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September 2010

Progress Report on Caijiaying Operations

Further to the announcements of the 9th August 2010 and the 16th August 2010, Griffin Mining Ltd (“Griffin” or the “Company”) continues to await the definitive written report and comments from the investigatory committee into the fatalities at the Caijiaying zinc gold mine, as required by Chinese legal regulations. Although the publication of the report is expected imminently, until the report is presented and its recommendations implemented, mining operations at Caijiaying remain suspended. In the interim, to keep overhead costs to a minimum, staff at Caijiaying have been demobilised on reduced pay until the recommencement of all mining and processing operations.

The Company has also been notified that in order for the People’s Republic of China to meet certain global warming targets agreed at the Copenhagen Summit, certain provinces have been ordered to begin rationing or shutting down power to both industrial and domestic users. Hebei Province, in which the Caijiaying zinc gold mine is located, is one such province. Consequently, electricity supplies to all mines in the Zhangjiakou prefecture are being suspended and electricity to all residential properties restricted. No announcement has been made as to when these restrictions will be lifted although it is unlikely that this will be a long term policy.

Interim Statement

Griffin Mining Limited (“Griffin” or “the Company”) is pleased to publish its interim results for the six months ended 30th June 2010.

Financial and Trading:

The results for the six months ended 30 June 2010 show a pre-tax profit of US$8,658,000 compared to a loss in the six months to 30 June 2009 of US$1,354,000, when operations at Griffin’s Caijiaying Zinc Gold Mine in Northern China were suspended for much of the period.

An operating profit of $11,201,000 was achieved in the first six months of 2010 compared to a loss of $4,696,000 in the first six months of 2009, when operations were suspended. 260,317 tonnes of ore were processed at Caijiaying in the six months to 30th June 2010, compared with 81,281 tonnes of ore in the first six months of 2009, to produce 15,101 tonnes of zinc metal in concentrate (2009 3,243 tonnes), 4,570 ounces gold (2009 617 ounces), 105,475 ounces silver (2009 20,003 ounces) and 441 tonnes of lead (2009 144 tonnes). Zinc and gold production in the first six months of 2010 was a record for any six month period at Caijiaying, with increased ore mined and processed and better grades.

Upgrade of the processing facilities to a minimum capacity of 750,000 tonnes of ore per annum is on schedule and virtually complete with commissioning of all the main items of equipment in August 2010. Subject to the temporary suspension of mining operations from 9th August 2010 following the tragic death of two employees of the mine contractor at Caijiaying, mining and haulage rates are being increased to meet the increase in processing capacity.

With the lower levels of the mine being accessed, costs have increased with increased development work ahead of planned increase in extraction rates. As extraction and process rates increase with the completion of the upgrade of the processing facilities, the cost per tonne of ore mined and processed and metal produced is expected to fall.

The results for the first six months of 2010 have been impacted by foreign exchange losses of $3,061,000 arising mainly on sterling bank deposits.

Griffin has a 39.2% equity interest in Spitfire Oil Ltd (“Spitfire”). Full provision has been made in the interim results for Griffin’s share of Spitfire’s losses of $127,000.

Griffin held cash balances of $67.1m as at 30 June 2010. This places the Company in an enviably strong position to continue its strategy of identifying acquisition opportunities to broaden the resources and geographical profile of the Company.

In line with previous years and the Company’s policy of determining annual dividends at the time of the Company’s full year results, the Board of Griffin has not declared an interim dividend.

Chairman’s Statement

“We have been delighted by the return to profitability following the global financial crisis in 2008 / 2009 and the continued firmness in metal prices. With the granting of the licence to mine below the 1300 level, new stopes are being developed to push mining rates to meet the increase in processing capacity on recently upgraded mill, crushing and tailings facilities and to access the increased gold available at these levels.

Unfortunately, the recent tragic fatalities at Caijiaying have caused a short term delay in increasing mine production. However, with the expectation that mining will be allowed to begin in the near future and the upgrade of the processing plant being completed, Griffin is poised to significantly increase production and revenues at Caijiaying in the near future.

Extraordinary developments continue to occur in China, including the development of major new cities through massive construction, new factories, power stations, wind farms, roads, railways and other associated infrastructure. This construction, continues to cause the very strong demand for concentrate from Caijiaying and is evidenced by the continuing recent falls in smelter charges by zinc smelters and metals traders.

Griffin’s directors and management remain committed to an unerring search for other mines or companies which hold premium mining assets. Unfortunately, with diminishing exploration expenditure, good projects that can provide economic returns to shareholders are scarce, exacerbated by predatory Chinese groups with almost limitless financial resources. We continue the search undeterred by these developments.”

Griffin Mining Limited
Condensed Consolidated Income Statement
(expressed in thousands US dollars)

  6 months
to 30/06/2010
Unaudited		 6 months
to 30/06/2009
Unaudited		 Year
to 31/12/2009
Audited
  $000 $000 $000
Revenue 27,014 2,366 25,368
Cost of sales (9,984) (3,484) (11,909)
Gross profit / (loss) 17,030 (1,118) 13,459
Net operating expenses (5,829) (3,578) (7,940)
Profit / (loss) from operations 11,201 (4,696) 5,519
Share of losses of associated company (127) (210) (517)
Foreign exchange (losses) / gains (3,061) 3,340 1,956
Finance income 614 167 253
Other income 31 45 35
Profit / (loss) before tax 8,658 (1,354) 7,246
Income tax expense (1,809) – (1,013)
Profit / (loss) after tax 6,849 (1,354) 6,233
Attributable to minority interests 4,815 – 2,621
Attributable to equity owners of parent 2,034 (1,354) 3,612
  6,849 (1,354) 6,233
Basic earnings / (loss) per share (cents) 1.12 (0.75) 1.99
Diluted earnings / (loss) per share (cents) 1.10 (0.75) 1.97

Griffin Mining Limited
Condensed Consolidated Statement Of Comprehensive income
(expressed in thousands US dollars)

  6 months
to 30/06/2010
Unaudited		 6 months
to 30/06/2009
Unaudited		 Year
to 31/12/2009
Audited
  $000 $000 $000
Profit / (loss) for the financial period 6,849 (1,354) 6,233
Other comprehensive income      
Exchange differences on translating foreign operations 343 (58) 87
Other comprehensive income for the period, net of tax 343 (58) 87
Total comprehensive income for the period 7,192 (1,412) 6,320
Attributable to minority interests 4,831 – 2,616
Attributable to equity share owners of the parent 2,361 (1,412) 3,704
  7,192 (1,412) 6,320

Griffin Mining Limited
Condensed Consolidated Statement Of Financial Position
(expressed in thousands US dollars)

  30/06/2010
Unaudited		 30/06/2009
Unaudited		 31/12/2009
Audited
  $000 $000 $000
ASSETS      
Non-current assets      
Property, plant and equipment 68,847 57,267 63,214
Intangible assets – Exploration interests 1,437 1,327 1,422
Investment in associated company 3,859 4,293 3,986
  74,143 62,887 68,622
Current assets      
Inventories 3,381 2,354 2,780
Financial assets 2,704 – –
Other current assets 5,441 5,715 5,279
Cash and cash equivalents 67,070 64,540 67,630
  78,596 72,609 75,689
Total assets 152,739 135,496 144,311
EQUITY AND LIABILITIES      
Equity attributable to equity holders of the parent      
Share capital 1,815 1,816 1,817
Share premium 75,807 75,942 75,984
Contributing surplus 3,690 3,690 3,690
Share based payments 1,329 6,068 4,790
Other reserves 764 711 759
Foreign exchange reserve 7,556 7,084 7,234
Profit and loss reserve 47,075 33,991 40,440
Total equity attributable to equity holders of the parent 138,036 129,302 134,714
Minority interests 4,831 – 2,616
Total Equity 142,867 129,302 137,330
Non-current liabilities      
Long-term provisions 1,076 138 743
Current liabilities      
Taxation payable 1,018 – 1,572
Trade and other payables 7,778 6,056 4,666
Total liabilities 8,796 6,056 6,238
Total equities and liabilities 152,739 135,496 144,311
Number of shares in issue 181,538,496 181,555,164 181,688,497
Attributable net asset value / total equity per share $0.76 $0.71 $0.74

Griffin Mining Limited
Condensed Consolidated Statement of Changes in Equity
(expressed in thousands US dollars)

  Share Capital Share Premium Contributing Surplus Share Based Payments Other Reserves Foreign Exchange Reserve Profit and Loss Reserve Total attributable to equity holders of parent Minority Interests Total Equity
  $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
At 31 December 2008 1,816 75,950 3,690 5,826 711 7,142 35,345 130,480 – 130,480
Purchase of shares for cancellation – (8) – – – – – (8) – (8)
Cost of share based payments – – – 242 – – – 242 – 242
Transaction with owners – (8) – 242 – – – 234 – 234
Retained profit for the 6 months – – – – – – (1,354) (1,354) – (1,354)
Other comprehensive income:                    
Exchange differences on translating foreign operations – – – – – (58) – (58) – (58)
Total comprehensive income for the 6 month period – – – – – (58) (1,354) (1,412) – (1,412)
At 30 June 2009 (unaudited) 1,816 75,942 3,690 6,068 711 7,084 33,991 129,302 – 129,302
Regulatory transfer for future investment – – – – 48 – (48) – – –
Issue of share capital 1 42 – – – – – 43 – 43
Cost of share based payments – – – 253 – – – 253 – 253
Transfer in respect of the lapsed options – – – (1,531) – – 1,531 – – –
Transaction with owners 1 42 – (1,278) 48 – 1,483 296 – 296
Retained profit for the 6 months – – – – – – 4,966 4,966 2,621 7,587
Other comprehensive income:                    
Exchange differences on translating foreign operations – – – – – 150 – 150 (5) 145
Total comprehensive income for the 6 month period – – – – – 150 4,966 5,116 2,616 7,732
At 31 December 2009 1,817 75,984 3,690 4,790 759 7,234 40,440 134,714 2,616 137,330
Issue of share capital 3 94 – – – – – 97 – 97
Purchase of shares for cancellation (5) (271) – – – – – (276) – (276)
Cost of share based payments – – – 1,140 – – – 1,140 – 1,140
Transfer in respect of lapsed options – – – (4,601) – – 4,601 – – –
Transfer other current assets – – – – – – – – (2,616) (2,616)
Transaction with owners (2) (177) – (3,461) – – 4,601 961 (2,616) (1,655)
Retained loss for the 6 months             2,034 2,034 4,815 6,849
Other comprehensive income:                    
Exchange differences on translating foreign operations – – – – 5 322 – 327 16 343
Total comprehensive income for the 6 month period – – – – 5 322 2,034 2,361 4,831 7,192
At 30 June 2010 (unaudited) 1,815 75,807 3,690 1,329 764 7,556 47,075 138,036 4,831 142,867

Griffin Mining Limited
Condensed Consolidated Cash Flow Statement
(expressed in thousands US dollars)

  6 months to
30/06/2010
Unaudited		 6 months to
30/06/2009
Unaudited		 Year to
31/12/2009
Audited
  $000 $000 $000
Net cash flows from operating activities      
Profit / (loss) before taxation 8,658 (1,354) 7,246
Share of associated company loss 127 210 517
Foreign exchange losses / (gains) 3,061 (3,340) (1,956)
Finance income (614) (167) (253)
Adjustment in respect of share based payments 1,140 242 495
Depreciation, depletion and amortisation 1,282 384 1,533
Provisions 333 41 –
(Increase) / decrease in inventories (601) 873 446
(Increase) / decrease in other current assets (2,777) (152) 285
Increase / (decrease) in trade and other payables 3,111 (2,051) (2,882)
Net cash inflow / (outflow) from operating activities 13,720 (5,314) 5,431
Taxation paid (2,363) – –
Cash flows from investing activities      
Interest received 148 167 253
Payments to acquire intangible fixed assets (7) (12) (105)
Payments to acquire tangible fixed assets (6,501) (827) (7,242)
Payments to acquire financial assets (2,238) – –
Net cash (outflow) from investing activities (8,598) (672) (7,094)
Cash flows from financing activities      
Issue of ordinary share capital 97 – 42
Purchase of shares for cancellation (276) (8) (7)
  (179) (8) 35
Dividends paid – – –
Increase / (decrease) in cash and cash equivalents 2,580 (5,994) (1,628)
Cash and cash equivalents at beginning of the period 67,630 67,193 67,193
Effects of exchange rate changes (3,140) 3,341 2,065
Cash and cash equivalents at end of the period 67,070 64,540 67,630

Griffin Mining Limited Notes to the Interim Statement

  1. These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31December2009.
  2. Copies of this interim report are being sent to all registered shareholders. Additional copies are available from the Company’s London office, 60 St James’s Street, London, SW1A 1LE.
  3. The summary accounts set out above do not constitute statutory accounts as defined by Section 84 of the Bermuda Companies Act 1981 or Section 434 of the UK Companies Act 2006. The condensed consolidated statement of financial position at 31 December 2009 and the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and the condensed consolidated cash flow statement for the year then ended have been extracted from the Group’s 2009 statutory financial statements upon which the auditors’ opinion is unqualified.
  4. Since 31 December 2009, the Company has purchased zinc put options to hedge against falls in the price of zinc. These options have been classified as a derivative financial asset at fair value with any gains or losses recognised in the Income Statement as part of finance income. The fair value of derivative financial assets are determined by reference to active market transactions or using a valuation technique where no active market exists.
  5. 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 period. The calculation of diluted earnings per share is based on the basic earnings per share on the assumed conversion of all dilutive options and other dilutive potential ordinary shares. Reconciliation of the earnings and weighted average number of shares used in the calculations are set out below:
  6 months to
30/06/2010
Unaudited		 6 months to
30/06/2009
Unaudited		 Year to
31/12/2009
Audited
  Earnings $000 Weighted average number of shares Per share amount (cents) 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 / (Loss) attributable to ordinary shareholders 2,034 181,836,513 1.12 (1,354) 181,555,355 (0.75) 3,612 181,560,512 1.99
Dilutive effect of securities
Options – 2,602,740     –     1,906,603  
Diluted earnings per share 2,034 184,439,253 1.10 (1,354) 181,555,355 (0.75) 3,612 183,467,115 1.97