Nevada
(State of Incorporation)
15310 Amberly Drive, Suite
250 Tampa, FL
(Address of principal executive offices)
|
43-1932733
(I.R.S. Employer Identification No.)
33647
(Zip Code)
|
Large Accelerated filer o
|
Accelerated Filer o
|
Non-Accelerated Filer o
|
Smaller Reporting Company x
|
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|
U.S. CHINA MINING GROUP, INC. AND SUBSIDIARIES
|
JUNE 30, 2013 AND DECEMBER 31, 2012
|
2013
|
2012
|
|||||||
(UNAUDITED)
|
||||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash & equivalents
|
$ | 34,695,810 | $ | 40,289,757 | ||||
Other receivables and prepaid expenses
|
279,416 | 242,908 | ||||||
Taxes receivable
|
618,143 | 631,353 | ||||||
Deposit for coal trading
|
1,995,485 | 2,085,585 | ||||||
Inventory
|
524,280 | 515,371 | ||||||
Total current assets
|
38,113,134 | 43,764,974 | ||||||
NONCURRENT ASSETS
|
||||||||
Deposits for mine acquisition
|
4,855,435 | 4,772,934 | ||||||
Prepaid mining rights, net
|
13,888,344 | 13,675,734 | ||||||
Property and equipment, net
|
19,066,423 | 13,422,003 | ||||||
Construction in progress
|
15,456,742 | 19,012,421 | ||||||
Deferred tax asset, net
|
720,568 | 688,378 | ||||||
Asset retirement cost, net
|
2,453,958 | 2,427,456 | ||||||
Total noncurrent assets
|
56,441,470 | 53,998,926 | ||||||
TOTAL ASSETS
|
$ | 94,554,604 | $ | 97,763,900 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable
|
$ | 120,087 | $ | - | ||||
Unearned revenue
|
117,460 | 82,479 | ||||||
Accrued liabilities and other payables
|
883,238 | 3,172,259 | ||||||
Taxes payable
|
4,866,046 | 3,619,848 | ||||||
Warrant derivative liability
|
524,387 | 750,035 | ||||||
Advance from shareholder
|
49,980 | 2,000 | ||||||
Total current liabilities
|
6,561,198 | 7,626,621 | ||||||
NONCURRENT LIABILITIES
|
||||||||
Asset retirement obligation, net of deposit for
mine restoration of $1,344,818 in 2013 and $1,306,059 in
2012, respectively
|
5,054,535 | 4,860,173 | ||||||
Total noncurrent liabilities
|
5,054,535 | 4,860,173 | ||||||
Total liabilities
|
11,615,733 | 12,486,794 | ||||||
CONTINGENCIES AND COMMITMENTS
|
||||||||
STOCKHOLDERS' EQUITY
|
||||||||
Series A Preferred Stock, $0.001 par value,
8,000,000 shares authorized, 400,000 shares
issued and outstanding
|
400 | 400 | ||||||
Common stock, $0.001 par value, 100,000,000 shares
authorized, 18,852,582 shares issued and
outstanding in 2013 and 2012
|
18,852 | 18,852 | ||||||
Additional paid in capital
|
41,208,339 | 41,199,601 | ||||||
Statutory reserves
|
13,606,357 | 13,479,992 | ||||||
Accumulated other comprehensive income
|
11,184,929 | 9,772,780 | ||||||
Retained earnings
|
16,919,994 | 20,805,481 | ||||||
Total stockholders' equity
|
82,938,871 | 85,277,106 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 94,554,604 | $ | 97,763,900 |
SIX MONTHS ENDED JUNE 30,
|
THREE MONTHS ENDED JUNE 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Net sales
|
$ | 1,067,149 | $ | 19,639,700 | $ | 528,294 | $ | 5,146,286 | ||||||||
Cost of goods sold
|
962,493 | 14,149,252 | 477,779 | 3,740,820 | ||||||||||||
Gross profit
|
104,656 | 5,490,448 | 50,515 | 1,405,466 | ||||||||||||
Operating expenses
|
||||||||||||||||
Selling
|
732,799 | 4,609,879 | 308,462 | 2,624,221 | ||||||||||||
General and administrative
|
3,313,822 | 4,456,390 | 1,663,975 | 2,607,126 | ||||||||||||
Total operating expenses
|
4,046,621 | 9,066,269 | 1,972,437 | 5,231,347 | ||||||||||||
Loss from operations
|
(3,941,965 | ) | (3,575,821 | ) | (1,921,922 | ) | (3,825,881 | ) | ||||||||
Non-operating income (expenses)
|
||||||||||||||||
Interest income
|
72,749 | 79,674 | 34,554 | 31,647 | ||||||||||||
Interest expense
|
(125,267 | ) | (149,731 | ) | (63,004 | ) | (73,096 | ) | ||||||||
Other expenses
|
(10,375 | ) | (3,111 | ) | 195 | |||||||||||
Warrant derivative income (expense)
|
225,648 | (27,604 | ) | 394,799 | 123,390 | |||||||||||
Total non-operating income (expenses), net
|
162,755 | (97,661 | ) | 363,238 | 82,136 | |||||||||||
Loss before income tax
|
(3,779,210 | ) | (3,673,482 | ) | (1,558,684 | ) | (3,743,745 | ) | ||||||||
Income tax expense (benefit)
|
(20,087 | ) | 717,868 | (9,867 | ) | 290,677 | ||||||||||
Net loss
|
(3,759,123 | ) | (4,391,350 | ) | (1,548,817 | ) | (4,034,422 | ) | ||||||||
Other comprehensive item
|
||||||||||||||||
Foreign currency translation gain (loss)
|
1,412,144 | (326,677 | ) | 1,192,989 | (420,161 | ) | ||||||||||
Comprehensive loss
|
$ | (2,346,979 | ) | $ | (4,718,027 | ) | $ | (355,828 | ) | $ | (4,454,583 | ) | ||||
Basic and diluted weighted average shares outstanding
|
18,852,582 | 18,852,582 | 18,852,582 | 18,852,582 | ||||||||||||
Basic and diluted net loss per share
|
$ | (0.20 | ) | $ | (0.23 | ) | $ | (0.08 | ) | $ | (0.21 | ) |
Preferred stock was excluded for the calculation of diluted loss per share due to anti-dilution for the six and three months ended June 30, 2013 and 2012
|
U.S. CHINA MINING GROUP, INC. AND SUBSIDIARIES
|
SIX MONTHS ENDED JUNE 30, 2013 AND 2012
|
(UNAUDITED)
|
2013
|
2012
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$ | (3,759,123 | ) | $ | (4,391,350 | ) | ||
Adjustments to reconcile net loss to net cash
|
||||||||
used in operating activities:
|
||||||||
Depreciation and amortization
|
759,476 | 1,892,499 | ||||||
Loss on disposal fixed asset
|
1,173 | - | ||||||
Changes in fair value of warrant derivative
|
(225,648 | ) | 27,604 | |||||
Accretion of interest on asset retirement obligation
|
125,267 | 119,145 | ||||||
Stock option compensation
|
8,738 | 54,624 | ||||||
Changes in deferred tax
|
(20,087 | ) | (159,744 | ) | ||||
(Increase) decrease in assets and liabilities:
|
||||||||
Accounts receivable
|
- | 2,306,509 | ||||||
Other receivables, deposits and prepaid expenses
|
58,055 | 2,570 | ||||||
Deposit for coal trading
|
- | 849,945 | ||||||
Inventory
|
- | (5,394,745 | ) | |||||
Deposit for mine restoration
|
(16,022 | ) | (79,272 | ) | ||||
Accounts payable
|
120,087 | - | ||||||
Unearned revenue
|
33,219 | 806,882 | ||||||
Accrued liabilities and other payables
|
(2,129,562 | ) | 1,303,653 | |||||
Taxes payable
|
1,195,657 | (1,331,179 | ) | |||||
Net cash used in operating activities
|
(3,848,770 | ) | (3,992,859 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Change in restricted cash
|
- | 3,000,000 | ||||||
Acquisition of property, plant & equipment
|
(2,425,534 | ) | (2,008,040 | ) | ||||
Construction in progress
|
- | (3,219,217 | ) | |||||
Net cash used in investing activities
|
(2,425,534 | ) | (2,227,257 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Loan repayment
|
- | (3,000,000 | ) | |||||
Due to shareholder
|
47,980 | - | ||||||
Net cash provided by (used in) financing activities
|
47,980 | (3,000,000 | ) | |||||
EFFECT OF EXCHANGE RATE CHANGE ON CASH & EQUIVALENTS
|
632,377 | (141,608 | ) | |||||
NET DECREASE IN CASH & EQUIVALENTS
|
(5,593,947 | ) | (9,361,724 | ) | ||||
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD
|
40,289,757 | 44,543,696 | ||||||
CASH & EQUIVALENTS, END OF PERIOD
|
$ | 34,695,810 | $ | 35,181,972 | ||||
Supplemental Cash flow data:
|
||||||||
Income tax paid
|
$ | - | $ | 812,936 | ||||
Interest paid
|
$ | - | $ | 30,375 |
Plant and Machinery
|
10-15
|
Motor Vehicles
|
5
|
Building and Mining Structure
|
10-25
|
2013
|
2012
|
|||||||
Building
|
$
|
11,688,142
|
$
|
5,450,943
|
||||
Mining structure
|
13,647,325
|
13,415,437
|
||||||
Production equipment
|
4,989,824
|
4,923,200
|
||||||
Office equipment
|
65,668
|
69,682
|
||||||
Vehicles
|
224,197
|
222,715
|
||||||
Total
|
30,615,156
|
24,081,977
|
||||||
Less: Accumulated depreciation
|
(11,548,733)
|
(10,659,974
|
)
|
|||||
Net
|
$
|
19,066,423
|
$
|
13,422,003
|
Grant Date of Mining Rights (1)
|
In Place Resources to which
Mining
Rights Relate (in metric tons)(2)
|
Corresponding Due Date for the
Payment of Mining Rights
|
||||||
Xing An
|
Tong Gong
|
Xing An
|
Tong Gong
|
Xing An
|
Tong Gong
|
|||
12/30/2004
|
4,649,700
|
PAID
|
||||||
4/1/2005
|
816,300
|
PAID
|
||||||
10/15/2005
|
13,520,700
|
PAID
|
||||||
3/1/2007
|
5,444,800
|
PAID
|
||||||
9/30/2007
|
1,500,000*
|
9/30/2017*
|
||||||
Total
|
19,781,800
|
6,149,700
|
2013
|
2012
|
|||||||
Prepaid mining rights
|
$
|
27,861,900
|
$
|
27,388,485
|
||||
Less: Amortized portion
|
(13,973,556
|
)
|
(13,712,751
|
)
|
||||
Prepaid mining rights, net
|
$
|
13,888,344
|
$
|
13,675,734
|
2013
|
2012
|
|||||||
Accrued liabilities
|
$
|
57,116
|
$
|
158,462
|
||||
Other payables
|
||||||||
Education and union outlays
|
158,856
|
156,156
|
||||||
Refundable deposit from a contractor for Tong Gong’s mining work
|
323,693
|
318,193
|
||||||
Transportation infrastructure construction fee
|
13,708
|
13,006
|
||||||
Mine security special purpose fee
|
13,708
|
6,175
|
||||||
Coal price adjustment fund
|
13,708
|
6,175
|
||||||
Resource compensation fee
|
89,827
|
88,301
|
||||||
Accrued cost for construction of the new building
|
-
|
2,242,218
|
||||||
Others
|
212,622
|
183,573
|
||||||
Total
|
$
|
883,238
|
$
|
3,172,259
|
2013
|
2012
|
|||||||
Land
|
$
|
4,075,615
|
$
|
2,670,909
|
||||
Value added
|
766,838
|
813,478
|
||||||
Resource
|
3,153
|
43,962
|
||||||
Others
|
20,440
|
91,499
|
||||||
Total
|
$
|
4,866,046
|
$
|
3,619,848
|
2013
|
2012
|
|||||||
Income
|
$
|
531,949
|
$
|
621,439
|
||||
Others
|
86,194
|
9,914
|
||||||
Total
|
$
|
618,143
|
$
|
631,353
|
2013
|
2012
|
|||||||
Asset retirement cost
|
$
|
4,818,609
|
$
|
4,736,734
|
||||
Less: Accumulated amortization
|
(2,364,651
|
)
|
(2,309,278
|
)
|
||||
$
|
2,453,958
|
$
|
2,427,456
|
2013
|
2012
|
|||||||
Balance at beginning of period
|
$
|
4,860,173
|
$
|
4,689,114
|
||||
Accretion of interest expense
|
125,267
|
238,096
|
||||||
Foreign currency translation gain (loss)
|
69,095
|
(67,037)
|
||||||
Ending balance
|
$
|
5,054,535
|
$
|
4,860,173
|
June 30, 2013
|
December 31,
2012
|
|||||||
Deferred tax asset on amortization of mining rights, amortization of asset
retirement cost, depreciation of assets using unit-of-production method; and mine
safety and maintenance expenses
|
$
|
3,084,615
|
$
|
3,012,256
|
||||
Deferred tax liability on statutory reserves for mine safety and maintenance expenses
|
(2,364,047)
|
(2,323,878
|
)
|
|||||
Net deferred tax asset
|
$
|
720,568
|
$
|
688,378
|
||||
Deferred tax liability on statutory reserves for mine safety and maintenance expenses
|
(2,364,047)
|
(2,323,878 )
|
2013
|
2012
|
|||||||
US statutory rates (benefit)
|
(34.0
|
)%
|
(34.0
|
)%
|
||||
Tax rate difference
|
8.9
|
%
|
6.7
|
%
|
||||
Permanent difference – change in FV of Warrants
|
(2.0
|
) %
|
0.3
|
%
|
||||
Permanent difference – accretion of interest on asset retirement obligation and excess portion of asset
retirement cost per US GAAP over amount allowed for deduction per PRC tax
|
1.0
|
%
|
1.2
|
%
|
||||
Valuation allowance on US NOL
|
25.6
|
%
|
45.3
|
%
|
||||
Tax expense (benefit) per financial statements
|
(0.5
|
)%
|
19.5
|
%
|
2013
|
2012
|
|||||||
US statutory rates (benefit)
|
(34.0
|
)%
|
(34.0
|
)%
|
||||
Tax rate difference
|
10.4
|
%
|
8.3
|
%
|
||||
Permanent difference – change in FV of Warrants
|
(9.0
|
) %
|
(1.1
|
)%
|
||||
Permanent difference – accretion of interest on asset retirement obligation and excess portion of asset
retirement cost per US GAAP over amount allowed for deduction per PRC tax
|
1.
|
5%
|
1.8
|
%
|
||||
Valuation allowance on US NOL
|
30.
|
5%
|
32.8
|
%
|
||||
Tax expense (benefit) per financial statements
|
(0.
|
6)%
|
7.8
|
%
|
2013
|
2012
|
|||||||
Income tax expense – current
|
$
|
-
|
$
|
877,612
|
||||
Income tax benefit – deferred
|
(20,087
|
)
|
(159,744)
|
)
|
||||
Total income tax expense (benefit)
|
$
|
(20,087
|
)
|
$
|
717,868
|
2013
|
2012
|
|||||||
Income tax expense – current
|
$
|
-
|
$
|
369,533
|
||||
Income tax benefit – deferred
|
(9,867
|
)
|
(78,856
|
)
|
||||
Total income tax expense (benefit)
|
$
|
(9,867
|
)
|
$
|
290,677
|
Customers
|
Sales of 2013
|
Percentage
to
Total Sales
|
Sales of
2012
|
Percentage
to
Total Sales
|
||||||||||||
Customer A
|
$
|
692,868
|
65%
|
$
|
16,055,846
|
82%
|
||||||||||
Customer B
|
$
|
374,281
|
35%
|
$
|
3,583,854
|
18%
|
Customers
|
Sales of 2013
|
Percentage
to
Total Sales
|
Sales of
2012
|
Percentage
to
Total Sales
|
||||||||||||
Customer A
|
$
|
337,224
|
64%
|
$
|
3,460,329
|
67%
|
||||||||||
Customer B
|
$
|
191,070
|
36%
|
$
|
1,685,957
|
33%
|
2013
|
2012
|
|||||||
Statutory surplus reserve
|
$
|
3,279,749
|
$
|
3,257,850
|
||||
Safety and Maintenance reserve
|
10,326,608
|
10,222,142
|
||||||
Total
|
$
|
13,606,357
|
$
|
13,479,992
|
Number
of
Shares
|
Average
Exercise
Price per Share ($)
|
Weighted Average
Remaining
Contractual
Term in Years
|
||||||||||
Outstanding at January 1, 2013
|
235,000
|
4.22
|
2.76
|
|||||||||
Exercisable at January 1, 2013
|
200,000
|
4.78
|
2.51
|
|||||||||
Granted
|
20,000
|
0.27
|
5.00
|
|||||||||
Exercised
|
-
|
-
|
-
|
|||||||||
Outstanding at June 30, 2013
|
255,000
|
3.91
|
2.44
|
|||||||||
Exercisable at June 30, 2013
|
235,000
|
4.22
|
2.26
|
Number of
Shares
|
Average
Exercise
Price per Share ($)
|
Weighed
Average
Remaining
Contractual
Term in Years
|
||||||||||
Outstanding at January 1, 2013
|
240,000
|
8.92
|
2.17
|
|||||||||
Exercisable at January 1, 2013
|
240,000
|
8.92
|
2.17
|
|||||||||
Granted
|
-
|
-
|
-
|
|||||||||
Exercised
|
-
|
-
|
-
|
|||||||||
Outstanding at June 30, 2013
|
240,000
|
8.92
|
1.67
|
|||||||||
Exercisable at June 30 2013
|
240,000
|
8.92
|
1.67
|
Number of
Shares
|
Average
Exercise
Price per Share ($)
|
Weighed
Average
Remaining
Contractual
Term in Years
|
||||||||||
Outstanding at January 1, 2013
|
2,250,000
|
6.80
|
3.01
|
|||||||||
Exercisable at January 1, 2013
|
2,250,000
|
6.80
|
3.01
|
|||||||||
Granted
|
-
|
-
|
-
|
|||||||||
Exercised
|
-
|
-
|
-
|
|||||||||
Outstanding at June 30, 2013
|
2,250,000
|
6.80
|
2.51
|
|||||||||
Exercisable at June 30, 2013
|
2,250,000
|
6.80
|
2.51
|
18. OTHER CONTINGENCIES AND COMMITMENTS
|
July 1, 2013 - June 30, 2014
|
$
|
24,000
|
||
July 1, 2014 – June 30, 2015
|
24,000
|
|||
July 1, 2015 - to July 30, 2015
|
2,000
|
|||
Total
|
$
|
50,000
|
2013
|
2012
|
|||||||||||||||
$
|
% of Sales
|
$
|
% of Sales
|
|||||||||||||
Sales
|
1,067,149
|
100
|
%
|
19,639,700
|
100
|
%
|
||||||||||
Cost of Goods Sold
|
962,493
|
90
|
%
|
14,149,252
|
72
|
%
|
||||||||||
Gross Profit
|
104,656
|
10
|
%
|
5,490,448
|
28
|
%
|
||||||||||
Operating Expenses
|
4,046,621
|
379
|
%
|
9,066,269
|
46
|
%
|
||||||||||
Loss from Operations
|
(3,941,965)
|
(369
|
)%
|
(3,575,821)
|
(18)
|
%
|
||||||||||
Other Income (Expenses), Net
|
162,755
|
15
|
%
|
(97,661)
|
(0.5)
|
%
|
||||||||||
Income Tax Expense (Benefit)
|
(20,087)
|
(2
|
)%
|
717,868
|
4
|
%
|
||||||||||
Net Loss
|
(3,759,123)
|
(352)
|
%
|
(4,391,350)
|
(22)
|
%
|
Tong Gong Coal Mine
|
|||||||||||||||
Salable Production
|
Brokerage
|
Sales
|
|||||||||||||
2013
|
2012
|
2013
|
2012
|
2013
|
2012
|
||||||||||
Six months ended June 30
|
17,220
|
74,011
|
-
|
105,000
|
17,220
|
179,011
|
Xing An Coal Mines (Hong Yuan and Sheng Yu)
|
|||||||||||||||
Salable Production
|
Brokerage
|
Sales
|
|||||||||||||
2013
|
2012
|
2013
|
2012
|
2013
|
2012
|
||||||||||
Six months ended June 30
|
- | 351,376 | - | - | - | 185,495 |
2013
|
2012
|
|||||||||||||||
$
|
% of Sales
|
$
|
% of Sales
|
|||||||||||||
Sales
|
528,294
|
100
|
%
|
5,146,286
|
100
|
%
|
||||||||||
Cost of Goods Sold
|
477,779
|
90
|
%
|
3,740,820
|
73
|
%
|
||||||||||
Gross Profit
|
50,515
|
10
|
%
|
1,405,466
|
27
|
%
|
||||||||||
Operating Expenses
|
1,972,437
|
373
|
%
|
5,231,347
|
102
|
%
|
||||||||||
Loss from Operations
|
(1,921,922)
|
(364
|
)%
|
(3,825,881)
|
(74)
|
%
|
||||||||||
Other Income, Net
|
363,238
|
69
|
%
|
82,136
|
2
|
%
|
||||||||||
Income Tax Expense (Benefit)
|
(9,867)
|
(2
|
)%
|
290,677
|
6
|
%
|
||||||||||
Net Loss
|
(1,548,817)
|
(293
|
)%
|
(4,034,422)
|
(78)
|
%
|
Tong Gong Coal Mine
|
|||||||||||||||
Salable Production
|
Brokerage
|
Sales
|
|||||||||||||
2013
|
2012
|
2013
|
2012
|
2013
|
2012
|
||||||||||
Three months ended June 30
|
8,470
|
39,021
|
-
|
45,000
|
8,470
|
84,021
|
Xing An Coal Mines (Hong Yuan and Sheng Yu)
|
|||||||||||||||
Salable Production
|
Brokerage
|
Sales
|
|||||||||||||
2013
|
2012
|
2013
|
2012
|
2013
|
2012
|
||||||||||
Three months ended June 30
|
- | - | - | - | - | - |
2013
|
2012
|
|||||||
Cash provided by (used in):
|
||||||||
Operating Activities
|
$
|
(3,848,769)
|
$
|
(3,992,859)
|
||||
Investing Activities
|
$
|
(2,425,534)
|
$
|
(2,227,257)
|
||||
Financing Activities
|
$
|
47,980
|
|
$
|
(3,000,000)
|
|
Payments Due by Period
|
|||||||||||||||||||
|
Total
|
Less than 1
Year
|
1-3 Years
|
3-5 Years
|
5 Years +
|
|||||||||||||||
|
||||||||||||||||||||
Contractual Obligations:
|
||||||||||||||||||||
Operating Leases
|
$
|
50,000
|
$
|
24,000
|
$
|
26,000
|
$
|
-
|
$
|
-
|
||||||||||
Deposit for land restoration
|
2,187,205
|
-
|
-
|
2,187,205
|
||||||||||||||||
Mining Rights
|
973,080
|
-
|
-
|
973,080
|
-
|
|||||||||||||||
Total Contractual Obligations:
|
$
|
3,210,285
|
$
|
24,000
|
$
|
26,000
|
$
|
3,160,285
|
$
|
-
|
Exhibit No.
|
Description
|
|
31.1
|
Section 302 Certification by the Corporation’s Chief Executive Officer. *
|
|
31.2
|
Section 302 Certification by the Corporation’s Chief Financial Officer. *
|
|
32.1
|
Section 906 Certification by the Corporation’s Chief Executive Officer. *
|
|
32.2
|
Section 906 Certification by the Corporation’s Chief Financial Officer. *
|
|
101.INS
|
XBRL Instance Document.**
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.**
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.**
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document**
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.**
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.**
|
U.S. CHINA MINING GROUP,
INC. (Registrant)
|
|||
Date: August 16, 2013 |
By:
|
/s/ Hongwen Li | |
Hongwen Li
|
|||
Chief Executive Officer
|
Date: August 16, 2013
|
By:
|
/s/ Xinyu Peng | |
Xinyu Peng
|
|||
Chief Financial Officer
(principal accounting officer)
|
Exhibit No.
|
Description
|
|
31.1
|
Section 302 Certification by the Corporation’s Chief Executive Officer. *
|
|
31.2
|
Section 302 Certification by the Corporation’s Chief Financial Officer. *
|
|
32.1
|
Section 906 Certification by the Corporation’s Chief Executive Officer. *
|
|
32.2
|
Section 906 Certification by the Corporation’s Chief Financial Officer. *
|
|
101.INS
|
XBRL Instance Document.**
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.**
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.**
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document**
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.**
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.**
|
Date: August 16, 2013 |
By:
|
/s/ Hongwen Li | |
Hongwen Li
|
|||
Chief Executive Officer
|
Date: August 16, 2013 |
By:
|
/s/ Xinyu Peng | |
Xinyu Peng
|
|||
Chief Financial Officer
|
/s/ Hongwen Li | |
Hongwen Li
|
|
Chief Executive Officer
|
/s/ Xinyu Peng
|
|
Xinyu Peng
|
|
Chief Financial Officer Date:
August 16, 2013
|
ASSET RETIREMENT COST AND OBLIGATION
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ASSET RETIREMENT COST AND OBLIGATION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ASSET RETIREMENT COST AND OBLIGATION | 12. ASSET RETIREMENT COST AND OBLIGATION Xing An voluntarily applied to Daxinganling District Environment Protection Bureau for asset retirement obligation to get a tax deduction and is obligated to account for land subsidence, restoration, rehabilitation and environmental protection at RMB 1 ($0.16) per ton for total reserves at the end of the useful lives of the mines. These activities include reclaiming the pit, sealing portals at underground mines, and reclaiming and vegetating refuse areas. Effective January 1, 2009, Xing An and Tong Gong were required by the local Environment Protection Bureau and HPNLRNB to deposit RMB 18,886,500 ($2,765,632) and RMB 5,000,000 ($731,090), respectively, within a period of time presently expected to be three to five years to a bank account held by local mining authority for land subsidence, restoration and rehabilitation when the mine is fully depleted. At June 30, 2013, Xing An deposited RMB 5,665,950 ($917,013), and Tong Gong deposited RMB 2,643,280 ($427,805). The Company accounts for Xing An and Tong Gong's asset retirement obligations in accordance with FASB ASC Topic 410, "Asset Retirement and Environmental Obligations". The Company reviews the asset retirement obligation at least annually and makes necessary adjustments for permitted changes as granted by state authorities and for revisions of estimates of the amount and timing of costs. For ongoing operations, adjustments to the liability result in an adjustment to the corresponding asset. Asset Retirement Cost at June 30, 2013 and December 31, 2012 was:
Amortization for asset retirement cost for the six months ended June 30, 2013 and 2012 was $15,302 and $166,600, respectively. Amortization for asset retirement cost for the three months ended June 30, 2013 and 2012 was $7,600 and $34,300, respectively. Changes in Asset Retirement Obligation for the six months ended June 30, 2013 and for the year ended December 31, 2012 consisted of the following:
|
MAJOR CUSTOMERS AND VENDORS (Details) (USD $)
|
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
Customer A [Member]
Sales [Member]
|
Jun. 30, 2012
Customer A [Member]
Sales [Member]
|
Jun. 30, 2013
Customer A [Member]
Sales [Member]
|
Jun. 30, 2012
Customer A [Member]
Sales [Member]
|
Jun. 30, 2013
Customer A [Member]
Customer Concentration Risk [Member]
|
Dec. 31, 2012
Customer A [Member]
Customer Concentration Risk [Member]
|
Jun. 30, 2013
Customer B [Member]
Sales [Member]
|
Jun. 30, 2012
Customer B [Member]
Sales [Member]
|
Jun. 30, 2013
Customer B [Member]
Sales [Member]
|
Jun. 30, 2012
Customer B [Member]
Sales [Member]
|
Jun. 30, 2013
Customer B [Member]
Customer Concentration Risk [Member]
|
Dec. 31, 2012
Customer B [Member]
Customer Concentration Risk [Member]
|
|
Revenue, Major Customer [Line Items] | ||||||||||||||||
Net sales | $ 528,294 | $ 5,146,286 | $ 1,067,149 | $ 19,639,700 | $ 337,224 | $ 3,460,329 | $ 692,868 | $ 16,055,846 | $ 191,070 | $ 1,685,956 | $ 374,281 | $ 3,583,854 | ||||
Concentration percentage | 64.00% | 67.00% | 65.00% | 82.00% | 36.00% | 33.00% | 35.00% | 18.00% | ||||||||
Accounts receivable | $ 0 | $ 0 | $ 0 | $ 0 |
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS [Abstract] | ||||
Net sales | $ 528,294 | $ 5,146,286 | $ 1,067,149 | $ 19,639,700 |
Cost of goods sold | 477,779 | 3,740,820 | 962,493 | 14,149,252 |
Gross profit | 50,515 | 1,405,466 | 104,656 | 5,490,448 |
Operating expenses | ||||
Selling | 308,462 | 2,624,221 | 732,799 | 4,609,879 |
General and administrative | 1,663,975 | 2,607,126 | 3,313,822 | 4,456,390 |
Total operating expenses | 1,972,437 | 5,231,347 | 4,046,621 | 9,066,269 |
Loss from operations | (1,921,922) | (3,825,881) | (3,941,965) | (3,575,821) |
Non-operating income (expenses) | ||||
Interest income | 34,554 | 31,647 | 72,749 | 79,674 |
Interest expense | (63,004) | (73,096) | (125,267) | (149,731) |
Other expenses | (3,111) | 195 | (10,375) | |
Warrant derivative income (expense) | 394,799 | 123,390 | 225,648 | (27,604) |
Total non-operating income (expenses), net | 363,238 | 82,136 | 162,755 | (97,661) |
Loss before income tax | (1,558,684) | (3,743,745) | (3,779,210) | (3,673,482) |
Income tax expense (benefit) | (9,867) | 290,677 | (20,087) | 717,868 |
Net loss | (1,548,817) | (4,034,422) | (3,759,123) | (4,391,350) |
Other comprehensive item | ||||
Foreign currency translation gain (loss) | 1,192,989 | (420,161) | 1,412,144 | (326,677) |
Comprehensive loss | $ (355,828) | $ (4,454,583) | $ (2,346,979) | $ (4,718,027) |
Basic and diluted weighted average shares outstanding | 18,852,582 | 18,852,582 | 18,852,582 | 18,852,582 |
Basic and diluted net loss per share | $ (0.08) | $ (0.20) | $ (0.21) | $ (0.23) |
OTHER RECEIVABLES
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
OTHER RECEIVABLES [Abstract] | |
OTHER RECEIVABLES | 5. OTHER RECEIVABLES Other receivables include advances to employees for traveling and other business related expenses and appraisal and consulting fees for certain potential projects of the Company. |
ACQUISITION OF COAL MINES
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
ACQUISITION OF COAL MINES [Abstract] | |
ACQUISITION OF COAL MINES | 19. ACQUISITION OF COAL MINES On January 20, 2011, the Company signed an agreement with an owner of a coal mine in Guizhou China. Pursuant to the agreement, the Company advanced a refundable RMB 30 million ($4.7 million, the maximum amount provided under the agreement) to an escrow account to be used for improvements to this mine. In addition, the Company intends to acquire the mine from the individual owner if the owner can complete the necessary restructuring of the mine as appropriate for acquisition and the new mining company after the restructuring has received all government required permits for normal production. If the potential acquisition goes forward, the escrow amount will be treated as partial consideration. If not, the amount will be reimbursed to the Company. During 2011, the owner completed the mine improvement construction and organization restructuring as appropriate for potential acquisition. The renovated mine has been in official test runs since July 2011, and is currently applying for all necessary mining and operating permits. The Company expects to acquire the mine once all the necessary permits are in place. The local mining authority delayed the approval of new permits for new or renovated mines during 2012 as a matter of policy and as a result of unexpected accidents that occurred in the neighboring counties. The Company expects to see progress in this acquisition during 2013 when the local government moves forward in its consolidating plan (where it plans to significantly reduce the number of operating mines by shutting down or discontinuing small mines with poor conditions and/or, safety and environment problems) and resumes the mining permit procedure. |
SHAREHOLDERS' EQUITY (Make Good Provision) (Details) (Guoqing Yue [Member], Performance Guarantee [Member], USD $)
|
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2013
|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
Guoqing Yue [Member] | Performance Guarantee [Member]
|
|||
Guarantor Obligations [Line Items] | |||
Number of shares guaranteed by the Chairman | 500,000 | ||
Fair value of guarantee | $ 550,000 | ||
Minimum net revenue | $ 102,000,000 | $ 81,300,000 | |
Percent of make good shares to be released back to Make Good Pledgor | 50.00% | ||
Shares to be transferred to investors | 332,000 | 168,000 |
DEFERRED TAX ASSET, NET
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||
DEFERRED TAX ASSET, NET [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
DEFERRED TAX ASSET, NET | 13. DEFERRED TAX ASSET, NET Deferred tax asset is the difference between the tax and book depreciation of mining shafts using unit-of-production method, amortization of mining rights for reserves under SEC Industry Guide 7, and amortization of asset retirement cost. Effective May 1, 2011, Tong Gong is required to pay additional safety and maintenance expense at RMB 10 ($1.60) per ton to the local government. The Company records this payment as an expense and also records a deferred tax asset for future tax deduction when the expense is actually incurred. The amount paid to the government can be recovered from the local government under certain circumstances. However, it is not clear whether the Company will be able to recover the amount paid to the government. Accordingly, the payments to government are recorded as an expense. Deferred tax liability consisted of tax-deductible safety and maintenance expenses of RMB 14.7 ($2.31) per ton for Tong Gong, RMB 14.7 ($2.31) for Xing An until 2011 and increased to RMB 23.7 ($3.73) after 2011 to be incurred in the future for coal produced. It is deductible for tax purposes at a predetermined rate per ton of coal produced per year until April 2011. For financial reporting purposes, this was recorded as an appropriation of retained earnings. As defined under US GAAP, a liability for safety and maintenance expenses does not exist at the balance sheet date because there is no present obligation to transfer assets or to provide services as a result of any past transaction (see Note 16 - Statutory Reserves). Effective May 1, 2011, per ruling No. 26, issued in 2011 by National Tax Authority Regarding Coal Mine Enterprise Tax Deduction Guidance for Maintenance of Productivity Expenses and Security (M&S), M&S expense can only be deductible under PRC tax law when the expense is incurred. Accordingly, there was no deferred tax liability for M&S expense since then. Deferred tax asset (liability) consisted of the following at June 30, 2013 and December 31, 2012:
|
ASSET RETIREMENT COST AND OBLIGATION (Narrative) (Details)
|
3 Months Ended | 6 Months Ended | 54 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
USD ($)
|
Jun. 30, 2012
USD ($)
|
Jun. 30, 2013
USD ($)
|
Jun. 30, 2013
|
Jun. 30, 2012
USD ($)
|
Jun. 30, 2013
Xing An [Member]
USD ($)
|
Jun. 30, 2013
Xing An [Member]
CNY
|
Jun. 30, 2013
Tong Gong [Member]
USD ($)
|
Jun. 30, 2013
Tong Gong [Member]
CNY
|
|
ASSET RETIREMENT COST AND OBLIGATION [Abstract] | |||||||||
Asset retirement obligation, cost per ton of total reserves | 0.16 | 1 | |||||||
Statement [Line Items] | |||||||||
Cash outflow for deposits with authorities | $ 2,765,632 | 18,886,500 | $ 731,090 | 5,000,000 | |||||
Amount deposited with local mining authority | 917,013 | 5,665,950 | 427,805 | 2,643,280 | |||||
Amortization for asset retirement cost | $ 7,600 | $ 34,300 | $ 15,302 | $ 166,600 |
SHAREHOLDERS' EQUITY (Stock-Based Compensation Plan) (Details) (USD $)
|
3 Months Ended | 6 Months Ended | 0 Months Ended | |||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Feb. 24, 2013
Employee Stock Option [Member]
|
Mar. 09, 2012
Employee Stock Option [Member]
|
Feb. 24, 2012
Employee Stock Option [Member]
|
Mar. 11, 2011
Employee Stock Option [Member]
|
|
STOCK-BASED COMPENSATION PLAN | ||||||||
Options granted | 20,000 | 20,000 | 50,000 | 20,000 | 50,000 | |||
Exercise price of options granted | $ 0.27 | $ 1.00 | $ 1.00 | $ 4.50 | ||||
Options, contractual term | 5 years | 5 years | 5 years | 5 years | ||||
Expected life of options | 5 years | 5 years | 5 years | 5 years | ||||
Expected volatility | 244.00% | 202.00% | 201.00% | |||||
Risk free interest rate | 0.78% | 0.90% | 0.89% | |||||
Expected dividend yield | 0.00% | 0.00% | 0.00% | |||||
Fair value of options issued | $ 5,366 | $ 48,831 | $ 19,518 | |||||
Stock option compensation | $ 2,018 | $ 25,468 | $ 8,738 | $ 54,624 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details)
|
6 Months Ended | 3 Months Ended | 6 Months Ended | 54 Months Ended | 6 Months Ended | 54 Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2013
|
Jun. 30, 2013
Sales Revenue, Goods, Net [Member]
Customer Concentration Risk [Member]
|
Jun. 30, 2012
Sales Revenue, Goods, Net [Member]
Customer Concentration Risk [Member]
|
Jun. 30, 2013
Sales Revenue, Goods, Net [Member]
Customer Concentration Risk [Member]
|
Jun. 30, 2012
Sales Revenue, Goods, Net [Member]
Customer Concentration Risk [Member]
|
Jun. 30, 2013
Plant and Machinery [Member]
Minimum [Member]
|
Jun. 30, 2013
Plant and Machinery [Member]
Maximum [Member]
|
Jun. 30, 2013
Motor Vehicles [Member]
|
Jun. 30, 2013
Building and Mining Structure [Member]
Minimum [Member]
|
Jun. 30, 2013
Building and Mining Structure [Member]
Maximum [Member]
|
Jun. 30, 2013
Xing An [Member]
USD ($)
|
Jun. 30, 2013
Xing An [Member]
CNY
|
Jun. 30, 2013
Xing An [Member]
USD ($)
|
Jun. 30, 2013
Xing An [Member]
CNY
|
Jun. 30, 2013
Heilongjiang Tong Gong Kuang Ye You Xian Gong Si [Member]
USD ($)
|
Jun. 30, 2013
Heilongjiang Tong Gong Kuang Ye You Xian Gong Si [Member]
CNY
|
Jun. 30, 2013
Heilongjiang Tong Gong Kuang Ye You Xian Gong Si [Member]
USD ($)
|
Jun. 30, 2013
Heilongjiang Tong Gong Kuang Ye You Xian Gong Si [Member]
CNY
|
|
Asset Retirement Cost and Obligations, Deposit for Mine Restoration | |||||||||||||||||||
Asset retirement obligation, cost per ton of total reserves | 0.16 | 1 | |||||||||||||||||
Cash outflow for deposits with authorities | $ 2,765,632 | 18,886,500 | $ 731,090 | 5,000,000 | |||||||||||||||
Amount deposited with local mining authority | $ 917,013 | 5,665,950 | $ 917,013 | 5,665,950 | $ 427,805 | 2,643,280 | $ 427,805 | 2,643,280 | |||||||||||
Resource Compensation Fees | |||||||||||||||||||
Resource fees per ton of total production | 0.64 | 4 | |||||||||||||||||
Resource fees as a percent of total sales | 1.00% | 1.00% | |||||||||||||||||
Property, Plant and Equipment [Line Items] | |||||||||||||||||||
Estimated useful life | 10 years | 15 years | 5 years | 10 years | 25 years | ||||||||||||||
Concentration Risk [Line Items] | |||||||||||||||||||
Concentration percentage | 100.00% | 100.00% | 100.00% | 100.00% |
PROPERTY AND EQUIPMENT, NET (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
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PROPERTY AND EQUIPMENT, NET [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment | Property and equipment consisted of the following at June 30, 2013 and December 31, 2012:
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
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6 Months Ended | ||||||
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Jun. 30, 2013
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||
Schedule of Estimated Useful Lives | The estimated useful lives for each category of fixed assets in years are as follows:
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TAXES PAYABLE AND RECEIVABLE (Details) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
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Taxes payable | ||
Land | $ 4,075,615 | $ 2,670,909 |
Value added | 766,838 | 813,478 |
Resource | 3,153 | 43,962 |
Others | 20,440 | 91,499 |
Total | 4,866,046 | 3,619,848 |
Taxes receivable | ||
Income tax | 531,949 | 621,439 |
Others | 86,194 | 9,914 |
Total | $ 618,143 | $ 631,353 |
MAJOR CUSTOMERS AND VENDORS (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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MAJOR CUSTOMERS AND VENDORS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Major Customers | Below is the table indicating the major customers accounting for over 10% of the Company's total sales for the six month periods ended June 30, 2013 and 2012:
Below is the table indicating the major customers accounting for over 10% of the Company's total sales for the three months ended June 30, 2013 and 2012:
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PREPAID MINING RIGHTS (Narrative) (Details)
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3 Months Ended | 6 Months Ended | 6 Months Ended | |||||||||||||||
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Jun. 30, 2013
USD ($)
t
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Jun. 30, 2012
USD ($)
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Jun. 30, 2013
USD ($)
t
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Jun. 30, 2013
t
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Jun. 30, 2012
USD ($)
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Dec. 31, 2012
t
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Jun. 30, 2013
Coal Mining Rights [Member]
USD ($)
t
|
Jun. 30, 2013
Coal Mining Rights [Member]
|
Jun. 30, 2013
Xing An [Member]
t
|
Jun. 30, 2013
Xing An [Member]
t
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Jun. 30, 2013
Tong Gong [Member]
t
|
Jun. 30, 2013
Tong Gong [Member]
t
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Finite-Lived Intangible Assets [Line Items] | ||||||||||||||||||
Cost per ton of coal | 1.28 | 8 | 1.28 | 8 | 1.43 | 9 | 1.27 | 8 | ||||||||||
Commitment to purchase coal mining rights | $ 973,080 | |||||||||||||||||
Length of time entities have to pay for rights | 10 years | 10 years | ||||||||||||||||
Amortization | $ 0 | $ 149,100 | $ 23,500 | $ 913,800 | ||||||||||||||
Maximum tons of coal that can be extracted | 25,931,500 | 25,931,500 | 25,931,500 | 25,931,500 | 19,781,800 | [1] | 19,781,800 | [1] | 6,149,700 | [1] | 6,149,700 | [1] | ||||||
Volume of proven and probable reserves | 7,830,000 | 7,830,000 | 7,830,000 | |||||||||||||||
Volume of coal mining rights that has been paid for | 25,165,295 | 25,165,295 | 25,165,295 | |||||||||||||||
Volume of coal related to the commitment | 766,205 | 766,205 | 766,205 | 766,205 | 766,205 | |||||||||||||
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ASSET RETIREMENT COST AND OBLIGATION (Schedule of Asset Retirement Cost) (Details) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
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ASSET RETIREMENT COST AND OBLIGATION [Abstract] | ||
Asset retirement cost | $ 4,818,609 | $ 4,736,734 |
Less: Accumulated amortization | (2,364,651) | (2,309,278) |
Asset Retirement Cost | $ 2,453,958 | $ 2,427,456 |
ASSET RETIREMENT COST AND OBLIGATION (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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ASSET RETIREMENT COST AND OBLIGATION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Asset Retirement Cost | Asset Retirement Cost at June 30, 2013 and December 31, 2012 was:
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Schedule of Changes in Asset Retirement Obligation | Changes in Asset Retirement Obligation for the six months ended June 30, 2013 and for the year ended December 31, 2012 consisted of the following:
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ACQUISITION OF COAL MINES (Details)
In Millions, unless otherwise specified |
Jun. 30, 2013
USD ($)
|
Jun. 30, 2013
CNY
|
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ACQUISITION OF COAL MINES [Abstract] | ||
Advance to mine owner held in escrow | $ 4.7 | 30.0 |
OTHER CONTINGENCIES AND COMMITMENTS (Details)
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3 Months Ended | 6 Months Ended | 6 Months Ended | |||||
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Jun. 30, 2013
USD ($)
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Jun. 30, 2012
USD ($)
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Jun. 30, 2013
USD ($)
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Jun. 30, 2012
USD ($)
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Jun. 30, 2013
Indemnification Agreement [Member]
CNY
|
Jun. 30, 2013
PRC Principal Executive Office [Member]
sqft
|
Jun. 30, 2013
Principal Shareholder [Member]
USD ($)
|
Jun. 30, 2013
Principal Shareholder [Member]
CNY
|
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Operating Leased Assets [Line Items] | ||||||||
Monthly rent payment | $ 2,000 | 12,500 | ||||||
Area of space | 7,000 | |||||||
Lease expiration date | Jul. 30, 2015 | Jul. 30, 2015 | ||||||
Rental expense | 20,000 | 20,000 | 40,000 | 40,000 | ||||
Future minimum rental payments under operating leases: | ||||||||
Date range one | 24,000 | 24,000 | ||||||
Date range two | 24,000 | 24,000 | ||||||
Date range three | 2,000 | 2,000 | ||||||
Total | 50,000 | 50,000 | ||||||
Guarantor Obligations [Line Items] | ||||||||
Amount of deposit | 30,000,000 |
CONSTRUCTION IN PROGRESS (Details) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
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Significant Acquisitions and Disposals [Line Items] | ||
Construction in progress | $ 15,456,742 | $ 19,012,421 |
Construction of New Building [Member]
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Significant Acquisitions and Disposals [Line Items] | ||
Construction in progress | 3,820,000 | |
Retrofit Project [Member]
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Significant Acquisitions and Disposals [Line Items] | ||
Estimated cost for the retrofit | 20,000,000 | |
Construction in progress | $ 15,460,000 | $ 15,210,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policy)
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6 Months Ended | ||||||
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Jun. 30, 2013
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the financial statements of SGZH and its subsidiaries, Tong Gong and Xing An. All significant inter-company accounts and transactions were eliminated in consolidation. |
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Cash and Equivalents | Cash and Equivalents For financial statement purposes, the Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. |
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Inventory | Inventory Inventory consists of coal extracted from the ground that is available for delivery to customers, and extracted coal removed from the ground but not yet processed through a wash plant. Inventory is valued at the lower of average cost or market, cost being determined on a first in, first out method including labor, all expenditures directly related to the removal of coal, and amortization of mining rights. |
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Prepaid Mining Rights | Prepaid Mining Rights Prepaid mining rights represent the portion of the mining rights for which the Company has previously paid. Prepaid mining rights are expensed based on actual production volume during the period. See additional discussion in Note 6, "Prepaid Mining Rights." |
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Asset Retirement Cost and Obligations, Deposit for Mine Restoration | Asset Retirement Cost and Obligations, Deposit for Mine Restoration The Company uses FASB ASC Topic 410, "Asset Retirement and Environmental Obligation". As of June 30, 2013 and December 31, 2012, there were no adjustments of the asset retirement obligations. Xing An voluntarily applied to Daxinganling District Environment Protection Bureau for the asset retirement obligation and is obligated to account for land subsidence, restoration, rehabilitation and environmental protection at a rate of RMB 1 ($0.16) per ton based on total reserves at the end of the useful lives of the mines. From January 1, 2009, Xing An and Tong Gong were required by the local Environment Protection Bureau and Heilongjiang Province National Land and Resources Administration Bureau ("HPNLRAB') to deposit RMB 18,886,500 ($2,765,632) and RMB 5,000,000 ($731,090), respectively, within a certain period of time, presently expected to be three to five years, to a bank account held by local mining authority for land subsidence, restoration and rehabilitation when the mine is fully depleted. As of June 30, 2013, Xing An had deposited RMB 5,665,950 ($917,013) and Tong Gong had deposited RMB 2,643,280 ($427,805). See additional discussion in Note 12, "Asset Retirement Cost and Obligations." |
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Environmental Costs | Environmental Costs The PRC has environmental laws and regulations that affect the coal mining industry. The outcome of environmental liabilities under proposed or future environmental legislation cannot be reasonably estimated at present, and could be material. Under existing legislation, however, Company management believes there are no probable liabilities that will have a material adverse effect on the financial position of the Company. |
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Property and Equipment | Property and Equipment The estimated useful lives for each category of fixed assets in years are as follows:
Mining structure includes the main and auxiliary mine shafts, underground tunnels, and other integrant mining infrastructure. Depreciation for the mine shafts is provided to write off the cost of the mining structure using the units-of-production method based on salable reserves determined under SEC Industry Guide 7. |
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Revenue Recognition | Revenue Recognition The Company's revenue recognition policies are in compliance with SEC Staff Accounting Bulletin ("SAB") 104 (codified in FASB ASC Topic 605). Coal sales include sales of coal produced at Company operations and coal purchased from other coal mining companies. Sales are recognized when a formal arrangement exists, which is generally represented by a contract between the Company and the buyer; the price is fixed or determinable; title has passed to the buyer, which generally is at the time of delivery; no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are recorded as unearned revenue. When the Company purchases coal from other mining companies, its customers pick up the coal at those coal mines' premises or the coal is shipped directly from other coal mining companies. Purchases and shipments of coal from other mining companies are arranged simultaneously. Sales of brokered coal are recognized at the time of delivery, which in most cases occurs when the coal is picked up by the customer. Sales represent the invoiced value of coal, net of value-added tax ("VAT"). All Company coal sold in the PRC is subject to a VAT of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing the finished product. The Company records VAT payable and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the receivables. Sales and purchases are recorded net of VAT collected and paid as the Company acts as an agent for the government. |
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Cost of Goods Sold | Cost of Goods Sold Cost of goods sold ("COGS") consists primarily of amortization of mining rights, direct material, direct labor, depreciation of mining plant items such as the underground tunnel and the major mine well and related expenses, which are directly attributable to the production of coal. Write-down of inventory to lower of cost or market is also recorded in COGS. |
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Resource Compensation Fees | Resource Compensation Fees In accordance with the relevant regulations, a company engaged in coal production is required to pay a fee to the HPNLRAB for the depletion of coal resources. Tong Gong is required to pay mineral resource fees of RMB 4 ($0.64) per ton for its total production during the period; Xing An is required to pay resource fees at 1% of its total sales. The Company expenses such costs as General and Administrative ("G&A") expense when incurred. |
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Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that subject the Company to credit risk consist primarily of accounts and other receivables. The Company does not require collateral or other security to support those receivables. The Company concentrates its sales to a few customers. For the six and three month periods ended June 30, 2013, and June 30, 2012, two customers comprised 100% of the Company's sales during such periods. See Note 15 for additional discussion regarding same. The Company conducts periodic reviews of its customers' financial condition and customer payment practices to minimize collection risk on its receivables. The Company has cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC. Cash in state-owned banks is not covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in these bank accounts. |
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Basic and Diluted Earnings (Loss) per Share (EPS) | Basic and Diluted Earnings (Loss) per Share (EPS) Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the relevant period. Diluted EPS is computed similar to basic net income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later). During the six and three month periods ended June 30, 2013 and 2012, preferred shares and shares for options and warrants were not included in the calculation of diluted EPS as a result of their anti-dilutive feature because both basic and diluted weighted average number of shares and loss per share were equal. |
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Foreign Currency Translation and Comprehensive Income (Loss) | Foreign Currency Translation and Comprehensive Income (Loss) The functional currency of Tong Gong and Xing An is the Renminbi ("RMB"). For financial reporting purposes, RMB were translated into US Dollars ("USD" or "$") as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet dates. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders' equity as "Accumulated other comprehensive income". Gains and losses resulting from foreign currency transactions are included in non-operating income (expense). There was no significant fluctuation in the exchange rate for the conversion of RMB to USD after the balance sheet date. The fluctuation of exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the People's Bank of China ("PBOC") or other banks authorized to buy and sell foreign currencies at the exchange rate quoted by the PBOC. The Company uses FASB ASC Topic 220 "Comprehensive Income". Comprehensive income is comprised of net income and all changes to the statements of stockholders' equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive income (loss) for the six and three month periods ended June 30, 2013 and 2012 consisted of net loss and foreign currency translation adjustments. |
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New Accounting Pronouncements | New Accounting Pronouncements In February 2013, the FASB issued ASU 2013-2, Comprehensive Income (ASC Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The new ASU requires entities to disclose in a single location (either on the face of the financial statement that reports net income or in the notes) the impact of reclassifications out of accumulated other comprehensive income (AOCI). For items reclassified out of AOCI and into net income in their entirety, entities must disclose the impact of the reclassification on each affected net income item. For AOCI reclassification items that are not reclassified in their entirety into net income, entities must provide a cross-reference to other required U.S. GAAP disclosures. There is no change in the requirement to present the components of net income and other comprehensive income in either a single continuous statement or two separate consecutive statements. The ASU does not change the items currently reported in other comprehensive income. For public entities, the new disclosure requirements are effective for annual reporting periods beginning after December 15, 2012, and interim periods within those years (i.e., the first quarter of 2013 for entities with calendar year-ends). The ASU applies prospectively, and early adoption is permitted. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements. As of June 30, 2013, there is no other recently issued accounting standards not yet adopted that would have a material effect on the Company's consolidated financial statements. |
ORGANIZATION AND DESCRIPTION OF BUSINESS
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6 Months Ended |
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Jun. 30, 2013
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ORGANIZATION AND DESCRIPTION OF BUSINESS [Abstract] | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | 1. ORGANIZATION AND DESCRIPTION OF BUSINESS U.S. China Mining Group, Inc. ("SGZH" or the "Company") was incorporated in Nevada on June 7, 2001. The Company is engaged in coal production and sales by exploring, assembling, assessing, permitting, developing and mining coal properties in the People's Republic of China ("PRC" or "China"). After obtaining permits from the Heilongjiang Province National Land and Resources Administration Bureau and the Heilongjiang Coal Production Safety Bureau, we extract coal, and then sell most of the coal on a metric ton ("ton") basis for cash on delivery. Through the end of March 2008, our business consisted of the operations of our Tong Gong coal mine through our subsidiary, Heilongjiang Tong Gong Mining Co., Ltd. ("Tong Gong"), in northern PRC. The mine is located approximately 175 kilometers southwest of the city of Heihe in the Heilongjiang Province. On December 31, 2007, we entered into an agreement to acquire two mining companies in the PRC, Heilongjiang Xing An Group Hong Yuan Coal Mining Co., Ltd. ("Hong Yuan") and Heilongjiang Xing An Group Sheng Yu Mining Co., Ltd. ("Sheng Yu", and with Hong Yuan collectively referred to as "Xing An" or the "Xing An Companies"). The Xing An Companies operate two coal mines, the Hong Yuan and Sheng Yu mines, located in the city of Mohe in Heilongjiang Province. We completed our acquisition of the Xing An Companies on April 4, 2008, and, as a result, our business now consists of the operations of the Tong Gong coal mine and the two Xing An coal mines. The consolidated interim financial information as of June 30, 2013 and for the six and three month periods ended June 30, 2013 and 2012 were prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") have not been included. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012, previously filed with the SEC. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company's consolidated financial position as of June 30, 2013, its consolidated results of operations and cash flows for the six and three month periods ended June 30, 2013 and 2012, as applicable, were made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods. |
INVENTORY
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6 Months Ended |
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Jun. 30, 2013
|
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INVENTORY [Abstract] | |
INVENTORY | 3. INVENTORY Inventory, as of June 30, 2013 and December 31, 2012, consisted of coal extracted from the ground that is available for delivery to customers, as well as extracted coal removed from the ground but not yet processed through a wash plant. Inventory is valued at the lower of average cost or market, cost being determined on a first in, first out method and including labor costs, all expenditures directly related to the removal of coal, and amortization of mining rights and asset retirement cost. |
PREPAID MINING RIGHTS
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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PREPAID MINING RIGHTS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PREPAID MINING RIGHTS | 6. PREPAID MINING RIGHTS Prepaid mining rights are the portion of the mining rights for which the Company previously paid. The price is determined by the local mining bureau from which the Company acquired its mining rights, based in part on market prices set by HPNLARB and in part on negotiations with the local mining bureau. The price is established at the time of payment, regardless of when production of the underlying coal occurs. The price for Tong Gong was RMB 8 ($1.27) per ton for 2008 through 2013; the price for Xing An was RMB 9 ($1.43) per ton for 2008 through 2013. Xing An paid for the mining rights in June 2008. Tong Gong needs to pay the remaining balance of $973,080 by September 30, 2017. For any mining rights granted prior to September 1, 2006, the Company is generally required to pay for the entire amount for coal underlying such mining rights within five years from the date such right is granted unless specific good cause exists for extension. Effective September 1, 2006, under the authority of the Heilongjiang Geology and Mineral Exploration Office, the Company has 10 years to pay for the coal underlying any mining rights granted on or after such date. If the Company decides to cease mining at a particular property, and the Company has extracted all the coal underlying its mining rights, the government will take back that coal mine. If the Company decides to cease mining but has not extracted all coal it has already paid to extract (i.e., its prepaid mining rights), while the Company will not be entitled to a refund of the corresponding prepaid mining rights from the government, the Company can sell such unused prepaid mining rights to a third party. The following table illustrates the grant dates of the Company's mining rights and corresponding payment due dates:
(1) Grant date is the date the reserves appraisal report by government authorized mining engineers is filed with Heilongjiang Department of Land and Resources and the Company is approved for the total tons of coal it is legally allowed to extract based on the PRC reserves appraisal report. (2) The Company's mining rights are based on appraisals of in place resources conducted by the appropriate PRC authorities and are expressed as a maximum number of metric tons of coal in each mine which the Company is entitled to extract under related mining rights. *paid for 733,795 metric tons The Company's prepaid mining rights consisted of the following at June 30, 2013 and December 31, 2012:
The Company amortizes the mining rights by using total cost of mining rights (the sum of those for which the Company has paid and those for which the Company is still committed to pay) divided by total salable reserves determined under SEC Industry Guide 7, multiplied by production during the period. The cost of unpaid mining rights is assumed to be the same as the most current prepaid mining right price per ton paid by the Company (RMB 8 ($1.28) per ton). Amortization was $23,500 and $913,800 for the six month periods ended June 30, 2013 and 2012, respectively. Amortization was $0 and $149,100 for the three month periods ended June 30, 2013 and 2012, respectively. Tonggong fully expensed the prepaid mining rights as of June 30, 2013. As of June 30, 2013 and December 31, 2012, the total quantity of coal the Company is allowed to extract under the mining rights of Xing An and Tong Gong was 25,931,500 tons (as per above table); however, as noted in the table above, this amount reflects the in place resources on which the mining rights are based and to which those mining rights extend. But these amounts, determined by the appropriate PRC authorities, do not coincide with the definition of proven and probable product reserves of SEC Industry Guide 7, which would be 7.83 million tons as of June 30, 2013. The Company paid for 25,165,295 tons at June 30, 2013, and is committed to pay for 766,205 tons of coal at RMB 8 ($1.28) per ton, or $973,080, which must be paid by September 30, 2017. The prepayment of mining rights is accounted for in a manner similar to a royalty agreement as neither the payment terms nor the price per ton is fixed. |
PROPERTY AND EQUIPMENT, NET
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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PROPERTY AND EQUIPMENT, NET [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT, NET | 4. PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following at June 30, 2013 and December 31, 2012:
Depreciation for the six month periods ended June 30, 2013 and 2012 was $720,600 and $811,900, respectively. Depreciation for the three month periods ended June 30, 2013 and 2012 was $371,400 and $314,400, respectively. |
PREPAID MINING RIGHTS (Schedule of Grant Dates and Payment Due Dates) (Details)
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6 Months Ended | |||||||||||||||||||||
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Jun. 30, 2013
t
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Dec. 31, 2012
t
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Jun. 30, 2013
Xing An [Member]
t
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Jun. 30, 2013
Tong Gong [Member]
t
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Jun. 30, 2013
12/30/2004 [Member]
Tong Gong [Member]
t
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Jun. 30, 2013
4/1/2005 [Member]
Xing An [Member]
t
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Jun. 30, 2013
10/15/2005 [Member]
Xing An [Member]
t
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Jun. 30, 2013
3/1/2007 [Member]
Xing An [Member]
t
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Jun. 30, 2013
9/30/2007 [Member]
Tong Gong [Member]
t
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Finite-Lived Intangible Assets [Line Items] | ||||||||||||||||||||||
Grant Date of Mining Rights | Dec. 30, 2004 | [1] | Apr. 01, 2005 | [1] | Oct. 15, 2005 | [1] | Mar. 01, 2007 | [1] | Sep. 30, 2007 | [1] | ||||||||||||
In Place Resources to which Mining Rights Relate (in metric tons) | 25,931,500 | 25,931,500 | 19,781,800 | [2] | 6,149,700 | [2] | 4,649,700 | [2] | 816,300 | [2] | 13,520,700 | [2] | 544,800 | [2] | 1,500,000 | [2] | ||||||
Corresponding Due Date for the Payment of Mining Rights | Sep. 30, 2017 | [3] | ||||||||||||||||||||
Amount paid for | 733,795 | |||||||||||||||||||||
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PREPAID MINING RIGHTS (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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PREPAID MINING RIGHTS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Grant Dates and Payment Due Dates | The following table illustrates the grant dates of the Company's mining rights and corresponding payment due dates:
(1) Grant date is the date the reserves appraisal report by government authorized mining engineers is filed with Heilongjiang Department of Land and Resources and the Company is approved for the total tons of coal it is legally allowed to extract based on the PRC reserves appraisal report. (2) The Company's mining rights are based on appraisals of in place resources conducted by the appropriate PRC authorities and are expressed as a maximum number of metric tons of coal in each mine which the Company is entitled to extract under related mining rights. *paid for 733,795 metric tons |
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Schedule of Prepaid Mining Rights | The Company's prepaid mining rights consisted of the following at June 30, 2013 and December 31, 2012:
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DEFERRED TAX ASSET, NET (Tables)
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Jun. 30, 2013
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DEFERRED TAX ASSET, NET [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Deferred Tax Assets and Liabilities | Deferred tax asset (liability) consisted of the following at June 30, 2013 and December 31, 2012:
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OTHER CONTINGENCIES AND COMMITMENTS (Tables)
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Jun. 30, 2013
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OTHER CONTINGENCIES AND COMMITMENTS [Abstract] | |||||||||||||||||||||
Schedule of Future Minimum Annual Lease Payments | As of June 30, 2013, the future minimum annual lease payments required under operating leases, are as follows:
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