Minerals Metals

Document Sample
Minerals Metals Powered By Docstoc
					Minerals & Metals
   Presented by:
    Albert Chou
  Davis (Jinqiu) Wei
   Mike Bergmann
        Xin Lu
       Copper Mining Industry
   Overall Introduction
   Product Use
   Production Process
   Structure of Industry
   Financial Structure
   Risk Assessment
   Recommended Strategy
         Overall Introduction-1
   Oldest metal known to humans
   Infinite recyclable life
   3rd most widely used metal
   Sensitive to political situation
   Producers store copper in warehouses
    until it is sold and shipped to buyer
         Overall Introduction-2
   Known resource 5.8 trillion pounds

   Only 0.7 trillion pounds (12%) are mined

   Also essential to human health
                      Products
   Sources
       Ore
       Scraps


   Forms
       Rods
       Cathodes
       Concentrate
                            Products
   Wires
       Substitution
            Fiber Optics


   Pipes/Tubes
       Substitution
          Steel
          Plastics

          Aluminum
                                                 Copper Use
           Used in highly cyclical industries

                                                                            Industry            %
                                                                            Building            48
                                                                            Electrical          17
                                                                            Gen. engineering    16
                                                                            Light engineering   8
                                                                            Transport           7
                                                                            Other               4

                                                                            Total               100




Source: http://www.nymex.com, http://www.copper.org, http://www.lme.co.uk
                              Production of Copper




Source: http://www.nymex.com, http://www.copper.org, http://www.lme.co.uk
Industry
Industry
                      Rivals
   77 firms internationally competing

   Compete on price/low cost production

   Product Quality

   Customer Service
         Key Success Factors
   Economies of Scale

   Refining technologies

   Location
              Cost Structure
   Research and Development

   Exploration

   Transportation

   Storage
              Cost Structure
   General Operation Cost

   Sales and Administrative

   Interest expenses

   Depreciation, Depletion and Amortization
           Risk Assessment-1
   Economic and Political
   Cyclical and Volatile price of Copper and
    other substitutes
   Environmental Conditions
   Licenses and Permits
   Laws and Regulations
           Risk Assessment-2
   Nature of Mineral Exploration and Mining
   Environmental Risks
   Reserve Estimates
   Worldwide Operations
   Licenses and Permits
     Recommended Strategy

Selection Criteria for Long Term Investment

   Larger companies with strong financial resources
   Companies that have good access to resources and
    (potential) markets
   Companies that already demonstrate superior cost
    structure and lower production costs
   Companies with large reserves of high grade ore
       Uranium Mining Industry
   Overall Introduction
   Product Use
   Production Process
   Structure of Industry
   Important Trend
   Risk Assessment
   Recommended Strategy
          Overall Introduction
   15% of Canada's electricity comes from
    nuclear power
   Increasing demand for nuclear fuel
   Uranium is most commonly found in
    nature as an oxide, and usually as an ore
    in a chemically complex body
   A significant amount can be found in the
    oceans of the world
             Overall Introduction
   Uranium (U): A mildly radioactive element with two
    isotopes which are fissile (U-235 and U-233) and two
    which are fertile (U-238 and U-234). Uranium is the
    basic fuel of nuclear energy.
   Uranium hexafluoride (UF6): A compound of uranium
    which is a gas above 56oC and is thus a suitable form in
    which to enrich the uranium.
   Uranium oxide concentrate (U3O8): The mixture of
    uranium oxides produced after milling uranium ore from
    a mine. Sometimes loosely called yellowcake. It is khaki
    in colour and is usually represented by the empirical
    formula U3O8. Uranium is sold in this form.
                      Product
   Application
       Providing electricity
       Producing medical isotopes
       Using it as a weapon & armour (depleted
        uranium)
   Co-product
       a co-product with copper (at Olympic Dam in
        Australia)
       a by-product from the treatment of other ores,
        such as the gold-bearing ores of South Africa
        (low concentration of uranium)
                       Product
   Substitutes
       Fossil fuel
       Coal
       Any other alternative fuels (solar, wind-driven,
        or tidal reserves)
World Electricity
Major Types of Ore
Production Process
Enrichment Process-Nuclear
           Fuel
Uranium Geographic Distribution
      Known Deposits of Uranium
              (2005)
               tonnes U    percentage of world
Australia      1,074,000   30%
Kazakhstan     622,000     17%
Canada         439,000     12%
South Africa   298,000     8%
Namibia        213,000     6%
Russian Fed.   158,000     4%
Brazil         143,000     4%
USA            102,000     3%
Uzbekistan     93,000      3%
World total    3,622,000
Quality of Uranium Reserves
Canadian Mines
Canadian Uranium Production

                 1994     1995     1996     1997     1998     1999     2000     2001     2002     2003     2004      2005


McArthur River                                                         4409     7830     8490     6877     8491      8491

Key Lake         5984     6444     6402     6408     6325     4400      474      353       *        *        -         -

McClean Lake                                                   660     2722     2994     2762     2734     2724      2490

Rabbit Lake      3382     3712     4685     5499     5309     3175     3290     2070      519     2690     2462      2732

Cluff Lake       1256     1432     2271     2316     1225     1455     1702     1496     1918      32        -         -

TOTAL            11 377   12 351   13 804   14 223   12 886   9 690    12 597   14 743   13 689   12 333   13 676   13 713

cf. World        37 890   39 271   42 200   42 092   40 008   36 643   40 962   42 886   42 529   41 998   47 430




                                                                                                             ( tonnes U3O8)
                      Strengths
   Canada has
       Highest quality reserve
       3rd largest reserve
   Growing demand for uranium fuel to
    replace polluting fossil fuel
   Nuclear power is cheaper to produce
    electricity
   Raising uranium price
              Risk Assessment

   Environmental Protests
       Green peace
   Political issue
       Long regulatory approval period
       High startup cost
   Safety concerns
       Power plant & Evacuation
       Hard to find storage location
            Important Trends
   Raising prices
   High demand due to need for electricity
   Production from world uranium mines now
    supplies only 55% of the requirements of
    power utilities
   Mine production is increasingly
    supplemented by ex-military material
     Recommended Strategy

Selection Criteria for Long Term
  Investment

   Larger companies with strong financial resources
   Companies that have good access to resources and
    (potential) markets
   Companies that already demonstrate superior cost
    structure and lower production costs
   Companies with large reserves of high grade ore
         Gold Mining Industry
   Overall Introduction
   Product Use
   Production Process
   Structure of Industry
   Financial Structure
   Risk Assessment
   Recommended Strategy
          Overall Introduction
   Major Product
                 GOLD



       Substitutes
         –Direct Substitutes
           –Currency
           –Other precious metals
    Production Process - 1




Exploration   Exploration Drilling   Open Pit Mining




 Blasting     Underground Mining     Ore and Waste Haulage
      Production Process - 2




Heap leaching      Milling     Oxidization




   Leaching     Stripping    Electro-winning
 Production Process - 3




Smelting   Gold Bullion   Refining




           Reclamation
             Industry Structure

   Market Dynamics:
       Gold price change
Recent Change in Gold Price

    Year 2000 – present
     Industry Structure-2

 •Major companies (selected by assets)
                            Meridian Gold
 Barrick Gold Corp.
                            Agnico-Eagle Mines
 Newmont Mining
                            Glamis Gold
 Kinross Gold Corp.        Goldcorp Inc.
                            Cambior Inc.
                            Ivanhoe Mines
                            Placer Dome
             Financial Structure
   Cost Structure
       Exploration, research and development
       General operation costs
       Depreciation, depletion and amortization
       Interest expenses
       Write-down of assets
            Risk Assessment
   Nature of Mineral Exploration and Mining
   Environmental Risks
   Reserve Estimates
   Worldwide Operations
   Licenses and Permits
   Supply and Demand
     Recommended Strategy

Selection Criteria for Long Term Investment

   Larger companies with strong financial resources
   Companies that have good access to resources and
    (potential) markets
   Companies that already demonstrate superior cost
    structure and lower production costs
   Companies with large reserves of high grade ore
Phelps Dodge




   Phelps Dodge Corp. is one of the
    world’s largest copper producers
   World leader in the production of
    molybdenum-based chemicals
   Leading producers of continuous-cast
    copper rod
Financial Statistics- PD (NYSE)
2 years Stock Price Chart
Major Divisions



   Phelps Dodge Mining Company (PDMC)

   Phelps Dodge Industries (PDI)
PDMC’s Major Operations

   Worldwide and vertically integrated copper
    operations
           from mining through rod production, marketing
            and sales
   Molybdenum operations
           from mining through conversion to chemical and
            metallurgical products, marketing and sales
   Other mining operations and investment
   Worldwide mineral exploration, technology and
    project development programs
PDMC’s Major Products

   Copper related products
        Copper cathode
        Copper concentrate
        Copper rod
   By-Products (Gold, silver, rhenium and
    sulfuric acid)
   Molybdenum related products
Copper


   In 2005, PDMC produced 1,228,000 tons of
    copper on a consolidated basis (1,042,300
    tons on a pro rata basis)
   An additional 60,000 tons of copper for 15%
    undivided interest in the Morenci mine
   Production of copper on pro rata basis
    constituted 53%of the copper mined in US
Molybdenum Concentrate

   In 2005, PDMC produced 62.3 million pounds
    of molybdenum
   High-purity, chemical-grade molybdenum
    concentrate is produced at Henderson mine
    in Colorado
   Most of concentrate is produced for
    metallurgical markets (steel industries) to
    strengthen the steel and lubricant industry
PDI’s Wire and Cable


 PDI produces magnet wire, copper and
 aluminum energy cables, specially
 conductors and other products for sale to
 original equipment manufacturers for US in
 electrical motors, generators, transformers,
 medical applications and public utilities
    PDMC’s Segments
     U.S. Mines
    Morenci,
                                         Smelt, Refine
    Bagdad,            Copper ready                      Refined copper
                       for production                    rod for delivery to
    Sierrita,
                       process           Manufacturing   customers
    Chino/Cobre
    And Tyrone
South American Mines     Sold as                             Sold as
                         copper to                           processed
     Candelara/
                         the 3rd party                       wires and
     Ojos del
                                                             cables
     Salado,
     CerroVerde
     and El Abra                           customers
Financial data with different mines
PD’s mines segments


   US Mines

   South American Mines
Performance in geographical areas
Locations of US Mines
Morenci

   Leading position: the largest copper producing
    operation in North America
   Operation Description:
           an open-pit mine,
           a concentrator,
           4 solution extraction facilities
           3 electronwinning tank houses.
   Ownership: 85% undivided interest
   Annual Capacity:
           410,000 tons electrowon cathode production
           crush-leach facility processes approximately 85,000 tons of
            ore daily with the remaining ore processed through
            stockpile leaching.
Morenci’s Key Future Growth Factors

   On June 1, 2005, the Company’s board of directors
    approved expenditures of $210 million to construct a
    concentrate-leach, direct-electrowinning facility
    at Morenci, and to restart its concentrator.
   The concentrate-leach, direct-electrowinning facility
    is expected to be in operation by mid-2007, and
    copper production is projected to be approximately
    150 million pounds per year .
Bagdad
   Location: Northwestern Arizona
   Material: Copper Sulfide and Oxide Ore.
   Description of Operation:
             an open-pit mine,
             a sulfide ore concentrator producing copper and molybdenum
              concentrates
             a leaching system with an SX/EW operation producing copper cathode.
   Ownership: 100%
   Undertaken an alternative technology that generates significantly less
    sulfuric acid and requires less oxygen than the high-temperature
    process.
   The benefit:
             Potential application in operations and projects where excess by-product
              sulfuric acid cannot be beneficially used in stockpile or heap leaching
              operations
             Lower-cost option for certain applications.
Sierrita
   Description of Operation:
            an open-pit mine,
            one sulfide ore concentrator producing copper and molybdenum
             concentrates
            2 molybdenum roasters and a rhenium processing facility.
   Technology: an oxide and low-grade sulfide ore stockpile
    leaching system with an SX/EW operation to produce copper
    cathode.
   Ownership: 100%
   Key Strengths:
            Sierrita’s on-site roasters process molybdenum concentrates produced at
             Sierrita, Bagdad and Chino, as well as purchased concentrates or
             concentrates tolled for third parties.
            Late in 2004, the Company completed construction of a plant that is
             capable of producing approximately 40 million pounds of copper sulfate
             pentahydrate. This is an alternative to cathode production and production
             commenced in early 2005. .
Miami/Bisbee

   Description of Operation:
           an open-pit copper mine (closed for 2005)
           an SX/EW operation producing copper cathode
           a smelter (closed for 2005)
           an acid plant
           a copper rod plant

   Cost of closure: an asset impairment charge
    of $59.1 million ($45.2 million after-tax) in the
    2005 second quarter
Chino/Cobre
   Description of Operation:
              an open-pit copper mine, concentrator, leaching and
               SX/EW facility near Silver City, New Mexico.
   Ownership: 100% ( PD acquired the remaining one-third general
    partnership interest in Chino On December 19, 2003)
   Cobre Mining Company Inc.
          southwestern New Mexico, adjacent to our Chino operations.
          The primary assets including
                an open-pit copper mine
                a concentrator
                the surrounding 12,000 acres of land with mineral rights.
   Closure of Chino’s refinery due to projected higher acid, external
    smelting and freight costs
          an asset impairment charge of $59.9 million ($45.9 million after-tax)
Tyrone

   Description of Operation:
             wholly owned Tyrone open-pit mine
             SX/EW plant near Tyrone, New Mexico
   New company strategy:
             In June 2005, PD decided to construct a concentrate-leach,
              direct-electrowinning facility at the Morenci copper mine
   Tyrone’s response to the new strategy:
         Reassessment of Tyrone’s long-lived asset
                 an asset impairment charge of $210.5 million ($161.2 million
                  after-tax)
         Accelerating reclamation of portions of stockpiles around
          the mine perimeter.
                 Increased production cost
                 decreased Tyrone’s copper ore reserves by
                  approximately155 million pounds, or 14 percent.
South American Mines
Candelaria/Ojos del Salado

   Description of Operation:
           an open-pit and underground copper mines
           a concentrator, port and associated facilities
   Ownership:
           80 % partnership interest of a Chilean contractual mining
            company in Candelaria
   Acquisition on Ojos del Salado by SMMA
           On December 22, 2005, SMMA Candelaria, Inc. acquired a
            20 percent equity interest in Ojos del Salado from PD
               Received cash of $24.8 million (net of $0.2 million of expenses)
               Phelps Dodge’s interest in Ojos del Salado was reduced to
                80 percent from 100 percent.
El Abra

   Description of Operation:
           Mine-for-leach, open-pit mining operation that uses three
            stages of
               crushing prior to leaching
               an on/off heap leach pad
               an SX/EW operation to produce copper cathode
   Ownership:
           51 percent partnership interest in Sociedad Contractual
            Minera El Abra (El Abra), a Chilean contractual mining
            company. The remaining 49 percent is owned by the state-
            owned copper enterprise Corporación Nacional del Cobre
            de Chile (CODELCO)
   El Abra holds mining concessions over more than
    33,000 acres of land near Calama in the copper-rich
    Second Region of northern Chile.
Cerro Verde
   Location: approximately 30 kilometers southwest of Arequipa,
    Peru.
   Description of Operation:
            two open-pit mines,
            Cerro Verde and Santa Rosa, a heap-leach operation
            an SX/EW operation.
   Cerro Verde produces copper cathode. The ore is processed
    through three stages of crushing and placed on a leach pad after
    agglomeration.
   New acquisitions led by other parties
            SMM Cerro Verde Netherlands B.V., acquired and increased its equity
             position in Cerro Verde to 21%
            Compañía de Minas Buenaventura S.A. (Buenaventura), a publicly traded
             Peruvian mining company, increased its ownership position in Cerro Verde
             to 18.2 percent.
            PD’s equity position reduced from 82.5% to 53.6%
Material Mined Comparison
Grade of ore mined
Copper Sale Comparison
Other Metal Sales
Manufacturing and production
Reserves (End of 2005)
Reserves (End of 2004)
Consolidated Financial Statements


   Income Statement
   Balance sheet statement
   Cash flow statement
Income Statement
Income Statement Con’t
Balance Sheet Statement
Balance Sheet Statement Con’t
Cash Flow Statement
Cash Flow Statement Con’t
Evaluation Dimensions


   Sale and Competition
   2006’s Copper Price
   Cost Factor
   Level of recoverable reserves
   Financial Strength $ Profitability
   Net cash position
Sale Performance Comparison
Copper price
   Determined by
             London Metal Exchange (LME)
             the New York Commodity Exchange (COMEX)
             the Shanghai Futures Exchange (SHFE)
   Factors affecting copper price:
             the worldwide balance of copper demand and supply,
             rates of global economic growth, trends in industrial production and
              conditions in the housing and automotive industries, all of which correlate
              with demand for copper,
             economic growth and political conditions in China, which has become
              the largest consumer of refined copper in the world, and other major
              developing economies,
             speculative investment positions in copper and copper futures,
             the availability and cost of substitute materials and
             currency exchange fluctuations, including the relative strength of the U.S.
              dollar.
   Conclusion: modest demand for copper globally, copper price will stay
    relatively stable for most of 2006.
Copper and Molybdenum Prices
Production Cost


   High energy cost: diesel fuel, natural gas,
    electricity, and purchased petroleum.
   High copper production cost
   Mine closure also incurred large loss
Recoverable reserves

   Levels of Ore Reserves and Mill and Leach
    Stockpiles Are Subject to Uncertainty and
    PD’s Ability to Replenish Ore Reserves Is
    Important for Long-Term Viability
Mill and leach stockpiles
Mill Stockpiles & Leach stockpiles

   Mill stockpiles contain low-grade ore that has been
    extracted from the mine and is available for
    processing to recover the contained copper by
    milling, concentrating, smelting and refining, or
    alternatively, by concentrate leaching.
   Leach stockpiles contain low-grade ore that has
    been extracted from the mine and is available for
    processing to recover the contained copper through
    a leaching process. Leach stockpiles are exposed to
    acidic solutions that dissolve contained copper and
    deliver the copper in solution to the extraction
    processing facilities.
The estimated recoverable copper contained stockpile in
each mine
Financial Strength




Conclusion: PD is less leveraged on average in the mining industry
Profitability




Conclusion: net margin is higher than the industry on average for the trailing year
Net cash position




 Strength: net cash increased by $716.6m ending with $1,916.7m
Recommendation



   Short term: Hold

   Long term: Sell
         Section Agenda
 Corporate Profile
 Stock Performance

 Management

 Recent History

 Competitive Strategy

 Uranium Overview

 Industry Competitors/ Positioning
         Section Agenda
 Core Business Properties: Uranium
  production
 Diversified operations

 Reserves and Resources

 Segmented performance/ CAPEX

 Financial statements

 Evaluation Metrics

 Recommendations/Conclusions
                 Corporate Profile
   Created 1988 by the merger of two Crown
    corporations—Saskatchewan Mining Development
    Corporation and Eldorado Nuclear Limited.
   Worlds largest low cost uranium production
    company
   Core businesses:
          Uranium production 20% of world supply
          Conversion services
          Nuclear electricity generation,
          Gold mining
   Market Capitalization: $7.316 Billion (CAD)
   Listings:
    • Common Stock TSX (CCO), NYSE(CCJ)
    • Convertible Debentures (Toronto) CCO.DB
            Stock Performance
Cameco Corp. CCO-T
EST Last: C$ 41.640 Net Change: C$ 0.090 % Change: 0.22%
Bid 41.420 High 42.000 Ask 41.680 Low 41.300
EPS 1.26 Volume 1,272,811     P/E 33.00 52-Week High 46.820




Indicated Annual Div. 0.16 52-Week Low 22.325 Yield 0.39
                       Management
   Gerald W. Grandey
    President and CEO
          Appointed chief executive officer January 1, 2003.
          Joined Cameco in 1993 as senior vice-president marketing and
           corporate development.
   Terry V. Rogers
    Senior Vice-President and COO
          Twenty-five years experience in mining engineering and project
           and operations management including a wide range of positions of
           increasing responsibility in both operations and corporate
           appointments.
   O. Kim Goheen
     Senior VP and CFO
          Joined Cameco in February 1997 as treasurer and was appointed
           vice-president in May 1999.
          Appointed senior vice-president and chief financial officer August
           1, 2004.
                      Recent History
   2005
   Cameco negotiates a toll-processing agreement with British nuclear fuels
    plc (BNFL) to secure 5 million kgU of additional conversion services from
    BNFL's Springfields plant in the united kingdom

    2004
   Cameco creates Centerra gold and consolidates gold assets
   Cameco announces development of uranium mine at Inkai, Kazakhstan
   Cameco decides to proceed with construction of a new mine at cigar lake
    in northern Saskatchewan
   Cameco announces a three-for-one share split and increases its annual
    cash dividend

   2002
   All of Cameco's common shares are publicly traded after the government
    of Saskatchewan sold its remaining 10% ownership in February
   Cameco increases its stake in Bruce power to 31.6%
         Competitive Strategy

   “..Simply stated it is our objective to
    be involved in every stage of the
    nuclear fuel cycle…from exploring
    for, and extracting the raw uranium
    ore…to conversion to a purer
    product…to further upgrading
    enrichment…to manufacturing fuel
    rods…and, finally, to the generation
    of nuclear electricity.” Jerry
    Grandey President & CEO
The Uranium Fuel Cycle
              Industry Outlook
   Expected growth worldwide in nuclear reactors to
    506 by 2016 from current 440
   90 reactors under construction, on order, or
    planned for Asia alone in the next 20 years
   Inelastic consumption patterns of buyers
    exceeding uranium production annually, drawing
    down inventories
   Annual consumption = 176 million lbs U308
   Expected demand growth (annually) = 2%
   Skyrocketing uranium (U3O8) spot price: $15.55
    (2003) to $40.00 USD (2005)
The Uranium Market
        Uranium Prices (U3O8)




   Current price as of March 13, 2006 : $40 USD
    per lbs U308
           Industry Competitors
2004 World Production
Producer                     Million pounds U3O8
Cameco                       21
Cogema                       11
Energy Resources of          10
Australia Ltd.
WMC Resources Ltd.           9
Priargunsky Industrial Mining 8
and Chemical Enterprise
(Russia)
Rossing Uranium Limited      5
NAVOI Mining Metallurgical   5
Kombinat (Uzbekistan)
Others                       21
TOTAL                        104
          Competitive Position
   Long term production contracts ranging from: 2-
    10 years: average realized price 28.50
    USD/lbs U308 (approx. 81% of spot) Average
    Cost = $17.50 per lbs
   40/60 blend on fixed/spot market prices on
    delivery to major clients
   Long term UF6 conversion market price increased
    average of 74% from 2004-2006 to between
    11.75 and 12.68 per lbs.
    Current production 21 million lbs U308
   Planned production 31 million by 2010
   Largest single uranium producer and converter
     Core Business: Uranium Production

   Uranium Properties
    • MacArthur River
    • Cigar Lake
    • Key Lake
    • Rabbit Lake
    • Crowe Butte
    • Smith Ranch Highland
    • Inkai
         MacArthur River
 Flagship operation (all figures 100%
  basis)
 Total reserves: 437 million lbs. U308

 Avg. ore grade = 25%

 Annual production capacity 18.7
  million lbs. U308
 Cameco primary operator
            Cigar Lake
 Largest undeveloped high grade
  (19%) U308 deposit
 Proven + probable reserves = 232

  million lbs U308
 Expected production life = 20 years

 Production startup 2007

 Cameco primary operator
             Key Lake
 Cameco’s primary milling operation
 Production capacity 18 million lbs.
  U308
 Milling support for MacArthur and

  Cigar Lake operations
 Cameco primary operator
             Rabbit Lake
 Longest operating milling production
  facility in Saskatchewan since 1975
 First Canadian mine to introduce 7
  days in 7 days out production cycle
 Eagle point property total reserves =

  12.5 million lbs. U308
 Total production 2005 6 million lbs.

  U308
    Crowe Butte/ Smith Highland
              Ranch
 United States uranium operations:
  total annual production = 3.1 million
  lbs. U308
 Total reserves proven + probable =

  24.9 million lbs. U308
 Both properties use (ISL) In situ
  leach for extraction
 Cameco 100% operator
                       Inkai
   Cameco Kazakhstan joint venture operation
   Proven + probable reserves = 114 million lbs.
    U308
   Test mining production in 2005 = 0.8 million lbs.
    U308
   Production ramp up to 5.3 million lbs. annually
    by 2010
          Conversion Operations
   Cameco is 100% owner and operator of Canada's only
    uranium refining and conversion facilities, located in
    Ontario. These include the Blind River refinery, the world's
    largest, where uranium concentrates are processed into
    high-purity uranium trioxide (UO3), an intermediate product
    used as feed at the company's Port Hope conversion plants.

   The Port Hope facility is one of only three commercial
    suppliers of uranium hexafluoride (UF6) in the western
    world. UF6 produced at the plant is delivered to others for
    enrichment and fabrication into the fuel pellets used in
    most nuclear reactors. The Port Hope facility is also the
    world's only commercial supplier of natural uranium dioxide
    (UO2) used to manufacture fuel for the Candu reactors.
    Bruce Power Ltd. Partnership
             (BPLP)
   Operating costs 95% fixed
   Realized average price over 2005 = $58 per MWh
   Average cost of 2005 operation = $40 per MWh
   48% of output for 2006 under fixed term
    contracts
   Operating capacity outlook for 2006 up to 90%
    from 79% 2005
   The plants use about 1.5 million
    pounds U3O8 and 600
    tonnes of uranium
    dioxide conversion
    services per year
                Centerra Gold
   Cameco owns 53% interest in Centerra
   Traded on TSX under ticker “CG”
   100% un-hedged on Gold production..
   4 gold production/exploration properties
         100% of the Kumtor mine in the Kyrgyz

          Republic
         approximately 95% of the Boroo mine in

          Mongolia
         73% of the Gatsuurt property in Mongolia

          near Boroo
         62% of the REN joint venture in Nevada, U.S.
                Reserves and Resources
                                                          Cameco's                Three Months Ended                    Year Ended
Cameco Production                                           Share               Dec 31/05    Dec 31/04           Dec 31/05      Dec 31/04


Uranium production (in thousands lbs U3O8)
      McArthur River                                         69.8%                    2,645              4,005       13,066          13,066
      Rabbit Lake                                           100.0%                    1,520              1,565        6,022           5,427
      Crow Butte                                            100.0%                      200                208          832             826
      Smith Ranch Highland                                  100.0%                      397                364        1,342           1,242
      Total                                                                           4,762              6,142       21,262          20,561

Uranium conversion (tU)                                     100.0%                    2,873              2,421       11,448           9,481

Gold (troy ounces)
       Kumtor (i)                                           100.0%                   99,000          139,000        501,000         423,000
       Boroo (ii)                                           100.0%                   68,000           67,000        286,000         218,000
       Total                                                                        167,000          206,000        787,000         641,000

    (i)    Cameco's effective ownership interest in Kumtor was 33.3% for the first six months of 2004.

    (ii)   Quantity reported for Boroo in 2004 excludes 28,000 ounces produced prior to declaration of commercial production.
           Cameco's effective ownership interest in Boroo is about 53%.
                           Segment Performance
Segmented Information                                                              (a)                                     (a)
For the year ended December 31, 2005                   Uranium      Conversion    Power      Gold        Subtotal      Adjustments     Total

  Revenue                                               $690,063      $157,672    $577,825   $412,108    $1,837,668       $(525,013)   $1,312,655
  Expenses
     Products and services sold                          428,547       120,175     315,457    230,955     1,095,134        (281,102)     814,032
     Depreciation, depletion and reclamation             102,069         9,774      76,633     73,853       262,329         (64,813)     197,516
     Exploration                                          25,699           -           -       31,769        57,468             -         57,468
     Research and development                                -           2,410         -          -           2,410             -          2,410
     Other (income) expense                              (79,513)          -       109,102        -          29,589         (13,323)      16,266
     Gain on sale of assets                                 (206)         (127)        -       (1,249)       (1,582)            -         (1,582)
     Earnings from Bruce Power                                                                                             (165,775)    (165,775)
     Non-segmented expenses                                                                                                     -        117,694
  Earnings before income taxes and minority interest     213,467        25,440      76,633     76,780      392,320              -        274,626
     Income tax expense                                                                                                                   30,257
     Minority interest                                                                                                                    26,738
  Net earnings                                                                                                                          $217,631
Capital Expenditures
                              Financial Highlights
                                                                                      Three Months Ended               Year Ended
                                                                                    Dec 31/05    Dec 31/04      Dec 31/05      Dec 31/04

Financial (in millions)
      Revenue                                                                             $522          $361        $1,313          $1,048
      Earnings from operations                                                              57            46           123             125
      Net earnings                                                                          81            37           218             279
      Cash provided by operations                                                           91            59           278             228
      Working capital (end of period)                                                                                  899             555
      Net debt to capitalization                                                                                       9%              13%

Per common share
      Net earnings - Basic                                                               $0.47         $0.21         $1.25           $1.63
                 - Diluted                                                                0.44          0.21          1.21            1.56
      Dividend                                                                            0.06          0.05          0.24            0.20

        Weighted average number of paid common
         shares outstanding (in thousands)                                             174,466       172,727       173,932         171,445

Average uranium spot price for the period (US$/lb)                                       $34.79       $20.44         $28.67         $18.60

Sales volumes
       Uranium (in thousands lbs U3O8)                                                  15,506        10,642        34,208          32,299
       Uranium conversion (tU)                                                           7,007         5,354        16,642          16,896
       Gold (troy ounces)                                                              158,000       204,000       781,000         619,000
       Electricity (TWh)                                                                    2.0           2.4           9.7           10.6

Note: Currency amounts are expressed in Canadian dollars unless stated otherwise.
                                Income Statement
                                                       Three Months Ended               Year Ended
                                                     Dec 31/05    Dec 31/04      Dec 31/05      Dec 31/04
Revenue from
    Products and services                             $522,265       $360,681    $1,312,655      $1,048,487
Expenses
    Products and services sold                          341,099       214,389       814,032         623,125
    Depreciation, depletion and reclamation              66,882        59,708       197,516         180,229
    Administration                                       31,851        20,050       108,025          69,565
    Exploration                                          17,680        13,900        57,468          35,972
    Research and development                                486           570         2,410           1,911
    Interest and other [note 5]                           7,612         6,837        12,103          14,264
    Gain on sale of assets                                 (291)         (499)       (1,739)         (1,958)
                                                        465,319       314,955     1,189,815         923,108
Earnings from operations                                 56,946        45,726       122,840         125,379
    Earnings from Bruce Power                            25,226         1,560       165,775         120,722
    Other income (expense) [note 6]                     (10,607)          725       (13,989)        133,421
Earnings before income taxes and minority interest       71,565        48,011       274,626         379,522
    Income tax expense (recovery) [note 7]              (13,986)        4,656        30,257          73,285
    Minority interest                                     4,409         6,650        26,738          27,452
Net earnings                                            $81,142       $36,705      $217,631        $278,785
Basic earnings per common share [note 8]                  $0.47         $0.21         $1.25           $1.63
Diluted earnings per common share [note 8]                $0.44         $0.21         $1.21           $1.56
                                       Balance Sheet                               As At
                                                                       Dec 31/05        Dec 31/04

Assets
Current assets
     Cash                                                                $623,193          $189,532
     Accounts receivable                                                  340,498           182,951
     Inventories                                                          399,675           386,936
     Supplies and prepaid expenses                                        152,790            90,923
     Current portion of long-term receivables, investments and other        8,303               898
                                                                        1,524,459           851,240

Property, plant and equipment                                           2,871,337         2,281,418
Long-term receivables, investments and other                              196,747           732,262
Goodwill [note 10]                                                        180,232           187,184
                                                                        3,248,316         3,200,864
Total assets                                                           $4,772,775        $4,052,104



Liabilities and Shareholders' Equity
Current liabilities
     Accounts payable and accrued liabilities                            $350,399          $231,697
     Dividends payable                                                     10,487             8,652
     Current portion of long-term debt [note 3]                           156,699                 -
     Current portion of other liabilities                                  17,553            17,317
     Future income taxes                                                   73,910            38,653
                                                                          609,048           296,319


Long-term debt [note 3]                                                   702,109           518,603
Provision for reclamation                                                 167,568           166,941
Other liabilities                                                         124,780            31,086
Future income taxes                                                       444,942           533,024
                                                                        2,048,447         1,545,973

Minority interest                                                         360,697           345,611

Shareholders' equity
    Share capital                                                         779,035           750,559
    Contributed surplus                                                   523,300           511,674
    Retained earnings                                                   1,114,693           938,809
    Cumulative translation account                                        (53,397)          (40,522)
                                                                        2,363,631         2,160,520
Total liabilities and shareholders' equity                             $4,772,775        $4,052,104
                         Cash Flow Statement                             Three Months Ended               Year Ended
                                                                       Dec 31/05    Dec 31/04      Dec 31/05      Dec 31/04

Operating activities
    Net earnings                                                          $81,142       $36,705      $217,631        $278,785
    Items not requiring (providing) cas h:
       Depreciation, depletion and reclamation                             66,882        59,708       197,516         180,229
       Provis ion for future taxes [note 7]                               (36,160)      (10,860)      (51,723)         31,058
       Deferred revenue recognized                                         (5,069)       (7,585)      (44,963)        (19,085)
       Unrealized (gains ) los s es on derivatives                          4,962        (3,594)       10,513          (7,217)
       Stock-bas ed compens ation [note 9]                                  3,915         1,842        14,751           7,206
       Gain on s ale of as s ets                                             (291)         (499)       (1,739)         (1,958)
       Earnings from Bruce Power                                          (25,226)       (1,560)     (165,775)       (120,722)
       Equity in (earnings ) los s from as s ociated companies                735        (1,299)         (184)           (990)
       Other (income) expens e                                             10,254           569        16,577        (124,050)
       Minority interes t                                                   4,409         6,650        26,738          27,452
    Other operating items [note 11]                                       (14,461)      (21,122)       58,194         (22,666)
Cas h provided by operations                                               91,092        58,955       277,536         228,042
Inves ting activities
     Acquis ition of net bus ines s as s ets , net of cas h acquired            -             -             -          (3,717)
     Additions to property, plant and equipment                          (111,230)      (60,741)     (284,929)       (148,273)
     Res tructuring of Bruce partners hip                                 200,000             -       200,000               -
     Proceeds on s ale of ERA s hares                                     101,956             -       101,956               -
     Increas e in long-term receivables , inves tments and other             (688)       (6,451)       (6,077)        (10,466)
     Proceeds on s ale of property, plant and equipment                     9,307           463        10,532           1,769
Cas h provided by (us ed in) inves ting                                   199,345       (66,729)       21,482        (160,687)
Financing activities
    Decreas e in debt                                                      (1,000)      (10,256)     (167,233)        (68,783)
    Short-term financing                                                        -        14,544       (14,544)         14,544
    Is s ue of debentures , net of is s ue cos ts                               -             -       297,750               -
    Is s ue of s hares                                                      5,804        13,023        25,199          41,281
    Subs idiary is s ue of s hares                                              -             -           -           101,234
    Dividends                                                             (10,463)       (8,622)      (39,970)        (34,262)
Cas h provided by (us ed in) financing                                     (5,659)        8,689       101,202          54,014
     Increas e in cas h during the period                                 284,778           915       400,220         121,369
     Exchange rate changes on foreign currency cas h balances                 113        (8,730)       (9,662)        (15,906)
     Increas e in cas h due to accounting change                           43,103           -          43,103             -
     Cas h at beginning of period                                         295,199       197,347       189,532          84,069
Cas h at end of period                                                  $623,193       $189,532      $623,193        $189,532




Supplemental cas h flow dis clos ure
    Interes t paid                                                         $5,798        $8,776       $26,610         $35,968
    Income taxes paid                                                      $8,405        $2,057       $48,429         $18,262
Profitability versus Sector for
           CCJ/CCO
             Evaluation Metrics
   Price to book ratio: (P/BV)
         7.316billion/(4.772-2.048) =2.685 x book
   EVA (Economic Value Added)
    • EVA = Invested Capital( ROIC –WACC)
       Assuming WACC of 14.75%
       Computed ROIC of 16.05% for 2005

    • EVA based on 2005 figures with shares
      outstanding = 173 million
         Intrinsic Value= 45.48 per share
Recommendations/Conclusions
Pros:
- Premium nuclear energy producer
- Strong internal fundamentals
- Good diversification across different elements of
  cycle
- Strong positioning in Gold, Conversion, Electricity
Cons:
- Constant Regulatory/ Public sentiment danger
- Instability risks in Kazakhstan property
- Cyclicality risks to spot rates for uranium, possibly
  nearing cycle peak on U308 spot
Recommendations/Conclusions



               Speculativ
                 e Buy
               2006
       Target Price: $45.00
       Newmont Mining
          Corporation
Creating Value with Every Ounce…
Uses of Gold

   Fabrication
       Jewelry, electronics, dentistry,
        industrial, decorative uses, medals
        (Olympic gold medal is in fact made of
        silver), official coins
   Investment
       Gold bullion, official coins, and jewelry
Corporate Profile

 Incorporated in 1921
 Other than gold, also engages in the
  production of and exploration for
  silver, copper and zinc
 Has operations in North America,
  Australia Peru Indonesia, Ghana,
  Canada, Uzbekistan, Bolivia, New
  Zealand, and Mexico
Sales composition




                                     gold
                                     copper




                    (as year 2005)
Executives

   Wayne W. Murdy, Chairman and CEO (61)
   Pierre Lassonde, President (58)
   Britt D. Banks, senior VP and general counsel
    (44)
   Thomas L. Enos, Senior VP, operations (54)
   Bruce D. Hansen, Senior VP, operation services
    and development (48)
   Richard D. O’Brien, Senior VP and CFO (51)
Executive Compensation
Reserves and its Value

   As year 2004, Newmont reserved
    92.4 million equity ounces of gold
    (93.2 million for year 2005)
       North America 35 million ounces
       South America 17 million ounces
       Africa 16 million ounces
       Australia/New Zealand 15.1 million ounces
       Indonesia 7.2 million ounces
       Central Asia 2.1 million ounces

   Probable copper reserve was 9.1
    billion equity pounds.
Newmont Properties
Reserve Composition

                                North America
          8%   2%
                                South America
   16%                    39%
                                Africa

                                Australia/New
                                Zealand
                                Indonesia
    17%

                    18%         Central Asia
Nevada Operation

 Newmont owns or controls
  approximately 3,056 square miles
  (7,915 square kilometers) of land in
  Nevada
 Three Regions:
     Eastern Nevada
     Twin Creeks, Lone Tree and Phoenix
     Midas
Nevada Map and Location
Ore Flow Chart in Nevada
Minera Yanacocha, Peru

   51.35% Newmont, 43.65% Peruvian
    mining firm, Compania de Minas
    Buenaventura S.A.A , 5%
    International Finance Corporate
Minerta Yanaocha, Peru
Australia/New Zealand

 Re-entry in year 2001
 After acquiring Normandy Mining,
  Newmont is now the largest gold
  producer in Australia
 Five mining operations in Western
  Australia, Queensland, the Northern
  Territory and New Zealand
Australia/NZ Map and Location
Indonesia Operation

 Minahasa, started operation in 1996
 Batu Hijau, a large copper-gold
  deposit on the island of Sumbawa,
  started in 1999
 Recent attack on workers’ residential
  camp may raise security issues
Indonesia Map and Location
Central Asia

 Zarafshan-Newmont Joint Venture
 The operation produces gold from low
  grade oxide ore.
Commodity Price Risk

   Metal prices fluctuate
       Due to demand, forward selling by
        producers, central bank sales,
        purchases and lending, investor
        sentiment, and global mine production
        levels
   Forward sales contracts with fixed
    and floating gold lease rates
Newmont stock and gold price
Hedging Philosophy

 A non-hedger
 Viewing gold as an equivalent to
  money
 Creating paper gold is considered too
  risky
Hedge Position
Hedge Postion

 Average put option strike price =
  $348
 Spot gold price = $552


   Effective hedging strategy?
Financial Statements

 Income Statement
 Blance Sheet
 Statement of Change in Shareholder
  Equity
 Statement of Cash Flow
Income Statement
Balance Sheet
Balance Sheet Con’t
More In-depth Look into
Goodwill




   Acquisition in 2002:
     Feb 16, 2002, Franco-Nevada Mining Co. Ltd.
     Feb 20, 2002, Normandy Mining Ltd.
Cash flow part 1
Cash flow part 2
Growth Vs Industry




   Sales and EPS growth under industry
    and market index performance
(Data from Reuters ProVestor Plus Company Report)
Recommendation


         EXIT

				
DOCUMENT INFO
Categories:
Tags:
Stats:
views:6
posted:6/26/2012
language:English
pages:170
jolinmilioncherie jolinmilioncherie http://
About