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China’s Yanzhou Coal Drops Plan to Buy Out Australian Unit

Yanzhou Coal Mining Co., China’s fourth-largest producer, abandoned a proposal to buy out its Australian unit Yancoal Australia Ltd., leading to a plunge in the subsidiary’s share price.

Yancoal, which operates seven coal mines, fell 9.4 percent to 58 cents at the close of trading in Sydney, giving it a market value of A$577 million ($525 million). Yanzhou Coal rose 6.6 percent, the most in more than six months, to HK$5.99 in Hong Kong.

Yanzhou Coal, based in Shandong province, proposed buying the rest of Yancoal in July last year, winning Australian government approval in December. Its proposal valued the 22 percent stake it didn’t own at A$151 million based on share prices before the initial offer was made, RBC Capital Markets said at the time.

“It would be challenging to pursue privatization now and wouldn’t benefit shareholders, especially not the minority shareholders of Yancoal Australia,” Yanzhou Chief Financial Officer Wu Yuxiang said at a press briefing today in Hong Kong. The company will consider a buyout at a more appropriate time, he said.

The proposal was to offer 0.91 depository receipts for every Yancoal share, using Yanzhou Coal’s Hong Kong-traded shares as underlying security.

Power-generation coal at the Australian port of Newcastle, an Asian benchmark, fell 2.9 percent to $72.98 in the week ended March 14, the lowest since October 2009, according to globalCOAL, a London-based data provider.

The Chinese coal miner reported on March 21 net income was 777.4 million yuan ($125 million) in 2013, compared with a restated 6.07 billion yuan a year earlier.

Yanzhou Coal will seek to cut at least 3,000 workers this year, Chairman Li Xiyong said today. Most of the planned cuts are contractors within China, according to Yuan Shuyin, the company’s associate finance director.

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