Mineral sands hopeful Base Resources made the cut as RFC’s top pick among fully financed developers ahead of its dual-listing on London’s AIM tomorrow.

“Base’s Kwale project is ranked as the number one project in our mineral sands universe on a 2015 forecast revenue-to-cash costs basis,” RFC said.

“The company plans to utilise a low-risk, uncomplicated, high-margin dry mining technique and is, in our view, extremely undervalued by the market – it has recently been oversold on the back of news flow suggesting the Kenyan government may take 35 per cent of the project.

“We see this as extremely unlikely and view this as an excellent opportunity for investors to buy into a robust project, close to infrastructure, that produces a significant proportion of high-value rutile.”

The top pick among low-cost producers was Toronto-listed Mandalay Resources, which owns the Cerro Bayo mine in Chile and the Costerfield mine in Australia.

RFC’s favoured explorers were Australia-based, Africa-focused Deep Yellow and Papillon Resources.

“Now that [Deep Yellow] is funded and returning excellent high-grade exploration results, we feel that if management pursues its alaskite uranium opportunities there is considerable upside in the share price,” RFC said.

Meanwhile, RFC said Papillon’s exploration upside was impressive and it expected the 3 million ounce Fekola project to grow.

RFC also picked Papillon and Perth-based World Titanium Resources as potential takeover targets.

Analysts also viewed many companies as being undervalued on permitting risk and saw many opportunities in Europe.

“With the recent push for increased local ownership in many emerging countries across the globe, we see more opportunities developing in Europe as relative political stability, excellent infrastructure and reduced permitting risk create significant mining opportunities,” RFC said.

RFC picked Ortac Resources, Ormonde Mining, EMED Mining, Edgewater Exploration and Australia’s Berkeley Resources as stocks to watch in Europe.

While analysts acknowledged that 2012 was a tough year, the softening of commodity prices was viewed as only a bump in the road, with the commodity “super-cycle” set to continue.

RFC said its preferred commodities for equity investment were gold, uranium and zinc.

“We continue to see a significant arbitrage opportunity in gold equities and we have high expectations for increased valuations in uranium and zinc in the medium term as demand and pricing strengthen,” RFC said.

RFC said the trends for 2012 were underperforming producers, increased nationalism/local ownership, risk-averse investors, higher dividend pay-out ratios and increased merger and acquisition activity.

“We see these trends continuing in 2013,” RFC said.

“We believe that equity markets may continue to face challenges ahead, at least until there appears to be some light at the end of the rather gloomy economic tunnel.

“We expect the rate of M&A to pick up over 2013 as the current trend in equity markets continues and more undervalued opportunities emerge.”

However, RFC warned that early stage explorers were likely to be the last to recover, unless they make a discovery or are well-financed.

“These stocks will likely be further sold down if expenditure is not value accretive and there is a possibility of a heavily discounted equity raise,” RFC said.

This article first appeared in ILN's sister publication MiningNews.net.