Still a nugget or 10 beneath the resources bull dust By: Helena...

Still a nugget or 10 beneath the resources bull dust



By: Helena Keers.



Small miners can deliver big gains for investors in 2007, writes Helena Keers.
As many investors developed a taste for speculative resource stocks over the past few months, mining analysts have come up with a top-10 list of mining and oil and gas hopefuls which could hit the big time in 2007.
"It's hard to find something that hasn't doubled already," Tricom analyst Hayden Bairstow says, "but share price appreciation in 2007 will be much bigger for smaller resource stocks than for larger resource stocks."
The hard part is sorting the gold from the fool's gold in a bull market, but as independent analyst and author of StockAnalysis Peter Strachan says: "When the music stops you want to have a solid chair."
So who are the favourites to race ahead in 2007?
Analysts tip gold companies Agincourt Resources, Northwest Resources, Medusa and Tamaya Resources; oil and gas companies Amadeus Energy and Incremental Petroleum; uranium player Bannerman Resources; and diversified companies Albidon, Fox Resources and Havilah Resources.
Many analysts agree that the gold sector is undervalued. "We favour gold and uranium as commodities for 2007," DJ Carmichael analyst Paul Adams says. "China and India will provide support to base metals, but we might see prices coming off just a tad. We think the fundamentals are strong in gold and uranium."
His top tips are Northwest Resources and Medusa. "I believe within a three-year period, Northwest Resources will have Australia's highest-grade goldmine."
He says the company expects to mine gold at a grade of 46 grams. "This is phenomenal against a norm of 2 to 3 grams, and the grade increases with depth," he says. "The company also has an excellent technical team. We think that's a really good story."
Adams says Medusa is ramping up its production in the Philippines from 40,000 ounces a year to 100,000 ounces a year.
His sentiments are shared by Gavin Wendt at Fat Prophets who rates gold miner Tamaya Resources.
"We are very positive on the outlook for gold," Wendt says. "Tamaya Resources picked up a project in South America. There's a lot of upside there and it's a very good company."
He says there is a lot of North American interest in South America mining and a number of new discoveries have been made there, pointing to the mines of South American gold prospector Mundo Minerals.
"Some analysts compare the Brazilian gold industry to the Australian gold industry in the 1980s," Wendt says.
Another analyst, Keith Williams from Wilson HTM, prefers gold miners Agincourt Resources and Kingsgate Consolidated, which he considers undervalued due to uncertainty over its leases.
One uranium stock that has caught analysts' eyes is Bannerman. Despite its having risen 2000 per cent so far this year, Wendt says Bannerman is a great address play since it is situated adjacent to Paladin Resources and Rio Tinto in Namibia. Market experts also agree that miner Fox Resources is another with the potential to move up as it steps up production.
Another eye-catching diversified miner is Havilah Resources. This company is a favourite of DJ Carmichael analysts James Wilson and Peter Strachan. The company has formed a joint venture with Chinese group Heilongjiang Resources to undertake a feasibility study on the Mutooroo copper-cobalt deposit near Broken Hill and then develop the mine.
"Havilah chairman Bob Johnson, who is also the founder of Maptek, which produces Vulcan mining software, could have three projects coming on at once with Havilah," says Wilson, noting that the projects are worth $80 million to $90 million undeveloped and that Johnson considers Havilah to be a potential $6 stock. Its shares closed on Friday at $1.14.
Meanwhile oil and gas stocks are also on a few shopping lists for 2007. Wilson HTM's Williams favours Arrow Energy.
"We've seen the emergence of the coal-seam gas sector in 2006," he says. "We've seen AGL and Santos starting to get involved in the energy and so you're likely to see repricing."