• Sat
  • Aug 30, 2014
  • Updated: 8:24pm

Longmay scraps US$1b public offer

PUBLISHED : Monday, 12 February, 2007, 12:00am
UPDATED : Monday, 12 February, 2007, 12:00am

Safety issues at state-owned company's mines halt plans for stock market listing


Heilongjiang Longmay Coal Mine Group, a state-owned mining company in the northeastern province, has had to scrap plans to raise about US$1 billion from an initial public offering due to safety issues at its mines, market sources said.


The company could not be reached for comment.


Six miners were killed at the company's Taoshan coal mine in Qitaihe in September last year after the mine collapsed. In 2005, an explosion at its Dongfeng coal mine in the same city killed 171 people.


'Usually the listed companies are much better on safety because if anything happens it tends to get a lot of attention,' said UOB Kay Hian analyst Foo Choy Peng. ' The mainland's top leaders are determined to improve the situation because it has the worst safety record in the world.'


Last year, the number of coal-mining fatalities dropped 20 per cent from the year before to 4,746, an average of 13 deaths per day, according to the State Administration of Coal Mine Safety. It was the first year in 30 that fewer than 4,800 miners were killed in mainland mines.


Over-mining and inadequate shaft support were the most common reasons for mine disasters, analysts said.


The worst abuses are found in the numerous illegal mines that dot the prime coal regions of Shanxi, Shaanxi and Inner Mongolia.


'The local governments are in league with these mine owners because coal prices are high and they want to get rich,' Ms Foo said.


The mainland's coal companies are intent on raising funds through IPOs because the central government is forcing the industry to consolidate and companies with the most cash have the best chance of surviving.


Beijing wants to build three or four 'national champions' in coal and another dozen or so medium-sized companies.


Shanxi Coking Coal Group plans to raise at least US$1 billion in a Hong Kong public offering later this year.


Yongcheng Coal & Electric Group, a diversified industrial conglomerate based in Henan province, plans to raise up to US$1.5 billion from a Hong Kong IPO this year.


Yongcheng's primary business is coal mining but it also has interests in thermal energy, cement and hotel subsidiaries.


Shares of China Coal Energy, which began trading in December after it raised US$1.7 billion from an IPO, have risen 93 per cent since then.


Shares of China Shenhua Energy, the mainland's largest coal mining company, doubled last year and are up 6.5 per cent this year.


China is the world's biggest producer and consumer of coal. It relies on coal for two-thirds of its energy needs. Mainland power demand could rise 11 per cent to 3.1 billion megawatt hours this year and rise another 10 per cent to 3.4 billion megawatt hours next year, according to analysts at Deutsche Bank.


The bank expects coal prices to remain flat this year and fall as much as 3 per cent next year as production increases and infrastructure improvements remove transportation bottlenecks.


Heilongjiang Longmay Coal, founded in December 2004, mines and processes coal, runs coal-related railways and makes coal-mining equipment. The company owns 17 billion tonnes of coal reserves in the province, or 76 per of the reserves, according to its website.


The company's 39 mines have annual production capacity of more than 55 million tonnes. Its 16 coal-processing plants can wash more than 26.3 million tonnes of coal a year. Its main products are coking coal, used in the production of steel, and steam coal, used to generate electricity.


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