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Fears that the Chinese economy, with its £500 billion available to invest abroad, is overheating and may sooner or later have a hard landing suggest at least a pause is due. But most market players subscribe to the long cycle view, which holds that the fundamental case for growth is robust, however bumpy the ride may be along the way.

Copper, a metal with myriad applications, has risen from less than $2,000 (£1,010) per tonne to nearly $7,500, despite recent wobbling. Iron ore has appreciated three-and-a-half times to more than $83 a tonne and aluminium has doubled.

Zinc has surged from below $1,000 a tonne to nearly $4,000. Nickel, needed for Chinese and Indian stainless steel production and not easy to find in new commercial quantities, has surged tenfold to nearly $52,500 a tonne.

Gold has risen from the mid $200s per ounce to around $656, after testing higher levels on the way, and has lately disappointed some of its more ardent fans. It is still seen as a hedge against US dollar weakness as well as a portable ‘store of value’ in crises, such as a global derivatives meltdown, and as a jewellery ingredient, though it has recently underperformed relative to some of the others.

Platinum, used for jewellery and for reducing carbon emissions from motor vehicles, has gone from around $500 an ounce to more than $1,300. But the star performer has been uranium, which has soared from depressed levels of below $10 a pound to more than $110 on the accelerating rehabilitation of nuclear power as a low-pollution energy source. However, its abundance, albeit in mostly uneconomic quantities, and the existence of state civil and military stockpiles suggest an element of vulnerability.

Mixed fortunes for shares
If the underlying metals have mostly boomed, shares in the sector have told a decidedly more mixed story. Some have been propelled to new heights by involvement in projects rendered lucrative by the impact of higher raw materials prices, while others are held back by exploration disappointments, operational challenges or country risk.

The game has changed from two or three years ago, when a gleam of a potential deposit of a fashionable mineral was enough to bring in the punters. Now, the prospect of production, cash and perhaps a bid are all needed to set the pulses racing.

Joe Nally of Cenkos Securities, renowned for his ability to float deserving mining companies successfully, takes a robust view. ‘The amateurs are scared it has stopped, like the dot.com boom, but the experienced people are stronger for longer,’ he says.

Citing persistent significant shortages in metals such as nickel, he points out that it can take five to seven years to build a mine and says investors should concern themselves with the ‘greenfield replacement cost’ of metals. ‘It’s tougher at the exploration end,’ he concedes and suggests that ‘the market won’t surge, but it won’t collapse either’.

Down from the peaks
Most shares are trading below their recent peaks. The FTSE Gold Mines Index, which more than doubled to nearly 2,750 between late 2002 and mid 2006, is now 500 points down from that level at around 2,250.

The Ernst & Young Mining EYe index of the top 20 mining companies on AIM was 12 per cent up between March 2006 and March 2007. But the index rose 14 per cent in the first quarter of this year, against 19 per cent in the first three months of 2006.

The quest has been to identify another First Quantum, the Toronto-based copper group floated on AIM at 145p six years ago with prospects in Zambia, which has moved to the London Stock Exchange’s main market after rising to nearly £40 on the strength of its operations there and in the Congo. Central African Mining & Exploration, floated by the entrepreneurial Phil Edmonds at 3p in 2002 and currently increasing its interests in the Congo by buying more of Toronto-listed Katanga Mining, delighted fans by hitting 97p a year ago, although some of the shine has been rubbed off by a subsequent fall to 49.5p.

Zinc and gold projects at Caijiaying and elsewhere in China have enabled Griffin Mining to recover from 2004’s depressed 16.25p to reach more than 110p now. Jubilee Platinum has risen fourfold in three years to 122p, with encouraging nickel prospects at Ambodilafa in Madagascar adding lustre to its platinum group metals projects in South Africa’s Bushveld.

Away from Africa, Peter Hambro Mining used excellent local connections to involve itself in promising gold production projects in Far Eastern Russia and saw its shares soar from 2002’s 130p float price to £17.10 before falling back to 978p, despite seeing off criticisms from Russia’s environmental agency. Russia is increasingly perceived as nationalistic over its resources and prone to rewrite mineral joint venture agreements at the last minute.

Kazakhstan and Russia-focused gold play Celtic Resources went from 135p in 2002 to 464p two years ago. Thereafter, Russian setbacks and other sector concerns sent the price back to 157.5p.

Entrepreneurial mining investment group Cambrian Mining soared from a 30p float price in 2003 to 225.5p two years later on a variety of resource-focused investments, including coal in Canada and Bangladesh. But the price has halved from its peak on disappointment over some of these ventures, although the company insists it is still sitting on some winners.

Diamonds have proved a beguiling market, on the prospect of a continuing tightness of supply in the face of awakening luxury goods demand from Asia’s booming economies. Petra Diamonds, headed by second-generation South African entrepreneur Adonis Poroulis, has risen from 45p to nearly 160p in two-and-a-half years.

In the doldrums for several years, Firestone Diamonds, with several prospects in Botswana, motored from 44p in 2004 to 192p the following year on joint ventures with diamond giant De Beers. The shares have eased back to 133.5p, despite reports of encouraging progress at a new kimberlite discovery at Tsabong in the same country.

Deals steal the show
Dealers and fund managers alike tell the same story. Institutional investors, who in the early stages of the boom could not buy enough pure exploration companies, with visions of El Dorado unencumbered with the tiresome complexities of production, project finance, off-take agreements and the rest, have changed their stance.

Sated with “blue-sky” ventures, some of decidedly questionable provenance, the heavy hitters are now looking for companies close to production deals or in line for mergers or takeovers, as larger companies buy production rather than looking for it themselves. Among the big companies, US aluminium colossus Alcoa has bid £16.5 billion for Alcan of Canada and the market is working out any combination or permutation involving Rio Tinto, BHP Billiton and Anglo American.

On AIM, African Platinum, originally launched by Phil Edmonds with projects in the Bushveld and latterly headed by former Zimbabwe Platinum boss Roy Pitchford, recently succumbed to the embrace of South Africa-based Impala Platinum. Canada-based Bema Gold, with interests in South Africa, Chile and Russia, has been snapped up by fellow Canadian Kinross Gold.

Recent Full List arrival Gem Diamonds, headed by ex-Oppenheimer family business luminary Clifford Elphick, bought BDI Mining – with diamonds in Indonesia and gold prospects in Papua New Guinea – for £42 million and is rumoured to be sniffing round several other potential targets, such as AIM-quoted Kimberley Diamonds.

Charles Kernot of stockbroker Seymour Pierce is clear about what companies should thrive in today’s market. ‘Make sure you are near production, with cash flow and earnings in sight,’ he says. ‘If you are only at the exploration stage, it is a very difficult market.

‘We’ll need more merger and acquisition activity,’ he reflects. Currently working on a few potential deals, he says, ‘It is often a question of finding roles for the relevant chief executives.’

Doing the right thing
While Jubilee Platinum has won fans by adding a Madagascar nickel prospect to its Bushveld platinum group metal projects, European Nickel, strong on AIM at 61.5p, has both raised £95 million for its 360,000-tonne Caldaq nickel deposit in Turkey and reached an agreement for BHP Billiton to take 100 per cent of Caldaq’s output. The company has also acquired 40 per cent of the Acoje nickel project in the Philippines.

At the other end of the scale, explorer Zambezi Nickel could have cheerful news soon about its projects in Zambia and Mozambique. A joint venture deal could bring some cheer to its speculative shares, now a depressed 4p.

Poised to turn annual losses of £2.2 million into a profit is fully listed Kenmare Resources, which aims to produce 800,000 tonnes of titanium-bearing ilmenite from Moma in Mozambique and lift that to 1.2 million tonnes by 2010. Steered by Northern Irish entrepreneur Michael Carvill, Kenmare expects £62.5 million revenues from Moma next year and operating costs of only £19 million, with ready markets for titanium oxide from makers of jet engines, pigments, paints, colouring for cosmetics, toothpaste and clothes.

Carvill, who has been working on Moma for 20 years, boasts off-take deals covering 80 per cent of projected revenues for the next five years, with price increases pegged either to inflation or the metal market. After years of performing dismally, the shares have risen from 14.25p in 2004 to 54p and should make more progress.

Coal International, whose shares plunged from 116.5p in 2005 to 27.5p two months ago, lost an interim £3.2 million on West Virginia thermal coal production as a record warm winter knocked prices. The company, which is seeking to raise £9 million at 28p, is now embarking on metallurgical coal production from its Maple Creek mine at the rate of 700,000 tonnes a year with a claimed margin of £10 a tonne, for a potential £7 million annual profit, and could regain some favour at 33p.

In the red-hot and possibly overheated uranium sector, UraMin, floated last year at 68.5p and recommended by Growth Company Investor at 181p in February, has powered to 323.75p on more than doubling its measured and indicated resource at Trekkopje in Namibia to 110 million pounds of eU308, with new areas in Niger too. Partial profit-taking would be wise, but keep some in case it works out in the long term.

For gold punters, Cluff Gold merits consideration at 78p, with encouraging drilling results at its Baomahun project in Sierra Leone. Centamin Egypt, which recently reported a potential resource of one million ounces at its Sukari property, could also find favour.