copper prices

AMERIGO RESOURCES $0.60 (Toronto symbol ARG; SI Rating: Speculative) (604-681 -2802; www.amerigoresources.com; Shares outstanding: 93.4 million; Market cap: $56.0 million) processes copper from the tailings (waste rock) from Chile’s El Teniente, the world’s largest underground copper mine. In the three months ended June 30, 2008, Amerigo’s revenues fell 2.6%, to $31.2 million from $32 million a year earlier. (All figures except share price in U.S. dollars.) Earnings per share fell 36.4%, to $0.07 from $0.11. Cash flow per share fell 30.8%, to $0.09 a share from $0.13. Amerigo shares are down lately along with most other junior mining stocks. As well, copper prices have dropped over 41% from a high of $4.10 in June, to $2.40 today. Still, the long-term production outlook for the company is positive, and copper prices should recover with the economy....

THE BOEING CO. $52.42, New York symbol BA, has agreed to a new contract with its striking machinists union. The strike began in early September, and probably cost Boeing $100 million a day in lost revenue. The company hopes this new agreement will help it secure a new contract with its engineers and technical workers, whose current contract expires on December 1, 2008. Meanwhile, Boeing’s third-quarter earnings fell 34.3%, to $0.94 a share from $1.43 a year earlier. The decline was mostly due to the strike. Revenue fell just 7.4%, to $15.3 billion from $16.5 billion, as strong growth at its military products division helped offset lower sales of commercial planes. Boeing’s order backlog now stands at a record $349.4 billion, which is equal to over five times its annual revenue. The slowing economy could prompt some airlines to delay or cancel their orders. However, about 90% of the backlog for commercial jets comes from overseas airlines, many of which receive financial subsidies from their governments. Demand for new fuel-efficient planes, such as the 787 Dreamliner, also remains strong....

ENCANA CORP. $94.20, Toronto symbol ECA, gained 10% this week after it decided to split itself up into two companies – one focusing on natural gas, the other on oil sands and oil refineries. The gas company will keep the EnCana name, while the oil company will assume a new name. Shareholders will receive one new common share in each new company for every EnCana share they hold. Investors will not be liable for capital gains taxes until they sell their new shares. EnCana intends that the initial combined dividends of the two companies will be equivalent to its current annual dividend rate of $1.60 U.S. per share (1.7% yield). EnCana aims to complete the plan in early 2009. The EnCana situation is a little different from a typical spinoff in that the two portions are of comparable size. More often, the company that is created and handed out or spun off to its shareholders as a special dividend is much smaller than the parent....

YAMANA GOLD $15.35, symbol YRI on Toronto, reports that earnings excluding one-time items were $0.06 a share in the three months ended December 31, 2007, compared to nil per share a year earlier. (All figures except share price in U.S. dollars.) Cash flow per share rose to $0.07 from $0.01. Revenues more than tripled to $218.6 million from $60 million. Earnings rose even though operating costs were higher and the Brazilian real rose 20% against the U.S. dollar. Most of Yamana’s costs are in Brazil, while the metal it sells is priced in U.S. dollars. Lower copper prices also hurt profits. Despite the higher profits, the stock fell because its earnings failed to meet consensus expectations. However, Yamana’s recent acquisition of Meridian and Northern Orion, plus earlier acquisitions, will give it an estimated 1.3 million ounces of gold production in 2008, and up to 2.2 million ounces by 2012. The company could generate more than $2 billion in cash flow annually by 2010....

AUR RESOURCES $21.60 (Toronto symbol AUR; SI Rating: Speculative) (416-362-2614; www.aurresources.com; Shares outstanding: 98.4 million; Market cap: $2.1 billion) mines mainly copper. It operates the open-pit Quebrada Blanca and Andacollo copper mines in northern Chile. Aur’s cash flow rose 48.5% in the three months ended December 31, 2006, to $107.4 million or $1.10 a share, from $72.3 million or $0.76 a share. (All figures except share price in U.S. dollars.) Aur now trades at 4.2 times its annual cash flow per share. Total debt stood at $93.8 million, or 14% of shareholders’ equity, at the end of December, 2006. The company also holds $630.3 million or $6.42 a share in cash ($7.58 Cdn.). Aur’s shares have a dividend yield of 0.5%. The company also paid a special dividend of $1 Cdn. a share in January, 2007. Aur is working to double its copper production over the next three years. It recently started production at its Duck Pond copper-zinc deposit in Newfoundland. The company also recently bought a further 27% interest in the Andacollo mine for $103 million U.S. This transaction increased Aur’s interest in the mine to 90% from 63%. The company is also developing a new deposit at the Andacollo mine. It expects that $336 million U.S. project to start up in 2009. The company could further add to output through acquisitions....

AUTODESK, INC. $41.06 (Nasdaq symbol ADSK; SI Rating: Average) (515-507-5000; www.autodesk.com; Shares outstanding: 230.0 million; Market cap: $9.4 billion) jumped recently after the company said it expects to report record third quarter sales of $457 million. That’s up 21% from sales of $378.3 million in the third quarter of 2005. Autodesk makes AutoCAD, the world’s top selling computer aided design program. About four million architects and engineers in over 100 countries use it to design and test new buildings and products. This business supplies nearly 90% of its revenue. The remainder comes from programs that filmmakers use to create special effects. Customer adoption of Autodesk’s 3D products is increasing, and customer demand for the company’s 2D software remains strong....

When the Resources sector is booming, as it is now, it’s easy to think we’ve entered a new era of eversoaring prices. That’s a common belief today, due to growing demand for resources in China, India and other developing countries. However, as the saying goes, “The best cure for high prices is high prices.” For instance, copper prices have risen nearly five-fold from lows of a few years ago. You can bet that copper users are looking for ways to use less copper, with product re-design or by switching to cheaper materials....

ALCOA INC. $35.99, New York symbol AA, aims to sell or spin-off its consumer aluminum products business, best known for Reynolds Wrap, by the end of 2007. It will also sell two of its smaller automotive parts operations. These businesses account for 16% of Alcoa’s total revenue, but only 3% of its earnings. These operations have less profit potential than Alcoa’s core aluminum production operations, so selling them makes sense. This will make Alcoa more sensitive to world aluminum markets, but aluminum demand and prices will probably remain high for at least the next several years. Alcoa is a buy....