Source: Arab Trader 24/12/2024
Bank of America (NYSE:BAC) analysts have highlighted several precious metals companies in North America preparing to capitalize on the recent fall in the value of the Canadian dollar (CAD) against the US dollar (USD).), IAM Gold (IAG), and New Gold (NGD), a large proportion of whose assets are located in Canada, according to the bank.
Bank of America analysts stated that “the interest on the costs of the depreciation of the Canadian dollar can be material.” These companies are said to be in a particularly good position because a weaker CAD reduces their operating and capital costs when converted into the US dollar, the reporting currency. Bank of America explains that a 10% depreciation of the Canadian dollar leads to an expected increase in net asset value of 11% for AEM, 15% for AGI and IAG, and 13% for NGD. Centerra Gold will also benefit from similar dynamics.
The Canadian dollar has fallen 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. The Canadian dollar has fallen year-to-date by 8%, with a 6% decline in the current quarter alone. Bank of America attributes this weakness to factors such as Canada’s financial decline, rising private debt levels, and the Bank of Canada’s faster pace of rate cuts than reserves. US Federal Reserve.
In addition, they suggest that the prospect of a 25% tariff on Canadian exports to the US could exacerbate downward pressure on the currency. This environment will also open up opportunities for companies like Triple Flag Precious Metals, which recently expanded into the lithium market. Bank of America views the timing as right, as lithium prices are set to recover by 2026. Although the move has a modest impact on the net worth of TFPM’s net worth of shares, however, maintains a buy rating of TFPM, noting that its undervaluation compared to its larger peers. As the Canadian dollar continues to fall, companies with strong exposure to the Canadian market remain in a position to make gains.
Fluctuations in the value of currencies are factors that greatly affect companies operating in international markets, especially those that have assets or operations in certain countries. The decline in the Canadian dollar, as noted by the Bank of America report, represents an important opportunity for precious metals companies with assets in Canada.
Despite the pressures that the Canadian economy may face from a weaker currency, companies that benefit from a weaker Canadian dollar could make significant gains in areas such as reducing operating costs and increasing the value of assets when they convert to the US dollar.
This underscores the importance of following economic fluctuations in different regions, especially for investors seeking to take advantage of the opportunities that may arise as a result of these changes. By adapting investment strategies to include these factors, companies and investors can achieve important economic benefits.
The future market environment will remain challenging as the gap between monetary policies in Canada and the United States grows. However, companies operating in the Canadian market that can adapt to these changes will maintain a strong position to take advantage of economic fluctuations.
In the long term, sustainable growth and taking advantage of the opportunities presented by a weaker currency remain part of the successful strategies adopted by global companies..
