While there are a growing number of optimistic coal explorers listed in Australia, few have the projects and the ability to go immediately into production and an insatiable customer base for their product – nor an incredibly economical pathway to their hungry market.

BlackGold International listed on the Australian Securities Exchange in February 2011. Its initial public offering was oversubscribed, raising $A70.2 million with the issue of 225 million shares and the sale of 45 million vendor shares at 26c each.

Non-executive chairman James Tong and executive director Yu Guo Peng recently outlined, in Hong Kong, the company’s position in the Chinese coal sector and their plans for the future.

Peng’s privately owned Lucky Magic Enterprises and Tong’s Prima Network Financial effectively control 70% of BlackGold.

To consolidate their position the company recently completed a 12 million share buyback program, which started in October 2011.

However, while the strong Chinese control of the company is interesting, the story demonstrates the management’s intuitive business sense and their ability to recognise an extremely good opportunity to develop a pathway to growth.

Blackgold is the first privately owned Chinese thermal coal producer to list on the ASX and it achieved the transformation from private to public with a minimum of fuss.

Located in China’s Chongqing province, an area boasting 31.5 million people in southwest central China, the company went to the public with two operating thermal coal mines in the region and the opportunity to add more as Chinese authorities threatened to close down small inefficient operations to consolidate production and improve safety and efficiency.

Blackgold was in the right place at the right time and the ASX listing gave it the capital to start a growth program with additional acquisitions.

Teng explained that the two original mines at Caotang and Heiwan produced more than 730,000 tonnes of thermal coal in 2010.

However, he said, the acquisition of the Wushan Mao JiaWang and Qijiang ChangHong mines had an immediate effect on the company’s production.

Qijiang started production in February this year and while production at the two original mines jumped 200% for the quarter end January 31 through improved mechanisation and increases in primary mining panels, there is a year-on-year target gain of 69%.

Production for the 2011 financial year was 0.94 million tonnes and is expected to rise to 1.6Mt in 2012.

Since listing, the company has expanded its JORC reserves and resources to 168 million tonnes.

“Our objective is to buy more mines and improve the infrastructure and produce more coal,” Teng said.

“We now have four coal mines strategically located along the Yangtze River.

“Our costs are very low compared to other mines. We are aiming to produce 1 million tonnes a year and by 2015 plan to be producing 4-5 million tonnes a year.

“The demand is very high in China.”

While the ASX listing may be seen as a clever move to build a “war chest” for expansion, the company has much bigger plans for the future.

In February it entered into a conditional share sale agreement to acquire the Chongqing Gouping Shipping Transportation Company, which is controlled by Peng, for 155 million renminbi ($A23.5 million).

The takeover helps BlackGold get its coal from Chongqing to Shanghai via the Yangtze River, a distance of about 1800km.

“Our mines are very well located and are close to the Yangtze River,” Tong said. “They are underground, but horizontal and access is through adits in the side of mountain.

“The coal is trucked about 20km to the dock and then transported down the Yangtze at a cost of about $5 a tonne.

“We have also selected a site for a proposed coal washing plant which will increase the value of our coal when shipped to market.”

The good news does not stop there.

Blackgold sells the majority of its coal to major power generation customers in Shanghai, with demand more than treble the amount of coal the company can currently produce in a year.

The future looks even brighter.

Traditionally China’s coal production has come from large state-owned mines and thousands of small scale village-operated mines.

The small scale village-operated mines have proven problematic. Their inefficiency and poor safety records have forced authorities to take action to close many down.

Already between 20,000 and 50,000 small coal mines have been closed, with about 4000 of them in the Fengjie County region in Chongqing province.

The number has been reduced to less than 100 over the past 10 years and BlackGold is ideally placed to benefit from the consolidation process by acquiring additional mines.

The company is looking to acquire an additional five mines.

Tong said that because of the company’s listed status, an excellent safety record, corporate governance and financial resources, it was viewed favourably by the Chongqing government, which acts in the role of regional consolidator for coal mines.

So, cashed up from the company’s ASX listing a little over a year ago and growing production significantly, BlackGold is preparing for phase two of its development.

It is working towards a dual listing on the main board of the Stock Exchange of Hong Kong, a move that is expected to increase the company’s coffers by about $US120-150 million.

Not bad work for a fledgling company that only listed on the ASX in February 2011 with two small coal mines to its credit, but a lot of upside.

It would not surprise if the BlackGold exercise prompts similar listings in Australia from one of the fastest-growing regions in China.