Contents
Chairman’s statement
Overview
Caijiaying
intrOduCtiOn
develOpment
geOlOgy
mineral resOurCe estimate
explOratiOn
OperatiOn
COmmunity investment & partnership
FinanCial
strategiC review
direCtOrs and 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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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
1
RepoRt and accounts 2014
2
Griffin MininG LiMited 20th anniversary celebrations at Caijiaying Mine
3
RepoRt and accounts 2014 Chairman’s statement
I present to you, the shareholders and owners of
the upgrade jigsaw should also be completed in the
Griffin Mining Limited (“Griffin” or “the Company”),
same timeframe with the commissioning of the new,
the Annual Report and Accounts of the Company for
750,000 tonne ball mill and the completion of the
the 2014 financial and calendar year.
construction and commissioning of the new upgraded
Although the Company remained profitable for its
power line in July.
10th consecutive year, it will come as no surprise
As shareholders are well aware, the processing of
that the 2014 production and financial results were
the larger throughput remains contingent upon the
substantially below the previous years almost solely
granting of the new Mining Licence over Zone II
due to the 3 month shutdown of the processing
and the area between Zones II and III. The Mining
facilities at the Caijiaying Mine between the 11th
Licence process is now at the end of its second year
of August and the 17th November to enable those
and whilst it would be easy to become cynical and
facilities to be expanded from a 750,000 to a 1.5
disheartened, I am neither. The process has not
million tonne per annum throughput. Furthermore,
stalled, but continues unabated, if slowly, and I have
the recommissioning of the plant with low grade ore
(so as not to risk higher grade ore on a untried circuit)
in addition to continuing softness in all commodity
every hope that it will be granted in this calendar year.
The year ahead should not only be seen as an increased
prices, inevitably led to the lower results the Company
production year with a hopefully rising zinc price.
achieved.
Such results are always heartbreaking and difficult
to accept, but in this case they were forced upon the
Company to ensure it could become a significant,
mid-tier, base and precious metals producer. As
stated, ad nauseam, in so many of my past missives,
mining is substantially a fixed cost business where
The exploration potential of Caijiaying is only now
beginning to become apparent and the Company is
firmly of the belief that the increase in underground
drilling rigs from 2 to 5 with the consequential almost
tripling of metres drilled will repay the expenditure
spent. It is expected that a new mineral resource will
be collated and released by the end of the year.
profitability rests almost exclusively on the rise
Although the expanding production profile and
and fall in commodity prices. As such, the benefits
surrounding exploration of the Caijiaying Mine
of the expansion undertaken should be felt most
remains the primary focus of the Company, suitable
significantly by shareholders when the throughput
acquisitions remain a priority. In the current, savagely
has doubled and the zinc price cycle turns upwards.
depressed,
junior mining market, only mining
With the continuing fall in London Metal Exchange
companies operating in the lowest cost quartile
zinc stockpiles and the announced closure of 4 major
will survive severe downturns in commodity prices.
zinc mines, in particular Century in the 3rd quarter
Consequently, the Company continues to trawl for
of this year, the long predicted turn in the zinc
any low cost, base or precious metals mining projects
price is hopefully not far away. The last 2 pieces of
that have the potential to be brought into long term,
4
Griffin MininG LiMited economic production for a capital cost that provides
Hebei Hua Ao, the first foreign owned mining joint
a substantial and justifiable return on equity to
venture formed after China allowed foreign joint
shareholders.
ventures in 1994, is the only mining joint venture that
Of course, I am not unaware that many shareholders
base the success of a mining company solely by its share
price and the Company’s offices frequently receive
calls questioning the falling, stationary or slow rising
share price. Unfortunately, most operating mining
companies share prices have a direct correlation with
the relevant commodity price with little interest in
the underlying assets or prospects of the company
concerned. Griffin’s share price has historically been
little different. However it should be noted that the
Company has outperformed the FTSE Small Mining
Index by 40.8% over the past 6 months and 85.4%
over the past 12 months.
As often stated, Griffin, through Hebei Hua Ao,
continues to assist and financially support the
Caijiaying community. In March 2015, the final 183
of 400 cows were purchased and presented to the
remains. It has been a momentous and outstanding
achievement. It has succeeded because it has been
operated on a legal, cultural and mutually respectful
basis by a continuous group of dedicated and able
visionaries. I would like to thank each and every one
of those who have been involved and contributed to
the success of the Caijaiying Mine and the Company.
This multitude of people includes the past and present
directors of both Hebei Hua Ao and Griffin, Chinese
government officials at all levels, western operational
management,
consultants, Chinese managers,
employees and contractors. And just this once, perhaps
I can also thank the silent supporters, the spouses,
children and significant others who have weathered
the long weeks and months at home dealing with the
daily mundane and occasional emergency. Certainly
my wife and children fit this description. Without all
of these individuals support and encouragement, this
Caijaiying village for the dairy herd outlined in last
dream of ours would have all come to naught.
year’s report to successfully complete this new, long
term industry which will provide a more sustainable
annual income for villagers reliant on the seasonality
of crops grown in the short summer months. In
addition, all of the expatriate staff have volunteered
their language abilities in their off-shift time to the
regional school to teach English to the local school
children.
Lastly, and critically, thank you to the shareholders of
the Company, particularly those who have stood with
us from the first day, who have personified loyalty and
believed when few believed. It may sound trite and
disingenuous, but it really is for you that we strive
every day to repay the trust, loyalty and support you
have shown over the countless years. May this be the
year that begins to produce the result you deserve.
As you will note from some of the pictures found
Mladen Ninkov
herein, 2014 marked the 20th anniversary of Hebei
Chairman
Hua Ao. Close to a hundred junior and major mining
17th April 2015
companies have entered and subsequently left China.
5
RepoRt and accounts 2014 6
Griffin MininG LiMited The then Australian Ambassador to China, the Hon Frances Adamson,
Griffin directors and senior management
7
RepoRt and accounts 2014 overview
Griffin Mining Limited (‘Griffin’ or ‘the Company’)
The Company also holds 90% of Hebei Sino Anglo
is a mining and investment company, incorporated in
Mining Development Company Limited (“Hebei
Bermuda, whose shares are quoted on the Alternative
Anglo”), which controls 41.5 square kilometres of
Investment Market of the London Stock Exchange
exploration licences immediately surrounding the
(“AIM”).
Caijiaying Mine.
The major asset of the Company is an 88.8%
The Company continues to aggressively explore,
interest in Hebei Hua Ao Mining Industry Company
expand
and develop
the Caijiaying Mine,
Limited (‘Hebei Hua Ao’), the holder of 11.3 square
whilst aggressively analysing
further potential
kilometres of mining and exploration licences and
acquisitions of mining projects that are capable of
the mine and processing facilities at Caijiaying in the
being brought into production to satisfy historically
People’s Republic of China (the “Caijiaying Mine”).
preset, economic returns to shareholders.
Caijiaying Mine Location
8
Griffin MininG LiMited Caijiaying
IntroductIon
The Caijiaying Mine is an operating zinc, gold,
silver and lead mine (together with the Camp
comprising staff accommodation, recreational and
mess facilities) located approximately 300 kilometres
by road, north-west of Beijing in Hebei Province in
the People’s Republic of China (“the PRC”). The
Caijiaying Mine 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 conditions are not
severe with warm summers and cold, dry winters
enabling operations at Caijiaying to continue for 365
days a year.
development
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
wholly owned Hong Kong subsidiary China Zinc
Limited, purchased an additional 28.8% interest
in Hebei Hua Ao from the Zhangjiakou Guoxin
Enterprise Management and Service Center in
2012. Griffin now holds an 88.8% interest in Hebei
Hua Ao and the Zhangjiakou Guoxin Enterprise
Management and Service Center 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 January 2004, a second contractual joint venture
company, Hebei Anglo, was formed to 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 Guoxin Enterprise Management
and Service Center holds 10%. Griffin, through
Hebei Hua Ao and Hebei Anglo, has a controlling
interest in mining and exploration licences over
approximately 53 square kilometres at Caijiaying.
40% held by the Zhangjiakou Guoxin Enterprise
Following extensive exploration, resource delineation
Management and Service Center (the previously
drilling, a number of scoping studies, feasibility study,
named Zhangjiakou Caijiaying Lead Zinc Mining
financing and construction, Griffin successfully
Company), the majority shareholder of which
commissioned the Caijiaying Mine on time and
remains the Zhangjiakou City People’s Government.
within budget in 2005. The initial design production
The initial term of Hebei Hua Ao was 25 years and
was due to expire in 2019. In light of the continuing
throughput rate of 200,000 tonnes of ore per annum
has steadily increased since commissioning.
increase in the resources base and production profile
In December 2007, production of a separate precious
of the Caijiaying Mine, the Company, through its
metals concentrate containing gold, silver and lead,
9
RepoRt and accounts 2014 commenced from an integrated circuit forming part
Ongoing exploration in the area surrounding the
of the main processing facilities. This allowed the full
Caijiaying Mine and within Hebei Hua Ao’s and Hebei
economic benefit of these metals to be obtained by
Anglo’s tenement boundary continues to confirm the
the Group, which had previously been unaccounted
area to be highly prospective, indicating significant
and unpaid for by the Chinese metals traders and
potential for further base metal and gold deposits.
smelters in the zinc concentrate.
The Company
is
in
the
process
of
completing a further upgrade of the processing
facilities at the Caijiaying Mine to enable the
mining and processing of 1.5 million tonnes of
mIneral resource estImate
In June 2013, a Mineral Resource Estimate for
Caijiaying was produced at a zinc cutoff of 1%, the
highlights of which were:
ore per annum. Whilst all civil works have been
• Total Resource 49.4 Mt @ 4.1% Zinc, 0.4% Lead,
completed and new infrastructure is now in place,
23.9 g/t Silver & 0.5 g/t Gold.
commissioning of the new circuit is dependent
• Total contained metal of:
upon the construction of a new power line to the
Caijiaying Mine, which can only be completed in the
Spring/Summer when weather conditions permit.
Underground development continues with a second
drive and portal begun and the main drive toward
- 2 million tonnes of Zinc
- 212,000 tonnes of Lead
- 37.9 million ounces of Silver
- 825,000 ounces of Gold
Zone II almost completed. The mining of Zone II
The continuing success of the exploration programme
is subject to the successful granting of a new mining
in conjunction with infill drilling and on-going mine
licence over the greater Zone II area.
development, is anticipated to lead to an upgrade of
GeoloGy
Mineralisation at Caijiaying is believed to be
related to a Jurassic igneous event that affected the
2.3 billion year old metamorphic basement rocks.
Base metal and gold mineralisation associated with
Jurassic intrusives have replaced favourable horizons
the Mineral Resource Estimate at the Caijiaying Mine
which should be completed in late 2015.
The revised zinc/gold resource model in conjunction
with data collection and management processes,
grade control, mine planning and mine reconciliation
procedures have optimised production at Caijiaying.
in the metamorphic rocks, most notably calcsilicates
The updated 2013 Mineral Resource estimate
and marble. Porphyry sills and dykes intruding along
is reported at a zinc cut-off grade of 1% and, as
faults have then cut across the sequence.
amended for depletion, is summarised overleaf.
10
Griffin MininG LiMited
Caijiaying Zone III Remaining Mineral Resources December 31 2014
Grade Tonnage Reported above a Cut off Grade of 1.0% Zn
Tonnes Zn
(%)
(Mt)
Pb
(Oz)
Ag
(g/t)
Au
(g/t)
Zn Metal Pb Metal Ag Metal
(t)
(t)
(t)
Au Metal
(t)
13.2
8.0
7.7
28.8
4.9
4.5
4.2
4.6
0.3
0.2
0.2
26.2
22.4
18.5
0.2
23.1
0.8
0.7
0.5
0.7
645,000
358,000
323,000
39,000
11,112,000
324,000
14,000
12,000
5,767,000
172,000
4,559,000
129,000
1,326,000
65,000
21,438,000
625,000
Caijiaying Zone II Remaining Mineral Resources December 31 2014
Grade Tonnage Reported above a Cut off Grade of 1.0% Zn
Tonnes Zn
(%)
(Mt)
Pb
(Oz)
Ag
(g/t)
Au
(g/t)
-
4.1
15.6
19.6
-
3.0
3.3
3.3
-
0.7
0.8
-
24.9
24.5
0.7
24.6
-
0.3
0.3
0.3
Zn Metal Pb Metal Ag Metal
(t)
(t)
(t)
-
-
-
Au Metal
(t)
-
123,000
27,000
3,242,800
39,300
516,000
117,000
12,276,700
124,200
638,000
144,000
15,519,600
163,500
Caijiaying Combined Global Remaining Mineral Resources
Grade Tonnage Reported above a Cut off Grade of 1.0% Zn
Tonnes Zn
(%)
(Mt)
Pb
(Oz)
Ag
(g/t)
Au
(g/t)
Zn Metal Pb Metal Ag Metal
(t)
(t)
(t)
Au Metal
(t)
13.2
12.1
23.2
48.5
4.9
4.0
3.6
4.1
0.3
0.3
0.6
26.2
23.2
22.5
0.4
23.7
0.8
0.5
0.3
0.5
645,000
481,000
39,000
11,112,000
324,000
41,000
9,010,000
211,000
839,000
129,000
16,835,000
253,000
1,965,000
209,000
36,958,000
788,000
Category
Measured
Indicated
Inferred
Sub-Total
Category
Measured
Indicated
Inferred
Sub-Total
Category
Measured
Indicated
Inferred
Total
The Mineral Resource estimate is based on 2,470 underground diamond drill holes and 579 surface drill holes. The underground drilling was
carried out using nominal fan patterns of 20m by 20m, grading to a 40m by 40m pattern at depth. Resource wireframes were interpreted by
CSA Global in consultation with Griffin’s geologists. The resource outlines were based on mineralization envelopes prepared on cross-sections using
a nominal 1% Zn cut-off grade. The Mineral Resource has been depleted using a three-dimensional survey “As Built” wireframe which models
all of the mined out voids at they stand at 31st December 2014.
The updated Caijiaying Mineral Resources are based on resource modelling work completed by CSA Global Pty Ltd in 2013 and reported in
accordance with JORC 2004 guidelines. The resource model has not been updated to comply with JORC 2012 guidance on the basis that the
information has not materially changed since it was last reported.
The information in this report that relates to Mineral Resources is based on information compiled by Dr. Bielin Shi, who is a Member of The
Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. Dr. Bielin Shi has sufficient experience which is
relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent
Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (the
JORC Code). Dr. Bielin Shi consents to the inclusion in the report of the matters based on his information in the form and context in which it
appears.
11
RepoRt and accounts 2014
exploratIon
The exploration program at Caijiaying was enhanced
in 2014 to provide a pipeline of new targets with
the aim of ensuring an ongoing ore supply for the
expanded 1.5 million tonne throughput expected
in 2015. This involved prioritizing targets in the
following categories:
• In-mine areas between or adjacent to known
orebodies;
• Near-mine targets, mainly within reach of
underground drilling from existing or planned
drives; and
• Regional targets both within and adjacent to
existing licences
Hebei Hua Ao Mining and Exploration Area
The first step in identifying priorities was a study of
the existing data to indicate trends in ore types which
involved studying the metal ratios within the mine
together with detailed re-logging and re-sampling
of existing core. This showed high potential for
increasing gold ratios between Zone II and Zone III
and higher zinc ratios underneath and to the north
of Zone III, thereby providing direction for future
underground drilling programs of the in-mine and
near-mine targets. To date this has comprised 227
new holes for a total of 21,981 metres, initially with
2 rigs in operation but increasing to 5 rigs in 2014.
Results will be incorporated in the next resource
update study to be completed late in 2015.
In addition, a surface drill hole was completed to test
the geology to the north of Zone III. This was drilled
to a 603 metre depth and revealed that the mine
host rocks were not as deep as previously thought,
thereby enabling them to be tested by underground
drilling from the existing northernmost workings.
This program is also now underway.
The metal ratio studies were complemented by an
onsite geology workshop with visiting geological
specialists. This helped identify the main geological
controls of the main orebodies and succeeded in
identifying a number of new theoretical targets
surrounding Zone III.
Hebei Anglo Exploration Area
For regional target generation, two additional
surveys were concluded throughout the exploration
licences during 2014. The first was a shallow static
seismic survey to map the depth of the soft cover
overlying the mine host rocks to aid planning.
The second was a gravity survey to integrate with
the previous magnetic and electrical surveys.
Independent consultants were then contracted to
review all previous data and come up with fresh
interpretations to guide future targeting. The review
identified geophysical characteristics of the known
orebodies and recommended and prioritized targets,
particularly to the north and east of Zone III and
with lesser priority areas for testing to the west. The
best targets are in what is interpreted to be a repeat
of the mine host rocks and will therefore form the
main priority during the 2015 exploration season.
12
Griffin MininG LiMited 2015 Exploration
During 2015, exploration activities will continue
to focus on high-priority targets in and adjacent to
Zone III and Zone II. Significant exploration success
was had in 2014 and the aim in 2015 is to leverage
off the improved geological understanding to define
further extensions of these zones and build the
resource inventory.
Additional underground
exploration will be
completed in an attempt to continue to increase the
size of the Mineral Resources. Particular attention
will be paid to further definition of high-grade zinc
and goldrich mineralisation which appears to be
increasing with depth. Several of the zinc-gold lodes
at Zone III remain open either along strike, at depth,
or both and these will be scheduled for further
drilling.
At the same time the Company’s exploration team
will continue to advance the evaluation of advanced
targets such as Zone V and the northern extension
of the Zone III orebody. Regional exploration
will concentrate on new priority targets that were
generated from the integration and interpretation of
the geophysical data sets.
13
RepoRt and accounts 2014 14
Griffin MininG LiMited Caijiaying greater area outlining known orebodies in green
and proposed 2015 exploration areas in gold
15
RepoRt and accounts 2014 operatIons
The processing of ore at the Caijiaying Mine was
suspended from 11th August through to the 17th
November 2014, 6 weeks longer than initially planned,
to enable the processing facilities to be upgraded to a
throughput capacity of 1.5 million tonnes per annum.
and precious metal grades of ore processed during
2014 were also marginally down on 2013, resulting
in a minor fall in the recovery of base metals.
Gold recoveries on the other hand benefitted from
metallurgical improvements to the flotation circuit
with recoveries of up to 60% achieved in 2014.
As a consequence of the suspension of processing and
Despite the impact associated with the suspension
the reduced production during the subsequent re-
of the processing facilities, significant operational
commissioning of the processing facilities, the amount
improvements were made to the underground mining
of ore processed and metals in concentrate produced
operations with a change in key management and
were significantly down on previous years.
technical personnel implemented in early 2014.
In summary, production in 2014 was as follows:
Underground infrastructure was also upgraded with
the installation of a modern leaky feeder two-way
• 747,775 tonnes of ore were mined, compared to
radio communication system, improvements to the
877,803 tonnes in 2013;
ventilation, electrical reticulation and dewatering
• 572,390 tonnes of ore were processed, compared
systems and the installation of two additional
to 838,431 tonnes in 2013;
emergency refuge chambers.
• 25,901 tonnes of zinc metal in concentrate were
produced, compared to 39,724 tonnes in 2013;
• 7,623 ounces of gold
in concentrate were
produced, compared to 11,468 ounces in 2013;
Underground development work was significantly
increased compared to previous years with 1,102
metres of capital development, 7,401 metres
of operational development and 111 metres of
• 201,982 ounces of silver in concentrate were produced,
exploration drives completed in 2014. In preparation
compared to 323,808 ounces in 2013; and
of the underground operations supplying ore to
• 857 tonnes of lead in concentrate were produced,
the expanded processing facilities, both the North
compared to 1,553 tonnes in 2013.
and South declines were extended by 813 metres
Although the processing of ore was suspended during
the upgrade process, mining continued such that by
31st December 2014, 292,000 tonnes of ore were
stockpiled on the surface with a further 100,000 tonnes
establishing
important new diamond drilling
platforms and production areas down to the 1170
metre level. In addition, 316 metres of development
towards Zone II was completed, which will form
part of the expanded underground production front
stockpiled underground, ready to be processed.
in 2016.
With the use of lower grade ores during the re-
Long hole open stoping continues to be the predominant
commissioning of the processing plant, the base
mining method with remote bogging ensuring ore
16
Griffin MininG LiMited recovery from the open stopes is maximised. In early
roads to the Caijiaying Mine and nearby villages that
2015 the transition from labour intensive air-leg
it previously constructed; the kindergarten; an old
development to modern jumbo development had
people’s rest home and other projects.
commenced which will further lift performance from the
expanding underground operation.
The placement of cemented
tailings
(backfill)
underground totalling 119,840 cubic metres through
In 2013, Griffin, through Hebei Hua Ao, instituted
a programme to create a long term industry for the
Caijiaying local village, in particular, to provide a
more sustainable annual income less reliant on the
2014, further reduced the amount of tailings facilities
seasonality of crops grown in the short summer
required at surface whilst also providing access to
months. Initially, Hebei Hua Ao purchased 170
secondary stoping and pillar recovery mining methods.
cows, which were already pregnant with 47 offspring,
communIty Investment & partnershIp
Griffin, through Hebei Hua Ao, continues to invest
heavily in the local community and continues to
demand best practices regarding the protection of
the environment. Consequently, solid and liquid
creating a sizeable initial herd of 217 cattle for the
creation of a dairy and cattle farm. In March 2015
Hebei Hua Ao purchased a further 183 cows to
complete the programme and finalise a successful
new industry for the local population.
wastes are not disposed of into the environment,
Hebei Hua Ao has also aided in the upgrade of facilities
all production water is recycled, gas emissions from
at the local township school and the “Project Hope”
boilers are treated to remove pollutants, mined
scholarships to local students for ongoing study at
areas underground are back filled, noise and dust
primary, secondary and tertiary levels, instituting
from operations at the Caijiaying Mine are strictly
English lessons for all the children attending the
controlled (including covering the tailings dam), and
local school to assist in the internationalisation of
all non-recyclable wastes from supporting facilities
new students and increase their language base for
are treated in an incinerator.
As previously reported Griffin’s environmental
practices were rewarded twice with Hebei Hua Ao
future education and employment opportunities.
During 2013, Hebei Hua Ao contributed over Rmb3
million ($490,000) to the local community.
being presented with the Environmental Award at
The Caijiaying Mine continues to provide direct and
the 2010 China Mining Conference and the Mine
indirect employment to over 1,000 Chinese nationals.
Development Outstanding Achievement Award at
the 2011 China Mining Conference.
During 2014, Hebei Hua Ao paid Rmb 82 million
($13.5 million) in taxes, royalties, social security fees,
Hebei Hua Ao continues to provide direct water
and other duties to Chinese governmental authorities
supplies to the local villagers and maintains: sealed
and agencies.
17
RepoRt and accounts 2014 18
Griffin MininG LiMited Maoheng Zhang, Operations Manager Caijiaying, teaching English to School of Hope in Sanhao
19
RepoRt and accounts 2014 FinanCial
Griffin Mining Limited (the “Company”) and its
Group operating costs (including Caijiaying site)
subsidiaries (together the “Group”) recorded;
rose 9.6% in 2014 to $13,487,000 (2013 $12,299,000)
• Revenues of $45,564,000
in 2014
(2013
with inflationary cost increases in China and non cash
$71,071,000);
share option charges. This includes amounts due to
• Operating profit of $6,732,000 in 2014 (2013
Griffin’s Chinese partners in the Hebei Hua Ao Joint
$18,694,000);
Venture of $1,958,000 (2013 $1,599,000) previously
• Profit before tax of $1,021,000 in 2014 (2013
treated as amounts due to non-controlling interests.
$13,228,000); and
Profits before tax declined to $1,021,000 (2013
• Profit after tax of $190,000 in 2014 (2013
$13,228,000) reflecting not just lower operating
$8,157,000).
profits but losses on the disposal of plant and
The financial results for 2014 were severely
equipment scrapped as part of the plant upgrade
impacted by the suspension of processing activities
of $1,835,000 and increased interest charges of
at Caijiaying from 11th August to 17th November
$4,165,000 (2013 $3,651,000) arising from the lease
to facilitate the upgrade of the processing facilities,
of a new dry tailings facility at Caijiaying in 2013 and
and the subsequent ramp-up on re-commissioning
increased borrowings to facilitate the plant upgrade.
of those facilities. As a result, the amounts of ore
processed and metals in concentrate produced and
sold were significantly down on previous years.
The Group benefited from interest receipts of
$223,000 (2013 $145,000), foreign exchange losses
of $39,000 (2013 gains $107,000), and other income
The average price per tonne of zinc metal in
of $105,000 (2013 $162,000).
concentrate received by the Group in 2014 rose by
Income taxes of $831,000 (2013 $5,071,000) have
3.3% to $1,345 (2013 $1,302), for silver rose 1.8% to
been charged. This includes a deferred taxation
$17.1 per ounce (2013 $16.8), for gold rose by 1.5%
provision of $313,000 (2013 $297,000).
to $1,251 per ounce (2013 $1,233) and for lead fell
Basic and diluted earnings per share in 2014 was 0.11
2.3% to $1,595 per tonne (2013 $1,633).
cents (2013 4.63 cents).
Cost of sales fell to $25,345,000 (2013 $40,078,000)
During 2014, 50,000 (2013 260,000) ordinary shares
reflecting
the
suspension
in processing and
were bought back in the market for cancellation at
stockpiling of ore mined and hauled. With processing
a cost of $30,000 (2013 $119,000). No shares were
suspended and with mining and haulage impacted by
issued in 2014 (2013 3,900,000 ordinary shares
restrictions in the supply of explosives and logistical
were issued on the exercise of options) bringing
issues created by the stockpiling of ore during the
the number of the Company’s shares in issue to
suspension in processing, unit cost of sales rose.
179,041,830.
20
Griffin MininG LiMited Net cash inflow from operating activities in 2014
areas. The new decline will also enable more haulage
amounted to $12,754,000
(2013 $24,561,000).
movements at the Caijiaying Mine.
$23,204,000 was invested in 2014 (2013 $7,347,000.
Attributable net assets per share at 31st December
2014 was 83 cents (2013 82 cents).
strategiC review
caIjIayInG
During 2014 work was substantially completed to
increase the throughput of the processing facilities
to 1.5 million tonnes of ore per annum. In order to
complete this upgrade, Hebei Hua Ao is awaiting
delivery of a new primary ball mill and Spring
weather to undertake the construction of a new
power line to the Caijiaying Mine. This work is
Ongoing exploration work at Caijiaying has indicated
expected to be completed by July 2015 enabling the
the potential for significant additional resources to be
considerable stock piles of ore to be processed in the
defined and management is now allocating resources
third quarter of 2015.
to aid in this process. The existing JORC resource
estimate confirms the availability of extensive ore
acquIsItIons
resources at Caijiaying for increased production.
The Company’s strategy is to continue to further
With the Hebei Hua Ao joint venture extended
explore and develop the Caijiaying Mine area and
to 2037 and the 1.5 million tonne upgrade almost
to investigate the acquisition of base metals mining
completed, the Company is ideally placed to take
projects that have the potential to be brought into
advantage of a commodity cycle increase and provide
long term, economic production for a capital cost
the maximum return on capital to shareholders.
that provides a substantial and justifiable return
Whilst taking considerably longer than anticipated,
progress is being made by Hebei Hua Ao in its
commodity price market.
on equity to shareholders, particularly in a rising
application for a new mining licence at Zone II and
A large number of potential ventures have been
the area between Zone II and the existing mining
analysed worldwide and,
in particular, where
operations at Zone III. This will allow all the
management have extensive knowledge and human
known resources at and between Zones II and III
resources. None have been successfully consummated
to be extracted. Development work has continued
to date, for a number of reasons including negative
toward the Zone II area underground from the
findings during due diligence, an insufficient return
main Zone III decline with a new access drive and
calculated for the risk shareholders would need to
a new second portal. This work will enable further
accept in funding a project to production and overall
resource definition underground drilling in these
risk profile.
21
RepoRt and accounts 2014 22
Griffin MininG LiMited Upgraded Caijiaying processing facilities
23
RepoRt and accounts 2014 DireCtors
Mladen Ninkov, Chairman, Australian, aged 53,
years. He has been responsible for the discovery,
holds a Master of Law Degree from Trinity Hall,
development and operation of several underground
Cambridge and Bachelor of Laws (with Honours)
gold mines during his career. Mr. Brynelsen is the
and Bachelor of Jurisprudence Degree from the
President and a director of Vangold Resources
University of Western Australia. He is the principal
Limited.
of Keynes Capital. He has a mining, legal, fund
management and investment banking background
and is admitted as a barrister and solicitor of the
Supreme Court of Western Australia. He was the
Chairman and Managing Director of the Dragon
Capital Funds management group, a director and
Head of International Corporate Finance at ANZ
Grindlays Bank Plc in London, and a Vice President
of Prudential-Bache Securities Inc. in New York.
He also worked at Skadden Arps Slate Meagher &
Flom in New York and Freehill Hollingdale & Page
in Australia. He has been chairman and director of
Rupert Crowe, Director, Australian, aged
66, is a graduate geologist from Trinity College
Dublin. He was the founding chairman and
managing director of CSA Global Pty Ltd, a
mining consultancy company founded in Ireland in
1983 and now headquartered in Australia. He is a
specialist in zinc-lead exploration and was involved
as a principal in the discovery and development of
several notable mines. He has served on the board
of four public companies listed in Dublin, London,
Vancouver and Australia.
a number of both public and private mining and oil
Adam Usdan, Director, USA, aged 53, holds
and gas companies.
Roger Goodwin, Finance Director, British, aged
59, is a Chartered Accountant. He has been with
the Company since 1996 having previously held
senior positions in a number of public and private
companies within the natural resources sector. He
has a strong professional background, including
that as a manager with KPMG, with considerable
public company and corporate finance experience,
and experience of emerging markets.
an MBA from the Kellogg Graduate School of
Management at Northwestern University with
majors in Finance, Marketing, and Accounting, and
a BA in English from Wesleyan University. He is the
President of Trellus Management Company LLC,
an equity hedge fund based in the USA. Mr Usdan
founded Trellus Management in January 1994 and
has been in the investment advisory industry for over
25 years. Mr Usdan began his investment career in
1987 at Odyssey Partners, where he was responsible
for managing long/short U.S. equity (small to mid-
Dal Brynelsen, Director, Canadian, aged 68, is
cap) pools of capital.
a graduate of the University of British Columbia
in Urban Land Economics. Mr. Brynelsen has
been involved in the resource industry for over 30
24
Griffin MininG LiMited senior exeCutives
Mark Hine, Chief Operating Officer,
Dr Bo Zhou, General Manager China,
Australian, aged 56 is a mining engineer having
Australian, aged 52, holds a PhD in exploration
graduated from the Western Australia School
geology from Sydney University and a BSc in
of Mines, a member of the Australian Institute
economic geology from Peking University. He
of Company Directors and a member of the
was Managing Director of Sinovus Mining Ltd,
Australian Institute of Mining and Metallurgy.
an ASX listed company with mineral interests in
He has extensive mining experience with over 25
China. Prior to that he was the General Manager
years of senior management roles in both surface
for Guangxi Golden Tiger Mining JV, a Sino-
and underground mining operations. He has
Australian JV gold company focussed on Guangxi,
held a number of senior positions in the mining
China, controlled by Golden Tiger Mining NL,
industry including Chief Operating Officer at
an ASX listed company. He has also worked as
Focus Minerals Ltd, Chief Executive Officer at
the Senior Geologist for Silk Road Resources (A
Golden West Resources Ltd, Executive General
Toronto listed company), responsible for evaluating
Manager Mining at Macmahon Contractors
various gold properties in Gansu Province in
Pty Ltd, Chief Executive Officer at Queensland
central western China. Dr Zhou has considerable
Industrial Minerals Ltd, Chief Executive Officer
experience in the Chinese resources sector.
at Consolidated Rutile Ltd and General Manager
Pasminco, Broken Hill / Elura Mines.
Wendy Zhang, Chief Financial Officer, Hebei
Hua Ao, aged 41, holds a Master of Accounting
degree from Macquarie University, a member of
the Certified Practising Accountant of Australia
and a qualified member of the Chinese Institute
of Certified Public Accountant for 11 years. Prior
to joining Griffin she spent the previous 4 years as
Financial Controller for Golden Tiger Mining’s
joint venture operations in China. Previously she
was Chief Accountant for Shanghai Silk Group and
subsequently Ann Taylor Shanghai.
25
RepoRt and accounts 2014 26
Back row left to right: Bo Zhou (General Manager China), Mark Hine (Chief Operating Officer),
Wendy Zhang (Chief Financial Officer - Hebei Hua Ao), Maoheng Zhang (Operations Manager Caijiaying),
Mark Hall (Chief Mine Geologist,) Li Fusheng (Chief Mining Engineer)
Griffin MininG LiMited Front row left to right: Adam Usdan (Director), Roger Goodwin (Finance Director),
Mladen Ninkov (Chairman), Dal Brynelsen (Director), Rupert Crowe (Director)
27
RepoRt and accounts 2014 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 2014.
FinanCial results
The Group profit before taxation, amounted to US$1,021,000 (2013 US$13,228,000). Taxation of US$831,000 (2013
US$5,071,000) has been provided. No dividend was paid in 2014 (2013 nil). US$190,000 has been credited to reserves (2013
credited US$8,157,000).
The basic earnings per share amounted to 0.11 cents (2013 4.63 cents). The attributable net asset value per share at 31 December
2014 amounted to 83 cents (2013 82 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 2014 and the indication of likely future developments are set out on pages 9 to 21.
DireCtors
The Directors of the Company during the year were:
Mladen Ninkov – Australian – Chairman
Roger Goodwin – British - Finance Director
Dal Brynelsen – Canadian
Rupert Crowe - Australian/ Irish
Adam Usdan – American (USA) – appointed 19 March 2014
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 2014 and their immediate families in the share capital of
the Company were as follows:
Name
At 31 December 2014
At 1 January 2014 or date of appointment
Ordinary
shares,
number
33,001
382,001
1
Options over ordinary
shares, number
exercisable at
40 pence
45 pence
-
-
400,000
-
877,830
500,000
1,200,000
28,324,556
-
-
Ordinary
shares,
number
Options over ordinary
shares, number
exercisable at
45 pence
6,000,000
400,000
-
1,200,000
-
1
1
577,830
27,826,113
3,500,000
6,000,000
33,001
Mladen Ninkov
Dal Brynelsen
Rupert Crowe
Roger Goodwin
Adam Usdan
All of the Directors’ interests detailed are beneficial.
The options exercisable at 45 pence per share entitled 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, all of which have lapsed.
28
Griffin MininG LiMited
DireCtors rePort (ContinueD)
On 13 February 2014 a new set of options (the “40 pence options”) over 5,000,000 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 40 pence option will entitle the holder to subscribe for new ordinary shares in the Company at an exercise price of £0.40
per share on or before 31 December 2018. One third of these options vested on 31 December 2014 with one third vesting on 31
December 2015 and one third on 31 December 2016.
The 40 pence options will not vest if the option holder resigns or leaves the Company for cause prior to the vesting event taking
place. All the options will vest immediately upon a takeover offer being made or a change in control of the Company taking place
prior to the options expiring.
On 6 February 2015 the Board resolved to adopt a new share option scheme (the “30 pence options”) over a total of 20,000,000
new ordinary shares in the Company in order to retain and incentivise the Company’s directors and management.
Each 30 pence option will entitle the holder to subscribe for new ordinary shares in the Company at an exercise price of 30 pence
per new ordinary share on or before 31 December 2020. The 30 pence options will vest with each option holder in installments
triggered by the following events:
i. One third of each holder’s options will vest immediately upon being granted;
ii. A further third of each holder’s options will vest on 31 December 2016; and
iii. A further third of each holder’s options will vest on the granting of a new mining licence over Zone II at the Caijiaying mine.
The 30 pence options will not vest if an employee or a director resigns or leaves the Company for cause prior to the vesting event
taking place.
All the 30 pence options will vest immediately upon a takeover offer being made; or a substantial change in the business of the
Company or its subsidiaries; or the sale of a substantial asset of the Company or by its subsidiaries; or a change in substantial
control of the Company taking place prior to the options expiring. The 30 pence options have yet to be allocated.
remuneration PoliCy
Remuneration of all executive and non-executive directors, officers and senior employees of the Group is determined by the
board of directors.
The Company is committed to remunerating senior executives in a manner that is market-competitive and consistent with
“Best Practice” including the interests of shareholders. Remuneration packages are based on fixed and variable components,
determined by the executives’ position, experience and performance, and may be satisfied via cash or equity.
Non-executive directors are remunerated at a level that is consistent with market and industry standards. The cash remuneration
of non-executive directors consists only of directors’ fees and no retirement benefits are payable.
The Group’s remuneration policy has been based on industry practice rather than Group performance and takes into account the
risk and liabilities assumed by the directors and executives as a result of their involvement in the speculative activities undertaken
by the Group. Directors and executives are fairly compensated for the extensive work they undertake.
No performance based bonuses were issued during the reporting year.
29
RepoRt and accounts 2014 DireCtors rePort
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, with the exception of Adam Usdan, 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.
30
Griffin MininG LiMited 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.
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
17th April 2015
31
RepoRt and accounts 2014
rePort oF the inDePenDent auDitor
inDePenDent auDitor rePort to the members oF griFFin mining limiteD
We have audited the Group financial statements (the financial statements) of Griffin Mining Limited for the year ended 31
December 2014 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 related notes. The financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with Section 90(2) of the Bermuda Companies
Act 1981. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required
to state to them in an 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 Statement of Directors’ Responsibilities in respect of the accounts set out on page 31, the directors
are responsible for the preparation of the Group financial statements which 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 Ethical Standards for
Auditors.
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 the financial and non-financial information in the Annual Report
to identify material inconsistencies with the audited financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
oPinion on the FinanCial statements
In our opinion, the financial statements give a true and fair view of the state of the Group’s affairs as at 31 December 2014 and of
its profit for the year then ended in accordance with IFRSs as adopted by the European Union.
Grant Thornton UK LLP
Statutory Auditor
Chartered Accountants
London
17th April 2015
32
Griffin MininG LiMited
ConsoliDateD inCome statement
For the year ended 31 December 2014
(expressed in thousands US dollars)
Revenue
Cost of sales
Gross profit
Net operating expenses
Profit from operations
Losses on disposal of plant and equipment
Loss on disposal of interest in associated company
Foreign exchange (losses) / gains
Finance income
Finance costs
Other income
Profit before tax
Income tax expense
Profit after tax
Notes
1
1
2014
$000
45,564
(25,345)
20,219
1
(13,487)
6,732
(1,835)
-
(39)
223
(4,165)
105
1,021
(831)
4
5
6
7
8
9
2013
Restated
$000
71,071
(40,078)
30,993
(12,299)
18,694
-
(2,229)
107
145
(3,651)
162
13,228
(5,071)
190
8,157
Basic earnings per share (cents)
Diluted earnings per share (cents)
10
10
0.11
0.11
4.63
4.63
33
RepoRt and accounts 2014
ConsoliDateD statement oF ComPrehensive inCome
For the year ended 31 December 2014
(expressed in thousands US dollars)
Profit for the year
Other comprehensive income that will be reclassified to profit or loss
Exchange differences on translating foreign operations
Other comprehensive income for the period, net of tax
2014
$000
190
(281)
(281)
2013
Restated
$000
8,157
757
757
Total comprehensive income for the period
(91)
8,914
34
Griffin MininG LiMited
ConsoliDateD statement oF FinanCial Position
As at 31 December 2014
(expressed in thousands US dollars)
Notes
2014
$000
2013
Restated
$000
2012
Restated
$000
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 reserve on acquisition of non controlling interests
Foreign exchange reserve
Profit and loss reserve
Total equity attributable to equity holders of the parent
Non-current liabilities
Long-term provisions
Deferred taxation
Finance lease
Current liabilities
Taxation payable
Trade and other payables
Finance lease
Bank loans
Total current liabilities
11
12
13
14
15
18
19
20
21
20
22
208,339
1,914
-
193,444
1,852
-
177,470
1,707
3,596
210,253
195,296
182,773
17,477
3,540
23,371
44,388
7,981
4,214
26,278
38,473
6,231
4,168
16,764
27,163
254,641
233,769
209,936
1,790
71,310
3,690
3,064
1,686
(29,365)
10,957
84,794
147,926
2,582
1,953
10,720
15,255
-
26,563
1,161
63,736
91,460
1,791
71,339
3,690
2,748
1,683
(29,346)
11,212
84,614
147,731
2,591
1,646
12,012
16,249
2,878
17,219
487
49,205
69,789
1,755
70,037
3,690
3,055
1,313
(29,346)
10,485
76,797
137,786
2,535
1,316
-
3,851
3,840
17,347
-
47,112
68,299
Total equities and liabilities
254,641
233,769
209,936
Attributable net asset value per share to equity holders of parent
23
0.83
$0.82
$0.79
The accounts on pages 33 to 57 were approved by the Board of Directors and signed on its behalf by:
Mladen Ninkov
Chairman
Roger Goodwin
Finance Director
17th April 2015
35
RepoRt and accounts 2014
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A
Griffin MininG LiMited
ConsoliDateD Cash Flow statement
For the year ended 31 December 2014
(expressed in thousands US dollars)
Notes
Net cash flows from operating activities
Profit before taxation
Loss on disposal of interest in associated company
Foreign exchange losses / (gains)
Finance income
Finance costs
Adjustment in respect of share based payments
Depreciation, depletion and amortisation
Losses on disposal of equipment
Increase in inventories
Decrease in receivables and other current assets
Increase in trade and other payables
Net cash inflow from operating activities
Taxation paid
Cash flows from investing activities
Interest received
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
Cash flows from financing activities
Issue of ordinary share capital on exercise of options
Purchase of shares for cancellation
Interest paid
Finance lease
Proceeds from bank loans
Repayment of bank loans
Net cash inflow/outflow from financing activities
5
7
16
11
5
11
11
11
12
2014
$000
1,021
-
39
(223)
4,165
316
6,211
1,835
(9,496)
1,256
7,630
2013
Restated
$000
8,157
2,229
(107)
(145)
3,651
-
7,184
-
(1,750)
563
4,779
12,754
24,561
(2,271)
(5,692)
223
(6,041)
(17,285)
(11)
(90)
(23,204)
-
(30)
(3,342)
(1,398)
21,186
(6,655)
9,761
145
(4,883)
(2,499)
-
(110)
(7,347)
1,150
(119)
(3,651)
(354)
15,508
(13,415)
(881)
(Decrease) / increase in cash and cash equivalents
(2,960)
10,641
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
26,278
53
23,371
16,764
(1,127)
26,278
23,371
26,278
Included within net cash flows of $2,960,000 (2013 $10,641,000) are foreign exchange gains of $107,000 (2013 losses $904,000)
which have been treated as realised.
37
RepoRt and accounts 2014
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.
new anD reviseD stanDarDs that are eFFeCtive For annual PerioDs beginning on or
aFter 1 january 2014
A number of new and revised standards are effective for annual periods beginning on or after 1 January 2014. Information on
these new standards is presented below.
Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)
These amendments clarify the application of certain offsetting criteria in IAS 32, including:
•
•
the meaning of ‘currently has a legally enforceable right of set-off’
that some gross settlement mechanisms may be considered equivalent to net settlement
The amendments have been applied retrospectively in accordance with their transitional provisions. As the Group does not
currently present any of its financial assets and financial liabilities on a net basis using the provisions of IAS 32, these amendments
had no material effect on the consolidated financial statements for any period presented.
Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)
The amendments clarify that an entity is required to disclose the recoverable amount of an asset (or cash generating unit)
whenever an impairment loss has been recognised or reversed in the period. In addition, they introduce several new disclosures
required to be made when the recoverable amount of impaired assets is based on fair value less costs of disposal, including:
•
•
additional information about fair value measurement including the applicable level of the fair value hierarchy, and a
description of any valuation techniques used and key assumptions made
the discount rates used if fair value less costs of disposal is measured using a present value technique
The amendments have been applied retrospectively in accordance with their transition provisions.
going ConCern
The financial statements have been prepared on a going concern basis. As at 31 December 2014, Hebei Hua Ao (a subsidiary of
the Company) had bank loans outstanding of $63,736,000. Having previously rolled over each of the bank facilities, Hebei Hua
Ao expects to roll over the existing facilities for a further 12 months and since 31 December 2014 has demonstrated its ability
to service these by paying all interest when falling due and rolling over a loan of Rmb 30m ($4.8m) in January 2015. Having
considered the cash resources, banking facilities and forecasts for the remainder of the Hebei Hua Ao joint venture term, 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.
38
Griffin MininG LiMited aCCounting PoliCies
ConsoliDation basis (ContinueD)
Acquisitions of subsidiaries are dealt with by the acquisition method. The acquisition 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.
Non controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not
held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent
and the non-controlling interests based upon their respective ownership interests.
assoCiates
Associates are those entities over which the Group has significant influence but which are neither subsidiaries nor interests
in joint ventures. Investments in associates are recognised initially at cost and subsequently accounted for using the equity
method. Acquired investments in associates are also subject to purchase method accounting. However, any goodwill or fair value
adjustment attributable to the Group’s share in the associate is included in the amount recognised as investment in associates.
All subsequent changes to the Group’s share of interest in the equity of the associate are recognised in the Group’s carrying
amount of the investment. Changes resulting from the profit or loss generated by the associate are reported in “share of profits
of associates” in 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,
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 which are determined as unsuccessful are written off to the income statement.
39
RepoRt and accounts 2014 aCCounting PoliCies
non Current assets (ContinueD)
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
On 21 May 2012 the term of Hebei Hua Ao’s joint venture business licence was extended to 12 October 2037 effective from 25
June 2012. The pre existing business licence terminated in 2019. Prior to 25 June 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 25 June 2012 to
reflect the increased term of operations, extractable resource, and economic lives of the assets as follows:
1.
2.
3.
4.
5.
Mine acquisition, development, licence, pre production and land use rights - on a unit of production
Plant and buildings - over 25 years on a straight line basis with a 10% residual value
Dry tailings facility held under finance lease- over 15 years on a straight line basis with no 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. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and
value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit
and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment
testing procedures are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the effects of
future reorganisations and asset enhancements. Estimate and assumptions used in the determining whether an asset has become
impaired are set out below.
Impairment assessments are based upon a range of estimates and assumptions:
ESTIMATES / ASSUMPTIONS BASIS
Future production
Commodity prices
Exchange rates
Discount rates
Proven and probable reserves and resource estimates together with processing capacity
Forward market and longer term price estimates
Current market exchange rates
Cost of capital risk
40
Griffin MininG LiMited
aCCounting PoliCies
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:
1.
2.
3.
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 held by the Group are 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. 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’, ‘cash’, 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 recognition 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.
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 statement of financial position 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.
41
RepoRt and accounts 2014 aCCounting PoliCies
Foreign CurrenCy transaCtions (ContinueD)
On consolidation the accounts of overseas subsidiary undertakings are translated into the presentation currency of the Group
at the rate of exchange ruling at the 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:
1.
2.
“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.
3.
“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.
4.
5.
6.
“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.
7.
“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.
8.
“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 2014 the total expense recognised in profit or loss arising from share based transactions
was $316,000 (2013: $Nil).
42
Griffin MininG LiMited 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 $1,300 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. There were no indicators of impairment in the
Group’s areas of interest.
Provision for mine closure costs (note 18) 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.
The determination of the value of Finance Leased Asset, and attributable Finance Lease Interest is assessed from future
expected utilisation of the asset, assuming half of all tailings will be treated by the asset and the Group’s inherent rate of
interest on bank loans in China.
Non-controlling interests (note 29) are determined by reference to the underlying agreements and practice, with the
allocation of the purchase consideration on acquisition of non-controlling interests and extension of the Hebei Hua Ao
Joint Venture between that capitalised to mineral interests and that charged to reserves by reference to the impact of
future cash flows.
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.
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.
43
RepoRt and accounts 2014 aCCounting PoliCies
taxation (ContinueD)
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 the 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.
segment 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 with production of zinc concentrate, and lead concentrate with associated precious metals credits. 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.
leaseD assets
Finance leases
The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards
of ownership of the leased asset. Where the Group is a lessee in this type of arrangement, the related asset is recognised at the
inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental
payments, if any. A corresponding amount is recognized as a finance lease liability.
See accounting policy on non-current assets and depreciation and note 11 for the depreciation methods and useful lives for assets
held under finance leases. The interest element of lease payments is charged to profit or loss, as finance costs over the period of
the lease.
44
Griffin MininG LiMited notes to the FinanCial statements
1. segmental rePorting
The Group has one business segment, the Caijiaying zinc gold mine in the People’s Republic of China. All sales and costs of
sales in 2014 and 2013 were derived from the Caijiaying zinc gold mine.
REVENUES
China
Zinc concentrate sales
Lead and precious metals concentrate sales
COST OF SALES
China
NET OPERATING EXPENSES
China
Australia
European Union
2014
$000
45,564
33,734
11,830
45,564
2013
$000
71,071
50,141
20,930
71,071
(25,345)
(40,078)
(9,139)
(149)
(4,199)
(13,487)
(8,973)
(44)
(3,282)
(12,299)
All revenues, cost of sales and operating expenses charged to profit relate to continuing operations.
Net operating expenses in China include amounts due to Griffin’s Chinese partners in the Hebei Hua Ao Joint Venture of
$1,958,000 (2013 $1,599,000) which in 2013 had been attributed to non-controlling interests (see note 29).
TOTAL ASSETS
China
Australia
European Union
CAPITAL EXPENDITURE
China
European Union
2. ProFit From oPerations
Profit from operations is stated after charging
Staff costs
Fair values of options granted to directors and management
Average number of persons employed by the Group in the year
2014
$000
251,223
711
2,707
254,641
23,416
11
23,427
2014
$000
(6,533)
(316)
No.
368
2013
$000
227,337
633
5,799
233,769
7,492
-
7,492
2013
$000
(5,659)
-
No.
368
45
RepoRt and accounts 2014
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:
Share Total
Fees Salary Pension
& social
2014
based
security payments
Fees Salary Pension
& social
Share
based
security payments
Total
2013
costs
costs
$000
$000
$000
$000
$000
$000
$000
$000
$000
$000
Mladen Ninkov*
Dal Brynelsen
Rupert Crowe**
115
212
97
-
-
-
-
-
-
221
-
-
336
212
97
114
202
28
-
-
-
-
-
-
Roger Goodwin
115
522
115
32
784
114
473
129
Adam Usdan
William Mulligan
76
-
-
-
-
-
-
-
76
-
-
87
-
-
615
522
115
253 1,505
545
473
Key personnel***
-
1,103
4
63 1,170
-
1,271
615
1,625
119
316 2,675
545
1,744
-
-
129
-
129
-
-
-
-
-
-
-
-
-
114
202
28
716
-
87
1,147
1,271
2,418
Adam Usdan was appointed a director on 19 March 2014, Rupert Crowe was appointed a director on 11 September 2013 and
William Mulligan resigned on 31 December 2013.
*Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust, received fees
under a consultancy agreement of $2,058,000 (2013 $1,864,000), 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.
**CSA Global Pty Ltd provides exploration services to the Subsidiary. Rupert Crowe is a director and shareholder of CSA Global
Pty Ltd. CSA Global received fees of $1,397,000 (2013 $153,746) in relation to services performed for the Subsidiary.
***Key personnel include all ex-pat personnel working at Caijiaying in senior positions.
On 31 October 2013 options granted to the directors and management in October 2008 over 4,400,000 new ordinary shares in
the Company at an exercise price of 20p per share were exercised.
No share options were exercised by the directors in 2014.
4. loss on DisPosal oF Plant anD equiPment
Loss on disposal of plant and equipment
2014
$000
1,835
2013
$000
-
During the upgrade of the processing facilities at Caijiaying the old crushers and ancillary equipment with a net book value of
$1,835,000 were scrapped.
5. loss on DisPosal oF interest in assoCiateD ComPany
Loss on disposal of 39.2% interest in Spitfire Oil Limited
2014
$000
-
2013
$000
2,229
46
Griffin MininG LiMited
notes to the FinanCial statements
6. FinanCe inCome
Interest on bank deposits
7. FinanCe Costs
Interest payable on short term bank loans
Finance lease interest
2014
$000
223
2014
$000
3,342
823
4,165
2013
$000
145
2013
$000
3,297
354
3,651
In 2014 $326,000 (2013 nil) of interest incurred during the upgrade of the processing plant was capitalised to property, plant
and equipment at a rate of 6.6%
8. other inCome
Scrap and sundry other sales
9. inCome tax exPense
Profit for the year before tax
2014
$000
105
2014
$000
1,021
Expected tax expense at a standard rate of PRC income tax of 25% (2013 25%)
255
Adjustment for tax exempt items:
- Income and expenses outside the PRC not subject to tax
Adjustments for timing differences:
- Other
Adjustments for short term timing differences:
- In respect of accounting differences
- Other
Withholding tax on intercompany dividends and charges
Current taxation expense
Deferred taxation expense
Origination and reversal of temporary timing differences
Total tax expense
1,043
-
(922)
160
(18)
518
313
313
831
2013
$000
162
2013
$000
13,228
3,307
1,442
93
(589)
167
354
4,774
297
297
5,071
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 2014 (25% in 2013) based upon the profits calculated under Chinese generally accepted accounting
principals (Chinese “GAAP”).
47
RepoRt and accounts 2014
notes to the FinanCial statements
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:
2014
2013
Earnings Weighted Per share
amount
number of
Average
(cents)
shares
$000
Earnings Weighted Per share
amount
(cents)
number of
shares
Average
$000
Basic earnings per share
Earnings attributable to ordinary shareholders
190 175,066,140
0.11
8,157
176,015,707
4.63
Dilutive effect of securities
Options
-
-
-
-
-
-
Diluted earnings per share
190 175,066,140
0.11
8,157
176,015,707
4.63
11. ProPerty, Plant anD equiPment
Mineral
Interests
Mill and
mobile mine
equipment
Office
furniture &
equipment
Total
At 31 December 2012
Foreign exchange adjustments
Additions during the year
Transfer rehabilitation deposit
Depreciation charge for the year
At 31 December 2013
Foreign exchange adjustments
Additions during the year
Transfer rehabilitation deposit
Disposals
Depreciation charge for the year
At 31 December 2014
At 31 December 2012
Cost
Accumulated depreciation
Net carrying amount
At 31 December 2013
Cost
Accumulated depreciation
Net carrying amount
At 31 December 2014
Cost
Accumulated depreciation
Net carrying amount
48
$000
154,614
1,494
4,883
758
(4,397)
157,352
(263)
6,008
32
-
(3,278)
159,851
167,405
(12,791)
154,614
174,810
(17,458)
157,352
180,536
(20,685)
159,851
$000
22,847
645
15,378
-
(2,782)
36,088
(152)
17,285
-
(1,835)
(2,910)
48,476
33,910
(11,063)
22,847
50,209
(14,121)
36,088
64,558
(16,082)
48,476
$000
$000
9
-
-
-
(5)
4
-
12
-
-
(4)
12
86
(77)
9
86
(82)
4
98
(86)
12
177,470
2,139
20,261
758
(7,184)
193,444
(415)
23,305
32
(1,835)
(6,192)
208,339
201,401
(23,931)
177,470
225,105
(31,661)
193,444
245,192
(36,853)
208,339
Griffin MininG LiMited
notes to the FinanCial statements
11. ProPerty, Plant anD equiPment (ContinueD)
Mineral interests comprise the Group’s interest in the Caijiaying ore bodies including cost 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 2014 and 2013 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.
During 2013 plant and equipment with a deemed value of $12,880,000 were acquired under a finance lease, upon which
depreciation of $634,000 (2013 $429,000) has been provided. At 31 December 2014 the net carrying amount of this equipment
was $11,911,000 (2013 $12,451,000).
12. intangible assets
China – Zinc / gold exploration interests
At 1 January 2013
Foreign exchange adjustments
Additions during the year
At 31 December 2013
Foreign exchange adjustments
Amounts provided in year
Additions during the year
At 31 December 2014
$000
1,707
35
110
1,852
(8)
(19)
89
1,914
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 2014
$19,000 (2013 $nil) had been provided and charged to the income statement in respect of the above exploration costs.
13. inventories
Underground ore stocks
Surface ore stocks
Concentrate ore stocks
Spare parts and consumables.
2014
$000
3,708
11,957
13
1,799
17,477
2013
$000
1,550
4,489
1
1,941
7,981
All inventories are expected to be sold, used or consumed within one year of the balance sheet date.
49
RepoRt and accounts 2014
notes to the FinanCial statements
14. reCeivables anD other Current assets
Receivables
Amounts due on disposal of interest in Spitfire Oil Ltd
Advance to Zhangjiakou Guoxin Enterprise Management and Service Center
Other receivables
Taxation
Prepayments
2014
$000
-
-
1,426
159
586
1,369
3,540
2013
$000
258
1,367
1,431
253
-
905
4,214
During the year $2,613,000 (2013 $2,071,000) was incurred in service charges with Zhangjiakou Guoxin Enterprise Management
and Service Center (formerly the Zhangjiakou Caijiaying Lead Zinc Mining Company).
15. share CaPital
AUTHORISED:
2014
2013
Number
$000
Number
$000
Ordinary shares of US$0.01 each
1,000,000,000
10,000
1,000,000,000
10,000
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
179,091,830
1,791
175,451,830
1,755
-
(50,000)
-
(1)
3,900,000
(260,000)
39
(3)
179,041,830
1,790
179,091,830
1,791
During 2014 50,000 (2013 260,000) ordinary shares were bought in for cancellation in the market under a buy back programme
at an average price of 36.3 UK pence ($0.595) (2013 average 29.5 UK pence ($0.445) per share).
On 31 October 2013 options granted to the directors and management in October 2008 over 4,400,000 new ordinary shares in
the Company at an exercise price of 20p per share were exercised. The Company was informed by persons exercising options
over 500,000 of these shares that they intended to sell those ordinary shares. In order to maintain an orderly market in the
Company’s shares, the Company agreed to buy out the options over these shares at the difference between the exercise price
and the mid market value of the Company’s shares at close of business on 31 October 2013 of 34.5p. As a result 3,900,000 new
ordinary shares in the Company were issued on the exercise of options exercisable at 20p per share.
16. share oPtions anD warrants
At
1 January
2014
Number
Granted
At
Number 31 December
2015
Number
Options exercisable at 40 pence per share to 31 December 2018
-
5,000,000
5,000,000
Options exercisable at 45 pence per share to 28 February 2015
10,000,000
-
10,000,000
10,000,000
5,000,000
15,000,000
50
Griffin MininG LiMited
notes to the FinanCial statements
16. share oPtions anD warrants (ContinueD)
The following table shows the number and weighted average exercise price of all the unexercised share options and warrants
at the year end:
2014
Number Weighted average
exercise price
Pence
2013
Number
Weighted average
exercise price
Pence
Outstanding at 1 January
10,000,000
45.0
14,433,333
Lapsed during the year
Exercised in year
Granted during the year
Outstanding at 31 December
-
-
5,000,000
15,000,000
-
-
40.0
43.3
(33,333)
(4,400,000)
-
10,000,000
37.5
(20.0)
(20.0)
-
45.0
The estimated value of the options exercisable at 45p up to 28 February 2015, which vested in 3 tranches of 3,333,333 each,
were 18.68p, 19.45p and 21.12p.
The estimated value of the options exercisable at 40p up to 31 December 2018, which vested in 3 tranches of 1,666,667 each,
were 7.4p, 7.9p and 8.4p.
Inputs into the Binomial valuation model were as follows:
Share price
Exercise price
Expected volatility
Risk free yield
Dividend yield
Options expiring
Options expiring
31 December 2018
28 February 2015
33.0p
40.0p
36%
1.31%
0%
43.25p
45.0p
65%
2.84%
0%
Expected volatility was determined by calculating the historical volatility of the Company’s share price with reference to the
correlation with the zinc price and zinc price volatility over the same period. The Binomial model used assumes that the
options will be exercised early when the share price exceeds the exercise price by a multiple of two.
The Group recognised a total expense of $316,000 (2013 $nil) during the year ended 31 December relating to equity settled
share option scheme transactions.
17. DiviDenDs
No dividends were paid in 2014 (2013 nil).
18. long-term Provisions
PROVISIONS FOR MINE CLOSURE COSTS
At 1 January
Foreign exchange adjustments
At 31 December
2014
$000
2,591
(9)
2,582
2013
$000
2,535
56
2,591
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.
51
RepoRt and accounts 2014
notes to the FinanCial statements
19. DeFerreD taxation
At 1st January
Foreign exchange adjustments
Charge for the year
At 31 December
2014
$000
1,646
(6)
313
1,953
2013
$000
1,316
33
297
1,646
Deferred taxation is provided in full on temporary timing differences under the liability method using a tax rate of 25%.
The deferred taxation provision arises on accelerated depreciation in the PRC deductable for taxation purposes.
20. FinanCe lease
Amounts falling due in more than one year
Amounts falling due within one year
2014
$000
10,720
1,161
11,881
2013
$000
12,012
487
12,499
Under the terms of an agreement Hebei Hua Ao pays Rmb21.32 per wet tonne treated by a dry tailings facility at Caijiaying.
At the end of the agreement term in February 2021, this facility becomes the property of Hebei Hua Ao with no further
payment. In determining the total liability it is assumed that one half of future production over the term of the agreement
will be treated by the dry tailings facility. In determining the value of the dry tailings facility and applicable interest a deemed
interest rate of 6.6% has been applied.
21. traDe anD other Payables
Trade creditors
Other creditors
Accruals
2014
$000
16,040
6,069
4,454
26,563
2013
$000
9,550
4,810
2,859
17,219
All amounts are short term. The carrying values of all trade and other payables are considered to be a reasonable approximation
of fair value.
22. banK loans
Bank loans falling due within one year
2014
$000
63,736
2013
$000
49,205
The bank loans are repayable within one year under revolving facilities and are unsecured. The bank loans carried interest as
follows:
Zhangjiakou Commercial Bank
Bank of Communications
Bank of China
52
2014
$000
%
6.43
10.44
6.6
21,245
16,343
26,148
63,736
2013
%
-
6.6
6.6
$000
-
16,402
32,803
49,205
Griffin MininG LiMited
notes to the FinanCial statements
23. 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 2014 of $147,926,000 ($147,731,000 at 31 December 2013) divided by the number of ordinary
shares in issue at 31 December 2014 of 179,041,830 (179,091,830 at 31 December 2013).
24. risK management
The Group is exposed to a variety of financial risks which result from its operating and investing activities. The Group’s risk
management is coordinated by its senior management and executive directors and focuses on actively securing the Group’s
short to medium term cash flows.
Foreign Currency Risk
The majority of the Group’s operational and financial cash flows are denominated in Chinese Renminbi and United States
Dollars with sterling bank deposits held to cover future sterling expenditure estimates.
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 Peoples Republic of China.
Sterling bank deposits translated into United States Dollars at the closing rate are as follows:
Short term bank deposits
2014
$000
794
2013
$000
2,385
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 2014. These changes are considered to be reasonable based on observation of current market conditions
for the year ended 31 December 2014. 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% (2013 10%) this would have had the following impact:
Net result for the year and on equity
2014
$000
88
If sterling had weakened against the US Dollar by 10% (2013 10%) this would have the following impact:
Net result for the year and on equity
2014
$000
(72)
2013
$000
265
2013
$000
(217)
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.
53
RepoRt and accounts 2014
notes to the FinanCial statements
24. risK management (ContinueD)
Foreign Currency Risk (continued)
Foreign currency denominated financial assets and liabilities, translated into US Dollars at the closing rate, are as follows:
2014
2013
GBP
Rmb
AusD
$000
$000
$000
915
22,711
(162)
(97,038)
753
(74,327)
708
(13)
695
GBP
$000
Rmb
AusD
$000
$000
2,497
24,448
(130)
(78,398)
2,367
(53,950)
633
(5)
628
Financial assets
Financial liabilities
Short term exposure
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s bank deposits with floating
interest rates. The Group currently does not have an interest rate hedging policy.
The following table illustrates the sensitivity of the net results for the year and equity to a reasonably possible change
in interest rates of + 300% and - 100% (2013 + 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
2014
2013
Plus 300% Minus 100%
Plus 300% Minus 100%
$000
690
$000
(223)
$000
968
$000
(145)
Fixed and non interest bearing financial assets and liabilities are as follows:
2014
2013
Floating Non interest
bearing
interest rate
Total
Floating Non interest
interest rate
Total
bearing
$000
$000
$000
$000
$000
$000
Financial Assets
Cash at bank
Other receivables
23,371
-
23,371
26,278
-
26,278
-
3,540
3,540
-
4,214
4,214
Total Financial Assets
23,371
3,540
26,911
26,278
4,214
30,492
Bank loans
Finance lease liabilities
(63,736)
(11,881)
- (63,736)
- (11,881)
(49,205)
(12,499)
-
-
(49,205)
(12,499)
Trade and other payables
-
(22,109) (22,109)
-
(14,360)
(14,630)
Total Financial Liabilities
(75,617)
(22,109) (97,726)
(61,704)
(14,360)
(76,064)
Net Financial (liabilities)
(52,246)
(18,569) (70,815)
(35,426)
(10,146)
(45,572)
54
Griffin MininG LiMited
notes to the FinanCial statements
24. risK management (ContinueD)
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 2014 or in 2013.
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% (2013 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.
2014
2013
Plus 20% Minus 20%
Plus 20% Minus 20%
$000
$000
$000
$000
Net result for the year - zinc
5,121
(5,121)
7,765
(7,765)
Net result for year - gold
Net result for year - silver
Credit risk
1,424
(1,424)
2,120
(2,120)
511
(511)
815
(815)
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading
to a financial loss. The Group is exposed to credit risk from its financing activities, including deposits with banks and financial
institutions, foreign exchange transactions and other financial instruments. The Group does not have trade receivables and does
not hold collateral as security.
Credit risk from balances with banks and financial institutions is managed by the Board. Investment 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.
25. 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. The directors consider the
capital of the Group to be the total equity attributable to the equity holders of the parent of $147,926,000 at 31 December 2014.
55
RepoRt and accounts 2014
notes to the FinanCial statements
26. 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.
The Group held the following investments in financial assets and financial liabilities:
FINANCIAL ASSETS
Loans and receivables
Cash and cash equivalents
FINANCIAL LIABILITIES
Loans
Trade and other payables
27. subsiDiary ComPanies
2014
$000
3,540
23,371
26,911
75,617
26,563
102,180
2013
$000
4,214
26,278
30,492
61,704
17,219
78,923
At 31 December 2014, Griffin Mining Limited had interests in the share capital of the following principal subsidiary companies.
Name
China Zinc Pty Ltd
China Zinc Limited
Hebei Hua’ Ao Mining
Industry Company Ltd*
Class of
Share held
Ordinary
Ordinary
Panda Resources Ltd
Ordinary
Hebei Sino Anglo Mining
Development Company Ltd*
Proportion of
shares held
100%
100%
88.8% **
100%
90%
Nature of
business
Country of
incorporation
Service company
Australia
Holding company
Hong Kong
Base and precious metals
mining and development
China
Holding company
England
Mineral
exploration and development
China
* China Zinc Ltd, China Zinc Pty Ltd and Panda Resources Ltd are directly owned by the Company. China Zinc Ltd has a
controlling interest in Hebei Hua’ Ao Mining Industry Company Ltd, see below, and Panda Resources Ltd has a 90% controlling
interest in Hebei Sino Anglo Mining Development Company Ltd.
** The joint venture contract establishing the Hebei Hua’ Ao Mining Industry Company Ltd originally provided that the foreign
party (China Zinc) received 60% of the cash flows, in accordance with its share in the equity interest in the joint venture. With
effect from 25 June 201, China Zinc receives 88.8% of the cash flows and profits of Hebei Hua Ao. On 21 May 2012 the term of
the joint venture’s business licence extended to 12 October 2037.
56
Griffin MininG LiMited
notes to the FinanCial statements
28. Commitments
At 31 December 2014 the Group had capital commitments of $4,762,000 (31 December 2013 $630,000).
29. Prior year aDjustments
The accounts have been drawn up and the 2013 accounts have been restated to include amounts due to Griffin’s Chinese
partners of $1,958,000 (2013 $1,599,000) in net operating costs rather than being attributable to non-controlling interests in the
Consolidated Income Statement, with the amounts due at 31 December 2014 of $4,966,000 (2013 $3,004,000) treated as other
payables rather than as amounts due to non-controlling interests within equity within the Consolidated Statement of Financial
Position. This relates back to the acquisition of Griffin’s Chinese partner’s equity interests in the Hebei Hua Ao Joint Venture
in 2012 and a reappraisal of the arrangements with the Chinese partners. This indicates that the relationship with them is in the
nature of a service provider facilitating Hebei Hua Ao’s operations in China.
57
RepoRt and accounts 2014 58
Griffin MininG LiMited Caijiaying Mine February 2015
59
RepoRt and accounts 2014 notes to the FinanCial statements
Principal office:
6th & 7th Floors, 60 St James’s Street, London, SW1A 1LE. UK.
Telephone: + 44 (0)20 7629 7772 / Facsimile: + 44 (0)20 7629 7773
Email: griffin@griffinmining.com Web site: www.griffinmining.com
Registered office:
Clarendon House, 2 Church Street, Hamilton, HM11. Bermuda.
China Zinc office:
Directors:
Level 9, BGC Centre, 28 The Esplanade, Perth, WA 6000. Australia.
Telephone: + 61(0)8 9321 7143 Facsimile: + 61 (0)8 9321 7035
Mladen Ninkov (Chairman)
Roger Goodwin (Finance Director)
Dal Brynelsen
Rupert Crowe
Adam Usdan
Company Secretary:
Roger Goodwin
Nominated Adviser
And Broker for AIM:
Panmure Gordon (UK) Limited
One New Change, London, EC4M 9AF. UK.
Joint Broker
Auditors:
Solicitors:
Cantor Fitzgerald Europe
1 Churchill Place, Canary Wharf, London, E14 5RB. UK.
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, 2 Church Street, Hamilton, HM11. 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
Griffin MininG LiMited