Taseko to add capacity at Gibraltar copper mine

Taseko Mines (TKO-T, TGB-X) wants to take advantage of robust copper prices and expand capacity at its 75%-owned Gibraltar copper mine in the Cariboo region of British Columbia, near Williams Lake.  

The board has given its approval to start building a new concentrator in early spring, and expects it will be commissioned in the fourth quarter of 2012.

The development plan involves building a 30,000-ton-per-day concentrator to complement the existing 55,000-ton-per-day facility that is operating now. 

The additional capacity will increase Gibraltar’s annual copper production by roughly 60 million lbs. to 180 million lbs., at a life-of-mine average grade. 

Part of the plan is a new molybdenum recovery facility that will increase molybdenum metal production by more than one million lbs. per year. 

Capital costs are expected to be $235 million for the concentrator and molybdenum plant, and about $90 million for mining equipment, on a 100% basis.  

Taseko says that, based on the assumption that strong metal prices will continue, the expansion project will have an internal rate of return of about 30% and a payback period of three years. 

Taseko’s president and chief executive Russell Hallbauer noted in a press release that the project’s capital cost intensity of $7,800 per ton of daily mill capacity and $10,800 per ton including mine equipment “is one of the lowest of any project being developed globally.” 

“A key component of this undertaking is our ability to execute quickly and take advantage of the robust copper price environment,” he said.

He added that Taseko will soon start a 10-hole drill program to complement the increased throughput of the new concentrator. The program will help convert part of the mine’s 500 million ton resource into reserves. Reserves currently stand at 445 million tons.

The expansion plan requires approval from Taseko’s 25% joint-venture partner, Cariboo Copper Corp., a consortium consisting of Japan’s Sojitz Corp., Furukawa Co. and Dowa Metals & Mining.

The Gibralter mine site is comprised of about 100 sq. km with 251 mineral claims and 30 mining leases. The property contains seven separate mineralized zones with resources which have supported mining for 30 years.

On Feb. 17 in Toronto, Taseko closed at $6.03 per share. It has traded in a 52-week range of $3.27 (July 5, 2010) and $7.27 (Oct. 14).  

In New York, Taseko closed at US$6.13 apiece on Feb. 17. 

Adam Graf, an analyst at Dahlman Rose & Co. in New York, has a “buy” rating on the stock and a 12-month target of US$14.28 per share.