"Usually investing in mining companies means having to choose between a junior company that is working to get a mine up and running, and a more stable, mature miner that is already in production," say Ian Wyatt and Tony Martin in Small Cap Investor.
They continue, "But then there's Northern Orion Resources Inc. (ASE: NTO), which allows you to put money into both types of play with one stock."
With a junior miner, they admit, you get more risk, at least until the final permit is received, the mining plan finalized, equipment in place, and ore being processed.
Of course, they counter, that can often mean greater leverage to metal prices. With the mature miner, they explain, ou know what you're getting in terms of output from the mine, but that typically limits any blue-sky financial upside for investors.
Northern Orion, they explain, has a 12.5% ownership position in the Alumbrera project, with Goldcorp (NYSE: GG) having a 37.5% position, and London's Xstrata PLC the remaining 50%. Located some 700 miles northwest of Buenos Aires, they point out, Alumbrera is a massive mine, with the project covering almost 13,000 acres.
Wyatt and Martin notes, "One of the lowest-cost copper and gold producers in the world, Northern Orion's share of production is some 50-million pounds of copper and 75,000 ounces of goal a year. The mine has been in production since 1997, and its mine life extends to 2016, promising healthy cash flow for another decade."
The company is also involved in the Agua Rica deposit, which they point out is located just 20 miles east of Alumbrera. The mine, they suggest, is expected to be in production by late 2010 or early 2011.
The company is dependent on the price of copper. And while the U.S. construction industry is slowing, the advisor notes that copper should remain "a hot commodity" in much of the rest of the world.
The advisor points to Japan's economy, which they note is recovering and China, which continues to build out its infrastructure. They conclude, "Indeed, in addition to its attractive fundamentals, the stock could also be considered a possible take-over target."
Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.
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