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May 6, 2010 Dear Friend,
BHP Billiton, Vale and
Teck are our favorite large cap stocks as large liquid
vehicles in the current global stock market buying
opportunity. We do not understand the significance of
alienated Greeks having to honestly report their national
accounts or losing the promise of full pensions at age 55,
mid-afternoon siestas or various days off for their favorite
Saints. We also doubt the Chinese will over-tighten to
sabotage their own economy. We discussed them in our
comparison of the six large diversified mines report
distributed yesterday and analyses of Australian and Chilean
tax rates distributed on Monday.
We are very impressed at
Goldcorp's potential to define 3 or more satellite mines to
its huge Penasquito 28 mm oz gold and 1.8 billion oz silver
resource in Zacatecas, MX. The Penasquito underground,
newly acquired Camino Rojo and the Noche Buena target each
appear to be additional mines, and Goldcorp also studies
several more potential satellites. We raised our estimates
of 2015 recoverable reserves by 9.5 mm oz to reflect these
updates, raising our price target to $55 from $43 per share.
We cut our investment
rating for Newmont Mining to Underweight from Neutral owing
to combinations of price appreciation, its lack of
production and reserve growth and the possibility that NEM
exploits its highest share prices since late-2003 and
late-2005 to acquire some promising new resources such as
Osisko, Detour Lake, Ventana Gold or Greystar Resources or
else a smaller established producer such as Kinross Gold,
Yamana, Goldcorp or Agnico-Eagle. We believe NEM will
"compare whether to eat out or cook," or whether to build at
Hope Bay, Conga or Aykem versus acquiring one of those other
companies. NEM may feel compelled to buy out one of the
companies positioned to surpass it in global gold industry
size rankings to preserve its position as a leading
producer.
The impacts of 2011 and
2012 two-year Chilean corporate income tax and mining
royalty surcharges upon Antofagasta PLC were not severe.
Fortunately, the company reported better output and lower
than expected operating costs this week, and the benefits of
strong performance more than offset the two years' earnings
hits due to income taxes and royalties.
Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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