Dahlman Rose & Co. LLC wrote in a research report Thursday that Richmond, Va.'s James River Coal Co. (NASDAQ:JRCC) could be tasty fodder for companies operating in Central Appalachia, including Massey Energy Co. (NYSE:MEE), Alpha Natural Resources Inc. (NYSE:ANR), International Coal Group Inc. (NYSE:ICO) and Teco Energy Inc. (NYSE:TE). Analyst Daniel Scott said James River's small size, nonunion workforce and strong cash flow also make it an attractive target.
James River has been on the block before. In 2006, pressured by hedge fund investor Pirate Capital LLC, the company hired Morgan Stanley (NYSE:MS) to advise it on strategic options but concluded a sale wasn't in the best interest of shareholders. Since then, it's been buying. Last year, it bought assets from Cheyenne Resources Inc. for $40 million.
Coal mining consolidation has picked up again after an abrupt slowdown last fall when energy prices plummeted. Last month, Alpha Natural Resources Inc. (NYSE:ANR) agreed to buy Foundation Coal Holdings Inc. for $2 billion in stock and Western Canadian Coal Corp. bought Cambrian Mining plc for C$120 million ($107 million).
National Coal Corp.(NASDAQ:NCOC) of Knoxville, Tenn., could be another target.
Coal is not exactly a favored commodity right now, given that cap-and-trade legislation proposed by the Obama administration could potentially bankrupt the industry. Miners have been faced with declining demand, falling prices and tight credit, so there are some deals to be had. But unless someone comes up with the magic formula for cleaning up coal, will size really matter? -
Claire Poole
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