Final Results

RNS Number : 8575F

Griffin Mining Ld

04 May 2011

 

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]

4^th MAY 2011

PRELIMINARY RESULTS

Griffin Mining Limited has today published its preliminary results for the year ended 31 December 2010.

Highlights:

·     Increased profit before tax and minority interests of $11.2 million, compared with $7.2m in 2009.

·     Increased profits from operations of $13.1m compared with $5.5m in 2009.

·     389,496 tonnes of ore processed compared to 276,880 tonnes in 2009, a 40.6% increase.

·     22,044 tonnes of zinc in concentrate produced compared to 17,167 tonnes in 2009, a 28% increase.

·     Record production of 7,067 ounces of gold in concentrate compared to 3,726 ounces in 2009, a 90% increase.

·     157,679 ounces of silver in concentrate produced compared to 89,222 ounces in 2009, a 77% increase.

·     690 tonnes of lead in concentrate produced compared to 500 tonnes in 2009, a 38% increase.

Overview

Griffin Mining Limited ("Griffin" or the "Company") and its subsidiaries (together the "Group") recorded a profit before tax for the year of $11,236,000 (2009: $7,246,000).  The increase in profit arises despite the suspension of site activities from the 9^th August 2010 to the 9^th December 2010 following the death of two men employed by the mining contractor at Caijiaying. This result is a tribute to the efforts of all site and administrative personnel who worked so tirelessly to lift the operating suspension at Caijiaying.

Despite the suspension in activities during 2010, production in 2010 represents a significant increase in performance from the interrupted 2009 year with zinc concentrate production falling just short of the maximum achieved in 2008 of 22,922 tonnes.  Outstandingly, 2010 was a record for gold production at Caijiaying.

In August 2010, construction of the upgraded processing facilities at Caijiaying was completed creating the operating capability to process 750,000 tonnes of ore per annum.  The unfortunate events of the 8^th August 2010 delayed commissioning of the new ball mill and crushing circuit until recommencement of operations on the 9^th December 2010.  Commissioning of the upgraded processing facilities has been completed and mining and haulage of ore has been increased to meet the expanded processing capacity of the mill. As with the previous construction of processing facilities at Caijiaying, it is expected that the engineering work recently completed on the upgrade to the processing facilities, in addition to the expertise of the staff on site, should enable significantly more throughput to be processed than the designated 750,000 tonnes of ore per annum.

In order to protect the Company's revenue stream should the price of zinc fall significantly, the Company purchased put options with a strike price of $1,700 per tonne over 24,000 tonnes of zinc metal at a cost of $2,238,000. The zinc price remained relatively strong in 2010 with the LME zinc price averaging approximately $2,160 per tonne. As a result, the put options were marked to market at 31 December 2010 with a charge to profit of $2,224,000.

With cash balances averaging some $67 million in 2010, Griffin benefited from interest receipts of $350,000 in 2010 (2009: $253,000). 

Foreign exchange gains of $38,000 were recorded in 2010 (2009: gains of $1,956,000) with a weakened sterling creating losses on sterling deposits offset by the strengthening Australian Dollar and Chinese Renminbi which created profits on both Dollar and Renminbi accounts.

Griffin's 39.2% share of the losses of Spitfire Oil Limited ("Spitfire") of $109,000 has been recognised in 2010 (2009 $517,000).

Chairman's Statement:

In spite of the year not progressing as originally envisaged due to factors outside the control of the Company, the Group still managed to record a profit before tax for the year of $11.24 million compared to $7.25 million in 2009.   This included a 40.6% increase in ore processed, a 28% increase in zinc concentrate produced, a 77% increase in silver produced in concentrate and a 90% increase in gold produced in concentrate, a record for gold production at Caijiaying.

The increase in profit and production was particularly noteworthy as it was achieved despite the suspension of all activities at Caijiaying for 4 months following the death of two men employed by the mining contractor at Caijiaying.   Although the Company's subsidiary, Hebei Hua Ao Mining Industry Company Limited ("Hebei Hua Ao"), was exonerated from primary fault, I would like to express my deep sorrow that such an event could occur at Caijiaying and send my condolences to the deceased miners' families.  Griffin has, and continues to provide, its full co-operation and support to the Chinese individuals and government departments touched by this unfortunate occurrence and continues to seek to improve safety at Caijiaying above and beyond that recommended by the Chinese authorities.

Although construction of the upgraded processing facilities at Caijiaying was completed in August 2010, the unfortunate deaths of the 8th August 2010 delayed commissioning of the new ball mill and crushing circuit until the first quarter of 2011.  As with the previous construction of processing facilities at Caijiaying, it is expected that the upgrade of the processing facilities should enable significantly more throughput to be processed than the designated 750,000 tonnes of ore per annum.

It is expected that part of that substantially increased throughput, over and above 750,000 tonnes of ore per annum, will be provided from the new resource at Zone II.  In January 2011, a new JORC reported Mineral Resource Estimate for Caijiaying was produced which showed an 18% increase in the mineral resource at Zones II and III representing a 30 plus year mine life at the increased throughput rate. This gave Hebei Hua Ao sufficient confidence to commence the necessary extra infill drilling, reports and work to support an application for a mining licence at Zone II with a view to extracting a further 500,000 tonnes of ore per annum from that area.

In this modern age, it is vital for a mining company to be a good citizen of the community and country in which it operates.  To that end, Hebei Hua Ao has provided direct water supplies to the local villagers, constructed sealed roads to the Caijiaying mine and nearby villages, financed the construction of a local kindergarten and old people's rest home and assisted with other infrastructure projects. Hebei Hua Ao has also assisted in the upgrade of facilities at the local township school and set up "Project Hope" to provide scholarships to local students. Griffin estimates that the Caijiaying mine has provided employment directly and indirectly to over 1,000 Chinese nationals whilst minimizing the employment of foreign personnel. Griffin has striven to protect the local environment and in that regard Hebei Hua Ao's activities in China were formally recognized when it was presented with the environmental award at the 2010 China Mining conference. Griffin, through Hebei Hua Ao, has shown itself to be a responsible partner and operator in China.

Unfortunately, the Company does not operate in an economic vacuum.  As has been mentioned numerous times in past missives, mining is generally a fixed cost business whose profitability is largely dependent on a predetermined commodity price.  With China now acquiring 60% of the world's iron ore and 40% of its base metals production, neither China nor the world's economy can be ignored, even at the microeconomic level at which Griffin operates.

Unfortunately the world's economy has been shown to be, at best, brittle and, at worst, structurally unsound.  The global financial crisis of 2008 has demonstrated that the USA and Europe are on the downward slope of their economic power without the political or economic bipartisanship will to undertake the reforms critical to stave off economic decline.  The huge transference of private to public debt in the USA reaching a staggering $14.3 trillion, unfunded Medicare and pension liabilities and the need to raise the national debt ceiling merely to pay recurring expenditure and interest obligations on US government debt, does not bode well for the world's largest economy.  Europe continues to try to live with the unliveable with a European Central Bank setting monetary policy over wayward individual country members setting their own fiscal policies.  The inevitable consequences have become apparent with Ireland, Portugal and Greece with more surely to follow.  China remains the world's economic powerhouse although with the advent of rapid inflation coupled with a fixed exchange rate, its export driven economy will inevitably suffer.  It is also worthy to note the questionable status of the Chinese banking system and the level of non-performing loans in that country.

What this means for Griffin is the need for patience.  Although the Company has significant financial resources, including some $65 million in cash, real value is created by purchasing assets below their true intrinsic value at the low end of an economic cycle or in a severe financial downturn.  It is the view of the Company that mineable resources are scarce and becoming ever harder to find.  It is also true that China and India are in the midst of a large urbanization process which will cause commodity prices to remain buoyant in the long term.  When commodity prices are high, mining asset values are even higher.  No economic growth process in history has been linear and the Company expects a significant correction in this progression in the near future.  It is therefore the Company's task to assemble the right acquisition targets, human capital and capital markets support to make these acquisitions when the inevitable correction occurs.  The Company remains dedicated to only acquiring further assets where they provide real value over a long period of time with substantial added value to shareholders.

It is also likely that the Company will list its shares on the Hong Kong Stock Exchange at some point in the future. That date will be driven by the Company’s need for capital should the next acquisition require additional funds. History has shown that unless liquidity is provided in a new listing through a new issue of shares, that company’s stock will trade thinly and without any real interest by Hong Kong and retail investors. Needless to say, an acquisition would never be made, a capital raising completed or a listing sought unless it was genuinely in the best long-term interest of shareholders.

In that same vein, the directors have agonized, after extensive consultation with shareholders, over the reinstatement of a dividend to shareholders.  Whilst understanding and agreeing with the discipline and financial need of many shareholders for a dividend, the Company still believes that the better use of internal funds can be made on the acquisition of assets that may become available in the near future.  In the interim, to alleviate some shareholders need for capital and to allow each individual shareholder to deal with his or her tax position, the Company has continued its share buy-back programme.

In such a year as 2010, tribute must be paid to the efforts of all site staff, head office personnel and the directors who worked so tirelessly to lift the operating suspension at Caijiaying, commission the plant upgrade, increase throughput, evaluate acquisitions and set the Company on the path to renewed financial strength in 2011.  My sincere thanks to every one of them.

Dividend

The directors do not recommend payment of a dividend at this time in the Company's development but have instigated a share buyback programme which provides an effective and tax efficient method of providing returns to individual shareholders.

Further information

Griffin Mining Limited

Mladen Ninkov - Chairman                                               Telephone: [phone]

Roger Goodwin - Finance Director

Panmure Gordon (UK) Limited                                                           Telephone: [phone]

               Dominic Morley

                Hannah Woodley

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 2010

(expressed in thousands US dollars)

		2010		2009
		$000		$000
Revenue		41,050		25,368
Cost of sales		(16,780)		(11,909)
Gross profit		24,270		13,459
Net operating expenses		(11,127)		(7,940)
Profit from operations		13,143		5,519
Share of losses of associated company		(109)		(517)
Foreign exchange gains		38		1,956
Finance income		350		253
Finance losses		(2,224)		-
Other income		38		35
Profit before tax		11,236		7,246
Income tax  expense		(2,376)		(1,013)
Profit after tax		8,860		6,233
Attributable to non-controlling interests		6,116		2,621
Attributable to equity share owners for the parent		2,744		3,612
		8,860		6,233
Basic earnings per share (cents)		1.51		1.99
Diluted earnings per share (cents)		1.49		1.97

 

Griffin Mining Limited

Summarised Consolidated Statement of Comprehensive Income

For the year ended 31 December 2010

(expressed in thousands US dollars)

		2010		2009
		$000		$000
Profit for the year		8,860		6,233
Other comprehensive income
Exchange differences on translating foreign operations		1,374		87
Other comprehensive income for the period, net of tax		1,374		87
Total comprehensive income for the period		10,234		6,320
Attributable to non-controlling interests		6,218		2,616
Attributable to equity owners of the parent		4,016		3,704
		10,234		6,320

 

Griffin Mining Limited

Summarised Consolidated Statement of Financial Position

As at 31 December 2010

(expressed in thousands US dollars)

		2010		2009
		$000		$000
ASSETS
Non-current assets
Property, plant and equipment		77,745		63,214
Intangible assets - Exploration interests		1,481		1,422
Investment in associated company		3,877		3,986
		83,103		68,622
Current assets
Inventories		3,136		2,780
Other current assets		3,423		5,279
Cash and cash equivalents		66,450		67,630
		73,009		75,689
Total assets		156,112		144,311
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital		1,804		1,817
Share premium		74,948		75,984
Contributing surplus		3,690		3,690
Share based payments		2,513		4,790
Other reserves		938		759
Foreign exchange reserve		8,480		7,234
Profit and loss reserve		47,631		40,440
Total equity attributable to equity holders of the parent		140,004		134,714
Non-controlling interests		6,218		2,616
Non-current liabilities
Long-term provisions		768		743
Current liabilities
Taxation payable		1,011		1,572
Trade and other payables		8,111		4,666
Total liabilities		9,122		6,238
Total equities and liabilities		156,112		144,311
Number of shares in issue		180,408,496		181,688,497
Attributable net asset value / total equity per share		$0.78		$0.74

Griffin Mining Limited

Summarised Consolidated Statement of Changes in Equity.

For the year ended 31 December 2010

(expressed in thousands US dollars)

	Share	Share	Contributing	Share	Other	Foreign	Profit	Total attributable	Non	Total
	Capital	Premium	surplus	Based	Reserves	Exchange	and loss	to equity holders	Controlling	Equity
				Payments		Reserve	Reserve	Of parent	Interests
	$000	$000	$000	$000	$000	$000	$000	$000	$000	$000
At 31 December 2008	1,816	75,950	3,690	5,826	711	7,142	35,345	130,480	-	130,480
Regulatory transfer for future investment	-	-	-	-	48	-	(48)	-	-	-
Issue of share capital	1	41	-	-	-	-	-	42	-	42
Purchase of shares for cancellation	-	(7)	-	-	-	-	-	(7)	-	(7)
Cost of share based payments	-	-	-	495	-	-		495	-	495
Transfer in respect of share based payments	-	-	-	(1,531)	-	-	1,531	-	-	-
Transaction with owners	1	34	-	(1,036)	48	-	1,483	530	-	530
Retained profit for the year	-	-	-	-	-	-	3,612	3,612	2,621	6,233
Other comprehensive income:
Exchange differences on translating foreign operations	-	-	-	-	-	92	-	92	(5)	87
Total comprehensive income for the year	-	-	-	-	-	92	3,612	3,704	2,616	6,320
At 31 December 2009	1,817	75,984	3,690	4,790	759	7,234	40,440	134,714	2,616	137,330
Regulatory transfer for future investment	-	-	-	-	153	-	(153)	-	-	-
Issue of share capital	3	94	-	-	-	-	-	97	-	97
Purchase of shares for cancellation	(16)	(1,130)	-	-	-	-	-	(1,146)	-	(1,146)
Cost of share based payments	-	-	-	2,323	-	-	-	2,323	-	2,323
Transfers in respect of share based payments	-	-	-	(4,600)	-	-	4,600	-	-	-
Transfers in respect of distributions	-	-	-	-	-	-	-	-	(2,616)	(2,616)
Transaction with owners	(13)	(1,036)	-	(2,277)	153	-	4,447	1,274	(2,616)	(1,342)
Retained profit for the year	-	-	-	-	-	-	2,744	2,744	6,116	8,860
Other comprehensive income:
Exchange differences on translating foreign operations	-	-	-	-	26	1,246	-	1,272	102	1,374
Total comprehensive income for the year	-	-	-	-	26	1,246	2,744	4,016	6,218	10,234
At 31 December 2010	1,804	74,948	3,690	2,513	938	8,480	47,631	140,004	6,218	146,222

Griffin Mining Limited

Summarised Cash Flow Statement

For the year ended 31 December 2010

(expressed in thousands US dollars)

		2010		2009
		$000		$000
Net cash flows from operating activities
Profit before taxation		11,236		7,246
Share of associated company losses		109		517
Foreign exchange (gains)		(38)		(1,956)
Finance (income)		(350)		(253)
Finance losses		2,224		-
Adjustment in respect of share based payments		2,323		495
Depreciation, depletion and amortisation		2,151		1,533
(Increase) / decrease in inventories		(356)		446
(Increase) / decrease in other current assets		(747)		285
Increase / (decrease) in trade and other payables		3,445		(2,882)
Net cash inflow from operating activities		19,997		5,431
Taxation paid		(2,936)		-
Cash flows from investing activities
Interest received		350		253
Payments to acquire intangible fixed assets - exploration interests		(10)		(105)
Payments to acquire tangible fixed assets - mineral interests		(10,162)		(5,944)
Payments to acquire tangible fixed assets - plant and equipment		(4,285)		(1,298)
Payments to acquire tangible fixed assets - office equipment		(36)
Payments to acquire put options		(2,239)
Net cash outflow from investing activities		(16,382)		(7,094)
Cash flows from financing activities
Issue of ordinary share capital		97		42
Purchase of shares for cancellation		(1,146)		(7)
		(1,049)		35
Decrease in cash and cash equivalents		(370)		(1,628)
Cash and cash equivalents at the beginning of the year		67,630		67,193
Effects of exchange rates		(810)		2,065
Cash and cash equivalents at the end of the year		66,450		67,630
Cash and cash equivalents comprise bank deposits.
Bank deposits		66,450		67,630

Included within net cash flows of $370,000 (2009 $1,628,000) are foreign exchange gains of $38,000 (2009 $1,956,000) which have been treated as realised.

Notes:

1.   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 435 of the UK Companies Act 2006.  The summarised consolidated statement of financial position at 31 December 2010 and the summarised consolidated income statement, summarised statement of comprehensive income, 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 2010 statutory financial statements upon which the auditors' opinion is unqualified. The results for the year ended 31 December 2009 have been extracted from the statutory accounts for that period, which contain an unqualified auditors' report.

3.   The annual report and accounts for 2010 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, 6^th 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:

			2010						2009
	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	2,744		181,579,409		1.51		3,612		181,560,512		1.99
Dilutive effect of securities
Options			2,648,124						1,906,603
Diluted earnings per share	2,744		184,227,533		1.49		3,612		183,467,115		1.97

 

END

 

 

FR AJMFTMBMMBPB