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Temporary suspension of 2 open pit mines to hit China Shenhua's 2017 results

The temporary suspension or reduction of production at China Shenhua Energy Co. Ltd.'s Ha'erwusu and Baorixile mines in northern China's Inner Mongolia region will hit the company's 2017 coal production and sales figures.

The production suspension started at the beginning of the month and is related to a temporary halt of earthwork stripping due to a delay of the land requisition for such open pit mines, the company said Aug. 3.

As a result, China Shenhua anticipates a decrease of about 3.08 billion Chinese yuan in profit attributable to shareholders for the period. The figure represents 12.4% of the company's 2016 profit of 24.91 billion yuan.

The suspension will also increase unit production costs at the two mines and impact transportation turnover for the company's own railways.

China Shenhua's recent forecast of a 143% year-over-year jump in profit attributable to shareholders for the first half of the year to about 26.28 billion yuan remains unchanged.

Based on preliminary estimates, the Chinese miner expects annual coal production and sales to be reduced by 20.6 million tonnes and 11.5 million tonnes, respectively, due to the temporary suspension or reduction of production at the Ha'erwusu and Baorixile operations.

The company noted that the two mines represented about 3.1% of its commercial coal production of 289.8 million tonnes in 2016.

In the first half of 2017, the Ha'erwusu mine produced about 14.9 million tonnes while the Baorixile mine produced about 15.7 million tonnes of coal.

The company will continue to progress the land requisition process, will proactively report to relevant departments and will improve coordination in order to resume normal production as soon as possible.

As of Aug. 3, US$1 was equivalent to 6.72 Chinese yuan.