BHP to Benefit from India’s Coal Demand


Gold’s a yoyo! I won’t lie, it’s hard to keep track of these daily fluctuations.

Thank God I don’t trade it. I feel sorry for those futures traders. They have a tough gig.

Speaking of gold.

Just a few days ago I wrote to you that you should ‘Watch for a top in gold’…

It continued ‘If the price of gold hits $1,621 between 10–13 January, I wouldn’t be surprised if the price of gold declines.’

Alright, I didn’t get it totally right. Gold hit its head on 8 January at US$1,611.7.

I was two days shy and around $10 too high. It’s good when this happens. It brings you back down to Earth.

This rally is cooling down

This doesn’t mean the gold rally is over. I’d still be watching to see what happens on 13 January. That time frame came on my radar for a reason. Let’s see what happens…

But it looks like the rally for gold is starting to cool down. At least for now.

Anyway, I’ve got a chart to show you, it’s of BHP. The Aussie bluechip.

But this chart still looks promising

Take a look below.

Port Phillip Publishing

Source: Optuma

[Click to open in a new window]

What you’re gazing at is the monthly chart of BHP.

I’ve included its entire history so you can get the bigger picture.

In short, the trend’s up!

The reason why we’re looking at BHP is that they could be about to hit a jackpot in India.


Why should you care about India?

Well, come March, the country is lifting restrictions on the coal mined in the country. They’re also easing bidding rules.

The goal is to attract foreign mining companies into the country.

And if you’re invested in companies like BHP, or even other Aussie coal mining companies, this could be good news for you.

The Financial Review said, ‘Australia’s coal exports to India jumped 39 per cent in November or $202 million with volumes up 23 per cent and prices up 13 per cent.’

That’s a pretty meaty jump. I’ll talk about it more soon…

You may know BHP owns 80% of BHP Mitsui Coal [BMC]. This company owns and operates two ‘open-cut metallurgical’ coal mines.

And right now, BHP is looking for someone who can replace China for coal.

As the Financial Review reported, India is where it’s at.

India is one of the world biggest coal producers. And as you may have guessed, they also use coal for cheap energy.

High priced stocks can still go higher

But it’s not just that…

BPH is projecting that Indian steelmaking can grow by 7% per year. And that’s for the next decade!

And to make steel you need coal. And lots of it.

It takes around 150 kgs of coal to produce just one tonne of steel.

Anyway, nothing is certain yet. Coal minister Pralhad Joshi still needs the president’s approval. If he disagrees then there goes this idea.

Should BHP win a bid into India that could open up a massive revenue stream for the miner.

All in all, keep your eyes on India. I’ve been quite hesitant to jump on the Indian bandwagon. And my colleague Callum cautioned against it last year.

But there is one thing I know about the stock market…

High priced stocks can still go higher. That means you shouldn’t be calling the top, just yet.

Until next time,

Jonathan Evans Signature

Jonathan Evans,
Analyst, Profit Watch

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