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May 5, 2010 Dear Friend,
We updated our
comparisons of the six large diversified mines, which we
compare meticulously using discounted cash flow models. We
estimate that BHP Billiton, Vale, Xstrata (assuming no
Glencore merger) and Teck each have excellent potential to
double from current levels. Recent iron ore, met coal and
nonferrous metals spot prices are highly favorable.
We believe our research
is very unique in our structured comparisons of BHP, Vale,
Rio Tinto, Xstrata, Anglo American and Teck. In general,
those stocks are covered by regional country analysts in
Brazil or Latin America specialists, Canada for Teck or
Australian, London or Jo-burg based mining analysts for the
others. We are the only U.S. based major analyst covering
many of them, and we believe the only analyst rigorously
covering them as an industry. We attached yesterday's
report on Australian tax issues herein again for your
convenience as the issue applies to 4 of these 6 companies.
We raised earnings
estimates and our price target to $29 from $23 for
MeadWestvaco, which benefits from higher productivity as
units enjoy volume gains from depressed year ago levels,
lower corporate costs especially for employee terminations,
and higher eland sales. MWV bought back 1.1 mm common
shares in the first-quarter. It is less volatile than many
companies we follow, offering less dramatic price, volumes
ore earnings upsides than Vale, for example, but some
investors might be looking for a place to hide in turbulent
markets.
We corresponded with
Greystar Resources' senior executive in Colombia concerning
recent political issues, and included our dialogue in the
format of a research report for your benefit. In
particular, no precise definition of a "Paramo" exists.
There are uncertainties as to whether the definition of "Paramo"
should begin at 3,200 or 3,800 meters. While some Paramo
may be habitat for bear or exotic species, Greystar's
property hosts 11 former mines, onion and potato farmers, is
dry, rocky and much less preservation-worthy that typical
romantic literature about Colombian high altitude
wildernesses. We believe Greystar warrants an exception to
the February 9th regulations for an array of good reasons,
and we maintain our $17 price target that we believe we
calculated very conservatively.
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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