With a market cap of $178m little known Blackgold International (BGG) is another coal producer to watch. This one an extra layer of risk to Bandana as the company is registered in Australia and trades on the ASX but its four underground operating mines are in China. Blackgold is the largest non-state owned thermal coal producer in China. While the China import ban is an environmental move, it will also support domestic coal producers. All four of Blackgold’s mines produce coal above the threshold standards being discussed for the import ban.
Blackgold management feels the company’s stock is significantly undervalued and the numbers suggest they may be right. The company began trading on the ASX in early 2011. For FY 2011 Blackgold showed a net profit after tax of $29.5m and a return on equity of 23.6%. For FY 2012 NPAT was $45.4m with an impressive ROE of 33.4%. The P/E is a tantalising 4.42 but growth estimates are absent due to the lack of analyst coverage.
Blackgold had been looking to list on the Hong Kong Exchange (SEHK) but is now focusing its effort on the Singapore Exchange (SGX). In addition to its mining operation, the company has a subsidiary that trades PCI coal imported from third party producers in Australia and Indonesia. PCI, an acronym describing coal derived from the pulverised coal injection technology, is used in steel production and as such is considered a form of coking coal. Blackgold is a thinly traded stock averaging about 40k shares per day versus 1m shares per day for smaller rival Bandana Energy. Here is a price chart for the company since it began trading:
