After the industry had developed to a certain stage, some clever mine owners began to break away from their narrow-minded approach to mining. From then on, a billion-dollar class emerged—the “mining enthusiasts.” For these mining enthusiasts, coal mines aren’t meant to be mined; they’re meant to be sold.

Things About Coal Mines —— From 50 million to 5 billion

　　After the industry had developed to a certain stage, some clever mine owners began to break away from their narrow-minded approach to mining. From then on, a billion-dollar class emerged—the “mining enthusiasts.” For these mining enthusiasts, coal mines aren’t meant to be mined; they’re meant to be sold.

　　Mineral rights transactions in the market are determined by the completeness of the required documentation as well as by the reserve size and quality. For example, if it’s a prospecting license being sold— even if there’s a detailed exploration report— the sale price will be based solely on the total reserves multiplied by five yuan per ton. Thus, the prospecting rights for a coal mine with 100 million tons of reserves would fetch just 500 million yuan. However, the same coal mine, once it has obtained an mining license—even if its annual extraction capacity indicated on the license is relatively low—can be sold at a much higher price, at twenty yuan or more per ton of reserves. Consequently, the mining rights for that same 100-million-ton coal mine could soar to as much as 2 billion yuan. And if the mine has completed a detailed exploration, developed a comprehensive production plan, paid all resource fees and compensation to farmers and herders, and is already in full-scale production, then congratulations—you’re looking at a mine whose value could easily reach 5 billion yuan (with reserves valued at 50 yuan per ton).

　　In the history of our country’s coal mining industry, there was a relatively sluggish period. At that time, in order to encourage risky exploration, the government agreed that as long as private entities financed the exploration themselves, they could obtain 80% of the exploration rights. This policy triggered a massive land-grabbing frenzy. In theory, mineral exploration does indeed carry risks—but in certain regions, the situation is quite different. Take the open-pit coal mines in Inner Mongolia as an example: In some areas, the geological conditions of the grasslands are remarkably consistent, and the coal deposits lie relatively shallow. In many places, even a mouse digging a hole could uncover coal. Moreover, since the founding of the People’s Republic of China, four nationwide geological surveys have been conducted (with the surveys conducted in 1956 and 1972 providing the most detailed data). As a result, in many areas, the presence of coal deposits is well known to everyone—what matters now is simply who has the connections to secure those prime spots. Once someone manages to get hold of such a site, they can strike it rich.

　　“Mining exploration” typically involves several steps: (1) Mining Prospecting: First, based on historical exploration data and local knowledge, we identify and delineate the areas with the best coal seams to secure mining exploration rights. The fee required to obtain these exploration rights is relatively low. Next, we conduct detailed drilling explorations to compile a comprehensive reserve report. (2) Mining Development: “Developing” a mine doesn’t mean simply watering or fertilizing it; rather, it involves completing all necessary formalities. After preparing the reserve report, we carry out feasibility studies, environmental assessments, and production design—among other procedures. Then, we handle land acquisition compensation, pay environmental resource fees, and complete the procedures for converting exploration rights into mining rights. We also obtain the six essential permits—mining license, coal production license, safety production license, mine director’s safety production license, mine director’s certificate, and business license—and in general, we bring the mine to a state where it’s ready to start operations at any time. (3) Packaging: Packaging refers to enhancing the value of the mine beyond its intrinsic worth. I won’t go into detail about this—it involves commercial secrets. (4) Selling the Mine: Finally, we sell the mine outright in one transaction. My former boss had a famous saying: “In China, it’s hard to do business between government entities, and it’s also hard to do business between private entities. The easiest kind of business is between government and private entities.” For a mine that has reached mature extraction conditions and has all the necessary permits in place, the market price is generally determined by the total reserves, with prices starting at over 50 yuan per ton of reserves.

　　Let me give you an example using numbers: Suppose a business owner has 50 million yuan in cash. Now, he’s acquired a plot of land—one acre—located in a certain area that was previously identified as having mineral deposits through surveys conducted in 1956 and 1972. The relocation compensation for each acre is 1,000 yuan, totaling 10 million yuan. Risk-based exploration requires drilling, exploration design, and detailed investigation. You can start by surveying only a portion of the land, and the actual costs will depend on the reserves ultimately confirmed. Generally speaking, such exploration would cost at least another 10 million yuan. Then there are the administrative fees—both on and off the books—needed to complete all the necessary procedures, which could add up to another 20 million yuan. There are also miscellaneous expenses like environmental compensation, which might run another 10 million yuan. With a total budget of 50 million yuan, this owner can secure all the permits and licenses required to begin mining operations—the so-called “six certificates.” Even if the proven reserves turn out to be 100 million tons (in fact, given that the land parcel covers 10,000 acres, the reserves would likely exceed this figure), and assuming the market price of the minerals is 50 yuan per ton, the total revenue from selling these reserves would come to 5 billion yuan. From 50 million yuan to 5 billion yuan—that’s no joke; it’s a story we’ve witnessed with our own eyes.

　　The Rich People's Game

　　In the previous discussion, many friends asked us: Why do mine owners, despite having so much cash on hand, still choose to borrow money? That’s a great question—and the fact that you’re thinking deeply about it shows just how close you are to achieving financial success yourself. So let me take a moment here to elaborate on this side issue. The wealthy individuals in China have all risen to prominence over the past thirty years. In other words, thirty years ago, everyone was earning wages of just a few dozen yuan. Yet today, some people have assets worth billions, while others can’t even afford to buy a house.

　　In recent years, from what I’ve seen and heard, I’ve observed that wealthy individuals generally possess three characteristics that most people don’t have. (1) Personal Qualities: Some people simply have a forward-looking vision—they can spot systemic opportunities and make money before others do. (2) Financial Leverage: In China, it’s impossible to get rich quickly without leveraging capital. Without financial leverage—without banks and without access to borrowed funds—development would be extremely slow. Many of the high-reward opportunities in China are fleeting; whether in real estate, mining, or finance, these sectors will inevitably become more regulated over time. If you don’t seize these opportunities within a short window, you’ll miss out on the best chances to make money. (3) Networking: I won’t dwell on this point—everyone in a relationship-based society can relate to it firsthand.

　　Among the wealthy individuals I know, there’s a common pattern: they all possess these three qualities simultaneously—unique vision, financial leverage, and strong networking connections. Those who manage to reach the pinnacle of wealth in a short period of time invariably have exceptional talents. Take the coal industry as an example: as coal prices rose, the industry boomed—a once-in-a-decade opportunity. But starting in 2008, with the consolidation of Shanxi’s coal sector, it marked the beginning of coal barons’ gradual exit from the stage of history. During those ten years, if a mine owner simply dug one mine or sold an entire mine, it would still take at least five years—from obtaining exploration rights and conducting exploration, to securing mining permits and finally extracting coal—even without taking a single detour. So, over those ten years, how much wealth could have been accumulated through this rolling process?

　　Experts do it this way: First, they borrow money to acquire land, then obtain mining rights and use those rights as collateral to secure a loan from the bank. Next, they borrow again to acquire more land, using that newly acquired land as collateral for yet another bank loan—and so on. This rapid cycle allows limited capital to circulate at lightning speed. By repeating this same pattern week after week, leveraging the same connections and networks, they can multiply their initial investment many times over using other people’s money. If the mining analogy seems too complicated, let me use buying a house as an example: Suppose someone had 1 million yuan in the year 2000. At that time, with housing prices at 5,000 yuan per square meter, they could have bought two 100-square-meter apartments in Shanghai—all cash. Today, those same 100-square-meter apartments would cost around 40,000 yuan each—meaning the value has increased eightfold. So, that original 1 million yuan has grown to 8 million yuan. Now, here’s another approach: Divide that 1 million yuan into 10 equal parts, each worth 100,000 yuan, and use these as down payments to buy 10 separate 100-square-meter apartments. Then, they can cover the mortgage payments by collecting rental income. By now, those 1,000 square meters of property are worth 40 million yuan. With the same initial principal of 1 million yuan, one strategy yields 8 million yuan, while the other produces 40 million yuan. Can you see how leverage works?

　　Returning to the mining industry—a sector with the highest capital barriers—this year, even for non-metallic mining, it’s extremely difficult to enter the field without at least 20 million yuan in capital. Leveraging financial resources to achieve rapid expansion in a short period is the very essence of doing business.

　　Getting back to the main point, as I mentioned earlier, just like all industries in China, the coal industry too has a specific time when its opportunities emerge—and eventually come to an end. Let’s take a moment to reflect on the successive waves of opportunities that have unfolded in China since the reform and opening-up: the commodity trading quotas in the latter half of the 1970s, the rise of manufacturing in the 1980s, the boom in treasury bills and securities in the early 1990s, the real estate frenzy that kicked off in the late 1990s, and the heyday of foreign trade after the year 2000. Each of these waves of opportunity disappeared once the markets had matured. So when exactly did the explosive opportunities in the coal industry reach their peak—and how did it all unfold?