China Shen Zhou Mining & Resources Reports Third Quarter 2006 Financial Results.BEIJING -- China Shen Zhou For the spacecraft, see . Life Shen Zhou (Chinese: 沈周; Pinyin: Shěn Zhōu, 1427–1509), courtesy name Qinan Mining & Resources, Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :CSZM), one of the leading companies in the exploration, development, mining, and processing of fluorite fluorite (fl  `ərīt) or fluorspar (fl , zinc, lead, copper, and
other non-ferrous metals in the PRC, has announced third quarter 2006
financial results which will be reported in the Company's 10-QSB
filed with the S.E.C. today.Financial highlights from the third quarter of 2006 compared to the third quarter of 2005 include: * Revenues increased 427% to $6.71 million in 3Q06 from $1.27 million in 3Q05. * Net income increased 310% to $2.75 million in 3Q06 from $0.67 million in 3Q05. * Gross income grew 329% to $3.61 million in 3Q06 from $0.84 million in 3Q05 * Income from operations increased 578% to $2.73 million from $0.40 million in 3Q05 "Our recent technological improvements successfully enabled us to increase our exploration and production capabilities," said Yu Xiao-Jing, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of China Shen Zhou Mining & Resources, "our increase in revenues reflect the results of these efforts." Quarter Ended September 30, 2006 Revenues increased by 427% in the third quarter of 2006 to $6.71 million from $1.27 million in 2005. This was mainly attributable to an increase in mining and processing capacity through technological improvements, which enabled the Company to process larger quantities of minerals in 2006 compared to 2005. It was also attributable to a big market price increase after May 2005, as a result of a substantial increase in demand for these minerals, combined with a limited supply. Net income increased $2.1 million or 310% to $2.75 million for the three months ended September 30, 2006, compared with $671,448 at September 30, 2005. Cost of sales increased to 46% as a percentage of cost of sales to net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the three months ended Sept. 30, 2006 compared to 34% for the three months ended Sept. 30, 2005. This increase is attributable to the Company's ability to increase sales volume. The total cost of sales for the third quarter of 2006 was $3.10 million as compared to $432,366 for 2005. This increase is directly tied to the growth in sales. Selling and operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. represented expenditures in connection with the distribution and selling of properties as well as expenses incurred for the operating of the business. Selling and operating expenses for the three months ended September. 30, 2006 were $201,513 as compared to $82,247 for the same period in 2005. Selling and operating expenses as a percentage of sales decreased by 3%, from 3% in the third quarter of 2006 to 6% in the third quarter of 2005. The increase in these expenses of $119,266 was mainly attributable to increases in freight and travel expenses, which was in turn caused by the high cost of gasoline in the world market. The increase in gas prices affected every aspect of business that is related to transportation. This increase was also due to the increase in business promotion, salaries to selling staff, and sales commissions. Nine Months Ended September 30, 2006 Revenues increased by 239% in the nine months ended September 30, 2006 to $13.77 million from $4.10 million in the same period of 2005. This was mainly attributable to an increase in mining and processing capacity through technological modernization, which enabled AFMG and Subsidiaries to process larger quantities of minerals in 2006. It was also attributable to the overall economic environment resulting in an increase in the demand for minerals. Net income increased $4.9 million or 525% to $5.84 million for the nine months ended September 30, 2006, compared with $0.93 million for the period ended September 30, 2005. Balance Sheet Cash and cash equivalents increased by $1.95 million or 379% to $2.47 million as of September 30, 2006 compared to $514,893 as of September 30, 2005. The increase was mainly due to increase in sales, which results more cash being generated and collected. The Company's consolidated shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. at September 30, 2006 of $17.92 million, reflects a substantial increase in shareholders' equity of $8.76 million over stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. of $9.16 million at December 31, 2005. Company Financing The Company signed a financing term sheet and agreement for a US$28.0 million financing with Citadel Equity Fund Ltd. ("Citadel") on November 17, 2006. Subject to completion of satisfactory due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. scheduled for completion by December 10, 2006, the agreement calls for Citadel to acquire $28.0 million of senior secured convertible notes due in 2012 with a cash coupon rate Coupon rate In bonds, notes, or other fixed income securities, the stated percentage rate of interest, usually paid twice a year. of 6.75%. The convertible notes are convertible into shares of common stock at a price of $3.20 per share, subject to certain conditions and adjustments, which is a 14.3% premium over the market price of the Company's common stock of $2.80 per share on November 16, 2006. The Company intends to use the financing proceeds for the purchase of a mine in neighboring Kyrgyzstan to cover additional capital expenditures for existing and new mine properties in China; and to cover general working capital needs. As part of the binding term sheet and subject to certain closing conditions, Citadel has further agreed to provide an interim bridge financing Bridge Financing A method of financing, used by companies before their IPO, to obtain necessary cash for the maintenance of operations. Notes: These funds are usually supplied by the investment bank underwriting the new issue. to the Company in order for the Company to close an intended transaction on November 27, 2006 with Kichi Chaarat who owns the mine property and exploring rights for the Kalu Tiegailieke Copper and Gold Mine in Kyrgyzstan and located across the border from the Company's existing Tianzhen Mine in far western Xinjiang province. Income Tax The Autonomous Region Council issued a special certificate to Qianzhen to grant Qianzhen income tax exempt starting from June, 2006; prior to the exemption status, Qianzhen was required to pay a fixed amount of enterprise income tax of $62,195 (RMB RMB Right Mouse Button RMB Regional Management Board (USACE) RMB Rolf Maier Bode (musician, band) RMB Ren Min Bi (currency of People's Republic of China) 500, 000) for the period ended June 30, 2006, regardless of its taxable earnings as its income tax rather than a percentage of its taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. as its income tax. Such preferential tax treatment was granted after the annual review of the Company's 2005 financial condition and operating results. On August, 2006, the Autonomous Region Council has informed the Company that its tax exemption tax exemption, immunity from the requirement of paying taxes. Federal, state, and usually local law provide exemption from taxation for a wide variety of organizations, usually not-for-profit, such as churches, colleges, universities, health care providers, various status has been approved by the Council. Such treatment is common in China to promote foreign investments. About China Shen Zhou Mining & Resources, Inc. China Shen Zhou Mining & Resources, Inc. conducts all of its business through its subsidiary, AFMG, which, in turn, conducts its business through its Subsidiaries. The principal business of AFMG is the exploration, development, mining, and processing of fluorite, zinc, lead, copper, and other non-ferrous metals in the PRC. AFMG has two principal areas of interest in the PRC: (a) fluorite and zinc exploration in the Sumochaganaobao region of Inner Mongolia Inner Mongolia Chinese Nei Mongol or Nei-meng-ku Autonomous region (pop., 2002 est.: 23,790,000), China. Stretching some 1,800 mi (2,900 km) across north-northeastern China, it has an area of 454,600 sq mi (1,177,500 sq km); its capital is Hohhot. Province; and (b) copper/gold exploration in the Yangye Huayuan region of Xinjiang Uygur Xin·jiang Uy·gur also Sin·kiang Ui·ghur or Sin·kiang Ui·gur An autonomous region of extreme western China. It came under Chinese control in the 16th century and was the site of a conflict between China and the Soviet Union in 1969. Autonomous Region. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People's Republic People's Republic n. A political organization founded and controlled by a national Communist party. of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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