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February 3, 2010 Dear Friend,
We were alarmed at
developments in the past months in Congo and West Papua, and
created a "country by country" DCF for FCX using an 8% discount
rate in the US and Chile, 9.5% in Peru, 12.5% in West Papua and
17.5% for Congo that equated to a 12.03% up from 9% aggregate
discount rate. We made other model changes, and cut our price
target to $135 from $192. We estimate peak earnings in the $20
range, but believe the market should discount the P/E.
Overweight rated Worthington
Industries acquired Gibraltar Steel Strip Processing on Monday,
and we like the accretive transaction on a cost and competitor
rationalization basis. Steel consumption has fallen, and four
Japanese trading companies and several existing U.S. companies
like Reliance Steel have emerged as stronger competitors. We
analyze the Steel Processing industry in some depth.
Attached is the agenda for
our March 24-25, 2010 Spring Metals Conference at the New York
Helmsley at 212 E. 42nd Street, New York. We plan to add a two
functions, "Exploration Cocktails" on the evening of the 24th
and a "Core Shack" around 2 pm on the 25th
for technical displays from smaller companies that will be
sponsored by WJB Capital. Knight Capital Group will host a
speakers dinner at the 21 Club on the evening of March 23rd at
6:30 pm at the with seating for 30 including seats for buy-side
clients. We will allocate one-on-one meetings preferentially
for our clients.
A Chinese government
investment bank, China Star Group USA, invited us to form a
joint venture with them to originate mining assets to sell to
Chinese investors. I have attached their proposed contract,
which we do not expect to pursue. It is flattering and possibly
a source of good contacts, but at age 54 I prefer to be loyal to
our core clients and avoid up to 20 hour flights to Asia to
pursue transactions. Life is too short.
Faithfully,
John C. Tumazos
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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