via: http://www.reuters.com/article/2011/02/22/canada-mining-copper-idUSN2213480820110222?feedType=RSS&feedName=basicMaterialsSector&rpc=43

* Big copper producers shopping for smaller miners

* Top players eye developed assets over exploration

* Copper prices at record levels as supply fears grow

* Predators could also become prey as sector heats up (In U.S. dollars unless noted)

By Bhaswati Mukhopadhyay and Julie Gordon

BANGALORE/TORONTO, Feb 22 (Reuters) - A record run for copper prices, fueled by Chinese industrial demand, has the world's most prolific copper producers shopping for smaller miners capable of boosting their output almost immediately.

Dozens of Canadian-based juniors have the potential to become prime targets. The strongest candidates already have operating mines with healthy growth profiles, and their share prices are undervalued, analysts say.

The drive to acquire is especially urgent because the output at some of the world's top producers is falling. Rio Tinto (RIO.L) sees copper demand doubling in the next 15 to 20 years but the Anglo-Australian mining giant experienced a 16 percent drop in mined production last year.

"We really haven't developed the next generation of new mines in terms of finding large-scale projects," said analyst John Hughes at Desjardins Securities. "Without the next wave of proper supply, junior companies with large resources will continue to be targets for the larger mining companies."

As a consequence, senior producers such as First Quantum (FM.TO) and Freeport-McMoRan (FCX.N), as well as Vale (VALE5.SA), BHP Billiton (BLT.L) and other diversified miners, will line up to buy established production rather than invest in development projects from scratch, analysts say.

"It takes such a long time to find something, then permit it, then build it, then ramp it up," said David Radclyffe, an analyst at BMO Capital Markets. "You're going to miss that leverage to the current price that you can get today."