Yanzhou halves spending amid coal downturn

Yanzhou Coal Mining has slashed its spending on future production capacity expansion by half amid weak coal market conditions, and floated a plan for its Canadian unit to fund its C$3.5 billion (HK$26.2 billion) potash mining project development via a Canadian stock market listing.

Wu Yuxiang, chief financial officer of the listed unit of the nation's fourth-largest coal producer Yankuang Group, expects the company's full-year capital expenditure to be 6.1 billion yuan (HK$7.6 billion), down from 12 billion yuan budgeted earlier this year.

Half of the cutback will be from its Australian operations, which will see their full-year budget slashed by 70 per cent.

Wu said the firm would spend only on projects that enhanced production safety and that were expected to be profitable in the next two years. Other projects will be put on hold.

The company will also "adjust" its goal to triple its output to 150 million tonnes by 2015 from 2010, he said, implying the time-frame for reaching the target will likely be deferred. Key to its future growth was the development of three coal mines in Ordos, Inner Mongolia, he added.

In late 2011 Yanzhou paid US$260 million for 19 permits to explore for potash - potassium salt that can be processed into fertiliser - in Saskatchewan, Canada. Wu said discoveries made so far required C$3.5 billion of investment to be developed into minable output, and that given Yanzhou's current financial circumstances, its Canadian unit would have to raise funds either by a stock market listing or from strategic investors.