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Stock Strategist

Have Mining Stocks Peaked?

The recent bull market may be losing steam.

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Look closely at the bidding wars for Canadian miners Falconbridge (FALB) and  Inco (N). Shareholders are demanding cash rather than stock for their shares. While that doesn't seem interesting at first, what is interesting is the timing. Not long ago, acquirees were perfectly willing to accept shares or a mix of shares and cash. Times were good, and metal prices and subsequent stock prices were rising to heights not seen in years. However, shareholders, who are likely the most educated about the space, are sensing that the likelihood of further gains is lower than it once was, even as a few as six months ago.

This "show me the money" attitude implies a peak in commodity stocks, if not in commodity prices. When shareholders, both individual and institutional, want to cash out, it is pretty clear that they see higher-return opportunities out there and that commodity stocks will either level off or decline. The momentum is losing its steam.

Mining Analyst Team does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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