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Business Overview Our Strengths Production Process
Kinetic Mines and Energy Limited (HKEx Stock Code: 1277, “Kinetic Mines”) is focused on developing the Dafanpu Coal Mine and seeks to operate highly efficient and safe coal mines. The Group’s vision is to become a leading integrated coal provider in China, after having developed its own mining, processing, rail transportation and storage capabilities.

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. Its Dafanpu Coal Mine had 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 were 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 its 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 Group obtained a safety production permit and a production permit for the Dafanpu Coal Mine at the end of 2012. It also completed construction of a coal washing plant with a feed capacity of 5.0 million tonnes per year in its concession area.

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 unit production costs decreased significantly with the higher production volume and stringent cost control.

The Group had a legally binding agreement with Shenhua Zhunge'er Resources to utilise the capacity of the Nanping Rail Line, to which Shenhua Zhunge'er Resources has the exclusive right of use, in exchange for its commitment not to mine certain areas along the Nanping Rail Line that runs across its concession area. The Nanping Rail Line is a branch rail line of the Datong-Zhunge'er Rail Line, which connects to the Datong-Qinhuangdao Rail Line, a major national railway to Qinhuangdao Port which is China's largest coal transshipment port. In addition, the Group has an individual railway account at Taiyuan Railway Bureau.

Xiaojia Station is designed to connect to the Group’s stockpile near its processing facilities. It is located in its concession area and is adjacent to both its mining site and processing facilities. Due to these conditions, Xiaojia Station can be effectively used to transport coal processed by its existing processing facilities and the processing facilities constructed by the Group with Shenhua Zhunge'er Resources. Xiaojia Station has an average handling capacity of approximately 5,000 tonnes per hour.

The Group obtained the required permits and approvals for the operation of Xiaojia Station and its associated rail spur line in June 2013. After the No. 6 coal seam of the Dafanpu Coal Mine commenced commercial production in early 2014, with higher production volume and stringent cost control, unit production costs decreased accordingly. Furthermore, rail transportation from the Xiaojia Station to Qinhuangdao had been in full operation for the whole year of 2014 and into 2015, strengthening the Group’s coal trading business in Qinhuangdao and reducing the transportation cost per tonne of coal to Qinhuangdao. 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. This strengthens the Group’s coal trading business in Qinhuangdao. Since the coal prices at Qinhuangdao port were higher than the mine gate prices at Inner Mongolia, the Group will continue to expand its coal trading business in Qinhuangdao through the Xiaojia Station.