Anglo May Spend Billions Developing Coal Project in China
By Xiao Yu
bloomberg.com
Nov. 14 (Bloomberg) -- Anglo American Plc., the world's second-biggest mining company, may spend billions of dollars to develop a coal project in China where demand for power is forecast to grow 8 percent a year until 2010.
A joint venture is conducting an initial study into the project in Shaanxi province, Phillip Dobbs, chief representative of Anglo's Beijing office said Nov. 9. ``If this goes ahead, the investment in the coal project will be several hundred million dollars and the whole project would cost several billion dollars in total.''
Anglo and BHP Billiton Ltd. are among global mining companies seeking to develop projects in China to feed demand for raw materials in the world's fastest growing major economy. China, the biggest energy consumer after the U.S., uses thermal coal to generate two-thirds of the electricity it consumes.
``Coal provides a large proportion of energy to China,'' Nigel Clark, chairman of the China International Mining Group, which has 90 overseas miners as members including Anglo, said Nov. 13. ``It has prospects for many years to come and I see it as a very dynamic industry.''
BHP Billiton, the world's largest mining company, said in January it has as many as 15 projects to explore for metal deposits in China. Teck Cominco Ltd., the world's biggest zinc producer, said last year it was looking for Chinese partners to help develop projects.
`Ultimate Goal'
``Our ultimate goal in China is to look for world- class mines,'' Dobbs said in an interview on Nov. 3 in Beijing. ``We do believe there are chances to find such mines in China, but exploration is inherently a risky business and there are no guarantees that we will succeed,'' he said in a Nov. 9 e-mail.
London-based Anglo, Teck and Rio Tinto Group, the world's third-largest mining company, are among speakers at the three-day China Mining 2006 conference starting today in Beijing.
The Anglo venture is planning to build an open-pit mine, power and chemical plants as part of the project, Dobbs said in the e-mail. Coal from the proposed mine, about 550 kilometers (340 miles) south-west of Beijing in Shaanxi, could produce as much as 15 million tons of coal a year, Anglo said in 2004. The fuel will mostly be used in northern Shaaxi, it said. The Chinese partner is state- owned Shaanxi Coalfield Geological Bureau.
China's power producers are boosting capacity to meet demand in an economy that expanded 10.7 percent in the first three quarters of this year. The world's second- biggest energy user is experiencing a fourth straight year of power shortages because economic growth has pushed demand beyond generating capacity.
State Grid
State Grid Corp. of China, the bigger of the nation's two power distributors, said last month it plans to spend at least 1 trillion yuan ($127 billion) by 2010 building and repairing power transmission lines to expand supply.
Anglo is in talks with China Shenhua Energy Co., the fifth-biggest coal producer, on joint coal-mining projects, Shenhua's chairman Chen Biting said in Hong Kong on June 1. Anglo would pay $150 million for a stake in Shenhua, Chen said.
Anglo also has a limestone plant in eastern province of Zhejiang and a bitumen plant near Shanghai as well as an interest in a zinc smelter in Chifeng in Inner Mongolia. In 2005, Anglo set up a joint venture with a unit of the Sichuan Bureau of Geology & Mineral Resources, in which Anglo Platinum Ltd. plans to invest in the region of $20 million for platinum exploration, said Anglo's Dobbs.
Thermal Coal
Prices of thermal coal may rise next year due to strong demand growth and supply constraints, Citigroup Inc., the largest U.S. bank, said in September. Demand for thermal coal is rising in China, India and Europe, said Alan Heap, director of global commodity analysis at Citigroup.
To be sure, China may face an excess coal production capacity of 100 million metric tons in 2008, the China Economic Information Network, a government research body, said in a Nov. 4 report. Coal production in 2007 may rise 8.6 percent to 2.52 billion tons and demand may gain 8.5 percent to 2.51 billion tons, it said.
Power Demand
Asian benchmark thermal coal prices for the year starting April 1, 2006, were settled in July by Xstrata Plc, the world's largest producer, at $52.50 per ton, near last year's record. China's thermal coal exports are falling from 75 million tons in 2004 to an estimated 55 million tons this year as domestic demand increases faster than supply, Citigroup's Heap said.
China's power use may rise 8 percent a year in the next five years to an average of 3.64 billion megawatt- hours by 2010, the China Economic Information Network said last month in its 2007 China Industrial Development Forum Background Report. Consumption may rise 4.5 percent a year in the decade from 2010 to 5.64 billion megawatt-hours by 2020, it said. Electricity demand may rise to 2.97 billion megawatt-hours next year. |
