汇力资源(01303) - 2019 - 年度财报

Corporate Information Board of Directors Composition The Board comprises executive, non-executive, and independent non-executive directors, with several appointments and resignations during the reporting period - The Board of Directors underwent several changes during the reporting period, including the resignation of Executive Directors Liu Huijie, Li Xiaobin, and Jia Dai, and the appointment of Zhou Jianzhong; the appointment of Non-executive Director Cao Ye; and the appointment of Independent Non-executive Director Chen Bingquan, the resignation of Cao Shiping, and the appointment of Xiang Siying as Chairlady[3] Audit Committee The Audit Committee consists of independent non-executive directors Huang Mei (Chairlady), Xiang Siying, and Chen Bingquan, with former member Cao Shiping having resigned - The Audit Committee comprises Ms Huang Mei (Chairlady), Ms Xiang Siying, and Mr Chen Bingquan (appointed on 11 March 2019), with Mr Cao Shiping resigning on the same day[3] Remuneration Committee The Remuneration Committee is composed of Xiang Siying (Chairlady), Wang Qian, and Huang Mei - The Remuneration Committee is composed of Ms Xiang Siying (Chairlady), Ms Wang Qian, and Ms Huang Mei[3] Nomination Committee The Nomination Committee is composed of Wang Qian (Chairlady), Xiang Siying, and Huang Mei - The Nomination Committee is composed of Ms Wang Qian (Chairlady), Ms Xiang Siying, and Ms Huang Mei[3] Independent Auditor The company's independent auditor is BDO Limited - The independent auditor is BDO Limited[3] Registered Office and Principal Place of Business The company's registered office is in the Cayman Islands, with principal places of business in Xinjiang, China, and Hong Kong - The registered office is located in the Cayman Islands, with principal places of business in Hami City, Xinjiang Uygur Autonomous Region, China, and Room 2805, 28/F, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong[3] Share Registrar The company maintains share registrars in both the Cayman Islands and Hong Kong, with the latter being Tricor Investor Services Limited - The share registrar in Hong Kong is Tricor Investor Services Limited[5] Principal Subsidiaries of the Group Subsidiary Structure The company holds entities in mineral resource development, trading, financial leasing, and engineering services in China through multi-layered investment holding companies - Huili Resources (Group) Limited indirectly holds key operating entities such as Hami Jiatia Mineral Resources Development Co, Ltd (90,9%) and Hami Jinhua Mineral Resources Development Co, Ltd through companies including Jiazhao Venture, Runce, Zhengyuan International, and Fulin Investment[7] - Shaanxi Jiahe Mining Development Co, Ltd was sold in March 2020[8] Mine Information Mineral Resources As of December 31, 2019, the company's main mineral resources include nickel-copper ore from Project 20 and Project H-989, and zinc-lead ore from the Baiganhu Project Mineral Resources Overview as of December 31, 2019 | Project Name | Category | Quantity (thousand tonnes) | Nickel Metal (tonnes) | Nickel Grade (%) | Copper Metal (tonnes) | Copper Grade (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Project 20 | Indicated | 1,330 | 9,430 | 0.71 | 3,150 | 0.24 | | | Inferred | 1,260 | 8,660 | 0.69 | 3,160 | 0.25 | | Project H-989 | Indicated | 3,390 | 16,540 | 0.49 | 7,750 | 0.23 | | | Inferred | 2,370 | 12,100 | 0.51 | 4,390 | 0.19 | | Total | Indicated | 4,720 | 25,970 | 0.55 | 10,900 | 0.23 | | | Inferred | 3,630 | 20,760 | 0.57 | 7,550 | 0.21 | | | Total | 8,350 | 46,730 | 0.56 | 18,450 | 0.22 | | Project Name | Category | Quantity (thousand tonnes) | Zinc Metal (tonnes) | Zinc Grade (%) | Lead Metal (tonnes) | Lead Grade (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Baiganhu Project | Indicated | 1,730 | 113,540 | 6.57 | 71,440 | 4.13 | | | Inferred | 2,150 | 137,910 | 6.42 | 85,140 | 3.96 | | Total | Total | 3,880 | 251,450 | 6.49 | 156,580 | 4.03 | | Project Name | Category | Quantity (thousand tonnes) | Gold Grade (g/t) | Gold Metal (tonnes) | | :--- | :--- | :--- | :--- | :--- | | Huangjinmei Project | Indicated | 430 | 3.61 | 1.5 | | | Inferred | 716 | 3.63 | 2.7 | | Total | Total | 1,146 | 3.62 | 4.2 | - The Huangjinmei Project (held by Shaanxi Jiahe Mining Development Co, Ltd) was sold in March 2020[14] Ore Reserves As of December 31, 2019, probable reserves included 1,099 thousand tonnes of nickel-copper ore at Project 20 and 1,055 thousand tonnes of zinc-lead ore at the Baiganhu Project Ore Reserves Overview as of December 31, 2019 | Project Name | Category | Quantity (thousand tonnes) | Nickel Metal (tonnes) | Nickel Grade (%) | Copper Metal (tonnes) | Copper Grade (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Project 20 | Probable | 1,099 | 7,071 | 0.64 | 2,362 | 0.21 | | Project Name | Category | Quantity (thousand tonnes) | Zinc Metal (tonnes) | Zinc Grade (%) | Lead Metal (tonnes) | Lead Grade (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Baiganhu Project | Probable | 1,055 | 62,773 | 5.95 | 39,352 | 3.73 | Exploration Permits The company holds exploration permits for the Baiganhu Gold Mine, Project H-989, and the Huangshan Project, with some permits expired and renewal applications pending Exploration Permits Overview | Project Name | Exploration Ore Type | Exploration Area (sq. km.) | Permit Expiry Date (Year/Month) | | :--- | :--- | :--- | :--- | | Baiganhu Gold Mine Project | Gold | 0.64 | July 2018 | | H–989 Project | Copper, Nickel | 0.96 | July 2018 | | Huangshan Project | Copper, Nickel | 3.49 | March 2019 | - The Group is in the process of renewing these permits, and renewal applications have been submitted to the relevant government authorities[17] Mining Permits The company holds mining permits for Project 20 (copper, nickel) and the Baiganhu Project (lead, zinc), with the Project 20 permit expired and renewal pending Mining Permits Overview | Project Name | Mining Ore Type | Mining Area (sq. km.) | Permit Expiry Date (Year/Month) | | :--- | :--- | :--- | :--- | | Project 20 | Copper, Nickel | 0.22 | October 2019 | | Baiganhu Project | Lead, Zinc | 0.96 | September 2021 | | Huangjinmei Project | Gold | 0.12 | February 2021 | - The Group is in the process of renewing the permit for Project 20, and the renewal application has been submitted to the relevant government authorities[17] - The Huangjinmei Project was sold in March 2020[18] Capital and Exploration Expenditure For the years ended December 31, 2018 and 2019, the Group did not engage in any ore production and incurred no capital or exploration expenditure - For the years ended December 31, 2018 and 2019, the Group did not engage in any ore production[19] - For the years ended December 31, 2018 and 2019, no capital expenditure was incurred for development and mining activities[20] - For the years ended December 31, 2018 and 2019, no exploration expenditure was charged to the consolidated statement of comprehensive income[21] Management Discussion and Analysis Business Review The Group primarily engages in non-ferrous mineral mining and processing, but suspended mining activities in 2019 due to commodity price volatility and sold Shaanxi Jiahe - The Group is principally engaged in the mining and ore processing of non-ferrous minerals (nickel, copper, zinc, lead and gold)[23] - As commodity prices have not yet stabilized at a level high enough to make the business segment profitable, the Group continued to suspend mining activities and planned maintenance work during the year to extend the service life of the mines and reduce operating losses[24] - The Group entered into an agreement on December 24, 2019 to dispose of its entire equity interest in Shaanxi Jiahe, which was completed on March 23, 2020, to improve its business portfolio and risk management[25] Mining Permits Hami Jinhua and Hami Jiatia hold mining permits for Mine 20 (copper-nickel) and Baiganhu Mine (lead-zinc), with Mine 20 requiring a hoisting system upgrade to resume production - Hami Jinhua and Hami Jiatia hold two mining permits for Mine 20 and Baiganhu Mine, with Mine 20 producing copper and nickel ore and Baiganhu Mine producing lead and zinc ore[28] - Mine 20 requires an upgrade of its hoisting system before production can be resumed[28] - The mining permit for the Huangjinmei Project was transferred upon the disposal of Shaanxi Jiahe[28] Exploration Permits Hami Jiatia holds three exploration permits for gold, nickel, and copper, with plans for further exploration when market conditions allow - Hami Jiatia holds three exploration permits in Xinjiang for the Baiganhu Gold Mine, Huangshan, and H–989, covering gold, nickel, and copper[29] - The Group will devote reasonable resources and/or cooperate with potential partners to carry out further exploration to enrich its resource and reserve base[29] - The exploration right for the Huangjinmei Project was transferred upon the disposal of Shaanxi Jiahe[29] Ore Processing Plants Hami Jiatia and Hami Jinhua operate copper-nickel and lead-zinc ore processing plants, respectively, each with a capacity of 1,500 tonnes per day, though both were inactive this year - Hami Jiatia operates a copper-nickel ore processing plant, and Hami Jinhua owns a lead-zinc ore processing plant, each with a processing capacity of 1,500 tonnes per day[30] - During the year, neither Hami Jiatia nor Hami Jinhua conducted any mining and ore processing business[30] Financial Services The Group's financial services segment generated revenue of approximately RMB 6,4 million in 2019, and three new loans totaling RMB 18 million were provided after the reporting period - The financial services segment generated revenue of approximately RMB 6,4 million for the year (2018: RMB 6,6 million)[31] - Subsequent to the year-end and up to the date of this report, the Group entered into three separate loan agreements with three different independent third parties to provide three loans of RMB 6 million each at an annual interest rate of 7%[31] - Loan II (RMB 65 million) was approved for a 31-month extension on February 28, 2020[31] Engineering Services The Group provides oil, gas, and coal-bed methane engineering services in Shanxi Province but has decided to temporarily suspend this segment to focus on the coal trading business - The Group, through Yonghe County Changshi Engineering Services Co, Ltd, provides oil, natural gas, and coal-bed methane engineering services, as well as pre-drilling engineering services in Shanxi Province, China[33] - The Group has decided to temporarily suspend this segment to concentrate its resources on the coal trading business[33] Trading Business During the year, the Group launched a coal trading business through two newly established subsidiaries, which contributed RMB 85,8 million in revenue - During the year, the Group commenced a coal trading business through two newly established indirect subsidiaries, Changzhi Runce Trading Co, Ltd and Gujiao Runce Trading Co, Ltd[34] - This segment contributed RMB 85,8 million to the Group's revenue for the year[34] Update on Shaanxi Jiahe The equity of Shaanxi Jiahe was transferred back to Hami Jiatia in May 2018, and the Group subsequently entered into an agreement to sell its entire stake, completing the transaction in March 2020 - The equity interest in Shaanxi Jiahe was transferred back to Hami Jiatia on May 22, 2018[35] - The Group entered into an agreement with an independent third party for the disposal of Jiahe on December 24, 2019, which has been completed as of the date of this report[36] - The non-operating receivables and payables of Shaanxi Jiahe were fully recovered and settled through an offsetting arrangement in April 2019[36] Performance Review Revenue nearly tripled to RMB 93,6 million due to the new coal trading business, while gross profit decreased by 63% as the business focus shifted to lower-margin trading Performance Comparison for 2019 and 2018 | Metric | 2019 (RMB million) | 2018 (RMB million) | Change | | :--- | :--- | :--- | :--- | | Revenue | 93.6 | 32.8 | +185% | | Cost of Sales | 90.3 | 24.0 | +276% | | Gross Profit | 3.3 | 8.8 | -63% | | Administrative Expenses | 21.1 | 28.3 | -25.5% | | Other Income — Net | 4.5 | 14.4 | -68.8% | | Other Operating Income/(Losses) | 4.5 | (27.4) | From Loss to Gain | | Finance Income — Net | 1.9 | 1.3 | +46.2% | | Income Tax (Expense)/Credit | (10.3) | 4.7 | From Credit to Expense | | Operating Loss | (6.9) | (49.5) | -86.1% | - The increase in revenue was mainly due to the revenue of approximately RMB 85,8 million generated from the new coal trading business segment during the year[38] - The decrease in gross profit was mainly due to the Group's business focus shifting to the lower-margin coal trading business during the year[38] Operating Loss by Segment In 2019, the coal trading business contributed RMB 85,8 million in revenue, while the mining segment recorded an operating profit of RMB 22,0 million despite having no revenue Segment Operating Performance Comparison for 2019 and 2018 | Segment | 2019 Revenue (RMB thousand) | 2019 Segment Results (RMB thousand) | 2019 Operating Margin (%) | 2018 Revenue (RMB thousand) | 2018 Segment Results (RMB thousand) | 2018 Operating Margin (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Coal Trading | 85,823 | 585 | 0.7% | – | – | N/A | | Financial Services Interest Income | 6,369 | 6,258 | 98.3% | 6,636 | 3,589 | 54.1% | | Engineering and Other Related Services | 1,380 | (2,590) | (187.7%) | 26,140 | 329 | 1.3% | | Mining | – | 22,039 | N/A | 52 | (51,170) | (98,403.8%) | | Total | 93,572 | 26,292 | 28.1% | 32,828 | (47,252) | (143.9%) | Liquidity and Financial Review The Group had total current assets of RMB 340,6 million, current liabilities of RMB 43,8 million, a current ratio of 7,8, and no outstanding interest-bearing bank loans Liquidity Metrics Comparison for 2019 and 2018 | Metric | 2019 (RMB million) | 2018 (RMB million) | | :--- | :--- | :--- | | Current Assets | 340.6 | 351.8 | | Current Liabilities | 43.8 | 58.9 | | Current Ratio | 7.8 | 6.0 | | Bank and Cash Balances | 218.2 | 167.9 | | Restricted Cash Deposits | 0.2 | 2.7 | | Outstanding Interest-bearing Bank Loans | 0 | 2.2 | - The Group primarily conducts its continuing business transactions in RMB and HKD and has not entered into any forward currency contracts for hedging purposes[51] Foreign Exchange Risk The Group's business is mainly conducted in RMB and has not experienced significant difficulties due to exchange rate fluctuations, thus no hedging activities are currently undertaken - The Group's business is primarily conducted in RMB and has not experienced any material difficulties in its operations and liquidity due to exchange rate fluctuations[53] - The Group believes that the costs associated with hedging arrangements would outweigh their benefits, and therefore, no hedging activities for foreign exchange risk are currently undertaken[53] Gearing Ratio As of December 31, 2019, the Group's gearing ratio was 0%, consistent with 2018 - As at 31 December 2019, the gearing ratio was 0% (2018: 0%)[54] Pledge of Assets, Commitments and Contingent Liabilities of the Company As of December 31, 2019, the Group had no contracted capital expenditures or pledged assets, but faces potential contingent liabilities from new environmental laws and insufficient employee insurance - As at 31 December 2019 and 2018, the Group had no contracted capital expenditures[55] - As at 31 December 2019 and 2018, the Company had no pledge of assets[56] - The Group may face contingent liabilities from new environmental laws and regulations in the future, as well as the impact of insufficient insurance coverage for future employee accidents[56] Human Resources and Share Option Scheme As of December 31, 2019, the Group employed 32 staff with total employee costs of RMB 8,9 million, and no share options were granted, exercised, or outstanding during the year - As at 31 December 2019, the Group employed 32 employees (2018: 39)[58] - Total staff costs (including directors' remuneration) for the year were approximately RMB 8,9 million (2018: RMB 9,6 million)[58] - As at 31 December 2019, there were no share options granted, exercised, lapsed or outstanding[58] Future Prospects and Outlook The Group will continue to study mine restart plans and develop its new coal trading business while actively exploring business diversification and potential acquisitions to mitigate risks - The Group will continue to study the feasibility of restarting production at its mines and will devote reasonable resources to its existing business segments, especially the new coal trading business[60] - The Group will continue to seek other opportunities to diversify its business (including business segments and geographical regions) to reduce business risks arising from commodity market fluctuations[60] - The Company will make its best efforts to operate more actively and explore potential acquisition opportunities to capture market opportunities in China and other countries[60] Significant Events After the Reporting Period Post-reporting period, the Group provided three new loans, extended a loan to Beijing Fengwo, completed the sale of Shaanxi Jiahe, and is monitoring the impact of COVID-19 - In January 2020, the Group entered into three loan agreements with independent third parties to provide loans totaling RMB 18 million at an annual interest rate of 7%[61] - On February 28, 2020, Loan II (RMB 65 million) was approved for a 31-month extension[62] - On March 23, 2020, the disposal of Shaanxi Jiahe was completed[63] - The outbreak of the Novel Coronavirus (COVID-19) has affected the global business environment, and the Group will continue to monitor its impact on its financial position and operating results[63] Biographies of Directors and Senior Management Executive Directors Ms Wang Qian has over 15 years of experience in finance and investment, while Mr Zhou Jianzhong has over 20 years of experience in construction and engineering management - Ms Wang Qian has over 15 years of experience in finance, investment, and management, and was appointed as an Executive Director on January 26, 2016[65][66] - Mr Zhou Jianzhong has over 20 years of experience in construction and engineering management and was appointed as an Executive Director on March 11, 2019, responsible for the general operations of the mines in China[67][68] Non-executive Director Mr Cao Ye has extensive experience in investment and coal trading and was appointed as a Non-executive Director on June 14, 2019 - Mr Cao Ye has extensive experience in investment and the coal trading business and was appointed as a Non-executive Director on June 14, 2019[70][71] Independent Non-executive Directors The independent non-executive directors bring extensive experience in investment, finance, accounting, and the mining industry - Ms Xiang Siying has extensive experience in investment, banking, and financial advisory and was appointed as Chairlady of the Board on March 11, 2019[72][73] - Ms Huang Mei has over 15 years of experience in accounting, auditing, and corporate management and was appointed as an Independent Non-executive Director on October 19, 2018[75][76] - Mr Chen Bingquan has over 10 years of experience in the mining and materials trading industry and was appointed as an Independent Non-executive Director on March 11, 2019[77][78] Senior Management Mr Huang Kenian serves as Vice President, responsible for direct investment and corporate finance, while Mr Yau Hong Kuen is the Company Secretary and Chief Financial Officer - Mr Huang Kenian is the Vice President of the Company, responsible for direct investment and corporate finance, with over 20 years of experience[79] - Mr Yau Hong Kuen was appointed as the Company Secretary and Chief Financial Officer on February 13, 2019, and has over 10 years of experience in accounting, auditing, and corporate fields[81] Report of the Directors Corporate Information Huili Resources (Group) Limited was incorporated in the Cayman Islands in February 2010 and listed on the Main Board of the Hong Kong Stock Exchange in January 2012 - The Company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law of the Cayman Islands on February 19, 2010[83] - The Company's shares were listed on the Main Board of the Stock Exchange on January 12, 2012[83] Principal Activities The Company is an investment holding company whose subsidiaries are engaged in mining, mineral processing, trading, and financial services in China, with coal trading added this year - The Company's principal activity is investment holding, Its subsidiaries are principally engaged in the mining, processing and sale of gold, nickel, copper, lead and zinc products, trading of oil and gas exploration materials and coal, and financial services in the PRC[84] - Apart from the commencement of the coal trading business, there were no significant changes in the nature of the Group's principal activities during the year[84] Directors' Opinion on the Qualified Opinion The Board notes the auditor's qualified opinion on assumptions used for the 2018 mining rights valuation and believes it will not carry forward to 2020 as Shaanxi Jiahe has been sold - The auditor has issued a qualified opinion on the Company's consolidated financial statements for the year, primarily related to the assumptions used in assessing the carrying amount of mining rights as at 31 December 2018[86] - As the disposal of Shaanxi Jiahe was completed on 23 March 2020, the Board considers that the assumption is no longer applicable as at 31 December 2019[86] - The Board is of the view that, except for the comparability of the figures for the year ending 31 December 2020 and the related figures, any resulting audit qualification is not expected to be carried forward to the year ending 31 December 2020[89] Principal Risks and Uncertainties The Group faces business risks from finite mine life and price volatility, operational risks from policy changes in China, and various financial risks - Business risks include limited mine life of projects, uncertainties in new mining projects, commodity price volatility, and the cyclical nature of the economy[90] - Operational risks include political, economic, and legal developments in China, changes in government policies, stricter environmental regulations, and uncertainty in the renewal of mining and exploration permits[90] - Financial risks include market risk (foreign exchange risk, interest rate risk), credit risk, and liquidity risk[90] Environmental Policies and Performance The Group complies with all relevant environmental laws in China, faced no environmental claims or penalties this year, and has a provision of RMB 2,8 million for environmental costs - The Group has complied in all material respects with all relevant PRC laws and regulations regarding environmental protection and was not subject to any environmental claims, lawsuits, penalties or administrative sanctions during the year[93] - As at 31 December 2019, the provision for closure, reclamation and environmental costs was approximately RMB 2,8 million (2018: RMB 5,3 million)[93] Compliance with Relevant Laws and Regulations The Group has complied in all material respects with the relevant laws and regulations that have a significant impact on its business and operations during the year - The Group has complied in all material respects with the relevant laws and regulations that have a significant impact on the Group's business and operations during the year[94] - The Group did not have any material breach of or non-compliance with applicable laws and regulations during the year[94] Results and Dividends The Group recorded a loss for the year, and the Directors do not recommend the payment of any dividend - The Directors do not recommend the payment of any dividend for the year[100] Distributable Reserves As of December 31, 2019, the Company's reserves available for distribution to shareholders amounted to approximately RMB 261,6 million - As at 31 December 2019, the Company's reserves available for distribution to shareholders amounted to approximately RMB 261,6 million, representing the share premium of approximately RMB 668,8 million less accumulated losses of approximately RMB 407,2 million[101] Major Customers and Suppliers Sales to the top five customers accounted for 60,4% of total sales, while purchases from the top five suppliers, primarily for the new coal trading business, accounted for 100% Sales/Purchases Percentage from Major Customers and Suppliers in 2019 | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Sales to top five customers as % of total sales | 60.4% | 97.6% | | Sales to largest customer as % of total sales | 19.4% | 41.4% | | Purchases from top five suppliers as % of total purchases | 100.0% | 96.6% | | Purchases from largest supplier as % of total purchases | 33.3% | 31.1% | - The data for major customers and suppliers in 2019 primarily came from the Group's newly commenced coal trading business[108] Changes and Re-election of Directors The Board saw multiple changes, including resignations and new appointments, with Ms Wang Qian, Mr Cao Ye, and Ms Huang Mei retiring by rotation and being eligible for re-election - The Board of Directors underwent several changes during the year, including the resignation of Executive Directors Liu Huijie, Li Xiaobin, and Jia Dai, and the appointment of Zhou Jianzhong; the appointment of Non-executive Director Cao Ye; and the appointment of Independent Non-executive Director Chen Bingquan, the resignation of Cao Shiping, and the appointment of Xiang Siying as Chairlady[109] - Ms Wang Qian, Mr Cao Ye and Ms Huang Mei will retire by rotation and, being eligible, offer themselves for re-election at the forthcoming annual general meeting[109] Equity-Linked Agreements (Share Option Scheme) The Company has a share option scheme to incentivize participants, effective for 10 years from December 2011, with no options granted or outstanding in 2019 - The Company has a share option scheme to incentivise eligible participants to contribute to the overall value of the Company and its shareholders[119] - The Share Option Scheme became effective on 16 December 2011 and will remain in force for a period of 10 years[119] - The maximum number of shares that may be issued under the Share Option Scheme shall not exceed 10% of the issued shares, and the maximum number of shares granted to any one participant in any 12-month period shall not exceed 1%[119][120] - The Company did not grant any share options under the Share Option Scheme during the year, and there were no outstanding share options as at 31 December 2019[121] Persons with Disclosable Interests in Shares and Underlying Shares As of December 31, 2019, major shareholders included Mr Guo Jianzhong (28,08%), China Huarong Asset Management Co, Ltd (19,75%), and Mr Li Guangrong and associates (11,64%) Major Shareholders' Holdings as of December 31, 2019 | Name | Nature of Interest | Total Interest in Shares (L) | Approximate Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Tian Yuan International Limited | Beneficial Owner | 412,592,702 | 25.47% | | Mr Guo Jianzhong | Interest of Controlled Corporation & Beneficial Owner | 454,958,702 | 28.08% | | Affinitiv Mobile Ventures Ltd. | Beneficial Owner | 320,000,000 | 19.75% | | China Huarong Asset Management Co., Ltd. | Interest of Controlled Corporation | 320,000,000 | 19.75% | | China Huarong Overseas Investment Holdings Co., Limited | Interest of Controlled Corporation | 320,000,000 | 19.75% | | Ministry of Finance of the PRC | Interest of Controlled Corporation | 320,000,000 | 19.75% | | Sun Shaojie | Interest of Controlled Corporation | 320,000,000 | 19.75% | | Huarong Zhiyuan Investment & Management Co., Ltd. | Interest of Controlled Corporation | 320,000,000 | 19.75% | | Huarong Overseas Chinese Asset Management Co., Ltd. | Interest of Controlled Corporation | 320,000,000 | 19.75% | | Guangdong Jinfeng Group Co., Ltd. | Interest of Controlled Corporation | 320,000,000 | 19.75% | | Legend Vantage Limited | Beneficial Owner | 188,638,883 | 11.64% | | Mr Li Guangrong | Interest of Controlled Corporation | 188,638,883 | 11.64% | | Ms Gao Miaomiao | Interest of Controlled Corporation | 188,638,883 | 11.64% | Sufficient Public Float Based on available information, at least 25% of the Company's total issued share capital is held by the public - At least 25% of the Company's total issued share capital is held by the public[131] Auditor BDO Limited was appointed as the Company's auditor effective January 30, 2019, and will be proposed for re-appointment at the upcoming annual general meeting - BDO Limited has been appointed as the auditor of the Company since the conclusion of the annual general meeting on 30 January 2019[133] Corporate Governance Report Introduction The Company is committed to maintaining high standards of corporate governance and has complied with the Corporate Governance Code, with deviations from provisions A,2,1, A,4,1, and A,6,7 - The Company is committed to maintaining high standards of corporate governance and has adopted and complied with the provisions of the Corporate Governance Code as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, with the exception of code provisions A,2,1, A,4,1 and A,6,7[134] Directors' Securities Transactions The Company has adopted the Model Code for Securities Transactions by Directors, and all Directors have confirmed their compliance with the code during the year - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules, and upon specific enquiry of all Directors, the Directors have confirmed that they have complied with the required standard set out in the Model Code during the year[135] Board of Directors As of December 31, 2019, the Board consisted of six directors, responsible for leading the Group, setting strategy, and overseeing senior management performance - As at 31 December 2019, the Board comprised six Directors, including two executive Directors, one non-executive Director and three independent non-executive Directors[137] - The Board is primarily accountable to the shareholders and is responsible for leading and governing the Company and its subsidiaries, including overseeing the Group's business, strategic direction, financial performance, setting objectives and business development plans, and monitoring the performance of senior management[137] - During the year, the Company considered all independent non-executive Directors (namely Ms Xiang Siying, Ms Huang Mei and Mr Chen Bingquan) to be independent of the Company[138] Directors' Attendance at Meetings The Board holds at least four regular meetings annually; some independent non-executive directors were unable to attend the AGM in 2019 due to other business commitments - The Board holds at least four regular meetings a year[142] - Mr Cao Shiping and Ms Xiang Siying (both independent non-executive Directors) were absent from the Company's annual general meeting on 30 January 2019 due to other business commitments[142] Attendance at Board and Committee Meetings in 2019 | Director's Name | Board Meetings | Audit Committee Meetings | Remuneration Committee Meetings | Nomination Committee Meetings | General Meetings | | :--- | :--- | :--- | :--- | :--- | :--- | | Ms Wang Qian | 22/23 | N/A | 4/4 | 4/4 | 2/2 | | Mr Zhou Jianzhong | 21/21 | N/A | N/A | N/A | 1/1 | | Mr Liu Huijie | 10/10 | N/A | N/A | N/A | 1/2 | | Mr Li Xiaobin | 1/1 | N/A | N/A | N/A | 1/1 | | Ms Jia Dai | 1/1 | N/A | N/A | N/A | 1/1 | | Mr Cao Ye | 12/13 | N/A | N/A | N/A | N/A | | Ms Xiang Siying | 23/23 | 3/3 | 4/4 | 4/4 | 1/2 | | Ms Huang Mei | 22/23 | 3/3 | 4/4 | 4/4 | 2/2 | | Mr Chen Bingquan | 20/21 | 2/2 | N/A | N/A | 1/1 | | Mr Cao Shiping | 1/1 | 1/1 | N/A | N/A | 0/1 | Roles and Responsibilities of Chairman and Chief Executive Officer The roles of Chairman and CEO are separate; following Mr Li Xiaobin's resignation, independent non-executive director Ms Xiang Siying was appointed as Chairlady - Code provision A,2,1 stipulates that the roles of chairman and chief executive officer should be separate and should not be performed by the same individual[145] - On 11 March 2019, Mr Li Xiaobin resigned as an executive Director and the Chairman, and Ms Xiang Siying, an independent non-executive Director, was subsequently appointed as the Chairlady of the Company[145] Term of Non-executive Directors All non-executive directors, except for Ms Huang Mei, have a three-year term and are subject to retirement by rotation in accordance with the Company's articles - With the exception of Ms Huang Mei who does not have a specific term of appointment, all other non-executive Directors are appointed for a term of three years[146] - All Directors (including non-executive Directors) are subject to retirement by rotation in accordance with the Company's articles of association[146] Senior Management Remuneration During the year, three members of senior management had remuneration falling within the band of not more than HK$1,000,000 Senior Management Remuneration Bands for 2019 | Remuneration Band | Number of Individuals | | :--- | :--- | | Not more than HK$1,000,000 (equivalent to not more than RMB 881,135) | 3 | Audit Committee The Audit Committee, comprising three independent non-executive directors, met three times during the year to review financial results, internal controls, and auditor independence - The Audit Committee comprises three independent non-executive Directors, namely Ms Huang Mei (Chairlady), Ms Xiang Siying and Mr Chen Bingquan[147] - The Audit Committee meets at least twice a year to review the annual and interim results reports and other information to be reported to shareholders, and to review the effectiveness and objectivity of the audit process[147] - During the year, the Audit Committee held three meetings[147] - The Audit Committee has reviewed the Group's audited results for the year and recommended their adoption by the Board[150] Audit Committee's Opinion on the Qualified Opinion The Audit Committee concurs with the Board's view on the auditor's qualified opinion and believes the matter will not carry forward to 2020, except for comparability purposes - The Audit Committee concurs with the opinion on the assumptions and qualified opinion discussed in the Report of the Directors[151] - The Audit Committee considers the measures sufficient to address the matters that may give rise to the qualified opinion and that, except for the comparability of the figures for the year ending 31 December 2020 and the related figures, any resulting audit qualification is not expected to be carried forward to the year ending 31 December 2020[151] Remuneration Committee The Remuneration Committee, comprising two independent non-executive directors and one executive director, is responsible for the Group's remuneration policy and structure - The Remuneration Committee currently comprises two independent non-executive Directors, Ms Xiang Siying (Chairlady) and Ms Huang Mei, and one executive Director, Ms Wang Qian[153] - The duties of the Remuneration Committee include considering and making recommendations to the Board on the Group's remuneration policy and structure, and reviewing and determining the remuneration packages of the Directors and senior management[153] - During the year, the Remuneration Committee held four meetings[153] Nomination Committee The Nomination Committee, comprising one executive director and two independent non-executive directors, reviews the Board's structure and nominates candidates for directorship - The Nomination Committee currently comprises one executive Director, Ms Wang Qian (Chairlady), and two independent non-executive Directors, Ms Xiang Siying and Ms Huang Mei[155] - Its principal duties include reviewing the structure, size, composition and skills of the Board at least annually and making recommendations; identifying and nominating candidates to fill casual vacancies on the Board; assessing the independence of independent non-executive Directors; and making recommendations to the Board on matters relating to the appointment and re-appointment of Directors and succession planning for Directors, in particular the Chairman and the Chief Executive Officer[154] - During the year, the Nomination Committee held four meetings[155] Accountability and Audit The Directors are responsible for preparing true and fair financial statements, with auditor's remuneration for the year including RMB 1,260 thousand for audit services - The Directors are responsible for preparing consolidated financial statements for each financial period which give a true and fair view of the state of affairs and of the results and cash flows of the Group for that period[159] Auditor's Remuneration | Service Category | Amount (RMB thousand) | | :--- | :--- | | Audit Services | 1,260 | | Other Non-audit Services | 200 | Risk Management and Internal Control The Board is responsible for the Company's risk management and internal control systems and has implemented measures including an internal compliance officer and annual reviews - The Board is responsible for the Company's risk management and internal control systems and for reviewing their effectiveness[164] - The Group has established an internal compliance officer position, engaged legal advisers in the PRC, the Cayman Islands and Hong Kong, and engaged an internal control consultant to conduct an annual review[169] - The results of the internal control consultant's review revealed no material internal control deficiencies[169] Directors' Training Newly appointed directors receive comprehensive induction training, and all directors are provided with continuous professional development and regulatory updates - Each newly appointed Director receives a comprehensive, formal and tailored induction on first appointment[171] - The Company Secretary provides regular updates on the Listing Rules, and Directors are provided with materials and attend seminars to keep abreast of the latest regulatory developments[171] Board Diversity Policy The Company has adopted a board diversity policy that considers factors such as gender, age, cultural background, professional experience, and skills to achieve board diversity - The Company has adopted a board diversity policy which aims to achieve diversity on the Board by taking into account a number of factors, including but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and other qualities[172] Dividend Policy The Company has established a dividend policy, but the Board does not recommend the payment of any dividend for the current year - The Company has established a dividend policy setting out the factors for determining the payment of dividends by the Company, the long-term profitability and expected cash inflows and outflows of the Company, the frequency and form of dividend payments[174] - The Board does not recommend the payment of any dividend for the year (2018: Nil)[175] Company Secretary Mr Yau Hong Kuen was appointed as Company Secretary on February 13, 2019, and has undertaken no less than 15 hours of relevant professional training during the year - Mr Yau Hong Kuen was appointed as the Company Secretary on 13 February 2019[176] - During the year, Mr Yau has undertaken no less than 15 hours of relevant professional training[176] Shareholders' Rights The Board is committed to maintaining ongoing communication with shareholders and encourages their attendance at general meetings - The Board is committed to maintaining ongoing communication with shareholders, and the Company encourages shareholders to attend general meetings[179] - Shareholders may make written enquiries to the Company by email to enquiry@huili,hk, by fax to (852) 2840 0470 or by post to Room 2805, 28/F, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong, for the attention of the Company Secretary[179] Independent Auditor's Report Qualified Opinion The auditor has issued a qualified opinion on the consolidated financial statements for the year ended December 31, 2019, concerning the validity of assumptions used in the 2018 mining rights valuation - The auditor has audited the consolidated financial statements of the Group for the year ended 31 December 2019 and has issued a qualified opinion[185] - The qualified opinion relates primarily to the validity of the assumptions used in assessing the carrying amount of the mining rights as at 31 December 2018[185] Basis for Qualified Opinion The qualified opinion stems from the inability to obtain sufficient evidence regarding the 2018 valuation assumptions for Shaanxi Jiahe's assets, impacting goodwill and subsequent impairment reversals - The auditor was unable to satisfy themselves that the impairment provision for the amount due from Xiaoyi Dajieshan at the acquisition date (May 2018) was not materially misstated and whether any additional provision or reversal of provision was necessary for the year ended 31 December 2018, due to the inability to obtain relevant documents and explanations to support the assumptions used in estimating the fair value of the 100% equity interest[187] - The auditor was unable to satisfy themselves that the fair values of the mining rights and other receivables at the acquisition date were not materially misstated and that the goodwill arising from the acquisition was appropriately presented[187][189] - Due to the scope limitation, the auditor was unable to satisfy themselves that the impairment losses on other receivables and goodwill recognised for the year ended 31 December 2018 were not materially misstated and that the carrying amount and impairment provision for the mining rights were fairly presented[189] - The above audit limitations remained unresolved in the audit of the 2019 consolidated financial statements, affecting the assessment of the reversal of impairment loss on mining rights and the fair value loss on the disposal group in 2019, and resulting in a limitation on the audit work on the comparability of the current period's figures and the corresponding figures[190][191][192] Key Audit Matters Key audit matters include the impairment of mining rights and buildings due to significant management judgment, and provisions for receivables due to estimation uncertainty - Impairment of mining rights and mining buildings was considered a key audit matter due to the significant management judgement involved in key assumptions such as pre-tax discount rates, estimated metal prices, production lines and inflation rates[197][199] - Impairment provision for trade receivables, loans receivable and other receivables was considered a key audit matter because the estimation of expected credit losses involves significant inherent uncertainty and judgement by management, including identifying risks of significant deterioration in credit quality and the assumptions used in the expected credit loss model[200][201] Directors' Responsibilities for the Consolidated Financial Statements The Directors are responsible for preparing true and fair consolidated financial statements in accordance with HKFRSs and the Hong Kong Companies Ordinance - The Directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance[204] - The Directors are responsible for such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error[204] Auditor's Responsibilities for the Audit of the Consolidated Financial Statements 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 opinion - The auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion[207] - The auditor exercises professional judgement and maintains professional scepticism, identifies and assesses the risks of material misstatement, understands internal control, and evaluates the appropriateness of accounting policies and the going concern basis[208][209][210] - The auditor communicates with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control[213] Consolidated Statement of Comprehensive Income Loss and Total Comprehensive Loss for the Year For the year ended December 31, 2019, the Group recorded a total comprehensive loss of RMB 15,236 thousand, a significant reduction from RMB 43,530 thousand in 2018 Key Data from the Consolidated Statement of Comprehensive Income | Metric | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Revenue | 93,572 | 32,828 | | Cost of sales | (90,289) | (24,012) | | Gross profit | 3,283 | 8,816 | | Administrative expenses | (21,088) | (28,306) | | Expected credit losses on financial assets | (25,595) | (16,955) | | Reversal of expected credit losses on financial assets | 27,532 | – | | Other operating income/(losses) | 4,498 | (27,386) | | Other income — net | 4,472 | 14,350 | | Operating loss | (6,898) | (49,481) | | Finance income — net | 1,945 | 1,256 | | Loss before income tax | (4,953) | (48,225) | | Income tax (expense)/credit | (10,283) | 4,695 | | Loss and total comprehensive loss for the year | (15,236) | (43,530) | | Loss for the year attributable to equity holders of the Company | (16,013) | (41,269) | | Loss for the year attributable to non-controlling interests | 777 | (2,261) | Consolidated Statement of Financial Position Total Assets As of December 31, 2019, the Group's total assets were RMB 494,170 thousand, a decrease from RMB 522,964 thousand in 2018 Key Asset Data from the Consolidated Statement of Financial Position | Metric | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Property, plant and equipment | 51,611 | 68,171 | | Mining and exploration rights | 90,752 | 88,867 | | Right-of-use assets | 10,997 | – | | Land use rights | – | 8,613 | | Total non-current assets | 153,607 | 171,127 | | Trade and bills receivables | 5,943 | 11,358 | | Loans receivable | 64,535 | 98,856 | | Other receivables and prepayments | 36,178 | 68,381 | | Cash and cash equivalents | 218,238 | 167,923 | | Assets of a disposal group classified as held for sale | 15,669 | – | | Total current assets | 340,563 | 351,837 | | Total assets | 494,170 | 522,964 | Total Liabilities As of December 31, 2019, the Group's total liabilities were RMB 68,856 thousand, a decrease from RMB 82,223 thousand in 2018 Key Liability Data from the Consolidated Statement of Financial Position | Metric | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Trade payables | 1,803 | 7,610 | | Other payables and accrued charges | 17,948 | 43,890 | | Contract liabilities | 11,654 | – | | Lease liabilities | 2,075 | – | | Borrowings | – | 2,200 | | Total current liabilities | 43,752 | 58,924 | | Provision for closure, reclamation and environmental costs | 2,770 | 5,307 | | Deferred tax liabilities | 21,626 | 17,992 | | Total non-current liabilities | 25,104 | 23,299 | | Total liabilities | 68,856 | 82,223 | Total Equity As of December 31, 2019, the Group's total equity was RMB 425,314 thousand, a decrease from RMB 440,741 thousand in 2018 Key Equity Data from the Consolidated Statement of Financial Position | Metric | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Share capital | 137,361 | 137,361 | | Share premium | 668,768 | 668,768 | | Other reserves | (11,291) | (12,168) | | Accumulated losses | (366,937) | (349,856) | | Non-controlling interests | (2,587) | (3,364) | | Total equity | 425,314 | 440,741 | Consolidated Statement of Changes in Equity Changes in Equity For the year ended December 31, 2019, total equity attributable to owners of the Company decreased to RMB 427,901 thousand, mainly due to the loss for the year Overview of Consolidated Changes in Equity for 2019 | Metric | Share Capital (RMB thousand) | Share Premium (RMB thousand) | Other Reserves (RMB thousand) | Statutory Reserve (RMB thousand) | Accumulated Losses (RMB thousand) | Total attributable to equity holders of the Company (RMB thousand) | Non-controlling Interests (RMB thousand) | Total Equity (RMB thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | At 1 January 2019 (restated) | 137,361 | 668,768 | (12,168) | – | (350,047) | 443,914 | (3,364) | 440,550 | | (Loss)/profit for the year | – | – | – | – | (16,013) | (16,013) | 777 | (15,236) | | Appropriation to statutory reserve | – | – | – | 877 | (877) | – | – | – | | At 31 December 2019 | 137,361 | 668,768 | (12,168) | 877 | (366,937) | 427,901 | (2,587) | 425,314 | - The initial application of HKFRS 16 had an impact of RMB 191 thousand on accumulated losses[223] Consolidated Statement of Cash Flows Net Cash from Operating Activities For the year ended December 31, 2019, net cash from operating activities was RMB 16,313 thousand, a significant decrease from RMB 103,270 thousand in 2018 Net Cash from Operating Activities | Metric | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Loss before income tax | (4,953) | (48,225) | | Cash used in operations before working capital changes | (4,969) | (1,574) | | Cash generated from operations | 18,300 | 103,535 | | Income tax paid | (1,892) | (265) | | Interest paid | (95) | – | | Net cash from operating activities | 16,313 | 103,270 | Net Cash from Investing Activities For the year ended December 31, 2019, net cash from investing activities was RMB 3,116 thousand, an increase from RMB 585 thousand in 2018 Net Cash from Investing Activities | Metric | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Purchase of property, plant and equipment | (361) | (2,865) | | Proceeds from disposal of property, plant and equipment | 1,097 | 1,904 | | Interest received | 2,380 | 1,544 | | Net cash from investing activities | 3,116 | 585 | Net Cash from Financing Activities For the year ended December 31, 2019, net cash from financing activities was RMB 30,662 thousand, a significant increase from RMB 1,025 thousand in 2018 Net Cash from Financing Activities | Metric | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Loans to third parties | (65,000) | (100,000) | | Repayment from third parties | 100,000 | 100,000 | | Repayment of borrowings | (2,200) | – | | Principal portion of lease liabilities repaid | (2,007) | – | | Interest paid | (131) | (175) | | Net cash from financing activities | 30,662 | 1,025 | Net Increase in Cash and Cash Equivalents For the year ended December 31, 2019, the net increase in cash and cash equivalents was RMB 50,091 thousand, resulting in a year-end balance of RMB 218,630 thousand Change in Cash and Cash Equivalents | Metric | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Net increase in cash and cash equivalents | 50,091 | 104,880 | | Cash and cash equivalents at beginning of financial year | 167,923 | 54,410 | | Exchange difference on cash and cash equivalents | 616 | 8,633 | | Cash and cash equivalents at end of financial year | 218,630 | 167,923 | Notes to the Consolidated Financial Statements 1. General Information The Group is primarily engaged in mining, mineral processing, financial services, engineering services, and coal trading in China, having commenced the coal trading business in 2019 - The Company was incorporated in the Cayman Islands on 19 February 2010 under the Companies Law of the Cayman Islands and was listed on the Main Board of The Stock Exchange of Hong