Massive flooding in northeastern Australia has been devastating to local residents but there's a silver lining to be had for shareholders of Teck Resources Ltd. , a key producer of metallurgical coal. All major coal miners in the affected Bowen Basin in Queensland have had to suspend deliveries to customers, leading to a sharp upturn in spot coking coal values.
Prices for spot hard coking coal have already increased by at least $20 (U.S.) from late November to more than $250 per tonne, according to Platts Coal. And there may be further room for prices to rise, as news reports from Australia suggest that the flooding is more severe than that in 2008 which caused a price spike to more than $300.
In a research note today, TD Newcrest analyst Greg Barnes also notes that weather forecasts for Queensland suggest that the monsoon rain could persist through the first quarter of 2011, bringing with it potential for further production challenges. Of the 264 million tonnes of seaborne coking coal expected to be shipped during 2010, about half was expected to originate from the Bowen Basin.
Mr. Barnes raised his forecast for 2011 coking coal by $20 to $240 per ton, and bumped up his prediction for 2012 by $35 to $235. "The loss of production should further tighten an already supply-constrained market, leading to higher prices," he said, adding that infrastructure constraints should continue to limit coking coal supplies hitting the market over the next several years.
Upside: Mr. Barnes hiked his 12-month target price on Teck by $10 (Canadian) to $75, and the stock remains on TD Newcrest's "action buy list."
Oil States International Inc. is "one of the more compelling stories in the oil patch," as recent acquisitions will bring additional growth avenues, further oil sands expansion is expected, and a ramp-up in global deepwater production should improve sales and margins, said Canaccord Genuity analyst John Tasdemir.
Upside: Mr. Tasdemir hiked his price target to $79 (U.S.) from $65.
Apple Inc. continues to see strong sales of the iPhone 4 and iPad, according to Canaccord Genuity's latest store checks. Analyst T. Michael Walkley hiked his fiscal 2011 iPhone unit sales estimate to 67.3 million from 65.5 million, and raised his iPad unit sales estimate for calendar year 2011 to 30.3 million from 26.9 million.
Upside: Mr. Walkley maintained his "buy" rating and $421 (U.S.) price target.
Iamgold Corp. released 2011 guidance that suggests higher-than-expected operating costs, according to CIBC World Markets Inc. analyst Barry Cooper. Still, "there is no other million-ounce-per-year producer that offers less expensive exposure to gold production," Mr. Cooper maintained.
Downside: Mr. Cooper lowered his price target by $1 (U.S.) to $27 and continues to rate the stock as a "sector outperformer."
Agnico-Eagle Mines Ltd. is faced with increasing capital expenditures and rising costs, partly due to significantly lower grades at its Pinos Altos mine in Mexico, said CIBC World Markets Inc. analyst Barry Cooper. Mr. Cooper estimates Pinos Altos has lost almost 25 per cent of its value amid new mine plans.
Downside: Mr. Cooper cut his price target by $2 (U.S.) to $100, but added that the company "will continue to post some of the best growth for large cap producers."
Darcy Keith