Miner and unnamed partners to invest 1.8b yuan in project that has reserves almost equal to firm's six operating mines Yanzhou Coal Mining will unveil in the next two days the purchase of a controlling stake in a coal mining project in Shaanxi province, according to chief financial officer Wu Yuxiang. Speaking three days after the company posted a 24 per cent decline in first-half profit, Mr Wu said the Shaanxi project involved investment of 1.84 billion yuan, which would be shared with two other entities that he declined to name. The mine is estimated to have 1.58 billion tonnes of recoverable reserves. It will have initial production capacity of eight million tonnes upon commissioning early next year that is expected to rise to 20 million tonnes in five years. The project will significantly boost the company's coal reserves and production next year after output fell a combined 19.9 per cent in 2004 and last year due to production cuts to prop up long-term output levels and disruption caused by delays in relocating villages sitting on coal fields. 'Its reserves are not far short of the 1.8 billion tonnes of remaining recoverable reserves of our six mines in operation,' Mr Wu said. Yanzhou Coal yesterday also announced it would buy its parent Yankuang Group's 98 per cent stake in Yankuang Shanxi Nenghua for 733 million yuan. Nenghua has a coal mine with 30.7 million tonnes of recoverable reserves. Scheduled to start operation in the fourth quarter this year, Nenghua will have the capacity to produce 1.2 million tonnes, expandable to 2.1 million tonnes. Total investment is 413 million yuan. Nenghua also has a project that uses waste gas from a coking coal plant as raw material to make methanol, which can be used as a fuel and industrial solvent. The project requires 509 million yuan of investment and will have annual capacity of 100,000 tonnes when it comes on stream in the third quarter next year. Meanwhile, Mr Wu said Yanzhou Coal was in talks to invest in its parent's coal-to-liquid fuel project. 'We should be able to decide whether to participate within the next year or so,' he said. The project's initial phase of development, which has gained central government approval, can produce one million tonnes of liquid fuel a year at an investment cost of 10 billion yuan. Capacity is expandable to five million tonnes a year at a total investment of more than 40 billion yuan. The project investors had secured coal supply from a mine in Shaanxi with more than four billion tonnes of recoverable reserves, Mr Wu said. Separately, Mr Wu expected Yanzhou Coal's Austar coal mine in Queensland, Australia, to break-even in the second half after chalking up a first-half net loss of 177 million yuan due to labour and materials expenses related to the mine's pre-production preparations. The mine's second-half output is expected to rise to 500,000 tonnes from 110,000 tonnes in the first half. Yanzhou Coal's shares shed 1.06 per cent yesterday to close at HK$5.58.