Is the commodity party over? Is last week’s bounce a sign of renewed vigor or a last hurrah? With a falloff in the housing sector, and consequent expectations that the American consumer will take a well-earned breather, most commodities, including zinc, copper and gold, are off more than 10% from their May highs. At the same time, the stock market has rallied, hoping for that Goldilocks economy of non-inflationary but job-producing growth.

Darko Kuzmanovic thinks the celebration may be a bit premature. He is a long-time commodities analyst and investor, and currently manages the Prudent Global Natural Resource Fund along with David Tice, better known for his Bear portfolio. Mr. Kuzmanovic regards the summer slide in most commodity prices as a blip in a strong long-term trend. Not mincing words, he said: “I’ve never felt so positive about the sector.” Still, he is cautious near-term.

He is an Aussie, and started out as a metallurgist working for a zinc producer in New South Wales, which eventually was taken over by Rio Tinto. After many years working in the resources industry, Mr. Kuzmanovic acquired an MBA, with which he hoped to break into mining’s management ranks. As luck would have it, he emerged at a terrible time — a time, which in retrospect, built the platform for his current successes.

Faced with slumping metals prices and no end in sight, Mr. Kuzmanovic joined Zurich Investment Management in Australia as a resources analyst, and from there became a fund manager. Among other things, and after several mergers, he ran Scudder’s Gold & Precious Metals Fund, which for a period of time Morningstar ranked no. one in the sector. In 2004 he joined David Tice & Associates.

In other words, Mr. Kuzmanovic knows a great deal about commodities — how to find them, produce them, and also invest in them. From his current location in Vancouver, he watches the global interplay of supply and demand, all the while looking for companies with growing, high-quality assets and above-average prospects.

That’s not to say that he doesn’t spend a fair amount of time anguishing over the big picture. And especially, over China. There is no question, according to Mr. Kuzmanovic, that China has been central to the skyrocketing prices we have seen for copper, lead and other commodities. A decade ago, he recalls that the guiding principle for mining companies was to avoid any commodity that China was exporting. They were ruthless traders, and prone to driving prices lower to gain share.

Those days are long gone, as China has become an importer of one product after another. There seems, according to Mr. Kuzmanovic, no end in sight. China’s most recent five-year plan focuses on its interior provinces, where widespread poverty has already caused demonstrations against the government. As the country tries to even out its economic progress, it will be forced to spend heavily on infrastructure in those regions.That means even greater demand for concrete, steel and other imported goods.

Overall, Mr. Kuzmanovic said, “the structural dynamics evident over the past five years are still okay.” The overexpansion of the 1980s and unwinding of Russia’s sizable inventories in the early 1990s caused a decline in real commodities prices that discouraged reinvestment in the sector. Though cyclical forces will eventually build up capacity and start the whole ball rolling again, that time is not near, according to Mr. Kuzmanovic.

Still, he is concerned that in the short term, a slowing in economic growth will put further pressure on prices, especially copper, where there is some new supply coming on stream, and nickel. Nickel shortages have led prices higher, to a point where some buyers will start to substitute chrome. He is more positive on the dynamics of the uranium, gold, and zinc markets.

Mr. Kuzmanovic says that today’s valuations of mining and energy stocks assume below-market commodities prices. Nonetheless, he expects stocks in the sector to trade lower if sentiment sours. As a result, he has adopted an unusually cautious position in his fund, which is currently only 55% net long, down from 85% at the start of the year.

He is poised to take advantage of any stock weakness. He favors resource plays, and especially companies with sound managements. He trades numerous small and mid-cap stocks, many of which trade on the Toronto exchange. In oil, for instance, he is looking for companies with expanding light crude reserves, especially in the North Sea, Africa and Asia. Companies like Bow Valley Energy (BVX.TO $6.05) and Talisman Energy (TLM $17.73) fit that bill. One of his recent acquisitions is a company called Addax Petroleum (AXC.TO $27), which is producing oil in Nigeria.

He likes BHP Billiton (BHP $42.75), a broad-based commodities company, at somewhat lower prices, because of its excellent growth prospects and generous cash flow. He might also be a buyer of Paladin Resources (PDN.TO $4.25),which is opening the first uranium mine to come on stream in six years. Another stock he thinks undervalued is Teck Cominco (TCK $67.30), a copper and zinc producer, which is selling off its high.

He is pretty positive on gold, citing Anatolia Minerals (ANO.TO $4.35) as an attractive possibility in that field. He recently scored a huge win with Viceroy Exploration (VYE.TO $11), which he bought a couple of years ago for less than $1 a share. It was just bought by Yamana Gold (YRI.TO $11) at about $11 a share.

The attraction of the group, and the underpinning, is that some minerals are getting harder to replace. Just as the large oil companies have an increasingly tough time replenishing reserves, so do minerals producers, lending the group a takeover potential.

Mr. Kuzmanovic is convinced that the long-term play is in place. He’s just waiting until no one else is.