Chinese miner offers more than $3.7 billion for the Australian company

BEIJING - China's Yanzhou Coal Mining Co, the country's fourth-largest coal producer, has offered more than $3.74 billion to acquire the Australian coal miner Whitehaven Coal Ltd. The move comes as the Chinese company attempts to secure more overseas resources to meet surging domestic demand, according to local media reports.

If the bid is successful, it will be Yanzhou's largest overseas acquisition since it paid $3.2 billion for Australia's Felix Resources Ltd in 2009, said the Hong Kong-based AASTOCKS.com on Monday.

The process is now coming to a conclusion, with Yanzhou and India's Aditya Birla Group on the final shortlist of bidders, Whitehaven said at the end of April.

Whitehaven was reportedly seeking offers of more than A$3.5 billion ($3.74 billion) from interested parties, after putting itself up for auction in October last year.

The Australian miner has attracted the attention of a large number of companies worldwide, including prospective Chinese buyers such as Yanzhou, Shenhua Group, and China National Coal Group Corp.

Whitehaven lowered its forecast for full-year net profit by 19 percent to $76 million, as a result of the March 11 earthquake and tsunami in Japan, which has reduced demand for its products.

Goldman Sachs and Grant Samuel are advising Whitehaven. UBS is advising Yanzhou.

Zhang Baocai, Yanzhou's board secretary, said Australia's coal reserves are high quality and its developed laws and facilities are attractive to Chinese investors.

He said Yanzhou is looking at seven or eight projects in Australia, hoping to acquire thermal coal and coke coal projects.

Yanzhou has coal reserves in Shandong province, however resources are not as abundant there as in Shanxi province or the Inner Mongolia autonomous region.

Yanzhou gained more than 1.5 billion tons of approved coal reserves in Australia through its acquisition of Felix.

Analysts said Yanzhou's success with Felix and its knowledge of local factors such as the law and culture, were instrumental in making it on the final shortlist for Whitehaven.

Yanzhou produced 49 million tons of coal in 2010, up 36 percent year-on-year, with 78.8 percent of that increase coming from Felix resources.

In the first quarter, Yanzhou had earnings of 0.5 yuan for each share, rising 17.9 percent year-on-year, thanks to the strong performance of its operations in Australia.

The company is expected to report an 80 percent surge in net profit in the first half of this year when it releases its results, because of surging demand for coal and a rise in price of the fuel.

Yanzhou is one of China's four largest coal producers. In total, they plan to increase production by 20 percent by 2015 and to acquire more overseas mining assets.

The country's coal imports increased 32 percent to 166 million tons in 2010 from a year earlier, according to data from China's General Administration of Customs.

By Zhang Qi

(China Daily 05/10/2011 page13)