Situated near Hengoed, in 1905 Powell Duffryn began the sinking of Penallta colliery, and had employed 291 men by 1908. The two shafts Nos.1 (downcast) and 2 (upcast) were 783 and 750 yards deep respectively, and at the time were the deepest in the South Wales coalfield. The first coal was raised in 1909, with the railway served by the Cylla branch which connected it to both the Rhymney Railway from the Ystrad Mynach north junction, and the Newport, Abergavenny and Hereford Railway. By 1923 there were 2,395 men employed, producing from the Six Feet seam, and at peak production during the 1930s, there were in excess of 3,200 men employed. In 1930 it produced 975,603 tons, and in 1935 it held the European record for coal winding.
In 1947, the mine was nationalised as part of the governments post-World War II regeneration scheme, and became owned by the National Coal Board. Investment was made, and in the late 1940s a Meco-Moore Cutter Loader was installed, one of the first power loaders to be used in British mines, and as a result the Minister of Fuel and Power Hugh Gaitskell made a visit in December 1949. The colliery formed a rugby union club in 1952 called Penallta RFC, and in 1954 produced 500,000 tonnes of coal. During 1960 the shafts were extended to reach 800 yards as part of a scheme, which also included electrification of the shaft winding engines.
Access to coal was becoming more difficult, and by the 1970s only 700 men were producing 210,000 tons yearly from the Lower Nine Feet and Seven Feet seams – both 20% of the figures at the height of production. The colliery survived the 1984-1985 miners strike, and made impressive gains in production after the return to work. It was closed by British Coal on November 1, 1991 with the last shift led out by a brass band, the last deep mine working in the Rhymney Valley.