COMPLETION OF CUNLIJI MINE

12 Months Ended

Dec. 31, 2012

Asset Retirement Obligation Disclosure [Abstract]

COMPLETION OF CUNLIJI MINE

NOTE 5. COMPLETION OF CUNLIJI MINE

The Company’s first project, the Cunli Ji Gold Mine, began in May 2009 and is operated and managed by the subsidiary, XinGuan. On May 4, 2009, the Company, through its VIE, XinGuan entered into an operating lease agreement with Penglai City Gold Mining Holding Co. Ltd (“PCGM”). Pursuant to the operating lease agreement, XinGuan agreed to lease and manage the gold mine for a term of 20 months, with a rental deposit of approximately $2.9 million (equivalent to RMB 20 million). Also, XinGuan agreed to acquire the gold mine for a purchase consideration of approximately $5 million (equivalent to RMB 34.8 million) under the acquisition agreement, if the following conditions are satisfied upon the expiry of the operating lease agreement: 1) the satisfaction of certain level of the monthly production capacity and 2) the production management of the mine reaches ISO (or equivalent) standard.

On January 3, 2011, the Company and PCGM mutually agreed to extend the lease term of the Cunliji gold mine for an additional six months expiry on July 3, 2011 with all terms and conditions to remain unchanged and granted the waiver of 12-months’ rental charge for 2010 fiscal year under the operating lease agreement. Since one of the criteria, namely daily production of 80 tonnes as set out in the aforesaid operating lease agreement cannot be met, on July 3, 2011 both parties agreed to extend the lease term of the Cunliji gold mine for another six months to January 2, 2012.

In July 2012, the acquisition transaction was completed. The rental deposit became the consideration of purchase price and capitalized as mining rights, which the Company has legal rights to explore, extract and operate the mineral deposits accordingly.