China Natural Resources(CHNR) - 2018 Q4 - Annual Report

Acquisition and Corporate Structure - The company reported a significant acquisition of Feishang Mining, which was treated as a reverse acquisition, with former shareholders holding 86.4% of outstanding common shares[28]. - The company is classified as not being a shell company as per the Exchange Act[5]. - Mr. Li Feilie controls approximately 59% of the company's outstanding common shares, influencing shareholder votes and corporate transactions[93]. - The company has not been involved in any bankruptcy or similar proceedings, maintaining a stable operational status[113]. - The company’s status as a foreign private issuer results in less information being available compared to domestic reporting companies, complicating investment decisions[86]. Financial Performance - For the year ended December 31, 2018, the profit before income tax from continuing operations was a loss of CNY 6,176,000, compared to a loss of CNY 6,179,000 in 2017[33]. - The total assets decreased significantly from CNY 29,748,000 in 2017 to CNY 7,743,000 in 2018[34]. - Current liabilities decreased from CNY 45,253,000 in 2017 to CNY 29,541,000 in 2018, indicating improved liquidity[34]. - The total equity attributable to owners of the Company showed a deficiency of CNY 21,798,000 in 2018, compared to a deficiency of CNY 15,505,000 in 2017[34]. - The company incurred operating losses from continuing operations of CNY4.52 million, CNY6.20 million, and CNY6.21 million (US$0.90 million) for the fiscal years ended December 31, 2016, 2017, and 2018 respectively[50]. - The company has not paid any dividends and has no plans to do so in the foreseeable future, intending to retain earnings for business development[34]. - The company generated no revenue during the fiscal years 2018 and 2017 due to the cessation of its copper smelting business and ongoing exploration activities[176][191]. Exploration and Mining Activities - The exploration program at Moruogu Tong Mine has indicated the presence of a "mid-size" deposit of lead and silver ore, warranting further exploration[41]. - The Company intends to fund mine exploration through bank borrowings and funds received from a cooperation agreement with Jijincheng Mining[41]. - The average LME price for silver in 2018 was US$2,021 per tonne, a decrease from US$2,531 per tonne in 2017[124]. - The company focused its resources on metals exploration and mining activities in the Inner Mongolia Autonomous Region of the PRC following the disposal of its previous operations[175]. - The company acquired Bayannaoer Mining in November 2017, which holds an exploration permit for the Moruogu Tong Mine, believed to contain lead and silver resources[174]. Regulatory and Compliance Issues - The company is subject to various government regulations that could adversely affect operations, including environmental protection and land use laws[48]. - The PRC government imposes controls on the convertibility of Renminbi into foreign currencies, which may affect the company's ability to remit dividends[69]. - The company has not filed any registrations with the SAFE regarding offshore investment activities, which may create regulatory uncertainties[75]. - PCAOB inspections of firms outside China have identified deficiencies, raising concerns about the effectiveness of the audit procedures of the company's auditor[79]. - SEC proceedings against PRC-based accounting firms could lead to financial statements being deemed non-compliant with the Securities Exchange Act of 1934[80]. Financial Reporting and Accounting - The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS)[16]. - The financial data for the years ended December 31, 2016, 2017, and 2018 are derived from audited consolidated financial statements, with unqualified auditor's reports issued by Ernst & Young Hua Ming LLP[29]. - The company maintains its accounts in Hong Kong Dollars and Renminbi, with financial statements prepared in Renminbi[23]. - The company has not disclosed any information regarding directors, senior management, and advisors in this report[26]. - The company recognizes asset retirement obligations at fair value when it is probable that an outflow of resources will be required, and a reasonable estimate of fair value can be made[205]. Market Conditions and Risks - The company faces risks related to changes in PRC government policies that could impact business operations and profitability[62]. - The company has incurred losses for each of the preceding three fiscal years, raising concerns about future profitability[49]. - The company does not currently generate revenues from operations and will continue to incur operating expenses until revenue-producing activities commence[51]. - The average exchange rate for the Renminbi against the U.S. Dollar in 2018 was 6.6363, reflecting a slight depreciation compared to previous years[39]. - The annual cumulative depreciation of the Renminbi against the U.S. dollar was 5.71% in 2018, while it appreciated by 2.42% from the beginning of 2019 to March 31, 2019[73].