Strategy Update and Q1 2017 Review

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

 

18 April 2017

 

Anglo Asian Mining plc

Strategy update and Q1 2017 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 a strategy update relating to exploration and production optimisation together with a quarterly review from its Gedabek gold, copper and silver mine ("Gedabek") in western Azerbaijan for the three months to 31 March 2017 ("Q1 2017").

 

Note that all references to "$" are to United States dollars.

 

Strategy update

 

·    Strategic review completed to optimise long term production at Gedabek

·    Extensive exploration and production optimisation planned for both the main open pit and Gadir underground mines in 2017

·    Gedabek ore stockpiles to be processed whilst exploration and production optimisation is on-going during a temporary pause in mining ore

·    Flotation treatment of ore prior to leaching now underway to process ore stockpiles with high copper content and to improve flexibility of processing operations

·    Ore mining to commence from a new open pit at the recently discovered Ugur deposit in Q4 2017

·    Conservative gold production target for Gedabek for the year to 31 December 2017 ("FY 2017") of between 52,000 ounces and 58,000 ounces (which includes approximately 8,000 ounces to 10,000 ounces of production from the flotation plant and 8,000 to 10,000 ounces from the new Ugur open pit), reflecting the strategy of exploration and long term production optimisation

·    Copper production target for FY 2017 is between 2,000 tonnes and 2,400 tonnes, comprising between 600 tonnes to 700 tonnes from SART processing and between 1,400 tonnes to 1,700 tonnes from flotation

·    Total production target for FY 2017 expressed as gold equivalent ounces is between 64,000 ounces and 72,000 ounces compared to FY 2016 actual total production of 72,304 gold equivalent ounces

 

 

 

Production overview

 

·    Gold production for Q1 2017 totalled 11,078 ounces - 9,258 ounces contained within gold doré, 5 ounces from SART processing and 1,815 ounces from flotation (Q4 2016: total 15,483 ounces)

·    Copper production for Q1 2017 totalled 606 tonnes - 210 tonnes from SART processing and 396 tonnes from flotation (Q4 2016: total 578 tonnes)

·    Silver production for Q1 2017 totalled 39,369 ounces - 2,447 ounces contained within gold doré, 5,523 ounces from SART processing and 31,399 ounces from flotation (Q4 2016: total 50,216 ounces)

 

Sales overview

 

·    Q1 2017 gold bullion sales of 8,283 ounces at an average of $1,220 per ounce (Q4 2016: 12,995 ounces at an average of $1,227 per ounce)

·    Q1 2017 copper concentrate shipments to the customer totalled 2,230 dry metric tonnes ("dmt") with a sales value of $4.4 million (excluding Government of Azerbaijan production share) (Q4 2016: 2,147 dmt with a sales value of $3.9 million)

 

Company financials

 

·    Net debt, being interest-bearing loans and borrowings, less cash and cash equivalents, totaled $33.1 million at 31 March 2017 ($35.1 million at 31 December 2016)

Anglo Asian CEO Reza Vaziri commented, "Following completion of a wide ranging strategic review we are now implementing various initiatives to ensure sustainable, long-term production at Gedabek. This is in response to our discovery of the Ugur deposit and a recent reduction in ounces of gold produced due to the decreasing gold grade of ore mined. These initiatives include extensive exploration and production optimisation of both the main open pit and the Gadir underground mines to enable the Company to gain a better understanding of the resource so that we can develop Gedabek in the most effective way. We are also testing a new configuration of the flotation and agitation leaching plants to give us added flexibility in processing. Important to this strategy is that we have extensive stockpiles of ore at Gedabek, which can now be processed initially by flotation, whilst mining is temporarily paused. Given the increasing proportion of copper in our production we will now also be presenting our total production target as gold equivalent ounces to aid comparability.

"The temporary cessation of mining in the main open pit for the remainder of 2017 will also enable redeployment of the equipment necessary to develop the newly discovered Ugur deposit into an open pit mine located three kilometres from Gedabek.  This is an exciting development for Anglo Asian and we plan to start production from the open pit at the Ugur deposit in Q4 2017.

"Whilst we undertake this exploration and optimisation throughout the remainder of 2017, we will understandably see a reduction from the level of gold production seen in the past two years, and this has been reflected in our gold production target for the year. However, this will be offset by increasing production of copper and we are confident that the initiatives that we are taking this year will provide the foundation of future sustained growth and development of the Company.

"I look forward to updating our shareholders on our progress throughout 2017."

 

Strategy update

 

The Group has recently completed an extensive strategic review of its Gedabek mining operation. This was in response to the declining gold grades of ore mined from the main open pit and the recent successful exploration programme during which the Company discovered the Ugur deposit. The result of this review is that an extensive programme of exploration and production optimisation will be carried out in 2017, together with starting ore production from a new open pit at the Ugur deposit, by the end of the year. The Company will also process part of its 1.1 million tonnes of high copper content ore stockpiles in 2017. To process this stockpiled ore, the flotation plant will be used to treat the ore to remove copper prior to leaching. This re-configuration of the processing facilities will enhance the flexibility of Anglo Asian's operations.

 

Ore mined from the open pit has recently had a lower gold grade and a higher percentage of copper than ore previously mined. It was therefore decided to carry out an extensive programme of exploration and production optimisation to better understand the distribution of copper in the ore body and to define the resource and reserve. Mining will therefore be temporarily stopped in the open pit in Q2 2017, and during the remainder of 2017 approximately 15,000 metres of drilling will be carried out, in furtherance of this programme. It is anticipated that mining from the open pit will recommence in Q1 2018.

 

Mining of ore from the Gadir underground mine was suspended in February 2017. Extensive underground exploration is being carried out and development tunneling undertaken. It is expected that mining of underground ore will recommence in Q4 2017. Any ore mined from Gadir during this exploration and development phase will be stockpiled for later processing.

 

To provide ore feed to the processing plants for those periods when ore is not being mined, the Company will process its current extensive stockpiles. Approximately 50 per cent. of the ore processed by the flotation and agitation leaching plants in Q1 2017 came from stockpiles. This stockpiled ore was blended with mined ore to ascertain the suitability of stockpiled ore for processing. Stockpiled ore also has the additional advantage of being a lower cost feedstock.

 

The Company's flotation plant is designed either to treat tailings from its agitation leaching plant or to treat fresh ore prior to leaching. Until the end of 2016, the Company initially treated ore via its agitation leaching plant, with the tailings from its leaching plant being further treated by flotation. Given the increasing copper content of the mined ore and the Company's stockpiles, it was decided in February 2017 to reverse the processing route by treating the ore initially by flotation, followed by leaching. This increases copper production and saves costs by removing copper minerals which consume cyanide before leaching.

 

The temporary cessation of mining in the open pit will enable the heavy earth moving equipment used in the open pit to be redeployed. The fleet will be used for transporting ore from the stockpiles and also for the road building and other development work necessary to bring the Ugur deposit into production as an open pit mine. It is expected ore will be mined from the Ugur open pit mine in Q4 2017.

 

Given the increasing proportion of copper in the production at Gedabek, the Company will from now on present its total production target in gold equivalent ounces ("GEOs"). The comparative GEOs for FY 2016 production have been calculated using actual selling prices of metal. The FY 2017 production target in GEOs has been calculated using budget selling prices of $1,200 per ounce, $17 per ounce and $5,900 per tonne for gold, silver and copper respectively.

 

Q1 2017 review

 

During Q1 2017, the Company mined 316,354 tonnes of ore from its Gedabek open pit. 14,477 tonnes of ore with an average grade of 2.97 grammes per tonne was mined from its Gadir underground mine until mining ceased in February 2017.

 

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 combined agitation leaching and flotation plants.

 

During Q1 2017, Anglo Asian stacked 111,701 tonnes of dry crushed ore on to heap leach pads with an average gold content of 1.00 grammes per tonne. The Company also heap leached uncrushed (Run of Mine - "ROM") ore. During Q1 2017, Anglo Asian stacked 101,163 tonnes of ROM ore on to heap leach pads with an average gold content of 0.87 grammes per tonne.

 

During Q1 2017, the Company processed 184,074 tonnes of ore with an average gold content of 1.46 grammes per tonne through the combined agitation leaching and flotation plants. Of the ore processed, 93,740 tonnes was mined during Q1 2017 from the open pit and Gadir mines and 90,334 tonnes was from the Company's stockpiles. Until 6 February 2017, ore was fed into the agitation leach plant and the tailings from the plant processed by flotation. After 6 February 2017, the ore was fed into flotation prior to leaching to remove some of the copper contained within the ore.

 

There was a total 84 per cent. gold recovery in agitation leaching and flotation for Q1 2017. This is higher than previously reported recoveries from the agitation leaching plant. However, due to the changing configuration of the processing plant in Q1 2017, the figures are not directly comparable. 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 Q1 2017, the Company produced gold doré containing 9,258 ounces of gold and 2,447 ounces of silver at Gedabek. The agitation leaching plant produced 5,508 and 1,352 ounces of gold and silver, respectively, and the heap leach operations produced 3,750 and 1,095 ounces of gold and silver, respectively. The reduced gold doré production from agitation leaching was due to the lower amount of crushed ore feedstock processed by the plant and lower gold grades of ore.

 

The Company is making good progress with building its water treatment plant. Tanks for the plant have now been constructed at the Gedabek site. The equipment for the water treatment plant has been manufactured and is currently being shipped to the Gedabek site.

  

 

The following table summarises gold doré production and sales at Gedabek for FY 2016 and Q1 2017:

 

	Gold produced* (ounces)		Silver Produced* (ounces)		Gold sales** (ounces)		Gold Sales price ($/ounce)
Quarter ended
31 March 2016	13,383		1,958		12,143		1,184
30 June 2016	17,926		2,983		15,661		1,265
H1 2016	31,309		4,941		27,804		1,230
30 Sept 2016	15,407		2,502		12,567		1,332
31 Dec 2016	14,221		2,845		12,995		1,227
H2 2016	29,628		5,347		25,562		1,278
FY 2016	60,937		10,288		53,366		1,253
31 March 2017	9,258		2,447		8,283		1,220

* 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 at Gedabek for FY 2016 and Q1 2017:

 

	Concentrate	Copper	Gold	Silver
	production*	content*	content*	content*
2016	(dmt)	(tonnes)	(ounces)	(ounces)
Quarter ended 31 March
SART processing	363	181	12	7,789
Flotation**	1,458	200	607	19,055
Total	1,821	381	619	26,844
Quarter ended 30 June
SART processing	373	195	4	10,047
Flotation**	1,988	302	1,445	39,184
Total	2,361	497	1,449	49,231
Quarter ended 30 Sept
SART processing	418	225	4	7,291
Flotation	1,426	260	1,123	24,106
Total	1,844	485	1,127	31,397
Quarter ended 31 December
SART processing	445	219	7	6,751
Flotation	2,059	359	1,255	40,620
Total	2,504	578	1,262	47,371
2017
Quarter ended 31 March
SART processing	428	210	5	5,523
Flotation	2,312	396	1,815	31,399
Total	2,740	606	1,820	36,922

* including Government of Azerbaijan's share.

** certain amounts for flotation production are different to those previously disclosed due to final reconciliation of production and sales.

 

 

 

 

 

 

 

 

 

The following table summarises copper concentrate production and sales at Gedabek for FY 2016 and Q1 2017. Note that sales of concentrates 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 2016	1,821	381	619	26,844	1,319	2,137
30 June 2016	2,361	497	1,449	49,231	1,582	2,977
H1 2016	4,182	878	2,068	76,075	2,901	5,114
30 Sept 2016	1,844	485	1,127	31,397	1,782	3,612
31 Dec 2016	2,504	578	1,262	47,371	2,147	3,865
H2 2016	4,348	1,063	2,389	78,768	3,929	7,477
FY 2016	8,530	1,941	4,457	154,843	6,830	12,591
31 March 2017	2,740	606	1,820	36,922	2,230	4,424

 

* including Government of Azerbaijan's share

** excludes Government of Azerbaijan's share

 

The Company had net debt at 31 March 2017 of $33.1 million, a reduction of $2.0 million since 31 December 2016. The net debt at 31 March 2017 was as follows:             

	$m
Amsterdam Trade Bank -  Agitation plant loan	7.4
Gazprombank -  Agitation plant loan	7.4
International Bank of Azerbaijan -  loan	5.4
International Bank of Azerbaijan -  credit line	1.3
International Bank of Azerbaijan -  letter of credit	0.5
Atlas Copco equipment finance loan	0.7
YapiKredit	3.0
Pasha Bank	3.9
Kapital bank	1.0
Director	3.8
Total loans	34.4
Cash on hand and at bank	(1.3)
Net debt	33.1

Market Abuse Regulation (MAR) Disclosure

 

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

**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 also operates the high grade

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 2016 from Gedabek totaled 65,394 ounces with 1,941 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 is 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.