BEIJING, April 17 /PRNewswire-FirstCall/ -- China Shen Zhou Mining & Resources, Inc. (BULLETIN BOARD: CSZM) , one of the leading companies in the exploration, development, mining, and processing of fluorite, zinc, lead, copper, and other nonferrous metals in the PRC, today announced full year 2006 financial results. The Company plans to file its Form 10-K SB today.
Financial Highlights from Fiscal Year 2006 Include:
* Revenues increased 218% to $22.4 million
* Gross profit increased 387% to $13.4 million and gross profit margin
increased over 800 basis points to 59.9%
* Income from operations increased 340% to $6.7 million
* Nonrecurring, non-cash expenses of $7.6 million or $0.27 per diluted
share, directly related to the Company's reverse merger transaction,
including $4.6 million and $3.0 million of equity-based payments to
consultants and management, respectively
* Net income increased 729% to $8.9 million, or $0.32 per diluted share,
excluding the $7.6 million of non-cash expense described above
* Reported net income increased 29% to $1.4 million or $0.052 per diluted
share
"The year 2006 was a historic year for China Shen Zhou Mining. We entered the U.S. capital markets and executed two important acquisitions. Our business also experienced exceptional revenue, gross and net profit growth as we benefited greatly from the increases in nonferrous metal prices on top of our fixed prices for raw materials, which we previously locked in via a thirty-month futures contract," said Ms. Jessica Yu, CEO of China Shen Zhou Mining & Resources. "While we are pleased that nonferrous market prices helped us realize revenue growth of over 200 percent and gross margin improvement to 59.9% from 39.1%, we are focused on a number of strategic initiatives that will position us for consistent, sustainable long-term growth. These initiatives include enhancing our processing capacity, increasing exploration activities and acquiring greater access to mineral resources."
For the year ended December 31, 2006, revenue increased 218% to $22.4 million from $7.1 million in 2005. The increase in revenues is mainly attributable to the increase in prices of nonferrous metals, including zinc, through the year 2006. The Company's newly acquired subsidiary, Qingshan Mining, contributed revenue of $776,000 in 2006.
Gross profit increased 387% to $13.4 million from $2.8 million in 2005. Gross margin increased to 59.9% compared with 39.1% in 2005. The increase in gross profit and gross margin directly reflects the effect of a thirty-month raw material supply agreement which ensured that the cost of raw materials remained constant while the selling price of zinc increased through the year.
Income from operations increased 340% to $6.7 million from $1.5 million in 2005. Selling and distribution expenses increased 78% to $185,000 in 2006 from $104,000 in 2005, while general and administrative expenses increased 480% to $6.5 million from $1.1 million in the prior year. The significant increase in the general and administrative expenses reflects $3.0 million of non-cash expense related to employee share payments as part of the reverse merger transaction completed in September 2006. Operating margin increased 830 basis points to 29.9% in 2006 from 21.6% in 2005, despite the $3.8 million nonrecurring payment.
Please note that financial results from 2006 include the following:
* $3.0 million, or $0.11 per diluted share, of non-cash expenses
reflecting employee share grants issued during the Company's reverse
merger, accounted for as general and administrative costs
* $4.6 million, or $0.16 per diluted share, of non-cash expense reflecting
share and option grants for consultation and service fees related to the
Company's reverse merger, accounted for as reverse merger costs
Net income in 2006 increased 29% to $1.4 million from $1.1 million in 2005. Net income per diluted share was $0.052 in 2006 compared to $0.061 in 2005, based on a diluted sharecount which increased to 27.5 million shares in 2006 from 17.7 million shares in 2005. Excluding non-cash, non-recurring equity based payments of $7.6 million in 2006, net income would be $8.9 million or $0.32 per diluted share in 2006, an increase of 729% and 425% from 2005, respectively.
Balance Sheet
As of December 31, 2006, the Company had $18.9 million of cash, compared to $294,000 at December 31, 2005 and $2.5 million at September 30, 2006. The improvement in cash reflects the issuance of $28.0 million of convertible notes in 2006.
Business Highlights from the Fiscal Year 2006 include:
* Successful completion of reverse merger transaction in September 2006
* April 2006 acquisition of ownership interest in Qingshan Mining, which
owns copper and zinc reserves and allows the Company sufficient supply
of raw zinc and copper minerals necessary for operations
* April 2006 acquisition of ownership interest in Xingzhen Mining, which
provides the Company potential mineral extraction opportunities
* November 2006 preliminary agreement to acquire Kichi-Chaarat, which
would enable the Company to explore for gold and other metals in the
Kuru-Tegerek licensed area in Kyrgyzstan
About China Shen Zhou Mining & Resources, Inc.
China Shen Zhou Mining & Resources, Inc. conducts all of its business through its subsidiary, AFMG, which, in turn, conducts its business through its Subsidiaries. The principal business of AFMG is the exploration, development, mining, and processing of fluorite, zinc, lead, copper, and other nonferrous metals in the PRC. AFMG has two principal areas of interest in the PRC: (a) fluorite and zinc exploration in the Sumochaganaobao region of Inner Mongolia Province; and (b) copper/zinc exploration in the Yangye Huayuan region of Xinjiang Uygur Autonomous Region.
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, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
December 31, December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $18,932 $294
Available for sales securities -
Margin Deposit 412 -
Accounts receivable, net 945 640
Refundable investment deposit 1,025 -
Other deposits and prepayments, net 4,115 153
Inventories 1,373 2,428
Due from related parties 71 -
Total current assets 26,873 3,515
Investment deposit 10,000 -
Property, machinery and mining
assets, net 16,359 9,723
Deferred debt issuance costs 2,518 -
Deferred income tax assets 431 201
Goodwill 1,001 -
Total assets 57,182 13,439
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $625 $798
Warrants liability 1,030 -
Short term bank loans 2,668 3,348
Other payables and accruals 7,366 886
Taxes payable 572 422
Due to a director 212 9
Current liabilities 12,473 5,463
Convertible notes payable 26,989 -
Total liabilities 39,462 -
Minority interests 258 -
CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
For the years ended
December 31,
2006 2005
Net revenue $22,433 $7,047
Cost of sales -9,004 -4,292
Gross profit 13,429 2,755
Operating expenses:
Selling and distribution expenses -185 -104
General and administrative expenses -6,545 -1,129
Income from operations 6,699 1,522
Other income (expense):
Reverse takeover costs -4,577 -
Other expenses -175 -37
Interest expense -1,082 -320
Other income 298 193
Income before income taxes and
minority interests 1,163 1,358
Provision for income taxes 185 -285
Income before minority interests 1,348 1,073
Minority interests 32 -
Income available to common
stockholders $1,380 $1,073
Earnings per common share
Basic $0.074 $0.061
Diluted $0.052 $0.061
Weighted average number of common
shares outstanding
Basic 18,735 17,687
Diluted 27,485 17,687
The accompanying notes are an integral part of these consolidated
financial statements.
