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August 1, 2011 Dear Friend,
We raised our price target for BHP
Billiton to $144 from $113 per ADS rated Overweight, where we applaud the
Petrohawk and Fayetteville shale acquisitions at $0.43 per $0.38 per mm btus,
respectively, or about $2.40 per barrel of crude oil equivalents (BOE). The
acquisitions are very accretive to revenues, production and EPS. They reduce
risks in putting assets in Texas and surrounding states, and reduce capital
allocation risks with the deployment of about one year of excess cash flow
and bypassing potential construction capital cost overruns. Further, the
129% copper resource increase at 57.5%-owned Escondida and 32% increase at
33.75%-owned Antamina solidify BHP Billiton's #1 position worldwide as the
largest holder of copper reserves and resources.
HudBay Minerals, which we rate Neutral, has considerable "project execution" ahead. It is less clear about gold ore grades and recovery rates at its Lalor project, where an gold IPO does not appear practical until those issues get resolved after 2016 or maybe 2020. Capital outlays have risen at Lalor, and could rise again both at Lalor and Constancia in Peru. We lowered a number of our tonnage, grade and recovery assumptions for five potential development projects, and cut our price target to $16 from $19.50. However, our future earnings estimates after 2016 are higher, where we take a patient tact as we await HudBay "executing" and sidestepping potential hazards from cap ex, ore grades, recovery rates or Peru's taxes. We wanted to take note of several interesting industry or scientific conferences in the Fall. These were mentioned in the most recent issue of the Northern Miner, and caught my eye. The Oct 19-21 Vancouver conferences by Snowden on Grade control and reconciliation and Reserves/ Resources caught my eye.
Oil Sands Trade Show & Conference
September 13-14 2011, Fort McMurray
GRADE CONTROL AND PRACTICAL RECONCILIATION- Snowden October 19-20 2011, Vancouver REPORTING RESOURCES AND RESERVES- Snowden October 21 2011, Vancouver GEOLOGY FOR NON-GEOLOGISTS - Snowden November 2 2011, Vancouver MINING FOR NON-MINERS - Snowden November 3 2011, Vancouver SUCCESSFUL SAMPLING and QAQC OF ASSAY DATA - Snowden November 14-15 2011, Lima
Faithfully
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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