2. DISCONTINUED OPERATION (CONTINUED)
The net cash flows incurred by the discontinued operation, excluding the cash consideration received from disposal of the discontinued operation are as follows:
2. DISCONTINUED OPERATION (CONTINUED)
The results of the discontinued operation are presented below:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2016
|
|
Six Months Ended
June 30, 2016
|
|
For the period from January 1, 2017 to March 3,
2017
|
|
|
|
|
CNY
|
|
CNY
|
|
CNY
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/ earnings per share from the discontinued operation (Presented in CNY per share)
|
|
|
|
|
|
|
|
|
Basic
|
(0.16
|
)
|
(0.24
|
)
|
|
0.44
|
|
|
Diluted
|
(0.16
|
)
|
(0.24
|
)
|
|
0.44
|
|
|
|
|
|
|
|
|
|
|
|
The calculations of basic and diluted loss or earnings per share from the discontinued operation are based on:
|
|
|
|
|
|
|
|
|
|
|
(Loss)/profit attributable to owners of the Company from the discontinued operation
|
(4,103
|
)
|
(6,078
|
)
|
|
10,978
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares in issue during the period used in the earnings or loss per share calculations:
|
|
|
|
|
|
|
|
|
Basic
|
24,910,916
|
|
24,910,916
|
|
|
24,910,916
|
|
|
Diluted
|
24,910,916
|
|
24,910,916
|
|
|
24,910,916
|
|
3. RESTATEMENT
The Company’s acquisition of Double Grow International Limited (“Double Grow”) in 2016 was accounted for as a combination of entities under common control since the Company and Double Grow were under the common control of Mr. Li Feilie. The consolidated financial statements incorporate the financial statements of the combining entity in which the common control combination occurs as if they had been combined from the date when the combining entity first came under the control of the controlling party.
The disposal of Wuhu Feishang was completed on March 3, 2017 and Wuhu Feishang was classified as a discontinued operation. Accordingly, the results of the Wuhu Feishang were separately reported as a "discontinued operation" in the condensed consolidated statement of profit or loss and other comprehensive income for the period ended June 30, 2017. The comparative amounts reported in the condensed consolidated statements of profit or loss and other comprehensive income and related notes have been revised accordingly to reflect the reclassification between continuing operations and the discontinued operation.
As a result of the acquisition of Double Grow and the disposal of Wuhu Feishang, the relevant line items in the condensed consolidated statements of profit or loss and other comprehensive income for the three months and six months ended June 30, 2016 have been restated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group
(as previously reported)
|
|
Adjustment in relation to acquisition of Double Grow
|
|
Adjustment in relation to disposal of Wuhu Feishang
|
|
The Group
(as restated)
|
|
|
|
|
CNY
|
|
CNY
|
|
CNY
|
|
CNY
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statements of profit or loss and other comprehensive income for three months ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
Selling and distribution expenses
|
|
(5
|
)
|
—
|
|
5
|
|
—
|
|
|
Administrative expenses
|
|
(2,118
|
)
|
(1,091
|
)
|
1,134
|
|
(2,075
|
)
|
|
Losses arising from temporary suspension of production
|
|
(1,021
|
)
|
—
|
|
1,021
|
|
—
|
|
|
Reversal of write down of inventories to net realizable value, net
|
|
251
|
|
—
|
|
(251
|
)
|
—
|
|
|
Other operating income/ (expenses)
|
|
71
|
|
(334
|
)
|
(42
|
)
|
(305
|
)
|
|
Finance costs
|
|
(86
|
)
|
(8
|
)
|
87
|
|
(7
|
)
|
|
Interest income
|
|
65
|
|
—
|
|
(42
|
)
|
23
|
|
|
Non-operating expenses, net
|
|
(2,220
|
)
|
(10
|
)
|
2,191
|
|
(39
|
)
|
|
Loss for the period from continuing operations
|
|
(5,063
|
)
|
(1,443
|
)
|
4,103
|
|
(2,403
|
)
|
|
Loss for the period from a discontinued operation
|
|
—
|
|
—
|
|
(4,103
|
)
|
(4,103
|
)
|
10 / 16
3. RESTATEMENT (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group
(as previously reported)
|
|
Adjustment in relation to acquisition of Double Grow
|
|
Adjustment in relation to disposal of Wuhu Feishang
|
|
The Group
(as restated)
|
|
|
|
|
CNY
|
|
CNY
|
|
CNY
|
|
CNY
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
(1
|
)
|
(237
|
)
|
—
|
|
(238
|
)
|
|
Total comprehensive income for the period, net of tax
|
|
(5,064
|
)
|
(1,680
|
)
|
—
|
|
(6,744
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share attributable to ordinary equity holders of the company:
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share:
|
|
|
|
|
|
|
|
|
|
|
- For loss from continuing operations (CNY per share)
|
|
(0.20
|
)
|
(0.06
|
)
|
0.16
|
|
(0.10
|
)
|
|
- For loss from a discontinued operation (CNY per share)
|
|
—
|
|
—
|
|
(0.16
|
)
|
(0.16
|
)
|
|
|
|
(0.20
|
)
|
(0.06
|
)
|
—
|
|
(0.26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group
(as previously reported)
|
|
Adjustment in relation to acquisition of Double Grow
|
|
Adjustment in relation to disposal of Wuhu Feishang
|
|
The Group
(as restated)
|
|
|
|
|
CNY
|
|
CNY
|
|
CNY
|
|
CNY
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statements of profit or loss and other comprehensive income for six months ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
Selling and distribution expenses
|
|
(12
|
)
|
—
|
|
12
|
|
—
|
|
|
Administrative expenses
|
|
(4,439
|
)
|
(1,757
|
)
|
2,370
|
|
(3,826
|
)
|
|
Losses arising from temporary suspension of production
|
|
(2,453
|
)
|
—
|
|
2,453
|
|
—
|
|
|
Reversal of write down of inventories to net realizable value, net
|
|
784
|
|
—
|
|
(784)
|
|
—
|
|
|
Other operating income/ (expenses)
|
|
142
|
|
(1,058
|
)
|
(143)
|
|
(1,059
|
)
|
|
Finance costs
|
|
(116
|
)
|
(23
|
)
|
116
|
|
(23
|
)
|
|
Interest income
|
|
164
|
|
—
|
|
(137)
|
|
27
|
|
|
Non-operating expenses, net
|
|
(2,191
|
)
|
(43
|
)
|
2,191
|
|
(43
|
)
|
|
Loss for the period from continuing operations
|
|
(8,121
|
)
|
(2,881
|
)
|
6,078
|
|
(4,924
|
)
|
|
Loss for the period from a discontinued operation
|
|
—
|
|
—
|
|
(6,078
|
)
|
(6,078
|
)
|
|
Foreign currency translation adjustments
|
|
(9
|
)
|
(3,278
|
)
|
—
|
|
(3,287
|
)
|
|
Total comprehensive income for the period
,
net of tax
|
|
(8,130
|
)
|
(6,159
|
)
|
—
|
|
(14,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share attributable to ordinary equity holders of the company:
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share:
|
|
|
|
|
|
|
|
|
|
|
- For loss from continuing operations (CNY per share)
|
|
(0.33
|
)
|
(0.11
|
)
|
0.24
|
|
(0.20
|
)
|
|
- For loss from a discontinued operation (CNY per share)
|
|
—
|
|
—
|
|
(0.24
|
)
|
(0.24
|
)
|
|
|
|
(0.33
|
)
|
(0.11
|
)
|
—
|
|
(0.44
|
)
|
4. (LOSS)/ EARNINGS PER SHARE
Basic (loss)/earnings per share amounts are calculated using the weighted average number of 24,910,916 (June 30, 2016: 24,910,916) common shares outstanding during the period. The Company did not have any potentially dilutive issuances during the six months ended June 30, 2016 and 2017. Accordingly, the diluted (loss)/ earnings per share amounts are the same as the basic (loss)/earnings per share amounts.
11 / 16
5. INVENTORIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
|
|
CNY
|
|
|
CNY
|
|
|
US$
|
|
|
|
|
(Audited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
8,437
|
|
|
|
4,498
|
|
|
|
663
|
|
|
Finished goods
|
|
|
2,120
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
10,557
|
|
|
|
4,498
|
|
|
|
663
|
|
6. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
|
|
CNY
|
|
|
CNY
|
|
|
US$
|
|
|
|
|
(Audited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
28,713
|
|
|
|
5,596
|
|
|
|
825
|
|
|
Mining structures and mining rights
|
|
|
33,942
|
|
|
|
326
|
|
|
|
48
|
|
|
Machinery and equipment
|
|
|
7,654
|
|
|
|
928
|
|
|
|
137
|
|
|
Motor vehicles
|
|
|
7,356
|
|
|
|
5,413
|
|
|
|
798
|
|
|
Construction in progress
|
|
|
36,060
|
|
|
|
39,142
|
|
|
|
5,774
|
|
|
Accumulated depreciation, depletion and amortization
|
|
|
(59,202
|
)
|
|
|
(3,588
|
)
|
|
|
(529
|
)
|
|
|
|
|
54,523
|
|
|
|
47,817
|
|
|
|
7,053
|
|
7. RELATED PARTY BALANCES AND TRANSACTIONS
In addition to the transactions detailed elsewhere in these condensed financial statements, the Company had the following transactions with related parties during the period.
(a)
Commercial transactions with a related company are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
|
|
CNY
|
|
|
CNY
|
|
|
US$
|
|
|
|
Notes
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHNR’s share of office rental, rates and others to Anka Consultants Limited (“Anka”)
|
i
|
|
(469
|
)
|
|
|
(634
|
)
|
|
|
(94
|
)
|
|
Gain on disposal of property, plant and equipment to Wuhu Industrial
|
ii
|
|
—
|
|
|
|
45
|
|
|
|
7
|
|
|
|
|
|
(469
|
)
|
|
|
(589
|
)
|
|
|
(87
|
)
|
(i)
On September 1, 2013, the Company signed an office sharing agreement with Anka, a private Hong Kong company that is owned by certain Directors of the Company. Pursuant to the agreement, the Company shared 119 square meters out of the total of 368 square meters of the office premises. On April 1, 2017, the Company signed an office sharing agreement with Anka which superseded all previously signed agreements between the parties, pursuant to which the Company shares 184 square meters of the total area of the office premises. The agreement also provides that the Company shares certain costs and expenses in connection with their use of the office, in addition to some of the accounting and secretarial services and day-to-day office administration services provided by Anka.
(ii)
On February 22, 2017, Wuhu Feishang signed an agreement with Wuhu Industrial, a related party, to dispose of certain property, plant and equipment prior to the Company’s disposal of Wuhu Feishang. The disposal gain amounted to CNY0.05 million (US$0.01 million).
12 / 16
7. RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
|
|
|
(b)
|
Balances with related companies
|
The Company’s balances with related companies are unsecured, non-interest bearing. The balances are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
|
|
CNY
|
|
|
CNY
|
|
|
US$
|
|
|
|
|
(Audited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable to related companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Empresa Minera Jacha Uru S.A
.
|
|
|
1,298
|
|
|
|
1,522
|
|
|
|
225
|
|
|
Feishang Enterprise
|
|
|
7,832
|
|
|
|
3,924
|
|
|
|
579
|
|
|
Feishang Hesheng
|
|
|
11,877
|
|
|
|
16,998
|
|
|
|
2,507
|
|
|
|
|
|
21,007
|
|
|
|
22,444
|
|
|
|
3,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable to the Shareholder:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Feishang Group
|
|
|
12,565
|
|
|
|
12,082
|
|
|
|
1,782
|
|
8. INCOME TAX EXPENSE
Effective from January 1, 2008, the PRC’s statutory corporate income tax (“CIT”) rate is 25%. The Company’s PRC subsidiaries are subject to income tax at 25% on their respective taxable incomes as calculated in accordance with the CIT Law and its relevant regulations. The Company’s Bolivian subsidiary is subject to a Bolivian enterprise income tax rate of 25% applicable to both foreign investment enterprises and domestic companies.
9. SUBSEQUENT EVENTS
On November 30, 2017, Yangpu Shuanghu Industrial Development Co., Limited (“Yangpu Shuanghu”), a wholly-owned subsidiary of CHNR, entered into separate agreements with Feishang Enterprise and Shenzhen Chaopeng Investment Co., Ltd. (“Shenzhen Chaopeng”), each of which is a related party. Pursuant to the agreement with Feishang Enterprise (the “Enterprise Group Agreement”), the Company consummated its acquisition of approximately 98.3% of the issued and outstanding capital shares of Bayannaoer City Feishang Mining Company Limited (“Bayannaoer Mining”). Pursuant to the agreement with Shenzhen Chaopeng (together with the Enterprise Group Agreement, the “Acquisition Agreements”), the Company consummated its acquisition of approximately 1.7% of the issued and outstanding capital shares of Bayannaoer Mining. The Acquisition Agreements are identical to each other except as to the name of seller, the amount of consideration and similar information.
The purchase price for all of the issued and outstanding capital shares of Bayannaoer Mining is CNY0.72 million (US$0.11 million), which is approximately equal to the net asset value of Bayannaoer Mining as of September 30, 2017. The purchase price was paid by delivery to Feishang Enterprise and Shenzhen Chaopeng of Yangpu Shuanghu’s several promissory notes (the “Notes”) in the aggregate amount of CNY0.72 million (US$0.11 million). The Notes are payable, without interest, on May 30, 2018.
13 / 16
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussion includes statements that constitute “forward-looking statements” within the meaning of Federal securities laws. These statements include, without limitation, statements regarding the intent, belief and current expectations of management with respect to the Company's policies regarding acquisitions, investments, dispositions, financings, conflicts of interest and other business matters; and trends affecting the Company's financial condition or results of operations. Forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, many of which are outside of our control, and actual results may differ materially from those in the forward-looking statements. Among the risks and uncertainties that could cause our actual results to differ from our forward-looking statements are: uncertainties relating to our business operations and operating results; uncertainties related to the governmental, economic and political environment in the People’s Republic of China and Bolivia; uncertainties associated with metal price volatility; uncertainties related to our ability to fund operations; uncertainties associated with the Company’s reliance on third-party contractors; and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including without limitation the information set forth in our 2016 Annual Report under the heading "Risk Factors". While management believes that its assumptions forming the bases for forward-looking statements are reasonable, assumed facts or bases generally vary from actual results, and there can be no assurance that the expectations or beliefs expressed in forward-looking statements will be achieved or accomplished.
INCOME TAX EXPENSE
Management believes that the Company is not subject to US taxes.
Under the current laws of the BVI, dividends and capital gains arising from the Company’s investments in the BVI are not subject to income tax and no withholding tax is imposed on payments of dividends to the Company.
The Company’s subsidiaries in the PRC are subject to a PRC enterprise income tax rate of 25% applicable to both foreign investment enterprises and domestic companies.
The Company’s subsidiaries in Bolivia are subject to a Bolivian enterprise income tax rate of 25% applicable to both foreign investment enterprises and domestic companies.
LOSS FOR THE PERIOD FROM CONTINUING OPERATIONS
The loss from continuing operations for the six months ended June 30, 2017 increased by CNY1.30 million (US$0.19 million) from a loss of CNY4.92 million (US$0.73 million) for the six months ended June 30, 2016 to a loss of CNY6.22 million (US$0.92 million) for the six months ended June 30, 2017. The increase in loss was mainly caused by an increase in administrative expenses amounting to CNY1.92 million (US$0.28 million) resulting from the increase in audit fee and the expansion of Antay Pacha’s operations. The loss increase was partially offset by the absence in 2017 of other operating expenses amounting to CNY1.06 million (US$0.16 million) for the six months ended June 30, 2016, which mainly represents the expenses in preparation for the trial production of Antay Pacha.
The loss from continuing operations for the three months ended June 30, 2017 increased by CNY0.83 million (US$0.12 million) from CNY2.40 million (US$0.36 million) for the three months ended June 30, 2016 to CNY3.23 million (US$0.48 million) for the three months ended June 30, 2017. The increase in loss was mainly due to an increase in administrative expenses amounting to CNY1.05 million (US$0.15 million) resulting from the increase in audit fee and the expansion of Antay Pacha’s operations. The loss increase was partially offset by the absence in 2017 of other operating expenses amounting to CNY0.31 million (US$0.05 million) for the three months ended June 30, 2016, which mainly represents the expenses in preparation for the trial production of Antay Pacha.
LOSS/ PROFIT FOR THE PERIOD FROM A DISCONTINUED OPERATION
The discontinued operation represents the non-ferrous metal mining operation conducted by Wuhu Feishang. For the period from January 1, 2017 to March 3, 2017, Wuhu Feishang incurred a loss of CNY1.36 million (US$0.20 million) and a one-off gain on disposal of the discontinued operation of CNY12.34 million (US$1.82 million), compared with the loss of CNY6.08 million (US$0.90 million) for the six months ended June 30, 2016, and the loss of CNY4.10 million (US$0.60 million) for the second quarter of 2016. The loss mainly represents overhead costs incurred during the temporary suspension of production of Wuhu Feishang.
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LIQUIDITY AND CAPITAL RESOURCES
The Company’s primary liquidity needs are to fund operating expenses. To date, the Company has financed its working capital requirements primarily through internally generated cash in prior years and non-interest bearing loans from the Shareholder and its affiliates. Although Antay Pasha’s copper smelting trial production run has begun, it can be expected that (a) the Company will continue to incur operating expenses prior to the commencement of revenue-producing activities and (b) the availability of internally generated funds to sustain operations will decrease until the commencement of commercial production of our copper smelting plant. It is currently projected that commercial production will commence in the second half of 2018. Feishang Group, Feishang Hesheng and Feishang Enterprise have confirmed that the balances due to them as at June 30, 2017 are not required to be settled during the ensuing 12 months.
Net cash used for operating activities for the six months ended June 30, 2017 was approximately CNY8.95 million (US$1.32 million) as compared to net cash used for operating activities of CNY21.07 million (US$3.11 million) for the corresponding period in 2016. The net cash outflows mainly represent the operating losses for the corresponding periods.
The following summarizes the Company’s financial condition and liquidity at the dates indicated:
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December 31,
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June 30,
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2016
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2017
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(Audited)
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(Unaudited)
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Current ratio
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0.48x
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0.46x
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Working capital (CNY'000)
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(40,054
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(30,294
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Net cash used in investing activities for the six months ended June 30, 2017 was CNY3.03 million (US$0.45 million), as compared with CNY1.68 million (US$0.25 million) for the corresponding period in 2016. The increase in investing activities cash outflows represents the acquisition of property and equipment for Antay Pacha’s copper smelting operations, which was partially offset by the net cash received from the disposal of Wuhu Feishang.
Net cash from financing activities for the six months ended June 30, 2017 was CNY7.96 million (US$1.17 million), as compared with CNY2.24 million (US$0.33 million) for the corresponding period in 2016. The net cash from financing activities is primarily comprised of net cash received from related parties.
OFF BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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EXHIBIT INDEX
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Exhibit Number
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Description
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99.1
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Press Release dated December 15, 2017
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