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Three Junior Copper Miners on a Roll

Stocks in this article: RIO BHP FCX TGB HBM PLM AZC

3. Taseko Mines (TGB) has primary operations related to the exploration of copper mines. With Wall Street analysts bullish on the stock, the stock has an attractive return on equity of 35.1% and a trailing P/E ratio of 10.37, as compared to a return on equity of 7.5% and P/E of 38.8 recorded by its peer Hudbay Minerals (HBM).

For mining companies, a low payback and high leverage multiple are healthy. Taseko has a payback of 2, which is lower compared to its peers, such as Hudbay, with a payback of 3.2. Its leverage is 15.7 times, the highest among peers; Hudbay has a leverage of 6.8. In a scenario where metal prices are assumed at current levels, Taseko is estimated to gain 338%, and when prices move 30% down or up, the stock is likely to gain 171% or 506%, respectively.

The company has a strong advantage over its peers indicated by a significant $200 million cash in hand, an estimated 60% copper production increase from one of its mines over the next nine months and almost 11 billion pounds of copper resources. For the second quarter ended June 2010, Taseko recorded copper production of 20.1 million tons.

For the third quarter, the junior miner reported a 5.6 million-pound production increase from its Gibraltar mine, as compared to the earlier quarter, up 11.7 million pounds from the year-ago quarter.

Taseko's chief executive attributed improving production to the capital investment made in 2006. The outcome is a modern, low-cost, efficient copper mine capable of generating significant cash flows over the next 25 years.

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