ANNUAL REPORT
2016
Incorporated in British Columbia,Canada with limited liability
HK Stock Exchange Stock Code：2099
Toronto Stock Exchange Stock Code：CGG
ANNUAL REPORT 2016
MESSAGE FROM THE CHAIRMAN
Xin Song
Chairman of the Board, Executive Director
SUCCESSES, CHALLENGES AND OPPORTUNITIES.
Dear Shareholders and Friends of the Company
Even though 2016 was another challenging year in the mining industry, China Gold made significant progress during the year.
The Company’s consolidated gold production was 211,302 ounces and copper production was 40.4 million pounds. Company
operations continue to expand and efforts from the entire team have proven to be remarkable. This progress would not be possible
without our incredible team of dedicated executives, employees and directors, and I wish to extend my heartfelt appreciation to
them.
However, the Company continues to direct our attention and focus to the operational and financial challenges it faces, which we
believe better equips the Company for future success and to maximize shareholder value.
China Gold International is also strengthening our work in health safety and environmental protection. Both of the Company’s
mines have been improving their management system in these three areas, enhancing the intrinsic safety, and strengthening the
management of construction units.
The Company is also planning to speed up the resource development, external mergers and acquisitions and seize opportunities
with quality projects to achieve its goal of developing into a premier international mining company.
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ANNUAL REPORT
2016
Incorporated in British Columbia,Canada with limited liability
HK Stock Exchange Stock Code：2099
Toronto Stock Exchange Stock Code：CGG
ANNUAL REPORT 2016
MESSAGE FROM THE CHAIRMAN
Xin Song
Chairman of the Board, Executive Director
SUCCESSES, CHALLENGES AND OPPORTUNITIES.
Dear Shareholders and Friends of the Company
Even though 2016 was another challenging year in the mining industry, China Gold made significant progress during the year.
The Company’s consolidated gold production was 211,302 ounces and copper production was 40.4 million pounds. Company
operations continue to expand and efforts from the entire team have proven to be remarkable. This progress would not be possible
without our incredible team of dedicated executives, employees and directors, and I wish to extend my heartfelt appreciation to
them.
However, the Company continues to direct our attention and focus to the operational and financial challenges it faces, which we
believe better equips the Company for future success and to maximize shareholder value.
China Gold International is also strengthening our work in health safety and environmental protection. Both of the Company’s
mines have been improving their management system in these three areas, enhancing the intrinsic safety, and strengthening the
management of construction units.
The Company is also planning to speed up the resource development, external mergers and acquisitions and seize opportunities
with quality projects to achieve its goal of developing into a premier international mining company.
1
MESSAGE FROM THE CHAIRMAN
In 2017, The Company will face a new challenge – the global economy is in a period of significant volatility and uncertainty.
China Gold will face these issues directly and focus on the work to ensure the Company’s success.
Sincerely,
Xin Song
Chairman of the Board, Executive Director
ANNUAL REPORT 2016
MESSAGE FROM THE CEO
Bing Liu
Message from the CEO
Dear Shareholders and Friends of the Company,
In 2016, China Gold International made full use of the great support the Company’s controlling shareholder, to strengthen the pro-
duction and operation control, promote the construction of key projects, and enhance the management level; further analyze the
dynamics of overseas market, seize resource development opportunities, push the improvement of the Company's development
quality, and continuously create new value for shareholders, employees, and the communities in which we operate. The Company
also actively participates in and supports social welfare and charity causes, sponsoring a highly successful annual event with the
Canadian Cancer Society.
Over the last year, China Gold International has grown continuously and steadily. The Company’s 100% owned subsidiary, Tibet
Huatailong has overcome challenges in expanding our Jiama Mine. Series I of the Jiama Phase II construction was completed
and commissioned smoothly and a significant leap in production development was realized. Our other operating subsidiary, Inner
Mongolia Pacific, which operates the CSH Mine, completed a new leaching plant project ahead of schedule, making a positive
contribution to the CSH Mine’s production in 2016. The Company was awarded first place in the Awards of Science and Technology
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MESSAGE FROM THE CHAIRMAN
In 2017, The Company will face a new challenge – the global economy is in a period of significant volatility and uncertainty.
China Gold will face these issues directly and focus on the work to ensure the Company’s success.
Sincerely,
Xin Song
Chairman of the Board, Executive Director
ANNUAL REPORT 2016
MESSAGE FROM THE CEO
Bing Liu
Message from the CEO
Dear Shareholders and Friends of the Company,
In 2016, China Gold International made full use of the great support the Company’s controlling shareholder, to strengthen the pro-
duction and operation control, promote the construction of key projects, and enhance the management level; further analyze the
dynamics of overseas market, seize resource development opportunities, push the improvement of the Company's development
quality, and continuously create new value for shareholders, employees, and the communities in which we operate. The Company
also actively participates in and supports social welfare and charity causes, sponsoring a highly successful annual event with the
Canadian Cancer Society.
Over the last year, China Gold International has grown continuously and steadily. The Company’s 100% owned subsidiary, Tibet
Huatailong has overcome challenges in expanding our Jiama Mine. Series I of the Jiama Phase II construction was completed
and commissioned smoothly and a significant leap in production development was realized. Our other operating subsidiary, Inner
Mongolia Pacific, which operates the CSH Mine, completed a new leaching plant project ahead of schedule, making a positive
contribution to the CSH Mine’s production in 2016. The Company was awarded first place in the Awards of Science and Technology
2
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MESSAGE FROM THE CEO
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
of Land Resources, and its 2015 social responsibility report obtained the leading 4.5 star evaluation from Chinese Academy of Social
Sciences.
In 2016， both of the Company’s mines carried out geological work required to improve their operations. At the Jiama Mine, infill
exploration in the South Pit and peripheral geophysical prospecting have provided the basis for selecting the new target areas.
The CSH Mine has implemented deep prospecting and exploration programs to expand the ore body and the Company is working
towards new breakthroughs in deep and peripheral prospecting.
The Company is also working to lower costs and improve efficiency at both its mines by taking practical and effective measures to
optimize mine plans, manage power costs and promote greater scientific innovation in its operations. The Company has also been
successful in reducing general and administrative, foreign exchange exposure and net interest expenses.
These remarkable results could not have been made possible without the strong support of all directors, leaders, departments and
employees of the Company. Extra recognition should go to our workers on the front lines, who work tenaciously on the Tibetan Pla-
teau in the extreme environment with high cold and oxygen deficit; those who struggle hard on the Inner Mongolia grassland with
the Central South Institute of Mining and Metallurgy.
Bing Liu
CHIEF EXECUTIVE OFFICER, EXECUTIVE DIRECTOR
vast sand. These individuals have created brilliant achievements for the Company with their devotion, dedication, and sincerity.
Mr. Liu, age 54, was elected as Chief Executive Officer and an Executive Director on February 24, 2014 and joined the Company
Sincerely,
Bing Liu
Chief Executive Officer, Executive Director
ANNUAL REPORT 2016
BOARD OF DIRECTORS
Xin Song
CHAIRMAN OF THE BOARD, EXECUTIVE DIRECTOR
Mr. Song, age 54, was elected as Chairman of the Board on February 24, 2014 having joined the Company on October 9, 2009.
From October 9, 2009 to February 24, 2014, Mr. Song served as the Chief Executive Officer and an Executive Director and was
responsible for the Company’s strategic planning and business operations. Mr. Song has served as the President of China National
Gold, the Company’s principal shareholder and the largest gold producer in China, since December 2013. From 2003 to December
2013, Mr. Song served as Vice President of China National Gold, where he was responsible for resources development, geological
exploration and international operations. Mr. Song served as Chairman of the Board of Skyland Mining Limited (“Skyland”) from April
2008 to May 2015 and served as the Chairman of the Board of Tibet Jia Ertong Mining Development Co., Ltd. (“Tibet Jia Ertong”)
from April 2008 to February 2014, which are shareholders of Tibet Huatailong Mining Development Co., Ltd. (“Tibet Huatailong”) that
hold the Company’s Jiama Mine. Mr. Song served as the Chairman of the board of Tibet Huatailong from October 2007 to June
2010. Mr. Song has served as Chairman of the board of Zhongjin Gold Corporation Limited (“Zhongjin Gold”), a public company
listed on the Shanghai Stock Exchange, since February 2014, for which he served as a director from March 2007 to February 2014
and Chairman of the Board from September 2003 to March 2007. Mr. Song has served as a Director of China National Gold Group
Hong Kong Limited (“China Gold Hong Kong”), since March 2008. Mr. Song has served as a director of China Gold Hong Kong
Holding Corp. Limited (“China Gold Hong Kong Holding”), since August 2011. He has served as a director of Mundoro Mining Inc.
(“Mundoro”), a private British Columbia based junior natural resource company, since October 2011.
Mr. Song holds a Ph.D. doctorate degree in resources economics and management from the University of Science and Technology
Beijing, a Master’s degree in business administration from the China Europe International Business School, a Master’s degree in mining
engineering from the University of Science and Technology Beijing and a Bachelor’s Degree in mineral processing engineering from
on May 12, 2008. From May 12, 2008 to February 24, 2014, Mr. Liu served as a non-Executive Director, and was responsible for the
supervision of finance related matters and the Company’s overall strategic planning. Mr. Liu has extensive experience in mine
financing, construction and development. Mr. Liu has served as Vice President of China National Gold, a director of China Gold
Hong Kong, a director of China Gold Hong Kong Holding and Mundoro, since November 1999, August 2011 and October 2011
respectively. Mr Liu has served as Chief Accountant of China National Gold since October 2006 to March 2016. He has served as
chairman of China Gold Finance from December 2014 to the present. Mr. Liu has served as the chairman of the board of Skyland
since May 2015, and has served as the chairman of the board of Tibet Jia Ertong since February 2014. Mr. Liu served as a director of
the board of Zhongjin Gold from September 2003 to May 2013, and served as a chairman of the supervisory committee of Zhongjin
Gold since May 2013 up to now. Mr Liu served as a chairman of China Gold Reserve from August 2011 to October 2016. Prior to
joining China National Gold, Mr. Liu served as Senior Secretary of the China National Economy and Trade Commission from April
1992 to October 1997 and from March 1998 to November 1999, and as Senior Secretary of the China Textile General Association
from October 1997 to March 1998. He also served as an Accountant of China Automobile Industry Corporation from July 1987 to
April 1992. Mr. Liu is a senior accountant, senior economist and associate researcher in China.
Mr. Liu holds a Master’s degree in business administration from the Department of Business Administration, Asia International Open
University in Macau, holds a Bachelor’s Degree in accounting from Capital University of Economics and Business and is a post-
graduate of currency and banking of Graduate School of China Academy of Social Sciences.
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MESSAGE FROM THE CEO
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
ANNUAL REPORT 2016
BOARD OF DIRECTORS
Xin Song
CHAIRMAN OF THE BOARD, EXECUTIVE DIRECTOR
Mr. Song, age 54, was elected as Chairman of the Board on February 24, 2014 having joined the Company on October 9, 2009.
From October 9, 2009 to February 24, 2014, Mr. Song served as the Chief Executive Officer and an Executive Director and was
responsible for the Company’s strategic planning and business operations. Mr. Song has served as the President of China National
Gold, the Company’s principal shareholder and the largest gold producer in China, since December 2013. From 2003 to December
2013, Mr. Song served as Vice President of China National Gold, where he was responsible for resources development, geological
exploration and international operations. Mr. Song served as Chairman of the Board of Skyland Mining Limited (“Skyland”) from April
2008 to May 2015 and served as the Chairman of the Board of Tibet Jia Ertong Mining Development Co., Ltd. (“Tibet Jia Ertong”)
from April 2008 to February 2014, which are shareholders of Tibet Huatailong Mining Development Co., Ltd. (“Tibet Huatailong”) that
hold the Company’s Jiama Mine. Mr. Song served as the Chairman of the board of Tibet Huatailong from October 2007 to June
2010. Mr. Song has served as Chairman of the board of Zhongjin Gold Corporation Limited (“Zhongjin Gold”), a public company
listed on the Shanghai Stock Exchange, since February 2014, for which he served as a director from March 2007 to February 2014
and Chairman of the Board from September 2003 to March 2007. Mr. Song has served as a Director of China National Gold Group
Hong Kong Limited (“China Gold Hong Kong”), since March 2008. Mr. Song has served as a director of China Gold Hong Kong
Holding Corp. Limited (“China Gold Hong Kong Holding”), since August 2011. He has served as a director of Mundoro Mining Inc.
(“Mundoro”), a private British Columbia based junior natural resource company, since October 2011.
Mr. Song holds a Ph.D. doctorate degree in resources economics and management from the University of Science and Technology
Beijing, a Master’s degree in business administration from the China Europe International Business School, a Master’s degree in mining
engineering from the University of Science and Technology Beijing and a Bachelor’s Degree in mineral processing engineering from
These remarkable results could not have been made possible without the strong support of all directors, leaders, departments and
the Central South Institute of Mining and Metallurgy.
Bing Liu
CHIEF EXECUTIVE OFFICER, EXECUTIVE DIRECTOR
Mr. Liu, age 54, was elected as Chief Executive Officer and an Executive Director on February 24, 2014 and joined the Company
on May 12, 2008. From May 12, 2008 to February 24, 2014, Mr. Liu served as a non-Executive Director, and was responsible for the
supervision of finance related matters and the Company’s overall strategic planning. Mr. Liu has extensive experience in mine
financing, construction and development. Mr. Liu has served as Vice President of China National Gold, a director of China Gold
Hong Kong, a director of China Gold Hong Kong Holding and Mundoro, since November 1999, August 2011 and October 2011
respectively. Mr Liu has served as Chief Accountant of China National Gold since October 2006 to March 2016. He has served as
chairman of China Gold Finance from December 2014 to the present. Mr. Liu has served as the chairman of the board of Skyland
since May 2015, and has served as the chairman of the board of Tibet Jia Ertong since February 2014. Mr. Liu served as a director of
the board of Zhongjin Gold from September 2003 to May 2013, and served as a chairman of the supervisory committee of Zhongjin
Gold since May 2013 up to now. Mr Liu served as a chairman of China Gold Reserve from August 2011 to October 2016. Prior to
joining China National Gold, Mr. Liu served as Senior Secretary of the China National Economy and Trade Commission from April
1992 to October 1997 and from March 1998 to November 1999, and as Senior Secretary of the China Textile General Association
from October 1997 to March 1998. He also served as an Accountant of China Automobile Industry Corporation from July 1987 to
April 1992. Mr. Liu is a senior accountant, senior economist and associate researcher in China.
Mr. Liu holds a Master’s degree in business administration from the Department of Business Administration, Asia International Open
University in Macau, holds a Bachelor’s Degree in accounting from Capital University of Economics and Business and is a post-
graduate of currency and banking of Graduate School of China Academy of Social Sciences.
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of Land Resources, and its 2015 social responsibility report obtained the leading 4.5 star evaluation from Chinese Academy of Social
Sciences.
In 2016， both of the Company’s mines carried out geological work required to improve their operations. At the Jiama Mine, infill
exploration in the South Pit and peripheral geophysical prospecting have provided the basis for selecting the new target areas.
The CSH Mine has implemented deep prospecting and exploration programs to expand the ore body and the Company is working
towards new breakthroughs in deep and peripheral prospecting.
The Company is also working to lower costs and improve efficiency at both its mines by taking practical and effective measures to
optimize mine plans, manage power costs and promote greater scientific innovation in its operations. The Company has also been
successful in reducing general and administrative, foreign exchange exposure and net interest expenses.
employees of the Company. Extra recognition should go to our workers on the front lines, who work tenaciously on the Tibetan Pla-
teau in the extreme environment with high cold and oxygen deficit; those who struggle hard on the Inner Mongolia grassland with
vast sand. These individuals have created brilliant achievements for the Company with their devotion, dedication, and sincerity.
Chief Executive Officer, Executive Director
Sincerely,
Bing Liu
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ANNUAL REPORT 2016
Xiangdong Jiang
VICE PRESIDENT OF PRODUCTION, EXECUTIVE DIRECTOR
Mr. Jiang, age 58, was elected as an Executive Director on June 17, 2010 and serves as the Company’s Vice President of Production,
since March 24, 2009. Mr. Jiang joined the Company in July 2002 as a manager in charge of projects in China and was responsible
for the supervision of all exploration projects including the establishment of the gold exploration and drilling program at the CSH
Gold Mine. Mr. Jiang served as Vice President of Business Development of the Company from May 20, 2004 to September 8, 2008
and was, during this time, primarily responsible for undertaking property review and evaluation and exploring business opportunities
for the Company. Mr. Jiang served as Vice President of Production and Technology from September 8, 2008 to March 23, 2009
and was promoted to Vice President of Production on March 24, 2009. Mr. Jiang has served as a director of Inner Mongolia Pacific
Mining Co. Ltd. (“Inner Mongolia Pacific”), since September 2008, which operates the Company’s CSH Gold Mine and as General
Manager of the CSH Gold Mine since August 2007.
Mr. Jiang has over 30 years of experience in the mining industry. Prior to joining the Company, Mr. Jiang worked on projects ranging
from grass roots to bankable feasibility studies for global mining companies including Cyprus Amax Minerals, Placer Dome, Barrick
Resources and First Quantum Minerals.
Mr. Jiang holds a Bachelor’s Degree in Geology and Mineral Exploration from Changchun College of Geology.
Ian He
INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. He, age 55, joined the Company on May 31, 2000 as a non-Executive Director and serves as an independent Director. Mr. He
has more than 30 years of experience in the mining industry. Mr. He has served as President and a director of Tri-River Ventures Inc.,
a public company listed on the TSX Venture Exchange since October 2006, as a director of several TSX Venture Exchange listed
companies, Huaxing Machinery Corp. since January 2011, and, as a director of Zhongrun Resources Investment Corporation, a
public company listed on the Shenzhen Stock Exchange, since December 2010, as a director of Vatukoula Gold Mines, a public
company listed on AIM of London Stock Exchange since February 2013. From August 1995 to June 2006, Mr. He served as President
Mr. He holds a Ph.D. degree and a M.A.Sc degree both in mineral process engineering from the University of British Columbia and
a Bachelor’s Degree in coal preparation from the Heilongjiang University of Technology (formerly Heilongjiang Institute of Mining
and Technology), China.
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Lianzhong Sun
NON-EXECUTIVE DIRECTOR
Mr. Sun, age 59, joined the Company on February 24, 2014 as a non-Executive Director and is responsible for the supervision of
operation related matters and the Company’s overall strategic planning. Mr. Sun serves as Vice President of China National Gold,
the Company’s principal shareholder, where he is mainly responsible for resources development. Mr. Sun served as chairman of
the board of Tibet Huatailong, from June 2010 to February 2012, which holds the Company’s Jiama Mine. Mr. Sun has served as a
director of China Gold Hong Kong since February 2014.
From March 2005 to January 2009, Mr. Sun served as Vice President of Zhongjin Gold. He has served as chairman of the board of
Kichi-chaarat Company, a mining company based in The Kyrgyz Republic, since February 2012, and has served as a director of
China Gold Hong Kong Buchuk Mining Company Limited (“Buchuk”) since May 2015, which controls a mining company based in
The Kyrgyz Republic. From December 2000 to July 2011, Mr. Sun served as Chairman of the Board of four other mining enterprises
which are subsidiaries of China National Gold. Mr. Sun has nearly 40 years of experience in the mining industry. In addition to
senior management experience, Mr. Sun also has extensive management experience in on-site operation of mining enterprises.
From March 1993 to December 2000, Mr. Sun served as head and general manager of three mining enterprises, through which
he had first-hand insight of the operation and management of mine-site production and became an expert in cost-control and
management enhancement. Since 2005, Mr. Sun has been responsible for resource development of China National Gold.
Mr. Sun graduated from Shenyang Gold Institute and majored in Mining Engineering.
Liangyou Jiang
SENIOR EXECUTIVE VICE PRESIDENT, EXECUTIVE DIRECTOR
Mr. Jiang, age 51, was appointed as Senior Executive Vice President of the Company on August 18, 2014 and an Executive Director
on October 23, 2014. Mr. Jiang joined the Company in August 2010 as the General Manager of Tibet Huatailong, the Company’s
and a director of Spur Ventures Inc., a public company listed on the Toronto Stock Exchange with phosphate mining and fertilizer
wholly-owned subsidiary, and served as the Chairman of Tibet Huatailong from February 2012 to August 2014. Mr. Jiang has served
operations in China. Mr. He served as a director of Jiulian Resources Inc. from October 2006 to November 2015, and as a director
as a director of Sino Mining Guizhou Pty and Guizhou Jinfeng Mining from August 2016 to the present. Mr. Jiang has served as a
of Dolly Varden Silver Corp. from June 2013 to September 2015.
director of Tibet Jia Ertong since August 2014, has served as a director of Skyland since October 2014, and has served as a director
of Buchuk since May 2015. Mr. Jiang has served as the director of China Gold Hong Kong Holding and Mundoro since January
2015 and August 2014 respectively. Mr. Jiang worked as Chief Engineer of China National Gold since August 2014. From September
2007, Mr. Jiang has served as the Head of Engineering Management Division of the Investment Management Department of China
National Gold. In February 2008, he was appointed as a Manager of the Investment Management Department of China National
Gold. Prior to joining China National Gold Group’s headquarters, Mr. Jiang served as a General Manager of China Kazakhstan
Mining Corp. Ltd., a subsidiary of China National Gold Group. From August 1987 to March 2005, Mr. Jiang worked at Changchun
Gold Design Institute. He was appointed as a Chief Engineer of the Institute in February 2000 and then as Vice President and Chief
Engineer of the Institute since April 2002. Mr. Jiang won more than 20 provincial-level scientific and technological achievement
awards and numerous honorary titles from various agencies. In 2005, Mr. Jiang was awarded the special allowance by the State
Council.
Mr. Jiang is a Senior Professional Engineer, holds a Bachelor’s Degree in mineral processing from Northeastern University.
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7
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
ANNUAL REPORT 2016
Xiangdong Jiang
VICE PRESIDENT OF PRODUCTION, EXECUTIVE DIRECTOR
Mr. Jiang, age 58, was elected as an Executive Director on June 17, 2010 and serves as the Company’s Vice President of Production,
since March 24, 2009. Mr. Jiang joined the Company in July 2002 as a manager in charge of projects in China and was responsible
for the supervision of all exploration projects including the establishment of the gold exploration and drilling program at the CSH
Gold Mine. Mr. Jiang served as Vice President of Business Development of the Company from May 20, 2004 to September 8, 2008
and was, during this time, primarily responsible for undertaking property review and evaluation and exploring business opportunities
for the Company. Mr. Jiang served as Vice President of Production and Technology from September 8, 2008 to March 23, 2009
and was promoted to Vice President of Production on March 24, 2009. Mr. Jiang has served as a director of Inner Mongolia Pacific
Mining Co. Ltd. (“Inner Mongolia Pacific”), since September 2008, which operates the Company’s CSH Gold Mine and as General
Manager of the CSH Gold Mine since August 2007.
Mr. Jiang has over 30 years of experience in the mining industry. Prior to joining the Company, Mr. Jiang worked on projects ranging
from grass roots to bankable feasibility studies for global mining companies including Cyprus Amax Minerals, Placer Dome, Barrick
Resources and First Quantum Minerals.
Mr. Jiang holds a Bachelor’s Degree in Geology and Mineral Exploration from Changchun College of Geology.
Ian He
INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. He, age 55, joined the Company on May 31, 2000 as a non-Executive Director and serves as an independent Director. Mr. He
has more than 30 years of experience in the mining industry. Mr. He has served as President and a director of Tri-River Ventures Inc.,
a public company listed on the TSX Venture Exchange since October 2006, as a director of several TSX Venture Exchange listed
companies, Huaxing Machinery Corp. since January 2011, and, as a director of Zhongrun Resources Investment Corporation, a
public company listed on the Shenzhen Stock Exchange, since December 2010, as a director of Vatukoula Gold Mines, a public
Mr. Jiang, age 51, was appointed as Senior Executive Vice President of the Company on August 18, 2014 and an Executive Director
company listed on AIM of London Stock Exchange since February 2013. From August 1995 to June 2006, Mr. He served as President
on October 23, 2014. Mr. Jiang joined the Company in August 2010 as the General Manager of Tibet Huatailong, the Company’s
and a director of Spur Ventures Inc., a public company listed on the Toronto Stock Exchange with phosphate mining and fertilizer
wholly-owned subsidiary, and served as the Chairman of Tibet Huatailong from February 2012 to August 2014. Mr. Jiang has served
operations in China. Mr. He served as a director of Jiulian Resources Inc. from October 2006 to November 2015, and as a director
as a director of Sino Mining Guizhou Pty and Guizhou Jinfeng Mining from August 2016 to the present. Mr. Jiang has served as a
of Dolly Varden Silver Corp. from June 2013 to September 2015.
Mr. He holds a Ph.D. degree and a M.A.Sc degree both in mineral process engineering from the University of British Columbia and
a Bachelor’s Degree in coal preparation from the Heilongjiang University of Technology (formerly Heilongjiang Institute of Mining
and Technology), China.
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Lianzhong Sun
NON-EXECUTIVE DIRECTOR
Mr. Sun, age 59, joined the Company on February 24, 2014 as a non-Executive Director and is responsible for the supervision of
operation related matters and the Company’s overall strategic planning. Mr. Sun serves as Vice President of China National Gold,
the Company’s principal shareholder, where he is mainly responsible for resources development. Mr. Sun served as chairman of
the board of Tibet Huatailong, from June 2010 to February 2012, which holds the Company’s Jiama Mine. Mr. Sun has served as a
director of China Gold Hong Kong since February 2014.
From March 2005 to January 2009, Mr. Sun served as Vice President of Zhongjin Gold. He has served as chairman of the board of
Kichi-chaarat Company, a mining company based in The Kyrgyz Republic, since February 2012, and has served as a director of
China Gold Hong Kong Buchuk Mining Company Limited (“Buchuk”) since May 2015, which controls a mining company based in
The Kyrgyz Republic. From December 2000 to July 2011, Mr. Sun served as Chairman of the Board of four other mining enterprises
which are subsidiaries of China National Gold. Mr. Sun has nearly 40 years of experience in the mining industry. In addition to
senior management experience, Mr. Sun also has extensive management experience in on-site operation of mining enterprises.
From March 1993 to December 2000, Mr. Sun served as head and general manager of three mining enterprises, through which
he had first-hand insight of the operation and management of mine-site production and became an expert in cost-control and
management enhancement. Since 2005, Mr. Sun has been responsible for resource development of China National Gold.
Mr. Sun graduated from Shenyang Gold Institute and majored in Mining Engineering.
Liangyou Jiang
SENIOR EXECUTIVE VICE PRESIDENT, EXECUTIVE DIRECTOR
director of Tibet Jia Ertong since August 2014, has served as a director of Skyland since October 2014, and has served as a director
of Buchuk since May 2015. Mr. Jiang has served as the director of China Gold Hong Kong Holding and Mundoro since January
2015 and August 2014 respectively. Mr. Jiang worked as Chief Engineer of China National Gold since August 2014. From September
2007, Mr. Jiang has served as the Head of Engineering Management Division of the Investment Management Department of China
National Gold. In February 2008, he was appointed as a Manager of the Investment Management Department of China National
Gold. Prior to joining China National Gold Group’s headquarters, Mr. Jiang served as a General Manager of China Kazakhstan
Mining Corp. Ltd., a subsidiary of China National Gold Group. From August 1987 to March 2005, Mr. Jiang worked at Changchun
Gold Design Institute. He was appointed as a Chief Engineer of the Institute in February 2000 and then as Vice President and Chief
Engineer of the Institute since April 2002. Mr. Jiang won more than 20 provincial-level scientific and technological achievement
awards and numerous honorary titles from various agencies. In 2005, Mr. Jiang was awarded the special allowance by the State
Mr. Jiang is a Senior Professional Engineer, holds a Bachelor’s Degree in mineral processing from Northeastern University.
Council.
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BOARD OF DIRECTORS AND SENIOR MANAGEMENT
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Yunfei Chen
INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. Chen, age 45, joined the Company on May 12, 2008 as a non-Executive Director and serves as an independent Director. Mr.
Chen is based in Hong Kong where he provides independent advisory services. Mr. Chen is currently the independent director of
Dongfeng Motor Group Company Limited; a Hong Kong listed Chinese auto company since October 2013. Previously, Mr. Chen
served as the board chairman of Asia Coal Limited, a company listed in Hong Kong from October 2010 to June 2011, and worked
for Deutsche Bank Hong Kong from July 2001 to August 2007, where he served as a director and managing director in charge of
general industries and mining for Asia at various times. Prior to joining Deutsche Bank, Mr. Chen was an attorney with Sullivan &
Cromwell based in New York and Hong Kong, from March 1997 to July 2001.
Mr. Chen graduated from Southern Illinois University, United States, with a juris doctor degree. Mr. Chen obtained his bachelor of
law degree from Wuhan University, China and is qualified to practice law in New York.
Gregory Hall
INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. Hall, age 67, joined the Company on October 9, 2009 as a non-Executive Director and serves as an independent Director. Mr.
Hall is a seasoned geologist with over 40 years of experience in the mining industry and has extensive experience working with
global mining companies. In his career, Mr. Hall has been involved in the discoveries of Gold’s Field’s Granny Smith and Wallaby
gold mines and Rio Tinto’s Yandicoogina iron ore mine in Western Australia. Mr. Hall serves as a director of Montero Mining and
Exploration Limited, a public company listed on the TSX Venture Exchange, since January 2010, as a director of Zeus Resources
Ltd., a public company listed on the Australian Stock Exchange since August 2010 and as a director of Dateline Resources a public
Mr. Zhang, age 47, joined the Company on January 4, 2010 and serves as Chief Financial Officer responsible for financing, internal
company listed on the Australian Stock Exchange since January 2015. Mr. Hall serves as a director of three private companies
control and the planning and management of the Company’s accounting and financial reporting, since August 10, 2011. Mr.
including Oryx Mining and Exploration Limited, Central Exploration Limited and Golden Phoenix International Pty. Ltd. From 2000 to
Zhang served as interim Chief Financial Officer of the Company from February 28, 2011 to August 10, 2011 and served as Controller
2006, Mr. Hall served as Chief Geologist of the Placer Dome Group.
Mr. Hall holds a Bachelor of Science Degree in Applied Geology from the University of New South Wales, Australia in 1973.
John King Burns
INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. Burns, age 66, joined the Company on October 27, 2009 as a non-Executive Director and serves as an independent Director. Mr.
Burns has extensive experience in the global resource sector. Mr. Burns serves as Chairman of Simba Energy Inc., a public company
listed on the TSX Venture Exchange, since September 2009, as Managing Director of Finance and Global Business Development,
of First Pac West US Corp., as director of Urban Select Capital Corporation since 2015, as Senior Advisor for Potomac Energy and
Strategic Resources Fund, since September 2010 and as Chairman of the Advisory Board of Lockwood Financial Group, since
September 2010. Mr. Burns has served as Chairman of Dolly Varden Silver Corporation, a public company listed on the TSX Venture
Exchange, until March 2015, as Chairman of Amana Copper Ltd., formerly Titan Goldworx Resources Inc., a public company listed
on the CNSX Exchange, until June 2015 and as a director of Corazon Gold Corp., a public company listed on the TSX Venture, until
2013, In his career, Mr. Burns has served as Vice President and Chief Financial Officer of the Drexel Burnham Lambert Commodity
Group in New York, London and Chicago, Managing Director and global head of the Derivative Trading and Finance Group of
Barclays Metals Group, Barclays Bank PLC in London and Managing Director of Frontier Risk Management LLC in Chicago and has
served as Lead Director and an audit committee member for a number of public companies in the extractive natural resources
and information technology spaces.
Mr. Burns holds a Bachelor of Arts Degree in economics from the University of Pennsylvania.
ANNUAL REPORT 2016
SENIOR MANAGEMENT
Jerry Xie
EXECUTIVE VICE PRESIDENT AND CORPORATE SECRETARY
Mr. Xie, age 56, joined the Company on March 24, 2009 and serves as Executive Vice President and Corporate Secretary. Mr. Xie
is responsible for overseeing corporate secretarial matters and managing compliance. Mr. Xie plays an important role in business
development, project evaluation, investor relations, public relations as well as manages the daily operations at the Company’s
Vancouver office. Mr. Xie served as Vice President and Secretary to the Board of the Company from March 24, 2009 to October 9,
2009 at which time he was promoted to Executive Vice President and Corporate Secretary. After joining the Company, Mr. Xie was
involved in the Company’s HK IPO process, Jiama Mine evaluation, merger and acquisitions and bond issuance. Mr. Xie has over
25 years of experience of Engineering and Project Management in the petro-chemical and oil-sand industry. Prior to joining the
Company, Mr. Xie worked as Project Manager, Project Engineer and a Senior Piping Stress Analyst for LPEC/SINOPEC, Fluor, Bantrel,
Tri-Ocean and WorleyParsons Canada Ltd., resource and energy engineering companies in China and Canada, from February 1982
to March 2009.
Mr. Xie holds a Master Degree in Engineering from the University of Calgary, a Master’s Degree in Engineering from the Beijing
University of Science & Technology and a diploma from the Mechanical Department of Shanghai Institute of Chemical Industry. Mr.
Xie is a Professional Engineer with Association of Professional Engineers and Geoscientists of Alberta.
Derrick Zhang
CHIEF FINANCIAL OFFICER
of the Company from January 4, 2010 to February 28, 2011. Mr. Zhang has over 20 years of experience in financial reporting
and engineering for public and private companies including experience leading financial reporting for mergers and acquisitions.
Mr. Zhang was a Financial and Accounting Supervisor and Cost Accountant for E-One Moli Energy (Canada) Ltd., an operating
subsidiary of China Synthetic Rubber Corporation, a public company listed on the Taiwan Stock Exchange, from May 2008 to
December 2009 and September 2006 to November 2007, respectively. Mr. Zhang was a Financial Analyst for Teleflex (Canada) Ltd.,
an operating subsidiary of Teleflex Incorporated, a public company listed on the New York Stock Exchange, from November 2007
to April 2008. Mr. Zhang was an accountant with Docuport Inc., a private technology company, from May 2005 to May 2006. From
1991 to 2001, Mr. Zhang worked as a Mining and Construction Cost Engineer in China and Singapore.
Mr. Zhang is a member of the Chartered Professional Accountants of British Columbia and a member of the Association of Chartered
Certified Accountants in the United Kingdom. Mr. Zhang is also a Member of the Society of Economic Geologists in United States.
Mr. Zhang holds a Bachelor of Commerce degree with a major in Accountancy from Concordia University in Montreal, Quebec,
Canada and a Bachelor of Engineering degree in Geology from Southwest University of Science and Technology in China.
8
9
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
ANNUAL REPORT 2016
Yunfei Chen
INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. Chen, age 45, joined the Company on May 12, 2008 as a non-Executive Director and serves as an independent Director. Mr.
Chen is based in Hong Kong where he provides independent advisory services. Mr. Chen is currently the independent director of
Dongfeng Motor Group Company Limited; a Hong Kong listed Chinese auto company since October 2013. Previously, Mr. Chen
served as the board chairman of Asia Coal Limited, a company listed in Hong Kong from October 2010 to June 2011, and worked
for Deutsche Bank Hong Kong from July 2001 to August 2007, where he served as a director and managing director in charge of
general industries and mining for Asia at various times. Prior to joining Deutsche Bank, Mr. Chen was an attorney with Sullivan &
Cromwell based in New York and Hong Kong, from March 1997 to July 2001.
Mr. Chen graduated from Southern Illinois University, United States, with a juris doctor degree. Mr. Chen obtained his bachelor of
law degree from Wuhan University, China and is qualified to practice law in New York.
Gregory Hall
INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. Hall, age 67, joined the Company on October 9, 2009 as a non-Executive Director and serves as an independent Director. Mr.
Hall is a seasoned geologist with over 40 years of experience in the mining industry and has extensive experience working with
global mining companies. In his career, Mr. Hall has been involved in the discoveries of Gold’s Field’s Granny Smith and Wallaby
gold mines and Rio Tinto’s Yandicoogina iron ore mine in Western Australia. Mr. Hall serves as a director of Montero Mining and
Exploration Limited, a public company listed on the TSX Venture Exchange, since January 2010, as a director of Zeus Resources
Ltd., a public company listed on the Australian Stock Exchange since August 2010 and as a director of Dateline Resources a public
2006, Mr. Hall served as Chief Geologist of the Placer Dome Group.
Mr. Hall holds a Bachelor of Science Degree in Applied Geology from the University of New South Wales, Australia in 1973.
John King Burns
INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. Burns, age 66, joined the Company on October 27, 2009 as a non-Executive Director and serves as an independent Director. Mr.
Burns has extensive experience in the global resource sector. Mr. Burns serves as Chairman of Simba Energy Inc., a public company
listed on the TSX Venture Exchange, since September 2009, as Managing Director of Finance and Global Business Development,
of First Pac West US Corp., as director of Urban Select Capital Corporation since 2015, as Senior Advisor for Potomac Energy and
Strategic Resources Fund, since September 2010 and as Chairman of the Advisory Board of Lockwood Financial Group, since
September 2010. Mr. Burns has served as Chairman of Dolly Varden Silver Corporation, a public company listed on the TSX Venture
Exchange, until March 2015, as Chairman of Amana Copper Ltd., formerly Titan Goldworx Resources Inc., a public company listed
on the CNSX Exchange, until June 2015 and as a director of Corazon Gold Corp., a public company listed on the TSX Venture, until
2013, In his career, Mr. Burns has served as Vice President and Chief Financial Officer of the Drexel Burnham Lambert Commodity
Group in New York, London and Chicago, Managing Director and global head of the Derivative Trading and Finance Group of
Barclays Metals Group, Barclays Bank PLC in London and Managing Director of Frontier Risk Management LLC in Chicago and has
served as Lead Director and an audit committee member for a number of public companies in the extractive natural resources
and information technology spaces.
Mr. Burns holds a Bachelor of Arts Degree in economics from the University of Pennsylvania.
SENIOR MANAGEMENT
Jerry Xie
EXECUTIVE VICE PRESIDENT AND CORPORATE SECRETARY
Mr. Xie, age 56, joined the Company on March 24, 2009 and serves as Executive Vice President and Corporate Secretary. Mr. Xie
is responsible for overseeing corporate secretarial matters and managing compliance. Mr. Xie plays an important role in business
development, project evaluation, investor relations, public relations as well as manages the daily operations at the Company’s
Vancouver office. Mr. Xie served as Vice President and Secretary to the Board of the Company from March 24, 2009 to October 9,
2009 at which time he was promoted to Executive Vice President and Corporate Secretary. After joining the Company, Mr. Xie was
involved in the Company’s HK IPO process, Jiama Mine evaluation, merger and acquisitions and bond issuance. Mr. Xie has over
25 years of experience of Engineering and Project Management in the petro-chemical and oil-sand industry. Prior to joining the
Company, Mr. Xie worked as Project Manager, Project Engineer and a Senior Piping Stress Analyst for LPEC/SINOPEC, Fluor, Bantrel,
Tri-Ocean and WorleyParsons Canada Ltd., resource and energy engineering companies in China and Canada, from February 1982
to March 2009.
Mr. Xie holds a Master Degree in Engineering from the University of Calgary, a Master’s Degree in Engineering from the Beijing
University of Science & Technology and a diploma from the Mechanical Department of Shanghai Institute of Chemical Industry. Mr.
Xie is a Professional Engineer with Association of Professional Engineers and Geoscientists of Alberta.
Derrick Zhang
CHIEF FINANCIAL OFFICER
Mr. Zhang, age 47, joined the Company on January 4, 2010 and serves as Chief Financial Officer responsible for financing, internal
company listed on the Australian Stock Exchange since January 2015. Mr. Hall serves as a director of three private companies
control and the planning and management of the Company’s accounting and financial reporting, since August 10, 2011. Mr.
including Oryx Mining and Exploration Limited, Central Exploration Limited and Golden Phoenix International Pty. Ltd. From 2000 to
Zhang served as interim Chief Financial Officer of the Company from February 28, 2011 to August 10, 2011 and served as Controller
of the Company from January 4, 2010 to February 28, 2011. Mr. Zhang has over 20 years of experience in financial reporting
and engineering for public and private companies including experience leading financial reporting for mergers and acquisitions.
Mr. Zhang was a Financial and Accounting Supervisor and Cost Accountant for E-One Moli Energy (Canada) Ltd., an operating
subsidiary of China Synthetic Rubber Corporation, a public company listed on the Taiwan Stock Exchange, from May 2008 to
December 2009 and September 2006 to November 2007, respectively. Mr. Zhang was a Financial Analyst for Teleflex (Canada) Ltd.,
an operating subsidiary of Teleflex Incorporated, a public company listed on the New York Stock Exchange, from November 2007
to April 2008. Mr. Zhang was an accountant with Docuport Inc., a private technology company, from May 2005 to May 2006. From
1991 to 2001, Mr. Zhang worked as a Mining and Construction Cost Engineer in China and Singapore.
Mr. Zhang is a member of the Chartered Professional Accountants of British Columbia and a member of the Association of Chartered
Certified Accountants in the United Kingdom. Mr. Zhang is also a Member of the Society of Economic Geologists in United States.
Mr. Zhang holds a Bachelor of Commerce degree with a major in Accountancy from Concordia University in Montreal, Quebec,
Canada and a Bachelor of Engineering degree in Geology from Southwest University of Science and Technology in China.
8
9
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Songlin Zhang
VICE PRESIDENT AND CHIEF ENGINEER
Mr. Zhang, age 56, joined the Company on February 15, 2012 and was appointed as Chief Engineer and promoted as Vice
President in the same year. Mr. Zhang has over 23 years of experience in the mining industry in both North America and China
and is experienced in mine project evaluation, reserve and resource estimation and mine economic analysis. Prior to joining the
Company, Mr. Zhang served as a technical director for White Tiger Gold where he managed all aspects of reserve and resource
evaluation activities for various projects. Mr. Zhang was formerly a Consulting Engineer for Newmont Gold Corp., where he was
involved in valuating production drilling and developing mine planning and ore grade control protocols in Newmont Northern
activities during the year.
Nevada and Peru Yanacocha operations. He was formerly a Senior Mine Engineer for Echo Bay Mines Ltd. (which merged with
Kinross Gold Corporation) at the McCoy/Cove mine where he developed methodology for reserve and resource estimation, served
as a member of the reserve committee for the company and conducted a full due diligence study of the Nevada Phoenix project.
Mr. Zhang conducted various research projects for open-pit and underground mines in China while working as an assistant professor
at the University of Science and Technology Beijing, China.
Mr. Zhang holds a Master Degree in Mining Engineering from Mackay School of Mines, University of Nevada-Reno in Nevada, USA,
a Master Degree in Mining Engineering from the University of Science and Technology Beijing, China and a Bachelor’s Degree in
Mining Engineering from the University of Science and Technology Beijing, China. Mr. Zhang is a registered member of The Society
for Mining, Metallurgy and Exploration and is a Qualified Person as defined in National Instrument 43-101 of the Canadian Securities
Administrators.
Lisheng Zhang
VICE PRESIDENT
Mr. Zhang, age 56, serves as the Company’s Vice President responsible for overseeing overall management of the CSH Gold Mine,
since March 2013. Mr. Zhang joined the Company in September 2008 as a chairman of Inner Mongolia Pacific Mining Co. Ltd.,
a subsidiary of the Company, which owns and operates CSH Gold Mine. Mr. Zhang serves as an Executive Officer of two large
mining companies which are subsidiaries of China National Gold, since 1995. Mr. Zhang has over 35 years of experience in the
mining industry. Mr. Zhang’s knowledge of local culture of Inner Mongolia and his working experience contributed to the rapid and
sustainable development of CSH Gold Mine.
The Directors do not recommend the payment of a final dividend as at December 31, 2016.
Shiliang Guan
VICE PRESIDENT
Mr. Guan, age 49, was appointed as the Vice President of the Company on September 22, 2016. Mr. Guan joined the Company in
2015 becoming the Board Chairman of Tibet Huatailong Mining Development Corp. Ltd., the Company’s wholly-owned subsidiary.
Mr. Guan started his career in 1991 and has 25 years of experience in the mining industry. Mr. Guan is a senior professional engineer,
holding a bachelor’s degree in mining engineering from Northeastern University of China.
10
ANNUAL REPORT 2016
DIRECTORS' REPORT
The Directors are pleased to present this report and the audited consolidated financial statements of the Company for the year
ended December 31, 2016 (the “Reporting Period”).
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The Company is a gold and base metal mining company based in Vancouver, Canada. The Company’s main business involves the
operation, acquisition, development and exploration of gold and base metal properties. The principal activities of the subsidiaries
are set out in note 33 of the Financial Statements. There were no significant changes in the nature of the Company’s principal
Further discussion and analysis of the business review as required by Schedule 5 to the Hong Kong Companies Ordinance,
including a fair view of the business and a discussion of the principal risks and uncertainties facing the Company, particulars
of important events affecting the Company that have occurred since the end of the financial year 2016, an indication of likely
future development in the Company’s business, the Group’s environmental policies and performance, compliance with relevant
laws and regulations which have a significant impact on the Company, outlook of the Company’s business, and an account of
the Company’s relationships with its key stakeholders can be found in the “Five-Year Financial Summary”, “Message From the
Chairman”, “Message From the CEO”, “Management Discussion and Analysis” and “Corporate Government Report” sections of
Details of the movement in the share capital of the Group during the Reporting Period are set out in Note 27 of the Financial
Details of the reserves available for distribution to the shareholders as at December 31, 2016 are set out in Note 35 of the Financial
The results of the Group as at December 31, 2016 are set out in the consolidated statement of profit or loss and other comprehensive
income on page 68 and page 69.
this annual report.
SHARE CAPITAL
Statements.
RESERVES
Statements.
RESULTS
DIVIDEND
DIRECTORS
The directors during the Reporting Period and up to the date of this report are as follows:
Executive Directors
Xin Song (Chairman)
Bing Liu
Liangyou Jiang
Xiangdong Jiang
Non-Executive Director
Lianzhong Sun
Ian He
Yunfei Chen
Gregory Hall
John King Burns
Independent Non-Executive Directors
In accordance with article 14.1 of the Company’s articles of association (the “Articles”), each of the Directors shall retire at the
2017 annual general meeting of the Company (the “2017 AGM”) and, being eligible, shall offer themselves to be re-elected and
re-appointed at the 2017 AGM.
11
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Songlin Zhang
VICE PRESIDENT AND CHIEF ENGINEER
Mr. Zhang, age 56, joined the Company on February 15, 2012 and was appointed as Chief Engineer and promoted as Vice
President in the same year. Mr. Zhang has over 23 years of experience in the mining industry in both North America and China
and is experienced in mine project evaluation, reserve and resource estimation and mine economic analysis. Prior to joining the
Company, Mr. Zhang served as a technical director for White Tiger Gold where he managed all aspects of reserve and resource
evaluation activities for various projects. Mr. Zhang was formerly a Consulting Engineer for Newmont Gold Corp., where he was
involved in valuating production drilling and developing mine planning and ore grade control protocols in Newmont Northern
Nevada and Peru Yanacocha operations. He was formerly a Senior Mine Engineer for Echo Bay Mines Ltd. (which merged with
Kinross Gold Corporation) at the McCoy/Cove mine where he developed methodology for reserve and resource estimation, served
as a member of the reserve committee for the company and conducted a full due diligence study of the Nevada Phoenix project.
Mr. Zhang conducted various research projects for open-pit and underground mines in China while working as an assistant professor
at the University of Science and Technology Beijing, China.
Mr. Zhang holds a Master Degree in Mining Engineering from Mackay School of Mines, University of Nevada-Reno in Nevada, USA,
a Master Degree in Mining Engineering from the University of Science and Technology Beijing, China and a Bachelor’s Degree in
Mining Engineering from the University of Science and Technology Beijing, China. Mr. Zhang is a registered member of The Society
for Mining, Metallurgy and Exploration and is a Qualified Person as defined in National Instrument 43-101 of the Canadian Securities
Mr. Zhang, age 56, serves as the Company’s Vice President responsible for overseeing overall management of the CSH Gold Mine,
since March 2013. Mr. Zhang joined the Company in September 2008 as a chairman of Inner Mongolia Pacific Mining Co. Ltd.,
a subsidiary of the Company, which owns and operates CSH Gold Mine. Mr. Zhang serves as an Executive Officer of two large
mining companies which are subsidiaries of China National Gold, since 1995. Mr. Zhang has over 35 years of experience in the
mining industry. Mr. Zhang’s knowledge of local culture of Inner Mongolia and his working experience contributed to the rapid and
Administrators.
Lisheng Zhang
VICE PRESIDENT
sustainable development of CSH Gold Mine.
Shiliang Guan
VICE PRESIDENT
Mr. Guan, age 49, was appointed as the Vice President of the Company on September 22, 2016. Mr. Guan joined the Company in
2015 becoming the Board Chairman of Tibet Huatailong Mining Development Corp. Ltd., the Company’s wholly-owned subsidiary.
Mr. Guan started his career in 1991 and has 25 years of experience in the mining industry. Mr. Guan is a senior professional engineer,
holding a bachelor’s degree in mining engineering from Northeastern University of China.
ANNUAL REPORT 2016
DIRECTORS' REPORT
The Directors are pleased to present this report and the audited consolidated financial statements of the Company for the year
ended December 31, 2016 (the “Reporting Period”).
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The Company is a gold and base metal mining company based in Vancouver, Canada. The Company’s main business involves the
operation, acquisition, development and exploration of gold and base metal properties. The principal activities of the subsidiaries
are set out in note 33 of the Financial Statements. There were no significant changes in the nature of the Company’s principal
activities during the year.
Further discussion and analysis of the business review as required by Schedule 5 to the Hong Kong Companies Ordinance,
including a fair view of the business and a discussion of the principal risks and uncertainties facing the Company, particulars
of important events affecting the Company that have occurred since the end of the financial year 2016, an indication of likely
future development in the Company’s business, the Group’s environmental policies and performance, compliance with relevant
laws and regulations which have a significant impact on the Company, outlook of the Company’s business, and an account of
the Company’s relationships with its key stakeholders can be found in the “Five-Year Financial Summary”, “Message From the
Chairman”, “Message From the CEO”, “Management Discussion and Analysis” and “Corporate Government Report” sections of
this annual report.
SHARE CAPITAL
Details of the movement in the share capital of the Group during the Reporting Period are set out in Note 27 of the Financial
Statements.
RESERVES
Details of the reserves available for distribution to the shareholders as at December 31, 2016 are set out in Note 35 of the Financial
Statements.
RESULTS
The results of the Group as at December 31, 2016 are set out in the consolidated statement of profit or loss and other comprehensive
income on page 68 and page 69.
DIVIDEND
The Directors do not recommend the payment of a final dividend as at December 31, 2016.
DIRECTORS
The directors during the Reporting Period and up to the date of this report are as follows:
Executive Directors
Xin Song (Chairman)
Bing Liu
Liangyou Jiang
Xiangdong Jiang
Non-Executive Director
Lianzhong Sun
Independent Non-Executive Directors
Ian He
Yunfei Chen
Gregory Hall
John King Burns
10
In accordance with article 14.1 of the Company’s articles of association (the “Articles”), each of the Directors shall retire at the
2017 annual general meeting of the Company (the “2017 AGM”) and, being eligible, shall offer themselves to be re-elected and
re-appointed at the 2017 AGM.
11
DIRECTORS' REPORT
THE BIOGRAPHY OF THE DIRECTORS AND THE SENIOR MANAGEMENT
The biographical details of the Directors and the senior management of the Company are set out in the Directors and senior
management’s profile from page 8 to page 13 of this annual report.
DISCLOSURE OF INFORMATION OF DIRECTOR PURSUANT TO RULE 13.51B(1) OF THE
HONG KONG LISTING RULES
Saved as disclosed in this annual report, there are no other changes to the Directors’ information as required to be disclosed
pursuant to Rule 13.51B(1) of the Rules (the “Hong Kong Listing Rules”) Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited (the “Hong Kong Stock Exchange”).
INDEPENDENCE OF THE INDEPENDENT NON-EXECUTIVE DIRECTORS
The Board has received from each of the independent non-executive Directors, an annual confirmation of his independence
pursuant to Rule 3.13 of the Hong Kong Listing Rules, and considers that all of the independent non-executive Directors are
independent.
DIRECTORS’ SERVICE CONTRACTS
None of the Directors who are proposed for re-election at the 2017 AGM have a service contract with the Company or any of its
subsidiaries which is not determinable by the employing company within one year without payment of compensation, other than
statutory compensation.
PERMITTED INDEMNITY
The Company has taken out insurance policies against the liabilities of the Directors that may arise out of corporate activities and
the costs associated with defending any proceeding. The insurance coverage is reviewed on an annual basis. During the Reporting
Period, no claims were made against the Directors.
Ian He
Director
150,000
Personal
0.0378%
DIRECTORS’ INTEREST IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS
Mr. Xin Song, Mr. Bing Liu, Mr. Lianzhong Sun and Mr. Liangyou Jiang are considered to have conflicts of interest in the transactions
as set out in the section headed “Connected Transactions and Continuing Connected Transactions” in this report due to their senior
management positions in China National Gold, the ultimate controlling shareholder of the Company. Save as disclosed in the
section headed “Connected Transactions and Continuing Connected Transactions” in this report, no transactions, arrangement
or contracts of significance in relation to the business of the Group to which the Company, any of its subsidiaries or the controlling
shareholder of the Company was a party and in which a Director or any of his connected entity had a material interest, whether
Note:
directly or indirectly, subsisted as at December 31, 2016 or at any time during the Reporting Period.
Information relating to share ownership is provided by each Director.
CONTRACTS OF SIGNIFICANCE
Save as disclosed under the section headed “Connected Transactions and Continuing Connected Transactions” in this report, no
other material contract (not being contracts entered into in the ordinary course of business) was entered into by the Company
during the Reporting Period.
DIRECTORS’ INTERESTS IN COMPETING BUSINESSES
To the best knowledge of the Directors, during the Reporting Period and up to the date of this report, save for the directorships and
management roles of our Directors in other mining companies, none of our Directors had any interests in businesses that compete or
are likely to compete, either directly or indirectly, with the Company. Please refer to the biographies of our Directors set out under
the section headed “Board of Directors and Senior Management” of this report for details of such circumstances.
12
13
ANNUAL REPORT 2016
DIRECTORS' REPORT
DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SHARES
As at December 31, 2016, the interests and short positions of the Directors and chief executive of the Company in the shares,
underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities
and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (“SFO”)) which were required to be notified to the Company and
the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which
they are taken or deemed to have under such provisions of the SFO), or as recorded in the register maintained by the Company
pursuant to Section 352 of the SFO or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Hong Kong
Listing Rules were as follows:
SHARES
LONG POSITION IN SHARES
Name
Position
Company
Number of
Shares Held
Nature of
Interest
Approximate
Percentage of
Interest in the
Company
China Gold
International
Resources
Corp. Ltd
Director and
China Gold Inter-
Vice President of
national Resources
Production
Corp. Ltd.
Xiangdong Jiang
38,800
Personal
0.0098%
Other than as disclosed above, as at December 31, 2016, none of the Directors and chief executive of the Company had any
interests or short positions in any shares, underlying shares or debentures of the Company or its associated corporations which were
required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests and short positions which they are taken or deemed to have under such provisions of the SFO), or as recorded
in the register kept by the Company under section 352 of the SFO, or as otherwise notified to the Company and the Hong Kong
Stock Exchange under the Model Code.
ANNUAL REPORT 2016
DIRECTORS' REPORT
DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SHARES
As at December 31, 2016, the interests and short positions of the Directors and chief executive of the Company in the shares,
underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities
and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (“SFO”)) which were required to be notified to the Company and
the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which
they are taken or deemed to have under such provisions of the SFO), or as recorded in the register maintained by the Company
pursuant to Section 352 of the SFO or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Hong Kong
Listing Rules were as follows:
SHARES
LONG POSITION IN SHARES
Name
Position
Company
The Company has taken out insurance policies against the liabilities of the Directors that may arise out of corporate activities and
the costs associated with defending any proceeding. The insurance coverage is reviewed on an annual basis. During the Reporting
Period, no claims were made against the Directors.
Ian He
Director
Xiangdong Jiang
Director and
China Gold
International
Resources
Corp. Ltd
China Gold Inter-
shareholder of the Company was a party and in which a Director or any of his connected entity had a material interest, whether
Note:
directly or indirectly, subsisted as at December 31, 2016 or at any time during the Reporting Period.
Information relating to share ownership is provided by each Director.
Vice President of
national Resources
Production
Corp. Ltd.
Number of
Shares Held
Nature of
Interest
Approximate
Percentage of
Interest in the
Company
150,000
Personal
0.0378%
38,800
Personal
0.0098%
Other than as disclosed above, as at December 31, 2016, none of the Directors and chief executive of the Company had any
interests or short positions in any shares, underlying shares or debentures of the Company or its associated corporations which were
required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests and short positions which they are taken or deemed to have under such provisions of the SFO), or as recorded
in the register kept by the Company under section 352 of the SFO, or as otherwise notified to the Company and the Hong Kong
Stock Exchange under the Model Code.
12
13
DIRECTORS' REPORT
THE BIOGRAPHY OF THE DIRECTORS AND THE SENIOR MANAGEMENT
The biographical details of the Directors and the senior management of the Company are set out in the Directors and senior
management’s profile from page 8 to page 13 of this annual report.
DISCLOSURE OF INFORMATION OF DIRECTOR PURSUANT TO RULE 13.51B(1) OF THE
HONG KONG LISTING RULES
Saved as disclosed in this annual report, there are no other changes to the Directors’ information as required to be disclosed
pursuant to Rule 13.51B(1) of the Rules (the “Hong Kong Listing Rules”) Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited (the “Hong Kong Stock Exchange”).
INDEPENDENCE OF THE INDEPENDENT NON-EXECUTIVE DIRECTORS
The Board has received from each of the independent non-executive Directors, an annual confirmation of his independence
pursuant to Rule 3.13 of the Hong Kong Listing Rules, and considers that all of the independent non-executive Directors are
None of the Directors who are proposed for re-election at the 2017 AGM have a service contract with the Company or any of its
subsidiaries which is not determinable by the employing company within one year without payment of compensation, other than
independent.
DIRECTORS’ SERVICE CONTRACTS
statutory compensation.
PERMITTED INDEMNITY
DIRECTORS’ INTEREST IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS
Mr. Xin Song, Mr. Bing Liu, Mr. Lianzhong Sun and Mr. Liangyou Jiang are considered to have conflicts of interest in the transactions
as set out in the section headed “Connected Transactions and Continuing Connected Transactions” in this report due to their senior
management positions in China National Gold, the ultimate controlling shareholder of the Company. Save as disclosed in the
section headed “Connected Transactions and Continuing Connected Transactions” in this report, no transactions, arrangement
or contracts of significance in relation to the business of the Group to which the Company, any of its subsidiaries or the controlling
CONTRACTS OF SIGNIFICANCE
Save as disclosed under the section headed “Connected Transactions and Continuing Connected Transactions” in this report, no
other material contract (not being contracts entered into in the ordinary course of business) was entered into by the Company
during the Reporting Period.
DIRECTORS’ INTERESTS IN COMPETING BUSINESSES
To the best knowledge of the Directors, during the Reporting Period and up to the date of this report, save for the directorships and
management roles of our Directors in other mining companies, none of our Directors had any interests in businesses that compete or
are likely to compete, either directly or indirectly, with the Company. Please refer to the biographies of our Directors set out under
the section headed “Board of Directors and Senior Management” of this report for details of such circumstances.
DIRECTORS' REPORT
CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS
China National Gold is the ultimate controlling shareholder of the Company currently holding approximately 39.3% of the issued
shares of the Company and is therefore a connected person of the Company under the Hong Kong Listing Rules. As a result, the
transactions entered into between China National Gold and the Group as described in this section below constitute non-exempt
continuing connected transactions or partially exempt connected transactions of the Company as defined under Chapter 14A of
the Hong Kong Listing Rules.
In addition, Tibet Huatailong, Inner Mongolia Pacific, China National Gold Group Finance Company Limited (the “China Gold
Finance”), China Tenth Metallurgy Group Limited Corporation (“CTMG”) and China Gold Hongkong (the “Controlled Entities”) are
ultimately controlled by China National Gold and are therefore connected persons of the Company by virtue of Rule 14A.07 of the
Hong Kong Listing Rules.
Non-Exempt Continuing Connected Transactions
Product and Service Framework Agreement
On April 26, 2013, the Company entered into a Product and Service Framework Agreement (the “Product and Service Framework
Agreement”) with China National Gold for the provision of providing mining related services and products to the Company for
three years until June 18, 2016. Details of the Product and Service Framework Agreement are as stated in the Company’s circular
dated May 21, 2013.
The Company entered into an amendment to the Product and Service Framework Agreement (the “Amendment Agreement”)
on May 29, 2015 to revise the expiry date of the Product and Service Framework Agreement to December 31, 2017 and include
the sale and purchase of copper concentrates produced at the Jiama Mine between the Group and China National Gold into
the product and service scope of the Product and Service Framework Agreement, which were approved by the independent
shareholders of the Company on June 30, 2015. For details, please refer to the Company’s announcement dated June 3, 2015,
circular dated May 29, 2015 and poll results announcement dated July 1, 2015.
For the Reporting Period, the transaction amounts under the Product and Service Framework (as amended by the Amendment
Agreement) were approximately RMB671.8 million where the relevant annual monetary cap was RMB5,800.1 million.
2015 Contract for Purchase and Sale of Doré
On May 7, 2014, Inner Mongolia Pacific entered into a Contract for Purchase and Sale of Doré (the “2015 Contract for Purchase
and Sale of Doré”) with China National Gold for the sale and purchase of gold doré bars and silver by-products produced at the
CSH Gold Mine. Details of the 2015 Contract for Purchase and Sale of Doré are as stated in the Company’s announcement dated
May 7, 2014, circular dated May 7, 2014 and poll results announcement dated June 20, 2014.
For the Reporting Period, the transaction amounts under the 2015 Contract for Purchase and Sale of Doré were approximately
RMB1,527.6 million where the relevant annual monetary cap was RMB2,437.5 million, which accounted for 67% of the total sales of
been entered into:
the Group for the year then ended.
Financial Services Agreement
On May 29, 2015, Inner Mongolia Pacific, Tibet Huatailong and China Gold Finance entered into a Financial Services Agreement
pursuant to which China Gold Finance will satisfy the financial services needs of Inner Mongolia Pacific and Huatailong by providing
certain functions performed by financial institutions offering flexibility and favourable terms for three years ending December 31,
2015, 2016 and 2017. Details of the Financial Services Agreement are as stated in the Company’s announcement dated June 3,
2015, circular dated May 29, 2015 and poll results announcement dated July 1, 2015.
Daily maximum deposit monetary caps for the transactions stipulated under the Financial Services Agreement pursuant to Chapter
14A of the Hong Kong Listing Rules (including accumulative settlement interest) shall not exceed RMB3.0 billion. There have not
been any deposits exceeding the daily maximum monetary cap for the Reporting Period.
14
15
ANNUAL REPORT 2016
DIRECTORS' REPORT
Partially Exempt Connected Transactions
Loan Agreement
On April 14, 2015, Skyland Mining (BVI) Limited (“Skyland Mining”), the wholly-owned subsidiary of the Company, entered into a loan
agreement (the “Loan Agreement”) with China Gold Hong Kong, pursuant to which Skyland Mining as lender, agreed to provide
a loan (the “Loan”) in the principal amount up to US$14 million with an interest rate of 5.0% p.a. for a term of one year, to China
Gold Hong Kong as borrower. Details of the Loan Agreement are as stated in the Company’s announcement dated April 14, 2015.
The Company entered into a Supplemental Loan Agreement (the “Supplemental Loan Agreement”) to the Loan Agreement with
China Gold Hong Kong on April 4, 2016, pursuant to which the maturity of the Loan has been extended to April 13, 2017. For details,
please refer to the announcement of the Company dated April 12, 2016.
Loan Framework Agreement
On May 24, 2016, the Group and China National Gold and/or any of its subsidiaries entered into a Loan Framework Agreement
(the “Loan Framework Agreement”) pursuant to which the Company or any of its subsidiaries, has agreed to make available to
China National Gold or any one of its subsidiaries, revolving loan(s) in an aggregate principal amount of up to US$200 million
(the “Revolving Loan(s)”) for a term commencing from the date of the actual drawdown and expiring on July 31, 2017. Any
repaid principal amount of the Revolving Loan(s) will refresh the facility amount available for drawing within the term of the Loan
Framework Agreement. A fixed interest rate of 3.9% per annum shall accrue on the principal amount of the Loan(s) calculated
from the drawdown date of such tranche, and shall remain unchanged during the term of such tranche until July 31, 2017. For
further details, please refer to the Company’s announcement dated May 24, 2016, circular dated May 24, 2016 and poll results
announcement dated June 24, 2016. During the Reporting Period, the Group loaned US$150.0 million to China National Gold
pursuant to the Loan Framework Agreement.
Annual Review
The Company’s auditor, Deloitte Touche Tohmatsu, was engaged to report on the Group’s continuing connected transactions in
accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of
Historical Financial Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing Connected Transactions
under the Hong Kong Listing Rules” issued by the Hong Kong Institute of Certified Public Accountants. The auditor’s letter containing
his findings and conclusions in respect of the continuing connected transactions disclosed above by the Group in accordance with
Rule 14A.56 of the Hong Kong Listing Rules has been provided to the Directors, and was confirmed in respect of the above matter.
A copy of the auditor’s letter has been provided by the Company to the Hong Kong Stock Exchange.
In accordance with Rule 14A.55 of the Hong Kong Listing Rules, the independent non-executive Directors have reviewed and
confirmed that the continuing connected transactions carried out under i) the Product and Service Framework Agreement, ii) the
2015 Contract for Purchase and Sale of Doré, iii) Financial Services Agreement, and iv) the Loan Framework Agreement have each
(a) in the ordinary and usual course of the Company’s business;
(b) on terms no less favorable to the Company than terms available to or from (as appropriate) independent third parties; and
(c) in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the
hh shareholders of the Company as a whole.
Related Party Transactions
During the Reporting Period, material related party transactions as disclosed in Note 28 to the consolidated financial statements in
this annual report (other than the above-mentioned) constituted connected transactions as defined in the Hong Kong Listing Rules,
the Company had complied with the relevant requirements under Chapter 14A of the Hong Kong Listing Rules during the year.
DIRECTORS' REPORT
CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS
China National Gold is the ultimate controlling shareholder of the Company currently holding approximately 39.3% of the issued
shares of the Company and is therefore a connected person of the Company under the Hong Kong Listing Rules. As a result, the
transactions entered into between China National Gold and the Group as described in this section below constitute non-exempt
continuing connected transactions or partially exempt connected transactions of the Company as defined under Chapter 14A of
the Hong Kong Listing Rules.
In addition, Tibet Huatailong, Inner Mongolia Pacific, China National Gold Group Finance Company Limited (the “China Gold
Finance”), China Tenth Metallurgy Group Limited Corporation (“CTMG”) and China Gold Hongkong (the “Controlled Entities”) are
ultimately controlled by China National Gold and are therefore connected persons of the Company by virtue of Rule 14A.07 of the
Hong Kong Listing Rules.
Non-Exempt Continuing Connected Transactions
Product and Service Framework Agreement
On April 26, 2013, the Company entered into a Product and Service Framework Agreement (the “Product and Service Framework
Agreement”) with China National Gold for the provision of providing mining related services and products to the Company for
three years until June 18, 2016. Details of the Product and Service Framework Agreement are as stated in the Company’s circular
dated May 21, 2013.
The Company entered into an amendment to the Product and Service Framework Agreement (the “Amendment Agreement”)
on May 29, 2015 to revise the expiry date of the Product and Service Framework Agreement to December 31, 2017 and include
the sale and purchase of copper concentrates produced at the Jiama Mine between the Group and China National Gold into
the product and service scope of the Product and Service Framework Agreement, which were approved by the independent
shareholders of the Company on June 30, 2015. For details, please refer to the Company’s announcement dated June 3, 2015,
circular dated May 29, 2015 and poll results announcement dated July 1, 2015.
For the Reporting Period, the transaction amounts under the Product and Service Framework (as amended by the Amendment
Agreement) were approximately RMB671.8 million where the relevant annual monetary cap was RMB5,800.1 million.
2015 Contract for Purchase and Sale of Doré
On May 7, 2014, Inner Mongolia Pacific entered into a Contract for Purchase and Sale of Doré (the “2015 Contract for Purchase
and Sale of Doré”) with China National Gold for the sale and purchase of gold doré bars and silver by-products produced at the
CSH Gold Mine. Details of the 2015 Contract for Purchase and Sale of Doré are as stated in the Company’s announcement dated
May 7, 2014, circular dated May 7, 2014 and poll results announcement dated June 20, 2014.
For the Reporting Period, the transaction amounts under the 2015 Contract for Purchase and Sale of Doré were approximately
RMB1,527.6 million where the relevant annual monetary cap was RMB2,437.5 million, which accounted for 67% of the total sales of
the Group for the year then ended.
Financial Services Agreement
On May 29, 2015, Inner Mongolia Pacific, Tibet Huatailong and China Gold Finance entered into a Financial Services Agreement
pursuant to which China Gold Finance will satisfy the financial services needs of Inner Mongolia Pacific and Huatailong by providing
certain functions performed by financial institutions offering flexibility and favourable terms for three years ending December 31,
2015, 2016 and 2017. Details of the Financial Services Agreement are as stated in the Company’s announcement dated June 3,
2015, circular dated May 29, 2015 and poll results announcement dated July 1, 2015.
Daily maximum deposit monetary caps for the transactions stipulated under the Financial Services Agreement pursuant to Chapter
14A of the Hong Kong Listing Rules (including accumulative settlement interest) shall not exceed RMB3.0 billion. There have not
been any deposits exceeding the daily maximum monetary cap for the Reporting Period.
ANNUAL REPORT 2016
DIRECTORS' REPORT
Partially Exempt Connected Transactions
Loan Agreement
On April 14, 2015, Skyland Mining (BVI) Limited (“Skyland Mining”), the wholly-owned subsidiary of the Company, entered into a loan
agreement (the “Loan Agreement”) with China Gold Hong Kong, pursuant to which Skyland Mining as lender, agreed to provide
a loan (the “Loan”) in the principal amount up to US$14 million with an interest rate of 5.0% p.a. for a term of one year, to China
Gold Hong Kong as borrower. Details of the Loan Agreement are as stated in the Company’s announcement dated April 14, 2015.
The Company entered into a Supplemental Loan Agreement (the “Supplemental Loan Agreement”) to the Loan Agreement with
China Gold Hong Kong on April 4, 2016, pursuant to which the maturity of the Loan has been extended to April 13, 2017. For details,
please refer to the announcement of the Company dated April 12, 2016.
Loan Framework Agreement
On May 24, 2016, the Group and China National Gold and/or any of its subsidiaries entered into a Loan Framework Agreement
(the “Loan Framework Agreement”) pursuant to which the Company or any of its subsidiaries, has agreed to make available to
China National Gold or any one of its subsidiaries, revolving loan(s) in an aggregate principal amount of up to US$200 million
(the “Revolving Loan(s)”) for a term commencing from the date of the actual drawdown and expiring on July 31, 2017. Any
repaid principal amount of the Revolving Loan(s) will refresh the facility amount available for drawing within the term of the Loan
Framework Agreement. A fixed interest rate of 3.9% per annum shall accrue on the principal amount of the Loan(s) calculated
from the drawdown date of such tranche, and shall remain unchanged during the term of such tranche until July 31, 2017. For
further details, please refer to the Company’s announcement dated May 24, 2016, circular dated May 24, 2016 and poll results
announcement dated June 24, 2016. During the Reporting Period, the Group loaned US$150.0 million to China National Gold
pursuant to the Loan Framework Agreement.
Annual Review
The Company’s auditor, Deloitte Touche Tohmatsu, was engaged to report on the Group’s continuing connected transactions in
accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of
Historical Financial Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing Connected Transactions
under the Hong Kong Listing Rules” issued by the Hong Kong Institute of Certified Public Accountants. The auditor’s letter containing
his findings and conclusions in respect of the continuing connected transactions disclosed above by the Group in accordance with
Rule 14A.56 of the Hong Kong Listing Rules has been provided to the Directors, and was confirmed in respect of the above matter.
A copy of the auditor’s letter has been provided by the Company to the Hong Kong Stock Exchange.
In accordance with Rule 14A.55 of the Hong Kong Listing Rules, the independent non-executive Directors have reviewed and
confirmed that the continuing connected transactions carried out under i) the Product and Service Framework Agreement, ii) the
2015 Contract for Purchase and Sale of Doré, iii) Financial Services Agreement, and iv) the Loan Framework Agreement have each
been entered into:
(a) in the ordinary and usual course of the Company’s business;
(b) on terms no less favorable to the Company than terms available to or from (as appropriate) independent third parties; and
(c) in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the
hh shareholders of the Company as a whole.
Related Party Transactions
During the Reporting Period, material related party transactions as disclosed in Note 28 to the consolidated financial statements in
this annual report (other than the above-mentioned) constituted connected transactions as defined in the Hong Kong Listing Rules,
the Company had complied with the relevant requirements under Chapter 14A of the Hong Kong Listing Rules during the year.
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15
DIRECTORS' REPORT
SKYLAND BONDS
On July 10, 2014, the Company, Skyland Mining, China National Gold, and Standard Chartered Bank, Citigroup Global Markets
Limited, Merrill Lynch International and CCB International Capital Limited (the “Joint Lead Managers”) entered into a subscription
agreement (the “Subscription Agreement”) pursuant to which Skyland Mining agreed to issue to the Joint Lead Managers, and
the Joint Lead Managers agreed to subscribe for bonds in an aggregate principal amount of US$500 million (equivalent to
approximately HK$3,900 million) at an issue price of 99.634% (the “Bonds”) bearing interest at the rate of 3.5% with a maturity date
or their respective spouse or children under 18 years of age, or were any such rights exercised by them; or was the Company or any
of its subsidiaries a party to any arrangement to enable the directors to acquire such rights in any other body corporate.
SUBSTANTIAL SHAREHOLDERS
of July 17, 2017, rated BBB- by Standard & Poor’s. The Bonds were unconditionally and irrevocably guaranteed by the Company.
As at December 31, 2016, according to the best available information made to the Board and the register of substantial shareholders
The net proceeds are used for working capital, capital expenditures and general corporate purposes of the Company.
required to be kept under section 336 of Part XV of the SFO, the Company was notified of the following substantial shareholders’
interests and short positions, being 5% or more of the Company’s issued share capital. These interests are in addition to those
On July 17, 2014, all the conditions to the issue of the Bonds as set out in the Subscription Agreement were satisfied and the issue of
disclosed above in respect of the Directors and chief executive:
the Bonds was closed. The Bonds were listed on the Hong Kong Stock Exchange on July 18, 2014.
Long Position in Shares of the Company
ANNUAL REPORT 2016
DIRECTORS' REPORT
Details of the Subscription Agreement are stated in the Company’s announcements dated July 11, 2014 and July 18, 2014.
NUMBER AND REMUNERATION OF EMPLOYEES
As at December 31, 2016, the Company had 1,760 employees working at various locations. During the Reporting Period, staff cost
(including Directors’ remuneration in the form of salaries and other benefits) was approximately US$28,178,000, compared to the
staff costs of US$25,689,000 in 2015.
EMOLUMENT POLICY
The Company’s executive emolument policy and compensation program is administered by the Compensation and Benefits
Committee which consists solely of independent Directors. The Compensation and Benefits Committee meet at least annually and
reviews levels of cash compensation and makes recommendations to the Board to adjust cash compensation in light of merit,
qualifications and competence, as needed. The Compensation and Benefits Committee also reviews the corporate goals and
objectives relevant to the compensation of the senior executive officers and based on recommendations from the Chief Executive
Officer and other members of the management team. The Compensation and Benefits Committee makes its determinations as
to overall compensation levels on the basis of both available third party data regarding comparable compensation at similar size
companies as well as their own industry experience and the Company’s hiring and retention needs. Decisions relating to executive
compensation are reported by the Compensation and Benefits Committee to the Board for approval.
The Company’s director emolument policy is administered by the Compensation and Benefits Committee with regard to comparable
market statistics. Decisions relating to the compensation of directors are reported by the Compensation and Benefits Committee
to the Board for approval.
The emolument policy for the Company’s employees is determined on a department by department basis with the Chief Executive
listed securities.
Officer determining the emoluments for employees and managers based on merit, qualifications and the Company’s hiring and
retention needs.
MANAGEMENT CONTRACTS
No contracts concerning the management and administration of the whole or any substantial part of the business of the Company
were entered into or existed during the Financial Year.
DIRECTORS’ RIGHT TO PURCHASE SHARES
Save as disclosed in the paragraph headed “Directors’ and Chief Executive’s Interests in Shares” above, at no time during the
Reporting Period, were there any rights to acquire benefits by means of acquisition of shares in or debentures of Company or any
of its subsidiaries or its holding companies or any of the subsidiaries of the Company’s holding companies granted to any director
Name
Nature of interest
China National Gold Group Corporation (1)
Indirect
China National Gold Group Hong Kong Limited
Registered Owner
Number of
Shares Held
155,794,830 (1)
155,794,830
Approximate
percentage of
outstanding
shares
39.3%
39.3%
Notes:
(1)
China National Gold Group Corporation directly and wholly owns China National Gold Group Hong Kong Limited therefore the interest
attributable to China National Gold Group Corporation represents its indirect interest in the Company’s shares through its equity interest in
China National Gold Group Hong Kong Limited.
(2)
Information relating to registered and indirect ownership of the Company’s shares were provided by China National Gold Group Corporation.
Based on the information available to the Board and save as disclosed above, as at December 31, 2016, no other person was
recorded in the register required to be kept under section 336 of the SFO as having an interest or short position in the shares or
underlying shares of the Company.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
During the Reporting Period, neither the Company, nor any of its subsidiaries purchased, sold and redeemed any of the Company’s
There are no provisions for pre-emptive rights under the Articles or under the laws of Canada which would oblige the Company to
PRE-EMPTIVE RIGHTS
offer new shares on a pro-rata basis to existing shareholders.
SUFFICIENCY OF PUBLIC FLOAT
Based on information that is available to the Company and within the knowledge of the Directors, as at the date of this report, the
Company has complied with the sufficiency of public float requirement under the Hong Kong Listing Rules.
16
17
ANNUAL REPORT 2016
DIRECTORS' REPORT
or their respective spouse or children under 18 years of age, or were any such rights exercised by them; or was the Company or any
of its subsidiaries a party to any arrangement to enable the directors to acquire such rights in any other body corporate.
SUBSTANTIAL SHAREHOLDERS
As at December 31, 2016, according to the best available information made to the Board and the register of substantial shareholders
required to be kept under section 336 of Part XV of the SFO, the Company was notified of the following substantial shareholders’
interests and short positions, being 5% or more of the Company’s issued share capital. These interests are in addition to those
On July 17, 2014, all the conditions to the issue of the Bonds as set out in the Subscription Agreement were satisfied and the issue of
disclosed above in respect of the Directors and chief executive:
the Bonds was closed. The Bonds were listed on the Hong Kong Stock Exchange on July 18, 2014.
Long Position in Shares of the Company
Name
Nature of interest
China National Gold Group Corporation (1)
Indirect
China National Gold Group Hong Kong Limited
Registered Owner
Number of
Shares Held
155,794,830 (1)
155,794,830
Approximate
percentage of
outstanding
shares
39.3%
39.3%
Notes:
(1)
China National Gold Group Corporation directly and wholly owns China National Gold Group Hong Kong Limited therefore the interest
attributable to China National Gold Group Corporation represents its indirect interest in the Company’s shares through its equity interest in
China National Gold Group Hong Kong Limited.
(2)
Information relating to registered and indirect ownership of the Company’s shares were provided by China National Gold Group Corporation.
Based on the information available to the Board and save as disclosed above, as at December 31, 2016, no other person was
recorded in the register required to be kept under section 336 of the SFO as having an interest or short position in the shares or
underlying shares of the Company.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
During the Reporting Period, neither the Company, nor any of its subsidiaries purchased, sold and redeemed any of the Company’s
The emolument policy for the Company’s employees is determined on a department by department basis with the Chief Executive
listed securities.
Officer determining the emoluments for employees and managers based on merit, qualifications and the Company’s hiring and
PRE-EMPTIVE RIGHTS
There are no provisions for pre-emptive rights under the Articles or under the laws of Canada which would oblige the Company to
offer new shares on a pro-rata basis to existing shareholders.
SUFFICIENCY OF PUBLIC FLOAT
Based on information that is available to the Company and within the knowledge of the Directors, as at the date of this report, the
Company has complied with the sufficiency of public float requirement under the Hong Kong Listing Rules.
16
17
DIRECTORS' REPORT
SKYLAND BONDS
On July 10, 2014, the Company, Skyland Mining, China National Gold, and Standard Chartered Bank, Citigroup Global Markets
Limited, Merrill Lynch International and CCB International Capital Limited (the “Joint Lead Managers”) entered into a subscription
agreement (the “Subscription Agreement”) pursuant to which Skyland Mining agreed to issue to the Joint Lead Managers, and
the Joint Lead Managers agreed to subscribe for bonds in an aggregate principal amount of US$500 million (equivalent to
approximately HK$3,900 million) at an issue price of 99.634% (the “Bonds”) bearing interest at the rate of 3.5% with a maturity date
of July 17, 2017, rated BBB- by Standard & Poor’s. The Bonds were unconditionally and irrevocably guaranteed by the Company.
The net proceeds are used for working capital, capital expenditures and general corporate purposes of the Company.
Details of the Subscription Agreement are stated in the Company’s announcements dated July 11, 2014 and July 18, 2014.
NUMBER AND REMUNERATION OF EMPLOYEES
As at December 31, 2016, the Company had 1,760 employees working at various locations. During the Reporting Period, staff cost
(including Directors’ remuneration in the form of salaries and other benefits) was approximately US$28,178,000, compared to the
staff costs of US$25,689,000 in 2015.
EMOLUMENT POLICY
The Company’s executive emolument policy and compensation program is administered by the Compensation and Benefits
Committee which consists solely of independent Directors. The Compensation and Benefits Committee meet at least annually and
reviews levels of cash compensation and makes recommendations to the Board to adjust cash compensation in light of merit,
qualifications and competence, as needed. The Compensation and Benefits Committee also reviews the corporate goals and
objectives relevant to the compensation of the senior executive officers and based on recommendations from the Chief Executive
Officer and other members of the management team. The Compensation and Benefits Committee makes its determinations as
to overall compensation levels on the basis of both available third party data regarding comparable compensation at similar size
companies as well as their own industry experience and the Company’s hiring and retention needs. Decisions relating to executive
compensation are reported by the Compensation and Benefits Committee to the Board for approval.
The Company’s director emolument policy is administered by the Compensation and Benefits Committee with regard to comparable
market statistics. Decisions relating to the compensation of directors are reported by the Compensation and Benefits Committee
to the Board for approval.
No contracts concerning the management and administration of the whole or any substantial part of the business of the Company
retention needs.
MANAGEMENT CONTRACTS
were entered into or existed during the Financial Year.
DIRECTORS’ RIGHT TO PURCHASE SHARES
Save as disclosed in the paragraph headed “Directors’ and Chief Executive’s Interests in Shares” above, at no time during the
Reporting Period, were there any rights to acquire benefits by means of acquisition of shares in or debentures of Company or any
of its subsidiaries or its holding companies or any of the subsidiaries of the Company’s holding companies granted to any director
DIRECTORS' REPORT
MAJOR CUSTOMERS AND SUPPLIERS
The percentage of purchases and sales for the Reporting Period attributable to the Company’s major suppliers and customers are
as follows:
The Board considers good corporate governance practices to be an important factor in the continued and long term success of
the Company by helping to maximize shareholder value over time.
Percentage of the
total purchases/sales
accounted for
steps:
To further this philosophy and to ensure that the Company follows good governance practices the Board has taken the following
ANNUAL REPORT 2016
CORPORATE GOVERNANCE REPORT
Purchases
-the largest supplier
-five largest suppliers combined
Sales
-the largest customer
-five largest customers combined
42%
62%
68%
100%
Save as disclosed above, at no time during the Reporting Period did a director, an associate of a director or any other shareholder
(which owned more than 5% of the Company’s issued share capital) hold any direct or indirect interest in the Company’s five
largest suppliers or customers during the Reporting Period.
CHARITABLE DONATIONS
The Company made charitable donations during the Reporting Period amounting to US$26,000.
EVENTS AFTER REPORTING PERIOD
There are no significant events occurring after December 31, 2016 as set out in the Financial Statements and Management’s
Discussion and Analysis.
INDEPENDENT AUDITORS
A resolution will be submitted at the 2017 AGM to re-appoint Deloitte Touche Tohmatsu of Hong Kong as the Company’s auditors.
On behalf of the Board,
Xin Song
Chairman of the Board
March 30, 2017
18
approved and adopted a mandate for the Board;
appointed an Audit Committee, a Nominating and Corporate Governance Committee and a Compensation and Benefits
Committee consisting solely of independent directors;
established a Health, Safety and Environmental Committee consisting solely of independent directors;
approved charters for all of the Board committees to formalize the mandates of those committees;
established a Disclosure Committee with a mandate to oversee the Company’s disclosure practices including the establishment
of a sub-committee charged with overseeing the Company’s technical disclosure;
adopted a formal Corporate Disclosure, Confidentiality and Securities Trading Policy and formalized the Company’s disclosure
adopted a formal Code of Business Conduct and Ethics that governs the behavior of directors, officers and employees and
controls and procedures;
which is also distributed to consultants;
roles and responsibilities;
adopted formal written position descriptions for the Chief Executive Officer and Chief Financial Officer, clearly defining their
adopted a whistleblower policy administered by an independent third party;
formalized a process for assessing the effectiveness of the Board as a whole, the Board committees and the contribution of
individual directors on a regular basis;
reviewing and approving the Company’s incentive compensation plans; and
providing continuing education opportunities for all directors.
COMPLIANCE WITH CORPORATE GOVERNANCE CODE
The Company has, throughout the Reporting Period, applied the principles and complied with the requirements of its corporate
governance practices as defined by the Board and all applicable statutory, regulatory and stock exchange listings standards, in
particular, the code provisions set out in the Corporate Governance Code (the “CG Code”) contained in Appendix 14 to the Hong
Kong Listing Rules. The Company’s current practices are reviewed and updated regularly to ensure that the latest developments in
corporate governance are followed and observed.
19
The percentage of purchases and sales for the Reporting Period attributable to the Company’s major suppliers and customers are
as follows:
The Board considers good corporate governance practices to be an important factor in the continued and long term success of
the Company by helping to maximize shareholder value over time.
ANNUAL REPORT 2016
CORPORATE GOVERNANCE REPORT
To further this philosophy and to ensure that the Company follows good governance practices the Board has taken the following
steps:
approved and adopted a mandate for the Board;
appointed an Audit Committee, a Nominating and Corporate Governance Committee and a Compensation and Benefits
Committee consisting solely of independent directors;
established a Health, Safety and Environmental Committee consisting solely of independent directors;
approved charters for all of the Board committees to formalize the mandates of those committees;
established a Disclosure Committee with a mandate to oversee the Company’s disclosure practices including the establishment
of a sub-committee charged with overseeing the Company’s technical disclosure;
adopted a formal Corporate Disclosure, Confidentiality and Securities Trading Policy and formalized the Company’s disclosure
controls and procedures;
adopted a formal Code of Business Conduct and Ethics that governs the behavior of directors, officers and employees and
which is also distributed to consultants;
adopted formal written position descriptions for the Chief Executive Officer and Chief Financial Officer, clearly defining their
roles and responsibilities;
adopted a whistleblower policy administered by an independent third party;
formalized a process for assessing the effectiveness of the Board as a whole, the Board committees and the contribution of
individual directors on a regular basis;
reviewing and approving the Company’s incentive compensation plans; and
providing continuing education opportunities for all directors.
COMPLIANCE WITH CORPORATE GOVERNANCE CODE
The Company has, throughout the Reporting Period, applied the principles and complied with the requirements of its corporate
governance practices as defined by the Board and all applicable statutory, regulatory and stock exchange listings standards, in
particular, the code provisions set out in the Corporate Governance Code (the “CG Code”) contained in Appendix 14 to the Hong
Kong Listing Rules. The Company’s current practices are reviewed and updated regularly to ensure that the latest developments in
corporate governance are followed and observed.
19
DIRECTORS' REPORT
MAJOR CUSTOMERS AND SUPPLIERS
Purchases
-the largest supplier
-five largest suppliers combined
Sales
-the largest customer
-five largest customers combined
Percentage of the
total purchases/sales
accounted for
42%
62%
68%
100%
Save as disclosed above, at no time during the Reporting Period did a director, an associate of a director or any other shareholder
(which owned more than 5% of the Company’s issued share capital) hold any direct or indirect interest in the Company’s five
largest suppliers or customers during the Reporting Period.
CHARITABLE DONATIONS
The Company made charitable donations during the Reporting Period amounting to US$26,000.
EVENTS AFTER REPORTING PERIOD
There are no significant events occurring after December 31, 2016 as set out in the Financial Statements and Management’s
Discussion and Analysis.
INDEPENDENT AUDITORS
A resolution will be submitted at the 2017 AGM to re-appoint Deloitte Touche Tohmatsu of Hong Kong as the Company’s auditors.
On behalf of the Board,
Xin Song
Chairman of the Board
March 30, 2017
18
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
BOARD COMPOSITION
Corporate governance guidelines adopted by the Canadian Securities Administrators (“CSA”) recommend that a majority of
the directors of a corporation be independent directors. Under the CSA corporate governance guidelines, an “independent
director” is a director who has no direct or indirect material relationship with the Company, including as a partner, shareholder or
governance rules and guidelines.
officer of an organization that has a relationship with the Company. A “material relationship” is one that would, or in the view of
the Board could be reasonably expected to, interfere with the exercise of a director’s independent judgment. As at December
The Directors are satisfied that the size and composition of the Board results in a balanced representation on the Board among
31, 2016 and as at the date of this report, the Board has determined that it consists of four “independent directors” and five non-
independent directors under the CSA corporate governance guidelines. The Board believes that its current size and composition
and the composition of the Board committees consisting solely of independent directors, results in balanced representation.
As at the date of this report, the Board has determined that it consists of four independent Directors and five non-independent
Directors as follows:
Independent Directors
Ian He
Yunfei Chen
Gregory Hall
John King Burns
Notes:
Non-independent Directors
Xin Song (Chairman) (1)
Bing Liu (Chief Executive Officer) (2)
Liangyou Jiang (Senior Executive Vice President) (3)
Lianzhong Sun (4)
Xiangdong Jiang (Vice President of Production) (5)
(1)
Mr. Song is a non-independent Director in his capacity as a senior officer of the Company and in his capacity as an executive officer of
China National Gold which has a material relationship with the Company.
(2)
Mr. Liu is a non-independent Director in his capacity as an executive officer of China National Gold which has a material relationship with
the Company.
Mr. Jiang is a non-independent Director in his capacity as a senior officer of the Company.
Mr. Sun is a non-independent Director in his capacity as an executive officer of China National Gold which has a material relationship with
the Company
Through active participation at Board meetings, taking the lead in managing issues involving potential conflict of interests
and serving on Board committees, all non-executive Directors (including independent non-executive Directors) make various
Mr. Jiang is a non-independent Director in his capacity as a senior officer of the Company.
contributions to the effective direction of the Company.
In accordance with the Articles, the non-executive Directors (including the independent non-executive Directors) are subject to
re-election each year at the Company’s annual general meeting.
(3)
(4)
(5)
20
ANNUAL REPORT 2016
As at the date of this report, China National Gold holds approximately 39.3% of the Company’s outstanding common shares.
The Board has determined that four of its nine directors being Mr. He, Mr. Chen, Mr. Hall and Mr. Burns are independent of China
National Gold, which the Board believes fairly reflects the investment in the Company by shareholders other than the Company’s
principal shareholder. The Board has further determined that four of its nine directors do not have an interest in the Company or
relationship with the Company’s principal shareholder and satisfy all independence requirements under the applicable corporate
management and non-management directors and the Company’s principal shareholder. While the Board believes that it functions
effectively given the size of the Company’s and complexity of its business, the Company, through its Nominating and Corporate
Governance Committee, may in the future seek to add qualified candidates to augment its experience and expertise and to
enhance the Company’s ability to develop its business interests.
Mr. Song currently serves as the Chairman of the Board and served as the Company’s Chief Executive Officer from October 2009
to February 2014. Mr. Liu currently serves as the Company’s Chief Executive Officer since February 2014.
At present, Mr. He, the Chairman of each of the committees of the Board, acts as the de facto lead independent Director and
liaises with management and the Directors regarding relevant matters. The Board is of the view that appropriate structures and
procedures are in place to allow the Board to function independently of management while continuing to provide the Company
with the benefit of having a Chairman with extensive experience in the mining industry.
The Company has received from each of its independent Directors, their confirmation of independence pursuant to listing rules in
all applicable jurisdictions.
To the best knowledge of the Company, none of the Directors are related. Relationships include financial, business or family
relationships. The Directors are free to exercise their independent judgment. Directors, including the current non-executive Director
and the independent non-executive Directors, are elected at each annual general meeting and hold office until the next annual
general meeting, unless a Director’s office is earlier vacated in accordance with the provisions of the British Columbia Business
Corporations Act (“Business Corporations Act”) and the Articles.
NON-EXECUTIVE DIRECTORS
The non-executive Directors bring a wide range of business and financial expertise, experience and independent judgment to the
Board. All the Board committees comprise at least four non-executive Directors (including independent non-executive Directors)
who have made significant contribution of their skills and expertise to these committees.
21
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
ANNUAL REPORT 2016
BOARD COMPOSITION
Corporate governance guidelines adopted by the Canadian Securities Administrators (“CSA”) recommend that a majority of
the directors of a corporation be independent directors. Under the CSA corporate governance guidelines, an “independent
director” is a director who has no direct or indirect material relationship with the Company, including as a partner, shareholder or
officer of an organization that has a relationship with the Company. A “material relationship” is one that would, or in the view of
the Board could be reasonably expected to, interfere with the exercise of a director’s independent judgment. As at December
31, 2016 and as at the date of this report, the Board has determined that it consists of four “independent directors” and five non-
independent directors under the CSA corporate governance guidelines. The Board believes that its current size and composition
and the composition of the Board committees consisting solely of independent directors, results in balanced representation.
As at the date of this report, the Board has determined that it consists of four independent Directors and five non-independent
Directors as follows:
Independent Directors
Ian He
Yunfei Chen
Gregory Hall
John King Burns
Notes:
the Company.
the Company
(3)
(4)
(5)
Non-independent Directors
Xin Song (Chairman) (1)
Bing Liu (Chief Executive Officer) (2)
Liangyou Jiang (Senior Executive Vice President) (3)
Lianzhong Sun (4)
Xiangdong Jiang (Vice President of Production) (5)
(1)
Mr. Song is a non-independent Director in his capacity as a senior officer of the Company and in his capacity as an executive officer of
China National Gold which has a material relationship with the Company.
(2)
Mr. Liu is a non-independent Director in his capacity as an executive officer of China National Gold which has a material relationship with
Mr. Jiang is a non-independent Director in his capacity as a senior officer of the Company.
Mr. Sun is a non-independent Director in his capacity as an executive officer of China National Gold which has a material relationship with
Mr. Jiang is a non-independent Director in his capacity as a senior officer of the Company.
As at the date of this report, China National Gold holds approximately 39.3% of the Company’s outstanding common shares.
The Board has determined that four of its nine directors being Mr. He, Mr. Chen, Mr. Hall and Mr. Burns are independent of China
National Gold, which the Board believes fairly reflects the investment in the Company by shareholders other than the Company’s
principal shareholder. The Board has further determined that four of its nine directors do not have an interest in the Company or
relationship with the Company’s principal shareholder and satisfy all independence requirements under the applicable corporate
governance rules and guidelines.
The Directors are satisfied that the size and composition of the Board results in a balanced representation on the Board among
management and non-management directors and the Company’s principal shareholder. While the Board believes that it functions
effectively given the size of the Company’s and complexity of its business, the Company, through its Nominating and Corporate
Governance Committee, may in the future seek to add qualified candidates to augment its experience and expertise and to
enhance the Company’s ability to develop its business interests.
Mr. Song currently serves as the Chairman of the Board and served as the Company’s Chief Executive Officer from October 2009
to February 2014. Mr. Liu currently serves as the Company’s Chief Executive Officer since February 2014.
At present, Mr. He, the Chairman of each of the committees of the Board, acts as the de facto lead independent Director and
liaises with management and the Directors regarding relevant matters. The Board is of the view that appropriate structures and
procedures are in place to allow the Board to function independently of management while continuing to provide the Company
with the benefit of having a Chairman with extensive experience in the mining industry.
The Company has received from each of its independent Directors, their confirmation of independence pursuant to listing rules in
all applicable jurisdictions.
To the best knowledge of the Company, none of the Directors are related. Relationships include financial, business or family
relationships. The Directors are free to exercise their independent judgment. Directors, including the current non-executive Director
and the independent non-executive Directors, are elected at each annual general meeting and hold office until the next annual
general meeting, unless a Director’s office is earlier vacated in accordance with the provisions of the British Columbia Business
Corporations Act (“Business Corporations Act”) and the Articles.
NON-EXECUTIVE DIRECTORS
The non-executive Directors bring a wide range of business and financial expertise, experience and independent judgment to the
Board. All the Board committees comprise at least four non-executive Directors (including independent non-executive Directors)
who have made significant contribution of their skills and expertise to these committees.
Through active participation at Board meetings, taking the lead in managing issues involving potential conflict of interests
and serving on Board committees, all non-executive Directors (including independent non-executive Directors) make various
contributions to the effective direction of the Company.
In accordance with the Articles, the non-executive Directors (including the independent non-executive Directors) are subject to
re-election each year at the Company’s annual general meeting.
20
21
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
DIRECTORS’ PROFESSIONAL DEVELOPMENT
The Board, through the Chairman of the Nominating and Corporate Governance Committee, ensures that all new Directors receive
a comprehensive orientation so that each new Director fully understands the role of the Board and its committees, as well as the
contribution individual directors are expected to make and to understand the nature and operation of the Company’s business.
The Board provides continuing education opportunities for all Directors, so that each individual Director may maintain or enhance
his skills and abilities as a Director, as well as to ensure his knowledge and understanding of the Company’s business remains current.
Directors are required to submit to the Company annually details of training sessions undertaken by them in each financial year so
that the Company can maintain a training record for its Directors. According to the training records maintained by the Company,
the trainings received by each of the Directors during the Reporting Period are summarized as follows:
Executive Directors
Xin Song (Chairman)
Bing Liu
Liangyou Jiang
Xiangdong Jiang
Non-Executive Director
Lianzhong Sun
Independent Non-Executive Directors
Ian He
Yunfei Chen
Gregory Hall
John King Burns
A.
attending seminars/conference/forums
Type of trainings
B
B
B
B
B
B
B
B
A, B
B.
reading newspapers, journals and updates relating to the economy, general business, real estate, corporate governance and director’s
duties and responsibilities
ANNUAL REPORT 2016
MANDATE OF THE BOARD
Under the Business Corporations Act, the Directors are required to manage the Company’s business and affairs, and in doing
so, to act honestly and in good faith with a view to furthering the best interests of the Company. In addition, each Director must
exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. The Board
is responsible for supervising the conduct of the Company’s affairs and the management of its business. The Board’s mandate
includes setting long term goals and objectives for the Company, formulating the plans and strategies necessary to achieve
those objectives and supervising senior management in their implementation. Although the Board delegates the responsibility for
managing the day-to-day affairs of the Company to senior management, the Board retains a supervisory role in respect of, and
ultimate responsibility for, all matters relating to the Company and its business.
The Board’s mandate requires that the Board be satisfied that the Company’s senior management will manage the affairs of
the Company in the best interest of the shareholders, in accordance with the Company’s principles, and that the arrangements
made for the management of the Company’s business and affairs are consistent with their duties described above. The Board
is responsible for protecting shareholder interests and ensuring that the incentives of the shareholders and of management are
aligned. The obligation of the Board must be performed continuously, and not merely from time to time, and in times of crisis or
emergency the Board may have to assume a more direct role in managing the affairs of the Company.
In discharging this responsibility, the Board’s mandate provides that the Board oversees and monitors significant corporate plans
and strategic initiatives. The Board’s strategic planning process includes annual budget reviews and approvals and discussions with
management relating to strategic and budgetary issues.
As part of its ongoing review of business operations, the Board periodically reviews the principal risks inherent in the Company’s
business, including financial risks, and assesses the systems established to manage those risks. Directly and through the Audit
Committee, the Board also assesses the integrity of internal control over financial reporting and management information systems.
In addition to those matters that must, by law, be approved by the Board, the Board is required under its mandate to approve
annual operating and capital budgets, any material dispositions, acquisitions and investments outside of the ordinary course of
business or not provided for in the approved budgets, long-term strategy, organizational development plans and the appointment
of senior executive officers. Management is authorized to act, without Board approval on all ordinary course matters relating to
the Company’s business.
The Board’s mandate provides that the Board expects management to provide the directors, on a timely basis, with information
concerning the business and affairs of the Company, including financial and operating information and information concerning
industry developments as they occur, all with a view to enabling the Board to discharge its stewardship obligations effectively. The
Board expects management to efficiently implement its strategic plans for the Company, to keep the Board fully apprised of its
progress in doing so and to be fully accountable to the Board in respect to all matters for which it has been assigned responsibility.
The Board has instructed management to maintain procedures to monitor and promptly address shareholder concerns and has
directed and will continue to direct management to apprise the Board of any major concerns expressed by shareholders.
Each Board committee is empowered to engage external advisors as it sees fit. Any individual Director is entitled to engage
an outside advisor at the expense of the Company provided such director has obtained the approval of the Nominating and
Corporate Governance Committee to do so. In conjunction with its review of operations, the Board considers risk issues when
appropriate and approves corporate policies addressing the management of the risk of the Company’s business.
22
23
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
DIRECTORS’ PROFESSIONAL DEVELOPMENT
The Board, through the Chairman of the Nominating and Corporate Governance Committee, ensures that all new Directors receive
a comprehensive orientation so that each new Director fully understands the role of the Board and its committees, as well as the
MANDATE OF THE BOARD
Under the Business Corporations Act, the Directors are required to manage the Company’s business and affairs, and in doing
so, to act honestly and in good faith with a view to furthering the best interests of the Company. In addition, each Director must
contribution individual directors are expected to make and to understand the nature and operation of the Company’s business.
exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. The Board
ANNUAL REPORT 2016
The Board provides continuing education opportunities for all Directors, so that each individual Director may maintain or enhance
his skills and abilities as a Director, as well as to ensure his knowledge and understanding of the Company’s business remains current.
Directors are required to submit to the Company annually details of training sessions undertaken by them in each financial year so
that the Company can maintain a training record for its Directors. According to the training records maintained by the Company,
the trainings received by each of the Directors during the Reporting Period are summarized as follows:
Executive Directors
Xin Song (Chairman)
Bing Liu
Liangyou Jiang
Xiangdong Jiang
Non-Executive Director
Lianzhong Sun
Ian He
Yunfei Chen
Gregory Hall
John King Burns
Independent Non-Executive Directors
A.
attending seminars/conference/forums
duties and responsibilities
B.
reading newspapers, journals and updates relating to the economy, general business, real estate, corporate governance and director’s
Type of trainings
B
B
B
B
B
B
B
B
A, B
is responsible for supervising the conduct of the Company’s affairs and the management of its business. The Board’s mandate
includes setting long term goals and objectives for the Company, formulating the plans and strategies necessary to achieve
those objectives and supervising senior management in their implementation. Although the Board delegates the responsibility for
managing the day-to-day affairs of the Company to senior management, the Board retains a supervisory role in respect of, and
ultimate responsibility for, all matters relating to the Company and its business.
The Board’s mandate requires that the Board be satisfied that the Company’s senior management will manage the affairs of
the Company in the best interest of the shareholders, in accordance with the Company’s principles, and that the arrangements
made for the management of the Company’s business and affairs are consistent with their duties described above. The Board
is responsible for protecting shareholder interests and ensuring that the incentives of the shareholders and of management are
aligned. The obligation of the Board must be performed continuously, and not merely from time to time, and in times of crisis or
emergency the Board may have to assume a more direct role in managing the affairs of the Company.
In discharging this responsibility, the Board’s mandate provides that the Board oversees and monitors significant corporate plans
and strategic initiatives. The Board’s strategic planning process includes annual budget reviews and approvals and discussions with
management relating to strategic and budgetary issues.
As part of its ongoing review of business operations, the Board periodically reviews the principal risks inherent in the Company’s
business, including financial risks, and assesses the systems established to manage those risks. Directly and through the Audit
Committee, the Board also assesses the integrity of internal control over financial reporting and management information systems.
In addition to those matters that must, by law, be approved by the Board, the Board is required under its mandate to approve
annual operating and capital budgets, any material dispositions, acquisitions and investments outside of the ordinary course of
business or not provided for in the approved budgets, long-term strategy, organizational development plans and the appointment
of senior executive officers. Management is authorized to act, without Board approval on all ordinary course matters relating to
the Company’s business.
The Board’s mandate provides that the Board expects management to provide the directors, on a timely basis, with information
concerning the business and affairs of the Company, including financial and operating information and information concerning
industry developments as they occur, all with a view to enabling the Board to discharge its stewardship obligations effectively. The
Board expects management to efficiently implement its strategic plans for the Company, to keep the Board fully apprised of its
progress in doing so and to be fully accountable to the Board in respect to all matters for which it has been assigned responsibility.
The Board has instructed management to maintain procedures to monitor and promptly address shareholder concerns and has
directed and will continue to direct management to apprise the Board of any major concerns expressed by shareholders.
Each Board committee is empowered to engage external advisors as it sees fit. Any individual Director is entitled to engage
an outside advisor at the expense of the Company provided such director has obtained the approval of the Nominating and
Corporate Governance Committee to do so. In conjunction with its review of operations, the Board considers risk issues when
appropriate and approves corporate policies addressing the management of the risk of the Company’s business.
22
23
ANNUAL REPORT 2016
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
The Board takes ultimate responsibility for the appointment and monitoring of the Company’s senior management. The Board
approves the appointment of senior management and reviews their performance on an ongoing basis.
The Company has a corporate disclosure policy addressing, among other things, how the Company interacts with analysts and
the public, and contains measures for the Company to avoid selective disclosure. The Company has a Disclosure Committee
responsible for overseeing the Company’s disclosure practices. The Disclosure Committee consists of the Company’s Executive Vice
President and Corporate Secretary, Chief Executive Officer, Chief Financial Officer and the Company’s senior communications
and investor relations officers, or those individuals who act in equivalent positions for the Company, and receives advice from
COMMITTEES OF THE BOARD
Audit Committee
The Board has established an Audit Committee, which operates under a charter approved by the Board. It is the Board’s responsibility
to ensure that the Company has an effective risk management and internal control system. This includes internal controls to manage
both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper
accounting records, and the reliability of financial information as well as non-financial considerations such as the benchmarking of
operational key performance indicators. The Company’s Audit Committee consists of Mr. He, Mr. Chen, Mr. Burns and Mr. Hall. Mr.
the Company’s external legal counsels. The Disclosure Committee assesses materiality and determines when developments justify
He serves as Chairman of the Audit Committee.
public disclosure. The Disclosure Committee reviews the corporate disclosure policy annually and as otherwise needed to ensure
compliance with regulatory requirements and reviews all documents which are reviewed by the Board and Audit Committee.
The Board reviews and approves the Company’s material disclosure documents, including its annual report, annual information
form and management proxy circular. The Company’s annual and quarterly financial statements, management’s discussion and
analysis and other financial disclosure is reviewed by the Audit Committee and recommended to the Board for approval, prior to
its release.
The Company has adopted a Board diversity policy in accordance with the requirement set out in code provision A.5.6 of the CG
Code. The Company recognizes and embraces the benefits of diverse Board. It works hard to ensure that the Board has a balance
of skills, experience and diversity of perspectives appropriate to the requirements of the Company’s business.
All Board appointments will continue to be made on a merit basis with due regard for the benefits of diversity of the Board members.
Selection of candidates will be based on a range of diversity perspectives, including, but not limited to, (i) business experience; (ii)
The primary objective of the Audit Committee is to act as a liaison between the Board and the Company’s independent auditors
and to assist the Board in fulfilling its oversight responsibilities with respect to (a) the financial statements and other financial
information provided by the Company to its shareholders, the public and others, (b) the Company’s compliance with legal
and regulatory requirements, (c) the qualification, independence and performance of the auditors and (d) the Company’s risk
management and internal financial and accounting controls, and management information systems.
Although the Audit Committee has the powers and responsibilities set forth in its charter, the role of the Audit Committee is
oversight. The members of the Audit Committee are not full-time employees of the Company and may or may not be accountants
or auditors by profession or experts in the fields of accounting or auditing and, in any event, do not serve in such capacity.
Consequently, it is not the duty of the Committee to conduct audits or to determine that the Company’s financial statements and
disclosures are complete and accurate and are in accordance with International Financial Reporting Standards (“IFRS”). These are
specialized skills and other experiences; (iii) race, ethnicity, international background, gender and age (iv) applicable regulatory
the responsibilities of management and the auditors.
requirements; and issues involving possible conflicts of interest. The ultimate decision will be made upon the merits and contribution
that the selected candidates will bring to the Board.
All services to be performed by the auditors of the Company must be approved in advance by the Audit Committee.
No measurable objectives for achieving diversity were specifically set by the Board during the year, other than the recruitment of
The Audit Committee held four meetings during the Reporting Period. In performing its duties in accordance with its charter, the
the most suitable candidate for a position.
Audit Committee has:
overseen the Company’s relationship with the auditors;
reviewed the Company’s interim and annual financial statements;
reviewed and assessed the effectiveness of systems of risk management and internal controls, and the
effectiveness of the Company’s internal audit function; and
reported to the Board on the proceedings and deliberations of the Audit Committee.
24
25
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
The Board takes ultimate responsibility for the appointment and monitoring of the Company’s senior management. The Board
approves the appointment of senior management and reviews their performance on an ongoing basis.
COMMITTEES OF THE BOARD
Audit Committee
The Board has established an Audit Committee, which operates under a charter approved by the Board. It is the Board’s responsibility
to ensure that the Company has an effective risk management and internal control system. This includes internal controls to manage
both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper
accounting records, and the reliability of financial information as well as non-financial considerations such as the benchmarking of
operational key performance indicators. The Company’s Audit Committee consists of Mr. He, Mr. Chen, Mr. Burns and Mr. Hall. Mr.
the Company’s external legal counsels. The Disclosure Committee assesses materiality and determines when developments justify
He serves as Chairman of the Audit Committee.
ANNUAL REPORT 2016
The primary objective of the Audit Committee is to act as a liaison between the Board and the Company’s independent auditors
and to assist the Board in fulfilling its oversight responsibilities with respect to (a) the financial statements and other financial
information provided by the Company to its shareholders, the public and others, (b) the Company’s compliance with legal
and regulatory requirements, (c) the qualification, independence and performance of the auditors and (d) the Company’s risk
management and internal financial and accounting controls, and management information systems.
Although the Audit Committee has the powers and responsibilities set forth in its charter, the role of the Audit Committee is
oversight. The members of the Audit Committee are not full-time employees of the Company and may or may not be accountants
or auditors by profession or experts in the fields of accounting or auditing and, in any event, do not serve in such capacity.
Consequently, it is not the duty of the Committee to conduct audits or to determine that the Company’s financial statements and
disclosures are complete and accurate and are in accordance with International Financial Reporting Standards (“IFRS”). These are
specialized skills and other experiences; (iii) race, ethnicity, international background, gender and age (iv) applicable regulatory
the responsibilities of management and the auditors.
No measurable objectives for achieving diversity were specifically set by the Board during the year, other than the recruitment of
The Audit Committee held four meetings during the Reporting Period. In performing its duties in accordance with its charter, the
the most suitable candidate for a position.
Audit Committee has:
All services to be performed by the auditors of the Company must be approved in advance by the Audit Committee.
overseen the Company’s relationship with the auditors;
reviewed the Company’s interim and annual financial statements;
reviewed and assessed the effectiveness of systems of risk management and internal controls, and the
effectiveness of the Company’s internal audit function; and
reported to the Board on the proceedings and deliberations of the Audit Committee.
The Company has a corporate disclosure policy addressing, among other things, how the Company interacts with analysts and
the public, and contains measures for the Company to avoid selective disclosure. The Company has a Disclosure Committee
responsible for overseeing the Company’s disclosure practices. The Disclosure Committee consists of the Company’s Executive Vice
President and Corporate Secretary, Chief Executive Officer, Chief Financial Officer and the Company’s senior communications
and investor relations officers, or those individuals who act in equivalent positions for the Company, and receives advice from
public disclosure. The Disclosure Committee reviews the corporate disclosure policy annually and as otherwise needed to ensure
compliance with regulatory requirements and reviews all documents which are reviewed by the Board and Audit Committee.
The Board reviews and approves the Company’s material disclosure documents, including its annual report, annual information
form and management proxy circular. The Company’s annual and quarterly financial statements, management’s discussion and
analysis and other financial disclosure is reviewed by the Audit Committee and recommended to the Board for approval, prior to
its release.
The Company has adopted a Board diversity policy in accordance with the requirement set out in code provision A.5.6 of the CG
Code. The Company recognizes and embraces the benefits of diverse Board. It works hard to ensure that the Board has a balance
of skills, experience and diversity of perspectives appropriate to the requirements of the Company’s business.
All Board appointments will continue to be made on a merit basis with due regard for the benefits of diversity of the Board members.
Selection of candidates will be based on a range of diversity perspectives, including, but not limited to, (i) business experience; (ii)
requirements; and issues involving possible conflicts of interest. The ultimate decision will be made upon the merits and contribution
that the selected candidates will bring to the Board.
24
25
ANNUAL REPORT 2016
MEETINGS OF THE BOARD AND BOARD COMMITTEES
The Board holds regular quarterly meetings by means of telephone conferencing facilities and meets as required between
quarterly meetings to update the Directors on corporate developments. During regular quarterly meetings, the non-executive and
independent non-executive Directors have an opportunity to meet separate from management. Management also communicates
informally with the Board on a regular basis, and solicits the advice of the Board members on matters falling within their special
knowledge or experience. In addition, the independent Directors meet regularly on a formal and informal basis to facilitate the
exercise of their independent judgment.
During the Reporting Period, four Board meetings, four Audit Committee meetings, one Nominating and Corporate Governance
Committee meeting, one Compensation and Benefits Committee meeting, two Health, Safety and Environmental Committee
meetings and three meetings of the Independent Directors was held.
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
Nominating and Corporate Governance Committee
The Board has established a Nominating and Corporate Governance Committee, which operates under a charter approved by the
Board. The primary objective of the Nominating and Corporate Governance Committee is to assist the Board in fulfilling its oversight
responsibilities by (a) identifying individuals qualified to become Board and Board committee members and recommending that
the Board select director nominees for appointment or election to the Board; and (b) developing and recommending to the
Board corporate governance guidelines for the Company and making recommendations to the Board with respect to corporate
governance practices. The Nominating and Corporate Governance Committee monitors the disclosure of conflicts of interest to
the Board and ensures that no director will vote in respect of a matter in which such director has a material interest. The members of
the Nominating and Corporate Governance Committee are Mr. He, Mr. Chen, Mr. Hall and Mr. Burns. Mr. He serves as Chairman of
the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee met during the
Financial Year to review its charter, to review the Articles, to assess the competencies and characteristics represented on the Board,
to review the results of a Board effectiveness survey and self-assessments and to confirm compliance with regulatory, corporate
governance and disclosure requirements. The Nominating and Corporate Governance Committee is also responsible for reviewing
and monitoring the training and continuous professional development of directors and senior management as required under code
provision D.3.1 (b) of the CG ode.
Compensation and Benefits Committee
The Board has established a Compensation and Benefits Committee, which operates under a charter approved by the Board.
The primary objective of the Compensation and Benefits Committee is to discharge the Board’s responsibilities relating to the
compensation and benefits for senior executives and directors of the Company. This role includes reviewing the adequacy and form
of compensation for senior executives and the directors, determining the recipients of, the nature and size of share compensation
awards granted from time to time and determining any bonuses to be awarded. The members of the Compensation and Benefits
Committee are Mr. He, Mr. Chen, Mr. Hall and Mr. Burns. Mr. He is the Chairman of the Compensation and Benefits Committee.
The Compensation and Benefits Committee met during the Financial Year to review its charter, to assess the performance and
compensation of the Chief Executive Officer, to review the compensation and benefits for senior executives and directors of the
Company and to complete self-assessments. The Compensation and Benefits Committee made recommendations to the Board for
adjustments to compensation for the Company’s senior executives on various occasions throughout the Reporting Period.
Health, Safety and Environmental Committee
The Board has established a Health, Safety and Environmental Committee, which operates under a charter approved by the
Board. The primary objective of the Health, Safety and Environmental Committee is to discharge the Board’s responsibilities
relating to compliance with applicable health, safety and environmental rules and regulations. This role includes assisting the
Board in its oversight of the development, implementation and evaluation by management of the Company’s health, safety and
environmental objectives and for monitoring the Company’s compliance with applicable health, safety and environmental laws
and regulations. The members of the Health, Safety and Environmental Committee are Mr. He, Mr. Chen, Mr. Hall and Mr. Burns.
Mr. He is the Chairman of the Health, Safety and Environmental Committee. The Health, Safety and Environmental Committee
met during the Reporting Period to receive reports from the Chief Safety Officers from the CSH and Jiama mines, to review the
findings of an independent safety audit, and to complete self-assessments. The Health, Safety and Environmental Committee made
recommendations to the mine sites for continuous improvements.
Ad Hoc and Special Committees
In appropriate circumstances, the Board will establish a special committee to review a matter in which several directors or
management may have a conflict of interest.
26
27
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
ANNUAL REPORT 2016
MEETINGS OF THE BOARD AND BOARD COMMITTEES
The Board holds regular quarterly meetings by means of telephone conferencing facilities and meets as required between
quarterly meetings to update the Directors on corporate developments. During regular quarterly meetings, the non-executive and
independent non-executive Directors have an opportunity to meet separate from management. Management also communicates
informally with the Board on a regular basis, and solicits the advice of the Board members on matters falling within their special
knowledge or experience. In addition, the independent Directors meet regularly on a formal and informal basis to facilitate the
exercise of their independent judgment.
During the Reporting Period, four Board meetings, four Audit Committee meetings, one Nominating and Corporate Governance
Committee meeting, one Compensation and Benefits Committee meeting, two Health, Safety and Environmental Committee
meetings and three meetings of the Independent Directors was held.
27
Nominating and Corporate Governance Committee
The Board has established a Nominating and Corporate Governance Committee, which operates under a charter approved by the
Board. The primary objective of the Nominating and Corporate Governance Committee is to assist the Board in fulfilling its oversight
responsibilities by (a) identifying individuals qualified to become Board and Board committee members and recommending that
the Board select director nominees for appointment or election to the Board; and (b) developing and recommending to the
Board corporate governance guidelines for the Company and making recommendations to the Board with respect to corporate
governance practices. The Nominating and Corporate Governance Committee monitors the disclosure of conflicts of interest to
the Board and ensures that no director will vote in respect of a matter in which such director has a material interest. The members of
the Nominating and Corporate Governance Committee are Mr. He, Mr. Chen, Mr. Hall and Mr. Burns. Mr. He serves as Chairman of
the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee met during the
Financial Year to review its charter, to review the Articles, to assess the competencies and characteristics represented on the Board,
to review the results of a Board effectiveness survey and self-assessments and to confirm compliance with regulatory, corporate
governance and disclosure requirements. The Nominating and Corporate Governance Committee is also responsible for reviewing
and monitoring the training and continuous professional development of directors and senior management as required under code
provision D.3.1 (b) of the CG ode.
Compensation and Benefits Committee
The Board has established a Compensation and Benefits Committee, which operates under a charter approved by the Board.
The primary objective of the Compensation and Benefits Committee is to discharge the Board’s responsibilities relating to the
compensation and benefits for senior executives and directors of the Company. This role includes reviewing the adequacy and form
of compensation for senior executives and the directors, determining the recipients of, the nature and size of share compensation
awards granted from time to time and determining any bonuses to be awarded. The members of the Compensation and Benefits
Committee are Mr. He, Mr. Chen, Mr. Hall and Mr. Burns. Mr. He is the Chairman of the Compensation and Benefits Committee.
The Compensation and Benefits Committee met during the Financial Year to review its charter, to assess the performance and
compensation of the Chief Executive Officer, to review the compensation and benefits for senior executives and directors of the
Company and to complete self-assessments. The Compensation and Benefits Committee made recommendations to the Board for
adjustments to compensation for the Company’s senior executives on various occasions throughout the Reporting Period.
Health, Safety and Environmental Committee
The Board has established a Health, Safety and Environmental Committee, which operates under a charter approved by the
Board. The primary objective of the Health, Safety and Environmental Committee is to discharge the Board’s responsibilities
relating to compliance with applicable health, safety and environmental rules and regulations. This role includes assisting the
Board in its oversight of the development, implementation and evaluation by management of the Company’s health, safety and
environmental objectives and for monitoring the Company’s compliance with applicable health, safety and environmental laws
and regulations. The members of the Health, Safety and Environmental Committee are Mr. He, Mr. Chen, Mr. Hall and Mr. Burns.
Mr. He is the Chairman of the Health, Safety and Environmental Committee. The Health, Safety and Environmental Committee
met during the Reporting Period to receive reports from the Chief Safety Officers from the CSH and Jiama mines, to review the
findings of an independent safety audit, and to complete self-assessments. The Health, Safety and Environmental Committee made
recommendations to the mine sites for continuous improvements.
In appropriate circumstances, the Board will establish a special committee to review a matter in which several directors or
Ad Hoc and Special Committees
management may have a conflict of interest.
26
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
Attendances/Number of Meetings
The table below shows the record of attendance by directors at meetings of the Board and its committees, as well as the number
of meetings held during the Reporting Period:
Board
Audit
Committee
Nominating
and Corporate
Governance
Committe
Compensation
and Benefits
Committe
Health, Safety
and Environmen-
tal Committee
4/4(100%)
4/4(100%)
4/4(100%)
1/4(25%)
4/4(100%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4/4(100%)
4/4(Chair)
1/1(Chair)
1/1(Chair)
1/1(Chair)
4/4(100%)
4/4(100%)
4/4(100%)
4/4
3/4
4/4
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
Xin Song
(Chairman)
Bing Liu
Liangyou Jiang
Xiangdong Jiang
Lianzhong Sun
Ian He
Yunfei Chen
Gregory Hall
John King Burns
2016 Annual and
Special Meeting*
Committees
(Total)
Overall
Attendance
0/1
0/1
0/1
0/1
0/1
0/1
0/1
0/1
1/1
--
--
--
--
--
4/5(80%)
4/5(80%)
4/5(80%)
1/5(20%)
4/5(80%)
7/7(100%)
11/12(92%)
7/7(75%)
6/7(86%)
11/12(92%)
10/12(83%)
7/7(100%)
12/12(100%)
* The 2016 Annual and Special Meeting was held on June 22, 2016, no other general meeting were held during the Reporting Period.
According to code provision A.6.7 of the CG Code, independent non-executive Directors and other non-executive Directors
should attend general meetings and develop a balanced understanding of the views of the shareholders.
The non-executive Directors and three independent non-executive Directors were unable to attend the Annual and Special
Meeting of the Company held on June 22, 2016 due to other business commitments.
The 2017 AGM will be held on June 16, 2017. The notice of the 2017 AGM will be sent to shareholders at least 20 clear business days
before the 2017 AGM.
CODE OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a Code of Business Conduct and Ethics applicable to all employees, consultants, executive officers
and Directors regardless of their position in the Company, at all times and everywhere the Company does business. The Code of
Business Conduct and Ethics provides that the Company’s employees, consultants, executive officers and directors will uphold its
commitment to a culture of honesty, integrity and accountability and the Company requires the highest standards of professional
and ethical conduct from its employees, consultants, executive officers and Directors.
The Company’s employees, executive officers and Directors are required to confirm, on an annual basis, that they have reviewed
the Company’s Code of Business Conduct and Ethics and if they are aware of any actual or potential conflicts of interest.
The Company’s Nominating and Corporate Governance Committee monitors compliance with the Code of Business Conduct and
Ethics and the disclosure of conflicts of interest by Directors with a view to ensuring that no Director votes on a matter in respect
of which he has a material interest.
ANNUAL REPORT 2016
APPOINTMENT AND RE-ELECTION OF DIRECTORS
The Board determines, in light of the opportunities and risks facing the Company, what competencies, skills and personal qualities
it should seek in new directors in order to add value to the Company. Based on this framework, the Nominating and Corporate
Governance Committee developed a skills matrix outlining the Company’s desired complement of competencies, skills and
characteristics. The specific make-up of the matrix includes technical, geological and engineering knowledge, financial literacy,
mining industry experience, public company experience and legal knowledge. The Nominating and Corporate Governance
Committee assesses the competencies and characteristics represented on the Board annually and utilize the matrix to determine
the Board’s strengths and to identify areas for improvement. This analysis assists the Nominating and Governance Committee in
discharging its responsibility for approaching and proposing new nominees to the Board and for assessing Directors on an ongoing
Unless a Director dies, resigns or is removed from office in accordance with the Business Corporations Act, the term of office of
each of the Director’s ends at the conclusion of the next annual general meeting following his or her most recent election or
basis.
appointment.
At every annual general meeting the shareholders entitled to vote at the annual general meeting for the election of directors are
entitled to elect a board consisting of the number of directors for the time being set under the Articles and all the directors cease
to hold office immediately before such election but are eligible for re-election. If the Company fails to hold an annual general
meeting on or before the date by which the annual general meeting is required to be held under the Business Corporations Act or
the shareholders fail, at the annual general meeting, to elect or appoint any directors then each director then in office continues
to hold office until the earlier of the date on which his or her successor is elected or appointed, or the date on which he or she
otherwise ceases to hold office under the Business Corporations Act or the Articles.
According to code provision A.4.3 of the CG Code, if an independent non-executive director serves more than 9 years, his further
appointment should be subject to a separate resolution to be approved by shareholders.
SECURITIES TRANSACTIONS BY DIRECTORS
The Company has adopted policies in its Corporate Disclosure, Confidentiality and Securities Trading Policy on terms no less
exacting than those set out in Appendix 10 to the Hong Kong Listing Rules.
Furthermore, if a Director (a) enters into a transaction involving a security of the Company or, for any other reason, the direct or
indirect beneficial ownership of, or control or direction over, securities of the Company changes from that shown or required to
be shown in the latest insider report filed by the Director, or (b) the director enters into a transaction involving a related financial
instrument, the Director must, within the prescribed period, file an insider report in the required form on the System for Electronic
Disclosure by Insiders website at www.sedi.ca.
A “related financial instrument” is defined as: (a) an instrument, agreement, security or exchange contract the value, market price
or payment obligations of which are derived from, referenced to or based on the value, market price or payment obligations of a
security, or (b) any other instrument, agreement or understanding that affects, directly or indirectly, a person’s economic interest
in respect of a security or an exchange contract.
Having made specific enquiry with each Board member, all Directors have confirmed their full compliance with the required
standards set out in the Corporate Disclosure, Confidentiality and Securities Trading Policy throughout the Reporting Period. Details
of the shareholding interests held by the directors as at December 31, 2016 are set out on page 15 of this annual report.
28
29
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
ANNUAL REPORT 2016
APPOINTMENT AND RE-ELECTION OF DIRECTORS
The Board determines, in light of the opportunities and risks facing the Company, what competencies, skills and personal qualities
it should seek in new directors in order to add value to the Company. Based on this framework, the Nominating and Corporate
Governance Committee developed a skills matrix outlining the Company’s desired complement of competencies, skills and
characteristics. The specific make-up of the matrix includes technical, geological and engineering knowledge, financial literacy,
mining industry experience, public company experience and legal knowledge. The Nominating and Corporate Governance
Committee assesses the competencies and characteristics represented on the Board annually and utilize the matrix to determine
the Board’s strengths and to identify areas for improvement. This analysis assists the Nominating and Governance Committee in
discharging its responsibility for approaching and proposing new nominees to the Board and for assessing Directors on an ongoing
basis.
Unless a Director dies, resigns or is removed from office in accordance with the Business Corporations Act, the term of office of
each of the Director’s ends at the conclusion of the next annual general meeting following his or her most recent election or
4/4(100%)
4/4(Chair)
1/1(Chair)
1/1(Chair)
1/1(Chair)
appointment.
At every annual general meeting the shareholders entitled to vote at the annual general meeting for the election of directors are
entitled to elect a board consisting of the number of directors for the time being set under the Articles and all the directors cease
to hold office immediately before such election but are eligible for re-election. If the Company fails to hold an annual general
meeting on or before the date by which the annual general meeting is required to be held under the Business Corporations Act or
the shareholders fail, at the annual general meeting, to elect or appoint any directors then each director then in office continues
to hold office until the earlier of the date on which his or her successor is elected or appointed, or the date on which he or she
otherwise ceases to hold office under the Business Corporations Act or the Articles.
According to code provision A.4.3 of the CG Code, if an independent non-executive director serves more than 9 years, his further
appointment should be subject to a separate resolution to be approved by shareholders.
SECURITIES TRANSACTIONS BY DIRECTORS
The Company has adopted policies in its Corporate Disclosure, Confidentiality and Securities Trading Policy on terms no less
exacting than those set out in Appendix 10 to the Hong Kong Listing Rules.
Furthermore, if a Director (a) enters into a transaction involving a security of the Company or, for any other reason, the direct or
indirect beneficial ownership of, or control or direction over, securities of the Company changes from that shown or required to
be shown in the latest insider report filed by the Director, or (b) the director enters into a transaction involving a related financial
instrument, the Director must, within the prescribed period, file an insider report in the required form on the System for Electronic
Disclosure by Insiders website at www.sedi.ca.
A “related financial instrument” is defined as: (a) an instrument, agreement, security or exchange contract the value, market price
or payment obligations of which are derived from, referenced to or based on the value, market price or payment obligations of a
security, or (b) any other instrument, agreement or understanding that affects, directly or indirectly, a person’s economic interest
in respect of a security or an exchange contract.
Having made specific enquiry with each Board member, all Directors have confirmed their full compliance with the required
standards set out in the Corporate Disclosure, Confidentiality and Securities Trading Policy throughout the Reporting Period. Details
of the shareholding interests held by the directors as at December 31, 2016 are set out on page 15 of this annual report.
Attendances/Number of Meetings
of meetings held during the Reporting Period:
The table below shows the record of attendance by directors at meetings of the Board and its committees, as well as the number
Board
Audit
and Corporate
Committee
Governance
Nominating
Committe
Compensation
Health, Safety
and Benefits
and Environmen-
Committe
tal Committee
2016 Annual and
Special Meeting*
Committees
Overall
(Total)
Attendance
Xin Song
(Chairman)
Bing Liu
Liangyou Jiang
Xiangdong Jiang
Lianzhong Sun
Ian He
Yunfei Chen
Gregory Hall
John King Burns
4/4(100%)
4/4(100%)
4/4(100%)
1/4(25%)
4/4(100%)
4/4(100%)
4/4(100%)
4/4(100%)
N/A
N/A
N/A
N/A
N/A
4/4
3/4
4/4
N/A
N/A
N/A
N/A
N/A
1/1
1/1
1/1
N/A
N/A
N/A
N/A
N/A
1/1
1/1
1/1
N/A
N/A
N/A
N/A
N/A
1/1
1/1
1/1
0/1
0/1
0/1
0/1
0/1
0/1
0/1
0/1
1/1
--
--
--
--
--
4/5(80%)
4/5(80%)
4/5(80%)
1/5(20%)
4/5(80%)
7/7(100%)
11/12(92%)
7/7(75%)
6/7(86%)
11/12(92%)
10/12(83%)
7/7(100%)
12/12(100%)
* The 2016 Annual and Special Meeting was held on June 22, 2016, no other general meeting were held during the Reporting Period.
According to code provision A.6.7 of the CG Code, independent non-executive Directors and other non-executive Directors
should attend general meetings and develop a balanced understanding of the views of the shareholders.
The non-executive Directors and three independent non-executive Directors were unable to attend the Annual and Special
Meeting of the Company held on June 22, 2016 due to other business commitments.
The 2017 AGM will be held on June 16, 2017. The notice of the 2017 AGM will be sent to shareholders at least 20 clear business days
before the 2017 AGM.
CODE OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a Code of Business Conduct and Ethics applicable to all employees, consultants, executive officers
and Directors regardless of their position in the Company, at all times and everywhere the Company does business. The Code of
Business Conduct and Ethics provides that the Company’s employees, consultants, executive officers and directors will uphold its
commitment to a culture of honesty, integrity and accountability and the Company requires the highest standards of professional
and ethical conduct from its employees, consultants, executive officers and Directors.
The Company’s employees, executive officers and Directors are required to confirm, on an annual basis, that they have reviewed
the Company’s Code of Business Conduct and Ethics and if they are aware of any actual or potential conflicts of interest.
The Company’s Nominating and Corporate Governance Committee monitors compliance with the Code of Business Conduct and
Ethics and the disclosure of conflicts of interest by Directors with a view to ensuring that no Director votes on a matter in respect
of which he has a material interest.
28
29
ANNUAL REPORT 2016
CORPORATE GOVERNANCE REPORT
The Board has established a framework for identifying, evaluating and managing key risks faced by the Company. The Board,
through the audit Committee, reviews annually the effectiveness of the internal control system of the Company and its subsidiaries,
changes in significant risks since the last review, and the Company’s ability to respond to changes in its business and the
management’s on going monitoring of risks and the internal control system, and the work of the internal audit function;
considering factors such as:
external environment
of the risk management
significant control failings or weaknesses that have been identified during the period. Also, the extent to which they have
caused unforeseeable outcomes or contingencies that had or might have material impact on the Company’s financial
performance or condition; and
the effectiveness of the Company’s processes for financial reporting and compliance with applicable listing rules and
The Company has also established a policy on the handling of confidential information, information disclosure and securities
dealing for all employees of the Company to comply with when they are in possession of confidential or inside information in
relation to the Company. Such policy has been posted on the Company’s intranet and disseminated to all employees of the
CORPORATE GOVERNANCE REPORT
REMUNERATION OF DIRECTORS
The Company’s director emolument policy is administered by the Compensation and Benefits Committee with regard to comparable
market statistics. Decisions relating to the compensation of directors are reported by the Compensation and Benefits Committee
to the Board for approval.
The Company pays its independent Directors a cash retainer of CAD$4,000 per month for acting as independent Directors and for
their roles on various Board committees. The Company pays the defacto lead independent Director and Chairman of the Board
committees a cash retainer of CAD$4,500 per month.
Currently no other compensation is paid to the Directors for acting as Directors. The Directors are reimbursed for actual expenses
reasonably incurred in connection with the performance of their duties as Directors.
Details regarding the remuneration of Directors are set out in Note 11 of the Financial Statements.
communication of the monitoring results to the Board that enables it to assess control of the Company and the effectiveness
COMPANY SECRETARY
The Corporate Secretary is responsible for advising the Board through the Chairman of the Board on governance matters and also
facilitates induction and professional development of Directors in Canada. The Corporate Secretary reports to the Chairman of
the Board. All Directors have access to the advice and services of the Corporate Secretary to ensure that Board procedures, all
applicable law, rules and regulations are followed.
Mr. Ngai Wai Fung (“Mr. Ngai”), the director and chief executive officer of SW Corporate Services Group Limited, an external service
securities laws.
provider, has been appointed by the Board as its company secretary in Hong Kong with effect from January 16, 2014. Mr. Ngai’s
contact person in the Company in relation to any corporate secretarial matters is Mr. Jiang Liangyou, an executive Director and
the Senior Executive Vice President.
According to Rule 3.29 of the Hong Kong Listing Rules, Mr. Ngai confirmed that he has taken no less than 15 hours of professional
Company.
training to update his skills and knowledge during the Reporting Period.
RISK MANAGEMENT AND INTERNAL CONTROLS
The Board is responsible for overseeing the risk management and internal controls of the Company. Risk management and
internal controls are used by the Board to facilitate the effectiveness and efficiency of operations, to safeguard the investment
of shareholders and assets of the Company and to ensure compliance with relevant statutory and regulatory requirements. The
Company’s risk management and internal control policies are designed to provide reasonable, but not absolute, assurance against
material misstatements and to help the Board identify and mitigate, but not eliminate, risk exposure.
The Company maintains internal audit functions for both itself and its operating subsidiaries. The Company leverages the internal
audit function of China National Gold, its controlling shareholder, for its internal audit function. Risk management and internal
control systems are reviewed on a quarterly basis in conjunction with the quarterly certification requirements for disclosure controls
and procedures and internal control over financial reporting as mandated by applicable Canadian securities laws.
The Audit Committee and the Board have reviewed the risk management and internal control systems of the Company and are
of the view that the Company’s current risk management and internal control systems are adequate and operating effectively in
safeguarding the investment of shareholders and assets of the Company.
The Company has used the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013 framework to
evaluate the Company’s internal control over financial reporting, and has concluded that its internal controls and procedures were
effective as of December 31, 2016 and provide reasonable assurance that material information, including financial information,
relating the Company is made known to senior management, the Audit Committee and the Board, as applicable, and is recorded,
processed, summarized and reported in a timely manner.
30
31
ANNUAL REPORT 2016
CORPORATE GOVERNANCE REPORT
The Company’s director emolument policy is administered by the Compensation and Benefits Committee with regard to comparable
market statistics. Decisions relating to the compensation of directors are reported by the Compensation and Benefits Committee
The Board has established a framework for identifying, evaluating and managing key risks faced by the Company. The Board,
through the audit Committee, reviews annually the effectiveness of the internal control system of the Company and its subsidiaries,
to the Board for approval.
considering factors such as:
Details regarding the remuneration of Directors are set out in Note 11 of the Financial Statements.
communication of the monitoring results to the Board that enables it to assess control of the Company and the effectiveness
changes in significant risks since the last review, and the Company’s ability to respond to changes in its business and the
external environment
management’s on going monitoring of risks and the internal control system, and the work of the internal audit function;
of the risk management
significant control failings or weaknesses that have been identified during the period. Also, the extent to which they have
caused unforeseeable outcomes or contingencies that had or might have material impact on the Company’s financial
performance or condition; and
the effectiveness of the Company’s processes for financial reporting and compliance with applicable listing rules and
Mr. Ngai Wai Fung (“Mr. Ngai”), the director and chief executive officer of SW Corporate Services Group Limited, an external service
securities laws.
According to Rule 3.29 of the Hong Kong Listing Rules, Mr. Ngai confirmed that he has taken no less than 15 hours of professional
Company.
training to update his skills and knowledge during the Reporting Period.
The Company has also established a policy on the handling of confidential information, information disclosure and securities
dealing for all employees of the Company to comply with when they are in possession of confidential or inside information in
relation to the Company. Such policy has been posted on the Company’s intranet and disseminated to all employees of the
CORPORATE GOVERNANCE REPORT
REMUNERATION OF DIRECTORS
The Company pays its independent Directors a cash retainer of CAD$4,000 per month for acting as independent Directors and for
their roles on various Board committees. The Company pays the defacto lead independent Director and Chairman of the Board
committees a cash retainer of CAD$4,500 per month.
Currently no other compensation is paid to the Directors for acting as Directors. The Directors are reimbursed for actual expenses
reasonably incurred in connection with the performance of their duties as Directors.
COMPANY SECRETARY
The Corporate Secretary is responsible for advising the Board through the Chairman of the Board on governance matters and also
facilitates induction and professional development of Directors in Canada. The Corporate Secretary reports to the Chairman of
the Board. All Directors have access to the advice and services of the Corporate Secretary to ensure that Board procedures, all
applicable law, rules and regulations are followed.
provider, has been appointed by the Board as its company secretary in Hong Kong with effect from January 16, 2014. Mr. Ngai’s
contact person in the Company in relation to any corporate secretarial matters is Mr. Jiang Liangyou, an executive Director and
the Senior Executive Vice President.
RISK MANAGEMENT AND INTERNAL CONTROLS
The Board is responsible for overseeing the risk management and internal controls of the Company. Risk management and
internal controls are used by the Board to facilitate the effectiveness and efficiency of operations, to safeguard the investment
of shareholders and assets of the Company and to ensure compliance with relevant statutory and regulatory requirements. The
Company’s risk management and internal control policies are designed to provide reasonable, but not absolute, assurance against
material misstatements and to help the Board identify and mitigate, but not eliminate, risk exposure.
The Company maintains internal audit functions for both itself and its operating subsidiaries. The Company leverages the internal
audit function of China National Gold, its controlling shareholder, for its internal audit function. Risk management and internal
control systems are reviewed on a quarterly basis in conjunction with the quarterly certification requirements for disclosure controls
and procedures and internal control over financial reporting as mandated by applicable Canadian securities laws.
The Audit Committee and the Board have reviewed the risk management and internal control systems of the Company and are
of the view that the Company’s current risk management and internal control systems are adequate and operating effectively in
safeguarding the investment of shareholders and assets of the Company.
The Company has used the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013 framework to
evaluate the Company’s internal control over financial reporting, and has concluded that its internal controls and procedures were
effective as of December 31, 2016 and provide reasonable assurance that material information, including financial information,
relating the Company is made known to senior management, the Audit Committee and the Board, as applicable, and is recorded,
processed, summarized and reported in a timely manner.
30
31
CORPORATE GOVERNANCE REPORT
AUDITORS
The Company’s auditor is Deloitte Touche Tohmatsu of Hong Kong. Deloitte Touche Tohmatsu were first appointed as auditor
of the Company on April 1, 2010. The appointment of Deloitte Touche Tohmatsu was approved by an ordinary resolution of the
shareholders at the Company’s annual and special meeting held on June 17, 2010. Deloitte Touche Tohmatsu will be nominated
for re-appointment as auditors of the Company for the fiscal year at the 2017 AGM, at a remuneration to be fixed by the Board.
Deloitte Touche Tohmatsu is independent of the Company in accordance with Section 290 “Independence – Assurance
Engagements” of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants.
ANNUAL REPORT 2016
CORPORATE GOVERNANCE REPORT
CONSTITUTIONAL DOCUMENTS
At the Company’s 2016 Annual and Special Meeting held on June 22, 2016, a special resolution was passed by the Shareholders
to remove the Company’s then Articles in its entirety and replace with new modernized Articles which will better align with recent
and regulatory developments and marker practice by the Toronto Stock Exchange and the Hong Kong Stock Exchange listed
companies.
SHAREHOLDERS’ RIGHTS
Right to convene a meeting of shareholders
The financial reporting responsibilities and audit report of Deloitte Touche Tohmatsu are set out on page 62 of the Financial
The general meetings of the Company provide an opportunity for communication between the shareholders and the Board. Every
Statements.
company having securities listed on the Toronto Stock Exchange must hold its annual meeting of shareholders within six months from
the end of its fiscal year, or at such earlier time as is required by applicable legislation.
Deloitte & Touche LLP of Canada served as auditor of the Company until April 1, 2010. The Company continues to use the services
of Deloitte & Touche LLP from time to time for tax compliance advice relating to transactions and proposed transactions of the
Pursuant to Section 167 of the Business Corporations Act, shareholders who hold in the aggregate at least one-twentieth of the
Company and its subsidiaries.
issued shares of the Company that carry a right to vote at general meetings may requisition a general meeting by delivering a
signed written requisition to the Board or the Company Secretary at the Company’s principal place of business at Suite 660, 505
The fees paid/payable to Deloitte Touche Tohmatsu and Deloitte & Touche LLP in respect of audit and non-audit services provided
Burrard Street, Vancouver, British Columbia, Canada, V7X 1M4 for the purpose of transacting any business that may be transacted
during the Reporting Period were as follows:
Nature of services rendered
Fees paid/payable(US$)
Audit fees (1)
Non-audit fees (2)
Total
Notes:
$585,100.00
$48,000.00
$633,100.00
(1) Fees for audit services consisted of fees incurred to Deloitte Touche Tohmatsu ($585,100.00) in connection with the audit of the Company’s
annual financial statements, review of the Company’s interim financial statements and other services related to securities regulatory matters.
(2) Fees for non-audit services consisted of fees incurred to Deloitte Touche Tohmatsu ($48,000.00) in connection with preparation of a comfort
letter for sufficiency of working capital.
RESPONSIBILITIES IN RESPECT OF FINANCIAL STATEMENTS
The Directors acknowledge their responsibility in overseeing the preparation of financial statements that provide a true and fair view
of the financial affairs of the Company. With the assistance of the Company’s management, the directors ensure that the financial
statements are being prepared and published in a timely manner in accordance with the applicable accounting standards and
statutory requirements.
at a general meeting.
Right to put enquiries to the Board
Shareholders have the right to put enquiries to the Board. All enquiries shall be in writing and sent by post to the principal place
of business of the Company at Suite 660, 505 Burrard Street, Vancouver, British Columbia, Canada, V7X 1M4, or by email to info@
chinagoldintl.com for the attention of the Company secretary.
Right to put forward proposals at general meetings
There are no provisions allowing shareholders to propose new resolutions at general meetings under the Business Corporations Act.
However, qualified shareholders (as defined in section 187 of the Business Corporations Act) may put forward a proposal for the
next general meeting pursuant to Part 5, Division 7 of the Business Corporations Act.
INVESTOR RELATIONS AND COMMUNICATION WITH SHAREHOLDERS
The Company follows a policy of disclosing relevant information to shareholders in a timely manner. Members of the Board meet
and communicate with shareholders at the annual general meeting of the Company. The Chairman proposes separate resolutions
for each issue to be considered and puts each proposed resolution to the vote by way of a poll. Voting results are posted on the
Company’s website on the day of the annual general meeting.
Our corporate website which contains corporate information, corporate governance practice, interim and annual reports, news
releases, announcements and circulars issued by the Company enables the Company’s shareholders to have timely and updated
information of the Company.
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ANNUAL REPORT 2016
CORPORATE GOVERNANCE REPORT
CONSTITUTIONAL DOCUMENTS
At the Company’s 2016 Annual and Special Meeting held on June 22, 2016, a special resolution was passed by the Shareholders
to remove the Company’s then Articles in its entirety and replace with new modernized Articles which will better align with recent
and regulatory developments and marker practice by the Toronto Stock Exchange and the Hong Kong Stock Exchange listed
companies.
SHAREHOLDERS’ RIGHTS
Right to convene a meeting of shareholders
The general meetings of the Company provide an opportunity for communication between the shareholders and the Board. Every
company having securities listed on the Toronto Stock Exchange must hold its annual meeting of shareholders within six months from
the end of its fiscal year, or at such earlier time as is required by applicable legislation.
Deloitte & Touche LLP of Canada served as auditor of the Company until April 1, 2010. The Company continues to use the services
of Deloitte & Touche LLP from time to time for tax compliance advice relating to transactions and proposed transactions of the
Pursuant to Section 167 of the Business Corporations Act, shareholders who hold in the aggregate at least one-twentieth of the
The fees paid/payable to Deloitte Touche Tohmatsu and Deloitte & Touche LLP in respect of audit and non-audit services provided
Burrard Street, Vancouver, British Columbia, Canada, V7X 1M4 for the purpose of transacting any business that may be transacted
during the Reporting Period were as follows:
at a general meeting.
issued shares of the Company that carry a right to vote at general meetings may requisition a general meeting by delivering a
signed written requisition to the Board or the Company Secretary at the Company’s principal place of business at Suite 660, 505
Right to put enquiries to the Board
Shareholders have the right to put enquiries to the Board. All enquiries shall be in writing and sent by post to the principal place
of business of the Company at Suite 660, 505 Burrard Street, Vancouver, British Columbia, Canada, V7X 1M4, or by email to info@
chinagoldintl.com for the attention of the Company secretary.
Right to put forward proposals at general meetings
There are no provisions allowing shareholders to propose new resolutions at general meetings under the Business Corporations Act.
However, qualified shareholders (as defined in section 187 of the Business Corporations Act) may put forward a proposal for the
next general meeting pursuant to Part 5, Division 7 of the Business Corporations Act.
INVESTOR RELATIONS AND COMMUNICATION WITH SHAREHOLDERS
The Company follows a policy of disclosing relevant information to shareholders in a timely manner. Members of the Board meet
and communicate with shareholders at the annual general meeting of the Company. The Chairman proposes separate resolutions
for each issue to be considered and puts each proposed resolution to the vote by way of a poll. Voting results are posted on the
Company’s website on the day of the annual general meeting.
Our corporate website which contains corporate information, corporate governance practice, interim and annual reports, news
releases, announcements and circulars issued by the Company enables the Company’s shareholders to have timely and updated
information of the Company.
CORPORATE GOVERNANCE REPORT
AUDITORS
The Company’s auditor is Deloitte Touche Tohmatsu of Hong Kong. Deloitte Touche Tohmatsu were first appointed as auditor
of the Company on April 1, 2010. The appointment of Deloitte Touche Tohmatsu was approved by an ordinary resolution of the
shareholders at the Company’s annual and special meeting held on June 17, 2010. Deloitte Touche Tohmatsu will be nominated
for re-appointment as auditors of the Company for the fiscal year at the 2017 AGM, at a remuneration to be fixed by the Board.
Deloitte Touche Tohmatsu is independent of the Company in accordance with Section 290 “Independence – Assurance
Engagements” of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants.
The financial reporting responsibilities and audit report of Deloitte Touche Tohmatsu are set out on page 62 of the Financial
Statements.
Company and its subsidiaries.
Audit fees (1)
Non-audit fees (2)
Total
Notes:
Nature of services rendered
Fees paid/payable(US$)
$585,100.00
$48,000.00
$633,100.00
(1) Fees for audit services consisted of fees incurred to Deloitte Touche Tohmatsu ($585,100.00) in connection with the audit of the Company’s
annual financial statements, review of the Company’s interim financial statements and other services related to securities regulatory matters.
(2) Fees for non-audit services consisted of fees incurred to Deloitte Touche Tohmatsu ($48,000.00) in connection with preparation of a comfort
letter for sufficiency of working capital.
RESPONSIBILITIES IN RESPECT OF FINANCIAL STATEMENTS
The Directors acknowledge their responsibility in overseeing the preparation of financial statements that provide a true and fair view
of the financial affairs of the Company. With the assistance of the Company’s management, the directors ensure that the financial
statements are being prepared and published in a timely manner in accordance with the applicable accounting standards and
statutory requirements.
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33
CORPORATE INFORMATION
DIRECTORS
Executive Directors
Xin Song (Chairman)
Bing Liu (Chief Executive Officer)
Liangyou Jiang
Xiangdong Jiang
Non-Executive Director
Lianzhong Sun
Independent Non-Executive Directors
Ian He
Yunfei Chen
Gregory Hall
John King Burns
AUDIT COMMITTEE
Ian He (Chairman)
Yunfei Chen
Gregory Hall
John King Burns
NOMINATING AND CORPORATE
GOVERNANCE COMMITTEE
Ian He (Chairman)
Yunfei Chen
Gregory Hall
John King Burns
COMPENSATION AND BENEFITS
COMMITTEE
Ian He (Chairman)
Yunfei Chen
Gregory Hall
John King Burns
HEALTH, SAFETY AND ENVIRONMENTAL
COMMITTEE
Ian He (Chairman)
Yunfei Chen
Gregory Hall
John King Burns
CORPORATE SECRETARY (CANADA)
Jerry Xie
34
COMPANY SECRETARY (HONG KONG)
Ngai Wai Fung
REGISTERED OFFICE
One Bentall Centre
Suite 660, 505 Burrard Street
Vancouver, British Columbia
Canada V7X 1M4
PRINCIPAL PLACE OF BUSINESS IN HONG
KONG
18/F, Tesbury Centre, 28 Queen’s Road East, Wanchai,
Hong Kong
PRINCIPAL BANK (CANADA)
BMO Bank of Montreal
PRINCIPAL BANKS (HONG KONG)
Bank of China
Agricultural Bank of China
PRINCIPAL SHARE REGISTER
Canadian Stock Transfer Company Inc.
Suite 1600-1066 West Hastings Street
Vancouver, British Columbia
Canada V6E 3X1
HONG KONG SHARE REGISTER
Computershare Hong Kong Investor Services Limited
Shops 1712-1716, 17/F
Hopewell Centre
183 Queen’s Road East
Wanchai, Hong Kong
INDEPENDENT AUDITOR
Deloitte Touche Tohmatsu
Certified Public Accountants
One Pacific Place
35th Floor, 88 Queensway
Hong Kong
WEBSITE ADDRESS
www.chinagoldintl.com
Management’s Discussion and Analysis of Financial Condition and Results of
Operations for the year ended December 31, 2016
(Stated in U.S. dollars, except as otherwise noted)
SELECTED QUARTERLY AND ANNUAL PRODUCTION DATA AND ANALYSIS
REVIEW OF QUARTERLY AND ANNUAL DATA
FORWARD-LOOKING STATEMENTS
THE COMPANY
OVERVIEW
PERFORMANCE HIGHLIGHTS
SELECTED ANNUAL INFORMATION
OUTLOOK
RESULTS OF OPERATIONS
SELECTED QUARTERLY FINANCIAL DATA
NON-IFRS MEASURES
MINERAL PROPERTIES
THE CSH MINE
THE JIAMA MINE
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
OPERATING CASH FLOW
INVESTING CASH FLOW
FINANCING CASH FLOW
EXPENDITURES INCURRED
GEARING RATIO
RESTRICTIVE COVENANTS
SIGNIFICANT INVESTMENTS, ACQUISITIONS AND DISPOSAL
CHARGE ON ASSETS
EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND RELATED HEDGES
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
COMMITMENTS AND CONTINGENCIES
RELATED PARTY TRANSACTIONS
PROPOSED TRANSACTIONS
CRITICAL ACCOUNTING ESTIMATES
CHANGE IN ACCOUNTING POLICIES
OFF-BALANCE SHEET ARRANGEMENTS
DIVIDEND AND DIVIDEND POLICY
OUTSTANDING SHARES
DISCLOSURE CONTROLS AND PROCE
RISK FACTORS
QUALIFIED PERSON
ANNUAL REPORT 2016
37
39
39
39
40
40
41
41
41
43
46
48
48
49
54
54
55
55
55
55
55
55
56
56
56
56
58
58
59
59
59
59
59
59
60
60
60
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CORPORATE INFORMATION
DIRECTORS
Executive Directors
Xin Song (Chairman)
Bing Liu (Chief Executive Officer)
Liangyou Jiang
Xiangdong Jiang
Non-Executive Director
Lianzhong Sun
Independent Non-Executive Directors
Ian He
Yunfei Chen
Gregory Hall
John King Burns
AUDIT COMMITTEE
Ian He (Chairman)
Yunfei Chen
Gregory Hall
John King Burns
NOMINATING AND CORPORATE
GOVERNANCE COMMITTEE
Ian He (Chairman)
Yunfei Chen
Gregory Hall
John King Burns
COMMITTEE
Ian He (Chairman)
Yunfei Chen
Gregory Hall
John King Burns
COMMITTEE
Ian He (Chairman)
Yunfei Chen
Gregory Hall
John King Burns
Jerry Xie
34
HEALTH, SAFETY AND ENVIRONMENTAL
CORPORATE SECRETARY (CANADA)
COMPANY SECRETARY (HONG KONG)
Ngai Wai Fung
REGISTERED OFFICE
One Bentall Centre
Suite 660, 505 Burrard Street
Vancouver, British Columbia
Canada V7X 1M4
PRINCIPAL PLACE OF BUSINESS IN HONG
18/F, Tesbury Centre, 28 Queen’s Road East, Wanchai,
KONG
Hong Kong
PRINCIPAL BANK (CANADA)
BMO Bank of Montreal
PRINCIPAL BANKS (HONG KONG)
Bank of China
Agricultural Bank of China
PRINCIPAL SHARE REGISTER
Canadian Stock Transfer Company Inc.
Suite 1600-1066 West Hastings Street
Vancouver, British Columbia
Canada V6E 3X1
HONG KONG SHARE REGISTER
Shops 1712-1716, 17/F
Hopewell Centre
183 Queen’s Road East
Wanchai, Hong Kong
INDEPENDENT AUDITOR
Deloitte Touche Tohmatsu
Certified Public Accountants
One Pacific Place
35th Floor, 88 Queensway
Hong Kong
WEBSITE ADDRESS
www.chinagoldintl.com
COMPENSATION AND BENEFITS
Computershare Hong Kong Investor Services Limited
Management’s Discussion and Analysis of Financial Condition and Results of
Operations for the year ended December 31, 2016
(Stated in U.S. dollars, except as otherwise noted)
FORWARD-LOOKING STATEMENTS
THE COMPANY
OVERVIEW
PERFORMANCE HIGHLIGHTS
SELECTED ANNUAL INFORMATION
OUTLOOK
RESULTS OF OPERATIONS
SELECTED QUARTERLY FINANCIAL DATA
SELECTED QUARTERLY AND ANNUAL PRODUCTION DATA AND ANALYSIS
REVIEW OF QUARTERLY AND ANNUAL DATA
NON-IFRS MEASURES
MINERAL PROPERTIES
THE CSH MINE
THE JIAMA MINE
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
OPERATING CASH FLOW
INVESTING CASH FLOW
FINANCING CASH FLOW
EXPENDITURES INCURRED
GEARING RATIO
RESTRICTIVE COVENANTS
SIGNIFICANT INVESTMENTS, ACQUISITIONS AND DISPOSAL
CHARGE ON ASSETS
EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND RELATED HEDGES
COMMITMENTS AND CONTINGENCIES
RELATED PARTY TRANSACTIONS
PROPOSED TRANSACTIONS
CRITICAL ACCOUNTING ESTIMATES
CHANGE IN ACCOUNTING POLICIES
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
OFF-BALANCE SHEET ARRANGEMENTS
DIVIDEND AND DIVIDEND POLICY
OUTSTANDING SHARES
DISCLOSURE CONTROLS AND PROCE
RISK FACTORS
QUALIFIED PERSON
ANNUAL REPORT 2016
37
39
39
39
40
40
41
41
41
43
46
48
48
49
54
54
55
55
55
55
55
55
56
56
56
56
58
58
59
59
59
59
59
59
60
60
60
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MANAGEMENT'S
DISCUSSION AND ANALYSIS
ANNUAL REPORT 2016
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Management Discussion and Analysis of financial condition and results of operations (“MD&A”) is prepared as of
March 30, 2017. It should be read in conjunction with the consolidated financial statements and notes thereto of China Gold
International Resources Corp. Ltd. (referred to herein as “China Gold International”, the “Company”, “we” or “our” as the context
may require) for the year ended December 31, 2016 and the year ended December 31, 2015, respectively. Unless the context
otherwise provides, references in this MD&A to China Gold International or the Company refer to China Gold International and
each of its subsidiaries collectively on a consolidated basis.
The following discussion contains certain forward-looking statements relating to the Company’s plans, objectives, expectations
and intentions, which are based on the Company’s current expectations and are subject to risks, uncertainties and changes in
circumstances. Readers should carefully consider all of the information set out in this MD&A, including the risks and uncertainties
outlined further in the Company’s Annual Information Form (“Annual Information Form” or “AIF”) dated March 30, 2017 on SEDAR
at www.sedar.com. For further information on risks and other factors that could affect the accuracy of forward-looking statements
and the result of operations of the Company, please refer to the sections titled “Forward-Looking Statements” and “Risk Factors”
and to discussions elsewhere within this MD&A. China Gold International’s business, financial condition or results of operations could
be materially and adversely affected by any of these risks.
FORWARD-LOOKING STATEMENTS
Certain statements made herein, other than statements of historical fact relating to the Company, represent forward-looking
information. In some cases, this forward-looking information can be identified by words or phrases such as “may”, “will”, “expect”,
“anticipate”, “contemplates”, “aim”, “estimate”, “intend”, “plan”, “believe”, “potential”, “continue”, “is/are likely to”, “should”
or the negative of these terms, or other similar expressions intended to identify forward-looking information. This forward-looking
information includes, among other things; China Gold International’s production estimates, business strategies and capital
expenditure plans; the development and expansion plans and schedules for the CSH Mine and the Jiama Mine; China Gold
International’s financial condition; the regulatory environment as well as the general industry outlook; general economic trends
in China; and statements respecting anticipated business activities, planned expenditures, corporate strategies, participation in
projects and financing, and other statements that are not historical facts.
By their nature, forward-looking information involves numerous assumptions, both general and specific, which may cause the
actual results, performance or achievements of China Gold International and/or its subsidiaries to be materially different from any
future results, performance or achievements expressed or implied by the forward–looking information. Some of the key assumptions
include, among others, the absence of any material change in China Gold International’s operations or in foreign exchange rates,
the prevailing price of gold, copper and other non-ferrous metal products; the absence of lower-than-anticipated mineral recovery
or other production problems; effective income and other tax rates and other assumptions underlying China Gold International’s
financial performance as stated in the Company’s technical reports for its CSH Mine and Jiama Mine; China Gold International’s
ability to obtain regulatory confirmations and approvals on a timely basis; continuing positive labor relations; the absence of any
material adverse effects as a result of political instability, terrorism, natural disasters, litigation or arbitration and adverse changes
in government regulation; the availability and accessibility of financing to China Gold International; and the performance by
counterparties of the terms and conditions of all contracts to which China Gold International and its subsidiaries are a party. The
forward-looking information is also based on the assumption that none of the risk factors identified in this MD&A or in the AIF that
could cause actual results to differ materially from the forward-looking information actually occurs.
36
37
MANAGEMENT'S
DISCUSSION AND ANALYSIS
ANNUAL REPORT 2016
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Management Discussion and Analysis of financial condition and results of operations (“MD&A”) is prepared as of
March 30, 2017. It should be read in conjunction with the consolidated financial statements and notes thereto of China Gold
International Resources Corp. Ltd. (referred to herein as “China Gold International”, the “Company”, “we” or “our” as the context
may require) for the year ended December 31, 2016 and the year ended December 31, 2015, respectively. Unless the context
otherwise provides, references in this MD&A to China Gold International or the Company refer to China Gold International and
each of its subsidiaries collectively on a consolidated basis.
The following discussion contains certain forward-looking statements relating to the Company’s plans, objectives, expectations
and intentions, which are based on the Company’s current expectations and are subject to risks, uncertainties and changes in
circumstances. Readers should carefully consider all of the information set out in this MD&A, including the risks and uncertainties
outlined further in the Company’s Annual Information Form (“Annual Information Form” or “AIF”) dated March 30, 2017 on SEDAR
at www.sedar.com. For further information on risks and other factors that could affect the accuracy of forward-looking statements
and the result of operations of the Company, please refer to the sections titled “Forward-Looking Statements” and “Risk Factors”
and to discussions elsewhere within this MD&A. China Gold International’s business, financial condition or results of operations could
be materially and adversely affected by any of these risks.
FORWARD-LOOKING STATEMENTS
Certain statements made herein, other than statements of historical fact relating to the Company, represent forward-looking
information. In some cases, this forward-looking information can be identified by words or phrases such as “may”, “will”, “expect”,
“anticipate”, “contemplates”, “aim”, “estimate”, “intend”, “plan”, “believe”, “potential”, “continue”, “is/are likely to”, “should”
or the negative of these terms, or other similar expressions intended to identify forward-looking information. This forward-looking
information includes, among other things; China Gold International’s production estimates, business strategies and capital
expenditure plans; the development and expansion plans and schedules for the CSH Mine and the Jiama Mine; China Gold
International’s financial condition; the regulatory environment as well as the general industry outlook; general economic trends
in China; and statements respecting anticipated business activities, planned expenditures, corporate strategies, participation in
projects and financing, and other statements that are not historical facts.
By their nature, forward-looking information involves numerous assumptions, both general and specific, which may cause the
actual results, performance or achievements of China Gold International and/or its subsidiaries to be materially different from any
future results, performance or achievements expressed or implied by the forward–looking information. Some of the key assumptions
include, among others, the absence of any material change in China Gold International’s operations or in foreign exchange rates,
the prevailing price of gold, copper and other non-ferrous metal products; the absence of lower-than-anticipated mineral recovery
or other production problems; effective income and other tax rates and other assumptions underlying China Gold International’s
financial performance as stated in the Company’s technical reports for its CSH Mine and Jiama Mine; China Gold International’s
ability to obtain regulatory confirmations and approvals on a timely basis; continuing positive labor relations; the absence of any
material adverse effects as a result of political instability, terrorism, natural disasters, litigation or arbitration and adverse changes
in government regulation; the availability and accessibility of financing to China Gold International; and the performance by
counterparties of the terms and conditions of all contracts to which China Gold International and its subsidiaries are a party. The
forward-looking information is also based on the assumption that none of the risk factors identified in this MD&A or in the AIF that
could cause actual results to differ materially from the forward-looking information actually occurs.
36
37
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Forward-looking information contained herein as of the date of this MD&A is based on the opinions, estimates and assumptions of
management. There are a number of important risks, uncertainties and other factors that could cause actual actions, events or
results to differ materially from those described as forward-looking information. China Gold International disclaims any obligation to
update any forward-looking information, whether as a result of new information, estimates, opinions or assumptions, future events
or results, or otherwise except to the extent required by law. There can be no assurance that forward-looking information will prove
to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The forward-
looking information in this MD&A is expressly qualified by this cautionary statement. The reader is cautioned not to place undue
reliance on forward-looking information.
38
39
ANNUAL REPORT 2016
THE COMPANY
Overview
China Gold International is a gold and base metal mining company based in Vancouver, Canada. The Company’s main business
involves the operation, acquisition, development and exploration of gold and base metal properties.
The Company’s principal mining operations are the Chang Shan Hao Gold Mine ( “CSH Mine” or “CSH”), located in Inner Mongolia,
China and the Jiama Copper-Gold Polymetallic Mine (“Jiama Mine” or “Jiama”), located in Tibet, China. China Gold International
holds a 96.5% interest in the CSH Mine, while its Chinese joint venture (“CJV”) partner holds the remaining 3.5% interest. The CSH
Mine commenced commercial production on July 1, 2008. The Company owns a 100% interest in the Jiama Mine, which hosts a
large scale copper-gold polymetallic deposit containing copper, gold, molybdenum, silver, lead and zinc metals. The Jiama Mine
commenced commercial production in September 2010.
China Gold International’s common shares are listed on the Toronto Stock Exchange (“TSX”) and The Stock Exchange of Hong
Kong Limited (“HKSE”) under the symbol CGG and the stock code 2099, respectively. Additional information about the Company,
including the Company’s Annual Information Form, is available on SEDAR at sedar.com as well as Hong Kong Exchange News at
hkexnews.hk.
Performance Highlights
Three months ended December 31, 2016
Revenue increased by 18% to US$93.6 million from US$79.0 million for the same period in 2015.
Mine operating earnings increased by 210% to US$13.0 million from US$4.2 million for the same period in 2015.
Net loss after income taxes decreased to US$9.1 million from US$18.5 million for the same period in 2015.
Gold production from the CSH Mine decreased by 5% to 52,828 ounces from 55,673 ounces for the same period in 2015.
Copper production from the Jiama Mine increased by 1% to 4,364 tonnes (approximately 9.62 million pounds) from 4,339
tonnes (approximately 9.56 million pounds) for the same period in 2015.
Year ended December 31, 2016
Revenue remained consistent to US$338.6 million from US$339.9 million for the same period in 2015.
Mine operating earnings decreased by 11% to US$56.2 million from US$62.8 million for the same period in 2015.
Net loss after income taxes increased to US$12.3 million from US$6.8 million for the same period in 2015, mainly due to foreign
exchange loss of US$16.4 million and US$3.8 million value impairment of Available-For-Sale securities incurred during the
current period and decreased copper price.
Gold production from the CSH Mine decreased by 9% to 185,052 ounces from 204,471 ounces for the same period in 2015.
Copper production from the Jiama Mine increased by 6% to 18,321 tonnes (approximately 40.4 million pounds) from 17,284
tonnes (approximately 38.1 million pounds) for the same period in 2015.
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANNUAL REPORT 2016
THE COMPANY
Overview
China Gold International is a gold and base metal mining company based in Vancouver, Canada. The Company’s main business
involves the operation, acquisition, development and exploration of gold and base metal properties.
The Company’s principal mining operations are the Chang Shan Hao Gold Mine ( “CSH Mine” or “CSH”), located in Inner Mongolia,
China and the Jiama Copper-Gold Polymetallic Mine (“Jiama Mine” or “Jiama”), located in Tibet, China. China Gold International
holds a 96.5% interest in the CSH Mine, while its Chinese joint venture (“CJV”) partner holds the remaining 3.5% interest. The CSH
Mine commenced commercial production on July 1, 2008. The Company owns a 100% interest in the Jiama Mine, which hosts a
large scale copper-gold polymetallic deposit containing copper, gold, molybdenum, silver, lead and zinc metals. The Jiama Mine
commenced commercial production in September 2010.
China Gold International’s common shares are listed on the Toronto Stock Exchange (“TSX”) and The Stock Exchange of Hong
Kong Limited (“HKSE”) under the symbol CGG and the stock code 2099, respectively. Additional information about the Company,
including the Company’s Annual Information Form, is available on SEDAR at sedar.com as well as Hong Kong Exchange News at
hkexnews.hk.
Performance Highlights
Three months ended December 31, 2016
Revenue increased by 18% to US$93.6 million from US$79.0 million for the same period in 2015.
Mine operating earnings increased by 210% to US$13.0 million from US$4.2 million for the same period in 2015.
Net loss after income taxes decreased to US$9.1 million from US$18.5 million for the same period in 2015.
Gold production from the CSH Mine decreased by 5% to 52,828 ounces from 55,673 ounces for the same period in 2015.
Copper production from the Jiama Mine increased by 1% to 4,364 tonnes (approximately 9.62 million pounds) from 4,339
tonnes (approximately 9.56 million pounds) for the same period in 2015.
Year ended December 31, 2016
Revenue remained consistent to US$338.6 million from US$339.9 million for the same period in 2015.
Mine operating earnings decreased by 11% to US$56.2 million from US$62.8 million for the same period in 2015.
Net loss after income taxes increased to US$12.3 million from US$6.8 million for the same period in 2015, mainly due to foreign
exchange loss of US$16.4 million and US$3.8 million value impairment of Available-For-Sale securities incurred during the
current period and decreased copper price.
Gold production from the CSH Mine decreased by 9% to 185,052 ounces from 204,471 ounces for the same period in 2015.
Copper production from the Jiama Mine increased by 6% to 18,321 tonnes (approximately 40.4 million pounds) from 17,284
tonnes (approximately 38.1 million pounds) for the same period in 2015.
Forward-looking information contained herein as of the date of this MD&A is based on the opinions, estimates and assumptions of
management. There are a number of important risks, uncertainties and other factors that could cause actual actions, events or
results to differ materially from those described as forward-looking information. China Gold International disclaims any obligation to
update any forward-looking information, whether as a result of new information, estimates, opinions or assumptions, future events
or results, or otherwise except to the extent required by law. There can be no assurance that forward-looking information will prove
to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The forward-
looking information in this MD&A is expressly qualified by this cautionary statement. The reader is cautioned not to place undue
reliance on forward-looking information.
38
39
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Selected Annual Information*
US$ Millions except for per share
Total revenue
Profit from continuing operations
Net (loss) profit
Basic (loss) earnings per share (cents)
Diluted (loss) earnings per share (cents)
Total assets
Total non-current liabilities
Distribution or cash dividends declared per share
*Prepared under IFRS
OUTLOOK
Year ended December 31
2015
340
39
(7)
(2.07)
(2.07)
2,781
971
-
2014
278
73
42
10.02
10.02
3,013
850
2013
303
76
57
13.88
13.88
2,219
431
2012
332
99
74
17.90
17.90
1,806
279
-
-
-
2016
339
34
(12)
(3.36)
N/A
2,967
737
-
Projected gold production of 218,700 ounces in 2017.
Projected copper production of approximately 79 million pounds in 2017.
The Jiama Mine’s Phase II expansion consists of two series, with each series having a mining and mineral processing capacity
of 22,000 tpd. The Phase II series I construction is now complete. The commissioning started in December 2016. It is expected
that the output of series I will be ramped up to its full capacity to 22,000 tpd around the middle of 2017. With Phase II series I
put in production, the total nameplate capacity will be increased from the current 6,000 tpd to 28,000 tpd.
The Company will continue to leverage the technical and operating experience of the Company’s controlling shareholder,
China National Gold Group Corporation (“CNG”), to improve operations at its mines. In addition, the Company continues to
focus its efforts on increasing production while minimizing costs at both mines.
To fulfill its growth strategy, the Company is continually working with CNG and other interested parties to identify potential
international mining acquisition opportunities, namely projects outside of China, which can be readily and quickly brought
into production with the possibility of further expansion through continued exploration.
ANNUAL REPORT 2016
(US$ in thousands except per share)
31-Dec
30-Sep
30-Jun
31-Mar
31-Dec
30-Sep
30-Jun
31-Mar
RESULTS OF OPERATIONS
Selected Quarterly Financial Data
Revenues
Cost of sales
Mine operating earnings
General and administrative expenses
Exploration and evaluation expenses
Income (loss) from operations
Foreign exchange gain (loss)
Finance costs
(Loss) profit before income tax
Income tax expense
Net (loss) profit
Basic (loss) earnings per share (cents)
Diluted (loss) earnings per share (cents)
Quarter ended
2016
93,552
80,517
13,035
5,127
216
7,692
(9,154)
4,264
(2,703)
6,431
(9,134)
(2.32)
N/A
109,560
85,681
23,879
5,902
65
17,912
2,493
3,793
13,972
6,276
7,696
1.82
1.82
69,904
58,162
11,742
5,361
53
6,328
(5,980)
4,063
(8,198)
5,563
(7,401)
(1.95)
(1.95)
Quarter ended
2015
99,948
82,752
17,196
5,330
45
11,821
(8,606)
7,181
692
5,850
83,647
63,336
20,311
5,988
62
1,482
6,570
13,742
3,173
65,585
58,039
7,546
5,049
46
2,451
1,198
4,453
78,967
74,798
4,169
6,483
157
(2,471)
(5,623)
(868)
(2,986)
(13,640)
500
4,836
(3,486)
(18,476)
(5,158)
10,569
(0.91)
(0.91)
(4.69)
(4.69)
(1.41)
(1.41)
2.54
2.54
77,387
56,217
21,170
6,028
38
(789)
8,524
10,813
4,575
6,238
1.49
1.49
14,261
15,104
Selected Quarterly and Annual Production Data and Analysis
CSH Mine
Three months ended
December 31,
Year ended
December 31,
64.92
2016
1,241
52,828
52,315
1,091
2015
60.92
1,070
55,673
56,924
961
753
2016
227.58
1,238
185,052
183,864
1,054
764
2015
233.80
1,117
204,471
209,285
884
652
Gold sales (US$ million)
Realized average price1 (US$) of gold per ounce
Gold produced (ounces)
Gold sold (ounces)
Total production cost2(US$) of gold per ounce
Cash production cost2 (US$) of gold per ounce
769
1 Net of resource compensation fees that is based on revenue and paid to the PRC government
2 Non-IFRS measure. See 'Non-IFRS measures’ section of this MD&A
Gold production at the CSH Mine decreased by 5% from 55,673 ounces for the three months ended December 31, 2015 to 52,828
ounces for the three months ended December 31, 2016. The decrease in gold production is mainly due to the lower grades of ores
mined during the current period.
The cash production cost, and total production cost of gold for the three months ended December 31, 2016 both increased
compared with the same period in 2015, which is mainly caused by the higher waste rock removal costs due to higher stripping
ratio during the current quarter.
40
41
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANNUAL REPORT 2016
Selected Annual Information*
US$ Millions except for per share
Total revenue
Profit from continuing operations
Net (loss) profit
Basic (loss) earnings per share (cents)
Diluted (loss) earnings per share (cents)
Total assets
Total non-current liabilities
*Prepared under IFRS
OUTLOOK
Year ended December 31
2016
339
34
(12)
(3.36)
N/A
2,967
737
-
2015
340
39
(7)
(2.07)
(2.07)
2,781
971
-
2014
278
73
42
10.02
10.02
3,013
850
2013
303
76
57
13.88
13.88
2,219
431
2012
332
99
74
17.90
17.90
1,806
279
Distribution or cash dividends declared per share
-
-
-
Projected gold production of 218,700 ounces in 2017.
Projected copper production of approximately 79 million pounds in 2017.
The Jiama Mine’s Phase II expansion consists of two series, with each series having a mining and mineral processing capacity
of 22,000 tpd. The Phase II series I construction is now complete. The commissioning started in December 2016. It is expected
that the output of series I will be ramped up to its full capacity to 22,000 tpd around the middle of 2017. With Phase II series I
put in production, the total nameplate capacity will be increased from the current 6,000 tpd to 28,000 tpd.
The Company will continue to leverage the technical and operating experience of the Company’s controlling shareholder,
China National Gold Group Corporation (“CNG”), to improve operations at its mines. In addition, the Company continues to
focus its efforts on increasing production while minimizing costs at both mines.
To fulfill its growth strategy, the Company is continually working with CNG and other interested parties to identify potential
international mining acquisition opportunities, namely projects outside of China, which can be readily and quickly brought
into production with the possibility of further expansion through continued exploration.
RESULTS OF OPERATIONS
Selected Quarterly Financial Data
(US$ in thousands except per share)
Revenues
Cost of sales
Mine operating earnings
General and administrative expenses
Exploration and evaluation expenses
Income (loss) from operations
Foreign exchange gain (loss)
Finance costs
(Loss) profit before income tax
Income tax expense
Net (loss) profit
Basic (loss) earnings per share (cents)
Diluted (loss) earnings per share (cents)
Quarter ended
2016
31-Dec
93,552
80,517
13,035
5,127
216
7,692
(9,154)
4,264
(2,703)
6,431
(9,134)
(2.32)
N/A
30-Sep
109,560
85,681
23,879
5,902
65
17,912
2,493
3,793
13,972
6,276
7,696
1.82
1.82
30-Jun
69,904
58,162
11,742
5,361
53
6,328
(5,980)
4,063
(8,198)
5,563
(7,401)
(1.95)
(1.95)
Quarter ended
2015
31-Dec
78,967
74,798
4,169
6,483
157
(2,471)
(5,623)
(868)
(13,640)
4,836
(18,476)
(4.69)
(4.69)
30-Sep
99,948
82,752
17,196
5,330
45
11,821
(8,606)
7,181
692
5,850
(5,158)
(1.41)
(1.41)
30-Jun
83,647
63,336
20,311
5,988
62
14,261
1,482
6,570
13,742
3,173
10,569
2.54
2.54
31-Mar
77,387
56,217
21,170
6,028
38
15,104
(789)
8,524
10,813
4,575
6,238
1.49
1.49
31-Mar
65,585
58,039
7,546
5,049
46
2,451
1,198
4,453
(2,986)
500
(3,486)
(0.91)
(0.91)
Selected Quarterly and Annual Production Data and Analysis
CSH Mine
Three months ended
December 31,
Year ended
December 31,
Gold sales (US$ million)
Realized average price1 (US$) of gold per ounce
Gold produced (ounces)
Gold sold (ounces)
Total production cost2(US$) of gold per ounce
2016
64.92
1,241
52,828
52,315
1,091
Cash production cost2 (US$) of gold per ounce
769
2015
60.92
1,070
55,673
56,924
961
753
2016
227.58
1,238
185,052
183,864
1,054
764
2015
233.80
1,117
204,471
209,285
884
652
1 Net of resource compensation fees that is based on revenue and paid to the PRC government
2 Non-IFRS measure. See 'Non-IFRS measures’ section of this MD&A
Gold production at the CSH Mine decreased by 5% from 55,673 ounces for the three months ended December 31, 2015 to 52,828
ounces for the three months ended December 31, 2016. The decrease in gold production is mainly due to the lower grades of ores
mined during the current period.
The cash production cost, and total production cost of gold for the three months ended December 31, 2016 both increased
compared with the same period in 2015, which is mainly caused by the higher waste rock removal costs due to higher stripping
ratio during the current quarter.
40
41
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Jiama Mine
Three months ended
December 31,
Year ended
December 31,
2016
19.40
1.81
4,365
2015
12.50
1.65
4,339
2016
69.28
1.55
18,321
2015
74.93
1.99
17,284
9,622,602
9,564,819
40,391,851
38,104,950
4,708
3,533
19,158
17,859
10,379,519
7,789,068
42,235,934
39,372,115
33% from 3,533 tonnes (7.8 million pounds) for the same period in 2015.
6,133
6,204
281,628
298,870
2.66
1.70
2.29
1.33
5,531
4,654
279,093
212,988
3.21
2.45
2.63
1.87
26,250
27,322
24,037
24,531
1,233,312
1,227,600
1,297,910
1,289,415
2.49
1.48
2.09
1.09
2.84
1.99
2.39
1.54
Copper sales1 (US$ in millions)
Realized average price2(US$) of copper per pound
after smelting fee discount
Copper produced (tonnes)
Copper produced (pounds)
Copper sold (tonnes)
Copper sold (pounds)
Gold produced (ounces)
Gold sold (ounces)
Silver produced (ounces)
Silver sold (ounces)
Total production cost3 (US$) of copper per pound
Total production cost3 (US$) of copper per pound
after by-products credits5
Cash production cost4 (US$) per pound of
copper
Cash production cost4 (US$) of copper per pound
after by-products credits5
1 Net of resource compensation fees that is based on revenue and paid to PRC government agency
million for the same period in 2015.
2 a discount factor of 22.4-30.9% is applied to the copper bench mark price to compensate the refinery costs incurred by the buyers
3 Production costs include expenditures incurred at the mine sites for the activities related to production including mining, processing, mine site
a G&A and royalties etc.
4 Non-IFRS measure. See 'Non-IFRS measures’ section of this MD&A
5 By-products credit refers to the sales of gold and silver during the corresponding period.
During the three months ended December 31, 2016, the Jiama Mine produced 4,364 tonnes (approximately 9.62 million pounds) of
copper in concentrate, an increase of 1% compared with the three months ended December 31, 2015 (4,339 tonnes, or 9.56 million
pounds). The increase in production was mainly due to the higher volume of ore processed and the higher copper grade of ore
during the period.
Both cash production cost and total production cost of copper per pound decreased, mainly because of the higher ore grade
mined and processed during the period.
ANNUAL REPORT 2016
Review of Quarterly and Annual Data
Three months ended December 31, 2016 compared to three months ended December 31,2015
Revenue of US$93.6 million for the fourth quarter of 2016 increased by US$14.6 million or 18%, from US$79.0 million for the same
period in 2015.
Revenue from the CSH Mine was US$64.9 million, an increase of US$4.0 million, compared to US$60.9 million for the same period in
2015. Gold produced by the CSH Mine was 52,828 ounces (gold sold: 52,315), compared to 55,673 ounces (gold sold: 56,924) for
the same period in 2015. CSH’s decreased production volumes are attributed to lower grades of ore mined.
Revenue from the Jiama Mine was US$28.6 million, an increase of US$10.5 million, compared to US$18.1 million for the same period
in 2015. Total copper sold was 4,708 tonnes (10.38 million pounds) for the three months ended December 31, 2016, an increase of
Cost of sales of US$80.5 million for the quarter ended December 31, 2016, an increase of US$5.7 million or 8% from US$74.8 million
for the same period in 2015. The overall increase is primarily attributed to an increase of 59% in revenue at Jiama. Cost of sales as
a percentage of revenue for the Company decreased from 95% to 86% for the three months ended December 31, 2015 and 2016,
respectively.
Mine operating earnings of US$13.0 million for the three months ended December 31, 2016 an increase of 210%, or US$8.8 million,
from US$4.2 million for the same period in 2015. Mine operating earnings as a percentage of revenue increased from 5% to 14% for
the three months ended December 31, 2015 and 2016, respectively. The increase in mine operating earnings as a percentage of
revenue can be attributed to a 10% increase in the realized average price of copper per pound and a 15% increase in the realized
average price of gold per ounce for the three months ended December 31, 2016.
General and administrative expenses decreased by US$1.4 million, from US$6.5 million for the quarter ended December 31, 2015
to US$5.1 million for the quarter ended December 31, 2016. The 22% decrease is consistent with the Company’s implementation of
cost reductions programs during the year.
Income from operations of US$7.7 million for the fourth quarter of 2016, increased by US$10.2 million, compared to a loss of US$2.5
Finance costs of US$4.3 million for the three months ended December 31, 2016, increased by US$5.1 million compared to the same
period in 2015. During the three months ended December 31, 2016, interest payments of US$6.2 million (2015: US$5.2 million) were
capitalized for borrowing costs related to the Jiama Mine expansion.
42
43
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANNUAL REPORT 2016
Review of Quarterly and Annual Data
Three months ended December 31, 2016 compared to three months ended December 31,2015
Revenue of US$93.6 million for the fourth quarter of 2016 increased by US$14.6 million or 18%, from US$79.0 million for the same
period in 2015.
Revenue from the CSH Mine was US$64.9 million, an increase of US$4.0 million, compared to US$60.9 million for the same period in
2015. Gold produced by the CSH Mine was 52,828 ounces (gold sold: 52,315), compared to 55,673 ounces (gold sold: 56,924) for
the same period in 2015. CSH’s decreased production volumes are attributed to lower grades of ore mined.
Revenue from the Jiama Mine was US$28.6 million, an increase of US$10.5 million, compared to US$18.1 million for the same period
in 2015. Total copper sold was 4,708 tonnes (10.38 million pounds) for the three months ended December 31, 2016, an increase of
10,379,519
7,789,068
42,235,934
39,372,115
33% from 3,533 tonnes (7.8 million pounds) for the same period in 2015.
Cost of sales of US$80.5 million for the quarter ended December 31, 2016, an increase of US$5.7 million or 8% from US$74.8 million
for the same period in 2015. The overall increase is primarily attributed to an increase of 59% in revenue at Jiama. Cost of sales as
a percentage of revenue for the Company decreased from 95% to 86% for the three months ended December 31, 2015 and 2016,
respectively.
Mine operating earnings of US$13.0 million for the three months ended December 31, 2016 an increase of 210%, or US$8.8 million,
from US$4.2 million for the same period in 2015. Mine operating earnings as a percentage of revenue increased from 5% to 14% for
the three months ended December 31, 2015 and 2016, respectively. The increase in mine operating earnings as a percentage of
revenue can be attributed to a 10% increase in the realized average price of copper per pound and a 15% increase in the realized
average price of gold per ounce for the three months ended December 31, 2016.
General and administrative expenses decreased by US$1.4 million, from US$6.5 million for the quarter ended December 31, 2015
to US$5.1 million for the quarter ended December 31, 2016. The 22% decrease is consistent with the Company’s implementation of
cost reductions programs during the year.
Income from operations of US$7.7 million for the fourth quarter of 2016, increased by US$10.2 million, compared to a loss of US$2.5
1 Net of resource compensation fees that is based on revenue and paid to PRC government agency
million for the same period in 2015.
Finance costs of US$4.3 million for the three months ended December 31, 2016, increased by US$5.1 million compared to the same
period in 2015. During the three months ended December 31, 2016, interest payments of US$6.2 million (2015: US$5.2 million) were
capitalized for borrowing costs related to the Jiama Mine expansion.
43
Copper sales1 (US$ in millions)
Realized average price2(US$) of copper per pound
after smelting fee discount
Copper produced (tonnes)
Copper produced (pounds)
Copper sold (tonnes)
Copper sold (pounds)
Gold produced (ounces)
Gold sold (ounces)
Silver produced (ounces)
Silver sold (ounces)
Total production cost3 (US$) of copper per pound
Total production cost3 (US$) of copper per pound
after by-products credits5
Cash production cost4 (US$) per pound of
copper
Cash production cost4 (US$) of copper per pound
after by-products credits5
Jiama Mine
Three months ended
December 31,
Year ended
December 31,
9,622,602
9,564,819
40,391,851
38,104,950
4,708
3,533
19,158
17,859
2016
19.40
1.81
4,365
6,133
6,204
281,628
298,870
2.66
1.70
2.29
1.33
2015
12.50
1.65
4,339
5,531
4,654
279,093
212,988
3.21
2.45
2.63
1.87
2016
69.28
1.55
18,321
2015
74.93
1.99
17,284
26,250
27,322
24,037
24,531
1,233,312
1,227,600
1,297,910
1,289,415
2.49
1.48
2.09
1.09
2.84
1.99
2.39
1.54
2 a discount factor of 22.4-30.9% is applied to the copper bench mark price to compensate the refinery costs incurred by the buyers
3 Production costs include expenditures incurred at the mine sites for the activities related to production including mining, processing, mine site
a G&A and royalties etc.
4 Non-IFRS measure. See 'Non-IFRS measures’ section of this MD&A
5 By-products credit refers to the sales of gold and silver during the corresponding period.
During the three months ended December 31, 2016, the Jiama Mine produced 4,364 tonnes (approximately 9.62 million pounds) of
copper in concentrate, an increase of 1% compared with the three months ended December 31, 2015 (4,339 tonnes, or 9.56 million
pounds). The increase in production was mainly due to the higher volume of ore processed and the higher copper grade of ore
Both cash production cost and total production cost of copper per pound decreased, mainly because of the higher ore grade
mined and processed during the period.
during the period.
42
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANNUAL REPORT 2016
Foreign exchange loss increased to US$9.2 million for the three months ended December 31, 2016 from US$5.6 million for the same
period in 2015. The increase is related to the revaluation of monetary items held in Chinese RMB, which was based on changes in
the RMB/USD exchange rates.
Interest and other income of US$3.0 million for the three months ended December 31, 2016 increased from an expense of US$1.7
million for the same period in 2015, due to higher income earned on term deposits and related party loans.
Income tax expense of US$6.4 million for the quarter ended December 31, 2016, increased by US$1.6 million from US$4.8 million for
the comparative period in 2015. During the current quarter, the Company had US$2.1 million of deferred tax expense compared
to US$1.7 million in 2015.
Net loss of the Company decreased by US$9.4 million from US$18.5 million for the three months ended December 31, 2015 to US$9.1
million for the three months ended December 31, 2016.
Year ended December 31, 2016 compared to Year ended December 31, 2015
Revenue of US$338.6 million for the year ended December 31, 2016, decreased by US$1.3 million or 0.4%, from US$339.9 million for
related to the Jiama Mine expansion.
the same period in 2015.
Revenue from the CSH Mine was US$227.6 million (2015: US$233.8 million), a decrease of US$6.2 million due to a 12% decrease in
gold sales volume. Gold produced by the CSH Mine was 185,052 ounces (gold sold: 183,864), compared to 204,471 ounces (gold
sold: 209,285 ounces) for the same period in 2015. CSH’s decreased production volumes are attributed to lower grades of ore
mined.
Revenue from the Jiama Mine was US$111.0 million compared to US$106.2 million for the same period in 2015. Total copper sold
was 19,158 tonnes (42.2 million pounds) for the year ended December 31, 2016, an increase of 7% from 17,859 tonnes (39.4 million
pounds) for the same period in 2015. The increase in revenue is attributed to higher copper production.
Cost of sales of US$282.4 million for the year ended December 31, 2016, increased by US$5.3 million or 2% from US$277.1 million for
the same period in 2015. The overall increase is primarily attributed to lower production volume at CSH in addition to lower grades
of ore mined during 2016. Cost of sales as a percentage of revenue for the Company increased to 83% from 82% for the year ended
December 31, 2016 compared to 2015.
Mine operating earnings of US$56.2 million for the year ended December 31, 2016 decreased by 11%, or US$6.6 million, from US$62.8
million in 2015. Mine operating earnings as a percentage of revenue decreased from 18% to 17% for the year ended December
31, 2016 and 2015, respectively. The decrease in mine operating earnings as a percentage of revenue can be attributed to a 22%
decrease in the realized average price of copper per pound after smelting fee discount.
General and administrative expenses decreased by US$2.4 million, from US$23.8 million for the year ended December 31, 2016 to
US$21.4 million in 2015. The decrease is due to the Company’s implementation of cost reduction programs and continuous efforts
in monitoring spending.
for the same period in 2015.
Income from operations for the year ended December 31, 2016 of US$34.4 million, decreased by US$4.3 million from US$38.7 million
Finance costs of US$16.6 million for the year ended December 31, 2016 decreased by US$4.8 million, from US$21.4 million for the
same period in 2015. The decrease in the 2016 period is attributed to lower interest rates held on Jiama’s project loans. During the
year ended December 31, 2016, US$24.8 million (2015: US$23.9 million) of interest payments were capitalized for borrowing costs
Foreign exchange loss increased to US$16.4 million for the year ended December 31, 2016 from US$13.5 million for the same period
in 2015. The 2016 loss is related to the revaluation of monetary items held in Chinese RMB, which was based on changes in the RMB/
USD exchange rates.
Interest and other income of US$8.9 million for the year ended December 31, 2016 decreased from US$12.5 million for the year
ended December 31, 2015, due to decreased interest income earned on term deposits and related party loans.
Loss on Available for sale investment of US$3.8 million was recognized in relation to the equity securities investment listed in Hong
Kong during the year ended December 31, 2016, compared to US$4.7 million for the year ended December 31, 2015. The loss was
recorded due to an overall 25% decline in the share price of the investment security since the purchase date.
Income tax expense of US$18.7 million for the year ended December 31, 2016, increased by 2%, from US$18.4 million in 2015. During
the current year, the Company had US$740,000 of deferred income tax expense compared to US$6.7 million in 2015, the change is
attributed to the depreciation of the RMB.
for the year ended December 31, 2016.
Net loss of the Company increased by US$5.5 million from US$6.8 million for the year ended December 31, 2015 to US$12.3 million
44
45
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANNUAL REPORT 2016
Foreign exchange loss increased to US$9.2 million for the three months ended December 31, 2016 from US$5.6 million for the same
period in 2015. The increase is related to the revaluation of monetary items held in Chinese RMB, which was based on changes in
the RMB/USD exchange rates.
Interest and other income of US$3.0 million for the three months ended December 31, 2016 increased from an expense of US$1.7
million for the same period in 2015, due to higher income earned on term deposits and related party loans.
Income tax expense of US$6.4 million for the quarter ended December 31, 2016, increased by US$1.6 million from US$4.8 million for
the comparative period in 2015. During the current quarter, the Company had US$2.1 million of deferred tax expense compared
to US$1.7 million in 2015.
Net loss of the Company decreased by US$9.4 million from US$18.5 million for the three months ended December 31, 2015 to US$9.1
million for the three months ended December 31, 2016.
Year ended December 31, 2016 compared to Year ended December 31, 2015
Revenue of US$338.6 million for the year ended December 31, 2016, decreased by US$1.3 million or 0.4%, from US$339.9 million for
the same period in 2015.
Revenue from the CSH Mine was US$227.6 million (2015: US$233.8 million), a decrease of US$6.2 million due to a 12% decrease in
gold sales volume. Gold produced by the CSH Mine was 185,052 ounces (gold sold: 183,864), compared to 204,471 ounces (gold
sold: 209,285 ounces) for the same period in 2015. CSH’s decreased production volumes are attributed to lower grades of ore
mined.
Revenue from the Jiama Mine was US$111.0 million compared to US$106.2 million for the same period in 2015. Total copper sold
was 19,158 tonnes (42.2 million pounds) for the year ended December 31, 2016, an increase of 7% from 17,859 tonnes (39.4 million
pounds) for the same period in 2015. The increase in revenue is attributed to higher copper production.
Cost of sales of US$282.4 million for the year ended December 31, 2016, increased by US$5.3 million or 2% from US$277.1 million for
the same period in 2015. The overall increase is primarily attributed to lower production volume at CSH in addition to lower grades
of ore mined during 2016. Cost of sales as a percentage of revenue for the Company increased to 83% from 82% for the year ended
December 31, 2016 compared to 2015.
Mine operating earnings of US$56.2 million for the year ended December 31, 2016 decreased by 11%, or US$6.6 million, from US$62.8
million in 2015. Mine operating earnings as a percentage of revenue decreased from 18% to 17% for the year ended December
31, 2016 and 2015, respectively. The decrease in mine operating earnings as a percentage of revenue can be attributed to a 22%
decrease in the realized average price of copper per pound after smelting fee discount.
General and administrative expenses decreased by US$2.4 million, from US$23.8 million for the year ended December 31, 2016 to
US$21.4 million in 2015. The decrease is due to the Company’s implementation of cost reduction programs and continuous efforts
in monitoring spending.
Income from operations for the year ended December 31, 2016 of US$34.4 million, decreased by US$4.3 million from US$38.7 million
for the same period in 2015.
Finance costs of US$16.6 million for the year ended December 31, 2016 decreased by US$4.8 million, from US$21.4 million for the
same period in 2015. The decrease in the 2016 period is attributed to lower interest rates held on Jiama’s project loans. During the
year ended December 31, 2016, US$24.8 million (2015: US$23.9 million) of interest payments were capitalized for borrowing costs
related to the Jiama Mine expansion.
Foreign exchange loss increased to US$16.4 million for the year ended December 31, 2016 from US$13.5 million for the same period
in 2015. The 2016 loss is related to the revaluation of monetary items held in Chinese RMB, which was based on changes in the RMB/
USD exchange rates.
Interest and other income of US$8.9 million for the year ended December 31, 2016 decreased from US$12.5 million for the year
ended December 31, 2015, due to decreased interest income earned on term deposits and related party loans.
Loss on Available for sale investment of US$3.8 million was recognized in relation to the equity securities investment listed in Hong
Kong during the year ended December 31, 2016, compared to US$4.7 million for the year ended December 31, 2015. The loss was
recorded due to an overall 25% decline in the share price of the investment security since the purchase date.
Income tax expense of US$18.7 million for the year ended December 31, 2016, increased by 2%, from US$18.4 million in 2015. During
the current year, the Company had US$740,000 of deferred income tax expense compared to US$6.7 million in 2015, the change is
attributed to the depreciation of the RMB.
Net loss of the Company increased by US$5.5 million from US$6.8 million for the year ended December 31, 2015 to US$12.3 million
for the year ended December 31, 2016.
44
45
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
NON-IFRS MEASURES
The following table provides certain unit cost information on a cost of production per tonne of ore processed (non-IFRS) basis for
the CSH Mine and the Jiama Mine for the three months and the year ended December 31, 2016 and 2015:
CSH Mine
Three months ended
December 31,
Year ended
December 31,
2016
US$
1.18
2.08
0.05
3.31
1.45
1.16
2.61
2015
US$
1.33
2.43
0.36
4.12
1.39
1.31
2.70
2016
US$
1.37
2.76
0.28
4.41
1.06
0.88
1.94
2015
US$
1.41
2.81
0.31
4.53
1.00
1.06
2.06
Cost of mining per tonne of ore
Cost of mining waste per tonne of ore
Other mining costs per tonne of ore
Total mining costs per tonne of ore
Cost of reagents per tonne of ore
Other processing costs per tonne of ore
Total processing cost per tonne of ore
The cash cost of production is a measure that is not in accordance with IFRS.
Total cash production costs
23,774,562
2.29
20,471,712
2.63
88,388,258
2.09
94,166,309
The Company has included cash production cost per ounce gold data to supplement its consolidated financial statements,
which are presented in accordance with IFRS. Non-IFRS measures do not have any standardized meaning prescribed under IFRS,
and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide
additional information and should not be considered in isolation or as a substitute for measures of performance, operating results or
financial condition prepared in accordance with IFRS. The Company has included cash production cost per ounce data because
it understands that certain investors use this information to determine the Company’s ability to generate earnings and cash flow.
The measure is not necessarily indicative of operating results, cash flow from operations, or financial condition as determined under
IFRS. Cash production costs are determined in accordance with the Gold Institute’s Production Cost Standard.
46
ANNUAL REPORT 2016
The following table provides a reconciliation of cost of sales to the cash costs of production in total dollars and in dollars per gold
ounce for the CSH Mine or per copper tonne for the Jiama Mine:
Three months ended December 31,
Year ended December 31,
CSH Mine （Gold）
2016
US$
US$
Per ounce
2015
US$
US$
Per ounce
2016
US$
US$
Per ounce
2015
US$
US$
Per ounce
Total production costs
57,066,133
1,091
54,715,003
193,797,572
1,054
185,052,316
Adjustments
(16,841,000)
(322)
(11,866,275)
(53,364,836)
(290)
(48,516,309)
Total cash production costs
40,225,133
769
42,848,728
798
140,432,736
764
136,536,007
961
(164)
Jiama Mine (Copper with by-products credits)
Three months ended December 31,
Year ended December 31,
2016
US$
US$
Per Pound
2015
US$
US$
Per Pound
2016
US$
US$
Per Pound
2015
US$
US$
Per Pound
Total production costs
27,577,076
2.66
25,024,225
3.21
105,122,287
2.49
111,798,518
Adjustments
(3,802,514)
(0.37)
(4,552,512)
(0.58)
(16,734,029)
(0.40)
(17,632,209)
By-products credits
(9,946,546)
(0.96)
(5,912,193)
(0.76)
(42,553,463)
(1.01)
(33,563,675)
Total cash production costs
after by-products credits
13,828,016
1.33
14,559,520
1.87
45,834,795
1.09
60,602,634
1.54
The adjustments above include depreciation and depletion, amortization of intangible assets, and selling expenses
included in total production costs.
884
(232)
652
2.84
(0.45)
2.39
(0.85)
47
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANNUAL REPORT 2016
The following table provides a reconciliation of cost of sales to the cash costs of production in total dollars and in dollars per gold
ounce for the CSH Mine or per copper tonne for the Jiama Mine:
Three months ended December 31,
Year ended December 31,
CSH Mine （Gold）
2016
US$
US$
Per ounce
2015
US$
US$
Per ounce
2016
US$
US$
Per ounce
2015
US$
US$
Per ounce
Total production costs
57,066,133
1,091
54,715,003
Adjustments
(16,841,000)
(322)
(11,866,275)
961
(164)
193,797,572
1,054
185,052,316
(53,364,836)
(290)
(48,516,309)
Total cash production costs
40,225,133
769
42,848,728
798
140,432,736
764
136,536,007
884
(232)
652
Jiama Mine (Copper with by-products credits)
Three months ended December 31,
Year ended December 31,
2016
US$
US$
Per Pound
2015
US$
US$
Per Pound
2016
US$
US$
Per Pound
2015
US$
US$
Per Pound
The cash cost of production is a measure that is not in accordance with IFRS.
Total cash production costs
23,774,562
2.29
20,471,712
2.63
88,388,258
2.09
94,166,309
By-products credits
(9,946,546)
(0.96)
(5,912,193)
(0.76)
(42,553,463)
(1.01)
(33,563,675)
Total production costs
27,577,076
2.66
25,024,225
3.21
105,122,287
2.49
111,798,518
Adjustments
(3,802,514)
(0.37)
(4,552,512)
(0.58)
(16,734,029)
(0.40)
(17,632,209)
2.84
(0.45)
2.39
(0.85)
Total cash production costs
after by-products credits
13,828,016
1.33
14,559,520
1.87
45,834,795
1.09
60,602,634
1.54
The adjustments above include depreciation and depletion, amortization of intangible assets, and selling expenses
included in total production costs.
NON-IFRS MEASURES
The following table provides certain unit cost information on a cost of production per tonne of ore processed (non-IFRS) basis for
the CSH Mine and the Jiama Mine for the three months and the year ended December 31, 2016 and 2015:
CSH Mine
Three months ended
December 31,
Year ended
December 31,
2016
US$
1.18
2.08
0.05
3.31
1.45
1.16
2.61
2015
US$
1.33
2.43
0.36
4.12
1.39
1.31
2.70
2016
US$
1.37
2.76
0.28
4.41
1.06
0.88
1.94
2015
US$
1.41
2.81
0.31
4.53
1.00
1.06
2.06
Cost of mining per tonne of ore
Cost of mining waste per tonne of ore
Other mining costs per tonne of ore
Total mining costs per tonne of ore
Cost of reagents per tonne of ore
Other processing costs per tonne of ore
Total processing cost per tonne of ore
The Company has included cash production cost per ounce gold data to supplement its consolidated financial statements,
which are presented in accordance with IFRS. Non-IFRS measures do not have any standardized meaning prescribed under IFRS,
and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide
additional information and should not be considered in isolation or as a substitute for measures of performance, operating results or
financial condition prepared in accordance with IFRS. The Company has included cash production cost per ounce data because
it understands that certain investors use this information to determine the Company’s ability to generate earnings and cash flow.
The measure is not necessarily indicative of operating results, cash flow from operations, or financial condition as determined under
IFRS. Cash production costs are determined in accordance with the Gold Institute’s Production Cost Standard.
46
47
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
MINERAL PROPERTIES
The CSH Mine
The CSH Mine is located in Inner Mongolia Autonomous Region of China (Inner Mongolia). The property hosts two low-grade, near
surface gold deposits, along with other mineralized prospects. The main deposit is called the Northeast Zone (the “Northeast
Zone”), while the second, smaller deposit is called the Southwest Zone (the “Southwest Zone”).
The CSH Mine is owned and operated by Inner Mongolia Pacific Mining Co. Limited, a Chinese Joint Venture in which China Gold
International holds a 96.5% interest and Ningxia Nuclear Industry Geological Exploration Institution (formerly known as Brigade 217)
holds the remaining 3.5%.
The CSH Mine has two open-pit mining operations and has a mining and processing capacity of 60,000 tpd.
The capital expenditure incurred in the CSH Mine for the year ended December 31, 2016 was US$83.0 million.
Major new contracts entered into during the year ended December 31, 2016 are as follows.
Item
No.
1
2
Contract Name
Counterpart
Subject amount
(US $ millions)
Contract period
(effective day and
expiration date)
Date of
Contract
Liquid Sodium Cyanide
Purchase contract
Inner Mongolia Chengxin Yongan
Chemical Co., Ltd.
Unit price contract
Estimated amount: 14
2016.5.11-2017.6.11
2016.5.11
Mixed Explosive Purchase
contract
Bayannuur Sheng An Chemical
Co., Ltd.
2016.1.1-2016.12.30
2016.1.1
Unit price contract
Estimated amount:
12.5
Production Update
Ore mined and placed on pad (tonnes)
5,005,467
4,719,942
22,275,694
21,144,471
The Company acquired the Jiama Mine on December 1, 2010. Jiama is a large copper-gold polymetallic deposit containing
CSH Mine
Three months ended
December 31,
2016
2015
Year ended
December 31,
2016
2015
The Jiama Mine
Average ore grade (g/t)
Recoverable gold (ounces)
0.49
0.51
0.49
46,868
46,883
209,616
Ending ore inventory (ounces)
181,720
176,037
181,720
0.55
219,128
176,037
Waste rock mined (tonnes)
26,175,092
16,124,486
92,691,570
96,310,335
For the three months ended December 31, 2016, the total amount of ore placed on the leach pad was 5.0 million tonnes, with total
contained gold of 46,868 ounces (1,458 kilograms). The accumulative project-to-date gold recovery rate has slightly increased
from approximately 51.71% at the end of September 2016 to 52.07% at the end of December 2016.
48
ANNUAL REPORT 2016
The Company continues to conduct surface reconnaissance and exploration for expansion opportunities around the CSH Mine.
Eight holes with a cumulative 7,211 meters have been drilled in 2015 and 2016.
Exploration
Mineral Reserves Update
CSH Mine Reserves by category, Northeast and Southwest pits combined at December 31, 2016 under NI 43-101:
Type
Measured
Indicated
M+I
Type
Proven
Probable
Total
Quantity Mt
26.72
136.59
163.31
Au g/t
0.67
0.61
0.62
Quantity Mt
Au g/t
25.87
93.32
119.20
0.68
0.64
0.65
Metal
Au t
17.94
83.35
102.29
Metal
Au t
17.59
59.34
76.93
Mineral Resource Update
CSH Mine Resources by category, Northeast and Southwest pits combined at December 31, 2016 under NI 43-101:
copper, gold, silver, molybdenum, and other metals located in the Gandise metallogenic belt in Tibet Autonomous Region of China.
The Jiama Mine has both underground mining and open-pit mining operations. Phase I of the Jiama Mine commenced mining
operations in the latter half of 2010 and reached its design capacity of 6,000 tpd in early 2011.
Au Moz
0.58
2.68
3.26
Au Moz
0.57
1.91
2.47
49
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANNUAL REPORT 2016
Exploration
The Company continues to conduct surface reconnaissance and exploration for expansion opportunities around the CSH Mine.
Eight holes with a cumulative 7,211 meters have been drilled in 2015 and 2016.
Mineral Reserves Update
CSH Mine Reserves by category, Northeast and Southwest pits combined at December 31, 2016 under NI 43-101:
Type
Measured
Indicated
M+I
Quantity Mt
26.72
136.59
163.31
Au g/t
0.67
0.61
0.62
Metal
Au t
17.94
83.35
102.29
Contract Name
Counterpart
Mineral Resource Update
Subject amount
(US $ millions)
Contract period
(effective day and
expiration date)
Date of
Contract
CSH Mine Resources by category, Northeast and Southwest pits combined at December 31, 2016 under NI 43-101:
Type
Proven
Probable
Total
Quantity Mt
Au g/t
25.87
93.32
119.20
0.68
0.64
0.65
Metal
Au t
17.59
59.34
76.93
Au Moz
0.58
2.68
3.26
Au Moz
0.57
1.91
2.47
The Jiama Mine
The Company acquired the Jiama Mine on December 1, 2010. Jiama is a large copper-gold polymetallic deposit containing
copper, gold, silver, molybdenum, and other metals located in the Gandise metallogenic belt in Tibet Autonomous Region of China.
The Jiama Mine has both underground mining and open-pit mining operations. Phase I of the Jiama Mine commenced mining
operations in the latter half of 2010 and reached its design capacity of 6,000 tpd in early 2011.
49
MINERAL PROPERTIES
The CSH Mine
The CSH Mine is located in Inner Mongolia Autonomous Region of China (Inner Mongolia). The property hosts two low-grade, near
surface gold deposits, along with other mineralized prospects. The main deposit is called the Northeast Zone (the “Northeast
Zone”), while the second, smaller deposit is called the Southwest Zone (the “Southwest Zone”).
The CSH Mine is owned and operated by Inner Mongolia Pacific Mining Co. Limited, a Chinese Joint Venture in which China Gold
International holds a 96.5% interest and Ningxia Nuclear Industry Geological Exploration Institution (formerly known as Brigade 217)
holds the remaining 3.5%.
The CSH Mine has two open-pit mining operations and has a mining and processing capacity of 60,000 tpd.
The capital expenditure incurred in the CSH Mine for the year ended December 31, 2016 was US$83.0 million.
Major new contracts entered into during the year ended December 31, 2016 are as follows.
Liquid Sodium Cyanide
Inner Mongolia Chengxin Yongan
Unit price contract
2016.5.11-2017.6.11
2016.5.11
Purchase contract
Chemical Co., Ltd.
Estimated amount: 14
Mixed Explosive Purchase
Bayannuur Sheng An Chemical
Unit price contract
2016.1.1-2016.12.30
2016.1.1
contract
Co., Ltd.
Estimated amount:
12.5
Production Update
CSH Mine
Three months ended
December 31,
2016
2015
Year ended
December 31,
2016
2015
Ore mined and placed on pad (tonnes)
5,005,467
4,719,942
22,275,694
21,144,471
Average ore grade (g/t)
Recoverable gold (ounces)
0.49
0.51
0.49
46,868
46,883
209,616
Ending ore inventory (ounces)
181,720
176,037
181,720
0.55
219,128
176,037
Waste rock mined (tonnes)
26,175,092
16,124,486
92,691,570
96,310,335
For the three months ended December 31, 2016, the total amount of ore placed on the leach pad was 5.0 million tonnes, with total
contained gold of 46,868 ounces (1,458 kilograms). The accumulative project-to-date gold recovery rate has slightly increased
from approximately 51.71% at the end of September 2016 to 52.07% at the end of December 2016.
Item
No.
1
2
48
MANAGEMENT'S DISCUSSION AND ANALYSIS
Phase II Expansion
The Jiama Expansion Program
The Jiama Mine’s Phase II expansion consists of two series, with each series having a mining and mineral processing capacity of
22,000 tpd. The Phase II series I construction is now complete. The commissioning started in December 2016. It is expected that
the output of Series I will be ramped up to its full capacity around the middle of 2017. With Phase II series I in production, the total
nameplate capacity will be increased from the current 6,000 tpd to 28,000 tpd. Given the recent global economic volatility and
uncertainty and their potential impact on commodity prices and market conditions, the Company will complete construction of
Phase II but slow down the mining projects construction, commissioning of the series II facility while it re-optimizes the mining plan
and production schedules.
The capital expenditure incurred for the Jiama Mine expansion for the year ended December 31, 2016 was US$143.7 million.
Major new contracts entered into during the year ended December 31, 2016 are as follows:
Item
No.
Contact Name
Counterpart
Jiama Copper Polymetallic
Mine Hornfel Open-pit
Mining and Stripping Project
Contract
Jiama Mine 4-12 Shaft UG
Mining Project (2000t/d)
Contract
Color Twelve Metallurgical
Construction Co.,Ltd.
Jiangxi Weile Construction
Group Co., Ltd.
Jiama Mine 4490 Ramp
Underground Mining
(1500t/d) Contract
In color twelve Metallurgical
Construction Co., Ltd.
Jiama Mine Copper Mt.
Underground Mining
(1000t/d) Contract
The Second Engineering Co.,
Ltd of China Railway 17 Bureau
Group Corporation
Subject amount
(US $ millions)
Contract period
(effective day and
expiration date)
Date of
Contract
17.2
2015.12.1-2018.11.30
2016.2.14
48.3
2016.3.1-2019.2.28
2016.3.1
The Company plans peripheral prospecting and mineral exploration work in 2016, and have planning of 12 drilling holes; nine
holes are completed and the drilling work was suspend due to the winter. The rest of fieldwork exploration will be continued in
28.9
2016.3.1-2019.2.28
2016.3.1
21
2016.3.1-2019.2.28
2016.3.1
Jiama Mine 4-12 Shaft UG
Mining Project(4000t/d) and
Shaft Repairment Project
Contract
Jiama Copper Polymetallic
Mine Filling System
Equipment & pipelines
Purchase and Installment
Project Contract
Jiama Copper Polymetallic
Mine Phase II UG Stope
Mining(Section III) Project
Contract
Zhejiang Huaye Mine Group
Co.,Ltd.
68.5
2016.3.1-2019.2.28
2016.3.1
Feiyi Co., Ltd.
Zhongtai Construction Group
Co., Ltd.
Zhejiang Huaye Mine Group
Co.,Ltd.
7.2
2016.4.26-2016.10.31
2016.4.25
194
2016.3.1-2026.2.28
2016.4.25
1
2
3
4
5
6
7
50
ANNUAL REPORT 2016
MANAGEMENT'S DISCUSSION AND ANALYSIS
Jiama Mine
Three months ended
December 31,
Year ended
December 31,
2016
2015
2016
2015
390,152
525,174
2,132,483
2,317,522
-
0.94
92
0.56
71
24.92
68
-
-
0.46
0.48
19.91
23.95
0.85
91
71
67
0.81
91
69
68
-
0.79
92
0.46
68
21.62
68
Production Update
Ore mined (tonnes)
Waste mined (tonnes)
Average copper ore grade (%)
Copper recovery rate (%)
Average gold ore grade (g/t)
Gold recovery rate (%)
Average silver ore grade (g/t)
Silver recovery rate (%)
Exploration
2017.
51
MANAGEMENT'S DISCUSSION AND ANALYSIS
Phase II Expansion
The Jiama Expansion Program
The Jiama Mine’s Phase II expansion consists of two series, with each series having a mining and mineral processing capacity of
22,000 tpd. The Phase II series I construction is now complete. The commissioning started in December 2016. It is expected that
the output of Series I will be ramped up to its full capacity around the middle of 2017. With Phase II series I in production, the total
nameplate capacity will be increased from the current 6,000 tpd to 28,000 tpd. Given the recent global economic volatility and
uncertainty and their potential impact on commodity prices and market conditions, the Company will complete construction of
Phase II but slow down the mining projects construction, commissioning of the series II facility while it re-optimizes the mining plan
and production schedules.
The capital expenditure incurred for the Jiama Mine expansion for the year ended December 31, 2016 was US$143.7 million.
Major new contracts entered into during the year ended December 31, 2016 are as follows:
Subject amount
(US $ millions)
Contract period
(effective day and
expiration date)
Date of
Contract
17.2
2015.12.1-2018.11.30
2016.2.14
Item
No.
Contact Name
Counterpart
Jiama Copper Polymetallic
Color Twelve Metallurgical
Mine Hornfel Open-pit
Construction Co.,Ltd.
Mining and Stripping Project
Contract
Mining Project (2000t/d)
Group Co., Ltd.
Contract
Jiama Mine 4-12 Shaft UG
Jiangxi Weile Construction
48.3
2016.3.1-2019.2.28
2016.3.1
Jiama Mine 4490 Ramp
In color twelve Metallurgical
28.9
2016.3.1-2019.2.28
2016.3.1
Underground Mining
(1500t/d) Contract
Construction Co., Ltd.
Jiama Mine Copper Mt.
The Second Engineering Co.,
21
2016.3.1-2019.2.28
2016.3.1
Underground Mining
(1000t/d) Contract
Ltd of China Railway 17 Bureau
Group Corporation
Jiama Mine 4-12 Shaft UG
Zhejiang Huaye Mine Group
68.5
2016.3.1-2019.2.28
2016.3.1
Jiama Copper Polymetallic
Feiyi Co., Ltd.
7.2
2016.4.26-2016.10.31
2016.4.25
Mining Project(4000t/d) and
Co.,Ltd.
Shaft Repairment Project
Contract
Mine Filling System
Equipment & pipelines
Purchase and Installment
Project Contract
Zhongtai Construction Group
Co., Ltd.
Mine Phase II UG Stope
Co.,Ltd.
Mining(Section III) Project
Contract
Jiama Copper Polymetallic
Zhejiang Huaye Mine Group
194
2016.3.1-2026.2.28
2016.4.25
1
2
3
4
5
6
7
50
ANNUAL REPORT 2016
MANAGEMENT'S DISCUSSION AND ANALYSIS
Jiama Mine
Three months ended
December 31,
Year ended
December 31,
2016
2015
2016
2015
390,152
525,174
2,132,483
2,317,522
-
0.94
92
0.56
71
24.92
68
-
-
0.81
91
0.85
91
0.46
0.48
69
71
19.91
23.95
68
67
-
0.79
92
0.46
68
21.62
68
Production Update
Ore mined (tonnes)
Waste mined (tonnes)
Average copper ore grade (%)
Copper recovery rate (%)
Average gold ore grade (g/t)
Gold recovery rate (%)
Average silver ore grade (g/t)
Silver recovery rate (%)
Exploration
The Company plans peripheral prospecting and mineral exploration work in 2016, and have planning of 12 drilling holes; nine
holes are completed and the drilling work was suspend due to the winter. The rest of fieldwork exploration will be continued in
2017.
51
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Mineral Resources Estimate
Mineral Reserves Estimate
ANNUAL REPORT 2016
An NI 43-101 compliant mineral resource estimate was independently completed by Mining One Pty Ltd. in November 2013,
based on information collected up to November 12, 2012. The drilling programs subsequent to November 2012, including an
extensive drill program conducted in 2013, will be included in future updates of the Mineral Resources and Reserves.
Mining One Pty Ltd. noted that gold and silver mineralization within the ore body had a significantly higher spatial variability than
the other elements. This classification takes into account the proposed large scale mining techniques where Au and Ag will only
be credits to the overall products from the operations. Mining One Pty Ltd has assumed that Au and Ag will not be assigned a
single cut-off grade for a selected mining block and will be mined in conjunction with the other elements.
Jiama Project - Cu, Mo, Pb, Zn ,Au, and Ag Mineral Resources under NI 43-101
Reported at a 0.3% Cu Equivalent Cut off grade*, as of December 31, 2016
Class
Measured
Indicated
M+I
Inferred
Quantity
Mt
96.6
1,382.7
1,479.4
406.1
Cu
Mo
Pb
Zn
Metal
Metal
Metal
Metal
Au
Ag
Cu %
0.40
0.41
0..41
0.31
Mo %
0.04
0.03
0.03
0.03
Pb %
0.04
0.05
0.05
0.08
Zn %
0.02
0.03
0.03
0.04
Au g/t
0.09
0.11
0.11
0.10
Au g/t
5.71
6.08
6.06
5.13
(kt)
384
5,695
6,079
1,247
(kt)
35
467
502
123
(kt)
43
751
794
311
(kt)
23
470
493
175
Moz
0.268
4.947
5.215
1.317
Moz
17.729
270.472
288.201
66.926
Note:
Figures reported are rounded which may result in small tabulation errors.
The Copper Equivalent basis for the reporting of resources has been compiled on the following basis:
CuEq Resources: = (Ag Grade * Ag Price + Au Grade * Au Price + Cu Grade * Cu Price + Pb Grade * Pb
Price + Zn Grade * Zn Price + Mo Grade * Mo Price) / Copper Price
A Mineral Reserve estimate, dated November 20, 2013, has been independently verified by Mining One Pty Ltd. in accordance
with the CIM Definitions Standards under NI 43-101.
Jiama Project Statement of NI 43-101 Mineral Reserve Estimate as of December 31, 2016
Mt
21.4
412.8
434.2
Cu %
Mo %
0.61
0.61
0.61
0.05
0.03
0.03
Pb %
0.05
0.13
0.13
Zn %
0.03
0.08
0.07
Au g/t
Au g/t
0.21
0.18
0.19
9.35
11.42
11.32
(kt)
131
2,520
2,651
(kt)
10
132
142
(kt)
11
549
561
(kt)
7
318
325
Moz
0.148
2.451
2.599
Ag
Moz
6.431
151.583
158.014
Cu
Mo
Pb
Zn
Metal
Metal
Metal
Metal
Au
Quantity
Class
Proven
Probable
P+P
Note:
1. All Mineral Reserves have been estimated in accordance with the JORC code and have been reconciled to CIM
standards as prescribed by the NI 43-101.
2. Mineral Reserves were estimated using the following mining and economic factors:
Open Pits:
a) 5% dilution factor and 95% recovery were applied to the mining method;
b) overall slope angles of 43 degrees;
c) a copper price of US$2.9/lbs;
d) an overall processing recovery of 88 – 90% for copper
Underground:
a) 10% dilution added to all Sub-Level Open Stoping;
b) Stope recovery is 87% for Sub-Level Open Stoping;
c) An overall processing recovery of 88 – 90% for copper.
3. The cut-off grade for Mineral Reserves has been estimated at copper equivalent grades of 0.3% Cu (NSR) for the
open pits and 0.45% Cu (NSR) for the underground mine.
52
53
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Mineral Resources Estimate
Mineral Reserves Estimate
ANNUAL REPORT 2016
An NI 43-101 compliant mineral resource estimate was independently completed by Mining One Pty Ltd. in November 2013,
based on information collected up to November 12, 2012. The drilling programs subsequent to November 2012, including an
extensive drill program conducted in 2013, will be included in future updates of the Mineral Resources and Reserves.
Mining One Pty Ltd. noted that gold and silver mineralization within the ore body had a significantly higher spatial variability than
the other elements. This classification takes into account the proposed large scale mining techniques where Au and Ag will only
be credits to the overall products from the operations. Mining One Pty Ltd has assumed that Au and Ag will not be assigned a
single cut-off grade for a selected mining block and will be mined in conjunction with the other elements.
Jiama Project - Cu, Mo, Pb, Zn ,Au, and Ag Mineral Resources under NI 43-101
Reported at a 0.3% Cu Equivalent Cut off grade*, as of December 31, 2016
Class
Measured
Indicated
M+I
Inferred
Quantity
Mt
96.6
1,382.7
1,479.4
406.1
Cu %
0.40
0.41
0..41
0.31
Mo %
0.04
0.03
0.03
0.03
Pb %
0.04
0.05
0.05
0.08
Zn %
0.02
0.03
0.03
0.04
Au g/t
Au g/t
0.09
0.11
0.11
0.10
5.71
6.08
6.06
5.13
(kt)
384
5,695
6,079
1,247
(kt)
35
467
502
123
(kt)
43
751
794
311
(kt)
23
470
493
175
Moz
0.268
4.947
5.215
1.317
Moz
17.729
270.472
288.201
66.926
Cu
Mo
Pb
Zn
Metal
Metal
Metal
Metal
Au
Ag
Note:
Figures reported are rounded which may result in small tabulation errors.
The Copper Equivalent basis for the reporting of resources has been compiled on the following basis:
CuEq Resources: = (Ag Grade * Ag Price + Au Grade * Au Price + Cu Grade * Cu Price + Pb Grade * Pb
Price + Zn Grade * Zn Price + Mo Grade * Mo Price) / Copper Price
A Mineral Reserve estimate, dated November 20, 2013, has been independently verified by Mining One Pty Ltd. in accordance
with the CIM Definitions Standards under NI 43-101.
Jiama Project Statement of NI 43-101 Mineral Reserve Estimate as of December 31, 2016
Quantity
Metal
Metal
Metal
Metal
Au
Ag
Mt
21.4
412.8
434.2
Cu %
0.61
0.61
0.61
Mo %
0.05
0.03
0.03
Pb %
0.05
0.13
0.13
Zn %
0.03
0.08
0.07
Au g/t
0.21
0.18
0.19
Au g/t
9.35
11.42
11.32
(kt)
131
2,520
2,651
(kt)
10
132
142
(kt)
11
549
561
(kt)
7
318
325
Moz
0.148
2.451
2.599
Moz
6.431
151.583
158.014
Cu
Mo
Pb
Zn
Class
Proven
Probable
P+P
Note:
1. All Mineral Reserves have been estimated in accordance with the JORC code and have been reconciled to CIM
standards as prescribed by the NI 43-101.
2. Mineral Reserves were estimated using the following mining and economic factors:
Open Pits:
a) 5% dilution factor and 95% recovery were applied to the mining method;
b) overall slope angles of 43 degrees;
c) a copper price of US$2.9/lbs;
d) an overall processing recovery of 88 – 90% for copper
Underground:
a) 10% dilution added to all Sub-Level Open Stoping;
b) Stope recovery is 87% for Sub-Level Open Stoping;
c) An overall processing recovery of 88 – 90% for copper.
3. The cut-off grade for Mineral Reserves has been estimated at copper equivalent grades of 0.3% Cu (NSR) for the
open pits and 0.45% Cu (NSR) for the underground mine.
52
53
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
The Company operates in a capital intensive industry. The Company’s liquidity requirements arise principally from the need for
financing the expansion of its mining and processing operations, exploration activities and acquisition of exploration and mining
rights. The Company’s principal sources of funds have been proceeds from borrowing from commercial banks in China, equity
financings, and cash generated from operations. The Company’s liquidity primarily depends on its ability to generate cash flow
from its operations and to obtain external financing to meet its debt obligations as they become due, as well as the Company’s
future operating and capital expenditure requirements.
At December 31, 2016, the Company had an accumulated surplus of US$172.2 million, working deficit of US$338.7 million and
borrowings of US$1,154.8 million. The Company’s cash balance at December 31, 2016 was US$59.9 million.
Management believes that its forecast operating cash flows are sufficient to cover the next twelve months of the Company’s
operations including its planned capital expenditures and current debt repayments. The Company’s borrowings are comprised
of US$506.9 million of 3.5% unsecured bonds maturing on July 17, 2017 and US$89.4 million of short term debt facilities with interest
rates ranging from 2.35% to 4.35% per annum arranged through various banks in China. In addition, on November 3, 2015, the
Company entered into a Loan Facility agreement with a syndicate of banks, led by Bank of China. The lenders agreed to lend
to the aggregate principle amount of RMB 3.98 billion, approximately US$613 million with the interest rate of 2.83% per annum
currently. The People’s Bank of China Lhasa Center Branch’s interest rate serves as a benchmark for the interest on the drawdowns.
The bank’s interest rate is then discounted by 7 basis points (or 0.07%) to calculate the interest on the drawdowns. The proceeds
from the Loan Facility are to be used for the development of the Jiama Mine. The loan is secured by the mining rights for the
Jiama Mine. As of December 31, 2016, the Company has drawdown RMB2.89 billion, approximately US$415.9 million under the Loan
Facility. The Company believes that the availability of debt financing in China at favorable rates will continue for the foreseeable
future. The Company is currently assessing various strategic alternatives for the repayment of its 3.5% unsecured bonds maturing
on July 17, 2017. The Company may pursue a new bond issuance or access other debt financing opportunities.
Given the challenging market conditions in the global mining industry, the Company continues to rigorously test its assets for
December 31, 2016 and 0.66 as at December 31, 2015.
impairment as part of its financial reporting processes. To date, the testing procedures carried out by the Company support
the carrying values of the Company’s assets, and no impairment has been required. However, management of the Company,
together with its auditors, continues to evaluate and test key assumptions on estimates and management judgments in order to
determine the fair value less cost of disposal of the CSH Mine and the Jiama Mine.
CASH FLOWS
The following table sets out selected cash flow data from the Company’s condensed consolidated interim cash flow statements
for the year ended December 31, 2016 and December 31, 2015.
Net cash from operating activities
Net cash used in investing activities
Net cash from (used in) financing activities
Net decrease in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
54
Year ended December 31,
2016
US$’000
79,330
(355,506)
225,808
(50,368)
(2,101)
112,399
59,930
2015
US$’000
66,867
(298,672)
(219,036)
(450,841)
(2,338)
565,578
112,399
ANNUAL REPORT 2016
MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating cash flow
For the year ended December 31, 2016, the net cash inflow from operating activities was US$79.3 million which is primarily attributable
to (i) depreciation and depletion of US$77.7 million (ii) increase in accounts and other payables and accrued expenses of US$19.4
million, and (iii) finance cost of US$16.6 million, partially offset by (i) interest paid of US$38.4 million; (ii) increase in inventory of
US$30.6 million and (iii) income taxes paid of US$17.5 million.
For the year ended December 31, 2016, the net cash outflow from investing activities was US$355.5 million, which is primarily
attributable to (i) payment for the acquisition of property, plant and equipment of US$194.3 million (ii) loan to a related company
of US$150.0 million and (iii) placement of restricted cash bank balance of US$33.7 million, partially offset by a release of restricted
Investing cash flow
bank balance of US$20.7 million.
Financing cash flow
Expenditures Incurred
Gearing ratio
For the year ended December 31, 2016, the net cash inflow from financing activities was US$225.8 million, which is primarily due to
proceeds from bank borrowings of US$411.7 million partially offset by repayments of borrowings of US$185.6 million.
For the year ended December 31, 2016, the Company incurred mining costs of US$82.4 million, processing costs of US$113.5 million,
transportation costs of US$5.1 million and resource compensation fee, which was paid to the PRC government, of US$2.4 million.
Gearing ratio is defined as the ratio of consolidated total debt to consolidated total equity. As at December 31, 2016, the Company’s
total debt was US$1,155 million and the total equity was US$1,420 million. The Company’s gearing ratio was therefore 0.81 as at
Restrictive covenants
The Company is subject to various customary conditions and covenants under the terms of its financing agreements.
Under a Loan Facility agreement entered on November 3, 2015 between the Company and a syndicated of banks, led by Bank of
China pursuant to which the banks agreed to lend to Tibet Huatailong, the Company’s subsidiary, the aggregate principle amount
of RMB 3.98 billion (approximately US$613 million), the debt to assets ratio of Huatailong should be less than 75% during the term of
the agreement.
55
ANNUAL REPORT 2016
MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating cash flow
For the year ended December 31, 2016, the net cash inflow from operating activities was US$79.3 million which is primarily attributable
to (i) depreciation and depletion of US$77.7 million (ii) increase in accounts and other payables and accrued expenses of US$19.4
million, and (iii) finance cost of US$16.6 million, partially offset by (i) interest paid of US$38.4 million; (ii) increase in inventory of
US$30.6 million and (iii) income taxes paid of US$17.5 million.
Investing cash flow
For the year ended December 31, 2016, the net cash outflow from investing activities was US$355.5 million, which is primarily
attributable to (i) payment for the acquisition of property, plant and equipment of US$194.3 million (ii) loan to a related company
of US$150.0 million and (iii) placement of restricted cash bank balance of US$33.7 million, partially offset by a release of restricted
bank balance of US$20.7 million.
Financing cash flow
For the year ended December 31, 2016, the net cash inflow from financing activities was US$225.8 million, which is primarily due to
proceeds from bank borrowings of US$411.7 million partially offset by repayments of borrowings of US$185.6 million.
Expenditures Incurred
For the year ended December 31, 2016, the Company incurred mining costs of US$82.4 million, processing costs of US$113.5 million,
transportation costs of US$5.1 million and resource compensation fee, which was paid to the PRC government, of US$2.4 million.
Gearing ratio
Gearing ratio is defined as the ratio of consolidated total debt to consolidated total equity. As at December 31, 2016, the Company’s
total debt was US$1,155 million and the total equity was US$1,420 million. The Company’s gearing ratio was therefore 0.81 as at
Given the challenging market conditions in the global mining industry, the Company continues to rigorously test its assets for
December 31, 2016 and 0.66 as at December 31, 2015.
Restrictive covenants
The Company is subject to various customary conditions and covenants under the terms of its financing agreements.
Under a Loan Facility agreement entered on November 3, 2015 between the Company and a syndicated of banks, led by Bank of
China pursuant to which the banks agreed to lend to Tibet Huatailong, the Company’s subsidiary, the aggregate principle amount
of RMB 3.98 billion (approximately US$613 million), the debt to assets ratio of Huatailong should be less than 75% during the term of
the agreement.
55
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
The Company operates in a capital intensive industry. The Company’s liquidity requirements arise principally from the need for
financing the expansion of its mining and processing operations, exploration activities and acquisition of exploration and mining
rights. The Company’s principal sources of funds have been proceeds from borrowing from commercial banks in China, equity
financings, and cash generated from operations. The Company’s liquidity primarily depends on its ability to generate cash flow
from its operations and to obtain external financing to meet its debt obligations as they become due, as well as the Company’s
future operating and capital expenditure requirements.
At December 31, 2016, the Company had an accumulated surplus of US$172.2 million, working deficit of US$338.7 million and
borrowings of US$1,154.8 million. The Company’s cash balance at December 31, 2016 was US$59.9 million.
Management believes that its forecast operating cash flows are sufficient to cover the next twelve months of the Company’s
operations including its planned capital expenditures and current debt repayments. The Company’s borrowings are comprised
of US$506.9 million of 3.5% unsecured bonds maturing on July 17, 2017 and US$89.4 million of short term debt facilities with interest
rates ranging from 2.35% to 4.35% per annum arranged through various banks in China. In addition, on November 3, 2015, the
Company entered into a Loan Facility agreement with a syndicate of banks, led by Bank of China. The lenders agreed to lend
to the aggregate principle amount of RMB 3.98 billion, approximately US$613 million with the interest rate of 2.83% per annum
currently. The People’s Bank of China Lhasa Center Branch’s interest rate serves as a benchmark for the interest on the drawdowns.
The bank’s interest rate is then discounted by 7 basis points (or 0.07%) to calculate the interest on the drawdowns. The proceeds
from the Loan Facility are to be used for the development of the Jiama Mine. The loan is secured by the mining rights for the
Jiama Mine. As of December 31, 2016, the Company has drawdown RMB2.89 billion, approximately US$415.9 million under the Loan
Facility. The Company believes that the availability of debt financing in China at favorable rates will continue for the foreseeable
future. The Company is currently assessing various strategic alternatives for the repayment of its 3.5% unsecured bonds maturing
on July 17, 2017. The Company may pursue a new bond issuance or access other debt financing opportunities.
impairment as part of its financial reporting processes. To date, the testing procedures carried out by the Company support
the carrying values of the Company’s assets, and no impairment has been required. However, management of the Company,
together with its auditors, continues to evaluate and test key assumptions on estimates and management judgments in order to
determine the fair value less cost of disposal of the CSH Mine and the Jiama Mine.
CASH FLOWS
The following table sets out selected cash flow data from the Company’s condensed consolidated interim cash flow statements
for the year ended December 31, 2016 and December 31, 2015.
Net cash from operating activities
Net cash used in investing activities
Net cash from (used in) financing activities
Net decrease in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
54
Year ended December 31,
2016
US$’000
79,330
(355,506)
225,808
(50,368)
(2,101)
112,399
59,930
2015
US$’000
66,867
(298,672)
(219,036)
(450,841)
(2,338)
565,578
112,399
ANNUAL REPORT 2016
The following table outlines payments for commitments for the periods indicated:
Principal repayment of bank loans
Repayment of bonds
Operating lease commitments (a)
Capital commitments (b)
Total
Total
US$’000
647,974
506,858
583
218,994
1,374,424
Within
One year
US$’000
89,375
506,858
108
218,994
815,335
Two to five years
Over 5 years
Within
US$’000
262,361
304
-
-
US$’000
296,238
171
-
-
262,665
296,409
In addition to the table set forth above, the Company has entered into service agreements with third-party contractors such as
China Railway and China Metallurgical for the provision of mining and exploration engineering work and mine construction work
for the CSH Mine. The fees for such work performed and to be performed each year varies depending on the amount of work
performed. The Company has similar agreements with third party contractors for the Jiama Mine.
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
SIGNIFICANT
INVESTMENTS, ACQUISITIONS AND DISPOSAL OF SUBSIDIARIES.
ASSOCIATES AND JOINT VENTURES, AND FUTURE PLAN FOR MATERIAL INVESTMENTS
OF CAPITAL ASSETS
Other than as disclosed elsewhere in this MD&A or in the audited annual consolidated financial statements for the year ended
December 31, 2016, there were no significant investments held by the Company, nor were there any material acquisitions or
disposals of subsidiaries, associates and joint ventures during the year ended December 31, 2016. Other than as disclosed in this
MD&A, there was no plan authorized by the Board for other material investments or additions of capital assets at the date of this
MD&A.
CHARGE ON ASSETS
Other than as disclosed elsewhere in this MD&A, none of the Group’s assets were pledged as at December 31, 2016.
(a)Operating leases are primarily for premises and production.
(b)Capital commitments relate to contracts signed for construction and equipment supply.
EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND RELATED HEDGES
The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates for the monetary assets and
liabilities denominated in the currencies other than the functional currencies to which they relate. The Company has not hedged
its exposure to currency fluctuation. However, the Management monitors foreign exchange exposure and will consider hedging
significant foreign currency exposure should the need arise. Refer to Note 30, Financial Instruments, in the annual consolidated
financial statements for the year ended December 31, 2016.
COMMITMENTS AND CONTINGENCIES
Commitments and contingencies include principal payments on the Company’s bank loans and syndicated loan facility, material
future aggregate minimum operating lease payments required under operating leases and capital commitments in respect of the
future acquisition of property, plant and equipment and construction for both the CSH Mine and the Jiama Mine.
The Company has leased certain properties in China and Canada, which are all under operating lease arrangements and are
negotiated for terms of between one and seventeen years. The Company is required to pay a fixed rental amount under the terms
of these leases.
The Company’s capital commitments relate primarily to the payments for purchase of equipment and machinery for both mines
and payments to third-party contractors for the provision of mining and exploration engineering work and mine construction work
for both mines. The Company has entered into contracts that prescribe such capital commitments; however, liabilities relating
to them have not yet been incurred. Therefore, capital commitments are not included in the Company’s consolidated financial
statements.
56
57
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANNUAL REPORT 2016
The following table outlines payments for commitments for the periods indicated:
Principal repayment of bank loans
Repayment of bonds
Operating lease commitments (a)
Capital commitments (b)
Total
Total
US$’000
647,974
506,858
583
218,994
1,374,424
Within
One year
US$’000
Within
Two to five years
US$’000
Over 5 years
US$’000
89,375
506,858
108
218,994
815,335
262,361
296,238
-
304
-
-
171
-
262,665
296,409
(a)Operating leases are primarily for premises and production.
(b)Capital commitments relate to contracts signed for construction and equipment supply.
In addition to the table set forth above, the Company has entered into service agreements with third-party contractors such as
China Railway and China Metallurgical for the provision of mining and exploration engineering work and mine construction work
for the CSH Mine. The fees for such work performed and to be performed each year varies depending on the amount of work
performed. The Company has similar agreements with third party contractors for the Jiama Mine.
57
SIGNIFICANT
INVESTMENTS, ACQUISITIONS AND DISPOSAL OF SUBSIDIARIES.
ASSOCIATES AND JOINT VENTURES, AND FUTURE PLAN FOR MATERIAL INVESTMENTS
OF CAPITAL ASSETS
Other than as disclosed elsewhere in this MD&A or in the audited annual consolidated financial statements for the year ended
December 31, 2016, there were no significant investments held by the Company, nor were there any material acquisitions or
disposals of subsidiaries, associates and joint ventures during the year ended December 31, 2016. Other than as disclosed in this
MD&A, there was no plan authorized by the Board for other material investments or additions of capital assets at the date of this
MD&A.
CHARGE ON ASSETS
Other than as disclosed elsewhere in this MD&A, none of the Group’s assets were pledged as at December 31, 2016.
EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND RELATED HEDGES
The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates for the monetary assets and
liabilities denominated in the currencies other than the functional currencies to which they relate. The Company has not hedged
its exposure to currency fluctuation. However, the Management monitors foreign exchange exposure and will consider hedging
significant foreign currency exposure should the need arise. Refer to Note 30, Financial Instruments, in the annual consolidated
financial statements for the year ended December 31, 2016.
COMMITMENTS AND CONTINGENCIES
Commitments and contingencies include principal payments on the Company’s bank loans and syndicated loan facility, material
future aggregate minimum operating lease payments required under operating leases and capital commitments in respect of the
future acquisition of property, plant and equipment and construction for both the CSH Mine and the Jiama Mine.
The Company has leased certain properties in China and Canada, which are all under operating lease arrangements and are
negotiated for terms of between one and seventeen years. The Company is required to pay a fixed rental amount under the terms
The Company’s capital commitments relate primarily to the payments for purchase of equipment and machinery for both mines
and payments to third-party contractors for the provision of mining and exploration engineering work and mine construction work
for both mines. The Company has entered into contracts that prescribe such capital commitments; however, liabilities relating
to them have not yet been incurred. Therefore, capital commitments are not included in the Company’s consolidated financial
of these leases.
statements.
56
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
RELATED PARTY TRANSACTIONS
CNG owned 39.3 percent of the outstanding common shares of the Company as at December 31, 2016 and December 31, 2015.
The Company had major related party transactions with the following companies related by way of shareholders and shareholder
annual consolidated financial statements.
in common:
On October 24, 2008, the Company’s subsidiary, Inner Mongolia Pacific entered into a non-exclusive contract for the purchase and
sale of doré with CNG (the “2008 Contract”) pursuant to which Inner Mongolia Pacific occasionally sold gold doré bars to CNG
through to December 31, 2011. The pricing was based on the daily average price of gold ingot as quoted on the Shanghai Gold
Exchange and the daily average price of silver as quoted on the Shanghai Huatong Platinum & Silver Exchange prevailing at the
time of each relevant purchase order during the contract period. On January 27, 2012, the 2008 Contract was renewed for another
three years ending December 31, 2014 and subsequently on June 30, 2014 for the period of January 1, 2015 to December 31, 2017.
Revenue from sales of gold doré bars to CNG decreased from US$233.8 million for the year ended December 31, 2015 to US$227.6
million for the year ended December 31, 2016.
On May 29, 2015, the Company entered into a revised continuing connected transaction and major transaction amending the
Product and Service Framework Agreement with CNG. According to the amendments, CNG purchases the copper concentrates
produced at the Jiama Mine. The quantity of copper concentrates, pricing terms and payment terms be established from time
to time by the parties with reference to the pricing principles for connected transactions set out under the Product and Service
Framework Agreement. For the year ended December 31, 2016, revenue from sales of copper concentrate and other products to
CNG was US$59.8 million, compared to US$21.0 million for the same period in 2015.
For the year ended December 31, 2016, construction services of US$39.6 million were provided to the Company by subsidiaries of
CNG (US$140.8 million for the year ended December 31, 2015).
DIVIDEND AND DIVIDEND POLICY
In addition to the two aforementioned major related party transactions, the Company also obtains additional services from related
Directors will determine any future dividend policy on the basis of, among others things, the results of operations, cash flows and
parties in its normal course of business, including a Financial Services Agreement entered on May 29, 2015 among Inner Mongolia
financial conditions, operating and capital requirements, the rules promulgated by the regulators affecting dividends in both
Pacific, Huatailong and China Gold Finance.
Canada and Hong Kong and at both the TSX and HKSE, and the amount of distributable profits and other relevant factors.
The Company has not paid any dividends since incorporation and does not currently have a fixed dividend policy. The Board of
PROPOSED TRANSACTIONS
The Board of Directors has given the Company approval to conduct reviews of a number of projects that may qualify as acquisition
targets through joint venture, merger and/or outright acquisitions. The Group did not have any material acquisition and disposal
of subsidiaries and associated companies in the year ended December 31, 2016. The Company continues to review possible
acquisition targets, including the Jinfeng Mine acquired by CNG in September 2016. However, there can be no assurances that
such review will result in any acquisition transactions.
ANNUAL REPORT 2016
CRITICAL ACCOUNTING ESTIMATES
In the process of applying the Company’s accounting policies, the Directors of the Company have identified accounting
judgments and key sources of estimation uncertainty that have a significant effect on the amounts recognized in the audited
Key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next twelve
months are described in Note 4 of the audited annual consolidated financial statements for the year ended December 31, 2016.
CHANGE IN ACCOUNTING POLICIES
financial statements as at December 31, 2016.
A summary of new and revised IFRS standards and interpretations are outlined in Note 2 of the audited annual consolidated
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
The Company holds a number of financial instruments, the most significant of which are available-for-sale investments, accounts
receivable, accounts payable, cash and loans. The financial instruments are recorded at either fair values or amortized amount
on the balance sheet.
The Company did not have any financial derivatives or outstanding hedging contracts as at December 31, 2016.
OFF-BALANCE SHEET ARRANGEMENTS
As at December 31, 2016, the Company had not entered into any off-balance sheet arrangements.
Subject to the British Columbia Business Corporations Act, the Directors may from time to time declare and authorize payment of
such dividends as they may deem advisable, including the amount thereof and the time and method of payment provided that
the record date for the purpose of determining shareholders entitled to receive payment of the dividend must not precede the
date on which the dividend is to be paid by more than two months.
A dividend may be paid wholly or partly by the distribution of cash, specific assets or of fully paid shares or of bonds, debentures
or other securities of the Company, or in any one or more of those ways. No dividend may be declared or paid in money or assets
if there are reasonable grounds for believing that the Company is insolvent or the payment of the dividend would render the
Company insolvent.
OUTSTANDING SHARES
As of December 31, 2016 the Company had 396,413,753 common shares issued and outstanding.
58
59
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
RELATED PARTY TRANSACTIONS
CNG owned 39.3 percent of the outstanding common shares of the Company as at December 31, 2016 and December 31, 2015.
CRITICAL ACCOUNTING ESTIMATES
In the process of applying the Company’s accounting policies, the Directors of the Company have identified accounting
judgments and key sources of estimation uncertainty that have a significant effect on the amounts recognized in the audited
The Company had major related party transactions with the following companies related by way of shareholders and shareholder
annual consolidated financial statements.
in common:
ANNUAL REPORT 2016
On October 24, 2008, the Company’s subsidiary, Inner Mongolia Pacific entered into a non-exclusive contract for the purchase and
sale of doré with CNG (the “2008 Contract”) pursuant to which Inner Mongolia Pacific occasionally sold gold doré bars to CNG
through to December 31, 2011. The pricing was based on the daily average price of gold ingot as quoted on the Shanghai Gold
Exchange and the daily average price of silver as quoted on the Shanghai Huatong Platinum & Silver Exchange prevailing at the
time of each relevant purchase order during the contract period. On January 27, 2012, the 2008 Contract was renewed for another
three years ending December 31, 2014 and subsequently on June 30, 2014 for the period of January 1, 2015 to December 31, 2017.
Revenue from sales of gold doré bars to CNG decreased from US$233.8 million for the year ended December 31, 2015 to US$227.6
million for the year ended December 31, 2016.
On May 29, 2015, the Company entered into a revised continuing connected transaction and major transaction amending the
Product and Service Framework Agreement with CNG. According to the amendments, CNG purchases the copper concentrates
produced at the Jiama Mine. The quantity of copper concentrates, pricing terms and payment terms be established from time
to time by the parties with reference to the pricing principles for connected transactions set out under the Product and Service
Framework Agreement. For the year ended December 31, 2016, revenue from sales of copper concentrate and other products to
CNG was US$59.8 million, compared to US$21.0 million for the same period in 2015.
For the year ended December 31, 2016, construction services of US$39.6 million were provided to the Company by subsidiaries of
CNG (US$140.8 million for the year ended December 31, 2015).
Pacific, Huatailong and China Gold Finance.
PROPOSED TRANSACTIONS
The Board of Directors has given the Company approval to conduct reviews of a number of projects that may qualify as acquisition
targets through joint venture, merger and/or outright acquisitions. The Group did not have any material acquisition and disposal
of subsidiaries and associated companies in the year ended December 31, 2016. The Company continues to review possible
acquisition targets, including the Jinfeng Mine acquired by CNG in September 2016. However, there can be no assurances that
such review will result in any acquisition transactions.
Key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next twelve
months are described in Note 4 of the audited annual consolidated financial statements for the year ended December 31, 2016.
CHANGE IN ACCOUNTING POLICIES
A summary of new and revised IFRS standards and interpretations are outlined in Note 2 of the audited annual consolidated
financial statements as at December 31, 2016.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
The Company holds a number of financial instruments, the most significant of which are available-for-sale investments, accounts
receivable, accounts payable, cash and loans. The financial instruments are recorded at either fair values or amortized amount
on the balance sheet.
The Company did not have any financial derivatives or outstanding hedging contracts as at December 31, 2016.
OFF-BALANCE SHEET ARRANGEMENTS
As at December 31, 2016, the Company had not entered into any off-balance sheet arrangements.
DIVIDEND AND DIVIDEND POLICY
The Company has not paid any dividends since incorporation and does not currently have a fixed dividend policy. The Board of
In addition to the two aforementioned major related party transactions, the Company also obtains additional services from related
Directors will determine any future dividend policy on the basis of, among others things, the results of operations, cash flows and
parties in its normal course of business, including a Financial Services Agreement entered on May 29, 2015 among Inner Mongolia
financial conditions, operating and capital requirements, the rules promulgated by the regulators affecting dividends in both
Canada and Hong Kong and at both the TSX and HKSE, and the amount of distributable profits and other relevant factors.
Subject to the British Columbia Business Corporations Act, the Directors may from time to time declare and authorize payment of
such dividends as they may deem advisable, including the amount thereof and the time and method of payment provided that
the record date for the purpose of determining shareholders entitled to receive payment of the dividend must not precede the
date on which the dividend is to be paid by more than two months.
A dividend may be paid wholly or partly by the distribution of cash, specific assets or of fully paid shares or of bonds, debentures
or other securities of the Company, or in any one or more of those ways. No dividend may be declared or paid in money or assets
if there are reasonable grounds for believing that the Company is insolvent or the payment of the dividend would render the
Company insolvent.
OUTSTANDING SHARES
As of December 31, 2016 the Company had 396,413,753 common shares issued and outstanding.
58
59
ANNUAL REPORT 2016
MANAGEMENT'S DISCUSSION AND ANALYSIS
INDEPENDENT AUDITOR'S REPORT
DISCLOSURE CONTROLS AND PROCEDURES AND
FINANCIAL REPORTING
Management is responsible for the design of disclosure controls and procedures (“DC&P”) and the design of internal control over
INTERNAL CONTROL OVER
financial reporting (“ICFR”) to provide reasonable assurance that material information relating to the Company, including its
consolidated subsidiaries, is made known to the Company’s certifying officers. The Company’s Chief Executive Officer and Chief
Financial Officer have each evaluated the Company’s DC&P and ICFR as of December 31, 2016 and, in accordance with the
requirements established under Canadian National Instrument 52-109 – Certification of Disclosure in Issuer’s Annual and Interim
Filings, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures were effective
as December 31, 2016, and provide reasonable assurance that material information relating to the Company is made known to
them by others within the Company and that the information required to be disclosed in reports that are filed or submitted under
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP. LTD.
(incorporated in British Columbia, Canada with limited liability)
Opinion
Canadian securities legislation are recorded, processed, summarized and reported within the time period specified in those rules.
We have audited the consolidated financial statements of China Gold International Resources Corp. Ltd. (the "Company") and
its subsidiaries (collectively referred to as "the Group") set out on pages 68 to 131, which comprise the consolidated statement of
The Company’s Chief Executive Officer and Chief Financial Officer have used the Committee of Sponsoring Organizations of the
financial position as at December 31, 2016, and the consolidated statement of profit or loss and other comprehensive income,
Treadway Commission (COSO) 2013 framework to evaluate the Company’s ICFR as of December 31, 2016 and have concluded
consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to
that these controls and procedures were effective as of December 31, 2016 and provide reasonable assurance that financial
the consolidated financial statements, including a summary of significant accounting policies.
information is recorded, processed, summarized and reported in a timely manner. Management is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures. The result of the inherent limitations in all control
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group
systems means design of controls cannot provide absolute assurance that all control issues and instances of fraud will be detected.
as at December 31, 2016, and of its consolidated financial performance and its consolidated cash flows for the year then ended
During the year ended December 31, 2016, there were no changes in the Company’s DC&P or ICFR that materially affected, or are
in accordance with International Financial Reporting Standards ("IFRSs") and have been properly prepared in compliance with
reasonably likely to materially affect, the Company’s internal control over financial reporting.
the disclosure requirements of the Hong Kong Companies Ordinance.
RISK FACTORS
There are certain risks involved in the Company’s operations, some of which are beyond the Company’s control. Aside from risks
Basis for Opinion
relating to business and industry, the Company’s principal operations are located within the People’s Republic of China and
We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those
are governed by a legal and regulatory environment that in some respects differs from that which prevails in other countries.
standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section
Readers of this MD&A should give careful consideration to the information included in this document and the Company’s audited
of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants'
annual consolidated financial statements and related notes. Significant risk factors for the Company are metal prices, government
Code of Ethics for Professional Accountants ("the Code"), and we have fulfilled our other ethical responsibilities in accordance
regulations, foreign operations, environmental compliance, the ability to obtain additional financing, risk relating to recent
with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
acquisitions, dependence on management, title to the Company’s mineral properties, and litigation. China Gold International’s
opinion.
business, financial condition or results of operations could be materially and adversely affected by any of these risks. For details of
risk factors, please refer to the Company’s annual audited consolidated financial statements, and Annual Information Form filed
from time to time on SEDAR at www.sedar.com.
Key Audit Matters
QUALIFIED PERSON
Disclosure of a scientific or technical nature in this section of the MD&A in respect of updates at the CSH Gold Project was prepared
by or under the supervision of Mr. Songlin Zhang, a qualified person for the purposes of NI 43-101.
Disclosure of a scientific or technical nature in this MD&A in respect of the Jiama Mine for the Mineral Resources, Mineral Reserves
and Phase II Expansion was prepared by or under the supervision of Mr. Bin Guo and Anthony R Cameron, both qualified person
for the purposes of NI 43-101; all remaining information in regards to the Jiama project contained in this MD&A was prepared by or
under the supervision of Mr. Songlin Zhang, a qualified person for the purposes of NI 43-101.
March 30, 2017
60
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
61
ANNUAL REPORT 2016
MANAGEMENT'S DISCUSSION AND ANALYSIS
INDEPENDENT AUDITOR'S REPORT
DISCLOSURE CONTROLS AND PROCEDURES AND
INTERNAL CONTROL OVER
FINANCIAL REPORTING
Management is responsible for the design of disclosure controls and procedures (“DC&P”) and the design of internal control over
financial reporting (“ICFR”) to provide reasonable assurance that material information relating to the Company, including its
consolidated subsidiaries, is made known to the Company’s certifying officers. The Company’s Chief Executive Officer and Chief
Financial Officer have each evaluated the Company’s DC&P and ICFR as of December 31, 2016 and, in accordance with the
requirements established under Canadian National Instrument 52-109 – Certification of Disclosure in Issuer’s Annual and Interim
Filings, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures were effective
as December 31, 2016, and provide reasonable assurance that material information relating to the Company is made known to
them by others within the Company and that the information required to be disclosed in reports that are filed or submitted under
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP. LTD.
(incorporated in British Columbia, Canada with limited liability)
Opinion
Canadian securities legislation are recorded, processed, summarized and reported within the time period specified in those rules.
We have audited the consolidated financial statements of China Gold International Resources Corp. Ltd. (the "Company") and
its subsidiaries (collectively referred to as "the Group") set out on pages 68 to 131, which comprise the consolidated statement of
The Company’s Chief Executive Officer and Chief Financial Officer have used the Committee of Sponsoring Organizations of the
financial position as at December 31, 2016, and the consolidated statement of profit or loss and other comprehensive income,
Treadway Commission (COSO) 2013 framework to evaluate the Company’s ICFR as of December 31, 2016 and have concluded
consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to
that these controls and procedures were effective as of December 31, 2016 and provide reasonable assurance that financial
the consolidated financial statements, including a summary of significant accounting policies.
information is recorded, processed, summarized and reported in a timely manner. Management is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures. The result of the inherent limitations in all control
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group
systems means design of controls cannot provide absolute assurance that all control issues and instances of fraud will be detected.
as at December 31, 2016, and of its consolidated financial performance and its consolidated cash flows for the year then ended
During the year ended December 31, 2016, there were no changes in the Company’s DC&P or ICFR that materially affected, or are
in accordance with International Financial Reporting Standards ("IFRSs") and have been properly prepared in compliance with
reasonably likely to materially affect, the Company’s internal control over financial reporting.
the disclosure requirements of the Hong Kong Companies Ordinance.
RISK FACTORS
There are certain risks involved in the Company’s operations, some of which are beyond the Company’s control. Aside from risks
Basis for Opinion
relating to business and industry, the Company’s principal operations are located within the People’s Republic of China and
We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those
are governed by a legal and regulatory environment that in some respects differs from that which prevails in other countries.
standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section
Readers of this MD&A should give careful consideration to the information included in this document and the Company’s audited
of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants'
annual consolidated financial statements and related notes. Significant risk factors for the Company are metal prices, government
Code of Ethics for Professional Accountants ("the Code"), and we have fulfilled our other ethical responsibilities in accordance
regulations, foreign operations, environmental compliance, the ability to obtain additional financing, risk relating to recent
with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
acquisitions, dependence on management, title to the Company’s mineral properties, and litigation. China Gold International’s
opinion.
business, financial condition or results of operations could be materially and adversely affected by any of these risks. For details of
risk factors, please refer to the Company’s annual audited consolidated financial statements, and Annual Information Form filed
from time to time on SEDAR at www.sedar.com.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
61
QUALIFIED PERSON
Disclosure of a scientific or technical nature in this section of the MD&A in respect of updates at the CSH Gold Project was prepared
by or under the supervision of Mr. Songlin Zhang, a qualified person for the purposes of NI 43-101.
Disclosure of a scientific or technical nature in this MD&A in respect of the Jiama Mine for the Mineral Resources, Mineral Reserves
and Phase II Expansion was prepared by or under the supervision of Mr. Bin Guo and Anthony R Cameron, both qualified person
for the purposes of NI 43-101; all remaining information in regards to the Jiama project contained in this MD&A was prepared by or
under the supervision of Mr. Songlin Zhang, a qualified person for the purposes of NI 43-101.
March 30, 2017
60
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP. LTD. - continued
(incorporated in British Columbia, Canada with limited liability)
Key Audit Matters - continued
Key Audit Matters
Impairment assessment of mining rights and property, plant
and equipment
How our audit addressed the key audit matters
Key Audit Matters
How our audit addressed the key audit matters
We identified the impairment assessment of mining rights and
Our procedures in relation to the impairment assessment of
property, plant and equipment as a key audit matter due to
mining rights and property, plant and equipment included:
Obtaining an understanding of the key controls over
the impairment assessment performed by manage-
ment of the Group’s mining rights and property, plant
and equipment;
Assessing the appropriateness of the Group’s identifi-
cation of individual CGUs;
Assessing the reasonableness of assumptions used in
the valuation models with reference to the historical
accuracy of such forecasts and the current opera-
tional results;
Engaging our internal valuation experts to evaluate
the appropriateness of the valuation methodology,
technical information provided by the external val-
uation expert and assumptions used in the valuation
models against external benchmarks, our knowledge
of the Group and its industry;
Comparing the input data in the cash flow forecast
to the source document; and
Evaluating the sensitivity analysis for the key assump-
tions in the valuation models.
significant management judgement involved in the impairment
assessment.
As at December 31, 2016, the market capitalisation of the
Company was below the carrying value of its net assets of
approximately US$1,420 million. This may indicate the need for
a write-down of the carrying amounts of the Group's mining
rights and property, plant and equipment.
As disclosed in notes 20 and 21 to the consolidated financial
statements, the carrying values of the Group's mining rights and
property, plant and equipment as at December 31, 2016 were
approximately US$923 million and US$1,531 million, respectively.
The Group's two cash-generating units ("CGUs") for impairment
assessment purposes include the mining rights and the related
property, plant and equipment associated with the Group's
gold mine, located in Inner Mongolia, China and copper
mine, located in Tibet, China. When an impairment review is
undertaken, recoverable amount is assessed with reference to
the higher of value in use and fair value less costs of disposal
and value in use which is based on the discounted cash flows
expected to be derived from the Group's CGUs, taking into
account the appropriate discount rate.
As disclosed in note 4 to the consolidated financial statements,
the management exercises significant judgement in respect of
the assumptions applied in the value in use calculation, such
as future metal selling price, recoverable reserves, resources,
exploration potential, production cost estimates, future
operating costs, discount rates and exchange rate.
During the year ended December 31, 2016, no impairment loss
was recognised for the Group's mining rights and property,
plant and equipment.
ANNUAL REPORT 2016
INDEPENDENT AUDITOR'S REPORT
We identified the going concern basis as a
Our audit procedures in relation to the going concern basis of
key audit matter due to the involvement of
the Group included:
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP. LTD. - continued
(incorporated in British Columbia, Canada with limited liability)
Key Audit Matters - continued
Going Concern Basis
a significant degree of both complexity and
management judgement in preparing the cash
flow forecasts.
The Group operates in a capital intensive industry.
The Group's liquidity requirements arise principally
from the need for financing the expansion of its
mining and processing operations. The Group
is dependent on its existing cash resources,
available banking facilities, bank borrowings and
bonds listed on The Stock Exchange of Hong Kong
Management prepares a cash flow forecast
b y t a k i n g i n t o a c c o u n t f u t u r e l i q u i d i t y a n d
performance of the Group and its available
s o u r c e s o f f i n a n c e i n c l u d i n g t h e G r o u p ' s
unutilised bank facilities, ability to renew or
refinance the banking facilities upon maturity,
bond repayment and the Group's future capital
expenditures in respect of its non-cancellable
capital commitments. Management considers
that the Group can operate as a going concern
for at least twelve months from the end of the
reporting period. Details are set out in note 1 to
the consolidated financial statements.
Assessing the cash flow forecasts prepared by manage-
ment and checking its mathematical accuracy;
Challenging the
reasonableness of key assumptions
based on our knowledge of the Group, industry, external
data and market conditions;
Evaluating the Group’s compliance with the debt cove-
nants included in their bank borrowing agreements;
Confirming the availability of unutilized banking facilities
as at December 31, 2016;
Evaluating the sensitivity analysis for the key assumptions
in the cash flow forecast;
Evaluating the accuracy of the cash flow forecast pre-
pared by management against historical performance;
Assessing the appropriateness of the related disclosures
included in note 1 to the consolidated financial state-
and
ments.
Limited.
2017.
As at December 31, 2016, the Group had net
current liabilities of approximately US$339 million,
including bonds with an aggregate principal
amount of US$500 million which will mature in July
Comparing the input data in relation to the Group’s com-
mitted debt repayment, non-cancellable capital commit-
ments, sources and uses of funds included in the cash flow
forecast to supporting documents;
62
63
ANNUAL REPORT 2016
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP. LTD. - continued
(incorporated in British Columbia, Canada with limited liability)
Key Audit Matters - continued
How our audit addressed the key audit matters
Key Audit Matters
How our audit addressed the key audit matters
We identified the impairment assessment of mining rights and
Our procedures in relation to the impairment assessment of
property, plant and equipment as a key audit matter due to
mining rights and property, plant and equipment included:
Going Concern Basis
We identified the going concern basis as a
Our audit procedures in relation to the going concern basis of
key audit matter due to the involvement of
the Group included:
a significant degree of both complexity and
management judgement in preparing the cash
flow forecasts.
The Group operates in a capital intensive industry.
The Group's liquidity requirements arise principally
from the need for financing the expansion of its
mining and processing operations. The Group
is dependent on its existing cash resources,
available banking facilities, bank borrowings and
bonds listed on The Stock Exchange of Hong Kong
Limited.
As at December 31, 2016, the Group had net
current liabilities of approximately US$339 million,
including bonds with an aggregate principal
amount of US$500 million which will mature in July
2017.
Management prepares a cash flow forecast
b y t a k i n g i n t o a c c o u n t f u t u r e l i q u i d i t y a n d
performance of the Group and its available
s o u r c e s o f f i n a n c e i n c l u d i n g t h e G r o u p ' s
unutilised bank facilities, ability to renew or
refinance the banking facilities upon maturity,
bond repayment and the Group's future capital
expenditures in respect of its non-cancellable
capital commitments. Management considers
that the Group can operate as a going concern
for at least twelve months from the end of the
reporting period. Details are set out in note 1 to
the consolidated financial statements.
Assessing the cash flow forecasts prepared by manage-
ment and checking its mathematical accuracy;
Challenging the
reasonableness of key assumptions
based on our knowledge of the Group, industry, external
data and market conditions;
Evaluating the Group’s compliance with the debt cove-
nants included in their bank borrowing agreements;
Confirming the availability of unutilized banking facilities
as at December 31, 2016;
Comparing the input data in relation to the Group’s com-
mitted debt repayment, non-cancellable capital commit-
ments, sources and uses of funds included in the cash flow
forecast to supporting documents;
Evaluating the sensitivity analysis for the key assumptions
in the cash flow forecast;
Evaluating the accuracy of the cash flow forecast pre-
pared by management against historical performance;
and
Assessing the appropriateness of the related disclosures
included in note 1 to the consolidated financial state-
ments.
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP. LTD. - continued
(incorporated in British Columbia, Canada with limited liability)
Key Audit Matters - continued
Key Audit Matters
and equipment
Impairment assessment of mining rights and property, plant
significant management judgement involved in the impairment
assessment.
As at December 31, 2016, the market capitalisation of the
Company was below the carrying value of its net assets of
approximately US$1,420 million. This may indicate the need for
a write-down of the carrying amounts of the Group's mining
rights and property, plant and equipment.
As disclosed in notes 20 and 21 to the consolidated financial
statements, the carrying values of the Group's mining rights and
property, plant and equipment as at December 31, 2016 were
approximately US$923 million and US$1,531 million, respectively.
The Group's two cash-generating units ("CGUs") for impairment
assessment purposes include the mining rights and the related
property, plant and equipment associated with the Group's
gold mine, located in Inner Mongolia, China and copper
mine, located in Tibet, China. When an impairment review is
undertaken, recoverable amount is assessed with reference to
the higher of value in use and fair value less costs of disposal
and value in use which is based on the discounted cash flows
expected to be derived from the Group's CGUs, taking into
account the appropriate discount rate.
As disclosed in note 4 to the consolidated financial statements,
the management exercises significant judgement in respect of
the assumptions applied in the value in use calculation, such
as future metal selling price, recoverable reserves, resources,
exploration potential, production cost estimates, future
operating costs, discount rates and exchange rate.
During the year ended December 31, 2016, no impairment loss
was recognised for the Group's mining rights and property,
plant and equipment.
Obtaining an understanding of the key controls over
the impairment assessment performed by manage-
ment of the Group’s mining rights and property, plant
and equipment;
Assessing the appropriateness of the Group’s identifi-
cation of individual CGUs;
Assessing the reasonableness of assumptions used in
the valuation models with reference to the historical
accuracy of such forecasts and the current opera-
tional results;
Engaging our internal valuation experts to evaluate
the appropriateness of the valuation methodology,
technical information provided by the external val-
uation expert and assumptions used in the valuation
models against external benchmarks, our knowledge
of the Group and its industry;
Comparing the input data in the cash flow forecast
to the source document; and
Evaluating the sensitivity analysis for the key assump-
tions in the valuation models.
62
63
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP.LTD.-continued
(incorporarted in British Columbia,Canada with limited liability)
Other Information
The directors of the Company are responsible for the other information. The other information comprises the information included
in the annual report, but does not include the consolidated financial statements and our auditor's report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
Responsibilities of Directors and Those Charged with Governance for the Consolidated
Financial Statements
The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and
fair view in accordance with IFRSs and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from
the directors.
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to
unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the
Those charged with governance are responsible for overseeing the Group's financial reporting process.
Group to cease to continue as a going concern.
Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence
64
ANNUAL REPORT 2016
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP.LTD.-continued
(incorporarted in British Columbia,Canada with limited liability)
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion solely to you, as a body, in accordance
with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person
for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
also:
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
65
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP.LTD.-continued
(incorporarted in British Columbia,Canada with limited liability)
Other Information
The directors of the Company are responsible for the other information. The other information comprises the information included
in the annual report, but does not include the consolidated financial statements and our auditor's report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
Financial Statements
Responsibilities of Directors and Those Charged with Governance for the Consolidated
ANNUAL REPORT 2016
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP.LTD.-continued
(incorporarted in British Columbia,Canada with limited liability)
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion solely to you, as a body, in accordance
with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person
for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We
also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and
fair view in accordance with IFRSs and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from
the directors.
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to
unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the
Those charged with governance are responsible for overseeing the Group's financial reporting process.
Group to cease to continue as a going concern.
Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence
64
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
65
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP.LTD.-continued
(incorporarted in British Columbia,Canada with limited liability)
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements-Continued
Revenues
Cost of sales
338,601
(282,399)
339,949
(277,103)
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of
the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's
report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
The engagement partner on the audit resulting in the independent auditor's report is Jimmy Toy.
Mine operating earnings
56,202
62,846
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
March 30 ,2017
66
ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016
Expenses
General and administrative expenses
Exploration and evaluation expenditure
Income from operations
Other (expenses) income
Foreign exchange loss, net
Interest and other income
Finance costs
Profit before income tax
Income tax expense
Impairment loss on available-for-sale investment
Other comprehensive (expenses) income for the year
Items that may be reclassified subsequently to profit or loss:
Exchange difference arising on translation
Fair value loss on available-for-sale investment
Reclassification adjustment upon impairment of
available-for-sale investment
5
6
7
8
19
9
10
19
19
Loss for the year
(12,325)
(6,827)
Total comprehensive expenses for the year
(26,793)
(17,602)
(21,439)
(380)
(23,829)
(302)
(21,819)
(24,131)
34,383
38,715
(16,429)
8,863
(16,573)
(3,831)
(13,537)
12,556
(21,407)
(4,720)
(27,970)
(27,108)
6,413
(18,738)
11,607
(18,434)
(15,746)
(2,553)
(11,497)
(3,998)
3,831
4,720
67
NOTESUS$'0002015US$'0002016 INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP.LTD.-continued
(incorporarted in British Columbia,Canada with limited liability)
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements-Continued
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of
the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's
report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
The engagement partner on the audit resulting in the independent auditor's report is Jimmy Toy.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
March 30 ,2017
ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016
Revenues
Cost of sales
Mine operating earnings
Expenses
General and administrative expenses
Exploration and evaluation expenditure
Income from operations
Other (expenses) income
Foreign exchange loss, net
Interest and other income
Finance costs
Impairment loss on available-for-sale investment
Profit before income tax
Income tax expense
Loss for the year
Other comprehensive (expenses) income for the year
Items that may be reclassified subsequently to profit or loss:
Exchange difference arising on translation
Fair value loss on available-for-sale investment
Reclassification adjustment upon impairment of
available-for-sale investment
5
6
7
8
19
9
10
19
19
338,601
(282,399)
339,949
(277,103)
56,202
62,846
(21,439)
(380)
(23,829)
(302)
(21,819)
(24,131)
34,383
38,715
(16,429)
8,863
(16,573)
(3,831)
(13,537)
12,556
(21,407)
(4,720)
(27,970)
(27,108)
6,413
(18,738)
11,607
(18,434)
(12,325)
(6,827)
(15,746)
(2,553)
(11,497)
(3,998)
3,831
4,720
66
67
Total comprehensive expenses for the year
(26,793)
(17,602)
NOTESUS$'0002015US$'0002016 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016
(Loss) profit for the year attributable to:
Non-controlling interests
Owners of the Company
Total comprehensive (expenses) income for the year attributable to:
Non-controlling interests
Owners of the Company
Loss per share
- Basic (US)
- Diluted (US)
Weighted average number of common shares
- Basic and diluted
13
13
979
(13,304)
1,361
(8,188)
(12,325)
(6,827)
977
(27,770)
1,164
(18,766)
(26,793)
(17,602)
3.36 cents
N/A
2.07 cents
2.07 cents
396,413,753
396,413,753
ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT DECEMBER 31, 2016
Current assets
Cash and cash equivalents
Restricted bank balance
Trade and other receivables
Prepaid expenses and deposits
Prepaid lease payments
Inventories
Non-current assets
Prepaid expenses and deposits
Prepaid lease payments
Deferred tax assets
Available-for-sale investments
Property, plant and equipment
Mining rights
Total assets
Current liabilities
Entrusted loan payable
Borrowings
Tax liabilities
Accounts and other payables and accrued expenses
14
14
15
16
17
18
16
17
9
19
20
21
22
24
23
470,799
356,989
59,930
21,085
163,228
5,633
366
220,557
12,156
14,403
382
14,755
1,531,307
922,817
112,399
9,242
35,801
8,446
225
190,876
11,974
7,620
1,728
17,447
1,454,319
930,516
2,495,820
2,423,604
2,966,619
2,780,593
176,464
28,831
596,233
7,944
809,472
166,004
-
189,009
7,802
362,815
Net current liabilities
(338,673)
(5,826)
Total assets less current liabilities
2,157,147
2,417,778
68
69
NOTESUS$'0002015US$'0002016NOTESUS$'0002015US$'0002016 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016
(Loss) profit for the year attributable to:
Non-controlling interests
Owners of the Company
Total comprehensive (expenses) income for the year attributable to:
Non-controlling interests
Owners of the Company
Loss per share
- Basic (US)
- Diluted (US)
13
13
979
(13,304)
1,361
(8,188)
(12,325)
(6,827)
977
(27,770)
1,164
(18,766)
(26,793)
(17,602)
3.36 cents
N/A
2.07 cents
2.07 cents
Weighted average number of common shares
- Basic and diluted
396,413,753
396,413,753
ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT DECEMBER 31, 2016
Current assets
Cash and cash equivalents
Restricted bank balance
Trade and other receivables
Prepaid expenses and deposits
Prepaid lease payments
Inventories
Non-current assets
Prepaid expenses and deposits
Prepaid lease payments
Deferred tax assets
Available-for-sale investments
Property, plant and equipment
Mining rights
Total assets
Current liabilities
Accounts and other payables and accrued expenses
Entrusted loan payable
Borrowings
Tax liabilities
14
14
15
16
17
18
16
17
9
19
20
21
22
24
23
59,930
21,085
163,228
5,633
366
220,557
112,399
9,242
35,801
8,446
225
190,876
470,799
356,989
12,156
14,403
382
14,755
1,531,307
922,817
11,974
7,620
1,728
17,447
1,454,319
930,516
2,495,820
2,423,604
2,966,619
2,780,593
176,464
28,831
596,233
7,944
809,472
166,004
-
189,009
7,802
362,815
Net current liabilities
(338,673)
(5,826)
Total assets less current liabilities
2,157,147
2,417,778
68
69
NOTESUS$'0002015US$'0002016NOTESUS$'0002015US$'0002016 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
AT DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
Non-current liabilities
Entrusted loan payable
Deferred tax liabilities
Deferred income
Borrowings
Environmental rehabilitation
Total liabilities
Owners’ equity
Share capital
Reserves
Retained profits
Non-controlling interests
24
9
25
23
26
27
-
124,808
4,214
558,599
49,337
30,800
125,414
1,798
763,422
49,090
736,958
970,524
1,546,430
1,333,339
1,229,061
5,191
172,205
1,406,457
13,732
1,229,061
18,849
186,317
1,434,227
13,027
Total owners’ equity
1,420,189
1,447,254
Total liabilities and owners’ equity
2,966,619
2,780,593
The consolidated financial statements on pages 68 to 131 were approved and authorized for issue by the Board of Directors
on March 30, 2017 and are signed on its behalf by:
(Signed by) Xin Song
(Signed by) Bing Liu
Xin Song
Director
Bing Liu
Director
Number
of shares
Share
capital
Equity
revaluation
Exchange
Statutory
Retained
reserve
reserve
reserve
reserve
profits
Subtotal
interests
Non-
controlling
Total
owners’
equity
Investment
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Note (a)
Note (b)
At January 1, 2015
396,413,753
1,229,061
11,179
(722)
7,615
11,355
194,505
1,452,993
12,165
1,465,158
At December 31, 2015
396,413,753
1,229,061
11,179
(3,685)
11,355
186,317
1,434,227
13,027
1,447,254
(Loss) profit for the year
Fair value loss on available-for-
asale investment
Reclassified adjustment upon
aimpairment of available-for-sale
ainvestment (note 19)
Exchange difference arising on
atranslation
Total comprehensive income
a(expenses) for the year
Dividend paid to a non-
acontrolling shareholder
(Loss) profit for the year
Fair value loss on available-for-
asale investment
Reclassified adjustment upon
aimpairment of available-for-sale
ainvestment (note 19)
Exchange difference arising on
atranslation
Total comprehensive income
a(expenses) for the year
Transfer to statutory reserve
Dividend paid to a non-
acontrolling shareholder
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(8,188)
(8,188)
1,361
(6,827)
(3,998)
4,720
(3,998)
4,720
-
(11,300)
(11,300)
(197)
(11,497)
722
(11,300)
(8,188)
(18,766)
1,164
(17,602)
-
(302)
(302)
(3,998)
4,720
-
-
-
-
(2,553)
3,831
-
-
-
-
-
-
-
(13,304)
(13,304)
979
(12,325)
(2,553)
3,831
(2,553)
3,831
-
-
-
-
-
(15,744)
(15,744)
(2)
(15,746)
1,278
(15,744)
(13,304)
(27,770)
977
(26,793)
808
(808)
-
-
-
(272)
(272)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At December 31, 2016
396,413,753
1,229,061
11,179
1,278
(19,429)
12,163
172,205
1,406,457
13,732
1,420,189
Notes:
(a)
plan of the Company.
Amounts represent equity reserve arising from share-based compensation provided to directors and employees under the stock option
(b)
Statutory reserve which consists of appropriations from the profit after taxation of the subsidiaries established in the People’s Republic of
China (“PRC”), forms part of the equity of PRC subsidiaries. In accordance with the PRC Company Law and the Articles of Association of
the PRC subsidiaries, the PRC subsidiaries are required to appropriate an amount equal to a minimum of 10% of their profits after taxation
each year to a statutory reserve until the reserve reaches 50% of the registered capital of the respective subsidiaries.
70
71
NOTESUS$'0002015US$'0002016 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
AT DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
Number
of shares
Share
capital
Equity
reserve
Investment
revaluation
reserve
Exchange
reserve
Statutory
reserve
Retained
profits
Subtotal
Non-
controlling
interests
Total
owners’
equity
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Note (a)
Note (b)
At January 1, 2015
396,413,753
1,229,061
11,179
(722)
7,615
11,355
194,505
1,452,993
12,165
1,465,158
(Loss) profit for the year
Fair value loss on available-for-
asale investment
Reclassified adjustment upon
aimpairment of available-for-sale
ainvestment (note 19)
Exchange difference arising on
atranslation
Total comprehensive income
a(expenses) for the year
Dividend paid to a non-
acontrolling shareholder
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At December 31, 2015
396,413,753
1,229,061
11,179
(Loss) profit for the year
Fair value loss on available-for-
asale investment
Reclassified adjustment upon
aimpairment of available-for-sale
ainvestment (note 19)
Exchange difference arising on
atranslation
Total comprehensive income
a(expenses) for the year
Transfer to statutory reserve
Dividend paid to a non-
acontrolling shareholder
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,998)
4,720
-
-
-
-
(11,300)
722
(11,300)
-
-
-
(2,553)
3,831
-
-
-
-
-
(15,744)
1,278
(15,744)
-
-
-
-
-
-
(8,188)
(8,188)
1,361
(6,827)
-
-
-
(3,998)
4,720
-
-
(3,998)
4,720
(11,300)
(197)
(11,497)
(8,188)
(18,766)
1,164
(17,602)
-
-
(302)
(302)
-
-
-
-
-
(13,304)
(13,304)
979
(12,325)
-
-
-
(2,553)
3,831
-
-
(2,553)
3,831
(15,744)
(2)
(15,746)
(13,304)
(27,770)
977
(26,793)
808
(808)
-
-
-
-
-
(272)
(272)
(3,685)
11,355
186,317
1,434,227
13,027
1,447,254
At December 31, 2016
396,413,753
1,229,061
11,179
1,278
(19,429)
12,163
172,205
1,406,457
13,732
1,420,189
Notes:
(a)
Amounts represent equity reserve arising from share-based compensation provided to directors and employees under the stock option
plan of the Company.
(b)
Statutory reserve which consists of appropriations from the profit after taxation of the subsidiaries established in the People’s Republic of
China (“PRC”), forms part of the equity of PRC subsidiaries. In accordance with the PRC Company Law and the Articles of Association of
the PRC subsidiaries, the PRC subsidiaries are required to appropriate an amount equal to a minimum of 10% of their profits after taxation
each year to a statutory reserve until the reserve reaches 50% of the registered capital of the respective subsidiaries.
70
71
Non-current liabilities
Entrusted loan payable
Deferred tax liabilities
Deferred income
Borrowings
Environmental rehabilitation
Total liabilities
Owners’ equity
Share capital
Reserves
Retained profits
Non-controlling interests
24
9
25
23
26
27
-
124,808
4,214
558,599
49,337
30,800
125,414
1,798
763,422
49,090
736,958
970,524
1,546,430
1,333,339
1,229,061
5,191
172,205
1,406,457
13,732
1,229,061
18,849
186,317
1,434,227
13,027
Total owners’ equity
1,420,189
1,447,254
Total liabilities and owners’ equity
2,966,619
2,780,593
The consolidated financial statements on pages 68 to 131 were approved and authorized for issue by the Board of Directors
on March 30, 2017 and are signed on its behalf by:
(Signed by) Xin Song
(Signed by) Bing Liu
Xin Song
Director
Bing Liu
Director
NOTESUS$'0002015US$'0002016 ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2016
Financing activities
Proceeds from borrowings
Repayments of borrowings
Dividend paid to a non-controlling shareholder
411,705
(185,625)
(272)
335,007
(553,741)
(302)
Net cash from (used in) financing activities
225,808
(219,036)
Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Effect of foreign exchange rate changes on cash and cash equivalents
(50,368)
112,399
(2,101)
(450,841)
565,578
(2,338)
Cash and cash equivalents, end of year
59,930
112,399
Cash and cash equivalents are comprised of cash and bank deposits in banks
59,930
112,399
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2016
Operating activities
Profit before income tax
Items not requiring use of cash and cash equivalents:
Amortization of mining rights
Depreciation
Finance costs
Impairment loss on available-for-sale investment
Loss on disposal of property, plant and equipment
Release of prepaid lease payment
Release of deferred income
Unrealized foreign exchange loss
Change in operating working capital items:
Trade and other receivables
Prepaid expenses and deposits
Inventories
Accounts and other payables and accrued expenses
Cash generated from operations
Environmental rehabilitation expense paid
Interest paid
Income taxes paid
6,413
4,814
77,686
16,573
3,831
34
208
(658)
21,142
15,292
1,414
(30,612)
19,358
135,495
(284)
(38,376)
(17,505)
11,607
5,264
70,456
21,407
4,720
-
185
(716)
17,197
(9,288)
2,081
(31,977)
31,216
122,152
-
(42,693)
(12,592)
Net cash from operating activities
79,330
66,867
Investing activities
Payment for acquisition of property, plant and equipment
Loan to a related company
Placement of restricted bank deposits
Receipt of asset-related government grants
Deposit paid for acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Payment for land use rights
Repayment from loan to a related party
Withdrawal of restricted bank balance
(194,333)
(150,000)
(33,654)
3,488
(90)
-
(7,586)
6,000
20,669
(276,068)
(14,021)
(9,242)
940
(616)
335
-
-
-
Net cash used in investing activities
(355,506)
(298,672)
72
73
US$'0002015US$'0002016US$'0002015US$'0002016 CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2016
Operating activities
Profit before income tax
Items not requiring use of cash and cash equivalents:
Amortization of mining rights
Depreciation
Finance costs
Impairment loss on available-for-sale investment
Loss on disposal of property, plant and equipment
Release of prepaid lease payment
Release of deferred income
Unrealized foreign exchange loss
Change in operating working capital items:
Trade and other receivables
Prepaid expenses and deposits
Inventories
Accounts and other payables and accrued expenses
Cash generated from operations
Environmental rehabilitation expense paid
Interest paid
Income taxes paid
Investing activities
Payment for acquisition of property, plant and equipment
Loan to a related company
Placement of restricted bank deposits
Receipt of asset-related government grants
Deposit paid for acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Payment for land use rights
Repayment from loan to a related party
Withdrawal of restricted bank balance
6,413
4,814
77,686
16,573
3,831
34
208
(658)
21,142
15,292
1,414
(30,612)
19,358
135,495
(284)
(38,376)
(17,505)
(194,333)
(150,000)
(33,654)
3,488
(90)
-
(7,586)
6,000
20,669
11,607
5,264
70,456
21,407
4,720
-
185
(716)
17,197
(9,288)
2,081
(31,977)
31,216
122,152
-
(42,693)
(12,592)
(276,068)
(14,021)
(9,242)
940
(616)
335
-
-
-
Net cash from operating activities
79,330
66,867
Financing activities
Proceeds from borrowings
Repayments of borrowings
Dividend paid to a non-controlling shareholder
411,705
(185,625)
(272)
335,007
(553,741)
(302)
Net cash from (used in) financing activities
225,808
(219,036)
Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Effect of foreign exchange rate changes on cash and cash equivalents
(50,368)
112,399
(2,101)
(450,841)
565,578
(2,338)
Cash and cash equivalents, end of year
59,930
112,399
Cash and cash equivalents are comprised of cash and bank deposits in banks
59,930
112,399
Net cash used in investing activities
(355,506)
(298,672)
72
73
US$'0002015US$'0002016US$'0002015US$'0002016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRSs")
Amendments to IFRSs that are mandatorily effective for the current year
The Group has applied the following amendments to IFRSs issued by International Accounting Standards Board (“IASB”) for
the first time in the current year:
Amendments to IFRS 11
Amendments to IAS 1
Accounting for Acquisitions of Interests in Joint Operations
Amendments to IAS 16 and IAS 38
Clarification of Acceptable Methods of Depreciation and
Disclosure Initiative
Amortization
Amendments to IAS 16 and IAS 41
Agriculture: Bearer Plants
Amendments to IFRS 10,IFRS 12 and IAS 28
Investment Entities: Applying the Consolidation Exception
Amendments to IFRSs
Annual Improvements to IFRS Standards 2012 - 2014 Cycle
1. GENERAL AND BASIS OF PREPARATION OF FINANCIAL STATEMENTS
Amendments to IAS 1 Disclosure Initiative
The Group has applied the amendments to IAS 1 Disclosure Initiative for the first time in the current year. The amendments
China Gold International Resources Corp. Ltd., formerly known as Jinshan Gold Mines Inc., (the "Company") is a publicly
to IAS 1 clarify that an entity need not provide a specific disclosure required by an IFRS if the information resulting from that
listed company incorporated in British Columbia, Canada on May 31, 2000 with limited liability under the legislation of the
disclosure is not material, and give guidance on the bases of aggregating and disaggregating information. However, the
Province of British Columbia and its shares are listed on the Toronto Stock Exchange ("TSX") and The Stock Exchange of Hong
amendments reiterate that an entity should consider providing additional disclosures when compliance with the specific
Kong Limited (the "Stock Exchange"). The Company together with its subsidiaries (collectively referred to as the "Group") is
requirements in IFRS is insufficient to enable users of financial statements to understand the impact of particular transactions,
principally engaged in the acquisition, exploration, development and mining of mineral reserves in the PRC. Particulars of
events and conditions on the entity's financial position and financial performance.
the subsidiaries of the Company are set out in note 33. The Group considers that China National Gold Group Corporation
("CNG"), a state owned company registered in Beijing, PRC which is controlled by State-owned Assets Supervision and
As regards the structure of the financial statements, the amendments provide examples of systematic ordering or grouping
Administration Commission of the State Council of the PRC, is able to exercise significant influence over the Company.
of the notes.
The head office, principal address and registered and records office of the Company are located at Suite 660, One Bentall
The Group has applied these amendments retrospectively. The grouping and ordering of segment information has been
Centre, 505 Burrard Street, Vancouver, British Columbia, Canada, V7X 1M4.
The consolidated financial statements are presented in United States Dollars ("US$") which is also the functional currency of
was reordered to note 5.
the Company.
At December 31, 2016, the Group's current liabilities exceeded its current assets by approximately US$339 million. In view
of these circumstances, the directors of the Company have given consideration to the future liquidity and performance
Other than the amendments to IAS 1, the application of the amendments to IFRSs in the current year has had no material
of the Group and its available sources of finance in assessing whether the Group will have sufficient financial resources to
impact on the Group's financial performance and positions for the current and prior years and/or on disclosures set out in
continue as a going concern. Taking into account the Group's cash flow projection, including the Group's unutilized bank
these consolidated financial statements.
revised to give prominence to the areas of the Group's activities that management considers to be most relevant to an
understanding of the Group's financial performance and financial position. Specifically, information in relation to segment
Other than the above presentation and disclosure changes, the application of the amendments to IAS 1 has not resulted in
any impact on the financial performance or financial position of the Group in these consolidated financial statements.
facilities of approximately US$496 million, ability to renew or refinance the banking facilities upon maturity and the Group's
future capital expenditure in respect of its non-cancellable capital commitments of US$219 million, the directors of the
Company consider that it has sufficient working capital to meet in full its financial obligations as they fall due for at least the
next twelve months from the end of the reporting period and accordingly, the consolidated financial statements have been
prepared on a going concern basis.
74
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
1. GENERAL AND BASIS OF PREPARATION OF FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRSs")
Amendments to IFRSs that are mandatorily effective for the current year
The Group has applied the following amendments to IFRSs issued by International Accounting Standards Board (“IASB”) for
the first time in the current year:
Amendments to IFRS 11
Amendments to IAS 1
Accounting for Acquisitions of Interests in Joint Operations
Disclosure Initiative
Amendments to IAS 16 and IAS 38
Clarification of Acceptable Methods of Depreciation and
Amendments to IAS 16 and IAS 41
Amortization
Agriculture: Bearer Plants
Amendments to IFRS 10,IFRS 12 and IAS 28
Investment Entities: Applying the Consolidation Exception
Amendments to IFRSs
Annual Improvements to IFRS Standards 2012 - 2014 Cycle
Amendments to IAS 1 Disclosure Initiative
The Group has applied the amendments to IAS 1 Disclosure Initiative for the first time in the current year. The amendments
China Gold International Resources Corp. Ltd., formerly known as Jinshan Gold Mines Inc., (the "Company") is a publicly
to IAS 1 clarify that an entity need not provide a specific disclosure required by an IFRS if the information resulting from that
listed company incorporated in British Columbia, Canada on May 31, 2000 with limited liability under the legislation of the
disclosure is not material, and give guidance on the bases of aggregating and disaggregating information. However, the
Province of British Columbia and its shares are listed on the Toronto Stock Exchange ("TSX") and The Stock Exchange of Hong
amendments reiterate that an entity should consider providing additional disclosures when compliance with the specific
Kong Limited (the "Stock Exchange"). The Company together with its subsidiaries (collectively referred to as the "Group") is
requirements in IFRS is insufficient to enable users of financial statements to understand the impact of particular transactions,
principally engaged in the acquisition, exploration, development and mining of mineral reserves in the PRC. Particulars of
events and conditions on the entity's financial position and financial performance.
the subsidiaries of the Company are set out in note 33. The Group considers that China National Gold Group Corporation
("CNG"), a state owned company registered in Beijing, PRC which is controlled by State-owned Assets Supervision and
As regards the structure of the financial statements, the amendments provide examples of systematic ordering or grouping
Administration Commission of the State Council of the PRC, is able to exercise significant influence over the Company.
of the notes.
The head office, principal address and registered and records office of the Company are located at Suite 660, One Bentall
The Group has applied these amendments retrospectively. The grouping and ordering of segment information has been
Centre, 505 Burrard Street, Vancouver, British Columbia, Canada, V7X 1M4.
the Company.
The consolidated financial statements are presented in United States Dollars ("US$") which is also the functional currency of
was reordered to note 5.
At December 31, 2016, the Group's current liabilities exceeded its current assets by approximately US$339 million. In view
of these circumstances, the directors of the Company have given consideration to the future liquidity and performance
Other than the amendments to IAS 1, the application of the amendments to IFRSs in the current year has had no material
of the Group and its available sources of finance in assessing whether the Group will have sufficient financial resources to
impact on the Group's financial performance and positions for the current and prior years and/or on disclosures set out in
continue as a going concern. Taking into account the Group's cash flow projection, including the Group's unutilized bank
these consolidated financial statements.
Other than the above presentation and disclosure changes, the application of the amendments to IAS 1 has not resulted in
any impact on the financial performance or financial position of the Group in these consolidated financial statements.
revised to give prominence to the areas of the Group's activities that management considers to be most relevant to an
understanding of the Group's financial performance and financial position. Specifically, information in relation to segment
facilities of approximately US$496 million, ability to renew or refinance the banking facilities upon maturity and the Group's
future capital expenditure in respect of its non-cancellable capital commitments of US$219 million, the directors of the
Company consider that it has sufficient working capital to meet in full its financial obligations as they fall due for at least the
next twelve months from the end of the reporting period and accordingly, the consolidated financial statements have been
prepared on a going concern basis.
74
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
aaaaaaREPORTING STANDARDS ("IFRSs") - continued
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
aaaaaaREPORTING STANDARDS ("IFRSs") - continued
New and amendments to IFRSs in issue but not yet effective
Amendments to IAS 7 Disclosure Initiative
The Group has not early applied the following new, amendments and interpretation to IFRSs that has been issued but are
ANNUAL REPORT 2016
not yet effective:
IFRS 9
IFRS 15
IFRS 16
IFRIC 22
Amendments to IFRS 2
Amendments to IFRS 4
Amendments to IFRS 10 and IAS 28
Amendments to IAS 7
Amendments to IAS 12
Amendments to IAS 40
Amendments to IFRSs
Financial Instruments2
Revenue from Contracts with Customers and the Related
Amendments2
Leases3
Foreign Currency Transactions and Advance Consideration2
Classification and Measurement of Share-based Payment
Transactions2
Applying IFRS 9 Financial Instruments with IFRS 4 Insurance
Contracts2
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture4
Disclosure Initiative1
Recognition of Deferred Tax Assets for Unrealised Losses1
Transfers of Investment Property2
Annual Improvements to IFRS Standards 2014 - 2016 Cycle5
1 Effective for annual periods beginning on or after January 1, 2017
2 Effective for annual periods beginning on or after January 1, 2018
3 Effective for annual periods beginning on or after January 1, 2019
4 Effective for annual periods beginning on or after a date to be determined
5 Effective for annual periods beginning on or after January 1, 2017 or January 1, 2018, as appropriate
The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes
in liabilities arising from financing activities including both changes arising from cash flows and non-cash changes.
Specifically, the amendments require the following changes in liabilities arising from financing activities to be disclosed: (i)
changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii)
the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes.
The amendments apply prospectively for annual periods beginning on or after January 1, 2017 with earlier application
permitted. The application of the amendments will result in additional disclosures on the Group's financing activities,
specifically reconciliation between the opening and closing balances in the consolidated statement of financial position for
liabilities arising from financing activities will be provided on application.
The directors of the Company anticipate that the application of IAS 7 in the future may result in more disclosures,
however, the directors of the Company do not anticipate that the application of IAS 7 will have a material impact on the
consolidated statement of cash flows in the respective reporting periods.
IFRS 9 Financial Instruments
IFRS 9 introduces new requirements for the classification and measurement of financial assets, financial liabilities, general
hedge accounting and impairment requirements for financial assets.
Key requirements of IFRS 9 which are relevant to the Group are:
all recognized financial assets that are within the scope of IFRS 9 are required to be subsequently measured at amortized
cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the
contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the
principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. Debt
instruments that are held within a business model whose objective is achieved both by collecting contractual cash
flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding, are generally measured at fair value
through other comprehensive income (“FVTOCI”). All other debt investments and equity investments are measured at
their fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable
election to present subsequent changes in the fair value of an equity investment (that is not held for trading). In other
comprehensive income, with only dividend income generally recognized in profit or loss.
in relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an incurred
credit loss model under IAS 39 Financial Instruments: Recognition and Measurement. The expected credit loss model
requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting
date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event
to have occurred before credit losses are recognized
76
77
The Group has not early applied the following new, amendments and interpretation to IFRSs that has been issued but are
not yet effective:
IFRS 9
IFRS 15
IFRS 16
IFRIC 22
Financial Instruments2
Amendments2
Leases3
Transactions2
Contracts2
Amendments to IFRS 2
Classification and Measurement of Share-based Payment
Foreign Currency Transactions and Advance Consideration2
Amendments to IFRS 4
Applying IFRS 9 Financial Instruments with IFRS 4 Insurance
Amendments to IFRS 10 and IAS 28
Sale or Contribution of Assets between an Investor and its
Amendments to IAS 7
Amendments to IAS 12
Amendments to IAS 40
Amendments to IFRSs
Associate or Joint Venture4
Disclosure Initiative1
Recognition of Deferred Tax Assets for Unrealised Losses1
Transfers of Investment Property2
Annual Improvements to IFRS Standards 2014 - 2016 Cycle5
1 Effective for annual periods beginning on or after January 1, 2017
2 Effective for annual periods beginning on or after January 1, 2018
3 Effective for annual periods beginning on or after January 1, 2019
4 Effective for annual periods beginning on or after a date to be determined
5 Effective for annual periods beginning on or after January 1, 2017 or January 1, 2018, as appropriate
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
aaaaaaREPORTING STANDARDS ("IFRSs") - continued
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
aaaaaaREPORTING STANDARDS ("IFRSs") - continued
New and amendments to IFRSs in issue but not yet effective
Amendments to IAS 7 Disclosure Initiative
Revenue from Contracts with Customers and the Related
the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes.
The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes
in liabilities arising from financing activities including both changes arising from cash flows and non-cash changes.
Specifically, the amendments require the following changes in liabilities arising from financing activities to be disclosed: (i)
changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii)
ANNUAL REPORT 2016
The amendments apply prospectively for annual periods beginning on or after January 1, 2017 with earlier application
permitted. The application of the amendments will result in additional disclosures on the Group's financing activities,
specifically reconciliation between the opening and closing balances in the consolidated statement of financial position for
liabilities arising from financing activities will be provided on application.
The directors of the Company anticipate that the application of IAS 7 in the future may result in more disclosures,
however, the directors of the Company do not anticipate that the application of IAS 7 will have a material impact on the
consolidated statement of cash flows in the respective reporting periods.
IFRS 9 Financial Instruments
IFRS 9 introduces new requirements for the classification and measurement of financial assets, financial liabilities, general
hedge accounting and impairment requirements for financial assets.
Key requirements of IFRS 9 which are relevant to the Group are:
all recognized financial assets that are within the scope of IFRS 9 are required to be subsequently measured at amortized
cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the
contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the
principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. Debt
instruments that are held within a business model whose objective is achieved both by collecting contractual cash
flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding, are generally measured at fair value
through other comprehensive income (“FVTOCI”). All other debt investments and equity investments are measured at
their fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable
election to present subsequent changes in the fair value of an equity investment (that is not held for trading). In other
comprehensive income, with only dividend income generally recognized in profit or loss.
in relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an incurred
credit loss model under IAS 39 Financial Instruments: Recognition and Measurement. The expected credit loss model
requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting
date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event
to have occurred before credit losses are recognized
76
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
aaaaaaREPORTING STANDARDS ("IFRSs") - continued
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
aaaaaaREPORTING STANDARDS ("IFRSs") - continued
IFRS 9 Financial Instruments– continued
IFRS 16 Leases
Application of IFRS 9 in the future may have a material impact on the classification and measurement of the Group's
IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both
financial assets. The Group's available-for-sale investments, including those currently stated at cost less impairment, will
lessors and lessees. IFRS 16 will supersede IAS 17 Leases and the related interpretations when it becomes effective.
either be measured as fair value through profit or loss or be designated as FVTOCI (subject to fulfillment of the designation
criteria). In addition, the expected credit loss model may result in early provision of credit losses which are not yet incurred
IFRS 16 distinguishes lease and service contracts on the basis of whether an identified asset is controlled by a customer.
in relation to the Group's financial assets measured at amortized cost. However, it is not practicable to provide a reasonable
Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by a model where a
estimate of the effect of IFRS 9 until the Group performs a detailed review.
right-of-use asset and a corresponding liability have to be recognized for all leases by lessees, except for short-term leases
ANNUAL REPORT 2016
IFRS 15 Revenue from Contracts with Customers
IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from
contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11
Construction Contracts and the related interpretations when it becomes effective.
The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when 'control' of the
goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive
guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS
15.
In 2016, the IASB issued Clarifications to IFRS 15 in relation to the identification of performance obligations, principal versus
agent considerations, as well as licensing application guidance.
The directors of the Company anticipate that the application of IFRS 15 in the future may result in more disclosures, however,
the directors of the Company do not anticipate that the application of IFRS 15 will have a material impact on the timing
and amounts of revenue recognized in the respective reporting periods
and leases of low value assets.
The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less
accumulated depreciation and impairment losses, adjusted for any re-measurement of the lease liability. The lease liability
is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease
liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. For the
classification of cash flows, the Group currently presents upfront prepaid lease payments as investing cash flows in relation
to leasehold lands for owned use and those classified as investment properties while other operating lease payments are
presented as operating cash flows. Upon application of IFRS 16, lease payments in relation to lease liability will be allocated
into a principal and an interest portion which will be presented as financing and operating cash flows by the Group,
respectively.
Under IAS 17, the Group has already recognized prepaid lease payments for leasehold lands where the Group is a lessee.
The application of IFRS 16 may result in potential changes in classification of these assets depending on whether the Group
presents right-of-use assets separately or within the same line item at which the corresponding underlying assets would be
presented if they were owned.
In contrast to lessee accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, and
continues to require a lessor to classify a lease either as an operating lease or a finance lease.
Furthermore, extensive disclosures are required by IFRS 16.
As at December 31, 2016, the Group as a lessee has non-cancellable operating lease commitments of HK$583,000 as
disclosed in note 31. The directors do not expect the adoption of IFRS would result in significant impact on the Group's result
but it is expected that certain portion of these lease commitments will be required to be recognized in the consolidated
statement of financial position as lease liabilities.
Other than those new and amendments to IFRSs mentioned above, the directors of the Company do not anticipated that
the application of other new and amendments to IFRSs will have a material impact on the Group's consolidated financial
statements.
78
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
aaaaaaREPORTING STANDARDS ("IFRSs") - continued
IFRS 9 Financial Instruments– continued
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
aaaaaaREPORTING STANDARDS ("IFRSs") - continued
IFRS 16 Leases
Application of IFRS 9 in the future may have a material impact on the classification and measurement of the Group's
IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both
financial assets. The Group's available-for-sale investments, including those currently stated at cost less impairment, will
lessors and lessees. IFRS 16 will supersede IAS 17 Leases and the related interpretations when it becomes effective.
either be measured as fair value through profit or loss or be designated as FVTOCI (subject to fulfillment of the designation
criteria). In addition, the expected credit loss model may result in early provision of credit losses which are not yet incurred
IFRS 16 distinguishes lease and service contracts on the basis of whether an identified asset is controlled by a customer.
in relation to the Group's financial assets measured at amortized cost. However, it is not practicable to provide a reasonable
Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by a model where a
estimate of the effect of IFRS 9 until the Group performs a detailed review.
right-of-use asset and a corresponding liability have to be recognized for all leases by lessees, except for short-term leases
ANNUAL REPORT 2016
IFRS 15 Revenue from Contracts with Customers
IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from
contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11
Construction Contracts and the related interpretations when it becomes effective.
The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when 'control' of the
goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive
guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS
In 2016, the IASB issued Clarifications to IFRS 15 in relation to the identification of performance obligations, principal versus
agent considerations, as well as licensing application guidance.
The directors of the Company anticipate that the application of IFRS 15 in the future may result in more disclosures, however,
the directors of the Company do not anticipate that the application of IFRS 15 will have a material impact on the timing
and amounts of revenue recognized in the respective reporting periods
15.
78
and leases of low value assets.
The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less
accumulated depreciation and impairment losses, adjusted for any re-measurement of the lease liability. The lease liability
is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease
liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. For the
classification of cash flows, the Group currently presents upfront prepaid lease payments as investing cash flows in relation
to leasehold lands for owned use and those classified as investment properties while other operating lease payments are
presented as operating cash flows. Upon application of IFRS 16, lease payments in relation to lease liability will be allocated
into a principal and an interest portion which will be presented as financing and operating cash flows by the Group,
respectively.
Under IAS 17, the Group has already recognized prepaid lease payments for leasehold lands where the Group is a lessee.
The application of IFRS 16 may result in potential changes in classification of these assets depending on whether the Group
presents right-of-use assets separately or within the same line item at which the corresponding underlying assets would be
presented if they were owned.
In contrast to lessee accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, and
continues to require a lessor to classify a lease either as an operating lease or a finance lease.
Furthermore, extensive disclosures are required by IFRS 16.
As at December 31, 2016, the Group as a lessee has non-cancellable operating lease commitments of HK$583,000 as
disclosed in note 31. The directors do not expect the adoption of IFRS would result in significant impact on the Group's result
but it is expected that certain portion of these lease commitments will be required to be recognized in the consolidated
statement of financial position as lease liabilities.
Other than those new and amendments to IFRSs mentioned above, the directors of the Company do not anticipated that
the application of other new and amendments to IFRSs will have a material impact on the Group's consolidated financial
statements.
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with IFRS issued by the IASB. In addition, the
consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on
the Stock Exchange of Hong Kong Limited ("Listing Rules") and by the Hong Kong Companies Ordinance ("CO").
The consolidated financial statements have been prepared on the historical cost basis except for certain financial
instruments, which are measured at fair values at the end of each reporting period, as explained in the accounting policies
below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the
characteristics of the asset or liability if market participants would take those characteristics into account when pricing the
asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated
financial statements is determined on such a basis, except for share-based payment transactions that are within the scope
of IFRS 2 Share-based Payment, leasing transactions that are within the scope of IAS 17 Leases, and measurements that
have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 Inventories or value in use in
IAS 36 Impairment of Assets.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company and its subsidiaries. Control is achieved when the Company:
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
and Discontinued Operations are measured in accordance with that standard.
has the ability to use its power to affect its returns.
80
81
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Basis of consolidation - continued
one or more of the three elements of control listed above.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses
control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are
included in the consolidated statement of profit or loss and other comprehensive income from the date the Group gains
control until the date when the Group ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-
controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-
controlling interests even if this results in the non-controlling interests having a deficit balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into
line with the Group's accounting policies.
All intragroup assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group's equity therein.
Business combination
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets
transferred by the Group, liabilities incurred by the Group to former owners of the acquiree and the equity interests issued
by the Group in exchange for control of the acquiree. Acquisition-related costs are recognized in profit or loss as incurred.
At the acquisition date, the acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for
recognition under IFRS 3 are recognized at their fair value, except that:
deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and
measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured
in accordance with IFRS 2 Share-based Payment at the acquisition date (see the accounting policy below); and
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with IFRS issued by the IASB. In addition, the
consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on
the Stock Exchange of Hong Kong Limited ("Listing Rules") and by the Hong Kong Companies Ordinance ("CO").
The consolidated financial statements have been prepared on the historical cost basis except for certain financial
instruments, which are measured at fair values at the end of each reporting period, as explained in the accounting policies
below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the
characteristics of the asset or liability if market participants would take those characteristics into account when pricing the
asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated
financial statements is determined on such a basis, except for share-based payment transactions that are within the scope
of IFRS 2 Share-based Payment, leasing transactions that are within the scope of IAS 17 Leases, and measurements that
have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 Inventories or value in use in
IAS 36 Impairment of Assets.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability,
access at the measurement date;
either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company and its subsidiaries. Control is achieved when the Company:
has power over the investee;
has the ability to use its power to affect its returns.
80
3. SIGNIFICANT ACCOUNTING POLICIES - continued
FOR THE YEAR ENDED DECEMBER 31, 2016
Basis of consolidation - continued
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to
one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses
control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are
included in the consolidated statement of profit or loss and other comprehensive income from the date the Group gains
control until the date when the Group ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-
controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-
controlling interests even if this results in the non-controlling interests having a deficit balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into
line with the Group's accounting policies.
All intragroup assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group's equity therein.
Business combination
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets
transferred by the Group, liabilities incurred by the Group to former owners of the acquiree and the equity interests issued
by the Group in exchange for control of the acquiree. Acquisition-related costs are recognized in profit or loss as incurred.
At the acquisition date, the acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for
recognition under IFRS 3 are recognized at their fair value, except that:
deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and
measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured
in accordance with IFRS 2 Share-based Payment at the acquisition date (see the accounting policy below); and
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale
is exposed, or has rights, to variable returns from its involvement with the investee; and
and Discontinued Operations are measured in accordance with that standard.
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Business combination- continued
Foreign currencies
ANNUAL REPORT 2016
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests
in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net
amount of the identifiable assets acquired and the liabilities assumed as at acquisition date. If, after re-assessment, the net
amount of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the
amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the
acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the
relevant subsidiary’s net assets in the event of liquidation may be initially measured either at recognized amounts or at
the non-controlling interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets. The
choice of measurement basis is made on a transaction-by-transaction basis.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those
provisional amounts are adjusted during the measurement period (see above) and additional assets or liabilities are
recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that,
if known, would have affected the amounts recognized as of that date.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated
customer returns, rebates and other similar allowances.
Revenue is recognized when the amount of revenue can be reliably measured; when it is probable that future economic
benefits will flow to the Group and when specific criteria have been met for each of the Group's activities, as described
below.
Revenue from the sale of goods is recognized when the goods are delivered and titles have passed.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount on initial recognition.
In preparing the financial statements of each individual group entity, transactions in currencies other than the functional
currency of that entity (foreign currencies) are recognized at the rates of exchanges prevailing on the dates of the
transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the
rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are
recognized in profit or loss in the period in which they arise.
For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group's foreign
operations are translated into the presentation currency of the Group (i.e. US$) using exchange rates prevailing at the end
of each reporting period and their income and expenses items are translated at the average exchange rates for the year.
Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity (exchange
reserve).
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those
assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the
temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing
costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
82
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
3. SIGNIFICANT ACCOUNTING POLICIES - continued
ANNUAL REPORT 2016
Foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies other than the functional
currency of that entity (foreign currencies) are recognized at the rates of exchanges prevailing on the dates of the
transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the
rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are
recognized in profit or loss in the period in which they arise.
For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group's foreign
operations are translated into the presentation currency of the Group (i.e. US$) using exchange rates prevailing at the end
of each reporting period and their income and expenses items are translated at the average exchange rates for the year.
Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity (exchange
reserve).
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those
assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the
temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing
costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
FOR THE YEAR ENDED DECEMBER 31, 2016
Business combination- continued
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests
in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net
amount of the identifiable assets acquired and the liabilities assumed as at acquisition date. If, after re-assessment, the net
amount of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the
amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the
acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the
relevant subsidiary’s net assets in the event of liquidation may be initially measured either at recognized amounts or at
the non-controlling interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets. The
choice of measurement basis is made on a transaction-by-transaction basis.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those
provisional amounts are adjusted during the measurement period (see above) and additional assets or liabilities are
recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that,
if known, would have affected the amounts recognized as of that date.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated
customer returns, rebates and other similar allowances.
Revenue is recognized when the amount of revenue can be reliably measured; when it is probable that future economic
benefits will flow to the Group and when specific criteria have been met for each of the Group's activities, as described
below.
Revenue from the sale of goods is recognized when the goods are delivered and titles have passed.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount on initial recognition.
82
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Government grants
Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions
attaching to them and that the grants will be received.
FOR THE YEAR ENDED DECEMBER 31, 2016
The tax currently payable is based on taxable profit for the year. Taxable profit differs from 'profit before income tax' as
Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognises
ANNUAL REPORT 2016
reported in the consolidated statement of profit or loss and other comprehensive income because of income or expense
that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current
tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognized on temporary differences between the carrying amount of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred
tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized
for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which
those deductible temporary differences can be utilised. Such deferred assets and liabilities are not recognized if the
temporary differences arise from the initial recognition (other than in a business combination) of other assets and liabilities in
a transaction that affects neither the taxable profit nor accounting profit.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except
where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only
recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of
the temporary difference and they are expected to reverse in the foreseeable future.
Cash and cash equivalents comprise cash at banks and on hand, and short-term deposits with an original maturity of three
The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability
is settled or the asset is realized, based on tax rate (and tax laws) that have been enacted or substantively enacted by the
end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner
in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and
liabilities.
Current and deferred tax is recognized in profit or loss, except when it relates to items that are recognized in other
comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other
comprehensive income or directly in equity respectively.
Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in
the accounting for the business combination.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose
primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as
deferred income in the consolidated statement of financial position and transferred to profit or loss on a systematic and
rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving
immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which
they become receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the
difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
Payments to state-managed retirement benefit scheme are recognized as an expense when employees have rendered
Retirement benefit costs
service entitling them to the contributions.
Cash and cash equivalents
months or less, which are readily convertible into a known amount of cash.
Prepaid lease payments
current assets.
Prepaid lease payments representing land use rights in the PRC are stated at cost and amortized on a straight-line basis
over the lease terms. Prepaid lease payments which are to be amortized in the next twelve months or less are classified as
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Taxation
3. SIGNIFICANT ACCOUNTING POLICIES - continued
FOR THE YEAR ENDED DECEMBER 31, 2016
Government grants
Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions
Income tax expense represents the sum of the tax currently payable and deferred tax.
attaching to them and that the grants will be received.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from 'profit before income tax' as
Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognises
ANNUAL REPORT 2016
reported in the consolidated statement of profit or loss and other comprehensive income because of income or expense
that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current
tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognized on temporary differences between the carrying amount of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred
tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized
for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which
those deductible temporary differences can be utilised. Such deferred assets and liabilities are not recognized if the
temporary differences arise from the initial recognition (other than in a business combination) of other assets and liabilities in
a transaction that affects neither the taxable profit nor accounting profit.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except
where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only
recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of
the temporary difference and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability
is settled or the asset is realized, based on tax rate (and tax laws) that have been enacted or substantively enacted by the
end of the reporting period.
liabilities.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner
in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and
Current and deferred tax is recognized in profit or loss, except when it relates to items that are recognized in other
comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other
comprehensive income or directly in equity respectively.
Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in
the accounting for the business combination.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose
primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as
deferred income in the consolidated statement of financial position and transferred to profit or loss on a systematic and
rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving
immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which
they become receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the
difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
Retirement benefit costs
Payments to state-managed retirement benefit scheme are recognized as an expense when employees have rendered
service entitling them to the contributions.
Cash and cash equivalents
Cash and cash equivalents comprise cash at banks and on hand, and short-term deposits with an original maturity of three
months or less, which are readily convertible into a known amount of cash.
Prepaid lease payments
Prepaid lease payments representing land use rights in the PRC are stated at cost and amortized on a straight-line basis
over the lease terms. Prepaid lease payments which are to be amortized in the next twelve months or less are classified as
current assets.
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on weighted
average cost method. Net realisable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
Gold in process inventory
Gold in process inventory consists of gold contained in the ore on leach pads and in-circuit material within processing
operations. Gold doré bar is gold awaiting refinement and gold refined and ready for sales.
Production costs are capitalized and included in gold in process inventory based on the current mining and processing
cost incurred up to the point prior to the refining process including the cost of raw materials and direct labour; mine-site
overhead expenses; stripping costs; and allocated indirect costs, including depreciation and depletion of mining interests.
Gold doré bars inventory
The recovery of gold from ore is achieved through a heap leaching process. Under this method, ore is placed on leach
pads where it is treated with a chemical solution which dissolves the gold contained in the ore. The resulting "pregnant"
solution is further processed in a plant where the gold is recovered. Costs are subsequently recycled from ore on leach
pads as ounces of gold are recovered based on the average cost per recoverable ounce on the leach pad. Estimates
of recoverable gold on the leach pads are calculated from the quantities of ore placed on the leach pads (measured in
tonnes added to the leach pads), the grade of the ore placed on the leach pads (based on assay data), and a recovery
percentage (based on ore type).
Copper inventory is copper concentrate after metallurgical processing and ready for sales.
Consumables used in operations, such as fuel, chemicals, and reagents and spare parts inventory are valued at the lower
of cost or net realisable value.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Property, plant and equipment
General
impairment charges.
Property, plant and equipment are recorded at cost less accumulated depreciation, depletion and
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal
or retirement of an item of property, plant and equipment is determined as the difference between the
sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
Expenditures incurred to replace a component of an item of property, plant and equipment that is
accounted for separately, including major inspection and overhaul expenditures, are capitalized and the
carrying amount of the component being replaced is derecognized. Directly attributable costs incurred
for major capital projects and site preparation are capitalized until the asset is brought to a working
condition for its intended use. These costs include dismantling and site restoration costs to the extent
these are recognized as a provision.
The Management of the Group (the "Management") reviews the estimated useful lives, residual values
and depreciation methods of the Group's property, plant and equipment at the end of each reporting
period and when events and circumstances indicate that such a review should be made. Changes to
estimated useful lives, residual values or depreciation methods resulting from such review are accounted
All direct costs related to the acquisition of mineral assets are capitalized, at their cost at the date of
for prospectively.
acquisition.
Exploration and evaluation expenditure
Drilling and related costs incurred on sites without an existing mine and on areas outside the boundary of
a known mineral deposit which contains proven and probable reserves are exploration and evaluation
expenditure and are expensed as incurred up to the date on which costs incurred are economically
recoverable. Further exploration and evaluation expenditures, subsequent to the establishment of
economic recoverability, are capitalized and included in the carrying amount of the mineral assets.
86
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on weighted
average cost method. Net realisable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
Gold in process inventory
Gold in process inventory consists of gold contained in the ore on leach pads and in-circuit material within processing
operations. Gold doré bar is gold awaiting refinement and gold refined and ready for sales.
Production costs are capitalized and included in gold in process inventory based on the current mining and processing
cost incurred up to the point prior to the refining process including the cost of raw materials and direct labour; mine-site
overhead expenses; stripping costs; and allocated indirect costs, including depreciation and depletion of mining interests.
Gold doré bars inventory
The recovery of gold from ore is achieved through a heap leaching process. Under this method, ore is placed on leach
pads where it is treated with a chemical solution which dissolves the gold contained in the ore. The resulting "pregnant"
solution is further processed in a plant where the gold is recovered. Costs are subsequently recycled from ore on leach
pads as ounces of gold are recovered based on the average cost per recoverable ounce on the leach pad. Estimates
of recoverable gold on the leach pads are calculated from the quantities of ore placed on the leach pads (measured in
tonnes added to the leach pads), the grade of the ore placed on the leach pads (based on assay data), and a recovery
percentage (based on ore type).
Copper inventory is copper concentrate after metallurgical processing and ready for sales.
Consumables used in operations, such as fuel, chemicals, and reagents and spare parts inventory are valued at the lower
of cost or net realisable value.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Property, plant and equipment
General
Property, plant and equipment are recorded at cost less accumulated depreciation, depletion and
impairment charges.
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal
or retirement of an item of property, plant and equipment is determined as the difference between the
sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
Expenditures incurred to replace a component of an item of property, plant and equipment that is
accounted for separately, including major inspection and overhaul expenditures, are capitalized and the
carrying amount of the component being replaced is derecognized. Directly attributable costs incurred
for major capital projects and site preparation are capitalized until the asset is brought to a working
condition for its intended use. These costs include dismantling and site restoration costs to the extent
these are recognized as a provision.
The Management of the Group (the "Management") reviews the estimated useful lives, residual values
and depreciation methods of the Group's property, plant and equipment at the end of each reporting
period and when events and circumstances indicate that such a review should be made. Changes to
estimated useful lives, residual values or depreciation methods resulting from such review are accounted
for prospectively.
All direct costs related to the acquisition of mineral assets are capitalized, at their cost at the date of
acquisition.
Exploration and evaluation expenditure
Drilling and related costs incurred on sites without an existing mine and on areas outside the boundary of
a known mineral deposit which contains proven and probable reserves are exploration and evaluation
expenditure and are expensed as incurred up to the date on which costs incurred are economically
recoverable. Further exploration and evaluation expenditures, subsequent to the establishment of
economic recoverability, are capitalized and included in the carrying amount of the mineral assets.
86
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Property, plant and equipment - continued
Exploration and evaluation expenditure - continued
Management evaluates the following criteria in its assessment of economic recoverability and probability of future
economic benefit:
Geology - whether or not there is sufficient geologic and economic certainty of being able to convert a residual
mineral deposit into a proven and probable reserve at a development stage or production stage mine, based on the
known geology and metallurgy. A history of conversion of resources to reserves at operating mines to support the
likelihood of conversion.
Scoping - there is a scoping study or preliminary feasibility study that demonstrates the additional resources will
generate a positive commercial outcome. Known metallurgy provides a basis for concluding there is a significant
likelihood of being able to recoup the incremental costs of extraction and production.
Accessible facilities - mining property can be processed economically at accessible mining and processing facilities
where applicable.
Life of mine plans - an overall life of mine plan and economic model to support the mine and the economic extraction
of resources/reserves exists. A long-term life of mine plan, and supporting geological model identifies the drilling and
related development work required to expand or further define the existing orebody.
Authorisations - operating permits and feasible environmental programs exist or are obtainable.
Therefore prior to capitalising exploration drilling and related costs, Management determines that the following conditions
have been met that will contribute to future cash flows:
There is a probable future benefit that will contribute to future cash inflows;
The Group can obtain the benefit and controls access to it;
The transaction or event giving rise to the future benefit has already occurred; and
Assets under construction are not depreciated until they are substantially complete and available for their
Costs incurred can be measured reliably.
88
89
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Property, plant and equipment - continued
Development expenditure
Drilling and related costs incurred to define and delineate a mineral deposit are capitalized as part of
mineral assets in the period incurred, when Management determines that there is sufficient evidence that
the expenditure will result in a probable future economic benefit to the Group.
Production expenditure
Capitalization of costs incurred ceases when the related mining property has reached the condition
necessary for it to be capable of operating in the manner intended by Management, therefore, such costs
incurred are capitalized as part of the mineral assets and the proceeds from sales prior to commissioning
are offset against costs capitalized.
Mine development costs incurred to maintain current production are included in cost of inventories. For
those areas being developed which will be mined in future periods, the costs incurred are capitalized and
depleted when the related mining area is mined.
Depreciation
Mineral assets are depreciated using the unit-of-production method based on the actual production
volume over the estimated total recoverable ounces contained in proven and probable reserves at the
related mine when the production level achieved designed production volume intended by Management.
Management reviews the estimated total recoverable ounces contained in proven and probable reserves
at the end of each reporting period and when events and circumstances indicate that such a review
should be made. Changes to estimated total recoverable ounces contained in proven and probable
reserves are accounted for prospectively.
intended use.
of the assets.
Leasehold improvements are depreciated over the shorter of the lease term and the estimated useful lives
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Property, plant and equipment - continued
Exploration and evaluation expenditure - continued
Management evaluates the following criteria in its assessment of economic recoverability and probability of future
economic benefit:
Geology - whether or not there is sufficient geologic and economic certainty of being able to convert a residual
mineral deposit into a proven and probable reserve at a development stage or production stage mine, based on the
known geology and metallurgy. A history of conversion of resources to reserves at operating mines to support the
likelihood of conversion.
Scoping - there is a scoping study or preliminary feasibility study that demonstrates the additional resources will
generate a positive commercial outcome. Known metallurgy provides a basis for concluding there is a significant
likelihood of being able to recoup the incremental costs of extraction and production.
Accessible facilities - mining property can be processed economically at accessible mining and processing facilities
where applicable.
Life of mine plans - an overall life of mine plan and economic model to support the mine and the economic extraction
of resources/reserves exists. A long-term life of mine plan, and supporting geological model identifies the drilling and
related development work required to expand or further define the existing orebody.
Authorisations - operating permits and feasible environmental programs exist or are obtainable.
Therefore prior to capitalising exploration drilling and related costs, Management determines that the following conditions
have been met that will contribute to future cash flows:
There is a probable future benefit that will contribute to future cash inflows;
The Group can obtain the benefit and controls access to it;
The transaction or event giving rise to the future benefit has already occurred; and
Costs incurred can be measured reliably.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Property, plant and equipment - continued
Development expenditure
Drilling and related costs incurred to define and delineate a mineral deposit are capitalized as part of
mineral assets in the period incurred, when Management determines that there is sufficient evidence that
the expenditure will result in a probable future economic benefit to the Group.
Production expenditure
Capitalization of costs incurred ceases when the related mining property has reached the condition
necessary for it to be capable of operating in the manner intended by Management, therefore, such costs
incurred are capitalized as part of the mineral assets and the proceeds from sales prior to commissioning
are offset against costs capitalized.
Mine development costs incurred to maintain current production are included in cost of inventories. For
those areas being developed which will be mined in future periods, the costs incurred are capitalized and
depleted when the related mining area is mined.
Depreciation
Mineral assets are depreciated using the unit-of-production method based on the actual production
volume over the estimated total recoverable ounces contained in proven and probable reserves at the
related mine when the production level achieved designed production volume intended by Management.
Management reviews the estimated total recoverable ounces contained in proven and probable reserves
at the end of each reporting period and when events and circumstances indicate that such a review
should be made. Changes to estimated total recoverable ounces contained in proven and probable
reserves are accounted for prospectively.
Assets under construction are not depreciated until they are substantially complete and available for their
intended use.
Leasehold improvements are depreciated over the shorter of the lease term and the estimated useful lives
of the assets.
88
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Mining rights
Mining rights are depreciated using the unit-of-production method based on the actual production volume over the
estimated total recoverable ounces contained in proven and probable reserves at the related mine.
Mining rights acquired in a business combination
Mining rights acquired in a business combination are recognized separately from goodwill and are initially recognized
at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, mining rights with finite useful lives are carried at costs less accumulated amortization
and any accumulated impairment losses. Amortization is provided using the unit of production method based on the
actual production volume over the estimated total proven and probable reserves of the ore mines.
Impairment of tangible assets and mining rights
At the end of the reporting period, the Group reviews the carrying amounts of its tangible assets and mining rights to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.
When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be
identified.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. In allocating the
impairment loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if applicable)
and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit. The carrying
amount of an asset is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in
use (if determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to the
asset is allocated pro rata to the other assets of the unit. An impairment loss is recognized immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset
(or a cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
90
91
ANNUAL REPORT 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial instruments
Financial assets and financial liabilities are recognized in the consolidated statement of financial
position when a group entity becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from
the fair value of financial assets or financial liabilities, as appropriate, on initial recognition.
Financial assets are classified as available-for-sale ("AFS") financial assets and loans and receivables.
The classification depends on the nature and purpose of the financial assets and is determined at the
Financial assets
time of initial recognition.
Effective interest method
recognition.
Loans and receivables
The effective interest method is a method calculating the amortized cost of a debt instrument and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and other premiums or discounts) through
the life of debt instrument or, where appropriate, a shorter period to the net carrying amount on initial
Interest income is recognized on an effective interest basis for debt instruments.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for those with maturities
greater than twelve months or those that are expected to be settled after twelve months from the end
of the reporting period, which are classified as non-current assets. Assets in this category include "cash
and cash equivalents", "restricted bank balance" and "trade and other receivables".
Loans and receivables are initially recognized at fair value plus transaction costs and subsequently
carried at amortized cost using the effective interest method, except for short-term receivables when
the recognition of interest would be immaterial.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Mining rights
Mining rights are depreciated using the unit-of-production method based on the actual production volume over the
estimated total recoverable ounces contained in proven and probable reserves at the related mine.
Mining rights acquired in a business combination
Mining rights acquired in a business combination are recognized separately from goodwill and are initially recognized
at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, mining rights with finite useful lives are carried at costs less accumulated amortization
and any accumulated impairment losses. Amortization is provided using the unit of production method based on the
actual production volume over the estimated total proven and probable reserves of the ore mines.
Impairment of tangible assets and mining rights
At the end of the reporting period, the Group reviews the carrying amounts of its tangible assets and mining rights to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.
When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be
identified.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. In allocating the
impairment loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if applicable)
and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit. The carrying
amount of an asset is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in
use (if determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to the
asset is allocated pro rata to the other assets of the unit. An impairment loss is recognized immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset
(or a cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial instruments
Financial assets and financial liabilities are recognized in the consolidated statement of financial
position when a group entity becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from
the fair value of financial assets or financial liabilities, as appropriate, on initial recognition.
Financial assets
Financial assets are classified as available-for-sale ("AFS") financial assets and loans and receivables.
The classification depends on the nature and purpose of the financial assets and is determined at the
time of initial recognition.
Effective interest method
The effective interest method is a method calculating the amortized cost of a debt instrument and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and other premiums or discounts) through
the life of debt instrument or, where appropriate, a shorter period to the net carrying amount on initial
recognition.
Interest income is recognized on an effective interest basis for debt instruments.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for those with maturities
greater than twelve months or those that are expected to be settled after twelve months from the end
of the reporting period, which are classified as non-current assets. Assets in this category include "cash
and cash equivalents", "restricted bank balance" and "trade and other receivables".
Loans and receivables are initially recognized at fair value plus transaction costs and subsequently
carried at amortized cost using the effective interest method, except for short-term receivables when
the recognition of interest would be immaterial.
90
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial assets - continued
AFS financial assets
AFS financial assets are non-derivatives that are either designated as available-for-sale or are not classified as (a) loans and
receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss. Equity securities held
by the Group that are classified as AFS financial assets and are traded in an active market are measured at fair value at
the end of each reporting period. Changes in the carrying amount of AFS monetary financial assets relating to changes in
foreign exchange rates are recognized in profit or loss. Dividends on AFS equity investments are recognized in profit or loss
when the Group’s right to receive the dividends is established. Other changes in the carrying amount of AFS financial assets
are recognized in other comprehensive income and accumulated under the heading of investment revaluation reserve.
When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in
the investment revaluation reserve is reclassified to profit or loss (see the accounting policy in respect of impairment loss on
financial assets below).
AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably
measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are
measured at cost less any identified impairment losses at the end of each reporting period (see the accounting policy in
respect of impairment loss on financial assets below).
Impairment of financial assets
Financial assets are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered
recoveries of amounts previously written off are credited to profit or loss.
to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.
For AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to
recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the
be objective evidence of impairment.
For loans and receivables, objective evidence of impairment could include:
significant financial difficulty of the issuer or counterparty; or
breach of contract, such as a default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial reorganisation.
92
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial assets - continued
Impairment of financial assets - continued
For certain categorises of financial assets, such as trade receivables (included in trade and other receivable),
are assessed for impairment on an individual basis. Objective evidence of impairment for the receivables could
include the Group's past experience of collecting payments, an increase in the number of delayed payments
past the average credit period of 180 days, observable changes in national or local economic conditions that
correlate with default on receivables.
For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference
between the asset's carrying amount and the present value of the estimated future cash flows, discounted at the
financial asset's original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between
the asset's carrying amount and the present value of the estimated future cash flows discounted at the current
market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods
(see accounting policy below).
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with
the exception of trade receivables, where the carrying amount is reduced through the use of an allowance
account. Changes in the carrying amount of the allowance account are recognized in profit or loss. When
a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent
For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment losses were
carrying amount of the asset at the date the impairment is reversed does not exceed what the amortized cost
would have been had the impairment not been recognized.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognized in
other comprehensive income are reclassified to profit or loss in the period in which the impairment takes place.
In respect of AFS equity investments, impairment losses previously recognized in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other
comprehensive income and accumulated under the heading of investment revaluation reserve.
Derecognition of financial assets
Financial assets are derecognized when the rights to receive cash flows from the assets expire On derecognition
of a financial asset, the difference between the asset's carrying amount and the sum of the consideration
received and receivable and the cumulated gain or loss that had been recognized in other comprehensive
income and accumulated in equity in recognized in profit or loss.
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial assets - continued
Impairment of financial assets - continued
For certain categorises of financial assets, such as trade receivables (included in trade and other receivable),
are assessed for impairment on an individual basis. Objective evidence of impairment for the receivables could
include the Group's past experience of collecting payments, an increase in the number of delayed payments
past the average credit period of 180 days, observable changes in national or local economic conditions that
correlate with default on receivables.
For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference
between the asset's carrying amount and the present value of the estimated future cash flows, discounted at the
financial asset's original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between
the asset's carrying amount and the present value of the estimated future cash flows discounted at the current
market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods
(see accounting policy below).
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with
the exception of trade receivables, where the carrying amount is reduced through the use of an allowance
account. Changes in the carrying amount of the allowance account are recognized in profit or loss. When
a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent
Financial assets are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered
recoveries of amounts previously written off are credited to profit or loss.
For AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to
recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the
For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment losses were
carrying amount of the asset at the date the impairment is reversed does not exceed what the amortized cost
would have been had the impairment not been recognized.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognized in
other comprehensive income are reclassified to profit or loss in the period in which the impairment takes place.
In respect of AFS equity investments, impairment losses previously recognized in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other
comprehensive income and accumulated under the heading of investment revaluation reserve.
Derecognition of financial assets
Financial assets are derecognized when the rights to receive cash flows from the assets expire On derecognition
of a financial asset, the difference between the asset's carrying amount and the sum of the consideration
received and receivable and the cumulated gain or loss that had been recognized in other comprehensive
income and accumulated in equity in recognized in profit or loss.
93
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial assets - continued
AFS financial assets
AFS financial assets are non-derivatives that are either designated as available-for-sale or are not classified as (a) loans and
receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss. Equity securities held
by the Group that are classified as AFS financial assets and are traded in an active market are measured at fair value at
the end of each reporting period. Changes in the carrying amount of AFS monetary financial assets relating to changes in
foreign exchange rates are recognized in profit or loss. Dividends on AFS equity investments are recognized in profit or loss
when the Group’s right to receive the dividends is established. Other changes in the carrying amount of AFS financial assets
are recognized in other comprehensive income and accumulated under the heading of investment revaluation reserve.
When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in
the investment revaluation reserve is reclassified to profit or loss (see the accounting policy in respect of impairment loss on
financial assets below).
AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably
measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are
measured at cost less any identified impairment losses at the end of each reporting period (see the accounting policy in
respect of impairment loss on financial assets below).
Impairment of financial assets
to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.
be objective evidence of impairment.
For loans and receivables, objective evidence of impairment could include:
significant financial difficulty of the issuer or counterparty; or
breach of contract, such as a default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial reorganisation.
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
3. SIGNIFICANT ACCOUNTING POLICIES - continued
ANNUAL REPORT 2016
Financial liabilities and equity instruments
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of a
financial liability and an equity instrument.
Equity instrument
An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the
proceeds received, net of direct issue costs. Equity instruments issued in a business combination are
recorded at their fair value at the acquisition date.
Financial liabilities at amortized cost
Financial liabilities, including borrowings, entrusted loan payable, bills payable and accounts and
other payables are initially measured at fair value, net of transaction costs, and are subsequently
measured at amortized cost using the effective interest method.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a financial liability and
of allocating interest expenses over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments through the expected life of the financial liability,
or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest
expense is recognized on an effective interest basis.
Derecognition of financial liabilities
For financial liabilities, they are derecognized only when the Group's obligation specified in the
relevant contract is discharged, cancelled or have expired. The difference between the carrying
amount of the financial liability derecognized and the consideration paid and payable is recognized
in profit or loss.
Environmental rehabilitation
An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused
by the development or ongoing production of a mining property. Such costs arising from the decommissioning of plant and
other site preparation work, discounted to their net present value, are provided for and capitalized as part of the related
property, plant and equipment at the start of each project, as soon as the obligation to incur such costs arises. These costs
are recognized in profit or loss over the life of the operation, through depreciation of the asset. Costs for restoration of
subsequent site damage which is created on an ongoing basis during production are recognized in profit or loss.
Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work that
result from changes in the estimated timing or amount of the cash flow, including the effects of inflation and movements in
foreign exchange rates, revisions to estimated reserves, resources and lives of operations, or a change in the discount rate,
are added to, or deducted from, the cost of the related asset in the period it occurred. The periodic unwinding of discount
is recognized in profit or loss as a finance cost as it occurs. If a decrease in the liability exceeds the carrying amount of the
asset, the excess is recognized immediately in profit or loss. If the asset value is increased and there is an indication that
the revised carrying value is not recoverable, an impairment test is performed in accordance with the Group's accounting
policy.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Leasehold land and building
When a lease includes both land and building elements, the Group assesses the classification of each element as a finance
or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to
ownership of each element have been transferred to the Group, unless it is clear that both elements are operating leases
in which case the entire lease is classified as an operating lease. Specifically, the minimum lease payments (including any
lump-sum upfront payments) are allocated between the land and the building elements in proportion to the relative fair
values of the leasehold interests in the land element and building element of the lease at the inception of the lease.
To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for
as an operating lease is presented as "prepaid lease payments" in the consolidated statement of financial position and is
amortized over the lease term on a straight-line basis.
94
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
3. SIGNIFICANT ACCOUNTING POLICIES - continued
3. SIGNIFICANT ACCOUNTING POLICIES - continued
ANNUAL REPORT 2016
Financial liabilities and equity instruments
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of a
financial liability and an equity instrument.
Equity instrument
An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the
proceeds received, net of direct issue costs. Equity instruments issued in a business combination are
recorded at their fair value at the acquisition date.
Financial liabilities at amortized cost
Financial liabilities, including borrowings, entrusted loan payable, bills payable and accounts and
other payables are initially measured at fair value, net of transaction costs, and are subsequently
measured at amortized cost using the effective interest method.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a financial liability and
of allocating interest expenses over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments through the expected life of the financial liability,
or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest
expense is recognized on an effective interest basis.
Derecognition of financial liabilities
For financial liabilities, they are derecognized only when the Group's obligation specified in the
relevant contract is discharged, cancelled or have expired. The difference between the carrying
amount of the financial liability derecognized and the consideration paid and payable is recognized
in profit or loss.
Environmental rehabilitation
An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused
by the development or ongoing production of a mining property. Such costs arising from the decommissioning of plant and
other site preparation work, discounted to their net present value, are provided for and capitalized as part of the related
property, plant and equipment at the start of each project, as soon as the obligation to incur such costs arises. These costs
are recognized in profit or loss over the life of the operation, through depreciation of the asset. Costs for restoration of
subsequent site damage which is created on an ongoing basis during production are recognized in profit or loss.
Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work that
result from changes in the estimated timing or amount of the cash flow, including the effects of inflation and movements in
foreign exchange rates, revisions to estimated reserves, resources and lives of operations, or a change in the discount rate,
are added to, or deducted from, the cost of the related asset in the period it occurred. The periodic unwinding of discount
is recognized in profit or loss as a finance cost as it occurs. If a decrease in the liability exceeds the carrying amount of the
asset, the excess is recognized immediately in profit or loss. If the asset value is increased and there is an indication that
the revised carrying value is not recoverable, an impairment test is performed in accordance with the Group's accounting
policy.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Leasehold land and building
When a lease includes both land and building elements, the Group assesses the classification of each element as a finance
or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to
ownership of each element have been transferred to the Group, unless it is clear that both elements are operating leases
in which case the entire lease is classified as an operating lease. Specifically, the minimum lease payments (including any
lump-sum upfront payments) are allocated between the land and the building elements in proportion to the relative fair
values of the leasehold interests in the land element and building element of the lease at the inception of the lease.
To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for
as an operating lease is presented as "prepaid lease payments" in the consolidated statement of financial position and is
amortized over the lease term on a straight-line basis.
94
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
4. KEY SOURCES OF ESTIMATION UNCERTAINTY
4. KEY SOURCES OF ESTIMATION UNCERTAINTY- continued
FOR THE YEAR ENDED DECEMBER 31, 2016
In the application of the Group’s accounting policies, which are described in note 3, the Group are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
(a) Impairment of mining rights and property, plant and equipment- continued
The carrying amounts of property, plant and equipment and mining rights as at December 31, 2016 are disclosed in notes 20
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
and 21, respectively.
considered to be relevant. Actual results may differ from these estimates.
ANNUAL REPORT 2016
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized
in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the
reporting period, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year.
(a) Impairment of mining rights and property, plant and equipment
While assessing whether any indications of impairment exist for mining rights and property, plant and equipment, consideration is given to
both external and internal sources of information. Information the Group considers includes changes in the market, economic and legal
environment in which the Group operates that are not within its control and affect the recoverable amounts of the mining rights and
property, plant and equipment. Internal sources of information includes the manner in which the mining rights and property, plant and
equipment are being used or are expected to be used and indications of economic performance of the assets and operating results. The
carrying amounts of mining rights and property, plant and equipment are reviewed for impairment in accordance with IAS 36 Impairment of
Assets whenever certain events or changes in circumstances indicate that the carrying amount may not be recoverable. As at December
31, 2016, the market capitalization of the Company was below the carrying value of its net assets of approximately US$1,420 million. This
may indicate the need for a write-down of the carrying amounts of the Group’s mining rights and property, plant and equipment.The
Group’s two cash-generating units (“CGUs”) for impairment assessment of mining rights and related property, plant and equipment are two
significant mine sites which are principal producing gold and copper mines.
When an impairment review is undertaken, recoverable amount is assessed by reference to the higher of 1) value in use and 2) fair value
less costs to disposal (“FVLCD”). The best evidence of FVLCD is the value obtained from an active market or binding sale agreement.
Where neither exists, FVLCD is based on the best information available to reflect the amount the Group could receive for the CGU in an
arm’s length transaction. This is often estimated using discounted cash flow techniques. In determining the recoverable amounts of the
Group’s mining rights and property, plant and equipment, the Group estimates the recoverable amount based on FVLCD and makes
estimates of the discounted future pre-tax cash flows expected to be derived from the Group’s CGUs, costs to sell the mining properties
and the appropriate discount rate. The key assumptions used in estimating the projected cash flows are metal selling price, recoverable
reserves, resources, and exploration potential, production cost estimates, future operating costs, discount rates and exchange rates.
Reductions in metal price forecasts, increases in estimated future costs of production, increases in estimated future operating costs,
reductions in the amount of recoverable reserves, resources, and exploration potential, and/or change in economic conditions can result in
a write-down of the carrying amounts of the Group’s mining rights and property, plant and equipment.
The Group uses its internal experts to perform the valuation for the purpose of impairment assessment with the assistance from third party
qualified valuers. The management works closely with internal experts and qualified external valuers to establish the appropriate valuation
techniques and inputs to the model, that are not based on observable market data to estimate the FVLCD for the mining rights and
property, plant and equipment.
96
During the years ended December 31, 2016 and 2015, no impairment loss was recognized for the property, plant and
equipment in the Group’s gold producing mine and the mining rights and property, plant and equipment in the Group’s
copper producing mine as the recoverable amounts were higher than their respective carrying amounts.
(b) Inventories
The Group records the cost of gold mining ore placed on its leach pads and in process at its mine as gold in process
inventory, and values gold in process inventory at the lower of cost and estimated net realisable value. The assumptions
used in the valuation of gold in process inventories include estimates of gold contained in the ore placed on leach pads,
assumptions of the amount of gold that is expected to be recovered from the ore placed on leach pads, and the amount
of gold in the processing plant and an assumption of the gold price expected to be realized when the gold is recovered. If
these estimates or assumptions prove inaccurate, the Group could be required to write down the recorded value of its gold
in process inventories. During the year, there is no change in the relevant estimation.
Although the quantities of recoverable gold placed on the leach pad and the processing plant are reconciled by
comparing the grades of ore placed on the leach pad to the quantities actually recovered, the nature of the leaching
process inherently limits the ability to precisely monitor inventory levels. The actual recovery of gold from the leach pad is
not known until the leaching process has concluded at the end of the mine life.
Management periodically reassesses the assumptions used in the valuation of gold in process and the costing of production
of gold doré bars, particularly the assumptions of the amount of gold that is expected to be recovered from the ore placed
on leach pads (the “Estimated Recovery Rate”). As a result of such reassessments, an increase/decrease in the Estimated
Recovery Rate led to a decrease/increase in the average production cost of gold doré bars. During the year, there is no
change in the relevant estimation.
The carrying amount of gold in process and gold doré bars as at December 31, 2016 is disclosed in note 18.
5.REVENUE AND SEGMENT INFORMATION
IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the chief
operating decision-maker (“CODM”) to allocate resources to the segments and to assess their performance.
The chief operating decision-maker, which is responsible for allocating resources and assessing performance of the
operating segments, has been defined as the executive directors of the Company. The chief operating decision-maker has
identified two operating and reportable segments as follows:
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
4. KEY SOURCES OF ESTIMATION UNCERTAINTY
4. KEY SOURCES OF ESTIMATION UNCERTAINTY- continued
FOR THE YEAR ENDED DECEMBER 31, 2016
In the application of the Group’s accounting policies, which are described in note 3, the Group are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
(a) Impairment of mining rights and property, plant and equipment- continued
The carrying amounts of property, plant and equipment and mining rights as at December 31, 2016 are disclosed in notes 20
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
and 21, respectively.
considered to be relevant. Actual results may differ from these estimates.
ANNUAL REPORT 2016
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized
in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the
reporting period, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year.
(a) Impairment of mining rights and property, plant and equipment
While assessing whether any indications of impairment exist for mining rights and property, plant and equipment, consideration is given to
both external and internal sources of information. Information the Group considers includes changes in the market, economic and legal
environment in which the Group operates that are not within its control and affect the recoverable amounts of the mining rights and
property, plant and equipment. Internal sources of information includes the manner in which the mining rights and property, plant and
equipment are being used or are expected to be used and indications of economic performance of the assets and operating results. The
carrying amounts of mining rights and property, plant and equipment are reviewed for impairment in accordance with IAS 36 Impairment of
Assets whenever certain events or changes in circumstances indicate that the carrying amount may not be recoverable. As at December
31, 2016, the market capitalization of the Company was below the carrying value of its net assets of approximately US$1,420 million. This
may indicate the need for a write-down of the carrying amounts of the Group’s mining rights and property, plant and equipment.The
Group’s two cash-generating units (“CGUs”) for impairment assessment of mining rights and related property, plant and equipment are two
significant mine sites which are principal producing gold and copper mines.
When an impairment review is undertaken, recoverable amount is assessed by reference to the higher of 1) value in use and 2) fair value
less costs to disposal (“FVLCD”). The best evidence of FVLCD is the value obtained from an active market or binding sale agreement.
Where neither exists, FVLCD is based on the best information available to reflect the amount the Group could receive for the CGU in an
arm’s length transaction. This is often estimated using discounted cash flow techniques. In determining the recoverable amounts of the
Group’s mining rights and property, plant and equipment, the Group estimates the recoverable amount based on FVLCD and makes
estimates of the discounted future pre-tax cash flows expected to be derived from the Group’s CGUs, costs to sell the mining properties
and the appropriate discount rate. The key assumptions used in estimating the projected cash flows are metal selling price, recoverable
reserves, resources, and exploration potential, production cost estimates, future operating costs, discount rates and exchange rates.
Reductions in metal price forecasts, increases in estimated future costs of production, increases in estimated future operating costs,
reductions in the amount of recoverable reserves, resources, and exploration potential, and/or change in economic conditions can result in
a write-down of the carrying amounts of the Group’s mining rights and property, plant and equipment.
The Group uses its internal experts to perform the valuation for the purpose of impairment assessment with the assistance from third party
qualified valuers. The management works closely with internal experts and qualified external valuers to establish the appropriate valuation
techniques and inputs to the model, that are not based on observable market data to estimate the FVLCD for the mining rights and
property, plant and equipment.
96
During the years ended December 31, 2016 and 2015, no impairment loss was recognized for the property, plant and
equipment in the Group’s gold producing mine and the mining rights and property, plant and equipment in the Group’s
copper producing mine as the recoverable amounts were higher than their respective carrying amounts.
(b) Inventories
The Group records the cost of gold mining ore placed on its leach pads and in process at its mine as gold in process
inventory, and values gold in process inventory at the lower of cost and estimated net realisable value. The assumptions
used in the valuation of gold in process inventories include estimates of gold contained in the ore placed on leach pads,
assumptions of the amount of gold that is expected to be recovered from the ore placed on leach pads, and the amount
of gold in the processing plant and an assumption of the gold price expected to be realized when the gold is recovered. If
these estimates or assumptions prove inaccurate, the Group could be required to write down the recorded value of its gold
in process inventories. During the year, there is no change in the relevant estimation.
Although the quantities of recoverable gold placed on the leach pad and the processing plant are reconciled by
comparing the grades of ore placed on the leach pad to the quantities actually recovered, the nature of the leaching
process inherently limits the ability to precisely monitor inventory levels. The actual recovery of gold from the leach pad is
not known until the leaching process has concluded at the end of the mine life.
Management periodically reassesses the assumptions used in the valuation of gold in process and the costing of production
of gold doré bars, particularly the assumptions of the amount of gold that is expected to be recovered from the ore placed
on leach pads (the “Estimated Recovery Rate”). As a result of such reassessments, an increase/decrease in the Estimated
Recovery Rate led to a decrease/increase in the average production cost of gold doré bars. During the year, there is no
change in the relevant estimation.
The carrying amount of gold in process and gold doré bars as at December 31, 2016 is disclosed in note 18.
5.REVENUE AND SEGMENT INFORMATION
IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the chief
operating decision-maker (“CODM”) to allocate resources to the segments and to assess their performance.
The chief operating decision-maker, which is responsible for allocating resources and assessing performance of the
operating segments, has been defined as the executive directors of the Company. The chief operating decision-maker has
identified two operating and reportable segments as follows:
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
5. REVENUE AND SEGMENT INFORMATION- continued
(i)
The mine-produced gold segment - the production of gold bullion through the Group's integrated processes, i.e., mining,
metallurgical processing, production and selling of gold doré bars to external clients.
(ii)
The mine-produced copper segment - the production of copper concentrate and other by-products through the Group's
integrated separation, i.e., mining, metallurgical processing, production and selling copper concentrate and other by-
products to external clients.
Information regarding the above segments is reported below.
(a) Segment revenues and results
The following is an analysis of the Group's revenues and results by reportable and operating segment:
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
5. REVENUE AND SEGMENT INFORMATION- continued
(a)Segment revenues and results - continued
The accounting policies of the operating segments are the same as the Group’s accounting policies described in note
3. Segment result represents profit (loss) before income tax attributable to the respective segment. This is the measure
reported to the CODM for the purposes of resource allocation and performance assessment.
There are no inter-segment sales for the years ended December 31, 2016 and 2015.
For the year ended December 31, 2016
(b)Segment assets and liabilities
US$’000
US$’000
US$’000
US$’000
US$’000
attributable to respective segment:
The following is an analysis of the Group’s assets and liabilities by segment representing assets/liabilities directly
Revenue - external and segment revenue
Cost of sales
Mining operating earnings
Income (expenses) from operations
Foreign exchange gain (loss), net (Note)
Interest and other (expense) income
Finance costs
Impairment loss on available-for-sale investment
227,580
111,021
338,601
(193,797)
(88,602)
(282,399)
33,783
33,405
6,036
(2,948)
(3,667)
-
22,419
7,177
56,202
40,582
(22,322)
(16,286)
980
(4,401)
-
(1,968)
(8,068)
-
Profit (loss) before income tax
32,826
(18,566)
14,260
-
-
-
(6,199)
(143)
10,831
(8,505)
(3,831)
(7,847)
338,601
(282,399)
56,202
34,383
(16,429)
8,863
(16,573)
(3,831)
6,413
For the year ended December 31, 2015
Revenue - external and segment revenue
Cost of sales
Mining operating earnings
Income (expenses) from operations
Foreign exchange gain (loss), net (Note)
Interest and other (expense) income
Finance costs
Impairment loss on available-for-sale investment
Profit (loss) before income tax
Note:
US$’000
US$’000
US$’000
US$’000
US$’000
233,799
106,150
339,949
(185,052)
(92,051)
(277,103)
48,747
48,444
4,808
(2,013)
(4,778)
-
14,099
(2,827)
(17,197)
5,169
(6,448)
-
62,846
45,617
(12,389)
3,156
(11,226)
-
46,461
(21,303)
25,158
-
-
-
(6,902)
(1,148)
9,400
(10,181)
(4,720)
(13,551)
339,949
(277,103)
62,846
38,715
(13,537)
12,556
(21,407)
(4,720)
11,607
Due to the depreciation of RMB against US$, the Group incurred net exchange loss amounting to US$16,429,000 (2015: US$13,537,000) for
the year ended December 31, 2016, which was mainly from the translation of US$ denominated intra-group borrowing of Tibet Huatailong
Mining Development Co. Ltd. ("Huatailong") from Skyland Mining (BVI) Limited to RMB, the functional currency of Huatailong, for the Jiama
Mine development in mine-produced copper segment.
98
As of December 31, 2016
Total assets
Total liabilities
Total assets
Total liabilities
As of December 31, 2015
US$’000
US$’000
US$’000
US$’000
US$’000
726,956
229,336
2,049,043
2,775,999
816,873
1,046,209
655,103
186,426
2,023,092
2,678,195
648,070
834,496
190,620
500,221
102,398
498,843
2,966,619
1,546,430
2,780,593
1,333,339
(c)Other segment information (included in the measure of segment profit or loss or
regularly provided to the chief operating decision maker)
For the year ended December 31, 2016
Additions of property,plant and equipment
D e p r e c i a t i o n o f p r o p e r t y , p l a n t a n d
equipment
Amortization of mining rights
For the year ended December 31, 2015
Additions of property,plant and equipment
Depreciation of property,plant and equipment
Amortization of mining rights
US$’000
US$’000
US$’000
US$’000
US$’000
82,987
(65,086)
-
-
71,731
(57,370)
145,309
(12,600)
(4,814)
206,877
(13,086)
(5,264)
228,296
(77,686)
(4,814)
278,608
(70,456)
(5,264)
-
-
-
-
-
-
228,296
(77,686)
(4,814)
278,608
(70,456)
(5,264)
99
UnallocatedSegment totalMine-produced copperMine-produced goldConsolidatedUnallocatedSegment totalMine-produced copperMine-produced goldConsolidatedUnallocatedSegment totalMine-produced copperMine-produced goldConsolidatedUnallocatedSegment totalMine-produced copperMine-produced goldConsolidated ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
5. REVENUE AND SEGMENT INFORMATION- continued
(i)
The mine-produced gold segment - the production of gold bullion through the Group's integrated processes, i.e., mining,
metallurgical processing, production and selling of gold doré bars to external clients.
(ii)
The mine-produced copper segment - the production of copper concentrate and other by-products through the Group's
integrated separation, i.e., mining, metallurgical processing, production and selling copper concentrate and other by-
products to external clients.
Information regarding the above segments is reported below.
(a) Segment revenues and results
The following is an analysis of the Group's revenues and results by reportable and operating segment:
FOR THE YEAR ENDED DECEMBER 31, 2016
5. REVENUE AND SEGMENT INFORMATION- continued
(a)Segment revenues and results - continued
The accounting policies of the operating segments are the same as the Group’s accounting policies described in note
3. Segment result represents profit (loss) before income tax attributable to the respective segment. This is the measure
reported to the CODM for the purposes of resource allocation and performance assessment.
There are no inter-segment sales for the years ended December 31, 2016 and 2015.
For the year ended December 31, 2016
(b)Segment assets and liabilities
US$’000
US$’000
US$’000
US$’000
US$’000
attributable to respective segment:
The following is an analysis of the Group’s assets and liabilities by segment representing assets/liabilities directly
Revenue - external and segment revenue
Cost of sales
Mining operating earnings
Income (expenses) from operations
Foreign exchange gain (loss), net (Note)
Interest and other (expense) income
Finance costs
Impairment loss on available-for-sale investment
227,580
111,021
338,601
(193,797)
(88,602)
(282,399)
33,783
33,405
6,036
(2,948)
(3,667)
-
(22,322)
(16,286)
22,419
7,177
980
(4,401)
-
56,202
40,582
(1,968)
(8,068)
-
Profit (loss) before income tax
32,826
(18,566)
14,260
For the year ended December 31, 2015
US$’000
US$’000
US$’000
US$’000
US$’000
Revenue - external and segment revenue
Cost of sales
Mining operating earnings
Income (expenses) from operations
Foreign exchange gain (loss), net (Note)
Interest and other (expense) income
Finance costs
Impairment loss on available-for-sale investment
Profit (loss) before income tax
Note:
233,799
106,150
339,949
(185,052)
(92,051)
(277,103)
48,747
48,444
4,808
(2,013)
(4,778)
-
14,099
(2,827)
(17,197)
5,169
(6,448)
-
62,846
45,617
(12,389)
3,156
(11,226)
-
46,461
(21,303)
25,158
Due to the depreciation of RMB against US$, the Group incurred net exchange loss amounting to US$16,429,000 (2015: US$13,537,000) for
the year ended December 31, 2016, which was mainly from the translation of US$ denominated intra-group borrowing of Tibet Huatailong
Mining Development Co. Ltd. ("Huatailong") from Skyland Mining (BVI) Limited to RMB, the functional currency of Huatailong, for the Jiama
Mine development in mine-produced copper segment.
98
(6,199)
(143)
10,831
(8,505)
(3,831)
(7,847)
-
-
-
-
-
-
(6,902)
(1,148)
9,400
(10,181)
(4,720)
(13,551)
338,601
(282,399)
56,202
34,383
(16,429)
8,863
(16,573)
(3,831)
6,413
339,949
(277,103)
62,846
38,715
(13,537)
12,556
(21,407)
(4,720)
11,607
As of December 31, 2016
Total assets
Total liabilities
As of December 31, 2015
Total assets
Total liabilities
US$’000
US$’000
US$’000
US$’000
US$’000
726,956
229,336
2,049,043
2,775,999
816,873
1,046,209
655,103
186,426
2,023,092
2,678,195
648,070
834,496
190,620
500,221
102,398
498,843
2,966,619
1,546,430
2,780,593
1,333,339
(c)Other segment information (included in the measure of segment profit or loss or
regularly provided to the chief operating decision maker)
For the year ended December 31, 2016
Additions of property,plant and equipment
D e p r e c i a t i o n o f p r o p e r t y , p l a n t a n d
equipment
Amortization of mining rights
For the year ended December 31, 2015
Additions of property,plant and equipment
Depreciation of property,plant and equipment
Amortization of mining rights
US$’000
US$’000
US$’000
US$’000
US$’000
82,987
(65,086)
-
71,731
(57,370)
-
145,309
(12,600)
(4,814)
206,877
(13,086)
(5,264)
228,296
(77,686)
(4,814)
278,608
(70,456)
(5,264)
-
-
-
-
-
-
228,296
(77,686)
(4,814)
278,608
(70,456)
(5,264)
99
UnallocatedSegment totalMine-produced copperMine-produced goldConsolidatedUnallocatedSegment totalMine-produced copperMine-produced goldConsolidatedUnallocatedSegment totalMine-produced copperMine-produced goldConsolidatedUnallocatedSegment totalMine-produced copperMine-produced goldConsolidated NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
5.REVENUE AND SEGMENT INFORMATION- continued
(d) Geographical information
8. FINANCE COSTS
FOR THE YEAR ENDED DECEMBER 31, 2016
The Group operated in two geographical areas, Canada and the PRC. The Group’s corporate division located in
Canada only earns revenue that is considered incidental to the activities of the Group and therefore does not meet
the definition of an operating segment as defined in IFRS 8 Operating Segments. During the years ended December 31,
2016 and 2015, the Group’s revenue was generated from gold sales and copper multi-products to customers in the PRC.
Approximately 99% (2015: 99%) of non-current assets of the Group are located in the PRC.
Effective interests on borrowings:
- wholly repayable within 5 years
- wholly repayable over 5 years
Accretion on environmental rehabilitation (note 26)
(e) Information about major customers
Less: Amounts capitalized to property, plant and equipment
Revenue from major customers which accounts for 10% or more of the Group’s total revenue are sales of gold doré bars
and copper and other products to CNG and its subsidiaries as disclosed in note 28 (a) (i)
ANNUAL REPORT 2016
28,447
9,929
2,967
41,343
(24,770)
16,573
42,225
468
2,606
45,299
(23,892)
21,407
6.GENERAL AND ADMINISTRATIVE EXPENSES
Administration and office
Professional fees
Salaries and benefits
Depreciation of property, plant and equipment
Others
7.EXPLORATION AND EVALUATION EXPENDITURE
7,394
1,546
8,590
2,721
1,188
8,934
1,802
9,474
2,640
979
Capitalization rate
4.12
4.01
9. INCOME TAX EXPENSE
The Company was incorporated in Canada and is subject to Canadian federal and provincial tax requirements which
are calculated at 26% (2015: 26%) of the estimated assessable profit for the year ended December 31, 2016. Since its
21,439
23,829
incorporation, the Company had no assessable profit subject to Canadian federal and provincial tax requirements.
CSH Gold Mine (note 20(a))
Generative exploration
378
2
380
302
-
302
Interest has been capitalized at the rate of interest applicable to the specific borrowings financing the assets under
construction, or, where financed through general borrowings, at a capitalization rate representing the average interest rate
on such borrowings.
PRC Enterprise Income Tax (“EIT”) is calculated at the prevailing tax rate of 25% on the estimated taxable profit of the group
entities located in the PRC for the years ended December 31, 2016 (2015: 25%) except as described below.
Huatailong and Metrorkongka County Jiama Industry and Trade Co. (“Jiama Industry and Trade”), subsidiaries acquired in
December 2010, were established in the westward development area of the PRC and subject to preferential tax rate of 15%
of taxable profit.
Under relevant PRC Tax Law, withholding tax is imposed on dividends declared in respect of profits earned by the PRC
subsidiaries from January 1, 2008 onwards. Deferred taxation has not been provided for in the consolidated financial
statements in respect of temporary differences attributable to accumulated distributable profits of the PRC subsidiaries
amounting to approximately US$334,637,000 and US$334,480,000 at December 31, 2016 and 2015, respectively, as the Group
is able to control the timing of the reversal of temporary differences and it is probable the temporary differences will not
reverse in the foreseeable future.
Taxation for other relevant jurisdictions is calculated at the rates prevailing in each of those jurisdictions respectively.
100
101
US$’000US$’00020152016%%20152016US$’000US$’00020152016US$’000US$’00020152016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
5.REVENUE AND SEGMENT INFORMATION- continued
(d) Geographical information
8. FINANCE COSTS
FOR THE YEAR ENDED DECEMBER 31, 2016
The Group operated in two geographical areas, Canada and the PRC. The Group’s corporate division located in
Canada only earns revenue that is considered incidental to the activities of the Group and therefore does not meet
the definition of an operating segment as defined in IFRS 8 Operating Segments. During the years ended December 31,
2016 and 2015, the Group’s revenue was generated from gold sales and copper multi-products to customers in the PRC.
Approximately 99% (2015: 99%) of non-current assets of the Group are located in the PRC.
Effective interests on borrowings:
- wholly repayable within 5 years
- wholly repayable over 5 years
Accretion on environmental rehabilitation (note 26)
(e) Information about major customers
Less: Amounts capitalized to property, plant and equipment
28,447
9,929
2,967
41,343
(24,770)
16,573
42,225
468
2,606
45,299
(23,892)
21,407
ANNUAL REPORT 2016
Interest has been capitalized at the rate of interest applicable to the specific borrowings financing the assets under
construction, or, where financed through general borrowings, at a capitalization rate representing the average interest rate
on such borrowings.
Capitalization rate
4.12
4.01
9. INCOME TAX EXPENSE
21,439
23,829
incorporation, the Company had no assessable profit subject to Canadian federal and provincial tax requirements.
The Company was incorporated in Canada and is subject to Canadian federal and provincial tax requirements which
are calculated at 26% (2015: 26%) of the estimated assessable profit for the year ended December 31, 2016. Since its
PRC Enterprise Income Tax (“EIT”) is calculated at the prevailing tax rate of 25% on the estimated taxable profit of the group
entities located in the PRC for the years ended December 31, 2016 (2015: 25%) except as described below.
Huatailong and Metrorkongka County Jiama Industry and Trade Co. (“Jiama Industry and Trade”), subsidiaries acquired in
December 2010, were established in the westward development area of the PRC and subject to preferential tax rate of 15%
of taxable profit.
Under relevant PRC Tax Law, withholding tax is imposed on dividends declared in respect of profits earned by the PRC
subsidiaries from January 1, 2008 onwards. Deferred taxation has not been provided for in the consolidated financial
statements in respect of temporary differences attributable to accumulated distributable profits of the PRC subsidiaries
amounting to approximately US$334,637,000 and US$334,480,000 at December 31, 2016 and 2015, respectively, as the Group
is able to control the timing of the reversal of temporary differences and it is probable the temporary differences will not
reverse in the foreseeable future.
Taxation for other relevant jurisdictions is calculated at the rates prevailing in each of those jurisdictions respectively.
Revenue from major customers which accounts for 10% or more of the Group’s total revenue are sales of gold doré bars
and copper and other products to CNG and its subsidiaries as disclosed in note 28 (a) (i)
6.GENERAL AND ADMINISTRATIVE EXPENSES
Administration and office
Professional fees
Salaries and benefits
Depreciation of property, plant and equipment
Others
7.EXPLORATION AND EVALUATION EXPENDITURE
CSH Gold Mine (note 20(a))
Generative exploration
7,394
1,546
8,590
2,721
1,188
378
2
380
8,934
1,802
9,474
2,640
979
302
-
302
100
101
US$’000US$’00020152016%%20152016US$’000US$’00020152016US$’000US$’00020152016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
9. INCOME TAX EXPENSE- continued
Tax expense comprises:
Current tax expense - PRC EIT
Deferred tax expense
FOR THE YEAR ENDED DECEMBER 31, 2016
9. INCOME TAX EXPENSE- continued
For the purpose of presentation in the consolidated statement of financial position, certain deferred tax assets and liabilities
have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:
17,998
740
18,738
11,747
6,687
18,434
Deferred tax assets
Deferred tax liabilities
Per the consolidated statement of profit or loss and other comprehensive income, the tax expense for the Group can be
reconciled to the profit before income tax for the year as follows:
The Group’s unrecognized deferred income tax assets are as follows:
Profit before income tax
PRC EIT tax rates
Tax at the PRC EIT tax rates
Tax effect of different tax rates of subsidiaries operating in other jurisdictions
Tax effect of concessionary tax rate
Tax effect of tax losses not recognized
Tax effect of non-deductible expenses
Tax effect of non-taxable income
Impacts on foreign exchange
Withholding tax in respect of interest income earned from PRC subsidiaries
6,413
25%
1,603
(22)
1,857
654
4,552
(1,086)
8,446
2,734
18,738
11,607
25%
2,902
(39)
2,130
1,093
4,886
(928)
6,571
1,819
18,434
The following are the major deferred tax (assets) liabilities recognized and movements thereon during the current and prior
years:
At January 1, 2015
Charge (credit) to profit or loss
At December 31, 2015
Charge (credit) to profit or loss
At December 31, 2016
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
(13,482)
2,671
(10,811)
6,420
(4,391)
(5,868)
(4,094)
(9,962)
(212)
133,905
(734)
133,171
(676)
(10,174)
132,495
4,198
8,192
12,390
(5,204)
7,186
(1,754)
116,999
652
6,687
(1,102)
123,686
412
(690)
740
124,426
(1) Amount represents deferred tax liability arising from the fair value adjustment on mining rights during the business
acquisition of Skyland Mining Limited and its subsidiaries (“Skyland”) in December 2010.
ANNUAL REPORT 2016
382
(124,808)
(124,426)
1,728
(125,414)
(123,686)
14,797
2,178
16,975
14,143
1,143
15,286
Deferred income tax assets
Tax loss carry forwards
Other deductible temporary differences
Total unrecognized deferred income tax assets
Deferred tax asset of US$14,797,000 (December 31, 2015: US$14,143,000) has not been recognized in respect of unused tax
loss due to the unpredictability of future profit streams. Under Canadian tax laws, unused tax loss arising in a tax year ended
between March 22, 2004 and December 31, 2005 can be carried forward for 10 years while the unused tax loss can be carried
forward for 20 years if the loss is arising in tax years ended after December 31, 2005.
Other deductible temporary differences primarily comprise of share issue costs and cumulative eligible capital expenditures
that were incurred by the Company which are tax deductible according to the relevant tax law in Canada. No deferred
tax asset has been recognized because the amount of future taxable profit that will be available to realize such assets is
unpredictable and not probable.
102
103
US$’000US$’00020152016US$’000US$’00020152016US$’000US$’00020152016US$’0002016US$’0002015InventoriesMining Rights (1)Environmental rehabilitationProperty,Plant and equipmentOthersTotal FOR THE YEAR ENDED DECEMBER 31, 2016
9. INCOME TAX EXPENSE- continued
Tax expense comprises:
Current tax expense - PRC EIT
Deferred tax expense
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
9. INCOME TAX EXPENSE- continued
For the purpose of presentation in the consolidated statement of financial position, certain deferred tax assets and liabilities
have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:
Per the consolidated statement of profit or loss and other comprehensive income, the tax expense for the Group can be
reconciled to the profit before income tax for the year as follows:
The Group’s unrecognized deferred income tax assets are as follows:
17,998
740
18,738
11,747
6,687
18,434
Deferred tax assets
Deferred tax liabilities
Deferred income tax assets
Tax loss carry forwards
Other deductible temporary differences
Total unrecognized deferred income tax assets
382
(124,808)
(124,426)
1,728
(125,414)
(123,686)
14,797
2,178
16,975
14,143
1,143
15,286
Deferred tax asset of US$14,797,000 (December 31, 2015: US$14,143,000) has not been recognized in respect of unused tax
loss due to the unpredictability of future profit streams. Under Canadian tax laws, unused tax loss arising in a tax year ended
between March 22, 2004 and December 31, 2005 can be carried forward for 10 years while the unused tax loss can be carried
forward for 20 years if the loss is arising in tax years ended after December 31, 2005.
Other deductible temporary differences primarily comprise of share issue costs and cumulative eligible capital expenditures
that were incurred by the Company which are tax deductible according to the relevant tax law in Canada. No deferred
tax asset has been recognized because the amount of future taxable profit that will be available to realize such assets is
unpredictable and not probable.
Tax effect of different tax rates of subsidiaries operating in other jurisdictions
Profit before income tax
PRC EIT tax rates
Tax at the PRC EIT tax rates
Tax effect of concessionary tax rate
Tax effect of tax losses not recognized
Tax effect of non-deductible expenses
Tax effect of non-taxable income
Impacts on foreign exchange
Withholding tax in respect of interest income earned from PRC subsidiaries
6,413
25%
1,603
(22)
1,857
654
4,552
(1,086)
8,446
2,734
18,738
11,607
25%
2,902
(39)
2,130
1,093
4,886
(928)
6,571
1,819
18,434
The following are the major deferred tax (assets) liabilities recognized and movements thereon during the current and prior
years:
At January 1, 2015
Charge (credit) to profit or loss
At December 31, 2015
Charge (credit) to profit or loss
At December 31, 2016
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
(13,482)
2,671
(10,811)
6,420
(4,391)
(5,868)
(4,094)
(9,962)
(212)
133,905
(734)
133,171
(676)
(10,174)
132,495
4,198
8,192
12,390
(5,204)
7,186
(1,754)
116,999
652
6,687
(1,102)
123,686
412
(690)
740
124,426
(1) Amount represents deferred tax liability arising from the fair value adjustment on mining rights during the business
acquisition of Skyland Mining Limited and its subsidiaries (“Skyland”) in December 2010.
102
103
US$’000US$’00020152016US$’000US$’00020152016US$’000US$’00020152016US$’0002016US$’0002015InventoriesMining Rights (1)Environmental rehabilitationProperty,Plant and equipmentOthersTotal NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
10. LOSS FOR THE YEAR
Loss for the year has been arrived at after charging (crediting):
Auditor’s remuneration
Depreciation included in cost of sales and inventories
Depreciation included in administrative expenses (note 6)
Total depreciation
Release of prepaid lease payment (included in cost of sales)
Amortization of mining rights (included in cost of sales)
Loss on disposal of property, plant and equipment
Staff costs
Directors’ and chief executive’s emoluments (note 11)
Staff salaries and benefits
Retirement benefit contributions
Total salaries and benefits included in administrative expenses (note 6)
Total salaries and benefits capitalized in construction in progress
Staff costs included in cost of sales and inventories
Total staff costs
Operating lease payment
Bank interest income
Government subsidies(1)
633
74,965
2,721
77,686
208
4,814
34
328
7,744
518
8,590
5,368
14,220
28,178
1,163
(562)
(660)
613
67,816
2,640
70,456
185
5,264
-
417
8,382
675
9,474
5,918
10,297
25,689
1,527
(1,498)
(4,087)
(1) Included government subsidies of nil (2015: US$3,934,000) received from the local Finance Bureau of Tibet in 2016 as a reward for the
Group’s contribution to community development and environmental preservation in the local Tibet region.
There was no condition attached to the subsidies and the entire amount was recognized as other income in 2015.
US$’000
US$’000
US$’000
US$’000
104
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
11.DIRECTORS', CHIEF EXECUTIVE'S AND EMPLOYEES' EMOLUMENTS
(a) Directors’ and Chief Executive’s emoluments
Directors’ and chief executive’s remuneration for the year, disclosed pursuant to the applicable Listing Rules and CO, is as
follows:
For the year ended December 31, 2016
Executive Directors and Chief Executive (Note a)
Bing Liu (Note e)
Executive Directors (Note b)
Xin Song (Note e)
Xiangdong Jiang
Liangyou Jiang
Non-executive Directors (Note c)
Lianzhong Sun (Note e)
Independent Non-executive Directors (Note d)
Ian He
Yunfei Chen
Gregory Hall
John King Burns
For the year ended December 31, 2015
Executive Directors and Chief Executive (Note a)
Bing Liu (Note e)
Executive Directors (Note b)
Xin Song (Note e)
Xiangdong Jiang
Liangyou Jiang
Non-executive Directors (Note c)
Lianzhong Sun (Note e)
Independent Non-executive Directors (Note d)
Ian He
Yunfei Chen
Gregory Hall
John King Burns
US$’000
US$’000
US$’000
US$’000
41
36
36
36
149
-
-
-
-
-
-
-
-
-
-
42
37
37
37
153
-
-
-
-
-
-
-
-
-
-
-
-
-
-
119
56
175
200
60
260
-
-
2
-
2
-
-
-
-
4
-
-
2
-
2
-
-
-
-
4
-
-
-
121
56
43
36
36
36
328
-
-
-
202
60
44
37
37
37
417
105
TotalRetirementbenefit contributionsSalaries and other benefitsFeesTotalRetirementbenefit contributionsSalaries and other benefitsFeesUS$’000US$’00020152016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
11.DIRECTORS', CHIEF EXECUTIVE'S AND EMPLOYEES' EMOLUMENTS
(a) Directors’ and Chief Executive’s emoluments
Directors’ and chief executive’s remuneration for the year, disclosed pursuant to the applicable Listing Rules and CO, is as
follows:
For the year ended December 31, 2016
Executive Directors and Chief Executive (Note a)
Bing Liu (Note e)
Executive Directors (Note b)
Xin Song (Note e)
Xiangdong Jiang
Liangyou Jiang
Non-executive Directors (Note c)
Lianzhong Sun (Note e)
Independent Non-executive Directors (Note d)
Ian He
Yunfei Chen
Gregory Hall
John King Burns
For the year ended December 31, 2015
Executive Directors and Chief Executive (Note a)
Bing Liu (Note e)
Executive Directors (Note b)
Xin Song (Note e)
Xiangdong Jiang
Liangyou Jiang
Non-executive Directors (Note c)
Lianzhong Sun (Note e)
Independent Non-executive Directors (Note d)
Ian He
Yunfei Chen
Gregory Hall
John King Burns
US$’000
US$’000
US$’000
US$’000
-
-
-
-
-
41
36
36
36
149
-
-
119
56
-
-
-
-
-
175
-
-
2
-
-
2
-
-
-
4
-
-
121
56
-
43
36
36
36
328
US$’000
US$’000
US$’000
US$’000
-
-
-
-
-
42
37
37
37
153
-
-
200
60
-
-
-
-
-
260
-
-
2
-
-
2
-
-
-
4
-
-
202
60
-
44
37
37
37
417
105
FOR THE YEAR ENDED DECEMBER 31, 2016
10. LOSS FOR THE YEAR
Loss for the year has been arrived at after charging (crediting):
Auditor’s remuneration
Depreciation included in cost of sales and inventories
Depreciation included in administrative expenses (note 6)
Total depreciation
Release of prepaid lease payment (included in cost of sales)
Amortization of mining rights (included in cost of sales)
Loss on disposal of property, plant and equipment
Staff costs
Directors’ and chief executive’s emoluments (note 11)
Staff salaries and benefits
Retirement benefit contributions
Total salaries and benefits included in administrative expenses (note 6)
Total salaries and benefits capitalized in construction in progress
Staff costs included in cost of sales and inventories
Total staff costs
Operating lease payment
Bank interest income
Government subsidies(1)
633
74,965
2,721
77,686
208
4,814
34
328
7,744
518
8,590
5,368
14,220
28,178
1,163
(562)
(660)
613
67,816
2,640
70,456
185
5,264
-
417
8,382
675
9,474
5,918
10,297
25,689
1,527
(1,498)
(4,087)
(1) Included government subsidies of nil (2015: US$3,934,000) received from the local Finance Bureau of Tibet in 2016 as a reward for the
Group’s contribution to community development and environmental preservation in the local Tibet region.
There was no condition attached to the subsidies and the entire amount was recognized as other income in 2015.
104
TotalRetirementbenefit contributionsSalaries and other benefitsFeesTotalRetirementbenefit contributionsSalaries and other benefitsFeesUS$’000US$’00020152016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
11. DIRECTORS', CHIEF EXECUTIVE'S AND EMPLOYEES' EMOLUMENTS- continued
(a) Directors’ and Chief Executive’s emoluments- continued
Notes:
(a) Mr. Bing Liu is a director and the Chief Executive of the Company. The emoluments disclosed above are inclusive
of services rendered by him as the Chief Executive.
(b) The executive directors’ emoluments shown above were mainly for their services in connection with the
Management of the affairs of the Company and the Group.
(c) The non-executive directors’ emoluments shown above were mainly for their services as directors of the Company.
(d) The independent non-executive directors’ emoluments shown above were mainly for their services as directors of
the Company.
(e) Mr. Xin Song, Mr. Bing Liu and Mr. Lianzhong Sun have also been employed by CNG and the payment of their
emoluments was centralized and made by CNG for both years, in which the amounts are considered as insignificant.
For the years ended December 31, 2016 and 2015, none of the directors of the Company waived or agreed to
waive any emoluments.
(b) Employees’ emoluments
The five highest paid individuals included nil (2015: one) director for the year ended December 31, 2016. The
emoluments of the remaining five (2015: four) non-director individuals for the year ended December 31, 2016, are as
The computation of diluted loss per share for 2015 does not assume the exercise of the Company's stock option, as it would
result in a decrease in loss per share for the year ended December 31, 2015.
follows:
Employees
Salaries and other benefits
Retirement benefit contributions
Their emoluments were within the following bands:
Nil to HK$1,000,000 (equivalent to approximately nil to US$129,000)
HK$1,000,001 to HK$1,500,000 (equivalent to approximately
US$129,001 to US$193,000)
HK$1,500,001 to HK$2,000,000 (equivalent to approximately
US$193,001 to US$258,000)
HK$2,000,001 to HK$2,500,000 (equivalent to approximately
US$258,001 to US$323,000)
964
4
968
-
4
-
1
778
4
782
-
3
-
1
During the years ended December 31, 2016 and 2015, no emoluments were paid by the Group to the directors of the
Company or the five highest paid individuals as an inducement to join or upon joining the Group or as compensation
Restricted bank balance carries interest at market rates ranging from 0.3% to 1.55% (2015: 0.35%) per annum for the year
ended December 31, 2016. The balance represents deposits pledged to banks to secure bills payable issued to suppliers
for loss of office.
106
ANNUAL REPORT 2016
12. DIVIDEND
No dividends were paid or proposed during the year ended December 31, 2016 and 2015, nor has any dividend been
proposed since the end of reporting period.
13. LOSS PER SHARE
Data used in determining loss per share are presented below:
Loss attributable to owners of the Company for the purposes of basic and
diluted loss per share(US$'000)
Weighted average number of shares, basic and diluted
Basic loss per share (US$)
Diluted loss per share (US$)
ended December 31, 2016.
No diluted loss per share for 2016 was presented as the Group had no potential dilutive instruments issued during the year
2016
2015
13,304
8,188
396,413,753
396,413,753
3.36 cents
N/A
2.07 cents
2.07 cents
14. CASH AND CASH EQUIVALENTS/RESTRICTED BANK BALANCE
Cash and cash equivalents of the Group are comprised of bank balances and bank deposits with an original maturity of
three months or less. The Group’s bank balances, cash equivalents and restricted bank balances are denominated in the
foreign currencies other than the respective group entities’ functional currencies are presented below:
December 31,
December 31,
Denominated in:
Canadian dollars (“CAD”)
Renminbi (“RMB”)
US$
Hong Kong dollars (“HK$”)
for mining costs.
The bank balances and bank deposits carry interest rates ranging from 0.3% to 2% (2015: 0.2% to 1.92%) per annum for the
year ended December 31, 2016.
2016
US$’000
1,512
43,447
35
571
45,565
2015
US$’000
494
35,673
971
600
37,738
107
US$’000US$’0002015201620152016No. of individuals NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
12. DIVIDEND
No dividends were paid or proposed during the year ended December 31, 2016 and 2015, nor has any dividend been
proposed since the end of reporting period.
13. LOSS PER SHARE
Data used in determining loss per share are presented below:
Loss attributable to owners of the Company for the purposes of basic and
diluted loss per share(US$'000)
Weighted average number of shares, basic and diluted
Basic loss per share (US$)
Diluted loss per share (US$)
2016
2015
13,304
8,188
396,413,753
396,413,753
3.36 cents
N/A
2.07 cents
2.07 cents
No diluted loss per share for 2016 was presented as the Group had no potential dilutive instruments issued during the year
ended December 31, 2016.
The five highest paid individuals included nil (2015: one) director for the year ended December 31, 2016. The
emoluments of the remaining five (2015: four) non-director individuals for the year ended December 31, 2016, are as
The computation of diluted loss per share for 2015 does not assume the exercise of the Company's stock option, as it would
result in a decrease in loss per share for the year ended December 31, 2015.
14. CASH AND CASH EQUIVALENTS/RESTRICTED BANK BALANCE
Cash and cash equivalents of the Group are comprised of bank balances and bank deposits with an original maturity of
three months or less. The Group’s bank balances, cash equivalents and restricted bank balances are denominated in the
foreign currencies other than the respective group entities’ functional currencies are presented below:
Denominated in:
Canadian dollars (“CAD”)
Renminbi (“RMB”)
US$
Hong Kong dollars (“HK$”)
December 31,
December 31,
2016
US$’000
1,512
43,447
35
571
45,565
2015
US$’000
494
35,673
971
600
37,738
During the years ended December 31, 2016 and 2015, no emoluments were paid by the Group to the directors of the
Company or the five highest paid individuals as an inducement to join or upon joining the Group or as compensation
Restricted bank balance carries interest at market rates ranging from 0.3% to 1.55% (2015: 0.35%) per annum for the year
ended December 31, 2016. The balance represents deposits pledged to banks to secure bills payable issued to suppliers
for loss of office.
106
for mining costs.
107
The bank balances and bank deposits carry interest rates ranging from 0.3% to 2% (2015: 0.2% to 1.92%) per annum for the
year ended December 31, 2016.
11. DIRECTORS', CHIEF EXECUTIVE'S AND EMPLOYEES' EMOLUMENTS- continued
(a) Directors’ and Chief Executive’s emoluments- continued
Notes:
(a) Mr. Bing Liu is a director and the Chief Executive of the Company. The emoluments disclosed above are inclusive
of services rendered by him as the Chief Executive.
(b) The executive directors’ emoluments shown above were mainly for their services in connection with the
Management of the affairs of the Company and the Group.
(c) The non-executive directors’ emoluments shown above were mainly for their services as directors of the Company.
(d) The independent non-executive directors’ emoluments shown above were mainly for their services as directors of
the Company.
(e) Mr. Xin Song, Mr. Bing Liu and Mr. Lianzhong Sun have also been employed by CNG and the payment of their
emoluments was centralized and made by CNG for both years, in which the amounts are considered as insignificant.
For the years ended December 31, 2016 and 2015, none of the directors of the Company waived or agreed to
waive any emoluments.
(b) Employees’ emoluments
follows:
Employees
Salaries and other benefits
Retirement benefit contributions
Their emoluments were within the following bands:
Nil to HK$1,000,000 (equivalent to approximately nil to US$129,000)
HK$1,000,001 to HK$1,500,000 (equivalent to approximately
HK$1,500,001 to HK$2,000,000 (equivalent to approximately
HK$2,000,001 to HK$2,500,000 (equivalent to approximately
US$129,001 to US$193,000)
US$193,001 to US$258,000)
US$258,001 to US$323,000)
964
4
968
-
4
-
1
778
4
782
-
3
-
1
US$’000US$’0002015201620152016No. of individuals NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
15. TRADE AND OTHER RECEIVABLES
The Group's accounts receivable arise from the following sources: trade receivables and amounts due from related
companies. The components are as follows:
Trade receivables
Less: allowance for doubtful debts
Amounts due from related companies (note 28(a))(1)
Loans to related companies (note 28(a))
Loans to a non-controlling shareholder(2)
Other receivables(3)
December 31,
December 31,
2016
US$’000
4,054
(94)
3,960
128
158,433
-
707
163,228
2015
US$’000
11,189
(398)
10,791
2,407
14,021
1,263
7,319
35,801
(1) The outstanding balances represent service fee receivables arising from provision of transportation services to the subsidiaries of CNG
during the years ended December 31, 2016 and 2015. The amounts are unsecured, interest free and repayable on demand.
(2) Loans to a non-controlling shareholder carry a floating rate, currently set at 4.35% per annum based on the benchmark interest rate of
the People’s Bank of China, and are unsecured and repayable on demand.
(3) Included in the balance as at December 31, 2016 is an amount of approximately US$279,000 (2015: US$6.3 million) value-added tax
recoverable which is expected to be recovered within twelve months after the end of the reporting period.
The Group allows an average credit period of 90 days and 180 days to its external trade customers including CNG for gold
doŕe bar sales and copper sales, respectively.
Below is an aged analysis of trade receivables (net of allowance) presented based on invoice dates, which approximated
the respective revenue recognition dates, at the end of the reporting period:
Less than 30 days
31 to 90 days
91 to 180 days
Over 180 days
108
December 31,
December 31,
2016
US$’000
-
1,307
2,387
266
3,960
2015
US$’000
5,834
4,532
75
350
10,791
ANNUAL REPORT 2016
15. TRADE AND OTHER RECEIVABLES- continued
FOR THE YEAR ENDED DECEMBER 31, 2016
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the reporting date. The customers with balances that are neither
past due nor impaired have good repayment history and thus no impairment is considered necessary.
Included in the Group's trade receivables balances are debtors with aggregate carrying amount of US$266,000 and
US$350,000 at December 31, 2016 and 2015, respectively, which are past due over six months for which the Group has not
provided for impairment loss as there has not been a significant change in credit quality and amounts are still considered
recoverable based on historical experience.
Movement in the allowance for doubtful debts:
At January 1
Addition
Amount written off as uncollectible
Exchange realignment
At December 31
The Group holds no collateral for any receivable amounts outstanding as at December 31, 2016 and 2015.
16. PREPAID EXPENSES AND DEPOSITS
Deposits for mine supplies and services (Note a)
Deposits for spare parts (Note a)
Deposits for environmental protection (Note b)
Deposit for acquisition of property, plant and equipment(Note c)
Prepaid property and machinery insurance
Amount due from a non-controlling shareholder of a subsidiary (Note d)
Other prepayment and deposits
Less: Amounts that will be settled or utilised within one year shown under current
Amounts that will be settled or utilised for more than one year shown under non-
assets
current assets
(5,633)
(8,446)
12,156
11,974
2016
2015
US$’000
US$’000
398
-
(291)
(13)
94
167
248
-
(17)
398
December 31,
December 31,
2016
US$’000
509
4,670
11,425
90
152
353
590
17,789
2015
US$’000
2,702
4,420
10,665
616
250
384
1,383
20,420
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
15. TRADE AND OTHER RECEIVABLES
The Group's accounts receivable arise from the following sources: trade receivables and amounts due from related
companies. The components are as follows:
Trade receivables
Less: allowance for doubtful debts
Amounts due from related companies (note 28(a))(1)
Loans to related companies (note 28(a))
Loans to a non-controlling shareholder(2)
Other receivables(3)
(1) The outstanding balances represent service fee receivables arising from provision of transportation services to the subsidiaries of CNG
during the years ended December 31, 2016 and 2015. The amounts are unsecured, interest free and repayable on demand.
(2) Loans to a non-controlling shareholder carry a floating rate, currently set at 4.35% per annum based on the benchmark interest rate of
the People’s Bank of China, and are unsecured and repayable on demand.
(3) Included in the balance as at December 31, 2016 is an amount of approximately US$279,000 (2015: US$6.3 million) value-added tax
recoverable which is expected to be recovered within twelve months after the end of the reporting period.
The Group allows an average credit period of 90 days and 180 days to its external trade customers including CNG for gold
doŕe bar sales and copper sales, respectively.
Below is an aged analysis of trade receivables (net of allowance) presented based on invoice dates, which approximated
the respective revenue recognition dates, at the end of the reporting period:
December 31,
December 31,
2016
US$’000
4,054
(94)
3,960
128
158,433
-
707
163,228
2015
US$’000
11,189
(398)
10,791
2,407
14,021
1,263
7,319
35,801
December 31,
December 31,
2016
US$’000
-
1,307
2,387
266
3,960
2015
US$’000
5,834
4,532
75
350
10,791
Less than 30 days
31 to 90 days
91 to 180 days
Over 180 days
108
15. TRADE AND OTHER RECEIVABLES- continued
FOR THE YEAR ENDED DECEMBER 31, 2016
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the reporting date. The customers with balances that are neither
past due nor impaired have good repayment history and thus no impairment is considered necessary.
Included in the Group's trade receivables balances are debtors with aggregate carrying amount of US$266,000 and
US$350,000 at December 31, 2016 and 2015, respectively, which are past due over six months for which the Group has not
provided for impairment loss as there has not been a significant change in credit quality and amounts are still considered
recoverable based on historical experience.
Movement in the allowance for doubtful debts:
At January 1
Addition
Amount written off as uncollectible
Exchange realignment
At December 31
2016
2015
US$’000
US$’000
398
-
(291)
(13)
94
167
248
-
(17)
398
The Group holds no collateral for any receivable amounts outstanding as at December 31, 2016 and 2015.
16. PREPAID EXPENSES AND DEPOSITS
Deposits for mine supplies and services (Note a)
Deposits for spare parts (Note a)
Deposits for environmental protection (Note b)
Deposit for acquisition of property, plant and equipment(Note c)
Prepaid property and machinery insurance
Amount due from a non-controlling shareholder of a subsidiary (Note d)
Other prepayment and deposits
Less: Amounts that will be settled or utilised within one year shown under current
assets
Amounts that will be settled or utilised for more than one year shown under non-
current assets
December 31,
December 31,
2016
US$’000
509
4,670
11,425
90
152
353
590
17,789
2015
US$’000
2,702
4,420
10,665
616
250
384
1,383
20,420
(5,633)
(8,446)
12,156
11,974
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
16. PREPAID EXPENSES AND DEPOSITS- continued
Notes:
(a) The amount represents deposits paid to third party vendors and related companies (note 28) for purchasing of raw materials,
consumable, spare parts and mine services.
(b) The amount represents deposits paid to the PRC local land administration bureau for undertaking the restoration of land when the
lease term is expired. Such amount is receivable upon the end of the mine life and is expected to be repaid after one year and
therefore it is shown as a non-current asset at both 2016 and 2015 year end.
(c) The amount represents deposits paid to third party contractors for the acquisition of property, plant and equipment to expand its
mining capacity in Tibet, the PRC. The amount is shown as non-current asset.
(d) The amount due from a non-controlling shareholder is non-interest bearing, unsecured and repayable after one year.
17. PREPAID LEASE PAYMENTS
At January 1, 2015
Release to profit or loss
Exchange realignment
At December 31, 2015 and January 1, 2016
Additions
Release to profit or loss
Exchange realignment
At December 31, 2016
Analysed for reporting purpose:
Current portion
Non-current portion
US$’000
8,372
(185)
(342)
7,845
7,586
(208)
(454)
14,769
December 31,
December 31,
2016
US$’000
366
14,403
14,769
2015
US$’000
225
7,620
7,845
Prepaid lease payments represent payments for medium-term leasehold land located in the PRC. The prepaid lease
payments are released to profit or loss over the remaining lease terms.
110
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
December 31,
December 31,
18. INVENTORIES
Gold in process
Gold doré bars
Consumables
Copper
Spare parts
of sales.
Listed investment, at fair value:
- Equity securities listed in Hong Kong(1)
Unlisted investment, at cost:
- Equity securities(2) (3)
Inventories totalling US$277,896,000 (2015: US$272,209,000) for the year ended December 31, 2016 was recognized in cost
19. AVAILABLE-FOR-SALE INVESTMENTS
December 31,
December 31,
(1) On June 29, 2012, the Group acquired 70,545,000 shares of China Nonferrous Mining Corporation Limited (“CNMC”), a
listed company in Hong Kong at HK$2.20 per share for a total consideration of US$20,011,000 which represents 2.03% equity
interest in CNMC.
During the year, impairment loss of US$3,831,000 (2015: US$4,720,000) was further recognized to profit or loss as there was
significant decline of the fair value of the security below its cost in the first quarter of the year and the Group considered
that such a drop is an impairment. Due to the increase in fair value of the listed shares subsequent to the recognition
of impairment loss, as mentioned US$1,278,000 was recognized in other comprehensive income and accumulated under
the heading of investment revaluation reserve in accordance with the Group’s accounting policies.
(2) As of December 31, 2016, the Group has invested RMB10,000,000, approximately US$1,441,000 (2015: US$1,540,000),
representing 10% share interest in Inner Mongolia Chengxin Yong’an Chemicals Co., Ltd. (“Yong’an Chemicals”). Yong’an
Chemicals is established in the PRC and principally engaged in the development and manufacturing of chemicals.
(3) As of December 31, 2016, the Group has invested RMB4,000,000, approximately US$577,000 (2015: US$616,000), representing
10% share interest in Mozu Gongka Jiulian Industrial Explosives Material Co. Ltd. (“Mozu Explosives”). Mozu Explosives
established in the PRC and principally engaged in the development and manufacturing of explosives.
Both Yong'an Chemicals and Mozu Explosives are measured at cost less impairment at the end of the reporting period
because the range of reasonable fair value estimates is so significant that the fair values cannot be measured reliably.
2016
US$’000
190,832
14,118
4,923
544
10,140
220,557
2016
US$’000
12,737
2,018
14,755
2015
US$’000
160,843
9,565
5,966
4,597
9,905
190,876
2015
US$’000
15,291
2,156
17,447
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
16. PREPAID EXPENSES AND DEPOSITS- continued
Notes:
(a) The amount represents deposits paid to third party vendors and related companies (note 28) for purchasing of raw materials,
consumable, spare parts and mine services.
(b) The amount represents deposits paid to the PRC local land administration bureau for undertaking the restoration of land when the
lease term is expired. Such amount is receivable upon the end of the mine life and is expected to be repaid after one year and
therefore it is shown as a non-current asset at both 2016 and 2015 year end.
(c) The amount represents deposits paid to third party contractors for the acquisition of property, plant and equipment to expand its
mining capacity in Tibet, the PRC. The amount is shown as non-current asset.
(d) The amount due from a non-controlling shareholder is non-interest bearing, unsecured and repayable after one year.
17. PREPAID LEASE PAYMENTS
At December 31, 2015 and January 1, 2016
At January 1, 2015
Release to profit or loss
Exchange realignment
Additions
Release to profit or loss
Exchange realignment
At December 31, 2016
Analysed for reporting purpose:
Current portion
Non-current portion
US$’000
8,372
(185)
(342)
7,845
7,586
(208)
(454)
14,769
2015
US$’000
225
7,620
7,845
December 31,
December 31,
2016
US$’000
366
14,403
14,769
Prepaid lease payments represent payments for medium-term leasehold land located in the PRC. The prepaid lease
payments are released to profit or loss over the remaining lease terms.
18. INVENTORIES
Gold in process
Gold doré bars
Consumables
Copper
Spare parts
FOR THE YEAR ENDED DECEMBER 31, 2016
December 31,
December 31,
2016
US$’000
190,832
14,118
4,923
544
10,140
220,557
2015
US$’000
160,843
9,565
5,966
4,597
9,905
190,876
Inventories totalling US$277,896,000 (2015: US$272,209,000) for the year ended December 31, 2016 was recognized in cost
of sales.
19. AVAILABLE-FOR-SALE INVESTMENTS
Listed investment, at fair value:
- Equity securities listed in Hong Kong(1)
Unlisted investment, at cost:
- Equity securities(2) (3)
December 31,
December 31,
2016
US$’000
12,737
2,018
14,755
2015
US$’000
15,291
2,156
17,447
(1) On June 29, 2012, the Group acquired 70,545,000 shares of China Nonferrous Mining Corporation Limited (“CNMC”), a
listed company in Hong Kong at HK$2.20 per share for a total consideration of US$20,011,000 which represents 2.03% equity
interest in CNMC.
During the year, impairment loss of US$3,831,000 (2015: US$4,720,000) was further recognized to profit or loss as there was
significant decline of the fair value of the security below its cost in the first quarter of the year and the Group considered
that such a drop is an impairment. Due to the increase in fair value of the listed shares subsequent to the recognition
of impairment loss, as mentioned US$1,278,000 was recognized in other comprehensive income and accumulated under
the heading of investment revaluation reserve in accordance with the Group’s accounting policies.
(2) As of December 31, 2016, the Group has invested RMB10,000,000, approximately US$1,441,000 (2015: US$1,540,000),
representing 10% share interest in Inner Mongolia Chengxin Yong’an Chemicals Co., Ltd. (“Yong’an Chemicals”). Yong’an
Chemicals is established in the PRC and principally engaged in the development and manufacturing of chemicals.
(3) As of December 31, 2016, the Group has invested RMB4,000,000, approximately US$577,000 (2015: US$616,000), representing
10% share interest in Mozu Gongka Jiulian Industrial Explosives Material Co. Ltd. (“Mozu Explosives”). Mozu Explosives
established in the PRC and principally engaged in the development and manufacturing of explosives.
Both Yong'an Chemicals and Mozu Explosives are measured at cost less impairment at the end of the reporting period
because the range of reasonable fair value estimates is so significant that the fair values cannot be measured reliably.
110
111
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
20. PROPERTY, PLANT AND EQUIPMENT- continued
The above items of property, plant and equipment, except for mineral assets, are depreciated using the straight-line method
over the estimated useful lives of the related assets as follows:
Buildings Over the shorter of the term of lease, or 24 years
Crushers 14 years
Furniture and office equipment 2 to 5 years
Machinery and equipment
2 to 10 years
Motor vehicles 5 to 10 years
Leasehold improvements
Over the shorter of the term of lease, or 5.5 years
Mineral assets mainly represent drilling, stripping and related costs incurred on sites with an existing mine and on areas within
the boundary of a known mineral deposit which contains proven and probable reserves and are capitalized when they are
incurred to improve access to the future ores. Mineral assets are depreciated using the unit-of-production method based
on the actual production volume over the estimated total proven and probable reserves of the mines.
Mineral Assets
(a) CSH Gold Mine
US$233,066,000).
(b) Jiama Mine
CSH Gold Mine, in which the Group holds a 96.5% equity interest, consists of a licensed area of 36 square kilometers
(“km2”) in the western part of Inner Mongolia, northern China. The site is centrally positioned within the east-west-
trending Tian Shan Gold Belt and is approximately 650 kilometers (“km”) northwest of Beijing. The carrying value
of the CSH Gold Mine in relation to mineral assets is US$252,467,000 as at December 31, 2016 (December 31, 2015:
The Jiama Mine, a large copper-gold polymetallic deposit consisting of skarn-type and hornfels-type mineralization
located in Metrorkongka County in Tibet, in which the Group holds 100% equity interest through its wholly-owned
subsidiary, Skyland. The Group acquired Skyland on December 1, 2010. The Jiama Mine holds two mining permits
covering an area of approximately 76.9 km
and 66.4 km
, respectively and were combined as one mining permit. The
2
2
carrying value of the Jiama Mine in relation to mineral assets is US$63,030,000 as at December 31, 2016 (December 31,
2015: US$67,725,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
20. PROPERTY, PLANT AND EQUIPMENT
Buildings
Crushers
Furniture
and office
equipment
Machinery
and
equipment
Motor
vehicles
Leasehold
improvements
Mineral
assets
Construction
in progress
("CIP")
Total
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
COST
At January 1, 2015
213,950
215,879
Additions
Reversal
Disposals
Transfer from CIP
Environmental rehabilitation
adjustment (note 26)
Exchange realignment
808
-
(286)
2,274
-
(8,238)
-
-
-
-
-
-
3,341
507
97,467
8,484
4,825
413
285
304,108
585,260
1,428,774
-
70,536
201,519
278,608
-
-
-
-
-
(129)
92
-
-
-
-
-
(87)
(2,550)
(289)
(87)
-
-
-
-
-
-
-
-
-
(2,366)
(87)
(415)
-
17,568
(4,722)
-
17,568
(32,237)
(48,123)
At December 31, 2015
208,508
215,879
3,761
99,705
8,608
198
387,490
752,176
1,676,325
Additions
Reversal
Disposals
Transfer from CIP
Environmental rehabilitation
adjustment (note 26)
1,075
-
-
-
2,196
-
(2,735)
-
-
-
-
398
-
(25)
425
3,216
-
-
11,117
-
-
454
-
(145)
-
-
(156)
(3,661)
(415)
-
-
-
-
-
-
60,870
162,283
228,296
-
-
-
-
-
(2,735)
(170)
(13,738)
-
857
-
857
(6,683)
(53,931)
(77,912)
Exchange realignment
(13,066)
At December 31, 2016
198,713
213,144
4,403
110,377
8,502
198
442,534
846,790
1,824,661
ACCUMULATED
DEPRECIATION
At January 1, 2015
(28,984)
(29,524)
(1,860)
(36,564)
(3,936)
Provided for the year
(9,435)
(16,855)
(372)
(8,970)
(1,217)
Eliminated on disposals
Exchange realignment
33
1,285
-
-
-
40
47
981
-
149
At December 31, 2015
(37,101)
(46,379)
(2,192)
(44,506)
(5,004)
Provided for the year
(9,033)
(16,837)
(466)
(9,451)
(1,027)
Reversal
Eliminated on disposals
-
-
Exchange realignment
2,177
1,537
-
-
-
24
65
-
-
1,660
-
112
247
(104)
(53,468)
(21)
(33,586)
-
-
-
355
(125)
(86,699)
(18)
(40,854)
-
-
-
-
-
516
-
-
-
-
-
-
-
-
-
(154,440)
(70,456)
80
2,810
(222,006)
(77,686)
1,537
136
4,665
At December 31, 2016
(43,957)
(61,679)
(2,569)
(52,297)
(5,672)
(143)
(127,037)
-
(293,354)
CARRYING VALUE
At December 31, 2016
154,756
151,465
1,834
58,080
2,830
55
315,497
846,790
1,531,307
At December 31, 2015
171,407
169,500
1,569
55,199
3,604
73
300,791
752,176
1,454,319
112
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
-
(129)
92
-
-
-
-
-
-
-
-
-
-
-
Furniture
Machinery
Construction
and office
and
Motor
Leasehold
Mineral
in progress
Buildings
Crushers
equipment
equipment
vehicles
improvements
assets
("CIP")
Total
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
At January 1, 2015
213,950
215,879
3,341
507
97,467
8,484
4,825
413
285
304,108
585,260
1,428,774
-
70,536
201,519
278,608
(87)
(87)
(415)
-
(2,366)
(87)
(2,550)
(289)
17,568
(4,722)
-
17,568
(32,237)
(48,123)
At December 31, 2015
208,508
215,879
3,761
398
99,705
8,608
3,216
454
198
387,490
752,176
1,676,325
60,870
162,283
228,296
(2,735)
(25)
425
11,117
(145)
(2,735)
(170)
(13,738)
-
857
857
Exchange realignment
(13,066)
(156)
(3,661)
(415)
(6,683)
(53,931)
(77,912)
At December 31, 2016
198,713
213,144
4,403
110,377
8,502
198
442,534
846,790
1,824,661
FOR THE YEAR ENDED DECEMBER 31, 2016
20. PROPERTY, PLANT AND EQUIPMENT
Transfer from CIP
Environmental rehabilitation
adjustment (note 26)
Exchange realignment
COST
Additions
Reversal
Disposals
Additions
Reversal
Disposals
Transfer from CIP
2,196
Environmental rehabilitation
adjustment (note 26)
ACCUMULATED
DEPRECIATION
808
-
(286)
2,274
-
(8,238)
1,075
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40
-
24
65
At January 1, 2015
(28,984)
(29,524)
(1,860)
(36,564)
(3,936)
Provided for the year
(9,435)
(16,855)
(372)
(8,970)
(1,217)
(104)
(53,468)
(21)
(33,586)
Eliminated on disposals
Exchange realignment
33
1,285
47
981
-
149
At December 31, 2015
(37,101)
(46,379)
(2,192)
(44,506)
(5,004)
Provided for the year
(9,033)
(16,837)
(466)
(9,451)
(1,027)
(125)
(86,699)
(18)
(40,854)
Reversal
Eliminated on disposals
1,537
Exchange realignment
2,177
-
-
1,660
-
112
247
-
-
-
-
-
-
-
-
-
(154,440)
(70,456)
80
2,810
(222,006)
(77,686)
1,537
136
4,665
At December 31, 2016
(43,957)
(61,679)
(2,569)
(52,297)
(5,672)
(143)
(127,037)
-
(293,354)
At December 31, 2016
154,756
151,465
1,834
58,080
2,830
55
315,497
846,790
1,531,307
At December 31, 2015
171,407
169,500
1,569
55,199
3,604
73
300,791
752,176
1,454,319
CARRYING VALUE
112
-
-
-
-
-
-
-
-
-
-
-
-
355
-
-
516
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
FOR THE YEAR ENDED DECEMBER 31, 2016
20. PROPERTY, PLANT AND EQUIPMENT- continued
The above items of property, plant and equipment, except for mineral assets, are depreciated using the straight-line method
over the estimated useful lives of the related assets as follows:
Buildings Over the shorter of the term of lease, or 24 years
Crushers 14 years
Furniture and office equipment 2 to 5 years
Machinery and equipment
2 to 10 years
Motor vehicles 5 to 10 years
Leasehold improvements
Over the shorter of the term of lease, or 5.5 years
Mineral assets mainly represent drilling, stripping and related costs incurred on sites with an existing mine and on areas within
the boundary of a known mineral deposit which contains proven and probable reserves and are capitalized when they are
incurred to improve access to the future ores. Mineral assets are depreciated using the unit-of-production method based
on the actual production volume over the estimated total proven and probable reserves of the mines.
Mineral Assets
(a) CSH Gold Mine
CSH Gold Mine, in which the Group holds a 96.5% equity interest, consists of a licensed area of 36 square kilometers
(“km2”) in the western part of Inner Mongolia, northern China. The site is centrally positioned within the east-west-
trending Tian Shan Gold Belt and is approximately 650 kilometers (“km”) northwest of Beijing. The carrying value
of the CSH Gold Mine in relation to mineral assets is US$252,467,000 as at December 31, 2016 (December 31, 2015:
US$233,066,000).
(b) Jiama Mine
The Jiama Mine, a large copper-gold polymetallic deposit consisting of skarn-type and hornfels-type mineralization
located in Metrorkongka County in Tibet, in which the Group holds 100% equity interest through its wholly-owned
subsidiary, Skyland. The Group acquired Skyland on December 1, 2010. The Jiama Mine holds two mining permits
covering an area of approximately 76.9 km
2
and 66.4 km
2
, respectively and were combined as one mining permit. The
carrying value of the Jiama Mine in relation to mineral assets is US$63,030,000 as at December 31, 2016 (December 31,
2015: US$67,725,000).
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
21. MINING RIGHTS
COST
At January 1, 2015
Exchange realignment
At December 31, 2015 and January 1, 2016
Exchange realignment
At December 31, 2016
ACCUMULATED AMORTIZATION
At January 1, 2015
Additions
Exchange realignment
At December 31, 2015 and January 1, 2016
Additions
Exchange realignment
At December 31, 2016
CARRYING VALUE
At December 31, 2016
At December 31, 2015
US$’000
979,607
(2,208)
977,399
(3,058)
974,341
(41,801)
(5,264)
182
(46,883)
(4,814)
173
(51,524)
922,817
930,516
The amounts represent mining rights in the Jiama Mine, in relation to the copper concentrate and other by-products
production, acquired through the acquisition of Skyland. The two mining permits were renewed in 2014 and 2015,
respectively and were combined as one mining permit. The mining permit will expire in 2023. The Group considers that it will
be able to renew the mining rights with the relevant government authority continuously at insignificant cost until the end of
mine life.
Amortization on mining rights acquired is provided to write off the cost of the mining rights using the unit-of-production
method based on the actual production volume over the estimated total proven and probable reserves of the mines.
114
FOR THE YEAR ENDED DECEMBER 31, 2016
22. ACCOUNTS AND OTHER PAYABLE AND ACCRUED EXPENSES
Accounts and other payables of the Group are principally comprised of amounts outstanding for trade purchases relating
to minerals production activities and construction activities. The average credit period taken for trade purchases is
between 120 to 150 days.
Accounts and other payable and accrued expenses comprise the following:
December 31,
December 31,
Accounts payable
Bills payable
Construction costs payable
Advances from customers
Mining cost accrual
Other accruals
Payroll and benefit payable
Other tax payables
Other payables
period:
Less than 30 days
31 to 90 days
91 to 180 days
Over 180 days
Less than 30 days
31 to 60 days
61 to 90 days
91 to 180 days
The following is an aged analysis of the accounts payable presented based on the invoice date at the end of the reporting
176,464
166,004
December 31,
December 31,
The credit period for bills payable is 180 days from the bills issue date.
The following is an ageing analysis of bills payables, presented based on bills issue date at the end of the reporting period:
December 31,
December 31,
ANNUAL REPORT 2016
2016
US$’000
17,738
73,785
69,582
46
5,453
1,138
4,967
1,762
1,993
2016
US$’000
7,277
5,445
2,396
2,620
17,738
2016
US$’000
18,739
7,208
11,799
36,039
73,785
2015
US$’000
51,815
36,960
61,005
49
6,466
1,844
4,271
1,061
2,533
2015
US$’000
41,975
1,783
1,195
6,862
51,815
2015
US$’000
-
-
12,320
24,640
36,960
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
US$’000
979,607
(2,208)
977,399
(3,058)
974,341
(41,801)
(5,264)
182
(46,883)
(4,814)
173
(51,524)
922,817
930,516
FOR THE YEAR ENDED DECEMBER 31, 2016
21. MINING RIGHTS
At December 31, 2015 and January 1, 2016
COST
At January 1, 2015
Exchange realignment
Exchange realignment
At December 31, 2016
ACCUMULATED AMORTIZATION
At January 1, 2015
Additions
Exchange realignment
At December 31, 2015 and January 1, 2016
Additions
Exchange realignment
At December 31, 2016
CARRYING VALUE
At December 31, 2016
At December 31, 2015
114
FOR THE YEAR ENDED DECEMBER 31, 2016
22. ACCOUNTS AND OTHER PAYABLE AND ACCRUED EXPENSES
Accounts and other payables of the Group are principally comprised of amounts outstanding for trade purchases relating
to minerals production activities and construction activities. The average credit period taken for trade purchases is
between 120 to 150 days.
Accounts and other payable and accrued expenses comprise the following:
December 31,
December 31,
Accounts payable
Bills payable
Construction costs payable
Advances from customers
Mining cost accrual
Other accruals
Payroll and benefit payable
Other tax payables
Other payables
2016
US$’000
17,738
73,785
69,582
46
5,453
1,138
4,967
1,762
1,993
2015
US$’000
51,815
36,960
61,005
49
6,466
1,844
4,271
1,061
2,533
176,464
166,004
The amounts represent mining rights in the Jiama Mine, in relation to the copper concentrate and other by-products
production, acquired through the acquisition of Skyland. The two mining permits were renewed in 2014 and 2015,
respectively and were combined as one mining permit. The mining permit will expire in 2023. The Group considers that it will
be able to renew the mining rights with the relevant government authority continuously at insignificant cost until the end of
mine life.
Amortization on mining rights acquired is provided to write off the cost of the mining rights using the unit-of-production
method based on the actual production volume over the estimated total proven and probable reserves of the mines.
period:
Less than 30 days
31 to 90 days
91 to 180 days
Over 180 days
December 31,
December 31,
2016
US$’000
7,277
5,445
2,396
2,620
17,738
2015
US$’000
41,975
1,783
1,195
6,862
51,815
The following is an aged analysis of the accounts payable presented based on the invoice date at the end of the reporting
The credit period for bills payable is 180 days from the bills issue date.
The following is an ageing analysis of bills payables, presented based on bills issue date at the end of the reporting period:
Less than 30 days
31 to 60 days
61 to 90 days
91 to 180 days
December 31,
December 31,
2016
US$’000
18,739
7,208
11,799
36,039
73,785
2015
US$’000
-
12,320
-
24,640
36,960
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
23. BORROWINGS
The borrowings are repayable as follows:
Carrying amount repayable on demand and within one year (Note 1)
Carrying amount repayable within one to two years
Carrying amount repayable within two to five years (Note 2)
Carrying amount repayable over five years (Note 2)
Less: Amounts due within one year (shown under current liabilities)
Amounts shown under non-current liabilities
Notes:
December 31,
December 31,
2016
US$’000
596,233
57,662
204,699
296,238
1,154,832
(596,233)
558,599
2015
US$’000
189,009
487,766
126,278
149,378
952,431
(189,009)
763,422
1. On July 17, 2014, the Company, through its wholly-owned subsidiary, Skyland Mining (BVI) Limited, completed the issuance of bonds
to independent third parties in an aggregate principal amount of US$500 million, listed on The Stock Exchange of Hong Kong
Limited. The bonds were issued at a price of 99.634%, bearing interest rate of 3.5% with a maturity date of July 17, 2017. Interest is
payable in equal semi-annual instalments on January 17 and July 17 in each year.
2. Skyland entered into a syndicated long term loan facility agreement with a syndicate of banks ("The Lenders"), on November 3,
2015 which is available for Skyland to draw down up to October 30, 2018. As at December 31, 2016, Skyland has drawn down the
loan amount of RMB2,885,000,000 (equivalent to approximately US$415,886,000) (2015: RMB1,400,000,000 (equivalent to
approximately US$215,597,000)). The unutilised facility was RMB1,095,000,000 (equivalent to approximately US$157,849,000) as at
December 31, 2016 (2015: RMB2,580,000,000 (equivalent to approximately US$397,314,000)). The loan carries a floating rate, currently
set at 2.83% per annum, set by the People's Bank of China Lhasa Center Branch's interest rate bench mark, discounted by 7 base
points (or 0.07%) as at December 31, 2016 and 2015. Repayment of the loan is scheduled to begin in May 2019 and will reach full
maturity and repayment in November 2023. The loan is subject to a financial covenant with which the Company was in compliance
as at December 31, 2016 and 2015.
Analysed as:
Secured
Unsecured
116
December 31,
December 31,
2016
US$’000
415,886
738,946
1,154,832
2015
US$’000
215,597
736,834
952,431
FOR THE YEAR ENDED DECEMBER 31, 2016
23. BORROWINGS- continued
Fixed rate loans amounting to approximately US$738,961,000 (December 31, 2015: US$736,835,000), carry weighted average
effective interest rate of 3.13% (2015: 4.54%) per annum.
The carrying values of the pledged assets to secure borrowings by the Group are as follows:
Mining rights
24. ENTRUSTED LOAN PAYABLE
25. DEFERRED INCOME
On January 17, 2014, the Group entered into a three-year entrusted loan agreement with CNG (note 28) and China
Construction Bank (“CCB”) in which CNG provided a loan of RMB200 million (equivalent to approximately US$32,221,000
based on the spot rate at the withdrawal date) to the Group through CCB as the entrusted bank. The entrusted loan is
unsecured and carries interest at a fixed rate of 3% per annum. The principal amount was fully repaid on January 18, 2017.
Deferred income - government grants
Deferred lease inducement
Movement in the deferred income - government grants:
At January 1
Addition
Charged to other income
Exchange realignment
At December 31
ANNUAL REPORT 2016
December 31,
December 31,
2016
US$’000
922,817
2015
US$’000
930,516
December 31,
December 31,
2016
US$’000
4,195
19
4,214
2016
US$’000
1,779
3,488
(658)
(414)
4,195
2015
US$’000
1,779
19
1,798
2015
US$’000
1,772
940
(716)
(217)
1,779
117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
23. BORROWINGS
The borrowings are repayable as follows:
Carrying amount repayable on demand and within one year (Note 1)
Carrying amount repayable within one to two years
Carrying amount repayable within two to five years (Note 2)
Carrying amount repayable over five years (Note 2)
Less: Amounts due within one year (shown under current liabilities)
Amounts shown under non-current liabilities
Notes:
December 31,
December 31,
2016
US$’000
596,233
57,662
204,699
296,238
1,154,832
(596,233)
558,599
2015
US$’000
189,009
487,766
126,278
149,378
952,431
(189,009)
763,422
1. On July 17, 2014, the Company, through its wholly-owned subsidiary, Skyland Mining (BVI) Limited, completed the issuance of bonds
to independent third parties in an aggregate principal amount of US$500 million, listed on The Stock Exchange of Hong Kong
Limited. The bonds were issued at a price of 99.634%, bearing interest rate of 3.5% with a maturity date of July 17, 2017. Interest is
payable in equal semi-annual instalments on January 17 and July 17 in each year.
2. Skyland entered into a syndicated long term loan facility agreement with a syndicate of banks ("The Lenders"), on November 3,
2015 which is available for Skyland to draw down up to October 30, 2018. As at December 31, 2016, Skyland has drawn down the
loan amount of RMB2,885,000,000 (equivalent to approximately US$415,886,000) (2015: RMB1,400,000,000 (equivalent to
approximately US$215,597,000)). The unutilised facility was RMB1,095,000,000 (equivalent to approximately US$157,849,000) as at
December 31, 2016 (2015: RMB2,580,000,000 (equivalent to approximately US$397,314,000)). The loan carries a floating rate, currently
set at 2.83% per annum, set by the People's Bank of China Lhasa Center Branch's interest rate bench mark, discounted by 7 base
points (or 0.07%) as at December 31, 2016 and 2015. Repayment of the loan is scheduled to begin in May 2019 and will reach full
maturity and repayment in November 2023. The loan is subject to a financial covenant with which the Company was in compliance
as at December 31, 2016 and 2015.
FOR THE YEAR ENDED DECEMBER 31, 2016
23. BORROWINGS- continued
Fixed rate loans amounting to approximately US$738,961,000 (December 31, 2015: US$736,835,000), carry weighted average
effective interest rate of 3.13% (2015: 4.54%) per annum.
The carrying values of the pledged assets to secure borrowings by the Group are as follows:
Mining rights
24. ENTRUSTED LOAN PAYABLE
December 31,
December 31,
2016
US$’000
922,817
2015
US$’000
930,516
On January 17, 2014, the Group entered into a three-year entrusted loan agreement with CNG (note 28) and China
Construction Bank (“CCB”) in which CNG provided a loan of RMB200 million (equivalent to approximately US$32,221,000
based on the spot rate at the withdrawal date) to the Group through CCB as the entrusted bank. The entrusted loan is
unsecured and carries interest at a fixed rate of 3% per annum. The principal amount was fully repaid on January 18, 2017.
25. DEFERRED INCOME
Deferred income - government grants
Deferred lease inducement
Movement in the deferred income - government grants:
December 31,
December 31,
2016
US$’000
415,886
738,946
1,154,832
2015
US$’000
215,597
736,834
952,431
At January 1
Addition
Charged to other income
Exchange realignment
At December 31
December 31,
December 31,
2016
US$’000
4,195
19
4,214
2016
US$’000
1,779
3,488
(658)
(414)
4,195
2015
US$’000
1,779
19
1,798
2015
US$’000
1,772
940
(716)
(217)
1,779
117
Analysed as:
Secured
Unsecured
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
26. ENVIRONMENTAL REHABILITATION
27. SHARE CAPITAL AND OPTIONS- continued
FOR THE YEAR ENDED DECEMBER 31, 2016
The environmental rehabilitation relates to reclamation and closure costs relating to the Group’s mine operations at the
(b) Stock options- continued
CSH Gold Mine and Jiama Mine. The environmental rehabilitation is calculated as the net present value of estimated future
The following is a summary of option transactions under the Group’s stock option plan during the year:
ANNUAL REPORT 2016
net cash flows of the reclamation and closure costs, which total US$85,467,000(2015: US$94,710,000), discounted at 6.19%
(2015: 6.9%) per annum at December 31, 2016.
The following is an analysis of the environmental rehabilitation:
At January 1
Additions to site reclamation
Additions resulted from change in discount rate during the year
Accretion incurred in the current year
Payment during the year
Exchange realignment
At December 31
27. SHARE CAPITAL AND OPTIONS
(a) Common shares
Authorised - Unlimited common shares without par value
Issued and outstanding
Issued & fully paid:
At January 1, 2015, December 31, 2015 and 2016
(b) Stock options
49,090
-
857
2,967
(284)
(3,293)
49,337
30,932
15,537
2,031
2,606
-
(2,016)
49,090
396,413,753
1,229,061
The Group had a stock option plan which permits the board of directors of the Company to grant options to directors
and employees to acquire common shares of the Company at the price on the date of approval by the board of
directors. The Company granted such options for exercisable periods of up to six years, with a portion of the options
having vested immediately on the grant date and the balance having vested over a period of up to five years from
the grant date. The fair market value of the exercise price is the volume weighted average price of the common
shares for the five days on which they were traded immediately preceding the date of approval by the board of
directors.
The fair value of the options was measured at grant date, using the Black-Scholes option pricing model, and is
recognized over the vesting period that the employees earn the options. The fair value is recognized as an expense
over its vesting periods with a corresponding increase in equity (equity reserve). The amount recognized as expense
in each period is adjusted to reflect the number of share options expected to vest. When the share options are
forfeited after the vesting or are still not exercised at the expiry date, the amount previously recognized in equity
reserve will continue to be held in equity.
118
Balance at January 1
Options expired
Balance at December 31
-
-
-
-
-
-
400,000
400,000
-
5.56
6.09
-
400,000 stock options were granted during the year ended December 31, 2010. The options were granted on June 1,
2010 and expire on June 1, 2015. No stock options were granted during the year ended December 31, 2016 and 2015.
28. RELATED PARTY TRANSACTIONS
The Group operates in an economic environment currently predominated by enterprises directly or indirectly owned or
controlled or significantly influenced by the PRC government (hereinafter collectively referred to as “Government-related
entities”). In addition, the Group itself is a Government-related entity. CNG, a substantial shareholder with significant
influence over the Group, is a state owned company registered in Beijing, PRC, which is controlled by State-owned Assets
Supervision and Administration Commission of the State Council of the PRC.
During the year, except as disclosed below, the Group did not have any individually significant transactions with other
government-related entities in its ordinary and usual course of business.
Name and relationship with related parties during the years are as follows:
CNG owned the following percentages of outstanding common shares of the Company:
CNG
39.3
39.3
119
CADCADWeightedaverageexercise priceNumber ofoptions20152016Weightedaverageexercise priceNumber ofoptions%%December 31, 2015December 31, 2016US$’000US$’00020152016US$’000AmountNumber of shares NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
26. ENVIRONMENTAL REHABILITATION
27. SHARE CAPITAL AND OPTIONS- continued
FOR THE YEAR ENDED DECEMBER 31, 2016
The environmental rehabilitation relates to reclamation and closure costs relating to the Group’s mine operations at the
(b) Stock options- continued
CSH Gold Mine and Jiama Mine. The environmental rehabilitation is calculated as the net present value of estimated future
The following is a summary of option transactions under the Group’s stock option plan during the year:
net cash flows of the reclamation and closure costs, which total US$85,467,000(2015: US$94,710,000), discounted at 6.19%
(2015: 6.9%) per annum at December 31, 2016.
The following is an analysis of the environmental rehabilitation:
ANNUAL REPORT 2016
49,090
-
857
2,967
(284)
(3,293)
49,337
30,932
15,537
2,031
2,606
-
(2,016)
49,090
Additions resulted from change in discount rate during the year
Accretion incurred in the current year
At January 1
Additions to site reclamation
Payment during the year
Exchange realignment
At December 31
27. SHARE CAPITAL AND OPTIONS
(a) Common shares
Authorised - Unlimited common shares without par value
Issued and outstanding
Issued & fully paid:
At January 1, 2015, December 31, 2015 and 2016
(b) Stock options
396,413,753
1,229,061
The Group had a stock option plan which permits the board of directors of the Company to grant options to directors
and employees to acquire common shares of the Company at the price on the date of approval by the board of
directors. The Company granted such options for exercisable periods of up to six years, with a portion of the options
having vested immediately on the grant date and the balance having vested over a period of up to five years from
the grant date. The fair market value of the exercise price is the volume weighted average price of the common
shares for the five days on which they were traded immediately preceding the date of approval by the board of
directors.
The fair value of the options was measured at grant date, using the Black-Scholes option pricing model, and is
recognized over the vesting period that the employees earn the options. The fair value is recognized as an expense
over its vesting periods with a corresponding increase in equity (equity reserve). The amount recognized as expense
in each period is adjusted to reflect the number of share options expected to vest. When the share options are
forfeited after the vesting or are still not exercised at the expiry date, the amount previously recognized in equity
reserve will continue to be held in equity.
118
Balance at January 1
Options expired
Balance at December 31
-
-
-
-
-
-
400,000
400,000
-
5.56
6.09
-
400,000 stock options were granted during the year ended December 31, 2010. The options were granted on June 1,
2010 and expire on June 1, 2015. No stock options were granted during the year ended December 31, 2016 and 2015.
28. RELATED PARTY TRANSACTIONS
The Group operates in an economic environment currently predominated by enterprises directly or indirectly owned or
controlled or significantly influenced by the PRC government (hereinafter collectively referred to as “Government-related
entities”). In addition, the Group itself is a Government-related entity. CNG, a substantial shareholder with significant
influence over the Group, is a state owned company registered in Beijing, PRC, which is controlled by State-owned Assets
Supervision and Administration Commission of the State Council of the PRC.
During the year, except as disclosed below, the Group did not have any individually significant transactions with other
government-related entities in its ordinary and usual course of business.
Name and relationship with related parties during the years are as follows:
CNG owned the following percentages of outstanding common shares of the Company:
CNG
39.3
39.3
119
CADCADWeightedaverageexercise priceNumber ofoptions20152016Weightedaverageexercise priceNumber ofoptions%%December 31, 2015December 31, 2016US$’000US$’00020152016US$’000AmountNumber of shares NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
28. RELATED PARTY TRANSACTIONS- continued
(a) Transactions/balances with government-related entities in the PRC
Transactions/balances with CNG and its subsidiaries
The Group had the following transactions with CNG and CNG's subsidiaries:
Gold doré bars sales by the Group (Note a)
Copper and other product sales by the Group (Note b)
Provision of transportation services by the Group (Note b)
Office lease to the Group (Note b)
Construction, stripping and mining services provided to the Group (Note b, c)
Loan advanced by the Group (Note d)
Loan provided to the Group (Note e)
Cash and cash equivalent held by the Group (Note e)
Notes:
227,580
59,750
633
1,129
39,624
150,000
43,246
31,052
233,799
20,987
428
1,162
140,829
14,021
21,560
14,956
a. On May 7, 2014, the Company's subsidiary, Inner Mongolia Pacific Mining Co. Ltd. ("IMP") entered into an exclusive contract
for the sale of doré with CNG pursuant to which IMP sells gold doré bars to CNG for the period up to December 31, 2017.
The extent of the continuing connected transactions for the year ended December 31, 2016 and 2015 did not exceed the limit
as set out in the announcement of the Group on May 7, 2014.
b. On April 26, 2013, the Company entered into a product and service framework agreement with CNG for the provision
of providing mining related services and products to the Company for three years until June 18, 2016. The agreement was
amended to extend the term of the agreement to December 31, 2017 and to include copper concentrates sales contract and
office lease contract with CNG since May 29, 2015.
The extent of the continuing connected transactions for the year ended December 31, 2016 and 2015 did not exceed the limit
as set out in the announcement of the Group on May 29, 2015.
c. On May 7, 2014, Tibet Huatailong entered into a stripping and mining agreement with China Tenth Metallurgy Group Limited
Corporation ("CTMG"), a subsidiary of CNG, whereby CTMG shall provide stripping and mining services for phase II production-
period hornfels at the Jiama Mine.
The extent of the continuing connected transactions for the year ended December 31, 2016 and 2015 did not exceed the limit
as set out in the announcement of the Group on May 7, 2014.
120
ANNUAL REPORT 2016
28. RELATED PARTY TRANSACTIONS- continued
FOR THE YEAR ENDED DECEMBER 31, 2016
(a) Transactions/balances with government-related entities in the PRC- continued
Notes- continued
Transactions/balances with CNG and its subsidiaries- continued
d. On April 14, 2015, Skyland Mining (BVI) Limited (“Skyland (BVI)”), the wholly-owned subsidiary of the Company, entered into a loan
agreement with China National Gold Group Hong Kong Limited ("CNGHK"), a subsidiary of CNG, pursuant to which Skyland (BVI)
as lender, agreed to provide the loan in the principal amount up to US$14 million for a term of one year, to CNGHK as borrower.
US$6.0 million of the loan was repaid on August 25, 2016. On April 12, 2016, the loan was extended to April 2017.
On August 25, 2016, Skyland (BVI) entered into a loan agreement with CNGHK, a subsidiary of CNG, pursuant to which Skyland
(BVI) as a lender, agreed to provide the loan in the principal amount up to US$120 million and expiring on July 1, 2017, to CNGHK
as borrower.
On September 13, 2016, Skyland (BVI) entered into a loan agreement with Kichi Chaarat CISC (“Kichi”) a subsidiary of CNG,
pursuant to which Skyland (BVI) as a lender, agreed to provide the loan in the principal amount up to US$30 million and expiring
on July 10, 2017, to Kichi as borrower.
The transaction constituted a connected transaction for the Company under Chapter 14A of the Listing Rules, details of which are
set out in the announcement of the Company dated April 14, 2015 and May 24, 2016, respectively.
e. On May 29, 2015, the Company's subsidiaries, IMP, Huatailong and China Gold Finance, a subsidiary of CNG, entered into a
financial services agreement pursuant to which China Gold Finance will provide deposit services, loan, settlement, credit facility,
financial advisory and other financial services subject to terms and conditions provided therein for a term of three years.
The extent of the continuing connected transactions for the year ended December 31, 2016 and 2015 did not exceed the limit as
set out in the announcement of the Group on May 29, 2015.
The Group has the following significant balances with CNG and its subsidiaries at the end of each reporting period:
Assets
Deposits
Amounts due from related companies (note 15)
Loans receivable from CNG subsidiaries (note 15)
Cash and cash equivalents held in a CNG subsidiary
Trade receivables from CNG subsidiaries (note 15)
128
168
158,433
31,052
490
190,271
2,407
912
14,021
14,956
-
32,296
121
US$’000US$’000December 31, 2015December 31, 2016US$’000US$’000December 31, 2015December 31, 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
28. RELATED PARTY TRANSACTIONS- continued
(a) Transactions/balances with government-related entities in the PRC
Transactions/balances with CNG and its subsidiaries
The Group had the following transactions with CNG and CNG's subsidiaries:
Construction, stripping and mining services provided to the Group (Note b, c)
Gold doré bars sales by the Group (Note a)
Copper and other product sales by the Group (Note b)
Provision of transportation services by the Group (Note b)
Office lease to the Group (Note b)
Loan advanced by the Group (Note d)
Loan provided to the Group (Note e)
Cash and cash equivalent held by the Group (Note e)
Notes:
227,580
59,750
633
1,129
39,624
150,000
43,246
31,052
233,799
20,987
428
1,162
140,829
14,021
21,560
14,956
a. On May 7, 2014, the Company's subsidiary, Inner Mongolia Pacific Mining Co. Ltd. ("IMP") entered into an exclusive contract
for the sale of doré with CNG pursuant to which IMP sells gold doré bars to CNG for the period up to December 31, 2017.
The extent of the continuing connected transactions for the year ended December 31, 2016 and 2015 did not exceed the limit
as set out in the announcement of the Group on May 7, 2014.
b. On April 26, 2013, the Company entered into a product and service framework agreement with CNG for the provision
of providing mining related services and products to the Company for three years until June 18, 2016. The agreement was
amended to extend the term of the agreement to December 31, 2017 and to include copper concentrates sales contract and
office lease contract with CNG since May 29, 2015.
The extent of the continuing connected transactions for the year ended December 31, 2016 and 2015 did not exceed the limit
as set out in the announcement of the Group on May 29, 2015.
c. On May 7, 2014, Tibet Huatailong entered into a stripping and mining agreement with China Tenth Metallurgy Group Limited
Corporation ("CTMG"), a subsidiary of CNG, whereby CTMG shall provide stripping and mining services for phase II production-
period hornfels at the Jiama Mine.
The extent of the continuing connected transactions for the year ended December 31, 2016 and 2015 did not exceed the limit
as set out in the announcement of the Group on May 7, 2014.
120
28. RELATED PARTY TRANSACTIONS- continued
FOR THE YEAR ENDED DECEMBER 31, 2016
(a) Transactions/balances with government-related entities in the PRC- continued
Notes- continued
Transactions/balances with CNG and its subsidiaries- continued
d. On April 14, 2015, Skyland Mining (BVI) Limited (“Skyland (BVI)”), the wholly-owned subsidiary of the Company, entered into a loan
agreement with China National Gold Group Hong Kong Limited ("CNGHK"), a subsidiary of CNG, pursuant to which Skyland (BVI)
as lender, agreed to provide the loan in the principal amount up to US$14 million for a term of one year, to CNGHK as borrower.
US$6.0 million of the loan was repaid on August 25, 2016. On April 12, 2016, the loan was extended to April 2017.
On August 25, 2016, Skyland (BVI) entered into a loan agreement with CNGHK, a subsidiary of CNG, pursuant to which Skyland
(BVI) as a lender, agreed to provide the loan in the principal amount up to US$120 million and expiring on July 1, 2017, to CNGHK
as borrower.
On September 13, 2016, Skyland (BVI) entered into a loan agreement with Kichi Chaarat CISC (“Kichi”) a subsidiary of CNG,
pursuant to which Skyland (BVI) as a lender, agreed to provide the loan in the principal amount up to US$30 million and expiring
on July 10, 2017, to Kichi as borrower.
The transaction constituted a connected transaction for the Company under Chapter 14A of the Listing Rules, details of which are
set out in the announcement of the Company dated April 14, 2015 and May 24, 2016, respectively.
e. On May 29, 2015, the Company's subsidiaries, IMP, Huatailong and China Gold Finance, a subsidiary of CNG, entered into a
financial services agreement pursuant to which China Gold Finance will provide deposit services, loan, settlement, credit facility,
financial advisory and other financial services subject to terms and conditions provided therein for a term of three years.
The extent of the continuing connected transactions for the year ended December 31, 2016 and 2015 did not exceed the limit as
set out in the announcement of the Group on May 29, 2015.
The Group has the following significant balances with CNG and its subsidiaries at the end of each reporting period:
Assets
Amounts due from related companies (note 15)
Deposits
Loans receivable from CNG subsidiaries (note 15)
Cash and cash equivalents held in a CNG subsidiary
Trade receivables from CNG subsidiaries (note 15)
128
168
158,433
31,052
490
190,271
2,407
912
14,021
14,956
-
32,296
121
US$’000US$’000December 31, 2015December 31, 2016US$’000US$’000December 31, 2015December 31, 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
28. RELATED PARTY TRANSACTIONS- continued
(a) Transactions/balances with government-related entities in the PRC- continued
Transactions/balances with CNG and its subsidiaries- continued
The loans receivable from CNG’s subsidiaries, which is included in trade and other receivables, carry fixed interest
rates at 3.9% to 5% (2015: 5%) per annum and are unsecured and repayable within one year. The remaining
amounts due from CNG and its subsidiaries which are included in other receivables is non-interest bearing,
unsecured and repayable on demand.
Liabilities
Entrusted loan payable (note 24)
Customer advance paid by CNG’s subsidiary
Construction costs payable to CNG’s subsidiaries
Loans payable to a CNG subsidiary
28,831
33
14,970
43,304
87,138
30,800
35
15,564
21,560
67,959
The loans payable to a CNG subsidiary, which are included in borrowings, carry fixed interest rates at 4.35% (2015:
range from 4.13% to 4.37%) per annum and are unsecured and repayable within one year. With the exception
of the entrusted loan payable to CNG and loans payable to a CNG subsidiary, the amounts due to CNG and
its subsidiaries which are included in other payables and construction costs payable, are non-interest bearing,
unsecured and have no fixed terms of repayments.
Transactions/balances with other government - related entities in the PRC
Apart from the transactions with CNG and its subsidiaries disclosed above, the Group has also entered into
transactions of bank deposits, borrowings and other general banking facilities with other government-related
entities in its ordinary course of business. Over 74%, 56% and 100% (2015: over 95%, 47% and 95%) of the Group's
bank deposits, borrowings and other general banking facilities are with government-related entities respectively.
(b) Compensation of key management personnel
Other than the directors’ emoluments disclosed in note 11(a), the Group has the following compensation to other key
Accounts and other payables*
Other financial liabilities
163,098
152,312
management personnel during the years:
Salaries and other benefits
Post-employment benefits
122
854
13
867
1,033
11
1,044
*Excluded advances from customers, mining cost accrual, other accrual, payroll and benefit payable and other tax
The Group's financial instruments are exposed to certain financial risks including market risk (e.g. currency risk and interest
ANNUAL REPORT 2016
29. CAPITAL RISK MANAGEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016
The Group manages its common shares and stock options as capital. The Group’s objectives when managing capital are
to safeguard the Group’s ability to continue as a going concern in order to operate its mines, pursue the development of
its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.
The Group’s overall strategy remains unchanged from prior years.
The Group manages the capital structure and makes adjustments to it in light of operating results, changes in economic
conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may
attempt to issue new shares or options, issue of new debt, redemption of existing debt or acquire or dispose of assets.
In order to facilitate the Management of its capital requirements, the Group prepares annual expenditure budgets that
are updated as necessary depending on various factors, including operating results, successful capital deployment and
general industry conditions. The annual and updated budgets are approved by the board of directors of the Company.
In order to maximize ongoing development efforts, the Group does not pay out dividends. The Group’s investment policy
is to invest its short-term excess cash in fixed bank deposits with maturities of 90 days or less from the original date of
acquisition, selected with regards to the expected timing of expenditures from its operations.
30. FINANCIAL INSTRUMENTS
Financial assets
Cash and cash equivalents
Restricted bank balance
Trade and other receivables
Amount due from a non-controlling
shareholder of a subsidiary
(included in prepaid expenses)
Available-for-sale investments
Financial liabilities
Borrowings
- Loans, other than syndicated loan
- Syndicated loan
Entrusted loan payable
payables.
rate risk), credit risk and liquidity risk.
Loans and receivables
Loans and receivables
Loans and receivables
59,930
21,085
163,228
Loans and receivables
Available-for-sale financial assets
353
14,755
Other financial liabilities
Other financial liabilities
Other financial liabilities
738,946
415,886
28,831
112,399
9,242
35,801
384
17,447
736,834
215,597
30,800
123
US$’000US$’000December 31, 2015December 31, 2016Financial instrument classificationUS$’000US$’000December 31, 2015December 31, 2016US$’000US$’00020152016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
28. RELATED PARTY TRANSACTIONS- continued
(a) Transactions/balances with government-related entities in the PRC- continued
Transactions/balances with CNG and its subsidiaries- continued
The loans receivable from CNG’s subsidiaries, which is included in trade and other receivables, carry fixed interest
rates at 3.9% to 5% (2015: 5%) per annum and are unsecured and repayable within one year. The remaining
amounts due from CNG and its subsidiaries which are included in other receivables is non-interest bearing,
unsecured and repayable on demand.
Liabilities
Entrusted loan payable (note 24)
Customer advance paid by CNG’s subsidiary
Construction costs payable to CNG’s subsidiaries
Loans payable to a CNG subsidiary
28,831
33
14,970
43,304
87,138
30,800
35
15,564
21,560
67,959
The loans payable to a CNG subsidiary, which are included in borrowings, carry fixed interest rates at 4.35% (2015:
range from 4.13% to 4.37%) per annum and are unsecured and repayable within one year. With the exception
of the entrusted loan payable to CNG and loans payable to a CNG subsidiary, the amounts due to CNG and
its subsidiaries which are included in other payables and construction costs payable, are non-interest bearing,
unsecured and have no fixed terms of repayments.
Transactions/balances with other government - related entities in the PRC
Apart from the transactions with CNG and its subsidiaries disclosed above, the Group has also entered into
transactions of bank deposits, borrowings and other general banking facilities with other government-related
entities in its ordinary course of business. Over 74%, 56% and 100% (2015: over 95%, 47% and 95%) of the Group's
bank deposits, borrowings and other general banking facilities are with government-related entities respectively.
(b) Compensation of key management personnel
management personnel during the years:
29. CAPITAL RISK MANAGEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016
The Group manages its common shares and stock options as capital. The Group’s objectives when managing capital are
to safeguard the Group’s ability to continue as a going concern in order to operate its mines, pursue the development of
its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.
The Group’s overall strategy remains unchanged from prior years.
The Group manages the capital structure and makes adjustments to it in light of operating results, changes in economic
conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may
attempt to issue new shares or options, issue of new debt, redemption of existing debt or acquire or dispose of assets.
In order to facilitate the Management of its capital requirements, the Group prepares annual expenditure budgets that
are updated as necessary depending on various factors, including operating results, successful capital deployment and
general industry conditions. The annual and updated budgets are approved by the board of directors of the Company.
In order to maximize ongoing development efforts, the Group does not pay out dividends. The Group’s investment policy
is to invest its short-term excess cash in fixed bank deposits with maturities of 90 days or less from the original date of
acquisition, selected with regards to the expected timing of expenditures from its operations.
30. FINANCIAL INSTRUMENTS
Financial assets
Cash and cash equivalents
Restricted bank balance
Trade and other receivables
Amount due from a non-controlling
shareholder of a subsidiary
(included in prepaid expenses)
Available-for-sale investments
Financial liabilities
Loans and receivables
Loans and receivables
Loans and receivables
59,930
21,085
163,228
Loans and receivables
Available-for-sale financial assets
353
14,755
112,399
9,242
35,801
384
17,447
Other than the directors’ emoluments disclosed in note 11(a), the Group has the following compensation to other key
Accounts and other payables*
Other financial liabilities
Borrowings
- Loans, other than syndicated loan
- Syndicated loan
Entrusted loan payable
Other financial liabilities
Other financial liabilities
Other financial liabilities
163,098
152,312
738,946
415,886
28,831
736,834
215,597
30,800
Salaries and other benefits
Post-employment benefits
854
13
867
1,033
11
1,044
*Excluded advances from customers, mining cost accrual, other accrual, payroll and benefit payable and other tax
payables.
The Group's financial instruments are exposed to certain financial risks including market risk (e.g. currency risk and interest
rate risk), credit risk and liquidity risk.
122
123
US$’000US$’000December 31, 2015December 31, 2016Financial instrument classificationUS$’000US$’000December 31, 2015December 31, 2016US$’000US$’00020152016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
30. FINANCIAL INSTRUMENTS- continued
(a) Currency risk
30. FINANCIAL INSTRUMENTS- continued
(a) Currency risk- continued
The Group is exposed to the financial risk related to the fluctuation of foreign exchange rates for the monetary
US$ monetary assets and liabilities- continued
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
assets and liabilities denominated in the currencies other than the functional currencies to which they related. The
Group has not hedged its exposure to currency fluctuations. However, the Management monitors foreign exchange
exposure and will consider hedging significant foreign currency exposure should the need arise.
At the end of each reporting period, Huatailong of which its functional currency is RMB, had US$ denominated intra-
group borrowings from Skyland Mining (BVI) Limited. The intra-group borrowing is approximately US$251,000,000 (2015:
US$346,000,000) as at December 31, 2016.
The Group is mainly exposed to exchange rate fluctuation of RMB and US$.
RMB monetary assets and liabilities
Cash and cash equivalents
Restricted bank balances
Trade and other receivables
Available-for-sale investments
Accounts and other payables
Borrowings
22,362
21,085
20
1,442
(112,290)
(72,077)
(139,458)
26,430
9,242
1,524
1,540
(91,311)
(50,819)
(103,394)
Based on the above net exposures, and assuming that all other variables remain constant, a 5% (2015: 5%)
depreciation/appreciation of the RMB against the US$ would result in an decrease/increase in the Group’s loss for
the year of approximately US$5,230,000 (2015: decrease/increase in the Group’s loss for the year of approximately
US$3,877,000) for the year ended December 31, 2016.
US$ monetary assets and liabilities
Cash and cash equivalents
Inter-company loans
Other payables
124
35
( 251,000)
(9,686)
(260,651)
971
(346,000)
(10,431)
(355,460)
The Group monitors interest rate exposure and will consider hedging significant interest rate exposure should the need
Based on the above net exposures, and assuming that all other variables remain constant, a 5% (2015: 5%)
depreciation/appreciation of the US$ against the RMB would result in an decrease/increase in the Group’s loss for
the year of approximately US$11,078,000 (2015: decrease/increase in the Group’s loss for the year of approximately
US$15,107,000) for the year ended December 31, 2016.
In Management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year
end exposure does not reflect the exposure during the year.
Interest rate risk is the risk that the fair value in relation to bank balance, borrowings, entrusted loan payable and
loan to a CNG subsidiary of US$782,521,000 (2015: US$802,389,000) bearing fixed interest rate or future cash flows of
a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to cash flow
interest rate risk on the variable rate bank balances and variable-rate bank borrowings (see note 23 for details of these
(b) Interest rate risk
borrowings).
Sensitivity analysis
The following analysis is prepared assuming the financial instruments outstanding at the end of the reporting period
were outstanding for the whole year and all other variables were held constant. A 25 basis point (2015: 25 basis points)
increase or decrease is used when reporting interest rate risk internally to key management personnel and represents
Management’s assessment of the reasonably possible change in interest rates.
The analysis below reflects the sensitivity that the interest rate may drop by 25 basis points (2015: 25 basis points) or limit
to 0 %.
arise.
25 basis points (2015: 25 basis points) higher
- (increase) decrease in profit for the year
- addition in finance costs capitalized
25 basis points (2015: 25 basis points) lower
- decrease(increase)in profit for the year
- reduction in finance costs capitalized
2016
US$’000
2015
US$’000
(152)
671
152
(671)
11
302
(11)
(302)
125
US$’000US$’000December 31, 2015December 31, 2016US$’000US$’000December 31, 2015December 31, 2016 ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
30. FINANCIAL INSTRUMENTS- continued
(a) Currency risk
30. FINANCIAL INSTRUMENTS- continued
(a) Currency risk- continued
FOR THE YEAR ENDED DECEMBER 31, 2016
The Group is exposed to the financial risk related to the fluctuation of foreign exchange rates for the monetary
US$ monetary assets and liabilities- continued
assets and liabilities denominated in the currencies other than the functional currencies to which they related. The
Group has not hedged its exposure to currency fluctuations. However, the Management monitors foreign exchange
exposure and will consider hedging significant foreign currency exposure should the need arise.
At the end of each reporting period, Huatailong of which its functional currency is RMB, had US$ denominated intra-
group borrowings from Skyland Mining (BVI) Limited. The intra-group borrowing is approximately US$251,000,000 (2015:
US$346,000,000) as at December 31, 2016.
Based on the above net exposures, and assuming that all other variables remain constant, a 5% (2015: 5%)
depreciation/appreciation of the US$ against the RMB would result in an decrease/increase in the Group’s loss for
the year of approximately US$11,078,000 (2015: decrease/increase in the Group’s loss for the year of approximately
US$15,107,000) for the year ended December 31, 2016.
In Management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year
end exposure does not reflect the exposure during the year.
The Group is mainly exposed to exchange rate fluctuation of RMB and US$.
RMB monetary assets and liabilities
(b) Interest rate risk
Based on the above net exposures, and assuming that all other variables remain constant, a 5% (2015: 5%)
depreciation/appreciation of the RMB against the US$ would result in an decrease/increase in the Group’s loss for
the year of approximately US$5,230,000 (2015: decrease/increase in the Group’s loss for the year of approximately
US$3,877,000) for the year ended December 31, 2016.
Cash and cash equivalents
Restricted bank balances
Trade and other receivables
Available-for-sale investments
Accounts and other payables
Borrowings
US$ monetary assets and liabilities
Cash and cash equivalents
Inter-company loans
Other payables
22,362
21,085
20
1,442
(112,290)
(72,077)
(139,458)
26,430
9,242
1,524
1,540
(91,311)
(50,819)
(103,394)
35
( 251,000)
(9,686)
(260,651)
971
(346,000)
(10,431)
(355,460)
Interest rate risk is the risk that the fair value in relation to bank balance, borrowings, entrusted loan payable and
loan to a CNG subsidiary of US$782,521,000 (2015: US$802,389,000) bearing fixed interest rate or future cash flows of
a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to cash flow
interest rate risk on the variable rate bank balances and variable-rate bank borrowings (see note 23 for details of these
borrowings).
Sensitivity analysis
The following analysis is prepared assuming the financial instruments outstanding at the end of the reporting period
were outstanding for the whole year and all other variables were held constant. A 25 basis point (2015: 25 basis points)
increase or decrease is used when reporting interest rate risk internally to key management personnel and represents
Management’s assessment of the reasonably possible change in interest rates.
The analysis below reflects the sensitivity that the interest rate may drop by 25 basis points (2015: 25 basis points) or limit
to 0 %.
25 basis points (2015: 25 basis points) higher
- (increase) decrease in profit for the year
- addition in finance costs capitalized
25 basis points (2015: 25 basis points) lower
- decrease(increase)in profit for the year
- reduction in finance costs capitalized
2016
US$’000
2015
US$’000
(152)
671
152
(671)
11
302
(11)
(302)
The Group monitors interest rate exposure and will consider hedging significant interest rate exposure should the need
arise.
124
125
US$’000US$’000December 31, 2015December 31, 2016US$’000US$’000December 31, 2015December 31, 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
30. FINANCIAL INSTRUMENTS- continued
(c) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial asset fails to meet its contractual
obligations. The Group sold approximately 100% (2015: 100%) of its gold to one creditworthy customer, CNG,
approximately 48% (2015: 20%) and 52% (2015: 80%) of its copper concentrate and other by-product to a CNG’s
subsidiary and third party respectively for the year ended December 31, 2016 and exposes the Group to concentration
of credit risk. The failure of these customers to make required payments could have a negative impact on the Group’s
results. The Group manages this risk by demanding upfront payment from CNG and has set up monitoring procedures
to ensure that follow-up action is taken for timely settlement of receivables from the CNG’s subsidiary and the third
party. The Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to
ensure the adequate impairment losses are made for irrecoverable amounts. In this regard, Management consider the
Group’s credit risk is significantly reduced.
The Group was exposed to credit risk on loans to related parties. Management periodically monitors the financial
position of each of the related companies to ensure each related company is financially viable to settle the amount
due to the Group.
The Group’s cash and short-term bank deposits are held in large PRC, Hong Kong and Canadian financial institutions.
These investments mature at various dates within three months from inception date. The exchange rate of RMB
is determined by the Government of the PRC and the remittance of funds out of the PRC is subject to exchange
restrictions imposed by the Government of the PRC.
The Group had concentration of credit risk by geographical locations as the other receivables comprise various debtors
which are located either in the PRC or Canada for the years ended December 31, 2016 and 2015.
Other than the concentration of the credit risk on bank balances and accounts receivable, the Group does not have
any other significant concentration of credit risk.
(d) Liquidity risk
The Group operates in a capital intensive industry. The Group's liquidity requirements arise principally from the needs for
financing the expansion of its mining and processing operations.
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group
manages liquidity risk through the Management of its capital structure and financial leverage as outlined in note 29.
The Group relies on existing cash resources, available banking facilities, bank borrowings and bonds listed on the Stock
Exchange as significant sources of liquidity. As at December 31, 2016, the Group has available unutilized bank facilities
of approximately US$496 million. In addition, the directors of the Company are of the view that the banking facilities
could be renewed as the Group has no difficulty to obtain the renewal based on historical experience. The directors
of the Company can monitor the utilization of bank borrowings to finance the Group’s operation and maintain the
Group’s liquidity. Therefore, the directors of the Company consider that it has sufficient working capital to meet in full
its financial obligations as they fall due for at least the next twelve months from the end of the reporting period and
accordingly, the consolidated financial statements have been prepared on a going concern basis.
The following table details the Group’s remaining contractual maturities for its financial liabilities (see note 31 for other
commitments). The table is based on the undiscounted cash flows of financial liabilities based on the earliest date on
which the Group can be required to satisfy the liabilities.
126
127
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
30. FINANCIAL INSTRUMENTS- continued
(d) Liquidity risk - continued
To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate at the end of
the reporting period:
On demand
or within
1 year
1 - 2
years
2 - 5
years
Over 5
undiscounted
Carrying
years
cashflow
Amount
Total
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
At December 31, 2016
Accounts and other payables
Borrowings
Entrusted loan payable
163,098
615,386
28,869
-
-
72,756
238,590
319,098
1,245,830
1,154,832
163,098
163,098
28,869
28,831
807,353
72,756
238,590
319,098
1,437,797
1,346,761
On demand
or within
Total
undiscounted
Carrying
1 year
1 - 2 years
2 - 5 years
Over 5 years
cashflow
Amount
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
At December 31, 2015
Accounts and other payables
Borrowings
Entrusted loan payable
152,312
197,688
955
-
495,082
31,797
143,909
155,652
152,312
992,331
32,752
152,312
952,431
30,800
350,955
526,879
143,909
155,652
1,177,395
1,135,543
-
-
-
-
-
-
-
-
(e) Fair value
Except for the available-for-sale investment - listed equity securities which are measured at quoted bid price in an
active market (Level 1), the fair value of other financial assets and financial liabilities is determined in accordance
with generally accepted pricing models based on discounted cash flow analysis.
The Group considers that the carrying amounts of financial assets and financial liabilities recorded at amortized cost
in the consolidated financial statements approximate their fair values. There was no transfer between 1, 2 and 3 in the
current and prior years.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
30. FINANCIAL INSTRUMENTS- continued
(c) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial asset fails to meet its contractual
obligations. The Group sold approximately 100% (2015: 100%) of its gold to one creditworthy customer, CNG,
approximately 48% (2015: 20%) and 52% (2015: 80%) of its copper concentrate and other by-product to a CNG’s
subsidiary and third party respectively for the year ended December 31, 2016 and exposes the Group to concentration
of credit risk. The failure of these customers to make required payments could have a negative impact on the Group’s
results. The Group manages this risk by demanding upfront payment from CNG and has set up monitoring procedures
to ensure that follow-up action is taken for timely settlement of receivables from the CNG’s subsidiary and the third
party. The Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to
ensure the adequate impairment losses are made for irrecoverable amounts. In this regard, Management consider the
Group’s credit risk is significantly reduced.
The Group was exposed to credit risk on loans to related parties. Management periodically monitors the financial
position of each of the related companies to ensure each related company is financially viable to settle the amount
due to the Group.
The Group’s cash and short-term bank deposits are held in large PRC, Hong Kong and Canadian financial institutions.
These investments mature at various dates within three months from inception date. The exchange rate of RMB
is determined by the Government of the PRC and the remittance of funds out of the PRC is subject to exchange
restrictions imposed by the Government of the PRC.
The Group had concentration of credit risk by geographical locations as the other receivables comprise various debtors
which are located either in the PRC or Canada for the years ended December 31, 2016 and 2015.
Other than the concentration of the credit risk on bank balances and accounts receivable, the Group does not have
any other significant concentration of credit risk.
(d) Liquidity risk
The Group operates in a capital intensive industry. The Group's liquidity requirements arise principally from the needs for
financing the expansion of its mining and processing operations.
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group
manages liquidity risk through the Management of its capital structure and financial leverage as outlined in note 29.
The Group relies on existing cash resources, available banking facilities, bank borrowings and bonds listed on the Stock
Exchange as significant sources of liquidity. As at December 31, 2016, the Group has available unutilized bank facilities
of approximately US$496 million. In addition, the directors of the Company are of the view that the banking facilities
could be renewed as the Group has no difficulty to obtain the renewal based on historical experience. The directors
of the Company can monitor the utilization of bank borrowings to finance the Group’s operation and maintain the
Group’s liquidity. Therefore, the directors of the Company consider that it has sufficient working capital to meet in full
The following table details the Group’s remaining contractual maturities for its financial liabilities (see note 31 for other
commitments). The table is based on the undiscounted cash flows of financial liabilities based on the earliest date on
which the Group can be required to satisfy the liabilities.
126
30. FINANCIAL INSTRUMENTS- continued
(d) Liquidity risk - continued
FOR THE YEAR ENDED DECEMBER 31, 2016
To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate at the end of
the reporting period:
On demand
or within
1 year
1 - 2
years
2 - 5
years
Over 5
undiscounted
Carrying
years
cashflow
Amount
Total
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
At December 31, 2016
Accounts and other payables
Borrowings
Entrusted loan payable
163,098
615,386
28,869
-
-
-
163,098
163,098
72,756
238,590
319,098
1,245,830
1,154,832
-
-
-
28,869
28,831
807,353
72,756
238,590
319,098
1,437,797
1,346,761
On demand
or within
Total
undiscounted
Carrying
1 year
1 - 2 years
2 - 5 years
Over 5 years
cashflow
Amount
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
At December 31, 2015
Accounts and other payables
Borrowings
Entrusted loan payable
152,312
197,688
955
-
495,082
31,797
-
-
143,909
155,652
-
-
152,312
992,331
32,752
152,312
952,431
30,800
350,955
526,879
143,909
155,652
1,177,395
1,135,543
(e) Fair value
Except for the available-for-sale investment - listed equity securities which are measured at quoted bid price in an
active market (Level 1), the fair value of other financial assets and financial liabilities is determined in accordance
with generally accepted pricing models based on discounted cash flow analysis.
The Group considers that the carrying amounts of financial assets and financial liabilities recorded at amortized cost
its financial obligations as they fall due for at least the next twelve months from the end of the reporting period and
in the consolidated financial statements approximate their fair values. There was no transfer between 1, 2 and 3 in the
accordingly, the consolidated financial statements have been prepared on a going concern basis.
current and prior years.
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
31.COMMITMENTS AND CONTINGENCIES
Operating leases commitments
33. PARTICULARS OF SUBSIDIARIES
Details of the Company's subsidiaries at December 31, 2016 and 2015 are as follows:
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
Within one year
In the second to fifth year inclusive
Over five years
December 31,
December 31,
2016
US$’000
108
304
171
583
2015
US$’000
106
350
247
703
Operating lease payments represent rentals payable by the Group for its premises. Leases are negotiated for a term of 1 to
14 years.
Capital commitments
December 31,
December 31,
Skyland
Barbados
US$233,380,700
100%
100%
Investment holding
Capital expenditure in respect of acquisition of property, plant and
equipment in the consolidated financial statements
- contracted but not provided for
Capital expenditure in respect of capital injection to an investee
2016
US$’000
218,994
3,604
2015
US$’000
211,196
3,850
Other commitments and contingencies existed at the end of each reporting period
In October 2006, the Group signed a ten-year service contract with a third party to provide mining services to the Group
commencing in the first quarter of 2007. The value of the mining service of each year will vary and is dependent upon the
amount of mining work performed.
32. RETIREMENT BENEFITS SCHEMES
The employees of the Group's subsidiaries are members of a state-managed retirement benefits scheme operated by the
PRC government. The subsidiaries are required to contribute a certain percentage of payroll cost to the retirement benefits
scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefits scheme is to make the
specified contributions.
The total cost charged to the consolidated statement of profit or loss and other comprehensive income of approximately
(1) Domestic limited liability company
US$1,964,000 and US$1,363,000 for the years ended December 31, 2016 and 2015, respectively, represent contributions
None of the subsidiaries had issued any debt securities at the end of the year.
payable to the scheme by the Group.
128
Pacific PGM Inc.
British Virgin Islands
US$100
100%
Investment holding
2015
2016
100%
Pacific PGM (Barbados) Inc.
Barbados
US$200,000
100%
100%
Investment holding
IMP
US$45,000,000
96.5%
96.5%
Engaged in
(“BVI”)
May 17, 2001
September 6, 2007
PRC
April 29, 2002
October 6, 2004
plus
RMB1,510,549,032
Tibet Jia Ertong Minerals
PRC
US$273,920,000
100%
100%
Exploration,
Exploration Ltd.
(1)
October 31, 2003
Huatailong
(1)
PRC
January 11, 2007
RMB1,760,000,000
100%
100%
Exploration,
Jiama Industry and Trade
(1)
PRC
Skyland Mining (BVI) Limited
BVI
December 1, 2011
RMB5,000,000
51%
51%
Mining logistics and
October 26, 2012
US$1
100%
100%
Issue of bonds
exploration
and development
of mining properties
in China
development and
mining of mineral
properties and
investment holding
development and
mining of mineral
properties
transport business
129
Principal activitiesPlace and date of incorporation/ establishmentName of subsidiariesIssued and fully paid share capital/ registered capitalEquity interest attributable to the Group as at December 31,At the end of each reporting period, the Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows: NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
31.COMMITMENTS AND CONTINGENCIES
Operating leases commitments
33. PARTICULARS OF SUBSIDIARIES
Details of the Company's subsidiaries at December 31, 2016 and 2015 are as follows:
FOR THE YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT 2016
December 31,
December 31,
2016
US$’000
108
304
171
583
2016
US$’000
218,994
3,604
2015
US$’000
106
350
247
703
2015
US$’000
211,196
3,850
Within one year
Over five years
In the second to fifth year inclusive
14 years.
Capital commitments
Operating lease payments represent rentals payable by the Group for its premises. Leases are negotiated for a term of 1 to
Capital expenditure in respect of acquisition of property, plant and
equipment in the consolidated financial statements
- contracted but not provided for
Capital expenditure in respect of capital injection to an investee
Other commitments and contingencies existed at the end of each reporting period
In October 2006, the Group signed a ten-year service contract with a third party to provide mining services to the Group
commencing in the first quarter of 2007. The value of the mining service of each year will vary and is dependent upon the
amount of mining work performed.
32. RETIREMENT BENEFITS SCHEMES
The employees of the Group's subsidiaries are members of a state-managed retirement benefits scheme operated by the
PRC government. The subsidiaries are required to contribute a certain percentage of payroll cost to the retirement benefits
scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefits scheme is to make the
specified contributions.
Pacific PGM Inc.
British Virgin Islands
US$100
(“BVI”)
May 17, 2001
2016
100%
2015
100%
Investment holding
Pacific PGM (Barbados) Inc.
Barbados
US$200,000
100%
100%
Investment holding
IMP
September 6, 2007
PRC
April 29, 2002
US$45,000,000
96.5%
96.5%
Engaged in
exploration
and development
of mining properties
in China
December 31,
December 31,
Skyland
Barbados
US$233,380,700
100%
100%
Investment holding
October 6, 2004
plus
RMB1,510,549,032
Tibet Jia Ertong Minerals
PRC
US$273,920,000
100%
100%
Exploration,
Exploration Ltd.
(1)
October 31, 2003
development and
mining of mineral
properties and
investment holding
Huatailong
(1)
PRC
January 11, 2007
RMB1,760,000,000
100%
100%
Exploration,
Jiama Industry and Trade
(1)
PRC
December 1, 2011
RMB5,000,000
51%
51%
Mining logistics and
transport business
Skyland Mining (BVI) Limited
BVI
October 26, 2012
US$1
100%
100%
Issue of bonds
development and
mining of mineral
properties
The total cost charged to the consolidated statement of profit or loss and other comprehensive income of approximately
(1) Domestic limited liability company
US$1,964,000 and US$1,363,000 for the years ended December 31, 2016 and 2015, respectively, represent contributions
None of the subsidiaries had issued any debt securities at the end of the year.
payable to the scheme by the Group.
128
129
Principal activitiesPlace and date of incorporation/ establishmentName of subsidiariesIssued and fully paid share capital/ registered capitalEquity interest attributable to the Group as at December 31,At the end of each reporting period, the Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows: ANNUAL REPORT 2016
Accumulated
losses
US$’000
(105,253)
2,286
-
-
-
-
2,286
108
108
Reserves
US$’000
2,073
-
(3,998)
4,720
722
2,795
-
(2,553)
3,831
1,278
4,073
Total
US$’000
(103,180)
2,286
(3,998)
4,720
3,008
108
(2,553)
3,831
1,386
At January 1, 2015
Profit for the year
Fair value loss on available- for-sale investment
Reclassification adjustment upon impairment
of available-for-sale investment
Total comprehensive income for the year
Profit for the year
Fair value loss on available- for-sale investment
Reclassification adjustment upon impairment
of available-for-sale investment
Total comprehensive income for the year
At December 31, 2015 and January 1, 2016
(102,967)
(100,172)
At December 31, 2016
(102,859)
(98,786)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
34. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY
35. RESERVES AND DEFICITS OF THE COMPANY
Current assets
Cash and cash equivalents
Other receivables
Prepaid expenses and deposits
Loan receivables from subsidiaries
Amounts due from subsidiaries
Non-current assets
Property, plant and equipment
Loan receivables from subsidiaries
Available-for-sale investment
Investments in subsidiaries
Amounts due from subsidiaries
Total assets
Current liabilities
Other payable and accrued expenses
Advance from a subsidiary
Non-current liability
Deferred income
Total liabilities
Net current assets (liabilities)
Total assets less current liabilities
Owners’ equity
Share capital (note 27)
Reserves (note 35)
Deficits (note 35)
Total owners’ equity
Total liabilities and owners’ equity
2016
US$’000
10,180
27
438
452,684
49,258
512,587
91
58,033
12,737
987,016
50,664
1,108,541
1,621,128
834
490,000
490,834
19
490,853
21,753
2015
US$’000
71,601
25
457
110,613
-
182,696
153
387,507
15,291
987,016
47,493
1,437,460
1,620,156
1,248
490,000
491,248
19
491,267
(308,552)
1,130,294
1,128,908
1,229,061
4,073
(102,859)
1,229,061
2,795
(102,967)
1,130,275
1,128,889
1,621,128
1,620,156
130
131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
FOR THE YEAR ENDED DECEMBER 31, 2016
34. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY
35. RESERVES AND DEFICITS OF THE COMPANY
ANNUAL REPORT 2016
At January 1, 2015
Profit for the year
Fair value loss on available- for-sale investment
Reclassification adjustment upon impairment
of available-for-sale investment
Total comprehensive income for the year
At December 31, 2015 and January 1, 2016
Profit for the year
Fair value loss on available- for-sale investment
Reclassification adjustment upon impairment
of available-for-sale investment
Total comprehensive income for the year
At December 31, 2016
Accumulated
losses
US$’000
(105,253)
2,286
-
-
2,286
Total
US$’000
(103,180)
2,286
(3,998)
4,720
3,008
(102,967)
(100,172)
108
-
-
108
108
(2,553)
3,831
1,386
(102,859)
(98,786)
Reserves
US$’000
2,073
-
(3,998)
4,720
722
2,795
-
(2,553)
3,831
1,278
4,073
Current assets
Cash and cash equivalents
Other receivables
Prepaid expenses and deposits
Loan receivables from subsidiaries
Amounts due from subsidiaries
Non-current assets
Property, plant and equipment
Loan receivables from subsidiaries
Available-for-sale investment
Investments in subsidiaries
Amounts due from subsidiaries
Total assets
Current liabilities
Other payable and accrued expenses
Advance from a subsidiary
Non-current liability
Deferred income
Total liabilities
Net current assets (liabilities)
Total assets less current liabilities
Owners’ equity
Share capital (note 27)
Reserves (note 35)
Deficits (note 35)
Total owners’ equity
Total liabilities and owners’ equity
2016
US$’000
10,180
27
438
452,684
49,258
512,587
91
58,033
12,737
987,016
50,664
1,108,541
1,621,128
834
490,000
490,834
19
490,853
21,753
2015
US$’000
71,601
25
457
-
110,613
182,696
153
387,507
15,291
987,016
47,493
1,437,460
1,620,156
1,248
490,000
491,248
19
491,267
(308,552)
1,130,294
1,128,908
1,229,061
4,073
(102,859)
1,229,061
2,795
(102,967)
1,130,275
1,128,889
1,621,128
1,620,156
130
131
FIVE-YEAR FINANCIAL SUMMARY
The consolidated results and assets and liabilities of the Group for the last five financial years, as extracted from the audited
financial statements are as follows:
RESULTS
Revenue
(Loss) profit attributable to owners of
the Company
ASSETS AND LIABILITIES
Total assets
Total liabilities
Total net assets
Year ended December 31
2016
US$’000
US$’000
US$’000
US$’000
US$’000
338,601
339,949
277,783
302,608
332,387
(13,304)
(8,188)
39,729
55,032
70,938
At December 31
2016
US$'000
2,966,619
US$’000
US$’000
US$’000
US$’000
2,780,593
3,013,494
2,218,501
1,806,264
(1,546,430)
(1,333,339)
(1,548,336)
(786,976)
(438,470)
1,420,189
1,447,254
1,465,158
1,431,525
1,367,794
Equity attributable to owners of the
Company
Non-controlling interests
Total owners’ equity
1,406,457
13,732
1,420,189
1,434,227
1,452,993
1,421,431
1,359,658
13,027
12,165
10,094
8,136
1,447,254
1,465,158
1,431,525
1,367,794
132