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4. PROPERTY, PLANT AND EQUIPMENT, NET
 12 Months Ended
Dec. 31, 2014
Property, Plant and Equipment [Abstract]  
4. PROPERTY, PLANT AND EQUIPMENT, NET

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

 

    As of December 31,  
    2014     2013  
At cost:            
Mineral rights   $ 6,506,668     $ 6,530,158  
Buildings     53,231,127       53,343,419  
Plant and machinery     177,485,689       172,842,611  
Motor vehicles     9,389       9,423  
Furniture, fixtures and office equipment     4,884,991       4,902,627  
Total     242,117,864       237,628,238  
Less: accumulated depreciation and amortization     (117,767,083 )     (91,227,802 )
Net book value   $ 124,350,781     $ 146,400,436  

 

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 $37,219,221 and $39,565,302 as at December 31, 2014 and 2013, respectively.

 

During the year ended December 31, 2014, depreciation and amortization expense totaled $27,287,976 of which $25,811,070 and $1,476,906 were recorded as cost of net revenue and administrative expenses, respectively.

 

During the year ended December 31, 2013, depreciation and amortization expense totaled $27,109,455 of which $25,311,885 and $1,797,570 were recorded as cost of net revenue and administrative expenses, respectively.

 

In late September 2013, the Transportation Bureau of Dongying City and other local government agencies requested to requisition the land where the original Factory No. 3 of SCHC was located for railway construction.

 

The operations of the original Factory No. 3 were stopped in September 2013 to allow for the demolition and relocation of the factory. During the relocation, net book value of plant and machinery of $ 307,182 was written off and demolition costs of $1,059,965 were incurred. A new factory was constructed for the amount of $3,186,609 on the same piece of land near to the where the original factory was located. The relocation and the construction of the new factory were completed in December 2013 and the new Factory No. 3 started operations in the same month.

 

Upon completion of demolition and clearance of all ground fixtures in October 2013, a sum of $3,868,483 was received in the same month from the Transportation Bureau of Dongying City and other local government agencies as compensation for the demolition of original Factory No. 3. The write-off and demolition costs were offset against the compensation proceeds resulting in a net gain on location of factory of $2,501,336. This is included in the income statement for the year ended December 31, 2013 as gain on relocation of factory. This is accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-40 “Revenue Recognition – Gains and Losses”.

 

In the third quarter of 2014, the Company incurred enhancement works in Factories No. 10 and 11 at costs of approximately $6,424,406 to the protective shells to transmission channels and ducts. The above enhancement projects have estimated useful lives of 5 to 8 years and are capitalized as buildings and plant and machinery.

 

For the years ended December 31, 2014 and 2013, ordinary repair and maintenance expenses were $1,050,204 and $1,566, respectively.