Lower quarterly earnings to continue
November 20, 2007
Greetings investors!
Last week I commented on how miners turned in lower quarterly earnings during the recent reporting season. That is particularly true of Canadian juniors, those with exposure to the Canadian dollar.
I believe this trend will continue through the current quarter, which has seen unprecedented gains in the loonie’s value relative to the US dollar.
However, the experts say the temporary squeeze is unlikely to put off investors, who have continued to pump money into Canadian miners in the hope of cashing in on the next big discovery or acquisition.
I beg to differ ….
A number of base metal companies have reported lower earnings because of the high loonie. That rapid rise has made doing business more expensive for many Canadian miners, especially those who record revenues in U.S. dollars but pay expenses in Canadian currency.
One example is FNX Mining (FNX.TSX), one of my favorite Canadian nickel miners. It posted lower 3rd Qtr. earnings despite record production. Its net income fell almost by half to to $12.5 million Cdn, even though revenue was higher.
On top of the higher loonie, labour and materials costs have risen across the board for miners, making it even harder to break even.
It’s why I’m not buying emerging or existing metals producers. I prefer grass roots plays trading for pennies. There’s a bigger upside there.
Careful out there.
The BarkerLetter on November 20th 2007 in Commodity investing, Nickel
