NEW YORK (AP) ¿ An analyst initiated coverage of James River Coal Co. with a top rating Thursday, citing the company's potential to be bought and strong coal contracts.

Dahlman, Rose & Co. analyst Daniel W. Scott rated the Richmond, Va., company a "Buy" with a $28 price target, implying he expects the stock to jump 25 percent from Wednesday's $22.40 close.

When coal prices rose last summer, James River set contracts with market-high prices, a move that the company is hoping will support future earnings, Scott said.

Since the company is a relatively small coal producer compared with its peers, has a small market cap and doesn't have a unionized work force, it could be seen as an "attractive target" by larger competitors, he said.

"We believe that the company's attractive contract position and takeout potential more than offset concerns about lower liquidity levels, lower reserves and lack of metallurgical coal exposure," Scott said in a note to clients.

Shares of James River rose 10 cents to $22.50 in early morning trading. The stock has traded between $5.05 and $62.83 in the past 52 weeks.

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