We believe the six large diversified mines all trade at large discounts to net present value expressed in a DCF model.  They are highly complex, and we model them meticulously as they are exciting to us.

 

We want to use strict assumptions, and make sure our calcuations are sound.  In the attached Anglo American report rated Overweight with a $27 per ADR price target we cut our terminal growth rate to 2.6% from 3.0%, do not extrapolate terminal growth until post-2020 and raised our capital spending forecasts and attempted to estimate capital outlays beyond the company's multiyear guidance period.  Our use of an 8% WACC or discount rate seems non-controversial.

 

We used higher iron ore volumes in South Africa, lower new nickel mine operating costs in Brazil and higher met coal and iron ore prices.   Thus, we forecast higher earnings.

 

In effect, cap ex levels, discount rate chosen and terminal growth rates suggest a less than full price-earnings ratio consistent with least distributions to shareholders in the form of dividends or share buybacks.

 

MARCH 24-25 CONFERENCE UPDATE

 

We have 33 one-on-one requests thus far, but no more than two for any company.  Thus, we have plenty of availabililty.  Most of our distribution channels have not yet reported back to us.  We expect to be busier with feedback one week from now after both BMO in FL and Toronto PDAC are over.

 

We added Hecla Mining this week as a speaker, as they called and asked us if they could speak.  We added some and a few smaller "Core Shack" or "Exploration Cocktails" companies backed out.  We have about 60 investor attendees confirmed.  Our updated agenda has been attached.

 

Our room rate at the New York Helmsley is $205.00 per night before taxes, and we blocked out 15 rooms but can add as many more as are needed.

 

Faithfully,

 

John C. Tumazos