Copper Mountain Prospects Good
BAY STREET-Gold, copper juniors poised to shine in 2010
* Exploration spending likely to rebound in 2010
* More M&A likely as equity markets return to normal
By Euan Rocha
TORONTO, March 6 (Reuters) - 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
<.SPCDNX> 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 owns the Caspiche gold-copper deposit in Chile,
adjacent to Barrick's Cerro Casale and Kinross Gold's
Maricunga deposits. Copper Mountain has already begun
construction at its namesake project in the Canadian province
of British Columbia, with copper production expected to begin
in April 2011.
FOCUS INTENSIFIES
The focus on small-cap miners will intensify as large
players race to secure promising assets. Barrick's recent suit
against Goldcorp over the El Morro copper-gold project
in Chile points to the looming scramble for assets.
[ID:nN13225887]
Moreover, the global economic crisis and credit crunch
forced most majors to slash capital expenditure spending last
year. The Metals Economics Group estimates that exploration
spending plummeted 42 percent to $7.7 billion in 2009.
"We expect to see a rebound in exploration spending in
2010 and more interest on the part of producing companies to
look very closely at high quality juniors," said Dundee
Securities analyst Ron Stewart.
Hundreds of juniors will vie to attract the interest of
investors and large miners at the upcoming PDAC Convention, one
of the sector's largest annual gatherings that opens in Toronto
on Sunday.
INCREASED M&A
The return to normalcy in equity markets and a slew of
equity financings through 2009 have led analysts to believe
that we will see more M&A deals in 2010.
"In a vibrant equity market joint venture deals, where
majors option into a project are less common than equity
stakes, or acquisitions," said Stewart.
Versant Partners analyst Anthona Curic sees Far West Mining
, which owns the Santo Domingo project in Chile, as a
potential takeover target. Quadra Mining has already
acquired an 8 percent stake in the company.
Curic also touts the prospects of Nevada Copper ,
which owns the Pumpkin Hollow copper project in the United
States. Capstone Mining has bought an 11 percent stake
in the exploration company.
"We didn't see an overwhelming amount of M&A transactions
last year. But now that everyone is a little bit more comforted
with the economic environment, companies will start looking at
their growth profile," said Curic.
(Reporting by Euan Rocha; Editing by Frank McGurty)
((euan.rocha@thomsonreuters.com; +1 416 941 8185; Reuters
Messaging: euan.rocha.reuters.com@reuters.net))
Keywords: COLUMN CANADA MARKETS/