Final Results

RNS Number : 1830E

Griffin Mining Ld

28 May 2012

 

28^th MAY 2012

Griffin Mining Limited

PRELIMINARY RESULTS

RECORD 256% INCREASE IN 2011 PROFIT TO $39.95 MILLION

RECORD ZINC, GOLD, SILVER & LEAD PRODUCED

Griffin Mining Limited has today published its preliminary results for the year ended 31 December 2011.

Highlights:

·     Record revenues of $79.06 million (2010: $41.05 million) and profits before tax and minority interests of $39.95 million (2010: $11.24 million).

·     Record  715,955 tonnes of ore processed compared to 420,928 tonnes in 2010, a 70% increase.  

·     Record metal in concentrate production of 36,283 tonnes of zinc; 10,281 ounces gold; 312,509 ounces silver; and 1,909 tonnes lead.

Overview

Griffin Mining Limited ("Griffin" or the "Company") and its subsidiaries (together the "Group") achieved record results in 2011 with record production and record profit before tax of $39,953,000 (2010: $11,236,000). The record results follow the completion of processing plant upgrades, increased mining rates with uninterrupted production throughout the year.

Revenues increased to a record $79,062,000 (2010 $41,050,000) with record metal in concentrate sales resulting in increased profits from operations of $36,832,000 in 2011 from $13,143,000 in 2010. In summary:

            •           Record 695,848 tonnes of ore were mined, compared to 389,496 tonnes in 2010, a 79%

                        increase;

            •           Record 715,955 tonnes of ore were processed, compared to 420,928 tonnes in 2010, a 70%

                        increase;

            •           Record 36,283 tonnes of zinc metal in concentrate were produced, compared to 22,044

                        tonnes in 2010, a 65% increase;

            •           Record 10,281 ounces of gold in concentrate were produced, compared to 7,067 ounces in

                        2010, a 45% increase;

            •           Record 312,509 ounces of silver in concentrate were produced, compared to 157,679 ounces                     in 2010, a 98% increase; and

            •           Record 1,909 tonnes of lead in concentrate were produced, compared to 690 tonnes in 2010,                     a 177% increase.

Despite market prices for zinc metal in 2011 remaining generally unchanged from 2010, the average price per tonne of zinc metal in concentrate received increased to $1,546 in 2011 from $1,409 in 2010, indicating increased demand for zinc concentrate within China. The average price received for all other metals in concentrate sold in 2011 also improved over that achieved in 2010 with the average price received for gold being $1,438 per oz (2010 - $1,027), silver $26 per oz (2010 - $13.50) and lead $2,054 per tonne (2010 - $1,741).

Costs of sales increased in 2011 to $31,918,000 from $16,780,000 in 2010 due to increased production and mining and haulage costs increasing as lower mine levels were accessed.  With the commissioning of the upgraded processing facilities, processing costs per tonne fell during 2011 as economies of scale begin to be felt with increased production.

Group operating costs, including mine site administration costs, fell in 2011 to $10,312,000 from $11,127,000 in 2010.

With cash balances averaged some $79 million in 2011 the Group benefited from interest receipts on those funds of $616,000 in 2011 (2010 - $350,000). 

Foreign exchange gains of $2,588,000 were recorded in 2011 (2010 - $38,000).  These gains arose on Renminbi accounts and sterling  bank deposits. The Group is now permitted to hold Renminbi funds in Group bank accounts in Hong Kong.

Griffin's 39.2% share of the losses of Spitfire Oil Limited ("Spitfire") in 2011 was $118,000 (2010 - $109,000).

The increasing upward trend in metal prices led to  no metal put options being purchased in 2011.  The residual value of zinc put options purchased in 2010 of $14,000 was written off in 2011 (2010 - $2,224,000).

Income taxes in 2011 were $12,256,000 (2010 - $2,376,000). This increase reflects larger profits and an increase in PRC income tax from 12.5% to 25% due to the end of the pre-construction tax concessions enjoyed by Hebei Hua Ao Mining Company Limited ("Hebei Hua Ao") and the PRC withholding tax of 10% on dividends paid overseas.

The minority party's share of Hebei Hua Ao's profit of $11,882,000 (2010 - $6,116,000) resulted in an attributable profit to Griffin of $15,815,000 (2010 -  $2,744,00).

The Company's basic earnings per share improved to 8.96 cents per share from 1.51 cents per share in 2010 with diluted earnings per share of 8.76 cents per share in 2011 (2010 - 1.49 cents per share).

During 2011, 5,040,000 (2010 - 1,580,000) ordinary shares were bought back on market for cancellation at a cost of $4,977,000 (2010 - $1,146,000) thereby reducing the number of Griffin shares in issue to 175,501,830.

Net cash inflow in 2011 increased to $23,433,000 (2010 outflow of $370,000) despite the share buyback programme, due to increased profits and lower capital expenditure.

Attributable net assets increased to 87 cents per share as at 31 December 2011 (2010 - 78 cents per share).   

Chairman's Statement:

What began as a remarkable journey in 1997 has now culminated in the Company's 88.8% ownership of a world class, extraordinarily long mine life, operating mine and a mineral province whose potential has only just begun to be tapped.

In the past year, the Company has striven to deliver on its promised potential.  Financially, Griffin achieved a record profit before tax of $39,953,000, a 256% increase from the $11,236,000 result recorded in 2010.

Operationally, a record 715,955 tonnes of ore were processed compared to 420,928 tonnes in 2010, a 70% increase. A record 36,283 tonnes of zinc metal in concentrate were produced, compared to 22,044 tonnes in 2010, a 65% increase; a record 10,281 ounces of gold in concentrate were produced, compared to 7,067 ounces in 2010, a 45% increase; a record 312,509 ounces of silver in concentrate were produced, compared to 157,679 ounces in 2010, a 98% increase; and a record 1,909 tonnes of lead in concentrate were produced, compared to 690 tonnes in 2010, a 177% increase.

Geologically, the announcement of the new JORC Resource for Zones II and III at Caijiaying displayed the true potential of the orebody with a 32% increase in the Mineral Resource from 38.6 to 51.2 million tonnes, representing a 50 plus year mine life at an increased throughput rate.  Not only was the Mineral Resource increased in Zone III, even with the mine depletion, by 8% from 29.1 to 31.5 million tonnes, but the Mineral Resource at Zone II was increased by 107% from 9.4 to 19.6 million tonnes.  This is highly significant in that it will provide a second source of ore for the mill to service a planned increase in throughput in the near future.  Further drilling results since the calculation of the new JORC Resource have only increased the likelihood of even further resource upgrades in the future.

Of course, the major achievement of 2011 was the announcement on the 10th May 2012 that the Company had entered into an agreement to increase its majority in Hebei Hua Ao Mining Industry Company Limited ("Hebei Hua Ao") to 88.8% and extend the term of the Hebei Hua Ao joint venture through to 2037 ("the Transaction").  The enormity of this Transaction should not be lost.  Firstly it allows for full management control to now rest with Griffin staff with the "government" layers of management abolished.  Secondly, it allows planning with confidence to now proceed to apply for, and obtain, a mining licence at Zone II and to plan for an upgrade to the processing facilities and the necessary below ground development to increase throughput at Caijiaying up to 1.5 million tonnes per annum.  All this with the security of knowing the Company will be at Caijiaying at least until 2037 and reaping the vast majority of the profits emanating from the Caijiaying mine.

Corporately, the Company continues to examine a vast array of possible corporate and asset acquisitions to see if they can meet the stringent financial, operating and political criteria demanded by the Company.  In addition, the Company continues to evaluate and discuss the listing of Griffin on the Hong Kong Stock Exchange with a significant number of investment banks in Hong Kong. 

As I have mentioned far too many times, all mining companies are subject to the vagaries of commodity prices.  In normal circumstances, these prices are substantially governed by supply and demand equations and, to a lesser extent, commodity traders.  Unfortunately, since the Global Financial Crisis in 2008 and the fiscal irresponsibility of investment banks, commercial banks and all levels of government, economic growth, so often driven by debt, has faltered.  Whilst China and the emerging markets continue to grow and demand raw materials, the outlook looks rosy, particularly for the supply deficit predicted in the zinc market in the next 2 years.  However, uncertainty remains with the mountain of debt in the public sector, the undercapitalized banking sector and the contracting economies of the European Union and the inevitable consequences for world trade, growth and commodities demand.  We can only sit and wait to see what will be the outcome of this fiasco.

Dividend

The directors do not recommend payment of a dividend at this time in view of the use of the Company's financial resources to acquire a further 28.8% interest in Hebei Hua Ao Mining Industry Company Limited and an extension of the term of this Joint Venture.

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 2011

(expressed in thousands US dollars)

		2011		2010
		$000		$000
Revenue		79,062		41,050
Cost of sales		(31,918)		(16,780)
Gross profit		47,144		24,270
Net operating expenses		(10,312)		(11,127)
Profit from operations		36,832		13,143
Share of losses of associated company		(118)		(109)
Foreign exchange gains		2,588		38
Finance income		616		350
Finance losses		(14)		(2,224)
Other income		49		38
Profit before tax		39,953		11,236
Income tax  expense		(12,256)		(2,376)
Profit after tax		27,697		8,860
Attributable to non-controlling interests		11,882		6,116
Attributable to equity share owners for the parent		15,815		2,744
		27,697		8,860
Basic earnings per share (cents)		8.96		1.51
Diluted earnings per share (cents)		8.76		1.49

 

Griffin Mining Limited

Summarised Consolidated Statement of Comprehensive Income

For the year ended 31 December 2011

(expressed in thousands US dollars)

		2011		2010
		$000		$000
Profit for the year		27,697		8,860
Other comprehensive income
Exchange differences on translating foreign operations		2,417		1,374
Other comprehensive income for the period, net of tax		2,417		1,374
Total comprehensive income for the period		30,114		10,234
Attributable to non-controlling interests		12,691		6,218
Attributable to equity owners of the parent		17,423		4,016
		30,114		10,234

 

Griffin Mining Limited

Summarised Consolidated Statement of Financial Position

As at 31 December 2011

(expressed in thousands US dollars)

		2011		2010
		$000		$000
ASSETS
Non-current assets
Property, plant and equipment		85,291		77,745
Intangible assets - Exploration interests		1,573		1,481
Investment in associated company		3,759		3,877
		90,623		83,103
Current assets
Inventories		4,608		3,136
Other current assets		2,505		3,423
Cash and cash equivalents		91,089		66,450
		98,202		73,009
Total assets		188,825		156,112
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital		1,755		1,804
Share premium		70,061		74,948
Contributing surplus		3,690		3,690
Share based payments		3,030		2,513
Other reserves		1,300		938
Foreign exchange reserve		10,041		8,480
Profit and loss reserve		63,131		47,631
Total equity attributable to equity holders of the parent		153,008		140,004
Non-controlling interests		12,523		6,218
Non-current liabilities
Long-term provisions		806		768
Current liabilities
Taxation payable		11,631		1,011
Trade and other payables		10,857		8,111
Total current liabilities		22,488		9,122
Total equities and liabilities		188,825		156,112
Number of shares in issue		175,501,830		180,408,496
Attributable net asset value / total equity per share		$0.87		$0.78

Griffin Mining Limited

Summarised Consolidated Statement of Changes in Equity.

For the year ended 31 December 2011

(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 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)
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
Regulatory transfer for future investment	-	-	-	-	315	-	(315)	-	-	-
Issue of share capital	1	40	-	-	-	-	-	41	-	41
Purchase of shares for cancellation	(50)	(4,927)	-	-	-	-	-	(4,977)	-	(4,977)
Cost of share based payments	-	-	-	517	-	-	-	517	-	517
Transfers in respect of distributions	-	-	-	-	-	-	-	-	(6,386)	(6,386)
Transaction with owners	(49)	(4,887)	-	517	315	-	(315)	(4,419)	(6,386)	(10,805)
Profit for the year	-	-	-	-	-	-	15,815	15,815	11,882	27,697
Other comprehensive income:
Exchange differences on translating foreign operations	-	-	-	-	47	1,561	-	1,608	809	2,417
Total comprehensive income for the year	-	-	-	-	47	1,561	15,815	17,423	12,691	30,114
At 31 December 2011	1,755	70,061	3,690	3,030	1,300	10,041	63,131	153,008	12,523	165,531

Griffin Mining Limited

Summarised Cash Flow Statement

For the year ended 31 December 2011

(expressed in thousands US dollars)

		2011		2010
		$000		$000
Net cash flows from operating activities
Profit before taxation		39,953		11,236
Share of associated company losses		118		109
Foreign exchange (gains)		(2,588)		(38)
Finance (income)		(616)		(350)
Finance losses		14		2,224
Adjustment in respect of share based payments		517		2,323
Depreciation, depletion and amortisation		5,900		2,151
(Increase) / decrease in inventories		(1,472)		(356)
(Increase) / decrease in other current assets		(1,226)		(747)
Increase / (decrease) in trade and other payables		2,746		3,445
Net cash inflow from operating activities		43,346		19,997
Taxation paid		(1,637)		(2,936)
Cash flows from investing activities
Interest received		616		350
Payments to acquire intangible assets - exploration interests		(19)		(10)
Payments to acquire tangible assets - mineral interests		(6,073)		(10,162)
Payments to acquire tangible assets - plant and equipment		(3,605)		(4,285)
Payments to acquire tangible assets - office equipment		(2)		(36)
Payments to acquire put options		-		(2,239)
Net cash (outflow) from investing activities		(9,083)		(16,382)
Cash flows from financing activities
Issue of ordinary share capital		41		97
Purchase of shares for cancellation		(4,977)		(1,146)
Dividends paid to non controlling interests		(4,257)		-
Net cash (outflow) from financing activities		(9,193)		(1,049)
Increase / (decrease) in cash and cash equivalents		23,433		(370)
Cash and cash equivalents at the beginning of the year		66,450		67,630
Effects of exchange rates		1,206		(810)
Cash and cash equivalents at the end of the year		91,089		66,450
Cash and cash equivalents comprise bank deposits.
Bank deposits		91,089		66,450

Included within net cash flows of $23,423,000 (2010 $370,000) are foreign exchange gains of $2,588,000 (2010 $38,000) 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 2011 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 2011 statutory financial statements upon which the auditors' opinion is unqualified. The results for the year ended 31 December 2010 have been extracted from the statutory accounts for that period, which contain an unqualified auditors' report.

3.   The annual report and accounts for 2011 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:

				2011						2010
	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	15,815			176,499,620		8.96		2,744		181,579,409		1.51
Dilutive effect of securities
Options				3,981,592						2,648,124
Diluted earnings per share	15,815			180,481,212		8.76		2,744		184,227,533		1.49

 

END

 

 

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