bly - blues view

Blues View

Feb market update showed that Management has learned a very valuable lesson from the GFC. They are loath to predict a return to a commodities super cycle ( Part 2. ), They dont want to disappoint by making too greater leap into the future.

May / June update will show that all excess rig capacity is utilised. The majors and jnrs traditionally bed down their finance first and then book out a drill schedule in q1 of each year. Consider:-

1. Metal / ore prices on the spot markets are soaring.
2. Lead times from green to brown field.
3. BLY advertising job now at 143 with over 100 filled in Jan - Factories in US that laid off staff have recalled them to work and are adding new employees at a fast clip.
4. Restocking by drillers and majors from the product division should be booming.
5. Price rises in key areas.

This in my view is whats happening in the background, I am also not even considering the impact on infrastructure drilling for new roads and tunnels from the world wide stimulus.

this should lead to a major repricing of BLY over the next few weeks.

so whats next ?

a. Debt and its costs within BLY have been almost wiped out.
b. BLY must be running the numbers on a 2 - 1 consolidation along with either a divy as free cash flows increase or bolt on acquisitions.
c. Acquisition ? possible ? takeover target ?

In any event BLY is unloved until management can surprise on the upside - any you can bank on that for 2010.

2011 will smash records as supply hits capacity constraints (no rigs for Jnrs as majors ramp up to full capacity.) -

Call: 2010 -

* Stock consolidation/ off market buyback - tender.
* Major upgrade in guidance in may by 25 - 30 %
* Short sellers / day traders will be wiped as the consolidation event will be fast and furious ( i.e. a Monday morning trading halt followed by the consolidation ) and lots of tears from those that sold at 0.31 when it re opens at .60+.

Based on above $1.20 by Dec.
No consolidation 0.88C by Dec

Cheers Jake.

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Op Ed only - opinion only and not to be construed as an offer to buy securities. Please do you own research.