Analysts Say Copper, Gold Stocks May Shine in 2010


"We like the overall environment for the junior mining space"

Shares of gold and copper exploration companies are the most likely to shine in the Canadian junior mining sector this year, as large miners raise their exploration budgets and scout for promising projects.

Small-cap stocks on the TSX Venture exchange enjoyed a strong run last year with the S&P/TSX Venture Composite Index gaining more than 90 percent through the course of the year.

While 2010 is unlikely to be a banner year for the sector as a whole, analysts say companies with advanced copper projects and those with promising gold assets will probably outpace the pack.

"We like the overall environment for the junior mining space,'' said Canaccord Adams analyst Wendell Zerb. "But we see 2010 as being more mixed, mostly because you typically don't just have everything go straight up—you do have periods of volatility.''

Zerb argues that above-average metal prices and a low interest rate environment bode well for the sector, while the overall weakness in the U.S. dollar translates into support for dollar-denominated metal prices.

The price of gold, which peaked in December at over $1,200 an ounce, continues to trade at historic highs, while the price of copper has rallied after the commodity crash of 2008 to well above $3 per pound.

"There has been a lot of interest in advanced copper assets and there also interest in gold-copper assets,'' said Zerb, who touts the prospects of Exeter Resource and Copper Mountain.

Exeter Resource Corp. (NYSE.A:XRA,TSX.V:XRC, Frkt:EXB) owns the Caspiche gold-copper deposit in Chile, adjacent to Barrick's Cerro Casale and Kinross Gold's Maricunga deposits. Copper Mountain Mining Corporation (TSX:CUM) has already begun construction at its namesake project in the Canadian province of British Columbia, with copper production expected to begin in April 2011.

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