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Coal stocks have been climbing today amid yet more takeover speculation.
The Australian newspaper says BHP Billiton is considering a $6-billion US takeover of US producer Walter Energy (WLT-N) because it thinks coal for smelting "will be scarcer than iron ore in the next decade."
Hedge fund Audley Capital has been urging Walter to seek a buyer, saying the company lacks the leadership to take advantage of an "unprecedented market opportunity.''
Walter stock has jumped 6 percent to trade at $79.50. In Toronto, Cline Mining Corp. (CMK-T) is also up 6 percent, trading at $1.88 CDN while Grande Cache Coal (GCE-T) has gained 3 percent to change hands at $5.24.
Shares in Walter have posted a spectacular rally from less than $60 at the start of this month.
The company and industry giant Alpha Natural Resources Inc. (ANR-N) slumped in late September after they cut forecasts because of mining disruptions. Alpha, whose stock is up 3 percent at $21.30, also cited "unexpectedly curtailed customer activity" in Asia.
But investors have been moving back into coal stocks in the past two weeks. Bloomberg says the record rains in Australia that drove up coking coal prices last year "are brewing again."
Walter runs mines in Alabama, West Virginia, British Columbia and Wales, It bought Vancouver-based Western Coal in April for $5.3 billion.
The Australian quotes BHP's chief executive of ferrous and coal, Marcus Randolph, as saying the company is "more bearish about iron ore than coking coal... Between now and 2020 there is going to be a lot more iron ore supply coming into the market than coking coal, and our expectation is that, of the two, the scarcer over that period of time will be coking coal.''
The paper also says BHP chief executive Marius Kloppers is expected to be in Canada next week, after the company's annual general meeting in London, where he is to meet Saskatchewan Premier Brad Wall. His visit is said to be an attempt to ease tensions between the miner and the government after BHP's $39-billion US bid for Potash Corporation of Saskatchewan was killed off earlier this year.
Speculation suggests rival bidders for Walter Energy include Anglo American, Rio Tinto and Brazil's Vale