Taseko Mines Ltd.

Taseko Mines Ltd. (TSX: TKO) is a Canadian mining company which is principally engaged in the production and sale of metals, as well as related activities, including exploration and mine development, within the province of British Columbia, Canada, and the State of Arizona, the United States.

Key Updates:

• Growing usage of copper: As per the recent trend, the usage of copper is likely to remain elevated in the coming years, supported by the growing usage in electric vehicles, charging stations and supporting infrastructure because of the metal’s durability, high conductivity and efficiency. Notably, the increase in the electric vehicles market is expected to support the demand of copper, while the requirement for the metal due to electric vehicles expected to increase by 1.7 Mt by 2027. The above trend is likely to boost the company’s upcoming sales volumes.

       Source: Company Report

• Robust profitability margins: At the end of Q3FY21, the company posted its EBITDA margin and operating margin of 67.9% and 50%, respectively, as compared to the industry median of 41% and 27%, respectively. Moreover, the company reported its net margin of 17%, as compared to the industry median of 12.9%. The above indicates strong operational efficiencies supported by improved cost structure.

• Growth in performance metrics: At the end of 9MFY21, the company reported its cash flow from operations of CAD 137.538 million, which is significantly higher than CAD 85.771 million in pcp. The increase was supported a net income of CAD 24.710 million, as compared to a net loss of CAD 29.218 million in pcp. Moreover, adjusted EBITDA stood higher at CAD 147.745 million, as compared to CAD 87.751 million in pcp. The above indicates improved operating performance, and continuation of the above trend is a key positive.

Risk: Due to volatility in the international commodity prices, the company might witness a slide in the realization price, which subsequently dampen the overall performance of the company.

Q3FY21 Financial Highlights:

• TKO announced its quarterly result, wherein the company posted its revenue of CAD 132.563 million, as compared to CAD 87.780 million in pcp. The growth was driven by higher revenue from Copper contained in concentrate segment.
• Earnings from mining operations soared to CAD 66.670 million, from CAD 11.811 million in pcp. The growth was supported by elevated revenue coupled with lower Production costs.
• The period was marked by increase in General and administrative costs, and a higher net finance expense.
• The group reported a net income of CAD 22.485 million, as compared to the CAD 0.987 million in pcp.

Q3FY21 Income Statement Highlights (Source: Company Report) 

Valuation Methodology (Illustrative) Price to CF Based

Stock Recommendation:

The stock of TKO closed above its crucial support level of 100-days and 200-days simple moving averages (SMA), which indicates a bullish pattern. We have valued the stock using the Price to CF-based relative valuation approach and arrived at a target price offering double-digit upside potential (in % terms). We have considered peers like Imperial Metals Corp, Copper Mountain Mining Corp and Capstone Mining Corp. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock at the last traded price of CAD 2.60 on December 31, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Summary Analysis

One-Year Technical Price Chart (as on December 31, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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