That, by the way, is why your guest editor jumped ship from London to move to Australia in 2005. Having sussed out the big picture (sell paper, buy stuff), we wanted to find good ‘stuff’ to buy. We’re not alone. Canadian mining legend Robert Friedland was in town a few weeks ago, talking up the copper prospects of Ivanhoe Australia Limited.

Friedland’s business strategy is simple. Buy a distressed asset. Front up the money to drill it like nobody’s business. Demonstrate that it’s worth a lot more than you paid for it. Then find a JV partner to front up the rest of the capital to make it a producer.

Friedland is also a big fan of "polymetallic mineralization," a kind of selling Peter’s copper to pay for Paul’s gold production. When you have a world-class polymetallic deposit, you can use the cash flow generated from one metal to sustain, or at least offset the production costs, in another.

Friedland thinks he’s got a world-class project going at Mount Isa in Queensland. "The Mount Isa mining district is one of the top five mineralized districts on planet earth," he told the local paper. "It doesn’t have to apologies to anyone. There’s the Witwatersrand in South Africa, there’s Norilsk in Russia, there’s the Cadillac district fault in Canada, there’s the main structure in Chile. This is one of the great mining regions in the world."

Friedland is clearly on to something. He points out that these great new ore bodies of the mining world will replace many tired, old, bed-ridden mines that are nearing the end of their productive life. "Our view, and we talk to Rio Tinto about this a lot, is around the year 2012 or 2013 we are going to have a crisis in copper because a lot of the great copper mines are like little old ladies lying in bed waiting to die."

Younger mines will have plenty of cost blowouts (see BHP’s Ravensthorpe nickel project). They will have to endure volatility in underlying commodity prices. But they have one thing the older mines don’t: a lot of ore in the ground. That’s worth something, especially at today’s resource share prices.

How are we playing it here at the Daily Reckoning’s Australian outpost?

While Frieldand looks for copper at Cloncurry, we’ve been targeting our investments to black coal and coal-seam-methane in Queensland, new uranium mines in South Australia (the only State which is permitting new mines right now), and, most importantly iron ore, vanadium, molybdenum and rare earth juniors in the vast expanse that is Western Australia (especially in the Pilbara region where we’re headed next week. A full report will follow).

Regards,

Dan Denning

The Daily Reckoning

Editor’s Note: Dan Denning is the editor of The Daily Reckoning Australia and The Australia Resource and Mining Report.. He’s also the author of 2005’s best-selling The Bull Hunter (John Wiley & Sons), and spent five years as editor of Strategic Investment, one of the most respected "big-picture" investment newsletters on the market. A former specialist in small-cap stocks, Dan draws on his network of global contacts from his new base in Melbourne, Australia. Click here to visit the DR Australia