At the end of 2009 ENRC had a balance sheet which gave it gross available funds of $1bn. EBITDA for 2009 came in at US$1.5bn which was a 65% fall from the year before. However, that the business made profits at all is attributable to its low cost base in Kazakhstan which puts ENRC in a strong position to weather any storm.

The strength of ENRC's financials also sets it apart from the mining majors which went on a debt-fuelled acquisition binge during the boom years. Xstrata most notably pursued this strategy setting itself up for a major fall when commodity prices fell back. Rio Tinto also undertook major deals which have put the group under pressure in the last couple years.

With prices recovering and capital constrained ENRC's focus on now on using its financial strength to grow. Capital expenditure of $1.5bn for 2010 is up from $1.1bn in 2009 and the total amount of projects being assessed comes to $5.8bn.

Looking at the long-term technical picture of Eurasian Natural Resource Corporation we can see that the stock has been in a clear uptrend since hitting a low of 183p on the 21st of November 2008 which has taken the share price to a 2010 high of 1269p in April.

The weekly MACD indicator is signalling that the trend is still up while the daily RSI is at 55 which is still a good distance from overbought territory. Looking at the daily chart we can see that the price action is consolidating sideways for a few weeks now. Of some concern is the bearish RSI divergence on the daily chart which is usually a reliable reversal signal.

The inability of the stock to push higher in line with the broader market combined with the aforementioned RSI divergence lead us to believe that a correction may be imminent. We would target a pullback with first support to be found at the 50 day moving average or even the 1070 horizontal support level.

It is in acquisition related growth where ENRC is really putting all fingers on the throttle. This potentially allows it to leverage its strong financial position to diversify its commodity offering and geographical focus. However, deals appear to be coming in at a pace which raises questions about the level of due diligence undertaken.

These have included buying the cobalt and copper producer, CAMEC, for US$931m which is no small deal even for a group of ENRC's size. It also pushes ENRC into what would appear to be a more risky country than its home base of Kazakstan. The Domocratic Republic of Congo has suffered from wars with foreign armies only withdrawing in June 2003.

That the DRC is resource rich and offering opportunity is not open to question. The key is whether the country can offer a stable environment and sound infrastructure as these lower the costs of doing business.

To take one example, in Kazakstan the bulk of electricity generation is in private hands (about 87%) and hydroelectric plants generate 12% of the power. This is important for miners as being able to plug into the domestic grid lowers costs. The key issue is whether the DRC can develop a level of infrastructure to match as to use generators or to build power plants for a mine can cause delays and is expensive.

Other acquisitions include $200m for a 25% in the Shubarkol coal business in Kazakhstan and $300m on Chambishi, which is a copper and cobalt refiner/smelter in Zambia. The latter deal is clearly focused on building up the group's African infrastructure by moving up the value-chain so that commodities can be processed near to their mines.

Earlier this week ENRC also announced a $300m deal to buy a 12.2% stake in the South African platinum producer Northern Platinum Limited. The deal is set to complete in May and gives ENRC exposure to a commodity which is expected to benefit from increased demand and supply constraints. Thus the outlook for platinum is positive.

Northern is one of only four major platinum group metals (PGM) mining groups in South Africa that has its own smelting operations. The company is currently working on a feasibility study for its Booyesndal property and with further funding likely ENRC will have the opportunity to increase its stake further.

Clearly, Africa provides a strong growth opportunity for ENRC but it also increases the risks facing the group. It is positive that the group is able to act quickly, as this shows decisiveness in taking advantage of the capital constraints other miners are facing.

However, it is also worth considering that stock markets as a whole look set for some volatility given the sovereign debt issues remain. Greece recently became the first eurozone country to have its credit rating downgraded to junk status and it is not clear if it can avoid default.

A failure of a sovereign nation clearly will cause writedowns in the financial sector as institutions which hold the debt suffer. This could serve to constrain credit as financial institutions come to fear further writedowns and therefore become more cautious.

Greece is also important in that it reflects wider issues with a variety of nations suffering from excessive borrowing and budget deficits. It could therefore serve to undermine confidence in the ability of Governments to repay their debts potentially triggering a string of defaults.

We do believe that emerging market demand will prove to be resilient as stimulus measures in China have been very successful and India has been boosted by domestic demand. However, with a period of summer weakness in the stock markets appearing possible it appears to be prudent to take some money off the table. Commodity shares are particularly prone to market setbacks given that commodity demand largely depends on investment and capital spending.

Longer-term it is also crucial to see how ENRC's acquisitions and African strategy pans out. The purchase of CAMEC, for example, was of a company that had fairly colourful management. The move to diversity into new metals also runs the risk that ENRC is going into areas it doesn't understand fully. Longer-term we remain bullish but believe reducing exposure at this stage is a prudent move.

Accordingly, we recommend that members sell half their ENRC holding.