China's Shenhua Sets Sights on Mongolian, Indonesian Coal Mines to Boost Production

Positive coal sales generation during January and February has prompted China Shenhua Energy Co Ltd. to declare its 2012 sales volume could likely reach 425 million tonnes to exceed earmarked targets.

"From the sales momentum we have seen in the first two months of this year, we feel our full-year sales target now looks a bit conservative," Zhang Xiwu, Chairman of China Shenhua Energy Co Ltd., told reporters in Hong Kong on Monday.

A unit of Shenhua Group Corp., the company last week reported its 2011 net profit rose 18 per cent from a year ago spurred by higher domestic coal prices and increased production volume, as well as the injection of some $1.3 billion of assets from its parent last year.

China's strong demand for the raw commodity coal, which it needs to fuel its power plants, steel and cement industries, helped support coal prices to reach and remain at high levels, ultimately helping coal companies like Shenhua to attain financial goals.

Meanwhile, the company, which has standing talks with Mongolia to invest in the latter's giant Tavan Tolgoi coal mining project, said it is waiting for the commencement of the country's parliamentary elections in June before opening negotiations again.

"Because this is Mongolia's election year, I think we will restart our talks when the election is over," Ling Wen, China Shenhua Energy Co Ltd. CEO, said on Monday.

Located in Mongolia's south Gobi region, the Tavan Tolgoi coal deposit holds an estimated reserves of 6 billion tons of coal, including the world's largest untapped deposit of coking coal, the main ingredient used to make steel, Reuters News reported.

China Shenhua Energy Co Ltd. has been searching the globe for potential coal asset purchases. It is currently in talks to buy coal mines in North America, Africa, Australia and Indonesia, Ling said.

The western Tsankhi block in Mongolia holds 1.2 billion tonnes of reserves, more than half or 65 per cent of which is coking coal. Production life is estimated to exceed more than 30 years at 15 million tonnes a year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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