Investing in Metals: Predatory Pricing and Supply Shortages

By Ann Sosnowski & Andrew Mickey

Buyout Targets: Dow Jones and Murdoch Talks "Not Complete"

Diligent Investor
Just because the DJ board of directors has reached an agreement with Murdoch does not mean the Bancroft family has, and they’re the ones to please.

Quantitative Analysis
I know what you’re probably thinking, what on earth is tungsten? Isn’t that the filament in light bulbs?

The whole investment community has been waiting to hear the fate of Rupert Murdoch’s bid for Dow Jones Company (DJ:NYSE).

There were conflicting reports that Murdoch, the owner of News Corp and giant social networking Web site Myspace, had succeeded with his $5 billion offer for Dow Jones Company and its golden prize, the Wall Street Journal.

However, the Bancroft family has replied to rumors by saying it’s still undergoing “due diligence” on its party and that the talks between DJ’s board of directors, the Bancroft family and Murdoch are “not complete.”

Of course, agreement between all three parties involved in this takeover bid by Murdoch are more convoluted than general discussions between companies being bought out or merging with each other. Just because the DJ board of directors has reached an agreement with Murdoch, does not mean the Bancroft family has, and they’re the ones to please. After all, they own 62% of the company through its dual-class share structure. And four “representatives” including family members of the Bancrofts are on DJ’s board of directors.

I’m fairly confident that the Bancrofts will give into Murdoch’s offer. While the company has been entertaining other bids, it’s a lock that Murdoch is the most skilled at leading businesses out of the offers that have been made (include Brad Greenspan’s (originator of Myspace.com) matching offer for part of the company.

If the Bancrofts want the Wall Street Journal and the other assets of DJ in good hands, then Murdoch would be the one to trust.

In other quick acquisition news in the market, Aluminum Corp. of China (ACH:NYSE), which recently bid to buy Peru Copper Inc. (CUP:NYSE), is making yet another acquisition, this time to appease its growing demand for aluminum in the People’s Republic. ACH has agreed to buy Baotou Aluminum Co. for $1.9 billion.

This is mainly due to China’s insistence on consolidating the aluminum industry to more efficiently supply the country with building materials.

On the news, ACH hit another new high before the Fourth of July of $49.43 per share. Diligent Investors are currently sitting on a tidy 57% gain… and counting.

P.S.: By recent count, 1 million Apple Inc. (AAPL:NASDAQ) iPhones have been activated by AT&T (T:NYSE). It is reported that all iPhone stocks have been depleted except at two locations: one in Pennsylvania and one in Oregon. Of course, you should know better than to believe “sell out” statistics: As with video game consoles, Apple and other technology companies create artificial demand and artificial “sell outs” by shipping only part of their stocks to stores across the country, and across the world.

AAPL hit a new lifetime high yesterday, and repeated it with a hit at $133.34 per share this morning, before dropping slightly out from overbought territory.

Quantitative Analysis
Investing in Metals: Predatory Pricing and Supply Shortages

It’s no secret the mining and mineral world has created a lot of wealth over the past few years. Copper, nickel, zinc, uranium, and dozens of other metals have doubled and tripled in value over the past few years. Anyone who got in early enough on the small companies that mine these metals is now sitting pretty.

However, the run is far from over, and there are still plenty of other opportunities out there. You see, a few metals haven’t joined in the run yet and that’s all about to change. One of the lagging metals that’s about to catch up very quickly is tungsten, a.k.a. wolfram.

I know what you’re probably thinking, what on earth is tungsten? Isn’t that the filament in light bulbs?

If so, you’re right. However, tungsten has so many other uses. Tungsten’s weight and durability make it one of the most valuable metals on the planet. And it’s used in everything from light bulbs to bullets to military armor. However, that’s not what is causing soaring demand for tungsten.

You see, thanks to its durability, high melting point and resiliency, oil drill bits, the kinds that are used to dig into the ground to discover new reserves, are made almost entirely out of tungsten.

From the Saudi desert, to the Alaskan tundra to the deepest depths of the ocean floor… if you’re drilling for oil, you’re doing it with a tungsten drill bit.

You simply won’t find an oil drill that isn’t made out of tungsten. According to the International Tungsten Industry Association, 60% of all tungsten production worldwide is used for hard metals like the ones drill bits are made from.

It’s practically the only metal in the world that can hold up under such a variety of harsh conditions.

The oil industry absolutely needs tungsten in order to continue exploration efforts to locate more of the precious petroleum that the world is demanding.

And oil exploration (requiring these kinds of tungsten drills) is experiencing a boom of its own right now, as countries around the world scramble to discover new sources of oil in an attempt to gain energy independence from unsavory partners.

This is translating into a huge surge in demand for the oil drill bits made from tungsten.

For instance, Dril-Quip (DRQ:NYSE), a Houston-based offshore drilling equipment company that uses tungsten bits for its products, recently rode the wave of demand for oil- exploration equipment to record highs.

From 2003 up until this year, Dril-Quip’s share price shot from $6.27 all the way up to $52.04… a 730% increase! And other oil drill-producing companies are experiencing very similar run-ups in value. And right along with its skyrocketing sales and share price is its insatiable demand for tungsten.

But that’s just part of the reason I’ve become so interested in tungsten. The other reason is that I’ve found a tiny company that is about to make it big in the tungsten market. It just uncovered a sizable high-grade deposit of tungsten in Northeastern Canada.

We’ve already seen shares of North American Tungsten soar 800% and Portuguese tungsten producer Primary Metals soar more than 2,000%. This is the next big find in the tungsten world. And if the gains are half as big as these other two, it will be well worth the time.