Yanzhou Coal Mining Company Limited (Yanzhou) has received approval from the Australian government for proceeding with its A$3.5 bn acquisition bid for Felix Resources Ltd (Felix). This represents an important step towards the completion of the acquisition. We maintain that the acquisition deal is beneficial for the company, given Felix’s high quality assets. However, given significant price appreciation since our last update report, we downgrade our rating on the common stock from a BUY to a HOLD The Hong Kong dollar is currently pegged to the US dollar. Therefore, no currency impact is expected on the ADR over our 6-12 month investment horizon. Given current price levels, we downgrade our rating for the ADR from a BUY to a HOLD.

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