Shenhua Energy Wins Australia Coal Exploration Permit

By Angela Macdonald-Smith

Aug. 15 (Bloomberg) -- China Shenhua Energy Co., the nation's biggest coal producer, agreed to pay A$300 million ($261 million) for a coal exploration license in Australia as it expands overseas to boost output.

The 190-square kilometer area near Gunnedah in New South Wales state is expected to contain shallow resources of power- station coal suitable for the Australian and export markets, New South Wales Minister for Mineral Resources Ian Macdonald said today in an e-mailed statement. The project could be worth more than A$670 million to the state, he said.

China's coal producers are adding capacity to meet the rising energy needs of the world's fastest-growing major economy. The nation burns coal to generate about 80 percent of its power. Shenhua said in April it intended to buy overseas assets, including mines in Australia, Indonesia or Mongolia.

The Watermark license will be awarded to Shenhua on the recommendation of an expert assessment panel, Macdonald said in the statement. The government invited initial bids for the permit in October and final bids closed in February, he said.

The license is for exploration only, not mining, Macdonald said. The exploration phase will last ``several years,'' he said.

Shenhua beat Anglo American Plc's coal unit, Griffin Coal Mining Co., Xstrata Plc, Donaldson Coal Pty and White Mining Ltd. for the license, the Australian Financial Review said today, without citing anyone.

Prices for power-station coal shipped from Newcastle port in New South Wales reached a record $194.79 a metric ton in the week ended July 4, according to the globalCOAL NEWC index.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net