Griffin Mining Ltd.
Annual Report 2008

Plain-text annual report

R E P O RT A N D A C C O U N T S 2 0 0 8 CONTENTS CHAIRMAN’S STATEMENT REVIEW OF OPERATIONS DIRECTORS & SENIOR EXECUTIVES DIRECTORS’ REPORT REPORT OF THE INDEPENDENT AUDITOR CONSOLIDATED INCOME STATEMENT CONSOLIDATED BALANCE SHEET CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED CASH FLOW STATEMENT ACCOUNTING POLICIES NOTES TO THE FINANCIAL STATEMENTS CORPORATE INFORMATION Griffin Mining Limited is a mining and investment company whose principal asset is the Caijiaying zinc-gold mine. 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). Registered number: EC13667 Bermuda. Registered Office: Clarendon House, 2 Church Street, Hamilton HM11, Bermuda United Kingdom office: 60 St James's Street, London SW1A 1LE Page 4 8 28 32 35 36 37 38 39 40 46 60 1 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 2 Caijiaying Mine Site Winter 2009 During Upgrade Construction 3 G R I F F I N M I N I N G L I M I T E D CHAIRMAN’S STATEMENT R E P O RT A N D A C C O U N T S 2 0 0 8 2008 will go down as one of the most catastrophic as one of the world’s lowest cost zinc producers. Spitfire Oil Limited, a company listed on the AIM make any acquisition of these assets prohibitively years for all involved in the mining, financial and With the continuing depressed commodity prices, of the London Stock Exchange. This company is difficult and uneconomic. Even without any further industrial markets. Almost every institution, the Company took the opportunity to temporarily attempting to economically extract fuel oils and acquisition, the Company’s future looks assured. company and individual was affected, some suspend operations at Caijiaying to undertake long other by-products from the huge Salmon Gums The industrialization of China and its spectacular irrevocably, and your company, Griffin Mining overdue heavy maintenance and complete lignite deposit in Western Australia. This is a long growth rate, although temporaily slowed, should Limited (“Griffin” or the “Company”) was no construction associated with the expansion of term, high risk venture. But the economic rewards, return and re-ignite the “super cycle” in exception. Even in this difficult environment, the production facilities. The economic cost of should Spitfire Oil Limited be successful, will be commodity prices. The Company’s balance sheet Company was still able to produce a profit before suspending operations was relatively small enormous and Company transforming. is very strong with a large cash balance and no debt. tax of almost $7 million, a truly remarkable result compared to suspending operations at a time of The Company is beginning to increase throughput considering the zinc price fell 46% in 2007 and a high commodity prices. By the beginning of June, Less successfully, in April 2008, the Company at Caijaying towards 750,000 tonnes per annum further 50% in 2008. This is a testament to the full operations should have resumed at Caijiaying. negotiated an agreed merger with Yukon Zinc and Caijiaying continues to be a low cost mine quality of the Caijiaying mine, its people and the Corporation, which was subsequently frustrated with the potential to become a world class mining management of the Company. The current environment does, however, provide by a higher takeover bid by Northwest Non region, particularly with further exploration some unique acquisition opportunities which the Ferrous International Investment Company between Zones II and III at Caijiaying. 2008 was unique, not in that it produced the Company would like to pursue. As most Limited and Jinduicheng Molybdenum Group beginning of a severe and prolonged recession. It shareholders are aware, in a booming commodity Limited. Nevertheless, the Company was still Logically, all these activities require smart, efficient is the task of any competent management to foresee market, mining companies and mining assets are able to walk away from the transaction with a and tireless human capital. The Company has such likelihood. Rather it was the complete given astronomical valuations. Even the small C$2.5 million break-up fee. Finally, and probably always prioritized obtaining, maintaining and breakdown of the financial system, including the number of assets the Company thought met the most disappointingly, in March 2009, the keeping the best possible staff because, at the end banking, equity and debt markets, that produced a financial, political, structural, metallurgical and Company made an unsolicited bid for a Canadian of the day, people make things happen. To the scenario that none of us had ever seen before and geological parameters set by the Company, were company, Ivernia Inc, the owner of the suspended Company’s directors, senior management, brought the world to the edge of financial calamity. financially out of reach. The current economic Magellan Lead Mine in Western Australia. That contractors and Chinese employees go all of our The ensuing ricochet effects caused the current crisis has savagely slashed these companies’ company’s management took the unfathomable thanks and gratitude. We also welcome Investec as recessionary environment and, for mining valuations and, in some cases, left them in a decision to deliver effective control, through our new Nominated Advisor and Broker. We hope companies, the unfortunate end to booming precarious financial predicament with little or no massive dilution of its share capital, to a related our relationship will be long and mutually commodity prices. In a fixed cost business such as cash and no hope of raising further funding to party without shareholder approval. That made beneficial. mining, the resulting dramatic fall in revenues survive. It is these companies that management has the acquisition of Ivernia uneconomic and caused by declining commodity prices was reflected been evaluating and attempting to acquire. unpalatable for Griffin. Lastly to you, our shareholders and owners, we directly in a corresponding fall in the profitability pledge to continue to add real value and work even of the Company. The Company made a number of acquisition None of this has dampened the Company’s harder to bring the rewards your loyalty has earned attempts during the year. On the plus side, in May enthusiasm to make further acquistions in this over the course of this difficult year. Fortunately for Griffin, prudent management has 2008, the Company bought back its own shares recessionary environment where the Company’s ensured that a significant cash balance has been from Citadel Investment Group, realising a gain cash has inordinate value, particularly before Mladen Ninkov maintained in the Company, no debt exists on the of over $30 million. From the same seller Griffin commodity prices start to rise again and the Chairman balance sheet and the Caijiaying mine is managed was able to acquire, for £2.5 million, over 39% of valuation of mining assets become so high as to 30 April 2009 4 5 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 6 Main Zone III Decline Caijiaying Mine Site 7 G R I F F I N M I N I N G L I M I T E D OPERATIONAL REVIEW 2008/09 R E P O RT A N D A C C O U N T S 2 0 0 8 OVERVIEW HISTORY OF CAIJIAYING Griffin Mining Limited (the “Company”) and its to be undertaken with relatively little economic loss The Mine is located at Caijiaying, which is established in 1994, in which Griffin, through its subsidiaries (together the “Group”) recorded a being incurred by the Group. approximately 250 kilometres north-west of Beijing wholly owned Hong Kong subsidiary, China Zinc profit before tax for the year of $6,959,000 (2007: in the Hebei Province. The site is easily accessible Limited (“China Zinc”), holds a 60% equity $26,762,000). Griffin benefited from interest receipts of by two separate freeway systems from Beijing and $4,670,000 during 2008 (2007: $5,607,000), secondary sealed roads. The site has significant All mining companies faced serious challenges however, this income has decreased during 2009 water supplies, two independent connections to the during 2008, however, the Group was positioned with declining interest rates world-wide. Griffin electricity grid, full connectivity to fixed and better than the vast majority of its fellow industry also benefited from a C$2.5 million break free on mobile telecommunications and broadband access participants in maintaining a low cost, long life the Company’s aborted acquisition of Yukon Zinc for internet services. Climatic conditions are not interest and the Chinese joint venture partners (which include the Zhangjiakou City People’s Government, the Hebei Bureau of the Ministry of Land and Resources and the Third Geological Brigade) a 40% interest. mine and retaining substantial cash balances. The Corporation. Group has benefited from receiving 100% of the severe with warm summers and cold, dry winters. In January 2004, a second contractual joint venture company, Hebei Sino Anglo Mining Development profits of the Caijiaying Zinc-Gold Mine (“the Foreign exchange losses of $3,221,000 were The assets of the Mine are held by Hebei Hua Ao Company Limited (“Hebei Anglo”), was formed to Mine”) over the three years to July 2008 and recorded in 2008 (2007: gains of $1,012,000) Mining Industry Company Limited (“Hebei Hua’ hold the mineral rights to the area surrounding the obtaining a net gain of over $30 million, recognized primarily on sterling deposits held to cover sterling Ao”), a contractual co-operative joint venture entity original Hebei Hua’ Ao licence area and any other through reserves and not in the profit for the year, commitments. The losses follow the fall in the by repurchasing $121.5 million of its own shares for value of sterling in the year. cancellation in May 2008 from Citadel Equity Fund Ltd (“Citadel”) having issued those same On 27 November 2008, Griffin acquired shares for $151.7 million in August 2007. 16,666,667 ordinary shares at £0.15 per share for a total cost of £2,500,000 ($4,542,000) in Spitfire Oil With the Group’s primary income generated by the Limited (“Spitfire”). This represents 39.2% of the Mine, profitability was severely impacted by the fall issued share capital of Spitfire. Spitfire’s principal in the price of zinc. During 2008, the zinc price asset is the Salmon Gums Lignite deposits in quoted on the London Metals Exchange fell from Western Australia from which Spitfire is intending $2,500 per tonne to $1,100 per tonne. Due to this to produce fuel oil, distillates and other by- price decline and the Group remaining unhedged products. This relatively modest investment to both metals and currency, a decision was taken provides Griffin with an entrée into a long term, to suspend operations in the first quarter of 2009 to large scale project that spreads the Company’s allow much needed maintenance and capital work political and commodity risk. 8 Caijiaying Mine Location: Courtesy of Google Maps 9 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 areas of interest in Hebei Province. Griffin, administration building extensions and other site Profitability was also impacted by a fall in the head second processing circuit to produce a gold, silver through its wholly owned UK subsidiary company, infrastructure. The construction of a new crushing grade of zinc during the year, a normal occurrence and lead concentrate in December 2007 and the Panda Resources Limited, has a 90% interest in circuit has not yet been completed and a second given the numerous lodes carrying various grades commissioning of a backfill plant to fill Hebei Anglo. The other Chinese shareholders in Hebei Anglo hold 10% and reflect those shareholders in Hebei Hua-Ao. Griffin, through Hebei Hua’ Ao and Hebei Anglo, has a controlling interest in mining and exploration licences over 67 square kilometres at Caijiaying. Application has been made for further exploration licences in the surrounding area. In 2005, Griffin successfully commissioned the mine and processing facilities at Caijiaying, on time and within budget, with an initial design production rate of 200,000 tonnes of ore per annum. Production rates have been steadily increased since commissioning with 491,848 tonnes of ore processed in 2008 and processing rates equivalent to 600,000 tonnes of ore per annum recently achieved. primary ball mill purchased but not yet installed. of zinc mineralization and the scheduling of mining underground voids caused costs to increase. When completed, this should enable processing of these different lode systems. To date, mining Administrative costs have also increased in China capacity to be increased to 750,000 tonnes of ore operations have been directed at the upper levels of with local managers being appointed by the Chinese per annum. the mine. Development of the lower levels of the joint venture partners to certain administrative MINE OPERATIONS Production capacity continued to increase at the Mine which allowed tonnes of ore processed to increase from 409,193 tonnes in 2007 to 491,848 tonnes in 2008. It also allowed the production of a second concentrate to be produced containing lead, silver and gold. mine were delayed by permitting issues and, in positions following the start of the Chinese profit particular, delays in obtaining an environmental sharing in July 2008. With the difficult state of the permit required for the expansion of mining mining industry, all costs are being reviewed to operations. The Company has been advised that ascertain where costs can be reduced including, these issues have now been resolved and work renegotiating terms with all contractors. should begin on developing the lower levels shortly. Underground mine development has continued Zinc metal in concentrate produced was increased throughout 2008 in order to provide increased from 21,781 tonnes in 2007 to 22,922 tonnes in throughput to the processing facilities. The main 2008, gold produced increased from 15 ounces in “Northern Decline” has been to be extended to the 2007 to 2,421 ounces in 2008, silver produced lower levels although development of the lower The upgrade of the processing plant did encounter increased from 6,470 ounces in 2007 to 171,888 levels were delayed by permitting issues. During delays and difficulties due to a number of reasons. ounces in 2008 and lead produced increased from 2008, 433,274 tonnes of ore were mined (2007: In the first instance poor design work was produced 13 tonnes in 2007 to 1,127 tonnes in 2008. Whilst 430,891 tonnes). Mining was hindered during the In December 2007, production of a separate by the local Chinese Engineering Institute and precious metals concentrate containing gold, silver below standard construction work followed by recovery rates for zinc have held in excess of 95% year by difficulties in sourcing supplies, most through 2008, recovery rates for lead, gold and notably explosives, during the Olympic and and lead commenced from an integrated circuit forming part of the main processing facilities at Caijiaying. Previously gold, silver and lead were lost to the smelters in the zinc concentrate. certain Chinese contractors. Construction was silver have not yet met expectations and further Paraplegic Olympic Games in Beijing and delays in then further significantly disrupted by the Olympic work is being undertaken in an attempt to improve accessing the lower mine levels. The inability to and Paraplegic Olympic games held in Beijing in recovery rates. With the development of the lower access the lower levels has resulted in having to the summer of 2008, which severely interrupted levels of the mine, grades, particularly for gold, are revert to shrink stoping to extract ore as opposed to supplies of equipment. As a result, the upgrade expected to improve as drilling results indicate up-hole benching. Greater use of up-hole Considerable work has been undertaken since remains ongoing with sufficient progress on the higher gold grades at lower levels. benching, which allows for increased extraction commissioning to increase production with the upgrade of the processing plant being made such rates albeit with greater dilution, will be made to installation of, inter alia, a new back-fill plant, new that processing rates equivalent to 600,000 tonnes The Mine continues to rank in the lowest quartile extract ore from the lower levels which are expected floatation circuits, new accommodation and of ore per annum have already been achieved. of zinc producer costs. The commissioning of the to be more amenable to such mining methods. 10 11 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 RESOURCES In 2008, 7,392 meters (2007: 7,200 meters) of In 2008 work was started on the development of a underground drives, rises and cross cuts were drive connecting Zone III and the extended Fox RESOURCE ESTIMATE AND RECONCILIATION ZONE III Resource in close proximity to existing development. Significant tonnages of mineralisation were defined developed. During 2008, within the area of current decline at Zone II. This will give services and mining activities at Zone III, over 35,570 metres haulage access to the Zone II resources for future (2007: 34,000 metres) of underground infill and development. It will also provide a suitable drilling exploration diamond drilling was completed. platform and allow cost effective underground exploration drilling of the area between Zones III Following the discovery of mineralisation and the and II. preparation of an initial resource estimate in 2007 at Zone II (approximately 1.5 kilometres to the The Caijiaying mine operated throughout 2008 south of Zone III), a further 120 meters of without any significant accident or environmental underground drives were constructed from the incident, retaining an excellent safety and “Fox” exploration decline at Zone II. This environmental record. development was undertaken to enable further exploration drilling in the future. Caijiaying Mine Site - Plant Upgrade Construction During 2008, approximately 34,000 metres of diamond drilling was completed. The programme breakdown was 9,000 metres of infill and 25,000 metres of extensional drilling. Several exploratory within the Qing Long, Ju Long, Fu Long, Chang Long and Xiao Long lodes. An updated Mineral Resource estimate is underway with results expected in the third quarter of 2009. probe holes were also drilled to the west of the Tabulated below is the updated Mineral Resource Qing Long lode. Extensional drilling targeted higher estimate to JORC reporting standards for Zone III grade zones within the 2002 Inferred Mineral at Caijiaying. Micromine 2002 Mineral Resource Estimate (Non Grade Control Drilling) Category Cut Tonnes -off Millions Metal Grade Zinc % Gold Silver grammes grammes per tonne per tonne Contained Metal Gold million ounces Zinc million tonnes Silver million ounces Indicated Inferred Total Indicated Inferred Total 1% 1% 1% 4% 4% 4% 40.32 34.29 74.61 13.72 4.89 18.61 4.3 2.9 3.6 7.9 8.5 8.1 0.7 0.5 0.6 0.8 0.5 0.7 20 13 17 32 31 32 1.67 0.93 2.60 1.09 0.42 1.51 0.95 0.56 1.51 0.33 0.09 0.42 29.53 18.25 47.78 13.97 4.82 18.79 FinOre 2006 Mineral Resource Estimate (Grade Control Drilling) Category Cut Tonnes -off Millions Metal Grade Zinc % Gold Silver grammes grammes per tonne per tonne Contained Metal Gold million ounces Zinc million tonnes Silver million ounces Measured Indicated Inferred Total 1% 1% 1% 1% 1.18 2.83 0.89 4.9 6.7 5.6 4.5 5.7 0.4 0.6 0.6 0.6 35 33 23 31 0.08 0.16 0.04 0.28 0.02 0.05 0.02 0.09 1.34 2.97 0.64 4.94 The information in this report that relates to the Mineral Resource Estimate for the 31 December 2008 grade control drilled areas is based on information compiled by Mr L Marshall BSc. MAIG. The mining depletion of the FinOre 2006 Mineral Resource estimate was carried out by Mr L Marshall. Mr. Marshall is a full time employee of Griffin Mining Ltd. The information relating to the FinOre 2006 Mineral Resource and the Micromine2002 Mineral Resource estimates were compiled by Mr C Fawcett BSc (Hons),G Dip Eng, MAusIMM of FinOre and Mr D Pertel MSc. MAIG. of Micromine Consulting Ltd. Mr Marshall, Mr Fawcett and Mr Pertel have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined by the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code, 2004 edition). 12 13 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 The table summarises the Mineral Resource as at The depleted FinOre 2006 Mineral Resource was The figure below is the FinOre 2006 Mineral control drilling) and the 2002 Inferred Mineral 31 December 2008 for: estimated by reporting the block model with Resource and the 2008 Mineral Resources (grade Resource (historic surface drilling only). • The grade control drilled area defined by the FinOre 2006 Mineral Resource estimate yearly surveyed void pickups removed up to the 2008 calendar year inclusive. The result was compared with the production figures for 2008. • The non grade control drilled area defined by Production reported 431,000 mined tonnes, the Micromine 2002 Mineral Resource estimate where the resource depletion reported 319,000 mined tonnes. The difference is attributed to the There was no change to the depleted Micromine 2002 mining of an estimated 112,000 tonnes of Mineral Resource estimate as no mining took place mineralisation from outside the FinOre 2006 from within the depleted resource reported in 2007. Mineral Resource block model. Mineral Resource Estimates for Zone II Material Tonnes INDICATED Oxide Transitional Fresh Sub-total INFERRED Oxide Transitional Fresh Sub-total 230,000 330,000 3,430,000 3,990,000 130,000 430,000 940,000 1,500,000 TOTAL 5,490,000 Note: Rounding errors may occur Zn % 1.9 1.9 3.3 3.1 2.4 2.9 3.8 3.4 3.2 Pb % 0.7 0.8 0.5 0.5 0.5 0.5 0.8 0.7 0.6 Au grammes per tonne Ag grammes per tonne 0.3 0.2 0.3 0.3 0.2 0.3 0.4 0.3 0.3 20.0 22.7 25.7 25.1 21.2 16.7 25.5 22.6 24.4 The information in this report that relates to the Mineral Resource estimates for Zone II is based on information compiled by Mr G. Fahey of CSA Australia Pty Ltd (CSA). Mr Fahey is a Chartered professional and Member of The Australasian Institute of Mining and Metallurgy and a Member of the Australian Institute of Geoscientists. Mr Fahey has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (the JORC Code). Mr Fahey consents to the inclusion in the report of the matters based on his information in the form and context in which they appear. EXPLORATION CAIJIAYING AREA Hebei Anglo’s tenement boundary continues to confirm the area to be highly prospective, indicating significant potential for further base Mineralisation at Caijiaying is believed to be related metal and gold deposits. to a Jurassic igneous event that affected the 2.3 billion year old metamorphic basement rocks. Base HEBEI HUA’ AO LICENCE AREA metal and gold mineralisation associated with Jurassic intrusives have replaced favourable horizons The 1.5 kilometre long area between Zones II and in the metamorphic rocks, most notably calc-silicates III has long been considered prospective for and marble. Porphyry sills and dykes intruding along additional zinc deposits but drilling has proved faults have then cut across the sequence. difficult due to either local access restrictions or deep sandy overburden. Zone III contains the current On-going exploration in the area surrounding the Mine and at Zone II, approximately 1.5 kilometres mine at Caijiaying and within Hebei Hua’ Ao’s and to the south of Zone III, drilling in previous years 14 15 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 16 Front End Loader Placing Ore into Jaw Crusher on Caijiaying Mine Site ROM Pad 17 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 HEBEI ANGLO LICENCE AREA A detailed review of the ground magnetic data in length of mineralisation another few kilometres. the Hebei Anglo licence area revealed an The programme had to be abandoned due to poor anomalous circular magnetic anomaly to the east of drilling conditions resulting from very broken Zone II, termed the Xiaobazi Prospect. During ground. The concept remains untested. 2008, a field programme was undertaken comprising geological mapping and the collection Newly developed geochemical techniques are of 422 soil and 98 rock samples. Assaying revealed currently being evaluated to determine if they can the presence of gold, copper, zinc, molybdenum be used to discover mineralisation beneath aeolian and lead geochemical anomalies. sands. This sand blankets a large part of the tenement block thereby hindering exploration. A short drilling programme was undertaken to test The ability to “see through” this cover would be a a concept that mineralisation extended across the major advance in exploration of the Caijiaying F45 fault. Success would have extended the strike region and for all areas covered by similar sands. Superimposed Diagrammatic View of Underground Mine Workings at Caijiaying: Courtesy of Google Maps defined an initial JORC resource estimate of 5.49 haulage and services access when mining million tonnes of 3.2% zinc, 0.6% lead, 0.3 grams commences from this area. per tonne gold and 24 grams per tonne silver. During 2008, the Fox decline was extended an Activities in 2008 concentrated on linking access additional 110 metres. The underground between Zone II and Zone III by extending the Fox exploration programme planned for 2008 had to be decline from Zone II northwards towards Zone III postponed, despite considerable effort, as the and developing a drive southwards from Zone III recruitment of suitably qualified and experienced towards Zone II. The aim of this work was firstly, geological and drilling personnel proved impossible to provide a more practical drilling platform than to find because of the world-wide mining boom drilling from the surface through soft aeolian sand which existed at that time. It is expected the as further significant resources are expected to be programme will commence in the current year. An defined at between Zone II and Zone III as this increase in ore resources is expected as underground should provide additional ore for the processing drilling moves northwards towards Zone III. facilities at Caijiaying, and secondly, to facilitate 18 Magnetic Image of Caijiaying Tenement Field 19 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 Applied research is being undertaken by Dr YUKON ZINC CORPORATION Zhaoshan Chang of the ARC Centre of Excellence in Ore Deposits at the University of Tasmania as In keeping with Griffin’s stated intention of part of a research programme sponsored by Griffin. acquiring further projects that meet the Company’s The purpose of this study is to understand the financial objectives, considerable time and effort origin and controls of the mineralisation at was expended in the past year reviewing potential Caijiaying and to apply this knowledge to the acquisition opportunities. In April 2008, the discovery of additional orebodies in the area. Company reached an agreement with the board of CORPORATE DEVELOPMENTS SHARE BUY BACKS In May 2008, Griffin purchased from Citadel, and cancelled, 79,851,818 shares at £0.765 per share (68,181,818 of which were issued to Citadel at £1.10 per share in July 2007 to raise $151.7m) for a total sum payable of £61.1 million ($121.5m), realising a net gain to the Company of in excess of $30m recognized through reserves. The directors of Griffin, having consulted with its then nominated adviser, considered that, at the time, the terms of the transaction were fair and reasonable insofar as its shareholders were concerned. In October 2008, a further 68,000 shares were purchased in the market for cancellation at an average price of £0.146 per share and, in January 2009, a further 34,567 shares were bought back in for cancellation in the market at an average price of £0.15 per share. directors of Yukon Zinc Corporation (“Yukon Zinc”) for the acquisition of all of the issued common stock of Yukon Zinc. With significant cash and no debt, Griffin was in a position to fund and provide expertise to bring Yukon Zinc’s 100% owned Wolverine zinc-copper-lead-silver-gold underground mine, which is located in an area with a similar climate to that at Caijiaying, into production. On 29 April 2008, Yukon Zinc informed the Company that the board of directors of Yukon Zinc intended to accept a cash offer from Northwest Non Ferrous International Investment Company Limited and Jinduicheng Molybdenum Group Limited for the acquisition of all the issued common stock of Yukon Zinc for a cash price of C$0.22 per share. The Company notified Yukon Zinc that it did not intend to increase its offer for the shares of Yukon Zinc. Consequently Griffin Drill Rig at Salmon Gums SPITFIRE OIL LIMITED Mr Mladen Ninkov and Mr Roger Goodwin, being directors of both Griffin and Spitfire, provide On 27 November 2008, Griffin purchased Griffin with significant influence over Spitfire, 16,666,667 ordinary shares in Spitfire Oil Ltd requiring Griffin to treat Spitfire as an associated (“Spitfire”), representing a 39.2% interest in the company and thereby recognise its share of issued share capital of Spitfire, at £0.15 per share for Spitfire’s financial results. a total cash consideration of £2,500,000 ($4,542,000) from Citadel. This purchase enabled For a period until 27 May 2008, Citadel held a 30.2% received its negotiated break fee of C$2.5 million. Griffin to acquire a strategic stake in a project that interest in the issued share capital of Griffin, meets Griffin’s investment criteria whilst spreading accordingly the transaction was considered a related both political and commodity risk. The opportunity party transaction under the AIM Rules. In this to acquire this strategic stake at such a favourable regard, the directors of Griffin (with the exception of price, being at a 75% discount to the initial public Mladen Ninkov and Roger Goodwin), having offering price, was considered and approved by consulted with its then nominated adviser, considered Griffin’s independent directors. All of Griffin’s that the terms of the transaction were fair and directors have experience in the oil and gas sector. reasonable insofar as its shareholders are concerned. 20 21 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 Spitfire was incorporated on 2 May 2007 and, on Spitfire is developing its proprietary L2V™ lignite bulk samples were collected for use in bolstered its technical expertise with the 11 July 2007, acquired the entire issued capital of process to extract oil and other products from the various laboratory test work. employment of a new Scientific Officer, Mr Barry Spitfire Oil Pty Ltd (formerly Hurricane Fuels Pty lignite at Salmon Gums. The L2V™ process is a Ltd) by way of a share swap. On 18 July 2007, form of Pyrolysis, a variation of the coal coking Spitfire’s shares were admitted to trading on AIM process which has been used for over 100 years and under the symbol “SRO”. At the same time, which is known to extract oils and gases from coals. Spitfire placed 16,666,667 new Ordinary Shares The technology being developed by Spitfire will be All drilling data and analyses are being entered into a database to generate a new lignite resource Tindall, who is a coal-to-liquids specialist with over 10 years experience with Sasol of South Africa, including the design and commissioning of coal to estimate with the view of producing an liquids technology. independent updated JORC Indicated Resource with Citadel at £0.60 per share to raise £10,000,000 compact with an environmental footprint that is estimate by July 2009. (before expenses). much smaller than that of the much more complex but conventional Fisher-Tropsch process. Low Spitfire’s principal activity is the pursuance of the carbon emissions are a necessity in the current production of fuel oil, distillate and other by- world climate. Production of a barrel of useable products from the Salmon Gums Lignite deposits in fuel from the L2V™ process is expected to Western Australia. At 31 December 2008, Spitfire generate a quarter of the emissions from that held 36,800 hectares of exploration tenements and generated by the conventional gasification plus had applied for two Mining Leases, totalling 9,854 Fisher-Tropsch process. In the context of the hectares, containing the bulk of the lignite resource. proposed Australian carbon Emissions Trading These tenements are near Salmon Gums, some Scheme, at a price of A$25 per tonne of CO2, the 100km north of Esperance, in the south-east of L2V™ process would incur a cost of about A$4.10 Western Australia. The tenements contain a large per barrel of produced oil whilst the more Whilst the main focus of the drilling in the field program has been on exploration and resource delineation, a number of important other activities have also taken place during 2008 including: Subsequently, Professor Chun-Zhu Li joined the Curtin faculty as head of CAESE where he will lead the research. Professor Li came from Monash University where he spent years studying Victoria Brown Coal and had carried out extensive research in various areas of energy science and engineering a helicopter electromagnetic survey; including coal and biomass pyrolysis. Since these a hydro-geological investigation, including appointments good progress has been made on flow tests from 5 wellbores; further proving of the L2V™ Process Technology, an aerial LIDAR survey to provide up-to-date in particular: • • • • photogrammetry over the license area; an aerial multi-spectral survey providing detailed environmental and botanical data; lignite (brown coal) deposit with a JORC Inferred conventional process would incur a cost in excess of and Resource (>10m thick seam) of 500 million tonnes A$16.6 per barrel. of lignite. The lignite has a high Kerogen (hydrocarbon) content which, based on Spitfire’s Since November 2007 Spitfire has been • further testing of the L2V™ Process Technology. testwork on a limited number of samples, indicates undertaking field delineation and exploration In June 2007, Spitfire’s wholly owned subsidiary, that oil may be recoverable from the deposit at an drilling with 420 holes drilled to date totalling Spitfire Oil Pty Ltd, entered into a A$4.4 million average yield of approximately 69 litres per tonne of 12,624 metres. The resource delineation program multi-year research contract with Curtin University lignite (in situ) or 0.43 barrel per tonne. This consisted of infill drilling, special on-lake drilling, of Technology’s Centre for Advanced Energy implies a potential recoverable fuel oil resource of logging and coring with the aim of bringing the Science and Engineering (“CAESE”) to pursue the approximately 200 million barrels (or 33 billion previously defined Inferred Resource to Indicated optimisation of the L2V™ process. The program litres) throughout the deposit. Salmon Gums is status. The exploration drilling program consisted of test work had fallen behind schedule, principally located next to a main road, railway and pipeline of additional air-core drilling in the area due to the original head of the centre moving to • • • • • • • a new, specifically designed, laboratory has been completed at Curtin University; detailed lignite characterisation, small scale pyrolysis and small-scale materials handling and lignite drying tests have been performed; larger scale handling and drying tests were contracted to Tsing Hua University in Beijing; optimum “off the shelf” industrial lignite drying technology has been identified; Spitfire’s prototype rotary kiln laboratory reactor has been constructed, commissioned and from which oil production has started; analysis of the produced oil commenced; and a new, fluidised bed, laboratory reactor has connecting Kalgoorlie and the port of Esperance. surrounding the resource. In addition, 12 tons of another tertiary institution. As a result, Spitfire has been conceived and procurement started. 22 23 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 Following consultation with the relevant This move brings Spitfire’s administration closer to IVERNIA TAKEOVER THE FUTURE Commonwealth and State environmental Griffin’s. In June 2008, Mr Thyl Kint was agencies in Australia it has been determined that appointed Chief Executive Officer of Spitfire, On 24 March 2009, Griffin announced its intention In relation to the Company’s current Mine, development of Salmon Gums project will be replacing Mr Andrew Woskett who resigned from to make a cash offer (“the Offer”), through a wholly operations are expected to re-commence on 1 June assessed for its environmental impact by way of the board of directors. Mr Kint is an energy owned subsidiary, to acquire all of the issued and 2009. With indications that commodity prices will an Environmental Review and Management Plan industry professional with over 25 years worldwide outstanding common shares of Ivernia Inc begin to increase in the foreseeable future, the which includes an eight week period for public oil and gas experience including, most recently, the ("Ivernia"). Ivernia holds a 100% interest in the financial future of the Company is well placed. Zinc, comment. Extensive baseline flora, fauna, salt position of Project Director for the very large Magellan lead mine in Western Australia, closed by in particular, suffered from the recent bull market of lake ecology, waste rock characterisation and Stybarrow and Pyrenees oil and gas projects in the Western Australian State Government for the 2004 – 2006 and the trading of zinc metal and its groundwater studies were completed during Australia operated by BHP Billiton Petroleum. past two years following an environmental incident derivatives by hedge funds. A subsequent correction 2008. Following these changes, Spitfire is in a much involving the shipment of lead carbonate and a change in market conditions following the stronger position to undertake the tasks ahead and concentrate to the Port of Esperance. credit crisis has caused zinc prices to fall to Consultations with the local communities have realise the objectives of achieving viable oil unsustainable levels with a significant proportion of been ongoing for some time. During 2008 the production from the Salmon Gums lignite deposits. On 3 April 2009, Griffin announced it had zinc mines recently operating at a loss. This has communities from the nearby port of Esperance withdrawn its proposed takeover of Ivernia as a resulted in a number of mine closures including the and local town of Salmon Gums were canvassed With dwindling world resources and the result of actions taken by the board of Ivernia Galmoy Mine in Ireland, the Lennard Shelf in and public meetings were held at both locations. expectation of significant increases in the price of which resulted in the current and future control of Australia as well as a considerable number of mines These attracted significant interest from local oil in the future, this alternative energy project is Ivernia being delivered to a related and other in China. Whilst refined zinc output is expected to residents and landholders. The area’s community, highly attractive. Should the results from the parties with latent massive dilution of up to 111% grow only modestly in the near future, tightness of businesses and local government have been L2VTM tests be successful and the development of of its share capital without the approval of Ivernia’s concentrate supply is already resulting in lower generally supportive of the Spitfire’s plans. a commercial plant be achievable, Griffin has the shareholders or allowing the shareholders to be treatment charges and a strengthening of zinc prices. potential to reap significant financial rewards upon given the opportunity to consider a number of Contact has also been made with various Australian the Salmon Gums project coming into commercial alternative proposals put forward by Griffin. In Griffin’s management team, consisting of finance, State and Federal Government bodies for support operation. such a situation, the total consideration which mining, metallurgy, geological and health and for Spitfire’s activities. With the resource being would have had to be paid for the newly diluted safety professionals, have reviewed over 600 mining West Australian based and the L2V™ Process Although Spitfire’s primary objective remains the share capital of Ivernia by Griffin was not companies and their key projects during the year. offering an attractive alternative source of energy, commercialisation of its L2V lignite-to-liquids considered either justified or certain and, as such, Of these, approximately 50 were selected for semi- Spitfire has been favourably received. technology over the large resource at the Salmon not in the best interest of Griffin shareholders. detailed evaluation and 20 for further involved In 2008 Spitfire moved its principal office and possible synergistic business opportunities and management from Melbourne to Perth, the capital continue to evaluate and pursue other energy of Western Australia, where its project is located. related opportunities. Gums, management have considered other detailed analysis. The companies selected held predominantly advanced projects in a range of commodities and locations. In addition, Griffin has been approached by a number of companies with a view to jointly developing a number of significant projects. This process remains ongoing. 24 25 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 26 Flotation Cells in the Caijiaying Plant 27 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 DIRECTORS & SENIOR EXECUTIVES Mladen Ninkov, Chairman, Australian, aged 47, Meagher & Flom in New York and Freehill Dal Brynelsen, Director, Canadian, aged 62, is Jeff Haitian Sun, General Manager China, holds a Masters of Law Degree from Trinity Hall, Hollingdale & Page in Australia. He has been a graduate of the University of British Columbia in Chinese, aged 48, is a Professor of Geology based Cambridge and Bachelor of Laws (with Honours) chairman and director of a number of both public Urban Land Economics. Mr. Brynelsen has been in Beijing. He holds a PhD and MSc in mineral and Bachelor of Jurisprudence Degree from the and private mining companies. University of Western Australia. He is the principal of Keynes Capital. He has a mining, legal, fund Roger Goodwin, Finance Director, British, management and investment banking background aged 54, is a Chartered Accountant. He has been and is admitted as a barrister and solicitor of the with the Company since 1996 having previously involved in the resource industry for over 30 years. deposits from the Chinese University of He has been responsible for the discovery, Geosciences and has undertaken postdoctoral development and operation of several underground research in geology at the Norwegian University of gold mines during his career. Mr. Brynelsen is the Technology. Jeff has worked on a number of President and a director of Vangold Resources mineral projects both in China and overseas. Prior Supreme Court of Western Australia. He was the held senior positions in a number of public and Limited. to joining Griffin he was engaged by Mundoro Mining Inc of Canada as a senior geologist. Chairman and Managing Director of the Dragon private companies within the natural resources Capital Funds management group, a director and sector. He has a strong professional background, Head of International Corporate Finance at ANZ including that as a manager with KPMG, with Grindlays Bank Plc in London, and a Vice considerable public company and corporate finance President of Prudential-Bache Securities Inc. in experience, and experience of emerging markets New York. He also worked at Skadden Arps Slate particularly in Africa, the CIS and Eastern Europe. DIRECTORS: (Left to Right): Back Row: Dal Brynelsen (Non-Executive), Roger Goodwin (Finance Director) Front Row: William Mulligan (Non Executive), Mladen Ninkov (Chairman) William Mulligan, Director, USA, aged 65, has a BSc from Thomas Clarkson University, an MS in Timothy Blyth, Operations Manager Geological Engineering from the University of Caijiaying, Australian, aged 49, holds an Connecticut and an MBA from NYU Bernard Associate Diploma in Geology from the Canberra Baruch School of Business Administration. He is Institute of Technology and has 24 continuous currently the Managing Director for Global years experience in the Australian mining industry, Projects and Political Risk at AIG Global Trade with the last 10 years in senior management and Political Risk Insurance Company, a wholly positions. Having started as an underground owned subsidiary of American International Group geologist, he also has significant experience of open Inc., and a director of AIG Investment Bank (ZAO) pit mining. Prior to joining Griffin he spent the Ltd based in Moscow. From 1994 to 1996 he was previous 5 years as Operations Manager and Executive Vice President for Corporate Project Manager for Hill 50 Gold, Harmony and Development at Latin American Gold Limited. Perilya. Previously he was a Chief Geologist (Geology Manager) for 5 years for Sons of Gwalia SENIOR EXECUTIVES and then Hill 50 Gold. Dominic Claridge, Operations Manager, Australian, aged 45, holds a degree in mining engineering from the University of Sydney (Australia). He has been involved in the mining industry for over 20 years having worked predominately with Australian mining companies, with short interludes in South Africa and Finland. He has worked in a variety of operations encompassing both underground and open cut mining, from small to medium sized mines. More recently he has worked in China as deputy general manager for an underground gold operation and was project manager for a new gold operation in Australia. William Zhang, Finance Manager China, aged 31, is an Australian resident and citizen of China. He holds a Bachelor of Commerce degree from University of Melbourne, and is an associate member of the Certified Public Accountants of Australia. He has a mining, accounting and finance background having worked on a number of coal mining projects both in China and Australia, including; Yanzhou Coal (a coal mining company listed in NYSE, SEHK, SSE) and Fiserv Solutions (a financial service firm listed in NASDAQ). 28 29 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 30 Moving Concentrate at New Storage Shed at Caijiaying Mine Site 31 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 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 2008. The options exercisable at 20 pence per share entitle the holder to subscribe for new ordinary shares in the Company on or before 31st October 2013. The options vest with each option holder in 3 separate and equal instalments as follows: FINANCIAL RESULTS The Group profit before taxation, amounted to US$6,959,000 (2007: US$26,762,000). Taxation of US$637,000 has been provided (2007: nil). A dividend of US$8,008,000 was paid in 2008 (2007: US$5,826,000). After deduction of dividends paid, US$1,686,000 has been debited to reserves (2007: credit - US$20,936,000). The earnings per share amounted to 2.87 cents (2007: 12.08 cents). The attributable net asset value per share at 31 December 2008 amounted to 72 cents (2007: 95 cents). In view of the fall in commodity prices resulting in the decline in profitability, current suspension of operations at Caijiaying, and the consequent need to preserve cash, the directors do not recommend the payment of a dividend. PRINCIPAL ACTIVITIES The principal activity of the Group is that of mining and exploration. A review of the Group’s operations for the year ended 31 December 2008 and the indication of likely future developments are set out on pages 8 to 25. 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) 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 2008 and their immediate families in the share capital of the Company were as follows: Name At 31 December 2008 Ordinary shares No. Options over ordinary shares exercisable at At 1 January 2008 Ordinary shares No. Options over ordinary shares exercisable at 20 pence 110 pence 65 pence 110 pence 65 pence Mladen Ninkov Dal Brynelsen Roger Goodwin William Mulligan 33,001 1 577,830 300,001 3,000,000 200,000 600,000 200,000 6,000,000 400,000 1,200,000 400,000 2,000,000 200,000 575,000 200,000 33,001 1 577,830 300,001 6,000,000 400,000 1,200,000 400,000 2,000,000 200,000 575,000 200,000 The options exercisable at 65 pence per share entitle the holder to subscribe for new ordinary shares in the Company on or before the 28 February 2009 and have all vested. Since the 31 December 2008, all the options exercisable at 65 pence per share have lapsed. The options exercisable at 110 pence per share entitle the holder to subscribe for new ordinary shares in the Company on or before 28 February 2010. The options vest with each option holder in 3 separate and equal instalments as follows: a. The first third of each holder’s options vested on 31 December 2007; b. The second third of each holder’s options vested on 31 December 2008; and c. The last third of each holder’s options will vest on 31 December 2009. a. The first third of each holder’s options vested on 28th October 2008; b. The second third of each holder’s options will vest on 31 December 2009; and c. The last third of each holder’s options will vest on 31 December 2010. The options exercisable at 110 pence and 20 pence will not vest if an employee or a director resigns or leaves the Company for cause prior to the vesting event taking place. All the Options will vest immediately upon a takeover offer being made or a change in substantial control of the Company taking place prior to the Options expiring. All of the Directors’ interests detailed are beneficial. 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, other than their shareholdings, 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, at least once a 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 AUDITORS Grant Thornton UK LLP 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 Bermudan 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. 32 33 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 DIRECTORS’ REPORT REPORT OF THE INDEPENDENT AUDITOR In so far as the directors are aware: REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF GRIFFIN MINING LIMITED • • there is no relevant information of which the Company’s auditors are unaware; and the directors have taken all steps that they ought to have taken as directors to make themselves aware of relevant audit information and to establish that the auditors are aware of that information. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Bermuda Companies Act 1981 as amended. 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. The directors are responsible for the maintenance and integrity of the corporate and financial information included in the Company’s website. Legislation in Bermuda and the United Kingdom governing the preparation and dissemination of financial statements may differ from the legislation in other jurisdictions. This report was approved by the Board and signed on its behalf by Roger Goodwin Finance Director and Company Secretary 30 April 2009 London We have audited the financial statements of Griffin Mining Limited for the year ended 31 December 2008 which comprise the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement, the accounting policies, and notes 1 to 26. These financial statements have been prepared 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 as amended. 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 AUDITOR The Directors' responsibilities for preparing the Annual Report and the financial statements in accordance with applicable Bermuda law and International Financial Reporting Standards as adopted by the EU 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 International Standards on Auditing (United Kingdom and Ireland). 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 Financial Reporting 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 AUDIT OPINION We conducted our audit in accordance with International Standards on Auditing (United Kingdom and Ireland) 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 in accordance with International Financial Reporting Standards as adopted by the EU of the state of the Group’s affairs at 31 December 2008 and of its profit for the year then ended; • the financial statements have been properly prepared in accordance with the provisions of the Bermudan Companies Act 1981 as amended. GRANT THORNTON UK LLP REGISTERED AUDITORS CHARTERED ACCOUNTANTS LONDON 30 April 2009 34 35 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 CONSOLIDATED INCOME STATEMENT CONSOLIDATED BALANCE SHEET For the year ended 31 December 2008 (expressed in thousands US dollars) Notes Revenue Cost of sales Gross profit Net operating expenses Profit from operations Share of losses of associated company Foreign exchange (losses) / gains Finance income Other income Interest payable Profit before tax Income tax expense Profit after tax attributable to equity share owners for the financial year Basic earnings per share (cents) from continuing operations Diluted earnings per share (cents) from continuing operations 1 1 1 2 4 5 6 7 8 8 2008 $000 32,061 (18,438) 2007 $000 37,989 (7,768) 13,623 30,221 (10,517) (10,078) 3,106 (39) (3,221) 4,670 2,533 (90) 6,959 (637) 20,143 - 1,012 5,607 - - 26,762 - 6,322 26,762 2.87 2.83 12.08 11.97 As at 31 December 2008 (expressed in thousands US dollars) Notes ASSETS Non-current assets Property, plant and equipment Intangible assets – exploration interests Investment in associated company Current assets Inventories Other current assets Cash and cash equivalents Total assets EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share capital Share premium Contributing surplus Share based payments Other reserves Foreign exchange reserve Profit and loss reserve Total equity Non-current liabilities Long-term provisions Current liabilities Trade and other payables Short term bank overdrafts Total liabilities Total equities and liabilities Number of shares in issue 9 10 11 12 13 14 17 18 19 2008 $000 56,885 1,313 4,503 62,701 3,227 5,564 67,193 75,984 138,685 1,816 75,950 3,690 5,826 711 7,142 35,345 130,480 2007 $000 44,381 751 - 45,132 4,639 4,155 199,949 208,743 253,875 2,615 196,637 3,690 4,426 579 3,109 37,106 248,162 98 - 8,107 - 5,047 666 8,107 5,713 138,685 253,875 181,589,731 261,509,549 Attributable net asset value / total equity per share 20 $0.72 $0.95 The accounts on pages 36 to 57 were approved by the Board of Directors and signed on its behalf by: Mladen Ninkov Chairman 30 April 2009 Roger Goodwin Finance Director 36 37 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2008 (expressed in thousands US dollars) Share Capital Premium Share Contributing Surplus Other Share Profit Based Reserves Exchange and Loss Reserve Reserve Foreign Payments Total For the year ended 31 December 2008 (expressed in thousands US dollars) Notes $000 $000 $000 $000 $000 $000 $000 $000 At 31 December 2006 1,841 39,166 3,690 2,553 297 479 16,432 64,458 Exchange differences on translating foreign operations Net income recognised directly in equity Profit for the year Total recognised income and expenses in the year Dividend paid Regulatory transfer for future investment Exercise of share options - - - - - - - - - - - - - 1,042 Issue of share capital 774 156,429 Cost of share based payments - - - - - - - - - - - - - - - - - (1,042) - 2,915 20 20 - 20 - 262 - - - 2,630 2,630 - - 2,650 2,650 - 26,762 26,762 2,630 26,762 29,412 - - - - - (5,826) (5,826) (262) - - - - - 157,203 2,915 At 31 December 2007 2,615 196,637 3,690 4,426 579 3,109 37,106 248,162 Exchange differences on translating foreign operations Net income recognised directly to equity Profit for the year Total recognised income and expenses in the year Dividend paid Regulatory transfer for future investment Purchase of shares for cancellation - - - - - - - - - - - - (799) (120,687) Cost of share based payments - - - - - - - - - - - - - - - - - 1,400 57 57 - 57 - 75 - - 4,033 4,033 - - 4,090 4,090 6,322 6,322 4,033 6,322 10,412 - - - - (8,008) (8,008) (75) - - (121,486) - 1,400 At 31 December 2008 1,816 75,950 3,690 5,826 711 7,142 35,345 130,480 Net cash flows from operating activities Profit before taxation Share of associated company losses Foreign exchange losses / (gains) Taxation paid Finance income Adjustment in respect of share based payments Depreciation, depletion and amortisation Provisions Decrease / (increase) in inventories (Increase) in other current assets Increase in trade and other payables Net cash inflow from operating activities Cash flows from investing activities Interest received Payments to acquire intangible fixed assets – exploration interests Payments to acquire plant and equipment – mineral interests Payments to acquire plant and equipment – plant and equipment Payments to acquire interest in associated company Net cash (outflow) from investing activities Cash flows from financing activities Issue of ordinary share capital Expenses paid in connection with share issue Purchase of share for cancellation 9 5 10 9 9 2008 $000 6,959 39 3,221 (637) (4,670) 1,400 2,844 98 1,412 (1,101) 3,059 12,624 4,670 (388) (9,393) (1,681) (4,542) (11,334) - - (121,486) (121,486) 2007 $000 26,762 - (1,012) - (5,607) 2,915 1,351 - (3,535) (3,091) 711 18,494 5,607 (126) (9,056) (1,854) - (5,429) 157,211 (7) - 157,204 Dividends Paid (8,008) (5,826) (Decrease)/Increase in cash and cash equivalents (128,204) 164,443 Cash and cash equivalents at beginning of the year Effects of exchange rate changes Cash and cash equivalents at the end of the year Cash and cash equivalents comprise: Bank deposits Short term bank overdrafts Total 199,283 (3,886) 67,193 67,193 - 67,193 34,081 759 199,283 199,949 (666) 199,283 Included within net cash flows of $128,204,000 (2007: $164,443,000) are foreign exchange losses of $3,221,000 (2007 gains: $1,012,000) which have been treated as realised. 38 39 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 ACCOUNTING POLICIES ACCOUNTING POLICIES BASIS OF ACCOUNTING CONSOLIDATION BASIS The accounts have been prepared in accordance with applicable International Financial Reporting Standards as issued by the International Reporting Standards Board and as adopted by the European Union. The significant accounting policies adopted are detailed below: ACCOUNTING CONVENTION The accounts have been prepared under the historical cost convention, except for financial assets which are measured at fair value. ISSUED INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS’S”) AND INTERPRETATIONS THAT ARE NOT YET EFFECTIVE The Group has not applied the following pronouncements: Those of which are expected to be most relevant to the Group are IFRS 8 and IAS 27 (revised). - - - IAS 1 Presentation of financial statements (revised 2007) – effective 1 January 2009 IAS 23 Borrowing Costs (revised 2007) - effective 1 January 2009 IAS 27 Consolidated and separate financial statements (revised 2007) – effective 1 July 2009. - Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation - effective 1 January 2009. - Amendment to IFRS 2 Share based payment – Vesting conditions and cancellations – effective 1 January 2009 - Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements - Costs of Investment in a Subsidiary, Jointly Controlled Entity or Associate - effective 1 January 2009. - Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items - effective 1 July 2009. - - - IFRS 3 Business combinations (revised 2008) – effective 1 January 2009 IFRS 8 Operating Segments – effective 1 January 2009. IFRIC 16 Hedges of a Net Investment in a Foreign Operation – effective 1 October 2008 The Group is evaluating the impact of the above pronouncements. The effect of the revision to IAS 27 will depends on the extent of relevant future transactions including the reduction in the Group's interest in Hebei Hua Ao. Otherwise, the changes are not expected to be material to the Group's earnings or to shareholders' funds. The Group accounts consolidate the accounts of the Company and all its subsidiary undertakings drawn up to 31 December each year. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights. Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Under the terms of the joint venture contract establishing the Hebei Hua’ Ao Mining Industry Company Limited, the Company provided all the funds required to develop the Caijiaying mine and was entitled to 100% of the net cash flows of the subsidiary for the first three years after commencement of commercial production. With effect from 24 July 2008 the Company’s share of the cash flows and profits reverted to the underlying equity interest of 60%. No minority interest in Hebei Hua’ Ao Mining Industry Company Limited is recognised in these financial statements as Hebei Hua’ Ao Mining Industry Company Limited has operated at a loss since July 2008. No minority interest in Hebei Sino Anglo Mining Development Company Limited is recognised in these financial statements as the minority interest’s share of capital is extinguished by losses. ASSOCIATES Entities whose economic activities are independent of the Group are accounted for using the equity method. Associates are those entities over which the Group has significant influence but which are neither subsidiaries nor interests in joint ventures. Investments in associates are recognised initially at cost and subsequently accounted for using the equity method. Acquired investments in associates are also subject to purchase method accounting. However, any goodwill or fair value adjustment attributable to the share in the associate is included in the amount recognised as investment in associates. All subsequent changes to the share of interest in the equity of the associate are recognised in the Group's carrying amount of the investment. Changes resulting from the profit or loss generated by the associate are reported in "share of profits of associates" in the consolidated income statement and therefore affect net results of the Group. These changes include subsequent depreciation, amortisation or impairment of the fair value adjustments of assets and liabilities. Items that have been recognised directly in the associate's equity are recognised in the consolidated equity of the Group. However, when the Group's share of losses in an associate equals or exceeds its interest in the associate, including any unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. 40 41 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 ACCOUNTING POLICIES ACCOUNTING POLICIES REVENUE MINE CLOSURE COSTS Revenue is measured by reference to the fair value of consideration received or receivable by the Group and comprises amounts received, net of VAT and production royalties, from sales of metal concentrates to third party customers. Sales are made on a cash on delivery / collection basis and are recognised on collection or delivery of the concentrate from the Group’s processing facilities. Mining operations are generally required to restore mine and processing sites at the end of their lives to a condition acceptable to the relevant authorities and consistent with the Group’s environmental policies. Whilst the Group strives to maintain and where possible enhance the environment of the Group’s processing sites, provision is made for site restoration costs in the accounts in accordance with local requirements. NON CURRENT ASSETS Intangible assets – exploration cost INVENTORIES Inventories are valued at the lower of cost or net realisable value. Expenditure on licences, concessions and exploration incurred on areas of interest by subsidiary undertakings are carried as intangible assets until such time as it is determined that there are commercially exploitable reserves within each area of interest and the necessary finance in place, at which time such costs are transferred to property, plant and equipment to be amortised over the expected productive life of the asset. The Group’s intangible assets are subject to periodic review at least annually by the Directors for impairment. Exploration, appraisal and development costs incurred in respect of each area of interest determined as unsuccessful are written off to the Income Statement. Costs incurred in bringing each product to its present location and condition are accounted for as follows: • • • Consumable stores and spares, at purchase costs on a first in first out basis Concentrate stockpiles at cost of direct materials, power, labour, and a proportion of site overhead Ore stockpiles at cost of direct material, power, labour contractor charges and a proportion of site overhead Property, plant and equipment Mine development expenditure for the initial establishment of access to mineral reserves, together with capitalised exploration, evaluation and commissioning expenditure, and direct overhead expenses prior to commencement of commercial production are capitalised to the extent that the expenditure results in significant future benefits. Property, plant and equipment are shown at cost less depreciation and provisions for the impairment of value (see note 9). Residual values Material residual value estimates are updated as required, but at least annually whether or not the asset is revalued. Depreciation All costs capitalised (mineral interest, mill and mine equipment) within an area of interest, are amortised over the current estimated economic reserve of the area of interest on a unit of production basis. Office equipment is depreciated over four years on a straight line basis. Impairment An impairment test is carried out at each balance sheet date to assess whether the net book value of the capitalised costs in each area of interest, together with the costs of development of undeveloped reserves, is covered by the discounted future net revenues from reserves within that area of interest. Any deficiency arising is provided for to the extent that, in the opinion of the Directors, it is considered to represent a permanent diminution in value of the related asset, and where arising, is dealt with in the income statement as additional depreciation. FINANCIAL ASSETS Financial assets, other than hedging instruments, can be divided into the following categories: • • • • loans and receivables financial assets at fair value through profit or loss available-for-sale financial assets held-to-maturity investments Financial assets are assigned to the different categories on initial recognition, depending on the characteristics of the instrument and its purpose. A financial instrument's category is relevant for the way it is measured and whether resulting income and expenses are recognised in profit or loss or charged directly against equity. The Group generally recognises all financial assets using settlement day accounting. An assessment of whether a financial asset is impaired is made at least at each reporting date. Financial assets that are substantially past due or when objective evidence is received that a specific counterparty will default, are also considered for impairment. All income and expense relating to financial assets are recognised in the income statement line item "finance costs" or "finance income", respectively. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as current assets or non current assets based on their maturity date. Loans and receivables are classified as either ‘trade and other receivables’ or ‘other financial assets’ in the balance sheet. On initial recognition loans and receivables are recognised at fair value net of transaction costs. They are subsequently measured at amortised cost using the effective interest method, less provision for impairment. Any change in their value is recognised in profit or loss. The Group’s other receivables fall into this category of financial instruments. Impairment assessments are based upon a range of estimates and assumptions: The Group has no financial assets at fair value through profit or loss or held-to-maturity investments. Estimate / assumption Basis Future production Proven and probable reserves and resource estimates together with processing capacity FINANCIAL LIABILITIES Commodity prices Forward market and longer term price estimates Exchange rates Current market exchange rates Discount rates Cost of capital risk The Group’s financial liabilities include borrowings, trade and other payables, which are measured at amortised cost using the effective interest rate method. On initial recognition loans and receivables are recognised at fair value net of transaction costs. Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest- related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included in the income statement line items "finance costs" or "finance income". 42 43 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 ACCOUNTING POLICIES ACCOUNTING POLICIES FOREIGN CURRENCY TRANSACTIONS SIGNIFICANT JUDGEMENTS AND ESTIMATES 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 and associates, operate in China, the United Kingdom, and Australia. In formulating accounting policies the directors are required to apply their judgement, and where necessary engage professional advisors, with regard to the following significant areas: Foreign currency transactions by Group companies are recorded in their functional currencies at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities have been translated at rates in effect at the balance sheet date. Any realised or unrealised exchange adjustments have been charged or credited to income. On consolidation the accounts of overseas subsidiary undertakings are translated into the presentation currency of the Group 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 retranslation of opening net assets is classified within equity and is taken directly to the foreign exchange reserve. All other translation differences are taken to the profit and loss account. The balance of the foreign currency translation reserve relating to an operation that is disposed of is transferred to the income statement at the time of the disposal. EQUITY Equity comprises the following: "Share capital" represents the nominal value of equity shares. "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. "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. • • • • • • • • Expenditure capitalised as intangible fixed assets (note 9) Expenditure capitalised as property, plant & equipment (note 9) Impairment review assumptions (note 9, 10 and 11) Provisions for mine closure costs (note 17) Share based payments (note 15) Classification of share based payments (note 15) Determination that investments in associates are not subsidiaries (note 11) Treatment of minority interests (notes 13, 23 and 26) The directors continually monitor the basis on which their judgements are formulated. Where required they will make amendments to these judgements. Where judgements and estimates are amended between accounting periods, full disclosure of the financial implications are given within the relevant notes to the Group accounts. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. "Share based payments" represents equity-settled share-based employee remuneration until such share options are exercised. DIVIDENDS "Foreign exchange reserve" represents the differences arising from translation of investments in overseas subsidiaries. "Other reserve" represents a statutory retained earnings reserve under PRC law for future investment by Hebei Hua-Ao. Dividend distributions payable to equity shareholders are included in "other short term financial liabilities" when the dividends are approved in a directors meeting prior to the balance sheet date. TAXATION "Profit and loss reserve" represents retained profits and losses. Current tax is the tax currently payable based on taxable profit for the year. EQUITY SETTLED SHARE BASED PAYMENTS All share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 January 2005 are recognised in the financial statements. All goods and services received in exchange for the grant of any share-based remuneration are measured at their fair values. Fair values of employee services are indirectly determined by reference to the fair value of the share options awarded. Their value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example, production upgrades). All share-based remuneration is ultimately recognised as an expense in the income statement with a corresponding credit to "Share based payments" in the balance sheet. If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting. Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital. For the financial year ended 31 December 2008 the application of the accounting standard has resulted in a net decrease in the profit for the year of $1,400,000 (2007: $2,915,000). Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the group are assessed for recognition as deferred tax assets. Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity (such as the revaluation of land) in which case the related deferred tax is also charged or credited directly to equity 44 45 • • • • • • • G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 1. SEGMENTAL REPORTING 3. DIRECTORS’ AND KEY PERSONNEL REMUNERATION The Group has one business segment, the Caijiaying zinc gold project in the Peoples Republic of China, which is its primary segment for the purposes of financial reporting. All sales and costs of sales in 2008 and 2007 were derived from the Caijiaying zinc gold project. REVENUES China COST OF SALES China NET OPERATING EXPENSES China Australia European Union All revenues, cost of sales, and operating expenses charged to profit relate to continuing operations. TOTAL ASSETS China Australia European Union CAPITAL EXPENDITURE China 2. PROFIT FROM OPERATIONS Profit from operations is stated after charging Depreciation, depletion and amortisation Staff costs Fair values of options granted to directors and management Average number of persons employed by the Group in the year 69,041 4,662 64,982 138,685 11,462 11,462 2008 $000 (2,844) (3,966) (1,400) No. 200 2008 $000 2007 $000 32,061 37,989 (18,438) (7,768) (6,379) (76) (4,062) (10,517) The following fees and remuneration were receivable by the Directors holding office and key personnel engaged during the year: Mladen Ninkov Dal Brynelsen Roger Goodwin William Mulligan Key personnel Fees $000 58 65 58 65 246 - 246 Salary Bonuses Share based Total 2008 $000 898 221 636 136 1,120 1,891 280 1,055 1,400 2,946 payments $000 840 56 168 56 $000 - - 359 - 359 775 1,134 $000 - 100 51 15 166 - 166 Fees Salary $000 45 66 45 66 222 - 222 $000 - - 365 - 365 801 1,166 Share based payments $000 1,744 116 349 116 2,325 588 2,913 Total 2007 $000 1,789 182 759 182 2,912 1,389 4,301 (4,735) 15 (5,358) (10,078) 54,841 79 198,955 253,875 11,036 11,036 2007 $000 (1,351) (2,301) (2,915) No. 200 Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust, received fees under a consultancy agreement of $1,013,000 (2007 $932,000), 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. In addition Keynes Capital received a fee of $327,000 charged solely to Griffin Mining Ltd. Mladen Ninkov is a director and employee of Keynes Investments Pty Limited. On 27 October 2008 the Company agreed to grant further options over 5,000,000 new ordinary shares to directors and key employees of the Company (the "New Options"). Each New Option entitles the holder to subscribe for new ordinary shares in the Company at an exercise price of 20 pence per new ordinary share on or before 31 October 2013. The New Options vest with each option holder in 3 separate and equal instalments per annum as follows: a. b. c. The first third of each holder’s New Options vested on 28 October 2008; The second third of each holder’s New Options will vest on 31 December 2009; and The last third of each holder’s New Options will vest on 31 December 2010. The New Options will not vest if an employee or a director resigns or leaves the Company for cause 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 new options have been allocated as follows: Directors: Mladen Ninkov Roger Goodwin Dal Brynelsen William Mulligan Management Key Personnel Total New Options granted Total number of Options now held Total number of Options vested 3,000,000 600,000 200,000 200,000 1,000,000 5,000,000 11,000,000 2,375,000 800,000 800,000 7,000,000 1,575,000 533,333 533,333 4,800,000 2,933,334 19,775,000 12,575,000 46 47 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 4. SHARE OF LOSSES OF ASSOCIATED COMPANY 8. EARNINGS PER SHARE Share of losses of Spitfire Oil Ltd 2008 $000 39 2007 $000 - The calculation of the basic earnings per share is based upon the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share on the assumed conversion of all dilutive options and other dilutive potential ordinary shares. Reconciliation of the earnings and weighted average number of shares used in the calculations are set out below: Griffin acquired 16,666,667 ordinary shares in Spitfire Oil Ltd (“Spitfire”), representing a 39.2% interest in the issued share capital of Spitfire, at 15p per share for a total cash consideration of £2,500,000 on 27 November 2008. 5. FINANCE INCOME Interest income on bank deposits 6. OTHER INCOME Break fee received on aborted acquisition of Yukon Zinc, net of expenses Other 7. INCOME TAX EXPENSE Profit for the year before tax Tax rate Expected tax expense Adjustment for tax exempt items: - Income and expenses outside the PRC not subject to tax - Share of associated company losses Adjustments for timing differences - PRC rebates on purchasing Chinese equipment - In respect of accounting differences Taxation charge 2008 $000 4,670 2008 $000 2,495 38 2,533 2008 $000 6,959 12.5% 870 97 (5) (333) 8 637 2007 $000 5,607 2007 $000 - - - 2007 $000 26,762 0.0% - - - - - - The Company is not resident in the United Kingdom for taxation purposes. Hebei Hua’ Ao paid income tax in the PRC at a rate of 12.5% in 2008 based upon the profits calculated under Chinese generally accepted accounting principals (Chinese “GAAP”). Hebei Hua’ Ao currently benefits from a reduced tax rate for past investment with the applicable PRC tax rate rising in future years in steps to 25%. Hebei Hua' Ao benefited from a Tax holiday until 2008. 2008 Earnings $000 Weighted average number of shares Per share amount (cents) Earnings $000 2007 Weighted average number of shares Per share amount (cents) 6,322 220,587,242 2.87 26,762 221,441,986 12.08 3,090,342 2,153,244 Basic earnings per share Earnings attributable to ordinary shareholders Dilutive effect of securities Options Diluted earnings per share 6,322 223,677,584 2.83 26,762 223,595,230 11.97 Mill and Mineral interests mine equipment $000 $000 Office furniture and equipment $000 9. PROPERTY, PLANT AND EQUIPMENT At 1 January 2007 net of accumulated depreciation Foreign exchange adjustments Additions during the year Transfers from exploration interests Transfers from long term provisions re mine closure costs on payment of rehabilitation bonds Depreciation charge for the year At 31 December 2007 Foreign exchange adjustments Additions during the year Transfers of rehabilitation bonds to other assets Depreciation charge for the year At 31 December 2008 At 1 January 2007 Cost Accumulated depreciation Net carrying amount At 31 December 2007 Cost Accumulated depreciation Net carrying amount At 31 December 2008 Cost Accumulated depreciation Net carrying amount 21,220 2,500 9,056 162 (384) (733) 31,821 3,287 9,393 (308) (2,011) 42,182 $000 21,574 (354) 21,220 32,937 (1,116) 31,821 45,521 (3,339) 42,182 10,848 457 1,854 - - (608) 12,551 1,295 1,681 - (828) 14,699 $000 11,970 (1,122) 10,848 14,336 (1,785) 12,551 17,517 (2,818) 14,699 Total $000 32,087 2,957 10,910 162 (384) (1,351) 44,381 4,582 11,074 (308) (2,844) 56,885 19 - - - - (10) 9 - - - (5) 4 $000 $000 46 (27) 19 46 (37) 9 46 (42) 4 33,590 (1,503) 32,087 47,319 (2,938) 44,381 63,084 (6,199) 56,885 48 49 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Mineral interests comprise the Group’s interest in the Caijiaying ore bodies including fair values on acquisition, plus subsequent expenditure on licences, concessions, exploration, appraisal and construction of the Caijiaying mine including expenditure for the initial establishment of access to mineral reserves, commissioning expenditure, and direct overhead expenses prior to commencement of commercial production and together with the end of life restoration costs. In undertaking impairment tests and considering the value of the mineral interests, mill and other equipment at Caijiaying, the directors have recognised the need for a revised mining licence to inter alia extract ore from below the 1300 level and ensure the long term viability of the mine. Whilst an application for such licence has been made, a revised licence has at the date of these accounts not been granted. The directors are not aware of any good reason or cause why the revised licence would not be granted. Having considered the geology, resource estimations, and ore block models at the mine area above the 1300 level, the directors consider that sufficient ore remains above the 1300 level, to justify the carrying value of mineral interests, and related equipment at Caijiaying. The office furniture and equipment disclosed above relates solely to the fixed assets of the Company. 10. INTANGIBLE ASSETS China – Zinc / gold exploration interests At 1 January 2007 Foreign exchange adjustments Additions during the year Transfer to mineral interests At 31 December 2007 Foreign exchange adjustments Additions during the year At 31 December 2008 $000 842 (55) 126 (162) 751 174 388 1,313 Intangible assets represent fair values on acquisition, plus subsequent expenditure on licences, concessions, exploration, appraisal and development work. Where expenditure on an area of interest is determined as unsuccessful such expenditure is written off to the income statement. 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. At 31 December 2008 no amounts had been provided or charged to the income statement in respect of the above exploration costs. 11. INVESTEMENT IN ASSOCIATED COMPANY At 1 January 2008 Additions in year Share of losses of Spitfire Oil Limited At 31 December 2008 2008 $000 - 4,542 (39) 4,503 2007 $000 - - - - Griffin acquired 16,666,667 ordinary shares in Spitfire Oil Ltd (“Spitfire”), representing a 39.2% interest in the issued share capital of Spitfire, at 15p per share for a total cash consideration of £2,500,000 ($4,542,000) on 27 November 2008. The directors consider that the fair value on acquisition of the underlying investment of Spitfire Oil Ltd equates to the fair value paid by the Company. No goodwill or value has been attributed on the acquisition of Griffin's interest in Spitfire Oil Ltd to its licences, proprietary or other rights, in view of the early stage nature of Spitfire Oil Ltd's development. Mladen Ninkov and Roger Goodwin are directors of Spitfire Oil Ltd giving Griffin significant influence over the financial and operating policy decisions of Spitfire. Spitfire’s principal activity is the pursuance of the production of fuel oil and distillate from the Salmon Gums Lignite deposits in Western Australia. Summarised financial information on Spitfire Oil Limited (expressed in thousands Australian dollars) Six months to 31 December 2008 Unaudited Aus$000 13 months to 30 June 2008 Audited Aus$000 Loss before income tax (686) (2,828) ASSETS Current assets Non-current assets Total assets LIABILITIES Current and total liabilities NET ASSETS EQUITY Issued capital Reserves Accumulated losses 31 December 2008 Unaudited Aus$000 30 June 2008 Audited Aus$000 11,908 6,504 18,412 14,331 3,457 17,788 (374) (1,172) 18,038 16,616 20,854 827 (3,643) 18,038 20,854 (1,409) (2,829) 16,616 Spitfire Oil Ltd reported no contingent liabilities at 31 December 2008 (30 June 2008 nil). The directors have considered the carrying value of the Company’s investment in Spitfire Oil Limited by reference to current market conditions, underlying assets and to projected discounted cash flow projections of Spitfire Oil Limited’s principal venture. 12. INVENTORIES Underground ore stocks Surface ore stocks Concentrate ore stocks Spare parts and consumables 2008 $000 628 1,627 63 909 3,227 2007 $000 1,006 223 2,869 541 4,639 All inventories are expected to be sold, used or consumed within one year of the balance sheet date. Inventories costing $3,973,000 (2007: $7,768,000) were charged to the income statement in 2008. 13. OTHER CURRENT ASSETS Other receivables Prepayments 2008 $000 3,537 2,027 5,564 2007 $000 1,695 2,460 4,155 Other receivables include advances of $3,080,000 to related parties, recoverable from future share of profits (note 24). The minority share of the losses of Hebei Hua' Ao Mining Industry for 2008 amounting to $663,000 (2007: nil) have been fully provided against. 50 51 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 14. SHARE CAPITAL AUTHORISED: Ordinary shares of US$0.01 each CALLED UP ALLOTTED AND FULLY PAID: Ordinary shares of US$0.01 each At 1 January Issued during the year Bought back in for cancellation At 31 December 2008 2007 Number $000 Number $000 1,000,000,000 10,000 1,000,000,000 10,000 261,509,549 - (79,919,818) 181,589,731 2,615 - (799) 1,816 184,061,064 77,448,485 - 261,509,549 1,841 774 - 2,615 On 27 May 2008 79,851,818 ordinary shares were bought in for cancellation from Citadel Equity Fund Ltd at £0.765 ($1.52) per share. On 28 October 2008 68,000 ordinary shares were bought in for cancellation from the market at 14.7 UK pence ($0.26) per share. 15. SHARE OPTIONS AND WARRANTS (CONTINUED) Inputs into the Binomial valuation model were as follows: Share price Exercise price Expected volatility Risk free rate Dividend yield Options expiring 28 February 2013 Options expiring 28 February 2010 Options expiring 28 February 2009 14.0p 20.0p 60% 3.97% 4% 105.8p 110.0p 33% 5.1% 0% 65.75p 65.0p 30% 4.31% 0% Expected volatility was determined by calculating the historical volatility of the Company’s share price with reference to the correlation with the zinc price and zinc price volatility over the same period. The Binomial model used assumes that the options will be exercised early when the share price exceeds the exercise price by a multiple of two. The Group recognised a total expense of $1,400,000 (2007: $2,915,000) during the year ended 31 December 2008 relating to equity settled share option scheme transactions. 15. SHARE OPTIONS AND WARRANTS 16. DIVIDENDS Options exercisable at 65 pence per share to 28 February 2009 Options exercisable at 110 pence per share to 28 February 2010 Options exercisable at 20 pence per share to 28 February 2013 At 1 January 2008 Number Granted At 31 December 2008 Number Number 5,475,000 10,000,000 - 15,475,000 - - 5,000,000 5,000,000 5,475,000 10,000,000 5,000,000 20,475,000 The following table shows the number and weighted average exercise price of all the unexercised share options and warrants at the year end: Outstanding at 1 January Granted during the year Exercised during the year Outstanding at 31 December 2008 Number Weighted average exercise price 2007 Number Weighted average exercise price 15,475,000 5,000,000 - 20,475,000 94.1 20.0 - 76.0 14,741,667 10,000,000 (9,266,667) 15,475,000 43.0 110.0 30.0 94.1 The estimated value of the options exercisable at 65p up to 28 February 2009, which vested in 3 tranches of 1,825,000 each, were 14.81p, 14.93p and 15.10p. All the options exercisable at 65p vested in 2006, but lapsed on 28 February 2009. The estimated value of the options exercisable at 110p up to 28 February 2010, which vested in 3 tranches of 3,333,333 each, were 25.19p, 25.87p and 26.52p. Two thirds of these options had vested at 31 December 2008. The estimated value of the options exercisable at 20p up to 31 October 2013, which vested in 3 tranches of 1,666,666 each, were 4.0p, 4.2p and 4.42p. One third of these options had vested at 31 December 2008. On 6 June 2008 a final dividend of 3 cents per ordinary share in the Company was paid. 17. LONG-TERM PROVISIONS PROVISIONS FOR MINE CLOSURE COSTS At 1 January Transfer to mineral interests on payment of rehabilitation bond Transfer At 31 December 2008 $000 - - 98 98 During 2007 the Group paid a bond under PRC regulations to be used to cover end of mine life restoration costs. 18. TRADE AND OTHER PAYABLES Trade payables Taxation payable Accruals 2008 $000 7,649 - 458 8,107 2007 $000 384 (384) - - 2007 $000 2,995 605 1,447 5,047 All amounts are short term. The carrying values of all trade and other payables are considered to be a reasonable approximation of fair value. 19. SHORT TERM BANK OVERDRAFTS Short term bank overdrafts comprised an 8.52% fixed rate bank loan of Rmb5,000,000 ($666,000) repaid during 2008, which was secured by way of a floating charge over Hebei Hua’ Ao’s concentrate stocks. 20. ATTRIBUTABLE NET ASSET VALUE / TOTAL EQUITY PER SHARE The attributable net asset value / total equity per share has been calculated from the consolidated net assets / total equity of the Group at 31 December 2008 of $130,480,000 ($248,162,000 at 31 December 2007) divided by the number of ordinary shares in issue at 31 December 2007 of 181,589,731 (261,509,549 at 31 December 2007). 52 53 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 21. RISK MANAGEMENT Interest rate risk The Group is exposed to a variety of financial risks which result from its operating and investing activities. The Group’s risk management is coordinated by its senior management and executive directors and focuses on actively securing the Group’s short- to-medium term cash flows. Foreign Currency Risk The majority of the Group’s operational and financial cash flows are denominated in Renminbi and United States Dollars with sterling bank deposits held to cover future sterling expenditure estimates. Associates operational and financial cash flows are denominated in Australian dollars. Currently the Group does not carry out any significant operations in currencies outside the above. The Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise. In addition, the conversion of Renminbi into foreign currencies is subject to the rules and regulations of the foreign exchange control promulgated by the government of the PRC. Sterling bank deposits are translated into United States Dollars at the closing rate are as follows: Short term bank deposits 2008 $000 10,556 2007 $000 60,134 The following table illustrates the sensitivity of the net results for the year and equity in regards to the Group’s sterling deposits and the sterling US Dollar exchange rate. It assumes a + / - 36% change in the sterling exchange rate for the year ended 31 December 2008. These changes are considered to be reasonable based on observation of current market conditions for the year ended 31 December 2008. The sensitivity analysis is based upon the Group’s sterling deposits at each balance sheet date. If sterling had strengthened against the US Dollar by 36% (2007: 9.6%) this would have had the following impact: Net result for the year and on equity 2008 $000 5,938 If sterling had weakened against the US Dollar by 36% (2007 9.6%) this would have the following impact: Net result for the year and on equity 2008 $000 (2,794) 2007 $000 6,386 2007 $000 (5,267) Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be indicative of the Group’s exposure to currency risk. Foreign currency denominated financial assets and liabilities, translated into US Dollars at the closing rate, are as follows: 2008 Rmb $000 GBP $000 10,692 7,621 (158) (7,855) 10,534 (234) AusD $000 160 (95) 65 2007 Rmb $000 GBP $000 60,895 5,093 (318) (4,674) 60,577 419 AusD $000 65 (55) 10 Financial assets Financial liabilities Short term exposure 54 The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s bank deposits with floating interest rates. The Group currently does not have an interest rate hedging policy. The following table illustrates the sensitivity of the net results for the year and equity to a reasonably possible change in interest rates of + 300% and - 100% (2007 +/- 20%), with effect from the beginning of the year. These changes are considered to be reasonable based on observation of current market conditions within which the Group operates. The sensitivity analysis is based upon the Group’s deposits at each balance sheet date. Net result for the year 2008 2007 Plus 300% Minus 100% Plus 20% Minus 20% $000 556 $000 (185) $000 2,009 $000 (3,013) Fixed and non interest bearing financial assets and liabilities are as follows: FFllooaattiinngg iinntteerreesstt rraattee 2008 NNoonn iinntteerreesstt bbeeaarriinngg TToottaall Floating interest rate 2007 Non interest bearing Total $$000000 $$000000 $$000000 $000 $000 $000 67,193 - 67,193 - - - 67,193 - 3,537 3,537 - 8,107 8,107 (4,570) 67,193 3,537 70,730 - 8,107 8,107 62,623 199,949 - 199,949 - - - 199,949 - 1,695 1,695 199,949 1,695 201,644 - 4,442 4,442 (2,747) - 4,442 4,442 197,202 Financial Assets Cash at bank Other receivables Total Financial Assets Trade payables Other payables Total Financial Liabilities Net Financial (Liabilities)/Assets Commodity risk The Group is exposed to the risk of changes in commodity prices and in particular that for zinc, lead, gold and silver. The Group currently sells its metal concentrate production by way of open auctions in China. The Group currently does not hedge its metal production. Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. The Group does not have trade receivables and does not hold collateral as security. Credit risk from balances with banks and financial institutions is managed by the Board. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Griffin Board on a regular basis. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterparty failure. No material exposure is considered to exist by virtue of the possible non performance of the counterparties to financial instruments. 55 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 22. FINANCIAL INSTRUMENTS 24. RELATED PARTY TRANSACTIONS The Group does not enter into derivative transactions such as interest rate swaps, forward rate agreements or forward currency contracts. With the exception of a fixed rate and fixed term Renminbi short term bank loan, 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. The Group has overseas subsidiaries operating in China and Australia, whose costs are denominated in local currencies. In the normal course of its operations the Group is exposed to commodity price, 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. Commodity prices are monitored on a regular basis to ensure the Group receives fair value for its products. At 31 December 2008 Hebei Hua’ Ao Mining Industry Company Limited had advanced Rmb3,009,000 ($440,000) (31 December 2007 Rmb 3,009,000 ($400,000)) to the 3rd Geological Brigade of the Hebei Province, a partner in the local Chinese entity (the Caijiaying Lead Zinc Preparatory Committee), that holds a 40% interest in Hebei Hua’ Ao. At 31 December 2008 Hebei Hua’ Ao had advanced Rmb18,003,000 ($2,640,000) (31 December 2007 Rmb 9,003,000 ($1,200,000)) to the Caijiaying Lead Zinc Preparatory Committee. Both these loans are non-interest bearing and repayable from their future share of the profits of Hebei Hua’ Ao. 25. COMMITMENTS At 31 December 2008 the Group had capital commitments of $3,350,000 (31st December 2007 $2,858,000). 23. SUBSIDIARY COMPANIES 26. CONTINGENT LIABILITIES As described in note 23, the joint venture contract establishing the Hebei Hua’ Ao Mining Industry Company Ltd provides that 100% of the cash flows and profits generated by the joint venture in the first three years from commencement of commercial production be paid to the foreign party (China Zinc). Thereafter, being with effect from 24 July 2008, the cash flows are shared 60% by the foreign party and 40% by the Chinese party, in accordance with their share in the equity interest in the joint venture. The registered capital (equity) of Hebei Hua' Ao was provided in full by China Zinc. Since 24 July 2008 Hebei Hua’ Ao has incurred losses and in view of the uncertainties in recovering the Chinese partners’ share of these losses, full provision has been made against the minority share of losses from 24 July to 31 December 2008. In view of the unusual nature of the joint venture contract and uncertainty as to its interpretation, with all the registered capital of Hebei Hua’ Ao being provided by China Zinc, no provision has been made for the minority interest in the net assets of Hebei Hua’ Ao. At 31 December 2008, the net assets of Hebei Hua’ Ao amounted to $10.7m. After allowing for the minority share of losses since 24 July 2008, the minority share of the net assets at 31 December 2008 on a termination of Hebei Hua’ Ao could amount to $3.6m. At 31 December 2008, Griffin Mining Limited had interests in the share capital of the following principal subsidiary companies. Name Class of Share held Proportion of shares held Nature of business Country of incorporation China Zinc Pty Ltd Ordinary China Zinc Limited Ordinary Hebei Hua’ Ao Mining Industry Company Ltd* Panda Resources Ltd Ordinary Hebei Sino Anglo Mining Development Company Ltd* 100% 100% 60%** 100% 90% Service company Australia Holding company Hong Kong Base and precious metals mining and development China Holding company England Mineral exploration and development China * China Zinc Ltd, China Zinc Pty Ltd and Panda Resources Ltd are directly owned by the Company. China Zinc Ltd has a controlling interest in Hebei Hua’ Ao Mining Industry 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 Industry Company Ltd provides that 100% of the cash flows generated by the joint venture in the first three years from commencement of commercial production (commenced in the second half of 2005) be paid to the foreign party (China Zinc). Thereafter, being with effect from 24 July 2008, the foreign party (China Zinc) receives 60% of the cash flows, in accordance with its share in the equity interest in the joint venture. The minority share of the losses of Hebei Hua' Ao Mining Industry Company Ltd for 2008 amounting to $633,000 (2007 nil) have been fully provided against. 56 57 G R I F F I N M I N I N G L I M I T E D R E P O RT A N D A C C O U N T S 2 0 0 8 58 Administration Buildings at Caijiaying Mine Site 59 G R I F F I N M I N I N G L I M I T E D CORPORATE INFORMATION Principal office: 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 Registered office: Clarendon House, 2 Church Street, Hamilton. HM11. Bermuda. China Zinc office: Levels 9 & 11, BGC Centre, 28 The Esplanade, Perth, WA 6000. Australia. Telephone: + 61 (0)8 9321 7143 Facsimile: + 61 (0)8 9321 7035 Directors: Mladen Ninkov (Chairman) Roger Goodwin (Finance Director) Dal Brynelsen William Mulligan Company Secretary: Roger Goodwin Nominated Adviser and Broker for AIM: Investec Bank (UK) Limited 2 Gresham Street, London. EC2V 7QP. UK. Auditors: Solicitors: Grant Thornton UK LLP Grant Thornton House, Melton Street, London. NW1 2EP. UK. Mallesons Stephen Jaques Unit 2925, South Tower, Beijing Kerry Centre, 1 Guang Hua Road, Chao Yang District, Beijing 100020. PRC Conyers Dill & Pearman Clarendon House, Church Street, P.O. Box HM 666, Hamilton. HMCX. Bermuda. Addleshaw Goddard LLP 150 Aldergate Street, London. EC1A 4EJ. UK. Bankers: HSBC Bank plc 27-32 Poultry, London. EC2P 2BX. UK National Westminster Bank PLC. St James’s and Piccadilly, London. W1A 2DG. UK. The Bank of Bermuda Ltd 6 Front Street, Hamilton. HM11. Bermuda. UK Registrars and Transfer Agents: Capita Registrars (Jersey) Limited 12 Castle Street, St Helier, Jersey, JE2 3RT. UK. 60 

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