Why Westmoreland Coal Company's Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of coal producer Westmoreland Coal Company (NASDAQ: WLB  ) jumped as much as 15.5% today after the company announced an acquisition.  

So what: Sherritt International is selling its coal-mining operations to Westmoreland for $435 million as part of a sale that will shed Sherritt of all of its coal operations. Westmoreland is acquiring seven thermal coal mines in Canada and a 50% stake in a carbon plant and production facility for char.  

Now what: The deal is expected to be accretive (or add) to cash flow and will more than double the overall size of the business. The thermal coal market is still struggling around the world and long term I don't think those trends change. That's why I'm not buying into this bump today.

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  • Report this Comment On December 24, 2013, at 3:59 PM, ffbj wrote:

    Yes, but with ng prices rising and the pricing prerogative this acquisition possibly gives WLB, it bears watching. Afterall if it was such a questionable acquisition why did the stock appreciate so much?

    Or are you simply saying, don't bother now the show is over. Perhaps a bit more analysis on why its over, aside from thermal coal is struggling around the world. (at least for now).

    Maybe they are getting a bargain. Though if you think that coal is the fuel of the past and its day is past then, that would make sense.

    Personally I think it is a value, and that coal will still be around for decades to come, though I would rather it go sooner and be a legacy fuel.

  • Report this Comment On December 25, 2013, at 10:11 PM, EJSe wrote:

    The Alberta thermal coal mines discussed in the WLB news release are actually owned by the utilities taking delivery from the subject mines. WLB is only acquiring the obligation to deliver coal, and the right to get paid for it.

    Sherritt was the utilities partner and also operated each of their mines. What they did yesterday was sell the partnership to Altius Minerals and separately, sell operating hardware and infrastructure at each site to Westmoreland. It is now up to Westmoreland to deliver the coal, and Altius to collect royalties and pay WLB. An extra middle man. Alas, these are mining companies, so someone has to get screwed over. Will it be the utilities' shareholders, or will it be electrical energy rate payers?

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