China’s Yancoal earmarks $1.2B to expand

China-backed Yancoal (ASX: YAL) plans to invest its A$1.8 billion (US$1.2 billion) capital reserve into acquiring new assets, potentially beyond Australia and even outside the coal sector.

The company, which operates coal mines in China and Australia, reported a profit after tax of A$1.2 billion for 2024. This marks a A$603 million or 38% decline from 2023 and the end a three-year coal boom. Revenue fell by 10% year-on-year to A$6.9 billion. The results come after CEO David Moult resigned suddenly in January after five years. 

Yancoal, majority held by Shandong province-owned Yankuang Energy Group, attributed the downturn to a 24% drop in coal prices amid soaring stockpiles in Asia even as the company increased sales by 14%. 

Despite the challenges, Yancoal declared a final dividend of A$687 million, equivalent to half of its net profit for the year. The payout reduces its cash reserves, which had climbed to A$2.5 billion, leaving A$1.8 billion available for potential acquisitions.

Thermal coal

As Australia’s second-largest coal producer, Yancoal has expressed a continued interest in expanding its thermal coal operations, primarily used for power generation. Thermal coal accounted for 90% of its sales over the 12 months to Dec. 31, with operations spanning New South Wales, Queensland and Western Australia.

David Bennett, Yancoal’s executive general manager, indicated that metallurgical coal, essential for steelmaking, offers a more promising growth avenue, provided the company can acquire the right assets at suitable prices.

To mitigate expected short-term volatility in thermal coal prices, Yancoal is focusing on ensuring product quality and volume while expanding its customer base and exploring new markets, it said. The company also has potash exploration projects in Saskatchewan. 

Yancoal, 60% owned by Yankuang Energy with China Cinda Asset Management holding a 7% stake, also announced the appointment of three new non-executive directors— Jiuhong Wang, Zhiguo Zhao, and Ang Li— effective Friday.