Kingold Jewelry : Reports 2017 First Quarter Financial Results

Kingold Jewelry Reports 2017 First Quarter Financial Results Company to Hold Conference Call with Accompanying Slide Presentation at 5:30 p.m. ET on May 11, 2017 WUHAN CITY, China, May 10, 2017 - 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 its unaudited financial results for the first quarter ended March 31, 2017. 2017 First Quarter Financial Highlights (all results compared to prior year period)

• Net sales were $292.3 million, an increase of 4% from $282.2 million

• Processed a total of 16.0 metric tons of 24-karat gold products, increased 8.1% from 14.8 metric tons

• Net loss was $21.3 million, or $(0.32) per diluted share, compared to net income of $15.2 million, or $0.23 per diluted share

  Outlook for 2017

• Company reiterates guidance of between 70 metric tons and 80 metric tons of 24-karat gold products in 2017

Management Commentary

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, "We were pleased to deliver strong operating results in the firs t quarter of 2017, and continue to increase our production capacity and total gold processed volume. During the quarter, we have witnessed strong growing demand for 24-karat gold products to encourage us to further expand our production. Under this competitive environment our management team continues to focus on establishing new sales channels while seeking sufficient free cash flow to support production volume to remain competitive. However, we have seen challenges from the higher interest rate resulted by our expansion in the gold investment business during the quarter, therefore we should be further observant in balancing the relationship of the market demand and trend with capital needs."

2017 FIRST QUARTER OPERATIONAL REVIEW

Metric Tons of Gold Sales
Three Months Ended:
March 31, 2017		March 31, 2016
Volume	% of Total	Volume	% of Total
Branded*	8.1	50.3%	8.2	55.1%
Customized**	7.9	49.7%	6.6	44.9%
Total	16.0	100.0%	14.8	100%

*	Branded Production:	The Company acquires gold from the Shanghai Gold Exchange to produce branded products.
**	Customized Production:	Clients who purchase customized products supply gold to the Company for processing.

For the three months ended March 31, 2017, the Company sold a total of 16 metric tons of gold, of which branded production was

8.1 metric tons, representing 50.3% of total gold sold, and customized production was 7.9 metric tons, representing 49.7% of total gold sold in the first quarter of 2017. In the first quarter of 2016, the Company sold a total of 14.8 metric tons, of which branded production was 8.2 metric tons, or 55.1% of the total gold sold, and customized production was 6.6 metric tons, or 44.9% of total gold sold.

Kingold Jewelry, Inc. May 10, 2017 2016 FINANCIAL REVIEW Net Sales Net sales for the three months ended March 31, 2017 was $292.3 million, representing an increase of $10.1 million, or 4%, from $282.2 million for the same period in 2016. The increase in net sales was primarily driven by the increase in the average selling price for our branded production from RMB 222.24 per gram in the three months ended March 31, 2016 to RMB 245.70 per gram in three months ended March 31, 2017. Gross Profit Gross profit for the three months ended March 31, 2017 was $17.1 million, compared to $28.5 million for the same period in 2016. Gross Margin The Company's gross margin was 6% for the three months ended March 31, 2017, compared to 10% in the prior year period. The decrease in gross margin was primarily due to the increased unit cost of our branded production sales. The unit cost of branded production sales was RMB 234.92 per gram for the three months ended March 31, 2017, increased by 16% compared to RMB 202.58 per gram for the same period in 2016. Net Income (Loss) Net loss for the three months ended March 31, 2017 was $21.3 million, or $(0.32) per diluted share based on 66.0 million weighted average diluted shares outstanding, compared to net income of $15.2 million in the prior year period, or $0.23 per diluted share based on 66.0 million weighted average diluted shares outstanding in the prior-year period. Balance Sheet Highlights (USD in Millions)
3/31/2017	12/31/2016	Percentage Change
Cash and Cash Equivalents	$9.4	$21.3	(55.8) %
Inventories	$88.8	$119.4	(25.6) %
Working Capital (Current Assets -- Current Liabilities)	$696.3	$460.0	51.4 %
Stockholders' Equity	$360.7	$282.5	27.7 %
Net cash used in operating activities was $54.7 million for the three months ended March 31, 2017, compared with net cash used in operating activities of $148 million for the same period in 2016. The increase of net cash used in operating was mainly due to the increase in value added tax receivable of $64.4 million, decrease in other payable and accrued expense of $2.1 million, offset by our decrease in inventories of $31.6 million for the increased production to meet the sales demand. Kingold's net cash from operating activities can fluctuate significantly due to changes in inventories (principally gold). Other factors that may vary significantly include the Company's purchases of gold and income taxes. The Company expects that the net cash it generates from operating activities will continue to fluctuate as the Company's inventories, receivables, accounts payables, and other factors described above change with increased production and purchase of larger quantities of raw materials (principally gold). OUTLOOK FOR 2017 Based on its existing resources and capacity along with strong demand for 24-karat gold products in China, the Company reiterates its expectation that gold processed will be between 70 metric tons and 80 metric tons during 2017. Conference Call Details Kingold also announced that it will discuss these financial results in a conference call on May 11, 2017, at 5:30 p.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/q1-2017. 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), centrally located in Wuhan City, one of China's largest cities, 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, as amended, and the Securities Exchange Act of 1934, as amended. You can identify these forward -looking statements by words such as "expects," "believe," "project," "anticipate," or similar expressions. The forward-looking statements in this release include statements regarding Kingold's outlook with respect to its 2017 outlook for gold processing, its expectations with respect to completion of construction of the Jewelry Park and planned grand opening, as well as its ability to engage in presales and finance the remaining construction. Readers are cautioned that actual results could differ materially from those expressed in any forward- looking statements. Forward-looking statements are subject to a number of risks, including those 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: [phone] (US) / [phone] (China)

[e-mail]

INVESTOR RELATIONS

The Equity Group Inc. Katherine Yao, Senior Associate Phone: [phone]

[e-mail]

KINGOLD JEWELRY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (IN US DOLLARS) (UNAUDITED)

For the three months ended

March 31,

2017	2016 (Restated)
NET SALES	$ 292,264,077	$ 282,188,057
COST OF SALES Cost of sales	(274,909,008)	(253,412,444)
Depreciation	(294,443)	(290,682)
Total cost of sales	(275,203,451)	(253,703,126)
GROSS PROFIT	17,060,626	28,484,931
OPERATING EXPENSES Selling, general and administrative expenses	3,697,383	2,838,593
Stock compensation expenses	11,143	11,143
Depreciation	105,839	23,513
Amortization, other	2,743	2,890
Total operating expenses	3,817,108	2,876,139
INCOME FROM OPERATIONS	$ 13,243,518	$ 25,608,792
OTHER INCOME (EXPENSES) Other income	65,365	-
Interest Income	686,845	59,224
Interest expense, including amortization of debt issuance costs of $3,287,709 and $430,772	(37,589,496)	(5,404,125)
Total other expenses, net	(36,837,286)	(5,344,901)
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES	(23,593,768)	20,263,891
INCOME TAX PROVISION (BENEFIT) Current	-	4,811,004
Deferred	(2,287,949)	255,674
Total income tax provision (benefit)	(2,287,949)	5,066,678
NET INCOME (LOSS)	(21,305,819)	15,197,213
Less: net loss attributable to the non-controlling interest	-	(1,197)
NET INCOME (LOSS) ATTRIBUTABLE TO KINGOLD JEWELRY, INC.	$ (21,305,819)	$ 15,198,410
OTHER COMPREHENSIVE INCOME Change in unrealized gain related to investments in gold	$ 102,907,389	$ 17,564,866
Total foreign currency translation gain (loss)	(3,427,417)	1,962,694
Less: foreign currency translation loss attributable to non-controlling interest	-	(454)
Total other comprehensive income attributable to KINGOLD JEWELRY, INC.	$ 99,479,972	$ 19,528,014
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
KINGOLD JEWELRY, INC.	$ 78,174,153	$ 34,726,424
Non-controlling interest	-	(1,651)
78,174,153	$ 34,724,773
Earnings (Losses) per share Basic and diluted	$ (0.32)	$ 0.23

Weighted average number of shares

Basic and diluted 66,018,867 65,963,502