Broker snap: Tradenext identifies potential in mining after recent falls

4th Apr 2013 10:18

Tradenext has highlighted opportunities for potential upside in the mining sector following the sell-off in recent weeks, though these opportunities are high risk, the broker warned.Gold fell again on Thursday, with futures for June delivery trading 0.4% lower at around $1,544 an ounce.Ronnie Chopra, Head of Strategy at Tradenext, said: "It is bizarre that the unrest in North/South Korea seems to be ignored by gold, which raises the question - where would gold be without this unrest? Possibly $1,450...these markets are too fickle."Meanwhile, he said that copper is also weak and has been falling as of late. However, he said that some mining companies' share prices are looking similar 2008-2009 "when financial armageddon was arguable priced in".The mining sector on the whole, up 1.0% in London on Thursday morning, has still lost nearly 11% of its value over the last month.He said: "China growth rates are slowing but surely the prices of some of these shares are at silly levels and could easily jump 25% in a blink of an eye. Stocks that warrant closer attention are those that have been hit very hard in recent weeks, some losing 50% of their value and others at 75% plus off their peaks."Although Chopra remains negative on commodity prices, he said that Kazakhmys, Petropavlovsk, Vedanta and Ferrexpo - where price-to-earnings multiples range from just 3.0 to 6.7 - "warrant closer attention"."Brokers at Tradenext take the view that a contrarian play on buying mining stocks such as Kazakhmys, Petroplavosk and Vedanta, while a high risk strategy could potentially yield some spectacular results."