REG - Anglo Asian Mining - Interim Results
15/09/2022 07:00
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RNS Number : 5142Z Anglo Asian Mining PLC 15 September 2022
Anglo Asian Mining plc / Ticker: AAZ / Index: AIM / Sector: Mining
15 September 2022
Anglo Asian Mining plc
Interim Results for the six-months to 30 June 2022
FY 2022 Production Guidance at 54,000 to 58,000 gold equivalent ounces
Interim Dividend for 2022 of US 4 cents per ordinary share
Anglo Asian Mining plc ("Anglo Asian", the "Company" or the "Group"), the
AIM-listed copper, gold, and silver producer in Azerbaijan, is pleased to
announce its interim results for the six-months ended 30 June 2022 ("H1
2022"). The Group has achieved encouraging progress in a difficult external
environment. Anglo Asian is pleased to announce its full year 2022 ("FY 2022")
production guidance of 54,000 to 58,000 gold equivalent ounces ("GEOs").
The Company also announces its 2022 interim dividend of US 4 cents per
ordinary share payable on 3 November 2022 to shareholders on record on 30
September 2022.
Financial highlights
· Total revenues of $31.5 million (H1 2021: $43.5 million)
o Lower gold doré sales of 11,273 ounces (H1 2021: 19,582 ounces) partially
offset by higher average gold sales price of $1,901 per ounce (H1 2021: $1,776
per ounce)
o Unsold gold inventory on 30 June 2022 of $13.0 million valued at the market
price on that date
· Profit before taxation of $5.7 million (H1 2021: $5.9 million)
o Profit before taxation includes a total charge of $1.6 million in respect of
Libero Copper & Gold Corporation ("Libero") which became an associate
company of the Group in January 2022
· All-in sustaining cost ("AISC") of gold production increased to $983
per ounce (H1 2021: $848 per ounce)
o Total costs were broadly flat as higher electricity and material costs were
offset by lower cyanide usage but lower gold production resulted in a higher
AISC per ounce
· Free cash flow was a net outflow of $13.2 million (H1 2021: $0.4
million) due to an increase in working capital of $17.2 million mainly due to
unsold gold inventory at 30 June 2022
· Cash of $21.2 million as at 30 June 2022 (31 December 2021: cash of
$37.5 million) and the Company remains debt free
· 2022 interim dividend declared of US 4 cents per ordinary share
o Dividend modestly increases the pay-out in Sterling at current exchange
rates due to the depreciation in the value of the pound Sterling against the
US dollar
Operational highlights
· Total production of 28,772 GEOs (H1 2021: 32,171 GEOs) due to lower
gold grades at Gedabek
o Gold production of 20,906 ounces (H1 2021: 24,247 ounces)
o Copper production of 1,283 tonnes (H1 2021: 1,333 tonnes)
o Silver production of 99,499 ounces (H1 2021: 78,980 ounces)
· Gold bullion sales of 11,273 ounces (H1 2021: 19,582 ounces)
completed at an average price of $1,901 per ounce (H1 2021: $1,776 per ounce)
· Excellent progress made at Zafar towards commencing mining next
year
o Final JORC ore resource published in March 2022
o Location of portal established and acquisition of the mining fleet underway
o First new centrifugal flotation cell for zinc production line under test
· Good progress at Vejnaly and Gosha
o Mine camp now established at Vejnaly and activity ramping up
o Underground tunnelling towards new Hasan vein at Gosha nearing
completion
· FY 2022 production guidance of between 54,000 to 58,000 gold
equivalent ounces
o Production from Hasan and Vejnaly should result in production at the upper
end of the guidance range, rather than increasing the upper end of the
potential total production
Post-period highlights
· The Company's revised production sharing agreement became law in
Azerbaijan, granting the Company three new contract areas
o The new Garadagh, Xarxar and Demirli contract areas underpin the Company's
growth strategy and ambition to become a mid-tier, copper-focused miner
o A detailed review of the previous exploration and other data for Garadagh
and Xarxar is underway and will be published as part of our 3 to 5 year growth
strategy
o New portal constructed at Xarxar and tunnelling commenced immediately
· Share buyback of 100,000 shares bought at an average price of
85.625 pence per share
· Further investment in Libero of $0.8 million during a fundraise
which maintained our shareholding at 19.9 per cent.
· With great sadness and regret the Company announces the first
fatality in its history at the Xarxar contract area
o An external investigation has cleared the Company of any blame for the
accident and mining and exploration activities have not been affected by this
tragic incident
Anglo Asian CEO Reza Vaziri commented:
"I am pleased to report these interim results for 2022. The Company produced
28,722 gold equivalent ounces during the period, down slightly versus last
year, although this was expected due to lower gold grades at Gedabek. We are
pleased to announce our full year production guidance of 54,000 to 58,000 gold
equivalent ounces. We are expecting a modest amount of production from Vejnaly
and the Hasan vein at Gosha this year so anticipate an outcome at the upper
end of the guidance. I am also very pleased to announce an interim dividend of
four United States cents per share. For the majority of our shareholders, who
are based in the United Kingdom, this will be an increase in their Sterling
interim dividend at current exchange rates.
"We made significant progress in the development of our portfolio with
excellent progress made at Zafar, Vejnaly and Hasan, all of which will enter
production in the next 3 to 12 months. This will ease our reliance on
production from Gedabek as they are set to produce meaningful quantities of
ore next year.
"This is an exciting time for Anglo Asian Mining, with the acquisition of our
three new contract areas. These will transform our business and are
substantial drivers for growth. We are in the process of further developing
our growth strategy which I look forward to publishing later in 2022."
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have been deemed
inside information for the purposes of Article 7 of Regulation (EU) No
596/2014, which was incorporated into UK law by the European Union
(Withdrawal) Act 2018, until the release of this announcement.
For further information please contact:
Reza Vaziri Anglo Asian Mining plc Tel: +994 12 596 3350
Bill Morgan Anglo Asian Mining plc Tel: +994 502 910 400
Stephen Westhead Anglo Asian Mining plc Tel: +994 502 916 894
Ewan Leggat SP Angel Corporate Finance LLP Tel: +44 (0) 20 3470 0470
Adam Cowl Nominated Adviser and Broker
Charlie Jack Hudson Sandler Tel: +44(0) 20 7796 4133
Harry Griffiths
Chairman's Statement
Dear Shareholders
I am delighted to present our Interim Results for 2022. Our operations
delivered a solid performance in the period, with total production of 28,772
GEOs, in line with our expectations. Production was slightly weaker than last
year due to lower gold grades at Gedabek.
Our full year production guidance is now reaffirmed at the upper end of the
range between 54,000 to 58,000 gold equivalent ounces and the Company remains
in a strong financial position. Accordingly, the board is pleased to declare
an interim dividend for 2022 of US 4 cents per ordinary share, reflecting our
underlying confidence in the business and its growth prospects.
We have made significant progress in the year despite the adverse environment.
We were delighted that our revised production sharing agreement was passed
into law in July 2022 with the resulting acquisition of Xarxar, Garadagh and
Demirli. This is a major milestone for the Company and now underpins our
growth plans. We subsequently acquired the historical geological and other
data for Garadagh and Xarxar, which is currently being analysed.
We also made considerable progress with our other mining properties. We have
established a mine camp at Vejnaly and mining will commence later this year.
The final JORC mineral resource for Zafar was published, mine planning is
proceeding at pace and mining will commence next year. Our exploration
programme continues to yield results with the announcement of another new
discovery in the year, "Hasan", a narrow gold vein accessible from our
existing Gosha mine.
We increased our investment in Libero in January 2022 which became an
associate company of the Group. Libero is a mineral exploration company that
holds a portfolio of exciting porphyry copper deposits throughout the
Americas. This is the first international investment the Group has completed
and reflects our ambition of mid-tier copper status and to operate beyond
Azerbaijan. We have so far been encouraged by the developments across Libero's
portfolio and Anglo Asian will provide invaluable expertise in developing
their projects.
The Company's Annual General Meeting ("AGM") took place on 23 June 2022, and
we were delighted to hold this in-person. The directors were pleased to have
the opportunity to meet shareholders again and we look forward to continuing
to engage with all stakeholders throughout the rest of the year and into 2023.
We executed share buybacks following approval by shareholders at the Company's
recent AGM and General Meeting. We aim to opportunistically buy back shares
when we believe they are undervalued by the market. The shares will be held in
treasury and be available for resale. This will enable institutional investors
to acquire a meaningful investment in the Company. This is currently very
difficult in the open market due to the very low liquidity of our shares. To
date, 100,000 shares have been acquired at an average price of 85.625 pence.
It is with great sadness and regret that I must announce that the Company
experienced its first employee fatality in early July. An employee lost
control of a loader he was driving up a hill at Xarxar and was killed in the
resulting accident. An external investigation has cleared the Company of any
blame for the incident. Anglo Asian remains committed to the upmost standards
of health and safety for all our employees, and we continue to offer our full
support to the family of the bereaved to whom we extend our deepest
condolences.
Our strategy for the Group remains unchanged. Our near-term focus continues to
be increasing production at our currently active contract areas of Gedabek,
Gosha and Vejnaly. Longer-term Garadagh, Demirli and Libero have significantly
increased our exposure to copper and are key growth drivers. We have made
considerable progress with this strategy during the year, and we look forward
to advancing this progress in the coming months and years.
I would like to extend my sincere gratitude to all Anglo Asian employees,
partners and the Government of Azerbaijan for their continued support in what
continue to be challenging times. I also wish to thank our shareholders for
their unwavering support of Anglo Asian Mining.
Khosrow Zamani
Non-executive chairman
14 September 2022
Chief Executive Officer's Review
I am pleased to report the results on Anglo Asian's 2022 interim performance.
We held cash on 30 June 2022 of $21.2 million, with revenues of $31.5 million
and profit before taxation of $5.7 million. I am particularly pleased with the
progress across our portfolio of assets during the year with significant
exploration and development milestones reached.
Operational Review
Total production during the period was 28,772 gold equivalent ounces, which
was a decline compared to 2021, but this was expected, due to lower grades at
Gedabek. Our existing mines at Gedabek are currently our main operational
assets, but we look forward shortly to bringing additional mines into
production to counteract the declining production of these older mines.
In March, we announced the discovery of Hasan at Gosha, a new sub-vertical
gold vein discovered by surface drilling towards the south of the main mine.
There are significant operational synergies to be realised, as the vein is
easily accessible from the existing network of underground tunnels at Gosha.
Activity at Vejnaly has also ramped up, with land clearance activities now
completed and staff permanently based on site. Production at Hasan and Vejnaly
is due to commence before the end of the year and will provide meaningful
quantities of ore from 2023.
The final JORC Mineral Resource for Zafar was released during the period,
confirming 6.8 million tonnes of mineralisation. This contains 28,000 tonnes
of copper, 73,000 ounces of gold and 36,000 tonnes of zinc. Encouragingly, the
upper part of the resource has been defined as more massive and continuous,
which will result in more efficient and cost-effective operations in the early
stages of exploitation. Considerable progress has been made towards starting
production at Zafar next year. The location of the mine's portal close to our
production facilities has been established and the mining fleet is being
acquired. A new flotation line will be built to produce zinc concentrate using
centrifugal flotation cells and the first of these new flotation cells is
currently under test at Gedabek. We anticipate total capital costs to bring
Zafar into production will be approximately $15 million.
In January 2022, Anglo Asian announced that it had completed its investment in
Libero, our first ever investment completed outside of Azerbaijan. Libero
holds significant copper deposits across North and South America at the
developmental stage. We acquired a 19.8 per cent. interest through a private
placing in January and in July, we followed up with a further investment to
maintain our holding. In January, Michael Sununu was appointed to Libero's
board of directors, and a technical committee was established. Farhang Hedjazi
was appointed to the technical committee and visited Libero's properties in
Argentina and Colombia.
In July, Anglo Asian was delighted to receive parliamentary ratification for
its three new contract areas. This ratification is a testament to our strong,
ongoing relationship with the Government of Azerbaijan. These assets are
transformational for the Company and underpin our strategy to transition into
a copper-focused miner with mid-tier production status. Having recently
acquired geological and other data for Garadagh and Xarxar, an assessment is
now underway to determine how best to develop these assets. Once complete,
this will form a key component of our growth strategy. Xarxar already has an
existing portal and exploration tunnel developed during the Soviet period.
Part of the old tunnel has collapsed near the portal, and so Company has
opened a new portal and is developing a parallel tunnel to access the rest of
the original tunnel to the deposit.
Financial Review
Anglo Asian performed in keeping with expectations with a half-year revenue of
$31.5 million, down from $43.5 million in 2021. This includes $21.7 million
generated from sales of gold and silver bullion versus $35.0 million in 2021.
Both these decreases were expected, given the previously indicated decreasing
rate of production at the existing mines at Gedabek and the higher inventory
at 30 June 2022.
Free cash flow from operations was an outflow of $13.2 million compared to
$0.4 million in H1 2021 due to an increase in inventories of $12.1 million
arising primarily from an increase in unsold gold to 7,167 ounces.
The Group managed costs satisfactory during the period, amid a challenging
macro-economic backdrop. We were subject to higher input costs such as energy,
reagent and consumables due to cost inflation and the indirect impact of the
Russian invasion of Ukraine. However, decreased use of reagents and in
particular cyanide, resulted in our costs being broadly flat. Due to the lower
gold production, our all-in sustaining cost of gold production increased in H1
2022 to $983 per ounce compared to $848 in H1 2021.
Our balance sheet remains strong, with cash of $21.2 million at period end.
This leaves us well positioned to pursue our growth strategy and any potential
investment opportunities that we deem attractive, as well as maintain our
dividend.
The board are pleased to recommend an interim dividend of US 4 cents per
ordinary share payable to shareholders on the register at the record date of
30 September 2022. This dividend modestly increases our dividend pay-out in
Sterling at current exchange rates for our shareholders, the majority of who
are based in the United Kingdom.
Environmental, social and governance ("ESG")
Anglo Asian is in the process of completing an ESG review, ascertaining the
priorities of our stakeholders for the Company so we can ensure that these are
fully included. This forms part of our strong commitment to ESG and delivering
these for our shareholders, endeavoring to achieve relevant best-in-class
standards and ensure we always maintain our social license to operate.
Outlook
We will continue our strategy of focusing on organic growth opportunities to
maintain and increase our production in the near future. Longer-term, our
planning has now started to exploit our new contract areas. We will continue
to prioritise maintaining attractive returns for shareholders and are proud of
our position as one of AIM's reliable dividend payers.
Reza Vaziri
President and chief executive
14 September 2022
Dividend
An interim dividend, in respect of the year ending 31 December 2022, of US 4
cents per ordinary share will be paid gross on 3 November 2022 to shareholders
that are on the shareholders record at the record date of 30 September 2022.
The shares will go ex-dividend on 29 September 2022. 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 3 to 7 October 2022.
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
(http://www.angloasianmining.com/media/pdf/CORPORATE_GOVERNANCE.pdf)
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 Vice President, who is a Fellow of The Geological Society of
London, a Chartered Geologist, Fellow of the Society of Economic Geologists,
Fellow 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 Fellow 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
Anglo Asian Mining PLC (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 owns multiple exploration
and development stage gold and copper deposits in Azerbaijan.
In January 2022, the Group completed its first investment outside of
Azerbaijan, acquiring 19.8 per cent. of Libero Copper & Gold Corporation
("Libero"), which is listed on the TSX Venture Exchange in Toronto. Libero
owns several significant copper exploration properties in North and South
America, including Mocoa in Colombia, one of the world's largest undeveloped
copper-molybdenum resources.
Mining concessions in Azerbaijan
The Group's mining concessions in Azerbaijan are held under a Production
Sharing Agreement with the Government of Azerbaijan ("PSA") dated 20 August
1997. Amendments to the PSA granting the Group three new mining concessions
became law in Azerbaijan on 5 July 2022.
The Group's mining concessions are called "Contract Areas" and the original
PSA in 1997 granted the Group six Contract Areas. The amended PSA on 5 July
2022 granted the Group three additional Contract Areas (Garadagh, Xarxar and
Demirli). In return for the new Contract Areas, the Group relinquished access
to the Soutely Contract Area.
The Group now has eight Contract Areas covering a total of 2,544 square
kilometres in western Azerbaijan:
· Gedabek. The location of the Group's primary gold, silver and copper
open pit mine and the Gadir and Gedabek underground mines. The Group's
processing facilities are also located at Gedabek.
· Gosha. Located approximately 50 kilometres from Gedabek and hosts a narrow
vein gold and silver mine.
· Ordubad. An early-stage gold and copper exploration project located in
the Nakhchivan exclave.
· Garadagh. Located to the north of Gedabek and hosts the Garadagh deposit
which contains 168,000 and 150,700 tonnes of copper in Soviet resource
classifications C1 and C2, respectively, totalling 318,700 tonnes of copper.
· Xarxar. Adjacent to Garadagh and shows significant potential as it is
likely part of the same mineral system.
· Kyzlbulag. Situated in Karabakh. Hosts the Demirli deposit, a
copper/molybdenum mine and a processing plant.
· Demirli. Adjacent to the Kyzlbulag Contract Area and expands this Contract
Area to the north-east.
· Vejnaly. Situated in the Zangilan district of Azerbaijan and hosts the
Vejnaly deposit.
There is currently no access to the Kyzlbulag and Demirli contract areas in
Karabakh and the PSA will only commence in respect of these two contract areas
upon notification by the Government of Azerbaijan to the Company of the
cessation of all hostilities and that it is safe to access the district.
Overview of H1 2022
The Company's strategy is to transition into a mid-tier copper-focused
producer, which will be achieved through progressing its significant
development and exploration assets, with the aim to create considerable
shareholder value. This will favourably position Anglo Asian for the upcoming
electrification and decarbonization era.
In January 2022, the Group announced the acquisition of the remaining 10 per
cent. of its investment in Libero, taking it to 19.8 per cent. Michael Sununu
was appointed to Libero's Board of Directors and a technical committee was
established to which Farhang Hedjazi was appointed as Anglo Asian's
representative. In July 2022, Anglo Asian announced a follow-on investment in
Libero via another private placement, to slightly increase its shareholding to
19.9 per cent. This was part of a fundraising by Libero to develop its Big Red
porphyry copper project in British Columbia.
In March 2022, the Group announced the discovery of a significant new
sub-vertical gold vein, "Hasan", at Gosha. Mining is planned to commence at
Hasan in Q4 2022. Also in March 2022, the final Mineral Resource estimate for
the Zafar deposit was released. Planning for the new Zafar mine continued at
pace throughout H1 2022.
Activity was steadily increased at Vejnaly throughout H1 2022 following access
being obtained in late 2021. A camp has been established and staff are now
permanently located at Vejnaly, where mining operations are planned to
commence, also in Q4 2022.
Production target for FY 2022
The Group has a production target for the year to 31 December 2022 of 40,000
ounces to 43,000 ounces of gold and 2,400 tonnes to 2,500 tonnes of copper.
The total production target for the year to 31 December 2022 expressed as gold
equivalent ounces ("GEOs") is between 54,000 GEOs and 58,000 GEOs, compared to
total production for the year to 31 December 2021 of 64,610 GEOs. The decrease
in production is due to declining ore grades at the Gedabek mine. Silver and
copper production were converted into GEOs using the following budget metal
prices:
Price of metal Gold equivalent ounces of metal
Metal Unit Actual Budget 2022 Actual Budget
31 December 2021 31 December 2021 2022
$ Ounces Ounces
$
Gold per ounce 1,790.43 1,750.00 1.000 1.000
Silver per ounce 22.53 23.00 0.013 0.013
Copper per tonne 9,692.00 9,300.00 5.413 5.314
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, the Gadir and Gedabek underground mines, the Zafar deposit and the
Company's processing facilities.
Gold production at Gedabek commenced in September 2009. Ore was initially
mined from an open pit, with underground mining commencing in 2015 when the
Gadir mine was opened. In 2020, underground mining commenced beneath the main
open pit (the "Gedabek underground mine"). The Gedabek and Gadir underground
mines have now been connected to form one continuous underground system of
tunnels.
Initial gold production was by heap leaching, with copper production beginning
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. From the start
of production in 2009 to 30 June 2022, approximately 765 thousand ounces of
gold and 17.6 thousand tonnes of copper have been produced at Gedabek.
Mineral resources and ore reserves
Key to the future development of the Company is our knowledge of the mineral
resources within the Company's Contract Areas. The Group's most recent mineral
resources and ore reserves estimates for the Gedabek open pit and Gadir
underground mine were published on 2 November 2020. A final mineral resources
statement for the Zafar deposit was published on 21 March 2022. A summary of
these estimates as of 30 June 2020 are given in Tables 1 to 4 below (amounts
are in-situ before recovery).
Table 1 shows the Gedabek open pit mineral resources estimate and Table 2
shows the Gedabek open pit ore reserves estimate. Table 3 shows the Gadir
underground mine mineral resources estimate and Table 4 shows the Gadir
underground mine ore reserves estimate. Table 5 shows the final Zafar mineral
resources estimate at 30 November 2021. Table 6 shows the Soviet Resource for
the Vejnaly deposit.
Table 1 - Gedabek open pit mineral resources estimate at 30 June 2020
MINERAL RESOURCES (cut-off grade of 0.2 g/t gold)
In-situ grades Contained metal
Mineral Tonnage
Resources
(Mt)
Gold Copper Silver Zinc grade Gold Copper Silver Zinc
grade grade grade (%)
(g/t) (%) (g/t) (koz) (kt) (koz) (kt)
Measured 15.8 0.66 0.12 2.58 0.24 335 19.0 1,311 37.9
Indicated 12.0 0.56 0.12 2.31 0.16 216 14.4 891 19.2
Measured and
Indicated
27.8 0.62 0.12 2.46 0.21 551 33.4 2,202 57.1
Inferred 13.0 0.44 0.06 0.61 0.15 184 7.8 255 19.5
TOTAL 40.8 0.56 0.10 1.87 0.19 735 41.2 2,457 76.6
Some of the totals above may not add due to rounding
ADDITIONAL MINERAL RESOURCES (additional to gold mineral resource)
(gold cut-off < 0.2 g/t and copper > 0.3 %
Gold Copper Silver Zinc Contained metal
Tonnage Gold Tonnage Copper Tonnage Silver Tonnage Zinc grade Gold Copper Silver Zinc
grade grade grade (%)
(Mt) (g/t) (Mt) (%) (Mt) (g/t) (Mt) (koz) (kt) (koz) (kt)
Measured - - 2.15 0.43 0.08 16.4 1.86 0.53 - 9.2 42 9.9
Indicated - - 2.13 0.34 0.28 13.9 2.03 0.51 - 7.2 125 10.4
Measured and
Indicated
- - 4.28 0.39 0.36 14.5 3.89 0.52 - 16.5 167 20.2
Inferred - - 2.85 0.40 0.15 19.4 7.04 0.54 - 11.4 94 38.0
TOTAL - - 7.10 0.39 0.51 15.9 10.9 0.50 - 27.9 261 58.2
Some of the totals above may not add due to rounding
Mineral resource classifications are based on the gold estimation
confidence. Copper, silver, and zinc are reported within these
classifications.
Stockpiles included in Measured Resources and Ore Reserves
Measured Mineral Resources Stockpile grades Contained metal
Tonnage
(Mt)
Gold Copper Silver Gold Copper Silver
grade grade grade
(g/t) (%) (g/t) (koz) (kt) (koz)
Agitation leach 0.02 1.87 0.24 17.79 1 - 10
Flotation 0.14 0.90 0.53 11.71 4 0.7 53
Heap leach (crushed) 0.06 0.81 0.11 7.71 2 0.1 16
Heap leach (ROM) 0.61 0.73 0.21 10.23 14 4.3 201
Stockpile Mineral Resources 0.83 0.79 0.26 10.44 21 2.2 279
Some of the totals above may not add due to rounding
Table 2 - Gedabek open pit ore reserves estimate at 30 June 2020
In-situ grades Contained metal
Tonnage
(Mt)
Gold Copper Silver Gold Copper Silver
grade grade grade
(g/t) (%) (g/t) (koz) (kt) (koz)
Proven 8.07 0.72 0.19 3.48 187 15.3 902
Probable 3.65 0.64 0.23 4.87 75 8.5 572
In-situ ore reserves 11.72 0.70 0.20 3.91 263 24 1,474
Stockpile grades
Agitation leach 0.02 1.87 0.24 17.79 1 - 10
Flotation 0.14 0.90 0.53 11.71 4 0.7 53
Heap leach (crushed) 0.06 0.81 0.11 7.71 2 0.1 16
Heap leach (ROM) 0.61 0.73 0.21 10.23 14 4.3 201
Stockpile ore reserves 0.83 0.79 0.26 10.44 21 2.2 279
TOTAL ORE RESERVES 12.55 0.70 0.21 4.34 284 26.0 1,754
Some of the totals above may not add due to rounding
Proved and probable ore reserves estimate is based on that portion of the
measured and indicated mineral resources of the deposit within the scheduled
mine designs that may be economically extracted, considering all "Modifying
Factors" in accordance with the JORC (2012) Code.
Table 3 - Gadir underground mine mineral resources estimate at 30 September
2020
MINERAL RESOURCES (cut-off grade of 0.5 g/t gold)
In-situ grades Contained Metal
Mineral Tonnage
Resources
(kt)
Gold Copper Silver Zinc grade Gold Copper Silver Zinc
grade grade grade (%)
(g/t) (%) (g/t) (koz) (t) (koz) (t)
Measured 2,035 2.47 0.09 4.69 0.61 162 1,831 307 12,407
Indicated 966 1.59 0.02 0.63 0.33 49 193 20 3,188
Measured and
Indicated
3,001 2.19 0.07 3.40 0.52 211 2,024 326 15,595
Inferred 1,594 1.10 0.01 0.03 0.10 56 159 2 1,594
TOTAL 4,595 1.81 0.05 2.22 0.37 267 2,183 328 17,189
Some of the totals above may not add due to rounding
Table 4 - Gadir underground mine ore reserves estimate at 30 September 2020
In-situ grades Contained metal
Tonnage
(Mt)
Gold Copper Silver Gold Copper Silver
grade grade grade
(g/t) (%) (g/t) (koz) (t) (koz)
Proven 0.47 2.32 0.04 3.38 35 173 51
Probable 0.19 2.20 0.01 0.74 14 18 5
TOTAL ORE RESERVE 0.66 2.28 0.03 2.60 49 191 56
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.
Table 5 - Zafar mineral resources estimate at 30 November 2021
Copper > 0.3 per cent. copper equivalent
Tonnage In-situ grades Contained metal
(Mt)
Copper Gold Zinc Copper Gold Zinc
(%) (g/t) (%) (kt) (kozs) (kt)
Measured and indicated 5.5 0.5 0.4 0.6 25 64 32
Inferred 1.3 0.2 0.2 0.3 3 9 3
Total 6.8 0.5 0.4 0.6 28 73 36
Note that all tonnages reported are dry metric tonnes. Totals may not add due
to rounding.
Table 6 - Soviet resource of the Vejnaly deposit
Metal content
Units Category C1 Category C2 Total C1 and C2
Ore tonnes 181,032 168,372 349,404
Gold content kilograms 2,148.5 2,264.2 4,412.7
Silver content kilograms 6,108.9 4,645.2 10,754.1
Copper content tonnes 1,593.6 1,348.8 2,942.4
Previously heap leached ore
Gold production at Gedabek from 2009 to 2013 was by heap leaching crushed ore
until the start-up of the agitation leaching plant in 2013. The heaps remain
in-situ and given the high grade of ore processed prior to the commencement of
agitation leaching, and the lower recovery rates, much of the previously heap
leached ore contains significant amounts of gold. This is now being processed
by agitation leaching. Table 7 shows the amount of previously heap leached ore
processed in H1 2022.
Table 7 - Amount of previously heap leached ore processed in H1 2022
In-situ material Average gold grade
(t) (g/t)
Total: 1 January 2022 1,586,313 1.36
Processed in H1 2022 (132,523) 1.27
Total: 30 June 2022 1,453,790 1.37
Mining operations
The principal mining operation at the Gedabek contract area is conventional
open-cast mining using trucks and shovels from the Gedabek open pit (which
comprises several contiguous smaller open pits).
Ore is also mined from the Gadir and Gedabek underground mines. Table 8 shows
the ore mined in the year ended 31 December 2021 and the 6 months ended 30
June 2022 from all the Company's mines. There was no mining at Gosha during
these eighteen months.
Table 8 - Ore mined at Gedabek from all mines (including Gosha) for the year
ended 31 December 2021 and the six months to 30 June 2022
12 months to 3 months to 3 months to
31 December 2021 31 March 2022 30 June 2022
Mine Ore mined Average Ore mined Average Ore mined Average
gold grade gold grade gold grade
(tonnes) (g/t) (tonnes) (g/t) (tonnes) (g/t)
Open pit 1,815,857 0.74 469,500 0.52 441,041 0.47
Gadir - u/g 115,943 1.91 30,712 1.44 36,295 1.43
Gedabek - u/g 248,792 1.42 77,937 1.60 111,827 1.25
Total 2,180,592 0.80 578,149 0.71 589,163 0.68
Processing operations
Ore is processed at Gedabek to produce either gold doré (an alloy of gold and
silver with small amounts of impurities, mainly copper) or a copper and
precious metal concentrate.
Gold doré is produced by cyanide leaching. Initial processing is to leach
(i.e. dissolve) the precious metal (and some copper) in cyanide solutions.
This is done by various methods:
1 Heap leaching of crushed ore. Crushed ore is heaped into permeable
"pads" onto which is sprayed a solution of cyanide. The solution dissolves the
metals as it percolates through the ore by gravity and it is then collected by
the impervious base under the pad.
2 Heap leaching of run of mine ("ROM") ore. The process is similar to
heap leaching for crushed ore, except the ore is not crushed, instead it is
heaped into pads as received from the mine (ROM) without further treatment or
crushing. This process is used for very low-grade ores.
3 Agitation leaching. Ore is crushed and then milled in a grinding
circuit. The finely ground ore is placed in stirred (agitation) tanks
containing cyanide solution and the contained metal is dissolved in the
solution. Any coarse, free gold is separated using a centrifugal-type Knelson
concentrator.
Slurries produced by the above processes with dissolved metal in solution are
then transferred to a resin-in-pulp ("RIP") plant. This plant selectively
absorbs then de-absorbs the gold and silver. The gold and silver dissolved in
the concentrated solution, which is produced by the RIP plant, is recovered by
electrolysis and then smelted to produce the doré metal, comprising an alloy
of mostly gold and silver.
Copper and precious metal concentrates are produced by two processes, SART
processing and flotation.
1 Sulphidisation, Acidification, Recycling and Thickening ("SART"). The
cyanide solution after gold absorption by resin-in-pulp processing is
transferred to the SART plant. The pH of the solution is then changed by the
addition of reagents which precipitates the copper and any remaining silver
from the solution. The process also recovers cyanide from the solution, which
is recycled back to leaching.
2 Flotation. Flotation is carried out in a separate flotation plant.
Ground ore is mixed with water to produce a slurry called "pulp" and other
reagents are then added. This pulp is processed in flotation cells (tanks),
where the pulp is stirred and air introduced as small bubbles. The sulphide
mineral particles attach to the air bubbles and float to the surface where
they form a froth which is collected. This froth is dewatered to form a
mineral concentrate containing copper, gold and silver.
Table 9 summarises the ore processed by leaching at Gedabek for the year ended
31 December 2021 and 6 months ended 30 June 2022
Table 9 - Ore and its gold grade processed by leaching at Gedabek for the year
ended 31 December 2021 and the six months ended 30 June 2022
Quarter ended Ore processed Gold grade of ore processed
Heap leach pad crushed ore Heap leach pad ROM Agitation leaching Heap leach pad crushed ore Heap leach pad ROM Agitation leaching
(tonnes) ore plant* (g/t) ore plant*
(tonnes) (tonnes) (g/t) (g/t)
31 March 2021 110,612 258,097 154,373 0.90 0.61 1.92
30 June 2021 154,619 177,369 164,288 0.81 0.59 1.64
30 September 2021 154,112 194,816 171,029 0.79 0.51 1.65
31 December 2021 113,623 309,374 151,701 0.68 0.49 1.53
FY 2021 532,966 939,656 641,391 0.80 0.54 1.68
31 March 2022 115,173 273,577 144,275 0.75 0.48 1.63
30 June 2022 82,814 299,168 162,239 0.78 0.53 1.4
H1 2022 197,987 572,745 306,514 0.76 0.51 1.48
* includes previously heap leached ore.
Table 10 summarises ore processed by flotation for the year ended 31 December
2021 and 6 months ended 30 June 2022.
Table 10 - Ore and its gold, silver and copper content processed by flotation
for the year ended 31 December 2021 and the six months ended 30 June 2022
Quarter ended Ore processed Gold content Silver content Copper content
(tonnes) (ounces) (ounces) (tonnes)
31 March 2021 111,060 920 15,782 652
30 June 2021 116,910 1,251 23,870 596
30 September 2021 121,283 1,231 19,939 519
31 December 2021 129,384 1,856 28,480 762
FY 2021 478,637 5,258 88,071 2,529
31 March 2022 104,475 1,921 33,522 577
30 June 2022 114,099 1,293 24,209 745
H1 2022 218,574 3,214 57,731 1,322
Production and sales
For the 6 months ended 30 June 2022, gold production totalled 20,906 ounces,
which was a decrease of 3,331 ounces in comparison to the production of 24,247
ounces for the 6 months ended 30 June 2021.
Table 11 summarises the gold and silver bullion produced from doré bars and
sales of gold bullion for the year ended 31 December 2021 and 6 months ended
30 June 2022.
Table 11 - Gold and silver bullion produced from doré bars and sales of gold
bullion for the year ended 31 December 2021 and 6 months ended 30 June 2022
Quarter ended Gold produced* Silver Gold sales** Gold Sales price
(ounces) produced* (ounces) ($/ounce)
(ounces)
31 March 2021 11,541 4,916 5,635 1,697
30 June 2021 11,789 5,921 13,947 1,808
H1 2021 23,330 10,837 19,582 1,776
30 September 2021 12,314 5,473 6,828 1,815
31 December 2021 10,561 5,430 13,153 1,825
H2 2021 22,875 10,903 19,981 1,821
FY 2021 46,205 21,740 39,563 1,799
31 March 2022 8,963 7,574 7,519 1,904
30 June 2022 10,137 7,620 3,754 1,895
H1 2022 19,100 15,194 11,273 1,901
Note
* including Government of Azerbaijan's share
** excluding Government of Azerbaijan's share
Table 12 summarises the total copper, gold and silver produced as concentrate
by both SART and flotation processing for the year ended 31 December 2021 and
6 months ended 30 June 2022.
Table 12 - Total copper, gold and silver produced as concentrate by both SART
and flotation processing for the year ended 31 December 2021 and 6 months
ended 30 June 2022
Concentrate Copper Gold Silver
production* content* content* content*
(dmt) (tonnes) (ounces) (ounces)
2021
Quarter ended 31 March
SART processing 473 276 13 19,850
Flotation 2,375 362 353 10,599
Total 2,848 638 366 30,449
Quarter ended 30 June
SART processing 512 301 12 22,428
Flotation 2,652 394 539 15,216
Total 3,164 695 551 37,644
Quarter ended 30 September
SART processing 503 265 13 19,526
Flotation 2,600 308 517 11,913
Total 3,103 573 530 31,439
Quarter ended 31 December
SART processing 338 193 16 16,414
Flotation 3,584 550 1,012 16,829
Total 3,922 743 1,028 33,243
2022
Quarter ended 31 March
SART processing 330 188 12 25,108
Flotation 2,586 380 1,065 18,007
Total 2,916 568 1,077 43,115
Quarter ended 30 June
SART processing 316 168 14 25,548
Flotation 3,811 547 715 15,642
Total 4,127 715 729 41,190
Note
* including Government of Azerbaijan's share.
Table 12 summarises the total copper concentrate (including gold and silver)
production and sales from both SART and flotation processing for the year
ended 31 December 2021 and 6 months ended 30 June 2022.
Table 12 - Total copper concentrate (including gold and silver) production and
sales from both SART and flotation processing for the year ended 31 December
2021 and six months ended 30 June 2022
Concentrate Copper Gold Silver Concentrate
Concentrate
production* content* content* content* sales** sales**
(dmt) (tonnes) (ounces) (ounces) (dmt) ($000)
Quarter ended
31 March 2021 2,848 638 366 30,499 - -
30 June 2021 3,164 695 551 37,644 3,467 9,066
H1 2021 6,012 1,333 917 68,143 3,467 9,066
30 September 2021 3,103 573 530 31,439 3,549 5,712
31 December 2021 3,922 743 1,028 33,243 4,132 8,941
H2 2021 7,025 1,316 1,558 64,682 7,681 14,653
FY 2021 13,037 2,649 2,475 132,825 11,148 23,719
31 March 2022 2,916 568 1,077 43,115 1,477 3,248
30 June 2022 4,127 715 729 41,190 4,642 8,127
H2 2022 7,043 1,283 1,806 84,305 6,119 11,375
* including Government of Azerbaijan's share
** excludes Government of Azerbaijan's share
Infrastructure
The Gedabek Contract Area benefits from excellent infrastructure and access.
The site is located at the town of Gedabek, which is connected by good
metalled roads to the regional capital of Ganja. Baku, the capital of
Azerbaijan, is to the south and the country's border with Georgia to the
north, are each approximately a four to five hour drive over good quality
roads. The site is connected to the Azeri national power grid.
Water management
The Gedabek site has its own water treatment plant which was constructed in
2017 and which uses the latest reverse osmosis technology. In the last few
years, Gedabek town has experienced water shortages in the summer and this
plant reduces to the absolute minimum the consumption of fresh water required
by the Company. Wastewater evaporation equipment is also deployed in the
tailings dam.
Tailings (waste) storage
Tailings are stored in a purpose-built dam approximately seven kilometres from
the Group's processing facilities, topographically at a lower level than the
processing plant, thus allowing gravity assistance of tailings flow in the
slurry pipeline. Immediately downstream of the tailings dam is a reed bed
biological treatment system to purify any seepage from the dam before being
discharged safely into the nearby Shamkir river.
The wall of the tailings dam was raised by seven metres in 2020 increasing the
capacity of the tailings dam to 6.0 million cubic metres. The dam has now been
reconfigured and has sufficient capacity for tailings to approximately the end
of 2023. There are two pipelines from the Company's processing facilities to
the tailings dam to increase capacity and provide redundancy.
A site has been identified for a new tailings dam in the close vicinity of the
existing dam and final permissions are being obtained for the land use. The
necessary investigations to determine the competency of the bedrock at the
proposed site have been successfully completed. The process of designing the
new dam and planning to transition to using it are currently underway.
Gosha
The Gosha Contract Area is 300 square kilometres in size and is situated in
western Azerbaijan, 50 kilometres north-west of Gedabek. Gosha is the location
of a high grade, underground gold mine. Ore mined at Gosha is transported by
road to Gedabek for processing. No mining was carried out in the Gosha mine in
the 6 months ended 30 June 2022.
Geological field work in 2021 resulted in the discovery of a new sub-vertical
high gold grade mineralised vein ("Hasan") immediately south of the existing
Gosha mine. The new gold vein can be accessed via a short tunnel from the
existing tunnelling at Gosha. During H1 2022, geological sampling was carried
out in the mine and preparations made for the tunnelling towards the Hasan
vein. Production of Hasan is expected to commence in Q4 2022.
Ordubad
The 462 square kilometre Ordubad Contract Area is located in Nakhchivan,
south-west Azerbaijan, and contains numerous targets. The Company carried out
only very limited geological exploration work at Ordubad in H1 2022 as normal
access to the site could not be obtained due to the COVID-19 pandemic.
Garadagh and Xarxar
Garadagh and Xarxar are situated 4.0 and 1.5 kilometres respectively from the
northern boundary of the Gedabek Contract Area. They are easily accessible,
being situated alongside the main road from Gedabek to Shamkir. These two
Contract Areas infill the territory between Gedabek and Gosha to create a
contiguous territory totalling 1,408 square kilometres. The territory includes
areas to the north, north-east and west of the current Gedabek Contract Area.
Legal ownership of the two Contract Areas was finally granted in July 2022.
Previously, extensive geological exploration and other investigations had been
carried out at both sites by their former owners. Subsequent to 30 June 2022,
all of the geological data and associated other documents and reports
resulting from the geological exploration were acquired by the Company. This
included extensive geochemistry and geophysical data including 3D geological
models plus assays of core drilling. The physical core samples were also
handed over to the Company. In addition, extensive further work had been
carried out, including: the preparation of metallurgical flowsheets;
environmental and social studies and preparatory mine plans and open pit
designs based on a preliminary mineral resource estimation. All of this
further work was included in the acquired package of documentation.
Xarxar has an existing portal and exploration tunnel developed during the
Soviet era. Part of the tunnel has collapsed, and the Company has recently
opened a new portal and is developing a parallel tunnel to access the original
tunnel and the deposit.
The Avshancli and Gilar discoveries are situated close to the northern
boundary of the Gedabek Contract Area. Geological exploration of Avshancli and
Gilar indicates that these discoveries trend to the north towards Xarxar. The
extension of the Contract Area to the north will therefore enable these
discoveries to be fully incorporated into the Company's expansion plans. The
Gilar, Xarxar and Garadagh deposits are all situated in close proximity,
within a ten square kilometre area. This will provide operational synergies
and facilitate coordinated development.
No work was carried out at Garadagh and Xarxar in H1 2022 as the Company only
acquired the Contract Areas in July 2022.
Kyzlbulag and Demirli
The Kyzlbulag Contract Area in the Karabakh economic region contains several
mines and has excellent exploration potential, as indicated by the presence of
many mineral occurrences and known targets in the region. There are
indications that up to 35,000 ounces of gold per year were extracted from the
Kyzlbulag copper-gold mine before the mine was closed several years ago,
indicating the likely presence of a significant gold mineralising system.
The new Demirli Contract Area contains the Demirli mining property. It is 74
square kilometres and extends the Kyzlbulag Contract Area by about 10
kilometres to the north-east.
Russian peacekeepers are currently present in the region, but the Government
of Azerbaijan will take all reasonable measures to ensure that the Company has
access to the region to undertake mineral exploration and exploitation.
No work was carried out at Kyzlbulag or Demirli in H1 2022 as the Company had
no access to the Kyzlbulag Contract Area in the period and the rights to the
Demirli Contract Area were only acquired in July 2022.
Vejnaly
The Vejnaly contract area is 300 square kilometres in size and is located
close to the Iranian border in the Zangilan region in south-west Azerbaijan.
The Contract Area was acquired as part of the original PSA in 1997,+ but
access was only obtained in late 2021 as the region was previously occupied by
Armenia. It contains the Vejnaly deposit which has been operated illegally
during the time the Company could not access the Contract Area. There is an
existing open pit and underground mine and processing plant.
During H1 2022, the Company ramped up its operations at Vejnaly. A camp
facility for 24 people has been established and surface access roads have been
widened and cleaned. Around 10 people are currently living on-site. The
existing laboratory at the camp has been refurbished and equipment has been
ordered. Warehouse facilities to store explosives have been constructed and a
permit obtained for their use. A new low loader for the underground mine has
been purchased and will shortly arrive at Vejnaly. Mine planning is underway
with mining and surface drilling planned to commence in Q4 2022.
The ownership of the physical assets at the site was transferred to the
Company at no cost.
Geological exploration
Summary
· New mineral deposit discovery "Zafar" at Gedabek
o Final Mineral Resource published on 21 March 2022
o In-situ Mineral Resource of 28,000 tonnes of copper, 73,000 ounces of gold
and 36,000 tonnes of zinc
o Further drilling carried out in H1 2022
· New sub-vertical gold vein, "Hasan", discovered at Gosha
o Located to the immediate south of the existing Gosha mine
o Vein can be accessed from existing underground mine workings
· Surface core and reverse circulation drilling to define the Gedabek
open pit ore zone carried out in H1 2022
o Seven surface core drill holes completed with a total length of 1,503
metres
o 85 reverse circulation drill holes completed with a total length of 9,384
metres
· Exploration tunnelling carried out beneath the Gedabek open pit
o 470 metres of tunnelling completed
o 9 core drill holes completed with a total length of 1,125 metres
o Positive assay results returned for gold, silver and copper
· Exploration continued in H1 2022 in the continuous Gedabek and Gadir
underground tunnel system
o Six core drill holes completed with a total length of 944 metres
o 1,141 metres completed of sidewall and roof mapping
· New mineralisation body discovered at Gilar
o Ore body is a south-west continuation of the deposit
o Considerable exploration activity carried out in H1 2022
· No geological field work was carried out at Ordubad during H1 2022
due to COVID-19 travel restrictions
· Work commenced at the Vejnaly deposit
o Soviet reserve of the Vejnaly deposit shows 142,000 ounces of gold and 2,942
tonnes of copper
o Existing galleries have been mapped and vein sampling and ore modelling now
being carried out
Gedabek
Zafar deposit
The discovery of a new mineral deposit "Zafar" was announced in early 2021.
The deposit is located 1.5 kilometres north-west of the existing Gedabek
processing plant.
The geology of the area is structurally complex, comprising mainly of Upper
Bajocian-aged volcanics. The mineralisation seems to be associated with a main
north-west to south-east trending structure, which is interpreted as
post-dating smaller north-east to south-west structures. In the south-west
area, outcrops with tourmaline have been mapped, which can be indicative of
the potential for porphyry-style mineral formation. The exploration area is
located along the regional Gedabek-Shekarbek fault system, with Shekarbek
being another target area known to host copper mineralisation, situated in the
north-west of the zone.
Six core drill holes with a total length of 3,295 metres were completed at
Zafar in H1 2022. Four drill holes returned grades above reportable limits.
One drill hole was for the purpose of geotechnical and metallurgical test
work. Grades of up to 1.5 grammes per tonne of gold and 3.95 per cent. copper
were reported. Bench scale X-ray diffraction ("XRD") analysis of drill core
samples was routinely used during H1 2022. This uses a portable XRD machine to
undertake geochemical analyses of core samples. The results are obtained in
"real time" without the need to wait for laboratory analysis, which enables a
better focused drill programme.
The final Mineral Resource estimate for the Zafar deposit was published on 21
March 2022 and is contained within table 5 above.
Gedabek open pit
Seven surface core drill holes were completed in H1 2022 with a total length
of 1,503 metres and 85 reverse circulation drill holes completed with a total
length of 9,384 metres to define the ore zone. The majority of the gold grades
returned were in the range 0.01 to 0.99 grammes of gold per tonne and copper
grades of 0.01 to 0.49 per cent. of copper.
Gedabek open pit - underground
The Gedabek and Gadir underground mines are connected, and form one continuous
underground network of tunnels, accessible from both the Gadir and Gedabek
portals. However, a significant fault structure separates the two mines. In H1
2022, an exploration tunnel of 470 metres was constructed from the existing
Gadir underground mine to underneath the northern end of the Gedabek main open
pit. Nine core drill holes (HQ/NQ size) totalling 1,125 metres were completed,
along the length of the tunnel, which showed significant mineralisation. The
tunnelling will provide access for further drill chambers to assess the
mineralisation between Gadir and the main open pit. The intersections have
been modelled independently and show continuous zones that can be considered
for further mining.
Gadir underground mine
During H1 2022, six underground exploration core drill holes (HQ/NQ size) were
completed with a total length of 944 metres. 1,140 metres of underground
sidewall and tunnel roof mapping were completed. This defined zones for
continuation of mining and extended the down dip footprint of the
mineralisation. As part of the mining activity, 15 core drill holes (HQ/NQ
size) with a total length of 2,056 metres were completed for ore zone
definition.
Avshancli
Avshancli is a mineral district which is 10.5 kilometres north-east of the
Gedabek open pit. In H1 2022, four core drill holes were completed totalling
1,316 metres. The geological work to date at Avshancli-1 shows discontinuous
surface mineralisation with gold grades dropping off from the surface as the
structures narrow with depth. Given the distribution of mineralisation,
economic volumes of ore are likely to be small.
Gilar
Gilar is a mineral occurrence located approximately two kilometres south of
Avshancli-1. The area hosts two styles of mineralisation, gold in quartz veins
and hydrothermal gold-copper. Three mineralisation bodies have been discovered
at the occurrence. 30 surface core drill holes were completed in H1 2022 for a
total length of 9,581 metres. The Company continues to assess the economic
feasibility of tunnelling for further exploration at Gilar to allow for
underground drilling and bulk sampling.
Ugur open pit and Ugur Deeps
The Ugur pit has now been fully exhausted. In H1 2022, drilling was carried
out in the vicinity of the depleted open pit (Ugur Deeps region) to locate
possible extensions to the deposit. Two core drill holes were completed with a
total length of 515 metres targeting high-grade copper-silver
mineralisation. Five trenches of length 65 metres were sampled, and 250,000
square metres of lithological-alteration structural mapping was completed. No
significant results were obtained.
Gosha
The Gosha contract area, which hosts the Gosha mine, is located next to the
Armenian border. Surface core drilling which commenced in 2021, resulted in
the discovery of a new sub-vertical high gold grade mineralised vein
("Hasan"), after surface mapping suggested the presence of gold at the
location. The discovery was announced in March 2022. The new gold vein can be
accessed via a short tunnel from the existing tunnelling at Gosha.
The Gosha mine was previously thought to consist of two narrow gold veins,
zone 13 and zone 5 to the south. Mining has previously taken place from both
veins. Hasan is located immediately south of the zone 5 and intersects it at
one point. The host rock mostly exhibits silicification and kaolinisation
alteration, which changes to quartz-haematite alteration in andesite.
There was no drilling activity in H1 2022 but preparatory work was carried out
for underground drilling. Sampling of the Hasan vein continued from existing
galleries and preparatory work was undertaken for the development of existing
underground tunnels towards the new Hassan vein so that mining can commence in
H2 2022.
Ordubad
Due to COVID-19 restrictions, drill access was proscribed during H1 2022 and
therefore very limited geological field work was completed.
The Company is awaiting results from the samples collected by the geological
team from the Natural History Museum London as part of their ongoing "From Arc
Magmas to Ores" ("FAMOS") international research project. This study is being
carried out to determine whether there are any indications of a porphyry
system within the Ordubad Contract Area. The results of this investigation
have unfortunately been delayed by the COVID-19 pandemic.
Vejnaly
The Vejnaly deposit is located within the volcanic-plutonic structure of the
Kafan structure formation and incorporates twenty-five gold-bearing vein
zones. Ore veins and zones of the deposit are mainly represented by
quartz-sulphide and, rarely, by quartz-carbonate-sulphide veins and
hydrothermally altered, disintegrated and brecciated rocks. Sulphides are
dominated by pyrite with subordinate chalcopyrite. There are prospects for
porphyry, epithermal and skarn type deposits.
A Soviet resource for the deposit (table 6 above) shows a total C1 and C1
resource of 141,000 ounces of gold and 2,942 tonnes of copper.
A geological team was established at Vejnaly in H1 2022 and commenced vein
sampling and ore modelling.
Sale of the Group's products
Important to the Group's success is its ability to transport its production to
market and sell them without disruption.
In H1 2022, the Group shipped all its gold doré to Switzerland for refining
by either MKS Finance SA or Argor-Heraeus SA. The Group continually reviews
which refiner offers the best commercial terms, and based on this, decides to
which refiner to ship each consignment. 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. The Group, at its discretion, can sell the resulting
refined gold bullion to the refiner.
The Gedabek mine site has good road transportation links and copper and
precious metal concentrate is collected by truck from the Gedabek site by the
purchaser. The Group sells its copper concentrate to three metal traders as
detailed in note 2 to the condensed Group interim financial statements below.
The contracts with each metal trader are periodically renewed and each new
contract requires the approval of the Government of Azerbaijan.
Libero Copper & Gold Corporation
Libero is a minerals exploration company listed on the Toronto TSX Venture
Exchange (ticker LBC). Anglo Asian made a further investment of 10 per cent.
in Libero Copper & Gold Corporation ("Libero") in January 2022 to take its
interest to 19.8 per cent. and Michael Sununu was appointed to its board. A
technical committee was established and Farhang Hedjazi was appointed as the
Company's representative. Farhang Hedjazi visited Libero's properties in
Argentina and Colombia in H1 2022.
Libero has an extremely attractive portfolio of exploration assets in
mining-friendly jurisdictions in North and South America, including Mocoa in
Colombia, Big Bulk and Big Red in British Columbia, Canada, and Esperanza in
Argentina.
Libero released the results of its first drill campaign at Mocoa in H1 2022
which are highly encouraging. The first drill hole was completed to a depth of
1,236 metres and complete assay results have been reported. 1,229 metres of
0.58 per cent. copper equivalent (0.42 per cent. copper and 0.047 per cent.
molybdenum) from 7 metres to 1,236 metres was returned. These assay results
confirm the exceptional grade, thickness, and strength of the mineralisation
present in the area. Nine new porphyry targets indicating significant
expansion potential at Mocoa have been identified.
Subsequent to 30 June 2022, Libero initiated a drill programme at its Big Red
property to test for hydrothermal sources immediately south-east of the Terry
porphyry copper-gold discovery.
Further information can be found at https://www.liberocopper.com/
(https://www.liberocopper.com/) .
Principal risks and uncertainties
Country risk in Azerbaijan
The Group's wholly-owned operations are solely in Azerbaijan and are therefore
at risk of adverse changes to the regulatory or fiscal regime within the
country. However, Azerbaijan is outward looking and desirous of attracting
direct foreign investment and the Company believes the country will be
sensitive to the adverse effect of any proposed changes in the future. In
addition, Azerbaijan has historically had a stable operating environment and
the Company maintains very close links with all relevant authorities.
Operational risk
The Company currently produces all its products for sale at Gedabek. Planned
production may not be achieved as a result of unforeseen operational problems,
machinery malfunction or other disruptions. Operating costs and profits for
commercial production therefore remain subject to variation. The Group
monitors its production daily, and has robust procedures in place to
effectively manage these risks.
Commodity price risk
The Group's revenues are exposed to fluctuations in the price of gold, silver
and copper and all fluctuations have a direct impact on the operating profit
and cash flow of the Group. Whilst the Group has no control over the selling
price of its commodities, it has very robust cost controls to minimise
expenditure to ensure it can withstand any prolonged period of commodity price
weakness. The Group actively monitors all changes in commodity prices to
understand the impact on its business. The Group has previously hedged against
the future movement in the price of gold. The directors keep under review the
potential benefit of hedging.
Foreign currency risk
The Group reports in United States Dollars and a large proportion of its costs
are incurred in United States Dollars. It also conducts business in Australian
Dollars, Azerbaijan Manats and United Kingdom Sterling. The Group does not
currently hedge its exposure to other currencies, although it continues to
review this periodically.
Liquidity and interest rate risk
During H1 2022, the Group had no bank debt and only occasional minor
borrowings in connection with providing letters of credit to suppliers. The
Group did therefore not have any significant interest rate risk during the
year.
The Group had significant surplus cash deposits during H1 2022. The Group
places these on deposit in United States dollars with a range of banks to both
ensure it obtains the best return on these deposits and to minimise
counterparty risk. The amount of interest received on these deposits is not
material to the financial results of the Company and therefore any decrease in
interest rates would not have any adverse effect.
Russian invasion of Ukraine
The Company is unaffected directly by the Russian invasion of Ukraine or the
international sanctions levied against various private and governmental
Russian entities. However, the Company is subject to global the macro-economic
conditions resulting from the Russian invasion such as higher input costs.
COVID-19 pandemic
The COVID-19 pandemic continued into H1 2022, but the intensity of the
pandemic decreased throughout the period. Most of the restrictions put in
place to combat the pandemic were lifted during H1 2022. The COVID-19 pandemic
remained a priority for the Group throughout the period and the board
continues to monitor the situation closely.
Key performance indicators
The Group has adopted certain key performance indicators ("KPIs") which enable
it to measure its financial performance. These KPIs are as follows:
1 Profit before taxation. This is the key performance indicator used by
the Group. It gives insight into cost management, production growth and
performance efficiency.
2 Net cash provided by operating activities. This is a complementary
measure to profit before taxation and demonstrates conversion of underlying
earnings into cash. It provides additional insight into how we are managing
costs and increasing efficiency and productivity across the business in order
to deliver increasing returns.
3 Free cash flow ("FCF"). FCF is calculated as net cash from operating
activities, less expenditure on property, plant and equipment and mine
development, and Investment in exploration and evaluation assets including
other intangible assets.
4 All-in sustaining cost ("AISC") per ounce. AISC is a widely used,
standardised industry metric and is a measure of how our operation compares to
other producers in the industry. AISC is calculated in accordance with the
World Gold Council's Guidance Note on Non-GAAP Metrics dated 27 June 2013. The
AISC calculation includes a credit for the revenue generated from the sale of
copper and silver, which are classified by the Group as by-products. There are
no royalty costs included in the Company's AISC calculation as the Production
Sharing Agreement with the Government of Azerbaijan is structured as a
physical production sharing arrangement. Therefore, the Company's AISC is
calculated using a cost of sales, which is the cost of producing 100 per cent.
of the gold and such costs are allocated to total gold production including
the Government of Azerbaijan's share.
Reza Vaziri
President and chief executive
14 September 2022
Financial Review
Group statement of income
The Group generated revenues in the six months ended 30 June 2022 ("H1 2022")
of $31.5 million ("m") (H1 2021: $43.5m) from the sales of gold and silver
bullion and copper and precious metal concentrate.
The revenues in H1 2022 included $21.7m (H1 2021: $35.0m) generated from the
sales of gold and silver bullion from the Group's share of the production of
doré bars. Bullion sales in H1 2022 were 11,273 ounces of gold and 11,169
ounces of silver (H1 2021: 19,582 ounces of gold and 7,616 ounces of silver)
at an average price of gold of $1,901 per ounce and an average price of silver
of $24 per ounce (H1 2021: $1,776 per ounce and $27 per ounce respectively).
In addition, the Group generated revenue in H1 2022 of $9.8m (H1 2021: $8.5m)
from the sale of 9,094 dry metric tonnes (H1 2021: 8,408 dry metric tonnes) of
copper and precious metal concentrate.
The Group did not hedge any metal sales during the year ending 31 December
2021 or the 6 months ending 30 June 2022.
The Group incurred cost of sales in H1 2022 of $20.4m (H1 2021: $34.7m) as
follows:
H1 2022 H1 2021 B/(W)*
($m) ($m) ($m)
Cash cost of sales** 27.4 27.8 0.4
Depreciation and amortisation 6.4 7.7 1.3
Cash costs, depreciation and amortisation 33.8 35.5 1.7
Capitalised costs (1.2) (1.2) -
Cost of sales before inventory movement 32.6 34.3 1.7
Inventory movement (12.2) 0.4 12.6
Cost of sales per the Group statement of income 20.4 34.7 14.3
*B/(W) - Better or Worse
**Cash costs of sales are defined as cost of sales per the Group statement of
income less depreciation and amortisation plus capitalised costs adjusted by
the movement in the period of opening and closing inventory. A reconciliation
of cash cost of sales to cost of sales per the Group income statement is given
in the table above.
The lower cash costs of sales in H1 2022 compared to H1 2021 were largely due
to lower reagent costs offset by higher consumable costs, electricity costs
and haulage costs. Reagent costs decreased by $1.3m due to lower cyanide costs
due to the changing composition of the ore feedstock. Consumables, electricity
and haulage costs increased by a total of $1.2m due to an increase in the
price of steel grinding balls, an 11 per cent. increase in electricity costs
and more ore hauled in the period. Depreciation decreased by $1.3m from
$7.7m in H1 2021 to $6.4m in H1 2022 due to lower gold production. 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. The $12.2m inventory movement arose due to unsold
gold at 30 June 2022 increasing to 7,167 ounces from 1,776 ounces at 31
December 2021.
Administrative expenses in H1 2022 were $3.1m compared to $2.6m in H1 2021.
The Group's administrative 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. Administrative costs increased in H1
2022 compared to H1 2021 primarily due to higher administrative salaries.
Finance costs in H1 2022 were $0.4m (H1 2021: $0.2m) and comprise interest on
letters of credit, interest on lease liabilities and accretion expenses on the
rehabilitation provision. The finance costs were higher due to higher lease
liabilities in H1 2022 compared to H1 2021. The Group had no bank debt during
the period 1 January 2021 to 30 June 2022.
Other expense in H1 2022 of $710,000 (H1 2021: $75,000) included the decrease
in the value of Libero Copper & Gold Corporation ("Libero") shares between
1 January to 26 January (the date it became an associate company) of $221,000,
a loss on the revaluation of share options in Libero of $304,000 and expensing
the forward contract of $214,000 established in respect of the January 2022
Libero share acquisition. The other expense in H1 2021 was the loss realised
on the sale of 325,000 shares in Conroy Gold and Natural Resources PLC.
The Group had a taxation charge in H1 2022 of $2.2m (H1 2021: $2.4m). This
comprised a current income tax charge of $nil (H1 2021: $1.8m) and a deferred
tax charge of $2.2m (H1 2021: $0.6m). R.V. Investment Group Services ("RVIG")
in Azerbaijan incurred a taxable loss of $9.4m in H1 2022 and these losses
will be carried forward and offset against future taxable profits. RVIG has no
other taxable losses available for offset against future profits.
All-in sustaining cost of production
AISC is a widely used, standardised industry metric and is a measure of how
our operation compares to other producers in the industry. AISC is calculated
in accordance with the World Gold Council's Guidance Note on Non-GAAP
Metrics dated 27 June 2013. The AISC calculation includes a credit for the
revenue generated from the sale of copper and silver, which are classified by
the Group as by-products. There are no royalty costs included in the Company's
AISC calculation as the Production Sharing Agreement with the Government
of Azerbaijan is structured as a physical production sharing arrangement.
Therefore, the Company's AISC is calculated using a cost of sales, which is
the cost of producing 100 per cent. of the gold and such costs are allocated
to total gold production including the Government of Azerbaijan's share.
The Group produced gold at an all-in sustaining cost ("AISC") per ounce of
$983 in H1 2022 compared to $848 in H1 2021. 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 Company's cost of production was broadly flat in H1 2022 compared to H1
2021. The Company experienced some cost inflation in H1 2022 notably in the
price of steel grinding balls and electricity. There was an 11 per cent.
increase in the price of electricity during the period. However, this was
offset by lower cyanide usage due to the lower amount of ore processed and its
changing composition. However, the AISC cost per ounce increased due to the
lower gold production in the period.
Group statement of financial position
Non-current assets increased from $95.1m at 31 December 2021 to $96.0m at 30
June 2022. Libero became an associate company on 26 January 2022, following
our further investment, with an acquisition cost of $4.9m (see Libero Copper
& Gold Corporation below). Intangible assets increased from $30.3m at 31
December 2021 to $32.2m at 30 June 2022 due to expenditure on geological
exploration and evaluation of $2.4m partially offset by amortisation of $0.5m
in respect of mining rights. Property, plant and equipment (including leased
assets) were lower by $2.1m due to depreciation in the period.
Net current assets were $67.7m at 30 June 2022 compared to $62.8m at 31
December 2021. The reason for the increase were increases in inventories of
$12.1m and trade and other receivables (excluding the amount owed to the
Government of Azerbaijan) of $3.6m and a decrease in tax payable of $3.0m.
These increases were partially offset by lower cash of $16.3m. The increase in
inventory arose due to an increase in unsold gold of $8.5m to $10.5m at 30
June 2022 compared to 31 December 2021. There were 7,167 ounces of unsold gold
at 30 June 2022 compared to 1,776 ounces at 31 December 2021. Trade and other
receivables increased due to an increase in gold owed to the Government of
Azerbaijan of $6.4m and an increase in trade and miscellaneous receivables of
$2.9m. The Group's cash balances at 30 June 2022 were $21.2m (31 December
2021: $37.5m). Surplus cash is mostly maintained in US dollars which is placed
on deposit with banks at interest rates of around 1 to 2 per cent.
Shareholders' equity of the Group at 30 June 2022 was $122.1m (31 December
2021: $118.4m). The increase was due to the profit retained in the period of
$3.4m and share based payment expense credited to reserves of $0.2m. There
were no shares issued or bought back in H1 2022.
The Group was financed only by equity at 31 December 2021 and 30 June 2022 as
there has been no bank debt outstanding since 1 January 2021.
In June 2020, the Group entered into a three-year standby credit facility with
Pasha Bank OJSC. The facility was for $15m cash borrowings and $3m to secure
letters of credit. The interest rate for cash borrowings is 4.75 per cent. per
annum. The repayment date for any tranche of borrowing is determined at the
time of draw-down and interest is payable monthly. The facility has not been
utilised to date.
Libero Copper & Gold Corporation
On 26 January 2022, the Company acquired a further 10 per cent. of Libero
which was then reclassified as an associate company of the Group. Its
acquisition cost was $4.9m as follows:
As at 26 January 2022 $k
Market value of the Company's existing 9.8 per cent. trade investment 2,173
Cost of the 10 per cent. investment (7m shares at CAD$ 0.50 / share) 2,776
Total acquisition cost of Libero as an associate Company 4,949
A reconciliation of the acquisition cost to the net assets of Libero is as
follow:
Company's share of the net assets of Libero 1,456
Goodwill on acquisition 3,493
Total acquisition cost of Libero as an associate Company 4,949
The acquisition of Libero resulted in a loss of $435,000, being a loss on the
revaluation of the Company's existing investment between 31 December 2021 and
26 January 2022 of $221,000 and the expensing of the derivative established at
31 December 2021 of $214,000 for the forward purchase of the 10 per cent.
investment which was subsequently exercised in January 2022.
In the six months to 30 June 2022, our share of Libero's loss for the period
it was an associate was $949,000. This loss was offset by a profit of $83,000,
on the deemed disposal of 0.25 per cent. of Libero following the issue of
743,302 shares to third party investors, resulting in a net loss of $866,000.
A net loss of $34,000 was also recognised in other comprehensive income for
currency translation. The Company also revalued its options in Libero to
market value at 30 June 2022, resulting in a loss of $304,000 mainly due to
the share price of Libero decreasing from CAD$0.54 at 31 December 2021 to
CAD$0.24 at 30 June 2022.
Group statement of cash flow
Operating cash inflow before movements in working capital for H1 2022 was
$14.6m (H1 2021: $14.0m).
Working capital movements in H1 2022 absorbed cash of $17.2m (H1 2021: $0.8m)
largely due to an increase in trade and other debtors of $3.7m (H1 2021:
$3.4m) and an increase in inventories of $12.1m (H1 2021: decrease of $1.0m).
The increase in inventories was due to an increase of unsold gold at 30 June
2022 of 5,391 ounces.
There was a cash outflow from operating activities in H1 2022 of $6.0m
compared to a cash inflow in H1 2021 of $5.8m. The cash outflow was caused by
cash absorbed by working capital in H1 2022 of $17.3m.
The Group paid corporation tax in H1 2022 of $3.4m (H1 2021: $7.5m)
in Azerbaijan. These were payments on account of RVIG's liability for the
year ending 31 December 2022 of $0.3m and a final settlement in respect of the
year ended 31 December 2021 of $3.1m.
Expenditure on property, plant and equipment in H1 2022 was $4.8m (H1 2021:
$3.3m). The main items of expenditure in H1 2022 were deferred stripping costs
of $1.1m, construction of a new heap leach pad of $0.9m, miscellaneous plant
and equipment of $0.9m and Gedabek mine development costs of $1.2m.
Exploration and evaluation expenditure incurred and capitalised in H1 2022 was
$2.4m (H1 2021: $2.8m). This arose on exploration at the Gedabek, Gosha,
Ordubad and Vejnaly contract areas.
COVID-19 pandemic
By 1 January 2022, the Government of Azerbaijan had lifted most of the
restrictions imposed to restrict the spread of the coronavirus. Management
evaluated that the COVID-19 pandemic had no material effect on the financial
results for the six months ended 30 June 2022 due to lost production and
increased costs.
Dividends
The Group paid an interim and final dividend in respect of the year ended 31
December 2021 totalling $0.08 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 16:00 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.
The directors have declared an interim dividend of $0.040 per share in respect
of the financial year ending 31 December 2022. The dividend will be paid on 3
November 2022 and will cost the Group $4.6m but has not been accrued in the H1
2022 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 and unrecovered costs are calculated separately for each
contract area and costs incurred at one contract area cannot be offset against
production at another. Unrecovered costs can only be recovered against future
production from their respective contract area. Profit Production for the
Group for all contract areas has been subject to the minimum 25 per cent.
since commencement of production including both the year to 31 December 2021
and the 6 months to 30 June 2022. The Government's share of production in the
six months to 30 June 2022 (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 2022 of 12.75 per cent.
(six months to 30 June 2021: 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 (currently its main operating site):
· all direct operating expenses of the mine;
· all exploration expenses;
· all capital expenditure incurred on the 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.
The total unrecovered costs for the Gedabek, Gosha and Vejnaly contract areas
at 30 June 2022 were $32.6m, $20.3m and $0.1m respectively (31 December 2021:
$29.7m, $19.7m and $nil 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 2022. The Company's revenues and its debt facility are also
denominated in US dollars. The Company does not currently have any significant
exposure to foreign exchange fluctuations and the situation is kept under
review.
Going concern
The directors have prepared the condensed Group interim financial statements
on a going concern basis after reviewing the Group's forecast cash position
for the period to 30 September 2023 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
have 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 $21.2 million and no bank debt at 30 June 2022.
The directors have prepared a base case cash flow forecast that assumes
production is consistent with the business plan and a gold price of $1,750.
The gold prices are lower than that used for the impairment testing to add
further conservatism to the forecast. The base case cash flow forecast shows
the Group is able to fund its working capital requirements from cash generated
from its operations at Gedabek provided production is maintained and finished
products sold. The Group has access to local sources of both short and long
term finance should this be required and has an $15 million standby credit
facility with Pasha Bank as a contingency measure which is available until
April 2023 with no conditions on drawdown.
By 1 January 2022, the Government of Azerbaijan had lifted virtually all of
the restrictions imposed to restrict the spread of the coronavirus. The very
few restrictions that remained were not having any effect on the ability of
the business to operate. The directors believe that the ability of the Company
to operate throughout the COVID-19 pandemic demonstrates the resilience of the
business should further restrictions be imposed due to any future
intensification of the COVID-19 pandemic.
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, the Chief Executive Officer's review 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 interim
financial statements for the 6 months to 30 June 2022.
William Morgan
Chief financial officer
14 September 2022
Anglo Asian Mining plc
Condensed group statement of income
Six months ended 30 June 2022
6 months to 6 months to
30 June 2022 30 June 2021
(unaudited) (unaudited)
Continuing operations Notes $000 $000
Revenue 2 31,548 43,521
Cost of sales (20,426) (34,652)
Gross profit 11,122 8,869
Other operating income - 52
Administrative expenses (3,058) (2,550)
Other operating expenses (511) (285)
Operating profit 7,553 6,086
Finance costs (359) (181)
Finance income 39 84
Other expense (710) (75)
Share of loss of an associate 3 (866) -
Profit before tax 5,657 5,914
Income tax expense 4 (2,182) (2,359)
Profit attributable to the equity holders of the parent 3,475 3,555
3,475 3,555
Profit per share attributable to the equity holders of the parent
Basic (US cents per share) 5 3.04 3.11
Diluted (US cents per share) 5 3.04 3.11
Anglo Asian Mining plc
Condensed group statement of comprehensive income
Six months ended 30 June 2022
6 months to 6 months to
30 June 2022 30 June 2021
(unaudited) (unaudited)
$000 $000
Profit for the period 3,475 3,555
Other comprehensive income
Other comprehensive income that may be reclassified to profit or loss in
subsequent periods (net of tax):
Exchange differences on translation of foreign associate company
Share of comprehensive profit of an associate company (37) -
-
3
Net other comprehensive profit / (loss) that may be reclassified to profit or
loss in subsequent periods
(34) -
Total comprehensive income for the period, net of tax
3,441 3,555
Anglo Asian Mining plc
Condensed group statement of financial position
30 June 2022
30 June 2021
30 June 2022 (unaudited) 31 December 2021
(unaudited) (audited)
Notes $000 $000 $000
Non-current assets
Intangible assets 6 32,200 26,150 30,347
Property, plant and equipment 7 56,853 62,792 58,710
Leased assets 8 2,814 1,928 3,066
Investment in an associate 3 4,049 - -
Non-current financial assets 9 80 - 2,777
Other receivables 10 - - 185
95,996 90,870 95,085
Current assets
Inventory 11 49,019 40,491 36,912
Trade and other receivables 10 29,784 15,322 19,752
Other current financial assets 9 - - 214
Current income tax asset 300 - -
Cash and cash equivalents 21,152 36,640 37,453
100,255 92,453 94,331
Total assets 196,251 183,323 189,416
Current liabilities
Trade and other payables 12 (32,131) (19,535) (28,024)
Income taxes payable - (594) (3,061)
Lease liabilities 8 (429) (520) (403)
(32,560) (20,649) (31,488)
Net current assets 67,695 71,804 62,843
Non-current liabilities
Provision for rehabilitation (12,026) (11,833) (11,922)
Lease liabilities 8 (2,715) (1,541) (2,890)
Deferred tax liability 4 (26,881) (25,494) (24,699)
(41,622) (38,868) (39,511)
Total liabilities (74,182) (59,517) (70,999)
Net assets 122,069 123,806 118,417
Equity
Share capital 13 2,016 2,016 2,016
Share premium 14 33 33 33
Share-based payment reserve 223 - 12
Merger reserve 46,206 46,206 46,206
Foreign currency translation reserve (34) - -
Retained earnings 73,625 75,551 70,150
Total equity 122,069 123,806 118,417
Anglo Asian Mining plc
Condensed group statement of cash flows
Six months ended 30 June 2022
6 months to 6 months to
30 June 2022 30 June 2021
(unaudited) (unaudited)
$000 $000
Cash flows from operating activities
Profit before tax 5,657 5,914
Adjustments to reconcile profit before tax to net cash flows:
Finance costs 359 181
Finance income (39) (84)
Unrealised loss on financial instruments 743 75
Depreciation of owned assets 5,945 7,092
Depreciation of leased assets 306 245
Share based payment 211 -
Share of loss of an associated company 866 -
Amortisation of mining rights and other intangible assets 550 625
Operating cash flow before movements in working capital 14,598 14,048
Increase in trade and other receivables (3,666) (2,479)
(Increase) / decrease in inventories (12,107) 966
(Decrease) / increase in trade and other payables (1,461) 695
Cash (absorbed by) / generated from operations (2,636) 13,230
Income taxes paid (3,363) (7,482)
Net cash (used by) / provided by operating activities (5,999) 5,748
Cash flows from investing activities
Expenditure on property, plant and equipment and mine development (4,794) (3,299)
Investment in exploration and evaluation activities (2,403) (2,810)
Proceeds from the sale of financial instruments - 110
Acquisition of an associated company (2,776) -
Interest received 38 84
Net cash used in investing activities (9,935) (5,915)
Cash flows from financing activities
Dividends paid - (1,711)
Interest paid - lease liabilities (164) (80)
Repayment of lease liabilities (203) (250)
Net cash used in financing activities (367) (2,041)
Net decrease in cash and cash equivalents (16,301) (2,208)
Cash and cash equivalents at beginning of period 37,453 38,848
Cash and cash equivalents at end of the period 21,152 36,640
Anglo Asian Mining plc
Condensed group statement of changes in equity
Six months ended 30 June 2022
(unaudited)
Foreign currency translation
Share-based reserve
Share Share payment Merger $000 Retained Total
capital premium reserve reserve earnings equity
Notes $000 $000 $000 $000 $000 $000
1 January 2022 2,016 33 12 46,206 - 70,150 118,417
Profit for the period - - - - - 3,475 3,475
Other comprehensive loss for the period - - - - (34) - (34)
Total comprehensive income for the period - - - - (34) 3,475 3,441
Share based payment - - 211 - - - 211
30 June 2022 2,016 33 223 46,206 (34) 73,625 122,069
Six months ended 30 June 2021
(unaudited)
Notes Share Share-based Merger Total
Share premium payment reserve Retained equity
capital $000 reserve $000 earnings $000
$000 $000 $000
1 January 2021 2,016 33 - 46,206 73,707 121,962
-
-
Profit for the period - - - - 3,555 3,555
Cash dividends paid 15 - - - - (1,711) (1,711)
30 June 2021 2,016 33 - 46,206 75,551 123,806
Year ended 31 December 2021
(audited)
Notes Share Share Share-based Merger Total
capital premium payment reserve Retained equity
$000 $000 reserve $000 earnings $000
$000 $000
1 January 2021 2,016 33 46,206 73,707 121,962
-
Profit for the year - - - 7,361 7,361
-
Cash dividends paid 15 - - - (10,918) (10,918)
-
Share-based payment - - - - 12
12
31 December 2021 2,016 33 46,206 70,150 118,417
12
Anglo Asian Mining plc
Notes to the condensed Group interim financial statements
Six months ended 30 June 2022
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. The Group also invests in mining
businesses outside of Azerbaijan.
Basis of preparation
The condensed Group interim financial statements for the six-month period
ending 30 June 2022 have been prepared in accordance with IAS 34 'Interim
Financial Reporting' as issued by the International Accounting Standards Board
and IAS 34 as adopted for use in the United Kingdom. The information for the
half year ended 30 June 2022 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 2021 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 interim financial
statements have not been audited.
The condensed Group interim financial statements have been prepared under the
historical cost convention except for the treatment of share-based payments,
certain trade receivables at fair value, derivatives not designated as hedging
instruments and financial assets at fair value through profit and loss. The
condensed Group interim 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 interim financial statements "£" and
"pence" are references to the United Kingdom pound sterling, "CAN$" and "CAN
cents" are references to Canadian dollars and cents and "AZN" is a reference
to the Azerbaijan New Manat.
Accounting policies and new standards, interpretations and amendments
The annual financial statements of Anglo Asian Mining plc are prepared in
accordance with IFRSs as issued by the International Accounting Standards
Board and in conformity with the requirements of the Companies Act 2006. The
condensed Group interim 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 in conformity with the requirements of the Companies Act 2006.
The accounting policies adopted in the preparation of the half-yearly
condensed Group interim financial statements for 2022 are consistent with
those followed in the preparation of the Group's annual report and accounts
for 2021, except for the adoption of new standards that became effective from
1 January 2022. The Group has not adopted any other standard, interpretation
or amendment that has been issued but is not yet effective.
Several amendments and interpretations apply for the first time in 2022, but
do not have an impact on the condensed Group interim financial statements.
Investment in associate companies and joint ventures
The Group acquired an interest in an associate company in the 6 months ended
30 June 2022. Accordingly, the Group has adopted the following accounting
policy for associate companies and joint ventures from 1 January 2022:
An associate is an entity over which the Group has significant influence.
Significant influence is the power to participate in the financial and
operating policy decisions of the investee but is not control or joint control
over those policies.
A joint venture is a type of joint arrangement whereby the parties that have
joint control of the arrangement have rights to the net assets of the joint
venture. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control
are similar to those necessary to determine control over subsidiaries. The
Group's investment in its associate and joint venture are accounted for using
the equity method.
Under the equity method, the investment in an associate or a joint venture is
initially recognised at cost. The carrying amount of the investment is
adjusted to recognise changes in the Group's share of net assets
of the associate or joint venture since the acquisition date. Goodwill
relating to the associate or joint venture is included in the carrying amount
of the investment and is not tested for impairment separately.
The statement of profit or loss reflects the Group's share of the results of
operations of the associate or joint venture. Any change in other
comprehensive income of those investees is presented as part of the Group's
comprehensive income. In addition, when there has been a change recognised
directly in the equity of the associate or joint venture, the Group recognises
its share of any changes, when applicable, in the statement of changes in
equity. Unrealised gains and losses resulting from transactions between the
Group and the associate or joint venture are eliminated to the extent of the
interest in the associate or joint venture.
The aggregate of the Group's share of profit or loss of an associate and a
joint venture is shown on the face of the statement of profit or loss outside
operating profit and represents profit or loss after tax and non- controlling
interests in the subsidiaries of the associate or joint venture.
The financial statements of the associate or joint venture are prepared for
the same reporting period as the Group. When necessary, adjustments are made
to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is
necessary to recognise an impairment loss on its investment in its associate
or joint venture. At each reporting date, the Group determines whether there
is objective evidence that the investment in the associate or joint venture is
impaired. If there is such evidence, the Group calculates the amount of
impairment as the difference between the recoverable amount of the associate
or joint venture and its carrying value, and then recognises the loss within
'Share of profit of an associate and a joint venture' in the statement of
profit or loss.
Upon loss of significant influence over the associate or joint control over
the joint venture, the Group measures and recognises any retained investment
at its fair value. Any difference between the carrying amount of the associate
or joint venture upon loss of significant influence or joint control and the
fair value of the retained investment and proceeds from disposal is recognised
in profit or loss.
Going concern
The directors have prepared the condensed Group interim financial statements
on a going concern basis after reviewing the Group's forecast cash position
for the period to 30 September 2023 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
have 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 $21.2 million and no bank debt at 30 June 2022.
The directors have prepared a base case cash flow forecast that assumes
production is consistent with the business plan and a gold price of $1,750.
The gold prices are lower than that used for the impairment testing to add
further conservatism to the forecast. The base case cash flow forecast shows
the Group is able to fund its working capital requirements from cash generated
from its operations at Gedabek provided production is maintained and finished
products sold. The Group has access to local sources of both short and long
term finance should this be required and has an $15 million standby credit
facility with Pasha Bank as a contingency measure which is available until
April 2023 with no conditions on drawdown.
By 1 January 2022, the Government of Azerbaijan had lifted virtually all of
the restrictions imposed to restrict the spread of the coronavirus. The very
few restrictions that remained were not having any effect on the ability of
the business to operate. The directors believe that the ability of the Company
to operate throughout the COVID-19 pandemic demonstrates the resilience of the
business should further restrictions be imposed due to any future
intensification of the COVID-19 pandemic.
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, the chief executive officer's review 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 interim
financial statements for the 6 months to 30 June 2022.
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.
Sales of gold within doré and gold and silver bullion were made to two
customers, the Group's gold refiners, MKS Finance SA and Argor-Heraeus SA,
both based in Switzerland.
The gold and copper concentrate was sold in 2021 and 2022 to Industrial
Minerals SA, Trafigura PTE Ltd and Metal-Kim Metalurji Ve Kimya Tarim Sanayi
Tic Ltd Sti.
3 Investment in an associate
Libero Copper & Gold Corporation ("Libero") is minerals exploration
company listed on the TSX Venture Exchange (ticker: LBC) in Canada and owns,
or has the right to acquire, several copper exploration properties in North
and South America.
On 26 January 2022, the Group acquired a further 10 per cent. interest in
Libero taking its total interest to 19.8 per cent. From this date, Libero is
accounted for using the equity method of accounting in the Group's
consolidated financial statements. Prior to 26 January 2022, the Group had a
9.8 per cent. interest in Libero and accounted for the investment as a
financial asset. The Group's interest was subsequently reduced in the period
to 19.6 per cent. following an issue of shares by Libero in which the Group
did not participate. The reduction in shareholding has been treated as a
deemed disposal of an interest of 0.2 per cent. of Libero.
The Group's interest in Libero at 30 June 2022 was 19.6 per cent. The
following tables illustrates the summarised financial information of the
Group's investment in Libero:
Balance sheet of Libero at 30 June 2022
30 June 2022
(Unaudited)
$000
Current assets 1,684
Non-current assets 2,908
Current liabilities (961)
Non-current liabilities (209)
Equity 3,422
Reconciliation to carrying value in Group balance sheet
Equity of Libero 3,422
Share based payment expense (582)
Equity recognised by Group 2,840
Group's share in equity - 19.6% (2021: nil) 556
Goodwill 3,493
Group carrying value of associate 4,049
Profit and loss account of Libero for the 6 months to 30 June 2022
6 months to
30 June 2022
(Unaudited)
$000
Expenses 5,169
Other expenses 314
Loss before taxation 5,483
Taxation -
Loss for the period 5,483
Reconciliation to loss of associate in Group P&L account
Loss for the period 5,483
Pre-acquisition loss to 25 January 2022 (659)
Post acquisition loss 4,824
Group's share of the loss at 19.8 and 19.6 per cent. 949
Profit on deemed disposal of 0.2 per cent. of Libero (83)
Loss recognised as an associate 866
Reconciliation of the movement in associate company in the 6 months
to 30 June 2022
6 months to
30 June 2022
(Unaudited)
$000
1 January 2022 -
Transfer from other financial assets 2,173
Additions 2,776
Share of loss of the associate (866)
Foreign exchange loss (34)
30 June 2022 4,049
Libero had no contingent liabilities or capital commitments on 30 June 2022
and 2021.
4 Income tax
The income taxation charge for the 6 months ended 30 June 2022 represents a
current income tax charge of $nil (2021: $1.8m) and a deferred taxation charge
of $2.2m (2021: $0.6m). These current and deferred taxation charges are in
respect of the representative office registered in Azerbaijan of RV Investment
Group Services LLC ("RVIG") (a wholly owned subsidiary of the Company).
Deferred taxation assets or liabilities are 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 2022, RVIG had unused taxation losses available for offset against
future profits of $9.4m and a deferred taxation asset has been established of
$3.0m. This has been offset against deferred taxation liabilities in the Group
balance sheet. The Group also 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.
5 Profit per ordinary share
Profit per ordinary share 6 months to 6 months to
30 June 2022 30 June 2021
(unaudited) (unaudited)
$000 $000
Profit after tax for the period 3,475 3,555
Basic profit per share (US cents) 3.04 3.11
Diluted profit per share (US cents) 3.04 3.11
Weighted average number of shares Number Number
For basic earnings per share 114,392,024 114,392,024
For diluted earnings per share 114,392,024 114,392,024
6 Intangible assets
Exploration & evaluation Exploration & evaluation Exploration & evaluation Exploration & evaluation Mining rights Other intangible assets Total
Gedabek Gosha Ordubad Vejnaly (unaudited) (unaudited) (unaudited)
(unaudited) (unaudited) (unaudited) (unaudited)
$000 $000 $000 $000 $000 $000 $000
Cost
1 January 2021 10,514 1,642 5,751 - 41,925 562 60,394
Additions 6,842 556 190 - - - 7,588
31 December 2021 17,356 2,198 5,941 - 41,925 562 67,982
Additions 2,011 34 81 150 - 127 2,403
30 June 2022 19,367 2,232 6,022 150 41,925 689 70,385
Amortisation and impairment
1 January 2021 - - - - 35,966 463 36,429
Charge for year - - - - 1,176 30 1,206
31 December 2021 - - - - 37,142 493 37,635
Charge for period - - - - 537 13 550
30 June 2022 - - - - 37,679 506 38,185
Net book value
31 December 2021 17,356 2,198 5,941 - 4,783 69 30,347
30 June 2022 19,367 2,232 6,022 150 4,246 183 32,200
7 Property, plant and equipment
Plant and
equipment Producing mines Assets under construction Total
and motor vehicles (unaudited) (unaudited) (unaudited)
(unaudited)
$000 $000 $000 $000
Cost
1 January 2021 25,207 220,421 1,590 247,218
Additions 1,974 4,782 637 7,393
Decrease in provision for
rehabilitation - (288) - (288)
31 December 2021 27,181 224,915 2,227 254,323
Additions 482 2,801 889 4,172
Decrease in provision for rehabilitation
- (84) - (84)
30 June 2022 27,663 227,632 3,116 258,411
Depreciation and impairment
1 January 2021 21,766 158,772 - 180,538
Charge for year 1,427 13,648 - 15,075
31 December 2021 23,193 172,420 - 195,613
Charge for period 420 5,525 - 5,945
30 June 2022 23,613 177,945 - 201,558
Net book value
31 December 2021 3,988 52,495 2,227 58,710
30 June 2022 4,050 49,687 3,116 56,853
8 Leases
Right of use assets
Plant and equipment Producing mines Total
and motor vehicles (unaudited) (unaudited)
(unaudited)
$000 $000 $000
Cost
1 January 2021 2,357 553 2,910
Additions 166 541 707
Lease modifications 957 116 1,073
31 December 2021 3,480 1,210 4,690
Additions 54 - 54
30 June 2022 3,534 1,210 4,744
Depreciation and impairment
1 January 2021 813 288 1,101
Charge for year 410 113 523
31 December 2021 1,223 401 1,624
Charge for period 220 86 306
30 June 2022 1,443 487 1,930
Net book value
31 December 2021 2,257 809 3,066
30 June 2022 2,091 723 2,814
Lease liabilities
Total
$000
1 January 2021 1,947
Additions 707
Lease modifications 1,073
Interest expense 266
Repayment (700)
31 December 2021 3,293
Addition 54
Interest expense 165
Repayment (368)
30 June 2022 3,144
30 June 2022 30 June 2021 (unaudited) 31 December 2021
(unaudited) $000 (audited)
$000 $000
Current liabilities 429 520 403
Non-current liabilities 2,715 1,541 2,890
Total lease liabilities 3,144 2,061 3,293
Amount recognised in the profit and loss account
6 months to 6 months to
30 June 2022 30 June 2021
(unaudited) (unaudited)
$000 $000
Depreciation expense of right to use assets 306 245
Interest expense 165 80
Expense relating to short leases 131 98
602 423
9 Other financial assets
30 June 2022 (unaudited) 30 June 2021 31 December 2021
Non - current $000 (unaudited) (audited)
$000 $000
Derivatives not designated as hedging instruments
Share warrants 80 - 384
Financial assets at fair value through profit and loss
Listed equity investments - - 2,393
80 - 2,777
30 June 2022 (unaudited) 30 June 2021 31 December 2021
Current $000 (unaudited) (audited)
$000 $000
Derivatives not designated as hedging instruments
Forward contract for the purchase of shares - - 214
Forward contract for the purchase of shares
In December 2021, the Group subscribed for 12,600,000 shares in Libero Copper
& Gold Corporation ("Libero"). 5,600,000 shares were purchased in December
2021, with the remaining 7,000,000 shares purchased in January 2022.
Accordingly, the 7,000,000 shares purchased in January 2022 is a forward
contract for the purchase of shares. The forward contract is measured at fair
value. The carrying value of the forward contract of $214,000 was expensed to
other expense in the 6 months ended 30 June 2022.
Share warrants
Each of the 12,600,000 shares purchased in Libero has half a warrant attached
totalling 6,300,000 warrants. The carrying value is the value of the 6,300,000
warrants valued using a risk-neutral binomial tree. Quantitative information
about the fair value measurement of the warrants using significant directly or
indirectly observable inputs together with the major assumptions used to value
the share warrants in Libero is as follows:
Assumption 30 June 2022 31 December 2021
Share price of Libero CAD$0.24 CAD$0.54
Option exercise price CAD$0.75 CAD$0.75
Acceleration condition CAD$1.00 CAD$1.00
Lapse date 22 December 2023 22 December 2023
Risk free rate 3.09 per cent. 0.51 per cent.
Expected volatility - daily 5.64 per cent. 7.64 per cent.
Expected volatility - annualised 89.58 per cent. 121.25 per cent.
Probability of regulatory approval Not applicable 95 per cent.
Discount for lack of marketability 11.61 per cent. 15.36 per cent.
Exchange rate US$1 = CAD$1.2872 US$1 = CAD$1.2634
10 Trade and other receivables
30 June 2022 (unaudited) 30 June 2021 31 December 2021
Non- current $000 (unaudited) (audited)
$000 $000
Advances for purchases - - 185
30 June 2022 (unaudited) 30 June 2021 31 December 2021
Current $000 (unaudited) (audited)
$000 $000
Gold held due to the Government of Azerbaijan
22,488 9,683 16,094
VAT refund due 25 1,086 390
Loan to employee 500 - -
Other tax receivable 1,432 238 182
Trade receivables - fair value* 1,441 1,866 718
Prepayments and advances 3,898 2,449 2,368
29,784 15,322 19,752
*Trade receivables subject to provisional pricing.
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 2021 and 2022 and 31 December 2021.
The VAT refund due at 30 June 2021 and 2022 and 31 December 2021 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 12.
11 Inventory
30 June 2022 (unaudited) 30 June 2021 31 December 2021
Current assets $000 (unaudited) (audited)
$000 $000
Cost
Finished goods - bullion 10,500 2,686 2,001
Finished goods - metal in concentrate 3,843 2,984 1,079
Metal in circuit 12,391 13,278 12,026
Ore stockpiles 7,138 9,127 7,107
Spare parts and consumables 15,147 12,416 14,699
Total current inventories 49,019 40,491 36,912
Total inventories at the lower of cost and net realisable value 49,019 40,491 36,912
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.
12 Trade and other payables
30 June 2021 (unaudited) 31 December 2021
30 June 2022 $000 (audited)
(unaudited) $000
$000
Accruals and other payables 4,868 4,914 5,999
Trade creditors 3,075 3,630 3,629
Gold held due to the Government of Azerbaijan 22,488 9,683 16,094
Payable to the Government of Azerbaijan from copper concentrate joint sale 2,302
1,700 1,308
32,131 19,535 28,024
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.
13 Share capital
Ordinary shares of 1 pence each $000
Ordinary shares issued and fully paid:
1 January and 31 December 2021 and 30 June 2022 114,392,024 2,016
14 Share premium account
$000
1 January and 31 December 2021 and 30 June 2022 . 33
15 Distributions made and proposed
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
$000 $000 $000
Cash dividends on ordinary shares declared and paid
Special dividend for 2020: 1.5 US cents* per share - 1,711 1,711
Final dividend for 2020: 3.5 US cents** per share - - 4,010
Interim dividend for 2021: 4.5 US cents*** per share - - 5,197
- 1,711 10,918
Cash dividends proposed on ordinary shares
Final dividend for 2021: 3.5 US cents**** per share - - 4,010
Interim dividend for 2021: 4.5 US cents*** per share - 5,197 -
Interim dividend for 2022: 4.0 US cents***** per share - -
4,572
* the special dividend for 2020 was declared in United States dollars but paid
in Sterling in the amount of 1.0767 pence per ordinary share on 11 March 2021.
** the final dividend for 2020 was declared in United States dollars but paid
in Sterling in the amount of 2.5354 pence per ordinary share on 29 July 2021.
*** the interim dividend for 2021 was declared in United States dollars but
paid in Sterling in the amount of 3.2937 pence per ordinary share on 4
November 2021.
**** the final dividend for 2021 was declared in United States dollars but
paid in Sterling in the amount of 2.9181 pence per ordinary share on 28 July
2022.
***** the interim dividend for 2022 is to be paid in Sterling on 3 November
2022 at a rate to be announced.
The proposed but not paid interim and final dividends for the year ending 31
December 2021 and the 6 months ended 30 June 2021 and 2022 are not recognised
as liabilities in the Group statements of financial position.
16 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 initial period of the mining licence for Gedabek was until March 2022. The
Company has the option to extend the licence for two five-year periods (ten
years in total) conditional upon satisfaction of certain requirements in the
PSA. The first of the five year extensions was obtained by the Company in
April 2021 and accordingly the mining licence now extends to March 2027 with a
further five year extension permitted.
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.
Subsequent to 30 June 2022, various revisions to the Group's PSA were passed
into the law of the Republic of
Azerbaijan as set out in note 18 - post balance sheet events.
17 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 2022 of $1,809,000 (6
months to 30 June 2021: $452,000) were made for equipment and spare parts
purchased from Proses Muhendislik Danismanlik Inshaat ve Tasarim Anonim
Shirket ("PMDI"), an entity in which the vice president of technical services
of Azerbaijan International Mining Company has a direct ownership
interest. There is an outstanding payable to PMDI of $nil at 30 June 2022 (30
June 2021: $21,000 and 31 December 2021: $157,000).
b) Total payments in the 6 months to 30 June 2022 of $1,033,000 (6
months to 30 June 2021: $503,000) were made for equipment and spare parts
purchased from F&H Group LLC ("F&H"), an entity in which the vice
president of technical services of Azerbaijan International Mining Company has
a direct ownership interest. There is an outstanding payable to F&H of
$576,000 at 30 June 2022 (30 June 2021: $488,000 and 31 December 2021:
$862,000).
c) On 30 June 2022, a loan of $500,000 was made to the vice president
of technical services of Azerbaijan International Mining Company. The loan
carries an interest rate of 4 per cent. and is repayable on 30 June 2023 with
earlier repayment permissible. The loan is secured on the Anglo Asian Mining
plc shares owned by the vice president of technical services of Azerbaijan
International Mining Company. The loan was guaranteed by the president and
chief executive officer of Anglo Asian Mining plc.
18 Post balance sheet events
Ratification of revised Production Sharing Agreement for the Group
Various amendments to the Group's Production Sharing Agreement ("PSA") were
ratified in July 2022 by the Parliament of the Republic of Azerbaijan which
granted the Group three new Contract Areas with a combined area of 882 square
kilometres. The Soutely contract area was relinquished. The parliamentary
ratification was signed into law on 5 July 2022 by the President of the
Republic of Azerbaijan. Following revision to the PSA, the Group has eight
contract areas covering 2,544 square kilometres in Azerbaijan.
Purchase of Company's own Shares
In the period 1 July 2022 to 14 September 2022, the Company purchased a
total of 100,000 of its own shares at an average price of 85.625 pence. The
shares were not cancelled but held in treasury.
Additional investment in Libero Copper & Gold Corporation ("Libero")
On 7 August 2022, the Company acquired 2,900,000 new shares in Libero by way
of a private placement at CAN 33 cents per share. The total acquisition price
was CAN$957,000 million ($748,000). The shares were admitted to the TSXV Stock
Exchange following issue. Following the placement, the Company owned 19.9 per
cent. of the enlarged share capital of Libero.
19 Approval of condensed group interim financial statements
The condensed group interim financial statements of Anglo Asian Mining plc and
its subsidiaries for the six-month period ended 30 June 2022 were authorised
for issue in accordance with a resolution of the directors on 14 September
2022.
**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 produced 64,610 gold equivalent ounces ("GEOs")
for the year ended 31 December 2021.
In December 2021, the Company undertook a private placement which acquired
19.8 per cent. of Libero Copper & Gold Corporation ("Libero"). The
transaction was completed in January 2022. Libero is listed on the TSX
Venture Exchange in Canada and owns, or has the option to acquire, several
copper exploration properties in North and South America, including Mocoa
in Colombia, one of the world's largest undeveloped copper-molybdenum
resources.
On 5 July 2022, the Government of Azerbaijan ratified amendments to its
Production Sharing Agreement, granting Anglo Asian three additional
concessions totalling a combined area of 882 square kilometres. This includes
the Garadagh porphyry copper deposit, with a Soviet classified resource of
over 300,000 tonnes of copper. The acquisition of these concessions is
transformational to Anglo Asian's asset portfolio and underpins the strategic
target of transitioning into a mid-tier copper focused miner.
https://www.angloasianmining.com/ (https://www.angloasianmining.com/)
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