REG-China Nonferrous Gold Limited Final Results
30/06/2022 13:00
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Final Results
The information contained within this announcement is deemed by the Company to
constitute inside information under the Market Abuse Regulation (EU) No.
596/2014.
China Nonferrous Gold Limited
(“CNG” or the “Company”)
Final Results
for the twelve months ended 31 December 2021
China Nonferrous Gold Limited 中国有色黄金有限公司 (AIM: CNG), the
mineral exploration and development company currently developing the Pakrut
gold project in the Republic of Tajikistan, today announces its final results
for the year ended 31 December 2021.
The results below are extracted from the Company’s audited Annual Report and
Financial Statements. Copies of the Annual Report have been dispatched to
shareholders today and are now available on the Company’s website
(www.cnfgold.com
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.cnfgold.com&esheet=52767146&newsitemid=20220630005440&lan=en-US&anchor=www.cnfgold.com&index=1&md5=d1dcf30afb119998f7540dc08bca0b33)
).
The Company also confirms that it will post a notice convening the annual
general meeting of the Company in due course. A further announcement will be
made when it is dispatched.
For further information please visit the Company’s website (www.cnfgold.com
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.cnfgold.com&esheet=52767146&newsitemid=20220630005440&lan=en-US&anchor=www.cnfgold.com&index=2&md5=b35a2a2a166da86caf90746d3bf85412)
) or contact:
China Nonferrous Gold Limited
Zhang Hui, Managing Director
Tel: +86 10 8442 6662
WH Ireland Limited (NOMAD & Broker)
Katy Mitchell (mailto:Katy.Mitchell@whirelandcb.com) , Andrew de Andrade
Tel: 0207 220 1666
BlytheRay (PR)
Tim Blythe, Megan Ray
Tel: +44 (0)20 7138 3224
Project Summary
The Pakrut gold project, of which CNG has 100 per cent ownership, is situated
in Tajikistan approximately 120 km northeast of the capital city Dushanbe.
Pakrut is located within the Tien Shan gold belt, which extends from
Uzbekistan into Tajikistan, Kyrgyzstan and Western China, and which hosts a
number of multi-million ounce gold deposits.
CNG is currently progressing well in several important aspects, with the
Pakrut gold mine entering normal production and achieving full operational
capacity in 2021.
The Company made significant achievements in 2021 and became an important
gold-production enterprise in Tajikistan. The Pakrut gold mine achieved its
internal production targets for 2021, which brings steady cash flows to
support the sustainable development of the company.
About Tajikistan
Tajikistan is a secular republic located in Central Asia. The country is a
member of the Commonwealth of Independent States and the Shanghai Cooperation
Organisation. Tajikistan hosts numerous operating precious metal mines as well
as the largest aluminium smelter in Central Asia. CNG's management team has
extensive experience in the mining industry in Tajikistan.
Chief Executive Officer’s Statement
As CEO of the board, it gives me great pleasure to present the CEO’s
statement of the annual report for the year ended 31 December 2021. Following
the first successful normal production in 2019, the Company has progressed
well in several important aspects, with the Pakrut gold mine entering formal
production and achieving full operational capacity in 2020.
The Company made significant achievements in 2021 and became an important
gold-production enterprise in Tajikistan. The Pakrut gold mine achieved its
internal production targets for 2021, which brings steady cash flows to
support the sustainable development of the Company.
Operation
From January to December 2021, a total of 625,078 tons of ore was extracted
from the Pakrut gold mine (2020: 640,036 tons), and a total of 650,995 tons of
ore were processed at a grade of 2.29 g/t, 19,918 tons of gold concentrate
were produced at a grade of 69.22 g/t,(2020: 640,035 tons of ore were
processed at a grade of 2.04 g/t, 19,416 tons of gold concentrate were
produced at a grade of 65.04g/t), 1,249 kg gold bullion were poured with a
comprehensive recovery rate of 91.61% (2020: 1,126 kg gold bullion with a
recovery rate of 92.94%).
COVID-19
With COVID-19 continuing to have a significant impact on the global economy,
our priority is the safety and health of our people and ensuring the
Company’s operations can continue in operation as normal. Since the outbreak
of COVID-19 in Tajikistan on 30 April 2020, the Company has taken appropriate
steps and effective measures to ensure that staff are protected at the mine
site. To date operations at the mine site at Pakrut continue as normal, and
there are no confirmed or suspected cases in the Company in Tajikistan or
China.
The impact on working conditions has been reduced as much as is practical.
Beijing has sought to reduce channels for the transmission of the virus and
there have been no cases reported within the Company to date. The mine is
still in normal operation. The amount of production personnel at the mine site
remains sufficient to meet the required production level, so production is
still progressing well at site in spite of COVID-19 and the targets for 2021
were not affected by the suspended flights. Since COVID-19, direct flights
from Tajik to China via Urumqi have been stopped. The Company has ensured the
mobility of employees through multiple channels, such as returning through
Dubai or Iran. It is gratifying that the Tajik government has issued an
official statement that direct flights back to China may be opened in June
2022, which will greatly reduce ticket costs and travel time. The government
of Tajikistan announced in early 2021 that 91% of the local adults had been
vaccinated against the new variant, and all the staff of the Company have now
been vaccinated with third vaccines to further guard against COVID-19.
Moreover, the Tajik government has also lifted all entry-exit restrictions at
the land ports between Uzbekistan and Tajikistan, facilitating the purchase of
materials by the Company.
Financial results
The development and construction work at the Pakrut Gold Project was finalised
at the end of the 2018 financial year. The Group therefore generated revenue
from full operational production from the beginning of the 2019 financial
year.
Administration expenditure for the year under review was US$19,878,782 (2020:
US$17,827,290). The main reason for the increase this year is due to pandemic
isolation costs for employees and the increase of pandemic subsidies for
employees due to the pandemic, as well as road tax calculated by 70% of the
income. The advance receipts of suppliers cannot be collected due to the
bankruptcy of suppliers, resulting in bad debts of $370,000.
The overall loss incurred by the Group was US$6,245,062 (2020: US$6,357,743).
Pakrut generated gold sales revenue of US$71,991,962 (2020: US$64,516,000), a
significant increase as a result of entering full operational production and
gold prices rose sharply due to Covid-19.
During the course of the year, the Group did not enter into any new financing
agreements with shareholders or their associates. Instead, the original
repayment dates in December 2020 on the loan contracts previously signed with
China Nonferrous Metals International Mining Co., Ltd. and China Nonferrous
Metals Mining Group Co., Ltd. (“CNMC Loans”) were extended once more and
are now repayable in December 2022.
In February 2021, the Group repaid US$20m of the CNMC International Capitals
Company Limited. And in June 2021, the Group repaid another US$9.26
million(¥60million).
In June 2021, the Group repaid the remaining US$65 million to China
Construction Bank Corporation Macau Branch (“CCBC”) in respect of its
existing loan agreement, which was signed in 2016. In January 2021, the Group
repaid a loan of US$20 million from Construction Bank Corporation Macau Branch
(“CCBC”), which was signed in 2019. In March 2021, the Group repaid a loan
of US$14.55 million from China Construction Bank (Asia) Corporation Limited
(“CCBC”), which was signed in 2020.
In January 2021, the Group executed an agreement with China CITIC Bank
Corporation Limited (Zhuhai Branch) (“CITIC”) for a loan facility of up to
CNY 300million which is equivalent to US$46.37million. The CITIC Loan facility
is for a maximum of 12 months and is repayable 12 months from first drawdown.
US$20million of the CITIC Loan was drawn down in January 2021 to replace the
China Construction Bank (CCB) Macau loan of US$20million which fell due in
January 2021. A second drawdown of US$14.55m in March 2021 was used to repay
the CCB Asia loan of US$14.55m.
In June 2021, the Group executed an agreement with Bank of Shanghai (Hong
Kong) Limited (“BOS”) for a loan facility of up to US $65 million (the
“BOS Loan”). The Loan facility is for a maximum of 24 months and is
repayable 24 months from the drawdown. The total amount of US$65m of the BOS
Loan had been drawn down in June 2021 to repay the CCBC Macau loan of US$65m.
The existing loan facilities from CITIC and BOS totaled US$99.55 million and
the CNMC and CNMIM loan facilities totaled US$269 million so that, including
interest, the total amount of loans drawn down by the Company was US$369
million (approximately US$319m without interest). As the major shareholder and
ultimate beneficial owner, CNMIM and CNMC have confirmed they will continue to
support the Company. The existing loans in place with the Company’s
shareholder (or its associates) were extended again once again in 2021 and now
fall due for repayment in 2022.
The Group has continued production throughout 2021 despite the outbreak of
COVID-19, enabling it to generate sufficient working capital for operations.
However, in order to ensure the repayment of the existing loans detailed above
a broader refinancing will be required. At the same time, for short-term loans
from external banks, it will continue to communicate with multiple banks and
make capital arrangements in advance (where necessary) to raise sufficient
working capital to be able to continue the normal operations of the Group. In
order to ensure the repayment of existing loans a broader refinancing will be
required. Some refinancing has been completed post-year end and is disclosed
in the following section. The ultimate parent Company CNMC has committed to
support the CNG group should this be required for a period of at least 12
months from the date of approval of these financial statements.
Events after the Reporting Period
In January 2022, the Group executed a loan agreement with CNMC Trade Company
Limited (“CNMC Trade”) for a loan of up to USD $34.55 million (the“CNMC
Loan”). This CNMC Loan has been used to repay the existing China CITIC Bank
Corporation Limited (“CITIC”) bank facilities of USD $34.55m (being USD20m
advanced in January 2021 (“First Loan”) and USD14.55m advanced in March
2021 (“Second Loan”)).
In addition, in April 2022, the Group executed a foreign currency working
capital loan agreement with China CITIC Bank Corporation Limited (Zhuhai
Branch) (“CITIC”) for a loan facility of up to US$20 million with an
annual interest at 3.00% over 6 month LIBOR, which was used to repay US$20m of
the CNMC Loan.
The Company continues to explore a wider refinancing of its loans.
Outlook
The Company is continuing to enhance its production capacity. Whilst improving
production, the Company is also focusing on perfecting and improving the
smelting process by reducing production costs, increasing recovery rates and
improving competitiveness.
The Company has long been dedicated to becoming a significant gold producer in
Central Asia. The Company has also established a strong relationship with the
government of Tajikistan and other Central Asian countries, and it will
consider other appropriate acquisitions at the right time, although there can
be no guarantee that any acquisition will occur.
While we have taken big strides in the production and operation of the Pakrut
gold mine and achieved much, there are still challenges to overcome and
targets to meet, all of which I am confident to accomplish in the coming
months.
Uncertainty created by the coronavirus pandemic on production and operations
still exists in Tajikistan, and the long term effects are difficult to predict
and estimate. The Company will make every effort to meet pandemic prevention
and control requirements, as well as stabilizing and expanding the production
and operation of Pakrut gold mine.
I would like to take this opportunity to thank all our employees, management
and advisers for their continued hard work in 2021. I would also like to
extend my thanks to all our stakeholders for their continued backing over the
years. I very much look forward to updating our shareholders further on the
mine developments, production levels, new strategy and direction.
Zhang Hui
Chief Executive Officer
30 June 2022
CHINA NONFERROUS GOLD LIMITED
Report of the Directors
Auditors Opinion
We have audited the group financial statements of China Nonferrous Gold
Limited (the ‘group’) for the year ended 31 December 2021 which comprise
the Consolidated Statement of Comprehensive Income, the Consolidated Statement
of Financial Position, the Consolidated Statement of Changes in Equity, the
Consolidated Statement of Cash Flows and Notes to the Financial Statements,
including significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion, the group financial statements:
• give a true and fair view of the state of the group’s affairs as at 31
December 2021 and of its loss for the year then ended; and
• have been properly prepared in accordance with IFRSs as adopted by the
European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the
audit of the financial statements section of our report. We are independent of
the group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to going concern
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. Our evaluation of the directors’
assessment of the group’s ability to continue to adopt the going concern
basis of accounting included an analysis of qualitative and quantitative
aspects within management’s forecast financial information up to the 31
December 2024, as well as obtaining a letter of support from the group’s
ultimate parent as well as the latest financial information of this entity.
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.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We
determined materiality for the financial statements as a whole to be
US$3,900,000 (2020: US$4,478,000) for the group financial statement using 1%
of gross assets as a basis.
We consider gross assets to be the most relevant determinant of the group’s
financial position and performance used by shareholders, with the key
financial statement balances being producing mines, other property, plant and
equipment, inventory and cash. The going concern of the group is dependent on
its ability to fund operations going forward, as well as on the valuation of
its assets, which represent the underlying value of the group. However, we
consider that loss before tax will also be a key indicator of performance to
financial statements users as the group is still in the early stages of its
production cycle and continues to seek to maximise production and operating
efficiencies at the mine.
Whilst materiality for the financial statement as a whole was set a
US$3,900,000, each significant component of the group was audited to an
overall materiality ranging between US$75,000 and US$3,800,000 with
performance materiality set at 70%. We applied the concept of materiality both
in planning and performing our audit, and in evaluating the effect of
misstatement.
Our approach to the audit
In designing our audit we determined materiality, as above, and assessed the
risk of material misstatement in the financial statements. In particular, we
looked at areas requiring the directors to make subjective judgements, for
example in respect of significant accounting estimates including impairment of
producing mines, and considered future events that are inherently uncertain.
We also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the directors that
represents a risk of material misstatement due to fraud.
A full scope audit was performed on the complete financial information of the
group’s operating components located in Tajikistan, with the group’s key
accounting function for all being based in China with a local finance function
in Tajikistan.
The group’s Tajikistan operations are audited by a component auditor. The
audit team discussed significant events occurring during the year and post
year-end period with the component auditor and performed a review of the
component auditor’s working papers, including review of planning and
completion stage group reporting. The group audit team are responsible for the
scope and direction of the audit process. All other work was performed
remotely by PKF Littlejohn LLP.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our 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) we identified, 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 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.
Key Audit Matter How our scope addressed this matter
Revenue recognition (Accounting Policies and Note 3)
The group records revenues from the sale of gold generated by the Pakrut Gold Our work in this area included:
Project in Tajikistan.
Reviewing component auditor’s working papers in respect of revenue which
included the following:
There is the risk that the revenues associated with gold sales have not been
*Obtaining and reviewing the sales contract and relevant documentation during
recognised and disclosed appropriately in the financial year, and that revenue the period to support the revenue recognised;
cut-off has not been appropriately accounted for.
*Review of the gold price used with reference to the London Bullion market
price on the date of sale and ensure that the invoice was accurate;
*Review of post year end receipts to ensure completeness of income recorded in
the accounting period;
*Testing revenue cut-off to ensure completeness of income recorded in the
accounting period; and
*Obtaining the contracts signed between Pakrut LLC and other parties to which
gold was sold during the year, and the associated approval from the National
Bank of Tajikistan regarding the sale of gold.
Understanding the revenue recognition policy and reviewing for compliance with
International Financial Reporting Standard (IFRS) 15.
Settlement of contractor balances (Note 19)
Following the completion of all construction work at the Pakrut mine site by Our work in this area included:
the end of 2018, the balances payable to the contractors 15MCC, Wenxhou and
Shanxi were due to be settled before the 31 December 2020. The carrying value Obtaining all available correspondence and agreements between the contractors,
of contractor balances, as at 31 December 2021, is US$24.7m (2020: US$22.7m). the group and the independent consultant relating to the settlement of the
balances;
Obtaining the third party consultant’s final settlement certificates or
There is a risk that the final net payable balance has not been correctly reports and vouched the final payable balances;
adjusted and accounted for in the financial statements as the final settlement
agreements have not yet been reached with all parties, particularly given Agreeing payments made during the year to bank statements and the nominal
there are multiple factors involved in reaching the final net payable balance ledger; and
for each contractor including pre-settlement amount, retentions, local
equipment and local project expenditures in Tajikistan. Reviewing adjustments posted by management regarding the contractors balance
settlement in the nominal ledger to ensure these have been correctly accounted
for.
Valuation of PPE/Producing Mines (Note 13)
Producing Mines within PPE is the most material balance with the financial Our work in this area included:
statement and represents the key source from which the group generates income.
The carrying value of Producing Mines, as at 31 December 2021, is US$357m A review of management’s impairment assessment, including consideration of
(2020: US$362m). net present value (‘NPV’) calculations used and providing challenge to the
source of the inputs, obtaining support where possible; and
Undertaking a sensitivity analysis on the NPV calculations to assess the
There is the risk that the value of the mine is impaired. impact on the headroom for possible changes to key assumptions; and
Ensuring valid mining licenses are held; and
Considering any potential impairment indicators through discussion with
management and the component auditor, who has visited the mine site as part of
their audit, as well as review of announcements to the market and Board
minutes for evidence of impairment; and
Reviewing management’s assessment of the impact of COVID-19 on operations at
the mine site as well as external macroeconomic factors, and consider whether
there is evidence to suggest the mine asset should be impaired.
We noted that the lifespan of the mine used in the depletion calculation is 18
years which is 8 years more than the licence currently held by CNG permits.
Based on the information available to management there is currently no reason
to expect the licence extension will not be granted however if it were not
then there is the risk that the key inputs into this calculation would need to
be amended. This could lead to a material impact on the related charge within
the financial statements and therefore on the carrying value of Producing
Mine.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the group financial statements does not cover
the other information and, we do not express any form of assurance conclusion
thereon. 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 course of the audit, or
otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. 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 in this regard.
Responsibilities of directors
As explained more fully in the Statement of Directors’ Responsibilities, the
directors are responsible for the preparation of the group financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors 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 group 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.
Auditor’s 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 auditor’s 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.
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:
* We obtained an understanding of the group and the sector in which it operates
to identify laws and regulations that could reasonably be expected to have a
direct effect on the financial statements. We obtained our understanding in
this regard through discussions with management, and discussions with the
internal legal team in Pakrut conducted by the component auditor. We also
selected a specific audit team based on experience with auditing entities
within this industry facing similar audit and business risks.
* We determined the principal laws and regulations relevant to the group in this
regard to be those arising from:
* AIM Rules
* Local industry regulations in Tajikistan
* Local tax and employment law in China and Tajikistan
* We designed our audit procedures to ensure the audit team considered whether
there were any indications of non-compliance by the group with those laws and
regulations. These procedures included, but were not limited to:
* Enquiries of management;
* Review of Board minutes;
* Review of legal ledger accounts;
* A review of RNS announcements; and
* A review of component auditor’s work surrounding local law and regulation in
Tajikistan.
* We also identified the risks of material misstatement of the financial
statements due to fraud. We considered, in addition to the non-rebuttable
presumption of a risk of fraud arising from management override of controls,
we did not identify any significant fraud risks.
* As in all of our audits, we addressed the risk of fraud arising from
management override of controls by performing audit procedures which included,
but were not limited to: the testing of journals; reviewing accounting
estimates for evidence of bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of
business.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
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
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.frc.org.uk%2Fauditorsresponsibilities&esheet=52767146&newsitemid=20220630005440&lan=en-US&anchor=www.frc.org.uk%2Fauditorsresponsibilities&index=3&md5=a97f78dd754749ad33f32dbac0f67ea4)
. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in
accordance with our engagement letter dated 10 May 2021. Our audit work has
been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone, other than the company and the company's
members as a body, for our audit work, for this report, or for the opinions we
have formed.
David Thompson (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
Canary Wharf
London E14 4HD
30 June 2022
The Directors present their annual report and the audited Financial Statements
of China Nonferrous Gold Limited for the year ended 31 December 2021.
Principal Activity
The principal activity of the Group is that of mineral exploitation, mine
development and mining.
BUSINESS REVIEW
Introduction
China Nonferrous Gold Limited (“CNG”) is a mineral exploration,
development and mining Company. The Group’s project is located in central
Asia, having been discovered during the Soviet era. The principal focus of the
Group is the development and exploitation of the Pakrut Gold Project in
Tajikistan.
CNG, following the scheme of arrangement between Kryso Resources Limited
(formerly Kryso Resources Plc) and its shareholders, was admitted to trading
on AIM on 31 July 2013 in order to continue funding the development of the
Pakrut Gold Deposit and the exploration of the Pakrut License Area, and to
better position the Group to obtain and acquire other gold and base metal
deposits in Tajikistan.
The Group’s Executive Directors have a proven track record of operating in
Tajikistan and they believe CNG to be the first foreign Company to obtain a
100% interest in a mining and exploration project in the country.
A review of the activities of the Group during 2021 is provided in the CEO’s
Statement.
Strategy
CNG’s strategy is to maximize shareholder value through the development of
the Group’s exploration properties, proving up additional resources. CNG’s
medium term objective is to become a mid-tier gold producer and keep in mind
the mission of state-owned enterprises, maintain strategic strength, and
strive to achieve the production goal of Pakrut. The directors of CNG have a
track record of operating successfully in Tajikistan and believe CNG to have
been the first foreign Company to obtain 100% ownership of a mining and
exploration project in Tajikistan.
OPERATING REVIEW
During 2021 the Group has:
* Reached production capacity of 1,713 tons per day from January 2021;
* Processed a total of 650,995 tons of ore at a grade of raw ore of 2.29g/t;
* The recovery rate of processing was 92.68% and the recovery rate of smelting
was 91.61%;
* 19,909 tons of gold concentrate were produced at the grade of 69.22g/t, 1,249
kg gold bullion were poured; and
* Generated revenue from production of US$71,991,962.
Pakrut Gold Deposit and License Area
In April 2004, LLC Pakrut, a wholly owned subsidiary of the Group, was granted
a license and geological lease to explore and exploit the Pakrut License Area
which comprises the Pakrut gold deposit and the surrounding 6,300 hectare
exploration area located in the metalliferous southern Tien-Shan Fold Belt.
This belt is reputed to have the second largest known gold resource after the
Witwatersrand in South Africa. The exploration license was valid for 10 years
and expired on 1 April 2014. An application has been submitted in accordance
with the required procedures to renew the exploration license. The renewal
application is being considered by the Government of Tajikistan and the Group
is working with the Government to ensure it is renewed as soon as possible.
Exploration and evaluation activities can continue at the Pakrut Gold Deposit
in the area covered by the mining license.
In November 2011, the Government of the Republic of Tajikistan issued the
Pakrut Project mining license to LLC Pakrut. According to the terms of the
license, the amount of ore that can be mined is variable depending upon the
mine plan. The plan submitted by the Group envisages an initial processing
capacity of 660,000 tons of ore per annum, increasing to 1,320,000 tons per
annum. The mining license is valid until 2 November 2030. An application has
been submitted in accordance with the required procedures to obtain approval
to mine all JORC compliant reserves arising from exploration and evaluation
activities undertaken by the Group between 2009 and 2013. The application is
currently being considered by the Tajik Department of Geology, following which
approval is required by the Scientific and Technical Counsel. It is the
current intention of the Group to seek an extension to the mining license to
ensure maximum exploitation of the resources available and this is permissible
under the current terms of the arrangements in place.
FINANCIAL REVIEW
The results for the year ended 31 December 2021 were as follows:
2021 2020
US$000 US$000
Revenue 71,992 64,516
Cost of sales (37,256) (35,297)
Administrative expenses (19,879) (17,827)
Foreign exchange loss (1,853) (1,076)
Other operating expenses (2,416) (46)
Total costs 61,405 54,247
% Administrative expenses to total costs 32.37% 32.86%
Operating profit/(loss) 10,587 10,268
Less: interest receivable (6) (196)
Add: interest payable 10,826 15,999
Loss on ordinary activities before taxation (235) (5,532)
Earnings per share (cents) (1.63) (1.64)
The main financial Key Performance Indicator (‘KPI’) for the Group is
administration costs as a percentage of total costs which continues to be at
an acceptable proportion. In 2021, KPI index is at 32.37% (2020: 32.86%).
Revenue is also considered to be a KPI and will be increasingly important to
monitor now that the Group has entered full production. Revenue for the year
was US$71.99 million (2020: US$64.52 million). This significant increase is in
line with expectations given the increased production levels and increased
price of gold at the mine site since 2019 now the mine operations are
operating at full production capacity.
Corporate Responsibility
The Group seeks to build a sustainable and profitable business to maximize the
return to its shareholders and in doing so will not knowingly overlook its
Corporate Responsibilities.
Certain Directors also serve as Directors of other companies involved in
natural resource exploration, development and mining and consequently there
exists the possibility for such Directors to be in a position of conflict. Any
decision made by such Directors involving the Group will be made in accordance
with their duties and obligations to deal fairly and in good faith with the
Group and such other companies. In addition, such Directors will declare, and
refrain from voting on, any matter in which such Directors may have a conflict
of interest.
People
The Group recognises that the success of its ventures is based on the
well-being and health of its employees. All employees have to pass through an
induction process where they are briefed on the Group’s health and safety
policies. The safety of the Group’s employees is of the utmost importance
and is therefore taken seriously in all areas in which the Group’s employees
operate.
The Group is also committed to the development of its employees and encourages
them to attend courses and programs to further develop their own skills. The
Group also aims to provide a favorable working environment which will continue
to draw, retain and motivate its employees so that they can reach their true
potential and share in the Group’s success.
Employees are kept well informed of the performance and objectives of the
Group through established methods of personal briefings and regular meetings.
Employees are given the opportunity to develop and progress according to their
ability. The Group has an employee share option scheme to encourage
employees’ participation in the Group’s performance.
The Group has continued its policy of giving the disabled full and fair
consideration for all job vacancies for which they offer themselves as
suitable applicants, having regard to their particular aptitudes and
abilities. With regard to existing disabled employees and those who may become
disabled during the year, the Group examines ways and means of providing
continuing employment under normal terms and conditions and provides training,
career development and promotion, where appropriate.
Social
The Group continues to have a strong relationship with the local communities
in the areas in which it operates, respecting their laws and customs. The
Group employs local people in all levels within the organization; this ensures
a transparent and fair transfer of benefits and support to their communities
where appropriate. The Group engages the local communities in all aspects of
the projects it is actively involved in, from exploration through to
feasibility and production, ensuring that concerns are addressed, and that
support is maintained throughout the entire process.
Environment
The Group has a strict environmental code with which all its employees are
well-versed during the induction process; this not only satisfies the local
environmental code, but also the international code. The Group has contracted
the services of a local environmental consultant who monitors its operations
to ensure that any lapses are immediately brought to the attention of
management.
Risk Factors
There are several principal risk factors outlined below that may affect the
Group’s businesses and which may not all be within the Group’s control.
PRINCIPAL RISKS AND UNCERTAINTIES
Environmental Risk
The Group’s core operations are located in Pakrut, a mountainous area of
Tajikistan. The area is remote and can be subject to adverse weather
conditions which, as evidenced in the first half of 2017, can impact the
ability of the Group to perform its core operations and may lead to
substantial damage of the Group’s properties. The Group seeks to manage this
risk by taking out appropriate insurance and carefully monitoring weather
reports during the seasons when adverse conditions are most likely and
ensuring that appropriate action is taken to minimise risk to life and
property damage.
Production Risk
The Pakrut Gold Project is now operating at full production capacity. The
Company's existing production equipment is considered to be sufficient to meet
the requirements of the budgeted gold production targets. The right choice of
production equipment has a major impact on productivity and costings.
The production process of the gold should be based on the specific performance
requirements of the product. This requires an increase in production skills
and requires training of Company technicians. Technology is changing rapidly
and existing production technology may have fallen behind, therefore
technicians must continue to develop their knowledge and skillset to keep up
with this pace.
At present, CNG is in a stable production and operation stage. The Company
will need to manage change and innovation and accumulate valuable experience
and systems as production levels continue to ramp up. A key factor will be the
continuous technological innovations and developments in the industry. To
become an industry leader, CNG must adhere to the technology innovation
strategy and seek innovative methods to achieve a comprehensive
transformation.
Production risks are related to the possibility that gold production or output
levels are lower than expected. The main sources of production risk are bad
weather conditions and limited production capacity, such as hail, snow
disasters, and limited Chinese technical staff. Despite the control measures
taken, the production risk may also be due to the harsh winter weather and the
breakdown of production equipment and machinery. At present, Pakrut is
adopting corresponding risk prevention and control strategies for the above
risks, including purchase of equipment spare parts and materials in advance to
ensure the sufficiency of raw materials and the normal operation of the
machinery at the mine site; vigorously training Tajik technical personnel,
exerting local talent policies, and rationally using manpower resources;
reasonably estimate the impact of severe weather to ensure the achievement of
the annual output target.
COVID-19 risk
Affected by the COVID-19, global gold price is still subject to some
fluctuations. However, from the current situation, the average delivery price
of gold for the first five months of 2022 was US$1,881.58 per ounce, and the
average delivery price of gold for the whole year of 2021 was US$1,808.72
(2020:US$1,798.81) . From the above data, it can be concluded that the
company’s average delivery price of gold is stable.
Secondly, the technicians of Shenyang Institute of Technology have come to
Tajikistan in 2022 to guide local production, conduct field exploration, and
further improve ore production and grade. Relevant technical innovations were
discussed with the company's personnel and returned to China smoothly.
The pandemic situation in Tajikistan seems to have stabilize in 2022, no
official numbers on infection and confirmed cases have been released since the
beginning of this year. On March 15, 2022, the government of Tajikistan
announced that all restrictive measures against the pandemic would be
abolished in Tajikistan, and the local residents would fully return to normal
life and work.
In addition, the Company has also arranged for Chinese employees to return
home for vaccination. The good news is that by March 2022, Tajikistan and
other transit third countries have liberalized the return policy,and Chinese
residents can return home as long as the nucleic acid (covid test) is
negative, which will greatly improve the mobility of returning personnel. So
far, 100% of Chinese employees have been vaccinated with the three doses. The
Company aims to minimize the risk of illness of employees and maximize the
health level of employees.
Exploration and Development Risk
The exploration for, and the development of, mineral deposits involves
significant risks, which even a combination of careful evaluation, experience
and knowledge may not eliminate. While the discovery of an ore body may result
in substantial rewards, few properties which are explored ultimately develop
into producing mines. Major resources are required to establish ore reserves,
to develop metallurgical processes and to construct mining and processing
facilities at the Pakrut site.
There is no certainty that the exploration and development expenditures made
by the Group as described in these financial statements will result in a
commercially feasible mining operation. There is aggressive competition within
the mining industry for the discovery and acquisition of properties considered
to have commercial potential. The Group will compete with other companies,
many of which have greater financial resources, for the opportunity to
participate in promising projects. Significant capital investment is required
to achieve commercial production from successful exploration efforts.
The commercial viability of a deposit is dependent on a number of factors.
These include deposit attributes such as size, grade and proximity to
infrastructure; current and future market prices which can be cyclical;
government regulations including those relating to prices, taxes, royalties,
land tenure, land use, importing and exporting of minerals and environmental
protection. The effect of these factors, either alone or in combination,
cannot be entirely predicted, and their impact may result in the Group not
receiving an adequate return on invested capital.
There is no assurance the Group will be able to adhere to the current
development and production schedule or that the required capital and operating
expenditure will be accurate. The Group’s development plans may be adversely
affected by delays and the failure to obtain the necessary approvals, licenses
or permits to commence production or technical or construction difficulties
which are beyond the Group’s control. Operational risks and hazards include:
unexpected maintenance, technical problems or delays in obtaining machinery
and equipment, interruptions from adverse weather conditions, industrial
accidents, power or fuel supply interruptions and unexpected variations in
geological conditions.
The risks inherent in developing the Group’s projects are mitigated to some
extent by the strategic alliance with China Nonferrous Metals Int’l Mining
Co. Ltd, which is a member of a group with a number of active mining
operations.
Regulatory and Legal Risk
Substantially all of the Group’s business and operations are governed by the
laws, rules and regulations in Tajikistan which can contain inherent
ambiguities, uncertainty, inconsistency and contradictions with regards to
their application, interpretation, implementation and enforcement. In
particular, the laws, rules and regulations which the Group is subject to,
including, but not limited to, those relating to foreign investments, subsoil
use, land use, licensing, customs, foreign currency, environmental protection
and taxation are still evolving and remain uncertain in many respects.
In addition, the judicial system in Tajikistan may not be independent and
immune from the economic, political and nationalistic influences in Tajikistan
and the decisions of the courts are often not transparent and available to the
public. In many circumstances there are no prior court decisions for reference
and the interpretations of the laws, rules and regulations by the courts in
Tajikistan remain ambiguous and it is difficult to predict or to seek
effective legal redress. The regulatory authorities in Tajikistan are
entrusted with a high degree of discretion and authority in the application,
interpretation, implementation and enforcement of the laws, rules and
regulations potentially resulting in ambiguous and inconsistent actions.
There is no assurance that the Group will be able to comply with all new laws,
rules and regulations applicable to its mining operations or any changes in
laws, rules and regulations. Furthermore, the legal protections available to
the Group may be limited and could have a material impact on the results of
the Group and the imposition of penalties and/or regulatory action. In
addition, the process of obtaining, retaining or renewing licenses and permits
could be time-consuming and costly and could give rise to unexpected delays
and expenses. The Group seeks and obtains sufficient and appropriate legal
advice where considered necessary.
The Group’s existing licenses and permits could be revoked, terminated or
not extended in accordance with expectations by the Tajikistan Government, the
local government or the Tajikistan courts under certain circumstances,
including failure to comply with the conditions imposed by the licenses and
permits, which may include the provision of regular reports to the relevant
regulatory authority, obtaining sufficient insurance coverage, adherence to
the permitted extraction of mineral resources or complying with the
obligations relating to sustainable management, subsoil, environmental
protection and health and safety regulations. Failure to obtain, retain or
renew the relevant licenses and permits required at all or on a timely basis
could have a material adverse effect on the Group’s financial condition. The
Group works closely with the Government and local government departments on
the mine project in order to ensure all parties are kept up to date on
progress and closely monitors compliance with the conditions imposed under its
existing licenses and permits.
Economic Risk
The profitability of the Group’s future operations may be significantly
affected by changes in the market prices for the materials it may produce and
is affected by numerous macroeconomic factors beyond the Group’s control.
The level of interest rates, the rate of inflation, world supply, and the
stability of exchange rates can all cause fluctuations in the price. Such
external factors are in turn influenced by changes in international investment
patterns and monetary systems and also political developments. Metal prices
have fluctuated in recent years, particularly gold, and future significant
price declines could cause future commercial production to be uneconomic and
have a material adverse effect on the Group’s financial condition. Economic
risk is continually evaluated by the Group, including expectations of future
events, and action undertaken as necessary.
Certain payments, in order to earn or maintain property interests, are to be
made in local currency in the jurisdiction where the applicable property is
located. As a result, fluctuations in the Chinese Renminbi and the Tajik
Somoni could have a material adverse effect on the Group’s financial results
which are denominated and reported in US dollars. Where possible the Group
maintains bank and cash balances in the same denomination as its expected
liabilities. The Group does not currently hedge its exposure to foreign
currencies.
The Group currently has a comprehensive program of insurance but does not
carry insurance to protect against certain risks and nor can it guarantee that
its level of insurance is sufficient to cover all outcomes and eventualities.
As a result, the Group may become subject to liability to include
environmental pollution, political risk and other hazards against which the
Group cannot insure or which it may elect not to insure. The payment of such
liabilities may have a material adverse effect on the Group’s financial
condition.
Pakrut is located in Tajikistan, an overseas country, and the tax pressure is
not insignificant. Due to the regional poverty and developing status of the
host country, the Directors understand that government funds are tight, and
that tax has become the main source of national revenue. The taxation bureau
has threatened that enterprises will be required to pay more taxes, although
to date there has been no local taxation policy change. In 2020, Pakrut
further strengthened its internal control and basic management, and has
formulated tax management measures that meet the Company's management needs,
that enables the team to promptly assess tax-related risks and related
countermeasures in the Company's business and management processes, and is
responsible for establishing and maintaining good relationships with the
relevant tax authorities in order to make representations in regard to
potential changes to tax law, tax planning, and tax incentives in order to
safeguard the Company's overall interests.
Financial Risk
The Group’s operations expose it to a number of financial risks. These are
discussed under ‘Financial Risk Management’ within Note 1 of the Financial
Statements.
Political and Country Risk
Substantially all of the Group’s business and operations are conducted in
Tajikistan. The political, economic, legal and social situation in Tajikistan
introduces a certain degree of risk with respect to the Group’s activities.
The Government of Tajikistan exercises control over such matters as
exploration and mining licenses, permitting, exporting and taxation, which may
adversely impact the Group’s ability to carry out exploration, development
and mining activities.
Government activity, which could include non-renewal of licenses, may result
in any income receivable by the Group being adversely affected. In particular,
changes in the application or interpretation of mining and exploration laws
and/or taxation provisions in Tajikistan could adversely affect the value of
the Group’s interests.
No assurance can be given that the Group will be able to maintain or obtain
effective security or insurance for any of its assets or personnel at its
operations in Tajikistan; this may affect the Group’s operations or plans in
the future. A moderate degree of security is also currently required to
mitigate the risk of loss by theft, either by the Group’s employees or by
third parties, and controls are implemented where possible to minimize this
risk. No assurance can be given that such factors will not have a material
adverse effect on the Group’s ability to undertake exploration, development
and mining activities in respect to present and future properties in
Tajikistan.
The Group’s controlling shareholder is a People’s Republic of China
(“PRC”) state-owned enterprise. Any adverse changes to Sino – Tajikistan
diplomatic relations could affect the policies and regulations of the
Tajikistan Government towards foreign investment and foreign exchange, which
could adversely affect the Group’s business, financial conditions and
prospects.
Tax risk
Tajikistan's poor tax environment, excessive discretion in tax collection and
high tax risk could have an adverse impact on the normal production and
operation of enterprises.
In 2021, compared with 2020, the corporate income tax increased significantly
by $5,187,869. The main reason is that the Tajik Local Taxation Committee
conducted a routine tax inspection on the Pakrut company. The Tax Committee
does not recognise some of the expenses that the Company considered deductible
which lead to an additional tax charge. This is the first inspection of the
Pakrut company since commencing full production two years after the issuance
of the presidential decree (an exemption from tax inspections).
The Company will further strengthen communication with the tax department and
actively respond to tax requirements and proposed changes in order to protect
the legitimate rights and interests of the enterprise.
Funding
The Group may need to secure further funding for working capital and other
purposes and in addition it will need to renegotiate its current funding in
the short-medium term. There is the risk that this may not be forthcoming
which would impact the Group operations. The Group has numerous funding
options available and remains in close contact with its controlling
shareholder who have, up to now, continued to provide economic support as
required.
Performance of Key Personnel and Employees
The Group is dependent on a relatively small number of key employees, the loss
of any of whom could have an adverse effect on the Group.
There has been a steady emigration of skilled personnel from Tajikistan in
recent years that could adversely affect the Group’s ability to retain its
employees.
The Group seeks to mitigate this risk by actively engaging with its employees
and seeking to offer a secure work environment with appropriate pay levels to
maintain both motivation and loyalty to the Group.
Results and Dividends
The results for the year and the Group’s financial position at the end of
the year are shown in the following Financial Statements. The Directors do not
recommend the payment of a dividend (2020: US$Nil).
Future Developments
Future prospects are set out in the CEO’s Statement on page 8 under
‘Outlook’.
Directors and their Interests
The Directors who served the Group during the year do not hold any beneficial
interests in the shares of the Group (2020: None).
No Director who served during the period held any share options in the
Company.
Remuneration of the Directors is disclosed in Note 5.
Substantial shareholdings
As at the date of these financial statements, the Directors were aware of the
following shareholdings in excess of 3% of the Company’s issued share
capital.
Number of ordinary shares Percentage of issued share capital
China Nonferrous Metals Int’l Mining Co Ltd 146,666,667 38.36
Zhao Bin 50,090,304 13.10
Golden Max Group 33,823,113 8.85
Huang Lihuo 33,068,430 8.65
BOCOM International 16,500,000 4.31
Rainbow Bridge Investment Fund 12,335,489 3.23
Going Concern
The Company’s business activities, together with the factors likely to
affect its future development, performance and position are set out in the
CEO’s Statement on pages 6 to 9. Note 1 to the financial statements includes
the Company’s objectives, policies and processes for managing its capital;
its financial risk management objectives; and its exposures to credit risk and
liquidity risk.
The Directors have prepared the Group financial statements on a going concern
basis after reviewing the Group’s forecast cash position and working capital
requirements for the period to 31 December 2024 and satisfying themselves that
the Group will have sufficient funds on hand to realise its assets and meet
its obligations as they fall due.
In making their assessment, the Directors have considered the level of
production and operation at the mine site and how the Group will be able to
use the cash inflows from these operations to support its working capital
position and repay loans when they fall due. The Directors have considered the
importance of working closely with its lenders, some of whom are related
parties, and they have obtained appropriate assurances from them regarding
their continued support. The Directors have also considered the ongoing
COVID-19 pandemic and, although the extent of the global impact is as yet
uncertain, the Group believes there are sufficient measures in place at the
mine site in Tajikistan and in the Beijing head office to mitigate any
potential risks presented and enable operations to continue as normal.
After making the due enquiries the Directors have a reasonable expectation
that the Company and Group have access to adequate resources to continue in
operational existence for the foreseeable future which is considered to be at
least 12 months from the date of the signing of these financial statements.
Accordingly, the Group continues to adopt the going concern basis in preparing
the annual report and financial statements.
Events after the Reporting Period
Details of events after the reporting period are set out in the Chief
Executive Officer’s Statement and in Note 28 to the Financial Statements.
Relevant Audit Information
The Directors who held office at the date of approval of this Report of the
Directors confirm that, so far as they are individually aware, there is no
relevant audit information of which the Company’s auditor is unaware; and
each Director has taken all the steps that they ought reasonably to have taken
as a Director to make themselves aware of any relevant audit information and
to establish that the auditor is aware of that information.
Auditor
PKF Littlejohn LLP has signified its willingness to continue in office as
auditor.
Signed by order of the Director
Mr Hui Zhang
30 June 2022
Consolidated Statement of Comprehensive Income, Year Ended 31 December 2021
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements
2021 2020
US$000 US$000
Revenue 3 71,992 64,516
Cost of sales (37,256) (35,297)
Gross Profit 34,736 29,219
Other operating income - 1
Administrative expenses 6 (19,879) (17,827)
Loss on foreign exchange (1,855) (1,076)
Other operating expenses 7 (2,416) (46)
Operating Profit 10,585 10,271
Finance income 9 6 196
Finance costs 9 (10,826) (15,999)
Loss before Income Tax (235) (5,532)
Income tax 8 (6,012) (824)
Loss for the year attributable to owners of the parent (6,247) (6,356)
Total comprehensive income attributable to owners of the parent for the year (6,247) (6,356)
Basic and Diluted Earnings per share attributable to owners of the parent 10 (1.63) (1.66)
(expressed in cents per share)
All of the activities of the Group are classed as continuing.
Consolidated Statement of Financial Position
Note As at As at
31 December 2021 31 December 2020
US$000 US$000
Non-Current Assets
Property, plant and equipment 13 364,337 373,201
Total Non-Current Assets 364,337 373,201
Current Assets
Inventories 16 17,334 15,911
Trade and other receivables 17 4,202 5,649
Cash and cash equivalents 7,472 27,196
Total Current Assets 29,008 48,756
Non-Current Liabilities
Borrowings 18 (65,000) (19,822)
Provisions for other liabilities and charges 20 (1,084) (995)
Total Non-Current Liabilities (66,084) (20,817)
Current Liabilities
Borrowings 18 (303,953) (368,919)
Trade and other payables 19 (49,696) (52,363)
Total Current Liabilities (353,649) (421,282)
Net Current Liabilities (324,841) (372,526)
Net Liabilities (26,388) (20,143)
Consolidated Statement of Cash Flow
31 December 31 December
2021 2020
US$000 US$000
Cash flows from Operating Activities (Note 24) 13,904 17,137
Net cash generated from Operating Activities 13,904 17,137
Cash flows from Investing Activities
Purchase of property, plant and equipment (994) (1,942)
Interest received 6 196
Net cash used in Investing Activities (989) (1,746)
Cash flows from Financing Activities
Proceeds from borrowings (net of capitalised issue costs) 99,550 14,550
Repayment of borrowings (128,806) (10,000)
Interest paid (3,384) (3,866)
Net cash generated from Financing Activities (32,640) 684
Net increase in Cash and cash equivalents (19,724) 16,075
Cash and cash equivalents at beginning of the year 27,196 11,120
Cash and cash equivalents at end of the year 7,472 27,196
Equity attributable to the owners of the parent
Share capital 22 38 38
Share premium 65,901 65,901
Other reserve 10,175 10,175
Retained earnings (102,502) (96,257)
Total Equity (26,388) (20,143)
Consolidated Statement of Changes in Equity
Attributable to owners of the parent
Share capital Share premium Other reserve Retained earnings Total
US$000 US$000 US$000 US$000 US$000
Balance at 1 January 2020 38 65,901 10,175 (89,899) (13,785)
Loss for the year - - - (6,356) (6,356)
Total comprehensive income for the year - - - (6,356) (6,356)
Total transactions with owners of the parent, recognised directly in equity - - - - -
Balance at 31 December 2020 38 65,901 10,175 (96,255) (20,141)
Balance at 1 January 2021 38 65,901 10,175 (96,255) (20,141)
Loss for the year - - - (6,247) (6,247)
Total comprehensive income for the year - - - (6,247) (6,247)
Total transactions with owners of the parent, recognised directly in equity - - - - -
Balance at 31 December 2021 38 65,901 10,175 (102,502) (26,388)
Notes to the Financial Statements
1. Financial Risk Management
The Group’s operations expose it to a number of financial risks; principally
the availability of adequate funding, movements in interest rates and
fluctuations in foreign currency exchange rates. Continuous monitoring of
these risks ensures that the Group is protected against any adverse effects of
such risks so far as it is possible and foreseeable.
Market Risk
a) Cash Flow and Interest Rate Risk
The continued operation of the Group is dependent on the ability to raise
sufficient working capital until the mine produces sufficient quantities of
gold to be self-sufficient. The Group currently finances itself through the
issue of equity share capital and the secured loan facilities from CNMIM, CNMC
and CCB. Management monitors its cash and future funding requirements through
the use of cash flow forecasts. All cash not immediately required for working
capital purposes is held on short term deposit. The Group’s exposure to
interest rate fluctuations on cash balances is restricted to the rate earned
on these short-term deposits. The potential impact of such fluctuations is not
considered material to the financial statements.
The Group’s interest rate risk arises from long-term borrowings. The Group
has both variable and fixed rate borrowings. Borrowings issued at variable
rates expose the Group to cash flow interest rate risk which is partially
offset by cash invested at variable rates. The annual fixed interest rate for
the CNMIM loan is 9% for all USD and RMB denominated tranches. All payments of
principal and interest in respect of the RMB denominated tranche are repayable
at a fixed RMB: USD exchange rate. The interest rate on the BOS loan of US$65
million is 1.50% per annum over the quarterly LIBOR rate and the loan is
repayable in US$. The interest rate on the CITIC loan of US$20 million is
2.70% per annum over the 6 month LIBOR rate and the loan is repayable in US$.
The interest rate on the CITIC loan of US$14.55 million is 2.71% per annum
over the 12 month LIBOR rate and the loan is repayable in US$. The interest
rate on the CNMC loan of US$207.24million is 3.25% per annum over the
quarterly LIBOR rate .
1. Financial Risk Management (continued)
At 31 December 2021, the potential impact of fluctuations in interest rates is
considered material to the financial statements.
b) Foreign Currency Risk
The Group operates internationally and is exposed to foreign exchange risk
arising from currency exposures. Currency risk is the risk that the fair value
or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Group has cash assets denominated in UK
Sterling, United States Dollars, Tajik Somoni and PRC Renminbi and incurs
liabilities for its working capital expenditure in all of these denominations.
Payments are made in all of these denominations at the pre-agreed price and
converted (if necessary) as soon as payment needs to occur. Currency
conversions and provisions for expenditure are only made as soon as debts are
due and payable. The Group is therefore exposed to currency risk in so far as
its liabilities are incurred in UK Sterling, PRC Renminbi and Tajik Somoni,
and fluctuations occur due to changes in the exchange rates against the
functional and presentational currency of US Dollar. The table below details
the split of the cash held as at 31 December 2021 between the various
currencies.
Somoni GBP Sterling US Dollar Renminbi Total US$000
3,342 4 3,869 257 7,472
Due to the different nature of assets and liabilities, changes in asset value
caused by exchange rate changes have different ways of affecting a Company's
free cash flow. Therefore, it must be considered separately when evaluating
the value of an enterprise. The first is the monetary items in the corporate
balance sheet. Typical monetary items include monetary funds, loans, accounts
receivable and accounts payable. When the exchange rate changes, the
above-mentioned assets or liabilities of the enterprise accounted in foreign
currencies will increase or depreciate accordingly. For example, in the
context of the depreciation of the Renminbi, the foreign currency deposits
(Somoni/USD) held by enterprises will appreciate, which in itself has a
substantial impact on the present value of cash. The foreign currency-settled
bonds or other debts issued by companies can be repaid at a lower RMB cost,
which can save companies more funds that can be used for free distribution,
thereby promoting the enhancement of corporate value.
1. Financial Risk Management (continued)
During 2021, the Group’s principal revenue, costs, assets and liabilities,
including intercompany loans were denominated in USD. The Group manages
foreign currency risk by matching receipts and payments and monitoring
movements in exchange rates. The Group does not currently hedge its exposure
to foreign currencies and recognises the profits and losses resulting from
currency fluctuations as and when they arise. At the year end the Group did
not have material exposure to foreign exchange risk relating to its non-US$
denominated bank deposits and as such this not disclosed. The year-end
exchange rates used in the preparation of the financial statements for 2021
and 2020 were as follows:
Somoni to USD GBP to USD Renminbi to USD
31 December 2021 11.30 1.3499 6.3757
31 December 2020 11.30 1.3625 6.5250
Liquidity Risk and Credit Risk
The continued operation of the Group is dependent on the ability to raise
sufficient working capital. As noted above, the Group currently finances
itself through the issue of equity and borrowings from CNMIM, CNMC, CCB, CITIC
and Bank of Shanghai. Management monitors its cash and future funding
requirements through the use of cash flow forecasts. The Group enters into
capital commitments to fund operations, and any surplus cash not immediately
required for working capital purposes is held on short term deposit.
1. Financial Risk Management (continued)
The table below summarises the maturity profile of the Group’s financial
liabilities based on contractual undiscounted payments.
Less than 1 Year US$000 Between Between Over Total Carrying amount
1 and 2 Years US$000 2 and 5 Years 5 Years US$000 US$000
US$000 US$000
Year ended
31 December 2021
Interest-bearing borrowings 303,953 65,000 - - 368,953 368,953
Trade and other payables 49,696 - - - 49,696 49,696
Provisions for other liabilities - - - 1,085 1,085 1,085
353,649 65,000 - 1,085 419,734 419,734
1. Financial Risk Management (continued)
Year ended
31 December 2020
Interest-bearing borrowings 368,919 19,822 - - 388,741 388,741
Trade and other payables 52,363 - - - 52,363 52,363
Provisions for other liabilities - - - 2,481 2,481 995
421,453 19,822 - 2,481 443,585 442,099
The Group holds bank accounts with banks in the UK, PRC and Tajikistan with
the following credit ratings:
Credit rating 2021 2020
US$000 US$000
A 3,229 21,212
No independent credit rating available 4,243 5,984
7,472 27,196
If a bank has no credit rating, the Group assesses the credit quality through
local knowledge and past experience in the particular jurisdiction.
1. Financial Risk Management (continued)
Capital Risk Management
The Group consider equity to be their capital. The Group’s objective when
managing their capital is to safeguard the Group’s ability to continue as a
going concern in order to provide returns for shareholders and to enable the
Group to continue its exploration, evaluation and mine construction. The Group
holds debt in the form of both shareholder and external loans and defines
capital based on the total equity of the Company. Except for the secured loan
facilities from CNMIM, CNMC and CCB, the Group’s current policy for raising
capital is through equity issues and debt financing. The Group is not
currently required to monitor its gearing ratio and is not exposed to any
externally imposed capital requirements.
2. Critical Accounting Estimates, Assumptions and Judgments
The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amount of assets and liabilities are set
out below. Estimates and assumptions are continually evaluated and are based
on management’s experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
Uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of assets and
liabilities affected in future periods.
The Group has identified the following areas where significant estimates,
assumptions and judgments are required. The most significant judgment for the
Group is the assumption that exploration and development at its sites will
ultimately lead to a commercial mining operation. Failure to do so could lead
to impairment of the mine.
Estimated impairment of Producing mines (Note 13)
The Group tests annually whether exploration, evaluation and licensing assets
and producing mines have suffered any impairment. The recoverable amounts of
the cash generating units (“CGUs”) have been determined based on value in
use calculations which require the use of estimates and assumptions such as
long-term commodity prices, gold recovery rates, discount rates, operating
costs and therefore expected margins, future capital requirements and mineral
resource estimates (see below). These estimates and assumptions are subject to
risk and uncertainty and therefore there is a possibility that changes in
circumstances will impact the recoverable amount. Management has assessed its
CGUs as being individual exploration and mine sites, which is the lowest level
for which cash inflows are independent of those of other assets or CGUs.
2. Critical Accounting Estimates, Assumptions and Judgments (continued)
In assessing the carrying amounts of its exploration, evaluation and licensing
assets and producing mines at Pakrut, the Directors have used an independently
prepared and Director approved bankable feasibility study
(http://www.cnfgold.com/projects/pakrut-gold-project
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.cnfgold.com%2Fprojects%2Fpakrut-gold-project&esheet=52767146&newsitemid=20220630005440&lan=en-US&anchor=http%3A%2F%2Fwww.cnfgold.com%2Fprojects%2Fpakrut-gold-project&index=4&md5=dc2d7d34b399973c059c8f9bc25ed994)
). The period used in management’s assessment is the anticipated life of the
mine to the expiration of the license in 2030 with revenues being generated
from full production from January 2019.
The calculation assumes a gradual increase in mining capacity of 2,000 tonnes
of ore daily. Estimated production volumes are based on detailed life-of-mine
plans and take into account development plans for the mines agreed by
management as part of the long-term planning process. Production volumes are
dependent on a number of variables, such as: the recoverable quantities; the
production profile; the cost of the development of the infrastructure
necessary to extract the reserves; the production costs; the contractual
duration of mining rights; and the selling price of the commodities extracted.
Gold revenues have been estimated over that period at a price of US$1,820
based on management’s estimates, which are derived from forward price curves
and long-term views of global supply and demand, building on past experience
of the industry and consistent with external sources.
The total cost per ounce is estimated to be around US$780 with a gross margin
of circa 57%. Royalties have been calculated at 6% of sales revenues and
corporate income tax at 13%, according to the relevant laws in Tajikistan. A
discount rate of 10% has been utilised.
The calculations have been tested for sensitivity to changes in the key
assumptions. The most sensitive inputs in the calculation of the value in use
are operating and direct costs, the gold price, and the discount rate. An
impairment to the mine value would occur if, compared to the base case
scenario, the discount rate were to increase to 13%, gold prices fell by 5%,
or direct costs were to increase by 25%.
2. Critical Accounting Estimates, Assumptions and Judgments (continued)
Approval of Pakrut reserves by Tajik Department of Geology
In November 2011, the Government of the Republic of Tajikistan issued the
Pakrut Gold Project mining license to LLC Pakrut. According to the terms of
the license, the amount of ore that can be mined is variable depending upon
the mine plan. The plan submitted by the Group envisages an initial processing
capacity of 760,000 tons of ore per annum, increasing to 800,000 tons per
annum. The mining license is valid until 2 November 2030.
The mining license issued in November 2011 currently entitles the Group to
mine JORC compliant resources (measured, indicated and inferred) of 904,000
ounces out of total JORC compliant resources of 4,383,000 ounces at Pakrut,
excluding the Eastern Pakrut, Rufigar and Sulfidnoye ore zones. The JORC
compliant resources include the results from the Group’s exploration and
evaluation work subsequent to the mining license issue date.
LLC Pakrut has sought approval of the increased JORC compliant resources from
the Tajik Department of Geology and the Scientific and Technical Counsel which
includes the results of all exploration and evaluation activities undertaken
by the Group between 2009 and 2013. The application is currently subject to
that approval process and the Directors are not aware of any legal or other
impediments which would prevent approval of their application and therefore
permit the Group to mine the increased resources. However, the approval
process currently remains incomplete.
The mine design and construction work undertaken to date, together with the
assessment of the recoverable amount of ‘Producing mines’ (see below), is
based upon the total quantity of JORC compliant resources of which part falls
outside the area covered by the mining license and still subject to formal
approval, as noted above. Failure to obtain this approval would lead to an
impairment of ‘Mines under Construction’, together with inventories, and
also impact the going concern basis of preparation of the Financial
Statements. The Group has made the judgement that this approval will be
forthcoming. No provision for impairment has been recognised in these
Financial Statements relating to this uncertainty.
2. Critical Accounting Estimates, Assumptions and Judgments (continued)
Mineral resource and reserve estimates
Reserves are estimates of the amount of resources that can be economically and
legally extracted from the Group’s mining properties. The Group estimates
its mineral resources based on information compiled by appropriately qualified
persons relating to the geological and technical data on the size, depth,
shape and grade of the ore body and suitable production techniques and
recovery rates. This analysis requires complex geological judgments to
interpret the data. The estimation of the recoverable amount is based upon
factors such as estimates of commodity prices, future capital expenditure and
production costs along with geological assumptions made in estimating the size
and grade of the resources. Details of the mineral resources and reserve
estimates can be found on www.cnfgold.com
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.cnfgold.com&esheet=52767146&newsitemid=20220630005440&lan=en-US&anchor=www.cnfgold.com&index=5&md5=faa08a6c55693af8bbe8ff8bc021e095)
.
The Group estimates and reports mineral resource estimates in line with the
principles contained in the Australasian Code for Reporting Exploration
Results, Mineral Resources and Ore Reserves (December 2004), which is prepared
by the Joint Ore Reserves Committee (JORC) of the Australasian Institute of
Mining and Metallurgy, Australian Institute of Geoscientists and Minerals
Council of Australia, known as the “JORC Code”. The determination of a
JORC resource is itself an estimation process that involves varying degrees of
uncertainty depending on how the resources are classified (i.e. measured,
indicated or inferred).
As additional geological information is produced during the operation of a
mine and through additional exploration activity, mineral resource estimates
may change. Such changes may impact on the Group’s reported financial
position which includes the carrying value of property, plant and equipment
and inventories.
2. Critical Accounting Estimates, Assumptions and Judgments (continued)
Estimated economically recoverable reserves are used in determining the
depreciation and/or amortisation of mine-specific assets. This results in a
depreciation/amortisation charge proportional to the depletion of the
anticipated remaining life-of-mine production. The life of each item, which is
assessed at least annually, has regard to both its physical life limitations
and present assessments of economically recoverable reserves of the mine
property at which the asset is located. These calculations require the use of
estimates and assumptions, including the amount of recoverable reserves and
estimates of future capital expenditure. The calculation of the UOP rate of
depreciation/amortisation could be impacted to the extent that actual
production in the future is different from current forecast production based
on economically recoverable reserves, or if future capital expenditure
estimates change. Changes to economically recoverable reserves could arise due
to changes in the factors or assumptions used in estimating reserves,
including:
* The effect on economically recoverable reserves of differences between actual
commodity prices and commodity price assumptions;
* Unforeseen operational issues.
Depreciation/Amortisation (Note 13)
As the mine entered full production during the period, 2019 was the first
period for which depreciation / amortisation was charged in respect of the
producing mine assets. As mentioned in the judgement above judgement is
required in the calculation of this amount with the key estimates considered
to be surrounding the amount of economically recoverable resources and the
lifespan of the asset. The economically recoverable reserves are considered to
be those detailed out on the website (see above for link) and the lifespan of
the mine is considered to be 18 years. As mentioned above the Group currently
only has a mining license that is valid until November 2030 which is less than
the 18 year period used within the depreciation/amortisation calculation.
After considering the information available to them which includes discussions
with Tajik officials and the required timing for extending the mining license,
management have made the judgement that they will be able to secure the
necessary extensions and therefore continue to the mine for a period of 18
years. If a 10 year license period were to be used then depreciation for 2021
would be approximately $15 million.
3. Segment Information
The following segments are based on the management reports received by the
Executive Directors, who are the chief operating decision makers. The Group
operates principally in three geographical areas, UK, PRC and Tajikistan, with
operations managed on a project by project basis within Tajikistan. For
segment reporting purposes, the operations of the Cayman Islands registered
parent Company are included in the UK and PRC segment as these segments are
jointly managed.
2021 UK and PRC Tajikistan Pakrut Total
US$000 US$000 US$000
Revenue - 71,992 71,992
Cost of sales - (37,256) (37,256)
Administrative expenses (including foreign exchange) (9,454) (12,280) (21,734)
Other operating expenses 2,117 (4,534) (2,416)
Operating profit/(loss) (9,454) 20,039 10,585
Finance costs (10,825) - (10,825)
Finance income 6 - 6
Income tax - (6,012) (6,012)
(Loss)/profit for the year (20,273) 14,027 (6,247)
Total assets 3,101 390,246 393,347
Total liabilities 383,777 35,957 419,734
Additions to property, plant and equipment - 994 994
3. Segment Information (continued)
The Group’s mining activities are located in Tajikistan, principally within
the Pakrut Gold Project. Support and administration services are provided from
the UK and PRC. Inter-segment revenue is eliminated on consolidation and is
conducted on mutually agreed terms between Group companies.
All revenue generated in the period was from the government of Tajikistan.
2020 UK and PRC Tajikistan Pakrut Total
US$000 US$000 US$000
Revenue - 64,516 64,516
Cost of sales - (35,297) (35,297)
Administrative expenses (including foreign exchange) (2,313) (16,591) (18,904)
Other operating expenses - (46) (46)
Impairment - - -
Other operating income - 1 1
Operating profit/(loss) (2,313) 12,583 10,270
Finance costs (15,999) - (15,999)
Finance income 151 45 196
Income tax - (824) (824)
Loss for the year (18,115) 11,804 (6,357)
Total assets 24,472 397,567 422,039
Total liabilities 418,203 23,898 442,099
Additions to property, plant and equipment - 1,942 1,942
4. Particulars of Employees
The average number of staff employed by the Group during the financial year
amounted to:
2021 2020
No. No.
Administrative and management 116 125
Operational staff 590 607
706 732
The aggregate costs of the above were:
2021 2020
US$000 US$000
Wages and salaries 4,575 4,379
Basic pension cost 1,036 885
5,611 5,265
No staff costs were capitalised as the Group entered into full production from
January 2019.
5. Directors’ Emoluments
The Directors’ emoluments in respect of qualifying services were:
Salary and fees Total
2021 US$ US$
Mr Wang Xiaohua** 37,500 37,500
Mr Yong Li 18,000 18,000
Mr Lixian Yu 80,000 80,000
Mr Delin Feng* 91,027 91,027
Mr Xiuzhi Shi 18,000 18,000
Mr Hui Zhang 18,000 18,000
262,527 262,527
Salary and fees Total
2020 US$ US$
Mr Boyi Liang 76,797 76,797
Mr Yong Li 23,088 23,088
Mr Lixian Yu 197,131 197,131
Mr Delin Feng 194,921 194,921
Mr Xiuzhi Shi 22,233 22,233
Mr Hui Zhang 61,142 61,142
575,312 575,312
Key management comprises Executive and Non-Executive Directors and all
emoluments are short term in nature.
*Mr Delin Feng resigned on November 2021
**Mr Xiaohua Wang appointed on November 2021
6. Expenses by nature
2021 2020
US$000 US$000
Employee benefit expenses 6,758 6,617
Operating lease expenses 50 145
Depreciation 3,023 3,200
Legal, professional and regulatory costs 515 170
Travel and entertaining 521 125
Social & other taxes 6,609 6,287
Other Expenses 1,067 258
Commission/bank fees 1,336 1,025
Total administrative expenses 19,879 17,827
6. Expenses by nature (continued)
2021 2020
US$000 US$000
Fees payable to the Company’s auditor for the audit of the consolidated 119 114
financial statements
Fees payable to the Company’s auditor for other services: - 3
*Tax compliance services
119 117
7. Other operating expenses
2021 2020
US$000 US$000
Impairment loss of fixed assets 2,307 -
Public welfare donation expenditure 2,227 46
Gain on dissolution of subsidiaries (2,118) -
2,416 46
Total other expenses in 2021 were US$2,416,000 (2020:US$46,312), net of gain
on dissolution of subsidiaries IMSS and Kryso Resources Ltd during the year of
US$2,118,000. The main reason for the increase compared to 2020 is that at the
request of the Tajik government, the donation expenditure increased compared
with last year; secondly, a number of fixed assets of Pakrut have incurred
physical wear and tear as a result of long-term use and cannot be repaired for
further use, so they were scrapped.
8. Income Tax
a) Analysis of Charge in the Year
2021 2020
US$000 US$000
Current tax:
Current tax 6,012 824
Deferred tax - -
Total 6,012 824
No provision for income taxes arose in the Cayman Islands, the UK, British
Virgin Islands. A current income tax expense arose in Tajikistan during the
year as LLC Pakrut sold gold in the amount of TJS 814,171,620 – equivalent
to US$ 71,991,962 (2020: TJS 671,738,902 – equivalent to US$ 64,515,782).
Thereby, the Company paid the amount of advance payments of income tax
according to the Tax Code of the Republic of Tajikistan, being 1.00% of
revenue.
The main reasons for the substantial increase in income tax compared with last
year are as follows: Pakrut was subject to a tax inspection by the local tax
Commission during 2021; secondly, the increase in sales revenue this year
resulted in a corresponding increase in corporate income tax.
Faced with the harsh tax environment in Tajikistan, the company has continued
to strengthen the study and research on the tax law of Tajikistan to reduce
tax losses; secondly, strengthen the visit and communication with the tax
bureau and the Tax Committee, maintain good relations, and continue to reduce
the prepaid tax.
8. Income Tax (continued)
Factors Affecting Current Tax Charge
The tax assessed on the loss for the year is higher than the weighted average
standard rate of corporation tax of 20% (2020 – 20%).
2021 2020
US$000 US$000
Loss before income tax (235) (5,451)
Loss on ordinary activities by weighted average rate of tax at 20% (2020: 20%) (47) (1,090)
Expenses not deductible for tax purposes 630 875
(Utilisation of tax losses)/Tax losses for which no deferred income tax asset (611) 215
was recognised
Pakrut income tax 6,012 824
Current tax payable 6,012 824
The Group did not recognise deferred tax assets of approximately US$Nil (2020:
$215,000). Unused Tajik tax losses amounting to approx. US$14,027,000 at 31
December 2021 can be carried forward for three years from the year incurred
and used against future taxable income at 15%.
9. Finance Income and Costs
2021 2020
US$000 US$000
Finance Income
Interest income on short term bank deposits 6 196
Finance Costs
Interest expense on shareholder’s loans wholly repayable within five years 7,315 13,111
Interest expense on bank borrowings wholly repayable within five years 3,510 2,888
Finance costs 10,825 15,999
10. Earnings per Share
2021 2020
US$ US$
Basic and diluted earnings per share (cents) (1.63) (1.66)
The basic earnings per share is calculated by dividing the loss attributable
to equity holders after tax of US$6,245,000 (2020: 6,357,000) by the weighted
average number of shares in issue and carrying the right to receive dividend.
For the year ended 31 December 2021 this was 382,392,292 (2020: 382,392,292)
shares.
As the Group has incurred a loss for the year, no option or warrant is
potentially dilutive, and hence the basic and diluted earnings per share are
the same. At the year end, there were nil (2020: nil) share options
outstanding that are potentially dilutive in the future.
11. Intangible Assets
Exploration and evaluation assets
US$000
Cost
At 1 January 2019, 31 December 2019, 31 December 2020 and 31 December 2021 -
Impairment
At 1 January 2019, 31 December 2019, 31 December 2020 and 31 December 2021 -
Net Book Value
At 31 December 2019, 31 December 2020 and 31 December 2021 -
The exploration and evaluation assets represent internally generated costs in
connection with the Group’s exploration and evaluation activities.
Expenditure is transferred from exploration and evaluation assets to mines
under construction once the work completed to date supports the future
development of the property and such development receives appropriate
approvals.
The rights of LLC Pakrut to carry out exploration and evaluation activity at
the Pakrut deposit expired on 1 April 2014. The renewal application by the
Group to extend the exploration license is being considered by the Government
of Tajikistan. Although the Directors are not aware of any legal or other
impediments which would ultimately prevent approval of the license extension,
the Directors fully impaired the carrying value of the exploration and
evaluation assets during 2014 due to non-renewal of the Exploration License.
Exploration and evaluation activities can continue at the Pakrut Gold Deposit
in the area covered by the mining license. Currently, staff members of Pakrut
are coordinating with the local government for exploration licenses.
12. Mines under Construction
Mining rights comprised of exploration and evaluation assets up to the date
the Pakrut Gold Project was determined to be technically feasible and
commercially viable. All subsequent exploration and evaluation expenditure at
this site was capitalised within mining rights. Mining rights also included
the subsoil contract signature bonus and payments to obtain land use rights.
Construction in progress comprised the mine, smelting plant, tailings pond,
power lines and road construction work carried out at the Pakrut Gold Project
by contractors and directly by the Group. It also included the borrowing costs
associated with the loan to finance the mine, construction from China
Nonferrous Metals Intl Mining Co. Limited (“CNMIM”) and China Construction
Bank (“CCB”), together with associated legal, professional and consultancy
costs.
Mines under construction are not depreciated until construction is completed
and the assets are available for their intended use and signified by the
formal commissioning of the mine for production. Construction was completed at
the end of the 2018 financial year with the mine being deemed to be fully
operational at the start of the 2019 financial year and all accumulated
capitalised costs were transferred into Property, Plant and Equipment at 1
January 2019.
13. Property, Plant and Equipment
Land Office furniture and equipment Motor Plant and machinery Producing mines Assets under construction Total
US$000 US$000 vehicles US$000 US$000 US$000 US$000
US$000
Cost
At 1 January 2020 32 587 8,698 17,119 398,639 4,322 429,396
Additions - 106 - 1,836 - - 1,942
Transfer from Assets under construction - - - 4,322 - (4,322) -
Settlement of historic liabilities - - - - (20,214) - (20,214)
At 31 December 2020 32 693 8,698 23,277 378,425 - 411,125
Additions - - 190 805 - - 994
Disposals - (90) (3,465) (2,639) - - (6,193)
Settlement of historical liabilities - - - - 4,307 - 4,307
At 31 December 2021 32 602 5,423 21,443 382,732 - 410,233
13. Property, Plant and Equipment (continued)
Accumulated Depreciation
At 1 January 2020 - 322 6,227 11,476 8,823 - 26,849
Charge for the year - 32 414 2,580 8,050 - 11,076
Disposals - - - - - - -
At 31 December 2020 - 354 6,641 14,056 16,873 - 37,924
Charge for the year - - 319 2,521 9,026 - 11,866
Disposals - (90) (2,112) (1,690) - - (3,892)
At 31 December 2021 - 264 4,847 14,888 25,899 - 45,898
Net Book Value
At 31 December 2021 32 341 575 6,555 356,833 - 364,377
At 31 December 2020 32 339 2,057 9,221 361,552 - 373,201
In 2019 as the mine entered full production, mines under construction were
transferred into Property, Plant & Equipment under the sub-category of
Producing mines as presented above, and depreciation/depletion charged as per
the accounting policies.
The carrying value of the PPE, most notably producing mines, and the
depreciation/depletion methodology used, are both considered to be key
accounting judgements. Detail of these are disclosed in Note 2 along with the
related key estimate.
14. Subsidiary Undertakings
The Group had the following subsidiary undertakings as at 31 December 2021:
Name of Company Holding Country of Incorporation Proportion of Voting Rights held Nature of Business Registered addresses
Directly held
Kryso Resources (BVI) Limited Ordinary shares (CNG) British Virgin Islands 100% Holding Company 190 Elgin Avenue, Grand Cayman, KY1-9005, Cayman Islands
Indirectly held
LLC Pakrut (BVI holds 100% share) Ordinary shares (BVI) Tajikistan 100% Mineral exploitation, development and mining Bahor district, Vahdat, Tajikistan
15. Financial Instruments by category
Financial assets at amortised cost
US$000
31 December 2021
Assets per Statement of Financial Position
Trade and other receivables, excluding prepayments 3,565
Cash and cash equivalents 7,472
Total 11,037
Financial liabilities at
amortised
cost
US$000
31 December 2021
Liabilities per Statement of Financial Position
Borrowings 368,953
Provisions for other liabilities and charges 1,084
Trade and other payables, excluding non-financial liabilities 49,696
Total 419,733
15. Financial Instruments by category (continued)
Financial assets at amortised cost
US$000
31 December 2020
Assets per Statement of Financial Position
Trade and other receivables, excluding prepayments 3,016
Cash and cash equivalents 27,196
Total 30,212
Financial liabilities at amortised cost
US$000
31 December 2020
Liabilities per Statement of Financial Position
Borrowings 388,741
Provisions for other liabilities and charges 995
Trade and other payables, excluding non-financial liabilities 52,363
Total 442,099
16. Inventories
2021 2020
US$000 US$000
Gold - -
Construction materials and processing equipment 17,334 15,911
17,334 15,911
Construction materials and processing equipment relates to raw materials and
semi-finished products used in gold production.
17. Trade and Other Receivables
Group Group
2021 2020
US$000 US$000
Other receivables 3,565 3,016
Prepayments and deposits 638 2,633
Total 4,203 5,649
None of the receivables are past due. The fair values are equal to the
carrying amounts.
Other receivables include $2,758,418 due from related party CNMIM in relation
to funds received from the insurance provider after the snowfall disaster,
which were received on behalf of CNG.
18. Borrowings
2021 2020
US$000 US$000
Bank borrowings 99,550 99,550
Other loans 269,403 289,191
Total 368,953 388,741
Non-current portion 65,000 19,822
Current portion 303,953 368,919
The fair value of borrowings equals their carrying amounts, as the impact of
discounting is not significant.
LIBOR is relied on the inherently subjective expert judgement of the panel of
submitting banks, such rates are prone to manipulation and are no longer truly
reflective of how banks fund in practice. Following the announcement by
Financial Conduct Authority (FCA) on 5 March 2021, the panel bank submissions
for all LIBOR have ceased or are no longer representative. As such, LIBOR
rates were no longer available. The implications of the reform were that: 1)
lenders were no longer able to issue loans based on LIBOR from 1 April 2021,
therefore new loans must reference a ‘risk free rate’ or alternative
non-LIBOR rate and 2) any existing contracts based on LIBOR should have been
switched to an alternate reference rate before 31 December 2021. The new
interest rate benchmark reforms have been considered, the impact is not
material in the current year and an appropriate rate will be reflected in next
year’s financial statements.
CNMIM loan
In accordance with the terms of the Subscription Agreement and Warrant
Instrument dated 27 July 2010 between Kryso Resources Limited (formerly Kryso
Resources Plc) and CNMIM, a subsidiary Company of significant shareholder
China Nonferrous Metals Mining (Group) Co. Limited (“China Nonferrous”),
CNMIM was required to use its best endeavors to secure mine funding for the
construction and development of the Pakrut Gold Project.
The USD tranche of the loan has been settled in full and US$Nil was
outstanding as at 31 December 2021 (2020: US$Nil). The amount outstanding on
the RMB tranche of the loan as at 31 December 2021 was US$12,683,599 (2020:
US$12,683,599).
CNMC loans
The loan agreement between CNMC International Capitals Company Limited and CNG
was signed on 20 September 2017. Under this agreement, CNMC International
Capitals Company Limited provided a loan facility of US$6,500,000 to CNG. This
loan was used to improve the daily business operations of China Nonferrous
Gold Limited.
The full amount of the loan was drawn down on 20 September 2017. The loan
contains annual fixed interest at 4%, however where the loan is used for a
purpose other than that stated in the contract (see comments above), the
proportion of the loan used will incur interest at a fixed rate of 8% per
annum. Payment of interest is made quarterly.
During 2019, the loan was transferred from CNMC International Capitals Company
Limited to another member of the group, CNMC Trade. On 15 July 2020, a loan
extension agreement was signed, extending the repayment date until 20 December
2020. The extension agreement incurs interest at a rate of 6 months LIBOR +
3.7%.
On 26 March 2021, a loan extension agreement was signed, extending the
repayment date until 20 December 2022. The extension agreement incurs interest
at a rate of 3 months LIBOR + 3.25%.
A loan agreement between CNMC International Capitals Company Limited and CNG
was signed on 27 April 2016. Under this agreement, CNMC International Capitals
Company Limited provided a loan facility of US$120,000,000 to CNG. This loan
was used to refinance the previous ICBC loan of the same amount, and the
purpose of these funds was for development, operations and management of the
Pakrut Gold Project, including operating and related expenses.
The full amount of the loan was drawn down on the 27 April 2016. The loan
contains annual fixed interest at 4%, however where the loan is used for a
purpose other than that stated in the contract (Pakrut Mine – see comments
above), the proportion of the loan used will incur interest at a fixed rate of
8% per annum. Payment of interest will be made biannually in June and
December.
During 2019, the loan was transferred from CNMC International Capitals Company
Limited to another member of the group, CNMC Trade. On 26 March 2021, a loan
extension agreement was signed extending the repayment date until 20 December
2022. The extension agreement incurs interest at a rate of 3 months LIBOR +
3.25%.
The Group has pledged its 100% equity interest in China Nonferrous Gold
Limited to CNMC as security for repayment of the loan.
A loan agreement between CNMC and CNG was signed on 27 May 2016 for a total
amount of US$20,000,000, which was drawn down in full on 27 June 2016. The
loan period per the contract was 6 months, from 27 May 2016 to 26 November
2016. The loan contains a fixed interest rate of 4% per annum, which is
calculated on a monthly basis from the 21st of the month to the 20 of the
following month.
During 2018, the loan was transferred from CNMC to another member of the
group, CNMC Trade. A further extension has been signed extending the repayment
date until 26 November 2020. On 26 March 2021, a loan extension agreement was
signed extending the repayment date until 2022. The extension agreement incurs
interest at a rate of 3 months LIBOR + 3.25%.
A loan agreement between CNMC International Capitals Company Ⅱ Limited (CNMC
International) and CNG was signed on 8 February 2018 for a total amount of
US$90,000,000, which was drawn down in full on 9 February 2018. The loan was
provided for the purposes of the construction, operations and management of
the Pakrut Gold Project, including operating and related expenses. This use is
in line with the terms of the agreement. The loan period per the contract was
from 9 February 2018 to 8 December 2020.
The loan contains a fixed interest rate of 5.8% per annum, which is calculated
on a half yearly basis from the 21st of December to the 20th June, and from
the 21st June to 20th December. Payment of interest will be made annually in
June and December of each year. Where the loan is used for a purpose other
than that stated in the contract (see comments above), the proportion of the
loan used will incur interest at a fixed rate of 11.6% per annum. At the
repayment date, interest will be charged at 8.7% on any unpaid balance. On 8
February 2021 US$20,000,000 was repaid, and on 26 March 2021, a loan extension
agreement was signed extending the repayment date of US$70,000,000 until 8
December 2022, and the extension agreement incurs interest at a rate of 3
months LIBOR + 3.25%. In June 2021, the Company repaid
US$9.26m（¥60million）of its outstanding loan.
CCB loans
The first loan agreement between China Construction Bank (“CCB”) and China
Nonferrous Gold Limited was signed on 14 June 2016. Under this agreement CCB
provided a loan facility of US$100,000,000 to China Nonferrous Gold Limited.
This loan was used to refinance a previous loan from CNMC of US$55,000,000,
with the remainder used for development, operations and management of the
Pakrut Gold Project, including operating and related expenses. This use is in
line with the terms of the agreement.
The loan is secured by Standby Letter(s) of Credit to be issued by China
Construction Bank Corporation, Beijing Branch, and guaranteed by CNMC under
the terms of the loan agreement, for an aggregate amount of not less than
US$103,092,783.51, with validity of not less than 60 months in favor of CCB.
The full amount of the loan was drawn down on 30 June 2016. The loan incurs
interest at a rate of 3 months LIBOR + 2.1% and is payable in arrears at the
end of each applicable interest period.
The loan is repayable in 8 installments commencing 18 months from drawdown
date and every 6 months thereafter as follows:
31/12/17 – US$5,000,000
30/06/18– US$5,000,000
31/12/18 – US$5,000,000
30/06/19 – US$5,000,000
31/12/19 – US$5,000,000
30/06/20 – US$5,000,000
31/12/20 – US$5,000,000
30/06/21 – Balance of loan
The second loan agreement between China Construction Bank (“CCB”) and
China Nonferrous Gold Limited was signed on 29 January 2019. Under this
agreement CCB provided a loan facility of US$20,000,000 to China Nonferrous
Gold Limited. This loan was used for the purpose of working capital for Pakrut
Gold Project. This use is in line with the terms of the agreement.
The loan is secured by Standby Letter(s) of Credit to be issued by China
Construction Bank Corporation, Beijing Branch, and guaranteed by CNMC under
the terms of the loan agreement, for an aggregate amount of not less than
US$20,620,000, with validity of not less than 12 months in favor of CCB.
The full amount of the loan was drawn down on 29 January 2019. The loan incurs
interest at a rate of 3 months LIBOR + 1.2% and is payable quarterly in
arrears. It has been repaid on 29 January 2021.
The third loan agreement between China Construction Bank (“CCB”) and China
Nonferrous Gold Limited was signed on 9 March 2020. Under this agreement CCB
provided a loan facility of US$14,550,000 to China Nonferrous Gold Limited.
This loan was used for the purpose of working capital for Pakrut Gold Project.
This use is in line with the terms of the agreement.
The loan is secured by Standby Letter(s) of Credit to be issued by China
Construction Bank Corporation, Beijing Branch, and guaranteed by CNMC under
the terms of the loan agreement, for an aggregate amount of not less than
US$30,000,000, with validity of not less than 12 months in favor of CCB.
The full amount of the loan was drawn down on 13 April 2020. The loan incurs
interest at a rate of 3 months LIBOR + 1.15% and is payable quarterly in
arrears. It was repaid on 16 March 2021.
CITIC loans
In 2022, the Group executed a loan agreement with CNMC Trade Company Limited
(“CNMC Trade”) for a loan of up to USD $34.55 million (the“CNMC
Loan”). This CNMC Loan has been used to repay the existing China CITIC Bank
Corporation Limited (“CITIC”) bank facilities of USD $34.55m (being USD20m
advanced in January 2021 (“First Loan”) and USD14.55m advanced in March
2021 (“Second Loan”).
In January 2021, the Company executed an agreement with China CITIC Bank
Corporation Limited (Zhuhai Branch) (“CITIC”) for a loan facility of up to
CNY 300million which is equivalent to US$46.37m. The CITIC Loan facility is
for a maximum of 12 months and is repayable 12 months from first drawdown.
US$20m of the CITIC Loan was drawn down in January 2021 including an annual
interest rate at 2.7% plus 6 month LIBOR. It has been repaid on 20 January
2022.
Another US$14.55m of the CITIC Loan was drawn down in March 2021 including an
annual interest rate at 2.71% plus 12 month LIBOR. It has been repaid on 26
January 2022.
Bank of Shanghai loan
The Company executed an agreement with Bank of Shanghai (Hong Kong) Limited
(“BOS”) for a loan facility of up to US $65 million (the “BOS Loan”).
The Loan facility is for a maximum of 24 months and is repayable 24 months
from the drawdown. The total amount of US$65m of the BOS Loan was drawn down
on 28 June 2021 in order to repay the CCBC Macau loan. The loan is secured by
Standby Letter(s) of Credit to be issued by Bank of Shanghai, Beijing Branch,
and guaranteed by CNMC under the terms of the loan agreement, for an aggregate
amount of not less than US$66,000,000, with validity of not less than 24
months in favor of BOS.
19. Trade and other payables
2021 2020
US$000 US$000
Trade and other payables 49,696 52,363
49,696 52,363
Trade and other payables include amounts due of US$44.3m (2020: US$42.4m) in
relation to mine development.
20. Provisions for Other Liabilities and Charges
Rehabilitation Total
US$000 US$000
At 1 January 2021 995 995
Unwinding of discount 90 90
At 31 December 2021 1,085 1,085
All provisions are non-current.
The Group makes full provision for the future cost of rehabilitating the mine
site and associated production facilities on a discounted basis at the time of
constructing the mine and installing those facilities.
The rehabilitation provision represents the present value of rehabilitation
costs relating to the Pakrut mine site, which are expected to be incurred up
to 2030, which is the expiration date of the mining license. The provision has
been created based upon the feasibility study. Assumptions based upon the
current economic environment within Tajikistan have been made, which
management believes are a reasonable basis upon which to estimate the future
liability and will be reviewed regularly to take into account any material
changes to the assumptions. The actual rehabilitation costs and works required
will ultimately depend upon future market prices for the necessary
rehabilitation works required, changes in future regulatory requirements and
the timing on when the mine ceases to operate commercially.
The discount rate used in the calculation of the provision as at 31 December
2021 is 9% per annum. The value of the undiscounted provision is US$2,481,000
(2020: US$2,481,000).
21. Treasury Policy and Financial Instruments
The Group operates informal treasury policies which include ongoing
assessments of interest rate management and borrowing policy. The Board
approves all decisions on treasury policy.
Facilities are arranged, based on criteria determined by the Board, as
required to finance the long-term requirements of the Group. The Group has
financed its activities by the raising of funds through the placing of shares
and through the issue and subsequent exercise of options and warrants.
There are no material differences between the book value and fair value of the
financial assets at the year end. Except for the impact of discounting on the
provisions for liabilities and other charges, there are no material
differences between the book value and fair value of financial liabilities at
the year end.
22. Share Capital
2021 2021 2020 2020
No. of Share No. of Share
ordinary Capital ordinary Capital
shares US$000 shares US$000
At 1 January (Ordinary shares of $0.0001) each 382,392,292 38 382,392,292 38
Issued during the year - - - -
At 31 December (Ordinary shares of US$0.0001 each) 382,392,292 38 382,392,292 38
All shares are authorised for issue and fully paid.
23. Share Based payments
Options can be granted to any employee of the Group in accordance with the
rules of the Group in accordance with the rules of the Unapproved Share Option
Scheme. The option price is not to be less than the initial Placing Price or
the price on the day of issue. The options cannot be exercised for a period of
at least one year from the date of grant. In the event of any employee to whom
options have been granted ceasing to be an employee of the Group he or she
will have a set period in which to exercise those options (depending on the
reasons for leaving), falling which, the options will lapse.
There were no share options outstanding at the year end.
24. Cash flow information
31 December 2021 31 December 2020
US$000 US$000
Cash flows from Operating Activities
Loss before income tax (235) (5,451)
Adjustments for:
Finance income (6) (196)
Finance costs 10,826 15,999
Depreciation 7,972 11,072
Foreign exchange loss 1,853 1,076
Change in working capital:
Inventory (1,423) 945
Trade and other receivables (1,869) (1,004)
Trade and other payables 3,222 (5,405)
Other current assets (549) 121
Other current liabilities (5,890) (19)
Net Cash generated from Operating Activities 13,904 17,137
24. Cash flow information (continued)
Net debt reconciliation
31 December 2021 31 December 2020
US$000 US$000
Cash and cash equivalents 7,472 27,196
Borrowings – repayable within one year (303,953) (368,919)
Borrowing – repayable after one year (65,000) (19,822)
Net debt (361,481) (361,545)
31 December 2021 31 December 2020
US$000 US$000
Cash and cash equivalents 7,472 21,196
Borrowings – fixed interest rates (117,664) (126,538)
Borrowings – variable interest rates (251,289) (262,204)
Net debt (361,481) (361,545)
24. Cash flow information (continued)
Borrowings due within 1 year Borrowings due after 1 year
Cash at bank US$000 US$000 Total
US$000 US$000
Net debt as at 1 January 2020 11,120 (267,527) (103,586) (359,993)
Cash flows 16,076 (677) - 15,392
Interest accrued - - (16,950) (16,950)
Movement between current and non-current - (100,715) 100,715 -
Net debt as at 31 December 2020 27,196 (368,919) (19,822) (361,545)
Cash flows (19,724) 30,613 - 10,889
Interest accrued - - (10,825) (10,825)
Movement between current and non-current - 34,353 (34,353) -
Net debt as at 31 December 2021 7,472 (303,953) (65,000) (361,481)
25. Controlling Party
The Directors consider China Nonferrous Metals Mining (Group) Co. Limited
(“CNMC”) to be the ultimate controlling party, by virtue of their
shareholding and representation on the Board of Directors.
26. Contingent Liabilities
During 2018, a contract was entered into between LLC Pakrut & LLC WenJian,
a Company set up by a former employee of Pakrut (Dept. 2), to provide
outsourced services including the extraction of ore, delivery of ore to
smelting plant, cleaning of mine, mine development and construction works. LLC
WenJian is not considered to be a related party.
Although LLC WenJian hold the relevant license for the construction works, the
Company does not hold a license in accordance with the laws of Tajikistan
“On subsoil” and “On licensing of certain types of activities” for
implementing the other services they have been contracted to perform. This is
a breach of Tajik laws and regulations which could result in penalties being
imposed on both parties to the contract. The outcome of this situation is
unclear and could result in fines imposed with the worst-case scenario being
that Pakrut could have their own license rescinded by the Tajik government.
There is no visibility surrounding the value or nature of any penalty at this
time.
27. Related Party Transactions
The amount paid by the Company and Kryso Resources Limited to CNMIM for
interest on the loan in 2021 amounted to US$Nil (2019:US$Nil). The amount of
loan interest accrued by the company to CNMIM in 2021 was US$1,257,032 (2020:
US$1,242,352). CNMIM is a significant shareholder of China Nonferrous Gold
Limited and Lixian Yu and Hui Zhang are President and CEO of CNMIM
respectively. During 2021, CNG did not pay any interest to CNMIM.
The amount of loan interest accrued by the Company to CNMC Trade in 2021 was
US$5,062,816 (2020: US$6,561,195). The amount of loan interest accrued by the
Company to CNMC International Capitals Company Ⅱ in 2021 was US$2,207,276
(2020: US$5,307,000). CNMC is the ultimate parent of China Nonferrous Gold
Limited.
27. Related Party Transactions (continued)
During 2021, 15MCC (a related party to CNG through being a subsidiary of CNMC,
the Company’s ultimate controlling party) provided equipment and materials,
together with installation and construction work to the Group amounting to
US$Nil (2020: $Nil) and the Group advanced payments to 15MCC amounting to
US$Nil in 2021 (2020:$ 1,524,503). As at 31 December 2021, the total liability
due to 15MCC was US$11,819,082 (2020: US$15,917,473).
In 2015 the Group entered into an additional consultancy contract with CNMC
Hongtoushan Fushun Mining Co Ltd., through CNMIM as agent as follows:
Smelting and Processing Agreement
CNMC Hongtoushan Fushun Mining Co Ltd. (CNHFMG) is a copper mine and
processing operation owned by CNMC. On 7th of September 2015, the Group
entered into a smelting and processing agreement with CNHFMG.
Under the terms of the Agreement, CNG will pay to CNHFMG an amount of RMB
17.99 (approximately US$2.8) per gram of finished gold once the Project
commences the 12-month production period. Prior to this period the Company
will cover the labour and associated costs of CNFMG. Once in production, in
the event the recovery of the plant is above the Beijing General Research
Institute of Mining and Metallurgy forecast rate over the life of production
of 82.99 percent, CNHFMG will share 40 percent of the profits from the upside
directly due to the increased recovery. In the event recovery is below 75
percent, CNHFMG will bear 20 per cent of any loss incurred by the Company from
the Project due to directly to recovery levels.
During 2021, CNHFMG provided equipment and materials, together with
installation and construction work to the Group amounting to US$Nil
(2020:US$Nil) and the Group advanced payments to CNHFMG amounting of 2021 was
Nill(2020: US$304,887). As at 31 December 2021, the total liability due to
CNHFMG was US$370,859 (the arrears have been paid off in January 2022).As of
June 2022, the project funds between the company and CNHFMG have been fully
settled.
27. Related Party Transactions (continued)
During the year of 2021 CNMC provided a guarantee for standby letters of
credit amounting to US$66,000,000 as security for the Group’s bank loan
facility with Bank of Shanghai.
During the year of 2021 CNMC guaranteed the Company's loan to China CITIC Bank
with a total amount of US$3.455 million.
As at 31 December 2021, PAKRUT has opened a foreign sales channel, and the
seller is Daye Nonferrous Metals. In December 2021, a total of 50.056kg gold
sales occurred in related party transactions, with an amount of US
$2,938,161.24, which has been received.
28. Events after the Reporting Period
In 2022, the Group executed a loan agreement with CNMC Trade Company Limited
(“CNMC Trade”) for a loan of up to USD $34.55 million (the “CNMC
Loan”). This CNMC Loan has been used to repay the existing China CITIC Bank
Corporation Limited (“CITIC”) bank facilities of USD $34.55m (being USD20m
advanced in January 2021 (“First Loan”) and USD14.55m advanced in March
2021 (“Second Loan”).
In 2022, the Group executed a foreign currency working capital loan agreement
with China CITIC Bank Corporation Limited (Zhuhai Branch) (“CITIC”) for a
loan facility of up to US$20 million (the “new CITIC Loan”), with an
annual interest at 3.00% over 6 month LIBOR, which was used to repay US$20m of
the CNMC Loan.
The Group has continued production throughout 2021 despite the outbreak of
COVID-19, enabling it to raise sufficient working capital.
The Company currently has total debt facilities (including banking
facilities), before interest, of c.US$319 million.
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