RESOURCE SECTOR OVERVIEW

Transcription

1 RESOURCE SECTOR OVERVIEW Australian Investors Association 20 July, 2005 Presenter: Ron Cameron Senior Analyst

2 Ord Minnett Research Disclaimer Research in this publication is sourced from JP Morgan Securities Australia Limited, Proview, Bloomberg and OML proprietary research. Disclosure: Ord Minnett is the trading brand of Ord Minnett Limited ABN , holder of AFS Licence Number and an ASX Market Participant. Ord Minnett Limited and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities referred to in this document. This document is not available for distribution outside Australia and may not be passed on to any third party or person without the prior written consent of Ord Minnett Limited. Disclaimer: Ord Minnett Limited believes that the information contained in this document has been obtained from sources that are accurate, but has not checked or verified this information. Except to the extent that liability cannot be excluded, Ord Minnett Limited and its associated entities accept no liability for any loss or damage caused by any error in, or omission from, this document. This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs, and therefore before acting on advice contained in this document, you should consider its appropriateness having regard to your objectives, financial situation and needs. If any advice in this document relates to the acquisition or possible acquisition of a particular financial product, you should obtain a copy of and consider the Product Disclosure Statement for that product before making any decision.

3 Resource Sector.Market Pariah to Market Darling.Driven by commodity prices Outpacing the All Ords by 80+%

4 Inventories DOWN Prices UP. Aluminium Copper Nickel Zinc

5 ..Driven by Global Industrial Production Global IP and commodity prices % oy a IP Prices % oy a

6 .Resulting in Superior Earnings Growth in the Mining Sector f 2005f BHP Billiton Limited Anglo American Rio Tinto CVRD Norilsk Nickel Alcoa Phelps Dodge Alcan Inc. Source: Colonial First State Investments Limited

7 Crude Oil Markets Crude Facts Oil prices encircling record nominal highs Appears fundamentally overdone, BUT spare capacity is very low Some commodity risk premium is warranted Industry, and many analysts still using US$25-30/bbl assumption long term

8 ENERGY: The Case For Moderating Prices Source: Fidelity Management & Research Co. May 2005 report entitled The State of the Market

9 ENERGY: The Case for Higher Prices Source: Fidelity Management & Research Co. May 2005 report entitled The State of the Market

10 Coal Prices Can They Get Much Better? Thermal Coal Hard Coking Coal Source: Access Economics

11 12 April 2005 Coal Stocks Have they run too hard? Outpacing the Market! Outpacing their Peers!

12 What About The Others? Zircon Mineral sands back in favour! Uranium Responding to the oil price shock? Even SUGAR!

13 Source: Fidelity Management & Research Co. May 2005 report entitled The State of the Market

14 Source: Fidelity Management & Research Co. May 2005 report entitled The State of the Market

15 CHINA IN PERSPECTIVE Aluminium Copper Nickel Zinc

16 CHINA IN PERSPECTIVE Aluminium Copper Nickel Zinc

17 CHINA IN PERSPECTIVE Aluminium Copper Nickel Zinc

18 The Global S-Curve! Source: Fidelity Management & Research Co. May 2005 report entitled The State of the Market

19 MINING SECTOR TURNING THE WORLD UPSIDE/DOWN! Aluminium Copper Nickel Zinc

20 When to Invest in Resource Companies?????

21 BHP Billiton Limited (BHP) 18 July 2005 Reasons to Invest High quality assets, long operating lives and low on the global cost curve (profitable in the bad times!) Greater diversification than any other major resources company! Deep inventory of organic growth projects (26 projects with >US$10b capital budget) Strong earnings growth for several years ahead Particular strengths in iron ore, coking coal, petroleum. Copper/uranium and nickel strengthened through WMR acquisition

22 BHP Billiton Limited (BHP) 18 July 2005 Recommendation: BUY (Low risk) Share Price: A$18.67 Valuation: A$17.05 (target range A$18-20) (in US$) 2004(A) 2005(E) 2006(E) Net Profit ($m) 3,510 6,249 8,121 Consensus N/P Range (Average) 2,212-6,497 (6,322) 4,136 8,840 (8,363) PER (x) Yield (%) AUD/USD* 5.0% 6.2% Copper* 2.8% 2.9% Oil* 3.5% 4.0% * % change in EPS for a 10% change in

23 Rio Tinto Limited (RIO) 18 July 2005 Reasons to Invest Long-life, low cash operating cost, asset suite over a diversified range of commodities Significant number of organic growth options (28 projects >US$6bn capex over next 2 years!) Compelling fundamentals Less volatile earnings, than perhaps its peers, through greater exposure to bulk commodities Well leveraged to the current buoyancy in the iron ore and coal markets

24 Rio Tinto Limited (RIO) 18 July 2005 Recommendation: ACCUMULATE (Medium risk) Valuation: A$48.00 (target range A$55-60) Share Price: A$46.25 (in US$) 2004(A) 2005(E) 2006(E) Net Profit ($m) 2,221 4,396 4,984 Consensus N/P Range (Average) 2,387 5,457 (4,331) 3,826 5,594 (4,710) PER (x) Yield (%) AUD/USD* 4.3% 4.0% Copper* 3.6% 2.7% Iron Ore - lump* 6.6% 7.6% * % change in EPS for a 10% change in

25 18 July 2005 Woodside Petroleum Limited (WPL) Reasons to Invest The quality oil/gas company on the ASX Strong organic growth until 2008 and probably beyond Several significant growth options not included by market analysts in their valuations (e.g. Pluto-1) Consensus oil price forecasts (circa US$30/bbl) remain well below spot and futures (circa US$50+/bbl!) Substantial exploration effort continues ($250m+ per annum)

26 18 July 2005 Woodside Petroleum Limited (WPL) Recommendation: ACCUMULATE (Medium risk) Valuation: $21.03 (base case), $27.69 (blue-sky) Share Price: $ (A) 2005(E) 2006(E) Net Profit ($m) ,324 Consensus N/P Range (Average) (832) 617 1,484 (1112) PER (x) Yield (%) AUD/USD (+/-1cent) 2.8% ($19m) 3.5% ($35m) Oil (+/- US$1/bbl) 3.0% ($20m) 4.3% ($44m)

27 18 July 2005 Newcrest Mining Limited (NCM) Reasons to Invest Recent interim profit a clear indication the company is back-on-track Successful Telfer commissioning (albeit later than expected) removes project and growth risks Copper exposure (Cadia/Ridgeway) a clear benefit in the current climate Open share register exposes corporate appeal Quality management team

28 18 July 2005 Newcrest Mining Limited (NCM) Recommendation: ACCUMULATE (Medium risk) Valuation: $10.19 (NPV) Share Price: $ (A) 2005(E) 2006(E) Net Profit ($m) Consensus N/P Range (Average) (140) (215) PER (x) Yield (%) AUD/USD (+/- 1c) n/c n/c Gold (+/- US$10/oz) n/c n/c

29 This satirical piece is based on the experiences of the English who invested in California and Australian mines. The featured subject is; "The Great Doo & Diddle, Gold, Silver, Copper, and Brass, Smash, Dash, & Crash Company"

30 We ve Come a Long Way! Aluminium Copper Nickel Zinc

31 Australian Worldwide Exploration Limited (AWE) Reasons to Invest The quality company in the mid-cap oil/gas stocks Strong management and Board 18 July 2005 Strong balance sheet, and good institutional support AWE will be transformed through four new projects coming on stream over , all in Australia/NZ Solid earnings base from two gas projects over years, upside from two oil projects

32 Australian Worldwide Exploration Limited (AWE) 18 July 2005 Recommendation: BUY (Medium risk) Valuation: $2.15 (base case) $3.00+ (spot oil) Share Price: $ (E) 2006(E) 2007(E) Net Profit ($m) (7.4) Consensus N/P Range (7.4) (Average) (-1.6) (25.1) (25.1) PER (x) n/a Yield (%) AUD/USD (+/- 1c) 1.6% ($0.4m) 2.4% ($2.0m) Oil (+/- US$1/bbl) 2.4% ($0.6m) 4.2% ($3.5m)

33 Jubilee Mines N.L. (JBM) 18 July 2005 Reasons to Invest Expanding portfolio of quality growth options Recent exploration success will lead to further resource/reserve upgrades and ongoing market re-rating Leveraged to movements in the nickel price (unhedged) Extensive wholly-owned land-bank covering known Nibearing province (Cosmos region et. al.) Total returns enhanced by solid yield

34 Jubilee Mines N.L. (JBM) 18 July 2005 Recommendation: BUY (Medium risk) Valuation: $5.24 ( most-likely case) Share Price: $ (A) 2005(E) 2006(E) Net Profit ($m) Consensus N/P Range (Average) (77) (82) PER (x) Yield (%) AUD/USD* 18.0% 21.3% Nickel* 11.1% 19.4% * % change in EPS for a 10% change in

35 18 July 2005 Bemax Resources N.L. (BMX) Recommendation: BUY (High risk) $0.195 Reasons to Invest Developing a world-class resource at Pooncarrie (20-25 year mine life) Existing mineral sands operations provide experienced management team in marketing, processing and extraction Guaranteed off-take agreement with Dupont & Cristal Delivering Pooncarrie on time & budget Clearly undervalued on a 1-2 year time frame Rationalisation of tenements with ILU provides another phase of growth

36 Bendigo Mining (BDG) Recommendation: BUY (High risk) $ July 2005 Reasons to Invest Emerging gold producer with circa 11 million ounces of inferred resources (post-bfs) Tenure over the entire Bendigo goldfiled (historical production of 22 million ounces of gold!) Substantial discount to our current valuation of $1.86 (upside to $2.25) Stage 1-140,000oz per annum cash cost) Stage 2-600,000oz per anum $200/oz)

37 18 July 2005 Paladin Resources (PDN) Recommendation: ACCUMULATE (High risk) $1.38 Reasons to Invest Emerging uranium producer Langer Heinrich (LH) project in Namibia is the most advanced uranium project globally outside the majors Total resource base of 135 million pounds (LH resources of 72 million pounds) Staged growth through 4 advanced projects Positive outlook for uranium prices

38 ANY QUESTIONS?