U.S. China Mining Group Inc fka SGZH

[bradford86]

SGZH - Global Speculation - It's Homework Time

The accounting issues relate to (i) the amortization of mining rights based on salable reserves determined under Industry Guide 7, (ii) the amortization of asset retirement obligation based on salable reserves determined under Industry Guide 7 and (iii) the accounting for the reverse acquisition in April 2008 of Heilongjiang Xing An Group Hong Yuan Coal Mining Co., Ltd. and Heilongjiang Xing An Group Sheng Yu Ming Co., Ltd.

Amortization of the related asset is recorded on a straight line basis over the estimated useful lives of the fixed amount of coal we are entitled to extract.

Depreciation and amortization
818,028 804,783

NET INCOME
12,430,720 $ 6,041,801

wow. we are talking 10% of net income here. who cares.

http://sec.gov/divisions/corpfin/guidance/coalmineletter.htm

http://sec.gov/about/forms/industryguides.pdf

Description of Property by Issuers Engaged or to Be Engaged in Significant Mining Operations
Guide 7.
(a) Definitions. The following definitions apply to registrants engaged or to be engaged in significant mining operations:
(1) Reserve. That part of a mineral deposit which could be economically and legally extracted or produced at the time of the
reserve determination.
Note: Reserves are customarily stated in terms of “ore” when dealing with metalliferous minerals; when other materials such
as coal, oil, shale, tar, sands, limestone, etc. are involved, an appropriate term such as “recoverable coal” may be substituted.
(2) Proven (Measured) Reserves. Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches,
workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection,
sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and
mineral content of reserves are well-established.
(3) Probable (Indicated) Reserves. Reserves for which quantity and grade and/or quality are computed form information similar to
that used for proven (measure) reserves, but the sites for inspection, sampling, and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high
enough to assume continuity between points of observation.
(4) (i) Exploration State — includes all issuers engaged in the search for mineral deposits (reserves) which are not in either the
development or production stage.
(ii) Development Stage — includes all issuers engaged in the preparation of an established commercially minable deposit
(reserves) for its extraction which are not in the production stage.
(iii) Production Stage — includes all issuers engaged in the exploitation of a mineral deposit (reserve).
Instruction to paragraph (a)
Mining companies in the exploration stage should not refer to themselves as development stage companies in the financial
statements, even though such companies should comply with FASB Statement No. 7, if applicable.
(b) Mining Operation Disclosure. Furnish the following information as to each of the mines, plants and other significant properties
owned or operated, or presently intended to be owned or operated, by the registrant:
(1) The location and means of access to the property.
(2) A brief description of the tile, claim, lease or option under which the registrant and its subsidiaries have or will have the right
to hold or operate the property, indicating any conditions which the registrant must meet in order to obtain or retain the
property. If held by leases or options, the expiration dates of such leases or options should be stated. Appropriate maps may be
used to portray the locations of significant properties;
(3) A brief history of previous operations, including the names of previous operators, insofar as known;
(4) (i) A brief description of the present condition of the property, the work completed by the registrant on the property, the
registrant’s proposed program of exploration and development, and the current state of exploration and/or development
of the property. Mines should be identified as either open-pit or underground. If the property is without known reserves
and the proposed program is exploratory in nature, a statement to that effect shall be made;
(ii) The age, details as to modernization and physical condition of the plant and equipment, including subsurface improvements
and equipment. Further, the total cost for each property and its associated plant and equipment should be stated.
The source of power utilized with respect to each property should also be disclosed.
(5) A brief description of the rock formations and mineralization of existing or potential economic significance on the property,
including the identity of the principal metallic or other constituents insofar as known. If proven (measured) or probable
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(indicated) reserves have been established, state (i) the estimated tonnages and grades (or quality, where appropriate) of such
classes of reserves, and (ii) the name of the person making the estimates and the nature of his relationship to the registrant.
Instructions to paragraph (b)(5):
1. It should be stated whether the reserve estimate is of in-place material or of recoverable material. Any inplace estimate
should be qualified to show the anticipated losses resulting from mining methods and beneficiation or preparation.
2. The summation of proven (measured) and probable (indicated) ore reserves is acceptable if the difference in degree of
assurance between the two classes of reserves cannot be readily defined.
3. Estimates other than proved (measured) or probable (indicated) reserves, and any estimated values of such reserves shall
not be disclosed unless such information is required to be disclosed by foreign or state law; provided, however, that where
such estimates previously have been provided to a person (or any of its affiliates) that is offering to acquire, merge, or
consolidate with, the registrant or otherwise to acquire the registrant’s securities, such estimates may be included.
(6) If technical terms relating to geology, mining or related matters whose definition cannot readily be found in conventional
dictionaries (as opposed to technical dictionaries or glossaries) are used, an appropriate glossary should be included in this
report.
(7) Detailed geographic maps and reports, feasibility studies and other highly technical data should not be included in the report
but should be, to the degree appropriate and necessary for the Commission’s understanding of the registrant’s presentation of
business and property matters, furnished as supplemental information.
(c) Supplemental Information.
(1) If an estimate of proven (measured) or probable (indicated) reserves is set forth in the report, furnish:
(i) maps drawn to scale showing any mine workings and the outlines of the reserve blocks involved together with the
pertinent sample-assay thereon.
(ii) all pertinent drill data and related maps.
(iii) the calculations whereby the basic sample-assay or drill data were translated into the estimates made the grade and
tonnage of reserves in each block and in the complete reserve estimate.
Instructions to paragraph (c)(1):
Maps and drawings submitted to the staff should include:
(a) A legend or explanation showing, by means of pattern or symbol, every pattern or symbol used on the map or
drawing; the use of the symbols used by the U.S. Geological Survey is encouraged;
(b) A graphical bar scale should be included; additional representations of scale such as “one inch equals one mile” may
be utilized provided the original scale of the map has not been altered;
(c) A north arrow on the maps;
(d) An index map showing where the property is situated in relationship to the state or province, etc., in which it was
located;
(e) A title of the map or drawing and the date on which it was drawn;
(f) In the even interpretive data is submitted in conjunction with any map, the identity of the geologist or engineer that
prepared such data; and
(g) Any drawing should be simple enough or of sufficiently large scale to clearly show all features on the drawing.
(2) Furnish a complete copy of every material engineering, geological or metallurgical report concerning the registrant’s property,
including governmental reports, which are known and available to the registrant. Every such report should include the name of
its author and the date of its preparation, if known to the registrant.
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Instruction to paragraph (c)(2)
Any of the above-required reports as to which the staff has access need not be submitted. In this regard, issuers should consult
with the staff prior to filing the report. Any reports not submitted should be identified in a list furnished to the staff. This list
should also identify any known governmental reports concerning the registrant’s property.
(3) Furnish copies of all documents such as title documents, operating permits and easements needed to support representations
made in the report.

VERDICT: Not Sure. I'm satisficing here... and going to say that the additional research time it would take to figure out the new amortization schedule would be wasted. odds are they are going to use some accelerated amortization or not let them amortize it. Either way, I think it won't make much of a difference.