(Incorporated in British Columbia, Canada with limited liability) HK Stock Exchange Stock Code: 2099 Toronto Stock Exchange Stock Code: CGG 2 0 2 0 A n n u a l R e p o r t 2020Annual Report 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 incorporated 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’s are the Chang Shan Hao Gold Mine (“CSH Gold Mine” or “CSH Mine” or “CSH”), located in Inner Mongolia Autonomous Region, China and the Jiama Copper-Gold Polymetallic Mine (“Jiama Mine” or “Jiama”), located in Tibet Autonomous Region, 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 the commercial production of phase I and phase II in September 2010 and September 2017 respectively. The Company is working to expand resources and reserves at its existing properties through exploration programs. The Company also 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. Annual Report 2020 11 Annual Report 2020COMPANY HIGHLIGHTS MESSAGE FROM THE CHAIRMAN AND CEO Dear shareholders and friends, 2020 was a year full of challenges for China Gold International Resources, and it was also a year for the Company to actively respond to such challenges and win victories. Despite the complex and changeable market environment, the impact of the Covid-19 pandemic, and the uncertainty with sharp downturn of global economy, the management team and all employees worked hard to overcome difficulties, and seized the opportunity of relatively high gold and copper prices. We achieved great success by means of improved operational excellence, continuous cost control and risk prevention, resulting in the best annual performance of the Company in its history. The Company produced an all time record high total of 240,848 ounces of gold and 180.9 million pounds (82,059 tonnes) of copper throughout the year which greatly exceeded the original production guidance. A net profit of USD114 million was realized, turning previous losses into a substantial profit. The Company was also successful in completing a USD300 million three-year fixed-rate bond offering during the year to achieve an additional advantage of low-cost financing. While achieving good operational results, we have always upheld advanced health, safety and environmental protection standards in the industry, and improved safety intrinsically through technological innovation. In 2020, some new technologies such as underground 3D software design and remote control of unmanned transportation of Jiama Mine was put into operation, as a result the Company’s innovation and digitalization reach a new level. The Company practices the concept of sustainable development and win-win cooperation consistently with a focus on our social responsibility. In 2020, Jiama Industry and Trade has achieved continuous dividends for eleven consecutive years. CSH Mine has improved livelihood of local people by drinking water projects and through donations and construction of hospitals. The communities in which they are located and related parties can benefit from our development. In 2021, the Company will strive to continue to set new milestones in operational optimization, cost control, exploration and technological innovation with commitment to creating greater value for shareholders. We will continue to work closely with our controlling shareholder China National Gold with its great support in management, technology, financing, mergers and acquisitions to us to tap internal potential and seek external opportunities, and improve the quality of development. I believe the Company, which is in a period of important historical opportunities, will definitely make a difference, and a prosperous future can be expected! Thank you for your continued interest and support. 2 China Gold International Resources Corp. Ltd. BOARD OF DIRECTORS Executive Directors Liangyou Jiang Mr. Jiang, age 55, was appointed as Chairman of the Board on March 29, 2020 concurrently as serving as Chief Executive Officer of the Company since November 2018. Mr Jiang has served as an Executive Director since October 2014 to present. Mr. Jiang was appointed as Vice President of China National Gold since July 2018. He was appointed as Director and Executive Vice President of China National Gold Group Hong Kong Ltd. (“China Gold Hong Kong” or “CNGHK”) from October 2018 to present. Mr. Jiang was elected as Senior Executive Vice President of the Company from August 2014 to November 2018. He 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 Chairman of Tibet Huatailong from February 2012 to August 2014. Mr. Jiang has served as Director of Guizhou Jinfeng Mining Limited from August 2016 to August 2018. He has also served as Chairman of Zhongji Mining and General Manager of China Gold Hong Kong Buchuk Mining Company Limited (“Buchuk”) from May 2015 to December 2020. Mr. Jiang has served as Chairman and Executive Director of Buchuk from October 2017 to December 2020. Mr Jiang has served as Chairman of Soremi Investments Limited from January 2018 to present. Mr. Jiang has served as Chairman of Kichi Chaarat Closed Joint Stock Company from January 2018 to December 2020. 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”) from August 2014 to December 2020. He has served as Director of Mundoro Mining Inc (“Mundoro”) from August 2014 to September 2020. He has served as Director of China Gold Hong Kong Holding Corp. Limited (“China Gold Hong Kong Holding”) from January 2015 to December 2020. 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 Co., Limited, 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 the 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 in China. 3 Annual Report 2020BOARD OF DIRECTORS AND SENIOR MANAGEMENT Shiliang Guan Mr. Guan, age 53, was appointed as the Vice President of the Company in September 2016 and elected as an Executive Director in June 2019. Mr Guan was appointed as Chairman of Tibet Jia Ertong and a Director of Skyland Mining Ltd. since June 2019. He has served as Chairman of Tibet Huatailong since November 2015 up to present. Prior to joining the Company, Mr. Guan served as Deputy Manager of the Production Management Department of China National Gold from 2011 to 2014. He was Chairman of the Board of Inner Mongolia Baotou Xinda Gold Mining Co., Ltd from February 2014 to November 2015, where he was responsible for the overall production and operations. Prior to 2011, Mr. Guan held senior positions at Jilin Haigou Mining Company, Shaanxi Dongtongyu Gold Mine of Zhongjin Gold Co., Ltd, Tongguan Zhongjin Gold Mining Co., Ltd, Songxian Jinniu Co., Ltd. and Jin Ding Mining Co. Ltd. Mr. Guan is a senior professional mining engineer and has over 26 years of experience in the mining industry. Mr. Guan holds a bachelor’s degree in Mining Engineering from Northeastern University in China. Weibin Zhang Mr. Zhang, age 57, joined Inner Mongolia Pacific Mining Co., Limited (“Inner Mongolia Pacific”) in March 2018 as Chairman and General Manager. From October 2017 to March 2018, he served as Executive Director and General Manager of Changchun Gold Design Institute Co., Ltd.. From March 2014 to October 2017, Mr. Zhang served as the Principle of Changchun Gold Design Institute Co., Ltd. (“Design Institute”). From March 2011 to March 2014, he served as Vice President of China National Gold Engineering Corporation. Starting in 1985 through March 2014, Mr. Zhang held numerous senior executive roles at the Changchun Gold Design Institute Co., Ltd. and Yunnan Gold LLC. Mr. Zhang is a senior professional mining engineer and has over 36 years of experience in the mining industry. Mr. Zhang holds a college diploma in Mining Engineering from Shenyang Gold College. Na Tian Ms. Tian, age 40, has been currently promoted as Deputy General Manager of Audit and Legal Compliance Department of China National Gold since February 2021. She joined CNGHK as Legal Deputy Manager of General Administration Office in September 2018. Since February 2012, Ms. Tian has worked in the Division of Corporate Secretary Affairs of the Company and was promoted to Deputy Director in September 2017. In July 2017, she was appointed as a director of Skyland Mining (BVI) Limited, a wholly owned subsidiary of the Company. From July 2008 to May 2011, Ms. Tian was an auditor at Ernst & Young Hua Ming LLP. In 2008, Ms. Tian passed PRC national judicial examination and obtained the Legal Professional Qualification. Ms. Tian holds a master’s degree in Law from Peking University Law School. She also holds double bachelor’s degrees and majored in law and business English from Guangdong University of Foreign Studies. 4 4 China Gold International Resources Corp. Ltd.BOARD OF DIRECTORS AND SENIOR MANAGEMENTChina Gold International Resources Corp. Ltd. Non-Executive Director Junhu Tong Mr. Tong, age 58, is elected as Non-Executive Director of the Company since June 2020. He joined CNGHK in October 2018 as Vice President. From July 2009 through October 2018, Mr. Tong served in numerous senior executive roles with China National Gold. Mr. Tong has had a long career in the mining industry spanning over 30 years, with extensive senior executive and board experience. Mr. Tong currently served as Chairman of Closed Joint-Stock Company Rudnik (“Zapadnava-Kluchi”) from October 2018 to present. Mr. Tong has been a Fellow authorized by Australasian Institute of Mining &Metallurgy since December 2013 up to present. Mr. Tong holds a master’s degree in Mining Engineering from Beijing Science and Technology University and a bachelor’s degree in Mining Engineer from Chongqing University. INDEPENDENT NON-EXECUTIVE DIRECTORS Yingbin Ian He Mr. He, age 59, joined the Company as an Independent Non-Executive Director in May 2000. He is appointed as Chairman of the Audit Committee since October 2009 and as Lead Independent Non-Executive Director since November 2018. Mr. He has over 30 years of experience in mining industry, with career covering research, engineering consulting, management of mining operations, merger and acquisition, and management of public companies. Mr. He serves as Managing Director of Lacnord Capital Corp, a venture capital company and Chairman of Vatukoula Gold Mines, a company with gold mining operation in Fiji. From 1995 to 2006, Mr. He served as President and Director of Spur Ventures Inc. a company listed on the TSX Venture Exchange with phosphate mining and phosphate fertilizer production in China. Mr. He also serves on the boards of several public companies, including SouthGobi Resources Ltd. a coal mining company dual listed on the Toronto Stock Exchange and Hong Kong Stock Exchange, and PT Bumi Resources Tbk, a mining company listed on Indonesian Stock Exchange. Mr. He holds a Ph.D. degree in mineral process engineering and a Master of Applied Science degree in mineral process engineering both from the University of British Columbia, and a Bachelor of Engineering degree in coal preparation and utilization technology from the Heilongjiang Institute of Mining and Technology (now Heilongjiang University of Science and Technology) in China. Wei Shao Mr. Shao, age 66, is elected as Independent Non-Executive Director as well as Chairman of the Nominating & Corporate Governance Committee since June 2019. He is a partner and the National China Service Co-Leader at Dentons Canada LLP and specializes in international business transactions focusing on China. Mr. Shao has over 27 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 Nationals 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. 55 Annual Report 2020BOARD OF DIRECTORS AND SENIOR MANAGEMENTAnnual Report 2020 Bielin Shi Dr. Shi, age 64, is elected as Independent Non-Executive Director as well as Chairman of the Health, Safety and Environmental Committee since June 2019. He 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 37, is elected as Independent Non-Executive Director as well as Chairwoman of the Compensation and Benefit Committee since June 2019. She is currently Deputy CEO and Executive Director of Mason Group Holdings Limited (HKEX Stock Code: 273) since 16 April 2020. From 2014 to March 2020. She was Head of Operations and Risk of MEC Advisory Limited, which was the sole Investment Advisor to Can-China Global Resource Fund. Ms. Han’s role in MEC Advisory Limited 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 has obtained her PhD’s degree of Economics (Finance), Master’s degree in Applied Economics (Venture Capital) and Bachelor’s degree of Economics (Finance) from Renmin University of China. 6 6 China Gold International Resources Corp. Ltd.BOARD OF DIRECTORS AND SENIOR MANAGEMENTChina Gold International Resources Corp. Ltd. SENIOR MANAGEMENT Jerry Xie EXECUTIVE VICE PRESIDENT AND CORPORATE SECRETARY Mr. Xie, age 60, 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 as well as public relations. 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 in Canada, 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. Yuehe Lu INTERIM CHIEF FINANCIAL OFFICER Ms. Lu, aged 36, joined the Company in August 2011 and is responsible for corporate financial management. She was promoted to Interim Chief Financial Officer in October 2020. Ms. Lu has participated in major financing activities of the Company, including the issuance of U.S. dollar-denominated bonds. Ms. Lu has extensive experience in financial reporting, internal control and corporate financing. Ms. Lu holds a Senior Accountant qualification in China, and is a Certified Internal Auditor (CIA) and a member of China Institute of Internal Audit (CIIA). Ms. Lu holds a Master’s Degree in Business Administration (MBA) from School of Economics and Management, Tsinghua University, and a Bachelor’s Degree in Management (International Accounting) from School of Economics and Management, Beijing Forestry University. 77 Annual Report 2020BOARD OF DIRECTORS AND SENIOR MANAGEMENTAnnual Report 2020 Gerard Guo CHIEF ENGINEER Mr. Guo, age 57, was appointed as Chief Engineer of the Company on November 13, 2018. Mr. Guo is a professional engineer with Professional Engineers of Ontario, Canada and has over 37 years’ experience in engineering studies, mine engineering and mine operations. He had served as a senior mining engineer and director of technical services 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 Deputy Principle 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. Areas of expertise include mine planning, feasibility studies, cost estimation, economic evaluations, risk analysis and due diligence. Mr. Guo holds a Master’s Degree in Natural Resources Engineering from Laurentian University, Sudbury, Ontario, Canada and a Bachelor’s Degree in Mining Engineering from Baotou Institute of Iron & Steel Technology (Presently Inner Mongolia University of Science & Technology) of the Ministry of Metallurgy Industry, China. He is trilingual (English, French and Chinese). 8 8 China Gold International Resources Corp. Ltd.BOARD OF DIRECTORS AND SENIOR MANAGEMENTChina Gold International Resources Corp. Ltd. The Directors are pleased to present this report and the audited consolidated financial statements of the Company for the year ended December 31, 2020 (the “Reporting Period”). PRINCIPAL ACTIVITIES AND BUSINESS REVIEW The Company is a gold and base metal mining company incorporated under the laws of British Columbia, 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 39 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 2020, 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 Chairman and CEO”, “Management Discussion and Analysis” and “Corporate Government Report” sections of this annual report. SHARE CAPITAL Details of the movement in the share capital of the Group during the Reporting Period are set out in Note 31 of the Financial Statements. RESERVES Details of the reserves available for distribution to the shareholders as at December 31, 2020 are set out in Note 41 of the Financial Statements. RESULTS The results of the Group as at December 31, 2020 are set out in the consolidated statement of profit or loss and other comprehensive income on page 70. DIVIDEND In Connection with the financial results for the year ended 31 December 2020, the Company has declared a special dividend in respect of the year ended 31 December 2020 of US$ 0.12 per common share, in an aggregate amount of US$ 47,570,000, payable on May 30, 2021 to shareholders of record as of April 20, 2021. The Board of Directors will determine any future dividends and dividend policy on the basis of earnings, financial requirements and other relevant factors. DIRECTORS The directors during the Reporting Period and up to the date of this report are as follows: 9 Annual Report 2020DIRECTORS’ REPORT Executive Directors Liangyou Jiang Shiliang Guan Weibin Zhang Na Tian Non-Executive Director Junhu Tong Independent Non-Executive Directors Yingbin 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 2021 annual and special meeting of the Company (the “2021 AGM”) and, being eligible, shall offer themselves to be re- elected at the 2021 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 3 to page 8 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 2020 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. 10 10 China Gold International Resources Corp. Ltd.DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd. 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. DIRECTORS’ INTEREST IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS Mr. Liangyou Jiang, Mr. Shiliang Guan, Mr. Weibin Zhang, Ms. Na Tian and Mr. Junhu Tong 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, 2020 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, 2020, 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: 1111 Annual Report 2020DIRECTORS’ REPORTAnnual Report 2020 SHARES Long Position in Shares Name Position Company Number of shares held Nature of interest Approximate percentage of interest in the Company Yingbin Ian He Independent Non- Executive Director China Gold International Resources Corp. Ltd. 150,000 Personal 0.0378% CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS China National Gold is the ultimate controlling shareholder of the Company currently holding approximately 40.01% 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 (as subsequently amended, 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 First Supplemental 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. 12 12 China Gold International Resources Corp. Ltd.DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd. On May 6, 2020, the Company and China National Gold entered into the Third Supplemental Products and Services Framework Agreement (the “Third Supplemental Product and Services Framework Agreement”) to extend the term of the Products and Services Framework Agreement to December 31, 2023. Details of the Third Supplemental Product and Services Framework Agreement are as stated in the Company’s announcement dated May 7, 2020, circular dated May 26, 2020 and poll results announcement dated June 17, 2020. For the Reporting Period, the transaction amounts under the Product and Service Framework Agreement, as amended were approximately RMB1,267 million 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 (as subsequently amended, the “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 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. 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. On 28 March 2018, Inner Mongolia Pacific entered into the Second Supplemental Contract for Purchase and Sale of Doré with China National Gold, to make certain immaterial and non-consequential amendments to the purchase terms of gold doré pursuant to which both parties agreed to amend the reference price for gold doré from “the real-time price of Au9995 gold ingot at Shanghai Gold Exchange on the notification date less RMB0.95 per gram” to the monthly average price of the AU(T+D) contract on the Shanghai Gold Exchange less RMB1.50 per gram”. On May 6, 2020 Inner Mongolia Pacific and China National Gold entered into the Third Supplemental Contract for Purchase and Sale of Doré for a three-year term commencing January 1, 2021 and expiring on December 31, 2023. Details of the Third Supplemental Contract for Purchase and Sale of Doré are as stated in the Company’s announcement dated May 7 2020, circular dated May 26, 2020 and poll results announcement dated June 17, 2020. For the Reporting Period, the transaction amounts under the Contract for Purchase and Sale of Doré, as amended, were approximately RMB1,794 million where the relevant annual monetary cap was RMB2,700 million. 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 RMB100,000,000, 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 Group 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. 1313 Annual Report 2020DIRECTORS’ REPORTAnnual Report 2020 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. On December 22, 2020, the Company and China Gold Finance entered into a 2021 Supplemental Deposit Services Agreement (the “2021 Supplemental Deposit Services Agreement”) to extend the term for a further year to December 31, 2021. Details of the Supplemental Deposit Services Agreement are as stated in the Company’s announcement dated December 23, 2020. Daily maximum deposit monetary caps for the transactions stipulated under the Deposit Services Agreement (as amended) pursuant to Chapter 14A of the Listing Rules (including accumulative settlement interest) shall not exceed RMB100,000,000 for 2020, increasing to RMB180,000,000 in the 2021 Supplemental Deposit Services Agreement. There have not been any deposits exceeding the daily maximum monetary cap for the Reporting Period. 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, 2020: (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. 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 (as amended), 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. 14 14 China Gold International Resources Corp. Ltd.DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd. 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 16, 2020, the Company, Skyland Mining, Bank of China (Hong Kong) Limited, China International Capital Corporation Hong Kong Securities Limited, China Construction Bank (Asia) Corporation Limited, Citigroup Global Markets Limited, Guotai Junan Securities (Hong Kong) Limited, Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch, Silk Road International Capital Limited and Standard Chartered Bank (the “Joint Bookrunners” and “Joint Lead Managers”) entered into a subscription agreement (the “Subscription Agreement”) pursuant to which Skyland Mining agreed to issue to the Joint Bookrunners and Joint Lead Managers, and the Joint Bookrunners and Joint Lead Managers agreed severally and not jointly, to subscribe for bonds in an aggregate principal amount of US$300 million at an issue price of 99.886% (the “Bonds”) bearing interest at the rate of 2.80% with a maturity date of June 23, 2023, rated BBB- by Standard & Poor’s. The Bonds were unconditionally and irrevocably guaranteed by the Company. The net proceeds were used for repaying existing indebtedness and general corporate purposes of the Company. On June 23, 2020, 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 Stock Exchange of Hong Kong Limited and the Chongwa (Macao) Financial Asset Exchange Co., Limited on 24 June 2020. Details of the Subscription Agreement are stated in the Company’s announcements dated June 16, 2020 and June 23, 2020. EQUITY-LINKED AGREEMENTS During the year ended December 31, 2020, 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)). NUMBER AND REMUNERATION OF EMPLOYEES As at December 31, 2020, the Company had 2,082 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$59,888,000 as compared to the staff costs of US$55,939,000 in 2019. 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. 1515 Annual Report 2020DIRECTORS’ REPORTAnnual Report 2020 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, 2020, 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: 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 158,588,330 (2) 158,588,330 40.01% 40.01% 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. 16 16 China Gold International Resources Corp. Ltd.DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd. 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: Purchases – the largest supplier – five largest suppliers combined Sales – the largest customer – five largest customers combined Percentage of the total purchases/sales accounted for 25% 62% 30% 89% Sales to the largest customer of the Company account for 30% of the Company’s sales and relate to the sale of gold doré from the CSH Gold Mine pursuant to the Contract for Purchase and Sale of Doré (as amended). In addition, the five largest customers account for 89% 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. 1717 Annual Report 2020DIRECTORS’ REPORTAnnual Report 2020 CHARITABLE DONATIONS The Company made charitable donations during the Reporting Period amounting to US$102,200. EVENTS AFTER THE REPORTING PERIOD With the exception of the early repayment of the entrusted loan payable, as set out in note 27 of the Financial Statements, there are no other significant events occurring after December 31, 2020 as set out in the Financial Statements and Management’s Discussion and Analysis. INDEPENDENT AUDITORS A resolution will be submitted at the 2021 AGM to re-appoint Deloitte Touche Tohmatsu of Hong Kong as the Company’s auditors. On behalf of the Board, Liangyou Jiang Chairman and Chief Executive Officer March 31, 2021 18 18 China Gold International Resources Corp. Ltd.DIRECTORS’ REPORTChina Gold International Resources Corp. Ltd. 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. 19 Annual Report 2020CORPORATE GOVERNANCE REPORT 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. Liangyou Jiang was appointed as Chairman of the Board with effect from March 29, 2020. 2. Mr. Yongqing Teng and Ms. Fuzhen Kang retired from the Board upon the conclusion of the annual and special meeting held on June 16, 2020. 3. Mr. Weibin Zhang, Ms. Na Tian and Mr. Junhu Tong were elected as Directors at the annual and special meeting held on June 16, 2020. 4. Mr. Derrick Zhang resigned as Chief Financial Officer with effect from 16 October 2020. 5. Ms. Yuehe Lu was appointed as interim Chief Financial Officer with effect from 16 October 2020. 6. Mr. Lisheng Zhang retired as Vice President with effect from 3 November, 2020. 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, 2020 and as at the date of this report, the Board has determined that it consisted of four “independent directors” and five non-independent directors under the CSA corporate governance guidelines. The Board believes that its current size and composition and the composition of the Board committees, 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 four (4) Executive Directors, one (1) Non-Executive Directors and four (4) Independent Non-Executive Directors. The Directors for the year ended 31 December 2020 and up to the date of this report are as follows: Executive Directors Liangyou Jiang (Chairman and Chief Executive Officer)(1) Shiliang Guan (Vice President)(2) Weibin Zhang Na Tian 20 20 China Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. Non-Executive Directors Junhu Tong(3) Independent Non-Executive Directors Yingbin 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. Zhang is an Executive Director in his capacity as an affiliate of China National Gold which has a material relationship with the Company. (4) Ms. Tian is an Executive Director in his capacity as an affiliate of China National Gold which has a material relationship with the Company. (5) Mr. Tong is a Non-Executive Director in his 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 40.01% 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 3 to 8 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. 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. For the reporting period, Mr. Yingbin Ian He was appointed lead Independent Non-Executive Director as of November 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. 2121 Annual Report 2020CORPORATE GOVERNANCE REPORTAnnual Report 2020 For the Reporting Period, the Nominating & Corporate Governance Committee is comprised of four Independent Non- Executive Directors, namely, Mr. Wei Shao, Mr. Yingbin Ian He, Dr. Bielin Shi and Ms. Ruixia Han and one Non- Executive Director, namely, Mr. Junhu Tong. 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. Yingbin Ian He, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han. Mr. Yingbin 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. Yingbin Ian He, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han and one Executive Director Mr. Weibin Zhang. Ms. Ruixia Han was appointed as the Chairwoman 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. Yingbin 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. 22 22 China Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. 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 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 for 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: Executive Directors Liangyou Jiang Shiliang Guan Weibin Zhang Na Tian Non-Executive Director Junhu Tong Independent Non-Executive Directors Yingbin Ian He Wei Shao Bielin Shi Ruixia Han Reading/ Attending seminars/ conferences and exchange views Yes Yes Yes Yes Yes Yes Yes Yes Yes 2323 Annual Report 2020CORPORATE GOVERNANCE REPORTAnnual Report 2020 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. 24 24 China Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. 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. 2525 Annual Report 2020CORPORATE GOVERNANCE REPORTAnnual Report 2020 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. Yingbin Ian He, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han. Mr. Yingbin Ian 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 powers and responsibilities set forth in its charter, the role of the Audit Committee is oversight. The members of the Audit Committee are not full-time employees of the Company and may or may not be accountants or auditors by profession or experts in the fields of accounting or auditing and, in any event, do not serve in such capacity. Consequently, it is not the duty of the 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. 26 26 China Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. The Audit Committee held five 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 29 of this annual report. 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. Yingbin Ian He, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han, and one Non-Executive Director, namely Mr. Junhu Tong. 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 29 of this annual report 2727 Annual Report 2020CORPORATE GOVERNANCE REPORTAnnual Report 2020 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. Yingbin Ian He, Mr. Wei Shao, Dr. Bielin Shi and Ms. Ruixia Han, and one Executive Director, namely, Mr. Weibin Zhang. Ms. Ruixia Han serves as Chairwoman 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. The individual attendance of Compensation and Benefits Committee members at meetings is set out on page 29 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. Yingbin 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 29 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. 28 28 China Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. 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 2020 Annual Audit Governance and Benefits Environmental and Special Committees Overall Board Committee Committee Committee Committee Meeting (Total) Attendance 4/4 (100%) 3/4 (75%) 2/2 (100%) 2/2 (100%) 2/2 (100%) N/A N/A N/A N/A N/A N/A N/A N/A N/A 0/1 (0%) N/A N/A N/A N/A N/A N/A 4/4 (100%) N/A N/A N/A 0/1 0/1 N/A N/A N/A N/A 4/4 (100%) N/A N/A 4/5 (80%) 7/9 (78%) 2/2 (100%) 2/2 (100%) 0/1 (0%) 2/3 (67%) 4/4 (100%) 5/5 (100%) 2/2 (100%) 1/1 (100%) 4/4 (100%) 1/1 12/12 (100%) 17/17 (100%) 4/4 (100%) 5/5 (100%) 2/2 (100%) 1/1 (100%) 4/4 (100%) 1/1 12/12 (100%) 17/17 (100%) 4/4 (100%) 5/5 (100%) 2/2 (100%) 1/1 (100%) 4/4 (100%) 0/1 12/12 (100%) 16/17 (94%) 4/4 (100%) 5/5 (100%) 2/2 (100%) 1/1 (100%) 4/4 (100%) 0/1 12/12 (100%) 16/17 (94%) Liangyou Jiang Shiliang Guan Weibin Zhang(1) Na Tian(2) Junhu Tong(3) Yingbin Ian He Wei Shao Bielin Shi Ruixia Han * Except for the 2020 Annual and Special Meeting held on June 16, 2020, no other general meeting was held during the Reporting Period. Notes: (1) Mr. Zhang was elected as a director June 16, 2020. (2) Ms. Tian was elected as a director June 16, 2020. (3) Mr. Tong was elected as a director June 16, 2020. 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 16, 2020 due to other business commitments. The 2021 AGM will be held on June 16, 2021. The notice of the 2021 AGM will be sent to shareholders at least 20 clear business days before the 2021 AGM. 2929 Annual Report 2020CORPORATE GOVERNANCE REPORTAnnual Report 2020 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. 30 30 China Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. 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, 2020 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. 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. 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. 3131 Annual Report 2020CORPORATE GOVERNANCE REPORTAnnual Report 2020 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, 2020 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; 32 32 China Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. • 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; • 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. 3333 Annual Report 2020CORPORATE GOVERNANCE REPORTAnnual Report 2020 AUDITORS The Company’s auditor is Deloitte Touche Tohmatsu of Hong Kong. Deloitte Touche Tohmatsu were first appointed as auditor of the Company on April 1, 2010. The appointment of Deloitte Touche Tohmatsu was approved by an ordinary resolution of the shareholders at the Company’s annual and special meeting held on June 16, 2020. Deloitte Touche Tohmatsu will be nominated for re-appointment as auditors of the Company for the fiscal year at the 2021 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 65 to 69 of the Financial Statements. 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$) 683,000 65,500 748,500 (1) Fees for audit services consisted of fees incurred to Deloitte Touche Tohmatsu (US$683,000) in connection with the audit of the Company’s annual financial statements, review of the Company’s interim financial statements and other services related to securities regulatory matters. (2) Fees for non-audit services consisted of fees incurred to Deloitte Touche Tohmatsu (US$65,500) in connection with preparation of the Company’s Hong Kong Tax filings and additional services. 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, 2020, the Company has not made any changes to its notice of articles or articles. 34 34 China Gold International Resources Corp. Ltd.CORPORATE GOVERNANCE REPORTChina Gold International Resources Corp. Ltd. 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. 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 ESG 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 2020 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. 3535 Annual Report 2020CORPORATE GOVERNANCE REPORTAnnual Report 2020 Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three months and year ended December 31, 2020. (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 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 39 40 40 41 42 42 43 43 43 45 48 50 50 52 57 58 59 59 59 59 59 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 60 60 60 60 61 62 62 62 63 63 63 63 64 64 64 MANAGEMENT’S DISCUSSION AND ANALYSIS 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 31, 2021. 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 three months and year ended December 31, 2020 and the three months and year ended December 31, 2019, 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 31, 2021 on SEDAR at www.sedar.com, www.chinagoldintl.com and www.hkex.com.hk. 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. 38 China Gold International Resources Corp. Ltd. MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS 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, pandemics such as COVID-19, 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. 39 Annual Report 2020 MANAGEMENT’S DISCUSSION AND ANALYSIS THE COMPANY Overview China Gold International is a gold and base metal mining company registered in British Columbia 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. 40 40 China Gold International Resources Corp. Ltd. China Gold International Resources Corp. Ltd. MANAGEMENT’S DISCUSSION AND ANALYSIS Performance Highlights Three months ended December 31, 2020 • • Revenue increased to US$265.8 million compared to US$162.3 million for the same period in 2019. Mine operating earnings increased by 485% to US$90.1 million from US$15.4 million for the same period in 2019. • Net income of US$56.4 million increased by US$60.7 million from a net loss of US$4.3 million for the same period in 2019. • Cash flow from operation increased by 186% to US$86.8 million from US$30.4 million for the same period in 2019. • • Total gold production increased by 14% to 59,177 ounces from 52,075 ounces for the same period in 2019. Total copper production increased by 72% to 50.1 million pounds (approximately 22,742 tonnes) from 29.2 million pounds (approximately 13,227 tonnes) for the same period in 2019. Year ended December 31, 2020 • • Revenue increased to US$864.0 million compared to US$657.5 million for the same period in 2019. Mine operating earnings increased by 227% to US$209.9 million from US$64.2 million for the same period in 2019. 41 Annual Report 2020 • Net income of US$113.9 million increased by US$146.1 million from a net loss of US$32.2 million for the same period in 2019. • Cash flow from operation increased by 65% to US$260.5 million from US$158.3 million for the same period in 2019. • • Total gold production increased by 12% to 240,848 ounces from 214,715 ounces for the same period in 2019. Total copper production increased by 31% to 180.9 million pounds (approximately 82,059 tonnes) from 137.9 million pounds (approximately 62,533 tonnes) for the same period in 2019. SELECTED ANNUAL INFORMATION* Year ended December 31 2020 2019 2018 2017 2016 864 154 114 28.24 N/A 3,323 1,284 657 (3) (32) (8.28) N/A 3,197 818 571 43 (4) (1.22) N/A 3,216 1,301 412 79 64 15.93 N/A 3,230 1,324 339 34 (12) (3.36) N/A 2,967 737 US$ Millions except for per share Total revenue Income (loss) from operations Net profit (loss) Basic earnings (loss) per share (cents) Diluted earnings (loss) per share (cents) Total assets Total non-current liabilities * Prepared under IFRS OUTLOOK • • • Projected gold production of 235,000 ounces in 2021. Projected copper production of 177 million pounds in 2021. The Company continues to focus its efforts on optimizing the operation at both mines, stabilizing the Jiama Mine’s production and potentially 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 COVID-19 pandemic. Both of the Company’s mines have been operating without significant interruption during the three months and year ended December 31, 2020. The Company continues to closely monitor the health of its employees and supply chains to be able to respond to any potential disruptions, should any arise. The Company is also managing its cash reserves to be able to withstand any financial ramifications of potential disruptions. 42 China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Selected Quarterly Financial Data Quarter ended 2020 2019 (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 Income (loss) from operations Gain on recognition of other assets Foreign exchange gain (loss) Finance costs Profit (loss) before income tax Income tax expense (credit) Net profit (loss) Basic earnings (loss) per share (cents) Diluted earnings (loss) per share (cents) 265,810 175,717 90,093 13,656 174 11,019 65,244 – 4,806 9,732 63,961 7,513 56,448 14.10 N/A 240,451 174,346 66,105 8,026 77 3,251 54,751 – 6,366 10,241 51,665 4,029 47,636 11.87 N/A 209,188 173,701 35,487 5,793 165 2,264 27,265 – (2,331) 11,525 17,597 (926) 18,523 4.52 N/A 148,583 130,414 18,169 9,186 61 1,966 6,956 – (5,438) 10,516 (7,793) 876 (8,669) (2.25) N/A 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 Selected Quarterly 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 2020 63.30 1,852 34,753 34,184 1,474 1,205 2019 52.99 1,488 34,474 35,622 1,297 937 2020 2019 260.07 1,739 149,572 149,578 1,392 942 205.21 1,407 146,805 145,811 1,318 862 43 Annual Report 2020MANAGEMENT’S DISCUSSION AND ANALYSIS Gold production at the CSH Mine increased by 1% to 34,753 ounces for the three months ended December 31, 2020 compared to 34,474 ounces for the three months ended December 31, 2019. The total production cost of gold for the three months ended December 31, 2020 increased to US$1,474 per ounce compared to US$1,297 for the three months ended December 31, 2019. The cash production cost of gold for the three months ended December 31, 2020 increased to US$1,205 per ounce from US$937 for the same period in 2019. Changes in total production cost and cash cost are mainly due to longer waste haulage distance leading to higher movement costs. Three months ended December 31, 2019 2020 95.29 74.00 1.78 22,742 2.26 13,227 Year ended December 31, 2020 291.18 1.64 82,059 2019 308.27 2.13 62,533 50,138,122 29,160,597 180,909,850 137,860,887 23,545 15,185 80,463 65,321 51,908,517 33,477,926 177,391,325 144,008,887 24,424 24,999 2,369,769 2,407,638 23,457 51,712,012 24,183 53,313,232 10,519 23,191,738 10,917 24,068,017 187 411,239 169 372,762 2.87 0.81 2.29 0.23 17,601 18,390 948,985 1,029,733 – – – – – – – – – – – – 3.55 2.50 2.92 1.87 91,276 89,771 7,275,862 7,113,859 72,031 67,910 69,997 3,782,151 3,960,521 2,752 158,800,112 6,067,205 69,714 2,752 153,691,955 6,067,205 34,425 75,893,783 33,315 73,447,451 187 411,239 169 372,762 2.80 1.04 2.14 0.38 – – – – 92 203,026 645 1,422,637 3.17 2.17 2.50 1.51 Jiama Mine Copper sales (US$ in millions) Realized average price 1 (US$) of copper per pound after smelting fee discount Copper produced (tonnes) Copper produced (pounds) Copper sold (tonnes) Copper sold (pounds) Gold produced (ounces) Gold sold (ounces) Silver produced (ounces) Silver sold (ounces) Lead produced (tonnes) Lead produced (pounds) Lead sold (tonnes) Lead sold (pounds) Zinc produced (tonnes) Zinc produced (pounds) Zinc sold (tonnes) Zinc sold (pounds) Moly produced (tonnes) Moly produced (pounds) Moly sold (tonnes) Moly sold (pounds) Total production cost 2 (US$) of copper per pound Total production cost 2 (US$) of copper per pound after by-products credits 4 Cash production cost 3 (US$) per pound of copper Cash production cost 3 (US$) of copper per pound after by-products credits 4 44 China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS 1 A discount factor of 15.8% to 29.1% 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 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 during the corresponding period. 3 4 During the three months ended December 31, 2020, the Jiama Mine produced 22,742 tonnes (approximately 50.1 million pounds) of copper, an increase of 72% compared with the three months ended December 31, 2019 (13,227 tonnes, or 29.2 million pounds). Both total production cost of copper per pound after by-products and cash production cost of copper per pound after by-product decreased greatly as compared to the same period in 2019 due to higher mined tonnes, higher head grade, higher recovery rates, and more by-products recovered of lead, zinc and molybdenum. Review of Quarterly Data Three months ended December 31, 2020 compared to three months ended December 31, 2019 Revenue of US$265.8 million for the fourth quarter of 2020 increased by US$103.5 million from US$162.3 million for the same period in 2019. Revenue from the CSH Mine was US$63.3 million, an increase of US$10.3 million, compared to US$53.0 million for the same period in 2019. Realized average gold price increased by 24% from US$1,488/oz in Q4 2019 to US$1,852/ oz in Q4 2020. Gold sold by the CSH Mine was 34,184 ounces (gold produced: 34,753 ounces), compared to 35,622 ounces (gold produced: 34,474 ounces) for the same period in 2019. Revenue from the Jiama Mine was US$202.5 million, an increase of US$93.2 million, compared to US$109.3 million for the same period in 2019. Total copper sold was 23,545 tonnes (51.9 million pounds) for the three months ended December 31, 2020, an increase of 55% from 15,185 tonnes (33.5 million pounds) for the same period in 2019. Cost of sales of US$175.7 million for the quarter ended December 31, 2020, an increase of US$28.7 million from US$147.0 million for the same period in 2019. Cost of sales as a percentage of revenue for the Company decreased from 91% to 66% for the three months ended December 31, 2019 and 2020, respectively. Cost of sales was impacted by many operation factors such as mining costs, grade of ore, metal recovery rates and stripping ratio. Refer to the sections below for details of production factors for each individual mine. Mine operating earnings of US$90.1 million for the three months ended December 31, 2020, an increase of 485%, or US$74.7 million, from US$15.4 million for the same period in 2019. Mine operating earnings as a percentage of revenue increased from 9% to 34% for the three months ended December 31, 2019 and 2020, respectively. General and administrative expenses decreased by US$1.6 million, from US$15.3 million for the quarter ended December 31, 2019 to US$13.7 million for the quarter ended December 31, 2020. The decrease was due to the Company’s continuous implementation of an overall cost reduction program. 45 Annual Report 2020MANAGEMENT’S DISCUSSION AND ANALYSIS Research and development expenses of US$11.0 million for the three months ended December 31, 2020, increased from US$3.2 million for the comparative 2019 period. The increase in 2020 was due to the Company’s R&D activities related to recovery rates and processing and mining optimization. Income from operations of US$65.2 million for the fourth quarter of 2020, increased by US$68.2 million, compared to a loss of US$3.0 million for the same period in 2019. Finance costs of US$9.7 million for the three months ended December 31, 2020, decreased by US$0.7 million compared to US$10.4 million for the same period in 2019. Foreign exchange gain of US$4.8 million for the three months ended December 31, 2020, increased from US$4.1 million for the same period in 2019. The gain was attributed to changes in the RMB/USD exchange rates and the revaluation of monetary items held in Chinese RMB. Income tax expense of US$7.5 million for the quarter ended December 31, 2020, decreased by US$1.5 million from US$9.0 million for the comparative period in 2019. During the current quarter, the Company had US$5.3 million of deferred tax credit compared to US$0.8 million for the same period in 2019. Net income of US$56.4 million for the three months ended December 31, 2020, increased by US$60.7 million from a net loss of US$4.3 million for the three months ended December 31, 2019. Year ended December 31, 2020 compared to year ended December 31, 2019 Revenue of US$864.0 million for the year ended December 31, 2020 increased by US$206.5 million from US$657.5 million for the same period in 2019. Revenue from the CSH Mine was US$260.1 million, an increase of US$54.9 million, compared to US$205.2 million for the same period in 2019. Realized average gold price increased by 24% from US$1,407/oz in 2019 to US$1,739/ oz in 2020. Gold sold by the CSH Mine was 149,578 ounces (gold produced: 149,572 ounces), compared to 145,811 ounces (gold produced: 146,805 ounces) for the same period in 2019. Revenue from the Jiama Mine was US$604.0 million, an increase of US$151.8 million, compared to US$452.2 million for the same period in 2019. Total copper sold was 80,463 tonnes (177.4 million pounds) for the year ended December 31, 2020, an increase of 23% from 65,321 tonnes (144.0 million pounds) for the same period in 2019. Cost of sales of US$654.2 million for the year ended December 31, 2020, an increase of US$61.0 million from US$593.2 million for the same period in 2019. Cost of sales as a percentage of revenue for the Company decreased from 90% to 76% for the year ended December 31, 2019 and 2020, respectively. Cost of sales was impacted by many operation factors such as mining costs, grade of ore, metal recovery rates and stripping ratio. Refer to the sections below for details of production factors for each individual mine. 46 China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS Mine operating earnings of US$209.9 million for the year ended December 31, 2020, an increase of 227%, or US$145.7 million, from US$64.2 million for the same period in 2019. Mine operating earnings as a percentage of revenue increased from 10% to 24% for the year ended December 31, 2019 and 2020, respectively. General and administrative expenses decreased by US$13.4 million, from US50.1 million for the year ended December 31, 2019 to US$36.7 million for the year ended December 31, 2020. The decrease was due to the Company’s continuous implementation of an overall cost reduction program. Research and development expenses of US$18.5 million for the year ended December 31, 2020, increased from US$16.9 million for the comparative 2019 period. The increase in 2020 was due to the Company’s R&D activities in relation to increasing metal recovery rates and optimizing processing and mining. Income from operations of US$154.2 million for the year ended December 31, 2020, increased by US$157.5 million, compared to a loss of US$3.3 million for the same period in 2019. Finance costs of US$42.0 million for the year ended December 31, 2020, decreased by US$0.5 million compared to US$42.5 million for the same period in 2019. Foreign exchange gain of US$3.4 million for the year ended December 31, 2020, increased from a loss of US$7.7 million for the same period in 2019. The gain 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$9.8 million for the year ended December 31, 2020 increased from US$3.3 million for the same period in 2019. The increase in 2020 was primarily attributed to the sales of lead-zinc concentrate at the Jiama Mine. Income tax expense of US$11.5 million for the year ended December 31, 2020, increased by US$4.2 million from US$7.3 million for the comparative period in 2019. During the current year, the Company had US$12.5 million of deferred tax credit compared to US$3.4 million for the same period in 2019. Net income of US$113.9 million for the year ended December 31, 2020, increased by US$146.1 million from a net loss of US$32.2 million for the year ended December 31, 2019. 47 Annual Report 2020MANAGEMENT’S DISCUSSION AND ANALYSIS NON-IFRS MEASURES The cash cost of production is a measure that is not in accordance with IFRS. The Company has included cash production cost per ounce gold data to supplement its consolidated financial statements, which are presented in accordance with IFRS. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance, operating results or financial condition prepared in accordance with IFRS. The Company has included cash production cost per ounce data because it understands that certain investors use this information to determine the Company’s ability to generate earnings and cash flow. The measure is not necessarily indicative of operating results, cash flow from operations, or financial condition as determined under IFRS. Cash production costs are determined in accordance with the Gold Institute’s Production Cost Standard. Although the Gold Institute ceased operations in 2002, the Company believes that the Gold Institute’s Production Cost Standard continues to represent the market accepted standard for reporting cash cost of production. However, different issuers may apply slight deviations to the standard so the cash production costs disclosed by the Company may not be directly comparable to other issuers. The following tables provide a reconciliation of cost of sales to the cash costs of production in total dollars and in dollars per gold ounce for the CSH Mine or per copper pound for the Jiama Mine: CSH Mine (Gold) Three months ended December 31, Year ended December 31, 2020 2019 2020 2019 US$ US$ Per ounce US$ US$ Per ounce US$ US$ Per ounce US$ US$ Per ounce Total Cost of sales 50,400,816 1,474 46,189,909 1,297 208,152,055 1,392 192,228,416 1,318 Adjustment – Depreciation & depletion (9,011,507) (264) (12,525,697) (352) (65,315,849) (437) (65,123,084) Adjustment – Amortization of intangible assets (193,794) (5) (284,942) (8) (1,923,637) Total cash production costs 41,195,515 1,205 33,379,270 937 140,912,569 (13) 942 (1,395,056) 125,710,276 (446) (10) 862 48 China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS Jiama Mine (Copper with by-products credits) Three months ended December 31, Year ended December 31, 2020 US$ US$ Per Pound 2019 US$ US$ Per Pound 2020 US$ US$ Per Pound 2019 US$ US$ Per Pound Total Cost of sales 125,314,548 2.41 104,954,616 3.14 446,024,457 2.52 401,017,851 2.78 General and administrative expenses 12,814,567 0.25 10,691,637 0.31 31,480,286 0.18 38,397,941 Research and development expenses 11,018,405 0.21 3,199,894 0.10 18,499,635 0.10 16,904,660 Total production cost 149,147,520 2.87 118,846,147 3.55 496,004,378 2.80 456,320,452 0.27 0.12 3.17 Adjustment – Depreciation & depletion (21,664,945) (0.41) (15,650,178) (0.47) (81,238,181) (0.46) (68,760,126) (0.48) Adjustment – Amortization of intangible assets (8,819,569) (0.17) (5,478,025) (0.16) (35,988,790) (0.20) (27,518,162) (0.19) Total cash production costs 118,663,006 2.29 97,717,944 2.92 378,777,407 2.14 360,042,164 2.50 By-products credits (106,956,933) (2.06) (35,259,216) (1.05) (312,118,617) (1.76) (143,142,843) (0.99) Total cash production costs after by-products credits 11,706,073 0.23 62,458,728 1.87 66,658,790 0.38 216,899,321 1.51 The adjustments above include depreciation and depletion, amortization of intangible assets, and selling expenses included in total production costs. 49 Annual Report 2020MANAGEMENT’S DISCUSSION AND ANALYSIS MINERAL PROPERTIES The CSH Mine The CSH Mine is located in Inner Mongolia Autonomous Region of China. 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. In July 2019, CSH updated its mine plan based on a result of latest ultimate limit optimization, in which the production rate was reduced to 40,000 t/d with a life of mine (“LoM”) of seven years as of 2019. In June 2020, the operation of southwest pit ended. The major new contracts entered into during the year ended December 31, 2020: Item No. Contract Name Counterpart (US$ millions) expiration date) Date of Contract Contract period Subject amount (effective day and Contract for supply of on -site Bayannur Sheng’an Chemical Estimated: 12.1 2020.1.1 – 2020.1.1 mixed emulsion explosives Co., Ltd. Urad Middle 2020.12.31 Supply Agreement of Liquid Inner Mongolia Chengxin Estimated: 18.5 2020.1.1 – 2020.1.1 Sodium Cyanide Yong’an Chemicals Co., 2020.12.31 Banner Branch Ltd. Purchase and sale contract of Hunan Zhongxing Estimated: 10.6 gold bearing materials Environmental Protection 2020.6.23 – 2020.7.22 2020.6.23 Technology Co., Ltd Contract for supply of Liquid Chengxin Yongan Chemical Estimated: 6.8 2021.1.1 – 2020.7.23 sodium cyanide (20000 tons) Co.,Ltd 2021.12.31 Contract for supply of on -site Bayannur Sheng'an Chemical Estimated: 10.3 2020.7.1 – 2020.6.30 mixed emulsion explosives Co., Ltd. Urad Middle 2023.5.31 Banner Branch 1 2 3 4 5 50 China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS Production Update CSH Mine Three months ended December 31, Year ended December 31, 2020 2019 2020 2019 Ore mined and placed on pad (tonnes) 2,564,675 3,827,729 11,508,406 14,751,364 Average ore grade (g/t) Recoverable gold (ounces) Ending gold in process (ounces) Waste rock mined (tonnes) 0.46 24,156 160,713 0.53 39,168 174,904 0.57 124,330 160,713 0.53 153,156 174,904 17,375,012 20,274,260 64,940,037 68,265,938 For the three months ended December 31, 2020, the total amount of ore placed on the leach pad was 2.6 million tonnes, with total contained gold of 24,156 ounces (751.3 kilograms). The overall accumulative project-to-date gold recovery rate has gradually increased to approximately 54.99% at the end of December 2020 from 54.26% at the end of December 2019. Of which, gold recovery from the phase I heap was 59.77% and; gold recovery from the Phase II heap was 50.34% at December 31, 2020. Exploration At the beginning of 2020, an exploration program at the south-west pit depth was started to identify and to upgrade the gold Mineral Resources below the ultimate pit limit for potentially extending the life of mine. Six surface diamond drill holes were completed totaling 3,690+/-m. Meanwhile an additional surface diamond drill hole was completed based on the mineralization interceptions, totaling 964.35+/-m. In the third quarter, the other exploration program at the north-east pit depth was planned, with 25 surface diamond drill holes totaling 16,735+/-m and one hydrogeological drill hole of 725+/-m, to investigate hydrgeological conditions and to upgrade Mineral Resources at depth. 24 surface drill holes and one hydrogeological drill hole were completed, totaling 15,494.72+/-m and 755.49+/-m, respectively. There was a sticking as the remaining one drill hole reached 780+/-m, causing a redrill with 329+/-m completed. 51 Annual Report 2020MANAGEMENT’S DISCUSSION AND ANALYSIS Mineral Resources Update CSH Mine Mineral Resources by category, at December 31, 2020 under NI 43-101 are listed below: Type Measured Indicated M+I Inferred Quantity Mt Au g/t 3.13 105.10 108.23 83.80 0.54 0.64 0.63 0.51 Metal Au t 1.69 65.31 67.00 43.07 Mineral Reserve Update CSH Mine Mineral Reserves by category at December 31, 2020 under NI 43-101 are summarized below: Type Proven Probable Total The Jiama Mine Quantity Mt 2.56 52.80 55.35 Au g/t 0.57 0.66 0.66 Metal Au t 1.45 35.08 36.53 Au Moz 0.05 2.10 2.15 1.38 Au Moz 0.05 1.13 1.17 Jiama is a large copper-gold polymetallic deposit containing copper, gold, silver, molybdenum, lead, zinc 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 operation 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. The combined mining and processing capacity at the Jiama Mine is 50,000 tpd. 52 China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS The major new contracts entered into during the year ended December 31, 2020: Item No. Contract Name Counterpart (US$ millions) expiration date) Date of Contract Contract period Subject amount (effective day and 1 2 3 4 5 6 7 8 9 10 11 12 13 Steel ball purchase contract Tongling Nonferrous Jinshen wear Estimated: 2.9 2020.4.28 – 2020.10.27 2020.4.28 Steel ball purchase contract Chinalco Industrial Services Co., Estimated: 3.0 2020.4.28 – 2020.10.27 2020.4.28 resistant materials Co., Ltd. Ltd Steel ball purchase contract Chinalco Industrial Services Co., Estimated: 3.0 2020.6.6 – 2021.6.5 2020.6.6 Ltd Production Technical Service China Gold Group Inner Mongolia Estimated: 4.2 2020.4.5 – 2021.4.4 2020.4.5 Contract Mining Co., Ltd Contract of pressure filtration Tibet Tianchu LiuYe Construction Estimated: 2.8 2020.6.30 – 2021.6.29 2020.6.30 production and operation project Industry Co., Ltd of No.1 processing plant Blasting service contract Tibet Zhongjin Xinlian Blasting Estimated: 9.9 2020.1.1 – 2020.12.31 2020.1.1 Blasting service contract Tibet Gaozheng Blasting Estimated: 9.9 2020.1.1 – 2020.12.31 2020.1.1 Engineering Co., Ltd Engineering Co., Ltd Mixed ore sales contract Tibet Hongshang Trade Co., Ltd. Estimated: 42.4 2020.1.1 – 2020.12.31 2020.1.1 Raw ore sales contract Mixed ore sales contract Mixed ore sales contract Tibet Hongshang Trade Co., Ltd. Estimated: 4.2 2020.6.15 – 2023.6.14 2020.6.15 Tibet Hongshang Trade Co., Ltd. Estimated: 32.5 2020.5.1 – 2020.6.1 2020.5.1 Tibet Mingchuan Trade Co., Ltd Estimated: 381.4 2020.6.12 – 2023.6.11 2020.6.12 Molybdenum concentrate sales Tibet Hongshang Trade Co., Ltd. Estimated: 23.2 2020.7.15 – 2023.7.14 2020.7.15 contract Supplementary Agreement for 4-12 The 2nd Engineering Co.,Ltd Of Estimated: 17.1 2020.11.1 – 2021.10.15 2020.1.1 Slope Road 2000 Tons/Day China Railway 17 Bureau Group Underground Mining Project (ie Corporation 4610 Flat Tunnel Deep Cutting and Mining Project) 14 Tibet Huatailong Mining Zhejiang Hua Ye Mine Group Estimated: 14.4 2020.5.21 – 2021.12.20 2020.7.4 Development Co., Ltd. Jiama Co.,Ltd Copper Polymetallic Mine 4300m middle section deep development project (third bid section) contract 15 Tibet Huatailong Mining Ycih Mining Engineering Co.,Ltd Estimated: 13.5 2020.5.21 – 2021.12.20 2020.7.4 Development Co., Ltd. Jiama Copper Polymetallic Mine 4300m Middle Section Deep Development Project (Second Bid Section) Contract 53 Annual Report 2020MANAGEMENT’S DISCUSSION AND ANALYSIS Contract period Subject amount (effective day and Item No. Contract Name Counterpart (US$ millions) expiration date) Date of Contract 16 17 18 19 20 21 22 23 Contract for purchase of Cement Sichuan Jiu Tai Fu Xin Mining Co. Estimated: 10.3 2020.8.18 – 2021.8.17 2020.8.18 Ltd Blasting service contract Tibet Gaozheng Blasting Estimated: 10.1 2020.12.1 – 2021.11.30 2020.12.1 Engineering Co., Ltd Blasting service contract Tibet Zhongjin Xinlian Blasting Estimated: 10.1 2020.12.1 – 2021.11.30 2020.12.1 Engineering Co., Ltd Steel ball purchase contract Chinalco Industrial Services Co., Estimated: 5.7 2020.9.30 – 2021.9.29 2020.9.30 Ltd Contract for purchase of sodium Fengshi Chemical (Shanghai) Co., Estimated: 4.9 2020.11.12 – 2020.11.12 hydrosulfide Ltd 2021.11.11 The first batch of chemical Yunnan Tiefeng Mining & Chemical Estimated: 3.4 2020.8.31 – 2021..8.30 2020.8.31 purchase contract New Technology Co. Ltd Contract for purchase of lime Xizang Bai Chuan Trading Co. Ltd Estimated: 3.0 2020.8.31 – 2021.8.30 2020.8.31 Contract for purchase of semi- Citic Heavy Industries Co.,Ltd. Estimated: 3.0 2020.9.8 – 2021.9.7 2020.9.8 autogenous mill lining plate In 2019, Tibet Huatailong Mining Development Co. Ltd. (“Huatailong”), the company holds the Jiama mine, entered into a cooperation agreement (the “Cooperation Agreement”) with an independent third party property developer, Zhongxinfang Tibet Construction Investment Co., Ltd. (“Zhongxinfang”) in relation to the development of a composite project in Lhasa, Tibet, China. Pursuant to the Cooperation Agreement, the Huatailong agreed to transfer the land use right for the development and the Zhongxinfang agreed to compensate the Huatailong by transferring a block of the buildings and twenty car parks 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. The land use right was transferred to the Zhongxinfang in 2019. During the year ended December 31, 2020, there was a construction contract dispute between independent third parties, the constructor, Huaxin Construction Group Co., Ltd. (formerly named as “Nantong Huaxin Construction Group Co., Ltd.”) (“Huaxin”) and Zhongxinfang, and the Group’s subsidiary, Huatailong. The land use right was transferred to Zhongxinfang in 2019 pursuant to the cooperation agreement signed between Zhongxinfang and Huatailong in 2019 in relation to the Land Exchange. Huaxin proceeded a lawsuit against the parties to the construction contract, Zhongxinfang and Huatailong, for the recoverability of the construction costs of RMB149 million (equivalent to US$21,319,000) and applied for pre-litigation preservation of assets from Huatailong. The Intermediate People’s Court of Lhasa City, Tibet, adjudicated that the bank deposit of RMB140 million (equivalent to US$19,775,000) of Huatailong to be frozen for one year from April 10, 2020 (the “1st Adjudication”). Based on the adjudication of the Intermediate People’s Court of Lhasa City, Tibet after the 1st Adjudication on December 1, 2020 and related notice of execution effective from December 3, 2020, the related frozen bank deposit of US$19,775,000 was released and reclassified from restricted bank balances to cash and cash equivalents accordingly. 54 China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS Based on the first instance adjudication dated July 23, 2020 (the “First Instance Adjudication”), the litigation ruling adjudicated that Zhongxinfang and Huatailong shall have the joint obligation for the construction costs of RMB140 million (equivalent to US$20,070,000) to Huaxin. Pursuant to the cooperation agreement signed between Zhongxinfang and Huatailong in 2019, Huatailong is not involved in the construction process. The related costs are the sole responsibilities of Zhongxinfang. Huatailong proceeded an appeal against the First Instance Adjudication on August 17, 2020 (the “Appeal”), and the High People’s Court of Lhasa City, Tibet entered the final instance adjudication dated November 20, 2020 (the “Final Instance Adjudication”), that Huatailong has no obligation for the aforesaid construction costs and rescinded the First Instance Adjudication. Production Update Jiama Mine Ore processed (tonnes) Average copper ore grade (%) Copper recovery rate (%) Average gold grade (g/t) Gold recovery rate (%) Average silver grade (g/t) Silver recovery rate (%) Average lead grade (%) Lead recovery rate (%) Average zinc grade (%) Zinc recovery rate (%) Average moly grade (%) Moly recovery rate (%) Three months ended December 31, Year ended December 31, 2020 2019 2020 2019 4,064,717 2,179,358 14,990,810 12,348,777 0.67 83 0.26 71 28.71 63 0.78 74 0.38 68 0.004 31 0.72 84 0.34 73 23.70 57 – – – – – – 0.67 82 0.27 70 24.94 61 0.69 70 0.36 64 0.002 60 0.64 79 0.29 60 17.30 55 0.06 36 0.03 27 0.001 59 During the year ended December 31, 2020, the metals recovery rates increased significantly, with increases by 3% for copper, 10% for gold, and 6% for silver, based on the continued optimization of operating parameters regime of reagents, and the amelioration of steady flowsheet, as well as recoveries of lead, zinc and molybdenum. Exploration In the fourth quarter of 2020, the Company continued the diamond drilling program, focusing on the well mineralized zones as outlined based on the drilling program in 2019. Eight projected surface drill holes were completed, totaling 7,973.48+/-m, given six drill holes intersecting skarn deposit. The mineralization interceptions and sample assaying of 2020 drilling results will be analyzed together with 2019 exploration results to evaluate mineralization prospects. 55 Annual Report 2020MANAGEMENT’S DISCUSSION AND ANALYSIS Mineral Resources Estimate Jiama Mine resources by category at December 31, 2020 under NI 43-101: 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, 2020 Class Measured Indicated M+I Inferred Quantity Cu Metal Mo Metal Pb Metal Zn Metal Mt Cu % Mo % Pb % Zn % Au g/t Ag g/t (kt) (kt) (kt) (kt) Au Moz Ag Moz 93.97 1,344.54 1,438.51 406.1 0.38 0.40 0.40 0.31 0.04 0.03 0.03 0.03 0.04 0.05 0.05 0.08 0.02 0.03 0.03 0.04 0.08 0.10 0.10 0.10 5.16 5.66 5.63 5.13 363.4 5,420.8 5,784.2 1,247 34.2 459.0 493.2 123.0 35.8 724.3 760.1 311 18.4 456.1 474.5 175 0.236 4.510 4.746 1.317 15.77 247.43 263.20 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 56 China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS Mineral Reserves Estimate Jiama Mine reserves by category at December 31, 2020 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, 2020 Mt Cu % Mo % Pb % Zn % Au g/t Ag g/t (kt) 19.21 370.53 389.74 0.60 0.60 0.60 0.05 0.03 0.03 0.03 0.12 0.12 0.02 0.07 0.07 0.20 0.17 0.17 8.03 10.51 10.39 115.4 2,221.7 2,337.1 (kt) 9.3 124.2 133.5 (kt) 5.8 461.5 467.3 (kt) Au Moz Ag Moz 3.9 258.7 262.6 0.123 2.016 2.139 4.96 125.22 130.18 Class Proven Probable P+P 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, 2020, the Company had an accumulated surplus of US$295.5 million, working capital of US$142.3 million and borrowings of US$1,225 million. The Company’s cash balance at December 31, 2020 was US$243.3 million. 57 Annual Report 2020MANAGEMENT’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$296.6 million of 2.8% coupon rate unsecured bonds maturing on June 23, 2023, and US$132.1 million of short term debt facilities with interest rates ranging from 1.20% to 4.51% 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. The People’s Bank of China Lhasa Center Branch’s interest rate serves as a local 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 loan interest rate was adjusted from benchmark interest rate minus 7 basis points to 5 year loan prime rate (“LPR”) less 2% (LPR-2%) in second quarter of 2020. The interest rate of 2.65% shall be applied for the current year after converting. 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, 2020 the Company has drawn down RMB 3,790 billion, approximately US$580.9 million under the Loan Facility. On April 29, 2020, the Company entered into a Loan Facility agreement with a syndicate of banks. The lenders agreed to lend an aggregate principal amount of RMB1.4 billion, approximately US$197.8 million with the interest rate of 2.65% per annum currently, maturing on April 28, 2034. The company obtained a loan in the aggregate principal amount of RMB400 million with China Development Bank bearing interest at the People’s Bank of China Loan Market Quote Rate (1 year) minus 2.65% on April 30, 2020. The current interest rate of the loan is 1.2% per annum. On July 6, 2020, the Company repaid the previously outstanding unsecured bonds issued in 2017 with an aggregate principal amount of US$500 million and interest expense of US$8.125 million. The Company believes that the availability of debt financing in China at favorable rates will continue for the foreseeable future. The Company continues to review and assess its assets for impairment as part of its financial reporting processes. To date, the assessment carried out by the Company support the carrying values of the Company’s assets and no impairment has been required. However, the management of the Company continues to evaluate key assumptions on estimates and management judgements in order to determine the recoverable amount of the CSH Mine and the Jiama Mine. CASH FLOWS The following table sets out selected cash flow data from the Company’s consolidated cash flow statements for the year ended December 31, 2020 and December 31, 2019. Net cash from operating activities Net cash used in investing activities Net cash (used in) from financing activities Net increase in cash and cash equivalents Effect of foreign exchange rate changes on cash and cash equivalents Cash and cash equivalents, beginning of period Year ended December 31, 2020 US$’000 260,456 (133,210) (71,636) 55,610 5,388 182,290 2019 US$’000 158,312 (128,046) 14,982 45,248 (954) 137,996 Cash and cash equivalents, end of period 243,288 182,290 58 China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS Operating cash flow For the year ended December 31, 2020, net cash inflow from operating activities was US$260.5 million which is primarily attributable to (i) profit before income tax of US$125.4 million (ii) depreciation of property, plant and equipment of US$148.7 million (iii) finance cost of US$42.0 million and (iv) amortization of mining rights of US$38.0 million, partially offset by (i) interest paid of US$37.9 million (ii) income taxes paid of US$19.3 million, (iii) increase in inventory of US$14.9 million, and (iv) increase in trade and other receivables of US$11.5 million. Investing cash flow For the year ended December 31, 2020, the net cash outflow from investing activities was US$133.2 million which is primarily attributable to (i) payment for acquisition of property, plant and equipment of US$150.2 million, and (ii) payment of restricted bank balance of US$101.1 million for bank notes, partially offset by release of restricted bank balance of US$115.0 million for bank notes. Financing cash flow For the year ended December 31, 2020, the net cash outflow mainly from financing activities was US$71.6 million which is primarily attributable to proceeds from borrowings of US$600.2 million which included the US$300 million bond issuance on June 24, 2020 offset by repayment of borrowings of US$671.4 million. Expenditures Incurred For the year ended December 31, 2020, the Company incurred mining costs of US$123.4 million, mineral processing costs of US$140.1 million and transportation costs of US$6.3 million. Gearing ratio Gearing ratio is defined as the ratio of consolidated total debt to consolidated total equity. As at December 31, 2020, the Company’s total debt was US$1,225 million and the total equity was US$1,595 million. The Company’s gearing ratio was therefore 0.77 as at December 31, 2020 and 0.86 as at December 31, 2019. 59 Annual Report 2020MANAGEMENT’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 annual consolidated financial statements for year ended December 31, 2020, 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, 2020. 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 Company’s assets were pledged as at December 31, 2020. 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 35, Financial Instruments, in the annual consolidated financial statements for the year ended December 31, 2020. 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 36, Commitments, in the annual consolidated financial statements for the year ended December 31, 2020. On July 7, 2017, the Company, through its wholly owned subsidiary Skyland Mining (BVI) Limited, issued bonds denominated 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 and were repaid in their entirety on maturity. On June 24, 2020, the Company, through its wholly owned subsidiary Skyland Mining (BVI) Limited, issued bonds denominated in U.S. dollar, with an aggregate principal amount of US$300 million. The Bonds were issued at a price of 99.886%, bearing a coupon of 2.8% per annum with a maturity date of June 23, 2023. Interest is payable in semi- annual installments on December 23 and June 23 of each year. The bonds are listed on HKSE and Chongwa (Macao) Financial Asset Exchange (“MOX”). 60 China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS The following table outlines payments for commitments for the periods indicated: Principal repayment of bank loans Repayment of bonds including interest Repayment of entrusted loan payable Repayment of loans payable to Total US$’000 859,476 296,616 30,652 Within One year US$’000 116,783 8,204 – Within Two to five years US$’000 325,829 288,412 30,652 a CNG subsidiary 38,305 15,316 22,989 Over five years US$’000 416,864 – – – Total 1,225,049 140,303 667,882 416,864 Subsequent to the reporting period, the entrusted loan of RMB200 million (equivalent to approximately US$30,652,000) was early repaid in full. 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 40.01 percent of the outstanding common shares of the Company as at December 31, 2020 and 39.3 percent as at December 31, 2019. 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. On June 16, 2020, the third Supplemental Contract for Purchase and Sale of Dore was approved by the Company’s Shareholders, commencing on January 1, 2021 and expiring on December 31, 2023. Revenue from sales of gold doré bars to CNG was US$260.1 million for the year ended December 31, 2020 which increased from US$205.2 million for the year ended December 31, 2019. 61 Annual Report 2020MANAGEMENT’S DISCUSSION AND ANALYSIS 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, 2020, revenue from sales of copper concentrate and other products to CNG was US$166.7 million, compared to US$79.5 million for the same period in 2019. On June 16, 2020, the third Supplemental Product and Service Framework Agreement was approved by the Company’s Shareholders, commencing on January 1, 2021 and expiring on December 31, 2023. For the year ended December 31, 2020, construction services of US$16.6 million were provided to the Company by subsidiaries of CNG (US$9.5 million for the year ended December 31, 2019). 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, December 31, 2019, and December 22, 2020 among the Company and China Gold Finance. Refer to Note 32 of the audited annual consolidated financial statements for the year ended December 31, 2020. 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 Company did not have any material acquisition and disposal of subsidiaries and associated companies for the year ended December 31, 2020. 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, 2020. 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, 2020. 62 China Gold International Resources Corp. Ltd.MANAGEMENT’S DISCUSSION AND ANALYSIS 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, 2020. OFF-BALANCE SHEET ARRANGEMENTS As at December 31, 2020, the Company had not entered into any off-balance sheet arrangements. DIVIDEND AND DIVIDEND POLICY The Company has not paid any dividends since incorporation and does not currently have a fixed dividend policy. The Board of 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, China 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. In Connection with the financial results for the year ended December 31, 2020, the Company has declared a special dividend in respect of the year ended 31 December 2020 of US$ 0.12 per common share, in an aggregate amount of US$47,570,000, payable on May 30, 2021 to shareholders of record as of April 20, 2021. The Board of Directors will determine any future dividends and dividend policy on the basis of earnings, financial requirements and other relevant factors. OUTSTANDING SHARES As of December 31, 2020 the Company had 396,413,753 common shares issued and outstanding. 63 Annual Report 2020MANAGEMENT’S DISCUSSION AND ANALYSIS 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, 2020 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, 2020, 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, 2020 and have concluded that these controls and procedures were effective as of December 31, 2020 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, 2020, 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. 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, natural disasters, pandemics such as COVID-19 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 and www.hkex.com.hk. QUALIFIED PERSON Disclosure of scientific or technical information in this MD&A was reviewed and 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 31, 2021 64 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 7 to 90, which comprise the consolidated statement of financial position as at December 31, 2020, 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, 2020, 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. 65 INDEPENDENT AUDITOR’S REPORTFOR THE YEAR ENDED DECEMBER 31, 2020Annual Report 2020 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 property, plant and equipment, right-of-use assets and mining rights How our audit addressed the key audit matter We identified the impairment assessment of property, plant and equipment, right-of-use assets and mining rights as a key audit matter due to significant management judgement and estimation involved in the impairment assessment. As at December 31, 2020, the market capitalisation of the Company was below the carrying value of its net assets of approximately US$1,595 million. This may be an indicator that the carrying amounts of the Group’s property, plant and equipment, right-of-use assets and mining rights are impaired. As disclosed in notes 21, 19 and 22 to the consolidated financial statements, the carrying values of the Group’s property, plant and equipment, right-of-use assets and mining rights as at December 31, 2020 were approximately US$1,809 million, US$14 million and US$867 million, respectively. The Group’s two cash-generating units (“CGUs”) for impairment assessment purposes include mining rights, the related property, plant and equipment and right-of-use assets 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. As disclosed in note 4 to the consolidated financial statements, the management exercises significant judgement and estimation in respect of the key assumptions applied in the VIU calculation, such as future metal selling prices, recoverable reserves, resources, exploration potential, production cost estimates, future operating costs and discount rates. During the year ended December 31, 2020, no impairment loss was recognised for the Group’s property, plant and equipment, right-of-use assets and mining rights. Our procedures in relation to the impairment assessment of property, plant and equipment, right- of-use assets and mining rights included: • • • • • • Obtaining an understanding of the key controls over the impairment assessment of the Group’s property, plant and equipment, right- of-use assets and mining rights; 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 the 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 historical accuracy of such forecasts and the current operational results; and • Comparing the input data in the cash flow forecast to the source documents. 66 INDEPENDENT AUDITOR’S REPORTFOR THE YEAR ENDED DECEMBER 31, 2020China Gold International Resources Corp. Ltd.INDEPENDENT AUDITOR’S REPORTFOR THE YEAR ENDED DECEMBER 31, 2020 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. 67 Annual Report 2020INDEPENDENT AUDITOR’S REPORTFOR THE YEAR ENDED DECEMBER 31, 2020 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. 68 INDEPENDENT AUDITOR’S REPORTFOR THE YEAR ENDED DECEMBER 31, 2020China Gold International Resources Corp. Ltd.INDEPENDENT AUDITOR’S REPORTFOR THE YEAR ENDED DECEMBER 31, 2020 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) 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, actions taken to eliminate threats or safeguards applied. 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 31, 2021 69 Annual Report 2020INDEPENDENT AUDITOR’S REPORTFOR THE YEAR ENDED DECEMBER 31, 2020 Revenue Cost of sales Mine operating earnings Expenses General and administrative expenses Exploration and evaluation expenditure Research and development expenses Income (loss) from operations Other income (expenses) Foreign exchange gain (loss), net Gain on recognition of other assets Interest and other income Finance costs Profit (loss) before income tax Income tax expense Profit (loss) for the year Other comprehensive income (expense) for the year Item that will not be reclassified to profit or loss: Fair value gain (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 of foreign operations NOTES 5 6 7 23 8 9 10 2020 US$’000 864,032 (654,178) 2019 US$’000 657,459 (593,246) 209,854 64,213 (36,661) (477) (18,500) (55,638) (50,069) (502) (16,905) (67,476) 154,216 (3,263) 3,403 – 9,825 (42,014) (7,668) 25,312 3,305 (42,528) (28,786) (21,579) 125,430 (11,492) (24,842) (7,309) 113,938 (32,151) 3,530 27,689 (1,170) (5,085) Total comprehensive income (expense) for the year 145,157 (38,406) 70 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED DECEMBER 31, 2020China Gold International Resources Corp. Ltd. NOTES Profit (loss) for the year attributable to: Non-controlling interests Owners of the Company Total comprehensive income (expense) for the year attributable to: Non-controlling interests Owners of the Company Earnings (loss) per share – Basic (US cents) Weighted average number of common shares – Basic 13 13 2020 US$’000 1,976 111,962 2019 US$’000 686 (32,837) 113,938 (32,151) 1,972 143,185 690 (39,096) 145,157 (38,406) 28.24 (8.28) 396,413,753 396,413,753 71 Annual Report 2020CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED DECEMBER 31, 2020 Current assets Cash and cash equivalents Restricted bank balances Trade, bills and other receivables Prepaid expenses and deposits Inventories Non-current assets Prepaid expenses and deposits Right-of-use assets Equity instruments at fair value through other comprehensive income Property, plant and equipment Mining rights Deferred tax assets Other non-current assets Total assets Current liabilities Accounts and other payables and accrued expenses Contract liabilities Borrowings Entrusted loan payable Lease liabilities Tax liabilities NOTES 14 14 15 17 18 17 19 20 21 22 9 23 24 25 26 27 28 2020 US$’000 243,288 5,069 35,760 3,309 297,694 2019 US$’000 182,290 17,687 26,011 12,271 281,123 585,120 519,382 2,575 14,244 20,824 1,808,961 867,259 4,463 19,196 19,044 13,869 17,059 1,709,449 900,373 – 17,954 2,737,522 2,677,748 3,322,642 3,197,130 280,592 2,878 140,303 – 95 18,905 296,403 6,783 582,952 28,669 89 13,850 442,773 928,746 Net current assets (liabilities) 142,347 (409,364) Total assets less current liabilities 2,879,869 2,268,384 72 CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAT DECEMBER 31, 2020China Gold International Resources Corp. Ltd. Non-current liabilities Borrowings Lease liabilities Deferred tax liabilities Deferred income Entrusted loan payable Environmental rehabilitation Total liabilities Owners’ equity Share capital Reserves Retained profits Non-controlling interests Total owners’ equity NOTES 2020 US$’000 2019 US$’000 26 28 9 29 27 30 31 1,054,094 352 111,306 2,333 30,652 85,663 632,149 444 119,293 2,686 – 63,145 1,284,400 817,717 1,727,173 1,746,463 1,229,061 53,918 295,543 1,578,522 16,947 1,229,061 6,791 199,485 1,435,337 15,330 1,595,469 1,450,667 Total liabilities and owners’ equity 3,322,642 3,197,130 The consolidated financial statements on pages 7 to 90 were approved and authorized for issue by the Board of Directors on March 31, 2021 and are signed on its behalf by: Liangyou Jiang Director Yingbin Ian He Director 73 Annual Report 2020CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAT DECEMBER 31, 2020 Attributable to the owners of the Company Number of shares Share capital US$’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, 2019 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 Profit for the year Fair value gain on equity instruments at fair value through other comprehensive income Exchange difference arising on translation Total comprehensive income for the year Transfer to statutory reserve – appropriation from retained profits Transfer to – safety production fund Dividend paid to a non-controlling shareholder – – – – – – – – – – – – – – – – – – – – – At December 31, 2020 396,413,753 1,229,061 11,179 – 3,530 – – – 27,693 3,530 27,693 – – – – 111,962 111,962 1,976 113,938 – – 3,530 27,693 – (4) 3,530 27,689 111,962 143,185 1,972 145,157 – – – 5 – – – 14,519 (14,519) 1,385 – (1,385) – – – – – – (355) – – (355) 7,360 35,374 295,543 1,578,522 16,947 1,595,469 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 Company Law 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. 74 CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED DECEMBER 31, 2020China Gold International Resources Corp. Ltd. Operating activities Profit (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, bills and other receivables, net Loss on disposal of property, plant and equipment Gain on recognition of other assets Release of deferred income Unrealised foreign exchange (gains) losses, net Change in operating working capital items: Trade, bills 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 2020 US$’000 2019 US$’000 125,430 (24,842) 38,021 148,672 492 (3,889) (545) 42,014 37 10 – (772) (6,337) 29,397 143,951 479 (1,712) (592) 42,528 25 358 (25,312) (824) 7,664 343,133 171,120 (11,504) 3,239 (14,931) (4,461) 2,209 317,685 (60) (37,886) (19,283) 4,902 13,515 679 2,174 16,087 208,477 (66) (47,677) (2,422) Net cash from operating activities 260,456 158,312 75 CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2020Annual Report 2020 Investing activities Interest received Dividend received Payment for acquisition of mining rights Payment for acquisition of property, plant and equipment Payment for capital injection of equity investment at fair value through other comprehensive income 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 balances Release of restricted bank balances Receipt of government grant 2020 US$’000 2019 US$’000 3,889 545 (1,207) (150,183) (184) 10 – (101,132) 114,973 79 1,712 592 (2,787) (127,857) – 14 2,023 (128,289) 126,420 126 Net cash used in investing activities (133,210) (128,046) Financing activities Proceeds from borrowings Repayments of borrowings Dividend paid to a non-controlling shareholder Repayments of lease liabilities 600,195 (671,374) (355) (102) 122,570 (107,339) (165) (84) Net cash (used in) from financing activities (71,636) 14,982 Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Effect of foreign exchange rate changes on cash and cash equivalents 55,610 182,290 5,388 45,248 137,996 (954) Cash and cash equivalents, end of year 243,288 182,290 76 China Gold International Resources Corp. Ltd.CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2020 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 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 resources in the PRC. Particulars of the subsidiaries of the Company are set out in note 39. 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, the 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. 2. A PPLICATION OF AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) Amendments to IFRSs that are mandatorily effective for the current year In the current year, the Group has applied the Amendments to References to the Conceptual Framework in IFRSs and the following amendments to IFRSs issued by International Accounting Standards Board (“IASB”) for the first time, which are mandatorily effective for the annual period beginning on or after January 1, 2020 for the preparation of the consolidated financial statements: Amendments to IAS 1 and IAS 8 Definition of Material Amendments to IFRS 3 Definition of a Business Amendments to IFRS 9, IAS 39 Interest Rate Benchmark Reform and IFRS 7 Except as described below, the application of the Amendments to References to the Conceptual Framework in IFRSs and the amendments to IFRSs in the current year had no material impact on the Group’s financial positions and performance for the current and prior years and/or on the disclosures set out in these consolidated financial statements. 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020Annual Report 2020 2. A PPLICATION OF AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) (Cont’d) Amendments to IFRSs that are mandatorily effective for the current year (Cont’d) Impacts on application of Amendments to IFRS 3 Definition of a Business The Group has applied the amendments for the first time in the current year. The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The amendments remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs. The amendments also introduce additional guidance that helps to determine whether a substantive process has been acquired. In addition, the amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets. The gross assets under assessment exclude cash and cash equivalents, deferred tax assets, and goodwill resulting from the effects of deferred tax liabilities. The election on whether to apply the optional concentration test is available on transaction- by-transaction basis. The amendments had no impact on the consolidated financial statements of the Group but may impact future periods should the Group make any acquisition. 78 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 2. A PPLICATION OF AMENDMENTS TO 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 Amendment to IFRS 16 Amendments to IFRS 3 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Amendments to IFRS 10 and IAS 28 Amendments to IAS 1 Amendments to IAS 1 and IFRS Practice Statement 2 Amendments to IAS 8 Amendments to IAS 16 Amendments to IAS 37 Amendments to IFRSs Insurance Contracts and the related Amendments1 Covid-19-Related Rent Concessions4 Reference to the Conceptual Framework2 Interest Rate Benchmark Reform – Phase 25 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture3 Classification of Liabilities as Current or Non-current1 Disclosure of Accounting Policies1 Definition of Accounting Estimates1 Property, Plant and Equipment: Proceeds before Intended Use2 Onerous Contracts – Cost of Fulfilling a Contract2 Annual Improvements to IFRSs 2018 – 20202 1 2 3 4 5 Effective for annual periods beginning on or after January 1, 2023 Effective for annual periods beginning on or after January 1, 2022 Effective for annual periods beginning on or after a date to be determined Effective for annual periods beginning on or after June 1, 2020 Effective for annual periods beginning on or after January 1, 2021 Except for the amendments to IFRSs mentioned below, the directors of the Company anticipate that the application of all other new and amendments to IFRSs will have no material impact on the consolidated financial statements in the foreseeable future. 79 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 2. A PPLICATION OF AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) (Cont’d) New and amendments to IFRSs in issue but not yet effective (Cont’d) Amendments to IAS 1 Classification of Liabilities as Current or Non-current The amendments provide clarification and additional guidance on the assessment of a right to defer settlement for at least twelve months from the reporting date for classification of liabilities as current or non-current, which: • specify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period. Specifically, the amendments clarify that: (i) the classification should not be affected by management intentions or expectations to settle the liability within 12 months; and (ii) 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, 2020, the application of the amendments will not result in reclassification of the Group’s liabilities. Amendments to IAS 16 Property, Plant and Equipment – Proceeds before Intended Use The amendments specify that the costs of any item that were produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended by management (such as samples produced when testing whether the relevant property, plant and equipment is functioning properly) and the proceeds from selling such items should be recognised and measured in the profit or loss in accordance with applicable standards. The cost of the items are measured in accordance with IAS 2 Inventories. The Group’s existing accounting policy is to account for sale proceeds on samples produced during testing as reduction of cost of the relevant property, plant and equipment. Upon application of the amendments, such sale proceeds and the related costs will be included in profit and loss with corresponding adjustments to the cost of property, plant and equipment. For the year ended December 31, 2020, no such sale was recognised in the consolidated financial statements. 80 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES Basic of preparation of consolidated financial statements The consolidated financial statements have been prepared in accordance with IFRSs issued by the IASB. For the purpose of preparation of the consolidated financial statements, information is considered material if such information is reasonably expected to influence decisions made by primary users. 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, 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. 81 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Significant accounting policies 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. 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. 82 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 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. 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 and other by-products is passed to customers, i.e. when the products are delivered and titles have passed to customers. 83 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Leases Definition of a lease 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 or arising from business combinations, the Group assesses whether a contract is or contains a lease based on the definition under IFRS 16 at inception or modification date or acquisition date, as appropriate. Such contract will not be reassessed unless the terms and conditions of the contract are subsequently changed. The Group as a lessee Allocation of consideration to components of a contract 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 the practical expedient not to separate non-lease components from a 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 assets 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. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. 84 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Leases (Cont’d) The Group as a lessee (Cont’d) Right-of-use assets (Cont’d) 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. 85 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Leases (Cont’d) The Group as a lessee (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 case 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, less any lease incentives receivable, 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. 86 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 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 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. 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 a 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. 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. 87 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Taxation (Cont’d) Deferred tax is recognised on temporary differences between the carrying amounts 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 tax assets and liabilities are not recognised if the temporary differences arise from the initial recognition (other than in a business combination) of 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. 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. 88 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Taxation (Cont’d) Current and deferred tax are recognised in profit or loss. 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 related to income 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. Such grants are presented under “other income”. 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 and annual leave) after deducting any amount already paid. 89 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Inventories Inventories are stated at the lower of cost and net realizable value. Costs of inventories are determined using the 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 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. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). 90 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND 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. Ownership interests in leasehold land and building When the Group makes payments for ownership interests of properties which include 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 is presented as “right-of-use assets” in the consolidated statement of financial position. When the consideration cannot be allocated reliably between the non-lease building element and the undivided interest in the underlying leasehold land, the entire property is classified as property, plant and equipment. 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 is comprised of the purchase price of crushers, and machinery and equipment, any costs directly attributable to the construction to bring 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 construction in progress is classified to the appropriate category of property, plant and equipment: (1) the completion of the construction 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). 91 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Property, plant and equipment (Cont’d) 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. The 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 is used 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, the 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 the Management determines that there is sufficient evidence that the expenditure will result in a probable future economic benefit to the Group. 92 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Property, plant and equipment (Cont’d) 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 the 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. 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. The 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. 93 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Impairment of property, 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 property, 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 property, plant and equipment, right-of-use assets, mining rights and other non- current assets are 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 testing a cash-generating unit for impairment, corporate assets are allocated to the relevant cash-generating unit when a reasonable and consistent basis of allocation can be established, or otherwise they are allocated to the smallest group of cash generating units for which a reasonable and consistent allocation basis can be established. The recoverable amount is determined for the cash-generating unit or group of cash-generating units to which the corporate asset belongs, and is compared with the carrying amount of the relevant cash-generating unit or group of cash-generating units. 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. 94 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Research and development expenses 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 Revenue from Contracts with Customers (“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 (“FVTPL”)) 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. 95 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND 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 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 is 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. 96 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND 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. Dividends are included in the “Interest and other income” line item in profit or loss. Impairment of financial assets The Group performs impairment assessments using expected credit loss (“ECL”) model on financial assets (including trade receivables, bills receivables, other receivables, amounts due from related companies, cash and cash equivalents and restricted bank balances) which are subject to impairment assessment 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. Assessments 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 there has been a significant increase in credit risk since initial recognition, in which case 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. 97 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND 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 or 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. 98 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND 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 to have occurred 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 reorganisation. (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. 99 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND 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 and 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. 100 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND 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/modification 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. When the contractual terms of a financial liability are modified, the Group assesses whether the revised terms result in a substantial modification from the original terms taking into account all relevant facts and circumstances including qualitative factors. If the qualitative assessment is not conclusive, the Group considers that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received, and discounted using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. Accordingly, such modification of terms is accounted for as an extinguishment with any costs or fees incurred recognised as part of the gain or loss on the extinguishment. The exchange or modification is considered a non- substantial modification when such difference is less than 10 per cent. For non-substantial modifications of financial liabilities that do not result in derecognition, the carrying amount of the relevant financial liabilities will be calculated at the present value of the modified contractual cash flows discounted at the financial liabilities’ original effective interest rate. Transaction costs or fees incurred are adjusted to the carrying amount of the modified financial liabilities and are amortised over the remaining term. Any adjustment to the carrying amount of the financial liability is recognised in profit or loss at the date of modification. 101 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 3. BASIC OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 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. 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. 102 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 4. KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont’d) (a) Impairment of property, plant and equipment, right-of-use assets and mining rights While assessing whether any indications of impairment exist for property, plant and equipment, right-of-use assets and mining rights, consideration is given to both external and internal sources of information. The Management consideration 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 property, plant and equipment, right-of-use assets and mining rights. The carrying amounts of property, plant and equipment, right-of-use assets and mining rights 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, 2020, the market capitalisation of the Company was below the carrying value of its net assets of approximately US$1,595 million (2019: US$1,451 million). This may be an indicator that the carrying amounts of the Group’s property, plant and equipment, right-of-use assets and mining rights are impaired. The Group’s two cash-generating units (“CGUs”) for impairment assessment of mining rights, related property, plant and equipment and right-of-use assets are two significant mine sites which are producing gold and copper concentrate. 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 of disposal. In determining the recoverable amounts of the Group’s property, plant and equipment, right-of-use assets and mining rights, 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 property, plant and equipment, right-of-use assets and mining rights. The Group uses its internal experts to perform the valuation for the purpose of the impairment assessment with 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 property, plant and equipment, right-of-use assets and mining rights. The carrying amounts of property, plant and equipment, right-of-use assets and mining rights as at December 31, 2020 and 2019 are disclosed in notes 21, 19 and 22, respectively. During the years ended December 31, 2020 and 2019, no impairment loss was recognised for the property, plant and equipment, right-of-use assets and mining rights in the Group’s gold producing mine and copper producing mine as the recoverable amounts were higher than their respective carrying amounts. 103 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 4. KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont’d) (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, the amount of gold in the processing plant and an assumption of the gold price expected to be realised when the gold is recovered. If these estimates or assumptions are proven inaccurate, the Group could be required to write down the recorded value of its gold in process inventories. During the year, there is no change in the relevant estimation. Although the quantities of recoverable gold placed on the leach pad and the processing plant are reconciled by comparing the grades of ore placed on the leach pad to the quantities actually recovered, the nature of the leaching process inherently limits the ability to precisely monitor inventory levels. The actual recovery of gold from the leach pad is not known until the leaching process has concluded at the end of the mine life. The 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 would lead 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, 2020 and 2019 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: 2020 US$’000 260,074 291,182 312,776 2019 US$’000 205,212 308,274 143,973 864,032 657,459 At a point in time Gold doré bars Copper Other by-products Total revenue 104 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 5. REVENUE AND SEGMENT INFORMATION (Cont’d) Revenue (Cont’d) (ii) Performance obligations for contracts with customers The Group sells gold doré bars, copper and other by-products directly to customers. Revenue is recognised at a point in time when control of the gold doré bars, copper 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 doré bars, copper and other by-products are for periods of one year or less. As permitted under IFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed. 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 doré bars 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 concentrate segment – the production of copper concentrate including other by- products through the Group’s integrated processes, i.e., mining, metallurgical processing, production and selling copper concentrate including other by-products to external clients. 105 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 5. REVENUE AND SEGMENT INFORMATION (Cont’d) Segment information (Cont’d) Information regarding the above segments is reported below. (a) Segment revenue and results The following is an analysis of the Group’s revenue and results by operating and reportable segment: For the year ended December 31, 2020 Mine – produced Mine – produced copper Segment gold concentrate total Unallocated Consolidated US$’000 US$’000 US$’000 US$’000 US$’000 Revenue – external and segment revenue Cost of sales 260,074 (208,152) 603,958 (446,026) 864,032 (654,178) Mining operating earnings 51,922 157,932 209,854 – – – Income (loss) from operations Foreign exchange (loss) gain, net Interest and other income Finance costs 51,444 (5,028) 1,305 (4,282) 107,953 159,397 8,857 7,838 3,829 9,143 (23,357) (27,639) (5,181) (426) 682 (14,375) 864,032 (654,178) 209,854 154,216 3,403 9,825 (42,014) Profit (loss) before income tax 43,439 101,291 144,730 (19,300) 125,430 106 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 5. REVENUE AND SEGMENT INFORMATION (Cont’d) Segment information (Cont’d) (a) Segment revenue and results (Cont’d) For the year ended December 31, 2019 Mine – produced Mine – produced copper Segment gold concentrate total Unallocated Consolidated US$’000 US$’000 US$’000 US$’000 US$’000 Revenue – external and segment revenue Cost of sales 205,212 (192,228) 452,247 (401,018) 657,459 (593,246) Mining operating earnings 12,984 51,229 64,213 Income (loss) from operations Foreign exchange gain (loss), net Gain on recognition of other assets Interest and other income Finance costs 12,486 947 – 327 (5,152) (4,073) (8,712) 25,312 2,276 (19,821) 8,413 (7,765) 25,312 2,603 (24,973) – – – (11,676) 97 – 702 (17,555) 657,459 (593,246) 64,213 (3,263) (7,668) 25,312 3,305 (42,528) Profit (loss) before income tax 8,608 (5,018) 3,590 (28,432) (24,842) The accounting policies of the operating segments are the same as the Group’s accounting policies described in note 3. Segment results represent profit (loss) before income tax without allocation of certain general and administrative expenses, foreign exchange gain (loss), interest and other income and finance costs, attributable to the respective segment. This is the measure reported to the CODM for the purposes of resource allocation and performance assessment. There are no inter-segment sales for the years ended December 31, 2020 and 2019. 107 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 5. REVENUE AND SEGMENT INFORMATION (Cont’d) Segment information (Cont’d) (b) Segment assets and liabilities The following is an analysis of the Group’s assets and liabilities by segment representing assets/liabilities directly attributable to the respective segment: Mine – produced Mine – produced copper Segment gold concentrate total Unallocated Consolidated US$’000 US$’000 US$’000 US$’000 US$’000 678,630 130,613 2,612,039 1,296,112 3,290,669 1,426,725 31,973 300,448 3,322,642 1,727,173 755,231 229,873 2,407,554 1,006,604 3,162,785 1,236,477 34,345 509,986 3,197,130 1,746,463 As of December 31, 2020 Total assets Total liabilities As of December 31, 2019 Total assets Total liabilities 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, property, plant and equipment and equity instrument at FVTOCI; and all liabilities are allocated to operating segments other than other payables and accrued expenses, lease liabilities, deferred income and certain borrowings. 108 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 5. REVENUE AND SEGMENT INFORMATION (Cont’d) Segment information (Cont’d) (c) Other segment information (included in the measure of segment profit or loss or segment assets regularly provided to the CODM) Mine – produced Mine – produced copper Segment gold concentrate total Unallocated Consolidated US$’000 US$’000 US$’000 US$’000 US$’000 For the year ended December 31, 2020 Additions of property, plant and equipment Depreciation of property, plant and equipment Amortisation of mining rights Depreciation of right-of-use assets For the year ended December 31, 2019 Additions of property, plant and equipment Addition of mining rights Addition of right-of-use assets Depreciation of property, plant and equipment Amortisation of mining rights Depreciation of right-of-use assets (d) Geographical information 30,327 115,401 145,728 (67,434) (2,033) (79) (81,238) (35,988) (317) (148,672) (38,021) (396) 41,700 11,141 – (75,190) (1,879) (75) 67,027 – – (68,761) (27,518) (323) 108,727 11,141 – (143,951) (29,397) (398) – – – (96) – – 514 – – (81) 145,728 (148,672) (38,021) (492) 108,727 11,141 514 (143,951) (29,397) (479) The Group operated in two geographical areas, Canada and the PRC. The Group’s corporate division located in Canada only earns revenue that is considered incidental to the activities of the Group and therefore is not presented as an operating segment. During the years ended December 31, 2020 and 2019, the Group’s revenue was generated from gold sales and copper multi-products to customers in the PRC. Approximately 99% (2019: 99%) of non-current assets of the Group are located in the PRC. 109 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 5. REVENUE AND SEGMENT INFORMATION (Cont’d) Segment information (Cont’d) (e) Information about major customers Revenue from major customers which accounts for 10% or more of the Group’s total revenue are sales of gold doré bars and copper concentrate including other by-products to CNG and its subsidiaries as disclosed in note 32 (a). In addition, revenue from third-party customers of the corresponding years contributing over 10% of the total sales of the Group are as follows: Customer A1 Customer B1 Customer C1 Year ended Year ended December 31, December 31, 2020 US$'000 N/A2 91,215 171,452 2019 US$'000 95,931 162,923 N/A2 1 2 Revenue from mine-produced copper concentrate segment. The corresponding revenue did not contribute over 10% of the total revenue of the Group. 6. GENERAL AND ADMINISTRATIVE EXPENSES Administration and office Depreciation of property, plant and equipment Depreciation of right-of-use assets Professional fees Salaries and benefits Others Year ended Year ended December 31, December 31, 2020 US$'000 7,447 4,060 96 3,454 14,121 7,483 2019 US$'000 14,395 4,656 81 6,224 15,997 8,716 Total general and administrative expenses 36,661 50,069 110 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 7. EXPLORATION AND EVALUATION EXPENDITURE CSH Gold Mine Generative exploration Total explorative and evaluation expenditure 8. FINANCE COSTS Interests on borrowings Interests on lease liabilities Accretion on environmental rehabilitation (note 30) Less: Amounts capitalised to property, plant and equipment Year ended Year ended December 31, December 31, 2020 US$'000 2019 US$'000 477 – 477 497 5 502 Year ended Year ended December 31, December 31, 2020 US$'000 40,134 16 2,410 42,560 (546) 2019 US$'000 40,751 2 2,217 42,970 (442) Total finance costs 42,014 42,528 Interest has been capitalised at a capitalisation rate representing the weighted average interest to general borrowings. Year ended Year ended December 31, December 31, Capitalisation rate 2020 % 2.45 2019 % 2.82 111 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 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% (2019: 27%) of the estimated assessable profit for the year ended December 31, 2020. 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% (2019: 25%) on the estimated taxable profit of the group entities located in the PRC for the year ended December 31, 2020 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% for three years from the year ended December 31, 2017 and eligible for renewal every three years. For the year ended December 31, 2020, IMP is subject to prevailing tax rate of 25% of taxable profit after expiry of certificate of “High and New Technology Enterprise”. 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% (2019: 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, 2020 and 2019. 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. Except the Group has recognised deferred tax of US$3,779,000 (2019: nil) on retained profits of the PRC subsidiary of US$35,751,000 (2019: nil) for the year ended December 31, 2020, deferred taxation has not been provided for in the consolidated financial statements in respect of temporary differences attributable to accumulated distributable profits of the other PRC subsidiaries amounting to approximately US$564,895,000 at December 31, 2020 (2019: US$437,820,000) as the Group is able to control the timing of the reversal of temporary differences and it is probable the temporary differences will not reverse in the foreseeable future. According to the requirements of the Provisional Regulations of the PRC on Land Appreciation Tax (“LAT”) (revised in 2011) effective from January 8, 2011, and the Detailed Implementation Rules on the Provisional Regulations of the PRC on LAT effective from January 27, 1995, all income from the sale or transfer of state-owned land use rights, buildings and their attached facilities in the PRC is subject to LAT at progressive rates ranging from 30% to 60% of the appreciation value. Taxation for other relevant jurisdictions is calculated at the rates prevailing in each of those jurisdictions respectively. 112 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 9. INCOME TAX EXPENSE (Cont’d) Tax expense comprises: Current tax expense – PRC EIT Overprovision in prior year – PRC EIT (Reversal of) provision for LAT Deferred tax credit Year ended December 31, 2020 US$'000 Year ended December 31, 2019 US$'000 25,744 (1,278) (524) (12,450) 4,969 (280) 6,059 (3,439) Total income tax expense 11,492 7,309 The income tax expense for the Group can be reconciled to the profit (loss) before income tax for the year as follows: Year ended December 31, 2020 US$'000 Year ended December 31, 2019 US$'000 Profit (loss) before income tax 125,430 (24,842) PRC EIT tax rates Tax at the PRC EIT tax rates Tax effect of different tax rates of subsidiaries operating in other jurisdictions Tax effect of concessionary tax rate Tax effect of tax losses and other deductible temporary differences not recognised Tax effect of non-deductible expenses Tax effect of non-taxable income Impacts on foreign exchange Impacts on opening deferred tax liabilities resulting from increase in applicable tax rate Utilisation of deductible temporary differences previously not recognised Withholding tax in respect of profit earned from PRC subsidiaries Withholding tax in respect of interest income earned from PRC subsidiaries Tax effect of LAT Overprovision of PRC EIT in prior year 25% 25% 31,358 (6,211) 447 (17,588) 501 5,690 (2,318) (12,532) 2,157 (1,142) 3,779 2,942 (524) (1,278) 11,492 (250) (78) 2,125 6,749 (284) (1,943) – – – 1,422 6,059 (280) 7,309 113 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 9. INCOME TAX EXPENSE (Cont’d) The following are the major deferred tax (assets) liabilities recognised and movements thereon during the current and prior years: Property, plant and Environmental equipment US$’000 rehabilitation US$’000 Mining rights(1) US$’000 Inventories US$’000 Others US$’000 Distributable profits of subsidiaries US$’000 At January 1, 2019 Charge (credit) to profit or loss At December 31, 2019 (Credit) charge to profit or loss Effect of change in tax rate (4,230) 818 (3,412) (5,623) 345 (7,768) (1,222) 128,400 (3,877) (8,990) (3,227) (2,990) 124,523 (5,055) – 7,044 3,229 10,273 (7,678) 6,848 (714) (2,387) (3,101) 3,197 (2,046) – – – 3,779 – Total US$’000 122,732 (3,439) 119,293 (14,607) 2,157 At December 31, 2020 (8,690) (15,207) 119,468 9,443 (1,950) 3,779 106,843 (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 2020 US$’000 4,463 (111,306) 2019 US$’000 – (119,293) (106,843) (119,293) purposes: Deferred tax assets Deferred tax liabilities 114 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 9. INCOME TAX EXPENSE (Cont’d) The Group’s unrecognised deferred income tax assets are as follows: Deferred income tax assets Tax losses carry forwards Other deductible temporary differences 2020 US$’000 2019 US$’000 23,288 1,794 22,795 2,928 Total unrecognised deferred income tax assets 25,082 25,723 Deferred tax asset of US$23,288,000 (2019: US$22,795,000) has not been recognised in respect of unused tax losses of US$96 million (2019: US$94 million) due to the unpredictability of future profit streams. Under Canadian tax laws, unused tax losses can be carried forward for 20 years if the loss arises in tax years ended after December 31, 2005. Included in unrecognised tax losses are losses of US$76 million that will expire from 2027 to 2040 (2019: US$75 million that will expire from 2027 to 2039). Other losses may be carried forward indefinitely. Other deductible temporary differences of US$7 million (2019: US$11 million) are primarily comprised of share issue costs and cumulative eligible capital expenditures that were incurred by the Company which are tax deductible according to the relevant tax law in Canada. No deferred tax asset has been recognised because the amount of future taxable profit that will be available to realize such assets is unpredictable and not probable. 115 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 10. PROFIT (LOSS) FOR THE YEAR Year ended Year ended December 31, December 31, 2020 US$'000 2019 US$'000 Profit (loss) for the year has been arrived at after charging (crediting): Auditor’s remuneration 745 834 Depreciation included in cost of sales and inventories Depreciation included in research and development expenses Depreciation included in general and administrative expenses (note 6) 141,891 2,721 4,060 137,935 1,360 4,656 Total depreciation of property, plant and equipment 148,672 143,951 Depreciation included in cost of sales and inventories Depreciation included in general and administrative expenses (note 6) Total depreciation of right-of-use assets 396 96 492 398 81 479 Amortisation of mining rights (included in cost of sales) 38,021 29,397 Loss on disposal of property, plant and equipment 10 358 Staff costs Directors’ and chief executive’s emoluments (note 11) Staff salaries and benefits Retirement benefits contributions Total salaries and benefits included in administrative expenses (note 6) Total salaries and benefits included in cost of sales and inventories Total salaries and benefits included in research and development expenses Total staff costs Bank interest income Government subsidies Allowance for credit losses of trade, bills and other receivables, net 116 388 13,197 536 14,121 41,151 4,616 426 14,515 1,056 15,997 33,434 6,508 59,888 55,939 (3,889) (1,712) (1,167) 37 (824) 25 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 10. PROFIT (LOSS) FOR THE YEAR (Cont’d) During the year ended December 31, 2020, the Group had entered into barter transactions of RMB105 million (equivalent to US$15 million) with independent third parties regarding exchange of gold bearing materials. The directors estimated the fair values of the inventories given up and received approximated the same and no gain or loss was recognised. 11. DIRECTORS’ AND CHIEF EXECUTIVE’S EMOLUMENTS AND FIVE HIGHEST PAID EMPLOYEES (a) Directors’ and chief executive’s emoluments Directors’ and chief executive’s remuneration for the year, disclosed pursuant to the applicable Listing Rules and CO, is as follows: For the year ended December 31, 2020 Executive Director and Chief Executive (Note a) Liangyou Jiang Executive Directors (Note b) Shiliang Guan Weibin Zhang Na Tian Non-executive Directors (Note c) Yongqing Teng Fuzhen Kang Junhu Tong Independent Non-executive Directors (Note d) Ian He Wei Shao Bielin Shi Ruixia (Rane) Han Salaries and other benefits US$’000 Retirement benefits contributions US$’000 Fees US$’000 Total US$’000 – – – – – – – 55 46 46 46 – 87 27 47 – 24 – – – – – – 1 1 2 – 2 – 2 2 – – – 88 28 49 – 26 – 57 48 46 46 193 185 10 388 117 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 11. DIRECTORS’ AND CHIEF EXECUTIVE’S EMOLUMENTS AND FIVE HIGHEST PAID EMPLOYEES (Cont’d) (a) Directors’ and chief executive’s emoluments (Cont’d) For the year ended December 31, 2019 Salaries and other benefits US$’000 Retirement benefits contributions US$’000 Fees US$’000 Total US$’000 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 – – – 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 14 426 118 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 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) Mr. Liangyou Jiang is the Chief Executive Officer (“CEO”) and 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. (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. Effective from June 17, 2020, Mr. Weibin Zhang and Ms. Na Tian were appointed as executive directors. 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 June 17, 2020, Mr. Junhu Tong was appointed as a non-executive director. During 2020, Mr. Yongqing Teng and Ms. Fuzhen Kang resigned as non-executive directors of the Company as of June 17, 2020. During 2019, Mr. Xiangdong Jiang resigned as non-executive director as of June 25, 2019. Mr. Yongqing Teng and Mr. Junhu Tong are employed by CNG and the payment of their emoluments are centralised and made by CNG for the years ended December 31, 2020 and 2019, in which the amounts are considered as insignificant. (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. Xin Song has also been employed by CNG and the payment of his emoluments was centralised and made by CNG for the year ended December 31, 2019, in which the amounts are considered as insignificant. For the years ended December 31, 2020 and 2019, none of the directors of the Company waived or agreed to waive any emoluments. 119 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 11. DIRECTORS’ AND CHIEF EXECUTIVE’S EMOLUMENTS AND FIVE HIGHEST PAID EMPLOYEES (Cont’d) (b) Five highest paid employees The five highest paid employees included nil (2019: nil) directors for the year ended December 31, 2020. The emoluments of the five (2019: five) non-director employees for the year ended December 31, 2020, are as follows: Employees Salaries and other benefits Retirement benefits contributions Year ended Year ended December 31, December 31, 2020 US$'000 2019 US$'000 818 6 824 852 6 858 The number of the highest paid employees who are not the directors of the Company whose remuneration fell within the following band is as follows: Nil to HK$1,000,000 (equivalent to approximately US$129,000) HK$1,000,001 to HK$1,500,000 (equivalent to approximately US$129,001 to US$193,000) No. of individuals 2020 2019 1 4 – 5 During the years ended December 31, 2020 and 2019, 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 shareholders of the Company during the years ended December 31, 2020 and 2019. Subsequent to the end of the reporting period, the directors of the Company declrared a special dividend in respect of the year ended December 31, 2020 of US$0.12 (2019: nil) per common share, in an aggregate amount of US$47,570,000 (2019: nil), payable on May 30, 2021 to shareholders of record as of April 20, 2021. 120 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 13. EARNINGS (LOSS) PER SHARE Profit (loss) used in determining earnings (loss) per share are presented below: Year ended Year ended December 31, December 31, 2020 US$'000 2019 US$'000 Profit (loss) attributable to owners of the Company for the purposes of basic earnings (loss) per share (US$’000) 111,962 (32,837) Weighted average number of common shares, basic 396,413,753 396,413,753 Basic earnings (loss) per share (US cents) 28.24 (8.28) The Group had no outstanding potential dilutive instruments issued as at December 31, 2020 and 2019 and during the years ended December 31, 2020 and 2019. Therefore, no diluted earnings (loss) per share is presented. 14. CASH AND CASH EQUIVALENTS/RESTRICTED BANK BALANCES 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 Renminbi (“RMB”) US$ Hong Kong dollars December 31, December 31, 2020 US$'000 2019 US$'000 214 20,577 13 1,680 578 57,310 18 1,275 22,484 59,181 The bank balances and bank deposits carry interest rates ranging from 0.001% to 2.45% (2019: 0.001% to 2.55%) per annum. Restricted bank balances carry interest at market rates ranging from 0.30% to 1.55% (2019: 0.30% to 1.55%) per annum. The balance represents deposits pledged to banks to secure bills payable issued to suppliers for mining costs. 121 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 15. TRADE, BILLS AND OTHER RECEIVABLES Trade receivables Less: allowance for credit losses Bills receivables Amounts due from related companies (note 32 (a))(1) Other receivables(2) December 31, December 31, 2020 US$'000 2019 US$'000 1,603 (119) 1,484 15,316 1,498 17,462 958 (78) 880 – 2,020 23,111 Total trade, bills and other receivables 35,760 26,011 At January 1, 2019, trade receivables from contracts with customers amounted to US$524,000. (1) The amounts are unsecured, interest free and repayable on demand. (2) Included in the balance as at December 31, 2020 are value-added tax recoverable of approximately US$7,257,000 (2019: US$11,697,000) and other receivables (as detailed in note 23) of US$9,211,000 (2019: US$7,980,000), which are expected to be recovered within twelve months after the end of the reporting period. The Group allows an average credit period of 30 days and 180 days to its trade customers including CNG for gold dore bar sales and copper concentrate trade business, respectively. Below is an aged analysis of trade receivables (net of allowance for credit losses) presented based on invoice dates, which approximated the respective revenue recognition dates, at the end of the reporting period: Less than 30 days 31 to 90 days 91 to 180 days Over 180 days Total trade receivables December 31, December 31, 2020 US$'000 2019 US$'000 745 348 127 264 1,484 62 523 – 295 880 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. 122 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 15. TRADE, BILLS AND OTHER RECEIVABLES (Cont’d) As at 31 December 2020, total bills receivable amounting to US$15,316,000 (2019: nil) are held by the Group for future settlement of trade receivables, which were further discounted to a CNG’s subsidiary by the Group. The Group continues to recognise their full carrying amounts of US$15,316,000 (2019: nil) at the end of the reporting period and details are disclosed in note 16. All bills received by the Group are with a maturity period of less than one year. Other than bills received amounting to US$15,316,000 (2019: nil), the Group does not hold any collateral over these balances. Details of impairment assessment of trade, bills and other receivables are set out in note 35 (d). 16. TRANSFERS OF FINANCIAL ASSETS The following were the Group’s financial assets as at 31 December 2020 and 2019 that were transferred to banks by discounting on a full recourse basis. As the Group has not transferred the significant risks and rewards, it continues to recognise the full carrying amount and has recognised the cash received on the transfer as a secured borrowings (see note 26). These financial assets are carried at amortised cost in the consolidated statement of financial position. Carrying amount of transferred assets Carrying amount of associated liabilities Net position Bills receivable discounted to bank with full recourse December 31, December 31, 2020 US$'000 15,316 (15,316) – 2019 US$'000 – – – 123 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 17. PREPAID EXPENSES AND DEPOSITS Deposits for mine supplies and services (Note a) Deposits for spare parts (Note a) Deposit for acquisition of property, plant and equipment (Note b) Prepaid property and machinery insurance Amount due from a non-controlling shareholder of a subsidiary (Note c) Prepaid interests Other prepayment and deposits December 31, December 31, 2020 US$'000 2019 US$'000 429 382 2,199 23 376 – 2,475 5,884 863 1,476 18,693 32 351 8,125 1,775 31,315 Less: Amounts that will be settled or utilised within one year shown under current assets (3,309) (12,271) Amounts that will be settled or utilised for more than one year shown under non-current assets 2,575 19,044 Notes: a. As at December 31, 2019, the amount represents deposits paid to third party vendors and related companies (note 32) for purchasing of raw materials, consumable, spare parts and mine services. b. The amount represents deposits paid to third party contractors for the acquisition of property, plant and equipment to expand its mining capacity in Tibet, the PRC. The amount is shown as non-current asset. c. The amount due from a non-controlling shareholder is non-interest bearing, unsecured and repayable after one year. 18. INVENTORIES Gold in process Gold doré bars Consumables Copper concentrate Spare parts Total inventories December 31, December 31, 2020 US$'000 220,059 22,665 23,255 9,016 22,699 2019 US$'000 222,180 20,708 16,923 855 20,457 297,694 281,123 Inventories totalling US$621,414,000 (2019: US$567,472,000) for the year ended December 31, 2020 was recognised in cost of sales. 124 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 19. RIGHT-OF-USE ASSETS At December 31, 2020 Carrying amount At December 31, 2019 Carrying amount For the year ended December 31, 2020 Depreciation charge For the year ended December 31, 2019 Depreciation charge Expenses relating to short-term leases Total cash outflow for leases Additions to right-of-use assets Leasehold lands US$’000 Leased properties US$’000 13,806 13,335 396 398 438 534 96 81 Total US$’000 14,244 13,869 492 479 Year ended Year ended December 31, December 31, 2020 US$'000 2019 US$'000 – 1,943 – 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 a 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. 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$447,000 are recognised with related right-of-use assets of US$438,000 as at December 31, 2020 (2019: lease liabilities of US$533,000 and related right-of-use assets of US$534,000). The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. 125 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 20. EQUITY INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME December 31, December 31, 2020 US$'000 2019 US$'000 Listed investments: Equity securities listed in Hong Kong (Note a) 20,015 16,485 Unlisted investments: Equity securities (Note b) Total Notes: 809 574 20,824 17,059 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, 2020, a fair value gain of US$3,530,000 (2019: a fair value loss of US$1,170,000) was recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve in accordance with the Group’s accounting policies. b. The above unlisted equity investments represent the Group’s equity interests in two (2019: one entities) private entities 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. During year ended December 31, 2020, the Company invested in 4% share interest in Tibet Electric Power Trading Center Co., Ltd. (“Tibet Electric”) for RMB1,272,000, approximately US$184,000. Tibet Electric is established in the PRC and is principally engaged in the trading of electric power in the PRC. During the year ended December 31, 2019, the Group disposed of the investment in Inner Mongolia Chengxin Yong’an Chemicals Co., Ltd., 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, 2020, the carrying amount of RMB5,272,000, approximately US$809,000 (2019: US$574,000), representing 7.425% share interest in Mozu Gongka Jiulian Industrial Explosives Material Co. Ltd. (“Mozu Explosives”) and 4% share interest in Tibet Electric (2019: representing 7.425% share interest in Mozu Gongka). Mozu Explosives is established in the PRC and principally engaged in the development and manufacturing of explosives. The directors of the Company are of the opinion that the fair value change of unlisted investments are insignificant and has not been recognised for the year ended December 31, 2020 and 2019. 126 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 21. PROPERTY, PLANT AND EQUIPMENT Buildings US$’000 Crushers US$’000 832,591 227,332 1,680 (620) 7,191 – (13,146) – – – – – COST At January 1, 2019 Additions Disposals Transfer from CIP Environmental rehabilitation adjustment (note 30) Exchange realignment At December 31, 2019 827,696 227,332 Additions Costs adjustment Disposals Transfer from CIP Environmental rehabilitation adjustment (note 30) Exchange realignment 1,224 4,442 – 4,004 – 54,949 – – – – – – Furniture and office equipment US$’000 Machinery and Motor Leasehold equipment US$’000 vehicles US$’000 improvements US$’000 Mineral assets US$’000 Construction in progress (“CIP”) US$’000 Total US$’000 6,919 2,049 (73) – – 306,007 6,578 – 587 – 9,664 1,178 (238) – – (69) (4,230) (114) 8,826 1,945 – – 900 – 581 308,942 10,490 5,206 (7,100) – 2,438 – 16,993 742 – (155) – – 548 198 – (100) – – – 98 – – – – – – 874,335 81,842 – – 2,448 (8,196) 950,429 116,262 (184) – – 14,492 35,346 11,364 15,400 – (7,778) 2,268,410 108,727 (1,031) – – (268) 2,448 (26,023) 18,718 20,349 2,352,531 145,728 – – (7,342) – 2,021 (2,842) (155) – 14,492 110,438 At December 31, 2020 892,315 227,332 12,252 326,479 11,625 98 1,116,345 33,746 2,620,192 ACCUMULATED DEPRECIATION At January 1, 2019 Provided for the year Eliminated on disposals Exchange realignment At December 31, 2019 Provided for the year Eliminated on disposals Exchange realignment (88,333) (37,991) 260 1,669 (124,395) (38,325) – (9,769) (91,632) (21,790) – – (113,422) (18,512) – – (4,180) (799) 73 72 (4,834) (1,064) – (272) (82,113) (21,756) – 964 (102,905) (24,377) – (5,672) (5,300) (946) 226 61 (5,959) (857) 135 (298) (186) (12) 100 – (98) – – – (231,306) (60,657) – 494 (291,469) (65,537) – (3,601) At December 31, 2020 (172,489) (131,934) (6,170) (132,954) (6,979) (98) (360,607) – – – – – – – – – (503,050) (143,951) 659 3,260 (643,082) (148,672) 135 (19,612) (811,231) CARRYING VALUE At December 31, 2020 719,826 95,398 6,082 193,525 4,646 At December 31, 2019 703,301 113,910 3,992 206,037 4,531 – – 755,738 33,746 1,808,961 658,960 18,718 1,709,449 127 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 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$275,068,000 as at December 31, 2020 (December 31, 2019: US$294,844,000). (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$480,670,000 as at December 31, 2020 (December 31, 2019: US$364,116,000). 128 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 22. MINING RIGHTS COST At January 1, 2019 Additions Exchange realignment At December 31, 2019 Exchange realignment At December 31, 2020 ACCUMULATED AMORTISATION At January 1, 2019 Provided for the year Exchange realignment At December 31, 2019 Provided for the year Exchange realignment At December 31, 2020 CARRYING VALUE At December 31, 2020 At December 31, 2019 Notes: US$’000 1,000,965 11,141 (1,534) 1,010,572 5,604 1,016,176 (80,898) (29,397) 96 (110,199) (38,021) (697) (148,917) 867,259 900,373 The amounts represent two mining rights in the Jiama Mine and CSH Gold Mine. Mining rights in the Jiama Mine are in relation to the copper and other by-products production, acquired through the acquisition of Skyland. The mining permit will expire in 2023. 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. 129 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 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, Zhongxinfang Tibet Construction Investment Co. Ltd. (“Zhongxinfang”) 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 Zhongxinfang 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 (the “Land Exchange”) and all related tax exposures including but not limited to LAT, EIT and other related tax. During the year ended December 31, 2019, the land use right was transferred to Zhongxinfang.. 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 (equivalent 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 (equivalent to RMB56,220,000) has been recognised in the profit or loss respectively during the year ended December 31, 2019. The right to receive the New Premises was initially recognised at its fair value and subsequently carried at cost less impairment. As disclosed in note 33, the lawsuit related to settlement of the tax reimbursement from Zhongxinfang is still in process but the Group assessed that there is no impairment of the receivable amount of US$9,211,000 (equivalent to RMB60,104,000, taking into account the additional payments made in the current year to be reimbursed from Zhongxinfang as details below) as at December 31, 2020 (December 31, 2019: US$7,980,000 (equivalent to RMB55,669,000). Based on the Cooperation Agreement, Zhongxinfang is obligated to deliver the New Premises to the Group no later than 2021. As at December 31, 2020 and up to the date these consolidated financial statements are authorised for issue, the composite project is still suspended due to litigations against Zhongxinfang. Based on Group’s assessment on the completion status of the New Premises, the construction of the New Premises has been substantially completed and there has been no significant market value decline of comparable properties during the current year. Accordingly, no impairment loss (2019: nil) 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 of US$19,196,000 (equivalent to RMB125,252,000) as at December 31, 2020. During the year ended December 31, 2019, the Group had an uncertain tax position in respect of tax exposure whereby the Company transferred the land use right in return of the New Premises based on the most likely amount of tax expenses. The most likely amount of tax expenses including LAT and EIT 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 current facts and circumstances. However, the tax expenses may be subject to change as the tax assessable amount is based on final decision by the relevant tax authority. As at December 31, 2020, the most likely amount of the relevant tax liabilities amounting to RMB14,449,000 (equivalent to US$2,214,000) (December 31, 2019: RMB56,220,000 (equivalent to US$8,059,000)) has been recognised. During the year ended December 31, 2020, the Group’s wholly-owned subsidiary, Tibet Huatailong Mining Development Co. Ltd. (“Huatailong”) has paid LAT amounting to RMB38,152,000 (equivalent to US$5,425,000) and other surcharges of RMB8,031,000 (equivalent to US$1,142,000) to the tax authority. The Group reversed the LAT overprovision of RMB3,619,000 (equivalent to US$525,000) and recognized a gain of other surcharge of US$1,142,000 to be reimbursed from Zhongxinfang. 130 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 24. ACCOUNTS AND OTHER PAYABLES AND ACCRUED EXPENSES Accounts and other payables of the Group are principally comprised of amounts outstanding for trade purchases relating to minerals production activities and construction activities. The average credit period taken for trade purchases is between 120 to 150 days. Accounts and other payables and accrued expenses comprise the following: Accounts payable Bills payable Construction costs payable Mining cost accrual Payroll and benefit payable Other accruals Other tax payables Other payables Payable for acquisition of a mining right December 31, December 31, 2020 US$'000 45,634 63,494 145,973 3,524 257 3,306 3,053 7,589 7,762 2019 US$'000 38,610 95,911 121,576 11,547 2,578 2,958 7,836 6,917 8,470 Total accounts and other payables and accrued expenses 280,592 296,403 The following is an aging analysis of the accounts payable presented based on the invoice date at the end of the reporting period: Less than 30 days 31 to 90 days 91 to 180 days Over 180 days December 31, December 31, 2020 US$'000 26,263 9,628 2,496 7,247 2019 US$'000 15,816 8,282 4,872 9,640 Total accounts payable 45,634 38,610 The credit period for bills payable is 180 days from the bills issue date. 131 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 24. ACCOUNTS AND OTHER PAYABLES AND ACCRUED EXPENSES (Cont’d) The following is an ageing analysis of bills payable, presented based on bills issue date at the end of the reporting period: Less than 30 days 31 to 60 days 61 to 90 days 91 to 180 days Total bills payable 25. CONTRACT LIABILITIES December 31, December 31, 2020 US$'000 27,720 6,832 13,867 15,075 2019 US$'000 21,003 9,532 15,233 50,143 63,494 95,911 December 31, December 31, 2020 US$'000 2019 US$'000 Copper concentrate 2,878 6,783 At January 1, 2019, contract liabilities amounted to US$4,593,000. The following table shows how much of the revenue recognised relates to carried-forward contract liabilities. Copper concentrate December 31, December 31, 2020 US$'000 2019 US$'000 Revenue recognised that was included in the contract liability balance at the beginning of the year 6,783 4,593 Typical payment terms which have an impact on the amount of contract liabilities recognised are as follows: When the Group receives a deposit before the goods are delivered, this will give rise to contract liabilities at the start of a contract, until the revenue recognised on the relevant contract exceeds the amount of the deposit. The Group typically receives 100% deposit on acceptance of sales order for copper concentrate including orders by- products. 132 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 26. BORROWINGS Bank loans Loans payable to a CNG subsidiary Bonds The borrowings are repayable as follows: Carrying amount repayable within one year (1) (2) (3) (4) (5) Carrying amount repayable within one to two years (2) (3) (4) (5) Carrying amount repayable within two to five years (2) (3) (4) (5) Carrying amount repayable over five years (4) (5) Less: Amounts due within one year (shown under current liabilities) December 31, December 31, 2020 US$'000 859,476 38,305 296,616 2019 US$'000 657,951 50,171 506,979 1,194,397 1,215,101 December 31, December 31, 2020 US$'000 140,303 118,228 519,002 416,864 2019 US$'000 582,952 157,679 204,983 269,487 1,194,397 (140,303) 1,215,101 (582,952) Amounts shown under non-current liabilities 1,054,094 632,149 (1) On July 7, 2017, the Company (as “Guarantor”), through its wholly-owned subsidiary, Skyland Mining (BVI) Limited (“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. The bonds were fully repaid on July 6, 2020. (2) On June 23, 2020, the Company, through its wholly-owned subsidiary, Skyland (BVI), completed the issuance of bonds to independent third parties in an aggregate principal amount of US$300 million, listed on the Stock Exchange and ChongWa (Macao) Financial Asset Exchange CO., Limited. The bonds were issued at a price of 99.886%, bearing coupon rate of 2.80% with a maturity date of June 23, 2023. Interest is payable in equal semi-annual instalments on December 23 and June 23 in each year. (3) As at December 31, 2020, included in the Group’s borrowing balance are loans payable to a CNG’s subsidiary with an amount of RMB249,934,000 (equivalent to approximately US$38,305,000) (2019: RMB350,000,000 (equivalent to approximately US$50,171,000)). Details of balances with related parties are set out in note 32 (a). 133 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 26. BORROWINGS (Cont’d) (4) 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, 2020, Skyland has the outstanding loan amount of RMB3,360,000,000 (equivalent to approximately US$514,950,000) (2019: RMB3,640,000,000 (equivalent to approximately US$521,774,000)). The loan carries a floating rate, currently set at 2.65% per annum, set by the People’s Bank of China National Interbank Funding Center Loan Prime Rate benchmark, discounted by 200 base points (or 2.00%) effective from June 30, 2020. The loan carried an interest rate of 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. 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, 2020 and 2019, after the assessment performed by the directors of the Company. (5) Skyland entered into a syndicated long term loan facility agreement with a syndicate of banks (“The Lenders”), on April 27, 2020 which is available for Skyland to draw down up to May 31, 2020. As at December 31, 2020, Skyland has the outstanding loan amount of RMB1,370,000,000 (equivalent to approximately US$209,965,000). The loan carries a floating rate, currently set at 2.65% per annum, set by the People’s Bank of China National Interbank Funding Center Loan Prime Rate benchmark, discounted by 200 base points (or 2.00%) as at December 31, 2020. Repayment of the loan is scheduled to begin in October 2020 and will reach full maturity and repayment in April 2034. The loan is subject to a financial covenant with which the Company was in compliance as at December 31, 2020, after the assessment performed by the directors of the Company. Analysed as: Secured Unsecured December 31, December 31, 2020 US$'000 740,231 454,166 2019 US$'000 521,774 693,327 1,194,397 1,215,101 Fixed rate loans amounting to approximately US$365,266,000 (December 31, 2019: US$693,327,000), carry weighted average effective interest rate of 2.68% (2019: 3.47%) per annum. The carrying values of the pledged assets to secure borrowings by the Group are as follows: December 31, December 31, 2020 US$'000 859,793 15,316 2019 US$'000 891,488 – 875,109 891,488 Mining rights Bills receivables (note 16) 134 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 27. ENTRUSTED LOAN PAYABLE On January 16, 2017, the Group entered 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 was repayable on January 15, 2020 and extended during the year ended December 31, 2020, for another 3 years until January 15, 2023. Subsequent to the end of the reporting period, the amount of RMB200 million (equivalent to approximately US$30,652,000) was early repaid in full. 28. LEASE LIABILITIES Lease liabilities payable: Within one year Within a period of more than one year but not more than two years Within a period of more than two years but not more than five years Within a period of more than five years Less: Amount due for settlement with 12 months shown under current liabilities Year ended Year ended December 31, December 31, 2020 US$'000 2019 US$'000 95 104 248 – 447 (95) 89 93 320 31 533 (89) Amount due for settlement after 12 months shown under non-current liabilities 352 444 The weighted average incremental borrowing rate applied to lease liabilities range is 5.24% (2019: 5.24%). 135 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 29. DEFERRED INCOME Deferred income – government grants Deferred lease inducement Total deferred income Movement in the deferred income – government grants: At January 1 Addition Credited to other income Exchange realignment At December 31 December 31, December 31, 2020 US$'000 2,314 19 2,333 2019 US$'000 2,667 19 2,686 2020 US$’000 2019 US$’000 2,667 79 (772) 340 3,459 126 (824) (94) 2,314 2,667 136 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 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 of US$128,375,000 (2019: US$91,069,000), discounted at 6.5% (2019: 4.6%) per annum at December 31, 2020. The following is an analysis of the environmental rehabilitation: At January 1 Additions to site reclamation Changes from change in discount rate during the year Accretion incurred in the current year Payment during the year Exchange realignment At December 31 2020 US$’000 63,145 23,134 (8,582) 2,410 (60) 5,616 2019 US$’000 59,469 – 2,514 2,217 (66) (989) 85,663 63,145 In compliance with the prevailing regulations regulatory and requirements of Metrorkongka County Natural Resources Bureau, the Group updated the estimated future cash flows of reclamation and closure costs with increment of RMB159,560,000 (equivalent to US$23,134,000) (2019: nil), with the assistance of an independent specialist during the year ended December 31, 2020. The environmental rehabilitation is determined based on the Jiama Mine’s latest closure plan being approved by Tibet Land and Mineral Rights Transaction and Resource Reserve Evaluation Center during the year ended December 31, 2020. 137 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 31. SHARE CAPITAL Common shares (i) Authorized – Unlimited common shares without par value (ii) Issued and outstanding Number of shares Amount US$'000 Issued & fully paid: At January 1, 2019, December 31, 2019 and 2020 396,413,753 1,229,061 32. RELATED PARTY TRANSACTIONS Related parties are those parties that have the ability to control the other party or exercise significant influence in making financial and operation decisions. Parties are also considered to be related if they are subject to common control. 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 management believes that information relating to related party transactions have been adequately disclosed in accordance with the requirements of IAS 24 “Related party disclosures”. In addition to the related party transactions and balances shown elsewhere in these consolidated financial statements, the following is a summary of significant related party transactions entered into in the ordinary course of business between the Group and its related parties for the years ended December 31, 2020 and 2019. Name and relationship with related parties during the years are as follows: CNG owned the following percentages of outstanding common shares of the Company: December 31, December 31, 2020 % 40.01 2019 % 39.30 CNG 138 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 32. RELATED PARTY TRANSACTIONS (Cont’d) (a) Transactions/balances with CNG and its subsidiaries The Group had the following transactions with CNG and CNG’s subsidiaries: December 31, December 31, 2020 US$'000 2019 US$'000 Gold doré bars sales by the Group (Note a) 260,074 205,212 Copper and other by-product sales by the Group (Note b) 166,671 79,531 Provision of transportation services by the Group (Note b) 658 830 Construction, stripping and mining services provided to the Group (Note b) Accrued rental expenses for PRC office (Note b) Commitment fee Interest income Interest expense 16,627 459 695 113 9,498 3,730 – 17 2,676 3,081 Loans provided to the Group (Note c) 15,316 50,769 Cash and cash equivalents held by the Group (Note c) 14,304 14,202 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. On May 6, 2020, the Company and IMP entered into the third Supplemental Contract for Purchase and Sale of Dore for an extended term commencing on January 1, 2021 and expiring on December 31, 2023. The extent of the continuing connected transactions for the years ended December 31, 2020 and 2019 did not exceed the limit as set out in the announcements of the Company on May 31, 2017. 139 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 32. RELATED PARTY TRANSACTIONS (Cont’d) (a) Transactions/balances with CNG and its subsidiaries (Cont’d) Notes: (Cont’d) 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. On May 6, 2020, the Company and CNG entered into the third supplemental product and service framework agreement to extend the term to December 31, 2023. The extent of the continuing connected transactions for the years ended December 31, 2020 and 2019 did not exceed the limit as set out in the announcement of the Company on May 31, 2017. 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 December 18, 2018, the Deposit Services Agreement has been extended for a one year term to December 31, 2019 pursuant to the supplemental deposit services agreement. 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. On December 22, 2020, the Company and China Gold Finance entered into an additional 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 RMB180 million (approximately equivalent to US$28 million) and extend for one year term to December 31, 2021 with all other terms and conditions remaining the same. The extend of the connected transaction for deposit services for the year ended December 31, 2020 and 2019 did not exceed the limit as set out in the announcement of the Company on December 19, 2017. 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, 2020, the Group discounted the bills received of RMB100 million (approximately equivalent to US$15 million) to China Gold Finance with recourse. As the Group has not transferred substantially all the risks and rewards of ownership of the bills receivables, the carrying values of bills received continue to be recognised as assets in the consolidated financial statements as set out in note 15 and accordingly, the liabilities associated with such bills are recognised as secured borrowing repayable within one year (note 26) based on the matured dates of bills. 140 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 32. RELATED PARTY TRANSACTIONS (Cont’d) (a) Transactions/balances with CNG and its subsidiaries (Cont’d) The Group has the following significant balances with CNG and its subsidiaries at the end of each reporting period: Assets Amounts due from related companies (note 15) Cash and cash equivalents held in a CNG’s subsidiary Deposits December 31, December 31, 2020 US$'000 2019 US$'000 1,498 14,304 – 2,020 14,202 90 Total amounts due from CNG and its subsidiaries 15,802 16,312 Other than the cash and cash equivalents held in a CNG subsidiary and deposits paid to CNG subsidiaries, the remaining amounts due from CNG and its subsidiaries as at December 31, 2020 and 2019, which are included in trade, bills and other receivables is non-interest bearing, unsecured and recoverable on demand. Liabilities Loans payable to a CNG’s subsidiary (note 26) Entrusted loan payable (note 27) Construction costs payable to CNG’s subsidiaries Trade payable to CNG’s subsidiaries Amount due to CNG Contract liabilities with a CNG’s subsidiary December 31, December 31, 2020 US$'000 2019 US$'000 38,305 30,652 7,296 280 258 2,539 50,171 28,669 22,860 930 33 2,253 Total amounts due to CNG and its subsidiaries 79,330 104,916 As at December 31, 2020, the loans payable to a CNG’s subsidiary, which are included in borrowings, carry fixed interest rates at 4.51% (2019: 4.51%) per annum and are unsecured and repayable in two years (2019: three years) and classified as non-current (2019: non-current). With the exception of the entrusted loan payable to CNG (terms are set out in note 27) and loans payable to a CNG’s subsidiary, the amounts due to CNG and its subsidiaries which are included in other payables and construction costs payable, are non- interest bearing, unsecured and have no fixed terms of repayments. 141 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 32. RELATED PARTY TRANSACTIONS (Cont’d) (b) Compensation of key management personnel Other than the directors’ emoluments disclosed in note 11 (a), the Group has the following compensation to other key management personnel during the years: Salaries and other benefits Post-employment benefits 33. CONTINGENCIES Year ended Year ended December 31, December 31, 2020 US$'000 2019 US$'000 653 8 661 678 21 699 During the year ended December 31, 2020, there was a construction contract dispute between independent third parties including the constructor, Huaxin Construction Group Co., Ltd. (formerly named as “Nantong Huaxin Construction Group Co., Ltd.”) (“Huaxin”) and Zhongxinfang, and the Group’s subsidiary, Huatailong. The land use right was transferred to Zhongxinfang in 2019 pursuant to the cooperation agreement signed between Zhongxinfang and Huatailong in 2019 in relation to the Land Exchange (note 23). Huaxin proceeded a lawsuit against the parties to the construction contract, Zhongxinfang and Huatailong, for the recoverability of the construction costs of RMB149 million (equivalent to US$21,319,000) and applied for pre-litigation preservation of assets from Huatailong. The Intermediate People’s Court of Lhasa City, Tibet, adjudicated that the bank deposit of RMB140 million (equivalent to US$19,775,000) of Huatailong to be frozen for one year from April 10, 2020 (the “1st Adjudication”). Based on the adjudication of the Intermediate People’s Court of Lhasa City, Tibet after the 1st Adjudication on December 1, 2020 and related notice of execution effective from December 3, 2020, the related frozen bank deposit of US$19,775,000 of Huatailong was released and reclassified from restricted bank balances to cash and cash equivalents accordingly. Based on the first instance adjudication dated July 23, 2020 (the “First Instance Adjudication”), the litigation ruling adjudicated that Zhongxinfang and Huatailong shall have the joint obligation for the construction costs of RMB140 million (equivalent to US$20,070,000) to Huaxin. Pursuant to the cooperation agreement signed between Zhongxinfang and Huatailong in 2019, Huatailong is not involved in the construction process. The related costs are the sole responsibilities of Zhongxinfang. Huatailong proceeded an appeal against the First Instance Adjudication on August 17, 2020. Huatailong has no obligation for the aforesaid construction costs as the High People’s Court of Lhasa City, Tibet entered the final instance adjudication dated November 20, 2020 (the “Final Instance Adjudication”) and rescinded the First Instance Adjudication. 142 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 33. CONTINGENCIES (Cont’d) As disclosed in note 23, Huatailong has paid the tax and other surcharges related to the Land Exchange during the year ended December 31, 2020 and expects to recover such payments from Zhongxinfang in accordance with the cooperation agreement between Huatailong and Zhongxinfang signed in 2019. On July 8, 2020, Huatailong applied for pre-litigation preservation of assets from Zhongxinfang, the Intermediate People’s Court of Lhasa City, Tibet, adjudicated that the value of properties limited to RMB46 million (equivalent to US$6,609,000) from Zhongxinfang was frozen for one year (the “Pre-litigation Preservation”). Based on the first instance adjudication dated November 20, 2020 in relation to the lawsuit against Zhongxinfang for the recoverability of the tax and other surcharges (the “Tax and Other Surcharge”) paid by Huatailong, which became final adjudication upon expiry of appeal application in December 2020, the litigation ruling adjudicated that Zhongxinfang shall repay the Tax and Other Surcharge of RMB46 million (equivalent to US$6,997,000) to Huatailong (the “November Adjudication”) within 30 days from the effective date of the November Adjudication (the “Due Date”). As Zhongxinfang has not settled such amount within the Due Date, Huatailong applied for an enforcement of the November Adjudication in January 2021 (the “Enforcement”). Based on legal advice, the Enforcement is currently under proceeding and the result is not ascertain as at the date these consolidated financial statements are authorised for issue. In the opinion of the directors of the Company, ECL on other receivables is insignificant based on the credit risk assessment for the year ended December 31, 2020, taking into account the Group has first priority of claim over one of the assets under pre-litigation preservation, and the estimated fair value of such asset exceeds the carry amount of the other receivable related to the Tax and Other Surcharge. 34. CAPITAL RISK MANAGEMENT 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, issue of new debt, redemption of existing debt. 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 currently have a recurring dividend policy. 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. 143 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 35. FINANCIAL INSTRUMENTS Financial assets Financial assets at amortised cost Equity instruments at FVTOCI Financial liabilities At amortised cost December 31, December 31, 2020 US$'000 277,236 20,824 2019 US$'000 214,642 17,059 1,495,501 1,515,254 Financial assets at amortised cost as at December 31, 2020 and 2019 respectively are as follows: Cash and cash equivalents Restricted bank balances Trade, bills and other receivables (1) Amount due from a non-controlling shareholder of a subsidiary December 31, December 31, 2020 US$'000 243,288 5,069 28,503 2019 US$'000 182,290 17,687 14,314 (included in prepaid expenses) 376 351 277,236 214,642 Financial liabilities at amortised cost as at December 31, 2020 and 2019 are as follows: Accounts and other payables (2) Borrowings – Loans, other than syndicated loan – Syndicated loan Entrusted loan payable December 31, December 31, 2020 US$'000 2019 US$'000 270,452 271,484 469,482 724,915 30,652 693,327 521,774 28,669 1,495,501 1,515,254 (1) Excluded VAT recoverables. (2) Excluded mining cost accrual, other accruals, payroll and benefit payable and other tax payables. The Group’s financial instruments are exposed to certain financial risks including market risk (e.g. currency risk, interest rate risk and other price risk), credit risk and liquidity risk. 144 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 35. FINANCIAL INSTRUMENTS (Cont’d) (a) Currency risk The Group is exposed to the financial risk related to the fluctuation of foreign exchange rates for the monetary assets and liabilities denominated in the currencies other than the functional currencies to which they related. The Group has not hedged its exposure to currency fluctuations. However, the Management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise. At the end of each reporting period, Huatailong of which its functional currency is RMB, had US$ denominated intra-group borrowings from Skyland (BVI). The intra-group borrowing is approximately US$42,961,000 (2019: US$225,550,000) as at December 31, 2020. The Group is mainly exposed to exchange rate fluctuation of RMB and US$. RMB monetary assets and (liabilities) Cash and cash equivalents Restricted bank balances Trade, bills and other receivables Accounts and other payables Borrowings December 31, December 31, 2020 US$'000 15,508 5,069 352 (38,108) (53,334) 2019 US$'000 39,623 17,687 1,266 (99,308) (78,839) (70,513) (119,571) Based on the above net exposures, and assuming that all other variables remain constant, a 5% (2019: 5%) depreciation/appreciation of the RMB against the US$ would result in an increase/decrease in the Group’s profit for the year of approximately US$2,644,000 (2019: decrease/increase in the Group’s loss for the year of approximately US$5,082,000) for the year ended December 31, 2020. 145 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 35. FINANCIAL INSTRUMENTS (Cont’d) (a) Currency risk (Cont’d) US$ monetary assets and (liabilities) Cash and cash equivalents Inter-company loans Other payables December 31, December 31, 2020 US$'000 13 (42,961) (110,003) 2019 US$'000 18 (225,550) (127,735) (152,951) (353,267) Based on the above net exposures, and assuming that all other variables remain constant, a 5% (2019: 5%) depreciation/appreciation of the US$ against the RMB would result in an increase/decrease in the Group’s profit for the year of approximately US$6,959,000 (2019: decrease/increase in the Group’s loss for the year of approximately US$16,074,000) for the year ended December 31, 2020. 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 balances, borrowings, entrusted loan payable, loans payable to a CNG subsidiary and lease liabilities of US$394,998,000 (2019: US$719,170,000) bearing fixed interest rate or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to cash flow interest rate risk on the variable rate bank balances and variable-rate bank borrowings (see note 26 for details of these borrowings). Sensitivity analysis The following analysis is prepared assuming the variable rate bank balances and borrowings outstanding at the end of the reporting period were outstanding for the whole year and all other variables were held constant. A 25 basis point (2019: 25 basis points) increase or decrease is used when reporting interest rate risk internally to key management personnel and represents the Management’s assessment of the reasonably possible change in interest rates. 146 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 35. FINANCIAL INSTRUMENTS (Cont’d) (b) Interest rate risk (Cont’d) Sensitivity analysis (Cont’d) The analysis below reflects the sensitivity that the interest rate may be higher/lower by 25 basis points (2019: 25 basis points). 25 basis points (2019: 25 basis points) higher – decrease in profit (2019: increase in loss) for the year – addition in finance costs capitalised 25 basis points (2019: 25 basis points) lower – increase in profit (2019: decrease in loss) for the year – reduction in finance costs capitalised Year ended Year ended December 31, December 31, 2020 US$'000 2019 US$'000 (1,070) 28 1,070 (28) (599) 14 599 (14) The Group monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arise. (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 the mining industry sector quoted on the Stock Exchange. In addition, the Group also invested in unquoted equity securities for an investee operating in the chemical and public utility industries for long term strategic purposes which had been designated as FVTOCI. The Group has formed a team led by the 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 for unlisted investments as the directors of the Company consider the amounts of unlisted investments to be insignificant. If the prices of the respective listed equity instruments had been 10% (2019: 10%) higher/lower, investments revaluation reserve would increase/ decrease by US$2,002,000 (2019: increase/decrease by US$1,649,000) for the Group as a result of the changes in fair value of listed investment at FVTOCI (2019: investment at FVTOCI). 147 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 35. FINANCIAL INSTRUMENTS (Cont’d) (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% (2019: 100%) of its gold to one creditworthy customer, CNG, and approximately 28% (2019: 17%) and 43% (2019: 57%) of its copper and other by- product to CNG subsidiaries and third-party customers representing 10% or more of the Group’s revenue respectively for the year ended December 31, 2020 which 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 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 assessments using the 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 ECL on trade receivables as permitted and prescribed by IFRS 9. The Management assessed the ECL on trade receivables individually. Based on the 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, 2020, included in the Group’s trade receivables balance are debtors with aggregate carrying amount of US$264,000 (2019: US$295,000) which are past due as at the reporting date. The directors of the Company are of the opinion that no default has occurred for the past due balances and the balances are still considered fully recoverable due to long-term/on-going relationships and good repayment records from these customers. Movement in the allowance for credit losses of trade receivables: At January 1 Allowance for credit losses Exchange realignment At December 31 December 31, December 31, 2020 US$'000 2019 US$'000 78 34 7 119 46 33 (1) 78 In order to minimise the credit risk on bills received from customers, the Group will only accept bills issued by certain licensed banks. Before accepting any bills from customers, the Group will verify the validity of each bill. In this regard, the directors of the Company consider that the Group’s credit risk associated with its bills receivable is limited. 148 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 35. FINANCIAL INSTRUMENTS (Cont’d) (d) Credit risk and impairment assessment (Cont’d) 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 except the receivable of the Tax and Other Surcharge, of which the impairment assessment has been disclosed in note 33. The Group’s cash and short-term bank deposits are held in large PRC and Canadian financial institutions, where the credit risks on cash and short-term bank deposits are limited. 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, 2020 and 2019. 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 34. The Group manages its liquidity primarily through maintaining an adequate level of cash and cash equivalents and borrowings. 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 Details of which are set out in note 26. 149 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 35. FINANCIAL INSTRUMENTS (Cont’d) (e) Liquidity risk (Cont’d) 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, 2020 Accounts and other payables Borrowings Entrusted loan payable Lease liabilities At December 31, 2019 Accounts and other payables Borrowings Entrusted loan payable Lease liabilities 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$'000 – 2.51 2.75 5.24 270,452 163,207 857 116 – 137,636 904 119 – 561,403 30,699 265 – 458,473 – – 270,452 1,320,719 32,460 500 270,452 1,194,397 30,652 447 434,632 138,659 592,367 458,473 1,624,131 1,495,948 Weighted On demand average interest rate % or within 1 year US$'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$'000 – 2.89 2.75 5.24 271,484 604,101 28,700 106 – – – 174,747 236,270 287,732 – 114 – 352 – 31 271,484 1,302,850 28,700 603 271,484 1,215,101 28,669 533 904,391 174,861 236,622 287,763 1,603,637 1,515,787 150 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 35. FINANCIAL INSTRUMENTS (Cont’d) (f) Fair value Equity instruments at FVTOCI – listed equity securities and equity instruments at FVTOCI – unlisted equity securities which are measured at fair value based on the quoted bid price in an active market (Level 1) and the discounted cash flow model are considered insignificant respectively. The fair values of other financial assets and financial liabilities measured at amortised cost are determined in accordance with generally accepted pricing models based on discounted cash flow analysis. The Group considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values. There was no transfer amongst 1, 2 and 3 in the current and prior years. 36. COMMITMENTS December 31, December 31, 2020 US$’000 2019 US$’000 Capital expenditure in respect of acquisition of property, plant and equipment in the consolidated financial statements – contracted but not provided for 35,966 31,072 37. 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$3,353,000 and US$5,209,000 for the years ended December 31, 2020 and 2019, respectively, represent contributions payable to the scheme by the Group. 151 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 38. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES The table below details changes in the Group’ liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities. Entrusted loan payable US$’000 (note 27) Lease liabilities US$’000 (note 28) Dividend payables US$’000 At January 1, 2020 Financing cash flows Dividend declared Exchange difference arising on translation Unrealised foreign exchange loss, net Others Borrowings US$’000 (note 26) 1,215,101 (71,179) – 52,789 3,782 (6,096) 28,669 – – 1,983 – – 533 (102) – – – 16 At December 31, 2020 1,194,397 30,652 447 At January 1, 2019 Financing cash flows Lease modified Dividend declared Exchange difference arising on translation Unrealised foreign exchange gain, net Others Borrowings US$’000 (note 26) 1,210,158 15,231 – – (10,293) (1,298) 1,303 Entrusted loan payable US$’000 (note 27) 29,140 – – – (471) – – 101 (84) 514 – – – 2 Lease liabilities US$’000 (note 28) Dividend payables US$’000 – (355) 355 – – – – – (165) – 165 – – – – At December 31, 2019 1,215,101 28,669 533 152 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 39. PARTICULARS OF SUBSIDIARIES Details of the Company’s subsidiaries at December 31, 2020 and 2019 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 2020 2019 Pacific PGM Inc. British Virgin Islands (“BVI”) US$100 100% 100% Investment holding May 17, 2001 Pacific PGM (Barbados) Barbados US$250,000 100% 100% Investment holding Inc. IMP(1) September 6, 2007 PRC April 29, 2002 US$45,000,000 96.5% 96.5% Engaged in exploration and development of mining properties in China Skyland Mining Limited Barbados October 6, 2004 US$233,380,700 plus RMB1,510,549,032 100% 100% Investment holding Jia Ertong (1) PRC US$273,920,000 100% 100% Exploration, development October 31, 2003 and mining of mineral properties and investment holding Huatailong(1) PRC RMB1,760,000,000 100% 100% Exploration, development January 11, 2007 and mining of mineral properties Jiama Industry and PRC RMB5,000,000 51% 51% Mining logistics and transport Trade(1) 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), which has issued listed bonds of US$300 million (2019: US$500 million) as at December 31, 2020. Other than Pacific PGM Inc., Pacific PGM (Barbados) Inc. and Skyland (BVI) which are directly held by the Company, all other subsidiaries listed above are indirectly held under the Group. 153 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 40. STATEMENT OF FINANCIAL POSITION OF THE COMPANY Current assets Cash and cash equivalents Other receivables Prepaid expenses and deposits Non-current assets Right-of-use assets Property, plant and equipment Loan receivables from subsidiaries Equity instruments at FVTOCI Investments in subsidiaries Amounts due from subsidiaries Total assets Current liabilities Other payable and accrued expenses Lease liabilities Net current assets December 31, 2020 US$’000 December 31, 2019 US$’000 5,094 1,034 90 6,218 438 5 67,347 20,015 987,066 40,998 7,824 1,034 127 8,985 534 10 64,790 16,485 987,066 42,053 1,115,869 1,110,938 1,122,087 1,119,923 3,263 95 3,358 2,860 2,361 89 2,450 6,535 Total assets less current liabilities 1,118,729 1,117,473 Non-current liabilities Lease liabilities Deferred income Total liabilities Owners’ equity Share capital (note 31) Reserves (note 41) Accumulated losses (note 41) Total owners’ equity 352 19 371 444 19 463 3,729 2,913 1,229,061 2,800 (113,503) 1,229,061 (730) (111,321) 1,118,358 1,117,010 Total liabilities and owners’ equity 1,122,087 1,119,923 154 China Gold International Resources Corp. Ltd.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 41. RESERVES AND DEFICITS OF THE COMPANY At January 1, 2019 Loss for the year Fair value loss on equity instruments at FVTOCI Reserves US$’000 Accumulated losses US$’000 Total US$’000 440 (105,966) (105,526) – (1,170) (5,355) – (5,355) (1,170) Total comprehensive expense for the year (1,170) (5,355) (6,525) At December 31, 2019 (730) (111,321) (112,051) Loss for the year Fair value gain on equity instruments at FVTOCI Total comprehensive income (expense) for the year – 3,530 3,530 (2,182) – (2,182) 3,530 (2,182) 1,348 At December 31, 2020 2,800 (113,503) (110,703) 155 Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2020 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 2020 US$’000 2019 US$’000 2018 US$’000 2017 US$’000 2016 US$’000 864,032 657,459 570,570 411,881 338,601 RESULTS Revenue Profit (loss) attributable to owners of the Company 111,962 (32,837) (4,837) 63,146 (13,304) At December 31 2020 US$’000 2019 US$’000 2018 US$’000 2017 US$’000 2016 US$’000 ASSETS AND LIABILITIES Total assets Total liabilities 3,322,642 (1,727,173) 3,197,130 3,215,895 3,230,444 2,966,619 (1,746,463) (1,726,657) (1,720,460) (1,546,430) Net assets 1,595,469 1,450,667 1,489,238 1,509,984 1,420,189 Equity attributable to owners of the Company Non-controlling interests 1,578,522 16,947 1,435,337 1,474,433 1,495,336 1,406,457 15,330 14,805 14,648 13,732 Total owners’ equity 1,595,469 1,450,667 1,489,238 1,509,984 1,420,189 156 FIVE-YEAR FINANCIAL SUMMARYChina Gold International Resources Corp. Ltd. (Incorporated in British Columbia, Canada with limited liability) HK Stock Exchange Stock Code: 2099 Toronto Stock Exchange Stock Code: CGG 2 0 2 0 A n n u a l R e p o r t 2020Annual Report