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Tuesday, February 28, 2006

Uranium and zinc remain Scotiabank's top commodity picks for investors this year, which may benefit zinc producers such as Teck Cominco Ltd. and the world's top uranium producer, Saskatoon-based Cameco Corp.

“The global shortage of zinc concentrates may not be alleviated until 2008 (at the earliest),” Scotia Economics vice president Patricia Mohr said in the bank's commodity report. By then, mines may be ramped up in Peru and Bolivia, and new mines started in Uzbekistan, Australia, and Indonesia.

Bank of Nova Scotia's commodity price index bounced back in January after two months of decline, buoyed by rising metal and forest-products prices. The index, which measures price trends in 32 of Canada's major exports, rose 0.9 per cent in January to 170.9. In October, it stood at 172.5.

Zinc and copper prices climbed to record levels in January on the London Metal Exchange, while aluminum prices reached a 17-year high on Feb. 7, before easing back mid-month as hedge funds locked in gains.

LME zinc prices, for example, surged to almost 95 cents (U.S.) a pound in January from 83 cents in December and then rose as high as $1.08 also on Feb. 7, exceeding the previous high of 95 cents established in March, 1989 by a wide margin.

Spot uranium prices also strengthened, rising to $37.50 a pound in late January and then to $38.25 in mid-February, up from $36.25 in late December. They remain “on track to approach the previous 1978 peak of $43.40 by late 2006,” Ms. Mohr said in the report.

In forest products, prices for two-by-four boards of western spruce, fir and pine advanced from $334 per 1,000 board feet in December to $348 in January, then fell back to the December levels.

The energy sector was the only drag on the index in January. Natural gas prices on the New York Mercantile Exchange plummeted from $13.43 per million British thermal units in December to $8.93 in January and currently stand at around $6.79.

The moves in West Texas intermediate crude prices have been much less dramatic. They climbed from $59.45 a barrel in December to $65.54 in January, then dipped as low as $57-$58 in mid-February before rebounding to around $61.

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