REG - Griffin Mining Ltd - 2022 Final Results
09/05/2023 07:15
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RNS Number : 6695Y Griffin Mining Limited 09 May 2023
Royal Trust House, 54 Jermyn Street, London SW1Y 6LX, United Kingdom
Telephone: + 44 (0)20 7629 7772 Facsimile: + 44 (0)20 7629 7773
E mail: griffin@griffinmining.com
9(th) May 2023
2022 Final Results
Griffin Mining Limited ("Griffin" or the "Company") has today published its
annual report and accounts for the year ended 31 December 2022 which will be
available shortly on the Company's web site wwww.griffinmining.com and will be
posted to shareholders on 25 May 2023.
Despite operations being suspended by the Chinese authorities for external
events for nearly five months of 2022, the Company and its subsidiaries
(together the "Group") recorded;
· Revenues of $94,397,000 (2021: $121,648,000);
· Gross profit of $38,252,000 (2021: $58,424,000);
· Operating profits of $15,625,000 (2021: $36,925,000);
· Profit before tax of $15,272,000 (2021: $36,526,000);
· Profit after tax of $7,704,000 (2021: $25,376,000); and
· Basic earnings per share of 4.41 cents (2021: earnings per share
14.53 cents).
The results for 2022 were severely impacted by various suspensions in
operations for nearly five months of the year. First quarter results were
impacted by the enforced suspension of all operations at the Caijiaying Mine
for the Chinese Lunar New Year holiday celebrations, the Winter Olympics and
the subsequent Winter Paralympics. Mining recommenced on the 23 March 2022 and
processing on the 25 March 2022. Operations were again suspended by the
Chinese authorities restricting the supply and use of explosives for the
duration of the Chinese Communist National Party Congress from 22 September
2022 to 17 November 2022.
As a result of the suspensions in operations in 2022, Group profits before tax
decreased from $36,526,000 in 2021 to $15,272,000 in 2022 with metal in
concentrate production down on that produced in 2021, whilst zinc, gold and
lead metal in concentrate prices achieved in 2022 were higher than those
achieved in 2021.
With the suspension in operations during 2022 mining, haulage, and processing
costs (cost of sales) were down 11.2%. This reduction is less than the
reduction in tonnes milled of 15.6% as a result of fixed costs and higher
depreciation charges as assets are brought into use.
Operating (administration) costs excluding minority service charges interests
rose by 14.9%, reflecting inflationary costs in China, additional fees on the
appointment of new directors and the resumption of travel.
TURNOVER
Turnover in 2022 of $94,397,000 was down $27,251,000 (22.4%) on that achieved
in 2021 of $121,648,000. This reflects zinc in concentrate sales down
$20,495,000 (21.1%) with 30,422 tonnes of zinc metal in concentrate sold in
2022 compared with 41,949 tonnes in 2021, a decrease of 27.5% with lower
production, and average zinc metal in concentrate prices received in 2022 of
$2,513 per tonne compared with $2,311 received in 2021 an increase of 8.7%.
This price increase reflects an increase in market prices with the average LME
zinc metal price of $3,488 per tonne in 2022 compared with $3,007 in 2021 (an
increase of 16.0%), mitigated by an increase in smelter treatment charges with
average smelter treatment charges equating to 27.9% of the average LME zinc
price in 2022 compared with 23.1% in 2021.
Sales may be summarised as follows:
2022 2021
Zinc metal in concentrate revenue before royalties ($000s) 76,456 96,951
Lead metal in concentrate revenue before royalties ($000s) 2,052 2,216
Silver metal in concentrate revenue before royalties ($000s) 3,829 5,326
Gold metal in concentrate revenue before royalties ($000s) 17,672 24,373
Royalties (5,612) (7,218)
Zinc metal in concentrate sold (tonnes) 30,422 41,949
Lead metal in concentrate sold (tonnes) 926 1,069
Silver in concentrate sold (ozs) 221,506 269,505
Gold in concentrate sold (ozs) 10,649 14,447
Average price per tonne received (zinc) ($) 2,513 2,311
Average price per tonne received (lead) ($) 2,216 2,074
Average price per oz received (silver) ($) 17.9 20.4
Average price received per oz (gold) ($) 1,814 1,748
Lead and precious metal in concentrate sales in 2022 of $23,553,000 were down
$8,362,000 (26.2%) on that
achieved in 2021 of $31,915,000. This reflects less lead and precious metals
sold, with lower production, with higher gold and lead prices received, but
lower silver prices received.
COST OF SALES
Total cost of sales in 2022 of $56,145,000 was down $7,079,000 (11.3%) on that
incurred in 2021 of $63,224,000. In the main this reflects less tonnes mined,
hauled, and processed in 2022 than 2021. Operations in 2022 were impacted by
the enforced suspensions in operations for the Winter Olympics and PRC
National Party Congress. Whilst costs were down 11.2%, ore tonnes mined were
down 12.2% and ore tonnes milled were down 15.6% with fixed costs mitigating
further cost reductions.
Mining costs in 2022 were down $2,221,000 (11.7%) on that in 2021 reflecting a
12.2% decrease in tonnes of ore mined, and reduced operational development
work. Some further fixed cost savings were made in mine administration and
other costs.
Haulage costs in 2022 were down $1,089,000 (9.5%) on that in 2021 reflecting a
14.3% decrease in tonnes of ore hauled and a 10.4% increase in average
distances hauled from 2.97 km in 2021 to 3.28 km in 2022.
Processing costs in 2022 were down $2,364,000 (14.1%) on that incurred 2021
with a 153,855 tonne (15.6%) reduction in ore throughput and fixed costs
mitigating a further reduction in costs. There was a modest improvement in
tailings being backfilled as opposed to discharged to dry tailings of 48%
compared with 42% in 2021.
Depreciation charges in 2022 were up $3,276,000 (22.6%) on that incurred in
2021 as assets are brought into use and with an additional charge to ensure
all development costs capitalised, including future development costs as
estimated in the Life of Mine Plan, are fully written off at the end of the
Life of Mine.
PRODUCTION
Tonnes of ore processed in 2022 were down 15.6% on that in 2021. With the zinc
head grade down 0.41% in absolute terms on that in 2021, and recoveries down
0.1% on that in 2021, zinc metal in concentrate production was down 23.5% on
that in 2021.
With lower throughput, recoveries, and the gold grade down 0.11 g/t (15.7%)
gold metal in concentrate
production in 2022 was down 29.8% on that produced in 2021. With lower
throughput and with the silver head grade down 0.88 g/t but better recoveries
silver metal in concentrate production in 2022 was down 16.7% on that produced
in 2021.
OPERATING EXPENSES
Operating (administration) costs (excluding service fees to Yuanrun) in 2022
of $20,228,000 were up $2,605,000 (14.9%) on that incurred in 2021 of
$17,623,000. Hebei Hua Ao's operating costs in 2022 were up $1,026,000 (8.4%)
on that incurred in 2021 albeit this is masked by a 3.4% fall in the value of
the Renminbi. Renminbi denominated administration costs have increased by
12.1%, primarily on increased salaries and bonuses and ongoing increased
environmental and safety regulatory compliance costs. Griffin and other
subsidiary company costs were up with increased directors' fees and bonuses,
increased travel costs and increased directors' and officers' liability
insurance premiums. Service fees to Yuanrun of $2,399,000 based on 11.2% of
the profits of Hebei Hua Ao, as adjusted for force majeure days when
operations were suspended, has been charged to profit and loss in 2022
compared with $3,876,000 in 2021.
PROFITS BEFORE TAX
After interest, foreign exchange adjustments and other income, a profit before
tax of $15,272,000 was recorded for 2022 compared to $36,526,000 in 2021. The
profit before tax in 2022 was after charging / crediting:
· FX losses of $387,000 (2021: losses $51,000);
· Bank interest charges of $nil (2021: $309,000);
· Finance lease interest $48,000 (2021: $11,000);
· Interest in respect of rehabilitation provisions $87,000 (2021:
$84,000);
· Interest receipts of $369,000 (2021: $236,000);
· Losses on the disposal of fixed assets of $404,000 (2021: $293,000);
· Provisions against capitalised intangible assets (Hebei Sino Anglo)
$nil (2021: $11,000); and
· Other income of $204,000 (2021: $124,000).
TAXATION
Taxation of $7,568,000 has been provided for in 2022 (2021: $11,150,000) being
25% of Hebei Hua Ao's profits under PRC GAAP amounting to $6,931,000;
withholding tax primarily of 5% on intercompany dividends received of
$803,000; UK corporation tax on Griffin Mining (UK Services) Limited profits
of $67,360 and a deferred tax credit of $260,000.
CASH FLOW
Cash generated from operations of $15,734,000 (2021 $42,880,000) have been
used in further developing the
mine and facilities.
NET ASSETS
Attributable net assets per share at 31st December 2022 was $1.40 (2021:
$1.50).
Whilst the directors do not recommend the payment of a dividend at this time,
all possible alternatives will be considered in 2023 by the board of directors
to either return excess cash to shareholders, or increase shareholder value.
Chairman's Statement:
Taking into consideration that operations were suspended at the Caijiaying
Mine for a full 5 months due to, initially, the Chinese Lunar New Year holiday
celebrations, the Winter Olympics and the Winter Paralympics and,
subsequently, the Chinese Communist National Party Congress, the Griffin
Mining Limited ("Griffin" or "the Company") was still able to generate its
18th continuous operating profit for the year and its 17th net profit, whilst
currently holding $47 million in cash and no debt.
Of course, the most significant operational and financial milestone of 2022
was the fulfilment of the Company's long held aim of having the Caijiaying
Mine run at an annualised production throughput of 1.5 million tonnes per
annum. This was achieved and has been maintained since the restart of
operations post the Chinese Communist National Party Congress in November
2022. A record of 136,000 tonnes of ore were processed in December 2022 and
the 1st quarter of 2023 was a record for the 1st quarter of any year since the
commissioning of the Caijiaying Mine in 2005. The implications of this
achievement cannot be underestimated and are already being reflected in the
financial results of the Company in 2023.
What makes these operational results even more remarkable is that not one
tonne of ore was sourced from Zone II. All ore was obtained from the
traditional mining area of Zone III. With the approval by the Hebei Provincial
Emergency Response Bureau of the Mine Design for Zone II, including the
expansion of the production throughput rate, it can only portend what is yet
to come when Zone II is fully developed and slotted into the production
profile.
The decision by the government of the People's Republic of China ("PRC") to
allow the Covid-19 epidemic to be considered at an end and the subsequent
re-opening of the PRC's borders with the rest of the world in late 2022, has
allowed normal staffing and transport to commence with materials and services
becoming normalised. Consequently, exploration has recommenced at the
Caijiaying Mine and the likelihood that exploration tenements will begin to be
issued in Hebei and the southern provinces of the PRC has become more
positive. This will include exploration below the 1000RL at Zone III, the
resource drilling in Zone II, further exploration at Zones V & VIII,
exploration drilling out to the far eastern boundary of the Caijiaying Mine's
mining licence area and the possibility that virgin exploration tenements will
be granted over other areas.
With the growing cash balances of the Company and the increasing cash
generating capacity of the Caijiaying Mine, and with the relatively recent
addition of new directors, discussions have intensified concerning the
strategic direction of the Company's future. These discussions have been, and
will continue to be, wide ranging and include dividends, share buybacks in
various forms, rationalisation and realisation of asset value, acquisitions
and joint or primary listings on other stock exchanges. It is expected that
these issues will take centre stage at board level this year.
I am fully aware that the value of the Company's assets have not yet been
reflected in the share price and that it has taken an inordinate amount of
time to do so. Such is the nature of operating at the infancy of mining in a
foreign country, the dwindling profile of the London Stock Market and the
disappearance of the retail investor as capital is squeezed in less and less
hands, mainly institutional, driven by Environment Sustainability and
Governance ("ESG") and other non-financial concerns.
Although the following may sound trite, I do not mean it to be. Mining is
facing a critical, if not insurmountable, supply problem. The danger is real
and frightening. The easily found deposits of all metals have been discovered
and generally mined over the past 100 years. The non-carbon future will
require large amounts of capital for advanced exploration techniques and
drilling. The projected time from exploration discovery to production, even in
a perfect world, is now estimated to be over 30 years and that does not take
into consideration native title and ESG issues. With just one wind turbine
requiring 4 tonnes of zinc, I remain convinced the value of the Caijiaying
Mine will be fully revealed in this surge for metals.
As a result, and without knowing the Company's, my or anyone else's future, it
would be remiss of me not to thank everyone who has been involved with the
success of the Company. It has been a unique, extraordinary and memorable
experience. Billions of dollars of metal value have been discovered and added
to the Company's resource inventory. The Company has been the sole trailblazer
for foreign mining in China. Extraordinary men have done extraordinary things
with little to no recognition by people who have no idea of how to create
value, how difficult it has traditionally been to operate in China, mining
and, sadly, the bonds of friendship.
I hesitate to name anyone individually for their contribution as it
immediately leads to forgetting someone and causing offence. But I am going to
repeat what I wrote last year, because I can't do better this year that I will
always be enormously grateful and humbled by the contribution and camaraderie
of the directors, whom I'm proud to call "my friends", gave so freely, warmly,
genuinely and passionately. It made this impossible dream possible and
bearable and I shall always be so grateful.
With production running at an annualized 1.5 million tonne throughput since
November 2022 through to the date of this statement, I predict 2023 will break
all operating and financial records for the Company including tonnes mined,
hauled, processed and zinc, gold, silver and lead produced. I look forward to
being able to deliver that news as the year progresses
About Griffin Mining Limited
Griffin Mining Limited's shares are quoted on the Alternative Investment
Market (AIM) of the London Stock Exchange (symbol GFM). Griffin Mining Limited
owns and operates in China, through its 88.8% owned Joint Venture stock
company, the Caijiaying Zinc Gold Mine, a profitable mine producing zinc,
gold, silver, and lead metals in concentrates. For more information, please
visit the Company's website www.griffinmining.com.
Further information
Griffin Mining Limited
Mladen Ninkov - Chairman Telephone: +44(0)20 7629 7772
Roger Goodwin - Finance Director
Panmure Gordon (UK) Limited Telephone: +44 (0)20
7886 2500
John Prior
Ailisa MacMaster
Berenberg Telephone: +44(0)20 3207 7800
Matthew Armitt
Jennifer Wyllie
Deltir Elezi
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No. 596/2014
Griffin Mining Limited
Summarised Consolidated Income Statement
For the year ended 31 December 2022
(expressed in thousands US dollars)
2022 2021
Audited Audited
$000 $000
Revenue 94,397 121,648
Cost of sales (56,145) (63,224)
Gross profit 38,252 58,424
Administration expenses (22,627) (21,499)
Operating Profit 15,625 36,925
Losses on disposal of plant and equipment (404) (293)
Provisions against intangible assets - (11)
Foreign exchange losses (387) (51)
Finance income 369 236
Finance costs (135) (404)
Other income 204 124
Profit before tax 15,272 36,526
Income tax expense (7,568) (11,150)
Profit for the year 7,704 25,376
Basic earnings per share (cents) 4.41 14.53
Diluted earnings per share (cents) 4.11 13.47
Griffin Mining Limited
Summarised Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
(expressed in thousands US dollars)
2022 2021
Audited Audited
$000 $000
Profit for the year 7,704 25,376
Other comprehensive income / expenses that will be reclassified to profit or
loss
Exchange differences on translating foreign operations (15,498) 3,336
Total other comprehensive (expense) / income for the year, net of tax (15,498) 3,336
Total comprehensive (expense) / income for the year (7,794) 28,712
Griffin Mining Limited
Summarised Consolidated Statement of Financial Position
As at 31 December 2022
(expressed in thousands US dollars)
2022 2021
Audited Audited
$000 $000
ASSETS
Non-current assets
Property, plant and equipment 258,041 275,296
Intangible assets - exploration interests 407 387
Other non- current assets 1,494 -
259,942 275,683
Current assets
Inventories 8,077 4,516
Receivables and other current assets 3,433 2,174
Cash and cash equivalents 34,138 38,159
45,648 44,849
Total assets 305,590 320,532
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital 1,749 1,749
Share premium 69,334 69,334
Contributing surplus 3,690 3,690
Share based payments 168 2,072
Shares held in treasury (1,644) (1,644)
Chinese statutory re-investment reserve 2,992 2,896
Other reserve on acquisition of non-controlling interests (29,346) (29,346)
Foreign exchange reserve (618) 14,635
Profit and loss reserve 199,140 199,190
Total equity attributable to equity holders of the parent 245,465 262,576
Non-current liabilities
Other Payables 6,317 10,352
Long-term provisions 2,649 2,667
Deferred taxation 2,717 3,240
Finance leases 683 794
12,366 17,053
Current liabilities
Trade and other payables 47,590 40,726
Finance leases 169 177
Total current liabilities 47,759 40,903
Total equities and liabilities 305,590 320,532
Attributable net asset value per share to equity holders of parent 1.40 1.50
Griffin Mining Limited
Summarised Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
(expressed in thousands US dollars)
Share Share Contributing Share Shares Chinese Other Foreign Profit Total
Capital Premium surplus Based held in statutory reserve on exchange and loss reserve attributable to equity holders of parent
payments treasury re-investment acquisition of non-controlling interests reserve
reserve
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
At 1 January 2021 1,728 68,470 3,690 2,072 (917) 2,830 (29,346) 11,365 173,814 233,706
- - - - - - - -
Regulatory transfer for future investment - -
Purchase of shares held in treasury - - - - (727) - - - - (727)
Issue of shares on exercise of options 21 864 - - - - - - - 885
Transaction with owners 21 864 - - (727) - - - - 158
- - - - - - 25,376 25,376
Profit for the year - -
Other comprehensive income:
Exchange differences on translating foreign operations - - - - 66 3,270 - 3,336
- -
Total comprehensive income - - - - - 66 - 3,270 25,376 28,712
1,749 69,334 3,690 2,072 2,896 14,635 199,190 262,576
At 31 December 2021 (1,644) (29,346)
- - - - 341 - (341) -
Regulatory transfer for future investment - -
Transfer on surrender of options - - - (1,904) - - - - (7,413) (9,317)
Transaction with owners - - - (1,904) - 341 - - (7,754) (9,317)
- - - - - - 7,704 7,704
Profit for the year - -
Other comprehensive income:
Exchange differences on translating foreign operations - - - - (245) (15,253) - (15,498)
- -
Total comprehensive income - - - - - (245) - (15,253) 7,704 (7,794)
1,749 69,334 3,690 168 2,992 (618) 199,140 245,465
At 31 December 2022 (1,644) (29,346)
Griffin Mining Limited
Summarised Consolidated Cash Flow Statement
For the year ended 31 December 2022
(expressed in thousands US dollars)
2022 2021
Audited Audited
$000 $000
Net cash flows from operating activities
Profit before tax 15,272 36,526
Foreign exchange losses 387 51
Finance income (369) (236)
Finance costs 135 404
Depreciation 19,590 16,530
Provisions against intangible assets - 11
Losses on disposal of equipment 404 293
Decrease / (increase) in inventories (3,561) 817
(Increase) / decrease in receivables and other current assets (1,807) 4,936
(Decrease) / increase in trade and other payables (6,284) (2,871)
Tax paid (8,033) (13,581)
Net cash inflow from operating activities 15,734 42,880
Cash flows from investing activities
Interest received 369 236
(Costs) / proceeds on disposal of equipment (178) 1
Payments to acquire - mineral interests (7,348) (13,564)
Payments to acquire - plant and equipment (13,749) (6,365)
Payments to acquire office, office furniture & equipment (6) -
Payments to acquire intangible fixed assets - exploration interests (20) (73)
Net cash outflow from investing activities (20,932) (19,765)
Cash flows from financing activities
Issue of ordinary shares on exercise of options - 885
Interest paid - (309)
Purchase of shares for treasury - (727)
Bank loan advances - 15,500
Repayment of bank loans - (15,500)
Finance lease repayments including interest (167) (462)
Net cash outflow from financing activities (167) (613)
(Decrease) / increase in cash and cash equivalents (5,365) 22,502
Cash and cash equivalents at the beginning of the year 38,159 16,435
Effects of exchange rates 1,344 (778)
Cash and cash equivalents at the end of the year 34,138 38,159
Cash and cash equivalents comprise bank deposits
Bank deposits 34,138 38,159
Included within net cash flows of $5,365,000 (2021 $22,502,000) are foreign
exchange losses of $387,000 (2021:losses $51,000) which have been treated as
realised.
Notes to the Summarised Financial Statements:
This statement has been prepared using accounting policies and presentation
consistent with those applied in the preparation of the statutory financial
statements of the Group.
The summary financial statements set out above do not constitute statutory
financial statements as defined by Section 84 of the Bermuda Companies Act
1981 or Section 435 of the UK Companies Act 2006. The Summarised
Consolidated Statement of Financial Position at 31 December 2022 and the
Summarised Consolidated Income Statement, Summarised Consolidated Statement of
Comprehensive Income, Summarised Consolidated Statement of Changes in Equity
and the Summarised Consolidated Cash Flow Statement for the year then ended
have been extracted from the Group's audited 2022 statutory financial
statements.
The annual report and accounts for 2022 are being sent by post to all
registered shareholders. Additional copies of the annual report and accounts
are available from the Company's London office, 8(th) Floor, 54 Jermyn Street,
London, SW1Y 6LX and are available on Griffin Mining Ltd's web site
www.griffinmining.com
The Group has one business segment, the Caijiaying zinc gold mine in the
People's Republic of China. All revenues and costs of sales in 2022 and 2021
were derived from the Caijiaying zinc gold mine.
2022 2021
$000 $000
REVENUES
China 94,397 121,648
Zinc concentrate sales 76,456 96,951
Lead and precious metals concentrate sales 23,553 31,915
Royalties and resource taxes (5,612) (7,218)
94,397 121,648
COST OF SALES: CHINA
Mining costs 16,782 19,003
Haulage costs 10,377 11,466
Processing costs 14,390 16,754
Depreciation (excluding depreciation in administration costs) 17,757 14,481
Stock movements (3,161) 1,520
56,145 63,224
ADMINISTRATION EXPENSES
China 16,136 16,433
Australia 75 136
UK / Bermuda 6,416 4,930
22,627 21,499
All revenues, cost of sales and operating expenses charged to profit relate to
continuing operations.
Notes (continued):
TOTAL ASSETS 2022 2021
$000 $000
China 299,810 312,026
Australia 1,044 1,011
UK / Bermuda 4,736 7,495
305,590 320,532
CAPITAL EXPENDITURE 2022 2021
$000 $000
China 21,117 19,929
UK / Bermuda 6 963
21,123 20,892
FINANCE INCOME 2022 2021
$000 $000
Interest on bank deposits 369 236
FINANCE COSTS 2022 2021
$000 $000
Interest payable on short term bank loans - 309
Interest on rehabilitation provisions 87 84
Finance lease interest 48 11
135 404
OTHER INCOME 2022 2021
$000 $000
Scrap and sundry other sales 204 124
Income Tax Expense
2022 2021
$000 $000
Profit for the year before tax 15,272 36,526
Expected tax expense at a standard rate of PRC income tax of 25% (2021: 25%) 3,818 9,132
Adjustment for tax exempt items:
- Income and expenses outside the PRC not subject to tax 1,054 934
Adjustments for short term timing differences:
- In respect of accounting differences 1,862 890
- In respect of other timing differences - (4)
Adjustments for permanent timing differences other 291 372
Withholding tax on intercompany dividends and charges 803 21
Current taxation expense 7,828 11,345
Deferred taxation (credit)
Origination and reversal of temporary timing differences (260) (195)
(260) (195)
Total tax expense 7,568 11,150
Notes (continued):
INCOME TAX EXPENSE (continued)
The parent company is not resident in the United Kingdom for taxation
purposes. Hebei Hua-Ao paid income tax in the PRC at a rate of 25% in 2022
(25% in 2021) based upon the profits calculated under Chinese generally
accepted accounting principles (Chinese "GAAP").
EARNINGS PER SHARE
Reconciliation of the earnings and weighted average number of shares used in
the calculations are set out below:
2022 2021
Earnings Weighted Per share amount (cents) Earnings Weighted Per share amount (cents)
Average number of shares Average number of shares
$000
$000
Basic earnings per share
Earnings attributable to ordinary shareholders
7,704 174,892,894 4.41 25,376 174,653,602 14.53
Dilutive effect of securities
Options - 12,384,576 (0.30) - 13,730,107 (1.06)
Diluted earnings per share
7,704 187,277,470 4.11 25,376 188,383,709 13.47
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the year. The calculation of diluted earnings per
share is based on the basic earnings per share on the assumed conversion of
all dilutive options and other dilutive potential ordinary shares.
Notes (continued):
Property, plant and equipment
Mineral Mill and mobile mine equipment Offices furniture & equipment Total
Interests
At 1 January 2021 214,944 51,599 166 266,709
Foreign exchange adjustments 3,405 1,224 (2) 4,627
Transfer (773) 773 - -
Additions during the year 13,564 6,365 963 20,892
Change in estimate of mine closure costs 327 - - 327
Release of rehabilitation provision (435) - - (435)
Disposals - (294) - (294)
Depreciation charge for the year (10,200) (6,180) (150) (16,530)
53,487
At 31 December 2021 220,832 977 275,296
Foreign exchange adjustments (12,832) (4,836) 8 (17,660)
Transfer re rehabilitation deposit (1,012) - - (1,012)
Additions during the year 7,348 13,749 6 21,103
Change in estimate of mine closure costs 130 - - 130
Disposals - (226) - (226)
Depreciation charge for the year (13,328) (6,104) (158) (19,590)
56,070
At 31 December 2022 201,138 833 258,041
At 1 January 2021
Cost 267,763 90,173 583 358,519
Accumulated depreciation (52,819) (38,574) (417) (91,810)
Net carrying amount 214,944 51,599 166 266,709
At 31 December 2021
Cost 285,471 97,910 1,544 384,925
Accumulated depreciation (64,639) (44,423) (567) (109,629)
Net carrying amount 220,832 53,487 977 275,296
At 31 December 2022
Cost 275,250 101,763 1,106 378,119
Accumulated depreciation (74,112) (45,693) (273) (120,078)
Net carrying amount 201,138 56,070 833 258,041
Mineral interests comprise the Group's interest in the Caijiaying ore bodies
including costs on acquisition, plus subsequent expenditure on licences,
concessions, exploration, appraisal and construction of the Caijiaying mine
including expenditure for the initial establishment of access to mineral
reserves, commissioning expenditure, and direct overhead expenses prior to
commencement of commercial production and together with the end of life
restoration costs.
Mill and mobile mine equipment include $14,007,000 (2021: $5,795,000) of
assets under construction yet to be depreciated.
Notes (continued):
Property, plant and equipment (continued)
The offices, furniture and equipment disclosed above relates solely to the
fixed assets, including leased offices, of Griffin Mining (UK Services)
Limited and China Zinc Pty Limited.
During 2013 plant and equipment with a deemed value of $11,381,000, revalued
in 2019 to $14,150,000, were acquired under a finance lease, upon which
depreciation of $8,601,000 (2021: $8,132,000) has been provided. At 31
December 2022 the net carrying amount of this equipment was $5,573,000 (2021:
$7,351,000). In 2019 the London office lease was capitalised, and in November
2021 renewed. At 31 December 2022 the net carrying amount of this office was
$826,000 (2021: $963,000).
The Group assesses the carrying value of the mineral interests, mill and
mobile mine equipment at least annually, and more frequently in the event of
any indications of impairment, by reference to discounted cash flow forecasts
of future revenue and expenditure for each business segment. These forecasts
are based upon both past and expected future performance, available resources
and expectations for future markets. Management determined there were no
impairment indicators at 31 December 2022 (2021: nil). However, as best
practice and in response to an updated Life of Mine Plan (LOM"), management
have updated the impairment model.
In determining any indications of impairment in the carrying value of the
Caijiaying Mine the directors have reassessed the net carrying value of
capitalised costs at 31 December 2022 by reference to the estimated mineral
resources at Caijiaying that may be extracted by 2050 (2021: 2056). While the
current business licence of Hebei Hua Ao expires in 2037, Hebei Hua Ao will be
converted to an equity joint venture company with an indefinite life in order
to comply with new PRC legislation. Accordingly, a new LOM has been prepared
by the Company, that indicates the continued extraction of ore until 2050. In
estimating the discounted future cash flows from the continuing operations at
the Caijiaying mine the following principal assumptions have been made:
· Future market prices for zinc of $3,097 (2021: $3,000) per tonne,
gold of $1,800 (2021: $1,800) per troy ounce and silver of $22.7 (2021: $22.5)
per troy ounce;
· Zinc treatment charges of 30% (2021: 30%) of market prices;
· Extraction of measured and indicated resources of 40.4 million tonnes
(2021: 50.3 million tonnes) to 2050 (2021: 2056) with ore mined and processed
rising to a maximum rate of 1.6 million tonnes (2021: 1.6 million) of ore
per annum;
· Operating costs, recoveries and payables based upon past performance,
that budgeted for 2023, and internal management forecasts for future years;
· Capital costs based upon that initially scheduled with sustaining
capital based on future scheduling;
· Discount rate of 10% (2021: 10%);
· Continued maintenance and grant of applicable licences and permits;
· No significant impact as a result of climate change, earthquakes or
other natural events; and
· A Renminbi to US dollar exchange rate of 7Rmb to $1 (2021: 6.5Rmb to
$1)
Sensitivities have been considered to assess the impact of changes in key
assumptions including, forecast metal prices, foreign exchange and discount
rates. If ongoing market prices for zinc fall below $3,000 per tonne, with all
other assumptions unchanged, this would result in an incremental impairment of
$2.5 million. A decrease in ongoing market prices for gold of 14% with all
other assumptions unchanged would result in the discounted cash flows equating
to the net carrying value. An increase in the discount rate to 11.1% with all
other assumptions unchanged would result in the discounted cash flows equating
to the net carrying value.
Notes (continued):
Attributable net asset value per share to total equity per holders of parent
shares
The attributable net asset value / total equity per share has been calculated
from the consolidated net assets / total equity of the Group at 31 December
2022 of $245,465,000 ($262,576,000 at 31 December 2021) divided by the number
of ordinary shares in issue at 31 December 2022 of 174,892,894 (174,892,894 at
31 December 2021).
POST BALANCE SHEET EVENTS
As a rationalisation of the capital structure of the Company, on 30 January
2023 10,130,526 new ordinary shares in the Company were issued for nil
consideration pursuant to the offer to holders of share purchase options for
the purchase and cancellation of outstanding options over 17,520,000 shares in
the Company which have subsequently been purchased and cancelled.
On 4 April 2023 a further 7,805,000 new ordinary shares in the Company were
issued as an incentive and to retain the services of officers and other
personnel of the Company, including 6,000,000 for the benefit of Mladen
Ninkov, Chairman. These new ordinary shares have been issued subject to
agreements between each of the said persons and the Company to confirm that
the shares issued will not be sold or otherwise transferred or disposed before
31st December 2024 or earlier in the event of a transaction, subject to malus,
and a pro rata repurchase option in favour of the Company if any holder of
these shares leaves before 31 December 2024.
At 31 December 2022 there were no adjusting post balance sheet events (2021:
none)
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