TIDMREG
RNS Number : 0197N
Rare Earths Global Limited
25 September 2012
Press Release 25 September 2012
Rare Earths Global Limited
("REG" or the "Group")
Interim Results
Rare Earths Global Limited (AIM: REG), a leading mining services
group focused on the extraction, separation, refinement and trading
of rare earth elements, oxides and other related products, today
announces its unaudited results for the six months ended 30 June
2012.
Highlights
-- Successful listing on the London Stock Exchange's AIM market
in March 2012;
-- US$10 million fund raising;
-- Commencement of the Group's trading division;
-- Memorandum of understanding signed with Fujian Huaming Enterprises
(Group) Co. Ltd, a state owned business in the Fujian province,
to build and set up a separation factory in the province;
-- A non-binding term sheet agreement secured with Credit Suisse
AG in June 2012 for up to US$50 million;
-- Significant fall in Rare Earth Oxide prices since the beginning
of the year, ranging from 11% to 43% depending on the element;
-- Revenue RMB 52.8 million (H1 2011: RMB 94.9 million), with
revenue for the full year expected to be significantly weighted
towards the second half of the year;
-- Normalised PBT RMB 0.6 million (H1 2011: RMB 29.2 million)
- this excludes IPO costs and non-cash expenses relating
to option awards.
Post period end highlights
-- Acquisition of the remaining 39% Pingyuan Sanxie Rare Earth
Smelting Co Ltd ("Sanxie Plant") from Grace Coast Limited
in July 2012;
* All amounts are in RMB unless otherwise stated
Commenting on the results, Simon Ong, CEO of Rare Earths Global
Limited, said: "Significant progress has been made in REG during
the period under review. We have successfully listed on AIM raising
US$10 million in the process, commenced business in our newly
formed trading division and acquired the remaining 39% of the
Sanxie Plant post the period end. However, the progress of the
business has been hampered by a number of factors including a
smaller than expected fund raising at the time of the IPO; a
softening of Rare Earth Oxide prices; delays in the period of
confirmations of production and export quotas from the Chinese
Government; and, implications of the first Chinese White Paper on
the Rare Earths market. Despite these challenges, the Board
believes that REG remains in position to meet market expectations
for the full year 2012."
- Ends -
For further information:
Rare Earths Global Limited
Simon Ong, Chief Executive Officer Tel: +86 755 8633 6388
Brian Ho, Finance Director www.rareearthsglobal.com
Charles Stanley Securities
Nominated Adviser & Broker
Dugald J. Carlean / Carl Holmes Tel: +44 (0) 20 7149 6000
www.csysecurities.com
Media enquiries:
Abchurch Communications Limited
Henry Harrison-Topham / Joanne Tel: +44 (0) 20 7398 7702
Shears
henry.ht@abchurch-group.com www.abchurch-group.com
Business Review
On an operational level the planned growth as envisaged had to
be scaled back as the Group was only able to raise US$10 million at
its IPO rather than the full US$50 million it had been targeting.
This has meant that the capital expenditure required to expand the
separation plant, mining services division and support the new
trading division has had to be scaled back accordingly or delayed.
In order to address this issue REG is seeking debt financing and as
announced on 20 June 2012 the Company is currently in discussions
with Credit Suisse in Hong Kong regarding a potential term loan of
up to US$50 million. Credit Suisse are continuing their due
diligence and the Board hopes to provide shareholders with an
update on the status of this facility in October.
Divisional Review:
Separation & Smelting
At the time of Admission to AIM, the Board set out that a 20%
reduction in Rare Earth Oxide ("REO") prices was to be expected in
the short term. In fact, the average price decline for REO's during
the period has been 29%. This larger than expected decrease has
been caused by an increased softening in demand for REO's as the
manufacturing slowdown both internationally and in the Chinese
economy continues with the result that the requirement for finished
products that use REO's has declined significantly. For example,
lanthanum oxide (used in hybrid car batteries) dropped from RMB
312,000 per tonne in beginning of the period to RMB 212,000 in June
2012, representing a 32% decrease. In addition, the cost of REO raw
material has remained constant in the domestic Chinese market which
has further affected the margins at the Sanxie Plant.
The Sanxie Plant has sold 27 tonnes (H1 2011: 4 tonnes) of REO
in the first six months of the year and 31 tonnes(H1 2011: 426
tonnes) of rare earth compounds. A significant impediment to the
Group's revenue has been the delay in the Chinese Government's
confirmation of both the production quota and export quota for
2012. This has been the case for most of the REO producers in China
as the government is revisiting its policy following criticism of
its Rare Earth practices by the World Trade Organisation ("WTO") in
March this year. The Company recently received confirmation of its
production quota of 300 mtpa of REE but are currently still
awaiting confirmation on the export quota for 2012. With this delay
in clarity over exports, the Board fully expects revenues for the
full year 2012 to be weighted to the second half of the year as its
inventory and new product is sold. The Board is pleased to report
that the Sanxie Plant continues to pass all of its environmental
inspections without any issues.
Since the period end, the Group acquired the outstanding 39% in
the Sanxie Plant from Grace Coast Limited, a company wholly owned
by Mr. Tong Man Tak. This acquisition, announced on 19 July 2012,
will further ensure that REG's revenue is significantly second half
biased.
REG continues to negotiate with Fujian Huaming Enterprises
(Group) Co. Ltd regarding the terms of the final joint venture
agreement to build a separation facility in Fujian province.
However, given REG's current capital constraints this project has
been delayed. The Board hope to update shareholders on its status
in the second half of the year.
Mining Services
REG's contract with Zhejiang Ke Xin Electronics Co. Ltd
("Kexin") has begun to deliver revenue in H1 2012 and the Board
looks forward to this increasing proportionately during H2 2012.
This will improve the Group's overall margin as all REO raw
materials sourced from Kexin is at a 40% discount to market
price.
The Group is working towards securing additional long-term
mining service contracts and is actively discussing further
opportunities both domestically and internationally. As disclosed
at Admission, the Board hopes that there will be further
opportunity to partner with other SOE's in this regard. The Board
would hope to update shareholders on progress during the second
half of the year.
Trading
The Group's new trading division was held back by a delay in the
Chinese Government confirming production and export quota levels
along with funding being directed onwards the Sanxie Plant
operation. In spite of this, REG has traded 10 tonnes of Neodymium
oxide during the first half of 2012 which it has sourced from third
parties outside of China and sold to international buyers. Since
the REO has not been sourced from the REG's Sanxie Plant the
overall gross profit from the Group's initial trading has been
circa 15%. The Board expects this to increase significantly once
export quota levels are confirmed and REG can trade its own
production in the international market.
The Board is pleased to report that a facility of US$2 million
was recently agreed with Standard Chartered Bank for use by the
Group's trading division which will enable the division to take
advantage of both domestic/international oxides coming onto the
market at prices which can generate attractive margins for the
division.
Financial Results
For the six months ended 30 June 2012,Group turnover was RMB
52.8 million, (H1 2011:RMB 94.9 million- 44%). Turnover for the
separation and smelting of rare earth products was RMB 36.7 million
(H1 2011:RMB 83.1 million -56%), and accounted for approximately
70% (H1 2011: 87%) of the Group's turnover. Turnover from the
mining business was RMB 4.9 million (H12011 RMB 11.84) million,
representing around 9% (H1 2011: 12%) of the Group's total
turnover. Turnover from the trading business commenced during the
period under review and contributed RMB 11.1 million or 21% to
total Group turnover. Due to the lower margin in trading business
and lower selling price of REG's rare earth products, the Group
recorded an overall gross profit margin of 21% in the first half of
2012, compared to 40% margin in the corresponding period last year.
During the period, the Group incurred share based payment expenses
of RMB 23.1 million, and IPO related expenses of RMB 7.4 million,
together with other operational expenses, the Group recorded a net
loss of RMB 29.4 million (H1 2011: net profit of RMB 17.7 million).
The loss per share was RMB 49 cents (H1 2011: earning per share of
RMB 24 cents).
Chinese White Paper on Rare Earth
On 20 June 2012, the Chinese Government published a White Paper
on the Rare Earth industry in China (the "White Paper"). The White
Paper set out a comprehensive background on the industry in China
and its challenges. This included the actions that the authorities
have taken against illegal mining and environmental issues. In
addition, it was made clear that no new licences for REO production
would be granted for the foreseeable future. On balance, the Board
felt that the White Paper was of benefit to REG by potentially
assisting price stabilisation with regard to all oxides and in
addition narrowing the competitive landscape domestically.
However, on 7 August 2012 the Ministry of Industry and
Information Technology ("MIIT") released a statement which
recommended that mixed rare earth mines in China will have to
produce a minimum of 20,000 metric tonnes a year and smelters will
have to ensure annual output of 2,000 tonnes.
At current levels, the Sanxie Plant does not meet the MIIT
recommendation. China Daily, an English language Chinese national
daily newspaper, reported that a ministry spokesman said that up to
a third of China's 23 mines and 99 smelting companies will fail to
meet the new regulations, resulting in China reducing its mining of
the 17 elements by about one-fifth.
The Board would like to stress that at the present time it is
unclear whether the White Paper will been acted upon and if so when
and in addition that the MIIT statement is simply a recommendation
which may or may not be adopted in law. Nevertheless, the Board is
aware of the impact this may have on production at the Group's
Sanxie Plant in its current form. The Board believes that despite
this announcement the Company has several compelling mitigating
options open to it which will ensure the Group will continue to
operate as a significant commodities business in the region. The
options include:
-- Increasing the production capacity at the Sanxie Plant to
more than 2,000 tonnes within an acceptable time;
-- Fast track REG's potential agreement with Fujian Huaming
Enterprises (Group) Co. Ltdfor a 2,000 tonnes separation plant,
details of which were outlined in REG's admission document at the
time of the IPO;
-- Agree a Joint Venture with another state owned enterprise for
a 2,000 tonne separation plant;
-- Add a more advanced downstream processing capability which
will exempt the Company from the minimum production capacity
requirement;
-- Focus on producing rare earth compounds rather than final oxides.
The Board is currently considering these options all of which
would are viable alternatives to the current format. However, the
status may not change as there is currently no certainty that the
White Paper will be finally legislated.
Outlook
The rare earth sector, both domestically and internationally, is
going through a period of rapid change and development. The White
Paper demonstrates the growing importance the Chinese Government
places on REO production and the efficient control of its market
domestically. This is creating much uncertainty in the short term
as market participants position themselves for any new
developments. Like most of our competitors REG will have to adapt
in the short term but the Board feels that the Company is well
positioned to build a solid foundation in the coming months for its
long term success.
The Board believes that the demand for REO's for new
applications will continue to increase and in absolute terms both
domestic and international global demand will return to previous
levels. Coupled with increasing regulation and control of
production both domestically and internationally we believe that
the long term outlook for the price of REO's (and more specifically
HRE's) is positive.
On behalf of the Board of Directors
Simon Ong
Chief Executive Officer
25 September 2012
CONSOLIDATED STATEMENT of comprehensive income
For the Six months ended 30 JUNE 2012
NOTES Six months Six months
ended ended
30 June 30 June
2012 2011
RMB RMB
(unaudited) (unaudited)
Revenue 4 52,883,571 94,982,960
Cost of sales (41,520,165) (56,664,420)
------------- -------------
Gross profit 11,363,406 38,318,540
Other operating income 332,044 79,345
Selling and distribution costs (719,869) (735,614)
Administrative expenses (12,173,136) (7,732,150)
Share based payment expenses (23,117,745) -
Finance costs (3,383,487) (722,155)
------------- -------------
(Loss)Profit before tax (27,698,787) 29,207,966
Income tax expense 5 (1,724,541) (4,958,875)
------------- -------------
(Loss)Profit and total comprehensive
(expenses)income
for the period (29,423,328) 24,249,091
------------- -------------
(Loss)Profit and total comprehensive
(expenses)income
for the period attributable to: (30,524,207) 14,888,535
Equity holders of the Company 1,100,879 9,360,556
------------- -------------
Non-controlling interests (29,423,328) 24,249,091
------------- -------------
(LOSSES)EARNINGS PER SHARE
- BASIC 7 RMB (49) RMB 24 cents
cents
- DILUTED N/A N/A
------------- -------------
CONSOLIDATED statement of financial position
at 30 JUNE2012
NOTES As at As at
30June 31 December
2012 2011
RMB RMB
(unaudited) (audited)
Non-current Assets
Property, plant and equipment 9 23,101,531 25,403,960
Prepaid lease payments 3,496,930 3,537,090
Goodwill 97,115,400 97,115,400
Other intangible assets 3,602,120 4,319,198
Deposit paid for acquisition of
property, plant and equipment 8,000,000 8,000,000
Other receivables 8 3,000,000 3,000,000
------------ -------------
Total non-current assets 138,315,981 141,375,648
------------ -------------
Current Assets
Financial assets at fair value through
profit or loss 13,601,000 13,601,000
Inventories 58,858,042 56,920,646
Prepaid lease payments 80,320 80,320
Trade and other receivables and prepayments 8 81,679,974 46,872,992
Amount due from related parties 11 19,004,622 -
Bank balances and cash 6,454,554 23,892,468
------------ -------------
Total current assets 179,678,512 141,367,426
------------ -------------
Total assets 317,994,493 282,743,074
------------ -------------
Capital and Reserves
Share capital 12 401,517 29,500,430
Reserves 124,324,079 39,253,111
------------ -------------
Equity attributable to owners of the
Company 124,725,596 68,753,541
Non-controlling interests 36,190,801 35,089,922
------------ -------------
Total Equity 160,916,397 103,843,463
------------ -------------
Non-current Liabilities
Deferred taxation liabilities 4,333,560 4,574,366
Bank borrowing 6,980,000 8,380,000
------------ -------------
Total non-current liabilities 11,313,560 12,954,366
Current Liabilities
Trade and other payables and accruals 10 8,562,988 18,596,259
Amounts due to related parties 11 130,326,596 140,065,998
Bank borrowing 3,345,000 2,320,000
Taxation payable 3,529,952 4,962,988
------------ -------------
145,764,536 165,945,245
------------ -------------
Total Equity and liabilities 317,994,493 282,743,074
------------ -------------
___________ ___________
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the SIX months ended 30 JUNE 2012
Attributable to equity holders of the Company
Share based
Share Share payment Other Retained Non-controlling
capital Premium reserve reserve profits Sub-total interests Total
(loss)
------------- ----------- ----------- ----------- ------------- ------------- ---------------- -------------
RMB RMB RMB RMB RMB RMB RMB RMB
------------- ----------- ----------- ----------- ------------- ------------- ---------------- -------------
At 1 January
2012
(audited) 29,500,430 - - 12,399,000 26,854,111 68,753,541 35,089,922 103,843,463
------------- ----------- ----------- ----------- ------------- ------------- ---------------- -------------
Issuance of
shares 401,517 63,362,134 - - - 63,763,651 - 63,763,651
Arising on the
Reorganization (29,500,430) - - 29,115,296 - (385,134) - (385,134)
Recognition of
equity-settled
share based
payments - - 23,117,745 - - 23,117,745 - 23,117,745
Profit and
total
comprehensive
income for the
period - - - - (30,524,207) (30,524,207) 1,110,879 (29,423,328)
------------- ----------- ----------- ----------- ------------- ------------- ---------------- -------------
At 30 June,
2012
(unaudited) 401,517 63,362,134 23,117,745 41,514,296 (3,670,096) 124,725,596 36,190,801 160,916,397
---------------- ------------- ----------- ----------- ----------- ------------- ------------- ---------------- -------------
Attributable to equity holders of the Company
Share based
Share Share payment Other Retained Non-controlling
capital Premium reserve reserve profits Sub-total interests Total
(loss)
----------- -------- -------- ----------- ------------ ----------- ---------------- -----------
RMB RMB RMB RMB RMB RMB RMB RMB
At 1 January
2011 (audited) 341,445 - - 2,036,000 (1,728,586) 648,859 15,349,450 15,998,309
----------- -------- -------- ----------- ------------ ----------- ---------------- -----------
Issuance of
shares 29,158,985 - - 29,158,985 - 29,158,985
Recognition of
call option - - - 10,363,000 - 10,363,000 - 10,363,000
Capital
contribution
from
Non-controlling
interest
shareholder - - - - - - 170,303 170,303
Profit and total
comprehensive
income for the
period - - - - 14,888,535 14,888,535 9,360,556 24,249,091
----------- -------- -------- ----------- ------------ ----------- ---------------- -----------
At 30 June, 2011
(unaudited) 29,500,430 - - 12,399,000 13,159,949 55,059,379 24,880,309 79,939,688
----------- -------- -------- ----------- ------------ ----------- ---------------- -----------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the SIX months ended 30 JUNE 2012
Six months Six months
ended ended
30 June 30 June
2012 2011
RMB RMB
(unaudited) (unaudited)
OPERATING ACTIVITIES
(Losses)profit before tax (27,698,787) 29,207,966
Adjustments for:
Depreciation of property, plant and equipment 2,059,504 1,780,801
Amortisation of prepaid lease payments 40,160 40,154
Amortisation of other intangible assets 717,078 717,079
Share based payment expenses 23,117,745 -
Finance costs recognised in profit and
loss 3,383,487 722,155
Interest income (24,068) (78,927)
Loss on disposal of property, plant and 410,580 -
equipment
--------------- -------------
Operating cash flows before movements in
working capital 2,005,699 32,389,228
Increase in inventories (1,937,396) (16,795,919)
Increase in trade and other receivables
and prepayments (34,806,982) (40,579,019)
Increase/(decrease) in trade and other payables
and accruals (10,033,271) 53,989,719
--------------- -------------
Cash generated from (used in) operations (44,771,950) 29,004,009
Interest received 24,068 78,927
Income tax paid (3,398,382) (2,692,310)
--------------- -------------
NETCASH GENERATED FROM(USED IN) OPERATING
ACTIVITIES (48,146,264) 26,390,626
--------------- -------------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (167,656) (10,542,272)
--------------- -------------
NETCASHFROM/(USED IN) INVESTING ACTIVITIES (167,656) (10,545,272)
--------------- -------------
FINANCING ACTIVITY
Proceeds from capital injection - 29,158,985
Proceeds from issuance of shares, net of 63,378,517 -
shares issuance expenses
Repayment of bank borrowing (375,000) -
Interest paid (1,722,088) -
Advance to non-controlling interests of
subsidiaries - (17,024,500)
Repayment to Bi Bang - (9,975,000)
Advance from (repayment to) related parties (30,405,423) 14,996,669
Capital contribution from non-controlling
interests of subsidiaries - 170,303
--------------- -------------
NETCASH USED IN(FROM) FINANCING ACTIVITY 30,876,006 17,326,457
--------------- -------------
NET INCREASE(DECREASE) IN CASHANDCASH EQUIVALENTS (17,473,914) 33,171,811
CASHANDCASH EQUIVALENTS AT 1 JANUARY 23,892,468 6,335,439
--------------- -------------
CASHANDCASH EQUIVALENTS AT 30 JUNE
represented by bank balances and cash 6,454,554 39,507,250
--------------- -------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the SIX months ended 30 JUNE 2012
1. GENERAL INFORMATION
Rare Earths Global Limited (the "Company") is an exempted
company incorporated in the Cayman Islands with limited liability
on 8 February 2012. The Company's registered address is Cricket
Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111,
Cayman Island. The Company's shares were traded on the AIM Market
of the London Stock Exchange Plc.
The Company together with its subsidiaries (collectively
referred to as the "Group") is principally engaged in the
production, separation and refining of rare earth products and
provisions of mining management services.
This condensed consolidated interim financial information has
not been audited.
2. THE REORGANISATION AND BASIS OF PREPARATION
Basis of Preparation
This interim report, which incorporates the financial
information of the Company has been prepared on the historical cost
basis except for certain financial instruments that are measured at
fair values, as appropriate; using accounting policies which are
consistent with those set out in the accountants report set out in
the AIM admission document and Dressport Limited ("Dressport")
consolidated financial statement for the year ended 31 December
2011.
The unaudited condensed consolidated financial statements are
presented on a condensed basis as permitted by IAS 34 'Interim
Financial Reporting' and therefore do not include all disclosures
that would otherwise be required in a full set of financial
statements and should be read in conjunction with the accountants
report set out in the AIM admission document and Dressport
Limited;
This interim financial information for the six months ended 30
June 2012, was prepared in accordance with IAS 34 and thereby
International Financial Reporting Standards ("IFRS"), both as
issued by the International Accounting Standards Board ("IASB") and
as adopted by the European Union ("EU"); and was approved by the
Board of Directors on 24 September 2012.
Group Reorganisation
Rare Earths Global acquired its 100% interest in Dressport by
way of share for share exchanges. This is a business combination
involving entities under common control and the consolidated
financial statements are issued in the name of REG but they are a
continuance of Dressport. Therefore the assets and liabilities of
Dressport have been recognised and measured in these consolidated
financial statements at their pre combination carrying values. The
retained earnings and other equity balances recognised in these
consolidated financial statements are the retained earnings and
other equity balances of REG and Dressport. The equity structure
appearing in these consolidated financial statements (the number
and the type of equity instruments issued) reflect the equity
structure of REG including equity instruments issued by the Company
to effect the consolidation.
The comparatives included are for Dressport prior to the group
reorganisation.
3. RECENT ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT YET ADOPTED
The International Accounting Standard Board (the "IASB") issued
a number of new and revised International Accounting Standards
("IASs"), International Financial Reporting Standards ("IFRSs"),
amendments and related Interpretations ("IFRICs") (hereinafter
collectively referred to as the "New IFRSs") which are effective
for the Company's financial period beginning on January 1, 2013. At
the date of this report, the IASB has not issued any new or revised
standards, amendments and interpretations.
4. REVENUE AND SEGMENT INFORMATION
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the Chief Operating Decision Maker ("CODM")
of the Group to allocate resources to the segments to assess their
performance.
The Group determines its operating segments based on the report
reviewed by the directors of the Group, who are also the CODM, to
make strategic decisions.
Information reported to the Group's CODM for the purposes of
resource allocation and performance assessment focuses specifically
on the separation and sales rare earth products, the mining
management services, and the trading of rare earth products.
Accordingly, the Group categorises its business into three
operating segments, namely (i) separation and sales of rare earth
products; (ii) mining management services; and (iii) trading of
rare earth product
Separation of rare earth products - production and sales of rare
earth products .
Mining management services - provides mining management
servicesand technical supportto PRC rare earth mining companies and
factories in the PRC.
Trading of rare earths products - trading of rare earth products
in the PRC and overseas.
The Group's CODM make decisions according to the operating
results of each segment. Information of segment assets and
liabilities is not part of the regular reports provided to the
Group's CODM for the purpose of resources allocation and
performance assessment. Accordingly, only segment results are
presented.
Segment result represents the gross profit earned by each
segment based on internal management reports prepared in accordance
with accounting policies similar to the accounting rules and
financial regulations applicable to enterprises in the PRC, without
allocation of other income, changes in fair values of financial
assets at fair value through profit or loss, selling and
distribution costs, administrative expenses and finance costs. This
is the measure reported to the chief operating decision makers for
the purposes of resource allocation and assessment of segment
performance.
The financial information as reviewed by the Company's CODM are
as follows:
For the six months ended 30 June 2012
Separation and Mining Management Trading Aggregated
Sales Service Management
--------------- -------------------- ------------- -------------
RMB RMB RMB RMB
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Segment revenue 36,745,468 4,962,500 11,175,603 52,883,571
Segment result 8,594,256 2,300,217 1,704,753 12,599,226
For the six months ended 30 June 2011
Separation and Mining Management Trading Aggregated
Sales Service Management
--------------- -------------------- ------------- -------------
RMB RMB RMB RMB
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Segment revenue 83,172,960 11,875,983 - 95,048,983
Segment result 28,385,975 7,186,471 - 35,572,446
For the six months ended 30 June 2012
Reconciliation of segment revenue and segment results of the
Group
Consolidated
RMB
(Unaudited)
Total segment and group
revenue 52,883,571
Total segment results: 12,599,226
Reconciliation:
Adjustment for depreciation (1,235,820)
Total Group gross profit 11,363,406
Other operating income 332,044
Selling and distribution
costs (717,079)
Administrative expenses (12,173,136)
Share based payment expenses (23,117,745)
Finance cost (3,383,487)
Profit before taxation 27,698,787
Other segment information
Separation and Mining Management Trading Aggregated
Sales Service Management
--------------- -------------------- ------------- -------------
RMB RMB RMB RMB
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Amount included
in the measure of
segment result
Depreciation of
property, plant
and equipment 772,211 43,947 - 816,158
For the six months ended 30 June 2011
Reconciliation of segment revenue and segment results of the
Group
Consolidated
RMB
(Unaudited)
Total segment revenue 95,048,943
Reconciliation:
Elimination of inter-segment interest
income (65,983)
Total Group revenue 94,982,960
Total segment results: 35,572,446
Reconciliation: (65,983)
Elimination of inter-segment interest
income
Adjustment for depreciation (1,235,820)
Classification of export tariffs
to selling expenses 4,047,897
Total Group gross profit 38,318,540
Other operating income 79,345
Selling and distribution costs (735,614)
Administrative expenses (7,732,150)
Finance cost (722,155)
Profit before taxation 29,207,966
Other segment information
Separation and Mining Management Trading Aggregated
Sales Service Management
--------------- -------------------- ------------- -------------
RMB RMB RMB RMB
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Amount included
in the measure of
segment result
Depreciation of
property, plant
and equipment 502,012 43,350 - 545,362
5. INCOME TAX EXPENSE
Six months Six months
ended ended
30 June 30 June
2012 2011
RMB RMB
(unaudited) (unaudited)
Current tax:
PRCEnterprise Income Tax ("EIT") (1,965,346) (5,199,681)
Deferred tax 240,805 240,806
(1,724,541) (4,958,875)
The provision for PRC current income tax is based on a statutory
rate of 25% (six months ended 30 June 2011: 25%) of the assessable
profit of the entities comprising the Group as determined in
accordance with the relevant income tax rules and regulations of
the PRC, except for certain branches and subsidiaries of the Group,
which are taxed at preferential rates.
The Company's PRC subsidiary, Sanxie, is a foreign invested
entity. In accordance with Foreign Enterprise Income Tax Laws in
the PRC, Sanxie was approved in 2007 to be exempted from income tax
for two years starting from its first profit making year and
following by a 50% tax relief for the next three years. Sanxie was
therefore exempted from income tax for each of the years ended 31
December 2007 and 2008 and subject to 12.5% tax rate for each of
the years ended 31 December 2009, 2010 and 2011.
6. DIVIDENDS
No dividend was paid or proposed during the period presented,
nor has any dividend has been proposed since the end of the
reporting period.
7. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share
attributable to the owners of the Company is based on the following
data:
Six months Six months
ended ended
30 June 30 June
2012 2011
RMB RMB
(unaudited) (unaudited)
Earnings
Profit/(losses) for the period attributable
to owners of the Company (30,524,207) 14,888,535
Number of shares
Weighted average number of ordinary shares
for the purpose of calculating earnings/(losses)
per share 62,291,236 60,994,790
The weighted average number of shares in issue during the six
months period ended 30 June 2011 represents the 60,994,790 shares
in issue before the listing of shares of the Company on the AIM of
the London Stock Exchange, as if such shares had been outstanding
during the entire six months period ended 30 June 2011.
The Group has no dilutive instruments during the six months
period ended 30 June 2011. No adjustment has been made to the basic
loss per share amounts presented for the six months ended 30 June
2012 in respect of a dilution as the impact of the share options
issued by the Company outstanding had an anti-dilutive effect on
the basic loss per share amounts presented.
8. TRADE AND OTHER RECEIVABLES AND PREPAYMENTS
At 30 June 2012 At 31 December2011
RMB RMB
(unaudited) (unaudited)
Trade receivables 24,662,386 39,824,270
Prepayments to suppliers 56,775,704 6,483,751
Other receivables (note) 3,241,884 3,654,971
60,017,588 10,048,722
84,679,974 49,872,992
Analysed for reporting purpose as:
Current assets 81,679,974 46,872,992
Non-current assets 3,000,000 3,000,000
84,679,974 49,872,992
Note: The amount as of 30 June 2012 and 31 December 2011
includes non-current other receivables of RMB3, 000,000, which
represents long-term deposits for renting professional mine
detection equipment.
The Group allows an average credit period of 60 days to its
trade customers. The following is an aged analysis of trade
receivables presented based on the invoice date at the end of the
reporting period:
At 30 June 2012 At 31 December
2011
RMB RMB
(unaudited) (unaudited)
0 - 60 days 18,746,219 38,028,333
61-120 days 3,925,000 1,793,937
Over 121 days 1,991,167 -
24,662,386 39,824,270
9. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT
During the six months ended 30 June 2012, the Group spent
approximately RMB 167,656 on acquisition of property, plant and
equipment in order to upgrade its operating capacities.
10. TRADE AND OTHER PAYABLES AND ACCRUALS
At 30 June 2012 At 31 December
2011
RMB RMB
(unaudited) (unaudited)
Trade payables 2,146,680 5,930,992
Advance from customers - 3,950,000
Other payable and accruals 6,416,308 8,715,267
8,562,988 18,596,259
In general, the Group is required to make full advance payments
(including issuance of bills) to suppliers for the purchases of its
major raw materials, rare earth. Suppliers of raw materials other
than rare earth generally allow the Group a credit period of 60 to
90 days.
11. AMOUNTS DUE FROM/TO RELATED PARTIES
At 30 June 2012 At 31 December
2011
RMB RMB
(unaudited) (unaudited)
Purchase consideration of Sanxie due to
a non-controlling
shareholder of Long Era, Mr. Tong:
- within one year 30,000,000 59,843,245
Other amounts due (from) to:
- a director and controlling shareholder
of the Company,
Mr.Ong 100,326,596 67,503,689
- a non-controlling shareholder, Mr. Tong - 12,719,064
- a non-controlling shareholder, Mr. Chen (19,004,622) -
81,321,974 80,222,753
Total 111,321,974 140,065,998
________
12. SHARE CAPITAL OF THE COMPANY
The share capital of the Group at 31 December 2011 represented
the amount of paid-in capital of Dressport contributed by its
equity holders which is the same as the owner of the Company.
The share capital of the Group at 30 June 2012 represented the
issued and fully paid capital of the Company.
Number of shares Share capital
(unaudited) (unaudited)
Authorised:
Ordinary shares of US$0.01each at date of 10,000,000 US$100,000
incorporation
Shares subdivision in the period (note (a)) 990,000,000 -
Ordinary shares of US$0.001each as at 30 1,000,000,000 US$100,000
June 2012
Issued and fully paid
Ordinary shares of US$0.01each at date of 1 US$0.01
incorporation(note (b))
Repurchase of share (note (c)) (1) (US$0.01)
Issue of shares on 7 March 2012 (note (d)) 60,994,790 US$60,995
Issue of shares on by placing (note (e)) 2,592,891 US$2,593
Ordinary shares of US0.001 each as at 30
June 2012 63,587,681 63,588
Presented as RMB RMB
Ordinary shares of US0.001 each as at 30
June 2012 63,587,681 401,517
Notes:
(a) Pursuant to an ordinary resolution passed in the meeting on
20 February 2012, each of the authorised and issued shares of the
Company were subdivided into 10 shares of US$0.001 each.
(b) Upon incorporation, the authorised capital of the Company
was US$100,000 divided into 10,000,000 shares of US$0.01 each, of
which one subscriber share was allotted and issued at par to
Citywell Limited as the sole subscriber.
(c) On 7 March 2012, the Company repurchased ten of its own
shares for a consideration of US$0.01.
(d) Pursant to a Share Exchange Agreement dated 7 March 2012,
the Company purchased from the Sellers the entire issued share
capital of Dressport in exchange for the issue of 60,994,790
ordinary shares in the Company as exactly mirrored the proportion
of shares held by them in Dressport prior to completion of the
share exchange agreement.
(e) On 29 March 2012, 2,592,891 ordinary shares of US$0.001 each
were issued at a price of GBP 247 pence per share under the
placing. The proceeds of US$ 2,593 (equivalent to approximately RMB
16,372) representing the par value, were credited to the Company's
share capital. The remaining proceeds of GBP 6,402,811(equivalent
to approximately RMB 64,392,000), after the issuing expenses, were
credited to the share premium account. The new shares rank pari
passu with the existing shares in all respect.
13. RELATED PARTY DISCLOSURES
(a) Except for transactions and balances disclosed elsewhere in
the condensed consolidated financial statements, the Group has no
other significant transactions and balances with its related
parties during the six months ended 30 June 2012.
(b) During the period, the Group granted share options of
2,861,462 (30 June 2011: nil) to Directors and advisors of the
Group with exercise price of GBP 247 pence.
(c) Compensation of key management personnel of the Group
Six months Six months
ended ended
30 June 30 June
2012 2011
RMB RMB
(unaudited) (unaudited)
Salaries and fee 372,230 -
Equity settled share option expense 1,587,397 -
1,959,627 -
14. CAPITAL COMMITMENTS
At 30 June 2012 At 31 December
2011
RMB RMB
(unaudited) (unaudited)
Capital expenditure in respect of property,
Plant and equipment contracted for but not
provided
in the consolidated financial statements 3,758,400 3,758,400
15. EVENT AFTER THE REPORTING PERIOD
On 14 July 2012, the Company has exercised its call option to
acquire the remaining 39% of Pingyuan Sanxie Rare Earth Smelting Co
Ltd from Grace Coast Limited, a company wholly owned by Mr. Tong
Man Tak. The 39% of the Sanxie Plant will be acquired by the issue
of 4,000,000 new ordinary shares in REG and a further US$10.0
million in cash which shall be paid in three tranches, US$3.0
million up on signing of the agreement, a further US$3.0 million on
or before 15 August 2012 and a final tranche of US$4,000,000 on or
before 15 September 2012. The total consideration being paid by REG
for the 39% of the Sanxie Plant (based on the closing middle market
price of an ordinary share in REG on 18 July 2012, being 337.5
pence per share) is approximately US$31.06 million.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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