The Group is determined to focus on the gold exploration and mining business. Subsequent to disposal of tea business in the first half of 2018, the Group has completed an acquisition of gold business at the end of this year. To strengthen the Group's resource and reserve, the Group will continue to explore the opportunities of high quality gold exploration and mining business. In respect of the mining areas which has completed the exploration stages, the Group has begun the application of mining licenses during the year. The management believes that the production capacity would be gradually improved with more mining activities.
This year, the central inspection teams visited Qinling for the one-off and large-scale environmental inspection. As advised by the local authorities, the Group has suspended the mining operation in Tongguan county temporarily and the production in second half of 2018 has been decreased. Nevertheless, the Group remains optimistic to the financial performance in the coming years. The management believes the central inspection is non-recurring and the Group will continue to put emphasis on workplace safety and environmental protection.
The Group considers work safety and environmental protection as an important topics when it comes to sustainable development. To mitigate the workplace injuries and accidents, the Group provides continuous trainings and workshops. To reduce the environmental damage, the Group has set up the internal control to monitor the waste being produced in the mining operation and promote energy-saving.
The phase one of the new processing plant is expected to complete in or around the first half of 2019. The new processing plant will strengthen our processing capacity and the production is expected to be benefited from the economics of scale. The Group will continue to look for opportunities to improve the production capacity and operate in a cost-effective manner.
The profitability of the Group highly depends on the gold price in the domestic and international markets and the market prices of gold (and other precious metals) are highly correlated with the global economic growth and stability. In view of the potential impacts from Fed interest rate hikes and the US-China trade war, the Company is of the view that the gold serves as a safe haven is beneficial to the Group.
The management will continually strive to explore the investment opportunities of high quality mining to enhance reserve, resources and production output. The Group will leverage its management expertise in the mining industry so as to increase the shareholders' value of the Group as a whole.