Kingold Jewelry Reports 2012 Fourth Quarter and Year-End Financial Results

  Kingold Jewelry Reports 2012 Fourth Quarter and Year-End Financial Results

Company to Hold Conference Call with Accompanying Slide Presentation on March
28, 2013, at 8:30 a.m. ET

PR Newswire

WUHAN CITY, China, March 27, 2013

WUHAN CITY, China, March 27, 2013 /PRNewswire/-- Kingold Jewelry, Inc.
("Kingold" or "the Company") (NASDAQ: KGJI), one of China's leading
manufacturers and designers of high quality 24-karat gold jewelry, ornaments
and investment-oriented products,  today announced financial results for its
fourth quarter and year ended December 31, 2012.

2012 Financial and Operating Highlights (comparisons are to 2011):

  oNet sales increase 16.1% to $915.7 million
  oProcessed a total of 37.8 metric tons of 24-karat gold products, an
    increase of 26.0% compared to the 30.0 metric tons [one metric ton =
    35,274 ounces]
  oNet income attributable to common shareholders increased 24.7% to $32.7
    million, or $0.60 per diluted share
  oBook value per diluted share of $2.97 at December 31, 2012, compared to
    $2.51

Fourth Quarter 2012 Highlights (comparisons are to Fourth Quarter 2011):

  oNet sales increased 19.5% to $201.4 million
  oProcessed a total of 7.6 metric tons of 24-karat gold products, an
    increase of 33.3% compared to 5.7 metric tons
  oNet income attributable to common shareholders increased 133.3% to $7.4
    million, or $0.14 per diluted share

Subsequent Operating Highlights

  oEntered into Subscription Agreement for the sale of 7,000,000 shares of
    its common stock at a price of $1.80 per share, along with warrants to
    acquire up to an aggregate 2,800,000 additional shares of common stock at
    a price of $1.80 per share, for gross proceeds of $12.6 million
  oGained access to new sources of gold under agreements with China
    Construction Bank and Shanghai Pudong Development Bank Ltd., which are
    expected to help accelerate growth and achieve a greater balance in free
    cash flow

Outlook for 2013

  oAs a result of the recent increase in gold inventory and continued strong
    demand for the Company's jewelry and investment gold products, Kingold
    expects to process between 50 - 60 metric tons of 24-karat gold products
    in 2013

Mr. Zhihong Jia, Chairman and CEO of Kingold, stated, "The last several months
have been a strong period in our Company's history, as we finished 2012 by
reporting solid financial results and strengthened our financial position
considerably through the closing of our recent financing and securing new
sources of gold. Kingold beat its previously announced volume guidance by over
7% and achieved year-over-year growth in volume, net sales, gross profit
margin, and net income. We believe that gold design and processing companies
like Kingold, with our developed distribution network, attractive designs and
reliable product quality, are well-positioned to expand our brand and capture
an increasing share of China's growing gold jewelry and investment market."

Operational Review

For 2012, Kingold processed a total of 37.8 metric tons of 24-karat gold
products, a 26.0% increase over the 30 metric tons processed in 2011. In the
fourth quarter of 2012, Kingold processed approximately 7.6 metric tons of
24-karat gold products, an increase of 33.3% over the 5.7 metric tons sold in
the fourth quarter of 2011. During the quarter and year, the Company continued
to see strong demand from major clients in jewelry products and increased
sales of investment gold products from its partner commercial banks' retail
branches in provinces throughout China.

Jewelry Business

Kingold offers a wide range of in-house designed jewelry products (launches
approximately 10,000 each year) including, but not limited to, gold necklaces,
rings, earrings, bracelets, and pendants. Kingold sells its jewelry products
directly to distributors, retailers and other wholesalers, who then sell these
products to consumers through retail counters located in both department
stores and other traditional stand-alone jewelry stores. In 2012, the Company
secured and deepened its sales relationship with leading wholesalers and
retailers in China, including Shenzhen Tongxing Jewelry as well as Shanghai
Lao Feng Xiang.

In 2012, the Company also expanded its business into new geographic regions in
China. The Company's jewelry products are now being sold in 25 provinces and
municipalities in China compared to 17 provinces at the end of 2011.

Investment Gold Business

Kingold's investment gold products primarily include gold bars and coins and
other customized products specifically designed for use by commercial banks.
Kingold distributes its investment gold products in partnered commercial
banks' local retail branches across China. Pricing of products is made at the
time of sale based upon the then-current price of gold, and Kingold then
reports sales upon delivery.

By the end of 2012, Kingold signed agreements with four major Chinese banks:
the Bank of Communications, China Merchant Bank, China CITIC Bank and Wuhan
Rural Commercial Bank, and expects to seek additional partnerships throughout
the coming year. In 2012, the Company worked diligently to widen the
geographic reach of its investment gold business, and products produced by
Kingold are now currently available in 366 retail bank branches across eight
provinces in China.

Market Overview

The average international gold price per ounce remained relatively flat
between 2011 and 2012. On an average basis, the price for gold was RMB338.5
per gram in 2012 and RMB 326.3 per gram in 2011, according to the World Gold
Council. Kingold purchases gold directly from the Shanghai Gold Exchange, of
which it has been a member since 2003. The membership grants the Company the
privilege of purchasing gold directly from the Shanghai Gold Exchange.

Total consumer demand in China recently reached a record of 776.1 metric tons
sold and processed in 2012, with jewelry accounting for 510.6 metric tons and
investment gold 265.5 metric tons (World Gold Council). The Company is
continuing to see consumers allocate greater sums of their available spendable
income to gold investment and jewelry purchases. Kingold believes this is
largely due to the continued urbanization of China's population, the dominance
of 24-karat gold and its role as a savings proxy, and increasing availability
of gold investment products to a populace with a growing awareness of gold's
investment properties – particularly its role as an inflation hedge.

2012 Fourth Quarter Financial Review

  oThe Company reported net sales for the 2012 fourth quarter of $201.4
    million, compared to $168.4 million in the fourth quarter of 2011.
  oGross profit for the period was $11.7 million, compared to $6.8 million in
    the prior-year period. Gross margin increased to 5.8% for the three months
    ended December 31, 2012, up from 4.1% for the prior-year period.The
    Company's gross margin is defined by the mark-up it charges reflecting
    design and processing fees, determined by the complexity of design.
  oThe Company reported net income attributable to Kingold shareholders for
    the fourth quarter of 2012 of $7.4 million, or $0.14 per diluted share
    based on 54.7 million weighted average diluted shares outstanding,
    compared to net income of $3.2 million, or $0.06 per diluted share based
    on 51.3 million diluted shares outstanding, in the prior-year period.

Full-year 2012 Financial Review

  oNet sales for the year ended December 31, 2012, increased to $915.7
    million, an increase of 16.1% from net sales of $789.0 million for the
    year ended December 31, 2011. Of the $126.7 million increase,
    approximately $66.5 million was attributable to increases in production,
    approximately $42.8 million was attributable to the increase in the price
    of gold, and the remainder was due to a foreign currency translation
    gain.The increase in net sales was primarily driven by the increased
    amount of products sold as well as growth in the Company's investment gold
    business.The Company's investment gold business accounted for
    approximately 5% of total revenue in 2012.
  oGross profit for the year ended December 31, 2012, increased to $50.9
    million, an increase of $8.7 million, or 21%, from $42.2 million for the
    same period in 2011. Gross margin for the year ended December 31, 2012,
    was 5.6%, compared to 5.4% for the same period in 2011. The increase in
    gross margin was primarily due to an increase in higher margin customized
    production and a slight increase in processing fees.
  oThe Company reported net income attributable to Kingold common
    shareholders for the year ended December 31, 2012, of $32.7 million, or
    $0.60 per diluted share based on 54.4 million weighted average diluted
    shares outstanding, compared to net income of $26.2 million, or $0.52 per
    diluted share based on 50.6 million diluted shares outstanding, in the
    prior year.

Balance Sheet and Cash Flow

(in millions except for percentages)   12/31/2012 12/31/2011 % Change
Cash                                 $ 2.5        8.8        (71.6%)
Inventories (gold)                     150.0      108.1      38.8%
Working Capital                        149.2      113.4      31.6%
Stockholders' Equity                   161.5      127.0      27.2%

Kingold's net cash from operating activities can fluctuate significantly due
to changes in inventories (principally gold). Other factors that may vary
significantly include our accounts payable, purchases of gold and income
taxes. The Company expects the net cash that it generates from operating
activities to continue to fluctuate as its inventories, receivables, accounts
payables and the other factors described above change with increased
production and the purchase of larger quantities of raw materials (gold).

Outlook for 2013

Based on the Company's existing resources and capacity (which includes the
Company's recent proceeds from its previously announced financing and gold
lease agreements), Kingold believes gold processed will be between 50 metric
tons and 60 metric tons during 2013.This guidance is based solely on current
projected, organic growth, and would represent a 32.3% to 58.7% increase from
the 37.8 metric tons processed in 2012.

Mr. Jia concluded, "We believe that Kingold is well-positioned and capitalized
to safely expand on our strong market position in China's gold market.Our
recent financing activities have provided Kingold with a strong capital base
from which to rapidly expand production.With 100% percent of our resources
focused on organic growth in our core jewelry and investment gold segments, we
are focused on returning shareholder value by re-investing in our business and
taking advantage of continued strong demand for gold products in China."

Conference Call

Kingold also announced that it will also discuss these results in a conference
call tomorrow morning (March 28, 2013) at 8:30 a.m. ET.The dial-in numbers
are:

Live Participant Dial In (Toll Free):     877-407-9038
Live Participant Dial In (International): 201-493-6742

The conference call will also be webcast live.To listen to the call, please
go to the Investor Relations section of Kingold's website at
www.kingoldjewelry.com, or click on the following link:
http://kingoldjewelry.equisolvewebcast.com. The Company will also have an
accompanying slide presentation available in PDF format on its homepage prior
to the conference call.

About Kingold Jewelry, Inc.:

Kingold Jewelry, Inc. (NASDAQ: KGJI - News), centrally located in Wuhan City,
China's fourth largest city, was founded in 2002 and today is one of China's
leading designers and manufacturers of 24-karat gold jewelry, ornaments and
investment-oriented products.The Company sells both directly to retailers as
well as through major distributors across China. Kingold has received numerous
industry awards and has been a member of the Shanghai Gold Exchange since
2003. For more information, please visit www.kingoldjewelry.com.

Business Risks and Forward-Looking Statements

This press release contains forward-looking statements that are subject to the
safe harbors created under the Securities Act of 1933 and the Securities
Exchange Act of 1934.These include statements regarding Kingold's ability to
accelerate growth and achieve greater balance in its free cash flow, the
amount of gold to be processed in 2013, [Kingold's gross margins for 2013,]
Kingold's ability to expand its brand and capture market share, the entry into
additional partnerships for the investment gold business, consumer demand in
China for gold, and fluctuations in net cash from operating activities.
Readers are cautioned that actual results could differ materially from those
expressed in any forward-looking statements. In addition, please refer to the
risk factors contained in Kingold's SEC filings available at www.sec.gov,
including Kingold's most recent Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q. Readers are cautioned not to place undue reliance on any
forward-looking statements, which speak only as of the date on which they are
made. Kingold undertakes no obligation to update or revise any forward-looking
statements for any reason.

Company Contact:

Kingold Jewelry, Inc.
Bin Liu, CFO
Phone: +1-847-660-3498 (US) / +86-27-6569-4977 (China)
Email: bl@kingoldjewelry.com

INVESTOR RELATIONS

The Equity Group Inc.
Adam Prior, Senior Vice President
(212) 836-9606
aprior@equityny.com

Katherine Yao, Associate
+86 10-6587-6435
kyao@equityny.com



KINGOLD JEWELRY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN US DOLLARS)
                     For the three months ended       For the years ended December
                     December 31,                     31,
                     2012            2011             2012            2011
NET SALES          $ 201,442,617   $ 168,435,388    $ 915,732,800   $ 788,968,746
COST OF SALES
 Cost of sales       (189,370,237)   (161,251,439))   (863,563,502)   (745,497,529)
 Depreciation        (362,837)       (351,293)        (1,253,256)     (1,223,418)
    Total cost of    (189,733,074)   (161,602,732)    (864,816,758)   (746,720,947)
    sales
GROSS PROFIT         11,709,543      6,832,656        50,916,042      42,247,799
OPERATING
EXPENSES
 Selling, general
 and                 1,385,011       1,381,298        4,550,669       3,931,824
 administrative
 Stock               130,958         547,296          1,178,313       804,796
 compensation
 Depreciation        44,395          39,299           148,979         137,724
 Amortization        3,020           2,919            11,978          11,700
    Total
    Operating        1,563,384       1,970,912        5,889,939       4,886,044
    Expenses
INCOME FROM          10,146,159      4,861,744        45,026,103      37,361,755
OPERATIONS
OTHER INCOME
(EXPENSES)
 Other income        -               29,415           -               47,649
 Interest income     -               22,846           -               22,846
 Other expenses      (15,848)        (5,758)          (17,407)        -
 Interest expense    (108,785)       (321,027)        (444,997)       (441,838)
    Total Other      (124,633)       (274,524)        (462,404)       (371,343)
    Expenses, net
INCOME FROM
OPERATIONS BEFORE    10,021,526      4,587,220        44,563,699      36,990,412
TAXES
PROVISION FOR        (2,612,737)     (1,411,009)      (11,893,370)    (9,758,782)
INCOME TAXES
NET INCOME         $ 7,408,789     $ 3,176,211        32,670,329    $ 27,231,630
 Less: net income
 attribute to the                    -                -               (1,039,754)
 noncontrolling
 interest
NET INCOME
ATTRIBUTABLE TO    $ 7,408,789     $ 3,176,211        32,670,329    $ 26,191,876
COMMON
STOCKHOLDERS
OTHER
COMPREHENSIVE
INCOME (LOSS)
 Total foreign
 currency            (815,549)       1,623,658        (62,772)        4,957,237
 translation gains
 (loss)
 Less: foreign
 currency
 translation gains
    attributable
    to               -               -                -               (49,612)
    noncontrolling
    interest
 Foreign currency
 translation gains
 (loss)
    attributable
    to common        (815,549)       1,623,658        (62,772)        4,907,625
    stockholders
COMPREHENSIVE      $ 6,593,240     $ 4,799,869        32,607,557    $ 31,099,501
INCOME
Earnings per
share
 Basic             $ 0.14          $ 0.06             0.61          $ 0.53
 Diluted           $ 0.14          $ 0.06             0.60          $ 0.52


Weighted average
number of shares
 Basic               54,493,965      50,279,886       53,590,528      49,616,147
 Diluted             54,669,131      51,264,247       54,359,564      50,600,508

KINGOLD JEWELRY, INC.
CONSOLIDATED BALANCE SHEETS
(IN US DOLLARS)
                                                  December 31,   December 31,
                                                  2012           2011
ASSETS
CURRENT ASSETS
 Cash                                           $ 2,544,114    $ 8,810,173
 Accounts receivable                              692,762        896,949
 Inventories                                      150,041,421    108,088,420
 Other current assets and prepaid expenses        133,539        72,333
 Value added tax recoverable                      7,031,374      4,750,847
       Total Current Assets                       160,443,210    122,618,722
PROPERTY AND EQUIPMENT, NET                       11,683,987     12,942,902
OTHER ASSETS
 Other assets                                     153,029        153,102
 Intangible assets, net                           503,313        515,543
       Total other assets                         656,342        668,645
TOTAL ASSETS                                    $ 172,783,539  $ 136,230,269
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
 Short term loans                               $ 6,340,551    $ 6,343,578
 Other payables and accrued expenses              1,445,513      870,454
 Related party loan                               209,890        -
 Income tax payable                               2,587,680      1,451,929
 Other taxes payable                              659,989        562,027
       Total Current Liabilities                  11,243,624     9,227,988
COMMITMENTS AND CONTINGENCIES                     -              -
EQUITY
 Preferred stock, $0.001 par value, 500,000
 shares
       authorized, none issued or outstanding
       as of December 31, 2012 and December 31,   -              -
       2011
 Common stock $0.001 par value, 100,000,000
 shares
       authorized, 54,521,140 and 53,107,343 shares
       issued and outstanding as of December 31, 2012
       and December 31, 2011                      54,521         53,108
 Additional paid-in capital                       57,656,674     55,728,009
 Retained earnings
  Unappropriated                                 92,606,479     59,936,120
  Appropriated                                   967,543        967,543
 Accumulated other comprehensive income           10,254,729     10,317,501
       Total Equity                               161,539,916    127,002,281
TOTAL LIABILITIES AND EQUITY                    $ 172,783,539  $ 136,230,269



KINGOLD JEWELRY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN US DOLLARS)
                                              For the years ended December 31,
                                              2012               2011
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                                 $ 32,670,329    $    27,231,630
 Adjusted to reconcile net income to cash
 used in
         operating activities:
         Depreciation                         1,402,235          1,361,142
         Amortization of intangible           11,978             11,700
         assets
         Share based compensation             1,178,313          804,796
 Changes in operating assets and
 liabilities
 (Increase) decrease in:
         Accounts receivable                  203,662            315,857
         Inventories                          (41,984,607)       (48,845,404)
         Other current assets and prepaid     (48,588)           (10,731)
         expenses
         Value added tax recoverable          (2,281,708)        (698,584)
 Increase (decrease) in:
         Other payables and accrued           562,823            (852,514)
         expenses
         Income tax payable                   1,135,904          (815,831)
         Other taxes payable                  98,184             (8,636)
         Net cash used in operating           (7,051,475)        (21,506,575)
         activities
CASH FLOWS FROM INVESTING ACTIVITIES
 Purchase of property and equipment           (150,091)          (368,791)
         Net cash used in investing           (150,091)          (368,791)
         activities
CASH FLOWS FROM FINANCING ACTIVITIES
 Net Proceeds from Stock repurchase           751,765            -
 agreement
 Deferred offering costs                      -                  666,364
 Proceeds from bank loans                     6,337,537          21,557,736
 Repayments of bank loans                     (6,337,537)        (21,557,736)
 Proceeds from related party loan             209,510            3,655,604
 Repayments of related party loan             -                  (3,655,604)
 Net proceeds from stock issuance in          -                  20,144,255
 public offering
 Net proceeds from exercise of warrants       -                  49,800
         Net cash provided by financing       961,275            20,860,419
         activities
EFFECT OF EXCHANGE RATES ON CASH & CASH       (25,768)           673,584
EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS     (6,266,059)        (341,363)
CASH AND CASH EQUIVALENTS, BEGINNING OF       8,810,173          9,151,536
YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR      $ 2,544,114     $    8,810,173
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
 Cash paid for interest expense             $ 470,455       $    441,838
 Cash paid for income tax                   $ 10,757,465    $    10,574,613

SOURCE Kingold Jewelry, Inc.

Website: http://www.kingoldjewelry.com
Website: http://kingoldjewelry.equisolvewebcast.com
 
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