What happened
On December 8, Yankuang Energy Group announced that it had acquired the exploration right to the No.1 coal mine in Inner Mongolia's Huolinhe coal mining area for a consideration of Rmb3.72bn. We think that the incremental coal resources will strengthen the firm's medium-to-long term supply capability and core competency.
Comments Average acquisition cost of Rmb3.57 per tonne. The Inner Mongolia
Public Resources Trading Center announced the transfer of exploration right to No.1 coal mine at Huolinhe coal mining area, and the reserve price was Rmb6.71mn. On December 8, Yankuang Energy won with a bid of Rmb3.72bn, translating to average acquisition cost of Rmb3.57/t.
Planned capacity of 6mnt/year. The Huolinhe No.1 coal mine is located in Huolingol city (Tongliao) in the eastern part of the Inner Mongolia Autonomous Region. The exploration section has an area of 33.54 sq km.
The National Development and Reform Commission approved planned annual capacity of 6mnt.
Total reserves of 1.04bnt long-flame coal and brown coal in 2018.
According to public information on the Inner Mongolia Public Resources Trading Center, on October 31, 2018 the Huolinhe No.1 coal mine had total coal reserves of 1.04bnt. Under the classification based on the feasibility and reliability of reserves and resources, the mine has 221.74mnt of basic reserves (122b), 758.93mnt of inferred resources (333), and 60.29mnt of predicted resources (334). By the type of coal, the mine has 795.15mnt of long-flame coal and 245.81mnt of brown coal, mainly for power generation, industrial broilers, and household use.
Inner Mongolia has a limited number of historical tenders for coal exploration right. The previous tender was for the Bayan Chaidamu mine, won by Sinopec on March 24, 2023 for Rmb30.15bn (average price of Rmb14.15/t), a 202% premium over the reserve price. The mine has an exploration area of 115.43 sq km, 2.13bnt of coal resources, and 10mnt/yr of designed production capacity. Its coal resources include non-caking coal, which accounts for the largest portion, and slight-caking coal. The bidding price was relatively high, but the mine is superior to the Huolinhe No.1 mine in terms of scale and coal types.
Risks
Project progress, and/or growth in coal demand disappoint.