Seeking More Gold at Newmont

Newmont Mining Corp. (NEM) is one of the world's largest unhedged gold producers. Gold prices are skyrocketing due to higher demand, U.S. trade/budget/currency issues and global instability. Declining grades are pushing up mining costs prompting the company to cut costs. As a result, we rate the shares a Hold, with a target of $47.50 due to high valuation and declining mine quality, despite the improving fundamentals. This is 22.1x our 2008 estimate.

Gold could average $1000/oz in 2008 due to dollar weakness, global instability, U.S. trade/budget deficits and low interest rates. Being an unhedged gold producer, the company reaps immediate benefits from these trends. The cost-cutting initiatives are primarily focused on energy. Commercial production at the Nevada plant is expected to begin in the second quarter, which will reduce Nevada's costs applicable to sales by approximately $25 per ounce.

Newmont expects the start-up of its Boddington mill in Australia in late 2008 or early 2009. The company completed 99% of the construction of Yanacocha gold mill in Peru by the end of the first quarter of 2008.

Newmont has also acquired a controlling interest in Miramar Mining Corporation that controls the Hope Bay Project. Recently, the company entered into three joint ventures with Kisa Gold mining to explore gold deposits in Alaska. It has also formed a strategic alliance with Cardero Resource Corp., to explore for a variety of gold deposit types in Argentina. Further, Newmont plans to enter into a joint venture with New Jersey Mining Company for gold deposits in Idaho.

The company has earmarked between $220 $230 million for exploration and is planning to mine between 5.1 million 5.4 million oz of gold in 2008.

Lincoln Electric at a Premium

Lincoln Electric Holdings Inc. (LECO) is a leading manufacturer and reseller of welding and cutting products. The company has spent the last couple of years shifting manufacturing facilities to low-cost countries and expanding production capabilities to fast-growing markets in China and India.

Going forward, we expect LECO to benefit from the welding product demand created by the boom in infrastructure spending, especially in the oil & gas sector. But, there is always the risk that projects could get delayed if commodity prices collapse. Given the macro risks, we initiate coverage of LECO with a Hold and a price target of $80.00 per share, which is 15.5x our FY08 estimate of $5.16.

Lincoln is benefiting from the increase in energy-related projects that drive demand for its industrial welding machines and consumables. The oil & gas infrastructure spending continues to drive sales and offset the weakness in soldering and brazing products from the U.S housing slowdown. The same goes for Europe. In Latin America, sales have grown by more than 30% in the last couple of quarters. The Middle East economies are also spending strongly on energy-related investments.

LECO's healthy balance sheet affords it the flexibility to finance its future growth requirements. Its business model throws off substantial amounts of free cash flow. But we remain concerned about inflationary pressures, slowing growth in the U.S and Europe and the potential for a reversal of the commodity boom.

We have valued Lincoln Electric using the P/E valuation metric and forward earnings estimates. At its current price, LECO trades at a P/E of 15.5x our FY08 EPS estimate of $5.16. This is a premium to the industry median multiple of 11.2x.

Good Entry Point for Amag Pharma

Amag Pharmaceuticals Inc.'s (AMAG) key drug candidate, Ferumoxytol, for the treatment of anemia in patients with chronic kidney disorders, is safe and efficacious. We expect the drug to receive approval from the U.S. Food and Drug Administration in late October. We maintain our Buy rating on the shares.

From currently available clinical evidence, over 1,700 patients indicate an excellent safety profile for the drug with lower incidents of heart problems. The company will also initiate additional phase III trials of Ferumoxytol for the treatment of iron deficiency anemia (IDA) in patients with abnormal uterine bleeding and for the treatment of IDA due to other diseases like cancer and inflammatory bowel disease later in 2008.

We are optimistic of the drug receiving approval for one or more of these indications by 2011, thereby driving growth in the post-2011 period. Peak sales of Ferumoxytol could reach $500 million.

The share price of AMAG has declined sharply in recent times due to the broad market environment. We believe current valuation is attractive and represents a good entry point for investors. We arrive at the price target of $70 by using our 2010 revenue of $203.7 million, multiplied by a P/S multiple of 9.6x and divided by the shares outstanding of 17.8 million, discounted at 25% for two years.