snippets from charlie

Extracts from Charlie Atkins in Eureka Report.

The recent auctions that appear to be occurring in domestic steelmaking raw material producers such as Aquila (AQA) and Felix (FLX) indicate the end game is some time away. We believe there is a significant amount of end customer interest in the data rooms from well-known steel producers. However, my other small-cap bulk commodity recommendations are Gindalbie (GBG), Mount Gibson (MGX) and Brockman Resources (BRM).

This raises a very important issue, which I believe investors are not appreciating. Currently I am urging investors to buy resource stocks driven down to significantly undervalued levels by the short-term and short-sighted actions of hedge funds. I believe the recent approval to go to 14.9% of Rio for Chinalco, an arm of the Chinese government, and Nippon's donation from the Japanese government, will drive a sovereign wealth fund frenzy for global resources that will make the private equity grabfest for industrials look like petty cash.

Iron ore contract prices have just risen 85% while coking coal prices are up 300%. How can the commodity bull market be over? I know one thing for sure: it will not end through the actions of some Manhattan desk jockey.

I strongly recommend investors follow the actions of global steel producers into upstream raw materials and commodity producers in general. It is hard to believe that BHP, Rio, and Fortescue are trading on single-digit forward multiples with 50% earnings growth locked in. In addition, real long-term value has emerged in small caps like such as Gindalbie Metals, Mount Gibson Iron and Brockman Resources. The day Lakshmi Mittal stops pulling out the chequebook it's time to go lukewarm on iron-ore, coking coal and base metals but I suspect that will not be anytime soon.