Griffin Mining Ltd. Annual Report 2001

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FY2001 Annual Report · Griffin Mining Ltd.

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Chairman’s Statement

Review of Operations

Directors and Senior Executives

Directors’ Report

Report of the Independent Auditors

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

Corporate Information

CONTENTS
CONTENTS

Page

Griffin Mining Limited’s shares are quoted on the Alternative Investment Market (AIM) of the London Stock Exchange (symbol GFM).

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

CHAIRMAN’S STATEMENT
CHAIRMAN’S STATEMENT

In my inaugural Chairman’s statement last year I

the Caijiaying mine. To achieve that goal,

stated that the first priority in the second half of 2001

Griffin has agreed to drill a minimum of 6 deep

was to complete the remaining matters required under

diamond drill holes in the northern section of the

the Chinese Mining Law to convert Griffin Mining

Caijiaying deposit. Drilling is to begin in May

Limited’s ("Griffin" or the "Company") exploration

and should be completed by July 2002. Assuming

licence over the Caijiaying zinc gold project into a

the drilling programme produces the anticipated

mining licence. It took all of 2001 and the beginning

results, the Company expects to move ahead with

of 2002 to complete the matters required to lodge the

the schedule outlined below.

application for a mining licence including the

Environmental Impact Study, the Staged Geological

2. The enhancement of the Chinese Feasibility

Report, the Chinese Feasibility Study and numerous

Study into a bankable feasibility study of western

other studies and reports. In the prosperous new

standard. This means editing and adding to the

Chinese Year of the Horse, Griffin was rewarded for

Chinese Feasibility Study including incorporating

its perseverance, patience and expertise by being

the above mentioned independent resource

granted its mining licence.

statement, the design of the underground decline

and the metallurgical work completed by the

This was a momentous event for your company, for

Company. It is envisaged this study will be

the Chinese mining industry and for the world mining

completed by the end of the northern hemisphere

industry in general. Griffin was able to accomplish

autumn.

something never previously achieved by any mining

company. It was granted the first ever mining licence

3. With the final bankable feasibility study in hand,

(over a base metals deposit) in the Peoples Republic

the Company with its financial advisor will

of China to a foreign controlled joint venture

approach, negotiate with and, hopefully, enter

company under the Chinese Mining Law of 1998.

into a project financing arrangement with one or

more commercial banks. That financing may

The Company’s focus has now turned to completing

involve debt, semi-debt, convertible debt or

all matters necessary to begin the construction of the

equity instruments. The Company hopes that

mine and processing plant at Caijiaying so that the

financing would be arranged and completed by

mine can be commissioned as soon as feasibly possible.

the end of 2002.

A number of critical steps will be required to be

completed prior to construction taking place.

4. With financing in place, the Company would

then move into the design, procurement and

1. The completion of a resource and reserve

construction stage. The majority of the design

statement drafted by independent resource

and tendering work would hope to be completed

geologists,

according

acknowledged

prior to the end of the northern hemisphere

international standards, to provide comfort to the

spring so that construction could begin in the

commercial banks that a long enough mine life

northern summer.

exists at Caijiaying to support repayment of the

project finance extended for the construction of

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CHAIRMAN’S STATEMENT
CHAIRMAN’S STATEMENT

5. The last stage would be the commissioning of the

to all of them. Special mention should, however, be

plant. Literally starting the mining, crushing and

made to those who have gone beyond the call of duty:

processing to ensure, over a period of time, that

Our nominated advisor and nominated broker,

all the components of the plant are functioning

Charles Stanley & Company; our loyal shareholders

according to specifications.

including Trellus Management Co; our independent

consultants, CSA Australia Pty Ltd; our loyal and

Griffin remains confident of China as a country in

hardworking staff in China and in London and finally

which to do business and as a place of continuing

your unpaid, yet dedicated, non executive directors.

exciting opportunities. The Company is well placed

to take advantage of these opportunities. The entry of

Obviously many things remain to be completed by the

China into the World Trade Organization at the end

Company, yet much has already been achieved. For a

of 2001, the continuing explosive growth in the

company of its market capitalization, Griffin has

Chinese economy and the country’s falling zinc

achieved impressive results with a limited staff and

production all augur well for the operations of Griffin

budget. The Company expects to achieve far more.

in China.

You, the shareholders, have been an integral part of

our success to date with your financial, moral and

Griffin has continued to initiate and investigate

market support. It is never forgotten and we continue

transactions both within and outside its traditional

to strive on a daily basis to repay that loyalty. We all

mining base to try to add real value to its

look forward to the year ahead in expectation of the

shareholders. In that regard, the Company obtained

continued success of the Company.

an equity holding in 2001 in Ozmosa Limited, an

Asian sports betting business. With the maturity of

that business, the Company decided to dispose of its

interest in Ozmosa. Although such a sale will not

realize proceeds to the Company anywhere near

expectations, Griffin invested no shareholders’ funds

in Ozmosa yet still obtained real benefits. Ozmosa

Mladen Ninkov

was able to shoulder some of the Company’s

Chairman

overheads and provided management with a real

30th April 2002.

understanding of the sports betting business and the

Asian markets, matters which will be of considerable

use to the Company in the foreseeable future.

Needless to say, the Company continues to look at

mining and non-mining transactions which meet its

strict investment parameters.

It should not be forgotten that a host of people and

other organizations have continued to strive to make

Griffin a success. The Company’s sincerest thanks go

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 development and investment company. Its principal
project is the Caijiaying zinc-gold project ("Caijiaying") in
the Peoples Republic of China (the "PRC").

Caijiaying Zinc Gold Project - China

Introduction

Caijiaying is a polymetallic deposit, comprising mainly

zinc, gold and silver, but also containing lead, gallium,
and other by-products. It is located approximately 200 km
north west of Beijing in Hebei Province, in the PRC. The
project site is easily accessible by sealed and unsealed road
with the Zhanggu highway passing through the project area.
Adequate water supplies are available from underground
sources on site which is also connected to the electricity
grid. The Caijiaying area is on the south east edge of the
Mongolian Plateau. Conditions are not severe although
winters are cold and dry.

The Caijiaying project is held by Griffin through its wholly
owned subsidiary, China Zinc Pty Ltd ("China Zinc").
China Zinc is an Australian company which has been
engaged in the development of Caijiaying through the
Hebei Hua' Ao Mining Development Company
("HSAMDC"), a contractual joint venture entity
established in 1994 in the PRC. China Zinc has a 60%
(80% until payback of capital) interest in HSAMDC, the
other shareholders being the Zhangjiakou City People’s
Government and the Hebei Bureau of the Ministry of
Land and Natural Resources.

In October 1998, HSAMDC was the first foreign
controlled joint venture to be issued with a new
exploration licence for a hard rock deposit in the PRC over
an area of 11.3 sq km at Caijiaying. This licence was
renewed in October 2001.

The licence area is broken down into five zones. Zone III
has been the main focus of exploration and development
activity. The other zones have not been so intensively
explored, but drilling and other work in zones II, IV and
V in particular have indicated significant potential for
further economic mineralisation.

Mineralisation at Caijiaying consists of multiple bodies of
zinc sulphide (plus gold and silver) in the main 1 sq km

resource area (zone III) which are of a porphyry intrusive
related class. Elsewhere on the property there is potential
for significant further discoveries of zinc, as well as gold
and copper (and other by-product metals). It has been
Griffin’s strategy to bring the project into production first
before testing these targets.

On the 21st March 2002, HSAMDC became the first
foreign controlled joint venture to be granted a mining
licence over a base metals deposit in the PRC when it
was granted a mining licence over 1.56 sq km of zone III
of the original 11.3 sq km licence area at Caijiaying.

On 5 June 2000 HSAMDC was granted a three year
exploration licence covering 102.2 sq km of highly
prospective ground surrounding the existing licence area
at Caijiaying.

Caijiaying project sketch map

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Overview

Mineralisation was first identified in the Caijiaying area
during the Chinese "Cultural Revolution" in the late
1960’s. Subsequently exploration teams under the aegis
of the Hebei Bureau of Land and Natural Resources
conducted 10 years of exploration work on Caijiaying,
including 95,000 metres of diamond drilling. $3 million
has since been spent by HSAMDC on Caijiaying
including; the cost of a pre-feasibility study by Bateman
Kinhill; a mining scoping study by CSA Australia Pty
Limited ("CSA") in conjunction with Gillespie Mining
Services Limited; approximately 8,000 metres of diamond
drilling; 300 metres of underground drive; ore-body
modelling; metallurgical testwork; and various geological,
metallurgical, engineering, environmental, power and
transport studies. A Staged Geological Report,
Environmental Impact Study and Chinese Feasibility
Study have also been completed as part of the application
for a mining licence.

Drilling angled verification holes at Caijiaying

REVIEW OF OPERATIONS
REVIEW OF OPERATIONS

A resource estimate for the deposit was originally
prepared for China Zinc by Bateman Kinhill. Bateman
Kinhill defined an in situ mineable resource of 27.6
million tonnes at 7.4% zinc at a 4% minimum zinc cut-
off (with a global resources of 57.8 million tonnes at 4.8%
zinc at a 1% minimum zinc cut-off). The Bateman
Kinhill resource estimate was based on a geological model
that showed zinc mineralisation occurring in steeply
dipping structures.

Work subsequently undertaken by Griffin initially
involved infill drilling and resource studies on an open-
pit concept. A polygonal resource estimate in micromine
was prepared for Griffin by CSA of 51 million tonnes at
5.01% zinc at a 1% cut off and 22 million tonnes at
8.87% zinc at a 4% cut off. However, the open pit
concept was hampered by difficulties in interpretation of
the ore-block geometry.

Underground trial mining in the southern section of zone
III completed in 2000 revealed that the main mineralised
bodies trend parallel to the drill grid. Although this
meant that the resource had to be downgraded from that
previously estimated, it is more amenable to smaller scale
underground mining than the previous interpretation.
On this basis, a resource of 2.6 million tonnes at 9.12%
zinc at a 4% cut off, and 1.52 million tonnes at 12.34%
zinc at a 7% cut off has been estimated. The smaller
resource estimate is conservative, but it has been
concluded that mining of the reduced resource is
financially robust and represents a lower cost, technically
more feasible and lower risk plan that will take advantage
of the low costs of underground mining in China.

In 2000 the Company commissioned a mining scoping
study from CSA in conjunction with Gillespie Mining
Services Limited. This indicated that an underground
mine could be brought into production at Caijiaying to
economically produce some 180,000 tonnes of ore per
annum at 12.3% zinc, 0.7 grams per tonne gold and 48
grams per tonne silver over approximately 10 years.

With the scoping study indicating that an underground
mine could be developed at Caijiaying to economically
produce zinc, gold, silver and other metals, HSAMDC
applied for, and on 21st March 2002 was granted, a
mining licence covering 1.56 sq km of zone III of the
original 11.3 sq km licence area.

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

Geology

Mineralisation at Caijiaying is hosted in amphibolite
grade meta-volcanics and meta-sediments formed at the
same time as the emplacement of regional granite
porphyries during the Yanshanian Orogeny being of
Jurassic age (about 141 million years). The
metallogenesis is interpreted as porphyry intrusive-
hydrothermal and comprises a polymetallic mineral
assemblage consisting of zinc, silver, gold and lead, with
traces of copper and a range of trace elements including
antimony, arsenic, mercury, cadmium, as well as
selenium.
gallium,
Mineralisation
zones
of
(I to V) covering an area of roughly 2 x 2 kilometres
and is thought to be locally controlled by ENE, NW
and nearly N-S faults and fractures. Zone III forms the
main mineralised zone explored (800 x 1000 metres)
and is the basis of the resource studies produced to date.

germanium,
forms

indium
a

number

and

Mineralisation was previously interpreted by Chinese
geologists of the Third Brigade of the now defunct
Ministry of Geology and Mineral Resources, as forming
a series of E-W trending, fairly steeply (-50º to -70º)
southerly-dipping lenses from 0-500 metres below
surface. However, it was recognised that the geometry
of the lenses was complex and that there were probably
a number of different orientations present. In 1994, the
first western evaluation was conducted by the
Australian office of Bateman Kinhill using the Chinese
geological model.

REVIEW OF OPERATIONS
REVIEW OF OPERATIONS

The Company’s focus has now turned to completing all
matters necessary to commission a mine at Caijiaying as
soon as possible.

The first stage in this process will be the completion of a
resource and reserve statement drafted by independent
resource geologists, according
to acknowledged
international standards. This is required to provide
comfort to the commercial banks that sufficient mine life
exists at Caijiaying to support repayment of any project
finance extended for the construction of the Caijiaying
mine. To achieve that goal, Griffin has agreed to drill a
minimum of 6 deep diamond drill holes in the northern
section of the Caijiaying deposit. Drilling is to begin in
May and should be completed by July 2002.

Assuming the drilling programme produces the
anticipated results, the Company then expects to proceed
with the enhancement of the Chinese Feasibility Study
into a bankable feasibility study of western standard. This
means editing and adding to the Chinese Feasibility
Study including incorporating the above mentioned
independent resource statement, the design of the
underground decline and the metallurgical study
completed by the Company.

With the final bankable feasibility study in hand, the
Company with its financial advisor, Endeavour Financial
Corporation, will approach, negotiate with, and
hopefully, enter into a project financing arrangement
with one or more commercial banks. That financing may
involve debt, semi-debt, convertible debt or equity
instruments.

With financing in place, the Company would then move
into the design, procurement and construction phase of
the Caijiaying project, leading to the commissioning of
the plant.

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REVIEW OF OPERATIONS
REVIEW OF OPERATIONS

Whilst concerns were expressed over ore-block
continuity, these were not seen as serious as the plan at
that time was for an open pit mining operation where
detailed geometry would be less important.

Initial follow on work by Griffin in 1998 showed that many
ore zones on N-S sections appeared better interpreted as
more horizontal than steeply dipping, which implied a
different ore block model than previously interpreted.

Infill drilling carried out in the southern part of zone III
during 1995 and in 1998 confirmed the occurrence of
mineralisation, however, direct correlation of individual
ore lenses was still difficult. Angled orientated drilling in
1998 also showed that mineralised lenses could cut-off
over distances of <25 metres in an E-W direction which
indicated there was a problem with a simple E-W ore lens
strike interpretation. However, good continuity was
shown in the N-S direction.

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

Due to the continuing difficulties with geological
interpretation, Griffin decided to undertake underground
trial mining and underground drilling at zone III in
October 1999 to better define the dimensions of the
mineralised zones. The underground development and
drilling work confirmed the presence of extensive high-
grade mineralisation in the southern end of zone III.
However, the orientation of the mineralised zones was
different and more variable than predicted and this meant
that it was necessary to revise the ore-block model
relating to the remainder of the deposit to agree with the
underground findings.

The underground work showed that the mineralised
lenses are both moderate angle (50º to 60º), southerly
dipping, fault-controlled lenses, averaging 2.5 metres
wide and very steeply dipping to sub-vertical, possibly
fracture controlled, N-S lenses, in zones from 5 to 10
metres wide. Areas of more patchy and possibly
shallower dipping mineralisation are interspersed.

Although the highest grade zones are often thin,
composite grade was maintained over much thicker
intervals (up to 12 metres thick at 16% zinc), due to
intervening areas carrying significant grade. A large
proportion of the mineralisation is now interpreted to
be controlled by N-S trending fractures and not in the
E-W lodes as previously thought.

Drilling over much of the deposit is on 100 metre spaced
sections. Infill drilling in the southern part of the deposit
(to 50 metre spacing) has confirmed the occurrence of
high grade mineralisation between the 100 metre spaced
sections. It is therefore reasonable to assume that
additional lenses occur between the currently drilled
sections although these cannot be quantified with the
current drill spacing.

Further infill and angled drilling in the wide spaced
northern section of zone III is planned for the Spring of
2002.

Underground drilling during trial mining

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REVIEW OF OPERATIONS
REVIEW OF OPERATIONS

Despite ongoing concerns about the ore lens geometry, a
further investigation into an open-pit option was
undertaken in 1999. It involved both block modeling
and optimisation studies completed by consultant PL
Kitto. A block model was constructed in datamine, using
wireframes of the zinc mineralisation at a 1% cut-off to
constrain the model and modeling parameters supplied by
Snowdens. This study estimated a global resource of
48.7Mt @ 4.7% zinc (at a 1% zinc cut-off), which
included 41.5Mt @ 5.29% zinc at a 2% cut-off and 25Mt
@ 6.81% zinc at a 4% cut-off. These estimates compared
well with the pre-feasibility study resource estimates (45.4
Mt @ 5.7% zinc at a 2% cut-off and 27.6 Mt @ 7.4% at
a 4% cut-off), with a slight decrease in tonnes and grade.

With doubts remaining about the ore-block geometry and
the difficulties of raising the large capital required for an
open pit mining operation (with a high pre-strip
requirement) it was decided to investigate the option of
mining Caijiaying via underground mining methods.

Resources

Using the drill hole results from the 1995 and 1998
drilling programmes, CSA calculated a polygonal
resource estimate in micromine based on the new
geological interpretation of more shallowly dipping ore
lenses (see Geology section in the Review of Operations).
Due to the irregular drill hole spacing across zone III, the
resource estimate was categorised as Inferred. Two
geological models were created. Model 1 included both
100 metre spaced fully drilled sections and 50 metre
spaced partially drilled sections and Model 2 included
only 100 metre spaced fully drilled sections. The two
models essentially reported lower and upper limits to the
resource. The two models reported the following tonnes
and grades:

At 1% zinc cut-off:

Model 1 31.47Mt @ 5.09% zinc

Model 2 50.69Mt @ 5.01 % zinc

At 4% zinc cut-off:

Model 1 13.42Mt @ 9.12% zinc
Model 2 21.61Mt @ 8.87 % zinc

Decline 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

Although the area of underground decline development in
1999 / 2000 was limited, it is believed that the evidence
acquired from the work produced results that can be
applied to the whole deposit in zone III. This work
consisted of detailed mapping and structural studies
followed by underground drilling up and down strike to
test the interpretations.

Studies based on the above work programme enabled a
reconciliation to be made with the original polygonal
resource interpretation. Whilst this indicated a resource
of some 20% of the original resource estimation, the large
decrease was due largely to the change in strike of the
mineralisation to N-S and the limited E-W continuity
compared to the previous models of E-W striking lodes.
However, it should be noted that there may well be
intervening areas within the area of the development that
have not been identified. In addition, very little
information is available up and down dip from the
current level of development. Thus, the potential for
additional mineralised lenses that pinch out either above
or below the development level and which were not
intersected, is considered high. As a result, the
downgrading factor in the resource must be considered
conservative.

The results from the reconciliation study were then
applied to the whole resource at zone III. In order to do
this an assumption had to be made that the area of the
representative of
underground development was
mineralisation over the entire deposit. This has not yet
been proven and represents a significant area of
uncertainty.

Prior to completion of the fully bankable feasibility study,
the Company has decided to confirm that
its
interpretation of the orientation of the orebody, gleaned
from the results attained in the southern section of zone
III, apply to the whole of zone III. This will be achieved
by drilling a minimum of 6 deep diamond drill holes in
the northern section of zone III. Until additional
information can be obtained
from this drilling
programme, the assumption relating to the representative
nature of the southern zone geology being extrapolative
to the whole deposit has to be made in order to estimate
the resource. This is a common problem in estimating
deep underground reserves.

Despite these conservative assumptions, the reduction to
20% of the previous resource estimate still results in
substantial resources of:

2.6Mt @ 9.12% zinc, 0.41% lead, 38g/t silver and 0.73g/t
gold, at a 4% zinc cut-off

1.52Mt @ 12.34% zinc, 0.53% lead, 48g/t silver and
0.75g/t gold, at a 7% zinc cut-off

Infill drilling to date has shown that mineralisation
occurs between the 100 metre and even 50 metre spaced
sections, so it is reasonable to predict that significant
additional undefined resources occur between the drilled
sections.

Mining

Following underground trial mining in 1999 / 2000 a
scoping study was prepared which indicated that the
deposit could be mined at an initial rate of 180,000
tonnes per annum over approximately 10 years. As the
geological model used for the scoping study is believed to
be conservative (being based on drilling that was
incorrectly oriented), additional resources may be proved
up ahead of mining by underground drilling and driving
in many areas where mineralisation is indicated from
original surface drilling. This will be significantly cheaper
than surface exploration because of the significant
overburden of up to 150 metres in the northern section
of zone III. The total tonnage, and possibly also the
grade, have potential to significantly increase as the
Caijiaying mine develops. This represents considerable
economic upside to the Company.

The scoping study provides for the deposit to be mined
by driving a new haulage decline (4 x 3.5 metre) to access
the main high-grade lenses in the northern part of the
deposit and spiral down to reach a total depth of 450
metres. A number of horizontal drives at 25 metre
intervals are proposed with an internal decline to access
ore zones to the south. The existing decline (2 x 2 metre)
can be extended and used for ventilation thereby
obviating the need for expensive ventilation shafts.

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REVIEW OF OPERATIONS
REVIEW OF OPERATIONS

Work completed in 2001/ 2002

Exploration potential

The main cause of the mineralisation at Caijiaying is
believed to be the heat and fluids associated with a
relatively young intrusive centre emplaced during a
period of volcanism that affected the area in the Jurassic
period. A number of volcanic centres occur at structural
intersections within a zone which trends east-northeast,
parallel to the margin of the North China Plate which is
200km to the north.

A number of empirical controls have been identified
within the exploration licence area surrounding Caijiaying
by previous Chinese work. Both regional and local
structural controls have also been recognised. The main
mineralisation occurs within synclinal folds, formed as
part of a conjugate set of structures in response to
movement along the regionally important F45 Fault,
which trends east-northeast across the area south of the
main deposits (Figure 4). The line of this fault is believed
to be on a zone of crustal weakness so that it may have
acted as a conduit for rising mineralising fluids

The priority for Griffin’s exploration strategy for Caijiaying
has been to concentrate on developing a zinc mine based
on the existing resources in zone III at Caijiaying rather
than pursuing further exploration targets. This has been
necessitated by the difficult financial markets rather than
a lack of exploration potential of the Caijiaying property.

The Company has long recognized the exceptional
exploration potential of the area surrounding the
Caijiaying project. Consequently HSAMDC applied for
an exploration licence over 102.2 sq km surrounding the
existing licence area at Caijiaying, the largest block
allowed under the Chinese mining regulations. On 5th
June 2000, HSAMDC was granted a 3 year exploration
licence over this area (see Figure 4). The Company
expects to maintain this licence by expending the
minimum amount required in 2002 by undertaking auger
drilling, base of hard pan geo-chemical sampling and
accumulated ground or aero magnetic data.

Following the successful completion of a private placing
and exercise of warrants to raise $3.1 million for the
Company in the Spring of 2001, the Company’s efforts in
late 2001 and early 2002 were focused upon applying for
a mining licence to allow for mining at Caijiaying. As
part of this process and as required by Chinese mining
regulations, Griffin commissioned a Staged Geological
Report, Environmental Impact Study and a Chinese
Feasibility Study from various local contractors in China.
These studies were based upon work completed to date by
HSAMDC and previously completed by the Chinese
holders of the original exploration licence, and were
designed to meet PRC, industrial, mining, environmental
and safety regulations. The Environmental Impact Study
concluded that the mine design, using advanced mining
and processing techniques and equipment with efficient
treatment installations for all discharges, will meet the
PRC’s industry policies. These studies were completed
in late 2001 and were supportive of HSAMDC’s
application for a mining licence at Caijiaying.

An application for a mining licence was submitted
following completion of the local technical studies in
late 2001, at the same time China joined the World
Trade Organisation. This, and other changes which are
seeing China move from a centrally planned economy to
a free market economy will benefit Griffin in the longer
term with reduced tariffs and taxation and fewer
restrictions on doing business. However, in the short
term, changes in procedures and the devolving of
authority resulted in delays, particularly in the granting
of the mining licence. Despite these difficulties,
HSAMDC was granted the first mining licence ever
awarded to a foreign controlled joint venture over a base
metals deposit on the 21st March 2002.

During the summer of 2001, Griffin successfully repatriated
$800,000 from the PRC promptly and without hindrance.
These funds were forwarded to HSAMDC as part of the
procedures for the contribution of capital by Griffin to
HSAMDC. The prompt repatriation of these funds from
the PRC without any difficulties reaffirms Griffin’s view of
the ability to repatriate funds from the PRC freely and
efficiently. This augurs well for the free transfer of funds
from the PRC from future earnings from the Caijiaying
mine when it enters production.

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

Regional geological sketch map of Caijiaying Project Area showing original and new exploration
licences and main geological components and targets

Future Plans

The results of the Scoping Study, the Chinese Feasibility
Study, Griffin’s work on the Caijiaying project and the
positive developments in the Chinese legal environment
have all confirmed Griffin's view that Caijiaying is
capable of being developed to economically produce zinc,
gold, silver and possibly other metals and minerals. For a
relatively small capital cost, the opportunity exists for
Griffin to generate significant cash flows in the future.
Consequently, and subject to the successful conclusion of
the Spring 2002 drilling programme and the subsequent
raising of the necessary finance, the Company has
decided to move forward as quickly as possible to
construct and commission the Caijiaying deposit as an
underground mining operation.

In the Spring of 2002 Griffin plans to drill a number of
orientated drill holes in the northern part of zone III
where no infill drilling has been attempted in an East -
West direction, to test for additional ore lenses and define
additional resources. Following the results of this drilling,
Griffin plans to complete a western standard fully
bankable feasibility study and move towards raising the
necessary project finance for the commissioning of an

underground mine at Caijiaying. To this end Griffin has
appointed Endeavour Financial Corporation as its
financial adviser in this process.

The Company believes that should it be able to
commission the first, majority foreign owned, base metals
mine in the PRC at Caijiaying, then the possibility exists
for world class projects to be offered to Griffin by various
arms of the PRC’s local, provincial and central
governments for development, modernisation and
operation. The capital raising in the Spring of 2001, the
grant of a mining licence and consequential step closer to
the commissioning of Caijiaying lays the foundation not
only for Griffin to become a profitable mining company,
but also gives it the potential to further expand its
influence in the mining sector of the world’s largest
mineral producer.

The Company also continues to initiate and investigate
transactions both within and outside its traditional
mining base to try to add real value to shareholders.

R E P O R T

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

2 0 0 1
C C O U N T S 2 0 0 1

REVIEW OF OPERATIONS
REVIEW OF OPERATIONS

Other Projects

Financial

In April 2001, Griffin obtained a 4% interest in Ozmosa
Limited ("Ozmosa"), a sports betting and casino
operator in the East and South East Asia regions, in
return for providing services and introducing Ozmosa to
Sportingbet Plc ("Sportingbet"). Ozmosa entered into
agreements with Sportingbet for the provision of
services to develop the Asian gaming market. With the
maturity of the Ozmosa business, the Company decided
to dispose of its interest in Ozmosa. Although such a
sale will not realize proceeds to the Company anywhere
near original expectations, Griffin expended no funds
on Ozmosa yet still obtained real benefits. Ozmosa was
able to shoulder some of the Company’s overheads and
provided management with an understanding of the
sports betting business and the Asian markets, matters
which will be of considerable benefit to the Company in
the future.

In 2000, Aurex AB ("Aurex") acquired all of Griffin’s
gold interests in Burkina Faso for an initial consideration
of $75,000 with a further deferred consideration of
between $250,000 and $400,000 payable, depending on
the gold price at the time, when cumulative gold
production reached 5,000 ozs. In 2001, Aurex terminated
all its operations in Burkina Faso, including Griffin’s
former gold interests, without producing any gold from
those operations. As a result, no further consideration is
receivable in respect of this disposal.

The Group recorded a loss for the year of $543,000
(2000 loss $608,000).

There was no disposal of any investment during 2001
(In 2000, profits of $39,000 were recorded on the disposal
of certain investments).

Operating costs in 2001 were $422,000 (2000 $629,000).

A loss of $250,000 was recorded in 2001 on full provision
being made against amounts receivable from Aurex AB
on the disposal of Griffin’s STREMCO gold project in
Burkina Faso. In 2000, profits were recorded on the
disposal of the Group's interests in; Britcan Minerals Plc
of $13,000; STREMCO gold project in Burkina Faso of
$42,000; and Nordic diamond exploration project in
Sweden of $3,000. Provisions were made in respect of
other investments of $55,000.

Shareholder funds rose from $5,565,000 at 31 December
2000 to $7,535,000 at 31 December 2001 with the
benefit of the proceeds from a share placing in March
2001 and subsequent exercise of warrants which raised $3
million net of expenses.

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

DIRECTORS AND SENIOR EXECUTIVES
DIRECTORS AND SENIOR EXECUTIVES

Directors:

Mladen Ninkov, Chairman

William Mulligan, Director

Mladen Ninkov, Chairman, Australia, aged 40, holds a
Masters of Law Degree from Trinity Hall, Cambridge and
Bachelor of Laws (with Honours) and Bachelor of
Jurisprudence Degree from the University of Western
Australia. He is a principal of Keynes Capital. 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 in London, managing director of
Maxwell Central and East European Partners plc in London
and a Vice President of Prudential-Bache Securities Inc. in
New York. He also worked at Skadden Arps Slate Meagher
& Flom in New York and Freehill Hollingdale & Page in
Australia. He was Chairman of Westgold Resources NL
and a director of Ramsgate Resources NL, both companies
listed on the Australian Stock Exchange, and was also a
director of Mt Monger Gold Project Pty Ltd, Castle Hill
Resources NL and Matu Mining Pty Ltd.

Roger Goodwin,
President and Finance Director

Roger Goodwin, President and Finance Director, UK,
aged 47, is a Chartered Accountant. He has been with
the Company since 1996 having previously held senior
positions in a number of public and private companies
within the natural resources sector. He is currently a non
executive director of Texas Oil & Gas Plc and Alamos
plc. He has a strong professional background with
considerable public company and corporate finance
experience, and experience of emerging markets
particularly in Africa, the CIS and Eastern Europe.

Dal Brynelsen, Director

Dal Brynelsen, Director, Canada, aged 55, 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. Mr.
Brynelsen is the President and a director of Pacific Vangold
Mines Limited and provides independent consulting
services to private clients and institutions.

William Mulligan, Director, USA, aged 58, 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.,
and a director of AIG Investment Bank (ZAO) Ltd
based in Moscow. 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, Director

John Steele, Director, Canada, aged 59, has an MSc in
Geophysics from the University of Toronto. From 1984
to 1987 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: Iriana Resources Corporation, International
Dunlap Minerals Corporation, Asian Tiger Resources
Ltd, Geothai Services Company Ltd and Vietnam
Exploration and Development Corporation. He is also a
director and convention committee Co-Chairman of the
Prospectors and Developers Association of Canada.

Senior Executives:

Jeff Haitian Sun, Chief Representative China

Jeff Sun is a Chinese citizen and a Professor of Geology
based in Beijing. He holds a PhD and MSc in mineral
deposits from the Chinese University of Geosciences and
has undertaken postdoctoral research in geology at the
Norwegian University of Technology. Jeff has worked on a
number of mineral projects both in China and overseas.
Prior to joining Griffin he was engaged by Mundoro Mining
Inc of Canada as a senior geologist.

R E P O R T

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

2 0 0 1
C C O U N T S 2 0 0 1

DIRECTORS REPORT
DIRECTORS 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 2001.

Financial Results

Group loss on ordinary activities before taxation, amounted to US$543,000 (2000 - loss US$608,000). No taxation
was charged (2000 - nil). The Group loss after taxation amounted to US$543,000 (2000 - loss US$608,000). The loss
for the year after taxation of US$543,000 (2000 – loss US$608,000) has been charged to reserves.

The loss per share amounted to 0.6 cents (2000 - loss 1.5 cents). The attributable net asset value per share at 31
December 2001 amounted to 7 cents (2000 – 14 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 2001 and the indication of likely future developments are set out on pages 4 to 13.

Directors

The Directors of the Company during the year were:

Mladen Ninkov – Australian – Chairman
Roger Goodwin – British - President and Finance Director
Dal Brynelsen – Canadian
Gordon Montgomery – British – Resigned 1st March 2002
William Mulligan – American (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 forthcoming
Annual General Meeting of the Company.

The interests of the Directors holding office at 31 December 2001 and their immediate families in the share capital of
the Company were as follows:

Name

At 31 December 2001

At 1 January 2001

Ordinary shares
no.

Options over Ordinary shares
no.

ordinary shares no.

Options over
ordinary shares no.

Mladen Ninkov
Roger Goodwin
Dal Brynelsen
Gordon Montgomery
William Mulligan
John Steele

33,001
30,000
1
66,165
1
27,501

6,000,000
800,000
300,000
300,000
300,000
300,000

33,001
20,000
1
44,110
1
27,001

1,000,000
200,000
250,000
250,000
250,000
250,000

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

DIRECTORS REPORT
DIRECTORS REPORT

On 26th March 2001 options were granted to the Directors over 8,000,000 new ordinary shares in the Company and
at the same time existing options over 2,200,000 ordinary shares previously granted to the Directors and which were
due to expire on 31st August 2001 were cancelled. Each new option entitles the holder to subscribe for new ordinary
shares in Griffin at 5 pence per share on or before 31 March 2004.

All of the Directors’ interests detailed are beneficial.

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 2001 and at 22 April 2002.

UBS (Luxembourg) SA CEDEL Account
Morstan Nominees Limited
BNY (OCS) Nominees Ltd

At 31 December 2001
Number
8,415,688
18,866,423
7,075,000

%
8.2
18.3
6.8

At 22 April 2002
Number
8,415,688
18,866,423
7,075,000

%
8.2
18.3
6.8

In order to improve the speed and efficiency in settling trades in the Company’s shares, which are not 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.

Griffin is aware that at 31st December 2001, Trellus Partners L.P. had a beneficial interest in 16,866,423 Ordinary
Shares registered in the name of Morstan Nominees Limited and a beneficial interest in 2,970,000 Ordinary Shares
registered in the name of UBS (Luxembourg) SA CEDEL Account, which amounts in aggregate to 19.2% of the
entire issued share capital of Griffin at 31 December 2001.

Post Balance Sheet Events

On the 21st March 2002, Hebei Hua’ Ao Mining Development Company became the first foreign controlled joint
venture to be granted a mining licence over a base metals deposit in the Peoples Republic of China when it was
granted a mining licence over 1.56 sq km of zone III of the original 11.3 sq km exploration licence area at Caijiaying.

Corporate Governance

Although registered in Bermuda and therefore not obliged to comply with the code of best practice established by the
Combined Code issued by the Committee on 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.

R E P O R T

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

2 0 0 1
C C O U N T S 2 0 0 1

DIRECTORS REPORT
DIRECTORS REPORT

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:

Roger Goodwin
President and Finance Director
30th April 2002
London

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 THE INDEPENDENT AUDITORS
REPORT OF THE INDEPENDENT AUDITORS

Report of the Independent Auditors to the Members of Griffin Mining Ltd

We have audited the financial statements of Griffin Mining Limited for the year ended 31 December 2001 which
comprise the consolidated profit and loss account, the consolidated balance sheet, the statement of total recognised
gains and losses, the cash flow statement, the accounting policies, and notes 1 to 23. These financial statements
have been prepared in accordance with International Accounting Standards and under the accounting policies set
out therein.

Respective Responsibilities of Directors and Auditors

The Directors' responsibilities for preparing the Annual Report and the financial statements in accordance with
applicable Bermuda law and International Accounting Standards are set out in the statement of directors'
responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory
requirements and United Kingdom auditing standards.

We report to you our opinion as to whether the financial statements give a true and fair view in accordance with
International Accounting Standards. 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 explanations we require for our audit.

We read other information contained in the Annual Report and consider whether it is consistent with the audited
financial statements. This other information comprises the Chairman's statement, review of operations and directors'
report. We consider the implications for our report if we become aware of any apparent misstatements or material
inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of Opinion

We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices
Board. 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
Company's 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 true and fair view of the state of affairs of the Group at 31 December
2001 and of its loss for the year then ended in accordance with International Accounting Standards.

GRANT THORNTON
REGISTERED AUDITORS
CHARTERED ACCOUNTANTS
SOUTHAMPTON
30th April 2002

R E P O R T

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

2 0 0 1
C C O U N T S 2 0 0 1

CONSOLIDATED PROFIT AND LOSS ACCOUNT
CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the year ended 31 December 2001
(expressed in thousands US dollars)

Income

Gains on the disposal of investments

Net operating expenses
Other income
Provisions in respect of continuing operations
(Loss) / profit on disposal of discontinued operations

Operating (loss)

Foreign exchange gains / (losses)
Interest receivable and similar income

(Loss) on ordinary activities before taxation

Taxation on ordinary activities

(Loss) for the financial year

(Loss) per share (cents)

Notes

4
5

2001
$000

–

(422)
–)
–)
(250)

(672)

47)
82)

2000
$000

39)

(629)
22)
(55)
58)

(565)

(85)
42)

(543)

(608)

–)

(543)

(608)

(0.6)

(1.5)

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 2001
(expressed in thousands US dollars)

Notes

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

Total net assets

Capital and reserves
Share capital
Share premium
Contributing surplus
Investment revaluation reserve
Foreign exchange reserve
Profit & loss account

Equity interests

Number of shares in issue

9
10

13
14
15
16
17
18

2001)
$000)

4,985)
3)
4,988)

17)
12)
7)
2,581)
2,617)

(32)
(38)

2000)
$000)

4,542)
4)
4,546)

501)
261)
18)
370)
1,150)

(64)
(67)

2,547)

1,019)

7,535)

5,565)

1,033)
15,516)
3,690)
(857)
173)
(12,020)

4,100)
13,154)
–)
(372)
160)
(11,477)

7,535)

5,565)

103,257,248)

41,003,551)

Attributable net asset value per share

$0.07)

$0.14)

The accounts on pages 19 to 31 were approved by the Board of Directors and signed on its behalf by:

Mladen Ninkov
Chairman
30th April 2002

Roger Goodwin
President and Finance Director

R E P O R T

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

2 0 0 1
C C O U N T S 2 0 0 1

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

For the year ended 31 December 2001
(expressed in thousands US dollars)

(Loss) for the financial year

Unrealised (losses) / gains on investments

Currency translation differences in foreign currency net investments

Total gains and losses recognised in the year

Notes

2001)
$000)

(543)

(485)

13)

2000)
$000)

(608)

392)

(1,015)

(213)

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

CONSOLIDATED CASH FLOW STATEMENT
CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2001
(expressed in thousands US dollars)

Net cash (outflow) from operating activities

Investing activities
Interest received
Payments to acquire intangible fixed assets
Payments to acquire tangible fixed assets
Receipts from the disposal of discontinued operations

Net cash (outflow) from investing activities

Notes

6
9
10

2001)
$000)

2000)
$000)

(420)

(1,039)

82)
(434)
(2)
–)

(354)

42)
(488)
–)
88)

(358)

Net cash (outflow) before financing

(774)

(1,397)

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

13/14
14

3,101)
(116)
2,985)

285)
(19)
266)

Increase / (decrease) in cash and cash equivalents

2,211)

(1,131)

Reconciliation of operating (loss) to net cash (outflow) from
operating activities
Operating loss
Taxation
Depreciation
(Gains) on sale of investments
Receipts on the sale of investments
(Payments) to acquire investments
Provisions in respect of continuing operations
Losses / (profits) on disposal of discontinued operations
Decrease / (increase) in debtors
(Decrease) in creditors
Other non-cash income, including exchange differences

(672)
–)
3)
–)
–)
–)
–)
250)
10)
(61)
50)
(420)

(565)
–)
5)
(39)
71)
(114)
55)
(58)
(16)
(303)
(75)
(1,039)

R E P O R T

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

2 0 0 1
C C O U N T S 2 0 0 1

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.

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).

Depreciation

Plant and equipment will be depreciated at rates appropriate to the expected life of the asset once production has
commenced. Office equipment is 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 traded on a recognised stock exchange, or an over the counter market, are valued at the
bid 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 portfolio investments as of 31 December are reflected within the
investment revaluation reserve.

Foreign Currency Transactions

The accounts have been prepared in United States dollars being the local currency of Bermuda. Whilst registered in
Bermuda the Company, together with its subsidiaries, operate in China, the United Kingdom, and Australia.

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.

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

2 0 0 1
C C O U N T S 2 0 0 1

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

1. Income

The Group’s income arises from continuing operations.

2. Net Operating Expenses

Administrative expenses include:
Depreciation
Staff Costs

Number of persons employed by the Group

All operating expenses charged to profit relate to continuing operations.

2001
$000

3
110

No.
4

3. Directors’ Remuneration

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

Mladen Ninkov
Dal Brynelsen
Roger Goodwin
Gordon Montgomery
William Mulligan
John Steele

Fees

Salary

$000

Taxable
benefits
$000

Total
2001
$000

–
–
–
–
–
–

–
–
86
–
–
–

–
–
–
–
–
–

–
–
86
–
–
–

2000
$000

5
116

No.
4

Total
2000
$000

–
12
1
–
12
–

Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust,
received fees under a consultancy agreement of $200,000 (2000 $200,000) for the provision of advisory and related
services to Griffin Mining Limited and its subsidiaries during the year. Mladen Ninkov is a director and employee of
Keynes Investments Pty Limited.

Gordon Montgomery is a partner in Company Investigations and Information Systems. No fees (2000 $12,000) 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. No fees (2000 $12,000) 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. Provisions in Respect of Continuing Operations

Provisions made in respect of the recoverability of assets.

Portfolio investments written off

2001
$000
–
)

2000)
$000)
(55)

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.

5. (Loss) / Profit on the Disposal of Discontinuing Operations

Nordic Exploration AB
Britcan Minerals Plc
STREMCO SA Burkina Faso gold exploration and development

6. Interest Receivable and Similar Income

Bank and short term interest

7. Taxation on Ordinary Activities

Taxation on ordinary activities

Corporation tax

2001)
$000)
–)
–)
(250)
(250)

2001
$000
82

2001
$000
–

2000
$000
3
13
42
58

2000
$000
42

2000
$000
–

The Company is resident for corporation tax purposes in the United Kingdom. No charge to corporation tax arises in
the United Kingdom due to losses in the year. The Company has unutilised income tax losses estimated at $5.1m, and
capital losses estimated at $2.0m.

8. (Loss) Per Share

The loss per share has been calculated on the basis of the net loss after taxation of US$543,000 (loss US$608,000 in
2000) and the weighted average number of shares in issue in the year ended 31 December 2001 of 85,098,010
(40,834,868 in 2000).

There is no dilutive effect of share purchase options.

R E P O R T

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

2 0 0 1
C C O U N T S 2 0 0 1

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

9. Intangible Assets

Exploration interests
China – Zinc

COST / VALUATION

At 1 January 2001
Foreign exchange adjustments
Additions during the year
At 31 December 2001

NET BOOK VALUE

At 31 December 2001

At 31 December 2000

$000
4,542
9
434
4,985

4,985

4,542

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.

10. Tangible Assets

Office furniture and equipment

COST / VALUATION
At 1 January 2001
Additions during the year
At 31 December 2001

DEPRECIATION
At 1 January 2001
Provided during the year
At 31 December 2001

NET BOOK VALUE

At 31 December 2001

At 31 December 2000

$000
19
2
21

15
3
18

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

11. Portfolio Investments

Quoted (cost $873,000- 2000 $873,000)

2001
$000
17

2000
$000
501

Quoted securities are valued at the bid market price. Unquoted investments have been fully provided against. Quoted
and unquoted investments are available for sale.

12. Cash and Deposits

Analysis of changes in cash and cash equivalents

At 1 January 2001
Net cash inflow
At 31 December 2001

13. Share Capital

$000
370
2,211
2,581

AUTHORISED:
Ordinary shares of US$0.01 each
(2000 US$0.10 each)

2001

2000

Number

$000)

Number

$000

1,000,000,000

10,000)

100,000,000

10,000

CALLED UP ALLOTTED AND FULLY PAID:
Ordinary shares of US$0.01 each (2000 US$0.10)
At 1 January
Transfer to Contributing Surplus
Issued during the year
At 31 December

41,003,551
–
62,253,697
103,257,248

4,100)
(3,690)
623)
1,033)

38,946,501
–
2,057,050
41,003,551

3,895
–
205
4,100

At a Special General Meeting of the Company held on 15th March 2001, shareholders approved resolutions to:
reduce the issued share capital of the Company with effect from 15th March, 2001, from $4,100,355 to $410,035 by a
reduction in par value of each of the 41,003,551 shares in issue from 10 cents each par value to 1 cent each par value
with $3,690,320 of the paid up share capital being reclassified as contributing surplus; subdivide the unissued capital of
$9,589,965 comprising 95,899,650 shares of 10 cent each par value, into 958,996,500 shares of a par value of 1 cent
each; and confirm the authorised share capital of the Company, following the reduction and sub-division at $10
million, but divided into 1,000,000,000 shares of US$0.01 par value each.

On 22nd March 2001, 41,751,922 new ordinary shares in the Company were allotted at 3.5 UK pence ($0.05) per
ordinary share for cash to raise $2.1 million before expenses on an equity placing.

On 3rd April 2001, 342,958 new ordinary shares were allotted at 3.5 UK pence ($0.05) per ordinary share on the
exercise of warrants granted to existing shareholders as part of arrangements for the equity placing in March 2001.

On 9th May 2001, 1,557,795 new ordinary shares were allotted at 3.5 UK pence ($0.05) per ordinary share on the
exercise of warrants granted to existing shareholders as part of arrangements for the equity placing in March 2001.

R E P O R T

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

2 0 0 1
C C O U N T S 2 0 0 1

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

On 11th June 2001, 18,601,022 new ordinary shares were allotted at 3.5 UK pence ($0.05) per ordinary share on the
exercise of warrants granted to existing shareholders as part of arrangements for the equity placing in March 2001.

On 26th March 2001 options were granted to the directors over 8,000,000 new ordinary shares in the Company and at
the same time existing options over 2,200,000 ordinary shares previously granted to the Directors and which were due
to expire on 31st August 2001 were cancelled. Each new option entitles the holder to subscribe for new ordinary
shares in Griffin at 5 pence per share on or before 31 March 2004.

14. Share Premium

At 1 January
Premium on shares issued in year
Expenses paid in connection with share issue
At 31 December

15. Contributing Surplus

At 1 January
Transfer from share capital
At 31 December

2001)
$000)
13,154)
2,478)
(116)
15,516)

2001)
$000)
–)
3,690)
3,690)

2000)
$000)
13,084)
89)
(19)
13,154)

2000)
$000)
–)
–)
–)

The Contributing surplus is a statutory reserve for the maintenance of capital under Bermuda company law and was
created on the reduction in the par value of the Company’s ordinary shares on 15th March 2001.

16. Investment Revaluation Reserve

At 1 January
Movements during the year
At 31 December

2001)
$000)
(372)
(485)
(857)

2000)
$000)
(764)
392)
(372)

Unrealised appreciation and depreciation of portfolio investments are reflected in the investment revaluation reserve

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

17. Foreign Exchange Reserve

At 1 January
Movements during the year
Transfer to profit and loss account on disposal of subsidiary company
At 31 December

2001)
$000)
160)
13)
–)
173)

2000)
$000)
266)
3)
(109)
160)

Exchange differences arising on the retranslation of opening net assets of overseas subsidiary undertakings, whose
accounts are prepared in local currencies, are reflected in the foreign exchange reserve.

18. Profit and Loss Account

At 1 January
(Loss) for the financial year
Foreign exchange transfer
At 31 December

19. Reconciliation of Shareholders’ Funds

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

2001)
$000)
(11,477)
(543)
–)
(12,020)

2001)
$000)
(1,015)
2,985)
1,970)
5,565)
7,535)

2000)
$000)
(10,978)
(608)
109)
(11,477)

2000)
$000)
(213)
275)
62)
5,503)
5,565)

20. Attributable Net Asset Value Per Share

The attributable net asset value per share has been calculated from the consolidated net assets of the Group divided by
the number of ordinary shares in issue at 31 December 2001 of 103,257,248 (41,003,551 at 31 December 2000).

21. Financial Instruments

The Group finances its operations primarily from equity issues. The Group does not enter into derivative transactions
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 and sterling short term
fixed and floating rate deposits. Although the Group has overseas subsidiaries operating in China and Australia, whose
costs are denominated in local currencies, liabilities are primarily incurred in US dollars.

In the normal course of its operations the Group is exposed to foreign currency and interest rate risks.

R E P O R T

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

2 0 0 1
C C O U N T S 2 0 0 1

NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS

The Group places funds in excess of immediate requirements in US dollar and sterling deposits with a number of
banks to spread currency, interest rate and bank risk. These deposits are kept under regular review to maximise interest
receivable and with reference to future expenditure and future currency requirements.

22. Post Balance Sheet Events

23. Subsidiary Companies

Name

Class of
shares held

Proportion of
shares held

Nature of
business

Country of
incorporation

23. Subsidiary companies

China Zinc
Pty Limited

Ordinary

100%

Holding company

Australia

At 31 December 2001, Griffin Mining Limited had interests in the share capital of the following principal subsidiary
companies.

Hebei Hua’ Ao Mining
Development Company
Limited*

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

Thakadu Mining
(Pty) Ltd. (‘TMP’)*

Zinc exploration
and development

China

80%
(reducing to
60%
after payback of

capital expenditure)**

Ordinary

75%

Holding company

Botswana

Ordinary

75%

Copper mining

Botswana

* China Zinc Pty Limited and PPP are directly owned by the Company. China Zinc Pty Limited has a controlling
interest in Hebei Hua’ Ao Mining Development Company Limited, see below, and TMP is a wholly owned
subsidiary of PPP.

** 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, together with a coupon of 4.5%, will be paid to the foreign party
until such time as the foreign party’s investment in the project has been recouped by it. 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

CORPORATE INFORMATION
CORPORATE INFORMATION

Principal office:

Registered office:

China Zinc office:

Directors:

4th Floor, Linen Hall,
162-168 Regent Street,
London. W1R 5TE. UK
Telephone: + 44 (0)20 7663 9855
Facsimile: + 44 (0)20 7663 9856
Email: griffin@griffinmining.demon.co.uk
Web site: www.griffinmining.com

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

Level 9, BGC Centre,
28 The Esplanade,
Perth, Western Australia 6000. Australia.
Telephone: + 61(0)8 9321 7143
Facsimile: + 61 (0)8 9321 7035

Mladen Ninkov (Chairman)
Roger Goodwin (President & Finance Director)
Dal Brynelsen
William Mulligan
John Steele

Company Secretary:

Roger Goodwin

Nominated Adviser and
Broker for AIM:

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

Auditors:

Solicitors:

Bankers:

Grant Thornton
31 Carlton Crescent, Southampton. SO15 2EW. UK

Denton Wilde Sapte
One Fleet Place, London. EC4M 7WS. 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.

Anglo Irish Bank Corporation plc
10 Old Jewry, London. EC2R 8DN. UK

Geological Consultants:

CSA Australia Pty Limited
Level 1, 161 Great Eastern Highway, Belmont, West Australia 6104, Austailia.

UK Registrars & Transfer Agents: Capita IRG plc

Bourne House, 34 Beckenham Road, Beckenham, Kent. BR3 4TU. UK