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CONTENTS
CHAIRMAN’S STATEMENT
CAIJIAYING MINE
FINANCIAL REVIEW
OPERATIONS REVIEW
ASSOCIATED INTERESTS
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
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60
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: 13667 Bermuda.
Registered Office: Clarendon House, 2 Church Street, Hamilton HM11, Bermuda
United Kingdom office: 60 St James's Street, London SW1A 1LE
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Caijiaying Mine - Winter 2013
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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 continuing pride that I present to you, the
interest in Hebei Hua Ao Mining Industry
shareholders, the Annual Report and Accounts for
Company Limited (“Hebei Hua Ao”) to 88.8% and
Griffin Mining Limited
(“Griffin” or
the
extend the term of the joint venture through to
“Company”) for the 2012 financial year. It has been
October 2037. Subsequently, significant time was
a remarkable year for your Company in spite of
dedicated to restructuring site management and
further decreases in metals prices, continuing global
solidifying reporting procedures from the Caijiaying
economic turmoil, virtually no real growth in the
Mine following the diminution of Chinese
western world, the continuing destruction of true
involvement in the day to day management of
wealth worldwide and stalled real growth in China.
Hebei Hua Ao.
Yet in spite of all this economic negativity, Griffin
was still able to achieve a memorable year.
The Company is now focused on the extensive
process of increasing the mining and processing of
Griffin and its subsidiaries (together the “Group”)
ore at the Caijiaying Mine to 1.5 million tonnes per
recorded: An operating profit of $31,174,000; profit
annum. This will include an expansion of the
before tax of $27,239,000; profit after tax of
processing facilities, the underground development
$19,707,000 and profit after non-controlling
of Zone II and an expansion of the existing mining
interests of $14,835,000 (a reduction of less than a
operations at Zone III. These developments are all
million dollars from the previous year). This all
subject to the successful granting of a mining licence
occurred whilst the average market price for zinc fell
over Zone II, which licence area will also include the
11%, silver by 13% and lead by 10%.
area between Zone II and Zone III, and which is not
expected to occur prior to the end of the first
Impressively, the Group achieved record throughput
quarter of 2014. By that time, the boundary survey,
and record zinc, lead and silver production. In summary,
feasibility study and environmental impact study
and in comparison with the 2011 results, there were
should have all been completed and underground
13.5% more tonnes of ore mined, 11.8% more ore
development work at both Zones II and III will be
processed, 11.8% more zinc metal in concentrate
well under way. The total upgrade is expected to
produced, 31.1% more silver in concentrate produced
be completed by the end of 2014.
and 25.8% more lead in concentrate produced.
Only gold in concentrate produced decreased by
Critically for shareholders, all capital costs
19.1% as the throughput of gold bearing ore was
associated with the upgrade will be funded from
minimized until the various gold mineralologies of
cash flow from existing operations. The Company
the different orebodies were examined and forward
expects to continue its extraordinary record of not
planning completed to ensure extraction of the
raising any new net equity for a decade and, as such,
highest possible recoveries going forward.
prevent
any
dilution
to
shareholders.
Unfortunately, that also means a decision not to
As expected, the first half of 2012 was primarily
declare a dividend yet again this year. Obviously, I
focused on the transaction to increase Griffin’s
am well aware of a number of shareholders desire
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for the Company to begin paying dividends both for
speaking, becoming rarer, as any brownfields
personal income requirements and the financial
exploration prospect has inevitably been explored
discipline
such
an
action
imposes upon
long ago and greenfields exploration becomes far
management. The Company has every intention to
more difficult, deeper and more expensive. Hope
do so when circumstances allow, however,
exists that, as the equity markets remain generally
shareholders short term need or desire to have cash
closed to the junior mining market, a hidden gem
returned to them cannot cause an under investment
will be found either in junior public mining
in the future growth of the Company.
It seems
companies or in private organisations incapable of
abundantly clear that, for now, further investment
raising new equity in private or public markets.
in the Caijiaying Mine represents the best use of
Griffin’s available resources. Having reviewed
I continue to be overwhelmed by the efforts of all
many potential acquisitions and having carefully
the directors, staff and contractors of the Company
considered the potential of Caijiaying and the future
and Hebei Hua Ao in making the Caijiaying Mine
market for metals, particularly zinc, it is clear that
and Company bigger, better and brighter. As a
further investment in the Caijiaying Mine will
person well known for giving scant praise or thanks
generate higher returns for the Company and its
(and always pointing out what needs to be done
shareholders than any new, low return/high risk
faster, cheaper and better), this is my opportunity to
investment elsewhere.
do so on, not only my behalf, but the Company’s
and the shareholders behalf. It is the people who
This is even more true when considering the
make any organisation and ours are some of the
number and size of the major world zinc mines
best.
reaching the end of their economic lives and the
substantial reduction in the future supply of zinc.
Lastly, to the shareholders and owners of the
Assuming the return of world, or at least Chinese,
Company,
from
the
largest
institutional
growth in the near future, then a rise in zinc prices
organisations to the smallest individual, so many of
should follow. Accordingly, it is expected that the
whom have been with us for so many years and with
further investment to increase production at the
whom we now converse on a personal, almost
Caijiaying Mine will result in significant returns to
familial basis, we say thank you. That tenure and
the Company and to its shareholders, at which time
loyalty of ownership not only deserves, but
the Company’s dividend policy will be reassessed.
demands, respect in this instantaneous and transient
world. Just know we never take it for granted and
As outlined so often in the past, the Company
we sincerely strive daily to repay the trust you have
continues to investigate a large number of potential
placed in your Company.
mining ventures worldwide, pursuing any mining
opportunity which shows the necessary economic
Mladen Ninkov
returns demanded by the Company’s shareholders.
Chairman
Such opportunities are rare and, geologically
11th April 2013
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Excellence Awards ceremony for outstanding employees of Hebei Hua Ao
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CAIJIAYING MINE
INTRODUCTION
The major asset of the Company is an 88.8%
interest in Hebei Hua Ao Mining Industry
Company Ltd (“Hebei Hua Ao”), the owner of the
mine and processing facilities located at Caijiaying
in the Peoples Republic of China (the "Caijiaying
Mine"). The Caijiaying Mine, together with staff
Caijiaying Mine site is easily accessible by two
alternative freeway systems from Beijing and a
number of secondary sealed roads. The site has
significant water supplies, two
independent
connections to the electricity grid, full connectivity
to fixed and mobile telecommunications systems
and broadband access for internet services. Climatic
accommodation, recreational and mess facilities, is
conditions are not severe with warm summers and
located approximately 300 kilometres by road,
cold, dry winters enabling operations at Caijiaying
north-west of Beijing in Hebei Province. The
to continue for 365 days a year.
8
Caijiaying Mine Location
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HISTORY
Hebei Hua Ao is a contractual co-operative joint
venture company entity established in 1994.
Initially, Griffin held 60% of Hebei Hua Ao,
through a wholly owned subsidiary, with the
remaining 40% held by the predecessor entity to
the Zhangjiakou Caijiaying Lead Zinc Mining
Company, the shareholders of which remain the
Zhangjiakou City People's Government and the
Third Geological Brigade of Hebei Province. The
hold the mineral rights to the area surrounding the
original Hebei Hua Ao licence area and any other
areas of interest in Hebei Province. Griffin,
through its wholly owned UK subsidiary, Panda
Resources Limited, has a 90% interest in Hebei
Anglo whilst the Zhangjiakou Caijiaying Lead Zinc
Mining Company holds 10%. Griffin, through
Hebei Hua Ao and Hebei Anglo, has a controlling
interest in mining and exploration licences over 55
square kilometres at Caijiaying.
initial term of Hebei Hua Ao was 25 years and was
Following
extensive
exploration,
resource
to expire in 2019. To enable the speedy return of
delineation drilling, scoping study, feasibility study,
capital to Griffin, which provided all the capital for
financing and construction, in 2005 Griffin
the development and construction of the Caijiaying
successfully commissioned the Caijiaying Mine on
Mine, Griffin was entitled to 100% of the profits of
time and within budget, meeting its initial design
the Caijiaying Mine for 3 years until the end of
throughput rate of 200,000 tonnes of ore per
2008. In 2012, Griffin, through its wholly owned
annum. Production rates have been steadily
Hong Kong subsidiary, China Zinc Limited,
increased since commissioning with processing
purchased an additional 28.8% interest in Hebei
rates in excess of 820,000 tonnes of ore per annum
Hua Ao from the Zhangjiakou Caijiaying Lead
having been achieved following the latest upgrade
Zinc Mining Company such that Griffin now holds
of the processing facilities.
an 88.8% equity interest in Hebei Hua Ao and the
Zhangjiakou Caijiaying Lead Zinc Mining
Company retains an 11.2% interest.. In addition,
and as part of this purchase agreement, the term
of the Hebei Hua Ao joint venture was extended
until October 2037.
In December 2007, production of a separate
precious metals concentrate containing gold, silver
and lead commenced from an integrated circuit
forming part of the main processing facilities at the
Caijiaying Mine. This allowed the full economic
benefit of these metals to be obtained by the
In January 2004, a second contractual joint venture
Group. Previously gold, silver and lead were "lost"
company, Hebei Sino Anglo Mining Development
and unaccounted for in the zinc concentrate by the
Company Limited ("Hebei Anglo"), was formed to
Chinese smelters.
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CORPORATE DEVELOPMENTS
to the extension of the joint venture term and
As previously outlined, on 25th June 2012, China
Zinc Ltd completed agreements to purchase a
28.8% interest in Hebei Hua Ao from the
Zhangjiakou Caijiaying Lead Zinc Mining
Company Limited with an extension of the joint
venture with the grant of a new 25 year business
capitalised to non-current assets and 25%
attributed to buying out the non controlling
interest share of 28.8% and charged directly to
reserves. This allocation has been based upon
estimated future discounted cash flows from the
Caijiaying Mine.
licence to the 12th of October 2037, for a cash
The acquisition of the majority proportion of the
consideration of Rmb700 million ($110 million)
non-controlling interests and extension of the joint
plus expenses ("the Transaction"). The total cost of
venture term has secured the long term future of
the Transaction amounted to $117,459,000.
the Caijiaying Mine enabling the Company to
On completion of the Transaction, Griffin's
interest in Hebei Hua Ao, was increased from 60%
to 88.8% and the joint venture period extended to
proceed with plans to significantly expand
operations as soon as possible.
October 2037. The pre-existing joint venture
EXPLORATION REVIEW
would have terminated in 2019.
Mineralisation at Caijiaying is believed to be related
The Zhangjiakou Caijiaying Lead Zinc Mining
to a Jurassic igneous event that affected the 2.3
Company retains a 11.2% interest in Hebei Hua
billion year old metamorphic basement rocks. Base
Ao.
In addition,
following completion of
the
Transaction, Hebei Hua Ao's joint venture contract
and articles of association were amended giving
Griffin greater control over the management and
operations of Hebei Hua Ao.
The consideration for the Transaction was financed
from Griffin's existing cash resources and from
dividends due from Hebei Hua Ao. These later
funds were drawn down from banking facilities in
China. Under International Financial Reporting
Standards, 75% of this amount has been attributed
metal and gold mineralisation associated with
Jurassic
intrusives have replaced favourable
horizons in the metamorphic rocks, most notably
calcsilicates and marble. Porphyry sills and dykes
intruding along faults have then cut across the
sequence.
On going exploration in the area surrounding the
Caijiaying Mine and within Hebei Hua Ao's and
Hebei Anglo's tenement boundary continues to
confirm the area to be highly prospective,
indicating significant potential for further base
metal and gold deposits.
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Hebei Hua Ao Licence Area
northeast-southwest faulting. Intersections in
Drilling activity continued underground at Zone
III with up to 5 rigs operating during 2012. Drilling
was focused on extending the known resource, both
along strike and at depth. Ore tonnes were
excess of 10 metres thick and 5% zinc were seen in
the southern-most holes drilled into the Xiao Long
orebody, proving that the mineralisation continues
to the south, beyond current mine development.
increased outside the previously defined resource
Hebei Anglo Licence Area
and a greater understanding of the ore distribution
was developed. Primary targets were Fu Long
North, South and down-dip, Qing Long South and
down-dip, Ju Long South, Xiao Long South, Zone
II North and down-dip extensions of the Inferred
Resource.
In 2012, exploration expenditure in the Hebei
Anglo licence area was focused on preparing the
tenement for the statutory relinquishment of 25%
of its land area. Previously recorded soil sampling,
illite crystallinity, Induced Polarisation, ground
magnetic and drillhole data were analysed to define
Along strike drilling of the Qing Long and Fu
areas of low prospectivity for relinquishment and
Long orebodies defined the northern extent of
areas of high prospectivity for future work.
these orebodies where the metamorphic host rocks
are truncated against the younger Jurassic volcanics
and sediments. Down-dip drilling of both of these
orebodies
intersected significant base metal
mineralisation up to 200 metres below the lowest
development level (1259RL).
Two vertical diamond drillholes of 500.3 metres
and 450.4 metres were drilled in the southwest of
the tenement where the intersection of the
regionally significant F45 Fault and a number of
smaller subordinate faults had been interpreted
from magnetic images. The aim of the drilling was
Mineralisation continues to remain open below
to test the depth to metamorphic basement and, if
these intersections and the down-dip extension of
basement was intersected, the nature of the
these zones will be tested with further drilling as
basement rocks and their geochemistry. Both holes
mining continues deeper at Zone III.
were terminated in younger, unmineralised Jurassic
Extensional drilling targeting Qing Long South
and Zone II North returned positive results with
volcanics where it was concluded that they had
passed beyond a practical mining depth.
significant base metal intersections seen in both
To the east of the Caijiaying Mine, several
drill programs. These two areas appear to have a
previously
tested
targets were considered
complex structural relationship and may represent
appropriate for relinquishment. Prior unfavourable
originally a single zone of mineralisation offset by
drilling and soil sample results determined that no
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further work was warranted in these areas. The
• All non-recyclable wastes from supporting
southern side of the F45 Fault is known to have
facilities are treated in an incinerator.
been down-thrown in excess of 500 metres
rendering basement metamorphic rocks impractical
to economically explore or mine. A portion of the
tenement to the south of the F45 Fault was also
selected
for relinquishment based on
this
information.
Two bio-geochemical surveys were carried out on
four areas within the lease during 2012. This
exploration technique attempts to use the broader
reach (in comparison to a traditional soil sample) of
vegetation's root systems to indicate geochemical
anomalies within soil by sampling and analysing the
foliage. Survey results were inconclusive as the
most significant anomalies recorded were obtained
from areas where the greatest likelihood of
contamination had been located, i.e. prior artisanal
processing operations.
COMMUNITY PARTICIPATION
Griffin's environmental practices were rewarded
twice with Hebei Hua Ao being presented with the
Environmental Award at the 2010 China Mining
Conference
and
the Mine Development
Outstanding Achievement Award at the 2011 China
Mining Conference.
Hebei Hua Ao has provided direct water supplies to
the local villagers, constructed sealed roads to the
Caijiaying Mine and nearby villages, financed the
construction of a local kindergarten, old peoples rest
home and assisted on other infrastructure projects.
Hebei Hua Ao has also assisted in the upgrade of
facilities at the local township school and set up
"Project Hope" to provide scholarships to local
students for ongoing study at primary, secondary
and tertiary levels. During 2012, Hebei Hua Ao
contributed Rmb1.7 million ($270,000) to a social
security fund for the local community.
Griffin has invested heavily in the local community
Griffin estimates that the Caijiaying Mine has
and
instigated best practices regarding the
provided direct and indirect employment to over
protection of the environment. In this regard:
1,000 Chinese nationals and minimised the
• Solid and liquid wastes are not disposed of into
employment of expatriate personnel.
the environment;
• All production water is recycled;
During 2012, Hebei Hua Ao paid Rmb203.8
million ($32.5 million ) in taxes, royalties, social
• Gas emissions from boilers are treated to remove
security fees, fines and other duties to Chinese
pollutants;
governmental authorities and agencies.
• Mined areas underground are back filled;
• Noise and dust from operations at the Caijiaying
Mine are strictly controlled; and
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FINANCIAL
• A record 409,596 ounces of silver in concentrate
were produced, compared to 312,509 ounces in
Griffin and
its subsidiaries (together the
2011, a 31.1% increase;
"Group") recorded:
• Operating profit of $31,174,000 (2011 -
$36,832,000);
• Profit before tax for the year of $27,239,000
(2011 - $39,953,000);
• A record 2,402 tonnes of lead in concentrate
were produced, compared to 1,909 tonnes in
2011, a 25.8% increase; and
• 8,322 ounces of gold in concentrate were
produced, compared to 10,281 ounces in 2011, a
• Profit after tax of $19,707,000 (2011 -
19.1% decrease.
$27,697,000); and
The average market price for zinc fell 11% in 2012
• Profit after non-controlling
interests of
from that in 2011. As a result, the average price per
$14,835,000 (2011 - $15,815,000).
Despite record throughput, base metal and silver
production, revenues and operating profits in 2012
were impacted by lower metal prices. As a result
of this and decreased gold production, revenues fell
to $76,860,000 (2011 - $79,062,000) with profits
tonne of zinc metal in concentrate received by the
Group in 2012 fell by 11% to $1,374 (2011 -
$1,546). The average price received for silver
declined 13% to $22.80 per ounce (2011 - $26.22)
and that for lead by 10% to $1,855 per tonne (2011
- $2,054). The average price received for gold
increased by 4% to $1,499 per ounce (2011 -
from operations of $31,174,000
(2011
-
$1,438).
$36,832,000).
In summary, production results were as follows:
• A record 789,692 tonnes of ore were mined,
compared to 695,848 tonnes in 2011, a 13.5%
increase;
• A record 800,288 tonnes of ore were processed,
compared to 715,955 tonnes in 2011, an 11.8%
increase;
• A record 40,581 tonnes of zinc metal in
concentrate were produced, compared to 36,283
tonnes in 2011, an 11.8% increase;
Costs of sales increased 9% in 2012 to $34,795,000
(2011 - $31,918,000). With throughput increasing
11.8%, some economies of scale were achieved
despite increasing costs as the lower mine levels
continue to be accessed.
Group operating costs, including Caijiaying Mine
site administration costs, rose 5.6% to $10,891,000
(2011 - $10,312,000) reflecting inflationary cost
pressures in China.
Profits before tax declined to $27,239,000 (2011 -
$39,953,000) reflecting not just lower operating
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Surface drilling between Zones II and III - Caijiaying Mine
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profits, but also interest charges not incurred in
withholding tax from 10% to 5% on dividends paid
prior years of $3,411,000, foreign exchange losses
to certain jurisdictions outside China.
of $904,000 (2011 - gains of $2,588,000) as well as
lower interest receipts.
The non-controlling interests’ share of Hebei Hua
Ao's profits of $4,872,000 (2011 - $11,882,000) has
Cash balances were utilised in 2012 in the
been provided for, resulting in attributable profits
Transaction to fund the acquisition of the non-
to Griffin of $14,835,000 (2011 - $15,815,000).
controlling interests in and extension of, the Hebei
The reduction in the non-controlling interests’
Hua Ao joint venture. As a result, interest receipts
reflects a reduction in profits received commensurate
declined to $495,000 (2011 - $616,000).
to the reduction in its equity interests from 40% to
Bank loan facilities in China were drawn down in
11.2% with effect from the 25th June 2012.
2012 to fund the payment of dividends used in the
Basic earnings per share in 2012 was 8.46 cents per
Transaction to purchase the non controlling
share (2011 - 8.96 cents) with diluted earnings per
interests in and extension of the Hebei Hua Ao
share of 8.36 cents in 2012 (2011 - 8.76 cents).
joint venture. As a result, interest costs of
$3,411,000 (2011 - nil) were incurred.
During 2012, 50,000 (2011 - 5,040,000) ordinary
shares in Griffin were bought back on market for
With outstanding dividends due from Hebei Hua
cancellation at a cost of $24,000 (2011 -
Ao denominated in Renminbi being paid and used
$4,977,000), thereby reducing the number of
in the Transaction as part of the acquisition of the
Griffin shares on issue to 175,451,830.
non controlling interests in, and extension of, the
Hebei Hua Ao joint venture at a time of declining
values in the US dollar, foreign exchange losses of
$904,000 (2011 - gains of $2,588,000) were
recorded.
Net cash inflow from operating activities in 2012
amounted to $32,244,000 (2011 - $43,346,000).
$125,419,000 was invested in 2012, which included
$117,459,000 in the Transaction to purchase the
non-controlling interests in, and extend the term
Griffin's 39.2% share of the losses of Spitfire Oil
of, the Hebei Hua Ao joint venture.
Attributable net assets per share at 31st December
2012 was 79 cents ( 2011 - 87 cents).
Limited ("Spitfire") of $163,000 (2011 - $118,000)
have been recognised.
Income taxes of $7,532,000 (2011 - $12,256,000)
have been charged. The decrease from 2011
reflects not just reduced profits subject to Chinese
income tax, but also a reduction in Chinese
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OPERATIONS
The processing plant has performed above its
During 2012, a record 789,692 tonnes of ore were
mined and a record 792,653 tonnes of ore hauled.
design capacity treating a record 800,288 tonnes of
Detailed planning for increasing mining and the
ore during 2012. Throughput was constrained by
further upgrade of the processing facilities will be
the safety production permit rather than mill
undertaken in 2013 with the expectation of
capacity, which will be increased as further
completing the upgrade by the end of 2014.
permitting is obtained.
Further mine development work was undertaken in
Average ore processed was 5.3% zinc, 0.41% lead,
2012 with the extension of the North and South
32.1 grammes per tonne silver and 0.66 grammes
declines and drives to access ore below the 1300
per tonne gold to produce 40,581 tonnes of zinc,
level. The south decline was developed to RL 1230
2,402 tonnes lead, 409,596 ounces silver and 8,322
(270 metres below surface portal) and the north
ounces of gold, all in concentrate. Zinc, lead and
decline to RL 1235 (265 metres below the surface
silver metal in concentrate production not only
portal). During 2012, 7,314 metres of development
exceeded 2011 production, but were a record for
drives and decline development were completed.
Caijiaying. Gold production was below 2011 levels
This enabled lower levels of the mine to be
due to lower grade gold mined.
Metallurgical recovery of all metals exceeded that
in 2011. However, the variability of the gold grade
and mineralogy in different ore lodes in Zone III
has resulted in gold recoveries remaining below
accessed including the larger Ju Long, Fu Long and
Qi Long lodes and allowed the greater use of
mechanised mining methods. Long hole stoping
continues to be the predominate mining method
used in Zone III.
50%. Metallurgical test work has been extensive
Remote bogging continued to be used to remove
and remains ongoing to increase gold grades and
ore left in previously mined stopes which increased
recoveries. In the interim, the mining of known
the recovery of ore mined during the year.
higher gold grade lodes has been avoided until
increased gold recoveries can be guaranteed. Lead
recoveries were increased significantly as a result of
modifications made to the processing circuit.
The percentage of tailings generated from the
processing plant and placed underground as backfill
increased to approximately 45%. Backfilling mined
stopes reduced the amount of waste material going
Mining rates have continued to be increased to
to the tailings dams and improved ground stability
meet the enhanced processing capacity with more
thereby allowing more ore to be extracted through
stopes opened and greater use made of mechanised
the year. A dry tailings facility is currently under
mining methods with faster rates of extraction.
construction to further reduce the surface tailing
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facility volume required in the future. Dry tailings
licence, expected in the Spring of 2014. Further
disposal should reduce the future capital cost of
anticipatory work will also include infrastructure
tailings dams, which would otherwise need to be
ventilation
construction
and underground
constructed to handle the amount of wet tailings
development work to enable ore definition drilling
produced by the Caijiaying Mine.
to be completed.
Administration procedures are well under way to
The development of the Zone II deposit and
lodge the final application for a mining licence over
upgrade of the processing facilities are not expected
Zone II and the area between Zone II and Zone III.
to result in any interruption to existing operations.
The submission of a geological report to the
relevant Chinese authorities has been accepted by
the Ministry of Land and Resources. A boundary
survey, feasibility study and environmental impact
study are now being prepared. Work to access Zone
II from the main decline has already begun in
anticipation of the granting of the new mining
Development and plant upgrade costs will be
funded from cash flow from existing operations
with surplus cash flow directed to repaying existing
Chinese banking facilities used in the Transaction
to fund the acquisition of additional equity in, and
the extension of, the joint venture in 2012.
18
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R E P O RT A N D A C C O U N T S 2 0 12
JORC RESOURCE
In May 2012, the latest JORC Mineral Resource
Approximately 35,898 meters of extensional and
Estimate for Caijiaying was produced at a zinc cut-
grade control drilling were completed in 2012. A
off of 1%. Tabled below is the summary of the 2012
resource update is planned to be completed by the
Mineral Resource.
end of 2013.
Lodes
Category
Tonnes
Metal Grade
Contained Metal
2012 Mineral Resource Estimates
Zinc Lead
Silver
Gold
Zinc
Lead
Silver
Gold
‘000t
%
%
Grams
per
Tonne
Grams
per
Tonne
Tonnes
Tonnes
Ounces
Ounces
Zone III
Fu, Jin,
Qing, Xiao,
Ju, Chang,
Hong Long
lodes
Zone III
Caijiaying
Measured
4,447
5.6
0.32
30.3
Indicated
10,926
Inferred
1,146
4.84
4.78
0.26
0.28
27.03
31.37
0.76
0.73
0.46
249,000
14,000
4,331,900
109,400
529,000
28,000
9,495,000
258,000
55,000
3,000
1,156,200
17,000
Subtotal
16,519
5.04
0.28
28.21
0.72
833,000
45,000
14,983,100
384,400
Inferred
15,075
3.91
0.22
21.68
0.76
589,000
32,000
10,507,600
370,400
Subtotal Zone III
31,594
4.50
0.25
25.09
0.74
1,422,000
77,000 25,490,700 754,800
Zone II
Measured
-
-
-
-
All
Indicated
4,056
Inferred
15,570
3.02
3.31
0.68
0.75
24.87
24.53
-
0.30
0.25
-
-
-
-
123,000
27,000
3,242,800
39,300
516,000
117,000
12,276,700
124,200
Subtotal Zone II
19,626
3.25
0.73
24.6
0.26
639,000 144,000 15,519,500 163,500
Total
51,220
4.02
0.43
24.90
0.56
2,061,000 221,000 41,010,200 918,300
The information in this report that relates to the May 2012 Mineral Resource estimates is based on information compiled by Mr
Matthew Stevens, B.Sc. (Hons) Geology, Member AIG and AusIMM. Mr Stevens was a full time employee of CSA Global Pty
Ltd. Mr Stevens 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 Stevens consents to the
inclusion in the report of the matters based on his information in the form and context which they appear.
†Zinc-equivalent grades are based on Caijiaying economics at 05/2011, assuming a linear correlation between all commodities.
Concentrates of Au=0.575g/t, Ag=18g/t and lead=0.97% correlate to an increase in value equivalent to 1% zinc above base
value.
19
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G R I F F I N M I N I N G L I M I T E D
20
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R E P O RT A N D A C C O U N T S 2 0 12
Remote bogging - Caijiaying Mine
21
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G R I F F I N M I N I N G L I M I T E D
STRATEGIC DIRECTION
Management efforts in the first half of 2012 were
primarily focused on the Transaction to acquire the
non controlling interests in, and extending the term
of, the Hebei Hua Ao joint venture. Subsequently,
a significant portion of management's efforts have
been directed at reorganising and restructuring site
relationships and reputation in China, many of
these opportunities have inevitably been mining
related within the Asian region. However, the
Company is not constrained by geographic region
and will pursue any mining opportunity which
shows the necessary economic returns demanded
by the Company’s shareholders.
management and reporting procedures from the
It is generally accepted that by the end of the
Caijiaying Mine following the lessening of local
decade 15 of the world’s larger zinc mines outside
Chinese
involvement
in
the day
to day
China are expected to exhaust their reserves
resulting in the loss of some 1.8* million tonnes of
zinc metal production with few new sources of
supply becoming available. Zinc supply is expected
to experience the sharpest decline in 2017.
Assuming ongoing world demand, particularly
from China, zinc consumption is expected to
exceed mine production by 2014, an encouraging
sign for the future profitability of the Caijiaying
Mine.
*CRU International Ltd Zinc Greenfield Mines 2012
report
management of Hebei Hua Ao.
Having reviewed many potential acquisitions and
having carefully considered the potential of
Caijiaying and the future market for metals,
particularly zinc, it was concluded that further
investment in the Caijiaying Mine would generate
higher returns
for
the Company and
its
shareholders than any new, low return/high risk
investment elsewhere.
With the finalisation of the Transaction for the
acquisition of the non-controlling interests in, and
the extension of the term of, the Hebei Hua Ao
joint venture, the Company’s aim is clearly focused
on increasing throughput at Caijiaying within the
next few years. The latest JORC resource estimate
confirms the availability of extensive ore resources
at Caijiaying for increased production over an
extended period.
Nevertheless,
the Company continues
to
investigate a large number of potential mining
ventures worldwide. With Griffin’s good
22
GM Ann Rep 12 highpics.qxd 16/4/13 17:18 Page 23
ASSOCIATED INTERESTS
SPITFIRE OIL LTD
R E P O RT A N D A C C O U N T S 2 0 12
Griffin currently holds 16,666,667 ordinary shares in
As part of its ongoing monitoring of any suitable
Spitfire Oil Limited ("Spitfire"), representing a 39.2%
process technologies for the Salmon Gums lignite
interest in the issued share capital of Spitfire. In
resource, Spitfire has conducted a review of currently
addition, with Mladen Ninkov and Roger Goodwin
available technologies for the gasification of the
being directors of both Griffin and Spitfire, this
lignite. This review was undertaken by a world
requires Spitfire to be treated as an associated company
recognised independent consulting firm specialising
of Griffin. As a result, $163,000 (2011 - $118,000) has
in the processing of lignite deposits, Higman
been charged to Griffin's income statement for its
Consulting GmbH. It concluded that due to the high
share of Spitfire's losses in the period.
water and salt content and the plastic physical nature
Spitfire, through its wholly owned subsidiary, Spitfire
Oil Pty Ltd, was formed to pursue the production of
liquid hydrocarbons, including fuels and distillates, from
the Salmon Gums Lignite Deposits in Western
Australia. Lignite is a low-rank form of brown coal which
has properties that allow it to be converted into oil.
On 4th September 2012, Spitfire Oil Pty Ltd was
of the material, the Salmon Gums lignite was unlikely
to be economic with existing gasification processes
and current capital and operating pricing structures.
In light of these conclusions, Spitfire has ceased any
further work on the Salmon Gums lignite project but
continues to maintain its investigation of processing
technologies, particularly the many new developments
to pyrolysis technology being undertaken at present
granted a five year renewable retention licence
for the bio fuels industry.
covering the Salmon Gums lignite resource area.
There are no annual exploration expenditure
commitments attaching to this licence other than the
prescribed licence fees.
The segments of the exploration licences previously
held by Spitfire Oil Pty Ltd that occurred outside the
Retention Licence area were relinquished in 2012 and
Surrender Reports lodged as required by the relevant
regulations. Extension-of-term applications were
lodged to cover the intervening period between the
expiry of the exploration licences and the grant of the
retention licence. The remaining exploration licences
have now expired and the licence fees refunded.
Following the completion of the gold exploration
program over the remainder of the exploration licences
that had remained untested, it was concluded that the
weak results did not merit further work for gold.
Spitfire continues to evaluate numerous alternative
natural resources projects. Several oil and gas projects
have been reviewed to date but none were found to
meet the necessary economic returns demanded by
Spitfire. With the continuing global financial
uncertainty, there has been a noticeable deterioration
in equity markets for smaller companies and more
robust projects may become available for acquisition
or joint venture in the future.
23
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G R I F F I N M I N I N G L I M I T E D
24
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R E P O RT A N D A C C O U N T S 2 0 12
Rom Pad - Caijiaying Mine
25
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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 51,
Dal Brynelsen, Director, Canadian, aged 66, is
holds a Masters of Law Degree from Trinity Hall,
is a graduate of the University of British Columbia
Cambridge and Bachelor of Laws (with Honours)
in Urban Land Economics. Mr. Brynelsen has
and Bachelor of Jurisprudence Degree from the
been involved in the resource industry for over 30
University of Western Australia. He is the principal
years. 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
Chief Executive Officer 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 69, 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 was
Meagher & Flom in New York and Freehill
the Managing Director for Global Projects and
Hollingdale & Page in Australia. He has been
Political Risk at AIG Global Trade and Political
chairman and director of a number of both public
Risk Insurance Company, a wholly owned
and private mining companies.
subsidiary of American International Group Inc.,
Roger Goodwin, Finance Director, British,
based in Moscow. From 1994 to 1996 he was
aged 57, 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.
and a director of AIG Investment Bank (ZAO) Ltd
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.
26
GM Ann Rep 12 highpics.qxd 16/4/13 17:19 Page 27
R E P O RT A N D A C C O U N T S 2 0 12
SENIOR EXECUTIVES
William Darcey, Operations Manager
Dr Bo Zhou, General Manager China,
Caijiaying, Australian, aged 61, holds degrees
Australian, aged 50, holds a PhD in exploration
from Curtin University in mining, metallurgy,
geology from Sydney University and a BSc in
mineral economics and a MEngSc (mining planning
economic geology from Peking University. He was
and design). He has over 30 years experience in the
Managing Director of Sinovus Mining Ltd, an ASX
mining and mineral processing industry working in
listed company with mineral interests in China.
both technical and operational roles. He has worked
Before that he was the General Manager for
on mining project in Australia and overseas. More
Guangxi Golden Tiger Mining JV, a Sino-
recently he worked in the Philippines as Operations
Australian JV gold company focussed in Guangxi,
Director for a gold mining company.
China, which is controlled by Golden Tiger
Mining NL, an ASX listed company. He has also
Wendy Zhang, Chief Financial Officer China,
worked as the Senior Geologist for Silk Road
Australian, aged 39, holds a Master of Accounting
Resources (a Toronto listed company), responsible
degree from Macquarie University, and is a
for evaluating various gold properties in Gansu
member of the Certified Practising Accountants of
Province in central western China. Dr Zhou has
Australia and a qualified member of the Chinese
considerable experience of and has established
Institute of Certified Public Accountants for 11
extensive contacts in the Chinese resources sector.
years. Prior to joining Griffin she spent the
previous 4 years as Financial Controller for Golden
Tiger Mining's joint venture operations in China (a
gold exploration and mining company listed in
Australian Stock Exchange). Previously she was a
Chief Accountant for Shanghai Silk Group and
subsequently Ann Taylor Shanghai.
27
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G R I F F I N M I N I N G L I M I T E D
28
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R E P O RT A N D A C C O U N T S 2 0 12
Crushing Plant and Fine Ore Bin - Caijiaying Mine
29
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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 financial statements of Griffin Mining Limited ("the
Company") and its subsidiaries ("the Group") for the year ended 31 December 2012.
FINANCIAL RESULTS
The Group profit before taxation, amounted to US$27,239,000 (2011 US$39,953,000). Taxation of US$7,532,000 (2011
US$12,256,000) and non controlling interests of $4,872,000 (2011 $11,882,000) have been provided. No dividend was paid in
2012 (2011 nil). US$14,835,000 has been credited to reserves (2011 US$15,815,000).
The basic earnings per share amounted to 8.46 cents (2011 8.96 cents). The attributable net asset value per share at 31 December
2012 amounted to 79 cents (2011 87 cents).
With cash flows from operations being used to fund the development of the Zone II deposit and the upgrade of the processing
facilities at Caijiaying and with any surplus cash flow directed to repaying existing Chinese banking facilities used to fund the
acquisition of additional equity in, and the extension of, the joint venture in 2012 the directors do not recommend the payment
of a dividend at this time.
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 2012 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 2012 and their immediate families in the share capital
of the Company were as follows:
Name
At 31 December 2012
At 1 January 2012
Ordinary
shares
number
Options over
ordinary shares,
number exercisable at
Ordinary
shares
number
Mladen Ninkov
Dal Brynelsen
Roger Goodwin
William Mulligan
33,001
15,001
577,830
300,001
45 pence
20 pence
6,000,000
400,000
1,200,000
400,000
3,000,000
200,000
600,000
200,000
33,001
1
577,830
300,001
Options over
ordinary shares,
number exercisable at
45 pence
20 pence
6,000,000
400,000
1,200,000
400,000
3,000,000
200,000
600,000
200,000
All of the Directors’ interests detailed are beneficial.
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 vested on 31 December 2010.
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R E P O RT A N D A C C O U N T S 2 0 12
DIRECTORS’ REPORT
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 incentivise key personnel with managerial and operating experience in
non-standard jurisdictions in a tight mining employment market.
Each new option 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 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 vested on 31 December 2010; and
c. The last third of each holder's options vested on 31 December 2011.
CORPORATE GOVERNANCE
Although incorporated in Bermuda and therefore not obliged to comply with the code of best practice established by the UK
Corporate Governance Code issued by the Financial Reporting Committee, 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. In particular, in view of the Company's size and the limited number of directors, the
Company has not formally established: an audit committee; a remuneration committee; and a nominations committee. However,
the non executive directors informally fulfil the roles and responsibilities normally expected of such committees.
The board of directors includes a number of non executive directors who, other than their shareholding, are considered to be
independent as their shareholdings are less than 0.2% of the Company's issued share capital and are 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
AUDITOR
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.
31
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G R I F F I N M I N I N G L I M I T E D
DIRECTORS’ REPORT
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
11th April 2013
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R E P O RT A N D A C C O U N T S 2 0 12
REPORT OF THE INDEPENDENT AUDITOR
REPORT OF THE INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GRIFFIN MINING
LIMITED
We have audited the Group financial statements of Griffin Mining Limited for the year ended 31 December 2012 which comprise
the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial
position, consolidated statement of changes in equity, consolidated cash flow statement, the accounting policies and the notes 1
to 29. 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
Amendment 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 auditor's 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 set out on page 28, 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 and express an opinion on 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, Caijiaying Mine, Financial Review, Operations Review,
Associated Interests 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.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of whether the accounting policies are appropriate to the company’s circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all of the financial and non-financial information in the Chairman’s
Statement, Caijiaying Mine, Financial Review, Operations Review, Associated Interests and Directors' Report to identify material
inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our reports.
OPINION
In our opinion, the financial statements:
•
•
give a true and fair view of the state of the Group's affairs as at 31 December 2012 and of its profit for the year
then ended;
have been properly prepared in accordance with International Financial Reporting Standards as adopted by the
European Union.
Grant Thornton UK LLP
Registered Auditors, Chartered Accountants
London
11th April 2013
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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 INCOME STATEMENT
For the year ended 31 December 2012
(expressed in thousands US dollars)
Notes
2012
$000
2011
$000
Revenue
Cost of sales
Gross profit
Net operating expenses
Profit from operations
Share of losses of associated company
Foreign exchange (losses)/gains
Finance income
Finance losses
Finance costs
Other income
Profit before tax
Income tax expense
Profit after tax
Attributable to non-controlling interests
Attributable to equity share owners of the parent
Basic earnings per share (cents)
Diluted earnings per share (cents)
1
1
1
4
5
6
7
8
9
10
10
76,860
79,062
(34,795)
(31,918)
42,065
47,144
(10,891)
(10,312)
31,174
(163)
(904)
495
-
(3,411)
48
36,832
(118)
2,588
616
(14)
-
49
27,239
39,953
(7,532)
(12,256)
19,707
4,872
14,835
19,707
8.46
8.36
27,697
11,882
15,815
27,697
8.96
8.76
34
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R E P O RT A N D A C C O U N T S 2 0 12
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2012
(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 non-controlling interests
Attributable to equity owners of the parent
2012
$000
2011
$000
19,707
27,697
545
545
20,252
4,960
15,292
20,252
2,417
2,417
30,114
12,691
17,423
30,114
35
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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 STATEMENT OF FINANCIAL POSITION
As at 31 December 2012
(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
Receivables and 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
Chinese statutory re-investment reserve
Other reserves on acquisition of non controlling interests
Foreign exchange reserve
Profit and loss reserve
Total equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Non-current liabilities
Long-term provisions
Current liabilities
Taxation payable
Trade and other payables
Bank loans
Total liabilities
Total equities and liabilities
Number of shares in issue
11
12
13
14
15
16
19
20
21
2012
$000
177,470
1,707
3,596
182,773
6,231
4,168
16,764
27,163
2011
$000
85,291
1,573
3,759
90,623
4,608
2,505
91,089
98,202
209,936
188,825
1,755
70,037
3,690
3,055
1,313
(29,346)
10,485
77,966
138,955
4,904
143,859
1,755
70,061
3,690
3,030
1,300
-
10,041
63,131
153,008
12,523
165,531
2,535
806
3,840
12,590
47,112
63,542
11,631
10,857
-
22,488
209,936
188,825
175,451,830
175,501,830
Attributable net asset value / total equity per share
to equity holders of parent
22
$0.79
$0.87
The accounts on pages 34 to 57 were approved by the Board of Directors and signed on its behalf by:
Mladen Ninkov
Chairman
11th April 2013
36
Roger Goodwin
Finance Director
GM Ann Rep 12 highpics.qxd 16/4/13 17:20 Page 37
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37
GM Ann Rep 12 highpics.qxd 16/4/13 17:20 Page 38
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 2012
(expressed in thousands US dollars)
Notes
4
5
6
7
17
11
Net cash flows from operating activities
Profit before taxation
Share of associated company losses
Foreign exchange losses / (gains)
Finance (income)
Finance losses
Finance costs
Adjustment in respect of share based payments
Depreciation, depletion and amortisation
(Increase) in inventories
(Increase) in receivables and 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 extend joint venture term and acquire non controlling interests
Payments to acquire – mineral interests
Payments to acquire – plant and equipment
Payments to acquire – office equipment
Payments to acquire intangible fixed assets - exploration interests
Net cash (outflow) from investing activities
5
11
11
11
12
Cash flows from financing activities
Issue of ordinary share capital
Purchase of shares for cancellation
Interest paid
Dividends paid to non controlling interests
Proceeds from bank loans
Net cash inflow / (outflow) from financing activities
(Decrease) / increase in cash and cash equivalents
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
2012
$000
27,239
163
904
(495)
-
3,411
25
6,762
(1,623)
(1,663)
(2,479)
32,244
(11,435)
495
(117,459)
(4,206)
(4,129)
(3)
(117)
(125,419)
-
(24)
(3,411)
(12,561)
47,112
31,116
(73,494)
91,089
(831)
16,764
2011
$000
39,953
118
(2,588)
(616)
14
-
517
5,900
(1,472)
(1,226)
2,746
43,346
(1,637)
616
-
(6,073)
(3,605)
(2)
(19)
(9,083)
41
(4,977)
-
(4,257)
-
(9,193)
23,433
66,450
1,206
91,089
16,764
91,089
Included within net cash flows of $73,494,000 (2011 $23,433,000) are foreign exchange losses of $904,000 (2011 gains $2,588,000)
which have been treated as realised.
38
GM Ann Rep 12 highpics.qxd 16/4/13 17:20 Page 39
R E P O RT A N D A C C O U N T S 2 0 12
ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accounts have been prepared in accordance with applicable International Financial Reporting Standards as issued by the
International Accounting Standards Board and as adopted by the European Union. The significant accounting policies adopted
are detailed below:
ACCOUNTING CONVENTION
The accounts have been prepared under the historical cost convention, except for certain financial assets which are measured at
fair value.
CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
(a) New and amended standards adopted by the Group
There were no International Financial Reporting Standards ("IFRSs") or International Reporting Interpretations Committee
("IFRIC") interpretations that are effective for the first time for the financial year beginning on or after 1st January 2012
that are expected to have a material impact on the Group.
(b) At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing
standards have been published by the International Accounting Standards Board ("IASB") but are not yet effective, and
have not been adopted early by the Group.
Management anticipates that all of the relevant pronouncements will be adopted in the Group's accounting policies for the
first period beginning after the effective date of the pronouncement. Information on new standards, amendments and
interpretations that are expected to be relevant to the Group's financial statements is provided below. Certain other new standards
and interpretations have been issued but are not expected to have a material impact on the Group's financial statements.
1.
IFRS 9 Financial Instruments. The IASB aims to replace IAS 39 Financial Instruments: Recognition and Measurement
in its entirety. IFRS 9 is being issued in phases. To date, the chapters dealing with recognition, classification, measurement
and de-recognition of financial assets and liabilities have been issued. These chapters are effective for annual periods
beginning 1 January 2015. Further chapters dealing with impairment methodology and hedge accounting are still being
developed. The Group's management have yet to assess the impact of this new standard on the Group's consolidated
financial statements. However, they do not expect to implement IFRS 9 until all of its chapters have been published
and they can comprehensively assess the impact of all changes.
2. Consolidation Standards A package of consolidation standards are effective for annual periods beginning or after 1 January
2014. Information on these new standards is presented below. The Group's management have yet to assess the impact
of these new and revised standards on the Group's consolidated financial statements.
i.
ii.
IFRS 10 Consolidated Financial Statements (IFRS 10). IFRS 10 supersedes IAS 27 Consolidated and Separate
Financial Statements (IAS 27) and SIC 12 Consolidation - Special Purpose Entities. It revised the definition of control
together with accompanying guidance to identify an interest in a subsidiary. However, the requirements and mechanics
of consolidation and the accounting for any non-controlling interests and changes in control remain the same.
IFRS 11 Joint Arrangements (IFRS 11). IFRS 11 supersedes IAS 31 Interests in Joint Ventures (IAS 31). It aligns
more closely the accounting by the investors with their rights and obligations relating to the joint arrangement. In
addition, IAS 31's option of using proportionate consolidation for joint ventures has been eliminated. IFRS 11 now
requires the use of the equity accounting method, which is currently used for investments in associates.
iii. IFRS 12 Disclosure of Interests in Other Entities (IFRS 12). IFRS 12 integrates and makes consistent the disclosure
requirements for various types of investments, including unconsolidated structured entities. It introduces new
disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities.
iv. Consequential amendments to IAS 27 and IAS 28 Investments in Associates and Joint Ventures (IAS 28). IAS 27 now
only deals with separate financial statements. IAS 28 brings investments in joint ventures into its scope. However,
IAS 28's equity accounting methodology remains unchanged.
39
GM Ann Rep 12 highpics.qxd 16/4/13 17:20 Page 40
G R I F F I N M I N I N G L I M I T E D
ACCOUNTING POLICIES
3. IFRS 13 Fair Value Measurement (IFRS 13). IFRS 13 does not affect which items are required to be fair-valued, but
clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements.
It is applicable for annual periods beginning on or after 1 January 2013. The Group's management have yet to assess
the impact of this new standard.
4. Amendments to IAS 1 Presentation of Financial Statements (IAS 1 Amendments). The IAS 1 Amendments require an
entity to group items presented in other comprehensive income into those that, in accordance with other IFRSs: (a) will
not be reclassified subsequently to profit or loss and (b) will be reclassified subsequently to profit or loss when specific
conditions are met. It is applicable for annual periods beginning on or after 1 July 2012. The Group's management
expects this will change the current presentation of items in other comprehensive income; however, it will not affect the
measurement or recognition of such items.
As far as can be determined, 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. Management have not assessed the impact of IFRS12 which could have a significant impact in respect
of non controlling interests.
GOING CONCERN
The financial statements have been prepared on a going concern basis. As at 31 December 2012, Hebei Hua Ao (a subsidiary
of the Company) had bank loans oustanding of $47.1 million. Since the year end $13.4 million of these facilities have been repaid
and Hebei Hua Ao is finalising terms for additional facilities of some $4.8 million and expects to roll over the existing facilities
for a further 12 months. Having considered the cash resources, banking facilities and forecasts, the directors do not expect any
going concern issues to arise.
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.
Acquisitions of subsidiaries are dealt with by the acquisition 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 statement of financial position 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.
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.
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 profit or loss 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 other comprehensive
income of the Group. However, when the Group's share of losses in an associate equals or exceeds its interest in the associate,
40
GM Ann Rep 12 highpics.qxd 16/4/13 17:20 Page 41
R E P O RT A N D A C C O U N T S 2 0 12
ACCOUNTING POLICIES
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 both technically feasible and commercially viable 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.
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 costs directly attributable to bringing the mine into 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 11).
Residual values
Material residual value estimates are updated as required, but at least annually whether or not the asset is re-valued.
Depreciation
With effect from 21st May 2012 the term of Hebei Hua Ao's joint venture business licence was extended to 12th October 2037.
The pre existing business licence terminated in 2019. Prior to 21st May 2012 all costs capitalised (mineral interests, mill and
mine equipment) within an area of interest were amortised over the current estimated economic reserve of the area of interest
on a unit of production basis.
In view of the extension of Hebei Hua Ao's business licence, thereby increasing the term of the joint venture, the economic lives
of all non current tangible assets have been reassessed and depreciation rates have been revised with effect from 25th June 2012
to reflect the increased term of operations, extractable resource, and economic lives of the assets as follows:
• Mine acquisition, development, licence, pre production and land use rights - on a unit of production basis
• Plant and buildings - over 25 years on a straight line basis with a 10% residual value
• Mechanical equipment - over 10 years on a straight line basis with a 10% residual value
• All other equipment, including vehicles - over 5 years on a straight line basis with a 10% residual value
Impairment
A review for impairment indicators at each reporting date is undertaken. In the event of impairment indicators being identified,
an impairment test is carried out to assess whether the net book value of the capitalised costs in each area of interest is covered
by the discounted future cash flows 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.
41
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G R I F F I N M I N I N G L I M I T E D
ACCOUNTING POLICIES
Impairment assessments are based upon a range of estimates and assumptions:
ESTIMATE / ASSUMPTION BASIS
Future production
Commodity prices
Exchange rates
Discount rates
Proven and probable resource estimates together with processing capacity
Forward market and longer term price estimates
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
FINANCIAL ASSETS
Financial assets, other than hedging instruments, can be divided into the following categories:
•
loans and receivables
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 in other comprehensive income.
Financial assets are reviewed by management individually and 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 statement of financial position. On initial recognition loans
and receivables are recognised at fair value plus 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 bank loans, trade and other payables, which are measured at amortised cost using the
effective interest rate method. On initial financial liabilities 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.
42
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R E P O RT A N D A C C O U N T S 2 0 12
ACCOUNTING POLICIES
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 profit or loss. 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 foreign operations are translated into the presentation currency of the Group at the rate of
exchange ruling at the reporting date and income statement items are translated at the average rate for the year. The exchange
difference arising on the retranslation of opening net assets is recognised in other comprehensive income and accumulated in
the foreign exchange reserve. All other translation differences are taken to profit or loss.
The balance of the foreign currency translation reserve relating to an operation that is disposed of is reclassified from equity to
profit or loss at the time of the disposal.
EQUITY
Equity comprises the following:
•
•
•
•
•
•
•
•
"Share capital" represents the nominal value of equity shares.
"Share premium" represents the excess over nominal value of the fair value of consideration received for equity
shares, net of expenses of the share issue.
"Contributing surplus" is a statutory reserve for the maintenance of capital under Bermuda company law and was
created on a reduction in the par value of the Company's ordinary shares on 15 March 2001.
"Share based payments" represents equity-settled share-based remuneration until such share options are
exercised.
"Foreign exchange reserve" represents the differences arising from translation of investments in overseas
subsidiaries.
"Chinese statutory re-investment reserve" represents a statutory retained earnings reserve under PRC law for
future investment by Hebei Hua-Ao.
"Other reserves on acquisition of non controlling interests" represents the excess of the purchase price paid to
acquire non controlling interest rights over the non controlling interests in subsidiary companies.
"Profit and loss reserve" represents retained profits and losses.
EQUITY SETTLED SHARE BASED PAYMENTS
All goods and services received in exchange for the grant of any share-based remuneration are measured at their fair values.
Fair values of 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 profit or loss with a corresponding credit to "Share based
payments" in the statement of financial position.
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 2012 the total expense recognised in profit or loss arising from share based transactions
was $25,000 (2011: $517,000).
43
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G R I F F I N M I N I N G L I M I T E D
ACCOUNTING POLICIES
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:
•
•
•
•
•
•
•
Impairment review assumptions, property, plant and equipment (note 11). Impairments are assessed by
comparison of the cash generating unit (the Caijiaying Mine) carrying amounts against the value of future
discounted cash flows expected to be derived from this unit. The value of the cash flows are estimated by direct
reference to the current prevailing value of the commodities extracted. Based on current production and costs
the directors have determined that the future profitability of the Group requires the market price of zinc to
remain above $1,100 per tonne with gold, silver and lead prices remaining at current prevailing levels.
Impairment review assumptions, exploration interests (note 12). Impairments are assessed by reference to
exploration results carried out in an area of interest. Where such exploration indicates that there are no
indications of mineralisation within the area of interest, provision is made for impairment in value.
Impairment review assumptions, investment in associated company (note 13). Impairments are assessed by
reference to the market value of the associated company and to the value of the associated company's underlying
assets. This includes capitalised exploration and evaluation costs which are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. Facts and
circumstances considered include periods of tenure, budgeted expenditure, and exploration and evaluation results
achieved. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount.
Provision for mine closure costs (note 19) have been made in accordance with the rules and regulations of the
Peoples Republic of China at a rate of Rmb0.5 per tonne of estimated resources. The expected amount of
resource due to be extracted during the life of the mine is based on estimated rates of extraction which take into
account reported measured, indicated and inferred levels of resource, the term of the Hebei Hua Ao joint venture
and current capability of the extractive machinery currently in use at the mine.
Share based payments (note 17). See aforementioned “Equity Settled Share Based Payments”
Determination that investments in associates are not subsidiaries (note 13). Mladen Ninkov and Roger Griffin
are non-executive directors of Spitfire Oil Ltd which, whilst not having unilateral day-to-day control of the
business operations, does give Griffin significant influence over the financial and operating policy decisions of
Spitfire. The directors of Griffin have considered whether this influence is such that Griffin controls Spitfire and
that therefore the entity should be fully consolidated under IAS27. The Directors judgement in this regard is
that as they are unable to control the business activities of Spitfire.
The division of the purchase consideration for the non controlling interests and the extension of the Hebei Hua
Ao joint venture period (note 11) has been determined from forecast discounted future cash flows from Caijiaying
assuming current metal prices, costs, extraction and processing rates.
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 reporting date.
44
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R E P O RT A N D A C C O U N T S 2 0 12
ACCOUNTING POLICIES
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 reporting 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 recognised in other comprehensive income (such as the revaluation of land) in which case the
related deferred tax is also charged or credited directly to other comprehensive income or 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.
45
GM Ann Rep 12 highpics.qxd 16/4/13 17:20 Page 46
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
1. SEGMENTAL REPORTING
The Group has one operating segment, the Caijiaying zinc gold project in the People’s Republic of China. All sales and costs
of sales in 2012 and 2011 were derived from the Caijiaying zinc gold project.
REVENUES
China
COST OF SALES
China
NET OPERATING EXPENSES
China
Australia
European Union
All revenues, cost of sales and operating expenses charged to profit relate to continuing operations.
TOTAL ASSETS
China
Australia
European Union
CAPITAL EXPENDITURE
China
Australia
European Union
China - acquisition of non-controlling interests
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
46
2012
$000
202,016
4,376
3,544
209,936
96,546
-
3
96,549
29,365
125,914
2012
$000
(4,929)
(25)
No.
367
2012
$000
2011
$000
76,860
79,062
(34,795)
(31,918)
(7,539)
(163)
(3,189)
(10,891)
(7,484)
(32)
(2,796)
(10,312)
2011
$000
128,961
6,363
53,501
188,825
9,678
-
2
9,680
-
9,680
2011
$000
(4,747)
(517)
No.
357
GM Ann Rep 12 highpics.qxd 16/4/13 17:20 Page 47
R E P O RT A N D A C C O U N T S 2 0 12
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:
Fees
Salary
Share Total
Pension
& Social
2012
based
Security payments
Fees
Salary
Mladen Ninkov *
Dal Brynelsen
Roger Goodwin
William Mulligan
Key personnel
$000
$000
112
154
112
88
466
-
466
-
-
445
-
445
775
1,220
costs
$000
-
-
108
-
108
-
108
$000
$000
$000
$000
15
1
3
1
20
5
25
127
155
668
89
1,039
780
1,819
99
77
99
77
352
-
352
-
-
442
-
442
569
1,011
Share Total
Pension
& Social
2011
based
Security payments
costs
$000
$000
$000
-
-
53
-
53
-
53
310
21
62
21
414
103
517
409
98
656
98
1,261
672
1,933
No share options were exercised by the directors in the year (2011 none).
*Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust, received
fees under a consultancy agreement of $1,692,000 (2011 $1,582,000), for the provision of advisory and support services to Griffin
Mining Limited and its subsidiaries during the year. 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
Griffin has a 39.2% interest in the issued share capital of Spitfire Oil Limited.
5. FINANCE INCOME
Interest on bank deposits
6. FINANCE LOSSES
Losses on revaluation of zinc put options
7. FINANCE COSTS
Interest payable on short term bank loans
8. OTHER INCOME
Scrap and other sundry sales
2012
$000
163
2012
$000
495
2012
$000
-
2012
$000
3,411
2012
$000
48
2011
$000
118
2011
$000
616
2011
$000
(14)
2011
$000
-
2011
$000
49
47
GM Ann Rep 12 highpics.qxd 16/4/13 17:20 Page 48
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. INCOME TAX EXPENSE
Profit for the year before tax
Tax rate
Expected tax expense:
Adjustment for tax exempt items:
- Income and expenses outside the PRC not subject to tax
- Share of associated company losses
Adjustments for timing differences:
- Other
Adjustments for short term timing differences:
- In respect of accounting differences
- Other
Withholding tax on intercompany charges
Taxation charge
2012
$000
27,239
25%
6,810
(1,796)
41
256
(109)
112
2,218
7,532
2011
$000
39,953
25%
9,988
(54)
30
105
273
(236)
2,150
12,256
The parent company is not resident in the United Kingdom for taxation purposes.
Hebei Hua’ Ao paid income tax in the PRC at a rate of 25% in 2012 (25% in 2011) based upon the profits calculated under
Chinese generally accepted accounting principals (Chinese “GAAP").
10. 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:
2012
Earnings
$000
Weighted
average
number of
shares
Per
share
amount
(cents)
Earnings
$000
2011
Weighted
average
number
of shares
Per
share
amount
(cents)
14,835
175,456,077
8.46
15,815
176,499,620
8.96
Basic earnings per share
Earnings attributable to
ordinary shareholders
Dilutive effect of securities
Options
-
2,021,897
Diluted earnings per share
14,835
177,477,974
-
8.36
-
3,981,592
15,815
180,481,212
-
8.76
48
GM Ann Rep 12 highpics.qxd 16/4/13 17:20 Page 49
NOTES TO THE FINANCIAL STATEMENTS
11. PROPERTY, PLANT AND EQUIPMENT
At 1 January 2011 net of accumulated depreciation
Foreign exchange adjustments
Additions during the year
Rehabilitation provision
Depreciation charge for the year
At 31 December 2011
Foreign exchange adjustments
Additions during the year
Additions re extensions of joint venture period
Rehabilitation provision
Depreciation charge for the year
At 31 December 2012
At 31 December 2010
Cost
Accumulated depreciation
Net carrying amount
At 31 December 2011
Cost
Accumulated depreciation
Net carrying amount
At 31 December 2012
Cost
Accumulated depreciation
Net carrying amount
Mineral
interests
$000
57,759
2,821
6,073
(56)
(2,752)
63,845
639
4,206
88,094
1,647
(3,817)
154,614
$000
63,408
(5,649)
57,759
72,652
(8,807)
63,845
167,405
(12,791)
154,614
R E P O RT A N D A C C O U N T S 2 0 12
Mill and
mobile mine
equipment
$000
Office furniture
and equipment
Total
$000
$000
19,963
1,001
3,605
-
(3,140)
21,429
223
4,129
-
-
(2,934)
22,847
$000
24,554
(4,591)
19,963
29,463
(8,034)
21,429
33,910
(11,063)
22,847
23
-
2
-
(8)
17
-
3
-
-
(11)
9
77,745
3,822
9,680
(56)
(5,900)
85,291
862
8,338
88,094
1,647
(6,762)
177,470
$000
$000
84
(61)
23
86
(69)
17
86
(77)
9
88,046
(10,301)
77,745
102,201
(16,910)
85,291
201,401
(23,931)
177,470
Mineral interests comprise the Group's interest in the Caijiaying ore bodies including costs 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.
At 31 December 2012 and 2011 there were no indications of impairment in the net book values of the capitalised cost.
The office furniture and equipment disclosed above relates solely to the fixed assets of the Company and China Zinc Pty Ltd.
On 25th June 2012 China Zinc Limited acquired a further 28.8% of the existing joint venture partner's interest in Hua Ao,
and with effect from 21st May 2012 the term of the joint venture's business licence extended to 12th October 2037, by the outlay
of $117,459,000. 75% of this amount has been attributed to the extension of the joint venture term and capitalised to non-
current tangible assets and 25% attributed to buying out the minority interests and charged directly to reserves within other
reserves on acquisition of non controlling interests. The allocation has been based upon estimated future discounted cash flows
from the Caijiaying mine.
In view of the extension of Hebei Hua Ao's business licence, thereby increasing the term of the joint venture, the rehabilitation
provision and depreciation rates have been revised with effect from 25th June 2012 to reflect the increased term of operations,
extractable resource, and economic lives of the assets.
49
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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. INTANGIBLE ASSETS
China – Zinc / gold exploration interests
At 1 January 2011
Foreign exchange adjustments
Additions during the year
At 31 December 2011
Foreign exchange adjustments
Additions during the year
At 31 December 2012
$000
1,481
73
19
1,573
17
117
1,707
Intangible assets represent cost 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
profit or loss. 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 2012 no amounts
had been provided or charged to the income statement in respect of the above exploration costs.
13. INVESTMENT IN ASSOCIATED COMPANY
At 1 January
Share of losses of Spitfire Oil Limited
At 31 December
2012
$000
3,759
(163)
3,596
2011
$000
3,877
(118)
3,759
Griffin acquired 16,666,667 ordinary shares in Spitfire Oil Ltd (“Spitfire”), representing a 39.2% interest in the issued share
capital of Spitfire, at 15p per share for a total cash consideration of £2,500,000 ($4,542,000) on 27 November 2008.
Mladen Ninkov and Roger Goodwin are non-executive directors of Spitfire Oil Ltd, which, whilst not having unilateral day-
to-day control of business, does give 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
Loss before income tax
ASSETS
Current assets
Non-current assets
Total assets
LIABILITIES
Current and total liabilities
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
50
Six months to 31 December 2012
Unaudited
$000
Year to 30 June 2012
Audited
$000
(188)
(444)
31 December 2012
Unaudited
$000
30 June 2012
Audited
$000
7,471
8,633
16,104
(24)
16,080
21,499
318
(5,737)
16,080
7,609
8,679
16,288
(47)
16,241
21,499
290
(5,548)
16,241
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R E P O RT A N D A C C O U N T S 2 0 12
NOTES TO THE FINANCIAL STATEMENTS
Spitfire Oil Ltd reported no contingent liabilities at 31 December 2012 (30 June 2011 nil).
In common with most Australian companies, Spitfire Oil Ltd’s reporting period is to 30th June.
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.
14. INVENTORIES
Underground ore stocks
Surface ore stocks
Concentrate ore stocks
Spare parts and consumables
2012
$000
1,546
1,757
926
2,002
6,231
All inventories are expected to be sold, used or consumed within one year of the reporting date.
15. RECEIVABLES AND OTHER CURRENT ASSETS
Receivables
Other receivables
Prepayments
2012
$000
1,906
904
1,358
4,168
2011
$000
1,051
1,652
-
1,905
4,608
2011
$000
-
849
1,656
2,505
Sales of metals in concentrate are made by way of open auction in China to Chinese smelters and agents.
During the year Rmb3.3m ($527,000) was incurred in service charges with the Zhangjiakou Caijiaying Lead Zinc Mining
Company, the non controlling equity holders in Hebei Hua Ao and charged to net operating expenses. Rmb58,191,000
($9,291,000) was incurred in haulage costs with the Third Geological Brigade of the Hebei Province who have an interest in the
Zhangjiakou Caijiaying Lead Zinc Mining Company and charged to cost of sales.
16. 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
2012
2011
Number
$000
Number
$000
1,000,000,000
10,000
1,000,000,000
10,000
175,501,830
-
(50,000)
175,451,830
1,755
-
-
1,755
180,408,496
133,334
(5,040,000)
175,501,830
1,804
1
(50)
1,755
During 2012 50,000 (2011: 5,040,000) ordinary shares were bought in for cancellation from the market under a buy back
programme at an average price of 29.5 UK pence ($0.475) (2011: average 62.6 UK pence ($0.975) per share.
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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. SHARE OPTIONS AND WARRANTS
Options exercisable at 20 pence per share to 31 October 2013
Options exercisable at 45 pence per share to 28 February 2015
At 1 January (Exercised) / At 31 December
(lapsed)
2012
Number
Number
2012
Number
4,333,333
10,000,000
14,333,333
-
-
-
4,433,333
10,000,000
14,433,333
The following table shows the number and weighted average exercise price of all the unexercised share options and warrants at
the year end:
2012
Number Weighted average
exercise price
Pence
2011
Number Weighted average
exercise price
Pence
Outstanding at 1 January
Lapsed during the year
Exercised in year
14,433,333
37.5
14,700,001
-
-
-
-
(133,334)
(133,334)
Outstanding at 31 December
14,433,333
37.5
14,433,333
37.0
(20.0)
(20.0)
37.5
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 estimated value of the options exercisable at 45p up to 28 February 2015, which vest in 3 tranches of 3,333,333 each, were
18.68p, 19.45p and 21.12p.
Inputs into the Binomial valuation model were as follows:
Share price
Exercise price
Expected volatility
Risk free yield
Dividend yield
Options expiring
28 February 2015
Options expiring
31 October 2013
43.25p
45.0p
65%
2.84%
0%
14.0p
20.0p
60%
3.97%
4%
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 $25,000 (2011 $517,000) during the year ended 31 December 2012 relating to equity
settled share option scheme transactions.
18. DIVIDENDS
No dividends were paid in 2012 (2011 nil)
19. LONG-TERM PROVISION
PROVISION FOR MINE CLOSURE COSTS
At 1 January
Transfer property plant and equipment (note 11)
Foreign exchange adjustments
At 31 December
52
2012
$000
806
1,647
82
2,535
2011
$000
768
(56)
94
806
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R E P O RT A N D A C C O U N T S 2 0 12
NOTES TO THE FINANCIAL STATEMENTS
Provision for mine closure and rehabilitation costs have been made in accordance with the laws and regulations of China at a
rate of Rmb 0.5 per tonne of estimated resources.
On 25th June 2012 China Zinc Limited acquired a further 28.8% of the existing joint venture partner’s interest in Hebei Hua
Ao, and with effect from 21st May 2012 the term of the joint venture's business licence was extended to 12th October 2037.
In view of the extension of Hebei Hua Ao's business licence, thereby increasing the term of the joint venture, the rehabilitation
provision has been increased to reflect the increase in the amount of extractable ore over the period of the joint venture.
20. TRADE AND OTHER PAYABLES
Trade creditors
Other creditors
Accruals
2012
$000
5,672
3,613
3,305
12,590
2011
$000
5,542
2,044
3,271
10,857
All amounts are short term. The carrying values of all trade and other payables are considered to be a reasonable approximation
of fair value.
21. BANK LOANS
Bank loans falling due within one year
2012
$000
47,112
47,112
2011
$000
-
-
The bank loans are repayable within one year under revolving facilities. At 31st December 2012 $13,415,000 of the amounts
due at 31st December 2012 were secured on inventories held at Caijiaying. All other amounts were unsecured. The bank loans
carried interest as follows:
Zhangjiakou Commercial Bank (repaid February 2013)
Bank of Communications
Bank of China
2012
2011
$000
13,415
8,023
25,674
47,112
%
10.44
6.6
6.6
$000
-
-
-
-
%
-
-
-
-
22. 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 2012 of $138,955,000 ($153,008,000 at 31 December 2011) divided by the number of ordinary shares
in issue at 31 December 2012 of 175,451,830 (175,501,830 at 31 December 2011).
23. 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.
53
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NOTES TO THE FINANCIAL STATEMENTS
23. RISK MANAGEMENT (CONTINUED)
Foreign Currency Risk
The majority of the Group’s operational and financial cash flows are denominated in Renminbi and United States Dollars with
sterling bank deposits held to cover future sterling expenditure estimates. Associates operational and financial cash flows are
denominated in Australian dollars.
Currently the Group does not carry out any significant operations in currencies outside the above.
The Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange
exposure and will consider hedging significant foreign currency exposure should the need arise. In addition, the conversion of
Renminbi into foreign currencies is restricted and subject to the rules and regulations of 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
2012
$000
1,722
2011
$000
19,535
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 2012. These changes are considered to be reasonable based on observation of current market conditions for the year
ended 31 December 2012. The sensitivity analysis is based upon the Group’s sterling deposits at each reporting date.
If sterling had strengthened against the US Dollar by 10% (2011: 10%) this would have had the following impact:
Net result for the year and on equity
2012
$000
191
If sterling had weakened against the US Dollar by 10% (2010: 10%) this would have the following impact:
Net result for the year and on equity
2012
$000
(157)
2011
$000
2,171
2011
$000
(1,776)
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.
With the Renminbi exchange rate linked to the value of the US dollar and with relatively small amounts held in Australian dollars,
the effect on the net results and equity of changes in Renminbi and Australian dollar exchange rates are not expected to be
significant.
Foreign currency denominated financial assets and liabilities, translated into US Dollars at the closing rate, are as follows:
2012
Rmb
$000
GBP
$000
1,697
15,232
(294)
(63,248)
1,403
(48,016)
AusD
$000
739
(1)
738
2011
Rmb
$000
AusD
$000
GBP
$000
19,650
37,563
2,605
(154)
(22,717)
-
19,496
14,846
2,605
Financial assets
Financial liabilities
Short term exposure
54
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NOTES TO THE FINANCIAL STATEMENTS
23. RISK MANAGEMENT (CONTINUED)
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% (2011: + 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
2012
2011
Plus 300%
Minus 100%
Plus 300%
Minus 100%
$000
548
$000
(183)
$000
2,177
$000
(616)
Fixed and non interest bearing financial assets and liabilities are as follows:
Floating
interest
rate
$000
16,764
-
16,764
(47,112)
-
(47,112)
(30,348)
2012
Non
interest
bearing
$000
-
2,810
2,810
-
(9,285)
(9,285)
(6,475)
Total
$000
16,764
2,810
19,574
(47,112)
(9,285)
(56,397)
(36,823)
Floating
interest
rate
$000
2011
Non
interest
bearing
$000
Total
$000
91,089
-
91,089
-
-
-
91,089
-
849
849
91,089
849
91,938
-
(10,857)
(10,857)
(10,008)
-
(10,857)
(10,857)
81,081
Financial Assets
Cash at bank
Other receivables
Total Financial Assets
Bank Loans
Trade and other payables
Total Financial Liabilities
Net Financial (Liabilities) / Assets
Commodity risk
The Group is exposed to the risk of changes in commodity prices and in particular that for zinc, gold and to a lesser extent silver
and lead. The Group currently sells its metal concentrate production by way of open auctions in China. The Group did not
hedge its metal production in 2012 or in 2011.
The following table illustrates the sensitivity of the net results for the year and equity to a reasonably possible change in the
market price of zinc, gold and silver of plus 20% and minus 20% (2011 plus 20% and minus 20%), with effect from the beginning
of the year. These changes are considered reasonable based upon observation of current market conditions within which the
Group operates. This sensitivity analysis is based upon the Group’s sales in each year.
Net results for the year - zinc
Net results for the year - gold
Net results for the year - silver
2012
Plus 20% Minus 20%
$000
$000
2011
Plus 20%
$000
Minus 20%
$000
8,025
1,871
1,401
(8,025)
(1,871)
(1,401)
8,245
2,218
1,229
(8,245)
(2,218)
(1,229)
55
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G R I F F I N M I N I N G L I M I T E D
23. RISK MANAGEMENT (CONTINUED)
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. Sales are made on a cash/delivery basis and the Group
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.
Liquidity and funding risk
The objective of the Group in managing funding risk is to ensure that it can meet its financial obligations as and when they fall
due. At the end of the year, Hebei Hua Ao, a subsidiary of the Company, had oustanding bank loans of $47.1 million under
revolving loan facilities with Chinese banks. The Group manages its liquidity risk related to these loans by repaying interest as
it comes due, managing cash flow from operations, staying in good standing with the counterparties of the loans and being in
compliance with all covenants.
Subsequent to the year end, the $13.4 million revolving loan with Zhangjiakou Commerical Bank has been repaid. The Company
is in the process of finalising terms for a new facility of Rmb30 million ($4.8 million) and expects to roll over the remaining
existing loans under the terms of the revolving facilities for a further 12 months as and when the loans fall due.
24. 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.
25. FINANCIAL INSTRUMENTS
The Group does not enter into derivative transactions such as interest rate swaps, forward rate agreements or forward currency
contracts. Funds in excess of immediate requirements are placed in US dollar, Chinese Renminbi, 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, Chinese Renminbi, 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.
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R E P O RT A N D A C C O U N T S 2 0 12
26. SUBSIDIARY COMPANIES
At 31 December 2012, 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
China Zinc Limited
Ordinary
Ordinary
Hebei Hua’ Ao Mining
Industry Company Ltd*
Panda Resources Ltd
Ordinary
Hebei Sino Anglo Mining
Development Company Ltd*
100%
100%
88.8%**
100%
90%
Service company
Australia
Service and
Holding company
Base and precious
metals mining and
development
Holding company
Mineral exploration
and development
Hong Kong
China
England
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 originally provided that the foreign
party (China Zinc Ltd) received 60% of the cash flows, in accordance with its share in the equity interest in the joint venture.
With effect from 25th June 2012, when 28.8% of the local Chinese joint venture partner’s equity interest in Hua Ao was
acquired, China Zinc Ltd receives 88.8% of the cash flows and profits of Hebei Hua Ao. On 21st May 2012 the term of the
joint venture's business licence extended to 12th October 2037.
27. RELATED PARTY TRANSACTIONS
At 31 December 2012 the Group had capital commitments of $333,000 (31st December 2011 $350,000).
28. CONTINGENT LIABILITIES
As described in note 26, the joint venture contract establishing the Hebei Hua’ Ao Mining Industry Company Ltd provided that
100% of the cash flows and profits generated by Hebei Hua Ao in the first three years from commencement of commercial
production be paid to the foreign party (China Zinc Ltd). Thereafter, being with effect from 24 July 2008, the cash flows were
shared 60% by the foreign party and 40% by the Chinese party, and since 25th June 2012, 88.8% by the foreign party and 11.2%
by the Chinese party in accordance with their share in the equity interest in Hebei Hua Ao. The registered capital (equity) of
Hebei Hua' Ao was provided in full by China Zinc. Although all the registered capital of Hebei Hua Ao has been provided by
China Zinc, in view of the unusual nature of the joint venture contract and uncertainty as to its interpretation, provision has only
been made for the non controlling interests in the profits of Hebei Hua Ao with no provision made in respect of the net assets
of Hebei Hua Ao. At 31 December 2012, the net assets of Hebei Hua’ Ao after distributions due amounted to $23.6m. The non-
controlling share of the net assets at 31 December 2012 on a termination of Hebei Hua’ Ao could amount to $2.6m. This liability
is only triggered on the early termination of the joint venture or at the end of the joint venture term when the net assets are
not expected to be significant.
29. POST BALANCE SHEET EVENTS
In February 2013, Hebei Hua Ao repaid bank loans from the Zhangjiakou Commercial Bank of Rmb83,600,000 ($13,415,000)
and have since negotiated a further bank facility from the Bank of Communications of Rmb30,000,000 ($4,790,000).
57
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58
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Senior Personnel Accommodation Block - Caijiaying Mine
59
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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
Website: www.griffinmining.com
Registered office:
Clarendon House, 2 Church Street, Hamilton. HM11. Bermuda.
China Zinc office:
Level 9, 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:
Panmure Gordon (UK) Limited
One New Change, London. EC4M 9AF. UK.
Auditors:
Solicitors:
Grant Thornton UK LLP
Grant Thornton House, Melton Street, London. NW1 2EP. UK.
DLA Piper UK LLP
20th Floor, 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
Milton Gate, 60 Chiswell Street, London. EC1Y 4AG. UK.
King & Wood Malleson
9/F, Hutchison House, 10 Harcourt Road, Central, Hong Kong
Bankers:
HSBC Bank plc
27-32 Poultry, London. EC2P 2BX. UK
The Hong Kong and Shanghai Banking Corporation Limited
HSBC Main Building, 1 Queen's Road Central, Hong Kong
National Westminster Bank PLC.
St James’s and Piccadilly, London. W1A 2DG. UK.
The Bank of Bermuda Ltd
6 Front Street, Hamilton. HM11. Bermuda.
UK Registrars
and Transfer Agents:
Capita Registrars (Jersey) Limited
12 Castle Street, St Helier, Jersey. JE2 3RT. UK.
60
New (third) tailings storage facility under construction summer 2009