Precious Metals Companies Benefiting from CAD Depreciation

Investing.com — Bank of America analysts have identified several North American precious metals companies set to benefit from the depreciation of the Canadian dollar (CAD) against the U.S. dollar (USD).

Key Beneficiaries

Key beneficiaries of this trend include:
– Agnico Eagle (NYSE:AEM) Mines
– Alamos Gold (NYSE:AGI)
– IAMGOLD (NYSE:IAG)
– New Gold (NYSE:NGD)

These companies have a significant proportion of their assets located in Canada, making them particularly well-positioned to benefit from a weaker CAD, which can materially reduce operating and capital costs when converted to USD, the reporting currency.

Impact of CAD Depreciation

BofA analysts note that:
– A 10% depreciation in the CAD can lead to projected NAV increases of:
– 11% for AEM
– 15% for AGI and IAG
– 13% for NGD
– Centerra Gold is also expected to benefit from similar dynamics.

The CAD has depreciated by 16% since its peak in June 2021, recently trading near levels not seen since early 2020. Year-to-date, it has fallen 8%, including a 6% decline this quarter.

Factors for CAD Weakness

BofA attributes the CAD's weakness to:
– Fiscal deterioration in Canada
– High private debt levels
– The Bank of Canada’s faster interest rate cuts compared to the U.S. Federal Reserve

Furthermore, the potential for 25% tariffs on Canadian exports to the U.S. could add further downward pressure on the currency.

Investment Opportunities

This environment is also seen as an opportunity for companies like Triple Flag Precious Metals, which has recently expanded into the lithium market.
– BofA believes the timing is favorable, anticipating lithium prices to recover by 2026.
– Although this expansion has a modest impact on TFPM’s NAV, the firm has maintained a Buy rating on TFPM, citing its undervaluation compared to senior peers.

As the CAD continues to decline, firms with a strong Canadian presence are well positioned for gains.