TIDMAAZ
RNS Number : 6871M
Anglo Asian Mining PLC
18 September 2019
Anglo Asian Mining plc / Ticker: AAZ / Index: AIM / Sector:
Mining
18 September 2019
Anglo Asian Mining plc
Interim Results for the six-months to 30 June 2019
Profit before tax increased to $10.3 million
Interim dividend for 2019 increased to US cents 3.50 per
ordinary share
Anglo Asian Mining plc ("Anglo Asian", the "Company" or the
"Group"), the AIM listed gold, copper and silver producer in
Azerbaijan, is pleased to announce its interim results for the
six-month period ended 30 June 2019 ("H1 2019"). Note that all
references to "$" and "cents" are to United States dollars and
cents.
The Company also announces its interim dividend in respect of
the year ending 31 December 2019 of US cents 3.50 per ordinary
share payable on 31 October 2019 to shareholders on record on 4
October 2019. The 2019 interim dividend is a 17 per cent. increase
on the interim dividend for 2018.
An updated corporate presentation including the Company's H1
2019 financial results will be available later today on the Anglo
Asian web-site: http://www.angloasianmining.com.
Highlights
-- Continued improvement in H1 2019 total production expressed
as gold equivalent ounces ("GEOs") with a seven per cent.
year-on-year ("y-o-y") increase to 39,905 GEOs (H1 2018: 37,349
GEOs):
o Gold production totalled 34,349 ounces (H1 2018: 33,255 ounces)
o Copper production of 963 tonnes (H1 2018: 587 tonnes)
o Silver production totalled 84,586 ounces (H1 2018: 84,785 ounces)
-- Gold bullion sales in H1 2019 of 26,588 ounces (H1 2018:
25,778 ounces) completed at the same average price of $1,319 per
ounce as H1 2018
-- All-in sustaining cost of gold production of $603 per ounce (H1 2018: $543 per ounce)
-- Total production target for FY 2019 maintained at between
82,000 and 86,000 GEOs when calculated using metal prices at 1
January 2019
-- Growth strategy remains on track with successful H1 2019
results from the geological exploration programme announced on 8
August 2019, continuing to confirm significant upside
potential:
o Significant progress on ZTEM targets at Gedabek
o Mineralisation at depth confirmed in an area below an existing
adit of the Gosha underground mine
o Very promising drill programme results at Ordubad
Financials
-- Interim dividend of US cents 3.50 per ordinary share declared
reflecting the strong cash position and low level of debt
-- Cash of $20.4 million and debt of $5.2 million equaling net
cash of $15.2 million at 30 June 2019 (31 December 2018: net cash
of $6.1 million)
-- Total revenues in H1 2019 of $43.3 million representing an
eight per cent. y-o-y increase on the previous year (H1 2018: $40.0
million)
-- Profit before taxation in H1 2019 of $10.3 million (H1 2018: $8.1 million)
-- Net cash flow from operating activities in H1 2019 of $14.5
million, $10.0 million lower than H1 2018 due to income tax paid of
$5.2 million and an increase in inventories of $4.7 million:
o Increase in inventories included increased gold in circuit due
to expanding ROM heap leaching
Chairman's Statement
Review of 2019 to date
I am pleased to report on another highly satisfactory six months
for Anglo Asian. The Company performed as planned and its excellent
financial performance in 2018 continued into 2019 with both revenue
and profit increasing compared to the previous half year. Cash
generation remains strong and I am delighted to declare a dividend
of US cents 3.50 per ordinary share as an interim dividend for the
year ending 31 December 2019.
Anglo Asian's main operation at Gedabek is now well-developed
and provides stable cash generation for the Group. This cash flow
enables the Company to both pay dividends to shareholders and
pursue its ambitions to grow the Group into a sustainable, mid-tier
gold, copper and silver producer. The JORC reporting for the three
mines at Gedabek was completed in the period which, together with
recent exploration results, has extended the combined mine life
until at least 2024.
A key pillar of the Company's growth strategy is to fully
exploit the potential of the over 1,000 square kilometers of land
within its three contract areas which the Group believes provide
significant upside potential. Last year, the Company embarked upon
a comprehensive three-year geological exploration programme which
has already yielded numerous targets and potential deposits, which
are under active investigation. This demonstrates that the Company
is now delivering on its growth strategy.
Operational review
39,905 GEOs were produced in the six months to 30 June 2019 ("H1
2019"), a seven per cent. increase compared to H1 2018. Gold
production increased to 34,349 ounces compared to 33,255 ounces in
H1 2018 and copper production also increased to 963 tonnes from 587
tonnes in H1 2018. The majority of the increase in gold production
and the increase in copper production was due to the independent
operation of the Company's flotation plant throughout H1 2019.
Since the installation of its dedicated jaw crusher in July 2018,
the flotation plant has operated in parallel with the Company's
agitation leaching plant which has increased the Company's overall
processing capacity.
The Company signed an off-take agreement in late 2018 for
flotation concentrate with Trafigura PTE. A second doré refining
contract was signed in 2018 with Argor-Heraeus SA in Switzerland
and a portion of gold doré production is now shipped to them. These
two new contracts have enabled the Group to obtain better
commercial terms for both concentrate sales and gold refining.
The Company's tailings dam was inspected in early June 2019 by
Knight Piésold Limited ("KP"), a leading environmental engineering
company. KP's initial observations were that the dam had been
properly constructed, showed no visible signs of instability and
that seepage is properly controlled. Various minor recommendations,
including moving the location of the tailings discharge pipes to
better spread sediment within the dam, were made to ensure that the
dam operates to best practice. These are now being implemented. KP
is now modelling the dam, including dynamic stability and capacity
calculations, and upon completion of this work will issue their
final report.
Mineral resources and geological exploration
The Company completed its goal of formalising its mineral
resource and ore reserves for its three mines at Gedabek in early
2019. Together with recent exploration work, this provides
confidence to shareholders of a combined mine life of Anglo Asian's
existing mines to at least 2024.
The geological exploration programme which commenced in 2018 is
now ramping up. Over $2 million was spent on geological exploration
in H1 2019 of which over $1 million was spent at Ordubad. The
results so far are highly encouraging. Near mine exploration at
Gedabek has revealed mineable extensions which will prolong the
life of the Company's existing mines. The ZTEM aerial survey
identified 20 shallow epithermal/porphyry targets, five deep
epithermal targets and six porphyry targets which have been ranked
and are now being investigated. Mineralisation has already been
found at some of the targets.
Work at Gosha is also encouraging as it indicates much more
extensive mineralisation within the contract area, including
copper. This additional mineralisation is both near to the existing
Gosha underground mine and at the new targets Asrikchay and
Khatinca. The Ordubad contract area continues to yield significant
copper and gold results, further demonstrating the important
potential of this region that is being revealed by the use of
modern exploration techniques.
The Company is continuing to vigorously investigate all of the
potential targets identified within its three contract areas. The
Company has a track record of rapidly developing discoveries and is
confident that any new deposits can be swiftly brought into
production.
Financial results and dividend
The Company's financial performance in H1 2019 remained strong
with revenue increasing by $3.3 million to $43.3 million due to
both higher gold bullion and copper sales. Profit after tax
increased to $6.6 million compared to $5.1 million in H1 2018. The
all-in sustaining cost ("AISC") per ounce of gold produced
increased in H1 2019 to $603 per ounce reflecting cash costs being
higher by $2.7 million due to mining a higher volume of ore. Some
of the additional ore mined has been stockpiled for use in 2020
which will reduce the mining costs next year. Anglo Asian still
remains a lowest quartile cost producer.
Revenues continued to be subject to an effective royalty of
12.75 per cent. in H1 2019. The Company anticipates that this
effective royalty rate will continue until at least 2023 and
further details are set out in the financial review below.
The Company continues not to hedge gold sales. However, the
Company's strong balance sheet gives it flexibility in timing the
sales of its gold bullion to take advantage of any "spikes" in the
price of gold. This enabled the Company to sell its gold bullion in
H1 2019 at an average price of $1,319 per ounce compared to the
average market price of gold in H1 2019 of $1,306 per ounce.
The Company's balance sheet continued to strengthen in H1 2019.
Cash flow from operations was $14.6 million, a decrease of $10.0
million compared to $24.6 million in H1 2018. However, this
decrease was mainly due to an increase in gold inventory in circuit
due to expanding the ROM heap leach operations and the commencement
of the payment of corporation taxation. Corporation taxation of
$5.2 million was paid in H1 2019 as the Company had utilised all
its tax losses in 2018. Despite the lower cash generation, the
Company had $20.4 million of cash at 30 June 2019 with net cash
increasing by $9.1 million to $15.2 million in the half year. The
Company now has a low level of debt with the $5.1 million balance
of the Pasha Bank refinancing loan currently being the only
outstanding loan payable.
The announcement of the interim dividend of US cents 3.50 per
ordinary share highlights the continued financial strength of the
Company and its ability to generate returns to shareholders.
Outlook
Anglo Asian remains in an enviable position to continue its
progression and deliver on its stated growth strategy. Gedabek's
operations generate stable cash flow which provides funds for both
investment and to pay dividends. The Company's solid balance sheet
and excellent relationships with banks in Azerbaijan and elsewhere
means loan finance can be easily obtained if required. Together,
these advantages mean the Company has ample financial resources to
seize any suitable opportunities that may arise.
The Company's geological exploration programme is now well
underway. It is both extending the life of Anglo Asian's existing
mines and yielding new discoveries. The Group is continuing this
programme with vigour with the aim of identifying deposits which
can be commercially exploited. The Company is also evaluating
several opportunities outside Azerbaijan and will pursue any of
these which it believes can be commercially successful.
Anglo Asian continues its concerted effort to meet with many
existing and potential investors and the Company believes it has a
strong reputation as an attractive investment opportunity. It has
also recently launched a new web-site which is in line with today's
standards and more accurately represents the Company's ambitions
and growth trajectory.
The Company set a production target of between 82,000 and 86,000
GEOs for 2019 calculated using metal prices at the beginning of
2019. However, the increase in the price of gold and decrease in
the price of copper since 1 January 2019 have resulted in one tonne
of copper decreasing in value from approximately 4.7 to 3.8 GEOs.
We are on track to achieve our initial production target, but when
translated into GEOs at actual metal prices, the FY 2019 forecast
outcome is now around the bottom end of the guidance range. I look
forward to updating shareholders with the Company's progress in the
coming months.
Anglo Asian has continued to build on its success of previous
years. It now has very solid foundations and an exciting growth
strategy, driven by exploration, to develop your Company into a
mid-tier gold, copper and silver producer. It is therefore with
continued optimism that I look forward to the remainder of 2019 and
beyond.
Appreciation
I would like to take this opportunity to thank the employees of
Anglo Asian, our partners, the Government of Azerbaijan and our
advisors for their continued support as we deliver on our strategy
of becoming a leading mid-tier gold, copper and silver producer.
Finally, I wish to sincerely thank our shareholders for their
continued investment and support in Anglo Asian. I look forward to
sharing the successes of the remainder of 2019 with you.
Khosrow Zamani
Non-executive Chairman
17 September 2019
Dividend
An interim dividend, in respect of the year ending 31 December
2019, of US cents 3.50 per ordinary share will be paid gross on 31
October 2019 to shareholders that are on the shareholders record at
the record date of 4 October 2019. The shares will go ex-dividend
on 3 October 2019. All dividends will be paid in cash and a scrip
dividend or other dividend reinvestment plan will not be offered by
the Company.
The dividend will be payable in pounds sterling. The dividend
will be converted to pounds sterling using the average of the
sterling closing mid-price using the exchange rate published by the
Bank of England at 16:00 BST each day from the 7 to 11 October
2019.
Corporate Governance
A statement of the Company's compliance with the ten principles
of corporate governance in the Quoted Companies Alliance Corporate
Governance Code ('QCA Code') can be found on the Company's website
at
http://www.angloasianmining.com/media/pdf/CORPORATE_GOVERNANCE.pdf
Market Abuse (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.
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
--------------------------- ----------------------
Stephen Westhead Anglo Asian Mining plc Tel: +994 502 916 894
--------------------------- ----------------------
Ewan Leggat SP Angel Corporate Finance Tel: +44 (0) 20 3470
LLP 0470
Nominated Adviser and
Broker
--------------------------- ----------------------
Soltan Tagiev SP Angel Corporate Finance Tel + 44 (0) 20 3470
LLP 0470
--------------------------- ----------------------
Camilla Horsfall Blytheweigh Financial Tel: +44 (0) 20 7138
3224
--------------------------- ----------------------
Megan Ray Blytheweigh Financial Tel: +44 (0) 20 7138
3224
--------------------------- ----------------------
Competent Person Statement
The information in the announcement that relates to exploration
results, minerals resources and ore reserves is based on
information compiled by Dr Stephen Westhead, who is a full time
employee of Anglo Asian Mining with the position of Director of
Geology & Mining, who is a Fellow of The Geological Society of
London, a Chartered Geologist, Fellow of the Society of Economic
Geologists, Member of The Institute of Materials, Minerals and
Mining and a Member of the Institute of Directors.
Stephen Westhead has sufficient experience that is relevant to
the style of mineralisation and type of deposit under consideration
and to the activity being undertaken to qualify as a Competent
Person as defined in the 2012 Edition of the 'Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves'; who is a Member or Fellow of a 'Recognised Professional
Organisation' (RPO) included in a list that is posted on the ASX
website from time to time (Chartered Geologist and Fellow of the
Geological Society and Member of the Institute of Material,
Minerals and Mining).
Stephen Westhead has sufficient experience, relevant to the
style of mineralisation and type of deposit under consideration and
to the activity that he is undertaking, to qualify as a "competent
person" as defined by the AIM rules.
Stephen Westhead has reviewed the resources and reserves
included in this announcement and consents to the inclusion in the
announcement of the matters based on his information in the form
and context in which it appears.
Strategic report
Principal activities
The principal activity of Anglo Asian Mining PLC (the "Company")
is that of a holding company and a provider of support and
management services to its main operating subsidiary R.V.
Investment Group Services LLC. The Company, together with its
subsidiaries (the "Group"), owns and operates gold, silver and
copper producing properties in the Republic of Azerbaijan
("Azerbaijan"). It also explores for and develops other potential
gold and copper deposits in Azerbaijan.
The Group has a 1,962 square kilometre portfolio of gold, silver
and copper properties in western Azerbaijan, at various stages of
the development cycle. The Group's primary operating site is
Gedabek, which is the location of the Group's main gold, silver and
copper open pit mine (the Gedabek open pit mine), the Ugur open pit
mine and the Gadir underground mine. The Group's processing
facilities to produce gold doré and copper, silver and gold
concentrates are also located at Gedabek. Gosha, the Group's second
underground gold and silver mine, is located 50 kilometres away
from Gedabek. Ordubad, the Group's early stage gold and copper
exploration project is located in Nakhchivan, South West
Azerbaijan.
Overview of H1 2019 and FY 2019 production target
In H1 2019, the Company continued its strategy to increase
shareholder value by progressing its strategy of developing Anglo
Asian into a mid-tier gold, copper and silver miner. The key
pillars of the strategy are as follows:
-- Formalise mineral resources and ore reserves for all existing mines
-- Optimisation of gold and copper production at its Gedabek site from existing mines
-- Increase its production profile by identifying further
resources and reserves in proximity to its existing mines
-- Pursue a comprehensive geological exploration programme to
extensively explore all of the land at its accessible contract
areas for new deposits with the potential to become new mines
-- Ramp-up exploration at Ordubad which is an untapped value opportunity
In H1 2019, the publication of resource and reserve statements
in accordance with the JORC Code (2012) were completed for all the
Company's mines. These were announced on 18 June 2019. The
Company's three-year geological exploration programme, which
commenced in 2018, is now starting to yield very positive results
with many new targets and potential deposits identified. The
exploration activities at Ordubad have also increased
significantly, with over $1 million spent on exploration at Ordubad
in H1 2019.
The Group set a production target for the year to 31 December
2019 expressed as gold equivalent ounces ("GEOs") of between 82,000
GEOs and 86,000 GEOs calculated using metal prices at 1 January
2019, compared to total production for the year to 31 December 2018
of 83,736 GEOs. Although expected production levels have been
achieved in H1 2019, the FY 2019 forecast outcome is now at the
bottom end of the guidance range due to the value of one tonne of
copper decreasing from approximately 4.7 to 3.8 GEOs because of the
gold price increase and copper price decrease during 2019.
Gedabek
Introduction
The Gedabek mining operation is located in a 300 square
kilometre contract area in the Lesser Caucasus mountains in western
Azerbaijan on the Tethyan Tectonic Belt, one of the world's most
significant copper and gold-bearing geological structures. Gedabek
is the location of the Group's Gedabek open pit mine, its Ugur open
pit mine, its Gadir underground mine and the Company's processing
facilities.
Gold was first poured from ore mined from the Gedabek open pit
and processed by heap leaching in May 2009, with production
commencing fully in September 2009. Copper and precious metal
concentrate production began in 2010 when the Sulphidisation,
Acidification, Recycling and Thickening (SART) plant was
commissioned. The Group's agitation leaching plant commenced
production in 2013 and its flotation plant in 2015. Underground
extraction of ore at Gedabek started in June 2015 when the Gadir
mine was opened. During 2017, the Group brought Ugur, a
newly-discovered gold deposit three kilometres north-west of its
processing facilities, into production as an open pit mine. In July
2018, a second crusher line was added to the flotation plant to
enable independent operation and processing by the agitation
leaching plant and the flotation plant.
Mineral resources and ore reserves
Key to the future development of the Gedabek site is the
knowledge of the mineral resources and ore reserves within the
Company's contract areas. The Group's most recent mineral resources
and ore reserves estimates for its Gedabek open pit were published
as of 18 September 2018. Full JORC (2012) reporting with unchanged
mineral resources and ore reserves estimates was subsequently
released on 14 March 2019. The mineral resource estimate showed a
total mineral resource (at a cut-off grade of 0.3 grammes per tonne
of gold) of approximately 986 thousand ounces of gold, 63.4
thousand tonnes of copper and 8,172 thousand ounces of silver. The
economically mineable ore reserves are over 343 thousand ounces of
gold and more than 36 thousand tonnes of copper, which has extended
the current life of the Gedabek open pit until 2024. Table 1 shows
the Gedabek open pit mineral resources estimate at 14 March 2019
and Table 2 shows the Gedabek open pit ore reserves estimate at 14
March 2019.
Table 1 - Gedabek open pit mineral resources estimate at 14
March 2019
Gold (and Copper) Mineral Resources (cut-off grade >= 0.3 g/t gold)
Tonnage In situ grades Contained metal
Gold Copper Silver Gold Copper Silver
Grade Grade Grade
Mineral Resources (Mt) (g/t) (%) (g/t) (koz) (kt) (koz)
-------- ------- ------- ------- ------ ------- -------
Measured 18.0 0.9 0.2 8.3 532 38.0 4,800
-------- ------- ------- ------- ------ ------- -------
Indicated 11.1 0.7 0.1 5.6 264 15.7 2,011
-------- ------- ------- ------- ------ ------- -------
Measured and Indicated 29.1 0.9 0.2 7.3 796 53.7 6,811
-------- ------- ------- ------- ------ ------- -------
Inferred 8.5 0.7 0.1 5.0 189 9.7 1,361
-------- ------- ------- ------- ------ ------- -------
Total 37.6 0.8 0.2 6.8 986 63.4 8,172
------------------------ -------- ------- ------- ------- ------ ------- -------
Some of the totals in the above table do not sum due to rounding
-----------------------------------------------------------------------------------------
Copper Mineral Resource (Additional to Gold Mineral Resource) (cut-off
grade copper >=0.3% and gold <0.3 g/t)
Tonnage In situ grades Contained metal
(Mt)
-------- ------------------------- ------------------------
Mineral Resources Gold Copper Silver Gold Copper Silver
Grade Grade Grade
--------
(g/t) (%) (g/t) (koz) (kt) (koz)
-------- ------- ------- ------- ------ ------- -------
Measured 5.3 0.1 0.5 2.1 21 26.3 356
-------- ------- ------- ------- ------ ------- -------
Indicated 0.9 0.1 0.5 1.6 3 4.4 48
-------- ------- ------- ------- ------ ------- -------
Measured and Indicated 6.2 0.1 0.5 2.0 24 30.7 404
-------- ------- ------- ------- ------ ------- -------
Inferred 0.5 0.1 0.4 1.5 1 1.9 23
-------- ------- ------- ------- ------ ------- -------
Total 6.7 0.1 0.5 2.0 25 32.6 426
------------------------ -------- ------- ------- ------- ------ ------- -------
Some of the totals in the above table do not sum due to
rounding
Table 2 - Gedabek open pit ore reserves estimate at 14 March
2019
Tonnage In situ grades Contained metal
(Mt)
Gold Copper Silver Gold Copper Silver
Grade Grade Grade
(g/t) (%) (g/t) (koz) (kt) (koz)
------- ------- ------- ------ ------- -------
Proved 10.9 0.89 0.29 8.83 311 31.9 3,084
-------- ------- ------- ------- ------ ------- -------
Probable 1.2 0.82 0.34 9.52 32 4.1 373
-------- ------- ------- ------- ------ ------- -------
Proved and Probable 12.1 0.88 0.30 8.90 343 36.0 3,457
--------------------- -------- ------- ------- ------- ------ ------- -------
Some of the totals in the above table do not sum due to
rounding
The above proved and probable ore reserves estimate is based on
that portion of the Measured and Indicated Mineral Resource of the
deposit within the scheduled mine designs that may be economically
extracted, considering all "Modifying Factors" in accordance with
the JORC (2012) Code.
The latest JORC (2012) mineral resources and ore reserves
statements for the Ugur deposit were completed in 2017. Table 3
shows the Ugur open pit mineral resources estimate and Table 4
shows the Ugur open pit ore reserves estimate.
Table 3 - Ugur open pit mineral resources estimate at 1 August
2017
Mineral Resources (cut-off grade >= 0.2 g/t gold)
Mineral resources Tonnage In situ grades Contained metal
(Mt)
Gold grade silver Gold Silver
Grade
(g/t) (g/t) (oz) (oz)
----------- ------- -------- ----------
Measured 4.12 1.2 6.3 164,000 841,000
-------- ----------- ------- -------- ----------
Indicated 0.34 0.8 3.9 8,000 44,000
-------- ----------- ------- -------- ----------
Measured and Indicated 4.46 1.2 6.2 172,000 884,000
-------- ----------- ------- -------- ----------
Inferred 2.50 0.3 2.1 27,000 165,000
-------- ----------- ------- -------- ----------
Total 6.96 0.9 4.7 199,000 1,049,000
------------------------ -------- ----------- ------- -------- ----------
Some of the totals in the above table do not sum due to
rounding
Table 4 - Ugur open pit ore reserves estimate at 1 August
2017
Tonnage In situ grades Contained metal
(Mt)
Ore Reserves Gold Grade Silver Gold Silver
Grade
(g/t) (g/t) (oz) (oz)
----------- ------- -------- --------
Proved 3.37 1.3 7.2 142,000 779,000
-------- ----------- ------- -------- --------
Probable 0.22 0.8 4.1 5,000 29,000
-------- ----------- ------- -------- --------
Proved and
Probable 3.59 1.3 7.0 147,000 808,000
-------------- -------- ----------- ------- -------- --------
Some of the totals in the above table do not sum due to
rounding
The above proved and probable ore reserves estimate is based on
that portion of the Measured and Indicated Mineral Resource of the
deposit within the scheduled mine designs that may be economically
extracted, considering all "Modifying Factors" in accordance with
the JORC (2012) Code.
In March 2019, the Group published the mineral resources
statement and ore reserves estimate in accordance with the JORC
(2012) Code for its Gadir underground mine. The mineral resources
statement showed measured plus indicated mineral resources (at a
cut-off grade of 0.5 grammes per tonne of gold) of 1,775,000 tonnes
containing 145,200 ounces of gold, 736,100 ounces of silver, 3,295
tonnes of copper and 14,470 tonnes of zinc. Table 5 shows the Gadir
underground mine mineral resources estimate as at 20 August 2018.
Table 6 shows the Gadir underground mine ore reserves estimate as
at 20 August 2018.
Table 5 - Gadir underground mine mineral resources estimate at
20 August 2018
Mineral Resources (cut-off grade >= 0.5 g/t gold)
Mineral Resources Tonnage Gold Silver Copper Zinc
(kt)
-------------------- -------- -------------- -------------- ------------- --------------
(g/t) (koz) (g/t) (koz) (%) (t) (%) (t)
-------------------- -------- ------ ------ ------ ------ ----- ------ ----- -------
Measured 540 3.70 64.2 17.49 303.6 0.29 1,566 1.01 5,454
-------- ------ ------ ------ ------ ----- ------ ----- -------
Indicated 1,235 2.04 81.0 10.89 432.4 0.14 1,729 0.73 9,016
-------- ------ ------ ------ ------ ----- ------ ----- -------
Measured+Indicated 1,775 2.54 145.2 12.90 736.1 0.21 3,295 0.84 14,470
-------- ------ ------ ------ ------ ----- ------ ----- -------
Inferred 571 1.48 27.2 5.68 104.4 0.10 571 0.52 2,972
-------- ------ ------ ------ ------ ----- ------ ----- -------
Total 2,347 2.29 172.4 11.14 840.4 0.19 3,866 0.78 17,442
-------------------- -------- ------ ------ ------ ------ ----- ------ ----- -------
Some of the totals in the above table do not sum due to
rounding
Table 6 - Gadir underground mine ore reserves estimate at 20
August 2018
Ore Reserves Tonnage Gold Silver Copper
(kt)
(g/t) (koz) (g/t) (koz) (%) (t)
------ ------ ----- ----- ------
Proved 222 2.81 25 14.13 101 0.24 535
-------- ------ ----- ------ ----- ----- ------
Probable 575 2.41 45 10.99 203 0.15 852
-------- ------ ----- ------ ----- ----- ------
Proved and
Probable 797 2.73 70 11.86 304 0.17 1,387
-------------- -------- ------ ----- ------ ----- ----- ------
Some of the totals in the above table do not sum due to
rounding
The above proved and probable ore reserves estimate is based on
that portion of the Measured and Indicated Mineral Resource of the
deposit within the scheduled mine designs that may be economically
extracted, considering all "Modifying Factors" in accordance with
the JORC (2012) Code. Zinc was not estimated as part of this
reserve as it is under study at resource level currently.
Mining operations
The principal mining operation at the Gedabek contract area is
conventional open-cast mining using truck and shovel from the
Gedabek open pit (which comprises several contiguous smaller open
pits) and the Ugur open pit. Ore is first drilled and blasted and
then transported either to a processing facility or to a stockpile
for storage. The major mining activities of blast-hole drilling and
haulage of ore and waste rock are carried out by contractors, while
blasting and mining activities are carried out by the Company.
Production commenced from the Ugur open pit mine in September
2017. To enable production, a 4.6 kilometre road was constructed
between the mine and the Company's processing facilities. All
necessary surface infrastructure, including geology, medical and
HSE offices, hygiene facilities, a mechanical workshop, lubricants
and spares stores, a weighbridge and a diesel store was also
constructed at the mine site. Due to the composition of the Ugur
ore, mining of ore in the first few months of operation was by free
digging, with drilling and blasting not required. Ore was mined
from the Ugur open pit mine throughout 2018 and H1 2019.
Ore is also mined from the Gadir underground mine, the portal of
which is situated approximately one kilometre from the Gedabek open
pit. Table 7 shows the ore mined in the year ended 31 December 2018
and the six months ended 30 June 2019 from all the Company's mines
at Gedabek and Gosha.
Table 7 - Ore mined in the year ended 31 December 2018 and the 6
months to 30 June 2019
12 months to 3 months to 3 months to
31 December 2018 31 March 2019 30 June 2019
Average Average Average
Mine Ore mined gold grade Ore mined gold grade Ore mined gold grade
(tonnes) (g/t) (tonnes) (g/t) (tonnes) (g/t)
---------- ------------ ---------- ------------ ---------- ------------
Gedabek
open pit 362,412 1.06 447,496 0.73 370,153 0.70
Ugur - o/pit 1,245,104 1.27 212,788 1.88 345,461 1.32
Gadir -
u/g 125,806 4.53 40,020 2.84 49,902 2.59
Gosha -
u/g 10,988 3.44 - - - -
---------- ------------ ---------- ------------ ---------- ------------
Total 1,744,310 1.47 700,304 1.20 765,516 1.10
-------------- ---------- ------------ ---------- ------------ ---------- ------------
Processing operations
Table 8 summarises the amount of ore and its gold grade
processed by leaching at Gedabek for the year ended 31 December
2018 and the six months ended 30 June 2019.
Table 8 - Ore and its gold grade processed by leaching at
Gedabek for the year ended 31 December 2018 and 6 months ended 30
June 2019
Ore processed (tonnes) Gold grade of ore processed
(g/t)
------------------------------------- ------------------------------------
Heap leach Heap leach Agitation Heap leach Heap leach Agitation
pad pad pad pad
(crushed (ROM ore) leaching (crushed (ROM ore) leaching
Quarter ended ore) plant ore) plant
----------- ----------- ----------- ----------- ----------- ----------
31 March 2018 170,655 188,364 184,846 0.92 0.51 2.07
30 June 2018 150,573 77,493 196,107 0.91 0.51 2.19
30 September
2018 195,957 136,595 196,700 0.91 0.40 2.39
31 December 2018 154,901 131,861 173,332 0.81 0.48 2.26
----------- ----------- ----------- ----------- ----------- ----------
FY 2018 672,086 534,313 750,985 0.89 0.47 2.23
------------------ ----------- ----------- ----------- ----------- ----------- ----------
31 March 2018 127,990 133,194 171,211 0.80 0.51 2.50
30 June 2019 152,173 286,163 176,602 0.90 0.49 2.40
----------- ----------- ----------- ----------- ----------- ----------
H1 2019 280,163 419,357 347,813 0.85 0.50 2.45
------------------ ----------- ----------- ----------- ----------- ----------- ----------
Table 9 summarises the amount of ore and its gold, silver and
copper content processed by flotation for the year ended 31
December 2018 and six months ended 30 June 2019.
Table 9 - Ore and its gold, silver and copper content processed
by flotation for the year ended 31 December 2018 and six months
ended 30 June 2019
Ore processed Gold content Silver content Copper content
Quarter ended (tonnes) (ounces) (ounces) (tonnes)
-------------- -------------- --------------- ---------------
31 March 2018* 43,159 1,790 21,979 199
30 June 2018* 54,134 2,415 29,236 237
30 September
2018** 131,102 4,818 62,472 587
31 December 2018** 129,102 4,625 70,292 690
-------------- -------------- --------------- ---------------
FY 2018 357,497 13,648 183,979 1,713
-------------------- -------------- -------------- --------------- ---------------
30 June 2019 130,012 3,498 44,810 633
30 June 2019 131,161 2,412 27,288 616
-------------- -------------- --------------- ---------------
H1 2019 261,173 5,910 72,098 1,249
-------------------- -------------- -------------- --------------- ---------------
* During this time the flotation plant was operated in series
with the agitation leaching plant processing its tailings.
** During this time the flotation plant was operated
independently in parallel to the agitation leaching plant following
installation of the second jaw crusher.
Production and sales
Table 10 summarises the gold doré production and sales at
Gedabek for the year ended 31 December 2018 and six months ended 30
June 2019.
Table 10 - gold doré production and sales at Gedabek for the
year ended 31 December 2018 and six months ended 30 June 2019
Gold produced* Silver Gold sales** Gold sales
(ounces) Produced* (ounces) price
Quarter ended (ounces) ($/ounce)
31 March 2018 15,750 7,110 14,956 1,328
30 June 2018 15,537 6,014 10,822 1,307
-------------- ----------- ------------- ----------
H1 2018 31,287 13,124 25,778 1,319
---------------- -------------- ----------- ------------- ----------
30 Sept 2018 18,885 7,416 18,637 1,216
31 Dec 2018 15,444 5,646 15,066 1,231
-------------- ----------- ------------- ----------
H2 2018 34,329 13,062 33,703 1,223
---------------- -------------- ----------- ------------- ----------
FY 2018 65,616 26,186 59,481 1,265
---------------- -------------- ----------- ------------- ----------
31 March 2019 15,547 6,634 13,121 1,306
30 June 2019 16,073 4,734 13,467 1,332
-------------- ----------- ------------- ----------
H1 2019 31,620 11,368 26,588 1,319
---------------- -------------- ----------- ------------- ----------
Note that some of the figures in the above table may differ from
previously reported due to agreement of final assay.
* including Government of Azerbaijan's share
** excludes Government of Azerbaijan's share
Table 11 summarises copper concentrate production from both its
SART and flotation plants at Gedabek for the year ended 31 December
2018 and six months ended 30 June 2019.
Table 11 - copper concentrate production from both its SART and
flotation plants at Gedabek for the year ended 31 December 2018 and
six months ended 30 June 2019
Concentrate Copper Gold Silver
production* content* content* content*
Year (dmt) (tonnes) (ounces) (ounces)
------------ --------- --------- ---------
2018
Quarter ended 31 March
SART processing 223 114 6 22,118
Flotation 819 141 735 11,587
------------ --------- --------- ---------
Total 1,042 255 741 33,705
------------ --------- --------- ---------
Quarter ended 30 June
SART processing 260 137 6 21,800
Flotation 1,136 195 1,226 16,387
------------ --------- --------- ---------
Total 1,396 332 1,232 38,187
------------ --------- --------- ---------
Quarter ended 30 Sept
SART processing 162 81 7 17,357
Flotation 2,501 389 2,437 34,573
------------ --------- --------- ---------
Total 2,663 470 2,444 51,930
------------ --------- --------- ---------
Quarter ended 31 December
SART processing 109 67 13 14,229
Flotation 3,557 521 2,752 45,947
------------ --------- --------- ---------
Total 3,666 588 2,765 60,176
------------ --------- --------- ---------
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 67 8 13,066
Flotation 2,252 383 1,068 15,490
------------ --------- --------- ---------
Total 2,395 450 1,076 28,556
------------ --------- --------- ---------
Note that some of the figures in the above table may differ from
previously reported due to agreement of final assay.
* including Government of Azerbaijan's share.
Table 12 summarises copper concentrate production and sales at
Gedabek for the year ended 31 December 2018 and six months ended 30
June 2019. Note that sales of concentrates are initially recorded
at provisional amounts until agreement of final assay.
Table 12 - copper concentrate production and sales at Gedabek
for the year ended 31 December 2018 and six months ended 30 June
2019
Concentrate Copper Gold Silver Concentrate Concentrate
production* content* content* content* sales** sales**
Quarter ended (dmt) (tonnes) (ounces) (ounces) (dmt) ($000)
------------ --------- --------- --------- ------------ --------------
31 March
2018 1,042 255 741 33,705 608 1,715
30 June 2018 1,396 332 1,232 38,187 1,736 4,221
------------ --------- --------- --------- ------------ --------------
H1 2018 2,438 587 1,973 71,892 2,344 5,936
--------------- ------------ --------- --------- --------- ------------ --------------
30 Sept 2018 2,663 470 2,444 51,930 1,557 3,368
31 Dec 2018 3,666 588 2,765 60,176 3,774 6,131
------------ --------- --------- --------- ------------ --------------
H2 2018 6,329 1,058 5,209 112,106 5,331 9,499
--------------- ------------ --------- --------- --------- ------------ --------------
FY 2018 8,767 1,645 7,182 183,998 7,675 15,435
--------------- ------------ --------- --------- --------- ------------ --------------
31 March
2019 3,013 513 1,698 44,662 279 718
30 June 2019 2,395 450 1,076 28,558 4,007 6,713
------------ --------- --------- --------- ------------ --------------
H1 2019 5,408 963 2,774 73,220 4,286 7,431
--------------- ------------ --------- --------- --------- ------------ --------------
* including Government of Azerbaijan's share
** excludes Government of Azerbaijan's share
Health, safety and environmental
The Company continues to invest resources to improve its health,
safety and environment ("HSE") performance to achieve best in class
practice. The Lost Time Injury ("LTI") frequency rate (per million
man hours worked) for the six months to 30 June 2019 was 1.94
compared to 1.13 in the comparable period in 2018. The Company
continued to implement several initiatives at Gedabek to improve
safety in the period.
There were two LTI injuries during the period. Two underground
employees sustained injuries while refilling underground blasting
drill-holes. During the refilling, the roof of the sublevel
stoped-out area collapsed. The employees suffered injury as they
jumped from a three metres high bucket to avoid the roof fall. As a
result of the incident, additional training has been given to all
staff on the task and the level of experience/seniority of the
staff authorised to carry out such work increased. In the second
incident, a welder suffered first degree face burns while cutting
an excavator tooth in a cone crusher. The procedures to carry out
such tasks have subsequently been revised and training given on
them to staff and long cutting torches are now utilised to improve
the safety of the procedures.
Geological exploration activity
Gedabek
The objectives of the geological exploration programme at
Gedabek in H1 2019 were as follows:
-- Continued exploration of the copper potential at the Gedabek open pit
-- Exploration of the mineralisation potential at Gedabek underground
-- Expanded drilling at Gadir to test lateral and down-dip extents
-- To rank all ZTEM targets and commence exploration work over those considered 'high-priority'
Gedabek open pit
Nine diamond drill-holes were completed at the Gedabek open pit
area during H1 2019 totalling 1,085 metres. Eight of the
drill-holes were to increase the data density around zones to
provide continuity confidence of copper mineralisation and their
locations were focused around the north-western and south-eastern
margins of the open pit. The results will be utilised in the next
Gedabek Mineral Resource update. Notable intersections include:
Depth Downhole Gold grade Silver grade Copper grade
Drill-hole (metres) length (grammes (grammes (per cent.)
(metres) per tonne) per tonne)
19GBD04 85.00 1.00 1.17 22.00 2.07
---------- ---------- ------------ ------------- -------------
97.00 1.00 1.94 28.00 1.19
---------- ---------- ------------ ------------- -------------
19GBD07 58.00 9.00 5.07 63.53 -
---------- ---------- ------------ ------------- -------------
19GBD08 147.90 4.90 11.05 76.08 -
---------- ---------- ------------ ------------- -------------
154.50 1.00 2.29 51.88 2.25
---------- ---------- ------------ ------------- -------------
An additional diamond drill-hole was completed for geotechnical
assessment in preparation for construction of the ventilation shaft
(which is now complete); this will allow for continued tunnelling
below the open pit and exploration drilling to take place.
A total of 63 reverse circulation ("RC") drill-holes were also
completed during H1 2019 proximal to the open pit, for grade
control and near-mine exploration purposes. These were focused
around regions where modelling of the copper ore body required
constraining, in preparation for the next Mineral Resource
Estimation and mine planning.
Gadir underground mine
A total of 101 diamond drill-holes were completed:
-- three deep exploration drill-holes from surface targeting lateral extensions of the deposit;
-- 33 underground exploration drill-holes of either HQ (63.5
millimetre) or NQ (47.6 millimetre) diameter, which targeted
previously untested areas; and
-- 65 shorter underground drill-holes producing BQ-sized (36.5
millimetre) core, designed to increase confidence around sites due
for stoping.
In-house geological wireframe modelling of the results has
commenced. Notable intersections include:
Depth Downhole length Gold grade Silver grade
Drill-hole (metres) (metres) (grammes per (grammes per
tonne) tonne)
19GUD02 42.70 0.80 9.11 -
---------- ---------------- -------------- --------------
19GUD09 58.40 1.60 4.45 -
---------- ---------------- -------------- --------------
19GUD10 99.50 1.20 11.09 -
---------- ---------------- -------------- --------------
19GUD14 94.60 1.00 1.32 49.00
---------- ---------------- -------------- --------------
19GUD17 19.00 13.50 4.47 25.21
---------- ---------------- -------------- --------------
19GUD17 36.00 1.00 6.02 92.00
---------- ---------------- -------------- --------------
19GUD29 25.00 49.50 0.78 -
---------- ---------------- -------------- --------------
19GDD02 363.00 1.00 5.86 -
---------- ---------------- -------------- --------------
ZTEM Study
Significant progress was made with the ZTEM targeting; primary
ranking was completed during H1 2019, with exploration work
starting over the region. Targets currently under study include
Korogly, Zehmet and Gyzyljadag/Yagublu (ZS8 and ZS9). Gyzyljadag
and Yagublu are being evaluated concurrently due their close
proximity to each other.
Over each target, detailed field mapping is ongoing in tandem
with outcrop sample collection. At all targets, a total of 443
field outcrop samples were collected and have been assayed.
Trenching has commenced at Zehmet, with 506 samples collected
during H1 2019. Samples are being submitted to the AIMC laboratory
where they will be assayed for gold, silver, copper and zinc.
Positive field observations have included jasperoid-bearing veins
found on surface and malachite found within both quartz vein and
volcanic samples.
The Company has received results for all outcrop samples with
excellent results from Korogly and Zehmet, including one sample
showing strong limonitic alteration with a gold grade of 95.40
grammes per tonne as previously reported. Follow-up work is being
completed at all areas by way of further outcrop sampling,
trenching or ground-based magnetic surveying.
Gosha
The Group's second mining project, in the 300 square kilometer
Gosha contract area is located in western Azerbaijan, 50 kilometres
north-west of Gedabek. Gosha is the location of a small, high grade
underground mine. No mining was carried out at the Gosha mine in
the six months ended 30 June 2019.
Geological exploration activity
The objectives of the geological exploration programme at Gosha
in H1 2019 were as follows:
-- to assess the potential depth extensions of mineralisation
beneath current development at the underground Gosha mine
-- to increase data collection around Asrikchay (including
outcrop sampling, potential further diamond drilling) in order to
establish a mineralisation model and further geological
understanding of the area
-- to identify potential new areas of mineralisation and drill
targets for drilling in 2019 through mapping and outcrop
sampling
Near mine exploration
A total of nine diamond drill-holes were planned at the Gosha
near-mine area during 2019. The aim of this drill programme is to
test the Gosha vein system at depth below an existing adit
development ("Zone 5"). One drill-hole (GSHDDA01) was completed
early, in Q4 2018, and the results have been previously reported.
During H1 2019, a further six drill-holes were completed and the
two remaining drill-holes are currently in progress.
During H1 2019, a total of 1,896 metres of core was drilled at
Gosha and assayed at the Gedabek laboratory. Significant drill-hole
intersections include the following:
Depth Downhole length Gold grade
Drill-hole (metres) (metres) (grammes per
tonne)
GSHDD02 361.8 0.20 3.59
---------- ---------------- --------------
GSHDD06 259.8 11.2 0.47
---------- ---------------- --------------
With notable
intersection 265.2 0.10 5.92
---------- ---------------- --------------
GSHDD06 282.2 0.30 4.27
---------- ---------------- --------------
Preliminary analysis of these latest drilling results confirms
the dominance of gold mineralisation in the vicinity of Gosha, with
minor elevated silver and rare copper grades also intersected.
Asrikchay
Asrikchay is a recent polymetallic mineralisation discovery
within the Gosha contract area. It is approximately seven
kilometres north of the existing Gosha underground mine within the
Asrikchay valley.
No further drilling was conducted during H1 2019 at Asrikchay,
however interpretation of the previous drill results is in
progress.
The target has been divided into two adjacent areas - "QS" and
"ASKL". 19 and 8 outcrop samples were obtained during H1 2019 from
areas QS and ASKL, respectively. Some notable grades were obtained
from the QS area samples as follows:
Silver grade Copper grade
Gold grade (grammes per (per cent.)
Sample number (grammes per tonne)
tonne)
QS02 2.77 33.50 9.75
--------------- -------------- -------------
QS03 0.82 19.00 0.19
--------------- -------------- -------------
QS04 4.13 30.72 10.32
--------------- -------------- -------------
QS14 0.08 31.97 0.38
--------------- -------------- -------------
QS16 7.46 99.34 9.26
--------------- -------------- -------------
QS17 2.52 22.27 0.98
--------------- -------------- -------------
QS18 4.38 38.77 0.10
--------------- -------------- -------------
QS19 1.82 35.36 0.54
--------------- -------------- -------------
Due to grades obtained, exploration will now focus on the QS
area.
Khatinca
Exploration commenced in H1 2019. Khatinca is a target one
kilometre from the village of Khatyndzhan and approximately four
kilometres from the existing Gosha mine. Khatinca has been selected
for its favourable geology, which is similar to the Gosha mine and
its easy surface conditions for access. 22 outcrop samples were
obtained during H1 2019, but none returned notable grades. Further
work at Khatinca is planned.
Ordubad
The 462 square kilometre Ordubad contract area is located in
Nakhchivan, South West Azerbaijan and contains numerous targets
including Shakardara, Piyazbashi, Misdag, Agyurt, Shalala and
Diakchay, all of which are located within a five-kilometre radius
of each other.
Geological exploration activity
The objectives of the geological exploration programme at
Ordubad in H1 2019 were as follows:
-- to assess the extent of the copper, gold and associated mineralisation potential of Ordubad
-- to bring new mineral occurrence targets into the resource and reserve development pipeline
-- to identify potential new areas of mineralisation and drill targets for drilling in 2019
-- to determine the logistical requirements for future production
Shakardara and surrounding area (copper, gold and silver
prospects)
Results have now been returned for all 5,504 litho-geochemical
samples obtained during 2018, collected over the Shakardara, Dirnis
and Keleki targets. All samples passed QAQC checks and the data are
currently being interpreted in-house. 48 element multi-element
analysis and gold determination were completed on each sample and
show positive results. Study of these results to define anomaly
trends with integration of other geological data is ongoing.
Dirnis (copper and silver prospect)
The Dirnis prospect is located approximately 2.5 kilometres west
of the village of Dirnis. A diamond drill programme was completed
in H1 2019. 18 drill-holes totalling 3,642 metres were completed
ahead of schedule. Assaying is being conducted at the AIMC
laboratory and data for some drill-holes have been returned.
Significant intersections are as follows:
Depth Silver grade Copper grade
Drill-hole (metres) Downhole length (grammes per (per cent.)
(metres) tonne)
DRDD03 101.10 0.90 37.01 0.95
---------- ------------------ -------------- -------------
DRDD04 102.40 0.60 47.64 3.80
---------- ------------------ -------------- -------------
108.40 1.00 19.91 0.76
---------- ------------------ -------------- -------------
With notable
intersection 109.00 0.40 24.39 1.19
---------- ------------------ -------------- -------------
115.00 2.00 18.48 1.29
---------- ------------------ -------------- -------------
Results for the remainder of the holes will be reported once
available.
Keleki (gold prospect)
A drill programme was completed at Keleki in H1 2019. Ten
diamond drill-holes totalling 1,765 metres were completed. The
programme was due to commence during H2 2019, however rig
availability due to the early completion of the Dirnis drilling
allowed acceleration of the Keleki programme. The entire programme
was finished by June of 2019. Assaying is being conducted at the
AIMC laboratory and the results are expected to be available during
Q3 2019.
Destabashi
A small-scale surface geochemical sampling campaign was
completed during Q1 2019 in the southwest of Ordubad. The total
area covered was 4.2 square kilometres, spread over two zones. In
total, 244 samples were collected, and detailed geological mapping
was completed of the sampling area. 82 samples were collected from
'Zone 1' (approximately two kilometres southeast of the village of
Khanagha) whilst 162 samples were obtained from 'Zone 2' (adjacent
to the village of Desta). Samples were collected 100 metres apart
along profile lines spaced 200 metres apart. All samples have been
forwarded to Baku for sample preparation. The material has been
shipped to the ALS Minerals "OMAC" laboratory in Ireland for
multi-element geochemical analysis.
Sale of the Group's products
Important to the Group's success is the ability to transport its
products to market and sell them without disruption.
Until late 2018, the Group shipped all its gold doré to MKS
Finance SA in Switzerland for refining. In late 2018, the Group
signed an additional contract with Argor-Heraeus SA, also in
Switzerland, for the refining of gold doré. The Group contracted
with a second refiner to ensure refining services are obtained on
the best commercial terms. The Group now ships its gold doré to
both refiners. The logistics of transport and sale are well
established and gold doré shipped from Gedabek arrives in
Switzerland within three to five days. The proceeds of the
estimated 90 per cent. of the gold content of the doré can be
settled within one to two days of receipt of the doré, or the
Group, at its discretion, can sell the resulting refined gold
bullion to the refiner following refining of the doré. The Group
experienced very minor delays to its export of gold doré in H1 2019
due to delays in obtaining export permission following a
reorganisation of the Ministry of Finance of the Government of
Azerbaijan. The delays had no significant effect on the operations
of the Group and the protocol for gold export was subsequently
amended by the Government of Azerbaijan. Since the protocol was
amended, no delay in the export of gold doré has been
experienced.
The Gedabek mine site has good road transportation links and the
Company's copper and precious metal concentrate is collected by
truck from the Gedabek site by the purchaser. In 2014, the Group
commenced selling its copper concentrate produced by SART
processing to Industrial Minerals SA, a Swiss-based integrated
trading, mining and logistics group, under an exclusive three year
contract. This contract has been subsequently renewed and expanded
to include copper concentrate produced by flotation, in addition to
the SART concentrate. The latest renewal of the contract was signed
on 1 January 2019 for a period of one year, but the contract will
automatically extend unless terminated by either party.
In June 2018, the Group signed a contract with Trafigura PTE.
Limited ("Trafigura") for the sale of copper concentrates produced
by flotation processing. The contract has no expiry date unless
terminated by either party and the first shipment of concentrate
was made under the contract in September 2018. Trafigura purchase
all concentrate produced by flotation and Industrial Minerals SA
all concentrate produced by SART processing. The Group experienced
minor delays in the shipment of flotation concentrates in H1 2019
whilst Trafigura established its logistical procedures. These have
now been settled and no delays are now being experienced in the
sale of concentrates.
Financial Review
Group statement of income
The Group generated revenues in the six months ended 30 June
2019 ("H1 2019") of $43.3m (H1 2018: $40.0m) from the sales of gold
and silver bullion and copper and precious metal concentrate.
The revenues in H1 2019 included $35.2m (H1 2018: $34.1m)
generated from the sales of gold and silver bullion from the
Group's share of the production of doré bars. Bullion sales in H1
2019 were 26,588 ounces of gold and 10,155 ounces of silver (H1
2018: 25,778 ounces of gold and 13,493 ounces of silver) at the
same average price of gold as H1 2018 of $1,319 per ounce and an
average price of silver of $15 per ounce (H1 2018: $1,319 per ounce
and $17 per ounce respectively). In addition, the Group generated
revenue in H1 2019 of $8.1m (H1 2018: $5.9m) from the sale of 4,286
dry metric tonnes (H1 2018: 2,344 dry metric tonnes) of copper and
precious metal concentrate.
Total cost of sales for H1 2019 increased by $1.6m to $29.1m
compared to $27.5m in H1 2018. Cash costs in H1 2019 increased by
$2.7m to $22.3m compared to $19.6m in H1 2018 due to higher costs
for consumables and spare parts, haulage and excavation. These
higher costs were partially offset by lower drilling costs.
Depreciation increased by $2.7m from $9.1m in H1 2018 to $11.8m in
H1 2019 due to higher gold production, a small decrease in the
minable reserves and increased depreciation in respect of deferred
stripping. Accumulated mine development costs within producing
mines are depreciated and amortised on a unit-of-production basis
over the economically recoverable reserves of the mine concerned,
except in the case of assets whose useful life is shorter than the
life of the mine, in which case the straight line method is
applied. The unit of account for run of mine ("ROM") costs and for
post-ROM costs are recoverable ounces of gold.
Administration expenses in both H1 2019 and H1 2018 were $2.5m.
The Group's administration expenses comprise the cost of the
administrative staff and associated costs at the Gedabek mine site,
the Baku office and maintaining the Group's listing on AIM.
Finance costs in H1 2019 were $0.5m (H1 2018: $1.0m) and
comprise interest on loans, interest on letters of credit and
accretion expenses on the rehabilitation provision. The costs
reduced in H1 2019 compared to H1 2018 due to a significant
reduction in the average debt in H1 2019 as the Pasha Bank
refinancing loan was paid down.
The Group had a taxation charge in H1 2019 of $3.6m (H1 2018:
$3.0m). This comprised a current income tax charge of $4.2m (H1
2018: $2.5m) offset by a deferred tax credit of $0.6m (H1 2018:
charge of $0.5m). The current income tax charge of $4.2m was
incurred by R.V. Investment Group Services ("RVIG") in Azerbaijan.
RVIG had no taxable losses brought forward at 1 January 2019 and
the charge is therefore its estimated taxable profits for H1 2019
of $13.2m taxed at 32 per cent. (the rate stipulated in the Group's
production sharing agreement). However, the Group's overall tax
rate is higher than 32 per cent. because the UK administrative
costs and depreciation of mining rights in Azerbaijan cannot be
offset against the taxable profits of RVIG arising in
Azerbaijan.
All-in sustaining cost of production
The Group produced gold at an all-in sustaining cost ("AISC")
per ounce in H1 2019 of $603 compared to $543 in H1 2018. The Group
reports its cash cost as an AISC calculated in accordance with the
World Gold Council's guidance which is a standardised metric in the
industry and includes the credit from the sales of silver and
copper.
The reason for the increase in H1 2019 compared to H1 2018 was
due to an additional $2.7 million cash costs of mining a higher
volume of ore. Some of the additional ore mined has been stockpiled
for use in 2020 which will reduce mining costs next year.
Group statement of financial position
Non-current assets decreased from $98.6m at 31 December 2018 to
$90.6m at 30 June 2019. The main reason for the decrease was
property, plant and equipment being lower by $9.0m due to
depreciation in the period. Intangible assets increased from $17.0m
at 31 December 2018 to $18.1m at 30 June 2019 due to expenditure on
geological exploration and evaluation of $2.0m partially offset by
amortisation.
Net current assets were $46.1m at 30 June 2019 compared to
$33.5m at 31 December 2018. The main reasons for the increase was
an increase in cash of $5.9m and an increase in inventory of $4.8m.
The Group's cash balances at 30 June 2019 were $20.4m (31 December
2018: $14.5m). Surplus cash is maintained in US dollars and placed
on fixed deposit with several banks at tenors of between one to
three months at interest rates of around 2.0 to 2.5 per cent.
Shareholders' equity of the Group at 30 June 2019 was $105.0m
(31 December 2018: $98.4m). The increase was due to the profit
retained in the period as there were no shares issued in H1
2019.
The Group is financed by a mixture of equity and debt and the
only loans outstanding at 30 June 2019 were the remaining balance
of $5.1m of the Pasha Bank refinancing loan and a short-term
facility of $0.2m with Yapi Credit Bank. Yapi Credit Bank provide
letters of credit to the Group for purchases and the facility was
to collateralise an outstanding letter of credit.
Group cash flow statement
Operating cash inflow before movements in working capital for H1
2019 was $23.6m (H1 2018: $18.5m). The main source of operating
cash flow was operating profit before the non-cash charges of
depreciation and amortisation in H1 2019 of $23.6m (H1 2018:
$18.5m).
Working capital movements in H1 2019 absorbed cash of $3.9m (H1
2018: generated cash of $6.0m) largely due to an increase in
inventories of $4.8m (H1 2018: decrease of $2.9m). The increase in
inventories at 30 June 2019 was mainly due to higher gold doré
inventory and gold being processed due to increased heap
leaching.
Cash flows from operations in H1 2019 at $19.7m was lower than
$24.6m in H1 2018 due to the cash absorbed by the increase in
inventory in H1 2019.
The Group paid corporation tax in H1 2019 of $5.2m (H1 2018:
$nil) in Azerbaijan. These were payments on account of RVIG's
liability for the year ending 31 December 2019 of $1.4m and a final
settlement in respect of the year ended 31 December 2018 of
$3.8m
Expenditure on property, plant and equipment and mine
development in H1 2019 was $3.0m (H1 2018: $8.2m). The main items
of expenditure in H1 2019 were mine development costs of $1.5m (H1
2018: $0.5m) and capitalisation of deferred stripping costs of
$0.9m (H1 2018:$4.9m).
Exploration and evaluation expenditure was incurred and
capitalised in H1 2019 of $2.0m (H1 2018: $0.1m). This arose on
exploration at the Gedabek, Gosha and Ordubad contract areas. The
expenditure was $0.7m, $0.3m and $1.0m respectively.
Dividends
The directors have announced a policy to target a distribution
to shareholders each year comprising approximately 25 per cent. of
the Group's free cash flow. This distribution will be made in two
approximately equal installments comprising an interim and final
dividend. The amounts and timing of payment of the interim and
final dividends will be announced each year along with the Group's
interim and final results respectively. The board will review this
policy each year taking into account the financing needs of the
business at that time. Free cash flow is defined as net cash flow
from operating activities less capital expenditure and in H1 2019
was $9.6m (H1 2018: $16.3m).
The Group paid an interim and final dividend in respect of the
year ended 31 December 2018 totalling $0.07 per share. The Group
declares its dividends in United States dollars but pays the
dividends in United Kingdom pounds sterling. The dividends declared
are converted into United Kingdom pounds sterling using a five day
average of the daily sterling closing mid-price exchange rate
published by the Bank of England at 4 pm each day for a week prior
to the payment of each dividend. The week used for the averaging is
announced at the same time as the dividend.
Despite the reduced free cash flow in H1 2019, the directors
have declared an interim dividend of $0.035 per share in respect of
the financial year ending 31 December 2019 reflecting the strong
cash position and low level of debt in the Group. The dividend will
be paid on 31 October 2019 and will cost the Group $4.0m but has
not been accrued in the H1 2019 financial statements.
Production sharing agreement
In accordance with the terms of the Production Sharing Agreement
("PSA") with the Government of Azerbaijan ("Government"), the Group
and the Government share the commercial products of each mine. The
Government's share is 51 per cent. of "Profit Production". Profit
Production is defined as the value of production, less all capital
and operating cash costs incurred during the period when the
production took place. Profit Production for any period is subject
to a minimum of 25 per cent. of the value of the production. This
is to ensure the Government always receives a share of production.
The minimum Profit Production is applied when the total capital and
operating cash costs (including any unrecovered costs from previous
periods) are greater than 75 per cent. of the value of production.
All operating and capital cash costs in excess of 75 per cent. of
the value of production can be carried forward indefinitely and set
off against the value of future production.
Profit Production for the Group has been subject to the minimum
25 per cent. since commencement of production including both the
year to 31 December 2018 and the six months to 30 June 2019. The
Government's share of production in the six months to 30 June 2019
(as in all previous periods) was therefore 12.75 per cent. being 51
per cent. of 25 per cent. with the Group entitled to the remaining
87.25 per cent. The Group was therefore subject to an effective
royalty on its revenues in the six months to 30 June 2019 of 12.75
per cent. (six months to 30 June 2018: 12.75 per cent.) of the
value of its production.
The Group can recover the following costs in accordance with the
PSA for its Gedabek contract area:
-- all direct operating expenses of the Gedabek mine;
-- all exploration expenses incurred on the Gedabek contract area;
-- all capital expenditure incurred on the Gedabek mine;
-- an allocation of corporate overheads - currently, overheads
are apportioned to Gedabek according to the ratio of direct capital
and operating expenditure at the Gedabek contract area compared
with direct capital and operational expenditure at the Gosha and
Ordubad contract areas; and
-- an imputed interest rate of United States Dollar LIBOR + 4
per cent. per annum on any unrecovered costs.
Unrecovered costs are calculated separately for the three
contract areas of Gedabek, Gosha and Ordubad and can only be
recovered against production from their respective contract areas.
The methodology for the calculation of the unrecovered costs for
the Gosha and Ordubad contract areas is the same as for the Gedabek
contract area. The total unrecovered costs for the Gedabek, Gosha
and Ordubad contract areas at 30 June 2019 were $70.0m, $24.4m and
$24.0m respectively (31 December 2018: $76.9m, $23.3m and $22.2m
respectively).
Foreign currency exposure
The Group reports in US dollars and a substantial proportion of
its business is conducted in either US dollars or the Azerbaijan
Manat ("AZN") which has been stable at AZN 1 equalling
approximately $0.58 during the six months ended 30 June 2019. In
addition, the Company's revenues and the majority of its
interest-bearing debt are denominated in US dollars. The Company
currently does not have any significant exposure to foreign
exchange fluctuations and the situation is kept under review.
Going concern
The directors have prepared the Group financial statements on a
going concern basis after reviewing the Group's forecast cash
position for the period to 30 September 2020 and satisfying
themselves that the Group will have sufficient funds on hand to
meet its obligations as and when they fall due over the period of
their assessment. Appropriate rigour and diligence has been applied
by the directors who believe the assumptions are prepared on a
realistic basis using the best available information.
The Group had cash balances of $20.4 million and debt of $5.2
million at 30 June 2019. The Group is able to fund its working
capital requirements and service its borrowings from cash generated
from its operations at Gedabek. The Group's borrowings are
unsecured and without any financial covenants and all payments of
interest and principal in 2018 and 2019 to date have been made in
accordance with the terms of the relevant loan agreements. The
Group has access to local sources of both short and long term
finance should this be required.
The Group's business activities, together with the factors
likely to affect its future development, performance and position,
can be found within the chairman's statement and the strategic
report above. The financial position of the Group, its cash flow,
liquidity position and borrowing facilities are discussed within
this financial review.
After making due enquiry, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, the directors continue to adopt the going concern
basis in preparing the Condensed Group Financial Statements for the
6 months to 30 June 2019.
Anglo Asian Mining plc
Condensed group statement of income
Six months ended 30 June 2019
6 months 6 months
to to
30 June 30 June
2019 2018
(unaudited) (unaudited)
Notes $000 $000
--------------------------------- ------ ---------------------------- ------------------
Revenue 43,333 39,967
Cost of sales (29,132) (27,528)
--------------------------------- ------ ---------------------------- ------------------
Gross profit 14,201 12,439
Other income - 9
Administrative expenses (2,505) (2,492)
Other operating expense (1,004) (899)
Operating profit 10,692 9,057
Finance income 73 19
Finance costs (488) (1,010)
--------------------------------- ------ ---------------------------- ------------------
Profit before tax 10,277 8,066
Income tax 3 (3,636) (2,990)
--------------------------------- ------ ---------------------------- ------------------
Profit attributable to the
equity holders of the parent 6,641 5,076
--------------------------------- ------ ---------------------------- ------------------
Profit per share attributable
to the equity holders of
the parent 6,641 5,076
--------------------------------- ------ ---------------------------- ------------------
Basic (US cents per share) 4 5.81 4.46
Diluted (US cents per share) 4 5.81 4.45
--------------------------------- ------ ---------------------------- ------------------
Anglo Asian Mining plc
Condensed group statement of comprehensive income
Six months ended 30 June 2019
6 months 6 months
to to
30 June 30 June
2019 2018
(unaudited) (unaudited)
$000 $000
------------------------------------ ------------ -------------
Profit for the period 6,641 5,076
------------------------------------ ------------ -------------
Total comprehensive profit for
the period 6,641 5,076
------------------------------------ ------------ -------------
Attributable to the equity holders
of the parent company 6,641 5,076
------------------------------------ ------------ -------------
Anglo Asian Mining plc
Condensed group statement of financial position
30 June 2019
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
Notes $000 $000 $000
------------------------------- ------ -------------- -------------- -------------
Non-current assets
Intangible assets 5 18,139 15,251 17,031
Property, plant and equipment 6 72,192 85,966 81,150
Other receivables 7 293 1,259 436
------------------------------- ------ -------------- -------------- -------------
90,624 102,476 98,617
------------------------------- ------ -------------- -------------- -------------
Current assets
Inventory 8 38,916 31,033 34,159
Trade and other receivables 7 15,846 15,113 8,496
Cash and cash equivalents 20,481 12,547 14,540
------------------------------- ------ -------------- -------------- -------------
75,243 58,693 57,195
------------------------------- ------ -------------- -------------- -------------
Total assets 165,867 161,169 155,812
------------------------------- ------ -------------- -------------- -------------
Current liabilities
Trade and other payables 9 (21,147) (21,387) (13,224)
Taxes payable (2,714) (2,526) (3,700)
Interest-bearing loans
and borrowings 10 (5,248) (10,382) (6,750)
------------------------------- ------ -------------- -------------- -------------
(29,109) (34,295) (23,674)
------------------------------- ------ -------------- -------------- -------------
Net current assets 46,134 24,398 33,521
------------------------------- ------ -------------- -------------- -------------
Non-current liabilities
Provision for rehabilitation (9,247) (9,524) (9,028)
Interest-bearing loans
and borrowings 10 - (5,063) (1,688)
Deferred tax liability (22,465) (21,858) (23,017)
------------------------------- ------ -------------- -------------- -------------
(31,712) (36,445) (33,733)
------------------------------- ------ -------------- -------------- -------------
Total liabilities (60,821) (70,740) (57,407)
------------------------------- ------ -------------- -------------- -------------
Net assets 105,046 90,429 98,405
------------------------------- ------ -------------- -------------- -------------
Equity
Share capital 11 2,016 2,008 2,016
Share premium account 12 33 32,484 33
Share-based payment reserve - 74 -
Merger reserve 46,206 46,206 46,206
Retained earnings 56,791 9,657 50,150
Total equity 105,046 90,429 98,405
------------------------------- ------ -------------- -------------- -------------
Anglo Asian Mining plc
Condensed group statement of cash flows
Six months ended 30 June 2019
6 months 6 months
to to
30 June 30 June
2019 2018
(unaudited) (unaudited)
$000 $000
----------------------------------------------- ---- ------------- -------------
Cash flows from operating activities
Profit before taxation 10,277 8,066
Adjustments to reconcile profit before
tax to net cash flows:
Finance income (73) (19)
Finance costs 488 1,010
Depreciation of property, plant and equipment 11,998 8,456
Amortisation of mining rights and other
intangible assets 871 986
Write down of unrecoverable inventory - 34
----------------------------------------------------- ------------- -------------
Operating cash flow before movements
in working capital 23,561 18,533
(Increase) / decrease in trade and other
receivables (162) 437
(Increase) / decrease in inventories (4,757) 2,912
(Increase) / decrease in taxes payable (986) 2,526
Increase in trade and other payables 2,053 172
----------------------------------------------------- ------------- -------------
Cash flows from operations 19,709 24,580
Income tax paid (5,173) -
----------------------------------------------- ---- ------------- -------------
Net cash flow from operating activities 14,536 24,580
----------------------------------------------------- ------------- -------------
Cash flows from investing activities
Expenditure on property, plant and equipment
and mine development (3,000) (8,183)
Investment in exploration and evaluation
activities (1,979) (91)
Interest received 73 19
Net cash used in investing activities (4,906) (8,255)
----------------------------------------------------- ------------- -------------
Cash flows from financing activities
Proceeds from borrowing 403 13,995
Repayment of borrowings (3,593) (19,199)
Interest paid (499) (1,108)
----------------------------------------------------- ------------- -------------
Net cash used in financing activities (3,689) (6,312)
----------------------------------------------------- ------------- -------------
Net increase in cash and cash equivalents 5,941 10,013
Cash and cash equivalents at beginning
of period 14,540 2,534
----------------------------------------------------- ------------- -------------
Cash and cash equivalents at end of the
period 20,481 12,547
----------------------------------------------------- ------------- -------------
Anglo Asian Mining plc
Condensed group statement of changes in equity
Six months ended 30 June 2019
(unaudited)
Share-based
Share Share payment Merger Retained Total
capital premium reserve reserve earnings equity
Notes $000 $000 $000 $000 $000 $000
------------------------ ---------- --------- ------------ --------- ----------- --------
1 January 2019 2,016 33 - 46,206 50,150 98,405
Profit for the period - - - - 6,641 6,641
------------------------ ---------- --------- ------------ --------- ----------- --------
30 June 2019 2,016 33 - 46,206 56,791 105,046
------------------------ ---------- --------- ------------ --------- ----------- --------
Six months ended 30 June 2018
(unaudited)
Share-based Retained
Share Share payment Merger earnings Total
capital premium reserve reserve equity
Notes $000 $000 $000 $000 $000 $000
----------------------- ----------- --------- ------------ --------- ---------- --------
1 January 2018 2,008 32,484 74 46,206 4,581 85,353
Profit for the period - - - - 5,076 5,076
30 June 2018 2,008 32,484 74 46,206 9,657 90,429
----------------------- ----------- --------- ------------ --------- ---------- --------
Year ended 31 December 2018
(audited)
Share-based Retained
Share Share payment Merger earnings Total
capital premium reserve reserve equity
Notes $000 $000 $000 $000 $000 $000
------------------------- ----------- --------- ------------ --------- ---------- --------
1 January 2018 2,008 32,484 74 46,206 4,581 85,353
Profit for the year - - - - 16,335 16,335
Shares issued 11,12 8 141 - - - 149
Share options exercised - - (74) - 74 -
Share premium reduction
12 - (32,592) - - 32,592 -
Cash dividends paid
13 - - - - (3,432) (3,432)
------------------------- ----------- --------- ------------ --------- ---------- --------
31 December 2018 2,016 33 - 46,206 50,150 99,405
------------------------- ----------- --------- ------------ --------- ---------- --------
Anglo Asian Mining plc
Notes to the condensed group financial statements
Six months ended 30 June 2019
1 General information
Anglo Asian Mining plc (the "Company") is a company incorporated
in England and Wales under the Companies Act 2006. The Company's
ordinary shares are traded on the AIM market of the London Stock
Exchange plc. The Company is a holding company. The principal
activity of the Company and its subsidiaries (the "Group") is
operating a portfolio of mining operations and metal production
facilities within Azerbaijan.
Basis of preparation
The condensed group financial statements for the six month
period ending 30 June 2019 have been prepared in accordance with
IAS 34 'Interim Financial Reporting' as issued by the International
Accounting Standards Board. The information for the half year ended
30 June 2019 does not constitute statutory accounts as defined in
section 435 of the Companies Act 2006. A copy of the statutory
accounts for the year ended 31 December 2018 has been delivered to
the Registrar of Companies. The auditor's report on those accounts
was not qualified, did not include a reference to any matters to
which the auditor drew attention by way of an emphasis of matter
and did not contain a statement under sections 498(2) or 498(3) of
the Companies Act 2006. The condensed group financial statements
have not been audited.
The condensed group financial statements have been prepared
under the historical cost convention except for the treatment of
share based payments. The condensed group financial statements are
presented in United States dollars ("$") and all values are rounded
to the nearest thousand except where otherwise stated. In the
condensed group financial statements "GBP" and "pence" are
references to the United Kingdom pound sterling and "AZN" is a
reference to the Azerbaijan New Manat.
Accounting policies
The annual financial statements of Anglo Asian Mining plc are
prepared in accordance with IFRSs as issued by the International
Accounting Standards Board and as adopted by the European Union.
The condensed group financial statements included in this
half-yearly financial report have been prepared in accordance with
IAS 34 'Interim Financial Reporting' as issued by the International
Accounting Standards Board and adopted by the European Union.
The accounting policies adopted in the preparation of the
half-yearly condensed Group financial statements for 2019 are
consistent with those followed in the preparation of the Group's
annual report and accounts for 2018, except for the adoption of new
standards that became effective from 1 January 2019. The Group has
not adopted any other standard, interpretation or amendment that
has been issued but is not yet effective.
The Group applied, for the first time, IFRS 16 - "Leases" but
did not restate previous financial statements as the adoption of
the standard did not have a material effect on the Group's
financial statements. IFRS 16 supersedes IAS 17 Leases, IFRIC 4
Determining whether an Arrangement contains a Lease, SIC-15
Operating Leases-Incentives and SIC-27 Evaluating the Substance of
Transactions Involving the Legal Form of a Lease. The standard sets
out the principles for the recognition, measurement, presentation
and disclosure of leases and requires lessees to account for most
leases under a single on-balance sheet mode similar to the
accounting for finance leases under IAS 17.
The Group adopted IFRS 16 using the full retrospective method of
adoption, with the date of initial application of 1 January 2019.
IFRS 16 includes two recognition exemptions for lessees - leases of
'low-value' assets (i.e. personal computers) and short-term leases
(i.e. Ieases with a lease term of 12 months or less). The Group
analysed all of its lease contracts outstanding in 2018 and in the
6 months to 30 June 2019. With the exception of one lease contract,
all contracts qualify for the exemption of recognition for leases
either because the leases are of low value or are short term
leases. The accounting for the one contract recognised as a lease
under IFRS 16 had no material effect on the Group's financial
statements for either the year ending 31 December 2018 or the 6
months ending 30 June 2019 as the amount of the lease was
immaterial. The Group does not carry out any activities which would
make it a lessor.
The amendments and interpretations listed below also apply for
the first time in 2019. None of the standards have an impact on the
interim condensed consolidated financial statements of the
Group.
-- IFRIC Interpretation 23 - "Uncertainty over Income Tax
Treatments"
-- Amendments to IFRS 9 - "Prepayment Features with Negative
Compensation"
-- Amendments to IAS 28 - "Long-term Interests in Associates and
Joint Ventures"
-- Amendments to IAS 19 - "Plan Amendment, Curtailment or
Settlement"
-- Annual IFRS Improvement Process
-- IFRS 3 Business Combinations - Previously held Interests in a
joint operation
-- IFRS 11 Joint Arrangements - Previously held Interests in a
joint operation
-- IAS 12 Income Taxes - Income tax consequences of payments on
financial instruments classified as equity
-- IAS 23 Borrowing Costs - Borrowing costs eligible for
capitalisation
Going concern
The directors have prepared the Group financial statements on a
going concern basis after reviewing the Group's forecast cash
position for the period to 30 September 2020 and satisfying
themselves that the Group will have sufficient funds on hand to
meet its obligations as and when they fall due over the period of
their assessment. Appropriate rigour and diligence has been applied
by the directors who believe the assumptions are prepared on a
realistic basis using the best available information.
The Group had cash balances of $20.4 million and debt of $5.2
million at 30 June 2019. The Group is able to fund its working
capital requirements and service its borrowings from cash generated
from its operations at Gedabek. The Group's borrowings are
unsecured and without any financial covenants and all payments of
interest and principal in 2018 and 2019 to date have been made in
accordance with the terms of the relevant loan agreements. The
Group has access to local sources of both short and long term
finance should this be required.
The Group's business activities, together with the factors
likely to affect its future development, performance and position,
can be found within the chairman's statement and the strategic
report above. The financial position of the Group, its cash flow,
liquidity position and borrowing facilities are discussed within
the financial review above.
After making due enquiry, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, the directors continue to adopt the going concern
basis in preparing the Condensed Group Financial Statements for the
6 months to 30 June 2019.
2 Operating segments
The Group determines operating segments based on the information
that is internally provided to the Group's chief operating decision
maker. The chief operating decision maker has been identified as
the board of directors. The board of directors currently considers
consolidated financial information for the entire Group and reviews
the business based on the Group income statement and Group
statement of financial position in their entireties. Accordingly,
the Group has only one operating segment, mining operations. The
mining operations comprise the Group's major producing asset, the
open cast and underground mines located at the Gedabek and Gosha
licence areas, which account for all the Group's revenues and the
majority of its cost of sales, depreciation and amortisation. The
Group's mining operations are all located within Azerbaijan and
therefore all within one geographic segment.
All sales of gold and silver bullion are made to two customers
who also refine the Group's gold, MKS Finance SA and Argor-Heraeus
SA, both based in Switzerland. Copper concentrate is sold to
Industrial Minerals SA and Trafigura PTE Ltd.
3 Income tax
The income taxation charge in the 6 months ended 30 June 2019
represents a current income tax charge of $4.2m (2018 :$2.5m) and a
deferred taxation credit of $0.6m (2018: charge of $0.5m). These
current and deferred taxation charges are in respect of the
representative office registered in Azerbaijan of RV Investment
Group Services LLC (a wholly owned subsidiary of the Company). The
taxable profits of the operating company in Azerbaijan are taxed at
32 per cent. However, the overall tax rate is higher than 32 per
cent. because the UK administrative costs and depreciation of
mining rights in Azerbaijan cannot be offset against the taxable
profits arising in Azerbaijan.
The deferred taxation asset or liability is calculated at the
taxation rates that are expected to apply in the period when the
liability is settled or the asset is realised. Deferred taxation is
charged or credited in the income statement, except when it relates
to items charged or credited directly to equity, in which case the
deferred taxation is also dealt with in equity.
Deferred taxation assets and liabilities are offset when there
is a legally enforceable right to offset current taxation assets
against current taxation liabilities and when they relate to income
taxes levied by the same taxation authority and the Group intends
to settle its current taxation assets and liabilities on a net
basis.
At 30 June 2019, the Group has unused taxation losses within the
Company and a subsidiary (Anglo Asian Operations Limited) available
for offset against future profits. No deferred taxation asset has
been recognised in respect of such losses due to the
unpredictability of future profit streams. Unused taxation losses
may be carried forward indefinitely.
4 Profit per ordinary share
6 months 6 months
to to
30 June 30 June
2019 2018
(unaudited) (unaudited)
Profit per ordinary share $000 $000
Profit after tax for the
period 6,641 5,076
Basic profit per share
(US cents) 5.81 4.46
Diluted profit per share
(US cents) 5.81 4.45
------------- -------------
Weighted average number Number Number
of shares
--------------------------- ---- ------------- --- -------------
For basic earnings per
share 114,392,024 113,761,024
For diluted earnings per
share 114,392,024 114,080,623
5 Intangible assets
Exploration Exploration Exploration
& & & Other
evaluation evaluation evaluation Mining intangible
Gedabek Gosha Ordubad rights assets Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
$000 $000 $000 $000 $000 $000
-------------- ----------- ----------- ------------ -------------------- ------------ ---------------------
Cost
1 January
2018 1,110 - 4,153 41,925 529 47,717
Additions 2,326 350 192 - 8 2,876
-------------- ----------- ----------- ------------ -------------------- ------------ ---------------------
31 December
2018 3,436 350 4,345 41,925 537 50,593
Additions 683 221 1,075 - - 1,979
-------------- ----------- ----------- ------------ -------------------- ------------ ---------------------
30 June 2019 4,119 571 5,420 41,925 537 52,572
-------------- ----------- ----------- ------------ -------------------- ------------ ---------------------
Amortisation
and
impairment
1 January
2018 - - - 31,207 365 31,572
Charge for
year - - - 1,948 42 1,990
31 December
2018 - - - 33,155 407 33,562
Charge for
period - - - 849 22 871
-------------- ----------- ----------- ------------ -------------------- ------------ ---------------------
30 June 2019 - - - 34,004 429 34,433
-------------- ----------- ----------- ------------ -------------------- ------------ ---------------------
Net book
value
31 December
2018 3,436 350 4,345 8,770 130 17,031
-------------- ----------- ----------- ------------ ------ -------------------------- -------
30 June 2019 4,119 571 5,420 7,921 108 18,139
-------------- ----------- ----------- ------------ ------ -------------------------- -------
6 Property, plant and equipment
Plant
and
equipment Assets
and motor Producing under
vehicles mines construction Total
(unaudited) (unaudited) (unaudited) (unaudited)
$000 $000 $000 $000
----------------------- ------------- ------------- -------------- -------------
Cost
1 January 2018 21,899 188,972 4,381 215,252
Additions 2,205 10,091 3,722 16,018
Transfer to producing
mines - 7,581 (7,581) -
Disposal - - (209) (209)
Decrease in provision
for
rehabilitation - (1,089) - (1,089)
31 December 2018 24,104 205,555 313 229,972
Additions 283 2,436 321 3,040
30 June 2019 24,387 207,991 634 233,012
----------------------- ------------- ------------- -------------- -------------
Depreciation and
impairment
1 January 2018 16,421 111,444 - 127,865
Charge for year 1,751 19,206 - 20,957
31 December 2018 18,172 130,650 - 148,822
Charge for period 892 11,106 - 11,998
----------------------- ------------- ------------- -------------- -------------
30 June 2019 19,064 141,756 - 160,820
----------------------- ------------- ------------- -------------- -------------
Net book value
31 December 2018 5,932 74,905 313 81,105
----------------------- ------------- ------------- -------------- -------------
30 June 2019 5,323 66,235 634 72,192
----------------------- ------------- ------------- -------------- -------------
7 Trade and other receivables
30 June 2019 30 June 31 December 1 January
(unaudited) 2018 2018 2018
Non-current assets $000 (unaudited) (audited) (audited)
$000 $000 $000
--------------------------- ------------- -------------- ------------- -------------
Advances for fixed
asset purchases 293 1,244 436 860
Loans - 15 - 15
--------------------------- ------------- -------------- ------------- -------------
293 1,259 436 875
--------------------------- ------------- -------------- ------------- -------------
Current assets
--------------------------- ------------- -------------- ------------- -----------
Gold held due to the
Government of Azerbaijan 10,087 11,720 2,898 7,445
VAT refund due 776 206 312 206
Other tax receivable 1,583 811 1,016 891
Trade receivables
- amortised cost - 56 250 440
Trade receivables
- fair value 1,135 938 1,988 -
Prepayments and advances 2,160 1,275 1,927 2,187
Loans 105 107 105 107
15,846 15,113 8,496 11,276
--------------------------- ------------- -------------- ------------- -----------
* Trade receivables not subject to provisional pricing.
**Trade receivables subject to provisional pricing
Trade receivables (not subject to provisional pricing) are for
sales of gold and silver to the refiner and are non
interest-bearing and payment is usually received one to two days
after the date of sale.
Trade receivables (subject to provisional pricing) are for sales
of gold and copper concentrate and are non interest-bearing, but
are exposed to future commodity price movements over the
quotational period ("QP") and, hence, fail the 'solely payments of
principal and interest' test and are measured at fair value up
until the date of settlement. These trade receivables are initially
measured at the amount which the Group expects to be entitled,
being the estimate of the price expected to be received at the end
of the QP. Approximately 90 per cent. of the provisional invoice
(based on the provisional price) is received in cash within one to
two weeks from when the concentrate is collected from site, which
reduces the initial receivable recognised under IFRS 15. The QPs
can range between one and four months post shipment and final
payment is due between 30-90 days from the end of the QP.
The Group does not consider any trade or other receivable as
past due or impaired. All receivables at amortised cost have been
received shortly after the balance sheet date and therefore the
Group does not consider that there is any credit risk exposure. No
provision for any expected credit loss has therefore been
established at 30 June 2018 and 2019 and 31 December 2018.
The VAT refund due at 30 June 2018 and 2019 and 31 December 2018
relates to VAT paid on purchases.
Gold bullion held and transferable to the Government is bullion
held by the Group due to the Government of Azerbaijan. The Group
holds the Government's share of the product from its mining
activities and from time to time transfers that product to the
Government. A corresponding liability to the Government is included
in trade and other payables shown in note 9.
8 Inventory
30 June 2019 30 June 31 December
(unaudited) 2018 2018
$000 (unaudited) (audited)
$000 $000
---------------------------------------- ------------- -------------- -------------
Cost
Finished goods - bullion 1,214 3,610 319
Finished goods - metal in concentrate 946 82 458
Metal in circuit 16,113 12,044 14,105
Ore stockpiles 7,273 3,699 6,371
Spare parts and consumables 13,370 11,598 12,906
---------------------------------------- ------------- -------------- -------------
Total current inventories 38,916 31,003 34,159
---------------------------------------- ------------- -------------- -------------
Total inventories at the lower
of cost and net realisable value 38,916 31,003 34,159
---------------------------------------- ------------- -------------- -------------
Current ore stockpiles consist of high-grade and low-grade oxide
ores that are expected to be processed during the 12 months
subsequent to the balance sheet date.
Inventory is recognised at lower of cost or net realisable
value.
9 Trade and other payables
30 June 2019 31 December
2018
(unaudited) 30 June
2018 (unaudited) (audited)
$000 $000 $000
--------------------------------- ---------------------------------- ------------------ ------------
Accruals and other payables 5,729 4,777 5,581
Trade creditors 3,779 3,595 3,065
Gold held due to the Government
of Azerbaijan 10,087 11,720 2,898
Payable to the Government
of Azerbaijan from copper
concentrate joint sale 1,552 1,295 1,680
--------------------------------- ---------------------------------- ------------------ ------------
21,147 21,387 13,224
--------------------------------- ---------------------------------- ------------------ ------------
Trade creditors primarily comprise amounts outstanding for trade
purchases and ongoing costs. Trade creditors are non-interest
bearing. Accruals and other payables mainly consist of accruals
made for accrued but not paid salaries, bonuses, related payroll
taxes and social contributions, accrued interest on borrowings, and
services provided but not billed to the Group by the end of the
reporting period. The directors consider that the carrying amount
of trade and other payables approximates to their fair value.
The amount payable to the Government of Azerbaijan from copper
concentrate joint sale represents the portion of cash received from
the customer for the government's portion from the joint sale of
copper concentrate
10 Interest-bearing loans and borrowings
Amortised cost
30 June 2019
(unaudited) 30 June 31 December
2018 (unaudited) 2018 (audited)
$000 $000 $000
------------------------------- -------------------------------------- ------------------ ----------------
Pasha Bank - refinancing loan 5,063 11,813 8,438
Pasha Bank - other loans - 2,632 -
Yapi Credit 185 - -
Kapital Bank - 1,000 -
Total interest bearing loans
and borrowings 5,248 15,445 8,438
------------------------------- -------------------------------------- ------------------ ----------------
Loans repayable in less than
one year 5,248 10,382 6,750
Loans repayable in more than
one year - 5,063 1,688
------------------------------- -------------------------------------- ------------------ ----------------
Total interest bearing loans
and borrowings 5,248 15,445 8,438
----------------
Pasha Bank
Refinancing loan
On 8 February 2018 a subsidiary of the Group, Azerbaijan
International Mining Company Limited, entered into a refinancing
agreement with Pasha Bank OJSC, as arranger, for a syndicated loan
facility for up to $15 million to refinance the majority of the
Group's existing loans. The significant terms of the loan were as
follows:
-- Two-year term loan facility for up to $15 million at 7 per
cent. per annum fixed interest rate;
-- The loan facility is unsecured and there are no financial covenants;
-- Total arrangement fee of 0.25 per cent. of the amount borrowed; and
-- Early repayment is permitted.
A total of $13.5 million of the facility was drawn-down on the 9
and 12 of February 2018 and used to repay the following loans:
-- $2.2 million to Yapi Credit Bank;
-- $3.7 million to Amsterdam Trade Bank N. V.;
-- $3.7 million to Gazprombank (Switzerland) Ltd; and
-- $3.9 million to the Chief Executive.
The transaction was completed by the end of March 2018.
Other loans
In 2017, the Group entered into a $3.0 million loan agreement
with Pasha Bank at an interest rate of 8.5 per cent. The interest
was payable monthly and the principal was repayable in 5 equal
installments of $600,000 payable in in April, July, August and
October 2018 and January 2019.
Yapi Credit
In June 2019, the Group entered into a one year credit facility
for $185,000 with Yapi Credit to finance letters of credit issued
by Yapi Credit for the purchase of cyanide. The facility was for 1
year at an interest rate of 6 per cent. per annum. The facility was
fully utilised at 30 June 2019 but was repaid and closed subsequent
to 30 June 2019.
Kapital Bank
On 17 May 2017, the Group entered into a $1 million working
capital loan facility with Kapital Bank. The term of the loan was
for 18 months at an interest rate of 8 per cent. Interest on the
loan was payable monthly with the principal repayable at the end of
the loan. The loan was fully repaid during the year ended 31
December 2018.
Unused credit facilities
The Group had a $2 million credit facility from Yapi Credit Bank
at 30 June 2019 (31 December 2018 - $2 million, 30 June 2018 -
$nil).
11 Share capital
Ordinary
shares of
1 pence each $000
---------------------------------------- -------------- ------
Ordinary shares issued and fully paid:
1 January 2018 113,761,024 2,008
Exercise of share options 631,000 8
---------------------------------------- -------------- ------
31 December 2018 and 30 June 2019 114,392,024 2,016
---------------------------------------- -------------- ------
12 Share premium account
Six months Year ended
ended 30
June 2019
$000 31 December
2018
$000
----------------------------------- ------------ --------------
1 January 33 32,484
Issue of shares - 141
Court approved reduction - (32,592)
----------------------------------- ------------ --------------
31 December 2018 and 30 June 2019 33 33
----------------------------------- ------------ --------------
On 13 July 2018, the Company issued a circular to its
shareholders proposing a resolution to reduce its share premium
account to $nil. This resolution was passed by its shareholders at
a meeting of its shareholders on 30 July 2018.
The reduction in the share premium account to $nil was approved
by the court on 28 August 2018. The share premium account of
$33,000 at 31 December 2018 is the share premium on shares issued
subsequent to the court approved reduction.
13 Distributions made and proposed
Six months Year ended
ended 30 31 December
June
2019 2018
$000 $000
-------------------------------------------- ------------ --------------
Cash dividends on ordinary shares declared
and paid
Interim dividend for 2018: 3 US cents* per
share - 3,432
Final dividend for 2018: 4 US cents** per - -
share
-------------------------------------------- ------------ --------------
Cash dividends proposed on ordinary shares -
Interim dividend for 2019: 3.5 US cents*** 4,004 -
per share
-------------------------------------------- ------------ --------------
* the dividend was declared in United States dollars but paid in
Sterling in the amount of 2.2864 pence per ordinary share.
** the dividend was declared in United States dollars but paid
in Sterling in the amount of 3.1797 pence per ordinary share on 25
July 2019.
*** to be paid in Sterling on 31 October 2019 at a rate to be
announced.
The final dividend on ordinary shares for the year ended 31
December 2018 and the proposed interim dividend for the year ending
31 December 2019 are not recognised as liabilities in the Group
statements of financial position at 31 December 2018 or 30 June
2019.
14 Contingencies and commitments
The Group undertakes its mining operations in the Republic of
Azerbaijan pursuant to the provisions of the Agreement on the
Exploration, Development and Production Sharing for the Prospective
Gold Mining Areas: Gedabek, Gosha, Ordubad Group (Piazbashi,
Agyurt, Shakardara, Kiliyaki), Soutely, Kyzilbulag and Vejnali
Deposits dated year ended 20 August 1997 (the "PSA"). The PSA
contains various provisions relating to the obligations of the R.V.
Investment Group Services LLC ("RVIG"), a wholly owned subsidiary
of the Company. The principal provisions are regarding the
exploration and development programme, preparation and timely
submission of reports to the Government, compliance with
environmental and ecological requirements. The Directors believe
that RVIG is in compliance with the requirements of the PSA. The
Group has announced a discovery on Gosha Mining Property in
February 2011 and submitted the development programme to the
Government according to the PSA requirements, which was approved in
2012. In April 2012 the Group announced a discovery on the Ordubad
Group of Mining Properties and submitted the development programme
to the Government for review and approval according to the PSA
requirements. The Group and the Government are still discussing the
formal approval of the development programme.
The mining licence on Gedabek expires in March 2022, with the
option to extend the licence by ten years conditional upon
satisfaction of certain requirements stipulated in the PSA.
RVIG is also required to comply with the clauses contained in
the PSA relating to environmental damage. The directors believe
RVIG is substantially in compliance with the environmental clauses
contained in the PSA.
There were no significant operating lease and no capital lease
commitments at 30 June 2019 (30 June 2018 and 31 December 2018:
$nil).
15 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Group and other
related parties are disclosed below.
Trading transactions
During the period, there were no trading transactions between
group companies and related parties who are not members of the
Group.
Other related party transactions
a) Total payments in the 6 months to 30 June 2019 of $710,000 (6
months to 30 June 2018: $843,000) were made for equipment and spare
parts purchased from Proses Muhendislik Danismanlik Inshaat ve
Tasarim Anonim Shirket ("PMDI"), an entity in which the chief
technical officer of Azerbaijan International Mining Company has a
direct ownership interest. There is an outstanding advance to PMDI
of $35,000 at 30 June 2019 (30 June 2018: payable of $400,000 and
31 December 2018: payable of $51,000).
b) Total payments in the 6 months to 30 June 2019 of $852,000 (6
months to 30 June 2018: $nil) were made for equipment and spare
parts purchased from F&H Group LLC ("F&H"), an entity in
which the chief technical officer of Azerbaijan International
Mining Company has a direct ownership interest. There is an
outstanding payable to F&H of $260,000 at 30 June 2019 (30 June
2018: $nil and 31 December 2018: $nil).
16 Approval of condensed group financial statements
The condensed group financial statements of Anglo Asian Mining
plc and its subsidiaries for the six month period ended 30 June
2019 were authorised for issue in accordance with a resolution of
the directors on 17 September 2019.
**ENDS**
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 recently
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 83,736 gold equivalent ounces ('GEOs') for
the year ended 31 December 2018. 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 dore 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. A second
dedicated crusher line has been commissioned and is now in
operation for the flotation plant to enable it to operate
independently of, and in parallel with, the agitation leaching
plant.
The Company has forecast metal production for FY 2019 of between
82,000 to 86,000 GEOs for the year ending 31 December 2019.
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR GGUBPBUPBPUM
(END) Dow Jones Newswires
September 18, 2019 02:01 ET (06:01 GMT)
Anglo Asian Mining (LSE:AAZ)
Historical Stock Chart
From Mar 2024 to May 2024
Anglo Asian Mining (LSE:AAZ)
Historical Stock Chart
From May 2023 to May 2024