Copper has served as a bellwether for the base metals sector and that role doesn’t appear to be in jeopardy anytime soon. It has recovered significantly since the global economic meltdown and now finds itself driven by both fundamental support and investment demand.
Despite the recent gains in the copper price, equities have not kept pace. This is partially due to the uncertainty and volatility in equity markets as a whole, according to Versant Partners analyst Anthona Curic. The firm expects copper to average US$3.10 per pound in 2010, US$3.25 in 2011 and US$1.95 on a long-term basis.
With the current state of capital markets in mind, Ms. Curic recently highlighted stocks that are robust at US$1.95 per pound copper, have limited geopolitical risk, strong potential, and are led by a quality management and technical teams.
First up is Capstone Mining Corp., an established mid-tier copper producer with a diversified portfolio of attractive high-grade prodjects in excellent jurisdictions. In addition to the company’s attractive growth profile, the analyst also noted that Capstone is a potential takeover target in the near term and the market is not giving it full credit for the hedges in place.
Next, she highlighted Copper Mountain Mining Corp., whose project 300 kilometres from Vancouver is fully permitted and has received approval to being construction of its processing plant. Total reserves and resources are 4.36 billion pounds of copper, 1.8 million ounces of gold and 23.1 million ounces of silver. Copper Mountain also has a strong partner in Mitsubishi Materials Corp., which owns 25% of the company.
Discovery Metals Ltd. has a large, undeveloped copper-silver project in a potential extension to the Zambian Copper Belt. Ms. Curic noted that it is located in mining friendly and politically stable Botswana, where recent improvements in regional infrastructure have opened the area up to potential development.
Hana Mining Ltd. operates in the same area as Discovery Metals, but
offers investors a much lower market capitalization. Discovery has a
similar sized resource but has already completed a feasibility study on
the project, Ms. Curic noted.
Large cap emerging copper producer Equinox Minerals Ltd. also made the list. Its primary asset is a large, low grade, open-pitable copper sulphide deposit in Zambia. Total resources are nearly 14 billion pounds of copper, 5 billion of which is categorized as proven and probable.
Far West Mining Ltd. has a large, undeveloped copper-iron-gold project in Chile with potential for near term production. It too is considered a potential takeover target, along with another pick, Globestar Mining Corp.
Iberian Minerals Corp., a mid-tier producer of copper and zinc with producing and developing assets in Peru and Spain, has strong sponsorship through Trafigura Beheer BV’s majority ownership. Trafigura is one of the largest independent companies trading commodities on a global basis.
Lundin Mining Corp. is an established base metals producer with mostly high grade and low-cost projects. It also offers an attractive near-term growth profile and ana improving balance sheet.
Mercator Minerals Ltd. operates in mining-friendly Arizona, with its high quality project and significant low-cost resource. The company recently addressed addressed its “single asset” risk with the acquisition of Stingray Copper Inc.
Nevada Copper Corp. has a large undeveloped project with total resources of 9.3 nillion pounds of copper, 1.45 million ounces of gold, 55 million ounces of silver, and 183 million tons of iron. “A positive feasibility study for Pumpkin Hollow could make Nevada Copper an attractive take-over target,” Ms. Curic said.
Nord Resources Corp. also operates in Arizona and its production is expected to increase from 5 million pounds of copper in 2008 to 11 million pounds in 2009.
Norsemont Mining Inc. has a large, undeveloped copper-molybdenum project that could make it a potential acquirer or a takeover target.
Finally, Quadra Mining Ltd. is also considered to be a good position as a consolidator in the copper sector.