ANNUAL REPORT
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(Incorporated in British Columbia, Canada with limited liability)
HK Stock Exchange Stock Code: 2099
Toronto Stock Exchange Stock Code: CGG
THE COMPANY
Overview
China Gold International Resources Corp. Ltd. (“China Gold International” or “The Company”)
and its subsidiaries (collectively referred to as the “Group”) 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 mineral properties. The
Company’s principal mining operation are the Chang Shan Hao Gold Mine (“CSH Gold Mine”
or “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 Gold Mine, while its Chinese joint venture (“CJV”) partner
holds the remaining 3.5% interest. China Gold International began its trial gold production at
the CSH Gold Mine in July 2007 and commercial production commenced on July 1, 2008. The
Company acquired 100% interest in the Jiama Mine on December 1, 2010. Jiama hosts a large
scale copper-gold polymetallic deposit consisting of copper, gold, molybdenum, silver, lead and
zinc. The Jiama Mine commenced commercial production in September 2010.
The Company has adopted a growth strategy focused on strategic acquisitions sourced from
the international project pipeline of its principal shareholder China National Gold Group Co.,
Ltd. (formerly known as China National Gold Group Corporation) (“China National Gold”)
and developing potential partnerships with other senior and junior mining companies. The
Company also contemplates expanding resources and reserves at its existing properties through
exploration programs.
1
COMPANY HIGHLIGHTSAnnual Report 2019 MESSAGE FROM THE CEO
LIANGYOU JIANG
Chief Executive Officer,
Executive Director
Dear valued shareholders and friends,
Hello everyone!
China Gold International’s success is mainly due to its strong asset base and culture of continuous improvement. Our
main goals for 2020 are to continue to improve our economics performances.
While we met or exceeded our commitments to the market in 2019, achieving higher goals is still our endless target.
We have set our sights on taking our performance to the next level in 2020.
2
China Gold International Resources Corp. Ltd. MESSAGE FROM THE CEO
We will continue to work very close with China National Gold. China National Gold is a significant gold producer in
China and a major shareholder of our Company. We will continue to leverage China National Gold’s technical and
operating experience to improve operations at our mines. We are the international expansion vehicle for China National
Gold and one of our mandates from them is to acquire and further develop accretive, top-quality assets.
We are focused on bringing the highest standards of business ethics in any region where we operate and combine
this philosophy with superb operational and financial performance to create a winning situation for the communities,
shareholders and our Company.
I believe that with the right strategy and team in place, we will deliver superior performance. It is an honor to serve our
stakeholders, and to serve alongside this team as we set and meet even higher performance standards. Thank you for
investing in us, and for your continued interest and support.
3
Annual Report 2019 BOARD OF DIRECTORS
EXECUTIVE DIRECTORS
Liangyou Jiang
Mr. Jiang, age 54, has served as an Executive Director of the Company since October 2014 to present. In November
2018, he was promoted to Chief Executive Officer. Mr. Jiang was elected as Vice President of China National Gold
since July 2018. He was also elected as Director and Executive Vice President of China National Gold Group Hong
Kong Limited (“China Gold Hong Kong”) from October 2018 to present. Mr. Jiang was elected as Senior Executive Vice
President of the Company from August 2014 to November 2018 and has served as a manager of Oversea Operation
Department of China National Gold from December 2015 to July 2018. Mr Jiang joined the Company in August 2010
as the General Manager of Tibet Huatailong Mining Development Co., Ltd. (“Tibet Huatailong”), and served as the
Chairman of Tibet Huatailong from February 2012 to August 2014. Mr. Jiang serves as Chairman of Zhongji Mining
since May 2015 up to present. He serves as General Manager of China Gold Hong Kong Buchuk Mining Company
Limited (“Buchuk”) since 2015 to present. He has also serves as Chairman of Buchuk since October 2017 to present.
He served as Director of Guizhou Jingfeng Mining Ltd. from August 2016 to August 2018. He serves as Chairman of
Sino Mining Guizhou Pty from June 2017 up to present. He also serves as Chairman of Soremi Investments Ltd. since
January 2018. Mr. Jiang serves as Chairman of Kichi Chaarat Closed Joint Stock Company since January 2018 to
present.
Mr. Jiang has served as a director of Tibet Jia Ertong Mining Development Co., Ltd.(“Tibet Jia Ertong”) and Executive
Director of Skyland Mining Limited(“Skyland”) since August 2018. Mr. Jiang has served as the director of China Gold
Hong Kong Holding Corp. Limited(“China Gold Hong Kong Holding”) and Mundoro Mining Inc(“Mundoro”) since
January 2015 and August 2014 respectively. From October 2007 to January 2008, Mr Jiang has served as the Head
of Engineering Management Division of the Investment Management Department of China National Gold. From January
2008 to August 2010, he has served as manager of Investment Management Department of China National Gold. Prior
to joining China National Gold’s headquarters, Mr. Jiang served as a General Manager of China Kazakhstan Mining
Corp. Ltd., a subsidiary of China National Gold from September 2006 to October 2007. From August 1987 to March
2005, Mr. Jiang worked at Changchun Gold Design Institute Co., Ltd. (the “Design Institute”). He was appointed as a
Chief Engineer of the Design Institute in February 2000 and then as Vice President and Chief Engineer of the Design
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.
Shiliang Guan
Mr. Guan, age 52, was appointed as the Vice President of the Company in September 2016. Mr. Guan joined the
Company in November 2015 and became Chairman of the Board of Tibet Huatailong. Mr. Guan started his career in
1991 and has over 29 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.
4
BOARD OF DIRECTORS AND SENIOR MANAGEMENTChina Gold International Resources Corp. Ltd. NON-EXECUTIVE DIRECTORS
Yongqing Teng
Mr. Teng, age 52, was elected as a Non-Executive Director of the Company since November 2018. Mr. Teng currently
serves as Vice President of China Gold Hong Kong from October 2018 to present. Mr. Teng also serves as Director for
Sichuan Gold Industry Administration Bureau and Chairman of Sichuan General Investment Co., Ltd. from November
2015 to present. Mr. Teng serves as an Executive Director and General Manager of China Gold Group Sichuan Co., Ltd
from October 2017 to present. Mr. Teng served as Manager of China Gold Group Sichuan Co., Ltd. from November
2015 to October 2017.
Mr. Teng was appointed as Tibet Huatailong’s General Manager from February 2012 to August 2014. He served as
Chairman of Tibet Huatailong from August 2014 to November 2015. He joined Tibet Huatailong in August 2010 where
he served as Executive Deputy General Manager until February 2012.
Mr. Teng previously served as General Manager of Sichuan Pingwu Zhongjin Mining Co., Ltd. from December 2006 to
August 2010. He also served as Deputy Department Director of Development Department of Hubei Sanxin Gold Copper
Limited Company (“Hubei Sanxin”) from from September 2006 to November 2006. He was subsequently promoted to
Director of Development Department of Hubei Sanxin from November 2006 to December 2006.
Mr. Teng has almost 30 years working experience in mining and corporate governance.
Fuzhen Kang
Ms. Kang, age 33, was elected as a Non-Executive Director of the Company since November 2018. Ms. Kang
currently serves as a Manager of The First Ore Processing Plant of Tibet Huatailong where her major responsibilities
are community relationship coordination and communications. Ms. Kang has held a number of communication and
community protection roles since joining Tibet Huatailong in July 2008.
Ms. Kang holds a bachelor’s degree in Environmental Science from the Tibet University.
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BOARD OF DIRECTORS AND SENIOR MANAGEMENTAnnual Report 2019BOARD OF DIRECTORS AND SENIOR MANAGEMENTBOARD OF DIRECTORS AND SENIOR MANAGEMENTAnnual Report 2019 INDEPENDENT NON-EXECUTIVE DIRECTOR
Ian He
Mr. He, age 58, joined the Company in May 2000 as a Non-Executive Director and serves as an independent Director.
Mr. He’s career in the mining industry has spanned over 30 years, with extensive senior executive and board
experience. Mr. He is a Director and Non-Executive Chairman of Vatukoula Gold Mines Plc, formerly listed on the
London Stock Exchange Alternative Investment Market; an Independent Non-Executive Director of SouthGobi Resources
Corp., a company dually listed on the Toronto Stock Exchange and The Stock Exchange of Hong Kong Limited (the
“Hong Kong Stock Exchange”); a Director and President of Tri-River Ventures Inc., listed on the TSX Venture Exchange
(the “TSX-V”) in Canada. Mr. He also served as a former Director on the Boards of Directors of following companies:
Zhongrun Resources Investment Corporation, listed on Shenzhen Stock Exchange; Dolly Varden Silver Corp., listed
on the TSX-V; Huaxing Machinery Corp., listed on the TSX-V. In addition to being a former Director and President of
Spur Ventures Inc. (now called Atlantic Gold Corp.), listed on the TSX-V, Mr. He was also the General Manager of its
operation subsidiary Yichang Mapleleaf Chemicals Inc. In his early career, Mr. He worked as a mineral process engineer
and coal preparation engineer in a Canadian mining company and an engineering consulting company.
Mr. He obtained his Doctoral and Master’s degrees in mineral process engineering from the University of British
Columbia in Canada and his Bachelor Degree in coal preparation from Heilongjiang Institute of Mining and Technology
(currently known as the Heilongjiang University of Technology) in China. Mr. He is a member of the Canadian Institute
of Mining, Metallurgy and Petroleum and the Canadian Institute of Corporate Directors.
Wei Shao
Mr. Shao, age 65, is the National China Service Co-Leader at Dentons Canada LLP and specializes in international
business transactions focusing on China. Mr. Shao has over 25 years of extensive experience in mergers and
acquisitions, corporate and project financing, cross-border counseling and general corporate and commercial
transactions.
Mr. Shao is actively involved in community and non-profit organizations. Prior to his legal career, Mr. Shao worked
for the United Nations in New York. Mr. Shao is an interpreter accredited by the United Nations and by the federal
government of Canada.
Mr. Shao holds an LLB from the University of Toronto, BA from Xi’an Foreign Languages Institute and U.N Accreditation
of Simultaneous Interpretation from the Beijing University of Foreign Studies.
6 6
BOARD OF DIRECTORS AND SENIOR MANAGEMENTChina Gold International Resources Corp. Ltd.BOARD OF DIRECTORS AND SENIOR MANAGEMENTChina Gold International Resources Corp. Ltd. Bielin Shi
Dr. Shi, age 63, is a leading mining executive and geologist who specialises in investment management, mining geology,
geostatistics, resource estimation and optimisation, exploration and project development.
Dr. Shi has over 30 years’ experience as a geologist with high level experience in investment management, applied
geostatistics, resource estimation and mining geology. And worldwide operational expertise in exploration and mine
projects. He also has expertise with independent technical reviews, due diligence audits and expert technical reporting
in compliance with the JORC Code, NI43-101 and Hong Kong Stock Exchange standards.
Dr. Shi is a Competent Person under the JORC Code and holds equivalent credentials in respect of Canadian and Hong
Kong’s Mineral Resources/Reserves reporting standards. Dr. Shi has published numerous papers on the application of
geostatistics in resource estimation.
Dr. Shi’s recent work has included investment management, audit and reviews of resources for multiple commodity
projects.
Dr. Shi is a Post-Doctoral Research Fellow in Geostatistics from Edith Cowan University, Western Australia. He obtained
his PhD in Geology from The University of Melbourne, Australia; and Master of Science in Geology from Guizhou
University of Technology, China.
Ruixia Han
Ms. Han, age 35, is currently Head of Operations and Risk of MEC Advisory Limited, which is the sole Investment
Advisor to Can-China Global Resource Fund. Ms. Han’s role covers investment, accounting, finance treasury and
investor relationships related matters. Prior to joining MEC Advisory Limited in 2014, Ms. Han was an Investment
Manager at The Export-Import Bank of China responsible for sourcing, evaluating and negotiating investment
opportunities in the banking and direct investment industry.
Ms. Han obtained her PhD degree in Economics (Finance), a Master degree in Economics (Venture Capital) and a
Bachelor degree in Economics (Finance) and has a double bachelor degree in Journalism from Renmin University of
China.
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BOARD OF DIRECTORS AND SENIOR MANAGEMENTAnnual Report 2019BOARD OF DIRECTORS AND SENIOR MANAGEMENTBOARD OF DIRECTORS AND SENIOR MANAGEMENTAnnual Report 2019 SENIOR MANAGEMENT
Jerry Xie
EXECUTIVE VICE PRESIDENT AND CORPORATE SECRETARY
Mr. Xie, age 59, joined the Company in March 2009 and serves as Executive Vice President and Corporate Secretary.
Mr. Xie is responsible for overseeing corporate secretarial matters and managing compliance and 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 2009 to October 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, evaluation of the Company’s Jiama
polymetallic mineral property located in Tibet, China (the “Jiama Mine”), merger and acquisitions and bond issuance, as
further described below. Mr. Xie has over 30 years of experience of Engineering and Project Management in the petro-
chemical and oil-sand industry and mining 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’s Degree in Mechanical Engineering from the University of Calgary, a Master’s Degree in Mining
Engineering from the Beijing University of Science & Technology and a diploma from the Mechanical Department of
Shanghai Institute of Chemical Industry.
Derrick Zhang
CHIEF FINANCIAL OFFICER
Mr. Zhang, age 50, joined the Company in January 2010 and serves as Chief Financial Officer responsible for financing,
internal control and the planning and management of the Company’s accounting and financial reporting, since August
2011. Mr. Zhang served as interim Chief Financial Officer of the Company from February 2011 to August 2011 and
served as Controller of the Company from January 2010 to February 2011. Mr. Zhang has over 27 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 Canada (CPA), a member of the Association of
Chartered Certified Accountants in the United Kingdom (ACCA) and a member of the Hong Kong Institute of Certified
Public Accounts (HKICPA). Mr. Zhang is also a Member of the Society of Economic Geologists in the United States. Mr.
Zhang is a certified Merger and Acquisition Specialist (CMAS) from the Chartered Institute of Management Consultants
in the United States. Mr. Zhang holds a Bachelor of Commerce degree with distinction majoring in Accountancy from
Concordia University in Montreal, Quebec, Canada and a Bachelor of Engineering degree (honors) in Geology from
Southwest University of Science and Technology in China.
8 8
BOARD OF DIRECTORS AND SENIOR MANAGEMENTChina Gold International Resources Corp. Ltd.BOARD OF DIRECTORS AND SENIOR MANAGEMENTChina Gold International Resources Corp. Ltd. Lisheng Zhang
VICE PRESIDENT
Mr. Zhang, age 59, serves as the Vice President responsible for overseeing overall management of the Company’s CSH
Gold Mine, from March 2013 to present. He was appointed as Vice President of China Gold Hong Kong since October
2018. Mr. Zhang joined the Company in September 2008 as a Chairman of Inner Mongolia Pacific Mining Co., Ltd. (the
“Inner Mongolia Pacific”)., 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.
Gerard Guo
CHIEF ENGINEER
Mr. Guo, age 56, was appointed as Chief Engineer of the Company on November 13, 2018. Mr. Guo is a professional
engineer with PEO and has over 36 years’ experience in engineering studies, mine engineering and mine operations.
He had served as a senior mining engineer and director of technical services center for the Company since 2014.
Previously Mr. Guo held senior mining engineer positions with global mining engineering consulting firms, working on
a variety of projects for a wide range of clients, including some of the world’s largest mining companies. He also held
the position of engineering director with the Mine and Gold Branch, Changsha Engineering and Research Institute of
Nonferrous Metallurgy, leading design and consultancy of key national and provincial/ministry projects in China. In
addition, he also assumed responsibilities of leading China’s strategic planning initiatives for development at new and
existing nonferrous metals mines and smelters. Mr. Guo has been serving as the Company’s internal qualified person
for purposes of National Instrument 43-101 of the Canadian Securities Administrators since May 2018.
The Directors are pleased to present this report and the audited consolidated financial statements of the Company for
the year ended December 31, 2019 (the “Reporting Period”).
99
BOARD OF DIRECTORS AND SENIOR MANAGEMENTAnnual Report 2019BOARD OF DIRECTORS AND SENIOR MANAGEMENTBOARD OF DIRECTORS AND SENIOR MANAGEMENTAnnual Report 2019 PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The Company is a gold and base metal mining company registered 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 38 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 2019, an indication of likely future development in the Company’s business, the Company and all its subsidiaries
(the “Group”) 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 CEO”, “Management
Discussion and Analysis” and “Corporate Governance 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 31 of the
Financial Statements.
RESERVES
Details of the reserves available for distribution to the shareholders as at December 31, 2019 are set out in Note 40 of
the Financial Statements.
RESULTS
The results of the Group for the year ended December 31, 2019 are set out in the consolidated statement of profit or
loss and other comprehensive income on pages 74 and 75.
DIVIDEND
The Directors do not recommend the payment of a final dividend as at December 31, 2019.
DIRECTORS
The directors during the Reporting Period and up to the date of this report are as follows:
Executive Directors
Liangyou Jiang
Shiliang Guan
Non-Executive Directors
Yongqing Teng
Fuzhen Kang
10
DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd. Independent Non-Executive Directors
Ian He
Wei Shao
Bielin Shi
Ruixia Han
In accordance with article 14.1 of the Company’s articles (the “Articles”), each of the Directors shall retire at the 2020
annual and special meeting of the Company (the “2020 AGM”) and, being eligible, shall offer themselves to be re-
elected at the 2020 AGM.
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 4 to page 9 of this annual report.
DISCLOSURE OF INFORMATION OF DIRECTOR PURSUANT TO RULE 13.51B(1) OF THE
HONG KONG LISTING RULES
Save 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 Governing the Listing of Securities on Hong Kong Stock Exchange (the
“Listing Rules”).
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 Listing Rules, and considers that all of the Independent Non-Executive
Directors are independent.
DIRECTORS’ SERVICE CONTRACTS
None of the Directors elected at the 2019 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 AND INSURANCE
Pursuant to the Articles of the Company and subject to the provisions of the Business Corporations Act (British
Columbia) (the “Business Corporations Act”), every Director or alternate director of the Company or its affiliates (and his
or her heirs and legal personal representatives) shall be indemnified by the Company against any judgment, penalty or
fine awarded or imposed in, or an amount paid in settlement of, a legal proceeding or investigative action where such
person is liable by reason of him/her having been a director or alternate director of the Company and the Company
must, after the final disposition of such proceeding, pay the expenses actually and reasonably incurred by such person.
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.
1111
DIRECTORS’ REPORTAnnual Report 2019DIRECTORS’ REPORTDIRECTORS’ REPORTAnnual Report 2019 DIRECTORS’ INTEREST IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS
Mr. Liangyou Jiang, Mr. Shiliang Guan, Mr. Yongqing Teng and Ms. Fuzhen Kang 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 or affiliate roles with 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 directly or
indirectly, subsisted as at December 31, 2019 or at any time during the Reporting Period.
CONTRACTS OF SIGNIFICANCE WITH CONTROLLING SHAREHOLDERS
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 a member of the Group, the controlling shareholder or its subsidiaries 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’ AND CHIEF EXECUTIVE’S INTERESTS IN SHARES
As at December 31, 2019, 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 Listing Rules were as follows:
SHARES
Long Position in Shares
Position
Company
Number of
shares held
Nature of
interest
Approximate
percentage of
interest in the
Company
Independent Non-
Executive Director
China Gold International
Resources Corp. Ltd.
150,000
Personal
0.0378%
Name
Ian He
12 12
DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd.DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd.
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 Listing Rules. As
a result, the transactions entered into between China National Gold and the Controlled Entities 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 Listing Rules.
In addition, Tibet Huatailong, Inner Mongolia Pacific, China National Gold Group Finance Company Limited (“China
Gold Finance”), and China Gold Hong Kong (together 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 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 mining related services and products to the
Company in order to facilitate the Group’s operations in the People’s Republic of China (the “PRC”) for three years until
June 18, 2016.
The Company entered into a First Supplemental Product and Service Framework Agreement (the “First Supplemental
Product and Service Framework Agreement”) on May 29, 2015 to extend the expiry date of the Product and Service
Framework Agreement to December 31, 2017 and included 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. Details of the Product and Services Framework 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.
The Company entered into a Second Supplemental Product and Services Framework Agreement (the “Second
Supplemental Product and Services Framework Agreement”) on May 26, 2017 to extend the term to December 31,
2020 and to extend the scope of the First Supplemental Product and Service Framework Agreement to include leasing
services to be provided by Zhongxin International Financial Leasing (Shenzhen) Co. Ltd., the shares of which are 80%
owned by China National Gold.
For the Reporting Period, the transaction amounts under the Product and Service Framework Agreement (as amended
by the First Supplemental Product and Service Framework Agreement and the Second Supplemental Product and
Service Framework Agreement) were approximately RMB645million where the relevant annual monetary cap was
RMB11,400 million.
Supplemental 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 from time to time for three years ending December 31, 2015, December 31, 2016
and December 31, 2017. 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 15, 2014 and poll results announcement dated June 20, 2014.
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DIRECTORS’ REPORTAnnual Report 2019DIRECTORS’ REPORTDIRECTORS’ REPORTAnnual Report 2019 On May 26, 2017 Inner Mongolia Pacific and China National Gold entered into the Supplemental Contract for Purchase and
Sale of Doré (the “Supplemental Contract for Purchase and Sale of Doré”) for a term commencing on January 1, 2018 and
expiring on December 31, 2020. Details of the Supplemental Contract for Purchase and Sale of Doré are as stated in the
Company’s announcement dated May 26, 2017, circular dated May 31, 2017 and poll results announcement dated June 30,
2017.
For the Reporting Period, the transaction amounts under the 2015 Contract for Purchase and Sale of Doré and Supplemental
Contract for Purchase and Sale of Doré were approximately RMB1,415 million where the relevant annual monetary cap was
RMB2,700 million, which accounted for 31% of the total sales of the Group for the year then ended.
Partially Exempt Connected Transactions
Deposit Services Agreement
On December 18, 2017, the Company and China Gold Finance entered into a deposit services agreement pursuant
to which the Company and its subsidiaries may, from time to time, make withdrawals and deposits with China Gold
Finance up to a daily maximum deposit balance (including interest) not exceeding RMB100 million for a term of one
year commencing on January 1, 2018 (the “Deposit Services Agreement”). Deposit interest rates payable by China
Gold Finance to the Company for any deposits shall be, at a minimum, 20% higher than the benchmark interest rate
published by The People’s Bank of China for the same period and for the same type of deposit. Details of the Deposit
Services Agreement are as stated in the Company’s announcement dated December 19, 2017.
On December 18, 2018, the Company and China Gold Finance entered into a Supplemental Deposit Services Agreement
(the “Supplemental Deposit Services Agreement”) to extend the term for a further year to December 31, 2019. Details
of the Supplemental Deposit Services Agreement are as stated in the Company’s announcement dated December 20,
2018.
On December 31, 2019, the Company and China Gold Finance entered into a Supplemental Deposit Services Agreement
(the “Supplemental Deposit Services Agreement”) to extend the term for a further year to December 31, 2020. Details
of the Supplemental Deposit Services Agreement are as stated in the Company’s announcement dated December 31,
2019.
Daily maximum deposit monetary caps for the transactions stipulated under the Deposit Services Agreement pursuant to
Chapter 14A of the Listing Rules (including accumulative settlement interest) shall not exceed RMB100 million. There
have not been any deposits exceeding the daily maximum monetary cap for the Reporting Period.
14 14
DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd.DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd. 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 (Revised) “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 its findings and conclusions in respect
of the continuing connected transactions disclosed above by the Group in accordance with Rule 14A.56 of the 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. The Auditor has confirmed to the Board
that nothing has come to their attention that causes them to believe that the above continuing connected transactions
for the year ended December 31, 2019: (a) have not been approved by the Board; (b) the transactions were not, in all
material respects, in accordance with the pricing policies of the Company; (c) the transactions were not entered into, in
all material respects, in accordance with the relevant agreements governing the transactions; and (d) have exceeded the
respective maximum aggregate annual caps as disclosed in the previous announcements of the Company.
1515
DIRECTORS’ REPORTAnnual Report 2019DIRECTORS’ REPORTDIRECTORS’ REPORTAnnual Report 2019 In accordance with Rule 14A.55 of the Listing Rules, the Independent Non-Executive Directors have reviewed
and confirmed that the continuing connected transactions carried out under (i) the Second Supplemental Product
and Services Framework Agreement, (ii) the Supplemental Contract for Purchase and Sale of Doré, and (iii) the
Supplemental Deposit Services Agreement have each been entered into: (a) in the ordinary and usual course of the
Company’s business; (b) on normal commercial terms or better; and (c) in accordance with the relevant agreements
governing them on terms that are fair and reasonable and in the interests of the shareholders of the Company as a
whole.
The Independent Non-Executive Directors also confirmed in their review of the continuing connected transactions that
all such transactions were carried out in accordance with the pricing policies of the Company and processes set out in
the respective agreements for such transactions.
Related Party Transactions
Details of the related party transactions undertaken during the Reporting Period set out in Note 32 of the Financial
Statements. All the related party transactions constituted connected transactions and/or continuing connected
transactions of the Company as defined in the Listing Rules. The Company had complied with the relevant requirements
under Chapter 14A of the Listing Rules during the Reporting Period.
SKYLAND BONDS
On June 27, 2017, the Company, Skyland Mining, China International Capital Corporation Hong Kong Securities Limited,
Citigroup Global Markets Limited, CCB International Capital Limited, Industrial Bank Co., Ltd. Hong Kong Branch
and Standard Chartered Bank (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 severally and not jointly, to subscribe for bonds in an aggregate principal amount of US$500 million
(equivalent to approximately HK$3.88 billion) at an issue price of 99.663% (the “Bonds”) bearing interest at the rate
of 3.25% with a maturity date of July 6, 2020, rated BBB- by Standard & Poor’s. The Bonds were unconditionally and
irrevocably guaranteed by the Company. The net proceeds are used for repaying existing indebtedness, working capital
and general corporate purposes of the Company.
On July 6, 2017, all the conditions to the issue of the Bonds as set out in the Subscription Agreement were satisfied
and the issue of the Bonds was closed. The Bonds were listed on the Hong Kong Stock Exchange on July 7, 2017.
Details of the Subscription Agreement are stated in the Company’s announcements dated June 27, 2017 and July 6,
2017.
EQUITY-LINKED AGREEMENTS
During the year ended December 31, 2019, the Company has not entered into any equity-linked agreement (as defined
in section 6 of the Companies (Directors’ Report) Regulation (Chapter 622D of the Laws of Hong Kong)).
16 16
DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd.DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd. NUMBER AND REMUNERATION OF EMPLOYEES
As at December 31, 2019, the Company had 2,085 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$55,939,000, as compared to the staff costs of US$55,944,000 in 2018.
EMOLUMENT POLICY
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 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 Reporting Period.
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 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, 2019, based on the information available 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 disclosed above in respect of the Directors and chief executive.
1717
DIRECTORS’ REPORTAnnual Report 2019DIRECTORS’ REPORTDIRECTORS’ REPORTAnnual Report 2019 Long Position in Shares of the Company
Approximate
Number of
percentage of
Name
Nature of interest
Shares held
outstanding shares
China National Gold Group Co., Ltd.(1)
China National Gold Group Hong Kong Limited
Indirect
Registered Owner
155,794,830(2)
155,794,830
39.3%
39.3%
Notes:
(1)
China National Gold Group Co., Ltd. directly and wholly owns China National Gold Group Hong Kong Limited and therefore the interest
attributable to China National Gold Group Co., Ltd. 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 Co., Ltd.
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 listed securities.
PRE-EMPTIVE RIGHTS
There are no provisions for pre-emptive rights under the Articles or under the laws of British Columbia, 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 Listing Rules.
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:
Percentage of the
total purchases/sales
accounted for
18%
49%
31%
85%
Purchases
– the largest supplier
– five largest suppliers combined
Sales
– the largest customer
– five largest customers combined
18 18
DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd.DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd.
Sales to the largest customer of the Company account for 31% of the Company’s sales and relate to the sale of gold
doré from the CSH Gold Mine pursuant to the Supplemental Contract for Purchase and Sale of Doré. In addition, the
five largest customers account for 85% of the Company’s sales. However, due to the fact that pricing for the Company’s
mineral products is based on prevailing market prices in accordance with the contracts with customers, the Company
does not consider there to be any risks associated with reliance on major customers. The Company considers that
its pricing structure based on prevailing metal prices mitigates against any adverse effects from concentration on five
customers.
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$311,400.
EVENTS AFTER REPORTING PERIOD
The Board appointed Mr Liangyou Jiang, currently the Chief Executive Officer of the Company and an Executive
Director, as the Chairman with effect from 29 March 2020.
There are no other significant events occurring after December 31, 2019 as set out in the Financial Statements and
Management’s Discussion and Analysis.
INDEPENDENT AUDITORS
A resolution will be submitted at the 2020 AGM to re-appoint Deloitte Touche Tohmatsu in Hong Kong as the
Company’s auditors.
On behalf of the Board,
Chairman and Chief Executive Director
Liangyou Jiang
March 30, 2020
1919
DIRECTORS’ REPORTAnnual Report 2019DIRECTORS’ REPORTDIRECTORS’ REPORTAnnual Report 2019 The Board will continue to review and, where appropriate, improve the current practices of the Company on the basis
of the experience and regulatory changes to enhance the confidence of shareholders of the Company, and to safeguard
shareholders’ interest for continued and long term success of the Company over time.
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;
established an Audit Committee, a Nominating and Corporate Governance Committee and a Compensation and
Benefits Committee;
established a Health, Safety and Environmental Committee;
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 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.
20
CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. CHANGES IN INFORMATION WITH RESPECT OF DIRECTORS AND EXECUTIVES
In accordance with Rule 13.51B(1) of the Listing Rules, the changes in information required to be disclosed by
directors pursuant to paragraphs (a) to (e) and (g) of Rule 13.51(2) of the Company are set out below:
1. Mr. Xiangdong Jiang retired from the board upon the conclusion of the annual and special meeting held on June
25, 2019;
2.
Each of Mr. Yunfei Chen, Mr. Gregory Hall and Mr. John King Burns voluntarily did not stand for re-election upon
the conclusion of the annual and special meeting held June 25, 2019;
3.
Each of Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han were elected as an independent Non-Executive Director
at the annual and special meeting held on June 25, 2019;
4. Mr. Shiliang Guan was elected as an Executive Director at the annual and special meeting held on June 25, 2019;
and
5. Mr. Xin Song resigned as Chairman on November 14, 2019.
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 and Rule 3.10 of the CG Code requires every Board of
Directors to include at least three Independent Non-Executive Directors and at least one-third of the Board of Directors
to comprise of Independent Non-Executive 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. The CG Code includes a number of factors to take into consideration when assessing the
independence of a Non-Executive director, including the percentage of shares held by him or her in the Company and
any material interest in any principal business activity of the Group. As at December 31, 2019 and as at the date of this
report, the Board has determined that it consisted of four “independent directors” and four 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, results in balanced representation.
As at the date of this report, the Company believes it has a well-balanced Board. The Board is comprised of two (2)
Executive Directors, two (2) Non-Executive Directors and four (4) Independent Non-Executive Directors. The Directors
for the year ended 31 December 2019 and up to the date of this report are as follows:
Executive Directors
Liangyou Jiang (Chief Executive Officer)(1)
Shiliang Guan (Vice President)(2)
2121
CORPORATE GOVERNANCE REPORTAnnual Report 2019CORPORATE GOVERNANCE REPORTCORPORATE GOVERNANCE REPORTAnnual Report 2019 Non-Executive Directors
Yongqing Teng(3)
Fuzhen Kang(4)
Independent Non-Executive Directors
Ian He
Wei Shao
Bielin Shi
Ruixia Han
Notes:
(1) Mr. Jiang is an Executive Director in his capacity as Chief Executive Officer of the Company.
(2) Mr. Guan is an Executive Director in his capacity as Vice President of the Company.
(3) Mr. Teng is a Non-Executive Director in his capacity as an affiliate of China National Gold which has a material relationship with the
Company.
(4) Ms. Kang is a Non-Executive Director in her capacity as an affiliate of China National Gold which has a material relationship with the
Company.
As at the date of this report, China National Gold holds approximately 39.3% of the Company’s outstanding common
shares.
Biographical details of the Directors of the Company are set out in the section headed “Biographical Details of Directors
and Senior Management” on pages 4 to 9 of this annual report. The Board has assessed the independence of all
the Independent Non-Executive Directors and considers each of them to be independent having regard to (i) their
annual confirmation on independence as required under the Listing Rules, (ii) the absence of involvement in the daily
management of the Company and (iii) the absence of any relationships or circumstances which would interfere with the
exercise of their independent judgement.
The Directors are satisfied that the size and composition of the Board results in a balanced representation on the Board
among executive and non-executive directors and the Company’s controlling 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.
Since November 2018, Mr. Liangyou Jiang serves as the Company’s Chief Executive Officer in addition to being an
Executive Director. The Chief Executive Officer is responsible for running the Company’s businesses and implementing
the Group’s strategic plans and business goals.
22 22
CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. For the Reporting Period, Mr. Ian He was appointed lead Independent Non-Executive Director as of November
13, 2018. The role of lead Independent Non-Executive Director was created to enhance the Company’s corporate
governance practices and provides leadership to the Independent Non-Executive Directors, liaise with Chief Executive
Officer on behalf of the Independent Non-Executive Directors and advise the Board on matters where there may be
an actual or perceived conflict of interest such as Chief Executive Officer’s performance evaluation to ensure the best
possible operation of the Board.
For the Reporting Period, the Nominating & Corporate Governance Committee is comprised of four Independent Non-
Executive Directors, namely, Mr. Wei Shao, Mr. Ian He, Dr. Bielin Shi and Ms. Ruixia Han and one Executive Director,
namely, Mr. Liangyou Jiang. Mr. Wei Shao was appointed Chairman of the Nominating & Corporate Governance
Committee on June 25, 2019.
For the Reporting Period, the Audit Committee is comprised of four Independent Non-Executive Directors, namely,
Mr. Ian He, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han. Mr. Ian He was appointed as the Chairman of the Audit
Committee on June 25, 2019.
For the Reporting Period, the Compensation & Benefits Committee is comprised of four Independent Non-Executive
Directors, namely, Mr. Ian He, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han and one Non-Executive Director Mr.
Yongqing Teng. Ms. Ruixia Han was appointed as the Chairman of the Compensation & Benefits Committee on June
25, 2019.
For the Reporting Period, the Health, Safety and Environmental Committee is comprised of four Independent Non-
Executive Directors, namely, Mr. Ian He, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han and one Executive Director
Mr. Shiliang Guan. Dr. Bielin Shi was appointed as the Chairman of the Health, Safety and Environmental Committee on
June 25, 2019.
The Company has received from each of its Independent Non-Executive 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 Directors 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 Business Corporations Act (British Columbia) and the Company’s Articles.
NON-EXECUTIVE DIRECTORS
The Non-Executive Directors bring a range of business, professional and financial expertise, experience and independent
judgment to the Board.
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 Company’s 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.
2323
CORPORATE GOVERNANCE REPORTAnnual Report 2019CORPORATE GOVERNANCE REPORTCORPORATE GOVERNANCE REPORTAnnual Report 2019 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 Directors are encouraged to participate in continuous professional development to develop and refresh their
knowledge and skills. The Board provides continuing education opportunities for all Directors, so that each individual
Director may maintain or enhance his or her skills and abilities as a Director, as well as to ensure his or her knowledge
and understanding of the Company’s business remains current.
The orientation and continuing education process will be reviewed on an annual basis and will be revised accordingly.
There are technical presentations at Board meetings, focusing on either a particular property or a summary of various
properties. The question and answer portions of these presentations are valuable learning resources for the non-
technical Directors. The Board has also incorporated training into their Board meetings with presentations by legal,
accounting and other professional groups and individuals.
All Directors participated in appropriate continuous professional development and provided the Company with their
records of training they received during the Reporting Period. Directors participated in the training which included
reading regulatory updates, attending seminars or conducting training sessions and exchanging views. 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:
Reading/
Attended seminars/
conferences and
exchange views
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Executive Directors
Liangyou Jiang
Shiliang Guan
Non-Executive Directors
Yongqing Teng
Fuzhen Kang
Independent Non-Executive Directors
Ian He
Wei Shao
Bielin Shi
Ruixia Han
24 24
CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd.
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 shareholders’ 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 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.
2525
CORPORATE GOVERNANCE REPORTAnnual Report 2019CORPORATE GOVERNANCE REPORTCORPORATE GOVERNANCE REPORTAnnual Report 2019 The Board has instructed the management to maintain procedures to monitor and promptly address shareholders’
concerns and has directed and will continue to direct the 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.
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 the Company’s external legal counsel. The Disclosure Committee
assesses materiality and determines when developments require 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.
In order to ensure diversity of the Board and improve the Company’s corporate governance, the Board approved the
Board diversity policy (the “Policy”) in accordance with the requirements set out in code provision A.5.6 of the CG
Code. The Policy sets out the approach to achieve diversity on the board by considering a number of factors, including
without limitation, gender, age, cultural and educational background, professional skills, knowledge, experience and
length of service, in order to maintain an appropriate range and balance of talents, skills, experience and background
of the Board. Appointments of Board members shall be based on merit, and candidates will be assessed based on
objective criteria. The Company will also take into account factors based on its own business model and specific needs
from time to time. The Nominating and Corporate Governance Committee will monitor the implementation of the Policy;
review the Policy from time to time, as appropriate; report to the Board on their decisions or propose recommendations
on any amendments for the Board’s review and approval, to ensure the effectiveness of the Policy. No measurable
objectives for achieving diversity were specifically set by the Board during the year, other than the recruitment of the
most suitable candidate for a position.
26 26
CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. COMMITTEES OF THE BOARD
To oversee particular aspects of the Company’s affairs and to assist in the execution of its responsibilities, the Board
has established four Board committees, namely Audit Committee, Nominating and Corporate Governance Committee,
Compensation and Benefits Committee, and Health, Safety and Environment Committee. Independent Non-Executive
Directors play an important role in these committees to ensure that independent and objective views are expressed and
to promote critical review and control.
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 is comprised of four Independent Non-Executive Directors, including Mr. Ian He, Mr. Wei Shao, Dr.
Bielin Shi and Ms. Ruixia Han. Mr. He serves as Chairman of the Audit Committee.
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 power 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 Audit 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 the responsibilities of the management and the auditors.
All services to be performed by the auditors of the Company must be approved in advance by the Audit Committee.
The Audit Committee held four meetings during the Reporting Period. In performing its duties in accordance with its
charter, the Audit Committee has:
•
•
•
•
•
•
overseen the Company’s relationship, audit fees and terms of engagement of the external auditors;
reviewed the independence of the external auditors and made recommendations to the Board on the re-
appointment of the external auditors;
reviewed the financial budget and planning including the annual and interim financial statements and results
announcements during the Financial Year;
reviewed and assessed the effectiveness of the Company’s financial controls, corporate governance, internal
controls and risk management systems;
reviewed the effectiveness of the Company’s internal audit function; and
reported to the Board on the decisions and recommendations of the Audit Committee.
The individual attendance of Audit Committee members at meetings is set out on page 30 of this annual report.
2727
CORPORATE GOVERNANCE REPORTAnnual Report 2019CORPORATE GOVERNANCE REPORTCORPORATE GOVERNANCE REPORTAnnual Report 2019 Nominating and Corporate Governance Committee
The Board established a Nominating and Corporate Governance Committee, operating under a charter approved by
the Board. The Nominating and Corporate Governance Committee is comprised of four Independent Non-Executive
Directors, including Mr. Ian He, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han and one Executive Director, namely
Mr. Liangyou Jiang. Mr. Wei Shao serves as Chairman of the Nominating and Corporate Governance Committee.
The primary objective of the Nominating and Corporate Governance Committee is to assist the Board in fulfilling its
oversight responsibilities by (a) determining a policy and process for 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 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 monitor, review and confirm compliance with legal, 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 Code.
The individual attendance of Nominating and Corporate Governance Committee members at meetings is set out on page
30 of this annual report.
Compensation and Benefits Committee
The Board has established the Compensation and Benefits Committee, which operates under a charter approved by the
Board. The Compensation and Benefits Committee is comprised of four Independent Non-Executive Directors including
Mr. Ian He, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han, and one Non-Executive Director, namely, Mr. Yongqing
Teng. Ms. Ruixia Han serves as Chairman of the Compensation and Benefits Committee.
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
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.
28 28
CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. The individual attendance of Compensation and Benefits Committee members at meetings is set out on page 30 of this
annual report.
Health, Safety and Environmental Committee
The Board has established the Health, Safety and Environmental Committee, which operates under a charter approved
by the Board. The Company’s Health, Safety and Environmental Committee is comprised of four Independent Non-
Executive Directors, including Mr. Ian He, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han, and one Executive Director,
namely, Mr. Shiliang Guan. Dr. Bielin Shi serves as the Chairman of the Health, Safety and Environmental Committee.
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 Health, Safety and Environmental Committee met during the Reporting Period
to receive reports from the Chief Safety Officers from the CSH Gold Mine and the Jiama Mine, 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.
The individual attendance of Health, Safety and Environmental Committee members at meetings is set out on page 30
of this annual report.
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.
2929
CORPORATE GOVERNANCE REPORTAnnual Report 2019CORPORATE GOVERNANCE REPORTCORPORATE GOVERNANCE REPORTAnnual Report 2019 MEETINGS OF THE BOARD AND BOARD COMMITTEES
Details of attendance of the Directors (either in person or through telephone conferences) at Board regular meetings,
meeting of Board Committees and general meetings during the Reporting Period are set out below. The management
also communicates informally with the Board on a regular basis, and solicits the advice of the Directors on matters
falling within their special knowledge or experience. In addition, the Independent Non Executive Directors meet regularly
on formal and informal basis to facilitate the exercise of their independent judgment.
Attendances/Number of Meetings
Attendances/Number of Meetings
Nominating
Health,
and Corporate
Compensation
Safety and
2019 Annual
Audit
Governance
and Benefits
Environmental
and Special
Committees
Overall
Board
Committee
Committee
Committee
Committee
Meeting*
(Total)
Attendance
2/4 (50%)
3/4 (75%)
1/2 (50%)
3/4 (75%)
N/A
N/A
N/A
N/A
1/1 (100%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3/3 (100%)
N/A
4/4 (100%)
4/4 (100%)
3/3 (100%)
1/1 (100%)
5/5 (100%)
2/2 (100%)
2/2 (100%)
1/1 (100%)
2/2 (100%)
2/2 (100%)
0/1 (0%)
2/2 (100%)
2/2 (100%)
1/1 (100%)
0/0
0/0
0/0
3/3 (100%)
3/3 (100%)
3/3 (100%)
0/1
0/1
0/1
0/1
1/1
1/1
0/1
0/1
1/1 (100%)
N/A
3/3 (100%)
N/A
3/6 (50%)
3/5 (60%)
4/6 (67%)
3/5 (60%)
13/13(100%) 18/18 (100%)
6/6 (100%)
8/8 (100%)
5/6 (83%)
7/8 (88%)
6/6 (100%)
8/8 (100%)
Liangyou Jiang
Yongqing Teng
Shiliang Guan(1)
Fuzhen Kang
Ian He
Wei Shao(2)
Bielin Shi(3)
Ruixia Han(4)
*
Except for the 2019 Annual and Special Meeting held on June 25, 2019, no other general meeting was held during the Reporting Period.
Notes:
(1) Mr. Guan was elected as a director June 25, 2019.
(2) Mr. Shao was elected as a director June 25, 2019.
(3)
Dr. Shi was elected as a director June 25, 2019
(4) Ms. Han was elected as a director June 25, 2019.
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 Executive and Non-Executive Directors and two of the four Independent Non-Executive Directors were unable to
attend the Annual and Special Meeting of the Company held on June 25, 2019 due to other business commitments.
The 2020 AGM will be held on June 16, 2020. The notice of the 2020 AGM will be sent to shareholders at least 20
clear business days before the 2020 AGM.
30 30
CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd.
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
requiring 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.
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 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 election should be subject to a separate resolution to be approved by shareholders.
3131
CORPORATE GOVERNANCE REPORTAnnual Report 2019CORPORATE GOVERNANCE REPORTCORPORATE GOVERNANCE REPORTAnnual Report 2019 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 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 Director, 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, 2019 are set out on page 12 of
this annual 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 Non-Executive Directors a cash retainer of US$3,825 per month for acting as
Independent Non-Executive Directors and for their roles on various Board Committees. The Company pays the lead
Independent Non-Executive Director a cash retainer of US$4,500 per month.
Independent Non-Executive Directors may also receive additional compensation for serving on any ad hoc special
committees that are established from time to time. 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.
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.
Dr. Ngai Wai Fung, the director and chief executive officer of SWCS Corporate Services Group (Hong Kong) Limited,
an external service provider, has been appointed by the Board as its company secretary in Hong Kong with effect from
January 16, 2014. Dr. Ngai’s contact person in the Company in relation to any corporate secretarial matters is Mr. Jerry
Xie, the Executive Vice President and Corporate Secretary.
According to Rule 3.29 of the Listing Rules, Dr. Ngai has confirmed that he has taken no less than 15 hours of
professional training to update his skills and knowledge during the Reporting Period.
32 32
CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. RISK MANAGEMENT AND INTERNAL CONTROLS
The Board is responsible for overseeing the risk management and internal controls of the Company and reviewing their
effectiveness. 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 effectiveness of the risk management and internal control
systems of the Company and its subsidiaries, including financial, operational and compliance controls, for the Reporting
Period 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, 2019 and provide reasonable assurance that material
information, including financial information, relating to 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.
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, considering factors such as:
•
•
changes, since the last annual review, in nature and extent of significant risks, and the Company’s ability to
respond to changes in its business and the external environment;
the scope and quality of management’s ongoing monitoring of risks and of the internal control systems, and the
work of the internal audit function;
•
the extent and frequency of communication of monitoring results to the Board which enables it to assess control
of the Company and the effectiveness of risk management;
•
•
•
•
adequacy of resources;
staff qualifications and experience;
training programmes;
budget of the Company’s accounting, internal audit and financial reporting functions; communication of the
monitoring results to the Board that enables it to assess control of the Company and the effectiveness of the risk
management;
3333
CORPORATE GOVERNANCE REPORTAnnual Report 2019CORPORATE GOVERNANCE REPORTCORPORATE GOVERNANCE REPORTAnnual Report 2019 •
significant control failings or weaknesses that have been identified during the period, and the extent to which
they have caused unforeseeable outcomes or contingencies that had or might have, a 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 securities laws.
Pursuant to National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings of the
Canadian Securities Administrators (“NI 52-109”), the Company’s Chief Executive Officer (“CEO”) and Chief Financial
Officer (“CFO”) are required to evaluate the effectiveness of the design and operation of the Company’s disclosure
controls and procedures (“DC&P”), as defined in NI 52-109, and certify that the DC&P are effective to achieve the
purpose for which they have been designed. Internal controls over financial reporting (“ICFR”), as defined in NI 52-
109, are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements in accordance with IFRS. Management is also responsible for the design of the Company’s internal
control over financial reporting in order to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with IFRS. The CEO and CFO provide
confirmation of the foregoing matters to the Audit Committee as part of its review and approval of periodic financial
disclosure.
The Company has established a Code of Business Conduct and Ethics and Corporate Disclosure, Confidentiality and
Securities Trading Policy (the “Code”), which includes 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. The Code provides that the Company’s employees, officers,
Directors and contract employees will uphold our commitment to a culture of honesty, integrity and accountability
and that the Company requires the highest standards of professional and ethical conduct from its employees, officers,
Directors and contract employees. The various policies forming the Code are available on the Company’s website
(www.chinagoldintl.com) and have been disseminated to all employees of the Company.
Ethics Point is the Company’s whistleblowing program, which is administered by an independent third party, and is
available for use when someone suspects or is aware of illegal, unsafe or inappropriate activity at work. Ethics Point
provides an avenue for individuals to raise concerns confidentially and anonymously. The Audit Committee monitors
compliance with the Code. The Nominating and Corporate Governance Committee monitors the Code and assists the
Board in dealing with conflict of interest issues.
AUDITORS
The Company’s auditor is Deloitte Touche Tohmatsu in Hong Kong (“Deloitte Touche Tohmatsu”). Deloitte LLP in
Canada (“Deloitte LLP”) 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 25, 2019. Deloitte Touche Tohmatsu will be nominated for re-appointment as auditors of the
Company for the fiscal year at the 2020 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 pages
69 to 73 of the Financial Statements.
34 34
CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. Deloitte LLP served as auditor of the Company until April 1, 2010. The Company continues to use the services of
Deloitte LLP from time to time for tax compliance advice relating to transactions and proposed transactions of the
Company and its subsidiaries.
The fees paid/payable to Deloitte Touche Tohmatsu in respect of audit and non-audit services provided during the
Reporting Period were as follows:
Nature of services rendered
Audit fees(1)
Non-audit fees(2)
Total
Notes:
Fees paid/payable
(US$)
712,000
291,500
1,003,500
(1)
Fees for audit services consisted of fees incurred to Deloitte Touche Tohmatsu ($712,000) in connection with the audit of the Company’s
annual financial statements, review of the Company’s interim financial statements.
(2)
Fees for non-audit services consisted of fees incurred to Deloitte Touche Tohmatsu ($291,500) in connection with preparation of the
Company’s Hong Kong Tax filings and other services related to securities regulatory matters and additional services resulting from due
diligence.
RESPONSIBILITIES IN RESPECT OF FINANCIAL STATEMENTS
The Directors acknowledge their responsibility in preparing the 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.
CONSTITUTIONAL DOCUMENTS
For the year ended December 31, 2019, the Company has not made any changes to its notice of articles or articles.
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.
Pursuant to Section 167 of the Business Corporations Act, shareholders who hold in the aggregate at least one-
twentieth of the 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 Burrard Street, Vancouver, British Columbia, Canada, V7X 1M4 for the purpose of
transacting any business that may be transacted at a general meeting.
3535
CORPORATE GOVERNANCE REPORTAnnual Report 2019CORPORATE GOVERNANCE REPORTCORPORATE GOVERNANCE REPORTAnnual Report 2019
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 and senior management meet and communicate with shareholders at the annual general meeting of the Company
to address shareholders’ queries. Voting results are posted on the Company’s website on the day of the annual general
meeting.
The Company also published its ESG Report on its website, www.chinagoldintl.com.
The Environmental, Social and Governance Report communicates to the Company’s stakeholders in a broad manner
the relevant environmental, social and governance initiatives that the Company has made in reference to Appendix 27
of the Listing Rules. The 2019 ESG Report will be published on the Company’s website no later than three months after
the publication of the Company’s Annual Report
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.
36 36
CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. DIRECTORS
Executive Directors
Liangyou Jiang (Chief Executive Officer)
Shiliang Guan (Vice President)
Non-Executive Directors
Yongqing Teng
Fuzhen Kang
Independent Non-Executive Directors
Ian He
Wei Shao
Bielin Shi
Ruixia Han
AUDIT COMMITTEE
Ian He (Chairman)
Wei Shao
Bielin Shi
Ruixia Han
N O M I N A T I N G A N D C O R P O R A T E
GOVERNANCE COMMITTEE
Wei Shao (Chairman)
Ian He
Bielin Shi
Ruixia Han
Liangyou Jiang
COMPANY SECRETARY (HONG KONG)
Dr. 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
40/F, Sunlight Tower
248 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
AST Transfer Company Inc.
Suite 1600-1066 West Hastings Street
Vancouver, British Columbia
Canada V6E 3X1
C O M P E N S A T I O N A N D B E N E F I T S
COMMITTEE
HONG KONG SHARE REGISTER
Ruixia Han (Chairman)
Ian He
Wei Shao
Bielin Shi
Yongqing Teng
HEALTH, SAFETY AND ENVIRONMENTAL
COMMITTEE
Bielin Shi (Chairman)
Ian He
Wei Shao
Ruixia Han
Shilang Guan
CORPORATE SECRETARY (CANADA)
Jerry Xie
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
37
CORPORATE INFORMATIONAnnual Report 2019CORPORATE INFORMATION Management’s Discussion and Analysis of Financial Condition
and Results of Operations for the three months and year ended
December 31, 2019.
(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 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
41
42
42
43
44
44
45
45
45
47
50
54
54
56
61
62
63
63
63
63
63
SIGNIFICANT INVESTMENTS, ACQUISITIONS
AND DISPOSAL OF SUBSIDIARIES. ASSOCIATES
AND JOINT VENTURES, AND FUTURE PLAN
FOR MATERIAL INVESTMENTS OF CAPITAL
ASSETS
CHARGE ON ASSETS
EXPOSURE TO FLUCTUATIONS IN
EXCHANGE RATES AND RELATED HEDGES
COMMITMENTS
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
PROCEDURES AND INTERNAL CONTROL
OVER FINANCIAL REPORTING
RISK FACTORS
QUALIFIED PERSON
64
64
64
64
65
66
66
66
66
66
67
67
67
68
68
MANAGEMENT’S
DISCUSSION AND
ANALYSIS
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, 2020. 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, 2019 and the year ended December 31,
2018, 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, 2020 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.
40
China Gold International Resources Corp. Ltd.
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.
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.
41
Annual Report 2019MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS
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 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.
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.
42
China Gold International Resources Corp. Ltd.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Performance Highlights
Three months ended December 31, 2019
•
•
•
•
•
Revenue remained consistent at US$162.3 million compared to US$163.0 million for the same period in 2018.
Mine operating earnings decreased by 54% to US$15.4 million from US$33.3 million for the same period in 2018.
Net loss after tax increased to US$4.3 million from US$2.0 million for the same period in 2018.
Total gold production decreased by 18% to 52,075 ounces from 63,656 ounces for the same period in 2018.
Total copper production decreased by 25% to 13,227 tonnes (approximately 29.2 million pounds) from 17,711
tonnes (approximately 39.0 million pounds) for the same period in 2018.
Year ended December 31, 2019
•
•
•
•
Revenue increased by 15% to US$657.5 million from US$570.6 million for the same period in 2018.
Mine operating earnings decreased by 42% to US$64.2 million from US$110.7 million for the same period in
2018.
Net loss after tax increased to US$32.2 million from US$4.2 million for the same period in 2018.
Total gold production remained consistent at 214,715 ounces compared to 215,158 ounces for the same period
in 2018.
•
Total copper production increased by 14% to 62,533 tonnes (approximately 137.9 million pounds) from 55,025
tonnes (approximately 121.3 million pounds) for the same period in 2018.
Annual Report 2019
43
SELECTED ANNUAL INFORMATION
US$ Millions except for per share
Total revenue
(Loss) profit from 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
Year ended December 31
2019
2018
2017
2016
2015
657
(3)
(32)
(8.28)
N/A
3,197
818
571
43
(4)
(1.22)
N/A
3,216
1,301
412
79
64
15.93
N/A
3,230
1,324
339
34
(12)
(3.36)
N/A
2,967
737
340
39
(7)
(2.07)
(2.07)
2,781
971
per share
–
–
–
–
–
*
Prepared under IFRS
OUTLOOK
•
•
•
Projected gold production of 212,000 ounces in 2020.
Projected copper production of 145 million pounds in 2020.
The Company continues to focus its efforts on optimizing the operation at both mines, debottlenecking the newly
commissioned Jiama Mine and extending the mine life of CSH Mine.
•
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.
•
The Company has not experienced any significant impact on its operations from the novel coronavirus but
continues to closed monitor the health of its employees and supply chains to be able to respond to any potential
disruptions, should any arise.
44
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Selected Quarterly Financial Data
Quarter ended
2019
2018
(US$ in thousands except per share)
31-Dec
30-Sep
30-Jun
31-Mar
31-Dec
30-Sep
30-Jun
31-Mar
Revenue
Cost of sales
Mine operating earnings
General and administrative expenses
Exploration and evaluation expenses
Research and development expenses
(Loss) income from operations
Gain on recognition of other assets
Foreign exchange gain (loss)
Finance costs
Profit (loss) before income tax
Income tax expense (credit)
Net (loss) profit
Basic (loss) earnings per share (cents)
Diluted earnings (loss) per share (cents)
162,326
146,952
15,374
15,280
(156)
3,200
(2,950)
14,067
4,074
10,398
4,732
9,037
(4,305)
(1.19)
N/A
186,375
160,094
26,281
11,762
368
4,308
9,843
11,245
(9,616)
10,560
2,380
2,701
(321)
(0.17)
N/A
163,166
155,876
7,290
9,532
175
4,541
145,592
130,324
15,268
13,495
115
4,856
(6,958)
(3,198)
–
(7,414)
11,482
(24,817)
(1,866)
(22,951)
(5.79)
N/A
–
5,288
10,088
(7,137)
(2,563)
(4,574)
(1.13)
N/A
162,957
129,693
33,264
16,701
(4)
7,374
9,193
–
(1,677)
11,224
(3,346)
(1,351)
(1,995)
(0.49)
N/A
158,841
123,743
35,098
12,666
134
3,068
19,230
–
(11,024)
10,909
(998)
3,591
(4,589)
(1.23)
N/A
142,087
106,294
106,685
100,131
35,793
12,674
251
2,800
20,068
–
(7,580)
11,214
3,839
3,449
390
0.05
N/A
6,554
9,383
78
2,553
(5,460)
–
4,463
11,128
(465)
(2,469)
2,004
0.45
N/A
The Company’s mining operations are impacted by harsh winter conditions at its mine sites and as such, performance
in the first quarter of the year is usually lower as compared with other quarters in the year.
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 price (US$) of gold per ounce
Gold produced (ounces)
Gold sold (ounces)
Total production cost (US$ per ounce)
Cash production cost(1) (US$ per ounce)
(1)
Non-IFRS measure. See ‘Non-IFRS measures’ section of this MD&A
2019
52.99
1,488
34,474
35,622
1,297
937
2018
52.15
1,306
41,506
39,928
1,288
817
2019
2018
205.21
1,407
146,805
145,811
1,318
862
186.80
1,286
144,896
145,272
1,164
750
45
Annual Report 2019MANAGEMENT’S DISCUSSION AND ANALYSIS
Gold production at the CSH Mine decreased by 17% to 34,474 ounces for the three months ended December 31, 2019
compared to 41,506 ounces for the three months ended December 31, 2018. The total production cost of gold for
the three months ended December 31, 2019 increased to US$1,297 per ounce compared to US$1,288 for the three
months ended December 31, 2018. Gold production in 2018 was higher due to a one time recovery of gold in carbon
within the processing tank. The cash production cost of gold for the three months ended December 31, 2019 increased
to US$937 per ounce from US$817 for the same period in 2018, mainly due to lower production volumes.
Jiama Mine
Copper sales (US$ in millions)
Realized average price 1 (US$) of copper per pound after smelting
fee discount
Copper produced (tonnes)
Copper produced (pounds)
Copper sold (tonnes)
Copper sold (pounds)
Gold produced (ounces)
Gold sold (ounces)
Silver produced (ounces)
Silver sold (ounces)
Three months ended December 31,
2018
2019
74.00
2.26
13,227
87.87
2.26
17,711
Year ended December 31,
2019
308.27
2.13
62,533
2018
285.68
2.37
55,025
29,160,597
39,046,970
137,860,887
121,309,024
15,185
16,663
65,321
53,280
33,477,926
36,735,800
144,008,887
117,462,608
17,601
18,390
948,985
1,029,733
22,150
21,941
987,628
856,090
67,910
69,997
3,782,151
3,960,521
70,262
66,545
3,212,452
3,009,074
Total production cost 2 (US$) of copper per pound
Total production cost 2 (US$) of copper per pound after by-
products credits 4
Cash production cost 3 (US$) of copper per pound
Cash production cost 3 (US$) of copper per pound after by-
products credits 4
3.55
2.50
2.92
1.87
2.73
1.82
2.10
1.19
3.17
2.29
2.51
1.63
2.97
2.08
2.25
1.36
1
A discount factor of 18.6% to 29.6% is applied to the copper benchmark price to compensate the refinery costs incurred by the buyers.
The discount factor is higher if the grade of copper in copper concentrate is below 18%. The industry standard of copper content in
copper concentrate is between 18-20%.
2
Production costs include expenditures incurred at the mine sites for the activities related to production including mining, processing,
mine site G&A and royalties etc.
Non-IFRS measure. See ‘Non-IFRS measures’ section of this MD&A.
By-products credit refers to the sales of gold and silver contained in the copper concentrate during the corresponding period.
3
4
46
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS
During the three months ended December 31, 2019, the Jiama Mine produced 13,227 tonnes (approximately 29.2
million pounds) of copper, a decrease of 25% compared with the three months ended December 31, 2018 (17,711
tonnes, or 39.0 million pounds). The decrease in production is due to lower volumes of ore mined.
During the three months ended December 31, 2019, both total production cost of copper per pound after by-products
and cash production cost of copper per pound after by-product increased as compared to the same period in 2018 due
to lower grades of ore from the open-pit mine. The Jiama Mine is currently developing its underground mine which is
expected to produce higher grade ore, with anticipated completion by the end of 2021.
Review of Quarterly Data
Three months ended December 31, 2019 compared to three months ended December 31, 2018
Revenue of US$162.3 million for the fourth quarter of 2019 decreased by US$0.7 million from US$163.0 million for the
same period in 2018.
Revenue from the CSH Mine was US$53.0 million, an increase of US$0.9 million, compared to US$52.1 million for the
same period in 2018. Realized average gold price increased by 14% from US$1,306/oz in Q4 2018 to US$1,488/oz in
Q4 2019. Gold sold by the CSH Mine was 35,622 ounces (gold produced: 34,474 ounces), compared to 39,928 ounces
(gold produced: 41,506 ounces) for the same period in 2018.
Revenue from the Jiama Mine was US$109.3 million, a decrease of US$1.6 million, compared to US$110.9 million
for the same period in 2018. Total copper sold was 15,185 tonnes (33.5 million pounds) for the three months ended
December 31, 2019, a decrease of 9% from 16,663 tonnes (36.7 million pounds) for the same period in 2018.
Cost of sales of US$147.0 million for the quarter ended December 31, 2019, an increase of US$17.3 million or
13% from US$129.7 million for the same period in 2018. Cost of sales as a percentage of revenue for the Company
increased from 80% to 91% for the three months ended December 31, 2018 and 2019, respectively. Cost of sales was
impacted by many operation factors such as grade of ore, recovery rates and stripping ratio. Refer to the sections below
for details of production factors for each individual mine.
Mine operating earnings of US$15.4 million for the three months ended December 31, 2019, a decrease of 54%,
or US$17.9 million, from US$33.3 million for the same period in 2018. Mine operating earnings as a percentage of
revenue decreased from 20% to 9% for the three months ended December 31, 2018 and 2019, respectively.
General and administrative expenses decreased by US$1.4 million, from US$16.7 million for the quarter ended
December 31, 2018 to US$15.3 million for the quarter ended December 31, 2019. The decrease was due to the
Company’s implementation of an overall cost reduction program.
47
Annual Report 2019MANAGEMENT’S DISCUSSION AND ANALYSIS Research and development expenses of US$3.2 million for the three months ended December 31, 2019, decreased from
US$7.4 million for the comparative 2018 period. The decrease in the fourth quarter of 2019 was mainly due to the
completion of several research projects in 2019.
Loss from operations of US$3.0 million for the fourth quarter of 2019, decreased by US$12.2 million, compared to an
income of US$9.2 million for the same period in 2018.
Finance costs of US$10.4 million for the three months ended December 31, 2019, decreased by US$0.8 million
compared to US$11.2 million for the same period in 2018.
Foreign exchange gain of US$4.1 million for the three months ended December 31, 2019, increased from a loss of
US$1.7 million for the same period in 2018. The gain was attributed to changes in the RMB/USD exchange rates and
the revaluation of monetary items held in Chinese RMB.
Gain on recognition of other assets of US$14.1 million was recorded during the three months ended December 31,
2019 in relation to a cooperation agreement between the Group and a third-party real estate developer. Pursuant to the
Cooperation Agreement, the Group agreed to transfer the land use right for the development and the Developer agreed
to compensate the Group by transferring a block of the buildings and twenty car parks. The land is located in Lhasa,
Tibet, China and was originally acquired by the Jiama Mine. During the period, the Group derecognized the right-of-use
assets, and recognized the right to receive the new premise. The project is still under development and is expected to
be completed no later than May 31, 2021.
Income tax expense of US$9.0 million for the quarter ended December 31, 2019, increased by US$10.4 million from an
income tax credit of US$1.4 million for the comparative period in 2018. During the current quarter, the Company had
US$0.8 million of deferred tax credit compared to US$2.3 million for the same period in 2018.
Net loss of US$4.3 million for the three months ended December 31, 2019, increased by US$2.3 million from US$2.0
million for the three months ended December 31, 2018
Year ended December 31, 2019 compared to Year ended December 31, 2018
Revenue of US$657.5 million for the year ended December 31, 2019 increased by US$86.9 million or 15%, from
US$570.6 million for the same period in 2018.
Revenue from the CSH Mine was US$205.2 million, an increase of US$18.4 million, compared to US$186.8 million
for the same period in 2018. Realized average gold price increased by 9% from US$1,286/oz in 2018 to US$1,407/
oz in 2019. Gold sold by the CSH Mine was 145,811 ounces (gold produced: 146,805 ounces), compared to 145,272
ounces (gold produced: 144,896 ounces) for the same period in 2018.
Revenue from the Jiama Mine was US$452.2 million, an increase of US$68.4 million, compared to US$383.8 million
for the same period in 2018. Total copper sold was 65,321 tonnes (144.0 million pounds) for the year ended December
31, 2019, an increase of 23% from 53,280 tonnes (117.5 million pounds) for the same period in 2018.
48
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS Cost of sales of US$593.2 million for the year ended December 31, 2019, an increase of US$133.3 million or 29%
from US$459.9 million for the same period in 2018. The overall increase was primarily attributed to a 38% increase in
cost of sales for the Jiama Mine which related to the 14% increase in copper production volumes. Cost of sales for the
CSH Mine increased by approximately 14% in 2019 due to lower grades of ore mined and increased amortization of
mine development costs. Cost of sales as a percentage of revenue for the Company increased from 81% to 90% for the
year ended December 31, 2018 and 2019, respectively. Cost of sales was impacted by many operation factors such as
grade of ore, mill recovery rates and stripping ratio. Refer to the sections below for details of production factors for each
individual mine.
Mine operating earnings of US$64.2 million for the year ended December 31, 2019, a decrease of 42%, or US$46.5
million, from US$110.7 million for the same period in 2018. Mine operating earnings as a percentage of revenue
decreased from 19% to 10% for the year ended December 31, 2018 and 2019, respectively.
General and administrative expenses decreased by US$1.3 million, from US$51.4 million for the year ended December
31, 2018 to US$50.1 million for the year ended December 31, 2019. The decrease was due to the Company’s
implementation of an overall cost reduction program.
Research and development expenses of US$16.9 million for the year ended December 31, 2019, increased from
US$15.8 million for the comparative 2018 period. The increase in 2019 was due to the Company’s R&D programs
related to optimization of mining and mineral processing.
Loss from operations of US$3.3 million for the year ended December 31, 2019, decreased by US$46.3 million,
compared to an income of US$43.0 million for the same period in 2018.
Finance costs of US$42.5 million for the year ended December 31, 2019, decreased by US$2.0 million compared to
US$44.5 million for the same period in 2018. During the year ended December 31, 2019, interest payments of US$0.4
million (2018: US$1.0 million) were capitalized for borrowing costs related to the Jiama Mine expansion.
Foreign exchange loss of US$7.7 million for the year ended in December 31, 2019, decreased from US$15.8 million for
the same period in 2018. The loss was attributed to changes in the RMB/USD exchange rates and the revaluation of
monetary items held in Chinese RMB.
Interest and other income of US$3.3 million for the year ended December 31, 2019 decreased from US$16.3 million for
the same period in 2018. The income amount in 2018 was primarily attributed to the sales of low grade product from
the Jiama Mine.
49
Annual Report 2019MANAGEMENT’S DISCUSSION AND ANALYSIS Gain on recognition of other assets of US$25.3 million was recorded during the year ended December 31, 2019
in relation to a cooperation agreement between the Group and a third-party real estate developer. Pursuant to the
Cooperation Agreement, the Group agreed to transfer the land use right for the development and the Developer agreed
to compensate the Group by transferring a block of the buildings and twenty car parks.The land is located in Lhasa,
Tibet, China and was originally acquired by the Jiama Mine. During the period, the Group derecognized the right-of-use
assets, and recognized the right to receive the new premise. The project is still under development and is expected to
be completed no later than May 31, 2021.
Income tax expense of US$7.3 million for the year ended December 31, 2019, compared to US$3.2 million for the same
period in 2018. During the current year, the Company had US$3.4 million of deferred tax credit compared to US$1.3
million of deferred tax expense for the same period in 2018.
Net loss of US$32.2 million for the year ended December 31, 2019, an increase by US$28.0 million loss from net loss
of US$4.2 million for the comparative 2018 period.
NON-IFRS MEASURES
The cash cost of production is a measure that is not in accordance with IFRS.
The Company has included cash production cost per ounce gold data to supplement its consolidated financial
statements, which are presented in accordance with IFRS. Non-IFRS measures do not have any standardized meaning
prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies.
The data is intended to provide additional information and should not be considered in isolation or as a substitute for
measures of performance, operating results or financial condition prepared in accordance with IFRS. The Company
has included cash production cost per ounce data because it understands that certain investors use this information
to determine the Company’s ability to generate earnings and cash flow. The measure is not necessarily indicative of
operating results, cash flow from operations, or financial condition as determined under IFRS. Cash production costs
are determined in accordance with the Gold Institute’s Production Cost Standard. Although the Gold Institute ceased
operations in 2002, the Company believes that the Gold Institute’s Production Cost Standard continues to represent the
market accepted standard for reporting cash cost of production. However, different issuers may apply slight deviations
to the standard so the cash production costs disclosed by the Company may not be directly comparable to other
issuers.
50
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS The following tables provide a reconciliation of cost of sales to the cash costs of production in total dollars and in dollars
per gold ounce for the CSH Mine or per copper pound for the Jiama Mine:
CSH Mine (Gold)
Three months ended December 31,
Year ended December 31,
2019
2018
2019
2018
US$
US$ Per ounce
US$
US$ Per ounce
US$
US$ Per ounce
US$
US$ Per ounce
Total Cost of sales
46,189,909
1,297
51,413,375
1,288
192,228,416
1,318
169,085,187
Adjustment – Depreciation &
depletion
(12,810,639)
(360)
(18,783,853)
(471)
(66,518,140)
(456)
(60,193,581)
Adjustment – Amortization of
intangible assets
(334,289)
Total cash production costs
33,044,981
(9)
928
–
32,629,522
–
817
(1,879,320)
123,830,956
(13)
849
–
108,891,606
1,164
(414)
–
750
Jiama Mine (Copper with by-products credits)
Three months ended December 31,
Year ended December 31,
2019
US$
US$ Per
Pound
2018
US$
US$ Per
Pound
2019
US$
US$ Per
Pound
2018
US$
US$ Per
Pound
Total Cost of sales
104,954,616
3.14
78,280,054
2.13
401,017,851
2.78
290,775,843
2.48
General and administrative
expenses
10,691,637
0.31
14,475,206
0.39
38,397,941
0.27
42,348,631
Research and development
expenses
3,199,894
0.10
7,374,441
0.20
16,904,660
0.12
15,795,333
Total production cost
118,846,257
3.55
100,129,701
2.72
456,320,452
3.17
348,919,807
0.36
0.13
3.07
Adjustment – Depreciation &
depletion
(15,650,178)
(0.47)
(16,899,721)
(0.46)
(68,760,126)
(0.48)
(63,187,961)
(0.54)
Adjustment – Amortization of
intangible assets
(5,478,025)
(0.16)
(5,921,886)
(0.16)
(27,518,162)
(0.19)
(21,356,430)
(0.18)
Total cash production costs
97,718,053
2.92
77,308,094
2.10
360,042,274
2.50
264,375,416
2.25
By-products credits
(35,269,789)
(1.05)
(33,422,628)
(0.91)
(125,903,193)
(0.87)
(104,185,742)
(0.89)
Total cash production costs after
by-products credits
62,448,264
1.87
43,885,466
1.19
234,139,081
1.63
160,189,674
1.36
The adjustments above include depreciation and depletion, amortization of intangible assets, and selling expenses
included in total production costs.
51
Annual Report 2019MANAGEMENT’S DISCUSSION AND ANALYSIS
The following table provides a breakdown of on-site production costs used to calculate cost of goods sold based on
production volumes for the period. Onsite productions costs are also used to calculate unit cost information for the three
months and year ended December 31, 2019 and 2018:
CSH Mine
Mining ore cost
Stripping waste cost
Other mining costs
Process Cost – reagents
Other process costs
Process cost – crusher
General and administrative expenses
Three months ended
December 31,
2019
US$
6,608,682
13,244,041
1,218,783
6,298,921
2,171,470
2,120,038
4,036,445
2018
US$
4,206,217
3,038,050
1,518,845
5,272,407
2,642,139
2,106,672
3,667,093
Year ended
December 31,
2019
US$
2018
US$
24,358,876
49,272,035
2,409,371
14,163,181
40,621,121
3,268,673
21,513,452
19,668,347
7,463,157
7,374,703
9,404,596
8,263,034
6,779,152
8,701,469
Cash Operating cost
35,698,380
22,451,423
121,796,190
101,464,977
Mining and resource tax
Other fees and taxes
2,854,169
6,479,024
2,847,027
3,431,797
8,208,484
9,298,737
7,471,855
6,875,502
Total Cash cost
45,031,573
28,730,247
139,303,411
115,812,334
Depreciation – Operations
5,537,282
5,914,620
Amortization – Mine development
13,342,399
10,819,725
24,393,842
49,322,292
22,478,571
41,540,681
Total Onsite production cost
63,911,254
45,464,592
213,019,545
179,831,586
Ratio of Inventory (production cost)
transfer to cost of goods sold
66%
113%
90%
94%
F
G
H
J
K
L
T
V
Total Cost of Sales
41,997,539
51,413,376
192,228,416
169,085,187 = T*V
52
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS
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 for the three months and year ended December 31, 2019 and 2018:
CSH Mine
Three months ended
December 31,
2019
US$
2018
US$
Year ended
December 31,
2019
US$
2018
US$
Ore mined and placed on pad (tonnes)
3,827,728
2,879,128
14,751,364
9,938,110
Average grade of ore (grams per tonne)
Recoverable gold (ounces)
Ending gold inventory (ounces)
Waste rock removed (tonnes)
0.53
39,168
174,904
0.40
22,209
165,250
0.53
153,156
174,904
0.51
95,262
165,250
20,274,260
19,517,887
68,265,938
67,858,227
Mining ore costs US$
Stripping waste costs US$
Other mining costs US$
6,608,682
13,244,041
1,218,783
4,206,219
3,038,050
1,518,845
24,358,876
49,272,035
2,409,371
14,163,181
40,621,121
3,268,673
Total mining costs US$
21,071,506
8,763,114
76,040,282
58,052,975
Process Cost – reagents US$
Other process costs US$
6,298,921
4,291,508
5,272,406
4,748,811
21,513,452
14,837,860
19,668,347
15,042,186
Total process cost US$
10,590,429
10,021,217
36,351,312
34,710,533
A
B
C
D
E
F
G
H
I
J
K
L
Cost of mining per tonne of ore
Cost of stripping 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
1.73
3.46
0.32
5.51
1.65
1.12
2.77
1.46
1.06
0.53
3.05
1.83
1.65
3.48
1.65
3.34
0.16
5.15
1.46
1.01
2.47
1.43
4.09
= F/A
= G/A
0.33 = H/A
5.85
1.98
1.51
3.49
= J/A
= K/A
53
Annual Report 2019MANAGEMENT’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
the Company holds a 96.5% interest and Ningxia Nuclear Industry Geological Exploration Institution holds the remaining
3.5%.
The CSH Mine has two open-pit mining operations with a combined mining and processing capacity of 60,000 tpd. The
run-of-mine ore is heap leached with cyanide solution to extract gold and electro-winned to produce a gold dore which
is sold to refiners.
The major new contracts entered into during the year ended December 31, 2019:
Contract period
Subject amount
(effective day and
Item No.
Contract Name
Counterpart
(US $ millions)
expiration date)
Date of Contract
1
2
3
4
Mixed explosives supply
Bayannur Sheng’an Chemical
Estimated: 13.7
2019.1.1 –
2019.1.1
agreement
Co., Ltd. Urad Middle
Banner Branch
2019.12.31
Loan agreement (extension)
Tibet Huatailong Mining
Estimated: 14.5
2019.1.25 –
2019.1.25
Development Co., Ltd.
2020.1.24
Working capital loan
China National Gold Group
Estimated: 50.9
2019.3.25 –
2019.3.25
agreement
Finance Co., Ltd.
2022.3.24
Contract for processing gold-
Hunan Taixing Environmental
Estimated: 5.2
NA
2019.6.24
containing materials
Technology Co., Ltd.
54
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS
Production Update
CSH Mine
Three months ended
December 31,
Year ended
December 31,
2019
2018
2019
2018
Ore mined and placed on pad (tonnes)
3,827,728
2,879,128
14,751,364
9,938,110
Average ore grade (g/t)
Recoverable gold (ounces)
Ending ore inventory (ounces)
Waste rock removed (tonnes)
0.53
39,168
174,904
0.40
22,209
165,250
0.53
153,156
174,904
0.51
95,262
165,250
20,274,260
19,517,887
68,265,938
67,858,227
For the three months ended December 31, 2019, the total amount of ore placed on the leach pad was 3.8 million
tonnes, with total contained gold of 39,168 ounces (1,218 kilograms). The overall accumulative project-to-date gold
recovery rate has slightly decreased to approximately 54.26% at the end of December 2019 from 54.28% at the end
of September 2019. Of which, gold recovery from the phase I heap was 59.77% and; gold recovery from the Phase II
heap was 47.55% at December 31, 2019.
In the second half of 2017, there were a series of wall failures at Northeast Zone on north side of the pit at the CSH
Mine which led to short term interruptions of mining activities. The Company curtailed production in certain areas of the
pit while it conducted studies to address the slope stability issues and remediation plans for the long term mine plan.
Based on the finalized studies, the Company has adopted an updated pit design for the Northeast Zone in accordance
with the pit limit optimization study carried out by Changchun Gold Design Institute. The ultimate pit wall slopes have
been reduced to 36.5 degrees from 42 degrees for the south wall and 38 degrees from 44 degrees for the north wall,
respectively. The new pit design is conducted based on the Mineral Reserves estimate for the CSH Mine reported as of
December 31, 2018. Accordingly, the life of mine updated production schedule is seven years.
In accordance with the updated design of the Northeast Zone, the life of mine is seven years from 2019 to 2025, The
updated production schedule is given in the table below.
Item
Unit
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Total
Ore
Grade
Waste
Total
t
g/t
t
t
13,086,505
9,964,463
13,163,700
13,172,500,
13,186,000
13,171,000
1,331,805
0.4
0.69
0.63
0.66
0.62
0.66
0.65
60,118,495
62,915,900
59,047,100
39,443,703
9,852,400
5,640,700
775,005
73,205,000
72,880,363
72,210,800
52,616,203
23,038,400
18,811,700
2,106,810
Strip Ratio t/t
4.59
6.31
4.49
2.99
0.75
0.43
Metal
Metal
oz
g
Gold Dore oz
Gold Dore g
268,211
220,766
264,789
281,581
263,845
279,489
8,342,316
6,866,600
8,235,860
8,758,160
8,206,490
8,693,100
127,050
131,912
153,643
148,102
156,211
164,945
3,951,687
4,102,910
4,778,821
4,606,486
4,858,710
5,130,368
1,981,313
0.58
28,031
871,866
63,701
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
77,075,973
0.65
– 237,793,303
– 314,869,276
–
–
–
3.09
1,606,712
49,974,392
17,205
535,139
6,444
200,416
2,939
91,412
541
972,693
16,825
30,254,087
55
Annual Report 2019MANAGEMENT’S DISCUSSION AND ANALYSIS
Exploration
The fieldwork of the geological exploration research project conducted by CSH was completed in the third quarter
of 2019. The data processing of drilling hole core logs, aero-magnetic anomalies, and sample assaying results are
underway to identify mineralization, establish 3D-quantitative geological model, and determine targets for exploration.
These interpretation outcomes will be employed to design the exploration program in 2020.
Mineral Resource Update
CSH Mine Resources by category, Northeast and Southwest Zones combined at December 31, 2019 under NI 43-101:
Type
Measured
Indicated
M+I
Inferred
Quantity Mt
Au g/t
9.00
115.70
124.70
78.86
0.60
0.62
0.62
0.52
Metal
Au t
5.44
71.93
77.37
40.90
Au Moz
0.17
2.31
2.49
1.32
Mineral Reserves Update
CSH Mine Reserves by category, Northeast and Southwest Zones combined at December 31, 2019 under NI 43-101:
Type
Proven
Probable
Total
The Jiama Mine
Quantity Mt
7.40
58.65
66.05
Au g/t
0.63
0.66
0.66
Metal
Au t
4.64
38.85
43.48
Au Moz
0.15
1.25
1.40
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. Phase II of the
Jiama Mine commenced mining operations in 2018 with 44,000 tpd design capacity.
56
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS
The major new contracts entered into during the year ended December 31, 2019:
Item No.
Contract Name
Counterpart
Subject amount
(US $ millions)
Contract period
(effective day and
expiration date)
Date of Contract
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Blasting engineering service
Tibet Gaozheng Blasting
Estimated: 7.3
contract
Engineering Co., Ltd.
Blasting engineering service
Tibet Zhongjin Xinlian Blasting
Estimated: 7.3
contract
Engineering Co., Ltd.
2019.1.1 –
2019.12.1
2019.1.1 –
2019.12.1
2018.12.27
2018.12.27
Sales contract of Copper
Tibet Huading Resources
Estimated: 49.8
2019.2.1 –
2019.2.1
Concentrate
Development Co., Ltd.
2021.12.31
Sales contract of Copper
Tibet Ruijia Trade Co, Ltd.
Estimated: 78.1
2019.3.1 –
2019.3.1
Concentrate
2021.12.31
Sales contract of Copper
Tibet Zhongjin Gold Smelting Co.,
Estimated: 59.3
2019.1.1 –
2019.1.1
Concentrate
Ltd.
2020.12.31
Sales contract of Copper
Daye Zhaoxiang Trading Co., Ltd.
Estimated: 9.3
2019.3.15 –
2019.3.15
Concentrate
2021.12.31
Sales contract of Copper
Tibet Chengling Trading Co., Ltd.
Estimated: 14.4
2019.3.15 –
2019.3.15
Concentrate
2021.12.31
Sales contract of Molybdenum
Tibet Mingchuan Trading Co., Ltd.
Estimated: 12.1
2019.3.15 –
2019.3.15
Concentrate
2019.4.30
Sales contract of mixed Concentrate Beijing Yuyangzhilu Investment Co.,
Estimated: 13.1
2019.2.20 –
2019.2.20
Sales contract of Molybdenum
Tibet Yanhua Trading Co., Ltd.
Estimated: 3.4
Concentrate
Ltd.
2019.6.30
2019.4.20 –
2019.5.14
2019.4.20
Tongqianshan 4490 Mining
Zhongse Twelve Metallurgical
Estimated: 55.7
2019.3.1 –
2019.3.1
Engineering Contract
Construction Co., Ltd.
2022.2.28
Tongqianshan 4410-4544 Mining
Wei Le Construction Group Co., Ltd. Estimated: 68.1
2019.3.1 –
2019.3.1
Engineering Contract
2022.2.28
Tongqianshan 4560-4700 Mining
China Railway Seventeenth Bureau
Estimated: 78.6
2019.3.1 –
2019.3.1
Engineering Contract
Group Second Engineering Co.,
2021.2.28
Ltd.
Steel Ball Purchase Contract
Tongling Nonferrous Metals Wear-
Estimated: 6.2
Steel Ball Purchase Contract
China Aluminum Industrial Service
Estimated: 3.2
resistant Materials Co., Ltd.
Co., Ltd.
2019.3.1 –
2020.3.1
2019.3.28 –
2020.3.28
2019.3.1
2019.3.28
Production Technical Service
China Gold Group Inner Mongolia
Estimated: 4.4
2019.1.1 –
2019.1.1
Contract
Mining Co., Ltd.
HTL Phase II Tailings Dam 4265-
Beijing General Research Institute
Estimated: 21.0
4315m EPC Contract
Contract for new dormitory building
of Mining & Metallurgy
Nuclear industry East China
Estimated: 3.3
project in Gaze new area of Tibet
Construction Engineering Group
Huatailong Mining Development
Co., Ltd
Co., Ltd
2019.12.31
2019.4.15 –
2020.7.14
2020.3.20 –
2020.11.20
2019.4.15
2019.12.27
57
Annual Report 2019MANAGEMENT’S DISCUSSION AND ANALYSIS
Item No.
Contract Name
Counterpart
Subject amount
(US $ millions)
19
Contract of cutting well and
Sichuan Chuanmei No.6
Estimated: 3.7
ventilation well project (VCR
Engineering Construction Co.,
primary well completion) for
Ltd
Contract period
(effective day and
expiration date)
Date of Contract
2019.8.15 –
2020.8.14
2019.8.15
underground mining and
cutting project of Jiama Copper
Polymetallic Mine phase II
of Tibet Huatailong Mining
Development Co., Ltd
20
21
22
23
24
25
26
Cement Purchase Contract
Tibet Weiye Industry Co., Ltd
Estimated: 5.4
2019.12.27 –
2019.12.27
2020.12.27
Pharmaceutical Purchase Contract
Yunnan Tiefeng Mining Chemical
Estimated: 4.0
2019.12.30 –
2019.12.30
Tripartite agreement on purchase
China Gold Group International
Estimated: 27.5
2019.7.1 –
2019.7.1
New Technology Co., Ltd
2020.12.30
and Sale Contract of Copper
Trade Co., Ltd
Concentrate
Tibet Zhongjin Gold Smelting
Co., Ltd
2020.12.30
Contract for Purchase and Sale of
Tibet Huading Resources
Estimated: 58
2019.7.1 –
2019.7.1
Copper Concentrate
Development Co., Ltd
2021.12.31
Contract for Purchase and Sale of
Tibet Ruijia Trade Co., Ltd
Estimated: 104
2019.7.1 –
2019.7.1
Copper Concentrate
2021.12.31
Contract for Purchase and Sale of
Tibet Chengling Trade Co., Ltd
Estimated: 29
2019.7.1 –
2019.7.1
Copper Concentrate
2021.12.31
Contract for Purchase and Sale of
Daye Zhaoxiang Trading Co., Ltd
Estimated: 40.7
2019.7.1 –
2019.7.1
Copper Concentrate
2021.12.31
58
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS
Production Update
Jiama Mine
Ore processed (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 (%)
Three months ended December 31,
Year ended December 31,
2019
2018
2019
2018
2,179,358
3,227,260
12,348,777
10,431,401
0.72
84
0.34
73
23.70
57
0.78
78
0.43
55
19.59
54
0.64
79
0.29
60
17.30
55
0.71
75
0.39
53
17.91
53
According to the mining plan for the Phase II expansion, the Jiama Mine began to mine low grade ore from the Jiaoyan
pit mine. As a result, the average ore grades for the combined high grade underground ore and low grade open pit ore
in 2019 and incoming years are lower than 2017 which had higher grade ore from underground mining only. The unit
metal production cost has also been higher due to the lower ore grade and lower metal recovery rates.
During 2019, average metal recovery rates began to improve and were higher compared to 2018, as the ratio of
oxidized ore from shallow part of the open pit continues to decrease.
Exploration
In 2019, a large scale exploration project projected surface drilling of 33,390 +/-m with 25 drill holes and
hydrogeological and engineering geological drilling of 1300 +/- m with 3 drill holes; at the end of the fourth quarter,
surface drilling of 27,309 +/-m with 24 drill holes were completed, totaling 96% of the adjusted annual program
following a cancelation of 1510 +/-m with one drill hole subject to the geological conditions; hydrogeological and
engineering geological drilling of 1100 +/- m with three drill holes were completed. The work of data processing of the
drilling, logging and assaying program of 2019 exploration project is underway.
59
Annual Report 2019MANAGEMENT’S DISCUSSION AND ANALYSIS
Mineral Resources Estimate
An NI 43-101 compliant mineral resource estimate was independently completed by Mining One Pty Ltd. in November
2013. 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, 2019
Quantity
Cu Metal
Mo Metal
Pb Metal
Zn Metal
Class
Mt
Cu %
Mo %
Pb %
Zn %
Au g/t
Ag g/t
(kt)
(kt)
(kt)
(kt)
Au Moz
Ag Moz
Measured
95.02
Indicated
1,359.51
M+I
Inferred
1,454.53
406.1
0.39
0.40
0.40
0.30
0.04
0.03
0.03
0.00
0.04
0.05
0.05
0.10
0.02
0.03
0.03
0.00
0.08
0.11
0.10
0.10
5.41
5.79
5.76
5.1
370.6
5,502.9
5,873.5
1,247
34.3
460.3
494.6
123
41.8
732
773.7
311
22.4
460
482.4
175
0.25
4.63
4.88
1.32
16.63
254.82
271.45
66.93
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 Grade: = (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
60
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS
Mineral Reserves Estimate
A Mineral Reserve estimate, dated November 20, 2013, has been independently prepared by Mining One Pty Ltd. in
accordance with the CIM Definitions Standards under NI 43-101.
Quantity
Cu Metal
Mo Metal
Pb Metal
Zn Metal
Jiama Project Statement of NI 43-101 Mineral Reserve Estimate as of December 31, 2019
Class
Mt
Cu %
Mo %
Pb %
Zn %
Au g/t
Ag g/t
(kt)
Proven
Probable
P+P
20.00
385.73
405.73
0.60
0.60
0.60
0.05
0.03
0.03
0.05
0.14
0.14
0.03
0.08
0.08
0.20
0.17
0.18
8.60
10.99
10.87
120.9
2,326.6
2,447.4
(kt)
9.4
127.0
136.4
(kt)
9.9
540.5
550.4
(kt)
Au Moz
Ag Moz
6.7
313.5
320.2
0.130
2.17
2.30
5.53
136.30
141.83
Notes:
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)
b)
c)
d)
5% dilution factor and 95% recovery were applied to the mining method;
an overall slope angles of 43 degrees;
a copper price of US$ 2.9/lbs;
an overall processing recovery of 88 - 90% for copper.
Underground:
a)
b)
c)
10% dilution added to all Sub-Level Open Stoping;
Stope recovery is 87% for Sub-Level Open Stoping;
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company operates in a capital intensive industry. The Company’s liquidity requirements arise principally from the
need for financing its mining and mineral 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, corporate bond financing, 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, 2019, the Company had an accumulated surplus of US$199.5 million, working deficit of US$409.4
million and borrowings of US$1,244 million. The Company’s cash balance at December 31, 2019 was US$182.3
million.
61
Annual Report 2019MANAGEMENT’S DISCUSSION AND ANALYSIS
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$507 million of 3.25% unsecured bonds maturing on July 6, 2020, which are included
in the current portion of borrowings, and US$76.0 million of short term debt facilities with interest rates ranging from
2.75% 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
an aggregate principle amount of RMB3.98 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, 2019 the Company has drawn down
RMB3.640 billion, approximately US$521.8 million under the Loan Facility. The Company believes that the availability
of debt financing in China at favorable rates will continue for the foreseeable future. The Company is currently assessing
various strategic alternatives for the repayment of its 3.25% unsecured bonds maturing on July 6, 2020. As part of this
assessment, the Company is planning on engaging an underwriter and is pursuing a new bond issuance while also at
the same time reviewing other financing options.
The Company continues to review and assess its assets for impairment as part of its financial reporting processes.
To date, the assessment carried out by the Company support the carrying values of the Company’s assets and no
impairment has been required. However, the management of the Company continues to evaluate key assumptions on
estimates and management judgements in order to determine the recoverable amount of the CSH Mine and the Jiama
Mine.
CASH FLOWS
The following table sets out selected cash flow data from the Company’s consolidated cash flow statements for the year
ended December 31, 2019 and December 31, 2018.
Net cash from operating activities
Net cash (used in) investing activities
Net cash from (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents
Cash and cash equivalents, beginning of period
Year ended December 31,
2019
US$’000
158,312
(128,046)
14,982
45,248
(954)
137,996
2018
US$’000
154,944
(128,899)
(29,908)
(3,863)
(5,459)
147,318
Cash and cash equivalents, end of period
182,290
137,996
62
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS
Operating cash flow
For the year ended December 31, 2019, net cash inflow from operating activities was US$158.3 million which is
primarily attributable to (i) depreciation of property, plant and equipment of of US$144.0 million (ii) finance cost of
US$42.5 million and (iii) amortization of mining rights of US$29.4 million, partially offset by (i) interest paid of US$47.7
million and (ii) gain on recognition of other assets.
Investing cash flow
For the year ended December 31, 2019, the net cash outflow from investing activities was US$128.0 million which is
primarily attributable to payment for acquisition of property, plant and equipment of US$127.9 million and payment for
acquisition of mining rights, partially offset by interest received of US$1.7 million.
Financing cash flow
For the year ended December 31, 2019, the net cash inflow from financing activities was US$15.0 million which is
primarily attributable to proceeds from borrowings of US$122.6 million, offset by repayments of borrowings of US$107.3
million.
Expenditures Incurred
For the year ended December 31, 2019, the Company incurred mining costs of US$104.5 million, mineral processing
costs of US$129.0 million and transportation costs of US$8.7 million.
Gearing ratio
Gearing ratio is defined as the ratio of consolidated total debt to consolidated total equity. As at December 31, 2019,
the Company’s total debt was US$1,244 million and the total equity was US$1,451 million. The Company’s gearing ratio
was therefore 0.86 as at December 31, 2019 and 0.83 as at December 31, 2018.
63
Annual Report 2019MANAGEMENT’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 consolidated financial statements for year ended
December 31, 2019, 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, 2019. 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 and annual consolidated financial statements, none of the Group’s
assets were pledged as at December 31, 2019.
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 34, Financial
Instruments, in the annual consolidated financial statements for the year ended December 31, 2019.
COMMITMENTS
Commitments include principal payments on the Company’s bank loans and syndicated loan facility, corporate bond
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’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. Refer to Note 35, Commitments, in the
annual consolidated financial statements for the year ended December 31, 2019.
On July 7, 2017, the Company, through its wholly owned subsidiary Skyland Mining (BVI) Limited, issued bonds
dominated in U.S. dollar, with an aggregate principal amount of US$500 million. The Bonds were issued at a price
of 99.663%, bearing a coupon of 3.25% per annum with a maturity date of July 6, 2020. Interest is payable in semi-
annual installments on January 6 and July 6 of each year. The bonds were listed on HKSE.
64
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS The following table outlines payments for commitments for the periods indicated:
Principal repayment of bank loans
Repayment of bonds including interest
Repayment of entrusted loan payable
Total
US$’000
708,122
506,979
28,669
Within
One year
US$’000
75,973
506,979
28,669
Within Two
to five years
US$’000
Over
five years
US$’000
362,662
269,487
–
–
–
–
Total
1,243,770
611,621
362,662
269,487
In addition to the table set forth above, the Company has entered into service agreements with third-party contractors
such as China Railway 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.
RELATED PARTY TRANSACTIONS
China National Gold Group Co., Ltd. (formerly known as China National Gold Group Corporation) (“CNG”) owned 39.3
percent of the outstanding common shares of the Company as at December 31, 2019 and December 31, 2018.
The Company had major related party transactions with the following companies related by way of shareholders or
shareholder in common:
The Company’s subsidiary, Inner Mongolia Pacific is a party to a non-exclusive contract for the purchase and sale of
doré with CNG (the “Dore Sales Contract”) pursuant to which Inner Mongolia Pacific sells gold doré bars to CNG. The
pricing is based on the monthly 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. The Dore Sales Contract has been in effect since October 24, 2008
and has been renewed for a current term that commenced on January 1, 2018 and expires on December 31, 2020,
which renewal was approved by the Company’s shareholders on June 28, 2017.
Revenue from sales of gold doré bars to CNG was US$205.2 million for the year ended December 31, 2019 which
increased from US$186.8 million for the year ended December 31, 2018.
The Company is also a party to a Product and Service Framework Agreement with CNG, pursuant to which CNG
provides construction, procurement and equipment financing services to the Company and also purchases the copper
concentrates produced at the Jiama Mine. The quantity of copper concentrates, pricing terms and payment terms may
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. On June 28, 2017, the Supplemental Product and Service
Framework Agreement was approved and extended to expire on December 31, 2020. For the year ended December
31, 2019, revenue from sales of copper concentrate and other products to CNG was US$79.5 million, compared to
US$127.5 million for the same period in 2018.
For the year ended December 31, 2019, construction services of US$9.5 million were provided to the Company by
subsidiaries of CNG (US$16.5 million for the year ended December 31, 2018).
65
Annual Report 2019MANAGEMENT’S DISCUSSION AND ANALYSIS
In addition to the aforementioned major related party transactions, the Company also obtains additional services from
related parties in its normal course of business, including a Loan Agreement and a Deposit Services Agreement entered
into on March 25, 2019 and December 31, 2019 among the Company and China Gold Finance.
Refer to Note 32 of the audited annual consolidated financial statements as at December 31, 2019.
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 for the year ended December 31, 2019. The
Company continues to review possible acquisition targets.
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 annual consolidated financial statements.
Key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting
period that have a 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, 2019.
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, 2019.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
The Company holds a number of financial instruments, the most significant of which are equity securities, accounts
receivables, accounts payables, 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, 2019.
OFF-BALANCE SHEET ARRANGEMENTS
As at December 31, 2019, the Company had not entered into any off-balance sheet arrangements.
66
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS 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 Directors will determine any future dividend policy on the basis of, among other things, the results of
operations, cash flows and 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, 2019 the Company had 396,413,753 common shares issued and outstanding.
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, 2019 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 of December 31, 2019, 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 Canadian securities legislation
are recorded, processed, summarized and reported within the time period specified in those rules.
The Company’s Chief Executive Officer and Chief Financial Officer have used the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) 2013 framework to evaluate the Company’s ICFR as of December 31, 2019 and
have concluded that these controls and procedures were effective as of December 31, 2019 and provide reasonable
assurance that financial 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 systems means design of controls cannot provide absolute assurance
that all control issues and instances of fraud will be detected. During the year ended December 31, 2019, there were
no changes in the Company’s DC&P or ICFR that materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
67
Annual Report 2019MANAGEMENT’S DISCUSSION AND ANALYSIS RISK FACTORS
There are certain risks involved in the Company’s operations, some of which are beyond the Company’s control. Aside
from risks relating to business and industry, the Company’s principal operations are located within the People’s Republic
of China and are governed by a legal and regulatory environment that in some respects differs from that which prevails
in other countries. Readers of this MD&A should give careful consideration to the information included in this document
and the Company’s audited annual consolidated financial statements and related notes. Significant risk factors for
the Company are metal prices, government regulations, foreign operations, environmental compliance, the ability to
obtain additional financing, risk relating to recent acquisitions, dependence on management, title to the Company’s
mineral properties, and litigation. China Gold International’s 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.
QUALIFIED PERSON
Disclosure of scientific or technical information in this MD&A was approved by Mr. Zhongxin Guo, P.Eng. the Company’s
Chief Engineer and a Qualified Person (“QP”) for the purposes of NI 43-101.
March 30, 2020
68
China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP. LTD.
(incorporated in British Columbia, Canada with limited liability)
OPINION
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 74 to 151, which comprise
the consolidated statement of financial position as at December 31, 2019, and the consolidated statement of profit or
loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash
flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies.
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position
of the Group as at December 31, 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”) issued by
the International Accounting Standards Board and have been properly prepared in compliance with the disclosure
requirements of the Hong Kong Companies Ordinance.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Group in accordance with the International Ethics
Standards Board for Accountants’ Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our
other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTER
Key audit matter is that matter that, in our professional judgment, was of most significance in our audit of the
consolidated financial statements of the current period. This matter was 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 this matter.
69
INDEPENDENT AUDITOR’S REPORTAnnual Report 2019 TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP. LTD. - (continued)
(incorporated in British Columbia, Canada with limited liability)
KEY AUDIT MATTER (Cont’d)
Impairment assessment of mining rights and
property, plant and equipment
How our audit addressed the key audit matter
We identified the impairment assessment of mining rights
and property, plant and equipment as key audit matter
due to significant management judgement involved in the
impairment assessment.
As at December 31, 2019, the market capitalisation of the
Company was below the carrying value of its net assets of
approximately US$1,451 million. This may be an indicator
that the carrying amounts of the Group's mining rights and
property, plant and equipment are impaired.
As disclosed in notes 21 and 22 to the consolidated
financial statements, the carrying values of the Group's
property, plant and equipment and mining rights as at
December 31, 2019 were approximately US$1,709 million
and US$900 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
("VIU") and fair value less costs of disposal. VIU is based
on the discounted cash flows expected to be derived from
the Group's CGUs, taking into account the appropriate
discount rate.
Our procedures in relation to the impairment assessment
of mining rights and property, plant and equipment
included:
•
•
•
•
•
•
Obtaining an understanding of the key controls over
the impairment assessment of the Group’s mining
rights and property, plant and equipment;
Assessing the appropriateness of the Group’s
identification of individual CGU;
Evaluating the independent external valuer’s
competence, capabilities and objectivity;
Engaging our internal valuation experts to evaluate
the appropriateness of the valuation methodology,
technical information provided by external valuation
expert and the key assumptions used in the valuation
models against external benchmarks, our knowledge
of the Group and its industry;
Evaluating the sensitivity analysis for the key
assumptions in the valuation models for risk
assessment;
Assessing the reasonableness of the key assumptions
used in the valuation models with reference to the
As disclosed in note 4 to the consolidated financial
historical accuracy of such forecasts and the current
statements, the management exercises significant
operational results; and
•
Comparing the input data in the cash flow forecast
to the source document.
judgement in respect of the key assumptions applied in
the VIU calculation, such as future metal selling price,
recoverable reserves, resources, exploration potential,
production cost estimates, future operating costs and
discount rates.
During the year ended December 31, 2019, no impairment
loss was recognised for the Group's mining rights and
property, plant and equipment.
70
China Gold International Resources Corp. Ltd.INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP. LTD. - (continued)
(incorporated 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 control as the directors determine is necessary to enable the preparation of consolidated financial
statements that are free from 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 a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
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.
71
Annual Report 2019INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP. LTD. - (continued)
(incorporated in British Columbia, Canada with limited liability)
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS (Cont’d)
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.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
•
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to 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 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 Group to cease to continue as a going concern.
•
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.
72
China Gold International Resources Corp. Ltd.INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
CHINA GOLD INTERNATIONAL RESOURCES CORP. LTD. - (continued)
(incorporated in British Columbia, Canada with limited liability)
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS (Cont’d)
From the matter communicated with those charged with governance, we determine that matter that was of most
significance in the audit of the consolidated financial statements of the current period and is therefore the key audit
matter. We describe this matter 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 Wong Ka I.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
March 30, 2020
73
Annual Report 2019INDEPENDENT AUDITOR’S REPORT Revenue
Cost of sales
Mine operating earnings
Expenses
General and administrative expenses
Exploration and evaluation expenditure
Research and development expenses
(Loss) income from operations
Other (expenses) income
Foreign exchange loss, net
Gain on recognition of other assets
Interest and other income
Finance costs
Loss before income tax
Income tax expense
Loss for the year
Other comprehensive expenses for the year
Item that will not be reclassified to profit or loss:
Fair value loss on equity instruments at fair value through
other comprehensive income
Item that may be reclassified subsequently to profit or loss:
Exchange difference arising on translation
NOTES
5
6
7
23
8
9
10
2019
US$'000
657,459
(593,246)
2018
US$'000
570,570
(459,861)
64,213
110,709
(50,069)
(502)
(16,905)
(51,424)
(459)
(15,795)
(67,476)
(67,678)
(3,263)
43,031
(7,668)
25,312
3,305
(42,528)
(15,818)
-
16,292
(44,475)
(21,579)
(44,001)
(24,842)
(7,309)
(970)
(3,220)
(32,151)
(4,190)
(1,170)
(1,461)
(5,085)
(14,601)
Total comprehensive expense for the year
(38,406)
(20,252)
74
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED DECEMBER 31, 2019China Gold International Resources Corp. Ltd.
NOTES
2019
US$'000
2018
US$'000
Profit (loss) for the year attributable to:
Non-controlling interests
Owners of the Company
Total comprehensive income (expense) for the year
attributable to:
Non-controlling interests
Owners of the Company
Loss per share – Basic (US cents)
Weighted average number of common shares
– Basic
13
13
686
(32,837)
647
(4,837)
(32,151)
(4,190)
690
(39,096)
651
(20,903)
(38,406)
(20,252)
(8.28)
(1.22)
396,413,753
396,413,753
75
Annual Report 2019CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED DECEMBER 31, 2019
Current assets
Cash and cash equivalents
Restricted bank balance
Trade and other receivables
Prepaid expenses and deposits
Prepaid lease payments
Inventories
Non-current assets
Prepaid expenses and deposits
Right-of-use assets
Prepaid lease payments
Equity instruments at fair value through
other comprehensive income
Property, plant and equipment
Mining rights
Other non-current assets
Total assets
Current liabilities
Accounts and other payables and accrued expenses
Contract liabilities
Borrowings
Entrusted loan payable
Leases liabilities
Tax liabilities
Net current (liabilities) assets
Total assets less current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred tax liabilities
Deferred income
Entrusted loan payable
Environmental rehabilitation
Total liabilities
76
NOTES
14
14
15
16
17
18
16
19
17
20
21
22
23
24
25
26
27
28
26
28
9
29
27
30
2019
US$'000
182,290
17,687
26,011
12,271
–
281,123
2018
US$'000
137,996
16,100
23,303
4,107
446
282,958
519,382
464,910
19,044
13,869
–
17,059
1,709,449
900,373
17,954
30,813
–
14,515
20,230
1,765,360
920,067
–
2,677,748
2,750,985
3,197,130
3,215,895
296,403
6,783
582,952
28,669
89
13,850
292,013
4,593
123,921
–
–
5,074
928,746
425,601
(409,364)
39,309
2,268,384
2,790,294
632,149
444
119,293
2,686
–
63,145
1,086,237
–
122,732
3,478
29,140
59,469
817,717
1,301,056
1,746,463
1,726,657
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAT DECEMBER 31, 2019China Gold International Resources Corp. Ltd.
Owners’ equity
Share capital
Reserves
Retained profits
Non-controlling interests
Total owners’ equity
NOTES
31
2019
US$'000
2018
US$'000
1,229,061
6,791
199,485
1,435,337
15,330
1,229,061
15,570
229,802
1,474,433
14,805
1,450,667
1,489,238
Total liabilities and owners’ equity
3,197,130
3,215,895
The consolidated financial statements on pages 74 to 151 were approved and authorized for issue by the Board of
Directors on March 30, 2020 and are signed on its behalf by:
Liangyou Jiang
Director
Ian He
Director
77
Annual Report 2019CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAT DECEMBER 31, 2019
Attributable to the owners of the Company
Number
of shares
Share
capital
US$'000
Equity
reserve
US$'000
Investments
revaluation
reserve
US$'000
Exchange
reserve
US$'000
Retained
profits
US$'000
Subtotal
US$'000
Non–
controlling
interests
US$'000
Total
owners’
equity
US$'000
Statutory
reserves
US$'000
(Note)
At January 1, 2018 (restated)
396,413,753
1,229,061
11,179
(330)
(639)
18,415
237,650
1,495,336
14,648
1,509,984
(Loss) profit for the year
Fair value loss on equity instruments at fair value
through other comprehensive income
Exchange difference arising on translation
Total comprehensive (expense) income for the year
Transfer to statutory reserve
– appropriation from retained profits
Transfer from
– safety production fund
Dividend paid to a non-controlling shareholder
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,461)
–
–
(14,605)
(1,461)
(14,605)
–
–
–
–
(4,837)
(4,837)
647
(4,190)
–
–
(1,461)
(14,605)
–
4
(1,461)
(14,601)
(4,837)
(20,903)
651
(20,252)
–
–
–
–
–
–
3,708
(3,708)
(697)
–
697
–
–
–
–
–
–
(494)
–
–
(494)
At December 31, 2018
396,413,753
1,229,061
11,179
(1,791)
(15,244)
21,426
229,802
1,474,433
14,805
1,489,238
(Loss) profit for the year
Fair value loss on equity instruments at fair
value through other comprehensive income
Exchange difference arising on translation
Total comprehensive (expense) income for the year
Transfer from
– safety production fund
Dividend paid to a non-controlling shareholder
Transfer upon disposal of investment in an
equity security
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,170)
–
–
(5,089)
(1,170)
(5,089)
–
–
–
–
(32,837)
(32,837)
686
(32,151)
–
–
(1,170)
(5,089)
–
4
(1,170)
(5,085)
(32,837)
(39,096)
690
(38,406)
–
–
(564)
–
–
–
(1,956)
–
1,956
–
–
564
–
–
–
–
(165)
–
–
(165)
–
At December 31, 2019
396,413,753
1,229,061
11,179
(3,525)
(20,333)
19,470
199,485
1,435,337
15,330
1,450,667
Note:
Statutory reserves which consist of (1) appropriations from the profit after taxation of the subsidiaries established in the People’s Republic
of China (“PRC”) and (2) provision of safety production fund of the subsidiaries engaged in the exploration and development in the mining
industry, form 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. In accordance with the ‘implementation
of entities’ safety production funds management’ of Caiqi (2012) No.16 issued by Ministry of Finance of the PRC and the Articles of Association
of the PRC subsidiaries, the PRC subsidiaries are required to appropriate an amount, equal to RMB5 per ton multiplied by the volume of
ore mined less actual payment, each year to a statutory reserve and utilise an amount when the actual payment is more than RMB5 per ton
multiplied by the volume of ore mined.
78
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED DECEMBER 31, 2019China Gold International Resources Corp. Ltd.
Operating activities
Loss before income tax
Items not requiring use of cash and cash equivalents:
Amortisation of mining rights
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Interest income
Dividend income
Finance costs
Allowance for credit losses of trade and other receivables, net
Loss on disposal of property, plant and equipment
Gain on recognition of other assets
Release of prepaid lease payment
Release of deferred income
Unrealised foreign exchange losses, net
Change in operating working capital items:
Trade and other receivables
Prepaid expenses and deposits
Inventories
Contract liabilities
Accounts and other payables and accrued expenses
Cash generated from operations
Environmental rehabilitation expense paid
Interest paid
Income taxes paid
2019
US$'000
2018
US$'000
(24,842)
(970)
29,397
143,951
479
(1,712)
(592)
42,528
25
358
(25,312)
–
(824)
7,664
23,835
127,019
–
(2,588)
(431)
44,475
133
44
–
497
(545)
17,766
171,120
209,235
4,902
13,515
679
2,174
16,087
208,477
(66)
(47,677)
(2,422)
2,018
(291)
(56,245)
1,797
45,969
202,483
(828)
(42,474)
(4,237)
Net cash from operating activities
158,312
154,944
Investing activities
Interest received
Dividend received
Payment for acquisition of mining rights
Payment for acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of equity investment at fair value
through other comprehensive income
Placement of restricted bank balance
Release of restricted bank balance
Receipt of government grant
1,712
592
(2,787)
(127,857)
14
2,023
(128,289)
126,420
126
2,588
431
–
(133,370)
13
–
(162,773)
163,956
256
Net cash used in investing activities
(128,046)
(128,899)
79
CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2019Annual Report 2019
Financing activities
Proceeds from borrowings
Repayments of borrowings
Dividend paid to a non-controlling shareholder
Repayments of lease liabilities
2019
US$'000
2018
US$'000
122,570
(107,339)
(165)
(84)
208,113
(237,527)
(494)
–
Net cash from (used in) financing activities
14,982
(29,908)
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Effect of foreign exchange rate changes on cash and cash equivalents
45,248
137,996
(954)
(3,863)
147,318
(5,459)
Cash and cash equivalents, end of year
182,290
137,996
80
China Gold International Resources Corp. Ltd.CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2019
1. GENERAL
China Gold International Resources Corp. Ltd., (the “Company”) is a publicly listed company incorporated in
British Columbia, Canada on May 31, 2000 with limited liability under the legislation of the Province of British
Columbia and its shares are listed on the Toronto Stock Exchange (“TSX”) and The Stock Exchange of Hong
Kong Limited (the “Stock Exchange”). The Company together with its subsidiaries (collectively referred to as the
“Group”) is principally engaged in the acquisition, exploration, development and mining of mineral reserves in
the PRC. Particulars of the subsidiaries of the Company are set out in note 38. The Group considers that China
National Gold Group Co., Ltd. (formerly known as China National Gold Group Corporation) (“CNG”), 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, is able to exercise significant influence over the Company.
The head office, principal address and registered and records office of the Company are located at Suite 660, One
Bentall 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 the Company.
At December 31, 2019, the Group’s current liabilities exceeded its current assets by approximately US$409
million. In view of these circumstances, the directors of the Company have given consideration to the future
liquidity and performance of the Group and its available sources of finance in assessing whether the Group will
have sufficient financial resources to continue as a going concern. Taking into account the Group’s cash flow
projection, including the Group’s proposed bond issuance to independent third parties, the Group’s available
unutilised banking facilities, and the Group’s future capital expenditure in respect of its non-cancellable capital
commitments, 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 date of these consolidated
financial statements are authorised for issue and accordingly, the consolidated financial statements have been
prepared on a going concern basis.
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS (“IFRSs”)
New and amendments to IFRSs that are mandatorily effective for the current year
The Group has applied the following new and amendments to IFRSs issued by International Accounting Standards
Board (“IASB”) for the first time in the current year:
IFRS 16
IFRIC 23
Leases
Uncertainty over Income Tax Treatments
Amendments to IFRS 9
Prepayment Features with Negative Compensation
Amendments to IAS 19
Plan Amendment, Curtailment or Settlement
Amendments to IAS 28
Long-term Interests in Associates and Joint Ventures
Amendments to IFRSs
Annual Improvements to IFRS Standards 2015 – 2017 Cycle
Except as described below, the application of the new and amendments to IFRSs in the current year has had no
material impact on the Group’s financial performance and positions for the current and prior years and/or on the
disclosures set out in these consolidated financial statements.
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019Annual Report 2019 2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS (“IFRSs”) (Cont’d)
New and amendments to IFRSs that are mandatorily effective for the current year (Cont’d)
IFRS 16 Leases
The Group has adopted IFRS 16 for the annual period beginning January 1, 2019 using the modified retrospective
approach and therefore the comparative information has not been restated and the cumulative effect of initially
applying IFRS 16 has been recorded on January 1, 2019.
On transition to IFRS 16, the Group recognised lease liabilities for leases which were previously classified as
operating leases under IAS 17 Leases and IFRIC-Int 4 Determining whether an Arrangement contains a Lease.
Therefore, the Group has not reassessed contracts which already existed prior to the date of initial application.
These liabilities were measured at the present value of the remaining lease payments, discounted using the rate
that reflects the weighted average lessee’s incremental borrowing rate of 3.6% of group entities as of January 1,
2019.
As at January 1, 2019, the Group recognised additional lease liabilities and right-of-use assets at amounts equal
to the related lease liabilities, adjusted by any prepaid lease payments, by applying IFRS 16.C8(b)(ii) transition.
The Group has made use of the following practical expedients available on transition to IFRS 16:
•
•
Relied on the assessment of whether leases are onerous by applying IAS 37 Provisions, Contingent Liabilities
and Contingent Assets as an alternative of impairment review;
Applied the recognition exemptions for leases that end within 12 months of the date of initial application,
and account for them as short-term leases; and
•
Excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application.
The impact to the Group’s consolidated financial statements at January 1, 2019 was as follows:
Operating lease commitments as at December 31, 2018
Effect from discounting at the incremental borrowing rate as at January 1, 2019
Recognition exemption for:
Short-term leases
Lease liabilities as at January 1, 2019
Less: Current-portion
Non-current portion
82
At January 1,
2019
US$'000
364
(2)
(261)
101
(83)
18
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS (“IFRSs”) (Cont’d)
New and amendments to IFRSs that are mandatorily effective for the current year (Cont’d)
IFRS 16 Leases (Cont’d)
The carrying amount of right-of-use assets as at January 1, 2019 comprises the following:
Right-of-use assets relating to operating leases recognised upon application of IFRS 16
Reclassified from prepaid lease payments (Note)
By class:
Office premise
Leasehold land
Note:
Right-of-use
assets
US$'000
101
14,961
15,062
101
14,961
15,062
Upfront payments for leasehold lands in the PRC were classified as prepaid lease payments as at December 31, 2018. Upon application
of IFRS 16, the current and non-current portion of prepaid lease payments amounting to US$446,000 and US$14,515,000 respectively
were reclassified to right-of-use assets.
83
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS (“IFRSs”) (Cont’d)
New and amendments to IFRSs that are mandatorily effective for the current year (Cont’d)
IFRS 16 Leases (Cont’d)
The following adjustments were made to the amounts recognised in the consolidated statement of financial
position at January 1, 2019. Line items that were not affected by the changes have not been included.
Current asset
Prepaid lease payments
Non-current assets
Prepaid lease payments
Right-of-use assets
Current liability
Lease liabilities
Non-current liability
Lease liabilities
Carrying amounts
previously recorded
at December 31,
2018
US$'000
Adjustments
US$'000
446
(446)
14,515
–
–
–
(14,515)
15,062
(83)
(18)
Carrying amounts
under IFRS 16
at January 1,
2019
US$'000
–
–
15,062
(83)
(18)
Impacts and changes in accounting policies of application of other new and amendments to
IFRSs
IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 23 sets out how to determine the accounting tax position when there is uncertainty over income tax
treatments. The interpretation requires the Group to determine whether uncertain tax positions are assessed
separately or as a group and assess whether it is probable that a tax authority will accept an uncertain tax
treatment used, or proposed to be used, by individual group entities in their respective income tax filings. If it
is probable, the current and deferred taxes are determined consistently with the tax treatment in the income tax
filings. If it is not probable that the relevant taxation authority will accept an uncertain tax treatment, the effect of
each uncertainty is reflected by using either the most likely amount or the expected value.
The impact of the uncertainty over income tax treatments in relation to other non-current assets arising from the
current year has been disclosed in the note 23.
84
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS (“IFRSs”) (Cont’d)
New and amendments to IFRSs in issue but not yet effective
The Group has not early applied the following new and amendments to IFRSs that have been issued but are not
yet effective:
IFRS 17
Amendments to IFRS 3
Amendments to IFRS 10 and IAS 28
Amendments to IAS 1
Amendments to IAS 1 and IAS 8
Amendments to IFRS 9,
IAS 39 and IFRS 7
Insurance Contracts1
Definition of a Business2
Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture3
Classification of Liabilities as Current or Non-current5
Definition of Material4
Interest Rate Benchmark Reform4
1
2
3
4
5
Effective for annual periods beginning on or after January 1, 2021
Effective for business combinations and asset acquisitions for which the acquisition date is on or after the beginning of the first
annual period beginning on or after January 1, 2020
Effective for annual periods beginning on or after a date to be determined
Effective for annual periods beginning on or after January 1, 2020
Effective for annual periods beginning on or after January 1, 2022
In addition to the above new and amendments to IFRSs, a revised Conceptual Framework for Financial Reporting
was issued in 2018. Its consequential amendments, the Amendments to References to the Conceptual Framework
in IFRS Standards, will be effective for annual periods beginning on or after January 1, 2020.
Except for the new and amendments to IFRSs mentioned below, the directors of the Company anticipate that the
application of all above new and amendments to IFRSs will have no material impact on the consolidated financial
statements in the foreseeable future.
Amendments to IAS 1 Classification of Liabilities as Current or Non-current
The amendments provide clarification and additional guidance on the assessment of right to defer settlement for
at least twelve months from reporting date for classification of liabilities as current or non-current, which:
•
specify that a liability should be classified as non-current if the Group has the right, the classification should
not be affected by management intentions or expectations to settle the liability within 12 months;
•
•
clarify that if the right is conditional on the compliance with covenants, the right exists if the conditions are
met at the end of the reporting period, even if the lender does not test compliance until a later date; and
clarify that if a liability has terms that could, at the option of the counterparty, result in its settlement by the
transfer of the entity’s own equity instruments, these terms do not affect its classification as current or non-
current only if the entity recognises the option separately as an equity instrument applying IAS 32 Financial
Instruments: Presentation.
Based on the Group’s outstanding liabilities as at December 31, 2019, the application of the amendments will not
result in reclassification of the Group’s liabilities.
85
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with IFRSs 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 (“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 and services.
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 IFRS 16 Leases (since January 1, 2019) or IAS 17 Leases (before application of IFRS 16), 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
has the ability to use its power to affect its returns.
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.
86
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Basis of consolidation (Cont’d)
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 in 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, which represent
present ownership interests entitling their holders to a proportionate share of net assets of the relevant subsidiaries
upon liquidation.
Revenue from contracts with customers
The Group 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.
A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series
of distinct goods or services that are substantially the same.
Control is transferred over time and revenue is recognised over time by reference to the progress towards complete
satisfaction of the relevant performance obligation if one of the following criteria is met:
•
the customer simultaneously receives and consumes the benefits provided by the Group’s performance as
the Group performs;
•
•
the Group’s performance creates or enhances an asset that the customer controls as the Group performs; or
the Group’s performance does not create an asset with an alternative use to the Group and the Group has
an enforceable right to payment for performance completed to date.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or
service.
A contract asset represents the Group’s right to consideration in exchange for goods or services that the Group
has transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with
IFRS 9 Financial Instruments (“IFRS 9”). In contrast, a receivable represents the Group’s unconditional right to
consideration, i.e. only the passage of time is required before payment of that consideration is due.
87
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Revenue from contracts with customers (Cont’d)
A contract liability represents the Group’s obligation to transfer goods or services to a customer for which the
Group has received consideration (or an amount of consideration is due) from the customer.
A contract asset and a contract liability relating to the same contract are accounted for and presented on a net
basis.
For contracts where the period between payment and transfer of the associated goods or services is less than one
year, the Group applies the practical expedient for not adjusting the transaction price for any significant financing
component.
Revenue is recognised at a point in time when control of the gold doré bars, copper concentrate and other by-
products is passed to customers, i.e. when the products are delivered and titles have passed to customers.
Leases
Definition of a lease (upon application of IFRS 16 in accordance with transitions in note 2)
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a
period of time in exchange for consideration.
For contracts entered into or modified on or after the date of initial application, the Group assesses whether
a contract is or contains a lease based on the definition under IFRS 16 at inception or modification date, as
appropriate. Such contract will not be reassessed unless the terms and conditions of the contract are subsequently
changed.
For a contract that contains a lease component and one or more additional lease or non-lease components, the
Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone
price of the lease component and the aggregate stand-alone price of the non-lease components.
The Group also applies practical expedient not to separate non-lease components from lease component, and
instead account for the lease component and any associated non-lease components as a single lease component.
Short-term leases
The Group applies the short-term lease recognition exemption to leases of office premises that have a lease term
of 12 months or less from the commencement date and do not contain a purchase option. Lease payments on
short-term leases are recognised as expense on a straight-line basis or another systematic basis over the lease
term.
Right-of-use assets
The cost of right-of-use asset includes:
the amount of the initial measurement of the lease liability;
any lease payments made at or before the commencement date, less any lease incentives received;
any initial direct costs incurred by the Group; and
an estimate of costs to be incurred by the Group in dismantling and removing the underlying assets,
restoring the site on which it is located or restoring the underlying asset to the condition required by the
terms and conditions of the lease.
•
•
•
•
88
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Leases (Cont’d)
Definition of a lease (upon application of IFRS 16 in accordance with transitions in note 2) (Cont’d)
Right-of-use assets (Cont’d)
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities.
Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying leased assets at
the end of the lease term are depreciated from commencement date to the end of the useful life. Otherwise, right-
of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease
term.
The Group presents right-of-use assets as a separate line item on the consolidated statement of financial position.
Refundable rental deposits
Refundable rental deposits paid are accounted under IFRS 9 and initially measured at fair value. Adjustments to
fair value at initial recognition are considered as additional lease payments and included in the cost of right-of-use
assets.
Lease liabilities
At the commencement date of a lease, the Group recognises and measures the lease liability at the present value
of lease payments that are unpaid at that date. In calculating the present value of lease payments, the Group uses
the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not
readily determinable.
The lease payments include:
•
•
•
•
•
fixed payments (including in-substance fixed payments) less any lease incentives receivable;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at
the commencement date;
amounts expected to be payable by the Group under residual value guarantees;
the exercise price of a purchase option if the Group is reasonably certain to exercise the option; and
payments of penalties for terminating a lease, if the lease term reflects the Group exercising an option to
terminate the lease.
89
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Leases (Cont’d)
Definition of a lease (upon application of IFRS 16 in accordance with transitions in note 2) (Cont’d)
Lease liabilities (Cont’d)
After the commencement date, lease liabilities are adjusted by interest accretion and lease payments. The Group
remeasures lease liabilities (and makes a corresponding adjustment to the related right-of-use assets) whenever:
•
the lease term has changed or there is a change in the assessment of exercise of a purchase option, in
which case the related lease liability is remeasured by discounting the revised lease payments using a
revised discount rate at the date of reassessment.
•
the lease payments change due to changes in market rental rates following a market rent review in which
cases the related lease liability is remeasured by discounting the revised lease payments using the initial
discount rate.
The Group presents lease liabilities as a separate line item on the consolidated statement of financial position.
Lease modifications
The Group accounts for a lease modification as a separate lease if:
•
the modification increases the scope of the lease by adding the right to use one or more underlying assets;
and
•
the consideration for the leases increases by an amount commensurate with the stand-alone price for the
increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of
the particular contract.
For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease liability
based on the lease term of the modified lease by discounting the revised lease payments using a revised discount
rate at the effective date of the modification.
The Group accounts for the remeasurement of lease liabilities by making corresponding adjustments to the
relevant right-of-use asset. When the modified contract contains a lease component and one or more additional
lease or non-lease components, the Group allocates the consideration in the modified contract to each lease
component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone
price of the non-lease components.
90
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Leases (Cont’d)
The Group as a lessee (prior to January 1, 2019)
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 recognised 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.
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 recognised 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 carried at fair value that are denominated
in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. 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
recognised 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. Income and expenses items are translated at the average exchange
rates for the period. Exchange differences arising, if any, are recognised in other comprehensive income
and accumulated in equity under the heading of exchange reserve (attributed to non-controlling interests as
appropriate).
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, which
includes completion of all necessary activities to bring the assets to readiness of fulfilling relevant regulatory
requirements and obtaining relevant regulatory consent.
With effective from January 1, 2019, any specific borrowing that remains outstanding after the related asset is
ready for its intended use or sale is included in the general borrowing pool for calculation of capitalisation rate on
general borrowings. Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing
costs are recognised in profit or loss in the period in which they are incurred.
91
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit/loss before
income tax because of income or expense that is 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 recognised 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 recognised for all taxable temporary differences. Deferred tax assets are
generally recognised 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 utilized. Such deferred assets and
liabilities are not recognised 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 recognised 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 are only recognised to the extent that it is probable that
there will be sufficient taxable profits against which to utilize 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.
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.
For the purposes of measuring deferred tax for leasing transactions in which the Group recognises the right-of-use
assets and the related lease liabilities, the Group first determines whether the tax deductions are attributable to
the right-of-use assets or the lease liabilities.
For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies IAS
12 Income Taxes requirements to right-of-use assets and lease liabilities separately. Temporary differences on
initial recognition of the relevant right-of-use assets and lease liabilities are not recognised due to application of
the initial recognition exemption. Temporary differences arising from subsequent revision to the carrying amounts
of right-of-use assets and lease liabilities, resulting from remeasurement of lease liabilities and lease modifications,
that are not subject to initial recognition exemption are recognised on the date of remeasurement or modification.
92
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Taxation (Cont’d)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied to the same taxable entity by the same
taxation authority.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in
other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised
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.
In assessing any uncertainty over income tax treatments, the Group considers whether it is probable that the
relevant tax authority will accept the uncertain tax treatment used, or proposed to be use by individual group
entities in their income tax filings. If it is probable, the current and deferred taxes are determined consistently with
the tax treatment in the income tax filings. If it is not probable that the relevant taxation authority will accept an
uncertain tax treatment, the effect of each uncertainty is reflected by using either the most likely amount or the
expected value.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the
conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group
recognises 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 recognised 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 recognised in profit or loss in
the period in which they become receivable.
Retirement benefit costs
Payments to state-managed retirement benefit scheme are recognised as an expense when employees have
rendered service entitling them to the contributions.
Short-term employee benefits
Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as
and when employees rendered the services. All short-term employee benefits are recognised as an expense unless
another IFRS requires or permits the inclusion of the benefit in the cost of an asset.
A liability is recognised for benefits accruing to employees (such as wages and salaries, annual leave and sick
leave) after deducting any amount already paid.
93
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Share-based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the fair
value of the equity instruments at the grant date.
The fair value of the equity-settled share-based payments determined at the grant date without taking into
consideration all non-market vesting conditions is expensed on a straight-line basis over the vesting period, based
on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity (equity
reserve).
When share options are exercised, the amount previously recognised in equity reserve will be transferred to share
capital and share premium. When the share options are forfeited after the vesting date or are still not exercised at
the expiry date, the amount previously recognised in equity reserve will continue to be held in equity reserve.
Inventories
Inventories are stated at the lower of cost and net realizable value. Costs of inventories are determined on
weighted average cost method. Net realizable 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 capitalised 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).
Others
Copper inventory is copper concentrate and other by-products 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 realizable value.
94
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Property, plant and equipment
General
Property, plant and equipment (other than construction in progress as described below) are stated in the
consolidated statement of financial position at cost less subsequent accumulated depreciation, depletion and
impairment losses, if any.
An item of property, plant and equipment is derecognised 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 recognised 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 capitalised and the carrying amount of
the component being replaced is derecognised. Directly attributable costs incurred for major capital projects and
site preparation are capitalised 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 recognised 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 capitalised, at their cost at the date of acquisition.
Construction in progress
Assets under construction are capitalised as construction in progress until the asset is available for use. The cost
of construction in progress comprises its purchase price of crushers, and machinery and equipment, any costs
directly attributable to the construction for bringing it into working condition for its intended use and for qualifying
assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Construction in progress
amounts related to development projects are included in the carrying amount of the construction in progress.
The Company uses the following factors to assess whether the criteria of construction completion and ready for
intended use have been met such that the construction in progress are classified to the appropriate categories of
the property, plant and equipment: (1) the completion of the constructions as planned; and (2) the completion of
testing of mine plant and equipment which demonstrates their ability to sustain ongoing production of minerals,
and ability to produce minerals in saleable form (within specifications).
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 capitalised and
included in the carrying amount of the mineral assets.
95
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Property, plant and equipment (Cont’d)
Exploration and evaluation expenditure (Cont’d)
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.
•
Authorizations – 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.
Development expenditure
Drilling and related costs incurred to define and delineate a mineral deposit are capitalised 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
A mine that is under construction is determined to enter the production stage when the project is in the position
and condition necessary for it to be capable of operating in the manner intended by management. Therefore,
such costs incurred are capitalised as part of the mineral assets and the proceeds from sales prior to commercial
production (if any) are offset against costs capitalised.
96
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Property, plant and equipment (Cont’d)
Production expenditure (Cont’d)
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 capitalised 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
mine is capable of operating as intended by the 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.
Mining rights
Mining rights are amortised 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 recognised separately from goodwill and are initially
recognised 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
amortisation and any accumulated impairment losses. Amortisation 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.
Other non-current assets
The right to receive a block of buildings and twenty car parks included under “other non-current assets” is carried
at cost less accumulated impairment if any.
97
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Impairment of properties, plant and equipment, right-of-use assets, mining rights and other
non-current assets
At the end of the reporting period, the Group reviews the carrying amounts of its properties, plant and equipment,
right-of-use assets, mining rights and other non-current assets 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
relevant asset is estimated in order to determine the extent of the impairment loss, if any.
The recoverable amounts of properties, plant and equipment, right-of-use assets, mining rights and other non-
current assets estimated individually. When it is not possible to estimate the recoverable amount individually,
the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. In addition,
the Group assesses whether there is indication that corporate assets may be impaired. If such indication exists,
corporate assets are also allocated to individual cash-generating units, 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 (or a cash-generating
unit) 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. For corporate
assets or portion of corporate assets which cannot be allocated on a reasonable and consistent basis to a cash-
generating unit, the Group compares the carrying amount of a group of cash-generating units, including the
carrying amounts of the corporate assets or portion of corporate assets allocated to that group of cash-generating
units, with the recoverable amount of the group of cash-generating units. 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 or the group of cash-
generating units. 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 or the group of
cash-generating units. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit
or a group of cash-generating units) 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 recognised for the asset (or a cash-generating unit or a group of cash-generating units) in
prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
98
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Research and development costs
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development activities (or from the development phase of an
internal project) is recognised if, and only if, all of the following have been demonstrated:
•
•
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use
or sell the intangible asset; and
•
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible asset is the sum of the expenditure incurred
from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-
generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period
in which it is incurred.
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual
provisions of the instrument. All regular way purchases or sales of financial assets are recognised and
derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that
require delivery of assets within the time frame established by regulation or convention in the market place.
Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising
from contracts with customers which are initially measured in accordance with IFRS 15. 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.
The effective interest method is a method of calculating the amortised cost of a financial asset or financial
liability and of allocating interest income and interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash receipts and payments (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 expected life of the financial asset or financial liability, or, where appropriate, a shorter
period, to the net carrying amount on initial recognition.
99
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Financial instruments (Cont’d)
Financial assets
Classification and subsequent measurement of financial assets
Financial assets that meet the following conditions are subsequently measured at amortised cost:
•
•
the financial asset is held within a business model whose objective is to collect contractual cash flows; and
the contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Financial assets that meet the following conditions are subsequently measured at fair value through other
comprehensive income (“FVTOCI”):
•
the financial asset is held within a business model whose objective is achieved by both selling and collecting
contractual cash flows; and
•
the contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
All other financial assets are subsequently measured at FVTPL, except that at the date of initial application of IFRS
9/initial recognition of a financial asset the Group may irrevocably elect to present subsequent changes in fair
value of an equity investment in other comprehensive income if that equity investment is neither held for trading
nor contingent consideration recognised by an acquirer in a business combination to which IFRS 3 Business
Combinations applies.
In addition, the Group may irrevocably designate a financial asset that are required to be measured at the
amortised cost or FVTOCI as measured at FVTPL if doing so eliminates or significantly reduces an accounting
mismatch.
(i)
Amortised cost and interest income
Interest income is recognised using the effective interest method for financial assets measured subsequently
at amortised cost. Interest income is calculated by applying the effective interest rate to the gross carrying
amount of a financial asset, except for financial assets that have subsequently become credit-impaired (see
below). For financial assets that have subsequently become credit-impaired, interest income is recognised by
applying the effective interest rate to the amortised cost of the financial asset from the next reporting period.
If the credit risk on the credit- impaired financial instrument improves so that the financial asset is no longer
credit-impaired, interest income is recognised by applying the effective interest rate to the gross carrying
amount of the financial asset from the beginning of the reporting period following the determination that the
asset is no longer credit impaired.
100
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Financial instruments (Cont’d)
Financial assets (Cont’d)
Classification and subsequent measurement of financial assets (Cont’d)
(ii) Equity instruments designated as at FVTOCI
Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses
arising from changes in fair value recognised in other comprehensive income and accumulated in the
investments revaluation reserve; and are not subject to impairment assessment. The cumulative gain or
loss will not be reclassified to profit or loss on disposal of the equity investments, and will be transferred to
retained profits.
Dividends from these investments in equity instruments are recognised in profit or loss when the Group’s
right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the
cost of the investment.
Impairment of financial assets
The Group performs impairment assessment under expected credit loss (“ECL”) model on financial assets (including
trade receivables, other receivables, amounts due from related companies and bank balances) which are subject
to impairment under IFRS 9. The amount of ECL is updated at each reporting date to reflect changes in credit risk
since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the
relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL that is
expected to result from default events that are possible within 12 months after the reporting date. Assessment are
done based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current conditions at the reporting date as well as the
forecast of future conditions.
The Group always recognises lifetime ECL for trade receivables which are assessed individually.
For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been
a significant increase in credit risk since initial recognition, the Group recognises lifetime ECL. The assessment of
whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default
occurring since initial recognition.
101
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Financial instruments (Cont’d)
Financial assets (Cont’d)
Impairment of financial assets (Cont’d)
(i)
Significant increase in credit risk
In assessing whether the credit risk has increased significantly since initial recognition, the Group compares
the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default
occurring on the financial instrument as at the date of initial recognition. In making this assessment, the
Group considers both quantitative and qualitative information that is reasonable and supportable, including
historical experience and forward-looking information that is available without undue cost or effort.
In particular, the following information is taken into account when assessing whether credit risk has
increased significantly:
•
an actual or expected significant deterioration in the financial instrument’s external (if available) or
internal credit rating;
•
significant deterioration in external market indicators of credit risk, e.g. a significant increase in the
credit spread, the credit default swap prices for the debtor;
•
existing or forecast adverse changes in business, financial or economic conditions that are expected to
cause a significant decrease in the debtor’s ability to meet its debt obligations;
•
•
an actual or expected significant deterioration in the operating results of the debtor;
an actual or expected significant adverse change in the regulatory, economic, or technological
environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt
obligations.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased
significantly since initial recognition when contractual payments are more than 30 days past due, unless the
Group has reasonable and supportable information that demonstrates otherwise.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a
significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of
identifying significant increase in credit risk before the amount becomes past due.
102
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Financial instruments (Cont’d)
Financial assets (Cont’d)
Impairment of financial assets (Cont’d)
(ii) Definition of default
For internal credit risk management, the Group considers an event of default occurs when information
developed internally or obtained from external sources indicates that the debtor is unlikely to pay its
creditors, including the Group, in full (without taking into account any collaterals held by the Group).
Irrespective of the above, the Group considers that default has occurred when a financial asset is more than
90 days past due unless the Group has reasonable and supportable information to demonstrate that a more
lagging default criterion is more appropriate.
(iii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-
impaired includes observable data about the following events:
(a)
significant financial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event;
(c)
the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial
difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise
consider; or
(d)
it is becoming probable that the borrower will enter bankruptcy or other financial reorganization.
(iv) Write-off policy
The Group writes off a financial asset when there is information indicating that the counterparty is in
severe financial difficulty and there is no realistic prospect of recovery, for example, when the counterparty
has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade
receivables, when the amounts are over two years past due, whichever occurs sooner. Financial assets
written off may still be subject to enforcement activities under the Group’s recovery procedures, taking
into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent
recoveries are recognised in profit or loss.
103
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Financial instruments (Cont’d)
Financial assets (Cont’d)
Impairment of financial assets (Cont’d)
(v) Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of
the loss if there is a default) and the exposure at default. The assessment of the probability of default and
loss given default is based on historical data adjusted by forward-looking information. Estimation of ECL
reflects an unbiased and probability-weighted amount that is determined with the respective risks of default
occurring as the weights.
Generally, the ECL is the difference between all contractual cash flows that are due to the Group in
accordance with the contract and the cash flows that the Group expects to receive, discounted at the
effective interest rate determined at initial recognition.
Interest income is calculated based on the gross carrying amount of the financial asset unless the financial
asset is credit impaired, in which case interest income is calculated based on amortised cost of the financial
asset.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting
their carrying amount, with the exception of trade receivables where the corresponding adjustment is
recognised through a loss allowance account.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to
another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and
continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated
liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable is recognised in profit or loss.
On derecognition of an investment in equity instrument which the Group has elected on initial recognition to
measure at FVTOCI, the cumulative gain or loss previously accumulated in the investments revaluation reserve is
not reclassified to profit or loss, but is transferred to retained profits.
104
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Financial instruments (Cont’d)
Financial liabilities and equity instruments
Classification as debt or equity
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 instruments
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 recognised at the proceeds received, net of direct
issue costs.
Financial liabilities at amortised cost
Financial liabilities including borrowings, entrusted loan payable, accounts and other payables are initially
measured at fair value, net of transaction costs, and are subsequently measured at amortised cost using the
effective interest method.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged,
cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and
the consideration paid and payable is recognised 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 capitalised 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 recognised 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 recognised 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 recognised 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 recognised 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.
105
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Ownership interests in leasehold land and building
When the Group makes payments for ownership interests of properties which includes both leasehold land and
building elements, the entire consideration is allocated between the leasehold land and the building elements in
proportion to the relative fair values at initial recognition.
To the extent the allocation of the relevant payments can be made reliably, interest in leasehold land that is
accounted for as an operating lease is presented as “right-of-assets” (upon application of IFRS 16) or “prepaid
lease payments” (before application of IFRS 16) in the consolidated statement of financial position. When the
consideration cannot be allocated reliably between non-lease building element and undivided interest in the
underlying leasehold land, the entire properties are classified as property, plant and equipment.
4. KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in note 3, the directors of the Company
are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates
are recognised 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
Management considered 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. 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, 2019, the market capitalisation of the Company was below the carrying value of its net assets of
approximately US$1,451 million (2018: US$1,489 million). This may be an indicator that the carrying
amounts of the Group’s mining rights and property, plant and equipment are impaired. 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 producing gold and copper.
106
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 4. KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont’d)
(a)
Impairment of mining rights and property, plant and equipment (Cont’d)
When an impairment review is undertaken, recoverable amount is assessed by reference to the higher of
1) value in use (“VIU”) and 2) fair value less costs to disposal. In determining the recoverable amounts of
the Group’s mining rights and property, plant and equipment, the Group estimates the recoverable amount
based on VIU and makes estimates of the discounted future pre-tax cash flows expected to be derived from
the Group’s CGUs and the appropriate discount rate. The key assumptions used in estimating the projected
cash flows are future metal selling price, recoverable reserves, resources, exploration potential, production
cost estimates, future operating costs and discount 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 to
estimate the VIU for the mining rights and property, plant and equipment.
The carrying amounts of property, plant and equipment and mining rights as at December 31, 2019 and
2018 are disclosed in notes 21 and 22, respectively.
During the years ended December 31, 2019 and 2018, no impairment loss was recognised 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
realizable 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.
107
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 4. KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont’d)
(b)
Inventories (Cont’d)
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, 2019 and 2018 are
disclosed in note 18.
5. REVENUE AND SEGMENT INFORMATION
Revenue
(i)
Disaggregation of revenue from contracts with customers
The following is an analysis of the Group’s revenue from its major products and services:
At a point in time
Gold bullion
Copper concentrate
Other by-products
Total revenue
2019
US$'000
205,212
308,274
143,973
2018
US$'000
186,796
277,988
105,786
657,459
570,570
(ii) Performance obligations for contracts with customers
The Group sells gold bullion, copper concentrate and other by-products directly to customers.
For sales of gold bullion, copper concentrate and other by-products directly to customers, revenue is
recognised at a point in time when control of the gold doré bars, copper concentrate and other by-products
is passed to customers, i.e. when the products are delivered and titles have passed to customers. A contract
liability represents the Group’s obligation to transfer goods or services to a customer for which the Group has
received consideration (or an amount of consideration is due) from the customer.
All sales of gold bullion, copper concentrate and other by-products directly are for periods of one year
or less. As permitted under IFRS 15, the transaction price allocated to these unsatisfied contracts is not
disclosed.
108
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
5. REVENUE AND SEGMENT INFORMATION (Cont’d)
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 CODM, who is responsible for allocating resources and assessing performance of the operating segments, has
been defined as the executive directors of the Company. The CODM has identified two operating and reportable
segments as follows:
(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 processes, 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 revenue and results
The following is an analysis of the Group’s revenues and results by operating and reportable segment:
For the year ended December 31, 2019
Mine –
produced
gold
US$'000
Mine –
produced
copper
US$'000
Segment
total
Unallocated
Consolidated
US$'000
US$'000
US$'000
Revenue – external and
segment revenue
Cost of sales
205,212
(192,228)
452,247
(401,018)
657,459
(593,246)
Mining operating earnings
12,984
51,229
64,213
Income (expenses) from
operations
Foreign exchange gain (loss), net
Gain on recognition of other
assets
Interest and other income
Finance costs
12,486
947
–
327
(5,152)
(4,073)
(8,712)
25,312
2,276
(19,821)
8,413
(7,765)
25,312
2,603
(24,973)
–
–
–
(11,676)
97
–
702
(17,555)
657,459
(593,246)
64,213
(3,263)
(7,668)
25,312
3,305
(42,528)
Profit (loss) before income tax
8,608
(5,018)
3,590
(28,432)
(24,842)
109
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
5. REVENUE AND SEGMENT INFORMATION (Cont’d)
(a) Segment revenue and results (Cont’d)
For the year ended December 31, 2018
Mine –
produced
gold
US$'000
Mine –
produced
copper
US$'000
Segment
total
Unallocated
Consolidated
US$'000
US$'000
US$'000
Revenue – external and segment
revenue
Cost of sales
186,796
(169,085)
383,774
(290,776)
570,570
(459,861)
Mining operating earnings
17,711
92,998
110,709
–
–
–
Income (expenses) from
operations
Foreign exchange gain (loss), net
Interest and other income
Finance costs
17,252
5,151
776
(5,689)
34,854
(20,895)
15,265
(21,233)
52,106
(15,744)
16,041
(26,922)
(9,075)
(74)
251
(17,553)
570,570
(459,861)
110,709
43,031
(15,818)
16,292
(44,475)
Profit (loss) before income tax
17,490
7,991
25,481
(26,451)
(970)
The accounting policies of the operating segments are the same as the Group’s accounting policies
described in note 3. Segment results represent profit (loss) before income tax without allocation of general
and administrative expenses, foreign exchange gain (loss), interest and other income and finance costs,
attributable to the respective segment. This is the measure reported to the CODM for the purposes of
resource allocation and performance assessment.
There are no inter-segment sales for the years ended December 31, 2019 and 2018.
110
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
5. REVENUE AND SEGMENT INFORMATION (Cont’d)
(b) Segment assets and liabilities
The following is an analysis of the Group’s assets and liabilities by segment representing assets/liabilities
directly attributable to the respective segment:
As of December 31, 2019
Total assets
Total liabilities
As of December 31, 2018
Total assets
Total liabilities
Mine –
produced
gold
US$'000
Mine –
produced
copper
US$'000
Segment
total
US$'000
Unallocated
US$'000
Consolidated
US$'000
755,231
229,873
2,407,554
1,006,604
3,162,785
1,236,477
34,345
509,986
3,197,130
1,746,463
745,729
203,453
2,435,072
1,013,025
3,180,801
1,216,478
35,094
510,179
3,215,895
1,726,657
For the purposes of monitoring segment performance and allocating resources between segments:
•
•
all assets are allocated to operating segments other than certain cash and cash equivalents, other
receivables, prepaid expenses and deposits, right-of-use assets and equity instrument at FVTOCI; and
all liabilities are allocated to operating segments other than other payables and accrued expenses,
lease liabilities and certain borrowings.
(c) Other segment information (included in the measure of segment profit or loss or
segment assets regularly provided to the CODM)
Mine –
produced
gold
US$'000
Mine –
produced
copper
US$'000
41,700
11,141
–
(75,190)
(1,879)
(75)
67,027
–
–
(68,761)
(27,518)
(323)
Segment
total
US$'000
108,727
11,141
–
(143,951)
(29,397)
(398)
Unallocated
US$'000
Consolidated
US$'000
–
–
514
–
–
(81)
108,727
11,141
514
(143,951)
(29,397)
(479)
For the year ended December 31, 2019
Additions of property, plant and equipment
Addition of mining rights
Addition of right-of-use assets
Depreciation of property, plant and equipment
Amortisation of mining rights
Depreciation of right-of-use assets
For the year ended December 31, 2018
Additions of property, plant and equipment
Depreciation of property, plant and equipment
Amortisation of mining rights
57,924
(63,831)
–
137,674
(63,188)
(23,835)
195,598
(127,019)
(23,835)
–
–
–
195,598
(127,019)
(23,835)
111
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 5. REVENUE AND SEGMENT INFORMATION (Cont’d)
(d) Geographical information
The Group operated in two geographical areas, Canada and the PRC. The Group’s corporate division located
in Canada only earns revenue that is considered incidental to the activities of the Group and therefore is not
presented as an operating segment. During the years ended December 31, 2019 and 2018, the Group’s
revenue was generated from gold sales and copper multi-products to customers in the PRC. Approximately
99% (2018: 99%) of non-current assets of the Group are located in the PRC.
(e)
Information about major customers
Revenue from major customers which accounts for 10% or more of the Group’s total revenue are sales of
gold doré bars and copper and other products to CNG and its subsidiaries as disclosed in note 32 (a)(i). In
addition, revenue from third-party customers of the corresponding years contributing over 10% of the total
sales of the Group are as follows:
Customer A1
Customer B1
1
Revenue from mine-produced copper segment.
6. GENERAL AND ADMINISTRATIVE EXPENSES
Administration and office
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Professional fees
Salaries and benefits
Others
Year ended
Year ended
December 31,
December 31,
2019
US$'000
95,931
162,923
2018
US$'000
119,362
121,195
Year ended
Year ended
December 31,
December 31,
2019
US$'000
14,395
4,656
81
6,224
15,997
8,716
2018
US$'000
22,372
3,786
–
3,924
16,855
4,487
Total general and administrative expenses
50,069
51,424
112
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
7. EXPLORATION AND EVALUATION EXPENDITURE
CSH Gold Mine
Generative exploration
Total explorative and evaluation expenditure
8. FINANCE COSTS
Interests on borrowings
Interests on lease liabilities
Accretion on environmental rehabilitation (note 30)
Less: Amounts capitalised to property, plant and equipment
Year ended
Year ended
December 31,
December 31,
2019
US$'000
2018
US$'000
497
5
502
459
–
459
Year ended
Year ended
December 31,
December 31,
2019
US$'000
40,751
2
2,217
42,970
(442)
2018
US$'000
42,474
–
2,984
45,458
(983)
Total finance costs
42,528
44,475
Interest has been capitalised at the rate of interest applicable to the specific borrowings financing the assets under
construction, or, where financed through general borrowings, at a capitalisation rate representing the weighted
average interest to such borrowings.
Year ended
Year ended
December 31,
December 31,
Capitalisation rate
2019
%
2.82
2018
%
2.80
113
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
9.
INCOME TAX EXPENSE
The Company was incorporated in Canada and is subject to Canadian federal and provincial tax requirements
which are calculated at 27% (2018: 27%) of the estimated assessable profit for the year ended December 31,
2019. Since its incorporation, the Company had no assessable profit subject to Canadian federal and provincial
tax requirements. PRC Enterprise Income Tax (“EIT”) is calculated at the prevailing tax rate of 25% (2018: 25%)
on the estimated taxable profit of the group entities located in the PRC for the year ended December 31, 2019
except as described below.
Pursuant to the Enterprise Income Tax Law (the “EIT” Law) effective on January 1, 2008, Inner Mongolia Pacific
Mining Co. Ltd. (“IMP”) is a certified “High and New Technology Enterprise” which is entitled to a preferential
tax rate of 15% (2018: 15%) for three years from the year ended December 31, 2017 and eligible for renewal
every three years. Such certificate will expire in 2020.
Tibet Huatailong Mining Development Co. Ltd. (“Huatailong”), Metrorkongka County Jiama Industry and Trade
Co. (“Jiama Industry and Trade”) and Tibet Jia Ertong Minerals Exploration Ltd. (“Jia Ertong”) established in the
westward development area of the PRC were subject to preferential tax rate of 15% (2018: 15%) of taxable profit,
except as described below.
Pursuant to the Tibet Administration (2018) Notice on Investment Promotion (“No. 25”), effective on June 15,
2018, Huatailong is certified as a “High and New Technology Enterprise”, and entitled to a preferential tax rate of 9%
for three years from the year ended December 31, 2018, set to expire in 2021.
Pursuant to No. 25, Jiama Industry and Trade, employs 70% or above of its employees who are Tibet Permanent
Residents and thus is entitled to a reduced preferential tax rate of 9% for the years ended December 31, 2019
and 2018.
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$437,820,000 at December 31, 2019 (2018: US$420,484,000)
as the Group is able to control the timing of the reversal of temporary differences and it is probable the temporary
differences will not reverse in the foreseeable future.
According to the requirements of the Provisional Regulations of the PRC on Land Appreciation Tax (“LAT”) (revised
in 2011) effective from January 8, 2011, and the Detailed Implementation Rules on the Provisional Regulations
of the PRC on LAT effective from January 27, 1995, all income from the sale or transfer of state-owned land use
rights, buildings and their attached facilities in the PRC is subject to LAT at progressive rates ranging from 30% to
60% of the appreciation value.
Taxation for other relevant jurisdictions is calculated at the rates prevailing in each of those jurisdictions
respectively.
114
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 9.
INCOME TAX EXPENSE (Cont’d)
Tax expense comprises:
Current tax expense – PRC EIT
Overprovision in prior year – PRC EIT
LAT
Deferred tax (credit) expense
Year ended
Year ended
December 31,
December 31,
2019
US$'000
4,969
(280)
6,059
(3,439)
2018
US$'000
4,151
(2,266)
–
1,335
Total income tax expense
7,309
3,220
The income tax expense for the Group can be reconciled to the loss before income tax for the year as follows:
Loss before income tax
PRC EIT tax rates
Tax at the PRC EIT tax rates
Tax effect of different tax rates of subsidiaries operating
in other jurisdictions
Tax effect of concessionary tax rate
Tax effect of tax losses and other deductible
temporary differences not recognised
Tax effect of non-deductible expenses
Tax effect of non-taxable income
Impacts on foreign exchange
Withholding tax in respect of interest income earned
from PRC subsidiaries
Tax effect of LAT
Overprovision of PRC EIT in prior year
Year ended
Year ended
December 31,
December 31,
2019
US$'000
(24,842)
25%
(6,211)
(250)
(78)
2,125
6,749
(284)
(1,943)
1,422
6,059
(280)
2018
US$'000
(970)
25%
(243)
(60)
(5,119)
5,146
2,719
(371)
1,933
1,481
–
(2,266)
7,309
3,220
115
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
9.
INCOME TAX EXPENSE (Cont’d)
The following are the major deferred tax (assets) liabilities recognised and movements thereon during the current
and prior years:
Property,
plant and
Environmental
equipment
US$'000
rehabilitation
US$'000
(6,826)
2,596
(4,230)
818
(7,228)
(540)
(7,768)
(1,222)
Mining
rights (1)
US$'000
131,744
(3,344)
128,400
(3,877)
At January 1, 2018
Charge (credit) to profit or loss
At December 31, 2018
Charge (credit) to profit or loss
Inventories
US$'000
Others
US$'000
Total
US$'000
121,397
1,335
(63)
(651)
(714)
(2,387)
122,732
(3,439)
3,770
3,274
7,044
3,229
At December 31, 2019
(3,412)
(8,990)
124,523
10,273
(3,101)
119,293
(1)
Amount represents deferred tax liability arising from the fair value adjustment on mining rights during the business acquisition of
Skyland Mining Limited and its subsidiaries (“Skyland”) in December 2010.
For the purpose of presentation in the consolidated statement of financial position, certain deferred tax assets
and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting
2019
US$'000
2018
US$'000
–
–
(119,293)
(122,732)
(119,293)
(122,732)
purposes:
Deferred tax assets
Deferred tax liabilities
116
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
9.
INCOME TAX EXPENSE (Cont’d)
The Group’s unrecognised deferred income tax assets are as follows:
Deferred income tax assets
Tax loss carry forwards
Other deductible temporary differences
2019
US$'000
22,795
2,340
2018
US$'000
20,623
2,387
Total unrecognised deferred income tax assets
25,135
23,010
Deferred tax asset of US$22,795,000 (2018: US$20,623,000) has not been recognised in respect of unused tax
losses of US$94 million (2018: US$85 million) due to the unpredictability of future profit streams. Under Canadian
tax laws, unused tax loss can be carried forward for 20 years if the loss is arising in tax years ended after
December 31, 2005. Included in unrecognised tax losses are losses of US$75 million that will expire from 2027 to
2039 (2018: US$67 million that will expire from 2027 to 2038). Other losses may be carried forward indefinitely.
Other deductible temporary differences of US$9 million (2018: US$9 million) primarily comprise of share issue
costs and cumulative eligible capital expenditures that were incurred by the Company which are tax deductible
according to the relevant tax law in Canada. No deferred tax asset has been recognised because the amount of
future taxable profit that will be available to realize such assets is unpredictable and not probable.
117
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
10. LOSS FOR THE YEAR
Loss for the year has been arrived at after charging (crediting):
Auditor’s remuneration
Year ended
December 31,
2019
US$'000
Year ended
December 31,
2018
US$'000
834
695
Depreciation included in cost of sales and inventories
Depreciation included in research and development expenses
Depreciation included in administrative expenses (note 6)
137,935
1,360
4,656
122,593
640
3,786
Total depreciation of property, plant and equipment
143,951
127,019
Depreciation included in cost of sales and inventories
Depreciation included in administrative expenses (note 6)
Total depreciation of right-of-use assets
Release of prepaid lease payment (included in cost of sales)
398
81
479
–
–
–
–
497
Amortisation of mining rights (included in cost of sales)
29,397
23,835
Loss on disposal of property, plant and equipment
358
44
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 capitalised in construction in progress
Total salaries and benefits included in cost of sales and inventories
Total salaries and benefits included in research and development
expenses
Total staff costs
Operating lease payment
Bank interest income
Government subsidies
Allowance for credit losses of trade and other receivables, net
118
426
14,515
1,056
15,997
–
33,434
6,508
55,939
299
15,427
1,129
16,855
1,556
31,702
5,831
55,944
–
3,774
(1,712)
(2,588)
(824)
25
(545)
133
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
11. DIRECTORS’ AND CHIEF EXECUTIVE’S EMOLUMENTS AND FIVE HIGHEST PAID
EMPLOYEES
(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, 2019
Executive Director and Chief Executive (Note a)
Liangyou Jiang
Executive Directors (Note b)
Xin Song (Note e)
Shiliang Guan
Non-executive Directors (Note c)
Xiangdong Jiang
Yongqing Teng
Fuzhen Kang
Independent Non-executive Directors (Note d)
Ian He
Yunfei Chen
Gregory Hall
John King Burns
Wei Shao
Bielin Shi
Ruixia (Rane) Han
Salaries
and other
Retirement
benefits
benefits
contributions
US$'000
US$'000
Fees
US$'000
Total
US$'000
–
–
–
23
–
–
71
23
23
23
39
38
38
–
–
82
–
–
52
–
–
–
–
–
–
–
–
–
7
1
–
2
2
–
–
–
2
–
–
–
–
89
24
–
54
73
23
23
23
41
38
38
278
134
14
426
119
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
11. DIRECTORS’ AND CHIEF EXECUTIVE’S EMOLUMENTS AND FIVE HIGHEST PAID
EMPLOYEES (Cont’d)
(a) Directors’ and chief executive’s emoluments (Cont’d)
For the year ended December 31, 2018
Executive Directors and Chief Executive (Note a)
Liangyou Jiang
Bing Liu (Note e)
Executive Director (Note b)
Xin Song (Note e)
Non-executive Directors (Note c)
Xiangdong Jiang
Yongqing Teng
Fuzhen Kang
Lianzhong Sun (Note e)
Independent Non-executive Directors (Note d)
Ian He
Yunfei Chen
Gregory Hall
John King Burns
Salaries
Retirement
and other
benefits
benefits
contributions
US$'000
US$'000
Fees
US$'000
Total
US$'000
–
–
–
48
–
–
–
54
46
46
46
44
–
–
–
–
9
–
–
–
–
–
240
53
1
–
–
2
–
1
–
2
–
–
–
6
45
–
–
50
–
10
–
56
46
46
46
299
120
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
11. DIRECTORS’ AND CHIEF EXECUTIVE’S EMOLUMENTS AND FIVE HIGHEST PAID
EMPLOYEES (Cont’d)
(a) Directors’ and chief executive’s emoluments (Cont’d)
Notes:
(a)
The executive directors’ emoluments shown above were for their services in connection with the management of the
affairs of the Company and the Group. Mr. Liangyou Jiang was appointed as Chief Executive Officer (“CEO”) effective from
November 13, 2018, and is also an executive director of the Company. He is also an employee of CNG and his emolument
payments are centralised by CNG as of his CEO appointment effective from November 13, 2018. The emoluments disclosed
above are inclusive of services rendered, up to November 13, 2018, by him as executive director. Mr. Bing Liu resigned as
executive director and CEO effective from November 13, 2018.
(b)
The executive directors’ emoluments shown above were for their services in connection with the management of the affairs
of the Company and the Group. During 2019, Mr. Xin Song resigned as chairman and executive director as of November
14, 2019. Effective from June 25, 2019, Mr. Shiliang Guan was appointed as an executive director.
(c)
The non-executive directors’ emoluments shown above were mainly for their services as directors of the Company. Effective
from November 13, 2018, Mr. Yongqing Teng and Ms. Fuzhen Kang were appointed as non-executive directors. During
2018, Mr. Lianzhong Sun resigned as non-executive director as of November 13, 2018. During 2019, Mr. Xiangdong Jiang
resigned as non-executive director as of June 25, 2019.
(d)
The independent non-executive directors’ emoluments shown above were mainly for their services as directors of the
Company. Effective from June 25, 2019, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia (Rane) Han were appointed as
independent non-executive directors. During 2019, Mr. Yunfei Chen, Mr. Gregory Hall and Mr. John King Burns resigned
as independent non-executive directors of the Company as of June 25, 2019.
(e) Mr. Bing Liu, Mr. Xin Song and Mr. Lianzhong Sun have also been employed by CNG and the payment of their emoluments
was centralised and made by CNG for both years, in which the amounts are considered as insignificant.
For the years ended December 31, 2019 and 2018, none of the directors of the Company waived or agreed
to waive any emoluments.
(b) Five highest paid employees
The five highest paid employees included nil (2018: nil) director for the year ended December 31, 2019.
The emoluments of the five (2018: five) non-director employees for the year ended December 31, 2019, are
as follows:
Employees
Salaries and other benefits
Retirement benefits contributions
Year ended
Year ended
December 31,
December 31,
2019
US$'000
2018
US$'000
852
6
858
857
6
863
121
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
11. DIRECTORS’ AND CHIEF EXECUTIVE’S EMOLUMENTS AND FIVE HIGHEST PAID
EMPLOYEES (Cont’d)
(b) Five highest paid employees (Cont’d)
The number of the highest paid employees who are not the directors of the Company whose remuneration
fell within the following bands is as follows:
HK$1,000,001 to HK$1,500,000 (equivalent to
approximately US$129,001 to US$193,000)
No. of individuals
2019
2018
5
5
During the years ended December 31, 2019 and 2018, no emoluments were paid by the Group to the
directors of the Company or the five highest paid individuals as an inducement to join or upon joining the
Group or as compensation for loss of office.
12. DIVIDEND
No dividend was paid or proposed for ordinary shareholders of the Company during the years ended December
31, 2019 and 2018, nor has any dividend been proposed since the end of reporting period.
13. LOSS PER SHARE
Loss used in determining loss per share are presented below:
Year ended
Year ended
December 31,
December 31,
2019
2018
Loss attributable to owners of the Company for the
purposes of basic loss per share (US$'000)
(32,837)
(4,837)
Weighted average number of shares, basic
396,413,753
396,413,753
Basic loss per share (US cents)
(8.28)
(1.22)
The Group had no outstanding potential dilutive instruments issued as at December 31, 2019 and 2018 and
during the years ended December 31, 2019 and 2018. Therefore, no diluted loss per share is presented.
122
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
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
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$”)
December 31,
December 31,
2019
US$'000
2018
US$'000
578
57,310
18
1,275
211
39,197
18
674
59,181
40,100
The bank balances and bank deposits carry interest rates ranging from 0.001% to 2.55% (2018: 0.01% to 2.80%)
per annum for the year ended December 31, 2019.
Restricted bank balance carries interest at market rates ranging from 0.30% to 1.55% (2018: 0.30% to 1.55%)
per annum for the year ended December 31, 2019. The balance represents deposits pledged to banks to secure
bills payable issued to suppliers for mining costs.
15. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: allowance for credit losses
Amounts due from related companies (note 32(a))(1)
Other receivables(2)
December 31,
December 31,
2019
US$'000
958
(78)
880
2,020
23,111
2018
US$'000
570
(46)
524
725
22,054
Total trade and other receivables
26,011
23,303
At January 1, 2018, trade receivables from contracts with customers amounted to US$20,652,000.
Notes:
(1)
The amounts are unsecured, interest free and repayable on demand.
(2)
Included in the balance as at December 31, 2019 are value-added tax recoverable of approximately US$11,697,000 (2018:
US$19,201,000) and other receivables (as detailed in note 23) of US$7,980,000 (2018: nil), which are expected to be recovered
within twelve months after the end of the reporting period.
123
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
15. TRADE AND OTHER RECEIVABLES (Cont’d)
The Group allows an average credit period of 90 days and 180 days to its trade customers including CNG for gold
doŕe bar sales and copper sales, respectively.
Below is an aged analysis of trade receivables (net of allowance for credit losses) presented based on invoice
dates, which approximated the respective revenue recognition dates, at the end of the reporting period:
Less than 30 days
31 to 90 days
91 to 180 days
Over 180 days
Total trade receivables
December 31,
December 31,
2019
US$'000
2018
US$'000
62
523
–
295
880
227
119
60
118
524
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the
trade receivable from the date credit was initially granted up to the reporting date.
Details of impairment assessment of trade and other receivables are set out in note 34(d).
16. PREPAID EXPENSES AND DEPOSITS
Deposits for mine supplies and services (Note a)
Deposits for spare parts (Note a)
Deposits for environmental protection (Note b)
Deposit for acquisition of property, plant and equipment (Note c)
Prepaid property and machinery insurance
Amount due from a non-controlling shareholder of a subsidiary (Note d)
Prepaid interests
Other prepayment and deposits
December 31,
December 31,
2019
US$'000
2018
US$'000
863
1,476
–
18,693
32
351
8,125
1,775
1,952
1,546
13,848
16,317
159
357
–
741
Less: Amounts that will be settled or utilised within one year
shown under current assets
(12,271)
(4,107)
31,315
34,920
Amounts that will be settled or utilised for more than one year
shown under non-current assets
19,044
30,813
124
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
16. PREPAID EXPENSES AND DEPOSITS (Cont’d)
Notes:
a.
The amount represents deposits paid to third party vendors and related companies (note 32) for purchasing of raw materials,
consumable, spare parts and mine services.
b.
The amounts represent deposits paid to the PRC local land administration bureau for undertaking the restoration of land when
the lease terms expire. Such deposits have been refunded by the relevant bureau in 2019 according to the implementation of the
rules of using dedicated bank account and abandonment of deposits kept in the relevant bureau jointly issued in 2019 by Minister
of Finance of the PRC, Ministry of Ecology and Environment of the PRC and Ministry of Natural Resource of the PRC. As at
December 31, 2018, the deposits were receivable upon the end of the mine life and are expected to be repaid after one year and
therefore are shown as non-current assets.
c.
The amount represents deposits paid to third party contractors for the acquisition of property, plant and equipment to expand its
mining capacity in Tibet, the PRC. The amount is shown as non-current asset.
d.
The amount due from a non-controlling shareholder is non-interest bearing, unsecured and repayable after one year.
17. PREPAID LEASE PAYMENTS
At January 1, 2018
Additions
Release to profit or loss
Exchange realignment
At December 31, 2018
Analysed for reporting purpose:
Current portion
Non-current portion
Total prepaid lease payments
US$'000
16,125
–
(497)
(667)
14,961
December 31,
2018
US$'000
446
14,515
14,961
Prepaid lease payments represent payments for leasehold land located in the PRC. The prepaid lease payments
are released to profit or loss over the remaining lease terms.
125
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
18. INVENTORIES
Gold in process
Gold doré bars
Consumables
Copper
Spare parts
Total inventories
December 31,
December 31,
2019
US$'000
222,180
20,708
16,923
855
20,457
2018
US$'000
203,067
19,021
29,794
17,251
13,825
281,123
282,958
Inventories totalling US$567,472,000 (2018: US$438,505,000) for the year ended December 31, 2019 was
recognised in cost of sales.
19. RIGHT-OF-USE ASSETS
At January 1, 2019
Carrying amounts
At December 31, 2019
Carrying amounts
Leasehold
lands
US$'000
Leased
properties
US$'000
Total
US$'000
14,961
101
15,062
13,335
534
13,869
For the year ended December 31, 2019
Depreciation charges
(398)
(81)
(479)
Expenses relating to short-term leases and other leases
with lease terms end within 12 months of the date of
initial application of IFRS 16
Total cash outflow for leases
Additions to right-of-use assets
3,730
3,844
514
For both years, the Group leases leasehold lands and office premises for its operations. The lease terms of
leasehold lands are 50 years. Lease contracts of office premises are entered into for fixed term of 5 years.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
In determining the lease term and assessing the length of the non-cancellable period, the Group applies the
definition of a contract and determines the period for which the contract is enforceable.
126
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
19. RIGHT-OF-USE ASSETS (Cont’d)
In addition, the Group obtained several land use right certificates for leasehold lands where its mining facilities are
primarily located. Lump sum payments were made upfront to acquire these leasehold lands. The leasehold lands
are presented separately.
Restrictions or covenants on leases
In addition, lease liabilities of US$533,000 are recognised with related right-of-use assets of US$534,000 as at
December 31, 2019. The lease agreements do not impose any covenants other than the security interests in the
leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
20. EQUITY INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Listed investments:
Equity securities listed in Hong Kong (Note a)
16,485
17,655
December 31,
2019
US$'000
December 31,
2018
US$'000
Unlisted investments:
Equity securities (Note b)
Total
Notes:
574
2,575
17,059
20,230
a.
The above listed equity investments represent ordinary shares of an entity listed in Hong Kong. These investments are not held
for trading, instead, they are held for long-term strategic purposes. The directors of the Company have elected to designate these
investments in equity instruments as at FVTOCI as they believe that recognising short-term fluctuations in these investments’ fair
value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes and
realising their performance potential in the long run.
The investment of China Nonferrous Mining Corporation Limited (“CNMC”), a listed company in Hong Kong, represents 2.03%
equity interest in CNMC. CNMC is engaged in mining, processing and trading of nonferrous metals in Zambia. During the year
ended December 31, 2019, a fair value loss of US$1,170,000 (2018: US$1,461,000) was recognised in other comprehensive
income and accumulated under the heading of investment revaluation reserve in accordance with the Group’s accounting policies.
b.
The above unlisted equity investments represent the Group’s equity interests in one (2018: two entities) private entity established
in the PRC. The directors of the Company have elected to designate these investments in equity instruments as at FVTOCI as they
believe that recognising short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the
Group’s strategy of holding these investments for long-term purposes and realising their performance potential in the long run.
As at December 31, 2018, the carrying amount of RMB10,000,000, approximately US$1,992,000, 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.
In the current year, the Group disposed of the investment in Yong’an Chemicals, at a consideration of RMB13,700,000,
approximately US$2,023,000, which was also the fair value as at the date of disposal. A cumulative gain on disposal of
US$564,000 has been transferred to retained profits at the date of disposal.
As at December 31, 2019, the carrying amount of RMB4,000,000, approximately US$574,000 (2018: US$583,000), representing
7.425% share interest in Mozu Gongka Jiulian Industrial Explosives Material Co. Ltd. (“Mozu Explosives”). Mozu Explosives
is established in the PRC and principally engaged in the development and manufacturing of explosives. The directors of the
Company are of the opinion that the fair value change is insignificant and has not been recognized for the year ended December
31, 2019 and 2018.
127
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
21. PROPERTY, PLANT AND EQUIPMENT
COST
At January 1, 2018
Additions
Costs adjustment
Disposals
Transfer from CIP
Environmental rehabilitation
adjustment (note 30)
Exchange realignment
Buildings
US$'000
791,759
371
(1,335)
(181)
82,833
–
(40,856)
Crushers
US$'000
223,439
3,893
–
–
–
–
–
At December 31, 2018
832,591
227,332
Additions
Disposals
Transfer from CIP
Environmental rehabilitation
adjustment (note 30)
Exchange realignment
1,680
(620)
7,191
–
(13,146)
–
–
–
–
–
Furniture
and office
equipment
US$'000
Machinery
and
Motor
Leasehold
equipment
US$'000
vehicles
US$'000
improvements
US$'000
5,855
1,362
(147)
(28)
–
–
257,607
2,185
(3,348)
(57)
62,641
–
8,476
1,700
(7)
(163)
–
–
(123)
(13,021)
(342)
6,919
2,049
(73)
–
–
306,007
6,578
–
587
–
9,664
1,178
(238)
–
–
(69)
(4,230)
(114)
198
–
–
–
–
–
–
198
–
(100)
–
–
–
Construction
in progress
(“CIP”)
US$'000
Total
US$'000
149,151
25,533
2,193,871
150,550
Mineral
assets
US$'000
757,386
115,506
–
–
–
–
(4,837)
(429)
–
17,992
(163,466)
8,069
(24,618)
874,335
81,842
–
–
–
146
8,069
(78,814)
11,364
15,400
–
(7,778)
2,268,410
108,727
(1,031)
–
2,448
(8,196)
–
(268)
2,448
(26,023)
At December 31, 2019
827,696
227,332
8,826
308,942
10,490
98
950,429
18,718
2,352,531
ACCUMULATED DEPRECIATION
At January 1, 2018
Provided for the year
Eliminated on disposals
Exchange realignment
At December 31, 2018
Provided for the year
Eliminated on disposals
Exchange realignment
(55,884)
(36,615)
172
3,994
(88,333)
(37,991)
260
1,669
(74,664)
(16,968)
–
–
(91,632)
(21,790)
–
–
(3,829)
(496)
20
125
(4,180)
(799)
73
72
(63,337)
(21,139)
40
2,323
(82,113)
(21,756)
–
964
(4,987)
(627)
140
174
(5,300)
(946)
226
61
(166)
(20)
–
–
(186)
(12)
100
–
(181,280)
(51,154)
–
1,128
(231,306)
(60,657)
–
494
At December 31, 2019
(124,395)
(113,422)
(4,834)
(102,905)
(5,959)
(98)
(291,469)
–
–
–
–
–
–
–
–
–
(384,147)
(127,019)
372
7,744
(503,050)
(143,951)
659
3,260
(643,082)
CARRYING VALUE
At December 31, 2019
703,301
113,910
3,992
206,037
4,531
–
658,960
18,718
1,709,449
At December 31, 2018
744,258
135,700
2,739
223,894
4,364
12
643,029
11,364
1,765,360
128
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
21. PROPERTY, PLANT AND EQUIPMENT (Cont’d)
The above items of property, plant and equipment, except for mineral assets, taking into account the residual
value, are depreciated using the straight-line method over the estimated useful lives of the related assets as
follows:
Buildings
Crushers
Furniture and office equipment
Machinery and equipment
Motor vehicles
Over the shorter of the term of lease, or 24 years
10 to 14 years
2 to 5 years
2 to 10 years
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
capitalised 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$294,844,000 as at
December 31, 2019 (December 31, 2018: US$301,684,000).
(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
carrying value of the Jiama Mine in relation to mineral assets is US$364,116,000 as at December 31, 2019
(December 31, 2018: US$341,345,000).
129
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 22. MINING RIGHTS
COST
At January 1, 2018
Exchange realignment
At December 31, 2018 and January 1, 2019
Additions
Exchange realignment
At December 31, 2019
ACCUMULATED AMORTISATION
At January 1, 2018
Additions
Exchange realignment
At December 31, 2018 and January 1, 2019
Additions
Exchange realignment
At December 31, 2019
CARRYING VALUE
At December 31, 2019
At December 31, 2018
Notes:
US$'000
1,004,561
(3,596)
1,000,965
11,141
(1,534)
1,010,572
(57,307)
(23,835)
244
(80,898)
(29,397)
96
(110,199)
900,373
920,067
The amounts represent two mining rights in the Jiama Mine and CSH Gold Mine. Mining rights in the Jiama Mine is in relation to the
copper concentrate and other by-products production, acquired through the acquisition of Skyland. The mining permit will expire in
2023. And, the Group acquired mining rights in the CSH Gold Mine from the Department of Natural Resources of Inner Mongolia in
relation to gold production at a consideration of US$11.1 million during the year ended December 31, 2019. The mining permit will
expire in 2026. The Group considers that it will be able to renew the mining rights with the relevant government authority continuously
until the end of mine life.
Amortisation 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.
130
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
23. OTHER NON-CURRENT ASSETS
During the year ended December 31, 2019, the Group entered into a cooperation agreement (the “Cooperation
Agreement”) with an independent third party property developer (the “Developer”) in relation to the development
of a composite project in Lhasa, Tibet, China. Pursuant to the Cooperation Agreement, the Group agreed
to transfer the land use right for the development and the Developer agreed to compensate the Group by
transferring a block of the buildings and twenty car parks (the “New Premises”) within two years from the date
of the Cooperation Agreement and all related tax exposures including but not limited to land appreciation tax,
enterprises income tax and other related tax. During the year ended December 31, 2019, the land use right was
transferred to the Developer. Accordingly, the Group derecognised the right-of-use assets with a carrying amount
of approximately US$999,000 (equivalent to RMB6,970,000) at the date of transfer, and recognised the right to
receive the New Premises of approximately US$17,954,000 (equivalent to RMB125,252,000), which approximates
the fair value of the New Premises at the date of transfer and the other receivables of US$7,980,000 (equivalents
to RMB55,669,000) relating to the tax reimbursement from the Developer. The related gain and income tax
expenses of approximately US$25,312,000 (equivalent to RMB174,502,000) and US$8,155,000 (equivalents to
RMB56,220,000) has been recognised in the profit or loss respectively. The right to receive the New Premises was
initially recognised at its fair value and subsequently carried at cost less impairment. As at December 31, 2019,
the composite project is still under development and expected to be completed not later than May 31, 2021. For
the year ended December 31, 2019, no impairment loss has been made on the other non-current assets as the
directors of the Company are of the opinion that the recoverable amount of the non-current assets is above its
carrying amount as at December 31, 2019.
The uncertain tax position in respective of tax exposure of the transferring of land use right in return of the New
Premises based on the most likely amount of tax expenses amounting to US$8,155,000 has been recognised
in the consolidated financial statements for the year ended December 31, 2019. The most likely amount of tax
expenses including land appreciation tax and enterprise income tax is calculated by the respective tax rates on
land value stated in the cooperation agreement and gain on recognition of other assets, respectively, based on
the current facts and circumstances. However, the tax expenses may be subject to change as the tax assessable
amount is based on final decision with the relevant tax authority.
24. ACCOUNTS AND OTHER PAYABLES AND ACCRUED EXPENSES
Accounts and other payables of the Group are principally comprised of amounts outstanding for trade purchases
relating to minerals production activities and construction activities. The average credit period taken for trade
purchases is between 120 to 150 days.
Accounts and other payables and accrued expenses comprise the following:
Accounts payable
Bills payable
Construction costs payable
Mining cost accrual
Payroll and benefit payable
Other accruals
Other tax payables
Other payables
Payable for acquisition of a mining right
December 31,
2019
US$'000
December 31,
2018
US$'000
38,610
95,911
121,576
11,547
2,578
2,958
7,836
6,917
8,470
44,670
83,263
138,838
3,578
4,863
5,018
5,185
6,598
–
Total accounts and other payables and accrued expenses
296,403
292,013
131
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
24. ACCOUNTS AND OTHER PAYABLES AND ACCRUED EXPENSES (Cont’d)
The following is an aging analysis of the accounts payable presented based on the invoice date at the end of the
reporting period:
Less than 30 days
31 to 90 days
91 to 180 days
Over 180 days
December 31,
December 31,
2019
US$'000
15,816
8,282
4,872
9,640
2018
US$'000
16,832
12,232
1,619
13,987
Total accounts payable
38,610
44,670
The credit period for bills payable is 180 days from the bills issue date.
The following is an ageing analysis of bills payable, presented based on bills issue date at the end of the reporting
period:
Less than 30 days
31 to 60 days
61 to 90 days
91 to 180 days
Total bills payable
25. CONTRACT LIABILITIES
December 31,
December 31,
2019
US$'000
21,003
9,532
15,233
50,143
2018
US$'000
19,512
15,265
14,196
34,290
95,911
83,263
December 31,
December 31,
2019
US$'000
2018
US$'000
Copper concentrate
6,783
4,593
At January 1, 2018, contract liabilities amounted to US$2,724,000.
132
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
25. CONTRACT LIABILITIES (Cont’d)
The following table shows how much of the revenue recognised relates to carried-forward contract liabilities.
Revenue recognised that was included in the contract
liability balance at the beginning of the year
Copper
concentrate
December 31,
2019
US$'000
December 31,
2018
US$'000
4,593
2,724
Typical payment terms which have an impact on the amount of contract liabilities recognised are as follows:
When the Group receives a deposit before the goods delivered, this will give rise to contract liabilities at the start
of a contract, until the revenue recognised on the relevant contract exceeds the amount of the deposit. The Group
typically receives 100% deposit on acceptance of sales order for copper concentrate and other by-products.
26. BORROWINGS
The borrowings are repayable as follows:
Carrying amount repayable on demand and within one year(1) (2) (3)
Carrying amount repayable within one to two years (3)
Carrying amount repayable within two to five years (2)(3)
Carrying amount repayable over five years (3)
Less: Amounts due within one year (shown under current liabilities)
December 31,
2019
US$'000
December 31,
2018
US$'000
582,952
157,679
204,983
269,487
123,921
537,659
263,725
284,853
1,215,101
(582,952)
1,210,158
(123,921)
Amounts shown under non-current liabilities
632,149
1,086,237
Notes:
(1)
On July 7, 2017, the Company (as “Guarantor”), through its wholly-owned subsidiary, Skyland (BVI), completed the issuance of
bonds to independent third parties in an aggregate principal amount of US$500 million, listed on the Stock Exchange. The bonds
were issued at a price of 99.663%, bearing coupon rate of 3.25% with a maturity date of July 6, 2020. Interest is payable in
equal semi-annual instalments on January 6 and July 6 in each year.
(2)
As at December 31, 2019, included in the Group’s borrowing balance are loans payable to a CNG subsidiary with an amount
of RMB350,000,000 (equivalent to approximately US$50,171,000) (2018: RMB350,000,000 (equivalent to approximately
US$50,997,000). Details of balances with related parties are set out in note 32(a).
133
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
26. BORROWINGS (Cont’d)
(3)
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. Subsequently, a supplementary agreement was
signed for the extension of the draw down period to October 30, 2020. As at December 31, 2019, Skyland has drawn down the
loan amount of RMB3,640,000,000 (equivalent to approximately US$521,774,000) (2018: RMB3,495,000,000 (equivalent to
approximately US$509,238,000)). The loan carries a floating rate, currently set at 2.83% per annum, set by the People’s Bank
of China Lhasa Center Branch’s interest rate bench mark, discounted by 7 base points (or 0.07%) as at December 31, 2019 and
2018. Repayment of the loan is scheduled to begin in May 2019 and will reach full maturity and repayment in November 2028.
The loan is subject to a financial covenant with which the Company was in compliance as at December 31, 2019 and 2018, after
the assessment performed by the directors of the Company.
Analysed as:
Secured
Unsecured
December 31,
2019
US$'000
521,774
693,327
December 31,
2018
US$'000
509,238
700,920
1,215,101
1,210,158
Fixed rate loans amounting to approximately US$693,327,000 (December 31, 2018: US$700,920,000), carry
weighted average effective interest rate of 3.47% (2018: 3.60%) per annum.
The carrying values of the pledged assets to secure borrowings by the Group are as follows:
December 31,
December 31,
2019
US$'000
2018
US$'000
Mining rights
891,488
920,067
27. ENTRUSTED LOAN PAYABLE
On January 16, 2017, the Group renewed the entrusted loan by entering into a three-year entrusted loan
agreement with CNG (note 32) and China National Gold Group Finance Company Limited (“China Gold
Finance”), a subsidiary of CNG, in which CNG provided a loan of RMB200 million (equivalent to approximately
US$29,186,000 based on the spot rate at the withdrawal date) to the Group through China Gold Finance as
the entrusted bank. The entrusted loan is unsecured and carries interest at a fixed rate of 2.75% per annum.
The principal amount is repayable on January 15, 2020. Subsequent to December 31, 2019, the loan has been
renewed and extended for 3 years and due for repayment on January 15, 2023.
134
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
28. LEASE LIABILITIES
Lease liabilities payable:
Within one year
Within a period of more than one year but not more than two years
Within a period of more than two years but not more than five years
Within a period of more than five years
Less: Amount due for settlement with 12 months shown under current liabilities
Amount due for settlement after 12 months shown under non-current liabilities
29. DEFERRED INCOME
Deferred income – government grants
Deferred lease inducement
Total deferred income
Movement in the deferred income – government grants:
At January 1
Addition
Charged to other income
Exchange realignment
At December 31
December 31,
2019
US$'000
89
93
320
31
533
(89)
444
December 31,
December 31,
2019
US$'000
2,667
19
2,686
2018
US$'000
3,459
19
3,478
2019
US$'000
2018
US$'000
3,459
126
(824)
(94)
4,560
256
(545)
(812)
2,667
3,459
135
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
30. ENVIRONMENTAL REHABILITATION
The environmental rehabilitation relates to reclamation and closure costs relating to the Group’s mine operations
at the CSH Gold Mine and Jiama Mine. The environmental rehabilitation is calculated as the net present value
of estimated future net cash flows of the reclamation and closure costs, which total US$91,069,000 (2018:
US$86,910,000), discounted at 4.6% (2018: 4.5%) per annum at December 31, 2019.
The following is an analysis of the environmental rehabilitation:
At January 1
Changes from change in discount rate during the year
Accretion incurred in the current year
Payment during the year
Exchange realignment
At December 31
31. SHARE CAPITAL
Common shares
(i)
Authorized – Unlimited common shares without par value
(ii)
Issued and outstanding
2019
US$'000
59,469
2,514
2,217
(66)
(989)
2018
US$'000
51,269
8,897
2,984
(828)
(2,853)
63,145
59,469
Number
of shares
Amount
US$'000
Issued & fully paid:
At January 1, 2018, December 31, 2018 and 2019
396,413,753
1,229,061
32. 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
136
December 31,
2019
%
December 31,
2018
%
39.3
39.3
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
32. RELATED PARTY TRANSACTIONS (Cont’d)
(a) Transactions/balances with government-related entities in the PRC
(i)
Transactions/balances with CNG and its subsidiaries
The Group had the following transactions with CNG and CNG’s subsidiaries:
December 31,
2019
US$'000
December 31,
2018
US$'000
Gold doré bars sales by the Group (Note a)
205,212
186,796
Copper and other product sales by the Group (Note b)
79,531
127,453
Provision of transportation services by the Group (Note b)
830
1,536
Construction, stripping and mining services provided
to the Group (Note b)
Office lease to the Group (Note b)
Interest income
Interest expense
9,498
3,730
17
3,081
16,548
4,051
177
3,094
Loans provided to the Group (Note c)
50,769
53,756
Cash and cash equivalent held by the Group (Note c)
14,202
14,570
Notes:
a.
On May 7, 2014, the Company’s subsidiary, 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. On May 26, 2017,
the Company and IMP entered into the Supplemental Contract for Purchase and Sale of Dore for an extended term
commencing on January 1, 2018 and expiring on December 31, 2020.
The extent of the continuing connected transactions for the years ended December 31, 2019 and 2018 did not
exceed the limit as set out in the announcements of the Company on May 31, 2017.
b.
On April 26, 2013, the Company entered into a product and service framework agreement with CNG for the provision
of 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. On May 26, 2017 the Company and CNG entered
into the second supplemental product and service framework agreement to extend the term to December 31, 2020
and to extend the scope of the supplemental product and service framework agreement to include leasing services
to be provided by Zhongxin International Financial Leasing (Shenzhen) Co. Ltd., the shares of which are 80% owned
by CNG.
The extent of the continuing connected transactions for the years ended December 31, 2019 and 2018 did not
exceed the limit as set out in the announcement of the Company on May 31, 2017.
137
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
32. RELATED PARTY TRANSACTIONS (Cont’d)
(a) Transactions/balances with government-related entities in the PRC (Cont’d)
(i)
Transactions/balances with CNG and its subsidiaries (Cont’d)
Notes: (Cont’d)
c.
On December 18, 2017, the Company and China Gold Finance entered into a deposit services agreement (“Deposit
Services Agreement”) pursuant to which the Company and its subsidiaries may, from time to time, make withdrawals
and deposits with China Gold Finance up to a daily maximum deposit balance (including interest) not exceeding
RMB100 million (approximately equivalent to US$15 million) and commencing from January 1, 2018 for one year.
On the same date, IMP and China Gold Finance entered into a loan agreement (“Loan Agreement”) pursuant
to which China Gold Finance agreed to provide an unsecured loan in the aggregate amount of RMB350 million
(approximately equivalent to US$51 million) to satisfy the financial needs of the Group within the PRC subject to
terms and conditions provided therein for a term of one year, and detail of terms as set out in loans payable to a
CNG subsidiary below.
On December 18, 2018, the Deposit Services Agreement and Loan Agreement have been extended for a one year
term to December 31, 2019 and four month term to April 30, 2019 pursuant to the supplemental deposit services
agreement and loan agreement respectively.
On March 25, 2019, IMP and China Gold Finance entered into a Loan Agreement pursuant to which China Gold
Finance agreed to provide financial assistance to be used towards daily operation working capital of RMB350 million
(approximately equivalent to US$50 million) for a term of 36 months, and detail of terms as set out in loans payable
to a CNG subsidiary below.
On December 31, 2019, the Deposit Services Agreement have been extended for a one year term to December 31,
2020 pursuant to the supplemental deposit services agreement, all other terms and conditions remain the same.
The extend of the connected transaction for deposit services for the year ended December 31, 2019 and 2018 did
not exceed the limit as set out in the announcement of the Company on December 19, 2017.
The Group has the following significant balances with CNG and its subsidiaries at the end of each
reporting period:
Assets
Amounts due from related companies (note 15)
Cash and cash equivalents held in a CNG subsidiary
Deposits
December 31,
December 31,
2019
US$'000
2,020
14,202
90
2018
US$'000
725
14,570
53
16,312
15,348
138
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
32. RELATED PARTY TRANSACTIONS (Cont’d)
(a) Transactions/balances with government-related entities in the PRC (Cont’d)
(i)
Transactions/balances with CNG and its subsidiaries (Cont’d)
Other than the cash and cash equivalents held in a CNG subsidiary and deposits paid to CNG
subsidiaries, the remaining amounts due from CNG and its subsidiaries as at December 31, 2019
and 2018, which are included in trade and other receivables is non-interest bearing, unsecured and
repayable on demand.
Liabilities
Loans payable to a CNG subsidiary (noted 26)
Entrusted loan payable (note 27)
Construction costs payable to CNG subsidiaries
Trade payable to CNG subsidiaries
Amount due to CNG
Contract liabilities with a CNG’s subsidiary
December 31,
December 31,
2019
US$'000
50,171
28,669
22,860
930
33
2,253
2018
US$'000
50,997
29,140
25,500
3,556
86
3,263
104,916
112,542
As at December 31, 2019, the loans payable to a CNG subsidiary, which are included in borrowings,
carry fixed interest rates at 4.51% (2018: 4.13%) per annum and are unsecured and repayable in
three years (2018: one year) and classified as non-current (2018: current). With the exception of the
entrusted loan payable to CNG (terms are set out on note 27) and loans payable to a CNG subsidiary,
the amounts due to CNG and its subsidiaries which are included in other payables and construction
costs payable, are non-interest bearing, unsecured and have no fixed terms of repayments.
(ii) Transactions/balances with other government – related entities in the PRC
Apart from the transactions with CNG and its subsidiaries disclosed above, the Group has also entered
into transactions of bank deposits, pledged bank deposits, borrowings and other general banking
facilities with other government-related entities in its ordinary course of business. Over 83%, 97%,
54% and 100% (2018: over 80%, 100%, 54% and 100%) of the Group’s bank deposits, pledged
bank deposits, borrowings and other general banking facilities are with government-related entities
respectively.
139
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
32. RELATED PARTY TRANSACTIONS (Cont’d)
(b) Compensation of key management personnel
Other than the directors’ emoluments disclosed in note 11(a), the Group has the following compensation to
other key management personnel during the years:
Salaries and other benefits
Post-employment benefits
33. CAPITAL RISK MANAGEMENT
Year ended
Year ended
December 31,
December 31,
2019
US$'000
2018
US$'000
678
21
699
666
23
689
The Group manages its common shares as capital. The Group’s objectives when managing capital are to safeguard
the Group’s ability to continue as a going concern in order to operate its mines, pursue the development of its
mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable
risk. The Group’s overall strategy remains unchanged from prior years.
The Group manages the capital structure and makes adjustments to it in light of operating results, changes
in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital
structure, the Group may attempt to issue new shares or options, issue of new debt, redemption of existing debt
or acquire or dispose of assets.
In order to facilitate the management of its capital requirements, the Group prepares annual expenditure budgets
that are updated as necessary depending on various factors, including operating results, successful capital
deployment and general industry conditions. The annual and updated budgets are approved by the board of
directors of the Company.
In order to maximize ongoing development efforts, the Group does not pay out dividends. The Group’s policy is to
invest its short-term excess cash in fixed bank deposits with maturities of 90 days or less from the original date of
acquisition, selected with regards to the expected timing of expenditures from its operations.
140
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
34. FINANCIAL INSTRUMENTS
Financial assets
Financial assets at amortised cost
Equity instruments at FVTOCI
Financial liabilities
At amortised cost
December 31,
December 31,
2019
US$'000
214,642
17,059
2018
US$'000
158,555
20,230
1,515,254
1,512,667
Financial assets at amortised cost as at December 31, 2019 and 2018 respectively are as follows:
Cash and cash equivalents
Restricted bank balance
Trade and other receivables (1)
Amount due from a non-controlling shareholder of a subsidiary
December 31,
December 31,
2019
US$'000
182,290
17,687
14,314
2018
US$'000
137,996
16,100
4,102
(included in prepaid expenses)
351
357
214,642
158,555
Financial liabilities at amortised cost as at December 31, 2019 and 2018 are as follows:
Accounts and other payables (2)
Borrowings
– Loans, other than syndicated loan
– Syndicated loan
Entrusted loan payable
December 31,
December 31,
2019
US$'000
2018
US$'000
271,484
273,369
693,327
521,774
28,669
700,920
509,238
29,140
1,515,254
1,512,667
(1)
Excluded VAT recoverables.
(2)
Excluded mining cost accrual, other accruals, payroll and benefit payable and other tax payables.
The Group’s financial instruments are exposed to certain financial risks including market risk (e.g. currency risk,
interest rate risk and other price risk), credit risk and liquidity risk.
141
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
34. FINANCIAL INSTRUMENTS (Cont’d)
(a) Currency risk
The Group is exposed to the financial risk related to the fluctuation of foreign exchange rates for the
monetary assets and liabilities denominated in the currencies other than the functional currencies to which
they related. The Group has not hedged its exposure to currency fluctuations. However, the Management
monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should
the need arise.
At the end of each reporting period, Huatailong of which its functional currency is RMB, had US$
denominated intra-group borrowings from Skyland (BVI). The intra-group borrowing is approximately
US$225,550,000 (2018: US$225,550,000) as at December 31, 2019.
The Group is mainly exposed to exchange rate fluctuation of RMB and US$.
RMB monetary assets and (liabilities)
Cash and cash equivalents
Restricted bank balances
Trade and other receivables
Equity instrument at FVTOCI
Accounts and other payables
Borrowings
December 31,
December 31,
2019
US$'000
39,623
17,687
1,266
–
(99,308)
(78,839)
2018
US$'000
23,097
16,100
65
1,992
(81,921)
(80,138)
(119,571)
(120,805)
Based on the above net exposures, and assuming that all other variables remain constant, a 5% (2018: 5%)
depreciation/appreciation of the RMB against the US$ would result in a decrease/increase in the Group’s
loss for the year of approximately US$5,082,000 (2018: decrease/increase in the Group’s loss for the year of
approximately US$5,134,000) for the year ended December 31, 2019.
US$ monetary assets and (liabilities)
December 31,
December 31,
2019
US$'000
18
(225,550)
(127,735)
2018
US$'000
18
(225,550)
(133,087)
(353,267)
(358,619)
Cash and cash equivalents
Inter-company loans
Other payables
142
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
34. FINANCIAL INSTRUMENTS (Cont’d)
(a) Currency risk (Cont’d)
Based on the above net exposures, and assuming that all other variables remain constant, a 5% (2018: 5%)
depreciation/appreciation of the US$ against the RMB would result in a decrease/increase in the Group’s
loss for the year of approximately US$16,074,000 (2018: decrease/increase in the Group’s loss for the year
of approximately US$16,317,000) for the year ended December 31, 2019.
In the 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.
(b)
Interest rate risk
Interest rate risk is the risk that the fair value in relation to bank balance, borrowings, entrusted loan
payable, loan to a CNG subsidiary and lease liabilities of US$719,170,000 (2018: US$725,694,000) bearing
fixed interest rate or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Group is exposed to cash flow interest rate risk on the variable rate bank balances and
variable-rate bank borrowings (see note 26 for details of these borrowings).
Sensitivity analysis
The following analysis is prepared assuming the variable rate bank balances and borrowings outstanding
at the end of the reporting period were outstanding for the whole year and all other variables were held
constant. A 25 basis point (2018: 25 basis points) increase or decrease is used when reporting interest rate
risk internally to key management personnel and represents the Management’s assessment of the reasonably
possible change in interest rates.
The analysis below reflects the sensitivity that the interest rate may be higher/lower by 25 basis points (2018:
25 basis points).
25 basis points (2018: 25 basis points) higher
– increase in loss for the year
– addition in finance costs capitalised
25 basis points (2018: 25 basis points) lower
– decrease in loss for the year
– reduction in finance costs capitalised
Year ended
Year ended
December 31,
December 31,
2019
US$'000
2018
US$'000
(599)
14
599
(14)
(652)
29
652
(29)
The Group monitors interest rate exposure and will consider hedging significant interest rate exposure should
the need arise.
143
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
34. FINANCIAL INSTRUMENTS (Cont’d)
(c) Other price risk
The Group is exposed to equity price risk through its investments in equity securities listed in Hong Kong.
The Group’s equity price risk is mainly concentrated on equity instruments operating in mining industry
sector quoted in the Stock Exchange. In addition, the Group also invested in an unquoted equity security
for investee operating in the chemical industry sector for long term strategic purposes which had been
designated as FVTOCI. The Group has formed a team led by Chief Financial Officer to monitor the price risk
and will consider hedging the risk exposure should the need arise.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to equity price risk at the
reporting date. No sensitivity analysis is presented as the directors of the Company consider the amounts
of unquoted investments are insignificant. If the prices of the respective listed equity instruments had been
10% (2018: 10%) higher/lower:
•
Investments revaluation reserve would increase/decrease by US$1,649,000 (2018: increase/decrease
by US$1,766,000) for the Group as a result of the changes in fair value of listed investment at FVTOCI
(2018: investment at FVTOCI).
(d) Credit risk and impairment assessment
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% (2018: 100%) of its gold to one creditworthy
customer, CNG, and approximately 17% (2018: 33%) and 57% (2018: 63%) of its copper concentrate and
other by-product to CNG subsidiaries and third-party customers with 10% or more of the Group’s revenue
respectively for the year ended December 31, 2019 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 for sales of copper concentrate and
other by-products and has set up monitoring procedures to ensure that follow-up action is taken for timely
settlement of receivables from CNG, the CNG subsidiary and third-party customers. 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 addition, the Group performs impairment
assessment under ECL model on trade balances individually. In this regard, Management considers the
Group’s credit risk is significantly reduced. The Group does not hold any collateral over these balances.
The Group applies the simplified approach to provide for expected credit losses on trade receivables as
permitted and prescribed by IFRS 9.
The Management assessed the expected loss on trade receivables individually. Based on historical
experience of the Group, these trade receivables are generally recoverable due to the long term/on-going
relationship and good repayment record.
As at December 31, 2019, included in the Group’s trade receivables balance are debtors with aggregate
carrying amount of US$295,000 (2018: US$118,000) which are past due as at the reporting date. The
directors of the Company are of the opinion that there has no default occurred for the past due balances
and the balances are still considered fully recoverable due to long-term/on-going relationship and good
repayment record from these customers.
144
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 34. FINANCIAL INSTRUMENTS (Cont’d)
(d) Credit risk and impairment assessment (Cont’d)
Movement in the allowance for credit losses of trade receivables:
At January 1
Allowance for credit losses
Exchange realignment
At December 31
December 31,
December 31,
2019
US$'000
2018
US$'000
46
33
(1)
78
33
20
(7)
46
The Group was also exposed to credit risk on amount due from related parties and other receivables.
The 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 Management makes
individual assessment on the recoverability of other receivables based on historical settlement records and
past experience. The directors of the Company believe that there is no material credit risk inherent in the
Group’s outstanding balance of other receivables.
The Group’s cash and short-term bank deposits are held in large PRC, Hong Kong and Canadian financial
institutions, which the credit risks on cash and short-term bank deposits are limited. These deposits 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 financial assets at amortised
cost comprise various debtors which are located either in the PRC or Canada for the years ended December
31, 2019 and 2018.
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.
(e) Liquidity risk
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.
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 33.
The Group manages its liquidity primarily through maintaining adequate level of cash and cash equivalents
and borrowings.
145
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
34. FINANCIAL INSTRUMENTS (Cont’d)
(e) Liquidity risk (Cont’d)
In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash
equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects
of fluctuations in cash flows. The Management monitors the utilisation of borrowings and ensures compliance
with loan covenants.
The Group relies on borrowings as a significant source of liquidity. Details of which are set out in note 26.
The considerations of going concerns assessment prepared by the directors of the Company are set out in
note 1, as the Group’s current liabilities exceeded its current assets by approximately US$409 million at
December 31, 2019.
The following table details the Group’s remaining contractual maturities for its financial liabilities. The table is
based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to satisfy the liabilities.
To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate at
the end of the reporting period:
At December 31, 2019
Accounts and other payables
Borrowings
Entrusted loan payable
Lease liabilities
At December 31, 2018
Accounts and other payables
Borrowings
Entrusted loan payable
Weighted
average
interest rate
%
On demand
or within
1 year
US$'000
1 – 2
years
2 – 5
years
US$'000
US$'000
Total
Over 5
undiscounted
years
US$'000
cash flow
US$'000
Carrying
amount
US$'000
271,484
604,101
28,700
106
–
–
–
174,747
236,270
287,732
–
114
–
352
–
31
271,484
1,302,850
28,700
603
271,484
1,215,101
28,669
533
2.89
2.75
5.24
904,391
174,861
236,622
287,763
1,603,637
1,515,787
Weighted
On demand
average
interest rate
%
–
2.86
2.75
or within
1 year
US$'000
273,369
143,414
801
1 – 2
years
2 – 5
years
US$'000
US$'000
Total
Over 5
undiscounted
years
US$'000
cash flow
US$'000
Carrying
amount
US$'000
–
554,282
29,173
–
296,829
–
–
306,206
–
273,369
1,300,731
29,974
273,369
1,210,158
29,140
417,584
583,455
296,829
306,206
1,604,074
1,512,667
146
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
34. FINANCIAL INSTRUMENTS (Cont’d)
(f) Fair value
Equity instruments at FVTOCI – listed equity securities and equity instruments at FVTOCI – unlisted equity
securities which are measured at fair value based on the quoted bid price in an active market (Level 1) and
the discounted cash flow model as considered insignificant respectively. The fair values of other financial
assets and financial liabilities measured at amortised cost are determined in accordance with generally
accepted pricing models based on discounted cash flow analysis.
The Group considers that the carrying amounts of financial assets and financial liabilities recorded at
amortised cost in the consolidated financial statements approximate their fair values. There was no transfer
amongst 1, 2 and 3 in the current and prior years.
35. COMMITMENTS
Operating leases commitments
The Group had commitments for future minimum lease payments under non-cancellable operating leases which
fall due as follows:
Within one year
In the second to fifth year inclusive
Over five years
December 31,
2018
US$'000
111
141
112
364
December 31,
December 31,
2019
US$'000
2018
US$'000
Capital commitments
Capital expenditure in respect of acquisition of property, plant
and equipment in the consolidated financial statements
– contracted but not provided for
31,072
61,657
Capital expenditure in respect of capital
injection to an investee
–
3,643
147
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
36. 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 US$5,209,000 and US$4,473,000 for the years ended December 31, 2019 and 2018, respectively,
represent contributions payable to the scheme by the Group.
37. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The table below details changes in the Group’ liabilities arising from financing activities, including both cash and
non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash
flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities.
At January 1, 2019
Financing cash flows
Lease modified
Dividend declared
Exchange difference arising on translation
Unrealised foreign exchange gain, net
Others
Borrowings
US$'000
(note 26)
1,210,158
15,231
–
–
(10,293)
(1,298)
1,303
Entrusted loan
payable
US$'000
(note 27)
29,140
–
–
–
(471)
–
–
At December 31, 2019
1,215,101
28,669
533
At January 1, 2018
Financing cash flows
Dividend declared
Exchange difference arising on translation
Unrealised foreign exchange gain, net
Borrowings
US$'000
(note 26)
1,274,933
(29,414)
–
(31,326)
(4,035)
At December 31, 2018
1,210,158
29,140
148
Lease
liabilities
US$'000
(note 28)
Dividend
payables
US$'000
101
(84)
514
–
–
–
2
30,608
–
–
(1,468)
–
–
(165)
–
165
–
–
–
–
–
(494)
494
–
–
–
Entrusted loan
payable
US$'000
(note 27)
Dividend
payables
US$'000
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
38. PARTICULARS OF SUBSIDIARIES
Details of the Company’s subsidiaries at December 31, 2019 and 2018 are as follows:
Name of subsidiaries
Place and date
of incorporation/
establishment
Issued and fully
paid share capital/
registered capital
Equity interest
attributable to the Group
as at December 31,
Principal activities
2019
2018
Pacific PGM Inc.
British Virgin Islands
US$100
100%
100%
Investment holding
(“BVI”)
May 17, 2001
Pacific PGM (Barbados)
Barbados
US$250,000
100%
100%
Investment holding
Inc.
IMP
September 6, 2007
(2018: US$200,000)
PRC
April 29, 2002
US$45,000,000
96.5%
96.5%
Engaged in exploration and
development of mining
properties in China
Skyland Mining Limited
Barbados
US$233,380,700
100%
100%
Investment holding
October 6, 2004
plus RMB1,510,549,032
Jia Ertong(1)
PRC
US$273,920,000
100%
100%
Exploration, development and
October 31, 2003
mining of mineral
properties
and investment holding
Huatailong(1)
PRC
RMB1,760,000,000
100%
100%
Exploration, development and
January 11, 2007
mining of mineral
properties
Jiama Industry and Trade(1)
PRC
RMB5,000,000
51%
51%
Mining logistics and transport
December 1, 2011
business
Skyland (BVI)
BVI
US$1
100%
100%
Issue of bonds
October 26, 2012
(1)
Domestic limited liability company.
None of the subsidiaries had issued any debt securities at the end of the year except for Skyland (BVI) has
US$500 million of listed bonds as at December 31, 2019 and 2018.
149
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019 39. STATEMENT OF FINANCIAL POSITION OF THE COMPANY
Current assets
Cash and cash equivalents
Other receivables
Prepaid expenses and deposits
Non-current assets
Right-of-use assets
Property, plant and equipment
Loan receivables from subsidiaries
Equity instruments at FVTOCI
Investments in subsidiaries
Amounts due from subsidiaries
Total assets
Current liabilities
Other payable and accrued expenses
Lease liabilities
Net current assets
December 31,
2019
US$'000
December 31,
2018
US$'000
7,824
1,034
127
8,985
534
10
64,790
16,485
987,066
42,053
6,758
48
223
7,029
–
31
62,220
17,655
987,016
53,988
1,110,938
1,120,910
1,119,923
1,127,939
2,361
89
2,450
6,535
4,385
–
4,385
2,644
Total assets less current liabilities
1,117,473
1,123,554
Non-current liabilities
Lease liabilities
Deferred income
Total liabilities
Owners’ equity
Share capital (note 31)
Reserves (note 40)
Accumulated losses (note 40)
444
19
2,913
–
19
4,404
1,229,061
(730)
(111,321)
1,229,061
440
(105,966)
Total owners’ equity
1,117,010
1,123,535
Total liabilities and owners’ equity
1,119,923
1,127,939
150
China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
40. RESERVES AND DEFICITS OF THE COMPANY
Reserves
US$'000
Accumulated
losses
US$'000
Total
US$'000
At January 1, 2018 (restated)
2,465
(103,126)
(100,661)
Loss for the year
Fair value loss on equity instruments at FVTOCI
–
(2,025)
(2,840)
–
(2,840)
(2,025)
Total comprehensive loss for the year
(2,025)
(2,840)
(4,865)
At December 31, 2018
440
(105,966)
(105,526)
Loss for the year
Fair value loss on equity instruments at FVTOCI
–
(1,170)
(5,355)
–
(5,355)
(1,170)
Total comprehensive loss for the year
(1,170)
(5,355)
(6,525)
At December 31, 2019
(730)
(111,321)
(112,051)
151
Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2019
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:
Year ended December 31
2019
US$'000
2018
US$'000
2017
US$'000
2016
US$'000
2015
US$'000
657,459
570,570
411,881
338,601
339,949
RESULTS
Revenue
(Loss) profit attributable to
owners of the Company
(32,837)
(4,837)
63,146
(13,304)
(8,188)
2019
US$'000
2018
US$'000
At December 31
2017
US$'000
2016
US$'000
2015
US$'000
ASSETS AND LIABILITIES
Total assets
Total liabilities
3,197,130
(1,746,463)
3,215,895
3,230,444
2,966,619
2,780,593
(1,726,657)
(1,720,460)
(1,546,430)
(1,333,339)
Net assets
1,450,667
1,489,238
1,509,984
1,420,189
1,447,254
Equity attributable to
owners of the Company
Non-controlling interests
1,435,337
15,330
1,474,433
1,495,336
1,406,457
1,434,227
14,805
14,648
13,732
13,027
Total owners’ equity
1,450,667
1,489,238
1,509,984
1,420,189
1,447,254
152
FIVE-YEAR FINANCIAL SUMMARYChina Gold International Resources Corp. Ltd.
ANNUAL REPORT
2
0
1
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A
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l
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(Incorporated in British Columbia, Canada with limited liability)
HK Stock Exchange Stock Code: 2099
Toronto Stock Exchange Stock Code: CGG