CONCENTRATIONS OF RISK

12 Months Ended

Dec. 31, 2012

Risks and Uncertainties [Abstract]

CONCENTRATIONS OF RISK

NOTE 18. CONCENTRATIONS OF RISK

The Company is exposed to the following concentrations of risk:

(a) Major customers

For the years ended December 31, 2012 and 2011, the customers who account for 10% or more of the Company’s revenues and its outstanding balance at year-end date, are presented as follows:

		Year ended December 31, 2012			December 31, 2012
Customer		Revenue		Percentage of revenue	Accounts receivable, trade
Customer D		$	2,698,546	53%	$	966,975
Customer E			1,208,750	24%		268,278
Customer F			1,100,374	22%		-
	Total:	$	5,007,670	99%	$	1,235,253

		Year ended December 31, 2011			December 31, 2011
Customer		Revenue		Percentage of revenue	Accounts receivable, trade
Customer A		$	2,436,693	64%	$	-
Customer B			576,883	15%		-
Customer C			444,102	12%		-
	Total:	$	3,457,678	91%	$	-

(b) Major vendors

For the years ended December 31, 2012 and for 2011, the vendors who account for 10% or more of the Company’s purchases and its outstanding balance at year-end date, are presented as follows:

		Year ended December 31, 2012			December 31, 2012
Vendor		Purchases		Percentage of purchases	Accounts payable, trade
Vendor A		$	1,628,800	54%	$	505,110
Vendor B			468,849	16%		7,925
Vendor C			408,384	14%		-
	Total:	$	2,506,033	84%	$	513,035

		Year ended December 31, 2011			December 31, 2011
Vendor		Purchases		Percentage of purchases	Accounts payable, trade
Vendor A		$	350,287	32%	$	61,452
Vendor B			349,485	32%		17,695
	Total:	$	699,772	64%	$	79,147

For the years ended December 31, 2012 and 2011, 100% of the Company’s purchases were derived from vendors located in the PRC.

(c) Credit risk

Financial instruments that are potentially subject to credit risk consist principally of accounts receivables. The Company believes the concentration of credit risk in its accounts and retention receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. Credit is extended based on evaluation of a customer's financial condition. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

(d) Exchange rate risk

The reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in RMB and a significant portion of the assets and liabilities are denominated in RMB. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and RMB. If RMB depreciates against US$, the value of RMB revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.

(e) Economic and political risks

The Company's operations are conducted in the PRC. Accordingly, the Company'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 Company'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 Company'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 abroad, and rates and methods of taxation.

(f) Mining industry risks

The Company's mining operations are subject to extensive national and local governmental regulations in China, which regulations may be revised or expanded at any time. Generally, compliance with these regulations requires the Company to obtain permits issued by government regulatory agencies. Certain permits require periodic renewal or review of their conditions. The Company cannot predict whether it will be able to obtain or renew such permits or whether material changes in permit conditions will be imposed. The inability to obtain or renew permits or the imposition of additional conditions could have a material adverse effect on the Company's ability to develop and operate its mines.

(g) Risk on changing price in gold

At present, the price of gold in the PRC is generally in line with the price of gold in the international market. There are many factors influencing the price of gold in the international market, including the international economic situation (in particular the economic situation in the US), petroleum prices, fluctuations in the exchange rates of the US dollar, fluctuations in the stock and other financial investment markets and various political, military, social and economic contingencies. These factors are beyond the control of the Company. Changes in the prices of the gold in the PRC and in the exchange rate of RMB as a result of these may adversely affect the operating results of the Company. Under the relevant PRC laws and regulations, hedging activities presently are not permitted in gold tracing in the PRC market. The Company has not been involved in hedging transactions or any alternative measures to manager the potential price risk.