Coal ETF Has Room to Run

Australia's government gave China's Yanzhou Coal Mining (YZC - commentary - Trade Now) the go-ahead to acquire Felix Resources on Friday. According to The Wall Street Journal, if approved by Chinese regulators, this agreement will be the largest Chinese takeover of an Australian company. The move will affect the makeup of Market Vectors Coal ETF (KOL - commentary - Trade Now), since Yanzhou and Felix represent 4.8% and 2.3% of the fund, respectively.

Prior to Friday's approval, the two companies had completed 12 months of negotiations. After the negotiations, however, the Australian government twice ordered Yanzhou to resubmit its takeover bid, with a final price tag of $3.2 billion.

The agreement between the two firms carries a number of stipulations. First, under the agreement, Yanzhou agreed to operate its Australian mines through an Australian-based firm, Yancoal Australia. Yancoal will be run by a predominantly Australian management and sales team. Additionally, the terms of the deal require that by 2012 Yancoal Australia is to be listed on the Australian Securities Exchange.

Year-to-date for the period ending October 26, the KOL has jumped 118.5%. A large portion of this gain is due to China's insatiable appetite for energy. While the performance has been excellent, moves such as a takeover of Felix by Yanzhou are a good sign that this fund may still have room to run.

At the time of publication, Dion had no positions in the stocks mentioned.

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At the time of publication, Dion had no positions in the stocks mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.