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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Rare Earth Metals – China’s Trump Card?

Historical enemies Japan and China are at it again, this time about a disputed territory in the Diaoyu islands (known as the Senkaku islands in Japan).

On Sept 7th, two Japanese coast guard ships collided with a Chinese fishing vessel (or perhaps spy ship, since fishing vessels are used as spy ships by many nations). The Chinese captain (agent?) is now incarcerated in Japan, and Chinese officials are demanding his release.

There are many uninhabited "islands" in the oceans East of Japan, some of which are no more than lumps of rock a few inches above sea level, surrounded by concrete and tetrapods so they don’t wash away. The islands are important, of course, because whoever owns them can claim the surrounding mineral rights. At least, this is the presumption, despite a UN convention that “rocks that cannot sustain human or economic life of their own shall have no exclusive economic zone…”

What is interesting about this most recent incident is that China may be playing the “rare earth metals trump card" to end the conflict.

Rare earth metals are used in batteries, wind turbines, lasers, cell phones and other high-tech devices. In this latest diplomatic incident, China's customs clearance of rare earth metals into Japan has been “delayed.” China of course denies that they have implemented a trade ban.

Since China produces the vast majority of the world’s rare earth metals (more than 97% by some estimates), rare earth could become a handy negotiating tool for China in the future.

There is no doubt that rare earth metals - and therefore rare earth mining - will be an important area for investors to watch in the years to come.
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See also:

Govt Probing China's Rare Earth Trade Embargo

China will never waiver on issue of sovereignty: experts

Chinese people's willingness to travel to Japan drops amid diplomatic dispute

China denies tightening rare earth trade

Mabuchi worried about China fallout
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“Life is really simple, but we insist on making it complicated.”

Confucius
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