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How Many Copper Stocks Do You Have? (Part 2)

11 October 2007 - Features - Editor

How Many Copper Stocks Do You Have? (Part 1)

Why Ivanhoe Stocks Top the Sector

A fictional name from 19th century English fictional literature is misleading for one of the most exciting copper stocks available on NASDAQ, the New York Stock Exchange and in Toronto. Ivanhoe Mines is substantially owned by Rio

Tinto, the world’s leader of the mining sector. The company has copper and gold reserves stretching all the way from Mongolia to Australia, with other properties as well. The Mongolian asset is especially important from the stocks perspective, for it could yield dramatic profits for almost half a century. The Rio Tinto acquisition has made Ivanhoe flush with cash for investments in top grade mining equipment and technologies.

Ivanhoe’s management team is a distinct strength. The company has been founded by a pioneering miner from North America, with quality experience in Asia and Australia. The top team has a good balance between skilled geologists, experienced finance professionals, and administrators with varied backgrounds. Rio Tinto’s core management resources also lend considerable strength to the Ivanhoe team. Ivanhoe is well poised to leverage its assets efficiently and to make new discoveries as well. Overall, its pool of human resources is streets ahead of other companies in copper.

Ivanhoe’s operating losses have mounted over the past 3 years, but this is because of its exploratory work in Mongolia that is expected to produce future profits for decades. The company has assiduously built its relations with the Mongolian government, which is fully seized of the values of foreign investments in its fledgling economy. Obviously, some quarters have been skeptical about Mongolia’s long term prospects, but the current dispensation in Ulan Bator seems to favor Ivanhoe. Moreover, Ivanhoe’s assets in China and Australia insulate it to some extent from any future changes in the policies of Mongolia towards foreign investors. All copper stocks are subject to investment and political risks and spatial diversification of crucial assets, as Ivanhoe has achieved, is the optimal way of protecting the long term interests of shareholders.

Economic cycles are not easy to predict, and there are additional uncertainties due to disruptive technologies, on the global consumption prospects for copper. However, there is no alternative to augmenting global supply for the long term, given the fact that many working mines are now nearing the ends of their operational lives. This is a major plank on which investors can value Ivanhoe Mines and its vast discoveries in Mongolia.

 


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