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Coal Sector flexes it muscle

Peter Kennedy

June 10,2010

Coal sector flexes its muscle, 8:37:16 PM 09-Jun-2010

Companies aim to cash in by using financial strength to raise production

Canada's coal mining industry is looking ahead to a brighter future, as leading producers increase their production in a bid to meet surging demand from the international steel sector and higher contract prices.

After releasing its year-end financial results on Wednesday, Calgary-based Grande Cache Coal  Corp. (TSX: T.GCE, Stock Forum), said it plans to boost its annual production rate to 3.5 million tonnes by the end of fiscal 2013, an increase from 1.74 million tonnes in the year ended March 31st, 2010.

" Business is very strong," said David Jan, a spokesman for  Western Coal Corp. (TSX: T.WTN, Stock Forum), which is eyeing higher production after announcing plans on Wednesday to buy the remaining interest in British company Energybuild Group Plc that it doesn't already own.

Jan said Western is planning to use its financial strength to boost annual production from operations in Canada, the United States and Wales to 10 million tonnes by 2013 from 3.4 million in 2010.

It will work to achieve that goal by investing $300 million this year in its operations.

Funds are being deployed as the sector bids to negotiate higher contract prices with Asian buyers, who are expected to pay US$225 per tonne for the three month period starting in July for metallurgical coal. That's up from US$125 per tonne last year.

Canada's biggest coal producer Teck Resources Ltd. (TSX: T.TCK.B, Stock Forum) has said it plans meet strong demand in China by increasing its production by more than 20% this year to about 25 million tonnes.

Given the favorable outlook for steelmaking coal demand, Teck recently said it is undertaking a feasibility study to potentially re-open the Quintette mine in northeast British Columbia, which operated between 1982 and 2000.

Western Coal said the sector is benefitting from a recovery in the international steel sector, and record coking coal imports in China. Coal supply has also been disrupted by weather issues in Australia as well as mine accidents in China and the United States.

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