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May 6, 2011 Dear Friend,
Combined output of the Big Six
diversified mines fell 10.2% for nickel, 13.2% for copper, 18.3% for met
coal and 10.9% for iron ore from the December quarter. The outlook for these
commodities is much more bullish than we had understood in the near-term
given the output misses, where the severity of Summer slowdowns may be less
deep than thought. Further, Japan should be accelerating in the
fourth-quarter owing to normal auto output, catch-up manufacturing and
preparations for basic reconstruction. We believe the Big Six mines
collectively are most timely buys, except for lead and zinc exposures
limited to a small part of BHP Billiton, part of Xstrata and the #3 product
groups within Teck. Vale's May 5th and Xstrata's May 4th output reports
permitted a full mosaic of the output declines, especially for iron ore and
nickel.
We will raise our iron ore price and earnings estimates to reflect $145 up from $120 for 2011 and $135 up from $120 per tonne for 2012, while staying at $100 for 2013 and $80 for 2014, respectively, out of conservatism. Our NPV models offer bullish conclusions even using $80 long-term prices already, which suggests higher price targets and stronger buy recommendations. Repeating an earlier email Friday morning, we updated our "Top Picks" tab this morning of our www.veryindependentresearch.com web site to include Anglo American, Vale, Xstrata, Domtar and Duluth Metals as our current favorites and our "Bottom Picks" to include AngloGold Ashanti (African valuation discount), Nucor (firm scrap inputs, competing capacities and weak nonresidential construction), Plum Creek (35 times pretax cash flow) and Weyerhaeuser (continued weak housing and wood markets). We want to remind all of you that you have a user name and password to access the security protected portions of our web site. Each user name = your email address and each password = first initial, last initial and the suffix "1VIR" in order to create uniform alphanumeric, six character passwords across the system. If you ever have a problem remembering or using your user name or password, (1) use my own user name & password as a bridge to provide immediate access and (2) contact either Joe Reagor or after July 1st Matt Van Cleve on our team to straighten things out. Some times the access requires a bit of familiarization. Our web page has grown into a very large database over the past four years with about 800 research reports, links to a about 50 webcasts, Core Shack photos, and all sorts of data attached. Time has passed, and the programming language has become 8 years old, may not be ideal for such large amounts of data and new languages have been invented. It is possible that a new web site design over the next several months incorporates a different security protocol. John C. Tumazos, CFA |
Copyright © 2008 John Tumazos Very Independent Research,
LLC
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