The Year Ahead pt. 2: Base Metal Prospects

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"There are still-profitable base metals miners out there and with the prospect of rising metal prices in the year ahead this could prove a fruitful investment sector."

While the prospects for the year ahead for precious metals are perhaps easier to assess (although equally likely to be proved wrong), those for base metals are so dependent on the state of the global economy, where recovery or otherwise is so uncertain, that it makes any kind of prediction fraught with problems. One reads little in the press apart from doom and gloom as the world plunges into recession and perhaps deflation over the next 12 months.

Yet for the commodities sector all the adverse forecasting may not be as it seems. There have been huge falls in base metals prices as industrial production has been slumping and demand has fallen away. But have the falls, and the remedies for them, been overcooked?

We certainly seem to have seen this in the price fallout for commodity stocks, which bottomed in mid-October and have mostly staged pretty strong recoveries, though still remaining hugely lower than they were only a year or so ago. To a large extent this has applied to the stock market in general, but there is perhaps more vulnerability in the overall economy than there is in the commodities sector precisely because the opportunities for reducing production are far higher, and can be accomplished far quicker, in the latter.

Despite the decent rises for many base metals miners, developers and explorers seen since the mid-October lows there still have to be some excellent prospects. There are still-profitable base metals miners out there and with the prospect of rising metal prices in the year ahead this could prove a fruitful investment sector.

Overall, the big commodities price fallout should provide good opportunities ahead as the world pulls out of recession, although this may be a slow process. Some of the specialist mining funds may prove a good safe bet as the fund managers and their analysts will hopefully be doing their homework and picking out the plums amongst the huge numbers of mining companies. Good due diligence by the investor should pave the way for excellent future portfolio growth.

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