ORGANIZATION AND BACKGROUND

12 Months Ended

Dec. 31, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND BACKGROUND

NOTE 1. ORGANIZATION AND BACKGROUND

China ShouGuan Mining Corporation (“CHSO” or “the Company”) was incorporated in the State of Nevada on May 4, 2010.

The Company, through its subsidiaries and variable interest entities, is principally engaged in the project management of gold mining operations in China. In May 2009, the Company commenced its first project, the Cunli Ji Gold Mine which is located in Shandong Province, the People Republic of China (“PRC”). Following May 2011, the Company commenced its second project, the Dayuan Gold Mine which is located in Shandong Province, the PRC.

Business background

The Company was founded by a number of professionals and experts who specialize in mining technologies, mining resources management and financial and strategic management. The Company focuses on existing gold mine projects in Shandong province of the PRC. These potential targets are mostly run with low productively because of inadequate funds and primitive technologies. The Company positions to re-engineer and redevelop these gold mines through transfer of advanced exploration and mining technologies, capital injection and effective management. The business model includes sourcing of early stage gold mines with good profit potential, conducting feasibility studies to identify suitable projects, leasing the suitable mining sites and facilities and managing the mining operations on these selected sites, with the goal of acquiring the mine if the operations proved to be satisfactory under the Company’s criteria.

Revenue is generated from the sales of non-refined gold concentrates, which is the principal raw material used in gold smelting operation to produce gold bar or product. The Company dig out chunks of mineral rocks from our mining site and undergoes a series of physical processes, including crushing, screening, grinding and scanning to produce gold concentrates. All the above processes are outsourced to independent third party contractors and the Company does not take possession of the mineral rocks during the whole processes. The Company only takes possession of the gold concentrates when they are sold to smelters and the selling prices are determined from two factors, the amount of gold in the gold concentrates and the price of gold at the date of sales. The amount of gold in the gold concentrates is determined and agreed between the Company and the smelters whereas the selling price is determined according to the official gold price at the time of sales as indicated by the Shanghai Gold Exchange (http://www.sge.sh, an entity governed by the PRC Government).

Reorganization

On June 23, 2010, the Company entered into a stock exchange transaction with the shareholders of Bei Sheng Limited (“BSL”), whereby the Company issued 100,000,000 shares of common stock in exchange for 100% of the ownership interest in BSL, for the purpose of re-domiciling BSL as a Nevada corporation in the United States. As a result of the share exchange transaction, BSL became a wholly-owned subsidiary of the Company. Unless otherwise indicated, all references to the Company throughout the financial statements include the operations of BSL and its subsidiaries and variable interest entities (“VIEs”).

BSL was incorporated in the British Virgin Islands (the “BVI”) on December 17, 2009 as a limited liability company with registered share capital of $50,000, divided into 50,000 common shares of US$1 par value each, for the purpose of holding 100% equity interest in Golden Wide International Limited (“GWIL”).

GWIL was incorporated in the Hong Kong Special Administrative Region (“Hong Kong”) on June 18, 2009 as a limited liability company with authorized share capital of $10,000, divided into 10,000 ordinary shares of $0.13 (equivalent to Hong Kong Dollars (“HK$”) HK$1) par value each. GWIL formed Shoujin Business Consulting (Shenzhen) Limited (“SBCL”) as a wholly foreign-owned enterprise under the laws of the People’s Republic of China (the “PRC”) on April 23, 2010. SBCL has a registered capital of RMB100,000 and is principally engaged in the provision of business consulting service in the PRC.

The Company, through SBCL entered into and consummated certain contractual arrangements with Shenzhen Shouguan Investment Co., Ltd (“SSIC”), JinGuan and XinGuan on May 15, 2010. As a result of these contractual arrangements, which obligates SBCL to absorb a majority of the risk of loss from the activities of SSIC, JinGuan and XinGuan and enables SBCL to receive a majority of its expected residual returns, the Company accounts for SSIC, JinGuan and XinGuan and its subsidiaries as a variable interest entity (“VIE”) under Accounting Standards Codification (“ASC”) Topic 810-10-5-8, “Variable Interest Entities”. (“VIE Arrangement”).

Details of subsidiaries and VIEs

The details of the Company’s subsidiaries and VIEs are described below:

Name	Place of incorporation and kind of legal entity	Principal activities and place of operation	Particulars of issued/registered share capital	Effective interest held
Bei Sheng Limited (“BSL”)	British Virgin Islands, a limited liability company	Investment holding in GWIL and provision of mining technical advice	50,000 issued shares of US$1 each	100%
Golden Wide International Limited (“GWIL”)	Hong Kong, a limited liability company	100%-investment holding in SBCL and provision of mining technical advice	10,000 issued ordinary shares of HK$1 each	100%
Shoujin Business Consulting (Shenzhen) Limited (“SBCL”)	The PRC, a limited liability company	Provision of consulting service in the PRC	RMB100,000	100%
Shenzhen Shouguan Investment Co., Ltd (“SSIC”) #	The PRC, a limited liability company	99%-investment holding in JinGuan	RMB10,180,000	N/A
Yantai JinGuan Investment Limited (“JinGuan”) #	The PRC, a limited liability company	100%-investment holding in XinGuan, provision of mining consulting service	RMB5,000,000	N/A
Penglai XinGuan Investment Limited (“XinGuan”) #	The PRC, a limited liability company	Exploration, drilling, mining and sale of gold products	RMB29,000,000	N/A

# represents variable interest entity (“VIE”)

The Company and its subsidiaries and VIEs are hereinafter collectively referred to as (“the Company”).