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June 27, 2011 Dear Friend,
Agrium, the #3 fertilizer company in
market value, has a limited number of "infield" seats available for the
Calgary Stampede on Thursday July 14th. Please let me know if you have any
interest either in fertilizers or the rodeo. During the same week on July
11-13 HudBay Minerals will run a tour to its Manitoba operations as well,
and we will take the HudBay charter east back to Toronto to return home on
July 13th.
The Stonegate Agricom prefeasibility study due at the end of 2011 and the final feasiblity study due at the end of 2012 should define capital expenditure needs, and over time Stonegate Agricom will learn whether or not it enjoy $60 mm in future cash inflows from warrant exercises. Future identification of a long-term customer will help to define transportation costs, and reinforce Stonegate Agricom's long-term margin opportunities. We believe its mineral property is promising, but await to see how much external financings it needs and whether it chooses to fund them with equity, debt or asset sales.
Last week commodity exchange aluminum,
copper, nickel, lead and zinc inventories each fell for the first time since
December 12th and by a collective total of about 94,000 tonnes. Zinc, for
example, broke a streak of 18 straight weekly exchange inventory rises, and
combined lead and zinc have reported only eight weekly rises since last
Thanksgiving. We believe that key consumers, perhaps some from China, have
begun drawing down inventories from exchanges to replenish their depleted
internal stockpiles. Recent metals price declines in sympathy to $90 crude
oil may also draw out some big buyers. We do not expect a bad summer
slowdown, as Japan's rebuilding from its March 11th disasters, Australian
rebuilding from Pilbara and Queensland severe flooding and U.S. rebuilding
from Midwest floods and Southern tornadoes should combine to benefit the
second half. U.S. wood prices have rebounded from mid-May lows, which could
be an early sign of the evolving repair cycle.
We believe metals stocks are depressed, and represent good value regardless of short-term trends. Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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