China Shen Zhou Reports Fiscal 2010 Financial Results

2010 Fourth Quarter Financial Highlights

• Revenues reached $4.9 million from $1.1 million in the 2009 fourth quarter,
• Gross margin was 15.2%,
• Cash and equivalents were $1.55 million.

Ms. Xiaojing Yu, the Chairwoman and CEO, commented, "The 2010 year has been a transition as we have brought new processing capacity on line, better defined our assets and the Chinese government's new policies are forcing a realignment of the fluorite industry.  As we possess the largest fluorite mine in Northern China, we are well positioned to benefit from the new regulations and policies. We experienced strong sales growth in the second half of 2010 and we believe 2011 will be an even better year."

Fourth Quarter Financial Results

For the fourth quarter of 2010, net sales were $4.9 million, a $3.8 million increase from $1.1 million in the same quarter of 2009. Net sales grew due to higher commodity prices, particularly fluorite, and processing a much larger amount of fluorite ore in the 2010 fourth quarter to develop greater tonnage of fluorite lumps and powder.

Gross profit was $741,000 for the fourth quarter of 2010, a difference of $951,000 from a gross loss of $210,000 in the 2009 fourth quarter. The profit increase was mainly due to soaring fluorite prices and the use of the larger processing plant which had started operation since August 2010.

Selling expenses in the fourth quarter of 2010 were $37,000, as compared to $24,000 in the 2009 fourth quarter. Selling expenses as a percentage of total net sales were 0.8% as compared to 2.1% in the fourth quarter of 2009.

General & Administrative ("G&A") expenses in the fourth quarter of 2010 were $1.1 million compared with $2.7 million in the 2009 fourth quarter. G&A expenses as a percentage of total net sales were 22.5%.

An impairment provision for doubtful accounts was $0.4 million, inventory available for sale investment was $0.3 and mining assets in the fourth quarter of 2010 were $1.4 million respectively as compared to a total of $0.49 million in the 2009 fourth quarter.  

Operating expenses in the fourth quarter of 2010 were $3.1 million compared with $2.7 million in the 2009 fourth quarter.

The operating loss in the 2010 fourth quarter was $2.4 million versus a loss of $2.9 million in the 2009 fourth quarter.

Other, net was $147,000 in the 2010 fourth quarter versus a loss of $11,000 in the 2009 fourth quarter.

Net loss attributable to stockholders for the fourth quarter of 2010 was $2.5 million compared with net profit attributable to stockholders of $9.2 million in the 2009 fourth quarter as a result of an almost $14 million gain on the extinguishment of convertible debt.

Fiscal Year 2010 Results

2010 Financial Highlights

• Revenues increased by 177%,
• Gross margin rose to 25.9%,
• The net loss attributable to stockholders was $3.4 million.

Revenue was $11.6 million for the fiscal year 2010, a 177% increase compared with the net sales of $4.2 million in 2009. Fluorite powder production was approximately 29,000 metric tons in 2010 versus approximately 12,000 metric tons in 2009. The average price for fluorite rose over 45% to $164 per metric ton in 2010 compared with $113 per metric ton in 2009. Performance of the nonferrous metals segment improved dramatically in 2010 as the Xingzhen mine restarted in May 2010. Xingzhen Mining processed 77,241 metric tons of ores to produce 3,129 metal tons of zinc concentrate and 155 metal tons of copper concentrate, and sold 2,538 metric tons of zinc concentrate and 115 metric tons of copper concentrate the year ended December 31, 2010. While in 2009, the Xingzhen Mining was in trial production.

Gross profit for the fiscal year 2010 increased by approximately $2.8 million to $3.0 million from $0.26 million in the 2009 fiscal year. Both fluorite and nonferrous metal segments demonstrated significant growth in gross profit. Gross margin increased to 25.9% in 2010 due to the rising price of fluorite and the growing use of a new large processing plant.

Selling and distribution expenses rose slightly to $104,000 and represented less than 1% of sales in 2010.

General and administrative expenses in 2010 declined to $4.1 million from $5.8 million in 2009.

Interest expense was $0.59 million in 2010 versus almost $3.0 million in 2009 as the Company's convertible bonds were repurchased in late 2009.

The net loss attributable to stockholders was a loss of $3.3 million, or basic and diluted loss per share of $0.11 in 2010 as compared with a net profit of $3 million, or earnings per share of $0.13 for 2009. The 2009 year included an almost $14 million gain on the extinguishment of convertible debt.

At December 31, 2010, the Company had cash and cash equivalents of $1.5 million compared with $333,000 at December 31, 2009. Total liabilities and stockholders' equity grew to $44.2 million from $41.2 million at the end of 2009.

Recent Developments

On March 16, 2011, Mr. Steven Wang resigned as CFO of China Shen Zhou Mining & Resources, Inc. for personal reasons.  There were no disagreements between him and the Company on any matter that resulted in his resignation. Mr. Jiayin Zhu was appointed as CFO by the Board of Directors. Most recently, Mr. Zhu held the position of Financial Manager with the Company from June of 2010 until his appointment as CFO.  Previously, Mr. Zhu held the positions of Deputy Financial Manager and Accountant with the Company.  Mr. Zhu received his master degree in management from Liaoning Technical University in 2008.  Mr. Zhu received his bachelor's degree in economics from Central China Normal University in 2005.

On January 19, 2011, China Shen Zhou Mining & Resources, Inc. agreed to sell to certain institutional investors, pursuant to a securities purchase agreement, 2,836,883 shares of the Company's common stock and warrants to purchase up to 851,066 shares in a registered direct public offering.  The Offering was effected as a takedown from the Company's shelf registration statement on Form S-3 (File No. 333-171243) pursuant to a prospectus supplement filed with the U.S. Securities and Exchange Commission. The Company will receive aggregate gross proceeds, before deducting fees to the placement agent and other estimated offering expenses payable by the Company, of approximately $20 million.  

On January 13, 2011, China Shen Zhou announced that its subsidiary Xingzhen Mining Ltd. ("Xingzhen") signed an equity transfer agreement to acquire a 55% equity position in Xinyi. Payment under the agreement consists of RMB 50 million (approximately US$ 7.58 million) in China Shen Zhou's common shares and RMB 15 million (approximately US$ 2.27 million) in cash.  Under the agreement, Xingzhen, together with two individual investors also agreed to pay an additional RMB 28 million (approximately US$ 4.24 million) to Xinyi including RMB 20 million (US$ 3.03 million) for the renovation of Xinyi's mining facilities.  The management of China Shen Zhou hopes the new entity could produce approximately 35,000 metric tons of fluorite powder to generate about $10 million in revenue and between $5 million to $6 million of net income in 2011.

On November 16, 2010, Mr. Yang Youming resigned from the position of director of China Shen Zhou Mining & Resources, Inc. Mr. Yang had no disagreements with the Company prior to his resignation.  On November 16, 2010, to replace Mr. Yang, Mr. Li Liancheng was appointed a new director of the Company and the Chair of the Compensation Committee.  Mr. Li brings over 20 years working experience in senior management and technology research and development. From 2005 to present, as senior engineer, Mr. Li served as the vice-director of Information Center of Tianjin Chemical Research & Design Institute of China National Offshore Oil Corp.  Mr. Li holds a bachelors degree in chemical engineering from Zhengzhou Institute of Technology.

Business Outlook

For the 2011 year, net revenues are expected to rise to an estimated $38.0 million with an estimated $11.0 million in net income.

About China Shen Zhou Mining & Resources, Inc.

China Shen Zhou Mining & Resources, Inc., through its subsidiaries, is engaged in the exploration, development, mining, and processing of fluorite and nonferrous metals such as zinc, lead and copper in China. The Company has the following principal areas of interest in China: (a) fluorite extraction and processing in the Sumochaganaobao region of Inner Mongolia; (b) fluorite extraction and processing in Jingde County, Anhui Province;（c）zinc/copper/lead exploration, mining and processing in Wulatehouqi of Inner Mongolia; and (d) zinc/copper exploration, mining and processing in Xinjiang.

Safe Harbor Statement

This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology such as "will", "believes", "expects" or similar expressions. These forward-looking statements may also include statements about our proposed discussions related to our business or growth strategy, which is subject to change. Such information is based upon expectations of our management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions with respect to future business decisions, which are subject to change. We do not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see our most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and our subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at http://www.sec.gov .