Newton Resources Ltd — Interim / Quarterly Report 2013

Aug 29, 2013

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1231)

INTERIM RESULTS FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2013

The Board wishes to announce the unaudited consolidated interim results of the Group for the Reporting Period together with the comparative figures for the Corresponding Prior Period as follows:—

CONDENSED CONSOLIDaTED STaTEMENT OF COMPREHENSIvE INCOME

Six-month period ended 30 June 2013

Notes Revenue 3 Cost of sales Gross proft Other income and gains Selling and distribution costs Administrative expenses Finance income 5 Loss from operations Equity-settled share option expense Loss before tax 4 Income tax expense 6 Loss for the period Total comprehensive loss for the period Attributable to: Owners of the Company Non-controlling interests LOSS PER SHaRE aTTRIBUTaBLE TO ORDINaRY EQUITY HOLDERS OF THE COMPaNY Basic and diluted (RMB cent) 8

Six-month period ended 30 June 2013 2012 RMB’000 RMB’000 (Unaudited) (Unaudited) 2,163 — (7,002) — (4,839) — 11 9 (191) — (17,563) (17,765) 10,733 5,505 (11,849) (12,251) (434) (3,049) (12,283) (15,300) (491) (218) (12,774) (15,518) (12,774) (15,518) (12,638) (15,425) (136) (93) (12,774) (15,518) (0.32) (0.39)

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CONDENSED CONSOLIDaTED STaTEMENT OF FINaNCIaL POSITION 30 June 2013

Note Non-current assets Property, plant and equipment Intangible assets Prepaid land lease payments Current assets Inventories Prepayments, deposits and other receivables Cash and cash equivalents Current liabilities Trade payables 10 Other payables and accruals Interest-bearing bank borrowings Income tax payable Net current assets Total assets less current liabilities Non-current liabilities Long-term payables Net assets Equity Equity attributable to owners of the Company Issued capital Reserves Non-controlling interests Total equity	30 June 2013 RMB’000 (Unaudited) 726,867 50,088 3,559 780,514 4,449 40,268 757,600 802,317 440 68,864 386,351 6,738 462,393 339,924 1,120,438 29,820 1,090,618 331,960 756,932 1,088,892 1,726 1,090,618	31 December 2012 RMB’000 (Audited) 725,188 50,088 3,610 778,886 4,736 41,781 793,146 839,663 427 85,879 393,238 6,227 485,771 353,892 1,132,778 29,820 1,102,958 331,960 769,136 1,101,096 1,862 1,102,958

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NOTES:

1. CORPORaTE INFORMaTION

The Company is a limited liability company incorporated in the Cayman Islands. The registered office of the Company is located at P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

During the period, the principal activity of the Company is investment holding and the principal activities of its subsidiaries include mining, ore processing and sale of iron concentrates and mining, processing and sale of gabbro-diabase products in the Mainland China.

2. BaSIS OF PREPaRaTION aND SIgNIFICaNT aCCOUNTINg POLICIES

2.1 Basis of Preparation

The unaudited condensed consolidated interim financial information of the Group for the six-month period ended 30 June 2013 (the “Interim Financial Information”) have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting issued by the International Accounting Standards Board and the disclosure requirements of Appendix 16 of the Listing Rules.

The Interim Financial Information does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements for the year ended 31 December 2012.

2.2 Significant Accounting Policies

The accounting policies adopted in the preparation of the Interim Financial Information are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2012, except for the adoption of new accounting standards and interpretations (which includes all new International Financial Reporting Standards, IASs and Interpretations issued by the International Accounting Standards Board, collectively the “IFRSs”) that are relevant and first effective for the current accounting period of the Company, as summarised below:

IFRS 10	Consolidated Financial Statements
IFRS 13	Fair Value Measurement
IAS 1 Amendments	Amendments to IAS 1_Presentation of Financial Statements_
	— Presentation of Items of Other Comprehensive Income
IFRIC-Int 20	Stripping Costs in the Production Phase of a Surface Mine

The adoption of the above amendments to IFRSs did not have any significant effect on the amounts reported and/or disclosures set out in the Interim Financial Information.

The Group has not early adopted any other accounting standard, interpretation or amendment that has been issued but is not yet effective.

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3. REvENUE aND OPERaTINg SEgMENT INFORMaTION

Revenue represents the net invoiced value of goods sold, net of trade discounts and returns and various types of government surcharges, where applicable.

Operating Segment Information

For management purposes, the Group organised its business units based on production and services. The Group has revenue of RMB2,163,000 recognised during the six-month period ended 30 June 2013 (six-month period ended 30 June 2012: nil) and the losses for the both periods were mainly derived from the “Sale of Iron Concentrates” operating segment. Therefore, there is no presentation of operating segment information.

Furthermore, as the Group’s revenue from the external customers (where applicable) and the majority of the Group’s non-current assets are located in the PRC in both periods, no geographical information is presented.

4. LOSS BEFORE TaX

The Group’s loss before tax is arrived at after charging:

	Six-month period	ended 30 June
	2013	2012
	RMB’000	RMB’000
	(Unaudited)	(Unaudited)
Cost of inventories sold	7,002	—
Depreciation of items of property, plant and equipment	2,563	3,477
Amortisation of prepaid land lease payments	51	51

5. FINaNCE INCOME

An analysis of the Group’s net finance income is as follows:

Interest on bank borrowings Less: Interest capitalised Interest income Bank charges Net foreign exchange gains/(losses) Finance income, net	Six-month period ended 30 June 2013 2012 RMB’000 RMB’000 (Unaudited) (Unaudited) (4,499) (4,931) — 4,931 (4,499) — 8,583 7,846 (170) (15) 6,819 (2,326) 10,733 5,505

During the six-month period ended 30 June 2013, no interest expense was capitalised (six-month period ended 30 June 2012: a capitalisation rate of 2.52%).

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6. INCOME TaX

The provision for the PRC corporate income tax (“CIT”) is based on the CIT rate applicable to the entities located in or deemed to be operating in Mainland China as determined in accordance with the relevant income tax rules and regulations of the PRC for the six-month periods ended 30 June 2013 and 2012.

No provision for Hong Kong profits tax had been made as the Group had no estimated assessable profits arising in Hong Kong during the six-month periods ended 30 June 2013 and 2012.

	Six-month period	ended 30 June
	2013	2012
	RMB’000	RMB’000
	(Unaudited)	(Unaudited)
Current tax — Mainland China
Charge for the period	491	218

7. DIvIDEND

The directors do not recommend the payment of an interim dividend to shareholders for the six-month period ended 30 June 2013 (six-month period ended 30 June 2012: nil).

8. LOSS PER SHaRE aTTRIBUTaBLE TO ORDINaRY EQUITY HOLDERS OF THE COMPaNY

The calculation of basic loss per share amounts is based on the loss for the period attributable to owners of the Company, and the weighted average number of ordinary shares of 4,000,000,000 in issue during the periods ended 30 June 2013 and 2012.

The calculations of basic and diluted loss per share are based on:

Loss Loss attributable to owners of the Company, used in the basic and diluted loss per share calculation Shares Weighted average number of ordinary shares in issue during the period used in the basic and diluted loss per share calculation	Six-month period ended 30 June 2013 2012 RMB’000 RMB’000 (Unaudited) (Unaudited) (12,638) (15,425) ’000 ’000 4,000,000 4,000,000

The Pre-IPO share options of the Company had an anti-dilutive effect on the basic loss per share amount for the six-month periods ended 30 June 2013 and 2012 and were ignored in the calculation of diluted loss per share.

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9. CREDIT POLICY

The Group trades only with recognised and creditworthy third parties, and generally requires deposits received in advance.

10. TRaDE PaYaBLES

An aged analysis of the trade payables as at the end of the reporting period, based on the invoice date, is as follows:

Within 6 months 6 months to 1 year Over 1 year	30 June 2013 RMB’000 (Unaudited) 191 90 159 440	31 December 2012 RMB’000 (Audited) 267 3 157 427

11. CONTINgENT LIaBILITIES aND EvENTS aFTER THE REPORTINg PERIOD

In March 2013, a subsidiary of the Group was involved in a litigation as a defendant regarding the construction sum payable arising out of the ordinary course of business of the Group. In May 2013, the local court issued a verdict to freeze two properties of the plaintiff and such subsidiary’s bank accounts or other assets up to RMB36 million. Consequently, in July 2013, certain bank accounts of such subsidiary with an aggregate balance of approximately RMB1.2 million were frozen by the local court. The litigation is currently in mediation. The Group is reviewing the relevant documents from the counterparty and will proactively respond to the case in accordance with the advice of the Group’s legal counsels. Based on the information provided so far, it is anticipated that the litigation would not have any material adverse impact to the financial position and operations of the Group.

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CHaIRMaN’S STaTEMENT

The Group recorded a net loss of approximately RMB12.8 million for the Reporting Period, as compared to a net loss of approximately RMB15.5 million for the first half of 2012. In spite of valiant efforts by our management team, our Yanjiazhuang Mine operations continue to face varying degrees of challenge. In the first half of 2013, the Group continued its trial production of the iron concentrates. Regrettably, negotiations with villagers and local government on land expropriation have proven to be a laborious and prolonged task. With a sense of fiduciary stewardship towards our Shareholders, we are steadfast in our principle that all discussions must be equitable, licit and efficacious on a bilateral basis. Under this tenet, notwithstanding mediations by the local government officials, not all asserted demands by the neighbouring villages and their inhabitants could be met amicably. This has prompted certain disturbance in our mine site. Such disturbance continues sporadically in varying degrees of intensity even to date and the Group was forced to suspend its trial production. We categorically disavow any such antagonistic conduct as leverage of negotiations. Our quest to resolve this matter has meant strenuous dialogues between our management, local government officials, and representatives from the surrounding villages over the last few months. I thank our management team for their unrelenting efforts and unwavering spirit to brave this herculean task. With the heightened rapport between us and Shougang, which I will elaborate in the next paragraph, I see impetus for optimism. Our management team is in active, albeit preliminary still, discussions with Shougang to study the situation with an aim for the Yanjiazhuang Mine to resume production as soon as possible. Meanwhile, during the Reporting Period, the Group was getting prepared for the gabbro-diabase mining at the Yanjiazhuang Mine, and made good progress in stripping and preparation works. The operation of the First Quarry was not materially affected by the disturbance caused by the neighbouring villages and their inhabitants.

For the last few months, our management has been in regular discussions with Shougang to determine the best means to collaborate with us on the development of and the resumption of production at the Yanjiazhuang Mine. Information is being exchanged, site visits are being made, management experience is being shared and joint visits to local regulators and government departments are taking places. Although I am pleased with the progress, I have urged our management team to expedite the process. Our management team is currently formulating a proposal to effectuate this collaboration with Shougang. Once an agreement in principle is reached, we will immediately inform the market as appropriate.

In closing, I would like to express my heartfelt gratitude to our Shareholders for their continuous patience and understanding, to my fellow Directors for their support and guidance to the Group, and to our management for their dedication and hard work throughout these difficult times.

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MaNagEMENT DISCUSSION aND aNaLYSIS

MaRkET REvIEw

In the first half of 2013, with a further slowing down in the economic growth of Mainland China which led to a decrease in the growth of GDP to 7.6% and the recovery prospect of international economy are uncertain, the iron and steel industry of China remained sluggish as a whole. As the profitability of steel enterprises weakened, approximately more than 40% of them suffered losses. Affected by such factors, the demand for iron ore declined and iron ore prices fluctuated in a gradual downward trend with the average price of the iron ores imported to Mainland China decreased by approximately 4% to US$133.2 per tonne, as compared against the same period last year.

In addition, as a large steel producing country, China’s iron ore demand continues to depend largely on imports as its domestically produced iron ores do not meet the production needs. In the first half of 2013, Mainland China imported about 384Mt of iron ores in total, representing a year-on-year increase of 4.9%. However, such import growth was slowed down. As the province in Mainland China with the largest steel production and iron ore demand, Hebei Province achieved about 237Mt in iron ore output in the first half of 2013, representing a year-on-year growth of 3.5%, through the growth was cut down by 18%. The decrease in iron ore production is mainly caused by the falling iron ore price, leading to the low utilisation rate of ore processing facilities and shrinking profits of iron mining enterprises. To complement the insufficient domestically produced iron ores, the iron ore imports in Hebei Province increased by 13.4% year on year in the first half of 2013. However, the growth of imported iron ores also slowed down due to the overall diminishing demand for iron ores in Hebei Province.

Looking into the second half of 2013, the Chinese government is further strengthening the adjustment of industrial structure, in particular the elimination of enterprises with low-efficient production capacity in the iron and steel industry. The measures include closing down of certain small and medium steel enterprises with heavy pollution due to environmental protection motive. The iron ore demand will continue to fall and exert downward pressure to the iron ore price. On the other hand, the stable economic growth policy of the Chinese government and the anticipation of urbanisation development plan are expected to restore confidence in the iron and steel industry and stablise the iron ore price.

BUSINESS aND OPERaTION REvIEw

Iron Concentrate Business

In the first half of 2013, the Group continued the trial production of iron concentrates. Regrettably, in the past few months, the local villagers have again caused disturbance around the Group’s mine site due to the land expropriation disputes. Such disturbance disrupted the Group’s mining activities, forcing the Group to suspend the trial production. The Group recorded sale revenue of approximately RMB2.2 million from the trial production and sale of iron concentrates.

During the Reporting Period, the Group passed the safety inspection for the New Tailings Storage Facility and the ancillary constructions and was granted the production safety permit by the Safety Authority.

The Group resumed the stripping activities, and started the trial operation of the No.1 dry magnetic cobbing system and the No.1 processing facility and trial production of a limited scale at the Yanjiazhuang Mine since November 2012. However, during the Reporting Period, notwithstanding mediations by the local government officials, not all asserted demands by the neighboring villages and their inhabitants could be met amicably. This has prompted certain disturbance in the mine site. Such disturbance continues sporadically in varying

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degrees of intensity even to date and the Group was forced to suspend its stripping and mining activities and its trial production at the Yanjiazhuang Mine. Given sufficient consideration for the difficulty and complexity that the Group is facing in the development and production at the mine site, the Group has been engaged in active communication with relevant government authorities on a “Reasonable and Legitimate” basis with an aim of achieving comprehensive and thorough solutions with the neighboring villages and their inhabitants in the future, so as to smoothing out the development of the production and operation at the Yanjiazhuang Mine. As at the date of this announcement, the Group has yet to make any estimate or judgment on the schedule of resuming the iron concentrate commercial production. The Company shall further disclose any progress on the resumption of production as and when appropriate.

During the Reporting Period, the Group and Shougang Hong Kong is exploring the strategic cooperation concerning the production operation and infrastructure development of the Yanjiazhuang Mine. Aiming at resuming commercial production as soon as practicable and optimising and carrying on the currently suspended infrastructure development plans, the Group is expecting to have a more professional management team and technical support at the Yanjiazhuang Mine in order to strengthen the mine management, to assist in the infrastructure development and operational planning, and to participate in enhancing the Group’s relationship with neighboring society.

Currently, the Phase Two and Phase Three expansion plans of the Group were hindered by land expropriation disputes. During the Reporting Period, the remaining construction works come to a standstill. Please refer to the paragraph headed “Iron Concentrate Business” in “Capital Expenditure and Infrastructure Development” section for further details.

gabbro-Diabase Business

During the Reporting Period, the Group was getting prepared for the gabbro-diabase mining at the Yanjiazhuang Mine, and made good progress in stripping and preparation works. During the process, the operation of the First Quarry was not materially affected by the disturbance caused by the neighboring villages and their inhabitants. For the gabbro-diabase infrastructure construction carried out during the Reporting Period, further discussion will be provided in the paragraphs headed “Gabbro-Diabase Business” in “Capital Expenditure and Infrastructure Development” section.

Apart from the mining preparation works and the progress in infrastructure construction, the Group is currently applying for the production safety permit from the Safety Authority, and with the successful passing of the expert evaluation on gabbro-diabase production safety as conducted by the Safety Authority, the Group is in the final stage to secure the gabbro-diabase production safety permit. The Group estimates that the production of gabbro-diabase products is expected to commence within 2013.

From the marketing perspective, the Group has continued to participate in recognised stone industry exhibitions to promote its gabbro-diabase products, aiming to create corporate branding and establish customer network. After the Reporting Period, the Group entered into a sales contract on gabbro-diabase materials with a stone factory in Beijing to provide this factory with gabbro-diabase materials of designated size which can be further processed into marketable decorating materials.

Upon the commencement of the exploitation and production of gabbro-diabase, it will enrich the Group’s product mix and expand its customer base, which benefits the Group’s successful development in the long run.

As the Group has not yet commenced the mining and production of gabbro-diabase during the Reporting Period, no revenue was recognised during the Reporting Period.

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CaPITaL EXPENDITURE aND INFRaSTRUCTURE DEvELOPMENT

During the Reporting Period, the Group incurred capital expenditure amounting to approximately RMB4.2 million, mainly on drainage and flood control infrastructure and infrastructure constructions of gabbro-diabase business.

Iron Concentrate Business

Due to the land expropriation disputes and the disturbance around, the relevant construction of Phase Two and Phase Three expansion plans was suspended during the Reporting Period.

During the Reporting Period, the Group basically completed the drainage construction and the summer enhancement works for flood control infrastructure amounting to approximately RMB1.6 million.

gabbro-Diabase Business

During the Reporting Period, the infrastructure in the First Quarry was basically completed and the production platform at the First Quarry is established, and the necessary machineries and equipments for exploitation and production are purchased. In addition, the preparatory works for other quarries are also in progress, laying solid foundation for the Group to commence gabbro-diabase production as soon as practicable.

In the past, the Group has been preparing for the development of a gabbro-diabase processing plant on a parcel of land with an area of 50 mu (approximately 33,333m[2] ) (the “Land”) located in the Lincheng County Industrial Park in Hebei Province. In view of the delayed expansion of the gabbro-diabase business, the Group had no further development of the Land during the Reporting Period.

At the end of the Reporting Period, the Group had paid RMB1.5 million as deposit for the Land. Recently, in August 2013, the Group reached an agreement with the administrative body of Lincheng County Industrial Park that the Group would return the Land to such administrative body, and in return the latter shall provide another parcel of land to the Group in future, as and when appropriate, for the construction of the Group’s gabbro-diabase processing plant subject to entering into a further definitive agreement. It has also been agreed that part of that deposit of RMB0.75 million will be refunded to the Group, and the remaining amount shall be retained by such administrative body as a prepayment for the new land in future. It is anticipated that the above event would not have any material adverse impact to the financial position and operation of the Group.

The Group will continue to monitor the production and development progress of the gabbro-diabase products, and maintain close contact with the administrative body of Lincheng County Industrial Park. In doing so, the Group is expected to commence the construction of the gabbro-diabase processing plant as and when the scale of the gabbro-diabase business becomes commercially viable.

During the Reporting Period, the capital expenditure incurred for the gabbro-diabase business was approximately RMB1.6 million, mainly incurred from the infrastructural ancillary constructions and stripping activities at the First Quarry.

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IRON ORE RESOURCE aND RESERvE ESTIMaTES

During the Reporting Period, the Group only conducted trial production in limited scale at the Yanjiazhuang Mine. Therefore, the mineral resource and ore reserve estimates of the Group as at 30 June 2013 recorded under the JORC Code have no significant changes as compared to the figures as set out in the annual report 2012 of the Company.

gaBBRO-DIaBaSE RESOURCE ESTIMaTES

In order to investigate the feasibility of utilising the gabbro-diabase resources at the Yanjiazhuang Mine, the Group has conducted an estimate for the gabbro-diabase resources. As at 30 June 2013, there was no material change of the gabbro-diabase resources at the Yanjiazhuang Mine (categorised as an Indicated Resource under the JORC Code), as compared against those disclosed in the annual report 2012 of the Company. During the Reporting Period, the mining and production of gabbro-diabase resources has yet to commence.

RESOURCES EXPLORaTION aND IDENTIFICaTION OF NEw RESOURCES

The Group engaged the No.11 Geological Brigade of Hebei Bureau of Geological Exploration of the PRC (the “No. 11 Geological Brigade”) to carry out exploration works on two iron mines, namely Gangxi Mine located in Lincheng County, Hebei Province and Shangzhengxi Mine located adjacent to Shahe City, Hebei Province. The contract between the Group and the No.11 Geological Brigade expired on 26 August 2013. The Group has not further extended the exploration and acquisition works of these two mines. The expiry of the above contract is not expected to have any material adverse impact to the financial position and operation of the Group.

The Group will continue to identify and evaluate opportunities for acquisition and merger of other reserves and resources. It is believed to be beneficial for the Group to further expand and strengthen the exploitable reserves and resources in the long run.

During the Reporting Period, the Group did not incur any expense or capital expenditure in exploration activities.

PRODUCTION SaFETY aND ENvIRONMENTaL PROTECTION

During the trial production, the Group has been focusing its attention highly on production safety and environmental protection. Therefore, the Group established a competent department responsible for production safety and management. This department has been consistently promoting safety standards and strengthening environmental protection policies so as to develop the Group into a socially responsible enterprise with high awareness of safety concerns. During the Reporting Period, the Yanjiazhuang Mine had no record of significant safety incident.

INTERIM DIvIDEND

The Board does not recommend the payment of an interim dividend for the Reporting Period (Nil for the Corresponding Prior Period).

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FINaNCIaL REvIEw

During the Reporting Period, the Group’s revenue was approximately RMB2.2 million (Nil for the Corresponding Prior Period). The increase in revenue was mainly attributable to the commencement of trial production of iron concentrates since the end of November 2012.

The net loss for the Reporting Period was approximately RMB12.8 million (loss of approximately RMB15.5 million for the Corresponding Prior Period). The loss attributable to owners of the Company amounted to approximately RMB12.6 million (loss of approximately RMB15.4 million for the Corresponding Prior Period). The basic and diluted loss per share for the Reporting Period was approximately RMB0.32 cent (basic and diluted loss per share of approximately RMB0.39 cent for the Corresponding Prior Period).

Revenue

The Group recorded revenue of approximately RMB2.2 million during the Reporting Period in relation to iron concentrate trial production. In the past few months, the neighboring villages and their inhabitants caused disturbance to the Group’s mine site, and as a result of these disturbance, the mining activities were disrupted thereby forcing the Group to suspend its trial production. During the Reporting Period, the Group produced and sold 2,600 tonnes of iron concentrates.

During the Corresponding Prior Period, the Group’s iron concentrate production at the Yanjiazhuang Mine was temporarily suspended, pending for the construction of the New Tailings Storage Facility. As a result, the Group did not record any revenue for the Corresponding Prior Period.

Cost of Sales

Cost of sales mainly comprised of operating fees incurred from mining and hauling, and expenses in relation to staff, materials, power and other utilities, repairs and maintenance, depreciation and amortisation. The Group’s cost of sales during the Reporting Period amounted to approximately RMB7.0 million (Nil for the Corresponding Prior Period). The increase in cost of sales was mainly attributable to the commencement of trial production of iron concentrates since the end of November 2012. In the Corresponding Prior Period, the Group’s production was suspended and therefore no cost of sales was recorded.

The cost of sales during the Reporting Period represented 318.2% of revenue (Nil for the Corresponding Prior Period). The cost of sales accounted for a relatively high proportion, mainly due to fairly limited production during the Reporting Period as affected by the mine site environment and the disturbance around.

Gross Loss and Negative Gross Profit Margin

Taking the above into consideration, the Group recorded gross loss of approximately RMB4.8 million and negative gross profit margin of -218.2% for the Reporting Period (Nil for the Corresponding Prior Period), which was mainly due to the fairly limit production during the Reporting Period. As a result, the revenue is unable to recover the cost of sales.

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Selling and Distribution Costs

Selling and distribution costs, which mainly comprise of salaries of sales staff and entertainment expenses, amounted to approximately RMB0.2 million during the Reporting Period. During the Corresponding Prior Period, no selling and distribution costs were incurred, as the Group had no selling activity prior to the trial production.

administrative Expenses

Administrative expenses slightly decreased by 1.1% to approximately RMB17.6 million during the Reporting Period, as compared to approximately RMB17.8 million for the Corresponding Prior Period. The decrease was mainly due to the recognition of production costs directly as cost of sales during the Reporting Period when the trial production commenced at the Yanjiazhuang Mine. In the Corresponding Prior Period, the relevant costs were recognised as administrative expenses due to the production suspension.

Finance Income

Finance income increased by 94.5% to approximately RMB10.7 million during the Reporting Period, as compared to approximately RMB5.5 million for the Corresponding Prior Period. The increase was mainly attributed to foreign exchange gains arising from the appreciation of RMB against HKD.

Income Tax Expense

The income tax expense represented the current period provision for the CIT calculated at the CIT rate applicable to the entities located in or deemed to be operating in Mainland China as determined in accordance with the relevant income tax rules and regulations of the PRC for the both periods.

The effective tax rate was negative and changed from -1.4% for the Corresponding Prior Period to -4.0% for the Reporting Period, which was mainly attributable to the non-recognition of tax losses of the Group as deferred tax assets. It is considered that it is premature to recognise the deferred tax assets as at 30 June 2013. Further details about the Group’s income tax are set out in note 6 to the Interim Financial Information.

Loss for the Period and Total Comprehensive Loss for the Period

As a result of the above, the Group’s loss and total comprehensive loss for the period amounted to approximately RMB12.8 million during the Reporting Period, as compared to a loss and total comprehensive loss for the period of approximately RMB15.5 million in the Corresponding Prior Period.

Property, Plant and Equipment

As at 30 June 2013, the Group’s property, plant and equipment had a net book value of approximately RMB726.9 million (approximately RMB725.2 million as at 31 December 2012). During the Reporting Period, the Group mainly completed the drainage and flood control infrastructure as well as infrastructure constructions of the gabbro-diabase business, and therefore, the property, plant and equipment remained at similar level as compared with that at 31 December 2012. The above net book value represents 45.9% of the Group’s total assets as at 30 June 2013 (44.8% as at 31 December 2012).

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Other Payables and accruals

As at 30 June 2013, the Group’s balances of other payables and accruals were approximately RMB68.9 million (approximately RMB85.9 million as at 31 December 2012). The decrease of 19.8% was mainly attributable to the settlement of payables to suppliers or contractors for the Group’s addition of items of property, plant and equipment during the Reporting Period.

LIQUIDITY aND CaSH aND CaSH EQUIvaLENTS

As at 30 June 2013, the Group’s cash and cash equivalents amounted to approximately RMB757.6 million (approximately RMB793.1 million as at 31 December 2012), representing 47.9% (49.0% as at 31 December 2012) of total assets of the Group. The Group’s net cash position (calculated as cash and cash equivalents less total borrowings) was approximately RMB371.2 million (approximately RMB399.9 million as at 31 December 2012). The liquidity (calculated as current assets divided by current liabilities) was approximately 1.7 (approximately 1.7 as at 31 December 2012).

During the Reporting Period, the Group paid approximately RMB16.9 million (approximately RMB61.2 million for the Corresponding Prior Period) for the settlement of payables to suppliers or contractors for the Group’s addition of items of property, plant and equipment.

CaPITaL STRUCTURE aND gEaRINg RaTIO

Gearing ratio of the Group is calculated by dividing its net debt position (calculated as total borrowings less cash and cash equivalents) by its total equity.

As at 30 June 2013, the total equity of the Group amounted to approximately RMB1,090.6 million (approximately RMB1,103.0 million as at 31 December 2012).

As at 30 June 2013 and 31 December 2012, as the Group had net cash position of approximately RMB371.2 million and RMB399.9 million, respectively, it is not considered to have any gearing as at these dates.

LOaNS, INDEBTEDNESS aND MaTURITY DaTE

As at 30 June 2013, the Group’s HKD denominated bank borrowings amounted to HK$485.0 million (equivalent to approximately RMB386.4 million) (HK$485.0 million, equivalent to approximately RMB393.2 million, as at 31 December 2012).The bank borrowings were all unsecured and carried interest at floating rates. Maturity of bank borrowings is subject to the banks’ overriding right of repayment on demand. As at 30 June 2013, no property, plant and equipment or leasehold land or land use rights were pledged by the Group.

EXPOSURE TO FLUCTUaTIONS IN EXCHaNgE RaTES

The Group businesses are located in the PRC and most of the transactions are conducted in RMB. Except for the Group’s HKD denominated bank borrowings and certain cash and cash equivalents, majority of the Group’s assets and liabilities are denominated in RMB. Therefore, the Group currently does not have a foreign currency hedging policy. It manages its foreign currency risk by closely monitoring the movement in the foreign currency rates.

As of 30 June 2013, certain cash and cash equivalents were denominated in HKD and USD and the bank borrowings were denominated in HKD. As the RMB fluctuates against HKD and USD in a limited extent during the Reporting Period, the Group had no material adverse exposure to foreign exchange fluctuations during the Reporting Period.

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OPERaTINg SEgMENT INFORMaTION

For management purposes, the Group organised its business units based on production and services. The Group has revenue of RMB2,163,000 recognised during the six-month period ended 30 June 2013 (six-month period ended 30 June 2012: nil) and the losses for the both periods were mainly derived from the “Sale of Iron Concentrates” operating segment. Therefore, there is no presentation of operating segment information.

Furthermore, as the Group’s revenue from the external customers (where applicable) and the majority of the Group’s non-current assets are located in the PRC in both periods, no geographical information is presented.

CaPITaL COMMITMENTS

At the end of the Reporting Period, the capital commitments of the Group were detailed as below:

Contracted, but not provided for: — Property, plant and equipment Authorised, but not contracted for: — Property, plant and equipment — Resource fees Total	30 June 2013 RMB’000 (Unaudited) 60,406 399,764 310,000 709,764 770,170	31 December 2012 RMB’000 (Audited) 59,991 400,591 310,000 710,591 770,582

CONTINgENT LIaBILITIES aND EvENTS aFTER THE REPORTINg PERIOD

In March 2013, a subsidiary of the Group was involved in a litigation as a defendant regarding the construction sum payable arising out of the ordinary course of business of the Group. In May 2013, the local court issued a verdict to freeze two properties of the plaintiff and such subsidiary’s bank accounts or other assets up to RMB36 million. Consequently, in July 2013, certain bank accounts of such subsidiary with an aggregate balance of approximately RMB1.2 million were frozen by the local court. The litigation is currently in mediation. The Group is reviewing the relevant documents from the counterparty and will proactively respond to the case in accordance with the advice of the Group’s legal counsels. Based on the information provided so far, it is anticipated that the litigation would not have any material adverse impact to the financial position and operations of the Group.

SIgNIFICaNT INvESTMENTS, aCQUISITIONS aND DISPOSaLS

During the Reporting Period, the Group had no significant acquisitions and disposals.

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30 June, 2013

341

EMPLOYEES aND REMUNERaTION POLICIES

The group

Number of employees

Type Production Iron ore mining Iron ore processing Ancillary mining activities Management, fnance and administration Gabbro-diabase business Others Total	approximate percentage to Number the total number of employees of employees 53 15.5 57 16.7 70 20.5 116 34.0 25 7.4 20 5.9 341 100.0	approximate percentage to Number the total number of employees of employees 53 15.5 57 16.7 70 20.5 116 34.0 25 7.4 20 5.9 341 100.0
		100.0

As at 30 June 2013, the Group had a total of 341 full-time employees (31 December 2012: 419 full-time employees) in Hong Kong and Mainland China (excluding independent third-party contractors engaged in mining and hauling works). The Group formulates its human resources strategy and executes recruitment plans based on its development strategies. The remuneration packages of the employees are structured by reference to job nature including geographical locations and prevailing market conditions. The remuneration policy of the Group is subject to periodic review, and year-end bonuses and share options are available to reward employees in accordance with their individual performances and industry practice. Appropriate training programs are also offered to ensure continuous staff training and development.

Since 2012, in view of the suspension of iron concentrate production at the Yanjiazhuang Mine and for the purpose of minimising the operating costs, certain employees at the Yanjiazhuang Mine were arranged to take leave. In compliance with the relevant PRC laws and regulations, the Group paid the upkeep of the basic living of those employees on leave. During their leave, the Group still maintained the employment relationship, and requested these employees to report periodically to the human resources department.

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USE OF NET PROCEEDS FROM THE LISTINg

The Group was listed on the Stock Exchange in 2011 and raised net proceeds of approximately RMB1,052 million. The net proceeds raised from the Listing, as allocated according to the basis set out in the prospectus of the Company dated 21 June 2011 in connection with the Listing, will be applied to fund the three-phase expansion plan of the Yanjiazhuang Mine, payment of resource fees, exploration and acquisition activities, development of gabbro-diabase business, repayment of the shareholders’ loans and working capital.

Three-phase expansion plan of the Yanjiazhuang Mine Payment of resource fees Exploration and acquisition activities Development of gabbro-diabase business Repayment of shareholders’ loans Working capital	Net proceeds from the Listing Utilised allocation available (up to basis to utilise 30 June 2013) % RMB’ million RMB’ million 35 368 143 9 95 — 17 179 — 26 273 55 10 105 105 3 32 32 100 1,052 335

As further detailed in the section headed “Resources Exploration and Identification of New Resources”, the Group’s contract with the No. 11 Geological Brigade in relation to the exploration works on Gangxi Mine and Shangzhengxi Mine was expired on 26 August 2013. In this connection, the Group will continue to identify and evaluate opportunities for acquisition and merger of other reserves and resources. The Company considers that the expiry of the above contract with the No. 11 Geological Brigade would not have any material impact on the Group’s estimated use of proceeds as summarised above.

OUTLOOk aND FUTURE PLaNS

As mentioned above, the Group is currently in discussions with its substantial Shareholder, Shougang Hong Kong, to further explore areas of cooperation and development and work out the detailed arrangements. As part of the business cooperation strategy, both parties are studying to provide management team support to the Yanjiazhuang Mine. That support will enhance the production operation and infrastructure development, and resolve land expropriation disputes and external issues, so that the commercial production can be resumed as soon as practical, which is believed to bring in positive initiatives for the Group’s business development.

The approval for production safety permit as required for the commercial production of the Group’s gabbrodiabase business has now reached the final stage, and is expected to be granted in the second half of 2013. The Board estimates that the mining, production and sale of gabbro-diabase products will be able to commence once the permit is granted. It is believed that the successful resumption of commercial production of iron concentrates and the production of gabbro-diabase, that will be gradually ramped up to a commercial scale, will contribute to the Group’s success in the long run.

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CORPORaTE gOvERNaNCE PRaCTICES

As part of the Company’s unwavering commitment to high standards of corporate governance, it has adopted all applicable Code Provisions and, where appropriate, Recommended Best Practices of the CG Code as set out in Appendix 14 of the Listing Rules throughout the Reporting Period. So far as known to the Directors, there has been no material deviation from the CG Code during the Reporting Period, except for the Code Provision A.6.7 of the CG Code as noted hereunder.

Under the Code Provision A.6.7 of the CG Code, independent non-executive directors and other nonexecutive directors should attend AGMs and develop a balanced understanding of the views of shareholders. Due to prior business commitments, a non-executive Director was unable to attend the AGM held on 7 June 2013.

The Company continues to enhance its corporate governance practices appropriate to the conduct and growth of its business and to review and improve such practices from time to time to ensure that business activities and decision making processes are regulated in a proper and prudent manner in accordance with international best practices.

During the Reporting Period, the Company did not have a chief executive officer and the function is divided among the remaining executive Directors.

Further information of the Company’s corporate governance practices can be found in the “Corporate Governance” section under “Investor Relations” on the Company’s website.

MODEL CODE FOR SECURITIES TRaNSaCTIONS BY DIRECTORS

The Company has adopted the Model Code as its own code of conduct regarding Directors’ securities transactions. Having made specific enquiry with all Directors, the Directors have confirmed their compliance with the required standard set out in the Model Code during the Reporting Period.

aUDIT COMMITTEE

The audit committee of the Company (the “Audit Committee”) was established in accordance with requirements of the Listing Rules for the purpose of reviewing and providing supervision over the Group’s financial reporting process and internal controls. All of the Audit Committee members are appointed from the three independent non-executive Directors, namely Mr. Tsui King Fai (chairman), Mr. Lee Kwan Hung and Mr. Wu Wai Leung, Danny, having appropriate professional qualifications, including membership of the Hong Kong Institute of Certified Public Accountants, and experience in legal, business and financial matters. The Audit Committee has reviewed with the management of the Company the unaudited condensed consolidated interim financial information of the Group for the Reporting Period, the accounting principles and practices adopted by the Group, and discussed internal controls and financial reporting matters. In addition, the Company’s auditors, Messrs. Ernst & Young has reviewed the unaudited condensed consolidated interim financial information of the Group for the Reporting Period.

PURCHaSE, SaLE OR REDEMPTION OF THE COMPaNY’S LISTED SECURITIES

During the Reporting Period, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any listed securities of the Company.

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PUBLICaTION OF INTERIM RESULTS aND INTERIM REPORT

This results announcement is published on the websites of Hong Kong Exchanges and Clearing Limited and the Company. The Interim Report 2013 will be despatched to the Shareholders and published on the above websites in due course.

gLOSSaRY OF TERMS

In this announcement, unless the context otherwise requires, the following expressions have the meanings as mentioned below:

“AGM”	annual general meeting
“Board”	the board of Directors
“CG Code”	the Corporate Governance Code contained in Appendix 14 of the Listing
	Rules
“Company”	Newton Resources Ltd
“Corresponding Prior Period”	the six-month period ended 30 June 2012
“Director(s)”	existing director(s) of the Company
“First Quarry”	the first gabbro-diabase quarry located in Pian Zhai Gou area at the
	Yanjiazhuang Mine
“Group”	the Company and its subsidiaries
“HK$” or “HKD”	Hong Kong dollar, the lawful currency of Hong Kong
“Hong Kong”	The Hong Kong Special Administrative Region of the PRC
“Interim Report 2013”	the interim report of the Company for the six-month period ended 30 June
	2013
“Listing”	the listing of the Shares on the main board of the Stock Exchange on 4 July
	2011
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“Mt”	megatonne(s)
“m2”	square metre(s)
“Model Code”	the Model Code for Securities Transactions by Directors of Listed Issuers
	contained in Appendix 10 of the Listing Rules
“New Tailings Storage Facility”	the new tailings storage facility of the Group, being constructed as part of
	Phase Two expansion plan

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“Phase Two”

“Phase Two” the second phase of the Company’s three-phase expansion plan, to achieve total mining and ore processing capacities of 7,000,000 tpa to produce approximately 1,770,000 tpa of iron concentrates “Phase Three” the third phase of the Company’s three-phase expansion plan, to achieve total mining and ore processing capacities of 10,500,000 tpa to produce approximately 2,655,000 tpa of iron concentrates “PRC” or “Mainland China” The People’s Republic of China for the purpose of this announcement, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan “Reporting Period” the six-month period ended 30 June 2013 “RMB” Renminbi, the lawful currency of the PRC “Safety Authority” the relevant government authority for the granting of production safety permit(s) for the New Tailings Storage Facility and/or the production of gabbro-diabase products “Share(s)” existing ordinary share(s) of HK$0.10 each in the share capital of the Company “Shareholder(s)” holder(s) of issued Share(s) “Shougang Hong Kong” Shougang Holding (Hong Kong) Limited, a subsidiary of Shougang Corporation, a company incorporated in Hong Kong “Stock Exchange” The Stock Exchange of Hong Kong Limited “tonne(s)” equal to 1,000 kilograms “tpa” tonne(s) per annum “US$” or “USD” the United States dollar, the lawful currency of the United States of America “Yanjiazhuang Mine” Lincheng Xingye Mineral Resources Co., Ltd Yanjiazhuang Mine ( 臨 城興業礦產資源有限公司閆家莊鐵礦 ), an iron ore mine located in Yanjiazhuang Mining Area, Shiwopu, Haozhuang Town, Lincheng County, Hebei Province, the PRC

By Order of the Board

Newton Resources Ltd Cheng kar Shun

Chairman and Non-Executive Director

Hong Kong, 29 August 2013

As at the date of this announcement, the executive Directors are Ms. Yu Shuxian, Mr. Jiao Ying and Mr. Li Yuelin; the non-executive Directors are Dr. Cheng Kar Shun, Mr. Lam Wai Hon, Patrick and Mr. Cheng Chi Ming, Brian; and the independent non-executive Directors are Mr. Tsui King Fai, Mr. Lee Kwan Hung and Mr. Wu Wai Leung, Danny.

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