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China's Yancoal Australia reviews expansion plans
by Staff Writers
Sydney (AFP) Aug 20, 2012

China-backed Yancoal Australia said Monday it has put expansion plans at all seven of its mines under review to keep costs down as weaker demand from key north Asian importers weighs on coal prices.

"Yancoal is considering all options to reduce costs," it said in a shareholder presentation.

"Expansion plans across all mines will be reviewed and ranked to ensure that the appropriate capital expenditure discipline is maintained."

Yancoal's major shareholder, with 78 percent of stock, is parent company Yanzhou Coal, one of China's largest international mining groups by market capitalisation.

The Australian entity was formed through Yanzhou Coal's recent takeover of Gloucester Coal with its shares floating in Sydney in late June to become the biggest Chinese-controlled entity listed on the Australian Stock Exchange.

In Monday's presentation, Yancoal said the price of metallurgical coal used in steelmaking has been declining since mid-2011 as demand in several of the major consuming countries falls.

"In the second half Yancoal expects the metallurgical coal prices to remain weak and volatile," it added.

As for thermal coal used in electricity generation, the company said prices dropped during the first half of the year as supply overwhelmed subdued economic activity but it was upbeat on the future.

"As excess stocks are consumed and production cuts take effect the thermal coal price should respond positively in the next year," it said.

Yancoal Australia owns five mines in New South Wales state and two mines in Queensland state.

-- Dow Jones Newswires contributed to this story --


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