Strived to Increase Mining Capacity Provided Quality Marble Stone Products

Date:2011-08-31sunshuxing  Text Size:

[30 August 2011, Hong Kong] China Kingstone Mining Holdings Limited (“China Kingstone” or the “Group”; stock code: 1380.HK), the largest marble producer in China, announced its interim results for the six months ended 30 June, 2011 (the “period under review”).

The Group’s revenue amounted to approximately RMB104,472,000 for the six months ended 30 June 2011. The Group commenced commercial production in September 2010, before that it focused on mine planning, construction and infrastructure development. Therefore, the Group did not generate revenue from its operations during the corresponding period last year while this year the Group achieved significant growth. Gross margin and profit of the Group for the period under review were RMB90,0233,000 and RMB 12,501,000 respectively while the gross profit margin and net profit margin reached 86.4% and 11.97%.

On 18 March 2011, the Group was successfully listed on the main Board of the Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’). During the period under review, the administrative expenses included the listing related expenses, which were approximately RMB24,916,000, and the equity-settled share based share option expense, which was approximately RMB20,406,000. If these two items, both one-off non-operating expenses, were excluded from the administrative expenses, the total comprehensive income to owners of the Group from core business for the period under review could be reflected as RMB55,088,000, approximately 52.7% of the revenue. In addition, the basic earnings per share attributable to shareholders of the Group amounted to approximately RMB0.64 cents for the six months ended 30 June 2011. The Board of Directors does not recommend an interim dividend payout for the period under review.

Ms. Chen Tao, Chairlady and Chief Executive Officer of China Kingstone expressed her satisfaction of the interim results since the Group’s successful listing on the main board of the Stock Exchange, “During the period under review, the Group continued to upgrade its mining and processing capacities and leveraged on its enlarged capacities to actively identify other high-quality mines with a view to reinforcing our strength in resources. With respect to our strategy on customers, we have aggressively pursued cooperation opportunities with end-customers in the industrial chain, targeted high-end marble construction market and approached target customers directly in order to reduce transaction costs and increase profits. The Group has also endeavored to increase its brand awareness through participating in landmark construction projects, trying to maximize returns for our shareholders.”

Since its listing on 18 March 2011, the Group has adhered to its listing commitments, focusing on enhancing capacity and improving business performance. During the period under review, the Group exploited a total of 9,371 m3 of marble blocks in Zhangjiaba Mine and processed a portion of the blocks into an aggregate of 91,460 m2 of marble slabs, of which, about 1,338 m2 was Pure Beige marble slabs and approximately 90,122 m2 was Mixed Beige and other marble slabs. Furthermore, the Group has sold about 7,612 m3 of marble blocks, which amounted to about RMB42,313,000, and about 88,384 m2 of marble slabs in the amount of approximately RMB62,159,000. Sales of marble blocks and marble slabs represented 60% and 40% of the total revenue from January to June 2011.

During the period under review, the area of the mining platform in the eastern orebody of Zhangjiaba Mine reached 18,000 m2 through the Group’s efforts in purchasing great quantity of machine and equipment, increasing human resources and expanding mine infrastructure. Meanwhile, the Group raised the manufacturing capacity to the level of about 3,500 m3 per month, meeting the target of annual production capacity for 2011 of 45,000 m2. Besides focusing on enlarging mining platform and perking up production capacity of blocks, the Group also actively prepared for the construction of its own processing plant.

In addition, the Group had identified several geographical hubs of the stone material industry in China and was studying on the possibility of constructing processing plant through methods of new construction and consolidation.

The Group continued to keep track and explored on the mine acquisition projects of this year and embarked on resources consolidation on a larger scale with a view to strengthening the competitiveness of the Group in terms of resources. On 28 March 2011, the Group entered into a letter of intent with an independent third party for acquiring the Tujisi Mine. In 29 August 2011, the Group entered into the sale and purchase agreement in acquisition of 100% equity interest in Beichuan Lida Mining Co., Ltd. which owned the mining right of Tujisi Mine, , which is situated in the same mineral vein as Zhangjiaba Mine and with estimated resources exceeding 6,100,000 m3 (332+333 under Chinese Standard). According to preliminary plan, the mining capacity for blocks will reach 50,000 m3 per annum, while processing capacity for slabs will amount to 1,000,000 m2 annually. Such resources enlargement plan will be launched in 2013 and target to be completed in 2015, when new products would be introduced to the market to meet requirements of various customers. The linear distance between Zhangjiaba Mine and Tujisi Mine is about 3 km. The Group is well-equipped to develop Tujisi Mine with its existing technical know-how, infrastructure and facilities and achieve synergy and realize the benefits of economies of scale. Through such acquisition, the Group could further increase its production volume of block and processing volume of slab, especially enriching the product mid of high-end beige marble series.

On the other hand, the Group has successfully entered into an equity transfer agreement with Guangdong Jiapeng Construction in July 2011, pursuant to which, 49% equity interest in Guangdong Jiapeng Construction will be acquired at a consideration of RMB15,000,000. The Acquisition not only allows the Group to sell its products directly to major high-end customers, but also curtails fees arising from the multi-layered intermediate sales channels, which would beef up profits of the Group and create synergy. In addition, the Group could enhance brand awareness of its marbles swiftly through participating in construction of landmark projects. Taking into consideration of the mine resources of the Group, the introduction of its products to the decoration and renovation market can deliver higher profit than merely selling slabs and blocks.

Looking forward, the Group will strive to completely change the long-held impression that marble manufactured in China is cheap but with poor quality. Leveraging on its quality stone mine resources, the Group will establish itself as a Chinese brand which could supply quality high-end stone products, secure its dominating position in the industry and develop into a large-scale international company which could compete effectively in the international market.

It is expected that the Group will be able to meet its maximum production target in 2014 by ramping up the production of its existing mines. Moreover, the synergy effect brought about by newly acquired projects has gradually materialized through which the Group is expected to enjoy more encouraging growth in the future.

Besides striving hard to meet its production target, the Group will also develop mining technology and procedures and management methods which could reduce cost and improve quality with a view to consolidating its leading position in the field of mine development and becoming a benchmark company in the stone mining industry.

Ms. Chen Tao concluded, “The Group’s vision is to become a leading integrated marble business operator in China by acquiring resources, designing and developing the upstream of value chain. In order to achieve this target, the Group will perk up its mining and processing capacity, establish a solid customer base and strengthen customer relations, participate in landmark construction project, enhance brand awareness and pricing power, increase marble reserves through further expansion and selective acquisition. We’ll enhance brand awareness of our marbles swiftly through participating in construction of landmark projects, introducing leading-edge design concepts and processing technology, sparing no efforts to create more returns for our shareholders.”

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