The U.S. dollar’s strength is being blamed for the recent weakness in base metals prices.
“The recent weakening of many currencies versus the U.S. dollar appears to be related more to a potential weakening of world economies and related less to any perceived renewed growth in the U.S. economy,” Desjardins Securities analysts John Redstone and John Hughes told clients, reminding them that most commodities trade in U.S. dollars.
But while base metals may be down, the lower loonie presents an opportunity in Canadian mining stocks. Desjardins continues to value most of the companies it covers using the two currencies at par, but highlighted what a US1¢ change in the value of the Canadian dollar would have on earnings per share (EPS).
The analysts highlighted Inmet Mining Corp. (IEMMF.PK) as the most sensitive name to changes between the U.S. and Canadian currencies, with a US1¢ change over 12 months producing an estimated C12¢ per share change in annual earnings. Teck Cominco Ltd. (TCK) is next at C8¢, while HudBay Minerals Inc. (HBMFF.PK) ranked third at C5¢ in EPS.