A titan in the gold and copper mining world, Freeport-McMoRan Copper and Gold Inc. (NYSE:FCX) closed at a three-and-half month low after dropping 3.5 percent yesterday (Jan. 26, 2010). While calling the bottom on any stock isn’t easy, there are a number of reasons to consider moving into FCX on an uptick in price.

The stock’s gotten pummeled since distributing a 15 cent dividend on Jan. 13 falling 18 percent in eight trading days. That’s too far to drop in too short a time; particularly as gold prices have stabilized. Here’s three reasons then to give Freeport-McMoRan a look:

1) Profit-to-earning ratio. Freeport-McMoRan’s the third-biggest gold mining stock on the major exchanges with a market cap of $31 billion. The only mining companies with bigger market caps are Rio Tinto Plc. (NYSE:RTP) at $96.4 billion and Barrick Gold Corporation (NYSE:ABX) at $35 billion. Freeport-McMoRan is currently the only profitable company among them, though. And they’re trading at a P/E of 12.62.

2) Earnings Report. On Jan. 21, Freeport-McMoRan reported profits of $2.15 per share. That smashed analyst estimates of $1.73. That’s great news after FCX underwent an enormous restructuring last year at a cost of $11.3 billion. Tighter belts and well-lubed wheels mean they’ll likely outperform their peers in the years to come.

3) Copper showing signs of life. As several economies around the world rebounded last year, industrial demand for copper started climbing. A report released yesterday showed that orders for the metal rose 2.7 percent in Europe in November, and analysts are predicting it may hit record prices this year on that demand. More importantly, demand from China has shown little sign of diminishing. Copper prices doubled in 2009, and FCX is the world’s lowest-cost copper producer. The company’s positioned perfectly then if things truly due turn around.

Shares in Tanzanian Royalty Exploration Corp. (AMEX:TRE and TSE:TNX) surged after an injection of capital in late December, and they rose another 9.5 percent yesterday. All told the stock’s up 39 percent over the past month, and the chart is starting to look scarily steep:

Even if you think the TRE’s due for long-term gains, that steep uptick presents a great time to sell out and buy back in later.

Why the jump in price?

Investors started salivating over Tanzanian Royalty when the company announced they’d raised $3.14 million by selling 1,155,835 shares of stock on Dec. 22. The plan? Use the money to finance the equipment to do bulk sampling of the Kigosi Gold Project in the Lake Victoria Goldfields of Tanzania.

That could be a major step forward toward capitalizing on TRE’s outsize holdings in Tanzania. Indeed, TRE controls more than half of all the gold projects in the entire country, and they’ve got a 60 percent stake in the Lake Victoria region (Barrick Gold – NYSE: ABX – has the rest, and that’s a sign in itself that the mines there should be taken seriously).

Still, investors are fickle people. They might be interested in Tanzanian Royalty for a few months, but they’ll tire before the results of samples come in. And that’s when you can buy again. Still, if the results of the samples are positive, the stocks recent gains will pale in comparison to their future spikes and Tanzanian Royalty just might become profitable.

Update: The day after writing this story, stock in Tanzanian Royalty plunged 14 percent making it the biggest loser among gold and silver stocks on the day. Support seems to have clustered around $4.

Analysts at Swiss banking giant Credit Suisse Group AG (NYSE:CS) released a report revising down their forecast for gold prices. “Our analysis of the gold market leads us to take a bearish stance with regard to the gold price in 2010.”

Specifically, in a report posted on Zerohedge, they argue that gold will hit $990 per ounce in the second quarter of 2010. That’s a drop of $135 an ounce from current levels. They also forecast gold prices dropping further in Q3 to $980 before rebounding back above $1040 in Q4.

Why all the bearishness? “In 2009 we reasoned that the main drivers of the gold price were significantly linked to the trade weighted dollar, increased investment demand, central bank purchases and market sentiment. The increase in investment demand for gold ETFs, in our view, had an ‘accelerating and reinforcing effect’ on market sentiment and the safe haven status of gold which resulted in upward pressure on the gold price which rose 24.6% during 2009. We do not expect the 2009 rate of investment in ETFs to continue at the same pace in 2010.”

Of course, others (myself included) would argue that we’re not out of the water yet. All we need is one black swan to swoop in and suck the air out of the hyped-up, government-fueled rally we’re in. A major bank collapse, perhaps, or continued losses across multiple sectors in Q1 2010 would do the trick.

More likely than a black swan, though, is a series of gray swans – a gradual and steady accumulation of bad news that skirts along the edge of the mainstream media. Perhaps we’re already there. See, yesterday’s article at AmericanBankingNews.com: “Bank Closures in 2010 Begin in Earnest: Three More Closed, One with No Buyer.”

An economy can’t keep losing a net number of jobs and expect to grow. Jobs drive the economy.

Since there aren’t any jobs, though, its been the government’s job to provide growth. And that’s ballooning the federal deficit. So long as the trend continues, inflation is going to be a very real threat – more so than it was last year. And that’s what leads me to disagree with Credit Suisse.

The threat of inflation drove the rally in gold last year, and it’s going to keep driving it this year. It might be slow and riddled with sell-offs, but it’ll keep going (unless, of course, we meet another black swan).

All that said, why then might Credit Suisse publish a report that’s bullish on the economy and negative on gold. The writers at Zerohedge have one theory: self-interest.

“Such optimism, even as the global economy is poised on the edge of the double-dip?” they write. “We wonder who Credit Suisse recommends its clients sell their gold to? Could it be… Credit Suisse?”

I wouldn’t go that far, but I would argue that Credit Suisse’s analysis comes with an enormous glittering caveat: if there aren’t any disruptive events, bank collapses, inflation, bond defaults, bank runs, massive layoffs or housing crises, then, perhaps, gold prices will take a tumble.

Definition of the day

Black Swan: An event that is highly improbable (and unforeseen and therefore omitted from models) that nonetheless occurs and has a significant impact (Source: moneyterms.co.uk)

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Aurizon Mines Ltd. (AMEX:AZK) has been trading sideways for months, while some of their flashier peers have kept climbing. All told, it’s down 9 percent over the past three months. Compare that with one of my favorite junior mining gold stocks, Taseko Mines Limited (AMEX:TGB), which is up 57.5 percent over the same time period.

That doesn’t mean Aurizon’s doomed. In fact, there are plenty of reasons to look closer at the company, and, perhaps, catch an upswing in prices.

Why Aurizon?

Aurizon’s production numbers of late have outstripped their own guidance, proving that their flagship mine Casa Berardi in Quebec has high-quality ore. All told, they dug 159,261 ounces of gold out of the ground in 2009. That’s a lot of gold, and they were able to do it at a cost of about $414 per ounce.

Here are some other reasons to look at the company:

  •  In all, Aurizon has more than 2 million ounces of provable reserves.
  •  The company has 80 claims in the Kipawa area of Quebec.
  •  The Joanna property near Casa Berandai has 1 million ounces of provable reserves (according to a study that focused on just one dense deposit of gold).
  •  Low debt. Aurizon’s long-term debt is hovering around $0.7 million.
  •  Aurizon shares are bouncing around their early 2008 levels – before gold spiked to record highs.

When the public interest shines their light on Aurizon again, the stock will rise again, too. Sideways trading only goes on for so long, when a company’s profits and potential keep going up.

Like Aurizon? You’ll like Taseko, too

Check out: “Taseko Mines Limited: The Most Under-appreciated Stock on the Market.”