Four mining stocks to watch in 2014

JP Morgan Natural Resources fund manager Neil Gregson shares his stocks to watch as we move into 2014 after a difficult year for the mining sector.

The two mining stocks with the strongest hold on Gregson's attention next year are giants Rio Tinto and Glencore Xstrata.

"The market is pricing in a fairly severe collapse in iron ore prices," he says on Rio, but adds he is less concerned about an iron-ore crisis than other investors in the sector.

He believes any crisis will be less severe and more gradual than some have predicted as it will be caused by excess supply rather than a negative demand shock.

"We don't think a supply-driven crisis will result in a sharp fall, it will result in downward pressure gradually over time," he explains.

In addition, he is dubious about the effect an iron-ore slump would have on Rio, which would "still make a lot of money" at the $80 (£48.9) consensus price for iron ore.

He concludes: "Rio still has world-class assets and is a very cheap stock."

Moving onto Glencore, he is more cautious, noting the company has "come through with a lot of positive surprises on cost cutting" over the past year.

"If it is genuine cost cutting on things the company doesn't really need then it will be absolutely fine but if the knife has cut too deeply at operations that will be something to watch out for," he comments, explaining that he will be monitoring this in 2014 and beyond.

But while he is most communicative on the larger stocks, he adds that "there is always quite a lot happening at the smaller end of the market". These are the stocks which he would encourage investors to target for growth.

At present his main stock picks among the smaller caps do not come from London's alternative investment market.

Reservoir Minerals, which has recently made a large copper discovery in Serbia, is listed on the Canadian TSX Venture market, and Gregson also highlights ASX-listed nickel explorer Sirius Resources.