Griffin Mining Limited: 2020 Results - Preliminary Announcement
Griffin Mining Limited ("Griffin" or the "Company" - https://www.commodity-tv.com/ondemand/companies/profil/griffin-mining-ltd/) has today published its annual report and financial statements for the year ended 31 December 2020 which are available on the Company’s web site wwww.griffinmining.com.
In 2020, the Company and its subsidiaries (together the “Group”) recorded;
- Revenues of $75,403,000 (2019: $82,267,000);
- Operating profit of $15,148,000 (2019: $14,225,000);
- Profit before tax of $14,515,000 (2019: $11,712,000);
- Profit after tax of $8,910,000 (2019: $6,084,000); and
- Basic earnings per share of 5.16 cents per share (2019: 3.52 cents).
Despite interruptions to operations in the first quarter of 2020 with restrictions imposed by the Chinese authorities to contain the Covid-19 pandemic, the Group recorded a 6.5% increase in operating profits on that recorded in 2019, primarily as a result of higher zinc metal prices received and reduced costs.
Turnover of $75,403,000 was down $6,864,000 (8.3%) on that achieved in 2019 of $82,267,000. This reflects zinc in concentrate sales down $2,532,000 (4.6%) with 5,535 tonnes (14.6%) less zinc in concentrate sold at average prices of $174 per tonne (11.8%) higher than in 2019, as the Group benefited from rising market prices and falling smelter treatment charges. Lead and precious metal in concentrate sales were down $3,851,000 (12.9%) on 2019 with 6,494 ozs (36.7%) less gold in concentrate sold at average prices of $441 per oz (33.4%) higher than 2019 and 41,337 ozs (12.4%) less silver in concentrate sold at average prices of $3.9 per oz (28.3%) higher than 2019.
In 2020, metal in concentrate sales were:
- Zinc 32,276 tonnes (2019: 37,811 tonnes);
- Gold 11,218 ozs (2019: 17,712 ozs);
- Silver 291,756 ozs (2019: 333,093 ozs); and
- Lead 1,425 tonnes (2019: 1,221 tonnes).
Average prices achieved in 2020 were:
- Zinc metal per tonne of $1,645 (2019: $1,471);
- Gold metal per oz of $1,759 (2019: $1,318);
- Silver metal per oz of $17.70 (2019: $13.80); and
- Lead metal per tonne of $1,339 (2019: $1,575).
Cost of sales of $42,737,000 in 2020 were down 12.1% on that incurred in 2019 of $48,609,000. This reduction in the main reflects less ore mined, hauled and processed with operations impacted by restrictions to contain the Covid-19 pandemic in the first quarter. Additional cost savings were achieved in mining and haulage thereby reducing unit costs per tonne of ore. Despite the reduction in tonnes of ore mined and processed, non-cash depreciation charges rose with additional capital costs.
Administration expenses fell $1,915,000 (9.9%) from $19,433,000 in 2019 to $17,518,000 in 2020. This reduction reflects efforts to contain costs across the Group during the Covid-19 pandemic, despite additional work on the application for a mining licence at Zone II and Green Mine certification.
Foreign exchange gains of $22,000 (2019: losses $93,000) were recorded in 2020, mainly on a strengthening of the Renminbi.
Interest of $108,000 (2019: $171,000) was received on bank deposits in 2020 whilst interest of $111,000 (2019: $51,000) was paid on short term bank loans. Finance interest on the lease of the dry tailings facility at Caijiaying and the London office totalling $171,000 (2019: $326,000) was incurred in 2020. Deemed interest on discounted rehabilitation provisions of $77,000 (2019: $Nil) was charged in 2020.
Losses on the disposal of $1,129,000 (2019: $305,000) were recorded with equipment being replaced to meet higher Chinese environmental standards.
Income taxes of $5,605,000 (2019: $5,628,000) have been charged in 2020. This includes a deferred taxation charge of $424,000 (2019: $380,000), and PRC withholding taxes on dividend distributions and fees of $232,000 ($50,000).
Basic earnings per share in 2020 was 5.16 cents (2019: 3.52 cents) and diluted earnings per share was 4.88 cents (2019: 3.24 cents).
Cash generated from operations of $24,398,000 (2019: $21,639,000) has been used in further developing the mine and facilities.
Attributable net assets per share at 31st December 2020 was $1.35 (2019: $1.24).
Chairman’s Statement:
I believe I can safely say, this was the year when Griffin fulfilled all of its outstanding promises to its past, current and future shareholders by delivering the confirmed regulatory and operational requirements to propel the Company forward into the foreseeable future. The list of achievements is extraordinary.
Firstly, the granting by the Chinese Ministry of Land and Natural Resources (the “MNR”) of new the Mining Licence covering both Zone II and Zone III in conjunction with the issuance of the 3rd Stage Zone III Project Final Acceptance Permit (the “PFA”) was a momentous achievement in terms of time, complexity and operational importance. It will increase the annual ore mined from Zone III from 820,000 tonnes in 2020 to 1.1 million tonnes in 2021, but with the increased ore accessed from Zone II, this should increase to over 1.5 million tonnes per annum in 2022, possibly increasing further as these zones continue to be developed. It catapults Griffin into the ranks of one of the largest zinc producers in China, which remains the largest consuming base and ferrous metals market in the world.
Secondly, the announcement of the new Global Mineral Resource estimate reported in accordance with the JORC Code (2012) for the Caijiaying Mine of an amazing 101.5 million tonnes at 3.9% Zinc, 0.6% Lead, 27.0 g/t Silver and 0.5 g/t Gold, resulting in total contained metal of approximately 4.0 million tonnes of Zinc, 0.6 million tonnes of Lead, 88.8 million ounces of Silver and 1.59 million ounces of Gold totalling $17.7 billion of metal in situ, a 50% increase in the known mineral resource.
Thirdly, obtaining Green Mine accreditation by the MNR having passed the national level green mine assessment. Failing to obtain certification would have meant closure of the Caijiying Mine. So not only has the smooth continuation of operations at the Caijiaying Mine been ensured, but it continues also to show the Company’s commitment to the environment, the local Chinese community and to the greater People’s Republic of China. Green Mine approval comes after the Company’s past environmental best practices were recognised by the Chinese government with the Environmental Award and the Mine Development Outstanding Achievement Award at successive China Mining Conferences.
Fourthly, yet another outstanding operational result considering operations were either suspended or severely curtailed in the first quarter of 2020 due to the Covid-19 pandemic, with access being denied for the whole of 2020 to the deeper stopes in Zone III awaiting PFA approval and the wait for the Zone II new Mining Licence. Nevertheless, operating profit, profit before tax, profit after tax and earnings per share all increased. Griffin now has the extraordinary claim that it has been profitable on an operational basis, in all the turmoils of the commodities markets, for the full 15 years it has been in operation and has only made a loss, on a net profit basis, in one of those years.
Fifthly, and although I place little faith in the share price as an indicator of value, in the last 12 months the Company’s share price has increased approximately 200%; 65.1% against the FTSE Fledgling Index, 64% against the FTSE All AIM Index and 60% against the FTSE Small Mining Cap Index. A remarkable performance.
As the Company has grown and generated cash, inevitably various opinions have been voiced in relation to the share price, share buybacks, dividends and even the realisation of the value of the Company. It is enough to say that your board continues to evaluate all these options on an ongoing and meticulous basis and remains committed to ensuring that the views of all the shareholders are considered and, where possible, acted upon, a course of action that Solomon himself, with all his wisdom, would find difficult.
The Company continues to evaluate opportunities not only through acquisition or organic expansion but also through continuing exploration at the Caijiaying Mine and the surrounding region and through exploration outside of Hebei Province wherever host rocks mimic the Caijiaying Mine area and provide the potential for significant exploration success.
Penultimately, I would like to thank our Chinese and ex pat employees, contractors, consultants, subsidiary directors, partners, spouses and children. Life has taught me that people make things happen and, in the extraordinary Covid-19 year of 2020, these very people went above and beyond the call of duty to travel and work in extremely difficult circumstances, often leaving homes and loved ones, to put the Company’s interests first. We couldn’t be more grateful.
Lastly, I would like to thank on behalf of the shareholders, those few to whom we owe so much and of whom Michael Jordan said in The Last Dance “Have some respect for the people who laid the foundations to make this a profitable organization.” I call them the founders of the Company. Those who believed when no-one believed. Those who flew standby (when that existed) and sat at the airport for a week hoping to catch a flight home. Those few who went to Caijiaying when it was a 12-hour drive from Beijing on a single lane gravel road overrun with over-laden coal trucks and stayed at what can only loosely be called accommodation. Those few who took no salaries or compensation and stayed when the Company had almost run out of funds. Those few who worked out of a terrible, serviced office the size of a cupboard. Those few include Roger Goodwin, Dal Brynelsen, the deceased Bill Mulligan and the recently departed Rupert Crowe.
It would be absolutely wrong of me to not mention Rupert, even though I have said much before. His wisdom, expertise and counsel are missed every day by all of us at Griffin. Without him, the Caijiaying Mine would have remained a valley, topped by Mongolian sands, next to a little village in northern China. An extraordinary, brilliant geologist, the Father of Caijiaying and, far more importantly, a gracious, gentle, considered, dedicated, intelligent human being it has been my absolute privilege to know and to have spent a large portion of my working life.
With the past behind us, I look forward to the next year of this incredible journey.
Further information
Griffin Mining Limited Telephone: +44 (0)20 76290 7772
Mladen Ninkov – Chairman
Roger Goodwin – Finance Director
Panmure Gordon (UK) Limited Telephone: +44 (0)20 7886 2500
John Prior
Joanna Langley
Berenberg Telephone: +44 (0)20 3207 7800
Matthew Armitt
Jennifer Wyllie
Deltir Elezi
Blytheweigh Telephone: +44(0)20 7138 3205
Tim Blythe
Swiss Resource Capital AG www.resource-capital.ch
Jochen Staiger
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 2020
(expressed in thousands US dollars)
2020
2019
Audited
Audited
$000
$000
Revenue
75,403
82,267
Cost of sales
(42,737)
(48,609)
Gross profit
32,666
33,658
Administration expenses
(17,518)
(19,433)
Profit from operations
15,148
14,225
Losses on disposal of plant and equipment
(1,129)
(305)
Provisions against intangible assets
(10)
(1,985)
Foreign exchange gains / (losses)
22
(93)
Finance income
108
171
Finance costs
(359)
(377)
Other income
735
76
Profit before tax
14,515
11,712
Income tax expense
(5,605)
(5,628)
Profit for the year
8,910
6,084
Basic earnings per share (cents)
5.16
3.52
Diluted earnings per share (cents)
4.88
3.24
Griffin Mining Limited
Summarised Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
(expressed in thousands US dollars)
2020
2019
Audited
Audited
$000
$000
Profit for the year
8,910
6,084
Other comprehensive income / (expenses) that will be reclassified to profit or loss
Exchange differences on translating foreign operations
9,662
(2,324)
Other comprehensive income / (expenses) for the year, net of tax
9,662
(2,324)
Total comprehensive income for the year
18,572
3,760
Griffin Mining Limited
Summarised Consolidated Statement of Financial Position
As at 31 December 2020
(expressed in thousands US dollars)
2020
2019
Audited
Audited
$000
$000
ASSETS
Non-current assets
Property, plant and equipment
266,709
228,287
Intangible assets – exploration interests
325
322
267,034
228,609
Current assets
Inventories
5,333
3,839
Receivables and other current assets
6,675
1,861
Cash and cash equivalents
16,435
19,885
28,443
25,585
Total assets
295,477
254,194
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital
1,728
1,728
Share premium
68,470
68,455
Contributing surplus
3,690
3,690
Share based payments
2,072
2,072
Shares held in treasury
(917)
(917)
Chinese statutory re-investment reserve
2,830
2,500
Other reserve on acquisition of non controlling interests
(29,346)
(29,346)
Foreign exchange reserve
11,365
1,703
Profit and loss reserve
173,814
165,059
Total equity attributable to equity holders of the parent
233,706
214,944
Non-current liabilities
Other Payables
13,487
-
Long-term provisions
2,200
2,150
Deferred taxation
3,359
2,731
Finance leases
-
479
19,046
5,360
Current liabilities
Trade and other payables
42,342
31,769
Finance leases
383
2,121
Total current liabilities
42,725
33,890
Total equities and liabilities
295,477
254,194
Attributable net asset value per share to equity holders of parent
1.35
1.24
Griffin Mining Limited
Summarised Consolidated Statement of Changes in Equity.
For the year ended 31 December 2020
(expressed in thousands US dollars)
Share
Share
Contributing
Share
Shares
Chinese
Other
Foreign
Profit
Total
Capital
Premium
surplus
Based
held in
statutory
re-investment
reserve on
Exchange
and loss
attributable to
Payments
Treasury
Reserve
acquisition of
Reserve
reserve
equity holders
non-controlling
of parent
interests
$000
$000
$000
$000
$000
$000
$000
$000
$000
$000
At 1st January 2019
1,727
68,442
3,690
2,072
(917)
2,386
(29,346)
4,027
159,161
211,242
Regulatory transfer for future investment
-
-
-
-
-
153
(153)
-
Issue of shares on exercise of options
1
13
-
-
-
-
-
-
-
14
Transaction with owners
1
13
-
-
-
153
-
-
(153)
14
Profit for the year
-
-
-
-
-
-
-
-
6,084
6,084
Adjustment for adoption of IFRS 16 leases
-
-
-
-
-
-
-
-
(33)
(33)
Other comprehensive income:
Exchange differences on translating foreign operations
-
-
-
-
-
(39)
-
(2,324)
-
(2,363)
Total comprehensive income
-
-
-
-
-
(39)
-
(2,324)
6,051
3,688
At 31st December 2019
1,728
68,455
3,690
2,072
(917)
2,500
(29,346)
1,703
165,059
214,944
Regulatory transfer for future investment
-
-
-
-
-
155
-
-
(155)
-
Issue of shares on exercise of options
-
15
-
-
-
-
-
-
-
15
Transaction with owners
-
15
-
-
-
155
-
-
(155)
15
Profit for the year
-
-
-
-
-
-
-
-
8,910
8,910
Other comprehensive income:
Exchange differences on translating foreign operations
-
-
-
-
-
175
-
9,662
9,837
Total comprehensive income
-
-
-
-
-
175
-
9,662
8,910
18,747
At 31st December 2020
1,728
68,470
3,690
2,072
(917)
2,830
(29,346)
11,365
173,814
233,706
Griffin Mining Limited
Summarised Consolidated Cash Flow Statement
For the year ended 31 December 2020
(expressed in thousands US dollars)
2020
2019
Audited
Audited
$000
$000
Net cash flows from operating activities
Profit before taxation
14,515
11,712
Foreign exchange (gains) / losses
(22)
93
Finance income
(108)
(171)
Finance costs
359
377
Depreciation, depletion and amortisation
12,801
12,343
Provisions against intangible assets
10
1,985
Losses on disposal of equipment
1,129
305
(Increase) / decrease in inventories
(1,494)
1,112
(Increase) / decrease in receivables and other current assets
(4,814)
959
Increase in trade and other payables
5,666
4,016
Taxation paid
(3,644)
(11,092)
Net cash inflow from operating activities
24,398
21,639
Cash flows from investing activities
Interest received
108
171
(Costs) / proceeds on disposal of equipment
(44)
1
Payments to acquire – mineral interests
(18,691)
(18,883)
Payments to acquire – plant and equipment
(5,684)
(8,193)
Payments to acquire office, office furniture & equipment
(5)
(69)
Payments to acquire intangible fixed assets – exploration interests
(11)
(308)
Net cash outflow from investing activities
(24,327)
(27,281)
Cash flows from financing activities
Issue of ordinary shares on exercise of options
15
14
Interest paid
(112)
(52)
Finance lease advance
-
65
Finance lease repayments
(2,469)
(2,762)
Net cash outflow from financing activities
(2,566)
(2,735)
(Decrease) / increase in cash and cash equivalents
(2,495)
(8,377)
Cash and cash equivalents at the beginning of the year
19,885
28,452
Effects of exchange rates
(955)
(190)
Cash and cash equivalents at the end of the year
16,435
19,885
Cash and cash equivalents comprise bank deposits.
Bank deposits
16,435
19,885
Included within net cash flows of $2,495,000 (2019 $8,377,000) are foreign exchange losses of $22,000 (2019: gains $93,000) which have been treated as realised.Notes:
This statement has been prepared using accounting policies and presentation consistent with those applied in the preparation of the statutory financial statements of the Company.
The summary financial statements set out above do not constitute statutory financial statements as defined by Section 84 of the Bermuda Companies Act 1981 or Section 435 of the UK Companies Act 2006. The Summarised Consolidated Statement of Financial Position at 31 December 2020 and the Summarised Consolidated Income Statement, Summarised Consolidated Statement of Comprehensive Income, Summarised Consolidated Statement of Changes in Equity and the Summarised Consolidated Cash Flow statement for the year then ended have been extracted from the Group’s audited 2020 statutory financial statements.
The annual report and accounts for 2020 are being sent by post to all registered shareholders. Additional copies of the annual report and accounts are available from the Company’s London office, 8th Floor, 54 Jermyn Street, London, SW1Y 6LX and are available on Griffin Mining Ltd’s web site www.griffinmining.com
The Group has one business segment, the Caijiaying zinc gold mine in the People's Republic of China. All revenues and costs of sales in 2020 and 2019 were derived from the Caijiaying zinc gold mine.
2020
2019
$000
$000
REVENUES
China
75,403
82,267
Zinc concentrate sales
53,095
55,627
Lead and precious metals concentrate sales
25,999
29,850
Royalties and resource taxes
(3,691)
(3,210)
75,403
82,267
COST OF SALES: CHINA
Mining costs
16,056
17,652
Haulage costs
7,282
8,277
Processing costs
8,868
10,019
Depreciation (excluding depreciation in administration costs)
11,780
11,462
Stock movements
(1,249)
1,199
42,737
48,609
ADMINISTRATION EXPENSES
China
12,939
14,253
Australia
312
414
UK / Bermuda
4,267
4,766
17,518
19,433
All revenues, cost of sales and operating expenses charged to profit relate to continuing operations.
Notes (continued):
TOTAL ASSETS
2020
2019
$000
$000
China
290,147
248,119
Australia
967
686
UK / Bermuda
4,363
5,389
295,477
254,194
CAPITAL EXPENDITURE
2020
2019
$000
$000
China
24,375
27,076
Australia
-
65
UK / Bermuda
5
4
24,380
27,145
FINANCE INCOME
2020
2019
$000
$000
Interest on bank deposits
108
171
FINANCE COSTS
2020
2019
$000
$000
Interest payable on short term bank loans
111
51
Interest on rehabilitation provisions
77
-
Finance lease interest
171
326
359
377
OTHER INCOME
2020
2019
$000
$000
Scrap and sundry other sales
735
76
Income Tax Expense
2020
2019
$000
$000
Profit for the year before tax
14,515
11,712
Expected tax expense at a standard rate of PRC income tax of 25% (2018 25%)
3,629
2.929
Adjustment for tax exempt items:
- Income and expenses outside the PRC not subject to tax
567
746
Adjustments for short term timing differences:
- In respect of accounting differences
(298)
(234)
Adjustments for permanent timing differences other
1,051
1,757
Withholding tax on intercompany dividends and charges
232
50
Current taxation expense
5,181
5,248
Deferred taxation expense
Correction of provision brought forward
-
18
Origination and reversal of temporary timing differences
424
362
424
380
Total tax expense
5,605
5,628
Notes (continued):
INCOME TAX EXPENSE (continued)
The parent company is not resident in the United Kingdom for taxation purposes. Hebei Hua-Ao paid income tax in the PRC at a rate of 25% in 2020 (25% in 2019) based upon the profits calculated under Chinese generally accepted accounting principles (Chinese “GAAP").
EARNINGS PER SHARE
Reconciliation of the earnings and weighted average number of shares used in the calculations are set out below:
2020
2019
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
8,910
172,788,420
5.16
6,084
172,748,831
3.52
Dilutive effect of securities
Options
-
9,861,227
(0.28)
-
15,107,500
(0.28)
Diluted earnings per share
8,910
182,649,647
4.88
6,084
187,856,331
3.24
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 year. 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.
Notes (continued):
Property, plant and equipment
Mineral
Interests
Mill and mobile mine equipment
Offices furniture & equipment
Total
At 1 January 2019
167,338
45,747
55
213,140
Foreign exchange adjustments
(1,611)
(786)
-
(2,397)
Additions during the year
18,883
8,193
69
27,145
Change in estimate of mine closure costs
(115)
-
-
(115)
Adjustment for adoption of IFRS16 leases
-
-
370
370
Adjustment for change in lease accounting estimate.
-
2,792
-
2,792
Disposals
-
(305)
-
(305)
Depreciation charge for the year
(6,912)
(5,268)
(163)
(12,343)
At 1 January 2020
177,583
50,373
331
228,287
Foreign exchange adjustments
8,292
3,408
5
11,705
Additions during the year
18,691
5,684
5
24,380
Provision for licence transfer fees
16,338
-
-
16,338
Change in estimate of mine closure costs
(115)
-
-
(115)
Transfer of rehabilitation provision
697
(697)
-
-
Disposals
-
(1,085)
-
(1,085)
Depreciation charge for the year
(6,542)
(6,084)
(175)
(12,801)
At 31 December 2020
214,944
51,599
166
266,709
At 31 December 2018
Cost
205,840
72,028
134
278,002
Accumulated depreciation
(38,502)
(26,281)
(79)
(64,862)
Net carrying amount
167,338
45,747
55
213,140
At 31 December 2019
Cost
222,589
80,935
573
304,097
Accumulated depreciation
(45,006)
(30,562)
(242)
(75,810)
Net carrying amount
177,583
50,373
331
228,287
At 31 December 2020
Cost
267,763
90,173
583
358,519
Accumulated depreciation
(52,819)
(38,574)
(417)
(91,810)
Net carrying amount
214,944
51,599
166
266,709
Mineral interests comprise the Group’s interest in the Caijiaying ore bodies including costs on acquisition, plus subsequent expenditure on licences, concessions, exploration, appraisal and construction of the Caijiaying mine including expenditure for the initial establishment of access to mineral reserves, commissioning expenditure, and direct overhead expenses prior to commencement of commercial production and together with the end of life restoration costs.
Mill and mobile mine equipment include $3,872,000 (2019: $1,997,000) of assets under construction yet to be depreciated.
Notes (continued):
Property, plant and equipment (continued)
The offices, furniture and equipment disclosed above relates solely to the fixed assets, including leased offices, of Griffin Mining (UK Services) Limited and China Zinc Pty Limited.
During 2013 plant and equipment with a deemed value of $11,381,000, revalued in 2019 to $14,150,000, were acquired under a finance lease, upon which depreciation of $6,712,000 (2019: $5,123,000) has been provided. At 31 December 2019 the net carrying amount of this equipment was $8,417,000 (2019: $9,027,000). In 2019 the London office lease was capitalised to comply with IFRS16 with a deemed value of $371,000 upon which depreciation of $248,000 has been provided. At 31 December 2020 the net carrying amount of this office was $124,000 (2019:$247,000).
The Group assesses the carrying value of the mineral interests, mill and mobile mine equipment at least annually, and more frequently in the event of any indications of impairment, by reference to discounted cash flow forecasts of future revenue and expenditure for each business segment. These forecasts are based upon both past and expected future performance, available resources and expectations for future markets. Management determined that there were no impairment indicators at 31 December 2020. However, as best practice management have updated the impairment model.
In determining any indications of impairment in the carrying value of the Caijiaying Mine the directors have reassessed the net carrying value of capitalised costs at 31 December 2020 by reference to the estimated mineral resources at Caijiaying that may be extracted by 2056 and 2037 when the current business licence of Hebei Hua Ao expires. However, it is expected that Hebei Hua Ao will be converted to an equity joint venture company with an indefinite life before then. Accordingly, a Life of Mine plan (“LOM”) has been prepared by the Company that indicates the continued extraction of ore until 2056. In estimating the discounted future cash flows from the continuing operations at the Caijiaying mine the following principal assumptions have been made:
- Future market prices for zinc of $2,500 per tonne, gold of $1,800 per troy ounce and silver of $20 per troy ounce;
- Zinc treatment charges of 30% of market prices;
- Extraction of measured and indicated resources of 25.5 million tonnes to 2037 when the current business licence of Hebei Hua Ao expires, with ore mined and processed rising to a maximum rate of 1.6 million tonnes of ore per annum;
- Operating costs, recoveries and payables based upon past performance and that budgeted for 2021;
- Capital costs based upon that initially scheduled with sustaining capital based on future scheduling:
- Discount rate of 10%; and
- Continued maintenance and grant of applicable licences and permits.
Notes (continued):
Intangible Assets
China – mineral exploration interests
$000
At 1 January 2019
2,016
Foreign exchange adjustments
(17)
Additions during the year
308
Impairment during the year
(1,985)
At 1 January 2020
322
Foreign exchange adjustments
2
Additions during the year
11
Impairment during the year
(10)
At 31 December 2020
325
Intangible assets represent cost on acquisition, plus subsequent expenditure on licences, concessions, exploration, appraisal and development work in respect to regional exploration in China. Where expenditure on an area of interest is determined as unsuccessful such expenditure is written off to profit or loss. The recoverability of these assets depends, initially, on successful appraisal activities, details of which are given in the report on operations. The outcome of such appraisal activity is uncertain. Upon economically exploitable mineral deposits being established, sufficient finance will be required to bring such discoveries into production. At 31 December 2020 impairment charges of $10,000 (2019: $1,985,000) had been provided and charged to the income statement in respect of the above exploration costs previously capitalised by Hebei Sino Anglo.
POST BALANCE SHEET EVENTS
As at 31 December 2020 there were no adjusting post balance sheet events (2019: none). Since 31 December 2020 the Company has bought in 316,840 shares to be held in treasury at a cost of $584,000.