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Another twist on copper story

1303145115 56 Another twist on copper story

IT is tough when you spot an investment trend such as the rising copper price but the share prices in the obvious companies have already run very hard.

Do you take a punt and join the fray or look for a left-field company that might present a more attractive entry?

I prefer the second approach and for those who believe the copper story has a long way to run, it may not be too late to find some value out there.

Marengo Mining is a well-run Australian-listed, Papua new Guinea-based company that would be trading on much higher multiples were the ground sitting in Australia.

You can argue that such a massive discount is warranted but with numerous multi-billion-dollar mining projects on the boil in PNG, our maturing northern neighbour should no longer be considered a particularly risky part of the world for mining projects.

If you take country risk out of the picture, Marengo is essentially another OZ Minerals which is still trading like a small cap stock.

Its Yandera copper resource is around the 6.5-billion-pound mark, making it potentially one of the world’s largest new copper mines at a time when copper head grades are falling at existing mines and Chinese and other demand for copper is showing no signs of slowing.

Eventually new copper supply might catch up with demand but that seems to be a long time away.

Renowned currency trader and investor George Soros is already on the share register with his Quantum Partners sitting on 19.9 per cent, while well-regarded private equity stock-picker Sentient Group is sitting on 22.2 per cent.

The one environmental sticking point for Marengo could be dealing with mine tailings through either deep-sea placement or a dam.

Exploration potential appears very strong given limited further drilling in highly prospective areas and significant molybdenum credits should add to the mine’s financial return.

Marengo is a speculative buy with the potential to graduate from a $300 million small cap to a takeover target or significant mining house in a few short years.

THE skyrocketing Australian dollar is producing a long list of winners and losers.

A Roy Morgan Research survey showed that a staggering 10 per cent of Australians intend to take on overseas holiday in the next year — the highest for the past five years.

Domestic tourism intentions for the January quarter were conversely low, showing the high dollar is literally driving holidaying Aussies offshore.

Other than the airlines, which company might make a motza out of all of these overseas holidays?

Flight Centre is one possibility, although the extra revenue it makes on the overseas trips it could lose on lower domestic bookings.

Plus it has the high fixed costs of a large retail network to consider.

Webjet has none of those problems, with a large proportion of extra revenue from its online booking service falling straight to the bottom line as profit.

It faces competition from the airline’s own websites and from other web players but should benefit from booking more expensive international flights, earning Webjet a speculative buy.

I HAVE put two separate sell calls on Sigma Pharmaceuticals in the past few months and there may be some who insist some exceptional value is emerging.

What was once a $2.50-a-share-plus company shed another 4.4 per cent yesterday to just 33c, with a 15c special dividend due for those who own shares on April 11.

It may be a record low for the generic drug distributor but I still think it is too early in the turnaround story to grasp this falling knife.

Just think what might happen once that dividend is paid and the focus moves back to falling generic drug prices and the massive restructuring task.

Sigma may have its day but not yet — sell.

The Herald Sun accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser.

<a href=",2005:cluster=, 06 Apr 2011 14:06:47 GMT 00:00″>Another twist on copper story

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