Shenhua’s Australia Prospect May Boost Reserves by 6%

By Winnie Zhu

Feb. 27 (Bloomberg) -- China Shenhua Energy Co.’s coal prospect in Australia may boost reserves at China’s largest miner by at least 6 percent, according to the company’s annual report.

The 190-square kilometer block near Gunnedah in New South Wales state may hold 1 billion metric tons of high-quality power-station coal reserves, parent Shenhua Group Corp. said in a statement on the Web site of Beijing-based State-owned Assets Supervision and Administration Commission today.

Shenhua Energy has coal reserves of 18 billion tons, of which 7.3 billion are recoverable, according to the company’s 2007 annual report. The coal miner agreed in August to pay A$300 million ($194 million) for the right to the Australian prospect, its first foreign exploration permit.

“The potentially big reserve will have a positive effect on the company,” Donovan Huang, a coal analyst with Nomura Securities Ltd., said by telephone in Shanghai today.

Coal prices in China traded at 560 yuan a ton as Feb. 23, down from a record 995 yuan a ton reached in July last year.

Wonderful Sky Financial Group Ltd., which handles Shenhua Energy’s public relations, wasn’t immediately able to comment.

Shenhua’s Output

Shenhua said in April it intended to buy overseas assets, including mines in Australia, Indonesia or Mongolia to boost reserves and meet demand. Shenhua Energy has started risk appraisals on the Gunnedah project, according to today’s statement.

The Chinese company said Nov 20 that it may need to pay an additional A$200 million for the Australian mining lease.

Shenhua Energy increased coal production by 18 percent to 185.7 million tons last year, accounting for 7 percent of the nation’s total, it said in January.

The company’s shares fell 3.6 percent to HK$15.46 at the stock exchange’s midday break. The benchmark Hang Seng Index was up 0.17 percent.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net.