Bloomberg referenced a Shanghai Stock Exchange filing from CSE, which has the company expecting rising demand to force domestic power stations to pay higher thermal coal prices.

The news service reported that some annual coal contract negotiations between Chinese utilities and coal producers had still not made much progress from late last year.

However, CSE detailed in its first quarter report that it “had accomplished its target of signing the domestic long-term contracts for the year” by the end of March.

One contract price given as an example was 540 yuan per tonne ($US79.11/t) for 5500 kilocalorie/kg seabourne thermal coal.

In an operational update, CSE said it had produced 22 million tonnes of coal for the month of April, a 16.7% increase from 15Mt in the same month in 2008.

Coal sales for April were up 11.7% year-on-year to 22Mt, but the export amount was 700,000t – a 65% dive year-on-year.

The major state-owned coal producer had a cash position of 58,689 billion yuan ($US8.6 billion) at the end of the first quarter.

The company is preparing to start drilling the Watermark exploration project near Gunnedah in New South Wales.

Shenhua Watermark Coal project director Joe Clayton has previously told International Longwall News that Every Day Mining Services subsidiary GOS Drilling was the preferred drilling contractor.

The drilling is to underpin a full mine feasibility study and has so far been scheduled for nine months, but Clayton said that might be shortened.

The tender for the contract from GOS Drilling covers seven surface rigs, including one workover rig.

Last year CSE paid $A299.9 million ($US229.44 million) to the New South Wales government for the five-year Watermark exploration licence, which covers 190 square kilometres.

An initial exploration program by the NSW Department of Primary Industries is the only previous work done in the area.

CSE hopes Watermark will host more than 1 billion tonnes of shallow thermal coal resources of domestic and export quality.