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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Miners Become Currency Traders

There's been one bright point for miners lately: depreciating global currencies.

Reports this month suggest that Australian coal miners are benefiting from a recently-weaker Aussie dollar.

Management at Indonesian coal miner PT Adaro Energy said their company is facing stiffer competition from these re-invigorated Australian producers. With the A$ lower against the USD, such miners make a larger domestic profit selling their product abroad in American dollars.

But it's not just Australia. Indonesia's biggest coal miner PT Bukit Asam said it may also benefit from a weaker rupiah when it next reports earnings.

It seems the story is the same in many mining-focused economies. South African coal miner and synfuel-maker Sasol reported last week that its headline earnings for the year ended June 30 may jump as much as 30%. Management cited a 14% depreciation on the rand against the dollar as part of the reason for the surprising rise in profits.

Watch for the same story to unfold in Brazil. The real has dropped a staggering 13% against the dollar in just three months. This is bad news for Brazilian firms buying USD-priced imports. But it's great news for miners and oil producers who sell their product in dollars, and mainly pay expenses in local currency.

We could see some earnings surprises here over the next quarter or two.

Here's to foreign exchange,

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By. Dave Forest


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