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Investors to jump on rally

WA’S economic performance has led at least one broker to the conclusion that investors may be preparing for a rally on the Australian Stock Exchange.

Figures released in the monthly review of WA companies by accounting firm Deloitte Touche Tohmatsu indicated that this State preformed negatively last month, although marginally better than the national average.

The optimistic assessment by State One Stockbroking’s Kamlesh Chand came in response to a steady market last week where only company specific events caused price changes. The Deloitte WA Index declined 4 per cent last month compared with a 5 per cent decline in the All Ordinaries Index.

During the past year, while markets around the world have fallen by about a quarter, the WA index rose 22 per cent, also outperforming the 4 per cent 12-month decline in the All Ordinaries.

Mr Chand’s weekly technical analysis of the market reflected the mood that a new price base level price has been reached by companies and was holding steady for another recovery.

In the gold industry sector, Mr Chand said stock prices: “Have all drifted down to their historical lows and in support areas. The next movement is likely to be upwards”.

Lihir Gold is in a support zone at between $1.05 and $1.10, Auiron Gold has support around $2.60 to $2.80 while Newcrest at $5.65 is a safe buy, having drifted back to the low of late July.

The resource stocks are also likely to be tainted with the same buying opportunities.

“The resource stocks could be making bottom and the outlook is increasingly bullish,” Mr Chand said.

He said BHP Billiton’s outlook was for a renewed push upward. Western Mining at $7.88 had consolidated its recent rally from under $7.00. And a close above $8.10 would give a buy signal for a $1 rally, while Woodside was likely to have bottomed at its current levels, Mr Chand said.

Nickel fever strikes

IT was nickel, nickel and nickel that was trumpeted at the recent Nickel Conference in Perth. Hartleys Ltd resource analyst Kevin Tomlinson told delegates that the evolution of the industry provided room for smaller players to make a lot of money. An exposé of the junior nickel sector released this month by Mr Tomlinson in time for the conference points to a number of excellent prospects.

“We feel that this sector will be one to follow in the future due to an anticipated increase in nickel demand on the back of a global recovery in consumption,” Hartley’s Junior Nickel Book says.

Mr Tomlinson believes sulphide nickel producers were looking like a threatened species in the late 1990s with the emergence of large laterite producers such as Anaconda Nickel. This was changing, he said, due to serious technical and engineering problems in extracting nickel from laterite ores, as well as greater efficiency from sulphide producers, which have allowed a new generation of sulphide nickel players.

This week Toronto-based international nickel producer LionOre Mining International Ltd declared that, since making the move for full ownership of its Australian subsidiary LionOre Australia (Nickel) Limited, it had increased its stake from 80 per cent to 86.8 per cent.

According to stockwatches the offer price is a significant premium to the true value. LionOre Nickel director Chris Barker recommended that shareholders accept the offer after independent firm KPMG Corporate Finance (Aust) Pty Ltd stamped a 77.3 cents per share valuation on the Australian operator.

Mr Tomlinson believes the value is closer to 65 cents.

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