20-F/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F/A

(Amendment No. 1)

(Mark One)

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

OR

¨  SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report _________________________

Commission file number: 001-34532

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

(Exact Name of Registrant as Specified in Its Charter)

Not Applicable

(Translation of Registrant’s Name Into English)

British Virgin Islands

(Jurisdiction of Incorporation or Organization)

1 Shuanghu Development Zone

Xinzheng City

Zhengzhou, Henan Province 451191

People’s Republic of China

(Address of Principal Executive Offices)

Mingwang Lu

1 Shuanghu Development Zone

Xinzheng City

Zhengzhou, Henan Province 451191

People’s Republic of China
Tel: 86-371-62568634; Fax: 86-371-67718787

Email: mingwang.lu@geruigroup.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange On Which Registered
Ordinary Shares, no par value	NASDAQ Global Select Market

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report (December 31, 2012): 59,561,899 ordinary shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large Accelerated Filer  o Accelerated Filer   x Non-Accelerated Filer  o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  x	International Financial Reporting        o	Other  o
	Standards as issued by the International
	Accounting Standards Board

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

o Item 17 o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

EXPLANATORY NOTE

The Company is filing this Amendment No. 1 to Form 20-F (the “Amendment No. 1”) for the purpose of amending certain disclosures related to the acquisition of Zhengzhou No. 2 Iron and Steel Company Limited, a PRC company (“Zhengzhou Company”) included in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2012, which was filed on April 30, 2013 (the “Form 20-F”).

As required by Rule 12b-15 under the Exchange Act of 1934, as amended, updated certifications of our principal executive officer and our principal financial officer are being filed as exhibits to this Amendment No. 1. This Amendment also includes a new Exhibit 15.1, which contains the consent of our independent registered public accounting firm with respect to this Amendment No. 1. Other than as described above, this Amendment No. 1 speaks as of the date of the initial filing of the Form 20-F and does not, and does not purport to, amend, update or restate the information in the Form 20-F or reflect any events that have occurred after the Form 20-F was filed.

PART I

ITEM 3. KEY INFORMATION

A. Selected Financial Data

The following table presents selected financial data regarding our business.  It should be read in conjunction with our consolidated financial statements and related notes contained elsewhere in this annual report and the information under Item 5 “Operating and Financial Review and Prospects.”  The selected consolidated statement of income data for the fiscal years ended December 31, 2012, 2011 and 2010, and the selected consolidated balance sheet data as of December 31, 2012 and 2011 have been derived from our audited consolidated financial statements that are included in this annual report beginning on page F-1.  The selected consolidated statement of income data for the fiscal years ended December 31, 2009 and 2008, and the selected consolidated balance sheet data as of December 31, 2010, 2009 and 2008 have been derived from our audited consolidated financial statements that are not included in this annual report.  

Our consolidated financial statements are prepared and presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.  The selected financial data information is only a summary and should be read in conjunction with the historical consolidated financial statements and related notes contained elsewhere herein.  The financial statements contained elsewhere fully represent our financial condition and operations; however, they are not indicative of our future performance.

(In thousands of U.S. Dollars, except number of shares and per share data)

	Fiscal Year Ended December 31,
	2012		2011		2010		2009		2008
Statement of Income Data:
Revenue	$	265,486	$	341,778	$	253,866	$	218,903	$	196,264
Gross profit		56,945		101,578		75,997		65,807		53,857
Operating income		42,331		83,537		66,950		60,315		49,594
Net income before income taxes		38,030		79,582		63,021		58,200		47,375
Net income		26,133		57,621		47,083		43,448		21,585
Weighted average ordinary shares - basic		58,543,076		56,297,652		43,891,670		33,751,844		30,000,000
Weighted average ordinary shares - diluted		58,543,076		56,297,652		46,655,721		37,675,479		30,000,000
Basic earnings per share	$	0.45	$	1.02	$	1.07	$	1.29	$	0.72
Diluted earnings per share	$	0.45	$	1.02	$	1.01	$	1.15	$	0.72
Balance Sheet Data:
Total current assets	$	495,040	$	445,186	$	227,915	$	146,638	$	94,019
Total assets		673,370		601,076		329,004		184,350		115,376
Total current liabilities		343,302		302,648		161,192		97,307		102,808
Total liabilities		343,302		302,648		161,192		97,307		102,836
Stockholders’ equity		330,067		298,428		167,812		87,043		12,540

2

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

An investment in our capital stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this annual report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our ordinary shares could decline, and you may lose all or part of your investment.

Risks Related to our Business

If we become directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved favorably.

Recently, U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the United States Securities and Exchange Commission, or the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits, SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our company, our business and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from growing our company. If such allegations are not proven to be groundless, our company and business operations would be severely damaged and your investment in our stock could be rendered worthless.

3

A significant percentage of our revenues are derived from sales to a limited number of large customers and our business will suffer if sales to these customers decline.

We currently sell high precision steel products to more than 20 major customers in the Chinese domestic market. For the fiscal years ended December 31, 2012 and 2011, sales revenues generated from our top 10 customers amounted for 30.8% and 25.8% of total sales revenues, respectively, and sales to our largest single customer for the same periods amounted to 6.8% and 5.5% of our total sales revenues, respectively. We do not enter into long-term contracts with our customers and therefore cannot be certain that sales to these customers will continue. The loss of any of our largest customers would likely have a material negative impact on our sales revenues and business.

Our customers operate in highly competitive markets, and they may be willing to accept substitutes in lieu of our products.

Our customers and other users of cold-rolled steel products operate in highly competitive markets, which are becoming increasingly cost-conscious. Cold-rolled precision steel competes with other materials, such as aluminum, plastics, composite materials and glass, among others, for industrial and commercial applications. Customers have demonstrated a willingness to substitute other materials for cold-rolled steel. If our customers increasingly utilize substitutes for cold-rolled steel products in their operations, sales of our products will decline and our business and results of operations will suffer.

We may be unable to fund the substantial ongoing capital and maintenance expenditures that our operations require.

Our operations are capital intensive and our business strategy is likely to require additional substantial capital investment. We completed an underwritten public offering in November 2009 and a private placement financing in June 2010 in which we raised total net proceeds of approximately $43 million.

As of December 31, 2012, we have used the net proceeds from the aforementioned financings to expand our cold-rolled steel processing capacity from 250,000 metric tons per annum to 500,000 metric tons per annum and to add 200,000 metric tons per annum of capacity to our 50,000-metric ton-per-annum chromium plating line so as to be capable of producing additional 250,000 tons of cold-rolled steel per annum. The estimated total capital expenditure for these expansion projects was approximately $45 million. We will also need to use capital to test and optimize our new production lines in order to bring them into full operation, maintain the condition of our equipment, and comply with environmental laws and regulations.

On February 26, 2013, we entered into an equity/asset transfer agreement to acquire 100% ownership of Zhengzhou Company, a related party of the Company. We agreed to pay a total cash purchase price of RMB 268 million (approximately $43.6 million) to the shareholders of Zhengzhou Company, of which we paid RMB 150.0 million (approximately $24.1 million) as of December 31, 2012. We expect that the balance of the purchase price will be paid within the next 6 months. If we fail to pay the full purchase price timely, we will be liable for a penalty fee at a daily rate of 0.03% of the outstanding purchase price. In addition, if any party breaches its representations and warranties provided in the equity/asset transfer agreement, the breaching party is required to pay the other parties for damages in an amount of RMB 1 million (approximately $0.16 million).

Our capital expenditure plans and estimates are subject to change as determined by our management and we may determine that we do not have sufficient cash on hand to fund these initiatives without seeking external capital funds. Sourcing external capital funds for these purposes are key factors that have constrained and may in the future constrain our growth, production capability and profitability. To the extent that we finance our capital expansion and maintenance projects with debt financing, we may become subject to financial covenants or operating covenants that restrict our ability to freely operate our business or take actions that are desired by shareholders, such as the payment of dividends. If we elect to finance our capital expansion and maintenance plans through equity financing, our shareholders may experience dilution or may have their voting or economic rights as shareholders subordinated to a senior class of stock. In either event, we may be unable to find external sources of financing on favorable terms or at all. Our failure to obtain external financing for our capital expansion and maintenance projects can severely impede our growth plans and strategy and impair our revenue, earnings and overall financial performance.

4

The recent global economic crisis could further impair the steel industry thereby limiting demand for our products and affecting the overall availability and cost of external financing for our operations.

The repetition, continuation or intensification of the recent global economic crisis and turmoil in the global financial markets have adversely impacted our business, the businesses of our customers from whom we generate revenues and our potential sources of capital financing. Our high precision, cold rolled steel products parts are primarily sold to customers who operate in the food and industrial packaging, construction and household decorations materials, electrical appliances, and telecommunications wires and cables industries. The global economic crisis harmed most industries and has been particularly detrimental to the steel industry. Since virtually all of our sales are made to end users in other industries, our sales and business operations are dependent on the financial health of both the steel industry and other industries in which our customers operate. Therefore, our business could suffer further if our customers continue to experience, difficulties in their respective industries or a downturn in their business. Presently, it is unclear whether and to what extent the economic stimulus measures and other actions taken or contemplated by the Chinese government and other governments throughout the world will mitigate the effects of the crisis on the steel industry and other industries that affect our business. Although these conditions have not presently impaired our ability to access credit markets and finance our operations, the impact of the current crisis on our ability to obtain capital financing in the future, and the cost and terms of same, is unclear.

A downturn or negative changes in the highly volatile steel industry has harmed our business and profitability.

Steel consumption is highly cyclical and generally follows general economic and industrial conditions, both worldwide and in various smaller geographic areas. Pricing can be volatile as a result of general economic conditions, labor costs, competition, import duties, tariffs and currency exchange rates. The steel industry has historically been characterized by excess world supply and wide fluctuations in results of operations both in China and globally. This has led to substantial price decreases during periods of economic weakness, which have not been offset by commensurate price increases during periods of economic strength. Substitute materials are increasingly available for many steel products, which may further reduce demand for steel. Additional overcapacity or the use of alternative products could further hurt our results of operations.

We are subject to risks associated with changing technology and manufacturing techniques, which could place us at a competitive disadvantage.

Our ability to implement our business plan and to achieve the results projected by management will depend on management's ability to anticipate technological advances in our industry and implement strategies to take advantage of technological change. We may be unable to address technological advances or introduce new designs or products that may be necessary to remain competitive within the steel industry.

We produce steel products that are characterized by stringent performance and specification requirements that mandate a high degree of manufacturing and engineering expertise. We believe that our customers rigorously evaluate our services and products on the basis of a number of factors, including, but not limited to:

· quality;

· price competitiveness;

· technical expertise and development capability;

· innovation;

· reliability and timeliness of delivery;

· product design capability;

· operational flexibility;

· customer service; and

· overall management.

Our success depends on our ability to continue to meet our customers’ changing requirements and specifications with respect to these and other criteria. There can be no assurance that we will be able to address technological advances or introduce new designs or products that may be necessary to remain competitive within the precision steel industry.

Our revenues will decrease if there is less demand for the end product in which our products are utilized.

Our finished steel products mainly serve as key components in food and industrial packaging, construction and household decorations materials, electrical appliances, and telecommunications wires and cables. Therefore, we are subject to the general changes in economic conditions affecting the food and industrial packaging, construction and household decorations materials, electrical appliance, and telecommunications wires and cables industries. If our customers which operate in these industries experience a downturn in their business or if they utilize substitutes for our products in their manufacturing operations, demand for our products and our business results will suffer.

5

Environmental compliance and remediation could result in substantially increased capital requirements and operating costs.

Steel manufacturing and processing operations are subject to numerous Chinese provincial and local laws and regulations relating to the protection of the environment. We are subject to regulations regarding emissions and waste disposal and management. These laws continue to evolve and are becoming increasingly stringent. The ultimate impact of complying with such laws and regulations is not always clearly known or determinable because regulations under some of these laws have not yet been promulgated or are undergoing revision. Our business and operating results could suffer if we were required to increase our expenditures to comply with any new environmental regulations affecting our operations.

Our level of indebtedness may make it more difficult for us to fulfill all of our debt obligations and may reduce the amount of cash available for maintaining and growing our operations, which could have an adverse effect on our revenues.

Our total debt under existing bank loans and lines of credit as of December 31, 2012 was approximately $317.0 million. Our obligations under certain of our short term bank loans are guaranteed by Zhengzhou Company, which owns the land use rights and buildings in which we conduct our operations. Zhengzhou Company has pledged the land use rights and buildings under this guarantee. We had $393.9 million in total cash (including certificate of deposit) of which $228.9 million was unrestricted cash as of December 31, 2012. We have elected to reserve the use of such cash for our capital expansion program and have recently renewed certain existing bank loans and lines of credit. This indebtedness and the incurrence of any new indebtedness could (i) make it more difficult for us to satisfy and pay our existing liabilities and obligations, which could in turn result in an event of default, (ii) require us to dedicate a substantial portion of our cash flow from operations to debt service payments, thereby reducing the availability of cash for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes, (iii) impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes, (iv) diminish our ability to withstand a downturn in our business, the industry in which we operate or the economy generally, (v) limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, or (vi) place us at a competitive disadvantage compared to competitors that have proportionately less debt. If we are unable to meet our debt service obligations, we could be forced to restructure or refinance our indebtedness, seek additional equity capital or sell assets. We may be unable to obtain financing or sell assets on satisfactory terms, or at all, which could cause us to default on our debt service obligations, be subject to foreclosure on such loans, and lose possession of the land and buildings in which we conduct our operations. Additionally, we could incur additional indebtedness in the future and, if new debt is added to our current debt levels, the risks above could intensify.

During 2012, we were not in compliance with the financial covenants. The terms of the loans prohibit making advances or providing guarantees to other unrelated parties without prior consent of the bank. Although the banks have not called the loans or assessed a penalty on us for these violations, there is no assurance that the banks will not call the loans because there is no standstill agreement reached between us and the banks. We do not believe that any penalty will be assessed by the banks for these violations. In addition, as of December 31, 2012, we provided guarantees for certain non-related parties. We believe that Zhengzhou Aluminum Industry Co., Ltd., one of the non-related companies to which we provided a loan guarantee, experienced financial difficulties in 2012 and may not be able to perform on its payments under its loans and guarantees. If Zhengzhou Aluminum Industry Co., Ltd. is unable to repay its debt or guarantees, we may be required to pay up to $6.4 million related to its debt and guarantees. No provision has been made in our financial statements for this obligation as we have not been called upon to date to perform under our guarantee.

We face significant competition from competitors with greater resources, and we may not have the resources necessary to successfully compete with them.

The steel manufacturing and processing business is highly fragmented and competitive. We compete with a large number of other steel manufacturers and processors in China, on a region-by-region basis, and with foreign steel manufacturers, such as POSCO Steel, on a worldwide basis. Our competitors are of various sizes, some of which have more established brand names and relationships in certain markets than we do. We generally are not in direct competition with China’s large state-owned steel companies in the high-end precision cold-rolled steel sector because those companies concentrate on the production of hot-rolled steel and relatively commoditized cold-rolled steel. As such, they are more often a raw material supplier to us, rather than a competitor. We are one of a limited number of specialty precision cold-rolled steel producers in China. However, part of our newer production capacity has not yet reached optimum customization, including strip thickness, and to an extent has been competing with commodity cold-rolled steel produced by large state-owned steel companies while we optimize this capacity to produce fully specialized products. In addition, differences in the type and nature of the specialty precision steel products in China’s steel industry are relatively small and, coupled with intense competition from international and local suppliers and customer price sensitivity, competition can be fierce. Our competitors may increase their market share through pricing strategies that damage our business. Since our industry is capital-intensive, our competitors may be able to successfully compete with us if their financial resources, staff and facilities are substantially greater than ours, placing us at a competitive disadvantage to these larger companies.

6

Any decrease in the availability, or increase in the cost, of raw materials could materially reduce our earnings.

Our business operations depend heavily on the availability of various raw materials and energy resources, primarily hot-rolled steel coil, but also chromium, tin, zinc, oil paint and electricity. Steel coil has historically accounted for approximately 92% of our total cost of sales. The availability of raw materials and energy resources may decrease and their prices may fluctuate greatly. We purchase a large portion of our raw materials from a selected number of suppliers, but we currently do not have long-term supply contracts with any particular supplier to assure a continued supply of raw materials. While we maintain good relationships with these suppliers, the supply of raw materials may nevertheless be interrupted on account of events outside our control, which will negatively impact our operations. If these or any other important suppliers are unable or unwilling to provide us with raw materials on terms favorable to us, we may be unable to produce certain products. This could result in a decrease in profit and damage to our reputation in our industry. So far we have been able to pass most raw material cost increases on to our customers. However, if our raw material and energy costs increase to such an extent that we cannot pass these higher costs on to our customers in full or at all, our margins will suffer. Although we currently benefit from favorable pricing in some of these supply contracts, if market prices for these raw materials decline, we may not be able to take advantage of decreasing market prices, and our profit margins may suffer.

Starting 2012, we began to offer our customers an increased number of products, including precision cold-rolled steel, chromium-plated and laminated cold-rolled steel of both narrow- and wide- strip. Our raw material may evolved from just narrow-strip to both narrow- and wide-strip hot-rolled coils and finished cold-rolled steel (for chromium-plating and laminating processing), thus posing changed demand on our suppliers for flexibility of type and timeliness of delivery. Any failure of our suppliers to meet our afore-mentioned demand may adversely impact our operation and ability to fulfill sales contracts in a timely manner.

We produce a limited number of products and may not be able to respond quickly to significant changes in the market or new market entrants.

Cold-rolled specialty precision steel manufacturing is a relatively new industry in China. Previously, our customers which manufacture durable goods have relied solely on imports from Japan, Korea, the European Union and the United States. We believe the average quality and standards of products of China’s high precision steel industry lags behind international standards. While we offer five series and over 20 types of high-precision steel products and believe we have developed a nationally recognizable brand, there are many other specialty precision steel products of similar nature in the market. While we began to export products to Turkey and India in 2012, we have not yet developed an internationally recognizable brand for specialty steel products. If there are significant changes in market demand and/or competitive forces, we may not be able to change our product mix or adapt our production equipment quickly enough to meet customers’ needs. Under such circumstances, our narrow band of precision steel products and/or new market entrants may negatively impact our financial performance.

Increased imports of steel products into China could negatively affect domestic steel demand and prices and reduce our profitability.

While China’s steel production has increased rapidly in recent years, we believe that domestic production continues to be insufficient to meet demand for high-end steel products. As a result, China is expected to continue to import a significant portion of its steel products. Foreign competitors may have lower raw material costs, and are often owned, controlled or subsidized by their governments, which allows their production and pricing decisions to be influenced by political and economic policy considerations as well as prevailing market conditions. Import levels may also be impacted by decisions of government agencies, under trade laws. Increases in future levels of imported steel could negatively impact future market prices and demand levels for our precision steel products.

7

While virtually all of our operations, customers and sales are in China, some limited administrative matters are geographically dispersed so any deterioration of general business conditions in China may make it difficult or prohibitive to continue to operate or expand our business.

Our manufacturing operations are located in China and some of our administrative matters are handled in Hong Kong and the BVI. We have regulatory filing obligations in the United States. The geographical distances between our facilities create a number of logistical and communications challenges, including time differences and differences in the cultures in each location, which makes communication and effective cooperation more difficult. In addition, because of the location of the manufacturing facilities in China, our operations could be affected by, among other things:

· economic and political instability in China, including problems related to labor unrest;

· lack of developed infrastructure;

· variances in payment cycles;

· currency fluctuations;

· overlapping taxes and multiple taxation issues;

· employment and severance taxes;

· compliance with local laws and regulatory requirements;

· greater difficulty in collecting accounts receivable; and

· the burdens of cost and compliance with a variety of foreign laws.

Moreover, inadequate development or maintenance of infrastructure in China, including adequate power and water supplies, transportation, raw materials availability or the deterioration in the general political, economic or social environment could make it difficult, more expensive and possibly prohibitive to continue to operate or expand our facilities in China.

Our rapid expansion could significantly strain our resources, management and operational infrastructure which could impair our ability to meet increased demand for our products and hurt our business results.

To accommodate our anticipated growth, we will need to expend capital resources and dedicate personnel to implement and upgrade our accounting, operational and internal management systems and enhance our record keeping and contract tracking system. Such measures will require us to dedicate additional financial resources and personnel to optimize our operational infrastructure and to recruit more personnel to train and manage our growing employee base. If we cannot successfully implement these measures efficiently and cost-effectively, we will be unable to satisfy the demand for our products, which will impair our revenue growth and hurt our overall financial performance.

Our production facilities are subject to risks of power shortages which may impair our ability to meet our customers’ needs.

Our manufacturing processes are extremely specialized and depend on critical pieces of equipment and a constant availability of energy to power them. Many cities and provinces in China have suffered serious power shortages in recent times, largely as a result of the growth and commercialization of formerly rural regions of China. Many of the regional grids do not have sufficient power generating capacity to fully satisfy the increased demand for electricity driven by continual economic growth and persistent hot weather.

In 2011, China announced new guidelines aiming to reduce energy use and carbon emissions per unit of industrial value added output by 4 percent in 2011 compared to 2010 levels. The target levels are slightly higher than those pledged by China in its recently released 12th Five Year Plan and are part of China's plan to cut energy consumption and carbon emissions per unit of gross domestic product by 18 percent over the next five years. In 2011 and 2012, electricity supplies were cut back to many industrial producers around China. Local governments have also occasionally required local factories to temporarily shut down their operations or reduce their daily operational hours in order to reduce local power consumption levels.

While we have not experienced any severe or lengthy power outages in the past as a result of power outages or administrative measures, we do not have any back up power generation systems. If we are affected by administrative measures or power outages in the future, we may experience material production disruption and delays in our delivery schedule. In such event, our business, results of operation and financial conditions could be damaged.

Unexpected equipment failures may damage our business due to production curtailments or shutdowns.

Highly specialized machinery is used in our manufacturing processes which cannot be repaired or replaced without significant expense and time delay. On occasion, our equipment may be out of service as a result of unanticipated failures which may result in plant shutdowns or periods of materially reduced production. Interruptions in production capabilities will inevitably increase production costs and reduce our sales and earnings. In addition to equipment failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions or adverse weather conditions. Furthermore, any interruption in production capability may require us to make large capital expenditures to remedy the situation, which could have a negative effect on our profitability and cash flows. We do not have business interruption insurance to cover losses as a result of equipment failures. In addition, longer-term business disruption could result in a loss of customers. If this were to occur, our future sales levels, and therefore our profitability, could decline.

8

We might fail to adequately protect our intellectual property and third parties may claim that our products infringe upon their intellectual property.

As part of our business strategy, we intend to accelerate our investment in new technologies in an effort to strengthen and differentiate our product portfolio and make our manufacturing processes more efficient. Our primary focus will be to develop new and better technologies to allow us to manufacture higher valued-added products, such as chrome finished, zinc-plated and galvanized products. As a result, we believe that the protection of our intellectual property will become increasingly important to our business. We expect to rely on a combination of trade secrets, trademarks and copyrights to provide protection in this regard, but this protection might be inadequate. For example, our future patent applications might not be approved or, if allowed, they might not be of sufficient strength or scope. Conversely, third parties might assert that our technologies infringe their proprietary rights. In either case, litigation could result in substantial costs and diversion of our resources, and whether or not we are ultimately successful, the litigation could hurt our business and financial condition.

We face risks associated with future investments or acquisitions.

A component of our growth strategy is to invest in or acquire businesses complementary to ours that will enable us, among other things, to expand the products we offer to our existing target customer base, and that will provide opportunities to expand into new markets. We may be unable to identify suitable investment or acquisition candidates or to make these investments or acquisitions on a commercially reasonable basis, if at all. If we complete an investment or acquisition, we may not realize the anticipated benefits from the transaction. Integrating an acquired company or technology is complex, distracting and time consuming, as well as a potentially expensive process. The successful integration of an acquisition would require us to:

· integrate and retain key management, sales, research and development, and other personnel;

· incorporate the acquired products or capabilities into our offerings both from an engineering and sales and marketing perspective;

· coordinate research and development efforts;

· integrate and support pre-existing supplier, distribution and customer relationships; and

· consolidate duplicate facilities and functions and combine back office accounting, order processing and support functions.

The geographic distance between the companies, the complexity of the technologies and operations being integrated and the disparate corporate cultures being combined may increase the difficulties of combining an acquired company or technology. Acquired businesses are likely to have different standards, controls, contracts, procedures and policies, making it more difficult to implement and harmonize company-wide financial, accounting, billing, information and other systems. Management’s focus on integrating operations may distract attention from our day-to-day business and may disrupt key research and development, marketing or sales efforts.

Our acquisition strategy also depends on our ability to obtain necessary government approvals that may be required. We may be unable to complete a business combination transaction efficiently or on favorable terms due to complicated merger and acquisition regulations implemented in China.

We do not carry any business interruption insurance, product liability or recall insurance or third-party liability insurance.

Operation of our business and facilities involves many risks, including equipment failures, natural disasters, industrial accidents, power outages, labor disturbances, business interruptions, property damage, product liability, personal injury and death. We do not carry any business interruption insurance or third-party liability insurance for our business to cover claims in respect of product liability, personal injury or property or environmental damage arising from accidents on our property or relating to our operations. Therefore, our existing insurance coverage may not be sufficient to cover all risks associated with our business. As a result, we may be required to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond our control, out of our own funds, which could have a material adverse effect on our business, financial condition and results of operations.

9

Our business will suffer if we lose our land use rights. Should our expenditures and efforts to strengthen our land use rights by acquiring Zhengzhou Company , a related party, be perceived as a waste of resources or non-arms’-length transaction, we may be subject to greater regulatory scrutiny or shareholder litigation risks.

There is no private ownership of land in China and all land ownership is held by the government of China, its agencies, and collectives. In the case of land used for business purposes, land use rights can be obtained from the government for a period up to 50 years, and are typically renewable. Land use rights can be granted upon approval by the land administrative authorities of China (State Land Administration Bureau) upon payment of the required land granting fee, the entry into a land use agreement with a competent governmental authority and certain other ministerial procedures.  Henan Green holds land use rights for some of its occupied properties and leases the land and the building on which its main facilities are located from third parties that it reasonably believes have proper land use rights, but no assurance can be given that Henan Green’s land use rights will be renewed or that our lessors will maintain their land use rights. We have received land use certificates for certain parcels of land on which our properties reside, but we may not have followed all procedures required to obtain such certificates or paid all required fees. If the Chinese administrative authorities determine that we have not fully complied with all procedures and requirements needed to hold a land use certificate, we may be forced by the Chinese administrative authorities to retroactively comply with such procedures and requirements, which may be burdensome and require us to make payments, or such Chinese administrative authorities may invalidate or revoke our land use certificates entirely. If the land use right certificates needed for our operations are determined by the government of China to be invalid or if they are not renewed, we may lose production facilities or employee accommodations that would be difficult or even impossible to replace. Should we have to relocate, our workforce may be unable or unwilling to work in the new location and our business operations will be disrupted during the relocation. The relocation or loss of facilities could cause us to lose sales and/or increase costs of production, which would negatively impact our financial results.

On February 26, 2013, we entered into an equity/asset transfer agreement to acquire 100% ownership of Zhengzhou Company, which is the owner of a land use right with respect to 24.94 acres (151.4 Chinese mu), on which our existing production lines and warehouses are located. We agreed to pay a total cash purchase price of RMB 268 million (approximately $43.6 million) to the shareholders of Zhengzhou Company, of which we paid RMB 150.0 million (approximately $24.1 million) as of December 31, 2012. We expect to pay the balance of the purchase price within the next six months. The purchase price was determined based on the appraisal report prepared by an independent appraisal firm, Henan Minsheng Asset Appraisal Office. We are in the process of transferring land use rights to Henan Green. The purpose of this transaction is to ultimately reduce our overall risk position by reducing our dependence on third parties for our land use rights, and that the terms of the transaction are substantially equivalent to those that would be paid to an unrelated third party. However, if a regulator or shareholder disagrees with this view and seeks to invalidate this transaction or sue for damages, we may need to engage in expensive litigation or other measures to defend our actions, which we may lose, and our efforts to bolster our land use rights may be frustrated. Even if this transaction is not invalidated or otherwise challenged, substantial additional funds may need to be paid in order to transfer the land use rights, which may have a material adverse effect on our financial condition.

We may be exposed to potential risks relating to our internal controls over financial reporting and our ability to have the operating effectiveness of our internal controls attested to by our independent auditors.

Companies that file reports with the SEC, including us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management to establish and maintain a system of internal control over financial reporting and annual reports on Form 10-K or Form 20-F filed under the Exchange Act to contain a report from management assessing the effectiveness of a company’s internal control over financial reporting. Separately, under SOX 404, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, public companies that are large accelerated or accelerated filers must include in their annual reports on Form 10-K or Form 20-F an attestation report of their regular auditors attesting to and reporting on management’s assessment of internal control over financial reporting. Non-accelerated filers and smaller reporting companies are not required to include an attestation report of their auditors in annual reports.

A report of our management and an attestation report of our auditor is included under Item 15 “Controls and Procedures” of this report. Although our management believes that our internal control over financial reporting was effective as of December 31, 2012, we can provide no assurance that we will comply with all of the requirements imposed by SOX 404 and we will receive a positive attestation from our independent auditors in the future. In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner or we are unable to receive a positive attestation from our independent auditors with respect to our internal controls, investors and others may lose confidence in the reliability of our financial statements.

Failure to comply with the U.S. Foreign Corrupt Practices Act and Chinese anti-corruption laws could subject us to penalties and other adverse consequences.

Our executive officers, employees and other agents may violate applicable law in connection with the marketing or sale of our products, including China’s anti-corruption laws and the U.S. Foreign Corrupt Practices Act, or the FCPA, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Foreign companies, including some that may compete with us, are not subject to these prohibitions, and therefore may have a competitive advantage over us. The PRC also strictly prohibits bribery of government officials. However, corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC. We have adopted a general FCPA policy in our Code of Ethics and intend to implement measures to ensure compliance with the FCPA and Chinese anti-corruption laws by all individuals involved with our company. However, our employees or other agents may engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations. In addition, our brand and reputation, our sales activities or the price of our ordinary shares could be adversely affected if we become the target of any negative publicity as a result of actions taken by our employees or other agents.

10

We rely heavily on our key management personnel and the loss of their services could adversely affect our business.

Our executive management team has a specialized knowledge of steel markets and works closely with our customers to provide products to exact specifications. Our Chairman and founder, Mr. Lu, has twenty-five years’ experience in the steel industry in China. In addition, the executive management team has an average of fifteen years of industry experience. Their long tenure with the company and the industry has enabled the management team to build close relationships with suppliers and customers. The expertise of management and technical innovation of the company give it a strong competitive advantage. We do not currently have employment agreements with our management team and we do not maintain key person insurance on these individuals. The loss of Mr. Lu’s services or any of our other management poses a risk to our business. We may not be able to attract or retain qualified management on acceptable terms in the future due to the intense competition for qualified personnel in our industry and as a result, our business could be adversely affected.

Risks Related to Doing Business in China

Substantially all of our operating assets are located in China and substantially all of our revenue is derived from our operations in China, so our business, results of operations and prospects are subject to the economic, political and legal policies, developments and conditions in China.

The PRC’s economic, political and social conditions, as well as government policies, could impair our business. The PRC economy differs from the economies of most developed countries in many respects. China’s gross domestic product has grown consistently since 1978. However, we cannot assure you that such growth will be sustained in the future. If, in the future, China’s economy experiences a downturn or grows at a slower rate than expected, there may be less demand for spending in certain industries. A decrease in demand for spending in certain industries could impair our ability to remain profitable. The PRC’s economic growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may have a negative effect on us. For example, our financial condition and results of operations may be hindered by PRC government control over capital investments or changes in tax regulations.

The PRC economy has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the PRC government has implemented measures emphasizing the use of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over PRC economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

If the PRC imposes restrictions designed to reduce inflation, future economic growth in the PRC could be severely curtailed which could hurt our business and profitability.

While the economy of the PRC has experienced rapid growth, this growth has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid economic growth often can lead to growth in the supply of money and rising inflation. In order to control inflation in the past, the PRC has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending. Imposition of similar restrictions may lead to a slowing of economic growth, a decrease in demand for our steel products and generally damage our business and profitability.

11

Fluctuations in exchange rates could harm our business and the value of our securities.

The value of our securities will be indirectly affected by the foreign exchange rate between U.S. dollars and RMB and between those currencies and other currencies in which our sales may be denominated. Because substantially all of our earnings and cash assets are denominated in RMB and our financial results are reported in U.S. dollars, fluctuations in the exchange rate between the U.S. dollar and RMB will affect our balance sheet and our earnings per share in U.S. dollars. In addition, appreciation or depreciation in the value of RMB relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will be exchanged into U.S. dollars as well as earnings from, and the value of, any U.S. dollar-denominated investments we make in the future. Since July 2005, RMB has not been pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in RMB exchange rate and lessen intervention in the foreign exchange market.

Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.

Exchange controls that exist in the PRC may limit our ability to utilize our cash flow effectively.

We are subject to the PRC’s rules and regulations on currency conversion. In the PRC, the State Administration for Foreign Exchange, or SAFE, regulates the conversion between RMB and foreign currencies. Currently, foreign investment enterprises, or FIEs, are required to apply to the SAFE for “Foreign Exchange Registration Certificates for FIEs.” With such registration certificates, which need to be renewed annually, FIEs are allowed to open foreign currency accounts including a “current account” and “capital account.” Currency conversion within the scope of the “current account,” such as remittance of foreign currencies for payment of dividends, can be effected without requiring the approval of SAFE. However, conversion of currency in the “capital account,” including capital items such as direct foreign investment, loans and securities, still require approval of SAFE. Further, any capital contributions to Henan Green by its offshore shareholder must be approved by MOFCOM or its local counterpart. We cannot assure you that the PRC regulatory authorities will not impose further restrictions on the convertibility of RMB. Any future restrictions on currency exchanges may limit our ability to use our cash flow for the distribution of dividends to our shareholders or to fund operations it may have outside of the PRC.

In August 2008, SAFE promulgated Circular 142, a notice regulating the conversion by FIEs of foreign currency into RMB by restricting how the converted RMB may be used. Circular 142 requires that RMB converted from the foreign currency-dominated capital of a FIE may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC unless specifically provided for otherwise. In addition, SAFE strengthened its oversight over the flow and use of RMB funds converted from the foreign currency-dominated capital of a FIE. The use of such RMB may not be changed without approval from SAFE, and may not be used to repay RMB loans if the proceeds of such loans have not yet been used. Violations of Circular 142 may result in severe penalties, including substantial fines as set forth in the SAFE rules.

Because Chinese law governs many of our material agreements, we may not be able to enforce our rights within the PRC or elsewhere, which could result in a significant loss of business, business opportunities or capital.

Chinese law governs many of our material agreements, some of which may be with Chinese governmental agencies. We cannot assure you that we will be able to enforce any of our material agreements or that remedies will be available outside of the PRC. The system of laws and the enforcement of existing laws and contracts in the PRC may not be as certain in implementation and interpretation as in the United States. The Chinese judiciary is relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital.

12

The ability of our Chinese operating subsidiaries to pay certain foreign currency obligations, including dividends, is subject to restrictions.

Our ability to pay dividends may be restricted due to the foreign exchange control policies and availability of cash balances. Since substantially all of our operations are conducted in China and a majority of our revenues are generated in China, a significant portion of our revenue earned and currency received are denominated in RMB. The Chinese government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. RMB is currently not a freely convertible currency. Shortages in the availability of foreign currency may restrict our ability to remit sufficient foreign currency to pay dividends, if any, on our ordinary shares or otherwise satisfy foreign currency denominated obligations. Under existing Chinese foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from appropriate governmental authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The Chinese government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay certain of our expenses as they come due. In addition, current regulations in China would permit our PRC operating subsidiaries to pay dividends to us only out of their accumulated distributable profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, they will be required to set aside at least 10% (up to an aggregate amount equal to half of its registered capital) of their accumulated profits each year. Such reserve account may not be distributed as cash dividends.

Our business could be severely harmed if the Chinese government changes its policies, laws, regulations, tax structure or its current interpretations of its laws, rules and regulations relating to our operations in China.

Our manufacturing facility is located in Henan, China and virtually all of our assets are located in China. We currently generate our sales revenue only from customers located in China. Our results of operations, financial state of affairs and future growth are, to a significant degree, subject to China’s economic, political and legal development and related uncertainties. Our operations and results could be materially affected by a number of factors, including, but not limited to:

· changes in policies by the Chinese government resulting in changes in laws or regulations or the interpretation of laws or regulations;

· changes in taxation;

· changes in employment restrictions;

· restrictions on imports and sources of supply;

· import duties; and

· currency revaluation.

Over the past several years, the Chinese government has pursued economic reform policies including the encouragement of private economic activities and greater economic decentralization. If the Chinese government does not continue to pursue its present policies that encourage foreign investment and operations in China, or if these policies are either not successful or are significantly altered, then our business could be harmed. Following the Chinese government’s policy of privatizing many state-owned enterprises, the Chinese government has attempted to augment its revenues through increased tax collection. It also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Continued efforts to increase tax revenues could result in increased taxation expenses being incurred by us. Economic development may be limited as well by the imposition of austerity measures intended to reduce inflation, the inadequate development of infrastructure and the potential unavailability of adequate power and water supplies, transportation and communications. In addition, the Chinese government continues to play a significant role in regulating industry by imposing industrial policies.

The Chinese laws and regulations which govern our current business operations are sometimes vague and uncertain and may be changed in a way that hurts our business.

China’s legal system is a civil law system based on written statutes, in which system decided legal cases have little value as precedents, unlike the common law system prevalent in the United States. There are substantial uncertainties regarding the interpretation and application of Chinese laws and regulations, including but not limited to the laws and regulations governing our business, or the enforcement and performance of our arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings. The Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We are considered an FIE under Chinese laws, and as a result, we must comply with Chinese laws and regulations. We cannot predict what effect the interpretation of existing or new Chinese laws or regulations may have on our business. If the relevant authorities find us to be in violation of Chinese laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation: levying fines; revoking our business and other licenses; requiring that we restructure our ownership or operations; and requiring that we discontinue any portion or all of our business.

13

A slowdown or other adverse developments in the Chinese economy may materially and adversely affect our customers’ demand for our services and our business.

All of our operations are conducted in China and substantially all of our revenues are generated from sales to businesses operating in China. Although the Chinese economy has grown significantly in recent years, such growth may not continue. We do not know how sensitive we are to a slowdown in economic growth or other adverse changes in Chinese economy which may affect demand for precision steel products. A slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in China may materially reduce the demand for our products and in turn harm our results of operations.

Controversies affecting China’s trade with the United States could depress the price of our securities.

While China has been granted permanent most favored nation trade status in the United States through its entry into the World Trade Organization, controversies and trade disagreements between the United States and China may arise that depress the price of our securities. Political or trade friction between the United States and China, whether or not actually affecting our business, could also materially and adversely affect the prevailing market price of our securities.

Imposition of trade barriers and taxes may reduce our ability to do business internationally, and the resulting loss of revenue could harm our profitability.

We may experience barriers to conducting business and trade in our targeted emerging markets in the form of delayed customs clearances, customs duties and tariffs. In addition, we may be subject to repatriation taxes levied upon the exchange of income from local currency into foreign currency, substantial taxes of profits, revenues, assets and payroll, as well as value-added tax. The markets in which we operate may impose onerous and unpredictable duties, tariffs and taxes on our business and products, and there can be no assurance that this will not reduce the level of sales that we achieve in such markets, which would reduce our revenues and profits.

If the Ministry of Commerce, China Securities Regulatory Commission, or another PRC regulatory agency, determines that approval of our recent merger was required or if other regulatory obligations are imposed upon us, we may incur sanctions, penalties or additional costs which would damage our business

On August 8, 2006, six PRC regulatory agencies, including the Ministry of Commerce, or MOFCOM, and the China Securities Regulatory Commission, or CSRC, promulgated the Rules on Acquisition of Domestic Enterprises by Foreign Investors, or the M&A Rules, a new regulation with respect to the mergers and acquisitions of domestic enterprises by foreign investors that became effective on September 8, 2006 and was revised on June 22, 2009. Article 11 of the M&A Rules requires PRC companies, enterprises or natural persons to obtain MOFCOM approval in order to effectuate mergers or acquisitions between PRC companies and foreign companies legally established or controlled by such PRC companies, enterprises or natural persons. Article 40 of the M&A Rules requires that an offshore special purpose vehicle formed for overseas listing purposes and controlled directly or indirectly by PRC companies or individuals should obtain the approval of the CSRC prior to the listing and trading of such offshore special purpose vehicle’s securities on an overseas stock exchange, especially in the event that the offshore special purpose vehicle acquires shares of or equity interests in the PRC companies in exchange for the shares of offshore companies. On September 21, 2006, the CSRC published on its official website procedures and filing requirements for offshore special purpose vehicles seeking CSRC approval of their overseas listings.

14

On March 17, 2009, we completed a merger transaction with COAC, which resulted in our current ownership and corporate structure. We believe, based on the opinion of our PRC legal counsel, Jingtian & Gongcheng, Attorneys at Law, that MOFCOM and CSRC approvals were not required for our merger transaction or for the listing and trading of our securities on a trading market because we are not an offshore special purpose vehicle that is directly or indirectly controlled by PRC companies or individuals. Although the merger and acquisition regulations provide specific requirements and procedures, there are still many ambiguities in the meaning of many provisions. Further regulations are anticipated in the future, but until there has been clarification either by pronouncements, regulation or practice, there is some uncertainty in the scope of the regulations and the regulators have wide latitude in the enforcement of the regulations and approval of transactions. If the MOFCOM, CSRC or another PRC regulatory agency subsequently determines that MOFCOM and CSRC approvals were required, we may face sanctions by MOFCOM, CSRC or another PRC regulatory agency. If this happens, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from this offering into China, restrict or prohibit payment or remittance of dividends paid by Henan Green, or take other actions that could damage our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our securities.

In 2008, Wealth Rainbow acquired 100% of the equity interest of Henan Green from 13 shareholders who are PRC nationals, following which Henan Green was changed from a domestic company into a FIE. The prior sole owner of Wealth Rainbow and former majority owner of China Gerui is the daughter of Mingwang Lu, one of the selling shareholders of Henan Green. The M&A Rules require that when a foreign investor which is established or controlled by a domestic natural person acquires the equity interest of a domestic company that is related with such foreign investor, such acquisition shall be approved by MOFCOM, and the parties to the acquisition shall have the obligation to disclose the existence of any interested party relationship. We believe, based on the opinion of our PRC legal counsel, Jingtian & Gongcheng, Attorneys at Law, that all the necessary approvals and registrations for Wealth Rainbow’s acquisition of the equity interest in Henan Green had been obtained. However, there remains some uncertainty as to the interpretation and implementation of M&A Rules with regard to the interested party relationship. If a PRC regulatory agency, such as MOFCOM, subsequently determines that the approval from MOFCOM was required for the acquisition, we may face sanctions by such PRC regulatory agency. If this happens, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from offerings into China, restrict or prohibit payment or remittance of dividends by Henan Green to us, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our securities. The PRC regulatory agency may also take actions requiring us, or making it advisable for us, to cancel this previous acquisition.

The M&A Rules establish more complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisition in China.

The M&A Rules establish additional procedures and requirements that could make some acquisitions of PRC companies by foreign investors, such as ours, more time-consuming and complex, including requirements in some instances that the approval of MOFCOM shall be required for transactions involving the shares of an offshore listed company being used as the acquisition consideration by foreign investors. In the future, we may grow our business in part by acquiring complementary businesses. Complying with the requirements of M&A Rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

The MOFCOM Security Review Rules may make it more difficult for us to make future acquisitions or dispositions of our business operations or assets in China.

In August 2011, MOFCOM promulgated the Rules of Ministry of Commerce on Implementation of Security Review System of Merger and Acquisition of Domestic Enterprises by Foreign Investors, or the MOFCOM Security Review Rules, to implement the Notice of the General Office of the State Council on Establishing the Security Review System for Merger and Acquisition of Domestic Enterprises by Foreign Investors promulgated on February 3, 2011, or Circular 6. The MOFCOM Security Review Rules became effective on September 1, 2011. Under the MOFCOM Security Review Rules, a national security review is required for certain mergers and acquisitions by foreign investors raising concerns regarding national defense and security. Foreign investors are prohibited from circumventing the national security review requirements by structuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. If the business of any target company that we plan to acquire falls within the scope subject to national security review, we may not be able to successfully acquire such company by equity or asset acquisition, capital increase or even through any contractual arrangement.

15

A failure by our shareholders or beneficial owners who are PRC citizens or residents in China to comply with certain PRC foreign exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities or subject us to liability under PRC laws.

The Notice on Issues Relating to Administration of Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or Notice 75, was issued on October 21, 2005 by SAFE (that replaced two previously issued regulations on January 24, 2005 and April 8, 2005, respectively). Notice 75 requires PRC residents (including both corporate entities and natural persons) to register with SAFE or its competent local branch before establishing or controlling any company outside of China referred to as an “offshore special purpose company” for the purpose of raising funds from overseas to acquire assets of, or equity interests in, PRC companies. Under Notice 75, a “special purpose vehicle” refers to an offshore entity established or controlled, directly or indirectly, by PRC residents for the purpose of seeking offshore equity financing using assets or interests owned by such PRC residents in onshore companies. In addition, any PRC resident that is the shareholder of an offshore special purpose company is required to amend his or her SAFE registration with the SAFE or its competent local branch, with respect to that offshore special purpose company in connection with any of its increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China. The SAFE regulations require retroactive approval and registration of direct or indirect investments previously made by PRC residents in offshore special purpose companies. To further clarify the implementation of Notice 75, SAFE issued Notice 106 in May, 2007. Under Notice 106, PRC subsidiaries of an offshore special purpose company are required to coordinate and supervise the filing of SAFE registrations by the offshore holding company’s shareholders who are PRC residents in a timely manner. In the event that a PRC shareholder with a direct or indirect investment in an offshore parent company fails to obtain the required SAFE approval and make the required registration, the PRC subsidiaries of such offshore parent company may be prohibited from making distributions of profit to the offshore parent and from paying the offshore parent proceeds from any reduction in capital, share transfer or liquidation in respect of the PRC subsidiaries. Further, failure to comply with the various SAFE approval and registration requirements described above, as currently drafted, could result in liability under PRC law for foreign exchange evasion. In June 2009, Notice 106 was superseded by the Notice on Foreign Exchange Implementing Guidelines regarding Capital Account Management (known as Notice 77) which allows establishing or controlling a special purpose company before the SAFE registration is complete. After this, in May 2011, a SAFE Notice on Issuance of the Operating Procedures for PRC Residents Engaging in Financing and Roundtrip investments via Overseas Special Purpose Vehicles (known as Notice 19) was promulgated to simplify the SAFE registration process which further superseded Notice 77 and came into force on July 1 2011.

There still remain uncertainties as to how certain procedures and requirements under the aforesaid SAFE regulations will be enforced, and it remains unclear how these existing regulations, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. We cannot assure that any of our shareholders or beneficial owners that are PRC citizens or residents have always complied with and will in the future make or obtain any applicable registrations or approvals required by Notice 75 or other related regulations. Failure by such shareholders or beneficial owners to comply with SAFE Notice 75 and Notice 106, Notice 77 and Notice 19 could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiary’s ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

PRC regulations relating to the establishment of offshore special purpose companies by PRC residents and registration requirements for employee stock ownership plans or share option plans may subject our PRC resident beneficial owners or the plan participants to personal liability, limit our ability to inject capital into our PRC subsidiaries, limit our subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.

Regulations promulgated by the SAFE require PRC residents and PRC corporate entities to register with local branches of the SAFE in connection with their direct or indirect offshore investment activities. These regulations apply to our shareholders who are PRC residents and may apply to any offshore acquisitions that we make in the future.

On February 15, 2012, the SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Administration for Domestic Individuals Participating in an Employee Share Incentive Plan of an Overseas-Listed Company (which replaced the old Circular 78, “Application Procedure of Foreign Exchange Administration for Domestic Individuals Participating in an Employee Stock Holding Plan or Stock Option Plan of an Overseas-Listed Company” promulgated on March 28, 2007), or the New Share Incentive Rule. Under the New Share Incentive Rule, PRC citizens who participate in a share incentive plan of an overseas publicly listed company are required to register with SAFE and complete certain other procedures. All such participants need to retain a PRC agent through a PRC subsidiary to register with SAFE and handle foreign exchange matters such as opening accounts, transferring and settlement of the relevant proceeds. The New Share Incentive Rule further requires that an offshore agent should also be designated to handle matters in connection with the exercise or sale of share options and transferring proceeds for the share incentive plan participants. We and our PRC employees who have been or in the future are granted stock options are subject to the New Share Incentive Rule. If we or our PRC employees fail to comply with the New Share Incentive Rule, we and/or our PRC employees may face sanctions imposed by the foreign exchange authority or any other PRC government authorities.

In addition, the State Administration of Taxation has issued a few circulars concerning employee stock options. Under these circulars, our employees working in China who exercise stock options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee stock options with relevant tax authorities and withhold individual income taxes of those employees who exercise their stock options. If our employees fail to pay and we fail to withhold their income taxes, we may face sanctions imposed by tax authorities or any other PRC government authorities.

16

Under the SAFE regulations, PRC residents who make, or have previously made, direct or indirect investments in offshore companies, will be required to register those investments. In addition, any PRC resident who is a direct or indirect shareholder of an offshore company is required to file or update the registration with the local branch of the SAFE, with respect to that offshore company, any material change involving its round-trip investment and capital variation. The PRC subsidiaries of that offshore company are required to urge the PRC resident shareholders to make such updates. If any PRC shareholder fails to make the required SAFE registration or file or update the registration, the PRC subsidiaries of that offshore parent company may be prohibited from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation, to their offshore parent company, and the offshore parent company may also be prohibited from injecting additional capital into their PRC subsidiaries. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions, such as restrictions on distributing dividends to our offshore entities or monetary penalties against us. We cannot assure you that all of our shareholders who are PRC residents will make or obtain any applicable registrations or approvals required by these SAFE regulations. The failure or inability of our PRC resident shareholders to comply with these SAFE registration procedures may subject us to fines and legal sanctions, restrict our cross-border investment activities, or limit our PRC subsidiaries’ ability to distribute dividends to or obtain foreign-exchange-dominated loans from our company.

As it is uncertain how the SAFE regulations will be interpreted or implemented, we cannot predict how these regulations will affect our business operations or future strategy. For example, we may be subject to more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our results of operations and financial condition. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the SAFE regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

Certain measures promulgated by the People’s Bank of China on foreign exchange for individuals set forth the respective requirements for foreign exchange transactions by PRC individuals under either the current account or the capital account. Implementing rules for these measures were promulgated by the SAFE which, among other things, specified approval requirements for certain capital account transactions such as a PRC citizen’s participation in the employee stock ownership plans or stock option plans of an overseas publicly-listed company. The SAFE also promulgated rules under which PRC citizens who are granted stock options by an overseas publicly-listed company are required, through a PRC agent or PRC subsidiary of such overseas publicly-listed company, to register with the SAFE and complete certain other procedures. We and our PRC employees who have been granted stock options are subject to these rules. If we or our PRC optionees fail to comply with these regulations, we or our PRC optionees may be subject to fines and legal sanctions.

Because we failed to make the payment of the transfer price of the acquisition of Henan Green’s equity interests on a timely basis pursuant to relevant PRC regulations, there is no guarantee that the PRC government will not challenge the validity of the acquisition in the future.

On August 10, 2008, Wealth Rainbow entered into an equity transfer agreement with the then shareholders of Henan Green to acquire all of their equity interests in Henan Green for RMB 65.6 million (approximately $9.6 million). On October 21, 2008, Henan Green obtained the Certificate of Approval for Establishment of Enterprises with Investment of Taiwan, Hong Kong, Macao and Overseas Chinese in the People’s Republic of China issued by Henan Provincial Government and a new business license was issued to Henan Green on October 30, 2008. Article 16 of the M&A Rules requires that the equity interest transfer price be paid in full within three months commencing from the issuance of the new business license to Henan Green. If the transfer price is not paid by this date, we may apply to the relevant PRC regulatory agency for an extension of up to one year from the date of the issuance of the license; provided, however, that 60% of the transfer price will be required to be paid within six months from such date, which was April 30, 2009. On January 4, 2009, we obtained the approval from the relevant PRC regulatory agency allowing us to make the full payment of the transfer price by October 30, 2009. Wealth Rainbow has fully paid the transfer price, making payments between July 2009 and September 16, 2009. However, because it did not comply with the requirement to pay 60% of the transfer price by April 30, 2009, the relevant PRC regulatory agency may challenge the validity of the acquisition in the future.

17

The implementation of the new PRC employment contract law and increases in the labor costs in China may hurt our business and profitability.

A new employment contract law became effective on January 1, 2008 in China. It imposes more stringent requirements on employers in relation to entry into fixed-term employment contracts, recruitment of temporary employees and dismissal of employees. In addition, under the Regulations on Paid Annual Leave for Employees, which also became effective on January 1, 2008, employees who have worked continuously for more than one year are entitled to paid vacation ranging from 5 to 15 days, depending on the length of the employee’s service. Employees who waive such vacation entitlements at the request of the employer will be compensated for three times their normal daily salaries for each vacation day so waived. As a result of the new law and regulations, our labor costs may increase. There is no assurance that disputes, work stoppages or strikes will not arise in the future. Increases in the labor costs or future disputes with our employees could damage our business, financial condition or operating results.

The Chinese government has been adopting increasingly stringent environmental, health and safety protection requirements, which could hurt our business.

The continuation of our operations depends upon compliance with the applicable environmental, health and safety, fire prevention and other regulations. Any change in the scope or application of these laws and regulations may limit our production capacity or increase our cost of operation and could therefore have an adverse effect on our business operations, financial condition and operating results. Our failure to comply with these laws and regulations could result in fines, penalties or legal proceedings. There can be no assurance that the Chinese government will not impose additional or stricter laws or regulations, compliance with which may cause us to incur significant capital expenditures, which it may not be able to pass on to our customers.

Under the Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders.

China passed a new Enterprise Income Tax Law, or the EIT Law, and its implementing rules, both of which became effective on January 1, 2008. Under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. In addition, a circular issued by the State Administration of Taxation on April 22, 2009 regarding the standards used to classify certain Chinese-invested enterprises controlled by Chinese enterprises or Chinese group enterprises and established outside of China as “resident enterprises” clarified that dividends and other income paid by such “resident enterprises” will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized by non-PRC enterprise shareholders. This circular also subjects such “resident enterprises” to various reporting requirements with the PRC tax authorities.

In addition, the circular mentioned above sets out criteria for determining whether “de facto management bodies” are located in China or overseas incorporated, domestically controlled enterprises. However, as this circular only applies to enterprises established outside of China that are controlled by PRC enterprises or groups of PRC enterprises, it remains unclear how the tax authorities will determine the location of “de facto management bodies” for overseas incorporated enterprises that are controlled by individual PRC residents like us and some of our subsidiaries.

18

Therefore, although substantially all of our management is currently located in the PRC, it remains unclear whether the PRC tax authorities would require or permit our overseas registered entities to be treated as PRC resident enterprises. We do not currently consider our company to be a PRC resident enterprise. However, if the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on offering proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC stockholders and with respect to gains derived by our non-PRC stockholders from transferring our shares.

In addition, under the EIT law, the Notice of the State Administration of Taxation on Negotiated Reduction of Dividends and Interest Rates, which was issued on January 29, 2008, the Arrangement between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion, which became effective on December 8, 2006, and the Notice of the State Administration of Taxation Regarding Interpretation and Recognition of Beneficial Owners under Tax Treaties, which became effective on October 27, 2009, dividends from our PRC operating subsidiaries paid to us through our Hong Kong subsidiary may be subject to a withholding tax at a rate of 10%, or at a rate of 5% if our Hong Kong subsidiary is considered a “beneficial owner” that is generally engaged in substantial business activities and entitled to treaty benefits. Furthermore, the ultimate tax rate will be determined by treaty between the PRC and the tax residence of the holder of the PRC subsidiaries. We are actively monitoring the proposed withholding tax and are evaluating appropriate organizational changes to minimize the corresponding tax impact.

Dividends declared and paid from pre-January 1, 2008 distributable profits are grandfathered under the EIT Law and are not subject to withholding tax.

We face uncertainty from China’s Circular on Strengthening the Administration of Enterprise Income Tax on Non-Resident Enterprises' Share Transfer that was released in December 2009 with retroactive effect from January 1, 2008.

The Chinese State Administration of Taxation, or SAT, released a circular on December 15, 2009 that addresses the transfer of shares by nonresident companies, generally referred to as Circular 698. Circular 698, which is effective retroactively to January 1, 2008, may have a significant impact on many companies that use offshore holding companies to invest in China. Circular 698, which provides parties with a short period of time to comply with its requirements, indirectly taxes foreign companies on gains derived from the indirect sale of a Chinese company. Where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise by selling the shares in an offshore holding company, and the latter is located in a country or jurisdiction where the effective tax burden is less than 12.5% or where the offshore income of his, her, or its residents is not taxable, the foreign investor is required to provide the tax authority in charge of that Chinese resident enterprise with the relevant information within 30 days of the transfers. Moreover, where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC tax authority will have the power to re-assess the nature of the equity transfer in accordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holding company that is used for tax planning purposes. There is uncertainty as to the application of Circular 698. For example, while the term “indirectly transfer” is not defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the country or jurisdiction and to what extent and the process of the disclosure to the tax authority in charge of that Chinese resident enterprise. In addition, there are not any formal declarations with regard to how to decide “abuse of form of organization” and “reasonable commercial purpose,” which can be utilized by us to balance if our Company complies with the Circular 698. As a result, we may become at risk of being taxed under Circular 698 and we may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations.

Risks Related to the Market for our Ordinary Shares Generally

The market price for our ordinary shares may be volatile.

The market price for our ordinary shares could be subject to wide fluctuations in response to a variety of factors, some of which may be beyond our control. During the fiscal year ended December 31, 2012, the high and low reported sales prices of our ordinary shares were $4.17 and $1.22, respectively. Factors affecting the trading price of our ordinary shares include:

19

· our earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the expectations of financial market analysts and investors;

· changes in financial estimates by us or by any securities analysts who might cover our shares;

· speculation about our business in the press or the investment community;

· significant developments relating to our relationships with our customers or suppliers;

· stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in the steel industry;

· customer demand for our products;

· investor perceptions of the steel industry in general and our company in particular;

· the operating and stock performance of comparable companies;

· general economic conditions and trends;

· major catastrophic events;

· announcements by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures;

· changes in accounting standards, policies, guidance, interpretation or principles;

· loss of external funding sources;

· sales of our stock, including sales by our directors, officers or significant shareholders; and

· additions or departures of key personnel.

Securities class action litigation is often instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs to us and divert our management’s attention and resources.

Moreover, securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to operating performance of particular companies. For example, from October 2008 until June 2009, securities markets in the United States, China and throughout the world experienced an historically large decline in share price. These market fluctuations may adversely affect the price of our ordinary shares and other interests in our company at a time when you want to sell your interest in us.

Our ordinary shares may be delisted from the NASDAQ Global Select Market, which could negatively impact the price of our ordinary shares and our ability to access capital markets.

Our ordinary shares are listed on the NASDAQ Global Select Market. Should we fail to satisfy the continued listing requirements of the NASDAQ Global Select Market, our ordinary shares could be delisted. Among others, we are required by NASDAQ to maintain a minimum bid price of $1.00 per share. Our stock price is currently above $1.00. However, in the event that our stock did close below the minimum bid price of $1.00 per share for any 30 consecutive business days, we would regain compliance if our ordinary shares closed at or above $1.00 per share for 10 consecutive days during the 180 days immediately following failure to maintain the minimum bid price. If we are unable to do so, our stock could be delisted from the NASDAQ Global Select Market, transferred to a listing on the NASDAQ Capital Market, or delisted from the NASDAQ markets altogether. The delisting of our ordinary shares would significantly affect the ability of investors to trade our securities and would significantly negatively affect the value and liquidity of our ordinary shares. In addition, the delisting of our ordinary shares could materially adversely affect our ability to raise capital on terms acceptable to us or at all. Delisting from the NASDAQ Global Select Market could also have other negative results, including the potential loss of confidence by our suppliers, customers and employees, the loss of institutional investor interest, and fewer business development opportunities.

Future sales or perceived sales of our ordinary shares could depress our stock price.

Most of our ordinary shares held by our current shareholders are freely tradable.  If the holders of these shares were to attempt to sell a substantial amount of their holdings at once, the market price of our ordinary shares could decline. Moreover, the perceived risk of this potential dilution could cause shareholders to attempt to sell their shares and investors to short the ordinary shares, a practice in which an investor sells shares that he or she does not own at prevailing market prices, hoping to purchase shares later at a lower price to cover the sale. As each of these events would cause the number of our ordinary shares for sale to increase, our ordinary shares market price would likely further decline.

We do not intend to pay dividends on our ordinary shares for the foreseeable future.

Prior to our March 2009 merger with COAC, our operating subsidiary, Henan Green, declared and paid dividends of $51.9 million and $42.3 million in 2008, respectively, and declared and paid dividends of $16.1 million in 2007.  We paid no dividends during the fiscal year ended December 31, 2012.  Notwithstanding Henan Green’s past history of making dividend payments, we intend to retain any future earnings to fund the operation and expansion of our business and, therefore, we do not anticipate paying cash dividends on our ordinary shares in the foreseeable future.

We are a “foreign private issuer,” and have disclosure obligations that are different than those of U.S. domestic reporting companies, so you should not expect to receive the same information about us as a U.S. domestic reporting company may provide.

We are a foreign private issuer and, as a result, we are not subject to certain of the requirements imposed upon U.S. domestic issuers by the SEC. For example, we are not required by the SEC or the federal securities laws to issue quarterly reports or file proxy statements with the SEC. We are also allowed to file our annual report with the SEC within four months of our fiscal year end.  We are also not required to disclose certain detailed information regarding executive compensation that is required from U.S. domestic issuers.  Further, our directors and executive officers are not required to report equity holdings under Section 16 of the Securities Act.  As a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. We are, however, still subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5.  Since many of the disclosure obligations required of us as a foreign private issuer are different than those required by U.S. domestic reporting companies, our shareholders should not expect to receive all of the same types of information about us and at the same time as information is received from, or provided by, U.S. domestic reporting companies.  We are liable for violations of the rules and regulations of the SEC which do apply to us as a foreign private issuer.  Violations of these rules could affect our business, results of operations and financial condition.

20

You may have difficulty enforcing judgments obtained against us.

We are a BVI company and substantially all of our assets are located outside of the United States. Virtually all of our assets and a substantial portion of our current business operations are conducted in the PRC.  In addition, almost all of our directors and officers are nationals and residents of countries other than the United States.  A substantial portion of the assets of these persons are located outside the United States.  As a result, it may be difficult for you to effect service of process within the United States upon these persons.  It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts including judgments based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, many of whom are not residents in the United States and whose assets are located in significant part outside of the United States.  The courts of the BVI would recognize as a valid judgment, a final and conclusive judgment in personam obtained in the federal or state courts in the United States against the Company under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) and would give a judgment based thereon provided that (a) such courts had proper jurisdiction over the parties subject to such judgment, (b) such courts did not contravene the rules of natural justice of the BVI, (c) such judgment was not obtained by fraud, (d) the enforcement of the judgment would not be contrary to the public policy of the BVI, (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the BVI and (f) there is due compliance with the correct procedures under the laws of the BVI.  In addition, there is uncertainty as to whether the courts of the BVI or the PRC, respectively, would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.  In addition, it is uncertain whether such BVI or PRC courts would entertain original actions brought in the courts of the BVI or the PRC, against us or such persons predicated upon the securities laws of the United States or any state.

Because we are incorporated under the laws of the BVI, it may be more difficult for our shareholders to protect their rights than it would be for a shareholder of a corporation incorporated in another jurisdiction.

Our corporate affairs are governed by our Memorandum and Articles of Association, by the BVI Business Companies Act, 2004 and by the common law of the BVI.  Principles of law relating to such matters as the validity of corporate procedures, the fiduciary duties of management and the rights of our shareholders differ from those that would apply if we were incorporated in the United States or another jurisdiction.  The rights of shareholders under BVI law may not be as clearly established as are the rights of shareholders in the United States or other jurisdictions.  Under the laws of most jurisdictions in the United States, majority and controlling shareholders generally have certain fiduciary responsibilities to the minority shareholders.  Shareholder action must be taken in good faith, and actions by controlling shareholders which are obviously unreasonable may be declared null and void. BVI law protecting the interests of minority shareholders may not be as protective in all circumstances as the law protecting minority shareholders in US jurisdictions.  In addition, the circumstances in which a shareholder of a BVI company may sue the company derivatively, and the procedures and defenses that may be available to the company, may result in the rights of shareholders of a BVI company being more limited than those of shareholders of a company organized in the US.  Furthermore, our directors have the power to take certain actions without shareholder approval which would require shareholder approval under the laws of most US jurisdictions.  The directors of a BVI corporation, subject in certain cases to court approval but without shareholder approval, may implement a reorganization, merger or consolidation, the sale of any assets, property, part of the business, or securities of the corporation, subject to a limit of up to 50% of such assets.  The ability of our board of directors to create new classes or series of shares and the rights attached by amending our Memorandum of Association and Articles of Association without shareholder approval could have the effect of delaying, deterring or preventing a change in our control without any further action by the shareholders, including a tender offer to purchase our ordinary shares at a premium over then current market prices. Thus, our shareholders may have more difficulty protecting their interests in the face of actions by our board of directors or our controlling shareholders than they would have as shareholders of a corporation incorporated in another jurisdiction.

21

Our share repurchase program did not succeed in reassuring the markets of our confidence in our financial condition and growth potential.

In April 2011, we announced that our board of directors had approved a six-month share repurchase program to repurchase up to an aggregate of $10 million of our ordinary shares. Our board of directors subsequently extended the program from six months to an indefinite period or until the program is completed. As of December 31, 2012, consistent with the program, we had repurchased ordinary shares from to time in an aggregate amount of approximately $6.1 million. Since the commencement of our program, the closing stock price of our ordinary shares has generally declined from a high of $5.20 a few days following the announcement of the program to a low of $1.22 as of April 12, 2013. Many factors may cause our stock price to decline and our share repurchase program was unable to prevent or reverse such a decline. To the extent that our share repurchase program is unsuccessful in reversing the downward trend of our stock price, we may have expended capital without achieving a concrete increase in our share value.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

General Information

The current legal and commercial name of the Company is China Gerui Advanced Materials Group Limited. The Company was incorporated in the BVI under the BVI Business Companies Act, 2004 on March 11, 2008. The address of our principal place of business is 1 Shuanghu Development Zone, Xinzheng City, Zhengzhou, Henan Province 451191, People’s Republic of China, and our telephone number is (+86) 371 62568634.

Corporate History

We are a holding company and all of our active business operations are conducted by our indirect, operating subsidiaries, Henan Green and Zhengzhou Company.

China Gerui was incorporated solely for the purpose of acquiring the issued share capital of Wealth Rainbow, which was organized for the sole purpose of acquiring and holding all of the outstanding equity capital in Henan Green.  Neither China Gerui nor Wealth Rainbow has any active business operations other than their ownership of Henan Green.

Henan Green was formed in China in December 2000 by Zhengzhou Company and six individuals including Mr. Mingwang Lu, our Chairman and CEO, and Mr. Baiwang Lu, the brother of Mr. Mingwang Lu.  In December 2006, Zhengzhou Company transferred all its equity interest in Henan Green to 11 individuals including Mr. Mingwang Lu.  On October 21, 2008, the then shareholders of Henan Green transferred all their equity interest in Henan Green to Wealth Rainbow. The acquisition was accounted for as a reorganization under common control with the purchase of a minority interest.

Wealth Rainbow was organized in 2008 for the sole purpose of acquiring and holding all of the outstanding equity capital in Henan Green. Wealth Rainbow was acquired by China Gerui on November 28, 2008. At the time of the acquisition, the sole shareholder of Wealth Rainbow was Ms. Yuying Lu, the daughter of Mr. Lu, and the majority shareholder of China Gerui was Oasis, whose sole shareholder was Ms. Lu.  Therefore, under U.S. GAAP reporting rules, the control group’s 55.02% interest of Henan Green that was acquired constitutes an exchange of equity interests between entities under common control, and the remaining 44.98% interest of Henan Green was accounted for as a minority interest prior to the date of acquisition. As of March 17, 2009, the minority interest ceased to exist.

On March 17, 2009, we completed a business combination transaction with COAC.  COAC was incorporated in Delaware on August 7, 2006 as a blank check company whose objective was to acquire an operating business with its principal operations located in China.  COAC completed its initial public offering in which it raised approximately $41.4 million on March 26, 2007.  All business activity conducted by COAC from its inception until our merger on March 17, 2009 related to its initial public offering and search for a business combination partner.  Upon completion of the merger transaction with COAC, we succeeded to foreign private issuer status under applicable securities laws.

22

On February 26, 2013, Henan Green entered into an equity/asset transfer agreement to acquire 100% ownership of Zhengzhou Company for a total cash purchase price of RMB 268 million (approximately $43.6 million), of which RMB 150.0 million (approximately $24.1 million) has been paid. If Henan Green fails to pay the full purchase price by the negotiated deadline, it will be liable for a penalty fee at a daily rate of 0.03% of the outstanding purchase price. In addition, if any party breaches its representations and warranties provided in the equity transfer agreement, the breaching party is required to pay the other parties for damages in an amount of RMB 1 million (approximately $0.16 million). Zhengzhou Company was formed in China on May 14,1993 and owns land use rights with respect to 24.94 acres of land, among which 6.69 acres of land had been leased to Henan Green pursuant to a lease agreement in December 2008. The term of the lease is from January 1, 2008 to December 31, 2027. Our existing production lines and warehouses are located on such land. In addition, three Company directors, Mr. Mingwang Lu, Mr. Yi Lu and Mr. Maotong Xu, were shareholders of Zhengzhou Company and owned 39.7%, 0.27% and 0.5% of Zhengzhou Company, respectively. We are in the process of completing ownership and land use rights transfer.

The following diagram illustrates our corporate structure as of the date of this annual report.  

 

Principal Capital Expenditures and Divestitures

In fiscal years 2012, 2011 and 2010, our total capital expenditures were $30.6 million, $49.1 million and $69.1 million, respectively. Capital expenditures in 2012 were primarily related to our capacity expansion program, which involved the construction of three new cold-rolled steel production lines with 250,000 tons of total annual capacity and a chromium plating line capable of processing 200,000 tons of cold-rolled steel per annum. The first phase of our production capacity expansion program, the construction of two new cold-rolled production lines with total annual capacity of 150,000 tons, was completed during 2011, and launched normal production operations in July 2011. The second phase of our capacity expansion program, the construction of an additional 100,000 tons of cold-rolled production capacity, was completed in the first quarter of 2012 and launched production operations in the third quarter of 2012.

B. Business Overview

General

We are a leading China-based, non-state-owned contract manufacturer of high precision cold-rolled narrow strip steel products. We convert steel manufactured by third parties into thin steel sheets and strips according to our customers’ specifications. We produce precision ultra-thin, high-strength cold-rolled steel products, with thicknesses starting from 0.05 mm width up to 600 mm and tolerance +/- 0.003mm. We sell our products to domestic Chinese customers who primarily operate in the food and industrial packaging, construction and household decorations materials, electrical appliances, and telecommunications wires and cables industries. The cold-rolled precision steel industry is relatively new in China. Manufacturers of products that use specialty precision steel products, including our customers, traditionally imported raw materials from Japan, South Korea, the European Union and the United States.

Prior to 2009, we produced and sold unplated steel sheets to manufacturers or distributors which then further treated or outsourced our products for tin or zinc plating to produce tinplate or zinc-plated steel, or for electrolytic chromic acid treatments to produce chromium plated steel, according to customer specifications. We added chromium plating facilities in December 2008 and launched mass production of chromium plated steel products in February 2009.

23

Our PRC manufacturing facility is located in Zhengzhou, Henan Province. We currently operate eleven sets of cold-rolled steel production lines with a current annual steel processing capacity of approximately 500,000 metric tons and two chromium-plating production lines with total annual processing capacity of approximately 250,000 metric tons. We recently completed our capacity expansion program, which involved the construction of three new cold-rolled steel production lines with 250,000 tons of total annual capacity and a chromium plating line capable of processing 200,000 tons of cold-rolled steel per annum. The first phase of our production capacity expansion program, with total annual capacity of 150,000 tons, was completed during 2011, and normal production operations in July 2011. The second phase of our capacity expansion program, the construction of an additional 100,000 tons of cold-rolled production capacity, was completed in the first quarter of 2012 and the production operation was launched in the third quarter of 2012. This recent expansion will increase our product offerings, which we believe will increase our profit margin. Newly-added capacity to produce these types of high-end plated steel products will enable us to enhance our higher-margin product offering to meet the increasing demand in the China market for high-end cold-rolled steel products.

Our revenue has increased from $253.9 million in 2010 to $341.8 million in 2011 and then decreased to $265.5 million in 2012, representing a compounded annual growth rate, or CAGR, of approximately 2.3% from 2010 to 2012. Our net income increased from $47.1 million in 2010 to $57.6 million in 2011 and decreased to $26.1 million in 2012, representing a CAGR of (25.6)% from 2010 to 2012.

As a net importer of high-end precision products, China currently still lacks the capability to produce high-end precision steel products. Our success in the past mainly came from being able to expand into products which replace expensive imported products and being able to manufacture these types of products at a cost-efficient level compared to other domestic Chinese manufacturers. We believe our technology and product development capability has been a key factor in our success.

Our Products

We are a leading niche and high value-added steel processing company in China. We produces high-end, high-precision, ultra-thin, high- strength, cold-rolled steel products, with thicknesses starting from 0.05 mm width up to 1,200 mm and tolerance +/- 0.003 mm, that are characterized by stringent performance and specification requirements that mandate a high degree of manufacturing and engineering expertise. Our products are not standardized commodity products. Instead, they are tailored to customers' requirements and subsequently incorporated into products manufactured for various applications. We sell our products to domestic Chinese customers in a diverse range of industries, including the food and industrial packaging, construction and household decorations materials, electrical appliances, and telecommunications wires and cables.

Prior to 2011, we produced and sold narrow-strip cold-rolled steel with width up to 600mm. Our annual production capacity was 250,000 metric tons. We started to build a chromium plating facilities in December 2008, and launched mass production of chromium plated steel products in October 2009 with annual chromium plating capacity of 50,000 metric tons. With the capacity expansion program recently completed in 2012, we now have total production capacity of 500,000 metric tons of both narrow- and wide-strip cold-rolled steel, of which up to 50% can be further chromium-plated as value-add service to customers.

We have five series and over 20 types of high precision strip steel products. Our products are manufactured from steel substrate of cold-rolled or hot-rolled pickled coils. We have the flexibility to adjust our production specifications to meet changes in market demand.

Our Pricing Strategy

We price our products after reflecting raw material and production costs, selling expenses and profit margin. Our product price is largely affected by the price of raw steel as well as the supply and demand dynamics of our products in the marketplace.

The price of precision steel products varies depending on thickness, precision, and hardness. Product quality is also a pricing factor, reflecting the technological leadership, engineering and operating efficiency of the manufacturers.

24

The market for our principal raw material, hot rolled steel, is price sensitive. We work with long-term suppliers, which are the large and mid-scale steel mills in China, as well as our customers to ensure quick reaction to the change of pricing directions in the market. As steel prices drop, we endeavor to obtain price concessions from suppliers, and pass the cost-savings to our customers. As steel prices rise, we negotiate with customers to pass on cost increases, and negotiate with suppliers to lock in lower steel costs. We believe our ability to manage the price of raw materials and the price of final products, as well as our long-term relationships with our suppliers and customers, are important factors in our success in this business.

Raw Materials and Suppliers

The principal raw material used in producing our products is hot rolled steel coil, which accounts for approximately 92% of our total production cost. Our raw material procurement policy is to use only long-term suppliers who have demonstrated quality control and reliability. We maintain multiple supply sources so that supply problems with any one supplier will not materially disrupt our operations. We also believe that we have sufficient suppliers to meet our present and anticipated future needs.

The prices of steel rolls can fluctuate and can be quite volatile. To provide some protection from the pressure and volatility of the market, we make bulk purchases only when all purchases are supported by customers’ orders. When executing sales orders with customers, we set pricing based on the currently prevailing price of steel coil thereby allowing us to pass incremental cost increases in raw materials to our customers. In a market environment when the steel price declines, it is a general industry practice that steel mills will provide concessions for price protection and we generally will pass on the price concessions to our customers.

However, our principal suppliers usually dedicate portions of their inventories as reserves to meet our manufacturing requirements. Suppliers are generally provided a prepayment and are paid in full when the products are delivered.

Since 2012, we began to offer cold-rolled wide-strip steel in addition to our traditional cold-rolled narrow-strip steel products with total capacity of 500,000 metric tons. Our chromium-plating capacity was increased from 50,000 metric tons (for narrow-strip only) to 250,000 metric tons (for both narrow- and wide-strip). Also, we are in the process of building a laminated steel production line that is expected to be launched for production in the second quarter of 2013. The afore-mentioned improvement of our product mix posed changed demand for raw materials, requiring our suppliers to meet our raw material need in a cost-effective, flexible, and timely manner.

For the years ended December 31, 2012, 2011 and 2010, our three largest suppliers accounted for over 80%, 79% and 66%, respectively, of our total purchases. For the years ended December 31, 2012, 2011 and 2010, our single largest supplier accounted for 37.4%, 42.8% and 29.7% of our total purchases, respectively.

Customers, Sales and Marketing

We sell our products primarily in China either directly to manufacturers or through distributors. We use our own sales staff and network which cover many Chinese provinces and regions, especially in the eastern coastal regions in China. We have developed and strive to maintain a diversified sales network that allows us to effectively market products and services to our customers.

Members of our sales team generate sales leads by contacting customers and customer prospects directly and by attending industry trade shows and exhibitions. Given our established status as one of China’s leading suppliers of cold-rolled precision steel products, our customers often contact us directly regarding new projects. Although most of our business is developed by direct personal contact and referrals from our customers, we have been marketing and promoting our products through the following means:

· hosting annual product promotion meeting with current and potential customers, in which we introduce our products and new improvements to the market;

· attending various exhibitions to improve our name recognition; and

· visiting our customers and collecting information regarding their needs.

Sales to customers in China account for virtually all of our revenue. We target our sales efforts primarily in the coastal provinces of Guangdong, Fujian, Zhejiang, Jiangsu and Shanghai areas, where the majority of our customers are located. We have a sales staff of approximately 30 employees. We maintain nine sales offices in China, including three in Guangdong, three in Zhejiang, one in Fujian, one in Shandong, and one in Anhui. We participate in industry expositions in which we showcase our products and services and from which we obtain new customers.

25

Generally, an initial deposit (approximately 30% of the aggregate contracted sales amount) is pre-paid by a customer when the customer contract is signed. The remainder of the customer’s payment is generally received in cash on delivery. Management reviews its accounts receivable on a regular basis to determine if the allowance for doubtful accounts is adequate at each quarter-end.

We produce on a contract basis for our customers and develop, process and manufacture steel products tailored to customers’ specifications. We sell our products to domestic Chinese customers primarily operating in the food and industrial packaging, construction and household decorations materials, electrical appliances, and telecommunications wires and cables industries. Our high precision steel products are sold directly to the end users in various parts of China and our production was based on confirmed sales orders.

The following table sets forth the percentages of sales of our products by industry applications during each of the three years of 2012, 2011 and 2010:

			Year Ended December 31,
Revenue by Industry Application	Thickness	Precision	2012			2011			2010
Food and industrial packaging	0.1 - 1.3 mm	±0.0025 - 0.005		50.6	%		49.2	%		51.8	%
Construction and household decorations materials	0.2 - 1.1 mm	±0.0025 - 0.005		22.6	%		19.2	%		33.7	%
Electrical appliances	0.09-1.1 mm	±0.002 - 0.005		17.5	%		23.5	%		6.0	%
Telecommunication wires and cables	0.1-0.24 mm	±0.0025 - 0.005		9.4	%		8.1	%		8.5	%

During the last three fiscal years, we have sold our products to more than 200 customers that were located in Shanghai, Zhejiang, Jiangsu, Shandong, Guangdong, Hebei, Tianjin, Guangxi, Fujian and Liaoning. Our major customers for the year ended December 31, 2012 included:

Customer Name	Quantity Sold (Metric Tons)		% of Total Sales
Dongying Bohai Metals Co. Ltd.		19,964		6.8	%
Luoyang Lixin Commerce and Trade Co., Ltd.		15,332		5.2	%
Henan Shun Kay Colored Steel Co., Ltd.		10,574		2.6	%
Zhongyuan Shengqi Co. Ltd.		10,545		3.6	%
Hangzhou Xinye Bottle Cap Co. Ltd.		8,618		2.8	%

For each of the years ended December 31, 2012, 2011 and 2010, our five largest customers accounted for 21.0%, 16.2% and 22.9% of total sales, respectively. For the years ended December 31, 2012, 2011 and 2010, the single largest customer accounted for 6.8%, 5.5% and 8.5% of our total sales, respectively.

Intellectual Property

We protect our intellectual property primarily by maintaining strict control over the use of production processes. All our employees, including key employees and engineers, have signed our standard form of labor contracts, pursuant to which they are obligated to hold in confidence all of our trade secrets, know-how or other confidential information and not to compete with us, both during the employment term and within five years after the termination of employment. In addition, for each project, only the personnel associated with the project have access to the related intellectual property. Access to proprietary data is limited to authorized personnel to prevent unintended disclosure or otherwise using our intellectual property without proper authorization. We will continue to take steps to protect our intellectual property rights.

In May, 2010, our utility model patent application was approved by the PRC government (application number: 200920089897.4), related to our production process technology, in particular, hydraulic pressured automatic thickness control system for four-roll reversible cold mill. The application was made on April 28, 2009.

We have registered the trademark for the logo with the Trademark Office of the State Administration for Industry and Commerce of China.  We use our trademark for the sales and marketing of our products.  Our trademark expires on December 27, 2014 and may be continually renewed thereafter.

26

Competition and Our Market Position

Competition within the steel industry, both in China and worldwide, is intense. There are many large state-owned enterprises and smaller private steel companies in China. In addition, Chinese steel makers also face competition from international steel manufacturers. In the absence of publicly available official statistics or independent third-party market research, we believe from our own competitive analysis that we are one of the leading precision cold-rolled steel producers in China.

The recent slowdown in China’s domestic economy and a slowdown in exports of steel also led to a somewhat depressed steel market in China which has forced large state-owned steel mills to rely on the domestic market to absorb their otherwise export-oriented output; this has resulted in an increase in supply and induced some short-term price cuts throughout the domestic steel sector. This phenomenon generated greater competition, particularly from large state-owned commoditized cold-rolled steel producers, and especially for our newer production capacity, which tends to produce products at a greater degree of commoditization, including with respect to strip thickness, than our more established production lines. However, as we further optimize the production process and fully realize our design specifications, including strip thickness, we expect to further replace imports of high-end steel products and face less competition from domestic producers. This dynamic was evident in 2011 when we launched new wide-strip steel production lines.

In the cold-rolled steel strip market in China, competitive advantages generally result from a number of factors, including the following:

· a producer’s flexibility to control cost and pricing of products and the ability to use economies of scale to secure advantages in procurement, production and distribution;

· a producer’s capacity to meet all current and potential demand;

· a producer’s ability to manufacture products efficiently, maximize raw material yield, and to achieve better production quality; and

· a producer’s technical knowledge, access to capital, local market knowledge and established relationships with suppliers and customers to support the development of commercially viable production facilities.

Particularly with respect to domestic cold-rolled narrow steel strip manufacturers, we believe that we differentiate ourselves by being an early mover in the industry, and by offering high product quality, timely delivery and better value. The following are attributes that we believe are important to our industry and we believe that we demonstrate each of them:

· performance and cost effectiveness of products;

· ability to manufacture and deliver products in required volumes, on a timely basis, and at competitive prices;

· high quality and reliability of products;

· flexibility to customize products to match customers’ end-use specifications;

· in-house production process;

· after-sale support capabilities, from both an engineering and an operational perspective;

· flexibility in operations;

· cost-effective supply chain management and production;

· access to financing for capital expenditures and working capital;

· effectiveness of customer service and ability to send experienced operators and engineers as well as a seasoned sales force to assist customers; and

· overall management capability.

We believe that we are positioned to address competition with international manufacturers of cold-rolled narrow steel strip, which primarily relates to the following attributes:

· ability to offer both a high quantity and a wide variety of customized, value-added products;

· technical expertise to match or exceed the quality of foreign-made products; and

· maintenance of lower transportation, labor, and other significant costs.

Our capacity expansion program is one of the primary ways that we believe that we are maintaining or increasing our competitiveness as to all competitors with respect to many of the above factors. As previously disclosed, our expansion plan was implemented in two phases. The first phase has involved the construction of 150,000 tons of total annual capacity and a chromium plating line capable of processing 200,000 tons of cold-rolled steel per annum, which started normal operations in July 2011. The second phase of our expansion plan involved the construction of another 100,000 metric tons of capacity and the production operation was launched in the third quarter of 2012.

27

Regulation

We are subject to numerous central, provincial and local laws and regulations, which may be changed from time to time in response to economic or political conditions and have a significant impact upon overall operations. Changes in these regulations could require us to expend significant resources to comply with new laws or regulations or changes to current requirements and could have a material adverse effect on our company.

Included among these laws and regulations are numerous central, provincial and local laws and regulations relating to the protection of the environment. These laws continue to evolve and are becoming increasingly stringent. The ultimate impact of complying with such laws and regulations is not always clearly known or determinable because regulations under some of these laws have not yet been promulgated or are undergoing revision. The State Environmental Protection Administration Bureau is responsible for the supervision of environmental protection in, implementation of national standards for environmental quality and discharge of pollutants for and supervision of the environmental management system of the PRC. Environmental protection bureaus at the county level or above are responsible for environmental protection within their jurisdictions.

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations.  This pattern may change, however, as a result of new market opportunities or new product introductions.

C. Organizational Structure

See “—A. History and Development of the Company—Corporate History” above for details of our current organizational structure.

D. Property, Plants and Equipment

There is no private ownership of land in China and all land ownership is held by the government of China, its agencies, and collectives. In the case of land used for business purposes, land use rights can be obtained from the government for a period up to 50 years, and are typically renewable. Land use rights can be transferred upon approval by the land administrative authorities of China (State Land Administration Bureau) upon payment of the required land transfer fee.

Our manufacturing facilities are located in Zhengzhou, Henan Province, China. The total land area is approximately 1,194,000 square feet, which is owned by Zhengzhou Company. Our facilities have a total area of approximately 264,000 square feet, of which 226,000 square feet is devoted to production facilities, 9,000 square feet is raw material warehouse space, 6,300 square feet is finished product warehouse space and 22,700 square feet is an office building. Prior to our acquisition of Zhengzhou Company in February 2013, we leased this space from Zhengzhou Company. The lease was for a 20-year term, beginning on January 1, 2008. The rent under the lease was approximately $12,867, $11,428 and $9,909 for 2012, 2011 and 2010, respectively. Zhengzhou Company pledged the land and buildings to guarantee our obligations under certain of our short-term bank loans.

As of December 31, 2012, our facilities had an annual cold rolling steel processing capacity of approximately 500,000 metric tons and an annual chromium coating capacity of approximately 250,000 metric tons.

We also have obtained land use rights and permission to construct facilities on additional land of approximately 2,152,780 square feet, adjacent to our present facilities, from the Zhengzhou local government. We have pledged the land use rights for this property to the lenders of certain of our short-term bank loans to secure our obligations under these loans.

Our manufacturing facilities are subject to various pollution control regulations with respect to noise and air pollution and the disposal of waste and hazardous materials. We are also subject to periodic inspections by local environmental protection authorities. Our operating subsidiaries have received certifications from the relevant PRC government agencies indicating that their business operations are in material compliance with the relevant PRC environmental laws and regulations. We are not currently subject to any pending actions alleging any violations of applicable PRC environmental laws.

28

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

Please refer to Item 6 “Directors, Senior Management and Employees—E. Share Ownership.”

B. Related Party Transactions

The following includes a summary of transactions since the beginning of the 2012 fiscal year between us and certain related persons.  We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

· On February 26, 2013, Henan Green entered into an equity/asset transfer agreement to acquire 100% ownership of Zhengzhou Company, a related party of the Company, for a total cash purchase price of RMB 268 million (approximately $43.6 million), of which RMB 150.0 million (approximately $24.1 million) has been paid. The balance of the purchase price is expected to be paid within the next six months. If Henan Green fails to pay the full purchase price by the negotiated deadline, it will be liable for a penalty fee at a daily rate of 0.03% of the outstanding purchase price. In addition, if any party breaches its representations and warranties provided in the equity transfer agreement, the breaching party is required to pay the other parties for damages in an amount of RMB 1 million (approximately $0.16 million). The purchase price was determined based on an appraisal report prepared by an independent appraisal firm. Three Company directors, Mr. Mingwang Lu, Mr. Yi Lu and Mr. Maotong Xu, were shareholders of Zhengzhou Company and owned 39.7%, 0.27% and 0.5% of Zhengzhou Company, respectively. We are in the process of transferring the ownership and land use rights of Zhengzhou Company.

29

· In December 2008, we entered into a new lease agreement with Zhengzhou Company. The lease term commenced on January 1, 2008 and terminates on December 31, 2027. Rent paid to Zhengzhou Company for the fiscal year ended December 31, 2012 was $12,867. Rent payable under the lease increases by 10% annually starting from 2010. Zhengzhou Company also guarantees our obligations under short term bank loans. We do not pay any consideration to this related guarantor for guaranteeing our obligations.

· Zhengzhou Company owns a land use right with respect to 24.94 acres. We leased a part of the land use right for 6.69 acres from Zhengzhou Company prior to the acquisition. Our existing production lines and warehouses are located on this parcel of land. For operation risk mitigation purpose, we started the process of title transfer of the land use right from Zhengzhou Company prior to the acquisition. To facilitate Zhengzhou Company’s negotiation with local regulatory authorities on the transfer and in anticipation of the upfront payments associated with the transaction, we prepaid $24,076,660 as of December 31, 2012 to acquire Zhengzhou Company.

· Since January 2010, we have paid Mr. Harry Edelson, a director, a monthly fee of $10,000 in return for his verbal agreement to perform certain services. These services have included or may include the following: (a) helping to promote awareness of the Company within the investment community through introductions to investors, investment banks, and research analysts; (b) participation in future deal or non-deal road shows and financing activities of the Company upon request and at the discretion of the Company and the Board of Directors; (c) assistance in investor conference presentations, whether or not management of the Company is able to be present; (d) providing occasional office use and communication facilities where required by the Company; (e) monitoring and providing capital market feedback on the Company; and (f) such other activities as may be requested of him, from time to time, by the Board or executive management team of the Company.

See also Item 6 “Directors, Senior Management and Employees—B. Compensation.”

C. Interests of Experts and Counsel

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

The full text of our audited consolidated financial statements begins on page F-1 of this annual report.

ITEM 19. EXHIBITS

The list of exhibits in the Exhibit Index to this report is incorporated herein by reference.

30

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Date: November 21, 2013	CHINA GERUI ADVANCED MATERIALS GROUP LIMITED
	/s/ Mingwang Lu
	Mingwang Lu
	Chief Executive Officer

31

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010

CONTENTS	Pages
Report of Independent Registered Public Accounting Firm	F-2 - F-3
Consolidated Balance Sheets	F-4
Consolidated Statements of Income	F-5
Consolidated Statements of Comprehensive Income	F-6
Consolidated Statements of Changes in Stockholders’ Equity	F-7
Consolidated Statements of Cash Flows	F-8
Notes to the Consolidated Financial Statements	F-9 - F-37

F-1

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

We have audited the accompanying consolidated balance sheets of China Gerui Advanced Materials Group Limited. and its subsidiaries (collectively the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of income and comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2012. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of China Gerui Advance Materials Group Limited and its subsidiaries as of December 31, 2012 and 2011, and the results of its consolidated income and its cash flows for each of the years in the three-year period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

F-2

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated April 30, 2013, expressed an unqualified opinion.

UHY VOCATION HK CPA LIMITED

Certified Public Accountants

Hong Kong, the People’s Republic of China,

April 30, 2013, except for Note 10, 17 and 22 as to which the date is November 21, 2013

(please refer to Note 1 - Revisions to the Consolidated Financial Statements)

F-3

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

	December 31, 2012			December 31, 2011
Assets
Current assets
Cash	$	228,861,009		$	246,600,917
Certificates of deposit		16,372,128			-
Restricted cash		145,413,726			118,130,253
Accounts receivable, net		2,276,153			6,382,630
Notes receivable		433,379			568,328
Inventories		22,762,545			24,463,142
Prepaid purchases		76,268,597			45,805,423
Prepaid expenses		382,569			385,131
Other receivables		2,270,073			2,850,601
Total current assets		495,040,179			445,186,425
Non-current assets
Property, plant and equipment, net		134,110,657			122,695,246
Land use right, net		13,625,738			13,807,056
Deposit on acquisition of future land use right		24,076,660			12,710,719
Deposit on acquisition of property, plant and equipment		266,312			-
Other receivable		3,039,835			3,499,083
Certificates of deposit		3,210,221			3,177,679
Total non-current assets		178,329,423			155,889,783
Total assets	$	673,369,602		$	601,076,208
Liabilities and stockholders' equity
Current Liabilities
Accounts payable	$	2,279,246		$	8,074,432
Notes payable		259,546,395			204,880,916
Term loans		57,462,962			44,169,751
Land use right payable		1,419,314			1,404,926
Income tax payable		5,140,306			5,458,482
Customers deposits		11,635,999			23,383,849
Accrued liabilities and other payables		5,818,060			15,276,016
Total current liabilities		343,302,282			302,648,372
Total liabilities		343,302,282			302,648,372
Stockholders' equity
Common stock, 100,000,000 shares authorized with no par value; 59,823,730 and 59,433,828 shares issued, 59,561,899 and 58,256,930 shares outstanding as of December 31, 2012 and December 31, 2011, respectively		140,418,118			140,418,118
Additional paid-in capital		4,978,698			6,930,944
Treasury stock, at cost, 261,831 and 1,176,898 shares, as of December 31, 2012 and December 31, 2011, respectively		(414,063	)		(4,516,744	)
Retained earnings		163,276,046			137,142,958
Accumulated comprehensive income		21,808,521			18,452,560
Total stockholders' equity		330,067,320			298,427,836
Total liabilities and stockholders' equity	$	673,369,602		$	601,076,208

See notes to financial statements.

F-4

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

CONSOLIDATED STATEMENTS OF INCOME

(IN US DOLLARS)

	For the Years Ended
	December 31,
	2012			2011			2010
Revenue	$	265,486,082		$	341,778,295		$	253,866,337
Cost of revenue		(208,541,058	)		(240,199,678	)		(177,869,648	)
Gross Profit		56,945,024			101,578,617			75,996,689
Operating expenses:
General and administrative expenses		(13,168,132	)		(10,707,418	)		(7,795,722	)
Selling and marketing expenses		(1,446,383	)		(1,634,232	)		(1,251,091	)
Warrant compensation expenses		-			(5,700,000	)		-
Total operating expenses		(14,614,515	)		(18,041,650	)		(9,046,813	)
Operating income		42,330,509			83,536,967			66,949,876
Other income and (expense):
Interest income		3,576,741			1,913,091			1,087,178
Interest expenses		(8,228,472	)		(6,470,126	)		(5,286,727	)
Sundry income		351,483			602,247			270,240
Income before income taxes		38,030,261			79,582,179			63,020,567
Income tax expense		(11,897,173	)		(21,961,627	)		(15,937,143	)
Net income	$	26,133,088		$	57,620,552		$	47,083,424
Earnings per share
- Basic	$	0.45		$	1.02		$	1.07
- Diluted	$	0.45		$	1.02		$	1.01
Weighted average common shares outstanding
- Basic		58,543,076			56,297,652			43,891,670
- Diluted		58,543,076			56,297,652			46,655,721

See notes to financial statements.

F-5

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(IN US DOLLARS)

	For the Years Ended
	December 31,
	2012		2011		2010
Net income	$	26,133,088	$	57,620,552	$	47,083,424
Other comprehensive income
Foreign currency translation gain		3,355,961		11,038,151		5,003,108
Total comprehensive income	$	29,489,049	$	68,658,703	$	52,086,532

See notes to financial statements.

F-6

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010

(IN US DOLLARS)

	Common Stock, with no Par Value					Treasury Stock, at cost						Additional			Accumulated				Total
	Number of					Number of						Paid-in			Comprehensive		Retained		Stockholders’
	Shares			Amount		Shares			Amount			Capital			Income		Earnings		Equity
Balance at December 31, 2009		40,692,323		$	45,261,630		-		$	-		$	6,930,944		$	2,411,301	$	32,438,982	$	87,042,857
Net income		-			-		-			-			-			-		47,083,424		47,083,424
Foreign currency translation gain		-			-		-			-			-			5,003,108		-		5,003,108
Shares issued for warrant conversion		2,142,959			10,714,795		-			-			-			-		-		10,714,795
Shares issued in private placement net of offering fees of $863,676		3,303,771			17,967,818		-			-			-			-		-		17,967,818
Balance at December 31, 2010		46,139,053		$	73,944,243		-		$	-		$	6,930,944		$	7,414,409	$	79,522,406	$	167,812,002
Net income		-			-		-			-			-			-		57,620,552		57,620,552
Foreign currency translation gain		-			-		-			-			-			11,038,151		-		11,038,151
Shares issued for warrant conversion		13,294,775			66,473,875		-			-			-			-		-		66,473,875
Purchase of treasury stock		-			-		(1,176,898	)		(4,516,744	)		-			-		-		(4,516,744	)
Balance at December 31, 2011		59,433,828		$	140,418,118		(1,176,898	)	$	(4,516,744	)	$	6,930,944		$	18,452,560	$	137,142,958	$	298,427,836
Net income		-			-		-			-			-			-		26,133,088		26,133,088
Foreign currency translation gain		-			-		-			-			-			3,355,961		-		3,355,961
Purchase of treasury stock		-			-		(795,031	)		(1,554,674	)		-			-		-		(1,554,674	)
Retirement of treasury stock		(1,710,098	)		-		1,710,098			5,657,355			(5,657,355	)		-		-		-
Grant of restricted common shares		2,100,000			-		-			-			-			-		-		-
Share-based compensation		-			-		-			-			3,705,109			-		-		3,705,109
Balance at December 31, 2012		59,823,730			140,418,118		(261,831	)	$	(414,063	)	$	4,978,698		$	21,808,521	$	163,276,046	$	330,067,320

See notes to financial statements.

F-7

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN US DOLLARS)

	For the years ended December 31
	2012			2011			2010
Cash flows from operating activities:
Net income	$	26,133,088		$	57,620,552		$	47,083,424
Adjustments to reconcile net income to net cash (used in) / provided by operating activities:
Depreciation of property, plant and equipment		10,899,049			7,994,638			3,149,314
(Gain)/loss on disposal of property, plant and equipment		(56,107	)		12,726			-
Amortization of land use right		330,244			322,638			259,438
Stock-based compensation		3,705,109			-			-
Warrant compensation expense		-			5,700,000			-
Changes in assets and liabilities:
Accounts receivable, net		4,126,206			(2,046,819	)		721,098
Notes receivable, net		139,228			(554,789	)		-
Inventories		1,929,773			(16,712,453	)		(1,043,397	)
Prepaid expenses		6,435			621,611			(914,841	)
Prepaid purchases		(29,666,016	)		(16,284,440	)		(11,361,129	)
Other receivable		(142,305	)		(697,676	)		224,051
Accounts payable		(5,813,580	)		5,168,689			(4,967,264	)
Income tax payable		(369,983	)		1,078,582			334,361
Customers deposit		(11,856,194	)		12,911,217			1,539,833
Accrued liabilities and other payables		(1,466,919	)		1,113,651			1,452,762
Net cash (used in) / provided by operating activities		(2,101,972	)		56,248,127			36,477,650
Cash flows from investing activities:
Cash paid for property, plant and equipment		(30,561,916	)		(29,816,858	)		(65,063,864	)
Proceeds from disposal of property, plant and equipment		59,517			9,655			-
Payment of purchases of land use right		-			(9,073,284	)		(1,903,656	)
Payment of acquisition of future land use right		(11,112,875	)		(10,213,261	)		(2,093,071	)
Cash deposit-potential business initiative program-related party		-			(5,000,000	)		-
Cash deposit refunded-related party		-			5,000,000			-
Advance to unrelated third parties		(4,017,304	)		(3,415,724	)		-
Advance from unrelated third party		1,587,554			-			-
Repayment of advance to unrelated third parties		5,252,326			-			-
Investment in certificates of deposit		(16,193,047	)		(3,101,978	)		-
Changes in restricted cash		(25,788,547	)		(47,212,098	)		(29,032,134	)
Changes in prepaid machinery deposits		-			-			13,973,966
Net cash used in investing activities		(80,774,292	)		(102,823,548	)		(84,118,759	)
Cash flows from financing activities:
Repayment of term loans		(50,484,204	)		(45,831,718	)		(45,984,848	)
Proceeds from term loans		63,184,632			43,815,432			56,093,042
Proceeds from notes payable, net		51,992,380			111,733,230			45,213,650
Proceeds received from common stock issued and warrant conversion, net		-			-			28,682,613
Proceeds received from exercise of warrants		-			66,473,875			-
Warrant compensation expense		-			(5,700,000	)		-
Purchase of treasury stock		(1,554,674	)		(4,516,744	)		-
Net cash provided by financing activities		63,138,134			165,974,075			84,004,457
Net (decrease) / increase in cash		(19,738,130	)		119,398,654			36,363,348
Effect on change of exchange rates		1,998,222			7,724,965			3,506,581
Cash as of January 1		246,600,917			119,477,298			79,607,369
Cash as of December 31	$	228,861,009		$	246,600,917		$	119,477,298
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest paid	$	8,322,263		$	6,254,304		$	3,927,906
Income tax paid	$	12,267,157		$	20,883,046		$	15,738,892

See notes to financial statements.

F-8

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)          

1. DESCRIPTION OF BUSINESS AND ORGANIZATION

China Gerui Advanced Materials Group Limited ("the Company" or "China Gerui") holdings are comprised of Wealth Rainbow, also a holding company and Henan Green, an operating company and a leading China-based specialty precision cold-rolled steel producer. Through its investment in these entities, the Company manufactures and sells specialty, high-end, high precision, ultra thin, high strength, cold-rolled, narrow and wide strip steel products that are characterized by stringent performance and specification requirements that mandate a high degree of manufacturing and engineering expertise, and are extensively used in the manufacturing industry throughout mainland China. The Company's products are not standardized commodity products, but are tailored to customers' requirements and then incorporated into products they and end-users make for various applications. The Company sells its products to its customers in the People's Republic of China (PRC) and to a limited extent to customers outside the PRC in a diverse range of industries, including the food packaging, telecommunication, electrical appliance, and construction materials industries.

The consolidated financial statements include the financial statements of China Gerui and its subsidiaries (together referred to as the "Group"). The Company owns 100% equity interests directly and indirectly, in two subsidiaries, namely Wealth Rainbow and Henan Green. The organization chart of the Group is as follows:

Details of the Company’s subsidiaries which are included in these consolidated financial statements are as follows:

		Percentage of
	Place and date of	ownership
Subsidiaries’ names	incorporation	by the Company	Principal activities
Wealth Rainbow Development Limited "Wealth Rainbow"	Hong Kong, People's Republic of China (“PRC”) March 1, 2007	100%	Intermediate holding company
Henan Green Complex Materials Co., Ltd. "Henan Green"	PRC December 31, 2000	100% (through Wealth Rainbow)	Operating entity

Revisions to the Consolidated Financial Statements

The business combination and related deposits in previous consolidated financial statements for the year ended December 31, 2012 dated April 30, 2013 have been re-characterized as an acquisition of future land use rights as the Company has determined that this presentation better reflects the substance of the transaction.. As a result, certain revisions were made to the notes to the consolidated financial statements which are reflected in Notes 10, 17, 22. In addition, the Company revised the consolidated balance sheet as of December 31, 2012 by reclassifying amounts totaling $24,076,660 previously reported as “Deposit on acquisition of business” to “Deposits on acquisition of future land use right” and revised certain cash flows from investing activities in the consolidated statement of cash flows for the year ended December 31, 2012 by reclassifying amounts totaling $11,112,875 from “Deposit payment to investing business” to “Payment of acquisition of future land use right.”

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

The accompanying audited consolidated financial statements and related notes have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP). The preparation of the consolidated financial statements in accordance with US GAAP requires management of the Group to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include the recoverability of the carrying amount and the estimated useful lives of long-lived assets; valuation allowances for receivables, realizable values for inventories. Actual results could differ from those estimates.

The consolidated financial statements include all accounts of the Company and its wholly-owned subsidiaries. All material inter-company balances and transactions have been eliminated.

F-9

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(b)     Foreign currency translation

The Group uses United States dollars (“U.S. Dollar” or “US$” or “$”) for financial reporting purposes. The Company maintains its books and records in its respective functional currency, Chinese Renminbi (“RMB”) and Hong Kong dollars (“HK$”), being the lawful currency in the PRC and Hong Kong, respectively. Assets and liabilities of the subsidiaries are translated from RMB or HK$ into U.S. Dollars using the applicable exchange rates prevailing at the balance sheet date. Items on the statements of income and comprehensive income and cash flows are translated at average exchange rates during the reporting period. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the Company’s financial statements are recorded as accumulated other comprehensive income included in the stockholders’ equity section of the balance sheets. The exchange rates used to translate amounts in RMB and HK$ into U.S. Dollars for the purposes of preparing the consolidated financial statements are as follows:

	2012	2011	2010
Balance sheet items, except for equity accounts	RMB6.2301=$1	RMB6.2939=$1	RMB6.6000=$1
	HK$7.7507=$1	HK$7.7663=$1	HK$7.7810=$1

	For the years ended
	2012	2011	2010
Items in statements of income and cash flows	RMB6.2990=$1	RMB6.4475=$1	RMB6.7604=$1
	HK$7.7556=$1	HK$7.7793=$1	HK$7.7700=$1

(c) Cash

Cash represents cash in banks and cash on hand.

The Group considers all highly liquid investments with original maturities of three months or less to be cash. The Group maintains bank accounts in HKSAR and Mainland China, PRC and the United States.

(d) Accounts receivable

Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts sales returns and trade discounts. The allowance for doubtful accounts is the Group’s best estimate of the amount of probable credit losses in the Group’s existing accounts receivable. Management determines the allowance based on historical write-off experience, customer specific facts and economic conditions. The Group has historically been able to collect all of its receivable balances, and accordingly, 10% allowance has been provided for specific doubtful accounts.

Outstanding account balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Group does not have any off-balance-sheet credit exposure to its customers.

F-10

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(e) Notes receivable

As of December 31, 2012, the Company received $433,379 in notes receivable in full payment of outstanding accounts receivable. The notes mature in 6 months. All notes are non-interest bearing. In management's opinion, the remaining balance is fully collectible.

(f) Inventories

Inventories are stated at the lower of cost or market and consist primarily of flat rolled steel. Cost is determined using the weighted average cost method. In the case of work in process and finished goods, such costs comprise of direct materials, direct labor and an appropriate proportion of overheads.

(g) Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to general and administrative expenses as incurred. Depreciation of property, plant and equipment is computed by the straight-line method over the assets estimated useful lives ranging from five to fifty years. Building improvements, if any, are amortized on a straight-line basis over the estimated useful life.

Upon sale or retirement of property, plant and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations.

Construction in progress represents the costs of property, plant and equipment under construction or installation. Depreciation commences when the asset is placed in service. The accumulated costs are reclassified as property, plant and equipment when installation or construction is completed. Government subsidies received reduce the cost of construction.

The estimated useful lives of the assets are as follows:

	Estimated Life (years)
Leasehold land improvement		46.5
Buildings		10 - 20
Machinery and equipment		5 - 20
Vehicles		5
Furniture fixtures and office equipment		5

Expenditures for repairs and maintenance, which do not extend the useful life of the assets, are expensed as incurred.

(h) Land use right

Land use right is recorded at cost less accumulated amortization. Land use rights represent the prepayments for the use of the parcels of land in the PRC where the Company’s production facilities are located, and are charged to expense over their respective lease periods. According to the laws of the PRC, the government owns all of the land in the PRC. Companies or individuals are authorized to possess and use the land only through land use rights granted by the PRC government. Land use right is amortized using the straight-line method over the lease term of 43 to 50 years.

F-11

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(i) Impairment of long-lived assets

In accordance with FASB ASC Topic 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. If long-lived assets are to be disposed, depreciation is discontinued, if applicable, and the assets are reclassified as held for sale at the lower of their carrying amounts or fair values less costs to sell.

China Gerui has one and only operating entity, i.e., Henan Green, whose sole business is high-end cold-rolled steel processing. The company produces products by utilizing its facilities and equipment at one location in Zhengzhou, Henan Province, China. The company offers chromium-plating as value-add service to its customers but chromium-plating is an integral part of the whole production process of the Company rather than a stand-alone service. As a result, the Group determined that the impairment review is appropriately evaluated at the entity level. Based on the Group’s assessment, no impairment was recognized as of December 31, 2012 and 2011.

F-12

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(j) Fair value measurements

FASB ASC Topic 820, “Fair Value Measurement and Disclosures” defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. FASB ASC Topic 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2 - Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The Group’s financial instruments consist principally of cash, accounts receivables, accounts payable, land use right payable, term loans, notes payables and accrued liabilities. None of which are held for trading purposes. Pursuant to ASC 820, the fair value of the Group's cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Group believes that the carrying amounts of all of the Group's other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

F-13

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(k) Revenue recognition

The Group generates revenue primarily from sales of steel mill flat-rolled products.

The Group recognizes its revenue upon the transfer of finished products to customers upon shipment from the Group's facilities. The Group sets the final price for a product based on the management's final measurement of the weight and dimensions of the product and confirmation that the product meets the customer's specifications as agreed in the original customer's order. The Group grants a three-week period for customers to dispute product quality. Based on the Group’s assessment and past experiences, the rate of customer disputes are considered immaterial.

In the PRC, value added tax (“VAT”) of 17% on the invoice amount is collected with respect to the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Group; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the tax authorities.

(l) Income taxes

The Group accounts for income taxes under FASB ASC Topic 740 "Income Taxes". Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be effective when the differences are expected to reverse.

Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of income in the period that includes the enactment date.

The Group adopted FASB ASC Topic 740, "Income Taxes", which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken in the tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

The Group recognizes interest and penalty related to income tax matters as income tax expense. As of December 31, 2012 and 2011, there was no penalty or interest recognized as income tax expenses.

(m) Commitments and contingencies

In the normal course of business, the Group is subject to contingencies, including legal proceedings and claims arising out of the normal course of businesses that relate to a wide range of matters, including among others, product liability. The Group records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments including past history, scientific evidence and the specifics of each matter. A determination of the amount of reserves and disclosures required, if any, for these contingencies are made after considerable analysis of each individual issue. The Group accrues for contingent liabilities when an assessment of the risk of loss is probable and can be reasonably estimated. The Group discloses contingent liabilities when the risk of loss is reasonably possible or probable. (See Note 22)

F-14

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(n) Share-based compensation expense

The Company accounts for share-based compensation issued to its directors and its officers using the fair value based methodology in accordance with relevant accounting guidance. Compensation cost related to restricted common shares issued to the Company's directors and officers are measured at its estimated fair value at the grant date, and is amortized and expensed over the vesting period on a straight-line basis.

(o) Earnings per share

Basic earnings per share are computed on the basis of the weighted-average number of shares of our common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted-average number of shares of our common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury method. As of December 31, 2012, the Company had a total of 144,000 warrants outstanding which were granted to its underwriter during November 2009 in connection with the sale of 4,800,000 ordinary shares. The warrants may be exercised on or after August 9, 2010 and until November 9, 2014. As of December 31, 2012, all such warrants are deemed to be anti-dilutive since their exercise price is higher than the fair value the Company's common stock.

The following table sets forth the computation of basic and diluted net income per common share:

	For the years ended
	2012		2011		2010
Net income	$	26,133,088	$	57,620,552	$	47,083,424
Weighted average outstanding shares of common stock		58,543,076		56,297,652		43,891,670
Dilutive effect of Warrants		-		-		2,584,713
Dilutive effect of Unit Purchase Option granted to underwriters		-		-		179,338
Diluted weighted average outstanding shares		58,543,076		56,297,652		46,655,721
Earnings per common stock:
Basic	$	0.45	$	1.02	$	1.07
Diluted	$	0.45	$	1.02	$	1.01

(p) Segment information

FASB ASC Topic 280 "Segment reporting" establishes standards for reporting information on operating segments in interim and annual financial statements. The Group has only one segment, all of the Group's operations and customers are in the PRC and all income are derived from the sales of steel mill flat-rolled products. Accordingly, no geographic information is presented.

F-15

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(q) Economic and political risks

The Group's operations are conducted in the PRC. Accordingly, the Group's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Group's operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Group's results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances aboard, and rates and methods of taxation, among other things.

(r) Recently issued accounting standards not yet adopted

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's financial condition, results of operations, or disclosures.

3. CASH

Cash represents cash in bank and cash on hand. Cash as of December 31, 2012 and 2011 consists of the following:

	2012			2011
Bank balances and cash (a)	$	390,646,863		$	364,731,170
Less: Restricted cash (b)		(145,413,726	)		(118,130,253	)
Less: Certificates of deposit (c )		(16,372,128	)		-
	$	228,861,009		$	246,600,917
Non-current portion
Certificates of deposit (c )	$	3,210,221		$	3,177,679

(a) Bank balances and cash

Unrestricted cash as of December 31, 2012 and 2011 was $228,861,009 and $246,600,917, respectively. As of December 31, 2012 and 2011, unrestricted cash of $221,014,759 and $234,778,502 was held respectively, in Renminbi and USD on deposit with banks located in the PRC. Renminbi is not a freely convertible currency and the remittance of funds out of the PRC is subject to the exchange restrictions imposed by the PRC government.

(b) Restricted cash

As of December 31, 2012 and 2011 the Group's cash amounting to $145,413,726 and $118,130,253 respectively, were restricted and deposited in certain banks as security for notes payable to the banks.

F-16

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

3. CASH (…/Cont’d)

(c) Certificates of deposit

Current portion:

As of December 31, 2012, six of the Certificates of deposit were held in Renminbi on deposit with a bank located in the PRC. The annual interest rate is 2.8% and 3.08%. The Certificates of deposit mature from February, 2013 to May, 2013.

Non-current portion:

As of December 31, 2012, the Certificates of deposit were held in Renminbi on deposit with a bank located in the PRC. The annual interest rate is 5%. The Certificates of deposit matures on December 12, 2014.

As of December 31, 2012, cash is classified by geographical areas is set out as follows:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2012
Hong Kong	$	5,917,837	$	-	$	-	$	5,917,837
United States		1,928,413		-		-		1,928,413
The PRC		221,014,759		145,413,726		19,582,349		386,010,834
	$	228,861,009	$	145,413,726	$	19,582,349	$	393,857,084

As of December 31, 2011, cash is classified by geographical areas is set out as follows:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2011
Hong Kong	$	8,339,234	$	-	$	-	$	8,339,234
United States		3,483,181		-		-		3,483,181
The PRC		234,778,502		118,130,253		3,177,679		356,086,434
	$	246,600,917	$	118,130,253	$	3,177,679	$	367,908,849

Maximum exposure to credit risk:

As of December 31, 2012, cash is denominated in the following currencies:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2012
USD	$	7,906,574	$	-	$	-	$	7,906,574
RMB (Current)		220,942,109		145,413,726		16,372,128		382,727,963
RMB (Non-current)		-		-		3,210,221		3,210,221
HKD		12,326		-		-		12,326
	$	228,861,009	$	145,413,726	$	19,582,349	$	393,857,084

F-17

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

3. CASH (…/Cont’d)

As of December 31, 2011, cash is denominated in the following currencies:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2011
USD	$	11,821,253	$	-	$	-	$	11,821,253
RMB		234,778,502		118,130,253		3,177,679		356,086,434
HKD		1,162		-		-		1,162
	$	246,600,917	$	118,130,253	$	3,177,679	$	367,908,849

4. ACCOUNTS RECEIVABLE

The Group performs ongoing credit evaluations of its customers' financial conditions. The Group generally encourages its customers to use its products and settle the outstanding balance within credit terms. As of December 31, 2012 and 2011, the provision on accumulated allowance for doubtful accounts was $125,993 and $124,715 respectively.

5. INVENTORIES

Inventories as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Raw materials	$	7,865,191	$	10,967,758
Work-in-process		3,491,181		3,007,200
Finished goods		11,406,173		10,488,184
	$	22,762,545	$	24,463,142

An impairment provision of $0.48 million has been made in 2012 owing to the decline in steel market price.

6. PREPAID PURCHASES

Prepaid purchases represent amounts prepaid to suppliers for the purchases of raw materials and accessories.

F-18

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

7. OTHER RECEIVABLES

Other receivables as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Advances to staff	$	211,671	$	254,229
Loan advanced to unrelated third parties		796,818		2,198,359
Loan advanced to a related company		318,332		-
Standby guarantee fund		530,489		-
Others		412,763		398,013
	$	2,270,073	$	2,850,601
Non-current portion (a)	$	3,039,835	$	3,499,083

Other receivables represent advances to staff and petty cash to department staff for daily expenditures. These amounts are interest free and with no fixed repayment terms.

As of December 31, 2012, $318,332 represented loan to a related company, Zhengzhou No. 2 Iron and Steel Company Limited. There was no agreement signed with the related party and no interest income was received.

As of December 31, 2012, $796,818 represented loans to unrelated third parties. There were no agreement signed with the third parties and the funds are non-interest bearing. The directors of the Group believe the outstanding balance is recoverable and that no allowance is considered necessary.

Included in other receivables is $530,489 of fund held by a unrelated third party to provide a standby guarantee for Henan Green to obtain additional bank loans. There was no agreement signed with the third party and no interest income was received.

(a) As of December 31, 2012 and 2011, $3,039,835 and $3,499,083 respectively, represented fund held by a unrelated third party to provide a standby guarantee for Henan Green to obtain additional bank loans. There was no agreement signed with the third party and the fund is non-interest bearing.

F-19

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of December 31, 2012 and 2011 consist of the following:

	2012			2011
Buildings	$	24,976,660		$	24,781,774
Leasehold land improvement		22,102			21,878
Machinery and equipment		106,179,264			104,318,990
Vehicles		3,216,660			3,261,984
Office equipment		419,456			387,815
Construction in progress		34,969,529			14,696,770
		169,783,671			147,469,211
Less: Accumulated depreciation		(35,673,014	)		(24,773,965	)
	$	134,110,657		$	122,695,246

During the year, none of the Company's plant was transferred to fixed assets from Construction in progress.

Depreciation expense for the years ended December 31, 2012, 2011 and 2010 was $10,899,049, $7,994,638 and $3,149,314 respectively.

Construction in progress consists of the construction of a plant and production lines on 300 acres of land and the improvement project on the 300,000 tons production lines and plant facilities and the staff quarters project. The total construction in progress as at December 31, 2012 and 2011 was $34,969,529 and $14,696,770 respectively.

	Balance at 2012		Estimated cost to complete as of December 31, 2013		Estimated time to complete
Production lines	$	15,080,014	$	168,536	June, 2013
Plant		6,983,931		6,142,664	April, 2013
Staff quarters		12,905,584		6,484,153	October, 2013
	$	34,969,529	$	12,795,353

The Company's subsidiary, Henan Green, signed an agreement to construct addition of the new laminated steel production line. The new production line is subject to further testing and technical upgrades until the second quarter of 2013 when official production will be launched. Plant includes the decoration expenses incurred for the new plant and electricity system installation. It is expected to be completed before April 2013. The Company improved the staffs' benefits and constructed a staff quarter for the experience staffs and their family to live, it is estimated to be completed before year-ended.

No depreciation has been provided for construction in progress.

F-20

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

9. LAND USE RIGHT

Land use right as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Land use right, net	$	13,625,738	$	13,807,056

Land use right represents the value of land approved to the Company for industrial production purpose by the local government in Zhengzhou, People's Republic of China. The right will expire between June 30, 2053 to June 30, 2054 for the land with 58.6 acres and 50 acres respectively. Land use right payable for the 58.6 acres as of December 31, 2012 and 2011 was $1,419,314 and $1,404,926 respectively.

The Company acquired the land use right of 58.6 acres in February 2010. Although there is no payment schedule to settle the outstanding amount of $1,419,314 until the Company receives notification from the local government, the Company expects to fully settle the outstanding amount within 12 months.

Land use right is amortized using the straight-line method over the lease term of 43 to 50 years. The amortization expense for the years ended December 31, 2012, 2011 and 2010 were $330,244, $322,638 and $259,438 respectively. The total future amortization is as follows:

December 31,
2013	$	333,897
2014		333,897
2015		333,897
2016		333,897
2017		333,897
Over 5 years		11,956,253
	$	13,625,738

10. DEPOSIT ON ACQUISITION OF FUTURE LAND USE RIGHT

Deposit on acquisition of future land use right as of December 31, 2012 and December 31, 2011 amounted to $24,076,660 and $12,710,719 respectively.

The Company’s related party, Zhengzhou No. 2 Iron and Steel Company Limited ("Zhengzhou Company") owns a land use right totaling 24.94 acres. The Company's subsidiary, Henan Green, currently leases a part of the land use rights for 6.69 acres from Zhengzhou Company which was the former owner of Henan Green. The Company's existing production lines and warehouses are located on this parcel of land. For operation risk mitigating purposes, the Company has started the process of transferring the title of the land use right for the 24.94 acres from Zhengzhou Company.

On February 26, 2013, Henan Green Complex Materials Co., Ltd. ("Henan Green"), the indirectly wholly owned subsidiary of the Company, entered into an equity/asset transfer agreement (“the "Equity Transfer Agreement") with the Zhengzhou Company pursuant to which Henan Green acquired 100% ownership of Zhengzhou Company.

F-21

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)   

10. DEPOSIT ON ACQUISITION OF FUTURE LAND USE RIGHT (…/Cont’d)

To facilitate Zhengzhou Company's acquisition, Henan Green prepaid $24,076,660 for the deposit on acquisition of future land use right which included payments of $11,235,775 directly to two unrelated companies to settle the loans on behalf of Zhengzhou Company and $12,840,885 for the deposit on acquisition of future land use right as of December 31, 2012. The total consideration to be paid is $43.6 million (exchange rate at June 30, 2013). The payment of acquisition was fully settled as at June 30, 2013 but the share transfer of Zhengzhou Steel and the land use right transfer are still in process.

11. NOTES PAYABLE

Notes payable as of December 31, 2012 and 2011 consist of the following:

	2012			2011
Classified by financial institutions:
China Citic Bank	$	35,312,435		$	42,580,912
Bank of Zhengzhou		6,420,443			9,533,040
Minsheng Bank of China		19,261,328			24,229,810
Guangdong Development Bank		22,471,549			14,299,560
Shanghai Pudong Development Bank		25,681,771			15,888,400
China Merchants Bank		11,235,775			16,523,936
China Everbright Bank		27,286,881			19,066,080
Bank of Luoyang		43,337,988			24,627,020
Bank of Communications		22,792,572			12,710,720
Bank of Pingdingshan		32,102,213			25,421,438
Bank of Xuchan		2,407,666			-
Commercial bank of Kaifeng		4,815,332			-
Huaxia Bank		1,605,111			-
Ping An Bank		4,815,331			-
	$	259,546,395		$	204,880,916
Additional information:
Maximum balance outstanding during the year	$	309,304,826		$	204,880,916
Interest expense	$	4,701,767		$	3,342,011
Finance charge per contract		0.05%-0.15	%		0.05%-0.5	%
Weighted average interest rate		0.69	%		1.29	%

F-22

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

11. NOTES PAYABLE (…/Cont’d)

All notes payable are secured by corresponding restricted cash. The range of collateral ranges from 10% to 100% of such notes. When the restricted cash is not sufficient to secure the note, inventories, Henan Green's assets or guarantees by Henan Green's director or other third parties are further requested. As of December 31, 2012 and 2011, the Group's cash of $145,413,726 and $118,130,253 respectively were restricted for such purpose. All the notes payable have terms of six months. Local PRC banks had certain covenants on the Company’s subsidiary, Henan Green, which required the Company to notify the banks if the Company was not in compliance. The Company was not in compliance with its financial covenants during 2012. The terms of the Notes prohibit making advances or providing guarantees to other unrelated parties without prior consent of the bank. The bank may call the Notes since the Company was not in compliance with its financial covenants. The Banks have not called the Notes or assessed a penalty on the Company for these violations. The Company does not believe that any penalty will be assessed by the Banks for these covenant violations.

12. TERM LOANS

In order to provide working capital for operations, the Group entered into the following short term loan agreements as of December 31, 2012 and 2011:

	2012			2011
Classified by financial institutions:
China Citic Bank	$	6,420,443		$	3,177,680
China Merchants Bank		9,630,664			7,944,200
Bank of Zhengzhou		7,704,531			7,626,431
Shanghai Pudong Development Bank		16,051,107			11,121,880
Bank of Luoyang		-			9,533,040
Bank of Xuchang		4,815,332			4,766,520
China Everbright Bank		1,605,111			-
Commercial Bank of Kaifeng		3,210,221			-
Ping An Bank		8,025,553			-
	$	57,462,962		$	44,169,751
Additional information:
Maximum balance outstanding during the year	$	62,278,294		$	44,884,729
Interest expense	$	3,525,936		$	2,912,292
Range of interest rate		0.465% - 1.205	%		0.347% - 0.868	%
Weighted average interest rate		3.29	%		3.27	%

All term loans are fixed term loans with a period of 12 months or less. Local PRC banks had imposed covenant on the Company’s subsidiary, Henan Green. For those loan facilities obtained from banks, all these terms loans are either guaranteed and secured by Henan Green's assets, including its machinery, land use right and inventories, or guaranteed and secured by a related party, Zhengzhou Company's land and plant properties, or guaranteed by Henan Green’s director or other third parties. The Company was not in compliance with its financial covenants during 2012. The terms of the bank loans prohibit making advances or providing guarantees to other unrelated parties without prior consent of the bank. The bank may call the loans since the Company was not in compliance with its financial covenants. The Banks have not called the loans or assessed a penalty on the Company for these violations. The Company does not believe that any penalty will be assessed by the Banks for these covenant violations.

F-23

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

12. TERM LOANS (…/Cont’d)

A summary of the principal payments for the outstanding term loans during the following fiscal year is as follows:

			Principal payment		Total outstanding
Name of bank	Collateral	Term of loans	due during 2012		loan amount
China Citic Bank	Secured by Henan Green's assets	August 21, 2012 to March 16, 2013	$	3,210,221	$	3,210,221
China Citic Bank	Secured by Henan Green's assets	December 7, 2012 to July 7, 2013		1,605,111		1,605,111
China Citic Bank	Secured by Henan Green's assets	December 19, 2012 to July 19, 2013		1,605,111		1,605,111
China Merchants Bank	Guaranteed by third party, Mingwang Lu and Yi Lu	August 31, 2012 to August 31, 2013		4,815,332		4,815,332
China Merchants Bank	Guaranteed by third party, Mingwang Lu and Yi Lu	September 10, 2012 to September 10, 2013		4,815,332		4,815,332
Bank of Zhengzhou	Guaranteed by third party	August 31, 2012 to August 31, 2013		4,815,332		4,815,332
Bank of Zhengzhou	Secured by Henan Green's bank deposit	December 12, 2012 to December 12, 2013		2,889,199		2,889,199
Shanghai Pudong Development Bank	Guaranteed by third party, Mingwang Lu	February 1, 2012 to January 31, 2013		2,247,155		2,247,155
Shanghai Pudong Development Bank	Guaranteed by third party, Mingwang Lu	February 24, 2012 to February 23, 2013		2,568,177		2,568,177
Shanghai Pudong Development Bank	Secured by Henan Green's land, Mingwang Lu	March 16, 2012 to March 15, 2013		1,605,111		1,605,111
Shanghai Pudong Development Bank	Secured by Henan Green's land, Mingwang Lu	November 28, 2012 to November 27, 2013		4,815,332		4,815,332
Shanghai Pudong Development Bank	Guaranteed by third party, Mingwang Lu	November 27, 2012 to November 26, 2013		4,815,332		4,815,332
Ping An Bank	Guaranteed by third party	December 03, 2012 to December 03, 2013		8,025,553		8,025,553
Bank of Xuchang	Guaranteed by third party	April 27, 2012 to April 25, 2013		4,815,332		4,815,332
China Everbright Bank	Guaranteed by third party & Mingwang Lu and Yi Lu	July 20, 2012 to July 19, 2013		1,605,111		1,605,111
Commercial Bank of Kaifeng	Guaranteed by third party & Mingwang Lu	August 23, 2012 to August 22, 2013		3,210,221		3,210,221
			$	57,462,962	$	57,462,962

F-24

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

13. ACCRUED LIABILITIES AND OTHER PAYABLES

Accrued liabilities and other payables as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Accrued liabilities
Accrued expenses	$	3,185,415	$	4,019,395
Other tax payables		494,446		656,060
		3,679,861		4,675,455
Other payables
Loan advanced from unrelated third parties		1,685,366		79,442
Other payable for purchasing machinery and equipment		96,307		9,753,549
Temporary receipt for staff quarters		48,205		-
Others		308,321		767,570
		2,138,199		10,600,561
	$	5,818,060	$	15,276,016

Accrued expenses are mainly represent accrued staff benefits and accrued wages.

Other tax payables represent payables other than income tax which consist of value added tax and city maintenance and construction tax.

As of December 31, 2012 and 2011, $1,685,366 and $79,442 respectively, represented loans advanced from unrelated third parties. There were no agreement signed with the third parties and the loans are non-interest bearing.

Temporary receipt for staff quarters represent contribution of staff quarter installment in purchases of staff quarters by staffs. Management was considering to sell the staff quarters to individuals by changing the usage from industrial use to residential use.

14. STOCKHOLDERS’ EQUITY

(a) Restricted ordinary shares

On October 1, 2012, the Compensation Committee of the Board of Directors of the Company approved grants of restricted ordinary shares to certain officers and directors of the Company under the China Gerui Advanced Materials Group Limited 2010 Share Incentive Plan. Except for shares granted to Mr. Meng, the Company’s Chief Finance Officer which vested immediately upon granting, all shares granted will be vested on January 3, 2013 subject to the continuous service of the recipient through December 31, 2012 and the other terms and conditions of the grant.

F-25

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

14. STOCKHOLDERS’ EQUITY (…/Cont’d)

(a) Restricted ordinary shares (…/Cont’d)

The following grant was made in accordance with the terms of 2010 Share Incentive Plan for the year indicated.

Grant Date	Restricted Shares		Grant Price
October 1, 2012		2,100,000	$	1.78

The shares were valued at the closing price of the Company's common stock on grant date.

The compensation expense recognized is based on the market value of the Company's common stock on the date the restricted stock award is granted and is not adjusted in subsequent periods. The amount recognized is amortized over the vesting period. Compensation expense is included in general administration expense in the accompanying consolidated statement of income. The amount of compensation expense recognized is reflected in the table below for the years indicated

	2012		2011
Compensation expense	$	3,705,109	$	-

A summary of restricted stock activity under the 2010 share incentive plan for the year ended December 31, 2012 is as follows:

	Number of Shares			Weighted Average Grant Price and Fair Value
Non-vested, December 31, 2011		-			-
Shares granted		2,100,000			1.78
Vested shares		(400,000	)		1.78
Non-vested, December 31, 2012		1,700,000			1.78

The remaining shares 1,700,000 vested on January 1, 2013.

(b) Treasury Stock

On April 1, 2011, the Company's Board of Directors approved a board resolution and announced that the Company would repurchase its ordinary shares in the open market up to an aggregate of $10 million. From June to December, 2012 and from May to December, 2011, the Company repurchased 795,031 shares at a cost of $1,554,674 and 1,176,898 shares at a cost of $4,516,744 respectively.

A total of 1,710,098 shares have been cancelled in the fourth quarter of 2012. There was a total 261,831 shares remained as Treasury Stock as of December 31, 2012.

F-26

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

14. STOCKHOLDERS’ EQUITY (…/Cont’d)

(b) Treasury Stock (…/Cont’d)

	Total number of shares purchased			Average price paid per share		Total number of shares purchased as part of publicly Announced Plans or Programs		Amount Paid		Approximately Dollar value of shares that may yet be purchased under the Plans or Programs
										$	10,000,000
1 May 2011 - 31 May 2011		309,490			4.5990		309,490		1,423,340		8,576,660
1 June 2011 - 30 June 2011		470,783			3.3070		780,273		1,556,886		7,019,773
1 July 2011 - 31 July 2011		183,070			4.0321		963,343		738,154		6,281,619
1 August 2011 - 31 August 2011		117,280			3.8038		1,080,623		446,107		5,835,512
1 September 2011 - 31 September 2011		42,129			3.6860		1,122,752		155,289		5,680,223
1 December 2011 - 31 December 2011		54,146			3.6877		1,176,898		196,967		5,483,256
1 May 2012 - 31 May 2012		48,238			2.6422		1,225,136		127,455		5,355,801
1 June 2012 - 30 June 2012		197,965			2.2429		1,423,101		444,041		4,911,760
1 August 2012 - 31 August 2012		59,369			1.7733		1,482,470		105,277		4,806,483
1 September 2012 - 30 September 2012		227,628			2.0377		1,710,098		463,838		4,342,645
1 December 2012 - 31 December 2012		261,831			1.5814		1,971,929		414,063		3,928,582
		1,971,929							6,071,418
Less: Retirement of treasury stock		(1,710,098	)
		261,831

(c) Warrants

The Company also granted in connection with its November 2009 public offering the Underwriter Representative (and its designees) a warrant (the “Underwriter Representative Warrant”) for the purchase of an aggregate of 144,000 ordinary shares (the “Warrant Shares”) for an aggregate purchase price of $100.00. The Underwriter Representative Warrant may be exercised in full or part to purchase Warrant Shares at an initial exercise price of $6.00 per share.

A summary of all warrants outstanding as of December 31, 2012 and 2011 and actions relating thereto during the years then ended is presented below:

	2012			2011
Expected volatility		63.00	%		60.00	%
Expected term (in years)		1.9			2.9
Risk free rate		0.25	%		0.36	%

F-27

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

14. STOCKHOLDERS’ EQUITY (…/Cont’d

(c) Warrants (…/Cont’d)

A summary of all warrants outstanding as of December 31, 2012 is presented below:

	Warrants			Exercise Price		Terms
Balance as of December 31, 2010		15,191,108
Exercised		(13,294,775	)		5.00		-
Expired		(1,752,333	)
Balance as of December 31, 2011		144,000		$	6.00		2.9 years
Granted		-
Exercised		-
Expired		-
Outstanding as of December 31, 2012		144,000		$	6.00		1.9 years

(d) Retained Earnings

Retained earnings as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Retained earnings	$	151,890,125	$	128,896,723
Statutory surplus reserves		11,385,921		8,246,235
	$	163,276,046	$	137,142,958

In accordance with PRC Company Law, the Group is required to allocate at least 10% profit to the statutory surplus reserve. Appropriation to the statutory surplus reserve by the Group is based on profit arrived under PRC accounting standards for business enterprises for each year.

The profit arrived at must be set off against any accumulated losses sustained by the Group in prior years, before allocation is made to the statutory surplus reserve. Appropriation to the statutory surplus reserve must be made before distribution of dividends to shareholders. The appropriation is required until the statutory surplus reserve reaches 50% of the registered capital. This statutory surplus reserve is not distributable in the form of cash dividends.

As of December 31, 2012, the Group's subsidiary, Henan Green, allocated $3,139,686 which was the 10% of net profits of the year ended December 31, 2012 to the statutory surplus reserves.

F-28

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)  

14. STOCKHOLDERS’ EQUITY (…/Cont’d)

A supplemental information of the movement of statutory surplus reserves and registered capital of Henan Green as of December 31, 2012 and 2011 are as follow:

	Statutory  surplus		Registered		Percentage
	reserves		capital		reached
At December 31, 2011	$	8,246,235	$	83,603,944		10	%
Statutory surplus reserves transferred from net profits		3,139,686		-		14	%
At December 31, 2012	$	11,385,921	$	83,603,944

15. INCOME TAXES

All of the Company's income is generated in the PRC.

	For the years ended
	2012		2011		2010
Current income tax expense	$	11,897,173	$	21,961,627	$	15,937,143

The Group's income tax provision in respect of operations in PRC is calculated at the applicable tax rates on the estimated assessable profits for the year based on existing legislation, interpretations and practices in respect thereof. The standard tax rate applicable to the Group changed from 33% to 25%, effective on January 1, 2008.

A reconciliation of the expected income tax expense to the actual income tax expense for the years ended December 31, 2012, 2011 and 2010 are as follows:

	For the years ended
	2012		2011		2010
Income before tax	$	38,030,261	$	79,582,179	$	63,020,567
Expected PRC income tax expense at statutory tax rate of 25%		9,507,565		19,895,544		15,755,141
Income not subject to PRC tax		-		-		56,949
Depreciation allowance over-claimed in 2011		1,127,816		-		-
Non deductible tax expenses		1,261,792		2,066,083		125,053
Actual income tax expense	$	11,897,173	$	21,961,627	$	15,937,143

F-29

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)

15. INCOME TAXES (…/Cont’d)

The PRC tax system is subject to substantial uncertainties and has been subject to recently enacted changes, the interpretation and enforcement of which are also uncertain. There can be no assurance that changes in PRC tax laws or their interpretation or their application will not subject the Group to substantial PRC taxes in future.

The new PRC income tax law imposes a 10% withholding income tax, subject to reduction based on tax treaty where applicable, for dividends distributed by a foreign invested enterprise to its immediate holding company outside China (5% withholding income tax for dividends paid to HK companies). Such dividends were exempted from PRC tax under the previous income tax law and regulations. The foreign investment enterprises are subject to the withholding tax beginning January 1, 2008. All of the Group’s income is generated in the PRC, through Henan Green. The Company considers undistributed earnings of Henan Green as of December 31, 2012, to be permanently reinvested in the PRC. As a result, no deferred tax expense and deferred liability recorded for dividend withholding tax.

No deferred tax liability has been provided as the amount involved is immaterial. The Group has analyzed the tax positions taken or expected to be taken in its tax filings and has concluded it has no material liability related to uncertain tax positions.

For the years ended December 31, 2012, 2011 and 2010, there was no unrecognized tax benefit. Management does not anticipate any potential future adjustments in the next twelve months which would result in a material change to its financial tax position. As of December 31, 2012 and 2011, the Group did not accrue any interest and penalties.

16. SUNDRY INCOME

Sundry income for the years ended December 31, 2012, 2011 and 2010 consist of the following:

	For the years ended
	2012		2011		2010
Local government subsidies	$	158,755	$	449,786	$	227,797
Transferred from receipts in advance, accounts payable and other receivables		57,571		11,835		542
Subcontracting income		-		19,565		-
Gain on disposal of motor vehicles		63,876		-		-
Others		71,281		121,061		41,901
	$	351,483	$	602,247	$	270,240

During the years ended December 31, 2012, 2011 and 2010, the Group received special one time subsidies from local government of Zhengzhou, China amounting to $158,755 and $449,786 and $227,797 respectively for its advance technology in manufacturing precision steel mill flat-rolled products. The subsidy is not a continuing nature and depends on the local government's policy announced within a valid period.

F-30

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)

17. RELATED PARTY TRANSACTIONS

The Company’s subsidiary, Henan Green, entered into a rental agreement for land use right with Zhengzhou Company, the former owner of Henan Green, from January 1, 2008 to December 31, 2027. Mingwang Lu, the Company’s Chief Executive Officer and his family hold approximately 44% of shareholding of the Company and approximately 41% of shareholding of Zhengzhou Company. Rental paid to Zhengzhou Company for the years ended December 31, 2012, 2011 and 2010 were $12,867, $11,428 and $9,909 respectively.

On February 26, 2013, Henan Green Complex Materials Co., Ltd. ("Henan Green"), the indirectly wholly owned subsidiary of the Company, entered into an equity/asset transfer agreement (“the "Equity Transfer Agreement") with the Zhengzhou Company pursuant to which Henan Green acquired 100% ownership of Zhengzhou Company.

To facilitate Zhengzhou Company's acquisition, Henan Green prepaid $24,076,660 for the deposit on acquisition of future land use right which included to pay $11,235,775 to two unrelated companies to settle the loans on behalf of Zhengzhou Company and $12,840,885 for the deposit on acquisition of future land use right as of December 31, 2012.

18. SIGNIFICANT CONCENTRATIONS

Our credit risk is somewhat limited due to a relatively large customer base and its dispersion across geographic areas of the PRC. During the years ended December 31, 2012 ,2011 and 2010, the Company had no customer which accounted for 10% or more of total revenue. As of December 31, 2012, the Company had one customer which accounted for approximately 15% of total accounts receivable. As of December 31, 2011, the Company had one customer which accounted for approximately 12% of total accounts receivable. As of December 31, 2010, the Company had one customer which accounted for approximately 81% of total accounts receivable.

All of the Group's suppliers are located in the PRC. During the year ended December 31, 2012, the Company had three suppliers which each accounted for approximately 37%, 23% and 20% of total purchases, respectively. During the year ended December 31, 2011, the Company had three suppliers which each accounted for approximately 43%, 25% and 11% of total purchases, respectively. During the year ended December 31, 2010, the Company had three suppliers which each accounted for approximately 30%, 24% and 12% of total purchases, respectively. As of December 31, 2012, the Company had two suppliers which accounted for approximately 23% and 10%, respectively of total accounts payable. As of December 31, 2011, the Company had two suppliers which accounted for approximately 55% and 18%, respectively of total accounts payable. As of December 31, 2010, the Company had two suppliers which accounted for approximately 19% and 16%, respectively of total accounts payable.

F-31

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)

19 FOREIGN OPERATIONS

Operations

All of the Group’s operations are carried out and all of its assets are located in the PRC. Accordingly, the Group’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC. The Group’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.

Dividends and reserves

Under laws of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) cumulative prior years' losses, if any; (ii) allocations to the "Statutory Surplus Reserve" of at least 10% of net income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the registered capital of the Company’s subsidiary, Henan Green; (iii) allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to Henan Green's "Statutory Common Welfare Fund", which is established for the purpose of providing employee facilities and other collective benefits to employees in China; and (iv) allocations to any discretionary surplus reserve, if approved by equity stockholders.

20. OPERATING LEASE COMMITMENTS

Rental expense for obligations under operating leases (Leasehold and Reservoir rental) was $28,744, $26,938 and $24,701 for the years ended December 31, 2012, 2011 and 2010 respectively. As the leasehold agreement will be terminated in 1st quarter of 2013 after the acquisition of the future land use right, Zhengzhou Company, no operating lease payment was required for leasehold. The total future minimum lease payments under non-cancellable operating leases as of December 31, 2012 are payable as follows:

Years Ended December 31,	Reservoir rental
2013	$	16,051
2014		16,051
2015		16,051
2016		16,051
2017		16,051
Over five years		256,816
	$	337,071

F-32

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)

21. CONTINGENCIES AND COMMITMENTS

The Group had the following contingencies and commitments as of December 31, 2012:

Guarantee

On October 13, 2012, the Company's subsidiary, Henan Green, entered into a co-financial guarantee agreement with Henan Shaolin Auto Co., Ltd, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $32.1 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee is effective through December 3, 2015.

On October 9, 2012, the Company's subsidiary, Henan Green, entered into a co-financial guarantee agreement with Henan Liantong Aluminum Co. Ltd, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment of approximately of $16.1 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee is effective through August 28, 2013.

On November 4, 2012, the Company's subsidiary, Henan Green, entered into a co-financial guarantee agreement with Henan Xibao Metallurgy Materials Group Co. Ltd, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $48.2 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee is effective through December 31, 2013.

On November 4, 2012, the Company's subsidiary, Henan Green, entered into a co-financial guarantee agreement with Zhengzhou Panhong Commerce & Trade Co Ltd, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $16.1 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee is effective through October 26, 2013.

On December 6, 2012, the Company's subsidiary, Henan Green, entered into a co-financial guarantee agreement with Henan Xinye Textile Co., Ltd. (Xinye), a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $9.6 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee is effective through December 5, 2013.

On October 31, 2011, the Company's subsidiary, Henan Green, entered into a financial guarantee agreement with Zhengzhou Aluminum Industry Co., Ltd arranged by China Citic Bank. Under the agreement, Henan Green acting as a guarantor for Zhengzhou Aluminum Industry Co., Ltd. a non-related company. Henan Green is contingent as guarantor with maximum aggregate potential amount of future payment approximately $2.4 million, plus interest accrued, legal fee, disbursement and any other compensation expense accrued. The guarantee is effective through September 7, 2014.

On November 4, 2011, the Company's subsidiary, Henan Green, entered into a financial guarantee agreement with Do-Fluoride Chemicals Co., Ltd, a non-related company. Under the agreement, Do-Fluoride Chemicals Co., Ltd is contingent as a guarantor for Zhengzhou Aluminum Industry Co., Ltd with a maximum aggregate potential amount of future payment approximately of $4.0 million and Henan Green also agreed to guarantee the future payment of Zhengzhou Aluminum Industry Co., Ltd for Do-Fluoride Chemicals Co., Ltd. The guarantee is effective through November 3, 2013.

The Company believes that Zhengzhou Aluminum Industry Co. Ltd. has experienced financial difficulties in 2012 and may not be able to perform on either its payments to the bank or its guarantees. If Zhengzhou Aluminum Industry Co. Ltd is unable to repay its debt or satisfy's it's guarantee, the Company may be required to pay up to $6.4 million related to those debts. No provision has been made in these financial statements for these potential obligations as the Company has not been called upon to date to perform under its guarantee.

Legal proceedings or claims

As of December 31, 2012 the Group’s management has evaluated all such proceedings and claims, and determined that the Group was not subject to any loss contingencies either for legal proceedings or claims that would significantly affect the Company's financial condition. In addition, the management has not aware of any product liability claims arising as of December 31, 2012, and therefore, the Group has not recognized any product liability claims accrual.

F-33

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)

22. SUBSEQUENT EVENT

Acquisition of Future Land Use Right

On February 26, 2013, Henan Green Complex Materials Co., Ltd. ("Henan Green"), the indirectly wholly owned subsidiary of the Company, entered into an equity/asset transfer agreement (“the "Equity Transfer Agreement") with the Zhengzhou Company pursuant to which Henan Green acquired 100% ownership of Zhengzhou Company.

The business combination and related deposits in previous consolidated financial statements for the year ended December 31, 2012 dated April 30, 2013 have been re-characterized as an acquisition of future land use rights as the Company has determined that this presentation better reflects the substance of the transaction.. As a result, certain revisions were made to the notes to the consolidated financial statements which are reflected in Notes 10, 17, 22. In addition, the Company revised the consolidated balance sheet as of December 31, 2012 by reclassifying amounts totaling $24,076,660 previously reported as “Deposit on acquisition of business” to “Deposits on acquisition of future land use right” and revised certain cash flows from investing activities in the consolidated statement of cash flows for the year ended December 31, 2012 by reclassifying amounts totaling $11,112,875 from “Deposit payment to investing business” to “Payment of acquisition of future land use right.”

The following table summarizes the carryover of the historical cost of the land use right of Zhengzhou Company at the acquisition date.

Land use right	$	17,444,274
Cash consideration		43,630,631
Difference	$	26,186,357

100% of the above difference was recorded in related earnings as dividend paid because it was acquired from a related party.

Acquisition of future land use right at cost values which was translated at closing rate of June 30, 2013. Based on the independent appraisal report, no impairment was recognized as of December 31, 2012.

The Equity Transfer Agreement and the transactions contemplated thereby were approved by both the Company's Board of Directors and the Audit Committee of the Board, which consists of three independent directors.

F-34

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)

23. CONDENSED PARENT COMPANY FINANCIAL INFORMATION

The Company records its investment in subsidiaries under the equity method of accounting as prescribed in FASB ASC Topic 323, “Investments - Equity Method and Joint Ventures”. Such investment and long-term loans to subsidiaries are presented on the balance sheet as “Investments in subsidiaries” and the income of the subsidiaries is presented as “Equity in income of subsidiaries” on the statement of income.

These supplemental condensed parent company financial statements should be read in conjunction with the notes to the Company’s Consolidated Financial Statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

As of December 31, 2012, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except as separately disclosed in the Company’s Consolidated Financial Statements, if any.

CONDENSED BALANCE SHEETS

	2012			2011
Assets
Cash	$	7,645,949		$	11,621,907
Investments in subsidiaries		322,526,371			286,912,377
Total assets	$	330,172,320		$	298,534,284
Liabilities and Stockholders'' Equity
Current liabilities
Accrued liabilities and other payables	$	105,000		$	106,448
Total liabilities		105,000			106,448
Stockholders' Equity
Common stock		140,418,118			140,418,118
Additional paid in capital		4,978,698			6,930,944
Treasury stock		(414,063	)		(4,516,744	)
Retained earnings		163,276,046			137,142,958
Accumulated other comprehensive income		21,808,521			18,452,560
Total stockholders' equity		330,067,320			298,427,836
Total liabilities and stockholders' equity	$	330,172,320		$	298,534,284

F-35

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)

23. CONDENSED PARENT COMPANY FINANCIAL INFORMATION (…/Cont’d)

CONDENSED STATEMENT OF INCOME

	For the years ended
	2012			2011			2010
General and administrative expenses	$	(2,419,836	)	$	(9,439,791	)	$	(2,059,737	)
Equity income of subsidiaries		28,552,924			67,060,343			49,143,161
Net income	$	26,133,088		$	57,620,552		$	47,083,424

CONDENSED STATEMENT OF CASH FLOWS

	For the years ended
	2012			2011			2010
Net cash used in operating activities	$	(2,421,284	)	$	(7,887,611	)	$	(3,511,915	)
Net cash used in investing activities		-			(48,000,000	)		(25,500,000	)
Net cash (used in)/provided by financing activities		(1,554,674	)		61,957,131			28,682,613
Cash as of January 1		11,621,907			5,552,387			5,881,689
Cash as of December 31	$	7,645,949		$	11,621,907		$	5,552,387

F-36

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(IN US DOLLARS)

24. QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

	2012
	March 31			June 30			September 30			December 31
Revenue:
Steel mill flat-rolled products	$	68,689,567		$	76,783,963		$	56,123,028		$	63,889,524
Cost of revenue		(47,196,745	)		(56,975,825	)		(47,331,341	)		(57,037,147	)
Gross Profit		21,492,822			19,808,138			8,791,687			6,852,377
Operating expenses:
General and administrative expenses		(2,369,361	)		(2,511,170	)		(2,548,672	)		(5,738,929	)
Selling and marketing expenses		(107,086	)		(506,711	)		(374,818	)		(457,768	)
Warrant compensation expenses		-			-			-			-
Total operating expenses		(2,476,447	)		(3,017,881	)		(2,923,490	)		(6,196,697	)
Operating income		19,016,375			16,790,257			5,868,197			655,680
Other income (expenses)
Interest income		626,251			624,578			1,233,910			1,092,002
Interest expenses		(1,030,917	)		(2,028,459	)		(3,105,412	)		(2,063,684	)
Sundry income		158,737			24,911			21,310			146,525
		18,770,446			15,411,287			4,018,005			(169,477	)
Income tax expense		(4,759,838	)		(5,136,010	)		(1,636,419	)		(364,906	)
Net income attributable to common stockholders	$	14,010,608		$	10,275,277		$	2,381,586		$	(534,383	)
Net income per share
- Basic	$	0.24		$	0.18		$	0.04		$	(0.01	)
- Diluted	$	0.24		$	0.18		$	0.04		$	(0.01	)
Weighted average common shares outstanding
- Basic		58,251,680			58,203,179			57,935,604			59,769,786
- Diluted		58,251,680			58,203,179			57,935,604			59,769,786

F-37

EXHIBIT INDEX

Exhibit No.	Description
1.1	Amended and Restated Memorandum and Articles of Association, adopted on March 17, 2009 [incorporated by reference to Exhibit 3.1 to the registrant’s Amendment No. 1 to Form 20-F filed on March 23, 2009]
4.1	Summary of English Translation of Equity/Asset Transfer Agreement, dated February 26, 2013, by and among Henan Green Complex Materials Co., Ltd., Zhengzhou No. 2 Iron and Steel Company Limited and its shareholders (English Translation) [incorporated by reference to Exhibit 4.1 to the registrant’s Form 20-F filed on April 30, 2013]
4.2	Form of Securities Purchase Agreement, by and among the registrant and the purchasers named therein, dated June 4, 2010 [incorporated by reference to Exhibit 10.1 to the registrant’s Report on Form 6-K filed on June 7, 2010]
4.3	Form of Registration Rights Agreement, by and among the registrant and the purchasers named therein, dated June 4, 2010 [incorporated by reference to Exhibit 4.1 to the registrant’s Report on Form 6-K filed on June 7, 2010]
4.4	China Gerui Advanced Materials Group Limited 2010 Share Incentive Plan [incorporated by reference to Exhibit 10.1 to the registrant’s Report on Form 6-K filed on November 16, 2010]
4.5	Form of Share Option Agreement for Employees relating to China Gerui Advanced Materials Group Limited 2010 Share Incentive Plan [incorporated by reference to Exhibit 10.2 to the registrant’s Report on Form 6-K filed on November 16, 2010]
4.6	Form of Share Option Agreement for Directors relating to China Gerui Advanced Materials Group Limited 2010 Share Incentive Plan [incorporated by reference to Exhibit 10.3 to the registrant’s Report on Form 6-K filed on November 16, 2010]
4.7	Form of Restricted Share Award Agreement relating to China Gerui Advanced Materials Group Limited 2010 Share Incentive Plan [incorporated by reference to Exhibit 10.4 to the registrant’s Report on Form 6-K filed on November 16, 2010]
8.1*	List of the registrant’s subsidiaries
11.1	Code of Ethics [incorporated by reference to Exhibit 14.1 to the registrant’s Annual Report on Form 20-F filed on July 15, 2009]
12.1*	Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)
12.2*	Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)
13.1*	Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2*	Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1*	Consent of Independent Registered Public Accounting Firm
101*	Interactive data files pursuant to Rule 405 of Regulation S-T (furnished herewith)

*Filed herewith.

EX-8.1

Exhibit 8.1

LIST OF SUBSIDIARIES

Name of Subsidiary	Jurisdiction of Incorporation or Organization	Percentage of Ownership
Wealth Rainbow Development Limited	Hong Kong		100	%
Henan Green Complex Materials Co., Ltd.	People’s Republic of China		100	%

EX-12.1

Exhibit 12.1

CERTIFICATIONS

I, Mingwang Lu, certify that:

1. I have reviewed this annual report on Form 20-F of China Gerui Advanced Materials Group Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: November 21, 2013

/s/ Mingwang Lu

Mingwang Lu

Chief Executive Officer

EX-12.2

Exhibit 12.2

CERTIFICATIONS

I, Edward Meng, certify that:

1. I have reviewed this annual report on Form 20-F of China Gerui Advanced Materials Group Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: November 21, 2013

/s/ Edward Meng

Edward Meng

Chief Financial Officer

EX-13.1

Exhibit 13.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Mingwang Lu, the Chief Executive Officer of CHINA GERUI ADVANCED MATERIALS GROUP LIMITED (the “Company”), DOES HEREBY CERTIFY that:

1.     The Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2012 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.     Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has executed this statement this 21^st day of November, 2013.

/s/ Mingwang Lu

Mingwang Lu

Chief Executive Officer

(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to China Gerui Advanced Materials Group Limited and will be retained by China Gerui Advanced Materials Group Limited and furnished to the Securities and Exchange Commission or its staff upon request.

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-13.2

Exhibit 13.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Edward Meng, the Chief Financial Officer of CHINA GERUI ADVANCED MATERIALS GROUP LIMITED (the “Company”), DOES HEREBY CERTIFY that:

1.     The Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2012 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.     Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has executed this statement this 21st day of November, 2013.

/s/ Edward Meng

Edward Meng

Chief Financial Officer

(Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to China Gerui Advanced Materials Group Limited and will be retained by China Gerui Advanced Materials Group Limited and furnished to the Securities and Exchange Commission or its staff upon request.

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-15.1

Exhibit 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements No. 333-172502 on Form S-8 and No. 333-167841, 333-170230 on Form F-3 of our reports dated April 30, 2013, relating to the consolidated financial statements of China Gerui Advanced Materials Group Limited (the “Company”) and the effectiveness of the Company’s internal control over financial reporting, appearing in this Amendment No. 1 to Annual Report on Form 20-F of the Company for the year ended December 31, 2012.

/s/ UHY VOCATION HK CPA LIMITED

Certified Public Accountants

Hong Kong, the People’s Republic of China,

November 21, 2013

XML

FOREIGN OPERATIONS (Details)	12 Months Ended
	Dec. 31, 2012
Foreign Operations [Line Items]
Minimum appropriation of profits into statutory reserve	10.00%
Required percentage of registered capital that much be reached in statutory reserves	50.00%
Henan Green [Member]
Foreign Operations [Line Items]
Required percentage of registered capital that much be reached in statutory reserves	50.00%
Henan Green [Member] | Minimum [Member]
Foreign Operations [Line Items]
Percentage of income after tax required for the Statutory Common Welfare Fund	5.00%
Henan Green [Member] | Maximum [Member]
Foreign Operations [Line Items]
Percentage of income after tax required for the Statutory Common Welfare Fund	10.00%

XML

STOCKHOLDERS' EQUITY (Outstanding Warrants - Assumptions) (Details) (Warrant [Member])	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Warrant [Member]
Stockholders Equity Note [Line Items]
Expected volatility	63.00%	60.00%
Expected term (in years)	1 year 10 months 24 days	2 years 10 months 24 days
Risk free rate	0.25%	0.36%

XML

STOCKHOLDERS' EQUITY (Retained Earnings) (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
STOCKHOLDERS' EQUITY [Abstract]
Retained earnings	$ 151,890,125	$ 128,896,723
Statutory surplus reserves	11,385,921	8,246,235
Retained Earnings (Accumulated Deficit), Total	$ 163,276,046	$ 137,142,958

XML

CONDENSED PARENT COMPANY FINANCIAL INFORMATION (Cash Flows) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities	$ (2,101,972)	$ 56,248,127	$ 36,477,650
Net cash used in investing activities	(80,774,292)	(102,823,548)	(84,118,759)
Net cash (used in)/provided by financing activities	63,138,134	165,974,075	84,004,457
Cash as of January 1	246,600,917	119,477,298	79,607,369
Cash as of December 31	228,861,009	246,600,917	119,477,298
Parent Company [Member]
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities	(2,421,284)	(7,887,611)	(3,511,915)
Net cash used in investing activities		(48,000,000)	(25,500,000)
Net cash (used in)/provided by financing activities	(1,554,674)	61,957,131	28,682,613
Cash as of January 1	11,621,907	5,552,387	5,881,689
Cash as of December 31	$ 7,645,949	$ 11,621,907	$ 5,552,387

XML

LAND USE RIGHT

12 Months Ended

Dec. 31, 2012

LAND USE RIGHT [Abstract]

LAND USE RIGHT

9. LAND USE RIGHT

Land use right as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Land use right, net	$	13,625,738	$	13,807,056

Land use right represents the value of land approved to the Company for industrial production purpose by the local government in Zhengzhou, People's Republic of China. The right will expire between June 30, 2053 to June 30, 2054 for the land with 58.6 acres and 50 acres respectively. Land use right payable for the 58.6 acres as of December 31, 2012 and 2011 was $1,419,314 and $1,404,926 respectively.

The Company acquired the land use right of 58.6 acres in February 2010. Although there is no payment schedule to settle the outstanding amount of $1,419,314 until the Company receives notification from the local government, the Company expects to fully settle the outstanding amount within 12 months.

Land use right is amortized using the straight-line method over the lease term of 43 to 50 years. The amortization expense for the years ended December 31, 2012, 2011 and 2010 were $330,244, $322,638 and $259,438 respectively. The total future amortization is as follows:

December 31,
2013	$	333,897
2014		333,897
2015		333,897
2016		333,897
2017		333,897
Over 5 years		11,956,253
	$	13,625,738

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Property, Plant, and Equipment) (Details)	12 Months Ended
	Dec. 31, 2012
Leasehold Land Improvement [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	46 years 6 months
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Furniture, Fixtures and Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Minimum [Member] | Building [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years
Minimum [Member] | Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Maximum [Member] | Building [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	20 years
Maximum [Member] | Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	20 years

XML

CONSOLIDATED STATEMENTS OF INCOME (USD $)	3 Months Ended				12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Revenue	$ 63,889,524	$ 56,123,028	$ 76,783,963	$ 68,689,567	$ 265,486,082	$ 341,778,295	$ 253,866,337
Cost of revenue	(57,037,147)	(47,331,341)	(56,975,825)	(47,196,745)	(208,541,058)	(240,199,678)	(177,869,648)
Gross Profit	6,852,377	8,791,687	19,808,138	21,492,822	56,945,024	101,578,617	75,996,689
Operating expenses:
General and administrative expenses	(5,738,929)	(2,548,672)	(2,511,170)	(2,369,361)	(13,168,132)	(10,707,418)	(7,795,722)
Selling and marketing expenses	(457,768)	(374,818)	(506,711)	(107,086)	(1,446,383)	(1,634,232)	(1,251,091)
Warrant compensation expenses						(5,700,000)
Total operating expenses	(6,196,697)	(2,923,490)	(3,017,881)	(2,476,447)	(14,614,515)	(18,041,650)	(9,046,813)
Operating income	655,680	5,868,197	16,790,257	19,016,375	42,330,509	83,536,967	66,949,876
Other income and (expense):
Interest income	1,092,002	1,233,910	624,578	626,251	3,576,741	1,913,091	1,087,178
Interest expenses	(2,063,684)	(3,105,412)	(2,028,459)	(1,030,917)	(8,228,472)	(6,470,126)	(5,286,727)
Sundry income	146,525	21,310	24,911	158,737	351,483	602,247	270,240
Income before income taxes	(169,477)	4,018,005	15,411,287	18,770,446	38,030,261	79,582,179	63,020,567
Income tax expense	(364,906)	(1,636,419)	(5,136,010)	(4,759,838)	(11,897,173)	(21,961,627)	(15,937,143)
Net income	$ (534,383)	$ 2,381,586	$ 10,275,277	$ 14,010,608	$ 26,133,088	$ 57,620,552	$ 47,083,424
Earnings per share
- Basic	$ (0.01)	$ 0.04	$ 0.18	$ 0.24	$ 0.45	$ 1.02	$ 1.07
- Diluted	$ (0.01)	$ 0.04	$ 0.18	$ 0.24	$ 0.45	$ 1.02	$ 1.01
Weighted average common shares outstanding
- Basic	59,769,786	57,935,604	58,203,179	58,251,680	58,543,076	56,297,652	43,891,670
- Diluted	59,769,786	57,935,604	58,203,179	58,251,680	58,543,076	56,297,652	46,655,721

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2012

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

The accompanying audited consolidated financial statements and related notes have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP). The preparation of the consolidated financial statements in accordance with US GAAP requires management of the Group to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include the recoverability of the carrying amount and the estimated useful lives of long-lived assets; valuation allowances for receivables, realizable values for inventories. Actual results could differ from those estimates.

The consolidated financial statements include all accounts of the Company and its wholly-owned subsidiaries. All material inter-company balances and transactions have been eliminated.

(b)     Foreign currency translation

The Group uses United States dollars ("U.S. Dollar" or "US$" or "$") for financial reporting purposes. The Company maintains its books and records in its respective functional currency, Chinese Renminbi ("RMB") and Hong Kong dollars ("HK$"), being the lawful currency in the PRC and Hong Kong, respectively. Assets and liabilities of the subsidiaries are translated from RMB or HK$ into U.S. Dollars using the applicable exchange rates prevailing at the balance sheet date. Items on the statements of income and comprehensive income and cash flows are translated at average exchange rates during the reporting period. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the Company's financial statements are recorded as accumulated other comprehensive income included in the stockholders' equity section of the balance sheets. The exchange rates used to translate amounts in RMB and HK$ into U.S. Dollars for the purposes of preparing the consolidated financial statements are as follows:

	2012	2011	2010
Balance sheet items, except for equity accounts	RMB6.2301=$1	RMB6.2939=$1	RMB6.6000=$1
	HK$7.7507=$1	HK$7.7663=$1	HK$7.7810=$1

	For the years ended
	2012	2011	2010
Items in statements of income and cash flows	RMB6.2990=$1	RMB6.4475=$1	RMB6.7604=$1
	HK$7.7556=$1	HK$7.7793=$1	HK$7.7700=$1

(c) Cash

Cash represents cash in banks and cash on hand.

The Group considers all highly liquid investments with original maturities of three months or less to be cash. The Group maintains bank accounts in HKSAR and Mainland China, PRC and the United States.

(d) Accounts receivable

Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts sales returns and trade discounts. The allowance for doubtful accounts is the Group's best estimate of the amount of probable credit losses in the Group's existing accounts receivable. Management determines the allowance based on historical write-off experience, customer specific facts and economic conditions. The Group has historically been able to collect all of its receivable balances, and accordingly, 10% allowance has been provided for specific doubtful accounts.

Outstanding account balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Group does not have any off-balance-sheet credit exposure to its customers.

(e) Notes receivable

As of December 31, 2012, the Company received $433,379 in notes receivable in full payment of outstanding accounts receivable. The notes mature in 6 months. All notes are non-interest bearing. In management's opinion, the remaining balance is fully collectible.

(f) Inventories

Inventories are stated at the lower of cost or market and consist primarily of flat rolled steel. Cost is determined using the weighted average cost method. In the case of work in process and finished goods, such costs comprise of direct materials, direct labor and an appropriate proportion of overheads.

(g) Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to general and administrative expenses as incurred. Depreciation of property, plant and equipment is computed by the straight-line method over the assets estimated useful lives ranging from five to fifty years. Building improvements, if any, are amortized on a straight-line basis over the estimated useful life.

Upon sale or retirement of property, plant and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations.

Construction in progress represents the costs of property, plant and equipment under construction or installation. Depreciation commences when the asset is placed in service. The accumulated costs are reclassified as property, plant and equipment when installation or construction is completed. Government subsidies received reduce the cost of construction.

The estimated useful lives of the assets are as follows:

	Estimated Life (years)
Leasehold land improvement		46.5
Buildings		10 - 20
Machinery and equipment		5 - 20
Vehicles		5
Furniture fixtures and office equipment		5

Expenditures for repairs and maintenance, which do not extend the useful life of the assets, are expensed as incurred.

(h) Land use right

Land use right is recorded at cost less accumulated amortization. Land use rights represent the prepayments for the use of the parcels of land in the PRC where the Company's production facilities are located, and are charged to expense over their respective lease periods. According to the laws of the PRC, the government owns all of the land in the PRC. Companies or individuals are authorized to possess and use the land only through land use rights granted by the PRC government. Land use right is amortized using the straight-line method over the lease term of 43 to 50 years.

(i) Impairment of long-lived assets

In accordance with FASB ASC Topic 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. If long-lived assets are to be disposed, depreciation is discontinued, if applicable, and the assets are reclassified as held for sale at the lower of their carrying amounts or fair values less costs to sell.

China Gerui has one and only operating entity, i.e., Henan Green, whose sole business is high-end cold-rolled steel processing. The company produces products by utilizing its facilities and equipment at one location in Zhengzhou, Henan Province, China. The company offers chromium-plating as value-add service to its customers but chromium-plating is an integral part of the whole production process of the Company rather than a stand-alone service. As a result, the Group determined that the impairment review is appropriately evaluated at the entity level. Based on the Group's assessment, no impairment was recognized as of December 31, 2012 and 2011.

(j) Fair value measurements

FASB ASC Topic 820, "Fair Value Measurement and Disclosures" defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. FASB ASC Topic 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company's assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2 - Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The Group's financial instruments consist principally of cash, accounts receivables, accounts payable, land use right payable, term loans, notes payables and accrued liabilities. None of which are held for trading purposes. Pursuant to ASC 820, the fair value of the Group's cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The Group believes that the carrying amounts of all of the Group's other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

(k) Revenue recognition

The Group generates revenue primarily from sales of steel mill flat-rolled products.

The Group recognizes its revenue upon the transfer of finished products to customers upon shipment from the Group's facilities. The Group sets the final price for a product based on the management's final measurement of the weight and dimensions of the product and confirmation that the product meets the customer's specifications as agreed in the original customer's order. The Group grants a three-week period for customers to dispute product quality. Based on the Group's assessment and past experiences, the rate of customer disputes are considered immaterial.

In the PRC, value added tax ("VAT") of 17% on the invoice amount is collected with respect to the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Group; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the tax authorities.

(l) Income taxes

The Group accounts for income taxes under FASB ASC Topic 740 "Income Taxes". Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be effective when the differences are expected to reverse.

Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of income in the period that includes the enactment date.

The Group adopted FASB ASC Topic 740, "Income Taxes", which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken in the tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

The Group recognizes interest and penalty related to income tax matters as income tax expense. As of December 31, 2012 and 2011, there was no penalty or interest recognized as income tax expenses.

(m) Commitments and contingencies

In the normal course of business, the Group is subject to contingencies, including legal proceedings and claims arising out of the normal course of businesses that relate to a wide range of matters, including among others, product liability. The Group records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments including past history, scientific evidence and the specifics of each matter. A determination of the amount of reserves and disclosures required, if any, for these contingencies are made after considerable analysis of each individual issue. The Group accrues for contingent liabilities when an assessment of the risk of loss is probable and can be reasonably estimated. The Group discloses contingent liabilities when the risk of loss is reasonably possible or probable. (See Note 22)

(n) Share-based compensation expense

The Company accounts for share-based compensation issued to its directors and its officers using the fair value based methodology in accordance with relevant accounting guidance. Compensation cost related to restricted common shares issued to the Company's directors and officers are measured at its estimated fair value at the grant date, and is amortized and expensed over the vesting period on a straight-line basis.

(o) Earnings per share

Basic earnings per share are computed on the basis of the weighted-average number of shares of our common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted-average number of shares of our common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury method. As of December 31, 2012, the Company had a total of 144,000 warrants outstanding which were granted to its underwriter during November 2009 in connection with the sale of 4,800,000 ordinary shares. The warrants may be exercised on or after August 9, 2010 and until November 9, 2014. As of December 31, 2012, all such warrants are deemed to be anti-dilutive since their exercise price is higher than the fair value the Company's common stock.

The following table sets forth the computation of basic and diluted net income per common share:

	For the years ended
	2012		2011		2010
Net income	$	26,133,088	$	57,620,552	$	47,083,424
Weighted average outstanding shares of common stock		58,543,076		56,297,652		43,891,670
Dilutive effect of Warrants		-		-		2,584,713
Dilutive effect of Unit Purchase Option granted to underwriters		-		-		179,338
Diluted weighted average outstanding shares		58,543,076		56,297,652		46,655,721
Earnings per common stock:
Basic	$	0.45	$	1.02	$	1.07
Diluted	$	0.45	$	1.02	$	1.01

(p) Segment information

FASB ASC Topic 280 "Segment reporting" establishes standards for reporting information on operating segments in interim and annual financial statements. The Group has only one segment, all of the Group's operations and customers are in the PRC and all income are derived from the sales of steel mill flat-rolled products. Accordingly, no geographic information is presented.

(q) Economic and political risks

The Group's operations are conducted in the PRC. Accordingly, the Group's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Group's operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Group's results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances aboard, and rates and methods of taxation, among other things.

(r) Recently issued accounting standards not yet adopted

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's financial condition, results of operations, or disclosures.

XML

SUNDRY INCOME

12 Months Ended

Dec. 31, 2012

SUNDRY INCOME [Abstract]

SUNDRY INCOME

16. SUNDRY INCOME

Sundry income for the years ended December 31, 2012, 2011 and 2010 consist of the following:

	For the years ended
	2012		2011		2010
Local government subsidies	$	158,755	$	449,786	$	227,797
Transferred from receipts in advance, accounts payable and other receivables		57,571		11,835		542
Subcontracting income		-		19,565		-
Gain on disposal of motor vehicles		63,876		-		-
Others		71,281		121,061		41,901
	$	351,483	$	602,247	$	270,240

During the years ended December 31, 2012, 2011 and 2010, the Group received special one time subsidies from local government of Zhengzhou, China amounting to $158,755 and $449,786 and $227,797 respectively for its advance technology in manufacturing precision steel mill flat-rolled products. The subsidy is not a continuing nature and depends on the local government's policy announced within a valid period.

XML

NOTES PAYABLE (Additional Information for Notes Payable) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Short-term Debt [Line Items]
Restricted cash	$ 145,413,726	$ 118,130,253
Short-term Debt [Member]
Short-term Debt [Line Items]
Maximum balance outstanding during the year	309,304,826	204,880,916
Interest expense	$ 4,701,767	$ 3,342,011
Weighted average interest rate	0.69%	1.29%
Short-term Debt [Member] | Minimum [Member]
Short-term Debt [Line Items]
Finance charge per contract	0.05%	0.05%
Percentage of restricted cash backing notes payable	10.00%
Short-term Debt [Member] | Maximum [Member]
Short-term Debt [Line Items]
Finance charge per contract	0.15%	0.50%
Percentage of restricted cash backing notes payable	100.00%

XML

CASH (Certificates of Deposit) (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash and Cash Equivalents [Line Items]
Bank balances and cash	$ 228,861,009	$ 246,600,917	$ 119,477,298	$ 79,607,369
Restricted cash	145,413,726	118,130,253
Certificates of deposit	3,210,221	3,177,679
Cash and Cash Equivalents, at Carrying Value, Total	393,857,084	367,908,849
HONG KONG [Member]
Cash and Cash Equivalents [Line Items]
Bank balances and cash	5,917,837	8,339,234
Restricted cash
Certificates of deposit
Cash and Cash Equivalents, at Carrying Value, Total	5,917,837	8,339,234
UNITED STATES [Member]
Cash and Cash Equivalents [Line Items]
Bank balances and cash	1,928,413	3,483,181
Restricted cash
Certificates of deposit
Cash and Cash Equivalents, at Carrying Value, Total	1,928,413	3,483,181
CHINA [Member]
Cash and Cash Equivalents [Line Items]
Bank balances and cash	221,014,759	234,778,502
Restricted cash	145,413,726	118,130,253
Certificates of deposit	19,582,349	3,177,679
Cash and Cash Equivalents, at Carrying Value, Total	$ 386,010,834	$ 356,086,434

XML

DEPOSIT ON ACQUISITION OF FUTURE LAND USE RIGHT

12 Months Ended

Dec. 31, 2012

DEPOSIT ON ACQUISITION OF FUTURE LAND USE RIGHT [Abstract]

DEPOSIT ON ACQUISITION OF FUTURE LAND USE RIGHT

10. DEPOSIT ON ACQUISITION OF FUTURE LAND USE RIGHT

Deposit on acquisition of future land use right as of December 31, 2012 and December 31, 2011 amounted to $24,076,660 and $12,710,719 respectively.

The Company's related party, Zhengzhou No. 2 Iron and Steel Company Limited ("Zhengzhou Company") owns a land use right totaling 24.94 acres. The Company's subsidiary, Henan Green, currently leases a part of the land use rights for 6.69 acres from Zhengzhou Company which was the former owner of Henan Green. The Company's existing production lines and warehouses are located on this parcel of land. For operation risk mitigating purposes, the Company has started the process of transferring the title of the land use right for the 24.94 acres from Zhengzhou Company.

On February 26, 2013, Henan Green Complex Materials Co., Ltd. ("Henan Green"), the indirectly wholly owned subsidiary of the Company, entered into an equity/asset transfer agreement ("the "Equity Transfer Agreement") with the Zhengzhou Company pursuant to which Henan Green acquired 100% ownership of Zhengzhou Company.

To facilitate Zhengzhou Company's acquisition, Henan Green prepaid $24,076,660 for the deposit on acquisition of future land use right which included payments of $11,235,775 directly to two unrelated companies to settle the loans on behalf of Zhengzhou Company and $12,840,885 for the deposit on acquisition of future land use right as of December 31, 2012. The total consideration to be paid is $43.6 million (exchange rate at June 30, 2013). The payment of acquisition was fully settled as at June 30, 2013 but the share transfer of Zhengzhou Steel and the land use right transfer are still in process.

XML

OPERATING LEASE COMMITMENTS (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Leases Operating [Line Items]
Rent expense	$ 28,744	$ 26,938	$ 24,701
Reservoir Rental [Member]
Leases Operating [Line Items]
2013	16,051
2014	16,051
2015	16,051
2016	16,051
2017	16,051
Over five years	256,816
Operating Leases, Future Minimum Payments Due, Total	$ 337,071

XML

SUBSEQUENT EVENT (Tables)

12 Months Ended

Dec. 31, 2012

SUBSEQUENT EVENTS [Abstract]

Schedule of Acquisition of Business

The following table summarizes the carryover of the historical cost of the land use right of Zhengzhou Company at the acquisition date.

Land use right	$	17,444,274
Cash consideration		43,630,631
Difference	$	26,186,357

XML

INCOME TAXES (Tax Expense) (Details) (USD $)	3 Months Ended				12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
INCOME TAXES [Abstract]
Current income tax expense	$ 364,906	$ 1,636,419	$ 5,136,010	$ 4,759,838	$ 11,897,173	$ 21,961,627	$ 15,937,143
Statutory tax rate					25.00%
Tax rate prior to 2008					33.00%

XML

CASH (Maximum Exposure to Credit Risk) (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash and Cash Equivalents [Line Items]
Bank balances and cash	$ 228,861,009	$ 246,600,917	$ 119,477,298	$ 79,607,369
Restricted cash	145,413,726	118,130,253
Certificates of deposit	16,372,128
Certificates of deposit	3,210,221	3,177,679
Cash and Cash Equivalents, at Carrying Value, Total	393,857,084	367,908,849
USD [Member]
Cash and Cash Equivalents [Line Items]
Bank balances and cash	7,906,574	11,821,253
Restricted cash
Certificates of deposit
Cash and Cash Equivalents, at Carrying Value, Total	7,906,574	11,821,253
RMB [Member]
Cash and Cash Equivalents [Line Items]
Bank balances and cash	220,942,109	234,778,502
Restricted cash	145,413,726	118,130,253
Certificates of deposit	16,372,128
Certificates of deposit		3,177,679
Cash and Cash Equivalents, at Carrying Value, Total	382,727,963	356,086,434
RMB (Non-current) [Member]
Cash and Cash Equivalents [Line Items]
Bank balances and cash
Restricted cash
Certificates of deposit	3,210,221
Cash and Cash Equivalents, at Carrying Value, Total	3,210,221
HKD [Member]
Cash and Cash Equivalents [Line Items]
Bank balances and cash	12,326	1,162
Restricted cash
Certificates of deposit
Cash and Cash Equivalents, at Carrying Value, Total	$ 12,326	$ 1,162

XML

OTHER RECEIVABLES (Tables)

12 Months Ended

Dec. 31, 2012

OTHER RECEIVABLES [Abstract]

Schedule of Other Receivables

Other receivables as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Advances to staff	$	211,671	$	254,229
Loan advanced to unrelated third parties		796,818		2,198,359
Loan advanced to a related company		318,332		-
Standby guarantee fund		530,489		-
Others		412,763		398,013
	$	2,270,073	$	2,850,601
Non-current portion (a)	$	3,039,835	$	3,499,083

Other receivables represent advances to staff and petty cash to department staff for daily expenditures. These amounts are interest free and with no fixed repayment terms.

As of December 31, 2012, $318,332 represented loan to a related company, Zhengzhou No. 2 Iron and Steel Company Limited. There was no agreement signed with the related party and no interest income was received.

As of December 31, 2012, $796,818 represented loans to unrelated third parties. There were no agreement signed with the third parties and the funds are non-interest bearing. The directors of the Group believe the outstanding balance is recoverable and that no allowance is considered necessary.

Included in other receivables is $530,489 of fund held by a unrelated third party to provide a standby guarantee for Henan Green to obtain additional bank loans. There was no agreement signed with the third party and no interest income was received.

(a) As of December 31, 2012 and 2011, $3,039,835 and $3,499,083 respectively, represented fund held by a unrelated third party to provide a standby guarantee for Henan Green to obtain additional bank loans. There was no agreement signed with the third party and the fund is non-interest bearing.

XML

FOREIGN OPERATIONS

12 Months Ended

Dec. 31, 2012

FOREIGN OPERATIONS [Abstract]

FOREIGN OPERATIONS

19 FOREIGN OPERATIONS

Operations

All of the Group's operations are carried out and all of its assets are located in the PRC. Accordingly, the Group's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC. The Group's business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.

Dividends and reserves

Under laws of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) cumulative prior years' losses, if any; (ii) allocations to the "Statutory Surplus Reserve" of at least 10% of net income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the registered capital of the Company's subsidiary, Henan Green; (iii) allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to Henan Green's "Statutory Common Welfare Fund", which is established for the purpose of providing employee facilities and other collective benefits to employees in China; and (iv) allocations to any discretionary surplus reserve, if approved by equity stockholders.

XML

SIGNIFICANT CONCENTRATIONS

12 Months Ended

Dec. 31, 2012

SIGNIFICANT CONCENTRATIONS [Abstract]

SIGNIFICANT CONCENTRATIONS

18. SIGNIFICANT CONCENTRATIONS

Our credit risk is somewhat limited due to a relatively large customer base and its dispersion across geographic areas of the PRC. During the years ended December 31, 2012 ,2011 and 2010, the Company had no customer which accounted for 10% or more of total revenue. As of December 31, 2012, the Company had one customer which accounted for approximately 15% of total accounts receivable. As of December 31, 2011, the Company had one customer which accounted for approximately 12% of total accounts receivable. As of December 31, 2010, the Company had one customer which accounted for approximately 81% of total accounts receivable.

All of the Group's suppliers are located in the PRC. During the year ended December 31, 2012, the Company had three suppliers which each accounted for approximately 37%, 23% and 20% of total purchases, respectively. During the year ended December 31, 2011, the Company had three suppliers which each accounted for approximately 43%, 25% and 11% of total purchases, respectively. During the year ended December 31, 2010, the Company had three suppliers which each accounted for approximately 30%, 24% and 12% of total purchases, respectively. As of December 31, 2012, the Company had two suppliers which accounted for approximately 23% and 10%, respectively of total accounts payable. As of December 31, 2011, the Company had two suppliers which accounted for approximately 55% and 18%, respectively of total accounts payable. As of December 31, 2010, the Company had two suppliers which accounted for approximately 19% and 16%, respectively of total accounts payable.

XML

SUNDRY INCOME (Tables)

12 Months Ended

Dec. 31, 2012

SUNDRY INCOME [Abstract]

Schedule of Sundry Income

Sundry income for the years ended December 31, 2012, 2011 and 2010 consist of the following:

	For the years ended
	2012		2011		2010
Local government subsidies	$	158,755	$	449,786	$	227,797
Transferred from receipts in advance, accounts payable and other receivables		57,571		11,835		542
Subcontracting income		-		19,565		-
Gain on disposal of motor vehicles		63,876		-		-
Others		71,281		121,061		41,901
	$	351,483	$	602,247	$	270,240

XML

DESCRIPTION OF BUSINESS AND ORGANIZATION (Tables)

12 Months Ended

Dec. 31, 2012

DESCRIPTION OF BUSINESS AND ORGANIZATION [Abstract]

Schedule of subsidiaries

Details of the Company's subsidiaries which are included in these consolidated financial statements are as follows:

		Percentage of
	Place and date of	ownership
Subsidiaries' names	incorporation	by the Company	Principal activities
Wealth Rainbow Development Limited "Wealth Rainbow"	Hong Kong, People's Republic of China ("PRC") March 1, 2007	100%	Intermediate holding company
Henan Green Complex Materials Co., Ltd. "Henan Green"	PRC December 31, 2000	100% (through Wealth Rainbow)	Operating entity

XML

LAND USE RIGHT (Tables)

12 Months Ended

Dec. 31, 2012

LAND USE RIGHT [Abstract]

Schedule of Land Use Rights

Land use right as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Land use right, net	$	13,625,738	$	13,807,056

Schedule of Future Amortization of Land Use Rights

The total future amortization is as follows:

December 31,
2013	$	333,897
2014		333,897
2015		333,897
2016		333,897
2017		333,897
Over 5 years		11,956,253
	$	13,625,738

XML

CONDENSED PARENT COMPANY FINANCIAL INFORMATION (Tables)

12 Months Ended

Dec. 31, 2012

CONDENSED PARENT COMPANY FINANCIAL INFORMATION [Abstract]

CONDENSED BALANCE SHEETS

CONDENSED BALANCE SHEETS

	2012			2011
Assets
Cash	$	7,645,949		$	11,621,907
Investments in subsidiaries		322,526,371			286,912,377
Total assets	$	330,172,320		$	298,534,284
Liabilities and Stockholders'' Equity
Current liabilities
Accrued liabilities and other payables	$	105,000		$	106,448
Total liabilities		105,000			106,448
Stockholders' Equity
Common stock		140,418,118			140,418,118
Additional paid in capital		4,978,698			6,930,944
Treasury stock		(414,063	)		(4,516,744	)
Retained earnings		163,276,046			137,142,958
Accumulated other comprehensive income		21,808,521			18,452,560
Total stockholders' equity		330,067,320			298,427,836
Total liabilities and stockholders' equity	$	330,172,320		$	298,534,284

CONDENSED STATEMENT OF INCOME

CONDENSED STATEMENT OF INCOME

	For the years ended
	2012			2011			2010
General and administrative expenses	$	(2,419,836	)	$	(9,439,791	)	$	(2,059,737	)
Equity income of subsidiaries		28,552,924			67,060,343			49,143,161
Net income	$	26,133,088		$	57,620,552		$	47,083,424

CONDENSED STATEMENT OF CASH FLOWS

CONDENSED STATEMENT OF CASH FLOWS

	For the years ended
	2012			2011			2010
Net cash used in operating activities	$	(2,421,284	)	$	(7,887,611	)	$	(3,511,915	)
Net cash used in investing activities		-			(48,000,000	)		(25,500,000	)
Net cash (used in)/provided by financing activities		(1,554,674	)		61,957,131			28,682,613
Cash as of January 1		11,621,907			5,552,387			5,881,689
Cash as of December 31	$	7,645,949		$	11,621,907		$	5,552,387

XML

CONDENSED PARENT COMPANY FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2012

CONDENSED PARENT COMPANY FINANCIAL INFORMATION [Abstract]

CONDENSED PARENT COMPANY FINANCIAL INFORMATION

23. CONDENSED PARENT COMPANY FINANCIAL INFORMATION

The Company records its investment in subsidiaries under the equity method of accounting as prescribed in FASB ASC Topic 323, "Investments - Equity Method and Joint Ventures". Such investment and long-term loans to subsidiaries are presented on the balance sheet as "Investments in subsidiaries" and the income of the subsidiaries is presented as "Equity in income of subsidiaries" on the statement of income.

These supplemental condensed parent company financial statements should be read in conjunction with the notes to the Company's Consolidated Financial Statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

As of December 31, 2012, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except as separately disclosed in the Company's Consolidated Financial Statements, if any.

CONDENSED BALANCE SHEETS

	2012			2011
Assets
Cash	$	7,645,949		$	11,621,907
Investments in subsidiaries		322,526,371			286,912,377
Total assets	$	330,172,320		$	298,534,284
Liabilities and Stockholders'' Equity
Current liabilities
Accrued liabilities and other payables	$	105,000		$	106,448
Total liabilities		105,000			106,448
Stockholders' Equity
Common stock		140,418,118			140,418,118
Additional paid in capital		4,978,698			6,930,944
Treasury stock		(414,063	)		(4,516,744	)
Retained earnings		163,276,046			137,142,958
Accumulated other comprehensive income		21,808,521			18,452,560
Total stockholders' equity		330,067,320			298,427,836
Total liabilities and stockholders' equity	$	330,172,320		$	298,534,284

CONDENSED STATEMENT OF INCOME

	For the years ended
	2012			2011			2010
General and administrative expenses	$	(2,419,836	)	$	(9,439,791	)	$	(2,059,737	)
Equity income of subsidiaries		28,552,924			67,060,343			49,143,161
Net income	$	26,133,088		$	57,620,552		$	47,083,424

CONDENSED STATEMENT OF CASH FLOWS

	For the years ended
	2012			2011			2010
Net cash used in operating activities	$	(2,421,284	)	$	(7,887,611	)	$	(3,511,915	)
Net cash used in investing activities		-			(48,000,000	)		(25,500,000	)
Net cash (used in)/provided by financing activities		(1,554,674	)		61,957,131			28,682,613
Cash as of January 1		11,621,907			5,552,387			5,881,689
Cash as of December 31	$	7,645,949		$	11,621,907		$	5,552,387

XML

LAND USE RIGHT (Amortization) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Land Use Rights [Line Items]
2013	$ 333,897
2014	333,897
2015	333,897
2016	333,897
2017	333,897
Over 5 years	11,956,253
Land use rights, total	13,625,738	13,807,056
Amortization expense	$ 330,244	$ 322,638	$ 259,438
Minimum [Member]
Land Use Rights [Line Items]
Amortization Period	43 years
Maximum [Member]
Land Use Rights [Line Items]
Amortization Period	50 years

XML

STOCKHOLDERS' EQUITY (Restricted Ordinary Shares) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012
STOCKHOLDERS' EQUITY [Abstract]
Grant Date	Oct. 01, 2012
Shares granted	2,100,000
Grant price	$ 1.78

XML

LAND USE RIGHT (Land Use Rights) (Details) (USD $)			12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Minimum [Member]	Dec. 31, 2012 Maximum [Member]
LAND USE RIGHT [Abstract]
Land use rights	$ 13,625,738	$ 13,807,056
Land use rights payable	$ 1,419,314	$ 1,404,926
Land Use Rights [Line Items]
Land use expiration date			Jun. 30, 2056	Jun. 30, 2054

XML

ACCRUED LIABILITIES AND OTHER PAYABLES (Tables)

12 Months Ended

Dec. 31, 2012

ACCRUED LIABILITIES AND OTHER PAYABLES [Abstract]

Schedule of Accrued Liabilities and Other Payables

Accrued liabilities and other payables as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Accrued liabilities
Accrued expenses	$	3,185,415	$	4,019,395
Other tax payables		494,446		656,060
		3,679,861		4,675,455
Other payables
Loan advanced from unrelated third parties		1,685,366		79,442
Other payable for purchasing machinery and equipment		96,307		9,753,549
Temporary receipt for staff quarters		48,205		-
Others		308,321		767,570
		2,138,199		10,600,561
	$	5,818,060	$	15,276,016

XML

TERM LOANS (Additional Information) (Details) (Loan Agreement [Member], USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Debt Instrument [Line Items]
Maximum balance outstanding during the year	$ 62,278,294	$ 44,884,729
Interest expense	$ 3,525,936	$ 2,912,292
Weighted average interest rate	3.29%	3.27%
Minimum [Member]
Debt Instrument [Line Items]
Range of interest rate	0.465%	0.347%
Maximum [Member]
Debt Instrument [Line Items]
Range of interest rate	1.205%	0.868%

XML

QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED) (Details) (USD $)	3 Months Ended				12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Revenue:
Steel mill flat-rolled products	$ 63,889,524	$ 56,123,028	$ 76,783,963	$ 68,689,567	$ 265,486,082	$ 341,778,295	$ 253,866,337
Cost of revenue	(57,037,147)	(47,331,341)	(56,975,825)	(47,196,745)	(208,541,058)	(240,199,678)	(177,869,648)
Gross Profit	6,852,377	8,791,687	19,808,138	21,492,822	56,945,024	101,578,617	75,996,689
Operating expenses:
General and administrative expenses	(5,738,929)	(2,548,672)	(2,511,170)	(2,369,361)	(13,168,132)	(10,707,418)	(7,795,722)
Selling and marketing expenses	(457,768)	(374,818)	(506,711)	(107,086)	(1,446,383)	(1,634,232)	(1,251,091)
Warrant compensation expenses						(5,700,000)
Total operating expenses	(6,196,697)	(2,923,490)	(3,017,881)	(2,476,447)	(14,614,515)	(18,041,650)	(9,046,813)
Operating income	655,680	5,868,197	16,790,257	19,016,375	42,330,509	83,536,967	66,949,876
Other income and (expense):
Interest income	1,092,002	1,233,910	624,578	626,251	3,576,741	1,913,091	1,087,178
Interest expenses	(2,063,684)	(3,105,412)	(2,028,459)	(1,030,917)	(8,228,472)	(6,470,126)	(5,286,727)
Sundry income	146,525	21,310	24,911	158,737	351,483	602,247	270,240
Income before income taxes	(169,477)	4,018,005	15,411,287	18,770,446	38,030,261	79,582,179	63,020,567
Income tax expense	(364,906)	(1,636,419)	(5,136,010)	(4,759,838)	(11,897,173)	(21,961,627)	(15,937,143)
Net income	$ (534,383)	$ 2,381,586	$ 10,275,277	$ 14,010,608	$ 26,133,088	$ 57,620,552	$ 47,083,424
Net income per share
-Basic	$ (0.01)	$ 0.04	$ 0.18	$ 0.24	$ 0.45	$ 1.02	$ 1.07
-Diluted	$ (0.01)	$ 0.04	$ 0.18	$ 0.24	$ 0.45	$ 1.02	$ 1.01
Weighted average common shares outstanding
- Basic	59,769,786	57,935,604	58,203,179	58,251,680	58,543,076	56,297,652	43,891,670
- Diluted	59,769,786	57,935,604	58,203,179	58,251,680	58,543,076	56,297,652	46,655,721

XML

RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2012

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

17. RELATED PARTY TRANSACTIONS

The Company's subsidiary, Henan Green, entered into a rental agreement for land use right with Zhengzhou Company, the former owner of Henan Green, from January 1, 2008 to December 31, 2027. Mingwang Lu, the Company's Chief Executive Officer and his family hold approximately 44% of shareholding of the Company and approximately 41% of shareholding of Zhengzhou Company. Rental paid to Zhengzhou Company for the years ended December 31, 2012, 2011 and 2010 were $12,867, $11,428 and $9,909 respectively.

On February 26, 2013, Henan Green Complex Materials Co., Ltd. ("Henan Green"), the indirectly wholly owned subsidiary of the Company, entered into an equity/asset transfer agreement ("the "Equity Transfer Agreement") with the Zhengzhou Company pursuant to which Henan Green acquired 100% ownership of Zhengzhou Company.

To facilitate Zhengzhou Company's acquisition, Henan Green prepaid $24,076,660 for the deposit on acquisition of future land use right which included to pay $11,235,775 to two unrelated companies to settle the loans on behalf of Zhengzhou Company and $12,840,885 for the deposit on acquisition of future land use right as of December 31, 2012.

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $)	Total	Common Stock, with no Par Value [Member]	Treasury Stock, at cost [Member]	Additional Paid-in Capital [Member]	Accumulated Comprehensive Income [Member]	Retained Earnings [Member]
Balance at Dec. 31, 2009	$ 87,042,857	$ 45,261,630		$ 6,930,944	$ 2,411,301	$ 32,438,982
Balance, shares at Dec. 31, 2009		40,692,323
Net income	47,083,424					47,083,424
Foreign currency translation gain	5,003,108				5,003,108
Shares issued for warrant conversion	10,714,795	10,714,795
Shares issued for warrant conversion, shares		2,142,959
Shares issued	17,967,818	17,967,818
Shares issued, shares		3,303,771
Balance at Dec. 31, 2010	167,812,002	73,944,243		6,930,944	7,414,409	79,522,406
Balance, shares at Dec. 31, 2010		46,139,053
Net income	57,620,552					57,620,552
Foreign currency translation gain	11,038,151				11,038,151
Shares issued for warrant conversion	66,473,875	66,473,875
Shares issued for warrant conversion, shares		13,294,775
Purchase of treasury stock	(4,516,744)		(4,516,744)
Purchase of treasury stock, shares	(117,898)		(1,176,898)
Balance at Dec. 31, 2011	298,427,836	140,418,118	(4,516,744)	6,930,944	18,452,560	137,142,958
Balance, shares at Dec. 31, 2011		59,433,828	(1,176,898)
Net income	26,133,088					26,133,088
Foreign currency translation gain	3,355,961				3,355,961
Purchase of treasury stock	(1,554,674)		(1,554,674)
Purchase of treasury stock, shares	(795,031)		(795,031)
Retirement of treasury stock			5,657,355	(5,657,355)
Retirement of treasury stock, shares		(1,710,098)	1,710,098
Grant of restricted common shares		2,100,000
Share-based compensation	3,705,109			3,705,109
Balance at Dec. 31, 2012	$ 330,067,320	$ 140,418,118	$ (414,063)	$ (4,978,698)	$ 21,808,521	$ 163,276,046
Balance, shares at Dec. 31, 2012		59,823,730	(261,831)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Cash flows from operating activities:
Net income	$ 26,133,088	$ 57,620,552	$ 47,083,424
Adjustments to reconcile net income to net cash (used in) / provided by operating activities:
Depreciation of property, plant and equipment	10,899,049	7,994,638	3,149,314
(Gain)/Loss on disposal of property, plant and equipment	(56,107)	12,726
Amortization of land use right	330,244	322,638	259,438
Stock-based compensation	3,705,109
Warrant compensation expense		5,700,000
Changes in assets and liabilities:
Accounts receivable, net	4,126,206	(2,046,819)	721,098
Notes receivable, net	139,228	(554,789)
Inventories	1,929,773	(16,712,453)	(1,043,397)
Prepaid expenses	6,435	621,611	(914,841)
Prepaid purchases	(29,666,016)	(16,284,440)	(11,361,129)
Other receivable	(142,305)	(697,676)	224,051
Accounts payable	(5,813,580)	5,168,689	(4,967,264)
Income tax payable	(369,983)	1,078,582	334,361
Customers deposit	(11,856,194)	12,911,217	1,539,833
Accrued liabilities and other payables	(1,466,919)	1,113,651	1,452,762
Net cash (used in) / provided by operating activities	(2,101,972)	56,248,127	36,477,650
Cash flows from investing activities:
Cash paid for property, plant and equipment	(30,561,916)	(29,816,858)	(65,063,864)
Proceeds from disposal of property, plant and equipment	59,517	9,655
Payment of purchases of land use right		(9,073,284)	(1,903,656)
Payment of acquisition of future land use right	(11,112,875)	(10,213,261)	(2,093,071)
Cash deposit - potential business initiative program - related party		(5,000,000)
Cash deposit refunded - related party		5,000,000
Advance to unrelated third parties	(4,017,304)	(3,415,724)
Advance from unrelated third party	1,587,554
Repayment of advance to unrelated third parties	5,252,326
Investment in certificates of deposit	(16,193,047)	(3,101,978)
Changes in restricted cash	(25,788,547)	(47,212,098)	(29,032,134)
Changes in prepaid machinery deposits			13,973,966
Net cash used in investing activities	(80,774,292)	(102,823,548)	(84,118,759)
Cash flows from financing activities:
Repayment of term loans	(50,484,204)	(45,831,718)	(45,984,848)
Proceeds from term loans	63,184,632	43,815,432	56,093,042
Proceeds from notes payable, net	51,992,380	111,733,230	45,213,650
Proceeds received from common stock issued and warrant conversion, net			28,682,613
Proceeds received from exercise of warrants		66,473,875
Warrant compensation expense		(5,700,000)
Purchase of treasury stock	(1,554,674)	(4,516,744)
Net cash provided by financing activities	63,138,134	165,974,075	84,004,457
Net (decrease) / increase in cash	(19,738,130)	119,398,654	36,363,348
Effect on change of exchange rates	1,998,222	7,724,965	3,506,581
Cash as of January 1	246,600,917	119,477,298	79,607,369
Cash as of December 31	228,861,009	246,600,917	119,477,298
Cash paid during the year for:
Interest paid	8,322,263	6,254,304	3,927,906
Income tax paid	$ 12,267,157	$ 20,883,046	$ 15,738,892

XML

CASH

12 Months Ended

Dec. 31, 2012

CASH [Abstract]

CASH

3. CASH

Cash represents cash in bank and cash on hand. Cash as of December 31, 2012 and 2011 consists of the following:

	2012			2011
Bank balances and cash (a)	$	390,646,863		$	364,731,170
Less: Restricted cash (b)		(145,413,726	)		(118,130,253	)
Less: Certificates of deposit (c )		(16,372,128	)		-
	$	228,861,009		$	246,600,917
Non-current portion
Certificates of deposit (c )	$	3,210,221		$	3,177,679

(a) Bank balances and cash

Unrestricted cash as of December 31, 2012 and 2011 was $228,861,009 and $246,600,917, respectively. As of December 31, 2012 and 2011, unrestricted cash of $221,014,759 and $234,778,502 was held respectively, in Renminbi and USD on deposit with banks located in the PRC. Renminbi is not a freely convertible currency and the remittance of funds out of the PRC is subject to the exchange restrictions imposed by the PRC government.

(b) Restricted cash

As of December 31, 2012 and 2011 the Group's cash amounting to $145,413,726 and $118,130,253 respectively, were restricted and deposited in certain banks as security for notes payable to the banks.

(c) Certificates of deposit

Current portion:

As of December 31, 2012, six of the Certificates of deposit were held in Renminbi on deposit with a bank located in the PRC. The annual interest rate is 2.8% and 3.08%. The Certificates of deposit mature from February, 2013 to May, 2013.

Non-current portion:

As of December 31, 2012, the Certificates of deposit were held in Renminbi on deposit with a bank located in the PRC. The annual interest rate is 5%. The Certificates of deposit matures on December 12, 2014.

As of December 31, 2012, cash is classified by geographical areas is set out as follows:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2012
Hong Kong	$	5,917,837	$	-	$	-	$	5,917,837
United States		1,928,413		-		-		1,928,413
The PRC		221,014,759		145,413,726		19,582,349		386,010,834
	$	228,861,009	$	145,413,726	$	19,582,349	$	393,857,084

As of December 31, 2011, cash is classified by geographical areas is set out as follows:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2011
Hong Kong	$	8,339,234	$	-	$	-	$	8,339,234
United States		3,483,181		-		-		3,483,181
The PRC		234,778,502		118,130,253		3,177,679		356,086,434
	$	246,600,917	$	118,130,253	$	3,177,679	$	367,908,849

Maximum exposure to credit risk:

As of December 31, 2012, cash is denominated in the following currencies:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2012
USD	$	7,906,574	$	-	$	-	$	7,906,574
RMB (Current)		220,942,109		145,413,726		16,372,128		382,727,963
RMB (Non-current)		-		-		3,210,221		3,210,221
HKD		12,326		-		-		12,326
	$	228,861,009	$	145,413,726	$	19,582,349	$	393,857,084

As of December 31, 2011, cash is denominated in the following currencies:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2011
USD	$	11,821,253	$	-	$	-	$	11,821,253
RMB		234,778,502		118,130,253		3,177,679		356,086,434
HKD		1,162		-		-		1,162
	$	246,600,917	$	118,130,253	$	3,177,679	$	367,908,849

XML

STOCKHOLDERS' EQUITY (Share Based Compensation Expense Allocation) (Details) (General and Administrative Expense [Member], USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
General and Administrative Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share-based Compensation Expense	$ 3,705,109

XML

DESCRIPTION OF BUSINESS AND ORGANIZATION

12 Months Ended

Dec. 31, 2012

DESCRIPTION OF BUSINESS AND ORGANIZATION [Abstract]

DESCRIPTION OF BUSINESS AND ORGANIZATION

1. DESCRIPTION OF BUSINESS AND ORGANIZATION

China Gerui Advanced Materials Group Limited ("the Company" or "China Gerui") holdings are comprised of Wealth Rainbow, also a holding company and Henan Green, an operating company and a leading China-based specialty precision cold-rolled steel producer. Through its investment in these entities, the Company manufactures and sells specialty, high-end, high precision, ultra thin, high strength, cold-rolled, narrow and wide strip steel products that are characterized by stringent performance and specification requirements that mandate a high degree of manufacturing and engineering expertise, and are extensively used in the manufacturing industry throughout mainland China. The Company's products are not standardized commodity products, but are tailored to customers' requirements and then incorporated into products they and end-users make for various applications. The Company sells its products to its customers in the People's Republic of China (PRC) and to a limited extent to customers outside the PRC in a diverse range of industries, including the food packaging, telecommunication, electrical appliance, and construction materials industries.

The consolidated financial statements include the financial statements of China Gerui and its subsidiaries (together referred to as the "Group"). The Company owns 100% equity interests directly and indirectly, in two subsidiaries, namely Wealth Rainbow and Henan Green. The organization chart of the Group is as follows:

Details of the Company's subsidiaries which are included in these consolidated financial statements are as follows:

		Percentage of
	Place and date of	ownership
Subsidiaries' names	incorporation	by the Company	Principal activities
Wealth Rainbow Development Limited "Wealth Rainbow"	Hong Kong, People's Republic of China ("PRC") March 1, 2007	100%	Intermediate holding company
Henan Green Complex Materials Co., Ltd. "Henan Green"	PRC December 31, 2000	100% (through Wealth Rainbow)	Operating entity

Revisions to the Consolidated Financial Statements

The business combination and related deposits in previous consolidated financial statements for the year ended December 31, 2012 dated April 30, 2013 have been re-characterized as an acquisition of future land use rights as the Company has determined that this presentation better reflects the substance of the transaction.. As a result, certain revisions were made to the notes to the consolidated financial statements which are reflected in Notes 10, 17, 22. In addition, the Company revised the consolidated balance sheet as of December 31, 2012 by reclassifying amounts totaling $24,076,660 previously reported as "Deposit on acquisition of business" to "Deposits on acquisition of future land use right" and revised certain cash flows from investing activities in the consolidated statement of cash flows for the year ended December 31, 2012 by reclassifying amounts totaling $11,112,875 from "Deposit payment to investing business" to "Payment of acquisition of future land use right."

XML

NOTES PAYABLE (Tables)

12 Months Ended

Dec. 31, 2012

NOTES PAYABLE [Abstract]

Schedule of Notes Payable

Notes payable as of December 31, 2012 and 2011 consist of the following:

	2012			2011
Classified by financial institutions:
China Citic Bank	$	35,312,435		$	42,580,912
Bank of Zhengzhou		6,420,443			9,533,040
Minsheng Bank of China		19,261,328			24,229,810
Guangdong Development Bank		22,471,549			14,299,560
Shanghai Pudong Development Bank		25,681,771			15,888,400
China Merchants Bank		11,235,775			16,523,936
China Everbright Bank		27,286,881			19,066,080
Bank of Luoyang		43,337,988			24,627,020
Bank of Communications		22,792,572			12,710,720
Bank of Pingdingshan		32,102,213			25,421,438
Bank of Xuchan		2,407,666			-
Commercial bank of Kaifeng		4,815,332			-
Huaxia Bank		1,605,111			-
Ping An Bank		4,815,331			-
	$	259,546,395		$	204,880,916
Additional information:
Maximum balance outstanding during the year	$	309,304,826		$	204,880,916
Interest expense	$	4,701,767		$	3,342,011
Finance charge per contract		0.05%-0.15	%		0.05%-0.5	%
Weighted average interest rate		0.69	%		1.29	%

XML

OPERATING LEASE COMMITMENTS

12 Months Ended

Dec. 31, 2012

OPERATING LEASE COMMITMENTS [Abstract]

OPERATING LEASE COMMITMENTS

20. OPERATING LEASE COMMITMENTS

Rental expense for obligations under operating leases (Leasehold and Reservoir rental) was $28,744, $26,938 and $24,701 for the years ended December 31, 2012, 2011 and 2010 respectively. As the leasehold agreement will be terminated in 1st quarter of 2013 after the acquisition of the future land use right, Zhengzhou Company, no operating lease payment was required for leasehold. The total future minimum lease payments under non-cancellable operating leases as of December 31, 2012 are payable as follows:

Years Ended December 31,	Reservoir rental
2013	$	16,051
2014		16,051
2015		16,051
2016		16,051
2017		16,051
Over five years		256,816
	$	337,071

XML

QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

12 Months Ended

Dec. 31, 2012

QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED) [Abstract]

QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

24. QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

	2012
	March 31			June 30			September 30			December 31
Revenue:
Steel mill flat-rolled products	$	68,689,567		$	76,783,963		$	56,123,028		$	63,889,524
Cost of revenue		(47,196,745	)		(56,975,825	)		(47,331,341	)		(57,037,147	)
Gross Profit		21,492,822			19,808,138			8,791,687			6,852,377
Operating expenses:
General and administrative expenses		(2,369,361	)		(2,511,170	)		(2,548,672	)		(5,738,929	)
Selling and marketing expenses		(107,086	)		(506,711	)		(374,818	)		(457,768	)
Warrant compensation expenses		-			-			-			-
Total operating expenses		(2,476,447	)		(3,017,881	)		(2,923,490	)		(6,196,697	)
Operating income		19,016,375			16,790,257			5,868,197			655,680
Other income (expenses)
Interest income		626,251			624,578			1,233,910			1,092,002
Interest expenses		(1,030,917	)		(2,028,459	)		(3,105,412	)		(2,063,684	)
Sundry income		158,737			24,911			21,310			146,525
		18,770,446			15,411,287			4,018,005			(169,477	)
Income tax expense		(4,759,838	)		(5,136,010	)		(1,636,419	)		(364,906	)
Net income attributable to common stockholders	$	14,010,608		$	10,275,277		$	2,381,586		$	(534,383	)
Net income per share
- Basic	$	0.24		$	0.18		$	0.04		$	(0.01	)
- Diluted	$	0.24		$	0.18		$	0.04		$	(0.01	)
Weighted average common shares outstanding
- Basic		58,251,680			58,203,179			57,935,604			59,769,786
- Diluted		58,251,680			58,203,179			57,935,604			59,769,786

XML

ACCRUED LIABILITIES AND OTHER PAYABLES (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
ACCRUED LIABILITIES AND OTHER PAYABLES [Abstract]
Accrued expenses	$ 3,185,415	$ 4,019,395
Other tax payables	494,446	656,060
Accrued liabilites total	3,679,861	4,675,455
Loan advanced from unrelated third parties	1,685,366	79,442
Payables to purchase of machinery and equipment	96,307	9,753,549
Temporary receipt for staff quarters	48,205
Others	308,321	767,570
Other payables total	2,138,199	10,600,561
Other payables and accrued liabilities	$ 5,818,060	$ 15,276,016

XML

INVENTORIES (Tables)

12 Months Ended

Dec. 31, 2012

INVENTORIES [Abstract]

Schedule of Inventories

Inventories as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Raw materials	$	7,865,191	$	10,967,758
Work-in-process		3,491,181		3,007,200
Finished goods		11,406,173		10,488,184
	$	22,762,545	$	24,463,142

XML

TERM LOANS (Summary of Principal Payments) (Details) (USD $)					12 Months Ended					12 Months Ended				12 Months Ended				12 Months Ended						12 Months Ended			12 Months Ended		12 Months Ended		12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 China Citic Bank [Member]	Dec. 31, 2011 China Citic Bank [Member]	Dec. 31, 2012 China Citic Bank [Member] Loan One [Member]	Dec. 31, 2012 China Citic Bank [Member] Loan Two [Member]	Dec. 31, 2012 China Citic Bank [Member] Loan Three [Member]	Dec. 31, 2012 China Merchants Bank [Member]	Dec. 31, 2011 China Merchants Bank [Member]	Dec. 31, 2012 China Merchants Bank [Member] Loan Four [Member]	Dec. 31, 2012 China Merchants Bank [Member] Loan Five [Member]	Dec. 31, 2012 Bank Of Zhengzhou [Member]	Dec. 31, 2011 Bank Of Zhengzhou [Member]	Dec. 31, 2012 Bank Of Zhengzhou [Member] Loan Six [Member]	Dec. 31, 2012 Bank Of Zhengzhou [Member] Loan Seven [Member]	Dec. 31, 2012 Shanghai Pudong Development Bank [Member]	Dec. 31, 2011 Shanghai Pudong Development Bank [Member]	Dec. 31, 2012 Shanghai Pudong Development Bank [Member] Loan Eight [Member]	Dec. 31, 2012 Shanghai Pudong Development Bank [Member] Loan Nine [Member]	Dec. 31, 2012 Shanghai Pudong Development Bank [Member] Loan Ten [Member]	Dec. 31, 2012 Shanghai Pudong Development Bank [Member] Loan Eleven [Member]	Dec. 31, 2012 Shanghai Pudong Development Bank [Member] Loan Twelve [Member]	Dec. 31, 2012 Ping An Bank [Member]	Dec. 31, 2012 Ping An Bank [Member] Loan Thirteen [Member]	Dec. 31, 2012 Bankof Xuchang [Member]	Dec. 31, 2011 Bankof Xuchang [Member]	Dec. 31, 2012 Bankof Xuchang [Member] Loan Fourteen [Member]	Dec. 31, 2012 China Everbright Bank [Member]	Dec. 31, 2012 China Everbright Bank [Member] Loan Fifteen [Member]	Dec. 31, 2012 Commercial Bank Of Kaifeng [Member]	Dec. 31, 2012 Commercial Bank Of Kaifeng [Member] Loan Sixteen [Member]
Debt Instrument [Line Items]
Principal payment due during 2012	$ 57,462,962				$ 3,210,221	$ 1,605,111	$ 1,605,111			$ 4,815,332	$ 4,815,332			$ 4,815,332	$ 2,889,199			$ 2,247,155	$ 2,568,177	$ 1,605,111	$ 4,815,332	$ 4,815,332		$ 8,025,553			$ 4,815,332		$ 1,605,111		$ 3,210,221
Term loans	$ 57,462,962	$ 44,169,751	$ 6,420,443	$ 3,177,680	$ 3,210,221	$ 1,605,111	$ 1,605,111	$ 9,630,664	$ 7,944,200	$ 4,815,332	$ 4,815,332	$ 7,704,531	$ 7,626,431	$ 4,815,332	$ 2,889,199	$ 16,051,107	$ 11,121,880	$ 2,247,155	$ 2,568,177	$ 1,605,111	$ 4,815,332	$ 4,815,332	$ 3,210,221	$ 8,025,553	$ 4,815,332	$ 4,766,520	$ 4,815,332	$ 1,605,111	$ 1,605,111	$ 8,025,553	$ 3,210,221
Collateral					Secured by Henan Green's assets	Secured by Henan Green's assets	Secured by Henan Green's assets			Guaranteed by third party, Mingwang Lu and Yi Lu	Guaranteed by third party, Mingwang Lu and Yi Lu			Guaranteed by third party	Secured by Henan Green's bank deposit			Guaranteed by third party, Mingwang Lu	Guaranteed by third party, Mingwang Lu	Secured by Henan Green's land, Mingwang Lu	Secured by Henan Green's land, Mingwang Lu	Guaranteed by third party, Mingwang Lu		Guaranteed by third party			Guaranteed by third party		Guaranteed by third party & Mingwang Lu and Yi Lu		Guaranteed by third party & Mingwang Lu
Term of loan, start date					Aug. 21, 2012	Dec. 07, 2012	Dec. 19, 2012			Aug. 31, 2012	Sep. 10, 2012			Aug. 31, 2012	Dec. 12, 2012			Feb. 01, 2012	Feb. 24, 2012	Mar. 16, 2012	Nov. 28, 2012	Nov. 27, 2012		Dec. 03, 2012			Apr. 27, 2012		Jul. 20, 2012		Aug. 23, 2012
Term of loan, end date					Mar. 16, 2013	Jul. 07, 2013	Jul. 19, 2013			Aug. 31, 2013	Sep. 10, 2013			Aug. 13, 2013	Dec. 12, 2013			Jan. 31, 2013	Feb. 23, 2013	Mar. 15, 2013	Nov. 27, 2013	Nov. 26, 2013		Dec. 03, 2013			Apr. 25, 2013		Jul. 19, 2013		Aug. 22, 2013

XML

CASH (Schedule of Cash) (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
CASH [Abstract]
Bank balances and cash	$ 390,646,863	$ 364,731,170
Less: Restricted cash	(145,413,726)	(118,130,253)
Less: Certificates of deposit	(16,372,128)
Cash	228,861,009	246,600,917	119,477,298	79,607,369
Certificates of deposit	$ 3,210,221	$ 3,177,679

XML

QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED) (Tables)

12 Months Ended

Dec. 31, 2012

QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED) [Abstract]

Schedule of Quarterly Financial Information

	2012
	March 31			June 30			September 30			December 31
Revenue:
Steel mill flat-rolled products	$	68,689,567		$	76,783,963		$	56,123,028		$	63,889,524
Cost of revenue		(47,196,745	)		(56,975,825	)		(47,331,341	)		(57,037,147	)
Gross Profit		21,492,822			19,808,138			8,791,687			6,852,377
Operating expenses:
General and administrative expenses		(2,369,361	)		(2,511,170	)		(2,548,672	)		(5,738,929	)
Selling and marketing expenses		(107,086	)		(506,711	)		(374,818	)		(457,768	)
Warrant compensation expenses		-			-			-			-
Total operating expenses		(2,476,447	)		(3,017,881	)		(2,923,490	)		(6,196,697	)
Operating income		19,016,375			16,790,257			5,868,197			655,680
Other income (expenses)
Interest income		626,251			624,578			1,233,910			1,092,002
Interest expenses		(1,030,917	)		(2,028,459	)		(3,105,412	)		(2,063,684	)
Sundry income		158,737			24,911			21,310			146,525
		18,770,446			15,411,287			4,018,005			(169,477	)
Income tax expense		(4,759,838	)		(5,136,010	)		(1,636,419	)		(364,906	)
Net income attributable to common stockholders	$	14,010,608		$	10,275,277		$	2,381,586		$	(534,383	)
Net income per share
- Basic	$	0.24		$	0.18		$	0.04		$	(0.01	)
- Diluted	$	0.24		$	0.18		$	0.04		$	(0.01	)
Weighted average common shares outstanding
- Basic		58,251,680			58,203,179			57,935,604			59,769,786
- Diluted		58,251,680			58,203,179			57,935,604			59,769,786

XML

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

INCOME TAXES [Abstract]

Schedule of Income Tax Expense

All of the Company's income is generated in the PRC.

	For the years ended
	2012		2011		2010
Current income tax expense	$	11,897,173	$	21,961,627	$	15,937,143

Schedule of Effective Income Tax Rate Reconciliation

A reconciliation of the expected income tax expense to the actual income tax expense for the years ended December 31, 2012, 2011 and 2010 are as follows:

	For the years ended
	2012		2011		2010
Income before tax	$	38,030,261	$	79,582,179	$	63,020,567
Expected PRC income tax expense at statutory tax rate of 25%		9,507,565		19,895,544		15,755,141
Income not subject to PRC tax		-		-		56,949
Depreciation allowance over-claimed in 2011		1,127,816		-		-
Non deductible tax expenses		1,261,792		2,066,083		125,053
Actual income tax expense	$	11,897,173	$	21,961,627	$	15,937,143

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Mar. 31, 2009
Common stock, shares authorized	100,000,000	100,000,000	100,000,000
Common stock, no par value
Common stock, shares issued	59,823,730	59,433,828	29,999,999
Common stock, shares outstanding	59,561,899	58,256,930	30,000,000
Treasury stock, shares	261,831	1,176,898

XML

PREPAID PURCHASES

12 Months Ended

Dec. 31, 2012

PREPAID PURCHASES [Abstract]

PREPAID PURCHASES

6. PREPAID PURCHASES

Prepaid purchases represent amounts prepaid to suppliers for the purchases of raw materials and accessories.

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Net income	$ 26,133,088	$ 57,620,552	$ 47,083,424
Other comprehensive income
Foreign currency translation gain	3,355,961	11,038,151	5,003,108
Total comprehensive income	$ 29,489,049	$ 68,658,703	$ 52,086,532

XML

ACCOUNTS RECEIVABLE (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
ACCOUNTS RECEIVABLE [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 125,993	$ 124,715

XML

CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2012	Dec. 31, 2011
Current assets
Cash	$ 228,861,009	$ 246,600,917
Certificates of deposit	16,372,128
Restricted cash	145,413,726	118,130,253
Accounts receivable, net	2,276,153	6,382,630
Notes receivable	433,379	568,328
Inventories	22,762,545	24,463,142
Prepaid purchases	76,268,597	45,805,423
Prepaid expenses	382,569	385,131
Other receivables	2,270,073	2,850,601
Total current assets	495,040,179	445,186,425
Non-current assets
Property, plant and equipment, net	134,110,657	122,695,246
Land use right, net	13,625,738	13,807,056
Deposit on acquisition of future land use right	24,076,660	12,710,719
Deposit on acquisition of property, plant and equipment	266,312
Other receivable	3,039,835	3,499,083
Certificates of deposit	3,210,221	3,177,679
Total non-current assets	178,329,423	155,889,783
Total assets	673,369,602	601,076,208
Current Liabilities
Accounts payable	2,279,246	8,074,432
Notes payable	259,546,395	204,880,916
Term loans	57,462,962	44,169,751
Land use right payable	1,419,314	1,404,926
Income tax payable	5,140,306	5,458,482
Customers deposits	11,635,999	23,383,849
Accrued liabilities and other payables	5,818,060	15,276,016
Total current liabilities	343,302,282	302,648,372
Total liabilities	343,302,282	302,648,372
Stockholders' equity
Common stock, 100,000,000 shares authorized with no par value; 59,823,730 and 59,433,828 shares issued, 59,561,899 and 58,256,930 shares outstanding as of December 31, 2012 and December 31, 2011, respectively	140,418,118	140,418,118
Additional paid-in capital	4,978,698	6,930,944
Treasury stock, at cost, 261,831 and 1,176,898 shares, as of December 31, 2012 and December 31, 2011, respectively	(414,063)	(4,516,744)
Retained earnings	163,276,046	137,142,958
Accumulated comprehensive income	21,808,521	18,452,560
Total stockholders' equity	330,067,320	298,427,836
Total liabilities and stockholders' equity	$ 673,369,602	$ 601,076,208

XML

DESCRIPTION OF BUSINESS AND ORGANIZATION (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
DESCRIPTION OF BUSINESS AND ORGANIZATION [Abstract]
Ownership percentage in two subsidiaries	100.00%
Prior Period Adjustments [Line Items]
Deposits on acquisition of future land use right	$ 24,076,660	$ 12,710,719
Payment of acquisition of future land use right	11,112,875	10,213,261	2,093,071
Subsequent Event [Member]
Prior Period Adjustments [Line Items]
Deposits on acquisition of future land use right	24,076,660
Payment of acquisition of future land use right	11,112,875
Previously Reported [Member] | Subsequent Event [Member]
Prior Period Adjustments [Line Items]
Deposit on acquisition of business	24,076,660
Deposit payment to investing business	$ 11,112,875

XML

STOCKHOLDERS' EQUITY (Statutory Surplus Reserves) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Stockholders Equity Note [Line Items]
Balance	$ 8,246,235
Statutory surplus reserves transferred from net profits	3,139,686
Balance	11,385,921
Balance, Registered capital	83,603,944
Increase in registered capital
Percentage reached, Statutory Reserves and Registered Capital	14.00%	10.00%
Required percentage of registered capital that much be reached in statutory reserves	50.00%
Henan Green [Member]
Stockholders Equity Note [Line Items]
Required percentage of registered capital that much be reached in statutory reserves	50.00%

XML

STOCKHOLDERS' EQUITY (Treasury Stock) (Details) (USD $)	3 Months Ended	12 Months Ended		24 Months Ended
	Dec. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012
Stockholders Equity Note [Line Items]
Total number of shares purchased		795,031	117,898	1,971,929
Amount paid		$ 1,554,674	$ 4,516,744	$ 6,071,418
Stock repurchase program, shares of common stock approved for repurchase			10,000,000
Retirement of treasury stock, shares	1,710,098
Treasury stock, shares	261,831	261,831	1,176,898	261,831
Treasury Stock [Member]
Stockholders Equity Note [Line Items]
Total number of shares purchased		795,031	1,176,898
Amount paid		1,554,674	4,516,744
Retirement of treasury stock, shares		1,710,098
Treasury Stock [Member] | 1 May 2011 - 31 May 2011 [Member]
Stockholders Equity Note [Line Items]
Total number of shares purchased			309,490
Average price paid per share			$ 4.5990
Total number of shares purchased as part of publicly Announced Plans or Programs			309,490
Amount paid			1,423,340
Approximately Dollar value of shares that may yet be purchased under the Plans or Programs			8,576,660
Treasury Stock [Member] | 1 June 2011 - 30 June 2011 [Member]
Stockholders Equity Note [Line Items]
Total number of shares purchased			470,783
Average price paid per share			$ 3.3070
Total number of shares purchased as part of publicly Announced Plans or Programs			780,273
Amount paid			1,556,886
Approximately Dollar value of shares that may yet be purchased under the Plans or Programs			7,019,773
Treasury Stock [Member] | 1 July 2011 - 31 July 2011 [Member]
Stockholders Equity Note [Line Items]
Total number of shares purchased			183,070
Average price paid per share			$ 4.0321
Total number of shares purchased as part of publicly Announced Plans or Programs			963,343
Amount paid			738,154
Approximately Dollar value of shares that may yet be purchased under the Plans or Programs			6,281,619
Treasury Stock [Member] | 1 August 2011 - 31 August 2011 [Member]
Stockholders Equity Note [Line Items]
Total number of shares purchased			117,280
Average price paid per share			$ 3.8038
Total number of shares purchased as part of publicly Announced Plans or Programs			1,080,623
Amount paid			446,107
Approximately Dollar value of shares that may yet be purchased under the Plans or Programs			5,835,512
Treasury Stock [Member] | 1 September 2011 - 31 September 2011 [Member]
Stockholders Equity Note [Line Items]
Total number of shares purchased			42,129
Average price paid per share			$ 3.6860
Total number of shares purchased as part of publicly Announced Plans or Programs			1,122,752
Amount paid			155,289
Approximately Dollar value of shares that may yet be purchased under the Plans or Programs			5,680,223
Treasury Stock [Member] | 1 December 2011 - 31 December 2011 [Member]
Stockholders Equity Note [Line Items]
Total number of shares purchased			54,146
Average price paid per share			$ 3.6877
Total number of shares purchased as part of publicly Announced Plans or Programs			1,176,898
Amount paid			196,967
Approximately Dollar value of shares that may yet be purchased under the Plans or Programs			5,483,256
Treasury Stock [Member] | 1 May 2012 - 31 May 2012 [Member]
Stockholders Equity Note [Line Items]
Total number of shares purchased		48,238
Average price paid per share		$ 2.6422
Total number of shares purchased as part of publicly Announced Plans or Programs		1,225,136
Amount paid		127,455
Approximately Dollar value of shares that may yet be purchased under the Plans or Programs		5,355,801
Treasury Stock [Member] | 1 June 2012 - 30 June 2012 [Member]
Stockholders Equity Note [Line Items]
Total number of shares purchased		197,965
Average price paid per share		$ 2.2429
Total number of shares purchased as part of publicly Announced Plans or Programs		1,423,101
Amount paid		444,041
Approximately Dollar value of shares that may yet be purchased under the Plans or Programs		4,911,760
Treasury Stock [Member] | 1 August 2012 - 31 August 2012
Stockholders Equity Note [Line Items]
Total number of shares purchased		59,369
Average price paid per share		$ 1.7733
Total number of shares purchased as part of publicly Announced Plans or Programs		1,482,470
Amount paid		105,277
Approximately Dollar value of shares that may yet be purchased under the Plans or Programs		4,806,483
Treasury Stock [Member] | 1 September 2012 - 30 September 2012
Stockholders Equity Note [Line Items]
Total number of shares purchased		227,628
Average price paid per share		$ 2.0377
Total number of shares purchased as part of publicly Announced Plans or Programs		1,710,098
Amount paid		463,838
Approximately Dollar value of shares that may yet be purchased under the Plans or Programs		4,342,645
Treasury Stock [Member] | 1 December 2012 - 31 December 2012 [Member]
Stockholders Equity Note [Line Items]
Total number of shares purchased		261,831
Average price paid per share		$ 1.5814
Total number of shares purchased as part of publicly Announced Plans or Programs		1,971,929
Amount paid		414,063
Approximately Dollar value of shares that may yet be purchased under the Plans or Programs		$ 3,928,582

XML

CONTINGENCIES AND COMMITMENTS

12 Months Ended

Dec. 31, 2012

CONTINGENCIES AND COMMITMENTS [Abstract]

CONTINGENCIES AND COMMITMENTS

21. CONTINGENCIES AND COMMITMENTS

The Group had the following contingencies and commitments as of December 31, 2012:

Guarantee

On October 13, 2012, the Company's subsidiary, Henan Green, entered into a co-financial guarantee agreement with Henan Shaolin Auto Co., Ltd, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $32.1 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee is effective through December 3, 2015.

On October 9, 2012, the Company's subsidiary, Henan Green, entered into a co-financial guarantee agreement with Henan Liantong Aluminum Co. Ltd, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment of approximately of $16.1 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee is effective through August 28, 2013.

On November 4, 2012, the Company's subsidiary, Henan Green, entered into a co-financial guarantee agreement with Henan Xibao Metallurgy Materials Group Co. Ltd, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $48.2 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee is effective through December 31, 2013.

On November 4, 2012, the Company's subsidiary, Henan Green, entered into a co-financial guarantee agreement with Zhengzhou Panhong Commerce & Trade Co Ltd, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $16.1 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee is effective through October 26, 2013.

On December 6, 2012, the Company's subsidiary, Henan Green, entered into a co-financial guarantee agreement with Henan Xinye Textile Co., Ltd. (Xinye), a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $9.6 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee is effective through December 5, 2013.

On October 31, 2011, the Company's subsidiary, Henan Green, entered into a financial guarantee agreement with Zhengzhou Aluminum Industry Co., Ltd arranged by China Citic Bank. Under the agreement, Henan Green acting as a guarantor for Zhengzhou Aluminum Industry Co., Ltd. a non-related company. Henan Green is contingent as guarantor with maximum aggregate potential amount of future payment approximately $2.4 million, plus interest accrued, legal fee, disbursement and any other compensation expense accrued. The guarantee is effective through September 7, 2014.

On November 4, 2011, the Company's subsidiary, Henan Green, entered into a financial guarantee agreement with Do-Fluoride Chemicals Co., Ltd, a non-related company. Under the agreement, Do-Fluoride Chemicals Co., Ltd is contingent as a guarantor for Zhengzhou Aluminum Industry Co., Ltd with a maximum aggregate potential amount of future payment approximately of $4.0 million and Henan Green also agreed to guarantee the future payment of Zhengzhou Aluminum Industry Co., Ltd for Do-Fluoride Chemicals Co., Ltd. The guarantee is effective through November 3, 2013.

The Company believes that Zhengzhou Aluminum Industry Co. Ltd. has experienced financial difficulties in 2012 and may not be able to perform on either its payments to the bank or its guarantees. If Zhengzhou Aluminum Industry Co. Ltd is unable to repay its debt or satisfy's it's guarantee, the Company may be required to pay up to $6.4 million related to those debts. No provision has been made in these financial statements for these potential obligations as the Company has not been called upon to date to perform under its guarantee.

Legal proceedings or claims

As of December 31, 2012 the Group's management has evaluated all such proceedings and claims, and determined that the Group was not subject to any loss contingencies either for legal proceedings or claims that would significantly affect the Company's financial condition. In addition, the management has not aware of any product liability claims arising as of December 31, 2012, and therefore, the Group has not recognized any product liability claims accrual.

XML

INCOME TAXES

12 Months Ended

Dec. 31, 2012

INCOME TAXES [Abstract]

INCOME TAXES

15. INCOME TAXES

All of the Company's income is generated in the PRC.

	For the years ended
	2012		2011		2010
Current income tax expense	$	11,897,173	$	21,961,627	$	15,937,143

The Group's income tax provision in respect of operations in PRC is calculated at the applicable tax rates on the estimated assessable profits for the year based on existing legislation, interpretations and practices in respect thereof. The standard tax rate applicable to the Group changed from 33% to 25%, effective on January 1, 2008.

A reconciliation of the expected income tax expense to the actual income tax expense for the years ended December 31, 2012, 2011 and 2010 are as follows:

	For the years ended
	2012		2011		2010
Income before tax	$	38,030,261	$	79,582,179	$	63,020,567
Expected PRC income tax expense at statutory tax rate of 25%		9,507,565		19,895,544		15,755,141
Income not subject to PRC tax		-		-		56,949
Depreciation allowance over-claimed in 2011		1,127,816		-		-
Non deductible tax expenses		1,261,792		2,066,083		125,053
Actual income tax expense	$	11,897,173	$	21,961,627	$	15,937,143

The PRC tax system is subject to substantial uncertainties and has been subject to recently enacted changes, the interpretation and enforcement of which are also uncertain. There can be no assurance that changes in PRC tax laws or their interpretation or their application will not subject the Group to substantial PRC taxes in future.

The new PRC income tax law imposes a 10% withholding income tax, subject to reduction based on tax treaty where applicable, for dividends distributed by a foreign invested enterprise to its immediate holding company outside China (5% withholding income tax for dividends paid to HK companies). Such dividends were exempted from PRC tax under the previous income tax law and regulations. The foreign investment enterprises are subject to the withholding tax beginning January 1, 2008. All of the Group's income is generated in the PRC, through Henan Green. The Company considers undistributed earnings of Henan Green as of December 31, 2012, to be permanently reinvested in the PRC. As a result, no deferred tax expense and deferred liability recorded for dividend withholding tax.

No deferred tax liability has been provided as the amount involved is immaterial. The Group has analyzed the tax positions taken or expected to be taken in its tax filings and has concluded it has no material liability related to uncertain tax positions.

For the years ended December 31, 2012, 2011 and 2010, there was no unrecognized tax benefit. Management does not anticipate any potential future adjustments in the next twelve months which would result in a material change to its financial tax position. As of December 31, 2012 and 2011, the Group did not accrue any interest and penalties.

XML

STOCKHOLDERS' EQUITY (Tables)

12 Months Ended

Dec. 31, 2012

STOCKHOLDERS' EQUITY [Abstract]

Schedule of Grants for the Year

The following grant was made in accordance with the terms of 2010 Share Incentive Plan for the year indicated.

Grant Date	Restricted Shares		Grant Price
October 1, 2012		2,100,000	$	1.78

Schedule of Share-Based Compensation Expense

The amount of compensation expense recognized is reflected in the table below for the years indicated

	2012		2011
Compensation expense	$	3,705,109	$	-

Summary of Stock Option Activity Under Stock Option and Incentive Plans

A summary of restricted stock activity under the 2010 share incentive plan for the year ended December 31, 2012 is as follows:

	Number of Shares			Weighted Average Grant Price and Fair Value
Non-vested, December 31, 2011		-			-
Shares granted		2,100,000			1.78
Vested shares		(400,000	)		1.78
Non-vested, December 31, 2012		1,700,000			1.78

Schedule of Treasury Stock

	Total number of shares purchased			Average price paid per share		Total number of shares purchased as part of publicly Announced Plans or Programs		Amount Paid		Approximately Dollar value of shares that may yet be purchased under the Plans or Programs
										$	10,000,000
1 May 2011 - 31 May 2011		309,490			4.5990		309,490		1,423,340		8,576,660
1 June 2011 - 30 June 2011		470,783			3.3070		780,273		1,556,886		7,019,773
1 July 2011 - 31 July 2011		183,070			4.0321		963,343		738,154		6,281,619
1 August 2011 - 31 August 2011		117,280			3.8038		1,080,623		446,107		5,835,512
1 September 2011 - 31 September 2011		42,129			3.6860		1,122,752		155,289		5,680,223
1 December 2011 - 31 December 2011		54,146			3.6877		1,176,898		196,967		5,483,256
1 May 2012 - 31 May 2012		48,238			2.6422		1,225,136		127,455		5,355,801
1 June 2012 - 30 June 2012		197,965			2.2429		1,423,101		444,041		4,911,760
1 August 2012 - 31 August 2012		59,369			1.7733		1,482,470		105,277		4,806,483
1 September 2012 - 30 September 2012		227,628			2.0377		1,710,098		463,838		4,342,645
1 December 2012 - 31 December 2012		261,831			1.5814		1,971,929		414,063		3,928,582
		1,971,929							6,071,418
Less: Retirement of treasury stock		(1,710,098	)
		261,831

Schedule of Assumptions of Warrants

A summary of all warrants outstanding as of December 31, 2012 and 2011 and actions relating thereto during the years then ended is presented below:

	2012			2011
Expected volatility		63.00	%		60.00	%
Expected term (in years)		1.9			2.9
Risk free rate		0.25	%		0.36	%

Summary of Warrants Activity

A summary of all warrants outstanding as of December 31, 2012 is presented below:

	Warrants			Exercise Price		Terms
Balance as of December 31, 2010		15,191,108
Exercised		(13,294,775	)		5.00		-
Expired		(1,752,333	)
Balance as of December 31, 2011		144,000		$	6.00		2.9 years
Granted		-
Exercised		-
Expired		-
Outstanding as of December 31, 2012		144,000		$	6.00		1.9 years

Schedule of Retained Earnings

Retained earnings as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Retained earnings	$	151,890,125	$	128,896,723
Statutory surplus reserves		11,385,921		8,246,235
	$	163,276,046	$	137,142,958

Schedule of Statutory Reserves

A supplemental information of the movement of statutory surplus reserves and registered capital of Henan Green as of December 31, 2012 and 2011 are as follow:

	Statutory  surplus		Registered		Percentage
	reserves		capital		reached
At December 31, 2011	$	8,246,235	$	83,603,944		10	%
Statutory surplus reserves transferred from net profits		3,139,686		-		14	%
At December 31, 2012	$	11,385,921	$	83,603,944

XML

STOCKHOLDERS' EQUITY (Warrant Activity) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
STOCKHOLDERS' EQUITY [Abstract]
Balance	144,000	15,191,108
Exercised		(13,294,775)	(2,142,959)
Expired		(1,752,333)
Balance	144,000	144,000	15,191,108
Balance, Exercise Price	$ 6.00
Exercised		$ 5.00	$ 5.00
Balance, Exercise Price	$ 6.0	$ 6.00
Terms, outstanding	1 year 10 months 24 days	2 years 10 months 24 days

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Earnings Per Share) (Details) (USD $)	3 Months Ended				12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Schedule Of Earnings Per Share Basic And Diluted Reconciliation [Line Items]
Net income	$ (534,383)	$ 2,381,586	$ 10,275,277	$ 14,010,608	$ 26,133,088	$ 57,620,552	$ 47,083,424
Weighted-average shares outstanding	59,769,786	57,935,604	58,203,179	58,251,680	58,543,076	56,297,652	43,891,670
Diluted weighted average outstanding shares	59,769,786	57,935,604	58,203,179	58,251,680	58,543,076	56,297,652	46,655,721
- Basic	$ (0.01)	$ 0.04	$ 0.18	$ 0.24	$ 0.45	$ 1.02	$ 1.07
- Diluted	$ (0.01)	$ 0.04	$ 0.18	$ 0.24	$ 0.45	$ 1.02	$ 1.01
Warrant [Member]
Schedule Of Earnings Per Share Basic And Diluted Reconciliation [Line Items]
Diluted weighted average outstanding shares							2,584,713
Options Granted To Underwriters [Member]
Schedule Of Earnings Per Share Basic And Diluted Reconciliation [Line Items]
Diluted weighted average outstanding shares							179,338

XML

DEPOSIT ON ACQUISITION OF FUTURE LAND USE RIGHT (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Subsequent Event [Member]	Dec. 31, 2012 Henan Green [Member] acre	Dec. 31, 2012 Zhengzhou Company [Member] acre	Dec. 31, 2012 Zhengzhou Company [Member] Henan Green [Member]	Feb. 26, 2013 Zhengzhou Company [Member] Henan Green [Member] Subsequent Event [Member]
Business Acquisition [Line Items]
Deposit on acquisition of future land use right	$ 24,076,660	$ 12,710,719	$ 24,076,660			$ 12,840,885
Area of land				6.69	24.94
Ownership percentage	100.00%						100.00%
Business acquisition, assumed obligation						11,235,775
Total purchase consideration							$ 43,630,631

XML

PROPERTY, PLANT AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2012

PROPERTY, PLANT AND EQUIPMENT [Abstract]

Schedule of Property, Plant and Equipment

Property, plant and equipment as of December 31, 2012 and 2011 consist of the following:

	2012			2011
Buildings	$	24,976,660		$	24,781,774
Leasehold land improvement		22,102			21,878
Machinery and equipment		106,179,264			104,318,990
Vehicles		3,216,660			3,261,984
Office equipment		419,456			387,815
Construction in progress		34,969,529			14,696,770
		169,783,671			147,469,211
Less: Accumulated depreciation		(35,673,014	)		(24,773,965	)
	$	134,110,657		$	122,695,246

Schedule of Construction in Progress

	Balance at 2012		Estimated cost to complete as of December 31, 2013		Estimated time to complete
Production lines	$	15,080,014	$	168,536	June, 2013
Plant		6,983,931		6,142,664	April, 2013
Staff quarters		12,905,584		6,484,153	October, 2013
	$	34,969,529	$	12,795,353

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2012

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Summary of exchange rates

The exchange rates used to translate amounts in RMB and HK$ into U.S. Dollars for the purposes of preparing the consolidated financial statements are as follows:

	2012	2011	2010
Balance sheet items, except for equity accounts	RMB6.2301=$1	RMB6.2939=$1	RMB6.6000=$1
	HK$7.7507=$1	HK$7.7663=$1	HK$7.7810=$1

	For the years ended
	2012	2011	2010
Items in statements of income and cash flows	RMB6.2990=$1	RMB6.4475=$1	RMB6.7604=$1
	HK$7.7556=$1	HK$7.7793=$1	HK$7.7700=$1

Schedule of Estimated Useful Life of Property, Plant and Equipment

The estimated useful lives of the assets are as follows:

	Estimated Life (years)
Leasehold land improvement		46.5
Buildings		10 - 20
Machinery and equipment		5 - 20
Vehicles		5
Furniture fixtures and office equipment		5

Schedule of the Computation of Basic and Diluted Net Income per Common Share

The following table sets forth the computation of basic and diluted net income per common share:

	For the years ended
	2012		2011		2010
Net income	$	26,133,088	$	57,620,552	$	47,083,424
Weighted average outstanding shares of common stock		58,543,076		56,297,652		43,891,670
Dilutive effect of Warrants		-		-		2,584,713
Dilutive effect of Unit Purchase Option granted to underwriters		-		-		179,338
Diluted weighted average outstanding shares		58,543,076		56,297,652		46,655,721
Earnings per common stock:
Basic	$	0.45	$	1.02	$	1.07
Diluted	$	0.45	$	1.02	$	1.01

XML

CASH (Tables)

12 Months Ended

Dec. 31, 2012

CASH [Abstract]

Schedule of Cash

Cash as of December 31, 2012 and 2011 consists of the following:

	2012			2011
Bank balances and cash (a)	$	390,646,863		$	364,731,170
Less: Restricted cash (b)		(145,413,726	)		(118,130,253	)
Less: Certificates of deposit (c )		(16,372,128	)		-
	$	228,861,009		$	246,600,917
Non-current portion
Certificates of deposit (c )	$	3,210,221		$	3,177,679

(a) Bank balances and cash

Unrestricted cash as of December 31, 2012 and 2011 was $228,861,009 and $246,600,917, respectively. As of December 31, 2012 and 2011, unrestricted cash of $221,014,759 and $234,778,502 was held respectively, in Renminbi and USD on deposit with banks located in the PRC. Renminbi is not a freely convertible currency and the remittance of funds out of the PRC is subject to the exchange restrictions imposed by the PRC government.

(b) Restricted cash

As of December 31, 2012 and 2011 the Group's cash amounting to $145,413,726 and $118,130,253 respectively, were restricted and deposited in certain banks as security for notes payable to the banks.

(c) Certificates of deposit

Current portion:

As of December 31, 2012, six of the Certificates of deposit were held in Renminbi on deposit with a bank located in the PRC. The annual interest rate is 2.8% and 3.08%. The Certificates of deposit mature from February, 2013 to May, 2013.

Non-current portion:

As of December 31, 2012, the Certificates of deposit were held in Renminbi on deposit with a bank located in the PRC. The annual interest rate is 5%. The Certificates of deposit matures on December 12, 2014.

Schedule of Cash Classified by Geographic Area

As of December 31, 2012, cash is classified by geographical areas is set out as follows:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2012
Hong Kong	$	5,917,837	$	-	$	-	$	5,917,837
United States		1,928,413		-		-		1,928,413
The PRC		221,014,759		145,413,726		19,582,349		386,010,834
	$	228,861,009	$	145,413,726	$	19,582,349	$	393,857,084

As of December 31, 2011, cash is classified by geographical areas is set out as follows:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2011
Hong Kong	$	8,339,234	$	-	$	-	$	8,339,234
United States		3,483,181		-		-		3,483,181
The PRC		234,778,502		118,130,253		3,177,679		356,086,434
	$	246,600,917	$	118,130,253	$	3,177,679	$	367,908,849

Schedule of Foreign Currency Cash Balances

As of December 31, 2012, cash is denominated in the following currencies:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2012
USD	$	7,906,574	$	-	$	-	$	7,906,574
RMB (Current)		220,942,109		145,413,726		16,372,128		382,727,963
RMB (Non-current)		-		-		3,210,221		3,210,221
HKD		12,326		-		-		12,326
	$	228,861,009	$	145,413,726	$	19,582,349	$	393,857,084

As of December 31, 2011, cash is denominated in the following currencies:

	Bank balances and cash		Restricted Cash		Certificates of deposit		2011
USD	$	11,821,253	$	-	$	-	$	11,821,253
RMB		234,778,502		118,130,253		3,177,679		356,086,434
HKD		1,162		-		-		1,162
	$	246,600,917	$	118,130,253	$	3,177,679	$	367,908,849

XML

INVENTORIES

12 Months Ended

Dec. 31, 2012

INVENTORIES [Abstract]

INVENTORIES

5. INVENTORIES

Inventories as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Raw materials	$	7,865,191	$	10,967,758
Work-in-process		3,491,181		3,007,200
Finished goods		11,406,173		10,488,184
	$	22,762,545	$	24,463,142

An impairment provision of $0.48 million has been made in 2012 owing to the decline in steel market price.

XML

PROPERTY, PLANT AND EQUIPMENT (Production Lines) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Construction in Progress, Gross	$ 34,969,529
Estimated cost to complete construction	12,795,353
Production Lines [Member]
Property, Plant and Equipment [Line Items]
Construction in Progress, Gross	15,080,014
Estimated cost to complete construction	168,536
Estimated time to complete	June, 2013
Plant [Member]
Property, Plant and Equipment [Line Items]
Construction in Progress, Gross	6,983,931
Estimated cost to complete construction	6,142,664
Estimated time to complete	April, 2013
Staff Quarters [Member]
Property, Plant and Equipment [Line Items]
Construction in Progress, Gross	12,905,584
Estimated cost to complete construction	$ 6,484,153
Estimated time to complete	October, 2013

XML

SUBSEQUENT EVENT (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2012 Subsequent Event [Member]	Dec. 31, 2012 Subsequent Event [Member] Scenario, Previously Reported [Member]	Dec. 31, 2012 Henan Green [Member] Zhengzhou Company [Member]	Feb. 26, 2013 Henan Green [Member] Zhengzhou Company [Member] Subsequent Event [Member]
Subsequent Event [Line Items]
Ownership percentage	100.00%						100.00%
Deposit on acquisition of business					$ 24,076,660
Deposit payment to investing business					11,112,875
Deposit on acquisition of future land use right	24,076,660	12,710,719		24,076,660		12,840,885
Payments For Acquisition Of Future Land Use Rights	11,112,875	10,213,261	2,093,071	11,112,875
Land use right							17,444,274
Cash consideration							43,630,631
Difference							$ 26,186,357

XML

SUBSEQUENT EVENT

12 Months Ended

Dec. 31, 2012

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

22. SUBSEQUENT EVENT

Acquisition of Future Land Use Right

On February 26, 2013, Henan Green Complex Materials Co., Ltd. ("Henan Green"), the indirectly wholly owned subsidiary of the Company, entered into an equity/asset transfer agreement ("the "Equity Transfer Agreement") with the Zhengzhou Company pursuant to which Henan Green acquired 100% ownership of Zhengzhou Company.

The business combination and related deposits in previous consolidated financial statements for the year ended December 31, 2012 dated April 30, 2013 have been re-characterized as an acquisition of future land use rights as the Company has determined that this presentation better reflects the substance of the transaction.. As a result, certain revisions were made to the notes to the consolidated financial statements which are reflected in Notes 10, 17, 22. In addition, the Company revised the consolidated balance sheet as of December 31, 2012 by reclassifying amounts totaling $24,076,660 previously reported as "Deposit on acquisition of business" to "Deposits on acquisition of future land use right" and revised certain cash flows from investing activities in the consolidated statement of cash flows for the year ended December 31, 2012 by reclassifying amounts totaling $11,112,875 from "Deposit payment to investing business" to "Payment of acquisition of future land use right."

The following table summarizes the carryover of the historical cost of the land use right of Zhengzhou Company at the acquisition date.

Land use right	$	17,444,274
Cash consideration		43,630,631
Difference	$	26,186,357

100% of the above difference was recorded in related earnings as dividend paid because it was acquired from a related party.

Acquisition of future land use right at cost values which was translated at closing rate of June 30, 2013. Based on the independent appraisal report, no impairment was recognized as of December 31, 2012.

The Equity Transfer Agreement and the transactions contemplated thereby were approved by both the Company's Board of Directors and the Audit Committee of the Board, which consists of three independent directors.

XML

TERM LOANS (Tables)

12 Months Ended

Dec. 31, 2012

TERM LOANS [Abstract]

Schedule of Short Term Loans

In order to provide working capital for operations, the Group entered into the following short term loan agreements as of December 31, 2012 and 2011:

	2012			2011
Classified by financial institutions:
China Citic Bank	$	6,420,443		$	3,177,680
China Merchants Bank		9,630,664			7,944,200
Bank of Zhengzhou		7,704,531			7,626,431
Shanghai Pudong Development Bank		16,051,107			11,121,880
Bank of Luoyang		-			9,533,040
Bank of Xuchang		4,815,332			4,766,520
China Everbright Bank		1,605,111			-
Commercial Bank of Kaifeng		3,210,221			-
Ping An Bank		8,025,553			-
	$	57,462,962		$	44,169,751
Additional information:
Maximum balance outstanding during the year	$	62,278,294		$	44,884,729
Interest expense	$	3,525,936		$	2,912,292
Range of interest rate		0.465% - 1.205	%		0.347% - 0.868	%
Weighted average interest rate		3.29	%		3.27	%

Schedule of Debt

A summary of the principal payments for the outstanding term loans during the following fiscal year is as follows:

			Principal payment		Total outstanding
Name of bank	Collateral	Term of loans	due during 2012		loan amount
China Citic Bank	Secured by Henan Green's assets	August 21, 2012 to March 16, 2013	$	3,210,221	$	3,210,221
China Citic Bank	Secured by Henan Green's assets	December 7, 2012 to July 7, 2013		1,605,111		1,605,111
China Citic Bank	Secured by Henan Green's assets	December 19, 2012 to July 19, 2013		1,605,111		1,605,111
China Merchants Bank	Guaranteed by third party, Mingwang Lu and Yi Lu	August 31, 2012 to August 31, 2013		4,815,332		4,815,332
China Merchants Bank	Guaranteed by third party, Mingwang Lu and Yi Lu	September 10, 2012 to September 10, 2013		4,815,332		4,815,332
Bank of Zhengzhou	Guaranteed by third party	August 31, 2012 to August 31, 2013		4,815,332		4,815,332
Bank of Zhengzhou	Secured by Henan Green's bank deposit	December 12, 2012 to December 12, 2013		2,889,199		2,889,199
Shanghai Pudong Development Bank	Guaranteed by third party, Mingwang Lu	February 1, 2012 to January 31, 2013		2,247,155		2,247,155
Shanghai Pudong Development Bank	Guaranteed by third party, Mingwang Lu	February 24, 2012 to February 23, 2013		2,568,177		2,568,177
Shanghai Pudong Development Bank	Secured by Henan Green's land, Mingwang Lu	March 16, 2012 to March 15, 2013		1,605,111		1,605,111
Shanghai Pudong Development Bank	Secured by Henan Green's land, Mingwang Lu	November 28, 2012 to November 27, 2013		4,815,332		4,815,332
Shanghai Pudong Development Bank	Guaranteed by third party, Mingwang Lu	November 27, 2012 to November 26, 2013		4,815,332		4,815,332
Ping An Bank	Guaranteed by third party	December 03, 2012 to December 03, 2013		8,025,553		8,025,553
Bank of Xuchang	Guaranteed by third party	April 27, 2012 to April 25, 2013		4,815,332		4,815,332
China Everbright Bank	Guaranteed by third party & Mingwang Lu and Yi Lu	July 20, 2012 to July 19, 2013		1,605,111		1,605,111
Commercial Bank of Kaifeng	Guaranteed by third party & Mingwang Lu	August 23, 2012 to August 22, 2013		3,210,221		3,210,221
			$	57,462,962	$	57,462,962

XML

PROPERTY, PLANT AND EQUIPMENT

12 Months Ended

Dec. 31, 2012

PROPERTY, PLANT AND EQUIPMENT [Abstract]

PROPERTY, PLANT AND EQUIPMENT

8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of December 31, 2012 and 2011 consist of the following:

	2012			2011
Buildings	$	24,976,660		$	24,781,774
Leasehold land improvement		22,102			21,878
Machinery and equipment		106,179,264			104,318,990
Vehicles		3,216,660			3,261,984
Office equipment		419,456			387,815
Construction in progress		34,969,529			14,696,770
		169,783,671			147,469,211
Less: Accumulated depreciation		(35,673,014	)		(24,773,965	)
	$	134,110,657		$	122,695,246

During the year, none of the Company's plant was transferred to fixed assets from Construction in progress.

Depreciation expense for the years ended December 31, 2012, 2011 and 2010 was $10,899,049, $7,994,638 and $3,149,314 respectively.

Construction in progress consists of the construction of a plant and production lines on 300 acres of land and the improvement project on the 300,000 tons production lines and plant facilities and the staff quarters project. The total construction in progress as at December 31, 2012 and 2011 was $34,969,529 and $14,696,770 respectively.

	Balance at 2012		Estimated cost to complete as of December 31, 2013		Estimated time to complete
Production lines	$	15,080,014	$	168,536	June, 2013
Plant		6,983,931		6,142,664	April, 2013
Staff quarters		12,905,584		6,484,153	October, 2013
	$	34,969,529	$	12,795,353

The Company's subsidiary, Henan Green, signed an agreement to construct addition of the new laminated steel production line. The new production line is subject to further testing and technical upgrades until the second quarter of 2013 when official production will be launched. Plant includes the decoration expenses incurred for the new plant and electricity system installation. It is expected to be completed before April 2013. The Company improved the staffs' benefits and constructed a staff quarter for the experience staffs and their family to live, it is estimated to be completed before year-ended.

No depreciation has been provided for construction in progress.

XML

CONDENSED PARENT COMPANY FINANCIAL INFORMATION (Condensed Statement of Income) (Details) (USD $)	3 Months Ended				12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Condensed Financial Statements, Captions [Line Items]
General and administrative expenses	$ (5,738,929)	$ (2,548,672)	$ (2,511,170)	$ (2,369,361)	$ (13,168,132)	$ (10,707,418)	$ (7,795,722)
Net income	(534,383)	2,381,586	10,275,277	14,010,608	26,133,088	57,620,552	47,083,424
Parent Company [Member]
Condensed Financial Statements, Captions [Line Items]
General and administrative expenses					(2,419,836)	(9,439,791)	(2,059,737)
Equity income of subsidiaries					28,552,924	67,060,343	49,143,161
Net income					$ 26,133,088	$ 57,620,552	$ 47,083,424

XML

STOCKHOLDERS' EQUITY (Summary of Restricted Stock Activity) (Details) (Share Incentive Plan [Member], USD $)	12 Months Ended
	Dec. 31, 2012
Share Incentive Plan [Member]
Number of Shares
Balance
Shares granted	2,100,000
Vested shares	$ (400,000)
Balance	1,700,000
Weighted Average Grant Price and Fair Value
Shares granted	$ 1.78
Vested shares	$ 1.78
Balance	$ 1.78

XML

ACCOUNTS RECEIVABLE

12 Months Ended

Dec. 31, 2012

ACCOUNTS RECEIVABLE [Abstract]

ACCOUNTS RECEIVABLE

4. ACCOUNTS RECEIVABLE

The Group performs ongoing credit evaluations of its customers' financial conditions. The Group generally encourages its customers to use its products and settle the outstanding balance within credit terms. As of December 31, 2012 and 2011, the provision on accumulated allowance for doubtful accounts was $125,993 and $124,715 respectively.

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) (USD $)	12 Months Ended
	Dec. 31, 2010 Private Placement [Member]
Issuance of shares, expenses	$ 863,676

XML

CONDENSED PARENT COMPANY FINANCIAL INFORMATION (Condensed Balance Sheets) (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Assets
Cash	$ 228,861,009	$ 246,600,917	$ 119,477,298	$ 79,607,369
Total assets	673,369,602	601,076,208
Current Liabilities
Accrued liabilities and other payables	5,818,060	15,276,016
Total liabilities	343,302,282	302,648,372
Stockholders' Equity
Common stock	140,418,118	140,418,118
Additional paid-in capital	4,978,698	6,930,944
Treasury stock	(414,063)	(4,516,744)
Retained earnings	163,276,046	137,142,958
Accumulated comprehensive income	21,808,521	18,452,560	7,414,409
Total stockholders' equity	330,067,320	298,427,836	167,812,002	87,042,857
Total liabilities and stockholders' equity	673,369,602	601,076,208
Parent Company [Member]
Assets
Cash	7,645,949	11,621,907	5,552,387	5,881,689
Investments in subsidiaries	322,526,371	286,912,377
Total assets	330,172,320	298,534,284
Current Liabilities
Accrued liabilities and other payables	105,000	106,448
Total liabilities	105,000	106,448
Stockholders' Equity
Common stock	140,418,118	140,418,118
Additional paid-in capital	4,978,698	6,930,944
Treasury stock	(414,063)	(4,516,744)
Retained earnings	163,276,046	137,142,958
Accumulated comprehensive income	21,808,521	18,452,560
Total stockholders' equity	330,067,320	298,427,836
Total liabilities and stockholders' equity	$ 330,172,320	$ 298,534,284

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	12 Months Ended		12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Minimum [Member]	Dec. 31, 2012 Maximum [Member]	Dec. 31, 2012 Foreign Exchange RMB [Member]	Dec. 31, 2011 Foreign Exchange RMB [Member]	Dec. 31, 2010 Foreign Exchange RMB [Member]	Dec. 31, 2012 Foreign Exchange HKD [Member]	Dec. 31, 2011 Foreign Exchange HKD [Member]	Dec. 31, 2010 Foreign Exchange HKD [Member]
Accounting Policies [Line Items]
Foreign exchange rate					6.2301	6.2939	6.600	7.7507	7.7663	7.7810
Average exchange rate					6.2990	6.4475	6.7604	7.7556	7.7793	7.7700
Notes receivable	$ 433,379	$ 568,328
Land use rights amortization period			43 years	50 years
VAT added to invoices	17.00%

XML

OPERATING LEASE COMMITMENTS (Tables)

12 Months Ended

Dec. 31, 2012

OPERATING LEASE COMMITMENTS [Abstract]

Schedule of Future Minimum Payments under Operating Leases

The total future minimum lease payments under non-cancellable operating leases as of December 31, 2012 are payable as follows:

Years Ended December 31,	Reservoir rental
2013	$	16,051
2014		16,051
2015		16,051
2016		16,051
2017		16,051
Over five years		256,816
	$	337,071

XML

INCOME TAXES (Narrative) (Details)	12 Months Ended
	Dec. 31, 2012
Income Tax Disclosure [Line Items]
Withholding income tax percentage	10.00%
HONG KONG [Member]
Income Tax Disclosure [Line Items]
Withholding income tax percentage	5.00%

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policy)

12 Months Ended

Dec. 31, 2012

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Basis of presentation

(a) Basis of presentation

The accompanying audited consolidated financial statements and related notes have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP). The preparation of the consolidated financial statements in accordance with US GAAP requires management of the Group to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include the recoverability of the carrying amount and the estimated useful lives of long-lived assets; valuation allowances for receivables, realizable values for inventories. Actual results could differ from those estimates.

The consolidated financial statements include all accounts of the Company and its wholly-owned subsidiaries. All material inter-company balances and transactions have been eliminated.

Foreign currency translation

(b)     Foreign currency translation

The Group uses United States dollars ("U.S. Dollar" or "US$" or "$") for financial reporting purposes. The Company maintains its books and records in its respective functional currency, Chinese Renminbi ("RMB") and Hong Kong dollars ("HK$"), being the lawful currency in the PRC and Hong Kong, respectively. Assets and liabilities of the subsidiaries are translated from RMB or HK$ into U.S. Dollars using the applicable exchange rates prevailing at the balance sheet date. Items on the statements of income and comprehensive income and cash flows are translated at average exchange rates during the reporting period. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the Company's financial statements are recorded as accumulated other comprehensive income included in the stockholders' equity section of the balance sheets. The exchange rates used to translate amounts in RMB and HK$ into U.S. Dollars for the purposes of preparing the consolidated financial statements are as follows:

	2012	2011	2010
Balance sheet items, except for equity accounts	RMB6.2301=$1	RMB6.2939=$1	RMB6.6000=$1
	HK$7.7507=$1	HK$7.7663=$1	HK$7.7810=$1

	For the years ended
	2012	2011	2010
Items in statements of income and cash flows	RMB6.2990=$1	RMB6.4475=$1	RMB6.7604=$1
	HK$7.7556=$1	HK$7.7793=$1	HK$7.7700=$1

Cash

(c) Cash

Cash represents cash in banks and cash on hand.

The Group considers all highly liquid investments with original maturities of three months or less to be cash. The Group maintains bank accounts in HKSAR and Mainland China, PRC and the United States.

Accounts receivable

(d) Accounts receivable

Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts sales returns and trade discounts. The allowance for doubtful accounts is the Group's best estimate of the amount of probable credit losses in the Group's existing accounts receivable. Management determines the allowance based on historical write-off experience, customer specific facts and economic conditions. The Group has historically been able to collect all of its receivable balances, and accordingly, 10% allowance has been provided for specific doubtful accounts.

Outstanding account balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Group does not have any off-balance-sheet credit exposure to its customers.

Notes receivable

(e) Notes receivable

As of December 31, 2012, the Company received $433,379 in notes receivable in full payment of outstanding accounts receivable. The notes mature in 6 months. All notes are non-interest bearing. In management's opinion, the remaining balance is fully collectible.

Inventories

(f) Inventories

Inventories are stated at the lower of cost or market and consist primarily of flat rolled steel. Cost is determined using the weighted average cost method. In the case of work in process and finished goods, such costs comprise of direct materials, direct labor and an appropriate proportion of overheads.

Property, plant and equipment

(g) Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to general and administrative expenses as incurred. Depreciation of property, plant and equipment is computed by the straight-line method over the assets estimated useful lives ranging from five to fifty years. Building improvements, if any, are amortized on a straight-line basis over the estimated useful life.

Upon sale or retirement of property, plant and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations.

Construction in progress represents the costs of property, plant and equipment under construction or installation. Depreciation commences when the asset is placed in service. The accumulated costs are reclassified as property, plant and equipment when installation or construction is completed. Government subsidies received reduce the cost of construction.

The estimated useful lives of the assets are as follows:

	Estimated Life (years)
Leasehold land improvement		46.5
Buildings		10 - 20
Machinery and equipment		5 - 20
Vehicles		5
Furniture fixtures and office equipment		5

Expenditures for repairs and maintenance, which do not extend the useful life of the assets, are expensed as incurred.

Land use right

(h) Land use right

Land use right is recorded at cost less accumulated amortization. Land use rights represent the prepayments for the use of the parcels of land in the PRC where the Company's production facilities are located, and are charged to expense over their respective lease periods. According to the laws of the PRC, the government owns all of the land in the PRC. Companies or individuals are authorized to possess and use the land only through land use rights granted by the PRC government. Land use right is amortized using the straight-line method over the lease term of 43 to 50 years.

Impairment of long-lived assets

(i) Impairment of long-lived assets

In accordance with FASB ASC Topic 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. If long-lived assets are to be disposed, depreciation is discontinued, if applicable, and the assets are reclassified as held for sale at the lower of their carrying amounts or fair values less costs to sell.

China Gerui has one and only operating entity, i.e., Henan Green, whose sole business is high-end cold-rolled steel processing. The company produces products by utilizing its facilities and equipment at one location in Zhengzhou, Henan Province, China. The company offers chromium-plating as value-add service to its customers but chromium-plating is an integral part of the whole production process of the Company rather than a stand-alone service. As a result, the Group determined that the impairment review is appropriately evaluated at the entity level. Based on the Group's assessment, no impairment was recognized as of December 31, 2012 and 2011.

Fair value measurements

(j) Fair value measurements

FASB ASC Topic 820, "Fair Value Measurement and Disclosures" defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. FASB ASC Topic 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company's assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2 - Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The Group's financial instruments consist principally of cash, accounts receivables, accounts payable, land use right payable, term loans, notes payables and accrued liabilities. None of which are held for trading purposes. Pursuant to ASC 820, the fair value of the Group's cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The Group believes that the carrying amounts of all of the Group's other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Revenue recognition

(k) Revenue recognition

The Group generates revenue primarily from sales of steel mill flat-rolled products.

The Group recognizes its revenue upon the transfer of finished products to customers upon shipment from the Group's facilities. The Group sets the final price for a product based on the management's final measurement of the weight and dimensions of the product and confirmation that the product meets the customer's specifications as agreed in the original customer's order. The Group grants a three-week period for customers to dispute product quality. Based on the Group's assessment and past experiences, the rate of customer disputes are considered immaterial.

In the PRC, value added tax ("VAT") of 17% on the invoice amount is collected with respect to the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Group; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the tax authorities.

Income taxes

(l) Income taxes

The Group accounts for income taxes under FASB ASC Topic 740 "Income Taxes". Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be effective when the differences are expected to reverse.

Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of income in the period that includes the enactment date.

The Group adopted FASB ASC Topic 740, "Income Taxes", which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken in the tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

The Group recognizes interest and penalty related to income tax matters as income tax expense. As of December 31, 2012 and 2011, there was no penalty or interest recognized as income tax expenses.

Commitments and contingencies

(m) Commitments and contingencies

In the normal course of business, the Group is subject to contingencies, including legal proceedings and claims arising out of the normal course of businesses that relate to a wide range of matters, including among others, product liability. The Group records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments including past history, scientific evidence and the specifics of each matter. A determination of the amount of reserves and disclosures required, if any, for these contingencies are made after considerable analysis of each individual issue. The Group accrues for contingent liabilities when an assessment of the risk of loss is probable and can be reasonably estimated. The Group discloses contingent liabilities when the risk of loss is reasonably possible or probable. (See Note 22)

Share-based compensation expense

(n) Share-based compensation expense

The Company accounts for share-based compensation issued to its directors and its officers using the fair value based methodology in accordance with relevant accounting guidance. Compensation cost related to restricted common shares issued to the Company's directors and officers are measured at its estimated fair value at the grant date, and is amortized and expensed over the vesting period on a straight-line basis.

Earnings per share

(o) Earnings per share

Basic earnings per share are computed on the basis of the weighted-average number of shares of our common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted-average number of shares of our common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury method. As of December 31, 2012, the Company had a total of 144,000 warrants outstanding which were granted to its underwriter during November 2009 in connection with the sale of 4,800,000 ordinary shares. The warrants may be exercised on or after August 9, 2010 and until November 9, 2014. As of December 31, 2012, all such warrants are deemed to be anti-dilutive since their exercise price is higher than the fair value the Company's common stock.

The following table sets forth the computation of basic and diluted net income per common share:

	For the years ended
	2012		2011		2010
Net income	$	26,133,088	$	57,620,552	$	47,083,424
Weighted average outstanding shares of common stock		58,543,076		56,297,652		43,891,670
Dilutive effect of Warrants		-		-		2,584,713
Dilutive effect of Unit Purchase Option granted to underwriters		-		-		179,338
Diluted weighted average outstanding shares		58,543,076		56,297,652		46,655,721
Earnings per common stock:
Basic	$	0.45	$	1.02	$	1.07
Diluted	$	0.45	$	1.02	$	1.01

Segment information

(p) Segment information

FASB ASC Topic 280 "Segment reporting" establishes standards for reporting information on operating segments in interim and annual financial statements. The Group has only one segment, all of the Group's operations and customers are in the PRC and all income are derived from the sales of steel mill flat-rolled products. Accordingly, no geographic information is presented.

Economic and political risks

(q) Economic and political risks

The Group's operations are conducted in the PRC. Accordingly, the Group's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Group's operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Group's results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances aboard, and rates and methods of taxation, among other things.

Recently issued accounting standards not yet adopted

(r) Recently issued accounting standards not yet adopted

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's financial condition, results of operations, or disclosures.

XML

INCOME TAXES (Effective Income Tax Reconciliation) (Details) (USD $)	3 Months Ended				12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
INCOME TAXES [Abstract]
Income before tax	$ (169,477)	$ 4,018,005	$ 15,411,287	$ 18,770,446	$ 38,030,261	$ 79,582,179	$ 63,020,567
Expected PRC income tax expense at statutory tax rate of 25%					9,507,565	19,895,544	15,755,141
Income not subject to PRC tax							56,949
Depreciation allowance over-claimed in 2011					1,127,816
Non deductible tax expenses					1,261,792	2,066,083	125,053
Actual income tax expense	$ 364,906	$ 1,636,419	$ 5,136,010	$ 4,759,838	$ 11,897,173	$ 21,961,627	$ 15,937,143

XML

CONTINGENCIES AND COMMITMENTS (Details) (Henan Green [Member], USD $)	0 Months Ended
	Dec. 06, 2012	Nov. 04, 2012	Oct. 13, 2012	Oct. 09, 2012	Nov. 04, 2011	Oct. 31, 2011	Dec. 31, 2012
Henan Green [Member]
Commitments And Contingencies [Line Items]
Loss contingency possible amount	$ 9,600,000	$ 48,200,000	$ 32,100,000	$ 16,100,000	$ 4,000,000	$ 2,400,000	$ 6,400,000
Loss contingency possible amount agreement two		$ 16,100,000
Loss contingency minimum guarantee percentage	120.00%	120.00%	120.00%	120.00%
Loss contingency minimum guarantee percentage agreement two		120.00%
Guarantee termination date	2013-12-05	2013-12-31	2015-12-03	2013-08-28	2014-09-07	2013-11-03
Guarantee termination date agreement two		2013-10-26

XML

NOTES PAYABLE (Classified by Financial Institutions) (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Short-term Debt [Line Items]
Notes Payable Current	$ 259,546,395	$ 204,880,916
China Citic Bank [Member]
Short-term Debt [Line Items]
Notes Payable Current	35,312,435	42,580,912
Bank Of Zhengzhou [Member]
Short-term Debt [Line Items]
Notes Payable Current	6,420,443	9,533,040
Minsheng Bank of China [Member]
Short-term Debt [Line Items]
Notes Payable Current	19,261,328	24,229,810
Guangdong Development Bank [Member]
Short-term Debt [Line Items]
Notes Payable Current	22,471,549	14,299,560
Shanghai Pudong Development Bank [Member]
Short-term Debt [Line Items]
Notes Payable Current	25,681,771	15,888,400
China Merchants Bank [Member]
Short-term Debt [Line Items]
Notes Payable Current	11,235,775	16,523,936
China Everbright Bank [Member]
Short-term Debt [Line Items]
Notes Payable Current	27,286,881	19,066,080
Bank Of Luoyang [Member]
Short-term Debt [Line Items]
Notes Payable Current	43,337,988	24,627,020
Bank Of Communications [Member]
Short-term Debt [Line Items]
Notes Payable Current	22,792,572	12,710,720
Bank Of Pingdingshan [Member]
Short-term Debt [Line Items]
Notes Payable Current	32,102,213	25,421,438
Bank Of Xuchan [Member]
Short-term Debt [Line Items]
Notes Payable Current	2,407,666
Commercial Bank Of Kaifeng [Member]
Short-term Debt [Line Items]
Notes Payable Current	4,815,332
Huaxia Bank [Member]
Short-term Debt [Line Items]
Notes Payable Current	1,605,111
Ping An Bank [Member]
Short-term Debt [Line Items]
Notes Payable Current	$ 4,815,331

XML

INVENTORIES (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
INVENTORIES [Abstract]
Raw materials	$ 7,865,191	$ 10,967,758
Work in process	3,491,181	3,007,200
Finished goods	11,406,173	10,488,184
Inventory, Net, Total	22,762,545	24,463,142
Inventory impairment provision	$ 480,000

XML

SUNDRY INCOME (Details) (USD $)	3 Months Ended				12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Component of Other Income, Nonoperating [Line Items]
Sundry income	$ 146,525	$ 21,310	$ 24,911	$ 158,737	$ 351,483	$ 602,247	$ 270,240
Local Governement Subsidies [Member]
Component of Other Income, Nonoperating [Line Items]
Sundry income					158,755	449,786	227,797
Transfer From Advances Accounts Payable And Other Receivables [Member]
Component of Other Income, Nonoperating [Line Items]
Sundry income					57,571	11,835	542
Subcontracting Income [Member]
Component of Other Income, Nonoperating [Line Items]
Sundry income						19,565
Gain On Disposal Of Motor Vehicles [Member]
Component of Other Income, Nonoperating [Line Items]
Sundry income					63,876
Others [Member]
Component of Other Income, Nonoperating [Line Items]
Sundry income					$ 71,281	$ 121,061	$ 41,901

XML

NOTES PAYABLE

12 Months Ended

Dec. 31, 2012

NOTES PAYABLE [Abstract]

NOTES PAYABLE

11. NOTES PAYABLE

Notes payable as of December 31, 2012 and 2011 consist of the following:

	2012			2011
Classified by financial institutions:
China Citic Bank	$	35,312,435		$	42,580,912
Bank of Zhengzhou		6,420,443			9,533,040
Minsheng Bank of China		19,261,328			24,229,810
Guangdong Development Bank		22,471,549			14,299,560
Shanghai Pudong Development Bank		25,681,771			15,888,400
China Merchants Bank		11,235,775			16,523,936
China Everbright Bank		27,286,881			19,066,080
Bank of Luoyang		43,337,988			24,627,020
Bank of Communications		22,792,572			12,710,720
Bank of Pingdingshan		32,102,213			25,421,438
Bank of Xuchan		2,407,666			-
Commercial bank of Kaifeng		4,815,332			-
Huaxia Bank		1,605,111			-
Ping An Bank		4,815,331			-
	$	259,546,395		$	204,880,916
Additional information:
Maximum balance outstanding during the year	$	309,304,826		$	204,880,916
Interest expense	$	4,701,767		$	3,342,011
Finance charge per contract		0.05%-0.15	%		0.05%-0.5	%
Weighted average interest rate		0.69	%		1.29	%

All notes payable are secured by corresponding restricted cash. The range of collateral ranges from 10% to 100% of such notes. When the restricted cash is not sufficient to secure the note, inventories, Henan Green's assets or guarantees by Henan Green's director or other third parties are further requested. As of December 31, 2012 and 2011, the Group's cash of $145,413,726 and $118,130,253 respectively were restricted for such purpose. All the notes payable have terms of six months. Local PRC banks had certain covenants on the Company's subsidiary, Henan Green, which required the Company to notify the banks if the Company was not in compliance. The Company was not in compliance with its financial covenants during 2012. The terms of the Notes prohibit making advances or providing guarantees to other unrelated parties without prior consent of the bank. The bank may call the Notes since the Company was not in compliance with its financial covenants. The Banks have not called the Notes or assessed a penalty on the Company for these violations. The Company does not believe that any penalty will be assessed by the Banks for these covenant violations.

XML

OTHER RECEIVABLES

12 Months Ended

Dec. 31, 2012

OTHER RECEIVABLES [Abstract]

OTHER RECEIVABLES

7. OTHER RECEIVABLES

Other receivables as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Advances to staff	$	211,671	$	254,229
Loan advanced to unrelated third parties		796,818		2,198,359
Loan advanced to a related company		318,332		-
Standby guarantee fund		530,489		-
Others		412,763		398,013
	$	2,270,073	$	2,850,601
Non-current portion (a)	$	3,039,835	$	3,499,083

Other receivables represent advances to staff and petty cash to department staff for daily expenditures. These amounts are interest free and with no fixed repayment terms.

As of December 31, 2012, $318,332 represented loan to a related company, Zhengzhou No. 2 Iron and Steel Company Limited. There was no agreement signed with the related party and no interest income was received.

As of December 31, 2012, $796,818 represented loans to unrelated third parties. There were no agreement signed with the third parties and the funds are non-interest bearing. The directors of the Group believe the outstanding balance is recoverable and that no allowance is considered necessary.

Included in other receivables is $530,489 of fund held by a unrelated third party to provide a standby guarantee for Henan Green to obtain additional bank loans. There was no agreement signed with the third party and no interest income was received.

(a) As of December 31, 2012 and 2011, $3,039,835 and $3,499,083 respectively, represented fund held by a unrelated third party to provide a standby guarantee for Henan Green to obtain additional bank loans. There was no agreement signed with the third party and the fund is non-interest bearing.

XML

TERM LOANS (Classified by Financial Institutions) (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Debt Instrument [Line Items]
Long Term Debt Current	$ 57,462,962	$ 44,169,751
China Citic Bank [Member]
Debt Instrument [Line Items]
Long Term Debt Current	6,420,443	3,177,680
China Merchants Bank [Member]
Debt Instrument [Line Items]
Long Term Debt Current	9,630,664	7,944,200
Bank Of Zhengzhou [Member]
Debt Instrument [Line Items]
Long Term Debt Current	7,704,531	7,626,431
Shanghai Pudong Development Bank [Member]
Debt Instrument [Line Items]
Long Term Debt Current	16,051,107	11,121,880
Bank Of Luoyang [Member]
Debt Instrument [Line Items]
Long Term Debt Current		9,533,040
Bankof Xuchang [Member]
Debt Instrument [Line Items]
Long Term Debt Current	4,815,332	4,766,520
China Everbright Bank [Member]
Debt Instrument [Line Items]
Long Term Debt Current	1,605,111
Ping An Bank [Member]
Debt Instrument [Line Items]
Long Term Debt Current	3,210,221
Commercial Bank Of Kaifeng [Member]
Debt Instrument [Line Items]
Long Term Debt Current	$ 8,025,553

XML

STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2012

STOCKHOLDERS' EQUITY [Abstract]

STOCKHOLDERS' EQUITY

14. STOCKHOLDERS' EQUITY

(a) Restricted ordinary shares

On October 1, 2012, the Compensation Committee of the Board of Directors of the Company approved grants of restricted ordinary shares to certain officers and directors of the Company under the China Gerui Advanced Materials Group Limited 2010 Share Incentive Plan. Except for shares granted to Mr. Meng, the Company's Chief Finance Officer which vested immediately upon granting, all shares granted will be vested on January 3, 2013 subject to the continuous service of the recipient through December 31, 2012 and the other terms and conditions of the grant.

The following grant was made in accordance with the terms of 2010 Share Incentive Plan for the year indicated.

Grant Date	Restricted Shares		Grant Price
October 1, 2012		2,100,000	$	1.78

The shares were valued at the closing price of the Company's common stock on grant date.

The compensation expense recognized is based on the market value of the Company's common stock on the date the restricted stock award is granted and is not adjusted in subsequent periods. The amount recognized is amortized over the vesting period. Compensation expense is included in general administration expense in the accompanying consolidated statement of income. The amount of compensation expense recognized is reflected in the table below for the years indicated

	2012		2011
Compensation expense	$	3,705,109	$	-

A summary of restricted stock activity under the 2010 share incentive plan for the year ended December 31, 2012 is as follows:

	Number of Shares			Weighted Average Grant Price and Fair Value
Non-vested, December 31, 2011		-			-
Shares granted		2,100,000			1.78
Vested shares		(400,000	)		1.78
Non-vested, December 31, 2012		1,700,000			1.78

The remaining shares 1,700,000 vested on January 1, 2013.

(b) Treasury Stock

On April 1, 2011, the Company's Board of Directors approved a board resolution and announced that the Company would repurchase its ordinary shares in the open market up to an aggregate of $10 million. From June to December, 2012 and from May to December, 2011, the Company repurchased 795,031 shares at a cost of $1,554,674 and 1,176,898 shares at a cost of $4,516,744 respectively.

A total of 1,710,098 shares have been cancelled in the fourth quarter of 2012. There was a total 261,831 shares remained as Treasury Stock as of December 31, 2012.

	Total number of shares purchased			Average price paid per share		Total number of shares purchased as part of publicly Announced Plans or Programs		Amount Paid		Approximately Dollar value of shares that may yet be purchased under the Plans or Programs
										$	10,000,000
1 May 2011 - 31 May 2011		309,490			4.5990		309,490		1,423,340		8,576,660
1 June 2011 - 30 June 2011		470,783			3.3070		780,273		1,556,886		7,019,773
1 July 2011 - 31 July 2011		183,070			4.0321		963,343		738,154		6,281,619
1 August 2011 - 31 August 2011		117,280			3.8038		1,080,623		446,107		5,835,512
1 September 2011 - 31 September 2011		42,129			3.6860		1,122,752		155,289		5,680,223
1 December 2011 - 31 December 2011		54,146			3.6877		1,176,898		196,967		5,483,256
1 May 2012 - 31 May 2012		48,238			2.6422		1,225,136		127,455		5,355,801
1 June 2012 - 30 June 2012		197,965			2.2429		1,423,101		444,041		4,911,760
1 August 2012 - 31 August 2012		59,369			1.7733		1,482,470		105,277		4,806,483
1 September 2012 - 30 September 2012		227,628			2.0377		1,710,098		463,838		4,342,645
1 December 2012 - 31 December 2012		261,831			1.5814		1,971,929		414,063		3,928,582
		1,971,929							6,071,418
Less: Retirement of treasury stock		(1,710,098	)
		261,831

(c) Warrants

The Company also granted in connection with its November 2009 public offering the Underwriter Representative (and its designees) a warrant (the "Underwriter Representative Warrant") for the purchase of an aggregate of 144,000 ordinary shares (the "Warrant Shares") for an aggregate purchase price of $100.00. The Underwriter Representative Warrant may be exercised in full or part to purchase Warrant Shares at an initial exercise price of $6.00 per share.

A summary of all warrants outstanding as of December 31, 2012 and 2011 and actions relating thereto during the years then ended is presented below:

	2012			2011
Expected volatility		63.00	%		60.00	%
Expected term (in years)		1.9			2.9
Risk free rate		0.25	%		0.36	%

A summary of all warrants outstanding as of December 31, 2012 is presented below:

	Warrants			Exercise Price		Terms
Balance as of December 31, 2010		15,191,108
Exercised		(13,294,775	)		5.00		-
Expired		(1,752,333	)
Balance as of December 31, 2011		144,000		$	6.00		2.9 years
Granted		-
Exercised		-
Expired		-
Outstanding as of December 31, 2012		144,000		$	6.00		1.9 years

(d) Retained Earnings

Retained earnings as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Retained earnings	$	151,890,125	$	128,896,723
Statutory surplus reserves		11,385,921		8,246,235
	$	163,276,046	$	137,142,958

In accordance with PRC Company Law, the Group is required to allocate at least 10% profit to the statutory surplus reserve. Appropriation to the statutory surplus reserve by the Group is based on profit arrived under PRC accounting standards for business enterprises for each year.

The profit arrived at must be set off against any accumulated losses sustained by the Group in prior years, before allocation is made to the statutory surplus reserve. Appropriation to the statutory surplus reserve must be made before distribution of dividends to shareholders. The appropriation is required until the statutory surplus reserve reaches 50% of the registered capital. This statutory surplus reserve is not distributable in the form of cash dividends.

As of December 31, 2012, the Group's subsidiary, Henan Green, allocated $3,139,686 which was the 10% of net profits of the year ended December 31, 2012 to the statutory surplus reserves.

A supplemental information of the movement of statutory surplus reserves and registered capital of Henan Green as of December 31, 2012 and 2011 are as follow:

	Statutory  surplus		Registered		Percentage
	reserves		capital		reached
At December 31, 2011	$	8,246,235	$	83,603,944		10	%
Statutory surplus reserves transferred from net profits		3,139,686		-		14	%
At December 31, 2012	$	11,385,921	$	83,603,944

XML

TERM LOANS

12 Months Ended

Dec. 31, 2012

TERM LOANS [Abstract]

TERM LOANS

12. TERM LOANS

In order to provide working capital for operations, the Group entered into the following short term loan agreements as of December 31, 2012 and 2011:

	2012			2011
Classified by financial institutions:
China Citic Bank	$	6,420,443		$	3,177,680
China Merchants Bank		9,630,664			7,944,200
Bank of Zhengzhou		7,704,531			7,626,431
Shanghai Pudong Development Bank		16,051,107			11,121,880
Bank of Luoyang		-			9,533,040
Bank of Xuchang		4,815,332			4,766,520
China Everbright Bank		1,605,111			-
Commercial Bank of Kaifeng		3,210,221			-
Ping An Bank		8,025,553			-
	$	57,462,962		$	44,169,751
Additional information:
Maximum balance outstanding during the year	$	62,278,294		$	44,884,729
Interest expense	$	3,525,936		$	2,912,292
Range of interest rate		0.465% - 1.205	%		0.347% - 0.868	%
Weighted average interest rate		3.29	%		3.27	%

All term loans are fixed term loans with a period of 12 months or less. Local PRC banks had imposed covenant on the Company's subsidiary, Henan Green. For those loan facilities obtained from banks, all these terms loans are either guaranteed and secured by Henan Green's assets, including its machinery, land use right and inventories, or guaranteed and secured by a related party, Zhengzhou Company's land and plant properties, or guaranteed by Henan Green's director or other third parties. The Company was not in compliance with its financial covenants during 2012. The terms of the bank loans prohibit making advances or providing guarantees to other unrelated parties without prior consent of the bank. The bank may call the loans since the Company was not in compliance with its financial covenants. The Banks have not called the loans or assessed a penalty on the Company for these violations. The Company does not believe that any penalty will be assessed by the Banks for these covenant violations.

A summary of the principal payments for the outstanding term loans during the following fiscal year is as follows:

			Principal payment		Total outstanding
Name of bank	Collateral	Term of loans	due during 2012		loan amount
China Citic Bank	Secured by Henan Green's assets	August 21, 2012 to March 16, 2013	$	3,210,221	$	3,210,221
China Citic Bank	Secured by Henan Green's assets	December 7, 2012 to July 7, 2013		1,605,111		1,605,111
China Citic Bank	Secured by Henan Green's assets	December 19, 2012 to July 19, 2013		1,605,111		1,605,111
China Merchants Bank	Guaranteed by third party, Mingwang Lu and Yi Lu	August 31, 2012 to August 31, 2013		4,815,332		4,815,332
China Merchants Bank	Guaranteed by third party, Mingwang Lu and Yi Lu	September 10, 2012 to September 10, 2013		4,815,332		4,815,332
Bank of Zhengzhou	Guaranteed by third party	August 31, 2012 to August 31, 2013		4,815,332		4,815,332
Bank of Zhengzhou	Secured by Henan Green's bank deposit	December 12, 2012 to December 12, 2013		2,889,199		2,889,199
Shanghai Pudong Development Bank	Guaranteed by third party, Mingwang Lu	February 1, 2012 to January 31, 2013		2,247,155		2,247,155
Shanghai Pudong Development Bank	Guaranteed by third party, Mingwang Lu	February 24, 2012 to February 23, 2013		2,568,177		2,568,177
Shanghai Pudong Development Bank	Secured by Henan Green's land, Mingwang Lu	March 16, 2012 to March 15, 2013		1,605,111		1,605,111
Shanghai Pudong Development Bank	Secured by Henan Green's land, Mingwang Lu	November 28, 2012 to November 27, 2013		4,815,332		4,815,332
Shanghai Pudong Development Bank	Guaranteed by third party, Mingwang Lu	November 27, 2012 to November 26, 2013		4,815,332		4,815,332
Ping An Bank	Guaranteed by third party	December 03, 2012 to December 03, 2013		8,025,553		8,025,553
Bank of Xuchang	Guaranteed by third party	April 27, 2012 to April 25, 2013		4,815,332		4,815,332
China Everbright Bank	Guaranteed by third party & Mingwang Lu and Yi Lu	July 20, 2012 to July 19, 2013		1,605,111		1,605,111
Commercial Bank of Kaifeng	Guaranteed by third party & Mingwang Lu	August 23, 2012 to August 22, 2013		3,210,221		3,210,221
			$	57,462,962	$	57,462,962

XML

Document and Entity Information	12 Months Ended
	Dec. 31, 2012
Document and Entity Information [Abstract]
Document Type	20-F
Amendment Flag	true
Document Period End Date	Dec. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY
Trading Symbol	CHOP
Entity Registrant Name	China Gerui Advanced Materials Group Ltd
Entity Central Index Key	0001449801
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding	59,561,899
Amendment Description	The Company is filing this Amendment No. 1 to Form 20-F (the "Amendment No. 1") for the purpose of amending certain disclosures related to the acquisition of Zhengzhou No. 2 Iron and Steel Company Limited, a PRC company ("Zhengzhou Company") included in the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2012, which was filed on April 30, 2013 (the "Form 20-F"). As required by Rule 12b-15 under the Exchange Act of 1934, as amended, updated certifications of our principal executive officer and our principal financial officer are being filed as exhibits to this Amendment No. 1. This Amendment also includes a new Exhibit 15.1, which contains the consent of our independent registered public accounting firm with respect to this Amendment No. 1. Other than as described above, this Amendment No. 1 speaks as of the date of the initial filing of the Form 20-F and does not, and does not purport to, amend, update or restate the information in the Form 20-F or reflect any events that have occurred after the Form 20-F was filed.

XML

RELATED PARTY TRANSACTIONS (Details) (USD $)	12 Months Ended					12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2012 Subsequent Event [Member]	Dec. 31, 2012 CEO and Family [Member]	Dec. 31, 2012 Zhengzhou Company [Member]	Dec. 31, 2011 Zhengzhou Company [Member]	Dec. 31, 2010 Zhengzhou Company [Member]	Dec. 31, 2012 Zhengzhou Company [Member] Henan Green [Member]	Feb. 26, 2013 Zhengzhou Company [Member] Henan Green [Member] Subsequent Event [Member]	Dec. 31, 2012 Zhengzhou Company [Member] CEO and Family [Member]
Related Party Transaction [Line Items]
Rent expense	$ 28,744	$ 26,938	$ 24,701			$ 12,867	$ 11,428	$ 9,909
Ownership percentage	100.00%				44.00%					100.00%	41.00%
Business acquisition, assumed obligation									11,235,775
Deposit on acquisition of future land use right	$ 24,076,660	$ 12,710,719		$ 24,076,660					$ 12,840,885

XML

ACCRUED LIABILITIES AND OTHER PAYABLES

12 Months Ended

Dec. 31, 2012

ACCRUED LIABILITIES AND OTHER PAYABLES [Abstract]

ACCRUED LIABILITIES AND OTHER PAYABLES

13. ACCRUED LIABILITIES AND OTHER PAYABLES

Accrued liabilities and other payables as of December 31, 2012 and 2011 consist of the following:

	2012		2011
Accrued liabilities
Accrued expenses	$	3,185,415	$	4,019,395
Other tax payables		494,446		656,060
		3,679,861		4,675,455
Other payables
Loan advanced from unrelated third parties		1,685,366		79,442
Other payable for purchasing machinery and equipment		96,307		9,753,549
Temporary receipt for staff quarters		48,205		-
Others		308,321		767,570
		2,138,199		10,600,561
	$	5,818,060	$	15,276,016

Accrued expenses are mainly represent accrued staff benefits and accrued wages.

Other tax payables represent payables other than income tax which consist of value added tax and city maintenance and construction tax.

As of December 31, 2012 and 2011, $1,685,366 and $79,442 respectively, represented loans advanced from unrelated third parties. There were no agreement signed with the third parties and the loans are non-interest bearing.

Temporary receipt for staff quarters represent contribution of staff quarter installment in purchases of staff quarters by staffs. Management was considering to sell the staff quarters to individuals by changing the usage from industrial use to residential use.

XML

PROPERTY, PLANT AND EQUIPMENT (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Property, Plant and Equipment [Line Items]
Property and equipment	$ 169,783,671	$ 147,469,211
Accumulated depreciation	(35,673,014)	(24,773,965)
Property, Plant and Equipment, Net, Total	134,110,657	122,695,246
Depreciation expense	10,899,049	7,994,638	3,149,314
Building [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	24,976,660	24,781,774
Leasehold Land Improvement [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	22,102	21,878
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	106,179,264	104,318,990
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	3,216,660	3,261,984
Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	419,456	387,815
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	$ 34,969,529	$ 14,696,770

XML

OTHER RECEIVABLES (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
OTHER RECEIVABLES [Abstract]
Advances to staff	$ 211,671	$ 254,229
Loan advanced to unrelated third parties	796,818	2,198,359
Loan advanced to a related company	318,332
Standby guarantee fund	530,489
Others	412,763	398,013
Other Receivables, Net, Current, Total	2,270,073	2,850,601
Non-current portion	$ 3,039,835	$ 3,499,083

XML

SIGNIFICANT CONCENTRATIONS (Details)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Supplier One Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	37.00%	43.00%	30.00%
Supplier Two Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	23.00%	25.00%	24.00%
Supplier Three Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	20.00%	11.00%	12.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	15.00%	12.00%	81.00%
Accounts Payable [Member] | Supplier One Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	23.00%	55.00%	19.00%
Accounts Payable [Member] | Supplier Two Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	10.00%	18.00%	16.00%