But coal stocks, on the other hand, continue to appreciate in value. That’s why I feel that every Taipan reader (like you) needs to own some upside exposure to the coal sector. Today’s Chart of the Day offers you a look at one stock pick.

According to the U.S. Department of Energy, China and India will account for 70% of the world’s coal consumption increases over the next two decades, and this demand is not about to stop anytime soon. Roughly 66% of the world’s coal is used to fuel electrical plants, and the remainder goes into steel and concrete production.

That makes coal a global play on energy and infrastructure.

That’s why I like Fording Canadian Coal Trust (FDG:NYSE). It’s enjoyed current coal contract rates running as high as $275 per ton — compared to the $93 per ton it charged in 2007. This incredible year-over-year coal price increase makes it easy to predict that shares of FDG will hit $100 by Q4 of 2008.

Bryan Bottarelli, Bottarelli Research

Source: Weak Markets? Not for Coal Stocks 

Currently, two-thirds of the world’s coal is used to generate electricity. The rest goes into steel and concrete production.

The US Department of Energy says China and India will account for 70% of the increase in world coal consumption over the next two decades.

And consider China’s plans for the next five years… they’re planning to build the equivalent of ten New York Cities, said a Canadian chief executive and financier at the mining conference I attended yesterday!

This will need unimaginable amounts of coal for steel production, concrete production and energy generation.

China used to be the largest coal producer in the world, but it is now a net importer. As the communist Republic continues to develop, it will have to import more and more coal. There are no realistic alternatives.

And that will continue to boost the coal price. It’s great news for one brilliant investment. More on that in a moment.

Two more UK coal power stations planned

Most governments have accepted that coal will have to play a big part in their future energy strategy.

Why? Because most of them have been useless in sorting their energy strategy out. This is particularly true in the UK.

France puts us to shame. The country gets 79% of its electricity from nuclear power; which is way ahead of anyone else in the nuclear stakes.

We still do not know for sure if any new nuclear power stations are going to be built – and it takes years to bring one into operation.

However, we do have plans to build our first coal power stations in 20 years. And it’s not just one – but two. And they’re being built by the Germans – even they are ahead of us in the nuclear stakes!

In March 2007, RWE Npower submitted proposals to spend more than £1bn to replace its existing coal-fired station at Tilbury in Essex. The plant would be operational by 2013. E.ON also hopes to replace its plant in Kingsnorth, Kent, by 2012.

Coal will bridge the energy gap as the oil price soars

It’s cheaper and less technologically challenging to build a coal-fired power station than a nuclear facility. This means coal will be attractive in developing countries too.

The American government has also been slow in resurrecting nuclear power as an energy option in the US.

This situation has been repeated all over the world, and I have no doubt it ensures coal’s continued bull-run over the next 10 years.

The US Energy Information Administration forecasts world coal consumption will double between 2003 and 2030. Non-OECD countries account for 81% of this increase.

So, coal is by no means the fuel of yesteryear – it will be around for a long time to come and demand is likely to soar.

If you haven’t got exposure to a coal producer in your portfolio, you need to think again

Here at Smart Commodities UK we’ve been invested in this trend since last October and it’s already showing a tidy gain.

But I believe there are much more gains to come.

You see, this company uses royalty streams (which are now rising) to invest in early-stage mining companies with a view to generating more royalty payments.

The board has proved this strategy works. Between 2002 and 2006 the group achieved a compound annual growth rate on its investments of 76% – this was before the recent surge in coal prices and the increased royalty payment news.

And just this morning they reported that from 1st July 2008 a two-tier coal royalty rate would now apply to its assets in Queensland.

The current 7% royalty rate will apply to the value of coal produced by a mine sold below $100 per tonne and a higher 10% rate will apply to the value of coal sold above $100 per tonne.

In April 2008, coking coal prices rose sharply to between US$250 and US$300 per tonne… so it looks likely that all payments from now on will be made at the 10% rate instead of 7%.

It goes some way to explain why analysts at brokerage firm Numis have upped its price target of this share by 12.5%.

The company also pays a dividend. A payment of 4.35p per share was approved in April. This fact makes the company virtually unique on the London Stock Exchange.

You get exposure to early-stage mining opportunities, paid for by rising coal royalty payments AND a dividend stream as well.

I’m encouraging my readers to buy this stock immediately.

Find out how to access these details here.

Regards,

Garry White
Editor Smart Commodities UK

Note: Past performance and forecasts are not a reliable indicator of future results.

Source: Coal Price Guaranteed to Soar