Article Source: China’s National Business Daily 2013-11-14

NDB Reporters YUE Qi, JIANG Ran, from Chengdu & Guangzhou

Reading Guidance: Guizhou Province is expecting to fulfill the national mandate of transformation and updating in coal mining industry with the slightest “twinge”.  However, the consolidation process involves interests of several parties, and strategies have undergone alterations under policies changes…

Urging consolidation at the trough of the coal mining industry, Guizhou Province is expecting to fulfill the national mandate of transformation and updating with the slightest “twinge”.  However, the consolidation process involves interests of several parties, and policies changes for many times. One of the officials of Guizhou Energy Administration, who is in charge of coal mine consolidation, frankly admitted: “It (the consolidation) touches the soul (of the coal mining industry).”

After winter, more than 1700 coal mines in Guizhou province, the “Southwest Coal Sea”, have been forced to confront the last choice within the coming two months, with only 800 mines able to survive in 2013 during the oncoming battle. In the rounds and rounds of consolidation, the government propels, miners thrill and capitals stirred, leaving the coal mines in deep mountains the only places that stay in quietness.

Reporters from National Business Daily(NBD), before the turning point of Guizhou’s coal mine consolidation, conducted on-site investigations in many places of Guizhou, and interviewed stakeholders such as small mine owners, consolidators and external investors, in an attempt to provide the public a whole picture of the consolidation campaign.

The biggest concern for most coal mine owners are unquestionably the local security target which is even above the national standard, the harsh punishment for accidents and frequent security inspections. For them, security comes first because security is the passport for consolidation and consolidation is the only way for survival.

In the beginning of November, 15 security hazards of many long-established state-owned enterprises were ferreted out during the spot check conducted by the inspection group from State Administration of Coal Mine Safety. Shortly after this spot check, a vice governor of Guizhou Province initiated a meeting with executives of these state-owned enterprises, mandating them to thoroughly reverse the unfavorable situation concerning production security.

Under the high-handed policy of consolidation, many miners became extremely cautious and would rather cut or even halt the production than take the risk of continuing normal production, worrying that any security hazard during the production would end the life of their enterprises. According to the investigation by NBD reporters, among more than 30 mines in Hezhang County, Bijie City of Guizhou, only seven mines are equipped with relevant safety facilities and none with stable production. Some coal mines even halt its production under great pressure of the security. Many insiders concurred with reporters’ findings by admitting that many mines in Guizhou Province have cut or even halted their production since the elevation of consolidation target last year.

Repeatedly Lifted Consolidation Targets

Being the largest coal production base of South China and one of the main coal exporters, Guizhou Province boasts an estimated amount of 86.4 billion tons of coal that surpasses the whole amount of coal storage of 12 provinces (Cities and Autonomous Regions included), ranking the 5^th in China, according to data released by Guizhou Energy Administration in 2010. Nevertheless, due to limitations in geographic locations, capitals, techniques and management, there are still many problems in Guizhou’s coal industry, such as low degree of industrial concentration and onefold industrial structure.

Guizhou started its coal mine consolidation and reconstruction in 2005. In the same year, 346 coal mines were shut down, followed by the closure of another 425 mines in the following two years. As shown in the 12^th Five-Year Plan for Coal Industry, Guizhou Province endeavors to establish an extra large-scale coal enterprise with an annual production capacity of 50 million tons and two 30-million-tonn-level coal enterprises, with the total number of enterprises cut to 200 by 2015, the last year of the plan period.

In May 2011, Guizhou Energy Administration issued A Guidance Document on Advancing Coal Mines Consolidation, which further specified the measures for merger and reconstruction. This document, also called No.47 Document by industrial insiders, marked a new round of consolidation, stipulating that coal enterprises that acquire or regroup other smaller ones should shoulder the main responsibility for safety control at those to be merged or regrouped, and local governments at all levels should enhance its surveillance on the production security of the enterprises to be merged or regrouped.

As complained by one official: “More documents are coming and the standards are higher and higher”, Guizhou Province has lifted its consolidation target for many times. Another target lift in this July stipulated that the number of coal enterprises be slashed to 100 and the number of coal mines to 1000. In addition, each enterprise should have a minimum annual production capacity of 1.5 million tons.

This September, the provincial government issued another document to slash coal mines to about 800 from the present 1700 by June 2014, requiring the lowest designed production capacity for consolidated mines be 450,000 tons per year for coal and gas outburst mines and 300,000 tons for other mines.

Ten years ago, the coal mine closure standard of Guizhou Province was 30 thousand tons per year. This standard was raised to 60 thousand tons in 2010 and again to 90 thousand two years later. In the newest round of consolidation and reconstruction, coal mines with an annual production capacity of even 150 thousand are facing regrouping or closure.

The most prominent issue in coal exploitation of Guizhou lies in its prevalence of small-scale coal mines and week foundation of production safety. Fujing, Director of Guizhou Energy Administration once made an announcement on their strategy to cope with this situation: “We are planning to safeguard the production security by combining our technical and talent advantages, with support from more capitals, so as to greatly increase the designed production capacity per annum.”

Frequent mining accidents are thought to be the primary cause for consolidation. Data from Guizhou Statistical Communique showed that 58 accidents were reported in 2012, causing 117 deaths. Another 15 accidents occurred from January to August in 2013, with 76 more deaths. What is worth noticing is that this data has already halved the number of accidents of the same period last year.

With the lift of consolidation target, more pressure is being posed on these coal mines and enterprises. The qualified consolidators shoulder the main responsibility for safety control at those to be merged or regrouped. A singe calamity or index abnormality may lead to production halts at the group requiring it and even those nearby.

Provincial Governor Initiated Talks with Enterprise Directors

At the crucial period of coal mining consolidation when all qualified consolidators are at the point of submitting consolidating schemes and plans, two devastating coal mining accidents which took place in October 25 and November 2 respectively in Bijie City, Guizhou Province sounded an alarm for all coal enterprises in the Province. These two accidents that caused 8 deaths and 3 missing were regarded to exert baneful influence and caused tremendous loses.

After the two accidents, a municipal inspection conducted by Bijie City ferreted out 1455 security hazards and labile factors from the coal mines involved and 52 inspection groups were assigned to conduct dragnet inspections on all the 345 coal mines that are in normal operation. Coal mines with any illegalities or violations such as unauthorized or illegal production, huge security hazards and productions without relevant safety facilities will all be stipulated to halt its production or construction.

This accident, along with an on spot check by inspection group from State Administration of Coal Mine Safety, pushed Xiangshui Mine in the line of fire. This mine is subordinated to Pannan Coal Company under the name of Panjiang Group, a state-owned enterprise in Guizhou Province. 15 security hazards were ferreted out during this spot check, including failure to ascertain the major responsibility undertaker, extensive management of gas outburst mines and incapability in coping with accidents.

On November 8, Wang Jiangping, Vice Governor of Guizhou Province initiated a talk with Zhang shihe and Zhoubinjun, the director and the manager of Panjiang Group, stipulating them to solve the existing problems concerning security management by implementing all-round rectification measures, with high standards and rigorous requirements.

Most notably, based on preliminary investigations, the direct and main reason which caused the accident occurring on October 25 in Qianxi County, Bijie City was that Guizhou Xinyue Mining Co., Ltd (thereafter shorted as Guizhou Xinyue) failed to adopt any measures to safeguard production security after it acquired Xinyi Mine. This finding was announced on a conference convened by Guizhou provincial government on November 11, in which the causes and responsibilities of the foregoing two accidents were disclosed.

After months’ attempt, Guizhou Xinyue finally obtained the qualification for consolidating and regrouping other mines and enterprises. This August, it also purchased Guizhou Xinyi Mining Co., Ltd (thereafter shorted as Guizhou Xinyi) with 130 million yuan from a listed company called Liuhua Shares (600423.SH). The core asset of this company is Guizhou Xinyi.

After being acquired, Guizhou Xinyi has long been under construction and in the stage of obtaining production qualification, with the only source of revenue from self-operated business.

Since the acquirement of qualification in April, 2012, the 1# Mine of Guizhou Xinyi has long been in abnormal operation, with a low output of 99.7 thousand in the whole year. In the first half of 2013, greatly affected by geological disasters and coal mining accidents nearby, Guizhou Xinyi has experienced long period of idling and a low operating rate.

After an accident, Huangshui Ba Mine and Xinyi Mine were all ordered to halt its production and listed as the targets of consolidation and regrouping. In the meantime, local authorities initially launched accountability program. County-level responsible persons such as the head of Administration of Coal Mine Safety, a vice director of Administration of Industry, Economy, Trade and Energy, and a Deputy County Mayor were all suspended from their work.

Under the intensive governmental monitoring and stipulation, even state-own enterprise long-established as Panjiang Group can’t remain an exception. As a listed company, Liuhua Shares is deeply aware of the difficulties lying in coal mine operation. And the vicissitudes of Xinyi Mine also threw Guizhou Xinyue, its liability party, into purgatory.

Small-scale Mines halted its Production under Great Pressure

Influenced by the recent coal mine accidents, a dragnet security inspection is underway in Hezhang County, Bijie City of Guizhou Province, which is 7 hours’ drive away from Guiyang City. An enquiry on local authority by NBD reporters in October suggested that among 31 coal mines in this county, only 7 mines are still in operation and 13 mines have been called an abort to under policy-related consideration, among which most have an annual production capacity of 90 thousand or 150 thousand.

Reporters conducted an on-site investigation on Weishe Mine, one of the seven mines in operation. Although many mines can still be seen along the road towards Weishe Mine, many of them are hardly in operation. Local drivers told the reporter coal conveyors were barely seen along this road in recent years and that allowed the road remain in good condition.

Mr. Cai, who became the mine director of Weishe Mine in 2008 and began his work in the Group this September, told reporters that under the influence of policy, the project acceptance of Weishe Mine was not completed until this August, before which, the coal output was only 1000 tons per month, with a total number of only 20 thousand because for most time of the year the mine was in the state of idling.

Reporters also conducted an investigation on Luozhou Mine that the Group claimed to be still in operation. However, reporters failed to see any coal conveyor along the road to the Mine. Besides, after a landslide near the mine, an emergency road that is not accessible for large coal conveyors is the only passageway to the Mine. The factory seems very quiet and machines are idled.

Mr. Qing, Head of Logistics Department of Luozhou Mine told reporters Luozhou Mine was called to stop its production by the enterprise in September and most workers have left the mine. But Mr. Qing didn’t have any knowledge about the specific reason for production halt.

One of the industry insiders from Hezhang County expressed his worry towards the situation that many coal mines that are equipped with relevant safety facilities have no choice but to halt its production under the great pressure of repeatedly lifted security targets. As a matter of fact, according to this insider, in terms of security targets such as methane intensity, the Chinese national standards are much higher than Western Countries’ and standards in Guizhou Province, which are already higher than the national ones, are dwarfed by the municipal targets.

Ren Haoning, Energy researcher in CI Consulting confirmed the foregoing statement during an interview with NBD reporters by saying according to previous investigations, the coal mining safety targets of China are indeed much higher than those in U.S and European countries.

Given the fact that there are dozens of safety targets in coal mining and that all these indications are under real-time county and municipal monitoring, there is a low possibility for accidents to take place. Moreover, at this crucial period, any exceeding of standards or even a little mishap may bring big troubles for the whole enterprise.

According to Guizhou Statistical Communique published by Guizhou Statistical Bureau, Guizhou Province saw a 5.4% rise of its raw coal output to 13.0334 million tons in 2011 and experienced another 26.2% rise in the year followed, amounting to 18.10705 million tons in total. However, its raw coal output was no longer recorded in 2013’s Statistical Communique.

Some experts pointed out that many small-scale mines, being the target for this round of consolidation, were shut shown even before being regrouped or consolidated. Intensive consolidation slashed considerable amount of accidents, but also the production.

“The adverse impact of coal mine consolidation on regional economy does exist.” admitted Hushiyan, vice director of Guizhou Energy Administration, “however, under such specific condition, where the whole industry is at trough, the influence can be neglected. As long as the market is sound and price reasonable, current production capacity is able to ensure the stability of economic growth.”

Article Source: China’s National Business Daily

The original article found on National Business Daily’s website is shown below.

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贵州煤矿整合标准“四级跳”：矿主宁可停产也不“撞枪口”

http://www.nbd.com.cn 2013-11-14 00:50