-- Yancoal Australia Reviews Expansion Plans For All Mines
-- Move comes as coal miners face falling prices, rising mining
costs
-- Yancoal owns five mines in New South Wales, two in
Queensland
-- Yancoal's 1H net profit totaled A$415.7 million, up from
A$250.8 million a year ago.
(Recasts lead; adds detail, background throughout)
By Ross Kelly and David Winning
SYDNEY--China-backed Yancoal Australia Ltd. (YAL.AU) said Monday
it is reviewing expansion plans at all seven of its mines, as
weaker demand from major north Asian importers continues to weigh
on coal prices.
Yancoal's approach underscores growing caution among coal
producers being squeezed by falling prices and rising mining costs.
A supply glut of steel has weakened Asian demand for coking coal
used in blast furnaces, while a slowdown in China's economy has
resulted in lower demand for coal-fired power.
Rio Tinto PLC (RIO) this month said it would close the Blair
Athol thermal coal mine in Queensland state by the end of this year
and defer a decision on another multibillion dollar development. It
comes just months after BHP Billiton Ltd.'s (BHP) shut its
loss-making Norwich Park coking coal mine in the state.
Growing caution among producers also raises questions about
whether billionaire Nathan Tinkler's offer for Australia's
Whitehaven Coal Ltd. (WHC.AU) will proceed at the currently
indicated A$5.4 billion price, particularly given tight debt
markets.
China is the world's largest coal importer by volume after
overtaking Japan last year. It shipped in more than 112 million
tons of the fuel in the January-June period, primarily from
Indonesia and Australia, up 61% on year.
But recent data, including the slowest rate of growth in
industrial production since 2009, has spooked the market despite
Beijing's pledges to stimulate the economy through subsidies for
manufacturing, including automotives and energy efficient home
appliances.
Last week, Commonwealth Bank of Australia cut its expectations
for all types of coking coal prices by between 2% and 8% next year
on risks "China is likely to experience a deeper and more
protracted economic turning point" than previously thought.
Yancoal's outlook is significant because it is majority owned by
Hong Kong-listed Yanzhou Coal Mining Co. (YZC), which is China's
third-biggest coal producer by volume. Yanzhou Coal has been
investing heavily in Australian coal mines to offset stagnant
production at its main base of Shandong in eastern China.
Yancoal, which was formed through Yanzhou Coal's recent takeover
of Gloucester Coal and listed on the Australian Securities Exchange
in June, owns five mines in New South Wales state and two mines in
neighboring Queensland.
"Expansion plans across all mines will be reviewed and ranked to
ensure that the appropriate capital expenditure discipline is
maintained," Yanzhou Australia said in a slideshow
presentation.
Late Friday, Yancoal said net profit for the six months to June
30 jumped to 415.7 million Australian dollars (US$433.2 million)
from A$250.8 million a year earlier.
It was downbeat in its outlook, saying the next few months will
be "difficult" and it would consider all options to cut operating
costs.
The company said Monday it expects prices for metallurgical coal
to remain weak and volatile in the six months to Dec. 31. As for
thermal coal, it said production cutbacks in a number of countries
have provided some price stability.
"As excess stocks are consumed and production cuts take effect
the thermal coal price should respond positively in the next year,"
Yancoal said.
Write to Ross Kelly at ross.kelly@wsj.com and David Winning at
david.winning@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires