Yancoal Australia Ltd wrote down a loss of A$749.4 million ($689.89 million) during the first half of 2013 mainly due to adverse exchange rate exposure and impairments to mining assets, according to a filing submitted late last week with the Australian Securities Exchange. No comparison was made with historical results.
Yanzhou Coal Mining Co, one of China's largest coal miners, holds a 78 percent stake in Yancoal. In a forecast issued last month, Yanzhou Coal also saw the above-mentioned factors behind the downbeat financial results expected for itself and its subsidiaries. Falling coal prices were identified as well as a major contributor to anticipated losses.
According to Zhang Pengcheng, a coal analyst with China Coal Resource, thermal coal prices in Australia have dropped nearly 30 percent since January, a development which has applied pressure across the coal sector.
"The average cost to export thermal coal from Australia is currently around $80 per ton, but Yancoal's costs are even higher, around $90 per ton," Zhang told the Global Times.
Meanwhile, Chinese buyers importing coal through southern ports are now paying overseas suppliers an average of $77 per ton, Zhang added.
Yancoal was established when Yanzhou Coal invested in Australian coal producer Gloucester Coal Ltd. Yanzhou Coal has been pursuing stakes in the Australian coal industry over the past decade and now holds positions in Austar Coal Mine, Syntech Holdings Pty Ltd and Wesfarmers Premier Coal Ltd, in addition to Yancoal.
"Chinese demand for energy has driven coal companies to secure resources overseas. The Chinese government has also been supportive of this trend as well," Liu Enqiao, a senior energy analyst with Anbound Consulting, told the Global Times Monday.
"But domestic and overseas markets are oversupplied with coal at the moment, so Australian miners can no longer bring advantages for Chinese companies," Liu said.
Despite the Australian outfit's tepid financial performance through the first six months, Yanzhou Coal proposed a complete buyout of the miner in July. The deal is still being reviewed by Chinese regulators and Yancoal's remaining shareholders.