Griffin Mining Ltd.
Annual Report 2021

Plain-text annual report

Contents Chairman’s statement Overview Caijiaying IntroductIon development mIneral resource estImates GeoloGy exploratIon operatIons sustainability, envirOnment and lOCal COmmunity FinanCial results strategiC review overvIew caIjIayInG acquIsItIons and Further projects clImate chanGe COrpOrate gOvernanCe report oF the audIt commIttee report oF the remuneratIon commIttee direCtOrs seniOr exeCutives direCtOrs’ repOrt independent auditOrs’ repOrt 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 4 6 7 7 7 8 11 11 13 18 32 33 33 33 33 33 34 36 38 41 42 43 49 55 56 57 58 59 60 84 Griffin Mining Limited (“Griffin” or “the Company”) 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’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 2021 2 Griffin MininG LiMitedCaijiaying Mine with rehabilitated Tailing Facilities 1 and 2 3 RepoRt and accounts 2021Chairman’s statement It gives me great pleasure to present to you, the shareholders in place making the transport of materials, employees of Griffin Mining Limited (“Griffin” or the “Company”), the and contractors over Provincial borders at the least, Annual Report and Accounts of the Company for the 2021 extraordinarily difficult and, at the most, impossible. calendar and financial year (the “Annual Report”). In terms Furthermore, China has prevented the entrance of any of the Company’s financial and operational performance, it foreign national into the country who does not have a pre- has been a stellar year, even more extraordinary considering existing work permit and then, only with 28 days hotel Zone II has yet to be fully developed or brought into quarantine. What this reinforces in simple terms is the production and in light of the continuing restrictions dedication and loyalty of both our on-site staff and our ex- imposed by the Covid-19 pandemic in China. pat staff. The former who, in effect, now live permanently In 2021, in comparison to 2020: • Revenue was 61% higher at $121,648,000; • Operating profit was 143% higher at $36,925,000; at camp as they are wary of not being permitted to return to the Caijiaying Mine site should quarantine be imposed unilaterally at local, county, city or Provincial level. The latter ex-pats, who now spend 3 to 6 months away from their partners, children and extended family, allow the Company • Profit before tax was 152% higher at $36,526,000; to keep operating. I should add, all this when there is a • Profit after tax was 185% higher at $25,376,000; and • Basic earnings per share was 182% higher at 14.53 cents per share. Operationally, record amounts of ore were mined and processed in 2021 and metal production of our 2 largest revenue producers, zinc and gold, were substantially higher 30,000 person shortage in the Australian mining industry where most of our ex pat staff are based. In particular, and most of all, I would like to thank John Steel, our new Chief Operating Officer, Paul Benson, our Chief Geologist, and Wendy Zhang, our site Chief Financial Officer, for their Herculean efforts over the past 12 months. All these on- site and ex-pat individuals have displayed the extent of their loyalty and I am grateful on behalf of everyone involved than in the previous year: with the Company. • Ore mined was up 14% at 971,492 tonnes; • Ore hauled was up 19% at 979,783 tonnes; • Ore processed was up 20% at 985,404 tonnes; • Zinc metal in concentrate produced was up 28% at 41,587 tonnes; and Needless to say, the safety and welfare of the Company’s workforce remains the overwhelming priority of the Company. Underground and surface operations operated safely and consistently in 2021 without any major incidents. With the Company’s extensive Covid-19 pandemic controls, there have been no outbreaks of Covid-19 at the Caijiaying • Gold metal in concentrate produced was up 28% at Mine to date. With assistance from local Chinese authorities 14,447 ounces. all personnel have received Chinese manufactured Covid-19 This bodes very well for the future results of the Company when Zone II is commissioned and in full production. Since the grant of the new mining licence over Zone II in January 2021, the Company has been working continuously and tirelessly on obtaining approval for the design and development of Zone II. That approval is expected shortly and drive development is planned to begin on the 1 July 2022. In the interim, the first drill platform for resource drilling at Zone II was constructed in September 2021 and diamond drilling commenced in early October 2021. vaccinations. Operational highlights throughout the year included the acquisition of land for the construction of new Tailings Dam 4 and the completion of the construction of the bridge to provide access to the area, the installation and extension of the paste pipe reticulation system and the continuation of the programme to further modernise and increase safety at the Caijiaying Mine. This included the introduction of 10 specific PRC Kuang Anquan (“KA”) wet brake vehicles for personnel transportation underground, further increasing mine safety, traffic management and the underground What makes the above results truly exceptional is the environment. In addition, a new 40 tonne low emission continuing Covid-19 crisis in China and the quarantine boiler used to heat the site processing, administration and procedures the various levels of government have put other buildings as well as the underground workings was 4 Griffin MininG LiMitedcommissioned and a new electrical boiler was installed and with these amazing individuals – the deceased Rupert Crowe commissioned at the Caijiaying Mine Camp reducing the and Bill Mulligan, the mining thoroughbred Dal Brynelsen Company’s carbon emissions footprint. and the indefatigable Roger Goodwin. To quote Bill Curry, Importantly, probably the most significant non-operational event of the past year was the activism of the major shareholders of the Company to effect change at the board level with the intention of seeking to extract greater value from the Company and their shareholding. To that end, 3 new independent directors were appointed to the board. Clive Whiley was appointed to the board in August 2021 an American football star, “It’s not for the bucks that I drive myself to the limits of my ability. It’s so that I can go back to the locker room, after having gone those last 35 yards and won the game and walk back in there with my arm around a teammate and know that we did that together, that we both gave it a little more than we really had. Now that may sound real phony but I promise you it’s the reason we play.” and Linda Naylor and Dean Moore in May 2022. I would To the shareholders, my overwhelming wish is that Covid-19 like to welcome all 3 formally to the board and wish them disappear from concern, that there be peace in Eastern every success and a productive and enjoyable time on the Europe, the World economy avoids severe recession and board. With this substantial change to the board I’d like to state that I will always be enormously grateful and humbled by the contribution and comradery the directors, whom I’m inflation, that the zinc price remains high and Zone II hits our long awaited full production target. May the Year of the Tiger make it just so. proud to call “my friends”, gave so freely, warmly, genuinely Mladen Ninkov and passionately. It made this impossible dream possible and Chairman bearable and I shall always be so grateful I had this journey 12 May 2022 5 RepoRt and accounts 2021overview Griffin Mining Limited (“Griffin” or “the Company”) is a held by the Company’s joint venture partner, Zhangjiakou mining and investment company, incorporated in Bermuda, Yuanrun Enterprise Management Consulting Service Co., whose shares are quoted on the Alternative Investment Ltd (“Yuanrun”), thereby allowing their retention under Market of the London Stock Exchange (“AIM”). PRC law within the Hebei Anglo Group. Should a mining The major asset of the Company is an 88.8% interest in Hebei Hua Ao Mining Industry Company Limited (“Hebei Hua Ao”) through its wholly-owned Hong Kong subsidiary, 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. China Zinc Limited (“China Zinc”), which holds licences, The Company continues to aggressively explore, expand including the mine and processing facilities near Caijiaying and develop the Caijiaying Mine whilst also investigating Village (the “Caijiaying Mine”) in the People’s Republic of potential acquisitions of mining projects that are capable, China (“PRC” or “China”). The Company also holds a 90% interest in Hebei Sino Anglo Mining Development Company Limited (“Hebei Anglo”), which has interests in exploration licences immediately surrounding the Hebei Hua Ao licence area which are through either advanced exploration or mining expertise held within the company, of being brought into production to meet the Company’s historically preset, economic returns to shareholders. Location of the Caijiaying Mine, People’s Republic of China 6 Griffin MininG LiMitedCaijiaying INTRODUCTION The Caijiaying Mine is an operating zinc, gold, silver and lead mine, together with processing plant, camp and supporting facilities, located approximately 250 kilometres by road, north-west of Beijing in Hebei Province in the through its wholly owned UK subsidiary Panda Resources Limited (“Panda”), 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 any such projects. PRC. The Caijiaying Mine is easily accessible by separate The Caijiaying Mine was commissioned on time and on freeways from Beijing. The site has significant water supplies, budget in 2005. Numerous upgrades to the Caijiaying Mine two 35,000 volt power lines connected to the electricity grid, have taken place since commissioning leading to the current full connectivity to fixed and mobile telecommunications name plate mill throughput capacity of 1.5 million tonnes of systems and broadband access for internet services. It is ore per annum. With mining and haulage rates from Zone 63 kilometres from Chongli, the location of the outdoor III limited, this capacity has yet to be fully utilised. It is events of the 2022 Winter Olympic and Paralympic Games, expected to begin being utilised in 2023 as production from connected via a new high speed train link with Beijing. the development of Zone II becomes available. Climatic conditions are not severe with warm summers and Since the third quarter of 2021, the underground operations cold, dry winters, enabling the Caijiaying Mine to operate in Zone III have been able to extract at an annualised rate throughout the year. DEVELOPMENT the equivalent of over one million tonnes of Zinc-Gold ore per annum. With the grant of a new mining licence in December 2020 Hebei Hua Ao is a contractual co-operative joint venture over the combined Zone II and Zone III areas, application company established in 1994 under PRC law. Initially, has been made for the approval of the mine design plan for Griffin held 60% of Hebei Hua Ao (through its wholly the new Zone II area, approval of which is expected by 1 owned subsidiary China Zinc) with the remaining 40% held July 2022. This will allow the development of Zone II to by Yuanrun, the shareholders of which are the Zhangjiakou commence which will enable at least 1.5 million tonnes of City People’s Government and the Third Geological ore per annum to be extracted from the Caijiaying Mine in Brigade of Hebei Province (the “Third Brigade”). the beginning in 2023. 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 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 service contract for accounting purposes for services rendered, resulting in Hebei Hua Ao being in the nature of a wholly owned subsidiary of the Company. In addition, and as part of this purchase agreement, the term of the Hebei Hua Ao joint venture was extended to October 2037. In order to comply with the new PRC law on Chinese-Foreign Equity Joint Ventures, Hebei Hua Ao will be required to convert to a limited liability equity company with an indefinite life by 1 January 2025. In January 2004, a second contractual joint venture company, Hebei Anglo, was formed to hold the mineral rights to the area surrounding the original Hebei Hua Ao licence area and any other areas of interest in Hebei Province. Griffin, 7 RepoRt and accounts 2021Caijiaying (contInued) MINERAL RESOURCE ESTIMATES Caijiaying Zone III Remaining Mineral Resources Zone III Domain 1 Zn Resources > 1% Zn Tonnes (Mt) Zn (%) 18.7 13.5 14.2 46.4 4.5 4.1 3.5 4.1 Pb (%) 0.2 0.2 0.2 0.2 Ag (g/t) 23.0 18.0 22.0 21.0 Au (g/t) 0.6 0.5 0.4 841 548 502 0.5 1,891 Zn Metal (kt) Pb Metal (kt) Ag Metal Au Metal (kOz) (kOz) 42 23 28 93 13,621 370 7,736 217 10,089 175 31,446 763 Zone III Domain 2: Au Resources > 0.5 g/t Au Tonnes (Mt) Zn (%) 0.6 0.6 0.8 0.8 Tonnes (Mt) Zn (%) 18.7 13.5 14.8 47.0 4.5 4.1 3.4 4.0 Pb (%) 0.1 0.1 Pb (%) 0.2 0.2 0.2 0.2 Ag (g/t) 19.0 19.0 Au (g/t) 2.8 2.8 Zn Metal (kt) Pb Metal (kt) Ag Metal Au Metal (kOz) (kOz) 5 1 386 57 5 1 386 57 Zone III: Total Ag (g/t) Au (g/t) Zn Metal (kt) Pb Metal (kt) Ag Metal Au Metal (kOz) (kOz) 23.0 18.0 22.0 21.0 0.6 0.5 0.5 841 42 13,621 370 548 23 7,736 217 507 29 10,475 232 0.5 1,896 94 31,832 819 Caijiaying Zone II Remaining Mineral Resources Zone II Oxide: Zn Resources > 1% Zn Tonnes (Mt) Zn (%) 1.2 1.6 2.8 2.9 2.5 2.7 Pb (%) 0.5 0.5 0.5 Ag (g/t) 19.0 17.0 18.0 Au (g/t) 0.3 0.1 Zn Metal (kt) Pb Metal (kt) Ag Metal Au Metal (kOz) (kOz) 35 6 751 11 39 8 830 7 0.2 74 14 1,581 17 Zone II Fresh: Zn Resources > 1% Zn Tonnes (Mt) 11.5 26.4 37.9 Tonnes (Mt) 12.7 27.9 40.7 Zn (%) 3.8 3.7 3.7 Zn (%) 3.7 3.6 3.7 Pb (%) 0.9 1.0 1.0 Pb (%) 0.9 1.0 0.9 Ag (g/t) 27.0 30.0 29.0 Au (g/t) 0.3 0.4 0.4 Zn Metal (kt) Pb Metal (kt) Ag Metal Au Metal (kOz) (kOz) 436 109 10,085 96 977 253 25,108 350 1,413 362 35,193 446 Zone II Total Ag (g/t) 27.0 29.0 28.0 Au (g/t) 0.3 0.4 0.4 Zn Metal (kt) Pb Metal (kt) Ag Metal Au Metal (kOz) (kOz) 471 115 10,836 107 1,015 261 25,938 356 1,486 376 36,774 463 Category Measured Indicated Inferred Sub-Total Category Inferred Sub-Total Category Measured Indicated Inferred Sub-Total Category Indicated Inferred Total Category Indicated Inferred Sub-Total Category Indicated Inferred Total 8 Griffin MininG LiMited  Caijiaying Zone V Mineral Resources Zone V Zn Resources > 1% Zn Category Inferred Total Tonnes (Mt) 6.0 6.0 Zn (%) 3.2 3.2 Pb (%) 1.4 1.4 Ag (g/t) 56.0 56.0 Au (g/t) 0.6 0.6 Zn Metal (kt) Pb Metal (kt) Ag Metal Au Metal (kOz) (kOz) 191 84 10,819 116 191 84 10,819 116 Caijiaying Zone VIII Mineral Resources Zone VIII Domain 1: Zn Resources > 1% Zn Tonnes (Mt) Zn (%) 6.1 6.1 4.4 4.4 Pb (%) 0.7 0.7 Ag (g/t) 36.0 36.0 Au (g/t) 0.5 0.5 Zn Metal (kt) Pb Metal (kt) Ag Metal Au Metal (kOz) (kOz) 272 41 7,112 106 272 41 7,112 106 Zone VIII Domain 2: Au Resources > 0.5 g/t Au Tonnes (Mt) Zn (%) 0.7 0.7 0.7 0.7 Tonnes (Mt) Zn (%) 6.8 6.8 4.0 4.0 Pb (%) 0.7 0.7 Pb (%) 0.7 0.7 Ag (g/t) 45.0 45.0 Au (g/t) Zn Metal (kt) Pb Metal (kt) Ag Metal Au Metal (kOz) (kOz) 2.4 5 5 1,012 54 2.4 5 5 1,012 54 Zone VIII Total Ag (g/t) 37.0 37.0 Au (g/t) Zn Metal (kt) Pb Metal (kt) Ag Metal Au Metal (kOz) (kOz) 0.7 277 46 8,124 160 0.7 277 46 8,124 160 Category Inferred Total Category Inferred Total Category Inferred Total Caijiaying Combined Global Mineral Resources February 2021 Category Measured Indicated Inferred Total Tonnes (Mt) Zn (%) 18.7 26.2 55.5 100.4 4.5 3.9 3.6 3.8 Pb (%) 0.2 0.5 0.8 0.6 Ag (g/t) 23.0 22.0 31.0 27.1 Au (g/t) Zn Metal (kt) Pb Metal (kt) Ag Metal Au Metal (kOz) (kOz) 0.6 0.4 0.5 841 42 13,621 370 1,019 138 18,572 324 1,990 421 55,356 864 0.5 3,850 600 87,549 1,558 Notes: The Caijiaying Mineral Resources are based on resource modelling work completed by CSA Global Pty Ltd and reported in 2022 in accordance with JORC 2012 guidelines. The information in this report that relates to Mineral Resources is based on, and fairly reflects, information compiled by Mr Serikjan Urbisinov a Competent Person, who is a Member of the Australian Institute of Geoscientists. Mr Serikjan Urbisinov is a full- time employee of CSA Global Pty Ltd. Mr Serikjan Urbisinov has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2012 edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code). Mr Serikjan Urbisinov consents to the disclosure of the information in this report of the matters based on his information in the form and context in which it appears. 9 RepoRt and accounts 2021 Caijiaying (contInued) MINERAL RESOURCE ESTIMATES Underground mine production continues to be the focus at Zone III while mine development applications at Zone II and extension of retention licence applications at Zone V and VIII progress. The Global Mineral Resource estimate initially reported on 26 January 2021, includes Zones II, III, V and VIII at a zinc cut-off grade of 1% and, amended for mining depletion at Zone III as of 31st December 2021. In summary the Global Measured, Indicated and Inferred Mineral Resource estimate totals 100.4 million tonnes at 3.8% Zn, 0.6% Pb, 27.1g/t Ag and 0.5g/t Au, resulting in total contained metal of approximately 3.85 million tonnes of zinc metal, 0.6 million tonnes of lead, 87.5 million ounces of silver and 1.56 million ounces of gold. Zone III The Zone III Mineral Resource estimate is based on geological interpretation and metal grade estimation that utilises all underground mapping and diamond drill data up to 30 September 2021 and depleted for mining activity up to 31 December 2021. The 2021 depleted Measured, Indicated and Inferred Zone III Mineral Resource estimate totals 47.0 million tonnes at 4.0% Zn, 0.2% Pb, 21.0g/t Ag and 0.5g/t Au, resulting in total metal of approximately 1.9 million tonnes of zinc, 0.1 million tonnes of lead, 31.8 million ounces of silver and 0.82 million ounces of gold. Underground diamond drilling continues to focus on resource definition 2021 remains unchanged at 40.7 million tonnes at 3.7% Zn, 0.9% Pb, 28.0g/t Ag and 0.4g/t Au, resulting in total metal of approximately 1.5 million tonnes of zinc, 0.4 million tonnes of lead, 36.8 million ounces of silver and 0.46 million ounces of gold. A total of 109 surface diamond drillholes, 91 reverse circulation surface drillholes and 163 underground diamond drillholes define the Zone II deposit at an average spacings of approximately 40 metres x 40 metres for a combined total of 91,383 metres of drilling. Zone V The Inferred Zone V Mineral Resource estimate as announced on 26 January 2021 totals 6.0 million tonnes at 3.2% Zn, 1.4% Pb, 56.0g/t Ag and 0.6g/t Au resulting in total metal of approximately 0.2 million tonnes of zinc metal, 0.08 million tonnes of lead, 10.8 million ounces of silver and 0.12 million ounces of gold. Zone V is located within the Company’s Retention Licence, see below, just 0.8km west of Zone II. A total of 34 surface diamond drillholes, 3 reverse circulation surface drillholes with an average spacing of approximately 25 metres x 100 metres define the Zone V deposit for a combined total of 15,242 metres of historical drilling. Zone VIII and grade control drilling within the main mine corridor The Inferred Zone VIII Mineral Resource estimate totals 6.8 above the 1,000mRL (“RL” refers to mean sea level) mine million tonnes at 4.0% Zn, 0.7% Pb, 37.0g/t Ag and 0.7g/t Au licence boundary. In addition, secondary inferred drill targets resulting in total metal of approximately 0.3 million tonnes have been tested to the east of Zone III. Further drilling of of zinc, 0.05 million tonnes of lead, 8.1 million ounces of these inferred drill targets is required and will continue in silver and 0.16 million ounces of gold. A total of 44 diamond 2022. During 2022 it is anticipated that the underground drillholes with a spacing of 50 to 100 metres define the Zone diamond drilling activity will incrementally transition from VIII deposit for a combined total of 32,193 metres. Zone III to Zone II. The Retention Licence containing Zones V and VIII covers A total of 189 surface diamond drillholes, 32 reverse an area of 2.23 square kilometres and is valid from 16 July circulation surface drillholes and 4,603 underground diamond 2020 to 16 July 2022. Administrative delays to the process drillholes with an average spacing of approximately 40 metres of converting the area to a Mining Licence occurred during x 40 metres, define the Zone III deposit for a combined total 2021 due to the 2022 winter Olympic and Paralympic Games. An extension to the term of the Retention Licence will be submitted in 2022 with the relevant authorities. of 607,959 metres of drilling. Zone II Underground resource definition diamond drilling commenced in October 2021 and will continue to intensify throughout 2022. The Indicated and Inferred Zone II Mineral Resource estimate as announced on 26 January 10 Griffin MininG LiMitedGEOLOGY The local geology comprises of Early Proterozoic granulite • Near-mine targets, within reach of underground drilling from existing or planned drives; and and gneiss with marble lenses, which is unconformably • Administrative report compilations and licence overlain by the Late Jurassic Baiqi Formation and applications to the relevant Government agencies. Zhangjiakou Formation. Porphyry sills and dykes intruding along faults have then cut across the sequence. Hebei Hua Ao Mining Area The Caijiaying deposits consist of Zn-Au-Ag-Pb orebodies hosted in a Paleoproterozoic inlier comprising a mixed sequence of amphibolite-grade metavolcanic and metasedimentary rocks intruded by three generations of Jurassic porphyry dykes and sills. The mineralisation comprises sulphide lenses of sphalerite with lesser pyrite and minor galena that favourably replace units within the folded 2.3-billion-year- old metamorphic basement rocks. The base metal and gold mineralisation have some similarities with a skarn type of deposit. Mineralisation lenses are up to 15 metres thick, tend to dip steeply to moderately to the west, and extend along strike and down dip tens to hundreds of metres. EXPLORATION The strategy of focusing on near-mine exploration and resource definition drilling has delivered substantial rewards culminating in the Global Mineral Resource first published in early 2021 and updated in April 2022 for depletion to 31 December 2021. Exploration drilling activity at the Caijiaying Mine continues to focus on near mine priority targets to the east of the main Zone III mine corridor above the lower 1000mRL mine licence boundary and at Zone II where there are numerous exploration targets within the main line of lodes. Additional Induce Polarization (IP) geophysical anomalies remain to be tested to the east of Zone II. At Zone V and VIII the current Retention Licence requires an extension of its term to enable a new Mining Licence to be granted. No on ground exploration activity is permitted during this approvals process. The Hebei Hua Ao Mining Area covers 3.13 km2 and includes Zone II and III. The Zone II Mineral Resource is accessible from the existing Zone III decline and underground diamond drilling platforms were established in 2021. Zone II resource definition drilling will continue to increase defineable extractable resources throughout 2022 while mine production applications and preparations progress. At Zone III, the focus has been on aggressive underground diamond drilling activity to convert Inferred and Indicated Mineral Resources into Measured and Indicated categories. A total of 351 underground diamond drill holes were drilled in 2021 for a total of 37,155 metres utilising 4 underground electric-hydraulic drill rigs. In 2021, diamond drilling has focused on resource definition within the mine corridor while also testing for extensions at depth and to the east of mine development. Structural and geochemical data collection has enabled the development of a robust indicator of favourable host lithology and proximity to mineralisation. These lithogeochemical indices developed for Zone III will continue to be refined and applied in Zone II throughout 2022. Hebei Hua Ao Retention Licence The Retention Licence containing Zones V and VIII covers an area of 2.23 square kilometres and is valid until 16 July 2022. An extension to the term of the Retention Licence will be sought in 2022. The Company will continue to work with the relevant authorities to convert the area to a Mining Licence. Drill access at Zone II was achieved in October 2021. Hebei Anglo Area This significant milestone enabled numerous well defined As previously reported in 2021 after careful consideration, a prioritised exploration drill targets to be unlocked and decision was made to transfer the licence to Griffin’s joint available for testing. These targets are developed from venture partner, Yuanrun, to allow its retention under PRC historical drilling and geophysical surveys combined with law within the Hebei Hua Ao Group. Should a mining advanced geochemical and structural modelling techniques. licence be granted over this area at any point in the future, Prioritised exploration targets and activities are defined into this new licence may be contractually transferred back to the following categories: • In-mine areas between or adjacent to known mineral resources; Hebei Anglo at the Company’s option. Given the depth of cover and existing underground infrastructure, the Company remains in a good position to benefit from any new discovery should it eventuate. 11 RepoRt and accounts 2021Caijiaying (contInued) Shitouhulun and Sangongdi Proposed 2022 Exploration Due to the halting of consideration of granting of any Exploration and resource development at Zone II will mining tenements in Hebei Province PRC during the be the primary focus of the Company throughout 2022. Winter Olympic and Paralympic Games in 2022, work was At Zone II, diamond drilling will test exploration targets suspended in obtaining any relevant permits in these areas. within and adjacent to the resource model and to the east of the main structural corridor. At Zone III, exploration will target Inferred Mineral Resources near mine development to the east of the main lodes. Plan view of Caijiaying Mine Zones II, III, V & VIII with surrounding licence areas 12 Griffin MininG LiMitedOPERATIONS The safety and welfare of Griffin’s workforce remains an overwhelming priority of the Company. Underground and In order to optimise underground stope scheduling, pillar recovery and economic extraction, the zinc equivalent head grade was reduced from 6.2% in 2020 to 6.1% in 2021. surface operations operated safely and consistently in 2021 Zinc and Gold recoveries were broadly maintained in 2021. without any major incidents. Covid-19 pandemic controls Lead and silver recoveries declined by 6.4% with lower continue to be maintained and there have been no outbreaks head grades. of Covid-19 at the Caijiaying Mine to date. With assistance from local PRC authorities, all Hebei Hua Ao and contractor personnel have received Chinese manufactured Sinovac and/or Sinopharm Covid-19 vaccinations. As a result, operations at Caijiaying have not been impacted by the Covid-19 pandemic. Accordingly, metal in concentrate production at the Caijiaying Mine in 2021 may be summarised as follows: • Zinc metal in concentrate produced 41,587 tonnes (2020: 32,472 tonnes); • Gold metal in concentrate produced 14,447 ozs (2020: A continuing programme of safety and training at the Caijiaying Mine resulted in an improved “Lost Time 11,250 ozs); Frequency Rate” for 2021 of 1.2 (2020: 1.28) per one • Silver metal in concentrate produced 269,570 ozs (2020: million hours and a “Total Recordable Injury Frequency 292,301 ozs); and Rate” for 2021 of 3.5 (2020: 4.5) per one million hours. • Lead metal in concentrate produced 1,069 tonnes (2020: Production at the Caijiaying Mine in 2021 can be 1,428 tonnes). summarised as follows: Following the grant of the mining licence over the Zone • Ore mined 971,492 tonnes (2020: 854,566 tonnes); II area, considerable effort has been expended by the • Ore hauled 979,783 tonnes (2020: 825,412 tonnes); • Ore processed 985,404 tonnes (2020: 822,058tonnes). Company’s personnel in working with the Beijing Non Ferrous Engineering Institute (“ENFI”) on the design and preparation of documentation for the approval of the Mine design of Zone II. Development is expected to commence Whilst mining, hauling and processing rates of the equivalent in the second half of 2022 once the approval process is of over one million tonnes of ore per annum at an annualised concluded. rate were achieved in the second and third quarters of 2021, production in the fourth quarter of 2021 was impacted by the PRC authorities restrictions on the supply of explosives, and from 1 January 2022, the suspension of explosive supplies to the Caijiaying Mine due to in the run up, and for, the Winter Olympic and Paralympic Games in February and March 2022. Chong Li, some 63 kilometres from the Caijiaying Mine, was the centre for all outdoor Winter Olympic events. Mining and processing at the Caijiaying mine recommenced at the end of March 2022. Long hole open stoping continues to be the predominant mining method. With Tailings Facilities 1 & 2 maximised and fully rehabilitated, and with Tailings Facility 3 near to capacity, land has been acquired for, and access constructed to, a new Tailings Facility 4. Importantly, unlike other tailings facilities around the world, the Caijiaying Mine produces “dry tailings” incapable of breaking or causing flooding. Tailings Dam 4 will be constructed to the highest standards. The installation and extension of the paste pipe reticulation system continues in order to increase the amount of waste material being backfilled into mined out stopes rather than being sent to the tailings facilities. Backfill includes cemented paste backfill with secondary stopes filled with Underground development work was primarily focused on waste rock material. developing future stoping horizons between the 1175 mRL and 1000 mRL levels. The programme to further modernise and increase safety at the Caijiaying Mine continued throughout 2021 with the In 2021, 4,657.3 metres (2020: 4,510.5 metres) of capital introduction of specific PRC Kuang Anquan (“KA”) (Mine development and 5,452.8 metres (4,459.3 metres) of Safety) sealed wet brake vehicles for the transportation of operational development were completed. personnel underground. By late August 2021 Hebei Hua Ao 13 RepoRt and accounts 2021Caijiaying (contInued) had 10 such vehicles in operation and the contractors at emissions footprint and negates the necessity of having the Caijiaying Mine had replaced their vehicles to be KA manual labour operating the boiler. The Camp now has a compliant thereby further increasing mine safety, traffic fully automated modernised heating system. management and the underground environment. During 2021 non-compliant electrical distribution installations were replaced with PRC “KA” compliant types. To further comply with PRC safety requirements, “Double Control Safety Applications” for digital management of all safety aspects of the mine were introduced. This application allows for the storage and real time information flow from the ‘mine face’ directly to department managers. Two new remote operated underground loaders were acquired in 2021 further enhancing Hebei Hua Ao’s remote operational capability for the safe extraction of ore from stopes. The main mining contractor at Caijiaying also took delivery of a new fit for purpose lifting device, a new electric over hydraulic production drill rig, a new single boom electric over hydraulic development drill rig and a new electric over hydraulic ground support installation drill rig. The haulage contractor also took delivery of three new 20 tonne trucks to replace three 10 tonne trucks in 2021. In 2021, a new environmentally friendly 40 tonne low New electronic detonators introduced in 2020 were used emission boiler was commissioned, used to heat the for both development and production blasting in 2021. Caijiaying Mine site processing, administration and other These are considerably more efficient and effective than the buildings and the underground workings. non-electric type detonators previously used. A new environmentally friendly electrical boiler was In late September 2021 the first drill platform was constructed installed at the Caijiaying Mine Camp and commissioned in to start resource drilling at Zone II with diamond drilling November 2021. This reduces the Caijiaying Mine’s carbon into Zone II commencing in early October. KA compliant underground vehicles at the Caijiaying Mine Site 14 Griffin MininG LiMitedNew Camp Electric Boiler 15 RepoRt and accounts 202116 Griffin MininG LiMited17 RepoRt and accounts 2021sustainability, environment and loCal Community SUSTAINABLE DEVELOPMENT POLICY Sustainability, safety and occupational health as well as care for the environment are central to Griffin’s values. Griffin endeavours to achieve economic, social and environmental benefits to its stakeholders with environmentally friendly (“green”) operations, circular and low-carbon operations whilst striving to realise high-quality sustainable development, respecting human rights, and actively engaging in communication and exchanges with stakeholders. STAKEHOLDER COMMUNICATION Griffin believes that establishing a strong and trustworthy relationship with its stakeholders is essential to the Group’s sustainable development. Actively understanding and responding to the needs of stakeholders is the cornerstone of Griffin’s sustainable development management. The Company and its subsidiaries regularly communicate with their stakeholders to understand their concerns and act accordingly. Stakeholders Key Issues Communication Government and regulatory agencies Compliance with laws, regulations and policies Corporate governance Cooperation with government agencies (See separate corporate governance report pages 34 & 35) Safety and environmental protection Daily communication and reporting Shareholders and investors Sustainable development governance Human rights policy disclosure Regular reporting (see corporate governance report pages 34 & 35) Anti-slavery policy, equal opportunities employer Anti-corruption Bribery and corruption policy Employees and their families Salary and benefits Employee performance interviews Training and development Staff representative conference Health and safety Regular safety reporting, safety meetings and safety inductions Suppliers/contractors Customer service Dedicated procurement department Product quality Independent assay and moisture checks of concentrate sold Community Community investment Involvement in local community Community benefits Local community support, including infrastructure, poverty alleviation, schooling Environmental protection and ecology Care and protection of local environment with minimal discharges 18 Griffin MininG LiMitedSUSTAINABLE DEVELOPMENT ACTIONS Griffin has proactively responded to the Sustainable Development Goals (“SDGs”) set by the United Nations. Nine SDG priorities have been identified that have the most relevance to the Group based on Griffin’s business characteristics and as a result Griffin has committed to supporting and implementing the SDGs in its corporate development strategy and business operations to achieve a “win-win” of business and social value. Key Goals Actions Corresponding Chapters Participation in community investment, implement rural revitalisation strategy, support for the development of special agriculture in underdeveloped areas, and help in improving the living standards of people Care for physical and mental safety of employees, ensuring employees’ health and safety during the Covid-19 epidemic, constantly improving the social security and the salary and welfare system to enhance the happiness of employees. Community Relations and Social Investment , page 30 Protection of Employees’ Rights, page 27 Promotion of water-saving with the strengthening of water usage management, support for a water-saving society, and elimination of water resources wastage. Environmental Management Improvement, page 20 Adherence to the people-oriented talent concept. Griffin has established a sound talent management and training mechanism, created an inclusive and harmonious working environment, and effectively protected the legitimate rights and interests of employees. Protection of Employees’ Rights, page 27 Prohibition of forced labour, child labour, and any form of discrimination such as gender, region, religious belief, or nationality, and adhere to the principle of equal employment to provide equal opportunities to employees. Ensuring safe production, continuous improvement of the utilisation of mineral resources, vigorous development of a circular economy, strengthening of supplier management, and building a sustainable value chain. implementing energy to climate change, Actively responding conservation and emission reduction measures, improving energy use efficiency, strengthening green mine construction, and promotion of low-carbon development. Protection of Employees’ Rights, page 27 Safety Management System Set Up, page 25 Supplier Management page 29 Customers and Products Responsibilities, page 29 Environmental Responsibility, page 20 “Zero Wastewater Discharge”, with the recycling of all production wastewater, resulting in the treatment and utilisation of 100% of mining waste water. Environmental Responsibility, page 20 The establishment of compliance management and reporting systems to monitor the integrity and compliance of regulations and business code, to ensure zero tolerance of corruption and any illegal acts against business ethics. Anti-corruption Management, page 30 19 RepoRt and accounts 2021sustainability, envirOnment and lOCal COmmunity (contInued) ENVIRONMENTAL RESPONSIBILITY vegetation to international standards and in compliance As a responsible corporate citizen, Griffin not only with PRC environmental regulations; abides by local regulatory requirements but seeks to • Funding the state endorsed China “greening” project apply best worldwide practices regarding the protection including the planting of trees by local villagers in the of the environment. Hebei Hua Ao strictly abides by the Caijiaying Mine area; Environmental Protection Law of the People’s Republic of China, the Environmental Impact Assessment Law of the People’s Republic of China and the Cleaner Production • China “green mine” certification with the number 1 ranking in Hebei Province; Promotion Law of the People’s Republic of China and • Approval from the relevant authorities to increase the other relevant laws and regulations. In doing so, Griffin capacity of the dry tailing’s storage facility without is committed to conserving resources and protecting the an increase in the footprint of the facility via modern environment by reducing the impact of operations on the design practices and with a new tailings facility being environment and natural resources. Griffin conducts its operational activities in strict accordance with the requirements of laws and regulations with the constructed in 2022. Crucially, these facilities are “dry” compared to those that are “wet” which have failed elsewhere in the world; establishment of internal environmental monitoring • Recycling of dry tailings by transportation to a local systems and the use of professional testing agencies to strictly monitor air emissions, wastewater, solid waste discharge to enable the timely resolution of any issues that might be encountered. Griffin continues to improve related management systems and technical standards for energy management, improve resource utilisation rates and maximise the efficiency of resources and energy consumption. Such practices include: brickwork for use as base material in brick manufacturing; • A dedicated waste collection building to accumulate Caijiaying Mine waste prior to sorting, collection and recycling; • The planting of landscape trees outside the main gate and some 30,000 elm trees and 3,000m² of grass planting around the Caijiaying Mine as part of local Chinese Environmental Protection Agency greening project; • Controls to prevent the discharge of waste into the • Planting of Mongolian scotch pine trees over an environment; area of 3,869m² to suppress dust and prevent surface • Sewage treatment plants at the Caijiaying Mine and degradation. Camp sites to deal with all effluent produced; • The construction of a new hazardous waste storage • All water from the Caijiaying Mine and Camp facility; accommodation being recycled; • Boiler flue gases being treated by a dust and sulphur extraction system to prevent the emission of pollutants into the atmosphere being enhanced with a new 40 tonne low emission boiler at the Caijiaying Mine and electric boiler at the Camp; • Waste rock and mill tailings used for backfilling underground stope voids. This minimises the mine footprint by reducing the need for larger tailings and waste storage facilities; • Noise, dust and blasting vibration from operations being strictly controlled; • Installation of drainage trenches around the ROM pad, waste dump and main access gate area to ensure effective water run-off and protection against soil erosion; • Timely renewal of environmental permits including water usage permits, radioactive source safety permits and waste discharge permits; • Installation of a Total Suspended Particles online monitoring system continually monitored by the Municipal Environmental Protection Authority Information Centre; • Heavy Metal on-line monitoring equipment replaced by more modern systems and monitored on-line by • Decommissioning and rehabilitation of Tailings Dams the Municipal Environmental Protection Authority 1 & 2. This work included battering the waste dump Information Centre; slope, backfilling, topsoil sheeting and planting of 20 Griffin MininG LiMited• Installation of additional fencing and dust cannons on national standard “Comprehensive Discharge Standard of the ROM pad to further control dust and any heavy Air Pollutants” (GB162967-1996). metal emissions; In 2021, Hebei Hua Ao removed the existing coal-fired boiler • Upgraded dust collection system in the screening house and hot air furnace at the Caijiaying Mine in accordance with new dust collectors effectively reducing fine ore with the national PRC environmental protection policy and loss and dust discharge; • The completion and acceptance of clean production targets with the targeted reduction in heavy metals confirmed; installed a low-emission coal-fired boiler to be used in 2022 after formal acceptance. The new coal-fired boiler adopts technologies such as wet type dust collection, sodium alkali and denitrification, which can treat pollutants such as smoke, sulphur dioxide and nitric oxide in accordance with • Mist cannon and vacuum trucks for dust suppression; national and local emission standards. • The blending of semi-coke coal with common coal for use in boilers to reduce the discharge of smoke, sulphur In 2021, the Company achieved full compliance with the emission standards for both “organised” and “unorganised” dioxide and nitric oxide; exhaust gases. • Greening of site and camp accommodation areas including vegetable gardens and flower beds; and • Ground hardening of main passageways around the Caijiaying surface facilities to suppress dust. WASTE GAS TREATMENT Griffin strictly abides by China’s air emissions standards and strictly controls air pollutants such as sulphur dioxide and nitrogen oxides generated during mining and processing by installing waste gas treatment devices to ensure that air pollutant emissions meet relevant standards. The smoke and WASTEWATER TREATMENT Wastewater at Caijiaying is mainly domestic sewage, production wastewater and drain water from the Mine. After treatment, sewage and plant wastewater is reused for production, with mine drain water clarified at the mine water purification station and then sent by pressurised pump to the high-level water tank for use in mill operations. In 2021, the Company continued to achieve full recycling of all production wastewater, sewage and mining waste water. WASTE STORAGE AND DISPOSAL dust generated by heating boilers and hot blast stoves are Non-hazardous waste produced consists primarily of waste efficiently treated by a series of desulphurisation and dust rock and tailings. All waste rock produced is backfilled to removal equipment such as bag filters to ensure that the the underground open stopes resulting in 100% utilisation pollutant emission concentration in the exhausted gas meets of mined waste rock. Part of the tailings generated is used the requirements of China’s “Boiler Air Pollutant Emission for underground paste fill whilst the remainder is used for Standard” (GB13271-2014). The main dust generating areas making bricks or stored in the tailings facility. This results such as crushing and screening at the mill are equipped with in total utilisation and safe disposal of all wastes. a sealed cover and bag filters with a dust removal efficiency of 98.65%. The resulting emissions meets the requirements of China’s national standard “Pollutant Emission Standard of Lead and Zinc Industry “ (GB25466-2010 ). The Company strictly abides by China’s national standard “Hazardous Waste Storage Pollution Control Standard (GB18579-2001)” and has formulated internal documents such as “Hazardous Waste Temporary Storage Management”, In addition, dust removal devices are set up in Hebei “Hazardous Waste Ledger Management” and “Hazardous Hua Ao’s workshops. Areas affected by uncontained dust Waste Incident Report”. All hazardous waste generated is emissions are controlled by setting up dust nets, spraying disposed of by a qualified third party. In accordance with the water and regular cleaning. Multiple total suspended PRC government’s environmental protection requirements, particulate matter online monitors have been installed Hebei Hua Ao has installed an online monitoring system in the mining area to ensure that the total suspended for hazardous waste transfer and connected it directly to the particulate matter and the concentration of unorganised National Environmental Protection System to prevent illegal particulate emissions meet the requirements of China’s disposal of hazardous waste. 21 RepoRt and accounts 2021sustainability, envirOnment and lOCal COmmunity (contInued) RESOURCE USAGE Griffin strictly abides by the PRC’s rules on Energy Conservation and other laws and regulations. The Company seeks to continuously promote resource conservation by introducing energy- saving equipment, eliminating high-energy consumption equipment, optimising mining methods and processing This includes the containment of rock crushers, ball mill, fan and other high-noise equipment to minimise noise pollution as much as possible. Noise monitoring stations have also been installed to comply with the PRC Environmental Noise Emission Standards for Industrial Boundaries (GB 12348-2008). technology to minimise resource use and create long term CLIMATE CHANGE sustainable operations. An energy conservation and emission reduction work team has been established at the Caijiaying Mine to make relevant assessments and promote energy conservation. Consequently, a resource utilisation assessment system has been created to set energy consumption targets for each workshop and team, incorporating the related KPIs into the annual assessment, all with the aim of enhancing the assessment of their energy-saving work and cultivating employees’ awareness of responsibility for energy conservation and environmental protection. In this regard, a number of measures have been undertaken to improve energy efficiency and raise personnel awareness including; the use of LED energy-saving lamps to replace traditional lamps; installing inverter air compressors to further reduce the consumption of energy and resource in the production process; and placing “Turn Off Lights” signs to encourage employees to turn off their electronic devices when they Griffin studies the possible impact of climate change on business operations and actively tackles climate change where it is able to. This has involved identifying risks related to climate change such as extreme weather and sudden natural disasters including rainstorms, snowstorms, typhoons, etc. that may lead to power supply interruptions and production accidents, causing significant economic losses and threatening personal safety. Accordingly, Griffin has developed relevant measures to address these risks including back-up diesel generators and ensuring sufficient supplies of essential goods. In 2021, the Company upgraded the emergency power generation facility from 3,200KW to 4,000KW. The upgraded facilities can ensure the continued operation of underground ventilation, drainage and mill maintenance work in case of an emergency, thereby reducing the risk of underground workers being trapped due to power outages. leave areas. ENVIRONMENTAL EMERGENCY Griffin recognises that water shortage is a serious world RESPONSE PLAN issue and whilst the Caijiaying area does not suffer Griffin recognises the impact of unexpected environmental significant water shortages, the Company has formulated a emergencies on operations and safety. Hebei Hua Ao “Water Conservation Management System” to record water complies with the Regulations on Safety Management of consumption in all parts of the Caijiaying Mine operations Hazardous Chemicals, the Regulations on the Management on a real time basis to avoid wasting water resources. Griffin of Chemicals Prone to Producing Narcotic Drugs, advocates water conservation and the awareness of water- the Measures for the Public Security Management of saving amongst employees. All water-using equipment Hazardous Chemicals Prone to Producing Explosives and such as reservoirs, faucets, and water pipes are regularly other relevant laws and regulations and uses special storage monitored to prevent the water leakage. NOISE MANAGEMENT Noise generated underground from the use of explosives and machinery has minimal impact at ground level and underground workers are required to wear ear protectors. To control noise generated from the operation of machinery and equipment on the surface, Griffin strictly abides by the PRC’s Prevention and Control of Environmental Noise Pollution and other relevant laws and regulations. facilities for hazardous chemicals. To prevent emergency environmental accidents, environmental risk assessments are regularly carried out and the Company, has developed a “One Plant, One Policy Implementation Plan” for Emergency Response to Heavy Pollution Weather and Environmental Emergencies, set up a specialised emergency leading group to ensure emergency plans can be effected and taken effective measures for rescue and reduction of pollution losses and ecological damage. 22 Griffin MininG LiMitedBricks manufactured from recyled tailings from the Caijiaying Mine 23 RepoRt and accounts 2021sustainability, envirOnment and lOCal COmmunity (contInued) Hebei Hua Ao regularly conducts emergency drills. In 2021 Griffin emphasises environmental monitoring in mining emergency drills were undertaken for waste mineral oil areas and has established a geological disaster monitoring leakage emergencies. HAZARDOUS CHEMICALS MANAGEMENT Griffin complies with the “Regulations on the Safety Management of Hazardous Chemicals”, “Regulations on the Management of Precursor Chemicals”, “Measures for the Public Security Management of Precursor Explosive Hazardous Chemicals” and other relevant laws and regulations and realises professional management of hazardous chemicals through dedicated storage facilities for hazardous chemicals. GREEN MINE CONSTRUCTION In 2020, Griffin actively enhanced its green mine operation and compiled the “Green Mine Self-Assessment Report” and “Green Mine Building Implementation Plan”. In doing so it successfully passed the national green mine review in China and was listed in the PRC National Green Mines list published by the National Ministry of Land and Resources. As one of the PRC National Green Mines, Griffin proactively implements the national decision and deployment on Green Mining Development and Green Mine Construction, adheres to the policy of “Development in Protection and Protection in Development” and strengthens the construction of green mines. Griffin is committed to environmental protection and sustainable development in the lifecycle of mining exploration, mining, processing, closure and rehabilitation. Griffin has formulated the Mine Geological Environmental Protection System and established a green mine construction team headed by the Caijiaying General Manager, with the relevant sub-leaders as deputy leaders and all production departments as team members. In 2021, Griffin played an active role in a leading group for green mine construction, established sound corporate management mechanisms and safety regulations, strictly implemented the requirements of relevant systems, and carried out improvement in the areas of operation in accordance with the law, standardized management, environmental protection and safety production by strengthening compliance emission management, optimizing the use of mineral resources, upgrading greening investment and establishing cooperation between enterprises and local communities. system. Griffin is committed to identifying potential disaster hazards on time by strengthening the management of the geological environment in mining areas and measuring the implementation of environmental standards and the progress of environmental protection work. Griffin has formulated the Green Mine Construction Plan, with the aim of investing 5%-10% of the total enterprise output value in “Mine Environmental Protection and Treatment Funds” from 2019 to 2023 by way of green mine construction projects such as the construction of covered ROM pad, tailings reclamation and boiler renovation. Tailings reclamation and boiler renovation projects have all now been completed. Whilst the covering of the ROM pad cannot be completed due to geological and foundation constraints, Hebei Hua Ao has taken measures such as erecting dust control nets, spraying chemicals, and sprinkling water to suppress dust to achieve the same treatment effect as the construction of a covering. In addition, Hebei Hua Ao is greening exposed land in the mining area to achieve the goal of “As Green as Possible”. In the future, Griffin will continue to strengthen ecological and environmental management, encourage employees to improve the level of development and utilisation, and promote the effective construction of green mines. TAILING FACILITIES CLOSURE Hebei Hua Ao has completed the closure and rehabilitation of the Tailings Facilities 1 and 2. Both tailing facilities’ closures and rehabilitation included a number of complex works such as a reservoir area treatment, slope greening, and a safety facilities set-up, with a total investment of more than $14.2 million. ENVIRONMENTAL RECOGNITION Griffin’s environmental best practices have been recognised in the past by Chinese Government authorities with Hebei Hua Ao being presented with the National Environmental Award and the Mine Development Outstanding Achievement Award at successive China Mining Conferences. 24 Griffin MininG LiMitedEnvironmental Key Performance Indicators - Emissions: Indicator Total GHG emissions (Scope 1 and Scope 2) (tonnes) Direct GHG emissions (Scope 1) (tonnes) including: Diesel Indirect GHG emissions (Scope 2) (tonnes) including: Purchased electricity Wastewater discharge (10,000 tonnes) Wastewater discharge intensity (tonnes/RMB million) Hazardous waste safely disposed of (tonnes) General solid waste generation (10,000 tonnes) Notes: 2021 42,644.31 1,166.88 41,477.43 0 0 47.60 68.83 The greenhouse gas (GHG) inventory includes carbon dioxide, methane, and nitrous oxide. GHG emissions are presented in carbon dioxide equivalents and calculated based on the electricity emission factor in the 2019 Baseline Emission Factors for Regional Power Grids in China issued by the Ministry of Ecology and Environment of the People’s Republic of China and the 2006 IPCC Guidelines for National Greenhouse Gas Inventories (2019 Revision) issued by the Intergovernmental Panel on Climate Change (IPCC). Scope 1 GHG covers GHG emissions directly generated from the businesses owned or controlled by the Company; Scope 2 GHG covers “indirect energy” GHG emissions from the Company’s internal consumption (purchased or obtained). Nitric oxide, sulphur dioxide and smoke mainly emanate from heating boilers. During the reporting period, Hebei Hua Ao has removed the original heating boiler and hot air furnace. The new low-emission coal-fired boiler, which has not yet been put into use, does not emit nitric oxide, sulphur dioxide and smoke emissions. Hazardous waste includes water mineral oil and waste oil drums. General solid waste is mainly from tailings. Waste water is recycled. Environmental Key Performance Indicators - Energy and Resources Consumption: Indicator Total energy consumption (MWh) Direct energy consumption (MWh) including: Diesel Indirect energy consumption (MWh) including: Purchased electricity Total water consumption (10,000 tonnes) Notes: 2021 58,263.004 0.004 58,263.00 40.90 Total energy consumption is calculated based on direct and indirect energy consumption according to the conversion factors listed in the National Standards of the People’s Republic of China General Principles for Calculation of the Comprehensive Energy Consumption (GB/T 2589- 2020). During the reporting period, Hebei Hua Ao has removed the original heating boiler and hot air furnace. A new low-emission coal-fired boiler has been installed but has yet to be put into use. The Company’s business does not involve the use of packaging materials and data disclosure. SAFETY MANAGEMENT As mining is inherently dangerous, Hebei Hua Ao strictly and the OHS Department, which is responsible for the work complies with laws and regulations of the PRC such as the related to the safety production management, and through Law of the PRC on Work Safety and the Law of the PRC on the establishment of the “Safety Production Responsibility Safety in Mines, implements the “Safety and Prevention First, System” and “Double Prevention System for Safety Comprehensive Governance” work safety policy, provides a Production” from those in charge to the operators. Hebei Hua safe working environment for employees, and continuously Ao clarifies the safety responsibilities of each point, so that the carries out safety management system development. Hebei safety responsibilities run through all aspects of production Hua Ao set up the Safety Production Management Committee and operation. 25 RepoRt and accounts 2021sustainability, envirOnment and lOCal COmmunity (contInued) In 2021, Griffin continued to improve safety management Safety Training and Emergency Drill systems and established a total of more than 80 production safety rules and regulations and more than 150 safety operation procedures to standardise the safe operation of operators. Hebei Hua Ao effectively ensures safe and compliant production by strengthening various forms of safety management. For higher risk jobs, Griffin requires employees to conduct a Job Safety Analysis (JSA) before starting work to ensure that safety hazard inspections are completed, and potential risks are identified beforehand. Hebei Hua Ao conducts safety inspections regularly to To enhance employees’ awareness of safety protection, the Company formulates annual safety education and training plans and invites experts to regularly train employees contractors on occupational health, first aid and safety operations. Employees are equipped with protection devices and personal protective equipment (PPE) in accordance with the requirements of PRC laws and regulations. Through regular emergency drills for flood control in tailing ponds and anti-snatching accidents and firefighting drills, employees improve self-rescue and self-help capabilities to ensure production activities are safe and compliant, and to be ready for tackling emergencies. reduce the number of safety accidents. In 2021, Hebei Hua Ao conducted 4 quarterly safety inspections, carried out a In 2021, the Company conducted safety training as follows: total of 176 safety inspections in areas such as processing, Training Type Number of Participants (Person-time) mining workshops, bases, and warehouses, and organised a total of 62 special safety inspections. Relying on a meticulous safety management system, the incident rate of all types of accidents decreased significantly. The total frequency of Annual safety training for all employees Occupational health training recordable injury accidents per million working hours in On-site first aid training 2021 was 3.5, which was 14.3% lower than the result in Emergency rescue team training 2020. In 2021 there were no work-related fatalities. New employee’s safety induction Daily safety training 750 157 173 83 384 2,135 Health and Safety of Employees Indicators 2021 2020 2019 Total number of work-related fatalities 0 0 0 Lost days due to work injury 180 570 720 Emergency Plan for Accidents To implement safety management policies, Griffin constantly improves work health and safety guidelines. In accordance with the requirements of relevant PRC laws and regulations such as Workplace Accident Emergency Plan Management Measures and Enterprises Workplace Accident Emergency Plan Preparation Code (GB/T 29639-2020), combined with risk identification and assessment, Hebei Hua Ao established a Comprehensive Emergency Plan for Production Safety Accidents and a Special Emergency Plan for Tailings Dam, Underground and Processing Plant to strengthen accident emergency management. The purpose is to ensure emergency rescue can be carried out timely and effectively to minimise accident damage, protect employees’ safety and reduce property loss. The total safety training hours in 2021 was 8,247hrs. Contractors Safety Management Hebei Hua focuses on improving the safety management level of contractors, based on management measures such as the Non-coal Mine Outsourcing Projects Safety Management Interim Measure and Enhance Metal and the Non-metal UG Mine Outsourcing Project Safety Management Regulations, formulating a safety management and assessment system for contractors into the Company’s safety management system. Hebei Hua Ao has signed a Safety Production Management Agreement with contractors to clarify the management responsibilities of both parties for accident potential hazard investigation, management, prevention, and control. Regular safety meetings are arranged to improve the safety awareness of contractors. For contractor safety management assessment, the OHS Department of Hebei Hua Ao and the contractor’s competent department jointly set up an assessment team to review the management structure, the implementation of laws and regulations, and safety training of contractors. Moreover, random checks are conducted on the contractors’ “Non-Coal Mining Enterprise Safety 26 Griffin MininG LiMited Production License” and other relevant certifications to equal opportunities for career development and to build a ensure their employees are qualified. harmonious labour relationship. Hebei Hua Ao implements EMPLOYEES’ RIGHTS Hebei Hua Ao values its employees by adhering to “Talents are the First Resource” policy. This insists on a people- oriented principle and the protection of employees’ basic rights and interests as well as mutual development between an 8-hour working day system in accordance with PRC law and stipulates that the average working hours of employees should not exceed 40 hours per week. Due to the nature of some activities, a special working hours system may be implemented after obtaining approval from the relevant departments. employees and the Company. This is an important part of Griffin offers competitive salary and welfare benefits to its Griffin’s overall sustainable development by continuing to employees according to the nature of the job. An employee optimise employee talents, improve the overall quality of whose work exceeds regular working hours will be offered employees and committing to building a professional and additional compensation or compensatory leave. Hebei ethical team with a high sense of responsibility. Hua Ao implements a system of 20 days of continuous work EMPLOYEE MANAGEMENT POLICY Griffin is an equal opportunities employer and Hebei Hua Ao strictly complies with the Labour Law of the PRC, the Labour Contract Law of the PRC, the Law of the PRC on the Protection of Women’s and Children’s Rights and other relevant laws and regulations. Griffin has established a number of employee management systems and procedures to protect the legitimate rights and interests of employees, including recruitment and dismissal, compensation and promotion, working hours, holidays, equal opportunities, and 10 days of continuous leave. Hebei Hua Ao reimburses travel expenses between the Caijiaying Mine and the employees’ home. Griffin advocates a diverse workforce and does not discriminate on the grounds of gender, age, nationality, race, religious beliefs, and physical condition in either recruitment, training, selection, salary and promotion. Griffin is against any forms of slavery, forced labour or child labour and will not deal with any party which it believes engages in such practices. diversification and other employee benefits. In 2021 there were no reported violations involving child Griffin has contracts with employees in accordance with all laws and regulations to ensure that all employees are given or forced labour and there were no major labour disputes within the Griffin Group. Further, no Griffin Group company received any complaints on human rights issues. Category Employee basic information Number of employees Proportion Number of employees in Hebei Hua Ao New employees in 2021 By gender By management level By employee type By region Male Female Management Personnel General Personnel Full-Time Part-Time Domestic Overseas 443 32 379 64 20 423 443 0 439 4 100% 7.2% 85.6% 14.4% 4.5% 95.5% 100% 0% 99.1% 0.9% 27 RepoRt and accounts 2021sustainability, envirOnment and lOCal COmmunity (contInued) HEALTH AND SAFETY OF EMPLOYEES environment for employees. Hebei Hua Ao strictly The health and safety of the Group’s employees is of paramount importance. All Group companies abide by the relevant laws and regulations of their country of incorporation and operation, including the Law on the Prevention and Control of Occupational Diseases of the PRC and the Measures for Supervision and Administration of Employer’s Occupational Health Surveillance. In particular, Hebei Hua Ao has established a sound and safe production management system and improved the emergency plans for production safety accidents to reduce the risks of occupational hazards. As of 31 December 2021, Hebei Hua Ao had a total of 443 employees. The employee composition is shown on page 27. OCCUPATIONAL HEALTH DISEASES COVID-19 CONTROL AND PREVENTION abides by the laws and regulations of the PRC such as the Law of the PRC on Prevention and Control of Occupational Diseases and the Measures for Supervision and Administration of Employer’s Occupational Health Surveillance, hires qualified third-parties to actively identify occupational disease hazards and carry out regular testing of occupational hazard factors. Medical insurance and supplemental medical insurance is provided for employees. Pre-employment, on-the-job and post-employment health checkups are undertaken. With the Covid-19 pandemic ongoing, Hebei Hua Ao strictly implements the epidemic prevention requirements of the PRC national and local governments, temperature checks everyone before entry to the Caijiaying Mine, regularly ventilates and disinfects the office premises, carries out personnel health checks, and strictly checks the health condition of visitors entering and leaving Company Hebei Hua Ao continues to strengthen procedures and premises, so as to protect the health and safety of employees. controls for the prevention and control of occupational diseases, improve the occupational health protection equipment and facilities, and the production and working Wherever possible, Griffin Group employees were encouraged to work from home in compliance with local regulatory requirements. Covid-19 Vaccination Centre at the Caijiaying Mine 28 Griffin MininG LiMitedCAREER DEVELOPMENT AND TRAINING OF EMPLOYEES Griffin values the training and development of all employees. It has formulated promotion channels and flexible employee training systems to support employees’ career development and improve employees’ capabilities. Training conducted in 2021 included: Hebei Hua Ao evaluates and assesses the performance of suppliers by carrying out various field inspections, quality tracking and testing analysis on supplier operations, reputation, product quality, production capacity, delivery capacity, transportation capacity, etc. Suppliers performance is monitored to understand and keep track of the risks they may be involved in. Suppliers with unqualified product quality, frequent untimely deliveries, and who fail to provide on-time and high-quality after-sales service, are blacklisted • 25 management personnel received safe production for three years. knowledge and management ability training. • 27 operators received training on getting special equipment operation certificates. CUSTOMERS AND PRODUCT RESPONSIBILITY • 20 operators and management personnel received special equipment management and operation training. Quality Control • 32 new employees received three-tier training. • All employees received safety training. SUPPLIER MANAGEMENT With strict production management and quality control, every effort is made to ensure the production of high quality zinc and lead concentrates that satisfy customers’ needs. The extraction of all lead from the zinc concentrate produces a separate lead concentrate containing precious metals and Suppliers are an important cornerstone of sustainable ensures that a highly desirable lead free zinc concentrate is development. To ensure that supplier activities comply produced. with the requirements of local regulatory authorities and our selection criteria, a supplier management system has been established that strictly controls the entire process of supplier access, evaluation and subsequent management. When establishing procurement contracts for equipment, building materials, steel, chemicals and other products, Griffin sets clear environmental and safety management requirements for suppliers, stipulating that they must strictly comply with national and local environmental and safety laws and regulations in production and operating The following measures are undertaken in the efficient production of good quality concentrate: • Strict maintenance plans to ensure that equipment is always in good and reliable condition; • Ongoing improvements to the flotation process, including optimisation of system controls, enhancement of process stability resulting in better recovery of zinc, lead, gold and silver; activities. Product packaging must be solid and clearly • PLC control systems to further ensure the stability of marked. The supplied goods must be safe and neatly processing operations; packaged and delivered to the designated place safely. In addition, a commitment letter on “Illegal Employment of Employees” from the suppliers is requested, requiring them to strictly comply with the Constitution of the PRC, the • Ongoing technical training to employees to improve their capabilities and their ability to deal promptly and safely with all emergencies; Employment Contract Law of the PRC, the Law of the • Samples taken every two hours during processing to PRC on the Protection of Minors and the Provisions on correct variances and ensure the stability of processing; Prohibition of Using Child Labour. Griffin prohibits the and employment of child labour and late salary payment to their employees so as to prevent social and environmental risks within the supply chain. • A combination of internal and external inspections for assay analysis to ensure the accuracy of all assay data. 29 RepoRt and accounts 2021sustainability, envirOnment and lOCal COmmunity (contInued) Protection of Rights and Interests of Customers COMMUNITY RELATIONS AND SOCIAL Griffin takes a responsible and proactive approach to building INVESTMENT long-term, harmonious and stable customer relationships Griffin, through Hebei Hua Ao, has invested heavily in the and endeavours to resolve all customer claims promptly. In local communities. This includes working with the local 2021, Hebei Hua Ao did not receive any complaints or have communities towards eliminating poverty and improving any returns regarding concentrate quality nor did it recall people’s livelihoods. Griffin believes that enterprise and any concentrate sold due to safety or health issues. community development are closely related, combining ANTI-CORRUPTION MANAGEMENT Griffin insists on transparent operation, with systems to fully implement anti-corruption management whilst respecting cultural norms. Hebei Hua Ao strictly abides by the Law of the PRC Against Unfair Competition, the Law of the PRC on Anti-money Laundering and relevant laws and regulations, has zero tolerance for any form of illegal behaviours including bribery, extortion, fraud, and money laundering, and prohibits directors and employees from engaging in illegal or unethical economic activities. corporate strengths with community needs. Griffin actively carries out community improvements, supports local institutions and provides charitable support where needed. By establishing a “Community Development Plan” and other support, Griffin has formulated community development plans in areas such as poverty alleviation, education, medical care, rural revitalisation, industrial support, infrastructure construction, disaster relief and traditional culture support. These are considered and implemented as a way to promote harmonious economic and social development and to be an excellent corporate citizen of the PRC. Griffin has carried out the following work to enhance anti- Poverty Alleviation corruption management, including: • Formulating anti-corruption policies and code of conduct for employees to monitor business operations and business activities of employees and third-party contractors.; • The employment behaviour code of conduct is reviewed and updated each year by Hebei Hua Ao’s Human Resources (“HR”) department head and the Caijiaying Mine’s Operation Manager to ensure all disciplinary actions are up-to-date and appropriate for any possible risks to the business including anti-bribery and anti- corruption; • Griffin encourages employees to report anonymously or through established reporting channels any suspicious misdeeds. Information provided by the whistleblower and their identity is kept confidential to protect the personal safety of the whistleblower; • Griffin regularly reinforces supervision and management, and regularly reviews the reporting procedures for anti-corruption and anti-fraud.; • Griffin continuously promotes the work of building a culture of integrity and employees’ anti-corruption awareness through regular training. In order to assist and implement the decisions and directives of the Chinese government to reduce poverty, in accordance with the requirements of the Leading Group of Poverty Alleviation in Hebei Province, Griffin has implemented a poverty alleviation plan in conjunction with the local community. This includes pensions and other financial support as well as non-financial donations to local people. In 2021, Hebei Hua Ao signed assistance agreements to help villages in Zhangjiakou City, Hebei Province, including No.3 Township, Qigangou Village, Sangongdi Village and Xingshengmao Village. 1,000 bags of white flour were donated to local villagers, and 950 bags of white flour and 600 bags of rice for Xiaobazi Administrative Village to help families in need. 2,675 kilograms of potatoes were purchased from villagers to help increase their incomes and boost local economic development by purchasing agricultural products. Education Since the commencement of operations at the Caijiaying Mine, Hebei Hua Ao has been providing financial support to the only elementary school in No.3 Township, Zhangbei County, Zhangjiakou City, Hebei Province. This includes the establishment of the “Hebei Hua Ao Hope Scholarship” to encourage local high school graduates to enter university. The “Hua Ao Hope Scholarship” was established with an annual investment of Rmb 100,000, and is specifically 30 Griffin MininG LiMited implemented and managed by the Zhangbei County With years of regular practice Hebei Hua Ao has established Hope Project Leading Group. By 31 December 2021 a and formed a set of emergency rescue rapid response total of Rmb1,020,290 (US$160,00) had been invested in processes. The emergency rescue team is not only able to educational support in the local area. respond to all kinds of emergencies in the mine, but also Community Investment Community communication is seen as an effective way to build trust with local community people and achieve harmony and co-prosperity between Griffin and the community. As well as poverty alleviation and support for local cultural events this has included: • The construction and maintenance of a new water bore and water supply; • The construction and maintenance of a sealed road from San Hao township to the Caijiaying Mine area; enable it to participate in community emergency rescue. In 2021, the emergency response team participated in two community fire-fighting operations to protect the lives and property of villagers. In addition, Hebei Hua Ao invested Rmb950,000 in the maintenance of rural roads around mining areas to help build public transportation and infrastructure in the community and fulfill Griffin’s social responsibility. During 2021, Hebei Hua Ao paid Rmb218.5million ($34 million) (2020: Rmb 95million) 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 • 500 head of cattle to Caijiaying Village to successfully in the Zhangjiakou City prefecture. create a dairy and cattle farm. It is estimated that the Caijiaying Mine currently provides direct and indirect employment to over 1,000 Chinese nationals. San Hao School Children’s day 31 RepoRt and accounts 2021FinanCial results In 2021, the Company and its subsidiaries (together the Total cost of sales in 2021 of $63,224,000 was up 47.9% “Group”) recorded; • Revenues of $121,648,000 (2020: $75,403,000); • Operating profits of $36,925,000 (2020: $15,148,000); • Profit before tax of $36,526,000 (2020: $14,515,000); • Profit after tax of $25,376,000 (2020: $8,910,000); and on that incurred in 2020 of $42,737,000. In the main this reflects more tonnes mined, hauled and processed in 2021. Further cost increases occurred with the mine deepening, increasing mine service costs and the distances ore is hauled, whilst processing costs were impacted by tailings disposal issues and increased maintenance costs. Costs were also increased by a 4.5% appreciation of the Renminbi to the • Basic earnings per share of 14.53 cents (2020: 5.16 US dollar and inflationary pay awards to all staff. cents). Administration expenses rose $3,981,000 (23%) from Record amounts of ore were mined and processed in 2021 $17,518,000 in 2020 to $21,499,000 in 2021. Administration costs which, with improved zinc metal market prices and lower include a charge of $3,876,000 (2020: $2,943,000) incurred smelter treatment charges (“TCs”), resulted in Group with Yuanrun based upon the profits of Hebei Hua Ao. Hebei profits before tax increasing 152% from that in 2020 Hua Ao’s administration fees increased by 27% in 2021 with a of $14,515,000 to $36,526,000 in 2021. Group profits 4.5% appreciation in the Renminbi exchange rate, pay awards after tax increased by 185% from $8,910,000 in 2020 to $25,376,000 in 2021. Turnover in 2021 of $121,648,000 was up $46,245,000 (61%) on that achieved in 2020 of $75,403,000. This mainly reflects zinc in concentrate sales up $43,856,000 (83%) with: 41,949 tonnes of zinc metal in concentrate sold in 2021 compared with 32,276 tonnes in 2020, an increase of 30%; and average zinc metal in concentrate prices received in 2021 of $2,311 per tonne compared with $1,645 received in 2020, an increase of 40%. This price increase reflects an increase in market prices with the average LME zinc metal price of $3,007 per tonne in 2021 compared with $2,268 in 2020, but also a reduction in TCs with average TCs equating to 23.1% of the average LME zinc price in 2021 compared with 27.5% in 2020. to staff and additional environmental and safety regulatory compliance costs. Administration costs outside the PRC were impacted by investor and public relation costs curtailed in previous years and significantly increased insurance premiums. Foreign exchange losses of $51,000 (2020: gains $22,000) were recorded in 2021, mainly on a weaker GBP sterling. Interest of $236,000 (2020: $108,000) was received on bank deposits in 2021. Interest of $309,000 (2020: $111,000) was paid on short term bank loans. Finance interest on the lease of the dry tailings facility at Caijiaying and the London office totaling $11,000 (2020: $171,000) was charged in 2021. Deemed interest on discounted rehabilitation provisions of $84,000 (2020: $77,000) was charged in 2021. Losses on the disposal of equipment of $293,000 (2020: $1,129,000) were recorded with equipment being replaced Lead and precious metal in concentrate sales in 2021 of to meet higher Chinese environmental standards. $31,915,000 were up 22.7% on that achieved in 2020 Income taxes of $11,150,000 (2020: $5,605,000) have been of $25,999,000. This reflects increased gold metal in charged in 2021. concentrate sold and increased lead and silver in concentrate prices received despite lower gold prices received. In 2021, metal in concentrate sales were: • Zinc 41,949 tonnes (2020: 32,276 tonnes); • Gold 14,417 ozs (2020: 11,218 ozs); Basic earnings per share in 2021 was 14.53 cents (2020: 5.16 cents) and diluted earnings per share was 13.47 cents (2020: 4.88 cents). Cash generated from operations of $42,880,000 (2020: $24,398,000) have been used in further developing the mine and facilities and retained pending development of the Zone • Silver 269,505 ozs (2020: 291,756 ozs); and II area at Caijiaying. • Lead 1,069 tonnes (2020: 1,425 tonnes). Average prices achieved in 2021 were: Attributable net assets per share at 31 December 2021 was $1.50 (2020: $1.35). Whilst the Directors do not recommend the payment of • Zinc metal per tonne of $2,311 (2020: $1,645); a dividend at this time, the Directors have discussed and • Gold metal per oz of $1,691 (2020: $1,759); • Silver metal per oz of $19.8 (2020: $17.7); and will further consider a dividend policy later this year when current political, social and economic circumstances permit enabling such a policy to be instituted and executed over a • Lead metal per tonne of $2,074 (2020: $1,339). consistent, long term basis. 32 Griffin MininG LiMitedstrategiC review OVERVIEW ACQUISITIONS AND FURTHER The objective of the directors and management is to PROJECTS ensure the long-term sustainability of the Company and its business to benefit its shareholders and other stakeholders. To achieve this objective, the directors and senior executives seek to add value, manage risks and minimise costs whilst pursuing economic returns commensurate to the risk taken pursuing the following strategy. In view of the significant potential of the Caijiaying Mine and surrounding areas and given the Company’s knowledge and expertise in China, the directors and management have focused on the further development of the Caijiaying Mine, investigation of prospective areas near the Caijiaying Mine and other potential projects in other provinces of China. In addition, the directors and senior executives evaluate other mining companies and projects worldwide to ascertain whether any acquisition can be made which has the possibility of matching the returns provided by the Caijiaying Mine. CAIJIAYING The Caijiaying Mine’s metal production capability has been augmented with continued extensive exploration, expansion of the mill processing facilities (including grinding and flotation circuits) and ongoing underground infrastructure development. Exploration has been focused 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 and 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 new mining licence over Zones II and III permits production to be raised to 1.5 million tonnes per annum, further expansion of operations will require further licences and permits from various Chinese authorities which are proving increasingly complex and time consuming to obtain. 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 that provides a substantial and justifiable return on equity to shareholders. Relatively new geological, geophysical and geochemical techniques, aided by new equipment, all sourced or discovered in Australia, Europe and/or the USA, have expanded the Company’s search criteria to include virgin, exploration ground. Any found of value may be sold, joint ventured or offered in a separate vehicle to existing Griffin shareholders or retained by the Company and developed for existing shareholders. To affect this strategy the Company has further expanded the scope and activities of China Zinc to encompass this 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. CLIMATE CHANGE Griffin studies the possible impact of climate change on business operations and actively tackles climate change where it is able to. This has involved identifying risks related to climate change such as extreme weather and sudden natural disasters including rainstorms, snowstorms, typhoons, etc. that may lead to power supply interruptions and production accidents, causing significant economic losses and threatening personal safety. Accordingly, Griffin has developed relevant measures to address these risks including back-up diesel generators and ensuring sufficient supplies of essential goods. In 2021, the Company upgraded the emergency power generation facility from 3,200KW to 4,000KW. The upgraded facilities can ensure the continued operation of underground ventilation, drainage and mill maintenance work in case of an emergency, thereby reducing the risk of underground workers being trapped due to power outages. 33 RepoRt and accounts 2021Corporate governanCe Griffin is incorporated in Bermuda, a jurisdiction which does The Board does not have a formal diversity policy but plans not have a formal overarching corporate governance code. to review the need for such a policy annually, taking into Under common law in Bermuda, shareholders are entitled account the size of the Board and skills required. to have the affairs of the Company conducted in accordance with general law and the Company’s memorandum of association and bye-laws. The Board has formally established an audit committee and a remuneration committee. The audit committee and remuneration committee reports are given on pages 36 to Bermuda law does not impose an all-embracing code of 40. conduct on directors. The Company’s memorandum of association and bye-laws comprise its constitution and together with the Bermuda Companies Act prescribe the ambit of the directors’ powers. Accordingly, if the directors act ultra vires the Company’s constitution, they are answerable to the Company. The function of the substantive law is to supplement the internal constitutional checks on a director’s powers and to deal with areas where the Company’s constitution may be silent. Directors generally are authorised to exercise all of the powers of the Company that are not reserved to the shareholders under the Company’s constitution or the Bermuda Companies Act. Directors are personally appointed and their appointment may not be generally delegated or assigned, although alternate directors may be appointed pursuant to 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; the Bermuda Companies Act • Preparation of regular operational reports; The Company and its directors have reviewed and • Prior approval of capital and other significant considered the various corporate governance codes and have expenditure; adopted the Corporate Governance Code published by the UK Quoted Company Alliance (“QCA”) and the principles contained therein so far as the Board is able and believes it is practicable. In effect, the directors continue to seek to add value, manage risks and minimise costs to ensure the long • Preparation and regular review of cash flow forecasts and funding requirements; • Regular review and assessment of foreign exchange risk and requirements; and term sustainability of the Company and its business. • Regular review of commodity prices and assessment of The board of directors (the “Board”) includes a number hedging requirements. of non-executive directors who, with the exception of The directors recognise the principles in the QCA code and Adam Usdan, are considered to be independent as their have applied these where appropriate. In this regard: 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 seeks to meet regularly within the confines of restrictions imposed to contain Covid-19 transmissions, 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. • 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. 34 Griffin MininG LiMited• Shareholder expectations: The Directors maintain A remuneration committee has been appointed with a regular contact with significant shareholders through the brief to set performance criteria. Chairman, Finance Director and Senior Independent Director 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. • Corporate culture: Both the Chairman and Finance Director regularly visit the Group’s operations to meet with management and other personnel. These visits have been limited of late because of travel restrictions to contain the Covid-19 pandemic. When able, the Board • Stakeholders: The Company through Hebei Hua Ao meets at least once a year at the Caijiaying Mine and has invested heavily in the local community in China elsewhere during the year. The safety of all personnel and continues to maintain and further implement best working at the Group’s operations is a priority with practices for the protection of the environment and for formal procedures in place to prevent and report any the benefit of the local community. Further details are safety and environmental issues. The Group will not given within the Sustainability, Environment and Local deal with any organisation or individual which it believes Community report on pages 18 to 31. To comply with Corporate Governance requirements set by AIM in 2018 an audit committee was formed comprising the non-executive directors Dal Brynelsen, Adam Usdan. 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. and Rupert Crowe, who died on 10 February 2021. Clive • Governance structures: The Company has appointed Whiley joined this committee on his appointment as a Chief Operating Officer who reports directly to the director on 13 August 2021. • Risks: The Company and its directors have identified and keeps 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 44 to 47. • Board of directors structure: The Board is headed by a Chairman whose services are provided through a service entity Keynes Capital (see report of the remunerations committee on page 39. The Company has no Chief Executive Officer. Accordingly, the roles of Chief Executive Officer and Chairman have not been separated as recommended by the QCA code for the above reason. The Board also includes a full time executive Finance Director as well as four non-executive directors. • Board of directors, skills: The existing Board with those of Hebei Hua Ao brings a balance of skills and experience to the Company, including legal, financial, mining, geological and market expertise. Details of each director are given in the biographies of each director on page 41. Chairman, who in turn reports directly to the Board. The Chief Operating officer oversees the Groups operations with individual department heads reporting directly to him. The Company has appointed a Chief Financial Officer in China who reports to both the Chief Operating Officer and directly to the Finance Director, who in turn reports to the board of directors. Individual department managers are able to communicate directly to the Chairman concerning any issues of concern. The Board has responsibility for setting the overall strategy of the Group, its performance, management and financial matters including, inter alia, the approval of budgets, significant capital expenditure and financial reports. • Shareholder communications: In addition to the publication of annual and interim reports, regulatory news releases and maintaining a web site, as aforementioned, the Company communicates directly with major shareholders on a regular basis and maintains an office in London, in part, as a point of contact with shareholders. Further details are provided on the Company’s web site • Board performance: The independent directors www.griffinmining.com. regularly consider the effectiveness and performance of the Chairman and Finance Director and vice-versa. 35 RepoRt and accounts 2021report oF the audit Committee To comply with Corporate Governance requirements set by and the corporate governance statement (insofar as it AIM in 2018 an audit committee was formed comprising relates to the audit and risk management). the non-executive directors Dal Brynelsen, Adam Usdan. and Rupert Crowe, who died on 10 February 2021. Clive Whiley joined this committee upon his appointment as a director on 13 August 2021. Dal Brynelsen resigned on Internal Controls and Risk Management Systems The Audit Committee: 5 May 2022 and Linda Naylor was appointed on 10 May (a) Keeps under review the effectiveness of the Company’s 2022. internal controls and risk management systems; and THE ROLE OF THE AUDIT COMMITTEE (b) Reviews and approve the statements to be included in the Annual Report concerning internal controls and risk The Audit Committee assists the Board in its oversight of management. the Company’s financial reporting, internal control and risk management. In this regard, the Audit Committee is charged with carrying out the following: Financial Reporting (c) Reviews taxation matters of the Group. In the past year the Audit Committee has focused on the following key areas: a) The impact of the Covid-19 pandemic on operations The Audit Committee monitors the integrity of the and going concern; financial statements of the Company, including its annual and interim reports, preliminary results and any other formal announcement relating to its financial performance whilst reviewing significant financial reporting issues and judgements contained within those announcements. The Audit Committee also reviews summary financial statements, significant financial returns to regulators and any financial information contained in certain other documents, such as announcements of a price sensitive nature. The Audit Committee reviews and challenges where necessary: (a) The consistency of, and any changes to, accounting policies, both on a year on year basis and across the Company and its Group; (b) The methods used to account for significant or unusual transactions where different approaches are possible; (c) Whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor; (d) The clarity of disclosure in the Company’s financial reports and the context in which statements are made; and b) The value of fixed assets and the need for any impairment provisions; c) Conversion of Hebei Hua Ao from a Joint Venture to a limited liability company with an indefinite life; and d) Gift giving, entertaining, and the risk of bribery and corruption. Whistle blowing The Audit Committee reviews the Company’s arrangements for its employees to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The Audit Committee ensures that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action. External Audit The Audit Committee: (a) Considers and 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 (e) All material information presented with the financial Audit Committee shall investigate the issues leading to statements, such as the operating and financial review this and decide whether any action is required; 36 Griffin MininG LiMited(b) Oversees the relationship with the external auditor (e) Reviews the findings of the audit with the external including (but not limited to): auditor. This includes but is not limited to, the following: (i) Approval of their remuneration, whether fees for (i) Discussion of any major issues which arose during audit or non audit services and that the level of fees the audit, is appropriate to enable an adequate audit to be conducted; (ii) Approval of their terms of engagement, including (ii) Any accounting and audit judgements, and (iii) Levels of errors identified during the audit. any engagement letter issued at the start of each (f) Reviews the effectiveness of the audit; audit and the scope of the audit; (iii) Assesses annually the auditors’ independence and objectivity taking into account relevant national, (g) Reviews the representation letter(s) requested by the external auditor before they are signed by management; professional and regulatory requirements and the (h) Reviews the management letter and management’s relationship with the auditor as a whole, including response to the auditor’s findings and recommendations; the provision of any non-audit services; and (iv) Satisfies itself that there are no relationships (such as family, employment, investment, financial or business) between the auditor and the Company (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 monitors 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 Company compared to the overall fee income (i) Develops and implements a policy on the supply of non audit services by the external auditor, taking into account any relevant ethical guidance on the matter. 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. Adam Usdan Chairman of the Audit Committee of the firm, office and partner and other related 12 May 2022 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; 37 RepoRt and accounts 2021report oF the remuneration Committee To comply with Corporate Governance requirements on a year by year basis. set by AIM in 2018, a remuneration committee (the “Remuneration Committee”) was formed comprising the non-executive directors Dal Brynelsen and Adam Usdan. On 13th August 2021 Clive Whiley was appointed a director of the Company and to the Remuneration Committee. Dal Brynelsen resigned on 5 May 2022 and Dean Moore was appointed on 10 May 2022. Nevertheless, the Remuneration Committee continues to assess various remuneration policies to attract and retain 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 ROLE OF THE REMUNERATION The policy is being framed around the following key COMMITTEE principles: The Remuneration Committee is responsible for • Total rewards will be set at levels that are sufficiently determining and agreeing with the Board the broad competitive to enable the recruitment and retention of policy for the remuneration and employment terms of the high-calibre executives; Directors 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 employee benefit structures across the Group. All the executives engaged by the Griffin Group 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 main Board of Directors has final approval of all directors’ fees. No director may be involved in any decision as to their own remuneration. Directors’ Remuneration Policy With only one executive director in the Group, the remuneration committee has determined that it would be inflexible, bureaucratically cumbersome and therefore inappropriate to have an extensive and prescriptive formula for determining one employee’s total compensation package. Accordingly, the executive director’s remuneration • Total incentive-based rewards will be earned through the achievement of performance conditions consistent with shareholder interests; • The design of long-term incentives will be prudent and will not expose shareholders to unreasonable financial risk; • In considering the market positioning of reward elements, account will be taken for the performance of the Group and of each individual executive director; and • Reward practice will conform to best practice standards as far as reasonably practicable. When formulating the scale and structure of remuneration, the Remuneration Committee considers a number of different factors including market practice and external market data of the level of remuneration offered to directors of similar type and seniority in other companies of the size and activities of the Company. In addition, the pay and employment conditions of employees are also considered when determining directors’ remuneration. The Remuneration Committee may also seek advice from external consultants where appropriate and the services of FIT Remuneration Consultants have been utilised in previous years. No director has been involved in deciding the level and composition of their own remuneration. Long-term performance is incentivised by way of the grant of share options. is considered by the Remuneration Committee, with the The Board seeks to strengthen the alignment of director, assistance of outside executive compensation consultants, employee and shareholder interests. 38 Griffin MininG LiMitedExecutive directors’ remuneration for 2021 Long Term Incentives The executive directors’ (Finance Director) base salary was As detailed in the Directors’ Report on page 43 and 44, last increased with effect from 1 January 2014. Since the options to purchase shares in the Company at 30 pence year end the Finance Director’s salary has been increased and 40 pence per share, exercisable at any time up to 31 from £315,000 per annum to £350,000 per annum with December 2023, have been granted to directors and senior effect from 1 April 2022. employees. No bonuses were paid to the Finance Director in 2021 or Subsequent to the financial year end, with the unanimous 2020 in view of the challenges facing the Company during agreement of all the option holders, the exercise period of the Covid-19 pandemic. In 2021, Roger Goodwin (Finance Director and Company Secretary) received a basic salary of £315,000 (2020: all the outstanding share purchase options were extended from 31 December 2022, to 31 December 2023, comprising options to purchase shares in the Company as follows: £315,000) and pension contributions of £30,000 (2020: - 4,518,333 new ordinary shares exercisable at 40 pence £30,000). In addition, he received directors’ fees of $210,000 per share, all of which have vested: and (2020: $201,000) from subsidiary companies. - 15,582,500 new ordinary shares exercisable at 30 pence The service contract between the Company and Roger per share, all of which have vested. Goodwin provides for three months’ notice by either side or six months in the event of a change of control of the Company. Chairman 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 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 $2,737,000 (2020: $2,801,000), for the provision of advisory and support services including office premises, staff and consultants to Griffin and its subsidiaries in 2021. The consultancy agreement with Keynes Capital expired on 30 June 2021 but was extended on a seven day rolling notice period. Since the year end, the Keynes Capital consultancy agreement has been renewed on similar terms, to 31 December 2023, with no increase in fees. In addition to the above, the Chairman received directors’ fees from subsidiary companies of $210,000 in 2020 (2020: $201,000). 39 RepoRt and accounts 2021repOrt OF the remuneratiOn COmmittee (contInued) 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. Number of options exercisable at 30 pence per new ordinary share. Roger Goodwin Finance Director Dal Brynelsen Director Rupert Crowe Director Non Executive Directors Vested 500,000 - - Vested 1,500,000 900,000 900,000 The non-executive Directors’ fees were last reviewed with effect from 1 July 2019 when they were held at £66,125 per annum. Since the year end, the non-executive directors’s fees were reviewed and held at £66,125 per annum. In view of Mr Dal Brynelsen receiving director fees from Hebei Hua Ao ($186,000 in 2021 and $177,000 in 2020) he In addition Mr Rupert Crowe received fees of $30,000 in 2021 for geological services over and above that expected from him as part of his services as a non executive director. Mr Clive Whiley was appointed a director on 13th August 2021 on an annual fee of £118,000. Since the year end Clive Whiley has been granted further consultancy fees bringing has agreed to forgo his fees from the Company. his total fees to £306,125 per annum. Total Directors’ Remuneration The table below sets out the total remuneration payable to the Directors: Fees Salary 2021 Pension Contributions $000 2020 Salary Pension Contributions $000 $000 Total $000 210 186 23 682 91 61 1,253 2,059 - - - 41 - - 41 5 Fees $000 201 262 114 201 84 - 862 - - - 402 - - 402 61 1,831 Total $000 201 262 114 641 84 - 1,302 1,908 - - - 38 - - 38 16 Mladen Ninkov* Dal Brynelsen Rupert Crowe Roger Goodwin Adam Usdan Clive Whiley $000 210 186 23 210 91 61 $000 - - - 431 - - Total 781 431 Key personnel 121 1,933 902 2,364 46 3,312 923 2,233 54 3,210 *Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust, received fees under a consultancy agreement of $2,737,000 (2020: $2,801,000), 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. Key personnel include senior executives engaged by Hebei Hua Ao and China Zinc Pty Limited. Clive Whiley Chairman of the Remuneration Committee 12 May 2022 40 Griffin MininG LiMited direCtors Mladen Ninkov, Chairman, Australian, holds a Master Clive Whiley, Independent non-executive Director, of Law Degree from Trinity Hall, Cambridge and Bachelor British, has over thirty-five years’ experience in regulated and of Laws (with Honours) and Bachelor of Jurisprudence listed company governance positions, both as an executive Degree from the University of Western Australia. He is the and non-executive director, across a wide range of industries principal of Keynes Capital. He has a mining, legal, fund and geographies, including extensive business experience management and investment banking background and is in the People’s Republic of China since 1983 becoming a admitted as a barrister and solicitor of the Supreme Court member of the London Stock Exchange in 1983. Mr Whiley of Western Australia. He was the Chairman and Managing is currently Chairman of Mothercare Plc, China Venture Director of the Dragon Capital Funds management group, Capital Management Ltd, First China Venture Capital Ltd, a director and Head of International Corporate Finance at Y-Lee Ltd, and a non-executive Director of Sportech Plc. 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. Linda Naylor, Independent non-executive Director, British, is a graduate of the London School of Economics and a Fellow of the Institute of Chartered Accountants in England & Wales. A former partner in Grant Thornton UK LLP, her experience has been gained over more than twenty years working as a Nominated Adviser in the Roger Goodwin, Finance Director, British, is a Fellow Capital Markets team and as an Audit Partner specialising of the Institute of Chartered Accountants in England and in the natural resource sector. She was Chair of the Audit Wales. He has been with the Company since 1996 having Committee whilst a Governor of Portsmouth University. previously held senior positions in a number of public and As Finance Director of AIM listed Chaarat Gold Holdings private companies within the natural resources sector. He Limited from 2009 to 2018, she worked as part of a small has a strong professional background, including that as a executive team. Her responsibilities encompassed financial manager with KPMG, with considerable public company reporting, investor relations and fund raising as that and corporate finance experience and experience of emerging company transitioned from gold explorer to developer in the markets. Kyrgyz Republic. Adam Usdan, Non-executive Director, USA, holds an Dean Moore, Independent non-executive Director, MBA from the Kellogg Graduate School of Management at British, is a Fellow of the Institute of Chartered Accountants Northwestern University with majors in Finance, Marketing, in England & Wales with extensive public company and Accounting, and a BA in English from Wesleyan experience having previously been Chief Financial Officer University. He is the President of Trellus Management at Cineworld Group plc, N Brown Group plc, T&S Stores Company LLC, an equity hedge fund based in the USA. plc and Graham Group plc and formerly non-executive Mr Usdan founded Trellus Management in January 1994 Chairman of Tuxedo Money Solutions Limited. He is and has been in the investment advisory industry for over currently a Director and Interim Chief Financial Officer of 30 years. Mr Usdan began his investment career in 1987 at Dignity plc and an independent non-executive director and Odyssey Partners where he was responsible for managing Chairman of the Remuneration Committee at Cineworld long/short U.S. equity (small to mid-cap) pools of capital. Group plc and Audit Committee Chairman and Senior Independent Director of Volex plc. Dal Brynelsen, Director, Hebei Hua Ao, 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 40 years. He has been responsible for the discovery, development and operation of several underground gold mines during his career. 41 RepoRt and accounts 2021senior exeCutives Dr Bo Zhou, General Manager China, Australian, holds Shirley Tsang, Director, China Zinc Limited, British, a PhD in exploration geology from Sydney University and a is a Chartered Management Accountant (United Kingdom) BSc in economic geology from Peking University. He was and a CPA (Hong Kong & Australia). She holds an MBA Managing Director of Sinovus Mining Ltd, an ASX listed (Finance) from the City University Business School, United company with mineral interests in China. Prior to that he Kingdom. She started her career as an auditor with Ernst was the General Manager for Guangxi Golden Tiger Mining & Whinney and moved on to business advisory practice for JV, a Sino-Australian JV gold company focused on Guangxi, international clients with Arthur Young. She was head of the China, controlled by Golden Tiger Mining NL, an ASX China and Hong Kong business advisor practice from 2003 listed company. He has also worked as the Senior Geologist to 2017 in the Tricor Group. She has considerable experience for Silk Road Resources (a TSX listed company), responsible in corporate restructuring for international clients and best for evaluating various gold properties in Gansu Province in practice in corporate governance. She is currently Managing central western China. Dr Zhou has considerable experience Director of SEAJA Consultancy Limited in Hong Kong. in the Chinese resources sector. Glenn Sheldon, China Zinc Business Development John Steel, Chief Operating Officer, Australian, is a Manager, Australian, is a geologist holding a BSc from graduate Mining Engineer from the Ballarat School of Mines Adelaide University. He is a Fellow of the AusIMM and AIG, and holds a Master of Business Administration from Deakin Member of SocEcGeol. He is fluent in Mandarin Chinese University. He is a member of the Australian Institute of with special emphasis on geological and mineral industry Mining and Metallurgy. John has extensive global mining terms. Prior to joining Griffin he was Principal Geologist experience including over a decade of in site operational for Mining Associates, providing competent person services expertise with tier one companies in Australia, Canada to inter alia the Hong Kong Stock Exchange; Vice President (Xstrata Mining PLC) and the Middle East (Barrick Gold Exploration for RH Mining Resources Ltd in Hong Kong; Corporation). John also has extensive supplier side experience Business Development Manager Exploration East Asia for holding country Managing Director positions in Norway Sandvik Mining and Construction; JV General Manager (EPC Groupe) as well as General Manager positions with Dragon Mountain Gold in China; Exploration Manager, several explosive and technology service providers within Lotus Resources plc in Mongolia; Chief Representative for 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 Practicing 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 Tiger Mining’s joint venture operations in China. Previously she was Chief Accountant for Shanghai Silk Group and subsequently Ann Taylor Shanghai. Centerra Gold Inc in China; President and Exploration Manager for TVI Pacific’s China WOFE - Hunan Pacific Geological Exploration Inc; Site Manager Jinfeng for Sino Gold Limited and Exploration and Business Development Manager for Newmont China Limited. 42 Griffin MininG LiMiteddireCtors’ report The Directors submit their report together with the audited consolidated financial statements of Griffin Mining Limited (“the Company”) and its subsidiaries (“the Group”) for the year ended 31 December 2021. FinanCial results The Group profit before taxation for 2021 amounted to US$36,526,000 (2020: US$14,515,000). Taxation of US$11,150,000 (2020: US$5,605,000) has been provided. No dividends were paid in 2021 (2020: nil). US$25,376,000 has been credited to reserves (2020: credited US$8,910,000). The basic earnings per share amounted to 14.53 cents (2020: 5.16 cents). The attributable net asset value per share at 31 December 2021 amounted to 150 cents (2020: 135 cents). Whilst the directors do not recommend the payment of a dividend at this time, in February 2021 the Company implemented a share buy back programme of up to a value of $10 million to acquire up to five million ordinary shares over the next 3 years to return excess monies not required to meet financial commitments and working capital requirements to shareholders, subject to cash balances being available to undertake those purchases. Griffin believes the buybacks will be value accretive and value- enhancing for the shareholders. The Company cannot guarantee that it will be successful in executing this program over the period stated. This arrangement is in accordance with the Company’s general authority to repurchase shares. 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 2021 and the indication of likely future developments are set out on page 6 to 33. direCtors The Directors of the Company during the year were: Mladen Ninkov – Australian – Chairman Roger Goodwin – British - Finance Director Dal Brynelsen – Canadian – Non-executive Director – Resigned 5 May 2022 Rupert Crowe – Australian / Irish – Non-executive Director – Deceased 10 February 2021 Adam Usdan – American (USA) – Non-executive Director Clive Whiley – British – Appointed 13 August 2021 - Senior Non-executive Director Linda Naylor – British – Appointed 5 May 2022 - Non-executive Director Dean Moore – British – Appointed 5 May 2022 - Non-executive Director Under the bye laws of the Company, the Directors serve until re-elected at the next Annual General Meeting of the Company. The beneficial interests of the Directors holding office at 31 December 2021 and their immediate families in the share capital of the Company were as follows: Name At 31 December 2021 At 1 January 2021 or on date of appointment Ordinary Options over ordinary shares, number shares, number exercisable at 40 pence 30 pence Ordinary shares, number Options over ordinary shares, number exercisable at 40 pence 30 pence Mladen Ninkov 33,001 - Dal Brynelsen 397,001 900,000 - - Roger Goodwin 877,830 1,500,000 500,000 33,001 397,001 877,830 - 900,000 - - 1,500,000 500,000 Adam Usdan* 29,209,348 Clive Whiley 100,100 - - - - 33,242,890 1,166,667 100,100 - - - * Mr. Adam Usdan is interested in 29,209,348 shares in Griffin representing 16.7% of the Company’s issued share capital, 7,960,221 of which are held directly with the remaining 21,249,127 shares being held by Trellus Partners LLP, the General Partner of a Limited Partnership in which Mr. Usdan has a controlling interest. Other than this, all the directors interests disclosed are beneficial. 43 RepoRt and accounts 2021 direCtOrs repOrt (contInued) On 13 February 2014 options (the “40 pence options”) over 5,000,000 new ordinary shares were granted to directors and key employees of the Company in order to retain and incentivise key personnel with managerial and operating experience in non- standard jurisdictions in a tight mining employment market. Each 40 pence option entitles the holder to subscribe for new ordinary shares in the Company at an exercise price of £0.40 per share on or before 31 December 2018, subsequently extended to 31 December 2023. One third of these options vested on 31 December 2014, one third vested on 31 December 2015, and one third vested on 31 December 2016. On 6 February 2015 the Board resolved to adopt a new share option scheme (the “30 pence options”) over a total of 20,000,000 new ordinary shares in the Company in order to retain and incentivise the Company’s directors and management. Each 30 pence option entitles the holder to subscribe for new ordinary shares in the Company at an exercise price of 30 pence per new ordinary share on or before 31 December 2020 subsequently extended to 31 December 2023. 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 vested on the granting of a new mining licence over Zone II at the Caijiaying Zinc Gold Mine on 7 January 2021. SUBSTANTIAL INTERESTS Apart from Adam Usdan’s interests in the share capital of the Company, the Company has been notified that: On 25 January 2021 Andrew Goffe and controlling undertakings held an interest in 26,513,657 ordinary shares in the Company representing 15.227% of the Company’s then issued share capital; and On 1 March 2021 Richard Griffiths and controlling undertakings held an interest in 24,313,224 ordinary shares in the Company representing 13.93% of the Company’s then issued share capital, together with voting rights through third party financial instruments equating to 3.34% of the Company’s then issued share capital. 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 76 to 79. 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 to Exposure the fluctuations Renminbi / US dollar exchange rate. in A fall in the value of the Renminbi would reduce the US dollar value of revenues, whilst an increase in the value of Renminbi would increase operating cost. Moderate 44 common with other mining In in China the companies operating Group sells its products by auction to local smelters and agents, however, management continues review the appropriateness of hedging and indicative cost of put options. to is Renminbi The to pegged Management foreign exchange rates appropriations of hedging. the US continually loosely dollar. reviews the and Griffin MininG LiMitedprinCipal risks and unCertainties Continued Risk Comment Business Impact Mitigation Economic Risks (continued) Exposure to increases in the market prices of materials, equipment and services the Group uses. Country Risks to is The Group 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 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. Low High The Group has operated in the PRC for over 25 years, in which time the country has been relatively stable, and retains good relationships with PRC authorities. Griffin actively engages with the local PRC authorities and agencies to identify and minimise the impact of changes in PRC regulations. Operational Risks Reliance on Third Party Contractors Moderate for particularly Griffin uses a number of unrelated its contractors, 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. Exposure hazards to mining The Group is exposed to a number of risks and hazards typically associated with mining for example rock falls, flooding and mechanical breakdowns. Moderate Reliability of Mineral Resources and Ore Reserves The calculation of Mineral Resources and Ore Reserves involves significant assumptions and estimates that may prove inaccurate. Low Griffin has an extensive occupational in Health and Safety Department conjunction with a Mining Manager and his team of underground foremen who constantly oversee all contractors’ activities, inter alia, punishing and fining contractors for safety breaches. Griffin keeps under consideration moving to owner operated activities. Griffin’s operational teams continually monitor mining and other risks, and report to senior management who report to the Board of directors, taking immediate and appropriate measures to minimise any such risks and hazards identified. In addition, the Group’s operations are regularly monitored by the PRC Safety Bureaus. 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. 45 RepoRt and accounts 2021 direCtOrs’ repOrt (contInued) prinCipal risks and unCertainties Continued Risk Comment Business Impact Mitigation Operational Risks (continued) Mine fatality High A fatality in 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 fines, dismissal of personnel held responsible and loss of licences. 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. Moderate High its through Griffin, subsidiary companies, holds a number of mining, exploration and other licences and permits to operate. These normally include ongoing operation and require periodic renewal. Renewals are not guaranteed. conditions for immediate As noted above, Griffin’s operational continually monitor mining teams and other risks and report to senior management who report to the Board, taking 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. and It is the Company’s policy to pursue growth through opportunities expansion in the Caijiaying area, as well as reviewing acquisition opportunities which can be shown to be value accretive. All licensing requirements are kept under review with operational staff liaising with local PRC authorities to ensure conditions are adhered to and applications made timely and in good order. Key management The management of Caijiaying is reliant on a small number of key executives, both inside and outside of China. Their death, retirement or departure may have significant effect on the operations of the Company. Moderate Griffin has contractual arrangements with all key employees which are renewed on a regular basis. Geological and Historical Information The loss of historical and/or geological a very information would have significant impact on the operations of the Company. Low Griffin has instituted a complete back up system relating to all geological and operational data in Perth with CSA Global. It is updated on a daily basis. Climate Change Climate change may have an impact on operations and demand for metals. Low Griffin studies the possible impact of climate change on operations, identifying risks that may interrupt operations and developing measures to counter these. 46 Griffin MininG LiMitedRisk Comment Business Impact Mitigation Other Risks (continued) Bribery and Corruption Whilst strict internal policies and procedures to ensure compliance with applicable laws are applied to prohibit all forms of bribery and corruption the risk remains that employees or contractors have circumvented these policies and procedures which could result in prosecution of the Group and its officers. Moderate Pandemic (Covid-19 / SARS etc) A further outbreak of Covid-19 or another virus may lead to restrictions on operations being imposed by the PRC authorities including a suspension in operations. Moderate The Group prohibits bribery and corruption in any form by directors, employees or by those working for and/ or connected with the business. With the advice and support of the Group’s lawyers the Group has implemented anti bribery and corruption policies and procedures including: anti-bribery instruction to staff and third party contractors; on-going monitoring, including setting up reporting channels; and regular review of antibribery 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. POST BALANCE SHEET EVENTS There were no significant post balance sheet events requiring adjustment to the financial statements. From 1 January 2022 to 16 March 2022, operations at Caijiaying were suspended in the run up to and during the Winter and Para Olympic games at Chongli. At the Annual General Meeting of the Company on 5 May 2022, Linda Naylor and Dean Moore were appointed Directors, and Dal Brynelsen did not seek re-election as a Director of the Company. GOING CONCERN Whilst it is difficult to accurately predict 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. The Group regularly prepares cash flow forecasts and revises its budgets to adapt to changing situations as the need arises. These have been extended for more than a year and adapted for a number of plausible scenarios to confirm that in all cases the Group could maintain liquidity cover. Amongst other matters management has taken into account sensitivities for the possible impacts of additional restrictions to contain further outbreaks of Covid-19. Whilst China has experienced localised outbreaks of Covid-19 into 2022, strict travel restrictions, testing and quarantine requirements implemented by the PRC authorities and Griffin have limited the impact and spread of Covid-19, such that no cases of Covid-19 have been reported at Caijiaying. As a result, apart from a suspension in operations in the lead upto and during the Winter Olympics at Chongli in the first quarter of 2022 to date, there have been no interruptions to operations at Caijiaying since the initial outbreak of Covid-19. In the unlikely event of an outbreak of Covid-19 at Caijiaying, every endeavour would be made to continue operations at Caijiaying, but supplies to and collection of concentrate from Caijiaying could be interrupted whilst the Caijiaying site could be quarantined. With this in mind a one month suspension has been built into the cash flow forecasts on a severe case scenario incorporating a reduction in market prices for metals. This is further considered in the notes to the financial statements on page 60. 47 RepoRt and accounts 2021direCtOrs’ repOrt (contInued) INDEPENDENT AUDITORS PricewaterhouseCoopers LLP were re-appointed auditors at the Annual General Meeting of the Company held on 5 May 2022 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 GROUP FINANCIAL STATEMENTS The directors are responsible for preparing the Group financial statements in accordance with applicable law and regulation. The Bermuda Companies Act 1981 requires the directors to prepare Group financial statements for each financial year. Under that law the directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union. The directors must not approve the Group financial statements unless they are satisfied that the Group 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 Group 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 Group financial statements; • making judgements and accounting estimates that are reasonable and prudent; and • preparing the Group 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 Group 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 12 May 2022 48 Griffin MininG LiMited independent auditors’ report to the members oF griFFin mining limited report on the audit oF the group FinanCial statements opinion In our opinion, Griffin Mining Limited’s Group financial statements (the “financial statements”): • give a true and fair view of the state of the Group’s affairs as at 31 December 2021 and of its profit and cash flows for the year then ended; • have been properly prepared in accordance with 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 2021 (the “Annual Report”), which comprise: the Consolidated Statement of Financial Position as at 31 December 2021; the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity and the Consolidated Cash Flow Statement for the year then ended; and the notes to the financial statements, which include a description of significant accounting policies. basis For opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. our audit approaCh Overview Materiality • Overall Group materiality: $1 million (2020: $1 million), based on 5% of the 3-year average profit before tax. • Performance Group materiality: $0.75 million (2020: $0.75 million) Audit Scope • We conducted full scope audits of three components out of the Group’s eleven entities which were selected due to their size and risk characteristics. • This enabled us to obtain 100% coverage of consolidated revenue, 99% coverage of consolidated profit before tax and 100% coverage of total assets for the Group. • To ensure sufficient oversight, direction and responsibility of the audit work performed by the component audit team in China, 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. Key Audit Matters • Extension of the business licence. • Impact of Covid-19. 49 RepoRt and accounts 2021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. 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. The key audit matters below are consistent with last year. key audit matter Extension of the business licence how our audit addressed the key audit matter Refer to Note 1, the Significant judgements and estimates In addition to holding discussions with management, we section and to Note 11, Property, Plant and Equipment. have discussed with, and obtained correspondence from, The current life of mine plan, which includes extraction of resources from ZONE II and ZONE III, extends beyond 2037 to 2056. 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 working to convert their joint venture agreement 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 management’s external legal advisors to understand the process for extending the term of the business licence from 2037 to 2056 and confirmed their view that extending the term of the business licence will be routine in nature and that no additional costs will be incurred, once the joint venture agreement is converted to a limited liability company. We also requested management to sensitise their life of mine plan to show the impact of the business licence not being granted and note that, due to the significant headroom, modelling this impact shows no impairment. Based on these enquiries and procedures, we are satisfied with management’s judgement that converting the current joint venture agreement to a limited liability company will enable an extension of the term of the business licence as a matter of routine and at no additional cost. licence would reduce the amount of resources that could be Finally, we considered the adequacy of management’s extracted. We consider this to be a key audit matter due to the level of judgement being exercised and the impact of this judgement on asset carrying values. disclosure of the key judgements in relation to the extension of the business licence and consider them to be reasonable. 50 Griffin MininG LiMitedindependent auditors’ report to the members oF griFFin mining limited how our audit addressed the key audit matter Our procedures and conclusions in respect of going concern are included in the “Conclusions relating to going concern” section below. We considered the appropriateness of disclosures in the Annual Report with regards to the impact and risks related to the pandemic and consider these to be appropriate. key audit matter Impact of Covid-19 Refer to the ‘Caijiaying’ and the ‘Sustainability, Environment and Local Community’ sections of the Annual Report and to Note 1, the Going Concern section, in the Notes to the financial statements. Covid-19 was declared a pandemic by the World Health Organisation on 11 March 2020 and the ongoing response is having an unprecedented impact on the global economy. Management have set out in the Annual Report the impact that Covid-19 has had on the Group and the actions that they have taken, and continue to take, to address the pandemic and its effect on the operations. In the first quarter of 2020, operations at the Caijiaying Mine were suspended for a month to comply with restrictions instigated by the PRC authorities to contain the coronavirus pandemic. However, once operations recommenced, mining and processing operations soon returned to expected levels with minimal further impact. There were no major Covid-19 outbreaks in the Caijiaying Mine. Management has also considered the potential impact of Covid-19 in undertaking their assessment of going concern. Based on this analysis management concluded that there is no material uncertainty in respect of the Group’s going concern assessment We determined management’s consideration of the impact of Covid-19 to be a key audit matter. How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which it operates. Griffin Mining Limited is a Bermuda company listed on AIM. The Group’s principal operation is the Caijiaying zinc mine in China. In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed by us, as the Group audit team, or by the component auditors in China. Our Group audit scope focused primarily on the Caijiaying zinc mine in China, which was subject to a full-scope audit by the component auditors. A full scope audit was also performed over the Parent Company and a service entity by the Group team. The above gave us coverage of 100% of consolidated revenue, 99% coverage of consolidated profit before tax and 100% coverage of total assets for the Group. 51 RepoRt and accounts 2021independent auditors’ report to the members oF griFFin mining limited As Covid-19 prevented travel to China, we were unable to make a site visit as planned; we instead conducted our oversight of the component audit team through regular dialogue via conference calls, video conferencing and other forms of communication as considered necessary as well as remote working paper reviews to satisfy ourselves as to the appropriateness of audit work performed by the component audit team. We also attended key meetings virtually with local management and the component audit team. We reviewed the audit work of the component audit team, which included file reviews, participation in key audit discussions with local management and participation in the audit clearance meeting. The Group engagement team directly performed the audit of the consolidation. This, together with additional procedures performed at the Group level, gave us the evidence we needed for our opinion on the Group financial statements as a whole. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall materiality $1 million (2020: $1million). 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 has impacted profitability, we have used a 3-year average profit before tax as the benchmark. For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between $150,000 and $900,000. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above $50,000 (2020: $50,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. ConClusions relating to going ConCern Our evaluation of the directors’ assessment of the Group’s ability to continue to adopt the going concern basis of accounting included: • Obtaining and reviewing the Group’s cash flow forecasts for the going concern period, challenging management’s assumptions used and verifying that these were consistent with our existing knowledge and understanding of the business, as well as with the Board-approved budget; • Reviewing the Group’s cash flow forecasts under the severe but plausible downside scenario, evaluating the assumptions used, and verifying that the Group is able to maintain liquidity within the going concern period under these scenarios; • Testing the model for mathematical accuracy; and • Assessing the adequacy of the disclosure provided in Note 1 of the financial statements. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. 52 Griffin MininG LiMitedindependent auditors’ report to the members oF griFFin mining limited In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s ability to continue as a going concern. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. reporting on other inFormation The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, 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 these responsibilities. responsibilities For the FinanCial statements and the audit Responsibilities of the directors for the financial statements As explained more fully in the Statement of Directors’ Responsibilities in respect of the Group Financial Statements, 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 statements. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. 53 RepoRt and accounts 2021independent auditors’ report to the members oF griFFin mining limited reporting on other inFormation (contInued) Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the Group/industry, we identified that the principal risks of non-compliance with laws and regulations related to unethical and prohibited business practices and compliance with the regulations of the Ministry of Land and Resources of the PRC, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 1981 (Bermuda). We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate results, and management bias in key accounting estimates. The Group engagement team shared this risk assessment with the component audit team so that they could include the appropriate audit procedures in response to such risks in their work. Audit procedures performed included: • Enquiries of the directors, management and the Group’s legal counsel, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud; • Inspection of supporting documentation, where appropriate; • Evaluation of management’s controls designed to prevent and detect irregularities; • Review of minutes of meetings of the Board of Directors; • Challenging assumptions and judgements made by management in relation to their significant accounting judgements and estimates; Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations; and Review of related work performed by the component audit team, including their responses to risks related to management override of controls and to the risk of fraud in revenue recognition. There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non- compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations or through collusion. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report This report, including the opinions, has been prepared for and only for the Group’s members as a body in accordance with Section 90 of the Companies Act 1981 (Bermuda) and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Partner responsible for the audit The engagement partner on the audit resulting in this independent auditors’ report is Timothy McAllister. PricewaterhouseCoopers LLP Chartered Accountants London 12 May 2022 54 Griffin MininG LiMitedConsolidated inCome statement For the year ended 31 December 2021 (expressed in thousands US dollars) Revenue Cost of sales Gross profit Administration expenses Operating Profit Losses on disposal of plant and equipment Provisions against intangible assets Foreign exchange ( losses) / gains Finance income Finance costs Other income Profit before tax Income tax expense Profit for the year Basic earnings per share (cents) Diluted earnings per share (cents) Notes 2 2 2 3 5 12 6 7 8 2021 $000 121,648 (63,224) 58,424 (21,499) 36,925 (293) (11) (51) 236 (404) 124 36,526 9 (11,150) 25,376 14.53 13.47 10 10 2020 $000 75,403 (42,737) 32,666 (17,518) 15,148 (1,129) (10) 22 108 (359) 735 14,515 (5,605) 8,910 5.16 4.88 The above Consolidated Income Statement should be read in conjunction with the accompanying notes. 55 RepoRt and accounts 2021 Consolidated statement oF Comprehensive inCome For the year ended 31 December 2021 (expressed in thousands US dollars) Profit for the year 2021 $000 2020 Restated $000 25,376 8,910 Other comprehensive income that will be reclassified to profit or loss Exchange differences on translating foreign operations Other comprehensive income for the year, net of tax 3,336 3,336 9,837 9,837 Total comprehensive income for the year 28,712 18,747 The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. The 2020 exchange differences on translating foreign operations has been corrected from that reported in 2020 of $9,662,000. 56 Griffin MininG LiMited Consolidated statement oF FinanCial position As at 31 December 2021 (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 Other Payables Long-term provisions Deferred taxation Finance leases Current liabilities Trade and other payables Finance leases Total current liabilities Total equities and liabilities Notes 2021 $000 2020 $000 11 12 13 14 15 16 19 20 21 22 23 22 275,296 266,709 387 325 275,683 267,034 4,516 2,174 38,159 44,849 5,333 6,675 16,435 28,443 320,532 295,477 1,749 69,334 3,690 2,072 (1,644) 2,896 (29,346) 14,635 199,190 262,576 10,352 2,667 3,240 794 1,728 68,470 3,690 2,072 (917) 2,830 (29,346) 11,365 173,814 233,706 13,487 2,200 3,359 - 17,053 19,046 40,726 177 42,342 383 40,903 42,725 320,532 295,477 Attributable net asset value per share to equity holders of parent 24 $1.50 $1.35 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. The financial statements on pages 55 to 81 were approved by the Board of Directors and signed on its behalf by: Mladen Ninkov Chairman 12 May 2022 Roger Goodwin Finance Director 57 RepoRt and accounts 2021 l a t o T t n e r a p f o o t e l b a t u b i r t t a s r e d l o h y t i u q e g n i l l o r t n o c - n o n e v r e s e r t fi o r P s s o l d n a e v r e s e r e v r e s e R n g i e r o F e g n a h c x E r e h t O n o e v r e s e r f o n o i t i s i u q c a t n e m t s e v n i - e r y r u s a e r T s t n e m y a p e s e n i h C y r o t u t a t s s e r a h S n i d l e h e r a h S d e s a b g n i t u b i r t n o C e r a h S s u l p r u s m u i m e r p e r a h S l a t i p a c 0 0 0 $ 0 0 0 $ 0 0 0 $ 0 0 0 $ s t s e r e t n i 0 0 0 $ 0 0 0 $ 0 0 0 $ 0 0 0 $ 0 0 0 $ 0 0 0 $ 4 4 9 , 4 1 2 9 5 0 5 6 1 , 3 0 7 1 , ) 6 4 3 9 2 ( , 0 0 5 , 2 ) 7 1 9 ( 2 7 0 , 2 0 9 6 , 3 5 5 4 , 8 6 8 2 7 , 1 0 2 0 2 y r a u n a J 1 t A - 5 1 5 1 0 1 9 8 , 7 3 8 9 , - ) 5 5 1 ( ) 5 5 1 ( 0 1 9 8 , - - - - - 2 6 6 9 , 7 4 7 8 1 , 0 1 9 8 , 2 6 6 9 , - - - - - - - 5 5 1 5 5 1 - 5 7 1 5 7 1 - - - - - - - - - - - - - - - - - - - 5 1 5 1 - - - - - - - - - t n e m t s e v n i e r u t u f r o f r e f s n a r t y r o t a l u g e R s n o i t p o f o e s i c r e x e n o s e r a h s f o e u s s I s r e n w o h t i w n o i t c a s n a r T n g i e r o f g n i t a l s n a r t n o s e c n e r e f f i d e g n a h c x E e m o c n i e v i s n e h e r p m o c l a t o T s n o i t a r e p o : e m o c n i e v i s n e h e r p m o c r e h t O r a e y e h t r o f t fi o r P 6 0 7 , 3 3 2 4 1 8 3 7 1 , 5 6 3 1 1 , ) 6 4 3 9 2 ( , 0 3 8 , 2 ) 7 1 9 ( 2 7 0 , 2 0 9 6 , 3 0 7 4 , 8 6 8 2 7 , 1 0 2 0 2 r e b m e c e D 1 3 t A - 5 8 8 8 5 1 ) 7 2 7 ( - - - - 6 7 3 5 2 , 6 7 3 5 2 , - - - - - 6 3 3 3 , - 0 7 2 3 , 2 1 7 8 2 , 6 7 3 5 2 , 0 7 2 3 , - - - - - - - - - - - - 6 6 6 6 - - ) 7 2 7 ( ) 7 2 7 ( - - - - - - - - - - - - - - - - - - - 4 6 8 4 6 8 - - - - - 1 2 1 2 - - - t n e m t s e v n i e r u t u f r o f r e f s n a r t y r o t a l u g e R s n o i t p o f o e s i c r e x e n o s e r a h s f o e u s s I y r u s a e r t n i d l e h s e r a h s f o e s a h c r u P s r e n w o h t i w n o i t c a s n a r T n g i e r o f g n i t a l s n a r t n o s e c n e r e f f i d e g n a h c x E e m o c n i e v i s n e h e r p m o c l a t o T s n o i t a r e p o : e m o c n i e v i s n e h e r p m o c r e h t O r a e y e h t r o f t fi o r P 6 7 5 , 2 6 2 0 9 1 9 9 1 , 5 3 6 4 1 , ) 6 4 3 9 2 ( , 6 9 8 , 2 ) 4 4 6 , 1 ( 2 7 0 , 2 0 9 6 , 3 4 3 3 , 9 6 9 4 7 , 1 1 2 0 2 r e b m e c e D 1 3 t A 1 2 0 2 r e b m e c e D 1 3 d e d n e r a e y e h t r o F ) s r a l l o d S U s d n a s u o h t n i d e s s e r p x e ( i y t u q e n i s e g n a h C F o t n e m e t a t s d e t a d i l o s n o C 58 . s e t o n g n i y n a p m o c c a e h t h t i j w n o i t c n u n o c n i d a e r e b d l u o h s y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C e v o b a e h T Griffin MininG LiMited Consolidated Cash Flow statement For the year ended 31 December 2021 (expressed in thousands US dollars) Net cash flows from operating activities Profit before tax Foreign exchange losses / (gains) Finance income Finance costs Depreciation, depletion and amortisation Provision against intangible assets Losses on disposal of equipment Decrease / (increase) in inventories Decrease / (increase) in receivables and other current assets (Decrease) / increase in trade and other payables Tax paid Net cash inflow from operating activities Cash flows from investing activities Interest received Proceeds / (costs) on disposal of equipment Payments to acquire – mineral interests Payments to acquire – property, plant and equipment Payments to acquire office lease, 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 Interest paid Purchase of shares for treasury Bank loan advances Repayment of bank loans Finance lease repayments including interest Net cash (outflow) from financing activities Notes 6 7 11 12 6 11 11 12 2021 $000 36,526 51 (236) 404 16,530 11 293 817 4,936 (2,871) (13,581) 42,880 236 1 (13,564) (6,365) - (73) (19,765) 885 (309) (727) 15,500 (15,500) (462) (613) 2020 $000 14,515 (22) (108) 359 12,801 10 1,129 (1,494) (4,814) 5,666 (3,644) 24,398 108 (44) (18,691) (5,684) (5) (11) (24,327) 15 (112) - - - (2,469) (2,566) Increase / (decrease) in cash and cash equivalents 22,502 (2,495) 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 16,435 (778) 38,159 19,885 (955) 16,435 38,159 16,435 Included within net cash flows of $22,502,000 (2020: $2,495,000) are foreign exchange losses of $51,000 (2020: gains $22,000) which have been treated as realised. The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes. 59 RepoRt and accounts 2021 notes to the FinanCial statements 1. basis oF aCCounting The financial statements have been prepared in accordance with applicable International Financial Reporting Standards as adopted by the EU 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 2021: • Definition of Material - amendments to IAS 1 and IAS 8 • Definition of a Business - amendments to IFRS 3 • Interest Rate Benchmark Reform - amendments to IFRS 9, IAS 39 and IFRS 7 • Revised Conceptual Framework for Financial Reporting • Proceeds before Intended Use - Amendments to IAS 16 The amendments listed above did not have any impact on the amounts recognised in the current period and are not expected to significantly affect future periods. 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 year ending 31 December 2021, nor have they been early adopted by the Group. These standards and interpretations are not expected to have a material impact on the Group’s consolidated financial statements in the current or future reporting periods. going ConCern The financial statements have been prepared on a going concern basis. The Group regularly prepares cash flow forecasts and revises its budgets to adapt to changing situations as the need arises. These have been extended for more than a year and adapted for a number of severe but plausible scenarios to confirm that in potential adverse cases the Group could maintain liquidity cover. Amongst other matters management has taken into account sensitivities for the possible impacts of additional restrictions to contain further outbreaks of Covid-19. Whilst China has experienced localised outbreaks of Covid-19 into 2022, strict travel restrictions, testing and quarantine requirements implemented by the PRC authorities and Griffin have limited the impact and spread of Covid-19, such that no cases of Covid-19 have been reported at Caijiaying. As a result, apart from a suspension in operations during and on the lead up to the winter Olympics at Chongli in the first quarter of 2022, there have been no interruptions to operations at Caijiaying since the initial outbreak of Covid-19 in the first quarter of 2020. In the unlikely event of an outbreak of Covid-19 at Caijiaying, every endeavour would be made to continue operations at Caijiaying, but supplies to and collection of concentrate from Caijiaying could be interrupted whilst the Caijiaying site could be quarantined. With this in mind a one month suspension has been built into the cash flow forecasts on a severe case scenario incorporating: • A reduction in market prices to $3,000 per tonne of zinc from July 2022 onwards. Management considers this a reasonable downside; and • Mitigating actions within management’s control, including the deferral of payments to certain creditors for a short period. • 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 Renminbi there is a natural currency hedge. On the aforementioned bases and 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. 60 Griffin MininG LiMitednotes to the FinanCial statements Consolidation basis The Group financial statements consolidate the financial statements of the Company and all its subsidiary undertakings drawn up to 31 December each year. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from their activities. The Group obtains and exercises control through voting rights. Management has assessed its involvement in Hebei Hua Ao and Hebei Sino Anglo in accordance with IFRS 10 and concluded that it has control. In making its judgement, management considered the Group’s voting rights, the relative size and dispersion of the voting rights held by other shareholders and the extent of recent participation by those shareholders in general meetings. Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. revenue Revenue is measured by reference to the fair value of consideration received or receivable by the Group and comprises amounts received, net of VAT and production royalties, from sales of metal concentrates to third party customers. Sales are recognised on a delivery or collection basis as at this point the performance obligations are satisfied. Delivery or 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 11). Residual values Material residual value estimates are updated as required, but at least annually and where adjustments are required these are made prospectively. depreCiation Depreciation rates reflect the term of operations, extractable resource, and economic lives of the assets as follows: • Mine acquisition, development, licence, pre production and land use rights (included in mineral interests) - 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.* * included in mill and mobile equipment 61 RepoRt and accounts 2021notes to the FinanCial statements impairment A review for impairment indicators at each reporting date is undertaken. In the event of impairment indicators being identified, an impairment test is carried out to assess whether the net book value of the capitalised costs in each area of interest is covered by the discounted future cash flows from resources 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 estimate 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, resource estimates, and life of mine plan adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Estimates and assumptions used in determining whether an asset has become impaired are set out in note 11. Impairment assessments are based upon a range of estimates and assumptions: Estimates / Assumptions Basis Future production: Measured and indicated resource estimates together with processing capacity Commodity prices: Forward market and longer term price estimates Exchange rates: Current market exchange rates Discount rates: Cost of capital risk mine Closure Costs Mining operations are generally required to restore mine and processing sites at the end of their lives to a condition acceptable to the relevant authorities and consistent with the Group’s environmental policies. Whilst the Group strives to maintain, and where possible, enhance the environment of the Group’s processing sites, provision is made for site restoration costs in the financial statements in accordance with local requirements which is anticipated to be greater than the actual costs of site restoration. inventories Inventories are valued at the lower of cost or net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: • Consumable stores and spares, at purchase cost on a first in first out basis. • Concentrate stockpiles at cost of direct materials, power, labour, and a proportion of site overhead. • Ore stockpiles at cost of direct material, power, labour contractor charges and a proportion of site overhead. FinanCial assets Classification From 1 January 2018, the Group classifies its financial assets in the following measurement categories: • those to be measured subsequently at fair value (either through the Statement of Other Comprehensive Income “OCI” or through profit or loss); and • those to be measured at amortised cost. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will be recorded either in profit or loss or in OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (“FVOCI”). 62 Griffin MininG LiMitednotes to the FinanCial statements FinanCial assets (Continued) The Group reclassifies debt investments when and only when its business model for managing those assets changes. Classification of financial assets at amortised cost The Group classifies its financial assets as at amortised cost only if both of the following criteria are met: • • the asset is held within a business model whose objective is to collect the contractual cash flows; and the contractual terms give rise to cash flows that are solely payments of principal and interest. Recognition and derecognition Regular purchases and sales of financial assets are recognised on trade date (that is, the date on which the Group commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (“FVPL”), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Impairment 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 14 for further details. Assets carried at amortised cost For loans and receivables, the amount of a loss is 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 will be reduced and the amount of the loss will be 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 (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss will be recognised in profit or loss. FinanCial liabilities The Group’s financial liabilities include bank loans, trade and other payables, which are measured at amortised cost using the effective interest rate method. On initial recognition financial liabilities are recognised at fair value net of transaction costs. Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included in the income statement line items “finance costs” or “finance income”. 63 RepoRt and accounts 2021notes to the FinanCial statements Foreign CurrenCy transaCtions The financial statements have been prepared in United States dollars being the local currency of Bermuda. Whilst registered in Bermuda the Company, together with its subsidiaries and associates, operate in China, the United Kingdom, Hong Kong and Australia. The functional and presentation currency of the Group and parent is US dollars. The functional currency of Hebei Hua Ao is Renminbi. Foreign currency transactions by Group companies are recorded in their functional currencies at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities have been translated at rates in effect at the statement of financial position date. Any realised or unrealised exchange adjustments have been charged or credited to profit or loss. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction. Non-monetary items measured at fair value are translated using the exchange rates at the date when the fair value was determined. On consolidation the financial statements of overseas subsidiary undertakings are translated into the presentation currency of the Group at the rate of exchange ruling at the reporting date and income statement items are translated at the average rate for the year. The exchange difference arising on the retranslation of opening net assets is recognised in other comprehensive income and accumulated in the foreign exchange reserve. All other translation differences are taken to profit or loss. The balance of the foreign currency translation reserve relating to an operation that is disposed of is reclassified from equity to profit or loss at the time of the disposal. equity Equity comprises the following: • “Share capital” represents the nominal value of equity shares. • “Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. • “Contributing surplus” is a statutory reserve for the maintenance of capital under Bermuda company law and was created on a reduction in the par value of the Company’s ordinary shares on 15 March 2001. • “Share based payments” represents equity-settled share-based remuneration until such share options are exercised. • “Foreign exchange reserve” represents the differences arising from translation of investments in overseas subsidiaries. • “Chinese statutory re-investment reserve” represents a statutory retained earnings reserve under PRC law for future investment by Hebei Hua Ao. • “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. Non-controlling interests are determined by reference to the underlying agreements, with the allocation of the purchase consideration on acquisition of non-controlling interests and extension of the Hebei Hua Ao business licence between that capitalised to mineral interests and that charged to reserves by reference to the impact of future cash flows. Following the acquisition of Griffin’s Chinese partner’s equity interests in the Hebei Hua Ao Joint Venture in 2012 and a reappraisal of the arrangements with the Chinese partners, the relationship with them is now in the nature of a service provider facilitating Hebei Hua Ao’s operations in China rather than that of non-controlling interests. In line with this new arrangement an annual service charge is paid to the Chinese partners, however, due to the potential variables the Directors are unable to estimate what this will be in any future year. 64 Griffin MininG LiMitednotes to the FinanCial statements equity settled share based payments All goods and services received in exchange for the grant of any share-based remuneration are measured at their fair values. Fair values of services are indirectly determined by reference to the fair value of the share options awarded. Their value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example, production upgrades). All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to “Share based payments” in the statement of financial position. If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting. Upon exercise of share options, the proceeds received net of attributable transaction costs are credited to share capital. For the financial year ended 31 December 2021 the total expense recognised in profit or loss arising from share based transactions was Nil (2020: 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 that indicated as well as measured mineral resources will be recovered from Zones II and III at Caijiaying as good conversion from inferred to indicated and indicated to measured has been achieved historically. It is further assumed that all necessary permits will be obtained. In this regard, and in order to comply with amended PRC corporate law, 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 so that its business licence be renewed without significant cost. Impairment review assumptions, exploration interests (note 12). Impairments are assessed by reference to exploration results carried out in an area of interest. Where such exploration indicates that there are no indications of mineralisation within the area of interest, provision is made for impairment in value. Non-impairment of assets is conditional upon continued exploration licences and permits which the directors consider will be maintained or obtained as appropriate. Estimates Impairment review assumptions, property, plant and equipment (note 11). 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: • future prices of the commodities extracted. Estimates were made as at the balance sheet date and do not include changes in future price estimates. • the expected tonnes and grade of ore mined. Management has assumed an increase in forecast production from current levels of circa 1.0 million tonnes per annum to 1.3 million tonnes in 2023 (2020: 1.5 million tonnes estimated from 2022 onwards), 1.4 million tonnes per annum from 2023 and up to 1.6 million tonnes per annum thereafter as set out in the life of mine plan. No alterations to existing processing facilities are required to facilitate the increase in production. 65 RepoRt and accounts 2021notes to the FinanCial statements signiFiCant judgements and estimates (Continued) • • future zinc treatment costs. 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 $2,600 per tonne with gold, silver and lead prices remaining at current prevailing levels, to avoid an impairment charge. It is also conditional upon mining licences continuing and permits being granted, which the directors consider will be maintained or obtained as appropriate. Provisions for mine closure and rehabilitation costs have been made in accordance with the laws and regulations of the PRC and as set out in the Hebei Hua Ao Mine Ecological Restoration Treatment and Land Reclamation Scheme (“the Scheme”) as approved by Ministry of Natural Resources of the PRC. This Scheme provides for a mine life of 40.11 years from January 2019 to February 2059. The Scheme incorporates a rehabilitation plan for “Mine Geological Environment Recovery” with an estimated cost of RMB 65,619,400 ($10,292,000), and “Land Rehabilitation” with an estimated cost of RMB 54,566,100 ($8,558,000). These amounts have been discounted over the deemed Life of Mine at a discount rate of 3.39%, being the PRC 40 year state bond rate. The directors continually monitor the basis on which their judgements are formulated. Where required they will make amendments to these judgements. Where judgements and estimates are amended between accounting periods, full disclosure of the financial implications are given within the relevant notes to the Group financial statements. Cash and Cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. dividends Dividend distributions payable to equity shareholders are included in “other short term financial liabilities” when the dividends are approved in a Board meeting prior to the reporting date. taxation Current tax is the tax currently payable based on taxable profit for the year. Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries, associates and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred 66 Griffin MininG LiMitednotes to the FinanCial statements 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 in note 2, as determined by the Board, management generally follows the Group’s service lines, which represent the main products produced by the Group. Management considers 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 11 for the depreciation methods and useful lives for assets held under leases. The interest element of lease payments is charged to profit or loss, as finance costs over the period of the lease. 67 RepoRt and accounts 2021notes to the FinanCial statements 2. segmental reporting The Group has one business segment, the Caijiaying zinc gold mine in the People’s Republic of China. All revenues and costs of sales in 2021 and 2020 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 expenses) Decrease / (increase) in stocks ADMINISTRATION EXPENSES China Australia UK / Bermuda 2021 $000 121,648 96,951 31,915 (7,218) 121,648 19,003 11,466 16,754 14,481 1,520 63,224 16,433 136 4,930 21,499 2020 $000 75,403 53,095 25,999 (3,691) 75,403 16,056 7,282 8,868 11,780 (1,249) 42,737 12,939 312 4,267 17,518 All revenues, cost of sales and operating expenses charged to profit relate to continuing operations and are allocated by receipt / payment location. TOTAL ASSETS China Australia UK / Bermuda CAPITAL EXPENDITURE China Australia UK / Bermuda 3. 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 68 312,026 1,011 7,495 320,532 19,929 - 963 20,892 2021 $000 190 98 10,304 4,279 No. 448 290,147 967 4,363 295,477 24,375 - 5 24,380 2020 $000 165 82 8,324 3,320 No. 435 Griffin MininG LiMited notes to the FinanCial statements 4. direCtors’ and key personnel remuneration The following fees and remuneration were receivable by the Directors holding office and key personnel engaged during the year: Fees Salary 2021 Pension Contributions $000 2020 Salary Pension Contributions $000 $000 Total $000 210 186 23 682 91 61 1,253 2,059 3,312 - - - 41 - - 41 5 46 Fees $000 201 262 114 201 84 - 862 - - - 402 - - 402 61 1,831 923 2,233 Total $000 201 262 114 641 84 - 1,302 1,908 3,210 - - - 38 - - 38 16 54 Mladen Ninkov* Dal Brynelsen Rupert Crowe Roger Goodwin Adam Usdan Clive Whiley $000 210 186 23 210 91 61 $000 - - - 431 - - Total 781 431 Key personnel 121 1,933 902 2,364 Key personnel comprise individuals in senior management positions. *Keynes Capital, the registered business name of Keynes Investments Pty Limited as trustee for the Keynes Trust, received fees under a consultancy agreement of $2,737,000 (2020: $2,801,000), 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 2021 or 2020. Trellus Partners LLP in which Adam Usdan has an interest exercised share purchase options over 1,166,666 new ordinary shares in the Company at an exercise price of 30 pence per share. 5. losses on disposal oF plant and equipment Losses on disposal of plant and equipment 6. FinanCe inCome Interest on bank deposits 7. FinanCe Costs Interest payable on short term bank loans Interest on rehabilitation provisions Finance lease interest 8. other inCome Scrap and sundry other sales 2021 $000 293 2021 $000 236 2021 $000 309 84 11 404 2021 $000 124 2020 $000 1,129 2020 $000 108 2020 $000 111 77 171 359 2020 $000 735 69 RepoRt and accounts 2021 notes to the FinanCial statements 9. inCome tax expense Profit for the year before tax 2021 $000 36,526 Expected tax expense at a standard rate of PRC income tax of 25% (2020: 25%) 9,132 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 - In respect of other timing differences Adjustments for permanent timing differences other Withholding tax on intercompany dividends and charges Current taxation expense Deferred taxation expense / (credit) Origination and reversal of temporary timing differences Total tax expense 934 890 (4) 372 21 11,345 (195) (195) 11,150 2020 $000 14,515 3,629 567 (298) - 1,051 232 5,181 424 424 5,605 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 2021 (25% in 2020) 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 Group’s Chinese mining operation total US$124.9m (2020: $109.6m). 10. earnings per share The calculation of the basic earnings per share is based upon the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share on the assumed conversion of all dilutive options and other dilutive potential ordinary shares. Reconciliation of the earnings and weighted average number of shares used in the calculations are set out below: Earnings $000 2021 Weighted Average Per share number of amount (cents) shares 2020 Earnings Weighted Average $000 Per share number of amount (cents) shares Basic earnings per share Earnings attributable to ordinary shareholders 25,376 174,653,602 14.53 8,910 172,788,420 5.16 Dilutive effect of securities Options - 13,730,107 (1.06) - 9,861,227 (0.28) Diluted earnings per share 25,376 188,383,709 13.47 8,910 182,649,647 4.88 70 Griffin MininG LiMited notes to the FinanCial statements 11. property, plant and equipment At 1 January 2020 Foreign exchange adjustments Additions during the year Provision for licence transfer fees Change in estimate of mine closure costs Adjustment for change in lease accounting estimate Disposals Depreciation charge for the year At 31 December 2020 Foreign exchange adjustments Transfer Additions during the year Change in estimate of mine closure costs Release of rehabilitation deposits Disposals Depreciation charge for the year At 31 December 2021 At 1 January 2020 Cost Accumulated depreciation Net carrying amount At 31 December 2020 Cost Accumulated depreciation Net carrying amount At 31 December 2021 Cost Accumulated depreciation Net carrying amount Mill and Mineral interests mobile mine equipment Offices, furniture & equipment Total $000 $000 $000 $000 177,583 50,373 331 228,287 8,292 18,691 16,338 (115) 697 - (6,542) 214,944 3,405 (773) 13,564 327 (435) - (10,200) 220,832 222,589 (45,006) 177,583 267,763 (52,819) 214,944 285,471 (64,639) 220,832 3,408 5,684 - - (697) (1,085) (6,084) 51,599 1,224 773 6,365 - - (294) (6,180) 53,487 80,935 (30,562) 50,373 90,173 (38,574) 51,599 97,910 (44,423) 53,487 5 5 - - - - 11,705 24,380 16,338 (115) - (1,085) (175) (12,801) 166 266,709 (2) - 963 - - 4,627 - 20,892 327 (435) (294) (150) (16,530) 977 275,296 573 304,097 (242) (75,810) 331 228,287 583 358,519 (417) (91,810) 166 266,709 1,544 384,925 (567) (109,629) 977 275,296 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. Mill and mobile mine equipment include $5,795,000 (2020: $3,872,000) of assets under construction yet to be depreciated. The offices, furniture and equipment disclosed above relates solely to the fixed assets, including leased offices, of Griffin Mining (UK Services) Limited and China Zinc Pty Limited. 71 RepoRt and accounts 2021 notes to the FinanCial statements 11. property, plant and equipment (Continued) During 2013 plant and equipment with a deemed value of $11,381,000, revalued in 2019 to $14,150,000, were acquired under a finance lease, upon which depreciation of $8,132,000 (2020: $6,712,000) has been provided. At 31 December 2021 the net carrying amount of this equipment was $7,351,000 (2020: $8,417,000). In 2019 the London office lease was capitalised, and in November 2021 renewed. At 31 December 2021 the net carrying amount of this office was $963,000 (2020: $124,000). The Group assesses the carrying value of the mineral interests, mill and mobile mine equipment at least annually, and more frequently in the event of any indications of impairment, by reference to discounted cash flow forecasts of future revenue and expenditure for each business segment. These forecasts are based upon both past and expected future performance, available resources and expectations for future markets. Management determined there were no impairment indicators at 31 December 2021 (2020: nil). However, as best practice management have updated the impairment model. In determining any indications of impairment in the carrying value of the Caijiaying Mine the directors have reassessed the net carrying value of capitalised costs at 31 December 2021 by reference to the estimated mineral resources at Caijiaying that may be extracted by 2056 and 2037 when the current business licence of Hebei Hua Ao expires. However, it is expected that Hebei Hua Ao will be converted to an equity joint venture company with an indefinite life before then in order to comply with new PRC legislation. Accordingly a Life of Mine plan (“LOM”) has been prepared by the Company that indicates the continued extraction of ore until 2056. In estimating the discounted future cash flows from the continuing operations at the Caijiaying mine the following principal assumptions have been made: • Future market prices for zinc of $3,000 (2020: $2,500) per tonne, gold of $1,800 (2020: $1,800) per troy ounce and silver of $22.5 (2020: $20.0) per troy ounce; • Zinc treatment charges of 30% (2020: 30%) of market prices; • Extraction of measured and indicated resources of 23.8 million tonnes (2020: 25.5 million tonnes) to 2037 when the current business licence of Hebei Hua Ao expires, with ore mined and processed rising to a maximum rate of 1.6 million tonnes of ore per annum and the extraction of 50.3 million tonnes by 2056; • Operating costs, recoveries and payables based upon past performance and that budgeted for 2022; • Capital costs based upon that initially scheduled with sustaining capital based on future scheduling; • Discount rate of 10% (2020: 10%); • Continued maintenance and grant of applicable licences and permits; • No significant impact as a result of climate change, earthquakes or other natural events; and • A Renminbi to US dollar exchange rate of Rmb6.5 to $1. 12. intangible assets - exploration interests China – mineral exploration interests At 1 January 2020 Foreign exchange adjustments Additions during the year Impairment during the year At 31 December 2020 Additions during the year Impairment during the year At 31 December 2021 $000 322 2 11 (10) 325 73 (11) 387 Intangible assets represent costs 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 appraisal activities, details of which are given in the report on operations. The outcome of such appraisal activity is uncertain. 72 Griffin MininG LiMited notes to the FinanCial statements 12. intangible assets - exploration interests (Continued) Upon economically exploitable mineral deposits being established, sufficient finance will be required to bring such discoveries into production. At 31 December 2021 impairment charges of $11,000 (2020: $10,000) had been provided and charged to the income statement in respect of the above exploration costs previously capitalised by Hebei Sino Anglo. 13. inventories Underground ore stocks Surface ore stocks Concentrate stocks Spare parts and consumables 2021 $000 603 277 123 3,513 4,516 2020 $000 1,332 423 728 2,850 5,333 All inventories are expected to be sold, used or consumed within one year of the balance sheet date. The Group did not have any significant slow moving or defective inventories at 31 December 2022 (2020: nil) requiring write off to the Income Statement 14. reCeivables and other Current assets Trade receivables Other receivables Prepayments 2021 $000 - 344 1,830 2,174 2020 $000 4,485 338 1,852 6,675 Any expected credit losses on the recoverability of receivables are not expected to be material. Prepayments include $428,000 (2020: $1,085,000) in respect of supplies and services for non-current assets. 15. share Capital AUTHORISED: 2021 2020 Number $000 Number $000 Ordinary shares of US$0.01 each 1,000,000,000 10,000 1,000,000,000 10,000 CALLED UP ALLOTTED AND FULLY PAID: Ordinary shares of US $0.01 each At 1 January 172,826,228 1,728 172,786,228 1,728 Shares issued in the year on exercise of share purchase options 2,066,666 21 40,000 - At 31 December 174,892,894 1,749 172,826,228 1,728 Share purchase options were exercised over 1,791,666 new ordinary shares at 30 pence per share and over 275,000 new ordinary shares at 40 pence per share in 2021 (2020: options over 40,000 new ordinary shares were exercised at 30 pence per share.) 16. shares held in treasury At 1 January Bought back in during the year At 31 December 2021 Number $000 540,000 399,799 917 727 2020 Number 540,000 $000 917 - - 939,799 1,644 540,000 917 In 2021 399,799 of the Company’s ordinary shares were purchased at an average price of 132p (2020; none). 73 RepoRt and accounts 2021 notes to the FinanCial statements 17. share options At 1 January 2021 Number Granted/ (exercised) Number At 31 December 2021 Number Options exercisable at 30 pence per share to 31 December 2023 17,374,166 (1,791,666) 15,582,500 Options exercisable at 40 pence per share to 31 December 2023 4,793,333 (275,000) 4,518,333 22,167,499 (2,066,666) 20,100,833 Share purchase options were exercised over 1,791,666 new ordinary shares in 2021 at 30 pence per share and over 275,000 new ordinary shares at 40 pence per share (2020: options over 40,000 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: 2021 2020 Number Weighted average exercise price Pence Number Weighted average exercise price Pence Outstanding at 1 January Exercised during the year Outstanding at 31 December 22,167,499 (2,066,666) 20,100,833 32.2 (31.3) 32.2 22,207,499 (40,000) 22,167,499 32.2 (40.0) 32.2 The estimated value of the options exercisable at 40p up to 31 December 2023, 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 2023, 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 2023 Options expiring 31 December 2023 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 (2020: $nil) during the year ended 31 December 2021 relating to equity settled share option scheme transactions. 18. dividends No dividends were paid in 2021 (2020: nil). 19. other payables PRC licence fees 74 2021 $000 10,352 2020 $000 13,487 Griffin MininG LiMited notes to the FinanCial statements 20. long-term provisions PROVISIONS FOR MINE CLOSURE COSTS At 1 January Change in estimate (note 11) Interest charges Foreign exchange adjustments At 31 December 2021 $000 2,200 327 84 56 2,667 2020 $000 2,150 (115) 77 88 2,200 Provisions for mine closure and rehabilitation costs have been made in accordance with the laws and regulations of the PRC and as set out in the Hebei Hua Ao Mine Ecological Restoration Treatment and Land Reclamation Scheme (“the Scheme”) as approved by Ministry of Natural Resources of the PRC. This Scheme provides for a mine life of 40.11 years from January 2019 to February 2059. The Scheme incorporates a rehabilitation plan for “Mine Geological Environment Recovery” with an estimated cost of RMB 65,619,400 ($10,292,000), and “Land Rehabilitation” with an estimated cost of RMB 54,566,100 ($8,558,000). These amounts have been discounted over the deemed Life of Mine at a discount rate of 3.39% (2020: 3.7596%), being the PRC 40 year state bond rate. 21. deFerred taxation At 1 January Foreign exchange adjustments (Credit) / charge for the year At 31 December 2021 $000 3,359 76 (195) 3,240 2020 $000 2,731 204 424 3,359 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 deductible for taxation purposes. 22. lease liabilities At 1 January Foreign exchange adjustments Advance during the period Interest charges Repayments in the year At 31 December Amounts falling due in more than one year Amounts falling due within one year 2021 $000 383 76 963 11 (462) 971 794 177 971 2020 $000 2,600 81 - 171 (2,469) 383 - 383 383 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 was due to become the property of Hebei Hua Ao with no further payment. This agreement was renewed in 2021 for one year and further extended in 2022 on the same terms, with all charges for ore processed charged to cost of sales. In determining the initial total lease 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. 75 RepoRt and accounts 2021 notes to the FinanCial statements 22. lease liabilities (Continued) The Company entered into an agreement in October 2016 to rent offices for 12 years from 1 November 2016 with a five year break. 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 1 January 2019 with a depreciation of $248,000 provided in the year, and a liability of $97,000 all of which is current. This lease was renewed in October 2021 with a deemed value of $1,581,000 upon which depreciation of $618,000 has been provided. 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 23. trade and other payables Trade creditors Other creditors Business taxation payable 2021 $000 177 169 169 169 169 338 1,191 2021 $000 19,358 6,174 2,884 Zhangjiakou Yuanrun Enterprise Management Consulting Service Co., Ltd (Note 30) 5,638 Accruals 6,672 40,726 2020 $000 490 12 0 0 0 0 502 2020 $000 13,821 7,624 5,120 4,246 11,531 42,342 All amounts are short term. The carrying values of all trade and other payables are considered to be a reasonable approximation of fair value. 24. 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 2021 of $262,576,000 ($233,706,000 at 31 December 2020) divided by the number of ordinary shares in issue at 31 December 2021 of 174,892,894 (172,826,228 at 31 December 2020). 25. risk management The Group is exposed to a variety of financial risks which result from its operating and investing activities. The Group’s risk management is coordinated by its senior management and executive directors and focuses on actively securing the Group’s short to medium term cash flows. Foreign Currency Risk The majority of the Group’s operational and financial cash flows are denominated in Chinese Renminbi and United States Dollars with Sterling, Hong Kong dollars, and Australian Dollar bank deposits held to cover future sterling expenditure estimates. 76 Griffin MininG LiMited notes to the FinanCial statements 25. risk management (Continued) Currently the Group does not carry out any significant operations in currencies outside the above. The Group currently does not have a formal foreign currency hedging policy but retains foreign currency to meet future requirements. Management monitors foreign exchange exposure and considers hedging significant foreign currency exposure should the need arise. The conversion of Renminbi into foreign currencies is restricted and subject to the rules and regulations of foreign exchange control promulgated by the government of the Peoples Republic of China. Sterling bank deposits translated into United States Dollars at the closing rate are as follows: Short term bank deposits 2021 $000 518 Australian dollar bank deposits translated into United States Dollars at the closing rate are as follows: Short term bank deposits 2021 $000 983 Renminbi bank deposits translated into United States Dollars at the closing rate are as follows: Short term bank deposits 2021 $000 30,477 2020 $000 1,270 2020 $000 909 2020 $000 7,420 The following table illustrates the sensitivity of the net results for the year and equity with regards to the Group’s Renminbi deposits and the Renminbi US Dollar exchange rate. It assumes a + / - 10% (2020: 10%) change in the Renminbi exchange rate for the year ended 31 December 2021. These changes are considered to be reasonable based on observation of current market conditions for the year ended 31 December 2021. The sensitivity analysis is based upon the Group’s Renminbi deposits at each reporting date. If the Renminbi had strengthened against the US Dollar by 10% (2020: 10%) this would have had the following impact: Net result for the year and on equity 2021 $000 3,387 If Renminbi had weakened against the US Dollar by 10% (2019: 10%) this would have the following impact: Net result for the year and on equity 2021 $000 (2,771) 2020 $000 804 2020 $000 (658) Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be indicative of the Group’s exposure to currency risk. With relatively small amounts held in Sterling, Australian dollars, and Hong Kong dollars the effect on the net results and equity of changes in Renminbi and Australian dollar exchange rates are not expected to be significant. As a result of a reduction in Sterling deposits, the impact of changes in the Sterling US Dollar exchange rate are considered minimal. In 2020 a strengthening of Sterling of 10% was reported as increasing the net results for 2020 and an equity of $141,000 and a weakening of $115,000. 77 RepoRt and accounts 2021 notes to the FinanCial statements 25. risk management (Continued) Foreign Currency Risk (continued) Foreign currency denominated financial assets and liabilities, translated into US Dollars at the closing rate, are as follows: 2021 Rmb $000 AusD $000 GBP $000 729 32,804 1,000 (1,300) (42,189) (571) (9,385) (37) 963 2020 Rmb $000 GBP $000 1,470 17,945 (414) (46,279) 1,056 (28,334) AusD $000 967 (152) 815 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 + 100% and - 100% (2020: + 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 2021 2020 Plus 100% Minus 100% Plus 300% Minus 100% $000 236 $000 (236) $000 296 $000 (108) Fixed and non interest bearing financial assets and liabilities are as follows: 2021 2020 Floating Non interest bearing interest rate Total Floating Non interest bearing interest rate Total $000 $000 $000 $000 $000 $000 38,159 - 38,159 (971) - (971) - 344 344 38,159 344 38,503 - (48,193) (971) (48,193) (48,193) (49,164) 16,435 - 16,435 (383) - (383) - 4,823 16,435 4,823 4,823 21,258 - (50,709) (383) (50,709) (50,709) (51,092) Financial assets Cash at bank Other receivables Total Financial assets Finance lease liabilities Trade and other payables Total Financial liabilities Net Financial assets / (liabilities) 37,188 (47,849) (10,661) 16,052 (45,886) (29,834) Other receivables in 2020 have been restated to exclude prepayments, and other payables in 2020 have been restated to exclude tax payable. Commodity risk The Group is exposed to the risk of changes in commodity prices and in particular that for zinc, gold and to a lesser extent silver and lead. The Group currently sells its metal concentrate production by way of open auctions in China. The Group did not hedge its metal production in 2021 or in 2020. 78 Griffin MininG LiMited notes to the FinanCial statements 25. 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% (2020: plus 30% and minus 30%), with effect from the beginning of the year. These changes are considered reasonable based upon observation of current market conditions within which the Group operates. This sensitivity analysis is based upon the Group’s sales in each year. Net result for the year – zinc Net result for year – gold Net result for year – silver Credit risk 2021 Plus $000 Minus $000 2020 Plus $000 Minus $000 20,504 (20,504) 11,077 (11,077) 1,794 (1,794) 4,440 (4,440) 786 (786) 1,162 (1,162) 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 2021 the Group held cash and cash equivalents (bank deposits) with high credit financial institutions of $38,159,000 (2020: $16,435,000) 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. 26. 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 $262,576,000 at 31 December 2021. 79 RepoRt and accounts 2021 notes to the FinanCial statements 27. 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, the United Kingdom, Hong Kong and Australia, whose costs are denominated in local currencies. In the normal course of its operations the Group is exposed to commodity price, foreign currency and interest rate risks. The Group places funds in excess of immediate requirements in US dollar, Chinese Renminbi, 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: 2021 $000 38,159 38,159 14,774 34,391 49,165 2020 $000 16,435 16,435 17,242 33,850 51,092 At 31 December 2020 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 and other payables 37,222 3,372 3,372 6,744 Lease liabilities 490 12 - - Total non-derivatives 37,712 3,384 3,372 6,744 Derivatives - - - - 50,710 502 51,212 - 50,710 383 51,093 - At 31 December 2021 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 and other payables 37,841 Lease liabilities 177 Total non-derivatives 38,018 3,451 169 3,620 3,451 169 3,620 3,450 676 4,126 48,193 1,191 49,384 48,193 971 49,164 Derivatives - - - - - - 80 Griffin MininG LiMited notes to the FinanCial statements 28. subsidiary Companies At 31 December 2021, Griffin Mining Limited had interests in the share capital of the following principal subsidiary companies. Name China Zinc Pty Ltd China Zinc Ltd China Zinc (Resources) Ltd Class of Share held Ordinary Ordinary Ordinary Griffin Mining (UK Services) Limited Ordinary Hebei Hua Ao Mining Industry Company Ltd* Panda Resources Ltd Ordinary Hebei Sino Anglo Mining Development Company Ltd* Proportion of shares held Nature of business Country of incorporation 100% 100% 100% 100% 88.8% ** 100% 90% Service company Australia Holding and service company Hong Kong Holding company Hong Kong Service company England Base and precious metals mining and development Holding company Mineral exploration and development China England China * China Zinc Pty Ltd, China Zinc Ltd, Griffin Mining (UK Services) Ltd and Panda Resources Ltd are directly owned by the Company. China Zinc Ltd has a 100% interest in China Zinc (Resources) Ltd and 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 provides that the foreign party (China Zinc Ltd) receives 88.8% of the cash flows and profits of Hebei Hua Ao in accordance with its share in the equity interest in the joint venture. The term of the joint venture’s business licence expires on 12 October 2037. Under the terms of an 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 $3,876,000 (2020 $2,934,000) are included in net operating costs rather than attributable to non-controlling interests. Likewise, the amounts due at 31 December 2021 of $5,638,000 (2020: $4,246,000) are included in other payables rather than due to non-controlling interests within equity within the Consolidated Statement of Financial Position. 29. Commitments At 31 December 2021 the Group had capital commitments of $1,144,000 (31 December 2020: $1,395,000). 30. 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 $2,737,000 (2020: $2,801,000), for the provision of advisory and support services to Griffin Mining Limited and its subsidiaries during the year including that of the Chairman Mladen Ninkov. Mladen Ninkov is a director and employee of Keynes Investments Pty Limited. Zhangiakou Yuanrun Enterprise Management and Service Centre During the year $4,279,000 was charged (2020: $3,320,000) for services 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 2021 $5,638,000 (2020: $4,246,000) was due to this company. 31. post balanCe sheet events At 31 December 2021 there were no adjusting post balance sheet events (2020: none). From 1st January 2022 to March 2022, operations at Caijiaying were suspended in the run up to and during the Winter and Para Olympic games at Chongli. 81 RepoRt and accounts 2021 82 Griffin MininG LiMitedTailings Facility Three in the background, with the new access road and bridge to Tailings Facility Four under construction 83 RepoRt and accounts 2021Corporate inFormation Griffin Mining (UK Services) Ltd 8 Floor, Royal Trust House, 54 Jermyn Street, London, SW1Y 6LX, UK. office: Telephone: + 44 (0)20 7629 7772 Facsimile: + 44 (0)20 7629 7773 Email: griffin@griffinmining.com Web site: www.griffinmining.com Griffin Mining Ltd 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 China Zinc Limited office: 18/F, Wai Wah Commercial Centre, 6 Wilmer Street, Sheung Wan, Hong Kong. Directors: Mladen Ninkov (Chairman) Roger Goodwin (Finance Director) Dean Moore Linda Naylor Adam Usdan Clive Whiley Company Secretary: Roger Goodwin Nominated Adviser And Broker for AIM: Panmure Gordon (UK) Limited One New Change, London, EC4M 9AF, UK. Joint Broker: Joh, Berenberg, Gossler & Co. KG 60 Threadneedle Street, London, EC2R 8HP, UK. Independent Auditors: PricewaterhouseCoopers LLP 1 Embankment Place, London, WC2N 6RH, UK. Solicitors: Bird and Bird 8/F China World Office 1, Jianguomenwai Dajie, Chao Yang District, Beijing, 10004, PRC. 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. 84 Griffin MininG LiMited 

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