2014 was an exciting year for us as we begin our transformation to become a leading mineral resources group in the region.
Since the beginning of the year in review, we have started to lay new inroads to diversify our earnings base and
provide new avenues of revenue streams for the Group. As such, we have identified mineral mining as a potential
source of sustainable income and consequently, we have identified several business opportunities which we believe
are value propositions with good earnings potential.
For a start, we have completed the acquisition of Starsmind Capital Pte. Ltd. (“Starsmind”) in November last year, through which the Group has an indirect stake of 23.64% in a mining company, Xinjiang Fengli De Yuan Trading Co., Ltd (“Xinjang Fengli”). Armed with a metals and minerals exploration permit in the Xinjiang Uygur Autonomous region, the China-based mining company has access to a surface mine with an estimated 4.2 billion tonnes of serpentine in measured and indicated mineral resources using a Magnesium Oxide cut-off grade of 30%. We have also since entered into a conditional sale and purchase agreement to acquire Singxin Resources Pte. Ltd. (“Singxin Resources”), which owns an indirect stake in another China-based mining company, Urumqi Jinshi Huilong Mining Co., Ltd (“UJHM”). UJHM holds mining exploration permits for minerals in 3 concession areas covering a total of 26.99 sq km in Xinjiang, China. The Singxin vendors and the Company are in the midst of completing the conditions precedent to the proposed acquisition. We will provide updates and make further announcements as and when there are any material developments in relation to the acquisition.
To further broaden our earnings base, the Group is currently in the midst of venturing into the mineral water mining industry through the proposed acquisition of Singxin Water Pte. Ltd. (“Singxin Water”). Singxin Water owns a China mining company, Wuqia County Kunlun Mineral Water Co., Ltd, which holds a mineral water mining permit that covers a total area of 0.5 sq km in Wuqia County in the Xinjiang Uygur Autonomous Region, China. We expect to complete this acquisition by 2H 2015.
Even as we work towards building a more resilient and stable revenue base through an array of diversification exercises, our core business took a hit on the back of continued adverse weather in Kalimantan, Indonesia, resulting in a reduction in coal transportation volume.
Consequently, the Group posted lower revenue of $17.0 million for the financial year ended 31 December 2014 (“FY2014”) as compared to $23.7 million in the same period the year before (“FY2013”). Coupled with higher depreciation expenses and an increase in legal and professional fees, the Group recorded a net attributable loss of $5.9 million in FY2014 as compared to a net profit of $2.5 million in FY2013.
From a balance sheet standpoint, the Group continues to remain in good financial health with net cash holdings
of $81.2 million and zero debt as at 31 December 2014, strengthening from a net cash position of $78.4 million
registered the year before.
Barging & Shipping
Coal prices are likely to remain lacklustre with continued volatility in global supply and demand. According to the Economist Intelligence Unit (EIU) Economic and Commodity Forecast, February 2015, average coal prices are expected to inch lower to US$66.7 per tonne in 2015 as compared to US$70.1 per tonne in 2014.
Coupled with the unpredictable weather that plagued our transport routes, we remain cautious on our earnings outlook for 2015.
With regard to our first foray into property, piling works for the Group’s 40-year leasehold development in Ningbo, China, are expected to commence in second quarter of 2015. The 54-storey development with a GFA of 159,926 sqm will comprise a mix of SOHO, retail and office units as well as a basement carpark, and is expected to be completed in 2020.
The mineral mining business has a considerable investment horizon, and we are prepared to take a long term view on it. We believe that there is tremendous value in owning assets rich in minerals which are depleting by the day. The key lies in our ability to unlock the value of these assets, and we are exploring all options to do so.
Following the departures of Independent Directors, Mr Chew Eng Soo and Mr Hirochika Shinohara in 2014, the Group is pleased to have appointed suitable replacements to fill the vacated positions.
We welcome Mr Lim Say Tai and Mr Tung Zhihong, Paul, to the Board as Independent Directors of the Group with effect from 2 May 2014.
In addition, we also wish to congratulate Ms Elaine Low on her appointment as the Group’s Executive Director with effect from 2 May 2014.
On behalf of the Board, I would like to extend our heartfelt appreciation to our management and employees for their hard work and unwavering loyalty.
I also wish to express our gratitude to our business partners for their continued support. Last but not least, I would like to thank our shareholders for embarking on this journey with us, as we work towards fostering a stronger earnings base, to deliver sustainable value to all in the years ahead.
Liow Keng Teck
27 March 2015