US China Mining Group, Inc., a Chinese leader in coal production and exploration in the People's Republic of China, today announced financial results for the first quarter ending March 31, 2012.
First Quarter of 2012 Financial Results
For the three months ended March 31, 2012, the Company generated net sales of $14.5 million compared to $22.2 million for the same period in 2011, a 35% decline. The composition of sales for each period is as follows:
The Company sold 280,485 metric tons of coal in the three months ended March 31, 2012, down 39% from 457,569 metric tons sold in the first quarter of 2011. The average sales price per ton increased 6% year-over-year, from $48.6 to $51.67. Our total production for the three months ended March 31, 2012 was 386,366 tons, compared to 426,820 tons produced for the 2011 period. At March 31, 2012, the Company had 194,558 metric tons of coal in inventory, resulted primarily from the difficulties in logistics in Xing An, such as limited access to railway cargoes resulted in the difficulties of shipment.
"While the first quarter left a certain amount of inventory, we believe that it will not take us long to sell and delivery the coal to our customers," said Mr. Hongwen Li, President of US China Mining Group. "We are well capitalized and intently focused on completing the Guizhou acquisition in the near term which will meaningfully increase both our coal reserves and production capacity, while capitalizing on higher market prices to drive incremental revenue and net income growth."
Cost of sales for the three months ended March 31, 2012 was $10.4 million, a $3.1 million decrease, or down approximately 23% over the year ago period, due to lower production and sales.
Gross profit was $4.1 million for the first quarter of 2012 compared to $8.7 million for the same period of 2011, a 53% decline. Gross margins decreased 11% to 28% for the first quarter of 2012 due to higher labor and materials costs and increased mining fees.
Operating expenses were $3.8 million, up $0.9 million from $2.9 million in the first quarter of 2011. The increase was attributable to 1) new fees and taxes levied by the provincial government, including a $0.65 million land use tax for Xing An required by local tax authority from the second quarter of 2011, 2) increased supplies expenses and machine accessories expenses of $1.4 million and 3) increased payroll of approximately $350,000 and welfare expenses and electricity and gas fees as a result of overall price inflation in China.
Operating income was $0.3 million for the three months ended March 31, 2012.
Other expenses totaled $0.2 million for the three months ended March 31, 2012 compared to approximately $5.5 million other income for the 2011 period. The $5.7 million decrease was mainly attributed to the non-cash non-operating income of $5.5 million in the first quarter of 2011 compared to $0.15 million non-cash non-operating expense in the 2012 period, resulting from the change of the fair value of the derivative warrants that we issued to approximate 300 investors and agents through the Private Placement in January 2011.
Net loss for the three months ended March 31, 2012 was $0.4 million compared to net income of $9.6 million for the same period of 2011. Diluted loss per share for the first quarter 2012 was $0.02 compared to diluted earnings per share of $0.51 in the same period of 2011. The decrease in net income and diluted earning per share was mainly attributed to the noncash income of $5.6, resulted from the changes of the fair value of derivative warrants that we issued through the Private Placement financing in January 2011, and decreased sale volume but increased percentage of costs and operating expenses compared to the same period of last year. Net income as a percentage of sales decreased from 43% for the first quarter of 2011 to (2)% for the same period of 2012.
The shares outstanding count was approximately 18.9 million as of March 31, 2012.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $41.8 million on March 31 2012, compared to $44.5 million on December 31, 2011. US China Mining Group had cash outflows from operations of $2.8 million, as compared to net cash used in operating activities of $1.1 million in the 2011 period. The increase in cash outflow resulted primarily from increased inventory, decreased net income and the payment on taxes payable. The Company had a current ratio of 8.1 to 1 at March 31, 2012. Working capital on March 31, 2012 was approximately $51.6 million versus $50.2 million in the year ago period.
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.
Safe Harbor Statement
This press release contains certain statements that may include 'forward-looking statements' as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by the use of forward-looking terminology such as "believe, expect, anticipate, optimistic, intend, will" or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of risks and factors, including those discussed in the Company's periodic reports that are filed with and available from the Securities and Exchange Commission. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risks and other factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
Chief Financial Officer
US China Mining Group Inc.
SOURCE US China Mining Group, Inc.