Resources Will Still Outperform In 2008, Says BMO

Array
(
    [0] => Array
        (
            [0] => ((KCN))
            [1] => ((LGL))
            [2] => ((OGC))
            [3] => ((NCM))
            [4] => ((RSG))
            [5] => ((SGX))
            [6] => ((BHP))
            [7] => ((RIO))
        )

    [1] => Array
        (
            [0] => KCN
            [1] => LGL
            [2] => OGC
            [3] => NCM
            [4] => RSG
            [5] => SGX
            [6] => BHP
            [7] => RIO
        )

)

This story features KINGSGATE CONSOLIDATED LIMITED, and other companies.
For more info SHARE ANALYSIS: KCN
The company is included in ASX300 and ALL-ORDS

By Rudi Filapek-Vandyck

Canada-based stockbrokers and equity researchers at BMO Capital recently released their annual Red Book which is in essence a 200 page outlook on the next twelve months. Investors in Australia may be heartened by the fact that BMO remains a bull when it comes to base metals and commodities in general. This is, among others, based on the premise the Federal Reserve will have some cutting to do throughout 2008 and the US dollar will thus remain under pressure for a long time still.

All metals should see lower prices in 2008 compared with this year, but it is BMO’s view that this does not mean investors should abandon the sector. On the contrary, BMO believes commodity producing stocks will continue to outperform global stock markets in 2008.

Says Global Strategist Donald Coxe: “After the subprime slime is cleared away, the next global boom “can and will take off in earnest.”

Among the forecasts penciled in for next year are an average price of US$800/oz for gold and US$15.50/oz for silver, US$115/lb for uranium, US$2.90/lb for copper, US$1.20/lb for zinc, US$1.14 for aluminium and US$13.00/lb for nickel.

But maybe equally interesting is that BMO’s list of internationally preferred investments includes a few Australian stocks. In the precious metals sector BMO likes Kingsgate Consolidated ((KCN)), Lihir Gold ((LGL)) and OceanaGold ((OGC)) but not Newcrest Mining ((NCM)) which is rated Underperform with a twelve month price target of $27.

Resolute Mining ((RSG)) is also rated Underperform, while Sino Gold ((SGX)) scores a Marketperform rating with a $8 target.

The Canadians cover more Australian stocks in other segments such as bulks and base metals, but due to some changes in analyst coverage most of these stocks have temporarily lost their rating. BMO does point out that the positive near-term outlook for bulk commodities should benefit BHP Billiton ((BHP)), CVRD (now Vale) and Rio Tinto ((RIO)).

Click to view our Glossary of Financial Terms