By Wan Zhihong (China Daily)
Updated: 2007-12-04 07:39

China Shenhua Energy Co Ltd, the nation's largest coal producer, is considering investments in Mongolia, Indonesia and Australia to boost its production.

Related readings:  Shenhua negotiating Mongolia deal  Shenhua added to Hang Seng China AH Index Series  Shenhua Energy shares surge 83% in Shanghai debut  China Shenhua raises US$8.9B from largest domestic IPO

The company is looking for merger and acquisition opportunities to make it larger and more profitable, company sources told China Daily.

The company is now in talks to buy a coking coal deposit in Mongolia to increase its coal resources, Huang Qing, secretary to the board of directors said in an earlier report. If approved, the deposit, located in Tavan Tolgoi in Mongolia, would yield more than 10 million tons of coking coal annually.

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

Earlier media reports said that Shenhua was considering a $4 billion bid for a controlling stake in an Indonesian coal producer. However, sources with Shenhua did not make further comment on the deal.

According to the World Energy Outlook 2007 published by International Energy Agency, coal will see the biggest increase in world energy demand, with shares in world energy consumption increasing from 25 percent in 2005 to 28 percent in 2030.

At present, coal accounts for over 70 percent of China's total energy mix. The world's largest coal producer Peabody Energy Corp said it is in talks to conduct joint coal exploration operations in China with several domestic companies.

Shenhua produced 13.5 million tons of coal in October, equal to its September output and 18.4 percent more than the average monthly output of 2006, Shenhua said in a statement.

Its 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.

The company in 2006 sold 171.1 million tons of coal. It exported 23.9 million tons of coal that year.

Shares of Shenhua rose 0.48 percent to 64.66 yuan on the Shanghai Stock Exchange Monday.

Analysts said that China's coal output was expected to reach 2.6 billion tons this year. In 2006 the country produced 2.38 billion tons of coal. This year the country's coal exports will match import totals, both standing at about 50 million tons.

On November 29 the National Development and Reform Commission, China's top economic planning body, published its national coal industry policy, saying the nation will not approve new coalmine projects with an annual capacity of less than 300,000 tons before 2010.