.htm_cmp_global010_bnr.gif)
|
|
|
|
February 10, 2011 Dear Friend,
We valued
Xstrata's resources at $1 per tonne of thermal coal,
$2 per tonne of metallurgical coal and $0.12 per lb
for copper resources and found that the assets in
those two product lines justify the entire current
valuation of the company. And we believe those are
very cautious metrics, especially given the fine
quality of the Oaky Creek met coals and Antamina,
Collahuasi, Las Bambas and other copper properties
easily worth three times as much.
We raised our
earnings estimates for Xstrata to reflect higher
copper and coal prices, higher volumes and fine cost
controls, and raised our price target to $33 from
$28 per share. And our models use lower commodity
prices than current levels in virtually all cases.
We estimate Xstrata has the #2 copper resource base
in the world after BHP Billiton, and after 2016 will
rank near 2nd among the Top Five global copper
producers.
We cut our
investment rating for Louisiana-Pacific to Neutral
from Overweight because it met our $11.00 price
target and appreciated 43% since we recommended
purchase on November 12th. We are "very nimble" in
long positions in commodity steel or wood companies
as excess capacity in their segments is quite large.
This morning we
similarly cut our rating on Alcoa to Neutral from
Overweight because of price appreciation,
near-record inventories, evidence of declines in
apparent consumption in the 2011 first-quarter in
ridiculous conflict to the 12% global demand growth
of Alcoa and evidence of speculation generally in
commodities and particularly aluminum.
This morning we
raised our price target on Domtar to $140 from $93
due to more share buybacks, firm pricing and better
than expected earnings despite 6.2%, 10.5% and 7.9%
end market volume declines in 2008, 2009 and 2010,
respectively. We forecast 50% margin declines due
to secular end market declines, but would forecast a
> $250 price target if we believed current margins
were sustainable.
Faithfully,
John C. Tumazos,
CFA
|
Copyright © 2008 John Tumazos Very Independent Research,
LLC
|
