UPDATE 1-Yancoal Australia takes $343 mln hit on coal price fall
MELBOURNE Aug 19 (Reuters) - The Chinese parent of Yancoal Australia made a $343 million provision for losses after warning it expected coal markets to remain weak as its subsidiary slid into the red due to plunging coal prices.
In a Hong Kong stock exchange filing on Monday, Yancoal Australia's Chinese parent, Yanzhou Coal Mining Co Ltd , said falling coal prices made it necessary to take a 2.1 billion yuan ($343.4 million) provision for impairment of assets, given a decline in the book value of its Moolarben and Gloucester coal mines.
"The provision for impairment losses was 2.099 billion yuan, representing approximately 4.73 percent of the audited net assets of the Yanzhou Coal Mining Co Ltd as at 31 December 2012 (of 44.37 billion yuan)," the statement said.
Yancoal, which has received a buyout offer from its Chinese parent, also named a new chief executive, Reinhold Schmidt, a former senior executive at Xstrata Coal and Glencore, now Glencore Xstrata.
At Xstrata, Schmidt ran the Wandoan project, which would have been Australia's biggest coal mine but is now one of many large coal projects that have been put postponed due to the slump in the coal market.
Yancoal said the challenges for the coal industry globally had intensified over the first half of the year, especially in the thermal coal market where many producers have been increasing output to help lower unit costs.
"For both metallurgical and thermal coal markets to return to balance, the market will require production cuts from some producers," the company said. "At this stage, there is no sign of any production cuts, so the outlook remains weak."
Yancoal reported a net loss of A$749 million ($689 million) for the six months to June, down from a net profit of A$410 million a year earlier.
At the operating level it reported a loss of A$109 million, down from a profit of A$57.8 million a year ago.
Its share of production from seven mines in New South Wales and Queensland was 7.5 million tonnes of saleable product, up from 4.2 million tonnes a year earlier, with most of that growth due to its takeover of Gloucester Coal last year.
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