Company Background

Introduction

Griffin Mining Limited (“Griffin” or “the Company”) is a mining and investment company, incorporated in Bermuda, whose shares are quoted on the Alternative Investment Market of the London Stock Exchange (“AIM”).

The major asset of the Company is an 88.8% interest in Hebei Hua Ao Mining Industry Company Limited (‘Hebei Hua Ao’), which holds 5.4 square kilometres of mining and retention licences, including the mine and processing facilities, in the People’s Republic of China (“the PRC”) at Caijiaying (the “Caijiaying Mine”).

The Company also holds 90% of Hebei Sino Anglo Mining Development Company Limited (“Hebei Anglo”), which has an interest in 15.7 square kilometres of exploration licences immediately surrounding the Hebei Hua Ao licence area. These licences are held by Griffin’s joint venture partner, the Zhangjiakou Yuanrun Enterprise Management Consulting Service Co., Ltd (“Yuanrun”), to allow their retention under PRC law within the Hebei Hua Ao Group. Should a mining licence be granted over this area at any point in the future, this new licence may be contractually transferred back to Hebei Anglo at the Company’s option.

The Griffin continues to explore, expand and develop the Caijiaying Mine whilst also investigating potential acquisitions of mining projects that are capable, through either advanced exploration or mining expertise, of being brought into production to meet the Company’s historically pre-set, economic returns to shareholders.

The Caijiaying Mine is an operating zinc, gold, silver and lead mine, together with processing plant, camp and supporting facilities, located approximately 250 kilometres by road, north-west of Beijing in Hebei Province in the People’s Republic of China. The Caijiaying Mine is easily accessible by two separate freeways from Beijing. The site has significant water supplies, two 35,000 volt power lines connected to the electricity grid, full connectivity to fixed and mobile telecommunications systems and broadband access for internet services. It is 63 kilometres from Chongli, the host city of the 2022 Winter Olympic Games, to which there is a high speed train link from Beijing. Climatic conditions are not severe with warm summers and cold, dry winters, enabling the Caijiaying Mine to operate for 365 days a year.

History

Griffin Mining Limited was formed in May 1988 in Bermuda as a mining finance company. In June 1997, the Company’s shares were admitted to trading on the Alternative Investment Market (“AIM”) of the London Stock Exchange.

In October 1997, the Company changed its principal activities to mining and its name to Griffin Mining Limited. In November 1997 Griffin acquired a 50% equity interest in China Zinc Pty Ltd which held a 60% interest in the Hebei Hua Ao Mining Industry Company Limited (“Hebei Hua Ao”) a Chinese joint venture company, which holds the mineral rights at Caijiaying in the Hebei Province in Northern China. In March 1998, Griffin acquired the remaining 50% equity stake in China Zinc Pty Ltd, giving Griffin a controlling 60% interest in Hebei Hua Ao. In June 2012, Griffin acquired a further 28.8% interest in Hebei Hua Ao taking its interest to 88.8% and at the same time negotiated an extension of the term of the Hebei Hua Ao Joint Venture for a further 25 years to October 2037.

Griffin through Hebei Hua Ao holds a mining licence over some 3.2 sq km at Caijiaying and a retention licence over 2.2 sq km adjacent to the mining licence tenement. Within these licence areas are eight zones of mineralisation, one of which, Zone III, is currently being mined. Development work is being undertaken to access the Zone II area to the south with the receipt of  a further mining licence over that area and the area between Zones II and III. Griffin has an interest over a further 15.7 sq km through a second Chinese joint venture company, Hebei Anglo, with further zones of mineralisation.

The Caijiaying Mine was commissioned on time and budget in 2005 with an initial design production throughput rate of 200,000 tonnes of ore per annum. Numerous upgrades to the Caijiaying Mine and processing facilities have taken place since commissioning leading to the latest upgrade which has taken the name plate mill throughput capacity to 1.5 million tonnes of ore per annum.

Underground development continues with the expansion of the existing mining operations at Zone III down to the 1,000 RL, meaning 1,000 metres above sea level, approximately 500 metres below surface. Access to the Zone II area to the south of Zone III has been constructed allowing for mining and development of Zone II to commence.

Griffin has been the leader in foreign investment in mining in China having been engaged in developing the Caijiaying zinc gold project since 1997.

Caijiaying Mine Winter 2020/2021

Hebei Hua Ao, was the first foreign controlled entity to receive an exploration licence in the Peoples Republic of China and the first to be awarded a new mining licence over a metal deposit in China, as well as being the first to construct a new mine. Griffin has been a responsible investor in China taking care of the environment and the local community. In November 2010 Hebei Hua Ao received the environmental award at the 2010 China Mining conference and in November 2011 the Mine Development Outstanding Achievements award at that years China Mining conference. In 2021, Caijiaying was granted “green Mine” certification confirming that Caijiaying operates to high safety and environmental standards.

The Caijiaying Project Background

Drilling at Caijiaying 1998

Mineralisation was first identified at Caijiaying by the Chinese in the 1960’s. In 1994, following the introduction of legislation in China allowing the formation of joint venture entities with foreign parties, Hua-Ao was formed and in 1996/97 Griffin acquired its interest in Hua-Ao.

Partnership with the Chinese

Griffin’s Chinese partner in Hua-Ao is the Zhangjiakou Yuanrun Enterprise Management Consulting Service Co. Ltd (formerly the Zhangjiakou Caijiaying Lead Zinc Mining Company), a partnership comprising of the Zhangjiakou City Government, and the Third Geological Brigade, of the Hebei Province. Griffin maintains good relations with the Chinese authorities at township, county, provincial, and state levels, which has perhaps enabled Griffin to advance its Caijiaying project further than any other foreign controlled mining project in China.

Signing ceremony for the purchase of additional interest in Hebei Hua Ao

Caijiaying Development and Investment

Since the acquisition of its interest in Hebei Hua Ao, Griffin has undertaken extensive exploration, resource delineation drilling and other work, leading to a scoping study, feasibility study, financing and construction of the Caijiaying mine and processing facilities. In 2005 Griffin successfully commissioned the Caijiaying Mine on time and within budget, meeting its initial design throughput rate of 200,000 tonnes of ore per annum. Production rates have been steadily increased since commissioning to just under one million tonnes of ore per annum.
In December 2007, production of a separate precious metals concentrate containing gold, silver and lead commenced from an integrated circuit forming part of the main processing facilities at the Caijiaying Mine. This allowed the full economic benefit of these metals to be obtained by the Group. Previously gold, silver and lead were “lost” and unaccounted for in the zinc concentrate by the Chinese smelters.

To date Griffin has invested over $350m on acquiring its interest in Caijiaying and in the development and construction of the mine and processing facilities financed mainly from internally generated funds.

Exploration and resource definition work is ongoing at Caijiaying. There are eight known areas (zones) of mineralisation within Hebei Hua Ao’s tenement area with Zone III currently being mined and development work commenced at Zone II and in the area between Zones II and III. The latest JORC reported Mineral Resource Estimate for Caijiaying Zones II & III amended for mining depletion totals 88 million tonnes, representing a 70 plus year mine life at current extraction and throughput rates and over 45 years at planned expansion rates.

Mill opening June 2005

Community Investment & Partnership

ENVIRONMENTAL SAFEGUARDS & CONTRIBUTIONS

The Company, through Hebei Hua Ao, continues to maintain and further implement best practices regarding the protection of the environment. The Company believes this to be a moral, humane, community and planetary obligation. This includes:

  • Controls to prevent the discharge of waste into the environment;
  • Sewage treatment plants at the mine and camp sites to deal with all effluent produced;
  • All water from the Caijiaying Mine and accommodation site being recycled;
  • Boiler flue gases being treated by a dust and sulphur extraction system to prevent the emission of pollutants into the atmosphere;
  • Waste rock and mill tailings being used for backfilling underground stope voids. This minimises the mine footprint by reducing the need for larger tailings and waste storages;
  • Noise, dust and blasting vibration from operations being strictly controlled;
  • Decommissioning and rehabilitation work on Tailings Dams 1 & 2. This work has included battering the waste dump slope and sheeting with soil ready for vegetation;
  • Funding the state endorsed China “greening” project including the planting of trees by local villagers in the Caijiaying area;
  • Approval from the relevant authorities to increase the capacity of the dry tailings storage facility without an increase in the footprint of the facility via modern design practices;
  • Recycling of dry tailings by transportation to a local brickwork for use as base material in brick manufacturing;
  • A dedicated waste collection building to accumulate Caijiaying Mine waste prior to sorting, collection and recycling where possible;
  • The planting of 60 landscape trees outside the main gate and 30,000 elm trees and 3,000m² of grass around the Caijiaying Mine as part of local Chinese Environmental Protection Agency         greening project;
  • The construction of a new hazardous waste storage facility;
  • Installation of drainage trenches around the ROM pad, waste dump and main access gate area to ensure effective water run-off and protection against soil erosion;
  • Timely renewal of environmental permits including; water usage permits, radioactive source safety permits and waste discharge permits;
  • Installation of a Total Suspended Particles (“TSP”) online monitoring system to monitor air quality, monitored in real time by the Municipal Environmental Protection Authority       Information Centre;
  • Heavy Metal on-line monitoring equipment replaced by more modern systems and monitored on-line by the Municipal Environmental Protection Authority Information Centre;
  • ROM pad dust suppression facilities including, dust suppression meshes and water spray system, effectively controlling dust on the ROM pad;
  • Upgraded dust collection system in the screening house with new dust collectors, effectively reducing fine ore loss and dust discharge;
  • The completion and acceptance of the 2019 clean production targets with the targeted reduction in heavy metal confirmed;
  • Mist cannon and vacuum trucks for dust suppression;
  • The blending of semi-coke coal with common coal for use in boilers to reduce the discharge of smoke, sulphur dioxide and nitric oxide;
  • Greening of site and camp accommodation areas including vegetable gardens and flower beds; and
  • The Caijiaying Mine was awarded Green Mine Accreditation, please click here for details.

Further, with the appearance of the Covid-19 pandemic in January 2020, the Company has worked closely with all levels of governmental authorities to contain this pandemic in the Caijiaying Mine area. To date, no Covid-19 cases have been reported at the Caijiaying Mine or the surrounding area and the Company remains in full compliance with the measures mandated by the central Chinese regulatory authorities to limit the potential transmission of Covid-19, including severe entry restrictions to the Caijiaying Mine, temperature and history screening, decontamination of all possible surfaces and extensive new sterilisation practices.

Receiving Environmental Award at the 2010 China Mining Conference
Teaching English at School of Hope in Sanhao
Cows provided by Hebei Hua Ao to the local community

COMMUNITY RELATIONS

The Company, through Hebei Hua Ao, has invested heavily in the local community with Hebei Hua Ao including:

  • The construction and maintenance of a new water bore at Caijiaying village to provide abundant and excellent quality water whilst maintaining the original water bore as a standby water supply;
  • The construction and maintenance of a sealed road and maintaining this to provide all weather access from San Hao township to the Caijiaying Mine and camp site;
  • Construction and maintenance of a pedestrian and traffic bridge into the west side of Caijiaying Village;
  • Supplying coal to the local primary and secondary schools during the winter;
  • The establishment of “Project Hope” to provide scholarships to local students for ongoing study at primary, secondary and tertiary levels, including scholarships to overseas tertiary institutions.  In November 2019, Hebei Hua Ao was granted the Zhangjiakou Hope Dream Star Award by the Zhangjiakou Project Hope office;
  • Supplementary pension payments to the elderly in the Caijiaying area;
  • Financial hardship alleviation support to the local Caijiaying village residents;
  • Financial and other support for local cultural events;
  • Funding for traditional local specialties for annual cultural events such as the Chinese Lunar New Year, Dragon Boat Festival and the mid-Autumn Festival; and
  • The donation of 500 head of cattle to Caijiaying Village to successfully create a dairy and cattle farm to ensure a more sustainable annual income less reliant on the seasonality of crops grown in the short summer months.

It is estimated that the Caijiaying Mine currently provides direct and indirect employment to over 1,000 Chinese nationals.

During 2020, Hebei Hua Ao paid Rmb 95 million ($14.5 million) in taxes, royalties, social security fees and other duties to Chinese Governmental authorities and agencies.

It is recognised as the largest tax payer in the local Zhangbei County and one of the largest in the Zhangjiakou City prefecture. In December 2019, Hebei Hua Ao was granted a Poverty Relief Silk Banner from the San Hao township government.

Future

The objective of the directors and management is to ensure the long term sustainability of the Company and its business to benefit its shareholders and other stakeholders. To achieve this objective, the directors and senior executives seek to add value, manage risks and minimise costs whilst pursuing economic returns commensurate to the risk taken pursuing the following strategy.

In view of the significant potential of the Caijiaying Mine and surrounding areas and given the Company’s knowledge and expertise in China, the directors and management have focused on the further development of the Caijiaying Mine, investigation of prospective areas near the Caijiaying Mine and other potential projects in other provinces of China. In addition, the directors and senior executives evaluate other mining companies and projects worldwide to ascertain whether any acquisition can be made which has the possibility of matching the returns provided by the Caijiaying Mine.

The Caijiaying Mine’s metal production capability has been augmented with continued extensive exploration, expansion of the mill processing facilities (including grinding and flotation circuits) and ongoing underground infrastructure development. Exploration has been focussed on identifying geological targets and evaluating the potential for significant additional resources. Whilst the existing Mineral Resource estimate confirms the availability of extensive resources at the Caijiaying Mine for increased production, further resource additions will provide an opportunity to further increase the Caijiaying Mine’s production profile. This includes more extensive exploration not only at Zones II & III, but also at Zones V & VIII, which require extensive further drilling to fully understand the size and nature of these orebodies. With the grant of a mining licence over Zone II production will be raised to 1.5 million tonnes per annum, further expansion of operations will require further licences and permits from various Chinese authorities which are proving increasingly complex and time consuming to obtain.

Whilst the Company continues to develop the Caijiaying Mine and explore the surrounding area, it also continues to search for, and investigate, other potential acquisitions of both gold and base metals projects that may be brought into long term, economic production for a capital cost that provides a substantial and justifiable return on equity to shareholders. Relatively new geological, geophysical and geochemical techniques, aided by new equipment, all sourced or discovered in Australia, Europe and/or the USA, have expanded the Company’s search criteria to include virgin, exploration ground. Any found of value may be sold, joint ventured or offered in a separate vehicle to existing Griffin shareholders or retained by the Company and developed for existing shareholders.

To affect this strategy, in 2019, the Company further expanded the scope and activities of China Zinc to encompass this new corporate goal.

In addition, a large number of potential mining projects have been analysed worldwide. None have been successfully consummated for a myriad of reasons including country risk, negative findings during due diligence, a questionable return calculated for the risk shareholders would need to accept in funding the project to production, the overall project risk profile and various other deficiencies in grade, tonnes, metallurgy, depth and difficulty in mining.

 

Zinc

Zinc is the fourth most valuable metal mined after iron, copper and aluminum. The zinc market currently stands at around 15 million tonnes per annum, of which the majority,  comes from newly mined metal with the balance from recycling. The majority of zinc produced is used for galvanizing steel in various forms to prevent corrosion. Zinc is an essential nutrient for humans and other living things. It can help to reduce illness and improve the health of children, particularly in developing nations where diets may be lacking in zinc. It can also be used in fertilizer to improve crop quality and quantity where soil is zinc deficient

Zinc occurs throughout the world with Canada, Australia, the USA and Peru traditionally providing most of the mined zinc, however, in recent years China has become an important producer having a market share of almost 40% of newly mined zinc. There are few large mines in China and production is dominated by hundreds of small mines. Reliable information on the Chinese zinc mining situation is hard to obtain.

Zinc is one of the world’s most widely used base metals and as global urbanization continues to grow so too will demand for zinc. Zinc is integral for many of the products we rely on in today’s society like automotive parts and construction materials.

The outlook for zinc bodes well for the strategy being pursued by the Company World demand for zinc currently exceeds supply.

In the past few years there has been a limited number of new mines and a series of mine closures (e.g. Glencore Xstrata’s Perseverance and Brunswick mines, Vedanta’s Lisheen operation and MMG’s Century Zinc mine in Australia). This bodes well for the price of zinc and the profitability of zinc producers in the future.