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September 6, 2011 Dear Friend,
We updated our spreadsheets on Century
Aluminum, where we assumed its first of four potlines at its Helguvik
smelter in Iceland would be delayed to the second-quarter of 2014 owing to
delays on the part of the electricity suppliers. We also increased our
production cost estimates owing to YTD 2011 actual performance. We
characterize the company as 615,000 tonnes of current "operating capacity"
and 530,000 tonnes at the 360,000 tonne Helguvik and 170,000 tonne idle
Ravenswood, WV idle smelter that are subject to market uncertainties. We
believe there is much potential for share price appreciation as Century
Aluminum clarifies the issues surrounding Helguvik and Ravenswood. While we
cut our price target by $2 to $22 from $24 owing to delays and cost
increases, we continue to rate it Overweight and view it as a superior
upside to Alcoa among smelers.
In our August 21, 2011 “Spot Markets” report we raised our gold price forecast for 2011 from $1,525 to $1,700, for 2012 from $1,500 to $2,300, for 2013 from $1,200 to $2,000, and for 2014 onwards from $1,200 to $1,500. We increased our earnings estimates for Goldcorp for 2011 through 2014 from $1.90, $1.65, $2.00, and $2.50 to $2.44, $4.57, $4.30, and $3.57, respectively. This was mainly due to our higher gold price forecast. Our Goldcorp price target increased to $54 from $45 owing to $6 per share increase in earnings estimates 2011-2013 and premium compression compared to other major gold companies as investors appear unconcerned with risks related to lower grade deposits of competitors, and pay a smaller "quality premium" for Goldcorp at higher prices and as Goldcorp delivers progress in fulfillment of prior expectations expressed as valuation premiums anticipating developments. Rating maintained at Neutral. John C. Tumazos, CFA |
Copyright © 2008 John Tumazos Very Independent Research,
LLC
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