SGZH 10K makes reference to mining rights and the accounting treatment thereof - sounds like it may simply be a timing issue rather than a significant overall adjustment to net income.
Thus, we have the right to extract 6,149,700 metric tons (“tonnes”) of coal from Tong Gong coal mine, provided that the coal underlying the two mining rights is fully paid for by a certain period of time. For mining rights granted prior to September 1, 2006, we are generally required to make full payment within five years unless specific good cause exists for extension. Effective September 1, 2006, under the authority of the Heilongjiang Geology and Mineral Exploration Office, the due date is ten years from the grant date for mining rights granted on or after September 1, 2006. The price is determined on a per tonne basis, and is subject to change based on the prevailing market price as determined by the Heilongjiang Department of Land and Resources. As of December 31, 2008, we have paid for 5,383,495 tonnes out of the 6,149,700 tonnes to which we have mining rights.
The amount of coal underlying our mining rights is determined based on PRC standards, which differ from those of SEC Industry Guide 7. As such, coal that is deemed extractable in China, where we operate, may not be deemed similarly under SEC Industry Guide 7. However, because our coal is mined and sold entirely in China, we believe that the amount of coal underlying our mining rights presents a more accurate picture than Tong Gong mine’s proven and probable reserves, as such terms are defined in Guide 7 of the Securities Act Industry Guide (“SEC Industry Guide 7”).
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