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China Shen Zhou Mining & Resources, Inc. Announces Third Quarter 2008 Financial Results
BEIJING, November 13, 2008/Xinhua- PRNewswire-FirstCall/ -- China Shen Zhou Mining & Resources, Inc. (American Stock Exchange: SHZ) (“China Shen Zhou”, or “the Company”), a leading company engaged in the exploration, development, mining and processing of fluorite, zinc, lead, copper, and other nonferrous metals in China, today announced its financial results for the third quarter ended September 30, 2008.
*All figures are in U.S. dollars
Third Quarter 2008 Financial Results
Net revenues for the three months ended September 30, 2008 were $2.9 million, representing a $1.4 million or 32% decrease as compared to the same period of 2007. The decrease in net revenues is mainly attributable to Qianzhen Mining, whose zinc processing operations were materially impacted by a shortage of ore supplies and sharp decrease of metal price, which resulted in a reduction of revenue of 77% or approximately $1.7 million as compared to the third quarter of 2007. Net revenue from Xiangzhen Mining’s fluorite products decreased 49% to $1.1 million as compared to 2007 due to the trial operation of the newly completed fluorite processing plant of Xiangzhen..
Net revenue for the third quarter did increase by 142% over the second quarter.
For the third quarter gross profit was $495,000 which decreased by approximately 74% from $1.9 million for the same period of 2007; gross profit margin dropped from 44% to 17% for the third quarter of 2008. The fixed amortization of mining assets and rights over the terms of the extraction license (three years or six years) that is included in the costs of sales caused the movement of the costs of sales to be disproportionate to actual production and sales, resulting in a lower gross profit margin. The low zinc price also created downside pressure on the gross profit margin of the nonferrous segment.
Gross profit for the third quarter did increase by $543,000 over the second quarter. Gross profit margin also increased by 21% over the second quarter.
For the third quarter general and administrative expenses increased by approximately $0.9 million to $2.6 million in 2008 as compared to $1.6 million in 2007. The significant increase was primarily due to (i) trial operating expense of $0.57 million by Xiangzhen and (ii) increased administrative expense of $0.3 million for the newly acquired Tun-Lin in Kyrgyzstan.
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Interest expense decreased approximately $57,000 in the third quarter as compared to the same period of 2007. The decrease in interest expense is mainly due to the difference in revaluation of the warrant liability.
Net loss for the third quarter was $2.0 million, a difference of $2.1 million compared to net income of $0.1 million for the same period of 2007. Basic earnings (loss) per share were $(0.091) and $0.005 for the three months ended September 30, 2008 and 2007, respectively.
Net revenues for the nine months ended September 30, 2008 were $4.8 million, representing a $7.2 million or 60% decrease as compared to the same period of 2007.
Gross profit for the nine months ended September 30, 2008, was $639,000 which decreased by approximately 91% from $6.8 million for the same period of 2007. Gross profit margin dropped from 57% for the nine months ended September 30 2007 to 13 % for the same period of 2008.
For the nine months ended September 30, 2008, general and administrative expenses increased by approximately $3.0 million to $6.9 million as compared to $3.9 million for the same period in 2007.
Net loss for the nine months was $7.5 million, a difference of $7.7 million compared to net income of $0.2 million for the same period in 2007. Basic earnings (loss) per share were $(0.339) and $0.010 for the nine months ended September 30, 2008 and 2007, respectively.
Cash and cash equivalents were $0.46 million as of September 30, 2008, a decrease of $2.5 million as compared to the balance at December 31, 2007 of $3 million.
About China Shen Zhou Mining & Resources, Inc.
China Shen Zhou Mining & Resources, Inc., through its subsidiary, American Federal Mining Group ("AFMG"), is engaged in the exploration, development, mining, and processing of fluorite and nonferrous metals such as zinc, lead and copper in China. The Company has the following principal areas of interest in China: (a) fluorite extraction and processing in the Sumochaganaobao region of Inner Mongolia; (b) zinc/copper/lead exploration, mining and processing in Wulatehouqi of Inner Mongolia; and (c) zinc/copper exploration, mining and processing in Xinjiang. In addition, AFMG owns 100% of Kichi-Chaarat Closed Joint Stock Company, whose major assets include a copper-gold mine located in the Kuru-Tegerek region of western Kyrgyzstan.
For more information, please visit http://www.chinaszmg.com/
Safe Harbor Statement
Certain of the statements made in the press release constitute forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward- looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in the People's Republic of China, variations in cash flow, fluctuation in mineral prices, risks associated with exploration and mining operations, and the potential of securing additional mineral resources, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
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Financial Tables to Follow
CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES | |||||
CONSOLIDATED BALANCE SHEETS | |||||
(Amounts in thousands, except share data) |
September 30, | December 31, | ||||||
2008 | 2007 | ||||||
Unaudited | Audited | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 462 | $ | 2,949 | |||
Accounts receivable, net | 482 | 2,481 | |||||
Other deposits and prepayments, net | 1,699 | 1,254 | |||||
Inventories | 4,510 | 1,639 | |||||
Total current assets | 7,153 | 8,323 | |||||
Available for sale investment | 147 | 137 | |||||
Prepayment for office rent | 540 | ||||||
Property, machinery and mining assets, net | 49,998 | 47,094 | |||||
Deferred debt issuance costs | 1,859 | 2,170 | |||||
Deferred income tax assets | 686 | 507 | |||||
Goodwill | 1,146 | 1,070 | |||||
Total assets | $ | 61,529 | $ | 59,301 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,212 | $ | 718 | |||
Fair value of detachable warrants liability | 116 | 1,100 | |||||
Short term bank loans | 1,760 | 1,314 | |||||
Other payables and accruals | 8,082 | 3,469 | |||||
Taxes payable | 314 | 257 | |||||
Due to related parties | 3,094 | 2,062 | |||||
Total current liabilities | 14,578 | 8,920 | |||||
Convertible notes payable | 23,478 | 21,186 | |||||
Deferred tax liabilities | 1,201 | 1,201 | |||||
Total liabilities | 39,257 | 31,307 | |||||
MINORITY INTEREST | 88 | 144 |
CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES | |||||
CONSOLIDATED BALANCE SHEETS | |||||
(Amounts in thousands, except share data) |
September 30, | December 31, | ||||||
2008 | 2007 | ||||||
Unaudited | Audited | ||||||
Commitment and contingencies | - | ||||||
STOCKHOLDERS’ EQUITY: | |||||||
Common Stock, $0.001 par value, | |||||||
50,000,000 shares authorized, 22,214,514 shares issued and outstanding | $ | 22 | $ | 22 | |||
Additional paid-in capital | 25,251 | 25,251 | |||||
PRC statutory reserves | 1,537 | 1,537 | |||||
Accumulated other comprehensive income | 4,104 | 2,247 | |||||
Retained earnings (deficit) | (8,730 | ) | (1,207 | ) | |||
Total stockholders’ equity | 22,184 | 27,850 | |||||
Total liabilities and stockholders’ equity | $ | 61,529 | $ | 59,301 | |||
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CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES | ||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||||
(Amounts in thousands, except per share data) |
For the Three Months Ended | For the Nine Months Ended | ||||||||||||
9/30/2008 | 9/30/2007 | 9/30/2008 | 9/30/2007 | ||||||||||
Unaudited | Unaudited | ||||||||||||
Net revenue | $ | 2,924 | 4,273 | $ | 4,845 | 12,063 | |||||||
Cost of sales | (2,429 | ) | (2,399 | ) | (4,206 | ) | (5,227 | ) | |||||
Gross profit | 495 | 1,874 | 639 | 6,836 | |||||||||
Operating expenses: | |||||||||||||
Selling and distribution expenses | (36 | ) | (72 | ) | (72 | ) | (207 | ) | |||||
General and administrative expenses | (2,550 | ) | (1,640 | ) | (6,942 | ) | (3,893 | ) | |||||
Income (loss) from operations | (2,091 | ) | 162 | (6,375 | ) | 2,736 | |||||||
Other income (expense): | |||||||||||||
Interest expense | (87 | ) | (144 | ) | (1,932 | ) | (2,489 | ) | |||||
Other, net | 48 | 161 | 590 | 146 | |||||||||
Income (loss) from continuing operations before income taxes and minority interests | (2,130 | ) | 179 | (7,717 | ) | 393 | |||||||
Income tax (expenses) benefits | 85 | (47 | ) | 129 | 32 | ||||||||
Income (loss) from continuing operations before minority interests | (2,045 | ) | 132 | (7,588 | ) | 425 | |||||||
Minority interests | 20 | (15 | ) | 65 | (6 | ) | |||||||
Income (loss) from continuing operations | (2,025 | ) | 117 | (7,523 | ) | 419 | |||||||
Discontinued operation | |||||||||||||
Loss from operations of discontinued component, net of taxes | - | (2 | ) | - | (195 | ) | |||||||
Income(loss) from discontinued operations | - | (2 | ) | - | (195 | ) | |||||||
Net income (loss) | (2,025 | ) | 115 | (7,523 | ) | 224 | |||||||
Other comprehensive income: | |||||||||||||
Foreign currency translation adjustments | 301 | 306 | 1,857 | 894 | |||||||||
Comprehensive income (loss) | $ | (1,724 | ) | 421 | $ | (5,666 | ) | 1,118 | |||||
Income (loss) per common share - basic and diluted | |||||||||||||
From continuing operations | (0.091 | ) | 0.005 | (0.339 | ) | 0.019 | |||||||
From discontinued operations | - | - | - | (0.009 | ) | ||||||||
Net income (loss) | $ | (0.091 | ) | 0.005 | $ | (0.339 | ) | 0.010 | |||||
Weighted average common shares outstanding | |||||||||||||
Basic and Diluted | 22,215 | 22,215 | 22,215 | 21,872 |
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CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
(Amounts in thousands) |
For the Nine Months Ended | |||||||
September 30, | |||||||
2008 | 2007 | ||||||
Unaudited | Unaudited | ||||||
Cash flows from operating activities: | |||||||
(Loss)income from continuing operations | $ | (7,523 | ) | $ | 419 | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | |||||||
Depreciation and amortization | 3,288 | 1,302 | |||||
Loss from investments | - | 81 | |||||
Deferred income tax benefits | (179 | ) | (158 | ) | |||
Fair value adjustment of warrants | (984 | ) | (239 | ) | |||
Accrual of coupon interest and accreted principal | 1,112 | 1,058 | |||||
Amortization of deferred financing costs | 1,179 | 108 | |||||
Amortization of debt issuance costs | 311 | 245 | |||||
Minority interests | (65 | ) | 6 | ||||
Changes in operating assets and liabilities: | |||||||
(Increase) decrease in - | |||||||
Accounts receivable | 1,999 | (2,023 | ) | ||||
Deposits and prepayments | (443 | ) | 1,107 | ||||
Prepayment for office rent | (540 | ) | |||||
Inventories | (2,871 | ) | (189 | ) | |||
Due from related companies | - | (847 | ) | ||||
Increase (decrease) in - | |||||||
Accounts payable | 494 | 786 | |||||
Other payables and accruals | 2,804 | 748 | |||||
Taxes payable | 57 | (191 | ) | ||||
Due to related parties | 1,032 | 28 | |||||
Net cash (used in) provided by operating activities from continuing operations | (329 | ) | 2,241 | ||||
Net cash provided by operating activities from discontinued operations | - | 4 | |||||
Net cash (used in) provided by operating activities | (329 | ) | 2,245 |
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CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Amounts in thousands) |
For the Nine Months Ended | |||||||
September 30, | |||||||
2008 | 2007 | ||||||
Unaudited | Unaudited | ||||||
Cash flows from investing activities: | |||||||
Purchases of property, machinery and mining assets | (1,975 | ) | (15,419 | ) | |||
Decrease in investment deposits | - | 1,025 | |||||
Acquisition of subsidiaries, net of cash and cash equivalents acquired | - | (466 | ) | ||||
Decrease in available-for-sale securities - margin deposit | - | 331 | |||||
Net cash used in investing activities of continuing operations | (1,975 | ) | (14,529 | ) | |||
Purchases of property, machinery and mining assets of discontinued operations | (388 | ) | |||||
Net cash used in investing activities | (1,975 | ) | (14,917 | ) | |||
Cash flows from financing activities: | |||||||
Issuance costs of convertible note | $ | - | $ | (2,096 | ) | ||
Proceeds from short-term borrowings | 446 | 226 | |||||
Repayments of short-term borrowings | - | (1,470 | ) | ||||
Net cash provided by (used in) financing activities | 446 | (3,340 | ) | ||||
Foreign currency translation adjustment | (629 | ) | 265 | ||||
Net decrease in cash and cash equivalents | (2,487 | ) | (15,747 | ) | |||
Cash and cash equivalents at the beginning of the period | 2,949 | 18,932 | |||||
Cash and cash equivalents at the end of the period | $ | 462 | $ | 3,185 | |||
Supplemental disclosures of cash flow information | |||||||
Cash paid for interest expenses | $ | 254 | $ | 1,037 | |||
Cash paid for income tax | $ | - | $ | - |
In China:
Sterling Song
Senior Investor Relations Manager
China Shen Zhou Mining & Resources, Inc.
Tel: +86-10-6887-2811
Email: investor@chinaszky.com
Web: http://www.chinaszmg.com
In the U.S.:
David Elias
Investor Relations
DME Capital LLC
Tel: +1-516-967-0205
Email: dave@dmecapital.com
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