10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2010

or

o Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 000-50491

China Shen Zhou Mining & Resources, Inc.

(Name of small business issuer in its charter)

Nevada	87-0430816
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

No. 166 Fushi Road, Zeyang Tower, Suite 1211 Shijingshan District, Beijing, China 100043 People’s Republic of China	100043
(Address of principal executive offices)	(Zip Code)

Issuer's telephone number:  86-010-88906927

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x No  ¨   

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ¨No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o	Accelerated filer  o
Non-accelerated filer  o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)   Yes  ¨ No  x

As of May 13, 2010, the Registrant had 27,974,514 shares of common stock outstanding.

 China Shen Zhou Mining & Resources, Inc.

Table of Contents

		Page
PART I -	FINANCIAL INFORMATION	3
Item 1.	Financial Statements:	3
	Consolidated Balance Sheets as of March 31, 2010 (Unaudited) and December 31, 2009 (Audited)	3
	Consolidated Statements of Operations and Comprehensive Loss (Unaudited) Three months ended March 31, 2010 and 2009	4
	Consolidated Statements of Cash Flows (Unaudited) Three months ended March 31, 2010 and 2009	5-6
	Notes to Financial Statements (Unaudited)	7-25
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26-34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II	OTHER INFORMATION	35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	(Removed and Reserved)	35
Item 5.	Other Information	35
Item 6.	Exhibits	35

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements 

CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

	March 31, 2010			December 31, 2009
	(Unaudited)			(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	869		$	333
Accounts receivable, net		272			302
Other deposits and prepayments, net		1,080			855
Inventories		5,433			3,721
Restricted assets		732			740
Total current assets		8,386			5,951
Prepayment for office rent		230			280
Available for sale investment		146			146
Property, machinery and mining assets, net		34,359			34,902
Total assets	$	43,121		$	41,279
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,546		$	4,694
Short term bank loans		3,160			3,603
Other payables and accruals		9,181			6,667
Taxes payable		351			333
Total current liabilities		17,238			15,297
Due to related parties		2,281			2,297
Total liabilities		19,519			17,594
STOCKHOLDERS’ EQUITY:
Common stock ($0.001 par value; 50,000,000 shares authorized;
27,974,514 shares and 27,214,514 shares issued and outstanding
as of March 31, 2010 and December 13, 2009 respectively)		28			27
Additional paid-in capital		29,270			28,518
Statutory reserves		1,672			1,672
Accumulated other comprehensive income		3,819			3,839
Accumulated deficit		(11,153	)		(10,342	)
Stockholders' equity - China Shen Zhou Mining & Resources, Inc. and Subsidiaries		23,636			23,714
Noncontrolling interest		(34	)		(29	)
Total stockholders’ equity		23,602			23,685
Total liabilities and stockholders’ equity	$	43,121		$	41,279

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Amounts in thousands, except per share data)

	For the Three Months Ended March 31,
	2010			2009
	(Unaudited)			(Unaudited)
Net revenue	$	921		$	619
Cost of sales		848			557
Gross profit		73			62
Operating expenses:
Selling and distribution expenses		13			4
General and administrative expenses		1,078			1,392
Total operating expenses		1,091			1,396
Net loss from operations		(1,018	)		(1,334	)
Other income (expense):
Interest expense		(86	)		(962	)
Other, net		288			96
Total other income (loss)		202			(866	)
Loss from continuing operations before income taxes		(816	)		(2,200	)
Income tax expenses		-			-
Loss from continuing operations		(816	)		(2,200	)
Discontinued operations :
Loss from operations of discontinued component, net of taxes		-			(158	)
Loss from discontinued operations		-			(158	)
Net loss		(816	)		(2,358	)
Less: Noncontrolling interests attributable to the noncontrolling interests		5			(22	)
Net loss - attributable to China Shen Zhou Mining & Resources, Inc. and Subsidiaries		(811	)		(2,380	)
Other comprehensive income:
Foreign currency translation adjustments		(20	)		191
Comprehensive loss	$	(831	)	$	(2,189	)
Net loss per common share – basic and diluted
From continuing operations		(0.02	)		(0.10	)
From discontinued operations		-			(0.01	)
	$	(0.02	)	$	(0.11	)
Weighted average common shares outstanding
- Basic and Diluted		27,762			22,215

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, except share data)

	For the Three Months Ended March 31,
	2010			2009
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(811	)	$	(2,380	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss from operations of discontinued component, net of income tax benefits		-			158
Depreciation and amortization		695			1,051
Fair value adjustment of warrants		-			21
Accrual of coupon interests and accreted principal		-			386
Amortization of deferred financing costs		-			401
Amortization of debt issuance costs		-			106
Noncontrolling interests		(5	)		(22	)
Forgiveness of payroll payables		(300	)	-
Changes in operating assets and liabilities:
(Increase) decrease in -
Accounts receivable		30			195
Other deposits and prepayments		(226	)		(88	)
Prepayment for office rent		50			10
Inventories		(1,717	)		397
Restricted assets		7			-
Increase (decrease) in -
Accounts payable		(142	)		(203	)
Other payables and accruals		3,574			230
Taxes payable		18			(147	)
Net cash provided by operating activities from continuing operations		1,173			115
Net cash provided by operating activities from discontinued operations		-			66
Net cash provided by operating activities		1,173			181

5

CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, except share data)

	For the Three Months Ended March 31,
	2010			2009
	(Unaudited)			(Unaudited)
Cash flows from investing activities:
Purchases of property, machinery and mining assets	$	(208	)	$	(31	)
Net cash used in investing activities  from continuing operations		(208	)		(31	)
Net cash used in investing activities		(208	)		(31	)
Cash flows from financing activities:
Due to related parties		(14	)		(117	)
Repayment at short-term bank loans		(731	)		-
Proceeds from short-term bank loans		293			-
Net cash used in financing activities		(452	)		(117	)
Foreign currency translation adjustment		23			52
Net increase in cash and cash equivalents		536			85
Cash and cash equivalents at the beginning of the period		333			205
Cash and cash equivalents at the end of the period	$	869		$	290
Non-cash investing and financing activities
Shares issued for accrued salaries	$	752		$	-
Supplemental disclosures of cash flow information:
Cash paid for interest expenses	$	74		$	47
Cash paid for income tax	$	-		$	-

 The accompanying notes are an integral part of these unaudited consolidated financial statements.

6

China Shen Zhou Mining & Resources, Inc. and Subsidiaries

Notes to Consolidated Financial Statements 

(Unaudited)

NOTE 1 - DESCRIPTION OF BUSINESSS AND ORGANIZATION

China Shen Zhou Mining & Resources, Inc. and its subsidiaries (collectively known as the “Company” or “we”) are principally engaged in the exploration, development, mining, and processing of fluorite, zinc, lead, copper, and other nonferrous metals in the People’s Republic of China (“PRC” or “China”).  

At March 31, 2010, the subsidiaries of China Shen Zhou Mining & Resources, Inc. are as follows:

Name		Domicile and Date of Incorporation		Paid-in Capital			Percentage  of Effective Ownership		Principal Activities
American Federal Mining Group, Inc. (“AFMG”)		Illinois November 15, 2005		USD	10		100%		Investments holdings
Inner Mongolia Xiangzhen Mining Industry Group Co. Ltd. (“Xiangzhen Mining”)		The PRC July 3,2002		RMB	88,860,699		100%		Acquisition, exploration and extraction, and development of natural resource properties
Inner Mongolia Wulatehouqi Qianzhen Ore Processing Co.,  Ltd. (“Qianzhen Mining”)		The PRC September 22, 2002		RMB	37,221,250		100%		Sales and processing of nonferrous metals and chemical products
Wulatehouqi Qingshan Non-Ferrous Metal Developing Company Ltd. (“Qingshan Metal”)		The PRC April 23, 1995 (Acquired on April 12, 2006)		RMB	4,100,000		60%		Exploration, extraction and processing of copper, zinc, lead etc
Xinjiang Buerjin County Xingzhen Mining Company (“Xingzhen Mining”)		The PRC April 10,2006 (Acquired on April 28, 2006)		RMB	1,000,000		90%		Exploration of solid metals, processing and sales of mining products.

7

NOTE 2- BASIS OF PRESENTATION AND GOING CONCERN

These consolidated financial statements for interim periods are unaudited.  In the opinion of management, all adjustments, consisting of normal, recurring adjustments, and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these consolidated financial statements are not necessarily indicative of the results that may be reported for the entire year. The accompanying consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all information and footnotes necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted in the United States of America.  These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed on March 31, 2010.

Going Concern-The accompanying consolidated financial statements have been prepared on a going concern basis. The Company has incurred net operating losses of approximately $1.02 million and $1.33 million during the first quarter ended March 31, 2010 and 2009, respectively. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to continue to provide for its capital requirements by issuing additional equity securities and debt in addition to executing their business plan. The outcome of these matters cannot be predicted at this time and there are no assurances that if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results.  These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

NOTE 3 - DISCONTINUED OPERATIONS

On November 20, 2009, the Company completed the sale of all its ownership interest in Tun-Lin Limited Liability Company (“Tun-Lin”), a subsidiary of the Company within the nonferrous metals segment. The Company received cash proceeds of $8.2 million. In accordance with Accounting Standard Codification (“ASC”) 360 (Formerly FAS 144) of Financial Accounting Standards Board (“FASB”), Accounting for Impairment or Disposal of Long-Lived Assets, the Company has reflected Tun-Lin’s results of operations in the consolidated statements of operations through the date of the sale as discontinued operations for the three months ended March 31, 2009. The cash flows of discontinued operations have also been reclassified.

The following table presents the revenue, net loss from discontinued operations and on disposal of Tun-Lin for the periods presented:

	For the three months ended March 31,
	2010	2009
	(In thousands)	(In thousands)
Revenue	Not Applicable		$	-
Loss from discontinued operations	Not Applicable		$	(158	)

8

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The Company’s consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of the Company’s consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting periods. The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves and value beyond proven and probable reserves that are the basis for future cash flow estimates utilized in impairment calculations, the estimated lives of the mineralized bodies based on estimated recoverable volume through the end of the period over which the company has extraction rights that are the basis for units-of-production depreciation, depletion and amortization calculations; estimates of fair value for certain reporting units and asset impairments (including impairments of goodwill, long-lived assets and investments); write-downs of inventory to net realizable value; reserves for contingencies and litigation; and the fair value and accounting treatment of financial instruments. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.

Certain of the Company’s accounting policies require higher degrees of judgment than others in their application. Management evaluates all of its estimates and judgments on an on-going basis

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries (AFMG, Xiangzhen Mining, and Qianzhen Mining) and its majority owned subsidiaries (Qingshan Metal and Xingzhen Mining).  All inter-company balances and transactions have been eliminated.

Minority interest in the net assets and earnings or losses of Xingzhen Mining have been absorbed by the Company as minority interest holders in the subsidiary have no basis in their investment in the subsidiary.

Basis of preparation

The accompanying consolidated financial statements have been prepared in conformity with US GAAP. The basis of accounting differs from that used in the statutory accounts of the Company, which are prepared in accordance with the accounting principles of the PRC (“PRC GAAP”). The Company’s functional currency is the Chinese Renminbi (“RMB”); however the accompanying consolidated financial statements have been translated and presented in United States Dollars (“USD”). All significant inter-company transactions and balances have been eliminated

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a maturity period of three months or less to be cash or cash equivalents. The carrying amounts reported in the accompanying consolidated balance sheets for cash and cash equivalents approximate their fair value. Substantially all of the Company’s cash is held in bank accounts in the PRC and is not protected by FDIC insurance or any other similar insurance. Restricted cash is excluded from cash and cash equivalents and is included in restricted assets.

9

Accounts receivable

Accounts receivable is stated at cost, net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses resulting from the failure of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectability of individual balances. In evaluating the collectibility of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends.

Inventories

Inventories are stated at the lower of cost, determined on a weighted average basis, or net realizable value. Costs of finished goods are composed of direct materials, direct labor and an attributable portion of manufacturing overhead. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose. The management also regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine if valuation allowance is required.

Available-for-sale securities

The Company accounts for its investments in auction rate securities in accordance with FASB ASC 320. Specifically, when the underlying security of an auction rate security has a stated or contractual maturity date in excess of 90 days, regardless of the frequency of the interest rate reset date, the security is classified as an available-for-sale marketable debt security.

Property, machinery and mining assets

Expenditures for new facilities or equipment and expenditures that extend the useful lives of existing facilities or equipment are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs over the estimated productive lives, which do not exceed the related estimated mine lives, of such facilities based on mineralized material.

Mineral exploration costs are expensed according to the term of license granted to the Company. Extraction rights are stated at the lower of cost and recoverable amount.  When extraction rights are obtained from the government according to mining industry practice in the PRC, extraction rights and other costs incurred prospectively to develop the property are capitalized as incurred and are amortized using the units-of-production (“UOP”) method over the estimated life of the mineralized body based on estimated recoverable volume through to the end of the period over which the Company has extraction rights. At the Company’s surface mines, these costs include costs to further delineate the mineralized body and remove overburden to initially expose the mineralized body. At the Company’s underground mines, these costs include the cost of building access ways, shaft sinking and access, lateral development, drift development, ramps and infrastructure development.

Major development costs incurred after the commencement of production are amortized using the UOP method based on estimated recoverable volume in mineralized material. To the extent that these costs benefit the entire mineralized body, they are amortized over the estimated life of the mineralized body. Costs incurred to access specific mineralized blocks or areas that only provide benefit over the life of that area are amortized over the estimated life of that specific mineralized block or area.  Interest cost allocable to the cost of developing mining properties and to constructing new facilities, if any, is capitalized until assets are ready for their intended use.

Land use rights are stated at cost, less accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of 25 years.

10

Estimated useful lives of the Company’s assets are as follows:

	Useful Life
	(In years)
Land use rights	25
Buildings	25
Machinery	12
Mining assets	License term
Motor vehicle	6
Equipment	5
Extraction rights	License term
Exploration rights	License term

Foreign Currency

The Company’s principal country of operations is located in the PRC. The financial position and results of operations of the Company’s subsidiaries located in the PRC are recorded in Renminbi (“RMB”) as the functional currency, respectively. The results of operations denominated in foreign currency are translated at the average rate of exchange during the reporting period.

Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the market rate of exchange ruling at that date. The registered equity capital denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of the financial statements into the reporting currency (“US dollar”) are recorded in accumulated other comprehensive income, a separate component within shareholders’ equity.

The exchange rates used to translate amounts in RMB into US Dollars for the purposes of preparing the consolidated financial statements were as follows:-

	March 31, 2010	December 31, 2009
Balance sheet items, except for the registered and paid-up capital and retained earnings, as of year end	US$1=RMB6.8361	US$1=RMB6.8282

	For the  Three Months Ended  March 31, 2010	For the  Three Months Ended  March 31, 2009
Amounts included in the statements of operations, statements of changes in stockholders’ equity and statements of cash flows for the period	US$1=RMB6.8360	US$1=RMB6.8356

For the three months ended March 31, 2010 and 2009, foreign currency translation adjustment of approximately ($20,000) and $191,000 respectively, have been reported as comprehensive loss in the consolidated statement of comprehensive loss.

Although government regulations now allow convertibility of RMB for current account transactions, significant restrictions still remain.  Hence, such translations should not be construed as representations that RMB could be converted into U.S. dollars at that rate or any other rate.

11

The value of RMB against the U.S. dollars and other currencies may fluctuate and is affected by, among other things, changes in Chinese political and economic conditions.  Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of U.S. dollar reporting.

Noncontrolling Interest

Noncontrolling interests in the Company’s subsidiaries are recorded in accordance with the provisions of FASB ASC 810  and are reported as a component of equity, separate from the parent’s equity.  Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions.  Results of operations attributable to the noncontrolling interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.

Revenue Recognition

Revenue is recognized on the sale of products when title has transferred to the customer in accordance with the specified terms of each product sales agreement and all the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. Generally, the Company’s product sales agreements provide that title and risk of loss pass to the customer when the quantity and quality of the products delivered are certified and accepted by the customer.

Sales revenue is recognized, net of PRC business taxes, sales discounts and returns at the time when the merchandise is sold to the customer. Based on historical experience, management estimates that sales returns are immaterial and has not made allowance for estimated sales returns

Stripping Costs

Stripping costs are costs of removing overburden and other mine waste materials.  Stripping costs incurred during the production phase of a mine are variable production costs that are included as a component of inventory to be recognized in cost of sales in the same period as the revenue from the sale of inventory.

Asset Impairment

(a) Long-lived Assets

The Company reviews and evaluates its long-lived assets including property, machinery and mining assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any. An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows are estimated based on quantities of recoverable metals, corresponding expected commodity prices (considering current and historical prices, price trends and related factors), production levels and operating costs of production and capital, all based on life-of-mine plans. Existing proven and probable reserves and value beyond proven and probable reserves are included when determining the fair value of mine site reporting units at acquisition and, subsequently, in determining whether the assets are impaired. The term “recoverable metals” refers to the estimated amount of metals that will be obtained after taking into account losses during ore processing and treatment. Estimates of recoverable metals from such exploration stage metal interests are risk adjusted based on management’s relative confidence in such materials. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company’s estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable metals prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.

12

Financial instruments

Effective January 1, 2008, the Company adopted FASB ASC 820-Fair Value Measurements and Disclosure or ASC 820 for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures.

ASC 820 defines fair value as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

The Company values its financial instruments as required by estimating their fair value. The estimated fair value amounts have been determined by the Company, using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, restricted assets, available for sale investment, accounts payable, warrant liability, other payables and accruals,, short-term bank loans, other current liabilities.

Cash and cash equivalents include money market securities and commercial paper that are considered to be highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the fair value hierarchy.

As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented due to the short maturities of these instruments and that the interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective year ends.

Taxation

(a)   Enterprise Income Tax

Taxation on profits earned in the PRC are calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the PRC after taking into effect the benefits from any special tax credits or “tax holidays” allowed in the PRC.

The Company provides for deferred income taxes using the asset and liability method. Under this method, the Company recognizes deferred income taxes for tax credits and net operating losses available for carry-forwards and significant temporary differences. The Company classifies deferred tax assets and liabilities as current or non-current based upon the classification of the related asset or liability in the financial statements or the expected timing of their reversal if they do not relate to a specific asset or liability. The Company provides a valuation allowance to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be realized.

13

Income taxes are accounted for under the Statement of FASB ASC 740, Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and tax loss carry forwards. Any deferred tax assets and liabilities would be measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Based on all known facts and circumstances and current tax law, the Company believes that the total amount of unrecognized tax benefits as of December 31, 2009, is not material to its results of operations, financial condition or cash flows. The Company also believes that the total amount of unrecognized tax benefits as of December 31, 2009, if recognized, would not have a material effect on its effective tax rate. The Company further believes that there are no tax positions for which it is reasonably possible, based on current Chinese tax law and policy, that the unrecognized tax benefits will significantly increase or decrease over the next 12 months producing, individually or in the aggregate, a material effect on the Company’s results of operations, financial condition or cash flows.

(b) Value Added Tax

The Provisional Regulations of the PRC Concerning Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations and the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax is imposed on goods sold in or imported into the PRC and on processing, repair and replacement services provided within the PRC.

Value added tax payable in the PRC is charged on an aggregated basis at a rate of 13% or 17% (depending on the type of goods involved) on the full price collected for the goods sold or, in the case of taxable services provided, at a rate of 17% on the charges for the taxable services provided, but excluding, in respect of both goods and services, any amount paid in respect of value added tax included in the price or charges, and less any deductible value added tax already paid by the taxpayer on purchases of goods and services in the same financial year.

Transportation charges

Transportation charges represent costs to deliver the Company’s inventory to point of sale.  Transportation costs are expensed and charged to cost of sales as incurred

Stock Based Compensation

In December 2004, the Financial Accounting Standards Board, or FASB, issued FASB ASC 718-10-55 - Compensation-Stock Compensation, or ASC 718-10-55. Under ASC 718-10-55, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In addition, FASB ASC 825-10-50-10 – Financial Instruments – Overall – Disclosures, or ASC 825-10-50-10, expresses views of the Securities and Exchange Commission, or the SEC, staff regarding the interaction between ASC 718-10-55 and certain SEC rules and regulations and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. The Company’s compensation cost is measured on the date of grant at its fair value.Such compensation amounts, if any, are amortized over the respective vesting periods or period of service of the option grant

Net income per common share

Basic and diluted earnings per share are presented for net income and for income from continuing operations. Basic earnings per share is computed by dividing net income by the weighted-average number of outstanding common shares for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts that may require the issuance of common shares in the future were converted. Diluted earnings per share is computed by increasing the weighted-average number of outstanding common shares to include the additional common shares that would be outstanding after conversion and adjusting net income for changes that would result from the conversion. Only those securities or other contracts that result in a reduction in earnings per share are included in the calculation.

14

Comprehensive Income (loss)

Accumulated other comprehensive income includes foreign currency translation adjustments. Total comprehensive loss for the three months ended March 31, 2010 and 2009 was approximately ($831,000) and ($2,189,000), respectively.

Reclassifications

Certain reclassifications have been made to the prior periods’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or the sum of retained earnings and statutory reserve.

-   In June 2009, the FASB issued authoritative guidance which eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor’s interest in transferred financial assets. The guidance is applicable for annual periods beginning after November 15, 2009 and interim periods therein and thereafter. The Company does not expect the adoption of this standard to have a material effect on its financial position or results of operations.

-   In August 2009, the FASB issued guidance on measuring liabilities at fair value. This guidance amends the fair value measurements and disclosures by providing additional guidance clarifying the measurement of liabilities at fair value. This new accounting guidance is effective for reporting period ending after December 15, 2009. The Company is evaluating this new guidance and the possible impact that the adoption of this new accounting guidance will have on their consolidated financial statements.

Recent accounting pronouncements

Recent accounting pronouncements applicable to the Company are summarized below.

-   On June 5, 2003, the United States Securities and Exchange Commission (“SEC”) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC Release No. 33-9072 on October 13, 2009. Commencing with its annual report for the year ending December 31, 2010, the Company will be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement of:

·    Management’s responsibility for establishing and maintaining adequate internal control over its financial reporting;

·    Management’s assessment of the effectiveness of its internal control over financial reporting as of year- end; and

·    The framework used by management to evaluate the effectiveness of the Company’s internal control over financial reporting.

Furthermore, it is required to file the auditor’s attestation report separately on the Company’s internal control over financial reporting on whether it believes that the Company has maintained, in all material respects, effective internal control over financial reporting.

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.

15

NOTE 5 - ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

	March 31, 2010			December 31, 2009
	(In thousands)			(In thousands)
Accounts receivable	$	338		$	368
Less: Allowance for doubtful accounts		(66	)		(66	)
	$	272		$	302

The activities in the Company’s allowance for doubtful accounts are summarized as follows:

	March 31,  2010		December 31, 2009
	(In thousands)		(In thousands)
Balance at the beginning of the year	$	66	$	51
Add: provision during the period		-		15
Balance at the end of the period	$	66	$	66

NOTE 6 - DEPOSITS AND PREPAYMENTS

Deposits and prepayments consist of the following:

		March 31,  2010		December 31, 2009
		(In thousands)		(In thousands)
Prepayments and advances	(a)	$	747	$	628
Other receivables			333		227
		$	1,080	$	855

(a)    Prepayments and advances as of March 31, 2010 and December 31, 2009 include payments of $521,414 and $461,199 to mining service providers, respectively.

NOTE 7 - INVENTORIES

Inventories consist of the following:

	March 31, 2010		December 31, 2009
	(In thousands)		(In thousands)
Raw materials	$	698	$	586
Unprocessed ore		3,362		1,391
Consumables		107		103
Finished goods and semi-manufactured goods		1,266		1,641
	$	5,433	$	3,721

16

NOTE 8 - RESTRICTED ASSETS

Restricted assets are the deposits saved in China Citic bank account of Xiangzhen Mining as collateral for the Company to issue bank drafts. As of March 31, 2010 and December 31, 2009, the Company has restricted assets of approximately $732,000 and $740,000, respectively.

NOTE 9 - PROPERTY, MACHINERY AND MINING ASSETS, NET

Property, machinery and mining assets consist of the following:

	March 31,  2010			December 31, 2009
	(In thousands)			(In thousands)
Land use rights	$	1,700		$	1,702
Buildings		13,002			12,986
Machinery		10,825			10,838
Mining assets		9,868			9,890
Motor vehicles		1,360			1,318
Equipment		323			332
Extraction rights		8,233			8,242
Construction in progress		406			269
		45,717			45,577
Less:
Accumulated depreciation and amortization		(11,253	)		(10,570	)
Impairment provision		(105	)		(105	)
	$	34,359		$	34,902

Depreciation and Amortization

Depreciation and amortization expense in aggregate for the three months ended March 31, 2010 and 2009 was approximately $695,000 and $1,051,000, respectively.

Impairment Provision

An impairment provision was a balance recorded for the equipment of Qingshan Metal, a subsidiary of the Company within the nonferrous metals segment.

Exploration and Extraction Rights

As in most jurisdictions, mineral rights in China are divided into two types: extraction rights and exploration rights. Extraction rights refer to the rights obtained in accordance with the law for exploitation of mineral resources and market control of mineral products. In nearly every jurisdiction in the world, mineral rights are absolutely exclusive. In China, however, there are no clear stipulations regarding the exclusivity of mineral rights. The Amendment of China Mining Regulation stressed the security of mineral rights and its Article 6 stated that “upon discovery of mineral resources, the exploration licensees have the privileged priority to obtain mining rights to the mineral resources within the exploration area.”  According to the Ministry of Land and Resources, this privileged priority will be guaranteed under further amendments to be made in the near future.

Exploration rights refer to the right obtained in accordance with the law for exploring for mineral resources within the areas authorized by the exploration license. The Company has been granted mineral exploration permits. These exploration rights enable the Company to explore selected prospective mines for possible economic value to mine and develop. Under Chinese mining laws and regulations, generally an exploration license is valid for no more than three years and extension of the exploration license shall not exceed two years and two extensions.

17

NOTE 10 - SHORT-TERM BANK LOANS

Short-term bank loans consist of the following:

	March 31,  2010		December 31, 2009
	(in thousands)		(in thousands)
12.21% note payable to Wulatehouqi Credit Union matures on March 11, 2010 , which is in the name of a related party and guaranteed by Qianzhen Mining	$	-	$	410
8.50% note payable to Baiyin Credit Union matures on March 23, 2010 with interest due on the 20th day of each quarter and principal due at date of maturity, which is in the name of a related party and guaranteed by Xiangzhen Mining		-		322
8.50% note payable to Baiyin Credit Union matures on February 13, 2010 with interest due on the 20th day of each quarter and principal due at date of maturity, guaranteed by Qianzhen Mining		-		220
8.50%% note payable to Baiyin Credit Union matures on February 13, 2010 with interest due on the 20th day of each quarter and principal due at date of maturity, guaranteed by Qianzhen Mining		-		103
6.37% note payable to Baiyin Credit Union matures on December 28, 2010 with interest due on the 20th day of each quarter and principal due at date of maturity, guaranteed by Qianzhen Mining and secured by the time deposit of Ms. Helin Cui , a director of the Company		88		88
6.37% note payable to Baiyin Credit Union matures on August 18, 2010 with interest due on the 20th day of each quarter and principal due at date of maturity, guaranteed by Qianzhen Mining and secured by the time deposit of Ms. Xiaojing Yu , a director of the Company		117		117
8.50% note payable to Baiyin Credit Union matures on December 29, 2010 with interest due on the 20th day of each quarter and principal due at date of maturity, guaranteed by Xiangzhen Mining		878		878
7.65% note payable to China Citic Bank matures on May 21, 2010, guaranteed by Xiangzhen Mining and collateralized with Xiangzhen’s extraction right.		1,463		1,465
9.03% note payable to Baiyin Credit Union matures on June 29, 2010 with interest due on the 20th day of each quarter and principal due at date of maturity, which is in the name of a related party and guaranteed by Xiangzhen Mining		293		-
8.64% note payable to Baiyin Credit Union matures on May 5, 2010 with interest due on the 20th day of each quarter and principal due at date of maturity, guaranteed by Qianzhen Mining		219		-
8.64%% note payable to Baiyin Credit Union matures on May 5, 2010 with interest due on the 20th day of each quarter and principal due at date of maturity, guaranteed by Qianzhen Mining		102		-
	$	3,160	$	3,603

NOTE 11 - OTHER PAYABLES AND ACCRUALS

Other payables and accruals consist of the following:

	March 31,  2010		December 31, 2009
	(In thousands)		(In thousands)
Accrued debt issuance costs  (a)	$	46	$	46
Receipts in advance		3,165		1,788
Accruals for payroll, bonus and other operating expenses		413		1,380
Payables for construction service vender		2,535		882
Others payables		3,022		2,571
	$	9,181	$	6,667

(a)   The balance mainly represents outstanding legal service fees payable in connection with the issuance of the convertible notes which had been repurchased on December 23, 2009.

18

NOTE 12 - DUE TO RELATED PARTIES

Due to related parties consist of the following:

	March 31,  2010		December 31, 2009
	(In thousands)		(In thousands)
Due to directors of the Company:
Ms. Xiaojing Yu, CEO of the Company (a)	$	145	$	145
Mr. Xueming Xu, Director of the Company (b)		26		27
Mr. Helin Cui , COO of the Company(c)		1		1
Due to Mr. Xiao Ming Yu, General Manager of Xiangzhen (d)		284		305
Due to Wulatehouqi Mengxin Co., Ltd, the former minority shareholder of Xingzhen Mining (e)		479		479
Mr. Mao Huang the minority shareholder of Xingzhen Mining (f)		1,346		1,340
	$	2,281	$	2,297

Amounts due to related parties are interest-free, unsecured and due on December 8, 2012.

(a)	Ms. Yu is the CEO of the Company.
(b)	Mr. Xu is a director of the Company.

(c) Mr. Cui is the COO of the Company.

(d) Mr. Yu is the General Manager of Xiangzhen Mining.

(e) Wulatehouqi Mengxin Co., Ltd is the former minority shareholder of Xingzhen Mining.

(f) Mr. Huang the minority shareholder of Xingzhen Mining

19

NOTE 13 - DEFINED CONTRIBUTION RETIREMENT PLANS

As stipulated by the regulations of the PRC government, companies operating in the PRC have defined contribution retirement plans for their employees. The PRC government is responsible for the pension liability to these retired employees. Commencing January 1, 2002, the Company is required to make specified contributions to the state-sponsored retirement plan at 20% of the basic salary cost of their staff. Each of the employees of the PRC subsidiaries is required to contribute 6% of his/her basic salary.

NOTE 14 - STATUTORY RESERVES

In accordance with the PRC Companies Law, the Company’s PRC subsidiaries were required to transfer 10% of their profit after tax, as determined in accordance with accounting standards and regulations of the PRC, to the statutory surplus reserve and a percentage of not less than 5%, as determined by management, of the profit after tax to the public welfare fund. With the amendment of the PRC Companies Law which was effective January 1, 2006, enterprises in the PRC are no longer required to transfer any profit to the public welfare fund. Any balance of public welfare fund brought forward from December 31, 2005 should be transferred to the statutory surplus reserve. The statutory surplus reserve is non-distributable.

NOTE 15 - ASSET RETIREMENT OBLIGATIONS

According to the “Rules on Mineral Resources Administration” and “Rules on Land Rehabilitation” of the PRC, mining companies causing damages to cultivated land, grassland or forest are required to restore the land to a state approved by the local governments. The local governments administering the “Rules on Mineral Resources Administration” and “Rules on Land Rehabilitation” on the Company’s two mines, “Sumochaganaobao Fluorite Mine” and “Mining site No. 2”, have confirmed that the Company is not required to restore or rehabilitate the two mining sites because those two mining sites are located at distant areas and the Company’s mining and extraction activities have not affected the surrounding environment. The Company’ property, machinery and mining assets related to those two mining sites at March 31, 2010 and December 31, 2009 were not subject to an asset retirement obligation.

The Company has identified but not recognized the asset retirement obligations related to the Company’s other mining sites for which the Company is applying the extraction rights. These sites are still at the exploration stage. The asset retirement obligations related to these sites are not estimable until extraction rights and licenses are granted. Upon the approval and issuance of the extraction licenses, the Company will be able to reasonably estimate the settlement dates of, and apply an expected present value technique to determine and recognize the asset retirement obligations related to these mining sites.

NOTE 16 - OPERATING RISK

Country risk

Currently, the Company’s revenues are mainly derived from sales in the PRC. The Company hopes to expand its operations in the PRC, however, there are no assurances that the Company will be able to achieve such an expansion successfully. Therefore, a downturn or stagnation in the economic environment of the PRC could have a material adverse effect on the Company’s financial condition.

Products risk

The Company competes with larger companies, who have greater funds available for expansion, marketing, research and development and the ability to attract more qualified personnel. There can be no assurance that the Company will remain competitive with larger competitors.

Exchange risk

The Company can not guarantee that the current exchange rate will remain steady, therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of a fluctuating exchange rate actually post higher or lower profit depending on exchange rate of PRC Renminbi (RMB) converted to U.S. dollars on that date. The exchange rate could fluctuate depending on changes in the political and economic environments without notice.

20

Political risk

Currently, the PRC is in a period of growth and is openly promoting business development in order to bring more business into the PRC. Additionally, the PRC allows a PRC corporation to be owned by a United States corporation. If the laws or regulations are changed by the PRC government, the Company’s ability to operate in the PRC could be affected.

Key personnel risk

The Company’s future success depends on the continued services of executive management in China. The loss of any of their services would be detrimental to the Company and could have an adverse effect on business development. The Company does not currently maintain key-man insurance on their lives. Future success is also dependent on the ability to identify, hire, train and retain other qualified managerial and other employees. Competition for these individuals is intense and increasing.

Non-compliance with financing requirements

The Company might need to obtain future financing that require timely filing of registration statements, and have declared effective those registration statements, to register the shares being offered by the selling stockholders in future financing. The Company might be subject to liquidated damages and other penalties if they continue to obtain future financing requiring registration statements, and not having those registration statements filed and declared effective in a prompt manner.

NOTE 17 - COMMITMENTS AND CONTINGENCIES

General

The Company follows ASC 450, Accounting for Contingencies, in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be been incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

Mining Industry in PRC and Kyrgyz

The Company's mining operations are and will be subject to extensive national and local governmental regulations in China or Kyrgyz, which may be revised or expanded at any time. A broad number of matters are subject to regulations.  Generally, compliance with these regulations requires the Company to obtain permits issued by government, state and local regulatory agencies.  Certain permits require periodic renewal or review of their terms and conditions.  The Company cannot predict whether it will be able to obtain or renew such permits or whether material changes in permit terms and conditions will be imposed. The inability to obtain or renew permits or the imposition of additional terms and conditions could have a material adverse effect on the Company's ability to develop and operate its properties.

Environmental matters

Environmental laws and regulations to which the Company is subject as it progresses from the development stage to the production stage mandate additional concerns and requirements of the Company. Failure to comply with applicable laws, regulations and permits can result in injunctive actions, damages and civil and criminal penalties.  The laws and regulations applicable to the Company's activities change frequently and it is not possible to predict the potential impact on the Company from any such future changes.

Although management believes that the Company is in material compliance with the statutes, laws, rules and regulations of every jurisdiction in which it operates, no assurance can be given that the Company’s compliance with the applicable statutes, laws, rules and regulations will not be challenged by governing authorities or private parties, or that such challenges will not lead to material adverse effects on the Company’s financial position, results of operations, or cash flows.

21

The Company is not involved in any legal matters arising in the normal course of business. While incapable of estimation, in the opinion of the management, the individual regulatory and legal matters in which it might be involved in the future are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Capital commitment

	March 31, 2010		December 31, 2009
	(In thousands)		(In thousands)
Purchase of machinery - within one year	$	75	$	75
Acquisition or construction of buildings-within one year		-		-
	$	75	$	75

NOTE 18 - SEGMENT INFORMATION

The Company follows FASB ASC 280-Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance. The Company has two operating segments identified by product, “fluorite” and “nonferrous metals”. The fluorite segment consists of our fluorite extraction and processing operations conducted through the Company’s wholly-owned subsidiary, Xiangzhen Mining. The nonferrous metals segment consists of the Company’s copper, zinc, lead and other nonferrous metal exploration, extraction and processing activities conducted through the Company’s wholly-owned subsidiaries, Qianzhen Mining, Xingzhen Mining and Qingshan Mining.

The Company primarily evaluates performance based on income before income taxes and excluding non-recurring items.

The segment data presented below were prepared on the same basis as the Company’s consolidated financial statements.

Three months ended March 31, 2010	Fluorite			Nonferrous metals			Consolidated
Segment revenue	$	921		$	-		$	921
Inter-segment revenue		-			-			-
Revenue from external customers	$	921		$	-		$	921
Segment loss	$	(560	)	$	(437	)	$	(997	)
Unallocated corporate income								181
Loss before income taxes and minority interests							$	(816	)
Total segment assets	$	35,933		$	27,102		$	63,035
Inter-segment receivables		(11,776	)		(8,155	)		(19,931	)
	$	24,157		$	18,947		$	43,104
Other unallocated corporate assets								17
							$	43,121
Other segment information:
Depreciation and amortization	$	430		$	265		$	695
Expenditure for segment assets	$	82		$	126		$	208

22

Three months ended March 31, 2009	Fluorite			Nonferrous metals			Consolidated
Segment revenue	$	619		$	-		$	619
Inter-segment revenue
Revenue from external customers	$	619		$	-		$	619
Segment loss	$	(791	)	$	(470	)	$	(1,261	)
Unallocated corporate expenses								(939	)
Loss from continuing operations before income taxes and minority interests							$	(2,200	)
Total segment assets	$	37,279		$	27,657		$	64,936
Inter-segment receivables		(15,730	)		2,500			(13,230	)
	$	21,549		$	30,157		$	51,706
Deferred debt issuance costs								1,649
Other unallocated corporate assets								72
							$	53,427
Other segment information:
Depreciation and amortization	$	739		$	312		$	1,051
Expenditure for segment assets	$	31		$	-		$	31

The following summarizes identifiable assets by geographic area:

	March 31, 2010		December 31, 2009
	(In thousands)		(In thousands)
China	$	43,104	$	41,260
Unallocated corporate assets		17		19
	$	43,121	$	41,279

23

The following summarizes operating losses before provision for income tax:

	Three Months Ended December 31,
	2009			2008
	(In thousands)			(In thousands)
China	$	(997	)	$	(1,261	)
Discontinued operation - Kyrgyzstan		-			(158	)
Unallocated corporate operating income (loss)		181			(939	)
	$	(816	)	$	(2,358	)

NOTE 19 - OTHER INCOME, NET

	March 31, 2010			December 31, 2009
	(In thousands)			(In thousands)
Liabilities exemption （a）	$	300		$	-
Exchange (loss) gain	$	(10	)	$	97
Others		(2	)		(1	)
	$	288		$	96

(a)   As the operation conditions failed to achieve the expected target in 2009, the Company entered into an agreement exempted from some directors’ unpaid salary amount to $0.3 million on February 5, 2010.

NOTE 20 - EARNINGS PER SHARE

The following table is a reconciliation of the weighted average shares used in the computation of basic and diluted earnings per share from continuing and discontinued operations for the periods presented (amounts in thousands, except per share data):

	For Three Months Ended March 31,
	2009			2008
	(In thousands, except per share data)			(In thousands, except per share data)
Income (loss) from continuing operations available to common shareholders:
-Basic and Diluted	$	(816	)	$	(2,200	)
Income (loss) from discontinued operations available to common shareholders:
-Basic and Diluted	$	-		$	(158
Weighted average number of shares:
-Basic and Diluted		27,762			22,215
Earnings (loss) per share from continuing operations
-Basic and Diluted	$	(0.02	)	$	(0.10	)
Earnings (loss) per share from discontinued operations
- Basic and Diluted	$	-		$	(0.01	)

24

NOTE 21 - CONCENTRATION OF CUSTOMERS AND SUPPLIERS

The Company had four main customers who contributed approximately $763,000 or 82% of the Company’s consolidated net revenue for the three months ended March 31, 2010. For the same period of 2009, the Company had three main customers who contributed approximately $564,000 or 92% of the Company’s consolidated net revenue.

The following table shows the Company’s major customers (10% or more of consolidated net revenue) for the three months ended March 31, 2010:

	Revenue		Percentage
Customer	(In thousands)		(%)
Zibo Bofeng Ltd	$	268	29		%
Handan Hongzhi  Ltd		214		23	%
Inner Mongolia Huadesanli Trading Ltd		157		17	%
Laiwu Steel Ltd		124		13	%
	$	763		82	%

The following table shows our major customers (10% or more of consolidated net revenue) for the three months ended March 31, 2009:

	Revenue		Percentage
Customer	(In thousands)		(%)
Laiwu Steel Ltd	$	257		42	%
Handan Hongzhi Ltd		239		39	%
Xinxing Ductile Iron Pipes Co., Ltd	68		11		%
	$	564		92	%

In the first three months of 2010, the Company had no concentrated suppliers.

NOTE 28 - SUBSEQUENT EVENT

In accordance with ASC 855, “Subsequent Events” the Company evaluated subsequent events after the balance sheet date of March 31, 2010 through May 14, 2010, which is the date the financial statements were issued. The Company has reported all required subsequent events.

25

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

The following management’s discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto and the other financial information appearing elsewhere in this quarterly report. In addition to historical information, the following discussion contains certain forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to our future plans, objectives, expectations and intentions. These statements may be identified by the use of words such as “may”, “will”, “could”, “expect”, “anticipate”, “intend”, “believe”, “estimate”, “plan”, “predict”, and similar terms or terminology, or the negative of such terms or other comparable terminology. Although we believe the expectations expressed in these forward-looking statements are based on reasonable assumptions within the bound of our knowledge of our business, our actual results could differ materially from those discussed in these statements. Factors that could contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of the Annual Report on Form 10-K filed on March 31, 2010. We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Our financial statements are prepared in U.S. Dollars and in accordance with generally accepted accounting principles in the United States of America. See “Exchange Rates” below for information concerning the exchange rates at which Renminbi (“RMB”) were translated into U.S. Dollars (“USD”) at various pertinent dates and for pertinent periods.

OVERVIEW

We are principally engaged in the exploration, development, mining, and processing of fluorite, zinc, lead, copper, and other nonferrous metals, through our subsidiaries in the PRC.

BUSINESS STRATEGY

Prospect in 2010

From the perspective of China’s overall micro-economic condition, China’s economic output will be expected to increase gradually in 2010. Non-ferrous metals and fluorite industry will be believed to have new development opportunities. The non-metallic mineral industry especially will expectedly be an industry in the positive direction.

Resumption of Production Capacity to Meet Demand

▼ Fluorite

In early 2006, we began a mining project at Xiangzhen Mining to produce 300,000 metric tons of fluorite ore and the project was completed in November 2007. At the same, at our mine site, we also started to build a plant with an annual processing capacity of 200,000 metric tons of fluorite ore, and the project was also completed in November 2007. We continued mining operations but the new plant remained in trial production in 2009.

We extracted approximately 47,900 metric tons of fluorite ore in 2009. We expect to extract 130,000 metric tons of fluorite ore in 2010.

We produced and sold approximately 12,000 metric tons of fluorite powder and 28,100 metric tons of fluorite lumps in 2009. We started the normal production on March 23, 2010 and we planned to process 45,000 tons of fluorite ore and produce 19,000 metric tons of fluorite powder in 2010. In addition, we plan to sell 55,000 metric tons of fluorite lumps and 19,000 tons of fluorite powder.

26

Xiangzhen Mining has the largest fluorite ore reserves in Northern China. Xiangzhen is a vice-president member in the China Fluorite Association. The new national policy of tighter restriction for new entrants into the fluorite production will have positive effect on Xiangzhen Mining. We expect the trend will continue for the business to concentrate in large enterprises through the acquisition of smaller enterprises.

▼ Zinc, Copper and Lead

No production was planned at Qianzhen Mining in 2009 due to the low grade of the ore supplied by Qingshan Metal and low copper price. Because the price of sulfur concentrate decreased greatly in 2009, Qianzhen Mining did not produce any sulfur products. We do not plan to produce at Qianzhen Mining and Qingshan Metal in 2010 due to the potential asset reorganization activity.

In July 2006, Xingzhen Mining began a project at Keyinbulake Multi-Metal Mine in Buerjin County, Aletai Zone, Xinjiang Uygur Autonomous Region. The project has a mining and processing capacity of 200,000 metric tons of mineralized zinc-copper ore per year. On April 28, 2008, Xingzhen Mining completed a successful testing at its first trial, and then went into production. In parallel with processing, Xingzhen did exploration in the area. Xingzhen stopped operations due to price decrease of non-ferrous metals for the most time of 2009.

In 2009, Xingzhen Mining produced and sold zinc concentrates and copper concentrates equivalent to 178 metric tons of zinc and 10 metric tons of copper, and sold 3,041 metric tons of oxide zinc-copper ore. We continued excavating and mining operations, and have been carrying out the operations until present time. Subject to purchase orders and weather conditions, we plan to start processing in late May 2010. We plan to produce extracted ore of 70,000 metric tons, excavate tunnels of 2,500 meters, process ores of 80,000 metric tons equivalent to 4,410 metric tons of zinc and 241 metric tons of copper. We plan to sell all the products. In addition, we plan to sell 10,000 metric tons of oxide copper-zinc ore.

Exploration Activities

·Keyinbulake Copper-Zinc Mine

In 2009, Xingzhen Mining made a great breakthrough in prospecting, though it did not finish its processing plan. Based on previous exploration, especially according to the results of the IP sounding work in geological prospecting carried out in 2009, the mineral formation conditions and the genesis of ore bodies shows that Keyinbulake Copper-Zinc Mine belongs to the submarine volcanogenic sediments. The analysis on the data of exploration shows that within the mineralized belt the ore bodies continue along with the strike and distribute in parallel and en echelon arrangement. The method of sounding indicates that the inclined deepening of the ore-bodies in this area is longer than the length of their strike prolongation. There are five high-polarization abnormal zones found through IP sounding methods and they coincide in space and positions with the known copper-zinc ore bodies controlled under current underground extraction, which confirms that Keyinbulake Copper-Zinc Mine exists with high potential of ore prospecting and the previous work greatly assists the Company to delimit the accurate target area for further verification.

In the first half of 2010, Xingzhen Mining will still focus on geophysical research, IP sounding prospecting, verification drilling design, and carrying out construction in strict accordance with design, as well as conducting the necessary geophysical investigations in the mining area. Xingzhen Mining is striving to explore further for more reserves as a public company before the end of 2010, and achieving breakthroughs in further identifying mineral resources in 2011.

Following the exploration in 2009, further exploration activities are planned in 2010 in the southern and northern parts of Keyinbulake Cu-Zn Mine. The exploration details are scheduled as follows:

Table 1-3: Exploration Program for Keyinbulake Property

Item	Method	Unit	Quantity
Geophysical	Surface scanning	km 2	2.5
Drilling	four medium/deep holes	m	3000
Trenching	-	m 3	500
Geophysical prospecting	IP sounding	points	1108

27

The exploration activities listed above will be completed by a Geophysical Prospecting Team of Xinjiang Nonferrous Geophysical Prospecting Bureau at the end of September 2010 with a total budget of approximately $0.88 million, which will be funded by a shareholder (natural person) of Xingzhen Mining.

Acquiring More Mineral Resources

To increase our reserve base and insure supply to our processing facilities, we plan to acquire domestic and foreign large-scale mines when the right opportunity arises. We also expect to acquire additional nonferrous metal mines and fluorite mines domestically that have good extracting and operating conditions and possess all necessary governmental licenses.

RECAPITALIZATION AND REORGANIZATION

On July 14, 2006, American Federal Mining Group, Inc. (“AFMG”, the then holding company of China Shen Zhou’s PRC subsidiaries) reached a stock exchange agreement with Earth Products & Technologies, Inc. (“EPTI”). Pursuant to the stock exchange agreement, and as instructed by the Company, EPTI issued 20,000,000 shares of its common stock, of which 17,687,000 shares were issued to shareholders of AFMG, 1,013,000 shares to management of AFMG and 1,300,000 shares to the financial advisors of AFMG, in exchange for a 100% equity interest in AFMG, making AFMG a wholly-owned subsidiary of EPTI.

The above stock exchange transaction resulted in those shareholders of AFMG obtaining a majority voting interest in EPTI. Generally accepted accounting principles in the United States of America require that the Company whose shareholders retain the majority interest in a combined business be treated as the acquirer for accounting purposes. Consequently, the stock exchange transaction has been accounted for as a recapitalization of AFMG as AFMG acquired a controlling equity interest in EPTI as of September 15, 2006. The reverse acquisition process utilizes the capital structure of EPTI and the assets and liabilities of AFMG recorded at historical cost. Although AFMG is deemed to be the acquiring corporation for financial accounting and reporting purposes, the legal status of EPTI as the surviving corporation did not change.

Subsequent to completion of the reverse takeover transaction, EPTI changed its name to China Shen Zhou Mining and Resources, Inc. on October 5, 2006.

On January 31, 2008, the Company’s common stock was listed on the American Stock Exchange, now called “NYSE Amex”.

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2010 AS COMPARED TO THREE MONTHS ENDED MARCH 31, 2009

Selected information from the Consolidated Statements of Operations

	For the three months ended March 31,
	2010				2009
	(in thousands)				(in thousands)
Net revenue		$	921			$	619
Gross profit		$	73			$	62
- Gross profit margin			8	%			10	%
General and administrative expenses		$	1,078			$	1,392
Interest expenses		$	86			$	962
Net loss		$	(811	)		$	(2,380	)

28

REVENUES. Net revenues for the three months ended March 31, 2010 were approximately $921,000, representing approximately $302,000 or 49% increase as compared to the same period of 2009.

GROSS PROFIT AND GROSS PROFIT MARGIN. For the three months ended March 31, 2010, gross profit was approximately $73,000 which increased by approximately 18% from $62,000 gross profit for the same period of 2009. Gross profit margin dropped from 10% for the three months ended March 31 2009 to 8% for the same period of 2010.

GENERAL AND ADMINISTRATIVE EXPENSES. For the three months ended March 31, 2010, general and administrative expenses decreased by approximately $314,000 to $1,078,000 in 2010 as compared to $1,392,000 in 2009. The decrease in general and administrative expenses was primarily due to the decrease in the depreciation of mining assets.

INTEREST EXPENSE.  Interest expense decreased approximately $876,000 as compared to the same period of 2009. The difference in interest expense is mainly due to the non-cash interest expense and costs associated with the convertible bond which was repurchased in December 2009.

NET LOSS. Net loss for the three months ended March 31, 2010was approximately $811,000, a decreaseof approximately $1,569,000 compared to net loss of $2,380,000 for the same period of 2009.Basicnet losses per share were $0.02and $0.11for the three months ended March 31, 2010 and 2009, respectively.

SEGMENT PERFORMANCE ANALYSIS

	Segment revenue						Segment profit (loss)
	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2010			2009			2010				2009
Fluorite		$	921		$	619		$	(560	)		$	(791	)
Nonferrous metals		$	-		$	-		$	(437	)		$	(470	)

Fluorite

For the first quarter, fluorite segment revenue increased by 49% from $0.62 million for 2009 to $0.92 million for 2010. The increase was primarily due to the increases in sales volume for fluorite powder.

29

Our fluorite segment loss was $0.56 million for the three months ended March 31, 2010, compared to a segment loss of $0.79 million in the same period of 2009.

Nonferrous Metals

Due to the inclement weather in the first quarter of 2010 and 2009, the Company ceased production of non-ferrous metal and had no sales in the first quarter of 2010 and 2009, respectively. The nonferrous metals segment loss was mainly due to the fixed assets’ depreciation and employees’ wages in the first quarter of 2010 and 2009, respectively.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $0.87 million as of March 31, 2010, an increase of $0.54 million as compared to the balance at December 31, 2009 of $0.33 million.

Net cash provided by operating activities for the three months ended March 31, 2010 was $1.17 million as compared to $0.18 million provided in the same period in 2009. The increase in operating cash flows was mainly due to the decreases in the loss from operations as compared to the same period of 2009.

Net cash used in investing activities for the three months ended March 31, 2010 were $0.21 million, as compared to $0.03 million used for the same period of 2009. The cash was mainly used in the purchasing of property, machinery and mining assets for the three months ended March 31, 2010 and 2009, respectively.

Net cash used in financing activities for the three months ended March 31, 2010 were $0.45 million, as compared to $0.12 million used for the same period of 2009. The difference was mainly due to the repayment at short-term bank loans.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

OFF-BALANCE SHEET ARRANGEMENTS

We have never entered into any off-balance sheet financing arrangements and have not formed any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

INFLATION

The Company does not foresee any material adverse effects on its earnings as a result of inflation.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

30

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimates are made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur, could materially impact the consolidated financial statements.

We believe that the following critical accounting policies reflect the significant estimates and assumptions which are used in the preparation of the consolidated financial statements and affect our financial condition and results of operations.

Property, Plant and Mine Development

Expenditures for new facilities or equipment and expenditures that extend the useful lives of existing facilities or equipment are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs over the estimated productive lives, which do not exceed the related estimated mine lives, of such facilities based on mineralized material.

Mineral exploration costs are expensed according to the term of the license granted to the Company. Extraction rights are stated at the lower of cost and recoverable amount.  When extraction rights are obtained from the government according to mining industry practice in the PRC, extraction rights and other costs incurred prospectively to develop the property are capitalized as incurred and are amortized using the units-of-production (“UOP”) method over the estimated life of the mineralized body based on estimated recoverable volume through the end of the period over which the Company has extraction rights. At the Company’s open pits, these costs include costs to further delineate the mineralized body and remove overburden to initially expose the mineralized body. At the Company’s underground mines, these costs include the cost of building access ways, shaft sinking and access, lateral development, drift development, ramps and infrastructure development.  

Major development costs incurred after the commencement of production are amortized using the UOP method based on estimated recoverable volume in mineralized material. To the extent that these costs benefit the entire mineralized body, they are amortized over the estimated life of the mineralized body. Costs incurred to access specific mineralized blocks or areas that only provide benefit over the life of that area are amortized over the estimated life of that specific mineralized block or area.  Interest cost allocable to the cost of developing mining properties and to constructing new facilities, if any, is capitalized until assets are ready for their intended use.

Asset Impairment

Long-lived Assets

The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any. An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows are estimated based on quantities of recoverable metals, corresponding expected commodity prices (considering current and historical prices, price trends and related factors), production levels and operating costs of production and capital, all based on life-of-mine plans. Existing proven and probable reserves and value beyond proven and probable reserves are included when determining the fair value of mine site reporting units at acquisition and, subsequently, in determining whether the assets are impaired. The term “recoverable metals” refers to the estimated amount of gold or other commodities that will be obtained after taking into account losses during ore processing and treatment. Estimates of recoverable metals from such exploration stage metal interests are risk adjusted based on management’s relative confidence in such materials. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company’s estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable metals, gold and other commodity prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.

31

Stock Based Compensation

In December 2004, the Financial Accounting Standards Board, or FASB, issued FASB ASC 718-10-55 - Compensation-Stock Compensation, or ASC 718-10-55. Under ASC 718-10-55, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In addition, FASB ASC 825-10-50-10 – Financial Instruments – Overall – Disclosures, or ASC 825-10-50-10, expresses views of the Securities and Exchange Commission, or the SEC, staff regarding the interaction between ASC 718-10-55 and certain SEC rules and regulations and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. The Company’s compensation cost is measured on the date of grant at its fair value. Such compensation amounts, if any, are amortized over the respective vesting periods or period of service of the option grant

Recent Accounting Pronouncements

Recent accounting pronouncements applicable to the Company are summarized below.

- In June 2009, the FASB issued authoritative guidance which eliminates the exemption for qualifying special-purpose entities from consolidation requirements, contains new criteria for determining the primary beneficiary of a variable interest entity, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity. The guidance is applicable for annual periods beginning after November 15, 2009 and interim periods therein and thereafter. The Company does not expect the adoption of this standard to have a material effect on its financial position or results of operations.

- EITF Issue No. 07-5 (ASC 815), “Determining Whether an Instrument (or embedded Feature) is Indexed to an Entity’s Own Stock” (EITF 07-5) was issued in June 2008 to clarify how to determine whether certain instruments or features were indexed to an entity’s own stock under EITF Issue No. 01-6 (ASC 815), “The Meaning of “Indexed to a Company’s Own Stock” (EITF 01-6) (ASC 815),. EITF 07-5(ASC 815), applies to any freestanding financial instrument (or embedded feature) that has all of the characteristics of a derivative as defined in FAS 133, for purposes of determining whether that instrument (or embedded feature) qualifies for the first part of the paragraph 11(a) scope exception. It is also applicable to any freestanding financial instrument (e.g., gross physically settled warrants) that is potentially settled in an entity’s own stock, regardless of whether it has all of the characteristics of a derivative as defined in FAS 133 (ASC 815), for purposes of determining whether to apply EITF 00-19 (ASC 815). EITF 07-5(ASC 815) does not apply to share-based payment awards within the scope of FAS 123(R), Share-Based Payment (FAS 123(R) (ASC 718)). However, an equity-linked financial instrument issued to investors to establish a market-based measure of the fair value of employee stock options is not within the scope of FAS 123(R) and therefore is subject to EITF 07-5(ASC 815).

- In January 2009, the FASB issued FSP EITF 99-20-1 (ASC 325), to amend the impairment guidance in EITF Issue No. 99-20 (ASC 325) in order to achieve more consistent determination of whether an other-than-temporary impairment (“OTTI”) has occurred. This FSP amended EITF 99-20 (ASC 325) to more closely align the OTTI guidance therein to the guidance in Statement No. 115 (ASC 320, 10-35-31). Retrospective application to a prior interim or annual period is prohibited. The guidance in this FSP was considered in the assessment of OTTI for various securities at December 31, 2008.

32

- On June 5, 2003, the United States Securities and Exchange Commission (“SEC”) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC Release No. 33-9072 on October 13, 2009. Commencing with its annual report for the year ending December 31, 2010, the Company will be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement of:

· Management’s responsibility for establishing and maintaining adequate internal control over its financial reporting;

· Management’s assessment of the effectiveness of its internal control over financial reporting as of year- end; and

· The framework used by management to evaluate the effectiveness of the Company’s internal control over financial reporting.

Furthermore, it is required to file the auditor’s attestation report separately on the Company’s internal control over financial reporting on whether it believes that the Company has maintained, in all material respects, effective internal control over financial reporting.

-  In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-04 “Accounting for Redeemable Equity Instruments - Amendment to Section 480-10-S99” which represents an update to section 480-10-S99, distinguishing liabilities from equity, per EITF Topic D-98, Classification and Measurement of Redeemable Securities. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows. In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-05 “Fair Value Measurement and Disclosures Topic 820 – Measuring Liabilities at Fair Value”, which provides amendments to subtopic 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. This update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: 1. A valuation technique that uses: a. The quoted price of the identical liability when traded as an asset b. Quoted prices for similar liabilities or similar liabilities when traded as assets. 2. Another valuation technique that is consistent with the principles of topic 820; two examples would be an income approach, such as a present value technique, or a market approach, such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability. The amendments in this update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. The amendments in this update also clarify that both a quoted price in an active market for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.

- In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-08 “Earnings Per Share – Amendments to Section 260-10-S99”,which represents technical corrections to topic 260-10-S99, Earnings per share, based on EITF Topic D-53, Computation of Earnings Per Share for a Period that includes a Redemption or an Induced Conversion of a Portion of a Class of Preferred Stock and EITF Topic D-42, The Effect of the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.

- In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-09 “Accounting for Investments-Equity Method and Joint Ventures and Accounting for Equity-Based Payments to Non-Employees”. This update represents a correction to Section 323-10-S99-4, Accounting by an Investor for Stock-Based Compensation Granted to Employees of an Equity Method Investee. Additionally, it adds observer comment Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees to the Codification. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

33

- In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-12 “Fair Value Measurements and Disclosures Topic 820 – Investment in Certain Entities That Calculate Net Assets Value Per Share (or Its Equivalent)”, which provides amendments to Subtopic 820-10, Fair Value Measurements and Disclosures-Overall, for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). The amendments in this update permit, as a practical expedient, a reporting entity to measure the fair value of an investment that is within the scope of the amendments in this update on the basis of the net asset value per share of the investment (or its equivalent) if the net asset value of the investment (or its equivalent) is calculated in a manner consistent with the measurement principles of Topic 946 as of the reporting entity’s measurement date, including measurement of all or substantially all of the underlying investments of the investee in accordance with Topic 820. The amendments in this update also require disclosures by major category of investment about the attributes of investments within the scope of the amendments in this update, such as the nature of any restrictions on the investor’s ability to redeem its investments at the measurement date, any unfunded commitments (for example, a contractual commitment by the investor to invest a specified amount of additional capital at a future date to fund investments that will be made by the investee), and the investment strategies of the investees. The major category of investment is required to be determined on the basis of the nature and risks of the investment in a manner consistent with the guidance for major security types in U.S. GAAP on investments in debt and equity securities in paragraph 320-10-50-1B. The disclosures are required for all investments within the scope of the amendments in this update regardless of whether the fair value of the investment is measured using the practical expedient. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

- In October 2009, the FASB issued guidance for amendments to FASB Emerging Issues Task Force on EITF Issue No. 09-1 “Accounting for Own-Share Lending Arrangements in Contemplation of a Convertible Debt Issuance or Other Financing” (Subtopic 470-20) “Subtopic”. This accounting standards update establishes the accounting and reporting guidance for arrangements under which own-share lending arrangements issued in contemplation of convertible debt issuance. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2009. Earlier adoption is not permitted. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not required.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a – 15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act”) are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. This information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

34

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factor

Not required

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. (Removed and Reserved) 

Item 5. Other Information

None

Item 6.  Exhibits 

The following exhibits are hereby filed as part of this Quarterly Report on Form 10-Q.

Exhibit Number	Description
31.1	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Accounting Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

35

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant certifies that it has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized, in Beijing.

	CHINA SHEN ZHOU MINING & RESOURCES, INC.
Date: May 14, 2010	By:	/s/ Xiaojing Yu
		Xiaojing Yu, Chief Executive Officer
		(Principal Executive Officer)

Date: May 14, 2010	By:	/s/ Jiusheng Zhang
		Jiusheng Zhang, Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

36

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a), AS

ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Principal Executive Officer

I, Xiaojing Yu, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of China Shen Zhou Mining & Resources, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	By:	/s/ Xiaojing Yu
Dated: May 14, 2010		Name: Xiaojing Yu
		Title: Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a), AS

ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Principal Financial/Accounting Officer

I, Jiusheng Zhang, certify that:

1. I have reviewed this quarterly report on Form 10-Q of China Shen Zhou Mining & Resources, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	By:	/s/ Jiusheng Zhang
Dated: May 14, 2010		Name: Jiusheng Zhang
		Title: Chief Financial Officer (Principal Financial Officer)

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

This Certification accompanies the Form 10-Q for the fiscal quarter ended March 31, 2010, of China Shen Zhou Mining & Resources, Inc.

The undersigned, Xiaojing Yu, Chief Executive Officer, and Jiusheng Zhang, Chief Financial Officer, of China Shen Zhou Mining & Resources, Inc. (the “Company”), DO HEREBY CERTIFY that:

1. The Company’s Form 10-Q for the fiscal quarter ended March 31, 2010 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, each of the undersigned has executed this statement on the date set forth below:

	/s/ Xiaojing Yu
Date: May 14, 2010	Xiaojing Yu
	Chief Executive Officer
	(Principal Executive Officer)
	/s/ Jiusheng Zhang
Date: May 14, 2010	Jiusheng Zhang
	Chief Financial Officer
	(Principal Financial Officer)