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January 3, 2011
Dear Friend,
We compared the ten larger
copper mine producers around the world, and
estimate in 2016 Xstrata surges to the #1 position with
various expansions
already engineered to 2.1 to 2.2 mmt. We expect Codelco
to be #2 near 2 mmt
by 2020 and for Minera Escondida, FCX and BHP Billiton
to range near 1.75
mmt of estimated 2020 mine outputs each. Acquisition,
exploration and
development activities or operating or permitting
failures can impact such
forecasts.
These ten large copper mines average 70 year resource
lives, estimated as
the sum of all reserves and resources divided by
estimated 2016 output. We
estimate these ten companies will increase 2009 mine
output by 42% by 2020
with Minera Escondida and Xstrata enjoying the largest
absolute gains. None
expect output declines. BHP Billiton at 99 years,
Xstrata at 95, Rio Tinto
at 78, Antofagasta at 77 years and FCX at 66 years have
the largest resource
bases.
. We expect January 3rd new capital allocations into
equities, commodities,
and resource stocks driving rallies higher. Our 2011
large cap favorites
are Teck, Xstrata, Anglo American, Antofagasta PLC,
Alcoa and Barrick Gold
and our smaller favorites are HudBay Minerals,
Worthington Ind., Greystar
Resources, Century Aluminum, MeadWestvaco and
Louisiana-Pacific.
. BHP Billiton, Xstrata, Rio Tinto, Anglo American,
McArthur Coal, Vale,
Wesfarmers Ltd. and Aquila Resources all have declared
force majeure on
thermal and coking coal exports from Queensland owing to
severe monsoon
rains. Two railroads suffered operating mishaps and
Gladstone Ports Corp.
warned it operates at half capacity. The April 1, 2008
rise from $93 to
$300+ per tonne for coking coal and subsequent mid-2008
rises to $890 per
ton for #1 busheling steel scrap in Chicago and $1,100
for hot-rolled sheets
started with lesser rainfalls preventing coking exports
from Australia.
. We estimate the April 1st met coal price quote will
rise from $225 per ton
in the first-quarter (up from $209 in December and
matching $225 in
September 2010 qtr.) to $275, depending on the rainfall,
output losses and
delivery delays. In 2008 Xstrata maintained most of its
output, while all
the major producers already now declared a faster and
fuller force majeure.
. We expect the met coal shortfalls to delay normal
seasonal April-May
declines in scrap steel prices, possibly forcing larger
$100 per ton upticks
in January 2011 along with the December 26th winter
storm, possibly causing
$100 per ton temporary scrap prices atop $50 to $75
November-Dec. rises.
ArcelorMittal's $700 per ton first-quarter price cap in
the U.S. and uneven
market strength. November 2010 global raw steel output
was 3.804 mmt per
day versus Spring 2008 peaks of 3.972 mmt, as growth in
Asia and emerging
markets has been less than EU and U.S. declines.
John C. Tumazos, CFA |
