某耐火材料公司上市計(jì)劃書（英文）

BUSINESSPLAN

AXXXREFRACTORIESCO.,LTD

January29,2007

IMPORTANTNOTICETORECIPIENTSOFTHIS

CONFIDENTIALBUSINESSPLAN

ThisConfidentialBusinessPlan(the“BusinessPlan2007”)anditscontentsarethepropertyofAXXXRefractories(“XXX”,“theCompany”).ByacceptingdeliveryofthisBusinessPlan2007,therecipientagreestoreturnthisBusinessPlan2007andallrelateddocuments,ifany,toAXXXRefractories,uponrequest.Therecipientagreesthatneitheritnoritsagents,representatives,directors,oremployeeswillcopy,reproduce,ordistributethisBusinessPlan,inwholeorinpart.TherecipientagreesnottodisclosethecontentsofthisBusinessPlan2007toanypartyotherthantherecipient’sbusinessortaxadvisors,forinvestmentconsiderationonly.

InformationcontainedinthisBusinessPlan2007hasbeenobtainedfromAXXXRefractories,andfromothersourcesdeemedreliable,asofthedateofit’spublishing,butnorepresentationorwarrantyismadeastoitsaccuracyorcompleteness.NopersonhasbeenauthorizedinconnectionwiththisBusinessPlan2007togiveanyinformationortomakeanyrepresentationsotherthanthosecontainedhereinand,ifgivenormade,mustnotberelieduponashavingbeenauthorized.Onlythoserepresentationsandwarranties,whichmaybemadebyAXXXRefractories,inadefinitivewrittenagreement,whenandifoneisexecuted,willhaveanylegaleffect.

ThisBusinessPlan2007containsforward-lookingstatementsconcerningplans,intentions,strategies,expectations,predictions,financialprojectionsandbeliefsofAXXXRefractories,inregardtofutureactivitiesandresultsofoperationsandotherfutureeventsorconditions.Actualresults,events,orconditionscoulddiffermateriallyfromthoseprojectedbyAXXXRefractories,duetoavarietyoffactors,someofwhicharebeyondthecontrolofAXXXRefractories.AXXXRefractoriesdisclaimsanyobligationstoupdateanysuchfactorsortopubliclyannouncetheresultsofanyrevisionstoanyoftheforward-lookingstatementscontainedhereintoreflectfutureresults,eventsordevelopments.

ThisBusinessPlan2007isnot,andshouldnotbeconstruedas,anoffertosellorasolicitationofanoffertobuysecuritiesofAXXXRefractoriesandisforinformationpurposesonly.

Tableofcontents

1.Executivesummary

5

1.1Overview

5

1.2Industry

5

1.3Product&service

6

1.4Marketing

6

1.5Competitiveadvantages

6

1.6Strategies

7

1.7Financials

8

1.8Financing

9

2.Industry

9

2.1World

9

2.2China

10

2.3Industrydynamics

11

2.4Regulations

12

3.Companyandmanagement

14

3.1Overview

14

3.2HistoryandMilestone

14

3.3Honorsandcertificate

15

3.4Properties

16

3.5Inventory

16

3.6Corporationstructure

17

3.7Managementteam

17

3.8Organizationstructure

19

3.9Humanresource

19

4.Product&Service

21

4.1Refractoriessegment

21

4.2Functionalceramicmaterials

23

4.3Rawmaterials&suppliers

24

4.4Mainequipments

25

4.5Manufacturing

26

4.6Research&Development

26

4.7Qualitycontrol

27

4.8Intellectualproperty

27

4.9Service

28

5.Marketing

29

5.1Competition

29

5.2Competitors

29

5.3Competitiveadvantages

29

5.4Market

31

5.5Price

31

5.6Distribution

32

5.7Salesforce

32

5.8Typesofsales

32

5.9Seasonality

33

5.10Customers

34

5.11Accountreceivables

34

6.Strategy

35

6.1Strategies

35

6.2Growthplan

35

6.3Research&Developmentplan

37

6.4Risks

37

7.Financials

39

8.Financing

40

8.1Financingtarget

40

8.2Useofproceeds

40

8.3Exitplan

40

1.Executivesummary

1.1Overview

Weengageindeveloping,producing,marketingabroadrangeofmineralbasedproductsthroughourwhollyownedsubsidiary,AXXXRefractoriesCo.,Ltd,locatedinAprovince.Weoperateintwoproductlines:Monolithicrefractorymaterials,andfunctionalceramic.In2006,wereachedoutputof100,000milliontonnesofmonolithicrefractories.

1.2Industry

Refractoriesarewidelyusedasliningstoprotectfurnaceandothervesselsunderextremelyhightemperatureinsteel,cement,cement,glass,aluminum,andothernon-steelindustries.Steel&Ironindustryremainsthemostimportantconsumerofrefractorymaterials.Thedevelopmentofrefractoriesdependstoalargeextentonthesteelmakingindustry.Although,theoutputofrefractorieswasincreasingoverthepastseveralyears,theconsumptionofrefractoriespertonneofsteelwasdecliningsignificantly.

MonolithicrefractoryproductsaccountedforarelativelessproportionofthewholeindustryoutputinChinacomparedtothesituationsindevelopedcountries.Additionalproportionisexpectedtoshifttomonolithicrefractoriessidegiventheexistingmarketsize.

1.3Product&service

Weprovidetwosegmentsofproductsincludingmonolithicrefractoriesandfunctionalceramictoourcustomers.Monolithicrefractoriesweproducedaremainlyappliedin:ironmaking,steelmaking,andindustrialfurnace.

Monolithicrefractoriescanbecharacterizedby:

Monolithicrefractoriescanbecastintocomplexwantedshapeswhichareunavailabletoshapedrefractories.

Monolithicrefractoriescanyieldtointegralstructurewhichprolongstheservicelifeofrefractories.

Monolithicrefractoriescanbeautomaticallyinstalledbyspecialtyequipments.

Apartfromproducts,weprovideinstallmentofrefractoriesfornewconstructionsandcontractedmaintenanceoftroughandladleforoperatingsteelproductionlines.

1.4Marketing

Wesellproductstotargetcustomersbydirectsales.Ourproductswerepricedbasedonrawmaterialpricesandmarketdemandlevel.Themarketpresencecovers25provincesinChinaandseveraloverseacountries.

Besidesproductsales,weprovideothertwotypesofsalesincluding:newconstructionproject,andcontractedmaintenanceproject.

Newconstructionprojectispricingbasedonthevolumeofrefractoriesconsumedbycustomers’projects,whereascontractedmaintenanceprojectispricingbyafixedrateofcustomersannualsteeloutput.

1.5Competitiveadvantages

Marketleadership

Weranktoponeinthesegmentofmonolithicrefractorymaterialsintermsofoutputscale.

Broadproductspectrum

Weofferthreeproductseriesofmonolithicrefractoriesappliedinironmaking,steelmaking,andindustrialfurnace.

Brandrecognition

Ourbrandof“XXX”iswidelyawareofamongChineserefractoriesindustry.

Solidcustomerrelationship

WehavelongtermcooperationrelationshipwithourcustomerslikeBaosteel,WuhanSteel,andMaanshansteel,etc.whichareallbignamesinChinesesteel&ironindustry.

Veteranmanagementteam

Themanagementteaminourcompanyhasinvolvedinrefractoriesindustryforscoreofyears.

Widelydistributedcustomerbase

Ourmarketpresencecovers25provincesinChinaandcertainoverseanations.Inthepastfiscalyear,wehadaround165customers,ofwhich7accountswereover10millionyuan.

Easyaccesstorawmaterials

OurcompanyislocatedinGongyi,Aprovince,wherehasabundantreserveofbauxiteandotherprincipalrawmaterialsforrefractoriesmanufacturing.

R&Dcapabilities

Ourgrowthdependstoalargeextentonthecontinuedsuccessoftheresearchanddevelopmentactivities.Ourexpertiseinmonolithicmaterialssupportstheproductlinesindevelopingnewproductsandhelpsincreaseourcustomers’satisfactionlevel.Weestablishednationallevellabofqualitytest.

Favorableindustrytrend

Webenefitfromtheindustrytrendofreplacingshapedrefractorieswithmonolithicrefractorymaterialinsteelindustry.

Emphasisoncontractedmaintenanceservice

Thecontractedmaintenanceservicebringsuscontinuingandstablebusinessaswellassolidcustomrelationship.Wehavebeenretainedbyeightsteelmakersandorganizedaserviceforcewith300employees.

1.6Strategies

Expandcustomerbaseofcontractedmaintenance.

IncreasemarketpenetrationbytargetingbigsizesteelmakersandaddingmorerefractoriesaccountswithoverRMB10millioneach.

Continuetoexpandoverseamarket

Expandproductlinesbyintroducingnewproducts

DiversityintoavarietyofspecialandhighmarginmineralbasedproductsincludingfractureproppantandFinePrecisionAbrasives

Improvecostcompetitiveness

Continueresearchanddevelopmenteffortsbyinvestingandhiringtalents.

1.7Financials

inUS$美元

2004

2005

2006

NetRevenue

18,921,617

22,184,246

27,481,539

Growthrateofrevenue

17.2%

23.9%

COGS

12,355,100

12,977,770

16,534,004

Grossprofit

6,566,517

9,206,476

10,947,535

GrossMargin

34.7%

41.5%

39.8%

Expenses

Selling

2,189,218

3,131,897

3,783,071

General&Administrative

1,944,976

2,199,433

2,511,494

Operatingincome

2,432,323

3,875,146

4,652,970

Growthrateofoperatingincome

59.3%

20.1%

Interestincome

5,628

7,986

8,698

Otherincome(expense),net

7,401

39,368

36,046

GrantIncome

465,528

320,783

33,251

Financecosts

93,084

102,824

226,236

Incomebeforetaxes

2,817,796

4,140,459

4,504,729

IncomeTax

665,401

250,415

7,010

Minorityinterest

2,465

9,162

1,617

NetIncome

2,149,930

3,880,882

4,496,102

1.8Financing

WeplantoraiseUS$10millionthroughconvertiblepreferredstockfinancing.Theuseofproceedsinclude:FinePrecisionAbrasives,expandingoperationsatPakistan,andsupplementingworkingcapital.ThroughAPOtransactionadvisedbyHalterFinancialGroup,wewillgopublicinU.S.OTCBBstockmarketaslongaswemeetfinancialtargets.

2.Industry

2.1World

Refractoryproductsareusedastheliningstoprotectfurnacesandothervesselsunderextremelyhightemperatureinsteel,cement,glass,aluminum,powergeneration,petrochemicalsandothernone-steelindustries.Steelindustryconsumesthelargestshareofrefractoryproducts.

Theoutputofrefractoryindustrykeptincreasingoverthepastseveralyears.Theoveralloutputworldwidein2005was35milliontonnesversus26milliontonnesworldwidein2000,representingaCAGRof6.12%.

ConsumptionofRefractories

Theconsumptionofrefractorymaterialspertonneofsteelwasdecliningsignificantly.InGermanyandUnitedStates,theconsumptionofrefractorymaterialswas52kilogramspertonneofsteelin1950’s.Thisnumberwaschangedto11kilogramspertonneofsteelin2004.TheinstanceinJapanwasbetter,andtheconsumptionofrefractorymaterialspertonneofsteelwas35kilogramsin1950’s.Thenumberwaschangedto9.8kilogramspertonneofsteelin2004.

2.2China

OutputandSales

TheproductionofrefractorymaterialshasexperiencedafastgrowthinrecentyearsinChina.

Inthepastsixyears,theoutputandrevenueofrefractoryindustryinChinawereshownasfollows:

Totaloutputgrewfrom9.81milliontonnesin2000to22.76milliontonesin2005,representinganannualizedgrowthrateof18.3%.

Totalsalesgrewfrom19,300millionyuanto64,000millionyuan,representinganannualizedgrowthrateof27.1%.

Market

SteelindustryistheprinciplemarketofChineserefractoryindustry.

Setforthbelowistheindustrycompositionofthemarketin2005.

Chinesesteelindustry

Drivenbyheatingfixedassetsinvestment,Chinesesteelindustrygrewfrom115milliontonnesin2001to450milliontonnesin2006,representingaCAGRof23.8%.

EventhoughChinesegovernmenttooktightcontrolonthecapacityofsteelproduction,growthspacestillremains.Chinesesteeloutputisexpectedtogrowto600milliontonnesby2010,representingaCAGRof7.5%overthefollowingfouryears.

2.3Industrydynamics

MonolithicrefractoryproducthasrelativelystronggrowthpotentialinChina.

Refractoriesincludetwocategories,monolithicrefractoriesandshapedones.Monolithicrefractoryproductsaremadebyaphysicalcombinationofvariouscomponentmineralsandstayinpowderformat.Itcanbecastintoawantedshapebycombiningwithwater.Shapedrefractoryproductsaremadebypressingandcalciningandstayinregularcubicformat.Itcanonlybepileduptoformawantedshapewithseparatepieces.Monolithicrefractoryproductoutperformsshapedoneintermsofproductioncost,applicationflexibilityandproductlife.

MonolithicrefractoryproductsaccountedforarelativelessproportionofthewholeindustryoutputinChinacomparedtothesituationsindevelopednations.Additionalproportionisexpectedtoshifttomonolithicrefractorysidegiventheexistingmarketsize.

Setforthbelowismonolithicrefractoryproduct’sproportionsofthewholeindustryoutput.

Chinesesteelmakers’productupgradeandincreasingneedforimprovedproductivityandlongerlasingrefractoriesprovidegrowthopportunitiesforcertainrefractoriesproducerswhopreparewell.

Forinstance,thenewsteelproductforvehiclebodyrequiresnonecarbonproductionenvironment.Ourspecificnonecarbonrefractoryproductsatisfiedsuchneedwellandreplacedimportsbyourcustomer.

Undercontractedmaintenanceservicemodel,refractoryproducersarecompensatedatafixedrateofsteelmakers’output.Thelongeritsproductslast,themoreprofittherefractoryproducerwillmake.

Decreasingrefractoryconsumptionperunitsteeloutput,representingrisingrefractoryproductivity

Indevelopednation,averagerefractoryconsumptionpertonneofsteeldroppedfrom60kgin1950sto13kgin2005.InChina,currentindustrywiderateisaround28kg.

IndustryShift

Chinaisbecomingtheindustrycenterintheworld.RefractoryproducersofdevelopednationsaretransferringtheiroperationstoChina.Chineseexportofrefractoryproductskeptincreasing.

2.4Regulations

Therefractorymaterialsindustryissubjecttostate,locallawsandregulationsrelatingtotheenvironment,health,andsafety.Theoperationofrefractorymaterialsinvolvesthereleaseofpowderanddustthatareclassifiedasenvironmentalpollutionwithinthemeaningofgovernmentlawsandregulations.

Weregularlymonitorandreviewouroperations,procedures,andpoliciesforcompliancewiththeselawsandregulations.WeinvestedRMB480,000($60,000)onseveralworkshopstoinstallthedustcatchersfrom1996to1998.Thecompanybelievesthatitsoperationsareinsubstantialcompliancewiththelawsandregulationsandthattherearenoviolationsthatwouldhaveamaterialeffectonthecompany.Thecostofcompliancewiththeselawsandregulationsisnotexpectedtohaveamaterialadverseeffectonthecompany.

3.Companyandmanagement

3.1Overview

Wearearesource-andtechnology-basedcompanythatdevelops,produces,andmarketsworldwideabroadrangeofmineralbasedproducts.Wehavetwosegments,monolithicrefractoryproductandfunctionalceramic.Weoperatethroughourwhollyownedsubsidiary,AXXXRefractoriesCo.,Ltd,locatedinAprovince.Wealsoplantoproducefractureproppant.Theconstructionofnewfacilitieshasalmostbeencompletedandtrialoperationhascommenced.

WeplantouseChinaMineralsTechasourcompanynameafterwebecomeaU.S.publiccompany.

3.2HistoryandMilestone

History

Wecommencedcorporationsin1986throughourpredecessorentityandestablishedAXXXRefractoriesCompanyin1986.

Milestone

In1989,wewerethefirstoneinChinaenteringthefieldofmonolithicrefractoryproducts.Bybuyingthepatentandworkingwiththewell-knownexpert,Mr.ZaigengLi,wesuccessfullydevelopedaseriesofmonolithicrefractoryproducts.

In1994,wedevelopedanewtypeofsteelladlemonolithicrefractoryproductbasedonhighaluminumandspinel,outperformingovertraditionalonesbasedonsolublewaterandaluminum-magnesium.Thelifeofourinnovativeproductwasthreetimeslongerthanpeergroups.

In2002,weacquired89.33%sharesofAHighTemperatureMaterialsCo.,Ltd.andenteredfunctionalceramicbusiness.

In2005,weunderwentanoverseareorganization.

In2006,ourmonolithicrefractoryproductcapacityreached100,000tonnes.

In2006,wesetupXXFractureProppantCo.,Ltd.inZhengzhouandbuiltupnewfacilitiestoproducefractureproppant.

3.3Honorsandcertificate

Wegaineddifferenthonorsandmadeextraordinaryperformanceamongtherefractorymaterialsindustrysincewebeganourbusiness.

In1991,thecastingmonolithicrefractoryproductwithlow,ultralowandnonecementwassuccessfullyappliedtoaluminarotarykilnandcementrotarykilnbyZhengzhouAluminumPlant.Thelifeofrefractoryproductwasprolongedseveraltimes,loweringthecustomer’sproducingcostby40%.

In1992,thecastingchrome-corundumrefractoryproductwassuccessfullyappliedtofoundrymainfrequencyfurnacebyLuoyangTractorPlant.

In1993,theproductofNPT-refractorycoatingfilledagapinrefractoryindustry.

“Thedevelopmentandapplicationoflowcement,ultralowcementandcementlesshighperformancerefractorycastable”cooperatedwithLuoyangRefractoryResearchInstitutewontheMetallurgicalScienceandTechnologyAdvancementAward,FirstClass,andthesecondawardintheStateScientificandTechnologicalProgress.

“Thedevelopmentandapplicationofhighstrengthmullitestemming”wasawardedthesecondawardintheScientificandTechnologicalProgress.

“TheapplicationonAluminaRotaryWheeloflowcement,ultralowcementandcementlesshighperformancerefractorycastable”wasawardedthegoldenawardofTownshipEnterpriseScientificandTechnologicalAdvancement.

“TheapplicationofNPT-refractorycoatingoncementdryprocesskilnwithfivecyclonebarrels”wasawardedoutstandingnewproductsbyAScienceandTechnologyCommission.

Thecompanywasgrantedthe1998BritishMoody’sISO9002internationalqualitysystemcertificate.

Thecompanywasidentifiedastorchplanfocusedonhigh-techenterprisebyNationalScienceandTechnologyCommissionandhigh-techenterpriseatAprovince.

“Thepouringmixertechnology”hasappliedforpatentsfromthestates,andwonthethirdprizeofZhengzhouScienceandTechnologyAdvancement.

3.4Properties

Monolithicrefractories

Address:No.88XXXAvenue,DayugouTown,Gongyi,AProvince

Informationrelatingtotheland-useandbuildings:

Area(m2)

Expireddate

XXXRefractoriesCo.,Ltd.

51,492

2055-9-22

XXXRefractoriesCo.,Ltd.

21,911

2055-9-22

Functionalceramicmaterials

TheXXXHigh-temperaturematerialsCo.,Ltd.leasedabout8000m2landsfortheoperationoffunctionalceramicproducts.

Thecompanybelievesthatitsfacilities,whichareofvaryingagesandareofdifferentconstructiontypes,havebeensatisfactorilymaintained,areingoodconditions.Theyaresuitableforthecompany’soperationsandgenerallyprovidesufficientcapacitytomeetthecompany’sproductionrequirements.Basedonpastexperience,thecompanybelievesitisadequatelyinsuredwithrespecttotheseassets,andforliabilitieswhicharelikelytoarisefromitsoperations.

3.5Inventory

AsonSeptember,2006,inventoriesincreasedbyRMB16.8milliontoRMB39.8millionfromRMB23millionasat31stDecember,2005,principallyduetotheincreaseoffinishedgoodsstocks.Thecompanydoesnothaveageneralallowancepolicyoninventorybasedonageinggiventhenatureofinventoriesthatarenotsubjecttofrequentwearandtearandfrequenttechnologicalchanges.However,operationalprocedureshavebeeninplacetomonitorthisriskasmajorityofworkingcapitalisdevotedoninventories.Thecostoffinishedgoodsandworkinprocesscomprisesrawmaterials,directlabor,otherdirectcostsandrelatedproductionoverheads.

3.6Corporationstructure

Mr.ZhangandotherChineseFounders

PowersmartHoldingsLimited(BVI)

ZhengzhouXXFractureProppantCo.,Ltd

SmarthighHoldingsLimited(BVI)

AXXXRefractoriesCo.,Ltd

AXXXHigh-temperatureMaterialsCo.,Ltd

89.33%

100%

100%

100%

100%

Overseas

3.7Managementteam

ShunqingZhang,ChairmanoftheBoard

ShunqingZhangwaselectedChairmanoftheBoardonDecember,2005.Priortothat,hebecameChairmanoftheBoardandPresidenteffectiveJune,2002.Mr.ZhangservedasChairmanoftheBoardandPresidentofXXXIndustryGroupofAProvincefrom1997to2002.HehadservedasDirectorofAcademyoftheMinistryofMetallurgyLofaResistanceAssociatedExperimentalPlantinGongyiCitysince1986.Mr.ZhangisaformerSecretaryofaLocalCoalMineatDayugouTown,GongyiCity.

XianZhang,President

XianZhangwaselectedPresidentonJanuary,2006.HehadbeenAssociateChairmanoftheBoardofXXXIndustryGroupofAProvincefromDecember,1996toDecember2005.Mr.ZhanghadservedasassociateDirectorofAcademyoftheMinistryofMetallurgyLofaResistanceAssociatedExperimentalPlaninGongyiCitysince1992.HeisaformerManagerofanIndustryCompanyofDayugouTown,GongyiCity.

JiansheWang,VicePresident

JiansheWangwaselectedVicePresidentonJanuary,1997.Priortothat,hehadservedasProductionChiefattheAcademyoftheMinistryofMetallurgyLofaResistanceAssociatedExperimentalPlaninGongyiCitysince1994.

GuangpuZhang,DirectorofRefractoriesofR&D

GuangpuZhangwaselectedDirectoroftheInstitutein1995.HeservedastechnologicalDirectorofAcademyoftheMinistryofMetallurgyLofaResistanceAssociatedExperimentalPlaninGongyiCitysince1986.

FengleZhang,DirectorofFunctionalCeramicMaterialsDivision

FengleZhang.HeservedasManagerofXXXHigh-temperatureMaterials.Mr.ZhanghadservedasVicePresidentofthecompanysinceDecember,1996.HeisaformerAssociateDirectorofAcademyoftheMinistryofMetallurgyLofaResistanceAssociatedExperimentalPlantinGongyiCity.

BoHu,DirectorofFractureProppantDivision

BoHuwaselectedPresidentofFractureProppantCo.,Ltd.onJanuary,2006.HeservedasPresidentofFuchangSmeltingLLC.fromJanuary,2004toDecember,2005.Priortothat,heheldpositionofAssociateDirector,DirectorofRenduZhenfengCementFactoryin2001.Mr.HuservedasAssociateDirectorinseveralcementfactoriesfromJanuary,1990.

ZhenyongBi,DirectorofMarketingandSales

ZhenyongBiwaselectedManagerofSalesin2004.Priortothat,heservedasPresidentofthecompanyfromJanuary,2003.Mr.BiworkedatInstituteofLuoyangRefractorymaterialsin1997.HeisholdingaMasterdegreemajoringinRefractoryMaterials.

3.8Organizationstructure

AXXXRefractoriesCo.,Ltd

SalesDivision

ForeignTradeDivision

AdministrationOffice

XXFractureProppantCo.,Ltd

InternalAuditingTeam

AXXXHigh-TemperatureMaterialsCo.,Ltd

FinanceDivision

EngineeringDivision

R&D

Division

ProcurementDivision

IRTeam

BoardofDirectors

SeniorManagement

President

3.9Humanresource

Totalnumber

AsofDecember23rd,2006,thecompanyhasapproximately1015employees,ofwhichareallsalariedemployees.Alltheemployeeshavejoinedthelaborunion.

Compositionbyeducation:

Compositionbyfunction:

Socialinsurance

Wepaidpension,medicalinsurance,andunemploymentinsurancefortheemployeesinlinewithrelatedregulation.Furthermore,wealsopaidworkinjuryinsurancefortheemployeesaswell.

Staffrecruitment

Werecruitworkersfromthesufficientlocallabormarketwhenitisrequired.Asthecompanycontinuesitsexpandingplan,weplantorecruitmoretalentsmajoringinmaterialscience,refractorymaterials,market