By Wan Zhihong (China Daily)
Updated: 2007-11-22 10:12

China Shenhua Energy Co Ltd, the nation's top coal producer, is negotiating with the Mongolian government to purchase a coking coal deposit in the country to increase its coal resources.

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If the deal goes through, the deposit, located in Mongolia's Tavan Tolgoi, would yield more than 10 million tons of coking coal annually, Shenhua's secretary to the board of directors Huang Qing told China Daily.

The solid residue of impure carbon obtained from bituminous coal and other carbonaceous materials is used as the raw material for making coke, which is heavily used in the steel industry.

The deal still depends on the Mongolian government's offer, Huang said, without elaborating.

If an agreement is reached, it would be the company's first overseas project, CITIC securities analyst Wang Ye said.

"It will help Shenhua improve its product mix, and it is an important step for the company to boost its overseas expansion."

World coal giant BHP Billiton and Peabody earlier said they hope to buy stakes in the coking coal deposit in Mongolia's Tavan Tolgoi.

According to Shenhua, its October coal output rose 18.4 percent to 13.5 million tons from 2006.

The company's coal sales totaled 17.4 million tons in October, up 21.7 percent from its monthly average in 2006. Of the total sales, 1.7 million tons were exported, a 15 percent decrease.

China's coal production in October was 198.77 million tons, according to the National Bureau of Statistics. Domestic coal output in the January-October period totaled 1.88 billion tons, up 10.2 percent from the same period of 2006.

The nation's coke output rose 12.3 percent year-on-year in October to 28.54 million tons. In the January-October period, domestic coke output totaled 269.87 million tons, up 18.1 percent year-on-year.

China's coking coal price recently hit several consecutive record highs due to resource scarcity and transportation costs.

The country's coking coal production is forecast to increase to 300 million tons this year. The coking coal industry would consolidate with a large number of small and unsafe production sites closing over the next three to five years.