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September 28, 2009 Dear Friend,
We will postpone our Boston,
RI and CT visits to Oct 12-14 from Oct 5-6 as three Boston
clients will be travelling and we are weary. We will be in
Brazil on Wednesday and Thursday on the Vale southern system
iron ore tour.
We raised our 2009 global
copper demand growth estimate to +1.1% from -4.9%, which raises
the chances of 2010 copper market shortages, and caused our
estimate of year-end 2013 global copper inventories to fall from
0.7 mmt to -1.9 mmt shortages. We also pushed back or cancelled
5 large projects in the 2013-20 time frame.
World steel output continued
to accelerate with another Chinese record in August and another
1 mmt rebound outside China. World aluminum output rose 2.3% in
August. Whle metals pricces fell last week, global rebounds,
global growth and capital spending halts that hurt future supply
all are bullish.
We wrote two separate
research reports on Rio Tinto -- financial modelling and field
trip notes. We used a 9.4% discount rate to value Rio Tinto as
opposed to 7% for BHP Billiton. Rio Tinto's debt, poor timings,
asset sales, capital spending halts and depletions suggest a
lower valuation or higher risk premium should be afforded.
We foresee absolute volume
declines in most of Rio Tinto's divisions, including iron ore on
three continents, copper on three continents and many other
minerals. These are on top of 52.5% more shares after warrant
issues and a lower dividend payout prior to considering more
shares outstanding. Aluminum is the only growth, and aluminum
oversupply seems inevitable for a couple years or so.
Faithfully,
John C. Tumazos
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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