Contents
Chairman’s statement
Overview
Caijiaying
IntroductIon
development
mIneral resource estImate
GeoloGy
exploratIon
operatIons
communIty Investment & partnershIp
FinanCial
strategiC review
caIjIayInG
acquIsItIons and Further projects
DireCtOrs
seniOr exeCutives
DireCtOrs’ repOrt
repOrt OF the inDepenDent auDitOr
COnsOliDateD inCOme statement
COnsOliDateD statement OF COmprehensive inCOme
COnsOliDateD statement OF FinanCial pOsitiOn
COnsOliDateD statement OF Changes in equity
COnsOliDateD Cash FlOw statement
aCCOunting pOliCies
nOtes tO the FinanCial statements
COrpOrate inFOrmatiOn
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18
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34
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53
68
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 in Bermuda, number: 13667.
Registered Office: Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda
United Kingdom Office: 8th Floor, Royal Trust House, 54 Jermyn Street, London SW1Y 6LX
1
RepoRt and accounts 2017
2
Griffin MininG LiMited Caijiaying Mine surface facilities winter 2017/2018
3
RepoRt and accounts 2017 Chairman’s statement
It gives me unbridled pleasure, coupled with enormous
entity, it is pleasing for the shareholders that from the
privilege, to present to you, the shareholders and owners
first to the last trading day in 2017, the share price of the
of Griffin Mining Limited (“Griffin” or the “Company”),
Company moved from 53p to 116.5p, a rise of 120%, a
the Annual Report and Accounts of the Company for
trend which has continued unabated into 2018.
the 2017 calendar and financial year. It would be an
understatement unworthy of all the patience and loyalty
shown by you in your Company to not state it has
been a watershed year and a sign to the mining world
of the arrival of Griffin as a force in the industry. If
nothing else it demonstrates clearly and unequivocally
that what almost everyone said or thought could not
be done, can be done and has been done.
It is almost impossible to downplay what has been
achieved in 2017. The Company achieved record
revenues (up 91% from 2016), record operating profit
(up 319% from 2016), record profit before tax (up
486% from 2016), record profit after tax (up 633%
from 2016), record earnings per share (up 645% from
2016), record ore mined, record ore hauled, record ore
processed, record zinc production (up 26% from 2016)
The Caijiaying Mine continues to be modernized with
a second electric-hydraulic development drill, second
remote loader and a mechanized rock bolting machine
delivered during the year. A new 20 tonne haulage
truck was trialed recently and will join the underground
haulage fleet in the near future.
At camp, the Company completed and settled a new
accommodation block for an additional 90 people
allowing all of Hebei Hua Ao’s staff to now be housed
on site and thereby obtaining all the benefits of existing
sporting, social and transportation amenities. A
new sewage plant was also commissioned at camp to
continue with the Company’s zero tolerance of any
environmental discharge from operations or from staff
at the Caijiaying Mine site.
and record gold production (up 62% from 2016). In
The only negative for the year, and for the past number
essence, the Company broke every record it had ever
of years, is the continuing inability to secure the new
previously set.
Specifically, Griffin and its subsidiaries (together
the “Group”) recorded revenues of $126,657,000,
an operating profit of $63,773,000, profit before tax
of $60,877,000, profit after tax of $43,321,000 and
earnings per share of 24.6 cents.
Operationally, record ore mined amounted to 920,168
tonnes, hauled 980,849 tonnes and processed 968,080
tonnes. This led to record zinc metal in concentrate
produced of 43,403 tonnes and gold metal
in
concentrate produced of 20,489 ounces.
The cash generated from these outstanding results
enabled all bank loans to be repaid and leaves the
Company debt free with $26.5 million in cash on hand
at year end.
mining licence for the greater Zone II area. This is
particularly frustrating considering the processing
facilities have been completed to accept the doubling of
ore capacity and the second portal almost completed to
allow more efficient ore transportation to the mill. The
economics of the Caijiaying Mine will be, yet again,
significantly improved when Zone II ore can be mined
and processed. I will not venture an opinion when the
new mining licence will be granted, particularly in light
of my previous predictions, but rest assured that every
possible effort is being made to complete this process
as soon as possible.
Despite all of the success outlined above, the Company
refuses to rest on its laurels and continues to move
on a number of fronts to increase shareholder value
including rigorously exploring at its current mining
In addition, although the share price of a company can
operations (Zone III), adjacent to its current mining
often be a very poor indicator of the true value of that
operations
(Zone VIII),
regionally
(Sangongdi
4
Griffin MininG LiMited and Shitouhulun), outside Hebei Province (Inner
will be in the future, thank you for your time, effort,
Mongolia) and searching internationally for projects
understanding and patience.
or companies that meet the predetermined rates of
return that the Company has set, particularly in light
of the extraordinary financial performance and life of
the Caijiaying Mine.
Lastly, and most sincerely, thank you to you, the
shareholders. It has been a long, difficult and time
consuming journey which has now seriously begun to
fulfill the promise of all those years ago. In the words
At this stage of the Company’s development, it is
of Warren Buffet, “Someone’s sitting in the shade
only just and proper to sincerely thank the multitude
today because someone planted a tree a long time ago.”
of people who have made the Company the success
I hope and expect that tree will become a forest in the
we hoped it would one day become. To the past
near future. Please stay with us as that forest grows and
and present directors, senior management, staff,
flourishes.
contractors, spouses, partners and families and all
others who have travelled the road less travelled and
have known the trials and tribulations undertaken to
make the Company what it has become today and
Mladen Ninkov
Chairman
28 March 2018
Hebei Hua Ao stand at the China Mining Conference. From left to right: Roger Goodwin (Finance Director),
Mladen Ninkov (Chairman), Honorable Jan Adams (Australian Ambassador to China),
Daly Brynelsen (Director), Bo Zhou (Griffin Chief Representative, China).
5
RepoRt and accounts 2017 overview
Griffin Mining Limited
(“Griffin” or “the
Company”) is a mining and investment company,
incorporated in Bermuda, whose shares are quoted
on the Alternative Investment Market of the London
Stock Exchange (“AIM”).
The Company also holds 90% of Hebei Sino Anglo
Mining Development Company Limited (“Hebei
Anglo”), which holds 15.7 square kilometres of
exploration licences immediately surrounding the
Hebei Hua Ao Licence Area.
The major asset of the Company is an 88.8%
interest in Hebei Hua Ao Mining Industry Company
Limited (‘Hebei Hua Ao’), which holds 6.0 square
kilometres of mining and exploration licences,
including the mine and processing facilities, at
Caijiaying in the People’s Republic of China (the
“Caijiaying Mine”).
The Company continues to aggressively explore,
expand and develop the Caijiaying Mine whilst also
investigating further potential acquisitions of mining
projects that are capable, through either advanced
exploration or mining expertise, of being brought
into production to meet historically preset, economic
returns to shareholders.
Caijiaying Mine Location, Hebei Province, People’s Republic of China
6
Griffin MininG LiMited Caijiaying
INTRODUCTION
The Caijiaying Mine is an operating zinc, gold, silver
and lead mine, together with processing plant, camp
and supporting facilities, located approximately 250
kilometres by road, north-west of Beijing in Hebei
Province in the People’s Republic of China. The
Caijiaying Mine is easily accessible by two freeways
from Beijing. The site has significant water supplies,
two 35 thousand volt “kv” power lines connected
to the electricity grid, full connectivity to fixed and
mobile tele-communications systems and broadband
access for internet services. It is 63 kilometres from
Chongli, the host city of the 2022 Winter Olympic
Games, to which a high speed train link from Beijing
is currently being constructed. Climatic conditions
are not severe with warm summers and cold, dry
winters, enabling the Caijiaying Mine to operate 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
40% held by the Zhangjiakou Guoxin Enterprise
Management and Service Center (“Guoxin”), the
previously named Zhangjiakou Caijiaying Lead Zinc
Mining Company, the shareholders of which remain
the Zhangjiakou City People’s Government and the
Third Geological Brigade of Hebei Province (the
“3rd Brigade”).
The initial term of Hebei Hua Ao was 25 years and
was due to expire in 2019. In light of the continuing
increase in the resources base and production profile
of the Caijiaying Mine, the Company, through
its wholly owned subsidiary China Zinc Limited,
purchased an additional 28.8% interest in Hebei
Hua Ao from Guoxin in 2012. Griffin now holds
an 88.8% equity interest in Hebei Hua Ao and
Guoxin retains an 11.2% residual interest with a fee
for services rendered, resulting in Hebei Hua Ao
being in the nature of a wholly owned subsidiary of
the Company with a service contract to Guoxin for
accounting purposes. In addition, and as part of this
purchase agreement, the term of the Hebei Hua Ao
joint venture was extended to 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
Guoxin holds 10%. Griffin, through Hebei Hua
Ao and Hebei Anglo, has a controlling interest in
mining and exploration licences over approximately
21.7 square kilometres at Caijiaying.
The Caijiaying Mine was commissioned on time
and budget in 2005 with an initial design production
throughput rate of 200,000 tonnes of ore per
annum. Numerous upgrades to the Caijiaying Mine
and processing facilities have taken place since
commissioning leading to the latest upgrade which
has taken the name plate mill throughput capacity to
1.5 million tonnes of ore per annum.
Underground development continues with the
expansion of the existing mining operations at Zone
III down to the 1,000 RL. Access to the Zone II
area to the south of Zone III has been constructed
allowing for underground drilling and exploration at
Zone II. The mining and development of Zone II is
subject to the successful granting of a new mining
licence over that area.
7
RepoRt and accounts 2017 8
Griffin MininG LiMited From left to right, Dal Brynelsen (director), Nigel Wilson (geologist), Roger Goodwin (director), Rupert Crowe
(director) and Mladen Ninkov (Chairman) examining drill core at the Caijiaying Mine core shed
9
RepoRt and accounts 2017 MINERAL RESOURCE ESTIMATE
In June 2013, a Mineral Resource Estimate for
Caijiaying was reported. The continuing success of
the exploration programme in conjunction with infill
drilling and on-going development, is anticipated to
lead to an upgrade of the Mineral Resource Estimate
for the Caijiaying Mine in the foreseeable future. The
2017 Mineral Resource estimate based on the 2013
estimate at a zinc cut-off grade of 1% and, as amended
for mining depletion, is summarised below:
Caijiaying Zone III Remaining Mineral Resources 31 December 2017
Grade Tonnage Reported above a Cut off Grade of 1.0% Zn
Tonnes Zn
(%)
(Mt)
Pb
(%)
Ag
(g/t)
Au
(g/t)
Zn Metal Pb Metal Ag Metal
(t)
(Oz)
(t)
12.0
7.6
7.6
27.3
4.9
4.4
4.2
4.6
0.3
0.2
0.2
0.2
26.2
22.2
18.5
22.9
0.7
0.7
0.5
0.7
586,000
336,000
321,000
1,244,000
36,000
13,000
12,000
61,000
10,158,000
5,402,000
4,529,000
20,090,000
Caijiaying Zone II Remaining Mineral Resources 31 December 2017
Grade Tonnage Reported above a Cut off Grade of 1.0% Zn
Tonnes Zn
(%)
(Mt)
Pb
(%)
Ag
(g/t)
Au
(g/t)
-
4.1
15.6
19.6
-
3.0
3.3
3.3
-
0.7
0.8
0.7
-
24.9
24.5
24.6
-
0.3
0.3
0.3
Zn Metal Pb Metal Ag Metal
(t)
(Oz)
(t)
-
123,000
516,000
638,000
-
27,000
117,000
144,000
-
3,242,800
12,276,700
15,519,600
Caijiaying Combined Global Remaining Mineral Resources
Grade Tonnage Reported above a Cut off Grade of 1.0% Zn
Tonnes Zn
(%)
(Mt)
Pb
(%)
Ag
(g/t)
Au
(g/t)
Zn Metal Pb Metal Ag Metal
(t)
(Oz)
(t)
12.0
11.6
23.2
46.9
4.9
3.9
3.6
4.0
0.3
0.3
0.6
0.4
26.2
23.1
22.5
23.6
0.7
0.5
0.3
0.5
586,000
459,000
837,000
1,883,000
36,000
40,000
129,000
205,000
10,158,000
8,645,000
16,806,000
35,609,000
Au Metal
(Oz)
286,000
160,000
128,000
574,000
Au Metal
(Oz)
-
39,300
124,200
163,500
Au Metal
(Oz)
286,000
199,000
252,000
737,000
Category
Measured
Indicated
Inferred
Sub-Total
Category
Measured
Indicated
Inferred
Sub-Total
Category
Measured
Indicated
Inferred
Total
Notes:
Zone II Mineral Resource includes 1.49 million tonnes at 3.09% zinc oxide material.
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 Pty Ltd in consultation with Griffin’s geologists. The resource outlines were based on mineralisation
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 the mined-out voids at they stand at 31st December 2017.
The Caijiaying Mineral Resources are based on resource modelling work completed by CSA Global Pty Ltd in 2013 and reported in accordance
with JORC 2012 guidelines.
The information in this report that relates to Mineral Resources is based on information compiled by Mr. Steve Rose, who is a Fellow of the
Australasian Institute of Mining and Metallurgy (AusIMM). Mr. Rose is a full-time employee of CSA Global Pty Ltd and has sufficient
experience 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 Mineral Resources and Ore Reserves”. Mr. Rose
consents to the inclusion of such information in this report in the form and context in which it appears.
10
Griffin MininG LiMited
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
in the metamorphic rocks, most notably calcsilicates
and marble. Porphyry sills and dykes intruding along
faults have then cut across the sequence.
Ongoing exploration in the area surrounding the
Caijiaying Mine and within Hebei Hua Ao’s and
Hebei Anglo’s tenement boundary continues to
confirm the area to be highly prospective, indicating
significant potential for further base metal and gold
deposits.
Plan view of Zone II, III, V and VIII and licence areas
11
RepoRt and accounts 2017 Long section view of the Zone III Mineral Resource wireframes (red)
and underground development and stoping (purple) looking west.
12
Griffin MininG LiMited Plan view of Caijiaying Mine’s major ore lodes in Zone III.
13
RepoRt and accounts 2017 EXPLORATION
The exploration programme at Caijiaying in 2017
continued to expand existing areas of mineralisation
providing new targets with the aim of ensuring an
ongoing supply of ore. This involved prioritising
targets into 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 Area
Extensive ongoing underground diamond drilling
continues to target extensions of known deposits
and areas adjacent to known deposits. These near
mine targets include extensions of known zinc
and gold rich lodes within Zone III. In 2017, 241
underground diamond drill holes were drilled for a
total of 39,782 metres, utilising three underground
electric-hydraulic drill rigs. These results will be
incorporated in the next resource update.
In 2017, 26 surface exploration drill holes were
completed for 19,742 metres. The holes were drilled
to the north of Zone III. This area, named Zone VIII,
contains similar rock types and mineralisation styles
already seen in Zones II and III. Two holes were also
drilled from surface for geotechnical investigation of
possible future ventilation shaft locations.
Significant progress was made in the application of
litho-geochemical data to provide an indicator of
proximity to mineralisation. Further progress was
also made with improving the structural model for
the deposit, leading to a better understanding of
controls on higher grade mineralisation. This will
lead to improved stope designs and lower dilution.
Hebei Anglo Area
Exploration in 2017 involved the drilling of two
surface holes immediately to the north of the Zone
VIII drilling for a total of 1,287 metres. In a similar
manner to Zone VIII, the drilling intersected similar
rocks and mineralisation styles to that seen in Zones
II and III beneath thickening cover sequences.
Results will be incorporated into various geological
reports before an application is submitted to the
Chinese authorities to have a portion of the Hebei
Anglo exploration licence retained and upgraded to
a higher level.
Shitouhulun and Sangongdi
An agreement was signed in December 2016
between Griffin’s wholly owned subsidiary, China
Zinc Limited, and the 3rd Brigade for co-operation
in exploration at Shitouhulun (30 kilometres South
West of the Caijiaying Mine) and Sangongdi (11
kilometres North West of the Caijiaying Mine)
having the same geological signatures as the known
orebodies at the Caijiaying Mine.
Limited field work was conducted over both these
areas in 2017 whilst the necessary permits were
lodged with the authorities. Once granted, it is
expected that more detailed exploration of both areas
will begin in the spring of 2018.
Proposed 2018 Exploration
Geochemical analysis will continue within the
Caijiaying Mine to increase the understanding of
the nature of the orebody. Regional exploration will
continue with surface geochemical sampling and
analysis to evaluate targets for further consideration
and drilling. Further exploration will also be carried
out in the Hebei Anglo exploration area.
14
Griffin MininG LiMited OPERATIONS
The underground mine and surface processing plant
operated safely and consistently setting new records
in safety and production performance during 2017.
Circuit improvements and de-bottlenecking in the
processing plant also resulted in gold recoveries
increasing from 58.2% in 2016 to 65.6% in 2017.
A significant improvement in safety was achieved
with the year on year “Lost Time Frequency Rate”
reducing from 3.5 down to 1.1 per one million hours.
This improvement was also a contributor to the uplift
in production performance in both the underground
operations and the processing plant.
from
In June 2017, the development “Project Final
Acceptance” was
the various
received
government authorities allowing the continuation
of both the North and South Declines from the
1175 metre level down to the 1000 metre level. It
is expected it will take 18 months to complete the
necessary development down to the 1000 metre
level. Work also commenced on the development
of a second portal which, once completed in April
2018, will provide improved ventilation and greater
flexibility
from underground
operations.
for ore haulage
New production records for the Caijiaying Mine
were established in 2017.
In summary:
• Ore mined of 920,168 tonnes (2016: 863,077
tonnes);
• Ore hauled of 980,849 tonnes (2016: 817,506
tonnes);
• Ore processed of 968,080 tonnes (2016: 874,983
tonnes);
• Zinc metal in concentrate produced of 43,403
tonnes (2016: 31,948 tonnes);
• Gold metal in concentrate produced of 20,489
ozs (2016: 12,654 ozs);
• Silver metal in concentrate produced of 394,117
ozs (2016: 310,611 ozs); and
• Lead metal in concentrate produced of 1,421
tonnes (2016: 1,439 tonnes).
The programme to further modernise the mine
continued throughout 2017 with a second electric-
hydraulic development drill (“jumbo”) on site at the
end of year together with a mechanised rock bolting
machine and a second remote loader equipped with
tele-remotes. An order has also been placed for a
twin boom electric hydraulic jumbo with delivery
expected in the middle of 2018. This follows the
initial purchase of a single boom jumbo and an
electric hydraulic long hole production drill rig in
2016.
In addition, a new 20 tonne haulage truck was
delivered to the Caijiaying Mine in March 2018.
This is the first of a fleet of 20 tonne trucks
expected to be delivered to replace the smaller
and ageing 10 and 12 tonne fleet. This will allow
more tonnes to be hauled from underground with
less truck movements, more economically and with
greater reliability. Underground development work
was primarily focused on developing future stoping
horizons between the 1245 metre and 1175 metre
level. Capital development totalled 2,467 metres and
operational development totalled 4,479 metres.
Long hole open stoping continues to be the
predominant mining method. The resulting voids
are backfilled with cemented hydraulic fill or
development waste.
Significant time and capital was spent on consolidating
all staff at the site camp at the Caijiaying Mine.
This included the construction of a new modern
accommodation block housing 90 staff. This has
allowed all staff previously housed off-site in rental
accommodation to be housed on site. In addition
a new sewage treatment plant was constructed and
commissioned in 2017 to deal with waste effluent
from the site accommodation.
15
RepoRt and accounts 2017 16
Griffin MininG LiMited New mechanised rock bolter and electric-hydraulic development drill (“jumbo”) at the Caijiaying Mine
17
RepoRt and accounts 2017 COMMUNITY INVESTMENT &
PARTNERSHIP
The Company, through Hebei Hua Ao, has invested
heavily in the local community and continues to
maintain and further implement best practices
regarding the protection of the environment. This
includes:
• Controls to prevent the discharge of waste into
the environment;
• The completion of a sewage treatment plant at
the site camp to deal with all effluent produced;
• All processed water and water from the mine
being recycled;
• Boiler flue gases being treated by a dust and
sulphur extraction system to prevent the emission
of pollutants into the atmosphere;
• Waste rock and mill tailings being used for
backfilling underground
stope voids. This
minimises the mine footprint by reducing the
need for larger tailings and waste storages;
• Noise and dust from operations being strictly
controlled;
• Commencement of rehabilitation work on
Tailings Dams 1 and 2. This work included
battering the waste dump slope and sheeting with
soil ready for vegetation in the spring of 2018;
• The Company funding the state endorsed China
“greening” project including the planting of trees
by local villagers in the Caijiaying area;
• Approval from the relevant authorities to increase
the capacity of the dry tailings storage facility
without an increase in the footprint of the facility
via modern design practices;
• A dedicated waste disposal building to store
Caijiaying Mine waste prior to sorting and
collection;
• Provision of coal to the local primary and
secondary schools for heating during the winter;
and
• Continuation of the collaboration with local brick
manufactures to supply mill tailings for brick
manufacturing in Zhangbei. In 2017, 32,311
18
cubic metres of mill tailings was provided to a
Zhangbei brick manufacturer.
These environmental best practices have been
recognised in the past by the Chinese Government
with Hebei Hua Ao being presented with the
Environmental Award at the 2010 China Mining
Conference and the Mine Development Outstanding
Achievement Award at the 2011 China Mining
Conference.
In terms of further community interaction, Hebei
Hua Ao provides a direct water supply to the
local villagers, has constructed sealed roads to the
Caijiaying Mine area, financed the construction of
a local kindergarten, an old peoples rest home and
assisted with other infrastructure projects. Hebei
Hua Ao has also assisted in the upgrade of classrooms
and accommodation at the local township school
and set up “Project Hope” to provide scholarships
to local students for ongoing study at primary,
secondary and tertiary levels. Expatriate workers
from the Caijiaying Mine donate their time every
week to teach English at the local township school in
their off-duty hours.
instigated a
Griffin, through Hebei Hua Ao,
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
seasonality of crops grown in the short summer
months. To that end, Hebei Hua Ao has to date
provided the local community with 500 head of
cattle and successfully created a dairy and cattle farm
for the Caijiaying area.
Griffin estimates that the Caijiaying Mine currently
provides direct and indirect employment to over
1,000 Chinese nationals.
During 2017, Hebei Hua Ao paid RMB 191 million
($28.4 million) in taxes, royalties, social security
fees and other duties to Chinese Governmental
authorities and agencies. It is recognised as the
largest tax payer in the local county.
Griffin MininG LiMited
FinanCial
Griffin Mining Limited (the “Company”) and its
subsidiaries (together the “Group”) recorded record
revenues and profits in 2017 with;
Record turnover was achieved
in 2017 with
metal in concentrate sales of $132,644,000 (2016:
$69,546,000) before royalties and resource taxes.
• Revenues of $126,657,000 (2016: $66,270,000);
• Operating profit of
$63,773,000
(2016:
$15,201,000);
• Profit before
$10,382,000);
tax of $60,877,000
(2016:
• Profit after tax of $43,321,000 (2016: $5,914,000);
and
• Earnings per share of 24.6 cents (2016: 3.3 cents).
Cash generated from operating activities of $77.4m
enabled all bank loans to be repaid with $46m repaid
in 2017 as well enabling the Group to invest $13.3m
in further development of the Caijiaying Mine,
exploration and equipment purchases.
Record tonnes of ore were mined, hauled and
processed in 2017 with:
• Ore mined of 920,168 tonnes (2016: 863,077
tonnes);
• Ore hauled of 980,849 tonnes (2016: 817,506);
and
• Ore processed of 968,080 tonnes (2016: 874,983).
With record throughput and improved grades,
record amounts of zinc and gold in concentrate were
produced in 2017.
• Zinc metal in concentrate produced of 43,403
tonnes (2016: 31,948 tonnes);
• Gold metal in concentrate produced of 20,489
ozs (2016: 12,654 ozs);
• Silver metal in concentrate produced of 394,117
ozs (2016: 310,611 ozs); and
• Lead metal in concentrate produced of 1,421
tonnes (2016: 1,439 tonnes).
Zinc metal in concentrate prices received were
significantly higher in 2017 than in 2016 up 51.6%.
This reflects higher market prices and a tightening
of concentrate supply in China.
In summary:
•
Zinc metal in concentrate sold of 43,342 tonnes
(2016: 31,864 tonnes);
• Gold in concentrate sold of 20,489 ozs (2016:
12,654 ozs);
• Silver in concentrate sold of 394,117 ozs (2016:
310,611 ozs); and
• Lead metal in concentrate sold of 1,421 tonnes
(2016: 1,439 tonnes).
Cost of sales in 2017 of $44,360,000 were up on
that incurred in 2016 of $37,851,000. This reflects
increased tonnage mined, hauled and processed.
Additional costs were incurred extracting ore from
greater depth and backfilling waste material and
tailings to minimise surface storage of tailings.
Administration expenses (including those of the
Caijiaying Mine site) have risen from $13,218,000
in 2016 to $18,524,000 in 2017. This increase arises
mainly from increased service fees to the Group’s
Chinese partners, Guoxin, up from $1,983,000 in
2016 to $5,900,000 in 2017, representing 11.2%
of Hebei Hua Ao’s profits. Administration costs
outside of China in 2017 were in line with 2016.
Administration costs within China have increased
with higher fees and costs in dealing with stricter
environmental, health and safety regulations and in
applying for the mining licence over Zone II.
With the repayment of all bank loans during the
year, interest costs fell from $4,286,000 in 2016 to
$2,219,000 in 2017.
19
RepoRt and accounts 2017 Foreign exchange gains of $87,000 (2016 losses
$532,000) were recorded in 2017 primarily due to an
increase in the value of the Renminbi.
Following the latest upgrade to the processing
facilities, losses on the disposal of redundant plant
and equipment of $1,067,000 were recorded in 2017
compared to $224,000 in 2016.
Income taxes of $17,556,000 (2016: $4,468,000) were
charged in 2017. This includes a deferred taxation
provision of $95,000 (2016: $151,000).
Basic earnings per share in 2017 was 24.63 cents
(2016: 3.3 cents) and diluted earnings per share was
22.97 cents (2016: 3.26 cents).
Attributable net assets per share at 31st December
2017 was 113 cents (2016: 80 cents).
strategiC review
In view of the significant potential of the Caijiaying
Mine and surrounding areas and given
the
Company’s knowledge and expertise in China, the
directors and management have focused on the
further development of Caijiaying, investigation
of prospective areas near to Caijiaying and other
potential projects in China.
Nevertheless, significant time continues to be spent
on the evaluation of mining companies and projects
worldwide to ascertain whether any successful
acquisition can be made which has the possibility of
matching the extraordinary returns provided by the
Caijiaying Mine.
on identifying geological targets and evaluating the
potential for significant additional resources. Whilst
the existing Mineral Resource Estimate (see page 10)
confirms the availability of extensive resources at the
Caijiaying Mine for increased production, further
resource additions will also provide an opportunity
to further increase production at the Caijiaying
Mine. This will require further licences and permits
from various Chinese authorities, an increasingly
time-consuming process.
Currently with the 1.5 million tonne upgrade
completed, every effort is being made to obtain
permits to enhance production and obtain a new
mining licence at Zone II. This will allow all the
known resources in Zones II and III to be extracted
at a higher and more economic rate. Development
work underground from the main Zone III area
towards Zone II has enabled further resource
definition underground drilling to be undertaken.
A new haulage drive was completed during 2016
with the dual purpose of improving ventilation and
removing previous bottlenecks caused by having only
a single haulage decline to surface. Development
work at Zone II is planned to begin as soon as the
new mining licence is received. It is expected that
this work will be completed in 2018 and that this will
enable significant production increases from 2019
onwards.
The two declines accessing the lower sections of
Zone III terminate on the 1175 metre level. These
declines will be extended to the 1000 metre level
during 2018 in order to access the Mineral Resource
between the 1175 metres and 1000 metre horizons to
provide long term mill feed.
CAIJIAYING
Caijiaying’s short and long term metal production
capability has been augmented with the expansion
of the grinding and flotation circuits, ongoing
underground
and
exploration work. Exploration has been focussed
infrastructure development
ACQUISITIONS AND FURTHER
PROJECTS
Whilst the Company continues to develop the
Caijiaying Mine and explore the surrounding area,
the directors and management continue to search
20
Griffin MininG LiMited for, and investigate the potential acquisition of
base metals projects that may be brought into long
term, economic production for a capital cost that
provides a substantial and justifiable return on equity
to shareholders, particularly in a rising commodity
price market.
In March 2016 an agreement was entered into
between the 3rd Brigade and Hebei Hua Ao, to
examine the 3rd Brigade’s extensive database for
existing known deposits and prospective mining areas
and enter into commercial arrangements on those
projects. A further agreement was entered into in
December 2016 with the 3rd Brigade to specifically
investigate and explore the Shitouhulun licence area
(held by the 3rd Brigade) and the Sangongdi area.
Both of these areas have considerable potential for
mineralisation and are proximal to the Caijiaying
Mine.
The company also continues to evaluate other mines
and assets in China outside the Hebei Province and
in particular Inner Mongolia.
for many
consummated
Furthermore, a large number of potential projects
have been analysed worldwide. None have been
successfully
reasons
including negative findings during due diligence,
for the risk
an
shareholders would need to accept in funding the
project to production, overall risk profile and various
other deficiencies in grade, tonnes, metallurgy, depth
and difficulty in mining.
insufficient return calculated
21
RepoRt and accounts 2017 22
Griffin MininG LiMited From left to right directors Adam Usdan, Roger Goodwin, Mladen Ninkov (Chairman), Rupert Crowe and
Dal Brynelsen at the new second portal under construction at the Caijiaying Mine
23
RepoRt and accounts 2017 Rupert Crowe, Director, Australian, aged 69, 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.
Adam Usdan, Director, USA, aged 56, holds
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-
cap) pools of capital.
DireCtors
Mladen Ninkov, Chairman, Australian, aged 56,
holds a Master of Law Degree from Trinity Hall,
Cambridge and Bachelor of Laws (with Honours)
and Bachelor of Jurisprudence Degree from the
University of Western Australia. He is the principal
of Keynes Capital. He has a mining, legal, fund
management and investment banking background
and is admitted as a barrister and solicitor of the
Supreme Court of Western Australia. He was 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 a
number of both public and private mining and oil and
gas companies.
Roger Goodwin, Finance Director, British, aged
62, 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.
Dal Brynelsen, Director, Canadian, aged 71, is
a graduate of the University of British Columbia in
Urban Land Economics. Mr. Brynelsen has been
involved in the resource industry for over 30 years. He
has been responsible for the discovery, development
and operation of several underground gold mines
during his career. Mr. Brynelsen is the President and
a director of Vangold Resources Limited.
24
Griffin MininG LiMited Dr Bo Zhou, General Manager China, Australian,
aged 55, holds a PhD in exploration geology from
Sydney University and a BSc in economic geology
from Peking University. He was Managing Director
of Sinovus Mining Ltd, an ASX listed company with
mineral interests in China. Prior to that he was the
General Manager for Guangxi Golden Tiger Mining
JV, a Sino-Australian JV gold company focussed on
Guangxi, China, controlled by Golden Tiger Mining
NL, an ASX listed company. He has also worked as
the Senior Geologist for Silk Road Resources (A
Toronto listed company), responsible for evaluating
various gold properties in Gansu Province in central
western China. Dr Zhou has considerable experience
in the Chinese resources sector.
senior exeCutives
Mark Hine, Chief Operating Officer, Australian,
aged 59, is a mining engineer having graduated from
the Western Australia School of Mines, a member of
the Australian Institute of Company Directors and
a member of the Australian Institute of Mining and
Metallurgy. He has extensive mining experience with
over 25 years of senior management roles in both
surface and underground mining operations. He
is a non-executive director of Ausdrill Limited and
has held a number of senior positions in the mining
industry including Chief Operating Officer at Focus
Minerals Ltd, Chief Executive Officer at Golden
West Resources Ltd, Executive General Manager
Mining at Macmahon Contractors Pty Ltd, Chief
Executive Officer at Queensland Industrial Minerals
Ltd, Chief Executive Officer at Consolidated Rutile
Ltd and General Manager Pasminco, Broken Hill /
Elura Mines.
Wendy Zhang, Chief Financial Officer, Hebei
Hua Ao, aged 44, holds a Master of Accounting
degree from Macquarie University, a member of
the Certified Practising Accountants of Australia
and a qualified member of the Chinese Institute
of Certified Public Accountants 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 2017 26
Griffin MininG LiMited New accommodation block for Chinese personnel at the Caijiaying Mine camp site
27
RepoRt and accounts 2017 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 2017.
FinanCial results
The Group profit before taxation for 2017 amounted to US$60,877,000 (2016: US$10,382,000). Taxation
of US$17,556,000 (2016: US$4,468,000) has been provided. No dividends were paid in 2017 (2016: nil).
US$43,321,000 has been credited to reserves (2016: credited US$5,914,000). The basic earnings per share
amounted to 24.63 cents (2016: 3.30 cents). The attributable net asset value per share at 31 December 2017
amounted to 113 cents (2016: 80 cents).
In anticipation of the need for funds for the development of Zone II at Caijiaying, 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 2017 and the indication of likely future developments are set out on pages 4 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)
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 2017 and their immediate families in the
share capital of the Company were as follows:
Name
At 31 December 2017
At 1 January 2017
Ordinary
shares,
number
Options over ordinary
shares, number
exercisable at
Ordinary
shares,
number
30 pence
40 pence
Options over ordinary
shares, number
exercisable at
30 pence
40 pence
Mladen Ninkov
33,001
-
Dal Brynelsen
397,001
900,000
Rupert Crowe
1
900,000
-
-
-
33,001
382,001
1
-
900,000
900,000
-
-
-
Roger Goodwin
877,830
1,500,000
500,000
877,830
1,500,000
500,000
Adam Usdan
30,359,556
3,500,000
-
30,584,556
3,500,000
-
All of the Directors’ interests detailed are beneficial.
28
Griffin MininG LiMited
DireCtors’ rePort
On 13 February 2014 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 entitles 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, one
third vested on 31 December 2015, and one third vested on 31 December 2016.
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 entitles 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. One third of these options vested
immediately upon being granted, one third of these options vested on 31 December 2016, and 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.
remuneration PoliCy
The 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 2017 DireCtors’ rePort
PrinCiPal risks anD unCertainties
The principal risks and uncertainties facing the Group are set out below, together with details of how these are
currently mitigated. Further information on how the Group manages risk is given on pages 61 to 64.
Risk
Comment
Business
Impact
Mitigation
Economic Risk
Exposure to a fall in
zinc, gold and to a lesser
extent silver and lead
metal prices.
Exposure to fluctuations
in the Renminbi / US
dollar exchange rate.
Exposure to
increases
in the market prices of
materials,
equipment
and services the Group
uses.
Country risks
Exposure
to political
and social risks in the
People’s Republic of
China (“the PRC”).
Exposure
to changes
in fiscal and regulatory
regime.
Revenue is dependent upon
metal prices.
High
In common with other mining
companies operating
in China
the Group sells its products by
auction to local smelters and agents,
however, Griffin continues to review
the appropriateness of hedging and
indicative cost of put options.
A fall in the value of the
Renminbi would reduce the
US dollar value of revenues,
whilst an increase in the value
of Renminbi would increase
operating cost.
is subject
The Group
to
increases in the market prices
for materials, services and
equipment.
Griffin’s assets are located in
the PRC and therefore exposed
to any adverse changes in the
political and social situations
there.
In addition to political/social
risks, the Group is exposed
in permitting,
to changes
environmental, health
and
safety, and tax regulations in
the PRC which may result in
a more challenging, or costly,
operating environment.
Moderate
The Renminbi is loosely pegged to
the US dollar.
Moderate
The Group seeks to agree long term
contracts for all major services and
goods supplied.
Low
The Group has operated in the
PRC for 20 years in which time the
country has been relatively stable.
High
Griffin actively engages with the
local PRC authorities and agencies
to identify and minimise the impact
of changes in PRC regulations.
30
Griffin MininG LiMited DireCtors’ rePort
Risk
Comment
Business
Impact
Mitigation
Operational Risk
Reliance on Third
Party Contractors
inherent
Griffin uses a number of unrelated
contractors, particularly for its
mining, haulage and drilling
activities. Each of these activities
has
including
injury or death to the contractor’s
employees. Such events could
cause a total shutdown of all
operational
activities which
may take a substantial time to
recommence.
risk,
Exposure to mining
hazards
The Group
is exposed to a
number of risks and hazards
typically associated with mining
for example rock falls, flooding
and mechanical breakdowns.
Moderate Griffin has an extensive occupational
Health and Safety Department in
conjunction with a Mining Manager
and his
team of underground
foreman who constantly oversee all
contractors’ activities.
Moderate Griffin’s
operational
teams
continually monitor mining and
other risks, and report to senior
management who report to the Board
of directors, taking immediate and
appropriate measures to minimise
any such risks and hazards identified.
In addition, the Group’s operations
are regularly monitored by the PRC
Safety Bureaus.
Reliability of Mineral
Resources and Ore
Reserves
calculation of Mineral
The
Resources and Ore Reserves
involves significant assumptions
and estimates that may prove
inaccurate.
Low
Griffin’s Mineral Resources and Ore
Reserve estimates are prepared by third
party consultants, based in Australia,
who are deemed “experts” under the
JORC Code.
Other
Exposure to a single
operation
Licence
administration
Griffin is reliant upon a single
operation, being the Caijiaying
zinc gold mine in the PRC.
Factors affecting operations at
Caijiaying have an impact upon
the Group.
Griffin, through
its subsidiary
companies, holds a number of
mining, exploration and other
licenses and permits to operate.
These normally include conditions
for ongoing operation and require
periodic renewal. Renewals are not
guaranteed.
Moderate
High
It is the Company’s policy to pursue
growth
through
opportunities
expansion in the Caijiaying area,
as well as reviewing acquisition
opportunities which can be shown to
be value accretive.
All licensing requirements are kept
under review with operational staff
liaising with local PRC authorities to
ensure conditions are adhered to and
applications made timely and in good
order.
31
RepoRt and accounts 2017 DireCtors’ rePort
PrinCiPal risks anD unCertainties (ContinueD)
Other (continued)
Key management
The management of Caijiaying is
reliant on a small number of key
executives, both inside and outside
of China. Their death, retirement
or departure may have significant
effect on the operations of the
Company.
Moderate
Griffin has contractual arrangements
with all key employees which are
renewed on a regular basis.
Geological
and Historical
Information
loss of historical and/or
The
geological
information would
have a very significant impact on
the operations of the Company.
Low
Griffin has instituted a complete back
up system relating to all geological
and operational data in Perth with
CSA Global. It is updated on a daily
basis.
CorPorate governanCe
Although the Company is not required to comply with the UK Corporate Governance Code, it attempts to follow
best practice as far as possible within the limitations of 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
32
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
28 March 2018
33
RepoRt and accounts 2017 rePort oF the inDePenDent auDitor
inDePenDent auDitor’s rePort to the members oF griFFin mining limiteD
oPinion
Our opinion on the financial statements is unmodified.
We have audited the group financial statements of Griffin Mining Limited for the year ended 31 December 2017
which comprise the consolidated income statement, the consolidated statement of comprehensive income, the
consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated
cash flow statement and notes to the financial statements, including a summary of significant accounting policies.
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.
In our opinion, the group financial statements give a true and fair view of the state of the group’s affairs as at 31
December 2017 and of its profit for the year then ended in accordance with IFRSs as adopted by the European
Union.
Basis for opinion:
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the group financial statements section of our report. We are independent of the group in accordance with the
ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Who we are reporting to:
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.
Conclusions relating to principal risks, going concern and viability statement:
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the group financial statements
is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the group’s ability to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial statements are authorised for issue.
34
Griffin MininG LiMited rePort oF the inDePenDent auDitor
Overview of our audit approach:
• Overall materiality: $ 3,043,850, which represents 5% of the company’s profit before
taxation
• Key audit matters were identified as carrying value of the mine and exploration assets
• We performed a full scope audit of the financial information in respect of the parent
company and the group consolidation, and directed a component auditor for the
Chinese mining operations (Hebei Hua’ Ao Mining Industry Company Ltd) which
covers 100% of revenue.
Key audit matters:
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the group financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters included those that had the greatest
effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the group financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How the matter was addressed in the audit
Carrying value of the mine and exploration
assets
The mine at Caijaying is the single most significant
asset owned by the group in terms of both its
carrying value and its importance in the Group’s
business activities.
Management are required to review the carrying
value of the mine for indications of impairment in
accordance with IAS36 and to consider the carrying
value of exploration assets in accordance with
IFRS 6. We therefore identified the carrying value
of the mine and exploration assets as a significant
risk, which was one of the most significant assessed
risks of material misstatement.
Our audit work included, but was not restricted to:
• Challenging management’s assessment of the carrying
value of the Caijaying mine by assessing the key
assumptions against externally sourced forecasts of
metal prices, against previous production levels, plant
capacity and available resources per the third party
resource statement
• Obtaining confirmation and documentation to support
that licences are held to support current operations
and discussed with management and obtained
representation from the directors as to the likely
renewal of permits
• Testing of additions on a sample basis and agreed to
supporting documentation and physical verification of
significant plant and machinery acquired during the
year along with a review of existing plant and machinery
for indications of impairment and continued existence
The group’s accounting policy on the carrying value of
the mine and exploration cost is shown in the accounting
policies to the financial statements and related disclosures
are included in notes 10 & 11.
35
RepoRt and accounts 2017 rePort oF the inDePenDent auDitor
Key audit matters: (continued)
Key observations
Although there is exposure to political and social risks in
the People’s Republic of China (PRC) as discussed in the
Directors’ report, the directors believe this to be a low risk.
We have not identified anything in our testing or reviews
to contradict management’s assessment that the carrying
values remain unimpaired.
Our application of materiality:
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in
determining the nature, timing and extent of our audit work and in evaluating the results of that work.
We determined materiality for the audit of the group financial statements as a whole to be $3,043,850 (2016:
$1,169,000), which was approximately 5% of the group’s earnings before taxes in the year to 31 December 2017
(2016: 0.5% of total assets). This benchmark is considered appropriate because, as an operating company, this is an
important measure of performance. No revision to the materiality determined at the planning stage of our audit
was necessary as we judged that it remained appropriate in the context of the group’s actual financial results for
the year ended 31 December 2017.
Materiality for the current year is higher than the level that we determined for the year ended 2016 to reflect the
full year of production, increased zinc prices and a significant increase in earnings before taxation.
We use a different level of materiality, performance materiality, to drive the extent of our testing and this was set
at 75% (2016: 75%) of financial statement materiality. We also determine a lower level of specific materiality for
certain areas such as directors’ remuneration and related party transactions.
We determined the threshold at which we will communicate misstatements to the audit committee to be $100,165
(2016: $58,450). In addition, we will communicate misstatements below that threshold that, in our view, warrant
reporting on qualitative grounds.
An overview of the scope of our audit:
Our audit approach was based on a thorough understanding of the group’s business and is risk based, and in
particular included:
• evaluation by the group audit team of identified components to assess the significance of that component and
to determine the planned audit response based on a measure of materiality. For example, significance as a
percentage of the group’s total assets, revenues and profit before taxation or significance based on qualitative
factors, such as specific issues or concerns over specific components;
36
Griffin MininG LiMited rePort oF the inDePenDent auDitor
• our approach was based on a thorough understanding of Griffin Mining Limited’s business and is risk based.
We identified and concentrated our resources on areas of higher risk, including those areas of concern to the
directors. We undertook substantive testing on significant transactions, account balances and disclosures, the
extent of which was based on various factors such as our overall assessment of the control environment, the
effectiveness of controls over individual systems and the management of specific risks.
• the overall approach to the group audit included the group audit team performing a full scope audit of
the financial information in respect of the parent company and the group consolidation, and directed the
component auditor in China of the mining operations site in China, which covers 100% of revenue. Specified
audit procedures were performed by the group audit team on certain immaterial balances and transactions
within the Group based on analytical review; and
• we provided detailed instructions to the auditors of Hebei Hua Ao Industry Company Ltd, performed site
visits in China and communication through the planning, fieldwork and completion stages of the audit.
Other information:
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the group financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the group financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify
such material inconsistencies or apparent material misstatements, we are required to determine whether there is
a material misstatement in the group financial statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a material misstatement of the other information,
we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors for the financial statements:
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic
alternative but to do so.
37
RepoRt and accounts 2017 rePort oF the inDePenDent auDitor
Auditor’s responsibilities for the audit of the financial statements:
Our objectives are to obtain reasonable assurance about whether the group financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
28 March 2018
38
Griffin MininG LiMited ConsoliDateD inCome statement
For the year ended 31 December 2017
(expressed in thousands US dollars)
Notes
2017
$000
2016
$000
Revenue
Cost of sales
Gross profit
Administration expenses
Profit from operations
Losses on disposal of plant and equipment
Foreign exchange profits / (losses)
Finance income
Finance costs
Other income
Profit before tax
Income tax expense
Profit after tax
Basic earnings per share (cents)
Diluted earnings per share (cents)
1
1
1
2
4
5
6
7
8
9
9
126,657
66,270
(44,360)
(37,851)
82,297
28,419
(18,524)
(13,218)
63,773
(1,067)
87
143
15,201
(224)
(532)
178
(2,219)
(4,286)
160
60,877
(17,556)
43,321
24.63
22.97
45
10,382
(4,468)
5,914
3.30
3.26
39
RepoRt and accounts 2017
ConsoliDateD statement oF ComPrehensive inCome
For the year ended 31 December 2017
(expressed in thousands US dollars)
Profit for the year
2017
$000
43,321
2016
$000
5,914
Other comprehensive income that will be reclassified to profit or loss
Exchange differences on translating foreign operations
5,004
(3,299)
Other comprehensive income for the period, net of tax
5,004
(3,299)
Total comprehensive income for the period
48,325
2,615
40
Griffin MininG LiMited
ConsoliDateD statement oF FinanCial Position
As at 31 December 2017
(expressed in thousands US dollars)
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets – Exploration interests
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
Shares held in treasury
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
Trade and other payables
Finance lease
Bank loans
Total current liabilities
Notes
2017
$000
2016
$000
10
11
12
13
14
15
18
19
20
21
20
22
214,695
2,035
216,730
5,868
4,374
26,518
36,760
204,491
1,792
206,283
6,148
8,232
13,218
27,598
253,490
233,881
1,700
67,295
3,690
2,072
-
2,204
(29,346)
9,777
133,972
191,364
2,418
2,865
712
5,995
52,437
3,694
-
56,131
1,790
71,310
3,690
2,072
(3,875)
1,583
(29,346)
4,871
91,174
143,269
2,277
2,607
3,791
8,675
34,466
2,783
44,688
81,937
Total equities and liabilities
253,490
233,881
Attributable net asset value per share to equity holders of parent
23
$1.13
$0.80
The accounts on pages 39 to 65 were approved by the Board of Directors and signed on its behalf by:
Mladen Ninkov
Chairman
28 March 2018
Roger Goodwin
Finance Director
41
RepoRt and accounts 2017
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42
Griffin MininG LiMited
ConsoliDateD Cash Flow statement
For the year ended 31 December 2017
(expressed in thousands US dollars)
Notes
Net cash flows from operating activities
Profit before taxation
Foreign exchange (profits) / losses
Finance income
Finance costs
Adjustment in respect of share based payments
Depreciation, depletion and amortisation
Losses on disposal of equipment
Decrease in inventories
Decrease / (increase) in receivables and other current assets
Increase in trade and other payables
Taxation paid
Net cash inflow from operating activities
Cash flows from investing activities
Interest received
Proceeds on disposal of equipment
Payments to acquire – mineral interests
Payments to acquire – plant and equipment
Payments to acquire – office equipment
Payments to acquire intangible fixed assets – exploration interests
Net cash outflow from investing activities
5
6
16
10
5
10
10
10
11
Cash flows from financing activities
Purchase of shares for treasury
Interest paid
Finance lease repayments
Repayment of bank loans
Net cash outflow from financing activities
2017
$000
60,877
(87)
(143)
2,219
-
9,783
1,067
280
3,928
7,621
(8,108)
77,437
143
184
(9,330)
(4,125)
(2)
(128)
(13,258)
(230)
(1,773)
(2,943)
(46,024)
(50,970)
2016
$000
10,382
532
(178)
4,286
709
8,526
224
1,034
(6,251)
3,280
(641)
21,903
178
-
(7,361)
(3,776)
(102)
(43)
(11,104)
-
(3,684)
(2,935)
(14,891)
(21,510)
Increase / (decrease) in cash and cash equivalents
13,209
(10,711)
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
13,218
91
26,518
24,062
(133)
13,218
26,518
13,218
Included within net cash flows of $13,209,000 (2016: $10,711,000) are foreign exchange gains of $87,000 (2016:
losses $532,000) which have been treated as realised.
43
RepoRt and accounts 2017
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 2017
The Group has not adopted any new standards or amendments that have a significant impact on the Group’s results
or financial position. The amendments to IFRS11 ‘Accounting for Acquisitions of Interests in Joint Operations’
have not had any impact on the Group.
stanDarDs, amenDments anD interPretations to existing stanDarDs that are not
yet eFFeCtive anD have not been aDoPteD early by the grouP
At the date of authorisation of these financial statements, certain new standards, and amendments to existing
standards have been published by the IASB that are not yet effective, and have not been adopted early by the
Group. Information on those expected to be relevant to the Group’s financial statements is provided below.
Management anticipates that all relevant pronouncements will be adopted in the Group’s accounting policies
for the first period beginning after the effective date of the pronouncement. New standards, interpretations and
amendments not either adopted or listed below are not expected to have a material impact on the Group’s financial
statements.
IFRS 9 ‘Financial Instruments’
The new standard for financial instruments (IFRS 9) introduces extensive changes to IAS 39’s guidance on the
classification and measurement of financial assets and introduces a new ‘expected credit loss’ model for the
impairment of financial assets. IFRS 9 also provides new guidance on the application of hedge accounting.
Although this is not expected to have a significant impact on the Group’s financial statements, management has
started to assess the impact of IFRS 9 but is not yet in a position to provide quantified information. At this stage
the main areas of expected impact are as follows:
• the classification and measurement of the Group’s financial assets will need to be reviewed based on the new
criteria that considers the assets’ contractual cash flows and the business model in which they are managed.
•
if the Group continues to elect the fair value option for certain financial liabilities (see Note 20), fair value
movements will be presented in other comprehensive income to the extent those changes relate to the Group’s
own credit risk.
IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018.
44
Griffin MininG LiMited aCCounting PoliCies
stanDarDs, amenDments anD interPretations to existing stanDarDs that are not
yet eFFeCtive anD have not been aDoPteD early by the grouP (ContinueD)
IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 ‘Revenue’, IAS 11 ‘Construction
Contracts’, and several revenue-related interpretations. The new standard establishes a control-based revenue
recognition model and provides additional guidance in many areas not covered in detail under existing IFRSs, including
how to account for arrangements with multiple performance obligations, variable pricing, customer refund rights,
supplier repurchase options, and other common complexities.
Management do not consider that this will have a significant impact on the Group’s financial statements.
IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018.
IFRS 16 ‘Leases’
IFRS 16 replaces IAS 17 and three related interpretations. It completes the IASB’s long-running project to
overhaul lease accounting. Leases will be recorded in the statement of financial position in the form of a right-of-
use asset and a lease liability. Management is yet to fully assess the impact of the Standard and therefore is unable
to provide quantified information.
However, in order to determine the impact the Group are in the process of:
• performing a full review of all agreements to assess whether any additional contracts will now become a lease
under IFRS 16’s new definition.
• deciding which transitional provision to adopt; either full retrospective application or partial retrospective
application (which means comparatives do not need to be restated). The partial application method also
provides optional relief from reassessing whether contracts in place are, or contain, a lease, as well as other
reliefs. Deciding which of these practical expedients to adopt is important as they are one-off choices.
• assessing their current disclosures for finance leases and operating leases as these are likely to form the basis of
the amounts to be capitalised and become right-of-use assets.
• determining which optional accounting simplifications apply to their lease portfolio and if they are going to
use these exemptions.
• assessing the additional disclosures that will be required.
IFRS 16 is effective from periods beginning on or after 1 January 2019.
going ConCern
The financial statements have been prepared on a going concern basis. Having considered the cash resources,
banking facilities and forecasts for the remainder of the Hebei Hua Ao contract term, the directors do not
anticipate any going concern issues.
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.
Management has assessed its involvement in Hebei Hua Ao and Hebei Sino Anglo in accordance with IFRS 10’s
revised control definition and guidance. It concluded that it has significant influence but not outright control.
45
RepoRt and accounts 2017 aCCounting PoliCies
ConsoliDation basis (ContinueD)
In making its judgement, management considered the Group’s voting rights, the relative size and dispersion of the
voting rights held by other shareholders and the extent of recent participation by those shareholders in general
meetings.
Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported
in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group.
Acquisitions of subsidiaries are dealt with by the acquisition method. The 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 excess of the purchase price paid to acquire
rights over the non-controlling interests in subsidiary companies.
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 delivery / collection basis and are recognised on agreement following open auction
of metals in concentrate and where delivery is taken and cash received within 30 days of the agreement.
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.
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 10).
Residual values
Material residual value estimates are updated as required, but at least annually whether or not the asset is re-
valued.
46
Griffin MininG LiMited aCCounting PoliCies
non Current assets (ContinueD)
Depreciation
Depreciation rates reflect the term of operations, extractable resource, and economic lives of the assets as follows:
1. Mine acquisition, development, licence, pre production and land use rights - on a unit of production
2. Plant and buildings - over 25 years on a straight line basis with a 10% residual value
3. Dry tailings facility held under finance lease- over 15 years on a straight line basis with no residual value
4. Mechanical equipment - over 10 years on a straight line basis with a 10% residual value
5. 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 in note 10.
Impairment assessments are based upon a range of estimates and assumptions:
estimates / assumPtions basis
Future production Proven and probable reserves and resource estimates together with processing capacity
Commodity prices Forward market and longer term price estimates
Exchange rates
Current market exchange rates
Discount rates
Cost of capital risk
mine Closure Costs
Mining operations are generally required to restore mine and processing sites at the end of their lives to a condition
acceptable to the relevant authorities and consistent with the Group’s environmental policies. Whilst the Group
strives to maintain, and where possible, enhance the environment of the Group’s processing sites, provision is
made for site restoration costs in the accounts in accordance with local requirements.
inventories
Inventories are valued at the lower of cost or net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
1. Consumable stores and spares, at purchase cost on a first in first out basis
2. Concentrate stockpiles at cost of direct materials, power, labour, and a proportion of site overhead
3. Ore stockpiles at cost of direct material, power, labour contractor charges and a proportion of site overhead
47
RepoRt and accounts 2017 aCCounting PoliCies
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.
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.
48
Griffin MininG LiMited aCCounting PoliCies
Foreign CurrenCy transaCtions (ContinueD)
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. “Share capital” represents the nominal value of equity shares.
2. “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. “Share based payments” represents equity-settled share-based remuneration until such share options are
exercised.
5. “Foreign exchange reserve” represents the differences arising from translation of investments in overseas
subsidiaries.
6. “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 2017 the total expense recognised in profit or loss arising from share
based transactions was nil (2016: $709,000).
49
RepoRt and accounts 2017 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 10). 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 Group requires the market price of zinc to be above $2,380 per
tonne with gold, silver and lead prices remaining at current prevailing levels, to avoid an impairment charge.
Non-impairment of all assets is conditional upon continued mining licences and permits which the directors
consider will be maintained or obtained as appropriate.
• Impairment review assumptions, exploration interests (note 11). 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. Non-impairments of all assets is conditional
upon continued mining licences and permits which the directors consider will be maintained or obtained as
appropriate.
• 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 business
licence and current capability of the extractive machinery currently in use at the mine.
• The determination of the value of Finance Leased Asset (note 10), and attributable Finance Lease Interest
(note 20) 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 27) 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 business licence between that capitalised to mineral interests and that charged to reserves
by reference to the impact of future cash flows. Following 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, the relationship with them is now in the nature of a service provider facilitating Hebei Hua Ao’s
operations in China rather than that of non-controlling interests. In line with this new arrangement an annual
service charge is paid to the Chinese partners, however, due to the potential variables the Directors are unable
to estimate what this will be in any future year.
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.
50
Griffin MininG LiMited aCCounting PoliCies
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.
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.
51
RepoRt and accounts 2017 aCCounting PoliCies
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 recognised as a finance lease
liability.
See accounting policy on non-current assets and depreciation and note 10 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.
52
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 2017 and 2016 were derived from the Caijiaying zinc gold mine.
2017
$000
2016
$000
REVENUES
China
Zinc concentrate sales
Lead and precious metals concentrate sales
Royalties and resource taxes
COST OF SALES
China
ADMINISTRATION EXPENSES
China
Australia
European Union
126,657
99,886
32,758
(5,987)
126,657
66,270
48,430
21,116
(3,276)
66,270
(44,360)
(37,851)
(13,819)
(434)
(4,271)
(18,524)
All revenues, cost of sales and operating expenses charged to profit relate to continuing operations.
TOTAL ASSETS
China
Australia
European Union
CAPITAL EXPENDITURE
China
European Union
2. ProFit From oPerations
Profit from operations is stated after charging
Fees for the audit of the Company
Fees for the audit of subsidiaries
Tax compliance
Other non-audit fees
Staff costs
Fair values of options granted to directors and management
Average number of persons employed by the Group in the year
250,809
641
2,040
253,490
13,455
2
13,457
2017
$000
64
79
-
-
7,439
-
No.
390
(8,410)
(474)
(4,334)
(13,218)
231,894
499
1,488
233,881
11,137
102
11,239
2016
$000
64
55
2
8
6,444
709
No.
385
53
RepoRt and accounts 2017
notes to the FinanCial statements
3. DireCtors’ anD key Personnel remuneration
The following fees and remuneration were receivable by the Directors holding office and key personnel engaged
during the year:
Fees Salary Pension
& social
security payments
Share Total
based 2017
Share Total
Fees Salary Pension
& social
2016
based
security payments
costs
costs
$000
$000
$000
$000 $000
$000 $000
$000
$000
$000
Mladen Ninkov*
Dal Brynelsen
Rupert Crowe
125
199
97
-
-
-
Roger Goodwin
125
440
Adam Usdan
Key personnel
86
-
632
440
- 1,544
-
-
-
97
-
97
15
-
-
-
-
-
125
199
97
662
86
105
186
82
-
-
-
-
-
-
105
440
100
82
-
- 1,169
560
440
- 1,559
- 1,248
-
100
11
111
430
30
30
54
116
660
49
709
535
216
112
699
198
1,760
1,308
3,068
632 1,984
112
- 2,728
560 1,688
*Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust,
received fees under a consultancy agreement of $2,235,000 (2016: $1,868,000), 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.
No share options were exercised by the directors in 2017 or 2016.
4. loss on DisPosal oF Plant anD equiPment
Loss on disposal of plant and equipment
5. FinanCe inCome
Interest on bank deposits
6. FinanCe Costs
Interest payable on short term bank loans
Finance lease interest
7. other inCome
Scrap and sundry other sales
54
2017
$000
1,067
2017
$000
143
2017
$000
447
1,772
2,219
2017
$000
160
2016
$000
224
2016
$000
178
2016
$000
3,684
602
4,286
2016
$000
45
Griffin MininG LiMited
notes to the FinanCial statements
8. inCome tax exPense
Profit for the year before tax
2017
$000
60,877
Expected tax expense at a standard rate of PRC income tax of 25% (2016: 25%) 15,219
Adjustment for tax exempt items:
- Income and expenses outside the PRC not subject to tax
854
Adjustments for short term timing differences:
- In respect of accounting differences
- Other
(490)
162
Adjustments for permanent timing differences re prior year costs disallowed
Adjustments for permanent timing differences other
-
1,678
Withholding tax on intercompany dividends and charges
Current taxation expense
Deferred taxation expense
Origination and reversal of temporary timing differences
Total tax expense
38
17,461
95
95
17,556
2016
$000
10,382
2,596
843
(545)
135
573
695
20
4,317
151
151
4,468
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 2017 (25% in 2016) based upon the profits calculated under Chinese generally
accepted accounting principals (Chinese “GAAP”).
9. 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:
2017
2016
Earnings Weighted
Average
$000
share
number of amount
(cents)
shares
Per Earnings Weighted
Average
$000
Per
share
number of amount
(cents)
shares
Basic earnings per share
Earnings attributable to ordinary shareholders 43,321 175,894,007
Dilutive effect of securities
Options
Diluted earnings per share
- 12,703,367
43,321 188,597,374
24.63
5,914 179,091,830
3.30
(1.66)
22.97
-
2,248,862
5,914 181,340,692
(0.04)
3.26
55
RepoRt and accounts 2017
notes to the FinanCial statements
10. ProPerty, Plant anD equiPment
At 31 December 2015
Foreign exchange adjustments
Additions during the year
Transfer rehabilitation deposit
Disposals
Depreciation charge for the year
At 31 December 2016
Foreign exchange adjustments
Additions during the year
Disposals
Depreciation charge for the year
At 31 December 2017
At 31 December 2015
Cost
Accumulated depreciation
Net carrying amount
At 31 December 2016
Cost
Accumulated depreciation
Net carrying amount
At 31 December 2017
Cost
Accumulated depreciation
Net carrying amount
Mineral
Office
Mill and
interests mobile mine furniture &
equipment equipment
Total
$000
$000
$000
$000
160,619
(5,113)
7,361
27
-
(4,750)
158,144
4,976
9,330
-
(5,404)
167,046
49,622
(3,164)
3,776
-
(224)
(3,772)
46,238
2,805
4,125
(1,250)
(4,351)
47,567
11
-
102
-
-
(4)
109
-
2
(1)
(28)
82
210,252
(8,277)
11,239
27
(224)
(8,526)
204,491
7,781
13,457
(1,251)
(9,783)
214,695
184,078
(23,459)
160,619
67,676
(18,054)
49,622
101
(90)
11
251,855
(41,603)
210,252
185,252
(27,108)
158,144
67,009
(20,771)
46,238
133
(24)
109
252,394
(47,903)
204,491
200,708
(33,662)
167,046
72,366
(24,799)
47,567
134
(52)
82
273,208
(58,513)
214,695
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 together with the end of life
restoration costs.
The office furniture and equipment disclosed above relates solely to the fixed assets of the Company and China
Zinc Pty Limited.
During 2013 plant and equipment with a deemed value of $12,880,000 were acquired under a finance lease, upon
which depreciation of $3,428,000 (2016: $2,466,000) has been provided. At 31 December 2017 the net carrying
amount of this equipment was $8,723,000 (2016: $8,980,000).
56
Griffin MininG LiMited
notes to the FinanCial statements
10. ProPerty, Plant anD equiPment (ContinueD)
The Group assesses the carrying value of the mineral interests, mill and mobile mine equipment at least annually,
and more frequently in the event of any indications of impairment, by reference to discounted cash flow forecasts of
future revenue and expenditure for each business segment. These forecasts are based upon both past and expected
future performance, available resources and expectations for future markets. The directors have reassessed the net
carrying value of capitalised costs at 31st December 2017 and in estimating the discounted future cash flows from
the continuing operations at the Caijiaying mine the following principal assumptions were made:
Future market prices for zinc of $2,500 per tonne and gold of $1,150 per troy ounce;
Mine life to end of the business licence in 2037 with ore mined and processed with grades based upon the 2015
depleted mineral resource estimate summarised on page 10;
Costs based upon past performance and that budgeted for 2018;
Discount interest rate of 6.14%; and
Continued maintenance and grant of applicable licences and permits.
Non impairment of all assets is conditional upon continued mining licences and permits which the directors
consider will be maintained or obtained as appropriate.
11. intangible assets
China – Zinc / gold exploration interests
At 1 January 2016
Foreign exchange adjustments
Additions during the year
At 31 December 2016
Foreign exchange adjustments
Additions during the year
At 31 December 2017
$000
1,870
(121)
43
1,792
115
128
2,035
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 2017 $nil (2016: $nil) had been provided and charged
to the income statement in respect of the above exploration costs.
12. inventories
Underground ore stocks
Surface ore stocks
Concentrate ore stocks
Spare parts and consumables
2017
$000
2,147
708
225
2,788
5,868
2016
$000
3,192
236
188
2,532
6,148
All inventories are expected to be sold, used or consumed within one year of the balance sheet date.
57
RepoRt and accounts 2017
notes to the FinanCial statements
13. reCeivables anD other Current assets
2017
$000
Receivables
-
Advance to Zhangjiakou Guoxin Enterprise Management and Service Center 2,613
276
Other receivables
1,485
Prepayments
4,374
2016
$000
3,677
2,461
343
1,751
8,232
During the year $6,286,000 was charged (2016: $1,983,000) for service charges with Zhangjiakou Guoxin
Enterprise Management and Service Centre, the Group’s joint venture partner in Hebei Hua Ao.
14. share CaPital
AUTHORISED:
Ordinary shares of US$0.01 each
2017
2016
Number
$000
Number
$000
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
Cancellation of shares held in treasury during the year
At 31 December
179,041,830
(9,048,103)
169,993,727
1,790
(90)
1,700
179,041,830
-
179,041,830
1,790
-
1,790
15. shares helD in treasury
At 1 January
Bought back in during the year
Cancelled during the year
At 31 December
2017
2016
Number
8,703,103
345,000
(9,048,103)
-
$000
3,875
230
(4,105)
-
Number
8,703,103
-
-
8,703,103
$000
3,875
-
-
3,875
During the year 345,000 of the Company’s ordinary shares were purchased at an average price of 53.2p per share.
16. share oPtions anD warrants
Options exercisable at 30 pence per share
to 31 December 2020
Options exercisable at 40 pence per share
to 31 December 2018
58
At 1 January
2017
Granted/
(Exercised) /
At 31 December
2017
Number
20,000,000
5,000,000
25,000,000
(lapsed)
Number
-
-
-
Number
20,000,000
5,000,000
25,000,000
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:
2017
2016
Number Weighted average
exercise price
Pence
Number Weighted average
exercise price
Pence
Outstanding at 1 January
Lapsed during the year
Granted during the year
Outstanding at 31December
25,000,000
-
-
25,000,000
32.2
-
-
32.2
25,000,000
-
-
25,000,000
32.2
-
-
32.2
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.
The estimated value of the options exercisable at 30p up to 31 December 2020, which vested in 3 tranches of
6,666,666 each, were 6.2p, 7.2p and 6.8p.
Inputs into the Binomial valuation model were as follows:
Share price
Exercise price
Expected volatility
Risk free yield
Dividend yield
Options expiring
31 December 2020
Options expiring
3 December 2018
26.5p
30.0p
35%
0.9%
0%
33.0p
40.0p
36%
1.3%
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 $nil (2016: $709,000) during the year ended 31 December relating to
equity settled share option scheme transactions.
17. DiviDenDs
No dividends were paid in 2017 (2016: nil).
18. long-term Provisions
PROVISIONS FOR MINE CLOSURE COSTS
At 1 January
Transfer property plant and equipment (note 10)
Foreign exchange adjustments
At 31 December
2017
$000
2,277
-
141
2,418
2016
$000
2,433
27
(183)
2,277
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.
59
RepoRt and accounts 2017
notes to the FinanCial statements
19. DeFerreD taxation
At 1 January
Foreign exchange adjustments
Charge for the year
At 31 December
2017
$000
2,607
163
95
2,865
2016
$000
2,630
(174)
151
2,607
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
2017
$000
712
3,694
4,406
2016
$000
3,791
2,783
6,574
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
Taxation payable
Due to Zhangjiakou Guoxin Enterprise Management and Service Centre
Accruals
2017
$000
12,904
7,902
12,349
12,418
6,864
52,437
2016
$000
14,946
4,527
2,549
5,968
6,476
34,466
All amounts are short term. The carrying values of all trade and other payables are considered to be a reasonable
approximation of fair value.
60
Griffin MininG LiMited
notes to the FinanCial statements
22. bank loans
Bank loans falling due within one year
2017
$000
-
2016
$000
44,688
The bank loans were repayable within one year under revolving facilities and were unsecured. The bank loans
carried interest as follows:
Zhangjiakou Commercial Bank
Bank of Communications
Bank of China
2016
%
8.7
4.785
5.22
$000
8,649
15,857
20,182
44,688
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 2017 of $191,364,000 ($143,269,000 at 31 December 2016) divided
by the number of ordinary shares in issue at 31 December 2017 of 169,993,727 (179,041,830 at 31 December
2016).
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 formal foreign currency hedging policy but retains foreign currency
to meet future requirements. The management monitors foreign exchange exposure and considers hedging
significant foreign currency exposure should the need arise. 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
2017
$000
290
2016
$000
168
61
RepoRt and accounts 2017
notes to the FinanCial statements
24. risk management (ContinueD)
Foreign Currency Risk continued
The following table illustrates the sensitivity of the net results for the year and equity in regards to the Group’s
sterling deposits and the sterling US Dollar exchange rate. It assumes a + / - 15% (2016: 15%) change in the
sterling exchange rate for the year ended 31 December 2016. These changes are considered to be reasonable
based on observation of current market conditions for the year ended 31 December 2017. The sensitivity analysis
is based upon the Group’s sterling deposits at each reporting date.
If sterling had strengthened against the US Dollar by 15% (2016: 15%) this would have had the following impact:
Net result for the year and on equity
2017
$000
51
2016
$000
30
If sterling had weakened against the US Dollar by 15% (2016: 15%) this would have the following impact:
Net result for the year and on equity
2017
$000
(38)
2016
$000
(22)
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions.
Nonetheless, the analysis above is considered to be indicative of the Group’s exposure to currency risk.
With the Renminbi exchange rate linked to the value of the US dollar and with relatively small amounts held in
Australian dollars, the effect on the net results and equity of changes in Renminbi and Australian dollar exchange
rates are not expected to be significant.
Foreign currency denominated financial assets and liabilities, translated into US Dollars at the closing rate, are
as follows:
2017
2016
Financial assets
Financial liabilities
Short term exposure
Interest rate risk
GBP
$000
Rmb AusD
$000
$000
821
592 27,455
(13)
(145) (44,040)
808
447 (16,585)
GBP
$000
885
(213)
672
Rmb AusD
$000
15,065
(79,493)
(64,428)
$000
501
(54)
447
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% (2016: + 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.
62
Griffin MininG LiMited
notes to the FinanCial statements
24. risk management (ContinueD)
Interest rate risk continued
The sensitivity analysis is based upon the Group’s deposits at each balance sheet date:
2017
Plus 300% Minus 100%
$000
$000
2016
Plus 300% Minus 100%
$000
$000
Net result for the year
618
(206)
313
(178)
Fixed and non interest bearing financial assets and liabilities are as follows:
2017
2016
Floating Non interest Total
interest rate
bearing
Floating Non interest
bearing
interest rate
Total
$000
$000
$000
$000
$000
$000
Financial Assets
Cash at bank
Other receivables
Total Financial Assets
Bank loans
Finance lease liabilities
Trade and other payables
Total Financial Liabilities
Net Financial (liabilities)
Commodity risk
26,518
-
26,518
-
(4,406)
-
(4,406)
22,112
-
4,374
4,374
26,518
4,374
30,892
-
-
-
(4,406)
(52,437) (52,437)
(52,437) (56,843)
(48,063) (25,951)
13,218
-
13,218
(44,688)
(6,574)
-
(51,262)
(38,044)
-
8,322
8,322
13,218
8,322
21,540
-
-
(34,466)
(34,466)
(26,144)
(44,688)
(6,574)
(34,466)
(85,728)
(64,188)
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 2017 or in 2016.
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% (2016: plus 20% and minus 20%),
with effect from the beginning of the year. These changes are considered reasonable based upon observation of
current market conditions within which the Group operates. This sensitivity analysis is based upon the Group’s
sales in each year.
Net result for the year – zinc
Net result for year – gold
Net result for year – silver
2017
Plus 20% Minus 20%
$000
$000
2016
Plus 20% Minus 20%
$000
$000
14,686
3,636
799
(14,686)
(3,636)
(799)
7,120
2,190
617
(7,120)
(2,190)
(617)
63
RepoRt and accounts 2017
notes to the FinanCial statements
24. risk management (ContinueD)
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer
contract, leading to a financial loss. The Group is exposed to credit risk from its financing activities, including
deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. 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 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 $191,364,000 at 31 December 2017.
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 Australi a, 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.
64
Griffin MininG LiMited
notes to the FinanCial statements
26. FinanCial instruments (ContinueD)
The Group held the following investments in financial assets and financial liabilities:
FINANCIAL ASSETS
Loans and receivables
Cash and cash equivalents
FINANCIAL LIABILITIES
Loans and finance lease
Trade and other payables
27. subsiDiary ComPanies
2017
$000
4,374
26,518
30,892
4,406
52,437
56,843
2016
$000
8,232
13,218
21,450
51,262
34,466
85,728
At 31 December 2017, 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
Proportion of
shares held
Nature of
business
Country of
incorporation
100%
Service company
Australia
100%
Holding and service company Hong Kong
Panda Resources Ltd
Ordinary
Hebei Sino Anglo Mining
Development Company Ltd*
88.8% **
Base and precious metals
mining and development
100%
90%
Holding company
Mineral
exploration and development
China
England
China
* China Zinc Ltd, China Zinc Pty Ltd and Panda Resources Ltd are directly owned by the Company. China Zinc
Ltd has a controlling interest in Hebei Hua’ Ao Mining Industry Company Ltd, see below, and Panda Resources
Ltd has a 90% controlling interest in Hebei Sino Anglo Mining Development Company Ltd.
** The joint venture contract establishing the Hebei Hua’ Ao Mining Industry Company Ltd originally provided
that the foreign party (China Zinc) received 60% of the cash flows, in accordance with its share in the equity interest
in the joint venture. With effect from 25 June 2012, 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.
Under the terms of the agreement dated 21 May 2012, Griffin’s Chinese Partners are obliged to provide various
services to facilitate Hebei Hua Ao’s operations in China and as such the amounts payable of $5,900,000 (2016:
$1,983,000) are included in net operating costs rather than attributable to non-controlling interests. Likewise the
amounts due at 31st December 2017 of $12,418,000 (2016: $5,968,000) are included in other payables rather than
due to non-controlling interests within equity within the Consolidated Statement of Financial Position.
28. Commitments
At 31 December 2017 the Group had capital commitments of $345,000 (31 December 2016: $556,000).
65
RepoRt and accounts 2017
66
Griffin MininG LiMited New 20 tonne haulage truck with, left to right, Yong Jun Xue (Deputy Mining Manager),
Mark Hine (Chief Operating Officer) and Paul Benson (Geology Manager).
67
RepoRt and accounts 2017 CorPorate inFormation
Principal office:
8th Floor, Royal Trust House, 54 Jermyn Street, London SW1Y 6LX, 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:
Level 9, BGC Centre, 28 The Esplanade, Perth WA 6000, Australia.
Telephone: + 61(0)8 9321 7143 / Facsimile: + 61(0)8 9321 7035
Directors:
Mladen Ninkov (Chairman)
Roger Goodwin (Finance Director)
Dal Brynelsen
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
30 Finsbury Square, London EC2P 2YU, UK.
Bird and Bird
8/F China World Office 1, Jianguomenwai Dajie,
Chao Yang District, Beijing 10004, 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.
HSBC Bank of Bermuda Ltd
6 Front Street, Hamilton HM11, Bermuda.
UK Registrars
And Transfer Agents:
Link Market Services (Jersey) Limited
12 Castle Street, St Helier, Jersey JE2 3RT, UK.
68
Griffin MininG LiMited