Yanzhou Coal Mining Company Limited ADRYZC

Morningstar Rating

Stock Research and Analysis

by Michael Tian

Blessed with great assets in attractive locations, Yanzhou is an extremely profitable coal producer. However, as its mature production base is slowly declining, Yanzhou is hoping to rejuvenate itself with the $3 billion acquisition of Felix Resources Read more

Bulls Say

The long-term outlook is good as long as China can grow. 2010 should see higher coal realizations for both thermal and metallurgical coal.

Yanzhou produces high-quality coal, which commands a premium in the marketplace. Coal quality should continue to improve as more metallurgical production comes on line.

Yanzhou Coal is in eastern China, where many power plants and steelmakers are located. Customers pass on some of their transportation savings to Yanzhou as higher prices.

Yanzhou uses only longwall mining, which is much more efficient than traditional methods. The firm can also apply its expertise to new projects.

Yanzhou's Felix acquisition gives it a solid growth platform for the next several years. Read more

Bears Say

Yanzhou has no control over coal prices. Furthermore, it has limited control over production costs, which are determined by fuel, steel, and labor prices.

Yanzhou's core mines are running low in very high-quality reserves. Growth will come from new mines that might not be as profitable as legacy operations.

China's current environmental laws are less stringent than in other countries. Stronger environmental protection laws in China might increase the firm's cost of sales and capital expenditures.

The Felix acquisition was not cheap. Yanzhou may overpay for acquisitions in the future as well.

Increasing international focus on greenhouse gas emissions is a long-term risk for the company and the coal industry in general. Read more

Strategy

Yanzhou is expanding in both Australia and other Chinese coal basins. Its biggest strategic move to date is acquiring Felix Resources. We may see further acquisitions in a few years once integration Read more

Management

Wang Xin, an engineering technique application researcher with a Ph.D. in engineering technology, is the chairman and vice chairman of the board, as well as the general manager of the parent company. Yanzhou's parent is a state-owned company that controls Read more

Profile

Yanzhou Coal Mining engages in underground mining, the preparation and sale of coal, and rail transportation in China and Australia. It produces and sells thermal coal and Read more

First Name

Last Name

Email Address

Zip Code

Create Password

Verify Password

(6-15 characters; case sensitive)

What is your occupation or job title?

Select...

Your registration indicates agreement to the terms of use.

The Trouble with Valuing Energy Companies
Watch more