Copper companies' stock now worth a pretty penny

Copper, and more specifically, Aur Resources Inc.(AUR-TSX), were first featured in our column in 2001, while sitting at $3.25, a couple of years after our purchase at $1.91. In those distant days, commodities had skulls and cross bones written all over them and investors relegated this sector to the deep dank shafts of mining history. Our view was different -- what a surprise, eh?

Last August, we returned to this territory. Copper prices were improving and naturally, valuations for copper mining companies were bounding. Aur was sitting at $4.47, and Corriente Resources Inc. (CTQ-TSX) had jumped from our buy-in price of 86 cents to the $1.20 range. However, our targets of $6.45 and $1.60, respectively, were distant.

Well lo and behold, both companies careened handily past their targets, with 70 per cent of Corriente being sold prematurely at $1.69. It currently sits at $3.42 and we're wondering when it will be wise to sell the rest. Aur was dumped at $7.25, a distance above our stated objective.

Our normal practice, although not carved in stone, is to sell 50 per cent of a position on achieving our price goal, but sometimes 100 per cent is sold. With Aur, given the relative bull market in copper and the manner that investor psychology had changed since our purchase, the election was to sell it all.

Nevertheless, we do not believe investors today are like the flock of 1999. Having been sheared in those woeful days of tech, many are skeptical of popping fresh money on the table to acquire hot sectors. Also, the buy-and-hold mantra is not as omnipotent. Learning from history -- and error -- seems to have transpired.

With the harvest of Aur in hand, Corriente rests in the stable. However, the speculative nature of this investment, and the huge gains already garnered, indicate that this junior might soon be tapped out. Sprott Securities has a target price of $4.65 on the stock. We're wondering if it is not a tad optimistic, and if our leave should be taken sooner. Decisions, decisions.

How long the copper run will continue is difficult to predict. Continuing decreases in the U.S. dollar indicate price increases in minerals, and while it is likely the dollar will fall further, the bottom is much closer than two years ago. One can argue that the current copper price increases are merely a recovery from another turbulent pendulum overswing, with far more upside potential to return to form. We can be sophists about this one, arguing it appears there will more upside through 2006 according to cyclical theory, yet a swift economic recovery in the global engine of the United States remains highly suspect.

Today, minerals are hot and as investors recognize sectoral returns in these funds, many could become magnetized to this field chasing past returns. When would be a good time to hop off this bandwagon? Not yet, but further trimming is being considered.

Benj Gallander and Ben Stadelmann are co-editors of Contra the Heard Investment Letter. This column first appeared on GlobeinvestorGOLD.com.