Energy

Chinese firms ink deal to tap Aussie coal reserves

By Wan Zhihong (China Daily)
Updated: 2010-10-20 13:54

Beijing - Two Chinese coal companies have teamed up to explore and develop coal resources in an area in Australia that has forecast reserves of 10 billion tons.

China Coal Geology Engineering Corp and Wanbei Coal-Electricity Group Co Ltd, based in East China's Anhui province, inked an agreement for the project. The two companies will carry out a five-year exploration and development in the area in Queensland.

A worker walks at a coal storage site near a freight station in Shenyang, capital of Liaoning province, on Oct 18 2010. Chinese mining companies, dissatisfied with domestic production, have been looking at overseas markets for supplies. [Photo / Agencies]

The deal is in line with domestic coal companies' quickening pace in venturing overseas. The timing now is appropriate for them to expand overseas, analysts said.

Chinese companies can enjoy more reasonable prices in making overseas deals, as international coal prices have dropped a lot after the economic recession, said Zhang Yanlin, an analyst with China Investment Consulting Co.

The global coal industry will continue to have a bright future and demand for coal in some emerging markets is rising rapidly, Zhang said.

The volume of China's coal imports more than tripled in 2009 from a year earlier as the country's economic stimulus package boosted demand.

China's coal imports jumped 2.1 times to 130 million tons in 2009 from a year earlier, with the average price at $84 a ton, according to the General Administration of Customs (GAC).

Related readings:  China shuts down 1,355 coal mines in first 9 months  Safety check may drive coal price up  Sharp coal price hike may shock power producers  Coal consumption to fall

GAC attributed the surge to higher domestic coal prices and a supply shortage caused by the increase in demand after the economic stimulus package came into effect. The move pushed up demand for high-quality coking coal in the steel, cement and chemical industries.

Yanzhou Coal Mining Co, China's third-largest coal producer, is scanning the market for additional coal acquisitions in overseas markets after becoming the new owner of Australia's Felix Resources Ltd, company executives told China Daily earlier.

State-owned Yanzhou is seeking to acquire new "coalmines as well as stakes" in coking or thermal coal companies in Australia.

Yanzhou had completed the legal footwork to take over Felix by the end of last year at a price of about $3 billion, ranking it China's biggest takeover of an Australian firm.