Fording Canadian Coal
That's exactly what's happened this year. Fording's price realizations have fallen 13% this year, measured in American greenbacks. The fall is even steeper in terms of native Loonies, which have appreciated strongly against the dollar. A lot of this weakness stems from the miners' achievement of significant production increases since coking coal doubled in price to $125 a ton back in 2005. Revenues came in 9% below last year, and quarterly distributions fell a dizzying 35%.
It might seem unfair for this industry to be punished for its success, but such is life in the natural resources sector. Targets are always moving, and things like nasty weather and port congestion can wreak havoc on the best-laid production plans.
In the case of Fording, you're actually investing in the capabilities of Teck Cominco, whose affiliate manages the partnership's mining affairs. You could do a lot worse in that regard -- Teck is a terrific miner. But if you're looking for leverage to relatively near-term coal prices, I think you could do better. Fording's coal prices are locked into full-year contracts through the end of March 2008. While Peabody Energy