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Teck Cominco Buys Fording Canadian Coal Trust

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July 29, 2008 – Comments (3) | RELATED TICKERS: FDG

Consolidation within the international coal industry is shifting into overdrive.

Mining giant Teck Cominco said Tuesday it will buy the Fording Canadian Coal Trust for close to $14 billion in cash and stock. The deal is just the latest in a growing string of giant acquisitions centered on coking coal, a key raw material for integrated steel mills.

Coking coal prices have more than doubled over the past year to as much as $250 a ton at times on the U.S. spot market. When combined with the soaring cost of scrap metal and other raw materials, mining interests such as Teck Cominco and international steel companies have begun snapping up coal producers in the U.S. and overseas.

It seems virtually every U.S. coal mine operator, especially those with met coal mines close to shipping ports in the eastern U.S., has a giant bulls eye on its back.

Teck Cominco, the world's largest producer of zinc and metallurgical coal, will pay $12.4 billion in cash and issue 36.9 million shares for Fording Canadian.

Teck Cominco Ltd. already owns about 19.9 percent of Fording and the two companies own Elk Valley Coal, the world's second largest exporter of metallurgical coal. Elk Valley produces 21 percent of the world's seaborne hard metallurgical coal for the international steel industry, according to the company.

Fording shareholders will receive $82.00 per share in cash and 0.245 of a Teck Cominco Class B subordinate voting share. Fording says that's a 17 percent premium over the weighted average trading price during the last 20 days on the Toronto Stock Exchange.

Fording is a Canadian open-ended mutual fund.

Teck Cominco shares rose 52 cents to $39.95 early Tuesday.

3 Comments – Post Your Own

#1) On July 29, 2008 at 1:17 PM, GNUBEE (28.81) wrote:

And I wondered why Sinch picked that up last Friday......

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#2) On July 29, 2008 at 1:30 PM, TMFSarahGen (99.73) wrote:

I don't know how I missed this.  No wonder coal is rallying today while nat gas and oil sell off!  Thanks for posting!

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#3) On July 29, 2008 at 1:37 PM, kdakota630 (29.58) wrote:

GNUBEE:  I was really surprised it wasn't one of his picks before Friday.

TMFSarahGen:  No problem.

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