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Colombian environmental law delegates
certain administrative details, definitions and research studies to the
Alexander von Humboldt Biological Resource Research Institute. It chose to
define a February 9, 2010 law to protect selected alpine glacial zones,
known as "Paramo," to forbid any mining > 3,200 meters. Such a rule would
take away Greystar's two preferred heap leach pad sites and 25% of its waste
dump zone.
We expect Greystar to obtain reversals to
this ruling on several rationales. First, Greystar's ground already has
some large disturbances from 11 artisanal mines it has reclaimed and cleaned
up and from farming as high as 3,700 meters. Second, the region surrounding
Greystar's planned operations is dry, has little influence on watersheds and
is largely outside the intent of protecting a unique environment. Third,
Greystar has been a good corporate citizen, and its projects offer to
generate many billions of dollars of wealth in a very poor country with high
unemployment.
We believe that regulating mining based
on elevation is extremely severe, equivalent to shutting down most mines in
Chile and Peru as Andean mineral deposits generally occur at elevation.
Despite today's 44% selloff, we not only MAINTAIN our $17 price target, but
we contemplate RAISING it as we discounted four valuation metric to reach
it, gold prices exceed our $1,050 long-term normal gold prices and we
believe Greystar's 15.2 mm oz resource base, recovery rates and other
metrics will be revised upwards as it drills more of its 75,000 hectares and
based year ago studies on $650 gold gold prices.
The World Bureau of Metals Statistics
reported large declines in Chinese apparent metals consumption in copper and
nickel in March as it works down stockpiles built last year. February
global apparent demand gains were small, and we expect even worse
comparisons in March to September. The World Steel Assn. and International
Aluminum Institute reported March output gains outside China but 1% and 3%,
respectively, lower daily Chinese outputs from the February 2010 all-time
records. The Spot Markets report updates various commodities data.
Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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