sector gaining interest...

Different markets for thermal versus coking coal but not too far removed...and interesting none the less how a relatively mild disruption to supply can have wider ramifications directly impacting spot prices.

Two stories, both includ Xstrata...and both highlight the significant interest growing for the sector.

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Xstrata confirms Australia coal force majeure
28-June-07 by AAP

Xstrata declared force majeure on Monday to all buyers of coal from its Australian Newlands mine due to a combination of operational difficulties, an Xstrata spokesman in Australia said today.

The Newlands 10 million tonnes a year thermal coal mine had been experiencing difficulties for several days, he said.

"It's been a start-stop impact due to operational difficulties including a rock-fall but there has been an ongoing problem due to exceptionally heavy rain which has impacted the transport of coal to the processing plant," he said.

Rain in the area has been the worst seen since the 1940s, he added.

Asian coal consumers, particularly in Japan and Korea, had stepped up efforts to buy alternative coal to Australian during the past few weeks, traders and producers said.

Australian coal prices FOB Newcastle have risen around $15 a tonne to $72 on electronic trading platform globalCOAL in the past month as producers and consumers scramble to buy spot cargoes.

This latest disruption to Australian exports will increase the speed of the current bull run and should propel Asian buyers into committing to buy more South African cargoes to avoid a critical shortage, traders and utilities said.

Newlands, in Queensland, produces a high-quality, low-sulphur thermal coal, which is exported via Gladstone port.

Xstrata had lifted a previous force majeure on shipments via Newcastle port in NSW late last Monday.

Australian coal exporters including BHP Billiton, Xstrata and Coal and Allied had declared force majeure on Newcastle exports earlier this month due to heavy flooding in the Hunter Valley region.

Australian exporters are going to have to push an estimated four million tonnes of scheduled 2007 deliveries into 2008, producers and utilities said, because the re-imposition of Newcastle quotas slowed exports and due to the effects of the recent Newcastle force majeure.

Coal and Allied still has a Newcastle force majeure in place.

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Noble Doubles Stake in Gloucester, Opposes Xstrata (Update3)

By Angela Macdonald-Smith

June 27 (Bloomberg) -- Noble Group Ltd., a Hong Kong-based supplier of raw materials from coffee to energy, doubled its stake in Gloucester Coal Ltd. to 10.4 percent, challenging a A$391 million ($329 million) takeover offer from Xstrata Plc.

Noble paid A$21.5 million for 4.4 million shares in Sydney- based Gloucester, taking its stake to 8.2 million shares and making it the largest shareholder, the Hong Kong company said in a statement. It will seek discussions with Gloucester's board, the company said.

Buying Gloucester will give the acquirer supplies of coal used by power stations and steelmakers as Asian demand increases. Australian benchmark prices for power-station coal reached a record last week, helped by bottlenecks at export ports.

``Noble Group believes that there has been a structural shift in coal markets, which reflects higher thermal and coking coal prices,'' Noble said in the statement. ``Xstrata's offer undervalues Gloucester Coal.''

Gloucester Coal shares rose 10 cents, or 2 percent, to A$5.08 on the Australian Stock Exchange, 6.9 percent higher than Xstrata's A$4.75-a-share cash offer, which has been unanimously recommended by Gloucester's board.

Noble paid an average of A$4.89 a share for the 4.4 million shares it bought this week, according to the Noble statement.

Not `Necessary'

Xstrata believes its offer, structured as a so-called scheme of arrangement, fully values Gloucester, said James Rickards, a spokesman for Xstrata Coal in Sydney.

``It's really in the hands of Noble and Gloucester to hold their discussions because up to now the Gloucester board has fully endorsed the scheme for A$4.75,'' Rickards said in a telephone interview. ``We've made it very clear that this isn't a necessary acquisition. We're not going to pay more for something if we don't think it's worth the value.''

Gloucester's board stands by the recommendation of Xstrata's offer, said Barry Tudor, chief financial officer. Under the ``no-shop, no-talk'' provisions of the accord with Xstrata, the board can't engage in talks with Noble unless a firm offer is made, he said.

The board ``continues to say that in the absence of a superior proposal they recommend this offer,'' Tudor said in an interview.

Gloucester's shareholders are due to vote on the Xstrata offer on July 5. The offer requires 75 percent of Gloucester shares to be voted in favor in order to proceed.

Under the agreement with Xstrata, Gloucester would have to pay the Zug, Switzerland-based company a break fee of A$3.91 million if it switches recommendation to a rival offer or if a third party buys at least 50 percent of the Australian company.

Gloucester produced about 1 million metric tons of thermal and coking coal in the six months ended Dec. 31 and is studying an option to boost output by 40 percent starting in mid-2009.

National Australia Bank Ltd., the nation's biggest lender, this month increased its forecasts for 2008 contract prices for thermal, hard coking and semi-soft coking coal on rising Asian demand and supply constraints in Australia.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at [email protected] .