TIDMCNG
CHINA NONFERROUS GOLD LIMITED
CHAIRMAN'S STATEMENT
28 June 2018
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 2017.
The results below are extracted from the Company's audited
Annual Report and Financial Statements. Copies of the Annual Report
will be posted to shareholders today and are available on the
Company's website (www.cnfgold.com) and 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
or
Investec Bank Plc
Jeremy Ellis, Alexander Ruffman Tel: +44 (0)20 7597 5970
or
Blytheweigh
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 120km 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.
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.
Chairman's Statement
As the chairman of the board, it gives me great pleasure to
present the chairman's statement of the annual report for the year
ended 31 December 2017.This was a difficult year for the group
during which Pakrut Gold Mine experienced high-levels of snowfall
that had not been seen for over 50 years, which resulted in the
interruption of the construction and production, brought
substantial economic loss to the group and impacted the audit of
the financial statements for the year ended 31 December 2016 on
which the auditors issued a disclaimer of opinion.
However, we are also grateful that both our management and staff
have worked tirelessly to repair the facilities damaged by the snow
disaster and resolve the prior year audit issues. Continuous
efforts have been made by the company to finalize mine development
and the overall construction of all projects is expected to be
completed during the fourth quarter of 2018, and production
recommenced in April 2018. The finance staff have been equally as
focused resolving the prior year issues which have led to a prior
year adjustment as the 2016 figures are restated as the relevant
information and work has been able to be performed following access
to the appropriate records.
Snowfall
In February 2017, the Pakrut Gold Mine experienced high levels
of snowfall that had not been seen for over 50 years with the
electric pylons destroyed and extensive damage to plant and
equipment. Due to the power supply to the mine site failing and the
inability to access the mine, drainage work could not be commenced
which resulted in the mine tunnels being flooded. The disaster
brought material economic losses to the Pakrut Gold Mine and at the
same time caused the project construction and production to fall
significantly behind schedule.
However management made a number of important operational
decisions to ensure development and construction could continue.
After the snowstorm, the company launched an emergency plan,
organizing manpower and equipment to manage the disaster. In March,
the roads were repaired to allow for traffic to return and site
access to be restored. In May, temporary power supply was resumed.
In September, underground drainage and dredging were completed.
Damaged buildings and equipment were all repaired in October and
normal power supply was restored at the end of December. With the
joint efforts of the management team and all the staff, the
facilities damaged by the snow disaster have now been fully
repaired laying a good foundation for restoring production and
completing all infrastructure construction works in 2018.
The insurance company has confirmed that the damage caused by
the avalanches and landslides at the Pakrut Gold Mine falls within
the scope of the insurance. The company also accordingly has
provided and submitted the documents regarding the various losses
and repairs to the insurance provider as requested, and the
insurance provider has performed an initial review thereon. At
present, the claims with the Company's insurance provider have
entered into the final negotiation stage of the compensation
settlement. The amount (24,000,000CNY or $3,639,452USD) is expected
to cover most of the direct losses incurred from that snow
disaster.
Construction
Although the majority of the Pakrut Gold Mine projects have been
completed and trial production was achieved in 2016, the company
has adjusted its mining methods, filling systems, ventilation
systems and tailings pond in order to maximize efficiency and reach
the scheduled design production target. Developments including the
construction of the flotation tailings pond, backfill stations,
mine camps and underground ventilation systems remain to be
completed, but all infrastructure projects are expected to be
finalized in the fourth quarter of 2018.
Following the snowfall, the construction work was restarted in
the second half of 2017. The construction of the road to the
flotation tailings pond has been fully completed. The basic
excavation and foundation treatment of the mine camp has been
completed with a third of the foundation construction now
finalized, and the steel structure and other materials have arrived
at the site. The basic excavation and foundation construction of
the backfill station have all been finished and all filling
equipment has already arrived at the site; a total of 21,270 cubic
meters of excavation work has been completed in the level of
2350m/2230m/2110m.
The group overcame the severe weather and the whole engineering
construction was achieved ahead of what the company had planned by
the end of 2017. The construction of underground projects such as
the ventilation system has been underway throughout the whole
winter. In April 2018, surface construction projects have also been
started and the overall construction of all projects is expected to
be completed during the fourth quarter of 2018.
Project Operation
The Pakrut Gold Mine produced the first gold ingot in January
2016 and processed 230,000 tons of ore and produced 162 kilograms
of gold, which marked the point at which the Pakrut gold mine had
officially entered the trial production stage. However, the
snowfall in early 2017 disrupted the whole process and with power
interrupted, tunnels flooded, and plant and equipment damaged,
production was halted. The company made full use of this period to
solve the problems found in trial production of the processing
plant and smelting plant by improving the process and replacing the
maintenance equipment. By the end of 2017, the company had
increased the operating efficiency and recovery rate, and reduced
the equipment failure rate and the cost of the processing plant and
smelting plant.
In April 2018, mining has already been started with 50,000 tons
of ore produced and stored. The processing plant has resumed
production and the smelting plant is also operating well.
Financial Results
As progress on the Pakrut project accelerated, expenditure
continued to be incurred by the Group on development and
construction work during the year and stood at US$340,519,685
(2016: US$72,768,000). Administration expenditure was US$4,836,052
(2016: US$5,100,000).. The overall loss incurred by the Group was
US$14,888,553 (2016: US$6,310,000).
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$26.5 million ("CNMC Loan") and with
China Construction Bank Corporation Macau Branch for a loan
facility of up to USD$20 million ("CCBC Loan"). In addition, the
2012 China Nonferrous Metals Int'l Mining Co., Ltd. facility signed
in May 2012, was extended post period end. The total balance
outstanding under the loans noted above amounted to US$261.5
million at the end of the period.
The Directors have received a letter of support from a
substantial shareholder, China Nonferrous Metal Mining Group (CNMC)
Co., Ltd, to provide the funding and support required to bring the
mine into production. This in turn enables the group to make loan
repayments and raise new loans.
Post Balance Sheet Events
As detailed in the announcement released on 5 March 2018, CNG
signed a total loan facility of US$90 million from CNMC
International Capitals Company Limited ("CNMC International"), and
a US$ 5 million repayment to China Construction Bank Corporation
Macau Branch has already taken place.
The Company's gross debt outstanding as at the date of this
announcement, before the repayments noted above, totals
approximately US$388.2 million of which $190 million is repayable
during 2018.
The Company expects to recommence production at the end of July
2018, which is expected to assist with raising further working
capital. As previously announced, the repayment of the existing
facilities will require a wider refinancing. Discussions are
ongoing and are expected to be concluded in advance of 31 December
2018 deadline.
Board Directors and Management
During 2017, the Group changed its board of directors and the
management team of the Pakrut gold mine project. The new management
team has extensive and abundant experience in mining management and
operations, which brings the very knowledge that the company is in
great need of in the future. At the same time, the company has
improved its board of directors as well by appointing two
experienced independent non-executive directors. The company is now
actively looking for another non-executive director with extensive
experience in mining investment and financing, western education
and work experience, and familiar with Eastern corporate culture to
enhance still further the corporate governance structure and
balanced composition of the management team.
Name Date of Appointment Title Age Gender Working Experience
Wu Xiang 2015/07/02 Non-executive 53 Male Over 30 years of
Director, experience
Chairman in the nonferrous
metal
industry and
numerous
financial
management
Yu Lixian 2017/09/01 Executive 51 Male approximately
Director, 30 years of
Managing Director experience
in project
management
roles in
mining industries
Zhang Hao 2017/09/01 Executive 41 Male has 20 years of
Director, experience
Finance Director in
business development
and financial
management
roles
Li Yong 2017/12/19 Non-executive 43 Male 12 years of
Director combined
experience
in numerous
industries
including
mining,
manufacturing,
infrastructure,
construction,
chemical
engineering
and in private
equity and venture
capital investment
Shi Xiuzhi 2017/12/19 Non-executive 52 Male Over 30 years
Director of combined
experience in gold
and
other nonferrous
metals mining
and relevant
activitie,
mining engineering
and safety
engineering.
Wang Gen 2016/08/26 Chief Executive 61 Male more than 30 years
of Operation of combined
experience in gold
and nonferrous
metals
mining and
management
Li Youyu 2016/04/12 Legal 59 Male approximately
Representative 30 years
of LLC Pakrut of combined
experience in
gold and
other nonferrous
metals mining
and relevant
activities
Zhang Gang 2016/05/20 General Manager 54 Male approximately
of LLC Pakrut 30 years
of combined
experience in
gold and
other nonferrous
metals mining
and relevant
activities
Dong Zezhen 2017/09/13 Deputy GM of 55 Male approximately
LLC Pakrut 30 years
of combined
experience in gold
and nonferrous
metals
mining and
management
Long Liangfei 2017/09/13 Deputy GM of 44 Male Over 20 years
LLC Pakrut of combined
experience
in numerous
industries
in
mining engineering
and development
Wang Hongjie 2017/09/13 Deputy GM of 36 Male More than 10 years
LLC Pakrut experience
mining engineering
and project
development
Outlook
The Company's new management and board of directors experienced
a difficult year in 2017 with the extreme natural disasters.
Operations have now almost been restored to normal and mining and
the production processes have already commenced. The Company will
start a new chapter in the fourth quarter of 2018 when it is
expected that the infrastructure works will be complete and that
full commercial production will begin.
It is expected that, in 2019, the Pakrut gold mine will achieve
a production capacity of 660,000 tons per year and produce 1.3 tons
of gold annually. The company is currently continuing to enhance
its production capacity and intends to double this capacity by
2021. Whilst improving production, the company is also focusing on
perfecting and improving the smelting process by reducing
production costs, increasing recovery rates and improving
competitiveness.
The company 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 company has also established a good
relationship with the government of Tajikistan and other Central
Asian countries and is well positioned potentially to gain more
gold resources and gold mines so as to create greater benefits for
our shareholders in the future.
I would like to take this opportunity to thank all our
employees, management and advisors for their continued efforts in
2017 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.
Xiang Wu
Chairman
Director
28 June 2018
View source version on businesswire.com:
https://www.businesswire.com/news/home/20180628005480/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
June 28, 2018 04:45 ET (08:45 GMT)
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