中国大冶有色金属(00661) - 2019 - 年度财报

Company Information This section outlines the fundamental corporate details, including board composition, key financial and legal advisors, and registration information Company Basic Information This section provides basic information about China Daye Non-Ferrous Metals Mining Limited, including its board members, principal bankers, and auditor - The company's Board of Directors consists of executive directors (Mr. Wang Yan as Chairman and CEO) and independent non-executive directors[8] - Principal bankers include Standard Chartered Bank (Hong Kong) Limited and Bank of Communications Co., Ltd[8] - The company's stock code is 00661, and its auditor is Deloitte Touche Tohmatsu[8] Biographies of Directors and Senior Management This section details the professional backgrounds and extensive industry experience of the executive directors, independent non-executive directors, and senior management Executive Directors This section details the professional backgrounds and extensive industry experience of the executive directors, including the Chairman and CEO, across various operational and financial domains - Mr. Wang Yan was appointed Chairman of the Board in April 2019, with over twenty years of corporate management experience[10] - Mr. Long Zhongsheng has served as CEO and Executive Director since 2012, with over thirty years of management experience in the mining industry[10] - Mr. Chen Zhimiao was appointed Executive Director in June 2019, possessing over twenty years of experience in accounting and finance[12] Independent Non-Executive Directors This section presents the three independent non-executive directors, highlighting their diverse expertise in accounting, telecommunications, and geological mining - Mr. Wang Guoqi is a Certified Public Accountant in China with extensive experience in accounting and finance[15] - Mr. Wang Qihong has extensive experience in the postal and telecommunications industry, having participated in China Mobile's listing in Hong Kong[15] - Mr. Liu Jishun is a professor and doctoral supervisor at Central South University, specializing in ore genesis theory research and mineral exploration practice[16] Senior Management This section introduces Mr. Chen Zhiyou, Vice President since 2016, detailing his responsibilities in quality, metrology, metal balance, and brand management, backed by extensive heavy metal smelting experience - Mr. Chen Zhiyou has served as Vice President since February 2016, responsible for quality management, metrology management, metal balance management, and brand building[17] - Mr. Chen possesses over 36 years of professional experience in heavy metal smelting[17] Chairman's Report This report provides an overview of the Group's 2019 performance, strategic initiatives, and the industry outlook for 2020, emphasizing cost control and efficiency improvements 2019 Annual Performance Review In 2019, the Group achieved a 6.69% revenue increase to RMB 32.806 billion and a profit of RMB 174 million, driven by precious metal prices, higher cathode copper output, and government subsidies 2019 Key Financial Indicators | Indicator | 2019 (RMB) | 2018 (RMB) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 32,805,685,000 | 30,749,010,000 | +6.69% | | Profit/(Loss) for the Year | 173,548,000 | (86,602,000) | Turned loss into profit, increased by 260,150,000 | - Profit growth was primarily due to (i) rising prices of precious metal products such as gold and silver; (ii) increased benefits from higher output of mined cathode copper; and (iii) government subsidies received for early retirees[21] 2019 Key Product Output | Product | 2019 Output | Y-o-Y Change | | :--- | :--- | :--- | | Mined Copper | 29,500 tonnes | -1.67% | | Cathode Copper | 533,100 tonnes | +6.53% | | Precious Metal Products | 1,273.03 tonnes | +16.34% | | Chemical Products (Sulfuric Acid, etc.) | 1,178,300 tonnes | +15.34% | | Iron Concentrate | 224,100 tonnes | -8.72% | | Molybdenum Concentrate | 78.06 tonnes | -5.68% | 2019 Operating Results and Strategic Initiatives Despite complex macroeconomic and industry challenges, the Group achieved all operating targets in 2019 through efficiency gains, optimized industrial layout, deepened reforms, strengthened risk management, and talent development, with notable progress in green mining and circular economy - Quality and efficiency improvements led to the full achievement of operating targets: the Ausmelt furnace achieved two repairs in three years, reaching an industry-leading furnace life, and the metallurgical and chemical system's operating rate reached 95.5%[25] - Focusing on core business, industrial layout continued to optimize: mining development projects were over-fulfilled, the 400,000 tonnes project progressed as scheduled, the circular economy became a highlight, and the collaborative circuit board disposal project received national funding support[26] - Deepened reforms achieved breakthroughs in key areas: promoting SOE reform actions, optimizing organizational structure, streamlining management, and properly addressing legacy issues from restructuring[29] - Risk prevention and control ensured compliant operations: optimizing the institutional system, strengthening financial supervision and management, formulating accountability measures for illegal operations and investments, and promoting green mine construction[30][31] - Talent cultivation strengthened capability support: continuously enhancing capability, talent acquisition, technological innovation, and basic management, with the establishment of a new accounting professional committee[32] Industry Outlook and 2020 Strategic Priorities In response to the COVID-19 pandemic, rising resource nationalism, and increased copper industry competition, the Group's 2020 strategy prioritizes cost control to enhance efficiency and capitalize on industry consolidation opportunities - The COVID-19 pandemic posed a threat to the health of employees at production bases, but the Group implemented strict prevention and control measures to ensure normal production and operations[33] - The macroeconomic situation is complex and volatile, with rising global resource nationalism and protectionism, prolonged Sino-US trade friction, and slowing domestic copper consumption growth, presenting opportunities for industry mergers and acquisitions[33][35] - The 2020 operating target is set as cost control, focusing on cost reduction to drive quality and efficiency improvements, while monitoring industry changes and seizing strategic opportunities for restructuring and consolidation[35] Management Discussion and Analysis This section provides a detailed financial review, an overview of the Group's mineral resources, exploration and production activities, 2020 strategic targets, and financial management insights Financial Review In 2019, the Group's revenue grew 6.69% to RMB 32.806 billion, gross profit rose 7.95% to RMB 1.018 billion, resulting in a profit of RMB 174 million and basic EPS of RMB 0.82 cents, marking a significant turnaround 2019 Key Financial Data | Indicator | 2019 (RMB) | 2018 (RMB) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 32,805,685,000 | 30,749,010,000 | +6.69% | | Cost of sales and services provided | 31,788,017,000 | 29,806,274,000 | +6.65% | | Gross Profit | 1,017,668,000 | 942,736,000 | +7.95% | | Other Income | 160,719,000 | 75,704,000 | +112.30% | | Other operating expenses | 8,295,000 | 111,488,000 | -92.56% | | Other gains and losses | 13,802,000 (net gain) | (121,132,000) (net loss) | Increased by 134,934,000 | | Income tax expense | 52,697,000 | 40,152,000 | +31.24% | | Basic earnings/(loss) per share | RMB 0.82 cents | RMB (0.56) cents | Turned loss into profit | - Revenue and gross profit growth were primarily driven by rising prices of precious metal products such as gold and silver, and increased production and sales of mined cathode copper[38][40] - Other income significantly increased by 112.30%, mainly due to government subsidies received for early retirees[41] Rich and High-Quality Mineral Resources As of December 31, 2019, the company held five mines in Hubei and Xinjiang, extracting copper, gold, silver, iron, and molybdenum, with resources and reserves estimated under JORC standards - The company owns five mines, located in Hubei (Tonglushan Mine, Fengshan Mine, Tongshankou Mine, Chimashan Mine) and Xinjiang (Sarek Copper Mine)[48][50] - Key extractable metals include copper, gold, silver, iron, and molybdenum, with copper concentrate as the main product[50] - All mineral resources and ore reserves are estimated according to JORC standards and are regularly updated[50][51] Tonglushan Project Overview The Tonglushan Mine, under JORC standards, has controlled resources of 14 million tonnes (1.2% Cu), inferred resources of 19 million tonnes (1.1% Cu), and indicated reserves of 10.8 million tonnes (1.1% Cu) Tonglushan Mine Resources and Reserves Overview (JORC Standards) | JORC Category | Quantity (million tonnes) | Cu (%) | Fe (%) | | :--- | :--- | :--- | :--- | | Resources (CuEq≥0.5%) | | | | | Controlled | 14 | 1.2 | 20 | | Inferred | 19 | 1.1 | 21 | | Total | 33 | 1.2 | 20 | | Reserves (CuEq≥0.79%) | | | | | Indicated Total | 10.8 | 1.1 | 17.0 | Fengshan Project Overview The Fengshan Mine, under JORC standards, reports controlled resources of 8.9 million tonnes (0.7% Cu), inferred resources of 22 million tonnes (0.7% Cu), and indicated reserves of 5.4 million tonnes (0.7% Cu) Fengshan Mine Resources and Reserves Overview (JORC Standards) | JORC Category | Quantity (million tonnes) | Cu (%) | Mo (%) | | :--- | :--- | :--- | :--- | | Resources (CuEq≥0.3%) | | | | | Controlled | 8.9 | 0.7 | 0.004 | | Inferred | 22 | 0.7 | 0.012 | | Total | 31 | 0.7 | 0.01 | | Reserves (CuEq≥0.43%) | | | | | Indicated Total | 5.4 | 0.7 | 0.003 | Tongshankou Project Overview The Tongshankou Mine, under JORC standards, has a total resource of 52 million tonnes (0.7% Cu) and indicated reserves of 17.1 million tonnes (0.67% Cu) Tongshankou Mine Resources and Reserves Overview (JORC Standards) | JORC Category | Quantity (million tonnes) | Cu (%) | Mo (%) | | :--- | :--- | :--- | :--- | | Resources | | | | | Total (Open Pit and Underground Mining Areas) | 52 | 0.7 | 0.013 | | Reserves | | | | | Total (Open Pit and Underground Mining Areas) | 17.1 | 0.67 | 0.006 | Chimashan Project Overview The Chimashan Mine, under JORC standards, has a total resource of 0.553 million tonnes (0.85% Cu) and indicated reserves of 0.016 million tonnes (0.73% Cu) Chimashan Mine Resources and Reserves Overview (JORC Standards) | JORC Category | Quantity (million tonnes) | Cu (%) | Mo (%) | | :--- | :--- | :--- | :--- | | Resources | | | | | Total (Within and Outside License Area) | 0.553 | 0.85 | 0.007 | | Reserves | | | | | Indicated Total | 0.016 | 0.73 | 0 | Sarek Project Overview The Sarek Copper Mine, under JORC standards, has a total resource of 16.71 million tonnes (1.01% Cu) and mineral reserves of 6.418 million tonnes (1.09% Cu) Sarek Copper Mine Resources and Reserves Overview (JORC Standards) | JORC Category | Resource Tonnage (million tonnes) | Copper Grade (%) | Copper Metal (tonnes) | | :--- | :--- | :--- | :--- | | Resources | | | | | Total | 16.71 | 1.01 | 168,575 | | Mineral Reserves | | | | | Total | 6,418 (thousand tonnes) | 1.09 | 70,087 | Exploration, Development, and Mining Production Activities In 2019, the Group conducted extensive exploration, development, and mining activities across its mines, incurring RMB 251 million in total expenditure, with significant copper output from Tonglushan, Fengshan, Tongshankou, and Sarek mines 2019 Key Output by Mine | Mine | Copper (tonnes) | Gold (kg) | Silver (kg) | Iron Concentrate (tonnes) | Molybdenum (tonnes) | | :--- | :--- | :--- | :--- | :--- | :--- | | Tonglushan Mine | 9,314 | 524 | 3,878 | 224,100 | - | | Fengshan Mine | 5,131 | 106 | 4,007 | - | 78 | | Tongshankou Mine | 6,789 | - | 3,169 | - | 0 | | Sarek Copper Mine | 8,258 | - | 6,710 | - | - | 2019 Exploration, Development, and Mining Production Activities Expenditure | Category | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Total | 251,361 | 1,476,160 | - Exploration activities included horizontal drilling and shaft exploration, development activities primarily involved level development engineering, and mining production activities focused on the production of various metal products[70] 2020 Operating Targets and Strategies The Group's 2020 operating targets focus on quality and efficiency improvements, driven by comprehensive cost management, optimized production, increased resource development, raw material diversification, progress on the 400,000 tonnes project, and enhanced corporate governance 2020 Key Product Output Targets | Product | 2020 Target Output | | :--- | :--- | | Mined Copper | 28,700 tonnes | | Cathode Copper | 505,000 tonnes | | Gold | 10 tonnes | | Silver | 850 tonnes | | Sulfuric Acid | 970,000 tonnes | | Iron Concentrate | 210,000 tonnes | | Molybdenum Concentrate | 80 tonnes | - Implement comprehensive cost management, identifying cost reduction opportunities from sourcing to production processes[77] - Intensify resource development, conduct in-depth exploration for marginal and deep ore bodies, and increase copper metal reserves by over 20,000 tonnes[79] - Promote raw material diversification, increasing procurement of high-value materials such as gold-silver rich materials and palladium-nickel bearing crude copper[80] - Fully advance the construction of the 400,000 tonnes project, while simultaneously optimizing organizational structure, human resources, and institutional process systems[83] Financial Management and Liquidity In 2019, the Group did not declare a final dividend, maintaining an issued share capital of approximately RMB 728 million; the current ratio was 1.01, and the debt-to-equity ratio decreased to 380.75%, supported by reduced net debt and profitability, with foreign exchange risk managed via currency forward contracts - The Board does not recommend the payment of a final dividend for 2019[85] 2019 Key Financial Ratios | Indicator | 2019 | 2018 | | :--- | :--- | :--- | | Current Ratio | 1.01 | 1.03 | | Debt-to-equity Ratio | 380.75% | 449.43% | - The decrease in the debt-to-equity ratio was due to a reduction in net debt and the impact of profit for the year[89] - The Group faces foreign exchange risk primarily involving the US dollar, managed through regular net position reviews and entering into currency forward/option contracts[94] - In August 2019, Daye Non-Ferrous Metals established a joint venture, Yangxin Hongsheng Copper Industry Co., Ltd., with other parties, where Daye Non-Ferrous Metals contributed RMB 1.3 billion for a 52% equity stake, with a business scope including non-ferrous metal smelting and processing[95] Directors' Report This report details the Group's business review, key performance indicators, five-year financial summary, corporate governance, shareholder information, connected transactions, and post-reporting period events Business Review and Key Indicators In 2019, the Group demonstrated stable business performance with a gross profit margin of 3.10% and sound financial ratios, emphasizing green development, regulatory compliance, strong stakeholder relationships, and effective talent management 2019 Key Financial Performance Indicators | Indicator | 2019 | 2018 | | :--- | :--- | :--- | | Gross Profit Margin | 3.10% | 3.07% | | Debt-to-Asset Ratio | 82.92% | 85.76% | | Current Ratio | 1.01 | 1.03 | | Asset Turnover Ratio | 1.94 | 1.87 | - Environmental Policy and Performance: In 2019, approximately RMB 240 million was invested in environmental protection projects, achieving zero environmental pollution incidents, compliant discharge of wastewater and exhaust gas, a wastewater recycling rate of 82% in mine production, and a recycled industrial water utilization rate of 98.31% in metallurgical and chemical production[103][104] - Compliance with Laws and Regulations: Strict adherence to the "Energy Conservation Law of the People's Republic of China," "Environmental Protection Law of the People's Republic of China," and "Work Safety Law of the People's Republic of China," with no energy violations, major environmental violations, or major production safety accidents in 2019[106][107][108] - Group Organization and Resources: As of the end of 2019, the Group had a total of 5,952 employees, comprising 4,951 males and 1,001 females; among trained employees, 92.6% were male and 84.5% were female, with an average training duration of 31.2 hours[117][120] Five-Year Financial Summary This section presents a five-year financial summary, highlighting the Group's 2019 revenue of RMB 32.806 billion, profit of RMB 174 million, and total assets of RMB 16.799 billion Summary of Selected Items from Consolidated Statement of Profit or Loss and Other Comprehensive Income (RMB thousand) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 32,805,685 | 30,749,010 | 33,529,012 | 38,915,713 | 39,361,792 | | Profit/(Loss) for the Year | 173,548 | (86,602) | (91,191) | (164,752) | (1,190,225) | | Profit/(Loss) for the Year Attributable to Owners of the Company | 146,664 | (100,959) | (97,247) | (163,484) | (976,337) | Summary of Selected Items from Consolidated Statement of Financial Position (RMB thousand) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 16,799,364 | 16,971,884 | 15,872,541 | 16,096,091 | 16,572,245 | | Total Liabilities | 13,929,802 | 14,555,870 | 13,344,633 | 13,476,992 | 13,788,394 | | Total Equity | 2,869,562 | 2,416,014 | 2,527,908 | 2,619,099 | 2,783,851 | | Equity Attributable to Owners of the Company | 2,384,125 | 2,237,461 | 2,363,712 | 2,460,959 | 2,624,443 | Corporate Governance and Shareholder Information This section covers the company's investment holding business, 2019 performance, and non-dividend decision, detailing board changes, directors' and major shareholders' interests, key customer/supplier percentages, and confirming no director rights to acquire shares or debentures - The Company's principal business is investment holding, with subsidiaries primarily engaged in ore mining and processing, and metal product sales/trading[127] - The Board does not recommend the payment of a final dividend for 2019[129] - Changes occurred in the Board of Directors in 2019, with Mr. Wang Yan appointed Executive Director and Chairman, and Mr. Tan Yaoyu and Mr. Zhai Baojin resigning[138] 2019 Proportion of Key Customers and Suppliers | Category | Proportion of Group's Revenue/Procurement | | :--- | :--- | | Largest Customer | 11.66% | | Top Five Customers | 38.61% | | Largest Supplier | 24.17% | | Top Five Suppliers | 57.55% | - As of December 31, 2019, major shareholder Zhongshi Development Co., Ltd. held 66.85% of the company's shares, and China Cinda (Hong Kong) Asset Management Co., Ltd. held 5.24% of the shares[144] Connected Transactions The Group engaged in various framework agreements with related parties for financial services, sales, procurement, and leasing, disclosing 2019 transaction amounts and 2020-2022 annual caps, all conducted at market rates or government-referenced prices in compliance with Listing Rules - The Group entered into multiple framework agreements with connected persons, including the parent group and China Nonferrous Metal Mining (Group) Co., Ltd. Group, covering financial services, product sales and procurement, production services, land and asset leasing, and technical services[156][161][174][188][199][213][218][231][237][245][253][259][274][286] - In 2019, the transaction amount for deposit services under the financial services framework agreement was RMB 683 million, for sales framework agreements was RMB 5.064 billion, and for parent group procurement and production services framework agreements was RMB 1.072 billion[182][183][193] - Newly established continuing connected transaction framework agreements will be effective from January 1, 2020, to December 31, 2022, with annual caps set for the next three years[307][312][324][336][349][362][377][393][407][421][432][443][456] - The company has established a Connected Transactions Management Committee and implemented strict internal control procedures to ensure that pricing standards and execution of connected transactions comply with applicable laws, rules, and regulations[460][461] - The independent non-executive directors have confirmed that the continuing connected transactions are on normal commercial terms or better, fair and reasonable, and in the overall interests of the shareholders[289] Post-Reporting Period Events and Auditor Post-reporting period, Mr. Wong Yat Tung was appointed Company Secretary, Yangxin Hongsheng Copper Industry Co., Ltd. secured a land use rights contract, Deloitte Touche Tohmatsu was re-appointed auditor, and the company confirmed sufficient public float - Mr. Li Ka Fai resigned as Company Secretary, and Mr. Wong Yat Tung was appointed as the new Company Secretary and authorized representative, effective from January 3, 2020[467] - The joint venture, Yangxin Hongsheng Copper Industry Co., Ltd., signed a land use rights transfer contract on January 8, 2020, to acquire a plot of land with a total area of approximately 281,356 square meters for a consideration of RMB 62.44 million[467] - Deloitte Touche Tohmatsu was appointed as the company's auditor for the 2019 financial year and will be re-appointed at the upcoming Annual General Meeting[472] - For the year ended December 31, 2019, and as of the report date, the Company maintained a sufficient public float as required by the Listing Rules[466] Corporate Governance Report This report details the Company's compliance with corporate governance codes, the structure and responsibilities of its Board and committees, and its approach to risk management and investor relations Compliance with Corporate Governance Code In 2019, the Company largely complied with the Corporate Governance Code, with a minor deviation regarding non-executive director terms, and confirmed directors' adherence to the Model Code for securities transactions - The Company complied with the Corporate Governance Code throughout 2019, except for a deviation from Code Provision A.4.1[477] - Non-executive directors are not appointed for a specific term but are subject to retirement by rotation and re-election at least once every three years at the Annual General Meeting, achieving the same effect[477] - The company has adopted the Model Code as the standard for directors' securities transactions, and all directors have confirmed compliance[478] Board Structure and Responsibilities The Board, composed of four executive and three independent non-executive directors, oversees Group strategy and operations, leveraging diverse expertise and clear separation of Chairman and CEO roles, with independent directors ensuring objectivity - The Board of Directors comprises four executive directors (including the Chairman) and three independent non-executive directors[480] - The Board is responsible for overseeing the Group's business, formulating overall strategies, approving significant transactions, performing corporate governance duties, and ensuring directors receive sufficient information and professional advice[481][482][487] - Mr. Wang Yan, as Chairman, leads the Board, while Mr. Long Zhongsheng, as CEO, is responsible for the Group's strategic planning, administration, and management, with clearly separated responsibilities[493] - Independent non-executive directors constitute more than one-third of the Board members, with one possessing professional accounting qualifications, and all have confirmed their independence[495] - Mr. Wong Yat Tung, the Company Secretary, plays a crucial role in supporting the Board, ensuring information flow and procedural compliance, and has received professional training[496][498] Board Committees The Board established an Audit, Remuneration, and Nomination Committee to assist with duties, covering remuneration policy, board structure and nominations, and financial oversight, internal controls, and risk management, respectively - The Board has an Audit Committee, Remuneration Committee, and Nomination Committee, each with written terms of reference[501] - The Remuneration Committee is responsible for recommending remuneration policies and structures for directors and senior management, adjusting compensation based on individual performance, contribution, and responsibilities[502][503] - The Nomination Committee's duties include reviewing board structure, identifying suitable director candidates, assessing the independence of independent non-executive directors, and formulating a board diversity policy[510] - The Audit Committee's primary responsibilities include overseeing the integrity of financial statements, reviewing internal controls and risk management, and providing recommendations on the appointment of external auditors[515] - In 2019, the Audit Committee held three meetings, reviewed annual and interim results, and discussed internal controls and risk management[516] Risk Management and Investor Relations The Board oversees the Group's risk management and internal control systems, ensuring their effectiveness through regular monitoring, and fosters transparent communication with shareholders and investors via various channels to encourage engagement - The Board is responsible for the effectiveness of the Group's risk management and internal control systems and has established procedures for continuous identification, assessment, and management of significant risks[521] - The Audit Committee annually reviews the effectiveness of internal control and risk management systems, and in 2019, was satisfied that the systems were effective[524] - The Group is committed to maintaining clear, timely, and effective communication with shareholders and investors, providing information through annual reports, interim reports, press releases, announcements, and the company website[528][529] - Shareholders can make inquiries to the Board through the Company Secretary and have the right to convene extraordinary general meetings and propose resolutions[533][536] Independent Auditor's Report This report presents the independent auditor's unmodified opinion on the consolidated financial statements, highlights key audit matters, and outlines the responsibilities of both directors and the auditor Auditor's Opinion and Basis Deloitte Touche Tohmatsu issued an unmodified opinion on the Group's 2019 consolidated financial statements, affirming their true and fair presentation under Hong Kong Financial Reporting Standards and compliance with the Hong Kong Companies Ordinance, based on Hong Kong Standards on Auditing - The auditor issued an unmodified opinion on the consolidated financial statements, deeming them to present a true and fair view of the Group's financial position, performance, and cash flows[538] - The audit was conducted in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants and complied with the Code of Ethics for Professional Accountants[539] Key Audit Matters A key audit matter involved the impairment assessment of property, plant and equipment, right-of-use assets, and mining rights for a Xinjiang copper mine, due to significant balances and judgments on copper price forecasts and discount rates, which the auditor reviewed - A key audit matter was the impairment assessment of property, plant and equipment, right-of-use assets, and mining rights related to a copper mine in Xinjiang[543] - The impairment assessment involved significant judgments regarding copper price forecasts and the discount rates adopted, with the total carrying amount of these assets being RMB 975 million as of December 31, 2019[543] - The auditor's procedures included understanding internal controls, comparing copper price forecasts with industry forecasts, evaluating valuation methodologies, and reviewing discount rates with internal valuation experts[543] Responsibilities of Directors and Auditor Directors are responsible for preparing true and fair consolidated financial statements under HKFRS and assessing going concern, while the auditor's role is to provide reasonable assurance against material misstatement, exercising professional judgment and communicating findings - Directors are responsible for preparing and presenting consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards, ensuring they are free from material misstatement due to fraud or error[547] - Directors are responsible for assessing the Group's ability to continue as a going concern and adopting the going concern basis of accounting[547] - The auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement and to issue an auditor's report[549] - The auditor exercises professional judgment during the audit, identifying and assessing risks of material misstatement, understanding internal controls, evaluating the reasonableness of accounting policies and estimates, and concluding on the going concern ability[550] Consolidated Financial Statements This section presents the Group's consolidated financial statements, including the statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, and statement of cash flows Consolidated Statement of Profit or Loss and Other Comprehensive Income For 2019, the Group reported revenue of RMB 32.806 billion, a 6.69% increase, and a profit of RMB 174 million, reversing the prior year's loss, with basic and diluted EPS of RMB 0.82 cents Summary of Consolidated Statement of Profit or Loss and Other Comprehensive Income | Indicator | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Revenue | 32,805,685 | 30,749,010 | | Gross Profit | 1,017,668 | 942,736 | | Profit/(Loss) and Total Comprehensive Income/(Expense) for the Year | 173,548 | (86,602) | | Profit/(Loss) for the Year Attributable to Owners of the Company | 146,664 | (100,959) | | Basic earnings/(loss) per share | RMB 0.82 cents | RMB (0.56) cents | - Other income significantly increased by 112.30% to RMB 161 million, primarily due to government subsidies[556] - Other operating expenses significantly decreased by 92.56% to RMB 8.295 million[556] Consolidated Statement of Financial Position As of December 31, 2019, the Group reported total assets of RMB 16.799 billion, total liabilities of RMB 13.930 billion, and total equity of RMB 2.870 billion, with property, plant and equipment and inventories being major components of assets, and bank borrowings dominating current liabilities Summary of Consolidated Statement of Financial Position | Indicator | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Non-current assets | 8,474,837 | 8,607,229 | | Current assets | 8,324,527 | 8,364,655 | | Total assets | 16,799,364 | 16,971,884 | | Current liabilities | 8,247,770 | 8,083,411 | | Non-current liabilities | 5,682,032 | 6,472,459 | | Total liabilities | 13,929,802 | 14,555,870 | | Total equity | 2,869,562 | 2,416,014 | | Equity attributable to owners of the Company | 2,384,125 | 2,237,461 | | Non-controlling interests | 485,437 | 178,553 | - Among non-current assets, property, plant and equipment constituted the largest portion, amounting to RMB 6.790 billion[559] - Among current assets, inventories amounted to RMB 4.869 billion, and trade and bills receivables were RMB 1.010 billion[559] - Among current liabilities, bank and other borrowings amounted to RMB 5.567 billion[559] Consolidated Statement of Changes in Equity For 2019, the Group's total equity increased from RMB 2.416 billion to RMB 2.870 billion, driven by a profit of RMB 174 million and a RMB 280 million capital injection from a non-controlling shareholder Summary of Consolidated Statement of Changes in Equity | Indicator | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Total equity at beginning of year | 2,416,014 | 2,502,616 | | Profit and total comprehensive income for the year | 173,548 | (86,602) | | Capital injection from non-controlling shareholder of a subsidiary | 280,000 | - | | Total equity at end of year | 2,869,562 | 2,416,014 | - Non-controlling interests increased from RMB 179 million at the end of 2018 to RMB 485 million, primarily influenced by the capital injection from non-controlling shareholders[563] - Statutory reserves include statutory surplus reserve and special reserve for maintenance and production funds, used to offset losses, expand business, or for development purposes[565] Consolidated Statement of Cash Flows For 2019, the Group's net cash from operating activities surged to RMB 1.182 billion, with net cash from investing activities at RMB 244 million, and net cash used in financing activities at RMB 785 million, resulting in year-end cash and cash equivalents of RMB 1.502 billion Summary of Consolidated Statement of Cash Flows | Indicator | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Net cash generated from operating activities | 1,181,795 | 338,030 | | Net cash generated from/(used in) investing activities | 244,436 | (1,651,635) | | Net cash (used in)/generated from financing activities | (784,636) | 1,218,383 | | Cash and cash equivalents at end of year | 1,501,884 | 861,616 | - The significant improvement in operating cash flow was primarily due to the turnaround to profit before tax and changes in working capital[569] - Investing activities shifted from a net outflow in 2018 to a net inflow in 2019, mainly due to a decrease in short-term advances to Daye Non-Ferrous Metals Group Holdings Limited[571] - Net cash outflow from financing activities primarily reflected the repayment of bank borrowings and gold loans[571] Notes to the Consolidated Financial Statements This section provides detailed explanations of the Group's accounting policies, key estimates, revenue breakdown, other financial information, asset and liability composition, financial instruments, risk management, financing activities, capital commitments, related party transactions, and subsidiary details General Information and Application of Accounting Standards This section provides background on China Daye Non-Ferrous Metals Mining Limited, its ultimate holding company, and details the impact of applying HKFRS 16 Leases, which led to recognizing additional lease liabilities and right-of-use assets, also listing new, un-effective HKFRS - The Company's ultimate holding company is China Nonferrous Metal Mining (Group) Co., Ltd., with its principal business being investment holding, and subsidiaries engaged in ore mining and processing, and metal product sales/trading[574] - This year marked the first-time application of Hong Kong Financial Reporting Standard 16 "Leases", leading to the recognition of additional lease liabilities and right-of-use assets, with no significant impact on the opening accumulated losses[581][590] Impact of HKFRS 16 Application | Indicator | December 31, 2018 (RMB thousand) | Adjustment (RMB thousand) | January 1, 2019 (RMB thousand) | | :--- | :--- | :--- | :--- | | Prepaid lease payments (non-current) | 676,764 | (676,764) | - | | Right-of-use assets | - | 849,725 | 849,725 | | Prepaid lease payments (current) | 21,611 | (21,611) | - | | Lease liabilities (current) | - | (4,285) | (4,285) | | Lease liabilities (non-current) | - | (147,065) | (147,065) | - New and amended Hong Kong Financial Reporting Standards issued but not yet effective include HKFRS 17 "Insurance Contracts", which are not expected to have a significant impact on the consolidated financial statements[593][595] Principal Accounting Policies This section details the Group's principal accounting policies for consolidated financial statements, covering areas like consolidation, investments, PPE, exploration, intangible assets, impairment, inventories, leases, provisions, financial instruments, revenue, borrowing costs, government grants, foreign currency, and taxation - The consolidated financial statements are prepared on a historical cost basis, with certain financial instruments measured at fair value[596] - Property, plant and equipment are stated at cost less accumulated depreciation and impairment, with depreciation of mining infrastructure calculated using the units of production method[611][612] - Exploration and evaluation expenditures are capitalized only under specific conditions and transferred to mining rights upon completion of a feasibility study[616] - Financial assets are measured at amortized cost or fair value through profit or loss, and impairment is assessed using the expected credit loss model[660][663] - Revenue is recognized when performance obligations are satisfied, i.e., when control of goods or services is transferred to the customer[695] Key Sources of Estimation Uncertainty This section highlights key estimation uncertainties impacting financial statements, including impairment assessments for PPE, right-of-use assets, and mining rights (Xinjiang copper mine), recoverability of deferred tax assets, and mine reserve estimates, all involving significant judgment - The impairment assessment of property, plant and equipment, right-of-use assets, and mining rights is a primary source of uncertainty, involving key assumptions such as copper price forecasts and discount rates[728][729] - The realization of deferred tax assets depends on the availability of sufficient future taxable profits, and the Board regularly reviews related assumptions and profit forecasts[732] - Technical estimates of mine reserves inherently contain inaccuracies, and changes in regularly updated estimates will be reflected in the depreciation rates of related assets on a prospective basis[733] Revenue and Segment Information In 2019, the Group's total revenue was RMB 32.806 billion, predominantly from sales of non-ferrous metals, with most revenue recognized at a point in time; operations are primarily in China, where Customer A contributed 11.66% of revenue 2019 Revenue Breakdown | Category | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Sales of goods | 32,755,962 | 30,694,020 | | Rendering of services | 49,723 | 54,990 | | Total revenue | 32,805,685 | 30,749,010 | - Key products include cathode copper (RMB 23.587 billion), gold and other gold products (RMB 3.370 billion), and silver and other silver products (RMB 4.850 billion)[741] - The Group primarily operates in China, with revenue from Chinese customers amounting to RMB 30.880 billion in 2019, accounting for 94.13% of total revenue[743] - Customer A contributed RMB 3.824 billion in sales in 2019, representing 11.66% of total revenue[744] Other Financial Information In 2019, the Group's other income surged to RMB 161 million (mainly government grants), net impairment losses were RMB 93.949 million, finance costs totaled RMB 455 million, and income tax expense was RMB 52.697 million, resulting in a profit of RMB 174 million and basic EPS of RMB 0.82 cents, with no dividends 2019 Other Income | Item | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Government grants | 98,945 | 4,241 | | Deferred income recognized | 21,235 | 20,922 | | Interest income from banks | 12,996 | 20,981 | | Interest income from Daye Group | 13,746 | 2,732 | | Total | 160,719 | 75,704 | 2019 Net Impairment Losses under Expected Credit Loss Model | Item | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Trade receivables | (177) | 383 | | Loans to and receivables from joint ventures | 91,592 | - | | Other receivables | 2,534 | 1,268 | | Total | 93,949 | 1,651 | - Other gains and losses recorded a net gain of RMB 13.802 million, primarily comprising insurance compensation of RMB 102 million, which offset land restoration costs and other costs of RMB 91.436 million arising from the Tonglushan Mine tailings dam failure[748] 2019 Finance Costs | Item | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Interest on bank and other borrowings | 367,977 | 329,644 | | Interest on acceptance bills | 42,347 | 42,348 | | Interest on lease liabilities | 7,416 | - | | Total (net of capitalized interest) | 454,620 | 424,571 | 2019 Directors' and Senior Executives' Emoluments | Category | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Executive Directors | 3,346 | 2,434 | | Independent Non-Executive Directors | 270 | 264 | | Total | 4,081 | 2,698 | Notes to the Statement of Financial Position This section details the Group's December 31, 2019, asset and liability composition, including PPE, right-of-use assets, inventories, and borrowings; it notes no further PPE impairment, derivative instruments for hedging, and total bank and other borrowings of RMB 9.466 billion - The carrying amount of property, plant and equipment was RMB 6.790 billion, with no further impairment losses or reversals recognized in 2019[781][783] - Right-of-use assets amounted to RMB 825 million, primarily consisting of leased land with remaining lease terms ranging from 19 to 60 years[784][785] - Total inventories amounted to RMB 4.869 billion, including raw materials, work-in-progress, finished goods, and goods in transit[800] - Total trade and bills receivables amounted to RMB 1.010 billion, of which trade receivables due within one year accounted for RMB 240 million[800][804] - Derivative financial instruments include copper, gold, and silver futures/forward contracts, and currency forward/option/swap contracts, used to hedge commodity price and foreign exchange risks[817][820] - Total bank and other borrowings amounted to RMB 9.466 billion, with fixed-rate borrowings accounting for RMB 6.776 billion and floating-rate borrowings for RMB 2.690 billion[850][852] - Total early retirement obligations amounted to RMB 163 million, determined based on valuations by independent actuaries[875] Financial Instruments and Risk Management The Group's capital structure, with a 2019 debt-to-equity ratio of 380.8%, faces commodity price, interest rate, and foreign exchange risks managed by derivatives and internal policies; credit risk is minimized via assessments, and liquidity risk is managed through cash flow monitoring and financing flexibility 2019 Debt-to-Equity Ratio | Indicator | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Net debt | 9,077,575 | 10,055,826 | | Equity attributable to owners of the Company | 2,384,125 | 2,237,461 | | Net debt to equity ratio | 380.8% | 449.4% | - Commodity price risk primarily involves copper and other metal products, economically hedged through commodity derivative contracts[887][888] - Interest rate risk is mainly concentrated in floating-rate borrowings, and the Group does not use derivative financial instruments to hedge interest rate risk[892] - Foreign exchange risk primarily involves the US dollar, managed through regular net position reviews and entering into currency forward/option contracts[896] - Credit risk is managed through customer credit assessments, regular monitoring of overdue debts, and credit limits for financial institutions[898][901] - Liquidity risk is managed by regularly monitoring cash flow positions and maintaining available credit facilities, with sufficient working capital expected for the next 12 months[915] Financing Activities and Capital Commitments This section reconciles liabilities from financing activities, including bank borrowings, lease liabilities, and acceptance bills; as of December 31, 2019, contracted capital expenditure was RMB 265 million, mainly for property, plant and equipment acquisition 2019 Reconciliation of Liabilities Arising from Financing Activities | Class of Liabilities | January 1, 2019 (RMB thousand) | Financing cash flows (RMB thousand) | Fair value adjustments (RMB thousand) | Interest expense (RMB thousand) | Exchange differences (RMB thousand) | December 31, 2019 (RMB thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Bank and other borrowings | 10,015,409 | (1,064,213) | 58,319 | 417,617 | 38,999 | 9,466,131 | | Lease liabilities | 151,350 | (11,701) | - | 7,416 | - | 147,065 | | Acceptance bills | 968,692 | - | - | 42,347 | - | 1,011,039 | | Amounts due to joint ventures and Daye Group under other payables and accrued charges | 45,347 | (423) | - | - | - | 44,924 | | Total | 11,180,798 | (1,064,636) | 58,319 | 467,380 | 38,999 | 10,669,159 | - As of December 31, 2019, the Group's contracted but unprovided capital expenditure amounted to RMB 265 million, primarily for the acquisition of property, plant and equipment[948] - As a lessor, the Group leases certain land and properties to Daye Group and fellow subsidiaries under non-cancellable operating leases, with future minimum lease income of RMB 9.56 million[945][946] Related Party Transactions and Subsidiary Details The Group conducted significant related party transactions with Chinese government-related entities for sales, services, procurement, and leasing, all at market terms; this section also details principal subsidiaries' information and financial summaries of non-wholly owned subsidiaries with material non-controlling interests - The Group engaged in multiple significant related party transactions with Chinese government-related entities, including sales of non-ferrous metals, provision of services, purchase of products, leasing of land/assets, and interest income/expenses[950][953] - In 2019, revenue from sales of non-ferrous metals to Daye Group and fellow subsidiaries totaled RMB 4.987 billion[950] - In 2019, expenditure on purchases of non-ferrous metals from Daye Group and fellow subsidiaries totaled RMB 1.657 billion[953] - Principal subsidiaries include China Daye Hong Kong International Trading Co., Limited, Daye Non-Ferrous Metals Design and Research Institute Co., Ltd., Daye Non-Ferrous Metals Co., Ltd. (Hubei Daye), and Yangxin Hongsheng Copper Industry Co., Ltd[962] - Hubei Daye and Huixiang are non-wholly owned subsidiaries with material non-controlling interests; Hubei Daye's 2019 profit was RMB 303 million, and Huixiang's was RMB 32.389 million[964][968][970] Company Statement of Financial Position and Reserve Statement As of December 31, 2019, the Company reported total assets less current liabilities of RMB 3.860 billion and total equity of RMB 2.548 billion, with unlisted investments in subsidiaries as major non-current assets; net current liabilities were RMB 132 million, and retained profits decreased to RMB 1.694 billion due to the year's loss Summary of Company Statement of Financial Position | Indicator | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Non-current assets | 3,991,847 | 4,288,829 | | Current assets | 50,728 | 167,815 | | Current liabilities | 182,861 | 187,550 | | Net current liabilities | (132,133) | (19,735) | | Total assets less current liabilities | 3,859,714 | 4,269,094 | | Total equity | 2,548,033 | 2,999,760 | | Non-current liabilities | 1,311,681 | 1,269,334 | Summary of Company Statement of Changes in Reserves | Class of Reserves | January 1, 2019 (RMB thousand) | Loss and total comprehensive expense for the year (RMB thousand) | December 31, 2019 (RMB thousand) | | :--- | :--- | :--- | :--- | | Share premium | 124,592 | - | 124,592 | | Other reserves | 1,825 | - | 1,825 | | Retained profits | 2,145,450 | (451,727) | 1,693,723 | | Total | 2,271,867 | (451,727) | 1,820,140 | - Among non-current assets, unlisted investments in subsidiaries amounted to RMB 3.782 billion[973] Events After the Reporting Period The COVID-19 pandemic in early 2020 is anticipated to negatively impact commodity markets and copper prices, potentially affecting the recoverable amounts of cash-generating units and inventory net realizable value, which the Group will closely monitor - The COVID-19 pandemic is expected to negatively impact commodity markets and copper prices, potentially affecting the recoverable amounts of cash-generating units and the net realizable value of inventories[976] - The Group will closely monitor the development of the pandemic and assess its impact on financial position and operating results[976] Definitions This section provides clear and concise definitions for key terms used throughout the report, ensuring a consistent understanding for all readers Definition of Terms This section defines key terms used throughout the report, such as "Company," "Board," "Group," "Parent Company," and "Listing Rules," to facilitate clear understanding for readers - "Company" refers to China Daye Non-Ferrous Metals Mining Limited (stock code: 661), a limited company incorporated in Bermuda[978] - "Parent Company" refers to Daye Non-Ferrous Metals Group Holdings Limited, the controlling shareholder[978] - "Group" refers to the Company and its subsidiaries[978]