* Bulls argue that market has overreacted to panel report
* Bears see limited upside with uncertainty around project
By Euan Rocha
TORONTO, July 6 (Reuters) - Shares of Taseko Mines (TKO.TO) have fallen 34 percent in the last week after an environmental review panel said the Canadian junior miner's flagship project hurt fish habitat and infringe on aboriginal rights. [ID:nSGE6610KO]
The federal fisheries and environment ministries have 60 days to review the panel document and decide on the fate of the Prosperity gold-copper project in British Columbia. [ID:nSGE6640HI]
Shares of Taseko closed at C$3.32 Monday on the Toronto Stock Exchange, with analysts split about the company's prospects and the future of the project.
Taseko is hosting a call on Tuesday, July 6 at 1100 ET to discuss the project's environmental assessment process]
The panel's conclusions can be found on Taseko's website at: here%2011.pdf. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Raymond James analyst Tom Meyer believes the stock market has overreacted to the panel as none of the negatives noted in the report are new or surprising.
"Many of these issues have been highlighted on and off for the last 17 years and both sides of these issues were discussed during the panel review," said Meyer, in a note to clients.
Meyer, who has an "outperform" rating and a C$7 price target on the stock, said the project has already got an environmental assessment certificate and long-term renewable mining lease from the provincial government.
"We believe the shares have overreacted on the downside," said Meyer, adding that the next step in the process will weigh both the environmental and other negative effects against the economic benefits of the project.
"We maintain our positive stance on the outcome and estimate that as of yesterday's closing price, the market is giving close to zero value for the Prosperity project," he said.
Credit Suisse analyst Alex Terentiew said Prosperity accounts for 43 percent of the company's net asset value and a vast majority of Taseko's growth potential.
Terentiew, in a note to clients, argues that shares of Taseko are still trading at a slight premium to those of its peers despite a significant drop in the company's share price over the last few days.
"Until an approval is granted to develop Prosperity, we think the upside to Taseko's valuation is limited," said Terentiew, who has an "underperform" rating on Taseko.
The panel report prompted TD Securities analyst Craig Miller to lower his 12-month price target on Taseko and remove the Prosperity project from his valuation of the company.
"We see a potentially messy decision process pitting provincial interests against federal interests, economic interests against environmental interests, and First Nations interests against those of the unemployed in the Williams Lake region," said Miller, in a note to clients.
"It is not going to be an easy decision. Given that a joint federal and provincial environmental review panel ruled against Northgate's Kemess North project in September 2007, which would have destroyed a lake, a positive outcome is far from certain," he said.
Miller, who cut his price target on Taseko to C$3.50 from C$7, also cut his rating on the company to "Hold," from "Buy."
Reporting by Euan Rocha; Editing by Frank McGurty