Event: Taseko’s key growth asset, the Prosperity Gold-Copper Project in British Columbia, is nearing final approval. BMO Research views the project as significantly de-risked from 12 months ago, with Provincial approval given; Federal approval pending; and financing progressing well.
Impact: Positive. Approval by the Federal Government allows Taseko to proceed with development of the Prosperity Project. Concurrent with the Federal Review, Taseko is pursuing financing for the project, with the intention to have 75% of capital costs (~C$600M) committed by the time a decision is given in Q3/10. Forecasts: The development adds significant production growth. BMO Research forecasts attributable copper production of 32,400t in 2010 increasing to >92,600t of copper by 2015. Prosperity adds ~C$300M in EBITDA from 2015, more than double the contribution from Gibraltar.
Valuation: BMO Research values Taseko at C$6.15/share. Prosperity is valued at C$2.29/share (or C$450M), rising to C$8.35/share by 2013 as the project is delivered and further de-risked.
Recommendation: Taseko is rated Outperform with a target price of C$7.00, representing 1.1x NPV. Development of Prosperity adds significant production growth rarely found in smaller cap copper stocks. At ~100kt of copper production by 2015 ranks Taseko with mid-cap peers Oz Minerals and Inmet.