The market has been so focused on gold lately that investors are missing out on the high potential profits which junior copper stocks offer.

The price of copper has been breaking new highs all year however many junior copper stocks have been trading flat. Today we will revisit Catalyst Copper (CCY, TSXV) which I believe is getting primed for a run-up in 2011 based on three major factors:

· Copper demand is growing stronger amid shrinking supplies

· Mergers and Acquisitions of junior copper mining companies are forecasted to begin

· Catalyst Copper is well on their way to confirming a historic 1.2 billion pound copper resource.

The Copper Market

Copper is currently trading at two year highs based on a mix of economic news from three of the world’s top economic powerhouses.

The biggest single driver behind copper demand is China. With the world’s biggest population and fastest growing economy, there is a middle-class of new consumers who are standing in line to buy refrigerators, stoves and an array of electronic goods. China currently consumes 39% of the world’s copper and just like you’d expect China to do, they are buying up copper assets internationally.

In Japan, their central bank announced that they will pump more Yen into their slow economy and keep interest rates virtually at zero. I guess they mean the square root of zero because it’s as close to free interest rates as you can get. At any rate, this caused the Euro to jump versus the U.S. dollar thus making copper cheaper in U.S. dollars – unless you’re a U.S. buyer that is.

While the U.S. economy may be sagging, it’s still the most powerful economy in the world despite the very obvious downturn. This week more bad news was reported. Non-manufacturing activity dipped to its lowest point since January. As a result, the interest rate gurus in the U.S. are forecasting rates will ease yet again. This will prompt more devaluation of the greenback and thus drive up copper prices as the spot price is denominated in U.S. dollars.

The bottom line is that copper prices are forecasted to take a strong run into 2011. Junior copper exploration companies who can quickly prove up resources will likely be prime takeover candidates as producers scramble to increase production.

Catalyst Copper (CCC, TSXV) Mountains of Copper

The term “mountains of Copper” may sound a little promotional but the fact is, Catalyst has been pulling some fantastically long drill intercepts of copper from their La Verde project in Mexico.

Historic exploration data has identified two large mineralized zones known as the West Hill and East Hill deposits.

Catalyst management believes the two zones may be joined at the base which would make it a monster deposit. Recent drill results are confirming the theory. Hole 21 is a good case in point. There was 634.8 meters of 0.42% copper starting at just 19 meters from the surface. At the bottom of the drill hole the copper grade got higher averaging 0.91% copper for 130 meters. It does beg the question; are these two mountains of copper joined at the bottom? Only further exploration will tell the story.

The Catalyst Exploration Program

Catalyst is in the unusual position of starting their exploration program knowing that they already have enough copper for a 12-year-mine life.

La Verde has a historical, but non-compliant NI 43-101 resource of 96.9 million tonnes @0.63% Copper which gives them 1.224 billion pounds in the ground. An engineering firm has been hired to review the historical data and prepare a compliant NI 43-101 technical report.

If the historical data proves they indeed have a 1.2 billion pound copper resource then they are off to a very good start. However there’s a further big upside to this deal. The management believes that with only a moderate amount of drilling there is significant potential to expand the scale of the mineralization. And better again; this project would be amenable for open pit mining thus keeping the capital costs low.

There are two objectives of the 2010 exploration program:

1. Drill extensions to the known mineralization in order to target the size potential of the porphyry system.
2. Confirmatory drilling over the known mineralization to develop a N.I. 43-101 compliant resource.

The Phase One program includes a deep level IP survey, 5,000 meters of confirmation drilling, block model creation, mineral resource estimation, and the generation of a technical report. Phase Two involves both drill definition of the known zones and step-out drilling to test numerous geophysical and geochemical anomalies immediately adjacent to the La Verde zones. Phase Two includes 25,000 meters of drilling that would culminate in a second mineral resource estimate and technical report.

La Verde Copper Property

The Property, located in the Sierra Madre del Sur is approximately 320 km west of Mexico City, consists of two claims, Capire and Unificacion Santa Maria, comprising approximately 17,000 ha.. Historically, copper porphyry mineralization has been exposed in a 3 km by 1 km system which is part of two main mineralized zones termed East Hill and West Hill. The East and West Hills have been explored with 585 drill holes comprising of nearly 80,000 meters of core. The system is open in all directions. As an added bonus there has been some potential for molybdenum and gold as well which could offset the cash costs of production if developed.

The project is located in an area with a preexisting infrastructure: 150 km to coast with water, power and rail all nearby.

Catalyst has an option on the La Verde copper property which will enable them to get a majority interest of 60% from the original owner, a subsidiary of the blue chip giant Teck Resources. Part of the deal calls for Catalyst to pay $6 million in cash, which has been done, and then spend $10 million on exploration before the end of 2012 which is in progress.

After Catalyst earns its 60% interest, Teck may elect to increase its interest to 60% by incurring aggregate optional expenditures equal to two times the expenditures incurred by Catalyst, to a maximum of US $20 million. Should Teck fail to exercise the option to earn a 60% interest, Catalyst can acquire a 100% interest by paying Teck a further US $20,000,000.

Teck’s involvement in La Verde will depend upon how large of a deposit it becomes. Teck is only interested in mega sized projects. If the deposit is only mid-sized in Teck’s view then Catalyst will likely develop this deal themselves if the numbers make sense.

Conclusion

If the upcoming 43-101 proves out that they in fact have a resource of 1.2 billion pounds of copper then this stock is set for a good run. This represents a low risk exploration play given the exposed 3km by 1km mineralized system within two zones which have had 80,000 meters of historic drilling with mineralization remaining open.

The management team is headed by John Greenslade who has had extensive experience in developing and financing in Mexico and internationally. Greenslade and V.P. of Exploration,Terry Hodson were key members of the team that got the Boleo copper cobalt deposit in Mexico into development.

They are both proven copper men who are comfortable on Mexican soil. They have a reputation for environmental diligence and Greenslade speaks Spanish. His projects are typically devoid of land use disputes because he treats community relations as a key component of macro project development. That’s great news for investors.

Catalyst is our top developing copper pick.