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
Consolidated Cash Flow Statement
Accounting Policies
Notes to the Financial Statements
Corporate Information
C O N T E N T S
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Registered number: EC13667 Bermuda.
Registered Office: Clarendon House, 2 Church Street, Hamilton HM11. Bermuda.
Principal Office: 60 St James’s Street, London SW1A 1LE. UK.
1
REPORT AND ACCOUNTS 2003 Griffin Mining Limited is a mining development and investment company whose principal asset is the Caijiaying zinc-gold
project located 200 kilometres north-west of Beijing, China. Griffin has begun construction of the Caijaiying mine and
processing facilities, with commissioning expected in early 2005.
Further information on the Company is available on the Company’s web site: www.griffinmining.com.
Griffin Mining Limited’s shares are quoted on the Alternative Investment Market (AIM) of the London Stock Exchange
(symbol GFM).
2
GRIFFIN MINING LIMITED C H A I R M A N ’S S TAT E M E N T
Lao Tzu once said, “The journey of a thousand miles
gold occurrences in zone V, and finally the large areas
begins with the first step”. For Griffin Mining Limited
of epithermal alteration along the F45 fault, south of
(“Griffin” or “the Company”), that first step was taken in
zone II.
1997 with the acquisition of the Caijiaying deposit. That
has been followed with drilling, numerous studies, resource
Traditionally, I have attempted to thank those people or
definition, licensing, feasibility study, financing, and now
groups of people who have contributed so greatly to the
finally, construction of the Caijiaying mine.
success of the Company. This year has again produced a
large number of such people, many of whom I will
2003 was a year of fervent activity and momentous
inevitably forget to mention. For that, I apologise. I would
progress. The full feasibility study was commissioned
like to thank: Ocean Equities, and in particular Guy Wilkes
and, notwithstanding the outbreak of the SARS virus in
and Rupert Williams, for successfully completing the large
China during the year, was completed in September
and vital institutional equity placing; CSA Australia, and in
2 0 0 3 . N e g o t i a t i o n s t h e n b e g a n w i t h n u m e r o u s
particular Rupert Crowe and Warren Woodhouse, for their
commercial and investment banks to arrange debt
tireless and endless work at Caijiaying; Griffin’s nominated
facilities to fund the construction of the Caijiaying
advisors and brokers, Charles Stanley and Company; and
mine. In particular, the Company was driven by the
Griffin’s staff who work extraordinary hours to achieve
need to begin construction of the processing plant so as
amazing results, and in particular, Jeff Sun in China and
to be completed prior to the onset of the 2004 winter.
Roger Goodwin in London.
The banks exhibited an insufficient understanding of
China to complete such a financing in a timely manner
Perhaps now is the appropriate time and place to
and the Company was forced to think laterally to find
acknowledge Trellus Management LLC, and in particular
the funding necessary for Caijiaying. The strength of
its principal Adam Usdan, for the courage, foresight and
the Company’s position in China and the quality of the
faith he has shown in the Company. Trellus has
Caijiaying asset brought several large and prestigious
participated in every equity placement by the Company
institutional investors to the Company’s register with
since the first placement in 1997/1998, and without its
t h e s u c c e s s f u l c o m p l e t i o n o f a n £ 8 . 7 5 m e q u i t y
support, it is most unlikely that the Company would be in
placement.
the fortunate position it finds itself in today.
The first consequence of the completion of the financing
I also would like to welcome the Company’s new
was that Griffin was fully funded to construct and
institutional shareholders. The Company has always
commission the Caijiaying mine. Construction of the
understood that its shareholders are the owners of the
mine has commenced with commissioning scheduled for
Company. Rest assured that responsibility is not taken
March 2005.
lightly and that the Company will use its best endeavours to
repay the faith its new and existing shareholders have
The second consequence of the completion of the financing
shown, and continue to show, in the Company.
was support for a higher share price. Only now is the
market beginning to appreciate some of the value
Finally, in Sir Winston Churchill’s words “Now this is not
represented by the Caijiaying project. The real value
the end. It is not even the beginning of the end. But it is,
inherent in Griffin will only be truly reflected with the
perhaps, the end of the beginning.”
commissioning of the Caijiaying mine and the cash flows
generated therefrom, and even more importantly,
exploration success in the Caijiaying area.
The Company remains committed to exploring the
C a i j i a y i n g a r e a a s s o o n a s c a s h f l o w s p e r m i t a n d
Mladen Ninkov
drilling, in the first instance, the extensions to the
known mineralization between zones II and III, the
Chairman
10th May 2004
3
REPORT AND ACCOUNTS 2003 R E V I E W O F O P E R AT I O N S
Caijiaying project location map
Introduction
Legal Structure
Griffin is a mining development and investment company
listed on the Alternative Investment Market of the London
Stock Exchange. Griffin, through two joint ventures, has a
controlling interest in mining and exploration licences over 67
square kilometres in the Caijiaying area of the Hebei Province
(“Caijiaying”) in the Peoples Republic of China (“the PRC”).
Caijiaying Area
Caijiaying is located approximately 200 km north west of
Beijing in the Hebei Province in the PRC. The site is
easily accessible by sealed road, which runs to site, has
adequate water supplies available from underground
sources and is 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.
Griffin’s initial interest in Caijiaying has been held through
its local Chinese subsidiary company Hebei Hua' Ao Mining
Development Company Limited ("Hebei Hua-Ao").
Hebei Hua-Ao is a contractual joint venture entity
established in 1994 in which Griffin, through its wholly
owned Australian subsidiary company China Zinc Pty Ltd
(“China Zinc”), holds a 60% equity interest and the
Chinese joint venture partners (which include the
Zhangjiakou City People’s Government, the Hebei Bureau
of the Ministry of Land and Resouces and the Third
Geological Brigade) have a 40% equity interest.
Significantly, for the first 3 years of commercial production
100% of the cash flows accrue to China Zinc.
In October 1998 Hebei Hua-Ao was the first foreign
controlled joint venture to be awarded a new exploration
licence for a hard rock deposit in the PRC when it received
an exploration licence covering an area of 11.3 square
kilometres at Caijiaying.
4
GRIFFIN MINING LIMITED R E V I E W O F O P E R AT I O N S
New entrance to incline at Caijiaying
On 21 March 2002, Hebei Hua-Ao 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 square kilometres of the original 11.3
square kilometres of the zone III licence area at Caijiaying.
The Company has long recognized the exploration
potential of the area surrounding the original 11.3 square
kilometre licence area at Caijiaying. On 5 June 2000, an
exploration licence was granted covering an area of over
102.2 square kilometres of highly prospective ground
surrounding the existing licence area at Caijiaying. This
licence area was subsequently reduced to discard the non-
prospective areas and a new 2 year exploration licence was
granted covering 55.7 square kilometres in January 2003.
In January 2004, a second contractual joint venture, the
Hebei Sino Anglo Mining Development Company Limited
(“Hebei Anglo"), was formed to hold the above exploration
licence over the 55.7 square kilometres and any further
areas of interest in the Hebei Province. Griffin, through its
wholly owned UK subsidiary company Panda Resources
Limited, has a 90% interest in Hebei Anglo. The other
shareholders holding the remaining 10% of Hebei Anglo
are the same as in Hebei Hua-Ao.
Caijiaying Geology
The Caijiaying zinc mineralization is believed to have
originated 131-204 million years ago during a volcanic
episode that affected ancient, 2.3 billion-year-old
metamorphic rocks, along a major northeast-trending
structure.
The base metal mineralization is believed to have been
caused by replacement of certain horizons in the
metamorphic rocks by hot metal-bearing solutions during
an early stage of a volcanic system. Some gold may have
been deposited at this time, but the main gold event is
interpreted to have occurred later as a hot-spring or
epithermal type of mineralization towards the end of the
volcanic period. This type of epithermal mineralization
usually consists of gold and silver (with minor base-metals)
deposited in veins and breccias with extensive alteration of
the surrounding rock by the hot fluid. The epithermal
nature of the system has been confirmed with
mineralization displaying many features in common with
other world-class epithermal deposits.
5
REPORT AND ACCOUNTS 2003 R E V I E W O F O P E R AT I O N S
Regional geological sketch map of Caijiaying Project Area showing
licence areas and zones of mineralisation
Within the original 11.3 sq km licence area at Caijiaying,
the Third Brigade defined 5 separate mineralized zones.
Zone III, covering an area of some 1.5 square kilometres,
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 particular in zones
II and V, have indicated significant potential for further
economic mineralization.
The Caijiaying project has had a long exploration history
because of the complex nature of the mineralization, which
was first interpreted by Chinese geologists of the Third
Brigade as forming a series of E-W trending, fairly steeply
(-50º to -70º) southerly-dipping lenses from 0-500 metres
below surface. This interpretation led to the Chinese drill
grid being orientated in the wrong direction, in parallel to
the main mineralized zones.
The main mineralization occurs within distinct north-
south trending altered corridors separated by zones of
barren rock. These are situated 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. The line of this fault is believed to be on a
zone of crustal weakness which is thought to have acted as
a conduit for rising mineralizing fluids.
Caijiaying Discovery
Mineralization was first identified in the Caijiaying area
during the Chinese “Cultural Revolution” in the late
1960’s. Subsequently, exploration teams of the Third
Brigade of the Hebei Province of the now defunct
Ministry of Geology and Mineral Resources (predecessor
to the Ministry of Land and Natural Resources),
conducted 10 years of exploration work on Caijiaying,
including 95,000 metres of diamond drilling.
6
GRIFFIN MINING LIMITED R E V I E W O F O P E R AT I O N S
Surveying processing plant site at Caijiaying
Development of Caijiaying
Since 1994, China Zinc, through Hebei Hua-Ao, has
expended some $5 million on Caijiaying, again mostly
on zone III, including the cost of a pre-feasibility study,
a m i n i n g s c o p i n g s t u d y , r e s o u r c e s t a t e m e n t s ,
approximately 10,000 metres of diamond drilling, 300
metres of underground drive, ore-body modelling,
m e t a l l u r g i c a l t e s t w o r k a n d v a r i o u s g e o l o g i c a l ,
metallurgical, engineering, environmental, power and
transport studies, culminating in the completion of a
full feasibility study in August 2003.
Work initially undertaken by China Zinc involved infill
drilling and resource studies on an open-pit concept.
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 instead of dipping
south, the main mineralised bodies trend north parallel to
the drill grid. This resulted in the resource estimates being
downgraded and the project reassessed as being more
amenable to smaller scale underground mining.
In 2000, the Company commissioned a mining scoping
study from CSA Australia Pty Ltd (“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 (“g/t”) gold and 48 g/t silver over approximately
10 years.
In 2002, a programme of diamond drilling was undertaken
in the correct east-west orientation for the first time. This
showed that the mineralised lodes occur within the north-
south corridors and dip 75-80º to the west. Recognition of
this geometry allowed a new geological resource model to
be interpreted by CSA which formed the basis of a new
resource estimate.
7
REPORT AND ACCOUNTS 2003 R E V I E W O F O P E R AT I O N S
Caijiaying ore-body cross section
Resource Estimate
The results of the 2002 drilling programme together with
drill hole data from past work enabled a new resource
statement to be compiled by independent consultants
Micromine Pty Ltd Consulting Division (“Micromine”) in
accordance with the guidelines set out in the Australasian
Code for Reporting of Mineral Resources and Ore Reserves
(The JORC Code):
- An indicated resource of 16.9 million tonnes at 7.84%
zinc and 0.75g/t gold; and
- An inferred resource of 6.68 million tonnes at 8.69%
zinc and 0.5g/t gold;
- For a total resource of 23.6 million tonnes at 8.08%
zinc and 0.68g/t gold; at a 4% zinc cut-off grade
or:
- An indicated resource of 6.95 million tonnes at 11.58%
zinc and 0.64g/t gold; and
- An inferred resource of 3.602 million tonnes at 11.73%
zinc and 0.49g/t gold;
- For a total resource of 10.56 million tonnes at 11.63%
zinc and 0.59 g/t gold at a 7% zinc cut-off grade
These resource estimates cover only zone III at Caijiaying.
The interpretation of steep north-trending lode
orientations is consistent with the mineralization at the
zone II deposit, which is situated within Hebei Hua-Ao’s
licence area, 1 kilometre to the south of the main zone III
deposit. This similarity of geometry strongly suggests
that the two deposits are continuous, opening up a large
area for further exploration. The mine has been designed
to enable this area to be accessed when needed.
The diamond drilling programme undertaken by Griffin
in the summer of 2002 also encountered significant gold
intercepts which, taken together with earlier gold results,
allowed Micromine to compile separate inferred estimates
for the gold resource at zone III, including 2.61 million
tonnes at 6.78 g/t at a 3 g/t cut off. This places over
500,000 ounces of gold at zone III at Caijiaying.
8
GRIFFIN MINING LIMITED R E V I E W O F O P E R AT I O N S
Underground drilling 2004
On the basis of the above resource statement, in November
2002, Griffin commissioned CSA Australia to complete a
full feasibility study on zone III at Caijiaying.
2003 Activity - Feasibility Study
The main focus of activity in 2003 was the production of a
full feasibility study which was completed in August 2003.
The feasibility study (“the Study”) broadly follows the plan
that was presented in the scoping study completed in 2000
for a zinc-gold mine with an initial throughput of 200,000
tonnes per annum using a western-style decline and low-
cost Chinese mining methods to feed a process plant to
produce zinc concentrates. A gold processing plant was
included in the design to produce gold dore bars on site for
refining and sale to the Chinese market.
The basic design of the mine incorporates a Chinese built
process plant using conventional crushing, grinding and
flotation technology to produce a standard zinc concentrate
for sale to the local market. However, the gold circuit is of
modular Australian design and will treat a precious-metals
concentrate from which both gravity and cyanide-extracted
gold will be won.
The mine has been designed for development from three
different directions at the same time. The first part
involves widening and lengthening the existing exploration
incline and developing the necessary ventilation and
production drives from its base. This will enable early
access to conduct the pre-production drilling and the
installation of water, power and compressed air services.
9
REPORT AND ACCOUNTS 2003 R E V I E W O F O P E R AT I O N S
Mining operations 2004
The second part involves sinking a 200m deep ventilation
shaft in the northern part of the deposit which will connect
the other drives and provide an emergency escape.
expects to increase throughput to 500,000 tonnes per year
as soon as practicable.
The third part is the production decline which will connect
the process plant to the mine and enable easy access and
upgrading of the mine capacity.
The Study demonstrates that the project is robust and is
capable of generating significant profits even at historically
low world zinc prices. Operating costs are expected to be
amongst the lowest of any underground zinc mining
operation in the world.
The Study shows life of mine production of 314,250 tonnes
of zinc metal and 108,450 kilograms of silver in 586,300
tonnes of concentrate grading 53.6% zinc and 185 g/t
silver. In addition, 39,850 ounces of gold will be produced
in bullion. It is anticipated that gold production will be
increased as the mine develops.
The mine has been designed so that an upgrade of mine
production can be readily implemented. The Company
10
The Study has been conducted using mainly Australian
experts for the mine process plant and infrastructure and the
leading Chinese base-metals engineering institute, the
Beijing Non Ferrous Engineering Institute (“ENFI”), for the
mine design to comply with Chinese regulations and costs.
The ore reserves (based on the aforementioned resources
compiled by Micromine Consulting) have been optimized
by Datamine Consulting and CSA and estimated by ENFI
according to the mine plan. Only those reserves that
relate to Phase One of the Caijiaying mine development
(i.e. the first 14.5 years) have been included in the ore
reserves. The result is a Probable Ore Reserve (under the
Australian JORC Code classification) of 2,570,000 tonnes
at 12.59% zinc, 0.42g/t gold and 45.63g/t silver. This
reserve is based on an optimized resource block model at a
7% minimum zinc cut off and incorporates 8% mining
dilution and an 8% ore loss.
GRIFFIN MINING LIMITED R E V I E W O F O P E R AT I O N S
Conceptual layout of mine and processing facilities at Caijiaying
In addition to the aforementioned computer-generated
reserve, the mining plan incorporates a manually
interpreted inferred resource block of higher grade gold
mineralisation of 330,000 tonnes at 8.61% zinc, 2.47g/t
gold and 36.35g/t silver. This resource block does not
include significant other gold intersections such as hole
ZK313-14 which produced 8 metres at 11.65 g/t gold,
7.12% zinc and 31.13 g/t silver from 118 metres. A gold
exploration drilling programme targeting this area is being
undertaken. The area surrounding drill hole ZK313-14 falls
outside the current ore reserve and mine plan but close to
the area of initial mining and is being drilled to define its
extent so that it can be included in the mine plan. It is
expected that further combined zinc/gold blocks will be
delineated by stope drilling ahead of mining.
Tests have shown that the majority of the contained gold is
free, although a portion occurs within the sulphides. With
mining costs covered by the zinc production, gold
production costs are expected to be minimal.
Caijiaying will benefit from reduced tax rates as it is
located in a special development region with no taxes
payable on profits in the first two years of production,
rising thereafter in increments to a maximum 18%
income tax after 10 years.
A financial model based upon the results of the Study has
been prepared by independent experts Northwind
Resources Pty Ltd, which shows the forecast performance
after payback of capital and applicable taxes but before
minority interests.
At the time of the preparation of the Study, Chinese zinc
concentrate prices were equivalent to an LME zinc price
of $760/tonne. At this price and using the then prevailing
world market prices for precious metals, the model shows
the project generates after tax cumulative cash of $41.2
million over the Phase One 14.5 year mine life. As
expected, the project is sensitive to the price of zinc,
which at the time of the preparation of the study was near
historical lows. Zinc prices have increased substantially
since the preparation of the Study to around $1,100 per
tonne at which price the model shows the project
generates after tax cumulative cash of $104.4m over Phase
One 14.5 year mine life.
11
REPORT AND ACCOUNTS 2003 R E V I E W O F O P E R AT I O N S
Northern ventilation shaft construction
The project requires total pre-production and working
capital of $15.7 million. These capital costs include a 15%
contingency for mining capital costs and a 20.75%
contingency for fixed plant and equipment and all other
capital costs. Payback of capital expenditure is expected in
under 2 years from commencement of production.
It is important that the following be noted:
1. The feasibility study applies only to zone III at
Caijiaying, which is only a small area of some 1.5 sq km
in the overall tenement package of 67 sq km held by the
Company at Caijiaying, the vast majority of which has
yet to be explored;
2. The Company will continue to drill underground for
further zinc and gold resources during the construction
and commissioning of the mine at zone III; and
3. The Company expects to increase throughput from
200,000 tonnes of ore per annum to 500,000 tonnes of
ore per annum as soon as practical.
With production of 22,000 tonnes of zinc metal per annum,
Caijiaying is expected to be the 11th largest zinc mine in
China and Hebei Hua-Ao is expected to be the 4th biggest
zinc producer in China which, despite declining production
and increased consumption, remains the largest zinc
producing country in the world.
Caijiaying Exploration Potential
The Company has long recognised the exploration
potential of the Caijiaying area, particularly for gold. Now
that the Caijiaying mine is due to start production in the
first quarter of 2005, Griffin is setting new priorities for
future exploration, in particular to focus on increasing
already identified deposits thereby enabling the current
mine plan to be enhanced, increasing profitability. The
main objectives of future exploration will be to:
1. Prove up additional high-gold and moderate-zinc grade
ore blocks within the mine area as soon as possible;
2. Prove up wider underground zinc ore blocks by
underground drilling on an east-west orientation,
similar to the surface drilling conducted in 2002 but at a
much lower cost, to enable mine throughput to be
increased as soon as practical;
3. Explore for gold and zinc in the surrounding prospects
with the aim of proving up additional resources that can
be added to the ore stream (zones II & V);
4. Explore between the present mine at zone III and zone II
where there are indications that the two areas are connected;
5. Re-evaluate the previous data and conduct further
exploration work in the original licence for further zinc
12
GRIFFIN MINING LIMITED R E V I E W O F O P E R AT I O N S
deposits that were not discovered by the wrongly
oriented previous drill holes; and
Nearby prospects
6. Conduct a regional epithermal gold exploration
programme for stand-alone new deposits.
To achieve the first two parts of the plan, Hebei Hua-Ao
has purchased two underground drill rigs and contracted an
Australian driller to manage the drilling programmes and
train local workers. This part of the programme is now
well underway.
To achieve the other parts of the exploration programme, it
is intended to use both local and international drill rigs, and
in particular, to use a western-style reverse-circulation rig.
This will allow more cost-effective testing of the various
targets, particularly the regional epithermal gold ones.
Gold zones within zone III
The first gold exploration target to be tested is the
southern end of zone III near the existing incline. Drilling
in 1998 discovered two high-grade zones: Drill hole CJ
313-14 of 2m at 30.90g/t (from 115m depth) and 8 metres
at 11.65g/t gold (from 118m depth). This target will be
re-evaluated once results from the initial holes are received.
A second set of combined zinc/gold targets will then be
tested by systematic pre-production drilling of a zone of
scattered gold values in a lode beneath the main zinc
mineralisation proved in the trial mining completed in 2000.
It is hoped that these two programmes will delinate up ore
in the vicinity of the first section of the orebody to be
mined (which are not currently in the mine plan).
Proving wider zinc lodes
As the pre-production grade control drilling is being
undertaken, the drill holes will be lengthened in order to
investigate the true width of the mineralised envelopes in the
zone III system, which were not fully tested by the previous
drilling. Griffin’s experience to date has consistently shown
that these corridors are wider than previously thought. This
part of the programme will be undertaken as part of the
general mine development.
Exploration of the nearby prospects will be conducted
firstly at zone V. Griffin had originally planned to
conduct the zone V drilling from underground workings
constructed by unlicensed local miners and since shut
down, but new information has suggested that these
workings would be difficult to dewater. Consequently, the
targets will be tested by a programme of surface drilling.
Following completion of this drilling programme a
decision will then be made as to whether to dewater the
old workings and undertake more extensive exploration.
Work at zone II will need to await the results of the longer
term programme between zone III and zone II. However,
it is expected that it will eventually be re-drilled to assess its
suitability as a separate source of ore when the process plant
is enlarged.
Area between zone III and zone II
A staged approach will be used to evaluate the large area
between zones III and II as this will take some time. The
first stage will be by surface drilling of wide-spaced holes.
If a sufficiently encouraging picture emerges, the next stage
will be to underground drive towards this area from the
planned decline to allow more densely spaced resource
definition drilling from underground workings.
Re-evaluation of original licence
Now that the correct geometry of the mineralization is
understood, Griffin expects to re-evaluate the original
licence area. This will be an ongoing task as there is a large
amount of previous data and many targets available. No
drill testing of these targets will be contemplated until
lower cost, reverse circulation drill rigs become available.
Regional epithermal gold exploration
Testing of the epithermal gold targets that were delineated in
2002 will also need to await the availability of a reverse-
circulation drill rig on site. In the meantime, a programme
of target delineation will be conducted during the
coming summer.
13
REPORT AND ACCOUNTS 2003 R E V I E W O F O P E R AT I O N S
Caijiaying primary exploration targets
14
GRIFFIN MINING LIMITED R E V I E W O F O P E R AT I O N S
The Future
With the completion of the feasibility study and the
successful raising of the necessary mine finance,
construction on an underground mine at zone III at
Caijiaying has commenced. Commissioning of the plant is
expected in early 2005 to be in full production by the
summer of 2005.
To date, the incline and underground levels driven in
2000 have been dewatered and extended, the incline
widened and the portal refurbished. A ventilation shaft is
being driven to a depth of 200 meters at the northern end
of the ore body. A number of surface buildings have been
constructed and site preparation has commenced. The
site has been connected to the Chinese electricity grid
and a substantial amount of equipment has been
purchased and the main items for the process
plant ordered.
A number of new staff have been engaged including Rupert
Crowe as project manager, Stan Rogers as mine manager,
and Gary Patrick as chief metallurgist. These personnel will
be assisted by a team of consultants covering the main
disciplines who will oversee the work being conducted by
Chinese contractors.
ENFI has been contracted to undertake detailed engineering
design work, equipment procurement advice and assistance
in construction of the mine and processing facilities.
As previously indicated, an underground drilling
programme is currently under way to test for extensions of
the best gold intersections to date in the planned mine area
in zone III.
Further exploration work at Caijiaying is also planned in
accordance with the previous section entitled “Caijiaying
Exploration Potential”.
Exploration success in any of these areas should add
significantly not only to the current gold and zinc resources
at Caijiaying, but should also enhance the probability that
they will be economically extractable as the processing
facilities being constructed at Caijiaying will be available to
process such additional resources with no additional capital
expenditure required.
The Company believes that with the commissioning of the
first, majority foreign owned mine in the PRC at
Caijiaying, the possibility exists for other 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
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.
Griffin will continue to initiate and investigate transactions
both within its traditional mining base and other areas
where its staff and consultants have particular expertise and
where further value may be added to the Company.
Financial
The Group recorded a loss for the year of $20,000 (2002
loss $230,000).
Operating costs in 2003 were $586,000 (2002 $462,000).
Foreign exchange gains of $476,000 were recorded in 2003
(2002 $159,000) on foreign currency deposits.
Shareholder funds increased from $7,321,000 at 31
December 2002 to $13,365,000 at 31 December 2003, with
the benefit of two share placings and exercises of warrants
and options completed in 2003.
Since the end of the financial year the Company has
completed a private private placing of 35,000,000 new
ordinary shares, and options over 6,600,000 new ordinary
shares have been exercised, to raise a further $16.3m
before expenses.
15
REPORT AND ACCOUNTS 2003 D I R E C T O R S A N D S E N I O R E X E C U T I V E S
Directors:
Mladen Ninkov, Chairman
Mladen Ninkov 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, a 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, Finance Director
Roger Goodwin 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 has a strong
professional background, including that as a manager with
KPMG, 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 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
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., 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.
Senior Executives:
Rupert Crowe, Project Manager
Rupert Crowe has been seconded from CSA Australia Pty
Ltd, to act as the Caijiaying Project Manager. He gained a
BSc (Hons) from Trinity College, Dublin. He has 30 years
of experience as a geologist and has managed gold and base
metal exploration and development projects in Australia,
South East Asia and Africa. He was Exploration Manager
for Aquitaine Mining in Ireland in the 1980s and established
CSA in both Ireland and Austrailia. He played a key role in
the development of the Lisheen zinc mine in Ireland, and
has been a director of Ivernia West, Golden Tiger
Resources and Maiden Gold.
Jeff Haitian Sun, General Manager
Jeff Haitian Sun is 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.
Stanley Rogers, Mine Manager
Stanley Rogers has had many years of experience in
managing mines in developing countries. He previously
managed the Wassa Gold Mine of Glencar Mining in
Ghana. He has worked at the Kilembe copper mine in
Uganda, was Mine Manager of the Pendarves tin mine in
Cornwall, Project Manager of a Sudanese gold mine,
General Manager of a Kenyan gold mine and Operations
Manager of the Mahd ad Dhahab gold mine in Saudi
Arabia.
16
GRIFFIN MINING LIMITED D I R E C T O R S ’ R E P O RT
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 2003.
Financial results
The Group loss on ordinary activities before taxation, amounted to US$20,000 (2002 - loss US$230,000). No taxation was
charged (2002 - nil). The Group loss after taxation amounted to US$20,000 (2002 - loss US$230,000) and has been charged
to reserves.
The loss per share amounted to 0.02 cents (2002 - loss 0.2 cents). The attributable net asset value per share at 31 December
2003 amounted to 10 cents (2002 - 7 cents).
The Directors do not recommend the payment of a dividend.
Principal activities
The principal activity of the Group is that of mining development and investment. A review of the Group’s operations for the
year ended 31 December 2003 and the indication of likely future developments are set out on pages 4 to 15.
Directors
The Directors of the Company during the year were:
Mladen Ninkov – Australian – Chairman
Roger Goodwin – British - Finance Director
Dal Brynelsen – Canadian
William Mulligan – American (US)
John Steele – Canadian – Resigned 7 March 2003
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 beneficial interests of the Directors holding office at 31 December 2003 and their immediate families in the share capital
of the Company were as follows:
Name
At 31 December 2003
At 1 January 2003
Ordinary shares
no.
Options over Ordinary shares
no.
ordinary shares no.
Options over
ordinary shares no.
Mladen Ninkov
Roger Goodwin
Dal Brynelsen
William Mulligan
33,001
311,163
1
1
6,000,000
0
0
300,000
33,001
30,000
200,001
1
6,000,000
800,000
0
300,000
The options granted to the Directors entitled the holders to subscribe for new ordinary shares in Griffin at 5 pence per share
on or before 31 March 2004.
On 31 July 2003 Roger Goodwin exercised options over 800,000 new ordinary shares at an exercise price of 5 pence per new
ordinary share of which 279,163 were retained by him and 520,837 ordinary shares, were placed with institutional investors.
17
REPORT AND ACCOUNTS 2003 D I R E C T O R S ’ R E P O RT
On 1 March 2004 Great Welland Corporation exercised options over 6,000,000 new ordinary shares at an exercise price of 5
pence per share. These options were acquired by Great Welland Corporation on 27 February 2004 from Frick Pty Ltd (a
company associated with the Chairman of Griffin, Mr Mladen Ninkov).
On 1 March 2004 William Mulligan exercised options over 300,000 new ordinary shares at an exercise price of 5 pence
per share.
On 9 March 2004 the Directors agreed to grant new options to the Directors and certain key management and on 22 March 2004
a total of 9,500,000 new options were granted to the Directors and certain key employees of the Company. Each new option
entitles the holder to subscribe for new ordinary shares in the Company at 30 pence per share on or before the 28 February 2007.
The new options vest with each option holder in 3 separate and equal instalments triggered by the following events:
a. The first third of each holder’s new options vest immediately;
b. The second third of each holder’s new options will vest upon the commissioning of the plant at Caijiaying, China
with an initial throughput of 200,000 tonnes per annum; and
c. The last third of each holder’s new options will vest upon the announcement of an upgrade in the throughput of
the Caijiaying plant from 200,000 tonnes per year to 500,000 tonnes per year.
The new options will not vest if an employee or a director resigns or leaves the Company prior to the vesting event taking
place. All the new options will vest immediately upon a takeover offer being made or a change in substantial control of the
Company taking place prior to the new options expiring.
The options have been allocated as follows:
Directors:
Mladen Ninkov (Chairman)
Roger Goodwin (Finance Director)
Dal Brynelsen (Director)
William Mulligan (Director)
Management:
Jeff Sun (General Manager – China)
Rupert Crowe (Project Manager)
Warren Woodhouse (Project Geologist)
Total
All of the Directors’ interests detailed are beneficial.
Substantial interests
No.
6,000,000
1,700,000
600,000
600,000
250,000
300,000
50,000
9,500,000
Griffin is aware that at 27 April 2004 Trellus Partners L.P. had a beneficial interest in 20,866,423 Ordinary Shares, which
amounts to 11.8% of the ordinary shares in issue at 30 April 2004.
Griffin was notified on 29 January 2004 that Gartmore Investment Limited, Gartmore Fund Managers Limited and
Gartmore Global Partners as discretionary investment managers of clients and client funds have an aggregate interest in
13,195,581 ordinary shares in the Company. This amounts to 7.5% of the ordinary shares in issue at 30 April 2004.
18
GRIFFIN MINING LIMITED D I R E C T O R S ’ R E P O RT
Griffin was notified on 25 February 2004 that Merrill Lynch International Investment Fund’s World Mining Fund has an
aggregate interest in 6,487,805 ordinary shares in the Company. This amounts to 3.7% of the ordinary shares in issue at
30 April 2004.
Post Balance Sheet Events
On 24 February 2004 Griffin completed a private placing of 35,000,000 new ordinary shares at 25 pence per share with
institutional investors to raise £8.75 million (US$16.2 million) before placing fees and expenses, to fund the completion of the
underground mine facilities and the above ground processing and other facilities at the Company’s Caijiaying project in
China. The financing will enable mine construction at Caijiaying to be completed with a view to the commissioning of the
Caijiaying zinc-gold mine in early 2005.
Corporate Governance
Although incorporated 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 at least once
per quarter, and is responsible for the overall strategy of the Group, its performance, management and major financial
matters. All directors are subject to re appointment annually at each annual general meeting of the Company’s shareholders.
Various safeguards and checks have been instigated as part of the Company’s system of financial control. These include:
•
•
•
•
•
preparation of regular financial reports and management accounts
preparation and review of capital and operational budgets
preparation of regular operational reports
prior approval of capital and other significant expenditure
regular review and assessment of foreign exchange risk and requirements
As part of these procedures all costs incurred on behalf of and by Hebei Hua-Ao are independently audited and checked by
the Chinese authorities and approved by the directors of Hebei Hua-Ao.
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.
19
REPORT AND ACCOUNTS 2003 D I R E C T O R S ’ R E P O RT
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
prepare the financial statements on a going concern basis unless it is inappropriate to presume the Company will
continue in business.
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
Finance Director and Company Secretary
10 May 2004
London
20
GRIFFIN MINING LIMITED REPORT OF THE INDEPENDENT AUDITORS
Report of the Independent Auditors to the Members of Griffin Mining Limited
We have audited the financial statements of Griffin Mining Limited for the year ended 31 December 2003 which comprise
the consolidated profit and loss account, the consolidated balance sheet, the statement of total recognised gains and losses, the
consolidated cash flow statement, the accounting policies, and notes 1 to 22. These financial statements have been prepared in
accordance with International Accounting Standards and under the accounting policies set out therein.
This report is made solely to the Company's members, as a body, in accordance with Section 90 of the Bermuda Companies
Act 1981. Our audit work has been undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit
work, for this report, or for the opinions we have formed.
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 and are properly prepared 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 Group'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 2003 and
of its loss for the year then ended in accordance with International Accounting Standards.
GRANT THORNTON
REGISTERED AUDITORS
CHARTERED ACCOUNTANTS
SOUTHAMPTON
10 May 2004
21
REPORT AND ACCOUNTS 2003 REPORT OF THE INDEPENDENT AUDITORS
The maintenance and integrity of the Griffin Mining Limited website is the responsibility of the directors:(cid:13)
the work carried out by the auditors does not involve consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that may have occurred to the financial statements since
they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of the financial statement
may differ from legislation in other jurisdictions.(cid:13)
21a
R EPORT AND ACCOUNTS 2003 CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2003
(expressed in thousands US dollars)
Income
Gains on the disposal of investments
Net operating expenses
Operating (loss)
Foreign exchange gains
Interest receivable and similar income
(Loss) on ordinary activities before taxation
Taxation on loss on ordinary activities
(Loss) for the financial year
(Loss) per share (cents)
Notes
1
2
4
5
17
6
2003
$000
-
(586)
(586)
476
90
(20)
-
(20)
(0.02)
2002
$000
8
(462)
(454)
159
65
(230)
-
(230)
(0.20)
22
GRIFFIN MINING LIMITED C O N S O L I D AT E D B A L A N C E S H E E T
As at 31 December 2003
(expressed in thousands US dollars)
Notes
2003)
$000)
2002)
$000)
Non-current assets
Intangible assets
Tangible assets
Current assets
Portfolio investments
Accounts receivable
Prepaid expenses
Cash and deposits
Current liabilities:
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
Shareholders equity interests
Number of shares in issue
7
8
9
10
11
13
14
15
16
17
6,285
174
6,459
62
33
66
6,831
6,992
(60)
(26)
5,617
2
5,619
29
10
13
1,737
1,789
(57)
(30)
6,906
1,702
13,365
7,321
1,352
21,385
3,690
(811)
(121)
(12,130)
1,036
15,537
3,690
(844)
152
(12,250)
13,365
7,321
135,227,731
103,557,248
Attributable net asset value per share
19
$0.10
$0.07
The accounts on pages 22 to 34 were approved by the Board of Directors and signed on its behalf by:
Mladen Ninkov
Chairman
10 May 2004
Roger Goodwin
Finance Director
23
REPORT AND ACCOUNTS 2003 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 December 2003
(expressed in thousands US dollars)
(Loss) for the financial year
Unrealised gains on investments
Currency translation differences on foreign currency net investments
Total gains and losses recognised in the year
Notes
15
16
18
2003)
$000)
(20)
33
(133)
(120)
2002)
$000)
(230)
13
(21)
(238)
Losses and profits for the financial year are the same as those on an historical cost basis.
24
GRIFFIN MINING LIMITED C O N S O L I D AT E D C A S H F L O W S TAT E M E N T
For the year ended 31 December 2003
(expressed in thousands US dollars)
Notes
2003)
$000)
2002)
$000)
Net cash (outflow) from operating activities
(227)
(285)
Investing activities
Interest received
Payments to acquire intangible fixed assets
Payments to acquire tangible fixed assets
Net cash (outflow) from investing activities
Net cash (outflow) before financing
Financing
Issue of ordinary share capital
Expenses paid in connection with share issue
4
7
8
11/13
13
90
(760)
(173)
(843)
(1,070)
6,452
(288)
6,164
65
(648)
-
(583)
(868)
24
-
24
Increase / (decrease) in cash and cash equivalents
10
5,094
(844)
Reconciliation of operating (loss) to net cash (outflow)
from operating activities
Operating loss
Depreciation
(Gains) on sale of investments
Receipts on the sale of investments
(Increase) in debtors
(Decrease) / increase in creditors
Exchange differences
2
(586)
1
-
-
(76)
(1)
435
(227)
(454)
1
(8)
8
(4)
17
155
(285)
25
REPORT AND ACCOUNTS 2003 A C C O U N T I N G P O L I C I E S
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.
Under the terms of the joint venture contract establishing the Hebei Hua’ Ao Mining Development Company Limited, the
Company is entitled to 100% of the net cash flows of the subsidiary for the first three years after commencement of
commercial production reverting thereafter to 60% being the Company's share of the equity interest.
No minority interest in Hebei Hua’ Ao Mining Development Company Limited is recognised in these financial statements as
the minority interest's share of capital is extinguished by accumulated losses.
Non current assets
Intangible assets
The Group uses the full cost method of accounting for mining operations. 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 and the necessary finance in place, 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
impairment in value (see note 8).
Depreciation
Plant and equipment will be depreciated at rates appropriate to the expected life of the asset once production has commenced
on a unit of production basis. Office equipment is depreciated over four years on a straight line basis.
26
GRIFFIN MINING LIMITED A C C O U N T I N G P O L I C I E S
Investments
Current asset investments are valued as follows:
Portfolio investments
Marketable securities listed or traded on a recognised stock exchange, are valued at the bid market price on such exchange or
market. Unrealised gains and losses on revaluation are taken direct to an investment revaluation reserve.
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. It is not practicable to ascertain the fair value of
unquoted investments.
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.
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 and
profit and loss account items are translated at the average rate for the year. The exchange difference arising on the
re-translation 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.
Equity compensation
Griffin operates an equity compensation plan under which directors and certain key management are granted options to
subscribe for new ordinary shares in the Company as described in the Directors' report on page 18. In accordance with
current accounting standards the Company does not make a charge to staff costs in connection with share options issued to
directors and employees.
27
REPORT AND ACCOUNTS 2003 N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
1. Income
The Group’s income arises from continuing operations.
2. Net operating expenses
Net operating costs comprise:
Depreciation
Staff costs
Other administrative costs
Total operating expenses
Number of persons employed by the Group
All operating expenses charged to profit relate to continuing operations.
2003
$000
(1)
(218)
(367)
(586)
No.
6
2002
$000
(1)
(163)
(298)
(462)
No.
5
3. Directors’ remuneration
The following fees and remuneration were receivable by the Directors holding office during the year:
Mladen Ninkov
Dal Brynelsen
Roger Goodwin
William Mulligan
John Steele
Fees
Salary
$000
-
-
-
-
-
$000
-
-
114
-
-
Taxable
benefits
$000
-
-
-
-
-
Total
2003
$000
-
-
114
-
-
Total
2002
$000
-
-
104
-
-
Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust, received
fees under a consultancy agreement of $225,000 (2002 $225,000), for the provision of advisory and support services to Griffin
Mining Limited and its subsidiaries during the year, 60% of which fees are charged to Hebei Hua-Ao and capitalised. Mladen
Ninkov is a director and employee of Keynes Investments Pty Limited.
On 31 July 2003 Roger Goodwin exercised options over 800,000 new ordinary shares at an exercise price of 5 pence per new
ordinary share of which 279,163 were retained by him and 520,837 ordinary shares, were placed with institutional investors.
On 1 March 2004 Great Welland Corporation exercised options over 6,000,000 new ordinary shares at an exercise price of 5
pence per share. These options were acquired by Great Welland Corporation on 27 February 2004 from Frick Pty Ltd (a
company associated with the Chairman of Griffin, Mr Mladen Ninkov).
On 1 March 2004 William Mulligan exercised options over 300,000 new ordinary shares at an exercise price of 5 pence per share.
On 9 March 2004 the Directors agreed to grant new options to the Directors and certain key management and on 22 March 2004 a
total of 9,500,000 new options were granted to the Directors and certain key employees of the Company. Each new option entitles
the holder to subscribe for new ordinary shares in the Company at 30 pence per share on or before the 28 February 2007. The new
options vest with each option holder in 3 separate and equal instalments triggered by the following events:
28
GRIFFIN MINING LIMITED N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
a.
b.
c.
The first third of each holder’s new options vest immediately;
The second third of each holder’s new options will vest upon the commissioning of the plant at Caijiaying, with an
initial throughput of 200,000 tonnes per annum; and
The last third of each holder’s new options will vest upon the announcement of an upgrade in the throughput of
the Caijiaying plant from 200,000 tonnes per year to 500,000 tonnes per year.
The new options will not vest if an employee or a director resigns or leaves the Company prior to the vesting event taking
place. All the new options will vest immediately upon a takeover offer being made or a change in substantial control of the
Company taking place prior to the new options expiring.
The Directors options have been allocated as follows:
Mladen Ninkov
Roger Goodwin
Dal Brynelsen
William Mulligan
Total
4. Interest receivable and similar income
Bank and short term interest
5. Taxation on loss on ordinary activities
Taxation on loss on ordinary activities
The Company is resident for corporation tax purposes in the United Kingdom.
Factors affecting total current corporate tax charge for the year
Loss on ordinary activities multiplied by the UK standard rate of corporation tax
30% (2002: 30%)
Expenses not deductible for tax purposes
Losses carried forward
Current tax charge for the year
The Company has unutilised tax losses estimated at $6.6m, and capital losses
estimated at $2.4m.
6. (Loss) per share
No.
6,000,000
1,700,000
600,000
600,000
8,900,000
2002
$000
65
2002
$000
-
2002
$000
(69)
2
67
-
2003
$000
90
2003
$000
-
2003
$000
(7)
2
5
-
The loss per share has been calculated on the basis of the net loss after taxation of US$20,000 (loss US$230,000 in 2002) and
the weighted average number of shares in issue in the year ended 31 December 2003 of 114,682,774 (103,266,289 in 2002).
There is no dilutive effect of share purchase options.
29
REPORT AND ACCOUNTS 2003 N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
7. Intangible assets
Exploration interests
China – Zinc/Gold
COST / VALUATION
At 1 January 2003
Foreign exchange adjustments
Additions during the year
At 31 December 2003
NET BOOK VALUE
At 31 December 2003
At 31 December 2002
$000
5,617
(92)
760
6,285
6,285
5,617
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. Upon economically exploitable mineral deposits
being established, sufficient finance will be required to bring such discoveries into production.
8. Tangible assets
COST
At 1 January 2003
Additions
At 31 December 2003
DEPRECIATION
At 1 January 2003
Provided during the year
At 31 December 2003
NET BOOK VALUE
At 31 December 2003
At 31 December 2002
Plant and
Machinery
$000
-
171
171
Office furniture
and equipment
$000
21
2
23
-
-
-
171
-
19
1
20
3
2
Total
$000
21
173
194
19
1
20
174
2
9. Portfolio investments
Quoted (cost $873,000 - 2002 $873,000)
2003
$000
62
2002
$000
29
Quoted securities are valued at the bid market price. Unquoted investments have been fully provided against. Quoted
and unquoted investments are classified as available for sale.
30
GRIFFIN MINING LIMITED N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
10. Cash and deposits
Analysis of changes in cash and cash equivalents
At 1 January
Net cash inflow / (outflow)
At 31 December
2003
$000
1,737
5,094
6,831
2002
$000
2,581
(844)
1,737
Include within the net cash inflows of $5,094,000 (2002 outflow $844,000) are $476,000 (2002 $159,000) of foreign exchange
gains on cash deposits which have been treated as realised.
11. Share capital
AUTHORISED:
Ordinary shares of US$0.01 each
1,000,000,000
10,000
1,000,000,000
10,000
2003
2002
Number
$000)
Number
$000
CALLED UP ALLOTTED AND FULLY PAID:
Ordinary shares of US$0.01 each
At 1 January
Issued during the year
At 31 December
103,557,248
31,670,483
135,227,731
1,036
316
1,352
103,257,248
300,000
103,557,248
1,033
3
1,036
On 31 July 2003, 10,416,667 new ordinary shares in the Company were allotted at 12 UK pence ($0.20) per ordinary share for
cash to raise $2.1m before expenses on an equity placing.
On 31 July 2003 1,100,000 new ordinary shares in the Company were allotted at 5 UK pence ($0.08) per ordinary share on
the exercise of options.
On 21 August 2003, 12,000,000 new ordinary shares in the Company were allotted at 14 UK pence ($0.23) per ordinary share
for cash to raise $2.8m before expenses on an equity placing.
On 3 September 2003 410,261 new ordinary shares were allotted at 12 UK pence ($0.20) per ordinary share on the exercise of
warrants to existing shareholders as part of arrangements for the equity placing in July 2003.
On 6 October 2003 6,493,555 new ordinary shares were allotted at 12 UK pence ($0.20) per ordinary share on the exercise of
warrants to existing shareholders as part of arrangements for the equity placing in July 2003.
On 6 October 2003 750,000 new ordinary shares in the Company were allotted at 5 UK pence ($0.08) per ordinary share and
500,000 new ordinary shares in the Company were allotted at 10 UK pence ($0.17) per ordinary share on the exercise
of warrants.
31
REPORT AND ACCOUNTS 2003 N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
12. Share options and warrants
1 January 2003
Number
At Granted
in year
Number
At
Exercised 31 December 2003
Number
Number
Options exercisable at 5 pence per share at anytime up to
31 March 2004.
7,700,000
(1,100,000)
6,600,000
Warrants exercisable at 5 pence at anytime up to
30 September 2003.
Warrants exercisable at 10 pence at anytime up to
30 September 2003.
Warrants exercisable at 15 pence at anytime up to
30 September 2004.
Warrants exercisable at 20 pence at anytime up to
30 September 2004.
Warrants exercisable at 20 pence at anytime up to
31 August 2005.
13. Share premium
At 1 January
Premium on shares issued in year
Expenses paid in connection with share issues
At 31 December
14. Contributing surplus
At 1 January and 31 December
750,000
500,000
500,000
250,000
-
-
-
-
-
(750,000)
(500,000)
-
-
-
-
6,000,000
9,700,000
6,000,000
(2,350,000)
2003
$000
15,537
6,136
(288)
21,385
2003
$000
3,690
-
-
500,000
250,000
6,000,000
13,350,000
2002
$000
15,516
21
-
15,537
2002
$000
3,690
The Contributing surplus is a statutory reserve for the maintenance of capital under Bermuda company law and was
created on a reduction in the par value of the Company’s ordinary shares on 15 March 2001.
15. Investment revaluation reserve
At 1 January
Movements during the year
At 31 December
2003
$000
(844)
33
(811)
2002
$000
(857)
13
(844)
Unrealised appreciation and depreciation of portfolio investments are reflected in the investment revaluation reserve
32
GRIFFIN MINING LIMITED N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
16. Foreign exchange reserve
At 1 January
Transfer profit and loss account
Movements during the year
At 31 December
2003
$000
152
(140)
(133)
(121)
2002
$000
173
-
(21)
152
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.
The transfer to the profit and loss account in the year is in respect of foreign exchange gains on the translation of the net
assets of overseas subsidiary undertakings disposed of during the year.
17. Profit and loss account
At 1 January
Transfer foreign exchange reserve
(Loss) for the financial year
At 31 December
18. Reconciliation of shareholders’ funds
Total (losses) and gains recognised in the year
Issue of ordinary shares in the year
Net additions to / (reductions in) shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
19. Attributable net asset value per share
2003
$000
(12,250)
140
(20)
(12,130)
2003
$000
(120)
6,164
6,044
7,321
13,365
2002
$000
(12,020)
-
(230)
(12,250)
2002
$000
(238)
24
(214)
7,535
7,321
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 2003 of 135,227,731 (103,557,248 at 31 December 2002).
20. Post Balance Sheet Events
On 24 February 2004 Griffin completed a private placing of 35,000,000 new ordinary shares at 25 pence per share with
institutional investors to raise £8.75 million (US$16.2 million) before placing fees and expenses, to fund the completion of
thea underground mine facilities and the above ground processing and other facilities at the Group’s Caijiaying project in
China.
33
REPORT AND ACCOUNTS 2003 N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
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.
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. Subsidiary companies
At 31 December 2003, 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*
Class of
shares held
Proportion of
shares held
Nature of
business
Country of
incorporation
Ordinary
100%
Holding company
Australia
60%
Zinc mining
and development
China
Panda Resources Limited Ordinary
100%
Holding company
England
Hebei Sino Anglo
Mining Development
Company Ltd*
90%
Gold exploration
and development
China
* China Zinc Pty Ltd and Panda Resources Ltd are directly owned by the Company. China Zinc Pty Ltd has a controlling
interest in Hebei Hua’ Ao Mining Development Company Ltd, see below, and Panda Resources Ltd has a 90% controlling
interest in Hebei Sino Anglo Mining Development Company Ltd.
** The joint venture contract establishing the Hebei Hua’ Ao Mining Development Company Ltd, as ammended, provides
that 100% of the cash flows generated by the joint venture in the first three years from commencement of commercial
production be paid to the foreign party. Thereafter the foreign party will receive 60% of the cash flows, in accordance with its
share in the equity interest in the joint venture.
34
GRIFFIN MINING LIMITED C O R P O R AT E I N F O R M AT I O N
Principal office:
Registered office:
China Zinc office:
Directors:
6th & 7th Floors, 60 St James’s Street,
London. SW1A 1LE. UK.
Telephone: + 44 (0)20 7629 7772
Facsimile: + 44 (0)20 7629 7773
Email: griffin@griffinmining.com
Web site: www.griffinmining.com
Clarendon House,
2 Church Street, Hamilton. HM11. Bermuda.
Level 9, BGC Centre,
28 The Esplanade,
Perth, WA 6000. Australia.
Telephone: + 61(0)8 9321 7143
Facsimile: + 61 (0)8 9321 7035
Mladen Ninkov (Chairman)
Roger Goodwin (Finance Director)
Dal Brynelsen
William Mulligan
Company Secretary:
Roger Goodwin
Nominated Adviser
and Broker for AIM:
Auditors:
Solicitors:
Bankers:
Charles Stanley and Company Limited
25 Luke Street,
London. EC2A 4AR. UK.
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.
UK Registrars & Transfer Agents:
Capita IRG plc
Bourne House, 34 Beckenham Road, Beckenham,
Kent. BR3 4TU. UK.
35
REPORT AND ACCOUNTS 2003