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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: gumnam who wrote (9790)	10/2/2006 2:59:31 AM
From: energyplay	Read Replies (3) \| Respond to of 217837

Thanks for reminding me of FDG, I should have looked at it earlier... Serveral things happening - 1) They are changing structure to a Royalty trust - this may limit non-Canadian holdings, meaning foreign holders would be forced to sell - A quick look at major holders shows about 6% non-Canadian mutual funds. Trust Reorganization At the 2005 Annual and Special Meeting, unitholders approved a two-step reorganization of the Trust and its subsidiaries pursuant to a plan of arrangement under section 192 of the Canada Business Corporations Act. The first step was the 2005 Arrangement, which was completed on August 24, 2005 and effectively resulted in distributions received from Elk Valley Coal and NYCO being taxed at the unitholder level. The second step to reorganize into a royalty trust was not completed and unitholders have since approved a modified royalty reorganization structure at the Annual and Special Meeting on May 2, 2006 (the 2006 Arrangement). The 2006 Arrangement, subject to the receipt of a favourable advance tax ruling from the Canada Revenue Agency, will result in the reorganization of the assets and liabilities of the Trust under a new trust that is a royalty trust. This new royalty trust will be a successor trust and qualify for an exemption from a provision in Canadian income tax laws that limits the level of foreign ownership of units of income trusts. It will not change the distribution policy of the Trust or, in itself, affect the amount of cash available for distribution to unitholders. It will not require any further action on the part of unitholders. Unitholders will receive one unit of the new royalty trust for each unit that they presently own of the Trust. For unitholders who hold unit certificates (as opposed to owning units through a brokerage account), there is no requirement to obtain new certificates. The Trust unit certificates that they presently have will represent the same number of units of the new royalty trust after the reorganization that the certificates currently represent in the Trust units. 2) There is general concern about steel demand world wide. FDG s business is 95% meturlurgical coal, for making steel, not steam coal for power. MET coal has a HUGE price premium over most low sulfur steam coal. FDG ships to North Asia - China, Japan, and North Korea. North Korea has been running heavy on Chinese steel demand. It competes to some degree with Australian MET coal, production of which is being expanded. There has been some real push back from China on the coal price from Australia. Read the Highlights section from this earnings press release for the details - biz.yahoo.com ****** So, lower prices and declining volumes and higher costs (labor, diesel fuel) can cut profits and this dividends. Right now the FEAR of a China slow down may be exceeding the reality....but I can't see that far into the future. FDG has some great assets, something like 40 + years of high quality coal. One possible item that requires more due dillignece from me is their shipping situation - they ship thru ONE port, one facility, and I would want to check the contract (the port is public company, once associated with FDG then spun off, I just can't remember the name right now) ************** I expect there will be some chances to pick up this stock cheaply, either becasue foreign holders will have to sell, or the China slow down. The high yield numbers will attract buyers, possibly into what is a trap if forced sales occur. Or, FDG could do another stock offering, Canadian only, and raise cash to pay off debt, and thus not force anyone to sell. That could raise the % of Canadian ownership > 50% They don't need the cash, but that would make Canadian securities firms happy as they would have something to sell. *********** FDG is the sort of stock you want to buy as low as possible, and then hold onto for years collecting dividends, until the price either gets too high or we see storm clouds. Right now we are haeded for the strom clouds.