Griffin Mining Ltd. Annual Report 1998

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FY1998 Annual Report · Griffin Mining Ltd.

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R E P O R T

E P O R T A N DN D A C C O U N T S

C C O U N T S 1 9 9 9

Corporate information

Chairman’s statement

Review of operations

Directors

Senior executives

Directors’ report

Auditors’ report

Consolidated profit and loss account

Consolidated balance sheet

Statement of total recognised gains and losses

Cash flow statement

Accounting policies

Notes to the financial statements

CONTENTS
CONTENTS

Page

Griffin Mining Limited’s shares are quoted on the Alternative Investment Market (AIM) of the London Stock Exchange (symbol GFM) and
traded on the Canadian Dealing Network in Toronto (symbol GRFM). Corporate information and share prices can be accessed via the
Newstrack Service on Reuters (symbol GFM.L) (page JPJA), Bloomberg (symbol GFM LN), ICV Topic (*1180#).
Further information on the Company, is available on the Company’s web site: www.griffinmining.com

Registered number: EC13667 Bermuda.
Registered Office: Clarendon House, 2 Church Street, Hamilton HM11, Bermuda

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

CORPORATE INFORMATION
CORPORATE INFORMATION

Principal office:

Registered office:

Directors:

Whitehall House, 5th Floor
41 Whitehall, London SW1A 2BY, United Kingdom.
Telephone: + 44 (0)207 321 2077
Facsimile: + 44 (0)207 321 2088
Email: griffin@griffinmining.demon.co.uk
Web site: www.griffinmining.com

Clarendon House,
2 Church Street, Hamilton HM11, Bermuda.

Craig Niven (Chairman)
Mladen Ninkov (President)
Dal Brynelsen
John Goodger
Gordon Montgomery
William Mulligan
John Steele

Company secretary:

Roger Goodwin

Nominated adviser for AIM:

English Trust Company Limited.
12a Charterhouse Square, London, EC1M 6AX. UK.

Nominated broker for AIM:

Charles Stanley and Company Limited
25 Luke Street, London EC2A 4AR.UK.

Auditors:

Solicitors:

Bankers:

Grant Thornton
Grant Thornton House, Melton Street, Euston Square,
London. NW1 2EP. UK.

Denton Hall
5 Chancery Lane, Clifford’s Inn, London, EC4A 1BU. UK.

Conyers Dill & Pearman
Clarendon House, Church Street, P.O. Box HM 666,
Hamilton, HMCX, Bermuda.

National Westminster Bank PLC.
St James’s and Piccadilly, London. W1A 2DG. UK.

The Bank of N T Butterfield & Son Ltd
Rosebank Centre, 14 Bermudiana Road, Pembroke, Bermuda.

UK Registrars & transfer agents:

IRG plc
Balfour House, 390/398 High Street, Ilford, Essex IG1 1NQ. UK.

Canadian transfer agents:

CIBC Mellon Trust Company
320 Bay Street, Toronto, Ontario, M5H 4A6. Canada.

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C C O U N T S 1 9 9 9

CHAIRMAN’S STATEMENT
CHAIRMAN’S STATEMENT

I am pleased to report that the year to 31 December 1998 was one of significant progress at Griffin’s Caijiaying zinc-

gold project in China. During the course of the year Griffin increased its equity interest in Caijiaying through its
wholly owned subsidiary China Zinc Pty Limited from 30% to 60%, and completed a major work programme at
Caijiaying, funded by a placing of new shares in June 1998 which raised USD 1.7 million at US 24 cents per share. In
addition, we were pleased to raise the profile of our Caijiaying joint venture significantly when the Company was
informed by the Chinese Deputy Minister for Mining that it had become the first foreign controlled joint venture
company to receive a new three year exploration licence for a hard rock deposit in China under the recently enacted
mining laws. This licence was presented by the Chinese Deputy Minister for Mining at a high profile ceremony in
Beijing on 17 October 1998.

Following the issue of this exploration licence, application has been made for an exploration licence covering 104 sq km
of land surrounding and immediately adjacent to the Caijiaying existing licence area. The Board considers the whole
Caijiaying area to be highly prospective for base metals and gold. It is intended to establish an ongoing exploration pro-
gramme in the new licence area once production has started at Caijiaying.

The 1998 Caijiaying work programme comprised approximately 5,000 metres of diamond drilling and a re-logging and
re-assaying programme based on 98,000 metres of previously drilled core. The conclusions that your Board has drawn
from the 1998 programme can be summarised as follows:

a) the geological re–interpretation of the ore body made by Griffin’s geological consultants, CSA Australia Pty
Limited, as shallow dipping ore lenses has been confirmed; b) the new ore body re–interpretation is likely to improve
project economics and suggests an increase in zinc grade and/or tonnage; and c) the potential area of the main orebody
in Zone III extends further to the south east.

Work is currently underway on the design of an extension of an existing decline on Zone III and associated horizontal
drives. The decline will be used to a) visually reconfirm the new geological interpretation of the orebody made by
CSA Australia Pty Limited, b) conduct underground drilling to define more accurately the ore block geometry, and c)
generate bulk samples for metallurgical test-work. Work is also ongoing in defining freight logistics and on detailed
feasibility work on the project power supply designed to link into major upgrades to the electricity grid being planned
in the Caijiaying area by the Chinese authorities. Environmental baseline work is planned to commence in 1999.

It is your Board’s intention to continue development work and progress towards completion of a full bankable
feasibility study at Caijiaying. On 4 June 1999 the Company announced the completion of a placing of 1,666,667 new
ordinary shares at U.S 30 cents per share. The shares were placed with an international institutional investor. The
funds raised will be used to continue development work at Caijiaying and in meeting ongoing working capital
requirements.

The current business climate in which Griffin operates is dominated by weak base metal prices, including zinc; and
negative market sentiment, both towards the mining sector generally and towards the smaller quoted company sector.
I hope that the next two years will see a more positive business environment developing, including higher zinc prices,
and improving market sentiment based on a cyclical recovery in commodity prices driven by continued resilience in
the United States economy and an increase in the level of economic activity in Asia.

Mine development and exploitation is a long term business activity. The Board believes in the long term fundamentals
of the market for zinc and in the prospects for the continued development of China’s political and economic
environment in a way that supports increasing foreign investment. Griffin also retains interests in Burkina Faso,
Sweden and Botswana but has restructured these so as to require minimal cash investment. Our strategy, originally set
out in 1997, continues to be to move the Caijiaying project forward to full bankable feasibility and to seek
opportunities to acquire other world class assets.

Craig Niven Chairman
4 June 1999.

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

REVIEW OF OPERATIONS
REVIEW OF OPERATIONS

Griffin Mining Limited (“Griffin” or “the Company”) is a mining exploration and development company. Its
principal project is the Caijiaying zinc-gold project in the Peoples Republic of China.

CAIJIAYING ZINC – GOLD PROJECT: China

BACKGROUND

Russia
Russia

Mongolia
Mongolia

C AIJ IAY ING

P ROJ ECT
n

¥
Beijing

PEOPLE' S REPUBLIC OF CHINA

N
N

epal
epal

India
India

Burma
Burma

Thailand
Thailand

NORTH

CHINA

SEA

sea of

japan

A N

EAST

CHINA

SEA

YELLOW

SEA

Indonesia
Indonesia

Malaysia
Malaysia

Indonesia
Indonesia

Location of Caijiaying project

O n 26 November 1997, Griffin acquired 50% of the

issued share capital of China Zinc Pty Limited
(“China Zinc”) together with an option to acquire the
remaining 50% of the issued share capital, for a consid-
eration of US$1.3 million. This was satisfied by the issue
2,230,000 new ordinary shares in Griffin and cash of
US$538,000. The call option to acquire the remaining
50% of China Zinc was exercised on 17 April 1998
satisfied by the issue of 3,500,000 new Griffin shares.
Following the exercise of this option Griffin owns 100%
of the issued share capital of China Zinc.

China Zinc is an Australian company which has been
engaged in the development of the Caijiaying zinc-gold
project in China (“the Caijiaying project”) through its 60%
local joint venture entity: Hebei Hua’ Ao Mining
Development Company Limited (“HSAMDC”). The joint
venture is a contractual joint venture that was established
in 1994 with the Zhangjiakou City People’s Government
and the Hebei Bureau of Geology and Mineral Resources
Exploration and Development (“MLNR”).

The terms of the joint venture agreement which established HSAMDC, provide for China Zinc to contribute the
whole of the “registered capital” of US$5 million. To date, China Zinc has expended approximately US$2
million for the benefit of the HSAMDC, of which US$954,027 had been certificated by the Chinese authorities
as at 31 December 1998. China Zinc is responsible for arranging the funding of the capital expenditure required
to bring the Caijiaying project into production. China Zinc is entitled to receive 80% of the net
profits of the Caijiaying project until all capital expenditures arranged by China Zinc have been recouped,
together with a coupon of 4.5%. Thereafter China Zinc is entitled to receive 60% of net profits.

The Caijiaying project is a polymetallic deposit comprising mainly zinc, gold and silver located 200 km north
west of Beijing in China. In a pre-feasibility study commissioned by China Zinc, Bateman Kinhill proposed an
open pit mine to exploit a mineable resource of 27.4 million tonnes containing 6.87% zinc. There are also sig-
nificant amounts of gold, silver, lead, gallium and other metals that Griffin believes can be economically
recovered in an open pit mining operation. Bateman Kinhill’s study proposed a process plant capable of pro-
ducing per annum 123,000 tonnes of zinc, 34,000 ounces of gold, and 1.5 million ounces of silver over a 13.7
year mine life. This proposal was based on the resource in Zone III where most of the exploration work has been
concentrated. However, the project area comprises six zones in total. Griffin believes that at least two of
these additional zones are highly prospective and will be undertaking additional exploration work with a view
to extending the total Caijiaying resource estimates.

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C C O U N T S 1 9 9 9

REVIEW OF OPERATIONS
REVIEW OF OPERATIONS

The project site is easily accessible by road
and is connected to power supplies.
Adequate water supplies are available on
site
from underground sources. The
Caijiaying area is on the edge of the Inner
Mongolian Plateau. Conditions are not
severe. Winters are cold and dry.

Surveying at Zone II Caijiaying September 1998

MLNR conducted 10 years of exploration
work on the Caijiaying project. It is
estimated by Griffin that if such work
had been undertaken by a non Chinese
company, the equivalent of US$10
million would have been spent over this period, including the costs of 95,000 metres of diamond drilling.
Subsequently some US$2 million has been spent on the Caijiaying project by western parties, which
included the cost of the Bateman Kinhill pre feasibility study, various geological reports, some 8,000
metres of infill diamond drilling, ore body modelling, metallurgical testwork, and engineering and
geological studies.

The Caijiaying project covers an area of 13.6 square kilometres. It is broken down into six zones as indicated
in the plan set out below. Zone III has been the main focus of exploration and development activity and formed
the basis of the Bateman Kinhill pre feasibility study. The other zones have not been intensively explored,
but drilling and other work in Zones II, IV and V in particular have indicated excellent potential.

HSAMDC has applied for an exploration licence to 104 square kilometres surrounding and adjacent to the
existing licence area at Caijiaying.

SUMMARY OF WORK UNDERTAKEN IN 1998

Work undertaken on the Caijiaying Project in 1998 by Griffin included further diamond drilling within the “starter
pit area” of Zone III, detailed orientated drilling in the central part of Zone III, and some regional
exploration drill holes in Zone II and between Zones II and III. A total of 19 drill holes were completed for a total
of 4998 metres. A program of re-logging and
re-sampling of previous drill core was also undertaken.

The highlights arising from the 1998 work programme:

• Orebody re–interpretation confirmed as
shallow dipping ore lenses, improving
project economics

• Extension of orebody to the south east

• New orebody interpretation may increase

zinc grade and/or tonnage

• Evidence of significant gold mineralisation

Caijiaying sketch map of drill results and
areas of further potential

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

REVIEW OF OPERATIONS
REVIEW OF OPERATIONS

The 1998 drilling programme was managed by Griffin’s inde-
pendent geological consultants: CSA Australia Pty Limited
(“CSA”). All base metal samples were assayed by Analabs
Pty Limited at its laboratory in Perth, Western Australia.
The work programme was designed as the first phase of a
bankable feasibility study and to meet applicable standards.

The results have confirmed not only the known zinc-lead-
gold-silver resource at the Caijiaying deposit, but have also
added significant upside to the project via the new orebody
interpretation, high grade intercepts in the southern limits
of Zone III of the deposit, and the significant potential to
increase the deposit further due to exploration success in the
adjacent Zone II area at Caijiaying.

Orientation drilling undertaken by Griffin in 1998 in the
central part of the starter pit area of Zone III, together with
detailed re-logging, has confirmed that the ore lenses are more
shallowly dipping than previously interpreted by the Chinese.
The new interpretation of thicker, less steeply orientated
lenses improves between-hole correlation and should positively
enhance the resource which currently stands, as calculated by
Bateman Kinhill, at an Indicated Mineral Resource of 57.8
million tonnes @ 4.8% Zinc at a 1% Zinc cut-off. This includes a resource of 27.4 million tonnes @ 6.87% Zinc
and 0.5 g/t Gold which the pre-feasibility study showed could be exploited by open pit mining.

Sketch Map of Zone III
Caijaiying Project

Set out below is a preliminary section of the deposit in Zone III prepared by CSA Australia Pty Limited
showing the new Orebody interpretation.

Preliminary re-interpretation of mineralisation zones

N
0
0
4
9
8

RL1500

Starter Pit

Final Pit

N
0
0
6
0
9

RL1400

RL1300

RL1200

RL1100

RL1000

SCALE
100m

200m

Sand Overburden
Jurassic sediments
PreCambrian granulite
Late porphyry dikes

Diagrammatic preliminary interpretation by Crowe Schaffalitzky Associates based on additional geological and other data. This interpretation
requires verification by field testing. January 1998.

CSA
• • • •
• • • •
• • • •
• • • •

CSA Preliminary section of Zone III

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C C O U N T S 1 9 9 9

REVIEW OF OPERATIONS
REVIEW OF OPERATIONS

completed within

drill holes were

The 1998 drilling results demonstrate that the orebody extends
further to the southeast than previously drilled limits. Two
regional
and
immediately to the north of the main exploration target in Zone
II, 1 kilometre to the south of Zone III. Results from this drilling
show that zinc-rich mineralisation now extends over a strike
length of over 100 metres in this area, and there is strong
evidence to suggest that this mineralisation may be linked to that
of Zone III, 1 kilometre to the north.

Drilling on Caijiaying project

The ore-body re-interpretation that has been confirmed by the
1998 work programme should have a significant and favourable
impact on the project economics. The Bateman Kinhill
pre-feasibility study had assumed a sharply dipping, narrow vein
deposit. It is now clear that the ore-body actually comprises a
seriesof tabular “lenses” dipping at a more shallow angle. The
implications of this re-interpretation for the project are as follows:

•

Mining plan and pit design are likely to change from
those envisaged in the pre-feasibility study. The expected
changes may result in lower costs of production than
calculated in the pre-feasibility study.

The resource, currently defined by Bateman Kinhill as
27.4 million tonnes @ 6.87% Zinc, may be improved as
to grade and/or tonnage.

Encouraging results were received from gold re-sampling of Chinese drill core which had not been previously
analysed for gold. A best intersection of 8.45metres @ 7.83 g/t Gold was returned from 154.59 metres in drill
hole 307-26. This indicates that there is potential for significant gold intersections outside those previously
included in the resource.

Drill core logging at Caijiaying

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

REVIEW OF OPERATIONS
REVIEW OF OPERATIONS

OTHER PROJECTS

G riffin Mining Limited retains interests in Burkina Faso, Sweden and Botswana but has restructured these

so as to require minimal cash investment. Britcan’s licence in Devon and Cornwall has not been renewed.

FINANCIAL

The Group recorded a loss for the year of $1,654,000 (1997 loss $3,718,000).

Gains on disposals of investments during 1998 amounted to $147,000 (1997 $139,000).

Operating costs in 1998 were $711,000 (1997 $882,000).

Taking into consideration the continued low price of gold, further provision of $251,000 has been made in
respect of the Guiro Gold Project in Burkina Faso and $7,000 of costs incurred on Britcan’s gold
project in Devon and Cornwall have been provided against in full. In view of a further extension to the
suspension of production not being granted on the Thakadu copper project in Botswana full provision of
$853,000 (after minority interests) has been made against the Company’s interest in this project.

Cash balances increased marginally to $408,000 at 31 December 1998 compared to $402,000 at 31 December
1997. $1,366,000 (net) was raised in June 1998 from the issue of 7,200,000 new ordinary shares, which has
been used to fund exploration costs of $1,093,000, including $988,000 on the Caijiaying zinc project in China,
and operating costs.

In addition to the issue of 7,200,000 new ordinary shares in the Company on a private placement in June 1998,
3,600,000 new ordinary shares were issued on exercise of the option to acquire 50% of the share capital in
China Zinc Pty limited not already owned by the Company. 214,375 ordinary shares in the Company were
bought back for cancellation during 1998 as part of an agreement for the disposal of the Company’s interest
in Firestone Diamonds.

Shareholder’s funds rose from $3,611,000 at 31 December 1997 to $4,046,000 at 31 December 1998.

YEAR 2000 ISSUE

G riffin Mining Limited is aware of potential problems with computer systems which express dates using

only the last two digits of the year and may therefore malfunction due to the date change to the year
2000. The issue is complex and no business can guarantee that there will be no Year 2000 problems. However,
the Board believes that its plans and actions are appropriate and adequate to address the issue. Griffin does
not operate any unique bespoke computer systems, but uses personal computers and standard “off the shelf”
systems which are primarily Windows based. All computers owned and operated by the Company were
purchased in July 1997 or subsequently. Prior to installation a comprehensive review of the Company’s
computer systems and requirements was undertaken by independent computer consultants. This review
included ensuring that all computer software and hardware operated and to be installed by the Company were
Year 2000 compliant. This review process remains on going particularly on installation of any system upgrades.
The Company does not anticipate any further significant costs in this regard.

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C C O U N T S 1 9 9 9

DIRECTOR’S
DIRECTOR’S

Craig Niven, Chairman, British, aged 42

Craig Niven holds a Masters Degree in Economics from St. Catharine’s College, Cambridge and is a Chartered
Accountant. Until 1994, he was a director and Head of International Corporate Finance at ANZ Grindlays
Bank Plc where he was involved in cross-border transactions focused on emerging markets and the natural
resource sector. In addition to his involvement in the Company, he is a director of a number of private
companies, outside the natural resource sector, in which he and/or his family have equity interests. He also acts
as investment advisor to Park Street Investments Pty. Limited, an offshore investment fund. He had
previously held various positions at Amalgamated Metal Corporation Plc and Pannell Kerr Forster.

Mladen Ninkov, President, Australian, aged 38

Mladen Ninkov holds a Masters of Law Degree from Trinity Hall, Cambridge University and Bachelor of Laws
(with Honours) and Bachelor of Jurisprudence Degree from the University of Western Australia. He is a
director of: Keynes Investments Ltd; Frick Pty Ltd; Dragon Capital Pty Ltd; and Dragon International Ltd.
He has a mining, legal, fund management and investment banking background and is admitted as a barrister
and solicitor of the Supreme Court of Western Australia. He was a Director and Head of International
Corporate Finance at ANZ Grindlays Bank Plc, a Vice President of Prudential-Bache Securities Inc. in New
York, and until recently, was Chairman of Westgold Resources NL, a listed Australian company. He was
also a director of; Mt. Monger Gold Project Pty. Ltd.; Castle Hill Resources NL; Ramsgate Resources NL;
and Matu Mining Pty. Ltd.

Dal Brynelsen, Canadian, aged 52

Dal Brynelsen is a graduate of the University of British Columbia in Urban Land Economics. Mr. Brynelsen
has been involved in the resource industry for over 20 years. He has been responsible for the discovery,
development and operation of several underground gold mines during his career. Over the past five years he
has focused on the exploration potential of Sub-Sahara Africa. He has secured mineral concessions covering
over 20,000 square kilometres in Central Africa. Recently, he completed a multi-million dollar exploration
agreement with a large South African mining house to further exploration on this concession for copper, gold,
nickel, cobalt, zinc, lead and precious stones. Mr. Brynelsen is the President and a Director of Pacific Vangold
Mines Limited and provides independent consulting services to private and institutional corporations.
Mr. Brynelsen was a Director of Graffoto Industries Limited.

John Goodger, British, aged 51

John Goodger has worked on smaller public and private companies since 1985 and is currently a director of
N.W. Brown Corporate Finance Ltd, a company regulated by The Securities and Futures Authority, LPA
Industries PLC, a fully listed electrical products company, and Focus Communications Limited. Between 1964
and 1974, he worked at National Provincial Bank, Slater Walker Investment Management, and the Investors
Chronicle. After four years at Good Relations City Ltd., he jointly founded the financial public relations
company, Financial Strategy Limited.

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

DIRECTOR’S / SENIOR EXECUTIVES
DIRECTOR’S / SENIOR EXECUTIVES

Gordon Montgomery, British, aged 42

Gordon Montgomery, is a Chartered Accountant with a background in corporate finance and venture capital
with experience in deal assessment, negotiation and capital raising. Since 1989, he has assisted in the raising of
capital and growth of a number of small to medium sized companies. He is currently a director of, Oasis Europe
Ltd. (a mergers and acquisitions adviser), Nale Industries Ltd. (an inspection equipment manufacturer), as well
as being a director and adviser to a number of other businesses.

William Mulligan, American, aged 56

William Mulligan has a BSc from Thomas Clarkson University, an MS in Geological Engineering from the
University of Connecticut and an MBA from NYU Bernard Baruch School of Business Administration. He
is currently the Managing Director for Global Projects and Political Risk at AIG Global Trade and Political
Risk Insurance Company, a wholly owned subsidiary of American International Group Inc. From 1994 to
1996 he was Executive Vice President for Corporate Development at Latin American Gold Limited. He is a
Director of Arcon International Plc, the Dublin based company which operates the Galmoy zinc mine in
Ireland.

John Steele, Canadian, aged 56

John Steele has an MSc in Geophysics from the University of Toronto. Until 1996, he worked for Yorkton
Securities Inc in Toronto where he was responsible for mining projects throughout South East Asia. He is
currently a director of the following companies active in the natural resource sector: High American Gold Inc;
Paron Resources Ltd; Asian Tiger Resources Ltd; Geothai Services Company Ltd; and Vietnam Exploration
and Development Corporation. He is also a director and convention committee Co-Chairman for the
Prospectors and Developers Association of Canada. He was a Director Westgold Resources N.L and Golden
Tiger Resources N L. (Vietnam).

SENIOR EXECUTIVES
SENIOR EXECUTIVES

Roger Goodwin, Chief Financial Officer and Company Secretary, British, aged 44

Roger Goodwin is a Chartered Accountant. He has held senior positions in a number of public and private
companies, including that of Group Financial Controller to a fully listed UK Plc in the natural resource
sector and director of an Anglo-Russian oil/gas development joint venture. He has a strong professional
background with considerable public company and corporate finance experience, and of emerging markets
particularly in Africa, the CIS, and Eastern Europe. He was appointed CFO in April 1996 and Secretary in
November 1997.

Bo Zhou, Chief Geologist and Chief Representative in China, Australian, aged 37,

Bo Zhou holds a Ph.D in exploration geology from Sydney University and a BSc in economic geology from
Peking University. He has worked on a number of base metal and exploration projects in Australia and in
China as a project geologist and project development manager. He has a wide range of experience in the
technical, commercial and legal aspects of project development in China.

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C C O U N T S 1 9 9 9

DIRECTOR’S REPORT
DIRECTOR’S REPORT

The Directors submit their report together with the audited consolidated accounts of Griffin Mining Limited
(“the Company”) and its subsidiaries (“the Group”) for the year ended 31 December 1998.

Financial results

Group income for the year ended 31 December 1998 amounted to US$147,000 (1997 - US$157,000) and the
Group loss on ordinary activities before taxation, amounted to US$2,029,000 (1997 - loss US$3,718,000). No
taxation was charged (1997 - nil). The Group loss after taxation and minority interests amounted to
US$1,654,000 (1997 - loss US$3,718,000). The loss for the year of US$1,654,000 (1997 - loss US$3,718,000)
has been charged to reserves.

The loss per share amounted to 10.0 cents (1997 - loss 46.0 cents). The attributable net asset value per share
at 31 December 1998 amounted to 19 cents (1997 - 35 cents)

The Directors do not recommend the payment of a dividend.

Principal activities

The principal activity of the Group is that of mining. A review of the Group’s operations for the year ended
31 December 1998 and the indication of likely future developments are set out on pages 3 to 8.

Director’s

The Directors of the Company during the year were:

Craig Niven — UK — Chairman
Mladen Ninkov — Australian — President
Dal Brynelsen — Canadian (Appointed 14 July 1998)
John Goodger — UK
Gordon Montgomery — UK
William Mulligan — US
John Steele — Canadian

Under the bye laws of the Company, the Directors serve until re-elected at the next Annual General Meeting
of the Company. Being eligible all the Directors currently in office offer themselves for re-election at the forth-
coming Annual General Meeting of the Company.

The interests of the Directors holding office at 31 December 1998 and their immediate families in the share
capital of the Company were as follows:

Name

At 31 December 1998

At 1 January 1998
or date of appointment

Ordinary shares
No.

Options over
ordinary shares No.

Ordinary shares
No.

Options over
ordinary shares No.

Craig Niven
Mladen Ninkov
Dal Brynelson
John Goodger
Gordon Montgomery
William Mulligan
John Steele

50,000
30,001
1
51,000
40,100
1
25,001

500,000
1,000,000
250,000
100,000
100,000
100,000
250,000

25,000
1
1
1,000
100
1
1

40,000
–
–
40,000
40,000
40,000
40,000

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

DIRECTOR’S REPORT
DIRECTOR’S REPORT

There has been no change in any of the Directors’ interests since the year end to the date of this report.

During 1998 new share options were granted to directors and management of the Company. The options that
were due to expire on 31 December 1998 and exercisable at 50 cent per share, over 200,000 new ordinary
shares in the Company held by five of the directors, were cancelled. New share purchase options over a
maximum of 2,450,000 new ordinary shares in the capital of the Company (“the New Options”) have been
granted to directors and management of the Company. Each New Option granted gives the holder the right
to subscribe for new ordinary shares in the Company at an exercise price of US 24 cents at any time from the
date of grant up to and including 31 August 2001.

All of the Directors’ interests detailed are beneficial.

On 22 April 1998, the Company was informed that Craig Niven had received irrevocable undertakings from
shareholders holding 7,250,000 ordinary shares in the Company then representing 51.8% of the ordinary shares
in issue. These undertakings provided for Craig Niven to exercise all voting rights attaching to those shares,
and expired on 16 June 1998.

Substantial interests

The following persons were on the register of members of the Company as being the registered holders of 3%
or more of the issued ordinary shares at 31 December 1998 and at 31 May 1999.

At 31 December 1998.

At 31 May 1999.

Number

UBS (Luxembourg) SA CEDEL Account
Morstan Nominees Limited
Bank Sal Oppenheim JR & CIE (Switzerland) Ltd
Chase Nominees Limited
Georgia Pacific Securities Corp.
Gee & Co.
Dynamic Mid-Ocean Global Fund Limited
Seine Finance SA
BGG Banque Genevoise De Gestion
Haywood Securities
MGT-EOC Nominees Limited

6,859,790
1,250,000
900,000
750,000
700,000
700,000
700,000
700,000
–
–
–

32.7
6.0
4.3
3.6
3.3
3.3
3.3
3.3
–
–
–

6,874,815
1,250,000
–
750,000
700,000
700,000
–
–
700,000
648,000
700,000

32.7
6.0
–
3.6
3.3
3.3
–
–
3.3
3.1
3.3

In order to improve the speed and efficiency in settling trades in the Company’s shares, which can not be
settled through CREST, shareholders may register their shareholdings with UBS (Luxembourg) SA CEDEL
Account, reference 003682323, for clearance through the international CEDEL clearance system. Further
details may be obtained from the Company secretary.

Post balance sheet events

On 4 June 1999 the Company completed a private placement of 1,666,667 new ordinary shares at 30 cents,
to raise cash of $500,000 before expenses.

R E P O R T

E P O R T A N DN D A C C O U N T S

C C O U N T S 1 9 9 9

DIRECTOR’S REPORT
DIRECTOR’S REPORT

Corporate Governance

A lthough registered in Bermuda and therefore not obliged to comply with the code of best practice

established by the Cadbury Committee in the report on the Financial Aspects of Corporate Governance,
the Company has reviewed and broadly supports this code. The Company does not comply where compliance
would not be commercially justified allowing for the practical limitations relating to the Company’s size.

The Board of directors includes a number of non executive directors who are independent and free from any
business or other relationship which could materially interfere with the exercise of their independent
judgement. The Board meets regularly and is responsible for the overall strategy of the Group, its performance,
management and major financial matters. A remuneration committee comprising two non executive
directors has been established to review the provision of services to the Company by the directors and the
terms of employment for management.

Auditors

Grant Thornton have indicated their willingness to continue in office as auditors to the Company and a
resolution proposing their appointment will be put to the forthcoming Annual General Meeting.

Statement of directors’ responsibilities in respect of the accounts

Bermuda company law and generally accepted best practice requires the Directors to prepare accounts for each
financial year which give a true and fair view of the state of affairs of the Group and of the profit or loss of
the Group for that period. In preparing these accounts, the Directors have:

•

selected suitable accounting policies and applied them consistently;

made judgements and estimates that are reasonable and prudent;

stated whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the accounts; and

prepared the accounts on the going concern basis

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy
at any time the financial position of the Group. They are also responsible for safeguarding the assets of the
Group and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.

This report was approved by the Board and signed on its behalf by:

Craig Niven
Chairman

Mladen Ninkov
President

London
4 June 1999

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

REPORT OF INDEPENDENT AUDITORS
REPORT OF INDEPENDENT AUDITORS

TO THE MEMBERS OF GRIFFIN MINING LIMITED

We have audited the financial statements on pages 15 to 30 which have been prepared in accordance with
International Accounting Standards and under the accounting policies set out on pages 19 and 20.

Respective responsibilities of directors and auditors

The directors are responsible for preparing the Annual Report, including as described on page 13, the
financial statements. Our responsibilities, as independent auditors, are established by statute, the Auditing
Practices Board, and by our profession’s ethical guidance.

We report to you our opinion as to whether the financial statements give a true and fair view. We also
report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the
company has not kept proper accounting records, or if we have not received all the information and expla-
nations we require for our audit.

We read the other information contained in the Annual Report and consider whether it is consistent with
the audited financial statements. We consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the financial statements.

Basis of opinion

We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board in the
United Kingdom. An audit includes examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the financial statements, and of whether the accounting
policies are appropriate to the circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
financial statements are free from material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the
financial statements.

Opinion

In our opinion the financial statements give a fair and true view of the state of affairs of the group at
31 December 1998 and of its loss for the year then ended.

GRANT THORNTON
REGISTERED AUDITORS &
CHARTERED ACCOUNTANTS

London
4th June 1999

R E P O R T

E P O R T A N DN D A C C O U N T S

C C O U N T S 1 9 9 9

CONSOLIDATED PROFIT AND LOSS ACCOUNT
CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the year ended 31 December 1998 (expressed in thousands US dollars)

Income

Gains on the disposal of investments
Other income

Net operating expenses
Provisions in respect of continuing operations
Release of negative goodwill

Operating (loss)

Foreign exchange (losses)

Interest receivable and similar income

(Loss) on ordinary activities before taxation

Taxation on ordinary activities

(Loss) on ordinary activities after taxation

Minority interests

(Loss) for the financial year

(Loss) per share (cents)

Fully diluted (Loss) per share (cents)

Notes

1
1

2
5
14

1998
$000

147
–
147

(711)
(1,976)
490

(2,050)

(10)

1997
$000

139
18
157

(882)
(3,226)
183

(3,768)

(3)

(2,029)

(3,718)

–

(2,029)

(3,718)

375

–

(1,654)

(3,718)

(10.0)

(46.0)

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET

As at 31 December 1998 (expressed in thousands US dollars)

Fixed assets
Intangible assets
Tangible assets

Current assets
Portfolio investments
Accounts receivable
Prepaid expenses
Cash and deposits

Creditors: Amounts falling due within one year
Accrued expenses
Creditors

Net current assets

Negative goodwill

Total net assets

Capital and reserves
Share capital
Shares to be issued
Share premium
Investment revaluation reserve
Foreign exchange reserve
Profit & loss account

Equity shareholders’ funds

Equity minority interests

Equity interests

Number of shares in issue and to be issued

Attributable net asset value per share

Notes

9
10

16
17

1998

$000

4,344
263
4,607

165
14
11
408
598

(119)
(85)

394

(288)

4,713

2,099
–
12,587
(911)
243
(9,972)

4,046

667

4,713

1997

$000

5,427
360
5,787

529
157
23
402
1,111

(85)
(63)

963

(778)

5,972

818
780
10,878
(717)
170
(8,318)

3,611

2,361

5,972

20,993,779

10,408,154

$0.19

$0.35

The accounts on pages 15 to 30 were approved by the Board of Directors and signed on its behalf by:

C L B Niven
Chairman
4th June 1999.

Gordon Montgomery
Director

R E P O R T

E P O R T A N DN D A C C O U N T S

C C O U N T S 1 9 9 9

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

For the year ended 31 December 1998 (expressed in thousands US dollars)

(Loss) for the financial year

Unrealised (losses) on investments

Currency translation differences in
foreign currency net investments

Total gains and losses recognised in the year

Notes

1998
$000

(1,654)

(194)

(1,776)

1997
$000

(3,718)

(677)

(97)

(4,492)

Losses and profits for the financial year are the same as those on an historical cost basis

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

CASH FLOW STATEMENT
CASH FLOW STATEMENT

For the year ended 31 December 1998 (expressed in thousands US dollars)

Net cash (outflow) from operating activities

Investing activities

Payments to acquire intangible fixed assets
Payments to acquire tangible fixed assets
Payments to acquire investments
Payments to acquire subsidiary undertakings

Net cash (outflow) from investing activities

Net cash (outflow) before financing

Financing

Issue of ordinary share capital
Expenses paid in connection with share issue

Increase / (Decrease) in cash and cash equivalents

Reconciliation of operating (loss) to net cash (outflow)
from operating activities

Operating (loss)
Interest received
Taxation
Depreciation
Gains on sale of investments
Receipts on the sale of investments
Payments to acquire investments
Provisions in respect of continuing operations
Release of negative goodwill
Decrease / (increase) in debtors
Increase / (decrease) in creditors
Other non-cash income, including exchange differences

Notes

9
10

15
16

1998
$000

(246)

(1,093)
(7)
–
(14)

(1,114)

1997
$000

(548)

(192)
(23)
(89)
(538)

(842)

(1,360)

(1,390)

1,728
(362)
1,366

(2,050)
31
–
4
(147)
230
–
1,976
(490)
155
57
(12)
(246)

1,000
(61)
939

(451)

(3,768)
53
–
9
(139)
1,390
(1,330)
3,226
(183)
308
(107)
(7)
(548)

R E P O R T

E P O R T A N DN D A C C O U N T S

C C O U N T S 1 9 9 9

ACCOUNTING POLICIES
ACCOUNTING POLICIES

Basis of accounting

The accounts have been prepared in accordance with applicable International Accounting Standards.

The significant accounting policies adopted are detailed below:

Accounting convention

The accounts have been prepared under the historical cost convention modified for the revaluation of
portfolio investments.

Consolidation basis

The Group accounts consolidate the accounts of the Company and all its subsidiary undertakings drawn up
to 31 December each year, with the exception of Onas Resources Oy which was put into liquidation in 1998.
The accounts of Onas Resources Oy, a wholly owned subsidiary, have not been consolidated as it has always
been intended to dispose of this company.

The results of subsidiary undertakings acquired are included from the date of acquisition. Profits or losses on
intra-group transactions are eliminated in full. On acquisition of a subsidiary, all of the subsidiary’s assets and
liabilities which existed at the date of acquisition are recorded at their fair values reflecting their condition
at that date.

Fixed assets

Intangible assets

Expenditure on licences, concessions and exploration incurred by subsidiary undertakings are carried as
intangible assets until such time as it is determined that there are commercially exploitable reserves at which
time such costs will be transferred to tangible fixed assets to be amortised over the expected productive life
of the asset. The Group’s intangible assets are subject to periodic review by the Directors. Exploration, appraisal
and development costs determined as unsuccessful are written off to the profit and loss account.

Tangible assets

Plant and equipment, office furniture and equipment and motor vehicles are shown at cost less depreciation
and provisions for permanent diminution in value (see note 10).

Investments

Fixed asset investments comprises royalties, carried interests, and interests in unconsolidated subsidiary under-
takings which are valued at cost. An adjustment is made if there is a permanent diminution in value of the
investment, or if a previous diminution in value is no longer justified by changed circumstances.

Adjustments to the value of long term investments are accounted for through the profit and loss account.

Depreciation

Plant and equipment will be depreciated at rates appropriate to the expected life of the asset once
production has commenced. Office equipment and motor vehicles are depreciated over four years on a straight
line basis.

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

ACCOUNTING POLICIES
ACCOUNTING POLICIES

Investments

Current asset investments are valued as follows:

Portfolio investments

Marketable securities listed or dealt in on a recognised stock exchange, or an over the counter market, are
valued at the mid market price on such exchange or market.

Unquoted investments are initially valued at cost. A reduction in the value of an unquoted investment will
be made if considered appropriate in the light of a company’s condition or prospects. Increases in value will
only be made if substantiated by significant transactions in the relevant company’s shares by third parties or
in the event of a material change in the underlying value of the company.

Realised gains and losses on sales of investments are calculated based on the average cost of the investment
and are reflected in income when realised.

Investment revaluation reserve

Unrealised appreciation and depreciation of investments as of 31 December are reflected within the
investment revaluation reserve.

Foreign currency transactions

Investments and monetary items have been translated at rates in effect at the balance sheet date. Foreign
currency transactions have been translated at the rate in effect at the date of transaction. Any realised or
unrealised exchange adjustments have been charged or credited to income.

The accounts of overseas subsidiary undertakings are translated at the rate of exchange ruling at the balance
sheet date. The exchange difference arising on the retranslation of opening net assets is taken directly to the
foreign exchange reserve. All other translation differences are taken to the profit and loss account.

Negative goodwill

The excess of the fair value of the attributable net assets acquired on acquisition of a subsidiary over the fair
value of the consideration given, representing a discount on the fair value of assets acquired, being “negative
goodwill”, will be recognised as income when the assets are disposed of, or amortised over the expected
productive life of the assets to which it relates.

Income

Income comprises, gains on disposal of investments and other income receivable from third parties net of Value
Added Tax or similar taxes

R E P O R T

E P O R T A N DN D A C C O U N T S

C C O U N T S 1 9 9 9

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

1. Income

The Group’s income arises in North America and from continuing operations.

2. Net operating expenses

Administrative expenses
Costs of determining the contracts of Christopher and Elizabeth Hall
Expenses of admission to Alternative Investment Market

All operating expenses charged to profit relate to continuing operations.

3. Directors’ remuneration

1998
$000
681
30
–
711

The following fees and remuneration were receivable by the Directors holding office during the year:

Craig Niven
Mladen Ninkov
Dal Brynelsen (appointed 14/07/98)
John Goodger
Gordon Montgomery
William Mulligan
John Steele

Fees

Salary

$000
–
–
6
13
–
13
–

$000
–
–
–
–
–
–
–

Taxable
benefits
$000
–
–
–
–
–
–
–

Total
1998
$000
–
–
6
13
–
13
–

1997
$000
718
126
38
882

Total
1997
$000
–
–
–
2
–
2
–

Until 12 February 1998 Craig Niven was a director of Global Emerging Markets Europe Limited, a subsidiary
of Global Emerging Markets Limited (“GEM”). In consideration of GEM procuring the services of Craig Niven
as a Director and Chairman of the Company, GEM received fees of $7,000 (1997 $35,000) during 1998. Craig
Niven is a director and shareholder of Zetachoice Limited which received fees of $58,000 (1997 nil) for the
provision of the services of Craig Niven as a Director and Chairman of the Company during 1998.

Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes
Trust, received fees of $116,000 (1997 nil) for the provision of advisory services to the Company during 1998.
Mladen Ninkov is a director and employee of Keynes Investments Pty Limited.

Gordon Montgomery is a partner in Company Investigations and Information Systems. $13,000 (1997 $2,000)
of fees were receivable by Company Investigation and information Systems during the year from the Company
for the provision of the services of Gordon Montgomery as a Director of the Company.

John Steele is a Director of Asian Tiger Resources Inc. $13,000 (1997 $1,000) of fees were receivable by Asian
Tiger Resources Inc during the year from the Company for the provision of the services of John Steele as a
Director of the Company.

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

4. Transactions with Directors

As provided by the terms of the sale and option agreement to purchase China Zinc Pty Limited, Keynes
Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust,
received a placement commission of $50,000, being 3% of the funds raised on a private placement
completed on 26 June 1998. Mladen Ninkov is a director and employee of Keynes Investments Pty Limited.

5. Provisions in respect of continuing operations

Provisions made in respect of the recoverability of assets.

United Kingdom gold exploration expenditure
Botswana copper exploration and development expenditure
Burkina Faso gold exploration and development expenditure
Total provisions against intangible assets
Burkina Faso gold exploration and development, tangible fixed assets
Onas Resources Oy fixed asset investment
Mount Hamilton royalty fixed asset investment
Current asset investments

1998
$000
7
1,718
151
1,876
100
–
–
–
1,976

1997
$000
1,075
–
1,089
2,164
126
469
444
23
3,226

The Directors have considered the value of each of the Group’s projects having regard to the current stage of
development and the economic and other factors affecting the realisable value of each project.

6. Interest receivable and similar income

Bank and short term interest

7. Taxation on ordinary activities

Taxation on ordinary activities

Corporation tax

1998
$000
31

1998
$000
–

1997
$000
53

1997
$000
–

The Company is resident for corporation tax purposes in the United Kingdom. No charge to corporation tax
arises in the UK due to losses in the year. The Company has unutilised income tax losses estimated at
$4,000,000, and capital losses estimated at $200,000.

8. (Loss) / per share

Losses per share have been calculated on the basis of the net loss after taxation of US$1,654,000 (loss
US$3,718,000 in 1997) and the weighted average number of shares in issue in the year ended 31 December
1998 of 16,457,940 (8,068,565 in 1997).

There is no dilutive effect of the warrants to purchase 1,250,000 shares at $0.50 and share purchase options
to purchase 2,775,000 shares at $0.24 because the exercise prices of the warrants and share purchase options
were greater than the weighted average market price of the Company’s ordinary shares in the year.

R E P O R T

E P O R T A N DN D A C C O U N T S

C C O U N T S 1 9 9 9

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

9. Intangible assets

Exploration interests

COST / VALUATION
At 31 December 1997,
Foreign exchange adjustments
Additions during the year
Adjustment to fair value on acquisition
At 31 December 1998

PROVISIONS
At 31 December 1997
Foreign exchange adjustments
Amounts provided during the year
At 31 December 1998

NET BOOK VALUE
At 31 December 1998
At 31 December 1997

Analysis by geographical area and nature of activity

China - Zinc
Burkina Faso- Gold
Botswana - Copper
Sweden - Diamonds

1998
$000
3,238
1,056
–
50
4,344

$000
7,591
86
1,093
(375)
8,395

(2,164)
(11)
(1,876)
(4,051)

4,344
5,427

1997
$000
2,652
1,105
1,626
44
5,427

Intangible assets represent fair values on acquisition, plus subsequent expenditure on licences, concessions,
exploration, appraisal and development work. Where expenditure on an area is determined as unsuccessful
such expenditure is written off to the profit and loss account. The recoverability of these assets depends,
initially, on successful appraisal activities, details of which are given in the report on operations. The outcome
of such appraisal activity is uncertain. Should economically exploitable mineral deposits be established,
sufficient finance would be required to bring such discoveries into production.

The adjustment to the fair value on acquisition arises from the Company exercising its option during 1998 to
acquire the remaining 50% interest in the share capital of China Zinc Pty Ltd (“China Zinc”) which it did
not already own. Consideration for this acquisition was settled by the issue of 3,500,000 new ordinary shares
in the Company at 25.8 cents per share. A further 100,000 new ordinary shares were issued to Global Emerging
Markets Limited at 25.8 cents per share as part of this acquisition. In addition, costs of US$14,000 were
incurred in exercising the option, giving a total cost of US$943,000. The directors consider that the fair value
on acquisition of the underlying investment of China Zinc equates to that paid by the Company. On this basis
the 50% minority interest not held by the Company at 1 January 1998 was valued at US$1,318,000 giving
rise to a fair value adjustment on the acquisition of this interest for a total consideration of US$943,000 in
1998 of US$375,000.

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

10. Tangible assets

COST / VALUATION
At 31 December 1997
Additions
At 31 December 1998

DEPRECIATION
At 31 December 1997
Provided during the year
At 31 December 1998

PROVISION FOR DIMINUTION IN VALUE
At 31 December 1997
Provided during the year
At 31 December 1998

NET BOOK VALUE
At 31 December 1998
At 31 December 1997

Tangible fixed assets comprise:

Cost:
Plant and equipment
Office furniture and equipment

Depreciation
Office furniture and equipment

Provisions for diminution in value
Plant and equipment

NET BOOK VALUE

11. Investments

COST
At 31 December 1997
Disposals during the year
At 31 December 1998

PROVISIONS
At 31 December 1997
Disposals during the year
At 31 December 1998

NET BOOK VALUE
At 31 December 1998 and 1997

$000
542
7
549

56
4
60

126
100
226

263
360

1998
$000

476
73
549

1997
$000

476
66
542

(60)

(56)

(226)

(126)

263

360

$000
913
(469)
444

(913)
469
(444)

–

R E P O R T

E P O R T A N DN D A C C O U N T S

C C O U N T S 1 9 9 9

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

Investments held as fixed assets and other unquoted investments have been valued at cost less provisions by
the Directors in the absence of readily ascertainable market values.

12. Portfolio investments

Quoted (cost US$1,076,000 – 1997 US$1,046,000)
Unquoted (cost US$200,000 – 1997)

1998
$000

165
–
165

Quoted securities are valued at the mid market price. Unquoted investments are valued at cost.

13. Cash and deposits

Analysis of changes in cash and cash equivalents

At 31 December 1997
Net cash outflow
At 31 December 1998

14. Negative goodwill

At 31 December 1997
Transfer to profit and loss account in respect of Professional
Property Projects (Pty) Limited
At 31 December 1998

1997
$000

329
200
529

$000
402
6
408

$000
778

(490)
288

The release of $490,000 to profit and loss account follows full provision being made against the Botswana
copper project in the year.

Negative goodwill represents the excess of the fair value of the attributable net assets acquired on the
acquisition of a subsidiary company, over the fair value of the consideration given, being a discount on the
fair value of the assets acquired. Negative goodwill will be recognised as income and credited to the profit and
loss account when the assets are sold or amortised over the expected productive life of the assets. Negative
goodwill may be analysed between the subsidiary companies acquired as follows:

Arising on acquisition of STREMCO S.A.
Arising on acquisition of Professional Property Projects (Pty) Ltd

1998
$000
288
–
288

1997
$000
288
490
778

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

15. Share capital

AUTHORISED:
Ordinary shares of US$0.10 each

1998
Number

$000

1997
Number

50,000,000

5,000

25,000,000

CALLED UP ALLOTTED AND FULLY PAID
Ordinary shares of US$0.10 each
At 1 January
Issued during the year
Bought back in the year
At 31 December

8,178,154
13,030,000
(214,375)
20,993,779

818
1,303
(22)
2,099

5,678,154
2,500,000
–
8,178,154

$000

2,500

568
250
–
818

The authorised share capital of the Company was increased by the passing of an ordinary resolution at the
annual general meeting of members held on 12 June 1998 to $5,000,000 by the creation of an additional
25,000,000 ordinary shares of $0.10 each ranking pari passu with the existing ordinary shares.

On 23 January 1998 the Company issued 2,230,000 new ordinary shares at 35 cents each as part of the
consideration for a 50% interest in the share capital of China Zinc Pty Limited acquired in 1997.

On 17 April 1998 the Company issued 3,500,000 new ordinary shares at 25.8 cents each as consideration on
the exercise of an option to acquire the remaining 50% interest in the share capital of China Zinc Pty Limited
not already owned by the Company. A further 100,000 new ordinary shares were issued at 25.8 cents each
on 17 April 1998 in connection with this acquisition.

On 26 June 1998 the Company issued 7,200,000 new ordinary shares in the Company at 24 cents each on a
private placement of shares.

On 15 September 1998 214,375 ordinary shares in the Company were bought in for cancellation at 40 cents
each as part of agreements for the sale of the Company’s interest in unquoted portfolio investments.

In addition to the options granted to directors and management in 1998 the Company granted options over
325,000 new ordinary shares in the Company exercisable at 24 cents each. 300,000 of these options expire on
31 August 1999. 25,000 of these options expire on 31 August 2001.

On 15 January 1999 the 1,250,000 quoted warrants, exercisable into new ordinary shares in the Company at
a subscription price of US$0.50 expired. No warrants were exercised prior to the expiry date. Following the
lapse of the warrants there are no further quoted warrants remaining open for exercise.

R E P O R T

E P O R T A N DN D A C C O U N T S

C C O U N T S 1 9 9 9

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

Certain former Directors participated in a bonus scheme which was linked to “phantom options” over the
Company’s shares. When this scheme was established, in 1995, it was designed to operate as a phantom option
scheme in respect of 637,500 ordinary shares. In the event that the market price of an ordinary share
exceeded US$0.50 on the day of exercise, the participating Directors were entitled to receive, in cash from
the Company, a sum calculated as the number of “phantom options” held multiplied by the difference between
US$ 0.35 and the market price on the exercise date. This bonus was subject to the participating directors’
applying 60% of the bonus payment received in subscribing for new ordinary shares in the Company at the
market price on the date of exercise. On 22 April 1998 the Company was notified of the existence of a
control group in accordance with s840 Income and Corporation Taxes Act 1988. This event resulted in the
final exercise date being brought forward to 22 May 1998. The former Directors did not exercise any of the
phantom options which duly lapsed on 22 May 1998.

16. Share premium

At 31 December 1997
Premium on shares issued in period
Expenses paid in connection with share issue
Premium on shares bought back in the year
At 31 December 1998

17. Investment revaluation reserve

At 31 December 1997
Movements during the year
At 31 December 1998

18. Profit and loss account

At 31 December 1997
(Loss) for the financial year
At 31 December 1998

19. Reconciliation of shareholders’ funds

Total gains and (losses) recognised in the year
Issue of ordinary shares in the year
Shares to be issued
Net additions to shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds

$000
10,878
2,135
(362)
(64)
12,587

$000
(717)
(194)
(911)

$000
(8,318)
(1,654)
(9,972)

1997
$000
(4,492)
939
780
(2,773)
6,384
3,611

1998
$000
(1,776)
2,991
(780)
435
3,611
4,046

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

20. Equity minority interests

At 31 December 1997
Adjustment on acquisition of minority interest in China Zinc Pty Limited
Transfer to profit and loss account in respect of Professional Property
Projects (Pty) Limited
At 31 December 1998

Analysis of minority interests by subsidiary company

Arising on acquisition of China Zinc Pty Limited
Arising on acquisition of STREMCO S.A.
Arising on acquisition of Professional Property Projects (Pty) Limited

$000
2,361
(1,319)

(375)
667

1998
$000
–
667
–
667

1997
$000
1,319
667
375
2,361

The release of $375,000 to profit and loss account represents the minority interest in Professional Property
Projects (Pty) Limited and follows full provision being made against the Thakadu project in the year.

21. Attributable net asset value per share

The attributable net asset value per share has been calculated from the consolidated net assets of the Group
after deducting the minority interest divided by the number of ordinary shares in issue at 31 December 1998
of 20,993,779 (10,408,154 at 31 December 1997).

R E P O R T

E P O R T A N DN D A C C O U N T S

C C O U N T S 1 9 9 9

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

22. Subsidiary companies

At 31 December 1998, Griffin Mining Limited had interests in the share capital of the following principal
subsidiary companies.

Name

China Zinc
Pty Limited

Hebei Hua’ Ao Mining
Development Company
Limited

Societé de Travaux
de Recherché et
D’Exploration Miniére
et Compagneé S.A
(‘STREMCO’)

Societé des Mines
du Faso S.A.
(‘FASOMINE’)*

Professional Property
Projects (Pty) Ltd (‘PPP’)

Thakadu Mining
(Pty) Ltd. (‘TMP’)*

Class of
shares held

Proportion of
share held

Nature of
business

Country of
incorporation

Ordinary

100%

Holding company

Australia

80%
reducing to

Zinc exploration
and development

China

60%( after payback of

capital expenditure)**

Ordinary

51%

Gold exploration

Burkina Faso

Ordinary

51%

Gold mining

Burkina Faso

Ordinary

75%

Holding company

Botswana

Ordinary

75%

Copper mining

Botswana

Nordic Exploration AB

Ordinary

100%

Diamond exploration

Sweden

* All companies are directly owned by the Company except for Hebei Hua’ Ao Mining Development Company Limited,

in which China Zinc Pty Limited has a controlling interest, see below, TMP which is a wholly owned subsidiary of PPP

and FASOMINE which is 79.6% owned by STREMCO and 10.4% owned directly by the Company.

** The Joint Venture contract establishing the Hebei Hua’ Ao Mining Development Company Limited provides that 80%

of the net profits generated by the Joint Venture will be paid to the Foreign Party until such time as all the capital

expenditures arranged by the Foreign Party have been recouped by it, together with a coupon of 4.5%. Thereafter the

Foreign Party will receive 60% of the net profits, in accordance with its share in the equity interest in the Joint Venture.

G R I F F I N

R I F F I N M I N I N G

I N I N G L I M I T E D
I M I T E D

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

23. Financial instruments

The Group finances its operations primarily from equity issues. The Group does not enter into derivative trans-
actions such as interest rate swaps, forward rate agreements or forward currency contracts. The Group has no
borrowings other than trade creditors and funds in excess of immediate requirements are placed in US dollar
floating rate deposits. Although the Group has overseas subsidiaries operating in China and Africa whose costs
are denominated in local currencies, liabilities are primarily incurred in US dollars.

24. Post balance sheet event

On 4 June 1999 the Company completed a private placement of 1,666,667 new ordinary shares at 30 cents
to raise cash of $500,000 before expenses.