The year 2025 is here, and it is time for the traditional "Top 5 Mining Stocks to Watch" list. 2024 was a success, as the five companies generated some very nice returns. As of December 25, IAMGOLD (IAG) was more than 100% up, followed by First Quantum Minerals (OTCPK:FQVLF) (60%), and Calibre Mining (OTCQX:CXBMF) (43%). Equinox Gold (EQX) recorded only a small gain (3.68%), and Adriatic Metals (OTCPK:ADMLF) ended 9% down. It means a 40.3% gain on average, compared to a 26.5% gain of the SPDR S&P 500 ETF Trust (SPY), a 10.96% gain of the VanEck Gold Miners ETF (GDX), or a 4.28% loss of the SPDR S&P Metals and Mining ETF (XME).
Source: Own Processng
It will be hard to replicate the 2024 results in 2025. However, with some luck, the "TOP 5 Mining Stocks to Watch in 2025" have the potential to repeat and maybe even beat them. All the featured companies should encounter major catalysts in 2025. Although they are not risk-free, they offer significant upside potential. Just like every year, I know that there are definitely some other companies with high potential that could have been considered for inclusion into the Top 5. If you are missing such a company on the list, please feel free to mention it in the comments section.
This year, for the first time, there will be a separate article published for each of the five companies. Franco-Nevada (FNV) took the 5th place, Eldorado Gold (EGO) the 4th place, and Calibre Mining (OTCQX:CXBMF) the 3rd place. The 2nd place is occupied by Aris Mining (ARMN). And the number one for 2025 is Taseko Mines (NYSE:TGB).
The Current State of Taseko Mines
Taseko Mines owns one operating mine (Gibraltar), one mine under construction (Florence), one advanced-stage development project (Yellowhead), and two less advanced, but very attractive projects (New Prosperity, Aley). Although Gibraltar produces also some molybdenum, Aley is a niobium project, and New Prosperity has large gold resources, Taseko's primary focus remains copper. As shown in the chart below, Taseko's copper reserves are nearly 15 billion lb. If also gold is included, there are over 19 billion lb of copper equivalent. As can be seen, Taseko's reserves are notably bigger in comparison to the reserves of some of its closest peers. And Taseko's market value in relation to the size of the reserve is much smaller. Moreover, Taseko faces lower jurisdiction risks, as all of its assets are located in Canada and the USA.
Source: Taseko Mines
In 2023, the Gibraltar mine produced 123 million lb copper. Taseko's revenues amounted to $396.2 million, the operating cash flow to $114 million, and the net income to $62.4 million. Over the first three quarters of 2024, Taseko generated revenues of $324 million, operating cash flow of $117 million, and net income of $6 million. The Q4 financial results haven't been released yet, but the FY 2023 operating cash flow has been already surpassed, and the revenues will be almost surely beaten too. Unless the copper prices collapse, the 2025 results should be even better. Let alone the 2026 ones.
The 2025 Catalysts
The main 2025 catalyst is the Florence mine start-up. Florence is a long-life project located in a safe jurisdiction of Arizona. It should boost Taseko's production volumes significantly while reducing the overall production costs. At the current copper prices, this would mean a significant boost to its cash flows. The mine should be producing around 85 million lb copper per year, over an initial 22-year mine life. The C1 cash cost was projected only at $1.11/lb copper. The mine construction is more than 50% complete, and the first copper production is expected in Q4 2025.
At a base-case copper price of $3.75/lb, the after-tax NPV(8%) should be $930 million, and after-tax IRR 47%. At the current copper price of approximately $4.3/lb, the after-tax NPV(8%) should be around $1.2 billion based on the 2023 technical study. Although the 2.67% copper stream and 2.05% Gross Revenue Royalty sold as a part of the financing package reduce the NPV, it remains over $1 billion. It is much more than Taseko's current market capitalization of $600 million and slightly less than its enterprise value of approximately $1.15 billion. So it is possible to say that buying the shares at their current market price is like buying Florence, and getting all the other assets, including the Gibraltar mine, almost for free.
Another catalyst is the expected Gibraltar mine production growth. Gibraltar underwent major maintenance in July. Subsequently, in Q4, the mine operated 5% over its designed capacity on average. As a result, the 2025 production should amount to 120-130 million lb copper, compared to the 2024 production of 106 million lb.
At a copper price of $4/lb, and conservative total cash cost of $3/lb (which is higher than in Q2 or Q3 with negative impacts of the mine maintenance), Gibraltar should be able to generate operating cash flows of around $125 million. Florence, at a more conservative production rate of 75 million lb per year and a more conservative total cash cost of $1.5/lb, should be able to generate an operating cash flow of over $180 million. It means that Gibraltar and Florence should generate around $300 million per year in total. Maybe more. The price-to-operating cash-flow ratio for the industry stands at 9.11. Using a more conservative value of 7, Taseko's market capitalization should grow to $2.1 billion.
Some positive news should come also from the Yellowhead project. Not only is an updated technical study expected. According to the Q3 earnings call, Taseko should initiate the permitting process in 2025. Although Yellowhead is years from production, it is an important asset for the long-term future of the company, and any positive developments should serve as a catalyst. According to the 2020 study, the average production should be 180 million lb copper per year on average over an initial 25-year mine life. The C1 cash operating costs were estimated at $1.67/lb copper. The pre-production CAPEX was estimated at C$1.3 billion ($1.04 billion at the 0.8 CAD/USD exchange rate used in the technical study).
Positive news could come also from New Prosperity. Taseko's management originally expected to close a First Nations agreement, which would enable them to start moving the project forward, by the end of 2024. No news arrived, so it is possible to expect it to be closed in 2025. Given the extent of New Prosperity, this would be big news for the company. New Prosperity contains one of the biggest undeveloped gold-copper deposits in the world, with measured and indicated resources of 13.3 million toz gold and 5.3 billion lb copper, including reserves of 7.7 million toz gold and 3.6 billion lb copper. Over the first 5 years of operations, New Prosperity should be producing over 300,000 toz gold and 200 million lb copper per year (chart below).
Source: Taseko Mines
Unfortunately, the New Prosperity permitting process encountered major obstacles. In 2010, the project was rejected by the Federal government. The rejection was blamed on claims that the mine would destroy Fish Lake, it would harm the grizzly bear population and would violate the rights of the First Nations. Following the 2010 rejection, Taseko reworked the project and decided to expend additional CAPEX of $300 million to preserve Fish Lake. Despite this, the project was rejected again in 2014. Since then, New Prosperity has been in a standby mode. However, the current negotiations with the First Nations give some hope for the project to start moving forward again.
Some of the 2025 news could be related also to the Aley niobium project. It contains one of the biggest niobium deposits in the world, with measured and indicated resources of 739 million kg (1.63 billion lb) of niobium, including reserves of 293 million kg (646 million lb). A technical study prepared in 2014 envisioned a mine with an annual production rate of 9 million kg of niobium, at a production cost of $21/kg, over a 24-year mine life. The initial CAPEX was estimated at C$870 million ($777 million, at the September 2014 USD/CAD exchange rate of 1.12). Although the numbers are pretty dated, and therefore not reliable anymore, they can still illustrate the potential of the project.
Conclusion
Of course, there are also risks. The copper prices are strong, and the outlook is positive, given the expected growth in demand and resulting copper market deficits. However, if some economic trouble emerges and copper prices start to fall, Taseko's share price will suffer too.
There is also the risk of potential Florence start-up issues. This is a risk factor that may scare some potential investors. Many of them are familiar with Gunnison Copper (OTCQB:GCUMF) (former Excelsior Mining) that failed with the ISR (in-situ recovery) at the Gunnison mine and only recently released a PEA according to which it will build a completely new open pit mine. Florence will use the same extraction process. Therefore, many investors may be tempted to wait on the sidelines until they see that the mine operates smoothly. This could delay the expected share price growth. However, the good thing is that Taseko has been successfully operating a pilot plant for several years. The probability of the pilot plant being a success, and the full-scale mine being a failure, is not big.
Another potential problem is Taseko's debt, which stood at $549 million at the end of Q3. If the Florence mine start-up goes well and the copper price remains around $4/lb, the debt will be no problem. However, if some trouble emerges, especially coupled with a copper price decline, the situation may deteriorate quickly.
But there are always some risks. No investment is completely risk-free. And in this case, the potential downside seems to be significantly outweighed by the potential upside. Under some conservative assumptions, Taseko's market capitalization should grow to $2.1 billion. At the current share count of 300 million, the share price should reach the $7 level. It means a nearly 250% upside. A major portion of the growth should occur this year, assuming that the Florence start-up is smooth and on time. It is also important to note that the $7 target is based purely on Gibraltar and Florence, and doesn't take into account Taseko's other assets.