Fording Upgraded on Rising Coal Price Rumors

With surging global demand and supply disruptions as a backdrop, everyone is predicting sharply higher coking coal prices for fiscal 2008. A report out of Australia last week suggested prices will more than double to $225 a ton, creating a huge windfall for coal producers.

As a result, Canaccord Adams analyst Gary Lampard is raising his estimates on three Canadian coking coal companies: Fording Canadian Coal Trust (FDG), Grande Cache Coal Corp. [GCE/TSX] and Western Canadian Coal Corp. [WTN/TSX].

Mr. Lampard lifted Fording to "buy" from "hold," and pushed his target all the way to C$67 a share from C$45. He also maintained "buy" ratings on Grande Cache and Western Canadian but made sharp increases to his price targets - C$5.50 a share on Grande Cache (up from C$3.60) and C$5.00 on Western Canadian (up from C$2.90). Shares of all three companies rose sharply Monday morning.

But Mr. Lampard also warned that prices are far from certain at this point.

In a note to clients he wrote:

Coal price negotiations for 2008 between large producers and Asian steelmakers are still underway. Market expectations are already extremely high, and the range of potential outcomes remains remarkably wide.

Comments

[whidbey:]

A great deal depends on China imports from other places, like Australia. The demand is there, but the Chinese are getting polluted and worried over price. This one is hung up on how the big users go.

2008 Mar 26 11:24 PM

[MS-ILLUSION:]

As of May 7, meet target prices for Fording and Western Coal; surpass target price for Grand Cache.

2008 May 07 04:19 PM