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July 26, 2010 Dear Friend,
We visited eight
leading Yukon mining companies, of whom Capstone
Resources has produced for 3 years below its 3,200
tonnes per day design and Alexco strains to assemble a
408 tonne per day tiny mill. There appears to be very
little chance that new Yukon mines will swamp the 18 mmt
global copper, 12 mmt global zinc or almost 9 mmt global
lead markets. The history of the province involves
largely 3,250 mtpd small mines, and the typical 20,000
mtpd proposed mines may stretch logistics, power, labor
and other resources thin. About 23,000 of the
Territory's 34,000 population resides mostly in White
Horse, and 3 of the sites we visited were "fly-in" camps
without road links to the outside. We were most
impressed with Capstone Resources, and believe
Atac Resources and Victoria Gold have a chance
though their shares already anticipate some successes.
Base metals markets
behave as though the global boom never missed a step,
and Wall Street wet itself over nothing.
Buy nonferrous shares, and short bonds.
Nonferrous metals inventories decline virtually every
day near the end of July as though no Holidays occur.
June global aluminum smelter output set a record
unexpectedly, while producer and exchange inventories
fell by 6.7% of monthly consumption suggesting the
smelter output was too little. June Chinese steel
output was the fourth highest daily rate ever, and the
2.6% drop in the global steel operating rate from record
April world output seems "normal" seasonally. May
Chinese copper consumption rose from 2009 inventory
over-built levels per WBMS data as well, and nonferrous
metals demand improves gradually. Copper inventories
fall daily even though Escondida, the world's largest
mine, predicted a 5%-10% drop in output in the coming 12
months, and Chinese may be "trapped" into buying in a
later tight market if they do not resume normal
purchases. Life is good, but getting much better.
Faithfully,
John C. Tumazos,
CFA.
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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