China Shenhua has budgeted 100 billion yuan to build two large-scale coal mines, each with annual capacity of 100 million tonnes. One is in Shaanxi province and the other in Inner Mongolia.

Under government policy directions to consolidate the coal mining sector, the group will also shut and upgrade small, inefficient, and unsafe mines.

China Shenhua aims to produce 197 million tonnes of coal this year, up 6.1 per cent from last year.

About 60 per cent or 240 million tonnes of its planned coal output capacity of 400 million tonnes by 2015 would be shipped via its Tianjin and Huanghua ports in the north. The remainder will be used for power generation and chemical production in regions near the mines.

To meet its growing demand for logistics, the company has budgeted 20 billion yuan to expand the Tianjin port's annual handling capacity to 80 million tonnes from 45 million tonnes, and that of the Huanghua port to 150 million tonnes from 85 million tonnes. At least 35 per cent of the expenditure will come from equity capital.

The company will also buy additional rail cars that can handle heavier cargoes to double each train's capacity to 10,000 tonnes. Its total rail capacity will rise to 240 million tonnes by 2015 from 160 million tonnes now.

Mr Huang also said China Shenhua had received government approval to spend 28 billion yuan to build power stations capable of generating a combined 6,700 megawatts (MW) of power in the next few years, enough to raise its capacity by 37 per cent from 18,000 MW.

Mr Huang said given China Shenhua's cash pile of 72.3 billion yuan, it would not be necessary to raise fresh equity to fund the expansion, which would be financed from internal resources and bank loans.

On overseas expansion, the company is conducting resource development in New South Wales, where it won a A$300 million (HK$1.96 billion) licence a year ago to explore for coal.

'Given our lack of overseas experience, if we start from scratch, we can learn the entire development process - from obtaining exploration rights, doing exploration, getting approvals, building and operating mines, labour management to environmental protection,' he said.

'This is not to say we will wait until we finish our first project before we will consider acquisitions. We'll keep our eyes open for opportunities.'

Shandong-based rival Yanzhou Coal Mining last week agreed to acquire all of Felix Resources for just under A$3 billion, making it China's largest investment in Australia's resources sector.

While the deal promised to offer a quick fix to Yanzhou Coal's problem of stagnant production volumes, the miner's lack of experience in boosting operations overseas exposes it to significant risk in executing Felix's plan to expand output to 15.7 million tonnes by 2012 from 4.8 million tonnes now, analysts at Morgan Stanley said in a research report.

Meanwhile, Mr Huang expects the price of high heat value power-station coal will range between 550 yuan and 650 yuan per tonne over the remainder of the year, compared with 570 yuan now.

He said prices would rise because of the global economic recovery and higher environmental protection costs.

His view contrasted with that of Huadian Power International general manager Chen Jihua, who said last week the price of coal was likely to be flat this year and fall next year as growth in mining capacity would exceed demand.

Five-year goals

The coal miner hopes to achieve its targets for expansion by 2015

The amount China Shenhua will spend to build two large coal mines, in yuan: 100b yuan