Pat McKeough responds to many personal questions about specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.

This week, one Inner Circle member asked about one of the Canadian copper stocks operating in South America. This firm is developing a large copper, gold and silver project. But it’s in Peru, so Pat takes a close look at the additional political risk that faces mining stocks in that country.

Q: Pat: Can you give me your recommendation on Candente Copper? Thanks.

A: Candente Copper (symbol DNT on Toronto; www.candentecopper.com), is developing the Canariaco Norte copper/gold/silver project in northern Peru. The deposit holds as much as 8.9 billion pounds of copper, 2 million ounces of gold and 53 million ounces of silver.

Candente handed out shares of Cobriza Metals (Toronto symbol CZA) to its shareholders in October 2011. Cobriza holds all of Candente’s properties in Peru except for Canariaco Norte.

The company holds cash of $14.4 million U.S. That’s enough to complete its feasibility study on the financial viability of a mine. Candente expects to complete this study in mid-2013. If it decides to go ahead, it will need to find a major partner because it will cost over $1.6 billion to develop a mine at the site.

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In Peru, political risk can mean violent protests

Operating in Peru carries significant political risk. President Ollanta Humala, who came to power in June 2011, was a left-wing candidate who promised higher taxes on, and greater control of, the mining industry.

Environmental protests by farmers and social activists are also a powerful force in Peru. Demonstrations have already halted projects by Barrick Gold, Southern Copper and Bear Creek Mining. As well, in response to violent protests, Newmont Mining has suspended work on its $4.8-billion Minas Conga gold project. So far, 17 people have been killed in protests since President Humala came to power. About 190 were killed in demonstrations during the previous administration.

Candente has outlined a huge mineral deposit. However, it needs a positive feasibility study and steady copper prices to move forward with a mine. It will also need the Peruvian government’s support.

In the Inner Circle Q&A, Pat examines the mining tax imposed by the new Peruvian government and its impact on Candente and other foreign-owned mining companies. He concludes with his clear buy-hold-sell advice on the stock.

(Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.)

COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members

When a mining stock faces considerable political risk, do you avoid it even if it has promising projects? Or have you taken any calculated risks with stocks like these and had them pay off? Let us know what you think.