VALE Update : Target Price Now $17.50

VALE : NYSE : US$14.76
Target: US$17.50

VALE is the largest seaborne exporter of iron ore and the world’s second largest nickel producer. The company also
produces copper, precious metals, manganese, ferroalloys, potash and other fertilizers, and has a large logistics business. The majority of operations are in Brazil and Canada.
All amounts in US$ unless otherwise noted

Metals and Mining — Senior Diversifieds
Vale announced its participation in the federal tax settlement (REFIS) in Brazil for payment of amounts relating to net income of its non-Brazilian subsidiaries from 2003 to 2012. Participating in the REFIS will result in income tax payments of R$6bn at the end of November and R$16.4bn payable in 179 monthly installments.
Our revised 2013/14 adjusted EPS forecasts of US$2.69 and US$2.21 compare to our prior estimates of US$2.72 and US$2.30. Our revised 2013/14 EBITDA forecasts of US$22.0 billion and US$19.8 billion compare to our prior estimates of US$22.1 billion and US$19.8 billion.
We are maintaining our BUY recommendation but decreasing our target price to US$17.50 (from US$18.50). Our US$17.50 target price is based on the average of: i) 6x our 2014E EV/EBITDA, which would imply a share price of US$18.35, and ii) our NPV10 estimate of US$16.55.
Next potential catalyst / Key risk
Vale noted that the tax payments will be funded from operating cashflow, without requiring additional debt financing. Given our current commodity price and operating and capex forecasts, we believe that additional financing may be required by 2015. However, we expect a full update of operating and capex guidance as part of Vale Day at the NYSE
on December 2.

MBAC Fertilizer Corp.

MBC : TSX : C$2.07
Target: C$3.55 

MBAC Fertilizer Corp. is a Canadian-domiciled development corporation focused on becoming a significant integrated fertilizer producer in Brazil. The company has ownership of assets within various regions of Brazil, but its immediate focus is on the development of the Itafos phosphate deposit in Goias state. Longer term, MBAC intends to produce phosphate from multiple locations across Brazil.
All amounts in C$ unless otherwise noted.

Investment recommendation
The net result of this press release to our model is favourable later in the decade as Santana ramps up to capacity in 2017E. The lowering of our capital expenditure estimate and of our operating cost assumption (albeit not to the company’s estimated levels) are net positives. However, given that our target price is based upon our 2015 EBITDA estimate and that our multiple takes into consideration the strong growth potential from additional forecast future production, our target price remains unchanged.
Investment highlights
The capital cost estimate is US$427 million (including a US$50 million contingency). There are some costs borne at the Itafos project (a US$323 million project) that would not be duplicated at the Santana project (a water dam, pre-planning/design for a doubling of output, etc), but other costs such as infrastructure to the site would be substantial (and hence why the overall cost was always expected to be higher at Santana). However, that is offset by a much higher grade and lower operating cost mine. The company expects to produce 500ktpa of SSP 0-19-0 product (which is a more valuable grade of product than what is being produced at Itafos (1-17-0) due to the much higher grade of the Santana ore body). Estimated operating cost per tonne at Santana in the BFS is US$113 versus our original estimate of US$140.
The reaction to the release was negative, not to the BFS, but to the lack of an update on Itafos, which is ramping to full operational capacity and should be at the desired level in Q4/13. We assume that the company will sell 50kt of SSP in 2013. We do highlight that every 25mt of sales only impacts our estimated cash balance by less than C$2 million. As a result, at this stage, we are more focused on the ramping up of the facility in Q4 than whether or not they meet or miss our sales estimate by 25kt in 2013, given how little an impact that is to their financial situation as estimated in our model. Further commentary on their financial position is discussed below and we believe funding is no longer a concern.
We continue to rate the shares of MBAC a BUY with a 12-month target price of C$3.55 based upon a 9.5x multiple to our 2015E EBITDA of C$80.9 million.

Aegerion Pharmaceuticals

English: Logo of the U.S. Food and Drug Admini...

English: Logo of the U.S. Food and Drug Administration (2006) (Photo credit: Wikipedia)

AEGR : NASDAQ : US$41.69
Target: US$54.00

Aegerion is a biopharmaceutical company focused on the development and commercialization of treatments for patients with severe lipid disorders. Its lead therapeutic is Juxtapid, an oral small-molecule inhibitor of MTP approved in the U.S. and currently pending regulatory review in the E.U. for treatment of patients with homozygous familial hypercholesterolemia (HoFH).


Following a top- and bottom-line beat, AEGR provided metrics on the first ~15 weeks of the Juxtapid launch and described the “accelerated” trajectory of 75 U.S. and ex-U.S. named-patients on drug (Brazil and Turkey) and scripts (>185 to date; ~9/week at week 6; ~13/week now). As a result, we continue to believe that guidance of 250-300 patients on drug by YE13 and $15M-$25M in FY13 revenue is conservative, but model for 273 and $25.5M, respectively (we assume 33 patients on drug entering April, 75 entering May [no additions] and 95 in June) until we get clarity on the trajectory post Q1. In addition, we believe a key overhang from AMGN’s AMG 145 data has been removed given the ~19% LDL reduction (vs. 40% for Juxtapid) as it is not a key competitive threat. We look to a positive CHMP decision in Q2/E.U. approval in mid-2013 as the next catalysts.
Launch details are all favorable: AEGR is seeing a higher-than-expected interest from cardiologists who have “a meaningful” number of HoFH patients, and is optimizing marketing for these practices. AEGR also indicated greater confidence on the 3K HoFH patients in the U.S. given launch experience, and will provide dropout (“very encouraging”) and compliance rates on future calls. On the payor front, AEGR has met with >100 payors and is surpassing internal pre-auth timeline metrics. The company is appealing negative payor decisions – rejections are due to paperwork or lack of payor policy. AEGR expects to give turnaround time for scripts on the Q2 call (guided to ~4-5 mo. in Jan).
E.U. approval on-track for mid-2013: AEGR likes the odds of E.U. approval (~60 days post-CHMP opinion in Q2). The company does not expect an oral explanation will be required and was pleased with the Scientific Advisory Group meeting (similar to FDA AdCom).
 Q1 financials, 2013 guidance: Q1 GAAP EPS of $(0.64) was better than consensus of $(0.71) and CGe of $(0.73) due to higher revenue ($1.2M vs. consensus of $630K) and lower GAAP R&D expense ($5.8M vs. CGe of $8.0M). AEGR exited Q1 with $140.7M and provided OpEx guidance (ex-stock-based comp) of $95M-$105M (we model for $96.2M)

Monsanto Company Target $ 121



MON : NYSE : US$104.51
Target: US$121.00

Monsanto is a leading global provider of seeds, biotechnology traits, and glyphosates. The company operates two segments: Seeds and Genomics and Agricultural Productivity. The seeds and genomics segment consists primarily of soybeans, corn, cotton, and vegetable seed brands, as well as biotechnology traits that help control weeds and insects. The agricultural productivity segment consists of crop protection, including glyphosates

Investment recommendation
Monsanto remains our top large cap equity to own: From an industry viewpoint, we continue to expect a large planting in both the US this spring and in Latin America next fall, which should set up the company for a strong F2013 and a positive start to F2014. We further believe that the concern farmers have had over sourcing the best seed this year as a result of last year’s drought-plagued crop should allow for an increase in margins. We believe Monsanto will be able to capitalize on these macro events more than its peers due to its yield leading products, both current and those in the pipeline, and the benefit that we should continue to see roll out in both North and South America through our forecast period. We expect the company to improve upon its market share, and going forward, we see no equal when it relates to the level of product launches the company should be able to introduce both in the near and medium term. We also believe the company has done a good job of diffusing a potential negative RR1 soybean event in Brazil next year through its disclosure, the removal of the related forecast earnings guidance from the current fiscal year (and next), and the proactive signing of farmers to the next generation product. As a result, we believe the company’s shares will continue to outperform its peers and the market in 2013.
Investment highlights
Monsanto reported adjusted Q2/F13 EPS of US$2.73 versus our estimate of US$2.38 and consensus of US$2.57. Gross margin was reported at US$3.07 billion, above our US$2.88 billion estimate (Figure 1). Operating costs were US$958 million versus our expectation at US$988 million. The company increased its ongoing F2013 EPS guidance to US$4.40-4.50 versus US$4.30-4.40 previously, our estimate of US$4.45, and consensus of US$4.57
We continue to rate the shares of Monsanto a BUY, but have increased our 12-month target price to US$121.00 from US$113.00 previously, based upon a 23.5x multiple to our blended F2014E EPS of US$5.16.

Colossus Minerals Drill Results


 TSX : $2.88
Expanding the zone, but does anyone care?

Colossus Minerals announced further drill results from their Serra Pelada project in Brazil. The drill holes which are testing the edge of the Central Mineralized Zone (CMZ) continued to demonstrate the potential of the deposit. Hole SPD-182 demonstrated that the CMZ is tucked in closer to the nose of the folded structure, returning 3.4 metres grading 13.28 g/t gold, 0.02 g/t platinum and 0.06 g/t palladium.

Underground delineation drilling has commenced from a new drill bay that is located 45 metres lower and half the distance to the mineralized zone. Highlights from the underground include Hole SPUD-018 that intercepted 0.8 metres grading 23.07 g/t gold and 3.6 metres grading 24.37 g/t gold, 0.28 g/t platinum and 0.88 g/t palladium. Overall, the results continue to delineate and extend the CMZ mineralization, while demonstrating localized increases in widths in certain areas.

Recently, CSI updated the market on development activitie s at Serra Pelada. The company commented that it remains on track to start initial production early in the second half of 2013 at an initial rate of 250 tonnes per day tpd and continue the ramp up phase throughout the remainder of 2013 to 500 tpd. The current plan envisages two active mining faces for 250 tpd of production, three to five mining faces for 500 tpd of production and six to nine mining faces for 1,000 tpd of production.

The company expects to achieve 1,000 tpd of production by the end of the first quarter of 2014. Shares of CSI have been down sharply over the past few weeks as the market focuses on the soft gold market, poor environment for juniors and milestone risks for Serra Pelada. Also weighing on the shares is the possibility that the company could be deleted from the S&P/TSX Composite Index, in its March quarterly review. The S&P/TSX will announce their official changes after the close on Friday, March 8, with these changes coming into effective after the close on Friday, March 15.

Colossus Minerals Inc. High Grade Strike

Colossus Minerals Intersects High Grade Gold Values in Diamond Drilling at Elefante

TORONTO, ONTARIO–(Marketwire – Jan. 10, 2013) – Colossus Minerals Inc. (TSX:CSI)(OTCQX:COLUF) reports assay results from the recent diamond drilling program on the Elefante area where earlier in the year auger drilling had returned values of gold, platinum and palladium. The Elefante area is located approximately two kilometres to the southeast of the Serra Pelada Gold-Platinum-Palladium Mine. The Serra Pelada Mine is a 75%/25% joint venture between Colossus and Cooperativa de Mineracao dos Garimpeiros de Serra Pelada (COOMIGASP) located in the State of Para, Brazil.


--  Precious metal values are near surface
--  Possible new exploration target model as the samples containing precious
    metals lack the strong carbon upgrading associated with the
    mineralization at the Serra Pelada Mine
--  Mineralization is currently open in all directions as preliminary four-
    hole program tested a small proportion of surface anomalies
--  Hole EL-12-001 contained the highest overall gold value and returned
    5.70 metres grading 5.41 g/t gold, 0.04 g/t platinum and 0.29 g/t
--  Hole EL-12-002 contained the highest overall platinum and palladium
    values and returned 5.10 metres grading 0.45 g/t gold, 1.27 g/t platinum
    and 2.04 g/t palladium

Claudio Mancuso, CEO of Colossus commented, “We conducted this limited drill program to explore the possibility that mineralization encountered in previous soil and auger sampling programs continue into the bedrock. While we remain focused on development of the Central Mineralized Zone (“CMZ”) where we continue progressing well with bulk sample extraction, we are encouraged by these results and anticipate that further exploration could lead to development of a satellite deposit. The area has seen little diamond drilling by Colossus and will be further explored in 2013. We look forward to providing an update on the progression of the bulk sample and other development activities in the next few weeks.”

Solazyme Target: US$10.00


Solazyme (Photo credit: Wikipedia)


NOV 15


BUY Target: US$10.00

Solazyme is a leading developer and producer of tailored and specialty oils for application in several large and growing markets, including  hemicals, fuels, nutrition and health sciences. Through its proprietary industrial biotechnology and biorefinery platform, the company
uniquely harnesses the power of microalgae to accelerate and optimize the production of oils.

Investment recommendation
Risk/reward stays favorable after a tough sell-off into the quarter. While we remain encouraged by Solazyme’s execution on milestones and
partnerships thus far, volatility stays elevated given commercialization and future funding risks.
Investment highlights
Solazyme reported Q3/12 rev/GAAP EPS of $8.6M/$(0.37) vs.consensus at $8.8M/$(0.37). As a reminder, we continue to find financial results to be less meaningful than progress vs. key milestones at this point.
Highlights this quarter include a new agreement with ADM in North America (~20kMt initially targeted in ’14, partial stock financing) and a
framework for expansion of the Bunge JV in Brazil (to ~300kMt by ’16). The Moema facility is expected to be up by Q4/13, with ADM kicking off
early in ’14. Algenist sales continue to drive product growth near term, while all key milestones appear on-track. Management forecasts sales of ~$44M in ’12 (from ~$44-50M), implying Q4 at ~$8.3M. The balance sheet still remains firm, with cash/investments at $167M after burning ~$75 YTD.

We derive our $10 target (from $17) by applying a 2.5x EV/sales multiple to our ’14 sales estimate of $255.0M, discounted back two years at 20%. Our new price target reflects lower industry multiples.

NIKO Resources in Brazil Bids

English: The President of Brazil, Dilma Rousse...

English: The President of Brazil, Dilma Rousseff, is awarded the Woodrow Wilson Award in New York City. September 21, 2011. (Photo credit: Wikipedia)

Sept. 20

Brazil’s first auction of oil licenses since 2008 is expected to lure companies from Royal Dutch Shell Plc (RDSA) to startup Niko Resources Ltd. (NKO) as producers seek to tap fields holding a third of the world’s new discoveries.

President Dilma Rousseff this week approved the plan to auction oil exploration areas as soon as May, including deep- water fields where Petroleo Brasileiro SA (PETR4) made the world’s largest oil finds in more than a decade. Round 11, as the auction is being called, will include 174 blocks on shore and off Brazil’s northeastern coast.


Niko Resources, a Canadian company that explores for oil and gas in seven countries, is getting a head-start identifying the best prospects up for grabs in the auction areas, Rodrigo Senne dos Santos, Niko’s manager for Brazil, said in an interview.

Calgary-based Niko hired a vessel from SapuraCrest Petroleum Bhd. to conduct geologic studies and identify natural oil seeps off the coast of northeastern Brazil starting in November, he said.

Niko is negotiating with at least five other oil companies to split the costs of the program to collect data on 2,000 square kilometers a day. In August, Petrobras and BP Plc (BP/) discovered oil 76 kilometers (47 miles) off the coast in the Ceara Basin near where some of the blocks will be auctioned, underscoring the region’s potential, Santos said.

While a legislative change in 2007 put Petrobras in charge of all new contracts in the so-called pre-salt area off Brazil, the company hasn’t been able to extract oil fast enough to meet targets. Petrobras cut its long-term production forecast by 11 percent to 5.7 million barrels a day in 2020. Output will remain within 2 percent of 2011 levels until 2014, it said on June 14.

‘Greater Expectations’

The Round 11 blocks include areas on shore and off Brazil’s northeastern coast where the geology is similar to recent discoveries in Suriname, French Guiana and the west coast of Africa, Eliane Petersohn, the superintendent in charge of defining new exploration blocks at the country’s oil regulator, said in a Sept. 18 interview.

The potential to find oil in the region is “enormous,” Marco Antonio Almeida, the head of oil and natural gas at the Energy Ministry, told reporters in Rio de Janeiro on Sept. 17.

“Everybody who works in exploration and production is excited about this round,” Danilo Oliveira, production director at QGEP Participacoes SA (QGEP3), said in an interview in Rio de Janeiro. “There are even greater expectations for the pre-salt round.”

The Coming Oil Supply Boom

English: Protest against fossil fuels April

English: Protest against fossil fuels April (Photo credit: Wikipedia)

August 11

The most important story in the global economy today may well be some good news that isn’t yet making as many headlines – the coming surge in oil production around the world.

Until very recently, our collective assumption was that oil was running out. That was partly a matter of what seemed like geological common sense. It took millions of years for the Earth to crush plankton into fossil fuels; it is logical to think that it would take millions of years to create more. The rise of the emerging markets, with their energy-hungry billions, was a further reason it seemed obvious that we would have less oil and gas in 2020 than we do today.

Thanks in part to technologies such as horizontal drilling and hydraulic fracking, we are entering a new age of abundant oil. As the energy expert Leonardo Maugeri contends in a recent report published by the Belfer Center at the John F. Kennedy School of Government at Harvard, “contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption.”

Mr. Maugeri, a research fellow at the Belfer Center and a former oil industry executive, bases that assertion on a field-by-field analysis of most of the major oil exploration and development projects in the world. He concludes that “by 2020, the world’s oil production capacity could be more than 110 million barrels per day, an increase of almost 20 per cent.” Four countries will lead the coming oil boom: Iraq, the United States, Canada and Brazil.

Much of the “new” oil is coming on stream thanks to a technology revolution that has put hard-to-extract deposits within reach: Canada’s oil sands, U.S. shale oil, Brazil’s presalt oil.

“The extraction technologies are not new,” Mr. Maugeri explains in the report, “but the combination of technologies used to exploit shale and tight oils has evolved. The technology can also be used to reopen and recover more oil from conventional, established oil fields.”

Mr. Maugeri thinks the tipping point will be 2015. Until then, the oil market will be “highly volatile” and “prone to extreme movements in opposite directions.” But after 2015, Mr. Maugeri predicts a “glut of oil,” which could lead to a fall, or even a “collapse,” in prices.

At a time when the global meme is of America’s inevitable economic decline, the surge in oil supply capacity is an important contrarian indicator. Mr. Maugeri calculates that the United States “could conceivably produce up to 65 per cent of its oil consumption needs domestically.” That national energy boom is already providing a powerful economic stimulus in some parts of the country – just look at North Dakota. Crucially, at a time when one of the biggest social and political problems in the U.S. is the disappearance of well-paid, blue-collar work, particularly for men, oil patch jobs fill that void.

Equally significant is the impact of oil on the most important human problem of our times: the environment. The sources of oil that will fuel the coming boom are harder to reach than the supplies of the 20th century, and the technologies required to extract them are more invasive. That will be one fault line in what is sure to be the escalating battle between environmentalists and the oil industry.

The implications for the climate change debate are even more fraught. Until now, the arithmetic of oil supply and the agenda of environmentalists conveniently dovetailed. Since we were running out of oil anyway, environmentally motivated efforts to limit fossil fuel consumption and increase our use of renewable energy boasted the additional virtue of being inevitable. In an age of abundant oil, those economically utilitarian arguments lose their power.

For environmentalists, and for the liberal political parties with which they are usually aligned, that poses a serious challenge. The temptation will be to oppose new oil production projects indiscriminately. That instinct could be politically dangerous. Political progress in combatting climate change has been slow, but the battle for hearts and minds, especially of the younger generation, is being won. That political capital can be lost in an instant if the environmental movement allows itself to be equated with opposition to one of the lone sources of growth – and of good blue-collar jobs – at a time of global economic stagnation.

A final conclusion to draw from the next oil revolution is a little more existential. This is yet another reminder that what both common sense and expert consensus assure us to be true very often isn’t. It was obvious that efficient markets worked and financial deregulation would stimulate economic growth, until the financial crisis and the subsequent international economic recession. It was equally apparent that we were running out of oil – until we weren’t.

Belo Sun Mining Corp – Junior Gold AMP AdditionTarget $ 2.00

Pôr do Sol no Belo - Manaus, Brazil

Pôr do Sol no Belo – Manaus, Brazil (Photo credit:

Belo Sun is a selection in the NEW AMP Gold and Precious Metals Portfolio – October 1 Publication

If you have precious metal stocks you want to see included – email me at ( Please note  NO OTC or Pink Sheet listings )

BSX : TSX : C$1.24 Speculative Buy , Target C$2.00

THESIS: Uncommon combination of good grades and scale in a stable jurisdiction;

12-month target price of C$2.00 based on 0.9x our 10%/diluted peak NAVPS estimate of US$2.17/share, assuming US$/C$ parity. Belo Sun is currently focused on advancing its 100%-owned Volta Grande gold project in Brazil. Our rating is based on: 

Potentially robust project in a favourable jurisdiction:

 A relatively large, highgrade  

global resource of 5.17 Moz grading 1.74 g/t,

location in a politically stable jurisdiction,

access to grid power, seemingly straightforward metallurgy, and

the potential to produce over 300,000 oz per year could potentially have a favourable impact on project economics at Volta Grande, possibly driving robust returns and  

positioning the company as a compelling M&A target.

 Key de-risking catalysts expected in the near-medium term:

We expect a number of catalysts to de-risk the project over the next 12 months, including the completion of the pre-feasibility study (Q3/12E), potential receipt of the Preliminary Licence (Q4/12E), completion of the Definitive Feasibility Study, and construction decision (Q2/13E).

 Compelling exploration upside potential: Resource growth has been rapid under the current management team, highlighted by a 146% increase in the global resource and a 74% increase in grade in just over two years, and with finding costs averaging only $12/oz. All deposits remain open for expansion along strike and at depth. Regional exploration potential also appears attractive on the company’s extensive landholdings, which cover an area of approximately 181,000 ha extending over the majority of the Tres Palmeiras Greenstone Belt, and include 16 known gold occurrences.

 Attractive valuation with room for re-rating:

 On an EV/oz (total resources) basis, the stock currently trades at US$47/oz, largely in line with the explorer/developer average trading multiple. However, we believe that a premium multiple is warranted based on the low geo-political risk profile and relatively high grades.

 Belo Sun currently trades at 0.44x P/NAV (5%/Spot gold, fully diluted) or 0.29x P/NAV (5%/Spot gold, undiluted) vs. the junior producer average of 0.66x, the difference in our view representing re-rating potential, as the Volta Grande project is de-risked through the feasibility, permitting, and development stages.




Get every new post delivered to your Inbox.

Join 2,099 other followers