Credit Suisse has downgraded Taseko Mines Limited (TKO.TO) to
UNDERPERFORM from Neutral and lowered its estimates and target
price to C$6.00 (from C$6.50).
Event: "Taseko reported headline EPS of $0.12, and after making
adjustments for unrealized derivative losses, we calculate an
adjusted Q4/10 EPS of $0.19, in-line with the consensus estimate of
$0.18 and slightly above our estimate of $0.16."
Cash Costs continue to trend upward. "Cash costs for the quarter
were $1.87/lb of copper, above our estimate of $1.59/lb. For 2010,
cash costs totaled $1.70/lb, and we expect this to increase to
$1.85/lb in 2011, as lower milled grades and continued high costs
for consumables put pressure on costs."
Working on the third Gibraltar expansion. "With Prosperity's
future still in limbo, we expect the next leg of growth to come
from the planned Gibraltar expansion, which is expected to increase
production capabilities at the mine by 50% to ~180 Mlb/year of
copper. We model the expansion to begin in 2013, reaching full
production the year after."
Catalysts: "The Prosperity project is likely to require
extensive review and consultation prior to environmental approval,
and we believe this could take several years. A feasibility study
on the Aley niobium project will commence in Q4 2011, with results
not out until 2012."
Valuation: "Based on our revised target price of C$6.00
(previously C$6.50), and the average forecast rate of return for
TKO's peer group of 35%, we downgrade Taseko to Underperform from
Neutral. Our target price continues to be based on a 70/30
weighting of 1.0x our NAVPS of C$6.44 (previously C$6.52) and 5.0x
FY2011 EBITDA of C$162 (previously C$184M). Our 2011 and 2012 EPS
estimates have declined to C$0.51 and C$0.68 (from C$0.61 and
C$0.74), reflecting lower production expectations for 2011 and
slightly higher operating costs in both years."