Credit Suisse has upgraded Taseko Mines Limited (TKO.TO) to
Neutral from Underperform and lifted the target price to $6.50 from
Event: "In addition to updating our model with revised commodity
price forecasts, we have chosen to take Prosperity completely out
of our valuation (previously we assumed 20% of its value), and
instead assume that Taseko will shift its focus towards another
expansion of its Gibraltar mine.
"While Prosperity will continue to represent option value for
Taseko, we believe the regulatory hurdles may be insurmountable,
and therefore anticipate the company to put less effort into moving
the project forward in the coming years.
"Expanding Gibraltar for a third time could deliver value, and
sooner. With the Phase II expansion of Gibraltar to 55 ktpd nearly
complete, TKO now plans on shifting its search for near-term
production growth towards a third expansion of Gibraltar. We
therefore assumed that an expansion ramps up in 2013 at a capital
cost of $250M. In our scenario, we forecast production from the
mine to range from 160-170 Mlb of copper per year (75% attributable
"Even with an expansion, the larger reserve base should allow
for a mine life of at least 16 years. With additional exploration
and incorporating higher copper prices into a reserve calculation,
we believe additional resources, which are roughly twice the size
of the resource base, could be upgraded to reserves, and further
lengthen the life of the operation."
Investment Case: "As TKO remains one of the most levered names
to copper prices in our coverage universe, due to its higher cash
costs (est. $1.59/lb in 2011), and its reliance on copper for 95%
of its revenues, it's share price should benefit in the rising
copper price environment we forecast for 2011."
Valuation: "Our 2010 EPS estimate is decreased to $0.28 from
$0.32. Our 2011/2012 is increased to $0.86/$0.82 from $0.59/$0.63.
We have increased our target price on Taseko to C$6.50 from $5.50
and increased our rating to Neutral from Underperform. The higher
EPS estimates reflect the new commodity price forecasts.: