Why Taseko Mines Will Get Better Despite Soft Copper Pricing

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Jan 21, 2015

Taseko Mines (TGB, Financial) recently posted its third-quarter results, which were not so impressive. The company couldn’t sustain the growth in its earnings. The main reason behind this was the challenge the company faced during mining at the bottom of the granite pit. But now, Taseko is seeing some improvements. After the minor pit wall movement, Taseko has made adjustments in its plans that will impact the copper production positively, leading to good results in the long run.

Improvements in the cards

Taseko is expecting good cost control as well which will lead Taseko to better profit margins even in the soft market environment. Besides this, Taseko is also dealing with other headwinds which might obstruct its smooth flow. This copper event has increased the haulage costs due to the longer ore haul which is affecting its truck productivities. However, Taseko thinks it to be only a short-term headwind, and the company can come back on track when its operations transition back to the upper benches of granite pit in future.

To deal with this Taseko is focusing on various other alternatives to improve its profitability. It is now looking for alternative mining plans for 2015 which are expected to drive more revenue to the company in the future. Moreover, Taseko also had been struggling with shovel availability issues and delay in the ore release before. To get over this, Taseko is now looking for other options to address lower than budgeted waste stripping in 2014.

Beyond the challenges

Although the copper pricing is weak and it has declined moderately recently, Taseko is least affected by this downfall as this is equalised by the weaker Canadian dollar. This is a key point that is helping Taseko in this soft copper pricing environment. Besides this, Taseko also has hedging programs which are helping it to mitigate its risk from declining copper prices. Taseko is basically on a defensive mode and is working on extending its put option beyond the first quarter under its hedging initiative.

With this Taseko is pleased to be in a strong position in the copper deficit supply in the future in 2015, 2016 and 2017. These are good signs for the strong long-term prospects of the company. Though there are lot of challenges and the journey isn’t smooth, the company is confident that it can overcome the challenges through its operational excellence in future.

Conclusion

The stock doesn’t have a trailing and a forward P/E due to the soft copper market. But the strategies that it is undertaking and Canadian dollar fluctuation is helping it big time. The company thinks that if these trends continue it will able to fetch more market share in future. However, the profit margin of the company is disappointing with -9.28%. Thus, the expectations of an over performance in the upcoming quarters appears shallow. So, as of now I would like to suggest the investors to look for other profitable stocks for investment and wait for Taseko to show concrete signs of gaining market share in future.