Yanzhou Coal Mining Co. has reported gains after its 2017 net income rose more than fourfold.
In a filing to the Honk Kong Stock Exchange, the Shandong-based company reported a profit jump in 2017 to 7.36 billion yuan ($1.16 billion) from 1.65 billion yuan, with sales rising 29% to 96.8 million tonnes after new mines in Inner Mongolia started operation, and on the acquisition of Coal & Allied Industries Ltd in Australia.
Profits climbed despite impairments of more than 2.2 billion yuan, including bad debts and depreciation of inventory. A company statement in late December 2017 showed that the bulk of the writedowns came from almost 1.5 billion yuan in assets held by Inner Mongolia Xintai Coal Mining Co. No further details, however, were provided.
Coal & Allied Industries acquisition
Yancoal Australia transformational acquisition of 100% of Coal & Allied Industries Limited from Rio Tinto Limited for US$2.69 billion drove immediate production and financial gains.
Increased production at a time of industry-high benchmark prices for semi-soft coking and thermal coals led Yancoal’s recovery to announce a profit before tax of $311 million from revenue before tax of $2.6 billion for the full year ended 31 December 2017.
Yancoal Chairman Xiyong Li said, “The strategic equity-funded acquisition of Coal & Allied has driven Yancoal’s significant financial turnaround and confirmed our position as an industry leader.
“The strength of this acquisition has re-capitalised our business, improved cashflow, brought new investment into our shareholder base and significantly reduced gearing.”
Having completed the Coal & Allied acquisition, Yancoal entered into a binding agreement with Glencore Coal to establish a 51:49 unincorporated joint venture in relation to Hunter Valley Operations (HVO JV).
Yancoal achieved a total operating EBITDA of $988 million before tax, including four months of equity contributions from the acquired assets MTW ($133 million before tax) and HVO ($146 million before tax).
Cost reduction strategies continued to be supported at all operations, with the Moolarben Stage Two underground mine commencing longwall production in November 2017, on time and below budget, driving the expansion of low-cost production.
Yancoal Chief Executive Officer Reinhold Schmidt acknowledged that the acquisition has effectively doubled the scale of production at a time of increasing global coal prices.