(Yicai Global) April 28 -- Shares in China Coal Energy Company soared today after the major coal producer said it will invest CNY23.8 billion (USD3.4 billion) to construct a facility that produces polyolefins, a form of plastic used in packaging, from coal.

China Coal Energy’s share price [SHA:601898] closed up 5 percent at CNY9.01 (USD1.30), while its Hong Kong-traded shares [HKG:1898] edged up 1.7 percent to end the day at HKD6.70 (USD0.85).

The new facility, which will be located in Yulin, northwestern Shaanxi province, will be comprised of a methanol plant with an annual capacity of 2.2 million tons and a polyolefin factory with a yearly output of 900,000 tons, the Beijing-based company said.

Unit Shaanxi Yulin Energy and Chemical will be in charge of the investment in and construction of this project, which is expected to take two and a half years, it said. No further details were given.

China Coal Energy’s website shows that the first phase of its coal-based olefin plant run by unit Yulin Energy started operations in 2015 and that as of the end of last year, it had produced a total of 5.8 million tons of polyolefins since then.

The project enables the company to extend its business into coal-based chemical industry that create more value by making higher end chemical products, it said.

China boasts an abundance of coal resources and the building of coal-based polyolefin factories allows coal resources to be utilized in a cleaner manner. In recent years, many of the country’s coal giants have said they will invest in coal-based olefin projects.

China Coal Energy posted a 5.3 percent jump in net profit in the first quarter from the same period a year ago to CNY7.2 billion (USD1 billion), according to its latest earnings report released yesterday. Revenue slumped 4.2 percent to CNY59.2 billion (USD8.5 billion).

Editor: Kim Taylor