* Yanzhou says to reconsider deal when conditions right
* Yanzhou was under pressure to improve its offer
* Noble Group holds more than half of the minority shares
* Yanzhou says China's coal prices to remain weak
* Yancoal shares tumble 9.4 pct in Sydney
(Adds comments from Yanzhou's CFO, coal price outlook)
By Maggie Lu Yueyang and Fayen Wong
SYDNEY/SHANGHAI, March 24 China's Yanzhou Coal
Mining Co Ltd has ditched a plan to buy out the
minority shareholders of its Australian arm, sending shares of
the Sydney-listed unit diving and boding ill for an industry
that has been trying to get back on its feet.
Last July, state-backed Yanzhou offered to buy the 22
percent it does not own in Yancoal Australia Ltd for
A$0.91 a share, valuing the unit at A$905 million ($823
A few months later, the bid cleared foreign investment
regulatory hurdles, reflecting the Australian government's
desire to protect assets and jobs in an industry that has been
whipped by weakening coal prices.
Yanzhou's decision to drop the offer comes after the company
reported last week that its 2013 net profit tumbled nearly 80
percent from a year earlier, weighed down by falling coal prices
and a depreciation in the Australian dollar.
Yanzhou, which owns 78 percent of Yancoal Australia, was
also under pressure from Singapore commodity trader Noble Group
Ltd to improve the offer, Reuters previously reported.
Hong Kong-based Noble owns more than half of the minority
shares and could block the deal from going ahead, Reuters
reported in October.
"We will do it when conditions are ripe. Under the current
market conditions, a privatisation does not work well for
minority shareholders," Wu Yuxiang, director and chief financial
officer of Yanzhou told reporters at the firm's results
Analysts said rising production costs and poor profits had
also weakened Yanzhou's balance sheet, with the firm's gross
debt-to-equity gearing reaching 137 percent in 2013, up from 90
percent the year before.
"Going forward, cost control remains ... the key task for
Yanzhou Coal to stay above break-even amid a weak coal price
outlook," said Shanghai-based Helen Lau, a senior mining analyst
at UOB-Kay Hian.
Yanzhou Chairman Li Xiyong said Yanzhou was focused on
slashing costs in 2014, after having already cut 5,400
contractors last year that resulted in cost savings of 600
million yuan ($96.39 million). Yanzhou plans to cut another
3,000-5,000 contractors this year.
China's coal prices are expected to remain soft this year
and fluctuate at low levels, with cheaper imports remaining a
threat, Li said.
Local steam coal prices fell 16 percent last year on the
back of an economic slowdown and change in the national energy
strategy to cut coal consumption. After a brief rebound late
last year, prices have been on a steady decline since January to
hover around 553 yuan a tonne.
Yancoal shares, which dropped 24 percent last year, ended
down 9.4 percent at A$0.55. The stock fell as much as 14.1
percent following the announcement. The benchmark Australian
share index closed up 0.2 percent.
Yanzhou's shares climbed 2.8 percent in Shanghai, versus a
0.9 percent gain on the Shanghai Composite Index.
($1 = 6.2250 Chinese Yuan)
($1 = 1.1002 Australian dollars)
(Additional reporting by Denny Thomas and Charlie Zhu in HONG
KONG; Editing by Stephen Coates, Ryan Woo and Mark Potter)