wilson's assumptions - are they valid?

Just looking through Wilson's most recent report on HGO, and their revised valuations and target prices of $0.490 and $0.580.

Here is what Wilson is assuming:

Copper:

2012E - US$4.02/lb (about 20% above current spot prices)
2013E - US$4.10/lb
2014E - US$3.95/lb

Usually forward estimates tend to be lower than existing prices. This is reflected in the prices at which hedging can be secured - the further forward you go in time, the lower the prices get. The same goes for assumptions that are made in BFS's. They don't assume commodity prices have to rise, and in fact usually err on the side of safety and assume they will fall. Any upside is an unexpected bonus.

So, I am not sure on what basis Wilson's have such a bullish view on the copper price. What would be more informative is what Wilson's target price for HGO is at current spot prices, or below. It would more realistically reflect slowing Chinese growth and concerns over European and US growth.

Wouldn't it be nice if HGO could hedge all of their remaining production at the Wilson assumed copper prices? If only... Trouble is they can't, as those assumptions are way too bullish. Or, alternatively, would Wilson's put their money where they mouth is and buy a put option at their target price for HGO? I doubt it. In fact, I KNOW they wouldn't.

These brokers reports carry little weight, IMO. They start with a target price, and then work their assumptions back from there. Rather than start with realistic commodity price assumptions and calculate the resultant target price.

Maybe Wison's analysis simply reflects the fact that they wish to talk up the value of the shares they hold?

Yaq