Valued at $714 million by market cap, Taseko Mines (TGB) is a Canada-based mining company engaged in the acquisition, development, and operation of mineral deposits. Typically, the share prices of mining companies are closely tied to the commodity they mine. In the last 12 months, Taseko Mines stock has returned 75% due to higher copper prices (HGN24).
However, in the last week, the mining stock has lost 10% after it suspended operations at the Gibraltar copper mine in British Columbia. Taseko failed to reach an agreement with union workers, which led to the suspension of mining operations. This development will negatively impact revenue and earnings for Taseko in the near term, as Gibraltar is the second largest open-pit copper mine in Canada, producing 130 million lbs of copper each year.
Let’s see if the ongoing dip in Taseko Mines stock offers you a buying opportunity.
Gibraltar is the Key Driver for Taseko
In Q1 of 2024, Taseko Mines reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of C$50 million, 38% higher than the year-ago period. It reported revenue of C$147 million and adjusted earnings of C$8 million, or C$0.03 per share, in the March quarter. In the year-ago period, Taseko reported revenue of C$115.5 million and adjusted net income of C$2.64 million, or C$0.01 per share.
The Gibraltar mine produced 30 million pounds of copper and 247,000 pounds of molybdenum in Q1, while Taseko’s operating cash costs stood at $2.46 per pound of copper.
Stuart McDonald, President and CEO of Taseko, commented, "Gibraltar operations performed generally in line with plan in the first quarter, generating strong margins on a realized copper sales price of US$3.89 per pound.”
Taseko acquired the remaining 12.5% interest in Gibraltar and now owns 100% of the mine. The mining company emphasized that the transaction is a positive that would provide immediate cash flow and production growth. Moreover, the acquisition cost is spread out over 10 years, with the next payment scheduled in 2026, providing Taseko with the flexibility to focus resources on developing the Florence mine.
We can see how crucial Gibraltar is to Taseko, and the stock may fall even lower if the union worker strike continues.
The Florence Copper Project is the Next Earnings Driver
In its Q1 of 2024 report, Taseko stated that the net present value of the Florence Copper Project is about $930 million if we assume an after-tax discount rate of 8% and copper prices at $3.75 per pound. The after-tax internal rate of return is around 47%, indicating a payback period of 2.6 years.
Further, the operating costs at this mine are $1.11 per pound, with an annual production capacity of 85 million pounds. The total life of mine production is forecast at 1.5 billion pounds of copper.
What is the Target Price for Taseko Stock?
Out of the four analysts covering Taseko stock, three recommend “strong buy” and one recommends “hold.”
The average target price for TGB stock is $2.84, indicating an upside potential of 14%.
Wall Street expects Taseko to report adjusted earnings per share of $0.23 in 2025, up from $0.11 in 2023. Priced at 10x forward earnings, TGB stock is quite cheap.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
