Occidental Sells Its Interest in China Coal Mine : Energy: Bank of China Trust & Consultancy Co. will pick up Oxy’s $145 million in loan guarantees, leaving the company free to walk away.

As expected, Occidental Petroleum Corp. announced Monday that it was selling its 25% interest in China’s largest open-pit coal mine back to the Chinese government, bringing to an end the biggest foreign joint venture in that sprawling nation.

Under terms of the deal, the country’s Bank of China Trust & Consultancy Co. agreed to pick up Occidental’s share of loan guarantees on the project, amounting to $145 million, leaving the Los Angeles energy company free to walk away.

For Occidental, the sale of its interest in the An Tai Bao coal mine in China’s Shanxi province extricates the company from a money-losing partnership forged by former company patriarch Armand Hammer, who died last year at age 92. In 1990, Occidental lost $31 million on the mine.

The deal also keeps the company ahead of schedule in its previously announced program to cut $3 billion in debt by divesting itself of non-strategic assets. Sales have netted the company $1.8 billion so far.

“We are pleased to be able to complete this sale in a timely manner and bring to an end a source of significant losses for Occidental,” said company Chairman Ray R. Irani in a statement. “At the same time, we have continued to maintain our good relations with our partners in the project, including the government of the People’s Republic of China.”

For the Chinese, the sale demonstrates to skeptics that foreign partners can walk away from joint ventures without undue losses, analysts said.

“China is sending a strong signal that the country will take whatever steps possible to establish meaningful joint ventures with foreign companies,” said analyst Paul Ting at Oppenheimer & Co. “If they were totally adamant about holding Oxy to the contract terms, it could have had the effect of keeping other foreign ventures away. They showed great flexibility.”

The deal had been widely anticipated. Occidental spokesman Kenneth J. Huffman said Occidental Executive Vice President John Dorgan signed the final agreement Saturday.

At the end of last year, the company took a $292-million writeoff on its investment in the mine. Monday’s deal means that about $140 million to $150 million of that reserve will now be credited back to earnings in the second quarter of 1991, Huffman said.

The China deal resulted directly from the relationship between Hammer and Chinese leader Deng Xiaoping. “It was a project that probably wouldn’t have happened without Hammer,” one industry observer said.

The original deal was signed, after many delays, in 1985. The following year, Hammer--dressed in a full-length mink coat and a beaver hat--watched as explosives went off to begin excavation of the mine, biographer Steve Weinberg wrote in “Armand Hammer: The Untold Story.”

But the mine was plagued with problems from the start, and low coal prices rendered it unprofitable.

“The project (had quite a few) delays because of the relatively poor infrastructure in China and the remote location of the mine,” said Robin Shoemaker, domestic oil analyst with Shearson Lehman Bros. in New York.

Occidental owned a 50% share of Island Creek of China Coal Ltd.; the remainder was owned by the Bank of China company. Island Creek, in turn, owned half of the coal mine; the remaining half was owned by another branch of the Chinese government.

As a partner in Island Creek of China, Occidental had guaranteed half of the $290-million outstanding balance on a $475-million loan arranged through a syndicate of foreign banks to finance the project.

Occidental’s Recent Spinoffs Assets sold under Occidental’s restructuring, announced in January:

North Sea oil fields and other holdings, sold to a French-British partnership for $1.35 billion in cash and assumption of $150 million in debt on May 8.

Natural gas liquids business, sold to a joint venture with Hicks, Muse & Co. for $700 million on May 6.

Industrial phosphate and phosphoric acid business, sold to FMC Corp. for a price estimated at $100 million on April 29.

A half-interest in an Antwerp natural gas liquids terminal in Belgium, sold for $38 million on Feb. 7.

A 5.4% interest in Church & Dwight, makers of Arm & Hammer baking soda, sold for $19 million on Jan. 28.

Perchloroethylene contracts, sold to Vulcan Chemical for $5 million on June 24.

A 25% interest in the An Tai Bao coal mine, sold to China in exchange for assumption of $145 million in loan guarantees on July 1.