Final hours! Save up to 55% OFF InvestingProCLAIM SALE

Who benefits most from a weak CAD?

Published 23/12/2024, 17:08
© Reuters.
USD/CAD
-
AEM
-
IAG
-
CG
-
NGD
-
TFPM
-

Investing.com -- Bank of America analysts highlighted several North American precious metals companies poised to benefit from the recent depreciation of the Canadian dollar (CAD) against the U.S. dollar (USD). 

Key beneficiaries include Agnico Eagle (NYSE:AEM) Mines, Alamos Gold (NYSE:AGI), IAMGOLD (NYSE:IAG), and New Gold (NYSE:NGD), which have a significant proportion of their assets located in Canada, according to the bank.

“The benefit to costs of a depreciating CAD can be material,” BofA analysts stated. 

These companies are said to be particularly well-positioned because a weaker CAD reduces their operating and capital costs when converted to USD, the reporting currency. 

BofA explains that a 10% depreciation in the CAD drives projected NAV increases of 11% for AEM, 15% for AGI and IAG (LON:ICAG), and 13% for NGD. Centerra Gold also stands to gain from similar dynamics.

The CAD has declined 16% since its peak in June 2021 and is now trading near levels last seen during the early days of the COVID-19 pandemic in March 2020. Year-to-date, the CAD has fallen 8%, with a 6% decline in the current quarter alone. 

BofA attributes this weakness to factors such as fiscal deterioration in Canada, high private debt levels, and the Bank of Canada’s faster pace of interest rate cuts compared to the U.S. Federal Reserve. 

Additionally, they state that the potential for 25% tariffs on Canadian exports to the U.S. could exacerbate downward pressure on the currency.

The environment is also said to open opportunities for companies like Triple Flag Precious Metals, which recently expanded into the lithium market. 

BofA considers the timing favorable, as lithium prices are expected to recover by 2026. Although the move modestly impacts TFPM’s NAV, the firm maintains a Buy rating on TFPM, citing its undervaluation compared to senior peers.

As the CAD continues its decline, companies with strong Canadian exposure remain positioned for gains.

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.