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PROPERTY, PLANT AND EQUIPMENT, NET
 6 Months Ended
Jun. 30, 2012
PROPERTY, PLANT AND EQUIPMENT, NET

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT, NET

 

Property, plant and equipment, net consist of the following:

 

    June 30,
2012		     December 31,
2011		  
At cost:            
Mineral rights   $ 6,294,862     $ 6,318,750  
Buildings     40,819,625       40,974,528  
Plant and machinery     134,002,545       136,862,383  
Motor vehicles     6,998       7,024  
Furniture, fixtures and office equipment     4,042,017       4,057,356  
Construction in progress     7,849,287       -  
Total     193,015,334       188,220,041  
Less: Accumulated depreciation and amortization     (50,518,857 )     (41,019,301 )
Net book value   $ 142,496,477     $ 147,200,740  

 

The Company has certain buildings and salt pans erected on parcels of land located in Shouguang, PRC, and such parcels of land are collectively owned by local townships. The Company has not been able to obtain property ownership certificates over these buildings and salt pans as the Company could not obtain land use rights certificates on the underlying parcels of land. The Company could not obtain property ownership certificates covering certain properties of aggregate carrying value of $30,316,834 and $33,108,012 as at June 30, 2012 and December 31, 2011, respectively.

  

During the three-month period ended June 30, 2012, depreciation and amortization expense totaled $5,521,178, of which $5,403,370 and $117,808 were recorded as cost of net revenue and administrative expenses, respectively. During the three-month period ended June 30, 2011, depreciation and amortization expense totaled $4,027,143, of which $3,830,437 and $196,707 were recorded as cost of net revenue and administrative expenses respectively. During the six-month period ended June 30, 2012, depreciation and amortization expense totaled $11,118,099, of which $10,645,703 and $472,396 were recorded as cost of sales and administrative expenses respectively. During the six-month period ended June 30, 2011, depreciation and amortization expense totaled $7,375,662, of which $6,805,179 and $570,483 were recorded as cost of net revenue and administrative expenses respectively.

 

Construction in progress as at June 30, 2012 represented the second phase enhancement projects to the Company’s existing bromine extraction and crude salt production facilities, which are currently under construction since mid-May 2012. The total construction costs of the enhancement work to the extraction wells and protective shells to transmission channels and ducts in Factory No. 1 to 9 are approximately $12,806,910 and $8,139,503, respectively, which are expected to be completed by late August 2012. The above enhancement projects are estimated to have useful lives of 5 to 8 years and will be capitalized as buildings and plant and machinery upon completion.

 

Certain eroded protective shells for transmission channels and ducts, with net book values of $911,995, were replaced during the second phase enhancement project, write-offs of the same amounts, were made in this quarter and included in write-off/impairment on property, plant and equipment.

 

For the three-month periods ended June30, 2012 and 2011, ordinary repair and maintenance expenses were $0 and $38,457, respectively. For the six-month periods ended June 30, 2012 and 2011, ordinary repair and maintenance expenses were $127 and $89,090, respectively.