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September 3, 2008 We took a very close look at our BHP Billiton model in view of potential delays or scuttling of its Rio Tinto bid. Our June 2009 earnings estimates reflect $86 crude oil, $1.25 aluminum, $3.25 copper, $200 per metric tonne metallurgical coal, no nickel profit and generally conservative assumptions. Crude oil is over $20 above our estimate, aluminum $0.06 below it, copper about $0.06 above it, Xstrata's contracted met coal prices $162 per tonne higher and nickel languishes. Xstrata's Oaky Creek mine largely met delivery commitments, while BHP Billiton had the biggest production misses to create the shortages, and Xstrata can command some premium on that basis. The weakening A$ to $0.834 and lower energy input costs, combined with some of the commodities yet above our forecasted levels, could permit BHP Billiton to exceed our $7.85 per US ADS earnings estimate by 5% or more. We took a close look at Neutral Weight-rated AngloGold Ashanti, and decided we had not missed all that much. We are sorry to read of the demise of a pair of commodities-oriented multibillion dollar funds in recent weeks. The current panic will pass, and reward the relatively unlevered investors able to weather it. Faithfully, John C. Tumazos |
Copyright © 2008 John Tumazos Very Independent Research,
LLC
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