Interim Statement

Below are the interim results for Griffin Mining Limited (“Griffin” or “the Company”) for the six months ended 30th June 2013.

Highlights:

• Revenues of $33.7 million (2012: $39.7 million)
• Operating profit of $7.3 million (2012: $16.7 million)
• Profit before tax of $5.8 million (2012: $15.0 million)
• Profit after tax of $4.0 million (2012: $11.4 million)
• Attributable profit after tax of $3.5 million (2012: $7.5 million)

Financial and Trading:

In the six months to the 30 th June 2013, throughput at Griffin’s Caijiaying Mine increased from 386,313 to 412,799 tonnes to produce in concentrate:

• 19,077 tonnes of zinc (2012: 20,336 tonnes);
• 903 tonnes of lead (2012: 1,364 tonnes);
• 151,921 ounces of silver (2012: 215,773 ounces);
• 3,869 ounces of gold (2012: 3,769 ounces).

Revenues and operating profits were impacted by lower metal prices for all metals produced and lower metal production for zinc, lead and silver resulting from lower mined grades at the Caijiaying Mine.

During the six months to 30 th June 2013, the average price received declined from that in the six months to 30th June 2012 for zinc by 7.5%, gold by 5%, lead by 5% and silver by 10%. In addition, during the six months to 30 th June 2013, priority was given to extracting the remaining economic mineralization at the upper levels of the Caijiaying Mine prior to being able to access lower levels resulting in a reduction in the zinc head grade of 0.66% from that recorded in the six months to 30th June 2012.

Throughput increased despite mining and haulage being impacted by the Chinese Spring Festival holidays in February 2013 and during the Chinese National Party congress in March 2013 with restricted delivery of explosives.

Progress has been made in improving gold recoveries with the expectation of higher gold recoveries in the second half of 2013.

Increases in costs of sales reflect operational mine development work and increased ore processed. Operating expenses have been reduced as the Group strives to minimise administration costs.

Profits before tax have been impacted by: Foreign exchange losses of $20,000 (2012: $684,000) arising as a result of a stronger US Dollar against Sterling in the period; interest payable on Chinese bank loans of $1,577,000 (2012: $1,385,000); Griffin’s 39.2% equity share of Spitfire Oil Ltd’s losses of $45,000 (2012: $88,000); and interest receivable of $59,000 (2012: $399,000) with lower interest receipts following the utilisation of cash resources in June 2012 to fund the extension of the local Chinese joint venture licence and purchase of non controlling interests.

Chinese income taxes and withholding taxes of $1,724,000 (2012: $3,617,000) have been charged to profit resulting in profits after tax of $4,035,000 (2012: $11,379,000).

Provision of $584,000 (2012: $3,840,000) has been made for the minority interests in the profit of Griffin’s Chinese subsidiary, Hebei Hua Ao Mining Industry Company Limited (“Hua Ao”) of 11.2% (2012: 40% to 25th June 2012). Profit attributable to Griffin amounted to $3,451,000 (2012: $7,539,000).

Basic earnings per share were 1.97 cents (2012: 4.3 cents) and diluted earnings per share 1.95 cents (2012: 4.26 cents). At 30 th June 2013, attributable net assets per share in issue amounted to 81 cents (2012: 75 cents).

Repatriation of funds from China was achieved, whilst still providing sufficient working capital within Hua Ao, by drawing down an additional $6,297,000 from banking facilities in China which were more than matched by cash balances throughout the Group increasing by $7,740,000 since 31 st December 2012.

Application for a mining licence over the Zone II area at Caijiaying and the area between the Zone II and III areas is progressing as expected.

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 t he Board of Griffin .

Chairman’s Statement

Chairman Mladen Ninkov commented, “Although in absolute terms the interim results are disappointing, they should come as no surprise in light of the recently released results by other small to large mineral producers. All miners continue to struggle with maintaining profitability in the light of falling commodity prices coupled with a mainly fixed cost business. Griffin’s results have also been further specifically impacted by the scheduling of major mine development work in the first half of 2013 to extract the remaining lower grade mineralization at the highest levels at Caijiaying before accessing the mineralization at lower levels. Assuming commodity prices remain at least constant and no ‘Black Swan’ event materializes, I expect significantly better results for the second half of 2013.”

 

Griffin Mining Limited
Condensed Consolidated Income Statement
(expressed in thousands US dollars)

 

	6 months to 30/06/2013 Unaudited		6 months to 30/06/2012 Unaudited		Year to 31/12/2012 Audited
	$000		$000		$000
Revenue	33,651		39,747		76,860
Cost of sales	(20,534)		(16,494)		(34,795)
Gross profit	13,117		23,253		42,065
Net operating expenses	(5,808)		(6,508)		(10,891)
Profit from operations	7,309		16,745		31,174
Share of losses of associated company	(45)		(88)		(163)
Foreign exchange losses	(20)		(684)		(904)
Finance income	59		399		495
Finance costs	(1,577)		(1,385)		(3,411)
Other income	33		9		48
Profit before tax	5,759		14,996		27,239
Income tax expense	(1,724)		(3,617)		(7,532)
Profit after tax	4,035		11,379		19,707
Attributable to non controlling interests	584		3,840		4,872
Attributable to equity share owners of the parent	3,451		7,539		14,835
	4,035		11,379		19,707
Basic earnings per share (cents)	1.97		4.30		8.46
Diluted earnings per share (cents)	1.95		4.26		8.36

Griffin Mining Limited
Condensed Consolidated Statement of Comprehensive Income
(expressed in thousands US dollars)

 

	6 months to 30/06/2013 Unaudited		6 months to 30/06/2012 Unaudited		Year to 31/12/2012 Audited
	$000		$000		$000
Profit for the financial period	4,035		11,379		19,707
Other comprehensive income
Exchange differences on translating foreign operations	211		(478)		545
Other comprehensive income for the period, net of tax	211		(478)		545
Total comprehensive income for the period	4,246		10,901		20,252
Attributable to non controlling interests	614		3,704		4,960
Attributable to equity share owners of the parent	3,632		7,197		15,292
	4,246		10,901		20,252

Griffin Mining Limited
Condensed Consolidated Statement of Financial Position
(expressed in thousands US dollars)

 

	30/06/2013 Unaudited		30/06/2012 Unaudited		31/12/2012 Audited
	$000		$000		$000
ASSETS
Non-current assets
Property, plant and equipment	178,433		171,617		177,470
Intangible assets – Exploration interests	1,766		1,572		1,707
Investment in associated company	3,552		3,670		3,596
	183,751		176,859		182,773
Current assets
Inventories	4,949		5,538		6,231
Other current assets	1,568		2,740		4,168
Cash and cash equivalents	24,504		28,720		16,764
	31,021		36,998		27,163
Total assets	214,772		213,857		209,936
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital	1,754		1,755		1,755
Share premium	70,016		70,061		70,037
Contributing surplus	3,690		3,690		3,690
Share based payments	3,055		3,043		3,055
Chinese statutory re-investment reserve	1,538		1,288		1,313
Other reserve on acquisition of non controlling interests	(29,346)		(29,336)		(29,346)
Foreign exchange reserve	10,655		9,711		10,485
Profit and loss reserve	81,203		70,670		77,966
Total equity attributable to equity holders of the parent	142,565		130,882		138,955
Non controlling interests	2,104		16,202		4,904
Total equity	144,669		147,084		143,859
Non-current liabilities
Long-term provisions	3,228		1,422		2,535
Current liabilities
Taxation payable	393		4,548		3,840
Trade and other payables	13,073		14,288		12,590
Bank loans	53,409		46,515		47,112
Total liabilities	66,875		65,351		63,542
Total equities and liabilities	214,772		213,857		209,936
Number of shares in issue	175,401,830		175,501,830		175,451,830
Attributable net asset value / total equity per share	$0.81		$0.75		$0.79

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 Reserve	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 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
Purchase of shares for cancellation	–	(24)	–	–	–	–	–	–	(24)	–	(24)
Cost of share based payments	–	–	–	12	–	–	–	–	12	–	12
Transfers in respect of distributions	–	–	–	–	–	–	–	–	–	(12,554)	(12,554)
Purchase of minority interests	–	–	–	–	–	(10)	–	–	(10)	–	(10)
Transaction with owners	–	(24)	–	12	–	(10)	–	–	(22)	(12,554)	(12,576)
Retained profit for the 6 months	–	–	–	–	–	–	–	7,296	7,296	1,032	8,328
Other comprehensive income:
Exchange differences on translating foreign operations	–	–	–	–	25	–	774	–	799	224	1,023
Total comprehensive income for the 6 month period	– –	–	–	–	25	–	774	7,296	8,095	1,256	9,351
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
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)
Transaction with owners	(1)	(21)	–	–	214	–	–	(214)	(22)	(3,414)	(3,436)
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 6 month period	–	–	–	–	11	–	170	3,451	3,632	614	4,246
At 30 June 2013 (unaudited)	1,754	70,016	3,690	3,055	1,538	(29,346)	10,655	81,203	142,565	2,104	144,669

Griffin Mining Limited
Condensed Consolidated Cash Flow Statement
(expressed in thousands US dollars)

 

	6 months to 30/06/2013 Unaudited		6 months to 30/06/2012 Unaudited		Year to 31/12/2012 Audited
	$000		$000		$000
Net cash flows from operating activities
Profit before taxation	5,759		14,996		27,239
Share of associated company losses	45		88		163
Foreign exchange losses	20		684		904
Finance (income)	(59)		(399)		(495)
Finance costs	1,577		1,385		3,411
Adjustment in respect of share based payments	–		12		25
Depreciation, depletion and amortisation	3,098		3,501		6,762
Provisions	671		623		–
Decrease / increase) in inventories	1,283		(929)		(1,623)
Decrease / (increase) in other current assets	2,008		(235)		(1,663)
(Decrease) / increase in trade and other payables	(1,160)		3,432		(2,479)
Net cash inflow from operating activities	13,242		23,158		32,244
Taxation paid	(3,528)		(10,699)		(11,435)
Cash flows from investing activities
Interest received	59		399		495
Payments to extend joint venture term and acquire non controlling interests	–		(117,444)		(117,459)
Payments to acquire intangible fixed assets – exploration interests	(48)		(13)		(117)
Payments to acquire tangible fixed assets – mineral interests	(2,305)		(2,201)		(4,206)
Payments to acquire tangible fixed assets – plant & equipment	(399)		(350)		(4,132)
Net cash (outflow) from investing activities	(2,693)		(119,609)		(125,419)
Cash flows from financing activities
Purchase of shares for cancellation	(22)		–		(24)
Interest paid	(1,577)		(1,385)		(3,411)
Distributions to non controlling interests	(3,414)		–		(12,561)
Proceeds from bank loans	6,297		46,515		47,112
	1,284		45,130		31,116
Increase / (decrease) in cash and cash equivalents	8,305		(62,020)		(73,494)
Cash and cash equivalents at beginning of the period	16,764		91,089		91,089
Effects of exchange rate changes	(565)		(349)		(831)
Cash and cash equivalents at end of the period	24,504		28,720		16,764
Cash and cash equivalents comprise bank deposits and loans
Bank deposits	24,504		28,720		16,764

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 2012.
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 2012 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 2012 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 30/06/2013 Unaudited			6 months to 30/06/2012 Unaudited			Year to 31/12/2012 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	3,451	175,442,576	1.97	7,539	175,501,830	4.30	14,835	175,456,077	8.46
Dilutive effect of securities
Options	–	1,582,970		–	1,374,747			2,021,897
Diluted earnings per share		177,025,546		7,539	176,876,577	4.26	14,835	177,477,974	8.36