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November 8, 2011 Dear Friend,
We cut our price target for
Overweight-rated Anglo American to $30 from $33 per ADS because the
earnings of an estimated 35% larger stake in DeBeers diamonds are
estimated to be less than the 49% of selected Chilean copper assets
to be sold to Codelco in Chile, reducing EPS esitmates by 7% from
2013. We ignored the possible takeover overtures from Glencore or
Xstrata, spinoffs of Anglo Platinum or Kumba iron ore or DeBeers or
share buybacks that could increase underlying values to larger
amounts.
We cut our price target by $0.50 per share and earnings estimates for Louisiana-Pacific as OSB oversupply continues. Charles Tumazos attended "Met Coal Summit 2011" in Pittsburgh, PA from October 31 to November 2nd. We learned about substitute processes to reduce use of coke, including Carbonyx being built by U.S. Steel, Carbonite to use biomass such as ancient charcoal blast furnaces, Nucor's DRI in LA or other processes. We learned about economizations of met coal use in blast furnaces, including increased use of natural gas, wood chips, pulverized coal, etc. We learned about declining qualities of met coal. The bottom line was that market pressures work against the long-term $250 per tonne met coal price we estimate. Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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