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Dave Forest

Dave Forest

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

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This "Lonely" Resource Sector Is Getting More Attractive

A great investor friend of mine once described very succinctly how to ensure you are always the smartest person in the room.

Find an empty room.

Such advice calls to mind today's coal sector. A space where it's getting harder and harder to find interested investors.

Last week another high-profile funding source made a decided move out of coal. The U.S. Export-Import Bank.

The Bank announced that it will stop funding coal projects abroad. Aligning itself with calls from the Obama administration to stop using federal dollars to support "dirty" industry.

Previously, the Export-Import Bank had been a major funder of both coal mines and coal-fired power plants. With project outlays in 2012 having approached $5 billion.

But those days are now gone. Leaving behind a big hole in capital provision to the coal sector.

This of course could mean opportunities for the few investors still sticking around in this "empty room". Coal investors today have less and less competition. We've recently seen even major investment banks pressured to back away from coal projects globally.

And when capital gets scarce, returns get better.

There will still be plenty of chances for coal investors willing to wade into these potentially-lucrative waters. Coal mining and coal-fired power are not going away. Particularly in the developing world, where we've discussed how coal demand in places like India is surging.

That means stalwart investors may get their pick of good projects here. And be able to demand excellent terms for their money.

However you feel about coal, there's no denying it's becoming a much less crowded part of the natural resources universe. Maybe enough to breed some new smartest people in the room.

Here's to a room of your own,

By. Dave Forest


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