Investing In Canada

has been moved to a new address

Sorry for the inconvenience...

Westshore Terminals Income Fund (WTE.UN) Profits to Soar over the next 3 years

Wednesday, September 30, 2009

Westshore Terminals Income Fund (WTE.UN) Profits to Soar over the next 3 years

Westshore Terminals Income Fund (TSE:WTE.UN) is the premier shipping terminal for metallurgical coal for the North American Market to the Pacific Rim. An announcement by Western Coal Corp. (TSE:WTN), a major coal mining company, on Tuesday will turn into a windfall bonus for shipments from the Roberts Bank Coal Terminal. Westshore Terminals Income Fund earns revenue from volume of shipments so the announcement of a major expansion by one of the major producers in North America is a big deal.

Western Coal Corp. (WTN.TO) announced Tuesday it is “aggressively” seeking to expand capacity to 10 million tonnes a year by 2013. According to the Globe and Mail article Western Coal keen to bulk up the company is selling off non-core assets while expanding coal production through acquisitions.

 Although the above statement sounds like a wash, selling one asset while buying another, it’s not. John Byrne, chairman of Western Coal Corp., stated that there are buying opportunities in British Columbia and West Virginia. Due to the large barriers to enter the coal mining industry Western Coal should be able to pick up some new mines with the $60 million the company raised with a bought deal in August and get them operational.

 Currently, Western Coal is operating just above 50 percent capacity extracting 7 million tonnes of metallurgical coal annually. Last November as coal prices plunged, Western Coal Corp slashed production, cut jobs and expenses at its operations.

   The company will now become a pure coal play and plans to export much of the coal to China, India, and others. According to Mr. Hogg, Western Coal CEO, “the company is now ramping up production as demand returns, particularly in countries such as China and India.”

 Much of the increased production will occur by expanding British Columbian operations including Brule Mine, Wolverine mine, and Willow Creek Mine.  This will have a significant impact on the shipments through Westshore Terminals Port since the majority of coal exported from North America makes its way through this terminal. It’s a good thing Westshore Terminals has been adding capacity and improving efficiency through new equipment and systems. Look for an upcoming announcement about the benefits of Western Coals expansion in Westshore Terminals Income Fund third quarter discussion in the coming months.

  It won’t be long before the market puts two and two together to figure out the positive impact this will have on Westshore Terminals. This is a great income trust to hold in a TFSA or RRSP so if you are investing in Canada as a Canadian Citizen makes sure you take advantage of your tax sheltering accounts. I am buying more WTE.UN to hold in my RRSP now because the stock has pulled back over the past 2 weeks so the entrance price is looking very nice. Even if the market pulls before the end of this year this looks like a great long term play.

 For previous articles about Westshore Terminals Income Fund take a look at the following:

1 comment: said...

WTE.UN Units Likely to Be Under Pressure in Near Term

RBC CM expects WTE units will be under pressure over the next six months as the company enters into negotiations surrounding the Elkview contract. Other factors likely to weigh on performance are recent insider selling and potential contract risk associated with WTE’s second contract, the Port Services Agreement. RBC CM’ recommendation goes to Sector Perform (from Outperform); target remains unchanged at $15. The Elkview contract, which RBC CM estimates represents roughly 5MMt (of WTE’s 20MMt volumes in 2009E), comes up for renewal on March 31, 2010. RBC CM expects that Teck Coal will negotiate aggressively to lower the loading rate – similar to the hard-line approach it took with CP. RBC CM has seen three WTE insiders significantly selling down their positions over the past five months. The most significant has been Jim Pattison, whose total position has been reduced from 17.4MM units (23.4% ofthe Fund) in May 2009 to 14.5MM units (or 19.6% of the Fund), as of September 25, 2009. RBC CM continues to view WTE as an attractive asset with a solid competitive position and upside potential from a possible take-out.