10 Base Metal Stocks to Watch in 2011 – Part 4

8. Invernia Inc. (TSX:IVW)

Thousands of birds died from lead poisoning in the Australian port city of Esperance in 2007 (source – ABS News).

April showers do not always bring May flowers. On April 5th, 2011 Ivernia’s shares were halted and the company announced that its wholly owned subsidiary, Magellan Metals, discovered mud on the bottom of a shipping container that was transported from the company’s Magellan mine to the Port of Fremantle. Mud on the bottom of a shipping container doesn’t sound like such a big deal – right?

Not so. The results of isotope testing found the presence of lead. And confirmed there was a high probability that the lead came from the Magellan mine. The company did suggest that the source of the lead was likely not from the bagged lead carbonate concentrate within the shipping container. However, during the transport process, shipping containers rest on the ground both at the Magellan mine site and at a rail yard in Leonora. Recent heavy rainfall in Australia has produced wet ground conditions at both locations and is considered to be the likely source of mud.

The company regarded the discovery of Magellan lead in the mud sample as unacceptable and initiated a full investigation and steps to cleanup the lead-bearing mud, regardless of its origin. Magellan Metals immediately informed Western Australia’s Office of the Environmental Protection Authority (OEPA) and voluntarily stopped the transport of lead concentrate from the mine site and halt operations to undertake a comprehensive end-to-end review of all its activities related to the Magellan mine.

Ivenria’s shares lost six and a half cents on the day of the announcement to close at $0.325 and have since fallen to $0.24 on the heels of more troubling news. On April 7th Invernia announced it was putting the mine site under full care and maintenance and could not provide any further guidance on when the company will restart operations at the Magellan mine.

Lead is toxic to everyone, but unborn babies and young children are at greatest risk for health problems from lead poisoning – their smaller, growing bodies make them more susceptible to absorbing and retaining lead. It is distributed throughout the body just like helpful minerals such as iron, calcium, and zinc. Most ingested lead ends up in the bone where it can interfere with the production of blood cells and the absorption of calcium that bones need to grow. Symptoms are widespread and treatment is with a medication called a chelating agent, which chemically binds with lead, making it easier for the body to get rid of it naturally. Contaminated soil is of particular concern because it can result in lead dust in the air.

In 2008 it was originally reported that a Queensland metal mine owned by mining giant Xstrata could face lawsuits over lead poisoning. Xstrata’s Mount Isa mine was cited as Australia’s biggest emitter of several heavy metals and that testing showed one tenth of local children had high levels of lead in their blood. On February, 20th, 2011 a $1 million lawsuit was launched on behalf of a 6 year old boy who is reportedly suffering from “severe lead poisoning”. If successful, the case may open the floodgates for additional lawsuits from other children in the area who are also allegedly suffering from lead poisoning.

For shareholders of Invernia the news of the mystery lead-containing mud and subsequent shutdown was undoubtedly very disappointing since the death of thousands of birds from lead poisoning at the port of Esperance in March 2007 resulted in a two and a half year halt in exports from the Magellan mine. Not to mention Invernia just delivered a record year in 2010 resulting in revenue of $100.8-million compared with $25.2-million in 2009 and net income of $17.1-million (eight cents per common share) compared with a net loss of $3.3-million in 2009.

9. Copper Fox Metals Inc. (TSXV:CUU)

You’ve probably heard or peak oil but have you heard of peak copper? The difference between peak oil and peak copper is that copper is recycled and reused. It has been estimated that at least 80% of all copper ever mined is still available above ground. Peak copper, in theory, is the point in time when the maximum global copper production rate is reached. Since copper is a finite resource, at some point in the future new production from the earth will diminish. When this will occur is very much a matter under dispute but, lately, the debate over peak copper has been adding fuel to the copper frenzy.  One Canadian listed company that plans on adding to the global supply of copper is Copper Fox Metals.

Copper Fox listed on the TSX Venture Exchange in June 2004 to explore the potential of the Schaft Creek deposit in Northern British Columbia, Canada. Schaft Creek deposit is an undeveloped copper-gold-molybdenum-silver that was owned by Teck-Cominico (now Teck Resources) that was optioned by Guillermo Salazar, the company’s founding president and CEO, in 2002. Pursuant to the option agreement, Copper Fox can earn a 78% interest (23.4 % of the deposit) in Liard Copper Mines Limited by completing a “positive” feasibility study. Teck maintains certain earn-back rights on receipt of a “positive” bankable feasibility study.

The recent approval of the Northwest Power Line by B.C.’s Provincial government was always considered a key component of the projects viability. BC Hydro performed technical studies on the project for years and advocated the new line would provide a reliable supply of clean power to potential industrial developments in the area. But, as is often the case with such mega-projects, environmental opponents were vocal.

Finally, on February 23rd, 2011 the BC Environmental Assessment Office announced that the Northwest Transmission Line was finally granted an Environmental Assessment Certificate. Copper Fox put out a press release applauding the decision and the company’s shares made a dramatic move from $.96 cents on February 11th to $2.70 a few months later. Shares of Copper Fox have subsequently pulled back from their April highs to the $2.00 range. MiningFeeds.com recently connected with Copper Fox boss Elmer Stewart to discuss the significance of the Northwest Power Line and the company’s future – CLICK HERE – for the exclusive interview.

10. First Quantum Minerals Ltd. (TSX:FM)

“Those that fail to learn from history, are doomed to repeat it.” – Winston Churchill.

Winston Churchill once said, “Those that fail to learn from history, are doomed to repeat it.” Perhaps First Quantum’s Chairman and CEO, Philip Pascall is a student of Mr. Churchill.

On April 29th, First Quantum held a groundbreaking ceremony for their Trident project in Kalumbila, Northwestern Province, Zambia. The ceremony was attended by Zambia’s President Rupiah Banda, traditional leaders led by Senior Chief Musele, government officials, and local residents. In his speech, Mr. Pascall reaffirmed First Quantum’s long-term commitment to the Government and people of Zambia and the project’s positive impact to the country’s economy through the creation of more than 2,000 direct jobs and by providing a catalyst for large-scale infrastructure development in the region.

Zambian President Banda was also given the floor and during his speech highlighted First Quantum’s status as the country’s largest single taxpayer, its investment in several social projects, and the positive impact of the mining industry on the country’s economy. President Banda also reiterated his government’s commitment to making Zambia a preferred destination for capital investments by international investors.

This ceremony marks the one year anniversary of the Congolese Supreme Court decision to annul First Quantum’s rights to two copper mines (Frontier and Lonshi mines) in the south of the country. Less than a year earlier, in 2009, the Government of the Democratic Republic of Congo closed First Quantum’s Kingamyambo Musonoi Tailings mining project. First Quantum is seeking international arbitration on these disputes that put, collectively, $1 billion of investments are under legal action.

Despite the company’s issues in the Congo, on January 25th, 2011, First Quantum provided a development update and expects to hit production of 470,000 tonnes of copper per year by 2015 from the addition of new projects like Trident in Zambia. Following the production update, BMO analyst David Radclyffe called the company “one of the strongest mid-term growth stories in copper, albeit this assumes delivery of one new project each year.” In a TD client note, analyst Greg Barnes referred to First Quantum as “the next copper major” stating the company’s “copper growth profile is one of the most attractive in the global mining sector – both for investors and potential acquirers.” Shares of First Quantum closed today, Friday, May 6th at $123.72 a share.

For 10 Base Metal Stocks to Watch in 2011 – Part 1 – CLICK HERE.

Mike Luft

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