Canada's coal reserves lure global steelmakers
Monday, 22 November 2010
TORONTO, Nov 21 (Reuters): US-based Walter Energy Inc's $3.24 billion bid for Canadian peer Western Coal Corp is seen as a mark of confidence in the undeveloped coal assets that the country is sitting on.
The offer puts the spotlight squarely on other Canadian miners of steelmaking coal -- Grande Cache Coal Corp and Cline Mining -- who together have reserves of about 750 million tons, almost double the reserves being touted by the Walter-Western combine.
"Grande Cache coal would be an acquisition target. Cline might be another one which can be identified as a target," Scotia Capital analyst Jackie Przybylowski told the reporter, hailing Grande Cache as the next target.
Both Grande Cache's and Cline Mining's stock soared about 13 per cent late last week on the Toronto Stock Exchange after Walter Energy's offer for Western Coal.
Year to date, Grande Cache's stock has risen about 40 per cent, while Cline Mining's stock has rocketed seven fold on positive development results especially from its flagship New Elk mine in Colorado.
Despite not being among the top 10 coal producers globally, Canada's potential with undeveloped projects is likely to draw the attention of global players looking to feed surging Asian demand for steelmaking coal.
"I think the scarcity of producing assets -- both iron ore and coal -- is the catalyst to the integration that we are starting to see in the industry," Desjardins Securities analyst John Hughes said.
Hughes said steel companies, especially in North America, used to own their own coal mines, but eventually sold them out as independent companies, or projects.
"We seem to be going full circle again, where in order to secure supply the steel manufacturers are backwardly integrating to own their own producing assets," Hughes said.
Steelmaking, or metallurgical, coal is a key ingredient used in about 70 per cent of worldwide steel production and with steel demand forecast to hit a record 1.34 billion tonnes in 2011, the hunt for the next big mine is on.
Analysts tout the world top steelmaker ArcelorMittal and US steelmaker AK Steel as potential bidders, despite recent indications of the steel industry's recovery being slower-than-expected.
The offer puts the spotlight squarely on other Canadian miners of steelmaking coal -- Grande Cache Coal Corp and Cline Mining -- who together have reserves of about 750 million tons, almost double the reserves being touted by the Walter-Western combine.
"Grande Cache coal would be an acquisition target. Cline might be another one which can be identified as a target," Scotia Capital analyst Jackie Przybylowski told the reporter, hailing Grande Cache as the next target.
Both Grande Cache's and Cline Mining's stock soared about 13 per cent late last week on the Toronto Stock Exchange after Walter Energy's offer for Western Coal.
Year to date, Grande Cache's stock has risen about 40 per cent, while Cline Mining's stock has rocketed seven fold on positive development results especially from its flagship New Elk mine in Colorado.
Despite not being among the top 10 coal producers globally, Canada's potential with undeveloped projects is likely to draw the attention of global players looking to feed surging Asian demand for steelmaking coal.
"I think the scarcity of producing assets -- both iron ore and coal -- is the catalyst to the integration that we are starting to see in the industry," Desjardins Securities analyst John Hughes said.
Hughes said steel companies, especially in North America, used to own their own coal mines, but eventually sold them out as independent companies, or projects.
"We seem to be going full circle again, where in order to secure supply the steel manufacturers are backwardly integrating to own their own producing assets," Hughes said.
Steelmaking, or metallurgical, coal is a key ingredient used in about 70 per cent of worldwide steel production and with steel demand forecast to hit a record 1.34 billion tonnes in 2011, the hunt for the next big mine is on.
Analysts tout the world top steelmaker ArcelorMittal and US steelmaker AK Steel as potential bidders, despite recent indications of the steel industry's recovery being slower-than-expected.