Interim Statement for the six months ended 30th June 2012

Griffin Mining Limited (“Griffin” or “the Company”) is pleased to publish its interim results for the six months ended 30th June 2012.

Highlights:

  • Record production of zinc, lead and silver in concentrate at Caijiaying for any six month period
  • Revenues of $39.7m (2011 $33.9m)
  • Operating profit of $16.7m (2011 $15.4m)
  • Profit before tax of $15.0m (2011 $17.9m)
  • Profit after tax of $11.4m (2011 $13.6m)
  • Attributable profit after tax of $7.5m (2011 $8.5m)

Financial and Trading:

Operating profit in the six months to the 30th June 2012 has benefited from increased throughput at Griffin’s Caijiaying Mine with 386,313 tonnes (2011 319,525 tonnes) processed to produce:

  • 20,336 tonnes (2011 16,069 tonnes) of zinc metal in concentrate;
  • 1,364 tonnes (2011 602 tonnes) of lead in concentrate;
  • 215,773 ounces (2011 117,036 ounces) of silver in concentrate;
  • 3,769 ounces (2011 4,493 ounces) of gold in concentrate.

Production of zinc, lead and silver in concentrate in the six months to the 30th June 2012 was a record for any six month period at Caijiaying despite production being impacted by the Chinese Spring Festival holidays in January / February and restricted delivery of explosives during the Chinese National Party Congress. Metallurgical configuration is continuing to help improve gold recoveries. In the interim, mining of high grade gold areas has been deferred until metallurgical improvements have been consolidated.

Increases in costs of sales and net operating costs mainly reflect increased ore processed and concentrate produced with unit costs per tonne of ore processed and zinc metal in concentrate produced in line with the equivalent period in 2011.

Profits before tax have been impacted by foreign exchange losses of $684,000 (2011 gains of $2,221,000) arising as a result of a stronger US Dollar against both the Chinese Renminbi and British Pound Sterling in the period and interest payable on Chinese bank loans of $1,385,000 (2011 nil).

Griffin has a 39.2% equity interest in Spitfire Oil Ltd (“Spitfire”). Griffin’s share of Spitfire’s losses of $88,000 (2011 profits $28,000) have been recognised in the interim results.

Interest receivable of $399,000 (2011 $228,000) was recorded in the period.

Chinese income taxes and withholding taxes of $3,617,000 (2011 $4,273,000) have been charged to profit resulting in profits after tax of $11,379,000 (2011 $13,598,000).

The minority interest in the profit of Griffins Chinese subsidiary, Hebei Hua Ao Mining Industry Company Limited (“Hua Ao”), of 40% to 21st May 2012 and 11.2% from the 22nd May to the 30th June of $3,840,000 (2011 $5,102,000), have been ascribed to the non-controlling interest and $7,539,000 (2011 $8,496,000) attributable to Griffin’s interest.

As announced on 10th May 2012, 28.8% of the existing joint venture partner’s interest in Hua Ao was acquired, and the term of the joint venture’s business licence extended to 2037, by the outlay of $117,444,000. In accordance with International Financial Reporting Standards 75% of this amount has been attributed to the extension of the joint venture term and capitalised to non-current assets and 25% attributed to buying out the minority interests and charged directly to reserves within other reserves on acquisition of non controlling interests. The allocation has been based upon estimated future discounted cash flows from the Caijiaying mine. The purchase price has been financed from undistributed retained dividends in Hua Ao, banking facilities in China and Griffin’s existing cash resources.

At 30th June 2012, attributable net assets per share on issue amounted to 75 cents (48p) compared with 82 cents (52.5p) at 30th June 2011.

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, “The interim results are very pleasing in the face of falling commodity prices and only minor financial benefits flowing at the 30th of June from the Company moving to an 88.8% interest in Hua Ao. Assuming commodity prices stay at or above these levels, we expect to see a significant improvement in the full year results.”

Griffin Mining Limited

Condensed Consolidated Income Statement

(expressed in thousands US dollars)

 

  6 months to

30/06/2012

Unaudited

  6 months to

30/06/2011

Unaudited

  Year to

31/12/2011

Audited

  $000   $000   $000
         
Revenue 39,747   33,938   79,062
         
Cost of sales (16,494)   (13,087)   (31,918)
         
         
Gross profit 23,253   20,851   47,144
         
Net operating expenses (6,508)   (5,469)   (10,312)
         
         
Profit from operations 16,745   15,382   36,832
         
Share of (losses) / profits of associated company (88)   28   (118)
Foreign exchange (losses) / gains (684)   2,221   2,588
Finance income 399   228   616
Finance (losses)   (14)   (14)
Finance costs (1,385)    
Other income 9   26   49
         
         
Profit before tax 14,996   17,871   39,953
       
Income tax expense (3,617)   (4,273)   (12,256)
       
       
Profit after tax 11,379   13,598   27,697
       
Attributable to non controlling interests 3,840   5,102   11,882
Attributable to equity share owners of the parent 7,539   8,496   15,815
11,379   13,598   27,697
       
Basic earnings per share (cents) 4.30   4.79   8.96
       
Diluted earnings per share (cents) 4.26   4.65   8.76

Griffin Mining Limited

Condensed Consolidated Statement Of Comprehensive income

(expressed in thousands US dollars)

 

  6 months to

30/06/2012

Unaudited

  6 months to

30/06/2011

Unaudited

  Year to

31/12/2011

Audited

  $000   $000   $000
         
Profit for the financial period 11,379   13,598   27,697
         
Other comprehensive income        
         
Exchange differences on translating foreign operations (478)   903   2,417
         
 

Other comprehensive income for the period, net of tax

(478)    

903

   

2,417

         
Total comprehensive income for the period 10,901   14,501   30,114
         
Attributable to non controlling interests 3,704   5,452   12,691
Attributable to equity share owners of the parent 7,197   9,049   17,423
         
  10,901   14,501   30,114

Griffin Mining Limited

Condensed Consolidated Statement Of Financial Position

(expressed in thousands US dollars)

 

  Unaudited   Unaudited   Audited
  30/06/2012   30/06/2011   31/12/2011
  $000   $000   $000
         
ASSETS        
Non-current assets        
Property, plant and equipment 171,617   80,368   85,291
Intangible assets – Exploration interests 1,572   1,537   1,573
Investment in associated company 3,670   3,905   3,759
  176,859   85,810   90,623
Current assets        
Inventories 5,538   4,277   4,608
Other current assets 2,740   2,248   2,505
Cash and cash equivalents 28,720   74,652   91,089
  36,998   81,177   98,202
         
Total assets 213,857   166,987   188,825
         
EQUITY AND LIABILITIES        
Equity attributable to equity holders of the parent        
Share capital 1,755   1,755   1,755
Share premium 70,061   70,061   70,061
Contributing surplus 3,690   3,690   3,690
Share based payments 3,043   2,775   3,030
Chinese statutory re-investment reserve 1,288   959   1,300
Other reserve on acquisition of non controlling interests (29,336)    
Foreign exchange reserve 9,711   9,011   10,041
Profit and loss reserve 70,670   56,127   63,131
Total equity attributable to equity holders of the parent 130,882   144,378   153,008
         
Non controlling interests 16,202   9,642   12,523
         
Non-current liabilities        
Long-term provisions 1,422   1,197   806
         
Current liabilities        
Taxation payable 4,548   2,939   11,631
Trade and other payables 14,288   8,831   10,857
Bank loans 46,515    
Total liabilities 65,351   11,770   22,488
         
Total equities and liabilities 213,857   166,987   188,825
         
Number of shares in issue 175,501,830   175,501,830   175,501,830
         
Attributable net asset value / total equity per share $0.75   $0.82   $0.87

Griffin Mining Limited

Condensed Consolidated Statement of Changes in Equity
(expressed in thousands US dollars)

 

  Share capital Share premium Contributing surplus Share based payments Chinese re-investment Reserve Other reserve on acquisition of non controlling interests Foreign exchange Profit and loss reserve Total attributable to equity holders of parent Non controlling interests Total equity
  $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
At 31 December 2010 1,804 74,948 3,690 2,513 938 8,480 47,631 140,004 6,218 146,222
                       
Issue of share capital 1 40 41 41
Purchase of shares for cancellation (50) (4,927) (4,977) (4,977)
Cost of share based payments 262 262 262
Transfer in respect of distributions (2,028) (2,028)
Transaction with owners (49) (4,887) 262 (4,674) (2,028) (6,702)
                       
Retained profit for the 6 months 8,496 8,496 5,102 13,598
Other comprehensive income:                      
Exchange differences on translating foreign operations 21  

531 552 350 902
Total comprehensive income for the 6 month period 21  

531 8,496 9,048 5,452 14,500
At 30 June 2011 (unaudited) 1,755 70,061 3,690 2,775 959 9,011 56,127 144,378 9,642 154,020
                       
Regulatory transfer for future investment investment 315 (315)
Cost of share based payments 255 255 255
Transfers in respect of distributions (4,358) (4,358)
Transaction with owners 255 315 (315) 255 (4,358) (4,103)
                       
Retained profit for the 6 months 7,319 7,319 6,780 14,099
Other comprehensive income:                      
Exchange differences on translating foreign operations 26  

1,030 1,056 459 1,515
Total comprehensive income for the 6 month period 26  

1,030 7,319 8,375 7,239 15,614
At 31 December 2011 1,755 70,061 3,690 3,030 1,300 10,041 63,131 153,008 12,523 165,531
                       
Cost of share based payments 13   13 13
Purchase of minority interests (29,336) (29,336) (25) (29,361)
Transaction with owners 13 (29,336) (29,323) (25) (29,348)
                       
Retained profit for the 6 months 7,539 7,539 3,840 11,379
Other comprehensive income:                      
Exchange differences on translating foreign operations (12)  

(330) (342) (136) (478)
Total comprehensive income for the 6 month period (12)  

(330) 7,539 7,197 3,704 10,901
At 30 June 2012 (unaudited) 1,755 70,061 3,690 3,043 1,288 (29,336) 9,711 70,670 130,882 16,202 147,084

Griffin Mining Limited

Condensed Consolidated Cash Flow Statement

(expressed in thousands US dollars)

 

  6 months to

30/06/2012

Unaudited

  6 months to

30/06/2011

Unaudited

  Year to

31/12/2011

Audited

  $000   $000   $000
Net cash flows from operating activities        
Profit before taxation 14,996   17,871   39,953
Share of associated company losses / (profits) 88   (28)   118
Foreign exchange losses / (gains) 684   (2,221)   (2,588)
Finance (income) (399)   (228)   (616)
Finance costs 1,385    
Finance losses   14   14
Adjustment in respect of share based payments 12   262   517
Depreciation, depletion and amortisation 3,501   2,555   5,900
Provisions 623   455  
(Increase) in inventories (929)   (1,141)   (1,472)
(Increase) in other current assets (235)   (867)   (1,226)
Increase in trade and other payables 3,432   719   2,746
         
Net cash inflow from operating activities 23,158   17,391   43,346
         
Taxation paid (10,699)   (2,346)   (1,637)
       
Cash flows from investing activities        
Interest received 399   228   616
Payments to extend joint venture term and acquire non controlling interests (117,444)    

   

Payments to acquire intangible fixed assets – exploration interests (13)   (21)   (19)
Payments to acquire tangible fixed assets – mineral interests (2,201)   (3,141)   (6,073)
Payments to acquire tangible fixed assets – plant & equipment (350)   (381)   (3,607)
Net cash (outflow) from investing activities (119,609)   (3,315)   (9,083)
         
Cash flows from financing activities        
Issue of ordinary share capital   41   41
Purchase of shares for cancellation   (4,977)   (4,977)
Interest paid (1,385)    
Dividends to non controlling interests     (4,257)
Proceeds from bank loans 46,515    
  45,130   (4,936)   (9,193)
         
(Decrease)/increase in cash and cash equivalents (62,020)   6,794   23,433
         
Cash and cash equivalents at beginning of the period 91,089   66,450   66,450
Effects of exchange rate changes (349)   1,408   1,206
Cash and cash equivalents at end of the period 28,720   74,652   91,089
         
Cash and cash equivalents comprise bank deposits and loans        
Bank deposits 28,720   74,652   91,089

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 2011.
  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 2011 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 2011 statutory financial statements upon which the auditors’ opinion is unqualified.
  4. 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
30/06/2012
Unaudited
6 months to
30/06/2011
Unaudited
Year to
31/12/2011
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 7,539 175,501,830 4.30  

 

 

8,496

177,513,948 4.79  

 

 

15,815

176,499,620 8.96
 

Dilutive effect of securities

   
Options 1,374,747 5,385,5439   3,981,592  
Diluted earnings per share 7,539 176,876,577 4.26  

 

8,496

182,899,491 4.65  

 

15,815

180,481,212 8.76