On September 3, Caixin reported (Journalist Liu Yue) that China Shenhua's (601088.SH) subsidiary's total investment exceeds 26 billion yuan in the New Street One and New Street Two projects, which have been approved by the NDRC, with both projects having a construction scale of 8 million tons per year.

According to Caixin reporter's rough calculations, after the project reaches production, an annual capacity of 16 million tons corresponds to annual sales revenue of hundreds of billions yuan, and annual profits could reach nearly 6 billion yuan.

With a total market value of nearly 800 billion yuan, the coal leader China Shenhua announced in the evening that its holding subsidiary, Xinja Energy Company, with a 60% stake, has obtained the NDRC approval for the New Street One and New Street Two projects in the Xinja Energy Company. The total investment of the two projects is 13.348 billion yuan and 131.63 billion yuan respectively (excluding mining rights expenses), with capital contributions accounting for 30.5% and 30.6% respectively.

In terms of funding, the total investment of the two projects amounts to 26.511 billion yuan, with a total capital contribution of 8.093 billion yuan. Interim report data shows that as of June 30, China Shenhua had monetary funds of 186.939 billion yuan, a 24.6% increase from the end of last year.

In July, China Shenhua responded on the interactive platform regarding 2024 capital expenditures, stating that the capital expenditure plan for the coal sector is 9.816 billion yuan, mainly for the purchase of mining equipment at Shendong Mining Area, and the construction of New Street One and Two in the Xinja Energy Company.

China Shenhua stated that the construction sites of the two projects are located in Ejinhoro Banner, Ordos City, Inner Mongolia Autonomous Region, with construction scale of 8 million tons per year. They will build coal preparation plants of the same scale, adopt shaft development methods, and use heavy medium shallow groove separation process for coal washing and selection.

Public information shows that China Shenhua has developed an integrated operating model based on coal. The company owns coal resources in Shendong Mining Area, Junggar Basin Mining Area, Shengli Mining Area, and Baorixile Mining Area. The output of commercial coal reached 0.1632 billion tons in the first half of the year.

How much economic benefit can the future projects with two 8 million tons/year capacity bring to the company? Interim data shows that China Shenhua's average coal sales price in the first half of the year was 566 yuan/ton. Based on this rough calculation, the annual production capacity of 16 million tons corresponds to sales revenue of 10.188 billion yuan; the self-produced coal unit production cost is 191.7 yuan/ton. Calculated at a profit of 374.3 yuan/ton, the annual profit can reach 5.989 billion yuan.

In fact, mining requires a series of procedures. According to the announcement disclosed by China Shenhua on August 11, 2017, at that time, the overall plan for the Xintai Taigemiao mining area in Inner Mongolia was approved by the National Development and Reform Commission. In 2020, three years later, China Shenhua stated on the interactive platform that in May of that year, the Inner Mongolia Department of Natural Resources approved the sub-division of exploration and mining rights for the North Taigemiao area, issuing exploration and mining rights for the Xintai No. 1 and No. 2 coal resources; in September of the same year, the National Energy Administration approved the production capacity replacement plan for the Xintai Taigemiao Xintai No. 1 and No. 2 wells, with approved production capacities of 8 million tons/year each. The announcement tonight shows that Xintai Energy Company is advancing preliminary project design, safety facility design, energy conservation evaluation, and other preparatory work before construction.

The announcement disclosed by China Shenhua in 2017 shows that the Xintai Taigemiao mining area covers an area of approximately 766 square kilometers, with total coal resources of approximately 14.4 billion tons (under Chinese standards). The mining area is divided into five mining areas and one reserve area, with a total planned mine construction scale of 62 million tons/year for the five mining areas. The development method for the reserve area will be determined after further exploration.

As for coal types and transportation, the coal seams in the Xintai Taigemiao mining area are low gas, low sulfur, and low ash coal seams, with non-caking coal as the main type. The mining area's coal products are mainly transported via the company-operated Baozun, Baoshen, Dazhun railways, and third-party railways.