Monday, October 2, 2023
Martin Hennecke
HKEx Stock Code : 01231 
Corporate Profile
The group is involved in mining; ore processing; and sale of iron concentrate.

Business Review - For the year ended December 31, 2012

Iron Concentrate Business

The Group's commercial production of iron concentrates regrettably came to a standstill in 2012.

During the Reporting Period, the Group has been focusing its resources and manpower on the construction and accomplishment of the New Tailings Storage Facility, which has been substantially completed by June 2012. Then, the Group proceeds with the application for trial tailings discharge with the Safety Authority. In the meantime, the Group is following up on further enhancing the safety features of the New Tailings Storage Facility, progress update on trial tailings discharge, and the issuance of a production safety permit by the Safety Authority.

Despite the progress achieved on the construction of New Tailings Storage Facility, a number of mid-level management staff and subordinates in the Yanjiazhuang Mine have not turned up for work since July 2012. This has hindered our schedule to resume the iron concentrate production. The Group has now terminated the employment relationship with these staff members and have been taking prompt recruitment action to fill up the vacancies.

The Group resumed the stripping activities and started commissioning of the No.1 dry magnetic cobbing system and the No.1 processing facility, and trial production of a limited scale at the Yanjiazhuang Mine around the end of November 2012. However, no revenue was recognised for FY 2012. The Group will continue to monitor the progress of trial production and tackle any upcoming challenges, through active communication with relevant authorities and parties, to smooth out its production and operations at the Yanjiazhuang Mine.

Meanwhile, the Group is in the process of applying for a production safety permit for the New Tailings Storage Facility. Once the Safety Authority is satisfied with the conditions for tailings discharge, it will issue a production safety permit to the Group. The Board expects that the mining and iron concentrate production at the Yanjiazhuang Mine will gradually resume to normal thereafter.

In 2011, the Group produced and sold 46,900 tonnes of iron concentrates and generated approximately RMB45.9 million in sales revenue. The average selling price of its iron concentrates, net of value-added tax, was approximately RMB979 per tonne, with its average iron concentrate grade of approximately 65%, for the said year.

Currently, the Group has accomplished the Phase One expansion plan. However, the Phase Two and Phase Three expansion plans were regrettably hindered by disputes arising from land expropriation. During FY 2012, the remaining construction projects remain uncompleted. For further details, please refer to the paragraphs headed ¡§Iron Concentrate Business ¡V Phase Two and Phase Three Expansion Plans and Anciliary Constructions¡¨ in ¡§Capital Expenditure and Infrastructure Development¡¨ section.

Gabbro-Diabase Business

Throughout FY 2012, the Group has been actively preparing for the gabbro-diabase mining at the Yanjiazhuang Mine, and had made good progress in site formation and stripping and preparation works at the First Quarry, and the access road to the First Quarry had been constructed. On the other hand, the Group engaged a Beijing-based stone mining specialty advisor in early 2012, which has a team of reputable stone mining experts, to provide the Group with technical supports and consultancy guidance in respect of the gabbro-diabase mining plan and production. For the gabbro-diabase infrastructure construction carried out during FY 2012, further discussion will be provided in the paragraphs headed ¡§Gabbro-Diabase Business¡¨ in ¡§Capital Expenditure and Infrastructure Development¡¨ section.

Apart from the mining plan and progress in infrastructure construction, the Group also received the mining and other requisite permits during the year. The Group received a mining permit for diabase resources in June 2012 from Hebei Province Department of Land and Resources and was also granted the business license for the production and sale of diabase products by the domestic Industrial and Commercial Administration Bureau. The Group is currently in the process of applying for a production safety permit from the Safety Authority. The Board anticipates that the Group could commence normal production of gabbro-diabase products sometime in 2013, with the remaining requisite permit issued by the Safety Authority.

From the marketing perspective, the Group has continued to participate in recognised stone industry exhibitions to promote its gabbro-diabase products, aiming to create corporate branding and establish customer network.

As the Group had not yet started the commercial mining and production of gabbro-diabase resources during the Reporting Period, no revenue was recognised for FY 2012.

Business Outlook - For the year ended December 31, 2012

There remains great uncertainty in global economic outlook for 2013, but positive signs are emerging. In Mainland China, further economic transformation, infrastructure projects, and the stimulus spending and measures by the PRC government to stablise economic growth will support the demands for iron concentrates and are expected to have a positive impact on helping the iron mines and steel mills to step out of the difficult year 2012. It could be anticipated that the demand for iron concentrates will benefit from capital spending plans including building of roads, subways, and extra spending on railways approved by the PRC government.

During the Reporting Period, the Group completed the New Tailings Storage Facility, and commenced the stripping and mining activities at the Yanjiazhuang Mine. However, the construction of Phase Two and Phase Three expansion plans was still hindered by the disputes arising from land expropriation and other issues. In 2013, the Group anticipates that there could still be a number of uncertainties, issues and challenges that will affect its operating and external environments. As a socially responsible company, the Group will continue to actively communicate with government and villages in an orderly manner according to laws and regulations to resolve future difference, and will continue to devote its every effort to smooth out the external issues and land expropriation disputes as may arise at the Yanjiazhuang Mine. Also, the Group will gradually proceed with the remaining construction of Phase Two expansion plan in 2013 to cope with the development of iron concentrate business and to enhance the iron concentrate production at the Yanjiazhuang Mine as early as we can.

The Group is actively following up with the Safety Authority for the issue of a production safety permit for gabbro-diabase mining, which is anticipated to be granted in 2013. The Board expects that the mining and production of gabbro-diabase resources could be commenced upon the permit is granted, and the gabbrodiabase business will be gradually ramped up to a commercial scale and contribute to the Group's success in the long run.

In November 2012, Shougang Hong Kong became a Substantial Shareholder and the second largest Shareholder of the Company. As part of our strategy to augment our undertakings at the Yanjiazhuang Mine, the Group is currently in discussions with Shougang Hong Kong to further explore areas of cooperation and development, which is believed to bring in positive initiatives for the Group's business development.

Source: Newton Resources (01231) Annual Results Announcement
Chairman Cheng Kar Shun Issued Capital (shares) 4,000M
Par Value HKD 0.1 Market Capitalisation (HKD) 2,600M
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