It's not like you you're going sneak up on an undiscovered bargain in a copper mining stock these days. 

Copper has been selling near record highs this year on an anticipated shortfall in supply in 2011 and on increased demand from commodity investors. On Tuesday, copper closed at $4.05 a pound. The close marked a retreat from a new all-time high but was still the highest price for the metal since July 2008. 

And copper stocks such as Freeport McMoRan Copper & Gold (FCX) and Southern Copper (SCCO) have responded by moving up to 52-week highs. 

They've pulled back a bit in the last day or two, but Freeport McMoRan still closed at $108.60 on Wednesday. That's below the 52-week high at $114.24 but not by a whole lot. Southern Copper closed at $45.73. That's just below the 52-week high at $47.48. 

The closest thing I can find to a copper bargain is Thompson Creek Metals (TC), which closed today at $13.20 and has a 52-week high of $15.20. 

Why is Thompson Creek a copper bargain? Because until Oct. 20, Thompson Creek wasn't even a potential copper miner. On that day the company, the sixth largest molybdenum producer in the world, closed its acquisition of Terrane Metals and its Mount Milligan project. 

Starting in 2013, when Mount Milligan goes into production, Thompson Creek will produce 81 million pounds of copper annually. Count in the 194,000 ounces of gold projected to be produced annually at Mount Milligan, and the cost of copper production at the mine is estimated by Thompson Creek at less than 50 cents a pound. 

That gives the company a lot of wiggle room if copper prices fall from the current $4.05-a-pound high. 

The Terrane Metals acquisition cost Thompson Metals CDN$700 million (or roughly the same amount in U.S. dollars since the two currencies currently trade at a rough parity). The company paid for the deal with $420 million in cash and the rest in shares. 

Developing Mount Milligan, which received its permits from the Canadian government on Nov. 2, will cost about $350 million in 2011. 

Thompson Creek turned around and sold 25% of future gold production from the site to Royal Gold (RGLD) for $312 million. That's about enough to cover 2011's estimated development costs. (The company finished the third quarter with $493 million in cash and debt of just $9.9 million. The stock's market capitalization is $2.2 billion.) 

After the deal, measured and indicated reserves at Thompson Creek Metals look like this:  1.6 billion pounds of molybdenum, 6.1 billion pounds of copper, 7.5 million ounces of gold, and 61.4 million ounces of silver. 

At current prices I think you're getting Thompson Creek's future copper production for just about nothing. Think of it this way: Thompson Creek Metal's shares traded with highs near $15 repeatedly in 2009 -- before the Terrane Metals deal. That's just about the $16 a share price that I put on Thompson Creek Metals -- for March 2011 -- again before considering the Terrane Metals acquisition. 

Granted that since copper production from Mount Milligan isn't due to start up until 2013, you don't want to pay a huge premium over the $15-$16 molybdenum-only price. (Remember the shares sold today at $13.55 when I wrote this.) 

But I think Thompson Creek will see $18 a share in 2011. As of Dec. 8, I'm setting that as my new target price for September 2011 for the stock in my Jubak's Picks portfolio.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did own shares of Freeport McMoRan Copper and Gold, Southern Copper, and Thompson Creek Metals as of the end of the September quarter. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 

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