Contents
Chairman’s statement
Overview
Caijiaying
IntroductIon
development
mIneral resource estImate
GeoloGy
exploratIon
operatIons
envIronmental safeGuards & contrIbutIons
communIty relatIons
FinanCial results
strategiC review
caIjIayInG mIne
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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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: 8 Floor, 54 Jermyn Street, London. SW1Y 6LX
1
RepoRt and accounts 2019
2
Caijiaying Mine Site Spring 2019
3
Griffin MininG LiMitedreport and accounts 2019 Chairman’s statement
I present to you, the shareholders and owners of Griffin
Indicated mineralisation. This is an extraordinary statistic
Caijiaying Mine. Retained earnings, which also could have
Penultimately, it’s my privilege to thank the people who
Mining Limited (“Griffin” or the “Company”), the Annual
and gives enormous comfort for the ultra-long mine life the
been paid out in dividends, were retained for the same capital
have gone, and continue to go, the extra yard to maintain
Report and Accounts of the Company for the 2019 calendar
Company will enjoy at the Caijiaying Mine.
needs. In addition, borrowings were never taken at the
the Company’s status as the only foreign owned mining
In addition, ongoing exploration has utilised knowledge
gained from the evolving structural model at Zone III to
enable re-interpretation of structure in the adjacent zones.
This is allowing the resource models for Zones II and VIII
Yet, in light of all the above progress, 2019 has been
overshadowed by the extraordinary beginning to 2020, the
effects which remain with us still and will do for at least
the next decade and perhaps forever. At the Company level,
the declaration of a pandemic by the government of the
the Company with its new mining licence over Zone II at
zones.
and financial year (the “Annual Report”). Although 2019
turned out to be a successful year operationally for the
Company, very low commodity prices coupled with very
high treatment charges produced a below average financial
result. In addition, as has been the case for far too many
years to remember, any success was overshadowed by the
continuing failure of regulatory authorities in China to issue
the Caijiaying Mine.
Production of zinc, gold, silver and lead all increased in
2019 but prices received for zinc, gold and lead all decreased
sharply leading to a 17% fall in revenue and a subsequent
60% fall in operating profit. For anyone who has ever read
one of my Annual Report missives, my standard comment
every year is that mining is a fixed cost business. Provided
we can control our costs and maintain our production,
we are at the vagaries of world commodity prices for our
financial success, and even more importantly, to treatment
charges offered by smelters in China. Unfortunately, 2019
was a particularly bad year for both.
to be more accurately measured, leading to the probability
The Covid-19 crisis, debt laden balance sheets and the
of new resource estimates to be released in 2020 for these
continuing low commodity price environment has shown
Griffin holding company level to buy back stock, something
company operating in China. That is an achievement almost
which will not only bankrupt a multitude companies, but
none can imagine in its complexity, intricacy, difficulty and
also many industries, including the US Airline industry,
exhausting nature. It deserves all of our thanks. From the
without massive government assistance.
truly outstanding Company directors, our Chinese joint
venture directors, our senior foreign staff, our Chinese
operational staff, our contractors, consultants, Chinese
government officials, spouses, partners and their children,
I thank you for your time, excellence and dedication on
behalf of the shareholders. You have been extraordinary.
the words of Warren Buffet to be truer than ever, “Only
when the tide goes out do you discover who’s been
swimming naked.” The last 3 months has seen a large
closure of marginal zinc mines and world zinc production
Lastly, and always most importantly, thank you to you the
falling by at least 10%. This trend will inevitably get worse
shareholders and owners of the Company. The road has
before it gets better, but it bodes well for the zinc price.
been long, arduous and often without reward. Your patience,
People’s Republic of China on the 24 January 2020 due
With the expectation of the granting of the new mining
to the Covid-19 outbreak forced mining and underground
licence and the doubling of production, the Company
development operations not to restart after the traditional 2
appointed a new Nominated Advisor and Broker, Numis
week mining shutdown for the Chinese New Year holidays.
Securities Limited. We look forward to a long and successful
Ore stockpiled at surface was processed until exhausted
relationship as the Company takes the next giant step in its
on the 30 January 2020, at which time the mill was placed
growth.
on care and maintenance. Operations restarted on the 21
February 2020. Underground mining operations reached
faith and commitment has all too often been tested. Yet
some of you, like one of your directors, Adan Usdan, have
stood the test of time. My sincerest wish is that this year the
old adage finally comes true that “All good things come to
those who wait.” I hope the wait is nearly over.
Mladen Ninkov
Chairman
16 June 2020
Operationally, the focus was on developing Zone III for
100% of planned rates by the 13 March 2020 and, with
greater, and more efficient, production and that was achieved
a new supply of ore, processing operations by late March
by the continued development and linking of the North and
2020.
Nevertheless,
international travel restrictions
South Declines and associated infrastructure down to the
remain in place preventing foreign personnel returning to
1000mRL; the development of the South Haulage Drive
the Caijiaying due to the prohibition of entry into China
in preparation for the commencement of development
to anyone other than Chinese citizens and permanent
into Zone II; significant mine ventilation improvements
residents. This is currently having only a limited impact
including two new 5 metre diameter ventilation shafts
upon operations at the Caijiaying Mine.
developed from surface together with an underground 5
metre diameter ventilation shaft down to the 1175mRL
level and the completion of three ventilation shafts (the
Underground Fresh Air Shaft totalling 126 metres, the
Main Exhaust Ventilation Shaft totalling 305 metres and the
Central Fresh Air Shaft totalling 176 metres) significantly
improving ventilation and the working environment
underground.
At the operational level, we are grateful that we find our
operations based in north-west China where Covid-19
virtually did not appear nor did it severely disrupt economic
activity. Further, we operate, and our commodities are sold,
in China where the economy has virtually returned to full
production, albeit not with the projected economic growth
estimated in 2019. It has been particularly pleasing to see
the treatment charges start to fall significantly in the last
Geologically, the resource base continued to expand. Even
2 months, inevitably due to the lack of imports of foreign
more astonishingly, the conversion rate at the Caijiaying
sourced concentrates by Chinese smelters.
Mine from an Inferred to a Measured or Indicated Resource
is effectively 157% based on a comparison of previous and
current Mineral Resource Estimate reports. This means
that exploration and resource definition drilling is not only
successfully converting existing Inferred mineralisation
to higher categories, but also defining new Measured or
At the Company level, thanks must be extended to the
prudency of the directors with their long experience in
the mining sector and the nature of the cyclical nature of
commodities who only allowed debt to be incurred at the
operational level to build or expand the operations at the
Hebei Hua Ao Directors Meeting, Perth, West Australia, August 2019
From left to right: back row: Chen Wanjun (Deputy Director of Zhangjiakou City State Assets Bureau);
Gao Ling (Chief of Zhangjiakou Environmental Protection Agency); Mark Hine (Chief Operating Officer -
Griffin); He Xi (Deputy Chief of Hebei Bureau of Geology and Mineral Resources);
Xing Jun (Chief of Zhangjiakou Emergency Response Bureau);
Wen Xuan (Deputy Chief of Zhangjiakou Bureau of Natural Resources); Sun Xiaoyan (Interpreter).
Front row: Sun Huiguang (Director); Roger Goodwin (Director); Jin Shengchang (Deputy Chairman);
Mladen Ninkov (Chairman); Dal Brynelsen (Director); Bo Zhou (Chief Representative China - Griffin).
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Griffin MininG LiMitedreport and accounts 2019 overview
Caijiaying
Griffin Mining Limited (“Griffin” or “the Company”) is a
licence area. These licences are expected to be transferred
INTRODUCTION
mining and investment company, incorporated in Bermuda,
in the near future to Griffin’s joint venture partner, the
whose shares are quoted on the Alternative Investment
Zhangjiakou Yuanrun Enterprise Management Consulting
Market of the London Stock Exchange (“AIM”).
Service Co., Ltd (“Yuanrun”), to allow their retention under
The major asset of the Company is an 88.8% interest in
Hebei Hua Ao Mining Industry Company Limited (‘Hebei
Hua Ao’), which holds 8.1 square kilometres of mining and
exploration tenements, including the mine and processing
facilities, in the People’s Republic of China (“the PRC”) at
Caijiaying (the “Caijiaying Mine”).
PRC law within the Hebei Hua Ao Group. Should a mining
licence be granted over this area at any point in the future,
this new licence may be contractually transferred back to
Hebei Anglo at the Company’s option.
The Company continues to aggressively explore, expand
and develop the Caijiaying Mine whilst also investigating
The Company also holds 90% of Hebei Sino Anglo Mining
potential acquisitions of mining projects that are capable,
Development Company Limited (“Hebei Anglo”), which
through either advanced exploration or mining expertise,
holds currently 15.7 square kilometres of exploration
of being brought into production to meet the Company’s
licences immediately surrounding the Hebei Hua Ao
historically preset, economic returns to shareholders.
Geographic location of the Caijiaying Mine, People’s Republic of China
The Caijiaying Mine is an operating zinc, gold, silver
and lead mine, together with processing plant, camp and
supporting facilities, located approximately 250 kilometres
Limited, has a 90% interest in Hebei Anglo whilst Yuanrun
holds 10%. As Griffin investigates other areas of interest
and projects in China, Hebei Anglo may be used to invest in
potential projects of interest to Griffin in China.
by road, north-west of Beijing in Hebei Province in the
The Caijiaying Mine was commissioned on time and budget
People’s Republic of China. The Caijiaying Mine is easily
in 2005. Numerous upgrades to the Caijiaying Mine have
accessible by two separate freeways from Beijing. The site
taken place since commissioning leading to the current
has significant water supplies, two 35,000 volt power lines
name plate mill throughput capacity of 1.5 million tonnes
connected to the electricity grid, full connectivity to fixed
of ore per annum. This throughput capacity will not be fully
and mobile telecommunications systems and broadband
utilized until the granting of the new mining licence over
access for internet services. It is 63 kilometres from
Zone II with the 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.
Chongli, the host city of the 2022 Winter Olympic Games,
to which a high speed train link from Beijing has recently
been constructed and commissioned. 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 Yuanrun,
the shareholders of which are the Zhangjiakou City People’s
Government and the Third Geological Brigade of Hebei
Province (the “Third Brigade”).
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 (“China Zinc”),
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 Sino Anglo Mining Development Company Limited
(“Hebei Anglo”), was formed to hold the mineral rights to
the area surrounding the original Hebei Hua Ao licence area
and any other areas of interest in Hebei Province. Griffin,
through its wholly owned UK subsidiary, Panda Resources
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Griffin MininG LiMitedreport and accounts 2019 8
Griffin Directors and Hebei Hua Ao Management at the Paste-Fill Plant Control Room.
9
Griffin MininG LiMitedreport and accounts 2019 MINERAL RESOURCE ESTIMATES
GEOLOGY
The Zone III Mineral Resource estimate is based on
estimate has been depleted for mining production through
Mineralisation at Caijiaying is believed to be related to a
Within Hebei Hua Ao’s tenements surrounding the mine,
interpretation and estimation carried out in March 2019.
to 31 December, 2019 and includes 8,000 tonnes of surface
Jurassic-age igneous event that affected the 2.3 billion-
ongoing exploration of Zones II and VIII have utilised
Zone III is currently being mined. The Mineral Resource
stockpiles surveyed on 31 December 2019.
year-old metamorphic basement rocks. Base metal and
knowledge gained from the evolving structural model at
Caijiaying Zone III Mineral Resources 31 December 2019
Zinc Domain Grade Tonnage Reported above a Cut off Grade of 1.0% Zn
Tonnes
(Mt)
Zn
(%)
19.4
10.0
17.9
47.4
4.6
4.0
4.0
4.2
Pb
(%)
0.2
0.2
0.2
0.2
Ag
(g/t)
22.9
18.1
21.5
21.4
Au
(g/t)
Zn Metal
(kt)
Pb Metal
(kt)
Ag Metal Au Metal
(kOz)
(kOz)
0.7
0.6
0.4
0.5
887
400
722
2,009
43
17
36
97
14,291
5,843
12,423
32,556
397
186
211
794
Caijiaying Zone III Mineral Resources 31 December 2019
Gold Domain Grade Tonnage Reported above a Cut off Grade of 0.5 g/t Au
Tonnes
(Mt)
Zn
(%)
-
-
0.7
0.7
-
-
0.8
0.8
Pb
(%)
-
-
0.1
0.1
Ag
(g/t)
-
-
19.8
19.8
Au
(g/t)
Zn Metal
(kt)
Pb Metal
(kt)
Ag Metal Au Metal
(kOz)
(kOz)
-
-
3.0
3.0
-
-
6
6
-
-
1
1
-
-
446
446
-
-
67
67
Caijiaying Zone II Mineral Resources 31 December 2019
Zinc Domain Grade Tonnage Reported above a Cut off Grade of 1.0% Zn
Tonnes
(Mt)
Zn
(%)
-
4.1
15.6
19.6
-
3.0
3.3
3.3
Pb
(%)
-
0.7
0.8
0.7
Ag
(g/t)
-
24.8
24.5
24.6
Au
(g/t)
-
0.3
0.2
0.3
Zn Metal
(kt)
Pb Metal
(kt)
Ag Metal Au Metal
(kOz)
(kOz)
-
123
516
638
-
27
117
144
-
3,243
12,277
15,520
-
39
124
164
Caijiaying Total Mineral Resources
Tonnes
(Mt)
Zn
(%)
19.4
14.1
34.2
67.7
4.6
3.7
3.6
3.9
Pb
(%)
0.2
0.3
0.4
0.4
Ag
(g/t)
22.9
20.0
22.9
22.3
Au
(g/t)
Zn Metal
(kt)
Pb Metal
(kt)
Ag Metal Au Metal
(kOz)
(kOz)
0.6
0.5
0.4
0.5
887
523
1,244
2,653
43
44
154
241
14,291
9,085
25,145
48,521
397
225
402
1,025
Category
Measured
Indicated
Inferred
Sub-Total
Category
Measured
Indicated
Inferred
Sub-Total
Category
Measured
Indicated
Inferred
Sub-Total
Category
Measured
Indicated
Inferred
Total
Notes:
Zone II Mineral Resource includes 1.49 million tonnes at 3.09% zinc oxide material. The Mineral Resource estimate is based on 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 2019. The Caijiaying Mineral Resources are based on resource modelling work completed by CSA Global
Pty Ltd in 2013 and 2018 and are reported in accordance with the JORC Code (2012 Edition).
gold mineralisation associated with Jurassic intrusives have
Zone III to enable re-interpretation of structure in the
replaced favourable horizons in the metamorphic rocks, most
adjacent zones. This is allowing the resource models for
notably calcsilicates, porphyry sills and dykes intruded along
Zones II and VIII to be improved and is an ongoing
faults cut across the sequence.
process.
Plan view of Zones II, III, V & VIII with surrounding licence areas.
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Griffin MininG LiMitedreport and accounts 2019
12
Long section view facing west of Zone III Mineral Resource wireframes (red) and underground development
and stoping (blue). Inset: plan view of Caijiaying Mine’s Zone III major ore lodes.
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Griffin MininG LiMitedreport and accounts 2019 EXPLORATION
OPERATIONS
The 2019 exploration programme at Caijiaying used a
Shitouhulun and Sangongdi
The safety and welfare of Griffin’s workforce remains a
• Silver metal in concentrate produced was 344,228
strategy of consolidation, with work completed to test
mineralisation along strike in the northern deposit area and
down-dip for extensions.
Work was confined to extending the existing agreement
with the Third Brigade to obtain the relevant licences
over these areas for Hebei Hua Ao when mining licencing
Studies of areas outside the identified resource zones but
resumes in Hebei Province.
Proposed 2020 Exploration
Once the Zone II mining licence is granted, underground
drilling will commence to follow-up targets generated from
the new structural model constructed from Zone III data.
Work will continue drilling exploration holes from the
bottom level of the Zone III decline, with the aim to
discover new lodes and extensions to currently known lodes,
both down-dip and to the east and west.
still within the licence areas has involved reinterpretation of
old geophysical data collected in 2004-6 in the light of the
updated structural resource models generated at Zone III.
These have confirmed new targets that were inadequately
tested in the past.
Hebei Hua Ao Mining Area
In 2019 the focus was on rapid underground diamond
drilling activity to target and infill down-dip extensions
of known zinc and gold lodes within Zone III using the
advancing decline to provide new drill locations. 313
underground diamond drill holes were drilled for a total of
42,562 metres utilising four underground electric-hydraulic
drill rigs.
Further progress has been made in the application of litho-
geochemical data to provide an indicator of proximity to
mineralisation. The litho-geochemical indices developed for
Zone III have been applied to Zone II for the new Mineral
Resource estimate. This work also included interpretation
of a 3D structural model for Zone II.
Hebei Anglo Area
Following the results of the 2017 surface drilling
programme, Hebei Anglo was granted a 2-year extension to
its exploration licence, which contains the possible northern
strike extension of Zone III & VIII mineralisation. This
licence extension expires in July 2020. A single surface
diamond drill hole was completed in 2019 to test for an
extension of mineralisation along strike. As mineralisation
exists at depth it was decided to retain the existing licence
by transferring the licence to Yuanrun to allow its retention
in the Hebei Hua Ao Group with the contractual right to
be transferred back to Hebei Anglo in the future should a
mining licence be applied for and granted over the area.
priority with underground and surface operations conducted
ounces (2018: 280,712 ounces); and
safely and consistently in 2019 without any major incidents.
•
Lead metal in concentrate produced was 1,219 tonnes
A continued focus on safety and training of the Chinese
(2018: 1,030 tonnes).
workforce resulted in a “Lost Time Frequency Rate” of
2.2 per one million hours and the “Total Recordable Injury
Frequency Rate” of 13.3 per one million hours, being in line
with the previous year.
With three fully-enclosed-cabin, 20-tonne haulage trucks,
being successfully introduced in 2019, it is planned for
the haulage contractor to add a further three trucks of the
same capacity in 2020 to increase haulage capacity, which
The key focus for 2019 was the continued development of
will also be aided by the introduction of a one way system
the North and South Declines and associated level access
underground with the construction of and via the South and
development at Zone III down to the 1000mRL to access
North Declines.
the ore bodies below the 1175RL . By the end of 2019 the
link between the two Declines at the 1000mRL and the
development of the South Haulage Drive, in preparation
for the commencement of development into Zone II, was
successfully completed. Importantly to improve ventilation
in the mine, two new 5.0m diameter ventilation shafts
were safely developed from surface into the underground
workings at Zone III together with an underground 5.0m
diameter ventilation shaft down to the 1175mRL level.
The completion of these three ventilation shafts with the
Underground Fresh Air Shaft (“UGFAS”) totalling 126m,
the Main Exhaust Ventilation Shaft (“MVS”) totalling 305m
and the Central Fresh Air Shaft (“CFAS”) totalling 176m
significantly improves ventilation and therefore the working
environment underground at Caijiaying.
Production results for the Caijiaying Mine in 2019 were
broadly in line with 2018 and can be summarised as follows:
• Ore mined of 862,029 tonnes (2018: 872,069 tonnes);
During 2019 underground development work was primarily
focused on developing the future stoping horizons between
the 1175mRL and 1000mRL levels. This included linking
the North and South Main Declines with 7,178m of new
drives in 2019 compared to 5,312m in 2018. In addition,
operational development totalling 3,385m was completed in
2019 compared to 4,047m in 2018.
Long hole open stoping continues to be the predominant
mining method. 2019 used a mix of backfilling methods
including waste fill, hydraulic fill and paste fill. The new
paste fill plant was successfully commissioned in September
with one double lift stope fully backfilled with paste fill
and additional stope voids partially filled with cementitious
paste. Existing and future stope voids will be paste filled.
Since mining and processing operations began at the
Caijiaying Mine
in 2005, mining and development
operations have been halted annually for 2 weeks to enable
employees and contractors to return to their extended
• Ore hauled of 925,903 tonnes (2018: 922,424 tonnes);
families in their home provinces for the Chinese New Year
and
• Ore processed of 930,613 tonnes (2018: 930,472
tonnes).
Whilst metal in concentrate recoveries were broadly
maintained, optimising underground stope scheduling,
pillar recovery and maximising economic extraction resulted
in a zinc equivalent head grade of 5.5% in 2019 compared
to 5.4% in 2018. As a result:
• Zinc metal in concentrate produced was 37,413 tonnes
(2018: 37,112 tonnes);
• Gold metal in concentrate produced was 17,768 ounces
(2018: 16,230 ounces);
festival and holidays. This year, those holidays commenced
on the 24 January 2020. At approximately the same time, the
government of the People’s Republic of China declared the
Covid-19 outbreak a pandemic and ordered the closure of all
Provincial borders. The Company therefore did not restart
mining and underground development operations until after
the Chinese New Year holidays on 21 February 2020, in the
mean time underground workings were placed on care and
maintenance with essential services, including pumping and
ventilation, maintained. All essential and senior Chinese staff
remained at Caijiaying whilst all foreign and non-essential
local staff were sent home and placed on standby. Ore
stockpiled at surface was processed until exhausted on the 30
January 2020 at which time the mill was placed on care and
maintenance.
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Griffin MininG LiMitedreport and accounts 2019 OPERATIONS continued
ENVIRONMENTAL SAFEGUARDS &
COMMUNITY RELATIONS
CONTRIBUTIONS continued
The Caijiaying Mine was directed by Chinese authorities
• Waste rock and mill tailings being used for backfilling
• ROM pad dust suppression facilities including, dust
The Company, through Hebei Hua Ao, has invested heavily
to restart all operations on the 21 February 2020.
underground stope voids. This minimises the mine
suppression meshes and water spray system, effectively
in the local community with Hebei Hua Ao including:
Unfortunately, due
to continuing
travel restrictions
footprint by reducing the need for larger tailings and
controlling dust on the ROM pad;
imposed by the Central Chinese authorities, the Company’s
waste storages;
mining contractor was unable to recommence activities due
to a complete quarantine of Zhejiang Province, the home
Province of the majority of the mining contractor’s staff.
This severely impacted mining, but more critically, capital
development of future mining stopes.
Underground mining operations reached 100% of planned
rates by the 13 March 2020 and, with a new supply of
ore, processing operations by late March 2020, despite
continuing difficulties in returning personnel to Caijiaying
because of travel restrictions within and into China. At the
time of writing, whilst travel restrictions within China have
been alleviated, difficulties remain in bringing key foreign
personnel to Caijiaying due to the prohibition of entry into
China to anyone other than Chinese citizens and permanent
residents. As a result, foreign national staff (including senior
management, geologists and mining engineers), are having
to work remotely from their home countries of Australia
• Upgraded dust collection system in the screening house
• Noise, dust and blasting vibration from operations
with new dust collectors, effectively reducing fine ore
being strictly controlled;
loss and dust discharge;
• Decommissioning and rehabilitation work on Tailings
• The completion and acceptance of the 2019 clean
Dams 1 & 2. This work has included battering the waste
production targets with the targeted reduction in heavy
dump slope and sheeting with soil ready for vegetation;
metal confirmed;
• Funding the state endorsed China “greening” project
• Mist cannon and vacuum trucks for dust suppression;
including the planting of trees by local villagers in the
Caijiaying area;
• The blending of semi-coke coal with common coal for
use in boilers to reduce the discharge of smoke, sulphur
• Approval from the relevant authorities to increase the
dioxide and nitric oxide;
capacity of the dry tailings storage facility without
an increase in the footprint of the facility via modern
design practices;
• Recycling of dry tailings by transportation to a local
brickwork for use as base material in brick manufacturing;
• Greening of site and camp accommodation areas
including vegetable gardens and flower beds; and
• Application made to be considered a “Green Site” by
the Ministry of Natural Resources.
and the United Kingdom via Skype and Zoom. This is
• A dedicated waste collection building to accumulate
having a limited short-term impact upon operations at the
Caijiaying Mine waste prior to sorting, collection and
Caijiaying Mine but presents longer term mine planning
recycling where possible;
These environmental best practices have been recognised
Zhangjiakou Project Hope office;
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
issues. In the meantime, with a full complement of Chinese
staff, operations at the Caijiaying Mine continue as planned.
Delivery of consumables, re-agents and spares necessary to
safely and efficiently run operations have returned to normal.
ENVIRONMENTAL SAFEGUARDS &
CONTRIBUTIONS
• The planting of 60 landscape trees outside the main gate
successive China Mining Conferences.
and 30,000 elm trees and 3,000m² of grass around the
Caijiaying Mine as part of local Chinese Environmental
Protection Agency greening project;
Further, with the appearance of the Covid-19 pandemic
in January 2020, the Company has worked closely with all
levels of governmental authorities to contain this pandemic
• The construction of a new hazardous waste storage
in the Caijiaying Mine area. To date, no Covid-19 cases have
facility;
The Company, through Hebei Hua Ao, continues to
•
Installation of drainage trenches around the ROM pad,
maintain and further implement best practices regarding
waste dump and main access gate area to ensure effective
the protection of the environment. The Company believes
water run-off and protection against soil erosion;
this to be a moral, humane, community and planetary
obligation. This includes:
• Timely renewal of environmental permits including;
water usage permits, radioactive source safety permits
• Controls to prevent the discharge of waste into the
and waste discharge permits;
environment;
• Sewage treatment plants at the mine and camp sites to
online monitoring system to monitor air quality,
deal with all effluent produced;
monitored in real time by the Municipal Environmental
•
Installation of a Total Suspended Particles (“TSP”)
• All water from the Caijiaying Mine and accommodation
site being recycled;
• Boiler flue gases being treated by a dust and sulphur
extraction system to prevent the emission of pollutants
into the atmosphere;
Protection Authority Information Centre;
• Heavy Metal on-line monitoring equipment replaced
by more modern systems and monitored on-line by
the Municipal Environmental Protection Authority
Information Centre;
been reported at the Caijiaying Mine or the surrounding
area and the Company remains in full compliance with
the measures mandated by the central Chinese regulatory
authorities to limit the potential transmission of Covid-19,
including severe entry restrictions to the Caijiaying Mine,
temperature and history screening, decontamination of all
possible surfaces and extensive new sterilisation practices.
It is estimated that the Caijiaying Mine currently provides
direct and indirect employment to over 1,000 Chinese
nationals.
During 2019, Hebei Hua Ao paid Rmb116 million ($16.7
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 the Zhangjiakou City
prefecture. In December 2019, Hebei Hua Ao was granted
a Poverty Relief Silk Banner from the San Hao township
government.
16
17
• The construction and maintenance of a new water bore
at Caijiaying village to provide abundant and excellent
quality water whilst maintaining the original water bore
as a standby water supply;
• The construction and maintenance of a sealed road and
maintaining this to provide all weather access from San
Hao township to the Caijiaying Mine and camp site;
• Construction and maintenance of a pedestrian and
traffic bridge into the west side of Caijiaying Village;
• Supplying coal to the local primary and secondary
schools during the winter;
• The 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. In
November 2019, Hebei Hua Ao was granted the
Zhangjiakou Hope Dream Star Award by
the
• Supplementary pension payments to the elderly in the
Caijiaying area;
• Financial hardship alleviation support to the local
Caijiaying village residents;
• Financial and other support for local cultural events;
• Funding for traditional local specialties for annual
cultural events such as the Chinese Lunar New Year,
Dragon Boat Festival and the mid-Autumn Festival; and
• The donation of 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.
Griffin MininG LiMitedreport and accounts 2019 18
Mid Autumn Festival Celebrations at the Caijiaying Mine Camp
19
Griffin MininG LiMitedreport and accounts 2019 FinanCial results
strategiC review
In 2019, the Company and its subsidiaries (together the
Administration expenses (including those of the Caijiaying
The objective of the directors and management is to
ACQUISITIONS AND FURTHER
“Group”) recorded;
Mine) rose $1,719,000 (9.7%) from $17,714,000 in 2018
ensure the long term sustainability of the Company and its
• Revenues of $82,267,000 (2018: $99,067,000);
• Operating profit of $14,225,000 (2018: $35,555,000);
to $19,433,000 in 2019. This increase arises mainly from
business to benefit its shareholders and other stakeholders.
inflationary increases; the pursuit of the mining licence
To achieve this objective, the directors and senior executives
over Zone II; levies and other costs in complying with
seek to add value, manage risks and minimise costs whilst
Chinese health, safety and environmental requirements and
pursuing economic returns commensurate to the risk taken
• Profit before tax of $11,712,000 (2018: $34,798,000);
the expansion of activities of China Zinc in investigating
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 both gold and base metals projects that may be brought
into long term, economic production for a capital cost
• Profit after tax of $6,084,000 (2018: $25,477,000); and
potential ventures elsewhere in China.
Foreign exchange losses of $93,000 (2018: gains $42,000)
and surrounding areas and given the Company’s knowledge
to shareholders. Relatively new geological, geophysical
In view of the significant potential of the Caijiaying Mine
that provides a substantial and justifiable return on equity
• Earnings per share of 3.52 cents (2018: 14.83 cents).
Lower profits in 2019 were primarily caused by falling zinc
prices and significantly higher smelter treatment charges
resulting in lower zinc metal in concentrate prices received
by the Group.
Despite greater quantities of zinc metal in concentrate
being produced and sold, zinc metal in concentrate sales
before royalties and resource taxes in 2019 amounted to
$55,627,000 compared with $78,821,000 in 2018. Lead
and precious metal in concentrate sales amounted to
$29,850,000 compared with $24,920,000 in 2018.
In 2019, metal in concentrate sales were:
• Zinc 37,811 tonnes (2018: 36,672 tonnes);
were recorded in 2019.
Interest of $171,000 (2018: $223,000) was received on bank
deposits in 2019 whilst $51,000 (2018: $Nil) was paid on
short term bank loans.
Losses on the disposal of fixed assets of $305,000 (2018:
$939,000) were recorded.
Provision of $1,985,000 (2018: $Nil) has been made to fully
provide against the costs capitalised in respect of Hebei Sino
Anglo’s exploration licence area. Griffin intends to agree a
contractual right to the licence to be transferred to Griffin’s
2020.
Finance costs on the lease of the dry tailings facility at the
• Gold 17,712 ounces (2018: 16,206 ounces);
Caijiaying Mine and the London and Perth offices totalling
• Silver 333,093 ounces (2018: 279,632 ounces); and
• Lead 1,221 tonnes (2018: 1,027 tonnes).
Average prices achieved in 2019 were:
• Zinc metal per tonne of $1,471 (2018: $2,149);
$326,000 (2018: $283,000) were incurred.
Income taxes of $5,628,000 (2018: $9,321,000) have been
charged in 2019. This includes a deferred taxation charge of
$380,000 (2018: credit $343,000).
Basic earnings per share in 2019 was 3.52 cents (2018: 14.83
cents) and diluted earnings per share was 3.24 cents (2018
• Gold metal per ounce of $1,318 (2018: $1,173);
13.35 cents).
Cash generated from operations of $21,639,000 (2018:
$20,439,000) has been used in further developing the
Caijiaying Mine and facilities.
• Silver metal per ounce of $13.80 (2018: $12.60); and
• Lead metal per tonne of $1,575 (2018: $2,250).
Cost of sales of $48,609,000 in 2019 were up 6.1% on
that incurred in 2018 of $45,798,000. This increase may
be attributed to higher mining costs with additional rock
bolting and meshing costs and additional depreciation
provisions reflecting increased costs capitalised being
depreciated. Haulage costs were broadly in line with
those incurred in 2018 and processing (milling) costs were
marginally down on that incurred in 2018.
and expertise in China, the directors and management
and geochemical techniques, aided by new equipment, all
have focused on the further development of the Caijiaying
sourced or discovered in Australia, Europe and/or the USA,
Mine, investigation of prospective areas near the Caijiaying
have expanded the Company’s search criteria to include
Mine and other potential projects in other provinces of
virgin, exploration ground. Any found of value may be sold,
China. In addition, the directors and senior executives
joint ventured or offered in a separate vehicle to existing
evaluate other mining companies and projects worldwide
Griffin shareholders or retained by the Company and
to ascertain whether any acquisition can be made which
developed for existing shareholders.
To affect this strategy, in 2019, the Company further
expanded the scope and activities of China Zinc to
encompass this new corporate goal.
In addition, a large number of potential mining projects
have been analysed worldwide. None have been successfully
consummated for a myriad of reasons including country
risk, 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.
has the possibility of matching the returns provided by the
Caijiaying Mine.
CAIJIAYING MINE
augmented with continued extensive exploration, expansion
of the mill processing facilities (including grinding and
flotation circuits) and ongoing underground infrastructure
development. Exploration has been focussed on identifying
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
tonnes per annum, further expansion of operations will
Attributable net assets per share at 31 December 2019 was
require further licences and permits from various Chinese
$1.24 (2018: $1.22).
authorities which are proving increasingly complex and
time consuming to obtain.
joint venture partner, prior to expiry of the licence in July
The Caijiaying Mine’s metal production capability has been
20
21
Griffin MininG LiMitedreport and accounts 2019 22
Caijiaying Mine’s Dry Tailings Facility Adjacent to Tailings Dam 3 with the Camp in the Background
23
Griffin MininG LiMitedreport and accounts 2019 Corporate governanCe
Griffin is incorporated in Bermuda, a jurisdiction which
• Regular review and assessment of foreign exchange risk
• Board skills: The existing Board brings a balance of
• Shareholder communications: In addition to the
does not have a formal overarching corporate governance
and requirements; and
skills and experience to the Company, including legal,
publication of annual and interim reports, regulatory
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 have 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 26 to
32. In view of the size of the Company and stability of the
Board 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;
• Regular review of commodity prices and assessment of
hedging requirements.
The directors recognise the principles in the QCA code and
have applied these 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 page 17.
• 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 36 to 38.
• Board structure: The Board is headed by a Chairman,
who whilst not employed by the Company, spends a
significant part of his time on the Company’s business.
The Chairman’s services are provided by Keynes
Capital (see report of the remunerations committee on
page 31). The Company has no Chief Executive Officer.
Accordingly, the roles of Chief Executive Officer and
• Preparation of regular operational reports;
Chairman have not been separated as recommended
• Prior approval of capital and other significant
expenditure;
by the QCA code for the above reason. The Board also
includes a full time executive Finance Director as well as
two independent non-executive directors.
financial, mining, geological and market expertise.
news releases and maintaining a web site, as
Details of each director are given in the biographies of
aforementioned, the Company communicates directly
each director on page 33.
• Board performance: The
independent directors
with major shareholders and maintains an office in
London, in part, as a point of contact with shareholders.
regularly consider the effectiveness and performance
Further details are provided on the Company’s web site
of the Chairman and Finance Director and vice-versa.
www.griffinmining.com
A remuneration committee has been appointed with a
brief to set performance criteria. All nominations are
considered by the Board.
• Corporate culture: Both the Chairman and Finance
Director regularly visit the Group’s operations to meet
with management and other personnel. The Board
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.
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. Individual
department managers are able to communicate directly
to the Chairman concerning any issues of concern. The
Board has responsibility for setting the overall strategy
of the Group, monitoring its performance, and the
management of financial matters including, inter alia,
the approval of budgets, significant capital expenditure
and financial reports.
24
25
Griffin MininG LiMitedreport and accounts 2019 report oF the audit Committee
To comply with Corporate Governance requirements set by
Internal Controls and Risk Management
(iv) Satisfies itself that there are no relationships (such
(i) Develops and implements a policy on the supply of
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
(a) Keeps under review the effectiveness of the Company’s
internal controls and risk management systems; and
The Audit Committee assists the Board in its oversight of
(b) Reviews and approves the statements to be included in
the Company’s financial reporting, internal control and
the Annual Report concerning internal controls and risk
risk management. In this regard, the Audit Committee is
management.
charged with carrying out the following.
Whistle blowing
Financial Reporting
The Audit Committee monitors the integrity of the
for its employees to raise concerns, in confidence, about
financial statements of the Company, including its annual
possible wrongdoing in financial reporting or other matters.
and interim reports, preliminary results and any other
The Audit Committee ensures that these arrangements
formal announcement relating to its financial performance
allow proportionate and independent investigation of such
whilst reviewing significant financial reporting issues and
matters and appropriate follow up action.
The Audit Committee reviews the Company’s arrangements
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;
External Audit
The Audit Committee:
(a) Considers and make 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
auditor. The Audit Committee oversees the selection
process for new auditors and if an auditor resigns the
as family, employment, investment, financial or
non audit services by the external auditor, 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);
(v) Agrees with the Board a policy on the employment
of former employees of the Company’s auditor,
then monitoring the implementation of this policy;
(vi) Monitors the auditors’ compliance with relevant
ethical and professional guidance on the rotation
of audit partners, the level of fees paid by the
In order to fulfil these duties, the Audit Committee receives
regular financial and other reports from management and
has unfettered access to employees of the Company and its
subsidiaries.
Rupert Crowe
Chairman of the Audit Committee
Company compared to the overall fee income
16 June 2020
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 with the external auditor, including once at the
planning stage before the audit and once after the audit
at the reporting stage and at other times when necessary.
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;
(b) The methods used to account for significant or unusual
this and decide whether any action is required;
auditor. This includes but is not limited to, the following:
Audit Committee shall investigate the issues leading to
(e) Reviews the findings of the audit with the external
transactions where different approaches are possible;
(c) Whether the Company has followed appropriate
including (but not limited to):
the audit,
(b) Oversees the relationship with the external auditor
(i) Discussion of any major issues which arose during
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
(ii) Any accounting and audit judgements, and
(iii) Levels of errors identified during the audit.
(d) The clarity of disclosure in the Company’s financial
conducted;
(f) Reviews the effectiveness of the audit;
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 operating and financial review
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 auditor as a whole, including
the provision of any non-audit services;
(g) Reviews the representation letter(s) requested by the
external auditor before they are signed by management;
(h) Reviews the management letter and management’s
response to the auditors’ findings and recommendations;
and
26
27
Griffin MininG LiMitedreport and accounts 2019 28
29
Griffin Directors and Hebei Hua Ao senior management at the entrance to the Caijiaying Mine.
From left to right, back row: John Steele(Mining Manager); Damian Brice-Houseman
(General Manager Caijiaying Mine); Rupert Crowe (Director); Roger Goodwin (Finance Director),
Mladen Ninkov (Chairman); Dal Brynelsen (Director); Adam Usdan (Director).
Front row: Runxi Jia (Processing Manager); Mark Hine (Chief Operating Officer);
Paul Benson (Geology Manager); Gaopeng Xi (Deputy Operations Manager);
Wenqi Zhang (Hebei Hua Ao Chief Financial Officer); Qing Zhang (Safety Manager).
Griffin MininG LiMitedreport and accounts 2019 REPORT OF THE REMUNERATION COMMITTEE
To comply with Corporate Governance requirements
remuneration
is considered by
the Remuneration
An additional payment equal to two months fees was
Chairman
set by AIM in 2018, a remuneration committee (the
Committee, with the assistance of outside executive
awarded to Keynes Capital in recognition of their services,
“Remuneration Committee”) was formed comprising the
compensation consultants, on a year by year basis.
including that of the Chairman Mladen Ninkov, in 2019.
non executive directors Dal Brynelsen and Adam Usdan.
Nevertheless, the Remuneration Committee continues to
Long-term performance is incentivised by way of the grant
assess various remuneration policies to attract and retain
of share options.
The Role of the Remuneration Committee
future high-calibre executives and motivate them to develop
and implement the Group’s business strategy in order to
optimise long-term shareholder value. It is intended that
such policy will build on past practice and apply in the future.
The policy is framed around the following key principles:
The Board seeks to strengthen the alignment of director,
employee and shareholder interests.
Executive directors’ remuneration for 2019
• Total rewards are set at levels that are sufficiently
The executive director’s base salary was last increased with
competitive to enable the recruitment and retention of
effect from 1 January 2014.
employee benefit structures across the Group.
• The design of long-term incentives is prudent and will
not expose shareholders to unreasonable financial risk;
•
In considering the market positioning of reward
£30,000). In addition, he received directors’ fees of $212,000
elements, account is taken of the performance of the
(2018: $138,000) from subsidiary companies.
A bonus equivalent to two months of the executive
directors’ base salary was awarded to the finance director in
recognition of short term performance in 2019.
In 2019, Roger Goodwin (Finance Director and Company
Secretary) received a basic salary of £315,000 (2018:
£315,000) and pension contributions of £30,000 (2018:
The Chairman has dedicated a significant portion of his
time to the Group and its operations. 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
to the Company in Australia, including support staff,
management reporting, financial reports and offices. The
Chairman, Mladen Ninkov, is a director and employee of
Keynes Investments Pty Ltd.
Under a consultancy agreement with the Company, Keynes
Capital received fees of $2,598,000 (2018: $2,137,000), for
the provision of advisory and support services to Griffin
and its subsidiaries in 2019. This included an additional
payment equal to two months fees.
The consultancy agreement with Keynes Capital runs from
1 July 2019 to 30 June 2021.
In addition to the above, the Chairman received directors’
fees from subsidiary companies of $212,000 in 2019 (2018:
$138,000).
The Remuneration Committee
is
responsible
for
determining and agreeing with the Board the broad policy
for the remuneration and terms of engagement of the
Finance Director, 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
to consider. The Committee is also responsible for the
review of, and making recommendations to, the Board in
connection with share option plans and performance related
pay and their associated targets and for the oversight of
Apart from the Finance Director, all the other Company
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 and few other directors
in the Group, the remuneration committee has determined
that it would be inflexible, bureaucratically cumbersome
high-calibre executives;
• Total incentive-based rewards are earned through the
achievement of performance conditions consistent with
shareholder interests;
Group and of each individual executive director; and
• Reward practice conforms with 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. No
director was involved in deciding the level and composition
of their own remuneration.
The executive director receives an amount of fixed pay made
up of a base salary, fixed fees from subsidiary companies and
pension contribution.
and therefore inappropriate to have an extensive and
A bonus equivalent to two months of base salary was
prescriptive formula for determining
individual total
awarded to the finance director in recognition of short term
compensation packages. Accordingly,
the directors
performance in 2019.
The service contract between the Company and Roger
Goodwin provides for three months’ notice by either side
or six months in the event of a change of control of the
Company.
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.
All 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
30
31
Griffin MininG LiMitedreport and accounts 2019
REPORT OF THE REMUNERATION COMMITTEE (CONTINUED)
direCtors
Long Term Incentives
As detailed in the Directors’ Report on page 36, the options
Mladen Ninkov, Chairman, Australian, holds a Master
Rupert Crowe, Director, Australian,
is a graduate
exercisable into new ordinary shares of the Company at
of Law Degree from Trinity Hall, Cambridge and Bachelor
geologist from Trinity College Dublin. He was the founding
In November 2018, with the unanimous agreement of all the
an exercise of £0.30 per share were granted on 6 February
of Laws (with Honours) and Bachelor of Jurisprudence
chairman and managing director of CSA Global Pty Ltd, a
issued option holders, the exercise periods were extended
2015, two thirds of which have vested with a further third
Degree from the University of Western Australia. He is the
mining consultancy company founded in Ireland in 1983
for outstanding share purchase options over:
of each holder’s options vesting on the granting of a new
principal of Keynes Capital. He has a mining, legal, fund
and now headquartered in Australia. He is a specialist in
mining licence over Zone II at the Caijiaying Mine.
management and investment banking background and is
zinc-lead exploration and was involved as a principal in the
• 4,350,000 new ordinary shares (vested) exercisable at
£0.40 per new ordinary share;
The options will not vest if an employee or a director resigns
• 10,732,500 new ordinary shares (vested) exercisable at
or leaves the Company for cause prior to the vesting event
£0.30 pence per new ordinary share; and
• 6,666,667 new ordinary shares (currently not vested)
exercisable at £0.30 pence per new ordinary share
from 31 December 2018, in respect of the options
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
exercisable at 40 pence per share, and from 31 December
options expiring.
2020 in respect of the options exercisable at 30 pence
per share, to the 31 December 2022. This was aimed at
Non Executive Directors
preventing the need, in the short-term, for the majority of
The non-executive Directors’ fees were last reviewed with
the option holders, once exercising their options, to sell a
effect from 1 July 2019 fees and were held at £66,125 per
significant portion of the resulting issued shares to meet
annum.
the associated subscription costs and personal income tax
liabilities imposed on such exercise.
In addition to the above Mr Dal Brynelsen received fees of
$188,000 (2018: $114,000) for acting as a director of Hebei
As detailed in the Directors’ Report on page 36, the options
Hua Ao.
exercisable into new ordinary shares of the Company at an
In addition to the above Mr Rupert Crowe received fees of
exercise of £0.40 per share were granted on 13 February
$50,000 for geological services over and above that expected
2014 and have all now vested.
from him as part of his services as a non executive director.
Total Directors’ Remuneration
The table below sets out the total remuneration payable to the Directors:
2019
2018
Fees
Salary
Pension Total
Contributions
$000
$000
Mladen Ninkov*
Dal Brynelsen
Rupert Crowe
Roger Goodwin
Adam Usdan
Total
$000
212
271
134
212
84
913
-
-
-
465
-
465
$000
212
271
134
715
84
-
-
-
38
-
38
1,416
Fees
$000
138
203
89
138
89
657
Salary
$000
Pension
Contributions
$000
-
-
-
424
-
424
-
-
-
40
-
40
Total
$000
138
203
89
602
89
1,121
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.
*Keynes Capital, the registered business name of Keynes Investments Pty Ltd as trustee for the Keynes Trust, received fees under
a consultancy agreement of $2,598,000 (2018: $2,137,000) 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 2019 or 2018. 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 2019 and 2018.
Dal Brynelsen
Chairman of the Remuneration Committee
16 June 2020
32
33
Griffin MininG LiMitedreport and accounts 2019
senior exeCutives
direCtors’ report
Mark Hine, Chief Operating Officer, Australian, is
Tiger Mining’s joint venture operations in China. Previously
The Directors submit their report together with the audited consolidated financial statements of Griffin Mining Limited (“the
a mining engineer having graduated from the Western
she was Chief Accountant for Shanghai Silk Group and
Company”) and its subsidiaries (“the Group”) for the year ended 31 December 2019.
Australia School of Mines, a member of the Australian
subsequently Ann Taylor Shanghai.
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. He is currently a non-executive
director of Parenti Global Limited.
Dr Bo Zhou, General Manager China, Australian, holds
a PhD in exploration geology from Sydney University and a
BSc in economic geology from Peking University. He was
Managing Director of Sinovus Mining Ltd, an ASX listed
company with mineral interests in China. Prior to that he
was the General Manager for Guangxi Golden Tiger Mining
JV, a Sino-Australian JV gold company focussed on Guangxi,
China, controlled by Golden Tiger Mining NL, an ASX
listed company. He has also worked as the Senior Geologist
for Silk Road Resources (a TSX listed company), responsible
for evaluating various gold properties in Gansu Province in
central western China. Dr Zhou has considerable experience
in the Chinese resources sector.
Shirley Tsang, Director, China Zinc Limited, British,
is a Chartered Management Accountant (United Kingdom)
and a CPA (Hong Kong & Australia). She holds an MBA
(Finance) from the City University Business School, United
Kingdom. She started her career as an auditor with Ernst
& Whinney and moved on to business advisory practice for
international clients with Arthur Young. She was head of the
China and Hong Kong business advisor practice from 2003
to 2017 in the Tricor Group. She has considerable experience
in corporate restructuring for international clients and best
practice in corporate governance. She is currently Managing
Director of SEAJA Consultancy Limited in Hong Kong.
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
terms. Prior to joining Griffin he was Principal Geologist
for Mining Associates, providing competent person services
FinanCial results
The Group profit before taxation for 2019 amounted to $11,712,000 (2018: $34,798,000). Taxation of $5,628,000 (2018:
$9,321,000) has been provided. No dividends were paid in 2019 (2018: Nil). $6,084,000 has been credited to reserves (2018:
credited $25,477,000).
The basic earnings per share amounted to 3.52 cents (2018: 14.83 cents). The attributable net asset value per share at 31 December
2019 amounted to 124 cents (2018: 122 cents).
In view of the current relatively low zinc market prices, high smelter treatment charges, 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 2019 and the indication of likely future developments are set out on pages 6 to 21.
direCtors
The Directors of the Company during the year were:
Mladen Ninkov – Australian – Chairman
Roger Goodwin – British - Finance Director
to inter alia the Hong Kong Stock Exchange; Vice President
Dal Brynelsen – Canadian
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 Gold in China; Exploration Manager,
Lotus Resources plc in Mongolia; Chief Representative for
Centerra Gold Inc in China; President and Exploration
Damian Houseman, General Manager Caijiaying Mine,
Manager for TVI Pacific’s China WOFE - Hunan Pacific
Australian, holds a diploma in mining from the School of
Geological Exploration Inc; Site Manager Jinfeng for Sino
Science and Engineering, Ballarat University, Victoria,
Gold Limited and Exploration and Business Development
Australia (now Federal University of Australia). He has over
Manager for Newmont China Limited.
23 years’ experience in the underground mining industry
from underground operator to senior management roles. He
was previously underground mine manager at Centamin’s
Sukari Gold Mine in Egypt; with Ausino Drilling Services Pty
Ltd in China; RH Mining Limited in China; Bariq Mining
Ltd in Saudi Arabia; Downer Mining Limited in Papua New
Guinea; Eldorado in China and Xstrata in Australia.
Wendy Zhang, Chief Financial Officer, Hebei Hua Ao,
Australian, holds a Master of Accounting degree from
Macquarie University, is a member of the Certified Practising
Accountants of Australia and is a qualified member of the
Chinese Institute of Certified Public Accountants for 11
years. She spent 4 years as Financial Controller for Golden
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 2019 and their immediate families in the share capital of
the Company were as follows:
Name
At 31 December 2019
At 1 January 2019
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
-
33,242,890
1,166,667
-
All of the Directors’ interests detailed are beneficial.
34
35
Griffin MininG LiMitedreport and accounts 2019
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.
Further information on how the Group manages risk is given on pages 67 to 70.
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
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.
Exposure to fluctuations
in the Renminbi / US
dollar exchange rate.
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.
Moderate
The
pegged
Renminbi
to
the
is
US
loosely
dollar.
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.
Exposure to increases
in the market prices of
materials,
equipment
and services the Group
uses.
36
direCtors’ report
prinCipal risks and unCertainties Continued
Risk
Comment
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
the 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.
Business
Impact
Mitigation
Low
High
The Group has operated in the PRC for
over 20 years in which time the country has
been relatively stable.
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
Griffin uses a number of contractors,
particularly for its mining, haulage
and drilling activities. Each of
these activities has inherent risk,
including injury or death to the
contractor’s employees. Such events
could cause a total shutdown of all
operational activities which may take
a substantial time to recommence.
Moderate
Griffin has an extensive occupational Health
in conjunction
and Safety Department
with a Mining Manager and his team of
underground
constantly
oversee all contractors’ activities, inter alia,
punishing and fining contractors for safety
breaches, Griffin keeps under consideration
moving to owner operated activities.
foremen who
Exposure to mining
hazards
risks and hazards
The Group is exposed to a number
of
typically
associated with mining for example
rock falls, flooding and mechanical
breakdowns.
Moderate
Low
High
Reliability of Mineral
Resources and Ore
Reserves
The calculation of Mineral Resources
and Ore Reserves involves significant
assumptions and estimates that may
prove inaccurate.
Mine fatality
in
fatality
A
the mine would
result in the closure of the mine
and suspension of operations for
an indefinite time to allow a full
investigation by the PRC authorities
with subsequent penalties possibly
including
of
personnel held responsible and loss
of licences.
dismissal
fines,
Griffin’s operational
teams continually
monitor mining and other risks, and report
to senior management who report to the
Board, 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.
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.
As noted above, Griffin’s operational teams
continually monitor mining and other risks and
report to senior management who report to
the Board, taking immediate and appropriate
measures to minimise any identified risks and
hazards. In addition, the Group’s operations
are monitored and continually inspected by the
PRC local, County, City and Provincial Safety
Bureaus.
37
Griffin MininG LiMitedreport and accounts 2019
direCtors’ report
Risk
Comment
Business
Impact
Mitigation
Other Risks
Exposure to a single
operation
Licence administration
Griffin is reliant upon a single
operation, being
the Caijiaying
zinc gold mine in the PRC. Factors
affecting operations at Caijiaying
have an impact upon the Group.
its
through
exploration
subsidiary
Griffin,
companies, holds a number of
mining,
and other
licences and permits to operate.
These normally include conditions
for ongoing operation and require
periodic renewal. Renewals are not
guaranteed.
Key management
Geological and
Historical Information
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 a significant effect
on the operations of the Company
loss of historical and/or
The
geological information would have
a very significant impact on the
operations of the Company.
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
these policies and
circumvented
procedures which could result in
prosecution of the Group and its
officers.
Pandemic
(Covid-19 / SARS)
Moderate
A further outbreak of Covid-19 or
other virus may lead to restrictions
on operations being imposed by
the PRC authorities including a
suspension in operations.
Moderate
High
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.
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.
Moderate
Griffin has contractual arrangements with
all key employees which are renewed on a
regular basis.
Low
Moderate
instituted a complete back
Griffin has
up system relating to all geological and
operational data in Perth with CSA Global.
It is updated on a daily basis.
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 antibribery 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.
China imposed strict controls to control the
Covid-19 and SARS outbreaks emerging
from these relatively quickly. Griffin works
closely with the PRC authorities to minimise
the impact of such outbreaks upon personnel
and operations.
direCtors’ report
post BalanCe sheet events and going ConCern
As disclosed in the operational review on pages 15 and 16, operations at Caijiaying were suspended for a month from 24 January
to comply with restrictions instigated by the PRC authorities to contain the Covid-19 pandemic. Operations at Caijiaying
recommenced on 21 February 2020 and have since steadily increased such that underground mining operations reached 100%
of planned rates by mid-March and processing operations by late March. As a result, in the three months to 31 March 2020,
zinc metal in concentrate production was down on that produced in the first quarter of 2019. Since the re-commencement of
operations at Caijiaying, Hebei Hua Ao has been able to sell both zinc and lead, with precious metal, concentrates in China which
in the main has now relaxed the restrictions placed to contain the Covid-19 pandemic. During suspension and thereafter Griffin
has been careful to manage liquidity such that to date it has not had to draw down on any bank credit facilities. Whilst it is difficult
to assess the impact of the Covid-19 on future profitability and liquidity, particularly regarding the impact of metal prices, the
directors consider that at current metal prices and with the benefit of agreed banking facilities the Group can continue as a going
concern for the foreseeable future without the need to curtail operations.
independent auditors
PricewaterhouseCoopers LLP were re-appointed auditors at the Annual General Meeting of the Company held on 31 July
2019 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
16 June 2020
38
39
Griffin MininG LiMitedreport and accounts 2019 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 financial statements (the “financial statements”):
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
• give a true and fair view of the state of the Group’s affairs as at 31 December 2019 and of its profit and cash flows for the year
evidence of bias by the directors that represented a risk of material misstatement due to fraud.
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 2019 (the “Annual Report”), which comprise:
the Consolidated Statement of Financial Position as at 31 December 2019; 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
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
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
Extension of the business licence and approval of the
increase in production permit
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: $1.7million (2018: $1.7million), based on 5% of the 3 year
average profit before tax.
• We conducted full scope audits of three components out of the Group’s nine entities
Materiality
which were selected due to their size and risk characteristics.
Audit scope
Key audit
matters
• This enabled us to obtain 100% coverage of consolidated revenue, 94% coverage of
consolidated profit before tax and 99% coverage of total assets for the Group.
• To ensure sufficient oversight, direction and responsibility of the audit work performed
over the Chinese components, the Group team performed a number of procedures
throughout the audit which included directing the audit approach and procedures,
conducting remote file reviews and conducting remote face to face meetings with local
management and the component team.
• Extension of the business licence and approval of the increase in production permit;
•
Impairment of property, plant and equipment;
• Basis of going concern; and
•
Impact of Covid-19.
See page 56 Significant accounting judgements and estimates
In addition to holding discussions with management, we
and note 10 Property, Plant and Equipment.
have discussed with, and obtained correspondence from,
The current life of mine plan, which includes extraction of
resources from ZONE III only, extends beyond 2037. Under
the terms of the Group’s current joint venture agreement
with Zhangjiakou Caijiaying Lead Zinc Mining, the Group’s
business licence will expire in 2037.
Management is currently converting their joint venture
to a limited liability company. As a result of this conversion
management expects to be able to extend the term of the
business licence as a matter of routine and at no additional cost.
Judgement is needed as to whether this conversion to a limited
liability company would enable an extension of the term of the
business licence as a matter of routine, and if it would lead to
additional cost being incurred. This impacts asset carrying
amounts and depreciation rates because a shorter business licence
would reduce the amount of resources that could be extracted.
management’s external legal advisors and the MNR to
understand the status of and applications for extending
the term of the business licence and obtaining the Zone
II licence and the increase in production permit. Through
performing these procedures:
• we concur with management that by converting the joint
venture to a limited liability company, extending the term
of the business licence will be routine in nature and no
additional costs will be incurred; and
• we have considered the delays faced by the Group in
obtaining the Zone II licence and increase in production
permit. Having requested management sensitise their
impairment model to show the impact of neither licence
being granted, we note that due to the significant
headroom, modelling this impact shows no impairment.
Based on these procedures, we are satisfied with management’s
In addition to, and separately from obtaining the extension of
judgements regarding these licences and the production
the business licence, the current life of mine plan assumes that
permit.
the Group will be able to increase production from current levels
of circa 0.9 million tonnes per annum (“mpta”) to 1.2mpta from
mid 2021. While the Group’s mining operation already has the
capacity to increase production, increasing production requires
approval from the Beijing Ministry of Natural Resources
(“MNR”). The increase in production permit is being applied
for in conjunction with a mining licence for ZONE II.
Finally, we considered the adequacy of management’s
disclosure of the key judgements in relation to the extension
of the business licence, the approval of the Zone II mining
licence and the application for an increased production
permit and consider them to be reasonable.
40
41
Griffin MininG LiMitedreport and accounts 2019 independent auditors’ report to the memBers oF
griFFin mining limited
independent auditors’ report to the memBers oF
griFFin mining limited
key audit matter
how our audit addressed the key
audit matter
Judgement is needed to determine the timing of when the
increase in production permit and ZONE II licence will
be obtained given the delays already faced by the Group in
obtaining these licences.
The timing of the ZONE II licence application being granted
does not impact the accounting estimates included within the
financial statements. A delay in the increase in production
permit being granted would impact asset carrying value for
the time value of money as production would reduce each year
and mineral resource will be recovered over a longer period
of time.
Impairment of property, plant and equipment
See page 56 Significant accounting judgements and estimates
We tested management’s discounted cash flow impairment
and note 10 Property, Plant and Equipment.
analysis (“impairment model”) on the Group’s property, plant
As at 31 December 2019, the carrying value of property, plant
and equipment by performing the work described below:
and equipment in the Consolidated Balance Sheet totalled
• Obtained management’s
impairment model used to
key audit matter
Basis of going concern
how our audit addressed the key
audit matter
Refer to page 39 of the Directors’ Report and page 51 Basis of
In assessing the appropriateness of the going concern
preparation.
assumption used in preparing the financial statements, we:
We focused on this area given the recent decline in the zinc
• Checked the mathematical accuracy of management’s cash
prices and the increase in treatment charges together with
flow forecast and validated the opening cash position;
the fact that the Group was in a net current liability position
of $8.3m as at 31 December 2019. In addition, the mine
temporarily shut down during February 2020 due to the
Covid-19 pandemic.
• Validated management’s underlying cash flow projections
for the Group to other external and internal sources
where appropriate, including recent production, zinc
price forecasts and comparing cost assumptions to historic
Management prepared a cash flow forecast for the period to 31
actuals and underlying budgets;
December 2021, and included sensitivities in their cash flow to
• Examined management’s sensitivity analysis to assess the
model scenarios including a prolonged fall in the commodity
reasonability and impact of the key assumptions underlying
price (below the forecast forward curve), continuing higher
the forecast including a reduction in zinc price, an increase
zinc treatment charges, a second shutdown of operations as
in zinc treatment charges, the impact of a mine shutdown
a result of a second wave of Covid-19 as well as mitigating
due to a second wave of Covid-19 and assessed the Group’s
management actions that are within their control.
ability to take mitigating actions, if required; and
Based on these forecasts’ management consider that it is
appropriate to prepare the financial statements on a going
• Evaluated the completeness and appropriateness of
management’s going concern disclosures in the financial
$228.3 million.
determine fair value of the property, plant and equipment
concern basis.
statements.
Our conclusions on going concern are set out later in this
report.
At the reporting date, management performed an impairment
indicator assessment and concluded that due to a reduction in
the zinc prices and an increase in the treatment charges during
the financial year, the property, plant and equipment should be
tested for impairment.
Management prepared an impairment analysis which uses a
discounted cash flow model to determine the fair value of the
Group’s property, plant and equipment. This incorporates
assumptions for the forward prices of commodities, operating
and administrative costs, capital expenditure, production
volumes and available resources as estimates by an external
mineral resources expert.
We focused on this area due to the material nature of the
balance, the judgement involved in assessing for impairment
and the estimates required to calculate the carrying value in
the current economic climate.
and checked its mathematical accuracy;
• Validated management’s assumptions used
in
the
impairment model to external and internal sources where
appropriate, including recent production, price forecasts
and comparing cost and capital expenditure assumptions
to historic actuals and underlying budgets;
• Assessed the competency, independence and objectivity of
the experts in relation to the resources. We discussed the
key judgments and assumptions used in the report directly
with these experts;
• Assessed the discount rate used by management in the
discounted cash flow model of 10%;
• Benchmarked zinc and other commodity price assumptions
to external sources including forward curves and found
these to be reasonable; and
• Performed sensitivity analysis around the key assumptions
within the cash flow forecasts using a range of discount
rates and lower long-term commodity prices and exchange
rates based on what, in our view, a market participant may
apply.
Based on our analysis, we consider management’s impairment
conclusions, and the associated disclosures to be reasonable.
Impact of Covid-19
Refer to page 39 of the Directors’ Report and note 29 Post
We examined management’s assessment that the impact of
balance sheet events.
The international outbreak of Covid-19 in early 2020 has
Covid-19 represents a non-adjusting post balance sheet event
and concur with that assessment.
affected business and economic activity around the world,
We examined the disclosures included in the Annual Report
including China where the Group operates. Given the spread
in respect of this risk, including on the principal risks and
of Covid-19, the range of the potential outcomes are both
uncertainties, going concern and post balance sheet events and
uncertain and difficult to predict, but are likely to include
consider them reasonable.
a prolonged global recession and increased volatility in
commodity prices.
Our audit work on management’s assessment of the impact of
Covid-19 on the Group’s ability to continue as a going concern
Management has assessed the impact of Covid-19 on the
is set out in the key audit matter above.
Group’s operations and ability to continue as a going concern.
Management concluded that the Covid-19 pandemic and
the factors that led to a suspension of operations in 2020
are a result of conditions that arose after the balance sheet
date and as a result are non-adjusting post balance events.
Consequently, the future assumptions used in the Group’s
impairment assessments performed as at 31 December 2019
were not adjusted for changes subsequent to that date.
42
43
Griffin MininG LiMitedreport and accounts 2019
independent auditors’ report to the memBers oF
griFFin mining limited
independent auditors’ report to the memBers oF
griFFin mining limited
How we tailored the audit scope
reporting on other inFormation
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, 94% coverage of
consolidated profit before tax and 99% coverage of total assets for the Group.
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, except to the extent otherwise explicitly stated in
this report, 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
To ensure sufficient oversight of the Chinese component audits, the Group team performed a number of procedures throughout
these responsibilities.
the audit which included directing the audit approach and procedures, remote file reviews and remote face to face meetings with
local management and the component team.
responsiBilities For the FinanCial statements and the audit
The Group engagement team directly performed the audit of the consolidation. This, together with additional procedures
Responsibilities of the directors for the financial statements
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.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
$1.7 million (2018: $1.7million).
How we determined it
5% of the 3 year average profit before tax.
Rationale for benchmark applied
Profit is the key indicator of the Group’s performance and the most appropriate
benchmark for materiality. Due to volatility in commodity prices which impacts
profitability, we have used the 3 year average profit before tax as the benchmark.
As explained more fully in the Statement of Directors’ Responsibilities In Respect Of The Financial Statements set out on page
39, 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.
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
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The
statements.
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
(2018: $85,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
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
ConClusions relating to going ConCern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when:
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
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
save where expressly agreed by our prior consent in writing.
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
The engagement partner on the audit resulting in this independent auditors’ report is Timothy McAllister.
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.
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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
16 June 2020
44
45
Griffin MininG LiMitedreport and accounts 2019 Consolidated statement oF Comprehensive inCome
For the year ended 31 December 2019
(expressed in thousands US dollars)
Profit for the year
2019
$000
6,084
2018
$000
25,477
Other comprehensive (expenses) / income that will be reclassified to profit or loss
Exchange differences on translating foreign operations
(2,324)
(5,856)
Other comprehensive (expenses) / income for the year, net of tax
(2,324)
(5,856)
Total comprehensive income for the year
3,760
19,621
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Consolidated inCome statement
For the year ended 31 December 2019
(expressed in thousands US dollars)
Notes
Revenue
Cost of sales
Gross profit
Administration expenses
Operating Profit
Losses on disposal of plant and equipment
Impairment of intangible assets
Foreign exchange (losses) / profits
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
11
5
6
7
8
9
9
2019
$000
82,267
(48,609)
33,658
(19,433)
14,225
(305)
(1,985)
(93)
171
(377)
76
11,712
(5,628)
6,084
3.52
3.24
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
13.53
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
46
47
Griffin MininG LiMitedreport and accounts 2019
Consolidated statement oF FinanCial position
As at 31 December 2019
(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
2019
$000
2018
$000
10
11
12
13
14
15
18
19
20
21
20
228,287
322
228,609
3,839
1,861
19,885
25,585
213,140
2,016
215,156
4,951
2,819
28,452
36,222
254,194
251,378
1,728
68,455
3,690
2,072
(917)
2,500
(29,346)
1,703
165,059
214,944
2,150
2,731
479
5,360
31,769
2,121
33,890
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
Total equities and liabilities
254,194
251,378
Attributable net asset value per share to equity holders of parent
22
$1.24
$1.22
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
The financial statements on pages 46 to 73 were approved by the Board of Directors and signed on its behalf by:
Mladen Ninkov
Chairman
16 June 2020
48
Roger Goodwin
Finance Director
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49
Griffin MininG LiMitedreport and accounts 2019
Consolidated Cash Flow statement
For the year ended 31 December 2019
(expressed in thousands US dollars)
Notes
Net cash flows from operating activities
Profit before taxation
Foreign exchange losses / (gains)
Finance income
Finance costs
Depreciation, depletion and amortisation
Impairment of intangible assets
Losses on disposal of equipment
Decrease in inventories
Decrease / (increase) in receivables and other current assets
Increase / (decrease) 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, office furniture & 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 for treasury
Interest paid
Finance lease advance
Finance lease repayments
Net cash outflow from financing activities
5
6
10
11
5
10
10
11
2019
$000
11,712
93
(171)
377
12,343
1,985
305
1,112
959
4,016
(11,092)
21,639
171
1
(18,883)
(8,193)
(69)
(308)
(27,281)
14
-
(52)
65
(2,762)
(2,735)
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)
notes to the FinanCial statements
aCCounting poliCies
Basis oF aCCounting
The financial statements have been prepared in accordance with applicable International Financial Reporting Standards 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 stated.
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 2019:
IFRS 16 “Leases”
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ and its related interpretations. This results 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 has adopted the standard from its mandatory adoption date of 1 January 2019 applying the modified retrospective
approach by not restating comparative amounts for prior years. Right-of-use assets for property leases have been 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).
On application of IFRS 16 the Group recognised right of use assets of $371,000 on which depreciation of $124,000 has been
provided in the year with lease liabilities at 1 January 2019 of $404,000, resulting in a prior period charge to profit and loss
reserve of $33,000. Operating lease commitments at 31 December 2018 totaled $451,000 and after taking into account the
impact of discounted commitments the lease liability recognised at 1 January 2019 was $404,000.
new standards and interpretations not yet adopted
At the date of authorisation of these financial statements, certain new and amended accounting standards and interpretations
have been published that are not mandatory for the period ending 31 December 2019, nor have they been early adopted by the
Group. These standards and interpretations are not expected to have a material impact on the Company’s consolidated financial
(Decrease) / increase in cash and cash equivalents
(8,377)
1,658
statements in the current or future reporting periods.
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
28,452
(190)
19,885
26,518
276
28,452
going ConCern
Notwithstanding the Group’s net current liabilities, the financial statements have been prepared on a going concern basis. In
consideration of recent events, notwithstanding that the Group prepares cash flow forecasts regularly, management has taken into
account sensitivities for the possible impacts of:
19,885
28,452
• The unlikely event of a second Covid-19 outbreak with a one month suspension in operations. Whilst a one month suspension
Included within net cash flows of $8,377,000 (2018: $1,658,000) are foreign exchange losses of $93,000 (2018: gains $42,000)
which have been treated as realised.
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
is in line with that experienced in the Spring of 2020 during the height of the Covid-19 pandemic in China, a second wave is
not expected to impact operations as severely as that experienced in the Spring of 2020 when miners were away on Chinese
New Year Holidays and unable to return to Caijiaying.
• A reduction in market prices to $1,850 per tonne of zinc from October 2020 for the rest of the forecast period, which is linked
to a potential second Covid-19 outbreak. Management consider this a reasonable downside as this is similar to the lowest
zinc market price during the global Covid-19 outbreak in March 2020. Until October 2020 the forward curve price has been
modelled which is flat compared to current market prices.
• Higher smelter treatment charges. Treatment charges have been forecast at levels recently experienced by the Group and in
line with market prices at the date of this report. As a sensitivity management has increased smelter treatment charges by 2%.
50
51
Griffin MininG LiMitedreport and accounts 2019
notes to the FinanCial statements
aCCounting poliCies
going ConCern (Continued)
notes to the FinanCial statements
aCCounting poliCies
• Mitigating actions within management’s control, including the deferral of payments to certain creditors for a short period.
depreCiation
• Management has held foreign exchange rates flat as they note that because the zinc price is pegged to the US Dollar and the
Group incurs costs in Remimbi there is a natural currency hedge.
On this basis, with the existing bank facilities available to the Group, the board of directors consider the Group will be able to meet its
liabilities as they fall due and have prepared the financial statements on a going concern basis.
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
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.
policies so as to obtain benefits from their activities. The Group obtains and exercises control through voting rights.
impairment
Management has assessed its involvement in Hebei Hua Ao and Hebei Sino Anglo in accordance with IFRS 10 and concluded
A review for impairment indicators at each reporting date is undertaken. In the event of impairment indicators being identified,
that it has 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
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:
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 recognised on
estimates / assumptions Basis
a delivery / collection basis as at this point the performance obligations are satisfied. Delivery / collection occur following open
auction of metals in concentrate and where delivery is taken and cash received within 30 days of the agreement.
non Current assets
Intangible assets – exploration cost
Expenditure on licences, concessions and exploration incurred on areas of interest by subsidiary undertakings are carried as
intangible assets until such time as it is determined that there are both technically feasible and commercially viable resources
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.
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
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.
52
53
Griffin MininG LiMitedreport and accounts 2019 notes to the FinanCial statements
aCCounting poliCies
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
notes to the FinanCial statements
aCCounting poliCies
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
time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). The
The financial statements have been prepared in United States dollars being the local currency of Bermuda. Whilst registered in
Group reclassifies debt investments when and only when its business model for managing those assets changes.
Bermuda the Company, together with its subsidiaries and associates, operate in China, the United Kingdom, Hong Kong and
Classification of financial assets at amortised cost
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
The Group classifies its financial assets as at amortised cost only if both of the following criteria are met:
date of the transaction.
•
•
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
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.
through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction
The balance of the foreign currency translation reserve relating to an operation that is disposed of is reclassified from equity to
costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with embedded derivatives are considered
profit or loss at the time of the disposal.
in their entirety when determining whether their cash flows are solely payment of principal and interest.
Impairment
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.
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.
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
equity
Equity comprises the following:
• “Share capital” represents the nominal value of equity shares.
• “Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of
expenses of the share issue.
• “Contributing surplus” is a statutory reserve for the maintenance of capital under Bermuda company law and was created on
a reduction in the par value of the Company’s ordinary shares on 15 March 2001.
• “Share based payments” represents equity-settled share-based remuneration until such share options are exercised.
• “Foreign exchange reserve” represents the differences arising from translation of investments in overseas subsidiaries.
• “Chinese statutory re-investment reserve” represents a statutory retained earnings reserve under PRC law for future
investment by Hebei Hua Ao.
• “other reserves on acquisition of non controlling interests” represents the excess of the purchase price paid to acquire non
controlling interest rights over the non controlling interests in subsidiary companies.
• “Profit and loss reserve” represent retained profits and losses.
(such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss was recognised
Non-controlling interests are determined by reference to the underlying agreements, with the allocation of the purchase
in profit or loss.
54
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
55
Griffin MininG LiMitedreport and accounts 2019 notes to the FinanCial statements
aCCounting poliCies
equity (Continued)
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.
notes to the FinanCial statements
aCCounting poliCies
signiFiCant judgements and estimates (Continued)
°
°
future operating and capital expenditure.
discount rates calculated using a capital asset pricing model.
Based on these estimates, the directors have determined that the Group requires the market price of zinc to be above $1,950
per tonne with gold, silver and lead prices remaining at current prevailing levels, to avoid an impairment charge. It is also
conditional upon continued mining licences and permits being granted, which the directors consider will be maintained or
obtained as appropriate.
•
Impairment review assumptions, exploration interests (note 11). Impairments are assessed by reference to exploration results
carried out in an area of interest. Where such exploration indicates that there are no indications of mineralisation within
the area of interest, provision is made for impairment in value. Non-impairments of all assets is conditional upon continued
exploration 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
Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from
in use at the mine.
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.
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
Upon exercise of share options, the proceeds received net of attributable transaction costs are credited to share capital.
the financial implications are given within the relevant notes to the Group financial statements.
For the financial year ended 31 December 2019 the total expense recognised in profit or loss arising from share based transactions
were Nil (2018: 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 on a unit of production basis, management have assumed
Interest rate implicit in the lease. Since the interest rate implicit in the lease cannot be readily determined, the lessee’s incremental
borrowing rate is used. The incremental borrowing rate (IBR) applicable for all of the leases for the Group is between 5% and
10%. While there is no definitive guidance in IFRS 16 on how to determine an IBR we are typically observing rates built up from
three components as follows:
a) Risk free rate – a treasury bond rate or an interest swap rate in the local currency for the country of the lease, which reflects
the duration of the lease;
b) Credit spread specific to the lessee; and
that all measured and indicated mineral resources will be recovered from Zone III at Caijiaying. It is further assumed that all
c) Asset/lease specific adjustments to reflect the nature of the collateral.
necessary permits will be obtained. In this regard the Company is seeking to convert Hebei Hua Ao from a limited liability
joint venture with a business licence that expires in 2037, to an equity limited liability company with an indefinite term and
that its business licence be renewed without significant cost.
Estimates
The determination of whether there is an interest rate implicit in the lease, the calculation of the Group’s incremental borrowing
rate, and whether any adjustments to this rate are required, involves some judgement and is subject to change over time. At the
commencement date of leases management consider whether the lease term will be the full term of the lease or whether any
option to break or extend the lease is likely to be exercised. Leases are regularly reviewed and will be revalued if the term is likely
•
Impairment review assumptions, property, plant and equipment (note 10). Impairments are assessed by comparison of the
cash generating unit’s (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 impacted by estimates of:
to change.
Cash and Cash equivalents
future prices of the commodities extracted. Estimates were made as at the balance sheet date and do not include changes
in future price estimates arising from Covid-19 which is assessed to be a non adjusting post balance sheet event.
the expected tonnes and grade of ore mined. Management has assumed an increase in forecast production from current
levels if 0.9 million tonnes per annum to 1.2 million tonnes per annum from 2021. This reflects management obtaining
additional safety permits for which application is at an advanced stage. No alterations to existing processing facilities are
required to facilitate the increase in production.
future zinc treatment costs.
°
°
°
56
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 Board meeting prior to the reporting date.
57
Griffin MininG LiMitedreport and accounts 2019
notes to the FinanCial statements
aCCounting poliCies
taxation
notes to the FinanCial statements
1. segmental reporting
Current tax is the tax currently payable based on taxable profit for the year.
The Group has one business segment, the Caijiaying zinc gold mine in the People’s Republic of China. All revenues and costs of
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on
the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on
the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries,
associates and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is
probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as
other income tax credits to the group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable
that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred
tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they
are enacted or substantively enacted at the reporting date.
Changes in deferred tax assets or liabilities are recognised as a component of the tax expense in the income statement, except
where they relate to items that are recognised in other comprehensive income (such as the revaluation of land) in which case the
related deferred tax is also charged or credited directly to other comprehensive income or equity
segment reporting
In identifying its operating segments, management generally follows the Group’s service lines, which represent the main products
produced by the Group. Management consider there to be only one operating segment being the operations at the Caijiaying Mine
based in China with production of zinc concentrate, and lead concentrate with associated precious metals credits. All activities of the
Group are reported through management and the executive director to the Board 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.
sales in 2019 and 2018 were derived from the Caijiaying zinc gold mine.
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 costs)
Stock movements
ADMINISTRATION EXPENSES
China
Australia
UK / Bermuda
2019
$000
82,267
55,627
29,850
(3,210)
82,267
17,652
8,277
10,019
11,462
1,199
48,609
14,253
414
4,766
19,433
All revenues, cost of sales and operating expenses charged to profit relate to continuing operations.
TOTAL ASSETS
China
Australia
UK / Bermuda
CAPITAL EXPENDITURE
China
Australia
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
248,119
686
5,389
254,194
27,076
65
4
27,145
2019
$000
142
129
8,668
3,989
No.
431
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
245,505
924
4,949
251,378
16,803
-
-
16,803
2018
$000
88
110
9,410
4,120
No.
421
58
59
Griffin MininG LiMitedreport and accounts 2019
notes to the FinanCial statements
notes to the FinanCial statements
3. direCtors’ and key personnel remuneration
8. inCome tax expense
The following fees and remuneration were receivable by the Directors holding office and key personnel engaged during the year:
Fees
Salary
Pension Total
2019
contributions
Fees
Salary
Pension
contributions
Total
2018
Profit for the year before tax
2019
$000
11,712
$000
$000
$000
$000
$000
$000
$000
$000
Expected tax expense at a standard rate of PRC income tax of 25% (2018: 25%)
2,929
Mladen Ninkov*
Dal Brynelsen
Rupert Crowe
Roger Goodwin
Adam Usdan
212
271
134
212
84
913
-
-
-
465
-
465
Key personnel
55
1,729
968
2,194
-
-
-
38
-
212
271
134
715
84
38 1,416
15 1,799
53 3,215
138
203
89
138
89
657
114
771
-
-
-
424
-
424
1,473
1,897
-
-
-
40
-
40
15
55
138
203
89
602
89
1,121
1,602
2,723
*Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust, received fees
under a consultancy agreement of $2,598,000 (2018: $2,137,000), 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 2019 or 2018. 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 2019 and 2018.
4. losses on disposal oF plant and equipment
Losses 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
60
2019
$000
305
2019
$000
171
2019
$000
51
326
377
2019
$000
76
2018
$000
939
2018
$000
223
2018
$000
-
283
283
2018
$000
200
2018
$000
34,798
8,699
629
(704)
(185)
1,154
71
9,664
(674)
331
(343)
9,321
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
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 expense/(credit)
Correction of provision brought forward
Origination and reversal of temporary timing differences
Total tax expense
746
(234)
-
1,757
50
5,248
18
362
380
5,628
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 2019 (2018: 25%) 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 $108.6m (2018: $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
2019
Weighted
Average
Per
share
number of amount
(cents)
shares
2018
Earnings Weighted
Average
$000
Per
share
number of amount
(cents)
shares
Basic earnings per share
Earnings attributable to ordinary shareholders
Dilutive effect of securities
Options
6,084
172,748,831
3.52
25,477
171,842,166
14.83
-
15,107,500
(0.28)
-
16,494,541
(1.30)
Diluted earnings per share
6,084
187,856,331
3.24
25,477
188,336,707
13.53
61
Griffin MininG LiMitedreport and accounts 2019
notes to the FinanCial statements
notes to the FinanCial statements
10. property, plant and equipment
At 1 January 2018
Foreign exchange adjustments
Additions during the year
Disposals
Depreciation charge for the year
At 1 January 2019
Foreign exchange adjustments
Additions during the year
Change in estimate of mine closure costs
Adjustment for adoption of IFRS 16 leases
Adjustment for change in accounting estimate on finance lease
Disposals
Depreciation charge for the year
Mineral
Mill and
interests mobile mine
equipment
Offices,
furniture &
equipment
Total
$000
167,046
(4,450)
10,669
-
(5,927)
167,338
(1,611)
18,883
(115)
-
-
-
(6,912)
$000
47,567
(2,291)
6,134
(1,289)
(4,374)
45,747
(786)
8,193
-
-
2,792
(305)
(5,268)
$000
$000
82
214,695
-
-
-
(6,741)
16,803
(1,289)
(27)
(10,328)
55
-
69
-
370
-
-
213,140
(2,397)
27,145
(115)
370
2,792
(305)
(163)
(12,343)
10. property, plant and equipment (Continued)
During 2013 plant and equipment with a value of $11,381,000, revalued in 2019 to $14,150,000, were acquired under a finance
lease, upon which depreciation of $5,123,000 (2018: $4,035,000) has been provided. At 31 December 2019 the net carrying
amount of this equipment was $9,027,000 (2018: $7,534,000). In 2019 the Company’s London office lease was capitalised to
comply with IFRS 16 with a value of $371,000 upon which depreciation of $124,000 has been provided in 2019. At 31 December
2019 the net carrying amount of this office was $247,000.
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, most notably metal prices, by reference to discounted cash flow forecasts
of future revenue and expenditure for each business segment. These forecasts are based upon both past and expected future
performance, available resources and expectations for future markets.
The directors have reassessed the net carrying value of capitalised costs at 31 December 2019, particularly in view of the decline
in metal prices for zinc and smelter treatment charges experienced in 2019 (see significant judgements and estimates on page
56). 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 $2,425 per tonne, gold of $1,500 per troy ounce and silver of $15 per troy ounce;
• Zinc treatment charges of 30% of market prices;
• Extraction of measured and indicated resources at Zone III at Caijiaying of 30 million tonnes with ore mined and processed
at a rate of 1.2 million tonnes of ore per annum;
• Operating costs, recoveries and payables based upon past performance and that budgeted for 2020;
At 31 December 2019
177,583
50,373
331
228,287
• Capital costs based upon that initially scheduled with sustaining capital based on future scheduling:
At 31 December 2017
Cost
Accumulated depreciation
Net carrying amount
At 31 December 2018
Cost
Accumulated depreciation
Net carrying amount
At 31 December 2019
Cost
Accumulated depreciation
Net carrying amount
200,708
(33,662)
167,046
205,840
(38,502)
167,338
222,589
(45,006)
177,583
72,366
(24,799)
47,567
72,028
(26,281)
45,747
80,935
(30,562)
50,373
134
(52)
82
134
(79)
55
273,208
(58,513)
214,695
278,002
(64,862)
213,140
573
(242)
331
304,097
(75,810)
228,287
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.
• Discount interest rate of 10%; and
• Continued maintenance and grant of applicable licences and permits. This assumes that Hebei Hua Ao will be converted to
an equity joint stock company with an indefinite life without compensation to the Chinese Joint Venture Partner and that the
business licence will be renewed at no significant cost.
11. intangiBle assets - exploration interests
China – mineral exploration interests
At 1 January 2018
Foreign exchange adjustments
Additions during the year
At 31 December 2018
Foreign exchange adjustments
Additions during the year
Impairment during the year
At 31 December 2019
$000
2,035
(100)
81
2,016
(17)
308
(1,985)
322
Intangible assets represent cost on acquisition, plus subsequent expenditure on licences, concessions, exploration, appraisal
and development work in respect to regional exploration in China. 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
Property, plant and equipment includes $1,997,000 (2018: $15,034,000) of assets under construction yet to be depreciated.
appraisal activities, details of which are given in the report on operations. The outcome of such appraisal activity is uncertain.
The offices, office furniture and equipment disclosed above relates solely to the fixed assets of the Company and China Zinc
Pty Limited.
62
Upon economically exploitable mineral deposits being established, sufficient finance will be required to bring such discoveries
into production. At 31 December 2019 impairment charges of $1,985,000 (2018: $Nil) had been provided and charged to the
income statement in respect of the above exploration costs previously capitalised by Hebei Sino Anglo. Griffin intends to agree
a contractual right to transfer the exploration licence to Griffin’s joint venture partner, Yuanrun, prior to expiry of the licence.
63
Griffin MininG LiMitedreport and accounts 2019
notes to the FinanCial statements
notes to the FinanCial statements
12. inventories
Underground ore stocks
Surface ore stocks
Concentrate stocks
Spare parts and consumables.
2019
$000
530
288
300
2,721
3,839
All inventories are expected to be sold, used or consumed within one year of the balance sheet date.
13. reCeivaBles and other Current assets
Other receivables
Prepayments
2019
$000
360
1,501
1,861
2018
$000
979
458
843
2,671
4,951
2018
$000
558
2,261
2,819
Any expected credit losses on the recoverability of receivables are not expected to be material.
14. share Capital
AUTHORISED:
Ordinary shares of $0.01 each
CALLED UP ALLOTTED AND FULLY PAID:
Ordinary shares of $0.01 each
At 1 January
2019
2018
Number
$000
Number
$000
1,000,000,000
10,000
1,000,000,000 10,000
172,748,728
1,727
169,993,727
1,700
Shares issued in the year on exercise of share purchase options
37,500
1
2,755,001
27
At 31 December
172,786,228
1,728
172,748,728
1,727
During the year share purchase options were exercised over 37,500 new ordinary shares at 30 pence per share (2018: 2,588,334).
In 2018 share purchase options were exercised over a further 166,667 new ordinary shares at 40 pence per share.
15. shares held in treasury
At 1 January
Bought back in during the year
At 31 December
2019
2018
Number
$000
Number
$000
540,000
917
-
-
540,000
917
-
540,000
540,000
-
917
917
In 2018 540,000 of the Company’s ordinary shares were purchased at an average price of 126.2p.
16. share options
At 1 January
2019
Number
Granted/
(exercised)
Number
At 31 December
2019
Number
Options exercisable at 30 pence per share to 31 December 2022
17,411,666
(37,500)
Options exercisable at 40 pence per share to 31 December 2022
4,833,333
-
22,244,999
(37,500)
17,374,166
4,833,333
22,207,499
During the year share purchase options over 37,500 new ordinary shares were exercised at 30 pence per share.
The following table shows the number and weighted average exercise price of all the unexercised share options and warrants at
the year end:
2019
2018
Number Weighted average
Number Weighted average
exercise price
exercise price
Outstanding at 1 January
Exercised during the year
Outstanding at 31 December
22,244,999
(37,500)
22,207,499
Pence
32.4
(30.0)
32.2
25,000,000
(2,755,001)
22,244,999
Pence
32.2
(30.6)
32.4
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 vested in 3 tranches of 6,666,666 each,
were 6.2p, 7.2p and 6.8p.
Inputs into the Binomial valuation model were as follows:
Share price
Exercise price
Expected volatility
Risk free yield
Dividend yield
Options expiring
31 December 2022
Options expiring
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 (2018: $Nil) during the year ended 31 December relating to equity settled share
option scheme transactions.
17. dividends
No dividends were paid in 2019 (2018: Nil).
64
65
Griffin MininG LiMitedreport and accounts 2019
notes to the FinanCial statements
notes to the FinanCial statements
18. long-term provisions
PROVISIONS FOR MINE CLOSURE COSTS
At 1 January
Change in estimate (note 10)
Foreign exchange adjustments
At 31 December
2019
$000
2,302
(115)
(37)
2,150
2018
$000
2,418
-
(116)
2,302
Provision for mine closure and rehabilitation costs have been made in accordance with the laws and regulations of China at a rate
of Rmb 0.5 per tonne of estimated resources.
19. deFerred taxation
At 1 January
Foreign exchange adjustments
Charge for the year
Charge/Credit re prior years
At 31 December
2019
$000
2,393
(42)
362
18
2,731
2018
$000
2,865
(129)
331
(674)
2,393
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. lease liaBilities
At 1 January
Foreign exchange adjustments
Advance during the period
Adjustment for change in accounting policy (note 10)
Adjustment for change in accounting estimate on finance lease (note 10)
Interest charges
Repayments in the year
At 31 December
Amounts falling due in more than one year
Amounts falling due within one year
2019
$000
1,809
(31)
65
404
2,792
323
(2,762)
2,600
479
2,121
2,600
2018
$000
4,406
(153)
-
-
-
284
(2,728)
1,809
258
1,551
1,809
Under the terms of an agreement Hebei Hua Ao pays Rmb21.32 per wet tonne treated by the 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. During the year the deemed value and liability was reappraised to take account of additional and continued use
of the facility.
The Company entered into an agreement in October 2016 to rent offices for 12 years from 1 November 2016 with a five year break.
20. lease liaBilities (Continued)
Minimum lease payments on leases entered into by the Group are as follows:
Within one year
Between 1 and 2 years
Between 2 and 3 year
Between 3 and 4 years
Between 4 and 5 years
Later than 5 years
21. trade and other payaBles
Trade creditors
Other creditors
Taxation payable
Zhangjiakou Yuanrun Enterprise Management Consulting Service Co., Ltd
Accruals
2019
$000
2,778
467
11
0
0
0
2018
$000
2,772
2,798
449
0
0
0
3,256
6,019
2019
$000
13,522
2,629
3,584
4,585
7,449
31,769
2018
$000
9,684
3,935
9,428
4,542
6,043
33,632
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 2019 of $214,944,000 ($211,242,000 at 31 December 2018) divided by the number of ordinary shares
in issue at 31 December 2019 of 172,786,228 (172,748,728 at 31 December 2018).
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, executive director and Chairman 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 local currency expenditure estimates.
As required under IFRS 16 the Group have recognised a right to use assets in respect of this lease having a value of $371,000 as at
Currently the Group does not carry out any significant operations in currencies outside the above.
1 January 2019 with a depreciation of $124,000 provided in the year, and a liability of $404,000 of which $143,000 is current and
$261,000 is non-current.
66
67
Griffin MininG LiMitedreport and accounts 2019
notes to the FinanCial statements
notes to the FinanCial statements
23. risk management (Continued)
Foreign Currency Risk (continued)
23. risk management (Continued)
Foreign Currency Risk (continued)
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
2019
$000
1,964
Australian dollar bank deposits translated into United States Dollars at the closing rate are as follows:
Short term bank deposits
2019
$000
628
Renminbi bank deposits translated into United States Dollars at the closing rate are as follows:
Short term bank deposits
2019
$000
13,650
2018
$000
488
2018
$000
919
2018
$000
22,085
The following table 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 + / - 10% (2018: 10%) change in the sterling exchange rate for the year
ended 31 December 2019. These changes are considered to be reasonable based on observation of current market conditions for
the year ended 31 December 2019. The sensitivity analysis is based upon the Group’s sterling deposits at each reporting date.
If sterling had strengthened against the US Dollar by 10% (2018: 10%) this would have had the following impact:
Net result for the year and on equity
2019
$000
220
If sterling had weakened against the US Dollar by 10% (2018: 10%) this would have the following impact:
Net result for the year and on equity
2019
$000
(180)
2018
$000
54
2018
$000
(44)
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the
analysis above is considered to be indicative of the Group’s exposure to currency risk.
Foreign currency denominated financial assets and liabilities, translated into US Dollars at the closing rate, are as follows:
2019
Rmb
$000
GBP
$000
2,173
16,003
(475)
(29,177)
1,698
(13,174)
AusD
$000
632
(75)
557
2018
Rmb
$000
GBP
$000
635
27,325
(147)
(35,233)
488
(7,908)
AusD
$000
926
(61)
865
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% (2018: + 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
2019
2018
Plus 300% Minus 100%
Plus 300% Minus 100%
$000
434
$000
(145)
$000
677
$000
(223)
Fixed and non interest bearing financial assets and liabilities are as follows:
2019
2018
Floating Non interest
bearing
interest rate
Total
Floating Non interest
bearing
interest rate
Total
$000
$000
$000
$000
$000
$000
19,885
-
19,885
-
19,885
1,861
1,861
1,861
21,746
28,452
-
28,452
-
28,452
2,819
2,819
2,819
31,271
Financial Assets
Cash at bank
Other receivables
Total Financial Assets
Finance lease liabilities
Trade and other payables
Total Financial Liabilities
(2,544)
-
(2,544)
(1,809)
-
(1,809)
-
(28,185)
(28,185)
-
(24,204)
(24,204)
(2,544)
(28,185)
(30,729)
(1,809)
(24,204)
(26,013)
Net Financial assets/(liabilities)
17,341
(26,324)
(8,983)
26,643
(21,385)
(5,258)
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
Commodity risk
be significant.
68
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 2019 or in 2018.
69
Griffin MininG LiMitedreport and accounts 2019
notes to the FinanCial statements
notes to the FinanCial statements
23. risk management (Continued)
Commodity Risk (continued)
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 30% and minus 30% (2018: plus 20% and minus 20%), with effect from the
25. FinanCial instruments
The Group does not enter into derivative transactions such as interest rate swaps, forward rate agreements or forward currency
contracts. Funds in excess of immediate requirements are placed in US dollar, Chinese Renminbi, and sterling short term fixed
and floating rate deposits. The Group has overseas subsidiaries operating in China and Australia, whose costs are denominated
beginning of the year. These changes are considered reasonable based upon observation of current market conditions within
in local currencies.
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
2019
2018
Plus 30% Minus 30%
Plus 20% Minus 20%
$000
$000
$000
$000
12,264
(12,264)
11,724
(11,724)
5,252
1,034
(5,252)
(1,034)
2,856
(2,856)
531
(531)
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.
Liquidity risk
Prudent liquidity risk management implies maintaining cash, marketable securities and adequate credit facilities to meet financial
obligations as they fall due. At 31 December 2019 the Group held cash and cash equivalents (bank deposits) of $19,885,000 (2018
$28,452,000) to meet financial obligations and apart from lease, trade and other payables had no bank loans or similar financial
liabilities.
Management monitors rolling cash flow forecasts on a weekly basis and keeps under review bank financing facilities at a local and
Group level, to ensure sufficient liquidity is maintained to meet future financial obligations. This also includes regular review of
metal market prices and foreign currency requirements.
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 $214,944,000 at 31 December 2019.
In the normal course of its operations the Group is exposed to commodity price, foreign currency and interest rate risks.
The Group places funds in excess of immediate requirements in US dollar, Chinese Renminbi, and sterling deposits with a
number of banks to spread currency, interest rate and bank risk. These deposits are kept under regular review to maximise interest
receivable and with reference to future expenditure and future currency requirements.
Commodity prices are monitored on a regular basis to ensure the Group receives fair value for its products.
The Group held the following investments in financial assets and financial liabilities:
FINANCIAL ASSETS
Cash and cash equivalents
FINANCIAL LIABILITIES
Financial liabilities at amortised cost
Trade and other payables
Contractual maturities of financial liabilities:
2019
$000
19,885
19,885
2,600
28,185
30,785
2018
$000
28,452
28,452
1,809
24,204
26,013
At 31 December 2019
Within
1 year
Between 1
and 2 years
Between 2
and 3 years
Over
3 years
Total contractual
cash flows
Carrying amount
(assets)/liabilities
$000
$000
$000
$000
$000
Non-derivatives
Trade payables
Lease liabilities
Total non-derivatives
31,769
2,778
34,547
-
467
467
Derivatives
-
-
-
11
11
-
-
-
-
-
31,769
3,256
35,025
-
$000
31,769
2,600
34,369
-
At 31 December 2018
Within
1 year
Between 1
and 2 years
Between 2
and 3 years
Over
3 years
Total contractual
cash flows
Carrying amount
(assets)/liabilities
$000
$000
$000
$000
$000
$000
Non-derivatives
Trade payables
Lease liabilities
Total non-derivatives
33,632
2,772
36,404
-
2,798
2,798
Derivatives
-
-
-
449
449
-
-
-
-
-
33,632
6,019
39,651
33,632
1,809
35,441
-
-
70
71
Griffin MininG LiMitedreport and accounts 2019
notes to the FinanCial statements
notes to the FinanCial statements
26. suBsidiary Companies
29. post BalanCe sheet events
At 31 December 2019, Griffin Mining Limited had interests in the share capital of the following principal subsidiary companies.
Since the year end operations at Caijiaying were suspended for a month from 24 January to comply with restrictions instigated
by the PRC authorities to contain the Covid-19 pandemic. Operations at Caijiaying recommenced on 21 February 2020 and
have since steadily increased such that underground mining operations reached 100% of planned rates by mid-March and
processing operations by late March. Since the re-commencement of operations at Caijiaying, restrictions in place to contain the
coronavirus pandemic throughout China have relaxed, and as a result Hebei Hua Ao has been able to sell its output. As a result
of these events, production and sale of metals in concentrate, and profitability was impacted in the first quarter of 2020, but has
returned to planned levels subsequently.
As at 31 December 2019 there were no adjusting post balance sheet events (2018: none).
Name
China Zinc Pty Ltd
China Zinc Ltd
China Zinc (Resources) Ltd
Hebei Hua Ao Mining
Industry Company Ltd*
Class of
Share held
Ordinary
Ordinary
Ordinary
Panda Resources Ltd
Ordinary
Hebei Sino Anglo Mining
Development Company Ltd*
Proportion of
shares held
Nature of
business
Country of
incorporation
100%
100%
100%
88.8% **
100%
90%
Service company
Australia
Holding and service company
Hong Kong
Holding 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.
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 $3,613,000 (2018: $3,732,000) are included
in net operating costs rather than attributable to non-controlling interests. Likewise, the amounts due at 31 December 2019 of
$4,664,000 (2018: $4,542,000) are included in other payables rather than due to non-controlling interests within equity within
the Consolidated Statement of Financial Position.
27. Commitments
At 31 December 2019 the Group had capital commitments of $528,000 (31 December 2018 $3,600,000).
28. related parties
Keynes Capital
Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust, received fees
under a consultancy agreement of $2,598,000 (2018: $2,137,000), 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 $3,989,000 was charged (2018: $4,120,000 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 2019 $3,613,000 (2018: $4,542,000) was due to
this company.
72
73
Griffin MininG LiMitedreport and accounts 2019
74
Caijiaying Mine Site September 2019
75
Griffin MininG LiMitedreport and accounts 2019 Corporate inFormation
Principal office:
8 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:
Numis Securities Limited
The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT.
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.
Bird and Bird LLP
12 Fetter Lane, London. EC4A 1JP
Conyers Dill & Pearman
Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.
Addleshaw Goddard LLP
Milton Gate, 60 Chiswell Street, London EC1Y 4AG, UK.
Bankers:
HSBC Bank plc
27-32 Poultry, London EC2P 2BX, UK.
The Hong Kong and Shanghai Banking Corporation Limited
HSBC M ain Building, 1 Queen’s Road, Central, Hong Kong.
HSBC Bank of Bermuda Ltd
6 Front Street, Hamilton HM11, Bermuda.
UK Registrars
Link Market Services (Jersey) Limited
And Transfer Agents:
12 Castle Street, St Helier, Jersey JE2 3RT, UK.
76
Griffin MininG LiMited