Markets live chat transcript for the chat ending at 12:11 on 23 Apr 2008. Participants in this chat were: Neil Hume (NH) Paul Murphy (PM)
NH:
you lose Monkey – 11.01am
PM:
Anyone here today?
PM:
Welcome!
PM:
it is working
PM:
Yes yes – apols all round.
PM:
We had tech meltdown yesterday.
NH:
If you were already logged in to FT Alphaville early on yesterday before FT.com generally went kaput you were able to continue reading.
NH:
But we are aware that umpteen thousand of you could get on. Which was frustrating for all concerned.
PM:
So sorry about that. Today we seem to be okay.
PM:
And Neil has promised to be really mature about yesterday’s little difficulties.
PM:
He understands that those events are now in the past. And that we go forward – looking to a bright glitch free future.
NH:
am I
NH:
still seething
PM:
NEIL HUME TO ANGER MANAGEMENT
PM:
NEIL HUME TO ANGER MANAGEMENT
PM:
PM:
Anyway — lets get on with it
PM:
Thanks ! — Top the roll call! 
NH:
right, where shall we start?
PM:
Miners — got to be
NH:
flying again this morning
PM:
Its like we are in a new paradym or somthing
PM:
Not that i can spell
NH:
yep its a bit like the dot.com bubble
NH:
we are in a super cycle and demand for metals, resources will keep rising for ever
PM:
Do you want to give us some prices
Lonmin (LMI:LSE): Last: 3,377, up 95 (+2.89%), High: 3,436, Low: 3,314, Volume: 996.28k
Xstrata (XTA:LSE): Last: 4,080, up 82 (+2.05%), High: 4,088, Low: 4,015, Volume: 2.04m
Antofagasta (ANTO:LSE): Last: 847.00, up 17 (+2.05%), High: 859.00, Low: 832.00, Volume: 1.60m
Anglo American (AAL:LSE): Last: 3,515, up 66 (+1.91%), High: 3,535, Low: 3,460, Volume: 1.58m
PM:
Jeeper
Vedanta Resources (VED:LSE): Last: 2,420, down 5 (-0.21%), High: 2,497, Low: 2,411, Volume: 454.93k
Xstrata (XTA:LSE): Last: 4,081, up 83 (+2.08%), High: 4,088, Low: 4,015, Volume: 2.05m
PM:
We seem to get this every day in the miners
NH:
we do
NH:
and lets hope the Chinese economy does not go into a dive
NH:
because there will be big trouble and the FTSE 100 will not have a 6 in front of it
NH:
and we can really stretch this new paradigm theory
NH:
whereas the defining moment of the dot.com bubble was Vodafone’s hostile bid for Mannesmann
NH:
so we have BHP’s hostile bid for RIO
PM:
Greatest and hastest destruction of corporate value ever
PM:
Is BHP Rio the same? I just dont know
PM:
BHP just come out with production figs
PM:
Here’s a quick note from Fairfax
PM:
BHP (BLT LN) mkt cap £115bln – 9 month production report to 31 March 2008 highlights production increases across a number of commodities. Copper production was up 8%, lead up 34%, zinc up 27%, silver up 37%, U3O8 up 25%, although quarter on quarter production showed decreases in most these metals with the exception of zinc.
Heavy rain and bad weather has affected mining and shipping in Australia as was seen with Rio Tinto’s production figures. Petroleum products showed a 10% increase, aluminium was down 1% following power shortages in South Africa, iron ore reached record levels and production was up 13% to 82mt, although in contrast metallurgical and thermal coal were down by 5% (to 26mt) and 2% (to 59mt) respectively.
The market is looking for a potential raised offer from BHP for Rio Tinto with a pre-emptive agreement with regulators on the iron ore and aluminium businesses.
Rio Tinto recently highlighted its superior production growth profile over BHP’s. Rio Tinto reckons it should be able to generate production volume growth of 8.6% vs BHP’s 3.9%. The slide appears to have stirred up BHP management but probably highlights why BHP really want to buy into Rio Tinto and why BHP will be ready to give up significant existing iron ore and alumina production under regulatory pressure.
BHP (BLT LN) mkt cap £115bln – 9 month production report to 31 March 2008 highlights production increases across a number of commodities. Copper production was up 8%, lead up 34%, zinc up 27%, silver up 37%, U3O8 up 25%, although quarter on quarter production showed decreases in most these metals with the exception of zinc.
Heavy rain and bad weather has affected mining and shipping in Australia as was seen with Rio Tinto’s production figures. Petroleum products showed a 10% increase, aluminium was down 1% following power shortages in South Africa, iron ore reached record levels and production was up 13% to 82mt, although in contrast metallurgical and thermal coal were down by 5% (to 26mt) and 2% (to 59mt) respectively.
The market is looking for a potential raised offer from BHP for Rio Tinto with a pre-emptive agreement with regulators on the iron ore and aluminium businesses.
Rio Tinto recently highlighted its superior production growth profile over BHP’s. Rio Tinto reckons it should be able to generate production volume growth of 8.6% vs BHP’s 3.9%. The slide appears to have stirred up BHP management but probably highlights why BHP really want to buy into Rio Tinto and why BHP will be ready to give up significant existing iron ore and alumina production under regulatory pressure.
PM:
China Take
The Truth! Unvarnished. The price of rice always falls. Shanghai investors do not sell stocks. Torch protestors are vile.
PM:
Did you notice this morning about the chinese clamp down on those
PM:
“building a rathole?”
NH:
no, missed that
PM:
Seems to be chinese version of front running
PM:
Except i think you get shot for it there
NH:
nice
NH:
anyway to round up on this mining stuff
NH:
note has just arrived from Lehman and talk about bullish
NH:
they have upgraded their 2010 copper price forecast by 100%
PM:
Wot!>!
NH:
and in 2011 75%
NH:
and 2012 50%
PM:
that is quite extraordinary — Buy Fags
NH:
Investment Conclusion
We are now using our new, significantly higher copper price forecasts (price upgrades were made yesterday) in our earnings models
for the European mining sector. Our copper price forecasts have increased from $3.00 to $3.90 per pound for 2008, from $2.75 to
$4.50 per pound for 2009, and from $2.00 to $4.00 per pound for 2010. We have increased our 2011, 2012, and long-term copper
price forecasts as well. The basis for these copper price upgrades is that we expect a combination of slower than expected supply
growth and relatively price inelastic, growing demand for copper. We are also modestly increasing our gold and molybdenum price
forecasts owing to mining cost inflation in gold and tighter than previously anticipated supply/demand for moly. As a result of these
new commodity price forecasts, we are significantly increasing our earnings estimates for the copper producers in our coverage. Our
top pick in the European mining sector is now Xstrata, followed by BHP Billiton, Rio Tinto and Anglo American.
Summary
We are now using our new, significantly higher copper price forecasts (price upgrades were made yesterday) in our earnings models
for the European mining sector. Our copper price forecasts have increased from $3.00 to $3.90 per pound for 2008, from $2.75 to
$4.50 per pound for 2009, and from $2.00 to $4.00 per pound for 2010. We have increased our 2011, 2012, and long-term copper
price forecasts as well. The basis for these copper price upgrades is that we expect a combination of slower than expected supply
growth and relatively price inelastic, growing demand for copper. We are also modestly increasing our gold and molybdenum price
forecasts owing to mining cost inflation in gold and tighter than previously anticipated supply/demand for moly. As a result of these
new commodity price forecasts, we are significantly increasing our earnings estimates for the copper producers in our coverage. Our
top pick in the European mining sector is now Xstrata, followed by BHP Billiton, Rio Tinto and Anglo American.
Summary