Yanzhou Coal

China Coal mine closed as flooding kills four

PUBLISHED : Thursday, 12 April, 2012, 12:00am
UPDATED : Friday, 08 May, 2015, 9:51am

China Coal Energy, the listed unit of the mainland's second-largest coal producer China National Coal, has announced its third suspension in two years as a result of deadly flooding, staining its already blemished safety record.

As a result of flooding on Tuesday, four out of seven trapped workers in its subsidiary Shanghai Datun Energy Resources' Kongzhuang mine, in Jiangsu province, were found dead, China Coal said. The other three workers were rescued.

Trading of its shares was suspended yesterday before the market opened, pending the announcement.

Sanford Bernstein senior analyst Michael Parker expects the company's share price to be under pressure when trading resumes today because the accident turns the spotlight on the operating challenges China Coal faces, and on the fact that its safety record is much worse than rivals China Shenhua Energy and Yanzhou Coal.

Besides the Kongzhuang mine, Shanghai Datun also runs the Yaoqiao, Xuzhuang and Longdong mines in the Datun region in Jiangsu. Kongzhuang is undergoing a 532 million yuan (HK$652.93 million) renovation which would raise its annual output capacity to 1.8 million tonnes from 1.05 million tonnes.

Shanghai Datun's four mines had combined raw coal output of 9 million tonnes in 2011, amounting to 6.6 per cent of China Coal's target output this year.

All four mines had suspended their operations, 'in order to learn lessons from the flooding accident and take all effective measures to ... ensure safety', China Coal said.

Last September, another flooding accident occurred at China Coal's parent company's Yuanbao Bay mine that was undergoing an upgrade in Shanxi province, resulting in the death of at least nine workers.

A subsequent order by the provincial government for all of the parent's mines in Shanxi to suspend operation meant five of China Coal's mines were also shut for between 11 and 56 days for safety inspections.

In March 2010, yet another flooding accident killed 38 workers at China Coal's Wangjialing mine in Shanxi, while it was being built. Construction work at the mine, which was able to produce six million tonnes of coal a year, was suspended for almost 19 months.

China Coal last month posted a 31.3 per cent rise in net profit to 9.8 billion yuan for 2011, mainly because an 11.6 per cent jump in sales volume of self-mined coal and a 9.6 per cent increase in the coal's average selling price more than offset a 7.8 per cent rise in production costs.

Analysts polled by Reuters have forecast its net profit to rise 13.3 per cent to 11.1 billion yuan this year.

Chairman Wang An last month said the firm aims to raise raw coal output to 200 million tonnes by 2015 from 129 million tonnes last year, through development of existing projects and acquisitions.

Output is targeted to rise five per cent this year.




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