August 25, 2009

Dear Friend,

We visited six companies in the Pittsburgh area last week, including the Langeloth moly roaster of Thompson Creek Metals, Allegheny Technologies, the three Mon Valley Works sites of U.S. Steel, the SMS-Siemag AG steel mill machinery company, RTI International titanium and Horsehead zinc.  Four of the companies saw slowly improving business conditions, except for the SMS-Siemag machinery vendor and RTI International.

 

In general, the various statistical reports suggest both the Chinese and global economies continue to grow and recover gradually.  Last week the World Bureau of Metals Statistics published June estimates of nonferrous metals demand and supply, the World Steel Association reported July output down just 11%, the International Aluminum Institute reported just a 2% sequential gain in July output from June and down 9% from July 2007 and the World Gold Council reported that investor demand for ETFs essentially halted in the June quarter and later it turned negative in July.

 

On August 20th we visited the U.S. Steel Mon Valley Works, which was among the 3 of its 9 plants that continued operating through the recession.  Its survival is impressive despite operating some of the comany's oldest equipment.

 

We raised our price target on Underweight-rated Barrick Gold to $29 from $22 owing to much higher expected 2010 and 2011 outputs.

 

We have been invited to a many analyst trips in the next month.  We will attend probably six, but cannot attend them all.  I will attend the Denver Gold Show September 14-16, the Rio Tinto tour of Quebec aluminum smelters, Northwest Territories diamond operations and Utah copper, the September 30-October 1 Vale tour of southern iron ore operations in Brazil and a likely October Colombian gold tour.  My team will attend the Teck investor day in Toronto September 29th and a September 9-11th Nevada gold tour including Allied Nevada Gold, Fronteer Development, Midway Gold, Victoria Gold, Klondex Mines and Auex Gold.  We are not planning to attend the Coeur d'Alene Mines investor day in Toronto September 24th nor the Teck Fording Coal mines tour and coastal coal terminal tour.  We had attended the prior Fording Coal tour in June 2008.

 

Faithfully,

 

John C. Tumazos