Flip This Fording

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Ah, strategic alternatives. This euphemistic phrase, which so often heralds merger and acquisition activity, is magic to the ears of short-term traders everywhere.

Through Wednesday's close, Fording Canadian Coal (NYSE: FDG) shares had badly lagged those of most other North American coal companies over the past three months. Peabody Energy (NYSE: BTU), Foundation Coal (NYSE: FCL), and Alpha Natural Resources (NYSE: ANR) were all up more than 30%, while Fording was flat. This is exactly the kind of situation that induces a board of directors to hire an investment bank -- in this case, Royal Bank of Canada subsidiary RBC Capital.

I noted the positive outlook for metallurgical coal back in late October, and that hasn't changed a whit. The clue to Fording's flimsy returns, despite a strong market, was made quite clear during partner Teck Cominco's (NYSE: TCK) quarterly conference call. It's all about the lightning-hot Loonie.

Here's the puzzling thing. With its near-20% ownership stake in Fording, Teck would be the most natural suitor in the case of a sale. That monster miner is having exactly the same foreign exchange issues, and its full ownership of Fording wouldn't appear to change much about the way the operation is run. Teck is, after all, the managing partner.

Will someone please explain to me why this announcement is such great news for Fording shareholders?