Mineweb

Ranking copper stocks

Listed specialist copper miners, worth USD 69bn, now rank as the world's hottest performing equities subsector.

Author: Barry Sergeant
Posted: Wednesday , 08 Apr 2009

JOHANNESBURG -

Amid a cacophony of discussion over the "appropriate" level for copper metal prices, listed copper stocks have assumed price leadership of the global resources sector, and likely rank first across all sectors. The development, seen in the past few days, has (only just) seen listed gold stocks pushed aside, for the first time in months. Gold bullion prices have been wobbly, just as copper has zoomed from multi year lows of USD 1.28/lb in December 2008 to levels within fractions of USD 2.00/lb, just under half the all time record seen in mid-2008 at USD 4.08/lb.

Classifying copper stocks is no simple task. Chile's Codelco, the world's biggest, is State-owned and unlisted; Freeport-McMoRan also ranks as the world's biggest producer of molybdenum, and also as a Tier I gold producer; BHP Billiton ranks as the world's biggest diversified resources stock, while Xstrata and Rio Tinto rank as diversified miners with a good number of other interests.

At this stage, a selection of 60 copper mining specialists have bounced by 136%, measured on a weighted basis, from stock price lows seen late in 2008. The very best performing stocks under the classification tend to be developers, rather than producers, indicating the possibility that investors are chasing potential acquisition targets, which could still be considered reasonably priced.

The top 12-month composite price performance has come from Canada-listed Northern Dynasty, up nearly 300% from its stock price lows. It's not rare for copper and gold to be found in the same basket; Northern Dynasty's Pebble project in Alaska (where Anglo American, a diversified miner with large in-house copper production has a stake) contains a gigantic resource of 72bn pounds of copper, 94m ounces of gold and 4.8bn pounds of molybdenum; silver, palladium and rhenium are also found in the deposit.

Sitting among the top performers as well are London-listed Monterrico (with its Rio Blanco copper-molybdenum deposit in northern Peru, one of the largest undeveloped copper resources in the world), Canada-listed Chariot (with its very big Marcona copper property in Peru), US-listed Augusta Resources (with its Rosemont, Arizona, deposit expected to produce 221m pounds a year of copper, plus molybdenum and silver once it begins production in late 2011), Canada-listed Imperial Metals (with its Mount Polley open pit copper-gold producing mine in central British Columbia, and its Huckleberry open pit copper-molybdenum producing mine in northern British Columbia), Centenario (busy merging with Quadra), the relatively small African Eagle, Corriente.

(with its Corriente copper belt asset in Ecuador, it may become a partner of Tongling), Frontera (which produces copper cathode from the Piedras Verdes operation in Sonora, Mexico, after reaching full production there in May 2007, and Yunnan Copper.

At the other end of the scale, there are a number of specialist copper stocks with prices that have recovered relatively well, but remain deeply under the water. Metorex, which ran into interesting times with its Ruashi project in the Democratic Republic of the Congo, sits with a stock price that is still more than 90% off its highs. Katanga Mining sits with a similar predicament, along with other DRC names Tiger Resources and Africo; better recoveries have been seen so far from Camec and Anvil (although both are also more than 90% below stock price highs).