NEW YORK (TheStreet) -- The S&P 500 has gained 2.9% so far in October, while the SPDR S&P Metals and Mining ETF (XME) surged 6.0%, outperforming the broader markets. Metals and mining stocks will likely provide attractive returns to investors, given the current positive momentum in the equity markets.

The following 10 metals and mining stocks are trading at deep discounts in comparison to the broader equity markets and peer stocks, offering bargain opportunities to investors. The stocks are ordered from cheap to cheapest.

10. Worthington Industries ( WOR) is a diversified metals processing company focusing on steel processing, metal framing, pressure cylinders and other businesses, accounting for 45%, 25%, 20% and 10% of the company's sales, respectively.

For the quarter ended August, the company's profits more than tripled. Earnings per share stood at 30 cents, compared to 8 cents a year earlier. Year-to-date, the stock returned around 17.0%, while peer companies declined 2.9%.

Over the past 12 months, return-on-equity is at 6.4%. In comparison, U.S. Steel ( X), AK Steel ( AKS) and ArcelorMittal ( MT) returned around -29.3%, -8.1% and 0.2%, respectively.

The stock provides an attractive dividend yield of 2.8%, ahead of U.S. Steel's 0.52%, Steel Dynamics' ( STLD) 2.27% and Schnitzer Steel's ( SCHN) 0.13%.

9. Cloud Peak Energy ( CLD) is a producer of sub-bituminous coal. Headquartered in Gillette, Wyoming, the company owns three Powder River coal mines: two in Wyoming, one in Montana.

Despite gaining 41.3% after the recent lows tested on July 6, the stock is trading at an attractive forward PE multiple of 11.6. The current EV to EBITDA ratio stands at 4.2 in comparison to Peabody Energy's ( BTU) 8.4, Consol Energy's ( CNX) 8.6 and Alpha Natural Resources' ( ANR) 6.2.

Over the past 12 months, the return-on-equity stood at 61.7%, emerging a top performer in the coal sector. Arch Coal ( ACI), Alpha Natural Resources, International Coal Group ( ICO) and Massey Energy ( MEE) are the worst performers, with ROEs of 2.2%, 3.5%, 3.8% and 8.8%, respectively.

8. Vale ( VALE), a global metals and mining giant with operations spanning across more than 50 countries, produces aluminum, copper, diamonds, coal, iron ore, uranium, gold and other industrial minerals.

During August, Vale announced a dividend of $4.0 billion for 2010, above the consensus estimate of $2.8 billion. The company has approved a share buyback plan of as much as $2.0 billion over the next six months, taking total shareholder returns to $6.0 billion, equivalent to a yield of 4.0%.

The first share buyback since October 2008 underscores Vale's belief that the shares are undervalued and indicates confidence in cash flow of the company. Vale will benefit from its iron ore business, which contributes as much as 60% toward total revenue. In addition, the company has announced plans to list its shares in Hong Kong, providing Vale direct exposure to Asian capital markets.

While BHP Billiton ( BHP) is striving to expand its fertilizer business by acquiring Potash Corp. of Saskatchewan ( POT), Vale has raised its stake in its fertilizer unit Vale Fertilizantes by 20.27% after buying up the shares held by Mosaic ( MOS) for $1.03 billion.

Of the 25 analysts covering the stock, 20 recommend buying, 5 suggest holding and none advise selling the stock.

7. Walter Energy ( WLT) is a premier producer and exporter of hard coking coal used by the steel industry. The company also produces steam and industrial coal, metallurgical coke and coal bed methane gas.

Early last month, Walter revised its full-year coking coal sales guidance to 7.2 million-7.5 million tons from the earlier guidance of 7.7 million-7.9 million tons, due to lower production volumes. However, earnings are expected to be robust on the back of concluded coking coal contracts. According to analysts polled by Bloomberg, the company is set to report earnings of $8.60 per share for 2010 and $10.25 per share for 2011, compared to $2.64 a share during 2009.

Despite the current gain of 47.3% from the recent lows in early July, the stock continues to trade at an attractive forward PE multiple of 10.6. Of the 16 analysts covering the stock, 11 recommend buying the stock, 5 suggest holding and none advise selling the stock.

6. Ternium (ADR) ( TX), a Luxembourg-based company, manufactures a range of steel products and has iron ore operations in Central and South America.

Goldman Sachs upgraded the stock to Neutral from Sell last week, saying the stock does not face the same pricing pressure as Brazilian companies Gerdau(ADR) ( GGB) and Companhia Siderurgica Nacional (ADR) ( SID).

Of the 13 analysts covering the stock, nine recommend buying Ternium, one suggests holding and three advise selling the stock. Among the major steel producers listed in the U.S., Ternium has the lowest EV to EBITDA ratio of 4.97.

5. Posco (ADR) ( PKX), a South Korea-based company, is the world's third-largest steel company. Warren Buffett's Berkshire Hathaway ( BRK.A) has a 4.5% stake in the company. Posco generates around 70% of its sales from South Korea, home turf for automobile majors Hyundai Motors and Kia Motors.

Maintaining high steel prices is necessary to maintain profit margins, as the company has agreed with Vale and iron ore suppliers to hike iron ore and coking coal prices. Despite increasing steel prices twice this year, the company could not pass on increased raw material costs to customers, because of the competitive pricing from integrated steel producers. This has led to a weaker-than-expected 9% increase in third-quarter operating profit to 1.1 trillion won ($985 million) vs. the consensus estimate of 1.27 trillion won.

Anticipating a further slide in profits during the fourth-quarter, the company reduced its full-year profit forecast by 7% on Tuesday. However, Posco is not yet an exception in the steel industry, as other non-integrated steel producers could slip-up on forecasts.

Posco will be among the first international steel producers that benefit from a rebound in steel demand in China. The company is ranked by analysts to be among the industry's most efficient producers.

During the past year, the stock's return-on-equity stood at 10.8%, behind Ternium. In addition, Posco is a less volatile stock, as indicated by its equity beta of 1.21. Among major steel producers listed in the U.S., only Nucor ( NUE) and Gerdau (ADR) are showing less volatility than to Posco.

4. Alliance Resource Partners ( ARLP), a diversified producer and marketer of coal to major utilities and industrial users, is the fifth-largest coal producer in eastern United States.

The company reported record revenue for the second quarter, driven by higher coal sales and a strong contract position. Alliance Resource has secured sales commitment for around 29.8 million tons, 24.2 million tons and 22.3 million tons in 2011, 2012 and 2013, respectively. For 2010, the company anticipates coal sales in the range of 30.8 million-31.5 million tons, and the entire volume is priced and committed.

Analysts polled by Bloomberg estimate the company to report earnings of $1.89 a share, the highest ever quarterly EPS, and up a staggering 232% from the year-earlier period.

Over the past one year, the stock has gained around 70.1%, while peers have returned only 41.7%. Over the past 12 months, the return-on-equity stood at 63.1%, the highest among coal producers. In addition, the company offers an attractive dividend yield of 6.82%.

3. Rio Tinto ( RIO), a global metals and mining giant, has operations across more than 50 countries. The company produces aluminum, copper, diamonds, coal, iron ore, uranium, gold and industrial minerals.

Rio Tinto, a stock loved by analysts, will continue to benefit from its iron ore business, which contributes 28% toward total revenues. Higher iron ore prices boosted net earnings by nearly 125% during the first half of 2010. According to analysts polled by Bloomberg, the company is set to announce earnings of $7.75 per share for 2010 and $8.29 per share for 2011, so far the highest reported by Rio Tinto.

Despite the current gain of 55.9%, from the lows tested on May 20, the stock hit 52-week highs last Friday and is trading at an attractive forward PE multiple of 8.7. During the same period, competitor BHP gained around 40.0% and is trading at an expensive PE multiple of 15.8.

2. Cliffs Natural Resources ( CLF) is the largest producer of iron ore pellets in North America. Higher iron ore prices will likely boost the company's revenue in the upcoming quarter. In addition, the company will benefit from its long-term contracts with major steel producers such as ArcelorMittal.

Analysts polled by Bloomberg expect the company to report earnings of $2.71 a share for the third quarter, from 45 cents per share in the year-earlier period. For the full year, Cliffs' earnings are estimated at $7.89 per share for 2010 and $9.23 per share for 2011, from $1.63 per share during 2009.

Despite the current gain of 46.6% from the recent lows tested on July 19, the stock is trading at an attractive forward PE multiple of 8.6. Over the past one year, the stock has gained around 77.1%, while its peers returned only 12.8%. Of the 12 analysts polled, 75% recommend buying Cliffs, 3 suggest holding and none advise selling the stock.

1. James River Coal ( JRCC) mines and sells bituminous, steam and industrial coal through six subsidiaries located in eastern Kentucky and southern Indiana.

During the second-quarter earnings released early August, the company upgraded its 2010 EPS estimates to $2.35-$2.70 from $1.70-$2.25, demonstrating management's confidence in the performance of the company.

Among major coal producers, James River has the lowest EV to EBITDA value of 3.27. Of the 10 analysts covering the stock, 70% recommend buying, three suggest holding and none advise selling the stock.

>To see these stocks in action, visit the 10 Metals & Mining Stocks portfolio on Stockpickr.

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