Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.
Use of Terms
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to: “we,” “us,” “our,” or the “Company” are to CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD., and its consolidated subsidiaries;
“MT” are to metric tons;
“PRC” and “China” are to the People’s Republic of China;
“SEC” are to the Securities and Exchange Commission;
“Securities Act” are to the Securities Act of 1933, as amended;
“Exchange Act” are to the Securities Exchange Act of 1934, as amended;
“Renminbi” and “RMB” are to the legal currency of China; and
“U.S. dollars,” “dollars” and “$” are to the legal currency of the United States.
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CHINA CHANGJIANG MINING AND NEW ENERGY COMPANY LTD.
For the Fiscal Year Ended December 31, 2011
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
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ITEM 1. BUSINESS.
Our Corporate History and Background
China Changjiang Mining & New Energy Co., Ltd. (the “Company”) is engaged in exploration in Shaanxi Province, China, for commercially recoverable metal-bearing mineral deposits. The Company has not yet identified any proven or probable mineral reserves, and only limited exploration activity has so far been undertaken, primarily by governmental bodies in Shaanxi Province. Provided the Company successfully identifies commercializable mineral deposits, it intends to engage in mining, processing and distributing zinc, lead, and gold. In 2011, we cooperated with Shaanxi Western Mining & Energy Co., Ltd (“Western Mining”) to develop our mines by providing the exploration rights, technical support and related information and generated exploitation compensation revenue of $1,568,357.
Subsequent Event
On June 1, 2012, the Company entered into an agreement with Xunyang Yongjin Mining Co., Ltd to transfer the exploration rights at a consideration of $2,380,612 (RMB15,000,000), subject to the approval of the Department of Land and Resources of Shaanxi Province. To date, the administrative approval has not been obtained and the management can give no assurance if or when the transaction would be approved. If the transfer of the exploration rights is approved, we intend to direct our resources in the new clean and renewable energy industry in the PRC.
The Company is the result of a 2008 share exchange transaction among: (i) North American Gaming and Entertainment Corporation, a Delaware corporation (“North American”); (ii) Shaanxi Changjiang Petroleum & Energy Development Stock Co., Ltd. (“CJP”), a limited liability company established and existing under the law of People’s Republic of China; and (iii) the shareholders of CJP, among whom the predominant shareholder, holding 97.2% of CJP’s shares, was a Hong Kong company, Hong Kong Wah Bon Enterprise Limited (“Wah Bon”). After completion of the share exchange transaction, the Company entered into a reverse merger with North American.
At the time of the share exchange transaction, CJP owned 60%, and the Company continues to control, Shaanxi Dongfang Mining Co., Ltd., (“Dongfang Mining”) which, as discussed further under “Item 2. Properties,” holds the Chinese exploration license through which we pursue our exploration activity.
The share exchange was completed on February 4, 2008, resulting in the shareholders of CJP controlling approximately 96% of the equity ownership of North American At the time of the closing of the share exchange, North American was a shell company domiciled in Delaware which filed reports under the Exchange Act and whose shares traded in the U.S. over-the-counter market. Wah Bon caused its subsidiary, CJP, to pay $370,000 in cash, and Wah Bon delivered shares constituting 97.2% of the outstanding equity of CJP, in exchange for 3,800,000 shares of North American common stock and 500,000 shares of Series C Preferred Stock of North American, which originally were entitled to 1,218 votes per share. Two U.S. individuals, through their advisory company, Capital Advisory Services, Inc., were paid in the aggregate 4,500,000 shares of North American. In June 2008, CJP changed its name to “Shaanxi Changjiang Mining &New Energy Co., Ltd (“Shaanxi Changjiang”).”
Following the share exchange transaction, Wah Bon replaced North American’s Board of Directors.
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China Changjiang Mining & New Energy Co., Ltd. was incorporated in the state of Nevada on September 19, 2008 for the purposes of re-domesticating the Company from Delaware to Nevada, adopting the Company’s current name, and to serve as the surviving company of a reverse merger with North American.
Pursuant to Articles of Merger filed with the Secretary of the State of the State of Nevada on December 4, 2008 and the Secretary of the State of the State of Delaware on April 2, 2009, North American was merged with and into the Company, with the Company being the surviving entity.
On February 9, 2010, we filed a Certificate of Amendment to our Articles of Incorporation to effect a 1-for-10 reverse stock split of our common stock, subject to FINRA approval. The 1-for-10 reverse split was approved by FINRA on July 30, 2010, effective August 2, 2010.
On September 15, 2010, the Company filed with the Nevada Secretary of State a Certificate of Designation and a Certificate of Conversion and Elimination of the Series C Convertible Preferred Stock, pursuant to which: (i) all shares of our Series C Preferred Stock were converted into shares of common stock at a rate of 1,218 shares of common stock for each outstanding share of Series C Preferred Stock; and (ii) we canceled and eliminated the Series C Preferred Stock. In the aggregate, the outstanding shares of the Company’s Series C Preferred Stock were converted into 609 million shares of common stock.
As a result of these transactions, we currently have 250,000,000 authorized shares of common stock, par value $0.01 per share, of which 64,629,559 shares are issued and outstanding on the date of filing of this Form 10-K, and 10,000,000 authorized shares of preferred stock, of which no shares are presently issued and outstanding. At the time our share exchange transaction was completed, approximately 96% of the outstanding shares of North American were owned by Wah Bon. See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
The present corporate structure of our Chinese subsidiaries is as depicted in the chart below:
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Our Industry and Principal Market
Sales and Marketing
Although we are still in the exploration phase, we have established a sales and marketing department which is focused on identifying and establishing relationships with companies that are likely to have a need for our products. We are seeking to explore further on our property for commercializable zinc, lead and gold deposits. Zinc and lead can be freely sold and marketed throughout the PRC. China remains a net importer of these metals, and we believe a customer base exists within China.
Current Business Operations
Our Business
Through our majority-controlled subsidiary, Dongfang Mining, we are engaged in the exploration for commercially recoverable metal-bearing mineral deposits, such as zinc, lead and gold. Currently, our exploration activities are in a 50.12 square kilometer area in Jiao Shan Zhai, Guo Jia Ling, Xunyang County, in the Shaanxi Province of China. To date, our activities have not resulted in the location of proven reserves.
Mining is a high-risk industry. We cannot assure we will obtain exploration and mining licenses in the near future. Actually, we prefer to withdraw from the mining industry if we find a better investment opportunity in the new clean and renewable energy industry in the PRC.
We also hold land use rights in a 5.7 square kilometer parcel located in Huanghe Nantan, Heyang County, in the Shaanxi Province of China. We lease a portion of the land use rights on the 5.7 square kilometer parcel to Shaanxi Huanghe Bay Springs Lake Theme Park Ltd. (“Huanghe”) for the development and operation of a theme park. The term of the lease agreement is from January 1, 2011 to December 31, 2029. The annual rent is approximately $1.2 million. In November 2010, the Company received the first rent payment under the lease, in the amount of approximately $0.6 million. For additional information, see “Item 2. Properties”.
We intend to invest more resources in new energy industry in the near future. Currently, new energy plays an increasingly important role in the energy industry, especially, in the PRC. The government strongly supports the development of new clean and renewable energy. We deem there should be more opportunity in the new energy industry and commence to develop the following new energy projects.
a) We established a subsidiary, named Shaanxi Weinan Changjiang solar photovoltaic energy applied science and technology Co., Ltd. (“Weinan Changjiang”), in April 2012 to develop the new energy business. Shaanxi Changjiang accounted for 51% shares of Weinan Changjiang , and Mr. Zhang Hongjun, the actual controller, accounted for the other 49% shares.
In September 2012, Weinan Changjiang entered into an agreement with Shaanxi Changling Solar Energy & Electric Co., Ltd (“Changling”) to outsource the construction of a solar energy project located in Huanghe Bay Springs Lake Theme Park. The project, with a total contract amount of $310,548, is going to be completed by the year end of 2012.
A series of licenses or permits must be obtained from the government organizations for power generation and distribution in PRC. Up to present, we have obtained following permits: a) The Heyang County Power Grid Access license; b) Application for the provincial solar photovoltaic building demonstration projects nominated by both the Housing and Urban-Rural Construction Bureau of Weinan City and Weinan Municipal Finance Bureau; and c) Filing in the Weinan City Municipal Development and Reform Commission. The project was designed to generate electricity mainly for Huanghe, and was anticipated to operate in 2013.