CHINA NONFERROUS GOLD
LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2020
Company Registration Number WK-277188
Page
3-5
6-9
10-22
23-25
26
27-31
32-36
37
38-39
40
41
42-51
52-94
CHINA NONFERROUS GOLD LIMITED
Contents
Company Information
Chief Executive Officer’s Statement
Report of the Directors
Board of Directors
Statement of Directors’ Responsibilities
Governance Report
Report of the Independent Auditor
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Accounting Policies
Notes to the Financial Statements
2
(Chairman and Non-Executive Director)
(Executive Director, Finance Director)
(Non-Executive Director)
(Non-Executive Director)
(Executive Director, Managing
Director)
CHINA NONFERROUS GOLD LIMITED
Company Information
Directors
Mr Lixian Yu
Mr Delin Feng
Mr Xiuzhi Shi
Mr Yong Li
Mr Hui Zhang
Company Secretary
Ms Ma Yifei
Registered Office
One Nexus Way
Camana Bay
Grand Cayman
KY1-9005
Cayman Islands
Nominated Adviser & Broker WH Ireland Limited
Bankers
24 Martin Lane
London
EC4R 0DR
United Kingdom
UK
National Westminster Bank Plc
Knightsbridge Commercial
Business Centre
186 Brompton Road
London SW3 1HL
3
Bankers (continued)
China
Bank of China
1/F CNMC
Building 10
Anding Road
Chaoyang District
Beijing 10029 China
Industrial and Commercial Bank of China (Macau) Limited 18/F
ICBC Tower
Macau Landmark
555 Avenida da mizade
Macau
China
China Construction Bank Macau Branch
5/F, Circle Square, 61
Avenida de Almeida
Ribeiro, Macau
Hong Kong
Wing Lung Bank Limited
Wing Lung Bank Building
45 Des Voeux Road
Central Hong Kong
Tajikistan
OJSC"AGROINVESTBANK" DUSHANBE, TAJIKISTAN
Dushanbe, Tajikistan
"AMONATBONK" DUSHANBE, TAJIKISTAN
Dushanbe, Tajikistan
OJSC "BANK ESKHATA" Republic of Tajikistan, Khujiand
VAHDAT, Tajikistan
Bankers (continued)
CJSC "SPITAMEN BANK" DUSHANBE, TAJIKISTAN
VAHDAT, Tajikistan
4
CJSC "NBP Pakistan Subsidiary Bank in Tajikistan"
Dushanbe, Tajikistan
Independent Auditor
PKF Littlejohn LLP
15 Westferry Circus
Canary Wharf
London E14 4HD
Legal Advisors
English law
Charles Russell Speechlys LLP
5 Fleet Place
London EC4M7RD
United Kingdom
Tajikistan law
Galimov Fa and Matt
No. 60, Building 6, Somony Street Dushanbe
Tajikistan
Cayman Islands law
Walkers
Suite 1501-1507
Alexandra House
18 Chater Road
Central
Hong Kong
5
CHINA NONFERROUS GOLD LIMITED
Chief Executive Officer’s Statement
Chief Executive Officer’s Statement
As CEO of the board, it gives me great pleasure to present the CEO’s statement of the annual report for the
year ended 31 December 2020. Following the first successful normal production work in 2019, the Company
has progressed well in several
important aspects, with the Pakrut gold mine entering formal production and
achieving full operational capacity in 2020.
The Company made significant achievements in 2020 and became an important gold-production enterprise in
Tajikistan. The Pakrut gold mine achieved its internal production targets for 2020, which brings steady cash
flows to support the sustainable development of the Company.
Operation
From January to December 2020, a total of 640,036 tons of ore was extracted from the Pakrut gold mine (2019:
731,600 tons), and a total of 684,526 tons of ore were processed at a grade of 2.16 g/t, 19,874 tons of gold
concentrate were produced at a grade of 68.52 g/t, 1,126 kg gold bullion were poured with a comprehensive
recovery rate of 80.01% (2019:1,168 kg gold bullion).
COVID-19
With COVID-19 continuing to have a significant impact on the global economy, our priority is the safety and
health of our people and ensuring the Company’s operations can continue in operation as normal. Since the
outbreak of COVID-19 in Tajikistan on April 30 2020, the Company has taken appropriate steps and effective
measures to ensure that staff at protected at site. To date operations at the mine site at Pakrut continue as
normal, and there are no confirmed or suspected cases in the Company in Tajikistan or China.
Through preventative measures such as social distancing and self-isolation to reduce COVID-19 spreading and
allowing healthcare systems to make critical adaptations for testing and triage capacity, the impact on working
conditions has been reduced as much as is practical. Beijing has sought
to reduce channels for the
transmission of the virus and there have been no cases reported within the Company to date. The mine is still in
normal operation. The amount of production personnel at the mine site remains sufficient to meet the required
production level, so production is still progressing well at site in spite of COVID-19 and the target for the first
half of 2021 is not affected by the suspended flights. In addition, the Company organized a private chartered
flight to transport around 45 Chinese employees to Tajikistan from China on 8 August 2020. We therefore
remain confident that the annual internal production target can be achieved.
Financial results
The development and construction work at the Pakrut Gold Project was finalised at the end of the 2018 financial
year. The Group therefore generated revenue from full operational production from the beginning of the 2019
financial year.
6
CHINA NONFERROUS GOLD LIMITED
Chief Executive Officer’s Statement (continued)
Administration expenditure for the year under review was US$17,827,290 (2019: US$16,336,541). The main
reason for the increase this year is due to property insurance premiums, epidemic isolation costs for employees
and supplementary payment of water and electricity bills from 2016 to 2020, which the authority of Electricity
and Water left some outstanding fees to collect.
The overall
loss incurred by the Group was US$6,357,743 (2019: US$21,981,000). Pakrut generated gold
sales revenue of US$64,516,000 (2019: US$49,157,000), a significant increase as a result of entering full
operational production.
During the course of the year, the Group did not enter into any new financing agreements with shareholders or
their associates. Instead, the original repayment dates in December 2019 on the loan contracts previously
signed with China Nonferrous Metals International Mining Co., Ltd. and China Nonferrous Metals Mining Group
Co., Ltd. (“CNMC Loans”) were extended once more and are now repayable in December 2022.
In July 2018, CNMC and CNMC Trade Co., Ltd. signed an agreement transferring one of the loans of US$20
million to China Nonferrous Mining Group Co, Ltd. to CNMC Trade Co., Ltd which constituted a related party
under the AIM Rules for Companies. In July 2019, the remaining $126.5 million was also transferred to the
same party.
In 2020, the Group repaid US$10 million to China Construction Bank Corporation Macau Branch (“CCBC”) in
respect of its existing loan agreement, of which US$85 million remains outstanding at the year end. During
2020, the Group signed a new financing agreement with CCBC for a loan of $14.55 million, repayable in March
2021.
The existing CCBC loan facilities totaled US$99.55 million and the CNMC and CNMIM loan facilities totaled
US$289 million so that, including interest, US$389 million of loans were payable as at 31 December 2020
(approximately US$349m without interest). US$349m （ without interest ） is payable within one year of the
financial statements, which includes US$99.55 million due to CCBC, which became due for repayment in the
first half of 2021, and the remaining balance due to shareholders. As the major shareholder and ultimate
beneficial owner, CNMIM and CNMC will continue strongly supporting the Company, especially on the
extension of the loans. The shareholder loans have been extended again once again in 2021 and now fall due
for repayment in 2023. In addition, regarding the bank facilities, refer to the following section surrounding post-
year end refinancing.
The Group has continued production throughout 2021 despite the outbreak of COVID-19, enabling it to raise
sufficient working capital. As announced on 15 July 2020, in order to ensure the repayment of existing loans a
broader refinancing will be required. This has been completed post-year end and is disclosed in the following
section. The parent Company CNMC has committed to support the CNG group should this be required for a
period of at least 12 months from the date of approval of these financial statements.
Events after the Reporting Period
7
CHINA NONFERROUS GOLD LIMITED
Chief Executive Officer’s Statement (continued)
In January 2021, the Company executed an agreement with China CITIC Bank Corporation Limited (Zhuhai
Branch) (“CITIC”) for a loan facility of up to CNY 300million which is equivalent to US$46.37m. The CITIC Loan
facility is for a maximum of 12 months and is repayable 12 months from first drawdown. The terms of the CITIC
Loan includes an annual interest rate at 2.7% plus 6 month LIBOR. US$20m of the CITIC Loan was drawn
down in January 2021 to replace the China Construction Bank (CCB) Macau loan of US$20m which fell due in
January 2021. A second drawdown of US$14.55m in March 2021 was used to repay the CCB Asia loan of
US$14.55m which fell due for repayment in March 2021.
In March 2021, the Company also extended the repayment period of loans in place with CNMC Trade Company
Limited (CNMC Trade), totaling US$146.50 million, to December 2023. The Company currently has total debt
facilities (including banking facilities), before interest, of c.US$319.5 million. The CCBC loan which is payable in
the first half of 2021 has been refinanced with a new loan from Bank of Shanghai (Hong Kong).
As announced on 25 June 2021, the Company has executed an agreement with Bank of Shanghai (Hong Kong)
Limited (“BOS”) for a loan facility of up to US $65 million (the “BOS Loan”). The Loan facility is for a maximum
of 24 months and is repayable 24 months from the drawdown. The total amount of US$65m of the BOS Loan is
expected to be drawn down before the end of the month in order to repay the CCBC Macau loan, of which US
$65m remains outstanding.
Refer also to Note 27.
Outlook
The Company is continuing to enhance its production capacity. Whilst improving production, the Company is
also focusing on perfecting and improving the smelting process by reducing production costs, increasing
recovery rates and improving competitiveness.
The Company has long been dedicated to becoming a significant gold producer in Central Asia. The
Company has also established a strong relationship with the government of Tajikistan and other Central Asian
countries, and it will consider other appropriate acquisitions at
the right
time, although there can be no
guarantee that any acquisition will occur.
While we have taken big strides in the production and operation of the Pakrut gold mine and achieved much,
there are still challenges to overcome and targets to meet, all of which I am confident to accomplish in the
coming months.
Uncertainty created by the coronavirus pandemic on production and operations still exists in Tajikistan, and the
long term effects are difficult to predict and estimate. The Company will make every effort to meet pandemic
prevention and control requirements, as well as stabilizing and expanding the production and operation of
Pakrut gold mine.
8
CHINA NONFERROUS GOLD LIMITED
Report of the Directors
The Directors present their annual report and the audited Financial Statements of China Nonferrous Gold
Limited for the year ended 31 December 2020.
Principal Activity
The principal activity of the Group is that of mineral exploitation, mine development and mining.
BUSINESS REVIEW
Introduction
China Nonferrous Gold Limited (“CNG”) is a mineral exploration, development and mining Company. The
Group’s project is located in central Asia, having been discovered during the Soviet era. The principal focus of
the Group is the development and exploitation of the Pakrut Gold Project in Tajikistan.
CNG, following the scheme of arrangement between Kryso Resources Limited (formerly Kryso Resources Plc)
and its shareholders, was admitted to trading on AIM 31 July 2013 in order to continue funding the development
of the Pakrut Gold Deposit and the exploration of the Pakrut License Area, and to better position the Group to
obtain and acquire other gold and base metal deposits in Tajikistan.
The Group’s Executive Directors have a proven track record of operating in Tajikistan and they believe CNG to
be the first foreign Company to obtain a 100% interest in a mining and exploration project in the country.
A review of the activities of the Group during 2020 is provided in the CEO’s Statement.
Strategy
CNG’s strategy is to maximize shareholder value through the development of the Group’s exploration properties,
proving up additional resources. CNG’s medium term objective is to become a mid-tier gold producer and keep
in mind the mission of state-owned enterprises, maintain strategic strength, and strive to achieve the production
goal of Pakrut. The directors of CNG have a track record of operating successfully in Tajikistan and believe
CNG to have been the first foreign Company to obtain 100% ownership of a mining and exploration project in
Tajikistan.
10
CHINA NONFERROUS GOLD LIMITED
Report of the Directors (continued)
OPERATING REVIEW
During 2020 the Group has:
Reached production capacity of 2,000 tons per day as a whole from January 2020;
Processed a total of 684,526 tons of ore at a grade of raw ore of 2.16g/t;
The recovery rate of processing was 91.94% and the recovery rate of smelting was 87.03%;
19,874 tons of gold concentrate were produced at the grade of 68.52g/t, 1,166 kg gold bullion were
poured with comprehensive recovery rate of 80.01%; and
Generated revenue from production of US$64,520,000.
Pakrut Gold Deposit and License Area
In April 2004, LLC Pakrut, a wholly owned subsidiary of the Group, was granted a license and geological lease
to explore and exploit the Pakrut License Area which comprises the Pakrut gold deposit and the surrounding
6,300 hectare exploration area located in the metalliferous southern Tien-Shan Fold Belt. This belt is reputed to
have the second largest known gold resource after the Witwatersrand in South Africa. The exploration license
was valid for 10 years and expired on 1 April 2014. An application has been submitted in accordance with the
required procedures to renew the exploration license. The renewal application is being considered by the
Government of Tajikistan and the Group is working with the Government to ensure it is renewed as soon as
possible. Exploration and evaluation activities can continue at the Pakrut Gold Deposit in the area covered by
the mining license.
In November 2011, the Government of the Republic of Tajikistan issued the Pakrut Project mining license to
LLC Pakrut. According to the terms of the license, the amount of ore that can be mined is variable depending
upon the mine plan. The plan submitted by the Group envisages an initial processing capacity of 660,000 tons
of ore per annum, increasing to 1,320,000 tons per annum. The mining license is valid until 2 November 2030.
An application has been submitted in accordance with the required procedures to obtain approval to mine all
JORC compliant reserves arising from exploration and evaluation activities undertaken by the Group between
2009 and 2013. The application is currently being considered by the Tajik Department of Geology, following
which approval is required by the Scientific and Technical Counsel. It is the current intention of the Group to
seek an extension to the mining license to ensure maximum exploitation of the resources available and this is
permissible under the current terms of the arrangements in place.
11
CHINA NONFERROUS GOLD LIMITED
Report of the Directors (continued)
FINANCIAL REVIEW
The results for the year ended 31 December 2020 were as follows:
Revenue
Cost of sales
Administrative expenses
Other operating expenses
Total costs
% Administrative expenses to total costs
Operating profit/ (loss)
Less: interest receivable
Add: interest payable
Loss on ordinary activities before taxation
Earnings per share (cents)
2020
2019
US$000
US$000
64,516
49,157
(35,297)
(32,842)
(17,827)
(16,337)
(46)
(136)
53,170
49,315
33.53%
33.12%
10,354
(196)
(947)
(270)
15,999
20,796
(5,451)
(21,473)
(1.64)
(5.75)
The main financial Key Performance Indicator (‘KPI’) for the Group is administration costs as a percentage of
total costs which continues to be at an acceptable proportion. In 2020, KPI index is at 33.53% (2019: 33.12%).
Revenue is also considered to be a KPI and will be increasingly important to monitor now that the Group has
entered full production. Revenue for the year was US$64.52 million (2019: US$49.16 million). This significant
increase is in line with expectations given the increased production levels at the mine site from 2019 now the
mine operations are operating at full production capacity.
12
CHINA NONFERROUS GOLD LIMITED
Report of the Directors (continued)
Corporate Responsibility
The Group seeks to build a sustainable and profitable business to maximize the return to its shareholders and
in doing so will not knowingly overlook its Corporate Responsibilities.
Certain Directors also serve as Directors of other companies involved in natural
resource exploration,
development and mining and consequently there exists the possibility for such Directors to be in a position of
conflict. Any decision made by such Directors involving the Group will be made in accordance with their duties
and obligations to deal fairly and in good faith with the Group and such other companies. In addition, such
Directors will declare, and refrain from voting on, any matter in which such Directors may have a conflict of
interest.
People
The Group recognises that the success of its ventures is based on the well-being and health of its employees.
All employees have to pass through an induction process where they are briefed on the Group’s health and
safety policies. The safety of
the Group’s employees is of
the utmost importance and is therefore taken
seriously in all areas in which the Group’s employees operate.
The Group is also committed to the development of its employees and encourages them to attend courses and
programs to further develop their own skills. The Group also aims to provide a favorable working environment
which will continue to draw, retain and motivate its employees so that they can reach their true potential and
share in the Group’s success.
Employees are kept well informed of the performance and objectives of the Group through established methods
of personal briefings and regular meetings. Employees are given the opportunity to develop and progress
according to their ability. The Group has an employee share option scheme to encourage employees’
participation in the Group’s performance.
The Group has continued its policy of giving the disabled full and fair consideration for all job vacancies for
which they offer themselves as suitable applicants, having regard to their particular aptitudes and abilities. With
regard to existing disabled employees and those who may become disabled during the year,
the Group
examines ways and means of providing continuing employment under normal
terms and conditions and
provides training, career development and promotion, where appropriate.
13
CHINA NONFERROUS GOLD LIMITED
Report of the Directors (continued)
Social
The Group continues to have a strong relationship with the local communities in the areas in which it operates,
respecting their laws and customs. The Group employs local people in all levels within the organization; this
ensures a transparent and fair transfer of benefits and support to their communities where appropriate. The
Group engages the local communities in all aspects of the projects it is actively involved in, from exploration
through to feasibility and production, ensuring that concerns are addressed, and that support is maintained
throughout the entire process.
Environment
The Group has a strict environmental code with which all its employees are well-versed during the induction
process; this not only satisfies the local environmental code, but also the international code. The Group has
contracted the services of a local environmental consultant who monitors its operations to ensure that any
lapses are immediately brought to the attention of management.
Risk Factors
There are several principal risk factors outlined below that may affect the Group’s businesses and which may
not all be within the Group’s control.
14
CHINA NONFERROUS GOLD LIMITED
Report of the Directors (continued)
PRINCIPAL RISKS AND UNCERTAINTIES
Environmental Risk
The Group’s core operations are located in Pakrut, a mountainous area of Tajikistan. The area is remote and
can be subject to adverse weather conditions which, as evidenced in the first half of 2017, can impact the ability
of the Group to perform its core operations and may lead to substantial damage of the Group’s properties. The
Group seeks to manage this risk by taking out appropriate insurance and carefully monitoring weather reports
during the seasons when adverse conditions are most likely and ensuring that appropriate action is taken to
minimise risk to life and property damage.
Production Risk
The Pakrut Gold Project is now operating at
full production capacity. The Company's existing production
equipment is considered to be sufficient to meet the requirements of the budgeted gold production targets. The
right choice of production equipment has a major impact on productivity and costings.
The production process of the gold should be based on the specific performance requirements of the product.
This requires an increase in production skills and requires training of Company technicians. Technology is
changing rapidly and existing production technology may have fallen behind,
therefore technicians must
continue to develop their knowledge and skillset to keep up with this pace.
At present, CNG is in a stable production and operation stage. The Company will need to manage change and
innovation and accumulate valuable experience and systems as production levels continue to ramp up. A key
factor will be the continuous technological
innovations and developments in the industry. To become an
industry leader, CNG must adhere to the technology innovation strategy and seek innovative methods to
achieve a comprehensive transformation.
Production risks are related to the possibility that gold production or output levels are lower than expected. The
main sources of production risk are bad weather conditions and limited production capacity, such as hail, snow
disasters, and limited Chinese technical staff. Despite the control measures taken, the production risk may also
be due to the harsh winter weather and the breakdown of production equipment and machinery. At present,
Pakrut is adopting corresponding risk prevention and control strategies for the above risks, including purchase
of equipment spare parts and materials in advance to ensure the sufficiency of raw materials and the normal
operation of the machinery at the mine site; vigorously training Tajik technical personnel, exerting local talent
policies, and rationally using manpower resources; reasonably estimate the impact of severe weather to ensure
the achievement of the annual output target.
15
CHINA NONFERROUS GOLD LIMITED
Report of the Directors (continued)
COVID-19 risk
Affected by the COVID-19, global gold price is still subject to some fluctuations. However, from the current
situation, the average delivery price of gold for the first five months of 2021 is US$1,795.17 per ounce, and
the average delivery price of gold for the whole year of 2020 is US$1,798.81 per ounce. From the above
data, it can be concluded that the company’s average delivery price of gold is stable.
Secondly, due to travel restrictions, some Chinese technicians can not be able to return to their posts in
early 2020. These technicians have successfully arrived in Tajikistan in August 2020 to increase
productivity and ensure that the 2020 production target has been achieved.
As the Tajik COVID-19 has not been completely eliminated, Pakrut has adopted policies such as to
prevent the coronavirus from spreading within the city/region or beyond and to schedule rotating shifts of
Tajik employees to ensure production and stability.
In addition, the company has successively arranged for Chinese employees to return to the country for
vaccinations.Up to now, 60% of Chinese employees have been vaccinated against the new crown. The
company will minimize the risk of employees’ illnesses and maximize their health.
Exploration and Development Risk
The exploration for, and the development of, mineral deposits involves significant risks, which even a
combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore
body may result in substantial rewards, few properties which are explored ultimately develop into producing
mines. Major resources are required to establish ore reserves, to develop metallurgical processes and to
construct mining and processing facilities at the Pakrut site.
There is no certainty that the exploration and development expenditures made by the Group as described in
these financial statements will
result
in a commercially feasible mining operation. There is aggressive
competition within the mining industry for the discovery and acquisition of properties considered to have
commercial potential. The Group will compete with other companies, many of which have greater financial
resources, for the opportunity to participate in promising projects. Significant capital investment is required to
achieve commercial production from successful exploration efforts.
The commercial viability of a deposit is dependent on a number of factors. These include deposit attributes
such as size, grade and proximity to infrastructure; current and future market prices which can be cyclical;
government regulations including those relating to prices, taxes, royalties, land tenure, land use, importing and
exporting of minerals and environmental protection. The effect of these factors, either alone or in combination,
cannot be entirely predicted, and their impact may result in the Group not receiving an adequate return on
invested capital.
16
CHINA NONFERROUS GOLD LIMITED
Report of the Directors (continued)
There is no assurance the Group will be able to adhere to the current development and production schedule or
that the required capital and operating expenditure will be accurate. The Group’s development plans may be
adversely affected by delays and the failure to obtain the necessary approvals,
licenses or permits to
commence production or technical or construction difficulties which are beyond the Group’s control. Operational
risks and hazards include: unexpected maintenance, technical problems or delays in obtaining machinery and
equipment,
interruptions from adverse weather conditions,
industrial accidents, power or
fuel supply
interruptions and unexpected variations in geological conditions.
The risks inherent in developing the Group’s projects are mitigated to some extent by the strategic alliance with
China Nonferrous Metals Int’l Mining Co. Ltd, which is a member of a group with a number of active mining
operations.
Regulatory and Legal Risk
Substantially all of the Group’s business and operations are governed by the laws, rules and regulations in
Tajikistan which can contain inherent ambiguities, uncertainty, inconsistency and contradictions with regards to
their application, interpretation, implementation and enforcement. In particular, the laws, rules and regulations
which the Group is subject to, including, but not limited to, those relating to foreign investments, subsoil use,
land use, licensing, customs, foreign currency, environmental protection and taxation are still evolving and
remain uncertain in many respects.
In addition, the judicial system in Tajikistan may not be independent and immune from the economic, political
and nationalistic influences in Tajikistan and the decisions of the courts are often not transparent and available
to the public. In many circumstances there are no prior court decisions for reference and the interpretations of
the laws, rules and regulations by the courts in Tajikistan remain ambiguous and it is difficult to predict or to
seek effective legal redress. The regulatory authorities in Tajikistan are entrusted with a high degree of
discretion and authority in the application, interpretation, implementation and enforcement of the laws, rules and
regulations potentially resulting in ambiguous and inconsistent actions.
There is no assurance that the Group will be able to comply with all new laws, rules and regulations applicable
to its mining operations or any changes in laws, rules and regulations. Furthermore, the legal protections
available to the Group may be limited and could have a material impact on the results of the Group and the
imposition of penalties and/or regulatory action. In addition, the process of obtaining, retaining or renewing
licenses and permits could be time-consuming and costly and could give rise to unexpected delays and
expenses. The Group seeks and obtains sufficient and appropriate legal advice where considered necessary.
17
CHINA NONFERROUS GOLD LIMITED
Report of the Directors (continued)
The Group’s existing licenses and permits could be revoked, terminated or not extended in accordance with
expectations by the Tajikistan Government,
the local government or the Tajikistan courts under certain
circumstances, including failure to comply with the conditions imposed by the licenses and permits, which may
include the provision of regular reports to the relevant regulatory authority, obtaining sufficient
insurance
coverage, adherence to the permitted extraction of mineral resources or complying with the obligations relating
to sustainable management, subsoil, environmental protection and health and safety regulations. Failure to
obtain, retain or renew the relevant licenses and permits required at all or on a timely basis could have a
material adverse effect on the Group’s financial condition. The Group works closely with the Government and
local government departments on the mine project in order to ensure all parties are kept up to date on progress
and closely monitors compliance with the conditions imposed under its existing licenses and permits.
Economic Risk
The profitability of the Group’s future operations may be significantly affected by changes in the market prices
for the materials it may produce and is affected by numerous macroeconomic factors beyond the Group’s
control. The level of interest rates, the rate of inflation, world supply, and the stability of exchange rates can all
cause fluctuations in the price. Such external
factors are in turn influenced by changes in international
investment patterns and monetary systems and also political developments. Metal prices have fluctuated in
recent years, particularly gold, and future significant price declines could cause future commercial production to
be uneconomic and have a material adverse effect on the Group’s financial condition. Economic risk is
continually evaluated by the Group,
including expectations of
future events, and action undertaken as
necessary.
Certain payments, in order to earn or maintain property interests, are to be made in local currency in the
jurisdiction where the applicable property is located. As a result, fluctuations in the Chinese Renminbi and the
Tajik Somoni could have a material adverse effect on the Group’s financial results which are denominated and
reported in US dollars. Where possible the Group maintains bank and cash balances in the same denomination
as its expected liabilities. The Group does not currently hedge its exposure to foreign currencies.
The Group currently has a comprehensive program of insurance but does not carry insurance to protect against
certain risks and nor can it guarantee that
its level of
insurance is sufficient
to cover all outcomes and
eventualities. As a result, the Group may become subject to liability to include environmental pollution, political
risk and other hazards against which the Group cannot insure or which it may elect not to insure. The payment
of such liabilities may have a material adverse effect on the Group’s financial condition.
18
CHINA NONFERROUS GOLD LIMITED
Report of the Directors (continued)
Pakrut is located in Tajikistan, an overseas country, and the tax pressure is relatively large. Due to the poverty
and backwardness of the host country, the financial funds are tight, and the tax has become the main source of
national revenue. Chinese companies in Tajikistan share the same feeling. In order to complete the taxation
task, the taxation bureau took various measures to order, even threaten to require enterprises to pay more
taxes, so there has been no local taxation policy change. In 2020, Pakrut further strengthens internal control
and basic management, formulates tax management measures that meet the Company's management needs,
promptly proposes tax-related risks and related countermeasures in the Company's business and management
processes, and is responsible for establishing and maintaining tax authorities good relationship, prepare and
maintain relevant tax-related business materials in accordance with the provisions of the tax law, strengthen tax
planning, actively obtain various tax incentives in the process of economic business development, and
safeguard the Company's overall interests.
Financial Risk
The Group’s operations expose it to a number of financial risks. These are discussed under ‘Financial Risk
Management’ within Note 1 of the Financial Statements.
Political and Country Risk
Substantially all of the Group’s business and operations are conducted in Tajikistan. The political, economic,
legal and social situation in Tajikistan introduces a certain degree of risk with respect to the Group’s activities.
The Government of Tajikistan exercises control over such matters as exploration and mining license, permitting,
exporting and taxation, which may adversely impact the Group’s ability to carry out exploration, development
and mining activities.
Government activity, which could include non-renewal of licenses, may result in any income receivable by the
Group being adversely affected.
In particular, changes in the application or interpretation of mining and
exploration laws and/or taxation provisions in Tajikistan could adversely affect the value of the Group’s interests.
No assurance can be given that the Group will be able to maintain or obtain effective security or insurance for
any of its assets or personnel at its operations in Tajikistan; this may affect the Group’s operations or plans in
the future. A moderate degree of security is also currently required to mitigate the risk of loss by theft, either by
the Group’s employees or by third parties, and controls are implemented where possible to minimize this risk.
No assurance can be given that such factors will not have a material adverse effect on the Group’s ability to
undertake exploration, development and mining activities in respect
to present and future properties in
Tajikistan.
The Group’s controlling shareholder is a People’s Republic of China (“PRC”) state-owned enterprise. Any
adverse changes to Sino – Tajikistan diplomatic relations could affect the policies and regulations of the
Tajikistan Government towards foreign investment and foreign exchange, which could adversely affect the
Group’s business, financial conditions and prospects.
19
CHINA NONFERROUS GOLD LIMITED
Report of the Directors (continued)
Funding
The Group may need to secure further funding for working capital and other purposes and in addition it will
need to renegotiate its current
funding in the short-medium term. There is the risk that
this may not be
forthcoming which would impact the Group operations. The Group has numerous funding options available and
remain in close contact with its controlling shareholder who have, up to now, continued to provide economic
support as required.
Performance of Key Personnel and Employees
The Group is dependent on a relatively small number of key employees, the loss of any of whom could have an
adverse effect on the Group.
There has been a steady emigration of skilled personnel from Tajikistan in recent years that could adversely
affect the Group’s ability to retain its employees.
The Group seeks to mitigate this risk by actively engaging with its employees and seeking to offer a secure
work environment with appropriate pay levels to maintain both motivation and loyalty to the Group.
Results and Dividends
The results for the year and the Group’s financial position at the end of the year are shown in the following
Financial Statements. The Directors do not recommend the payment of a dividend (2019: US$Nil).
Future Developments
Future prospects are set out in the CEO’s Statement on page 8 under ‘Outlook’.
20
CHINA NONFERROUS GOLD LIMITED
Report of the Directors (continued)
Directors and their Interests
The Directors who served the Group during the year do not hold any beneficial interests in the shares of the
Group (2019: None).
No Director who served during the period held any share options in the Company.
Remuneration of the Directors is disclosed in Note 5.
Substantial shareholdings
As at the date of these financial statements, the Directors were aware of the following shareholdings in excess
of 3% of the Company’s issued share capital.
China Nonferrous Metals Int’l Mining Co Ltd
Zhao Bin
Golden Max Group
Huang Lihuo
BOCOM International
Rainbow Bridge Investment Fund
Going Concern
Number of
Percentage of
ordinary
issued share
shares
capital
146,666,667
50,090,304
33,823,113
33,068,430
16,500,000
12,335,489
38.36
13.10
8.85
8.65
4.31
3.23
The Company’s business activities, together with the factors likely to affect its future development, performance
and position are set out in the CEO’s Statement on pages 6 to 9. Note 1 to the financial statements includes the
Company’s objectives, policies and processes for managing its capital; its financial risk management objectives;
and its exposures to credit risk and liquidity risk.
The Directors have prepared the Group financial statements on a going concern basis after reviewing the
Group’s forecast cash position and working capital requirements for the period to 31 December 2023 and
satisfying themselves that the Group will have sufficient funds on hand to realise its assets and meet its
obligations as they fall due.
21
CHINA NONFERROUS GOLD LIMITED
Board of Directors
Board of Directors
The current Board comprises:
Mr Boyi Liang (aged 57), CEO and Non-Executive Director
Mr. Liang, aged 57, holds a Master’s degree and is a senior engineer by trade, has served as deputy manager
of the asset operation department of China National Construction Group, as deputy manager of the planning
department and as manager and director of the corporate department of the China Nonferrous Mining Group
Company. He currently serves as the CEO of China Nonferrous Metals International Mining Company Limited,
and the assistant to the general manager of the China Nonferrous Mining Group Company, and as director of
the Strategic Research Office.
Mr Lixian Yu (aged 53), Chairman and Non-Executive Director
Mr Yu, aged 53, a senior engineer, is the General Manager of China Nonferrous Metals Int’l Mining Co., Ltd.
(“CNMIM”), the Company’s largest shareholder, having joined CNMIM on July 2017. He graduated with a
Bachelor’s degree majoring in mining engineering from Central South University (formerly known as College of
Changsha Nonferrous Metals) in the PRC in June 1990 and has a postgraduate degree in law from CPC Hubei
Provincial Party School
in the PRC. Mr Yu has extensive management and industry experience. From May
2002 to August 2006, Mr Yu held various positions in Daye Nonferrous Metals Co., a large-scale copper
industry enterprise and from August 2006 to July 2017 he served as deputy president of Daye Nonferrous
Metals Group Holdings Co., Ltd.
Mr Hui Zhang (aged 50), Managing Director
Mr. Zhang, aged 50, is the Managing Director of China Nonferrous Metals Int’l Mining Co., Ltd. ("CNMIM"), the
Company's largest shareholder, having joined CNMIM in July 2020. He graduated with a Bachelor's degree
from Kunming University of Science and Technology in the PRC, majoring in a specialty of civil engineering
from September 1988 to July 1992.
As a senior mining engineer by trade, Mr. Zhang has significant mining and management experiences. From
July 1992 to December 1998, he worked as an engineer in Beijing Central Engineering and Research Institute
of Nonferrous Metallurgical Industries; from January 1999 to March 2003, chief engineer of China Nonferrous
Metal Mining (Group) Co., Ltd; from March 2003 to March 2005, Vice General Manager of Department of
Engineering Business of China Nonferrous Metal Mining (Group) Co., Ltd; from March 2005 to November 2007,
Senior Engineer of Technical Department of NFC Africa Mining PLC, which is a listed Africa mining company in
Honkong; from December 2007 to April 2018, Vice Director of Department of supervision and administration of
production safety in China Nonferrous Metal Mining (Group) Co., Ltd; from April 2018 to April 2019, Deputy
Mayor of De Hong City, Yun Nan Province; and from April 2019 to July 2020, Vice Director of Department of
supervision and administration of production safety of China Nonferrous Metal Mining (Group) Co., Ltd.
He currently serves as the Managing Director of China Nonferrous Metals International Mining Company
Limited.
23
CHINA NONFERROUS GOLD LIMITED
Board of Directors
Mr Delin Feng (aged 50), Financial Director
Mr Feng, aged 50, a senior accountant, is the Chief Accountant of CNMIM, having joined the group in January
2019. He was appointed to the Board of China Nonferrous Gold on 21 March 2019. He graduated with a
Bachelor’s degree majoring in law from Wuhan University in the PRC in June 2004 and Bachelor of Science in
Management Accounting from Zhongnan University of Economics and Law in the PRC in June 2007. He
obtained the Master of Business Administration from Tianjin Polytechnic University in the PRC in March 2017.
Mr Feng has extensive accounting and management experience. From December 2008 to January 2010, he
worked as head of Fund Division of Finance Department of Daye Nonferrous Metals Co., Ltd.; from January
2010 to May 2013, Deputy director of Finance Department of Daye Nonferrous Metals Group Holdings Co., Ltd.;
from May 2013 to October 2015, Deputy director of Finance Department of Daye Nonferrous Metals Co., Ltd.;
from October 2015 to February 2018, Director of Finance Department of Daye Nonferrous Metals Group
Holdings Co., Ltd,; and from February 2018 to January 2019, Director of capital operation department of Daye
Nonferrous Metals Group Holdings Co., Ltd.
24
CHINA NONFERROUS GOLD LIMITED
Board of directors
Mr Xiuzhi Shi (aged 54), Non-Executive Director
Mr. Shi, aged 54, holds a PhD in Mining Engineering from the Central South University, where he has been an
Associate Professor and Professor of the School of Resources and Safety Engineering since September 1999.
Mr. Shi has significant industry and academic experience in mining engineering and safety engineering. From
May 1990 to August 1999, Mr. Shi worked as the technical market researcher at the Hebei Coal Science
Research Institute while holding the post of mining engineer at the Gypsum Mine project for the Yunlong Group.
Mr. Shi
is a member of the mining committee of the Nonferrous Metals Society of China, a standardisation
expert for the China Safety Industry Association and a safety culture expert for the State Administration of Work
Safety. Mr. Shi has also hosted or participated in more than 80 scientific research projects in mining and safety
engineering and has published over 160 academic papers in well-known domestic and overseas academic
journals.
Mr Yong Li (aged 45), Non-Executive Director
Mr. Li, aged 45, is an attorney and managing Partner of Sequoia Smith LLP.. He is also the Executive Director
at the Case Law Research Centre and is a supervisor of graduate students at the Law School of the Central
University of Finance and Economics. Mr. Li holds a PhD degree in Law from the Tsinghua University and is a
visiting scholar of Stanford Law School. Mr. Li has significant expertise in academic research in Company Law,
International Law and International
Investment Law. He also has experience in investment, banking and
mergers and acquisitions. Mr. Li has also worked in dispute resolutions in numerous industries including mining,
manufacturing,
infrastructure, construction, chemical engineering and in private equity and venture capital
investment. He is a director at the Beijing Finance Law Institute and the China Securities Law Institute, and is a
member of the China Law Society and the China National Lawyers' Association.
25
CHINA NONFERROUS GOLD LIMITED
Corporate Governance Report
Corporate Governance Report
This report forms part of the Report of the Directors.
The CEO of the Board of Directors of China Nonferrous Gold Ltd has a responsibility to ensure that CNG has a
sound corporate governance policy and an effective Board.
The Board has adopted the Quoted Companies Alliance (QCA) Corporate Governance Code in line with the
London Stock Exchange’s recent changes to the AIM Rules requiring all AIM-quoted companies to adopt and
comply with a recognised corporate governance code. The QCA code identifies ten principles to be followed in
order for companies to deliver growth in long-term shareholder value, encompassing effective management
with regular and timely communication to shareholders. This report follows the structure of those principles and
explains how we have applied the guidance as well as disclosing any areas of non-compliance.
We will provide annual updates on our compliance with the code. The Board considers that the Group complies
with the QCA code so far as is practicable having regard to the size, nature and current stage of development
of the Company.
Principle 1: Establish a strategy and business model which promotes long-term value for shareholders
The principal strategy of the Group in the short term is to develop the Group’s exploration assets and to bring
the Pakrut Gold Project into a higher stage.
CNG is a gold exploration specialist, with operations in Pakrut. Our goal is to deliver long term value for our
shareholders. We aim to do this by identifying good quality.
Consequently we:
•
•
•
use our expertise to identify those areas with economically feasible deposits,
assess the business environment of
the target country and its attractiveness for prospecting and
eventual mining operation,
understand existing interests in a license area in order to ensure we can earn-in to existing interests on
terms favourable to our shareholders.
Principle 2: Seek to understand and meet shareholder needs and expectations
The board is committed to regular shareholder dialogue with both its institutional and retail shareholders. The
principal opportunity for the board to meet shareholders is at the Company’s AGM, to which shareholders are
encouraged to attend.
Charles Chung has been appointed by the board to act as the investor relations manager for CNG. Mr Chung is
the principal contact point for shareholders wishing to discuss matters with the board and any shareholder
views received by Mr Chung are communicated to the full board.
27
CHINA NONFERROUS GOLD LIMITED
Corporate Governance Report
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long term
success
Given the industry in which CNG operates, good relationships are essential with both its suppliers and local
communities. CNG strives to have a strong relationship with those local communities and is committed to
respecting their laws and customs. To further this, CNG as far as possible seeks to employ local workers so as
to ensure that some benefits of the Group’s operations are kept within those local communities. The Group also
has a two-way dialogue with relevant local communities to discuss any concerns which may arise.
Linked to this, the Group retains the services of a local environmental consultant to ensure any actual or
potential
issues impacting on the environment in which the Group operates are brought to the attention of
management as soon as possible so they can be addressed.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the
organisation
We have set out on pages 9-12 of this report the principal risks to the Company’s business and outlook, and
how such risks are minimised.
Risk matters are reviewed in board meetings on a regular basis and are reported against in the Company’s
annual report below.
Principle 5: Maintaining the Board as a well-functioning, balanced team led by the Chair
The board is responsible for running the Company, maintaining all internal control systems and considering all
major business and financial risks. All strategic decisions are decided by the board acting collectively.
The board consists of three non-executive directors and two executive directors. It is considered that Mr Shi
and Mr Li are independent non-executive directors. Board minutes and related papers are circulated to directors
in good time ahead of the relevant board meeting.
The board has established audit, remuneration and nomination committees which meet regularly in accordance
with their terms of reference (http://www.cnfgold.com/corporate-information/corporate-governance).
The three committees are all composed of Shi Xiuzhi, Li Yong and Liang Boyi.
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and
capabilities
The board must have an appropriate balance of sector, financial and public markets skills and experience, as
well as an appropriate balance of personal qualities and capabilities. The board should understand and
challenges its own diversity, including gender balance, as part of its composition. The board should not be
dominated by one person or a group of people. Strong personal bonds can be important but can also divide a
board.
28
CHINA NONFERROUS GOLD LIMITED
Corporate Governance Report
As companies evolve,
the mix of skills and experience required on the board will change, and board
composition will need to evolve to reflect this change.
The Nomination Committee is required to give recommendations to the directors where there are vacancies or
where it is felt that additional directors should be appointed. For new appointments the search for candidates is
conducted, and appointments are made, on merit, against objective criteria and with due regard for the benefits
of diversity on the Board.
Whilst the Company’s largest shareholder, China Nonferrous Metals Int’l Mining Co Ltd, has the right to appoint
directors to the Board, the Nomination Committee will still assess any proposed appointees to ensure that the
board maintains an appropriate balance of skills and experience.
The Board recognizes that it has limited diversity and this will form a part of any future recruitment consideration
if there are any Director resignations or the board concludes that additional Directors are required.
Each Director undertakes a mixture of formal and informal continual professional development as necessary to
ensure that their skills remain current and relevant to the Group.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous
improvement
The board reviews its effectiveness annually and as shown by the changes to the board of directors in 2019 the
board will make changes to its composition when deemed necessary.
Additional non-executives may be considered for appointment to the board to improve the make-up of the
board’s skills. The Company is currently looking for an additional non-executive director with extensive industry
and other relevant experience in order to enhance CNG’s corporate governance structure.
Principle 8: Promote a culture that is based on ethical values and behaviours
The report of the directors sets out CNG’s values including those relating to corporate responsibility,
the
Group’s people, its social impact and the impact upon the environment.
The Board aims to lead by example and do what is in the best interests of the Company. We operate in remote
and under-developed areas and ensure our employees understand their obligations towards the environment
and in respect of their job obligations.
The board seeks to ensure that all of its employees are aware of CNG’s ethical values and this is covered in the
mandatory induction process for new employees.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-
making by the Board
The Company has established a robust governance structure in order to manage internal and external risks.
These are reviewed regularly to ensure they remain suitable for the Company.
29
CHINA NONFERROUS GOLD LIMITED
Corporate Governance Report
Board programme
The Board sets direction for the Company through a formal schedule of matters reserved for its decision. The
Board and its Committees receive appropriate and timely information prior to each meeting; a formal agenda is
produced for each meeting and Board and Committee papers are distributed by the Company Secretary several
days before meetings take place. Any Director may challenge Company proposals and decisions are taken
democratically after discussion. Any Director who feels that any concern remains unresolved after discussion
may ask for that concern to be noted in the minutes of the meeting, which are then circulated to all Directors.
Any specific actions arising from such meetings are agreed by the Board or relevant Committee and are then
followed up by the Company’s management.
Roles of the Board and Chief Executive Officer
The Board is responsible for the long-term success of the Company. There is a formal schedule of matters
reserved to the Board. It is responsible for overall Group strategy; approval of exploration projects; approval of
the annual and interim results; annual budgets; dividend policy; and Board structure. It monitors the exposure to
key business risks. There is a clear division of responsibility at the head of the Company. The Chief Executive
Officer (‘CEO’) is responsible for running the business of the Board and for ensuring appropriate strategic focus
and direction.
The CEO is responsible for proposing the strategic focus to the Board, implementing it once it has been
approved and overseeing the management of the Company. The CEO, together with the Chief Financial Officer
(‘CFO’) and other senior employees, is responsible for establishing and enforcing systems and controls, and
liaison with external advisors. The CEO has responsibility for communicating with shareholders, assisted by the
CFO and other senior employees.
All Directors receive regular and timely information on the Group’s operational and financial performance.
Relevant information is circulated to the Directors in advance of meetings. The business reports monthly on its
headline performance against its agreed budget, and the Board reviews the monthly update on performance
and any significant variances are reviewed at each meeting. Senior executives below Board level attend Board
meetings when deemed appropriate by the CEO, to present business updates.
30
CHINA NONFERROUS GOLD LIMITED
Corporate Governance Report
The table below sets out the attendance statistics for all current Board members through 2020:
Meetings attended
Meetings held during the
year (or since appointment)
Mr Liang Boyi**
Mr Lixian Yu
Mr Zhang Hui*
Mr Delin Feng
Mr Xiuzhi Shi
Mr Yong Li
*Mr Zhang Hui was appointed on 30 July 2020
**Mr Liang Boyi resigned on 25 September 2020
Board committees
6
6
2
9
10
9
6
10
2
10
10
10
The Board is supported by the Audit and Remuneration committees. Each committee has access to such
resources, information and advice as it deems necessary, at the cost of the Company, to enable the committee
to discharge its duties. The Company is looking for an additional non-executive director in part to enhance its
corporate governance structure.
The Audit Committee provides a formal review of the effectiveness of the internal control systems, the Group’s
financial reports and results announcements and the external audit process. The audit committee met four
times during the year. All three members were present at all meetings, being Shi Xiuzhi, Li Yong and Zhang Hui.
The four audit committees were held on January 15, April 27, September 18, and December 20 2020.
The Remuneration Committee provides a formal and transparent review of the remuneration of the Executive
Directors and senior employees and makes recommendations to the Board on individual remuneration
packages. The remuneration committee met three times during the year. All members were present at all
meetings, being Shi Xiuzhi, Li Yong and Zhang Hui. The three remuneration committees were held on March 25,
July 15, and November 20 2020.
Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders.
The Company is committed to open dialogue with both institutional and retail shareholders.The CEO liaises with
CNG’s principal shareholders and relays their views to the wider board.
The Company considers that its annual AGM is an important part of this dialogue and encourages shareholders
to attend.
31
CHINA NONFERROUS GOLD LIMITED
Report of the Independent Auditor
Opinion
We have audited the financial statements of China Nonferrous Gold Limited (the ‘group’) for the year ended 31
December 2020 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement
of Cash Flows and notes to the financial statements, including significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion, the group financial statements:
give a true and fair view of the state of the group’s affairs as at 31 December 2020 and of its loss for the
year then ended; and
have been properly prepared in accordance with IFRSs as adopted by the European Union.
Basis for opinion
in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
We conducted our audit
applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of
the company in
the financial statements section of our report. We are independent of
accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of
accounting in the preparation of
the directors’
assessment of the group’s ability to continue to adopt the going concern basis of accounting included an
analysis of qualitative and quantitative aspects within management’s forecast financial information up to the end
of 2023, as well as obtaining a letter of support from the group’s related party lenders, and reviewing the latest
financial information of this entity.
the financial statements is appropriate. Our evaluation of
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
32
CHINA NONFERROUS GOLD LIMITED
Report of the Independent Auditor
Our application of materiality
The scope of our audit was influenced by our application of materiality. We determined materiality for the
financial statements as a whole to be US$4,478,000 (2019: US$3,500,000) for the group financial statements
using 1% of gross assets as a basis.
We consider gross assets to be the most relevant determinant of the group’s financial position and performance
used by shareholders, with the key financial statement balances being producing mines, other property, plant
and equipment,
the group is dependent on its ability to fund
operations going forward, as well as on the valuation of its assets, which represent to the underlying value of
the group. However, we consider that loss before tax will also be a key indicator of performance to financial
statements users as the group is still
in the early stages of its production cycle and continues to seek to
maximise production and operating efficiencies at the mine.
inventory and cash. The going concern of
Whilst materiality for the financial statements as a whole was set a US$4,478,000 each significant component
of
the group was audited to an overall materiality ranging between US$21,000 and US$2,310,000 with
performance materiality set at 70%. We applied the concept of materiality both in planning and performing our
audit, and in evaluating the effect of misstatement.
Our approach to the audit
In designing our audit we determined materiality, as above, and assessed the risk of material misstatement in
the financial statements. In particular, we looked at areas requiring the directors to make subjective judgements,
for example in respect of significant accounting estimates including impairment of producing mines, and
considered future events that are inherently uncertain. We also addressed the risk of management override of
internal controls, including evaluating whether there was evidence of bias by the directors that represents a risk
of material misstatement due to fraud.
A full scope audit was performed on the complete financial information of the group’s operating components
located in Tajikistan and United Kingdom, with the group’s key accounting function for all being based in China
with a local function in Tajikistan.
The group’s Tajik operations are audited by a non PKF network firm. The audit team discussed significant
events occurring during the year and post year-end period with the component auditor and performed a review
of the component auditor’s working papers, including review of planning and completion stage group reporting.
The group audit team are responsible for the scope and direction of the audit process. All other work was
performed remotely by PKF Littlejohn LLP.
33
CHINA NONFERROUS GOLD LIMITED
Report of the Independent Auditor
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of
the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How our scope addressed this matter
Valuation of Producing Mines – Pakrut
LLC (Note 12)
Producing mines within PPE is the most
material balance within the financial
statements and represents the key
source from which the group generates
income.
of
Producing mines, as at 31 December
2020, is $362m (2019: $390m).
carrying
value
The
There is the risk that the value of the
mine is impaired.
Our work in this area included:
A review of management’s impairment assessment,
including consideration of any net present value
calculations used, providing challenge as to the source
of the inputs and obtaining support where possible;
Ensuring valid mining licenses are held;
Considering any potential impairment indicators
through discussion with management and the
component auditor, who has visited the mine site as
part of their audit, as well as review of announcements
to the market and Board minutes for evidence of
impairment; and
A review of management’s assessment of the impact
of COVID-19 on operations at the mine site as well as
external macroeconomic factors, and consideration of
whether there is evidence to suggest the mine asset
should be impaired.
We noted that the lifespan of the mine used in the depletion
calculation is 18 years which is 8 years more than the licence
currently held by CNG permits. Based on the information
available to management there is currently no reason to expect
the licence extension will not be granted however if it were not
then there is the risk that the key inputs into this calculation
would need to be amended. This could lead to a material
impact on the related charge within the financial statements
and therefore on the carrying value of Producing mines.
34
CHINA NONFERROUS GOLD LIMITED
Report of the Independent Auditor
Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information contained
within the annual report. Our opinion on the financial statements does not cover the other information and,
to the extent otherwise explicitly stated in our report, we do not express any form of assurance
except
conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. 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
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’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 company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the 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. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with ISAs (UK) 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 financial statements.
Irregularities,
including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities,
to which our procedures are capable of detecting irregularities,
including fraud is detailed below:
including fraud. The extent
We obtained an understanding of the group and the sector in which it operates to identify laws and
regulations that could reasonably be expected to have a direct effect on the financial statements. We
obtained our understanding in this regard through discussions with management and the internal legal
team in Pakrut. We also selected a specific audit team based on experience with auditing entities within
this industry facing similar audit and business risks.
We determined the principal
laws and regulations relevant to the group and parent company in this
regard to be those arising from:
o AIM Rules
o
o
Local industry regulations in Tajikistan
Local tax and employment law in China and Tajikistan
We designed our audit procedures to ensure the audit
team considered whether there were any
indications of non-compliance by the company with those laws and regulations. These procedures
included, but were not limited to:
35
CHINA NONFERROUS GOLD LIMITED
Report of the Independent Auditor
enquiries of management;
o
review of Board minutes;
o
review of legal ledger accounts;
o
o A review of RNS announcements;
o A review of component auditor’s work surrounding local laws and regulations in Tajikistan.
We also identified the risks of material misstatement of the financial statements due to fraud. Aside
from the non-rebuttable presumption of a risk of fraud arising from management override of controls, we
did not identify any significant fraud risks.
As in all of our audits, we addressed the risk of fraud arising from management override of controls by
performing audit procedures which included, but were not limited to: the testing of journals, reviewing
accounting estimates for evidence of bias; and evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of business.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including
those leading to a material misstatement in the financial statements or non-compliance with regulation. This
risk increases the more that compliance with a law or regulation is removed from the events and transactions
reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.
The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves
intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with our engagement letter
dated 10 May 2021. Our audit work has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the
company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Joseph Archer (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
Date: 30 June 2021
15 Westferry Circus
Canary Wharf
London E14 4HD
36
CHINA NONFERROUS GOLD LIMITED
Consolidated Statement of Comprehensive Income
Revenue
Cost of sales
Gross Profit
Other operating income
Administrative expenses
Loss on foreign exchange
Other operating expenses
Operating Profit/(Loss)
Finance income
Finance costs
Loss before Income Tax
Income tax
2020
2019
US$000
US$000
3
64,516
49,157
(35,297)
(32,842)
29,219
1
16,315
116
6
(17,827)
(16,337)
(1,076)
(46)
10,271
196
(905)
(136)
(947)
270
(15,999)
(20,796)
(5,532)
(21,473)
(824)
(508)
8
8
7
Loss for the year attributable to owners of the parent
(6,356)
(21,981)
Total comprehensive income attributable to owners of
the parent for the year
(6,356)
(21,981)
Basic and Diluted Earnings per share attributable to
owners of the parent (expressed in cents per share)
9
(1.66)
(5.75)
All of the activities of the Group are classed as continuing.
The accounting policies and notes on pages 42 to 94 form part of these Financial Statements.
37
CHINA NONFERROUS GOLD LIMITED
Consolidated Statement of Financial Position
As at
As at
31 December 2020
31 December 2019
Note
US$000
US$000
Non-Current Assets
Property, plant and equipment
12
373,201
402,548
Total Non-Current Assets
373,201
402,548
Current Assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total Current Assets
Non-Current Liabilities
Borrowings
Provisions for other liabilities and charges
Total Non-Current Liabilities
Current Liabilities
Borrowings
Trade and other payables
15
16
17
19
17
18
15,911
5,649
27,196
48,756
16,856
4,766
11,120
32,743
(19,822)
(103,586)
(995)
(913)
(20,817)
(104,499)
(368,919)
(267,527)
(52,363)
(77,050)
Total Current Liabilities
(421,282)
(344,577)
Net Current Liabilities
(372,526)
(311,843)
Net Liabilities
(20,143)
(13,785)
38
CHINA NONFERROUS GOLD LIMITED
Consolidated Statement of Changes in Equity
Year ended 31 December 2020
Attributable to owners of the parent
Share
capital
Share
Other
Retained
premium
reserve
earnings
Total
US$000
US$000
US$000
US$000
US$000
Balance at 1 January 2019
38
65,901
10,175
(67,918)
8,196
Loss for the year
Total comprehensive income for the
year
Total transactions with owners of the
parent, recognised directly in equity
Balance at 31 December 2019
Balance at 1 January 2020
Loss for the year
Total comprehensive income for the
year
Total transactions with owners of the
parent, recognised directly in equity
-
-
-
38
38
-
-
-
-
-
-
-
-
-
(21,981)
(21,981)
(21,981)
(21,981)
-
-
65,901
10,175
(89,899)
(13,785)
65,901
10,175
(89,899)
(13,785)
-
-
-
-
-
-
(6,356)
(6,356)
(6,356)
(6,356)
-
-
Balance at 31 December 2020
38
65,901
10,175
(96,255)
(20,141)
Description and purpose of reserves:
a)
b)
c)
d)
Share capital: share capital consists of amounts subscribed for share capital at nominal value.
Share premium: share premium consists of amounts subscribed for share capital in excess of nominal value.
Other reserve: other reserve comprises the capital re-organisation reserve under the scheme of arrangement.
Retained earnings: cumulative net gains and losses recognised in the consolidated statement of comprehensive
income. Also included in this figure is the share options and warrants reserve established in 2013 as part of the
capital restructuring program. This reserve holds a $Nil balance and has been recycled in full through retained
earnings as all options and warrants have expired (see Note 22).
The accounting policies and notes on pages 42 to 94 form part of these Financial Statements.
40
CHINA NONFERROUS GOLD LIMITED
Consolidated Statement of Cash Flows
Year ended 31 December 2020
Cash flows from Operating Activities (Note 23)
Net cash generated from Operating Activities
Cash flows from Investing Activities
31 December
31 December
2020
2019
US$000
US$000
17,137
17,137
3,624
3,624
Purchase of property, plant and equipment
(1,942)
(5,842)
Interest received
Net cash used in Investing Activities
196
270
(1,746)
(5,572)
Cash flows from Financing Activities
Proceeds from borrowings (net of capitalised issue costs)
14,550
20,000
Repayment of borrowings
Interest paid
(10,000)
(10,000)
(3,866)
(5,295)
Net cash generated from Financing Activities
684
4,705
Net increase in Cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
16,075
11,120
27,196
2,757
8,363
11,120
Major non-cash transactions
During the year, the Company settled historic contractor liabilities, resulting in a non-cash adjustment of
$20,131k.
The accounting policies and notes on pages 42 to 94 form part of these Financial Statements.
41
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements
Accounting Policies
Basis of Preparation
The principal accounting policies applied in the preparation of
these consolidated financial
statements are set out below. These policies have been consistently applied to all the years
presented, unless otherwise stated. The consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations
Committee (IFRIC) as adopted by the European Union. The consolidated financial statements
have been prepared on a historical cost basis.
The preparation of Financial Statements in conformity with IFRSs requires the use of certain
critical accounting estimates.
It also requires management
to exercise its judgment
in the
process of applying the Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the
Consolidated Financial Statements are disclosed in Note 2.
The functional and presentational currency of the Group is US dollars and accordingly the
amounts in the Financial Statements are denominated in that currency.
General Information
China Nonferrous Gold Limited was incorporated in the Cayman Islands on 24 April 2013 in
order to effect group re-organisation by means of a scheme of arrangement (“the Scheme”).
Under the Scheme dated 30 July 2013, the shareholders of the existing ordinary shares in
Kryso Resources Limited (formerly Kryso Resources Plc) had their shares cancelled in
consideration for which they received ordinary shares in China Nonferrous Gold Limited on a
one-for-one basis. The ordinary shares of Kryso Resources Limited were de-listed and the
issued shares of China Nonferrous Gold Limited admitted to trading on AIM.
Changes in Accounting Policies and Disclosures
a) New and amended standards adopted by the Group
The International Accounting Standards Board (IASB)
issued various amendments and
revisions to IFRS and IFRIC interpretations. The amendments and revisions were effective for
the first time for the financial year beginning 1 January 2020. Their adoption has not had any
material impact on the disclosures or on the amounts reported in these financial statements:
The following standards were adopted by the Group during the year:
Standards/Interpretations
Application
IAS 1 & IAS 8 amendments
IFRS 3 amendments
Definition of Material
Business Combinations
42
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
Amendments to IFRS 9, IAS 39 and IFRS 17
Interest Rate Benchmark Reform
N/A
Amendments to References to the Conceptual
Framework in IFRS Standards
b) New and amended standards and interpretations issued but not yet effective for the
financial year beginning 1 January 2020 and not early adopted
Standards /interpretations
Application
IAS 1 amendments
IFRS 3 amendments
IAS 16 amendments
IAS 37 amendments
N/A
Presentation of Financial Statements: Classification of Liabilities
as Current or Non-Current and Classification of Liabilities as
Current or Non-current – Deferral of Effective Date: Effective 1
January 2023
Business Combinations – Reference to the Conceptual
Framework: Effective 1 January 2022*
Property, Plant and Equipment: Effective 1 January 2022*
Provisions, Contingent Liabilities and Contingent Assets: Effective
1 January 2022*
Annual Improvements to IFRS Standards 2018-2020 Cycle:
Effective 1 January 2022*
*Subject to EU endorsement
These Standards will have no material impact on the Group.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be
expected to have a material impact on the Group.
Basis of Consolidation
The consolidated Financial Statements comprise the financial statements of the Group as at 31
December 2020. Subsidiaries are all entities over which the Group has control which is where
the Group is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over the entity. These subsidiaries
are adjusted, where appropriate, to conform to Group accounting policies. All intra-group assets
and liabilities, equity, income, expenses and cash flows are eliminated on consolidation. Where
necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s
accounting policies.
Subsidiaries are consolidated from the date on which control is transferred to the Group and
continue to be consolidated until the date when such control ceases.
43
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
Share Capital
Shares are classified as equity when there is no obligation to transfer cash or other assets.
Incremental costs attributable to the issue of equity instruments are shown in equity as a
deduction from the proceeds.
Financial Instruments – Initial Recognition and Subsequent Measurement
Classification
The Group classifies its financial assets into only one category, being those to be measured at
amortised cost.
The classification is dependent on the Group’s business model for managing the financial
assets and the contractual terms of the cash flows.
Recognition
Purchases and sales of financial assets are recognised on trade date (that is, the date on which
the Group commits to purchase or sell the asset). Financial assets are de-recognised when the
rights to receive cash flows from the financial assets have expired or have been transferred and
the Group has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus transaction costs
that are directly attributable to the acquisition of the financial asset.
Debt instruments
Amortised cost: Assets that are held for collection of contractual cash flows, where those cash
flows represent solely payments of principal and interest, are measured at amortised cost.
Interest income from these financial assets is included in finance income using the effective
interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or
loss and presented in other gains/(losses) together with foreign exchange gains and losses.
Impairment losses are presented as a separate line item in the statement of profit or loss.
Impairment
The Group assesses, on a forward-looking basis, the expected credit losses associated with its
debt instruments carried at amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which
requires expected lifetime losses to be recognised from initial recognition of the receivables.
44
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
Intangible Assets – Exploration and Evaluation Expenditure
Exploration and evaluation activity involves the search for mineral resources, the determination
of technical feasibility and the assessment of commercial viability of an identified resource.
Research expenditure is written off in the year in which it is incurred. The Group recognises
expenditure as exploration and evaluation assets when it determines that the legal rights to said
assets have been obtained. When a decision is taken that a mining property becomes viable for
commercial production, all
further pre-production expenditure is capitalized. Expenditure
included in the initial measurement of exploration and evaluation assets and which is classified
as intangible assets, relates to the acquisition of rights to undertake topographical, geological,
geochemical and geophysical studies, exploratory drilling,
trenching, sampling and other
activities to evaluate the technical feasibility and commercial viability of extracting a mineral
source.
Mines under construction
Expenditure is transferred from “Exploration and evaluation” assets to mining rights within
“Mines under construction” once the work completed to date supports the future development of
the property and such development
receives the requisite approvals. All subsequent
expenditure on technically and commercially feasible sites is capitalised within mining rights.
All expenditure on the construction,
installation or completion of
infrastructure facilities is
capitalised as construction in progress within “Mines under construction”. Mines under
construction are stated at cost. The initial cost comprises transferred exploration and evaluation
assets, construction costs, infrastructure facilities, any costs directly attributable to bringing the
asset into operation, the initial estimate of the rehabilitation obligation and, for qualifying assets,
borrowing costs. Costs are capitalised and categorised between mining rights and construction
in progress respectively according to whether they are intangible or tangible in nature.
Once the mine is fully operational and normal production levels commence, all assets included
in “Mines under construction” are transferred into “Property, Plant and Equipment” or “Producing
mines”. It is at this point that depreciation/amortisation commences over its useful economic life.
In 2019,
the mine entered full production and therefore depletion/depreciation/amortisation
commenced and ‘Mines under construction’ balances were transferred into Property, Plant and
Equipment.
Impairment of non-financial assets
In accordance with its accounting policies and processes, each asset or cash generating unit
(CGU) is evaluated annually at 31 December, to determine whether there are any indications of
impairment. If any such indications of impairment exist, a formal estimate of the recoverable
amount is performed.
45
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
If an indication exists, or when annual impairment testing for an asset is required, the Group
estimates the asset’s or CGU’s recoverable amount. The recoverable amount is the higher of an
asset’s or CGU’s fair value less costs of disposal (FVLCD) and its value in use. Where the
carrying amount of an asset or CGU exceeds its recoverable amount,
the asset/CGU is
considered impaired and is written down to its recoverable amount. The Group bases its
impairment calculation on detailed budgets and forecasts based on the life-of-mine plans.
The assessment is carried out by allocating assets including exploration and evaluation and
producing mines to CGUs which are based on specific projects and geographical areas. Where
exploration for and evaluation of mineral resources in CGUs does not lead to the discovery of
commercially viable quantities of mineral resources and the Group has decided to discontinue
such activities, the associated expenditure will be written off to profit or loss. Exploration and
evaluation assets are also impaired when the Group’s right to explore in an area has expired.
The determination of FVLCD for each CGU are considered to be Level 3 fair value
measurements, as they are derived from valuation techniques that include inputs that are not
based on observable market data. The Group considers the inputs and the valuation approach
to be consistent with the approach taken by market participants.
Property, plant and equipment
(i)
Initial recognition
Upon completion of
the mine construction phase,
the assets held within ‘Mines under
construction’ are transferred into ‘Property, plant and equipment’ as ‘Producing Mines’. Items of
property, plant and equipment and producing mines are stated at cost,
less accumulated
depreciation and accumulated impairment losses.
The initial cost of an asset comprises its purchase price or construction cost, any costs directly
attributable to bringing the asset into operation, the initial estimate of the rehabilitation obligation,
and, for qualifying assets (where relevant), borrowing costs. The purchase price or construction
cost is the aggregate amount paid and the fair value of any other consideration given to acquire
the asset.
Producing mines also consist of the value attributable to mineral reserves and the portion of
mineral resources considered to be probable of economic extraction at the time of an acquisition.
When a mine construction project moves into the production phase, the capitalisation of certain
mine construction costs ceases, and costs are either regarded as part of the cost of inventory or
expensed, except for costs which qualify for capitalisation relating to mining asset additions,
improvements or new developments, underground mine development or mineable reserve
development.
46
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
(ii)
Depreciation/amortisation
Accumulated mine development costs or ‘Producing mines’ are depreciated/amortised on a unit
of production (UOP) basis over the economically recoverable reserves of the mine concerned.
The unit of account for run-of-mine (ROM) costs is tonnes of ore, whereas the unit of account
for post-ROM costs is recoverable ounces of gold. Rights and concessions are depleted on the
UOP basis over the economically recoverable reserves of the relevant area. The UOP rate
calculation for the depreciation/amortisation of mine development costs takes into account
expenditures incurred to date,
together with sanctioned future development expenditure.
Economically recoverable reserves include proven and probable reserves.
The estimated fair value attributable to the mineral reserves and the portion of mineral
resources considered to be probable of economic extraction at the time of the acquisition is
amortised on a UOP basis, whereby the denominator is the proven and probable reserves.
Depreciation on other plant and equipment is provided to write off the cost of an asset, less its
estimated residual value, evenly over the expected useful economic life of that asset as follows:
Plant and Machinery
Motor Vehicles
Office Furniture and Equipment
– 8-10 years
– 5-10 years
– 3-5 years
Depreciation on assets used in exploration and evaluation activities and mines under
construction is capitalised within non-current assets.
Assets under construction relate to ongoing construction work at the mine site which does not
form part of the mine asset, for example office and accommodation buildings. Such assets are
not depreciated until they are ready for use, at which time they are transferred into plant and
equipment and depreciation commences.
An item of property, plant and equipment and any significant part
initially recognised is
derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future
economic benefits are expected from its use or disposal. Any gain or
loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds and
the carrying amount of
the asset)
is included in statement of profit or
loss and other
comprehensive income when the asset is derecognised.
The asset’s residual values, useful lives and methods of depreciation/amortisation are reviewed
at each reporting period and adjusted prospectively, if appropriate.
47
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset
that necessarily takes a substantial period of time to get ready for its intended use (a qualifying
asset) are capitalised as part of the cost of the respective asset until the asset is substantially
ready for its intended use after which they are expensed. Borrowing costs consist of interest and
other costs that an entity incurs in connection with the borrowing of funds.
Where funds are borrowed specifically to finance a project, the amount capitalised represents
the actual borrowing costs incurred under the effective interest method. The effective interest
method is a method of calculating the amortised cost of a financial
liability and of allocating
borrowing costs over the relevant period.
Inventories
Inventories, comprising materials, spares, mining and processing equipment, explosives, diesel
fuel and supplies, are valued at cost, after making due allowance for obsolete and slow moving
items. Cost is determined using the weighted average cost method.
Inventories comprising gold are valued at the lower of weighted average cost and net realisable
value. Cost includes direct materials, direct labour costs and production overheads, including
depreciation and depletion of relevant property, plant and equipment.
Foreign Currencies
Items included in the Financial Statements of each of the Group’s entities are measured using
the currency of the primary economic environment in which the entity operates (‘the functional
currency’), being US Dollar. The Group Financial Statements are presented in US Dollars,
which is the Group’s functional and presentation currency.
In preparing the financial statements of the individual companies, transactions in currencies
other than the entity’s functional currency (foreign currencies) are initially recorded in the
functional currency at the exchange rate ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at
the Statement of Financial Position date. Exchange differences arising on the settlement of
monetary items, and on the translation of monetary items at the Statement of Financial Position
date, are included in the Statement of Comprehensive Income for the period.
Current Income Tax and Deferred Taxation
Current income tax assets and liabilities for the current period are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws
48
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
used to compute the amount are those that are enacted or substantively enacted, at
the
reporting date, in the countries where the Group operates.
Deferred tax is accounted for using the liability method in respect of temporary differences
arising from differences between the carrying amount of assets and liabilities in the Financial
Statements and the corresponding tax bases used in the computation of taxable profit or loss. In
principle, deferred tax liabilities are recognised for all
taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.
The Group has losses to be carried forward on which no deferred tax asset is recognised due to
the uncertainty as to the timing of profit.
Share Based Payments
The Group operates a share option scheme to encourage participation by Directors and
employees in the Group’s performance and also issues warrants to third party service providers
and investors. The fair value of the services received in exchange for the grant of options and
warrants is recognised as an expense over the vesting period. Where the fair value of the
services received cannot be determined, the total amount to be expensed is determined by
reference to the fair value of any option and warrant granted, excluding non-market vesting
conditions. Non-market vesting conditions are included in assumptions about the number of
options that are expected to vest. At each Statement of Financial Position date, the Group
revises its estimate of options that are expected to vest.
The proceeds received net of any directly attributable transaction costs are credited to share
capital (nominal value) and share premium when the options and warrants are exercised.
Rehabilitation and Environmental Provision
The Group recognises a rehabilitation and environmental provision where it has a legal and
constructive obligation as a result of past events, and it is probable that an outflow of resources
will be required to settle the obligation, and a reliable estimate of the amount of the obligation
can be made. The nature of these restoration activities includes dismantling and removing
structures;
rehabilitating the mine and tailings dam; dismantling operating facilities; and
restoring, reclaiming and revegetating affected areas.
On initial recognition, the present value of the estimated costs is capitalised by increasing the
carrying amount of the related mining asset to the extent that it was incurred as a result of the
development or construction of the mine. Any changes to or additional rehabilitation costs are
recognised as additions or charges to the corresponding asset and rehabilitation liability when
they occur.
49
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
Over time, the discounted liability is increased for the change in present value based on the
discount rate that reflects current market assessments and the risks specific to the liability. The
annual unwinding of the discount is recognized in the statement of comprehensive income as
part of finance costs.
The Group does not recognise a deferred tax asset in respect of the temporary difference on the
rehabilitation liability nor the corresponding deferred tax liability in respect of the temporary
difference on the rehabilitation asset.
Going Concern
The Group’s activities, together with the factors likely to affect its future development,
performance and position are set out in the Chief Executive Officer’s Statement and Report of
the Directors. These areas also include the Group’s objectives, policies and procedures for
managing its business risk objectives, which includes its exposure to economic, political and
environmental and other operational risks.
The Directors of the Group have prepared cash flow forecasts which reflect the Group’s forecast
production, operational and overhead costs, cash inflows and loan repayments. In making these
assessments the Directors have considered all available information available to date including
actual revenues generated, costs incurred, golds prices, productions volumes, financing costs
as well as loan repayments.
As at 31 May 2021 the Group had approximately US$14.98 million of cash and cash
equivalents and US$349 million of debt (excluding accrued interest to the date of maturity, the
terms of which are disclosed in the notes) comprising the following:
-
-
-
-
-
CNMC Trade loan of US$146.5 million, repayable on 20 December 2022, excluding
accrued interest to 20 December 2022.
CNMC International Capitals Company ⅡLimited loan of US$70 million, repayable on
8 December 2022, excluding accrued interest to 8 December 2022.
CCB Macau drawn down loan facility of US$65 million, excluding interest, the maturity
date is 29 June 2021. This was refinanced in June 2021 as disclosed in Note 27.
China CITIC Bank Zhuhai branch drawn down loan facility of US$20 million, excluding
interest, the maturity date is 26 January 2022.
China CITIC Bank Zhuhai branch drawn down loan facility of US$14.55 million,
excluding interest, the maturity date is 8 March 2022.
The Board has reviewed the Group's cash flow forecast for the period to 30 June 2022 and
beyond. The forecasts show that the CNMC Trade loan of US$146.5 million will need to be
extended or refinanced before 20 December 2022, the $70 million loan will need to be extended
or refinanced by 8 December 2022, and the Group forecasts it will not require further funding to
50
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
meet operational commitments and overheads. The forecasts also show that if COVID 19 had
an adverse impact on the Pakrut mine operations,the Group would require further funding if the
Pakrut mine was temporarily suspended for more than two months.
The Directors have obtained a letter confirming that the ultimate parent will continue to support
the Group and therefore the Directors believe that funding and financial support will be
forthcoming if required although this is not guaranteed. The Directors have also ensured that the
ultimate parent has sufficient funds to provide such support.
Taking into account the above measures and after assessing the Group’s current and future
cash flow positions, the directors of the Company are satisfied that the Group will be able to
meet their financial obligations when they fall due. Accordingly, the directors of the Company
are of the opinion that it is appropriate to prepare the consolidated financial statements on a
going concern basis.
The Company is working closely on operational efficiencies across the board to improve
profitability and the Directors consider that these initiatives, along with points mentioned above
will ensure that mine develops as intended..
Segmental Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision makers. The chief operating decision maker (“CODM”), who is
responsible for allocating resources and assessing performance of the operating segments, has
been identified as the executive board of Directors.
Revenue
IFRS 15 establishes a comprehensive framework for determining whether, how much and when
revenue is recognised. It establishes a five-step model to accounts for revenue arising from
contracts with customers. These steps are as follows: identification of the customer contract;
identification of the contract performance obligations; determination of the transaction price;
allocation of the transaction price to the performance obligations; and revenue recognition as
performance obligations are satisfied.
Under
IFRS 15,
revenue is recognised when performance obligations are met. This is
considered to be the point of delivery of goods to the customer. Revenue is measured at the fair
value of consideration received or receivable from sales of gold to an end user (based on the
opening market price in London – http://www.lbma.org.uk/precious-metal-prices), net of buyer’s
discount, treatment charges, freight costs and value added tax.
Other income
51
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
In 2019 US$0.12 million has been generated, which was derived from Pakrut’s sale of surplus
stock materials. No such income has been generated in 2020.
1.
Financial Risk Management
The Group’s operations expose it to a number of financial risks; principally the availability
of adequate funding, movements in interest rates and fluctuations in foreign currency
exchange rates. Continuous monitoring of these risks ensures that the Group is protected
against any adverse effects of such risks so far as it is possible and foreseeable.
Market Risk
a) Cash Flow and Interest Rate Risk
The continued operation of the Group is dependent on the ability to raise sufficient working
capital until the mine produces sufficient quantities of gold to be self-sufficient. The Group
currently finances itself through the issue of equity share capital and the secured loan
facilities from CNMIM, CNMC and CCB. Management monitors its cash and future funding
requirements through the use of cash flow forecasts. All cash not immediately required for
working capital purposes is held on short term deposit. The Group’s exposure to interest
rate fluctuations on cash balances is restricted to the rate earned on these short-term
deposits. The potential
impact of such fluctuations is not considered material
to the
financial statements.
The Group’s interest rate risk arises from long-term borrowings. The Group has both
variable and fixed rate borrowings. Borrowings issued at variable rates expose the Group
to cash flow interest rate risk which is partially offset by cash invested at variable rates.
The annual
fixed interest
rate for
the CNMIM loan is 9% for all USD and RMB
denominated tranches. All payments of principal and interest
in respect of
the RMB
denominated tranche are repayable at a fixed RMB: USD exchange rate. The interest rate
on the CCB loan of US$65 million is 2.10% per annum over the quarterly LIBOR rate and
the loan is repayable in US$. The interest rate on the new CCB loan of US$20 million is
1.20% per annum over the quarterly LIBOR rate and the loan is repayable in US$. The
interest rate on the CNMC loan of US$90 million taken out in 2018 is fixed at 5.8% per
annum, calculated and paid on a half yearly basis. The interest rate on CNMCTC loans
totaling $146.5 million is 3.70% per annum over the six month LIBOR rate and the loan is
repayable in US$.
52
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
1.
Financial Risk Management (continued)
At 31 December 2020,
the potential
impact of
fluctuations in interest
rates is not
considered material to the financial statements.
b)
Foreign Currency Risk
The Group operates internationally and is exposed to foreign exchange risk arising from
currency exposures. Currency risk is the risk that the fair value or future cash flows of a
financial
instrument will
fluctuate because of changes in foreign exchange rates. The
Group has cash assets denominated in UK Sterling, United States Dollars, Tajik Somoni
and PRC Renminbi and incurs liabilities for its working capital expenditure in all of these
denominations. Payments are made in all of these denominations at the pre-agreed price
and converted (if necessary) as soon as payment needs to occur. Currency conversions
and provisions for expenditure are only made as soon as debts are due and payable. The
Group is therefore exposed to currency risk in so far as its liabilities are incurred in UK
Sterling, PRC Renminbi and Tajik Somoni, and fluctuations occur due to changes in the
exchange rates against the functional and presentational currency of US Dollar. The table
below details the split of the cash held as at 31 December 2020 between the various
currencies.
Somoni
GBP Sterling
US Dollar
Renminbi
Total US$000
5,984
33
13,767
7,411
27,196
Due to the different nature of assets and liabilities, changes in asset value caused by
exchange rate changes have different ways of affecting a Company's free cash flow.
Therefore, it must be considered separately when evaluating the value of an enterprise.
The first is the monetary items in the corporate balance sheet. Typical monetary items
include monetary funds,
loans, accounts receivable and accounts payable. When the
exchange rate changes,
the above-mentioned assets or
liabilities of
the enterprise
accounted in foreign currencies will increase or depreciate accordingly. For example, in
the context of
the depreciation of
the Renminbi,
the foreign currency deposits
(Somoni/USD) held by enterprises will appreciate, which in itself has a substantial impact
on the present value of cash. The foreign currency-settled bonds or other debts issued by
companies can be repaid at a lower RMB cost, which can save companies more funds
that can be used for free distribution, thereby promoting the enhancement of corporate
value.
53
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
1.
Financial Risk Management (continued)
During 2020,
the Group’s principal
revenue, costs, assets and liabilities,
including
intercompany loans were denominated in USD. The Group manages foreign currency risk
by matching receipts and payments and monitoring movements in exchange rates. The
Group does not currently hedge its exposure to foreign currencies and recognises the
profits and losses resulting from currency fluctuations as and when they arise. At the year
end the Group did not have material exposure to foreign exchange risk relating to its non-
US$ denominated bank deposits and as such this not disclosed. The year-end exchange
rates used in the preparation of the financial statements for 2020 and 2019 were as
follows:
Somoni to USD
GBP to USD
Renminbi to USD
31 December 2020
11.30
31 December 2019
9.6872
1.3625
1.31162
6.5250
6.9762
Liquidity Risk and Credit Risk
The continued operation of the Group is dependent on the ability to raise sufficient working
capital. As noted above, the Group currently finances itself through the issue of equity and
borrowings from CNMIM, CNMC and CCB. Management monitors its cash and future
funding requirements through the use of cash flow forecasts. The Group enters into capital
commitments to fund operations, and any surplus cash not
immediately required for
working capital purposes is held on short term deposit.
54
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
1.
Financial Risk Management (continued)
The table below summarises the maturity profile of the Group’s financial liabilities based
on contractual undiscounted payments.
Between
Less than
1 and 2
1 Year
Years
Between
2 and 5
Over
Carrying
Years
5 Years
Total
amount
US$000
US$000
US$000
US$000
US$000
US$000
Year ended
31 December 2020
Interest-bearing
borrowings
368,919
19,822
Trade and other
payables
52,363
Provisions for other
liabilities
-
-
-
421,453
19,822
-
-
-
-
-
-
388,741
388,741
52,363
52,363
2,481
2,481
995
2,481
443,585
442,099
55
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
1.
Financial Risk Management (continued)
Year ended
31 December 2019
Interest-bearing
borrowings
267,527
103,586
Trade and other
payables
77,050
Provisions for other
liabilities
-
-
-
344,577
103,586
-
-
-
-
-
-
371,113
371,113
77,050
77,050
2,481
2,481
913
2,481
450,644
449,076
The Group holds bank accounts with banks in the UK, PRC and Tajikistan with the
following credit ratings:
Credit rating
A
No independent credit rating available
2020
2019
US$000
US$000
21,212
5,314
5,984
5,806
27,196
11,120
If a bank has no credit rating,
the Group assesses the credit quality through local
knowledge and past experience in the particular jurisdiction.
56
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
1.
Financial Risk Management (continued)
Capital Risk Management
The Group consider equity to be their capital. The Group’s objective when managing their
capital
is to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders and to enable the Group to continue its exploration,
evaluation and mine construction. The Group holds debt in the form of both shareholder
and external loans and defines capital based on the total equity of the Company. Except
for the secured loan facilities from CNMIM, CNMC and CCB, the Group’s current policy for
raising capital
is through equity issues and debt financing. The Group is not currently
required to monitor its gearing ratio and is not exposed to any externally imposed capital
requirements.
2.
Critical Accounting Estimates, Assumptions and Judgments
The estimates and assumptions that have a significant
risk of causing a material
adjustment to the carrying amount of assets and liabilities are set out below. Estimates
and assumptions are continually evaluated and are based on management’s experience
and other
factors,
including expectations of
future events that are believed to be
reasonable under the circumstances. Uncertainty about these assumptions and estimates
could result in outcomes that require a material adjustment to the carrying amount of
assets and liabilities affected in future periods.
The Group has identified the following areas where significant estimates, assumptions and
judgments are required. The most significant judgment for the Group is the assumption
that exploration and development at its sites will ultimately lead to a commercial mining
operation. Failure to do so could lead to impairment of the mine.
Estimated impairment of Producing mines (Note 12)
The Group tests annually whether exploration, evaluation and licensing assets and
producing mines have suffered any impairment. The recoverable amounts of the cash
generating units (“CGUs”) have been determined based on value in use calculations which
require the use of estimates and assumptions such as long-term commodity prices, gold
recovery rates, discount rates, operating costs and therefore expected margins, future
capital requirements and mineral resource estimates (see below). These estimates and
assumptions are subject to risk and uncertainty and therefore there is a possibility that
changes in circumstances will impact the recoverable amount. Management has assessed
its CGUs as being individual exploration and mine sites, which is the lowest level for which
cash inflows are independent of those of other assets or CGUs.
57
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
2.
Critical Accounting Estimates, Assumptions and Judgments (continued)
In assessing the carrying amounts of its exploration, evaluation and licensing assets and
producing mines at Pakrut,
the Directors have used an independently prepared and
Director approved bankable feasibility study (http://www.cnfgold.com/projects/pakrut-gold-
project). The period used in management’s assessment is the anticipated life of the mine
to the expiration of the license in 2030 with revenues being generated from full production
from January 2019.
The calculation assumes a mining capacity of 2,000 tonnes of ore daily increasing to 4,000
tonnes per day. Estimated production volumes are based on detailed life-of-mine plans
and take into account development plans for the mines agreed by management as part of
the long-term planning process. Production volumes are dependent on a number of
variables, such as:
the recoverable quantities;
the production profile;
the cost of
the
development of the infrastructure necessary to extract the reserves; the production costs;
the contractual duration of mining rights; and the selling price of the commodities extracted.
Gold revenues have been estimated over that period at a price of US$1,600 based on
management’s estimates, which are derived from forward price curves and long-term
views of global supply and demand, building on past experience of the industry and
consistent with external sources.
The total cost per ounce is estimated to be around US$780 with a gross margin of circa
60%. Royalties have been calculated at 6% of sales revenues and corporate income tax at
13%, according to the relevant laws in Tajikistan. A discount rate of 10% has been utilised.
The calculations have been tested for sensitivity to changes in the key assumptions. The
most sensitive inputs in the calculation of the value in use are operating and direct costs,
the gold price, and the discount rate. An impairment to the mine value would occur if,
compared to the base case scenario, the discount rate were to increase to 14%, gold
prices fell by 9%, or direct costs were to increase by 27%.
58
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
2.
Critical Accounting Estimates, Assumptions and Judgments (continued)
Approval of Pakrut reserves by Tajik Department of Geology
In November 2011, the Government of the Republic of Tajikistan issued the Pakrut Gold
Project mining license to LLC Pakrut. According to the terms of the license, the amount of
ore that can be mined is variable depending upon the mine plan. The plan submitted by
the Group envisages an initial processing capacity of 760,000 tons of ore per annum,
increasing to 800,000 tons per annum. The mining license is valid until 2 November 2030.
The mining license issued in November 2011 currently entitles the Group to mine JORC
compliant resources (measured, indicated and inferred) of 904,000 ounces out of total
JORC compliant resources of 4,383,000 ounces at Pakrut, excluding the Eastern Pakrut,
Rufigar and Sulfidnoye ore zones. The JORC compliant resources include the results from
the Group’s exploration and evaluation work subsequent to the mining license issue date.
LLC Pakrut has sought approval of the increased JORC compliant resources from the
Tajik Department of Geology and the Scientific and Technical Counsel which includes the
results of all exploration and evaluation activities undertaken by the Group between 2009
and 2013. The application is currently subject to that approval process and the Directors
are not aware of any legal or other impediments which would prevent approval of their
application and therefore permit the Group to mine the increased resources. However, the
approval process currently remains incomplete.
The mine design and construction work undertaken to date, together with the assessment
of the recoverable amount of ‘Producing mines’ (see below), is based upon the total
quantity of JORC compliant resources of which part falls outside the area covered by the
mining license and still subject to formal approval, as noted above. Failure to obtain this
approval would lead to an impairment of
‘Mines under Construction’,
together with
inventories, and also impact
the going concern basis of preparation of
the Financial
Statements. The Group has made the judgement that this approval will be forthcoming. No
provision for impairment has been recognised in these Financial Statements relating to
this uncertainty.
59
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
2.
Critical Accounting Estimates, Assumptions and Judgments (continued)
Mineral resource and reserve estimates
Reserves are estimates of the amount of resources that can be economically and legally
extracted from the Group’s mining properties. The Group estimates its mineral resources
based on information compiled by appropriately qualified persons relating to the geological
and technical data on the size, depth, shape and grade of the ore body and suitable
production techniques and recovery rates. This analysis requires complex geological
judgments to interpret the data. The estimation of the recoverable amount is based upon
factors such as estimates of commodity prices, future capital expenditure and production
costs along with geological assumptions made in estimating the size and grade of the
resources. Details of
the mineral resources and reserve estimates can be found on
www.cnfgold.com.
The Group estimates and reports mineral resource estimates in line with the principles
contained in the Australasian Code for Reporting Exploration Results, Mineral Resources
and Ore Reserves (December 2004), which is prepared by the Joint Ore Reserves
Committee (JORC) of
the Australasian Institute of Mining and Metallurgy, Australian
Institute of Geoscientists and Minerals Council of Australia, known as the “JORC Code”.
The determination of a JORC resource is itself an estimation process that involves varying
degrees of uncertainty depending on how the resources are classified (i.e. measured,
indicated or inferred).
As additional geological
information is produced during the operation of a mine and
through additional exploration activity, mineral resource estimates may change. Such
changes may impact on the Group’s reported financial position which includes the carrying
value of property, plant and equipment and inventories.
60
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
2.
Critical Accounting Estimates, Assumptions and Judgments (continued)
Estimated economically recoverable reserves are used in determining the depreciation
and/or amortisation of mine-specific assets. This results in a depreciation/amortisation
charge proportional to the depletion of the anticipated remaining life-of-mine production.
The life of each item, which is assessed at least annually, has regard to both its physical
life limitations and present assessments of economically recoverable reserves of the mine
property at which the asset is located. These calculations require the use of estimates and
assumptions, including the amount of recoverable reserves and estimates of future capital
expenditure. The calculation of
the UOP rate of depreciation/amortisation could be
impacted to the extent that actual production in the future is different from current forecast
production based on economically recoverable reserves, or if future capital expenditure
estimates change. Changes to economically recoverable reserves could arise due to
changes in the factors or assumptions used in estimating reserves, including:
The effect on economically recoverable reserves of differences between actual
commodity prices and commodity price assumptions;
Unforeseen operational issues.
Depreciation/Amortisation (Note 12)
As the mine entered full production during the period, 2019 was the first period for which
depreciation / amortisation was charged in respect of
the producing mine assets. As
mentioned in the judgement above judgement is required in the calculation of this amount
with the key estimates considered to be surrounding the amount of economically
recoverable resources and the lifespan of
the asset. The economically recoverable
reserves are considered to be those detailed out on the website (see above for link) and
the lifespan of the mine is considered to be 18 years. As mentioned above the Group
currently only has a mining license that is valid until November 2030 which is less than the
18 year period used within the depreciation/amortisation calculation. After considering the
information available to them which includes discussions with Tajik officials and the
required timing for extending the mining license, management have made the judgement
that they will be able to secure the necessary extensions and therefore continue to the
mine for a period of 18 years. If a 10 year license period were to be used then depreciation
for 2020 would be approximately $14.49 million.
61
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
3. Segment Information
The following segments are based on the management reports received by the Executive
Directors, who are the chief operating decision makers. The Group operates principally in three
geographical areas, UK, PRC and Tajikistan, with operations managed on a project by project
basis within Tajikistan. For segment reporting purposes, the operations of the Cayman Islands
registered parent Company are included in the UK and PRC segment as these segments are
jointly managed
2020
US$000
US$000
US$000
UK and PRC
Tajikistan Pakrut
Total
Revenue
Cost of sales
Administrative expenses (including
foreign exchange)
Other operating expenses
Impairment
Other operating income
Operating profit/(loss)
Finance costs
Finance income
Income tax
Loss for the year
Total assets
Total liabilities
Additions
to
property,
plant
and
-
-
64,516
64,516
(35,297)
(35,297)
(2,313)
(16,591)
(18,904)
-
-
-
(2,313)
(15,999)
151
-
(46)
-
1
(46)
-
1
12,583
10,270
-
45
(824)
(15,999)
196
(824)
(18,115)
11,804
(6,357)
397,567
422,039
23,898
442,099
1,942
1,942
24,472
418,203
-
62
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
equipment
3. Segment Information (continued)
The Group’s mining activities are located in Tajikistan, principally within the Pakrut Gold Project.
Support and administration services are provided from the UK and PRC.
Inter-segment
revenue is eliminated on consolidation and is conducted on mutually agreed terms between
Group companies.
All revenue generated in the period was from the government of Tajikistan.
2019
US$000
US$000
US$000
UK and PRC
Tajikistan Pakrut
Total
Revenue
Cost of sales
-
-
49,157
49,157
(32,842)
(32,842)
Administrative expenses (including foreign
exchange)
(4,536)
(12,705)
(17,241)
Other operating expenses
(136)
(136)
Impairment
Other operating income
Operating profit/(loss)
Finance costs
Finance income
Income tax
Loss for the year
Total assets
Total liabilities
-
-
(4,536)
(20,796)
270
-
(25,062)
-
116
3,590
-
-
(508)
3,082
-
116
(947)
(20,796)
270
(508)
(21,981)
8,787
426,504
435,291
414,609
34,467
449,076
63
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
Depreciation
Additions to property, plant and equipment
22
-
2,544
5,842
2,566
5,842
64
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
4.
Particulars of Employees
The average number of staff employed by the Group during the financial year amounted to:
Administrative and management
Operational staff
The aggregate costs of the above were:
Wages and salaries
Basic pension cost
2020
No.
125
607
732
2019
No.
129
574
703
2020
2019
US$000
US$000
4,379
885
5,265
4,721
861
5,582
No staff costs were capitalised as the Group entered into full production from January
2019.
65
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
5.
Directors’ Emoluments
The Directors’ emoluments in respect of qualifying services were:
2020
Mr Boyi Liang*
Mr Yong Li
Mr Lixian Yu
Mr Delin Feng
Mr Xiuzhi Shi
Mr Hui Zhang**
2019
Mr Boyi Liang
Mr Xiang Wu
Mr Yong Li
Mr Lixian Yu
Mr Delin Feng
Mr Xiuzhi Shi
Salary and
fees
US$
76,797
23,088
Total
US$
76,797
23,088
197,131
197,131
194,921
194,921
22,233
61,142
22,233
61,142
576,311
576,311
Salary and
fees
US$
49,360
17,953
22,853
Total
US$
49,360
17,953
22,853
227,754
227,754
140,340
140,340
22,989
22,989
481,249
481,249
Key management comprises Executive and Non-Executive Directors and all emoluments are
short term in nature.
* Mr Boyi Liang was appointed on 30 July 2019 and resigned on 25 September 2020
** Mr Hui Zhang was appointed on 25 September 2020
66
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
6.
Expenses by nature
Employee benefit expenses
Operating lease expenses
Depreciation
Legal, professional and regulatory costs
Travel and entertaining
Social & other taxes
Other Expenses
Commission/bank fees
2020
2019
US$000
US$000
6,617
6,057
145
186
3,200
2,566
170
125
338
232
6,287
5,721
258
159
1,025
1,077
Total administrative expenses
17,827
16,337
67
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
6.
Expenses by nature (continued)
2020
2019
US$000
US$000
Fees payable to the Company’s auditor for the audit of the consolidated
financial statements
114
104
Fees payable to the Company’s auditor for other services:
-
Tax compliance services
3
117
3
107
7.
Income Tax
a)
Analysis of Charge in the
Year
Current tax:
Current tax
Deferred tax
Total
2020
2019
US$000
US$000
824
-
824
508
-
508
No provision for income taxes arose in the Cayman Islands, the UK, British Virgin Islands. A
current income tax expense arose in Tajikistan during the year as LLC Pakrut sold gold in the
amount of TJS 671,738,902 – equivalent
to US$ 64,515,782 (2019: TJS 469,386,040 –
equivalent to US$ 49,156,539). Thereby, the Company paid the amount of advance payments
of income tax according to the Tax Code of the Republic of Tajikistan, being 1.00% of revenue.
68
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
7.
Income Tax (continued)
Factors Affecting Current Tax Charge
The tax assessed on the loss for the year is higher than the weighted average standard rate
of corporation tax of 20% (2019 – 20%).
Loss before income tax
2020
2019
US$000
US$000
(5,451)
(21,473)
Loss on ordinary activities by weighted average rate of tax at 20% (2019 – 20%)
(1,090)
(4,295)
Expenses not deductible for tax purposes
640
513
Tax losses for which no deferred income tax asset was recognised
1,274
4,289
Current tax payable
824
508
The Group did not recognise deferred income tax assets of approximately US$1,274,000
(2019: US$4,289,000). Unused Tajik tax losses amounting to approx. US$16,772,000 at 31
December 2020 can be carried forward for three years from the year incurred and used
against future taxable income at 15%.
69
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
8.
Finance Income and Costs
Finance Income
Interest income on short term bank deposits
196
270
2020
2019
US$000
US$000
Finance Costs
Interest expense on shareholder’s loans wholly repayable within
five years
13,111
16,304
Interest expense on bank borrowings wholly repayable within
five years
2,888
4,493
Less: Borrowing costs capitalised in qualifying assets
-
Finance costs
15,999
20,797
9.
Earnings per Share
Basic and diluted earnings per share (cents)
(1.66)
(5.75)
2020
US$
2019
US$
The basic earnings per share is calculated by dividing the loss attributable to equity holders
after tax of US$ 6,357,000 (2019: 21,981,000) by the weighted average number of shares in
issue and carrying the right to receive dividend. For the year ended 31 December 2020 this
was 382,392,292 (2019– 382,392,292) shares.
As the Group has incurred a loss for the year, no option or warrant is potentially dilutive, and
hence the basic and diluted earnings per share are the same. At the year end, there were nil
(2019: nil) share options outstanding that are potentially dilutive in the future.
70
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
10.
Intangible Assets
Cost
Exploration and
evaluation assets
US$000
At 1 January 2018, 31 December 2018, 31 December 2019 and 31
9,941
December 2020
Impairment
At 1 January 2018, 31 December 2018, 31 December 2019 and 31
(9,941)
December 2020
Net Book Value
At 31 December 2018, 31 December 2019 and 31 December 2020
-
The exploration and evaluation assets represent internally generated costs in connection
with the Group’s exploration and evaluation activities. Expenditure is transferred from
exploration and evaluation assets to mines under construction once the work completed
to date supports the future development of the property and such development receives
appropriate approvals.
The rights of LLC Pakrut to carry out exploration and evaluation activity at the Pakrut
deposit expired on 1 April 2014. The renewal application by the Group to extend the
exploration license is being considered by the Government of Tajikistan. Although the
Directors are not aware of any legal or other impediments which would ultimately prevent
approval of the license extension, the Directors fully impaired the carrying value of the
exploration and evaluation assets during 2014 due to non-renewal of the Exploration
License. Exploration and evaluation activities can continue at the Pakrut Gold Deposit in
the area covered by the mining license. Currently, staff members of Pakrut are
coordinating with the local government for exploration licenses.
71
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
11. Mines under Construction
Cost
At 1 January 2019
Additions
Transfer to PPE
At 31 December 2019 and 1 January
2020
Additions
Transfer to PPE
At 31 December 2020
Construction in
Mining rights
progress
US$000
US$000
Total US$000
35,022
364,378
399,400
-
-
-
(35,022)
(364,378)
(399,400)
-
-
-
-
-
-
-
-
-
-
-
-
Mining rights comprised of exploration and evaluation assets up to the date the Pakrut
Gold Project was determined to be technically feasible and commercially viable. All
subsequent exploration and evaluation expenditure at
this site was capitalised within
mining rights. Mining rights also included the subsoil contract signature bonus and
payments to obtain land use rights.
Construction in progress comprised the mine, smelting plant, tailings pond, power lines
and road construction work carried out at the Pakrut Gold Project by contractors and
directly by the Group. It also included the borrowing costs associated with the loan to
finance the mine, construction from China Nonferrous Metals Intl Mining Co. Limited
(“CNMIM”) and China Construction Bank (“CCB”),
together with associated legal,
professional and consultancy costs.
Mines under construction are not depreciated until construction is completed and the
assets are available for their intended use and signified by the formal commissioning of
the mine for production. Construction was completed at the end of the 2018 financial year
with the mine being deemed to be fully operational at the start of the 2019 financial year
and all accumulated capitalised costs were transferred into Property, Plant and Equipment
at 1 January 2019.
72
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
12.
Property, Plant and Equipment
Office
furniture
and
Motor
Plant and
Producing
Assets under
Land
equipment
vehicles
machinery
mines
construction
Total
US$000
US$000
US$000
US$000
US$000
US$000
US$000
Cost
At 1 January 2019
32
755
10,772
14,990
Additions
Transfer from MUC
Disposals
-
-
-
152
-
-
-
(320)
(2,074)
2,129
-
-
-
-
-
26,549
3,561
5,842
398,639
761
399,400
-
-
(2,394)
At 31 December 2019
32
587
8,698
17,119
398,639
4,322
429,396
Additions
Transfer from MUC
Transfer from Assets
under Construction
Settlement of
historical liabilities
Disposals
-
-
-
-
-
106
-
-
-
-
-
-
-
-
-
1,836
-
4,322
-
-
-
-
-
(4,322)
1,942
-
-
-
-
(20,214)
-
-
-
-
(20,214)
-
411,125
At 31 December 2020
32
693
8,698
23,277
378,425
73
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
12. Property, Plant and Equipment (continued)
Accumulated
Depreciation
At 1 January
2019
Charge for the
year
Disposal
At 31 December
2019
Charge for the
year
Disposal
At 31 December
2020
Net Book Value
At 31 December
2020
At 31 December
2019
-
-
-
-
-
-
-
32
32
611
7,909
10,607
-
31
392
869
8,823
(320)
(2,074)
-
-
322
6,227
11,476
8,823
32
-
414
2,580
8,050
-
-
-
354
6,641
14,056
16,873
339
2,057
9,221
361,552
-
-
-
-
-
-
-
-
19,127
10,115
(2,394)
26,849
11,076
-
37,924
373,201
265
2,471
5,643
389,816
4,322
402,548
In 2019 as the mine entered full production, mines under construction were transferred
into Property, Plant & Equipment under the sub-category of Producing mines as presented
above, and depreciation/depletion charged as per the accounting policies.
The carrying value of the PPE, most notably producing mines, and the depreciation /
depletion methodology used, are both considered to be key accounting judgements. Detail
of these are disclosed in Note 2 along with the related key estimates.
74
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
13. Subsidiary Undertakings
The Group had the following subsidiary undertakings as at 31 December 2020:
Proportion
Country of
of Voting
Nature of
Registered
Holding
Incorporation
Rights held
Business
addresses
Name of
Company
Directly held
Kryso Resources
Ordinary shares
British Virgin
Holding
9005, Cayman Islan
(BVI) Limited
(CNG)
Islands
100%
Company
ds
190 Elgin Avenue, G
rand Cayman, KY1-
Kryso Resources
Ordinary shares
Holding
Unit 2.24, the Plaza
Limited
(CNG)
UK
100%
Company
535 Kings Road
Indirectly held
International
Mining Supplies
and Services
Limited (BVI holds
100% share)
Ordinary shares
Service
Unit 2.24, the Plaza
(BVI)
UK
100%
Company
535 Kings Road
LLC Pakrut (BVI
Ordinary shares
development
Bahor district,
holds 100% share)
(BVI)
Tajikistan
100%
and mining
Vahdat, Tajikistan
Mineral
exploitation,
75
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
14. Financial Instruments by category
31 December 2020
Assets per Statement of Financial Position
Trade and other receivables, excluding prepayments
Cash and cash equivalents
Total
31 December 2020
Liabilities per Statement of Financial Position
Borrowings
Provisions for other liabilities and charges
Trade and other payables, excluding non-financial liabilities
Total
Financial assets at
amortised cost
US$000
3,016
27,196
30,212
Financial liabilities at
amortised
cost
US$000
388,741
995
52,363
442,099
76
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
14. Financial Instruments by category (continued)
31 December 2019
Assets per Statement of Financial Position
Trade and other receivables, excluding prepayments
Cash and cash equivalents
Total
31 December 2019
Liabilities per Statement of Financial Position
Borrowings
Provisions for other liabilities and charges
Trade and other payables, excluding non-financial liabilities
Total
77
Financial assets at
amortised cost
US$000
3,137
11,120
14,258
Financial liabilities
at amortised cost
US$000
371,113
913
77,050
449,076
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
15.
Inventories
2020
2019
US$000
US$000
Gold
-
-
Construction materials and processing equipment
15,911
16,856
15,911
16,856
The inventory balance in 2020 relates to raw materials and semi-finished products used in gold production.
16. Trade and Other Receivables
Other receivables
Prepayments and deposits
Total
Group
Group
2020
2019
US$000
US$000
3,016
2,633
5,649
3,137
1,629
4,766
None of the receivables are past due. The fair values are equal to the carrying amounts.
Other receivables includes $2,758,418 due from related party CNMIM in relation to funds received from
the insurance provider after the snowfall disaster, which were received on behalf of CNG.
78
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
17. Borrowings
Bank borrowings
Other loans
Total
2020
2019
US$000
US$000
99,550
95,000
289,191
276,113
388,741
371,113
Non-current portion
19,822
103,586
Current portion
368,919
267,527
The fair value of borrowings equals their carrying amounts, as the impact of discounting is not significant.
CNMIM loan
In accordance with the terms of the Subscription Agreement and Warrant Instrument dated 27 July 2010
between Kryso Resources Limited (formerly Kryso Resources Plc) and CNMIM, a subsidiary Company of
significant shareholder China Nonferrous Metals Mining (Group) Co. Limited (“China Nonferrous”),
CNMIM was required to use its best endeavors to secure mine funding for the construction and
development of the Pakrut Gold Project.
The USD tranche of the loan has been settled in full and US$Nil was outstanding as at 31 December 2020
(2019: US$Nil). The amount outstanding on the RMB tranche of the loan as at 31 December 2020 was
US$12,683,599 (2019: US$12,683,599).
79
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
CNMC loans
The loan agreement between CNMC International Capitals Company Limited and CNG was signed on 20
September 2017. Under this agreement, CNMC International Capitals Company Limited provided a loan
facility of US$6,500,000 to CNG. This loan was used to improve the daily business operations of China
Nonferrous Gold Limited.
The full amount of the loan was drawn down on 20 September 2017. The loan contains annual fixed
interest at 4%, however where the loan is used for a purpose other than that stated in the contract (see
comments above), the proportion of the loan used will
incur interest at a fixed rate of 8% per annum.
Payment of interest is made quarterly.
During 2019, the loan was transferred from CNMC International Capitals Company Limited to another
member of the group, CNMC Trade. On 15 July 2020, a loan extension agreement was signed, extending
the repayment date until 20 December 2020. The extension agreement incurs interest at a rate of 6
months LIBOR + 3.7%.
On 26 March 2021, a loan extension agreement was signed, extending the repayment date until 20
December 2023. The extension agreement incurs interest at a rate of 3 months LIBOR + 3.25%.
A loan agreement between CNMC International Capitals Company Limited and CNG was signed on 27
April 2016. Under this agreement, CNMC International Capitals Company Limited provided a loan facility
of US$120,000,000 to CNG. This loan was used to refinance the previous ICBC loan of the same amount,
and the purpose of these funds was for development, operations and management of the Pakrut Gold
Project, including operating and related expenses.
The full amount of the loan was drawn down on the 27 April 2016. The loan contains annual fixed interest
at 4%, however where the loan is used for a purpose other than that stated in the contract (Pakrut Mine –
see comments above), the proportion of the loan used will incur interest at a fixed rate of 8% per annum.
Payment of interest will be made biannually in June and December.
80
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
During 2019, the loan was transferred from CNMC International Capitals Company Limited to another
member of
the group, CNMC Trade. On 26 March 2021, a loan extension agreement was signed
extending the repayment date until 20 December 2023. The extension agreement incurs interest at a rate
of 3 months LIBOR + 3.25%.
The Group has pledged its 100% equity interest in China Nonferrous Gold Limited to CNMC as security
for repayment of the loan.
A loan agreement between CNMC and CNG was signed on 27 May 2016 for a total amount of
US$20,000,000, which was drawn down in full on 27 June 2016. The loan period per the contract was 6
months, from 27 May 2016 to 26 November 2016.The loan contains a fixed interest rate of 4% per annum,
which is calculated on a monthly basis from the 21st of the month to the 20 of the following month.
During 2018, the loan was transferred from CNMC to another member of the group, CNMC Trade. A
further extension has been signed extending the repayment date until 26 November 2020. On 26 March
2021, a loan extension agreement was signed extending the repayment date until 2023. The extension
agreement incurs interest at a rate of 3 months LIBOR + 3.25%.
A loan agreement between CNMC International Capitals Company Ⅱ Limited (CNMC International) and
CNG was signed on 8 February 2018 for a total amount of US$90,000,000, which was drawn down in full
on 9 February 2018. The loan was provided for the purposes of
the construction, operations and
management of the Pakrut Gold Project, including operating and related expenses. This use is in line with
the terms of the agreement. The loan period per the contract was from 9 February 2018 to 8 December
2020.
The loan contains a fixed interest rate of 5.8% per annum, which is calculated on a half yearly basis from
the 21st of December to the 20th June, and from the 21st June to 20th December. Payment of interest will
be made annually in June and December of each year. Where the loan is used for a purpose other than
that stated in the contract (see comments above), the proportion of the loan used will incur interest at a
fixed rate of 11.6% per annum. At the repayment date, interest will be charged at 8.7% on any unpaid
balance. On 8 February 2021 US$20,000,000 was repaid, and on 26 March 2021, a loan extension
81
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
agreement was signed extending the repayment date of US$70,000,000 until 8 December 2023,and the
extension agreement incurs interest at a rate of 3 months LIBOR + 3.25%.In June 2021, the Company has
repaid US$9.26m（¥60million）of its outstanding loan.
CCB loans
The first loan agreement between China Construction Bank (“CCB”) and China Nonferrous Gold Limited
was signed on 14 June 2016. Under this agreement CCB provided a loan facility of US$100,000,000 to
China Nonferrous Gold Limited. This loan was used to refinance a previous loan from CNMC of
US$55,000,000, with the remainder used for development, operations and management of the Pakrut
Gold Project, including operating and related expenses. This use is in line with the terms of the agreement.
The loan is secured by Standby Letter(s) of Credit to be issued by China Construction Bank Corporation,
Beijing Branch, and guaranteed by CNMC under the terms of the loan agreement, for an aggregate
amount of not less than US$103,092,783.51, with validity of not less than 60 months in favor of CCB.
The full amount of the loan was drawn down on 30 June 2016. The loan incurs interest at a rate of 3
months LIBOR + 2.1% and is payable in arrears at the end of each applicable interest period.
The loan is repayable in 8 installments commencing 18 months from drawdown date and every 6 months
thereafter as follows:
31/12/17 – US$5,000,000
30/06/18– US$5,000,000
31/12/18 – US$5,000,000
30/06/19 – US$5,000,000
31/12/19 – US$5,000,000
30/06/20 – US$5,000,000
31/12/20 – US$5,000,000
82
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
30/06/21 – Balance of loan
The second loan agreement between China Construction Bank (“CCB”) and China Nonferrous Gold
Limited was signed on 29 January 2019. Under
this agreement CCB provided a loan facility of
US$20,000,000 to China Nonferrous Gold Limited. This loan was used for the purpose of working capital
for Pakrut Gold Project. This use is in line with the terms of the agreement.
The loan is secured by Standby Letter(s) of Credit to be issued by China Construction Bank Corporation,
Beijing Branch, and guaranteed by CNMC under the terms of the loan agreement, for an aggregate amount of
not less than US$20,620,000, with validity of not less than 12 months in favor of CCB.
The full amount of the loan was drawn down on 29 January 2019. The loan incurs interest at a rate of 3 months
LIBOR + 1.2% and is payable quarterly in arrears. It has been repaid on 29 January 2021.
The third loan agreement between China Construction Bank (“CCB”) and China Nonferrous Gold Limited was
signed on 9 March 2020. Under this agreement CCB provided a loan facility of US$14,550,000 to China
Nonferrous Gold Limited. This loan was used for the purpose of working capital for Pakrut Gold Project. This
use is in line with the terms of the agreement.
The loan is secured by Standby Letter(s) of Credit to be issued by China Construction Bank Corporation,
Beijing Branch, and guaranteed by CNMC under the terms of the loan agreement, for an aggregate amount of
not less than US$30,000,000, with validity of not less than 12 months in favor of CCB.
The full amount of the loan was drawn down on 13 April 2020. The loan incurs interest at a rate of 3 months
LIBOR + 1.15% and is payable quarterly in arrears. It was repaid on 16 March 2021.
83
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
18. Trade and other payables
2020
2019
US$000
US$000
Trade and other payables
52,363
77,050
Trade and other payables include amounts due of US$46,354,408 (2019: US$61,010,581) in relation to mine
development.
52,363
77,050
84
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
19. Provisions for Other Liabilities and Charges
At 1 January 2020
Unwinding of discount
Rehabilitation
Total
US$000
US$000
913
82
913
82
At 31 December 2020
995
995
All provisions are non-current.
The Group makes full provision for the future cost of rehabilitating the mine site and associated production
facilities on a discounted basis at the time of constructing the mine and installing those facilities.
The rehabilitation provision represents the present value of rehabilitation costs relating to the Pakrut mine
site, which are expected to be incurred up to 2030, which is the expiration date of the mining license. The
provision has been created based upon the feasibility study. Assumptions based upon the current
economic environment within Tajikistan have been made, which management believes are a reasonable
basis upon which to estimate the future liability and will be reviewed regularly to take into account any
material changes to the assumptions. The actual rehabilitation costs and works required will ultimately
depend upon future market prices for the necessary rehabilitation works required, changes in future
regulatory requirements and the timing on when the mine ceases to operate commercially.
The discount rate used in the calculation of the provision as at 31 December 2020 is 9% per annum. The
value of the undiscounted provision is US$2,481,000 (2019: US$2,481,000).
85
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
20. Treasury Policy and Financial Instruments
The Group operates informal
treasury policies which include ongoing assessments of
interest rate
management and borrowing policy. The Board approves all decisions on treasury policy.
Facilities are arranged, based on criteria determined by the Board, as required to finance the long-term
requirements of the Group. The Group has financed its activities by the raising of funds through the
placing of shares and through the issue and subsequent exercise of options and warrants.
There are no material differences between the book value and fair value of the financial assets at the year
end. Except for the impact of discounting on the provisions for liabilities and other charges, there are no
material differences between the book value and fair value of financial liabilities at the year end.
86
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
21. Share Capital
2020
No. of
2020
2019
Share
No. of
2019
Share
ordinary
Capital
ordinary
Capital
shares
US$000
shares
US$000
At 1 January (Ordinary shares
of $0.0001) each
382,392,292
38
382,392,292
Issued during the year
-
-
-
At 31 December (Ordinary
shares of US$0.0001 each)
382,392,292
38
382,392,292
38
-
38
All shares are authorised for issue and fully paid.
22.
Share Based payments
Options can be granted to any employee of the Group in accordance with the rules of the Group in
accordance with the rules of the Unapproved Share Option Scheme. The option price is not to be less
than the initial Placing Price or the price on the day of issue. The options cannot be exercised for a period
of at least one year from the date of grant. In the event of any employee to whom options have been
granted ceasing to be an employee of the Group he or she will have a set period in which to exercise
those options (depending on the reasons for leaving), falling which, the options will lapse.
There were no share options outstanding at the year end.
87
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
23. Cash flow information
31 December
31 December
2020
2019
US$000
US$000
Cash flows from Operating Activities
Loss before income tax
(5,451)
(21,473)
Adjustments for:
Finance income
Finance costs
Depreciation
Foreign exchange loss
Change in working capital:
Inventory
Trade and other receivables
Trade and other payables
Other current assets
Other current liabilities
Net Cash generated from Operating Activities
(196)
15,999
11,072
1,076
945
(1,004)
(270)
20,796
7,722
905
487
(904)
(5,405)
(7,039)
121
(19)
17,137
(154)
3,554
3,624
88
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
23. Cash flow information (continued)
Net debt reconciliation
31 December
31 December
2020
US$000
2019
US$000
Cash and cash equivalents
27,196
11,120
Borrowings – repayable within one year
(368,919)
(267,527)
Borrowing – repayable after one year
(19,822)
(103,586)
Net debt
(361,545)
(359,993)
31 December
31 December
2020
US$000
2019
US$000
Cash and cash equivalents
21,196
11,120
Borrowings – fixed interest rates
(126,538)
(116,685)
Borrowings – variable interest rates
(262,204)
(254,429)
Net debt
(361,545)
(359,993)
89
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
23. Cash flow information (continued)
Borrowings
Borrowings
Cash at bank
due within 1
due after 1
US$000
year
US$000
year
US$000
Total
US$000
Net debt as at 1 January 2019
Cash flows
Interest accrued
Movement between current and
non-current
8,363
2,757
-
-
(162,724)
(182,285)
(336,645)
10,000
(14,705)
(1,948)
-
(21,400)
(21,400)
(114,803)
114,803
-
Net debt as at 31 December 2019
11,120
(267,527)
(103,586)
(359,993)
Cash flows
Interest accrued
Movement between current and
non-current
16,076
(677)
-
15,392
-
-
-
(16,950)
(16,950)
(100,715)
100,715
-
Net debt as at 31 December 2020
27,196
(368,919)
(19,822)
(361,545)
90
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
24. Controlling Party
The Directors consider China Nonferrous Metals Mining (Group) Co. Limited (“CNMC”) to be the ultimate
controlling party, by virtue of their shareholding and representation on the Board of Directors.
25. Contingent Liabilities
During 2018, a contract was entered into between LLC Pakrut & LLC WenJian, a Company set up by a
former employee of Pakrut (Dept. 2), to provide outsourced services including the extraction of ore,
delivery of ore to smelting plant, cleaning of mine, mine development and construction works. LLC
WenJian is not considered to be a related party.
Although LLC WenJian hold the relevant license for the construction works, the Company does not hold a
license in accordance with the laws of Tajikistan “On subsoil” and “On licensing of certain types of
activities” for implementing the other services they have been contracted to perform. This is a breach of
Tajik laws and regulations which could result in penalties being imposed on both parties to the contract.
The outcome of this situation is unclear and could result in fines imposed with the worst-case scenario
being that Pakrut could have their own license rescinded by the Tajik government. There is no visibility
surrounding the value or nature of any penalty at this time.
26. Related Party Transactions
The amount paid by the Company and Kryso Resources Limited to CNMIM for interest on the loan in 2020
amounted to US$Nil
(2019:US$Nil). The amount due to CNMIM as at 31 December 2020 was
US$19,821,708 (2019: US$18,586,242). CNMIM is a significant shareholder of China Nonferrous Gold
Limited and Boyi Liang and Hui Zhang are CEO and President of CNMIM respectively. During 2020, CNG
did not pay any interest to CNMC.
The amount payable by the Company to CNMC for interest on the loans in 2020 amounted to
US$5,292,500 (2019: US$5,989,013). The amount due to CNMC as at 31 December 2020 was
US$106,709,291 (2019: US$101,402,291). CNMC is the ultimate parent of China Nonferrous Gold Limited
and Feng Delin is Chief Accountant of CNMC.
91
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
26. Related Party Transactions (continued)
During 2020, 15MCC (a related party to CNG through being a subsidiary of CNMC, the Company’s
ultimate controlling party) provided equipment and materials, together with installation and construction
work to the Group amounting to US$Nil (2019: $Nil) and the Group advanced payments to 15MCC
amounting to US$1,524,503 (2019: $3,945,580). As at 31 December 2020, the total liability due to 15MCC
was US$15,917,473 (2019: US$28,541,552).
In 2015 the Group entered into an additional consultancy contract with CNMC Hongtoushan Fushun
Mining Co Ltd., through CNMIM as agent as follows:
Smelting and Processing Agreement
CNMC Hongtoushan Fushun Mining Co Ltd. (CNHFMG) is a copper mine and processing operation
owned by CNMC. On 7th of September 2015,
the Group entered into a smelting and processing
agreement with CNHFMG.
Under the terms of the Agreement, CNG will pay to CNHFMG an amount of RMB 17.99 (approximately
US$2.8) per gram of finished gold once the Project commences the 12-month production period. Prior to
this period the Company will cover the labour and associated costs of CNFMG. Once in production, in the
event the recovery of the plant is above the Beijing General Research Institute of Mining and Metallurgy
forecast rate over the life of production of 82.99 percent, CNHFMG will share 40 percent of the profits from
the upside directly due to the increased recovery. In the event recovery is below 75 percent, CNHFMG will
bear 20 per cent of any loss incurred by the Company from the Project due to directly to recovery levels.
During 2020, CNHFMG provided equipment and materials, together with installation and construction work
to the Group amounting to US$Nil (2019:US$Nil) and the Group advanced payments to CNHFMG amount
to US$304,887(2019: US$166,962). As at 31 December 2020, the total
liability due to CNHFMG was
US$575,565.
92
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
26. Related Party Transactions (continued)
During the year of 2020 CNMC provided a guarantee for standby letters of credit amounting to
US$30,000,000 as security for the Group’s bank loan facility with China Construction Bank. During the
year of 2019, CNMC provided a guarantee from standby letters of credit amounting to US$134,020,629 as
security for the Group’s bank loan facility with China Construction Bank.
93
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
26. Related Party Transactions (continued)
During 2020, there is a total receivable amount of $2,739,702 (2019: US$2,739,702 ) owed by CNMIM for
the insurance claim on the 2017 snowfall disaster which is held on the Group’s behalf. There is also a total
amount of US$25,079 payable by the entities within the group owed to CNMIM as at 31 December 2020
(2019: US$25,079).
As at 31 December 2020, there is a total payable amount of $226,080 (2019: $226,080) owed to Daye
Nonferrous Metal Group Holding Co., Ltd, a subsidiary of the ultimate controlling party, CNMC.
94
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
27. Events after the Reporting Period
In January 2021,
the Company executed an agreement with China CITIC Bank Corporation Limited
(Zhuhai Branch) (“CITIC”) for a loan facility of up to CNY 300million which is equivalent to US$46.37m.
The CITIC Loan facility is for a maximum of 12 months and is repayable 12 months from first drawdown.
The terms of the CITIC Loan includes an annual interest rate at 2.7% plus 6 month LIBOR. US$20m of the
CITIC Loan has been drawn down in January 2021 to replace the China Construction Bank (CCB) Macau
loan of US$20m which became due in January 2021. Second drawdown of US$14.55m in March 2021
was used to repay the CCB Asia loan of US$14.55m which was due for repayment in March 2021.
The Group has continued production throughout 2020 despite the outbreak of COVID-19, enabling it to
raise sufficient working capital. As announced on 25 June 2021,
the Company has executed an
agreement with Bank of Shanghai (Hong Kong) Limited (“BOS”) for a loan facility of up to US $65 million
(the “BOS Loan”). The Loan facility is for a maximum of 24 months and is repayable 24 months from the
drawdown. The total amount of US$65m of the BOS Loan has been drawn down on 28 June 2021 in order
to repay the CCBC Macau loan, of which US $65m remains outstanding.
As announced in February 2021, the Company has repaid US$20m of its outstanding loan with CNMC
International Capitals Company Ⅱ Limited (CNMC International) in accordance with its terms. The
Company extended the repayment period of loans in place with CNMC Trade Company Limited (CNMC
Trade) and CNMC International , totaling US$216.50 million, to 2023. In June 2021 ， the Company has
repaid US$9.26m（¥60million）of its outstanding loan with CNMC International. The Company currently
has total debt facilities (including banking facilities), before interest, of c.US$319.5 million.
95