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          Yanzhou Coal acquires Aussie mining firm

          Updated: 2011-12-23 09:39

          By Du Juan (China Daily)

            Comments() Print Mail Large Medium  Small 分享按鈕 0

           Yanzhou Coal acquires Aussie mining firm

          Workers at Yanzhou Coal Mining Co Ltd's Dongtan mine in Shandong province. Yanzhou Coal's move to acquire Gloucester Coal Ltd is crucial because it will help its Australian assets to list on the country's exchanges, says an industry insider. [Photo/China Daily]

          The buy will help Chinese company in its quest for overseas expansion

          BEIJING - China's Yanzhou Coal Mining Co Ltd announced on Thursday that it will acquire the Australian miner, Gloucester Coal Ltd, to increase its overseas expansion.

          The deal is likely to create Australia's biggest coal miner, according to an industry insider, and initial indications were that it could be worth as much as $2 billion.

          "The deal is significant for Yanzhou Coal Mining because it will help its Australian assets to be listed in the country, fulfilling its promise to the local government in 2009 when it bought Felix Resources, another Australian coal miner," said an industry insider who declined to be named.

          Yanzhou Coal is required to float at least 30 percent of its business in Australia on the local exchange by the end of 2012, according to the terms of the 2009 purchase.

          The insider said the company doesn't have many advantages in acquiring new mines in China compared with other larger coal companies, so its overseas strategy has become its main interest in recent years.

          A separate source working at the Shandong-based Yanzhou Group, the parent of Yanzhou Coal, said it's becoming increasingly difficult for the company to obtain new mines in other provinces. That's because all local governments are eager to maintain control of their resources by forming local energy groups.

          "Even in Shandong province, Yanzhou Group is facing fierce competition after the formation of Shandong Energy Group Co Ltd in March," said the insider. "So, the company has chosen to find new mines in the international market."

          He said Yanzhou Coal is interested in a number of mines in Canada and that possible cooperation with Canadian business partners is under discussion. The company is also interested in mines in Australia.

          According to Gloucester's annual report, the Australian company has total coal reserves of 276 million tons and other resources of 1.5 billion tons.

          It also owns rail and port assets. However, its shares have dropped by more than 40 percent this year to A$7.03 ($7), becoming one of the worst-performing stocks among Australian companies. Currently, Gloucester has three mines in operation and another under development. The company's annual production capacity is estimated to be 6 million tons in 2012 and 10 million by 2015.

          Australia has seen an increasing number of mergers and acquisitions in recent years. That's as emerging economies, especially China and India, have an increasing demand for commodities such as coals and other raw materials for their domestic steel industries, power generation and other energy sectors.

          The insider said Yanzhou Coal Mining has more overseas experience than any other domestic coal miner and it is targeting a large number of coalmines.

          "Peabody Energy Co of the US has made several recent investments in Australia, which has prompted Yanzhou's move," he said. "The two will probably become competitors in the Australian coal markets."

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