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Griffin Mining Ld (GFM)

  Print          Annual reports

Tuesday 30 April, 2019

Griffin Mining Ld

Final Results

RNS Number : 4716X
Griffin Mining Ld
30 April 2019
 

 

 

Griffin Mining Limited

 

Royal Trust House, 54 Jermyn Street, London SW1Y 6LX, United Kingdom

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

E mail: [email protected]

 

30th April 2019

 

Results for 2018 and Annual Report and Accounts

 

Griffin Mining Limited ("Griffin" or the "Company") has today published its annual report and financial statements for the year ended 31 December 2018 which are available on the Company's web site wwww.griffinmining.com.

 

In 2018, the Company and its subsidiaries (together the "Group") recorded;

 

·     Revenues of $99,067,000 (2017: $126,657,000);

 

·     Operating profits of $35,555,000 (2017: $63,773,000);

 

·     Profit before tax of $34,798,000 (2017: $60,877,000);

 

·     Profit after tax of $25,477,000 (2017: $43,321,000); and

 

·     Earnings of 14.83 cents per share (2017: 24.63 cents).

 

Profits were impacted by falling zinc metal prices, higher treatment charges and lower concentrate production.

 

Zinc metal in concentrate sales before royalties and resource taxes in 2018 amounted to $78,821,000 (2017: $99,886,000). Lead and precious metal in concentrate sales amounted to $24,920,000 (2017: $32,758,000).

 

In 2018, metal in concentrate sales were:

 

·     Zinc 36,672 tonnes (2017: 43,342 tonnes);

 

·     Gold 16,206 ounces (2017: 20,489 ounces);

 

·     Silver 279,632 ounces (2017: 310,611 ounces); and

 

·     Lead 1,027 tonnes (2017: 1,421 tonnes).

 

Average prices achieved in 2018 were:

 

·     Zinc metal per tonne of $2,149 (2017: $2,305);

 

·     Gold metal per ounce of $1,173 (2017: $1,183);

 

·     Silver metal per ounce of $12.60 (2017: $13.50); and

 

·     Lead metal per tonne of $2,250 (2017: $2,242).

 

Cost of sales of $45,798,000 in 2018 were up 3.2% on that incurred in 2017 of $44,360,000. This increase may be attributed to inflation in China with consequent wage increases, higher costs incurred extracting ore from greater depth, higher costs incurred backfilling waste material and tailings to minimise surface storage of tailings, higher power charges and changes in the recoverability of Chinese VAT inputs.

 

Administration expenses (including those of the Caijiaying Mine) have fallen 4.4% to $17,714,000 from $18,524,000 in 2017. This reduction was mainly due to lower service fees paid to Hebei Hua Ao's Chinese shareholder, Zhangjiakou Yuanrun Enterprise Management Consulting Services Company Limited, of $3,732,000 in 2018 compared with $5,900,000 in 2017. Otherwise, administration costs were up reflecting inflationary pressures in China, expenses incurred in applying for the new mining licence over Zone II and the expansion of China Zinc Limited activities in investigating potential ventures elsewhere in China. Central Company costs incurred outside China have been reduced. 

 

Foreign exchange gains of $42,000 (2017: $87,000) were recorded in 2018.

 

Following the repayment of all bank loans in 2017, bank deposit interest of $223,000 (2017: $143,000) was received.

 

Income taxes of $9,321,000 (2017: $17,556,000) have been charged in 2018. This includes a deferred taxation credit of $343,000 (2017: charge $95,000).

 

Basic earnings in 2018 were 14.83 cents per share (2017: 24.63 cents) and diluted earnings were 13.35 cents per share (2017: 22.97 cents).

 

Cash generated from operations have been used to reduce liabilities resulting in net cash flow from operating activities of $20,439,000, $16,884,000 of which has been expended in further development of the Caijiaying Mine including equipment and exploration. In addition, 540,000 shares in the Company were bought in at a cost of $917,000.

 

Attributable net assets per share at 31st December 2018 was $1.22 (2017: $1.13).

 


 

Chairman's Statement:

 

By the measure of almost any other mining company, 2018 would be considered a monumentally, outstanding success.  $3 billion of in situ metal was added to the resource base, an operating profit of $36 million and a net profit after tax of $25.5 million was generated, major above and below ground capital developments were undertaken to position the Caijiaying Mine operationally for the next 10 years and all this whilst remaining debt free and self-funding from operations.

 

In terms of long term value added to the Company, over 3 million tonnes of zinc metal and 1.16 million ounces of gold have been defined by the Company since the start of mining in 2005 emphasizing the success of the Company's exploration efforts and the extraordinary size and nature of the orebody contained within  the Caijiaying Mine.

 

Nevertheless, and reversing a well known proverb, perhaps every silver lining has a cloud, with the mining licence over Zone II still failing to be granted.  In effect, this means constructed and commissioned infrastructure lies idle waiting for this new source of ore to be mined and processed to substantially increase the Company's metal production.  I am not sure I have any remaining credibility in crystal ball gazing and my days as a seer may well and truly be over, but I sincerely believe the new mining licence will be granted in 2019.

 

The stand-out achievement of the year was the Company increasing its resource base by 78.5%, all from Zone III, including adding 807,000 tonnes of zinc metal, 311,000 ounces of gold and 13.6 million ounces of silver.  Modelling of the other "zones" at the Caijiaying Mine has been progressing well with all concerned very excited on the possible size of the revised Zone II resource model as well as the maiden estimate for Zone VIII, both expected by the end of the northern summer.

 

Financially, the Company and its subsidiaries had a good year in light of falling zinc metal prices, higher treatment charges and lower concentrate production.  Revenues of $99 million were recorded with an Operating Profit of $35.6 million, Profit before Tax of $34.8 million, Profit after Tax of $25.5 million and Earnings of 14.83 cents per share.

 

Operationally, ore mined amounted to 872,069 tonnes whilst ore processed was  930,472 tonnes amounting to metal in concentrate produced of 37,112 tonnes of zinc,  16,230 ounces of gold, 280,712 ounces of silver and 1,030 tonnes of lead.

 

With the development of Zone II awaiting the new mining licence, the decision was taken to institute a programme to further modernise the Caijiaying Mine.  Underground development work was primarily focused on developing future stoping horizons between the 1175 metre and 1000 metre level, a much larger development than previously undertaken at the Caijiaying Mine.  A twin boom electric hydraulic development drill and three 20 tonne, fully enclosed cabin, haulage trucks were added to the fleet by the contractor allowing more material being hauled from deeper in the Caijiaying Mine with less truck movements and greater reliability.  Further fleet upgrades continue on an ongoing basis.

 

As a responsible citizen of both China and Planet Earth, the Company continues to maintain and further implement best practices regarding the protection of the environment and has invested heavily in the local community. The Company believes these to be moral, humane, community and planetary obligations. I would urge you to read of our practices and contributions in this Annual Report and obtain the sense of pride from the contributions the Company has made in this area. 

 

In spite of all the above achievements, the Company does not rest on its laurels. In the words of Mark Twain, "To stand still is to fall behind." Firstly, it continues to explore areas surrounding the Caijiaying Mine, including the prospective Sangongdi area.  The scope of that work can be deemed in the Exploration section of this Annual Report.  Secondly, in 2018, the Company expanded the scope and activities of its wholly owned subsidiary China Zinc Limited to create a data base of the geology, exploration and mining activities in China to search for potential acquisitions of base metals projects that meet the Company's pre-set economic criteria.  Any such projects found not to meet this criteria will be either ignored, or if seemingly of value, sold, joint ventured or offered in a separate vehicle to existing Griffin shareholders.  Thirdly, the Company continues to investigate potential mining projects located outside of China on the same objective investment basis as historically has been the case.

 

 

 

 

 

Further information

 

Griffin Mining Limited

Mladen Ninkov - Chairman  Telephone: +44(0)20 7629 7772

Roger Goodwin - Finance Director

 

Panmure Gordon (UK) Limited                                    Telephone: +44 (0) 20 7886 2500

               Dominic Morley

 

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

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No.596/2014.

 



 

Griffin Mining Limited

Summarised Consolidated Income Statement

For the year ended 31 December 2018

(expressed in thousands US dollars)

 


2018


2017


Audited


Audited


$000


$000





Revenue

99,067


126,657





Cost of sales

(45,798)


(44,360)









Gross profit

53,269


82,297





Administration expenses

(17,714)


(18,524)









Profit from operations

35,555


63,773





Losses on disposal of plant and equipment

(939)


(1,067)

Foreign exchange gains    

42


87

Finance income

223


143

Finance costs

(283)


(2,219)

Other income

200


160









Profit before tax

34,798


60,877





Income tax  expense

(9,321)


(17,556)









Profit for the year

25,477


43,321









Basic earnings per share (cents)

14.83


24.63





Diluted earnings per share (cents)

13.35


22.97



Griffin Mining Limited

Summarised Consolidated Statement of Comprehensive Income

For the year ended 31 December 2018

(expressed in thousands US dollars)

 

 



2018


2017



Audited


Audited



$000


$000






Profit for the year


25,477


43,321






Other comprehensive (expenses) / income that will be reclassified to profit or loss










Exchange differences on translating foreign operations


(5,856)


5,004






 

Other comprehensive (expenses) / income for the year, net of tax


 

(5,856)


 

5,004






 

Total comprehensive income for the year


 

19,621


 

48,325

 


Griffin Mining Limited

Summarised Consolidated Statement of Financial Position

As at 31 December 2018

(expressed in thousands US dollars)

 


2018


2017


Audited


Audited


$000


$000

ASSETS




Non-current assets




Property, plant and equipment

213,140


214,695

Intangible assets - exploration interests

2,016


2,035


215,156


216,730

Current assets




Inventories

4,951


5,868

Receivables and other current assets

2,819


4,374

Cash and cash equivalents

28,452


26,518


36,222


36,760





Total assets

251,378


253,490





EQUITY AND LIABILITIES




Equity attributable to equity holders of the parent




Share capital

1,727


1,700

Share premium

68,442


67,295

Contributing surplus

3,690


3,690

Share based payments

2,072


2,072

Shares held in treasury

(917)


-

Chinese statutory re-investment reserve

2,386


2,204

Other reserve on acquisition of non controlling interests

(29,346)


(29,346)

Foreign exchange reserve

4,027


9,777

Profit and loss reserve

159,161


133,972

Total equity attributable to equity holders of the parent

211,242


191,364





Non-current liabilities




Long-term provisions

2,302


2,418

Deferred taxation

2,393


2,865

Finance lease

258


712


4,953


5,995

Current liabilities




Trade and other payables

33,632


52,437

Finance lease

1,551


3,694

Total current liabilities

35,183


56,131





Total equities and liabilities

251,378


253,490





Attributable net asset value per share to equity holders of parent

$1.22


$1.13

 

 

Griffin Mining Limited

Summarised Consolidated Statement of Changes in Equity.

For the year ended 31 December 2018

(expressed in thousands US dollars)

 


Share

Share

Contributing

Share

Shares

Chinese

Other

Foreign

Profit

Total


Capital

premium

surplus

Based

held in

Re-investment

reserve on

Exchange

and loss

attributable to





Payments

Treasury

Reserve

acquisition of

Reserve

reserve

equity holders








non-controlling



of parent








interests





$000

$000

$000

$000

$000

$000

$000

$000

$000

$000

 

At 31 December 2016

1,790

71,310

3,690

2,072

 

(3,875)

1,583

 

(29,346)

4,871

91,174

143,269

 

Regulatory transfer for future investment

-

-

-

-

 

-

523

 

-

-

(523)

-

Purchase of shares held in treasury

-

-

-

-

(230)

-

-

-

-

(230)

Cancellation of shares held in treasury

(90)

(4,015)

-

-

4,105

-

-

-

-

-

Transaction with owners

(90)

(4,015)

-

-

3,875

523

-

-

(523)

(230)

 

Profit for the year

-

-

-

-

 

-

-

 

-

-

43,321

43,321

Other comprehensive income:











Exchange differences on translating foreign   operations

-

-

-

-

 

-

98

 

-

4,906

-

5,004

Total comprehensive income

-

-

-

-

-

98

-

4,906

43,321

48,325

 

At 31 December 2017

1,700

67,295

3,690

2,072

 

-

2,204

 

(29,346)

9,777

133,972

191,364

 

Regulatory transfer for future investment

-

-

-

-

 

-

288



(288)

-

Issue of shares on exercise of options

27

1,147

-

-

-

-

-

-

-

1,174

Purchase of shares held in treasury

-

-

-

-

(917)

-

-

-

-

(917)

Transaction with owners

27

1,147

-

-

(917)

288

-

-

(288)

257

 

Profit for the year

-

-

-

-

 

-

-

 

-

-

25,477

25,477

Other comprehensive income:











Exchange differences on translating foreign operations

-

-

-

-

 

-

(106)

 

-

(5,750)

-

(5,856)

Total comprehensive income

-

-

-

-

-

(106)

-

(5,750)

25,477

19,621

 

At 31 December 2018

1,727

68,442

3,690

2,072

 

(917)

2,386

 

(29,346)

4,027

159,161

211,242


Griffin Mining Limited

Summarised Consolidated Cash Flow Statement

For the year ended 31 December 2018

(expressed in thousands US dollars)

 


2018


2017


Audited


Audited


$000


$000





Net cash flows from operating activities




Profit  before taxation

34,798


60,877

Foreign exchange gains

(42)


(87)

Finance income

(223)


(143)

Finance costs

283


2,219

Depreciation, depletion and amortisation

10,328


9,783

Losses on disposal of equipment

939


1,067

Decrease in inventories

917


280

(Increase) / decrease in receivables and other current assets

(1,059)


3,928

(Decrease) / increase in trade and other payables

(12,917)


7,621

Taxation paid

(12,585)


(8,108)

Net cash inflow from operating activities

20,439


77,437





Cash flows from investing activities




Interest received

223


143

Proceeds on disposal of equipment

351


184

Payments to acquire - mineral interests

(10,669)


(9,330)

Payments to acquire - plant and equipment

(6,134)


(4,125)

Payments to acquire - office equipment

-


(2)

Payments to acquire intangible fixed assets - exploration interests

(81)


(128)

Net cash outflow from investing activities

(16,310)


(13,258)





Cash flows from financing activities




Issue of ordinary shares on exercise of options

1,174


-

Purchase of shares for treasury

(917)


(230)

Interest paid

-


(1,773)

Finance lease repayments

(2,728)


(2,943)

Repayment of bank loans

-


(46,024)

Net cash outflow from financing activities

(2,471)


(50,970)





Increase in cash and cash equivalents

1,658


13,209





Cash and cash equivalents at the beginning of the year

26,518


13,218

Effects of exchange rates

276


91

Cash and cash equivalents at the end of the year

28,452


26,518





Cash and cash equivalents comprise bank deposits.




Bank deposits

28,452


26,518

 

 

Included within net cash flows of $1,658,000 (2017 $13,209,000) are foreign exchange gains of $42,000 (2017 gains $87,000) 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 financial statements of the Company.

 

2.   The summary financial statements set out above do not constitute statutory financial statements 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 2018 and the Summarised Consolidated Income Statement, Summarised Consolidated Statement of Comprehensive Income, Summarised 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 audited 2018 statutory financial statements.

 

3.   The annual report and accounts for 2018 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, 8th Floor, 54 Jermyn Street, London, SW1Y 6LX.

 

4.   The Group has one business segment, the Caijiaying zinc gold mine in the People's Republic of China ("PRC").  All sales and costs of sales in 2018 and 2017 were derived from the Caijiaying zinc gold mine.

 


2018


2017


$000


$000

REVENUES




  China

99,067


126,657





  Zinc concentrate sales

78,821


99,886

  Lead and precious metals concentrate sales

24,920


32,758

  Royalties and resource taxes

(4,674)


(5,987)


99,067


126,657





COST OF SALES




  Mining costs

16,680


16,630

  Haulage costs

8,374


8,130

  Processing costs

10,423


9,681

  Depreciation, depletion and amortisation (excluding that in administration costs)

9,652


9,182

  Stock movements

669


737


45,798


44,360





ADMINISTRATION EXPENSES




China

13,122


13,819

Australia

442


434

European Union

4,150


4,271


17,714


18,524

 

All revenues, cost of sales and operating expenses charged to profit relate to continuing operations.



Notes (continued):

TOTAL ASSETS

2018


2017


$000


$000

China

245,505


250,809

Australia

924


641

UK / Bermuda

4,949


2,040


251,378


253,490





CAPITAL EXPENDITURE

2018


2017


$000


$000

China

16,884


13,583

UK / Bermuda

-


2


16,884


13,585

 

FINANCE INCOME

2018


2017


$000


$000

Interest on bank deposits

223


143

 

FINANCE COSTS

2018


2017


$000


$000

Interest payable on short term bank loans

-


1,772

Finance lease interest

283


447


283


2,219

 

OTHER INCOME

2018


2017


$000


$000

Scrap and sundry other sales

200


160

 

INCOME TAX EXPENSE

2018


2017


$000


$000

Profit for the year before tax

34,798


60,877





Expected tax expense at a standard rate of PRC income tax of 25% (2017 25%)

8,699


15,219

Adjustment for tax exempt items:




- Income and expenses outside the PRC not subject to tax

629


854





Adjustments for short term timing differences:




- In respect of accounting differences

(704)


(490)

- Other

-


162





Adjustments for permanent timing differences re prior year adjustments

(185)


-

Adjustments for permanent timing differences other

1,154


1,678





Withholding tax on intercompany dividends and charges

71


38





Current taxation expense

9,664


17,461





Deferred taxation (credit) / expense




Correction of provision brought forward

(674)


-

Origination and reversal of temporary timing differences

331


95


(343)


95





Total tax expense

9,321


17,556

 

Notes (continued):

 

INCOME TAX EXPENSE (continued)

 

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 2018 (25% in 2017) based upon the profits calculated under Chinese generally accepted accounting principles (Chinese "GAAP").

 

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.

 

 

EARNINGS PER SHARE

 

Reconciliation of the earnings and weighted average number of shares used in the calculations are set out below:

 




2018






2017




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

 

25,477

 

 

171,842,166

 

 

14.83

 

 

43,321

 

 

175,894,007

 

 

24.63

Dilutive effect of securities

 

 

 

 

 

 

 

 

 

 

 

Options

-

 

16,494,541

 

(1.48)

 

-

 

12,703,367

 

(1.66)

Diluted earnings per share

 

25,477

 

 

188,336,707

 

 

13.35

 

 

43,321

 

 

188,597,374

 

 

22.97

 

 

Property, plant and equipment

 


Mineral

Interests


Mill and mobile mine equipment


Office furniture & equipment


Total


$000


$000


$000


$000

 

At 31 December 2016

 

158,144


 

46,238


 

109


 

204,491

Foreign exchange adjustments

4,976


2,805


-


7,781

Additions during the year

9,330


4,125


2


13,457

Disposals

-


(1,250)


(1)


(1,251)

Depreciation charge for the year

(5,404)


(4,351)


(28)


(9,783)

 

At 31 December 2017

 

167,046


 

47,567


 

82


 

214,695

Foreign exchange adjustments

(4,450)


(2,291)


-


(6,741)

Additions during the year

10,669


6,134


-


16,803

Disposals

-


(1,289)


-


(1,289)

Depreciation charge for the year

(5,927)


(4,374)


(27)


(10,328)

 

At 31 December 2018

 

167,338


 

45,747


 

55


 

213,140

Property, plant and equipment (continued)








Mineral

Interests


Mill and mobile mine equipment


Office furniture & equipment


Total


$000


$000


$000


$000

At 31 December 2016








Cost

185,252


67,009


133


252,394

Accumulated depreciation

(27,108)


(20,771)


(24)


(47,903)

Net carrying amount

158,144


46,238


109


204,491









At 31 December 2017








Cost

200,708


72,366


134


273,208

Accumulated depreciation

(33,662)


(24,799)


(52)


(58,513)

Net carrying amount

167,046


47,567


82


214,695









At 31 December 2018








Cost

205,840


72,028


134


278,002

Accumulated depreciation

(38,502)


(26,281)


(79)


(64,862)

Net carrying amount

167,338


45,747


55


213,140

 

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.

 

Property, plant and equipment includes $15,034,000 (2017: $13,170,000) of assets under construction yet to be depreciated.

 

The office furniture and equipment disclosed above relates solely to the fixed assets of the Company and China Zinc Pty Limited.

 

During 2013 plant and equipment with a deemed value of $12,880,000 were acquired under a finance lease, upon which depreciation of $4,035,000 (2017: $3,428,000) has been provided. At 31 December 2018 the net carrying amount of this equipment was $7,534,000 (2017: $8,723,000).

 

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.

 

The directors have reassessed the net carrying value of capitalised costs at 31 December 2018 and in estimating the discounted future cash flows from the continuing operations at the Caijiaying mine the following principal assumptions were made:

 

•       Future market prices for zinc of $2,700 per tonne and gold of $1,300 per troy ounce;

•       Future production from Zone III at Caijiaying to end of the business licence in 2037 with ore mined and processed rising to 1.5 million tonnes of ore per annum;

•       Costs based upon past performance and that budgeted for 2019;

•       Discount interest rate of 10%; and

•       Continued maintenance and grant of applicable licences and permits.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
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