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June 8, 2010 Dear Friend
We are hosting a lunch from 12:00-1:30 pm
on Tuesday, June 29th for Deni Nicoski, the Vice President of Investor
Relations for Barrick Gold, at "Pete's Room" on the third floor of the 21
Club at 21 West 52nd Street in New York. Please let me know if you would
like to join us. We have room for 8 to 10 people. We expect Deni to
highlight the large projects near completion such as Pueblo Viejo or Pascua,
and the finalization of Cerro Casale, Reko Diq, Donlin Creek, Kabanga or
other
developments.
We characterize our Vale report as
conservative or "incomplete" in some ways. First, we and other investors
will get a "glimpse" of the full productivity of Vale's past three years'
investments in iron ore mines, rail, port and ocean shipping expansions. We
estimate output at 315.5 mmt in 2010 and 334 mmt in 2011, but we suspect
Vale will "make hay when the sun shines." Second, we estimate a 2.5% pretax
return from prior year-end20 cash balances, which we estimate will increase
to $112 billion by year-end 2016 and grow by $100 billion in 2011-2016. The
deployment of that cash will impact shareholder returns and could be many
times more profitable than we model. While we raised our iron ore price
hike for the 2010 second half and 2011 to $125 per tonne, we remain at $100
for 2012 and 2013 and cut 2014 onwards to $80 from $100. Thus, our $64
price target raised from $55 has upsides.
Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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