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| April 27, 2011 Dear Friend,
Joe Reagor from our team will visit Domtar's
Windsor, Quebec 655,000 ton uncoated free sheet mill on Wednesday
May 11th, leaving from the Domtar downtown Montreal HQ at 9:30 am.
You are welcome to join us. I will excuse myself as my son Charles
graduates in Florida the afternoon of May 9th, and I promised to
help his drive his belongings back north that night on too tight of
a timetable to catch a flight to Montreal. The attached word
document summarizes our full May 11th agenda for the Domtar field
trip.
Separately, Everton Resources is hosting a May 11-13th tour of its landholdings adjoining the Barrick Gold-Goldcorp 30 mm oz Pueblo-Viejo gold deposit in the Dominican Republic. I own 30,000 Everton shares, hosted them at our March 30th "Core Shack", met them at PDAC and have a strong interest in the five or so juniors on the same trend. It is "too much" for me to try to attend their program during the same week, but we are happy to put you in touch with the company if you would like to attend. It represents a fine opportunity for a "trade check" on ABX and GG or simply a nice holiday. We downgraded Plum Creek, the 6.8 mm acre timber lands owner, to Underweight from Neutral. Falling wood products prices suggest that its 15 to 16 million ton volume guidance will fall short, and it lacks cash flow support should interest rates begin to rise. Its shares trade near 35 times untaxed earnings, and much of the earnings come from land sales. It has little cash flow support should interest rates rise. We updated our Copper M&A database of 56 transactions since 2004, and summarized our copper-industry demand-supply analyses in the same report. We estimate that a "controversy" exists, where some companies apply $2.50 and others $3.50 per lb copper long-term prices in their mine acquisition bidding. Barrick paid $0.79 per lb of copper resources using the same economic cutoff grades as Equinox, Equinox paid $1.16 per lb to take control of 70% of its Saudi Arabian project and Perilya paid $0.498 per lb for a gold-rich copper-gold project in the Dominican Republic. These three "outlier" transactions drive the escalation to a recent 35.6 cent average price /LB of resources. Excluding these three pricey deals, the ten recent transactions average 21.85 per LB up from 12.8 in 2004 to early 2010. In fact, four recent transactions remained under 20 cents with Duluth buying Franconia at 5.3 cents per LB and Tongling buying Corriente Resources at 9.3 cents per LB. It is possible that the Antofagasta-Duluth Metals joint venture buying at 5.3 cents per LB is the market leader, or that they will create more value than the terms Equinox or ABX have paid. Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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