Final Results

RNS Number : 4064R

Griffin Mining Ld

30 April 2009

 



GRIFFIN MINING LIMITED

60 St James's Street, London SW1A 1LE, United Kingdom

Telephone: + 44 (0)20 7629 7772 Facsimile: + 44 (0)20 7629 7773

E mail: [e-mail]

30th APRIL 2009

PRELIMINARY RESULTS

Griffin Mining Limited ('Griffin' or 'the Company') has today published its preliminary results for the year ended 31 December 2008.

Highlights:

• Profit before tax of $7.0 million on a declining zinc price, compared with $26.8m in 2007. 

• 22,922 tonnes of zinc in concentrate produced in 2008, compared to 21,781 tonnes in 2007. 

• 2,421 ounces of gold in concentrate produced in 2008, compared to 15 ounces in 2007.

• 171,888 ounces of silver in concentrate produced in 2008, compared to 6,470 ounces in 2007.

• 1,127 tonnes of lead in concentrate produced in 2008, compared to 13 tonnes in 2007.

• 433,274 tonnes ore mined in 2008, compared to 430,891 tonnes in 2007

• 491,848 tonnes of ore processed in 2008, compared with 409,193 tonnes in 2007

Overview

Griffin Mining Limited and its subsidiaries (together the 'Group') recorded a profit before tax for the year of $6,959,000 (2007: $26,762,000).

All mining companies faced serious challenges during 2008, however, the Group was positioned better than the vast majority of its fellow industry participants in maintaining a low cost, long life mine and retaining substantial cash balances. The Group has benefited from receiving 100% of the profits of the Caijiaying Zinc-Gold Mine (the 'Mine') over the three years to July 2008 and obtaining a net gain of over $30 million, recognised through reserves and not in the profit for the year, by repurchasing $121.5 million of its own shares for cancellation in May 2008 from Citadel Equity Fund Ltd ('Citadel') having issued those same shares for $151.7 million in August 2007.  

With the Group's primary income generated by the Mine, profitability was severely impacted by the fall in the price of zinc. During 2008, the zinc price quoted on the London Metals Exchange fell from $2,500 per tonne to $1,100 per tonne. Due to this price decline and the Group remaining unhedged to both metals and currency, a decision was taken to suspend operations in the first quarter of 2009 to allow much needed maintenance and capital work to be undertaken with relatively little economic loss being incurred by the Group. 

Griffin benefited from interest receipts of $4,670,000 during 2008 (2007: $5,607,000), however, this income has decreased during 2009 with declining interest rates world-wide.  Griffin also benefited from a C$2.5 million break free on the Company's aborted acquisition of Yukon Zinc Corporation.

Foreign exchange losses of $3,220,000 were recorded in 2008 (2007: gains of $1,012,000) primarily on sterling deposits held to cover sterling commitments. The losses follow the fall in the value of sterling in the year.

On 27th November 2008, Griffin acquired 16,666,667 ordinary shares at £0.15 per share for a total cost of £2,500,000 ($4,542,000) in Spitfire Oil Limited ('Spitfire'). This represents 39.2% of the issued share capital of Spitfire.  Spitfire's principal asset is the Salmon Gums Lignite deposits in Western Australia from which Spitfire is intending to produce fuel oil,  distillates and other by-products  This relatively modest investment provides Griffin with an entrée into a long term, large scale project that spreads the Company's political and commodity risk.

Chairman's Statement:

2008 will go down as one of the most catastrophic years for all involved in the mining, financial and industrial markets. Almost every institution, company and individual was affected, some irrevocably, and your company, Griffin Mining Limited ('Griffin' or the 'Company') was no exception. Even in this difficult environment, the Company was still able to produce a profit before tax of almost $7 million, a truly remarkable result considering the zinc price fell 46% in 2007 and a further 50% in 2008. This is a testament to the quality of the Caijiaying mine, its people and the management of the Company.

2008 was unique, not in that it produced the beginning of a severe and prolonged recession. It is the task of any competent management to foresee such likelihood. Rather it was the complete breakdown of the financial system, including the banking, equity and debt markets, that produced a scenario that none of us had ever seen before and brought the world to the edge of financial calamity. The ensuing ricochet effects caused the current recessionary environment and, for mining companies, the unfortunate end to booming commodity prices. In a fixed cost business such as mining, the resulting dramatic fall in revenues caused by declining commodity prices was reflected directly in a corresponding fall in the profitability of the Company.

Fortunately for Griffin, prudent management has ensured that a significant cash balance has been maintained in the Company, no debt exists on the balance sheet and the Caijiaying mine is managed as one of the world's lowest cost zinc producers. With the continuing depressed commodity prices, the Company took the opportunity to temporarily suspend operations at Caijiaying to undertake long overdue heavy maintenance and complete construction associated with the expansion of production facilities. The economic cost of suspending operations was relatively small compared to suspending operations at a time of high commodity prices. By the beginning of June, full operations should have resumed at Caijiaying.

The current environment does, however, provide some unique acquisition opportunities which the Company would like to pursue.  In a booming commodity market, mining companies and mining assets are given astronomical valuations. Even the small number of assets the Company thought met the financial, political, structural, metallurgical and geological parameters set by the Company, were financially out of reach. The current economic crisis has savagely slashed these companies' valuations and, in some cases, left them in a precarious financial predicament with little or no cash and no hope of raising further funding to survive. It is these companies that management has been evaluating and attempting to acquire.

The Company made a number of acquisition attempts during the year. On the plus side, in May 2008, the Company bought back its own shares from Citadel Investment Group, realising a gain of over $30 million. From the same seller, Griffin was able to acquire, for £2.5 million, over 39% of Spitfire Oil Limited, a company listed on the AIM of the London Stock Exchange. This company is attempting to economically extract fuel oils and other by-products from the huge Salmon Gums lignite deposit in Western Australia. This is a long term, high risk venture. But the economic rewards, should Spitfire Oil Limited be successful, will be enormous and Company transforming.

Less successfully, in April 2008, the Company negotiated an agreed merger with Yukon Zinc Corporation, which was subsequently frustrated by a higher takeover bid by Northwest Non Ferrous International Investment Company Limited and Jinduicheng Molybdenum Group Limited. Nevertheless, the Company was still able to walk away from the transaction with a C$2.5 million break-up fee. Finally, and probably most disappointingly, in March 2009, the Company made an unsolicited bid for a Canadian company, Ivernia Inc, the owner of the suspended Magellan Lead Mine in Western Australia. That company's management took the unfathomable decision to deliver effective control, through massive dilution of its share capital, to a related party without shareholder approval. That made the acquisition of Ivernia uneconomic and unpalatable for Griffin.  

None of this has dampened the Company's enthusiasm to make further acquisitions in this recessionary environment where the Company's cash has inordinate value, particularly before commodity prices start to rise again and the valuation of mining assets become so high as to make any acquisition of these assets prohibitively difficult and uneconomic.

Even without any further acquisition, the Company's future looks assured. The industrialization of China and its spectacular growth rate, although temporarily slowed, should return and re-ignite the 'super cycle' in commodity prices. The Company's balance sheet is very strong with a large cash balance and no debt. The Company is beginning to increase throughput at Caijaying towards 750,000 tonnes per annum and Caijiaying continues to be a low cost mine with the potential to become a world class mining region, particularly with further exploration between Zones II and III at Caijiaying.

Dividend

In view of the fall in commodity prices resulting in the decline in profitability, current suspension of operations at Caijiaying and the need to preserve cash, a dividend is not being paid.

Further information

Griffin Mining Limited

                 Mladen Ninkov - Chairman                   Telephone: [phone]

                 Roger Goodwin - Finance Director

Investec Investment Banking:

                 Gerard Kisbey-Green                              Telephone: [phone]        

                 Stephen Cooper                                                            [phone]

Griffin Mining Limited's shares are quoted on the Alternative Investment Market (AIM) of the London Stock Exchange (symbol GFM).

The Company's news releases are available on the Company's web site: www.griffinmining.com

  Griffin Mining Limited

Summarised Consolidated Income Statement

For the year ended 31 December 2008

(expressed in thousands US dollars)

		2008		2007
		$000		$000
Revenue		32,061		37,989
Cost of sales		(18,438)		(7,768)
Gross Profit		13,623		30,221
Net operating expenses		(10,517)		(10,078)
Profit from operations		3,106		20,143
Share of losses of associated company		(39)		-
Foreign exchange (losses) / gains		(3,221)		1,012
Finance income		4,670		5,607
Other income		2,533		-
Interest payable		(90)		-
Profit before tax		6,959		26,762
Income tax expense		(637)		-
Profit after tax attributable to equity share owners for the financial year		6,322		26,762
Basic earnings per share (cents) from continuing operations		2.87		12.08
Diluted earnings per share (cents) from continuing operations		2.83		11.97

  Griffin Mining Limited

Summarised Consolidated Balance Sheet

As at 31 December 2008

(expressed in thousands US dollars)

		2008		2007
		$000		$000
ASSETS
Non-current assets
Property, plant and equipment		56,885		44,381
Intangible assets – exploration interests		1,313		751
Investment in associated company		4,503		-
		62,701		45,132
Current assets
Inventories		3,227		4,639
Other current assets		5,564		4,155
Cash and cash equivalents		67,193		199,949
		75,984		208,743
Total assets		138,685		253,875
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital		1,816		2,615
Share premium		75,950		196,637
Contributing surplus		3,690		3,690
Share based payments		5,826		4,426
Other reserves		711		579
Foreign exchange reserve		7,142		3,109
Profit and loss reserve		35,345		37,106
Total equity		130,480		248,162
Non-current liabilities
Long-term provisions		98		-
Current liabilities
Trade and other payables		8,107		5,047
Short term bank overdrafts		-		666
Total liabilities		8,107		5,713
Total equities and liabilities		138,685		253,875
Number of shares in issue		181,589,731		261,509,549
Attributable net asset value / total equity per share		$0.72		$0.95

  Griffin Mining Limited

Summarised Consolidated Statement of Changes in Equity

For the year ended 31 December 2008

(expressed in thousands US dollars)

	Share	Share	Contributing	Share	Other	Foreign	Profit
	Capital	premium	surplus	based	Reserves	Exchange	and loss	Total
				payments		Reserve	Reserve
	$000	$000	$000	$000	$000	$000	$000	$000
At 31 December 2006	1,841	39,166	3,690	2,553	297	479	16,432	64,458
Exchange differences on translating foreign operations	-	-	-	-	20	2,630	-	2,650
Net income recognised directly to equity	-	-	-	-	20	2,630	-	2,650
Profit for the year	-	-	-	-	-	-	26,760	26,760
Total recognised income and expenses in the year	-	-	-	-	20	2,630	26,762	29,412
Dividend paid	-	-	-	-	-	-	(5,826)	(5,826)
Regulatory transfer for future investment	-	-	-	-	262	-	(262)	-
Exercise of options	-	1,042	-	(1,042)	-	-	-	-
Issue of share capital	774	156,429	-	-	-	-	-	157,203
Cost of share based payments	-	-	-	2,915	-	-	-	2,915
At 31 December 2007	2,615	196,637	3,690	4,426	579	3,109	37,106	248,162
Exchange differences on translating foreign operations	-	-	-	-	57	4,033	-	4,090
Net income recognised directly to equity	-	-	-	-	57	4,033	-	4,090
Profit for the year	-	-	-	-	-	-	6,322	6,322
Total recognised income and expenses in the year	-	-	-	-	57	4,033	6,322	10,412
Dividend paid	-	-	-	-	-	-	(8,008)	(8,008)
Regulatory transfer for future investment	-	-	-	-	75	-	(75)	-
Purchase of shares for cancellation	(799)	(120,687)	-	-	-	-	-	(121,486)
Cost of share based payments	-	-	-	1,400	-	-	-	1,400
At 31 December 2008	1,816	75,950	3,690	5,826	711	7,142	35,345	130,480

Griffin Mining Limited

Summarised Consolidated Cash Flow Statement

For the year ended 31 December 2008

(expressed in thousands US dollars)

		2008		2007
		$000		$000
Net cash flows from operating activities
Profit before taxation		6,959		26,762
Share of associated company losses		39		-
Foreign exchange losses / (gains)		3,221		(1,012)
Taxation paid		(637)		-
Finance income		(4,670)		(5,607)
Adjustment in respect of share based payments		1,400		2,915
Depreciation, depletion and amortisation		2,844		1,351
Provisions		98		-
Decrease / (increase) in inventories		1,412		(3,535)
(Increase) in other current assets		(1,101)		(3,091)
Increase in trade and other payables		3,059		711
Net cash inflow from operating activities		12,624		18,494
Cash flows from investing activities
Interest received		4,670		5,607
Payments to acquire intangible fixed assets - exploration interests		(388)		(126)
Payments to acquire plant and equipment - mineral interests		(9,393)		(9,056)
Payments to acquire plant and equipment - plant and equipment		(1,681)		(1,854)
Payments to acquire interest in associated company		(4,542)		-
Net cash (outflow) from investing activities		(11,334)		(5,429)
Cash flows from financing activities
Issue of ordinary share capital		-		157,211
Expenses paid in connection with share issue		-		(7)
Purchase of shares for cancellation		(121,486)		-
		(121,486)		157,204
Dividends paid		(8,008)		(5,826)
Increase in cash and cash equivalents		(128,204)		164,443
Cash and cash equivalents at the beginning of the year		199,283		34,081
Effects of exchange rates		(3,886)		759
Cash and cash equivalents at the end of the year		67,193		199,283
Cash and cash equivalents comprise:
Bank deposits		67,193		199,949
Short term bank overdrafts		-		(666)
Total		67,193		199,283

  Notes:

• This statement has been prepared using accounting policies and presentation consistent with those applied in the preparation of the statutory accounts of the Company.

2.    The summary accounts set out above do not constitute statutory accounts as defined by Section 84 of the 
       Bermuda Companies Act 1981 or Section 240 of the UK Companies Act 1985. The summarised 
       consolidated balance sheet at 31 December 2008 and the summarised consolidated income statement, 
       consolidated statement of changes in equity and the summarised consolidated cash flow statement for the 
       year then ended have been extracted from the Group's 2008 statutory financial statements upon which the 
       auditors' opinion is unqualified. The results for the year ended 31 December 2007 have been extracted 
       from the statutory accounts for that period, which contain an unqualified auditors' report.

3.    The annual report and accounts for 2008 together with the notice of the Annual General Meeting to be 
       held on 12 June 2009 are being sent by post to all registered shareholders. Additional copies of the annual 
       report and accounts are available from the Company's London office, 6th Floor, 60 St James's Street, 
       London,  SW1A 1LE.

4.   The calculation of the basic earnings per share is based on 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:

			2008						2007
	Earnings $000		Weighted Average number of shares		Per share amount (cents)		Earnings $000		Weighted Average number of shares		Per share amount (cents)
Basic earnings per share
Earnings attributable to ordinary shareholders	6,322		220,587,242		2.87		26,762		221,441,986		12.08
Dilutive effect of securities
Options			3,090,342						2,153,244
Diluted earnings per share	6,322		223,677,584		2.83		26,762		223,595,230		11.97

 

END

 

 

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