average price holding it, but got it all back in other moves.
Crowd Noise Fundamentals profile picture
All US politicians seem very supportive of quantitative easing and large fiscal deficits at the moment. The fixation on the stock market seems misguided to me and has blown a tremendous bubble in many names IMO. You may be right on timing of any buy of TSK/TGB given the likely difficult time ahead for the market. Good luck with your trades!
lol, TGB will be lucky if it avoids bankruptcy
Thanks for the great article! I am very optimistic on this stock future and it is one of my major holdings. I expect the Florence test facility to be able to address any environmental concerns. It will provide real numbers and data versus emotional concerns and hunches from the opposition.
Mr.Sir profile picture
Same here, this price has been a great opportunity to add. My fear which grows with time is that copper may not have hit bottom yet. And this virus scare is driving the prices down even more. Long term TGB should do fine, but Q1 and 2 may keep this at the bottom.
Crowd Noise Fundamentals profile picture
I agree. A lot depends on Florence and everything I’ve seen seem positive. If they can prove that the in-situ process will not cause damage to the local water system - they should get final approval. They’ll then need financing but I think that will be forthcoming as the project seems attractive. Thanks for the kind words and thoughtful comment.
Crowd Noise Fundamentals profile picture
I agree we may not have hit bottom. If TGB can survive and get Florence commercialized I see this being a good result particularly from the current market price which is extremely low in my opinion. Let’s hope we are right.
This company is on the brink of failure
Crowd Noise Fundamentals profile picture
Thanks for commenting. I know you are bearish on the company. What is the context for your comments?
How so?
With 1,200 mining companies chasing $3BN in available funding, do you think you're underestimating the financing risk for Florence? If Florence never comes to fruition, what's TGB worth? Also, any environmental concerns that could shelve Florence?
Crowd Noise Fundamentals profile picture
Thanks for the questions. 1,200 mining companies in Canada with $3BN in the Toronto Stock Exchange (TSX). That was a driver for Taseko to move their primary listing to the London Stock Exchange (LSE). The feeling was that there many more active investors and more liquid market in the LSE. Assigning zero value to any of the other long term assets and nothing for Florence the stock would only be worth ~$20m using their own numbers PV8% of Gibraltar in USD is $596m against current liabilities of $522m. Current market cap is ~$85m. That said they do have the other assets which could theoretically be sold or commercialized.

There are two regulators that they have to work with AZ Department of Environmental Quality and the Federal EPA - permit applications to both were submitted last summer. Once approved there is then a public comment period and the local town of Florence has made legal challenges to stop the Florence mine over environmental concerns. So far Taseko has been able to move forward with test production etc... Below is link to a local article that lays out the town's concerns. Mind you its from August 2018 and Taseko has progressed but gives you the other side of the story.


I grew up in Butte, which was considered back in the day to be the richest hill on earth. A LOT of copper came out area, & that's when the world population is much less then it is today. So with such history being the case, their's no doubt in my mind that copper will continue to play a big part in our world, & with plenty of room for growth, & emerging markets it'll likely be bigger then it's ever been as we move forward in time.
Crowd Noise Fundamentals profile picture
I fully agree. I also see a lack of new investment given the current market prices. Timing is always difficult but there are certainly reasons to be bullish long term on copper. Thanks for the comment.
Mr.Sir profile picture
great article, I am of the same opinion and have been slowly adding to my position. I think TGB is a long term hold, since they have great upside. Also at this price its a great deal.
Crowd Noise Fundamentals profile picture
Thank you for the kind words. I have been doing the same. Its very interesting as you know this stock can move fairly quickly and was $0.60 as recently as January. At $0.60 you could also have sold $1.00 August option calls on TGB for $0.05 for part of your position. No bid at the moment but the return can be significant and at a minimum will lower your cost basis if they expired worthless. Appreciate your comment and good luck with the position.
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