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 exploration 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 exploration licence tenements over some 10 sq km at Caijiaying and a mining licence over some 1.5 sq km. Within these licence areas are five zones of mineralisation, one of which, Zone III, is currently being mined, with development work started to access the Zone II area to the south in anticipation of a further mining licence over that area and the area between Zones II and III. Griffin holds an exploration licence over a further 44 sq km through a second Chinese joint venture company, Hebei Sino Anglo Mining Industry Company Limited ("Hebei Anglo") in which Griffin has a 90% interest.
In June 2005 Griffin completed the construction of the first new foreign owned and operated mine and processing plant in China at Caijiaying, which now processes in excess of 750,000 tonnes of ore per annum to produce over 40,000 tonnes of zinc metal in concentrate per annum together with gold, silver and lead. Plans are being made to further expand operations at Caijiaying. This will include the development of the nearby Zone II and the area between Zones III and II, which are now known to contain substantial deposits and to upgrade the processing facilities to significantly increase current production rates.
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 is located in the Hebei Province, some 250 km north west of Beijing. Griffin's local subsidiary company, 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.
The Caijiaying process plant facilities
The Caijiaying Project Background
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 in 1992 and in 1997 Griffin acquired its interest in Hua-Ao.
Drilling at Caijiaying 1998
Partnership with the Chinese
Griffin's Chinese partner in Hua-Ao is the Zhangjiakou Caijiaying Lead Zinc Mining Company, a partnership comprising of the Zhangjiakou City Government, and the Third Geological Brigade. 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 with processing rates in excess of 820,000 tonnes of ore per annum having been achieved following the latest upgrade of the processing facilities.
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 some $200m on acquiring its interest in Caijiaying and in the development and construction of the mine and processing facilities.
Mill opening June 2005
Exploration and resource definition work is ongoing at Caijiaying . Whilst only one zone (Zone III) of mineralisation is currently being mined there are other known areas of mineralisation, notably at Zone II within Hebei Hua Ao's tenement areas where development work has already commenced to access this area. The latest JORC reported Mineral Resource Estimate for Caijiaying Zones II & III totals 51.2 million tonnes, representing a 50 plus year mine life at current extraction and throughput rates.
Further information on Caijiaying may be found in the section on Caijiaying.
Griffin has invested heavily in the local community and instigated best practices regarding the protection of the environment. In this regard:
- Solid and liquid wastes are not disposed of into the environment;
- All production water is recycled;
- Gas emissions from boilers are treated to remove pollutants;
- Mined areas underground are back filled;
- Noise and dust from operations at the Caijiaying Mine are strictly controlled; and
- All non-recyclable wastes from supporting facilities are treated in an incinerator.
Griffin's environmental practices were rewarded twice with Hebei Hua Ao being presented with the Environmental Award at the 2010 China Mining Conference and the Mine Development Outstanding Achievement Award at the 2011 China Mining Conference.
Hebei Hua Ao has provided direct water supplies to the local villagers, constructed sealed roads to the Caijiaying Mine and nearby villages, financed the construction of a local kindergarten, old peoples rest home and assisted on other infrastructure projects. Hebei Hua Ao has also assisted in the upgrade of facilities at the local township school and set up "Project Hope" to provide scholarships to local students for ongoing study at primary, secondary and tertiary levels. During 2012, Hebei Hua Ao contributed Rmb1.7 million ($270,000) to a social security fund for the local community.
Griffin estimates that the Caijiaying Mine has provided direct and indirect employment to over 1,000 Chinese nationals and minimised the employment of expatriate personnel.
During 2012, Hebei Hua Ao paid Rmb203.8 million ($32.5 million ) in taxes, royalties, social security fees, fines and other duties to Chinese governmental authorities and agencies.
On 27 November 2008, Griffin purchased 16,666,667 ordinary shares in Spitfire Oil Ltd (“Spitfire”), representing a 39.2% interest in the issued share capital of Spitfire, at £0.15 per share for a total cash consideration of £2,500,000 ($4,542,000) from Citadel Equity Fund Ltd (“Citadel”). This purchase enabled Griffin to acquire a strategic stake in a project that meets Griffin’s investment criteria whilst spreading both political and commodity risk. The opportunity to acquire this strategic stake at such a favourable price, being at a 75% discount to the initial public offering price, was considered and approved by Griffin’s independent directors. All of Griffin’s directors have experience in the oil and gas sector. Mr Mladen Ninkov and Mr Roger Goodwin, being directors of both Griffin and Spitfire, provide Griffin with significant influence over Spitfire, requiring Griffin to treat Spitfire as an associated company and thereby recognise its share of Spitfire’s financial results.
Having reviewed many potential acquisitions and having carefully considered the potential of Caijiaying and the future market for metals, particularly zinc, it was concluded that further investment in the Caijiaying Mine would generate higher returns for the Company and its shareholders than any new, low return/high risk investment elsewhere.
With the finalisation of the Transaction for the acquisition of the non-controlling interests in, and the extension of the term of, the Hebei Hua Ao joint venture, the Company’s aim is clearly focused on increasing throughput at Caijiaying within the next few years. The latest JORC resource estimate confirms the availability of extensive ore resources at Caijiaying for increased production over an extended period.
Nevertheless, the Company continues to investigate a large number of potential mining ventures worldwide. With Griffin’s good relationships and reputation in China, many of these opportunities have inevitably been mining related within the Asian region. However, the Company is not constrained by geographic region and will pursue any mining opportunity which shows the necessary economic returns demanded by the Company’s shareholders.
It is generally accepted that by the end of the decade 15 of the world’s larger zinc mines outside China are expected to exhaust their reserves resulting in the loss of some 1.8* million tonnes of zinc metal production with few new sources of supply becoming available. Zinc supply is expected to experience the sharpest decline in 2017. Assuming ongoing world demand, particularly from China, zinc consumption is expected to exceed mine production by 2014, an encouraging sign for the future profitability of the Caijiaying Mine.
*CRU International Ltd Zinc Greenfield Mines 2012