According to the Chinese Coal Classification Standards, coal is classified into three ranks, namely the anthracite coal, the bituminous coal and the lignite coal, as measured by its volatile matter content. The anthracite coal refers to coal with a volatile matter content (dry ash free basis) of no more than 10.0%, which is the highest rank of coal. The coal produced or to be produced at all our four coal mines are classified as anthracite coal.
Due to the geographic location of our mines in Hezhang County and Dafang County, which are within two of the richest anthracite coal bases in Guizhou Province, our coal features characteristics such as high calorific value, low sulphur content, low ash content, low volatile matter content and low moisture content. These characteristics have contributed to the high quality and marketing value of our coal.
High Calorific Value
Calorific value is the amount of potential energy in coal that can be converted into actual heating ability during combustion. As the calorific value of different ranks and types of coal is of significant difference, it is recognised as the fundamental determining characteristics of coal quality. Compared with coal with lower energy value which is widely used in power generation, coal with higher calorific value is mainly used as fuel or raw material in the chemical industry, metal smelting industry, construction industry and other industries that require higher quality of coal. As such, the coal with higher calorific value is generally more valuable. All of the coal reserves in our four coal mines are ranked as anthracite coal, which is generally of higher calorific value than the other ranks of coal, such as bituminous coal and lignite coal.
Low Sulphur Content
It is a natural characteristic for coal to contain sulphur. When the coal is burned, sulphur dioxide, a typical air pollutant will be emitted. As a result of meeting the regulatory and policing requirements in the PRC to limit the emission of sulphur dioxide, coal with lower sulphur content generally can be sold at a higher price. A major part of our proved and probable coal reserves naturally come with low sulphur content. We adopt clean coal and fine coal preparation process during the production to further reduce the sulphur content of our coal products.
Low Ash Content
Coal ash refers to the mixture of a number of waste materials resulting from the combustion of coal. Coal with lower ash content generally has higher combustion ratio, thereby the fuel utilisation of the end users is enhanced. All of our proved and probable coal reserves have low ash content. The adoption of the coal preparation process further contributes to the lower ash content of our clean coal and fine coal products.
Low Volatile Matter Content
With respect to coal, volatile matter refers to substances, other than moisture, that are driven off as gas or vapour during combustion. Coal with lower volatile matter content is generally less reactive and thus has better heat release performance during combustion. The volatile matter content of our coal reserve ranges from 5.9% to 6.6%.
Low Moisture Content
For the same weight of coal, the higher moisture content it has, the lesser calorific value it has. Apart from the facts that all our proved and probable coal reserves are with low moisture content, the coal preparation process further lowers the moisture content of the coal products and our coal products are stored in coal bunkers with roofs to avoid impact from moist weather conditions.
According to the size of coal, our products are classified into four types, namely the big lump coal, the medium lump coal, the clean coal and the fine coal. Benefiting from the high strength of our coal reserves, a large portion of our coal products are lump coal which demonstrate greater stability and thereby achieve better performance when used as raw material or fuel.
Prior to the joint trial run approved in December 2015 and January 2016, the designed production capacity of Weishe Coal Mine, Lasu Coal Mine and Luozhou Coal Mine was 150,000 tonnes, 300,000 tonnes and 150,000 tonnes, respectively. The current designed production capacity of each of these three coal mines in commercial production is 450,000 tonnes per year.
Based on its usages, anthracite coal is generally classified as thermal coal, chemical coal and PCI coal. According to the Fenwei Report, 74% of our coal products are suitable to be used as chemical coal and 25% of our coal products are suitable to be used as PCI coal for end users mainly in the chemical, metal smelting and construction industries. Chemical coal and PCI coal are generally sold at higher prices than thermal coal. As the production process and production costs for different types of coal are largely similar, the higher selling prices commanded by chemical coal and PCI coal contributes to our high profitability.