Contents
Chairman’s statement
Overview
Caijiaying
IntroductIon
development
mIneral resource estImate
GeoloGy
exploratIon
operatIons
envIronmental safeGuards & contrIbutIons
communIty relatIons
FinanCial results
strategiC review
caIjIayInG
acquIsItIons and further projects
COrpOrate gOvernanCe
report of the audIt commIttee
report of the remuneratIon commIttee
DireCtOrs
seniOr exeCutives
DireCtOrs’ repOrt
inDepenDent auDitOrs’ repOrt tO the members OF griFFin mining limiteD
COnsOliDateD inCOme statement
COnsOliDateD statement OF COmprehensive inCOme
COnsOliDateD statement OF FinanCial pOsitiOn
COnsOliDateD statement OF Changes in equity
COnsOliDateD Cash FlOw statement
nOtes tO the FinanCial statements
COrpOrate inFOrmatiOn
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76
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 2018
2
Griffin MininG LiMited Caijiaying Mine Surface Facilities summer 2018
3
RepoRt and accounts 2018 Chairman’s statement
I present to you, the shareholders and owners of Griffin
After Tax of $25.5 million and Basic Earnings of 14.83 cents
Mining Limited (“Griffin” or the “Company”), the
per share.
Annual Report and Accounts of the Company for the 2018
calendar and financial year (the “Annual Report”). By the
measure of almost any other mining company, 2018 would
be considered a monumentally, outstanding success. $3
billion of in situ metal was added to the resource base, an
operating profit of $36 million and a net profit after tax
of $25.5 million was generated, major above and below
ground capital developments were undertaken to position
the Caijiaying Mine operationally for the next 10 years and
all this whilst remaining debt free and self-funding from
operations.
In terms of long term value added to the Company, over
3 million tonnes of zinc metal and 1.16 million ounces of
gold have been defined by the Company since the start of
mining in 2005 emphasizing the success of the Company’s
exploration efforts and the extraordinary size and nature of
the orebody contained at the Caijiaying Mine.
Operationally, ore mined amounted to 872,069 tonnes
whilst ore processed was 930,472 tonnes amounting to
metal in concentrate produced of 37,112 tonnes of zinc,
16,230 ounces of gold, 280,712 ounces of silver and 1,030
tonnes of lead.
With the development of Zone II awaiting the new mining
licence, the decision was taken to institute a programme
to further modernise the Caijiaying Mine. Underground
development work was primarily focused on developing
future stoping horizons between the 1175 metre and 1000
metre level, a much larger development than previously
undertaken at the Caijiaying Mine. A twin boom electric
hydraulic development drill and three 20 tonne, fully
enclosed cabin, haulage trucks were added by the contractors
to the fleet allowing more material being hauled from
deeper in the Caijiaying Mine with less truck movements
and greater reliability. Further fleet upgrades continue on
Nevertheless, and reversing a well known proverb,
an ongoing basis.
perhaps every silver lining has a cloud, with the mining
licence over Zone II still failing to be granted. In effect,
this means constructed and commissioned infrastructure
lies idle waiting for this new source of ore to be mined and
processed to substantially increase the Company’s metal
production. I am not sure I have any remaining credibility
in crystal ball gazing and my days as a seer may well and
truly be over, but I sincerely believe the new mining licence
will be granted in 2019.
The stand-out achievement of the year was the Company
increasing its resource base by 78.5%, all from Zone
III, including adding 807,000 tonnes of zinc metal,
311,000 ounces of gold and 13.6 million ounces of silver.
Modelling of the other “zones” at the Caijiaying Mine has
been progressing well with all concerned very excited on
the possible size of the revised Zone II resource model as
well as the maiden estimate for Zone VIII, both expected
by the end of the northern summer.
As a responsible citizen of both China and Planet Earth,
the Company continues to maintain and further implement
best practices regarding the protection of the environment
and has invested heavily in the local community. The
Company believes these to be moral, humane, community
and planetary obligations. I would urge shareholders to read
of our practices and contributions in this Annual Report
and obtain the sense of pride from the contributions the
Company has made in this area.
In spite of all the above achievements, the Company does
not rest on its laurels. In the words of Mark Twain, “To
stand still is to fall behind.” Firstly, it continues to explore
areas surrounding the Caijiaying Mine, including the
prospective Sangongdi area. The scope of that work can
be seen in the Exploration section of this Annual Report.
Secondly, in 2018, the Company expanded the scope and
activities of its wholly owned subsidiary China Zinc Limited
to create a data base of the geology, exploration and mining
Financially, the Company and its subsidiaries had a good
activities in China to search for potential acquisitions
year in light of falling zinc metal prices, higher treatment
of base metals projects that meet the Company’s pre-set
charges and lower concentrate production. Revenues of
economic criteria. Any such projects found not to meet this
$99 million were recorded with an Operating Profit of
criteria will be either ignored, or if seemingly of value, sold,
$35.6 million, Profit Before Tax of $34.8 million, Profit
joint ventured or offered in a separate vehicle to existing
4
Griffin MininG LiMited Griffin shareholders. Thirdly, the Company continues to
Lastly, and as always, my greatest thanks goes to you, the
investigate potential mining projects located outside of
shareholders and owners of the Company. Without you,
China on the same objective investment basis as historically
none of this would be possible. From the first, unbelievably
has been the case.
Traditionally, I am afforded the privilege to thank all those
individuals who have worked professionally, tirelessly and
anonymously to achieve the results seen above. Believe
me when I state that nothing would give me greater
satisfaction than to list all of them individually with a
record of the service they have provided. But, sadly, the
size and complexity of the Company now precludes such
a possibility. So let me just say, on your behalf, thank you
to all the directors, employees, contractors, consultants,
patient and supremely loyal shareholder, Adam Usdan, to
the small, longstanding, retail shareholder, to the latest,
large US institutional shareholders, it is insufficient to say
thank you. Your support, and just as importantly, patience,
is the reason this Company continues to flourish and is
driven to succeed substantially further where all others have
failed. It sounds trite, and I expect not to be believed, but
we push ourselves beyond normal boundaries to repay that
loyalty and that belief that you have shown in the Company.
In the well-known phrase, “May you be repaid in spades”.
officials, spouses, children, families and friends associated
Mladen Ninkov
in whatever means with the Company. To paraphrase the
Chairman
words of Ricky Gervais in The Office, every one of them
29 April 2019
makes a difference, every single day and usually in a very
distant country, on a demanding schedule, far away from
family and friends.
Hebei Hua Ao Joint Venture Meeting, London, November 2018
From left to right: Sun Huiguang (Director Hebei Hua Ao); He Yuqing (Captain of the 3rd Geological Brigade
of Hebei Province); He Xi (Deputy Chief of Hebei Bureau of Geology and Mineral Resources); Mladen Ninkov
(Chairman); Jin Shengchang (Director Hebei Hua Ao); Dal Brynelsen (Director); Roger Goodwin (Director);
Bo Zhou (Griffin Chief Representative China).
5
RepoRt and accounts 2018 overview
Griffin Mining Limited (“Griffin” or “the Company”) is a
The Company also holds 90% of Hebei Sino Anglo
mining and investment company, incorporated in Bermuda,
Mining Development Company Limited (“Hebei Anglo”),
whose shares are quoted on the Alternative Investment
which holds 15.7 square kilometres of exploration licences
Market of the London Stock Exchange (“AIM”).
immediately surrounding the Hebei Hua Ao Licence Area.
The major asset of the Company is an 88.8% interest in
The Company continues to aggressively explore, expand
Hebei Hua Ao Mining Industry Company Limited (‘Hebei
and develop the Caijiaying Mine whilst also investigating
Hua Ao’), which holds 8.1 square kilometres of mining and
potential acquisitions of mining projects that are capable,
exploration tenements, including the mine and processing
through either advanced exploration or mining expertise,
facilities, at Caijiaying in the People’s Republic of China
of being brought into production to meet the Company’s
(the “Caijiaying Mine”).
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
through its wholly owned UK subsidiary Panda Resources
Limited, has a 90% interest in Hebei Anglo whilst Yuanrun
holds 10%. Griffin, through Hebei Hua Ao and Hebei
Anglo, has a controlling interest in mining and exploration
licences over approximately 23.8 square kilometres in the
Caijiaying area.
by two freeways from Beijing. The site has significant water
The Caijiaying Mine was commissioned on time and budget
supplies, two 35,000 volt power lines connected to the
in 2005. Numerous upgrades to the Caijiaying Mine have
electricity grid, full connectivity to fixed and mobile tele-
taken place since commissioning leading to the current
communications systems and broadband access for internet
name plate mill throughput capacity of 1.5 million tonnes
services. It is 63 kilometres from Chongli, the host city of
of ore per annum. This throughput capacity will not be fully
the 2022 Winter Olympic Games, to which a high speed
utilized until the granting of the new mining licence over
train link from Beijing is currently being constructed.
Zone II and enhanced safety production permit.
Underground development continues with the expansion
of the existing mining operations at Zone III down to the
1,000 Relative Level (“RL” which in this report shall refer
to mean sea level).
Drive access to the Zone II area 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 the new mining licence over that area.
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 Yuanrun
Enterprise Management Consulting Service Co., Ltd
(“Yuanrun”), the shareholders of which are the Zhangjiakou
City People’s Government and the Third Geological
Brigade of Hebei Province.
The initial operating 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
Hong Kong subsidiary China Zinc Limited, purchased an
additional 28.8% interest in Hebei Hua Ao from Yuanrun in
2012. Griffin now holds an 88.8% equity interest in Hebei
Hua Ao and Yuanrun retains an 11.2% residual interest
compensated via 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
Yuanrun 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,
7
RepoRt and accounts 2018 8
Griffin MininG LiMited Griffin Directors at the New Caijiaying Mine Second Portal with new 20 Tonne Haulage Truck.
From left to right: Roger Goodwin (Finance Director); Adam Usdan (Director); Rupert Crowe (Director);
Mladen Ninkov (Chairman); and Dal Brynelsen (Director).
9
RepoRt and accounts 2018 MINERAL RESOURCE ESTIMATES
An update of the Mineral Resource estimates for Zone III has
estimate to be published once the studies are completed.
been carried out, incorporating new drilling and the results
Further studies on the results of drilling in Zone VIII should
of geological and structural studies. The Zone II Mineral
result in a new Mineral Resource estimate. Mineralisation at
Resource estimate remains the same as last year. Geological
Caijiaying comprises zinc domains and gold domains. The zinc
and structural studies are currently underway on Zone II,
domains are reported at a cut off of 1% Zn. The gold domains
which should allow an update to this Mineral Resource
are reported above 0.5 g/t Au.
Caijiaying Zone III Mineral Resources 31 December 2018
Zinc Domain Grade Tonnage Reported above a Cut off Grade of 1.0% Zn
Tonnes Zn
(%)
(Mt)
19.9
10.1
18.0
48.0
4.6
4.0
4.0
4.3
Pb
(%)
0.2
0.2
0.2
0.2
Ag
(g/t)
23.0
18.2
21.5
21.5
Au
(g/t)
Zn Metal
(kt)
Pb Metal Ag Metal Au Metal
(kOz)
(kOz)
(kt)
0.7
0.6
0.4
0.5
917
404
724
2,045
44
17
36
98
14,739
5,907
12,455
33,100
413
187
211
812
Caijiaying Zone III Mineral Resources 31 December 2018
Gold Domain Grade Tonnage Reported above a Cut off Grade of 0.5 g/t Au
Tonnes Zn
(%)
(Mt)
-
-
0.8
0.8
-
-
0.8
0.8
Pb
(%)
-
-
0.1
0.1
Ag
(g/t)
-
-
19.9
19.9
Au
(g/t)
Zn Metal
(kt)
Pb Metal Ag Metal Au Metal
(kOz)
(kOz)
(kt)
-
-
3.0
3.0
-
-
6
6
-
-
1
1
-
-
483
483
-
-
73
73
Caijiaying Zone II Mineral Resources 31 December 2018
Zinc Domain Grade Tonnage Reported above a Cut off Grade of 1.0% Zn
Tonnes Zn
(%)
(Mt)
-
4.1
15.6
19.6
-
3.0
3.3
3.3
Pb
(%)
-
0.7
0.8
0.7
Ag
(g/t)
-
24.9
24.5
24.6
Au
(g/t)
-
0.3
0.3
0.3
Zn Metal
(kt)
Pb Metal Ag Metal Au Metal
(kOz)
(kOz)
(kt)
-
123
516
638
-
27
117
144
-
3,243
12,277
15,520
-
39
124
164
Caijiaying Total Mineral Resources
Tonnes Zn
(%)
(Mt)
19.9
14.2
34.3
68.4
4.6
3.7
3.6
3.9
Pb
(%)
0.2
0.3
0.4
0.4
Ag
(g/t)
23.0
20.1
22.9
22.3
Au
(g/t)
Zn Metal
(kt)
Pb Metal Ag Metal Au Metal
(kOz)
(kOz)
(kt)
0.6
0.5
0.4
0.5
917
527
1,246
2,689
44
44
154
243
14,739
9,150
25,215
49,103
413
227
409
1049
Category
Measured
Indicated
Inferred
Sub-Total
Category
Measured
Indicated
Inferred
Sub-Total
Category
Measured
Indicated
Inferred
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 3,837 underground diamond drill holes and 624 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 or 0.5 g/t Au 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 31 December 2018.
The Caijiaying Mineral Resources are based on resource modelling work completed by CSA Global Pty Ltd in 2013 and 2019 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 Exploration Results, 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. Mr Steve Rose’s work
has been peer reviewed in part as he holds options over 37,500 Griffin Mining Ltd Shares exercisable at 30 pence per share.
10
Griffin MininG LiMited
EXPLORATION
The New Mineral Resource estimate for Zone III provides
The 2018 exploration programme at Caijiaying continued
a substantional resource upgrade to the operating mine
to expand existing areas of mineralisation whilst providing
area at Zone III at the Caijiaying Mine. The Measured,
and testing new targets designed to increase the resource
Indicated and Inferred Mineral Resources has increased to
inventory and extend the existing mine life. This involved
48.8 million tonnes at 4.2% Zinc, 0.2% Lead, 21.4 grammes/
ongoing technical targeting studies applying advanced
tonne Silver and 0.6 grammes/tonne Gold, a 78.5% increase
geochemical, structural and modelling techniques to deliver
in tonnes from the previously reported Measured, Indicated
prioritised targets in the following categories:
and Inferred Mineral Resources of 27.3 million tonnes at
4.6% Zinc, 0.2% Lead, 22.9 grammes/tonne Silver and 0.7
grammes/tonne Gold. The results lift the estimate of the
contained metal at Zone III from approximately 1.22 to 2.051
million tonnes of zinc metal, from 0.574 to 0.885 million
ounces of gold and from 20 to 33.6 million ounces of silver.
This increase comes after some 4.5 million tonnes of ore
being mined at Zone III since the previous 2013 Resource
Estimate. The full extraction of the new Mineral Resources
•
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
will require the extension of the business licence beyond 2037
In 2018, due to the Zone II mining licence continuing to
or increase in production capacity and enhanced permits.
be delayed in being issued, the focus was on aggressive
It should be stressed that this new resouce is not the total
‘Global Resource’ for the Caijiaying tenement area.
The big increase in resources at Zone III has been due to
the combination of additional drilling and far improved
understanding of the controls and the distribution of ore
within the deposit. Modelling of the resources of other ‘zones’
underground diamond drilling activity to target extensions
of known zinc and gold lodes within Zone III. 320
underground diamond drill holes were drilled for a total of
38,112 metres utilising four underground electric-hydraulic
drill rigs. These results have been incorporated into the
new Zone III resource update.
at Caijiaying has been progressing with work well advanced
Whilst there was no surface drilling conducted in 2018, the
on a revised Zone II resource model as well as the maiden
results of the major surface drilling programme undertaken
estimate for Zone VIII (the recently identified northern
in Zone VIII in 2017 were integrated into an updated 3D
resource extension of the Zone III deposit). Resource
geological and mineralisation model for the area and a non-
announcements for those zones should be forthcoming
JORC Chinese Resource (a license retention requirement
in the near future.
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.
of the Chinese government) was completed for Zone VIII.
Zone VIII contains similar rock types and mineralisation
styles already seen in Zones II & III and drilling confirmed
that mineralisation not only continues along strike from
Zone III into Zone VIII, but that mineralisation remains
open to the north of the Zone VIII drilling.
Significant progress continues to be made in the application
of litho-geochemical data to provide an indicator of
proximity to mineralisation. The lithogeochemical indices
developed for Zone III have been applied to Zone VIII,
regional exploration targeting and prospect generation.
A major update to the 3D structural model was completed
for Zone III which has directly impacted the effectiveness
of exploration targeting, grade control drill design and
ore block modelling and has resulted in improved stope
designs.
11
RepoRt and accounts 2018 12
Griffin MininG LiMited Plan Of The Tenement Holdings At The Caijiaying Mine
13
RepoRt and accounts 2018 EXPLORATION (CONTINUED)
A major programme of relogging and lithogeochemistry
Whilst Griffin retains an exclusive right for exploration
sampling has commenced for Zone II. This is to ensure that
at Shitouhulun and Sangongdi, further work is being
the knowledge obtained from Zone III lithogeochemistry and
minimised until such time as exploration licences over these
structural geological modelling advances can be applied to
areas are received.
Zone II ahead of the granting of the Zone II mining licence.
Hebei Anglo Area
PROPOSED 2019 EXPLORATION
Geochemical analysis and detailed structural mapping and
Following the results of the 2017 surface drilling
3D modelling will continue within the Caijiaying Mine to
programme, Hebei Anglo was granted a 2-year extension to
increase the understanding of the nature of the orebody.
its exploration licence, which contains the possible northern
Regional exploration will continue with additional surface
strike extension of mineralisation observed in Zones III
geophysics, surface geochemical sampling and analysis to
& VIII. This licence extension expires in July 2020 and
evaluate targets for further consideration and drilling.
an exploration strategy is currently being formulated to
Exploration will also be carried out in the Hebei Anglo
optimise this opportunity.
exploration area.
Shitouhulun and Sangongdi
Regional exploration focused on the Sangongdi prospect,
11 kilometres northwest of the Caijiaying Mine, where
surface geochemical exploration in 2015-2017 (using the
lihtogeochemistry indicators developed for Zone III)
identified a significant mineralisation indicator anomaly.
This work was followed up in 2018 by two surface
geophysics programmes aimed at improving the geological
understanding of the Sangongdi prospect ahead of the
granting of approvals to conduct drilling at the area.
A static seismic survey was completed in April 2018 that
successfully defined the depth of recent wind-blown cover
sediments at Sangongdi. This survey also highlighted several
major structural trends that appear to have controlled
recent basin architecture and may have implications for
mineralisation in the area.
A detailed ground magnetic survey was also completed
over the prospect during 2018. The data collected has
helped define the major geological structures in the area
and modelling of the magnetic data has also provided an
indication of the depth to the prospective Proterozoic
basement rocks (that hosts the mineralisation at the
Caijiaying Mine). The combination of the geophysics,
lithogeochemistry and surface mapping has facilitated
the development of a solid geology interpretation and a
structural map upon which the geochemical anomalies have
been overlain. The work has culminated in a prioritised
exploration target map for the Sangongdi prospect which
will form the basis for further exploration.
14
Griffin MininG LiMited OPERATIONS
The underground mine and surface processing plant
• Lead metal in concentrate produced was 1,030 tonnes
operated safely and consistently during 2018.
(2017: 1,421 tonnes).
A continued focus on safety and training of the Chinese
The programme to further modernise the Caijiaying Mine
workforce resulted in a “Lost Time Frequency Rate” of 2.2
continued throughout 2018 with a twin boom electric
(2017: 1.1) per one million hours being reported for the
hydraulic development drill and three fully enclosed cabin,
year while the “Total Recordable Injury Frequency Rate”
20 tonne haulage trucks, added to the fleet by the haulage
of 13.3 per one million hours was maintained in line with
contractor. The addition of the larger capacity haulage
the previous year.
A key focus for 2018 was the development of the North and
South Declines from the 1175 metre level down to the 1000
trucks has already had a positive benefit with more material
being hauled from deeper in the Caijiaying Mine with less
truck movements and greater reliability.
metre level. By year end, both declines had been advanced
Underground development work was primarily focused on
to the 1060 metre level with an interlink drive connecting
developing future stoping horizons between the 1175 metre
the declines at the 1100 metre level and only requiring a
and 1000 metre level. Capital development totalled 5,312
further 70 metres of additional development to connect the
metres and operational development totalled 4,047 metres.
Long hole open stoping continues to be the predominant
mining method. The resulting voids are backfilled with
cemented hydraulic fill or development waste.
drives. Work also commenced on the establishment of a new
5 metre diameter, 300 metre deep, main exhaust shaft and
a 5 metre diameter, 180 metre deep, fresh air intake shaft.
Previously reported work on the development of a second
portal was successfully completed in April 2018.
Compared to 2017, ore mined, hauled and processed for
2018 were impacted by the planned focus on the near term
development of Zone III from the 1175 metre level down
to the 1000 metre level. Capital development in 2018 was
significantly higher than in 2017.
Production results for the Caijiaying Mine in 2018 can be
summarised as follows:
• Ore mined of 872,069 tonnes (2017: 920,168 tonnes);
• Ore hauled of 922,424 tonnes (2017: 980,849 tonnes);
• Ore processed of 930,472 tonnes (2017: 968,080 tonnes);
Whilst metal in concentrate recoveries were broadly
maintained, optimising underground stope scheduling,
pillar recovery and maximising economic extraction resulted
in a planned fall in the zinc equivalent head grade to 5.4% in
2018 from 6.3% in 2017. As a result:
• Zinc metal in concentrate produced was 37,112 tonnes
(2017: 43,403 tonnes);
• Gold metal in concentrate produced was 16,230 ozs
(2017: 20,489 ozs);
• Silver metal in concentrate produced was 280,712 ozs
(2017: 394,117 ozs); and
15
RepoRt and accounts 2018 16 Plan view of Caijiaying Mine’s Zone III major ore lodes
Griffin MininG LiMited Long Section of Zone III Mineral Resource wireframes (red)
and Underground Development and Stoping (purple)
17
RepoRt and accounts 2018 ENVIRONMENTAL SAFEGUARDS & CONTRIBUTIONS
The Company, through Hebei Hua Ao, continues to
These practices were further augmented in 2018 with:
maintain and further implement best practices regarding
the protection of the environment. The Company believes
this to be a moral, humane, community and planetary
obligation. This includes:
• Controls to prevent the discharge of waste into the
environment;
• Sewage treatment plants at the mine and camp sites to
deal with all effluent produced;
• 1,507 Poplar and 170 Pine trees planted around the
Caijiaying Mine;
• 3 Total Suspended Particles (“TSP”) online monitoring
systems being installed and continually monitored by
the Municipal Environmental Protection Authority
Information Centre;
• The Heavy Metal on-line monitoring equipment being
replaced by more modern systems and monitored
• All water from the Caijiaying Mine and accommodation
on-line by the Municipal Environmental Protection
site being recycled;
Authority Information Centre;
• Boiler flue gases being treated by a dust and sulphur
• The implementation of stage 1 of the ROM pad dust
extraction system to prevent the emission of pollutants
suppression project with dust suppression meshes and
into the atmosphere;
water spray system installed effectively controlling dust
• Waste rock and mill tailings being used for backfilling
on the ROM pad;
underground stope voids. This minimises the mine
• An upgrade of the dust collection system in the screening
footprint by reducing the need for larger tailings and
house with new dust collectors effectively reducing fine
waste storages;
ore loss and dust discharge;
• Noise and dust from operations being strictly controlled;
• The completion and acceptance of the 2018 clean
• Commencement of rehabilitation work on Tailings
Dams 1 & 2. This work has included battering the waste
production targets with the targeted reduction in heavy
metal confirmed;
dump slope and sheeting with soil ready for vegetation;
• The purchase of mist cannon and vacuum trucks for
• 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;
• Maximum recycling of dry tailings by transportation
to a local brickworks for use as base material in brick
manufacturing;
• A dedicated waste collection building to accumulate
Caijiaying Mine waste prior to sorting, collection and
recycling where possible;
These environmental best practices have been recognised
in the past by the Chinese Government with Hebei Hua
Ao being presented with the Environmental Award and the
Mine Development Outstanding Achievement Award at
successive China Mining Conferences.
dust suppression leading to a substantial improvement
in dust control at the Caijiaying Mine;
• The blending of semi-coke coal with common coal for
use in boilers to reduce the discharge of smoke, sulphur
dioxide and nitric oxide. The site boiler chimney was
also waterproofed to ensure no irregular discharge and
safety of operation;
• The planting of 570 Spruce trees around the new
carpark at the entrance to the Caijiaying Mine gate;
• The accommodation camp courtyard has been expanded
and the hardened area enlarged with further greening
continuing including substantial vegetable gardens and
flower beds; and
• Tailings recycling being
further enhanced with
73,672.82 cubic metres of tailings shipped to a local
brickworks which reduced the pressure of tailings
storage and environmental encroachment.
18
Griffin MininG LiMited COMMUNITY RELATIONS
The Company, through Hebei Hua Ao, has invested heavily
During 2018, Hebei Hua Ao paid RMB234m ($34.8m)
in the local community with Hebei Hua Ao providing:
(2017: RMB191 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 Zhangbei County and one
of the largest in Zhangjiakou City prefecture.
•
In 2018, the drilling, construction and operation of a
new water bore at Caijiaying village providing abundant
and excellent quality water whilst maintaining the
original water bore as a standby water supply;
• Construction and maintenance of sealed and reinforced
roads in the greater Caijiaying area;
• Construction of a pedestrian and traffic bridge into the
west side of Caijiaying Village;
• Finance for the construction of a local Kindergarten
and Primary school, an Old Age Care Home and other
infrastructure projects in the Caijiaying greater area;
• Winter coal supplies to the local primary and secondary
schools;
• Establishment of “Project Hope” to provide scholarships
to local students for ongoing study at primary, secondary
and tertiary levels, including scholarships to overseas
tertiary institutions;
• Donating the time of expatriate workers from the
Caijiaying Mine every week to teach English at the local
township school;
• Supplementary pension payments to the elderly in the
Caijiaying area;
• Financial hardship alleviation support to local village
residents;
• Entertainment allowances for local cultural events;
• Traditional local specialties for annual cultural events
such as the Chinese Lunar New Year, Dragon Boat
Festival and the mid-Autumn Festival; and
• 500 head of cattle to Caijiaying village to successfully
create a dairy and cattle farm to ensure a more
sustainable annual income less reliant on the seasonality
of crops grown in the short summer months.
It is estimated that the Caijiaying Mine currently provides
direct and indirect employment to over 1,000 Chinese
nationals.
19
RepoRt and accounts 2018 20
Griffin MininG LiMited Sinking of the New Internal Fresh Air Shaft
21
RepoRt and accounts 2018 FinanCial results
In 2018, the Company and its subsidiaries (together the
Administration expenses (including those of the Caijiaying
“Group”) recorded;
• Revenues of $99,067,000 (2017: $126,657,000);
• Operating profits of $35,555,000 (2017: $63,773,000);
• Profit before tax of $34,798,000 (2017: $60,877,000);
• Profit after tax of $25,477,000 (2017: $43,321,000); and
Mine) have fallen 4.4% to $17,714,000 from $18,524,000
in 2017. This reduction was mainly due to lower service
fees paid to Hebei Hua Ao’s Chinese shareholder, Yuanrun,
of $3,732,000 in 2018 compared with $5,900,000 in
2017. Otherwise, administration costs were up reflecting
inflationary pressures in China, the pursuit of the mining
licence over Zone II and the expansion of activities of
China Zinc Limited, the Company’s wholly owned Hong
• Basic earnings per share of 14.83 cents (2017: 24.63
Kong investment and services subsidiary, in investigating
cents).
Lower profits in 2018 from the record results in 2017
potential ventures elsewhere in China. Central Company
costs incurred outside China have been reduced.
resulted primarily from falling zinc metal prices received
Foreign exchange gains of $42,000 (2017: $87,000) were
and lower metal in concentrate production from lower head
recorded in 2018.
grades.
Following the repayment of all bank loans in 2017, interest
Zinc metal in concentrate sales before royalties and
of $223,000 was received on bank deposits in 2018 compared
resource taxes in 2018 amounted to $78,821,000 compared
with $143,000 in 2017.
with $99,886,000 in 2017. Lead and precious metal in
concentrate sales amounted to $24,920,000 compared with
$32,758,000 in 2017.
Following the latest upgrade to the processing facilities,
losses on the disposal of redundant plant and equipment of
$939,000 were recorded in 2018 compared to $1,067,000
In 2018, metal in concentrate sales were:
in 2017.
• Zinc 36,672 tonnes (2017: 43,342 tonnes);
No bank loan interest was incurred in 2018 compared with
• Gold 16,206 ounces (2017: 20,489 ounces);
• Silver 279,632 ounces (2017: 310,611 ounces); and
• Lead 1,027 tonnes (2017: 1,421 tonnes).
$1,772,000 in 2017. Finance costs on the lease of the dry
tailings facility at Caijiaying of $283,000 were incurred in
2018 compared with $447,000 in 2017.
Income taxes of $9,321,000 (2017: $17,556,000) have been
charged in 2018. This includes a deferred taxation credit of
Average prices achieved in 2018 were:
$343,000 (2017: charge $95,000).
• Zinc metal per tonne of $2,149 (2017: $2,305);
• Gold metal per ounce of $1,173 (2017: $1,183);
• Silver metal per ounce of $12.60 (2017: $13.50); and
Basic earnings per share in 2018 was 14.83 cents (2017:
24.63 cents) and diluted earnings per share was 13.35 cents
(2017: 22.97 cents).
Cash generated from operations has been used to reduce
• Lead metal per tonne of $2,250 (2017: $2,242).
liabilities resulting in net cash flow from operating activities
Cost of sales of $45,798,000 in 2018 were up 3.2% on
that incurred in 2017 of $44,360,000. This increase may
be attributed to inflation in China with consequent wage
increases, higher costs incurred extracting ore from greater
of $20,439,000, $16,884,000 of which has been expended
in further development of the Caijiaying Mine including
equipment and exploration. In addition, 540,000 shares in
the Company were bought in at a cost of $917,000.
depth, higher costs incurred backfilling waste material and
Attributable net assets per share at 31 December 2018 was
tailings to minimise surface storage of tailings, higher power
$1.22 (2017: $1.13).
charges and changes in the recoverability of Chinese VAT
inputs.
22
Griffin MininG LiMited strategiC review
The objective of the directors and management is to
ACQUISITIONS AND FURTHER
ensure the long term sustainability of the Company and its
business to benefit its shareholders and other stakeholders.
To achieve this objective, the directors and senior executives
seek to add value, manage risks and minimise costs whilst
pursuing economic returns commensurate to the risk taken
pursuing the following strategy.
PROJECTS
Whilst the Company continues to develop the Caijiaying
Mine and explore the surrounding area, it also continues
to search for, and investigate, other potential acquisitions
of base metals projects that may be brought into long term,
economic production for a capital cost that provides a
In view of the significant potential of the Caijiaying Mine
substantial and justifiable return on equity to shareholders.
and surrounding areas and given the Company’s knowledge
This does not include virgin, exploration ground, which
and expertise in China, the directors and management have
requires
long term exploration techniques, planning
focused on the further development of the Caijiaying Mine,
and licencing prior to any possible construction and
investigation of prospective areas near the Caijiaying Mine
commissioning of an operating mine. Any such projects
and other potential projects in other provinces of China. In
found which match this criteria will be either ignored, or
addition, the directors and senior executives evaluate other
if seemingly of value, sold, joint ventured or offered in a
mining companies and projects worldwide to ascertain
separate vehicle to existing Griffin shareholders.
whether any acquisition can be made which has the
possibility of matching the extraordinary returns provided
by the Caijiaying Mine.
CAIJIAYING
To effect this strategy, in 2018, the Company expanded the
scope and activities of China Zinc Limited to encompass
this new corporate goal. A China Development Manager
and a local Hong Kong director were appointed with briefs
to investigate mining tenements and projects in China and
The Caijiaying Mine’s metal production capability has been
create a data base of the geology, exploration and mining
augmented with continued extensive exploration, expansion
activities in China. To date, this strategy has proved
of the mill processing facilities including grinding and
successful and an extensive data base has been created and
flotation circuits and ongoing underground infrastructure
numerous projects evaluated. No binding agreement has yet
development. Exploration has been focussed on identifying
been executed with any property, person or Chinese entity.
geological targets and evaluating the potential for significant
additional resources. Whilst the existing Mineral Resource
estimate confirms the availability of extensive resources
at the Caijiaying Mine for increased production, further
resource additions will provide an opportunity to further
increase the Caijiaying Mine’s production profile. This
includes more extensive exploration not only at Zones II &
III, but also at Zones V & VIII, which require extensive
further drilling to fully understand the size and nature of
these orebodies. Whilst the grant of a mining licence over
Zone II will permit production to be raised to 1.5 million
tonnnes per annum, further expansion of operations will
require further licences and permits from various Chinese
authorities which are proving increasingly complex and
time consuming to obtain.
In addition, a large number of potential mining projects
have been analysed worldwide. None have been successfully
consummated for a myriad of reasons including negative
findings during due diligence, a questionable return
calculated for the risk shareholders would need to accept
in funding the project to production, the overall project
risk profile and various other deficiencies in grade, tonnes,
metallurgy, depth and difficulty in mining.
23
RepoRt and accounts 2018 24
Griffin MininG LiMited Construction of the new Paste-Fill Plant at the Caijiaying Mine
25
RepoRt and accounts 2018 Corporate governanCe
Griffin is incorporated in Bermuda, a jurisdiction which
• Prior approval of capital and other significant
does not have a formal overarching corporate governance
expenditure;
code. Under common law in Bermuda, shareholders are
entitled to have the affairs of the Company conducted
in accordance with general law and the Company’s
memorandum of association and bye-laws. The Company
and its directors having reviewed and considered the
various corporate governance codes and have adopted the
Corporate Governance Code published by the UK Quoted
Company Alliance (“QCA”) and the principles contained
therein. In effect, the directors continue to seek to add
value, manage risks and minimise costs to ensure the long
term sustainability of the Company and its business.
The board of directors (the “Board”) includes a number
of non-executive directors who, with the exception of
Adam Usdan, 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.
The Board has formally established an audit committee
and a remuneration committee. The audit committee and
remuneration committee reports are given on pages 28
to 32. In view of the size of the Company and stability of
the Board of directors and senior executives, a nomination
committee has not been established but will be appointed as
the need arises.
As required by Bermuda company law, all the directors are
shareholders in the Company to align their interests with
that of the shareholders.
Various safeguards and checks have been instigated as part of
the Company’s system of financial controls. These include:
• Preparation of regular financial reports and management
accounts;
• Preparation and review of capital and operational
budgets;
• Preparation of regular operational reports;
• Regular review and assessment of foreign exchange risk
and requirements; and
• Regular review of commodity prices and assessment of
hedging requirements.
The directors recognise the principles in the QCA code and
unless explained below have applied these principles where
appropriate. In this regard:
• Strategy: 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 are focused on the further
development of the Caijiaying Mine, investigation of
prospective areas near the Caijiaying Mine and other
potential projects in China. In addition the Company’s
directors and management continue to evaluate other
mining companies and projects worldwide for potential
acquisitions.
• Shareholder expectations: The Chairman and Finance
Director maintain regular contact with significant
shareholders and the Company retains an office in
London as a point of contact for all shareholders and
potential shareholders in order to gauge the needs and
expectations of shareholders in the Company.
• Stakeholders: The Company through Hebei Hua Ao
has invested heavily in the local community in China
and continues to maintain and further implement best
practices for the protection of the environment and for
the benefit of the local community. Further details are
given on pages 18 to 19.
• Risks: The Company and its directors have identified
and keep under consideration the risks facing the
Company and its subsidiaries (“the Group”). These risks
and how they are managed are detailed in the directors’
report on pages 39 to 41.
• Board of directors, structure: The board of directors
is headed by a Chairman, who whilst not employed by
the Company, spends a significant part of his time on
the Company’s business thereby acting in the nature of
an Executive Chairman of the Company. The Company
has no Chief Executive Officer. Accordingly the roles
of Chief Executive Officer and Chairman have not
26
Griffin MininG LiMited been separated as recommended by the QCA code for
• Shareholder communications: In addition to the
the above reason. The board also includes a full time
publication of annual and interim reports, regulatory
executive Finance Director as well as two independent
news releases and maintaining a web site, as
non executive directors.
• Board of directors, skills: The existing board of
directors brings a balance of skills and experience to the
aforementioned, the Company communicates directly
with major shareholders and maintains an office in
London, in part, as a point of contact with shareholders.
Company, including legal, financial, mining, geological
Further details are provided on the Company’s website.
and market expertise. Details of each director are given
in the biographies of each director on page 34.
• Board performance: The
independent directors
regularly consider the effectiveness and performance
of the Chairman and Finance Director and vice-versa.
A remuneration committee has been appointed with
a brief to set performance criteria. All nominations
are considered by the main board of directors of the
Company.
• Corporate culture: Both the Chairman and Finance
Director regularly visit the Group’s operations to meet
with management and other personnel. The Board of
directors meets at least once a year at the Caijiaying
Mine and elsewhere during the year. The safety of
all personnel working at the Group’s operations is a
priority with formal procedures in place to prevent and
report any safety and environmental issues. The Group
will not deal with any organization or individual which
it believes to be involved with slavery. The Company
has formal procedures regarding the avoidance of
bribery and corruption. The Group engages personnel
regardless of race or gender.
• Governance structures: The Company has appointed
a Chief Operating Officer who reports directly to the
Chairman, who in turn reports directly to the board
of directors. The Chief Operating officer oversees the
Group’s operations with individual department heads
reporting directly to him. The Company has appointed
a Chief Financial Officer in China who reports to
both the Chief Operating Officer and directly to the
Finance Director, who in turn reports to the board of
directors. Individual department managers are able
to communicate directly to the Chairman concerning
any issues of concern. The board of directors has
responsibility for setting the overall strategy of the
Group, its performance, management and financial
matters including, inter alia, the approval of budgets,
significant capital expenditure and financial reports.
27
RepoRt and accounts 2018 REPORT OF THE AUDIT COMMITTEE
To comply with Corporate Governance requirements set by
Internal Controls and Risk Management
AIM in 2018 an audit committee was formed comprising
the non-executive directors Dal Brynelsen, Rupert Crowe
Systems
and Adam Usdan.
The Audit Committee:
The Role of the Audit Committee
The Audit Committee assists the Board in its oversight of
the Company’s financial reporting, internal control and
risk management. In this regard, the Audit Committee is
charged with carrying out the following.
Financial Reporting
The Audit Committee monitors the integrity of the
financial statements of the Company, including its annual
and interim reports, preliminary results and any other
formal announcement relating to its financial performance
whilst reviewing significant financial reporting issues and
judgements contained within those announcements. The
Audit Committee also reviews summary financial statements,
significant financial returns to regulators and any financial
information contained in certain other documents, such as
announcements of a price sensitive nature.
The Audit Committee reviews and challenges where
necessary:
(a) The consistency of, and any changes to, accounting
policies, both on a year on year basis and across the
Company and its Group;
(a) Keeps under review the effectiveness of the Company’s
internal controls and risk management systems; and
(b) Reviews and approve the statements to be included in
the Annual Report concerning internal controls and risk
management.
Whistle blowing
The Audit Committee reviews the Company’s arrangements
for its employees to raise concerns, in confidence, about
possible wrongdoing in financial reporting or other matters.
The Audit Committee ensures that these arrangements
allow proportionate and independent investigation of such
matters and appropriate follow up action.
External Audit
The Audit Committee:
(a) Considers and makes recommendations to the Board,
to be put to shareholders for approval at the annual
general meeting, in relation to the appointment, re-
appointment and removal of the Company’s external
auditors. The Audit Committee oversees the selection
process for new auditors and if an auditor resigns the
Audit Committee shall investigate the issues leading to
(b) The methods used to account for significant or unusual
this and decide whether any action is required;
transactions where different approaches are possible;
(b) Oversees the relationship with the external auditors
(c) Whether the Company has followed appropriate
including (but not limited to):
accounting standards and made appropriate estimates
and judgements, taking into account the views of the
external auditor;
(i) Approval of their remuneration, whether fees for
audit or non audit services and that the level of fees
is appropriate to enable an adequate audit to be
(d) The clarity of disclosure in the Company’s financial
conducted;
reports and the context in which statements are made;
and
(ii) Approval of their terms of engagement, including
any engagement letter issued at the start of each
(e) All material information presented with the financial
audit and the scope of the audit;
statements, such as the Operations and Financial Results
and the corporate governance statement (insofar as it
relates to the audit and risk management).
(iii) Assesses annually the auditors’ independence and
objectivity taking into account relevant national,
professional and regulatory requirements and the
relationship with the auditors as a whole, including
the provision of any non-audit services;
28
Griffin MininG LiMited (iv) Satisfies that there are no relationships (such as
(h) Develops and implements a policy on the supply of
family, employment,
investment, financial or
non audit services by the external auditors, taking into
business) between the auditors and the Company
account any relevant ethical guidance on the matter.
(other than in the ordinary course of business);
In order to fulfil these duties, the Audit Committee receives
(v) Agree with the Board a policy on the employment
regular financial and other reports from management and
of former employees of the Company’s auditor,
has unfettered access to employees of the Company and its
then monitoring the implementation of this policy;
subsidiaries.
(vi) Monitors the auditors’ compliance with relevant
Having been formed during 2018, the Audit Committee has
ethical and professional guidance on the rotation
yet to fulfil a full year of its duties and as a result has only
of audit partners, the level of fees paid by the
met on two occasions since being formed.
Rupert Crowe
Chairman of the Audit Committee
29 April 2019
Company compared to the overall fee income
of the firm, office and partner and other related
requirements; and
(vii) Assesses annually the auditors’ qualifications,
expertise and resources and the effectiveness of
the audit process which shall include a report from
the external auditor on their own internal quality
procedures;
(c) Meets regularly with the external auditors, including
once at the planning stage before the audit and once
after the audit at the reporting stage. The Audit
Committee is required to meet the external auditor at
least once a year, without management being present, to
discuss their remit and any issues arising from the audit;
(d) reviews and approves the annual audit plan and
ensures that it is consistent with the scope of the audit
engagement;
(e) Reviews the findings of the audit with the external
auditors. This includes but is not limited to, the
following:
(i) Discussion of any major issues which arose during
the audit,
(ii) Any accounting and audit judgements, and
(iii) Levels of errors identified during the audit.
(e) Reviews the effectiveness of the audit;
(f) Reviews the representation letter(s) requested by the
external auditors before they are signed by management;
(g) Reviews the management letter and management’s
response to the auditors’ findings and recommendations;
and
29
RepoRt and accounts 2018 REPORT OF THE REMUNERATION COMMITTEE
To comply with Corporate Governance requirements
Nevertheless, having been formed in 2018, the Remuneration
set by AIM in 2018, a remuneration committee (the
Committee is currently assessing various remuneration
“Remuneration Committee”) was formed comprising the
policies to attract and retain future high-calibre executives
non executive directors Dal Brynelsen and Adam Usdan.
and motivate them to develop and implement the Group’s
The Role of the Remuneration Committee
value. It is the intention that this policy will build on past
business strategy in order to optimise long-term shareholder
The Remuneration Committee
is
responsible
for
determining and agreeing with the Board the broad
policy for the remuneration and employment terms of the
executive directors, Chairman and other senior executives
and, in consultation with the Chairman, for determining
the remuneration packages of such other members of the
executive management of the Group, as it is designated
practice and apply in the future.
The policy is being framed around the following key
principles:
• Total rewards will be set at levels that are sufficiently
competitive to enable the recruitment and retention of
high-calibre executives;
to consider. The Committee is also responsible for the
• Total incentive-based rewards will be earned through
review of, and making recommendations to, the Board in
the achievement of performance conditions consistent
connection with share option plans and performance related
with shareholder interests;
pay and their associated targets and for the oversight of
employee benefit structures across the Group.
• The design of long-term incentives will be prudent and
will not expose shareholders to unreasonable financial
Apart from the one executive director, all the other Company
risk;
executives are either employed by operating subsidiaries or
independent contractors (contracting through professional
service companies). Almost all of these executives or service
companies are employed or retained by Hebei Hua Ao. As
such, and as an operating mining company, Hebei Hua Ao
has always applied remuneration standards commensurate
with local and international mining industry standards and,
far more importantly, the legal and cultural traditions of the
People’s Republic of China.
The remuneration of non executive directors is a matter for
the Board. No director may be involved in any decision as
to their own remuneration.
This Remuneration Committee report includes a summary
of the remuneration policy and the Annual Report on
Remuneration.
Directors’ Remuneration Policy
With only one executive director in the Group, it would
be inflexible, bureaucratically cumbersome and therefore
•
In considering the market positioning of reward
elements, account will be taken for the performance of
the Group and of each individual executive director; and
• Reward practice will conform to best practice standards
as far as reasonably practicable.
When formulating the scale and structure of remuneration,
the Remuneration Committee considers a number of
different factors including market practice and external
market data of the level of remuneration offered to directors
of similar type and seniority in other companies of the size
and activities of the Company.
In addition, the pay and employment conditions of
employees are also considered when determining directors’
remuneration. The Remuneration Committee may also seek
advice from external consultants where appropriate and the
services of FIT Remuneration Consultants were retained
during 2018/2019. No director was involved in deciding the
level and composition of their own remuneration.
inappropriate to have an extensive and prescriptive formula
The executive director receives an amount of fixed pay made
for determining one employee’s
total compensation
up of a base salary, fixed fees from subsidiary companies and
package. Accordingly the executive director’s remuneration
pension contribution.
is considered by the Remuneration Committee, with the
assistance of outside executive compensation consultants,
on a year by year basis.
30
Griffin MininG LiMited No bonuses in recognition of short term performance
to the Company in Australia, including support staff and
were paid by the Company to any of the directors in 2018
offices. The Chairman, Mladen Ninkov, is a director and
but may do so in the future depending on various factors
employee of Keynes Investments Pty Ltd.
outlined above.
Under a consultancy agreement with the Company, Keynes
Long-term performance is incentivised by way of the grant
Capital received fees of $2,137,000 (2017: $2,235,000), for
of share options.
The Board seeks to strengthen the alignment of director,
employee and shareholder interests.
the provision of advisory and support services to Griffin and
its subsidiaries in 2018. This consultancy agreement runs
from 1 July 2017 to 30 June 2019.
In addition to the above, the Chairman received directors
Executive Directors’ Remuneration for 2018
fees from subsidiary companies of $138,000 in 2018 (2017:
The executive directors’ base salary was last increased with
effect from 1 January 2014.
No bonus was paid to the executive director in 2018.
In 2018, Roger Goodwin (Finance Director and Company
Secretary) received a basic salary of £315,000 (2017:
£315,000) and pension contributions of £30,000 (2017:
£30,000). In addition, he received director’s fees of $138,000
(2017: $125,000) from subsidiary companies.
The service contract between the Company and Roger
Goodwin provides for three months notice by either side
$125,000).
Long Term Incentives
In November 2018, with the unanimous agreement of all the
issued option holders, the exercise periods were extended
for outstanding share purchase options over:
• 4,350,000 new ordinary shares (vested) exercisable at 40
pence per new ordinary share;
• 10,732,500 new ordinary shares (vested) exercisable at
30 pence per new ordinary share; and
or six months in the event of a change of control of the
• 6,666,667 new ordinary shares (currently not vested)
Company.
Chairman
The Chairman has dedicated a significant portion of his time
to the Group and its operations and, as such, substantially
fulfils the role of a Chief Executive Officer. His services are
provided through a service entity, Keynes Capital, being the
registered business name of Keynes Investments Pty Ltd as
trustee for the Keynes Trust. In addition to the services of
the Chairman, Keynes Capital provides supporting services
exercisable at 30 pence per new ordinary share.
This is from 31 December 2018 in respect of the options
exercisable at 40 pence per share and from 31 December
2020 in respect of the options exercisable at 30 pence
per share, to the 31 December 2022. This was aimed at
preventing the need, in the short-term, for the majority of
the option holders, once exercising their options, to sell a
significant portion of the resulting issued shares to meet
the associated subscription costs and personal income tax
liabilities imposed on such exercise.
The following directors and senior executives agreed to the extension of options in which they have an interest:
Name
Number of options
exercisable at 40 pence
per new ordinary share.
Vested
Number of options
exercisable at 30 pence
per new ordinary share.
Vested
Number of options
Vested at 40 pence
per new ordinary share.
Unvested
Roger Goodwin Finance director
500,000
Dal Brynelsen Director
Rupert Crowe Director
Adam Usdan Director
Mark Hine Chief Operating Officer
-
-
-
-
1,000,000
600,000
600,000
-
125,000
500,000
300,000
300,000
1,166,666
125,000
31
RepoRt and accounts 2018
REPORT OF THE REMUNERATION COMMITTEE (CONTINUED)
As detailed in the Director’s Report on pages 38 and 39,
Performance Incentives
the options exercisable into new ordinary shares of the
Company at an exercise of £0.40 per share were granted on
Having been formed in 2018, the Remuneration Committee
13 February 2014 and have all now vested.
As detailed in the Director’s Report on page 39, the options
exercisable into new ordinary shares of the Company at
an exercise of £0.30 per share were granted on 6 February
2015, two thirds of which have vested with a further third
of each holder’s options vesting on the granting of a new
mining licence over Zone II at the Caijiaying Mine.
The options will not vest if an employee or a director resigns
or leaves the Company for cause prior to the vesting event
taking place and 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.
is consulting on short term bonus payments and a long term
incentive plan in order to incentivise directors and senior
executives. This will take account of the financial and
operational performance of the Group.
Non Executive Directors
The non-executive Directors’ fees were reviewed with effect
from 1 July 2017 to take account of the time commitment
and responsibilities of the non executive Directors. In order
to compensate the non executive directors who are based
outside the UK for the fall in the value of sterling, their
fees were increased from £57,500 per annum to £66,125 per
annum with effect from 1 July 2017.
In addition to the above Mr Dal Brynelsen received fees of
$114,000 (2017: $113,000) for acting as a director of Hebei
Hua Ao.
Total Directors’ Remuneration
The table below sets out the total remuneration payable to the Directors:
2018
2017
Fees
Salary
Pension Total
Fees
Salary
Pension
Total
Contributions
Contributions
$000
$000
$000
$000
$000
$000
$000
$000
Mladen Ninkov*
Dal Brynelsen
Rupert Crowe
Roger Goodwin
Adam Usdan
Total
138
203
89
138
89
657
-
-
-
424
-
424
-
-
-
40
-
138
203
89
602
89
40
1,121
125
199
97
125
86
632
-
-
-
440
-
440
-
-
-
38
-
38
125
199
97
603
86
1,110
*Keynes Capital, the registered business name of Keynes
Details of the share options and shares held by the directors
Investments Pty Ltd as trustee for the Keynes Trust,
are given on page 38.
received fees under a consultancy agreement of $2,137,000
(2017: $2,235,000) for the provision of advisory and
support services to Griffin and its subsidiaries during the
year. Mladen Ninkov is a director and employee of Keynes
Investments Pty Ltd.
No share options were granted to the directors in 2018 or
2017. In 2018, Adam Usdan exercised options over 2,333,333
new ordinary shares in the Company at an exercise price of
£0.30 per share. Otherwise, no other options were exercised
by the directors in 2018 and 2017.
Dal Brynelsen
Chairman of the Remuneration Committee
29 April 2019
32
Griffin MininG LiMited
Dust Suppressor in Operation at the Caijiaying Mine
33
RepoRt and accounts 2018 DireCtors
Mladen Ninkov, Chairman, Australian, holds a Master
Rupert Crowe, Director, Australian,
is a graduate
of Law Degree from Trinity Hall, Cambridge and Bachelor
geologist from Trinity College Dublin. He was the founding
of Laws (with Honours) and Bachelor of Jurisprudence
chairman and managing director of CSA Global Pty Ltd, a
Degree from the University of Western Australia. He is the
mining consultancy company founded in Ireland in 1983
principal of Keynes Capital. He has a mining, legal, fund
and now headquartered in Australia. He is a specialist in
management and investment banking background and is
zinc-lead exploration and was involved as a principal in the
admitted as a barrister and solicitor of the Supreme Court
discovery and development of several notable mines. He
of Western Australia. He was the Chairman and Managing
has served on the board of four public companies listed in
Director of the Dragon Capital Funds management group,
Dublin, London, Vancouver and Australia.
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.
Adam Usdan, Director, USA, 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
Roger Goodwin, Finance Director, British, is a Fellow
investment advisory industry for over 25 years. Mr Usdan
of the Institute of Chartered Accountants in England and
began his investment career in 1987 at Odyssey Partners,
Wales. He has been with the Company since 1996 having
where he was responsible for managing long/short U.S.
previously held senior positions in a number of public and
equity (small to mid-cap) pools of capital.
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, 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 was the President
and a director of Vangold Resources Limited.
34
Griffin MininG LiMited senior exeCutives
Mark Hine, Chief Operating Officer, Australian, is
Limited in China; Bariq Mining Ltd in Saudi Arabia; Downer
a mining engineer having graduated from the Western
Mining Limited in Papua New Guinea; Eldorado in China;
Australia School of Mines, a member of the Australian
and Xstrata in Australia.
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 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
Glenn Sheldon, China Zinc Business Development
Manager, Australian, is a geologist holding a BSc from
Adelaide University. He is a Fellow of the AusIMM and AIG,
Member of SocEcGeol. He is fluent in Mandarin Chinese
with special emphasis on geological and mineral industry
Chinese. Prior to joining Griffin he was Principal Geologist
for Mining Associates, providing competent person services
to inter alia the Hong Kong Stock Exchange. Prior to
that he was Vice President Exploration for RH Mining
Resources Ltd in Hong Kong; Business Development
Manager Exploration East Asia for Sandvik Mining and
Construction; JV General Manager Dragon Mountain
Wendy Zhang, Chief Financial Officer, Hebei Hua
Gold in China; Exploration Manager, Lotus Resources plc
Ao, holds a Master of Accounting degree from Macquarie
in Mongolia; Chief Representative for Centerra Gold Inc in
University, a member of the Certified Practising Accountant
China; President and Exploration Manager for TVI Pacific’s
of Australia and a qualified member of the Chinese Institute
China WOFE - Hunan Pacific Geological Exploration Inc;
of Certified Public Accountant for 11 years. Prior to joining
Site Manager Jinfeng for Sino Gold Limited; Exploration
Griffin she spent the previous 4 years as Financial Controller
and Business Development Manager for Newmont China
for Golden Tiger Mining’s joint venture operations in China.
Limited.
Previously she was Chief Accountant for Shanghai Silk
Group and subsequently Ann Taylor Shanghai.
Shirley Tsang, Director, China Zinc Limited, British, is a
Chartered Management Accountant (United Kingdom) and
Dr Bo Zhou, General Manager China, Australian, holds
a CPA (Hong Kong & Australia). She holds a MBA (Finance)
a PhD in exploration geology from Sydney University and a
from the City University Business School, United Kingdom.
BSc in economic geology from Peking University. He was
She started her career as an auditor with Ernst & Whinney,
Managing Director of Sinovus Mining Ltd, an ASX listed
and moved on to business advisory practice for international
company with mineral interests in China. Prior to that he
clients with Arthur Young. She had witnessed the global
was the General Manager for Guangxi Golden Tiger Mining
merger of Ernst & Whinney and Arthur Young, forming
JV, a Sino-Australian JV gold company focussed on Guangxi,
Ernst & Young in 1990 and sale of business in 2002 and 2017
China, controlled by Golden Tiger Mining NL, an ASX listed
respectively, of the Tricor Group. She was head of the China
company. He has also worked as the Senior Geologist for
and Hong Kong business advisory practice from 2003 to
Silk Road Resources (A Toronto listed company), responsible
2017 in the Tricor Group. She has considerable experience
for evaluating various gold properties in Gansu Province in
in corporate restructuring for international clients, and best
central western China. Dr Zhou has considerable experience
practice in corporate governance. She is currently Managing
in the Chinese resources sector.
Director of SEAJA Consultancy Limited.
Damian Houseman, General Manager Caijiaying Mine,
Australian, holds a diploma in mining from the School of
Science and Engineering, Ballarat University, Victoria,
Australia (now Federal University of Australia). He has over
23 years’ experience in the underground mining industry
from underground operator to senior management roles.
Prior to joining Griffin he was underground mine manager
at Centamin’s Sukari Gold Mine in Egypt. Previously he was
with; Ausino Drilling Services Pty Ltd in China; RH Mining
35
RepoRt and accounts 2018 Left to Right, Front Row:
Fusheng Li, Chief Mining Engineer; Mark Hine, Chief Operating Officer; Jack Jia, Mill Manager;
Jinshan Liu, Community Liaison Manager; Shikao Li, Administration Manager;
36
Griffin MininG LiMited Second Row: Ian Lin, Mill Deputy Manager; John Zhang, Safety Manager;
Bo Zhou, Griffin Chief China Representative;
Dal Brynelsen, Director, Griffin; Susan, Executive Assistant to the Operations Manager;
Wendy Zhang, Chief Financial Officer; Cathy Jia, Human Resources Manager;
Adam Usdan, Director, Griffin; Graham Younge, Paul Benson, Geology Manager;
Back Row: Rupert Crowe, Director, Griffin; Mladen Ninkov, Chairman, Griffin;
Roger Goodwin, Finance Director, Griffin.
37
RepoRt and accounts 2018
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 2018.
FinanCial results
The Group profit before taxation for 2018 amounted to US$34,798,000 (2017 US$60,877,000). Taxation of US$9,321,000 (2017
US$17,556,000) has been provided. No dividends were paid in 2018 (2017 nil). US$25,477,000 has been credited to reserves
(2017 credited US$43,321,000).
The basic earnings per share amounted to 14.83 cents (2017 24.63 cents). The attributable net asset value per share at 31
December 2018 amounted to 122 cents (2017 113 cents).
In view of the need for funds for the development of Zone II at Caijiaying, additional land for tailings facilities and upgrade of
facilities to comply with environmental requirements in China, 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 2018 and the indication of likely future developments are set out on pages 6 to 23.
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 2018 and their immediate families in the share capital of
the Company were as follows:
Name
At 31 December 2018
At 1 January 2018
Ordinary
shares,
number
Options over ordinary
shares, number
exercisable at
30 pence
40 pence
Mladen Ninkov
Dal Brynelsen
Rupert Crowe
33,001
397,001
1
-
900,000
900,000
-
-
-
Ordinary
shares,
number
33,001
397,001
1
Options over ordinary
shares, number
exercisable at
30 pence
40 pence
-
900,000
900,000
-
-
-
Roger Goodwin
877,830
1,500,000
500,000
877,830
1,500,000
500,000
Adam Usdan
33,242,890
1,166,667
-
30,359,556
3,500,000
-
All of the Directors’ interests detailed are beneficial.
38
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 will entitle the holder to subscribe for new ordinary shares in the Company at an exercise price of £0.40
per share on or before 31 December 2018 subsequently extended to 31 December 2022. 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 will entitle the holder to subscribe for new ordinary shares in the Company at an exercise price of 30 pence
per new ordinary share on or before 31 December 2020 subsequently extended to 31 December 2022. 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.
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.
Risk
Comment
Business
Impact
Mitigation
Economic Risks
Exposure to a fall in
zinc, gold, silver and
lead metal prices.
Revenue is dependent upon metal
prices.
High
Exposure to fluctuations
in the Renminbi / US
dollar exchange rate.
Moderate
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 costs.
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.
Renminbi
to
The
pegged
Griffin
appropriateness
Renminbi.
the
of
keeps under
is
US
review
hedging
loosely
dollar.
the
the
Exposure to increases
in the market prices of
equipment
materials,
and services the Group
uses.
The Group
to
is
increases in the market prices for
materials, services and equipment.
subject
Moderate
The Group seeks to agree long term
contracts for all major services and goods
supplied.
39
RepoRt and accounts 2018
DireCtors’ report
prinCipal risks anD unCertainties ContinueD
Risk
Comment
Business
Impact
Mitigation
Country Risks
Exposure to political
and social risks in the
Peoples Republic of
China (“the PRC”).
Griffin’s assets are located in the
PRC and therefore exposed to any
adverse changes in the political and
social situations there.
Exposure to changes
in fiscal and regulatory
regime.
In addition to political/social risks,
the Group is exposed to changes in
permitting, environmental, health
and safety, and tax regulations in
the PRC which may result in a more
challenging, or costly, operating
environment.
Low
High
The Group has operated in the PRC for
over 20 years in which time the country
has been relatively stable, and anticipates
near term stability in the country.
Griffin actively engages with the local
PRC authorities and agencies to identify
and minimise the impact of changes in
PRC regulations.
Operational Risks
Reliance on Third
Party Contractors
Moderate
inherent
Griffin uses a number of related and
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
a
take
substantial time to recommence.
risk,
Exposure to mining
hazards
Moderate
The Group is exposed to a number
of risks and hazards
typically
associated with mining for example
rock falls, flooding and mechanical
breakdowns.
Griffin has an extensive occupational
Health and Safety Department
in
conjunction with a Mining Manager
and his team of underground foremen
who constantly oversee all contractors’
activities, inter alia, punishing and fining
construction for safety breaches. Griffin
keeps under consideration moving to
owner operated activities.
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
The calculation of Mineral 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.
40
Griffin MininG LiMited DireCtors’ report
Risk
Comment
Business
Impact
Mitigation
Other Risks
Exposure to a single
operation
Licence administration
is reliant upon a single
Griffin
operation, being
the Caijiaying
zinc gold mine in the PRC. Factors
affecting operations at Caijiaying
have an impact upon the Group.
Moderate
It is the Company’s policy to pursue
growth opportunities through expansion
in the Caijiaying area, as well as reviewing
acquisition opportunities which can be
shown to be value accretive.
its
through
Griffin,
subsidiary
companies, holds a number of mining,
exploration and other licenses and
permits to operate. These normally
for ongoing
include
operation
require periodic
renewal. Renewals are not guaranteed.
conditions
and
High
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.
Key management
Moderate
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.
Griffin has contractual arrangements with
all key employees which are renewed on a
regular basis.
suitably qualified
Sufficient
senior
management are retained at the Caijiaying
mine to provide for back up and roster
rotation with additional support from
external consultants
Geological and
Historical Information
loss of historical
The
and/or
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.
Moderate
Bribery and Corruption Whilst strict internal policies and
procedures to ensure compliance with
applicable laws are applied to prohibit
all forms of bribery and corruption
the risk remains that employees or
contractors have circumvented these
policies and procedures which could
result in prosecution of the Group and
its officers.
The Group prohibits bribery
and
corruption in any form by directors,
employees or by those working for and/
or connected with the business. With the
advice and support of the Group’s lawyers
the Group has implemented anti bribery
and corruption policies and procedures
including: Anti-bribery instruction to staff
and third party contractors; On-going
monitoring, including setting up reporting
channels; and Regular review of anti-
bribery reporting policies and procedures.
41
RepoRt and accounts 2018 DireCtors’ report
inDepenDent auDitors
PricewaterhouseCoopers LLP were appointed auditors after a formal tender at a Special General Meeting of the Company held
on 26 September 2018 and have indicated their willingness to continue in office as auditors to the Company and a resolution
proposing their appointment will be put to the forthcoming Annual General Meeting.
statement oF DireCtors’ responsibilities in respeCt oF the FinanCial statements
The directors are responsible for preparing the financial statements in accordance with applicable law and regulation.
The Bermuda Companies Act 1981 requires the directors to prepare financial statements for each financial year. Under that law
the directors have prepared the financial statements in accordance with International Financial Reporting Standards (“IFRSs”)
as adopted by the European Union.
The directors must not approve the financial statements unless they are satisfied that the financial statements 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 the financial
statements, the directors are responsible for:
•
•
selecting suitable accounting policies and then applying them consistently;
stating whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures
disclosed and explained in the financial statements;
• making judgements and accounting estimates that are reasonable and prudent; and
• preparing the financial statements on the going concern basis unless it is inappropriate to presume that the group will
continue in business.
The directors 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 keeping adequate accounting records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group, and enable them to ensure the
financial statements comply with applicable law and regulation.
Directors’ confirmations
In the case of each director in office at the date the Directors’ Report is approved:
•
so far as the director is aware, there is no relevant audit information of which the Group’s auditors are unaware; and
•
they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant
audit information and to establish that the Group’s auditors are aware of that information.
This report was approved by the Board and signed on its behalf by:
Roger Goodwin
Finance Director and Company Secretary
29 April 2019
42
Griffin MininG LiMited inDepenDent auDitors’ report to the members oF
griFFin mining limiteD
report on the auDit oF the ConsoliDateD FinanCial statements
opinion
In our opinion, Griffin Mining Limited’s consolidated financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s affairs as at 31 December 2018 and of its profit and cash flows for the year
then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union; and
• have been prepared in accordance with the requirements of the Companies Act 1981 (Bermuda).
We have audited the financial statements, included within the Report and Accounts 2018 (the “Annual Report”), which comprise:
the Consolidated Statement of Financial Position as at 31 December 2018; the Consolidated Income Statement, the Consolidated
Statement of Comprehensive Income, the Consolidated Cash Flow Statement and the Consolidated Statement of Changes in
Equity for the year then ended; and the Notes To The Financial Statements, which include a description of the significant
accounting policies.
basis For opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
our auDit approaCh
Overview
• Overall Group materiality: $1.7 million, based on 5% of profit before tax.
Materiality
• We conducted full scope audits of three components out of the Group’s nine entities which were
selected due to their size and risk characteristics.
• This enabled us to obtain coverage of 100% of consolidated revenue, 100% coverage of consolidated
Audit scope
profit before tax and 99% coverage of total assets for the Group.
• The Group audit team visited the China operations as part of our audit in order to have sufficient
oversight of the work of our component auditors in China. This included a site visit to the Caijiaying
Key audit
matters
zinc mine.
• Recoverability of resources and impact on property, plant and equipment carrying value and
depreciation; and
• Completeness and valuation of the decommissioning provision.
43
RepoRt and accounts 2018 inDepenDent auDitors’ report to the members oF
griFFin mining limiteD
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all
of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was
evidence of bias by the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which 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, and any comments we make on the
results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified
by our audit.
key auDit matter
how our auDit aDDresseD the key auDit
matter
Recoverability of resources and impact on property, plant
We have obtained management’s life of mine plan and tested
and equipment carrying value and depreciation
the key inputs used in the model which we consider are
See page 58 Significant Judgements and Estimates and note 10
reasonable.
Property, Plant and Equipment.
The assets of the operating mine are owned by Hebei Hua Ao
Mining Industry Company Limited in which the Group has an
88.8% interest through a business licence.
In 2012 the previous business licence was extended to 2037 in a
transaction that included increasing the Group’s interest from
For impairment testing and depreciation a key assumption
is volumes processed before expiry of the current licence in
2037.
We have reviewed management’s production forecasts in the
life of mine plan and concur with the estimate of the amount
of resources which can be recovered before 2037.
60% to 88.8%. The cost to the Group of the transaction was
We have agreed these production forecasts to those used in
$110 million.
the impairment testing and depreciation calculations.
Management expect that they will be able to renew the business
Finally we considered the adequacy of management’s
licence before 2037, however the cost and terms of renewal
disclosure of the key judgements and sensitivities in relation
are not known. As the current mine life extends beyond 2037,
to recoverable resources in the Resource statement on page
due to the uncertainty surrounding extending the business
10 and in the significant estimates and judgements on page
licence, management has restricted recovered resources, for
58.
the purposes of calculating depreciation and assessing the
appropriateness of the carrying value of property, plant and
equipment, to those resources expected to be mined before
2037 in the life of mine plan.
The life of mine plan is used in unit of production depreciation
calculations and for impairment testing purposes.
44
Griffin MininG LiMited
inDepenDent auDitors’ report to the members oF
griFFin mining limiteD
key auDit matter
how our auDit aDDresseD the key auDit
matter
Completeness and valuation of the decommissioning
We have recalculated the decommissioning provision based
provision
See page 59 Significant Judgements and Estimates and note
18 Long-Term Provisions.
A provision of $2.3 million has been made for the
decommissioning of the Group’s Caijiaying Mine based on a
rate of RMB 0.5 per tonne of estimated resources recovered
(in accordance with the laws and regulations of China)
on the statutory rate through agreeing the cost per tonne to
statutory laws and the tonnes mined to the life of mine plan.
In addition we have tested management’s internal estimate
of future costs through considering the completeness of the
work program and tested the reasonableness of cost estimates
through comparing them to actuals previously incurred for
similar works.
multiplied by the expected recoverable resource to 2037
We concur with management that the provision calculated using
when the business licence expires.
the rate in accordance with the laws and regulations of China
is therefore an appropriate estimate of the decommissioning
provision.
Finally we considered the adequacy of management’s disclosure
of the key judgements in relation to the decommissioning
liability in the Significant Estimates and Judgements on page
59 and in note 18 to the financial statements.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry
in which it operates.
Griffin Mining Limited is a Bermuda company listed on AIM. The Group’s principal operation is the Caijiaying zinc mine in
China.
Our group audit scope focused primarily on the Caijiaying zinc mine in China, which was subject to a full-scope audit by our
component team in China. A full scope audit was also performed over the exploration company in China by the component team
and the parent company by the Group team. The above gave us coverage of 100% of consolidated revenue, 100% coverage of
consolidated profit before tax and 99% coverage of total assets for the Group.
The Group team’s involvement also comprised of conference calls, review of component auditor work papers, attendance at
component audit clearance meetings and other forms of communication as considered necessary. In addition, senior members
of the Group audit team performed a site visit to the operating asset in China. The Group engagement team directly performed
the audit of the consolidation. This, together with additional procedures performed at the Group level, gave us the evidence we
needed for our opinion on the Group financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of
our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements,
both individually and in aggregate on the financial statements as a whole.
45
RepoRt and accounts 2018
inDepenDent auDitors’ report to the members oF
griFFin mining limiteD
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
$1.7 million
How we determined it
5% of profit before tax.
Rationale for benchmark applied We have assessed profit before tax as being the most appropriate benchmark as it is the
key indicator of the Group’s performance.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The
range of materiality allocated across components was between $38,000 and $1.4 million.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above $85,000 as
well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
ConClusions relating to going ConCern
ISAs (UK) require us to report to you when:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the 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.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability
to continue as a going concern. For example, the terms on which the United Kingdom may withdraw from the European Union
are not clear, and it is difficult to evaluate all of the potential implications on the Group’s trade, customers, suppliers and the
wider economy.
reporting on other inFormation
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit opinion or any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the 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 this other information, we are required to report that fact. We have nothing to report based on
these responsibilities.
responsibilities For the FinanCial statements anD the auDit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities In Respect Of The Financial Statements set out on page
42, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and
for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
46
Griffin MininG LiMited inDepenDent auDitors’ report to the members oF
griFFin mining limiteD
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.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ 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 auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with
Section 90 of the Companies Act 1981 (Bermuda) and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
The engagement partner on the audit resulting in this independent auditors’ report is Timothy McAllister.
PricewaterhouseCoopers LLP
Chartered Accountants
Embankment Place
29 April 2019
47
RepoRt and accounts 2018 ConsoliDateD inCome statement
For the year ended 31 December 2018
(expressed in thousands US dollars)
Notes
Revenue
Cost of sales
Gross profit
Administration expenses
Profit from operations
Losses on disposal of plant and equipment
Foreign exchange gains
Finance income
Finance costs
Other income
Profit before tax
Income tax expense
Profit for the year
Basic earnings per share (cents)
Diluted earnings per share (cents)
1
1
1
2
4
5
6
7
8
9
9
2018
$000
99,067
(45,798)
53,269
(17,714)
35,555
(939)
42
223
(283)
200
34,798
(9,321)
25,477
14.83
13.35
2017
$000
126,657
(44,360)
82,297
(18,524)
63,773
(1,067)
87
143
(2,219)
160
60,877
(17,556)
43,321
24.63
22.97
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
48
Griffin MininG LiMited
ConsoliDateD statement oF Comprehensive inCome
For the year ended 31 December 2018
(expressed in thousands US dollars)
Profit for the year
2018
$000
25,477
2017
$000
43,321
Other comprehensive (expenses) / income that will be reclassified to profit or loss
Exchange differences on translating foreign operations
(5,856)
5,004
Other comprehensive (expenses) / income for the year, net of tax
(5,856)
5,004
Total comprehensive income for the year
19,621
48,325
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
49
RepoRt and accounts 2018
ConsoliDateD statement oF FinanCial position
As at 31 December 2018
(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
Total current liabilities
Notes
2018
$000
2017
$000
10
11
12
13
14
15
18
19
20
21
20
213,140
2,016
215,156
4,951
2,819
28,452
36,222
214,695
2,035
216,730
5,868
4,374
26,518
36,760
251,378
253,490
1,727
68,442
3,690
2,072
(917)
2,386
(29,346)
4,027
159,161
211,242
2,302
2,393
258
4,953
33,632
1,551
35,183
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
Total equities and liabilities
251,378
253,490
Attributable net asset value per share to equity holders of parent
22
$1.22
$ 1.13
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
The financial statements on pages 48 to 73 were approved by the Board of Directors and signed on its behalf by:
Mladen Ninkov
Chairman
29 April 2019
50
Roger Goodwin
Finance Director
Griffin MininG LiMited
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51
RepoRt and accounts 2018
ConsoliDateD Cash Flow statement
For the year ended 31 December 2018
(expressed in thousands US dollars)
Notes
5
6
10
5
10
10
10
11
Cash flows from operating activities
Profit before taxation
Foreign exchange gains
Finance income
Finance costs
Depreciation
Losses on disposal of equipment
Decrease in inventories
(Increase) / decrease in receivables and other current assets
(Decrease) / 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
Cash flows from financing activities
Issue of ordinary shares on exercise of options
Purchase of shares held in treasury
Interest paid
Finance lease repayments
Repayment of bank loans
Net cash outflow from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of foreign exchange rates
Cash and cash equivalents at the end of the year
Cash and cash equivalents comprise bank deposits
Bank deposits
2018
$000
34,798
(42)
(223)
283
10,328
939
917
(1,059)
(12,917)
(12,585)
20,439
223
351
(10,669)
(6,134)
-
(81)
(16,310)
1,174
(917)
-
(2,728)
-
(2,471)
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)
1,658
13,209
26,518
276
28,452
13,218
91
26,518
28,452
26,518
Included within net cash flows of $1,658,000 (2017 $13,209,000) are foreign exchange gains of $42,000 (2017 gains $87,000)
which have been treated as realised.
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes
52
Griffin MininG LiMited
notes to the FinanCial statements
aCCounting poliCies
basis oF preparation
The financial statements have been prepared in accordance with applicable International Financial Reporting Standards as issued
by the International Accounting Standards Board as adopted by the European Union and in accordance with the Bermuda
Companies Act. The significant accounting policies adopted are detailed below: These policies have been consistently applied to
all years unless otherwise state.
aCCounting Convention
The financial statements have been prepared under the historical cost convention.
new anD amenDeD stanDarDs aDopteD by the group
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing
1 January 2018:
•
•
IFRS 9, ‘Financial Instruments’; and
IFRS 15, ‘Revenue from Contracts with Customers’;
These accounting policies have not had any material impact on the Group’s financial position or financial performance.
new stanDarDs anD interpretations not yet aDopteD
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 16 ‘Leases’
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ and its related interpretations. It will result in almost all leases being recognised on the
Balance Sheet as, from a lessee perspective, the distinction between operating and finance leases is removed. Under the new standard,
an asset (the right to use the leased item) and a financial liability to pay rentals are recognised.
The Group will apply the standard from its mandatory adoption date of 1 January 2019. The Group intends to apply the simplified
transition approach and will not restate comparative amounts for the year prior to first adoption. Right-of-use assets for property leases
will be measured on transition as if the new rules had always been applied. All other right-of-use assets will be measured at the amount
of the lease liability on adoption (adjusted for any prepaid or accrued lease expenses).
As at 31 December 2018, the Group has non-cancellable operating lease commitments of $451,000 as detailed in Note 27 on page 73.
These commitments are all within the scope of IFRS and relate to the Group’s property leases. The Group expects to recognise right-
of-use assets of approximately $350,000 and lease liabilities of approximately $445,000 on 1 January 2019. Net current assets will be
approximately $137,000 lower due to the presentation of a portion of the liability as a current liability. The Group expects that profit
before tax will increase by approximately $14,000 for 2019 as a result of adopting the new rules. Depreciation of property, plant and
equipment and finance costs are expected to increase by approximately $124,000 and $22,000 respectively. Cash flows from operating
activities are expected to increase by approximately $160,000 because repayment of the principal portion of the lease liabilities will be
classified as cash flows from financing activities.
going ConCern
The financial statements have been prepared on a going concern basis. Having considered the cash resources, banking facilities
and forecasts for 12 months from the date of this report, the directors do not anticipate any going concern issues.
53
RepoRt and accounts 2018 notes to the FinanCial statements
aCCounting poliCies
ConsoliDation basis
The Group financial statements consolidate the financial statements 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 and concluded
that it has significant control.
In making its judgment, 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.
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 the performance obligations are satisfied and are recognised following open auction of metals in
concentrate and where delivery is taken and cash received within 30 days of the agreement. There has been no impact on revenue
recognition by the Group following the introduction of IFRS 15.
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. Until such time intangible assets are not depreciated. 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.
DepreCiation
Depreciation rates reflect the term of operations, extractable resource, and economic lives of the assets as follows:
• Mine acquisition, development, licence, pre production and land use rights - on a unit of production basis.
• Plant and buildings - over 25 years on a straight line basis with a 10% residual value.
• Dry tailings facility held under finance lease- over 15 years on a straight line basis with no residual value.
• Mechanical equipment - over 10 years on a straight line basis with a 10% residual value.
• All other equipment, including vehicles - over 5 years on a straight line basis with a 10% residual value.
54
Griffin MininG LiMited notes to the FinanCial statements
aCCounting poliCies
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 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
Measured and indicated 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
Further details are given in note 10.
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 financial
statements in accordance with local requirements which is anticipated to be greater than the actual costs of site restoration.
inventories
Inventories are valued at the lower of cost or net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
• Consumable stores and spares, at purchase cost on a first in first out basis
• Concentrate stockpiles at cost of direct materials, power, labour, and a proportion of site overhead
• Ore stockpiles at cost of direct material, power, labour contractor charges and a proportion of site overhead
FinanCial assets
Classification
From 1 January 2018, the Group classifies its financial assets in the following measurement categories:
•
those to be measured subsequently at fair value (either through OCI or through profit or loss); and
•
those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash
flows. For assets measured at fair value, gains and losses will be recorded either in profit or loss or in OCI. For investments in
equity instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the
time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). The
Group reclassifies debt investments when and only when its business model for managing those assets changes.
55
RepoRt and accounts 2018 notes to the FinanCial statements
aCCounting poliCies
FinanCial assets (ContinueD)
Classification of financial assets at amortised cost
The Group classifies its financial assets as at amortised cost only if both of the following criteria are met:
•
•
the asset is held within a business model whose objective is to collect the contractual cash flows; and
the contractual terms give rise to cash flows that are solely payments of principal and interest.
Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade date (that is, the date on which the group commits to
purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have
expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with embedded derivatives are considered
in their entirety when determining whether their cash flows are solely payment of principal and interest.
Impairment
From 1 January 2018, the Group assesses, on a forward-looking basis, the expected credit losses associated with its debt
instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a
significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to
be recognised from initial recognition of the receivables, see note 13 for further details.
Accounting policies applied until 31 December 2017
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.
Subsequent measurement
The measurement at initial recognition did not change on adoption of IFRS 9, see description above. Subsequent to the initial
recognition, loans and receivables and held-to-maturity investments were carried at amortised cost using the effective interest
method.
Assets carried at amortised cost
For loans and receivables, the amount of the loss was measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding future credit losses that had not been incurred), discounted at the financial
asset’s original effective interest rate. The carrying amount of the asset was reduced and the amount of the loss was recognised
in profit or loss.
56
Griffin MininG LiMited notes to the FinanCial statements
aCCounting poliCies
FinanCial assets (ContinueD)
If a loan or held-to-maturity investment had a variable interest rate, the discount rate for measuring any impairment loss was the
current effective interest rate determined under the contract. As a practical expedient, the group could measure impairment on
the basis of an instrument’s fair value using an observable market price. If, in a subsequent period, the amount of the impairment
loss decreased and the decrease could be related objectively to an event occurring after the impairment would be recognised
(such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss was recognised
in profit or loss.
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 financial statements 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 financial statements of overseas subsidiary undertakings are translated into the presentation currency of the
Group at the rate of exchange ruling at the reporting date and income statement items are translated at the average rate for the
year. The exchange difference arising on the retranslation of opening net assets is recognised in other comprehensive income and
accumulated in the foreign exchange reserve.
All other translation differences are taken to profit or loss.
The balance of the foreign currency translation reserve relating to an operation that is disposed of is reclassified from equity to
profit or loss at the time of the disposal.
equity
Equity comprises the following:
• “Share capital” represents the nominal value of equity shares.
• “Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of
expenses of the share issue.
• “Contributing surplus” is a statutory reserve for the maintenance of capital under Bermuda company law and was created on
a reduction in the par value of the Company’s ordinary shares on 15 March 2001.
• “Share based payments” represents equity-settled share-based remuneration until such share options are exercised.
•
“Foreign exchange reserve” represents the differences arising from translation of investments in overseas subsidiaries.
• “Chinese statutory re-investment reserve” represents a statutory retained earnings reserve under PRC law for future
investment by Hebei Hua-Ao.
57
RepoRt and accounts 2018 notes to the FinanCial statements
aCCounting poliCies
equity (ContinueD)
• “other reserves on acquisition of non controlling interests” represents the excess of the purchase price paid to acquire non
controlling interest rights over the non controlling interests in subsidiary companies.
• “Profit and loss reserve” represents retained profits and losses.
Non-controlling interests are determined by reference to the underlying agreements, 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.
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 2018 the total expense recognised in profit or loss arising from share based transactions
was nil (2017: nil).
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:
Judgements
•
In assessing potential impairment adjustments and depreciation, reference is made to measured, indicated, and inferred
mineral resources and future production to 2037 when Hebei Hua Ao’s current business licence expires with all future
production from Zone III at Caijiaying. It is further assumed that all necessary permits will be obtained.
Estimates
•
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 forecast production uplifted to 1.5Mt per annum of ore and costs, the directors have
determined that the Group requires the market price of zinc to be above $2,230 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.
58
Griffin MininG LiMited notes to the FinanCial statements
aCCounting poliCies
signiFiCant juDgements anD estimates (ContinueD)
•
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 and indicated
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.
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 financial statements.
Cash anD Cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments
that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
DiviDenDs
Dividend distributions payable to equity shareholders are included in “other short term financial liabilities” when the dividends
are approved in a directors meeting prior to the reporting date.
taxation
Current tax is the tax currently payable based on taxable profit for the year.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on
the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on
the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries,
associates and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is
probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as
other income tax credits to the group are assessed for recognition as deferred tax assets.
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.
59
RepoRt and accounts 2018 notes to the FinanCial statements
aCCounting poliCies
segment reporting
In identifying its operating segments, management generally follows the Group’s service lines, which represent the main products
produced by the Group. Management consider there to be only one operating segment being the operations at the Caijiaying Mine
based in China with production of zinc concentrate, and lead concentrate with associated precious metals credits. All activities of the
Group are reported through management and the executive directors to the Board of directors of the Company. The measurement
policies the Group uses for Segment reporting under IFRS 8 are the same as those used in its financial statements.
Corporate assets which are not directly attributable to the business activities of Caijiaying Mine are not allocated to the Chinese
segment but are reviewed in light of operating expenses by the region in which they occur. In the financial periods under review, this
primarily applies to the Group’s head office and intermediary holding companies within the Group.
There have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss.
leaseD assets
Finance leases
The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards
of ownership of the leased asset. Where the Group is a lessee in this type of arrangement, the related asset is recognised at the
inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental
payments, if any. A corresponding amount is 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.
60
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 revenue and costs of
sales in 2018 and 2017 were derived from the Caijiaying zinc gold mine. All revenue is recognised at a point in time.
REVENUE
China
Zinc concentrate sales
Lead and precious metals concentrate sales
Royalties and resource taxes
COST OF SALES: CHINA
Mining costs
Haulage costs
Processing costs
Depreciation (excluding depreciation in administration expenses)
Stock movements
ADMINISTRATION EXPENSES
China
Australia
UK / Bermuda
2018
$000
99,067
78,821
24,920
(4,674)
99,067
16,680
8,374
10,423
9,652
669
45,798
13,122
442
4,150
17,714
All revenues, cost of sales and operating expenses charged to profit relate to continuing operations.
TOTAL ASSETS
China
Australia
UK / Bermuda
CAPITAL EXPENDITURE
China
UK / Bermuda
2. proFit From operations
Profit from operations is stated after charging
Fees for the audit of the Company
Fees for the audit of subsidiaries
Staff costs
Service fees to Zhangjiakou Yuanrun Enterprise Management
Average number of persons employed by the Group in the year
245,505
924
4,949
251,378
16,884
-
16,884
2018
$000
88
110
9,410
4,120
No.
421
2017
$000
126,657
99,886
32,758
(5,987)
126,657
16,630
8,130
9,681
9,182
737
44,360
13,819
434
4,271
18,524
250,809
641
2,040
253,490
13,455
2
13,457
2017
$000
64
79
7,439
6,286
No.
390
61
RepoRt and accounts 2018
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 Total
Fees
Salary
Pension
Total
contributions
2018
contributions
$000
$000
$000
$000
$000
$000
$000
$000
2017
Mladen Ninkov*
Dal Brynelsen
Rupert Crowe
Roger Goodwin
Adam Usdan
138
203
89
138
89
657
-
-
-
424
-
424
Key personnel
114
1,473
771
1,897
-
-
-
138
203
89
40
602
-
89
40 1,121
15 1,602
55 2,723
125
199
97
125
86
632
-
-
-
440
-
440
-
1,544
632
1,984
-
-
-
38
-
38
-
38
125
199
97
603
86
1,110
1,544
2,654
*Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust, received fees
under a consultancy agreement of $2,137,000 (2017 $2,235,000), 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 granted to the directors in 2018 or 2017. In 2018 Adam Usdan exercised options over 2,333,333 new
ordinary shares in the Company at an exercise price of 30 pence per share. Otherwise, no other options were exercised by the
directors in 2018 and 2017.
4. losses 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
62
2018
$000
939
2018
$000
223
2018
$000
-
283
283
2018
$000
200
2017
$000
1,067
2017
$000
143
2017
$000
1,772
447
2,219
2017
$000
160
Griffin MininG LiMited
notes to the FinanCial statements
8. inCome tax expense
Profit for the year before tax
Expected tax expense at a standard rate of PRC income tax of 25% (2017 25%)
Adjustment for tax exempt items:
- Income and expenses outside the PRC not subject to tax
Adjustments for short term timing differences:
- In respect of accounting differences
- Other
Adjustments for permanent timing differences re prior year adjustments
Adjustments for permanent timing differences other
Withholding tax on intercompany dividends and charges
Current taxation expense
Deferred taxation (credit)/expense
Correction of provision brought forward
Origination and reversal of temporary timing differences
2018
$000
34,798
8,699
629
(704)
-
(185)
1,154
71
9,664
(674)
331
2017
$000
60,877
15,219
854
(490)
162
-
1,678
38
17,461
-
95
Total tax expense
9,321
17,556
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 2018 (25% in 2017) based upon the profits calculated under Chinese Generally Accepted Accounting Principles
(Chinese “GAAP”).
Withholding tax is recognised as a current tax charge when paid. As the Company can control the timing of payments giving
rise to withholding tax, deferred tax liabilities for unpaid withholding taxes on unremitted earnings and undistributed dividend
payments are recognised using a ‘probable’ threshold (based on the recognition threshold in IAS 12) , and are reflected at the
amount expected to be paid to taxation authorities. Unremitted earnings and undistributed dividend payments from the Groups
Chinese mining operation total US$98m.
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:
Earnings
$000
Per Earnings Weighted
Average
$000
2018
Weighted
Average
share
number of amount
(cents)
shares
2017
Per
share
number of amount
(cents)
shares
Basic earnings per share
Earnings attributable to ordinary shareholders
25,477
171,842,166
14.83
43,321
175,894,007
24.63
Dilutive effect of securities
Options
-
16,494,541
(1.48)
-
12,703,367
(1.66)
Diluted earnings per share
25,477
188,336,707
13.35
43,321
188,597,374
22.97
63
RepoRt and accounts 2018
notes to the FinanCial statements
10. property, plant anD equipment
At 31 December 2016
Foreign exchange adjustments
Additions during the year
Disposals
Depreciation charge for the year
At 31 December 2017
Foreign exchange adjustments
Additions during the year
Disposals
Depreciation charge for the year
At 31 December 2018
At 31 December 2016
Cost
Accumulated depreciation
Net carrying amount
At 31 December 2017
Cost
Accumulated depreciation
Net carrying amount
At 31 December 2018
Cost
Accumulated depreciation
Net carrying amount
Mineral
Mill and
interests mobile mine
equipment
Office
furniture &
equipment
Total
$000
158,144
4,976
9,330
-
(5,404)
167,046
(4,450)
10,669
-
(5,927)
167,338
185,252
(27,108)
158,144
200,708
(33,662)
167,046
205,840
(38,502)
167,338
$000
46,238
2,805
4,125
(1,250)
(4,351)
47,567
(2,291)
6,134
(1,289)
(4,374)
45,747
67,009
(20,771)
46,238
72,366
(24,799)
47,567
72,028
(26,281)
45,747
$000
$000
109
204,491
-
2
(1)
(28)
7,781
13,457
(1,251)
(9,783)
82
214,695
-
-
-
(6,741)
16,803
(1,289)
(27)
(10,328)
55
213,140
133
(24)
109
134
(52)
82
134
(79)
55
252,394
(47,903)
204,491
273,208
(58,513)
214,695
278,002
(64,862)
213,140
Mineral interests comprise the Group’s interest in the Caijiaying ore bodies including costs on acquisition, plus subsequent
expenditure on licences, concessions, exploration, appraisal and construction of the Caijiaying mine including expenditure
for the initial establishment of access to mineral reserves, commissioning expenditure, and direct overhead expenses prior to
commencement of commercial production and together with the end of life restoration costs.
Property, plant and equipment includes $15,034,000 (2017: $13,170,000) of assets under construction yet to be depreciated.
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 $4,035,000 (2017: $3,428,000) has been provided. At 31 December 2018 the net carrying amount of this
equipment was $7,534,000 (2017: $8,723,000).
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.
64
Griffin MininG LiMited
notes to the FinanCial statements
10. property, plant anD equipment (ContinueD)
The directors have reassessed the net carrying value of capitalised costs at 31 December 2018 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 $2,700 per tonne and gold of $1,300 per troy ounce;
• Future production from Zone III at Caijiaying to end of the business licence in 2037 with ore mined and processed rising to
1.5 million tonnes of ore per annum;
• Costs based upon past performance and that budgeted for 2019;
• Discount interest rate of 10%; and
• Continued maintenance and grant of applicable licences and permits.
11. intangible assets - exploration interests
China – Zinc / gold exploration interests
At 1 January 2017
Foreign exchange adjustments
Additions during the year
At 31 December 2017
Foreign exchange adjustments
Additions during the year
At 31 December 2018
$000
1,792
115
128
2,035
(100)
81
2,016
Intangible assets represent cost on acquisition, plus subsequent expenditure on licences, concessions, exploration, appraisal and
development work in respect to regional exploration incurred by Hebei Sino Anglo. 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 2018 $nil (2017: $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
2018
$000
979
458
843
2,671
4,951
All inventories are expected to be sold, used or consumed within one year of the balance sheet date.
13. reCeivables anD other Current assets
Advance to Zhangjiakou Yuanrun Enterprise Management and Service Centre
Other receivables
Prepayments
2018
$000
-
558
2,261
2,819
Any expected credit losses on the recoverability of receivables is not expected to be material.
2017
$000
2,147
708
225
2,788
5,868
2017
$000
2,613
276
1,485
4,374
65
RepoRt and accounts 2018
notes to the FinanCial statements
14. share Capital
AUTHORISED:
2018
2017
Number
$000
Number
$000
Ordinary shares of US$0.01 each
1,000,000,000
10,000
1,000,000,000 10,000
CALLED UP ALLOTTED AND FULLY PAID:
Ordinary shares of US$0.01 each
At 1 January
169,993,727
1,700
179,041,830
1,790
Cancellation of shares held in treasury during the year
-
Shares issued in the year on exercise of share purchase options
2,755,001
-
27
(9,048,103)
(90)
-
-
At 31 December
172,748,728
1,727
169,993,727
1,700
During the year share purchase options over 166,667 new ordinary shares were exercised at 40 pence per share and share
purchase options over 2,588,334 new ordinary shares were exercised at 30 pence per share.
15. shares helD in treasury
At 1 January
Bought back in during the year
Cancelled during the year
At 31 December
2018
Number
$000
-
540,000
-
540,000
-
917
-
917
2017
Number
8,703,103
345,000
$000
3,875
230
(9,048,103)
(4,105)
-
-
During the year 540,000 (2017: 345,000) of the Company’s ordinary shares were purchased at an average price of 126.2p (2017:
53.2p) per share.
16. share options
At 1 January
2018
Number
Granted/
(exercised)
Number
At 31 December
2018
Number
Options exercisable at 30 pence per share
20,000,000
(2,588,334)
17,411,666
to 31 December 2022 (2017: 31 December 2020)
Options exercisable at 40 pence per share
5,000,000
(166,667)
4,833,333
to 31 December 2012 (2022: 31 December 2018)
25,000,000
(2,755,001)
22,244,999
During the year share purchase options over 166,667 new ordinary shares were exercised at 40 pence per share and share
purchase options over 2,588,334 new ordinary shares were exercised at 30 pence per share.
In November 2018 and with the unanimous agreement of all the issued option holders, the exercise periods of the share purchase
options were extended from 31 December 2018 in respect of the options exercisable at 40 pence per share and 31 December 2020
in respect of the options exercisable at 30 pence per share, to the 31 December 2022.
66
Griffin MininG LiMited
notes to the FinanCial statements
16. share options (ContinueD)
The following table shows the number and weighted average exercise price of all the unexercised share options and warrants at
the year end:
2018
2017
Number Weighted average
Number
Weighted average
exercise price
exercise price
Outstanding at 1 January
Exercised during the year
Outstanding at 31December
25,000,000
(2,755,001)
22,244,999
Pence
32.2
(30.6)
32.5
25,000,000
-
25,000,000
Pence
32.2
-
32.2
The estimated value of the options exercisable at 40p up to 31 December 2022, 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 2022, which vest 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
Options expiring
31 December 2022
31 December 2022
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 (2017: $nil) during the year ended 31 December relating to equity settled share
option scheme transactions.
17. DiviDenDs
No dividends were paid in 2018 (2017: nil).
18. long-term provisions
PROVISIONS FOR MINE CLOSURE COSTS
At 1 January
Foreign exchange adjustments
At 31 December
2018
$000
2,418
(116)
2,302
2017
$000
2,277
141
2,418
Provision for mine closure and rehabilitation costs has been made in accordance with the laws and regulations of China at a rate
of RMB0.5 per tonne of estimated resources.
67
RepoRt and accounts 2018
notes to the FinanCial statements
19. DeFerreD taxation
At 1 January
Foreign exchange adjustments
Charge for the year
Credit with respect to prior years
At 31 December
2018
$000
2,865
(129)
331
(674)
2,393
2017
$000
2,607
163
95
-
2,865
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
2018
$000
258
1,551
1,809
2017
$000
712
3,694
4,406
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
Zhangjiakou Yuanrun Enterprise Management Consulting Service Co., Ltd
Accruals
2018
$000
9,684
3,935
9,428
4,542
6,043
33,632
2017
$000
12,904
7,902
12,349
12,418
6,864
52,437
All amounts are short term. The carrying values of all trade and other payables are considered to be a reasonable approximation
of fair value.
22. attributable net asset value per share to total equity per holDers
oF parent shares
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 2018 of $211,242,000 ($191,364,000 at 31 December 2017) divided by the number of ordinary
shares in issue at 31 December 2018 of 172,748,728 (169,993,727 at 31 December 2017).
68
Griffin MininG LiMited
notes to the FinanCial statements
23. risk management
The Group is exposed to a variety of financial risks which result from its operating and investing activities. The Group’s risk
management is coordinated by its senior management and executive directors and focuses on actively securing the Group’s short
to medium term cash flows.
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, Hong Kong Dollars and Australian Dollar 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. 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
2018
$000
488
Australian dollar bank deposits translated into United States Dollars at the closing rate are as follows:
Short term bank deposits
2018
$000
919
Renminbi bank deposits translated into United States Dollars at the closing rate are as follows:
Short term bank deposits
2018
$000
22,085
2017
$000
290
2017
$000
636
2017
$000
23,388
The table below illustrates the sensitivity of the net results for the year and equity with regards to the Group’s sterling deposits
and the sterling US Dollar exchange rate. It assumes a + / - 15% (2017 15%) change in the sterling exchange rate for the year
ended 31 December 2018. These changes are considered to be reasonable based on observation of current market conditions for
the year ended 31 December 2018. 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% (2017 15%) this would have had the following impact:
Net result for the year and on equity
2018
$000
54
If sterling had weakened against the US Dollar by 15% (2017: 15%) this would have the following impact:
Net result for the year and on equity
2018
$000
(44)
2017
$000
51
2017
$000
(38)
69
RepoRt and accounts 2018
notes to the FinanCial statements
23. risk management (ContinueD)
Foreign Currency Risk (continued)
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:
2018
Rmb
$000
GBP
$000
635
27,325
(147)
(35,233)
AusD
$000
926
(61)
2017
Rmb
$000
GBP
$000
592
27,455
(145)
(44,040)
488
(7,908)
865
447
(16,585)
AusD
$000
821
(13)
808
Financial assets
Financial liabilities
Short term exposure
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s bank deposits with floating
interest rates. The Group currently does not have an interest rate hedging policy.
The following table illustrates the sensitivity of the net results for the year and equity to a reasonably possible change in interest
rates of + 300% and - 100% (2017 + 300% - 100%), with effect from the beginning of the year. These changes are considered to
be reasonable based on observation of current market conditions within which the Group operates.
The sensitivity analysis is based upon the Group’s deposits at each balance sheet date:
Net result for the year
2018
2017
Plus 300% Minus 100%
Plus 300% Minus 100%
$000
677
$000
(223)
$000
618
$000
(206)
Fixed and non interest bearing financial assets and liabilities are as follows:
2018
2017
Floating Non interest
bearing
interest rate
Total
Floating Non interest
bearing
interest rate
Total
$000
$000
$000
$000
$000
$000
28,452
-
28,452
-
28,452
2,819
2,819
2,819
31,271
26,518
-
26,518
-
26,518
4,374
4,374
4,374
30,892
(1,809)
-
(1,809)
(4,406)
-
(4,406)
-
(33,632)
(33,632)
-
(52,437)
(52,437)
(1,809)
26,643
(33,632)
(35,441)
(30,813)
(4,170)
(4,406)
22,112
(52,437)
(56,843)
(48,063)
(25,951)
Financial Assets
Cash at bank
Other receivables
Total Financial Assets
Finance lease liabilities
Trade and other payables
Total Financial Liabilities
Net Financial (liabilities)
70
Griffin MininG LiMited
notes to the FinanCial statements
23. risk management (ContinueD)
Commodity risk
The Group is exposed to the risk of changes in commodity prices and in particular that for zinc, gold and to a lesser extent silver
and lead. The Group currently sells its metal concentrate production by way of open auctions in China. The Group did not hedge
its metal production in 2018 or in 2017.
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% (2017 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
Credit risk
2018
2017
Plus 20% Minus 20%
Plus 20% Minus 20%
$000
$000
$000
$000
11,724
(11,724)
14,686
(14,686)
2,856
(2,856)
3,636
(3,636)
531
(531)
799
(799)
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.
24. Capital management anD proCeDures
The Group’s capital management objectives are:
•
•
•
To ensure the Group’s ability to continue as a going concern;
To increase the value of the assets of the Group: and
To enhance shareholder value in the Company and returns to shareholders.
The achievement of these objectives is undertaken by developing existing ventures and identifying new ventures for future
development. The Company will also undertake other transactions where these are deemed financially beneficial to the Company.
The directors continue to monitor the capital requirements of the Group by reference to expected future cash flows. Capital for
the reporting periods under review is summarised in the consolidated statement of changes in equity. The directors consider the
capital of the Group to be the total equity attributable to the equity holders of the parent of $211,242,000 at 31 December 2018.
71
RepoRt and accounts 2018
notes to the FinanCial statements
25. FinanCial instruments
The Group does not enter into derivative transactions such as interest rate swaps, forward rate agreements or forward currency
contracts. Funds in excess of immediate requirements are placed in US dollar, Chinese Renminbi, and sterling short term fixed
and floating rate deposits. The Group has overseas subsidiaries operating in China, Hong Kong and Australia, whose costs are
denominated in local currencies.
In the normal course of its operations the Group is exposed to commodity price, foreign currency and interest rate risks.
The Group places funds in excess of immediate requirements in US dollar, Chinese Renminbi, Hong Kong dollars, and sterling
deposits with a number of banks to spread currency, interest rate and bank risk. These deposits are kept under regular review to
maximise interest receivable and with reference to future expenditure and future currency requirements.
Commodity prices are monitored on a regular basis to ensure the Group receives fair value for its products.
The Group holds the following financial investments:
FINANCIAL ASSETS
Financial assets at amortised cost
Cash and cash equivalents
FINANCIAL LIABILITIES
Financial liabilities at amortised cost
Trade and other payables
26. subsiDiary Companies
2018
$000
-
28,452
28,452
1,809
18,161
19,970
2017
$000
-
26,518
26,518
4,406
33,224
37,630
At 31 December 2018, Griffin Mining Limited had interests in the share capital of the following principal subsidiary companies.
Name
China Zinc Pty Ltd
China Zinc Limited
Hebei Hua’ Ao Mining
Industry Company Ltd*
Class of
Share held
Ordinary
Ordinary
Panda Resources Ltd
Ordinary
Hebei Sino Anglo Mining
Development Company Ltd*
Proportion of
shares held
100%
100%
88.8% **
100%
90%
Nature of
business
Country of
incorporation
Service company
Australia
Holding and service company
Hong Kong
Base and precious metals
mining and development
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.
72
Griffin MininG LiMited
notes to the FinanCial statements
26. subsiDiary Companies (ContinueD)
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 $3,732,000 (2017: $5,900,000) are included
in net operating costs rather than attributable to non-controlling interests. Likewise the amounts due at 31 December 2018 of
$4,542,000 (2017: $12,418,000) are included in other payables rather than due to non-controlling interests within equity within
the Consolidated Statement of Financial Position, as described in the accounting policies.
27. Commitments
At 31 December 2018 the Group had capital commitments of $3,600,000 (31 December 2017 $345,000).
At 31 December the Group had operating lease commitments of
Within one year
Between one and five years
28. relateD parties
Keynes Capital
2018
$000
160
291
451
2017
$000
160
450
610
Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust, received fees
under a consultancy agreement of $2,137,000 (2017: $2,235,000), 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.
Zhangiakou Yuanrun Enterprise Management and Service Centre
During the year $4,120,000 was charged (2017 $6,286,000 charged) relating to service charges paid to Zhangjiakou Yuanrun
Enterprise Management and Service Centre, the Group’s joint venture partner in Hebei Hua Ao in connection with local PRC
licensing and permitting requirements and land acquisitions. At 31 December 2018 $4,542,000 (2017: $12,418,000) was due to
this company. At 31 December 2018 there were no amounts advanced to this company (2017: $2,613,000).
29. post balanCe sheet events
At 31 December 2018 there were no adjusting post balance sheet events (2017: none)
73
RepoRt and accounts 2018
74
Griffin MininG LiMited Hebei Hua Ao Staff Lunching at the Caijiaying Mine Canteen
75
RepoRt and accounts 2018 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 Pty Ltd 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.
Independent Auditors:
PricewaterhouseCoopers LLP
1 Embankment Place, London, WC2N 6RH, UK.
Solicitors:
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.
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Griffin MininG LiMited