Yanzhou Coal Mining has vowed to improve its compliance with Hong Kong listing rules after drawing criticism for making a down payment on an acquisition from its parent company before obtaining shareholder approval. The company paid Yankuang Group 570 million yuan in the fourth quarter of last year for a 95.67 per cent stake in Yankuang Heze Power Chemical without seeking shareholder approval. 'We will do a better job in future on compliance with rules for connected transactions rather than focus solely on earnings enhancement,' executive director Chen Guangshui said. The firm did not disclose the deal until April or announce the details until yesterday. 'We are of the opinion that the down payment ... has not been in the best interest of the company and its shareholders as a whole,' independent financial adviser CLSA said in a letter to Yanzhou's shareholders yesterday. Heze is developing the Zhaolou and Wanfu mines in the Juye coalfield in Shandong province. Yanzhou Coal has also agreed to buy from its parent the operation rights to the two mines before June 30 next year but the acquisition costs are unknown as they are subject to independent valuation. It will invest 1.2 billion yuan in the next 30 months to develop the Zhaolou mine, which will have an annual production capacity of three million tonnes by December 2007, rising to a maximum of six million tonnes in later years. Yanzhou Coal's production reached 39.15 million tonnes last year. The Zhaolou mine has 105.9 million tonnes of recoverable reserves and 208 million tonnes of probable reserves. Mr Chen said the Wanfu mine would require development expenditures of 1.5 billion yuan and have an annual capacity of 1.8 million tonnes, but he would not disclose the expected production start-up date and estimated reserves, saying the mine's feasibility study had not been approved by the government. Chief financial officer Wu Yuxiang told analysts in October last year the mine was expected to come on stream in 2009. Meanwhile, Mr Chen said the earlier-cancelled auction for the disposal of its Huaxia Bank non-tradable shares had yet to be rescheduled but it was likely to take place before the end of the year. Yanzhou Coal obtained the shares in lieu of 640 million yuan owed by a debtor. Mr Chen said the auction proceeds should be more than sufficient to repay the debt.