Veteran analyst Eric Coffin would like to see some mining companies stop or cut production to signal to traders and the market that the worst is over for the mining sector.
If copper prices fall below $2, Coffin expects production to “vaporize” and no new mines to be built.
“I think copper may be the first to turn because the copper miners have been historically the smartest at cutting production when they have to and below $2 a lot of them would have to.”
Coffin suggested Nevsun Resources Ltd. (NYSE:NSU) as a copper producer with a healthy dividend and lots of cash “if you need to own a base metal miner.”
He was impressed with Kaminak Gold Corporation's (OTC:KMKGF) recent $22.5 million financing because the biggest placee was the new Electrum Fund (Thomas Kaplan), which recently raised about $250 million USD for investments in the mining sector.
“To turn this thing around, we need guys [like Kaplan] who are willing to put money into strong deals, not just guys who are going to try to warehouse weak projects that might be good if metal prices go up 30%.”