汇力资源(01303) - 2020 - 中期财报

Company Information Provides an overview of the company's governance structure, key personnel, independent advisors, and registration details Board of Directors The company's Board of Directors comprises executive, non-executive, and independent non-executive directors, supported by audit, remuneration, and nomination committees to ensure sound corporate governance - The Board of Directors includes Ms. Wang Qian, Mr. Zhou Jianzhong (Executive Directors), Mr. Cao Ye (Non-executive Director), and Ms. Xiang Siying (Chairperson), Ms. Huang Mei, Mr. Chen Bingquan (Independent Non-executive Directors)[2] - The Audit Committee is chaired by Ms. Huang Mei, the Remuneration Committee by Ms. Xiang Siying, and the Nomination Committee by Ms. Wang Qian[2] Independent Auditor, Legal Advisors, and Registered Office The company's independent auditor is Zhonghui Ankuai CPAs, with legal advisors including Sidley Austin, Global Law Office, and Conyers Dill & Pearman, and main business locations in Xinjiang, China, and Hong Kong - The independent auditor is Zhonghui Ankuai Certified Public Accountants Co., Ltd[3] - Legal advisors include Sidley Austin (Hong Kong law), Global Law Office (PRC law), and Conyers Dill & Pearman (Cayman Islands law)[3] - Main business locations are in Hami City, Xinjiang Uygur Autonomous Region, China, and Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong[3] Share Registrar, Company Website, and Stock Code The company maintains share registrars in both the Cayman Islands and Hong Kong, with its official website and stock code publicly available - The Cayman Islands share registrar is Codan Trust Company (Cayman) Limited[6] - The Hong Kong share registrar is Tricor Investor Services Limited[6] - The company website is www.huili.hk, and the stock code is 1303[6] Mine Information Details the company's mineral resources, ore reserves, and the status of its exploration and mining permits, along with capital and exploration expenditures Mineral Resources As of June 30, 2020, the company's primary mineral resources include lead, zinc, and copper, with significant zinc and lead at the Ziganghu project, and copper and lead at Projects No. 20 and H-989 Total Mineral Resources as of June 30, 2020 | Project Name | Category | Quantity (thousand tonnes) | Zinc Metal (tonnes) | Zinc Grade (%) | Copper Metal (tonnes) | Copper Grade (%) | | :----------- | :--- | :--------- | :--------- | :-------- | :--------- | :-------- | | Project No. 20 | Controlled | 1,330 | 9,430 | 0.71 | 3,150 | 0.24 | | | Inferred | 1,260 | 8,660 | 0.69 | 3,160 | 0.25 | | Project H-989 | Controlled | 3,390 | 16,540 | 0.49 | 7,750 | 0.23 | | | Inferred | 2,370 | 12,100 | 0.51 | 4,390 | 0.19 | | Ziganghu Project | Controlled | 1,730 | 113,540 | 6.57 | 71,440 | 4.13 | | | Inferred | 2,150 | 137,910 | 6.42 | 85,140 | 3.96 | - Total controlled mineral resources are 4,720 thousand tonnes, containing 25,970 tonnes of zinc metal (grade 0.55%) and 10,900 tonnes of copper metal (grade 0.23%)[8] - Total inferred mineral resources are 3,630 thousand tonnes, containing 20,760 tonnes of zinc metal (grade 0.57%) and 7,550 tonnes of copper metal (grade 0.21%)[8] Ore Reserves As of June 30, 2020, the company's ore reserves are primarily concentrated in Project No. 20 and Ziganghu Project, mainly in the probable category, containing zinc and copper metals Total Ore Reserves as of June 30, 2020 | Project Name | Category | Ore Quantity (thousand tonnes) | Zinc Metal (tonnes) | Zinc Grade (%) | Copper Metal (tonnes) | Copper Grade (%) | | :----------- | :--- | :------------- | :--------- | :-------- | :--------- | :-------- | | Project No. 20 | Probable | 1,099 | 7,071 | 0.64 | 2,362 | 0.21 | | Ziganghu Project | Probable | 1,055 | 62,773 | 5.95 | 39,352 | 3.73 | - The mineral resources and ore reserves report was prepared by Mineng Mining Consulting Co., Ltd, an independent technical consultant[11] Exploration Permits The company holds exploration permits for Baiganhu Gold Mine, Project H-989, and Huangshan Project, though some permits expired between 2018 and 2019 Exploration Permit Overview | Project Name | Exploration Ore Type | Exploration Area (square kilometers) | Permit Expiry Date | | :----------- | :----------- | :----------------- | :------------- | | Baiganhu Gold Mine Project | Gold | 0.64 | July 2018 | | Project H-989 | Copper, Lead | 0.96 | July 2018 | | Huangshan Project | Copper, Lead | 3.49 | March 2019 | - All listed exploration permits have expired, but the report does not state whether renewal applications have been submitted[12] Mining Permits The company holds mining permits for Project No. 20 and Baiganhu Project, with Project No. 20 having expired in 2019 and Baiganhu Project expiring in September 2021, for which renewal applications are in progress Mining Permit Overview | Project Name | Mining Ore Type | Mining Area (square kilometers) | Permit Expiry Date | | :----------- | :----------- | :----------------- | :------------- | | Project No. 20 | Copper, Lead | 0.22 | October 2019 | | Baiganhu Project | Lead, Zinc | 0.96 | September 2021 | - The Group is in the process of renewing expired permits, with renewal applications submitted to relevant government authorities[15] Capital Expenditure and Exploration Expenses For the six months ended June 30, 2020, and 2019, the Group had no ore production, capital expenditure for development and mining activities, or exploration expenses - For the six months ended June 30, 2020, and 2019, the Group did not engage in any ore production[16] - During the same period, there was no capital expenditure for development and mining activities, nor were exploration expenses deducted from the interim condensed consolidated statement of comprehensive income[17][18] Interim Condensed Consolidated Financial Statements Presents the company's financial performance, position, equity changes, and cash flows for the interim period, highlighting key financial metrics and trends Interim Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2020, revenue increased by 48.3% year-on-year to RMB 17,499 thousand, but gross profit decreased by 49.2% due to a significant rise in cost of sales, resulting in an operating loss of RMB 11,563 thousand and a net loss of RMB 11,185 thousand Key Data from Interim Condensed Consolidated Statement of Comprehensive Income | Indicator | June 30, 2020 (RMB thousand) | June 30, 2019 (RMB thousand) | Year-on-year Change | | :--- | :------------------------- | :------------------------- | :------- | | Revenue | 17,499 | 11,801 | +48.3% | | Cost of sales | (15,698) | (8,301) | +89.1% | | Gross profit | 1,801 | 3,500 | -48.5% | | Administrative expenses | (10,892) | (11,703) | -6.9% | | Other income | 3,891 | 2 | Significant increase | | Operating (loss)/profit | (11,563) | (8,155) | -41.8% | | Finance income — net | 556 | 843 | -34.0% | | (Loss)/profit before income tax expense | (11,007) | (7,312) | -50.5% | | Income tax expense | (178) | (761) | -76.6% | | (Loss)/profit and total comprehensive (expense)/income for the period | (11,185) | (8,073) | -38.6% | | (Loss)/profit attributable to owners of the Company | (11,208) | (8,096) | -38.4% | | Basic and diluted (loss)/earnings per share (RMB cents) | (0.69) | (0.50) | -38.0% | - The increase in revenue was primarily due to an increase of RMB 6.3 million in coal trading revenue, partially offset by a decrease of RMB 0.6 million in financial services segment revenue[148] - The decrease in gross profit was mainly due to a shift in business focus to lower-margin coal trading[148] Interim Condensed Consolidated Statement of Financial Position As of June 30, 2020, the company's total assets were RMB 466,351 thousand, a 5.6% decrease from the end of 2019, with both current assets and liabilities declining, maintaining a healthy current ratio Key Data from Interim Condensed Consolidated Statement of Financial Position | Indicator | June 30, 2020 (RMB thousand) | December 31, 2019 (RMB thousand) | Change Rate | | :--- | :------------------------- | :-------------------------- | :----- | | Assets | | | | | Total non-current assets | 227,549 | 153,607 | +48.1% | | Total current assets | 238,802 | 340,563 | -29.9% | | Total assets | 466,351 | 494,170 | -5.6% | | Liabilities | | | | | Total non-current liabilities | 24,452 | 25,104 | -2.6% | | Total current liabilities | 27,770 | 43,752 | -36.6% | | Total liabilities | 52,222 | 68,856 | -24.2% | | Equity | | | | | Total equity | 414,129 | 425,314 | -2.6% | - The increase in non-current assets was mainly due to an increase in loans receivable, while the decrease in current assets was primarily due to a decrease in cash and cash equivalents[25][28] - The current ratio increased from 7.8 as of December 31, 2019, to 8.6 as of June 30, 2020, indicating good liquidity[160] Interim Condensed Consolidated Statement of Changes in Equity For the six months ended June 30, 2020, equity attributable to owners of the company decreased from RMB 427,901 thousand at the beginning of the period to RMB 416,693 thousand, primarily due to the loss incurred during the period Interim Condensed Consolidated Statement of Changes in Equity | Indicator | January 1, 2020 (RMB thousand) | June 30, 2020 (RMB thousand) | January 1, 2019 (RMB thousand) | June 30, 2019 (RMB thousand) | | :--- | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | Capital and reserves attributable to owners of the Company | 427,901 | 416,693 | 443,914 | 455,335 | | Non-controlling interests | (2,587) | (2,564) | (3,364) | (2,234) | | Total equity | 425,314 | 414,129 | 440,550 | 453,101 | - A loss of RMB 11,208 thousand for the period led to a decrease in equity attributable to owners of the Company[30] Interim Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2020, operating cash flow shifted from a net inflow to a net outflow of RMB 23,824 thousand, while net cash inflow from investing activities increased and net cash outflow from financing activities decreased, resulting in a period-end cash and cash equivalents balance of RMB 204,032 thousand Key Data from Interim Condensed Consolidated Statement of Cash Flows | Indicator | June 30, 2020 (RMB thousand) | June 30, 2019 (RMB thousand) | Change | | :--- | :------------------------- | :------------------------- | :--- | | Net cash (used in)/generated from operating activities | (23,824) | 24,982 | Shift from inflow to outflow | | Net cash generated from investing activities | 10,652 | 2,141 | +397.5% | | Net cash used in financing activities | (1,034) | (3,307) | -68.7% | | Net (decrease)/increase in cash and cash equivalents | (14,206) | 23,816 | Shift from increase to decrease | | Cash and cash equivalents at end of period | 204,032 | 191,392 | +6.6% | - The shift to negative operating cash flow primarily reflects the operating loss for the period and the impact of expected credit losses on trade receivables[23] - The increase in net cash inflow from investing activities partially offset the impact of cash outflow from operating activities[33] Notes to the Interim Condensed Consolidated Financial Information Provides detailed explanations and disclosures regarding the company's financial statements, including general information, accounting policies, risk management, and segment data 1 General Information Huili Resources (Holdings) Limited is incorporated in the Cayman Islands and listed on the Hong Kong Stock Exchange, primarily engaged in mining, beneficiation, and sales of non-ferrous metal products, financial services, and coal trading in China - The Company was incorporated in the Cayman Islands on February 19, 2010, and has been listed on the Main Board of the Hong Kong Stock Exchange since January 12, 2012[35] - The Group's principal activities include mining, beneficiation, and sales of lead, copper, and zinc products, financial services, and coal trading[35] 2 Basis of Preparation The interim condensed consolidated financial statements are prepared in accordance with HKAS 34 and the Listing Rules, presented on a historical cost basis, and should be read in conjunction with the 2019 annual financial statements - The statements are prepared in accordance with Hong Kong Accounting Standard 34 and the Listing Rules issued by the Hong Kong Institute of Certified Public Accountants[36] - The statements are prepared on a historical cost basis and should be read in conjunction with the 2019 annual financial statements[39] 3 Changes in Accounting Policies The Group adopted several new and revised HKFRSs, including amendments to the definitions of "material" and "business" and interest rate benchmark reform, but these are not expected to have a significant impact on the current financial statements - The Group adopted HKAS 1 and HKAS 8 (Amendments) "Definition of Material", HKFRS 3 (Amendments) "Definition of a Business", and other new/revised HKFRSs[41] - The amendments redefine "material" to emphasize the impact of omitted, misstated, or obscured information on the decisions of primary users[43] - The Group's assessment indicates that these new standards and amendments are not expected to have a significant impact on its financial performance and position[46] 4 Estimates The significant judgments, estimates, and assumptions made by management in preparing the financial statements are consistent with those applied in the 2019 annual financial statements, and actual results may differ from these estimates - The significant judgments and key sources of estimation uncertainty made by management in preparing the statements are the same as those applied in the 2019 annual financial statements[48] 5 Financial Risk Management The Group is exposed to market risks (foreign currency and interest rate), credit risk, and liquidity risk, but has not used derivative instruments for hedging, with no changes in risk management policies since the end of 2019 and no financial assets or liabilities measured at fair value in the current period - The Group's operations are exposed to market risk, credit risk, and liquidity risk, and it has not historically used derivative instruments for hedging[49] - There have been no changes in risk management policies since December 31, 2019[50] - As of June 30, 2020, and December 31, 2019, the Group had no financial assets or liabilities measured at fair value[55] 6 Segment Information The Group's operating segments include mining, financial services, and trading businesses, with engineering services temporarily suspended and classified as "unallocated" in the first half of 2020, showing significant growth in trading revenue and a slight decrease in financial services revenue - The Group has three reportable segments: mining, financial services, and trading business; the engineering services segment's activities were suspended and classified as "unallocated"[56][57] Segment Revenue Overview (RMB thousand) | Segment | June 30, 2020 | June 30, 2019 | Change | | :--- | :------------ | :------------ | :--- | | Mining | - | - | - | | Financial services interest income | 2,888 | 3,500 | -17.5% | | Coal trading | 14,611 | 8,301 | +76.0% | | Total | 17,499 | 11,801 | +48.3% | Segment Assets and Liabilities (RMB thousand) | Indicator | June 30, 2020 | December 31, 2019 | | :--- | :------------ | :------------- | | Segment assets | 466,351 | 494,170 | | Segment liabilities | 52,222 | 68,856 | - Revenue from China accounted for 100% of total revenue, and specific non-current assets are also primarily concentrated in China[74] 7 Other Income For the six months ended June 30, 2020, other income significantly increased to RMB 3,891 thousand, primarily driven by exchange gains Other Income Overview (RMB thousand) | Item | June 30, 2020 | June 30, 2019 | | :--- | :------------ | :------------ | | Exchange gains | 3,624 | - | | Government grants | 267 | - | | Others | - | 2 | | Total | 3,891 | 2 | - Other income for the period primarily consisted of exchange gains from financial assets denominated in currencies other than RMB[150] 8 Finance Income – Net For the six months ended June 30, 2020, net finance income was RMB 556 thousand, a decrease from RMB 843 thousand in the prior period, mainly due to lower interest income Finance Income – Net (RMB thousand) | Item | June 30, 2020 | June 30, 2019 | | :--- | :------------ | :------------ | | Interest income | 653 | 1,071 | | Interest expense | (97) | (228) | | Finance income — net | 556 | 843 | - Net finance income primarily refers to interest income earned from the Group's bank cash (net of interest expenses)[153] 9 (Loss)/Profit Before Income Tax Expense For the six months ended June 30, 2020, the loss before income tax expense was RMB 11,007 thousand, an increase from the prior period, primarily impacted by inventory costs, depreciation, and employee benefit expenses (Loss)/Profit Before Income Tax Expense Components (RMB thousand) | Item | June 30, 2020 | June 30, 2019 | | :--- | :------------ | :------------ | | Cost of inventories recognized as expense | 14,444 | 8,248 | | Depreciation — right-of-use assets | 966 | 1,083 | | Depreciation — owned assets | 1,193 | 1,641 | | Employee benefit expenses | 4,307 | 4,083 | - The expanded loss before income tax expense reflects the impact of increased cost of sales and decreased gross profit[23] 10 Income Tax Expense For the six months ended June 30, 2020, income tax expense was RMB 178 thousand, a significant decrease from the prior period, mainly from tax provisions for China operations, with no provision for Hong Kong profits tax Income Tax Expense (RMB thousand) | Item | June 30, 2020 | June 30, 2019 | | :--- | :------------ | :------------ | | Current income tax | 178 | 761 | | Deferred income tax | - | (27) | | Income tax expense | 178 | 734 | - The Company is an exempted company incorporated in the Cayman Islands and is not subject to Cayman Islands taxation; British Virgin Islands subsidiaries are not subject to BVI taxation[81] - Hong Kong subsidiaries are subject to profits tax at a rate of 16.5%, with eligible entities subject to a two-tiered profits tax rate (8.25% for the first HKD 2 million); PRC subsidiaries are subject to enterprise income tax at a rate of 25%[81] 11 (Loss)/Earnings Per Share For the six months ended June 30, 2020, basic and diluted loss per share was RMB 0.69 cents, a shift from profit to loss compared to the prior period, primarily due to the loss attributable to owners of the company (Loss)/Earnings Per Share (RMB cents) | Indicator | June 30, 2020 | June 30, 2019 | | :--- | :------------ | :------------ | | (Loss)/profit attributable to owners of the Company (RMB thousand) | (11,208) | 11,421 | | Weighted average number of ordinary shares in issue (thousand shares) | 1,620,000 | 1,620,000 | | Basic and diluted (loss)/earnings per share (RMB cents) | (0.69) | 0.71 | - As there were no potentially dilutive ordinary shares outstanding during the period, diluted loss per share was equal to basic loss per share[85] 12 Dividends The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2020, and 2019 - The Directors do not recommend the payment of any interim dividend for the period[86] 13 Property, Plant and Equipment For the six months ended June 30, 2020, and 2019, the Group made no additions to property, plant and equipment, and no disposals in the first half of 2020 - For the six months ended June 30, 2020, and 2019, there were no additions to property, plant and equipment[87] - For the six months ended June 30, 2020, there were also no disposals of property, plant and equipment (RMB 1,299 thousand for the corresponding period in 2019)[87] 14 Trade and Bills Receivables As of June 30, 2020, net trade and bills receivables were RMB 3,981 thousand, a decrease from RMB 5,943 thousand at the end of 2019, primarily due to a reduction in trade receivables Net Trade and Bills Receivables (RMB thousand) | Item | June 30, 2020 | December 31, 2019 | | :--- | :------------ | :------------- | | Net trade receivables | 3,713 | 3,713 | | Net bills receivables | 268 | 268 | | Total net trade and bills receivables | 3,981 | 3,981 | - The carrying amount of trade receivables approximates their fair value, and the related balances are denominated in RMB[89] 15 Loans Receivable As of June 30, 2020, net loans receivable significantly increased to RMB 82,031 thousand from RMB 64,535 thousand at the end of 2019, mainly due to new loans provided to third parties and extensions of existing loan terms Net Loans Receivable (RMB thousand) | Item | June 30, 2020 | December 31, 2019 | | :--- | :------------ | :------------- | | Loans to third parties | 83,000 | 65,000 | | Less: Expected credit losses on loans receivable | (969) | (465) | | Net loans receivable | 82,031 | 64,535 | - The Group provided a loan of RMB 65,000 thousand to Beijing Liwo Technology Co., Ltd. in December 2019, and extended its term to December 2022 in February 2020[92] - In January 2020, the Group entered into two loan agreements with two independent third parties, each providing a loan of RMB 6,000 thousand for a term of 36 months at an annual interest rate of 7%[92] 16 Other Receivables and Prepayments As of June 30, 2020, other receivables and prepayments totaled RMB 24,859 thousand, a decrease from RMB 36,178 thousand at the end of 2019. Among these, amounts due from Merit Progress, Shaanxi Jiahe, and Mr. Wei Xing have been fully impaired Other Receivables and Prepayments (RMB thousand) | Item | June 30, 2020 | December 31, 2019 | | :--- | :------------ | :------------- | | Amount due from Merit Progress | 22,807 | 22,349 | | Amount due from Shaanxi Jiahe | 32,480 | 32,480 | | Amount due from Mr. Wei Xing | 29,784 | 29,054 | | Subtotal of other receivables | 97,658 | 96,856 | | Less: Expected credit losses on other receivables | (94,426) | (93,227) | | Advances to suppliers | 21,627 | 32,549 | | Total | 24,859 | 36,178 | - The amount due from Merit Progress represents a deposit for the acquisition of China Green Energy Investment Limited, which has been fully impaired as the acquisition did not proceed and the exclusive negotiation period expired[97][98] - Amounts due from Shaanxi Jiahe and Mr. Wei Xing have also been fully impaired due to disputes or overdue payments[98][100][101] 17 Trade Payables As of June 30, 2020, trade payables significantly increased to RMB 5,821 thousand from RMB 1,803 thousand at the end of 2019, primarily concentrated in the 0 to 90-day aging category Trade Payables Aging Analysis (RMB thousand) | Aging | June 30, 2020 | December 31, 2019 | | :--- | :------------ | :------------- | | 0 to 90 days | 3,936 | - | | 91 to 180 days | - | - | | 181 to 365 days | - | - | | Over 365 days | 1,885 | 1,803 | | Total | 5,821 | 1,803 | - Due to the short-term nature of trade payables, their carrying amounts approximate their fair values, and the balances are denominated in RMB[105] 18 Other Payables and Accrued Charges As of June 30, 2020, other payables and accrued charges totaled RMB 15,428 thousand, a decrease from RMB 17,948 thousand at the end of 2019, mainly comprising salaries and welfare payable and accrued taxes Other Payables and Accrued Charges (RMB thousand) | Item | June 30, 2020 | December 31, 2019 | | :--- | :------------ | :------------- | | Other payables | 4,334 | 4,353 | | Salaries and welfare payable | 5,508 | 5,649 | | Accrued taxes (excluding income tax) | 5,586 | 7,946 | | Total | 15,428 | 17,948 | - Other payables primarily include equipment purchase costs payable, service fees payable, and advances from third parties[107] 19 Assets and Liabilities of Disposal Group Classified as Held for Sale The Group entered into an agreement on December 24, 2019, to dispose of its entire equity interest in Shaanxi Jiahe, with the disposal group's assets and liabilities classified as held for sale as of December 31, 2019, and a fair value loss of RMB 9,191 thousand recognized - Hami Jiahe entered into a disposal agreement with an independent third-party buyer to dispose of Shaanxi Jiahe for a consideration of RMB 10,000 thousand[108] - Shaanxi Jiahe was classified as held for sale as of December 31, 2019, with the disposal expected to be completed within 12 months[108] Assets and Liabilities of Disposal Group Classified as Held for Sale (December 31, 2019, RMB thousand) | Item | Amount | | :--- | :--- | | Assets of disposal group classified as held for sale | 15,669 | | Liabilities of disposal group classified as held for sale | 5,669 | - A fair value loss of RMB 9,191 thousand on the disposal group was recognized for the year ended December 31, 2019[111] 20 Share Capital and Share Premium As of June 30, 2020, the company's authorized share capital was 5,000,000,000 shares with a par value of HKD 0.1 each, with 1,620,000 thousand shares issued, resulting in share capital of RMB 137,361 thousand and share premium of RMB 668,768 thousand Share Capital and Share Premium (RMB thousand) | Item | June 30, 2020 | | :--- | :------------ | | Authorized shares (par value HKD 0.1 per share) | 5,000,000,000 | | Number of issued shares (thousand shares) | 1,620,000 | | Share capital | 137,361 | | Share premium | 668,768 | | Total | 806,129 | - Share capital and share premium have remained unchanged since January 1, 2019[115] 21 Disposal of Shaanxi Jiahe The Group completed the change of shareholder registration for Shaanxi Jiahe on March 23, 2020, ceasing it to be a subsidiary, with a disposal consideration of RMB 10,000 thousand generating net cash inflow of RMB 9,608 thousand - The change of shareholder registration for Shaanxi Jiahe was completed on March 23, 2020, and it ceased to be a subsidiary of the Company[122] Net Cash Inflow from Disposal of Shaanxi Jiahe (RMB thousand) | Item | Amount | | :--- | :--- | | Cash consideration received | 10,000 | | Cash and cash equivalents disposed of | (392) | | Net cash inflow from disposal | 9,608 | - The net assets at the date of disposal were negative RMB 8,634 thousand[123] 22 Related Party Transactions For the six months ended June 30, 2020, the main related party transaction was key management personnel compensation, totaling RMB 1,898 thousand, an increase from the prior period Key Management Personnel Compensation (RMB thousand) | Item | June 30, 2020 | June 30, 2019 | | :--- | :------------ | :------------ | | Basic salaries, allowances and other benefits | 1,867 | 1,223 | | Contributions to retirement benefit schemes | 31 | 18 | | Total | 1,898 | 1,241 | 23 Capital Commitments As of June 30, 2020, and December 31, 2019, the Group had no contracted capital expenditure - As of June 30, 2020, and December 31, 2019, there was no contracted capital expenditure[127] 24 Contingent Liabilities The Group faces environmental contingencies and risks of insufficient insurance coverage, with the ultimate cost of environmental liabilities highly uncertain and potential significant impact from stricter future environmental standards, and personal injury commercial insurance possibly inadequate for future losses - Environmental liabilities are highly uncertain, and future environmental legislation may have a significant adverse impact on the financial position or operating results[128] - The Group has purchased commercial personal injury insurance for underground employees, but it may be insufficient to cover potential future losses, which could have a significant adverse impact on operating results or financial position[129] 25 Events After the Reporting Period The COVID-19 pandemic has impacted the global business environment since January 2020, but as of the report date, it has not caused significant financial difficulties for the Group, though future developments may affect financial performance to an unquantifiable extent - The outbreak of the COVID-19 pandemic has impacted the global business environment, but as of the date of this report, it has not caused significant financial difficulties for the Group[132] - The future development and spread of the pandemic may affect the Group's financial performance, the extent of which cannot be estimated[132] 26 Comparative Figures 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[133] Management Discussion and Analysis Provides an overview of the Group's business operations, financial performance, liquidity, and future strategies, including responses to market challenges and business diversification efforts Business Review The Group primarily engages in non-ferrous mineral mining and beneficiation, expanding into financial services and coal trading, with mining activities temporarily suspended due to COVID-19, but the Group optimized its business portfolio by disposing of Shaanxi Jiahe and actively seeks to restart mines and explore cooperation opportunities - The Group is primarily involved in mining and beneficiation of non-ferrous metals (lead, copper, zinc, lead) in Xinjiang, China[135] - Due to the COVID-19 pandemic, commodity market prices fell, forcing the Group to temporarily suspend mining activities and planned maintenance work[135] - The disposal of the entire equity interest in Shaanxi Jiahe was completed on March 23, 2020, to improve the business portfolio and reallocate resources[136] Mining Permits Hami Jinhua and Hami Jiahe hold mining permits for Project No. 20 and Baiganhu Mine, with Project No. 20 requiring hoist system upgrades to restart production, and Baiganhu Mine's production feasibility being evaluated, while Shaanxi Jiahe's permit for Huangjinmei Project No. 1 Mine was transferred upon disposal - Project No. 20, which produces copper and lead ore, requires an upgrade of its hoist system to restart production[139] - Baiganhu Mine, which produces lead and zinc ore, is being evaluated for production feasibility, and the Group is seeking cooperation partners[139] - The mining permit for Huangjinmei Project No. 1 Mine, held by Shaanxi Jiahe, was transferred upon the completion of the Jiahe disposal[139] Exploration Permits Hami Jiahe holds three exploration permits for Baiganhu Gold Mine, Huangshan, and H-989, covering gold, lead, and copper, with preliminary exploration conducted and plans for further exploration with potential partners when market conditions allow - Hami Jiahe holds three exploration permits for Baiganhu Gold Mine, Huangshan, and H-989, covering gold, lead, and copper[140] - The Group has conducted preliminary exploration in the Baiganhu Gold Mine area and identified initial mineral types and deposits[140] - The Group plans to allocate reasonable resources and/or collaborate with potential partners for further exploration to enrich its resource and reserve base[140] Beneficiation Plants Hami Jiahe operates a copper-lead ore beneficiation plant, and Hami Jinhua owns a lead-zinc beneficiation plant, both with a processing capacity of 1,500 tonnes per day, neither of which conducted mining or beneficiation operations during the period - Hami Jiahe operates a copper-lead ore beneficiation plant, and Hami Jinhua owns a lead-zinc beneficiation plant[141] - Each beneficiation plant has a processing capacity of 1,500 tonnes per day and employs a non-traditional flotation circuit[141] - During the period, neither Hami Jiahe nor Hami Jinhua conducted any mining or beneficiation operations[141] Financial Services The Group provided an RMB 65 million loan to a third party in December 2019, extended in February 2020, and three additional RMB 6 million loans to independent third parties during the period, generating approximately RMB 2.9 million in revenue from the financial services segment - In December 2019, a loan of RMB 65 million was provided to an independent third party at an annual interest rate of 7%, with the term extended to 31 months in February 2020[142] - During the period, three additional loans of RMB 6 million each were provided to three independent third parties, two for 36 months and one for 6 months, all at an annual interest rate of 7%[142] - The financial services segment generated revenue of approximately RMB 2.9 million during the period (2019: RMB 3.5 million)[143] Trading Business The Group conducts coal trading through its newly established indirect subsidiaries, Changzhi Runce and Gujiao Runce, with business activities slowed by COVID-19, but the trading business segment contributed RMB 14.6 million in revenue to the Group during the period - The Group conducts coal trading business through its indirect subsidiaries, Changzhi Runce Trading Co., Ltd. and Gujiao Runce Trading Co., Ltd[144] - Business activities slowed, and demand for commodities decreased due to the COVID-19 pandemic[144] - The trading business segment contributed RMB 14.6 million to the Group's revenue during the period (2019: RMB 8.3 million)[145] Results Review Revenue increased by 48.3% year-on-year to RMB 17.5 million during the period, primarily driven by coal trading; however, a significant increase in cost of sales led to a 49.2% decrease in gross profit, with operating loss expanding but administrative and income tax expenses decreasing Revenue and Gross Profit Changes (RMB million) | Indicator | H1 2020 | H1 2019 | Year-on-year Change | | :--- | :----------- | :----------- | :------- | | Revenue | 17.5 | 11.8 | +48.3% | | Cost of sales | 15.7 | 8.3 | +89.2% | | Gross profit | 1.8 | 3.5 | -49.2% | - The increase in revenue was primarily due to an increase of RMB 6.3 million in coal trading revenue, partially offset by a decrease of RMB 0.6 million in financial services segment revenue[148] - The decrease in gross profit was mainly due to a shift in business focus to lower-margin coal trading[148] Administrative Expenses Administrative expenses for the period were approximately RMB 10.9 million, a decrease from RMB 11.7 million in the prior period, mainly comprising depreciation, professional fees, staff costs, and office expenses - Administrative expenses for the period were approximately RMB 10.9 million (2019: RMB 11.7 million)[149] - These primarily included depreciation expenses, professional fees, staff costs, and office expenses[149] Other Income Other income for the period was approximately RMB 3.9 million, primarily consisting of exchange gains from financial assets denominated in currencies other than RMB - Other income for the period was approximately RMB 3.9 million, primarily consisting of exchange gains from financial assets denominated in currencies other than RMB[150] Finance Income – Net Net finance income for the period was approximately RMB 0.6 million, a decrease from RMB 0.8 million in the prior period, mainly representing interest income earned from the Group's bank cash - Net finance income for the period was approximately RMB 0.6 million (2019: RMB 0.8 million), primarily representing interest income earned from the Group's bank cash (net of interest expenses)[153] Income Tax Expense Income tax expense for the period was approximately RMB 0.2 million, a decrease from RMB 0.7 million in the prior period, primarily representing tax provisions for China operations - Income tax expense for the period was approximately RMB 0.2 million (2019: RMB 0.7 million), primarily representing tax provisions for China operations during the period[154] - No Hong Kong profits tax provision was made for the period[154] Operating Loss The operating loss for the period was RMB 5.2 million, with a loss margin of 29.7%, narrowing from RMB 8.155 million in the prior period, mainly due to increased revenue from trading business and contributions from financial services Segment Operating Results (RMB thousand) | Segment | H1 2020 Revenue | H1 2020 Segment Result | H1 2020 Operating (Loss)/Profit Margin (%) | | :--- | :--------------- | :------------------- | :------------------------------------ | | Coal Trading | 14,611 | (27) | (0.2%) | | Financial Services Interest Income | 2,888 | 1,451 | 50.2% | | Exploration | - | (2,092) | Not applicable | | Unallocated | - | (4,532) | Not applicable | | Total | 17,499 | (5,200) | (29.7%) | - The total operating loss narrowed from RMB 8,155 thousand in H1 2019 to RMB 5,200 thousand in H1 2020[156] Material Investments Held As of June 30, 2020, and 2019, the Group held no material investments - As of June 30, 2020, and 2019, the Group held no material investments[157] Material Acquisitions and Disposals The Group completed the disposal of its entire equity interest in Shaanxi Jiahe on March 23, 2020. Other than this, there were no other material acquisitions or disposals during the period - The Group completed the disposal of its entire equity interest in Shaanxi Jiahe to the buyer on March 23, 2020[159] - Other than the Jiahe disposal, there were no other material acquisitions or disposals during the period[159] Liquidity and Financial Review The Group funds its daily operations through internally generated cash flows. As of June 30, 2020, current assets were RMB 238.8 million and current liabilities were RMB 27.8 million, resulting in a healthy current ratio of 8.6 and period-end bank and cash balances of RMB 204.0 million Liquidity Overview (RMB million) | Indicator | June 30, 2020 | December 31, 2019 | | :--- | :------------ | :------------- | | Current assets | 238.8 | 340.6 | | Current liabilities | 27.8 | 43.8 | | Current ratio | 8.6 | 7.8 | - As of June 30, 2020, the Group's bank and cash balances were approximately RMB 204.0 million[161] - There were no outstanding interest-bearing bank loans or other borrowings[161] Foreign Exchange Risk The Group's operations are primarily conducted in RMB and have not experienced significant difficulties due to exchange rate fluctuations, with no current hedging activities, but management continues to monitor the situation - The Group's operations are primarily conducted in RMB and have not experienced significant difficulties due to exchange rate fluctuations[163] - The Group currently does not engage in hedging activities for foreign exchange risk, but management will continue to monitor the situation[163] Gearing Ratio As of June 30, 2020, and December 31, 2019, the Group's gearing ratio was 0%, indicating no net debt - As of June 30, 2020, the gearing ratio was 0% (December 31, 2019: 0%)[164] - The gearing ratio is calculated as net debt divided by total capital, where net debt is total borrowings less cash and cash equivalents[164] Pledge of the Company's Assets, Commitments and Contingent Liabilities As of June 30, 2020, and December 31, 2019, the Group had no other contracted capital expenditure, commitments, or pledges of assets, but may face contingent liabilities from new environmental regulations and insufficient employee accident insurance in the future - The Group had no other contracted capital expenditure, commitments, or pledges of the Company's assets[165] - The Group may face additional costs and liabilities from new environmental laws and regulations, as well as the impact of insufficient insurance coverage for future employee accidents[165] Dividends The directors do not recommend the payment of any interim dividend for the period - The directors do not recommend the payment of any interim dividend for the period (June 30, 2019: nil)[166] Human Resources and Share Option Scheme As of June 30, 2020, the Group employed 33 staff with total staff costs of approximately RMB 4.3 million, providing compensation based on job nature, performance, and tenure, with no outstanding share options during the period - As of June 30, 2020, the Group employed 33 staff (December 31, 2019: 32 staff)[169] - Total staff costs (including directors' emoluments) for the period were approximately RMB 4.3 million (prior period: RMB 4.1 million)[169] - There were no outstanding share options issued or unexercised during the period and as of June 30, 2020, and December 31, 2019[169] Future Outlook and Prospects The COVID-19 pandemic, Sino-US disputes, and economic slowdown create uncertainty for commodity markets, prompting the Group to monitor the pandemic, study mine restart plans, and mitigate risks by diversifying businesses (trading and financial services) and exploring new projects to optimize its business structure and seek new profit growth - The COVID-19 pandemic, Sino-US disputes, and slowing economic growth create uncertainty for the commodity market outlook[170] - The Group will study feasible mine restart plans and mitigate business risks through business diversification (trading and financial services)[170] - In the future, the Group will continue to deepen its mining business while developing trading and financial services, and explore other quality projects or opportunities to achieve business diversification[171] Events After the Reporting Period The COVID-19 pandemic has impacted the global business environment since January 2020, but as of the report date, it has not caused significant financial difficulties for the Group, though future developments may affect financial performance to an unquantifiable extent - The outbreak of the COVID-19 pandemic has impacted the global business environment, but as of the date of this report, it has not caused significant financial difficulties for the Group[172] - The future development and spread of the pandemic may affect the Group's economic condition and financial performance, the extent of which cannot be estimated[172] Directors' and Chief Executive's Interests and Short Positions in Shares and Underlying Shares As of June 30, 2020, no directors or chief executive of the company held any disclosable interests or short positions in the shares, underlying shares, or debentures of the company or its associated corporations - As of June 30, 2020, no directors or chief executive of the Company held any interests or short positions in the shares, underlying shares, or debentures of the Company or its associated corporations that were required to be notified to the Company and the Stock Exchange[173] Interests of Substantial Shareholders and Other Persons As of June 30, 2020, Mr. Guo Jianzhong and his controlled entity, Tianyuan International Limited, were the largest shareholders, collectively holding 28.08% equity, while China Huarong Asset Management Co., Ltd. and its associates held 19.75%, and Legend Vantage Limited and its associates held 11.64% Substantial Shareholder Holdings Overview (June 30, 2020) | Name | Nature of Interest | Total Interest in Shares | Approximate Percentage of the Company's Issued Share Capital | | :--- | :------- | :------------- | :--------------------------- | | Tianyuan International Limited | Beneficial owner | 412,592,702 | 25.47% | | Mr. Guo Jianzhong | Interest in controlled corporation 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. | Interest in controlled corporation | 320,000,000 | 19.75% | | Legend Vantage Limited | Beneficial owner | 188,638,883 | 11.64% | - Mr. Guo Jianzhong is the legal and beneficial owner of the entire issued share capital of Tianyuan International Limited and directly holds a portion of the shares[178] - Affinitiv Mobile Ventures Ltd. is indirectly wholly-owned by China Huarong Asset Management Co., Ltd. and its associates[180] Purchase, Redemption or Sale of Securities Neither the company nor any of its subsidiaries purchased, redeemed, or sold any of the company's listed securities during the period - Neither the Company nor any of its subsidiaries purchased, redeemed, or sold any of the Company's listed securities during the period[185] Disclosure Pursuant to Rule 13.20 of the Listing Rules The RMB 65 million loan provided by the Group to Beijing Liwo constitutes a continuing disclosure obligation under Listing Rule 13.20, as its principal amount exceeds 8% of the assets defined in Listing Rule 14.07(1), and is secured by Beijing Liwo's property - The RMB 65 million loan provided by the Group to Beijing Liwo constitutes a general disclosure obligation as its principal amount exceeds 8% of the assets as defined in Rule 14.07(1) of the Listing Rules[186] - The loan is secured by Beijing Liwo's property located in Beijing, China, with outstanding and accrued loan balances and interest of RMB 65 million and RMB 2.6 million, respectively[186] Non-Compliance with Financial Reporting Requirements of Listing Rules Due to COVID-19 travel restrictions, the company failed to publish its 2019 annual audited results on time, violating Listing Rule 13.49, but issued a preliminary results announcement on March 31, 2020, and obtained auditor's agreement on April 9, 2020, in accordance with HKEX guidance - Due to COVID-19 travel restrictions, the Company failed to publish its 2019 annual audited results on time, violating Listing Rule 13.49[188] - In accordance with HKEX guidance, the Company published a preliminary results announcement on March 31, 2020, and obtained auditor's agreement on April 9, 2020[188] Compliance with Corporate Governance Code The company is committed to maintaining high standards of corporate governance and has complied with the Corporate Governance Code in Appendix 14 of the Listing Rules, except for the non-separation of Chairman and Chief Executive roles and the absence of specific terms for some non-executive directors - The Company has taken appropriate steps to comply with the Corporate Governance Code, except for the non-separation of the roles of Chairman and Chief Executive[189] - Except for Mr. Chen Bingquan and Mr. Cao Ye who have three-year terms, all other non-executive directors are appointed without specific terms but are subject to retirement by rotation in accordance with the Company's Articles of Association[189] Standard Code for Securities Transactions by Directors The company has adopted the Model Code set out in Appendix 10 of the Listing Rules, and all directors have confirmed compliance with the code throughout the period - The Company has adopted the Model Code set out in Appendix 10 of the Listing Rules, and all directors have confirmed compliance with the code throughout the period[192] Review by Audit Committee The Audit Committee, composed of three independent non-executive directors, has reviewed the interim results for the period - The Audit Committee, composed of three independent non-executive directors, aims to review and monitor the Group's financial reporting process, internal controls, and risk management systems[193] - The Audit Committee has reviewed the interim results for the period[193] Publication of Interim Results and Interim Report The interim results announcement and this interim report have been published on the HKEX website and the company's website - The interim results announcement and this interim report are available on the HKEX website (www.hkexnews.hk) and the Company's website (www.huili.hk) for viewing[194]