Business Overview

We are a profitable producer of anthracite coal based in Guizhou Province, the PRC, engaging in the extraction and sale of anthracite coal.We had the largest designed annual production capacity among privately owned anthracite coal producers in Guizhou Province as at the end of 2015. We possess scarce anthracite coal resources with the characteristics of high calorific value, low sulphur content and low ash content. Our coal products are suitable to be used as chemical coal and PCI coal, as well as for further value-added applications, such as premium quality active charcoal. We have also been cooperating with Southern Power Grid to utilise CBM resources of our coal mines for power generation.

According to the Fenwei Report, due to the high quality of our anthracite coal, 74% of our coal products are suitable to be used as chemical coal and 25% as PCI coal for end users mainly in the chemical, metal smelting and construction industries, which allows us to command high selling price. Moreover, due to the high strength of our coal, we maintained large output of big lump coal and medium lump coal which generally command higher selling prices among anthracite coal products. In addition, we are one of the few privately-owned coal mining enterprises in Guizhou Province that have installed coal preparation system. Since July 2015, we have employed coal preparation processes in our coal production at all of our three coal mines in commercial production, which allows us to further enhance the quality of our coal products and customise our coal products to satisfy the specification requirements for our customers.

Guizhou Province is a core production base of anthracite coal in southwest China. According to the Fenwei Report, Guizhou Province was estimated to have approximately 40.1 billion tonnes of anthracite coal resource reserve as at 31 December 2014, accounting for 28% of total anthracite coal resource reserve in the PRC, ranking first among provinces in Southwestern and Southern China and second among all provinces in the PRC. Benefiting from our location in Guizhou Province, we enjoy strong demand of anthracite coal in the regional anthracite coal market in Southwestern and Southern China where anthracite coal is generally under shortage of supply. In 2015, the shortage in supply of anthracite chemical coal and PCI coal in Southwestern and Southern China was 3.1 million tonnes, and such shortage is expected to increase in the future. Due to high transportation costs, it is not economically viable to transport coal from Northern China to Southwestern and Southern China. As Guizhou Province has abundant anthracite coal resources, it has become the only net exporter of anthracite coal in Southwestern and Southern China since 2014.

We are a qualified consolidator in the coal mining industry in Guizhou Province. Since April 2011, the Guizhou government has been promoting and implementing the coal industry consolidation policy to reduce the number of local coal mines from approximately 1,800 to approximately 800 by 2015. According to such policy, only qualified consolidators are permitted to operate these consolidated coal mines in Guizhou Province, and the number of qualified consolidators will be limited to no more than 100, thereby reducing the number of our competitors.

We currently have four underground anthracite coal mines, three of which, namely Weishe Coal Mine, Lasu Coal Mine and Luozhou Coal Mine, are in commercial production, and the remaining one, Tiziyan Coal Mine, is under development.

We have grown rapidly in recent years, primarily as a result of the technological upgrades of our coal mines, which has led to increased production capacity and improved mechanisation rate of operation and recovery rate. During the last quarter of 2015, we started to adopt the semi-mechanised longwall mining method to complement the manual longwall mining method  at all of our three coal mines in commercial production as a result of the technical upgrade, which has enabled us to extract coal more efficiently and safely.