UDPATE: Whitehaven Coal In Talks Over Potential Corporate Transaction

Whitehaven Coal Ltd. (WHC.AU) said Thursday that it's in discussions with unnamed third parties about potential corporate transactions, sustaining the whirlwind of corporate activity buffeting Australia's booming coal sector.

Sydney-based Whitehaven produces metallurgical coal used in steelmaking and thermal coal used in power generation from five operating mines in New South Wales state and has expansion plans underway.

Given Asia's unwavering demand for fossil fuels, the company has always been considered by analysts as an obvious takeover target, so news that it's been approached by potential suitors is of little surprise.

But speculation of an imminent deal intensified late Wednesday when The Australian Financial Review newspaper reported that Whitehaven's board is considering an offer from an offshore party, after receiving approaches from two bidders.

Whitehaven shares jumped 6.1% in late trading Wednesday and at 0340 GMT Thursday they have risen another 6.1% to A$6.08, giving it a market value of A$3 billion.

"Whitehaven has had, and continues to have, discussions with third parties in relation to potential corporate transactions," the company said in a statement.

"Those discussions that are continuing are preliminary and remain incomplete, and it is highly uncertain whether they will lead to a proposal for consideration by the company's directors and shareholders," Whitehaven said.

A spokeswoman declined to elaborate.

Citigroup coal analyst Craig Sainsbury reiterated comments he made in an April client note that Whitehaven's growing production base, increasing pulverized coal exposure and "first table" position for future rail capacity additions out of the Gunnedah Basin in New South Wales make it an attractive target.

Chinese coal mining giant Shenhua is the most likely acquirer, given its existing assets in the Gunnedah Basin, Sainsbury said. But he added that other Chinese groups, Indian groups and U.S.-based Peabody Energy Ltd. (BTU) could also be interested.

Peabody recently withdrew an attempt to buy another Australian coal producer Macarthur Coal Ltd. (MCC.AU), deterred by a proposed new mining tax that has since been watered down.

Alongside Macarthur, New Hope Coal Ltd. (NHC.AU) and Gloucester Coal Ltd. (GCL.AU), Whitehaven is one of the few Australian coal producers left available to buy following recent deals involving Felix Resources Ltd. (FLX.AU) and Centennial Coal Ltd. (CEY.AU).

Macarthur has three big global players on its share register, making a takeover difficult, and New Hope and Gloucester are very closely held, making Whitehaven stand out as an obvious target.

Whitehaven, though, would be no push-over, with its directors holding close to 60% of the company's shares.

Without citing sources, the Australian Financial Review said that Whitehaven has been subject to persistent interest from potential bidders, including from Chinese and Indian coal companies such as Shenhua and Coal India Ltd. (COAL.YY).

The report also said that South Korea's POSCO (005490.SE) and some Japanese groups have also approached the coal miner on supply deals and a possible minority equity stake.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; [e-mail]