Taseko’s Q1 earnings fall short

 Taseko Mines (TKO-T, TGB-X) saw higher first-quarter profits compared to last year, but still fell below expectations.

Taseko reported earnings per share (EPS) of $5.7 million, or 3¢ per share, while adjusted earnings were $10.8 million, or 6¢ per share, falling short of the consensus of 10¢ per share.

Alex Terentiew, an analyst at Credit Suisse, wrote in a June 9 research note that he estimated an adjusted EPS of 8¢, noting the miss was partially due to fewer sales and higher operating costs at the company’s Gibraltar copper mine in British Columbia.

Gibraltar churned out 19.2 million lbs. copper, of which 17 million lbs. were sold in the first quarter, compared to 23.2 million lbs. produced and 20.5 million lbs. sold a year ago.

The company says the lower production resulted from harsh winter conditions and an unscheduled four-day maintenance shutdown and lower head grade.

Total cash cost amounted to $2.05 per lb. copper sold, up from $1.71 per lb. last year.

Taseko notes operating cash costs were also affected by a higher strip ratio, lower copper production, and a stronger loonie.

However, the company notes that the quarter saw molybdenum production of 316, 500 lbs., up by 63% compared to the same period of 2010, due to better molybdenum recovery.

During the quarter, the company unveiled its Gibraltar Development Plan 3 (GDP3) to increase copper production, by building a new concentrator. The expansion would cost $325 million, and would increase annual production capacity by 50% to 180 million lbs. copper. Taseko also plans to boost molybdenum production with a new molybdenum recovery facility.

Terentiew of Credit Suisse writes: “GDP3 provides the next leg of growth, but not until 2013,” but, added higher copper production and grades are expected for next year.  

As the company works on GDP3, it’s also pushing ahead at its other projects in the province.

On June 6, it submitted a new project description to the federal government to seek final approval for its New Prosperity gold-copper project.

The company says the revised proposal preserves Fish Lake, reduces the impact on the environment and addresses other concerns that were identified during the Federal review in February.  However, the revision adds $300 million in capital and operating expense to the original design.

Once the Canadian Environmental Assessment Agency confirms the new project description, the federal government would have 90 days to launch an environment assessment review.

But, relations with the local First Nations who opposed the draining of Fish Lake still appear strained as a local paper reported on June 9 that the Tsilhqot’in Nation said that they were not consulted during the redesigning of the project. Taseko disputed this by saying it contacted the Tsilhqot’in Nation after its original plan was rejected in November 2010, but was told the Tsilhqot’in Nation wasn’t interested in meeting.

The company is also planning a feasibility study on its Aley niobium project in the last quarter of 2011.

The company shares dipped 6% to $4.52 on the day.