BUSINESS REVIEW
Gold Mining Business
The Company acquired 51% equity interest in a gold mining company in Russian Federation and completed the acquisition on 15 August 2012. The gold mining company is a company established under the laws of Russian Federation with limited liability and currently operates and owns the legal and beneficial interest in a mining project related to the mine. With an aggregate mining area of about 309.3 square kilometres, the mine is operated by the gold mining company and located in Molchan river, Zeyskiy region, Amur area, the Russian Federation. The mine is estimated to have sand gold reserve of 35 tonnes (C1 category). The gold mining company is still in process of devising its production and exploitation plan.
On 30 January 2015, the Company acquired a 35% equity interest of Port First. Major assets of Port First are its 70% equity interest in each of Jinxin Company and Jinhui Company. Jinxin Company (i) holds the mine exploitation license and mine exploration license of the Shanchakou Mine; (ii) holds the mine exploitation license of Jinjiling Area; and (iii) owns a gold processing plant and a gold refinery plant. Jinhui Company holds the mine exploitation license and mine exploration license of the Yaojia Mine. During the Year, the average selling price of gold was under great downward pressure which undermined the profitability of the gold mining business.
The gold mining business has valid licenses, environmental protection policies and permits for conducting its business operations and has complied with relevant local requirements and applicable laws and regulations for its business operations.
The principal risk and uncertainties of the gold mining business are (i) fluctuation of gold prices, which will direct effect the sale performance; and (ii) social and environmental issues, any complaints or protests by the local community, and change of the environmental regulation or requirement will direct effect the efficiency and the cost of the operation.
Property Development Business
The property development project “Anlu Taihe Paradise” at Liang Ji Bei Road, Anlu Economic Development District in Anlu city, Hubei province in the PRC is wholly owned by the Group and is having positive contribution to the Group. The project comprises three phases, with a total gross floor area of approximately 272,568 square meters and are approved for residential and commercial composite uses. The land use rights of the properties have been granted for a term expiring on 22 August 2065. In which, some of properties are held by the Group as investment purposes (as shops, kindergarten and hotel) to generate the rental income, and some of the properties are held for sale. The properties held for sales comprise various types of properties including villas and apartments. During the Year, the PRC property market condition had made challenges to the property development business. The property sales situations and average selling prices were still under great pressure and undermined the profitability of the property development business.
The property development business has valid licenses and permits for conducting its business operation, and has complied with relevant local requirements and applicable laws and regulations for its business.
The principal risk and uncertainties of the property development business are (i) economic conditions, both domestic and global issues will direct effect the sale performance; and (ii) government policy change, any change of the PRC government policies over the property industry in China will direct effect the sale performance and the cost of operation.
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