Breezes are better than hurricanes, and showers are preferable to downpours. Too much of a good thing can really be a downer.
It's a similar thing with the recent enormous rally among shares of virtually all metal miners, from BHP Billiton
Although markets are forward-looking, earnings are the spectacles they must peer through. Third-quarter results from the industry were painful enough, but metal prices deteriorated further through the Q4. Gold managed a nice recovery to end the year, but silver, copper, nickel, molybdenum, and zinc all continued to flounder. The abrupt declines sent miners such as Freeport-McMoRan
I have chronicled how the zinc effect had an impact on mining costs even for gold miners, including my top stock pick for 2009: Agnico-Eagle Mines
Too much of a bad thing is clearly a downer, too, so what's the bright side to all of this? Even if the market reclaims some of the recent gains as earnings hit the wires this time around, I believe that a long and sustained rally remains in the cards for the best-positioned miners. Hiccups within a rally are part of the process, and I welcome some near-term declines to set the stage for the next phase of recovery for the miners of metals.
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Fool contributor Christopher Barker is the commodore of copper and the Colonel Klink of zinc. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Anglo American, Agnico-Eagle Mines, BHP Billiton, Freeport-McMoRan, Teck Cominco, and Yamana Gold. The Motley Fool has a disclosure policy.