Differences over coal pricing with power suppliers, which led to reduced sales, and a delay in relocating villagers based near mining areas were the major reasons for the decline in net profit – to $A97 million from $132 million a year previously. The impasse with local communities lowered coal production, especially in the 2005 third quarter, when Yanzhou ran into delays relocating the villagers.

First-quarter coal sales fell 16.5% from a year earlier to 7.2 million tonnes, Dow Jones Chinese Financial Wire reported.

The average selling price for coal dropped 0.3% to $A66 per tonne in the first quarter of 2006, but was higher than the average price in 2005. The domestic selling price in China dropped 5.9% to $59/t.

The company’s full year results were also down 9% to around $480 million after it incurred extra costs from compensation given to those affected by the relocation. The company expects to spend more than $100 million on the resettlement program. So far settlements have been reached with two villages, although negotiations with a further four are yet to be finalised.

China's coal output from January to March fell 3.1% to 410.14Mt, according to the latest official data.