David Morgan, The Unexpected Coal Crisis


Uploaded by silverguru on 14.01.2011

Transcript:
David Morgan Update, www.silver-investor.com
This is an excerpt from the January 2011 Morgan Report: The Unexpected Coal Crisis.
This was from Bloomberg, the second of December, 2010.
The chairman of Coal India limited said, on November 25, 2010, that
"India's annual coal demand will exceed output by 100 million tonnes in four years.
Coal India is studying the purchase of five mines in the United States, Australia, and Indonesia, to help plug the deficit."
They go on to say, "Mining coal is a dangerous business to be in because of the flammable nature of the material.
Many companies are close to bankrupt with large fines and downtime of production due to the many disasters that seem to follow the business.
As disaster strikes a mine, the effect on the rest of the nation is unbelievable.
What affects India affects Australia, which affects the United States, affects Russia, affects China, and affects Indonesia,
and so on and on and so forth and so on. The domino effect at its best."
As countries such as India and Russia close down coal mining production due to disasters,
they begin to import more coal than they can produce, causing coal prices to increase at an alarming rate.
While India and Russia depend on coal for their energy source, countries like China need to import from other countries as well as causing a shortage.
As our members know, especially our longterm subscribers, we look throughout the mining sector to find value for our members.
We are not a silver-only letter, although many who are not members perceive us in that light.
This is not to diminish the fact that most of our time and energy is devoted to the macroeconomic picture and the precious metals.
But in the past we have suggested copper, manganese, moly, uranium, lithium, and on and on.
All types of resource investments.
As we begin to face a coal shortage at an alarming rate,
Australian firms seem to be the companies to invest in, according to the mainstream.
It is true their ability to produce enough coal for at least five years, and maintain control of the coking coal supply,
puts Australian companies near the top of the industry list.
These firms will be deciding the prices and the quantities.
Investors would be smart to do a thorough analysis of any company before investing.
Wealth will be made by smart investors in coal and related businesses.
As an aside, we have recommended a junior coal producer recently,
and it's actually up a fairly significant amount from the time of the recommendation.
Going on and closing this out, steel will rise as coking coal prices rise,
leading to an increase in the automotive and construction industries.
British automobile component manufacturers have already seen a 20 percent rise,
and steel component suppliers with contracts to supply steel in the future will more than likely take a loss in those contracts.
China is expected to enter the fight with Japan and South Korea for coking coal.
Unfortunately for Japan and South Korea,
China has a knack for cornering the markets, and last year had already increased its coking coal imports by a factor of 12.
And with that, I'm going to stop the excerpt.
Again, remember, we want you all to do well in 2011, and being in the commodities sector,
especially with well-selected stocks and also the underlying commodities is, in our view, a great way to do this.
Please read our disclaimer before investing.
And that's it for this month.
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