Griffin Mining Limited

Interim / Quarterly Report • Sep 3, 2014

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RNS Number : 6341Q

Griffin Mining Ld

03 September 2014

60 St James's Street, London SW1A 1LE, United Kingdom

Telephone: + 44 (0)20 7629 7772  Facsimile:  + 44 (0)20 7629 7773

E mail: [email protected]

3rd September 2014

INTERIM STATEMENT

for the six months ended 30th June 2014

Below are the interim results for Griffin Mining Limited ("Griffin" or "the Company") for the six months ended 30th June 2014.

Highlights:

·     Revenues of $33.2 million (2013: $33.7 million)

·     Operating profit of $9.2 million (2013: $7.3 million)

·     Profit before tax of $7.4 million (2013: $5.8 million)

·     Profit after tax of $5.4 million (2013: $4.0 million)

Financial and Trading:

Throughput of 408,671 tonnes of ore in the six months to the 30th June 2014 at Griffin's Caijiaying Mine was in line with that achieved of 412,799 tonnes in the six months to 30th June 2013, resulting in metal in concentrate production of:

·     19,147 tonnes of zinc (2013: 19,077 tonnes);

·     609 tonnes of lead (2013: 903 tonnes);

·     147,901 ounces of silver (2013: 151,921 ounces); and

·     5,999 ounces of gold (2013: 3,869 ounces). 

Metal in concentrate production in the six months to 30th June 2014 compared to that in the six months to 30th June 2013 was impacted by lower lead and silver grades but better gold grades and recoveries.  Zinc grades were marginally better with recoveries in line with previous years.

Revenues in the six months to 30th June 2014 were down 1.2% on that achieved in the first six months of 2013 with less zinc, lead and silver in concentrate sold, whilst more gold was sold at lower prices. 

Operating costs and expenses were down on that incurred in the six months to 30th June 2014 following the appointment of a new management team at Caijiaying with savings achieved across most areas of operations.

Profits before tax were impacted by: Foreign exchange losses of $26,000 (2013: $20,000) arising from a weaker Renminbi offset by gains on Sterling deposits against the US dollar in the period;  interest payable on Chinese bank loans of $1,629,000 (2013: $1,577,000);  finance lease interest of $411,000 (2013: $nil); interest receivable of $126,000 (2013: $59,000);  and other income of $62,000 ( 2013: $33,000).

Chinese income taxes and withholding taxes of $1,754,000 (2013: $1,724,000) and deferred taxation of $255,000 (2013: $nil) have been charged to profit resulting in profits after tax of $5,350,000 (2012: $4,035,000).

Provision of $1,601,000 (2013: $584,000) has been made for the minority interests in the profit of Griffin's Chinese subsidiary, Hebei Hua Ao Mining Industry Company Limited ("Hua Ao").  Profit attributable to Griffin amounted to $3,749,000 (2013: $3,451,000).

Basic earnings per share were 2.09 cents (2013: 1.97 cents) and diluted earnings per share 2.09 cents (2013: 1.95 cents).  At 30th June 2014, attributable net assets per share on issue amounted to 84 cents (2013: 81 cents).

Funds continue to be repatriated from China to cover central costs whilst leaving sufficient working capital within Hua Ao for the upgrade of the processing facilities and the further development of the Caijiaying mine. During the period: $6,548,000 was expended on mine development and plant upgrade work; $2,072,000 of bank loans in China were repaid; whilst cash balances throughout the Group have decreased by $2,519,000 (2013: $7,740,000 increase).

Administrative state issues in China outside the Company's control continue to delay the grant of a new mining licence over the unmined Zone III deeps, Zone II and adjacent areas at Caijiaying.  Despite this delay, work is continuing with the upgrade of the processing facilities and underground development to increase throughput capacity to 1.5 million tonnes of ore per annum.  Considerable progress has been made to date with the above ground work expected to be completed by the end of October.  Whilst the mining and haulage of ore has continued unabated during the expansion, the processing of ore has been suspended since 12th August for a scheduled 2 month period.  Once the expanded processing capacity has been commissioned, it is expected that the stockpiled ore will be processed and the annual budgeted production targets met by year end. 

In line with previous years practice and the Company's policy of determining annual dividends at the time of the Company's full year results, no interim dividend has been declared by the Board of Griffin.

Chairman's Statement

Chairman Mladen Ninkov commented, "these are very pleasing results with a 26% increase in operating profit and a 35% increase in net profit with no real change in revenues.  In effect, this means that management has been able to successfully implement real, substantial cuts in costs at Caijiaying with all the benefits that will ensue in the future with the predicted rise in the zinc price.  Added to these positive results  is the further good news of the doubling of our processing capacity in the near future from 750,000 tonnes per annum to 1.5 million tonnes per annum.  All these factors point to 2015 being a watershed year for the Company."

Further information

Griffin Mining Limited

Mladen Ninkov - Chairman                               Telephone: +44(0)20 7629 7772

Roger Goodwin - Finance Director

Panmure Gordon (UK) Limited                                      Telephone: +44 (0) 20 7459 3600

Dominic Morley

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

Griffin Mining Limited

Condensed Consolidated Income Statement

(expressed in thousands US dollars)

	6 months to 30/06/2014 Unaudited		6 months to 30/06/2013 Unaudited		Year to 31/12/2013 Audited
	$000		$000		$000
Revenue	33,226		33,651		71,071
Cost of sales	(18,217)		(20,534)		(40,078)
Gross profit	15,009		13,117		30,993
Net operating expenses	(5,772)		(5,808)		(10,700)
Profit from operations	9,237		7,309		20,293
Share of losses of associated company	-		(45)		-
Loss on disposal of interest in associated company	-		-		(2,229)
Foreign exchange (losses) / gains	(26)		(20)		107
Finance income	126		59		145
Finance costs	(2,040)		(1,577)		(3,651)
Other income	62		33		162
Profit before tax	7,359		5,759		14,827
Income tax  expense	(2,009)		(1,724)		(5,071)
Profit  after tax	5,350		4,035		9,756
Attributable to non-controlling interests	1,601		584		1,599
Attributable to equity share owners of the parent	3,749		3,451		8,157
	5,350		4,035		9,756
Basic earnings per share (cents)	2.09		1.97		4.63
Diluted earnings per share (cents)	2.09		1.95		4.63

Griffin Mining Limited

Condensed Consolidated Statement Of Comprehensive income

(expressed in thousands US dollars)

	6 months to 30/06/2014 Unaudited		6 months to 30/06/2013 Unaudited		Year to 31/12/2013 Audited
	$000		$000		$000
Profit for the financial period	5,350		4,035		9,756
Other comprehensive income
Exchange differences on translating foreign operations	(401)		211		841
Other comprehensive income for the period, net of tax	(401)		211		841
Total comprehensive income for the period	4,949		4,246		10,597
Attributable to non-controlling interests	1,567		614		1,683
Attributable to equity share owners of the parent	3,382		3,632		8,914
	4,949		4,246		10,597

Griffin Mining Limited

Condensed Consolidated Statement Of Financial Position

(expressed in thousands US dollars)

	30/06/2014		30/06/2013		31/12/2013
	Unaudited		Unaudited		Audited
	$000		$000		$000
ASSETS
Non-current assets
Property, plant and equipment	195,301		178,433		193,444
Intangible assets - Exploration interests	1,833		1,766		1,852
Investment in associated company	-		3,552		-
	197,134		183,751		195,296
Current assets
Inventories	8,501		4,949		7,981
Other current assets	2,456		1,568		4,214
Cash and cash equivalents	24,310		24,504		26,278
	35,267		31,021		38,473
Total assets	232,401		214,772		233,769
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital	1,790		1,754		1,791
Share premium	71,310		70,016		71,339
Contributing surplus	3,690		3,690		3,690
Share based payments	2,896		3,055		2,748
Chinese statutory re-investment reserve	1,667		1,538		1,683
Other reserve on acquisition of non-controlling interests	(29,346)		(29,346)		(29,346)
Foreign exchange reserve	10,861		10,655		11,212
Profit and loss reserve	88,363		80,034		84,614
Total equity attributable to equity holders of the parent	151,231		141,396		147,731
Non-controlling interests	4,571		1,957		3,004
Total equity	155,802		143,353		150,735
Non-current liabilities
Long-term provisions	2,567		3,228		2,591
Deferred taxation	1,886		1,316		1,646
Finance lease	10,908		-		12,012
	15,361		4,544		16,249
Current liabilities
Taxation payable	1,321		393		2,878
Trade and other payables	11,783		13,073		14,215
Finance lease	1,001		-		487
Bank loans	47,133		53,409		49,205
### Total liabilities	61,238		66,875		66,785
Total equities and liabilities	232,401		214,772		233,769
Number of shares in issue	179,041,830		175,401,830		179,091,830
### Attributable net asset value / total equity per share	$0.84		$0.81		$0.84

Griffin Mining Limited

Condensed Consolidated Statement of Changes in Equity

(expressed in thousands US dollars)

	Share	Share	Contributing	Share	Chinese	Other	Foreign	Profit	Total	Non	Total
	capital	premium	surplus	Based	re investment	reserve on	Exchange	and loss	attributable to	Controlling	Equity
				Payments	Reserve	acquisition of	Reserve	Reserve	equity holders	Interests
						non-controlling			of parent
						Interests
	$000	$000	$000	$000	$000	$000	$000	$000	$000	$000	$000
At 31 December 2012	1,755	70,037	3,690	3,055	1,313	(29,346)	10,485	77,966	138,955	4,904	143,859
Prior period adjustment re deferred taxation	-	-	-	-	-	-	-	(1,169)	(1,169)	(147)	(1,316)
At 1st January 2013 restated	1,755	70,037	3,690	3,055	1,313	(29,346)	10,485	76,797	137,786	4,757	142,543
Regulatory transfer for future investment	-	-	-	-	214	-	-	(214)	-	-	-
Purchase of shares for cancellation	(1)	(21)	-	-	-	-	-	-	(22)	-	(22)
Transfers in respect of distributions	-	-	-	-	-	-	-	-	-	(3,414)	(3,414)
Retained profit for the 6 months	-	-	-	-	-	-	-	3,451	3,451	584	4,035
Other comprehensive income:
Exchange differences on translating foreign operations	-	-	-	-	11	-	170	-	181	30	211
Total comprehensive income for the period	-	-	-	-	11	-	170	3,451	3,632	614	4,246
At 30 June 2013 restated  (unaudited)	1,754	70,016	3,690	3,055	1,538	(29,346)	10,655	80,034	141,396	1,957	143,353
Regulatory transfer for future investment	-	-	-	-	126	-	-	(126)	-	-	-
Purchase of shares for cancellation	(2)	(95)	-	-	-	-	-	-	(97)	-	(97)
Issue of shares on exercise of options	39	1,228	-	-	-	-	-	-	1,267	-	1,267
Transfer on exercise of options	-	190	-	(190)	-	-	-	-	-	-	-
Buy out of share purchase options	-	-	-	(117)	-	-	-	-	(117)	-	(117)
Transfers in respect of dividends	-	-	-	-	-	-	-	-	-	(22)	(22)
Transaction with owners	37	1,323	-	(307)	126	-	-	(126)	1,053	(22)	1,031
Retained profit for the 6 months	-	-	-	-	-	-	-	4,706	4,706	1,015	5,721
Other comprehensive income:
Exchange differences on translating foreign operations	-	-	-	-	19	-	557	-	576	54	660
Total comprehensive income for the period	-	-	-	-	19	-	557	4,706	5,282	1,069	6,351
At 31 December 2013	1,791	71,339	3,690	2,748	1,683	(29,346)	11,212	84,614	147,731	3,004	150,735
Cost of share based payments	-	-	-	148	-	-	-	-	148		148
Purchase of shares for cancellation	(1)	(29)	-	-	-	-	-	-	(30)	-	(30)
Transaction with owners	(1)	(29)	-	148	-	-	-	-	118	-	118
Retained profit for the 6 months	-	-	-	-	-	-	-	3,749	3,749	1,601	5,350
Other comprehensive income:
Exchange differences on translating foreign operations	-	-	-	-	(16)	-	(351)	-	(367)	(34)	(401)
Total comprehensive income for the period	-	-	-	-	(16)	-	(351)	3,749	3,382	1,567	4,949
At 30 June 2014 (unaudited)	1,790	71,310	3,690	2,896	1,667	(29,346)	10,861	88,363	151,231	4,571	155,802

Griffin Mining Limited

Condensed Consolidated Cash Flow Statement

(expressed in thousands US dollars)

	6 months to 30/06/2014 Unaudited		6 months to 30/06/2013 Unaudited		Year to 31/12/2013 Audited
	$000		$000		$000
Net cash flows from operating activities
Profit before taxation	7,359		5,759		14,827
Share of associated company losses	-		45		-
Loss on disposal of interest in associated company	-		-		2,229
Foreign exchange losses / (gains)	26		20		(107)
Finance (income)	(126)		(59)		(145)
Finance costs	2,040		1,577		3,651
Adjustment in respect of share based payments	148		-		-
Depreciation, depletion and amortisation	3,701		3,098		7,184
Provisions	-		671		-
(Increase) / decrease in inventories	(520)		1,283		(1,750)
Decrease in receivables and other current assets	1,745		2,008		563
(Decrease) / increase in trade and other payables	(3,510)		(1,160)		1,545
Net cash inflow from operating activities	10,863		13,242		27,997
Taxation paid	(2,231)		(3,528)		(5,692)
### Cash flows from investing activities
Interest received	126		59		145
Payments to acquire intangible fixed assets - exploration interests	3		(48)		(110)
Payments to acquire - mineral interests	(2,459)		(2,305)		(4,883)
Payments to acquire - plant & equipment	(4,089)		(399)		(2,499)
Net cash (outflow) from investing activities	(6,419)		(2,693)		(7,347)
Cash flows from financing activities
Issue of ordinary shares on exercise of options	-		-		1,150
Purchase of shares for cancellation	(30)		(22)		(119)
Interest paid	(2,040)		(1,577)		(3,651)
Finance lease	(590)		-		(354)
Distributions to non-controlling interests	-		(3,414)		(3,436)
Proceeds from bank loans	-		6,297		15,508
Repayment of bank loans	(2,072)		-		(13,415)
	(4,732)		1,284		(4,317)
(Decrease) / increase in cash and cash equivalents	(2,519)		8,305		10,641
Cash and cash equivalents at beginning of the period	26,278		16,764		16,764
Effects of exchange rate changes	551		(565)		(1,127)
Cash and cash equivalents at end of the period	24,310		24,504		26,278
Cash and cash equivalents comprise bank deposits and loans
Bank deposits	24,310		24,504		26,278

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 31 December 2013.

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 2013 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 2013 statutory financial statements upon which the auditors' opinion is unqualified.

4.     The summary accounts have been prepared on a going concern basis.  As at 30th June 2014, Hebei Hua Ao (a subsidiary of the Company) had bank loans outstanding of $47,133,000.  Having previously rolled over each of the bank facilities Hebei Hua Ao expects to roll over the existing facilities for a further 12 months.  Having considered the cash resources, banking facilities and forecasts for the remainder of the Hebei Hua Ao joint venture term, the directors do not expect any going concern issues to arise.

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 30/06/2014 # Unaudited				6 months to 30/06/2013 Unaudited			Year to 31/12/2013 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  attributable to ordinary shareholders		3,749	179,091,830	2.09	3,451	175,442,576	1.97	8,157	176,015,707	4.63
Dilutive effect of securities
Options		-	-	-	-	1,582,970	(0.02)	-	-	-
Diluted earnings per share		3,749	179,091,830	2.09	3,451	177,025,546	1.95	8,157	176,015,707	4.63

6.     A prior year adjustment of $1,316,000 has been charged to profit and loss reserve, and deferred taxation in respect of financial periods to 31st December 2010. The impact of this is reflected in the statement of changes in equity and deferred taxation set out below. The Statement of Financial Position at 30th June 2013 has been restated to reflect this. This charge relates to deferred taxation at 25% on accelerated depreciation for Chinese tax purposes during which time Hebei Hua Ao enjoyed advantageous tax rates in the PRC tax.

Deferred taxation	$000
At 31st December 2012	-
Prior period adjustment	1,316
At 1st January 2013 restated	1,316
Charge for the period	-
At 30th June 2013 restated	1,316
Charge for the period	297
Foreign exchange adjustments	33
At 31st December 2013	1,646
Charge for the period	256
Foreign exchange adjustments	(16)
At 30th June 2014	1,886

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