Jizhong Energy Group Established to Regroup Non-Coal Business     

On June 30th, Jizhong Energy Group was established formally in Shijiazhuang, Hebei province, northern China, through merging Hebei Jinniu Energy Group Co., Ltd. (Jinniu Energy Group) and Hebei Fengfeng Group Co., Ltd. (Fengfeng)
   Fengfeng produces 13.0 million tons of raw coal a year. It owns four coking plants and produces 1.55 million tons of metallurgical coke a year. Jinniu Energy produces 22.0 million tons of coal a year. Partner with Hong Kong China Resources Power Holding Co., Ltd. and Hong Kong Kingboard Chemical Co., Ltd., Jinniu Energy Group owns two listed companies named Jinniu Energy Resources Co., Ltd.(SZ: 000937) and Jinniu Chemical Industry Co., Ltd. (Jinniu Chemical, former Cangzhou Chemical Industrial Co., Ltd., SH: 600722).
   On July 1st, 2007 Cangzhou Chemical (SH: 600722) announced that it will issue up to 200 million shares to its controlling shareholders Jinniu Energy Resources Co., Ltd. (SZ: 000937) and Xingtai Mining (Group) Co., Ltd., to purchase 100% equity and the related working capital of up to RMB400 million in Xingtai Jinniu Fiberglass Co., Ltd. and all asset value of RMB1.382 billion in Jinniu Potash Co., Ltd. of Xingtai Mining Group. Jinniu Energy Resources Co., Ltd. and Xingtai Mining (Group) Co., Ltd. are now both controlled by Jizhong Energy Group.
   Jinniu Energy Resources Co., Ltd. says that according to preliminary estimates, the company would directly hold 277.6548 million shares in Jinniu Chemical if it purchased the 150 million shares to be issued by Jinniu Chemical.
   Xingtai Jinniu Fiberglass Co., Ltd. owns two alkali-free fiberglass kiln drawing production lines with a capacity of 30 000 t/a and 15 000 t/a respectively. The 2007 net profit was RMB33.7078 million.
   The first-phase project in Jinniu Potash Co., Ltd. was completed in June 2004 and the second-phase project was completed in June 2008. The company has a capacity of 56 000 t/a potassium hydroxide, with the 2007 net profit of RMB8.4680 million.
   Upon completion of the issuance, Jinniu Chemical expects to have a total capital stock of up to 621.42 million shares. Jinniu Energy and the State-Asset Management Commission of Hebei province will respectively remain to be the controlling shareholder and the actual controller of the company.
   Jinniu Chemical grew out of Cangzhou Chemical Industrial Co., Ltd. as Cangzhou Chemical was unable to pay back matured debts and was insolvent.
   As of March 31st, 2008 the net asset of Jinniu Chemical was negative RMB298.8 million. After completion of the share issuance this time, the net asset of the company may increase to around RMB1.1 billion and the debt will be reduced by RMB400 million. It is expected that its fiberglass business and the potash business can generate a profit of RMB80 million for 2008. Along with the 230 000 t/a PVC business itself, the company can gain a net profit for 2008.