TAMPA, Fla., Nov. 15, 2012 /PRNewswire/ -- US China Mining Group, Inc., ("US China Mining") (OTCQB: SGZHE) a Chinese leader in coal production and exploration in the People's Republic of China, yesterday announced financial results for the third quarter ending September 30, 2012.
Third Quarter of 2012 Financial Results
For the three months ended September 30, 2012, the Company generated net sales of $2.0 million compared to $6.3 million for the same period in 2011, a 69% decline. The Company sold 32,469 metric tons of coal in the three months ended September 30, 2012, down 71% from 113,474 metric tons sold in the third quarter of 2011. Our total production for the three months ended September 30, 2012 was 27,469 tons, compared to 21,341 tons produced for the 2011 period, an increase of 6,128 tons. The average sales price per ton ("ASPs") increased 13% year-over-year, from $54.08 to $61.07. At September 30, 2012, the Company had 194,558 metric tons of coal in Xing An's inventory. The composition of sales for each respective period is as follows:
The decreased sales was to due to decreased sales of Tong Gong, as a result of brokerage sales, as a result of local weaker market and economic condition, and no sale of Xing An mines, caused by logistical difficulties of Xing An, and stockpiling the coal inventory for selling at a higher price in the future, as well as ceased production in Xing An mines due to seasonality and mine upgrading during the Third quarter of 2012.
"We are not pleased with the financial result of this quarter," said Mr. Hongwen Li, President of US China Mining Group. "In anticipation of Xing An's resuming its production and potential easing up of local market conditions in the fourth quarter of 2012, the Company is looking forward to some rally up in our business, so as to be able to recover some loss in the upcoming quarters."
Cost of sales for the three months ended September 30, 2012 was $1.5 million, a $2.6 million decrease, or down approximately 63% over the year ago period, due to lower production and sales.
Gross profit was $0.4 million for the third quarter of 2012 compared to $2.1 million for the same period of 2011, an 80% decline. Gross margins decreased 13% to 21% for the third quarter of 2012 from a year ago period, due to higher labor, materials costs, increased mining fees and higher depreciation and amortization cost per ton on average.
Operating expenses were $2.5 million, down $0.7 million from $3.2 million in the third quarter of 2011. The decrease was attributable to decreased environment fee which decreased $0.4 million for three months ended September 30 2012 compared to the same period of 2011.
Operating loss was $2.1 million for the three months ended September 30 2012, compared to operating loss $1.0 million in the same quarter of 2011. The increased loss was mainly due to decreased sales and increased percentage of cost and operating expenses to sales.
Other expenses totaled $155,548 for the three months ended September 30, 2012 compared to $3.0 million other income for the 2011 period. The decrease in non-operating income was mainly attributed to decreased non-cash non-operating income from $3.0 million in the three months ended September 30, 2011 compared to expense $0.14 million in the 2012 period, resulting from the changes of the fair value of the warrant derivative issued to approximately 200 investors and agents through the January 2011 Private Placement financing.
Net loss for the three months ended September 30, 2012 was $2.1 million compared to net income of $2.2 million for the same period of 2011. Diluted loss per share for the third quarter 2012 was $0.11 compared to diluted earning per share of $0.11 in the same period of 2011. The decrease in net income and diluted earning per share was mainly attributed to the increase in our operating expenses and decrease in sales and non-cash other income. Net income (loss) as a percentage of sales decreased from 35% for the third quarter of 2011 to (108)% for the same period of 2012, resulting from significant decreased non-operating income from change of the fair value of the warrant derivative, and decreased sales but increased percentage of cost to sales.
About US China Mining Group
US China Mining Group is a company engaged in coal production and sales by exploring, assembling, assessing, permitting, developing and mining coal properties in the People's Republic of China ("PRC"). After obtaining permits from the Heilongjiang Province National Land and Resources Administration Bureau and the Heilongjiang Economic and Trade Commission, we extract coal from properties to which we have the right to mine capped amounts of coal, and then sell most of the coal on a per metric ton ("ton") basis for cash on delivery, primarily to power plants, cement factories, wholesalers and individuals for home heating.
We do not own the coal mines, but have mining rights to extract a capped amount of coal from a mine as determined by government authorized mining engineers and approved by the Heilongjiang Department of Land and Resources. Our business consists of the operations of Tong Gong coal mine in northern PRC, located approximately 175 km southwest of the city of Heihe in the Heilongjiang Province and the Hong Yuan and Sheng Yu coal mines located in the city of Mohe in Heilongjiang Province. For more information about the Company, please visit: www.uschinamining.com.
SOURCE US China Mining Group, Inc.