Business review Gold mining business The Company acquired 51% of the shares in a gold mining company located in the Russian Federation and completed the acquisition on August 15, 2012. The gold mining company is a limited company established under the laws of the Russian Federation. It currently operates a mining project related to gold mining and has legal and beneficial interests in it. The mine has a total mining area of about 309.3 square kilometers, is operated by the gold mining company and is located on the Molchan River in the Zeyskiy district of the Amor region of the Russian Federation. The mine is estimated to have 35 tons of sand and gold reserves (C1 category). The gold mining company is currently developing its production and mining plans. On January 30, 2015, the Company acquired 35% of the shares in Shougang. The main assets of Shougang are 70% of the shares held in Jinxin Company and Jinhui Company respectively. Jinxin Company (i) holds a mining license and prospecting license for the Shanchakou mining area; (ii) holds a mining license for the Jinjiling mining area; and (iii) owns a gold processing plant and a gold smelter. Jinhui Company holds the mining license and prospecting license for the Yaojia Mine. During this year, the average selling price of gold came under huge downward pressure, weakening the profitability of the gold mining business. The gold mining business has a valid license, environmental protection policy and license required to carry out its business, and has complied with relevant local regulations and applicable laws and regulations with respect to its business. The main risks and uncertainties in the gold mining business are: (i) fluctuations in gold prices will directly affect sales performance; and (ii) social environmental issues, any complaints or protests, and any changes in environmental regulations or regulations in the local community will directly affect operating efficiency and costs. Property development business The property development project “Anlu Taihe Park” located on Liangji North Road, Anlu Economic Development Zone, Anlu City, Hubei Province, China, is wholly owned by the Group and has brought positive contributions to the Group. The project is divided into three phases, with a total construction area of about 272,568 square meters, and has been approved for residential and commercial mixed use. The term of land use rights for such properties expires on August 22, 1965. Among these, some properties are held by the Group for investment purposes (such as shops, kindergartens and hotels) to generate rent income, and some properties are held for sale. The property held for sale consists of various types of properties, including villas and apartments. During this year, the real estate market situation in China posed a challenge for property development business. Property sales conditions and average sales prices are under tremendous pressure, and the profitability of the property development business has been weakened as a result. The property development business has valid licenses and permits required to carry out its business operations and has complied with relevant local regulations and applicable laws and regulations with respect to its business. The main risks and uncertainties in the property development business are: (i) economic conditions and domestic and global issues will directly affect sales performance; and (ii) changes in government policies and any changes in policies introduced by the Chinese government on the domestic property industry will directly affect sales performance and operating costs.
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