TIDMCNG
China Nonferrous Gold Limited
("CNG" or the "Company")
Final Results
for the twelve months ended 31 December 2020
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 2020.
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).
The Company also confirms that it will post a notice convening
the annual general meeting of the Company in due course. A further
announcement will be made when it is dispatched.
For further information please visit the Company's website
(www.cnfgold.com) or contact:
China Nonferrous Gold Limited
Zhang Hui, Managing Director
Tel: +86 10 8442 6662
WH Ireland Limited (NOMAD & Broker)
Katy Mitchell, James Sinclair-Ford
Tel: 0207 220 1666
Blytheweigh (PR)
Tim Blythe
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 progressing well in several important aspects,
with the Pakrut gold mine entering normal production and achieving
full operational capacity in 2020.
The Company made significant achievements in 2020 and became an
important gold-production enterprise in Tajikistan. The Pakrut gold
mine achieved its internal production targets for 2020, which
brings steady cash flows to support the sustainable development of
the company.
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.
Chief Executive Officer's Statement
As CEO of the board, it gives me great pleasure to present the
CEO's statement of the annual report for the year ended 31 December
2020. Following the first successful normal production work in
2019, the Company has progressed well in several important aspects,
with the Pakrut gold mine entering formal production and achieving
full operational capacity in 2020.
The Company made significant achievements in 2020 and became an
important gold-production enterprise in Tajikistan. The Pakrut gold
mine achieved its internal production targets for 2020, which
brings steady cash flows to support the sustainable development of
the Company.
Operation
From January to December 2020, a total of 640,036 tons of ore
was extracted from the Pakrut gold mine (2019: 731,600 tons), and a
total of 684,526 tons of ore were processed at a grade of 2.16 g/t,
19,874 tons of gold concentrate were produced at a grade of 68.52
g/t, 1,126 kg gold bullion were poured with a comprehensive
recovery rate of 80.01% (2019:1,168 kg gold bullion).
COVID-19
With COVID-19 continuing to have a significant impact on the
global economy, our priority is the safety and health of our people
and ensuring the Company's operations can continue in operation as
normal. Since the outbreak of COVID-19 in Tajikistan on April 30
2020, the Company has taken appropriate steps and effective
measures to ensure that staff at protected at site. To date
operations at the mine site at Pakrut continue as normal, and there
are no confirmed or suspected cases in the Company in Tajikistan or
China.
Through preventative measures such as social distancing and
self-isolation to reduce COVID-19 spreading and allowing healthcare
systems to make critical adaptations for testing and triage
capacity, the impact on working conditions has been reduced as much
as is practical. Beijing has sought to reduce channels for the
transmission of the virus and there have been no cases reported
within the Company to date. The mine is still in normal operation.
The amount of production personnel at the mine site remains
sufficient to meet the required production level, so production is
still progressing well at site in spite of COVID-19 and the target
for the first half of 2021 is not affected by the suspended
flights. In addition, the Company organized a private chartered
flight to transport around 45 Chinese employees to Tajikistan from
China on 8 August 2020. We therefore remain confident that the
annual internal production target can be achieved.
Financial results
The development and construction work at the Pakrut Gold Project
was finalised at the end of the 2018 financial year. The Group
therefore generated revenue from full operational production from
the beginning of the 2019 financial year.
Administration expenditure for the year under review was
US$17,827,290 (2019: US$16,336,541). The main reason for the
increase this year is due to property insurance premiums, epidemic
isolation costs for employees and supplementary payment of utility
bills from 2016 to 2020, which the authority of Electricity and
Water left some outstanding fees to collect.
The overall loss incurred by the Group was US$6,357,743 (2019:
US$21,981,000). Pakrut generated gold sales revenue of
US$64,516,000 (2019: US$49,157,000), a significant increase as a
result of entering full operational production.
During the course of the year, the Group did not enter into any
new financing agreements with shareholders or their associates.
Instead, the original repayment dates in December 2019 on the loan
contracts previously signed with China Nonferrous Metals
International Mining Co., Ltd. and China Nonferrous Metals Mining
Group Co., Ltd. ("CNMC Loans") were extended once more and are now
repayable in December 2022.
In July 2018, CNMC and CNMC Trade Co., Ltd. signed an agreement
transferring one of the loans of US$20 million to China Nonferrous
Mining Group Co, Ltd. to CNMC Trade Co., Ltd which constituted a
related party under the AIM Rules for Companies. In July 2019, the
remaining $126.5 million was also transferred to the same
party.
In 2020, the Group repaid US$10 million to China Construction
Bank Corporation Macau Branch ("CCBC") in respect of its existing
loan agreement, of which US$85 million remains outstanding at the
year end. During 2020, the Group signed a new financing agreement
with CCBC for a loan of $14.55 million, repayable in March
2021.
The existing CCBC loan facilities total US$99.55 million and the
CNMC and CNMIM loan facilities total US$289 million so that,
including interest, US$389 million of loans were payable as at 31
December 2020 (approximately US$349m without interest). US$349m
without interest is payable within one year of the financial
statements, which includes US$99.55 million due to CCBC and the
remaining balance due to shareholders. As the major shareholder and
ultimate beneficial owner, CNMIM and CNMC will continue strongly
supporting the Company, especially on the extension of the loans.
The loan will be extended again even though it was expired. In
addition, regarding the bank facilities, the Company is confident
that it will use the bank's new loans to repay/replace the debts.
The CCBC loan is due for repayment in the first half of 2021.
The Group has continued production throughout 2021 despite the
outbreak of COVID-19, enabling it to raise sufficient working
capital. As announced on 15 July 2020, in order to ensure the
repayment of existing loans a broader refinancing will be required.
Discussions are ongoing and the remaining discussions are expected
to be completed in the near term. The parent Company CNMC has
committed to support the CNG group should this be required for a
period of at least 12 months from the date of approval of these
financial statements.
Events after the Reporting Period
In January 2021, the Company executed an agreement with China
CITIC Bank Corporation Limited (Zhuhai Branch) ("CITIC") for a loan
facility of up to CNY 300million which is equivalent to US$46.37m.
The CITIC Loan facility is for a maximum of 12 months and is
repayable 12 months from first drawdown. The terms of the CITIC
Loan include an annual interest rate at 2.7% plus 6 month LIBOR.
US$20m of the CITIC Loan was drawn down in January 2021 to replace
the China Construction Bank (CCB) Macau loan of US$20m which fell
due in January 2021. A second drawdown of US$14.55m in March 2021
was used to repay the CCB Asia loan of US$14.55m which fell due for
repayment in March 2021.
In March 2021, the Company also extended the repayment period of
loans in place with CNMC Trade Company Limited (CNMC Trade),
totaling US$146.50 million, to December 2022. The Company currently
has total debt facilities (including banking facilities), before
interest, of c.US$319.5 million. The CCBC loan which is payable in
the first half of 2021 has been repaid with a new loan from Bank of
Shanghai (Hong Kong).
Outlook
The Company is continuing to enhance its production capacity.
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. The Company has also established a
strong relationship with the government of Tajikistan and other
Central Asian countries, and it will consider other appropriate
acquisitions at the right time, although there can be no guarantee
that any acquisition will occur.
While we have taken big strides in the production and operation
of the Pakrut gold mine and achieved much, there are still
challenges to overcome and targets to meet, all of which I am
confident to accomplish in the coming months.
Uncertainty created by the coronavirus pandemic on production
and operations still exists in Tajikistan, and the long term
effects are difficult to predict and estimate. The Company will
make every effort to meet pandemic prevention and control
requirements, as well as stabilizing and expanding the production
and operation of Pakrut gold mine.
I would like to take this opportunity to thank all our
employees, management and advisers for their continued hard work in
2020. I would also like to extend my thanks to all our stakeholders
for their continued backing over the years. I very much look
forward to updating our shareholders further on the mine
developments, production levels, new strategy and direction.
Zhang Hui
Chief Executive Officer
30 June 2021
Auditors Opinion
We have audited the financial statements of China Nonferrous
Gold Limited (the 'group') for the year ended 31 December 2020
which comprise the Consolidated Statement of Comprehensive Income,
the Consolidated Statement of Financial Position, the Consolidated
Statement of Changes in Equity, the Consolidated Statement of Cash
Flows and notes to the financial statements, including significant
accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion, the group financial statements:
-- give a true and fair view of the state of the group's affairs as at 31
December 2020 and of its loss for the year then ended; and
-- have been properly prepared in accordance with IFRSs as adopted by the
European Union.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
director's use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the directors' assessment of the group's ability to
continue to adopt the going concern basis of accounting included an
analysis of qualitative and quantitative aspects within
management's forecast financial information up to the end of 2023,
as well as obtaining a letter of support from the group's related
party lenders, and reviewing the latest financial information of
this entity.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
company's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of
materiality. We determined materiality for the financial statements
as a whole to be US$4,478,000 (2019: US$3,500,000) for the group
financial statements using 1% of gross assets as a basis.
We consider gross assets to be the most relevant determinant of
the group's financial position and performance used by
shareholders, with the key financial statement balances being
producing mines, other property, plant and equipment, inventory and
cash. The going concern of the group is dependent on its ability to
fund operations going forward, as well as on the valuation of its
assets, which represent to the underlying value of the group.
However, we consider that loss before tax will also be a key
indicator of performance to financial statements users as the group
is still in the early stages of its production cycle and continues
to seek to maximise production and operating efficiencies at the
mine.
Whilst materiality for the financial statements as a whole was
set a US$4,478,000 each significant component of the group was
audited to an overall materiality ranging between US$21,000 and
US$2,310,000 with performance materiality set at 70%. We applied
the concept of materiality both in planning and performing our
audit, and in evaluating the effect of misstatement.
Our approach to the audit
In designing our audit we determined materiality, as above, and
assessed the risk of material misstatement in the financial
statements. In particular, we looked at areas requiring the
directors to make subjective judgements, for example in respect of
significant accounting estimates including impairment of producing
mines, and considered future events that are inherently uncertain.
We also addressed the risk of management override of internal
controls, including evaluating whether there was evidence of bias
by the directors that represents a risk of material misstatement
due to fraud.
A full scope audit was performed on the complete financial
information of the group's operating components located in
Tajikistan and United Kingdom, with the group's key accounting
function for all being based in China with a local function in
Tajikistan.
The group's Tajik operations are audited by a non PKF network
firm. The audit team discussed significant events occurring during
the year and post year-end period with the component auditor and
performed a review of the component auditor's working papers,
including review of planning and completion stage group reporting.
The group audit team are responsible for the scope and direction of
the audit process. All other work was performed remotely by PKF
Littlejohn LLP.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter How our scope addressed this matter
Valuation of Producing Mines -- Pakrut
LLC (Note 12)
Producing mines within PPE is the most Our work in this area included: A
material balance within the financial review of management's impairment
statements and represents the key assessment, including consideration of
source from which the group generates any net present value calculations
income. The carrying value of used, providing challenge as to the
Producing mines, as at 31 December source of the inputs and obtaining
2020, is $379m (2019: $390m). There is support where possible; Ensuring valid
the risk that the value of the mine is mining licenses are held; Considering
impaired. any potential impairment indicators
through discussion with management and
the component auditor, who has visited
the mine site as part of their audit,
as well as review of announcements to
the market and Board minutes for
evidence of impairment; and A review
of management's assessment of the
impact of COVID-19 on operations at
the mine site as well as external
macroeconomic factors, and
consideration of whether there is
evidence to suggest the mine asset
should be impaired. We noted that the
lifespan of the mine used in the
depletion calculation is 18 years
which is 8 years more than the licence
currently held by CNG permits. Based
on the information available to
management there is currently no
reason to expect the licence extension
will not be granted however if it were
not then there is the risk that the
key inputs into this calculation would
need to be amended. This could lead to
a material impact on the related
charge within the financial statements
and therefore on the carrying value of
Producing mines.
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information contained within the annual report. Our opinion
on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
-- We obtained an understanding of the group and the sector in which it
operates to identify laws and regulations that could reasonably be
expected to have a direct effect on the financial statements. We obtained
our understanding in this regard through discussions with management and
the internal legal team in Pakrut. We also selected a specific audit team
based on experience with auditing entities within this industry facing
similar audit and business risks.
-- We determined the principal laws and regulations relevant to the group
and parent company in this regard to be those arising from:
-- AIM Rules
-- Local industry regulations in Tajikistan
-- Local tax and employment law in China and Tajikistan
-- We designed our audit procedures to ensure the audit team considered
whether there were any indications of non-compliance by the company with
those laws and regulations. These procedures included, but were not
limited to:
-- enquiries of management;
-- review of Board minutes;
-- review of legal ledger accounts;
-- A review of RNS announcements;
-- A review of component auditor's work surrounding local laws and
regulations in Tajikistan.
-- We also identified the risks of material misstatement of the financial
statements due to fraud. Aside from the non-rebuttable presumption of a
risk of fraud arising from management override of controls, we did not
identify any significant fraud risks.
-- As in all of our audits, we addressed the risk of fraud arising from
management override of controls by performing audit procedures which
included, but were not limited to: the testing of journals, reviewing
accounting estimates for evidence of bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the
normal course of business.
Because of the inherent limitations of an audit, there is a risk
that we will not detect all irregularities, including those leading
to a material misstatement in the financial statements or
non-compliance with regulation. This risk increases the more that
compliance with a law or regulation is removed from the events and
transactions reflected in the financial statements, as we will be
less likely to become aware of instances of non-compliance. The
risk is also greater regarding irregularities occurring due to
fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditors responsibilities.
This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with our engagement letter dated 1 June 2020. Our
audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Joseph Archer (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
Canary Wharf
London E14 4HD
Date:
Consolidated Statement of Comprehensive Income, Year Ended 31
December 2020
CHINA NONFERROUS GOLD LIMITED
Notes to the Financial Statements (continued)
2020 2019
US$000 US$000
Revenue 364,516 49,157
Cost of sales (35,297) (32,842)
Gross Profit 29,219 16,315
Other operating income 1 116
Administrative expenses 6(17,827) (16,337)
Loss on foreign exchange (1,076) (905)
Other operating expenses (46) (136)
Operating Profit/(Loss) 10,271 (947)
Finance income 8196 270
Finance costs 8(15,999) (20,796)
Loss before Income Tax (5,532) (21,473)
Income tax 7(824) (508)
Loss for the year attributable to owners of the
parent (6,356) (21,981)
Total comprehensive income attributable to owners
of the parent for the year (6,356) (21,981)
Basic and Diluted Earnings per share attributable
to owners of the parent (expressed in cents per
share) 9(1.66) (5.75)
All of the activities of the Group are classed as
continuing.
Consolidated Statement of Financial Position
As at As at
31 December 2020 31 December 2019
Note US$000 US$000
Non-Current Assets
Property, plant and equipment 12 373,201 402,548
Total Non-Current Assets 373,201 402,548
Current Assets
Inventories 15 15,911 16,856
Trade and other receivables 16 5,649 4,766
Cash and cash equivalents 27,196 11,120
Total Current Assets 48,756 32,743
Non-Current Liabilities
Borrowings 17 (19,822) (103,586)
Provisions for other liabilities
and charges 19 (995) (913)
Total Non-Current Liabilities (20,817) (104,499)
Current Liabilities
Borrowings 17 (368,919) (267,527)
Trade and other payables 18 (52,363) (77,050)
Total Current Liabilities (421,282) (344,577)
Net Current Liabilities (372,526) (311,843)
Net Liabilities (20,143) (13,785)
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 (96,257) (89,899)
Total Equity (20,143) (13,785)
Consolidated Statement of Cash Flow
31 December 31 December
2020 2019
US$000 US$000
Cash flows from Operating Activities (Note 23) 17,137 3,624
Net cash generated from Operating Activities 17,137 3,624
Cash flows from Investing Activities
Purchase of property, plant and equipment (1,942) (5,842)
Interest received 196 270
Net cash used in Investing Activities (1,746) (5,572)
Cash flows from Financing Activities
Proceeds from borrowings (net of capitalised issue
costs) 14,550 20,000
Repayment of borrowings (10,000) (10,000)
Interest paid (3,866) (5,295)
Net cash generated from Financing Activities 684 4,705
Net increase/(decrease) in Cash and cash
equivalents 16,075 2,757
Cash and cash equivalents at beginning of the year 11,120 8,363
Cash and cash equivalents at end of the year 27,196 11,120
Consolidated Statement of Changes in Equity
Attributable
to owners of
the parent
Share Share Other Retained
capital premium reserve earnings Total
US$000 US$000 US$000 US$000 US$000
Balance at 1
January 2019 38 65,901 10,175 (67,918) 8,196
Loss for the
year - - - (21,981) (21,981)
Total
comprehensive
loss for the
year 38 65,901 10,175 (89,899) (13,785)
Total
transactions
with owners of
the parent,
recognised
directly in
equity - - - - -
Balance at 31
December
2019 38 65,901 10,175 (89,899) (13,785)
Balance at 1
January 2020 38 65,901 10,175 (89,899) (13,785)
Loss for the
year - - - (6,356) (6,356)
Total
comprehensive
loss for the
year
Total
transactions
with owners of
the parent,
recognised
directly in
equity - - - - -
Balance at 31
December
2020 38 65,901 10,175 (96,255) (20,141)
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 the mine produces
sufficient quantities of gold to be self-sufficient. 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. The potential impact of such fluctuations is not
considered material to the financial statements.
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
of US$65 million is 2.10% per annum over the quarterly LIBOR rate
and the loan is repayable in US$. The interest rate on the new CCB
loan of US$20 million is 1.20% per annum over the quarterly LIBOR
rate and the loan is repayable in US$. The interest rate on the
CNMC loan of US$90 million taken out in 2018 is fixed at 5.8% per
annum, calculated and paid on a half yearly basis. The interest
rate on CNMCTC loans totaling $146.5 million is 3.70% per annum
over the six month LIBOR rate and the loan is repayable in US$.
At 31 December 2020, the potential impact of fluctuations in
interest rates is not considered material to the financial
statements.
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. 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 2020 between the various currencies.
Somoni GBP Sterling US Dollar Renminbi Total US$000
30,212 27 16,057 53,198 13,157
Due to the different nature of assets and liabilities, changes
in asset value caused by exchange rate changes have different ways
of affecting a Company's free cash flow. Therefore, it must be
considered separately when evaluating the value of an enterprise.
The first is the monetary items in the corporate balance sheet.
Typical monetary items include monetary funds, loans, accounts
receivable and accounts payable. When the exchange rate changes,
the above-mentioned assets or liabilities of the enterprise
accounted in foreign currencies will increase or depreciate
accordingly. For example, in the context of the depreciation of the
Renminbi, the foreign currency deposits (Somoni/USD) held by
enterprises will appreciate, which in itself has a substantial
impact on the present value of cash. The foreign currency-settled
bonds or other debts issued by companies can be repaid at a lower
RMB cost, which can save companies more funds that can be used for
free distribution, thereby promoting the enhancement of corporate
value.
During 2020, the Group's principal revenue, costs, assets and
liabilities, including intercompany loans were denominated in USD.
The Group manages foreign currency risk by matching receipts and
payments and monitoring movements in exchange rates. The Group does
not currently hedge its exposure to foreign currencies and
recognises the profits and losses resulting from currency
fluctuations as and when they arise. At the year end the Group did
not have material exposure to foreign exchange risk relating to its
non-US$ denominated bank deposits and as such this not disclosed.
The year-end exchange rates used in the preparation of the
financial statements for 2020 and 2019 were as follows:
Somoni to USD GBP to USD Renminbi to USD
31 December 2020 11.30 1.3625 6.5250
31 December 2019 9.6872 1.31162 6.9762
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 to fund
operations, 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 Between Between
than 1 1 and 2 2 and 5 Over 5 Carrying
Year Years Years Years Total amount
US$000 US$000 US$000 US$000 US$000 US$000
Year ended
31 December 2020
Interest-bearing
borrowings 368,919 19,822 - - 388,741 388,741
Trade and other
payables 52,363 - - - 52,363 52,363
Provisions for
other
liabilities - - - 2,481 2,481 995
421,453 19,822 - 2,481 443,585 442,099
Year ended
31 December 2019
Interest-bearing
borrowings 267,527 103,586 -- 371,113 371,113
Trade and other
payables 77,050 - -- 77,050 77,050
Provisions for other
liabilities - - -2,481 2,481 913
344,577 103,586 -2,481 450,644 449,076
The Group holds bank accounts with banks in the UK, PRC and
Tajikistan with the following credit ratings:
2020 2019
Credit rating US$000 US$000
A 21,212 5,314
No independent credit rating available 5,984 5,806
27,196 11,120
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 Producing mines (Note 12)
The Group tests annually whether exploration, evaluation and
licensing assets and producing mines 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 producing mines at Pakrut, the Directors
have used an independently prepared and Director approved bankable
feasibility study
(http://www.cnfgold.com/projects/pakrut-gold-project). 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.
The calculation assumes a mining capacity of 2,000 tonnes of ore
daily increasing to 4,000 tonnes per day. Estimated production
volumes are based on detailed life-of-mine plans and take into
account development plans for the mines agreed by management as
part of the long-term planning process. Production volumes are
dependent on a number of variables, such as: the recoverable
quantities; the production profile; the cost of the development of
the infrastructure necessary to extract the reserves; the
production costs; the contractual duration of mining rights; and
the selling price of the commodities extracted. Gold revenues have
been estimated over that period at a price of US$1,600 based on
management's estimates, which are derived from forward price curves
and long-term views of global supply and demand, building on past
experience of the industry and consistent with external
sources.
The total cost per ounce is estimated to be around US$780 with a
gross margin of circa 60%. Royalties have been calculated at 6% of
sales revenues and corporate income tax at 13%, 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 and direct costs, the gold price,
and the discount rate. An impairment to the mine value would occur
if, compared to the base case scenario, the discount rate were to
increase to 14%, gold prices fell by 9%, or direct costs were to
increase by 27%.
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
760,000 tons of ore per annum, increasing to 800,000 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
'Producing mines' (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.
2. Critical Accounting Estimates, Assumptions and Judgments
(continued)
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 property, plant and equipment and inventories.
Estimated economically recoverable reserves are used in
determining the depreciation and/or amortisation of mine-specific
assets. This results in a depreciation/amortisation charge
proportional to the depletion of the anticipated remaining
life-of-mine production. The life of each item, which is assessed
at least annually, has regard to both its physical life limitations
and present assessments of economically recoverable reserves of the
mine property at which the asset is located. These calculations
require the use of estimates and assumptions, including the amount
of recoverable reserves and estimates of future capital
expenditure. The calculation of the UOP rate of
depreciation/amortisation could be impacted to the extent that
actual production in the future is different from current forecast
production based on economically recoverable reserves, or if future
capital expenditure estimates change. Changes to economically
recoverable reserves could arise due to changes in the factors or
assumptions used in estimating reserves, including:
-- The effect on economically recoverable reserves of differences between
actual commodity prices and commodity price assumptions;
-- Unforeseen operational issues.
2. Critical Accounting Estimates, Assumptions and Judgments
(continued)
Depreciation/Amortisation (Note 12)
As the mine entered full production during the period, 2019 was
the first period for which depreciation / amortisation was charged
in respect of the producing mine assets. As mentioned in the
judgement above judgement is required in the calculation of this
amount with the key estimates considered to be surrounding the
amount of economically recoverable resources and the lifespan of
the asset. The economically recoverable reserves are considered to
be those detailed out on the website (see above for link) and the
lifespan of the mine is considered to be 18 years. As mentioned
above the Group currently only has a mining license that is valid
until November 2030 which is less than the 18 year period used
within the depreciation/amortisation calculation. After considering
the information available to them which includes discussions with
Tajik officials and the required timing for extending the mining
license, management have made the judgement that they will be able
to secure the necessary extensions and therefore continue to the
mine for a period of 18 years. If a 10 year license period were to
be used then depreciation for 2020 would be approximately $14.49
million.
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
UK and PRC Tajikistan Pakrut Total
2020 US$000 US$000 US$000
Revenue - 64,516 64,516
Cost of sales - (35,297) (35,297)
Administrative expenses
(including foreign exchange) (2,313) (16,591) (18,904)
Other operating expenses - (46) (46)
Impairment - - -
Other operating income - 1 1
Operating profit/(loss) (2,313) 12,583 10,270
Finance costs (15,999) - (15,999)
Finance income 151 45 196
Income tax - (824) (824)
Loss for the year (18,115) 11,804 (6,357)
Total assets 24,472 397,567 422,039
Total liabilities 418,203 23,898 442,099
Additions to property, plant
and equipment - 1,942 1,942
The Group's mining 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.
All revenue generated in the period was from the government of
Tajikistan.
UK and PRC Tajikistan Pakrut Total
2019 US$000 US$000 US$000
Revenue - 49,157 49,157
Cost of sales - (32,842) (32,842)
Administrative expenses
(including foreign
exchange) (4,536) (12,705) (17,241)
Other operating
expenses (136) (136)
Impairment - - -
Other operating income - 116 116
Operating profit/(loss) (4,536) 3,590 (947)
Finance costs (20,796) - (20,796)
Finance income 270 - 270
Income tax - (508) (508)
Loss for the year (25,062) 3,082 (21,981)
Total assets 8,787 426,504 435,291
Total liabilities 414,609 34,467 449,076
Depreciation 22 2,544 2,566
Additions to property,
plant and equipment - 5,842 5,842
4. Particulars of Employees
The average number of staff employed by the Group during the
financial year amounted to:
2020 2019
No. No.
Administrative and management 125 129
Operational staff 607 574
732 703
The aggregate costs of the above were:
2020 2019
US$000 US$000
Wages and salaries 4,379 4,721
Basic pension cost 885 861
5,265 5,582
No staff costs were capitalised since the Group entering into
full producing from January 2019.
5. Directors' Emoluments
The Directors' emoluments in respect of qualifying services
were:
Salary and fees Total
2020 US$ US$
Mr Boyi Liang* 76,797 76,797
Mr Yong Li 23,088 23,088
Mr Lixian Yu 197,131 197,131
Mr Delin Feng 194,921 194,921
Mr Xiuzhi Shi 22,233 22,233
Mr Hui Zhang** 61,142 61,142
576,311 576,311
Salary and fees Total
2019 US$ US$
Mr Boyi Liang 49,360 49,360
Mr Xiang Wu 17,953 17,953
Mr Yong Li 22,853 22,853
Mr Lixian Yu 227,754 227,754
Mr Delin Feng 140,340 140,340
Mr Xiuzhi Shi 22,989 22,989
481,249 481,249
Key management comprises Executive and Non-Executive Directors
and all emoluments are short term in nature.
* Mr Boyi Liang was appointed on 30 July 2019 and resigned on 25
September 2020
** Mr Hui Zhang was appointed on 25 September 2020
6. Expenses by nature
2020 2019
US$000 US$000
Employee benefit expenses 6,617 6,057
Operating lease expenses 145 186
Depreciation 3,200 2,566
Legal, professional and regulatory costs 170 338
Travel and entertaining 125 232
Social & other taxes 6,287 5,721
Other Expenses 258 159
Commission/bank fees 1,025 1,077
Total administrative expenses 17,827 16,337
6. Expenses by nature (continued)
2020 2019
US$000 US$000
Fees payable to the Company's auditor for the audit of
the consolidated financial statements 114 104
Fees payable to the Company's auditor for other
services: Tax compliance services 3 3
117 107
7. Income Tax
a. Analysis of Charge in the Year
2020 2019
US$000 US$000
Current tax:
Current tax 824 508
Deferred tax - -
Total 824 508
No provision for income taxes arose in the Cayman Islands, the
UK, British Virgin Islands. A current income tax expense arose in
Tajikistan during the year as LLC Pakrut sold gold in the amount of
TJS 671,738,902 -- equivalent to US$ 64,515,782 (2019: TJS
469,386,040 -- equivalent to US$ 49,156,539). Thereby, the Company
paid the amount of advance payments of income tax according to the
Tax Code of the Republic of Tajikistan, being 1.00% of revenue.
7. Income Tax (continued)
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% (2019 --
20%).
2020 2019
US$000 US$000
Loss before income tax (5,451) (21,473)
Loss on ordinary activities by weighted average rate of
tax at 20% (2019 -- 20%) (1,090) (4,295)
Expenses not deductible for tax purposes 640 513
Tax losses for which no deferred income tax asset was
recognised 1,274 4,289
Current tax payable 824 508
The Group did not recognise deferred income tax assets of
approximately US$1,274,000 (2019: US$4,289,000). Unused Tajik tax
losses amounting to approx. US$16,772,000 at 31 December 2020 can
be carried forward for three years from the year incurred and used
against future taxable income at 15%.
8. Finance Income and Costs
2020 2019
US$000 US$000
Finance Income
Interest income on short term bank deposits 196 270
Finance Costs
Interest expense on shareholder's loans wholly
repayable within five years 13,111 16,304
Interest expense on bank borrowings wholly repayable
within five years 2,888 4,493
Less: Borrowing costs capitalised in qualifying
assets -
Finance costs 15,999 20,797
9. Earnings per Share
2020 2019
US$ US$
Basic and diluted earnings per share (cents) (1.66) (5.75)
The basic earnings per share is calculated by dividing the loss
attributable to equity holders after tax of US$ 6,357,000 (2019:
21,981,000) by the weighted average number of shares in issue and
carrying the right to receive dividend. For the year ended 31
December 2020 this was 382,392,292 (2019-- 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 nil
(2019: nil) share options outstanding that are potentially dilutive
in the future.
10. Intangible Assets
Exploration and evaluation assets
US$000
Cost
At 1 January 2018, 31 December 2018, 31
December 2019 and 31 December 2020 9,941
Impairment
At 1 January 2018, 31 December 2018, 31
December 2019 and 31 December 2020 (9,941)
Net Book Value
At 31 December 2018, 31 December 2019 and -
31 December 2020
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
Mining rights Construction in
Cost US$000 progress US$000 Total US$000
At 1 January 2019 35,022 364,378 399,400
Additions - - -
Transfer to PPE (35,022) (364,378) (399,400)
At 31 December 2019 - - -
and 1 January
2020
- - -
Additions
Transfer to PPE - - -
At 31 December 2020 - - -
Mining rights comprised of 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 was capitalised
within mining rights. Mining rights also included the subsoil
contract signature bonus and payments to obtain land use
rights.
Construction in progress comprised 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 included 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
and signified by the formal commissioning of the mine for
production. Construction was completed at the end of the 2018
financial year with the mine being deemed to be fully operational
at the start of the 2019 financial year and all accumulated
capitalised costs were transferred into Property, Plant and
Equipment at 1 January 2019.
12. Property, Plant and Equipment
Office
furniture
and Motor Plant and Producing Assets under
Land equipment vehicles machinery mines construction Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
Cost
At 1 January
2019 32 755 10,772 14,990 - - 26,549
Additions - 152 - 2,129 - 3,561 5,842
Transfer from
MUC - - - - 398,639 761 399,400
Disposals - (320) (2,074) - - - (2,394)
At 31 December
2019 32 587 8,698 17,119 398,639 4,322 429,396
Additions - 106 - 1,836 - - 1,942
Transfer from
MUC - - - - - - -
Transfer from
Assets under
Construction - - - 4,322 - (4,322) -
Settlement of
historical
liabilities - - - - (20,214) - (20,214)
Disposals - - - - - - -
At 31 December
2020 32 693 8,698 23,277 378,425 - 411,125
12. Property, Plant and Equipment (continued)
Accumulated
Depreciation
At 1 January
2019 - 611 7,909 10,607 - - 19,127
Charge for the
year - 31 392 869 8,823 - 10,115
Disposal - (320) (2,074) - - - (2,394)
At 31 December
2019 - 322 6,227 11,476 8,823 - 26,849
Charge for the
year - 32 414 2,580 8,045 - 11,072
Disposal - - - - - - -
At 31 December
2020 - 354 6,641 14,056 16,868 - 37,920
Net Book
Value
At 31 December
2020 32 339 2,057 9,221 361,557 - 373,205
At 31 December
2019 32 265 2,471 5,643 389,816 4,322 402,548
In 2019 as the mine entered full production, mines under
construction were transferred into Property, Plant & Equipment
under the sub-category of Producing mines as presented above, and
depreciation/depletion charged as per the accounting policies.
The carrying value of the PPE, most notably producing mines, and
the depreciation / depletion methodology used, are both considered
to be key accounting judgements. Detail of these are disclosed in
Note 2 along with the related key estimates.
13. Subsidiary Undertakings
The Group had the following subsidiary undertakings as at 31
December 2020:
Name of Company Holding Country of Proportion Nature of Registered
Incorporation of Voting Business addresses
Rights held
Directly held
Kryso Resources Ordinary shares British Virgin 100% Holding Company 190 Elgin
(BVI) Limited (CNG) Islands Avenue, Grand
Cayman,
KY1-9005,
Cayman
Islands
Kryso Resources Ordinary shares UK 100% Holding Company Unit 2.24, the
Limited (CNG) Plaza 535
Kings Road
Indirectly held
International Ordinary shares UK 100% Service Company Unit 2.24, the
Mining Supplies and (BVI) Plaza 535
Services Limited Kings Road
(BVI holds 100%
share)
LLC Pakrut (BVI Ordinary shares Tajikistan 100% Mineral Bahor
holds 100% share) (BVI) exploitation, district,
development and Vahdat,
mining Tajikistan
14. Financial Instruments by category
Financial assets at amortised cost
US$000
31 December 2020 Assets per Statement
of Financial Position
Trade and other receivables, excluding
prepayments 3,016
Cash and cash equivalents 27,196
Total 30,212
Financial liabilities at
amortised
cost
US$000
31 December 2020 Liabilities per
Statement of Financial Position
Borrowings 388,741
Provisions for other liabilities and
charges 995
Trade and other payables, excluding
non-financial liabilities 52,363
Total 442,099
14. Financial Instruments by category (continued)
Financial assets at amortised cost
US$000
31 December 2019 Assets per Statement
of Financial Position
Trade and other receivables, excluding
prepayments 3,137
Cash and cash equivalents 11,120
Total 14,258
Financial liabilities at amortised
cost
US$000
31 December 2019 Liabilities per
Statement of Financial Position
Borrowings 371,113
Provisions for other liabilities and
charges 913
Trade and other payables, excluding
non-financial liabilities 77,050
Total 449,076
15. Inventories
2020 2019
US$000 US$000
Gold - -
Construction materials and processing equipment 15,911 16,856
15,911 16,856
The inventory balance in 2020 relates to raw materials and
semi-finished products used in gold production.
16. Trade and Other Receivables
Group Group
2020 2019
US$000 US$000
Other receivables 3,016 3,137
Prepayments and deposits 2,633 1,629
Total 5,649 4,766
None of the receivables are past due. The fair values are equal
to the carrying amounts.
Other receivables includes $2,758,418 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
2020 2019
US$000 US$000
Bank borrowings 99,550 95,000
Other loans 289,191 276,113
Total 388,741 371,113
Non-current portion 19,822 103,586
Current portion 368,919 267,527
The fair value of borrowings equals their carrying amounts, as
the impact of discounting is not significant.
CNMIM loan
In accordance with the terms of the Subscription Agreement and
Warrant Instrument dated 27 July 2010 between Kryso Resources
Limited (formerly Kryso Resources Plc) and CNMIM, a subsidiary
Company of significant shareholder China Nonferrous Metals Mining
(Group) Co. Limited ("China Nonferrous"), CNMIM was required to use
its best endeavors to secure mine funding for the construction and
development of the Pakrut Gold Project.
The USD tranche of the loan has been settled in full and US$Nil
was outstanding as at 31 December 2020 (2019: US$Nil). The amount
outstanding on the RMB tranche of the loan as at 31 December 2020
was US$12,683,599 (2019: US$12,683,599).
CNMC loans
The loan agreement between CNMC International Capitals Company
Limited and China Nonferrous Gold Limited was signed on 20
September 2017. Under this agreement, CNMC International Capitals
Company Limited provided a loan facility of US$6,500,000 to CNG.
This loan was used to improve the daily business operations of
CNG.
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.
During 2019, the loan was transferred from CNMC International
Capitals Company Limited to another member of the group, CNMC
Trade. On 15 July 2020, a loan extension agreement was signed
extending the repayment date until 20 December 2020. The extension
agreement incurs interest at a rate of 6 months LIBOR + 3.7%.
On 26 March 2021, a loan extension agreement was signed
extending the repayment date until 20 December 2022. The extension
agreement incurs interest at a rate of 3 months LIBOR + 3.25%.
A loan agreement between CNMC International Capitals Company
Limited and China Nonferrous Gold Limited was signed on 27 April
2016. Under this agreement, CNMC International Capitals Company
Limited 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 was 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.
During 2019, the loan was transferred from CNMC International
Capitals Company Limited to another member of the group, CNMC
Trade. On 15 July 2020, a loan extension agreement was signed
extending the repayment date until 20 December 2020. The extension
agreement incurs interest at a rate of 6 months LIBOR + 3.7%.
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 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.The loan contains a fixed
interest rate of 4% per annum, which is calculated on a monthly
basis from the 21(st) of the month to the 20 of the following
month.
During 2018, the loan was transferred from CNMC International
Capitals Company Limited to another member of the group, CNMC
Trade. A further extension has been signed extending the repayment
date until 26 November 2020. On 26 March 2021, a loan extension
agreement was signed extending the repayment date until 20 December
2022. The extension agreement incurs interest at a rate of 3 months
LIBOR + 3.25%.
A loan agreement between CNMC International Capitals Company II
Limited (CNMC International) 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 21(st) of December to
the 20(th) June, and from the 21(st) June to 20(th) 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. On 8 February 2021 US$20,000,000 was repaid, and on
26 March 2021, a loan extension agreement was signed extending the
repayment date of US$70,000,000 until 20 December 2022. The
extension agreement incurs interest at a rate of 3 months LIBOR +
3.25%. The Company has repaid US$9.26m Yen60million of its
outstanding loan in June 2021.
CCB loans
The first 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
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 -- Balance of loan
The second loan agreement between China Construction Bank
("CCB") and China Nonferrous Gold Limited was signed on 29 January
2019. Under this agreement CCB provided a loan facility of
US$20,000,000 to China Nonferrous Gold Limited. This loan was used
for the purpose of working capital for Pakrut Gold Project. 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$20,620,000, with validity of
not less than 12 months in favor of CCB.
The full amount of the loan was drawn down on 29 January 2019.
The loan incurs interest at a rate of 3 months LIBOR + 1.2% and is
payable quarterly in arrears. It has been repaid on 29 January
2021.
The third loan agreement between China Construction Bank ("CCB")
and China Nonferrous Gold Limited was signed on 9 March 2020. Under
this agreement CCB provided a loan facility of US$14,550,000 to
China Nonferrous Gold Limited. This loan was used for the purpose
of working capital for Pakrut Gold Project. 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$30,000,000, with validity of
not less than 12 months in favor of CCB.
The full amount of the loan was drawn down on 13 April 2020. The
loan incurs interest at a rate of 3 months LIBOR + 1.15% and is
payable quarterly in arrears. It has been repaid on 16 March
2021.
18. Trade and other payables
2020 2019
US$000 US$000
Trade and other payables 52,363 77,050
52,363 77,050
Trade and other payables include amounts due of US$46,354,408
(2019: US$61,010,581) in relation to mine development.
19. Provisions for Other Liabilities and Charges
Rehabilitation Total
US$000 US$000
At 1 January 2020 913 913
Unwinding of discount 82 82
At 31 December 2020 995 995
All provisions are non-current.
The Group makes full provision for the future cost of
rehabilitating the mine site 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 2020 is 9% per annum. The value of the undiscounted
provision is US$2,481,000 (2019: 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.
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
2020 2020 2019 2019
No. of Share No. of Share
ordinary Capital ordinary Capital
shares US$000 shares US$000
At 1 January (Ordinary
shares of $0.0001) each 382,392,292 38 382,392,292 38
Issued during the year - - - -
At 31 December (Ordinary
shares of US$0.0001
each) 382,392,292 38 382,392,292 38
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 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), falling which, the options
will lapse.
There were no share options outstanding at the year end.
23. Cash flow information
31 December 2020 31 December 2019
US$000 US$000
Cash flows from Operating Activities
Loss before income tax (5,451) (21,473)
Adjustments for:
Finance income (196) (270)
Finance costs 15,999 20,796
Depreciation 11,072 7,722
Foreign exchange loss 1,076 905
Change in working capital:
Inventory 945 487
Trade and other receivables (1,004) (904)
Trade and other payables (5,405) (7,039)
Other current assets 121 (154)
Other current liabilities (19) 3,554
Net Cash generated from Operating
Activities 17,137 3,624
23. Cash flow information (continued)
Net debt reconciliation
31 December 2020 31 December 2019
US$000 US$000
Cash and cash equivalents 27,196 11,120
Borrowings -- repayable within one
year (368,919) (267,527)
Borrowing -- repayable after one year (19,822) (103,586)
Net debt (361,545) (359,993)
31 December 2020 31 December 2019
US$000 US$000
Cash and cash equivalents 21,196 11,120
Borrowings -- fixed interest rates (126,538) (116,685)
Borrowings -- variable interest rates (262,204) (254,429)
Net debt (361,545) (359,993)
23. Cash flow information (continued)
Borrowings Borrowings
Cash at bank due within 1 due after 1 Total
US$000 year US$000 year US$000 US$000
Net debt as at
1 January
2019 8,363 (162,724) (182,285) (336,645)
Cash flows 2,757 10,000 (14,705) (1,948)
Interest
accrued - - (21,400) (21,400)
Movement
between
current and
non-current - (114,803) 114,803 -
Net debt as at
31 December
2019 11,120 (267,527) (103,586) (359,993)
Cash flows 16,076 (677) - 15,392
Interest
accrued - - (16,950) (16,950)
Movement
between
current and
non-current - (100,715) 100,715 -
Net debt as at
31 December
2020 27,196 (368,919) (19,822) (361,545)
24. Controlling Party
The Directors consider China Nonferrous Metals Mining (Group)
Co. Limited ("CNMC") to be the ultimate controlling party, by
virtue of their shareholding and representation on the Board of
Directors.
25. Contingent Liabilities
During 2018, a contract was entered into between LLC Pakrut
& LLC WenJian, a Company set up by a former employee of Pakrut
(Dept. 2), to provide outsourced services including the extraction
of ore, delivery of ore to smelting plant, cleaning of mine, mine
development and construction works. LLC WenJian is not considered
to be a related party.
Although LLC WenJian hold the relevant license for the
construction works, the Company does not hold a license in
accordance with the laws of Tajikistan "On subsoil" and "On
licensing of certain types of activities" for implementing the
other services they have been contracted to perform. This is a
breach of Tajik laws and regulations which could result in
penalties being imposed on both parties to the contract. The
outcome of this situation is unclear and could result in fines
imposed with the worst-case scenario being that Pakrut could have
their own license rescinded by the Tajik government. There is no
visibility surrounding the value or nature of any penalty at this
time.
26. Related Party Transactions
The amount paid by the Company and Kryso Resources Limited to
CNMIM for interest on the loan in 2020 amounted to US$Nil
(2019:US$Nil). The amount due to CNMIM as at 31 December 2020 was
US$19,821,708 (2019: US$18,586,242). CNMIM is a significant
shareholder of China Nonferrous Gold Limited and Boyi Liang and Hui
Zhang are CEO and President of CNMIM respectively. During 2020, CNG
did not pay any interest to CNMC.
The amount payable by the Company to CNMC for interest on the
loans in 2020 amounted to US$5,292,500 (2019: US$5,989,013). The
amount due to CNMC as at 31 December 2020 was US$106,709,291 (2019:
US$101,402,291). CNMC is the ultimate parent of China Nonferrous
Gold Limited and Feng Delin is Chief Accountant of CNMC.
27. Related Party Transactions (continued)
During 2020, 15MCC (a related party to CNG through being a
subsidiary of CNMC, the Company's ultimate controlling party)
provided equipment and materials, together with installation and
construction work to the Group amounting to US$Nil (2019: $Nil) and
the Group advanced payments to 15MCC amounting to US$1,524,503
(2019: $3,945,580). As at 31 December 2020, the total liability due
to 15MCC was US$15,917,473 (2019: US$28,541,552).
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$2.8) per gram of finished
gold once the Project commences the 12-month production period.
Prior to this period the Company will cover the labour and
associated costs of CNFMG. Once in production, in the event the
recovery of the plant is above the Beijing General Research
Institute of Mining and Metallurgy forecast rate over the life of
production of 82.99 percent, CNHFMG will share 40 percent of the
profits from the upside directly due to the increased recovery. In
the event recovery is below 75 percent, CNHFMG will bear 20 per
cent of any loss incurred by the Company from the Project due to
directly to recovery levels.
During 2020, CNHFMG provided equipment and materials, together
with installation and construction work to the Group amounting to
US$Nil (2019:US$Nil) and the Group advanced payments to CNHFMG
amount to US$304,887(2019: US$166,962). As at 31 December 2020, the
total liability due to CNHFMG was US$575,565.
During the year of 2020 CNMC provided a guarantee for standby
letters of credit amounting to US$30,000,000 as security for the
Group's bank loan facility with China Construction Bank. During the
year of 2019, CNMC provided a guarantee from standby letters of
credit amounting to US$134,020,629 as security for the Group's bank
loan facility with China Construction Bank.
27. Related Party Transactions (continued)
During 2020, there is a total receivable amount of $2,739,702
(2019: US$2,739,702 ) 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$25,079 payable by the entities within
the group owed to CNMIM as at 31 December 2020 (2019:
US$25,079).
As at 31 December 2020, there is a total payable amount of
$226,080 (2019: $226,080) owed to Daye Nonferrous Metal Group
Holding Co., Ltd, a subsidiary of the ultimate controlling party,
CNMC.
28. Events after the Reporting Period
In January 2021, the Company executed an agreement with China
CITIC Bank Corporation Limited (Zhuhai Branch) ("CITIC") for a loan
facility of up to CNY 300million which is equivalent to US$46.37m.
The CITIC Loan facility is for a maximum of 12 months and is
repayable 12 months from first drawdown. The terms of the CITIC
Loan includes an annual interest rate at 2.7% plus 6 month LIBOR.
US$20m of the CITIC Loan has been drawn down in January 2021 to
replace the China Construction Bank (CCB) Macau loan of US$20m
which became due in January 2021. Second drawdown of US$14.55m in
March 2021 was used to repay the CCB Asia loan of US$14.55m which
was due for repayment in March 2021.
The Group has continued production throughout 2020 despite the
outbreak of COVID-19, enabling it to raise sufficient working
capital. As announced on 25 June 2021, The Company has executed an
agreement with Bank of Shanghai (Hong Kong) Limited ("BOS") for a
loan facility of up to US $65 million (the "BOS Loan"). The Loan
facility is for a maximum of 24 months and is repayable 24 months
from the drawdown. The total amount of US$65m of the BOS Loan is
expected to be drawn down before the end of the month in order to
repay the CCBC Macau loan, of which US $65m remains
outstanding.
As announced in February 2021, the Company repaid US$20m of its
outstanding loan with CNMC International Capitals Company Limited
("CNMC International") in accordance with its terms. The Company
extended the repayment period of loans in place with CNMC Trade
Company Limited (CNMC Trade) and CNMC International, totaling
US$216.50 million, to December 2022. Then in June 2021 the Company
repaid US$9.26m Yen60million of its outstanding loan with CNMC
International. The Company currently has total debt facilities
(including banking facilities), before interest, of c.US$319.5
million.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20210630005465/en/
CONTACT:
China Nonferrous Gold Limited
SOURCE: China Nonferrous Gold Limited
Copyright Business Wire 2021
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