UPDATE 2-Alpha shareholder concerned over Foundation deal

* Duquesne says concerns over Alpha-Foundation merger

* Duquesne has 8.31 pct stake in Alpha Natural Resources

* Alpha stock rises 8.8 pct; Foundation up 7.7 pct (Updates with more background, closing stock prices)

NEW YORK, July 16 (Reuters) - Coal miner Alpha Natural Resources Inc's (ANR.N) largest shareholder said on Thursday it has concerns about Alpha's proposed $1.5 billion all-stock acquisition of Foundation Coal Holdings Inc (FCL.N).

In a filing with the U.S. Securities and Exchange Commission, Duquesne Capital Management said it was evaluating its position on the transaction.

The filing said Duquesne has "concerns about the proposed merger between the company and Foundation Coal Holdings," which was announced in May.

It gave no further details, nor elaborated on its concerns. There was no immediate comment from Alpha, Duquesne could not be reached and a spokesman for Foundation declined to comment.

Duquesne holds 8.31 percent of Alpha's outstanding common stock and is the company's largest shareholder, according to Reuters data.

Alpha stock closed up $2.26, or 8.87 percent, at $27.73 on the New York Stock Exchange after the filing. Foundation's stock rose $2.11, or 7.72 percent, to $29.44.

On May 12, Alpha said it would acquire Foundation for $1.5 billion in an all-stock deal to create the third-largest U.S. coal producer.

Both sides said the strategy behind the acquisition was to position the merged company to benefit from an expected rebound in demand from steelmakers and power plants for coal.

Last year, Alpha itself had been the takeover target of iron ore pellet maker Cliffs Natural Resources Inc (CLF.N). But the proposed cash and stock deal, valued at about $8.3 billion last July, fell apart in November under opposition from Cliffs' largest shareholder, hedge fund Harbinger Capital Partners.

The value of that deal, which would have created the largest North American producer of steel-making metallurgical coal, had fallen to about $2.9 billion amid global financial market weakness and fluctuating commodity prices.

When the Alpha-Foundation deal was announced in May, both sides said the strategy behind the acquisition was to position the merged company to benefit from an expected rebound in demand from steelmakers and power plants for coal.

Alpha offered a 35 percent premium for Foundation in what was seen as the first in an anticipated spate of deals to allow smaller players in the industry to better compete.

The proposed merger, which had been expected to close in August or September, came at a time of economic downturn when coal prices had slumped and demand for electricity and steel -- the two biggest customers for coal -- had dropped off.

(Reporting by Steve James; Editing by Richard Chang)