China Natural Resources Releases 2008 Annual Results Of Operations

HONG KONG, June 29 /PRNewswire-FirstCall/ -- CHINA NATURAL RESOURCES, INC. (Nasdaq: CHNR), a company based in the People's Republic of China, today released results of operations for the year ended December 31, 2008 (derived from the Company's audited financial statements) as follows.


                         CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
                (Amounts in thousands, except share and per share data)

                                             Year ended December 31,
                                   2006         2007        2008        2008
                                   RMB          RMB         RMB          US$

    NET SALES
     Related parties                  -            -     379,114      55,526
     Others                     145,389      125,963     466,970      68,394
                                -------      -------     -------     -------
                                145,389      125,963     846,084     123,920
                                -------      -------     -------     -------

    COST OF SALES
     Related parties                  -            -    (363,938)    (53,303)
     Others                     (36,787)     (38,541)   (426,920)    (62,528)
                                -------      -------     -------     -------
                                (36,787)     (38,541)   (790,858)   (115,831)
                                -------      -------     -------     -------

    GROSS PROFIT                108,602       87,422      55,226       8,089

    SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES,
     including share-based
     compensation expense of nil in
     2006, RMB38,998
     (US$5,712)in 2007, and
     RMB26,016 (US$3,810)
     in 2008                   (14,170)     (52,499)     (78,712)    (11,530)
                                -------      -------     -------     -------

    INCOME (LOSS) FROM
     OPERATIONS                 94,432       34,923      (23,486)     (3,441)
                                -------      -------     -------     -------

    OTHER INCOME (EXPENSE)
     Interest income               904        4,520        4,265         625
     Interest expense,
      related party                  -            -       (1,835)       (269)
     Loss attributable to investment
      in unconsolidated investees    -       (2,145)      (9,691)     (1,419)
     Net gain on derivative assets   -            -       25,834       3,784
     Gain on sale of investment
      in subsidiary                  -            -       78,877      11,553
     Other                       4,929         (512)      10,465       1,532
                                -------      -------     -------     -------
                                 5,833        1,863      107,915      15,806
                                -------      -------     -------     -------
    INCOME FROM CONTINUING
     OPERATIONS BEFORE
     INCOME TAXES              100,265       36,786       84,429      12,365

    INCOME TAX EXPENSE         (15,157)     (12,051)      (8,402)     (1,231)
                               -------      -------      -------     -------

    INCOME FROM CONTINUING
    OPERATIONS                  85,108       24,735       76,027      11,134
                               -------      -------      -------     -------

    DISCONTINUED OPERATIONS
    Loss from discontinued
     advertising and
     HARC operations,
     net of taxes of nil          (659)           -            -           -


    Loss on disposal of
     discontinued operations,
     net of taxes of nil       (11,901)           -            -           -
                                -------      -------     -------     -------


    LOSS FROM DISCONTINUED
     OPERATIONS                (12,560)           -            -           -
                               -------      -------      -------     -------


    NET INCOME                  72,548       24,735       76,027      11,134
                               =======      =======      =======     =======

    NET INCOME (LOSS) PER SHARE:
     Basic
      Income from continuing
       operations                 7.46         1.86         3.94        0.58
      Loss from discontinued
       operations                (1.10)           -            -           -
                                  ----         ----         ----        ----

      Net income per share        6.36         1.86         3.94        0.58
                                  ====         ====         ====        ====




    NET INCOME (LOSS) PER SHARE:
     Diluted
     Income from continuing
      operations                  6.17         1.43         3.41        0.50
     Loss from discontinued
      operations                 (0.91)           -            -           -
                                  ----         ----         ----        ----

     Net income per share         5.26         1.43         3.41        0.50
                                  ====         ====         ====        ====

    WEIGHTED AVERAGE NUMBER OF
     COMMON SHARES OUTSTANDING:

    Basic                   11,402,372   13,290,471   19,276,019  19,276,019
                            ==========   ==========   ==========  ==========
    Diluted                 13,798,731   17,347,024   22,278,600  22,278,600
                            ==========   ==========   ==========  ==========

                           CONSOLIDATED BALANCE SHEETS
                            DECEMBER 31, 2007 AND 2008
                     (Amounts in thousands, except share data)

                                    ASSETS
                                                   December 31,
                                         2007          2008         2008
                                         RMB           RMB          US$

    CURRENT ASSETS
    Cash                              483,689       120,888        17,706
    Trade receivables:
     Related parties                        -        70,830        10,374
     Others                             1,525         4,157           609
    Bills receivable                   13,000         1,460           214
    Inventories                         4,633        66,245         9,702
    Note receivable                         -        96,166        14,085
    Deferred tax assets                     -         4,425           648
    Other assets                       10,967        25,061         3,670
                                       ------        ------         -----



    TOTAL CURRENT ASSETS              513,814       389,232        57,008

    Property and equipment, net        37,772       242,463        35,512
    Deposits for business
     acquisitions and other                 -       119,741        17,537
    Investment in unconsolidated
     investees                         30,495        22,210         3,253
    Advances to unconsolidated
     investee, net                          -        39,290         5,754
                                       ------        ------         -----
    TOTAL ASSETS                      582,081       812,936       119,064
                                      =======       =======       =======

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                                                    December 31,
                                         2007          2008         2008
                                         RMB           RMB          US$

    CURRENT LIABILITIES
    Accounts payable                     991          7,361         1,078
    Other payables                    24,355         25,484         3,732
    Advances from customers            2,169         15,261         2,235
    Accrued liabilities                3,367          8,014         1,174
    Related party payables             2,221         18,316         2,683
    Income tax and other
     taxes payable                     5,593         11,341         1,661
    Current portion of related
     party capital lease obligation        -          9,977         1,461
                                       -----         ------         -----

    TOTAL CURRENT LIABILITIES         38,696         95,754        14,024
                                      ------         ------        ------

    Related party capital lease
     obligation, net of current
     portion                               -         10,780         1,579
    Other payables                     8,312         10,087         1,477

                                       8,312         20,867         3,056
                                       -----         ------         -----


    TOTAL LIABILITIES                 47,008        116,621        17,080
                                      ------        -------        ------
    MINORITY INTEREST                      -         13,919         2,039
                                      ------         ------        ------

    SHAREHOLDERS' EQUITY
    Preferred shares, no par;
     Authorized - 10,000,000 shares;
     issued and outstanding -none          -              -             -
    Common shares, no par:
     Authorized - 200,000,000 shares;
     issued and outstanding
     -17,323,416 and 19,623,416
     shares at December 31, 2007 and
     2008, respectively              312,081        312,081        45,708
    Reserves                           7,331          7,331         1,074
    Additional paid in capital       127,707        228,752        33,503
    Retained earnings                100,915        176,942        25,915
    Excess of Mark Faith purchase
     price over net asset value            -         (7,149)       (1,047)
    Other comprehensive loss         (12,961)       (35,561)       (5,208)
                                      ------         ------         -----
    TOTAL SHAREHOLDERS' EQUITY       535,073        682,396        99,945
                                     =======        =======        ======

    TOTAL LIABILITIES AND
     SHAREHOLDERS' EQUITY            582,081        812,936       119,064
                                     =======        =======       =======

The consolidated statements of operations for the years ended December 31, 2006, 2007 and 2008 and the consolidated balance sheets as of December 31, 2007 and 2008 have been prepared in accordance with generally accepted accounting principles in the United States, are derived from, and should be read in conjunction with, the Company's consolidated financial statements for the years ended December 31, 2006, 2007 and 2008, as filed with the Securities and Exchange Commission on June 29, 2008 under cover of Form 20-F.

For the convenience of the reader, amounts in Renminbi ("RMB") have been translated into United States dollars ("US$") at the rate of US$1.00=RMB6.8277 quoted by Bloomberg Finance L.P. on December 31, 2008. The RMB is not freely convertible into foreign currencies and no representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate, or at all.

Mr. Li Feilie, the Company's Chairman, commented on the results: "China Natural Resources recorded total sales revenue of RMB846.1 million (US$123.9 million) in 2008, a surge of 571.7% from a year earlier. This represents principally the contribution from our copper smelting business. The Company achieved net income of RMB76.0 million (US$11.1 million) in 2008, representing an increase of over 200% from a year earlier. This was attributable to the disposition of a 40% equity interest in our copper smelting business. The disposition was made to strengthen the Company's working capital so that the Company is better able to focus on the development of its upstream coal and nonferrous metal businesses. In January 2009, we completed the acquisition of a 70% interest of a coal mining asset in Guizhou Province, the PRC. The operating environment for 2009 will remain difficult. Although market conditions are weak, there are signs of recovery in the PRC economy as the PRC government's economic stimulus package, introduced in November 2008, is starting to bear fruit. Despite the continuing impact of the global financial crisis, we will continue our strategy of acquiring coal resources and non-ferrous/ iron metal assets."

This press release includes forward-looking statements within the meaning of federal securities laws. These forward-looking statements are based upon assumptions believed to be reliable, but involve risks and uncertainties that may cause actual results of operations to differ materially from the forward-looking statements. Among the risks and uncertainties that could cause our actual results to differ from our forward-looking statements are our intent, belief and current expectations as to business operations and operating results of the Company, uncertainties regarding the governmental, economic and political circumstances in the People's Republic of China, risks and hazards associated with the Company's mining activities, uncertainties associated with ore reserve estimates, uncertainties associated with metal price volatility, uncertainties associated with the Company's reliance on third-party contractors and other risks detailed from time to time in the Company's Securities and Exchange Commission filings. Although the Company's management believes that the expectations reflected in forward-looking statements are reasonable, it can provide no assurance that such expectations will prove to be accurate.

SOURCE China Natural Resources, Inc.



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