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Second Quarter Financial Statement And Dividend Announcement 2017

Financials Archive

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UNAUDITED FINANCIAL STATEMENTS FOR THE SECOND QUARTER ENDED 30 JUNE 2017 ("Q2 2017") IN RESPECT OF THE FINANCIAL YEAR ENDING 31 DECEMBER 2017 ("FY2017")

Income Statement

"Q2 2016" and "Q2 2017" denotes the second quarter or the three-month period ended 30 June 2016 and 30 June 2017 respectively

"H1 2016" and "H1 2017" denotes the six- month period ended 30 June 2016 and 30 June 2017 respectively

"% Change" denotes increase/(decrease) in the relevant profit or loss item as compared with the comparative figure

"N/M" denotes "Not meaningful"

Balance Sheet

Review of Performance

(a) Review of consolidated statement of comprehensive income of the Group for Q2 2017 (relative to that for Q2 2016)

Turnover

The overall turnover, generated mainly from the sales of developed properties, increased by RMB2.2 million from RMB2.9 million in Q2 2016 to RMB5.1 million in Q2 2017. The increase was principally attributed to more completed units being delivered to buyers in Q2 2017 (relative to Q2 2016) in respect of the Xinxiang Sunny Town Project (新乡阳光新城项目).

Gross profit

As a result of the increased turnover, the Group registered a higher gross profit of RMB1.1 million in Q2 2017 compared to that of RMB648,000 in Q2 2016 albeit at comparable gross profit margins ranging between 22% and 23%.

Other expenses

Our other expenses increased tripled from RMB392,000 in Q2 2016 to RMB1.2 million in Q2 2017. The increase was principally attributed to the write-off of the investment in a leasehold housing our Beijing office following an early termination of the lease in Q2 2017.

Other income

Our other income decreased by RMB1.4 million from RMB1.5 million in Q2 2016 to RMB104,000 in Q2 2017.

Our other income attained in Q2 2016 relates principally to: (i) an exchange gain of RMB498,000 resulting from the currency fluctuation on Renminbi against Singapore dollar; and (ii) the fair value gain of RMB966,000 on derivative financial instruments in respect of an investment of RMB65.0 million made during FY2015 in an integrated property project, Yi Feng Holiday Plaza Project (懿丰假日广场项目) (the "Yi Feng Project"), located at Henan Province Zhu Ma Dian City Zhu Ping County (河南省驻马店逐平县 ), for a share of profit of 10% thereof (the "Fair Value Gain"). The Fair Value Gain was derived based on the discounted cash flow stream of the Yi Feng Project, which had since 17 April 2017 been disposed as part of the Group's purchase consideration for an effective equity interest of 16.06% in an iron ore mine project situated in Thabazimbi, Limpopo Province, South Africa (the "Thabazimbi Project") (the "Yi Feng Disposal").

Our other income attained in Q2 2017 relates principally to interest income earned on a term deposit placed with a bank.

Share of losses of joint ventures

The Group's share of loss of joint ventures decreased by RMB7,000 or 30% from RMB23,000 in Q2 2016 to RMB16,000 in Q2 2017. The decrease was attributed mainly to decreased operating expenses incurred by Tian Cheng Holdings Limited ("天晟控股有限公司"), particularly in respect of the two iron ore mines it owned which have yet to commence production (the "Joint Venture").

General and administrative expenses and Selling and distribution expenses

In line with our decreased business activities and coupled with our concerted cost-control efforts, our general and administrative expenses decreased by RMB750,000 or 10% from RMB7.4 million in Q2 2016 to RMB6.7 million in Q2 2017 while our selling and distribution expenses decreased by RMB928,000 or 98% from RMB951,000 in Q2 2016 to RMB23,000 in Q2 2017.

Finance income

Our finance income attained in Q2 2016 was attributed to the amortization of unwinding discount of the long-term other investment in connection with the Yi Feng Project.

Loss before tax

Consequence to the above, the Group's loss before tax increased by RMB1.9 million or 39% from RMB4.8 million in Q2 2016 to RMB6.7 million in Q2 2017.

Income tax (expense)/credit

We registered an income tax expense of RMB333,000 in Q2 2017 vis-à-vis an income tax credit of RMB146,000 in Q2 2016.

The income tax credit recorded in Q2 2016 was principally attributed to a one-off write-back of overprovision for tax in respect of one of our wholly-owned subsidiaries.

The income tax expenses recorded in Q2 2017 was principally attributed to the operating income of a subsidiary for Q2 2017.

Net loss attributable to owners of the Company

Accordingly, the net loss attributable to the owners of the Company increased from RMB4.7 million in Q2 2016 to RMB7.0 million in Q2 2017.

(b) Review of statements of financial position of the Group as at 30 June 2017 (relative to that as at 31 December 2016)

Non-current assets

Our non-current assets increased by RMB68.2 million from RMB6.3 million as at 31 December 2016 to RMB74.5 million as at 30 June 2017. The increase was principally attributed to a new investment in the Thabazimbi Project during Q2 2017. In compliance with IAS 39 – Financial Instruments: Recognition and Measurement, the investment in the Thabazimbi Project was recognized as an "other investment" under the "non-current assets" category.

Current assets

Our current assets decreased by RMB81.8 million or 44% from RMB188.1 million as at 31 December 2016 to RMB106.3 million as at 30 June 2017. The decrease was mainly attributed to the Yi Feng Disposal and the reduction in cash and bank balances through working capital usage in meeting daily operation expenses.

Current liabilities

In line with reduced business activities, our trade payables decreased by RMB3.1 million or 47% from RMB6.5 million as at 31 December 2016 to RMB3.5 million as at 30 June 2017.

Our amount due to joint venture increased by RMB793,000 or 42% from RMB1.88 million as at 31 December 2016 to RMB2.67 million as at 30 June 2017. The increase was in relation to expenses paid by the Group's two mining joint ventures on our behalf.

Taken as a whole, our current liabilities decreased by RMB2.3 million or 3% from RMB89.1 million as at 31 December 2016 to RMB86.7 million as at 30 June 2017.

Consequence to the above, our cash used in operating activities reduced to RMB766,000 in Q2 2017 from RMB2.4 million in Q2 2016.

Commentary

As announced by the Company on 17 April 2017, the Company had completed its investment in the Thabazimbi Project, which involved the purchase of 8,030 shares of Sino Feng Mining International S.à r.l. ("Target Company"), constituting 40.15% of the total issued share capital of the Target Company. The Target Company holds a 40% equity interest in Aero Wind Properties (Pty) Limited ("AWP") through its wholly-owned subsidiary, Huixin Mining International Limited. Following the completion of the investment, the Company now holds an effective interest of 16.06% of the total issued share capital of AWP, which is the holder of an exploration right in respect of the iron ore mine project situated in Thabazimbi, Limpopo Province, South Africa and is in the midst of applying for the mining license with the local authority.

With regard to the reverse takeover transaction as announced by the Company on 11 July 2013 and 1 April 2014 and 31 December 2014 (the "Proposed RTO"), the relevant parties to the amended and restated conditional sale and purchase agreement entered into on 31 December 2014 in respect of the Proposed RTO (the "Amended and Restated SPA") have entered into a further supplementary agreement on 30 June 2017 to extend the long stop date for completion from 30 June 2017 to 30 June 2018. The relevant parties currently still awaiting for certain technical reports to be completed in order that they may work out possible revised terms to the Amended and Restated SPA, which may include, but not limited to, the portfolio of the exploration and mining projects that will form part of the group of companies to be acquired by the Company pursuant to the Proposed RTO. Appropriate announcement concerning the Proposed RTO will be made as and when there is any significant development.

Some of the statements in this release constitute "forward-looking statements" that do not directly or exclusively relate to historical facts. These forward-looking statements reflect our current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from our intentions, plans, expectations, assumptions and beliefs about the future, undue reliance must not be placed on these statements.