BEIJING - Yanzhou Coal Mining Co Ltd, the third largest listed coal company in China, said it will increase the capital investment in its wholly-owned Yancoal Australia Pty Ltd by A$909 million ($917 million).
The move will increase its total capital investment to A$973 million from A$64 million, paving the way for a listing plan of the unit in Australia.
Yanzhou Coal Mining Co made a commitment in 2009 that the initial public offering of Yancoal Australia will be launched in late 2012 in the country.
Zhang Baocai, executive secretary of the company, said even though the scheduled launch time is in 2012, the company is making efforts to join the capital market in Australia this year.
Liu Yishe, analyst at Coal.com.cn, said Yanzhou Coal has made the right and wise decision against the backdrop of increasing domestic demand for coal in China.
"It will help the country's coal imports through such a move," said Liu. "It will help open the international energy market to China and increase the scale of imports."
Zhang added that the Australia-based company would use the funds to repay loans and bank borrowings in order to decrease its liability ratio.
The investment will improve Yancoal Australia's asset-liability structure, making its total assets rise to A$4.771 billion and liabilities decline to A$3.451 billion with asset-liability ratio falling to 72.34 percent.
After the completion of the capital increase, Yancoal Australia will spend $250 million on an acquisition of a 30-percent equity interest in Ashton Coal Mine, a joint venture between Yancoal Australia and Singapore IMC Group's wholly owned subsidiary in Australia.
Yancoal Australia acquired the interest in the Ashton Coal Mine effective December 2009, through its purchase of Felix Resources Pty Ltd.
Ashton Underground and Open-cut Coal Operations are located approximately 12 kilometers northwest of Singleton in the Hunter Valley, New South Wales. It has a raw coal production capacity of 520 tons a year and a rich reserve of coking coal.
According to the Australian Joint Ore Reserves Committee standards, the total reserve of Ashton coalmine is 96.5 million tons, among which 49.1 million tons are open-cut coal operations.
Zhang said the company will gain strong competitiveness with the rich coking coal reserve in Ashton coal operations due to a shortage for such coking coal in the domestic market.
Yancoal Australia reported A$166 million in profits from January through September 2010, though the rising international coal price is believed to have polished its full-year performance.
According to the company's latest financial report, Yancoal Australia contributed 7.07 million tons production increase among the total increase of 9.29 million tons of Yanzhou Coal Mining Co in the first three quarters in 2010.
The announcement of capital increase came after the stock market closed on Thursday. Yanzhou Coal shares were up 1.96 percent, outperforming the Hang Seng index's 0.13 percent gain.