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November 24, 2009 Dear Friend,
We raised earnings estimates
and updated financial models for Overweighted Teck for which we
estimate a $95 price target. We estimated capital outlays fall
in 2010 and 2011 as the Andocollo project has been completed and
Teck has authorized virtually no new projects. Instead, the
company is building cash to establish an investment grade bond
rating in mid-2010, repay bank debt in mid-2010 and achieve much
higher ratings upgrades in 2011 and 2012. It will engineer
Quebrada Blanca sulphides and the Relincho projects in 2010 and
2012, and expects to shell out the money for their possible
constructions in 2012.
We estimate Teck will build a
substantial cash hoard in 2012-17, creating enormous flexibility
to built the Fort Hills oil sands project without an oil major,
buy out partner UTS Energy, build a rail spur southwards to the
Burlington Northern to ship more coal from B.C., build a deep
underground mine at Carrapateena in Western Australia or pursue
other big projects. Clearly the company seeks to have a balance
sheet able to seize big opportunities like a major mining
company.
Last week the World Bureau of
Metals Statistics, the International Aluminum Institute, the
World Steel Association and the World Gold Council each reported
monthly or quarterly demand or supply data. In general, metals
demand is buoyant, and many markets now appear stronger than in
2008. We estimate apparent demands for copper, nickel and lead
rise in 2009 from 2008 full year global levels.
The WBMS and IAI made data
revisions to suggest much higher aluminum demand.
The World Gold Council
estimated producer hedging at 105 tonnes in the third-quarter
and net central bank purchases at 15 tonnes, which are
"inflections" benefiting the gold price.
Faithfully,
John C. Tumazos
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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