Company Overview Company Information This section outlines basic information about Huili Resources (Group) Limited, including board members, authorized representatives, auditors, and stock details - The company is incorporated in the Cayman Islands, listed on the Main Board of the Hong Kong Stock Exchange, with principal places of business in Hong Kong and Xinjiang, China27 - The Board of Directors includes executive, non-executive, and independent non-executive directors, with Ms. Xiang Siying serving as Chairperson2 - The independent auditor is BDO Limited, Hong Kong, and the company's stock code is 1303, with its website at www.huili.hk[2](index=2&type=chunk)3 Mine Information This section provides mineral resources and ore reserves data for the company's key mining projects as of June 30, 2019, along with details on exploration and mining permits 2019 Mineral Resources Overview as of June 30 | Project Name | Category | Quantity (thousand tons) | Copper Metal (tons) | Copper Grade (%) | Lead Metal (tons) | Lead Grade (%) | Zinc Metal (tons) | Zinc Grade (%) | Gold Metal (tons) | Gold Grade (grams/ton) | | :----------- | :------- | :----------------------- | :------------------ | :--------------- | :---------------- | :--------------- | :---------------- | :--------------- | :---------------- | :--------------------- | | Project 20 | Measured | 1,330 | 9,430 | 0.71 | 3,150 | 0.24 | - | - | - | - | | | Inferred | 1,260 | 8,660 | 0.69 | 3,160 | 0.25 | - | - | - | - | | H-989 Project| Measured | 3,390 | 16,540 | 0.49 | 7,750 | 0.23 | - | - | - | - | | | Inferred | 2,370 | 12,100 | 0.51 | 4,390 | 0.19 | - | - | - | - | | Ziganhu Project| Measured | 1,730 | - | - | 71,440 | 4.13 | 113,540 | 6.57 | - | - | | | Inferred | 2,150 | - | - | 85,140 | 3.96 | 137,910 | 6.42 | - | - | | Huangjinmei Project| Measured | 430 | - | - | - | - | - | - | 1.5 | 3.61 | | | Inferred | 716 | - | - | - | - | - | - | 2.7 | 3.63 | 2019 Ore Reserves Overview as of June 30 | Project Name | Reserve Category | Ore Quantity (thousand tons) | Copper Metal (tons) | Copper Grade (%) | Lead Metal (tons) | Lead Grade (%) | Zinc Metal (tons) | Zinc Grade (%) | | :----------- | :--------------- | :--------------------------- | :------------------ | :--------------- | :---------------- | :--------------- | :---------------- | :--------------- | | Project 20 | Probable | 1,099 | 7,071 | 0.64 | 2,362 | 0.21 | - | - | | Ziganhu Project| Probable | 1,055 | - | - | 39,352 | 3.73 | 62,773 | 5.95 | - Exploration permits include the Ziganhu Gold Mine Project, H-989 Project, and Huangshan Project, with some permits expired in 2018 and currently under renewal; mining permits include Project 20, Baiganhu Project, and Huangjinmei Project, with Project 20's permit expiring in October 2019 and a renewal application submitted810 - For the six months ended June 30, 2019 and 2018, the Group incurred no capital expenditures on ore production, development, or mining activities, nor did it deduct exploration expenses111213 Financial Statements Interim Condensed Consolidated Statement of Comprehensive Income This section presents the consolidated comprehensive income for the six months ended June 30, 2019, showing a turnaround from loss to profit, primarily due to a significant increase in other income Key Data from Interim Condensed Consolidated Statement of Comprehensive Income (Six Months Ended June 30) | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | YoY Change (%) | | :-------- | :------------------- | :------------------- | :------------- | | Revenue | 11,801 | 14,610 | -19.23 | | Cost of sales | (8,255) | (10,333) | -20.11 | | Gross profit | 3,546 | 4,277 | -17.10 | | Administrative expenses | (11,703) | (10,752) | 8.84 | | Other income - net | 20,599 | 1,762 | 1069.18 | | Operating profit/(loss) | 12,442 | (4,816) | 358.38 | | Finance income - net | 843 | 431 | 95.59 | | Profit/(loss) before income tax expense | 13,285 | (4,385) | 403.08 | | Income tax expense | (734) | (718) | 2.23 | | Profit/(loss) and total comprehensive income for the period | 12,551 | (5,103) | 346.00 | | Profit/(loss) attributable to owners of the Company | 11,421 | (4,904) | 332.90 | | Basic and diluted earnings/(loss) per share (RMB cents) | 0.71 | (0.30) | 336.67 | - Revenue for the period decreased by 19.23% year-on-year to RMB 11.8 million, primarily due to a reduction in selling and marketing costs14 - The company successfully turned a loss into a profit, with profit and total comprehensive income for the period at RMB 12.55 million, compared to a loss of RMB 5.10 million in the prior period, mainly driven by a significant increase in net other income14 Interim Condensed Consolidated Statement of Financial Position This section presents the consolidated statement of financial position as of June 30, 2019, reflecting minor changes in asset structure and a significant reduction in liabilities Key Data from Interim Condensed Consolidated Statement of Financial Position | Indicator | June 30, 2019 (RMB thousands) | December 31, 2018 (RMB thousands) | Change (%) | | :-------- | :---------------------------- | :-------------------------------- | :--------- | | Assets | | | | | Total non-current assets | 171,875 | 171,127 | 0.44 | | Total current assets | 337,907 | 351,837 | -3.96 | | Total assets | 509,782 | 522,964 | -2.52 | | Liabilities | | | | | Total non-current liabilities | 25,057 | 23,299 | 7.55 | | Total current liabilities | 31,510 | 58,924 | -46.53 | | Total liabilities | 56,567 | 82,223 | -31.19 | | Equity | | | | | Total equity | 453,215 | 440,741 | 2.83 | - Total assets slightly decreased by 2.52% to RMB 509.78 million, primarily due to a reduction in current assets15 - Total current liabilities significantly decreased by 46.53% to RMB 31.51 million, leading to a 31.19% reduction in total liabilities to RMB 56.57 million19 - Total equity increased by 2.83% to RMB 453.22 million, reflecting the accumulation of profit during the period19 Interim Condensed Consolidated Statement of Changes in Equity This section presents the consolidated statement of changes in equity for the six months ended June 30, 2019, primarily reflecting the contribution of profit to equity and the initial application impact of HKFRS 16 Changes in Equity Attributable to Owners of the Company (Six Months Ended June 30) | Indicator | January 1, 2019 (Restated) (RMB thousands) | Profit for the Period (RMB thousands) | June 30, 2019 (RMB thousands) | | :-------- | :----------------------------------------- | :-------------------- | :---------------------------- | | Share capital | 137,361 | - | 137,361 | | Share premium | 668,768 | - | 668,768 | | Other reserves | 221 | - | 221 | | Accumulated losses | (349,933) | 11,421 | (338,512) | | Total equity attributable to owners of the Company | 444,028 | 11,421 | 455,449 | | Non-controlling interests | (3,364) | 1,130 | (2,234) | | Total equity | 440,664 | 12,551 | 453,215 | - As of June 30, 2019, equity attributable to owners of the Company increased from approximately RMB 444.03 million at the beginning of the year to approximately RMB 455.45 million, primarily due to a profit of RMB 11.42 million recorded during the period23 - The initial application of HKFRS 16 resulted in an adjustment of RMB 77 thousand to accumulated losses at the beginning of the period, with a corresponding reduction in total equity23 Interim Condensed Consolidated Statement of Cash Flows This section presents the consolidated statement of cash flows for the six months ended June 30, 2019, showing a significant improvement in operating cash flow and a substantial increase in cash and cash equivalents at period-end Key Data from Interim Condensed Consolidated Statement of Cash Flows (Six Months Ended June 30) | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | YoY Change (%) | | :-------- | :------------------- | :------------------- | :------------- | | Net cash from/(used in) operating activities | 24,982 | (1,413) | 1867.52 | | Net cash from investing activities | 2,141 | 83,447 | -97.43 | | Net cash used in financing activities | (3,307) | - | Not Applicable | | Net increase in cash and cash equivalents | 23,816 | 82,034 | -70.97 | | Cash and cash equivalents at beginning of period | 167,923 | 54,410 | 208.62 | | Cash and cash equivalents at end of period | 191,392 | 137,209 | 39.49 | - Net cash from operating activities turned from a net outflow of RMB 1.41 million in the prior period to a net inflow of RMB 24.98 million, indicating a significant improvement in operating performance26 - Net cash from investing activities significantly decreased by 97.43% to RMB 2.14 million, primarily due to substantial cash inflows from investing activities in the prior period26 - Cash and cash equivalents at the end of the period increased by 39.49% to RMB 191.39 million26 Notes to the Interim Condensed Consolidated Financial Information General Information and Basis of Preparation This section provides the company's basic information, the basis for preparing the interim condensed consolidated financial statements, and their relationship to the annual financial statements - Huili Resources (Group) Limited is incorporated in the Cayman Islands, primarily engaged in mining, mineral processing, sales of gold, silver, copper, lead, and zinc products, financial services, engineering and other related services, and coal trading in China27 - The interim condensed consolidated financial statements are prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, and should be read in conjunction with the 2018 annual consolidated financial statements28 Changes in Accounting Policies This section details the Group's first-time adoption of new and revised Hong Kong Financial Reporting Standards, particularly the impact of HKFRS 16 "Leases" on the financial statements - The Group first adopted new and revised standards, including HKFRS 16 "Leases," and other standards had no significant financial impact on the interim condensed consolidated financial statements apart from HKFRS 163233 Impact of Adopting HKFRS 16 The adoption of HKFRS 16 significantly changed lease accounting, leading to the recognition of right-of-use assets and lease liabilities on the statement of financial position - HKFRS 16 requires lessees to recognize most leases on the statement of financial position as right-of-use assets and lease liabilities35 - The Group applied HKFRS 16 using the cumulative effect method and recognized an adjustment to accumulated losses at the date of initial application35 Impact of Adopting HKFRS 16 on the Statement of Financial Position as of January 1, 2019 | Indicator | Increase/(Decrease) (RMB thousands) | | :-------- | :-------------------------------- | | Right-of-use assets | 13,167 | | Land use rights | (8,613) | | Increase in total assets | 4,554 | | Lease liabilities | 4,631 | | Increase in total liabilities | 4,631 | | Accumulated losses | (77) | | Decrease in total equity | (77) | New Definition and Accounting for Leases This section explains the new definition of a lease under HKFRS 16 and the accounting treatment for right-of-use assets and lease liabilities as a lessee - Under HKFRS 16, a lease is defined as a contract or part of a contract that conveys the right to use an asset for a period of time in exchange for consideration43 - The Group has elected not to separate non-lease components, accounting for all lease components and associated non-lease components as a single lease component43 - All leases are capitalized on the statement of financial position as right-of-use assets and lease liabilities, except for low-value assets and short-term leases, which the Group has elected not to capitalize44 - Right-of-use assets are recognized at cost, including the initial measurement of lease liabilities, lease payments, initial direct costs, and estimated dismantling and removal costs; lease liabilities are recognized at the present value of lease payments4748 Transition Arrangements This section describes the transition methods and practical expedients adopted by the Group upon initial application of HKFRS 16 - The Group applied HKFRS 16 using the cumulative effect method, with the cumulative effect recognized as an adjustment to accumulated losses at the date of initial application (January 1, 2019)50 - The Group has elected to apply the exemption for leases with a term ending within 12 months from the date of initial application and has removed initial direct costs when measuring right-of-use assets51 Estimates and Financial Risk Management This section describes the significant judgments and estimates made by management in preparing the financial statements, as well as the financial risks faced by the Group and its management strategies - The significant judgments and estimates made by management in preparing the interim condensed consolidated financial statements are the same as those applied in the 2018 annual financial statements52 - The Group's business is exposed to market risk (including foreign exchange risk and interest rate risk), credit risk, and liquidity risk, but has not historically used derivative instruments for hedging or trading purposes53 - There have been no changes in risk management policies since December 31, 2018; fair value estimates are categorized into three levels, and the Group had no financial assets or liabilities measured at fair value (other than financial assets at fair value through other comprehensive income) as of June 30, 2019, and December 31, 20185458 Segment Information This section provides operating segment information for the Group, categorized by business type and geography, including revenue, profit, assets, and liabilities for mining, financial services, engineering services, and trading businesses - The Group has four reportable segments: mining, financial services, engineering services, and trading business (newly added in 2019)5960 Reportable Segment Results This section presents the performance of each reportable segment in terms of revenue, operating profit, finance income/costs, income tax expense, assets, and liabilities Reportable Segment Revenue (Six Months Ended June 30) | Segment | 2019 (RMB thousands) | 2018 (RMB thousands) | | :------ | :------------------- | :------------------- | | Financial services | 3,500 | 3,345 | | Engineering services | - | 11,265 | | Trading business | 8,301 | - | | Total | 11,801 | 14,610 | Reportable Segment Operating Profit/(Loss) (Six Months Ended June 30) | Segment | 2019 (RMB thousands) | 2018 (RMB thousands) | | :------ | :------------------- | :------------------- | | Mining | 21,154 | (3,901) | | Financial services | 2,997 | 1,732 | | Engineering services | (4,036) | (3,954) | | Trading business | 151 | - | | Unallocated | (7,668) | 1,307 | | Total | 12,442 | (4,816) | - In the first half of 2019, trading business contributed RMB 8.3 million in revenue, financial services revenue grew steadily to RMB 3.5 million, while engineering services revenue was zero (compared to RMB 11.27 million in the prior period)63 - The mining segment achieved an operating profit of RMB 21.15 million, a significant improvement from a loss of RMB 3.90 million in the prior period63 Revenue Disaggregation and Geographical Information This section disaggregates revenue by major geographical markets, principal product and service lines, and timing of revenue recognition, and provides geographical information based on customer location - All of the Group's revenue is derived from mainland China697782 - In the first half of 2019, revenue from major products and services came from financial services (RMB 3.5 million) and coal trading (RMB 8.3 million)69 - As of June 30, 2019, specific non-current assets in mainland China amounted to RMB 161.77 million, and in Hong Kong to RMB 4.63 million82 Other Income and Finance Income This section details the composition and changes in the Group's net other income and net finance income Other Income — Net (Six Months Ended June 30) | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :------------------- | :------------------- | | Exchange gain | - | 1,585 | | Expected credit loss on trade receivables | (2,490) | - | | Expected credit loss on loans and other receivables | (1,553) | - | | Reversal of impairment loss on other receivables | 24,640 | - | | Others | 2 | 177 | | Total | 20,599 | 1,762 | - Net other income significantly increased to RMB 20.60 million in the first half of 2019 (2018: RMB 1.76 million), primarily due to a reversal of impairment loss on other receivables of RMB 24.64 million83 Finance Income — Net (Six Months Ended June 30) | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :------------------- | :------------------- | | Interest income from bank deposits | 1,071 | 595 | | Interest expense | (228) | (164) | | Finance income — net | 843 | 431 | - Net finance income increased by 95.59% to RMB 0.84 million (2018: RMB 0.43 million), mainly from interest income on bank deposits86 Income Tax Expense and Earnings Per Share This section presents the composition of the Group's income tax expense, applicable tax rates, and the calculation of basic and diluted earnings per share Income Tax Expense (Six Months Ended June 30) | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :------------------- | :------------------- | | Current income tax | 761 | 745 | | Deferred income tax | (27) | (27) | | Income tax expense | 734 | 718 | - Income tax expense remained relatively stable compared to the prior period, at approximately RMB 0.73 million, primarily from taxes paid by PRC subsidiaries at a 25% corporate income tax rate9192 Earnings/(Loss) Per Share (Six Months Ended June 30) | Indicator | 2019 (Unaudited) | 2018 (Unaudited) | | :-------- | :--------------- | :--------------- | | Profit/(loss) attributable to owners of the Company (RMB thousands) | 11,421 | (4,904) | | Adjusted weighted average number of ordinary shares in issue (thousands) | 1,620,000 | 1,620,000 | | Basic and diluted earnings/(loss) per share (RMB cents) | 0.71 | (0.30) | - Basic and diluted earnings per share were RMB 0.71 cents, compared to a loss per share of RMB 0.30 cents in the prior period, reflecting a significant improvement in the company's profitability97 Dividends and Property, Plant and Equipment This section states that the Board does not recommend an interim dividend and reports on changes in property, plant and equipment - The directors do not recommend the payment of an interim dividend for the six months ended June 30, 2019 and 201898 - There were no additions to property, plant and equipment during the period, but approximately RMB 1.299 million of property, plant and equipment were disposed of99 Receivables and Prepayments This section provides a detailed analysis of the Group's trade receivables, loans receivable, other receivables, and prepayments, including their composition, aging, and impairment provisions Trade Receivables This section presents the aging analysis and expected credit loss provision for trade receivables Trade Receivables (RMB thousands) | Indicator | June 30, 2019 | December 31, 2018 | | :-------- | :------------ | :---------------- | | Third parties | - | 11,516 | | Less: Expected credit loss | - | (158) | | Total | - | 11,358 | - As of June 30, 2019, trade receivables were zero, compared to RMB 11.36 million as of December 31, 2018, indicating that trade receivables have been fully collected or settled101 Loans Receivable This section describes the loans provided by the Group to third parties and their expected credit loss provisions Loans Receivable (RMB thousands) | Indicator | June 30, 2019 | December 31, 2018 | | :-------- | :------------ | :---------------- | | Loan to a third party | 100,000 | 100,000 | | Less: Expected credit loss on loans receivable | (1,169) | (1,144) | | Total | 98,831 | 98,856 | - The Group provided a RMB 100 million loan to Shenzhen Danfeng Bailu Hotel Apartment Co., Ltd. at an annual interest rate of 7%, extended to September 11, 2019102 Other Receivables and Prepayments This section details the composition of other receivables and prepayments, including amounts due from Zhonghai Wobang, Merit Progress, Shaanxi Jiatai, Mr. Wei Xing, and Shaanxi Garner, along with related impairment provisions Other Receivables and Prepayments (RMB thousands) | Item | June 30, 2019 | December 31, 2018 | | :--- | :------------ | :---------------- | | Subtotal of other receivables | 67,181 | 159,200 | | Less: Impairment provision | (92,019) | (92,019) | | Advances to suppliers | 1,200 | 1,200 | | Total | 44,665 | 68,381 | - As of June 30, 2019, total other receivables and prepayments amounted to RMB 44.67 million, a decrease from RMB 68.38 million as of December 31, 2018103 - Impairment provisions primarily target amounts due from Shaanxi Jiatai (RMB 32.48 million) and Mr. Wei Xing (RMB 28.48 million), both fully provided due to disputes with counterparties116 - Amounts due from Merit Progress Investments Limited have been partially recovered, with the remaining RMB 21.96 million expected to be settled by the end of December 2019, secured by share pledges and personal guarantees109 Payables and Borrowings This section analyzes the Group's trade payables, other payables and accruals, and the composition and changes in borrowings Trade Payables This section presents the aging analysis of trade payables Trade Payables (RMB thousands) | Indicator | June 30, 2019 | December 31, 2018 | | :-------- | :------------ | :---------------- | | Third parties | 3,318 | 7,610 | - As of June 30, 2019, trade payables amounted to RMB 3.32 million, a decrease from RMB 7.61 million as of December 31, 2018118 Other Payables and Accruals This section details the composition of other payables and accruals, including salaries and welfare payable, accrued taxes, and others Other Payables and Accruals (RMB thousands) | Item | June 30, 2019 | December 31, 2018 | | :--- | :------------ | :---------------- | | Other payables | 5,958 | 30,196 | | Salaries and welfare payable | 5,286 | 5,805 | | Accrued taxes (excluding income tax) | 7,560 | 7,889 | | Total | 18,804 | 43,890 | - As of June 30, 2019, total other payables and accruals amounted to RMB 18.80 million, a significant decrease from RMB 43.89 million as of December 31, 2018119 - The decrease in other payables was primarily due to a significant reduction in amounts payable to Mr. Wei Xing and Beijing Jiatai119 Borrowings This section describes the Group's borrowing situation Borrowings (RMB thousands) | Item | June 30, 2019 | December 31, 2018 | | :--- | :------------ | :---------------- | | Loans from Dongzheng and other village committees | - | 2,200 | - As of June 30, 2019, the Group had no outstanding borrowings, compared to RMB 2.2 million in unsecured loans from Dongzheng and other village committees as of December 31, 2018123 Share Capital and Business Combination This section presents the company's share capital structure and provides information on the 2018 business combination Share Capital and Share Premium (RMB thousands) | Indicator | Number of Shares (thousands) | Share Capital | Share Premium | Total | | :-------- | :--------------------------- | :------------ | :------------ | :------ | | As of June 30, 2019 | 1,620,000 | 137,361 | 668,768 | 806,129 | - As of June 30, 2019, the number of issued shares was 1,620,000 thousand, with total share capital and share premium amounting to RMB 806.13 million124 - On May 22, 2018, Shaanxi Jiahe became an indirectly 95%-owned subsidiary of the Company, with a total acquisition consideration of RMB 13.16 million and goodwill recognized at RMB 1.12 million125126 Related Party Transactions and Commitments This section discloses the Group's related party transactions, as well as capital commitments and irrevocable operating lease commitments as of the end of the reporting period Related Party Transactions This section lists the compensation of key management personnel Key Management Personnel Compensation (Six Months Ended June 30) | Item | 2019 (RMB thousands) | 2018 (RMB thousands) | | :--- | :------------------- | :------------------- | | Basic salaries, allowances and other benefits | 1,223 | 2,226 | | Contributions to retirement benefit schemes | 18 | 8 | | Total | 1,241 | 2,234 | - Total key management personnel compensation for the first half of 2019 was approximately RMB 1.24 million, a decrease from RMB 2.23 million in the prior period129 Commitments This section describes the Group's capital commitments and irrevocable operating lease commitments - As of June 30, 2019, and December 31, 2018, the Group had no contracted capital expenditures130 - Due to the application of HKFRS 16, future lease payments have been recognized as lease liabilities since January 1, 2019, and are no longer presented as operating lease commitments131 Irrevocable Operating Lease Minimum Rent Receivable (RMB thousands) | Period | June 30, 2019 | December 31, 2018 | | :----- | :------------ | :---------------- | | Within one year | 1,267 | 1,267 | | After one year but not more than five years | 3,000 | 3,600 | | Total | 4,267 | 4,867 | Comparative Figures This section states that certain comparative figures have been reclassified to conform to the current period's presentation - Certain comparative figures have been reclassified to conform to the current period's presentation; accumulated losses and non-controlling interests as of January 1, 2018, have also been restated to conform to the audited results for the year ended December 31, 2018135 Management Discussion and Analysis Business Review This section reviews the Group's various businesses, including mining, financial services, engineering services, and the newly launched coal trading business, and provides an update on Shaanxi Jiahe - The Group is primarily involved in the mining and beneficiation of non-ferrous minerals, including copper, silver, zinc, and lead in Xinjiang, and gold in Shaanxi Province136 - Due to volatile commodity prices not yet stabilizing at profitable highs, the Group continued to suspend mining activities and planned maintenance work during the period to extend mine service life and reduce operating losses137 Mining Business This section details the Group's mining permits, exploration permits, and the operational status of its beneficiation plants - Project 20 mine requires an upgrade of its hoisting system to comply with new safety production regulations, while the Baiganhu mine's feasibility for production is being assessed; the Huangjinmei Project will engage a mining construction company or seek potential partners for development when appropriate138 - Hami Jiahe holds three exploration permits for the Baiganhu Gold Mine, Huangshan, and H-989 projects, and has conducted preliminary exploration on the Baiganhu Gold Mine; the Group will invest reasonable resources for further exploration139 - The beneficiation plants of Hami Jiahe and Hami Jinhua both have a processing capacity of 1,500 tons per day, but no mining or beneficiation activities were conducted during the period140 Financial Services This section introduces the Group's financial services business and its revenue contribution - Financial services are conducted by Jia Yi, a wholly-owned subsidiary, providing a RMB 100 million loan to an independent third party at an annual interest rate of 7%, generating approximately RMB 3.5 million in revenue during the period (2018: RMB 3.3 million)141 Engineering Services This section describes the scope of the Group's engineering services business - Engineering services are carried out by Changshi, a wholly-owned subsidiary in Shanxi Province, China, primarily engaged in oil, natural gas, coalbed methane engineering services, pre-drilling engineering services, and trading of oil and gas exploration materials142 Trading Business This section introduces the Group's newly launched coal trading business and its initial results - The coal trading business, launched through the newly established wholly-owned subsidiary Changzhi Runce, contributed RMB 8.3 million in revenue during the period143 - After the reporting period, purchase orders for approximately 78,100 tons of coal were received, with a contract value of approximately RMB 32.8 million143 Shaanxi Jiahe Update This section provides an update on Shaanxi Jiahe after the equity transfer back, including asset protection measures and potential disposal matters - All equity interest in Shaanxi Jiahe was transferred back to Hami Jiahe on May 22, 2018, making it an indirectly 95%-owned subsidiary of the Company144 - The Company is actively taking measures to protect Shaanxi Jiahe's assets, including resolving exploration right transfer issues, developing the Huangjinmei Project, and considering potential disposal offers147 - The Company is in preliminary discussions with potential buyers regarding a possible disposal of Shaanxi Jiahe, but no binding terms or agreements have been entered into, and shareholders and potential investors are advised to exercise caution146 Results Review This section provides a detailed analysis of the Group's revenue, gross profit, selling and marketing costs, administrative expenses, other income, finance income, and income tax expense, along with their reasons for change Revenue and Gross Profit Analysis This section analyzes the revenue and gross profit contributions from each of the Group's business segments Revenue and Gross Profit (Six Months Ended June 30) | Segment | 2019 Revenue (RMB millions) | 2019 Cost of Sales (RMB millions) | 2019 Gross Margin | 2018 Revenue (RMB millions) | 2018 Cost of Sales (RMB millions) | 2018 Gross Margin | | :------ | :-------------------------- | :-------------------------------- | :---------------- | :-------------------------- | :-------------------------------- | :---------------- | | Coal trading | 8.3 | 8.3 | 0% | - | - | Not Applicable | | Financial services interest income | 3.5 | - | 100% | 3.3 | - | 100% | | Trading of oil and gas exploration materials | - | - | Not Applicable | 11.3 | 9.0 | 20% | | Mining | - | - | Not Applicable | - | 1.3 | Not Applicable | | Total | 11.8 | 8.3 | | 14.6 | 10.3 | | - Revenue for the period was approximately RMB 11.8 million, a year-on-year decrease of approximately 19%, mainly due to the cessation of the oil and gas exploration materials trading business, but the new coal trading business contributed RMB 8.3 million in revenue148150 - The gross margin for financial services interest income remained at 100%, while the gross margin for coal trading business was 0%150 - The Group continued to suspend production plans for Project 20, Baiganhu, and Huangjinmei projects, awaiting commodity price stabilization152 Expenses and Other Income Analysis This section analyzes the changes in selling and marketing costs, administrative expenses, net other income, and net finance income - There were no selling and marketing costs during the period; administrative expenses were approximately RMB 11.7 million (2018: RMB 10.8 million), mainly comprising depreciation, professional fees, staff costs, and office expenses153 - Net other income was approximately RMB 20.6 million, primarily due to the reversal of impairment losses on other receivables from prior years154 - Net finance income was approximately RMB 0.8 million (2018: RMB 0.4 million), mainly representing interest income (net of interest expenses)155 Income Tax Expense This section describes the composition of income tax expense - Income tax expense was approximately RMB 0.7 million, remaining relatively unchanged compared to the prior period, mainly comprising tax provisions for PRC operations and deferred tax, with no Hong Kong profits tax provision made during the period156 Investments and Liquidity This section outlines the Group's significant investments, acquisition and disposal activities, liquidity position, gearing ratio, and pledged assets Significant Investments and Acquisitions/Disposals This section describes the Group's significant investment and acquisition/disposal activities during the reporting period - As of June 30, 2019, and December 31, 2018, the Group held no significant investments, and there were no significant acquisitions or disposals during the period157158 Liquidity and Financial Position This section analyzes the Group's current assets, current liabilities, current ratio, and cash balance - Current assets for the period were approximately RMB 337.9 million (December 31, 2018: RMB 351.8 million), and current liabilities were approximately RMB 31.5 million (December 31, 2018: RMB 58.9 million)159 - The current ratio improved from 6.0 as of December 31, 2018, to 10.7 as of June 30, 2019, indicating a significant improvement in liquidity159 - As of June 30, 2019, the Group had no outstanding interest-bearing bank loans or other borrowings159 - Bank and cash balances were approximately RMB 191.4 million (December 31, 2018: RMB 167.9 million)159 Gearing Ratio and Pledged Assets This section describes the Group's gearing ratio and pledged assets - As of June 30, 2019, the gearing ratio was 0% (December 31, 2018: 0%), indicating no net debt for the company161 - As of June 30, 2019, and December 31, 2018, the Company had no pledged assets164 Dividends and Human Resources This section states that the Board does not recommend an interim dividend and provides information on the Group's human resources and share option scheme - The directors do not recommend the payment of any interim dividend for the period166 - As of June 30, 2019, the Group employed 30 employees (December 31, 2018: 39 employees), with total staff costs of approximately RMB 4.1 million (prior period: RMB 4.8 million)167 - No share options were issued or outstanding during the period and as of June 30, 2019, and December 31, 2018167 Future Outlook and Prospects This section outlines the Group's future development strategies in the current economic environment, including mine restart, diversification of existing businesses, and new business expansion - The Group will continue to study the feasibility of restarting mine production and closely monitor commodity markets to capture future economic growth in China169 - The Group will continue to invest resources in its existing business segments (financial services and engineering services) and actively expand its coal trading business to broaden revenue streams and mitigate the impact of unfavorable commodity market conditions169 - The Company will explore potential acquisition opportunities to capture business opportunities in the Chinese market and diversify the Group's business and broaden its revenue base170 Significant Events After Reporting Period This section states that there were no significant events affecting the Group after the reporting period - As of the date of this report, there were no significant events affecting the Group after the period171 Shareholder Interests and Securities Transactions This section discloses the interests of directors and chief executive, major shareholders in the company's shares, as well as the company's securities transactions and disclosures related to listing rules Directors' and Chief Executive's Interests This section describes the interests of directors and the chief executive in the company's shares and related shares - As of June 30, 2019, no director or chief executive of the Company had any interests or short positions in the shares, underlying shares, or debentures of the Company or its associated corporations that were required to be disclosed173 Major Shareholders' Interests This section lists major shareholders holding 5% or more of the company's share capital as of June 30, 2019 Major Shareholders' Interests (as of June 30, 2019) | Name | Nature of Interest | Total Interest in Shares (L) | Approximate Percentage of Share Capital | | :--- | :----------------- | :--------------------------- | :-------------------------------------- | | Tianyuan International Limited | Beneficial owner | 412,592,702 | 25.47% | | Mr. Guo Jianzhong | Controlled corporation interest and beneficial owner | 454,958,702 | 28.08% | | Affinitiv Mobile Ventures Ltd. | Beneficial owner | 320,000,000 | 19.75% | | China Huarong Asset Management Co., Ltd. | Controlled corporation interest | 320,000,000 | 19.75% | | Legend Vantage Limited | Beneficial owner | 188,638,883 | 11.64% | - Mr. Guo Jianzhong is the largest shareholder, holding 28.08% of the equity, including his personal holdings and shares held through Tianyuan International Limited174176 - China Huarong Asset Management Co., Ltd. and its associates hold 19.75% of the equity through Affinitiv Mobile Ventures Ltd174177 Purchase, Redemption or Sale of Securities This section states that the Company and its subsidiaries did not engage in any purchase, redemption, or sale of securities during the reporting period - Neither the Company nor any of its subsidiaries purchased, redeemed, or sold any of the Company's listed securities during the period180 Listing Rules Disclosure This section discloses ongoing disclosure information regarding the Group's loan to Shenzhen Danfeng Bailu Hotel Apartment Co., Ltd. under Listing Rule 13.20 - The Group's RMB 100 million loan to Danfeng has been extended to September 11, 2019, with outstanding and accrued loan balances and interest of RMB 100 million and RMB 2.2 million, respectively181 - The total loan amount exceeds 8% of the asset ratio as defined in Listing Rule 14.07(1), thus triggering ongoing disclosure obligations181 Corporate Governance This section describes the Company's corporate governance practices, including compliance with the Corporate Governance Code, the Model Code for Securities Transactions by Directors, and the Audit Committee's review Compliance with Corporate Governance Code This section describes the Company's compliance with the Corporate Governance Code and notes a deviation from Code Provision A.4.1 - The Company is committed to maintaining high standards of corporate governance and has taken appropriate steps to comply with the provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules182 - Except for Mr. Chen Bingquan and Mr. Cao Ye who have three-year terms, all other non-executive directors are appointed without a specific term but are subject to retirement by rotation in accordance with the Company's articles of association, which deviates from Code Provision A.4.1182 Model Code for Securities Transactions by Directors This section describes the directors' compliance with the Model Code for Securities Transactions - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 of the Listing Rules, and after inquiry, all directors have complied with the said code throughout the period184 Audit Committee Review This section describes the Audit Committee's review of the interim results - The Audit Committee, comprising three independent non-executive directors, has reviewed the interim results for the period, aiming to review and monitor the Group's financial reporting process, internal control, and risk management systems185
汇力资源(01303) - 2019 - 中期财报