Hard rock picks - the Twelfth Five-Year Plan promotes the development of coal in Shaanxi

　　On January 17, 2014, Shaanxi Coal Industry Co., Ltd. (hereinafter referred to as "Shaanxi Coal Industry" or "the Company"), known as the "China Western Coal Carrier," completed its online subscription and determined its issuance price. Currently, the western coal carrier is about to land on the Chinese capital market.
　　Currently, China's energy strategy is in the process of shifting westward. The "National Energy Medium- and Long-Term Development Plan (2004-2020)" clearly proposes a coal development policy of "controlling the east, stabilizing the central region, and developing the west," establishing an energy strategic pattern of "coal as the main body and electricity as the center." Shaanxi Province, as a representative of the western region, is rich in coal resources and has great development potential. Key coal transportation channels are under construction or planned, and coal transportation capacity will be significantly improved. In the future, Shaanxi Province will focus on promoting resource integration within large coal bases, orderly constructing a number of modern mines, expanding production scale, and increasing the amount of coal shipped out. The "National Twelfth Five-Year Plan for Energy" proposes to "accelerate the exploration and development of coal resources in western regions such as Shaanxi and Xinjiang in accordance with regional economic characteristics," further clarifying Shaanxi Province's strategic position in the coal industry. As a major coal-producing province in China, Shaanxi Province has good coal resource endowment conditions, excellent coal quality, coal reserves of 1,654.23 billion tons, and a raw coal output of 463 million tons in 2012, accounting for 12.65% of the national raw coal output of 3.66 billion tons. During the Eleventh Five-Year Plan period, Shaanxi Province gradually improved the concentration of the coal industry within the province, and has now become the third largest coal reserve province, production province, and shipping-out province in China. The National Development and Reform Commission issued the "Coal Industry Policy" on November 29, 2007, proposing a development strategy for the construction of thirteen large coal bases, including Shendong, Jinbei, Jinzhong, Jindong, Shanbei, Huanglong (Hating), Luxi, Lianghuai, Henan, Yunnan-Guizhou, Mengdong (Northeast), and Ningdong, to improve the sustained and stable supply capacity of domestic coal. Shaanxi Province covers three bases: Shendong, Shanbei, and Huanglong (Hating), and has an important national energy strategic position. Located at the bridgehead of the Western Development, the Shaanxi Provincial "Twelfth Five-Year Plan" clearly proposes to build a number of 10-million-ton mines, with a total coal output exceeding 600 million tons, an increase in production capacity of 240 million tons, a coal construction scale of 157 billion yuan, and 54 new projects. This has laid a policy foundation for continuing to accelerate the development of the Shaanxi coal industry, and the future development space of Shaanxi Coal Industry is enormous.
　　According to the "Opinions on Accelerating the Merger and Restructuring of Coal Mining Enterprises" issued by the National Development and Reform Commission on October 16, 2010, it is required to resolutely eliminate backward small coal mines and vigorously improve the concentration of the coal industry. In 2012, the National Energy Administration issued the "Twelfth Five-Year Plan for the Development of the Coal Industry," planning to achieve significant results in coal layout adjustment and standardized development order by 2015, further concentrating production on large bases and large groups. Through mergers and acquisitions, the number of coal enterprises will be reduced from 11,000 to 4,000, and 10 billion-ton and 10 50-million-ton extra-large coal enterprises will be formed, so that their coal output will account for more than 60% of the national total output. In 2004, under the call of the national resource integration, the Shaanxi Provincial Party Committee and Provincial Government followed the development trend of the centralized coal industry, reorganized provincial coal enterprises, and reorganized the key state-owned coal enterprises such as Tongchuan, Pubai, Chenghe, Hancheng, and Huangling, which were transferred to Shaanxi Province from the former Ministry of Coal, to establish the only development platform—Shaanxi Coal Chemical Industry Group. As the only coal asset listing platform of Shaanxi Coal Chemical Industry Group, Shaanxi Coal Industry carries the glorious history of Shaanxi's coal industry, gathers the talent and Technology of Shaanxi's coal industry, and has established its advantageous position and capabilities in the western coal industry, and also bears the responsibility of undertaking the national task of planning large coal bases and integrating coal resources in Shaanxi. In 2010, the Shaanxi Provincial Government issued relevant policies, requiring the Shaanxi Coal Chemical Industry Group and local state-owned large mines to take the lead, adhering to the principle of "large mines integrating small mines," and vigorously promoting the merger and acquisition of coal resources within the province. As the only specialized coal production platform built with the efforts of the whole province, Shaanxi Coal Industry, in accordance with the national coal industry policy's requirement of one main body for one mining area, is undertaking the main responsibility for the construction of large coal bases in Shaanxi and has ushered in a new round of great development opportunities. The company can make full use of favorable location and policy conditions, selectively acquire high-quality coal resources, and integrate excellent resources through the forms of joint ventures and transformation of local small coal mines, rapidly expanding resource reserves to ensure steady growth in coal output. The company's production capacity improvement space will be far greater than that of similar enterprises.



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　　China's coal production and coal consumption are inversely distributed. Shaanxi, as the first step in the westward shift of China's energy strategy, has unique locational advantages in coal industry development. Compared with Shanxi, a major coal-producing province, it has great growth space and development potential; compared with Inner Mongolia, another major coal-producing province, it has a good location, is close to the coal consumption market, has high coal prices, and good returns. Shaanxi Province is located in the easternmost part of the western region, which is rich in coal resources, and is adjacent to eight provinces and municipalities including Henan, Hubei, Chongqing, and Sichuan. It has locational advantages connecting east and west and communicating north and south, and is a transportation hub in the western region, a key area for the westward shift of the national energy strategy, and the forefront of the energy center market consumption area. Shaanxi Province has a well-developed railway transportation system. The east-west energy arteries Longhai Line and Tai-Zhong-Yin Line run across Shaanxi Province, and the north-south Baoji-Xi'an double-track line runs through Shaanxi Province, enabling the province's coal products to connect with railway trunk lines such as the Longhai Line and Tai-Zhong-Yin Line, as well as important branch lines such as the Shenshuo Line, Ningxi Line, Houyue Line, Xiangyu Line, and Xikang Line, transporting coal products to major coal-demanding provinces, especially having outstanding advantages in supplying coal to the newly emerging coal-deficient regions in central and southwest China. According to the "Twelfth Five-Year Plan for Western Development" compiled by the National Development and Reform Commission, during the Twelfth Five-Year Plan period, the construction of coal transportation channels from Inner Mongolia to central China will be accelerated. The railway coal transportation channel project from Inner Mongolia to central China starts from the Haoerbaoji Station of the Dongwu Railway in the north, passes through Yulin and Yan'an in Shaanxi Province, and ends in Ji'an, Jiangxi Province, with a total length of 1,837 kilometers. This line connects the "Golden Triangle" energy region of Inner Mongolia, Shaanxi, Gansu, and Ningxia with the central China region of Hubei, Hunan, and Jiangxi. The planned design transportation capacity is 200 million tons, and the initial transportation capacity upon completion and operation will reach 100 million tons. It is a new national strategic transportation channel for "transporting coal from the north to the south." Currently, many new railway lines and double-track lines are under construction in Shaanxi and surrounding provinces, mainly including the Ningxi double-track line, Xiping line, Xihe double-track line, Xikang double-track line, and Huang-Han-Hou line. At the same time, the construction of the Longhai passenger dedicated line will achieve the separation of passenger and freight traffic on the Longhai Line, further improving the freight capacity of the Longhai Line. According to the national railway network and Shaanxi Provincial railway plan, with the construction of coal transportation channels from Inner Mongolia to central China during the Twelfth Five-Year Plan period and the basic formation of Shaanxi Province's "two longitudinal, five transverse, eight radiating, and one intercity" railway network by the end of the Twelfth Five-Year Plan period, the coal transportation situation of Shaanxi Coal will be greatly improved, which will be conducive to further enhancing the market value of Shaanxi's high-quality coal and promoting the construction of new projects and the improvement of the company's Achievements of Shaanxi Coal Industry.
　　According to the "Twelfth Five-Year Plan" for the Development of the Coal Industry: "By 2015, the national coal mine coal mining mechanization rate is expected to reach more than 75%. Among them: large coal mines will reach more than 95%; medium and small coal mines of 300,000 tons and above will reach more than 70%; small coal mines below 300,000 tons will reach more than 55%. There will be 60 ten-million-ton-level mines (open-pit), with a production capacity of 800 million tons/year. There will be 800 safe and efficient coal mines, with a total output of 2.5 billion tons." The plan also requires: "Constructing large-scale modern coal mines and improving the management level of small coal mines. Newly built coal mines will mainly be large-scale modern coal mines, giving priority to the construction of open-pit coal mines, extra-large mines, and coal-electricity integrated projects. Stop building new high-gas mines below 300,000 tons/year and coal and gas outburst mines below 450,000 tons/year." Shaanxi Coal Industry Group followed the policy orientation and utilized the company's accumulated technical foundation to successively build a number of large-scale modern high-yield and high-efficiency mines, including Huangling No. 2, Dafosi, Hongliulin, Ningtiaota, and Zhangjiamao. By the end of 2012, the company had 9 production mines with an output of more than 3.5 million tons, accounting for 71.96% of the total output. While building new mines, Shaanxi Coal Industry Group also achieved remarkable results in the technological transformation of existing mines, significantly improving the production capacity of old mines. Among them, through the mechanized upgrading and transformation of old mines, coal mining mechanization reached 96%, and comprehensive mining mechanization reached more than 80%, exceeding the average level of the industry. In addition, Shaanxi Coal Industry Group adheres to the path of scientific and technological enterprise development combining "production, learning, and research," continuously increasing investment in technological research on aspects affecting coal production safety, product quality improvement, and production process optimization, especially on key technologies for coal mine mining, such as the protective layer mining technology for complex loose and soft coal seams, integrated demonstration of gas control technology for top coal caving in high-gas oil-gas symbiotic and easy-to-ignite thick coal seams, mine water prevention and control technology, surface extraction technology for mine gas and coalbed methane, fire prevention and extinguishing technology, surrounding rock support technology, and clean coal utilization technology, achieving remarkable achievements and providing a solid technical guarantee for improving coal mine production capacity and safe mining.
　　　Shaanxi Coal Industry Group, as the only provincial super-large coal enterprise group in Shaanxi Province, is the province's veritable "only child." The company will make full use of national policies and local laws and regulations to maximize the acquisition and merger of high-quality coal enterprises within Shaanxi Province, improve the concentration of the coal industry in Shaanxi Province, and seize opportunities to expand coal reserves. The company will gradually move out of Shaanxi and enter major coal-producing provinces such as Xinjiang, Inner Mongolia, Shanxi, Ningxia, and Qinghai, with the principle of acquiring entire coalfields as its main investment principle, and the purpose of enriching coal varieties to expand its product lines, holding controlling stakes or participating in relevant coal enterprises. As an enterprise aspiring to become a manager of the value chain in China's coal industry, the company will strategically deploy investments with a global perspective, targeting countries including Australia, Russia, Mongolia, India, and South Africa.
　　Shaanxi Coal Industry Group enjoys preferential tax policies under the Western Development strategy. According to the State Finance and Taxation Document [2011] No. 58, all of the company's coal production, railway transportation, and trading platforms will continue to enjoy a 15% tax reduction policy from 2011 to 2020, ensuring stable and sustainable income.
　　The "Twelfth Five-Year Plan" strongly promotes the development of coal in Shaanxi. With Shaanxi Coal Industry Group's listing, the company will surely take off strongly with the advantages of the capital market and policy tailwinds. The bright future of the western coal carrier is worth looking forward to.