US China Mining Group Provides Business Update; Announces Preliminary 2011 Coal Production Results

CITY OF INDUSTRY, Calif., Feb. 21, 2012 /PRNewswire/ -- US China Mining Group, Inc., ("US China Mining") (OTC Bulletin Board: SGZH) a Chinese leader in coal production and exploration in the People's Republic of China, today provided an update on its operations in China and status of its potential acquisition in Guizhou Province, China. The Company also announced that it has taken a series of steps with the provincial government to become a consolidator of coal mines in Guizhou.

The Company provided preliminary, unaudited production results for the fourth quarter and full year 2011:

U.S. China Mining will report fourth quarter and full year 2011 results in late March 2012. Additional information will be provided once the details have been finalized.

Business Update

The Company continues to progress on retrofitting its mines in Xing An, which is expected to increase its output capacity by 50% by 2013. The estimated cost for the retrofit is approximately $15.5 million, approximately $13 million of which has been spent as of Dec.31, 2011. Management expects tunnel construction to be completed by March 2012.

US China Mining Group made an initial entry into the consolidation movement in 2011 when it reached an advance agreement to purchase a Guizhou-based private mining operator with 15 million metric tons ("MT") of in-place reserves and a license to produce up to 300,000 MT of anthracite coal per year. The approval process to complete the transaction has taken longer than expected due to the provincial government extending the timeline for reviewing and approving both new and existing mining licenses. US China Mining made a $4.6 million refundable advance into an escrow account, which is fully refundable if the acquisition is not consummated. This safety and operating approval is the only outstanding item needed to complete the acquisition.

Since 2010, China's Central Government has implemented higher standards for mining consolidation in China in order to improve workers' safety, shut down illegal mines, while improving the economic viability of mines in operation. The process has been completed in Shanxi, Henan and Inner Mongolia, and is now moving southwest to Guizhou. Guizhou's local regulators commenced planning for mining consolidation in May of 2011 and plan to reduce the number of coal operators in Guizhou from more than 1,000 today to below 200 within two years. Further information can be found on these activities at: http://en.sxcoal.com/511/60218/DataShow.html; http://en.sxcoal.com/65885/NewsShow.html.  

"We recognized the opportunity to invest our cash flow to significantly expand our reserves through consolidation several years ago," explained Mr. Hongwen Li, President of US China Mining Group. "After evaluating several potential regions, we targeted Guizhou because of its comparative advantages, favorable economics and access to large, scalable coal reserves. While we have had active discussions with the local regulatory agencies to obtain approval for our proposed acquisition, the process has taken longer than we originally anticipated. With our excellent operating safety record and strong capital, we remain committed to completing this and other potential acquisitions."

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 in 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.

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.

Contact:
Tony Peng
US China Mining Group, Inc.
626-581-8878

Investor Relations
MZ North America
Ted Haberfield, President
760-755-2716
[email protected]
Web: www.mz-ir.com

SOURCE US China Mining Group, Inc.