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Tuesday, December 14, 2010

Stocks I Like - Taseko Mines



Taseko Mines (TKO) is a gloriously priced stock, due to investor overreaction to a recent "disaster."

Taseko's Prosperity Mine is a property in British Columbia, Canada, with indicated resources of 7.7 million ounces of gold and 3.6 billion pounds of copper: in other words, it is massive. Importantly, the financial estimates of the mine are based on realistic long-term prices of $1.65/pound for copper and $650/ounce for gold.

In November of 2010, the Federal Ministry of the Environment announced that the Prosperity mine project, as proposed, cannot proceed due to environmental concerns. This is despite already having received approval by the Provincial Government, and Taseko having already built a portion of the proposed expansion.

Today's stock price does not accurately reflect the true value of Taseko mines. First of all, Taseko is not a startup. It already has producing properties, giving it earnings of $0.65 CDN per share, and a current P/E ratio of only 8 (at today closing price of $5.22). In short, even without the Prosperity Mine, Taseko has real value.

Of course, Taseko is not giving up on the expansion of its Prosperity Mine. No one seriously believes that Taseko will abandon 7.7 million ounces of gold and almost 4 billion ounces of copper.

According to the company's website, "Taseko is currently in discussions with both the Federal and Provincial Governments to define the issues and determine solutions so that this mining project can move forward and meet the criteria that the Federal Government deem appropriate. The company expects to have more information early in 2011."

Taseko mines is priced like a lightweight, is already a middleweight, and has heavyweight potential.

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“The desire of gold is not for gold. It is for the means of freedom and benefit.”

Ralph Waldo Emerson, poet.

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Disclosure

Do not buy stocks, or take this or any other financial advice without doing your own analysis; including, but not limited to: reviewing business models, financial statements, management style and philosophy, recent developments, market macroeconomic analysis, and chart analysis. If you do not know how to do these things, you shouldn't be buying stocks in the first place. Seek the advice of professionals, as appropriate.

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