If you had told someone in January that grimy old coal would provide the kindling to light up the Canadian stock market in 2004, no doubt you'd have been laughed off the street and fitted for a straitjacket.
But the truth is that Cinderella wears steel-toed boots and carries a coal bucket.
If you had put your money where your mouth was and plunked down $10,000 on an obscure Vancouver coal mining company on the TSX Venture exchange named Pine Valley Mining on Jan. 1 and let it ride through the year, as the company began production at its Willow Creek mine in northeastern B.C., you'd have been laughing all right.
All the way to the bank.
A $10,000 investment in Pine Valley (TSXV:PVM) at 20 cents on Jan. 1 would have earned a profit of $192,500, a fantasy that few stock market punters ever get to live.
The Pine Valley story is the kind of action you might have expected from a gold exploration penny stock but not coal, for years the Rodney Dangerfield of resource stocks.
But coal is on the comeback trail and this story may be far from over.
Asia's booming steel industry and China's, in particular, has rekindled the long-depressed market for metallurgical coal that is used in steel production.
With China's steel production escalating 20 per cent in the first nine months of the year and the price of metallurgical coal tripling, shares in numerous Canadian coal-mining stocks have gone on a wild rampage as many sleepy, abandoned coal mines in B.C. and Alberta were brought back to life.
Among the biggest movers on the TSX and TSX Venture exchanges through to December of 2004, three of the top four winners were junior coal miners.
Pine Valley's remarkable run ranks second among Canadian stocks over $1 while two other B.C. coal miners ranked third and fourth.
Cline Mining (TSXV:CMX) was up 1,140 per cent to $2.06 and Western Canadian Coal (TSXV:WTN) was up 867 per cent to $4.88.
Among the larger metallurgical coal companies, Calgary-based Grande Cache Coal (TSX:GCE) surged 440 per cent from its May initial public offering and the industry giant, Fording Canadian Coal Trust (TSX:FDG.UN), more than doubled its unit price to $90.
Some analysts believe that, based on Asian demand for metallurgical coal, the coal story may only be in the early innings.
Sprott Securities analyst George Topping has set a target price for coal of $120 US per tonne for 2005, a substantial jump from the recent price in the $85 US range.
In a year where the overriding theme in the Canadian stock market was energy and resources, coal shared the limelight with other energy and resource plays.
But the belle of the ball wasn't a coal-mining play or any mining play. It was an unheralded Toronto company that is building a wind farm in Ontario, aptly named Leader Capital Corp.
Once speculators caught wind of Leader's plans for a wind farm along the shores of Lake Huron in Ontario, the stock exploded, running from three cents to $1.20 for a mind-boggling 3,900-per-cent gain, rarely even pausing to catch its breath in vaulting the $1 plateau.
Not surprisingly, two of the year's other biggest movers did so on the back of escalating oil prices. Yet, oddly enough, they weren't junior oil and gas exploration plays but indirect plays on a robust oilpatch.
McCoy Bros. (TSX:MCB) of Edmonton, a manufacturer of truck trailers and oilfield equipment, ramped up earnings on the strength of a flourishing oilpatch. The company was the biggest mover on the TSX with an 815-per-cent return, which ranked the company fifth among Canadian stocks.
Zed.i Solutions (TSXV:ZED), which specializes in well-monitoring solutions, also cashed in on the vibrant oil industry with a 518-per-cent return, the 10th-best gain in Canada.
Rounding out the Top 10 were Venture stocks Pacific Safety Products (PSP), up 808 per cent for sixth; Corporate Properties (CPR), up 625 per cent for seventh; Western Prospector Group (WNP), up 600 per cent for eighth; and Acero-Martin Exploration (ASD), up 560 per cent for ninth.
Pacific Safety, a Kelowna, B.C., company that makes body armour used in the military, turned out to be much more than a bullet-proof investment.
Longtime investing guru Peter Lynch used to advocate the virtues of picking boring names. Well, try to find a more mundane name than Corporate Properties. Yet, the returns for this Toronto real estate developer were anything but boring.
Uranium was also a huge story in Canada in 2004 but it's an industry with only a handful of names, all of which had spectacular runs fuelled by soaring uranium prices.
Shares in Western Prospector leaped on news of the company's acquisition of uranium prospects in Mongolia.
Gold plays were the showstoppers in 2003 but many of the exploration plays either took a breather or came crashing back to earth in 2004, even with the gold price busting out to 16-year highs.
However, Acero-Martin was an exception, blasting off on impressive drilling results from its gold project in Peru.
With many experts predicting the U.S. dollar will continue its freefall, gold stocks, which have become largely a play on U.S. dollar weakness, could certainly reassert themselves in '05.
Yet, as the amazing coal comeback story has proven, calling the next big thing is nothing but a fool's game.
* SAGE WORDS: "When opinions in Wall Street are too unanimous - BEWARE! The market is famous for doing the unexpected."
- Author Peter Wyckoff, from The Psychology of Stock Market Timing.
HOT 2004 STOCK: McCoy Bros.
TSX:MCB $2.65 Up $2.30 (+657.1%)
A play on trucks named McCoy may not be the sexiest way to play the market. But, hey, what can be sexier than a sweet 657.1-per-cent gain in under a year? Not long ago, McCoy's mere survival was in question, but the Edmonton company that services and sells trucks and trucking equipment is suddenly a market darling after 90 years in business. McCoy's third-quarter earnings of $1.21 million (two cents a share) were the real McCoy, breaking the company's all-time earnings record.
COLD 2004 STOCK: WorldHeart
TSX:WHT $1.95 Down $8.18 (-79.1%)
Wasn't Rod Bryden's developer of heart devices supposed to be good for the heart? Well, you may have trouble convincing shareholders of that. Bryden's personal financial mess has been well documented but WorldHeart, a company Bryden ran until he resigned as CEO in July, doesn't have much to brag about from a financial perspective. The company lost $6.3 million US (43 cents a share) in the third quarter and there's been some heartstopping news along the way, including a restatement of earnings, to dampen the spirits of stockholders.
(Gyle Konotopetz can be reached at gyle@businessedge.ca)
