Hidili, which reported 76 per cent earnings growth to 1 billion yuan last year, said in its March results announcement that it proposed to acquire coal mines in Guizhou province with reserves of 200 million to 300 million tonnes.

Mr Xu did not identify the potential targets and the amount of money involved but said the current acquisition price was lower than last year because of falling coal prices.

Hidili, which aims to become a consolidator of the mainland's small and medium-sized coal mines, paid 1.8 billion yuan for six mines with more than 150 million tonnes of reserves in Guizhou last year. By the end of last year, it had coal mines in Sichuan and Guizhou with total reserves of 627 million tonnes of coal.

'The average acquisition cost in Guizhou last year was about 12 yuan per reserve tonne, but now it costs between five yuan and eight yuan per reserve tonne,' said Mr Xu.

Based on this price range, the potential acquisition may cost Hidili between 1 billion and 2.4 billion yuan.

According to investment bank Goldman Sachs, Hidili is likely to finance the purchases by using its internal cash of 800 million yuan and a bank credit facility of 2 billion yuan.

Mr Xu said the company had not decided on how to fund the acquisitions but stressed it had plenty of cash, while its debt ratio was low.

The company's gearing was just 2.2 per cent at the end of December, according to its annual results announcement.

Meanwhile, Mr Xu said prices for coking coal, which is used in steel-making, were likely to stabilise or even slightly rebound for the rest of the year as steel production gained steam.

Coking coal prices in Kailuan, Hebei, the mainland's largest steel-producing province, fell to about 1,100 yuan a tonne in April from high of 2,095 yuan in August last year, according to the Goldman report.

Goldman forecasts the spot coking coal price to average 1,080 yuan a tonne this year, down 30 per cent year on year, and rise 10 per cent to 1,188 yuan a tonne next year.