Money managers bet on cheap mining stocks

By Pratima Desai

LONDON (Reuters) - Fund managers are piling into mining stocks because they are cheap and do not reflect the strength of metals prices that by historical standards are still very high.

Copper, which accounts for almost 30 percent of British miners' earnings, jumped by nearly 85 percent to $8,800 a tonne between August 2002 and May this year.

Prices have fallen since May, but most of the gains bar about 17 percent are still intact.


The sell-off was precipitated by fears of a U.S.-led global economic slowdown, rising inflationary pressure and significantly higher interest rates around the world.

Share prices of leading British miners shot up by an average of around 70 percent between August 2002 and May this year, since when they have tumbled by nearly 20 percent.

"The sell-off ... is really overdone. The fundamentals really haven't changed substantially," said Aljoscha Haesen, senior analyst at British fund manager Forsyth Partners.

"The (fund) managers are taking advantage of these sell-offs in equity prices and are buying quality companies at valuations that are still very compelling."

The market's failure to appreciate the value of natural resource companies is why private equity funds which rarely foray into mining are scouting the sector, managers say
Source Reuters