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China Nonferrous Gold Annual Report and Accounts

28/06/2018 9:45am

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28 June 2018


Annual Report and Accounts


China Nonferrous Gold Limited ?????????? (AIM: CNG), the mineral exploration and development company currently developing the Pakrut gold project in the Republic of Tajikistan, today announces its final results for the year ended 31 December 2017.


The results below are extracted from the Company's audited Annual Report and Financial Statements. Copies of the Annual Report will be posted to shareholders today and are available on the Company's website ( and from the Company's office at Unit 2.24, The Plaza, 535 Kings Road, London SW10 0SZ.


For further information please visit the Company's website ( or contact:


China Nonferrous Gold Limited


Yu Lixian, Managing Director


Tel: +86 10 8442 6681




Investec Bank Plc


Jeremy Ellis, Alexander Ruffman Tel: +44 (0)20 7597 5970






Tim Blythe, Camilla Horsfall


Tel: +44 (0)20 7138 3224


Project Summary


The Pakrut gold project, of which CNG has 100 per cent ownership, is situated in Tajikistan approximately 120km northeast of the capital city Dushanbe. Pakrut is located within the Tien Shan gold belt, which extends from Uzbekistan into Tajikistan, Kyrgyzstan and Western China, and which hosts a number of multi-million ounce gold deposits.


About Tajikistan


Tajikistan is a secular republic located in Central Asia. The country is a member of the Commonwealth of Independent States and the Shanghai Cooperation Organisation. Tajikistan hosts numerous operating precious metal mines as well as the largest aluminium smelter in Central Asia. CNG's management team has extensive experience in the mining industry in Tajikistan.


Chairman's Statement


As the chairman of the board, it gives me great pleasure to present the chairman's statement of the annual report for the year ended 31 December 2017.This was a difficult year for the group during which Pakrut Gold Mine experienced high-levels of snowfall that had not been seen for over 50 years, which resulted in the interruption of the construction and production, brought substantial economic loss to the group and impacted the audit of the financial statements for the year ended 31 December 2016 on which the auditors issued a disclaimer of opinion.


However, we are also grateful that both our management and staff have worked tirelessly to repair the facilities damaged by the snow disaster and resolve the prior year audit issues. Continuous efforts have been made by the company to finalize mine development and the overall construction of all projects is expected to be completed during the fourth quarter of 2018, and production recommenced in April 2018. The finance staff have been equally as focused resolving the prior year issues which have led to a prior year adjustment as the 2016 figures are restated as the relevant information and work has been able to be performed following access to the appropriate records.




In February 2017, the Pakrut Gold Mine experienced high levels of snowfall that had not been seen for over 50 years with the electric pylons destroyed and extensive damage to plant and equipment. Due to the power supply to the mine site failing and the inability to access the mine, drainage work could not be commenced which resulted in the mine tunnels being flooded. The disaster brought material economic losses to the Pakrut Gold Mine and at the same time caused the project construction and production to fall significantly behind schedule.


However management made a number of important operational decisions to ensure development and construction could continue. After the snowstorm, the company launched an emergency plan, organizing manpower and equipment to manage the disaster. In March, the roads were repaired to allow for traffic to return and site access to be restored. In May, temporary power supply was resumed. In September, underground drainage and dredging were completed. Damaged buildings and equipment were all repaired in October and normal power supply was restored at the end of December. With the joint efforts of the management team and all the staff, the facilities damaged by the snow disaster have now been fully repaired laying a good foundation for restoring production and completing all infrastructure construction works in 2018.


The insurance company has confirmed that the damage caused by the avalanches and landslides at the Pakrut Gold Mine falls within the scope of the insurance. The company also accordingly has provided and submitted the documents regarding the various losses and repairs to the insurance provider as requested, and the insurance provider has performed an initial review thereon. At present, the claims with the Company's insurance provider have entered into the final negotiation stage of the compensation settlement. The amount (24,000,000CNY or $3,639,452USD) is expected to cover most of the direct losses incurred from that snow disaster.




Although the majority of the Pakrut Gold Mine projects have been completed and trial production was achieved in 2016, the company has adjusted its mining methods, filling systems, ventilation systems and tailings pond in order to maximize efficiency and reach the scheduled design production target. Developments including the construction of the flotation tailings pond, backfill stations, mine camps and underground ventilation systems remain to be completed, but all infrastructure projects are expected to be finalized in the fourth quarter of 2018.


Following the snowfall, the construction work was restarted in the second half of 2017. The construction of the road to the flotation tailings pond has been fully completed. The basic excavation and foundation treatment of the mine camp has been completed with a third of the foundation construction now finalized, and the steel structure and other materials have arrived at the site. The basic excavation and foundation construction of the backfill station have all been finished and all filling equipment has already arrived at the site; a total of 21,270 cubic meters of excavation work has been completed in the level of 2350m/2230m/2110m.


The group overcame the severe weather and the whole engineering construction was achieved ahead of what the company had planned by the end of 2017. The construction of underground projects such as the ventilation system has been underway throughout the whole winter. In April 2018, surface construction projects have also been started and the overall construction of all projects is expected to be completed during the fourth quarter of 2018.


Project Operation


The Pakrut Gold Mine produced the first gold ingot in January 2016 and processed 230,000 tons of ore and produced 162 kilograms of gold, which marked the point at which the Pakrut gold mine had officially entered the trial production stage. However, the snowfall in early 2017 disrupted the whole process and with power interrupted, tunnels flooded, and plant and equipment damaged, production was halted. The company made full use of this period to solve the problems found in trial production of the processing plant and smelting plant by improving the process and replacing the maintenance equipment. By the end of 2017, the company had increased the operating efficiency and recovery rate, and reduced the equipment failure rate and the cost of the processing plant and smelting plant.


In April 2018, mining has already been started with 50,000 tons of ore produced and stored. The processing plant has resumed production and the smelting plant is also operating well.


Financial Results


As progress on the Pakrut project accelerated, expenditure continued to be incurred by the Group on development and construction work during the year and stood at US$340,519,685 (2016: US$72,768,000). Administration expenditure was US$4,836,052 (2016: US$5,100,000).. The overall loss incurred by the Group was US$14,888,553 (2016: US$6,310,000).


During the course of the year the Group signed financing agreements with CNMC International Capitals Company Limited, an associate of China Nonferrous Metals International Mining Co., Ltd for a loan facility of USD$26.5 million ("CNMC Loan") and with China Construction Bank Corporation Macau Branch for a loan facility of up to USD$20 million ("CCBC Loan"). In addition, the 2012 China Nonferrous Metals Int'l Mining Co., Ltd. facility signed in May 2012, was extended post period end. The total balance outstanding under the loans noted above amounted to US$261.5 million at the end of the period.


The Directors have received a letter of support from a substantial shareholder, China Nonferrous Metal Mining Group (CNMC) Co., Ltd, to provide the funding and support required to bring the mine into production. This in turn enables the group to make loan repayments and raise new loans.


Post Balance Sheet Events


As detailed in the announcement released on 5 March 2018, CNG signed a total loan facility of US$90 million from CNMC International Capitals Company Limited ("CNMC International"), and a US$ 5 million repayment to China Construction Bank Corporation Macau Branch has already taken place.


The Company's gross debt outstanding as at the date of this announcement, before the repayments noted above, totals approximately US$388.2 million of which $190 million is repayable during 2018.


The Company expects to recommence production at the end of July 2018, which is expected to assist with raising further working capital. As previously announced, the repayment of the existing facilities will require a wider refinancing. Discussions are ongoing and are expected to be concluded in advance of 31 December 2018 deadline.


Board Directors and Management


During 2017, the Group changed its board of directors and the management team of the Pakrut gold mine project. The new management team has extensive and abundant experience in mining management and operations, which brings the very knowledge that the company is in great need of in the future. At the same time, the company has improved its board of directors as well by appointing two experienced independent non-executive directors. The company is now actively looking for another non-executive director with extensive experience in mining investment and financing, western education and work experience, and familiar with Eastern corporate culture to enhance still further the corporate governance structure and balanced composition of the management team.

Name            Date of Appointment  Title              Age  Gender  Working Experience 
Wu Xiang        2015/07/02           Non-executive      53   Male    Over 30 years of 
                                     Director,                       experience 
                                     Chairman                        in the nonferrous 
                                                                     industry and 
Yu Lixian       2017/09/01           Executive          51   Male    approximately 
                                     Director,                       30 years of 
                                     Managing Director               experience 
                                                                     in project 
                                                                     roles in 
                                                                     mining industries 
Zhang Hao       2017/09/01           Executive          41   Male    has 20 years of 
                                     Director,                       experience 
                                     Finance Director                in 
                                                                     business development 
                                                                     and financial 
Li Yong         2017/12/19           Non-executive      43   Male    12 years of 
                                     Director                        combined 
                                                                     in numerous 
                                                                     and in private 
                                                                     equity and venture 
                                                                     capital investment 
Shi Xiuzhi      2017/12/19           Non-executive      52   Male    Over 30 years 
                                     Director                        of combined 
                                                                     experience in gold 
                                                                     other nonferrous 
                                                                     metals mining 
                                                                     and relevant 
                                                                     mining engineering 
                                                                     and safety 
Wang Gen        2016/08/26           Chief Executive    61   Male    more than 30 years 
                                     of Operation                    of combined 
                                                                     experience in gold 
                                                                     and nonferrous 
                                                                     mining and 
Li Youyu        2016/04/12           Legal              59   Male    approximately 
                                     Representative                  30 years 
                                     of LLC Pakrut                   of combined 
                                                                     experience in 
                                                                     gold and 
                                                                     other  nonferrous 
                                                                     metals mining 
                                                                     and relevant 
Zhang Gang      2016/05/20           General Manager    54   Male    approximately 
                                     of LLC Pakrut                   30 years 
                                                                     of combined 
                                                                     experience in 
                                                                     gold and 
                                                                     other  nonferrous 
                                                                     metals mining 
                                                                     and relevant 
Dong Zezhen     2017/09/13           Deputy GM of       55   Male    approximately 
                                     LLC Pakrut                      30 years 
                                                                     of combined 
                                                                     experience in gold 
                                                                     and nonferrous 
                                                                     mining and 
Long Liangfei   2017/09/13           Deputy GM of       44   Male    Over 20 years 
                                     LLC Pakrut                      of combined 
                                                                     in numerous 
                                                                     mining engineering 
                                                                     and development 
Wang Hongjie    2017/09/13           Deputy GM of       36   Male    More than 10 years 
                                     LLC Pakrut                      experience 
                                                                     mining engineering 
                                                                     and project 



The Company's new management and board of directors experienced a difficult year in 2017 with the extreme natural disasters. Operations have now almost been restored to normal and mining and the production processes have already commenced. The Company will start a new chapter in the fourth quarter of 2018 when it is expected that the infrastructure works will be complete and that full commercial production will begin.


It is expected that, in 2019, the Pakrut gold mine will achieve a production capacity of 660,000 tons per year and produce 1.3 tons of gold annually. The company is currently continuing to enhance its production capacity and intends to double this capacity by 2021. Whilst improving production, the company is also focusing on perfecting and improving the smelting process by reducing production costs, increasing recovery rates and improving competitiveness.


The company has long been dedicated to becoming a significant gold producer in Central Asia and participating in the "Belt and Road Initiative" with the substantial support and advantages of major shareholders. The company has also established a good relationship with the government of Tajikistan and other Central Asian countries and is well positioned potentially to gain more gold resources and gold mines so as to create greater benefits for our shareholders in the future.


I would like to take this opportunity to thank all our employees, management and advisors for their continued efforts in 2017 and thank our shareholders for their continued support. I very much look forward to updating our shareholders further on the mine developments, production levels, new strategy and direction.


Xiang Wu






28 June 2018


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This information is provided by Business Wire 

(END) Dow Jones Newswires

June 28, 2018 04:45 ET (08:45 GMT)




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