NEW YORK ( TheStreet) -- China, the world's largest copper consumer, is focusing on the Canadian markets to gain access to new copper resources. The acquisition of Vancouver-based junior copper-gold explorer Continental Minerals for $432 million by China-based Jinchuan Group helps demonstrate China's insatiable appetite for the metal and its pursuit of gaining access to additional copper assets.

These three junior Canadian miners will likely attract China's interest, especially in projects that produce copper concentrates and not the finished metal. The pace of M&A in the junior space is escalating, as they not only form part of the supply chain for the much needed copper, but China is facing a supply crunch.

Major industry players, like Rio Tinto ( RIO), BHP Billiton ( BHP) and Freeport-McMoRan Copper & Gold ( FCX), expect the market for mined copper to remain in a deficit in the foreseeable future.

At a recent industry conference in London, Rio Tinto said that planned copper mining projects will be unable to support demand growth at current rates. Rio sees production from probable mining projects supporting annual demand growth of only 3%, while the forecast for demand during 2011 is 4.5%.

In such a scenario, the following three Canadian junior miners will likely provide attractive opportunities to investors in the near term. Industry analysts believe that these stocks will grab the attention of foreign investors or mid-tier producers looking to improve their long-term growth profile. Besides, even sovereign wealth funds in China, India, Brazil and other developing economies are likely to concentrate on these junior mining companies.

3. Taseko Mines ( TGB) has primary operations related to the exploration of copper mines. With Wall Street analysts bullish on the stock, the stock has an attractive return on equity of 35.1% and a trailing P/E ratio of 10.37, as compared to a return on equity of 7.5% and P/E of 38.8 recorded by its peer Hudbay Minerals ( HBM).

For mining companies, a low payback and high leverage multiple are healthy. Taseko has a payback of 2, which is lower compared to its peers, such as Hudbay, with a payback of 3.2. Its leverage is 15.7 times, the highest among peers; Hudbay has a leverage of 6.8. In a scenario where metal prices are assumed at current levels, Taseko is estimated to gain 338%, and when prices move 30% down or up, the stock is likely to gain 171% or 506%, respectively.

The company has a strong advantage over its peers indicated by a significant $200 million cash in hand, an estimated 60% copper production increase from one of its mines over the next nine months and almost 11 billion pounds of copper resources. For the second quarter ended June 2010, Taseko recorded copper production of 20.1 million tons.

For the third quarter, the junior miner reported a 5.6 million-pound production increase from its Gibraltar mine, as compared to the earlier quarter, up 11.7 million pounds from the year-ago quarter.

Taseko's chief executive attributed improving production to the capital investment made in 2006. The outcome is a modern, low-cost, efficient copper mine capable of generating significant cash flows over the next 25 years.

2. Canada-based PolyMet Mining ( PLM) is a development-stage company engaged in the exploration and development of natural resource properties. A CIBC junior copper report has ranked Polymet first for lowest cash costs and maximum production per dollar of capital expenditure among peers.

For the second quarter ending July 2010, the junior miner's capital expenditure stood at $4.17 million as compared to $14.66 million recorded by peer Augusta ( AZC) and $8.08 million by Taseko in its first quarter.

During May 2008, the company recorded copper cash costs of $1.05 per pound, which is on par with the current average cash costs of $1.01 per pound recorded in the Chilean industry, the world's biggest producer of the red metal. BNAmericas cites a study by Cochilco, which expects cash costs to remain flat at $1.01 through 2011 and then decrease to $0.93 per pound by 2015.

PolyMet's major mines are NorthMet Project and Erie Plant. The company says that its Erie plant has the capacity to operate at almost three times the planned production rate. Additionally, any expansion in production can be backed by a reserve expansion at NorthMet and other identified deposits in the area.

The stock is trading at a price-to-book ratio of 2.6, which is lower than its peers and, therefore, indicates a buying opportunity for investors.

1. Augusta Resource ( AZC) is engaged in the acquisition, exploration and development of natural mineral resource properties and has a price-to-book ratio of 4.03, as compared to 8.4 recorded by a Canada-based mineral exploration company Duluth Metals. The company is developing the Rosemont copper property, which has an estimated reserve of 560 million tons scheduled to be developed from 2012.

Recently a Korean consortium including LG International agreed to invest $176 million in Augusta's Rosemont project for a 20% joint venture interest in the project. Besides, the consortium has also agreed to buy 30% of the copper concentrate and 20% of copper cathode and molybdenum concentrates produced annually at Rosemont.

Augusta has a payback of 2, which is lower than peers like Hudbay, with a payback of 3.2, while the leverage is 9.7 times, much higher than Hudbay's leverage of 6.8. In a scenario where metal prices are assumed at current levels, Augusta is estimated to gain 278%, and when the prices move 30% higher or lower, the stock is likely to gain 121% or 436%, respectively.

The company has a capital expenditure of $897 million, which is very low as compared to the production of 220 million pounds of copper per year. The Rosemont project is likely to be the third-largest copper mine in the U.S.. Augusta has a cash cost of $0.62 per pound.

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