Coal firms seek investment opportunities amid mergers

( Xinhua )

Updated: 2009-11-04

Zhang Jian has changed from being owner of a coal mine in north China's Shanxi province to a shareholder of China's largest coal mining firm, Shanxi Coking Coal Group Co Ltd.

An order from the National Development and Reform Commission in September required the country's top coal producing province to close about 1,600 of its 2,600 mines by the end of 2010 through mergers and reorganizations.

The plan is that each coal mining companies would have an annual production of at least 3 million tons and each mine would produce at least 900,000 tons in order to end the province's reputation for pollution and fatal mining accidents.

By the end of 2010, all 1,000 coal mines in Shanxi should be mechanized, the commission said.

Zhang's mine in Zuoquan county had an annual production capacity of 300,000 tonnes, so it was targeted for takeover.

"As a shareholder, I retain a 35-percent share in the mine, which is to be developed so it has an annual output of more than 1 million tons," said Zhang.

He said the merger process has been supervised by the provincial government, which had conducted an evaluation of the mine's assets.

Unlike Zhang, Wang Jianzhen, general manager of Sanjia Group, a private mining firm in Shanxi, has decided to shift its business focus from coal mining to other sectors -- especially tourism.

"The coal mining sector, which helped start the company, has been badly affected by the economic downturn since last year. It was our investment in tourism that has enabled us withstand the crisis," said Wang.

The company began to diversify 10 years ago. It has invested more than 2 billion yuan ($293 million) to develop Mianshan Mountain in Shanxi into a tourist attraction, which turned in revenues of almost 150 million yuan in the first half year.

"About 500 coal mining firms have invested an estimated 12 billion yuan in tourism," said Ji Zhenfang, director of the Shanxi Tourism Bureau.

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Agriculture had also attracted private coal mining firms, said Sun Lianzhu, director of the Shanxi agriculture bureau.

He said coal firms had invested about 6.8 billion yuan in the farm produce processing sector. More private investment could be expected to flow to industrial farming and urban-rural integration projects, as many coal firms looked for good investment projects.

Li Baoqing, head of the Shanxi provincial development and reform commission, said the provincial government planned to open big government projects worth 650 billion yuan to private investors in the next two years to help direct private investment in building infrastructure, and developing public transportation and facilities.

Du Fuxing, chairman of the Shanxi Coking Coal Group Co Ltd, said Shanxi had more than 5,000 coal mines back in the 1990s.

"Under the circumstances, the more coal we produced, the less money we earned. The resource has been coarsely exploited," he said.

According to the provincial coal industry bureau small mines with an annual production of less than 300,000 tons produced 70 percent of Shanxi's coal, and less than 30 percent of Shanxi mines in Shanxi were mechanized.

"Small coal mines have low recovery rate in mining. They waste 4 tonnes of coal for every tone they extract," said Ding Jigang, an official of the provincial coal industry department.

He said the annual waste of coal resources in Shanxi was estimated at 1.4 billion tons. The industry consolidation would help improve mining technology and make better use of the resources.