TEN TO FIFTEEN YEAR UPTREND Don’t sell your mining stocks in May...

TEN TO FIFTEEN YEAR UPTREND
Don’t sell your mining stocks in May
Raymond James says long-term and seasonal trends support investment case for mining equities.

Author: Tessa Kruger
Posted: Tuesday , 01 May 2007

JOHANNESBURG -

Investors should not follow the seasonal trend of selling shares in May but should stay long or add to positions in mining stocks this month.

Tom Meyers, base metals and mining analyst of financial services company, Raymond James, says from his investment perspective both the long term cyclical and short-term seasonal effects of metal supply and demand support the investment case for mining equities at the moment.

Although metal equity share prices have increased by almost 15% from lows in March 2007, investors should not forget about the positive long-term outlook for commodities and company drivers such as production growth, delivery of feasibility studies, exploration results and merger and acquisition activity.

"We believe we are in year five of a ten to 15 year up-trend and better returns are lying ahead."

Meyer adds that each "pull-back" in market values presents a good buying opportunity.

"Given the recent share price strength and the "sell-in-May" mentality potentially setting in, any inclination to ‘underweight' the sector should be reconsidered."

Further supporting the investment case and positive performance in the sector is continued demand from emerging economies while the mining industry is struggling to keep up with demand.

In terms of seasonal factors, current low levels of inventory do not provide enough of a buffer to prevent sharp and sudden increases in prices.

And the probability of further price spikes is set to increase as temperatures rise and seasonal factors spur demand.

Meyer continues to see "great value" in the sector with base metal equity producers now trading at P/NAV of 0.82 times.

He recommends First Quantum, Frontera Copper, Equinox Minerals and Chariot Resources as the most attractive ways to taking advantage of the cycle at this point.

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