Walter Energy jumps on hopes BHP’s US buying spree will continue

In play Walter Energy (NYSE: WLT) jumped higher by more than 7% in pre-market trading to over $80/share after the UK’s Independent newspaper reported that Anglo American (LON:AAL) and BHP Billiton (NYSE: BHP) may bid for the company.

By mid-afternoon the volatile stock – over the past 12 months shares in Walter Energy have traded as low as $56 and as high as $143 – had settled back to trade up around 2%. Global miners are scrambling for coal assets as metallurgical coal trades at record levels above $330/tonne.

Walter Energy, which also produces coal seam gas, would follow BHP’s August $12 billion buy of US shale gas company Petrohawk.

Walter Energy also produces coal seam gas and in August BHP completed its $12 billion acquisition of US shale gas company Petrohawk.

The Australian reports BHP’s chief executive of ferrous and coal, Marcus Randolph, said the company expected coking coal to be scarcer than iron ore over the next decade.

Investment site Motley Fool says while metallurgical coal has been at record highs betting on a buyout is risky business, so look at the fundamentals before jumping on this one.

Walter Energy, worth some $4.8 billion on the NYSE, primarily produces and exports coking coal in addition to thermal coal, coal bed methane gas and coke. Coking coal in 2011 sells for record highs of $330/tonne while coal for power-generation is averaging about $130/tonne this year from less than $100 in 2010 as coal consumption worldwide continues to grow.

Coal accounts for over 40% of total global electricity generation. Global coal consumption advanced 7.6% last year and at a faster pace than crude oil, natural gas and nuclear, according to statistics published by oil giant BP.

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