Griffin Mining Ld Final Results (1667Q)

TIDMGFM

RNS Number : 1667Q

Griffin Mining Ld

17 June 2020

Royal Trust House, 54 Jermyn Street, London SW1Y 6LX, United Kingdom

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

E mail: griffin@griffinmining.com

17(th) June 2020

2019 Results

Annual Report & Accounts

Griffin Mining Limited ("Griffin" or the "Company") has today published its annual report and financial statements for the year ended 31 December 2019 which are available on the Company's web site wwww.griffinmining.com. The release of these were delayed by travel restrictions within and to China imposed by authorities to contain the Coronavirus pandemic preventing Company personnel and the auditors completing their work at Caijiaying.

In 2019, the Company and its subsidiaries (together the "Group") recorded;

   --    Revenues of $82,267,000 (2018: $99,067,000); 
   --    Operating profit of $14,225,000 (2018: $35,555,000); 
   --    Profit before tax of $11,712,000 (2018: $34,798,000); 
   --    Profit after tax of $6,084,000 (2018: $25,477,000); and 
   --    Earnings of 3.52 cents per share (2018: 14.83 cents).

Lower profits in 2019 were primarily caused by falling zinc prices and significantly higher smelter treatment charges resulting in lower zinc metal in concentrate prices received by the Group.

Despite greater quantities of zinc metal in concentrate being produced and sold, zinc metal in concentrate sales before royalties and resource taxes in 2019 amounted to $55,627,000 compared with $78,821,000 in 2018. Lead and precious metal in concentrate sales amounted to $29,850,000 compared with $24,920,000 in 2018.

In 2019, metal in concentrate sales were:

   --    Zinc 37,811 tonnes (2018: 36,672 tonnes); 
   --    Gold 17,712 ounces (2018: 16,206 ounces); 
   --    Silver 333,093 ounces (2018: 279,632 ounces); and 
   --    Lead 1,221 tonnes (2018: 1,027 tonnes).

Average prices achieved in 2019 were:

   --    Zinc metal per tonne of $1,471 (2018: $2,149); 
   --    Gold metal per ounce of $1,318 (2018: $1,173); 
   --    Silver metal per ounce of $13.8 (2018: $12.60); and 
   --    Lead metal per tonne of $1,575 (2018: $2,250).

Cost of sales of $48,609,000 in 2019 were up 6.1% on that incurred in 2018 of $45,798,000. This increase may be attributed higher mining costs with additional rock bolting and meshing costs and additional depreciation provisions reflecting increased costs capitalised being depreciated. Haulage costs were broadly in line with that incurred in 2018 and processing (milling) costs were marginally down on that incurred in 2018.

Administration expenses (including those of the Caijiaying Mine) rose $1,719,000 (9.7%) from $17,714,000 in 2018 to $19,433,000 in 2019. This increase arises mainly from inflationary increases; the pursuit of the mining licence over Zone II; levies and other costs in complying with Chinese health, safety and environmental requirements; and the expansion of activities of China Zinc in investigating potential ventures elsewhere in China.

Foreign exchange losses of $93,000 (2018: gains $42,000) were recorded in 2019.

Interest of $171,000 (2018: $223,000) was received on bank deposits in 2019 whilst $51,000 (2018: $Nil) was paid on short term bank loans.

Losses on the disposal of fixed assets of $305,000 (2018: $939,000) were recorded.

Provision of $1,985,000 (2018: $Nil) has been made to fully provide against the costs capitalised in respect of Hebei Sino Anglo's exploration licence area. Griffin intends to agree a contractual right to the licence to be transferred to Griffin's joint venture partner, prior to expiry of the licence in July 2020.

Finance costs on the lease of the dry tailings facility at Caijiaying Mine and the London and Perth offices totalling $326,000 (2018: $283,000) were incurred.

Income taxes of $5,628,000 (2018: $9,321,000) have been charged in 2019. This includes a deferred taxation charge of $380,000 (2018: credit $343,000).

Basic earnings per share in 2019 was 3.52 cents (2018: 14.83 cents) and diluted earnings per share was 3.24 cents (2018 13.35 cents).

Cash generated from operations of $21,639,000 (2018: $20,439,000) have been used in further developing the Caijiaying Mine and facilities.

Attributable net assets per share at 31 December 2019 was $1.24 (2018: $1.22)

Chairman's Statement:

Although 2019 turned out to be a successful year operationally for the Company, very low commodity prices coupled with very high treatment charges produced a below average financial result. In addition, as has been the case for far too many years to remember, any success was overshadowed by the continuing failure of regulatory authorities in China to issue the Company with its new mining licence over Zone II at the Caijiaying Mine.

Production of zinc, gold, silver and lead all increased in 2019 but prices received for zinc, gold and lead all decreased sharply leading to a 17% fall in revenue and a subsequent 60% fall in operating profit. For anyone who has ever read one of my Annual Report missives, my standard comment every year is that mining is a fixed cost business. Provided we can control our costs and maintain our production, we are at the vagaries of world commodity prices for our financial success, and even more importantly, to treatment charges offered by smelters in China. Unfortunately, 2019 was a particularly bad year for both.

Operationally, the focus was on developing Zone III for greater, and more efficient, production and that was achieved by the continued development and linking of the North and South Declines and associated infrastructure down to the 1000mRL; the development of the South Haulage Drive in preparation for the commencement of development into Zone II; significant mine ventilation improvements including two new 5 metre diameter ventilation shafts developed from surface together with an underground 5 metre diameter ventilation shaft down to the 1175mRL level and the completion of three ventilation shafts (the Underground Fresh Air Shaft totalling 126 metres, the Main Exhaust Ventilation Shaft totalling 305 metres and the Central Fresh Air Shaft totalling 176 metres) significantly improving ventilation and the working environment underground.

Geologically, the resource base continued to expand. Even more astonishingly, the conversion rate at the Caijiaying Mine from an Inferred to a Measured or Indicated Resource is effectively 157% based on a comparison of previous and current Mineral Resource Estimate reports. This means that exploration and resource definition drilling is not only successfully converting existing Inferred mineralisation to higher categories, but also defining new Measured or Indicated mineralisation. This is an extraordinary statistic and gives enormous comfort for the ultra-long mine life the Company will enjoy at the Caijiaying Mine.

In addition, ongoing exploration has utilised knowledge gained from the evolving structural model at Zone III to enable re-interpretation of structure in the adjacent zones. This is allowing the resource models for Zones II and VIII to be more accurately measured, leading to the probability of new resource estimates to be released in 2020 for these zones.

Yet, in light of all the above progress, 2019 has been overshadowed by the extraordinary beginning to 2020, the effects which remain with us still and will do for at least the next decade and perhaps forever. At the Company level, the declaration of a pandemic by the government of the People's Republic of China on the 24 January 2020 due to the Coronavirus COVID-19 outbreak forced mining and underground development operations not to restart after the traditional 2 week mining shutdown for the Chinese New Year holidays. Ore stockpiled at surface was processed until exhausted on the 30 January 2020, at which time the mill was placed on care and maintenance. Operations restarted on the 21 February 2020. Underground mining operations reached 100% of planned rates by the 13 March 2020 and, with a new supply of ore, processing operations by late March 2020. Nevertheless, international travel restrictions remain in place preventing foreign personnel returning to the Caijiaying due to the prohibition of entry into China to anyone other than Chinese citizens and permanent residents. This is currently having only a limited impact upon operations at the Caijiaying Mine.

At the operational level, we are grateful that we find our operations based in north-west China where COVID-19 virtually did not appear nor did it severely disrupt economic activity. Further, we operate, and our commodities are sold, in China where the economy has virtually returned to full production, albeit not with the projected economic growth estimated in 2019. It has been particularly pleasing to see the treatment charges start to fall significantly in the last 2 months, inevitably due to the lack of imports of foreign sourced concentrates by Chinese smelters.

At the Company level, thanks must be extended to the prudency of the directors with their long experience in the mining sector and the nature of the cyclical nature of commodities who only allowed debt to be incurred at the operational level to build or expand the operations at the Caijiaying Mine. Retained earnings, which also could have been paid out in dividends, were retained for the same capital needs. In addition, borrowings were never taken at the Griffin holding company level to buy back stock, something which will not only bankrupt a multitude companies, but also many industries, including the US Airline industry, without massive government assistance.

The COVID-19 crisis, debt laden balance sheets and the continuing low commodity price environment has shown the words of Warren Buffet to be truer than ever, "Only when the tide goes out do you discover who's been swimming naked." The last 3 months has seen a large closure of marginal zinc mines and world zinc production falling by at least 10%. This trend will inevitably get worse before it gets better, but it bodes well for the zinc price.

With the expectation of the granting of the new mining licence and the doubling of production, the Company appointed a new Nominated Advisor and Broker, Numis Securities Limited. We look forward to a long and successful relationship as the Company takes the next giant step in its growth.

Penultimately, it's my privilege to thank the people who have gone, and continue to go, the extra yard to maintain the Company's status as the only foreign owned mining company operating in China. That is an achievement almost none can imagine in its complexity, intricacy, difficulty and exhausting nature. It deserves all of our thanks. From the truly outstanding Company directors, our Chinese joint venture directors, our senior foreign staff, our Chinese operational staff, our contractors, consultants, Chinese government officials, spouses, partners and their children, I thank you for your time, excellence and dedication on behalf of the shareholders. You have been extraordinary.

Further information

Griffin Mining Limited Telephone: +44 (0)20 76290 7772

   Mladen Ninkov  -   Chairman

Roger Goodwin - Finance Director

Numis Securities Limited: Telephone: +44 (0)20 7260 1000

John Prior

Alamgir Ahmed

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

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No.596/2014.

Griffin Mining Limited

Summarised Consolidated Income Statement

For the year ended 31 December 2019