“One Canadian Mine is Giving Away Gold … The best junior mining company in the history of junior mining companies.”

By Travis Johnson, Stock Gumshoe, August 25, 2010

So, did that headline catch your attention? That’s the heart of a new teaser ad out from Keith Fitz-Gerald, trying to get you to subscribe to the Money Map Report.

The ad is all about becoming a “Kevlar Investor” by investing in “near guaranteed” 300% gains and protecting yourself from “financial terrorism.”

And don’t worry, I faithfully reproduced all their quotation marks. After all “near guaranteed” can mean “not guaranteed at all” … right?

But the key to the tease, or at least the part that has eager readers banging on my door and demanding answers, is that you can “Get Free Gold!”

Really? Well, sort of (but no, not really) … let’s investigate, shall we?

The basic threat of the letter is that we’re up against still more challenges this year — commercial property defaults, more subprime trouble, bank failures, and the growing sovereign debt crisis that should crush the US (and other governments) and lead to devaluation and inflation.

Most of which you’ve probably heard before, in one form or another — and over the last couple weeks, the fears of a faltering market have been front page news, so it’s no shock that the markets could collapse again … most mainstream folks aren’t arguing that we’ll test those lows from back in March of last year, but some investors certainly think we’re headed way, way down from here.

So what to do in the face of this? Well, the Money Map folks have a plan for you — and in their “action guide” they say that they’ll tell you about …

“… the world’s best investment for profiting far beyond the reach of the financial terrorists…

“One Canadian Mine Is Giving Away Gold

“Right now, men are meeting in private quarters and plotting the biggest “financial coup” in history. Their endgame? They want to lay the foundation for a new global currency… to replace the dollar!

“This story takes us wide and far before returning to the “free gold” I promised (no catch, all legit). The coup is being led by China, but most of the world – everyone except the U.S. – is in on it. If you arm yourself with an insider’s understanding of this coup, you will experience something that is both tragic and wildly rewarding.

“Instead of holding yesterday’s money, you’ll be holding tomorrow’s money.”

There’s some more chatter about this “new global currency” that Fitz-Gerald calls “the commodit” (get it, “commodities”? Hard to decide whether that name is any worse or better than the ridiculous “amero” that so many folks got scammed and spooked by a couple years ago).

But basically, the idea is that copper might become the backing for a new global currency, since copper is far more useful and critical to the world (and because there’s a lot more of it to go around).

And whether or not this ever actually happens, the tease is that China is trying to strategically buy up copper reserves (and gold), and that you can “front run China’s hoarding of commodities” by buying this teased stock.

So finally, we get to some clues … ready?

“We found one junior mining company that is about to announce production breakthroughs in BOTH copper and gold.

“This very unique mining company first came onto our radar on May 5, 1993…

“An article in the New York Times mentioned in passing that this outfit could become one of North America’s lowest-cost producers of gold. We looked into it, and crunched the numbers, and found that they could produce an ounce of gold for only $147 (versus today’s industry average of $450 – giving them a huge edge).

“We didn’t know then that this gold mining outfit would mature into an $800 million producer of copper with operating profits of $48.3 million last year. And we didn’t know it would offer investors a uniquely satisfying way to front-run China in the commodities markets.

“So we watched… and waited… patiently.

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“Now, finally, we are ready to recommend what promises to be…

The best junior mining company in the history of junior mining companies.

Sounds pretty good, right? That’s enough for me to tell you who this company is, but let me share a few more of the clues that they spit out …

The company’s stock price is “roughly equal” to the book value of their copper.

3.6 billion pounds of copper and 7.7 million ounces of gold should be produced “in the next few years.”

Finally, we hear that “China’s people in Vancouver” have an eye on this miner … and we get a few more clues as follows in answer to those questions you’re probably asking yourself (to paraphrase, if it’s so good, why ain’t it expensive?”):

“First, the company is still a few weeks away from getting all the necessary approvals from the Canadian government. But our sources have confirmed that it is a done deal.

“Second, the company got hammered in the derivatives fiasco. Like everyone else, they had losses… and a lot of investors got spooked. As a result, the stock fell from a 2009 average of $6 all the way to 75 cents. For us, that flashed a big “pay attention” signal.

“A close look at the numbers gave us a lot to like.

“The stock has crawled back to $5 and today boasts a $926 million market value. As I said, that’s roughly equal to the value of the copper they expect to pull from the ground. It doesn’t include the gold… which could make a run at $2,000 in the next market-crashing inflation run-up!

“Add the copper and gold together, and this company could be worth $12.8 billion – about 13 times what it’s worth now!”

So who is it?

Taseko Mines (TGB in NY, or TKO in Toronto)

These guys did have a market cap of a bit over $900 million back in June, and a share price a bit over $5, though it’s tailed off since and the shares are now at about $4 again (market cap ~$750 million). And despite being probably the most aggressively covered miner by the Motley Fool folks (not their newsletters, just the free articles).

And yes, the mine they’re trying to get a permit/approval for is the same one that was reported in a tiny blurb in the New York Times — actually a Reuters blurb, so it probably appeared in a bunch of places, but it was in the Times. You can see the whole blurb here if you like, but yes, the basic news at the time was that …

“Taseko Mines Ltd. said studies at its Fish Lake deposit showed it contained 17.2 million ounces of gold and 6.2 billion pounds of copper. The cost to produce one ounce of gold from the area was estimated at a 40-year average of $147 an ounce. “

So that’s a big part of the reason that Taseko might be a bit cheaper than you expect, this key mine has been undergoing studies and environmental reviews for 17 years (they also have a producing copper mine called Gibraltar, quite near by in British Columbia, which has helped them post enough earnings to trade at a PE of about 6). To be fair, they haven’t been consistently working on the mine for this whole time, but that’s still a looong delay. The mine, just FYI, is now called “Prosperity”, perhaps since calling it the “Fish Lake Deposit” is too strong a reminder of the fact that the planned mine would destroy the aforementioned Fish Lake — far better to remind people that the project will bring in much-needed money.

And while they did release that info back in 1993, they didn’t actually complete the feasibility study until 2007 (work on Prosperity was on hold, it appears, for about four years in the early 2000s), and they updated the study in late 2009 with new numbers — the basic numbers are available on the website here. As far as gold goes, it looks like the “recoverable” part comes in near half of those initial reports from 1993 — the numbers from the report say there are indeed 3.6 billion pounds of recoverable copper and 7.7 million ounces of recoverable gold, though that seems to be over the expected 33-year life of the mine, which is, I suppose, technically “a few years” but could more accurately be described as “a few decades.”

Gibraltar is still, and will be for some time, the profit center for Taseko — they own 75% of that mine, and have been investing in it over the past couple years to upgrade the reserves and improve the equipment. They say on their website that “the goal is to create an operation with a mid-tier cost profile that is able to generate positive cash flow at all points of the copper price cycle.”

Costs have climbed lately, but they’re certainly still profitable — their latest earnings release is here, and their latest press release about the environmental review for the Prosperity mine is here. There’s one take on the stock from a blogger here who thinks you should buy, and Christopher Barker, the guy at the Fool who covers Taseko very frequently, also wrote about the shares following that latest panel recommendation (his latest update on the stock is here, by the way).

It sounds like the next significant catalyst for Taseko will be the approval (or non-approval) by the Canadian government — that’s what Fitz-Gerald says his source reports is a “sure thing”, and most of the other investing pundits I’ve seen commenting on Taseko also seem to believe that the feds will follow the provincial recommendation to allow the mine development to go forward, though I certainly don’t know anything about the predilections of the Government of Canada. The company itself says that they fully expect final approval in September and they may well be right … but of course, what else could they say? If Prosperity does get approval to move forward, it looks like they expect the construction and commissioning of the mine to take a little less than three years … and they say they have the financing largely in place.

Also fairly rare among small miners is that there are options available on these shares, so you can see that investors are clearly speculating on some near-term action, there’s quite a bit of open interest on the $5 call options for November, compared to other active contracts on the shares, though if everyone really does expect this approval to go through in September one would think that ought to be “baked in” if our markets are really as efficient as theorists would posit.

So … on the surface, this is certainly an interesting stock with one big copper mine operating and another one possibly starting up in a few years, with the rare distinction of being a relatively small mining stock that’s also profitable. And no, they’re not quite “giving away gold”, but you can argue, I suppose, that the copper value of their mines exceeds the market cap of the company and therefore you’re somehow “getting the gold for free” (just don’t look in your mailbox for the ingots to arrive anytime soon).

That pretty well exhausts my knowledge of Taseko Mines, so if you’ve got an opinion on the stock feel free to chime in with a comment below.



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August 25, 2010 12:51 pm

Thanks Travis – You never cease to amaze us in digging up the nitty gritty of these teasers. It is also nice to have your "ideas" knowing that you have done the research and are just sharing it with us – without the "fluff and stuff" of the normal newletters. Regards, HT

August 25, 2010 1:09 pm

I have had Taseko for some time and have been an eternal optimist about its success. However, there are a number of unknown answers to some serious questions. First, while the ore is there, First Nation aboriginal approval is not. Although there isn't a single cabin within 15 kilometers of the proposed mine site, First Nation has complained about the loss of a small lake and there is concern a mine might have an affect on the annual grizzly migration. So, the answer is absolutely unknown to the first question as to what First Nations might want to obtain their approval. And the answer to the second question is just as obtuse. Stephen Harper, the Prime Minister, has a minority government and in the past has not had the best of relations with First Nations. The answer to whether the Harper government will support First Nation concerns or not is also a great unknown. There is no gamble on the ore, since it is there. The gamble is on which way the Harper government will go on this native issue.

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August 25, 2010 1:10 pm