Whether it's BHP Billiton (BHP), Glencore (OTCPK:GLNCY), or Anglo American (OTCPK:AAUKY), the basic story of weak commodity prices is dominating the investing environment. It's even worse for Teck Resources (TCK)
as this Canadian mining company is very heavily weighted toward
metallurgical coal and prices continue to scrape along the bottom. Teck
Resources has the benefit of unusually low production costs for its
major products (coal, copper, and zinc), but this low price environment
is pushing the company to cut costs and curtail expansion projects and
leading investors to worry about the dividend. I do like this stock as a
way to leverage better base metals and an eventual recovery in met
coal, but there is room to quibble about the fair value today.
Please read the full article here:
Teck Resources Hunkering Down
Showing posts with label Teck Resources. Show all posts
Showing posts with label Teck Resources. Show all posts
Saturday, June 28, 2014
Tuesday, April 22, 2014
Seeking Alpha: High Costs Leave Copper Mountain Mining Leveraged To Higher Prices
Costs matter in mining, but not always in the way that investors think.
All things considered, it is better to have the lowest possible cost of
production, but companies like Copper Mountain Mining (OTCPK:CPPMF,
(CUM.TO)) with elevated costs can offer more upside when commodity
prices rise. This company has done many things right, including getting
its southern British Columbia mine up and running both on time and on
budget, but production challenges and high costs loom as ongoing
challenges. These shares aren't tremendously interesting at prevailing
prices, but if copper goes on a tear, these shares should outperform the
peer group.
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High Costs Leave Copper Mountain Mining Leveraged To Higher Prices
Click this link for more:
High Costs Leave Copper Mountain Mining Leveraged To Higher Prices
Wednesday, November 27, 2013
The Motley Fool: Cutting Costs Won't Solve All of Alpha Natural Resources' Problems
In what has remained a stubbornly miserable market for coal stocks, Alpha Natural Resources (NYSE: ANR ) stands out, perhaps, as one of the less-bad names this year. While coal companies like Arch Coal, Peabody, Cloud Peak, Walter Energy, and James River have
seen double-digit stock price declines in the past year (with the last
two down nearly 50%), Alpha Natural has somehow squeaked out a tiny gain
as of this writing.
To be sure, Alpha Natural's management deserves praise for the cost cuts that they have already achieved and the benefit of the doubt with respect to additional targeted cost cuts for 2014. The problem, though, is that I don't see how any coal company, and particularly a met-coal company like Alpha Natural, can cost-cut its way back to prosperity.
Unless European and Brazilian steel mills get moving again with respect to product and seaborne thermal-coal prices improve, it seems likely to me that the cost cuts will simply keep Alpha Natural in the game. For the stock to work, you must believe that better coal prices are coming soon, or at least that the Street will believe that, and production guidance doesn't seem to be pointing in that direction.
Read the full article at The Motley Fool:
To be sure, Alpha Natural's management deserves praise for the cost cuts that they have already achieved and the benefit of the doubt with respect to additional targeted cost cuts for 2014. The problem, though, is that I don't see how any coal company, and particularly a met-coal company like Alpha Natural, can cost-cut its way back to prosperity.
Unless European and Brazilian steel mills get moving again with respect to product and seaborne thermal-coal prices improve, it seems likely to me that the cost cuts will simply keep Alpha Natural in the game. For the stock to work, you must believe that better coal prices are coming soon, or at least that the Street will believe that, and production guidance doesn't seem to be pointing in that direction.
Read the full article at The Motley Fool:
Cutting Costs Won't Solve All of Alpha Natural Resources' Problems
Monday, October 21, 2013
Seeking Alpha: Nyrstar Far From Health
It's not hard to find a base metal mining or smelting company whose
stock is down over the last twelve months. In fact, the bigger challenge
is finding a winner. So it's not necessarily an unforgivable black mark
against Nyrstar (OTC:NYRSY) (NYR.BR) that the shares have been so weak (down 30%) over the past year.
The bigger problem here is that the company has made a series of poor capital allocation decisions and may well find it next to impossible to cut costs to a point where the returns from the business are attractive again. But there's another side to the story, one that may appeal to more trading-inclined investors. This is one of those rare stories where almost every sell-side analyst covering the stock is negative on it (either rating it a Sell/Underperform or a weak hold), and if zinc prices stage a recovery (and/or the company irons out its operational issues), these shares could bounce.
Please continue here:
Nyrstar Far From Health
The bigger problem here is that the company has made a series of poor capital allocation decisions and may well find it next to impossible to cut costs to a point where the returns from the business are attractive again. But there's another side to the story, one that may appeal to more trading-inclined investors. This is one of those rare stories where almost every sell-side analyst covering the stock is negative on it (either rating it a Sell/Underperform or a weak hold), and if zinc prices stage a recovery (and/or the company irons out its operational issues), these shares could bounce.
Please continue here:
Nyrstar Far From Health
Tuesday, June 25, 2013
Investopedia: Teck Profitable, Liquid, And Maybe Too Cheap
These are ugly days in the natural resources sector as the bottomless
pit that was China's appetite for mined commodities apparently had a
bottom after all. Most of the well-known miners have racked up
double-digit losses over the past year, and companies with outsized
exposure to iron ore (like Vale (Nasdaq:VALE) metallurgical coal like Teck Resources (NYSE:TCK) have suffered even worse.
It may not be the worst time to think about Tech Resources, though. The combination of mines that are still profitable at spot prices, extensive production expansion potential, good liquidity, and global prices that are having miners contemplating production curtailment could make this an appealing time to consider this beaten-down miner, but investors need to prepared for conditions to get uglier before they turn around.
Please read the full article here:
http://www.investopedia.com/stock-analysis/062513/teck-profitable-liquid-and-maybe-too-cheap-tck-fcx-bhp.aspx
It may not be the worst time to think about Tech Resources, though. The combination of mines that are still profitable at spot prices, extensive production expansion potential, good liquidity, and global prices that are having miners contemplating production curtailment could make this an appealing time to consider this beaten-down miner, but investors need to prepared for conditions to get uglier before they turn around.
Please read the full article here:
http://www.investopedia.com/stock-analysis/062513/teck-profitable-liquid-and-maybe-too-cheap-tck-fcx-bhp.aspx
Thursday, May 24, 2012
Investopedia: Near Tangible Book, Teck Is Worth A Look
Commodity companies can do nothing to change the sometimes-devastating
cyclicality of their markets, but that same cyclicality gives investors
multiple chances to play the same stocks. Right now there's a great deal
of worry about global growth, and particularly growth in markets like
China, Brazil and Europe. Although no investor should fool themselves
about the risks involved, the fact that Teck Resources (NYSE:TCK) trades near tangible book value ought to be of interest to investors looking for potentially over-punished commodity stocks.
Read more here:
http://stocks.investopedia.
Read more here:
http://stocks.investopedia.
Wednesday, May 2, 2012
Seeking Alpha: Arch Coal Has To Bottom Out Eventually
The most dangerous words in commodity investing are "it can't get any
worse". Nevertheless, it's hard to investigate the current conditions
and valuation at Arch Coal (ACI)
and come away thinking that there isn't some long-term potential here
in the shares. Potential is a dangerous word, though, and nobody should
consider these shares today who can't stomach the thought of another leg
down before stabilization.
Click here for more:
Arch Coal Has To Bottom Out Eventually
Click here for more:
Arch Coal Has To Bottom Out Eventually
Wednesday, July 13, 2011
Investopedia: Peabody Tries Again To Get Macarthur Coal
Give credit where credit is due - Peabody Energy (NYSE:BTU) does not give up easily when management sees a valuable asset that could improve its business. In this case, the company is trying again to acquire Australian metallurgical coal miner Macarthur Coal (OTCBB:MACDY). While the price that Peabody is offering is a little high, it is not too out of line with recent deals, and the operating leverage that Peabody has should allow the company to make a decent return even at these levels.
A New Bid for an Old Target
Peabody has been interested in Macarthur Coal and its 175 million tons of attributable coal reserves for some time now. About a year ago, Peabody bid A$15 a share for the company, but ultimately found rejection from the target's board (and its large shareholders).
Now Peabody is trying again, but this time it's bringing a buddy. ArcelorMittal (NYSE:MT) already owns about 16% of Macarthur and was previously not in favor of selling out to Peabody. Now Peabody wants the company to be a partner, and the companies have launched a joint 60/40 bid for the company with Peabody as the projected controlling partner.
The link below leads to the full piece:
http://stocks.investopedia.
A New Bid for an Old Target
Peabody has been interested in Macarthur Coal and its 175 million tons of attributable coal reserves for some time now. About a year ago, Peabody bid A$15 a share for the company, but ultimately found rejection from the target's board (and its large shareholders).
Now Peabody is trying again, but this time it's bringing a buddy. ArcelorMittal (NYSE:MT) already owns about 16% of Macarthur and was previously not in favor of selling out to Peabody. Now Peabody wants the company to be a partner, and the companies have launched a joint 60/40 bid for the company with Peabody as the projected controlling partner.
The link below leads to the full piece:
http://stocks.investopedia.
Thursday, February 10, 2011
Investopedia: ArcelorMittal And The Steel Catch-Up Trade
The financial news often seems to talk about commodities as though they all trade together. The reality, though, is altogether different. While it is true that producers of copper, aluminum, and steel all depend to some extent on a healthy global economy, there can be a great deal of inconsistency between the individual commodities. So while iron giant Vale (Nasdaq: VALE) and aluminum king Alcoa (NYSE:AA) have done well over the past year, Freeport McMoRan (NYSE:FCX) has far surpassed them while ArcelorMittal (NYSE:MT) has been quite the laggard.
Maybe that begins to change in 2011, and maybe investors should freshen up their due diligence on the largest player in the steel business.
A Solid End to a Tough Year
Although 2010 was hardly a disaster for ArcelorMittal or the steel industry as a whole, the memory of the boom years of 2007 and 2008 are still fresh in many people's minds. With certain commodities like copper hitting all-time highs recently, patience has been a little harder to come by in a steel sector still suffering from a sluggish economic recovery in North America and Western Europe. (For more, see Steel Cycle Looks Good.)
Still, ArcelorMittal ended the year on a solid note. Revenue rose 19% from the year-ago level (and 5% sequentially) and topped $20 billion. EBITDA was down 14% from the third quarter, but still higher than the consensus expectation and this quarter's number was arguably cleaner (that is, there were fewer non-operating items influencing the number).
To continue, please click:
http://stocks.investopedia.
Maybe that begins to change in 2011, and maybe investors should freshen up their due diligence on the largest player in the steel business.
A Solid End to a Tough Year
Although 2010 was hardly a disaster for ArcelorMittal or the steel industry as a whole, the memory of the boom years of 2007 and 2008 are still fresh in many people's minds. With certain commodities like copper hitting all-time highs recently, patience has been a little harder to come by in a steel sector still suffering from a sluggish economic recovery in North America and Western Europe. (For more, see Steel Cycle Looks Good.)
Still, ArcelorMittal ended the year on a solid note. Revenue rose 19% from the year-ago level (and 5% sequentially) and topped $20 billion. EBITDA was down 14% from the third quarter, but still higher than the consensus expectation and this quarter's number was arguably cleaner (that is, there were fewer non-operating items influencing the number).
To continue, please click:
http://stocks.investopedia.
Tuesday, February 1, 2011
Alpha Looks To Be The Big Dog In U.S. Met Coal
This weekend's announcement from Alpha Natural Resources (NYSE:ANR) that it reached an agreement to acquire Massey Energy (NYSE:MEE) not only ends months of speculation about Massey's future, but it also represents yet another tremor through the metallurgical coal world. With steel prices already on the rise, met coal trading at about twice the price of steam coal and relatively modest near-term supply coming online, it seems a safe bet that met coal pricing is going to be a popular topic this year.
Alpha's Deal
Alpha agreed to pay over $7 billion in cash and stock to acquire Massey. The deal is being structured as a mix of equity and cash, with Massey shareholders getting 1.025 shares of Alpha (and thereby owning about 46% of the combined company) and $10 in cash. That is not only a 21% premium to where Massey closed on Friday (and the stock has been strong since the summer of 2010), but a rather high multiple relative to normal historical coal stock metrics. (For more, see Coal Burns Bright Despite Pressures.)
Alpha may have felt that it needed to make an impressive bid for Massey in order to fend off potential rivals. Though unattributed rumors are hardly proof, it does not seem unreasonable that companies like Arch Coal (NYSE:ACI) or ArcelorMittal (NYSE:MT) may have been interested in Massey as well.
What Alpha Will Be
With this deal, Alpha acquires 2.9 billion tons in coal reserves, with 1.3 billion of those being the more valuable metallurgical coal. All told, the combined company will have more than 5 billion tons in coal reserves and will become a real player in the global met coal market. Though BHP Billiton (NYSE:BHP), Mitsubishi and Teck Resources (NYSE:TCK) will still have roughly 40% of the world met coal market, the new Alpha will crack into the double-digits in terms of share of the global seabourne market.
Please click below for the full piece:
http://stocks.investopedia.
Alpha's Deal
Alpha agreed to pay over $7 billion in cash and stock to acquire Massey. The deal is being structured as a mix of equity and cash, with Massey shareholders getting 1.025 shares of Alpha (and thereby owning about 46% of the combined company) and $10 in cash. That is not only a 21% premium to where Massey closed on Friday (and the stock has been strong since the summer of 2010), but a rather high multiple relative to normal historical coal stock metrics. (For more, see Coal Burns Bright Despite Pressures.)
Alpha may have felt that it needed to make an impressive bid for Massey in order to fend off potential rivals. Though unattributed rumors are hardly proof, it does not seem unreasonable that companies like Arch Coal (NYSE:ACI) or ArcelorMittal (NYSE:MT) may have been interested in Massey as well.
What Alpha Will Be
With this deal, Alpha acquires 2.9 billion tons in coal reserves, with 1.3 billion of those being the more valuable metallurgical coal. All told, the combined company will have more than 5 billion tons in coal reserves and will become a real player in the global met coal market. Though BHP Billiton (NYSE:BHP), Mitsubishi and Teck Resources (NYSE:TCK) will still have roughly 40% of the world met coal market, the new Alpha will crack into the double-digits in terms of share of the global seabourne market.
Please click below for the full piece:
http://stocks.investopedia.
Friday, January 21, 2011
Investopedia: Freeport Looking Shiny
Investors can easily lose themselves in the details of calculating PV-10, forecasting future inventory imbalances and interpreting drill hole data. But here is an alternative way to look at the mining sector - developing countries like China, Brazil and India need a lot of metal to develop their infrastructure and support their economies, and certain companies like Freeport McMoRan (NYSE:FCX) have both ample resources and attractive production profiles. While there is really no good way to completely tamp down the volatility that goes with commodity speculation, buying good companies at good prices seems like an approach worth exploring.
Digging into the Fourth Quarter
Freeport McMoRan delivered another strong quarterly result. Revenue rose more than 21% from the year-ago level, fueled by higher price realizations for copper, gold and molybdenum. Freeport actually sold less copper (down 4% in pounds), but got nearly 31% more per pound for what it did sell. The same was true of molybdenum, while the company both sold more gold and got a higher price per ounce in the fourth quarter.
Freeport also managed to produce its ore more effectively in the fourth quarter. Overall consolidated costs came out to $0.53 per pound in the fourth quarter - down from $0.62 a year ago and lower than the company's full-year average of $0.79 per pound. (For more, see Copper Developments Continued To Heat Up In 2010.)
The link below will take you to the full article:
http://stocks.investopedia.
Digging into the Fourth Quarter
Freeport McMoRan delivered another strong quarterly result. Revenue rose more than 21% from the year-ago level, fueled by higher price realizations for copper, gold and molybdenum. Freeport actually sold less copper (down 4% in pounds), but got nearly 31% more per pound for what it did sell. The same was true of molybdenum, while the company both sold more gold and got a higher price per ounce in the fourth quarter.
Freeport also managed to produce its ore more effectively in the fourth quarter. Overall consolidated costs came out to $0.53 per pound in the fourth quarter - down from $0.62 a year ago and lower than the company's full-year average of $0.79 per pound. (For more, see Copper Developments Continued To Heat Up In 2010.)
The link below will take you to the full article:
http://stocks.investopedia.
Friday, January 7, 2011
Investopedia: Will Aussie Flooding Rain On China's Parade?
Australia's summer has brought more than its usual wet season to parts of the country. This year the large northeastern state of Queensland has seen devastating flooding; the sort of flooding that leads to world news clips of people paddling boats through streets and animals seeking refuge wherever they can from the waters. Though the human toll of the disaster is likely to be severe for Australians, there are economic impacts that will stretch beyond the country and be felt throughout 2011.
Trouble In Coal
Australia is a major producer of metallurgical coal, and mines in Queensland produce about half of the country's supply of this critical steel component. In particular, China is critically dependent upon Australia's met coal mines to feed its ever-hungry steel sector. With about 90 million tonnes of met coal already subject to force majeure, it would seem that steel customers in Asia are going to have to scramble (and pay up) to find the coal to fuel their blast furnaces.
BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO), Wesfarmers and Xstrata all have major met coal operations in Australia. Even for those companies and mines that are relatively less affected, there is the issue of the ports and rails - flooding has damaged infrastructure and delayed ship loadings, and it will take some time to work through the backlog. While companies like Xstrata do have other producing areas (South Africa for Xstrata, for instance), there is only so much coal to go around. Likewise, for companies like Peabody (NYSE:BTU), which does have some operations in New South Wales (in addition to Queensland), there is only so much they can do to increase mine production in the short term.
Please follow the link below:
http://stocks.investopedia.
I realize this isn't really "news" anymore ... unfortunately, it got held up in queue.
Trouble In Coal
Australia is a major producer of metallurgical coal, and mines in Queensland produce about half of the country's supply of this critical steel component. In particular, China is critically dependent upon Australia's met coal mines to feed its ever-hungry steel sector. With about 90 million tonnes of met coal already subject to force majeure, it would seem that steel customers in Asia are going to have to scramble (and pay up) to find the coal to fuel their blast furnaces.
BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO), Wesfarmers and Xstrata all have major met coal operations in Australia. Even for those companies and mines that are relatively less affected, there is the issue of the ports and rails - flooding has damaged infrastructure and delayed ship loadings, and it will take some time to work through the backlog. While companies like Xstrata do have other producing areas (South Africa for Xstrata, for instance), there is only so much coal to go around. Likewise, for companies like Peabody (NYSE:BTU), which does have some operations in New South Wales (in addition to Queensland), there is only so much they can do to increase mine production in the short term.
Please follow the link below:
http://stocks.investopedia.
I realize this isn't really "news" anymore ... unfortunately, it got held up in queue.
Wednesday, January 5, 2011
Heavy Metal
I'm wondering if this little mini-meltdown in commodity names has any real legs to it. One of my bigger regrets from 2010 is that I couldn't manage to part with any of my current holdings and make room for some quality "stuff" companies. If we could get a nice little correction in materials stocks, though, I'd be happy to do some cherry-picking. After all, I do happen to believe that there is a general link that goes something like "higher global growth = higher commodity prices" - at least for the next few years, at any rate, and before a lot of major new capacity/supply comes on line.
I am not all that interested in gold at this point. There are just too many nuts still beating the "you'll all be sorry when the dollar goes to zero" drum for me to be comfortable with it. I prefer to swim alone and there are just too many other people in the gold pool these days.
Silver and platinum are different stories, though, and I might be interested in Silver Wheaton (NYSE: SLW) or Impala (Nasdaq: IMPUY). I need to do more work on SLW, particularly with respect to what sort of future silver price is baked into the stock today. As for Impala ... well, this may be a name where I just have to swallow hard and hope for the best.
A lot of Impala's future value is predicated on resources in Zimbabwe and that looks like a dangerous bet to me. Zimbabwe's dictator Robert Mugabe (who is theoretically part of a "power sharing" arrangement so not technically a dictator) is a pretty awful fellow even by the low standards of Africa and I don't see how any investor can ever be completely comfortable with a thesis that rests on Mugabe respecting law and honoring contracts. Then again, maybe Mugabe would think twice about messing with a South African company; alienating the West is one thing as they are not likely to interfere directly in Zimbabwe's affairs. South Africa can, and given the right provocation, probably would.
Beyond this, though, there is a short list of names I'm following closely.
Freeport-McMoRan (NYSE: FCX) - owner of one of the best mines in the world, and a major player in copper and gold (as well as molybdenum).
OM Group (NYSE: OMG) - traditionally a player in cobalt, but trying to move into more advanced materials as well.
Vale (Nasdaq: VALE) - a huge Brazilian mining company with interests in iron ore, nickel, potash, and many other resources. I'm not sure any company in the world has a more aggressive expansion plan over the next five years than Vale.
Xstrata (XTA.L) - a global miner of copper, coal, nickel, lead, and alloys.
Thompson Creek (NYSE: TC) - long a player in molybdenum, the company is expanding into gold and copper.
Teck Resources (NYSE: TCK) - met coal, copper, zinc - Teck is leveraged to some of the best commodities for ongoing industrial growth in the developing world.
These are the major names I'm circling right now and hoping that the stocks fall to me. I'm also looking at a host of junior miners in a variety of metals (gold, zinc, potash, etc), but this post is already running on the longish side. When I come up with some actionable ideas there, I'll write a separate post.
OM Group is cheap enough to interest me today and Freeport McMoRan is oh-so-close. I'd need to see about a 10% pullback in the other names to get really excited, though, and maybe actually a bit more with Thompson Creek. Of course, trying to really get a firm sense of fair value on these companies is almost fatuous - I just generally try to pay less than 7x forward EBITDA and pay attention to the underlying commodity charts (as well as the growth in emerging economies and general investor sentiment). After all, why waste my time trying to be precisely wrong instead of vaguely right?
So maybe I get lucky and get to add some quality materials names at attractive prices. Time will tell...
I am not all that interested in gold at this point. There are just too many nuts still beating the "you'll all be sorry when the dollar goes to zero" drum for me to be comfortable with it. I prefer to swim alone and there are just too many other people in the gold pool these days.
Silver and platinum are different stories, though, and I might be interested in Silver Wheaton (NYSE: SLW) or Impala (Nasdaq: IMPUY). I need to do more work on SLW, particularly with respect to what sort of future silver price is baked into the stock today. As for Impala ... well, this may be a name where I just have to swallow hard and hope for the best.
A lot of Impala's future value is predicated on resources in Zimbabwe and that looks like a dangerous bet to me. Zimbabwe's dictator Robert Mugabe (who is theoretically part of a "power sharing" arrangement so not technically a dictator) is a pretty awful fellow even by the low standards of Africa and I don't see how any investor can ever be completely comfortable with a thesis that rests on Mugabe respecting law and honoring contracts. Then again, maybe Mugabe would think twice about messing with a South African company; alienating the West is one thing as they are not likely to interfere directly in Zimbabwe's affairs. South Africa can, and given the right provocation, probably would.
Beyond this, though, there is a short list of names I'm following closely.
Freeport-McMoRan (NYSE: FCX) - owner of one of the best mines in the world, and a major player in copper and gold (as well as molybdenum).
OM Group (NYSE: OMG) - traditionally a player in cobalt, but trying to move into more advanced materials as well.
Vale (Nasdaq: VALE) - a huge Brazilian mining company with interests in iron ore, nickel, potash, and many other resources. I'm not sure any company in the world has a more aggressive expansion plan over the next five years than Vale.
Xstrata (XTA.L) - a global miner of copper, coal, nickel, lead, and alloys.
Thompson Creek (NYSE: TC) - long a player in molybdenum, the company is expanding into gold and copper.
Teck Resources (NYSE: TCK) - met coal, copper, zinc - Teck is leveraged to some of the best commodities for ongoing industrial growth in the developing world.
These are the major names I'm circling right now and hoping that the stocks fall to me. I'm also looking at a host of junior miners in a variety of metals (gold, zinc, potash, etc), but this post is already running on the longish side. When I come up with some actionable ideas there, I'll write a separate post.
OM Group is cheap enough to interest me today and Freeport McMoRan is oh-so-close. I'd need to see about a 10% pullback in the other names to get really excited, though, and maybe actually a bit more with Thompson Creek. Of course, trying to really get a firm sense of fair value on these companies is almost fatuous - I just generally try to pay less than 7x forward EBITDA and pay attention to the underlying commodity charts (as well as the growth in emerging economies and general investor sentiment). After all, why waste my time trying to be precisely wrong instead of vaguely right?
So maybe I get lucky and get to add some quality materials names at attractive prices. Time will tell...
Thursday, December 23, 2010
Commercial Metals - A Tough Market May Be Getting Better
Although the sector has had a rough 2010, the stocks of many players have been doing a lot better of late, as investors take a more encouraging view of steel prices and demand in 2011. As Commercial Metals (NYSE:CMC) earnings reflect, though, there are still a lot of pressures in the industry and a great 2011 is no guarantee.
Fiscal First Quarter Results - Some Good, Some Bad
In many respects, CMC's earnings this quarter are a microcosm of the industry; some good and some bad, with reasons for cautious optimism. On a simple top line basis, for instance, revenue was up 27% from last year as units like recycling and American mini-mills did well (each up about 41%) and no units had year-on-year declines. Within that top line number, the company saw total mill tons shipped increase 9%, with fabrication tons shipped up a similar 8%. Selling prices were also strong, with domestic prices up almost 20% and foreign mill prices up more than 30%.
Profitability also improved from the year-ago level. Although scrap costs were quite a bit higher (up 17% domestically and 23% overseas), per-ton operating profits still grew almost 22% and 45% at home and abroad, respectively. Interestingly, the purchase prices for scrap (as opposed to the cost of scrap used) were even higher, and that could be an issue. Still, the company reversed a year-ago operating loss and was profitable on an as-reported basis.
This link will take you to the full piece:
http://stocks.investopedia.
Fiscal First Quarter Results - Some Good, Some Bad
In many respects, CMC's earnings this quarter are a microcosm of the industry; some good and some bad, with reasons for cautious optimism. On a simple top line basis, for instance, revenue was up 27% from last year as units like recycling and American mini-mills did well (each up about 41%) and no units had year-on-year declines. Within that top line number, the company saw total mill tons shipped increase 9%, with fabrication tons shipped up a similar 8%. Selling prices were also strong, with domestic prices up almost 20% and foreign mill prices up more than 30%.
Profitability also improved from the year-ago level. Although scrap costs were quite a bit higher (up 17% domestically and 23% overseas), per-ton operating profits still grew almost 22% and 45% at home and abroad, respectively. Interestingly, the purchase prices for scrap (as opposed to the cost of scrap used) were even higher, and that could be an issue. Still, the company reversed a year-ago operating loss and was profitable on an as-reported basis.
This link will take you to the full piece:
http://stocks.investopedia.
Tuesday, December 7, 2010
More M&A In Met Mining?
Global growth is back; and so, too, is demand for commodities. With that in mind, many major resource companies are looking to position themselves for the next wave with a variety of project investments and corporate M&A activity. Following relatively closely on the heels of the deal between Walter Energy (NYSE:WLT) and Western Coal, Rio Tinto (NYSE:RIO) is trying to buy more metallurgical coal assets of its own by making a bid for Australia's Riversdale Mining.
The Deal, As It Might Be
At this point, there is no "done deal" between the two companies, but Riversdale has acknowledged that Rio Tinto has made a bid for the company worth about $3.5 billion. While the Rio Tinto bid was reportedly at A$15 per share (a modest premium for a stock that has risen more than 50% since September), Riversdale shares were recently trading for more than A$16 - suggesting that investors expect (if not demand) a better bid or competing offers. (For more, see The Wacky Worlds Of Mergers And Acquisitions.)
Please follow this link for the complete article:
http://stocks.investopedia.
The Deal, As It Might Be
At this point, there is no "done deal" between the two companies, but Riversdale has acknowledged that Rio Tinto has made a bid for the company worth about $3.5 billion. While the Rio Tinto bid was reportedly at A$15 per share (a modest premium for a stock that has risen more than 50% since September), Riversdale shares were recently trading for more than A$16 - suggesting that investors expect (if not demand) a better bid or competing offers. (For more, see The Wacky Worlds Of Mergers And Acquisitions.)
Please follow this link for the complete article:
http://stocks.investopedia.
Sunday, December 5, 2010
Met-Coal Mash Up
Given all the rumors and discussions about the bid, the actual announcement that Walter Energy (NYSE:WLT) is buying Canada's Western Coal for C$11.50 a share is perhaps something of an anticlimax. That notwithstanding, this deal will create the largest metallurgical coal pure-play and the third-largest met coal producer overall.
The Deal
Under the terms of the deal announced Friday, Walter will offer Western Coal shareholders their choice of C$11.50 in cash or 0.114 shares of Walter Energy, or a combination thereof up to a limit of 70% total cash in the deal. That represents a total deal value of about $3.3 billion and a 56% premium on Western Coal shares before this chatter began.
The New Company
As Walter Energy boasted in its press release on the deal, this combination will create the largest pure-play met coal producer in the world, with some 385 million tons of reserves. Met coal is used primarily in smelting iron and steelmaking, where the higher carbon content (and lower moisture) of this type of coal is necessary. That is different than thermal coal - the coal used to power electrical utilities, and the bulk of the coal produced and sold by companies like Peabody Energy (NYSE:BTU) and Arch Coal (NYSE:ACI). (For more, see Metallurgical Coal Update.)
Please click the link for the full article:
http://stocks.investopedia.
The Deal
Under the terms of the deal announced Friday, Walter will offer Western Coal shareholders their choice of C$11.50 in cash or 0.114 shares of Walter Energy, or a combination thereof up to a limit of 70% total cash in the deal. That represents a total deal value of about $3.3 billion and a 56% premium on Western Coal shares before this chatter began.
The New Company
As Walter Energy boasted in its press release on the deal, this combination will create the largest pure-play met coal producer in the world, with some 385 million tons of reserves. Met coal is used primarily in smelting iron and steelmaking, where the higher carbon content (and lower moisture) of this type of coal is necessary. That is different than thermal coal - the coal used to power electrical utilities, and the bulk of the coal produced and sold by companies like Peabody Energy (NYSE:BTU) and Arch Coal (NYSE:ACI). (For more, see Metallurgical Coal Update.)
Please click the link for the full article:
http://stocks.investopedia.
Monday, October 11, 2010
Copper ... It's Back
Gold gets all the attention, but copper has staged a pretty remarkable recovery from its early summer lows. After bottoming out below $2.80 a pound, the December contract is near $3.70 and the highs of 2008 are in sight. Considering just how useful copper is in so many industrial, construction and communications applications, an ongoing global economic recovery should be a solid demand driver.
Most of the major copper producers have already run up in concert with the price of the metal, but investors may want a refresher course on the major players with an eye toward buying the inevitable dips.
Freeport-McMoRan (NYSE: FCX)
These are the fat times for Freeport-McMoRan, as this company is not only a major copper producer, but a major gold miner as well. At current prices, the 83 billion pounds of copper and nearly 34 million ounces of gold in Freeport's reserves are worth over $800 per share. Of course, that does not include the costs of extracting those resources (nor the risk of lower future prices), but it should give investors a sense of the magnitude of Freeport's resources. Freeport has long since diversified its reliance upon its Indonesia mine to a tolerable level, and the company produces more than 10% of the world's annual copper output. (For more, see Taking A Shine To Copper.)
For the full article, please click on the link below:
http://stocks.investopedia.com/stock-analysis/2010/Copper---Its-Back-FCX-SCCO-TGB-TCK-RTP-BHP1011.aspx
Most of the major copper producers have already run up in concert with the price of the metal, but investors may want a refresher course on the major players with an eye toward buying the inevitable dips.
Freeport-McMoRan (NYSE: FCX)
These are the fat times for Freeport-McMoRan, as this company is not only a major copper producer, but a major gold miner as well. At current prices, the 83 billion pounds of copper and nearly 34 million ounces of gold in Freeport's reserves are worth over $800 per share. Of course, that does not include the costs of extracting those resources (nor the risk of lower future prices), but it should give investors a sense of the magnitude of Freeport's resources. Freeport has long since diversified its reliance upon its Indonesia mine to a tolerable level, and the company produces more than 10% of the world's annual copper output. (For more, see Taking A Shine To Copper.)
For the full article, please click on the link below:
http://stocks.investopedia.com/stock-analysis/2010/Copper---Its-Back-FCX-SCCO-TGB-TCK-RTP-BHP1011.aspx
Wednesday, June 23, 2010
Good-Bye Rudd
So, Australia's PM Kevin Rudd, he who presided over the idea to launch a new mining tax, has stepped aside and Julia Gillard is now the PM of Australia (the first woman to hold that job, I believe).
Rudd learned something that I would have thought to be completely obvious to an Australian - if you take on the mining industry, you're going to get run over and run out of town. Mining is a huge chunk of the Aussie economy, and a major part of the reason that Australia has come through this global recession in much better shape than most other countries.
Now, before holders of BHP Billiton (NYSE: BHP), Rio Tinto (NYSE: RTP), Xstrata and so on get too excited, keep in mind that Gillard is also Labor and arguably "more left wing" than Rudd. So, the idea that she is going to be a softy on mining is probably way too much to hope for right now. But, since it wasn't her idea in the first place, there may be more room for compromise without losing face or looking like she backed down from the fight.
One way or another, the mining tax is coming. That's bad news for the aforementioned companies, others like Barrick Gold (NYSE: ABX), Newmont (NYSE: NEM), Fortescue, Lynas, and so on. It's also still, arguably, good news for companies like Freeport McMoran (NYSE: FCX), Teck Resources (NYSE: TCK), Anglo American, Vedanta, and Vale (Nasdaq: VALE) who don't have big exposure to Australian assets.
Is it going to hurt Australia? Probably, but only to a point. While companies like Xstrata have certainly threatened to halt and curtail investments in Australian assets, these companies are going to face a pretty hard reality. Australia is a country with high-quality mining assets, very familiar rule-of-law, excellent stability and infrastructure, an educated homogenous workforce, and physical proximity to major markets like China and India. Compare that to a country like Congo or Mynamar and suddenly the extra tax doesn't seem so bad. After all, nobody in Australia worries about a government just seizing assets or an outbreak of bloody civil war.
Oh, and these companies that were so worried about the tax? Turns out that their stock prices are pretty much all more or less back (or better) than they were when news of this mining tax came out. So, lots of sound, lots of fury, but probably not a whole lot of long-term significance.
Rudd learned something that I would have thought to be completely obvious to an Australian - if you take on the mining industry, you're going to get run over and run out of town. Mining is a huge chunk of the Aussie economy, and a major part of the reason that Australia has come through this global recession in much better shape than most other countries.
Now, before holders of BHP Billiton (NYSE: BHP), Rio Tinto (NYSE: RTP), Xstrata and so on get too excited, keep in mind that Gillard is also Labor and arguably "more left wing" than Rudd. So, the idea that she is going to be a softy on mining is probably way too much to hope for right now. But, since it wasn't her idea in the first place, there may be more room for compromise without losing face or looking like she backed down from the fight.
One way or another, the mining tax is coming. That's bad news for the aforementioned companies, others like Barrick Gold (NYSE: ABX), Newmont (NYSE: NEM), Fortescue, Lynas, and so on. It's also still, arguably, good news for companies like Freeport McMoran (NYSE: FCX), Teck Resources (NYSE: TCK), Anglo American, Vedanta, and Vale (Nasdaq: VALE) who don't have big exposure to Australian assets.
Is it going to hurt Australia? Probably, but only to a point. While companies like Xstrata have certainly threatened to halt and curtail investments in Australian assets, these companies are going to face a pretty hard reality. Australia is a country with high-quality mining assets, very familiar rule-of-law, excellent stability and infrastructure, an educated homogenous workforce, and physical proximity to major markets like China and India. Compare that to a country like Congo or Mynamar and suddenly the extra tax doesn't seem so bad. After all, nobody in Australia worries about a government just seizing assets or an outbreak of bloody civil war.
Oh, and these companies that were so worried about the tax? Turns out that their stock prices are pretty much all more or less back (or better) than they were when news of this mining tax came out. So, lots of sound, lots of fury, but probably not a whole lot of long-term significance.
Monday, June 7, 2010
Ode to Joy Global
It is practically an investing meme now that investors should focus on the "pick and shovel" plays for major investment themes. I suppose you can take that advice very literally in the case of Joy Global (Nasdaq:JOYG), as this leading mining equipment company is very much a pick and shovel play on ongoing theme of global commodity exploitation.
The Quarter That WasAlthough Joy Global did not have a superb quarter at first glance, the context is important. Revenue was down 3% and operating income was down about 4%, but those results were significantly better than analysts expected. With equipment orders up about 43%, the backlog up by double-digits since the beginning of the year and a second straight quarter of a book-to-bill ratio above 1, there was no shortage of reasons to be pleased with the company's quarter.
For the complete article, please continue on to:
http://stocks.investopedia.
The Quarter That WasAlthough Joy Global did not have a superb quarter at first glance, the context is important. Revenue was down 3% and operating income was down about 4%, but those results were significantly better than analysts expected. With equipment orders up about 43%, the backlog up by double-digits since the beginning of the year and a second straight quarter of a book-to-bill ratio above 1, there was no shortage of reasons to be pleased with the company's quarter.
For the complete article, please continue on to:
http://stocks.investopedia.
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