(MENAFN- ProactiveInvestors)
(TSE:TKO) a Canadian copper producer had its "neutral" rating reiterated by analysts at Dundee Capital Markets who also lowered their price target to C$1.15 from C$1.30 previously citing lower than expected earnings in the fourth quarter of 2014 and a challenging year ahead.
The target price revision reflects Dundee’s lack of confidence in Taseko’s claim that it can achieve its targeted US$2.00/lb. cost of production in 2015 until the release of the company's new 20-year mine plan that will account for changes due to some failures last year.
On March 25 Taseko released its fourth quarter and 2014 year end results. The miner was especially affected by lower copper production due to lower grades from pit wall stability issues in the Granite Pit forcing the company to defer the planned mining of higher grade ore in the second half of 2014.
Dundee said copper production in the fourth quarter was heavily impacted by a 17 percent quarter-on-quarter decrease in copper head grade due to the alternate mine sequence that was implemented as a result of the pit wall.
"Taseko is working on a new 20 year mine plan that will account for the production changes resulting from the wall failure. 2015 is essentially a catch up year on stripping. Until we receive Taseko's new mine plan we are not confident in the $2.00/lb costs that Taseko is targeting" wrote analyst Joseph Gallucci in a note to investors on March 27.
In the fourth quarter Taseko reported a fourth quarter net loss of 10 cents per share wider than the 7 cent loss Dundee was expecting and double the loss of consensus estimates.
Overall the company saw a disappointing fourth quarter with production of 28.1 million pounds of copper versus Dundee's forecast of 33.3 million pounds.
Gallucci noted however that Taseko's management remains comfortable with its liquidity position ending the year with $70.2 million in working capital. The company is still in a cash conservation mode with no major capital commitments at its Gibralter mine in British Columbia.
Taseko also acquired the Florence Copper Project from () in November 2014 an advanced-stage in-situ copper recovery (ISR) project in central Arizona.
The ISR was intended to strengthen the company's near-term development pipeline with an advanced-stage project.
But Dundee said it doesn't believe there will be "any significant spending at the Florence ISR project either as Taseko does not have sufficient cash to fund Florence at this time."
Taseko has set its copper production guidance for 2015 at 130-140 million lbs. with grades in the range of 0.25% - 0.28% copper.
Dundee suggests that the targets may be too ambitious given that "2015 is essentially a catch up year".
Taseko’s shares were trading at C$0.85 per share up 1.19 percent in Toronto today.
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