Q2 & H1 2016, Production Update, Operations Review

Anglo Asian Mining plc / Ticker: AAZ / Index: AIM / Sector: Mining

 

14 July 2016

 

Anglo Asian Mining plc

Q2 and H1 2016, Production Update and Operations Review

  Gedabek gold, copper and silver mine, Azerbaijan

 

Anglo Asian Mining plc ("Anglo Asian" or "the Company"), the AIM listed gold, copper and silver producer focused in Azerbaijan, is pleased to provide an operations and production update for its Gedabek gold, copper and silver mine ("Gedabek") in western Azerbaijan for the three months to 30 June 2016 ("Q2 2016") and the six months to 30 June 2016 ("HY1 2016").  Note that all references to "$" are to United States dollars.

 

Production overview

            Q2 2016

·    Gold production for Q2 2016 increased to 19,665 ounces with 17,926 ounces contained within gold doré, 4 ounces from SART processing and 1,735 ounces from flotation (Q1 2016: total 14,172 ounces)

·    Copper production for Q2 2016 totalled 537 tonnes, 195 tonnes from SART processing and 342 tonnes from flotation (Q1 2016: total 432 tonnes)

·    Silver production for Q2 2016 totalled 56,440 ounces with 2,983 ounces contained within gold doré, 8,979 ounces from SART processing and 44,478 ounces from flotation (Q1 2016: total 34,342 ounces)

H1 2016

·    Gold production for HY1 2016 totalled 33,837 ounces (HY1 2015: total 35,938 ounces)

·    Copper production for HY1 2016 totalled 969 tonnes (HY1 2015: 418 tonnes)

·    Silver production for HY1 2016 totalled 90,782 ounces (HY1 2015: total 6,477 ounces)

FY 2016 target production

·    Target production for the year to 31 December 2016 ("FY 2016") remains at between 73,000 ounces and 77,000 ounces of gold and 1,700 to 2,100 tonnes of copper

Sales

·    Q2 2016 gold doré sales of 15,661 ounces of gold at an average of $1,265 per ounce (Q1 2016: 12,058 ounces at an average of $1,184 per ounce)

·    Q2 2016 copper concentrate shipments to the customer totalled 1,582 dry metric tonnes ("dmt") with a sales value of $3 million (excluding Government of Azerbaijan profit share) (Q1 2016: 1,330 dmt with a sales value of $2.1 million)

·    18,000 ounces of gold sales in HY2 2016 now hedged at no cost with a minimum and maximum sales price per ounce of $1,200 and $1,426 respectively

 

Operational update

·    Second SAG mill expected to be operational by early August

·    Contracts for water treatment plant and evaporation equipment now executed

·    Contract to build electrical sub-station and associated overhead power lines executed with completion expected by end of 2016 - anticipated annual savings of $1.8 to $2.0 million from 2017 onwards

·    New underground equipment now fully deployed

 

Company financials

·    Net debt, being interest-bearing loans and borrowings less cash and cash equivalents, totaled $40.8 million at 30 June 2016 ($47.5 million at 31 March 2016)

 

Anglo Asian CEO Reza Vaziri said, "We are delighted to report these highly encouraging second quarter production numbers which show a substantial increase over the first quarter. The second half of the year has historically been our best performing half due to the seasonally better weather and our production will also benefit from the second SAG mill which is due to start operating next month. We are therefore confident of meeting our production target for 2016 of between 73,000 and 77,000 ounces of gold and 1,700 to 2,100 tonnes of copper. 

 

"The Company continues to invest at Gedabek both to improve the sustainability of the operation and to lower costs to further enhance our operational and financial performance. In addition to the second SAG mill, two other major initiatives were undertaken in the first half. The first initiative is to purify water from the tailings dam so it can be released into the environment and the second is to use cleaner and cheaper electric power from the grid. These will both be highly beneficial for your company and also lower costs. The new underground equipment which is now in full time use at Gadir is also improving our productivity. That these investments have been undertaken whilst we have also significantly reduced the Company's net debt shows that the Company's financial position is improving as we work towards our goal of returning the Company towards profitability.

 

"The Company also took the opportunity to hedge some future gold sales due to the recent strength in the gold price resulting from the uncertainty of the UK's EU referendum decision. This protects the Company against any significant downside in the price of gold whilst still giving us considerable exposure to any further increases in this volatile gold market. This is the first time Anglo Asian has hedged gold sales and this transaction therefore marks another stage in the development of your Company.

 

"I look forward to providing further updates in due course as we continue to improve our production performance and lower costs in order to deliver the utmost value for shareholders."

 

Production and sales details

 

During Q2 2016, the Company mined 491,210 tonnes of ore from its Gedabek open pit (Q1 2016: 344,171 tonnes). In Q2 2016, 37,732 tonnes of ore with an average grade of 9.29 grammes per tonne was mined from its Gadir underground mine (Q1 2016: 17,756 tonnes with an average grade of 7.91 grammes per tonne).

 

As previously reported, low grade ore (less than 1.5 grammes per tonne of gold) is being treated by heap leaching, whilst higher grade ore (more than 1.5 grammes per tonne of gold) is being processed through the agitation leaching plant.

 

During Q2 2016, Anglo Asian stacked 110,202 tonnes of dry crushed ore on to heap leach pads with an average gold content of 1.36 grammes per tonne (Q1 2016: 91,450 tonnes with an average gold grade of 1.46 grammes per tonne). The Company also heap leached uncrushed (Run of Mine - "ROM") ore. During Q2 2016, Anglo Asian stacked 263,432 tonnes of ROM ore on to heap leach pads with an average gold content of 0.76 grammes per tonne (Q1 2016: 114,508 tonnes with an average gold grade of 0.88 grammes per tonne).

 

During the quarter, the Company processed 151,649 tonnes of ore with an average gold content of 3.59 grammes per tonne through the agitation leaching plant (Q1 2016: 131,930 tonnes with an average gold grade of 2.93 grammes per tonne).

 

There was a 74 per cent. gold recovery in agitation leaching for Q2 2016, an increase from 70 per cent. seen in the previous quarter. The increased gold recovery was as a result of the higher grade of ore processed. Gold doré is produced from both heap and agitated leach intermediate solutions, which are combined for final processing and also recirculated around the plant, heap leach pads and tailings dam. Heap leaching is a long term process and recoveries are therefore only estimates calculated from available metallurgical statistics.

 

During Q2 2016, the Company produced gold doré containing 17,926 ounces of gold and 2,983 ounces of silver at Gedabek (Q1 2016: 13,383 ounces of gold and 1,958 ounces of silver). The agitation leach plant produced 12,928 and 2,122 ounces of gold and silver, respectively, and the heap leach operations produced 4,998 and 869 ounces of gold and silver, respectively. The increased gold doré production from agitation leaching was due to the higher amount of crushed ore feedstock processed by the plant, the higher grade of ore and the increased recoveries.

 

During Q2 2016, 140,570 dmt of agitation leach plant tailings were processed by the flotation plant. The gross metal contained within this feed-stock was 5,724 ounce of gold, 99,416 ounces of silver and 606 tonnes of copper. Copper concentrate totaling 1,988 dmt was produced containing 342 tonnes of copper and 1,735 ounces of gold.

 

The following table summarises gold doré production and sales at Gedabek for FY 2015 and Q1 and Q2 2016:

 

	Gold produced* (ounces)		Silver Produced* (ounces)		Gold sales** (ounces)		Gold Sales price ($/ounce)
Quarter ended
31 March 2015	17,185		597		17,206		1,214
30 June 2015	18,739		900		16,088		1,193
30 Sept 2015	18,158		907		14,871		1,123
31 Dec 2015	17,588		1,858		15,759		1,108
FY 2015 - total	71,670		4,262		63,924		1,161
31 March 2016	13,383		1,958		12,058		1,184
30 June 2016	17,926		2,983		15,661		1,265

* including Government of Azerbaijan's share

** excludes Government of Azerbaijan's share

 

  

The following table summarises copper concentrate production from both its SART and flotation plants for Q1 and Q2 2016:

 

	Concentrate	Copper	Gold	Silver
	production*	content*	content*	content*
	(dmt)	(tonnes)	(ounces)	(ounces)
Quarter ending 31 March 2016
SART processing	363	181	12	7,789
Flotation	1,458	251	777	24,595
Sub - total	1,821	432	789	32,384
Quarter ending 30 June 2016
SART processing	373	195	4	8,979
Flotation	1,988	342	1,735	44,478
Sub - total	2,361	537	1,739	53,457
6 months ending 30 June 2016
SART processing	736	376	16	16,768
Flotation	3,446	593	2,512	69,073
Total	4,182	969	2,528	85,841

 

* including Government of Azerbaijan's share

 

The following table summarises total copper concentrate production and sales at Gedabek for FY 2015 and H1 2016. Note that sales of concentrate are initially recorded at provisional amounts until agreement of final assay:

 

	Concentrate	Copper	Gold	Silver	Concentrate	Concentrate
	production*	content*	content*	content*	sales**	sales**
	(dmt)	(tonnes)	(ounces)	(ounces)	(dmt)	($000)
Quarter ended
31 March 2015	298	182	8	1,354	234	660
30 June 2015	391	236	6	3,627	372	1,076
30 Sept 2015	406	216	7	3,532	279	661
31 Dec 2015	955	335	341	15,851	817	1,285
FY 2015 - total	2,050	969	362	24,364	1,702	3,682
31 March 2016	1,821	432	789	32,384	1,330	2,137
30 June 2016	2,361	537	1,739	53,457	1,582	3,019

 

* including Government of Azerbaijan's share

** excludes Government of Azerbaijan's share

 

 

 

Operational update

 

The agitation leaching plant's second semi-autogenous grinding ("SAG") mill is now in place at Gedabek and is being commissioned. It is expected that commissioning will be completed by early August. Once in operation, it will ensure sustainable production and assist in achieving our 2016 annual production target.

 

The Company has started on several initiatives to improve the sustainability and lower costs at Gedabek. Contracts totalling $1.7 million have been signed to purify, and dispose of, waste water. A membrane filtration plant will produce water of sufficient purity from water in the tailings dam that it can be discharged into the environment. Further water can also be disposed of by the ancillary evaporation equipment which is also being installed. A by-product concentrate will also be produced from which metal and cyanide can be recovered. This will improve the water balance of the site and save costs as it will reduce the tailings dam capacity required. It will also enable the recovery of metal currently in the tailings dam. The system is estimated to be installed and in operation by Q4 2016.

 

The Company has also contracted for $2 million to construct and install a 35/6 kV 2x16 MVA electrical sub-station and associated overhead power lines to connect the site to the electricity grid. This will result in cleaner and cheaper electrical power at Gedabek. It is expected that the work will be completed and power will be available from the electricity grid by the end of 2016. Once in operation, purchasing electricity from the grid compared to generating electricity using diesel generators will result in cost savings of approximately $1.8 to $2.0 million per annum.

 

The new underground equipment which was purchased from Atlas Copco comprising an underground drill machine, loader and truck is now fully deployed in the Gadir underground mine. 

 

Company financial details

 

On 27 June 2016, the Company entered into a series of net zero cost options with a lower (PUT option) sales price of US$1,200 per ounce and an upper (CALL option) sales price of US$1,426 per ounce. The options mature in lots of 1,500 ounces of gold with the first lot maturing on 12 July 2016. The remainder of the lots mature every two weeks from this date with the final lot maturing on 13 December 2016. The PUT options give the right to the Company (but not the obligation) to sell gold at the option price. The CALL options give the right to the holder (but not the obligation) to buy gold at the option price. The 18,000 ounces will therefore have a minimum and maximum sales price per ounce of $1,200 and $1,426 respectively. Where the spot price on date of sale is between $1,200 and $1,426, sales will take place at spot price and the options will expire without exercise.

 

The Company had net debt at 30 June 2016 of $40.8 million, a reduction of $8.2 million since 31 December 2015. The net debt at 30 June 2016 was as follows:                

	$m
Amsterdam Trade Bank -  Agitation plant loan	22.2
International Bank of Azerbaijan -  loan International Bank of Azerbaijan - credit line	8.7 2.8
Atlas Copco equipment finance loan YapiKredit Pasha Bank Director	1.5 1.4 3.3 3.9
Total Loans	43.8
Cash on hand and at bank	(3.0)
Net debt	40.8

 

 

**ENDS**

 

For further information please visit www.angloasianmining.com or contact:

 

Reza Vaziri	Anglo Asian Mining plc	Tel: +994 12 596 3350
Bill Morgan	Anglo Asian Mining plc	Tel: +994 502 910 400
Ewan Leggat	SP Angel Corporate Finance LLP Nominated Adviser and Broker	Tel: +44 (0) 20 3470 0470
Laura Harrison	SP Angel Corporate Finance LLP	Tel + 44 (0) 20 3470 0470
Lottie Brocklehurst	St Brides Partners Ltd	Tel: +44 (0) 20 7236 1177
Susie Geliher	St Brides Partners Ltd	Tel: +44 (0) 20 7236 1177

 

Notes:

Anglo Asian Mining plc (AIM:AAZ) is a gold, copper and silver producer in Central Asia with a broad portfolio of production and exploration assets in Azerbaijan.  The Company has a 1,962 square kilometre portfolio, assembled from analysis of historic Soviet geological data and held under a Production Sharing Agreement modelled on the Azeri oil industry.

 

The Company developed Azerbaijan's first operating gold/copper/silver mine, Gedabek, which commenced gold production in May 2009.  Gedabek is an open cast mine with a series of interconnected pits. The Company is also mines high grade ore from the Gadir underground mine which is co-located at the Gedabek site. The Company has a second underground mine, Gosha, which is 50 kilometres from Gedabek. Ore mined at Gosha is processed at Anglo Asian's Gedabek plant.

 

Gold production for the year ended 31 December 2015 from Gedabek totaled 72,032 ounces with 969 tonnes of copper also produced.  Gedabek is a polymetallic deposit and its ore has a high copper content, and as a result the Company produces copper concentrate from its Sulphidisation, Acidification, Recycling, and Thickening (SART) plant. Anglo Asian also produces a copper and precious metal concentrate from its flotation plant, which commenced production in the last quarter of 2015. This is initially processing tailings from the agitation leach plant.

 

Anglo Asian is also actively seeking to exploit its first mover advantage in Azerbaijan to identify additional projects, as well as looking for other properties in order to fulfil its expansion ambitions and become a mid-tier gold and copper metal production company.