China Shenhua Energy Co., the world’s largest coal producer by market value, agreed to pay A$300 million ($261 million) for a coal exploration license in Australia as it expands overseas to gain supplies.

Shenhua’s first foreign exploration permit is a 190-square kilometer area near Gunnedah in New South Wales state. The site is expected to contain shallow resources of power-station coal suitable for the Australian and export markets, New South Wales Minister for Mineral Resources Ian Macdonald said today.

Beijing-based Shenhua beat Anglo American Plc’s coal unit, Griffin Coal Mining Co., Xstrata Plc, Donaldson Coal Pty and White Mining Ltd. for the license, the Australian Financial Review said today, without citing anyone. Shenhua said in April it intended to buy overseas assets, including mines in Australia, Indonesia or Mongolia.

“As the Chinese company’s first overseas acquisition, the Australian exploration rights will help boost Shenhua’s reserves,” Wang Shuai, a coal analyst with Orient Securities Ltd., said by telephone in Shanghai today.

Huang Qing, a Beijing-based spokesman of Shenhua Energy, wasn’t immediately available for comment.

Chinese coal producers are adding capacity to meet the rising energy needs of the world’s fastest-growing major economy. The nation burns coal to generate about 80 percent of its power.

Power Shortages

The country is experiencing a sixth year of electricity shortages because of inadequate coal supplies. Prices at Qinhuangdao, the nation’s largest port for the fuel, rose to a record $168 a metric ton on Aug. 8.

The Watermark exploration license will be awarded to Shenhua on the recommendation of an expert assessment panel, Macdonald said in an e-mailed statement in Sydney. The government invited initial bids for the permit in October and final submissions closed in February. The project could be worth more than A$670 million to the state, he said.

The license is for exploration only, not mining, Macdonald said. The exploration phase will last “several years,” he said.

Shenhua Energy has held talks with New South Wales on the potential purchase of energy assets to be sold by the government, the Daily Telegraph said in December, citing a spokesman for Treasurer Michael Costa.

“The central government will particularly support Shenhua Energy, the nation’s top producer, in both overseas and domestic expansion as the country vies to ensure energy supply safety,” said Orient Securities’ Wang.

Xinjiang, Ningxia

Shenhua Energy’s production may accelerate in the next few years as the company increases development in western China’s Xinjiang region, Inner Mongolia and Ningxia, areas that will lead growth in China’s future coal production, Wang said.

Parent Shenhua Group Corp. said today it has started construction of coal, power and coal-to-fuel projects in the province of Inner Mongolia with a combined investment of 134 billion yuan ($19.5 billion).

The group is building a 60-million-metric-ton-a-year mining project and a coal-fired power plant with six 600-megawatt units. A 5-million-ton-a-year coal-to-fuel project and a 2,000-megawatt wind farm are also being constructed, according to the statement.

The state-owned coal producer said yesterday it won government approval to develop a mine with reserves exceeding China’s consumption for one year.

The Tarangaole mine in Inner Mongolia has about 3 billion tons of proven coal reserves and an estimated lifespan of more than 95 years, the government said. The venture will have an annual capacity of 10 million tons.

Shenhua Group produced 235 million tons of the fuel in 2007, while China’s coal production rose 9.4 percent to 2.3 billion tons last year. The nation’s coal demand may rise 5.3 percent to 2.76 billion tons this year, according to the Coal Sales and Transportation Association of China.

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