Source:Wall Street Journal                       Date: 14 September, 2011

The world-wide demand for coal has made it a top mineral for mining firms this year.

For mining companies, the black stuff is now the right stuff. The mining sector's confidence in coal, especially coking coal for steel production, has incited a great deal of activity in the market.

Coal prices have remained high, despite concerns regarding the economy. In the third quarter of this year, coal stood at USD 315 per ton. Four of the 10 largest mergers in the first-half of this year were for coal assets. The sum of all deals reaches nearly USD 19 billion and might soon exceed last year's total of USD 22 billion. In August Peabody Energy and ArcelorMittal agreed to buy out Macarthur Coal for USD 5 billion.

The rising demand of coal from nations such as China has sparked a flurry of acquisitions and stock buyouts. However, strong demand has also bolstered the prices of these firms. This year firms such as Peabody have paid 12.2 times trailing operating profit for coal companies compared with 11.2 times average throughout the last decade. The possibility of rival bids has also driven up prices on acquisitions. Buyouts and acquisitions are attractive to mining firms because they are an easy way to expand operations without investment into a new mine and exploration.