- Coal producer Massey Energy Co. said Tuesday it has agreed to buy privately held rival Cumberland Resources Corp. for $960 million in cash and stock. Richmond, Va.-based Massey called Cumberland a good fit for its strategy of capitalizing on growing Asian demand for higher-priced metallurgical coal. Approximately half of Abingdon, Va.-based Cumberland's 416 million tons of reserves in Virginia and Kentucky can be used as metallurgical coal, a key ingredient in making steel.
- Massey recently announced its first shipment of 80,000 tons of metallurgical coal to China and expects to sell about 2 million tons of coal to India this year. Earlier this year, the company announced plans to invest $160 million this year in the first phase of a a mining complex capable of producing 2 million tons of metallurgical coal annually.
- Terms of the deal call for Massey to pay $640 million in cash and $320 million in stock.
This is one of the sector's I had been looking to move into (along with iron ore) when I sold my Potash exposure, but I was waiting for this elusive pullback that just seems to never appear. Chasing stocks has been the way to go in this now 5 week non stop rally.
- Mine operator Massey Energy says this week's $960 million acquisition of Cumberland Resources will advance its goal of doubling sales of higher-priced coal used to make steel by 2012. Massey, like other coal producers, has moved aggresively to capitalize on surging demand in Asia for metallurgical coal, with the U.S. and Europe still recovering from the recession.
- Massey told analysts Wednesday the company is pushing for 20 million tons of metallurgical sales. Virginia-based Massey plans to ship 10 million tons this year and says Cumberland should contribute 5 million more within two years. Cumberland shipped 800,000 tons of metallurgical coal last year.
I'm actually fascinating by this sector's movements, considering China - who is the main country sucking up the world's commodities while the rest of the largest developed economies suck wind - is making noises about slowing down its economy. Quite a dichotomy but it does fit in the thesis of those who believe the world economy will be back to (near) normal by 2011.