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2015 ANNUAL REPORT 2015 Annual Repor t

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2015 ANNUAL REPORT COMPANY HIGHLIGHTS THE COMPANY Overview China Gold International Resources Corp Ltd. ( China Gold International or The Company ) and its subsidiaries (collectively referred to as the
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2015 ANNUAL REPORT COMPANY HIGHLIGHTS THE COMPANY Overview China Gold International Resources Corp Ltd. ( China Gold International or The Company ) and its subsidiaries (collectively referred to as the Group ) is a gold and base metal mining company based in Vancouver, Canada. The Company s main business involves the operation, acquisition, development and exploration of gold and base metal mineral properties. The Company s principal mining operation are the Chang Shan Hao Gold Mine ( CSH Gold Mine or CSH Mine or CSH ), located in Inner Mongolia, China and the Jiama Copper-Gold Polymetallic Mine ( Jiama Mine or Jiama ), located in Tibet, China. China Gold International holds a 96.5% interest in the CSH Gold Mine, while its Chinese joint venture ( CJV ) partner holds the remaining 3.5% interest. China Gold International began its trial gold production at the CSH Gold Mine in July 2007 and commercial production commenced on July 1, The Company acquired 100% interest in the Jiama Mine on December 1, Jiama hosts a large scale copper-gold polymetallic deposit consisting of copper, gold, molybdenum, silver, lead and zinc. The Jiama Mine commenced commercial production in September The Company has adopted a growth strategy focused on strategic acquisitions sourced from the international project pipeline of its principal shareholder and the largest gold producer in China, China National Gold Group Corporation ( China National Gold ) and developing potential partnerships with other senior and junior mining companies. The Company also contemplates expanding resources and reserves at its existing properties through exploration programs. JIAMA MINE Annual Report MESSAGE FROM THE CHAIRMAN Xin Song Chairman of the Board Executive Director SUCCESSES, CHALLENGES AND OPPORTUNITIES. Dear Shareholders, Employees and Supporters of the Company, In 2015, the Company adhered to the principle of sustaining growth through steady progress, outstanding performance and profit consciousness, proactively responded to the prolonged downward trend of the gold and copper prices, sought to reform via strategic transformation, and concreted our foundation with united spirit, and we are closer to our goal of becoming an eminent mining company not only in China but also in Canada and globally. Under uninspiring market conditions, we carefully and constantly monitor and analyze the investor confidence and the commodity prices. It is not the first time in our careers that we see a downturn in our cyclical industry which was always followed by a boom. It is evident to us that this downturn may be a longer one with more profound effects. Under this condition, we not only strive to overcome the challenges, but also have a clear plan and vision on how we maximize our value. 2 China Gold International Resources Corp. Ltd. MESSAGE FROM THE CHAIRMAN In 2015, we made achievements in production expansion, technical enhancement, operational efficiencies improvement, cost management, and international mergers and acquisitions. Our Company is proud of our mutually beneficial and unique affiliation with China National Gold, the largest gold producer in China and a major shareholder of our company. We are the only international expansion and mining development vehicle for China National Gold, and we have access to their vast financial capabilities and technical expertise to achieve rapid development was another year of record production for both of our mines. Consolidated gold production from both of our mines increased by 26% to 228,508 ounces, copper production grew by 24% to 38,104,950 pounds in Consequently, our revenues amounted to US$ million, representing an increase of 22%. Persistent and dedicated efforts were made by every single one of our departments and employees at all levels of seniority, to promote operation and management, enhance operational efficiencies, comprehensively implement cost-control and management enhancement, so as to further strengthen the cost control capabilities and core competitiveness of the Company. One of the competitive strengths of our Company is its ability to secure low-cost, long-term financing. On November 3, 2015 our Company has entered into a Loan Facility agreement for the aggregate principal amount of RMB3.98 billion, approximately USD627 million. The drawdowns from this Loan Facility bear a floating rate of interest which is around at 2.83% per annum. This rate is significantly lower than typical in our industry. Leveraging on the quality of our assets, we continue to be granted a high corporate rating of BBB- by Standard & Poor s Rating Services ( S&P ). This rating is comparable to those received by top-tier mining companies. We view this industry downturn as a unique opportunity for us to pursue our M&A strategy and identify good quality assets that could be developed using our expertise and low cost financing capabilities. In 2015 we have evaluated numerous potential acquisitions using our own team and with the help from our industry and banking colleagues. Several times we got close to potential transactions but at the end were not convinced that those transactions would create significant immediate or long term value for our shareholders and that is one of our ultimate goals. This cautious approach of M&A strategy worked favorably for us and allowed us to avoid substantial impairment, mine suspensions and layoffs that are so widespread in our industry. We expect that the opportunities will become more abundant in our sector. Annual Report MESSAGE FROM THE CHAIRMAN We are confident that our employment, environmental and human rights practices are some of the best practices in the mining industry as evidenced by approximately 100 awards, honors and recognitions that both of our mines and the Company received since 2008 from various government and non-government organizations in China and Canada. We have Chinese, Canadians, Americans, Russians, Dutch, Ghanese and many more nationalities happily employed in various positions including managerial positions worldwide. Our employees come from various religious and cultural backgrounds, and we respect the belief of every employee. At the moment, about 27% of our employees are ethnic minorities. Of which, 34% of our workers in Jiama Mine are local Tibet, that is about 7 times higher than a comparable ratio in Canada. In Canada, aboriginal people have maintained a relatively stable employment proportion in the mining and gas extraction industry in recent years: 5% between 2007 and 2012, according to the latest Government of Canada s Employment and Social Development statistics. About 21% of our workforce is female which is a high number for a mining company. This is higher than the 16% participation rate of women in the Canadian mining industry, according to the latest statistics published on the Mining Industry Human Resources Council website in Canada. Despite facing pressure of deep cost cuts this year, we continued participating in public welfare and charitable activities around our CSH and Jiama mines and in Canada. I would like to thank all our employees, our directors and management for your contribution to our growth. I am grateful to the communities where we operate and to our shareholders and am looking forward to grow and prosper together. Sincerely, Xin Song Chairman of the Board, Executive Director 4 China Gold International Resources Corp. Ltd. MESSAGE FROM THE CEO Bing Liu Chief Executive Officer, Executive Director GROWTH, EFFICIENCIES AND COST SAVINGS. Dear Shareholders and Friends of the Company, It was my honor again to work with incredible team of dedicated executives and employees and the directors to bring you another year of successful operations. We are currently witnessing the biggest downturns in the mining industry in recent years. When market conditions and the investor s sentiment are against us, it becomes very critical for any company to adjust its strategy to assure profitability. Our management team has done exactly that this year. We devoted efforts in reducing costs and improving efficiencies to boost the operational efficiencies of both of our mines, as well as, studied and implemented new innovative technologies to increase the production of metals. In 2015, both our gold and copper production targets were surpassed. The Company s consolidated gold production from both of its mines increased by 26% from 180,674 ounces in 2014 to 228,508 in 2015 surpassing its previously announced 2015 guidance of 226,000 ounces. Gold production from the CSH increased by 25% from 163,443 ounces in 2014 to 204,471 ounces in Gold production from Jiama increased by 39% from 17,231 ounces in 2014 to 24,037 ounces in Copper production from the Jiama Mine increased by 24% from 30,847,753 pounds in 2014 to 38,104,950 pounds in This is the fifth straight year of increasing production at the Jiama mine. The Company exceeded its previously announced 2015 expected copper production target guidance of 37.5 million pounds. Annual Report MESSAGE FROM THE CEO This continued growth in our production is in line with our objective to deliver profitability to our shareholders and supporters. We have made significant advancements this year in technological innovation and cost control and are aiming to prosper despite challenging market conditions. Subsequently we aim to achieve our 2016 production from Jiama to be 38,600,000 pounds of copper and 16,000 ounces of gold, and the Company s CSH mine is expected to produce 219,000 ounces of gold in Our Company attaches great importance to scientific and technological innovation. There were four scientific and technological achievements at Jiama, awarded by the China Gold Association. Three national scientific and technological projects of the 13th Five-Year Plan have been submitted with international and domestic well-known scientific research institutes, which are being reviewed by the Department of Science and Technology of Tibet Autonomous Region. Supported by CNG, Jiama had submitted the application for the National Technology Innovation Demonstration Enterprise. Currently there are three invention patents under review. Jiama also commenced study on geotechnical engineering, rock mechanics etc., in order to provide technical support for safe and efficient mining. CSH is at the forefront of innovation as well. It commenced studies and experiments on powdered carbon control and recycling of powdered carbon in barren solution, which has effectively solved the problem of adsorption and retention of gold by powdered carbon. As a result it reduced carbon wear and powdered carbon generation during the process, as well as, increasing gold production. Inner Mongolia Pacific also proactively cooperated with Jiangsu University, to commence the study of recycling copper, iron and other impurity ions in barren solution. Currently, the laboratory stage has completed and the industrial tests will be commenced soon. Jiama phase II expansion project has gone through numerous remarkable progresses this year, and has completed the application of mining license for Phase II. The defects that appeared during the loaded test run in Jiama phase II are being rectified; the phase II controlling project of underground inclined shaft of belt is being pushed forward with full effort, and phase II underground project is proceeded as planned. At the same time, CSH has implemented the 2015 exploration plan and has completed the design of heap leaching of 2C. Also, CSH phase II expansion has been reviewed and approved by China National Gold, and is awarded as Project Model by China National Gold. I am pleased to report that we achieved revenues of US$340 million and income from operation of US$39 million in In 2016, given the gold and copper price moving at the low price range, we will continue to uphold the spirit of tackling difficulties, further strengthen the organization and management of production, improve five ratios, reduce five expenses, and capitalize our cost leverage via refined management. Also, we will continue to carry out various works based on the themes of cost and growth, in order to elevate the global development of China Gold to reach a new higher level, as well as, to create value for our shareholders and the society. I am honored to work with our team of experienced and dedicated employees, directors and management to continue to maximize the value for our shareholders and the communities where we operate. Sincerely, Bing Liu Chief Executive Officer, Executive Director 6 China Gold International Resources Corp. Ltd. BOARD OF DIRECTORS AND SENIOR MANAGEMENT BOARD OF DIRECTORS Xin Song CHAIRMAN OF THE BOARD, EXECUTIVE DIRECTOR Mr. Song, 53, was elected as Chairman of the Board on February 24, 2014 having joined the Company on October 9, From October 9, 2009 to February 24, 2014, Mr. Song served as the Chief Executive Officer and an Executive Director and was responsible for the Company s strategic planning and business operations. Mr. Song has served as the President of China National Gold, the Company s principal shareholder and the largest gold producer in China, since December From 2003 to December 2013, Mr. Song served as Vice President of China National Gold, where he was responsible for resources development, geological exploration and international operations. Mr. Song served as Chairman of the Board of Skyland Mining Limited ( Skyland ) from April 2008 to May 2015 and served as the Chairman of the Board of Tibet Jia Ertong Mining Development Co., Ltd. ( Tibet Jia Ertong ) from April 2008 to February 2014, which are shareholders of Tibet Huatailong Mining Development Co., Ltd. ( Tibet Huatailong ) that hold the Company s Jiama Mine. Mr. Song served as the Chairman of the board of Tibet Huatailong from October 2007 to June Mr. Song has served as Chairman of the board of Zhongjin Gold Corporation Limited ( Zhongjin Gold ), a public company listed on the Shanghai Stock Exchange, since February 2014, for which he served as a director from March 2007 to February 2014 and Chairman of the Board from September 2003 to March Mr. Song has served as a Director of China National Gold Group Hong Kong Limited ( China Gold Hong Kong ), since March Mr. Song has served as a director of China Gold Hong Kong Holding Corp. Limited ( China Gold Hong Kong Holding ), since August He has served as a director of Mundoro Mining Inc. ( Mundoro ), a private British Columbia based junior natural resource company, since October Mr. Song holds a Ph.D. doctorate degree in resources economics and management from the University of Science and Technology Beijing, a Master s degree in business administration from the China Europe International Business School, a Master s degree in mining engineering from the University of Science and Technology Beijing and a Bachelor s Degree in mineral processing engineering from the Central South Institute of Mining and Metallurgy. Bing Liu CHIEF EXECUTIVE OFFICER, EXECUTIVE DIRECTOR Mr. Liu, 53, was elected as Chief Executive Officer and an Executive Director on February 24, 2014 and joined the Company on May 12, From May 12, 2008 to February 24, 2014, Mr. Liu served as a non-executive Director, and was responsible for the supervision of finance related matters and the Company s overall strategic planning. Mr. Liu has extensive experience in mine financing, construction and development. Mr. Liu has served as Vice President and Chief Accountant of China National Gold, a director of China Gold Hong Kong, a director of China Gold Hong Kong Holding and Mundoro, since November 1999, March 2008, August 2011 and October 2011 respectively. Mr. Liu has served as the chairman of the board of Skyland since May 2015, and has served as the chairman of the board of Tibet Jia Ertong since February Mr. Liu served as a director of the board of Zhongjin Gold from March 2007 to May 2013, and served as a chairman of the supervisory committee of Zhongjin Gold since May 2013 up to now. Prior to joining China National Gold, Mr. Liu served as Senior Secretary of the China National Economy and Trade Commission from April 1992 to October 1997 and from March 1998 to November 1999, and as Senior Secretary of the China Textile General Association from October 1997 to March He also served as an Accountant of China Automobile Industry Corporation from July 1987 to April Mr. Liu is a senior accountant, senior economist and associate researcher in China. Mr. Liu holds a Master s degree in business administration from the Department of Business Administration, Asia International Open University in Macau, holds a Bachelor s Degree in accounting from Capital University of Economics and Business and is a post-graduate of currency and banking of Graduate School of China Academy of Social Sciences. Annual Report BOARD OF DIRECTORS AND SENIOR MANAGEMENT Lianzhong Sun NON-EXECUTIVE DIRECTOR Mr. Sun, 58 joined the Company on February 24, 2014 as a non-executive Director and is responsible for the supervision of operation related matters and the Company s overall strategic planning. Mr. Sun serves as Vice President of China National Gold, the Company s principal shareholder, where he is mainly responsible for resources development. Mr. Sun served as chairman of the board of Tibet Huatailong, from June 2010 to February 2012, which holds the Company s Jiama Mine. Mr. Sun has served as a director of China Gold Hong Kong since February From March 2005 to January 2009, Mr. Sun served as Vice President of Zhongjin Gold. He has served as chairman of the board of Kichi-chaarat Company, a mining company based in The Kyrgyz Republic, since February 2012, and has served as a director of China Gold Hong Kong Buchuk Mining Company Limited ( Buchuk ) since May 2015, which controls a mining company based in The Kyrgyz Republic. From December 2000 to July 2011, Mr. Sun served as Chairman of the Board of four other mining enterprises which are subsidiaries of China National Gold. Mr. Sun has nearly 40 years of experience in the mining industry. In addition to senior management experience, Mr. Sun also has extensive management experience in on-site operation of mining enterprises. From March 1993 to December 2000, Mr. Sun served as head and general manager of three mining enterprises, through which he had first-hand insight of the operation and management of mine-site production and became an expert in cost-control and management enhancement. Since 2005, Mr. Sun has been responsible for resource development of China National Gold. Mr. Sun graduated from Shenyang Gold Institute and majored in Mining Engineering. Liangyou Jiang SENIOR EXECUTIVE VICE PRESIDENT, EXECUTIVE DIRECTOR Mr. Jiang, 50, was appointed as Senior Executive Vice President of the Company on August 18, 2014 and an Executive Director of the Company on October 23, Mr. Jiang joined the Company in August 2010 as the General Manager of Tibet Huatailong, the Company s wholly-owned subsidiary, and served as the Chairman of Tibet Huatailong from February 2012 to August Mr. Jiang has served as a director of Tibet Jia Ertong since August 2014, has served as a director of Skyland since October 2014, and has served as a director of Buchuk since May Mr. Jiang has served as the director of China Gold Hong Kong Holding and Mundoro since January 2015 and August 2014 respectively. Mr. Jiang worked as Chief Engineer of China National Gold since August From September 2007, Mr. Jiang has served as the Head of Engineering Management Division of the Investment Management Department of China National Gold. In February 2008, he was appointed as a Manager of the Investment Management Department of China National Gold. Prior to joining China National Gold Group s headquarters, Mr. Jiang served as a General Manager of China Kazakhstan Mining Corp. Ltd., a subsidiary of China National Gold Group. From August 1987 to March 2005, Mr. Jiang worked at
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