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January 24, 2011



Hey John - It's interesting that I was just looking at FCX, BHP and POT about 2 weeks ago. Yes I know they are in different markets, with different commodities driving them, but they all seemed to be at close to their 3 year high and close to their 5 year high. The interesting thing is that the global economy has been somewhat slow and these companies are booming. I'm pretty good at doing basic research, but it's hard to pull the trigger sometimes. Any thoughts on POT?


I don't know much about POT.

I know that market cap and EV levels are high but their net debt levels are lower. And, in the case of FCX, sustained higher prices of copper has enabled the company to pay down a lot of debt and return cash to shareholders via dividends and a special dividend.

The global economy has been slower in our "new normal" or really, the old normal when things are not so debt-fueled. But I like metals better because 1) we seem to be reaching the limits of existing mines in many base metals (certainly copper) and these things take time to come online 2) new metal ETF's will make the underlying a bit more frothy and 3) metal intensity is still pretty low per capita in the developing world than it is in the developed world.

My opinion about FCX - a shameless long of mine - is that it will likely go down some more before it goes up. People do pay attention to the technicals though we don't too much for long term stuff, but that it remains very cheap and will appreciate.

There is also a decent chance of a takeout since the company can now be re-levered but FCX could also be a buyer of the juniors. There aren't many strategic buyers of FCX.

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