MINING FINANCE / INVESTMENT TORPID GOLD PRICE The ‘next big thing' may be moly and uranium - Ecclestone As base metals prices suffer from a non-nuclear China Syndrome, Hallgarten's Christopher Ecclestone warns investors to beware of the ‘zombie stocks' that distract from the more attractive uranium miner equities.
In an analysis published Monday, Hallgarten & Company's Christopher Ecclestone observed, "The mining corporate scene continues to strengthen with more companies moving into the fundable category (including some that are deeply unworthy of life after death)."
"At best this gives investors trapped underwater in some stories that are no longer convincing a second chance to exit gracefully," he said.
Ecclestone noted that precious metals have stabilized "with the effect that investors have started searching out left behind sub-sectors in the mining space. The moves in the base metals have not taken them back to previous highs but some, copper in particular, have not been brought back to levels broadly above production costs."
"In looking for the ‘next big thing' the moly and uranium spaces seem the obvious candidates," he said, adding, "The ‘last big thing' that strikes us as a flash in the pan is hard-rock lithium."
In his Model Mining Portfolio: Performance Review, Ecclestone observed metals stocks "have gone into a holding pattern for their own diverse reasons the precious metals focused companies are flat to retreating while selective base metals miners are still gaining upward momentum."
Ecclestone asserted that torpor currently exists in the gold price as "the main economies are perched in the middle with the possibility of gold going either way."
"To our amusement though the silver bugs out there are slowly coming to the horrible realization that the gold-silver ratio of early 2008 (when gold was just over $1,000 and silver was $22) was likely an aberration and they shall have to content themselves with 60 to 70 to one," he advised.
Meanwhile, Ecclestone suggested, base metals "are suffering from the China Syndrome. This is not a meltdown but a controlled melt-up. The Chinese are now scrambling to correct their error in reviving prices ‘too soon' and sabotaging their various asset accumulation stratagems around the globe. Their recent attempts to talk down the market have singularly failed. They have become the boy that cried wolf at the LME warehouse. They will be wary to not push prices higher."
In what Ecclestone called "an environment of relative stasis in metals prices," he asserted the obvious candidates for the next big thing in terms of capital gains are uranium stocks and molybdenum stories.
"In both cases producers are way more attractive than wannabes," he declared. "The U-space is just too crowded with zombie stocks for them all to come back in life."
Meanwhile, Ecclestone observed, "Moly has some great producers that are still in the price dumpster. The steel sector appears to be flat on its back and yet spot purchases of iron ore by the Chinese are soaring."
"Whether or not yet another head fake, moly looks like the next mover," he advised.
"And finally, speaking of over-hyping and next movers, there is the hard-rock lithium barrow-pushing competition. Some of those stories are already starting to lose their wheel. A wheelbarrow without its one wheel is a total non-mover," Ecclestone concluded.
MOL Price at posting:
46.5¢ Sentiment: Buy Disclosure: Held
