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Kinetic Mines and Energy Limited (“Kinetic Mines” or the “Group”, HKEx Stock Code: 1277) is an integrated coal producer and operator. Its activities cover the whole coal industry chain from coal production and washing, through coal loading and transportation, all the way to coal trading. The Group’s vision is to become a leading integrated coal provider in China.

Coal production and washing

Kinetic Mines focuses on developing the Dafanpu Coal Mine, and seeks to operate highly efficient and safe coal mines. The Dafanpu Coal Mine is an underground mine, occupying a concession area of approximately 9.6 km2 located in Zhunge'er Banner, Erdos City, Inner Mongolia, China. The Dafanpu Coal Mine has JORC-compliant Coal Resources of approximately 449.9 million tonnes, comprising 145.6 million tonnes of Measured Coal Resources, 247.7 million tonnes of Indicated Coal Resources and 56.6 million tonnes of Inferred Coal Resources. The estimated JORC-compliant Coal Reserves are approximately 201.2 million tonnes, comprising 67.2 million tonnes of Proven Coal Reserves and 134.0 million tonnes of Probable Coal Reserves. Approximately 23.4% of the Coal Reserves at the Dafanpu Coal Mine (or 47.1 million tonnes of the Coal Reserves) is expected to be lump coal. The remaining 76.6% of the Coal Reserves (or 154.1 million tonnes of the Coal Reserves) is expected to be fine coal. The approximate proportion of final saleable product results from the 20%/80% split of run-of-mine, or “ROM”, coal tonnes of lump/fine coal being subject to the varying washability yields of the fine coal portion.

The No. 6 coal seam is the best coal seam at the Dafanpu Coal Mine, with an average coal seam thickness of 23 meters. After the No. 6 coal seam of the Dafanpu Coal Mine commenced commercial production in early 2014, the Group’s production volume of commercial coal increased significantly while unit production costs decreased significantly.

Kinetic Mines has a coal washing plant with a feed capacity of 5.0 million tonnes per year in its concession area. The coal washing plant washes raw coal from its own production and purchased from third parties to produce a range of coal products to meet the varying energy value requirements of its customers.

Coal loading and transportation

The Group obtained the required permits and approvals for the operation of Xiaojia Loading Station and its associated rail spur line in June 2013, of which the Group holds a 45% interest. The Xiaojia Station has an average handling capacity of approximately 5,000 tonnes per hour.

The Xiaojia Station enables the Group to transport coal products from its Dafanpu Coal Mine and those procured from other third-party coal mine operators to Qinhuangdao through the Nanping Rail Line and Datong-Qinhuangdao Rail Line.

Coal Trading

The Xiaojia Station, together with the associated spur rail lines, strengthen the Group’s coal trading business in Qinhuangdao and reduces the unit transportation cost from Zhunge’er Banner to Qinhuangdao.

The Group’s coal trade centre in Qinhuangdao had obtained the relevant coal sales and trading permit in the first half of 2012. The Xiaojia Station and its associated rail spur lines had been in operation for the whole year 2014 to deliver most of the coal products from the Dafanpu Coal Mine via the Nanping Rail Line and the Datong-Qinhuangdao Rail Line to the Group’s coal trading centre in Qinhuangdao, thus substantially strengthening the Group’s trading business. In addition, the Group has an individual railway account at Taiyuan Railway Bureau. Also, with an average handling capacity of 5,000 tonnes per hour at the Xiaojia Station, the Group can sell coal procured from external parties, so as to increase its sales and profitability.

Since rail transportation significantly reduced the unit transportation cost from Inner Mongolia to Qinhuangdao, the Group had demonstrated its competitiveness and advantages in costs and ultimately laid an excellent foundation for long-term sustainable development. On the other hand, through direct participation in the coal trading business in Qinhuangdao, the Group stays abreast of the latest trends in pricing, marketing, transportation demand, technology, safety and management, so as to strengthen its position in the coal industry.

The Group’s coal trading business in Qinhuangdao was operating efficiently, fully utilising its advantages in transportation and costs.