Q2 & H1 2020 Production and Operations Review

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

 

15 July 2020

 

 

Anglo Asian Mining plc

Q2 & H1 2020 Production and Operations Review

Production of 14,819 gold equivalent ounces in Q2 2020 calculated using budget metal prices

Increase in Cash to $29.2 million

 

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 production, sales and operations review for its Gedabek gold, copper and silver mining and production contract area ("Gedabek") in western Azerbaijan for the three months to 30 June 2020 ("Q2 2020") and six months to 30 June 2020 ("H1 2020").

 

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

 

Overview

 

·    Cash increased by $3.2 million to $29.2 million at the end of Q2 2020

·    14,819 gold equivalent ounces ("GEOs") produced in Q2 2020 calculated using budgeted metal prices

·    Reportable production at actual metal prices of 14,301 GEOs (Q2 2019: 19,618 GEOs)

·    Gold production of 12,048 ounces (Q2 2019: 17,149 ounces)

o Lower gold production in Q2 2020 due to the lower grade of ore processed from the Gedabek open pit and less ore mined from the Gadir underground mine

o COVID-19 restrictions had some impact on efficiency at Gedabek

·    Copper production increased to 648 tonnes (Q2 2019: 448 tonnes)

·    Gold doré production from 7 May to 22 June 2020 was shipped to the refiner and 90 per cent. of the Company's share received prior to the end of June

·    Current FY 2020 production guidance of 75,000 GEOs to 80,000 GEOs and revenue guidance of over $100 million at current metal prices remains unchanged with various measures being taken to increase production in the second half of the year

o New portal opened with a decline currently being constructed to allow underground mining of high-grade ore beneath the Gedabek open pit starting in Q4 2020

o Previously heap leached ore with high residual gold grades being recovered from old heaps and reprocessed by agitation leaching

·    New JORC resource and reserves statements to be released by the end of Q3 2020

·    Baku office remains open

 

Anglo Asian CEO Reza Vaziri commented:

 

"The first half of the year has presented a number of challenges for the Company. However, it is pleasing to note that we have maintained gold shipments and increased our net cash position by $3.2 million during the quarter and by $8.0 million since the start of the year.

 

"The COVID-19 pandemic has had some effect on our operations at Gedabek including our second quarter production. Our workforce remains highly committed but the COVID-19 restrictions in Azerbaijan have resulted in staff working without rotation continuously at Gedabek since March with reduced social interaction. The constraints placed on obtaining supplies, maintaining equipment and shipping gold have also required extra effort. Whilst we are largely overcoming the issues, Gedabek is not yet operating as efficiently as prior to the pandemic.

 

"The lower gold production than the previous quarter was also a result of lower than anticipated gold grades. A number of measures are currently on-going to ensure we meet our production guidance for the year. These include constructing a new decline to allow underground mining of the high-grade ore below the Gedabek open pit and the reprocessing by agitation leaching of previously heap leached ore with residual high gold grades.

 

"The gold price continues to perform favourably and, in Q2 2020, we received an increase of approximately $400 per ounce for gold bullion sales compared to the same period last year. With prices expected to remain at these levels, this bodes well for the future financial performance of the Company.

 

"I look forward to a more productive second half of the year as we remain on track to meet our FY 2020 production guidance of 75,000 GEOs to 80,000 GEOs and revenue guidance of over $100 million"

 

Measures to ensure FY 2020 Guidance is achieved

The Company is carrying out several measures to ensure the FY 2020 Guidance is achieved:

 

A new portal has been opened and a new decline is being constructed of approximately 500 metres to access the high-grade extension of the ore body under the main open pit. It is anticipated the decline will be completed around the end of the current quarter depending on the hardness of rock encountered. It will join the tunnel currently being constructed from the Gadir underground mine to give the two egresses required to commence mining. It is anticipated underground mining of Gedabek ore will begin in Q4 2020.

 

Around 100,000 tonnes of previously heap leached ore containing gold grades greater than two grammes per tonne has been identified. This ore, which was processed in the early years of the Company's life, will be recovered from the old heaps and retreated by agitation leaching in H2 2020. The final lift of the tailings dam wall is almost complete, which is releasing earth-moving equipment that will be transferred to this task.

 

Production Overview

 

Q2 2020

·    Total production of 14,301 GEOs (Q2 2019: 19,618 GEOs)

·    Gold production totalled 12,048 ounces (Q2 2019: 17,149 ounces):

o 11,468 ounces contained within gold doré

o Seven ounces from SART processing

o 573 ounces from flotation

·    Copper production totalled 648 tonnes (Q2 2019: 448 tonnes):

o 151 tonnes from SART processing

o 497 tonnes from flotation processing

·    Silver production totalled 23,884 ounces (Q2 2019: 33,058 ounces):

o 3,449 ounces contained within gold doré

o 10,893 ounces from SART processing

o 9,542 ounces from flotation

H1 2020

·    Total reportable production of 32,501 GEOs (H1 2019: 39,905 GEOs)

·    Gold production totalled 27,922 ounces (H1 2019: 34,394 ounces)

·    Copper production totalled 1,207 tonnes (H1 2019: 963 tonnes)

·    Silver production totalled 58,529 ounces (H1 2019: 84,354 ounces)

·    On track to achieve forecast production for FY 2020 of 75,000 to 80,000 GEOs

 

Sales overview

·    Q2 2020 gold bullion sales of 12,743 ounces at an average of $1,713 per ounce (Q2 2019: 13,467 ounces at an average of $1,332 per ounce)

·    Q2 2020 copper concentrate shipments to the customer totalled 3,526 dry metric tonnes ("dmt") with a sales value of $4.8 million (excluding Government of Azerbaijan production share) (Q2 2019: 4,007 dmt with a sales value of $6.7 million)

 

Company financials

·    Net cash, being cash less interest-bearing loans and borrowing equivalents, totalled $29.2 million at 30 June 2020 ($26.0 million at 31 March 2020)

 

Operations review

The Company mined the following ore in the six months ended 30 June 2020:

 

	12 months to  31 December 2019		3 months to 31 March 2020		3 months to 30 June 2020
Mine	Ore mined	Average gold grade	Ore mined	Average gold grade	Ore mined	Average gold grade
	(tonnes)	(g/t)	(tonnes)	(g/t)	(tonnes)	(g/t)
Open pit	1,475,278	0.73	292,480	0.86	197,014	0.99
Ugur - o/pit	1,283,437	1.24	285,600	1.08	134,539	0.79
Gadir - u/g	147,316	2.73	20,243	2.64	26,445	2.48
Gosha - u/g	7,235	2.81	-	-	4,517	2.50
Total	2,913,266	1.06	598,323	1.03	362,515	1.04

 

Anglo Asian stacked 139,752 tonnes of dry crushed ore on to heap leach pads with an average gold content of 0.79 grammes per tonne of gold during Q2 2020 (Q1 2020: 132,731 tonnes with an average gold content of 0.84 grammes per tonne of gold). The Company also heap leached uncrushed Run of Mine ("ROM") ore. During Q2 2020, Anglo Asian stacked 134,675 tonnes of ROM ore on to heap leach pads with an average gold content of 0.44 grammes per tonne of gold (Q1 2020: 258,121 tonnes with an average gold content of 0.49 grammes per tonne of gold).

 

The Company processed 161,079 dry tonnes of ore with an average gold content of 1.95 grammes per tonne of gold through the agitation leaching plant in Q2 2020 (Q1 2020: 163,379 dry tonnes with an average gold content of 2.53 grammes per tonne of gold). 136,314 dry tonnes of ore containing an average copper content of 0.56 per cent. were processed by the flotation plant (Q1 2020: 126,354 dry tonnes of ore containing an average copper content of 0.49 per cent.).

 

The Company produced gold doré containing 11,468 ounces of gold and 3,449 ounces of silver at Gedabek (Q1 2020: 15,041 ounces of gold and 3,852 ounces of silver) in the quarter. During Q2 2020, the agitation leaching plant produced 8,139 and 2,440 ounces of gold and silver, respectively, and the heap leach operations produced 3,329 and 1,008 ounces of gold and silver, respectively.

 

SART processing produced 267 dmt of copper concentrate containing 151 tonnes of copper, seven ounces of gold and 10,893 ounces of silver in Q2 2020 (Q1 2020: 221 dmt of copper concentrate containing 114 tonnes of copper, eight ounces of gold and 12,898 ounces of silver).

 

In Q2 2020, flotation processing produced 2,904 dmt of copper concentrate containing 497 tonnes of copper, 573 ounces of gold and 9,542 ounces of silver (Q1 2020, 2,773 dmt of copper concentrate containing 445 tonnes of copper, 825 ounces of gold and 17,895 ounces of silver).

 

The Company sold 3,526 dmt of copper concentrate in Q2 2020 for $4.7 million compared to 2,018 dmt for $2.9 million in Q1 2020 (excluding Government of Azerbaijan production share).

 

The following table summarises gold doré production and sales at Gedabek for FY 2019 and H1 2020:

 

	Gold produced* (ounces)		Silver Produced* (ounces)		Gold sales** (ounces)		Gold Sales price ($/ounce)
Quarter ended
31 March 2019	15,547		6,634		13,191		1,306
30 June 2019	16,073		4,773		13,467		1,332
H1 2019	31,620		11,407		26,658		1,319
30 Sept 2019	16,619		4,420		14,894		1,513
31 Dec 2019	15,912		3,880		12,509		1,481
H2 2019	32,531		8,300		27,403		1,498
FY 2019	64,151		19,707		54,061		1,410
31 March 2020	15,041		3,852		11,236		1,577
30 June 2020	11,468		3,449		12,743		1,713
H1 2020	26,509		7,301		23,979		1,649
NOTE

* including Government of Azerbaijan's share

** excludes Government of Azerbaijan's share

 

The following table summarises copper concentrate production from both the SART and flotation plants for FY 2019 and H1 2020:

 

	Concentrate	Copper	Gold	Silver
	production*	content*	content*	content*
	(dmt)	(tonnes)	(ounces)	(ounces)
2019
Quarter ended 31 March
SART processing	142	63	11	16,201
Flotation	2,871	450	1,687	28,461
Total	3,013	513	1,698	44,662
Quarter ended 30 June
SART processing	143	65	8	12,794
Flotation	2,252	383	1,068	15,491
Total	2,395	448	1,076	28,285
Quarter ended 30 Sept
SART processing	154	70	10	11,754
Flotation	2,793	450	1,168	17,142
Total	2,947	520	1,178	28,896
Quarter ended 31 December
SART processing	165	113	16	11,159
Flotation	3,354	616	1,979	26,647
Total	3,519	729	1,995	37,806
2020
Quarter ended 31 March
SART processing	221	114	8	12,898
Flotation	2,773	445	825	17,895
Total	2,994	559	833	30,793
Quarter ended 30 June
SART processing	267	151	7	10,893
Flotation	2,904	497	573	9,542
Total	3,171	648	580	20,435

 

* including Government of Azerbaijan's share.

Note that certain amounts for flotation production maybe different to those previously disclosed due to final reconciliation of production and sales.

 

The following table summarises total copper concentrate production and sales at Gedabek for FY 2019 and H1 2020. 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 2019	3,013	513	1,698	44,662	279	718
30 June 2019	2,395	448	1,076	28,285	4,007	6,771
H1 2019	5,408	961	2,774	72,947	4,286	7,492
30 Sept 2019	2,947	520	1,178	28,896	2,255	3,438
31 Dec 2019	3,519	729	1,995	37,806	3,723	7,350
H2 2019	6,466	1,249	3,173	66,702	5,978	10,788
FY 2019	11,874	2,210	5,947	139,649	10,264	18,280
31 March 2020	2,994	559	833	30,793	2,018	2,863
30 June 2020	3,171	648	580	20,435	3,526	4,707
H1 2020	6,165	1,207	1,413	51,228	5,544	7,570

* including Government of Azerbaijan's share.

** excluding Government of Azerbaijan's share.

Note that certain figures maybe different to those previously disclosed due to final reconciliation of concentrate production and sales.

 

Geological exploration report for H1 2020 and new JORC resource and reserves statements

The preparation of the H1 2020 geological exploration report is currently underway and the Company expects this to be released around the end of July. The Company can confirm the new JORC resource and reserves statements are still expected to be released by end of the current quarter (Q3 2020).

 

Company financial review

 

Cash

The Company had cash at 30 June 2020 of $29.2 million and no bank debt, an increase in cash of $3.2 million since 31 March 2020 when cash was $26.0 million. The Company made advance profit tax payments totalling $2.9 million in Q2 2020.

 

Gold doré shipment and sales

Gold doré production for the period 7 May to 22 June 2020 was shipped to the refiner prior to the end of June. 90 per cent. of the Company's share of the estimated gold content was sold for $7.4 million with the proceeds received before the end of June.

 

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 contact:

Reza Vaziri	Anglo Asian Mining plc	Tel: +994 12 596 3350
Bill Morgan	Anglo Asian Mining plc	Tel: +994 502 910 400
Stephen Westhead	Anglo Asian Mining plc	Tel: +994 502 916 894
Ewan Leggat	SP Angel Corporate Finance LLP Nominated Adviser and Broker	Tel: +44 (0) 20 3470 0470
Soltan Tagiev	SP Angel Corporate Finance LLP Nominated Adviser and Broker	Tel + 44 (0) 20 3470 0470
Camilla Horsfall	Blytheweigh Financial	Tel: + 44(0) 20 7138 3224
Megan Ray	Blytheweigh Financial	Tel: + 44(0) 20 7138 3224

 

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's main operating location is the Gedabek contract area ("Gedabek") which is a 300 square kilometre area in the Lesser Caucasus mountains in western Azerbaijan. The Company developed Azerbaijan's first operating gold/copper/silver mine at Gedabek which commenced gold production in May 2009.  Mining at Gedabek was initially from its main open pit which 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. In September 2017, production commenced at the Ugur open pit mine, a newly discovered gold ore deposit at Gedabek. 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.

 

The Company produced 81,399 gold equivalent ounces ("GEOs") for the year ended 31 December 2019.  Gedabek is a polymetallic ore deposit that has gold together with significant concentrations of copper in the main open pit mine, and an oxide gold-rich zone at Ugur. The Company therefore employs a series of flexible processing routes to optimise metal recoveries and efficiencies.  The Company produces gold doré through agitation and heap leaching operations, copper concentrate from its Sulphidisation, Acidification, Recycling, and Thickening (SART) plant and also a copper and precious metal concentrate from its flotation plant.

 

The Company has a production target for the year to 31 December 2020 of 65,000 ounces to 67,000 ounces of gold and 2,200 tonnes to 2,400 tonnes of copper. This total production target expressed as gold equivalent ounces ("GEOs") at budgeted prices is between 75,000 GEOs and 80,000 GEOS.

 

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 elsewhere in order to fulfil its expansion ambitions and become a mid-tier gold and copper metal production company.