The proposed listing comes as Chinese state coal assets are being privatised and small, inefficient and potentially dangerous mines are being shut down as part of a drive to increase production, improve productivity and ensure worker welfare and safety.
In the past few years, China has shut down 50,000 small mines.
Blackgold operates two mines in Chongqing province in west-central China, Caotang and Heiwan. The mines produce 700,000 tonnes per annum of thermal coal, a figure predicted to increase to 1Mtpa in 2011 and 1.2Mtpa in 2012.
When coupled with expected acquisitions and coal-trading activities, Blackgold forecasts 2.7Mtpa of production by 2012.
Production is predominantly sold to domestic power plants at spot-based prices.
The latter is responsible for all transport and logistical costs, meaning Blackgold generates all revenue and margins at the mine gate and is also paid by clients in advance of delivery.
“This listing is a critical step in the development of the company,” Blackgold non-executive chairman Chi Ho Tong said.
“The proceeds from the float will be invested in upgrading and modernising the two mines, acquiring new assets in the province, and expanding its coal-trading capabilities.
“At the same time an ASX listing will give us access to Australian mining expertise, higher quality coal and the status from being associated with a stock exchange that has an international reputation, particularly in resources.”
China is the world’s largest consumer and producer of coal. In 2008, it consumed 3 billion short tonnes, representing nearly 40% of total world consumption.
About 70% of China’s ongoing requirement for power comes from thermal coal.
Within the Chongqing region about 4000 smaller coal mines have been closed down over the past five years to a current 100 mines.
As the region’s largest privately owned coal operator, Blackgold is ideally positioned to bring about government-backed industry rationalisation.
Blackgold’s aim is to bridge the gap between international coal producers and Chinese thermal coal consumers and leverage its unique position towards producing and/or procuring 5Mtpa of coal.
The Chongqing region contains more than 2.5 billion tonnes of known coal resources and consumers in the Shanghai region (which includes Blackgold’s clients) go through an estimated 50Mtpa of coal.
Blackgold will issue 225 million new shares and 45 million vendor shares at 26c each. This will give Blackgold a market capitalisation of $234 million with 30% of the equity being offered in the IPO.
Privately owned Lucky Magic Enterprises, controlled by Yu Guo Peng, Blackgold’s executive director and group chief executive, will remain the majority shareholder with about 60.5% post listing, voluntarily escrowed for two years.
