Was scrolling through the AGO posts and came across this post...

Was scrolling through the AGO posts and came across this post from ausjpn dated yesterday.

While it is not IGR related, I thought it was interesting and also there is a slight mention of IGR in it, so I copied and pasted here. Thanks ausjpn if you read this:

WHILE acknowledging that he has been proved wrong more than once, Hartleys resource analyst Andrew Muir nevertheless remains cautious and conservative, opting to forecast commodity prices on the lower rather than higher side. Just in case.

He has seen the market rally, he has heard the bullish talk and he is feeling reassured that the Chinese economy -- the key to all this -- is going along all right. So far, and assuming demand for its exports will pick up. But Muir looks at the stockpiles on the London Metal Exchange. Those figures make him think there has to be a pull back in commodity and share prices in the near term.

Aluminium stocks, at the time of writing, were at a 52-week high of 4.57 million tonnes. Copper inventories are certainly way down on their year high but almost double what they were a year ago.

Lead inventories were at a 52-week high. Zinc, too. And nickel stockpiles were not too far off their high for the past year.

Muir also sees some stock prices getting a bit speculative. Notwithstanding its spectacular copper intercepts north of Meekatharra, he believes that Sandfire Resources (SFR) is just one stock that has got ahead of itself.

"It's just too frothy at the speculative end (of the market) at the moment," he says.

His advice is to look for resource stocks with upside. And that means having a long mine life, low cash costs and good potential for further exploration success. Switch to quality, in other words.

"If there is a pull back, these sort of stocks will still be all right. There'll be a flight to quality."

He cites, as an example of the frothiness, the market capitalisation of Sandfire, which is in the early stages of drilling with no indication that there will be an economic resource, compared with that of Jabiru Metals (JML), a company that has an operating mine in Jaguar (and is producing zinc at the lower end of the cost spectrum) and has raised $11.5 million to get its Bentley deposit into production. Yet there is not a great deal of daylight between the values ascribed by the market to the two companies.

Atlas Iron (AGO) is another quality stock in his opinion, a company that has shipped its first iron ore through Port Hedland and has several other discoveries to advance. Muir describes Atlas as nimble and able to get projects going with low capital costs, something you don't see too often in the iron ore sector.

He likes gold and thinks the metal is holding up well at $US900 ($1094) to $US950 an ounce.

He also likes Gold One International (GDO) whose Modder East mine in South Africa had its first gold pour at the end of June.

For nickel, his standout stock is Western Areas (WSA), which has shown just how important good grades are at its Forrestania mining operation. Another quality stock in his view is Riversdale Mining (RIV), with its potential to double the coal resource at its Mozambique mine.

By contrast, Gavin Wendt at Sydney-based investment firm Fat Prophets is pretty well sitting on his hands at present, not prepared to recommend buys on just about any stock, apart from, possibly, the big diversifieds, BHP Billiton (BHP) and Rio Tinto (RIO).

"I think we're in a recovery, but we've recovered too fast," is his concern. The basket of commodity prices is up 60 per cent this year and he doesn't expect the next leg upwards until next year.

Before then, alas, he expects a pull back in metal and stock prices some time before December 31, most probably in the final quarter of the calendar year, and it could be of the magnitude of as much a 20 per cent downward leg.

The prices, in his view, are again being propelled by investment sentiment and speculation, not by demand. The only thing he would feel confident buying at the moment would be gold and other precious metals stories. "Generally, I'm keeping my powder dry," he adds.

But there are still plenty of "buy" recommendations lobbing into client inboxes. Sydney-based Stock Resource, for example, in recent weeks has given the thumbs-up to Senegal gold producer Mineral Deposits (MDL), Integra Mining (IGR), which has gold southeast of Kalgoorlie, Cue Energy (CUE) and Innamincka Petroleum (INP).

Look at most investment firms and brokerages covering the resources sector, and you'll find they see some buys out there, despite the run-up of recent months. Warwick Grigor at BGF Equities is also fairly sanguine, partly because he thinks we may be misunderstanding what is happening in the markets. That doesn't mean to say that he's throwing caution, and his money, to the wind.

Grigor expects some correction, some time, and prices could come off as much as 10 per cent.

But he's a big-picture person. Maybe, he says, the period 2003 to 2007 was just the first leg of the super-cycle, not the entirety of it.

Historically, the first leg of a bull market is the most aggressive and steepest; the next leg upwards is far more measured. That's what we may be seeing now, in his opinion.

Last year's bust was due to the speculative element of the commodities market getting out of hand. "It got to a stage where speculators were the market," he argues. The hedge funds were forcing the prices up and putting pressure on the main buyers, the Chinese.

Then we had the big de-leveraging, and China took advantage of the price collapses to stock up, to be in a position where -- if the speculators took the lead again -- they could stop buying commodities, use their stockpiles instead, and cut the speculators off at the knees.

Grigor sees money on the sidelines, waiting for a correction as another chance to get set in stocks.

So he is also watching and waiting. He likes the copper stories at Equinox Minerals (EQN), which is in Zambia, and PanAust (PNA) with its project in Laos that could have a mine life of 20 to 40 years. Next month Cloncurry's CuDeco (CDU) will complete its definitive feasibility study, and then we should know more about one of Australia's most ambitious copper exploration stories.

Grigor thinks the slimmed down OZ Minerals (OZL), with its Prominent Hill copper mine, will provide good trading opportunities and the shares will track the red metal's price. He is a big believer in uranium and the future of nuclear energy. He likes Peninsula Minerals (PEN), of which he is a director. This is a stock he thinks has been flying under the radar while picking up more ground positions, although it's a day-trader favourite.

Grigor watches Alliance Resources (AGS) and its 25 per cent stake in Australia's next uranium mine at Four Mile, South Australia. He would like it more but for what he calls its "feral partner" from the US.

He is not the only analyst to be concerned about the relationship between the joint venture partners. Storm clouds on the horizon there, he feels.

Also on his list is NGM Resources (NGM), which is drilling for uranium in Niger.

All market watchers love statistics, bar charts and graphs. But these are not always the most reliable guide for punters.

Take the example of the accompanying bar chart on this page. Lead and copper have been the stars of the past 12 months -- at least in terms of percentage gains. But neither -- particularly lead -- is back to the levels that make miners throw caution to the wind. Silver has performed better than gold, but this does not dent gold's superiority in the eye of those looking to precious metals as a safe haven. And uranium's decline probably has little to do with the global financial crisis; it had fallen back from a ridiculous speculative high in the spot market. Nor is it an indicator of the metal's future potential. You just need to look at the numbers of nuclear power plants being built, planned or proposed to get some sense of future demand.

Uncertainty about the future is everywhere.

Belgium-based Fortis Bank, in its latest monthly metals report, has a section titled: "Copper: on fire or about to crash and burn?"

Its best explanation for the big run-up is that there is a very heavy speculative bet that the scramble for raw materials by China is set to spark commodity boom part II, and that these speculators are assuming that the present recession is just a hiccup. Fortis's metal people plump for the China re-stocking explanation, rather than any explosion in immediate demand.

Speculators are pricing in the way they see the future, not what is happening today.

But speculators can turn very quickly. They did it last year, sending everything into the basement. If they do so again in the coming months, then local investors may get their heads whacked for the second time in 12 months. Then they'll be back looking at the red in their stock portfolios, not the commodities big picture.

Disclosure: the writer holds shares in Rio Tinto.