UPDATE 1-Proxy adviser Glass Lewis recommends Alpha-Foundation

* Glass Lewis recommends Alpha-Foundation deal

* Says merger in best interests of Alpha shareholders

NEW YORK, July 24 (Reuters) - Alpha Natural Resources Inc (ANR.N) said on Friday that the proxy advisory firm Glass Lewis & Co recommended Alpha shareholders vote for the proposed $1.5 billion acquisition of Foundation Coal Holdings FCL.N.

Glass Lewis noted Alpha expects the merger to boost earnings and cash flow in 2010, the coal mining company said.

The deal has come under fire from Alpha's largest shareholder, Duquesne Capital Management, which says it will vote against the deal at a stockholders meeting on July 31.

Duquesne argues a merged company would have more exposure to less lucrative domestic markets, rather than more profitable metallurgical coal and international thermal coal markets.

Alpha says Duquesne is being overly optimistic about future demand for metallurgical coal, which is used in steelmaking.

In the Glass Lewis report, obtained by Reuters, the proxy advisory firm noted that "any accretion/dilution analysis necessarily involves substantial uncertainty regarding future market trends and the realization of synergies."

But it dismissed Duquesne's concerns about the dynamics of coal markets and Foundation's pension and debt obligations.

"We do not believe Duquesne's stated concerns alone warrant voting against the proposed merger," the report said.

"As such, we continue to believe that the proposed merger is in the best interests of shareholders," Glass Lewis said, recommending shareholders vote in favor of the deal.

Duquesne, which is run by financier Stanley Druckenmiller, owns 5.9 million Alpha shares, or around 8.3 percent of the miner's outstanding common stock. (Reporting by Steve James; Editing by Derek Caney)