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Taseko Mines (TKO, TGB) announced that the US Environmental Protection Agency (EPA) has issued the Final Underground Injection Control Permit (UIC) for the Florence Copper Project, located in Arizona. Now with the UIC permit in-hand, construction of the Florence Copper production facility can finally commence. Following a nearly five year endeavor at Florence, we view this final permit receipt as a monumental stepping stone which will allow for ISR mining to finally become reality (following an estimated 18-month build). Underpinned by our LT $4.35 per lb copper price and using a weighted valuation methodology incorporating a 1.10x NAV7%-8% target (75%) coupled with a 6.5x 2024 EV/EBITDA multiple (25%), we maintain our 12-month price objective of C$3.70 per share. This represents upside of +78% from the current intra-day TSX quote.
The granting of the final UIC Permit concludes a long permitting/testing path which began in 2018 with the construction of a small scale, $25.0M proof-of-concept ISR production test facility. After the first cathode was produced in April 2019, the Aquifer Protection Permit was issued in December 2019, followed by the Draft UIC permit issued by the EPA in August 2022. This was then followed up by the publication of an updated NI43-101 Technical Report in March 2023. Today, note that procurement of ~$80M in long lead time items has already started many months ago. More immediately, the mobilization of contractors for the wellfield and SX/EW plant construction will commence.
Over the last year, much has been accomplished on the financing front as well. Committed financings/partnerships were previously inked with both Mitsui ($50M construction financing + $50M option) and Bank of America ($25M lease financing). Recall that Taseko maintains ~$180M in available liquidity via cashflow from Gibraltar and has access to a $50M ATM facility and a $30M corporate revolver.
The Florence Copper Project represents one of the least capital intensive (~$232M) copper projects situated anywhere in the world. Given the ISR nature of the project, low water use, low energy consumption and a low carbon emission footprint make the project not only one of the more profitable projects currently in development but also one of the greenest.
Following an estimated 18-month construction period, we forecast a nearly 20 year LOM operation. Given ISR recovery, we forecast that the Florence copper project will average 74.0M lbs of copper per year at an AISC of $2.70/lb. We continue to view the project with a certain level of conservatism as we note that the 2023 Technical Report estimated a 22 year LOM with an annual production capacity of 85M lbs.
Underpinned by a LT $4.35 per lb copper price and using a weighted valuation methodology incorporating a 1.10x NAV7%-8% target (75%) coupled with a 6.5x 2024 EV/EBITDA multiple (25%), we maintain our 12-month price objective of C$3.70 per share. This represents upside of +78% from the most recent TSX intra-day quote.
Ultimately, the Taseko Mines story is one of consistent copper production from Gibraltar, meaningful, near term ISR production upside from Florence along with longer term (heavily discounted) optionality from the billion+ copper reserve projects such as Yellowhead and New Prosperity. All assets are located in the mining friendly jurisdictions of British Columbia or Arizona (Florence). Including the longer term portfolio pipeline which is currently being entirely discounted by the market, the Proven & Probable reserve base exceeds that of numerous much larger copper producing TSX listed peers.
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