ITOCHU Corporation has decided to make its investment to Heilongjian Longmei Coal Ltd.,(hereinafter call “Longmei Coal”) which is a newly formed merger company of four major coal mining firms in Heilongjian Province, China. This is the first time investment in a Chinese coal firm by Japanese company. On Dec. 13th, ITOCHU signed the Alliance Agreement with Longmei Coal and the State-owned Assets Supervision and Administration Commission of the Heilongjian Popular Government.

ITOCHU will invest 6 million dollars (about 630 million yen) to Longmei Coal for the company’s new share placement. As Longmei Coal intended to place a part of their new shares to the selected domestic and foreign strategic partners, only ITOCHU and POSCO, Korean largest steel mills, were selected as the strategic partner from overseas. Through the deal, ITOCHU secures a certain export tonnage for Japanese market.

Heilongjian Province has enough reserve of both high quality coking and thermal coal, and the merger of the four big coal mining firms matches two major Chinese government’s strategies one of which is the amalgamations and modernization of Chinese Coal Industry and the redevelopment plan of North-eastern province is another. ITOCHU has agreed comprehensive business alliance with the Heilongjian Province government on October 2003, and also established Harbin Office on July 2004 to expand its coal business in Heilongjian Province.

Total estimated production tonnages of Longmei Coal is 55Mt on 2004 and planning to double this up to 100Mt on 2010.

ITOCHU agreed in the Alliance Agreement for not only coal export right but also for joint works to create new coal mine development opportunity, effective utilization method of coal mine methane and environmental business by obtaining emission credit etc.

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