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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Canadian Debt Levels Hit Record

In a speech this week that was as straightforward as possible, Bank of Canada governor Mark Carney told the crowd at the Economic Club in Toronto that "low rates today do not necessarily mean low rates tomorrow. Risk reversals when they happen can be fierce; the greater the complacency, the more brutal the reckoning."

Mr. Carney was, of course, referring to Statistic's Canada's announcement that household debt ratios have hit a record high, and that people could get stung badly if rates increase. Statistics Canada's announcement was surely a frustrating development for Mr. Carney, who has been warning Canadians about their debts for over a year.

The debt-to-income ratio for Canadians is now higher than that of Americans - a fact which many Canadians likely refuse to believe, since their self-image is that of financial prudence compared with their Southern neighbors.

Dangerously, these record debt levels coincide with unusually high home prices and unusually low interest rates: a situation that could easily lead to the double-whammy of rising payments on falling equity values - a sure formula for financial disaster.

Meanwhile, deaf ears continue to buy new condos and pull out the plastic for Christmas shopping. It is likely that most indebted Canadians will never read this article, or, for that matter, give it a second thought even if they do.

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"It’s a matter of concern but it’s not a matter with respect to which we’re going to act immediately."

Jim Flaherty, Canadian Finance Minister, December 2010, when asked if Canadian personal debt levels are a concern.

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See also:

Canadian Debt Levels now Higher than Americans

Back to Business

This blog is a quick apology....Oct 31st is Financial Institution fiscal year-end, which made me extremely busy for weeks before and after. Then a couple more weeks for recuperation and now...The Frost Report is back.

Sorry for the delay!