MARKET ANALYSIS AND COMMENTARY


2010 Grassroots Copper Picks

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By: Peter Szafranski, MineralStox.com.

Copper prices rose to a 16-month high this week on speculation that demand may build as the U.S. economy improves – and are now over 170% above their December 2008 lows. Dr. Copper seems to be making a strong case for the world’s economic future.

Copper has had an incredible recovery over the past year and in the past two weeks has literally shot up. This gives the big copper producers huge profit margins, and even for the mid-tier producers, who generally have higher costs.
 




The opportunity now lies with exploration stocks with big copper discoveries - these should get handsomely rewarded as investment capital gets redeployed deeper into the sector, looking for mispriced opportunities. Which companies should investors be watching in the junior mining market as 2010 gets underway?

Here are three copper exploration ideas for investors. These stocks have either grassroots projects that could become real deposits this year, or old deposits that could be greatly enlarged & add value for investors.

SVIT GOLD (SDP-TSXv; $0.25)

Shares Out: 84.5 million now/180 million after property vend-in

This new company has optioned the La Verde copper porphyry in Mexico from a subsidiary of Teck Resources. Svit is about to be renamed Catalyst Copper, with symbol CCC on the TSXv, probably by the end of January.

There is an historical, non-NI43-101 compliant resource on La Verde, and the company has hired an engineering firm to produce a NI 43-101 Technical Report on the property. Management clearly believes the deposit can be much bigger – as does Teck, or they would have sold it outright.

The way the deal is structured – where Svit can earn 60% for $16 million, and then buy out Teck for another $20 million – is telling. In mining speak, this means that if La Verde ends up being a medium sized deposit, Teck will sell it to Catalyst Copper, but if it’s a huge deposit, they’ll probably just buy them out.

Svit/Catalyst is managed by John Greenslade and Terry Hodson, who were key members of the team that got the Boleo copper cobalt deposit in Mexico into development. So they have done this before. The company is also backed by the Endeavour Financial group, who have created some of the top performing junior mining stocks of the last 10 years.

AMANTA RESOURCES LTD. (AMH-TSXv; $0.09)

Shares Out: 55 million

Yes, it’s cheap, but the 200 km˛ Luang Namtha copper project in the northern part of Laos could surprise the market this year. It’s a relatively unexplored area of the world. And Amanta optioned out 51% of the project to Japan Oil, Gas and Metals National Corporation (JOGMEC) a state owned Japanese company, for $3.75 million in expenditures.

Amanta remains the operator and earns a 10% fee for managing the program, and has the ability to pay back JOGMEC their expenditures & reclaim the project.

Outcropping high-grade silver-copper material was found to occur over a very large – 6-8 km˛ – area. Copper values in these outcrops reach up to 6% with accompanying silver values of up to 14 oz/t.

President Gerald Wright and his technical team have a lot of connections in Southeast Asia, having lived and worked there for 20 years.

CONSTANTINE METAL RESOURCES LTD. (CEM-TSXv: $0.24)

Shares Out 67.9 million

Constantine has made one of the few, true new VMS discoveries in an area with other high grade and large VMS deposits – the top of the Alaska panhandle - such as Greens Creek and Windy Craggy.

Gerald McVeigh and his team have discovered two zones on this mountainous deposit, which are called RW and South Wall. In 2007, one of the discovery holes hit 4.1% Cu, 7.4% Zn, 0.40 g/t Au, 51 g/t Ag. So this is a high grade and potentially large target.

Management anticipates there is near term potential to define a 10-20 million tonne high-grade resource, with longer term potential to develop a +50 million tonne mining camp.

An initial resource estimate is expected in early 2010, which could be a catalyst for its share price. Constantine also has a $5 million exploration plan for 2010 to expand South Wall & RW resource. There is clearly grade, now they need to find size.

Investor enthusiasm for copper, obviously, goes up and down with the price of the commodity.

Despite the recession early in 2009, copper demand from Asia grew by 18% over 2008, thanks to China’s commodity appetite.

Several analysts are predicting that in the first quarter of 2010, copper prices could experience a correction due to flat growth in Chinese demand. However, from the second quarter of 2010, a combination of demand recovery in developed countries and a possible supply clutch may push the LME prices of Copper toward $4/lb..

Data from the OECD economies suggest that the recovery is picking up pace while in the U.S. improving car sales, a ninth straight monthly rise in home sales, slowing job losses and continued growth in manufacturing are all creating a picture of strong recovery in 2010.

Even limited demand recovery combined with today’s looming supply crunch means investors will get handsomely rewarded for grassroots copper discoveries.