Higher Base Metal Prices Starting to Move Junior Stocks

Base metal prices continue to flirt with 6-month highs, and they are starting to take some of the base metal stocks with them. Zinc is up to 70 cents per pound, copper at $2.30 per pound and nickel at $6.50 per pound. All are post-October-2008-crash highs.

The stocks of base metal producers have been on an upward tear since January look at Breakwater (BWR-TSX) for zinc, First Quantum (FM-TSX) for copper But it is only recently that the juniors have established new uptrends.

As an example, the stock of junior zinc explorer Donner Metals (DON-TSXv) is breaking out on the chart, now trading at 24 cents. It jumped out of a two year downtrend this week, and held its move. Donner is advancing a high grade zinc deposit in Quebec with Xstrata Canada, right beside Xstrata’s Matagami mill.

With a compliant resource and operating mill in place, Donner should be one of the first juniors renewed investor interest from rising base metal prices.

Xstrata will likely be paying the full freight on a scoping study on their joint deposit, which is called Bracemac-McLeod. A scoping study is a rough economic estimate on the potential profitability of the deposit.

But the stock could also be moving on anticipation of drill results. Because while there is a strong asset being fast tracked towards production, they are also now drilling new zinc targets nearby. Donner is just an example of how base metal stocks can move on speculation.

Donner used a new geologic model to discover Bracemac-McLeod two years ago. They are now drilling 3 look-alike targets in the same camp. The first few holes are being drilled near a former producer, the Isle Dieu mine, which was the highest grade deposit in the camp. It graded 17.85% zinc, 1.01% copper, 76.63 g/t silver, and 0.46 g/t gold. These new holes are also only a few kilometres from the Matagami mill.

The Bracemac-McLeod deposit was discovered in exactly the same geological setting with the same geologic model in mind that they are using on this new set of targets.

Investors might also be interested in knowing that base metals have outperformed gold since the beginning of 2009 by a wide margin – almost double. That’s the market telling us that the recession, as severe as it was, will be brief.

And now it’s also telling us it can reward junior base metal stocks.

Gord Zelko, Publisher

June 15, 2009

(Thanks to oldstock at SH for posting the article.)

I'm a big fan and shareholder of DONNER and have featured it one our website in the past: http://ca.geocities.com/qtrader@rogers.com/index.html

Good luck to all,

Mike