After a rather unusual four-day halt, shares of Chinese coal miner Yanzhou Coal Mining (NYSE:YZC) finally resumed trading Friday morning. China's insatiable thirst for resources and related investments, meanwhile, has taken no such pause.
The long-awaited acquisition by Yanzhou of Australian coal miner Felix Resources matured into a $2.9 billion cash bid Thursday, boosted by unanimous support from Felix's board. The addition of Felix's thermal and coking coal assets in eastern Australia, along with a 15.4% stake in one of the world's largest coal export terminals at the Port of Newcastle, is nothing less than a strategic development both for Yanzhou and for China at large.
For Yanzhou, geographic diversification of the company's coal portfolio not only positions the miner to participate in China's transformation into a net importer of coal, but also builds timely exposure to critical pan-Asian coal markets from Korea to India. In a single bound, Yanzhou joins Asia-ready miners like Peabody Energy (NYSE:BTU) and Rio Tinto (NYSE:RTP), though on a smaller scale. With steelmaker POSCO (NYSE:PKX) and equipment maker Joy Global (NASDAQ:JOYG) joining a chorus of bellwethers confirming Asia as the nexus of relative strength within a crisis-stricken world, Yanzhou is growing in all the right places.
For China, Yanzhou's overseas acquisition represents one of the largest outright foreign purchases yet, and helps to cement access to precious coal resources to fuel the nation's growth. In addition, the purchase marks another notch in China's exploding tally of resource-oriented deals that are strongly encouraged as official strategic economic policy. In July, premier Wen Jiabao issued a directive for Chinese companies to execute a strategic "going out" policy by accelerating overseas expansion with the full support of China's foreign reserves.
Reflecting that explicit initiative, China has been on a tear lately:
- China's sovereign wealth fund acquired a 17% stake in Teck Resources (NYSE:TCK) for $1.5 billion.
- Sinopec Group pounced upon Addax Petroleum for $7.2 billion.
- President Hu Jintao extended a $10 billion loan to Petrobras (NYSE:PBR) in return for an allocation of Brazilian oil production.
- The China National Petroleum Corp. is reportedly pursuing a $17 billion deal for oil assets in Argentina.
If all the deals go through, recent resource-related investments by Chinese entities overseas are approaching the $40 billion mark, without even counting the stockpiling of physical resources like oil, copper, and iron ore.
By gobbling up strategic resources while the world reels from financial upheaval, Yanzhou Coal Mining not only supports an explicit directive from the Chinese state, but also builds one of the more compelling coal mining companies available to Western investors.
