RESULTS FOR 2018 AND ANNUAL REPORT AND ACCOUNTS
Griffin Mining Limited (“Griffin” or the “Company”) has today published its annual report and financial statements for the year ended 31 December 2018 which are available on the Company’s web site wwww.griffinmining.com.
In 2018, the Company and its subsidiaries (together the “Group”) recorded;
- Revenues of $99,067,000 (2017: $126,657,000);
- Operating profits of $35,555,000 (2017: $63,773,000);
- Profit before tax of $34,798,000 (2017: $60,877,000);
- Profit after tax of $25,477,000 (2017: $43,321,000); and
- Earnings of 14.83 cents per share (2017: 24.63 cents)
Profits production were impacted by falling zinc metal prices, higher treatment charges and lower concentrate
Zinc metal in concentrate sales before royalties and resource taxes in 2018 amounted to $78,821,000 (2017: $99,886,000). Lead and precious metal in concentrate sales amounted to $24,920,000 (2017: $32,758,000).
In 2018, metal in concentrate sales were:
- Zinc 36,672 tonnes (2017: 43,342 tonnes);
- Gold 16,206 ounces (2017: 20,489 ounces);
- Silver 279,632 ounces (2017: 310,611 ounces); and
- Lead 1,027 tonnes (2017: 1,421 tonnes).
Average prices achieved in 2018 were:
- Zinc metal per tonne of $2,149 (2017: $2,305);
- Gold metal per ounce of $1,173 (2017: $1,183);
- Silver metal per ounce of $12.60 (2017: $13.50); and
- Lead metal per tonne of $2,250 (2017: $2,242).
Cost of sales of $45,798,000 in 2018 were up 3.2% on that incurred in 2017 of $44,360,000. This increase may be attributed to inflation in China with consequent wage increases, higher costs incurred extracting ore from greater depth, higher costs incurred backfilling waste material and tailings to minimise surface storage of tailings, higher power charges and changes in the recoverability of Chinese VAT inputs.
Administration expenses (including those of the Caijiaying Mine) have fallen 4.4% to $17,714,000 from $18,524,000 in 2017. This reduction was mainly due to lower service fees paid to Hebei Hua Ao’s Chinese shareholder, Zhangjiakou Yuanrun Enterprise Management Consulting Services Company Limited, of $3,732,000 in 2018 compared with $5,900,000 in 2017. Otherwise, administration costs were up reflecting inflationary pressures in China, expenses incurred in applying for the new mining licence over Zone II and the expansion of China Zinc Limited activities in investigating potential ventures elsewhere in China. Central Company costs incurred outside China have been reduced.
Foreign exchange gains of $42,000 (2017: $87,000) were recorded in 2018.
Following the repayment of all bank loans in 2017, bank deposit interest of $223,000 (2017: $143,000) was received.
Income taxes of $9,321,000 (2017: $17,556,000) have been charged in 2018. This includes a deferred taxation credit of $343,000 (2017: charge $95,000).
Basic earnings in 2018 were 14.83 cents per share (2017: 24.63 cents) and diluted earnings were 13.35 cents per share (2017: 22.97 cents).
Cash generated from operations have been used to reduce liabilities resulting in net cash flow from operating activities of $20,439,000, $16,884,000 of which has been expended in further development of the Caijiaying Mine including equipment and exploration. In addition, 540,000 shares in the Company were bought in at a cost of $917,000.
Attributable net assets per share at 31st December 2018 was $1.22 (2017: $1.13).
By the measure of almost any other mining company, 2018 would be considered a monumentally, outstanding success. $3 billion of in situ metal was added to the resource base, an operating profit of $36 million and a net profit after tax of $25.5 million was generated, major above and below ground capital developments were undertaken to position the Caijiaying Mine operationally for the next 10 years and all this whilst remaining debt free and self-funding from operations.
In terms of long term value added to the Company, over 3 million tonnes of zinc metal and 1.16 million ounces of gold have been defined by the Company since the start of mining in 2005 emphasizing the success of the Company’s exploration efforts and the extraordinary size and nature of the orebody contained within the Caijiaying Mine.
Nevertheless, and reversing a well known proverb, perhaps every silver lining has a cloud, with the mining licence over Zone II still failing to be granted. In effect, this means constructed and commissioned infrastructure lies idle waiting for this new source of ore to be mined and processed to substantially increase the Company’s metal production. I am not sure I have any remaining credibility in crystal ball gazing and my days as a seer may well and truly be over, but I sincerely believe the new mining licence will be granted in 2019.
The stand-out achievement of the year was the Company increasing its resource base by 78.5%, all from Zone III, including adding 807,000 tonnes of zinc metal, 311,000 ounces of gold and 13.6 million ounces of silver. Modelling of the other “zones” at the Caijiaying Mine has been progressing well with all concerned very excited on the possible size of the revised Zone II resource model as well as the maiden estimate for Zone VIII, both expected by the end of the northern summer.
Financially, the Company and its subsidiaries had a good year in light of falling zinc metal prices, higher treatment charges and lower concentrate production. Revenues of $99 million were recorded with an Operating Profit of $35.6 million, Profit before Tax of $34.8 million, Profit after Tax of $25.5 million and Earnings of 14.83 cents per share.
Operationally, ore mined amounted to 872,069 tonnes whilst ore processed was 930,472 tonnes amounting to metal in concentrate produced of 37,112 tonnes of zinc, 16,230 ounces of gold, 280,712 ounces of silver and 1,030 tonnes of lead.
With the development of Zone II awaiting the new mining licence, the decision was taken to institute a programme to further modernise the Caijiaying Mine. Underground development work was primarily focused on developing future stoping horizons between the 1175 metre and 1000 metre level, a much larger development than previously undertaken at the Caijiaying Mine. A twin boom electric hydraulic development drill and three 20 tonne, fully enclosed cabin, haulage trucks were added to the fleet by the contractor allowing more material being hauled from deeper in the Caijiaying Mine with less truck movements and greater reliability. Further fleet upgrades continue on an ongoing basis.
As a responsible citizen of both China and Planet Earth, the Company continues to maintain and further implement best practices regarding the protection of the environment and has invested heavily in the local community. The Company believes these to be moral, humane, community and planetary obligations. I would urge you to read of our practices and contributions in this Annual Report and obtain the sense of pride from the contributions the Company has made in this area.
In spite of all the above achievements, the Company does not rest on its laurels. In the words of Mark Twain, “To stand still is to fall behind.” Firstly, it continues to explore areas surrounding the Caijiaying Mine, including the prospective Sangongdi area. The scope of that work can be deemed in the Exploration section of this Annual Report. Secondly, in 2018, the Company expanded the scope and activities of its wholly owned subsidiary China Zinc Limited to create a data base of the geology, exploration and mining activities in China to search for potential acquisitions of base metals projects that meet the Company’s pre-set economic criteria. Any such projects found not to meet this criteria will be either ignored, or if seemingly of value, sold, joint ventured or offered in a separate vehicle to existing Griffin shareholders. Thirdly, the Company continues to investigate potential mining projects located outside of China on the same objective investment basis as historically has been the case.
The full Preliminary Announcement is available as a PDF download, please click here.
For a copy of the 2018 Annual Report, please click here.