Wednesday, August 25, 2010

A Mess In Africa Highlights A Challenge To Resource Companies

Half a world away, a messy situation in a resource-rich land is offering up a lesson in caution to investors who seek out smaller mining companies. Canadian miner First Quantum once thought it had a valuable resource and a valid contract in its Kolwezi copper project in the Democratic Republic of Congo. Since then the company has seen the government of the RDC seize the project, sell it to another party, and now has seen the asset sold yet again - this time to mining company Eurasian Natural Resources. All the while, international law has more or less stood behind First Quantum. 

Investors in natural resource stocks have always contended with a higher level of risk and volatility relative to broader stock market indices, and those who invest in small miners (also called "juniors") take on even greater risks. In addition to the uncontrollable commodity price cycles, there are a host of production issues and dangers, as well as the risk that a project does not contain as much mineral wealth as the company hoped. 


To read the full story, please go to:
http://stocks.investopedia.com/stock-analysis/2010/A-Mess-In-Africa-Highlights-A-Challenge-To-Resource-Companies-OXY-FCX-AU-CX-XOM0825.aspx

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