Having completed several profitable mining and other coal-related acquisitions in the past year, L & L Energy, Inc. (LLEN) is one of the industry standouts set to benefit from both the industry’s growth and the government’s consolidation initiative for the coal industry. Investor’s Business Daily (IBD), a prominent financial news, commentary, and research organization serving individual and professional investors, recently ranked L&L at the top of its industry with a composite rating of 97, compared to an industry group average rating of 83. IBD also ranked L&L “best in group” in its EPS rating and SMR rating categories, putting it ahead of well-known industry names such as Puda Coal (PUDA) and Sinocoking Coal and Coke (SCOK).
At a PRC State Council work conference yesterday, China’s Premier Wen called for further consolidation of the country’s coal mining industry, according to the central government. The reiteration of China’s resolve to de-fragment its coal industry and improve safety conditions at smaller mines boosted shares of every coal stock listed on China’s Shanghai and Shenzhen exchanges, with the nation’s three largest coal producers gaining an average of more than one percent.
According to a Reuters article on the announcement, “China is the world’s largest coal producer and consumer, but its highly fragmented coal industry has long been plagued with a poor safety record as well as inefficient and polluting mining operations. For the past few years, the government has vowed to cut down on the number of dangerous and polluting small coal mines, for a more consolidated industry.” The government also plans to offer taxation and financing incentives to encourage mergers and acquisitions and subsequent safety and efficiency improvements at small mines, an initiative which analysts expect to spur long-term appreciation in coal stocks.
China currently derives 80% of its electricity from coal-fired power plants. Considering that power-generating capacity is expected to grow 10% in 2010 and that China is now the world’s third largest coal importer, it is no surprise that the International Energy Agency (IEA) forecasts that it will be at least another 20 years before coal’s share of total energy usage even drops below 75%, despite China’s recent moves towards cleaner and renewable fuel sources.
With such attractive industry and market conditions, a spotless endorsement from IBD, and a recent dip in share price, now is a great time to consider investing in L&L Energy.
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