TIDMCNG
China Nonferrous Gold Limited
("CNG" or the "Company")
Annual Report and Accounts
China Nonferrous Gold Limited ?????????? (AIM: CNG), the mineral
exploration and development company currently developing the Pakrut
gold project in the Republic of Tajikistan, today announces its
final results for the year ended 31 December 2018.
The results below are extracted from the Company's audited
Annual Report and Financial Statements. Copies of the Annual Report
have been dispatched to shareholders today and are available on the
Company's website (www.cnfgold.com) and will also be available from
the Company's office at Unit 2.24, The Plaza, 535 Kings Road,
London SW10 0SZ.
For further information please visit the Company's website
(www.cnfgold.com) or contact:
China Nonferrous Gold Limited
Yu Lixian, Managing Director
Tel: +86 10 8442 6681
WH Ireland Limited (NOMAD & Broker)
Katy Mitchell, James Sinclair-Ford
Tel: 0207 220 1666
Blytheweigh (PR)
Tim Blythe, Camilla Horsfall
Tel: +44 (0)20 7138 3224
Project Summary
The Pakrut gold project, of which CNG has 100 per cent
ownership, is situated in Tajikistan approximately 120 km northeast
of the capital city Dushanbe. Pakrut is located within the Tien
Shan gold belt, which extends from Uzbekistan into Tajikistan,
Kyrgyzstan and Western China, and which hosts a number of
multi-million ounce gold deposits.
CNG is currently in a commissioning phase with mining
contractors on site finalising construction of the mine, plant,
tailings dam and refinery.
About Tajikistan
Tajikistan is a secular republic located in Central Asia. The
country is a member of the Commonwealth of Independent States and
the Shanghai Cooperation Organisation. Tajikistan hosts numerous
operating precious metal mines as well as the largest aluminium
smelter in Central Asia. CNG's management team has extensive
experience in the mining industry in Tajikistan.
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014.
CEO's Statement
As CEO, it gives me great pleasure to present the CEO's
statement of the annual report for the year ended 31 December 2018.
With the full cooperation of the construction companies, designers
and equipment suppliers, the construction of the mine site at the
Pakrut gold project was successfully completed at the end of 2018
with US$17.9m revenue being generated from trial production in the
period. Following the successful completion of infrastructure and
construction works at the mine site, the Pakrut gold project
entered full operation in 2019 and is currently producing at levels
of 2,000 tons per day.
This marks a new chapter for the Group as it becomes an
important gold producer in Tajikistan and brings steady cash flows
to support the sustainable development of the company.
Construction
2018 was a critical year for the Pakrut gold mine. The flotation
tailings pond, filling station, mine camp and underground
ventilation system, all of which began construction after the
snowfall damage, were successfully completed and commissioned at
the end of 2018, meaning that the construction works surrounding
the Pakrut gold project were finalised and it has been possible to
commence full production in 2019.
Operation
Through the joint efforts of company staff, the Pakrut gold mine
produced the first gold since the suspended production in 2017 as a
result of the snowfall disaster. In 2018, from trial production, a
total of 268,200 tons of ore were processed at a grade of 2.18 g/t,
9,030 tons of gold concentrate were produced at a grade of 63.58
g/t, 451.46kg of gold bullion were poured with a comprehensive
recovery rate of 80.89%. This achievement was hard-won because both
construction and trial production for Pakrut gold project were
carried out at the same time in 2018 to ensure that the Group could
enter full production in 2019.
Full production commenced at the start of 2019 and from January
to April 2019, 186,800 tons of ore were processed, 5,325 tons of
gold concentrate were produced, the recovery rate of processing was
86.77%, the recovery rate of smelting was 87.3% and the output of
gold ingots was 350kg. Revenue to April 2019 is US$12.5m and gross
margin for the same period is 31.14%.
Financial results
As progress on the Pakrut project moved towards completion
during the year, expenditure continued to be incurred by the Group
on development and construction work and as at 31 December 2018 the
value of mines under construction stood at US$397,876,955 (2017:
US$331,160,369). Administration expenditure was US$6,371,750 (2017:
US$5,084,991). The main reason for the increase is due to higher
local taxes paid in Tajikistan during 2018 as a result of increases
in subsoil taxes.
The overall loss incurred by the Group was US$4,483,499 (2017:
US$15,036,884). The reduced loss is mainly as a result of the 2017
impairment to Mines under construction of US$10,702,895. In
addition, in the current year other income of US$2.8 million (2017:
US$Nil) has been generated, being compensation from the insurance
provider following the snowfall disaster in early 2017.
During the course of the year, the Group signed financing
agreements with CNMC International Capitals Company Limited(?), an
associate of China Nonferrous Metals International Mining Co., Ltd
for a loan facility of USD$90 million ("CNMC Loan"). The time
limits on the loan contracts previously signed with China National
Capital International Co, Ltd., China Nonferrous Metals
International Mining Co., Ltd. and China Nonferrous Metals Mining
Group Co., Ltd. were extended to December 2019.
In July 2018, CNMC and China National Economic Trade Co, Ltd.
signed an agreement transferring one of the loans of US$20 million
to China Nonferrous Mining Group Co, Ltd. to Zhongse Economic and
Trade Co., Ltd which constitutes a related party under the AIM
Rules for Companies. In 2018, the Group repaid a loan of US$35
million to China Construction Bank Corporation Macau Branch.
The existing CCBC loan facility of US$85 million and the CNMC
and CNMIM loan facilities of US$260 million amounted to US$345
million in total of loans payable as at 31 December 2018. Of this,
US$163 million is payable within one year of the financial
statements, which includes US$10 million due to CCBC and the
remaining balance due to shareholders. The CCBC loan is due for
repayment in March 2021.
Events after the Reporting Period
In January 2019, the Group drew down US$20 million on a US$30
million loan facility with China Construction Bank Corporation
Macau Branch. The contract was signed in November 2018 but at that
time there was no withdrawal.
As mentioned earlier, in order to ensure the repayment of
existing loans, a broader refinancing is required. Discussions are
ongoing and with the signing of the new loan agreement, the
remaining discussions are expected to be completed in the near
term. The Group has now entered full production and this should
enable sufficient working capital to be raised. As previously
announced, to ensure repayment of the existing facilities as they
fall due, a wider refinancing will be required.
Outlook
With the completion of mine construction and improvement of
technology, the Pakrut gold mine has now entered into full
production, and the annual revenue target of ore is expected to
increase based on normal operations in 2019.
The Group is currently continuing to enhance its production
capacity and intends to double this capacity by 2021. Whilst
improving production, the Group is also focusing on perfecting and
improving the smelting process by reducing production costs,
increasing recovery rates and improving competitiveness.
The Group has long been dedicated to becoming a significant gold
producer in Central Asia and participating in the "Belt and Road
Initiative" with the substantial support and advantages of major
shareholders. The Group has also established a strong relationship
with the government of Tajikistan and other Central Asian countries
and is well positioned to potentially gain more gold resources and
gold mines so as to create greater benefits for its shareholders in
the future.
I would like to take this opportunity to thank all our
employees, management and advisors for their continued efforts in
2018 and thank our shareholders for their continued support. I very
much look forward to updating our shareholders further on the mine
developments, production levels, new strategy and direction.
Yu Lixian
CEO
28 June 2019
Consolidated Statement of Comprehensive Income, Year Ended 31
December 2018
2018 2017
Note US$000 US$000
Revenue 3 17,926 5,784
Cost of sales (17,926) (5,784)
Gross Profit - -
Other operating income 2,838 -
Administrative expenses 6 (6,192) (5,017)
(Loss)/gain on foreign exchange (1,873) 750
Impairment of mines under construction - (10,703)
Operating Loss (5,227) (14,970)
Finance income 8 923 1
Finance costs 8 - -
Loss before Income Tax (4,304) (14,969)
Income tax 7 (179) (68)
Loss for the year attributable (4,483) (15,037)
to owners of the parent
Total comprehensive income attributable (4,483) (15,037)
to owners of the parent for the year
Basic and Diluted Earnings 9 (1.17) (3.93)
per share attributable to
owners of the parent (expressed
in cents per share)
All of the activities of the Group are classed as
continuing.
Consolidated Statement of Financial Position
Note As at As at
31 December 2018 31 December 2017
US$000 US$000
Non-Current Assets
Intangible assets 10 - -
Mines under construction 11 399,400 331,160
Property, plant and equipment 12 7,422 8,967
Total Non-Current Assets 406,822 340,127
Current Assets
Inventories 15 17,343 18,216
Trade and other receivables 16 3,709 629
Cash and cash equivalents 8,363 12,067
Total Current Assets 29,415 30,912
Non-Current Liabilities
Borrowings 17 (182,285) (106,500)
Provisions for other liabilities 19 (838) (767)
and charges
Total Non-Current Liabilities (183,122) (107,267)
Current Liabilities
Borrowings 17 (162,724) (172,684)
Trade and other payables 18 (82,194) (78,409)
Total Current Liabilities (244,918) (251,093)
Net Current Liabilities (215,503) (220,180)
Net Assets 8,196 12,679
Equity attributable to the
owners of the parent
Share capital 21 38 38
Share premium 65,901 65,901
Other reserve 10,175 10,175
Retained earnings (67,918) (63,435)
Total Equity 8,196 12,679
Notes for the Financial Statements will be posted on the
Company's website (www.cnfgold.com).
Notes to the Financial Statements
1. Financial Risk Management
The Group's operations expose it to a number of financial risks;
principally the availability of adequate funding, movements in
interest rates and fluctuations in foreign currency exchange rates.
Continuous monitoring of these risks ensures that the Group is
protected against any adverse effects of such risks so far as it is
possible and foreseeable.
Market Risk
a) Cash Flow and Interest Rate Risk
The continued operation of the Group is dependent on the ability
to raise sufficient working capital until commencement of
commercial production. The Group currently finances itself through
the issue of equity share capital and the secured loan facilities
from CNMIM, CNMC and CCB. Management monitors its cash and future
funding requirements through the use of cash flow forecasts. All
cash not immediately required for working capital purposes is held
on short term deposit. The Group's exposure to interest rate
fluctuations on cash balances is restricted to the rate earned on
these short-term deposits. At the year end the Group had cash
reserves of US$20,786 held in a sterling deposit account. A 0.25%
change to the interest rate would give rise to a US$52 increase or
decrease in interest on this deposit, on an annual basis.
The Group's interest rate risk arises from long-term borrowings.
The Group has both variable and fixed rate borrowings. Borrowings
issued at variable rates expose the Group to cash flow interest
rate risk which is partially offset by cash invested at variable
rates. The annual fixed interest rate for the CNMIM loan is 9% for
all USD and RMB denominated tranches. All payments of principal and
interest in respect of the RMB denominated tranche are repayable at
a fixed RMB: USD exchange rate. The interest rate on the CCB loan
is 2.10% per annum over the quarterly LIBOR rate and the loan is
repayable in US$. The interest rate on the new CNMC loan of US$90
million is fixed at 5.8% per annum, calculated and paid on a half
yearly basis. The interest rate on all other CNMC loans is a fixed
annual interest rate of 4% on the amount drawn down, payable in
arrears.
At 31 December 2018, if interest rates on variable rate
borrowings at that date had been 0.25% higher/lower, with other
variables held constant, the recalculated loss for the year would
be US$9,978 higher/lower due to the higher/lower interest
expense.
b) Foreign Currency Risk
The Group operates internationally and is exposed to foreign
exchange risk arising from currency exposures. Currency risk is the
risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in foreign exchange
rates. The Group has cash assets denominated in UK Sterling, United
States Dollars, Tajik Somoni and PRC Renminbi and incurs
liabilities for its working capital expenditure in all of these
denominations, primarily Tajik Somoni. Payments are made in all of
these denominations at the pre-agreed price and converted (if
necessary) as soon as payment needs to occur. Currency conversions
and provisions for expenditure are only made as soon as debts are
due and payable. The Group is therefore exposed to currency risk in
so far as its liabilities are incurred in UK Sterling, PRC Renminbi
and Tajik Somoni, and fluctuations occur due to changes in the
exchange rates against the functional and presentational currency
of US Dollar. The table below details the split of the cash held as
at 31 December 2018 between the various currencies.
Somoni GBP Sterling US Dollar Renminbi Total US$000
1,098 31 7,142 92 8,363
The Group manages this risk by matching receipts and payments
and monitoring movements in exchange rates. The Group does not
currently hedge its exposure to foreign currencies and recognises
the profits and losses resulting from currency fluctuations as and
when they arise. At the year end the Group did not have material
exposure to foreign exchange risk relating to its non-US$
denominated bank deposits and as such this not disclosed.
1. Financial Risk Management (continued)
Liquidity Risk and Credit Risk
The continued operation of the Group is dependent on the ability
to raise sufficient working capital. As noted above, the Group
currently finances itself through the issue of equity and
borrowings from CNMIM, CNMC and CCB. Management monitors its cash
and future funding requirements through the use of cash flow
forecasts. The Group enters into capital commitments for
exploration and construction expenditure, and any surplus cash not
immediately required for working capital purposes is held on short
term deposit.
The table below summarises the maturity profile of the Group's
financial liabilities based on contractual undiscounted
payments.
Less than 1 Year Between Between Over Total Carrying amount
US$000 1 and 2 Years 2 and 5 Years 5 Years US$000 US$000
US$000 US$000 US$000
Year ended
31 December
2018
Interest-bearing 162,724 117,285 65,000 - 345,010 345,010
borrowings
Trade and 82,194 - - - 82,194 82,194
other
payables
Provisions - - - 2,481 2,481 837
for other
liabilities
244,918 117,285 65,000 2,481 429,685 428,041
Year ended
31 December
2017
Interest-bearing 172,684 31,500 75,000 - 279,184 279,184
borrowings
Trade and 78,409 - - - 78,409 78,409
other
payables
Provisions - - - 2,481 2,481 767
for other
liabilities
251,093 31,500 75,000 2,481 360,074 358,360
The Group holds bank accounts with banks in the UK, PRC and
Tajikistan with the following credit ratings:
Credit rating 2018 2017
US$000 US$000
A 7,216 11,489
AA- - -
BBB+ - 60
No independent credit rating available 992 518
8,208 12,067
If a bank has no credit rating, the Group assesses the credit
quality through local knowledge and past experience in the
particular jurisdiction.
Capital Risk Management
The Group consider equity to be their capital. The Group's
objective when managing their capital is to safeguard the Group's
ability to continue as a going concern in order to provide returns
for shareholders and to enable the Group to continue its
exploration, evaluation and mine construction. The Group holds debt
in the form of both shareholder and external loans and defines
capital based on the total equity of the Company. Except for the
secured loan facilities from CNMIM, CNMC and CCB, the Group's
current policy for raising capital is through equity issues and
debt financing. The Group is not currently required to monitor its
gearing ratio and is not exposed to any externally imposed capital
requirements.
2. Critical Accounting Estimates, Assumptions and Judgments
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amount of assets and
liabilities are set out below. Estimates and assumptions are
continually evaluated and are based on management's experience and
other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Uncertainty
about these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of assets and
liabilities affected in future periods.
The Group has identified the following areas where significant
estimates, assumptions and judgments are required. The most
significant judgment for the Group is the assumption that
exploration and development at its sites will ultimately lead to a
commercial mining operation. Failure to do so could lead to
impairment of the mine.
Estimated impairment of mines under construction (note 11)
The Group tests annually whether exploration, evaluation and
licensing assets and mines under construction have suffered any
impairment. The recoverable amounts of the cash generating units
("CGUs") have been determined based on value in use calculations
which require the use of estimates and assumptions such as
long-term commodity prices, gold recovery rates, discount rates,
operating costs and therefore expected margins, future capital
requirements and mineral resource estimates (see below). These
estimates and assumptions are subject to risk and uncertainty and
therefore there is a possibility that changes in circumstances will
impact the recoverable amount. Management has assessed its CGUs as
being individual exploration and mine sites, which is the lowest
level for which cash inflows are independent of those of other
assets or CGUs.
In assessing the carrying amounts of its exploration, evaluation
and licensing assets and mines under construction at Pakrut, the
Directors have used an independently prepared and Director approved
bankable feasibility study. The period used in management's
assessment is the anticipated life of the mine to the expiration of
the license in 2030 with revenues being generated from full
production from January 2019. Gold revenues have been estimated
over that period at a price of US$1,300. These estimates are based
on, and are consistent with, external sources of information. The
calculation assumes a mining capacity of 2,000 tonnes of ore daily
increasing to 4,000 tonnes per day. The total cost per ounce is
estimated to be around US$650 with a gross margin of circa 60%.
Royalties have been calculated at 6% of sales revenues and
corporate income tax at 15%, according to the relevant laws in
Tajikistan. A discount rate of 10% has been utilised.
The calculations have been tested for sensitivity to changes in
the key assumptions. The most sensitive inputs in the calculation
of the value in use are operating costs, the gold price, and the
discount rate. An impairment to the mine value would occur if the
discount rate were to increase to 12%, gold prices fell by 1% or
costs were to increase by 1%.
2. Critical Accounting Estimates, Assumptions and Judgments
(continued)
Approval of Pakrut reserves by Tajik Department of Geology
In November 2011, the Government of the Republic of Tajikistan
issued the Pakrut Gold Project mining license to LLC Pakrut.
According to the terms of the license, the amount of ore that can
be mined is variable depending upon the mine plan. The plan
submitted by the Group envisages an initial processing capacity of
660,000 tons of ore per annum, increasing to 1,320,000 tons per
annum. The mining license is valid until 2 November 2030.
The mining license issued in November 2011 currently entitles
the Group to mine JORC compliant resources (measured, indicated and
inferred) of 904,000 ounces out of total JORC compliant resources
of 4,383,000 ounces at Pakrut, excluding the Eastern Pakrut,
Rufigar and Sulfidnoye ore zones. The JORC compliant resources
include the results from the Group's exploration and evaluation
work subsequent to the mining license issue date.
LLC Pakrut has sought approval of the increased JORC compliant
resources from the Tajik Department of Geology and the Scientific
and Technical Counsel which includes the results of all exploration
and evaluation activities undertaken by the Group between 2009 and
2013. The application is currently subject to that approval process
and the Directors are not aware of any legal or other impediments
which would prevent approval of their application and therefore
permit the Group to mine the increased resources. However, the
approval process currently remains incomplete.
The mine design and construction work undertaken to date,
together with the assessment of the recoverable amount of 'Mines
under Construction' (see below), is based upon the total quantity
of JORC compliant resources of which part falls outside the area
covered by the mining license and still subject to formal approval,
as noted above. Failure to obtain this approval would lead to an
impairment of 'Mines under Construction', together with
inventories, and also impact the going concern basis of preparation
of the Financial Statements. The Group has made the judgement that
this approval will be forthcoming. No provision for impairment has
been recognised in these Financial Statements relating to this
uncertainty.
Mineral resource and reserve estimates
Reserves are estimates of the amount of resources that can be
economically and legally extracted from the Group's mining
properties. The Group estimates its mineral resources based on
information compiled by appropriately qualified persons relating to
the geological and technical data on the size, depth, shape and
grade of the ore body and suitable production techniques and
recovery rates. This analysis requires complex geological judgments
to interpret the data. The estimation of the recoverable amount is
based upon factors such as estimates of commodity prices, future
capital expenditure and production costs along with geological
assumptions made in estimating the size and grade of the resources.
Details of the mineral resources and reserve estimates can be found
on www.cnfgold.com.
The Group estimates and reports mineral resource estimates in
line with the principles contained in the Australasian Code for
Reporting Exploration Results, Mineral Resources and Ore Reserves
(December 2004), which is prepared by the Joint Ore Reserves
Committee (JORC) of the Australasian Institute of Mining and
Metallurgy, Australian Institute of Geoscientists and Minerals
Council of Australia, known as the "JORC Code". The determination
of a JORC resource is itself an estimation process that involves
varying degrees of uncertainty depending on how the resources are
classified (i.e. measured, indicated or inferred).
As additional geological information is produced during the
operation of a mine and through additional exploration activity,
mineral resource estimates may change. Such changes may impact on
the Group's reported financial position which includes the carrying
value of mines under construction, property, plant and equipment
and inventories.
2. Critical Accounting Estimates, Assumptions and Judgments
(continued)
Production start date
Estimations are made in the determination of the point at which
development ceases and production commences for a mine development
project. This point determines the cut-off between pre-production
and production accounting. The group ceases to capitalise
pre-production costs and begins depreciation and amortisation of
mine assets at the point at which the mine's plant becomes
available for use as intended by management. Determining when this
is achieved is an assessment made by the group's management and
includes the following factors:
-- The level of development expenditure compared to project cost estimates.
-- Completion of a reasonable period of testing of the mine plant and equipment.
-- Achieved mineral recoveries, plant availability and throughput levels are at or near expected / budgeted levels.
-- The ability to produce gold into a saleable form.
-- The achievement of continuous production.
In December 2018, the construction and infrastructure projects
at the mine site were completed and production levels began to ramp
up. However, management have assessed that it was not until early
2019 that the mine's plant has been available for use as intended
by management, as it has been seen since the year end that
production levels are stable, process technologies have improved
leading to efficiencies and target mineral recoveries of reliable
and high-quality gold are being achieved in line with budgeted
levels.
Therefore, in the 2019 financial year, the mine assets in the
consolidated financial statements will be presented
accordingly.
3. Segment Information
The following segments are based on the management reports
received by the Executive Directors, who are the chief operating
decision makers. The Group operates principally in three
geographical areas, UK, PRC and Tajikistan, with operations managed
on a project by project basis within Tajikistan. For segment
reporting purposes, the operations of the Cayman Islands registered
parent company are included in the UK and PRC segment as these
segments are jointly managed
The Group's exploration and evaluation activities are located in
Tajikistan, principally within the Pakrut Gold Project. Support and
administration services are provided from the UK and PRC.
Inter-segment revenue is eliminated on consolidation and is
conducted on mutually agreed terms between Group companies.
2018 UK and PRC Tajikistan Pakrut Total
US$000 US$000 US$000
Revenue - 17,926 17,926
Cost of sales - (17,926) (17,926)
Administrative expenses (3,257) (4,808) (8,065)
(including
foreign exchange)
Impairment - - -
Other operating income - 2,838 2,838
Operating loss (3,257) (1,970) (5,227)
Finance income 923 - 923
Income tax - (179) (179)
Loss for the year (2,334) (2,149) (4,483)
Intersegment revenue
Total assets 10,375 425,862
436,237
Total liabilities 394,784 33,257 428,041
Depreciation 23 50 73
Additions to property, - - -
plant and equipment
Additions to mines - 66,717 66,717
under construction
Revenue generated in the period was from two customers, the
government of Tajikistan and an independent bank, the latter being
minimal at TJS 363,139.
2017
- 5,784 5,784
Revenue - (5,784) (5,784)
Cost of sales (870) (3,397) (4,267)
Administrative expenses (including - (10,703) (10,703)
foreign exchange)
Operating loss (870) (14,100) (14,970)
Finance income 1 - 1
Income tax - (68) (68)
Loss for the year (869) (14,168) (15,037)
Total assets 2,747 368,292 371,039
Total liabilities 337,413 20,947 358,360
Depreciation 25 81 106
Additions to property, plant and equipment - 11 11
Additions to mines under construction - 23,622 23,622
4. Particulars of Employees
The average number of staff employed by the Group during the
financial year amounted to:
2018 2017
No. No.
Administrative and management 121 130
Construction in progress 375 409
496 539
The aggregate costs of the above were:
2018
US$000 2017
US$000
Wages and salaries 3,380 3,984
Social security costs 693 882
4,072 4,866
Staff costs include US$2.045 million (2017: US$2.26 million) of
costs capitalised and included within additions to 'Mines under
Construction'.
5. Directors' Emoluments
During the year, no Directors (2017 - none) exercised share
options.
The Directors' emoluments in respect of qualifying services
were:
Salary and Bonus and Other benefits Termination Total
fees holiday fees
pay
2018 US$ US$ US$ US$ US$
Mr Xiang Wu 31,950 - - - 31,950
Mr Lixian Yu 296,148 - - - 296,148
Mr Yong Li 23,737 - - - 23,737
Mr Xiuzhi Shi 23,620 - - - 23,620
Mr Hao Zhang * 246,812 - - - 246,812
622,267 - - - 622,267
Salary and fees Bonus and Other benefits Termination Total
holiday fees
pay
2017 US$ US$ US$ US$ US$
Mr Xiang Wu 31,732 - - - 31,732
Mr Lixian Yu 79,991 - - - 79,991
Mr Yong Li 839 - - - 839
Mr Xiuzhi Shi 839 - - - 839
Mr Weili Tang 13,256 - - - 13,256
Mr Hao Zhang 66,664 - - - 66,664
Mr Pizhao Che 23,047 - - - 23,047
216,368 - - - 216,368
Key management comprises Executive and Non-Executive Directors
and all emoluments are short term in nature.
* Mr Hao Zhang resigned on 22 November 2018.
6. Expenses by nature
2018 2017
US$000 US$000
Employee benefit expenses 2,530 2,818
Operating lease expenses 94 393
Depreciation 3,526 2,488
Less transfer to mines under construction (3,453) (2,382)
Legal, professional and regulatory costs 911 1,069
Travel and entertaining 289 371
Social & other taxes 1,232,354 -
Other Expenses 922 159
Commission/bank fees 142 101
Total administrative expenses 6,192 5,017
2018
US$000 2017
US$000
Fees payable to the Company's auditor for the audit 137 135
of the consolidated financial statements
Fees payable to the Company's 12 -
auditor for other services:
- Tax compliance services
149 135
7. Income Tax
a) Analysis of Charge in the Year
2018 2017
US$000 US$000
Current tax:
Current tax 179 68
Deferred tax - -
Total 179 68
No provision for income taxes arose in the Cayman Islands, the
UK, British Virgin Islands. A current income tax expense arose in
Tajikistan during the year as LLC Pakrut sold gold in the amount of
TJS 164,152,371 - equivalent to US$ 17,926,000 (2017: TJS
49,442,586 - equivalent to US$5,784,000). Thereby, the Company paid
the amount of advance payments of income tax according to the Tax
Code of the Republic of Tajikistan, being 1% of revenue. During the
year ended 31 December 2018, LLC Pakrut was in development stage of
the mine. Although Pakrut produced income, it is in a state of
loss, so does not incur corporation tax at 15%.
Factors Affecting Current Tax Charge
The tax assessed on the loss for the year is higher than the
weighted average standard rate of corporation tax of 20% (2017 -
20%).
2018 2017
US$000 US$000
Loss before income tax (4,304) (14,169)
Loss on ordinary activities by weighted average
rate of tax at 20% (2017 - 20%) (861) (2,994)
Expenses not deductible for tax purposes 73 106
Tax losses for which no deferred 967 2,956
income tax asset was recognised
179 68
The Group did not recognise deferred income tax assets of
approximately US$967,000 (2017 - US$2,956,000). These were in
respect of unused Tajikistan tax losses amounting to approximately
US$16,772,000 (2017- US$14,802,000). The Tajikistan tax losses can
be carried forward for three years from the year incurred and used
against future taxable income at 15%.
8. Finance Income and Costs
2018 2017
US$000 US$000
Finance Income
Interest income on short term bank deposits 923 1
Finance Costs
Interest expense on shareholder's loans 11,871 7,531
wholly repayable within five years
Interest expense on bank borrowings 4,522 4,404
wholly repayable within five years
Less: Borrowing costs capitalized in qualifying assets (16,393) (11,935)
Provisions: Unwinding of discount 69 63
Less: Unwinding of discount capitalized (69) (63)
in qualifying assets
Finance costs - -
9. Earnings per Share
2018 2017
US$ US$
Basic and diluted earnings per share (cents) (1.17) (3.93)
The basic earnings per share is calculated by dividing the loss
attributable to equity holders after tax of US$4,483,000 (2017-
loss $15,037,000) by the weighted average number of shares in issue
and carrying the right to receive dividend. For the year ended 31
December 2018 this was 382,392,292 (2017- 382,392,292) shares.
As the Group has incurred a loss for the year, no option or
warrant is potentially dilutive, and hence the basic and diluted
earnings per share are the same. At the year end, there were no
(2017 - 50,000) share options outstanding that are potentially
dilutive in the future.
10. Intangible Assets
Exploration and evaluation assets
US$000
Cost
At 1 January 2017, 31 December 9,941
2017 and 31 December 2018
Impairment
At 1 January 2017, 31 December (9,941)
2017 and 31 December 2018
Net Book Value
At 31 December 2017 and 31 December 2018 -
The exploration and evaluation assets represent internally
generated costs in connection with the Group's exploration and
evaluation activities. Expenditure is transferred from exploration
and evaluation assets to mines under construction once the work
completed to date supports the future development of the property
and such development receives appropriate approvals.
The rights of LLC Pakrut to carry out exploration and evaluation
activity at the Pakrut deposit expired on 1 April 2014. The renewal
application by the Group to extend the exploration license is being
considered by the Government of Tajikistan. Although the Directors
are not aware of any legal or other impediments which would
ultimately prevent approval of the license extension, the Directors
fully impaired the carrying value of the exploration and evaluation
assets during 2014 due to non-renewal of the Exploration License.
Exploration and evaluation activities can continue at the Pakrut
Gold Deposit in the area covered by the mining license. Currently,
staff members of Pakrut are coordinating with the local government
for exploration licenses.
11. Mines under Construction
Cost Mining rights US$000 Construction Total US$000
in progress
US$000
At 1 January 2017 35,022 283,219 318,241
Additions 23,622 23,622
Impairment - (10,730) (10,730)
At 31 December 2017 35,022 296,138 331,160
- 68,240 68,240
Additions
Impairment - - -
At 31 December 2018 35,022 364,378 399,400
The additions figure is stated net of costs relating to
depletion of mine assets as a result of trial production of
US$17,925,914 (2017: US$5,783,976).
Mining rights comprise exploration and evaluation assets up to
the date the Pakrut Gold Project was determined to be technically
feasible and commercially viable. All subsequent exploration and
evaluation expenditure at this site is capitalised within mining
rights. Mining rights also includes the subsoil contract signature
bonus, a share-based payment for securing the Pakrut Mining License
and payments to obtain land use rights.
Construction in progress comprises the mine, smelting plant,
tailings pond, power lines and road construction work carried out
at the Pakrut Gold Project by contractors and directly by the
Group. It also includes the borrowing costs associated with the
loan to finance the mine construction from China Nonferrous Metals
Intl Mining Co. Limited ("CNMIM") and China Construction Bank
("CCB"), together with associated legal, professional and
consultancy costs.
Mines under construction are not depreciated until construction
is completed and the assets are available for their intended use,
signified by the formal commissioning of the mine for production.
This is discussed further in Note 2.
12. Property, Plant and Equipment
Land Office furniture Motor Plant and Total
US$000 and equipment vehicles machinery US$000
US$000 US$000 US$000
Cost
At 1 January 2017 32 848 8,894 14,823 24,596
Additions - 11 - - 11
Disposals - (8) (26) (6) (40)
At 31 December 2017 32 851 8,868 14,817 24,567
Additions - 114 1,904 242 2,260
Disposals - (209) - (68) (278)
At 31 December 2018 32 755 10,772 14,990 26,549
Accumulated Depreciation
At 1 January 2017 - 428 3,611 9,091 13,130
Charge for the year - 96 1,064 1,311 2,471
At 31 December 2017 - 524 4,675 10,402 15,601
Charge for the year - 87 3,234 205 3,526
At 31 December 2018 - 611 7,909 10,607 19,127
Net Book Value
At 31 December 2018 32 144 2,862 4,384 7,422
At 31 December 2017 32 327 4,193 4,415 8,967
Depreciation of US US$3,453,000 (2017 - US$2,382,000) has been
capitalised as part of mines under construction assets. The net
book value of tangible assets used in exploration and evaluation
was US$ Nil (2017 - US$ Nil). The net book value of tangible fixed
assets used in mines under construction was US$5,277,980 (2017 -
US$8,730,980).
13. Subsidiary Undertakings
The Group had the following principal subsidiaries at 31
December 2018:
Name Holding Country of Incorporation Proportion of Voting Rights held Nature of Business
of Company
Directly
held
Kryso Resources Ordinary shares British Virgin Islands 100% Holding Company
(BVI) Limited
Kryso Resources Ordinary shares UK 100% Holding Company
Limited
Indirectly
held
International Ordinary shares UK 100% Service Company
Mining
Supplies and
Services
Limited (BVI holds
100% share)
LLC Pakrut(BVI holds Ordinary Shares Tajikistan 100% Mineral exploitation,
100% share) development and mining
14. Financial Instruments by category
Financial assets at amortised cost
US$000
31 December 2018
Assets per Statement of
Financial Position
Trade and other receivables, 3,709
excluding prepayments
Cash and cash equivalents 8,363
Total 12,072
Financial liabilities at
amortised
cost
US$000
31 December 2018
Liabilities per Statement
of Financial Position
Borrowings 345,010
Provisions for other liabilities 838
and charges
Trade and other payables, excluding 82,194
non-financial liabilities
Total 428,041
14. Financial Instruments by category (continued)
Financial assets at amortised cost
US$000
31 December 2017
Assets per Statement of
Financial Position
Trade and other receivables, 629
excluding prepayments
Cash and cash equivalents 12,067
Total 12,696
Financial liabilities at
amortised
cost
US$000
31 December 2017
Liabilities per Statement
of Financial Position
Borrowings 279,184
Provisions for other liabilities 767
and charges
Trade and other payables, excluding 78,409
non-financial liabilities
Total 358,360
15. Inventories
2018 2017
US$000 US$000
Gold 49 49
Construction materials and processing equipment 17,294 18,167
17,344 18,216
Inventories categorised as construction materials and processing
equipment are acquired for use in mine construction at which time
they are charged to construction in progress within Mines under
construction.
The cost of inventories recognised as an expense in profit or
loss during 2018 was US$ Nil (2017 -US$Nil).
16. Trade and Other Receivables
Group Group
2018 2017
US$000 US$000
Other receivables 2,983 75
Prepayments and deposits 725 554
Total 3,709 629
None of the receivables are past due. The fair values are equal
to the carrying amounts.
Other receivables includes $2,739,702 (2017: $Nil) due from
related party CNMIM in relation to funds received from the
insurance provider after the snowfall disaster, which were received
on behalf of CNG.
17. Borrowings
2018 2017
US$000 US$000
Bank borrowings 85,000 120,000
Other loans 260,010 159,184
Less: unamortised borrowing costs - -
Total 345,010 279,184
Non-current portion 182,285 106,500
Current portion 162,724 172,684
The fair value of borrowings equals their carrying amounts, as
the impact of discounting is not significant.
CNMIM loan
In accordance with the terms of the Subscription Agreement and
Warrant Instrument dated 27 July 2010 between Kryso Resources
Limited (formerly Kryso Resources Plc) and CNMIM, a subsidiary
company of significant shareholder China Nonferrous Metals Mining
(Group) Co. Limited ("China Nonferrous"), CNMIM was required to use
its best endeavors to secure mine funding for the construction and
development of the Pakrut Gold Project.
The USD tranche of the loan has been settled in full and US$Nil
was outstanding as at 31 December 2018 (2017: US$Nil). The amount
outstanding on the RMB tranche of the loan as at 31 December 2018
was US$12,683,599 (2017: US$12,683,599).
CNMC loans
The loan agreement between CNMC International Capitals Company
Limited ("CNMC") and China Nonferrous Gold Limited was signed on 20
September 2017. Under this agreement, CNMC provided a loan facility
of US$6,500,000 to China Nonferrous Gold Limited. This loan was
used to improve the daily business operations of China Nonferrous
Gold Limited.
The full amount of the loan was drawn down on the 20 September
2017. The loan contains annual fixed interest at 4%, however where
the loan is used for a purpose other than that stated in the
contract (see comments above), the proportion of the loan used will
incur interest at a fixed rate of 8% per annum. Payment of interest
is made quarterly.
The loan is repayable in full on 20 December 2019. For any
outstanding amounts owed after this date, interest will be charged
at a rate of 6% per annual until the outstanding amount is
paid.
The Group has pledged its 100% equity interest in China
Nonferrous Gold Limited to CNMC as security for repayment of the
loan.
A loan agreement between CNMC International Capitals Company
Limited ("CNMC") and China Nonferrous Gold Limited was signed on 27
April 2016. Under this agreement, CNMC provided a loan facility of
US$120,000,000 to China Nonferrous Gold Limited. This loan was used
to refinance the previous ICBC loan of the same amount, and the
purpose of these funds is for development, operations and
management of the Pakrut Gold Project, including operating and
related expenses.
The full amount of the loan was drawn down on the 27 April 2016.
The loan contains annual fixed interest at 4%, however where the
loan is used for a purpose other than that stated in the contract
(Pakrut Mine - see comments above), the proportion of the loan used
will incur interest at a fixed rate of 8% per annum. Payment of
interest will be made biannually in June and December.
The loan is repayable in full on 20 December 2019. For any
outstanding amounts owed after this date, interest will be charged
at a rate of 6% per annum until the outstanding amount is paid.
The Group has pledged its 100% equity interest in LLC Pakrut to
CNMC as security for repayment of the loan.
A loan agreement between CNMC and China Nonferrous Gold Limited
was signed on 27 May 2016 for a total amount of US$20,000,000,
which was drawn down in full on 27 June 2016. The loan period per
the contract was 6 months, from 27 May 2016 to 26 November 2016.
During 2018, the loan was transferred from CNMC to another member
of the group, CNMCTC. As at 31 December 2017, a loan extension
agreement was signed extending the repayment date until 26 November
2018. A further extension has been signed extending the repayment
date until 26 November 2019.
The loan contains a fixed interest rate of 4% per annum, which
is calculated on a monthly basis from the 21st of the month to the
20 of the following month. Interest payments are due on a quarterly
basis on the 21st of the month. Interest on the overdue balance
will be charged at 150% of the fixed interest rate per the
agreement.
A loan agreement between CNMC and China Nonferrous Gold Limited
was signed on 8 February 2018 for a total amount of US$90,000,000,
which was drawn down in full on 9 February 2018. The loan was
provided for the purposes of the construction, operations and
management of the Pakrut Gold Project, including operating and
related expenses. This use is in line with the terms of the
agreement. The loan period per the contract was from 9 February
2018 to 8 December 2020.
The loan contains a fixed interest rate of 5.8% per annum, which
is calculated on a half yearly basis from the 21st of December to
the 20th June, and from the 21st June to 20th December. Payment of
interest will be made biannually in June and December of each year.
Where the loan is used for a purpose other than that stated in the
contract (see comments above), the proportion of the loan used will
incur interest at a fixed rate of 11.6% per annum. At the repayment
date, interest will be charged at 8.7% on any unpaid balance.
CCB loan
The first loan agreement between China Construction Bank ("CCB")
and China Nonferrous Gold Limited was signed on 13 April 2016.
Under this agreement CCB provided a loan facility of US$20,000,000
to China Nonferrous Gold Limited. This loan was used to improve
operations and management of the Pakrut Gold Project as well as
recovery from snow disaster. This use is in line with the terms of
the agreement.
The loan is secured by Standby Letter(s) of Credit to be issued
by China Construction Bank Corporation, Beijing Branch, and
guaranteed by CNMC under the terms of the loan agreement, for an
aggregate amount of not less than US$20,618,556.70, with validity
of not less than 12 months in favor of CCB.
The full amount of the loan was drawn down on 13 April 2016. The
loan incurs interest at a rate of 3 months LIBOR + 1.3% and is
payable in quarterly in arrears.
The principal amount of the loan was repaid on 12 October
2018.
The second loan agreement between China Construction Bank
("CCB") and China Nonferrous Gold Limited was signed on 14 June
2016. Under this agreement CCB provided a loan facility of
US$100,000,000 to China Nonferrous Gold Limited. This loan was used
to refinance a previous loan from CNMC of US$55,000,000, with the
remainder used for development, operations and management of the
Pakrut Gold Project, including operating and related expenses. This
use is in line with the terms of the agreement.
The loan is secured by Standby Letter(s) of Credit to be issued
by China Construction Bank Corporation, Beijing Branch, and
guaranteed by CNMC under the terms of the loan agreement, for an
aggregate amount of not less than US$103,092,783.51, with validity
of not less than 60 months in favor of CCB.
The full amount of the loan was drawn down on 30 June 2016. The
loan incurs interest at a rate of 3 months LIBOR + 2.1% and is
payable in arrears at the end of each applicable interest
period.
The loan is repayable in 8 installments commencing 18 months
from drawdown date and every 6 months thereafter as follows:
31/12/17 - US$5,000,000 (payment made in January 2018)
30/06/18- US$5,000,000
31/12/18 - US$5,000,000
30/06/19 - US$5,000,000
31/12/19 - US$5,000,000
30/06/20 - US$5,000,000
31/12/20 - US$5,000,000
30/06/21 (or 14 working days prior to expiry date of relevant
Standby Letter(s) of Credit - whichever is earlier) - Balance of
loan
18. Trade and other payables
2018 2017
US$000 US$000
Trade and other payables 82,194 78,409
82,194 78,409
Trade and other payables include amounts due of US$65,906,519
(2017 - US$70,474,164) in relation to exploration and evaluation
activities and mines under construction.
19. Provisions for Other Liabilities and Charges
Rehabilitation Total
US$000 US$000
At 1 January 2018 767 767
Unwinding of discount 71 71
At 31 December 2018 838 838
All provisions are non-current.
The Group makes full provision for the future cost of
rehabilitating mine sites and associated production facilities on a
discounted basis at the time of constructing the mine and
installing those facilities.
The rehabilitation provision represents the present value of
rehabilitation costs relating to the Pakrut mine site, which are
expected to be incurred up to 2030, which is the expiration date of
the mining license. The provision has been created based upon the
feasibility study. Assumptions based upon the current economic
environment within Tajikistan have been made, which management
believes are a reasonable basis upon which to estimate the future
liability and will be reviewed regularly to take into account any
material changes to the assumptions. The actual rehabilitation
costs and works required will ultimately depend upon future market
prices for the necessary rehabilitation works required, changes in
future regulatory requirements and the timing on when the mine
ceases to operate commercially.
The discount rate used in the calculation of the provision as at
31 December 2018 is 9% per annum. The value of the undiscounted
provision is US$2,481,000 (2017: US$2,481,000).
20. Treasury Policy and Financial Instruments
The Group operates informal treasury policies which include
ongoing assessments of interest rate management and borrowing
policy. The Board approves all decisions on treasury policy.
Facilities are arranged, based on criteria determined by the
Board, as required to finance the long-term requirements of the
Group. The Group has financed its activities by the raising of
funds through the placing of shares and through the issue and
subsequent exercise of options and warrants.
At 31 December 2018 and 2017 there were no monetary assets
denominated in currencies other than the functional currencies of
the Group's operations.
There are no material differences between the book value and
fair value of the financial assets at the year end. Except for the
impact of discounting on the provisions for liabilities and other
charges, there are no material differences between the book value
and fair value of financial liabilities at the year end.
21. Share Capital
2018 2018 2017 2017
No. of Share No. of Share
ordinary Capital ordinary Capital
shares US$000 shares US$000
At 1 January (Ordinary shares 382,392,292 38 382,392,292 38
of $0.0001) each
Issued during the year - - - -
At 31 December (Ordinary shares 382,392,292 38 382,392,292 38
of US$0.0001 each)
All shares are authorised for issue and fully paid.
22. Share Based Payments
Options can be granted to any employee of the Group in
accordance with the rules of the Unapproved Share Option Scheme.
The option price is not to be less than the initial Placing Price
or the price on the day of issue. The options cannot be exercised
for a period of at least one year from the date of grant. In the
event of any employee to whom options have been granted ceasing to
be an employee of the Group he or she will have a set period in
which to exercise those options (depending on the reasons for
leaving), failing which, the options will lapse.
Details of share options granted by the Company were as
follows:
2018 2017
Weighted Weighted
No. of average No. of average
share exercise share exercise
options price options price
Share Option Scheme (pence) (pence)
Outstanding at beginning 50,000 30.00 1,525,000 30.00
of year
Expired during the year 50,000 30.00 (1,475,000) 30.00
Outstanding at end of year - - 50,000 30.00
Exercisable at 31 December - - 50,000 30.00
There were no share options outstanding at the year end.
23. Cash flow information
31 December 2018 31 December 2017
US$000 US$000
Cash flows from Operating Activities
Loss before income tax (4,304) (14,969)
Adjustments for:
Finance income (923) (1)
Depreciation 73 102
Impairment - 10,703
Foreign exchange loss -
Change in working capital:
Inventory 873 2,732
Trade and other receivables (172) 90
Trade and other payables (766) (2,758)
Other current assets (2,908) -
Other current liabilities 11,684 -
Net Cash generated from 3,556 (4,101)
Operating Activities
Net debt reconciliation
31 December 2018 31 December 2017
US$000 US$000
Cash and cash equivalents 8,363 12,067
Borrowings - repayable within one year (162,724) (172,684)
Borrowing - repayable after one year (182,285) (106,500)
Net debt (336,646) (267,117)
31 December 2018 31 December 2017
US$000 US$000
Cash and cash equivalents 8,363 12,067
Borrowings - fixed interest rates (260,010) (159,184)
Borrowings - variable interest rates (85,000) (120,000)
Net debt (336,647) (267,117)
Borrowings Borrowings
Cash at bank due within 1 year due after 1 year Total
US$000 US$000 US$000 US$000
Net debt 12,563 (26,667) (227,684) (241,787)
as at
1 January
2017
Cash flows (496) (146,017) 121,184 (25,329)
Net debt 12,067 (172,684) (106,500) (267,117)
as at 31
December
2017
Cash flows (3,703) 9,960 (75,785) (69,528)
Net debt 8,363 (162,724) (182,285) (336,645)
as at 31
December
2018
24. Controlling Party
The Directors consider China Nonferrous Metals Mining (Group)
Co. Limited ("CNMC") to be the ultimate controlling party, by
virtue of their shareholding and representation on the Board of
Directors.
25. Capital Commitments - Pakrut Gold Project
Capital commitments contracted for at the end of the reporting
period but not yet incurred is as follows:
2018 2017
US$000 US$000
Capital expenditure contracted for but not provided for
in respect of new treatment facilities, electrical
upgrades and construction design fees (2017:
acquisition of mines under construction and
property, plant and equipment) 5,029 35,735
Capital commitments categorised within mines under construction
relate to construction of the Pakrut gold mine.
26. Contingent Liabilities
a) During 2018, a contract was entered into between LLC Pakrut
& LLC WenJian, a company set up by a former employee of Pakrut
(Dept. 2), to provide outsourced services including the extraction
of ore, delivery of ore to smelting plant, cleaning of mine, mine
development and construction works. LLC WenJian is not considered
to be a related party.
Although LLC WenJian hold the relevant license for the
construction works, the company does not hold a license in
accordance with the laws of Tajikistan "On subsoil" and "On
licensing of certain types of activities" for implementing the
other services they have been contracted to perform. This is a
breach of Tajik laws and regulations which could result in
penalties being imposed on both parties to the contract. The
outcome of this situation is unclear and could result in fines
imposed with the worst-case scenario being that Pakrut could have
their own license rescinded by the Tajik government. There is no
visibility surrounding the value or nature of any penalty at this
time.
b) In accordance with the terms of the 'investment agreement'
for sale of gold between the government of Tajikistan, Kryso
Resources (BVI) Limited and LLC Pakrut, the employee ratio at
Pakrut should be 80% Tajik citizens and 20% foreign. The actual
ratio during 2018 was 68% Tajik & 32% foreign employees.
Non-compliance could result in penalties or, in the worst case,
unilateral termination of the agreement by government of Tajikistan
(to which Pakrut currently makes all sales). The potential value of
the monetary impact of any consequences is unknown at this
time.
27. Related Party Transactions
The amount paid by the Company and Kryso Resources Limited to
CNMIM for interest on the loan in 2018 amounted to US$Nil (2017:
US$1,847,814). The amount due to CNMIM as at 31 December 2018 was
US$17,299,431 (2017: US$16,095,682). CNMIM is a significant
shareholder of China Nonferrous Gold Limited and Xiang Wu and Leo
Yu are Chairman and President of CNMIM respectively. During 2018,
CNG did not pay any interest to CNMC.
The amount payable by the Company to CNMC for interest on the
loans in 2018 amounted to US$9,857,378 (2017: US$5,805,833). The
amount due to CNMC as at 31 December 2018 was US$221,913,278 (2017:
US$149,283,611). CNMC is the ultimate parent of China Nonferrous
Gold Limited and Xiang Wu is Chief Accountant of CNMC.
During the year, the loan amount of US$20,000,000 and interest
payable of US$811,111 due to CNMC was transferred to being due to
CNMCTC a related party to China Nonferrous Gold Limited.
During 2018, 15MCC provided equipment and materials, together
with installation and construction work to the Group amounting to
US$27,684,899 (2017: $3,391,001) and the Group advanced payments to
15MCC amounting to US$20,462,214 (2017: $6,494,020). As at 31
December 2018, the total liability due to 15MCC was $33,976,176
(2017: US$33,762,180).
In 2015 the Group entered into an additional consultancy
contract with CNMC Hongtoushan Fushun Mining Co Ltd., through CNMIM
as agent as follows:
Smelting and Processing Agreement
CNMC Hongtoushan Fushun Mining Co Ltd. (CNHFMG) is a copper mine
and processing operation owned by CNMC. On 7th of September 2015,
the Group entered into a smelting and processing agreement with
CNHFMG.
Under the terms of the Agreement, CNG will pay to CNHFMG an
amount of RMB 17.99 (approximately US$2.8) per gram of finished
gold once the Project commences the 12-month production period.
Prior to this period the Company will cover the labour and
associated costs of CNFMG. Once in production, in the event the
recovery of the plant is above the Beijing General Research
Institute of Mining and Metallurgy forecast rate over the life of
production of 82.99 percent, CNHFMG will share 40 percent of the
profits from the upside directly due to the increased recovery. In
the event recovery is below 75 percent, CNHFMG will bear 20 per
cent of any loss incurred by the Company from the Project due to
directly to recovery levels.
During 2018, CNHFMG provided equipment and materials, together
with installation and construction work to the Group amounting to
US$Nil (2017: US$Nil) and the Group advanced payments to CNHFMG
amounting to US$98,302 (2017: USD$102,263). As at 31 December 2018,
the total liability due to CNHFMG was $1,047,414 (2017:
US$1,217,446). In October 2018, the contract with CNHFMG was
terminated by mutual agreement.
During the year of 2018 CNMC provided a guarantee for standby
letters of credit amounting to US$103,092,784 as security for the
Group's bank loan facility with China Construction Bank. During the
year of 2017, CNMC provided a guarantee from standby letters of
credit amounting to US$118,556,701 as security for the Group's bank
loan facility with China Construction Bank.
During the year, there is a total receivable amount of
$2,739,702 (2017: US$Nil) owed by CNMIM for the insurance claim on
the 2017 snowfall disaster which is held on the Group's behalf.
There is also a total amount of US$10,123,046 payable by the
entities within the group owed to CNMIM as at 31 December 2018
(2017: US$Nil).
There is an amount of US$1,911 (2017: $2,026) owed to Pizhao Che
who is a retired director of the group.
28. Events after the Reporting Period
In January 2019, the Group drew down US$20 million on a US$30
million loan facility with China Construction Bank Corporation
Macau Branch. The contract was signed in November 2018 but at that
time there was no withdrawal.
The Group has resumed production in January 2019, enabling it to
raise sufficient working capital. As mentioned earlier, in order to
ensure the repayment of existing loans, a broader refinancing is
required. Discussions are ongoing and with the signing of the new
loan agreement, the remaining discussions are expected to be
completed in the near term. The Group has now entered full
production and this should enable sufficient working capital to be
raised. As previously announced, to ensure repayment of the
existing facilities as they fall due, a wider refinancing will be
required.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20190630005107/en/
This information is provided by Business Wire
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