Griffin Mining Ltd. Annual Report 2009

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FY2009 Annual Report · Griffin Mining Ltd.

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CONTENTS

CHAIRMAN’S STATEMENT

REVIEW OF OPERATIONS

DIRECTORS

SENIOR EXECUTIVES

DIRECTORS’ REPORT

REPORT OF THE INDEPENDENT AUDITOR

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

ACCOUNTING POLICIES

NOTES TO THE FINANCIAL STATEMENTS

CORPORATE INFORMATION

Page

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

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

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Caijiaying Mine Site Spring 2010

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

CHAIRMAN’S STATEMENT

It is with some satisfaction and pride that I present

the 1300 level. This immediately enabled larger

to you, the owners and shareholders of Griffin

and higher grade ore lodes to be accessed via more

Mining Limited (“Griffin” or the “Company”) the

extensive mechanised mining which led to increased

Annual Report and Accounts of the Company for

extraction rates. The new licence also justified the

the 2009 calendar year. It has been a significant

decision to complete the processing plant upgrade,

year in your Company’s history.

including the installation of a new primary ball mill,

a new crushing circuit, the construction of a very

Following the unforeseeable catastrophe of the

large third tailings dam and all ancillary equipment,

Global Financial Crisis in the final quarter of 2008

to allow a minimum throughput capacity of 750,000

and the subsequent collapse in commodity prices,

tonnes per annum. This upgrade is scheduled to be

the Company decided to shut down mining

completed by the 10th of August 2010. The

operations at Caijiaying, place staff on temporary

economic benefits which should flow should be

leave and undertake long term maintenance and

substantial. Needless to say, the Company decided

extensive geological work whilst the economic

not to declare a dividend for the 2009 year to enable

opportunity cost of doing so was minimal. Further,

the retention of funds in China to finance this plant

a concerted effort was made at this time to ensure

upgrade and expansion of operations.

the economic performance of the mine was

enhanced once production restarted by seeking to

Secondly, the publication of the new JORC

cut any extraneous costs. Whilst these measures are

reported Mineral Resource for Zone III at

not apparent in the 2009 results, which were

Caijiaying, confirmed the very extensive mine life

impacted by the suspension of mining, costs have

available at Zone III at the higher production levels

been declining per tonne of metal produced since

expected to be obtained in the late summer of 2010.

the restart of operations.

This does not even take into account the ore

believed to be contained at the lower levels of Zone

Operations recommenced after a five month

III, the known ore at Zone II and the significant

shutdown in the first week of June 2009. This led

resources believed to be housed in the area between

to an immediate return to profitability with profit

Zones II and III.

before tax in the second half of 2009 being $8.6

million compared to a loss of $6.1 million in the

Of course, mining continues to be a fixed cost

second half of 2008.

business whose profitability continues to be

There were a number of momentous developments

prices. Although the zinc price has been stable since

for the Company in 2009/2010. The first was the

the recommencement of operations, serious

receipt of the new mining licence to mine below

concerns still exist in the global economy with huge

governed by the swings inherent in commodity

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public debt levels, rising interest rates, a liquidity

Penultimately, thanks should be given to the tireless

and associated housing bubble in China and world

staff at Caijiaying, both local and expatriate, the

zinc supply outstripping demand. To lessen the

London and Perth staff and the directors of Griffin,

impact to the Company’s financial health should

all of whom work extraordinary hours, travel

some economic shock reoccur and zinc prices

amazing distances and spend significant time away

deteriorate as in 2008/2009, in 2010 the Company

from their families to generate the tremendous

purchased put options over the next year’s

results the Company has achieved. Their individual

production at a very modest cost. This was

and collective efforts can never be minimized.

considered to be a prudent course of action whilst

not in any way limiting the upside potential to the

Finally, appreciation must be given to our new and

Company should the zinc price continue to rise.

old shareholders who have remained so loyal and

steadfast in a difficult first half of 2009. That type

As has come to be expected, the Company

of loyalty is never forgotten and deserves to be

continues to aggressively investigate, evaluate and

rewarded. All our efforts are focused in doing just

negotiate a myriad of mining companies and

that.

projects to find the next long life, profitable mine

for its shareholders. The task continues to be a

difficult one with many poor quality assets and

Mladen Ninkov

companies available, but few projects uncovered of

Chairman

the standard which the shareholders of the

5 May 2010

Company have come to deserve and expect. The

Company will continue to undertake this task

energetically in 2010.

With respect to the Company’s investment in Spitfire

Oil Limited (“Spitfire”), enough progress has been

made to recognise the need to bring in a strategic

partner capable of providing, primarily, the technical

expertise needed to progress the development of

the process for the commercial production of oil

from the Salmon Gums lignite deposit. In the

interim, overhead costs have been minimised and

all efforts have been placed on the strategic path

needed to make Spitfire a commercial success.

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

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New Crushing and Screening House Framework

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

OPERATIONAL REVIEW 2009

OVERVIEW

Griffin Mining Limited (the “Company”) and its

mine below the 1300 level at Caijiaying. This

subsidiaries (together the “Group”) recorded a

restricted mining operations to the upper levels of

profit before tax for the year of $7,246,000 (2008:

the mine where the ore lenses are less continuous

$6,959,000). This was a commendable performance

than below the 1300 level. Such continuity allows

in light of the suspension of operations in the first

for more mechanised mining and higher extraction

half of 2009 and the dramatic fall in commodity

rates. Accordingly, the permitting delays lessened

prices in late 2008.

the immediate need to upgrade the processing plant

to a planned throughput capacity of 750,000 tonnes

Although the Global Financial Crisis caused a

of ore per annum. With the receipt of the new

dramatic and sustained fall in commodity prices in

mining licence in January 2010, the Group began

2008/2009, the Company was able to weather these

immediately with the completion of the plant

economic conditions to place itself in an enviable

upgrade including the installation of a second

position to benefit from an improved economic

primary ball mill, new crushing circuit, thickener

climate. This was

foreseen by suspending

and third tailings storage facility, construction of

operations at Caijiaying in the first half of 2009,

which should be completed by the autumn 2010.

when the opportunity cost of a shut-down was

relatively low, which allowed for ore block

Group profitability benefited from an increasing

modelling, long term structural maintenance and

zinc price throughout 2009, as quoted on the

an operational efficiency review to be completed

London Metals Exchange (“LME”), beginning the

at Caijiaying. The rewards of this work were felt

year at $1,200 per tonne and ending the year at

immediately on resumption of production with

$2,500 per tonne. Whilst historically Griffin has

increased ore grades, production and revenues,

never hedged its zinc production, to protect the

resulting in the Group returning rapidly to

Company from any adverse effects of any future fall

profitability in the second half of 2009. The full

in the zinc rice, Griffin has purchased put options

benefit of this foresight will be felt when

over a significant portion of its next 12 month zinc

production rates are increased in the second half of

production from Caijiaying.

2010 with the completion of the plant upgrade.

The maximization of operational productivity failed

during 2009 (2008: $4,670,000). Interest receipts

to be achieved throughout 2009 due to the

have declined from that received in 2008 as a result

continuing delay in obtaining a mining permit to

of reduced interest rates and a reduction in cash

Griffin benefited from interest receipts of $253,000

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balances following the buy-back of shares in the

of Beijing in Hebei Province. Site is easily

Company from Citadel Equity Fund Ltd in May 2008.

accessible by two alternative freeway systems from

Beijing and a number of secondary sealed roads.

Foreign exchange gains of $1,956,000 were

The site has significant water supplies, two

recorded in 2009 (2008: losses of $3,221,000)

independent connections to the electricity grid, full

primarily on sterling deposits held to cover sterling

connectivity

fixed

and mobile

tele-

commitments. The gains follow the increase in the

communications and broadband access for internet

value of sterling in the later part of 2009, since

services. Climatic conditions are not severe with

reversed in early 2010.

warm summers and cold, dry winters.

Griffin’s 39.2% share of the losses of Spitfire Oil

The assets of the Mine are held by Hebei Hua Ao

Limited

(“Spitfire”) of $517,000 has been

Mining Industry Company Limited (“Hebei Hua

recognised. In the autumn of 2009, testwork and

Ao”), a contractual co-operative joint venture

investigations into Spitfires’ proprietary L2VTM

company entity established in 1994 in which

process to extract oil and other products from the

Griffin, through its wholly owned Hong Kong

lignite at Salmon Gums highlighted the need for

subsidiary China Zinc Limited (“China Zinc”),

additional research in refining and finalising the

holds a 60% equity interest and the Zhangjiakou

process for commercial production. As a result,

Caijiaying Lead Zinc Mining Company (the

active development work was suspended pending the

shareholders of which are the Zhangjiakou City

conclusion of a full technical and economic review

People’s Government and the Third Geological

including all viable options being evaluated for the

Brigade of Hebei Province) a 40% interest.

project including the use of alternative technologies,

technical and financial joint venture partners and the

In January 2004, a second contractual joint venture

sale of the Salmon Gums lignite tenements.

company, Hebei Sino Anglo Mining Development

CAIJIAYING

Company Limited (“Hebei Anglo”), was formed to

hold the mineral rights to the area surrounding the

original Hebei Hua Ao licence area and any other

The mine and processing facilities (the “Mine),

areas of interest in Hebei Province. Griffin,

together with the staff accommodation, recreational

through its wholly owned UK subsidiary Panda

and mess facilities, are located at Caijiaying,

Resources Limited, has a 90% interest in Hebei

approximately 250 kilometres by road, north-west

Anglo whilst the Zhangjiakou Caijiaying Lead Zinc

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

Caijiaying Mine Location: Courtesy of Google Maps

Mining Company holds 10%. Griffin, through

expected to be completed in the autumn 2010. This

Hebei Hua’ Ao and Hebei Anglo, has a controlling

will enable the processing capacity to be increased

interest in mining and exploration licences over 67

to a minimum of 750,000 tonnes of ore per annum.

square kilometres at Caijiaying.

In December 2007, production of a separate precious

In 2005, Griffin successfully commissioned the

metals concentrate containing gold, silver and lead

Mine at Caijiaying, on time and within budget,

commenced from an integrated circuit forming part

with an initial design throughput rate of 200,000

of the main processing facilities at Caijiaying.

tonnes of ore per annum. Production rates have

This allowed the full economic benefit of these

been steadily increased since commissioning with

metals to be obtained by the Group. Previously

current processing rates equivalent to in excess of

gold, silver and lead were “lost” and unaccounted

500,000 tonnes of ore per annum. Work to upgrade

for by the smelters in the zinc concentrate.

the processing facilities is ongoing with construction

of a third tailings storage facility, new crushing

To date, the Caijiaying mine has operated without

circuit and installation of second primary ball mill

any

significant accident or environmental

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incident and retains an excellent safety and

reduced

salary

ensuring

that

re-

environmental record.

commencement of operations, all staff would

MINE OPERATIONS

return promptly to work on the 1st June 2009.

The suspension of operations allowed technical

staff to re-evaluate and optimise the mine and

With relatively low market prices for metals

milling operations. This proved highly profitable,

prevailing at the beginning of 2009 and thereby a

as evidenced in the months following the re-

time where the loss to revenues to the Group

commencement of operations, where increasing

would be relatively small, a decision was made to

production rates and better grades were produced.

suspend operations to allow for ore block

The full benefit of this optimisation will only be

modelling, long term structural maintenance and

felt upon the completion of the plant upgrade in

an operational efficiency review to be completed

the second half of 2010 and as mining and haulage

at Caijiaying. Mining operations were suspended

rates increase to satisfy the upgraded throughput

on the 1st January 2009 whilst milling operations

capacity. The six months to 31st December 2009

continued throughout January and February to

produced record mine production with 244,000

process the surface stockpiles. During the

tonnes mined from June to December 2009 (see

suspension period, staff were given leave on a

Graph I).

Graph I

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

A substantial amount of management time has been

A temporary work permit was granted in late

expended in striving to obtain a permit to mine

October 2009, allowing underground infrastructure

below the 1300 level (approximately 120 metres

to be installed and exploration development work

below the surface) from the Chinese regulatory

to be undertaken below the 1300 level, but not the

authorities. The delay in obtaining the new mining

extraction of ore. This allowed development of the

licence created some operational difficulties. In

North and South Declines to recommence. By the

particular, the delay in the development of the

year end, access below the 1300 level had been

lower mine levels restricted stoping to the upper

achieved with development work started on the first

levels. Nevertheless, mine operations continued

three stopes planned for the 1290, 1275 and 1260

smoothly and without incident. Despite mining

levels.

operations being suspended for the majority of the

first half of 2009, over 4,530 metres of development

The new 16 year mining

licence (Permit

was completed in 2009. This compared to a total of

No.C1000002010013210053716) was granted on

6,796 metres

in 2008. However,

further

the 15th January 2010. The grant of this licence has

development of the North Decline and South

enabled mine development below the 1300 level

Decline was suspended pending receipt of the

and the full recommencement of the upgrade to the

licence to mine below the 1300 level.

processing facilities.

Graph II

R E P O RT A N D A C C O U N T S 2 0 0 9

Mine facilities have been improved over the year

As local operators become even more familiar with

with the haulage contractor increasing its mobile

the processing circuit changes, further rate

fleet to 11 trucks and 4 loaders in readiness for

increases are anticipated.

increased mine production. Further equipment will

be acquired by this contractor as needed. In support

With the benefit of enhanced modelling of the

of this increase in haulage capacity, new servicing

mineralisation undertaken during the suspension

facilities were constructed for the haulage fleet

period, the grade of ore both mined and processed

during the year.

has

increased

since

recommencement of

operations. This has resulted in record zinc metal

As previously mentioned, significant improvements

in concentrate production of 13,924 tonnes in the

and modifications were made to the processing

second half of 2009 (see Graph III). In addition,

plant and supporting

facilities during

the

the improved ore modelling enabled higher gold

suspension of operations at the Mine. These

grade bearing zones to be targeted. As a result, the

improvements have enhanced the operational

second half of 2009 also recorded increased gold

capabilities of the process plant enabling a higher

production of 3,109 oz. (see Graph IV overleaf).

throughput to be processed through the on-site

facilities. By the end of 2009, the milling rate had

Construction work on the upgrading of the plant

been increased to pre-suspension of operations

and supporting facilities to increase processing

levels, and since that time, surpassed (see Graph II).

capacity to a minimum 750,000 tonnes of ore per

Graph III

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

Graph IV

annum has increased apace since obtaining receipt

and second tailings storage facilities have had their

of the licence to mine below the 1300 level.

walls lifted to increase tailings storage capacity.

Construction work on the upgrade was slowed to

a minimum during the suspension of operations as

Although the Hydraulic Backfill plant was

such expenditures could not be justified during a

commissioned in 2008, due to the suspension of

period of low commodity prices and the inability to

operations and a number of commissioning issues,

access the more productive lower levels of the

it was not fully operational until late 2009. With

mine. With the grant of the new mining licence,

the backfill plant now fully operational and the

upgrade works are now scheduled to be completed

third tailings storage facility completed, the Mine

early in the fourth quarter of 2010.

will have sufficient capacity to deal with waste

material at planned production rates for the

During 2009, further land was acquired for a third

foreseeable future.

tailings storage facility. All earthworks for this third

tailings storage facility were completed in the

Underground diamond drilling was suspended at

summer of 2009. It is expected the new tailings dam

the Mine at the same time as mining operations and

will be commissioned in the summer of 2010 once

did not recommence until May 2009. Drilling

the pipe lines running from the mine site have been

activities were necessarily concentrated on the

installed. Over the past year, both the existing first

upper levels of Zone III pending receipt of the new

R E P O RT A N D A C C O U N T S 2 0 0 9

permit to mine below the 1300 level. Approximately

undertaken. Initial results from this drilling have

21,000 metres of extensional and grade control

been encouraging with several holes intersecting

drilling was completed in 2009. Drilling results were

mineralisation over the induced polarisation (“IP”)

very encouraging with notable successes in identifying

anomalies that were located in the 2008 IP survey

further mineral resources at the Ju Long, Fu Long,

program. These results have provided the necessary

Qing Long and Xiao Long lodes.

confidence to commit to a 25,000 metre surface

and underground drilling program in 2010 which

No development work was undertaken in 2009 at

may enable an estimate to be made to JORC

Zone II, some 1.5 kilometres to the south of the

reporting standards on the mineral resource located

Mine at Zone III. The Zone II inclined shaft was

in the area between Zones II and III. If, as

put on care and maintenance. However, an

expected, an economic resource can be identified

underground drive is being developed from Zone

between Zones II and III and with the benefit of

III towards Zone II (the “Fox Linking Drive”),

the existing resource at Zone II, an application will

from which exploratory drilling

is being

be made for a new mining licence to cover this area.

Caijiaying Mine Site Showing New Structures

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

RESOURCES

RESOURCE ESTIMATE AND RECONCILIATION
ZONE III

During 2009, approximately 21,000 metres of

underground diamond drilling was completed,

mainly above the 1300 level, targeting the Fu Long,

Qing Long, Ju Long, Jin Long and Xiao Long

lodes. Drilling provided enough information to

allow re-modelling to be completed in a number of

areas, resulting in significant increases in estimated

mineral resource tonnages. Of particular note was

nearly 1,000,000 tonnes of ore added to the mineral

resources in the Qing Long lode.

A complete reinterpretation of the geometry of the

ore bodies, based on the knowledge gained from

five years of mining at Zone III, has allowed a

single, coherent, resource model to be built

removing the need for two resource tables

previously published. This has resulted in a near

doubling of the measured and indicated resource

base.

The 2010 Mineral Resource was estimated at a zinc

cut-off of 1%. Tabled below is a summary of the

recent up-dated 2010 Mineral Resource.

2010 Mineral Resource Estimate

Category

Cut Tonnes
-off

Metal Grade

Contained Metal

Zinc Lead

Silver

Gold

Zinc

Lead

Silver

Gold

000s

% grammes grammes

tonnes

ounces

per
tonne

Measured 1%

4,737

6.73 0.41

34.29

0.87

318,657 19,191

5,221,348 131,761

Indicated

5,999

5.85 0.35

32.48

0.81

351,052 20,787

6,263,912 155,724

Inferred

1% 16,596

4.38 0.24

26.39

0.95

726,957

39,437

14,078,921 508,317

Total

1% 27,332

5.11 0.29

29.09

0.91

1,396,666 79,416 25,564,182 795,803

The information in this report that relates to the 2010 Mineral Resource estimates for the 2010 is based on information compiled
by Mr Luke Marshall BSc Geology, Member AIG. Mr. Marshall is a full time employee of Hebei Hua Ao Mining Industry
Company Limited, a subsidiary of Griffin Mining Limited. Mr. Marshall has sufficient experience which is relevant to the style
of mineralisation and type of deposit under consideration and to the activity which he has 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 Marshall consents to the inclusion in the report of the matters based on his information in the
form and context in which they appear.

CSA Global Pty Ltd undertook a high level review of the resource model and found no flaws to the model or estimation.

R E P O RT A N D A C C O U N T S 2 0 0 9

Zone III Lode Map Showing Indicated and Measured Resources Only

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

The deeper Mineral Resources have not been

ZONE II

included in the above table. They will be evaluated

No work was completed on Zone II during 2009

in light of the proposed drilling program to be

and, consequently, the mineral resource estimate

undertaken in 2010 which should provide the

remains unchanged from that previously published.

necessary information to evaluate the deeper

Tabled below is a summary of the Zone II mineral

mineralisation at Zone III.

resource at a zinc cut-off of 1%.

Mineral Resource Estimates for Zone II

Material

Tonnes

Zinc
%

Lead
%

Gold
grammes
per tonne

Silver
grammes
per tonne

INDICATED

Oxide

Transitional

Fresh

Sub-total

INFERRED

Oxide

Transitional

Fresh

230,000

330,000

3,430,000

3,990,000

130,000

430,000

940,000

Sub-total

1,500,000

TOTAL

5,490,000

Note: Rounding errors may occur

1.9

3.3

3.1

2.4

2.9

3.8

3.4

3.2

0.7

0.8

0.5

0.8

0.7

0.6

0.3

0.2

0.3

0.2

0.3

0.4

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.

R E P O RT A N D A C C O U N T S 2 0 0 9

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

During 2009, all existing datasets were reviewed

metal and gold mineralisation associated with

and then imported into Graphical Information

Jurassic intrusives have replaced favourable horizons

Systems (“GIS”) and three dimensional (“3D”)

in the metamorphic rocks, most notably calc-

mining software. This enabled a multi layered

silicates and marble. Porphyry sills and dykes

targeting exercise to be undertaken with a number

intruding along faults have then cut across the

sequence.

of datasets able to be viewed at the same time in

real space. This also allowed a 3D magnetic model

to be constructed, giving geologists a better

On-going exploration in the area surrounding the

understanding of the main structural controls on

mine at Caijiaying and within Hebei Hua Ao’s and

mineralisation at Caijiaying.

Map Showing Location of Successful Drilling

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

HEBEI HUA’ AO LICENCE AREA

the IP anomalies. Drilling will be further expanded

The importing of the existing IP anomalies into the

should the IP technology continue to prove to be a

successful targeting tool

identifying zinc

3D computer environment with the overlaying

anomalies at the Caijiaying.

surface magnetic and geochemical

imagery

emphasised the need for further drilling to test the

As indicated previously, the remodelling of the entire

effectiveness of IP for detecting zinc mineralisation.

Zone III known deposit was completed in 2009

Two strong IP anomalies were able to be tested from

which provided a much improved picture of the

existing drill cuddies off the main decline and the

mineralisation. This has led to several high priority

Fox Linking Drive. Drilling returned immediate

drill targets being identified and the commitment to

success with hole UGCJY-1657 intersecting multiple

a three year underground development and drilling

zones of zinc mineralisation including 9.52 metres @

programme to test all targets and confirm, upgrade

7.25% Zinc from 218.68 metres and 3.69 metres @

and extend the global resource base within the Zone

13.17% Zinc from 282.36 metres (the assay results

II - Zone III corridor. The drilling programme is

were from the Mine’s laboratory). Drilling will

already well underway and the aforementioned IP

continue through 2010, both inside and outside of

drill testing is part of this programme.

Map Showing Location of Successful Drilling

R E P O RT A N D A C C O U N T S 2 0 0 9

HEBEI ANGLO LICENCE AREA

100 metres thick, which is encouraging for

A detailed magnetic interpretation has been

undertaken in the larger Hebei Anglo licence area,

allowing the major controlling structures to be

modelled in three dimensions. The magnetic

potential future work such as IP surveying. A

number of the rock chip samples returned

anomalous zinc, gold and silver results.

interpretation was compared with geochemical data

SPITFIRE OIL LIMITED

and a number of targets were selected for drill

testing. Mapping and rock chip sampling programs

Griffin currently holds 16,666,667 ordinary shares

were undertaken to further validate the targets

in Spitfire Oil Ltd (“Spitfire”), representing a

before drilling.

39.2% interest in the issued share capital of

Spitfire. This purchase enabled Griffin to acquire a

A total of four diamond drill holes were completed,

strategic stake in a project that meets Griffin’s

targeting several coincident geochemical and

investment criteria whilst spreading both political

geophysical anomalies. The ultimate aim of the

and commodity risk. All of Griffin’s directors have

drilling was to:

1. Determine the thickness of Jurassic volcanic

units in order to assess the likely effectiveness of

geophysical and geochemical techniques;

2. Intersect the interpreted structures of interests,

favourable host lithologies and, extrapolatively,

mineralisation;

experience in the oil and gas sector. Mr Mladen

Ninkov and Mr Roger Goodwin, being directors of

both Griffin and Spitfire, provide Griffin with

significant influence over Spitfire, requiring Griffin

to treat Spitfire as an associated company and

thereby recognising its share of Spitfire’s financial

results.

3. Determine the sources of surface geochemical

Spitfire’s principal activity is the pursuance of the

anomalies; and

production of fuel oil, distillate and other by

4. Refine the three dimensional stratigraphic and

products from the Salmon Gums Lignite deposits in

structural models to help in developing a

Western Australia. Spitfire’s tenements are near

strategy for the 2010 field season.

Salmon Gums, some 100 kilometres north of

Esperance, in the south-east of Western Australia.

Twenty-five rock chip samples were collected and

Salmon Gums is located next to a main road,

some mapping completed before drilling

railway and pipeline connecting Kalgoorlie and the

commenced. The results are encouraging with all

port of Esperance. The tenements contain a large

drill holes penetrating to the Proterozoic basement.

lignite (brown coal) deposit with a reported JORC

Jurassic volcanic cover has generally been less than

Resource (at 4m coal thickness & 45% ashdb cut-

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

off) of: Indicated 406 million tonnes and Inferred of

partners and the sale of the Salmon Gums lignite

470 million tonnes for a total of 876 million tonnes.

tenements. Consequently, Spitfire immediately

This substantial resource is the result of a one and

retrenched its full time employees, except the

a half year drilling campaign involving 420 new

CEO, who subsequently resigned on the 2nd

drilled and cored holes for a total of 12,624 metres.

December 2009 but who currently continues to

Spitfire, in conjunction with Curtin University in

consult to the company.

Perth, Western Australia, has been developing its

proprietary L2V™ process to extract oil and other

Although Spitfire’s primary objective remains the

products from the lignite at Salmon Gums. The

realisation of the value contained in the large

L2V™ process is a form of Pyrolysis, a variation

resource contained at Salmon Gums, management

of the coal coking process which has been used for

continues to evaluate other energy related

over 100 years and which is known to extract oils

opportunities and other possible synergistic

and gases from coals.

business opportunities.

The Salmon Gums lignite has a high Kerogen

In September 2009, Spitfire commissioned a gold

(hydrocarbon) content which, if the current oil

exploration program into the granite basement of a

yields achieved with the test reactors in the Curtin

geologically prospective area at the intersection of

University laboratory can be maintained at an

the two faults located on its tenements. The

industrial scale, corresponds to an oil resource in

reconnaissance program consisted of a desktop

the range of 330 to 420 million barrels on the

study utilising in-house geological data of the area

reported Resource of

lignite via Pyrolysis

and a

specially commissioned geophysical

extraction.

interpretation to define the target zone which was

tested by 132 air-core holes drilled on a wide-

In the autumn of 2009, testwork and investigations

spaced 800 x 200 metre grid for a total of 7,706

into Spitfires’ proprietary L2VTM process to

metres with an average hole depth of 58.4 metres.

extract oil and other products from the lignite at

The results are encouraging with several areas of

Salmon Gums highlighted the need for additional

anomalous gold delineated, two of which occur

research in refining and finalising the process for

along important regional structures identified by

commercial production. As a result, active

the desktop studies. The two structural anomalies

development work was suspended pending the

contain values up to 23 parts per billion in an area

conclusion of a full technical and economic review,

in which bedrock chips indicate a metasediment

including all viable options being evaluated for the

sequence occurring between two areas of granite.

project,

including

the use of alternative

Some anomalous values were also recorded in the

technologies, technical and financial joint venture

surrounding granite, some of which is pyritic.

R E P O RT A N D A C C O U N T S 2 0 0 9

Given the early stage of investigation these are

processing facilities at Caijiaying, to a capacity of

encouraging results and further work is required to

750,000 tonnes of ore per annum throughput,

infill drill the anomalous zones and also to extend

should be completed. With significant potential for

coverage over the remainder of the anomalous

further resources within the current area being

structures throughout the rest of the Spitfire

mined at Zone III to be defined, the potential for

exploration licences.

other known areas of mineralisation to be mined

CORPORATE DEVELOPMENTS

ACQUISITIONS

and the potential for new mineralisation to be

discovered, the likelihood exists for production to

be further enhanced at Caijiaying in the future.

Having achieved notable success with Caijiaying,

Griffin’s management team, consisting of finance,

the challenge remains to acquire, develop or

mining, metallurgy, geological and health and

discover a new mining project to build on the

safety professionals, has reviewed over 1,300

efficient in-house skills that have been developed

mining companies and their key projects during the

within the Company. Griffin remains one of the

year. Of these, approximately 150 were selected for

few mining success stories in China and, having

semi detailed evaluation and approximately 50 for

maintained a presence in China for over 12 years,

further involved detailed analysis. This analysis

Griffin has gained an excellent reputation in that

included a number of site visits to potential target

country. This provides Griffin with a unique entry

projects and companies. The companies selected

into China, its culture and power structures. To

held predominantly advanced projects in a range of

date, it has proved difficult to find a venture of the

commodities and locations. In addition, Griffin has

quality of Caijiaying in China. This has forced the

been approached by a number of companies with a

Company to widen its geographic and commodity

view to jointly developing a number of significant

focus. Nevertheless, the Company remains

mineral projects. This process remains ongoing.

dedicated to only acquiring further assets where

they provide real value over a long period of time

with substantial added value to shareholders.

THE FUTURE

Having significant financial resources at hand and

substantial mineral resources, Griffin is well placed

to benefit from improved economic conditions.

The new JORC resource confirms the availability

of ore for increased future production at Caijiaying.

By the autumn of 2010, the upgrade of the

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 9

New Haulage Service Workshop

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

DIRECTORS

Mladen Ninkov, Chairman, Australian, aged 48,

Dal Brynelsen, Director, Canadian, aged 63, is

holds a Masters of Law Degree from Trinity Hall,

a graduate of the University of British Columbia in

Cambridge and Bachelor of Laws (with Honours)

Urban Land Economics. Mr. Brynelsen has been

and Bachelor of Jurisprudence Degree from the

involved in the resource industry for over 30 years.

University of Western Australia. He is the principal

He has been responsible for the discovery,

of Keynes Capital. He has a mining, legal, fund

development and operation of several underground

management and investment banking background

gold mines during his career. Mr. Brynelsen is the

and is admitted as a barrister and solicitor of the

President and a director of Vangold Resources

Supreme Court of Western Australia. He was the

Limited.

Chairman and Managing Director of the Dragon

Capital Funds management group, a director and

William Mulligan, Director, USA, aged 66, has

Head of International Corporate Finance at ANZ

a BSc from Thomas Clarkson University, an MS in

Grindlays Bank Plc in London, and a Vice

Geological Engineering from the University of

President of Prudential-Bache Securities Inc. in

Connecticut and an MBA from NYU Bernard

New York. He also worked at Skadden Arps Slate

Baruch School of Business Administration. He is

Meagher & Flom in New York and Freehill

currently the Managing Director for Global

Hollingdale & Page in Australia. He has been

Projects and Political Risk at AIG Global Trade

chairman and director of a number of both public

and Political Risk Insurance Company, a wholly

and private mining companies.

owned subsidiary of American International Group

Roger Goodwin, Finance Director, British,

Ltd based in Moscow. From 1994 to 1996 he was

aged 55, is a Chartered Accountant. He has been

Executive Vice President

for Corporate

with the Company since 1996 having previously

Development at Latin American Gold Limited.

Inc., and a director of AIG Investment Bank (ZAO)

held senior positions in a number of public and

private companies within the natural resources

sector. He has a strong professional background,

including that as a manager with KPMG, with

considerable public company and corporate finance

experience, and experience of emerging markets

particularly in Africa, the CIS and Eastern Europe.

R E P O RT A N D A C C O U N T S 2 0 0 9

SENIOR EXECUTIVES

Dominic Claridge, Operations Manager,

Wendy Zhang, Finance Manager China, aged

Australian, aged 47, holds a degree in mining

36, holds a Master of Accounting degree from

engineering from the University of Sydney

Macquarie University, a member of the Certified

(Australia). He has been involved in the mining

Practising Accountant of Australia and a qualified

industry

for over 20 years having worked

member of the Chinese Institute of Certified Public

predominately with Australian mining companies,

Accountant for 11 years. Prior to joining Griffin

with short interludes in South Africa and Finland. He

she spent the previous 4 years as Financial

has worked in a variety of operations encompassing

Controller for Golden Tiger Mining’s joint venture

both underground and open cut mining, from small

operations in China (a gold exploration and mining

to medium sized mines. More recently he has worked

company listed in Australian Stock Exchange).

in China as deputy general manager for an

Previously she was a Chief Accountant for

underground gold operation and was project

Shanghai Silk Group and subsequently Ann Taylor

manager for a new gold operation in Australia.

Shanghai.

Andrew Little, Operations Manager Caijiaying,

Dr Bo Zhou, General Manager China,

Australian, aged 54, holds an HNC in mechanical

Australian, aged 47, holds a Ph.D in exploration

engineering from Bell College of Technology,

geology from Sydney University and a BSc in

Hamilton, Scotland and a BSc (Hons) in quarrying

economic geology from Peking University. He was

technology from Doncaster Polytechnic, England.

Managing Director of Sinovus Mining Ltd, an ASX

He is a fellow of the UK Institute of Quarrying and

listed company with mineral interests in China.

a fellow of the UK Institute of Mining, Metallurgy

Before that he was the General Manager for

and Materials. He is also a registered professional

Guangxi Golden Tiger Mining JV, a Sino-

engineer with the European Engineering Council.

Australian JV gold company focussed in Guangxi,

He has twenty years experience in project

China, which is controlled by Golden Tiger

development, field engineering, construction

Mining NL, an ASX listed company. He has also

management, project engineering, and design

worked as the Senior Geologist for Silk Road

management in the mining sector. This experience

Resources (A Toronto listed company), responsible

has been gained from all perspectives of the

for evaluating various gold properties in Gansu

industry from conceptual design, procurement and

Province in central western China. Dr Zhou has

construction through to plant commissioning and

considerable experience of and has established

technical support for operations personnel.

extensive contacts in the Chinese resources sector.

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 9

Trench and earthworks for pipeline to new third tailings facility

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

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 2009.

FINANCIAL RESULTS

The Group profit before taxation, amounted to US$7,246,000 (2008 – US$6,959,000). Taxation of US$1,013,000 (2008
US$637,000) and minority interests of $2,621,000 (2008 nil) have been provided. No dividend was paid in 2009 (2008
US$8,008,000). US$3,612,000 has been credited to reserves (2008 - US$6,322,000).

The earnings per share amounted to 1.99 cents (2008 – 2.87 cents). The attributable net asset value per share at 31 December
2009 amounted to 74 cents (2008 - 72 cents).

In view of the suspension of operations in the first half of 2009 and requirement to finance the expansion of operations at
Caijiaying, 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 2009 and the indication of likely future developments are set out on pages 8 to 23.

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 2009 and their immediate families in the share capital
of the Company were as follows:

Name

At 31 December 2009

At 1 January 2009

Ordinary
shares
number

Options over
ordinary shares,
number exercisable at

Ordinary
shares
number

Options over
ordinary shares,
number exercisable at

Mladen Ninkov
Dal Brynelsen
Roger Goodwin
William Mulligan

33,001
1
577,830
300,001

20 pence

110 pence

3,000,000
200,000
600,000
200,000

6,000,000
400,000
1,200,000
400,000

33,001
1
577,830
300,001

20 pence

110 pence

65 pence

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

The options exercisable at 65 pence per share lapsed on 28 February 2009.

The options exercisable at 110 pence per share lapsed on 28 February 2010.

The options exercisable at 20 pence per share entitle the holder to subscribe for new ordinary shares in the Company on or
before 31 October 2013. 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 28 October 2008;

b. The second third of each holder’s options vested on 31 December 2009; and

c. The last third of each holder’s options will vest on 31 December 2010.

R E P O RT A N D A C C O U N T S 2 0 0 9

DIRECTORS’ REPORT

The 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 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.

On 4 March 2010 a new set of options (the “new options”) over 10,000,000 new ordinary shares were granted to directors and
key employees of the Company in order to retain and incentivize key personnel with managerial and operating experience in
non-standard jurisdictions in a tight mining employment market.

Each new option will entitle the holder to subscribe for new ordinary shares in the Company at an exercise price of 45 pence
per new ordinary share on or before 28 February 2015. The new options will vest with each option holder in 3 separate and
equal instalments as follows:

a. The first third of each holder’s options vested on 4 March 2010;

b. The second third of each holder’s options will vest on 31 December 2010; and

c. The last third of each holder’s options will vest on 31 December 2011.

The 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 Options will vest immediately upon a takeover offer being made or a change in control of the Company
taking place prior to the Options expiring.

These Options have been allocated as follows:

Number of Options to subscribe for one new ordinary share in the Company

New Options
granted

Total number
of Options now held

Total number
of Options vested

Directors:
Mladen Ninkov (Chairman)
Roger Goodwin (Finance Director)
Dal Brynelsen (Director)
William Mulligan (Director)

Management:
Key personnel

Total

CORPORATE GOVERNANCE

6,000,000
1,200,000
400,000
400,000

2,000,000

10,000,000

9,000,000
1,800,000
600,000
600,000

2,400,000

14,400,000

4,000,000
800,000
266,667
266,667

900,000

6,233,334

Although the Company’s shares are traded on the Alternative Investment Market (AIM) of the London Stock Exchange, the
Company is 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 shareholding, are independent and
free from any business or other relationship which could materially interfere with the exercise of their independent judgement.
The Board meets regularly and is responsible for the overall strategy of the Group, its performance, management and major
financial matters. 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

regular review of commodity prices and assessment of hedging requirements

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

DIRECTORS’ REPORT

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.

In so far as the directors are aware:

•

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

5 May 2010

R E P O RT A N D A C C O U N T S 2 0 0 9

REPORT OF THE INDEPENDENT AUDITOR

REPORT OF THE INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GRIFFIN MINING
LIMITED

We have audited the financial statements of Griffin Mining Limited for the year ended 31 December 2009 which comprise the
consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial
position, 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

As explained more fully in the Directors’ Responsibilities Statement on page 32, the directors are responsible for the preparation
of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the
group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

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 of the state of the Group’s affairs at 31 December 2009 and of
its profit for the year then ended; and

the financial statements have been properly prepared in accordance with in accordance with International
Financial Reporting Standards as adopted by the EU

Grant Thornton UK LLP
Registered Auditors
Chartered Accountants
London

5 May 2010

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

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2009
(expressed in thousands US dollars)

Revenue

Cost of sales

Gross profit

Net operating expenses

Profit from operations

Share of losses of associated company
Foreign exchange gains / (losses)
Finance income
Other income
Interest payable

Profit before tax

Income tax expense

Profit after tax

Attributable to minority interests

Attributable to equity share owners of the parent

Basic earnings per share (cents)

Diluted earnings per share (cents)

Notes

2009
$000

2008
$000

5
6

25,368

32,061

(11,909)

(18,438)

13,459

(7,940)

5,519

(517)
1,956
253
35
-

7,246

(1,013)

6,233

2,621

3,612

6,233

1.99

1.97

13,623

(10,517)

3,106

(39)
(3,221)
4,670
2,533
(90)

6,959

(637)

6,322

2.87

2.83

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

R E P O RT A N D A C C O U N T S 2 0 0 9

For the year ended 31 December 2009
(expressed in thousands US dollars)

Profit for the year

Other comprehensive income

Exchange differences on translating foreign operations

Other comprehensive income for the period, net of tax

Total comprehensive income for the period

Attributable to minority interests

Attributable to equity share owners of the parent

2009
$000

6,233

6,320

2,616

3,704

6,320

2008
$000

6,322

4,090

10,412

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2009
(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 attributable to equity holders of the parent
Minority interests

Total Equity

Non-current liabilities
Long-term provisions

Current liabilities
Taxation payable

Trade and other payables

Total liabilities

Total equities and liabilities

Number of shares in issue

9
10
11

12
13

2009
$000

63,214
1,422
3,986
68,622

2,780
5,279
67,630
75,689

2008
$000

56,885
1,313
4,503
62,701

3,227
5,564
67,193
75,984

144,311

138,685

1,817
75,984
3,690
4,790
759
7,234
40,440
134,714
2,616

137,330

1,816
75,950
3,690
5,826
711
7,142
35,345
130,480
-

130,480

743

1,572

4,666

6,238

8,107

144,311

138,685

181,688,497

181,589,731

Attributable net asset value / total equity per share

$0.74

$0.72

The accounts on pages 34 to 56 were approved by the Board of Directors and signed on its behalf by:

Mladen Ninkov
Chairman

5 May 2010

Roger Goodwin
Finance Director

R E P O RT A N D A C C O U N T S 2 0 0 9

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

2
6
1
8
4
2

)
8
0
0
8
(

)
6
8
4
1
2
1
(

0
0
4
1

)
4
9
0
8
2
1
(

2
2
3
6

0
9
0
4

2
1
4
0
1

0
8
4
0
3
1

2
4

)
7
(

5
9
4

0
3
5

3
3
2
6

1
2
6
2

2
1
6
3

7
8

)
5
(

2
9

0
2
3
6

6
1
6
2

4
0
7
3

2
4

)
7
(

5
9
4

0
3
5

)
8
0
0
8
(

)
6
8
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1
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1
(

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4
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2
3
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G R I F F I N M I N I N G L I M I T E D

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2009
(expressed in thousands US dollars)

Notes

Net cash flows from operating activities
Profit before taxation
Share of associated company losses
Foreign exchange (gains) / losses
Finance income
Adjustment in respect of share based payments
Depreciation, depletion and amortisation
Provisions
Decrease in inventories
Decrease / (increase) in other current assets
(Decrease) / increase in trade and other payables

Net cash inflow from operating activities

Taxation paid

Cash flows from investing activities
Interest received
Payments to acquire intangible assets – exploration interests
Payments to acquire tangible assets – mineral interests
Payments to acquire tangible assets – 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
Purchase of shares for cancellation

Dividends paid

5
15
9
17

5
10
9
9

2009
$000

7,246
517
(1,956)
(253)
495
1,533
-
446
285
(2,882)

5,431

253
(105)
(5,944)
(1,298)
-
(7,094)

42
(7)
35

2008
$000

6,959
39
3,221
(4,670)
1,400
2,844
98
1,412
(1,101)
3,059

13,261

(637)

4,670
(388)
(9,393)
(1,681)
(4,542)
(11,334)

-
(121,486)
(121,486)

(8,008)

(Decrease) in cash and cash equivalents

(1,628)

(128,204)

Cash and cash equivalents at the beginning of the year
Effects of exchange rates
Cash and cash equivalents at the end of the year

Cash and cash equivalents comprise bank deposits
Bank deposits
Short term bank overdrafts
Total

67,193
2,065
67,630

67,630
-
67,630

199,283
(3,886)
67,193

67,193
-
67,193

Included within net cash flows of $1,628,000 (2008 $128,204,000) are foreign exchange gains of $1,956,000 (2008 losses
$3,221,000) which have been treated as realised.

R E P O RT A N D A C C O U N T S 2 0 0 9

ACCOUNTING POLICIES

BASIS OF ACCOUNTING

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.

CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

(a) New and amended standards adopted by the Group

The Group has adopted the following new and amended IFRSs as of 1 January 2009:

•

IAS 1 (revised) ‘Presentation of financial statements’ – effective 1st January 2009. The revised standard prohibits the
presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in
equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes in equity in a statement
of comprehensive income. As a results the Group has elected to present the ‘Statement of comprehensive income’ in
two statements: the ‘Consolidated income statement’ and a ‘Consolidated statement of comprehensive income’. Only
one comparative period has been presented for the balance sheet as there are no retrospective restatements of any figures
from applying the amended IAS 1. As the change in accounting policy only impacts presentation aspects, there is no
impact on earnings per share.

•

IFRS 8 ‘Operating Segments’ – effective 1st January 2009. The standard requires disclosure of information about the
Group’s operating segments and also about the Group’s businesses and the geographical area in which it operates.

(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted
by the Group

The following standards and amendments to existing standards have been published and are mandatory for the Group’s
accounting periods beginning on or after 1st January 2010 or later periods, but the Group has not early adopted them:

•

IFRS 9 ‘Financial Instruments’ – effective 1st January 2013

IFRIC 14 (amendments) ‘Prepayments of a Minimum Funding Requirement’ – effective 1st January 2011

IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’ – effective 1st July 2010

IFRS 2 (amendments) ‘Group Cash-settled Share-based Payment Transactions’ – effective 1st January 2010

IAS 24 (revised 2009) ‘Related Party Disclosures’ – effective 1st January 2011

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact
on the financial statements of the Group. The Group does not intend to apply any of these pronouncements early.

CONSOLIDATION BASIS

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.

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

ACCOUNTING POLICIES

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%.

ASSOCIATES

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 Group’s share in the associate is included in the amount recognised as investment in associates.

All subsequent changes to the Group’s 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 other comprehensive income of the associate 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.

REVENUE

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.

NON CURRENT ASSETS

Intangible assets – exploration cost

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.

R E P O RT A N D A C C O U N T S 2 0 0 9

ACCOUNTING POLICIES

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 re-valued.

Depreciation

All costs capitalised (mineral interest, mill and mine equipment) within an area of interest, are depreciated 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.

Impairment assessments are based upon a range of estimates and assumptions:

ESTIMATE / ASSUMPTION BASIS

Future production

Proven and probable reserves and resource estimates together with processing capacity

Commodity prices

Forward market and longer term price estimates

Exchange rates

Discount rates

Current market exchange rates

Cost of capital risk

MINE CLOSURE COSTS

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.

INVENTORIES

Inventories are valued at the lower of cost or net realisable value.

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

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

ACCOUNTING POLICIES

FINANCIAL ASSETS

Financial assets, other than hedging instruments, can be divided into the following categories:

•

loans and receivables

available-for-sale financial assets

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.

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.

FINANCIAL LIABILITIES

The Group’s financial liabilities include 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”.

FOREIGN CURRENCY TRANSACTIONS

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

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. Non monetary items measured at historical cost are translated using the
exchange rate at the date of the transaction. Non monetary items measured at fair value are translated using the exchange rates
at the date when the fair value was determined.

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 profit and loss.

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.

R E P O RT A N D A C C O U N T S 2 0 0 9

ACCOUNTING POLICIES

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.

"Share based payments" represents equity-settled share-based employee remuneration until such share options
are exercised.

"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.

"Profit and loss reserve" represents retained profits and losses.

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 2009 the application of the accounting standard has resulted in a net decrease in the
profit for the year of $495,000 (2008: $1,400,000).

SIGNIFICANT JUDGEMENTS AND ESTIMATES

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:

•

Expenditure capitalised as intangible fixed assets (note 10)

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)

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

ACCOUNTING POLICIES

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.

DIVIDENDS

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

Current tax is the tax currently payable based on taxable profit for the year.

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, associates 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.

SEGMENTAL REPORTING

In identifying its operating segments, management generally follows the Group's service lines, which represent the main products
produced by the Group. Management consider there to be only one operating segment being the operations at the Caijiaying
Mine based in China. All activities of the Group are reported through management and the executive directors to the Board of
directors of the Company. The measurement policies the Group uses for Segment reporting under IFRS 8 are the same as those
used in its financial statements.

Corporate assets which are not directly attributable to the business activities of Caijiaying Mine are not allocated to the Chinese
segment but are reviewed in light of operating expenses by the region in which they occur. In the financial periods under review,
this primarily applies to the Group's head office and intermediary holding companies within the Group.

There have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss.

R E P O RT A N D A C C O U N T S 2 0 0 9

NOTES TO THE FINANCIAL STATEMENTS

1. SEGMENTAL REPORTING

The Group has one operating business segment, the Caijiaying zinc gold project in the Peoples Republic of China. All sales and
costs of sales in 2009 and 2008 were derived from the Caijiaying zinc gold project.

REVENUES
China

COST OF SALES
China

NET OPERATING EXPENSES
China
Australia
European Union

DEPRECIATION DEPLETION AND AMORTISATION
China
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
European Union

2. PROFIT FROM OPERATIONS

Profit from operations is stated after charging

Staff costs
Fair values of options granted to directors and management

Average number of persons employed by the Group in the year

2009
$000

81,695
4,007
58,609
144,311

7,345
2
7,347

2009
$000

(3,772)
(495)

No.
245

2009
$000

2008
$000

25,368

32,061

(11,909)

(18,438)

(5,382)
(50)
(2,508)
(7,940)

(1,529)
(4)

(1,533)

(6,379)
(76)
(4,062)
(10,517)

(2,839)
(5)

(2,844)

2008
$000

69,041
4,662
64,982
138,685

11,462
-
11,462

2008
$000

(3,966)
(1,400)

No.
200

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

NOTES TO THE FINANCIAL STATEMENTS

3. DIRECTORS’ AND KEY PERSONNEL REMUNERATION

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

Salary

$000
94
65
94
65
318
-
318

$000
-
-
343
-
343
1,033
1,376

Sharebased
payments
$000
297
20
59
20
396
99
495

Total
2009
$000
391
85
496
85
1,057
1,132
2,189

Fees

Salary

Bonus

$000
58
65
58
65
246
-
246

$000
-
-
359
-
359
775
1,134

$000
-
100
51
15
166
-
166

Share based
payments
$000
840
56
168
56
1,120
280
1,400

Total
2008
$000
898
221
636
136
1,891
1,055
2,946

Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust, received fees
under a consultancy agreement of $982,000 (2008 $1,013,000), 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 2008 Keynes Capital
received an additional fee of $327,000 charged solely to Griffin Mining Ltd. Mladen Ninkov is a director and employee of
Keynes Investments Pty Limited.

4. SHARE OF LOSSES OF ASSOCIATED COMPANY

Share of losses of Spitfire Oil Ltd

2009
$000
517

2008
$000
39

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

2009
$000
253

2009
$000
-
35
35

2008
$000
4,670

2008
$000
2,495
38
2,533

R E P O RT A N D A C C O U N T S 2 0 0 9

NOTES TO THE FINANCIAL STATEMENTS

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 permanent timing differences:
- PRC rebates on purchasing Chinese equipment
- Other

Adjustments for short term timing differences:
- In respect of accounting differences
- Other

Taxation charge

2009
$000
7,245

2008
$000
6,959

12.5%

906

(2)
65

-
67

(37)
14

1,013

870

97
(5)

(333)
8

-
-

637

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 2009 (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%

8. EARNINGS PER SHARE

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:

2009

Earnings

$000

Weighted
average
number of
shares

Per
share
amount
(cents)

Earnings

$000

2008

Weighted
average
number
of shares

Per
share
amount
(cents)

3,612

181,560,512

1.99

6,322

220,587,242

2.87

Basic earnings per share
Earnings attributable to
ordinary shareholders

Dilutive effect of securities

Options

1,906,603

3,090,342

Diluted earnings per share

3,612

183,467,115

1.97

6,322

223,677,584

2.83

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

NOTES TO THE FINANCIAL STATEMENTS

9. PROPERTY, PLANT AND EQUIPMENT

At 1 January 2008 net of accumulated depreciation

Foreign exchange adjustments

Additions during the year

Transfers of rehabilitation bonds to other assets

Depreciation charge for the year

At 31 December 2008

Foreign exchange adjustments

Additions during the year

Rehabilitation provision (note 17)

Depreciation charge for the year

At 31 December 2009

At 31 December 2007
Cost

Accumulated depreciation

Net carrying amount

At 31 December 2008

Cost

Accumulated depreciation

Net carrying amount

At 31 December 2009

Cost

Accumulated depreciation

Net carrying amount

Mill and
Mineral
interests mine equipment
$000

$000

Office furniture
and equipment
$000

31,821

3,287

9,393

(308)

(2,011)

42,182

(18)

5,944

(870)

47,238

32,937

(1,116)

31,821

45,521

(3,339)

42,182

51,445

(4,207)

47,238

12,551

1,295

1,681

(828)

14,699

(7)

1,296

645

(659)

15,974

14,336

(1,785)

12,551

17,517

(2,818)

14,699

19,547

(3,573)

15,974

(5)

(4)

(37)

(42)

(46)

Total

$000

44,381

4,582

11,074

(308)

(2,844)

56,885

(25)

7,242

645

(1,533)

63,214

47,319

(2,938)

44,381

63,084

(6,199)

56,885

71,040

(7,826)

63,214

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.

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 2008
Foreign exchange adjustments
Additions during the year
At 31 December 2008
Foreign exchange adjustments
Additions during the year
At 31 December 2009

$000
751
174
388
1,313
4
105
1,422

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 2009
no amounts had been provided or charged to the income statement in respect of the above exploration costs.

R E P O RT A N D A C C O U N T S 2 0 0 9

NOTES TO THE FINANCIAL STATEMENTS

11. INVESTEMENT IN ASSOCIATED COMPANY

At 1 January 2009
Additions in year
Share of losses of Spitfire Oil Limited
At 31 December 2009

2009
$000

4,503
-
(517)
3,986

2008
$000

-
4,542
(39)
4,503

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)

Loss before income tax

(1,094)

(767)

Six months to 31 December 2009
Unaudited
Aus$000

Year to 30 June 2009
Audited
Aus$000

ASSETS
Current assets
Non-current assets
Total assets

LIABILITIES
Current and total liabilities

NET ASSETS

EQUITY
Issued capital
Reserves
Accumulated losses

31 December 2009
Unaudited
Aus$000

30 June 2009
Audited
Aus$000

8,651
7,997
16,648

(363)

16,285

20,854
790
(5,359)
16,285

10,048
7,605
17,653

(219)

17,434

20,854
845
(4,265)
17,434

Spitfire Oil Ltd reported no contingent liabilities at 31 December 2009 (30 June 2009 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.

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

NOTES TO THE FINANCIAL STATEMENTS

12. INVENTORIES

Underground ore stocks
Surface ore stocks
Concentrate ore stocks
Spare parts and consumables

2009
$000
471
1,412
33
864
2,780

2008
$000
628
1,627
63
909
3,227

All inventories are expected to be sold, used or consumed within one year of the balance sheet date. Inventories costing
$1,283,000 (2008: $3,973,000) were charged to the income statement in 2009.

13. OTHER CURRENT ASSETS

Other receivables
Prepayments

2009
$000
3,567
1,712
5,279

2008
$000
3,537
2,027
5,564

Other receivables include advances of $3,078,000 (2008: $3,080,000) to related parties, recoverable from future share of profits
(note 24). The minority share of the profits of Hebei Hua' Ao Mining Industry for 2009 amounting to $2,616,000 are offsetable
against this. The share of losses in 2008 of $663,000 have been fully provided against.

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

2009

2008

Number

$000

Number

$000

1,000,000,000

10,000

1,000,000,000

10,000

181,589,731
133,333
(34,567)
181,688,497

1,816
1
-
1,817

261,509,549
-
(79,919,818)
181,589,731

2,615
-
(799)
1,816

On 1 January 2009 34,567 ordinary shares were bought in for cancellation from the market at 15.2 UK pence ($0.22) per
share.

On 24 December 2009 133,333 new ordinary shares were issued on the exercise of options at 20 pence ($0.32) per share.

R E P O RT A N D A C C O U N T S 2 0 0 9

NOTES TO THE FINANCIAL STATEMENTS

15. SHARE OPTIONS AND WARRANTS

At 1 January

Granted At 31 December
2009

2009 (Exercised)/
(lapsed)
Number

Number

-
10,000,000
5,000,000
15,000,000

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

5,475,000
10,000,000
5,000,000
20,475,000

(5,475,000)
-
-
(5,475,000)

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

Lapsed during the year

Outstanding at 31 December

2009
Number Weighted average
exercise price

2008
Number Weighted average
exercise price

20,475,000

(5,475,000)

15,000,000

76.0

(65.0)

80.0

15,475,000

5,000,000

20,475,000

94.2

20.0

76.0

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.

The estimated value of the options exercisable at 20p up to 31 October 2013, which vest in 3 tranches of 1,666,666 each, were
4.0p, 4.2p and 4.42p.

The share options which lapsed during the year gave rise to a transfer of $1,531,000 from the share-based payment reserve to
the profit and loss reserve.

Inputs into the Binomial valuation model were as follows:

Share price
Exercise price
Expected volatility
Risk free rate
Dividend yield

Options expiring
31 October 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 $495,000 (2008: $1,400,000) during the year ended 31 December 2009 relating to
equity settled share option scheme transactions.

16. DIVIDENDS

No dividends were paid in 2009. On 6 June 2008 a final dividend of 3 cents per ordinary share in the Company was paid.

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

NOTES TO THE FINANCIAL STATEMENTS

17. LONG-TERM PROVISIONS

PROVISIONS FOR MINE CLOSURE COSTS

At 1 January
Transfer to mill and mining equipment
Foreign exchange adjustments
At 31 December

2009
$000
98
645
-
743

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.

Provision for mine closure costs have been made by reference to Chinese regulations based upon the resource estimate of
mineable tonnes.

18. TRADE AND OTHER PAYABLES

Trade creditors
Taxation payable
Other creditors
Accruals

2009
$000
2,638
1,572
654
1,374
6,238

2008
$000
7,649
-
-
458
8,107

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. 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 2009 of $134,714,000 ($130,480,000 at 31 December 2008) divided by the number of ordinary shares
in issue at 31 December 2009 of 181,688,497 (181,589,731 at 31 December 2008).

20. RISK MANAGEMENT

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. The 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 translated into United States Dollars at the closing rate are as follows:

Short term bank deposits

2009
$000

47,562

2008
$000

10,556

R E P O RT A N D A C C O U N T S 2 0 0 9

NOTES TO THE FINANCIAL STATEMENTS

20. RISK MANAGEMENT (CONTINUED)

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 + / - 10% change in the sterling exchange rate for the year ended 31
December 2009. These changes are considered to be reasonable based on observation of current market conditions for the year
ended 31 December 2009. 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 10% (2008: 36%) this would have had the following impact:

Net result for the year and on equity

2009
$000

5,285

If sterling had weakened against the US Dollar by 10% (2008 36%) this would have the following impact:

Net result for the year and on equity

2009
$000

(4,324)

2008
$000

5,938

2008
$000

(2,794)

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:

2009

Rmb
$000

GBP
$000

47,583

13,890

(147)

(4,501)

47,436

(9,389)

AusD
$000

(18)

2008

Rmb
$000

GBP
$000

10,692

7,621

(158)

(7,855)

10,534

(234)

AusD
$000

160

(95)

Financial assets

Financial liabilities

Short term exposure

Interest rate risk

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% (2008 + 300% - 100%), 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

2009

2008

Plus 300%

Minus 100%

Plus 20%

Minus 20%

$000

292

$000

(97)

$000

556

$000

(185)

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

NOTES TO THE FINANCIAL STATEMENTS

20. RISK MANAGEMENT (CONTINUED)

Fixed and non interest bearing financial assets and liabilities are as follows:

Floating
interest
rate

2009

Non
interest
bearing

Total

Floating
interest
rate

2008

Non
interest
bearing

Total

$000

67,630
-
67,630

-
-
-

-
3,567
3,567

-
4,667
4,667

67,630
3,567
71,197

-
4,667
4,667

67,193
-
67,193

-
-
-

-
3,537
3,537

-
8,107
8,107

67,193
3,537
70,730

-
8,107
8,107

Financial Assets
Cash at bank
Other receivables
Total Financial Assets

Trade payables
Other payables
Total Financial Liabilities

Net Financial (Liabilities)/Assets

67,630

(1,100)

66,530

67,193

(4,570)

62,623

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 did not hedge its metal production
in 2009 or 2008.

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.

Fair value hierarchy

The Group adopted the amendments for IFRS 7 ‘Improving Disclosures about Financial Instruments’ effective from 1 January
2009. These amendments require the Group to present certain information about financial instruments measured at fair value
in the statement of financial position. On review of the financial instruments held by the Group management do not consider
this relevant to the Group.

R E P O RT A N D A C C O U N T S 2 0 0 9

21. CAPITAL MANAGEMENT AND PROCEDURES

The Group’s capital management objectives are:

• To ensure the Group’s ability to continue as a going concern;

• To increase the value of the assets of the Group: and

• To enhance shareholder value in the Company and returns to shareholders.

The achievement of these objectives is undertaken by developing existing ventures and identifying new ventures for future
development. The Company will also undertake other transactions where these are deemed financially beneficial to the Company.

The directors continue to monitor the capital requirements of the Group by reference to expected future cash flows. Capital
for the reporting periods under review is summarised in the consolidated statement of changes in equity.

22. FINANCIAL INSTRUMENTS

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 repaid in 2008, 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.

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

23. SUBSIDIARY COMPANIES

At 31 December 2009, 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%

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 and will not be recovered from minority share of future profits.

24. RELATED PARTY TRANSACTIONS

At 31 December 2009 Hebei Hua’ Ao Mining Industry Company Limited had advanced Rmb3,009,000 ($441,000) (31 December
2008 Rmb 3,009,000 ($440,000)) to the 3rd Geological Brigade of the Hebei Province, a partner in the local Chinese entity (the
Zhangjiakou Caijiaying Lead Zinc Mining Company), that holds a 40% interest in Hebei Hua’ Ao. At 31 December 2009 Hebei
Hua’ Ao had advanced Rmb18,003,000 ($2,637,000) (31 December 2008 Rmb 18,003,000 ($2,640,000)) to the Zhangjiakou
Caijiaying Lead Zinc Mining Company. 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 2009 the Group had capital commitments of $3,066,000 (31 December 2008 $3,350,000).

R E P O RT A N D A C C O U N T S 2 0 0 9

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. In 2008 Hebei Hua’ Ao
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, provision has only been made for the minority interest in the profits of Hebei Hua Ao for 2009 with no provision made
in respect of the net assets of Hebei Hua’ Ao. At 31 December 2009, the net assets of Hebei Hua’ Ao after distributions due
amounted to $20.9m. The minority share of the net assets at 31 December 2009 on a termination of Hebei Hua’ Ao could
amount to $8.4m.

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 9

Underground front end loader mucking out ore

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

CORPORATE INFORMATION

London 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.