News Headlines

Applications for unemployment aid drop slightly

• Fewer people applied for unemployment benefits last week, adding to
evidence that layoffs are slowing and employers may be stepping up hiring
Asian shares rise for fourth straight day
Coelho says impossible to tell whether Portugal can avoid bailout
• Bolsters belief that rescue is only a matter of time
BHP to invest billions in Australian projects
• $7.4 bln invested in iron ore operations
• $2.5 bln invested in extending life of Queensland mine by 21 years
• $400 mln invested in New South Wales site
• Shares closed 1.4% before the statements were issued
South Africa's rand hit a one-week high against the dollar on Thursday and
stocks went up by more than 1%, both getting support from higher
commodities prices
• Gold miner Harmony was the biggest gainer after a brokerage report suggested the
world's fifth-largest gold miner could be a takeover target
 Equities

Index Level % Change

  DOW Jones 12,170.56 +0.70%

  Hang Seng 22,915.28 +0.39%

  FTSE 100  5,880.87 +1.47%

  DAX  6,933.58 +1.90%

Nikkei 225  9,435.01 -0.15%

• Tech Earnings lift Stocks

• Euro gains as inflation concern trumps debt fear
• Japan earthquake could cost $309 billion
• Oil jumps $2 as Libya crisis escalates
Commodities - Libya is the start of theworries

 Libya, Africa's third-largest oil producer.

 Growing unrest in the Middle East.
 Escalating violence between Syrian security forces and anti-government protesters left 15 dead.
 The governments of Bahrain, Tunisia, Yemen and Egypt are all in various stages of disarray.
 Portugal's debt crisis continues unabated.
 If all oil production ceased in Libya, Bahrain and Yemen, oil prices could rise to $125 a barrel.
If Iran reduced production by 50%, prices could rise to $150. (Moody’s)
Commodity - global food prices surging

Wheat prices on the Kansas City Board of Trade, which track the hard-red
winter variety grown in the southern Great Plains, have surged 71 percent
during the past year
Wheat futures in Chicago are up 50 percent in the past year
 Commodity – unusual 2011

Texas, the biggest U.S. cattle producer and second-largest winter-wheat grower
Dry conditions extending to Oklahoma, Kansas and Colorado may cut crop yields in the
U.S., the world’s largest exporter
drought in Russia and floods in Australia hurt output and sent global food prices surging.
 Profile of VALE and Rio Tinto
VALE
• Is the second biggest mining company in the
world.
• Mines ore in Brazil ans ships it mainly to China
• Large distribution network, many ships ordered
in Asian shipbuilders
• Brazilian government pushing toward
management change
• Brazilian government wants VALE to invest more
in Brazil, instead of Asia

Rio Tinto
• Is the third largest mining company in the world.
• Headquarters in London and Melbourne
• Mines and processes a broad spectrum of minarals
• Biggest operations in Australia
 Comparison VALE and Rio Tinto

Vale Rio Tinto

Market Cap 168.76 134.9B$

Revenue 47.4 56.6B$

Profits 17.1 14.3B$

Price/Book 2.71 2.48

P/E 9.48 9.46TTM

Div Yield 1.40% 1.96%

 Similar patterns in 1Y stock price

Stock quote Rio 1Y Stock Vale Rio 1Y

Trading range 62.50 – 72.50 Trading range 30.50 - 35
 Scaled stockprice last 1Y
140

130

120

110

100

Vale
90
Rio
80

70

60
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1
2 0 1 2 01 20 1 2 0 1 2 01 20 1 2 0 1 2 0 1 20 1 2 01 20 1 2 0 1 2 01 20 1 2 0 1 2 0 1 20 1 20 1 2 0 1 2 0 1 20 1 2 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 0 1 20 1 2 0 1 2 0 1 2 01 20 1
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
22 /1 14 26 /6 18 28 10 22 /2 15 27 /6 18 30 10 22 /4 14 26 /5 17 30 10 22 /4 14 27 /8 18 /3 15
3/ 4 4 / 4/ 5 5 / 5/ 6/ 6 / 7 7 / 7/ 8 8 / 8/ 9/ 9 / 1 0 10 / 1 0 / 1 1 11 / 11 / 1 2 / 12 / 1 1/ 1 / 2 2/ 3 3 /

• Buy 1.03 share Rio Tinto ADS on NYSE at 67.52

• Short 2 shares VALE ADS on NYSE at 32.70
• Time Horizon 1 Year
• Rio Tinto to top of traderange, Vale to bottom, 15% difference
• Stoploss when gap widens 5%