Top Biz News

Coal mine owners exploring new opportunities

By Liu Yiyu (China Daily)
Updated: 2009-12-14 08:03

When the coal industry consolidation nears completion in North China's Shanxi province, Wang Xiaoping, a small coal miner in Shaanxi province of Northwest China, is also seeking his fortune in other ways.

He was sitting at a recent investment seminar in Beijing, contemplating where to earn his living next.

Wang sold one of his two coal mines to a State-owned enterprise recently in the wake of the coal industry consolidation taking place in Shanxi.

The one he sold is a small mine in Shaanxi's Fugu county with a production capacity of 300,000 tons. Wang is talking to possible buyers for his other mine, which has an annual output of 600,000 tons.

The Shanxi government plans to reduce the number of coal mines from about 1,500 to 1,000 before 2011, and then reduce that number to 800 by 2015. This will be achieved by closing mines with an annual output of less than 300,000 tons each.

Even though the Shaanxi government's plans are not official, coal miners are ready for a stricter policy.

"A coal industry consolidation is actually under way in Shaanxi, as well, although no specific policy has been officially issued yet," Wang said. "Lots of private coal mine bosses are searching for new fortunes."

Wang said coal mine owners are looking at the property market and service industry for investments.

"Xi'an is the most attractive place for local coal mine bosses to pool money into the city's property market," he said.

The coal industry consolidation of Shanxi province has set an example for other coal-rich provinces following the government's pledge to streamline the energy sector.

Other coal-abundant provinces such as Inner Mongolia, Hebei, Henan, Shandong and Heilongjiang are following suit.

An official from Gansu province, who participated at the same investment seminar with Wang, but asked not to be identified, said some of the coal mine owners in Shanxi and Shaanxi provinces are merging their small coal mines to set up a large coal corporation.

With a new corporation with an annual output of over 3 million tons, they can survive and continue operations, he said.

The official from Gansu said self-consolidation is not allowed by city-level governments.

However, in small counties, such a merger is not strictly prohibited, because the local governments are in need of investors and their capital to develop local economies, he added.

Some owners of small coal mines have expressed interest in downstream businesses, namely the coal chemical processing sector, according to the official.

Coal miners who have to quit the business also have become the target of small companies in need of funds, government investment promotion bureaus and even overseas.

It is estimated that the Shanxi's consolidation will mean billions of yuan in payouts to small mine operators.

On Capital, a Hong Kong-based capital management company, also took part in the same investment seminar as Wang in a bid to raise funds.

"We hope to attract the 'idle money' for our upcoming renminbi fund," said Laurie Kan of On Capital.