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China Shen Zhou Mining & Resources Reports First Quarter 2007 Financial Results


BEIJING, May 21 /Xinhua-PRNewswire-FirstCall/ -- China Shen Zhou Mining & Resources, Inc. (OTC Bulletin Board: CSZM), one of the leading companies in the exploration, development, mining, and processing of fluorite, zinc, lead, copper, and other nonferrous metals in the PRC, today announced first quarter 2007 financial results. The Company plans to file its Form 10-Q today.

Financial Results from First Quarter of 2007 Include:

-- Revenues increased 3.4% year over year to $3.0 million from $2.9

million

-- Gross profit of $1.8 million compared to $1.9 million in the first

quarter of 2006

-- Income from operations of $319,000, reflecting public company costs not

incurred in the prior year period

-- Non-cash interest expenses of $1.1 million, including $391,000 for

accrual of finance costs and amortization of deferred finance costs,

$588,000 for the revaluation of warrant liability and $100,000 of

amortization of deferred debt issuance costs

-- Non-cash interest expense totaled approximately $0.05 per diluted share

-- Reported net loss was $1.2 million, or $0.05 per diluted share

"In the first quarter of 2007, our revenue increased 3.4% to $3.0 million from the same period of 2006, despite the more severe weather conditions and the seasonality that we always experience in the first quarter of the year. Our facilities are located in northwestern China, where winter weather and geographical factors result in low production and revenue in the first quarter of our business cycle," said Ms. Jessica Yu, CEO of China Shen Zhou Mining & Resources. "We continue to focus on expanding production capacity, increasing exploration activities and acquiring more mineral resources. We believe these efforts will position us for consistent, sustainable long-term growth."

Revenue for the first quarter of 2007 increased 3.4% to $3.0 million from $2.9 million in the first quarter of 2006, mainly due to the contribution of net revenue of $185,000 by a subsidiary which was acquired in the second quarter of 2006. Excluding this contribution, revenue decreased 3.4% compared to the same period of 2006, which is the result of a longer suspension in ore-dressing production due to more severe weather conditions and thorough maintenance on equipment in the first quarter of 2007.

In the first quarter of 2007, gross profit decreased 5.3% to $1.8 million from $1.9 million in the first quarter of 2006 as a result of production suspension. Gross margin decreased to 58.7% from 64.3% in the same period of 2006. The decrease in gross margin was due to the increase in sales of copper products from the newly acquired subsidiary which has a lower gross margin than other products. Management believes that with expected efficiency improvements, the Company’s newly acquired subsidiary will run properly soon and will benefit the company in the long term.

Income from operations for the first quarter 2007 decreased to $319,000 from $1.2 million in the same period of 2006. Selling and distribution expenses decreased 20.7% to $46,000 in the first quarter of 2007 from $58,000 in the first quarter of 2006, while general and administrative expenses increased 88.4% to $1.4 million from $743,000 in the same period of prior year. The significant increase in general and administrative expenses reflects additional professional and consultancy expenses of approximately $461,000 to meet public company reporting and other requirements following the completion of the reverse takeover in September 2006. General and administrative expenses also include $84,000 of expenses incurred in the newly acquired subsidiaries. Operating margin decreased to 10.7% in the first quarter of 2007 from 40.4% in the first quarter of 2006.

Interest expense increased to $1.6 million in the first quarter of 2007 from $60,000 in the first quarter of 2006. The increase is mainly due to non-cash interest expenses associated with the convertible bonds and warrants issued in the fourth quarter of 2006. This includes: i) accrual of finance costs and amortization of deferred finance of $391,000; ii) revaluation of the warrant liability of approximately $588,000; and iii) amortization of deferred debt issuance costs of approximately $100,000.

Net loss was $1.2 million or $0.05 per diluted shares in the first quarter of 2007, compared to $1.1 million or 0.06 per diluted share in the same period of 2006.

Balance Sheet

As of March 31, 2007, the Company had $14.5 million of cash, compared to $18.9 million at December 31, 2006. The decrease in cash position was due to the $3.1 million of payment in investing activities and the $1.3 million of net repayment of bank borrowings during the three months ended March 31, 2007.

With the proceeds from the issuance of $28.0 million convertible note in December 2006, management believes that the company has adequate sources of liquidity to finance its business operations and expansion plans for the foreseeable future.

About China Shen Zhou Mining & Resources, Inc.

China Shen Zhou Mining & Resources, Inc. conducts all of its business through its subsidiary, AFMG, which, in turn, conducts its business through its Subsidiaries. The principal business of AFMG is the exploration, development, mining, and processing of fluorite, zinc, lead, copper, and other nonferrous metals in the PRC. AFMG has two principal areas of interest in the PRC: (a) fluorite and zinc exploration in the Sumochaganaobao region of Inner Mongolia Province; and (b) copper/gold exploration in the Yangye Huayuan region of Xinjiang Uygur Autonomous Region.

Safe Harbor Statement

Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People’s Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.

For more information, please contact:

Ashley Ammon MacFarlane or Bill Zima

Integrated Corporate Relations, Inc.

Tel: +1-203-682-8200 (Investor Relations)

Web: http://www.chinaszky.com

Source: China Shen Zhou Mining & Resources, Inc.
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