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2020 Results preliminary Announcement

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Griffin Mining Limited ("Griffin" or the "Company" - https://www.commodity-tv.com/ondemand/companies/profil/griffin-mining-ltd/) has today published its annual report and financial statements for the year ended 31 December 2020 which are available on the Company’s web site wwww.griffinmining.com.

In 2020, the Company and its subsidiaries (together the “Group”) recorded;

  • Revenues of $75,403,000 (2019: $82,267,000);
  • Operating profit of $15,148,000 (2019: $14,225,000);
  • Profit before tax of $14,515,000 (2019: $11,712,000);
  • Profit after tax of $8,910,000 (2019: $6,084,000); and
  • Basic earnings per share of 5.16 cents per share (2019: 3.52 cents).

Despite interruptions to operations in the first quarter of 2020 with restrictions imposed by the Chinese authorities to contain the Covid-19 pandemic, the Group recorded a 6.5% increase in operating profits on that recorded in 2019, primarily as a result of higher zinc metal prices received and reduced costs.

Turnover of $75,403,000 was down $6,864,000 (8.3%) on that achieved in 2019 of $82,267,000. This reflects zinc in concentrate sales down $2,532,000 (4.6%) with 5,535 tonnes (14.6%) less zinc in concentrate sold at average prices of $174 per tonne (11.8%) higher than in 2019, as the Group benefited from rising market prices and falling smelter treatment charges. Lead and precious metal in concentrate sales were down $3,851,000 (12.9%) on 2019 with 6,494 ozs (36.7%) less gold in concentrate sold at average prices of $441 per oz (33.4%) higher than 2019 and 41,337 ozs (12.4%) less silver in concentrate sold at average prices of $3.9 per oz (28.3%) higher than 2019.

In 2020, metal in concentrate sales were:

  • Zinc 32,276 tonnes (2019: 37,811 tonnes);
  • Gold 11,218 ozs (2019: 17,712 ozs);
  • Silver 291,756 ozs (2019: 333,093 ozs); and
  • Lead 1,425 tonnes (2019: 1,221 tonnes).

Average prices achieved in 2020 were:

  • Zinc metal per tonne of $1,645 (2019: $1,471);
  • Gold metal per oz of $1,759 (2019: $1,318);
  • Silver metal per oz of $17.70 (2019: $13.80); and
  • Lead metal per tonne of $1,339 (2019: $1,575).

Cost of sales of $42,737,000 in 2020 were down 12.1% on that incurred in 2019 of $48,609,000. This reduction in the main reflects less ore mined, hauled and processed with operations impacted by restrictions to contain the Covid-19 pandemic in the first quarter. Additional cost savings were achieved in mining and haulage thereby reducing unit costs per tonne of ore. Despite the reduction in tonnes of ore mined and processed, non-cash depreciation charges rose with additional capital costs.

Administration expenses fell $1,915,000 (9.9%) from $19,433,000 in 2019 to $17,518,000 in 2020. This reduction reflects efforts to contain costs across the Group during the Covid-19 pandemic, despite additional work on the application for a mining licence at Zone II and Green Mine certification.

Foreign exchange gains of $22,000 (2019: losses $93,000) were recorded in 2020, mainly on a strengthening of the Renminbi.

Interest of $108,000 (2019: $171,000) was received on bank deposits in 2020 whilst interest of $111,000 (2019: $51,000) was paid on short term bank loans. Finance interest on the lease of the dry tailings facility at Caijiaying and the London office totalling $171,000 (2019: $326,000) was incurred in 2020. Deemed interest on discounted rehabilitation provisions of $77,000 (2019: $Nil) was charged in 2020.

Losses on the disposal of $1,129,000 (2019: $305,000) were recorded with equipment being replaced to meet higher Chinese environmental standards.

Income taxes of $5,605,000 (2019: $5,628,000) have been charged in 2020. This includes a deferred taxation charge of $424,000 (2019: $380,000), and PRC withholding taxes on dividend distributions and fees of $232,000 ($50,000).

Basic earnings per share in 2020 was 5.16 cents (2019: 3.52 cents) and diluted earnings per share was 4.88 cents (2019: 3.24 cents).

Cash generated from operations of $24,398,000 (2019: $21,639,000) has been used in further developing the mine and facilities.

Attributable net assets per share at 31st December 2020 was $1.35 (2019: $1.24).

Chairman’s Statement:

I believe I can safely say, this was the year when Griffin fulfilled all of its outstanding promises to its past, current and future shareholders by delivering the confirmed regulatory and operational requirements to propel the Company forward into the foreseeable future. The list of achievements is extraordinary.

Firstly, the granting by the Chinese Ministry of Land and Natural Resources (the “MNR”) of new the Mining Licence covering both Zone II and Zone III in conjunction with the issuance of the 3rd Stage Zone III Project Final Acceptance Permit (the “PFA”) was a momentous achievement in terms of time, complexity and operational importance. It will increase the annual ore mined from Zone III from 820,000 tonnes in 2020 to 1.1 million tonnes in 2021, but with the increased ore accessed from Zone II, this should increase to over 1.5 million tonnes per annum in 2022, possibly increasing further as these zones continue to be developed. It catapults Griffin into the ranks of one of the largest zinc producers in China, which remains the largest consuming base and ferrous metals market in the world.

Secondly, the announcement of the new Global Mineral Resource estimate reported in accordance with the JORC Code (2012) for the Caijiaying Mine of an amazing 101.5 million tonnes at 3.9% Zinc, 0.6% Lead, 27.0 g/t Silver and 0.5 g/t Gold, resulting in total contained metal of approximately 4.0 million tonnes of Zinc, 0.6 million tonnes of Lead, 88.8 million ounces of Silver and 1.59 million ounces of Gold totalling $17.7 billion of metal in situ, a 50% increase in the known mineral resource.

Thirdly, obtaining Green Mine accreditation by the MNR having passed the national level green mine assessment. Failing to obtain certification would have meant closure of the Caijiying Mine. So not only has the smooth continuation of operations at the Caijiaying Mine been ensured, but it continues also to show the Company’s commitment to the environment, the local Chinese community and to the greater People’s Republic of China. Green Mine approval comes after the Company’s past environmental best practices were recognised by the Chinese government with the Environmental Award and the Mine Development Outstanding Achievement Award at successive China Mining Conferences.

Fourthly, yet another outstanding operational result considering operations were either suspended or severely curtailed in the first quarter of 2020 due to the Covid-19 pandemic, with access being denied for the whole of 2020 to the deeper stopes in Zone III awaiting PFA approval and the wait for the Zone II new Mining Licence. Nevertheless, operating profit, profit before tax, profit after tax and earnings per share all increased. Griffin now has the extraordinary claim that it has been profitable on an operational basis, in all the turmoils of the commodities markets, for the full 15 years it has been in operation and has only made a loss, on a net profit basis, in one of those years.

Fifthly, and although I place little faith in the share price as an indicator of value, in the last 12 months the Company’s share price has increased approximately 200%; 65.1% against the FTSE Fledgling Index, 64% against the FTSE All AIM Index and 60% against the FTSE Small Mining Cap Index. A remarkable performance.

As the Company has grown and generated cash, inevitably various opinions have been voiced in relation to the share price, share buybacks, dividends and even the realisation of the value of the Company. It is enough to say that your board continues to evaluate all these options on an ongoing and meticulous basis and remains committed to ensuring that the views of all the shareholders are considered and, where possible, acted upon, a course of action that Solomon himself, with all his wisdom, would find difficult.

The Company continues to evaluate opportunities not only through acquisition or organic expansion but also through continuing exploration at the Caijiaying Mine and the surrounding region and through exploration outside of Hebei Province wherever host rocks mimic the Caijiaying Mine area and provide the potential for significant exploration success.

Penultimately, I would like to thank our Chinese and ex pat employees, contractors, consultants, subsidiary directors, partners, spouses and children. Life has taught me that people make things happen and, in the extraordinary Covid-19 year of 2020, these very people went above and beyond the call of duty to travel and work in extremely difficult circumstances, often leaving homes and loved ones, to put the Company’s interests first. We couldn’t be more grateful.

Lastly, I would like to thank on behalf of the shareholders, those few to whom we owe so much and of whom Michael Jordan said in The Last Dance “Have some respect for the people who laid the foundations to make this a profitable organization.” I call them the founders of the Company. Those who believed when no-one believed. Those who flew standby (when that existed) and sat at the airport for a week hoping to catch a flight home. Those few who went to Caijiaying when it was a 12-hour drive from Beijing on a single lane gravel road overrun with over-laden coal trucks and stayed at what can only loosely be called accommodation. Those few who took no salaries or compensation and stayed when the Company had almost run out of funds. Those few who worked out of a terrible, serviced office the size of a cupboard. Those few include Roger Goodwin, Dal Brynelsen, the deceased Bill Mulligan and the recently departed Rupert Crowe.

It would be absolutely wrong of me to not mention Rupert, even though I have said much before. His wisdom, expertise and counsel are missed every day by all of us at Griffin. Without him, the Caijiaying Mine would have remained a valley, topped by Mongolian sands, next to a little village in northern China. An extraordinary, brilliant geologist, the Father of Caijiaying and, far more importantly, a gracious, gentle, considered, dedicated, intelligent human being it has been my absolute privilege to know and to have spent a large portion of my working life.

With the past behind us, I look forward to the next year of this incredible journey.

Further information

Griffin Mining Limited Telephone: +44 (0)20 76290 7772

Mladen Ninkov – Chairman

Roger Goodwin – Finance Director

Panmure Gordon (UK) Limited

Telephone: +44 (0)20 7886 2500

John Prior

Joanna Langley

 

Berenberg

Telephone: +44 (0)20 3207 7800

Matthew Armitt

Jennifer Wyllie

Deltir Elezi

 

Blytheweigh

Telephone: +44(0)20 7138 3205

Tim Blythe

 

Swiss Resource Capital AG

www.resource-capital.ch

Jochen Staiger

[email protected]

Griffin Mining Limited’s shares are quoted on the Alternative Investment Market (AIM) of the London Stock Exchange (symbol GFM).

The Company’s news releases are available on the Company’s web site: www.griffinmining.com

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

 

Griffin Mining Limited

Summarised Consolidated Income Statement

For the year ended 31 December 2020

(expressed in thousands US dollars)

 

2020

 

2019

 

Audited

 

Audited

 

$000

 

$000

    

Revenue

75,403

 

82,267

    

Cost of sales

(42,737)

 

(48,609)

    
    

Gross profit

32,666

 

33,658

    

Administration expenses

(17,518)

 

(19,433)

    
    

Profit from operations

15,148

 

14,225

    

Losses on disposal of plant and equipment

(1,129)

 

(305)

Provisions against intangible assets

(10)

 

(1,985)

Foreign exchange gains / (losses)

22

 

(93)

Finance income

108

 

171

Finance costs

(359)

 

(377)

Other income

735

 

76

    
    

Profit before tax

14,515

 

11,712

    

Income tax expense

(5,605)

 

(5,628)

    
    

Profit for the year

8,910

 

6,084

    
    

Basic earnings per share (cents)

5.16

 

3.52

    

Diluted earnings per share (cents)

4.88

 

3.24

Griffin Mining Limited

Summarised Consolidated Statement of Comprehensive Income

For the year ended 31 December 2020

(expressed in thousands US dollars)

  

2020

 

2019

  

Audited

 

Audited

  

$000

 

$000

     

Profit for the year

 

8,910

 

6,084

     

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

    
     

Exchange differences on translating foreign operations

 

9,662

 

(2,324)

     

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

 

9,662

 

(2,324)

     

Total comprehensive income for the year

 

18,572

 

3,760

 

Griffin Mining Limited

Summarised Consolidated Statement of Financial Position

As at 31 December 2020

(expressed in thousands US dollars)

 

2020

 

2019

 

Audited

 

Audited

 

$000

 

$000

ASSETS

   

Non-current assets

   

Property, plant and equipment

266,709

 

228,287

Intangible assets – exploration interests

325

 

322

 

267,034

 

228,609

Current assets

   

Inventories

5,333

 

3,839

Receivables and other current assets

6,675

 

1,861

Cash and cash equivalents

16,435

 

19,885

 

28,443

 

25,585

    

Total assets

295,477

 

254,194

    

EQUITY AND LIABILITIES

   

Equity attributable to equity holders of the parent

   

Share capital

1,728

 

1,728

Share premium

68,470

 

68,455

Contributing surplus

3,690

 

3,690

Share based payments

2,072

 

2,072

Shares held in treasury

(917)

 

(917)

Chinese statutory re-investment reserve

2,830

 

2,500

Other reserve on acquisition of non controlling interests

(29,346)

 

(29,346)

Foreign exchange reserve

11,365

 

1,703

Profit and loss reserve

173,814

 

165,059

Total equity attributable to equity holders of the parent

233,706

 

214,944

    

Non-current liabilities

   

Other Payables

13,487

 

-

Long-term provisions

2,200

 

2,150

Deferred taxation

3,359

 

2,731

Finance leases

-

 

479

 

19,046

 

5,360

Current liabilities

   

Trade and other payables

42,342

 

31,769

Finance leases

383

 

2,121

Total current liabilities

42,725

 

33,890

    

Total equities and liabilities

295,477

 

254,194

    

Attributable net asset value per share to equity holders of parent

1.35

 

1.24

 

Griffin Mining Limited

Summarised Consolidated Statement of Changes in Equity.

For the year ended 31 December 2020

(expressed in thousands US dollars)

 

Share

Share

Contributing

Share

Shares

Chinese

Other

Foreign

Profit

Total

 

Capital

Premium

surplus

Based

held in

statutory

re-investment

reserve on

Exchange

and loss

attributable to

    

Payments

Treasury

Reserve

acquisition of

Reserve

reserve

equity holders

       

non-controlling

  

of parent

       

interests

   
 

$000

$000

$000

$000

$000

$000

$000

$000

$000

$000

At 1st January 2019

1,727

68,442

3,690

2,072

(917)

2,386

(29,346)

4,027

159,161

211,242

Regulatory transfer for future investment

-

-

-

-

-

153

  

(153)

-

Issue of shares on exercise of options

1

13

-

-

-

-

-

-

-

14

Transaction with owners

1

13

-

-

-

153

-

-

(153)

14

Profit for the year

-

-

-

-

-

-

-

-

6,084

6,084

Adjustment for adoption of IFRS 16 leases

-

-

-

-

-

-

-

-

(33)

(33)

Other comprehensive income:

          

Exchange differences on translating foreign operations

-

-

-

-

-

(39)

-

(2,324)

-

(2,363)

Total comprehensive income

-

-

-

-

-

(39)

-

(2,324)

6,051

3,688

At 31st December 2019

1,728

68,455

3,690

2,072

(917)

2,500

(29,346)

1,703

165,059

214,944

Regulatory transfer for future investment

-

-

-

-

-

155

-

-

(155)

-

Issue of shares on exercise of options

-

15

-

-

-

-

-

-

-

15

Transaction with owners

-

15

-

-

-

155

-

-

(155)

15

Profit for the year

-

-

-

-

-

-

-

-

8,910

8,910

Other comprehensive income:

          

Exchange differences on translating foreign operations

-

-

-

-

-

175

-

9,662

 

9,837

Total comprehensive income

-

-

-

-

-

175

-

9,662

8,910

18,747

At 31st December 2020

1,728

68,470

3,690

2,072

(917)

2,830

(29,346)

11,365

173,814

233,706

Griffin Mining Limited

Summarised Consolidated Cash Flow Statement

For the year ended 31 December 2020

(expressed in thousands US dollars)

 

2020

 

2019

 

Audited

 

Audited

 

$000

 

$000

    

Net cash flows from operating activities

   

Profit before taxation

14,515

 

11,712

Foreign exchange (gains) / losses

(22)

 

93

Finance income

(108)

 

(171)

Finance costs

359

 

377

Depreciation, depletion and amortisation

12,801

 

12,343

Provisions against intangible assets

10

 

1,985

Losses on disposal of equipment

1,129

 

305

(Increase) / decrease in inventories

(1,494)

 

1,112

(Increase) / decrease in receivables and other current assets

(4,814)

 

959

Increase in trade and other payables

5,666

 

4,016

Taxation paid

(3,644)

 

(11,092)

Net cash inflow from operating activities

24,398

 

21,639

    

Cash flows from investing activities

   

Interest received

108

 

171

(Costs) / proceeds on disposal of equipment

(44)

 

1

Payments to acquire – mineral interests

(18,691)

 

(18,883)

Payments to acquire – plant and equipment

(5,684)

 

(8,193)

Payments to acquire office, office furniture & equipment

(5)

 

(69)

Payments to acquire intangible fixed assets – exploration interests

(11)

 

(308)

Net cash outflow from investing activities

(24,327)

 

(27,281)

    

Cash flows from financing activities

   

Issue of ordinary shares on exercise of options

15

 

14

Interest paid

(112)

 

(52)

Finance lease advance

-

 

65

Finance lease repayments

(2,469)

 

(2,762)

Net cash outflow from financing activities

(2,566)

 

(2,735)

    

(Decrease) / increase in cash and cash equivalents

(2,495)

 

(8,377)

    

Cash and cash equivalents at the beginning of the year

19,885

 

28,452

Effects of exchange rates

(955)

 

(190)

Cash and cash equivalents at the end of the year

16,435

 

19,885

    

Cash and cash equivalents comprise bank deposits.

   

Bank deposits

16,435

 

19,885

Included within net cash flows of $2,495,000 (2019 $8,377,000) are foreign exchange losses of $22,000 (2019: gains $93,000) which have been treated as realised.

Notes:

This statement has been prepared using accounting policies and presentation consistent with those applied in the preparation of the statutory financial statements of the Company.

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 2020 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 2020 statutory financial statements.

The annual report and accounts for 2020 are being sent by post to all registered shareholders. Additional copies of the annual report and accounts are available from the Company’s London office, 8th Floor, 54 Jermyn Street, London, SW1Y 6LX 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 2020 and 2019 were derived from the Caijiaying zinc gold mine.

 

2020

 

2019

 

$000

 

$000

REVENUES

   

China

75,403

 

82,267

    

Zinc concentrate sales

53,095

 

55,627

Lead and precious metals concentrate sales

25,999

 

29,850

Royalties and resource taxes

(3,691)

 

(3,210)

 

75,403

 

82,267

    

COST OF SALES: CHINA

   

Mining costs

16,056

 

17,652

Haulage costs

7,282

 

8,277

Processing costs

8,868

 

10,019

Depreciation (excluding depreciation in administration costs)

11,780

 

11,462

Stock movements

(1,249)

 

1,199

 

42,737

 

48,609

    

ADMINISTRATION EXPENSES

   

China

12,939

 

14,253

Australia

312

 

414

UK / Bermuda

4,267

 

4,766

 

17,518

 

19,433

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

Notes (continued):

 

TOTAL ASSETS

2020

 

2019

 

$000

 

$000

China

290,147

 

248,119

Australia

967

 

686

UK / Bermuda

4,363

 

5,389

 

295,477

 

254,194

    

CAPITAL EXPENDITURE

2020

 

2019

 

$000

 

$000

China

24,375

 

27,076

Australia

-

 

65

UK / Bermuda

5

 

4

 

24,380

 

27,145

FINANCE INCOME

2020

 

2019

 

$000

 

$000

Interest on bank deposits

108

 

171

FINANCE COSTS

2020

 

2019

 

$000

 

$000

Interest payable on short term bank loans

111

 

51

Interest on rehabilitation provisions

77

 

-

Finance lease interest

171

 

326

 

359

 

377

OTHER INCOME

2020

 

2019

 

$000

 

$000

Scrap and sundry other sales

735

 

76

Income Tax Expense

 

2020

 

2019

 

$000

 

$000

Profit for the year before tax

14,515

 

11,712

    

Expected tax expense at a standard rate of PRC income tax of 25% (2018 25%)

3,629

 

2.929

Adjustment for tax exempt items:

   

- Income and expenses outside the PRC not subject to tax

567

 

746

    

Adjustments for short term timing differences:

   

- In respect of accounting differences

(298)

 

(234)

    

Adjustments for permanent timing differences other

1,051

 

1,757

    

Withholding tax on intercompany dividends and charges

232

 

50

    

Current taxation expense

5,181

 

5,248

    

Deferred taxation expense

   

Correction of provision brought forward

-

 

18

Origination and reversal of temporary timing differences

424

 

362

 

424

 

380

    

Total tax expense

5,605

 

5,628

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 2020 (25% in 2019) 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:

   

2020

     

2019

  
 

Earnings

$000

 

Weighted

Average number of shares

 

Per share amount (cents)

 

Earnings

$000

 

Weighted

Average number of shares

 

Per share amount (cents)

Basic earnings per share

           

Earnings attributable to ordinary shareholders

8,910

 

172,788,420

 

5.16

 

6,084

 

172,748,831

 

3.52

Dilutive effect of securities

           

Options

-

 

9,861,227

 

(0.28)

 

-

 

15,107,500

 

(0.28)

Diluted earnings per share

8,910

 

182,649,647

 

4.88

 

6,084

 

187,856,331

 

3.24

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

Interests

 

Mill and mobile mine equipment

 

Offices furniture & equipment

 

Total

At 1 January 2019

167,338

 

45,747

 

55

 

213,140

Foreign exchange adjustments

(1,611)

 

(786)

 

-

 

(2,397)

Additions during the year

18,883

 

8,193

 

69

 

27,145

Change in estimate of mine closure costs

(115)

 

-

 

-

 

(115)

Adjustment for adoption of IFRS16 leases

-

 

-

 

370

 

370

Adjustment for change in lease accounting estimate.

-

 

2,792

 

-

 

2,792

Disposals

-

 

(305)

 

-

 

(305)

Depreciation charge for the year

(6,912)

 

(5,268)

 

(163)

 

(12,343)

At 1 January 2020

177,583

 

50,373

 

331

 

228,287

Foreign exchange adjustments

8,292

 

3,408

 

5

 

11,705

Additions during the year

18,691

 

5,684

 

5

 

24,380

Provision for licence transfer fees

16,338

 

-

 

-

 

16,338

Change in estimate of mine closure costs

(115)

 

-

 

-

 

(115)

Transfer of rehabilitation provision

697

 

(697)

 

-

 

-

Disposals

-

 

(1,085)

 

-

 

(1,085)

Depreciation charge for the year

(6,542)

 

(6,084)

 

(175)

 

(12,801)

At 31 December 2020

214,944

 

51,599

 

166

 

266,709

        

At 31 December 2018

       

Cost

205,840

 

72,028

 

134

 

278,002

Accumulated depreciation

(38,502)

 

(26,281)

 

(79)

 

(64,862)

Net carrying amount

167,338

 

45,747

 

55

 

213,140

        

At 31 December 2019

       

Cost

222,589

 

80,935

 

573

 

304,097

Accumulated depreciation

(45,006)

 

(30,562)

 

(242)

 

(75,810)

Net carrying amount

177,583

 

50,373

 

331

 

228,287

        

At 31 December 2020

       

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

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 $3,872,000 (2019: $1,997,000) 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 $6,712,000 (2019: $5,123,000) has been provided. At 31 December 2019 the net carrying amount of this equipment was $8,417,000 (2019: $9,027,000). In 2019 the London office lease was capitalised to comply with IFRS16 with a deemed value of $371,000 upon which depreciation of $248,000 has been provided. At 31 December 2020 the net carrying amount of this office was $124,000 (2019:$247,000). 

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 that there were no impairment indicators at 31 December 2020. However, as best practice 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 2020 by reference to the estimated mineral resources at Caijiaying that may be extracted by 2056 and 2037 when the current business licence of Hebei Hua Ao expires. However, it is expected that Hebei Hua Ao will be converted to an equity joint venture company with an indefinite life before then. Accordingly, a Life of Mine plan (“LOM”) has been prepared by the Company that indicates the continued extraction of ore until 2056. 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 $2,500 per tonne, gold of $1,800 per troy ounce and silver of $20 per troy ounce;
  • Zinc treatment charges of 30% of market prices;
  • Extraction of measured and indicated resources of 25.5 million tonnes to 2037 when the current business licence of Hebei Hua Ao expires, with ore mined and processed rising to a maximum rate of 1.6 million tonnes of ore per annum;
  • Operating costs, recoveries and payables based upon past performance and that budgeted for 2021;
  • Capital costs based upon that initially scheduled with sustaining capital based on future scheduling:
  • Discount rate of 10%; and
  • Continued maintenance and grant of applicable licences and permits.

Notes (continued):

Intangible Assets

China – mineral exploration interests

     

$000

At 1 January 2019

    

2,016

Foreign exchange adjustments

    

(17)

Additions during the year

    

308

Impairment during the year

    

(1,985)

At 1 January 2020

    

322

Foreign exchange adjustments

    

2

Additions during the year

    

11

Impairment during the year

    

(10)

At 31 December 2020

    

325

Intangible assets represent cost on acquisition, plus subsequent expenditure on licences, concessions, exploration, appraisal and development work in respect to regional exploration in China. Where expenditure on an area of interest is determined as unsuccessful such expenditure is written off to profit or loss. The recoverability of these assets depends, initially, on successful appraisal activities, details of which are given in the report on operations. The outcome of such appraisal activity is uncertain. Upon economically exploitable mineral deposits being established, sufficient finance will be required to bring such discoveries into production. At 31 December 2020 impairment charges of $10,000 (2019: $1,985,000) had been provided and charged to the income statement in respect of the above exploration costs previously capitalised by Hebei Sino Anglo.

POST BALANCE SHEET EVENTS

As at 31 December 2020 there were no adjusting post balance sheet events (2019: none). Since 31 December 2020 the Company has bought in 316,840 shares to be held in treasury at a cost of $584,000.

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