Annual Report 2011 - QuamIR

Chairman’s MessageOver the course of this year our businesswas further expanded. Mining ventures inHeilongjiang Province and the AutonomousRegion of Inner Mongolia provide a strongfoundation for growth. Recently announcedinitiatives in Aohan Banner, Inner Mongolia andHebei Province demonstrate our commitment tothe sector and remain consistent are with ourestablished corporate strategy.With cash reserves of some HK$700 million, no debt(excluding normal course trade payables) and adiversified portfolio of mining properties the comingyear holds great promise. A solid financial positionis critical at a time when Sino Prosper looks todevelop its existing projects and seeks to exploitnew opportunities in the China precious metalsarena. In addition, revenue and profitability fromthe core mining business is planned to rise, thusproviding a foundation for future growth.Growth StrategySino Prosper’s past year was rewarding. Manylessons were learned as the Group took its firststep in establishing a significant Chinese preciousmetals mining company. Perhaps the mostimportant lesson was the importance of setting aclear strategic direction and ensuring its properexecution.Central to our corporate strategy is to build adiversified portfolio of China-based precious metalsprojects to generate above average returns oninvestment. Sino Prosper focuses on acquiringproducing or near-producing assets, with thepotential for substantial enhancement in sizeand quality of resources as well as productionscale. Aohan Banner and Zhongyi Weiye are twoprojects that exemplify this strategy. The potentialacquisition of Xiang Guang silver mine and theAohan Banner Regional Cooperation Agreementare in line with Sino Prosper’s approach to buildcorporate value.Sino Prosper is committed to become anintegrated enterprise that controls all steps inthe precious metals mining value chain, fromexploration through development, mining,smelting, refining and sales. This strategy allowsSino Prosper to enhance returns from theresources it owns, thus increasing margins toimprove corporate profitability. The expansion ofproduction facilities and the launch of a refineryproject in Aohan Banner are concrete measuresadopted to realize this integration strategy.Another key objective is to secure projects withlow production costs. For instance, the AohanQi projected gold production cost, according toChangchun Gold Design Institute, is expectedto be less than US$200 per ounce, amongst thelowest 10% of gold mining production costsworldwide. As Aohan Qi reaches full productioncapacity in the coming years the result of theselow production costs is expected to translateinto substantial profitability and shareholdervalue.These are all important components of abroad and comprehensive strategic vision thatunderpins the growth initiative of Sino Prosper.However, amongst all these elements, themost important component is one that is hardto quantify in mere dollars and cents. This isour China style with a global vision, a criticalcombination of skill sets and experience inthe China market with proprietary technology,capital and a knowledge base from the globalarena.China StyleChina style is comprised of many uniqueelements which take into account the peculiarnature of Chinese practice, regional concernsand local needs, all of which are important inthe highly sensitive precious metals miningindustry. Relationships, market characteristics,regional nuances, customized business practices,Annual Report 2011