Coal miner earmarks 4.8b yuan to spend on building and restoring facilities at home and abroad Yanzhou Coal Mining plans to almost quadruple its capital expenditure this year to build new production capacity domestically and abroad, as it shrugs off the output-cutting impact of problematic village resettlement at home. The Shandong province-based coal miner planned 4.81 billion of expenditure this year, up from 1.29 billion yuan last year, chief financial officer Wu Yuxiang said yesterday. It has set aside 1.26 billion yuan for plant and equipment on its existing six mines, 1.51 billion yuan for restoration of the Austar mine in Queensland, Australia, 1.35 billion yuan for a new coal mine and a methanol plant in Shaanxi province and 690 million yuan for the Zhaolou mine in Shandong. The Austar mine, of which Yanzhou bought a 90 per cent stake in late 2004, is expected to come on stream in July or August with two to three million tonnes of annual capacity. The Shaanxi mine would have initial annual capacity of eight million tonnes, expandable to 20 million tonnes in three to five years, Mr Wu said. Yanzhou expects to complete negotiations on the stake it will own in this mine by May or June. It agreed to invest in the mine - estimated to have 1.24 billion tonnes of recoverable reserves - in July 2004. 'We are striving to have this mine come on stream late this year and make profit contribution next year,' Mr Wu said. The Zhaolou mine, which will have initial annual capacity of three million tonnes and expandable to six million tonnes in later years, is expected to begin contributing to Yanzhou's bottom line from 2008. Yanzhou on Sunday announced an 8.6 per cent decline in net profit to 2.88 billion yuan for last year, and a 26.5 per cent year-on-year fall in net profit to 582.49 million yuan for this year's first quarter. The main culprit for the disappointing results was lower than expected production stemming from delays in negotiations on the resettlement of six villages sitting above coal seams. It resulted in an 11.5 per cent fall in last year's output to 34.66 million tonnes, and a 96.94 per cent rise in land subsidence and restoration costs to 636.59 million yuan. A 23 per cent or 235 million yuan rise in salary expense also hurt profits. Settlement was reached with two villages by last year's fourth quarter and the rest by this year's first quarter. Unit production cost soared 35.9 per cent to 159.61 yuan a tonne, offsetting a 28.3 per cent increase in average coal selling price to 349.50 yuan a tonne. With production back to normal from this month, Yanzhou expects output of 34 million tonnes for this year, of which 7.2 million was realised in the first quarter. Mr Wu expected local coal price to remain high near term as supply growth will lag demand growth and the closure of thousands of small mines will cut supply, despite a long pipeline of new mines. Yanzhou is considering taking part in its parent Yankuang Group's coal-to-liquid fuel project, which will cost 10 billion yuan to build the first-phase one million tonne a year of capacity. Annual capacity will be expanded to five million tonnes. No timetable is available.