ar40771-LingBaoGold 2008
ar40771-LingBaoGold 2008
ar40771-LingBaoGold 2008
(股份代號:3330)
G r o w t h I n n o v a t i o n P r o g r e s s G r o w t h I n n o v a t i o n P r o g r e s s
Principal Bankers
Independent Non-executive Directors
Bank of China, Lingbao City Branch
Niu Zhongjie
Agricultural Bank of China, Lingbao City Branch
Wang Han
China Construction Bank, Lingbao City Branch
Yan Wanpeng
Industrial Bank, Zhengzhou Branch
Du Liping
Bank of Communications, Zhengzhou Branch
Supervisors
Liu Shengmin Share Registrar and Transfer
(Chairman of the Supervisory Committee) Office for H Shares
Meng Fanrui Computershare Hong Kong Investor Services Limited
Guo Xuchang Shops 1712-1716, 17th Floor
Zhu Yusheng Hopewell Centre
Yang Bo 183 Queen’s Road East
Hang Zhanping Wanchai
Jiao Xiaoxiao Hong Kong
Stock Information
Stock Code : 3330
Listing Date : 12 January 2006
Issued Shares : 297,274,000 shares (H Shares)
472,975,091 shares (Domestic Shares)
Nominal Value : RMB0.20 per share
Stock Name : Lingbao Gold
Website of the Company : www.lbgold.com
Investor Relations
Mr. Poon, Lawrence Chi Leung
Hong Kong Office
Room 1902, 19th Floor
MassMutual Tower
38 Gloucester Road
Wanchai
Hong Kong
Email: [email protected]
Ms. Qi Haihua
PRC Office
Xin Village, Yinzhuang Town
Daonan Industrial Area
Lingbao
Henan
The People’s Republic of China
(Postcode: 472500)
Tel: (86-398) 2296880
Fax: (86-398) 8860-166
Email: [email protected]
Turnover
RMB’000
4,000,000
3,559,089
3,500,000
3,000,000 2,844,560
2,500,000 2,234,975
2,000,000
1,555,704
1,500,000 1,223,429
1,000,000
500,000
0
2004 2005 2006 2007 2008
RMB’000
250,000
219,836 222,270
200,000
154,584
150,000
120,060
108,166
100,000
50,000
0
2004 2005 2006 2007 2008
1.9%
1.4% 4.0%
4.5%
16.6%
11.0%
4.0%
2.2%
2007 2008
77.5% 76.9%
Capital Resources
Lingbao Gold Company Ltd. (“Lingbao Gold” or the “Company” and together with its subsidiaries,
the “Group”) is listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock
Exchange”) since 12 January 2006.
The Group is an integrated gold mining enterprise in the People’s Republic of China (“PRC”), and is
mainly engaged in gold mining, smelting and refining. The products of the Group are gold, silver, copper
products, copper foils, copper cords and sulphuric acid. The Shanghai Gold Exchange certified the Group
as a standard gold bullion production enterprise. The Group’s mineral resources are scattered in the
PRC regions of Henan, Xinjiang, Jiangxi, Inner Mongolia, Gansu and Kyrgyz Republic with 55 mining
and exploration rights with a total area of 1,310.84 sq. km. The total gold reserve and resources as
at 31 December 2008 was approximately 125.49 tonnes (approximately 4,034,597 ounce). In 2008,
approximately 14,001 kg (approximately 450,143 ounce) of gold was produced with the profit for the
year amounting to RMB106,761,000.
The objective of the Group’s strategy in the future is continuous expansion, to become the leading
integrated gold mining enterprise in the PRC and gradually promote our brand in the international
market. The Group will focus on the exploration and expansion of production scale and continue to
acquire gold resources with potential, in order to increase the self-produced gold and gold reserve and
resources and enhance the Group’s self-sufficiency rate.
Review of Business and Prospect Given that raw materials accounted for over 80%
In 2008, the Group produced approximately 14,001 of total production cost, the Group intends to
kg (equivalent to approximately 450,143 ounce) increase its self-produced output of mineral sand
gold, representing an increase of approximately through acquisition and expansion of mining
1,009 kg (equivalent to approximately 32,440 operation, thereby uplifting the overall production
ounce) or 7.8% as compared with the previous and operation targets so as to minimise the risks
year. The Group’s turnover for 2008 increased associated with the raw materials purchased from
by 25.1% to approximately RMB3,559,089,000. outsiders.
The profit for the year was approximately
RMB106,761,000, representing a decrease of 1. Mining Segment
approximately 52.2% as compared with the
previous year. The Company’s basic earnings Turnover and production
per share decreased to RMB0.14 in 2008. The Our mining business mainly comprises the
decrease was mainly attributable to decline in sales of gold concentrates and compound
commodity prices in the second half of 2008, and gold. Most of the gold concentrates and
this adversely affected the profit of the Group. compound gold were sold to the Group’s
smelting plants as inter-segment sales.
2008 2007
Approximate Approximate Approximate Approximate
production sales production sales
Unit volume volume volume volume
2. Smelting Segment
Our smelting plant is situated in Henan Province, and is capable of processing gold, silver, copper
and sulphur. Its main products include gold bullion, silver, copper products and sulphuric acid.
The following table sets forth the analysis on the production and sales volume of the smelting
segment by product category:
2008 2007
Approximate Approximate Approximate Approximate
production sales production sales
Product Unit volume volume volume volume
Financial Condition
Turnover
The Group’s sales analysis by products is shown as follows:
2008 2007
Sales Unit price Sales Unit price
Amount volume RMB per Amount volume RMB per
RMB’000 kg/tonne kg/tonne RMB’000 kg/tonne kg/tonne
3,559,089 2,844,560
During March 2008, the Group has acquired the entire interest in Lingbao Wason Copper-Foil
Co., Ltd (“Lingbao Wason”) for a consideration of RMB27,900,000. Lingbao Wason is principally
engaged in production of copper foil and copper cord. During 2008, production volume of copper
foil and copper cord were 2,330 tonnes and 1,013 tonnes respectively; sales volume of copper
foil and copper cord were 2,249 tonnes and 940 tonnes respectively.
Gold price and other commodities price freely convertible and the currency would
risk fluctuate against a basket of currencies. The
The Group’s turnover and profit during PRC government may take further actions
the year are affected by fluctuations in and implement new measures on free trade
the gold prices and other commodities of Renminbi.
price as all the products are sold at the
market prices with fluctuation not subject Apart from the above, the Group is also
to the control of the Group. We have exposed to exchange rate risk primarily
not used and strictly prohibit the use of through bank deposits and other payables
commodity derivative instruments or futures that are denominated in a currency
for speculation purpose, and all commodity other than the functional currency of
derivative instruments are only used to the operations to which they relate. The
minimise the potential price fluctuation of currencies giving rise to risk are primarily
gold and other commodities. Hong Kong dollars, United States dollars
and Japanese Yen.
Interest rate
The Group is exposed to risk resulting from Fluctuations in exchange rates may adversely
the fluctuation in interest rates on our affect the value of our net assets, earnings
debt obligations. The Group undertakes and any dividends we declare when such are
debt obligations for supporting capital being converted to Hong Kong dollars.
expenditure and general working capital.
Our bank loans bear interest rates that 6. Contractual obligations
are subject to adjustment made by our As at 31 December 2008, capital
lenders in accordance with changes of the commitments, including the construction costs
relevant People’s Bank of China (“PBOC”) not provided for in the financial statements,
regulations. If the PBOC increases the were approximately RMB176,184,000,
interest rates, our finance cost increases representing an increase of approximately
accordingly. In addition, to the extent that RMB152,702,000 from approximately
we may need to raise debt financing in the RMB23,482,000 as at 31 December 2007.
future, upward fluctuations in interest rates
will increase the cost of new debt. As at 31 December 2008, our total future
minimum lease payments under non-
Exchange rate risk cancellable operating leases amounted to
The Group’s transactions are mainly approximately RMB2,205,000, of which
denominated in Renminbi. Fluctuations in approximately RMB768,000 was payable
exchange rates may affect the international within one year, approximately RMB1,104,000
and domestic gold price, which may impact was payable after one year but within five
our results of operation. Renminbi is not years, and approximately RMB333,000 was
payable after five years.
7. Contingent liabilities
The Company has given guarantee to a
bank to secure facilities of RMB100,000,000
(2007: RMB Nil) granted to a subsidiary and
such facilities have been fully utilised at 31
December 2008.
8. Human resources
In 2008, the average number of employees
of the Group was 4,339. The Company
highly treasures its human resources
and offers competitive remuneration to
employees and provides employees with
training programs.
Directors
Executive Directors
Mr. Xu Gaoming(許高明先生), aged 50, chairman and an Executive Director. Mr. Xu completed
a postgraduate course in politics and economics at Shaanxi Normal University(陝西師範大學)and
obtained a MBA degree. Mr. Xu has 30 years’ working experience in the mining and smelting industry
and has overseen several smelting technology improvements. He was appointed as the chairman of
the Company in June 2004.
Mr. Wang Jianguo(王建國先生), aged 50, general manager and an Executive Director. Mr. Wang
completed a course in facility management at Zhengzhou Aviation Industry Management Institute(鄭
州航空工業管理學院)and is an assistant environmental engineer. He has 27 years’ working experience
in the mining and smelting industry. Mr. Wang was appointed as a Director and general manager of
the Company since June 2004.
Mr. Lu Xiaozhao(呂曉兆先生), aged 46, deputy general manager and an Executive Director. He
completed a course in mining engineering at Shenyang Gold Institute(瀋陽黃金學院). He is a mining
engineer and a registered senior consultant with over 23 year’s working experience in the mining and
smelting industry. Mr. Lu was appointed as a Director and deputy general manager of the Company
since September 2002.
Mr. Jin Guangcai(靳廣才先生), aged 42, deputy general manager and an Executive Director. He
completed a postgraduate course in politics and economics at Shannxi Normal University(陝西師
範大學). He has approximately ten years’ experience in the mining and smelting industry. Mr. Jin
was appointed as a deputy general manager of the Company in May 2003 and a Director in October
2004.
Mr. Liu Pengfei(劉鵬飛先生), aged 34, deputy general manager and an Executive Director. He
completed a course in corporate management at Henan School of Financial and Economics(河南省
財經學院). Mr. Liu has more than 17 years’ experience in the mining and smelting industry. He was
appointed as a Director and deputy general manager of the Company in January 2009.
Mr. Zhang Guo(張果先生), aged 42, deputy general manager and an Executive Director. He
completed a course in mining engineering at Baotou Steel and Iron College(包頭鋼鐵學院)and
obtained the qualification of mining engineer. He has more than 19 years of experiences in the mining
industry. Mr. Zhang was appointed as a Director of the Company in January 2009.
Non-executive Directors
Mr. Wang Yumin(王育民先生), aged 49, a Non-executive Director. Mr. Wang obtained college
education. He is currently the general manager of Lingbao State-owned Assets Operation Limited
Liability Company. He was appointed as a Non-executive Director of the Company in January 2009.
Mr. Wang Han(王瀚先生), aged 45, is currently deputy principal of Northwest University of Politics
and Law(西北政法大學)and an arbitrator of Court of Arbitration of China International Commerce
Chamber(中國國際商會仲裁院). Mr. Wang obtained a bachelor degree from Northwest Normal
University(西北師範大學)in 1984, a master degree in laws from Northwest University of Politics & Law
in 1987 and a doctor degree in laws from School of Law at Wuhan University(武漢大學)in 1998. Mr.
Wang was appointed as dean, deputy dean and faculty officer and various other positions in Northwest
University of Politics and Law. In addition, he is also a legal consultant to Shaanxi provincial government,
Xi’an municipal government and Baoji municipal government and an arbitrator to various arbitration
committees. Mr. Wang is also writer of various publications mainly on law-related topics. Mr. Wang
was appointed as an Independent Non-executive Director of the Company in January 2009.
Mr. Yan Wanpeng(閆萬鵬先生), aged 43, is currently the chief accountant of Henan Investment
Company Group. Mr. Yan graduated with a bachelor degree and qualified for certified public
accountant, certified asset valuer and senior accountant. Mr. Yan was appointed as an Independent
Non-executive Director of the Company in January 2009.
Mr. Liu Shengmin(劉勝民先生), aged 50, a Supervisor and chairman of the supervisory committee
of the Company. He has been the chairman of Wason Copper-Foil since 2004. Mr. Liu studied chemical
engineering in Zhengzhou College of Technology(鄭州工學院)from 1978 to 1982. Mr. Liu was
appointed as chairman of the supervisory committee of the Company in January 2009.
Mr. Zhu Yusheng(朱育生先生), aged 52, a Supervisor. He is currently the deputy secretary-general
of Sanmen Xia Municipal CPC Party Committee and the chairman of Sanmen Xia Jin Qu Group Company
Limited. Mr. Zhu completed his undergraduate studies in economics and management at the Party
School of the CPC Central Committee(中央黨校)in 1995 and he graduated with a master degree
from Shaanxi Normal University(陝西師範大學)in 1999. Mr. Zhu was appointed as a Supervisor of
the Company in January 2009.
Mr. Meng Fanrui(孟凡瑞先生), aged 54, a Supervisor. Mr. Meng is a senior economist in the PRC.
He is the chairman and general manager of Henan Xuanrui. He was appointed as a Supervisor of the
Company in September 2002.
Mr. Guo Xuchang(郭續長先生), aged 47, a Supervisor. He completed his study of the economics
management post-secondary course at Henan Provincial Committee Party School of the Chinese
Communist Party(中共河南省委黨校)in 1995. He has been the chairman and general manager of
Lingbao Guoshi Mining since September 1999. Mr. Gao was appointed as a Supervisor of the Company
in September 2002.
Mr. Hang Zhanping(杭占平先生), aged 46, a Supervisor. He is currently the chief of the sales team
of Qiang Ma Gold Mine. Mr. Hang was appointed as a Supervisor of the Company in January 2009.
Mr. Yang Bo(楊波先生), aged 41, a Supervisor. He is currently working in the quality testing section
of the smelting branch of Lingbao Gold Company Ltd. and has been working in this section since 1992.
Mr. Yang was appointed as a Supervisor of the Company in January 2009.
Mr. Jiao Xiaoxiao(焦瀟霄先生), aged 26, is currently the deputy officer of integrated office of the
Company. Mr. Jiao graduated with a degree in Chinese language from Henan University(河南大學).
Mr. Jiao was appointed as a Supervisor of the Company in January 2009.
Senior Management
Mr. Xing Jiangze(邢江澤先生), aged 41, financial controller of the Company. He is a registered
certified public accountant, certified tax agent, senior accountant, senior consultant and economist in
the PRC, having over 15 years’ experience in finance, accounting and auditing. Mr. Xing was appointed
as the financial controller of the Company in January 2009.
Ms. Qi Haihua(戚海花女士), aged 39, joint company secretary and secretary to the Board of
Directors, is responsible for the company secretarial and investor relations affairs of the Company.
Ms. Qi graduated with a bachelor degree in English Literature from Zhengzhou University(鄭州大
學). Ms. Qi joined the Company in June 2004 and was the manager of the securities department of
the Company. Ms. Qi was appointed as the secretary to the Board of Directors and the joint company
secretary of the Company in November 2008.
Mr. Poon, Lawrence Chi Leung(潘之亮先生), aged 34, joint company secretary, chief financial
officer and qualified accountant of the Company, is responsible for company secretarial, financial
and accounting management, and investor relations affairs of the Company. Mr. Poon graduated
from Monash University, Australia, with a bachelor degree of Commerce. He is a certified practising
accountant of CPA Australia and a member of the Hong Kong Institute of Certified Public Accountants.
Mr. Poon has over 10 years’ experience in auditing, accounting and finance. Mr. Poon was appointed
as the qualified accountant and the joint company secretary of the Company in March 2007.
Pursuant to the articles of association of the employment relationships with the Company,
Company (“Articles of Association”), the term there is no any financial, business, family or other
of appointment of the Directors (including the material relationships amongst members of the
non-executive Directors and independent non- Board.
executive Directors) shall be three years and the
Directors are eligible for re-election. The chairman The Company has established various internal
of the Company, Mr. Xu Gaoming, and the other control systems which allow the Board of Directors
five executive Directors have been engaged in the to maintain high standard of corporate governance
management of gold mining business for years in the management of the Company. To ensure
with extensive experience. They are responsible that the Board of Directors performs its duties
for the business management of the Company, effectively, the management is required to submit
formulation and implementation of important business and financial reports of the Company to
strategies, making daily business decision, and the Directors regularly.
coordination of overall business operation.
Directors would make further enquiries if they
All of the Directors can give sufficient time and require further enquiries than information
attention to the Company’s affairs. volunteered by management. The Board of
Directors has separate and independent access
Non-executive Directors and independent non- to the joint company secretaries, qualified
executive Directors possess wide expertise and accountant and other senior management at all
are able to give professional advice in various times to conduct informal discussions. It is at the
aspects such as law, accounting, finance, tax, Company’s expense for the Board of Directors to
equity capital and industrial and commercial contact the auditors, lawyers or other professionals
industries. The non-executive Directors would to obtain independent professional opinions when
participate in Board meetings of the Company to appropriate. Management are regularly reminded
bring an independent judgment to bear on issues by the joint company secretaries that they have an
of strategy, policy, performance, accountability, obligation to provide the Board and its committees
resources, key appointments and standards of with adequate, complete and reliable information
conduct. In addition, they would take the lead in a timely manner. All Directors have access to
in Board meetings where potential conflicts of board papers and related materials which will
interests arise. They also have to scrutinise the enable the Board to make an informed decision
Company’s performance in achieving agreed on matters placed before it. Steps are taken to
corporate goals and objectives. respond to enquiries raised by Directors as fully
as possible.
Independent non-executive Directors are expressly
identified in all corporate communications that For the year ended 31 December 2008, the
disclose the names of the Directors. Board of Directors of the Company held eleven
meetings to discuss and approve various important
The Company has received annual written matters. All such meetings were convened in
confirmation from each of the independent accordance with the Articles of Association. The
non-executive Directors to ensure they are in table below lists out the attendance of each
compliance with Rule 3.13 of the Listing Rules Director at the Board meetings held during the
in respect of their independence. Apart from year up to the date of the report. The attendance
illustrates the attention of the Board of Directors given an equal opportunity to speak. In addition,
to the management of the Company’s affairs. Directors are given an opportunity to include
The matters processed by the Board of Directors matters in the agenda. Minutes of Board meetings
in the meetings are all recorded, and the relevant and meetings of Board committees record detailed
records are kept pursuant to relevant laws and concerns raised by Directors and dissenting
regulations. views expressed. Minutes of Board meetings and
meetings of Board committees would be kept
The number The number by secretary and such minutes are opened for
of Board of Board inspection at any reasonable time on reasonable
meetings that meetings notice by any Director.
the Director that the
was entitled Director Attendance If a substantial shareholder or a Director has a
Director to attend attended (%) conflict of interest in a matter to be considered
by the Board which the Board has determined to
Mr. Xu Gaoming 11 11 100 be material, the matter would not be dealt with
Mr. Wang Jianguo 11 11 100 by way of circulation or by a committee but a
Mr. Lu Xiaozhao 11 11 100 Board meeting would be held. Independent non-
Mr. Jin Guangcai 11 11 100 executive Directors have no material interest in
Mr. Xu Wanmin 11 11 100 the transaction would be present at such Board
Mr. Di Qinghua 11 11 100 meeting.
Mr. Qi Guozhong 11 11 100
Mr. Ning Jincheng 11 11 100 With respect to the re-election of newly
Mr. Wang Yanwu 11 11 100 appointed Director, the Company has complied
Mr. Niu Zhongjie 11 11 100 with Paragraph 4(2) of Appendix 3 of the Listing
Mr. Zheng Jinqiao 11 11 100 Rules, which permits the Directors who have been
appointed to fill a casual vacancy of the Board be
Prior to each regular Board meeting, the eligible for re-election at the next annual general
management of the Company shall submit meeting of the Company. As such, Code Provision
materials relevant to the affairs to be discussed A.4.2, which requires the re-election to take place
in the meeting to the Board of Directors. Notice at the next general meeting, was not adopted.
convening the regular meeting shall be sent to
the Directors at least ten days before the meeting Every newly appointed Director would receive
so that arrangements can be made to attend a comprehensive, formal and tailored induction
the meeting. Documents required for the Board on the first occasion of his appointment, and
meeting shall be sent to the Directors at least subsequently continuous briefing and professional
three days before the meeting, to ensure that development would be arranged to ensure
enough time is given to the Directors to review the that he/she has a proper understanding of the
documents and get prepared for the meeting. operations and business of the Company and that
he/she is fully aware of his/her responsibilities
The Board meeting is chaired by the chairman under statute and common law, the Listing Rules,
of the Company to ensure that sufficient time is applicable legal requirements and other regulatory
allocated to the consideration and discussion of requirements and the business and governance
each matter in the agenda and each Director is policies of the Company.
Company’s auditors; (viii) the committee Details of audit committee meetings held
would consider any significant or unusual during the year are as follows:
items that are, or may need to be, reflected
in such reports and accounts and must give Number The number
due consideration to any matters that have of meetings of meetings
been raised by the Company’s qualified of audit that
accountant, compliance adviser and committee Director Attendance
auditors; (i) to discuss with the management Director in 2008 attended (%)
the system of internal control and ensure
that management has discharged its Mr. Zheng Jinqiao 2 2 100
duty to have an effective internal control Mr. Xu Wanmin 2 2 100
system; (j) to consider any findings of major Mr. Ning Jincheng 2 2 100
investigations of internal control matters Mr. Wang Yanwu 2 2 100
as delegated by the Board or on its own Mr. Niu Zhongjie 2 2 100
initiative and management’s response;
(k) to ensure co-ordination between the In 2008, two meetings of the audit
internal and external auditors, and to committee were held. On 22 April
ensure that the internal audit function is 2008, the audit committee met with the
adequately resourced and has appropriate international auditors to discuss the general
standing within the Company, and to scope of their audit work. On 22 September
review and monitor the effectiveness of 2008, the audit committee reviewed the
the internal audit function; (l) to review the Company’s interim report for the year
external auditor’s management letter, any 2008. In addition, the audit committee
material queries raised by the auditor to had reviewed the financial statements for
management in respect of the accounting the year ended 31 December 2008 before
records, financial accounts or systems of the announcement of the Company’s
control and management’s response; (m) annual results. During the discussion, the
to report to the Board on the matters set audit committee had reviewed key areas
out in Code Provision C.3.3; and (n) to be in which management’s judgment applied
responsible for other matters as authorized for adequate provision and disclosure, and
by the Company. internal control policies.
thereon; and (f) undertaking other tasks as Ms. Du Liping (Chairman of the committee)
delegated by the Board. (appointed on 7 January 2009)
Mr. Wang Yumin (appointed on 7 January 2009)
The nomination committee would hold a Mr. Niu Zhongjie
meeting to discuss the appropriateness of Mr. Wang Han (appointed on 7 January 2009)
the candidates and consult the chairman Mr. Yan Wanpeng (appointed on 7 January 2009)
about their proposals relating to the Mr. Wang Yanwu (resigned on 7 January 2009)
nomination of other executive Directors Mr. Zheng Jinqiao (resigned on 7 January 2009)
and have access to professional advice Mr. Ning Jincheng (resigned on 7 January 2009)
if considered necessary. The criteria for Mr. Xu Wanmin (resigned on 7 January 2009)
selection include professional qualification,
industrial experience and academic The main duties of the remuneration and
background. review committee include: (a) formulating
and making recommendation to the Board
Written notice of the intention to nominate on policy and structure for remuneration
a candidate together with the respective packages or proposals according to the
resume would be delivered to the Board for major areas, duties and importance of the
its consideration and approval. management position of Directors and
senior management and the remuneration
In 2008, no meeting of the nomination for relevant positions of other relevant
committee was held. enterprises; (b) establishing criteria,
procedures and major assessment system
(4) Remuneration and Review for performance assessment and major
Committee proposals and systems for awards and
The remuneration and review committee punishments; (c) reviewing the performance
of the Board is a body specifically set up of duties and conducting annual
by the Board according to the resolutions performance assessment of the Company’s
of general meetings and shall mainly be Directors and senior management; (d)
responsible for formulating the review monitoring the implementation of the
criteria of and conducting review for the Company’s remuneration system; and (e)
Directors and senior management of the undertaking other tasks as delegated by
Company, as well as formulating and the Board.
reviewing their remuneration packages and
proposals. It is accountable to the Board. Moreover, the remuneration and review
The committee would be provided with committee has to review and approve
sufficient resources to discharge its duty. the compensation payable to executive
Directors and senior management in
The remuneration and review committee connection with any loss or termination
comprises of five members, the majority of their office or appointment to ensure
of whom are independent non-executive that such compensation is determined in
Directors. The members are as follows: accordance with relevant contractual terms
and that such compensation is otherwise
fair and not excessive for the Company.
Besides, the committee would review The remuneration and review committee
and approve compensation arrangements had considered the annual salary review as
relating to dismissal or removal of Directors well as bonus plan of Directors and senior
for misconduct to ensure that such management of the Company for 2008.
arrangements are determined in accordance
with relevant contractual terms and that Breakdown of the Directors’ and the
any compensation payment is otherwise supervisors’ remuneration for the year
reasonable and appropriate. ended 31 December 2008 are set out in
note 9 to the financial statements.
The remuneration and review committee
will also ensure that none of the Directors Securities Transactions by Directors
or any of their associates is involved in The Company has adopted the Model Code for
deciding his own remuneration. Securities Transactions by Directors of Listed
Companies (“Model Code”) as set out in Appendix
The remuneration committee makes 10 of the Listing Rules as the code of conduct for
available its terms of reference, explaining securities transactions by Directors. The Company
its role and the authority delegated to it has made specific enquiry to all Directors and
by the Board, and copies of the terms of Supervisors, who have conformed that they have
reference are kept at the registered office complied with the Model Code in 2008.
of the Company.
The Board has established written guidelines for
In 2008, one meeting of the remuneration employees who are likely to possess unpublished
and review committee was held. Attendance price sensitive information in respect of their
of individual members of remuneration dealings in the securities of the Company.
and review committee to the committee
meeting in 2008 are as follows: Chairman and Chief Executive
Officer
The Code Provision A.2.1 states that the roles of
number of The chairman and chief executive officer should be
meetings of number of separate and should not be performed by the
remuneration meetings that same individual.
and review member of
committee committee Attendance The chairman is responsible for ensuring that
Director in 2008 attended (%) Directors are properly explained on matters
discussed at Board meetings and reliable
Mr. Wang Yanwu 1 1 100 information have been received by Directors.
Mr. Zheng Jinqiao 1 1 100
Mr. Ning Jincheng 1 1 100 Mr. Xu Gaoming is the chairman and chief
Mr. Xu Wanmin 1 1 100 executive officer of the Company and has
Mr. Niu Zhongjie 1 1 100 considerable industry experience. Thus, there is
a derivation from the Code Provision A.2.1. The
Board is of the view that it is in the best interests suggestions to the Board of Directors. Moreover,
of the Group to have an executive chairman so chief financial officer shall be responsible for
that the Board can have the benefit of a chairman giving advice to the Board of Directors regarding
who is knowledgeable about the business of the the disclosure of notifiable transactions, connected
Group and is capable to guide discussions and transactions and price-sensitive information.
brief the Board, in particular, the non-executive
Directors, in a timely manner on various issues Joint company secretaries
and developments of the industry. In addition, The joint company secretaries shall be directly
the Board believes that this structure can assist responsible to the Board of Directors. They are
the Group to implement decisions promptly and responsible for ensuring that the proceedings of
more efficiently. the Board of Directors are complied with, making
appropriate disclosures regarding the interests of
Management Functions securities of the Directors and giving advice to
The Board is responsible for formulating and the Board of Directors regarding the disclosure
executing the operation plans and management of notifiable transactions, connected transactions
decisions of the Company as well as establishing and price-sensitive information. The joint
the overall strategic direction. When the Board company secretaries act as the principal channel
delegates its management functions to the of communication between the Company and
management, clear directions will be given and the Stock Exchange. They also assist the Board of
management will report to the Board on regularly Directors in realizing and strengthening corporate
basis. The Board reserves most of the powers governance practices in order to enhance the best
and delegates routine duties to management interest of the Company and the shareholders.
including bank loan arrangement. There would
be a periodic review of the arrangement. Financial Reporting
Management must obtain prior approval from the Management provides financial information with
Board before making decisions or entering into explanation to the Board to assist the Board in
any commitments on behalf of the Group. assessing the financial position of the Company.
Financial statements are the responsibilities of
Chief Financial Officer Directors. The Board has to present a balanced,
Chief financial officer of the Company is clear and understandable assessment which
responsible for the preparation of the interim extends to annual and interim reports, other
and annual financial statements in accordance price-sensitive announcements and other financial
with the Hong Kong Accounting Standards and to disclosures required under the Exchange Listing
make sure that the results and financial position Rules, and reports to regulators as well as to
of the Company are disclosed in an accurate information required to be disclosed pursuant to
and fair manner. Chief financial officer of the statutory requirements.
Company shall also be responsible for contacting
the auditors regularly. The duties of the chief The reporting responsibilities of KPMG, the
financial officer also include reviewing the financial international auditors, are stated in the Auditor’s
risk management of the Company and making Report on pages 43-44 of the Annual Report.
v. External Guarantees
Details of guarantees given by the
Company as at 31 December 2008
are set out in notes 33(d) to the
financial statements.
Under these deeds, no remuneration is payable to For the year ended 31 December 2008, the annual
the supervisors. electricity fee paid by the Group to Lingbao
Electric amounted to RMB69,423,000.
No Director or supervisor has a service contract
with the Company, which is not determinable by
The independent non-executive Directors of the
the Company within one year without payment of
Company have reviewed the continuing connected
compensation, other than statutory obligations.
transactions and are of the opinion that: (1)
Continuing Connected Transactions these transactions are within the ordinary course
Lingbao Electric (also known as Lingbao Electric of business of the Group; (2) these transactions
Bureau) supplies electricity to the Company on are conducted on normal commercial terms,
an ongoing basis, as the supply of electricity is or where there was no sufficient comparable
essential to the operation of the business of the transactions to judge whether they are on normal
Group. commercial terms, on terms no less favourable
to the Group than terms available to or from (as
A total of seven electricity supply contracts have
applicable) independent third parties; and (3) these
been entered into between Lingbao Electric and
the Company for the supply of electricity to the transactions are conducted in accordance with the
Company. These contracts were entered into on relevant agreement governing them on terms that
30 July 2006, 15 September 2007, 26 November are fair and reasonable and in the interests of the
2007, 21 January 2008, 30 January 2008, 11 shareholders of the Company as a whole.
February 2008 and 10 October 2008 respectively.
These electricity supply contracts are valid for a The auditor of the Group has confirmed to
period of three years. Under these electricity supply
the Board of Directors in writing that (a) The
contracts, upon expiry of their respective terms,
transactions have been approved by the Board of
the contracts will continue to be in force upon
written confirmation by both parties. Pursuant to Directors; (b) The transactions have been entered
these electricity supply contracts, the Company into for considerations consistent with the price
shall make payment to Lingbao Electric in full by charged for comparable transactions that were
the 25th day of each month. identified by management; and (c) The transactions
have been entered into in accordance with the
In respect of the above new electricity supply terms of the respective agreements and documents
agreements, the Group failed to comply in governing the respective transactions;
time with the reporting, announcement and
independent shareholders’ approval requirements
The Group’s continuous connected transactions
under Chapter 14A of the Listing Rules in relation
to transactions under the existing electricity supply were passed at the extraordinary general meeting
agreements and transactions under the new held on 1 April 2009. The annual caps of the
electricity supply agreements after the expiry of above continuous connected transactions shall
the exemption. not exceed RMB77,500,000, RMB89,100,000, and
RMB93,600,000 respectively for the three years
Lingbao Electric is a company incorporated in the ending 31 December 2011.
PRC and is a promoter of the Company. Lingbao
Electric held approximately 2.26% shareholding
For details, please refer to the circular dated 11
in the Company as at the date of this report.
Accordingly, Lingbao Electric is a connected person February 2009 issued by the Company.
of the Company under the Listing Rules and
the transactions with Lingbao Electric constitute
continuing connected transactions.
Directors’, Supervisors’ and Chief taken or deemed to have under such provisions of
Executive’s interest in shares SFO) or which were required, pursuant to section
As at 31 December 2008, the interest and 352 of the SFO, to be entered in the register
short position of each Director, Supervisor and referred to therein, or were required, pursuant
chief executive of the Company in any shares, to the Model Code for Securities Transactions
underlying shares or debentures of the Company by Directors of Listed Companies as set out in
or any associated corporation (within the meaning Appendix 10 of the Listing Rules, to be notified
of Part XV of the Securities and Futures Ordinance to the Company and the Stock Exchange (for this
(“SFO”) which were required to be notified to the purpose, the relevant provisions of the SFO will be
Company and the Stock Exchange pursuant to interpreted as if applicable to Supervisors) were
Divisions 7 and 8 of Part XV of the SFO (including as follows:
interests and short positions which they were
Approximate Approximate
Number of percentage of percentage
domestic the total of the total
Name of Director/ Relevant shares held issued domestic issued
Supervisor entity Capacity (Long position) share capital share capital
Notes:
1. Henan Xuanrui Assets Company Limited (“Henan 2. Lingbao Guoshi Mining owns approximately 1.59%
Xuanrui”) (河南軒瑞產業股份有限公司), a promoter of interest in the Company as at the date of this report.
the Company, owns approximately 2.34% interest in Mr. Guo Xuchang (郭續長先生) owns approximately
the Company as at the date of this report. Mr. Meng 78.8% interest in Lingbao Guoshi Mining and together
Fanrui (孟凡瑞先生) owns approximately 61.6% interest with his wife Ms. Yang Yuqin (楊玉琴女士), hold 100%
in Henan Xuanrui and together with his wife Ms. Ma of the shareholding in Lingbao Guoshi Mining. Under
Xianting (馬仙婷女士), hold approximately 96.1% of section 316 of the SFO, Mr. Guo Xuchang (郭續長先
the shareholding in Henan Xuanrui. Under section 316 生) is deemed to be interested in the Shares held by
of the SFO, Mr. Meng Fanrui (孟凡瑞先生) is deemed Lingbao Guoshi Mining.
to be interested in the Shares held by Henan Xuanrui.
Approximate
percentage Approximate
of the total percentage of
Number of issued domestic the total
Domestic Shares Capacity share capital share capital
Sanmenxia Jinqu Group Company Limited 37,698,784 Beneficial owner 7.97% 4.89%
(“Sanmenxia Jinqu”)
(三門陝金渠集團有限公司)
Confirmation of Independence
The Company has received from each of the
independent non-executive directors an annual
confirmation of independence pursuant to
Rule 3.13 of the Listing Rules and considers all
the independent non-executive directors to be
independent.
Auditors
KPMG retire and, being eligible, offer themselves
for reappointment. A resolution for the
reappointment of KPMG as auditors of the
Company is to be proposed at the forthcoming
annual general meeting.
Taxation
For the year ended 31 December 2008, no foreign
shareholder who is not resident of the PRC is liable
for Individual or Enterprise Income Tax, Capital
Gains Tax, Stamp Duty or Estate Duty of the
PRC in relation to their holding of shares of the
Company. Shareholders are urged to consult their
tax advisers regarding the PRC, Hong Kong and
other tax consequences of owning and disposing
of H shares.
Xu Gaoming
Chairman
We have audited the consolidated financial statements of Lingbao Gold Company Ltd. (the “Company”)
set out on pages 45 to 135, which comprise the consolidated and company balance sheets as at 31
December 2008, and the consolidated income statement, the consolidated statement of changes in
equity and the consolidated cash flow statement for the year then ended, and a summary of significant
accounting policies and other explanatory notes.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. This report
is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards
or accept liability to any other person for the contents of this report.
We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong
Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity’s preparation and true and fair presentation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs
of the Company and of the Group as at 31 December 2008 and of the Group’s profit and cash flows
for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been
properly prepared in accordance with the disclosure requirements of the Hong Kong Companies
Ordinance.
KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
24 April 2009
2008 2007
Note RMB’000 RMB’000
Attributable to:
2008 2007
Note RMB’000 RMB’000
Non-current assets
Property, plant and equipment 15 826,253 634,551
Construction in progress 16 445,198 302,451
Intangible assets 17 556,335 362,112
Goodwill 18 38,882 38,882
Lease prepayments 19 86,870 36,940
Other investments 21 10,504 10,504
Investment deposit 22 80,000 80,000
Non-current prepayments 26 135,376 45,334
Deferred tax assets 23(b) 50,764 23,093
2,230,182 1,533,867
Current assets
Inventories 24 711,333 591,443
Trade and other receivables, deposits
and prepayments 25 545,958 663,360
Available-for-sale investment 21 – 40,000
Current tax recoverable 23(a) 22,205 –
Cash restricted for use 29 – 181,982
Cash and cash equivalents 27 575,478 389,651
1,854,974 1,866,436
Current liabilities
Bank loans 29 1,280,000 599,861
Unsecured debenture 28 – 580,000
Trade and other payables 30 464,403 346,666
Loan from ultimate holding company 31 23,800 –
Current tax payable 23(a) 17,662 28,426
1,785,865 1,554,953
Non-current liabilities
Bank loans 29 455,160 120,000
Other loan 28 3,270 3,270
Other payables 30 111,730 –
Deferred tax liabilities 23(b) – 23,697
570,160 146,967
2008 2007
Note RMB’000 RMB’000
Approved and authorised for issue by the board of directors on 24 April 2009.
2008 2007
Note RMB’000 RMB’000
Non-current assets
Property, plant and equipment 15 476,284 439,496
Construction in progress 16 113,444 109,075
Intangible assets 17 19,616 22,778
Lease prepayments 19 29,474 8,623
Investments in subsidiaries 20 622,951 437,725
Other investments 21 10,504 10,504
Investment deposit 22 80,000 80,000
Non-current prepayments 26 36,079 8,097
Deferred tax assets 23(b) 23,007 14,824
1,411,359 1,131,122
Current assets
Inventories 24 644,524 553,604
Trade and other receivables, deposits
and prepayments 25 456,345 655,579
Amounts due from subsidiaries 20 611,202 402,480
Available-for-sale investment 21 – 40,000
Current tax recoverable 23(a) 20,424 –
Cash restricted for use 29 – 181,982
Cash and cash equivalents 27 260,508 322,781
1,993,003 2,156,426
Current liabilities
Bank loans 29 1,280,000 599,861
Unsecured debenture 28 – 580,000
Trade and other payables 30 237,576 288,446
Current tax payable 23(a) – 15,737
Amounts due to subsidiaries 20 27,505 8,531
1,545,081 1,492,575
Non-current liabilities
Bank loans 29 150,000 120,000
Other loan 28 3,270 3,270
153,270 123,270
2008 2007
Note RMB’000 RMB’000
Approved and authorised for issue by the board of directors on 24 April 2009.
2008 2007
Note RMB’000 RMB’000
1,012 (7,197)
Attributable to:
– Equity shareholders of the Company 108,166 222,270
– Minority interests (1,405) 1,059
106,761 223,329
2008 2007
Note RMB’000 RMB’000
Operating activities
Profit before taxation 122,244 338,998
Adjustments for:
– Gain on deemed disposal of subsidiary 5 (392) –
– Negative goodwill 5 (12,437) –
– Net realised gain on financial
instruments at fair value 5 (45,421) –
– Net unrealised loss on financial instruments
at fair value 5 856 –
– Depreciation 7(b) 102,245 64,217
– Finance costs 7(a) 115,262 101,613
– Interest income 4 (5,612) (12,844)
– Impairment losses on:
– trade and other receivables 7(b) 2,539 624
– purchase deposit 7(b) 4,726 8,367
– intangible assets 7(b) 2,781 –
– inventories 24(b) 36,112 –
– Net loss/(gain) on disposal of property,
plant and equipment 5 2,315 (2,581)
– Amortisation of lease prepayments 7(b) 1,637 724
– Amortisation of intangible assets 7(b) 43,181 26,532
– Compensation income 4 – (112,900)
– Dividend income from unlisted securities 4 (420) (280)
– Foreign exchange differences 29,177 10,211
2008 2007
Note RMB’000 RMB’000
Investing activities
Interest received 5,612 22,512
Gain on settlement of financial instruments
commodity derivative contracts 45,421 –
Decrease in restricted deposits 80,386 414,416
Payment for purchase of property,plant and equipment (84,784) (88,236)
Proceeds from disposal of property,plant and equipment 2,356 14,617
Payment for construction in progress (202,667) (307,045)
Payment for purchase of intangible assets (112,224) (67,921)
Payment for purchase of net assets 35 – (3,108)
Payment for acquisition of a subsidiary 36 (13,284) (145,381)
Payment for purchase of minority interests 32(a) – (10,871)
Payment for investment deposit – (80,000)
Return of investment deposits – 130,000
Payment for deposit of mining right – (3,290)
Payment for available-for-sale investments – (40,000)
Proceeds from disposal of available-for-sale investments 40,000 –
Payment for non-current prepayments (181,699) (42,433)
Placement of restricted cash – (263,604)
Release of restricted cash 181,982 81,622
Dividends received from other investments 420 280
Financing activities
The measurement basis used in the preparation of the financial statements is the historical
cost basis except that financial instruments classified as available-for-sale securities (see
note 1(e)); derivative financial instruments (see note 1(f)); property, plant and equipment
and construction in progress (see note 1(g)) are stated at fair value as explained in the
accounting policies set out below. These consolidated financial statements are presented
in Renminbi rounded to the nearest thousand.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
Judgements made by management in the application of HKFRSs that have significant effect
on the financial statements and estimates with a significant risk of material adjustment in
the next year are discussed in note 39.
(i) the Group has been actively negotiating with its principal bankers to secure
continual financial support. Following the maturity of short-term bank loans
totalling RMB420,000,000 subsequent to the year end, the Group obtained bank
loans with an aggregate amount of RMB740,000,000 of which RMB310,000,000
are repayable within one year with maturity dates from January to March 2010 and
RMB430,000,000 with maturity dates from March 2011 to February 2012 up to the
date of approval of these financial statements;
(iii) as at 31 December 2008, the Group had total available banking facilities amounting
to RMB2,995,160,000 of which RMB1,260,000,000 has not been utilised.
Minority interests represent the portion of the net assets of subsidiaries attributable to
interests that are not owned by the Company, whether directly or indirectly through
subsidiaries, and in respect of which the Group has not agreed any additional terms
with the holders of those interests which would result in the Group as a whole having a
contractual obligation in respect of those interests that meets the definition of a financial
liability. Minority interests are presented in the consolidated balance sheet within equity,
separately from equity attributable to the equity shareholders of the Company. Minority
interests in the results of the Group are presented on the face of the consolidated income
statement as an allocation of the total profit or loss for the year between minority interests
and the equity shareholders of the Company.
Where losses applicable to the minority exceed the minority’s interests in the equity of a
subsidiary, the excess, and any further losses applicable to the minority, are charged against
the Group’s interest except to the extent that the minority has a binding obligation to, and
is able to, make additional investment to cover the losses. If the subsidiary subsequently
reports profits, the Group’s interest is allocated all such profits until the minority’s share
of losses previously absorbed by the Group has been recovered.
Loans from holders of minority interests and other contractual obligations towards these
holders are presented as financial liabilities in the consolidated balance sheet in accordance
with note 1(r).
When the Group acquires any minority interests, no fair value adjustment is made to the
identifiable net assets acquired. The excess of the purchase price over the carrying value
of minority interests acquired is recognised as a component of equity. Where the Group’s
interest in a subsidiary is decreased without losing control, any gain or loss on the partial
disposal or deemed disposal is recognised as a movement in equity.
(d) Goodwill
Goodwill represents the excess of the cost of a business combination over the Group’s
interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent
liabilities.
Any excess of the Group’s interest in the net fair value of the acquiree’s identifiable assets,
liabilities and contingent liabilities over the cost of a business combination is recognised
immediately in profit or loss.
On disposal of a cash generating unit during the year, any attributable amount of
purchased goodwill is included in the calculation of the profit or loss on disposal.
Investments in equity securities are initially stated at cost, which is their transaction
price unless fair value can be more reliably estimated using valuation techniques whose
variables include only data from observable markets. Cost includes attributable transaction
costs. These investments are subsequently accounted for as follows, depending on their
classification:
Investments in equity securities that do not have a quoted market price in an active market
and whose fair value cannot reliably measured are recognised in the balance sheet at cost
less impairment losses (see note 1(j)(i)).
Investments in securities which do not fall into the above category are classified as
available-for-sale securities. At each balance sheet date the fair value is remeasured, with
any resultant gain or loss being recognised directly in equity. Dividend income from these
investments is recognised in profit or loss in accordance with the policy set out in note
1(s)(iii) and, where these investments are interest-bearing, interest calculated using the
effective interest method is recognised in profit or loss in accordance with the policy set
out in note 1(s)(iv). When these investments are derecognised or impaired (see note 1(j)
(i)), the cumulative gain or loss previously recognised directly in equity is recognised in
profit or loss.
The cost of self-constructed items of property, plant and equipment includes the cost of
materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and
removing the items and restoring the site on which they are located, and an appropriate
proportion of production overheads.
Construction in progress represents property, plant and equipment under construction and
equipment pending installation, and is initially recognised in the balance sheet at cost.
Cost comprises direct cost at construction. Capitalisation of these costs ceases and the
construction in progress is transferred to property, plant and equipment when the asset
is substantially ready for its intended use, notwithstanding any delays in the issue of the
relevant commissioning certificate by the relevant authorities in the People’s Republic of
China (the “PRC”).
When proved and probable gold reserves have been determined, costs incurred to develop
gold mines are capitalised as part of the cost of mining structures. All other expenditures,
including the cost of repairs and maintenance and major overhaul, are expenses as they are
incurred. Mining exploration costs, such as expenditures related to locating gold deposits
and determining the economic feasibility, and the costs of removing waste materials or
“stripping costs” are expensed as incurred.
Subsequent to the revaluation pursuant to the PRC rules and regulations in connection
with a restructuring of the Company in 2002 (the “Restructuring”), which was determined
based on depreciation replacement costs basis, property, plant and equipment are carried
at revalued amount, being the fair value at the date of the revaluation, less subsequent
accumulated depreciation and impairment losses (see note 1(j)(ii)).
Gains or losses arising from the retirement or disposal of an item of property, plant and
equipment are determined as the difference between the net disposal proceeds and the
carrying amount of the item and are recognised in profit or loss on the date of retirement
or disposal. Any related revaluation surplus is transferred from the revaluation reserve to
retained profits and is not reclassified to profit or loss.
Depreciation is calculated to write off the cost or valuation of items of property, plant
and equipment, less their estimated residual value, if any, using the straight line method
over their estimated useful lives as follows:
Buildings 2 – 30 years
Plant and machinery 4 – 12 years
Transportation equipment 8 years
Office and electronic equipment 5 – 10 years
Included in property, plant and equipment are mining shafts located at the mining sites.
Depreciation is provided to write off the cost of mining shafts using the units of production
method based on the proven and probable mineral reserves.
Where parts of an item of property, plant and equipment have different useful lives, the
cost or valuation of the item is allocated on a reasonable basis between the parts and
each part is depreciated separately. Both the useful life of an asset and its residual value,
if any, are reviewed annually.
Intangible assets are not amortised while their useful lives are assessed to be indefinite.
Any conclusion that the useful life of an intangible asset is indefinite is reviewed annually
to determine whether events and circumstances continue to support the indefinite useful
life assessment for that asset. If they do not, the change in the useful life assessment
from indefinite to finite is accounted for prospectively from the date of change and in
accordance with the policy for amortisation of intangible assets with finite lives as set
out above.
The Group’s mining rights are of sufficient duration (or convey a legal right to
renew for sufficient duration) to enable all reserves to be mined in accordance with
current production schedules.
(iii) Exploration and evaluation assets and mining development assets (continued)
When it can be reasonably ascertained that a mining property is capable of
commercial production, exploration and development costs capitalised are transferred
to mining development assets and amortised using the units of production method
based on the proven and probable mineral reserves. If any project is abandoned
during the exploration and evaluation stage, the related exploration and evaluation
assets are written off to profit or loss.
– it becoming probable that the debtor will enter bankruptcy or other financial
reorganisation;
– For unquoted equity securities that are carried at cost, the impairment loss
is measured as the difference between the carrying amount of the financial
asset and the estimated future cash flows, discounted at the current market
rate of return for a similar financial asset where the effect at discounting is
material. Impairment losses for equity securities are not reversed.
– For trade and other current receivables and other financial assets carried at
amortised cost, the impairment loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future
cash flows, discounted at the financial asset’s original effective interest
rate (i.e. the effective interest rate computed at initial recognition of these
assets), where the effect of discounting is material. This assessment is made
collectively where financial assets carried at amortised cost share similar risk
characteristics, such as similar past due status, and have not been individually
assessed as impaired. Future cash flows for financial assets which are assessed
for impairment collectively are based on historical loss experience for assets
with credit risk characteristics similar to the collective group.
– For available-for-sale securities, the cumulative loss that has been recognised
directly in equity is removed from equity and is recognised in profit or loss.
The amount of the cumulative loss that is recognised in profit or loss is the
difference between the acquisition cost (net of any principal repayment and
amortisation) and current fair value, less any impairment loss on that asset
previously recognised in profit or loss.
– construction in progress;
– investments in subsidiaries;
– goodwill.
If any such indication exists, the asset’s recoverable amount is estimated. In addition,
for goodwill, intangible assets that are not yet available for use and intangible assets
that have indefinite useful lives, the recoverable amount is estimated annually
whether or not there is any indication of impairment.
The recoverable amount of an asset is the greater of its net selling price and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of time value of money and the risks specific to
the asset. Where an asset does not generate cash inflows largely independent
of those from other assets, the recoverable amount is determined for the
smallest group of assets that generates cash inflows independently (i.e. a
cash-generating unit).
(m) Inventories
Inventories are carried at the lower of cost and net realisable value.
Cost is calculated using the weighted average cost formula and comprises all costs of
purchase, costs of conversion and other costs incurred in bringing the inventories to their
present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion and the estimated costs necessary to make the sale.
When inventories are sold, the carrying amount of those inventories is recognised as an
expense in the period in which the related revenue is recognised. The amount of any
write-down of inventories to net realisable value and all losses of inventories are recognised
as an expense in the period the write-down or loss occurs. The amount of any reversal of
any write-down of inventories is recognised as a reduction in the amount of inventories
recognised as an expense in the period in which the reversal occurs.
Current tax is the expected tax payable on the taxable income for the year, using tax rates
enacted or substantively enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous years.
Deferred tax assets and liabilities arise from deductible and taxable temporary differences
respectively, being the differences between the carrying amounts of assets and liabilities
for financial reporting purposes and their tax bases. Deferred tax assets also arise from
unused tax losses and unused tax credits.
The limited exceptions to recognition of deferred tax assets and liabilities are those
temporary differences arising from goodwill not deductible for tax purposes, the initial
recognition of assets or liabilities that affect neither accounting nor taxable profit (provided
they are not part of a business combination), and temporary differences relating to
investments in subsidiaries to the extent that, in the case of taxable differences, the Group
controls the timing of the reversal and it is probable that the differences will not reverse
in the foreseeable future, or in the case of deductible differences, unless it is probable
that they will reverse in the future.
The amount of deferred tax recognised is measured based on the expected manner of
realisation or settlement of the carrying amount of the assets and liabilities, using tax
rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and
liabilities are not discounted.
The carrying amount of a deferred tax asset is reviewed at each balance sheet date and
is reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to allow the related tax benefit to be utilised. Any such reduction is reversed to
the extent that it becomes probable that sufficient taxable profit will be available.
– in the case of current tax assets and liabilities, the Company or the Group intends
either to settle on a net basis, or to realise the asset and settle the liability
simultaneously; or
– in the case of deferred tax assets and liabilities, if they relate to income taxes levied
by the same taxation authority on either:
(iii) Dividends
Dividend income from unlisted investments is recognised when the shareholder’s
right to receive payment is established.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign
currency are translated using the foreign exchange rates ruling at the transaction dates.
Non-monetary assets and liabilities denominated in foreign currencies that are stated at
fair value are translated using the foreign exchange rates ruling at the dates the fair value
was determined.
The results of foreign operations are translated into Renminbi at the exchange rate
approximating the foreign exchange rates ruling at the dates of the transactions. Balance
sheet items are translated into Renminbi at the foreign exchange rates ruling at the
balance sheet date. The resulting exchange differences are recognised directly in a separate
component of equity.
(i) the party has the ability, directly or indirectly through one or more intermediaries,
to control the Group or exercise significant influence over the Group in making
financial and operating decisions, or has joint control over the Group;
(ii) the Group and the party are subject to common control;
(iii) the party is an associate of the Group or a joint venture in which the Group is a
venturer;
(iv) the party is a member of key management personnel of the Group or the Group’s
parent, or a close family member of such an individual, or is an entity under the
control, joint control or significant influence of such individuals;
(vi) the party is a post-employment benefit plan which is for the benefit or employees
of the Group or of any entity that is a related party of the Group.
Close family members of an individual are those family members who may be expected to
influence, or be influenced by, that individual in their dealings with the entity.
In accordance with the Group’s internal financial reporting system, the Group has
chosen business segment information as the primary reporting format and geographical
segment information as the secondary reporting format for the proposes of these financial
statements.
Segment revenue, expenses, results, assets and liabilities include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis to that segment.
For example, segment assets may include inventories, trade receivables and property,
plant and equipment. Segment revenue, expenses, assets, and liabilities are determined
before intra-group balances and intra-group transactions are eliminated as part of the
consolidation process, except to the extent that such intra-group balances and transactions
are between group entities within a single segment. Inter-segment pricing is based on
similar terms as those available to other external parties.
Segment capital expenditure is the total cost incurred during the period to acquire segment
assets (both tangible and intangible) that are expected to be used for more than one
period.
Unallocated items mainly comprise financial and corporate assets, interest-bearing loans,
borrowings, tax balances, corporate and financing expenses.
The Group has not applied any new standard or interpretation that is not yet effective for the
current accounting period (see note 41).
3 Turnover
The principal activities of the Group are mining, smelting, processing and sales of gold and other
metallic products in the PRC.
Turnover represents the sales value of goods sold to customers, net of sales tax and value added
tax. The amount of each significant category of revenue recognised in turnover during the year
is as follows:
2008 2007
RMB’000 RMB’000
Sales of:
– Gold 2,743,352 2,208,327
– Other metals 681,650 586,523
– Others 142,846 55,637
Less: Sales taxes and levies (8,759) (5,927)
3,559,089 2,844,560
4 Other revenue
2008 2007
RMB’000 RMB’000
18,180 142,861
31,992 (4,494)
6 Staff costs
2008 2007
RMB’000 RMB’000
119,681 91,289
Less: Staff costs capitalised into construction in progress (4,737) (3,601)
114,944 87,688
Pursuant to the relevant labour rules and regulations in the PRC, the Group participates in
defined contribution retirement benefit schemes (the “Schemes”) organised by the relevant local
government authorities whereby the Group is required to make contributions to the Schemes
at the rate of 20% of the eligible employees’ salaries. The local government authorities are
responsible for the entire pension obligations payable to retired employees.
The Group has no other material obligation for the payment of pension benefits associated with
those schemes beyond the annual contributions described above.
2008 2007
RMB’000 RMB’000
115,262 101,613
115,262 101,613
Auditors’ remuneration
– audit services 3,245 3,928
– other services 400 891
43,181 26,532
102,245 64,217
2008 2007
RMB’000 RMB’000
66,948 136,874
Deferred tax
Origination and reversal of temporary differences (51,465) (28,647)
Effect of change in tax rate on deferred tax balances – 7,442
15,483 115,669
(b) Reconciliation between tax expense and accounting profit at applicable tax rates:
2008 2007
RMB’000 RMB’000
Notes:
(i) On 16 March 2007, the Fifth Plenary Session of the Tenth National People’s Congress passed the Corporate
Income Tax Law of the PRC (“new tax law”) which has taken effect from 1 January 2008. As a result of
the new tax law, the statutory income tax rate applicable to the Company and its subsidiaries is 25%
from 1 January 2008 onwards.
(ii) The provisions for PRC income tax is based on a statutory rate of 25% (2007: 33%) of the assessable
profit of the Company and its subsidiaries in the PRC as determined in accordance with the relevant
income tax rules and regulations of the PRC. Taxation for subsidiaries outside the PRC is charged at the
appropriate current rates of taxation ruling in the relevant countries.
(iii) The provision for Hong Kong Profits Tax for 2008 is calculated at 16.5% (2007:17.5%). No provision for
Hong Kong Profits Tax is made for the year as Lingbao Gold International Company Limited did not earn
any income which is subject to Hong Kong Profits Tax.
(iv) The provision for Kyrgyzstan Profits Tax for 2008 is calculated at 10%. No provision for Kyrgyzstan Profits
Tax is made for the year as Full Gold Mining Limited Liability Company did not earn any income which is
subject to Kyrgyzstan Profits Tax.
Executive directors
Mr. Xu Gaoming – 480 5 165 650
Mr. Wang Jianguo – 432 5 149 586
Mr. Lu Xiaozhao – 336 5 116 457
Mr. Jin Guangcai – 336 5 116 457
Non-executive directors
Mr. Di Qinghua – – – – –
Mr. Qi Guozhong – – – – –
Mr. Xu Wanmin – – – – –
Independent non-
executive directors
Mr. Ning Jincheng 100 – – – 100
Mr. Wang Yanwu 100 – – – 100
Mr. Zheng Jinqiao 100 – – – 100
Mr. Niu Zhongjie 120 – – – 120
Supervisors
Mr. Gao Yang – – – – –
Mr. Meng Fanrui – – – – –
Mr. Guo Xuchang – – – – –
Mr. Peng Jinzeng – – – – –
Mr. Lei Mingyang – – – – –
Executive directors
Mr. Xu Gaoming – 904 4 – 908
Mr. Wang Jianguo – 814 4 – 818
Mr. Lu Xiaozhao – 633 4 – 637
Mr. Jin Guangcai – 633 4 – 637
Non-executive directors
Mr. Di Qinghua – – – – –
Mr. Qi Guozhong – – – – –
Mr. Xu Wanmin – – – – –
Independent non-
executive directors
Mr. Ning Jincheng 100 – – – 100
Mr. Wang Yanwu 100 – – – 100
Mr. Zheng Jinqiao 100 – – – 100
Mr. Niu Zhongjie 117 – – – 117
Supervisors
Mr. Gao Yang – 633 4 – 637
Mr. Meng Fanrui – – – – –
Mr. Guo Xuchang – – – – –
Mr. Peng Jinzeng – 75 3 – 78
Mr. Lei Mingyang – 45 1 – 46
2008
RMB’000
664
12 Dividends
The final dividend proposed after the balance sheet date had not been recognised as a
liability at the balance sheet date.
Transactions with other state-controlled entities include but are not limited to the
following:
– obtaining finance.
These transactions are conducted in the ordinary course of the Group’s business on terms
comparable to those with other entities that are not state-controlled. The Group has
established its buying, pricing strategy and approval process for purchases and sales of
products and services. Such buying, pricing strategy and approval processes do not depend
on whether the counterparties are state-controlled entities or not.
2008 2007
RMB’000 RMB’000
3,640 5,598
The Group
Office and
Mining Plant and Transportation electronic
Buildings shafts machinery equipment equipment Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost:
At 1 January 2007 101,405 97,818 163,981 38,421 8,148 409,773
Additions 14,873 3,820 66,634 12,911 7,411 105,649
Transfer from construction in
progress (note 16) 110,675 57,942 111,255 – 1,698 281,570
Through business combination
(note 36) 18,966 16,665 9,072 299 81 45,083
Purchase of net assets (note 35) 627 – – 336 304 1,267
Disposals (739) (5,150) (3,408) (5,502) (1,517) (16,316)
Representing:
Cost 154,678 122,650 310,009 42,747 15,689 645,773
Valuation–2002 24,422 48,445 37,525 3,718 436 114,546
Valuation–2005 66,707 – – – – 66,707
Accumulated depreciation:
At 1 January 2007 6,469 42,132 56,675 9,327 3,055 117,658
Charge for the year 10,294 18,419 28,896 5,323 1,869 64,801
Through business combination
(note 36) 3,737 8,308 2,159 75 17 14,296
Written back on disposals (29) – (2,103) (1,822) (326) (4,280)
Cost:
At 1 January 2008 245,807 171,095 347,534 46,465 16,125 827,026
Exchange adjustments (238) – (507) (285) (9) (1,039)
Additions 13,710 28,863 44,501 7,794 2,260 97,128
Transfer from construction
in progress (note 16) 64,163 50,424 23,702 – 827 139,116
Through business combination
(note 36) 18,238 – 47,201 806 298 66,543
Disposals (1,082) (733) (4,272) (2,747) (3) (8,837)
Representing:
Cost 249,804 201,204 421,670 48,989 19,062 940,729
Valuation–2002 24,087 48,445 36,489 3,044 436 112,501
Valuation–2005 66,707 – – – – 66,707
Accumulated depreciation:
At 1 January 2008 20,471 68,859 85,627 12,903 4,615 192,475
Exchange adjustments (15) – (19) (14) (1) (49)
Charge for the year 17,542 25,396 51,049 6,315 3,046 103,348
Through business combination
(note 36) 266 – 1,762 22 26 2,076
Written back on disposals (240) (127) (2,158) (1,640) (1) (4,166)
Had property, plant and equipment been carried at cost less accumulated depreciation, the
historical carrying amount as at 31 December 2008 and 2007 would have been as follows:
2008 2007
RMB’000 RMB’000
800,955 612,673
The Company
Office and
Mining Plant and Transportation electronic
Buildings shafts machinery equipment equipment Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost or valuation:
At 1 January 2007 82,629 83,672 141,696 24,506 4,762 337,265
Additions 69 – 4,180 5,797 1,984 12,030
Transfer from construction
in progress (note 16) 71,634 43,503 120,500 – – 235,637
Disposals – – (1,150) (2,497) – (3,647)
Representing:
Cost 63,203 78,730 227,701 24,088 6,310 400,032
Valuation – 2002 24,422 48,445 37,525 3,718 436 114,546
Valuation – 2005 66,707 – – – – 66,707
Accumulated depreciation:
At 1 January 2007 4,638 39,341 49,579 7,930 2,460 103,948
Charge for the year 6,500 6,843 22,174 3,329 1,117 39,963
Written back on disposals – – (905) (1,217) – (2,122)
Cost or valuation:
At 1 January 2008 154,332 127,175 265,226 27,806 6,746 581,285
Additions 1,679 – 16,076 3,840 1,541 23,136
Transfer from construction in
progress (note 16) 15,137 41,845 17,288 – 179 74,449
Disposals (477) – (2,968) (2,343) – (5,788)
Representing:
Cost 79,877 120,575 259,133 26,259 8,030 493,874
Valuation – 2002 24,087 48,445 36,489 3,044 436 112,501
Valuation – 2005 66,707 – – – – 66,707
Accumulated depreciation:
At 1 January 2008 11,138 46,184 70,848 10,042 3,577 141,789
Charge for the year 8,115 14,308 30,993 3,413 1,359 58,188
Written back on disposals (186) – (1,513) (1,480) – (3,179)
As required by the relevant PRC rules and regulations with respect to the Restructuring, the
property, plant and equipment, and construction in progress as at 31 May 2002 were revalued
for each asset class by 亞太(集團)會計師事務所有限公司, a firm of independent valuers registered
in the PRC, on a depreciated replacement costs basis. The surpluses arising from the revaluation
of certain property, plant and equipment, and construction in progress of RMB28,939,000
and RMB3,076,000 respectively were credited to capital reserve while deficit arising from the
revaluation of certain property, plant and equipment of RMB17,833,000 was charged as an
expense for the year ended 31 December 2002. The revalued amounts serve as the tax base for
future years for such assets.
In accordance whit HKAS 16, subsequent to these revaluations, which was based on depreciated
replacement costs, property, plant and equipment are carried at revalued amount, being the
fair value at the date of the revaluation less any subsequent accumulated depreciation and
impairment losses. Revaluation will be performed periodically to ensure that the carrying amount
does not differ materially from that which would be determined using fair value at the balance
sheet date.
16 Construction in progress
The Group The Company
2008 2007 2008 2007
RMB’000 RMB’000 RMB’000 RMB’000
Cost:
At 1 January 302,451 254,533 109,075 145,594
Exchange adjustments (1,288) – – –
Additions 277,068 318,861 78,818 199,118
Acquisition through business
combination (note 36) 6,083 14 – –
Purchase of net assets (note 35) – 10,613 – –
Transfer to property, plant and
equipment (note 15) (139,116) (281,570) (74,449) (235,637)
17 Intangible assets
The Group
Shanghai Exploration
Gold and Mining Mining Exploration
Exchange evaluation development rights rights
trading rights assets assets (note (b)) (note (b)) Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost:
At 1 January 2007 820 138,520 11,484 71,476 15,423 237,723
Additions – 24,043 – 8,171 51,852 84,066
Through business
combination (note 36) – – – 41,830 31,677 73,507
Capitalisation of amortisation – 71,352 – – – 71,352
Purchase of net assets
(note 35) – 5,187 – – 32,891 38,078
Accumulated amortisation:
At 1 January 2007 – – 5,296 27,355 10,194 42,845
Through business
combination (note 36) – – – 1,155 730 1,885
Charge for the year – – 1,198 25,334 71,352 97,884
Cost:
At 1 January 2008 820 239,102 11,484 121,477 131,843 504,726
Exchange adjustments – – – (19,359) – (19,359)
Additions – 58,431 – 195,109 6,004 259,544
Capitalisation of amortisation – 34,355 – – – 34,355
Accumulated amortisation:
At 1 January 2008 – – 6,494 53,844 82,276 142,614
Impairment loss (note (e)) – 2,781 – – – 2,781
Charge for the year – – 2,897 40,284 34,355 77,536
The Company
Shanghai
Gold Mining Exploration
Exchange rights rights
trading rights (note (b)) (note (b)) Total
RMB’000 RMB’000 RMB’000 RMB’000
Cost:
At 1 January 2007 and
31 December 2007 820 50,139 447 51,406
Accumulated amortisation:
At 1 January 2007 – 24,170 421 24,591
Charge for the year – 4,011 26 4,037
Shanghai
Gold Mining Exploration
Exchange rights rights
trading rights (note (b)) (note (b)) Total
RMB’000 RMB’000 RMB’000 RMB’000
Cost:
At 1 January 2008 and
31 December 2008 820 50,139 447 51,406
Accumulated amortisation:
At 1 January 2008 – 28,181 447 28,628
Charge for the year – 3,162 – 3,162
(a) Included in intangible assets of the Group are assets related to mines which are not operative as at 31 December
2008 with a carrying value of RMB496,871,000 (2007: RMB289,889,000). These assets are not subject to
amortisation until they are placed in use.
(b) The Group’s mining rights and principal exploration rights are as follows:
Mining rights:
Lingjin One Mine Lingbao, Henan December 2021
Lingjin Two Mine Lingbao, Henan December 2014
Hongxin Gold Mine Lingbao, Henan August 2012
Duolanasayi Gold Mine (note (d)) Habahe, Xinjiang July 2018
Tuokuzibayi Gold Mine Habahe, Xinjiang August 2017
Kaqia Gold Mine Wushi, Xinjiang September 2009
Shangrao County Jintian Industrial Shangrao, Jiangxi November 2010
Company Limited Gold Mine
Shanzaoling Gold Mine Shangrao, Jiangxi June 2011
Chifeng Jinchan Mining Company Chifeng, Inner Mongolia January 2010
Limited Gold Mine
桐柏興源有限公司上上河金礦 Nanyang, Henan October 2012
桐柏興源礦業有限公司 Nanyang, Henan April 2011
Istanbul Gold Mine (note (c)) Kyrgyz Republic February 2017
Exploration rights:
Harqin Banner Shijiaxiang Shuiquangou Chifeng, Inner Mongolia April 2010
Gold Mine
林西縣小北溝銀多金屬礦 Chifeng, Inner Mongolia May 2010
甘肅省天水市麥積區橋礦金礦 Tianshui, Gansu May 2010
喀喇沁旗十家鄉城南山金礦 Chifeng, Inner Mongolia May 2010
喀喇沁旗龍山鄉達子營金礦點 Chifeng, Inner Mongolia May 2010
甘露池金礦普查 Tianshui, Gansu April 2010
Notes:
(i) The Group was in the process of applying for extension of the certificates of certain of its mining or
exploration rights. The relevant rights and exploration and evaluation assets have an aggregate carrying
value of approximately RMB53,948,000 as at 31 December 2008. The directors are of the opinion that
the Group is entitled to lawfully and validly occupy or use the above mentioned intangible assets.
(ii) The amortisation charge for the year ended 31 December 2008 is included in “cost of sales” and “other
operating expenses” in the consolidated income statement of the Group.
At the date of acquisition, the mining right is recognised on the consolidated balance sheet at its fair value of
RMB164,687,000. As at 31 December 2008, payable of this mining right amounting to RMB158,741,000 of which
RMB74,101,000 and RMB84,640,000 is recognised as current liabilities and non-current liabilities respectively.
As at 31 December 2008, other payable of respective mining right for RMB21,290,000 is recognised of which
RMB4,300,000 and RMB16,990,000 is recognised as current liabilities and non-current liabilities respectively.
(e) During the year ended 31 December 2008, the carrying amount of certain exploration and evaluation assets was
written down by RMB2,781,000 (2007: RMB Nil) as the related exploration projects have been suspended.
18 Goodwill
The Group
2008 2007
RMB’000 RMB’000
Cost:
At 1 January 38,882 4,824
Additions (note 36) – 34,058
18 Goodwill (continued)
2008 2007
RMB’000 RMB’000
The recoverable amount of the CGU is determined based on value-in-use calculations. These
calculations use cash flow projections based on financial budgets approved by management
covering a five-year period. Cash flows beyond the five-year period are extrapolated using the
estimated rates stated below. The growth rate does not exceed the long-term average growth
rate for the business in which the CGU operates.
2008 2007
% %
Gross margin 30 30
Growth rate 3 5
Discount rate 8 13
Management determined the budgeted gross margin based on past performance and their
expectation for market development. The weighted average growth rates used are consistent with
the forecasts included in industry reports. The discount rate used is pre-tax and reflect specific
risks relating to the mining segment.
19 Lease prepayments
The Group The Company
2008 2007 2008 2007
RMB’000 RMB’000 RMB’000 RMB’000
The Group’s and the Company’s leasehold land are located in the PRC. The Group and the
Company was formally granted by the relevant PRC authorities certain rights to use the land on
which the Group’s and the Company’s factories and infrastructures are erected for a period of
50 years.
20 Investment in subsidiaries
The Company
2008 2007
RMB’000 RMB’000
The amounts due from/to subsidiaries are unsecured, interest free and have no fixed terms of
repayment.
Issued
Percentage of and fully
Place of equity attributable paid-up/
Type of incorporation to the Company registered
Name of company legal entity and operation Direct Indirect capital Principal activities
% % ’000
Xinjiang Baoxin Mining Limited liability The PRC 80 20 RMB10,000 Sales of mineral products
Company Limited company
(“Xinjiang Baoxin”)
Lingbao Hongxin Mining Limited liability The PRC 80 – RMB3,000 Exploration and processing
Limited Liability Company company of gold; sales of mineral
products
Akesu District Xindi Mining Limited liability The PRC – 100 RMB10,000 Mining and exploration of
Company Limited company mineral reserves
(“Akesu Xindi”)
Jiangxi Mingxin Mining Limited liability The PRC 80 – RMB5,000 Production and sales of
Company Limited company precious metal products
Habahe Huatai Gold Limited Limited liability The PRC 83.3 16.7 RMB9,800 Mining, processing
Liability Company company and smelting of gold,
(“Habahe Huatai”) production of gold
products, sales of
gold bullion products,
machinery, equipment
and components for gold
processing
Tongbai Xingyuan Mining Limited liability The PRC 100 – RMB17,000 Geological exploration of
Company Limited company mineral reserves
(“Tongbai Xingyuan”)
Shangrao County Jintian Limited liability The PRC 100 – RMB38,000 Mining and exploration
Industrial Company Limited company of mineral reserves,
processing and smelting
of gold, further
processing and sales
of gold products
Chi Feng City Zheng Ji Limited liability The PRC 80 – RMB5,000 Processing of metallurgy
Mining Limited Company company products, sales of
mineral products
Lingbao Gold International Limited liability Hong Kong 100 – HKD50,000 Investment holding
Company Limited company
Wuyuan County Jincheng Limited liability The PRC 100 – RMB500 Sales of mineral products
Mining Company Limited company
Chifeng Jinchan Mining Limited liability The PRC 100 – RMB20,000 Mining and exploration
Company Limited company of mineral reserves
(“Chifeng Jinchan”)
Chifeng Lingjin Mining Limited liability The PRC 80 – RMB40,000 Mining and exploration
Company Limited company of mineral reserves
Lingbao Yixin Mining Limited liability The PRC 80 – RMB3,670 Mining and exploration
Limited Liability Company company (note i) of mineral reserves
(“Lingbao Yixin”)
Full Gold Mining Limited Limited liability Kyrgyz 82 – SOM33,300 Mining and exploration
Liability Company company Republic of mineral reserves
(“Full Gold”)
Tianshui Hongwu Mining Limited liability The PRC 74 – RMB1,000 Mining and exploration
Development company (note ii) of mineral reserves
Company Limited
(“Tianshui Hongwu”)
Lanzhou Lingjin Mining Limited liability The PRC 100 – RMB1,000 Mining and exploration
Limited Liability Company company of mineral reserves
(“Lanzhou Lingjin”)
Beijing Fushengda Limited liability The PRC 100 – RMB10,000 Investment holding
Investment company
Company Limited
(“Beijing Fushengda”)
Lingbao Wason Copper-Foil Limited liability The PRC 100 – RMB27,900 Processing of copper
Company Limited company products
(“Lingbao Wason”)
Ha Mi Jiachang Mining Limited liability The PRC 100 – RMB27,900 Mining and exploration
Investment and company of mineral reserves
Development
Company Limited
Notes:
(i) Lingbao Yixin was acquired by the Group in June 2007. Pursuant to the sale and purchase agreement, the Group
is entitled to an amount of initial profit which is equivalent to the Group’s investment cost in Lingbao Yixin. Profit
generated thereafter is shared between the Group and the minority shareholder on a 55%: 45% basis.
(ii) Tianshui Hongwu was acquired by the Group in November 2007. Pursuant to the sale and purchase agreement,
the Group is entitled to an amount of initial profit which is equivalent to the Group’s investment cost in Tianshui
Hongwu. Profit generated thereafter is shared between the Group and the minority shareholder on a 60%: 40%
basis.
As at 1 January 2007, the Group held 80% equity interest in Tongbai Xingyuan. On 20 September
2007, the Group acquired the remaining 20% equity interest from Mr. Zhou Yudao and Mr. Xu
Zhongjian for a consideration of RMB4,000,000. After the acquisition, Tongbai Xingyuan become
a wholly-owned subsidiary of the Group.
The excess of the purchase consideration over the carrying value of minority interests acquired
in the above transaction of RMB858,000 are charged to other reserve in consolidated equity
(see note 1(c)).
21 Other investments
The Group
and the Company
2008 2007
RMB’000 RMB’000
Non-current investment
Unlisted available-for-sale equity securities, at cost 10,504 10,504
Current investments
Unlisted available-for-sale equity securities, at fair value – 40,000
Non-current unlisted available-for-sale equity securities represent the Group’s 5% equity interest
in a PRC domiciled enterprise which is mainly engaged in geological exploration, mining,
processing, sales of gold, as well as research, development, production and sale of artificial
industrial diamonds. There is no quoted market price for such equity securities and a reasonable
estimate of the fair value could not be made without incurring excessive costs.
On 24 December 2007, the Group entered into a principal-protected fund management contract
with financial institution in the PRC whereby principal amount of RMB40,000,000 was placed
with the financial institution for investment management at 31 December 2007. A gain of
RMB667,000 was resulted upon the expiry of the contract on 19 April 2008.
22 Investment deposit
Investment deposit represents RMB80,000,000 deposit paid to an independent third party,
Beijing Jiuyi Investment Company Limited (“Beijing Jiuyi”) for exclusive rights to certain mining
assets in the PRC. On 21 May 2007, the Group has entered into a co-operation agreement (the
“Co-operation Agreement”) with Beijing Jiuyi to acquire 56.25% interest of a company with
mining assets situated in Gansu Province, the PRC. Following the expiry of the Co-operation
Agreement, the Group has entered into a supplementary agreement on 6 March 2009 to extend
the expiry date to 30 June 2009. The amount is unsecured, interest-free and repayable when
the relevant exclusive rights expire. The directors of the Company consider that appropriate
procedures have been taken by the Group to assess the viability of the potential mine and expect
that the deposit would be recovered through the conversion to relevant equity interest in the
mining company.
Provision
Depreciation for doubtful
in excess of Pre- debt, salary
related Amortisation operating and other Tax
depreciation of other expenses employee losses Financial
allowance intangibles written off benefits (note) Inventories instruments Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Deferred tax
arising from:
At 1 January 2007 (1,292) 661 166 6,312 5,650 – – 11,497
Credited/(charged)
to profit or loss 4,535 5,668 (166) 2,979 (3,328) 5,871 5,646 21,205
Acquisition through
business combination
(note 36) (3,882) (25,681) – – – (4,119) – (33,682)
Purchase of net assets
(note 35) – – – – 376 – – 376
Note:
Tax losses will expire within 3 years for tax losses of Full Gold and 5 years for companies incorporated
in the PRC.
24 Inventories
Carrying amount of
inventories sold 3,141,680 2,391,647
Write down of inventories 36,112 –
3,177,792 2,391,647
All of the trade and other receivables, deposits and prepayments are expected to be recovered
within one year.
The Group requests customers to pay cash or settle by bills in full prior to delivery of
goods. Subject to negotiation, credit term of a maximum of 180 days is only available for
certain major customers with well-established trading records.
Receivables that were neither past due nor impaired relate to a wide range of customers
for whom there was no recent history of default.
Receivables that were past due but not impaired relate to a number of independent
customers that have a good track record with the Group. Based on past experience,
management believes that no impairment allowance is necessary in respect of these
balances as there has not been a significant change in credit quality and the balances
are still considered fully recoverable. The Group does not hold any collateral over these
balances.
Movement in the allowance for doubtful receivables during the year are as follows:
At 31 December 2008, the Group’s and the Company’s trade and bills receivable
of RMB4,644,000 (2007: RMB2,105,000) and RMB2,105,000 (2007: RMB2,105,000)
respectively were individually determined to be impaired.
The Group
2008
RMB’000
The net unrealised loss on the Group’s commodity derivative contracts remeasured at fair
value as at 31 December 2008 recognised in profit or loss for the year then ended are
as followings:
2008
RMB’000
26 Non-current prepayments
The Group The Company
2008 2007 2008 2007
RMB’000 RMB’000 RMB’000 RMB’000
# The Company’s H shares were successfully listed on the Main Board of the Stock Exchange on 12 January 2006.
The Group raised RMB865,379,000 (net of related expenses) from the offer. The proceeds from the offer is
placed in designated bank saving and deposits accounts. The deposits can only be used for the specified purposes
stipulated in the Prospectus dated 30 December 2005. As at 31 December 2008, the amount of cash and bank
deposits placed in the designated accounts amounted to RMB10,067,000 (2007: RMB94,959,000). The balance
will only be released after the approval from State Administration of Foreign Exchange was obtained.
28 Interest-bearing borrowings
Current portion:
Bank loans (note 29) 1,280,000 599,861 1,280,000 599,861
Unsecured debenture
(note 28(b)(i)) – 580,000 – 580,000
Non-current portion:
Bank loans (note 29) 455,160 120,000 150,000 120,000
Other loan (note 28(b)(ii)) 3,270 3,270 3,270 3,270
29 Bank loans
At 31 December 2008, the bank loans were repayable as follows:
Bank loans
– secured 205,160 174,861 – 174,861
– unsecured 1,530,000 545,000 1,430,000 545,000
At 31 December 2008, a bank loan of the Group of RMB205,160,000 was secured by the mining
right of Istanbal Gold Mine with carrying amount of RMB145,328,000 and the ordinary shares
of Full Gold.
In September 2007, the Group obtained commodity-linked interest-bearing bank loans from
a bank, the repayment of which is determined with reference to the gold price quoted by the
Shanghai Gold Exchange on the date of repayment. The bank loans are stated at fair value and
changes in the fair value are recognised immediately in profit or loss. At 31 December 2007,
the bank loans with an aggregate amount of RMB174,861,000 were secured by pledges over
the Group’s and the Company’s bank deposits totalled RMB181,982,000. The bank loans were
fully repaid during the year ended 31 December 2008.
111,730 – – –
(a) Included in trade and other payables are trade creditors with the following
ageing analysis as of the balance sheet date:
The Group The Company
2008 2007 2008 2007
RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2007 154,050 827,931 74,945 32,334 – – 426,953 1,516,213 27,658 1,543,871
Profit for the year – – – – – – 222,270 222,270 1,059 223,329
Dividend approved in
respect of the
previous year 12(b) – – – – – – (61,620) (61,620) – (61,620)
Exchange difference on
translation of financial
statements of overseas
subsidiaries – – – – (3,959) – – (3,959) – (3,959)
Acquisition of minority
interests – – – – – (858) – (858) (10,013) (10,871)
Restatement of profit
appropriations for
prior years (vii) – – (335) – – – 335 – – –
Capital contributions from
minority shareholder (vi) – – – – – – – – 8,000 8,000
Capital returned to
minority shareholders – – – – – – – – (367) (367)
Transfer to reserves (ii) – – 23,326 – – – (23,326) – – –
At 31 December 2007 154,050 827,931 97,936 32,334 (3,959) (858) 564,612 1,672,046 26,337 1,698,383
At 1 January 2008 154,050 827,931 97,936 32,334 (3,959) (858) 564,612 1,672,046 26,337 1,698,383
Profit for the year – – – – – – 108,166 108,166 (1,405) 106,761
Dividend approved in
respect of the
previous year 12(b) – – – – – – (77,025) (77,025) – (77,025)
Exchange difference on
translation of financial
statements of overseas
subsidiaries – – – – 250 – – 250 – 250
Capital contributions from
minority shareholders (viii) – – – – – – – – 1,154 1,154
Gain on deemed
disposal of subsidiary (viii) – – – – – – – – (392) (392)
Transfer to reserves (ii) – – 8,477 – – – (8,477) – – –
At 31 December 2008 154,050 827,931 106,413 32,334 (3,709) (858) 587,276 1,703,437 25,694 1,729,131
Notes:
(i) The share premium represents the difference between the total amount of the par value of shares issued
and the amount of the net proceeds received upon the global initial public offering. The application of
the share premium account is governed by sections 168 and 169 of the PRC Company Law.
The Company and the subsidiaries incorporated in the PRC are required to transfer 10% of their net
profit, as determined in accordance with the PRC accounting standards and regulations, to the statutory
surplus reserve (the “SSR”) until the reserve balance reaches 50% of the registered capital. Subject to
certain restrictions as set out in the relevant PRC regulations, the SSR may be converted to increase the
share capital of the company, provided that the remaining balance after the capitalisation is not less than
25% of the registered share capital.
Notes: (continued)
(iii) The capital reserve, primarily represents the surpluses arising from the revaluation of certain property,
plant and equipment, and construction in progress as required by the relevant PRC rules and regulations
with respect to the Restructuring of the Company on 31 May 2002.
(iv) The exchange reserve comprises all foreign exchange differences arising from the translation of the
financial statements of overseas operations. The reserve is dealt with in accordance with the accounting
policies set out in note 1(w).
(v) The excess of purchase consideration on acquisition of minority interests over the carrying value of the
share of net assets acquired and are charged to other reserve.
(vi) The contributions represented assets contributed by minority shareholders upon establishment of a
subsidiary in 2007.
(vii) The Group adopted the Accounting Standards for Business Enterprise (2006) (“new PRC Accounting
Standards”) and other regulations promulgated by the Ministry of Finance on 15 February 2006 effective
from 1 January 2007. Appropriations to statutory surplus reserves for prior years were restated due to
the change in net profit arising from the prior year adjustments following the adoption of the new PRC
Accounting Standards.
(viii) As disclosed in note 17(c), the Company has signed a Co-operation Agreement with third parties in order
to acquire the mining right of Istanbul Gold Mine. Pursuant to the Co-operation Agreement, the Company,
CRB and Xinjiang Lingxi are required to contribute SOM27,306,000 (equivalent to RMB5,259,000),
SOM3,330,000 (equivalent to RMB641,000) and SOM2,664,000 (equivalent to RMB513,000) to Full Gold
as share capital respectively. The Company setup Full Gold, a wholly-owned subsidiary of the Group, with
share capital of SOM166,000 (equivalent to RMB32,000) on 7 June 2007. The remaining share capital of
SOM33,134,000 (equivalent to RMB6,381,000) was injected into Full Gold in March 2008 by the Company,
CRB and Xinjiang Lingxi and the Company’s interest in Full Gold was diluted from 100% to 82%. Such
dilution resulted in a gain on deemed disposal of subsidiary amounting to RMB392,000.
The holders of Domestic shares and H shares are entitled to receive dividends as and when
declared by the Company. All Domestic shares and H shares are ordinary shares and rank
pari passu with the same rights and benefits.
Consistent with industry practice, the Group monitors its capital structure on the basis of
a net debt-to-adjusted capital ratio. For this purpose the Group defines net debt as total
debt (which includes interest-bearing loans and borrowings, trade and other payables plus
unaccrued proposed dividends, less cash and cash equivalents). Adjusted capital comprises
all components of equity less unaccrued proposed dividends.
In order to maintain or adjust the ratio, the Group may adjust the amount of dividends
payable to shareholders, issue new shares, return capital to shareholders, raise new debt
financing or sell assets to reduce debt.
Current liabilities:
– Trade and other payables 30 464,403 346,666 237,576 288,446
– Bank loans 28 1,280,000 599,861 1,280,000 599,861
– Loan from ultimate
holding company 31 23,800 – – –
– Unsecured debenture 28 – 580,000 – 580,000
Non-current liabilities:
– Other payables 30 111,730 – – –
– Interest-bearing borrowings 28 458,430 123,270 153,270 123,270
There were no changes in the Group’s approach to capital management during the
year.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital
requirements.
(b) At 31 December 2008, the total future minimum lease payments under
non-cancellable operating leases are payable as follows:
The Group
2008 2007
RMB’000 RMB’000
2,205 1,833
The Group is the leasee in respect of a number of properties under operating leases. The
leases typically run for an initial period of one to ten years, with an option to renew the
lease when all terms are renegotiated. None of the leases includes contingent rentals.
(d) The Company has given guarantee to bank to secure facilities of RMB100,000,000 (2007:
RMB Nil) granted to a subsidiary and has been fully utilised at 31 December 2008.
34 Financial instruments
Exposure to gold price, other commodity price, interest rate, credit, liquidity and currency risks
arises in the normal course of the Group’s business. The Group is also exposed to equity price
risk arising from its equity investments in other entities or financial products. These risks are
limited by the Group’s financial management policies and practices described below.
Bank loans 6.29 480,000 5.40 389,861 6.29 480,000 5.40 389,861
Unsecured debenture – – 5.44 580,000 – – 5.44 580,000
Less: Deposits with bank – – 3.00 (46,704) – – – –
Bank loans 5.87 1,255,160 6.05 330,000 5.86 950,000 6.05 330,000
Other loan 4.23 3,270 4.17 3,270 4.23 3,270 4.17 3,270
Less: Cash restricted for use – – 0.72 (181,982) – – 0.72 (181,982)
Less: Cash and cash equivalents 0.53 (575,478) 0.89 (342,947) 0.35 (260,508) 0.91 (322,781)
Less: Interest-bearing
accounts receivables – – 7.47 (35,639) – – 7.47 (35,639)
The sensitivity analysis above indicates the instantaneous change in the Group’s
profit after tax (and retained profits) and other components of consolidated equity
that would arise assuming that the change in interest rates had occurred at the
balance sheet date and had been applied to re-measure those financial instruments
held by the Group which expose the Group to fair value interest rate risk arising
from floating rate non-derivative instruments held by the Group at the balance sheet
date, the impact on the Group’s profit after tax (and retained profits) and other
components of consolidated equity is estimated as an annualised impact on interest
expense or income of such a change in interest rates. The analysis is performed on
the same basis for 2007.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of
each customer. The default risk of the industry and country in which customers operate
also has an influence on credit risk but to a lesser extent.
The Group’s and the Company’s major customers are Shanghai Gold Exchange and other
metallurgical companies in the PRC, which accounted for significant amounts of the
Group’s and the Company’s total operating revenues during the year. The Group and the
Company have no significant credit risk with any of these customers since the Group and
the Company maintain long-term and stable business relationships with these customers.
Normally, the Group does not obtain collateral from customers.
At the balance sheet date, the Group has a certain concentration of credit risk on trade
receivables as 35% (2007: 60%) and 76% (2007: 99%) of the total trade receivables was
due from the Group’s largest customer and the five largest customers respectively.
At 31 December 2008, the Group was also exposed to credit risk in respect of other
receivables of RMB108,700,000 (2007: RMB418,700,000) due from Beijing Jiuyi (see note
25(f)). This exposure to credit risk is monitored continuously by the management.
The maximum exposure to credit risk without taking account of any collateral held is
represented by the carrying amount of each financial asset in the balance sheet after
deducting any impairment allowance. The Group does not provide any other guarantees
which would expose the Group or the Company to credit risk.
Further quantitative disclosures in respect of the Group’s exposure to credit risk arising
from trade and other receivables are set out in note 25.
A number of products, including derivatives, are used to manage the gold and copper price
risks that arise out of the Group’s core business activities. Commodity derivative contracts
are entered into with independent futures trading agents and commodity-linked financial
instruments are used by the Group to manage these risks. Details of commodity derivative
contracts entered by the Group are disclosed in note 25(e) to these financial statements.
At 31 December 2008, there is no outstanding gold loan contract (2007: 900kg).
With the authorisation from the PRC government, the PBOC announced that the PRC
government reformed the exchange rate regime by moving into a managed floating
exchange rate regime based on market supply and demand with reference to a basket of
currencies on 21 July 2005.
Apart from the above, the Group is exposed to currency risk primarily through bank
deposits and other payables that are denominated in a currency other than the functional
currency of the operations to which they relate. The currencies giving rise to this risk are
primarily Hong Kong dollars (“HKD”), United States dollars (“USD”) and Japanese yen
(“JPY”).
The Group
The Company
Exposure to foreign currencies (expressed in Renminbi)
2008 2007
HKD USD HKD USD
RMB’000 RMB’000 RMB’000 RMB’000
The Group
2008 2007
Increase/ Effect on Increase/ Effect on
(decrease) profit after (decrease) profit after
in foreign tax and in foreign tax and
exchange retained exchange retained
rates profits rates profits
% RMB’000 % RMB’000
JPY 5 764 – –
The sensitivity analysis assumes that the change in foreign exchange rates had
been applied to re-measure those financial instruments held by the Group which
expose the Group to foreign currency risk at the balance sheet date, including
inter-company payables and receivables within the Group which are denominated in
a currency other than the functional currencies of the lender or the borrower. The
analysis excludes differences that would result from the translation of the financial
statements of foreign operations in the Group’s presentation currency. The analysis
is performed on the same basis for 2007.
The Group closely monitors cash flow requirements and optimising its cash return. The
Group prepares cash flow forecasts and ensures it has sufficient cash for the servicing of
operation, financial, and capital obligations. This excludes the potential impact of extreme
circumstances that cannot be reasonably predicted, such as natural disasters.
The following table details the remaining contractual maturities at the balance sheet date
of the Group’s and the Company’s financial liabilities, which are based on contractual
undiscounted cash flows (including interest payments computed using contractual rates
or, if floating, based on rates current at the balance sheet date) and the earliest date the
Group and the Company can be required to pay:
The Group
2008 2007
Contractual undiscounted cash outflow Contractual undiscounted cash outflow
More than More than Balance More than More than Balance
Within 1 1 year but 2 years but Sheet Within 1 1 year but 2 years but Sheet
year or less than less than More than carrying year or less than less than More than carrying
on demand 2 years 5 years 5 years Total amount on demand 2 years 5 years 5 years Total amount
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
1,836,383 231,293 204,367 261,842 2,533,885 2,332,225 1,597,254 121,325 1,158 2,589 1,722,326 1,678,223
The Company
2008 2007
Contractual undiscounted cash outflow Contractual undiscounted cash outflow
More than More than Balance More than More than Balance
Within 1 1 year but 2 years but Sheet Within 1 1 year but 2 years but Sheet
year or less than less than More than carrying year or less than less than More than carrying
on demand 2 years 5 years 5 years Total amount on demand 2 years 5 years 5 years Total amount
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
1,593,869 151,436 415 4,233 1,749,953 1,698,351 1,534,876 121,325 1,158 2,589 1,659,948 1,615,845
The Group and the Company are exposed to equity price changes arise from available-for-sale
equity securities and other investments held which are unlisted investments. Unquoted
investments are held for long-term strategic purposes. Their performance is assessed at
least annually based on the information available to the Group and the Company, together
with an assessment of their relevance to the Group’s and the Company’s long-term
strategic plans.
The fair value of payable for mining rights are estimated as the present value of future
cash flows, discounted at rates with reference to six-month London Interbank Offered
Rate plus 1.8% margin.
The fair value of non-derivative financial liabilities, which is determined for disclosure
purposes, is calculated based on the present value of future principal and interest cash
flows, discounted at the market rate of interest at the balance sheet date.
The fair value of derivative financial liabilities and assets is marked to market using open
market prices.
All other significant financial assets and liabilities are carried at amounts not materially
different from their respective fair values as at 31 December 2008 and 2007 due to the
nature or short-term maturity of these instruments.
These companies hold primarily exploration rights of unexploited rutile mines and had no
established infrastructure or significant mining equipment at the date of acquisition. The
underlying set of assets acquired was not integrated in forming a business to generate revenues.
As such, the directors are of the opinion that the acquisition of these companies is a purchase
of net assets which does not constitute a business combination for accounting purposes.
The aggregate acquisition consideration was RMB26,724,000 satisfied in cash. The aggregate
amount recognised at the acquisition date of their assets and liabilities are RMB62,117,000
and RMB35,393,000 respectively. The acquired companies did not generate any revenue since
acquisition and have recorded an accumulated loss of RMB1,560,000 since the date of acquisition
to 31 December 2007. If the acquisition had occurred on 1 January 2007, the acquired companies
would have recorded an accumulated loss of RMB2,237,000 for 2007.
The directors considered that the total purchase consideration paid represented the fair value
of net assets acquired and the fair value of exploration rights, which is presented as intangible
assets below, is considered as the excess of fair value of net assets acquired over the fair value
of net tangible assets acquired.
Carrying Carrying
values prior Fair value values upon
to purchase adjustments purchase
RMB’000
RMB’000
RMB’000
Satisfied by:
Cash 10,724
Other payables 16,000
26,724
36 Business combination
For the year ended 31 December 2008
On 24 March 2008, the Group has acquired the entire equity interest in Lingbao Wason from a
third party at a consideration of RMB27,900,000 satisfied in cash. The aggregate amount of its
assets and liabilities recognised at the acquisition date are RMB243,487,000 and RMB203,150,000
respectively.
Pre-acquisition Recognised
carrying Fair value values on
amount adjustments acquisition
RMB’000 RMB’000 RMB’000
Satisfied by:
Cash 27,900
The excess of fair value of net assets acquired over purchase consideration is recognised as
negative goodwill in the consolidated income statement. Such negative goodwill was primarily
resulted from low purchase consideration which is the highest bidding price in the public auction
on 19 March 2008.
Pre-acquisition Recognised
carrying Fair value values on
amount adjustments acquisition
RMB’000 RMB’000 RMB’000
Satisfied by:
Cash 146,000
37 Segment information
Segment information is presented in respect of the Group’s business segments. Business segment
information is chosen as the primary format because this is more relevant to the Group’s internal
financial reporting.
Business segments
The Group comprises the following main business segments:
Mining – Gold mining and mineral ores processing operations of the Group.
Smelting – Gold and other metal smelting and refinery operations of the Group.
Turnover and contributions to the Group’s profit from principal activities during the year, after
elimination of all material inter-company transactions, are as follows:
Inter-segment
Mining Smelting Processing elimination Unallocated Consolidated
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Impairment
– trade and other receivables – – 2,539
– Purchase deposits – 4,726 –
– intangible assets 2,781 – –
Inter-segment
Mining Smelting elimination Unallocated Consolidated
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Impairment
– trade and other receivables – 624
– purchase deposits – 8,367
As at 31 December 2008
Other segmental
information
Capital expenditure
incurred during the year 539,924 68,116 147,294 – 4,927 760,261
Depreciation and
amortisation for the year 137,956 33,744 8,258 – 2,563 182,521
As at 31 December 2007
Other segmental
information
Capital expenditure
incurred during the year 617,378 155,827 – 4,599 777,804
Depreciation and
amortisation for the year 136,997 24,247 – 2,165 163,409
Geographical segments
The Group’s turnover and operating profit are almost entirely derived from the gold mining
and smelting business in the PRC. Accordingly, no analysis by geographical segment has been
presented.
Engineering estimates of the Group’s gold reserves are inherently imprecise and represent
only approximate amounts because of the subjective judgements involved in developing
such information. There is Chinese system, which is the national standard set by the PRC
Government, regarding the engineering criteria that have to be met before estimated gold
reserves can be designated as “proved and probable”. Proved and probable gold reserve
estimates are updated at regular basis and have taken into account recent production
and technical information about each mine. In addition, as prices and cost levels change
from year to year, the estimate of proved and probable gold reserves also changes. This
change is considered a change in estimate for accounting purposes and is reflected on a
prospective basis in related depreciation rates.
Despite the inherent imprecision in these engineering estimates, these estimates are used in
determining depreciation expenses and impairment loss. Depreciation rates are determined
based on estimated proved and probable gold reserve quantity (the denominator) and
capitalised costs of mining shafts, mining rights and mining development assets (the
numerator). The capitalised cost of mining shafts, mining rights and mining development
assets are amortised based on the units of mineral ore extracted.
(ii) Impairments
In considering the impairment losses that may be required for certain of the Group’s assets
which include property, plant and equipment, construction in progress, pre-paid interest in
leasehold land, intangible assets, goodwill and investments in its subsidiaries, recoverable
amount of the assets, need to be determined. The recoverable amount is the greater of
the net selling price and the value in use. It is difficult to precisely estimate selling price
because quoted market prices for these assets may not be readily available. In determining
the value in use, expected cash flows generated by the assets are discounted to their
present value, which requires significant judgement relating to items such as level of sale
volume, selling price and amount of operating costs. The Group uses all readily available
information in determining an amount that is reasonable approximation of recoverable
amount, including estimates based on reasonable and supportable assumptions and
projections of items such as sale volume, selling price and amount of operating costs.
In considering the impairment losses that may be required for current receivables, future
cashflows need to be determined. One of the key assumptions that has to be applied is
about the ability of the debtors to settle the receivables. Despite that the Group has used
all available information to make this estimation, inherent uncertainty exists and actual
write-offs may be higher than the amount estimated.
(iv) Depreciation
Other than the mining shafts, mining rights and mining development assets, property,
plant and equipment and intangible assets are depreciated on a straight-line basis over
the estimated useful lives of the assets, after taking into account the estimated residual
value. The Group reviews annually the useful life of an asset and its residual value, if any.
The useful lives are based on the Group’s historical experience with similar assets and
taking into account anticipated technological changes. The depreciation expense for future
periods is adjusted if there are significant changes from previous estimation.
The Group is in the process of making an assessment of what the impact of these amendments,
new standards and new interpretations is expected to be in the period of initial application. So far
it has concluded that the adoption of them is unlikely to result in a restatement of the Group’s
results of operations and financial position.
In addition, the following developments are expected to result in amended disclosures in the
financial statements, including restatement of comparative amounts in the first period of
adoption:
Effective for
accounting periods
beginning on or after
Total equity
attributable to
equity shareholders
of the Company 1,703,437 1,672,046 1,516,213 492,618 337,715
Minority interests 25,694 26,337 27,658 9,502 1,935
Operating results
Turnover 3,599,089 2,844,560 2,234,975 1,555,704 1,223,429
Profit from operations 237,506 440,611 368,554 247,887 194,352
Deficit on revaluation of
property, plant and
equipment written back – – – 1,991 –
Finance costs (115,262) (101,613) (31,213) (23,085) (15,503)
Attributable to:
Equity shareholders
of the Company 108,166 222,270 219,836 154,584 120,060
Minority interests (1,405) 1,059 996 192 (665)