REG - Anglo Asian Mining - Interim Results
26/09/2023 07:00
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RNS Number : 5963N Anglo Asian Mining PLC 26 September 2023
26 September 2023
Anglo Asian Mining plc
Interim results for the six-months to 30 June 2023
FY 2023 Production Guidance at 30,000 to 34,000 gold equivalent ounces
Anglo Asian Mining plc ("Anglo Asian", the "Company" or the "Group"), the
AIM-listed copper, gold, and silver producer in Azerbaijan announces its
interim results for the six-months ended 30 June 2023 ("H1 2023" or the
"Period"). The Group's performance in the Period was in line with expectations
given the declining grades of the Gedabek open pit. The Group also released
its strategic plan to become a mid-tier copper focused miner and double its
production.
The curtailment of the Group's agitation leaching and flotation processing
from the beginning of August presented the Group with significant challenges
in the latter half of the year. The report from Micon International Co Limited
("Micon") containing the results of the environmental inspection is currently
being finalised.
Financial highlights
· Total revenues of $30.8 million (H1 2022: $31.5 million)
o Lower gold bullion sales of 10,506 ounces (H1 2022: 11,273 ounces) partially
offset by a higheaverage gold sales price of $1,939 per ounce (H1 2022: $1,901
per ounce)
o Copper concentrate sales increased to $10.4 million (H1 2022: $9.8 million)
· Profit before taxation of $1.4 million (H1 2022: $5.7 million)
o Cost of sales increased by $4.8 million due to the increased costs of
processing lower grade ore
o Profit before taxation includes a charge of $0.2 million (H1 2022: $1.6
million) in respect of the Group's share of the loss of Libero Copper &
Gold Corporation
· Further investment in Libero Copper & Gold Corporation of $0.6
million (H1 2022: $2.8 million)
· All-in sustaining cost ("AISC") of gold production increased to $1,357
per ounce (H1 2022: $983 per ounce) due to lower gold production
· Free cashflow was a net outflow of $9.8 million (H1 2022: $13.2 million)
o $6.6 million capital expenditure and mine development (H1 2022: $4.8
million)
o $3.8 million on exploration and evaluation activities (H1 2022: $2.4
million)
· Cash of $9.6 million as at 30 June 2023 (31 December 2022: $20.4
million) and no bank debt
· No interim dividend declared for 2023 due to curtailment of processing
subsequent to the Period end
Operational highlights
· Total production of 23,391 GEOs (H1 2022: 28,772 GEOs) due to lower gold
grades at Gedabek
o Gold production of 14,608 ounces (H1 2022: 20,906 ounces)
o Copper production of 1,860 tonnes (H1 2022: 1,283 tonnes)
o Silver production of 44,576 ounces (H1 2022: 99,548 ounces)
· Construction of Gilar and Zafar mines commenced although development was
stopped between August and September
o Development expected to be restarted in October
· Capacity of flotation plant increased to provide operational flexibility
and process the future increased rates of production
· FY 2023 production guidance of between 30,000 to 34,000 gold equivalent
ounces
o Decrease as a result of curtailment of agitation leaching and flotation
processing since the beginning of August 2023
o Only heap leach production expected to be carried out between August and
December 2023
o Assumes restart of agitation leaching and flotation processing in the first
quarter of 2024
Curtailment of agitation leaching and flotation processing in August 2023
· As previously announced, the Company's agitation leaching and flotation
processing have been curtailed since the start of August 2023
· Heap leaching continues as normal with 3,684 ounces of gold produced
from 1 July to 22 September 2023
· Development of the Gilar and Zafar mines delayed due to blasting suspended
in August and September
· Micon commissioned to carry out a health, safety and environmental
management review of tailings dam management at Gedabek
o The report of the environmental inspection is currently being finalised
· Until the Micon report is finalised, and the Group is able to restart
full operations, there is a material uncertainty as to the Group's ability to
continue as a going concern
Anglo Asian CEO Reza Vaziri commented:
"Our results for the Period were satisfactory, and within expectations, given
that we were predominantly only mining from our open pit mine. The ore mined
contains reducing gold grades as the mine approaches the end of its life.
However, copper production increased as the processing capacity of our
flotation plant was increased and a higher proportion of the capacity of our
crushing and grinding circuits was utilised to provide it with feedstock.
"The curtailment of our agitation leaching and flotation processing whilst an
environmental inspection was carried out, whilst regrettable, was
understandable. The Company has fully cooperated with all Government requests
to ensure the environmental inspection was carried out properly and to
expedite other related matters. The report by Micon of the environmental
inspection is currently being finalised.
"Given the curtailment of agitation leaching and flotation processing, we have
also revised our production guidance for the year to between 30,000 and 34,000
gold equivalent ounces. This guidance assumes agitation leaching and flotation
processing will not be restarted until 2024.
"We published our growth strategy during the Period, which we believe is an
achievable plan to transition to mid-tier producer status with copper as our
principal commodity. We remain committed to our growth strategy, and whilst
the curtailment of processing has led to certain implementation delays, we are
entirely focused on, and confident of, achieving mid-tier production in the
medium term."
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
Our performance in the six months to 30 June 2023 was in line with our
expectations and previously issued guidance. The Company also made good
progress in advancing its strategy to become a mid-tier miner in the next few
years.
However, it is important to address the significant challenges the Company is
facing in the latter half of 2023 as a result of the protests against the
construction of a second tailings dam at Gedabek. To ensure the existing
tailings dam presented no danger to local residents or Company employees,
Micon carried out a health, safety and environmental review of tailings
management at Gedabek in July 2023. Agitation leaching and flotation
processing was also curtailed from the beginning of August.
Our first half year performance was resilient despite falling grades at
Gedabek and macro-economic inflationary challenges. Total half-year production
was 23,291 gold equivalent ounces ("GEOs") and in line with management's
expectations. Copper production increased significantly, growing by 45 per
cent. year-on-year to a total of 1,860 tonnes in line with our strategic
growth targets.
We have revised our production guidance for 2023 to between 30,000 to 34,000
GEOs due to the curtailment of processing in the second half of the year. We
maintained a cash balance of $9.4 million at the Period end with a total of
saleable inventory at a market value of $9.1 million. We have not declared an
interim dividend for 2023 due to the curtailment of processing subsequent to
the Period end.
In March, we announced our medium-term growth strategy, which envisaged Anglo
Asian more than doubling its production within the next five years as the
Company transitions to a multi-asset, mid-tier producer with a portfolio
dominated by copper. The completion of this strategy was a significant
achievement, and I would like to thank the entire management team for their
hard work and dedication in developing it. Whilst the recent curtailment of
processing has led to certain implementation delays to the growth strategy, we
are entirely focused on, and confident of, achieving mid-tier production in
the medium term and delivering the considerable shareholder value of which the
strategy is capable.
During the Period, we made two follow-on investments in Libero Copper &
Gold Corporation, the owner of several copper exploration properties in North
and South America including Mocoa, one of the world's largest undeveloped
copper-molybdenum resources. However, we did not participate in Libero's
private placing announced in July 2023. Our shareholding is currently 17.4 per
cent. but we have the right to increase this in the future. Libero represents
an exciting proposition for Anglo Asian, with meaningful deposits that align
with our growth strategy.
We are still waiting for Micon to issue the final report of their Health,
Safety and Environmental review of tailings management at the Gedabek site in
late July 2023. Once the Micon report is finalised, we will fully update our
shareholders. Until the Micon report is released, and the Group is able to
resume full operations, there is a material uncertainty as to the Group's
ability to continue as a going concern.
At our Annual General Meeting, which was held in London on 22 June 2023, the
directors were pleased to engage with shareholders and receive their feedback
on the Company's performance. Pleasingly, there was strong support for Anglo
Asian's growth strategy and prospects.
We are monitoring closely the very recent events in Karabakh. There have been
reports in the press that the Azerbaijan Government has taken back control of
the Demirli/Kyzlbulag mine, which is located in our contract areas. We will
keep shareholders fully updated regarding future events.
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
25 September 2023
Chief Executive Officer's review
The performance of the Company in H1 2023 was satisfactory given that this
year we are transitioning away from mining from our legacy open pit mine to
our new mines under development and the challenging external conditions. We
also unveiled our strategic growth plan outlining a five-year transition to
become a mid-tier miner with production of approximately 36,000 tonnes of
copper equivalent by 2028.
The operational performance in H1 2023, has regrettably been overshadowed by
subsequent events. Following protests at Gedabek in June 2023 against the
construction of a second tailings dam, the Company and the Government of
Azerbaijan ("Government") jointly commissioned a third-party inspection to
reassure residents that our tailings facility and management practices present
no threat to the health of local communities. Micon visited Gedabek in July
2023 and carried out the inspection to determine our working practices were
safe and that no discharge of cyanide into the environment was taking place.
The Company also curtailed agitation leaching and flotation processing from
the beginning of August whilst Micon prepared their results. We are still
awaiting the final report on Micon's inspection.
Operational review
Total production for the Period was 23,391 gold equivalent ounces ("GEOs")
compared to 28,722 GEOs during the same period last year. Copper production
totalled 1,860 tonnes, a significant increase versus last year and in line
with our growth strategy. Gold production was at 14,608 ounces, slightly lower
than in 2022 due to reduced grades at Gedabek. Additionally, silver production
totalled 44,576 ounces.
During the Period, we also completed the expansion of our Gedabek flotation
plant, increasing our processing capacity to provide significant operational
flexibility. This is a critical step in meeting our growth targets.
We also made considerable progress with our new mines. At Gilar, further drill
results confirmed an extension to the previously reported mineralisation,
where the deeper zone confirmed significant quantities of gold, copper and
zinc with an intercept thickness of over 50 metres.
We completed a mining scoping study to determine the development and
construction of the Zafar mine. Zafar has a JORC Mineral Resource of 28,000
tonnes of copper, 73,000 ounces of gold and 36,000 tonnes of zinc, with
production planned from 2024. Construction of the mine started in the Period
but development was suspended from August.
In February, we announced the purchase of an underground mining fleet from
Caterpillar and drilling machinery from Epiroc which will be used initially at
Zafar and Gilar. The total cost of this equipment was $10 million, with 40 per
cent. paid from our cash reserves and the rest via vendor financing. This is
Caterpillar's first vendor financing agreement in Azerbaijan and the wider
Caucasus region, so represents a strong endorsement. However, the purchase of
the equipment is currently on hold whilst processing is curtailed.
At Garadag, following an assessment of the historical geological data acquired
from AzerGold CJSC, we confirmed the potential to produce over 300,000 tonnes
of copper. We also completed an initial geological block model and open pit
optimisation study at Xarxar. Xarxar and Garadag underpin our medium-term
growth strategy and are both world class assets that contain considerable
quantities of copper. We expect these projects to be commissioned by 2026 and
2028 respectively.
Financial review
The Company maintained a satisfactory financial performance in H1 2023 with
half-year revenues of $30.8 million, slightly down from $31.5 million in 2022.
This includes gold bullion sales of 10,506 ounces at an average price of
$1,939 per ounce and total copper concentrate sales of 6,648 dry metric tonnes
valued at $10.4 million. Decreased gold bullion sales were offset by increased
sales of copper concentrate which is becoming an increasing proportion of our
production.
The Group decided to hedge some of its gold bullion production in 2023 given
that the price of gold appeared to plateau earlier in the year. In June 2023,
monthly forward sales of gold bullion were made of approximately 25 to 30 per
cent. of budgeted production for the remainder of 2023. A total of 4,600
ounces were sold at prices between $1,950 to $1,979 per ounce. The first
forward sale of 1,000 ounces of gold bullion was completed at the end of June
2023, generating additional revenue of $35,250.
Free cash flow from operations was an outflow of $9.8 million compared to
$13.2 million in H1 2022. The improvement arose due to less cash being
absorbed by increased working capital.
The Group managed costs satisfactorily during the Period. Due to the lower
gold production, our all-in sustaining cost of gold production increased in H1
2023 to $1,357 per ounce compared to $983 in H1 2022.
The Company had cash of $9.4 million at 30 June 2023 and saleable inventory of
2,553 ounces of gold with a market value of $4.9 million, and copper
concentrate with a market value of $4.2 million.
Revenues from production at Gedabek continued to be subject to an effective
royalty of 12.75 per cent. through our production sharing agreement with the
Government of Azerbaijan. We anticipate that this same royalty rate will
continue to apply to at least the end of 2025. Part of the gold and silver
produced from the ore stockpile at Vejnaly was sold in the Period. This was
subject to an effective royalty of 32 per cent. because the ore stockpile was
acquired at zero cost.
Revised production guidance for 2023
Due to the curtailment of processing, the Company has only produced gold doré
and SART concentrate from heap leaching since the beginning of August 2023.
The Group has revised its production guidance for the 12 months to 31 December
2023 to between 30,000 to 34,000 gold equivalent ounces. This includes 22,000
to 23,000 ounces of gold and 2,100 to 2,200 tonnes of copper. This assumes
that agitation leaching and flotation processing are not restarted before the
end of 2023.
Environmental inspection and suspension of processing in August
Anglo Asian has been operating at Gedabek since 2009. It is proud of its
long-standing and strong community relations, particularly its significant
social and economic contribution to the local area. Accordingly, the protests
in June 2023 over the construction of a second tailings dam were unexpected.
Following the protests, Micon carried out a health, safety and environmental
review of tailings management at the Gedabek site in late July 2023. The
review was carried out under the auspices of the Ministry of Ecology and
Natural Resources of Azerbaijan. The Company's local environmental
engineers, CQA International, and its independent tailings management
consultant Knight Piésold, assisted in the review. Environmental samples
were taken by both Micon and the Company and assayed by independent accredited
laboratories. The Company is still awaiting the final report from Micon
regarding the environmental inspection.
The Company has been carrying out extensive maintenance of its operations
during the suspension of processing including relining all its mills. These
works will also make good an accumulated backlog of wear and tear. The Company
also suspended blasting during the curtailment of processing which stopped
development of the Gilar and Zafar mines. The commencement of mining from
Gilar will therefore be delayed until the first quarter of 2024. The delivery
of the mining fleet from Caterpillar Inc. was also postponed given the delay
in mine development. The installation of the new Imhoflot flotation cells in
the flotation plant was also postponed to 2024.
Tailings storage at Gedabek
The current tailings dam is almost full and the Company has submitted plans to
the Government for a further 7.5 metre raise of the wall to give sufficient
capacity for two to three years of production. This raise will be carried out
in two stages with the first raise of 2.5 metres being completed in
approximately four months after permission is obtained. This permission will
only be granted following a further independent inspection of the stability of
the tailings dam wall commissioned by the Government. It is expected that
permission will be received in January 2024 provided the independent
inspection reveals no defects in the wall.
Environment, Safety and Governance ("ESG")
Anglo Asian is committed to complying with all relevant sustainability best
practice standards. We remain on target with our internal ESG development
timetable and have made meaningful progress during the Period.
Outlook
In the immediate future, we will be primarily focused on working with the
Government to fully resume mining and processing at Gebabek. Longer term, we
will remain committed to pursuing our strategy to become a mid-tier miner and
delivering attractive shareholder returns.
Reza Vaziri
President and chief executive
25 September 2023
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 explores for and develops
gold and copper deposits in Azerbaijan.
The Group also owns approximately 17.4 per cent. of Libero Copper & Gold
Corporation ("Libero"), a company which owns several copper exploration
properties in North and South America including Mocoa in Colombia, one of
the world's largest undeveloped copper-molybdenum resources.
Production Sharing Agreement with the Government of Azerbaijan
The Group's mining concessions in Azerbaijan are held under a Production
Sharing Agreement ("PSA") with the Government of Azerbaijan dated 20 August
1997. Amendments to the PSA were passed into law in Azerbaijan on 5 July
2022.
The Group's mining concessions are called Contract Areas and six were granted
to the Group by the original PSA in 1997. These were Gedabek, Gosha, Ordubad,
Vejnaly, Kyzlbulag and Soutely. However, there was no access to Vejnaly,
Kyzlbulag and Soutely, which were situated in territory occupied at that time
by Armenia. Following the resolution of the conflict
between Azerbaijan and Armenia in 2020, access was obtained to Vejnaly in
2021.
On 5 July 2022, amendments to the PSA were passed into law by the Government
of Azerbaijan which granted the Group three additional Contract Areas:
Garadag, Xarxar and Demirli and relinquished Soutely. There was no payment
made for the amendments to the PSA.
Contract Areas in Azerbaijan
Following the amendments to its PSA in 2022, the Group has eight Contract
Areas covering a total of 2,544 square kilometres in western Azerbaijan:
Ø Gedabek. The location of the Group's primary gold, silver and copper open
pit mine and the Gadir and Gedabek underground mines. The Group has two new
underground mines in development at Gedabek - Zafar and Gilar. The Group's
main processing facilities are also located at Gedabek.
Ø Gosha. Located approximately 50 kilometres from Gedabek and hosts a narrow
vein gold and silver mine.
Ø Xarxar. Another copper deposit, adjacent to Garadag, which shows
significant potential as it is likely part of the same mineral system.
Ø Garadag. Located to the north of Gedabek and which hosts the large
Garadag copper deposit.
Ø Vejnaly. Situated in the Zangilan district of Azerbaijan and hosts the
Vejnaly deposit.
Ø Ordubad. An early-stage gold and copper exploration project located in
the Nakhchivan exclave.
ØKyzlbulag. Situated in the Karabakh economic region. Hosts the Demirli
deposit, a copper/molybdenum mine and a processing plant. The Group currently
has no access to the Kyzlbulag Contract Area.
Ø Demirli. Adjacent to Kyzlbulag and expands the Kyzlbulag Contract Area to
the north-east. The Group currently has no access to the Demirli Contract
Area.
Overview of the six months to 30 June 2023
The Company's strategy is to transition into a mid-tier, copper-focused
producer, which will be achieved through developing its significant assets.
The Company has made significant progress towards becoming a mid-tier copper
producer in the six months to 30 June 2023.
In January 2023, a third investment in Libero Copper & Gold Corporation
("Libero") was made to acquire 2.6 million new shares at CAN 15 cents per
share for a total consideration of CAN$390,000 (US$289,000).
In January 2023, the portal to the Gilar mine, a new copper and gold mine at
Gedabek, was completed and underground tunnelling commenced to access the
mineral deposit.
In February 2023, a fourth investment was made in Libero to acquire 3.2
million new shares at CAN 15 cents per share for a total consideration of
CAN$480,000 (US$355,000).
In February 2023, a mining scoping study was completed for the Zafar
underground mine. Development work and the construction of two portals for the
Zafar mine started.
In February 2023, contracts were executed for the purchase of the mining fleet
and other major items of equipment required for the Company's new Zafar and
Gilar mines. Good progress was also made with the upgrades to the Gedabek
flotation plant.
In March 2023, an initial geological block model and open pit optimisation
study for Xarxar were completed identifying significant copper
mineralisation. These models predicted potential mining and processing of 3
million tonnes of ore per annum, with a production target of 10,000 tonnes of
copper metal per annum over a 7-year period.
In March 2023, an increased mineral resources estimate (non-JORC) ("MRE") for
the Gilar deposit was published. The MRE for Gilar now contains over 249,000
ounces of gold, 46,000 tonnes of copper, and 48,000 tonnes of zinc.
In March 2023, an initial assessment of data acquired in 2022 relating to the
Garadag porphyry copper deposit confirmed the potential of the deposit to
produce over 300,000 tonnes of copper.
In March 2023, the Company's strategic plan for growth was announced
including:
● Production to more than double in the next five years with the Company
transitioning to a multi-asset, mid-tier copper and gold producer by 2028.
● Total production forecast to increase by 30 to 50 per cent. to 70,000 to
75,000 gold equivalent ounces for 2024 and 2025 (copper equivalent of 15,000
to 15,500 tonnes).
● Copper equivalent production forecast to increase to approximately 36,000 plus
tonnes per annum (gold equivalent of 175,000 ounces) from 2028.
● Production growth to be delivered through the sequential opening of four new
mines in Azerbaijan.
In May 2023, drill results further extended the mineralisation at Gilar.
Production target for 2023
The Group's initial production guidance for the year ended 31 December 2023
was 50,000 to 54,000 gold equivalent ounces. Following the curtailment of
processing in August 2023, the production guidance was revised to between
30,000 to 34,000 gold equivalent ounces as follows:
Metal Unit Full year 2023
Full year 2022 Production guidance
Actual production
Gold ounce 43,114 22,000 to 23,000
Copper tonne 2,516 2,100 to 2,200
Total gold and copper GEO* 57,618 30,000 to 34,000
The Company does not forecast silver production as it is not material.
* Gold equivalent ounce
The production guidance was calculated using a mixture of actual year to date
and rest of year forecast metal prices to calculate the gold equivalent
ounces.
Mineral resources and ore reserves
Key to the future development of the Group are the mineral resources and ore
reserves within its Contract Areas. Mineral resources and ore reserves are
produced both in accordance with the JORC (2012) code ("JORC") and as non-JORC
estimates.
The Group's most recent mineral resources and ore reserves estimates (amounts
in-situ before recovery) in accordance with JORC for the Gedabek open pit and
Gadir underground mine were published on 2 November 2020. 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.
A final mineral resources estimate for the Zafar deposit at 30 November 2021
prepared in accordance with JORC was published on 21 March 2022 and is shown
in Table 5. The latest non-JORC mineral resources estimate for the Gilar
deposit was published in March 2023 and is shown in Table 6.
Table 7 shows the Soviet mineral resources for the Vejnaly deposit and Table 8
shows the Soviet C1 and C2 copper resources for the Garadag 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 in the above table may not sum 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 in the above table may not sum 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 in the above table may not sum 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 in the above table may not sum 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 in the above table may not sum 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 may 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
Some of the totals in the above table may not sum due to rounding
Note that all tonnages reported are dry metric tonnes.
Table 6 - Latest non-JORC mineral resources estimate of the Gilar deposit
Tonnes Gold Copper Zinc Gold Copper Zinc
(Mt) (g/t) (%) (%) (Oz) (T) (T)
Class 1+2 3.93 1.53 0.93 0.94 192,929 36,687 37,009
Class 3 1.71 1.02 0.57 0.69 56,155 9,778 11,777
Total 5.64 1.37 0.82 0.87 249,083 46,466 48,786
Some of the totals in the above table may not sum due to rounding
Cut-off grade 0.5 gold eq. / gold eq = gold g/t + (copper % x 1.49) + (zinc x
0.46) + (silver x 0.01) + (lead x 0.37).
Amounts of contained metal have been rounded to the nearest hundred of ounces
or tonnes.
Table 7 - Soviet mineral resources of the Vejnaly deposit
Metal content
Units Category C1 Category C2 Total C1 and C2
Ore tonnes 181,032 168,372 349,404
Gold kilograms 2,148.5 2,264.2 4,412.7
Silver kilograms 6,108.9 4,645.2 10,754.1
Copper tonnes 1,593.6 1,348.8 2,942.4
Some of the totals in the above table may not sum due to rounding
Table 8 - Soviet copper resources for the Garadag deposit
Copper content
Category C1 C2 Total C1 and C2
Ore Millions of tonnes 25.35 23.69 49.04
Copper Thousands of tonnes 168.0 150.7 318.7
Grade Per cent. 0.65 0.64 0.64
Some of the totals in the above table may not sum due to rounding
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 and the Company's processing
facilities. The new Zafar and Gilar underground mines are both being developed
at Gedabek.
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 to 30 June 2023, approximately 802 thousand ounces of gold and
21 thousand tonnes of copper have been produced at Gedabek.
Gedabek open pit and Gedabek and Gadir underground mines
The principal mining operation at the Gedabek 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. These two 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. Table 9 shows all the ore mined by the Group in the year ended 31
December 2022 and six months ended 30 June 2023.
Table 9 - Ore mined at Gedabek for the year ended 31 December 2022 and 6
months ended 30 June 2023
12 months to 3 months to 3 months to
31 December 2022 31 March 2023 30 June 2023
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 1,705,337 0.47 415,365 0.43 591,118 0.30
Gadir - u/g 136,715 1.41 38,867 1.64 46,334 1.54
Gedabek - u/g 373,915 1.30 - - - -
Total 2,215,967 0.67 454,232 0.53 637,452 0.39
Zafar mine development
The Zafar deposit was discovered in 2021 and is located 1.5 kilometres
north-west of the existing Gedabek processing plant. Its final mineral
resource estimate was published in March 2022 and is set out in Table 5 -
"Zafar mineral resources estimate at 30 November 2021".
A mining scoping study for the Zafar mine was completed in February 2023 and
development commenced. Two declines are under construction to access the
mineralisation, a haulage decline and a parallel ventilation decline. The two
portals for the declines have been constructed close to the existing Gedabek
processing facilities and about 1,000 metres from the mineralisation. Five
metres of haulage tunnel and 6.6 metres of ventilation tunnel were completed
in H1 2023.
Mining will be by sub-level caving supplemented by sub-level open stoping. The
significant underground machinery has been contracted for with drilling
equipment manufactured by Epiroc and the mining and loading equipment
manufactured by Caterpillar.
Gilar mine development
Gilar is a mineral occurrence located approximately seven kilometres from the
Company's processing facilities and close to the northern boundary of the
Gedabek Contract Area. The Group commenced developing the Gilar underground
mine in late 2022 following exceptional drilling results in the south of the
area.
The latest non-JORC mineral resources estimate for Gilar was published in
March 2023. The mineral resources estimate (which is not a JORC resource) was
compiled by an independent consultant and based on stage one drilling. The
mineral resources were estimated using the JORC guidelines, but because the
mineral resource estimate is subject to validation, classes 1, 2 and 3 are
stated, instead of the usual Measured, Indicated and Inferred classifications.
The mineral resources estimate is set out in Table 6 - "Latest Non-JORC
mineral resources estimate of the Gilar deposit".
A portal has been constructed and a tunnel is under construction suitable for
both exploration and production. A ventilation tunnel is also under
construction. Total development at 30 June 2023 of the production tunnel and
the ventilation tunnel was 501 metres and 114 metres respectively. The
majority of the walls of the decline are supported by steel arches and
shotcrete due to the soft rock. Extensive geological exploration was carried
out at Gilar in H1 2023.
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 a cyanide solution.
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 solution which is produced are recovered by electrolysis and are then
smelted to produce the doré metal, comprising an alloy of 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. Finely ground ore is mixed with water to produce a slurry
called "pulp" and 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.
During 2022, the Group contracted to purchase an additional seven cells for
the flotation plant. These cells use "Imhoflot" pneumatic flotation
technology, which require less energy and offers better recoveries than
traditional stirred tank cells and flotation columns. A new thickener and
filter press were also ordered. The new equipment, together with modifications
to de-bottleneck the existing flotation plant, will double its capacity at a
total cost of around $3.0 million. It will also enable the production of a
zinc concentrate. The modifications to increase the capacity of the flotation
plant have been completed. However, the installation of the new flotation line
has been postponed until the first half of 2024 due the suspension of
operations at Gedabek from the beginning of August 2023 .
Table 10 summarises the ore processed by leaching for the year ended 31
December 2022 and the six months to 30 June 2023:
Table 10 - Ore processed by leaching at Gedabek for the year ended 31 December
2022 and six months ended 30 June 2023:
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 2022 115,173 273,577 144,275 0.75 0.48 1.63
30 June 2022 82,814 299,762 162,239 0.78 0.53 1.49
30 September 2022 92,398 302,714 162,669 0.81 0.57 1.41
31 December 2022 24,606 213,120 156,285 0.72 0.56 1.52
FY 2022 314,991 1,089,173 625,468 0.77 0.56 1.51
31 March 2023 94,518 196,595 62,006 0.74 0.49 1.3
30 June 2023 56,522 203,016 105,213 0.75 0.46 1.4
H1 2023 151,040 399,611 167,219 0.75 0.49 1.4
* includes previously heap leach ore
Table 11 summarises ore processed by flotation for the year ended 31 December
2022 and six months ended 30 June 2023.
Table 11 - Ore processed by flotation for the year ended 31 December 2022 and
six months ended 30 June 2023
Quarter ended Ore processed Gold content Silver content Copper content
(tonnes) (ounces) (ounces) (tonnes)
31 March 2022 104,475 1,921 33,522 577
30 June 2022 114,099 1,293 24,209 745
30 September 2022 143,838 1,314 24,582 724
31 December 2022 119,819 1,389 18,003 670
FY 2022 482,231 5,917 100,316 2,716
31 March 2023 192,516 1,487 19,787 1,133
30 June 2023 190,593 1,033 10,380 1,191
H1 2023 383,109 2,520 30,167 2,324
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 12 shows the amount of previously heap leached
ore processed in the year ended 31 December 2022 and the six months ended 30
June 2023.
Table 12 - Amount of previously heap leached ore processed in the year ended
31 December 2022 and six months ended 30 June 2023
In-situ material Average gold grade
(t) (g/t)
1 January 2022 1,586,313 1.36
Processed in the year (195,689) 1.18
31 December 2022 1,390,624 1.39
Processed in H1 2023 (27,815) 1.01
30 June 2023 1,366,081 1.39
Production and sales
For the 6 months ended 30 June 2023, gold production totalled 14,608 ounces,
which was a decrease of 6,298 ounces in comparison to the production of 20,906
ounces for the 6 months ended 30 June 2022.
Table 13 summarises the gold and silver bullion produced from doré bars and
sales of gold bullion for the year ended 31 December 2022 and 6 months ended
30 June 2023.
Table 13 - Gold and silver bullion produced from doré bars and sales of gold
bullion for the year ended 31 December 2022 and 6 months ended 30 June 2023
Quarter ended Gold produced* Silver Gold sales** Gold Sales price
(ounces) produced* (ounces) ($/ounce)
(ounces)
31 March 2022 8,963 7,574 7,519 1,904
30 June 2022 10,137 7,620 3,754 1,895
30 September 2022 10,473 6,949 10,000 1,727
31 December 2022 10,437 4,820 13,645 1,727
FY 2022 40,010 26,963 34,918 1,783
31 March 2023 5,965 2,841 5,719 1,895
30 June 2023 7,375 3,593 4,787 1,992
H1 2023 13,340 6,434 10,506 1,939
Note
* including Government of Azerbaijan's share
** excluding Government of Azerbaijan's share
Table 14 summarises the total copper, gold and silver produced as concentrate
by both SART and flotation processing for the year ended 31 December 2022 and
6 months ended 30 June 2023.
Table 14 - Total copper, gold and silver produced as concentrate by both SART
and flotation processing for the year ended 31 December 2022 and 6 months
ended 30 June 2023
Concentrate Copper Gold Silver
production* content* content* content*
(dmt) (tonnes) (ounces) (ounces)
2022
Quarter ended 31 March
SART processing 330 188 12 25,114
Flotation 2,586 380 1,065 17,986
Total 2,916 568 1,077 43,100
Quarter ended 30 June
SART processing 316 168 14 25,582
Flotation 3,811 547 715 15,672
Total 4,127 715 729 41,254
Quarter ended 30 September
SART processing 367 208 33 24,077
Flotation 2,805 401 581 14,094
Total 3,172 609 614 38,171
Quarter ended 31 December
SART processing 438 244 39 20,833
Flotation 2,648 380 645 11,725
Total 3,086 624 684 32,558
2023
Quarter ended 31 March
SART processing 364 190 25 8,750
Flotation 4,544 657 751 10,975
Total 4,908 847 776 19,725
Quarter ended 30 June
SART processing 272 146 16 10,348
Flotation 5,613 867 476 8,069
Total 5,885 1,013 492 18,417
Note
* including Government of Azerbaijan's share.
Table 15 summarises the total gold and silver production from agitation and
heap leaching for the year ended 31 December 2022 and 6 months ended 30 June
2023.
Table 15 - Total gold and silver production from agitation and heap leaching
for the year ended 31 December 2022 and six months ended 30 June 2023
Quarter Gold Silver
ended
Agitation Heap Total Agitation Heap Total
leaching leaching leaching leaching
(ounces) (ounces) (ounces) (ounces) (ounces) (ounces)
31 March 2022 5,674 3,289 8,963 4,803 2,771 7,574
30 June 2022 6,196 3,941 10,137 4,654 2,966 7,620
30 Sept 2022 5,517 4,956 10,473 3,673 3,276 6,949
31 Dec 2022 5,831 4,606 10,437 2,684 2,136 4,820
FY 2022 23,218 16,792 40,010 15,814 11,139 26,963
31 March 2023 2,105 3,860 5,965 1,077 1,764 2,841
30 June 2023 3,463 3,912 7,375 1,735 1,858 3,593
H1 2023 5,568 7,772 13,340 2,812 3,622 6,434
Table 16 summarises the total copper concentrate (including gold and silver)
production and sales from both SART and flotation processing for the year
ended 31 December 2022 and 6 months ended 30 June 2023.
Table 16 - Total copper concentrate (including gold and silver) production and
sales from both SART and flotation processing for the year ended 31 December
2022 and six months ended 30 June 2023
Concentrate Copper Gold Silver Concentrate
Concentrate
production* content* content* content* sales** sales**†
(dmt) (tonnes) (ounces) (ounces) (dmt) ($000)
Quarter ended
31 March 2022 2,916 568 1,077 43,100 1,477 3,248
30 June 2022 4,127 715 729 41,254 4,642 8,127
30 September 2022 3,172 609 614 38,171 1,718 3,378
31 December 2022 3,086 624 684 32,558 4,606 7,487
FY 2022 13,301 2,516 3,104 155,083 12,443 22,240
31 March 2023 4,908 847 776 19,725 1,147 2,743
30 June 2023 5,885 1,013 492 18,417 5,501 7,678
H1 2023 10,793 1,860 1,268 38,142 6,648 10,421
* including Government of Azerbaijan's share
** excludes Government of Azerbaijan's share
† these are the invoiced sales of the Group's share of production before any
accounting adjustments in respect of IFRS 15. The totals given above do not
therefore agree to amounts disclosed as revenue in these interim financial
statements
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.
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 current tailings dam has
the capacity for approximately three months of production once production
restarts.
Knight Piésold, a leading firm of geotechnical and consulting engineers, has
determined that the wall of the existing tailings dam has a maximum height of
90 metres. This means the current wall can be raised by approximately an
average of 7.5 metres to give enough capacity for production for the next two
to three years. The Company is proposing to do this wall raise in two stages
of 2.5 metres followed by 5.0 metres. It is anticipated that it will take
approximately four months to raise the wall by 2.5 metres. The Company has
applied for permission from the Government to carry out the raise.
A site has been identified for a new tailings dam in the close vicinity of the
existing dam and permission for land use has been obtained. However, following
protests against its proposed location by local communities, the suitability
of the site is being reevaluated in conjunction with the Government of
Azerbaijan. Alternative sites for the location of a second tailings dam will
also be considered.
The construction of an auxiliary tailings dam close to the Zafar mine
commenced in 2022. However, following a reevaluation of the site, it was
decided not to complete its construction. The storage space already
constructed at the location will be used for alternative purposes.
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 regarded as
under explored. 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 six months ended 30 June 2023.
Geological fieldwork has resulted in the recent discovery of additional
mineralisation adjacent to the existing underground mine. This includes
"Hasan", a new sub-vertical high gold grade mineralised vein, immediately
south of the existing Gosha mine. Hasan can be accessed via a short tunnel
from the existing tunnelling at Gosha. A further vein close to Hasan called
"Akir" is also showing promising mineralisation.
The Company is also carrying out geological fieldwork at Asrikchay, a copper
and gold target situated within the Gosha Contract area. Asrikchay is located
in the northeast corner of the Gosha Contract Area, about 7 kilometres from
the Gosha mine, within the Asrikchay valley.
Xarxar
The 464 square kilometre Contract Area is located immediately north of Gedabek
which it borders. Xarxar is a known area of mineralisation which was explored
in the Soviet era. Xarxar hosts a portal and exploration tunnel constructed
in Soviet times. However, the tunnel has collapsed near its entrance.
Geological exploration began at Xarxar immediately following its acquisition
in July 2022. A new portal was constructed next to the Soviet portal.
Tunnelling then commenced parallel to the existing tunnel. A surface drill
programme was also started. The Group also acquired historical geological and
other data in respect of Xarxar owned by AzerGold CJSC for $0.7 million. This
included 805 assays taken from 4,923 metres of Xarxar drill core.
Gilar is situated close to the northern boundary of the Gedabek Contract Area.
Geological exploration indicates that this deposit trends to the north. The
Xarxar Contract Area extends the Gedabek Contract Area to the north and will
therefore enable Gilar to be fully exploited.
Garadag
The 344 square kilometre Garadag Contract Area is situated four kilometres
north of Gedabek alongside the road from Gedabek to Shamkir. Garadag was
explored during the Soviet era and a Soviet resource for the deposit dated 1
January 1992 is set out in Table 8 - "Soviet copper resource for the Garadag
deposit". This mineral resource contained over 318,000 tonnes of copper under
the Soviet standard of resource classification. Garadag has been extensively
explored since the end of the Soviet era, most recently by AzerGold CJSC, its
previous owner.
In August 2022, the Group acquired historical geological and other data and
associated reports (the "Data") in respect of Garadag owned by AzerGold CJSC
for $3.3 million. The Data includes geochemical and geophysical data including
maps and interpretative reports. Substantial core drilling and data
interpretation were carried out by Azergold CJSC and the Data includes 9,645
chemical assays taken from 23,454 metres of drill core. The Data also includes
an initial mining scoping study based on a preliminary mineral resource
estimate with various options for mine development including open pit designs,
initial mining schedules and an outline metallurgical flow sheet. An
environmental and socio-economic baseline assessment has also been carried and
is included in the Data. Since acquisition, the Group has started an extensive
exercise to index, analyse, interpret and verify the Data.
Vejnaly
Vejnaly is a 300 square kilometre Contract Area located in the Zangilan
district in south-west Azerbaijan. It borders Iran to the south and Armenia to
the west and hosts the Vejnaly deposit. Access to the Contract Area was
obtained in 2021 following the resolution of the conflict between Azerbaijan
and Armenia.
A camp is now established at Vejnaly for Group employees. A thorough survey of
the site has been carried out which has found that the main ore body was
extensively mined during the Armenian occupation. There are both open pit and
underground workings at the location. There is also an existing crusher and
flotation processing plant at the mine which will need extensive renovation to
recommence operation. There was no mining or production at Vejnaly in H1 2023.
Approximately 35 full-time employees are based at the site, who are mainly
geologists exploring in the vicinity of the existing mine. During H1 2023,
development of a ventilation tunnel commenced with 22 metres completed. Minor
amounts of ore are being extracted from the underground mine as the geologists
clean out and rehabilitate the tunnels as part of their exploration. This ore
will be transported to Gedabek for processing.
Subsequent to the end of the Period, staff were removed from Vejnay on the
instructions of the Government of Azerbaijan, following the discovery of a
landmine. The Government of Azerbaijan recommenced de-mining activities to
ensure the site was clear of landmines.
Ordubad
The 462 square kilometre Ordubad Contract Area is located in Nakhchivan,
south-west Azerbaijan, and contains numerous targets. The Company carried out
very limited geological fieldwork in 2021 and 2022, as access was restricted
due to the COVID-19 pandemic. However, drilling resumed in H1 2023 targeting
copper porphyry potential.
Kyzlbulag and Demirli
The Kyzlbulag Contract Area is 462 square kilometres located in the Karabakh
economic region. It contains several mines and has excellent potential for
exploration, as indicated by the presence of many mineral deposits and known
targets in the region. The Demirli concession is 74 square kilometres and
extends to the north-east by about 10 kilometres from the Kyzlbulag Contract
Area and contains the Demirli mining property. 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
presence of a gold mineralising system.
The situation in Karabakh is currently uncertain given the very recent events
when the Government of Azerbaijan (the "Government") moved to take full
control of the region. The Government will use all reasonable endeavours to
ensure that the Company has physical access to the region to undertake mineral
exploration and production. No work was carried out at Kyzlbulag and Demirli
in the six months to 30 June 2023 as the Group had no access to the Contract
Areas.
Geological exploration
Summary
· Mineralisation extended at Gilar
o 21 surface core drill holes completed with a total length of 8,650 metres
o Preliminary mineral resources estimate (non-JORC) published containing
over 249,000 ounces of gold, 46,000 tonnes of copper and 48,000 tonnes of zinc
· Significant copper identified at Xarxar
o 23 surface core drill holes completed with a total length of 10,246 metres
o 6 underground core drill holes completed with a total length of 1,149 metres
o Initial geological block model and open pit optimisation study completed
· Base case using $8,000 per tonne copper price showed over 93,000
tonnes of economically extractable copper
· Over 300,000 tonnes of copper identified at Garadag
o Comprehensive assessment of historical geological data continued
o Initial non-JORC assessment showed potential of deposit to produce over
300,000 tonnes of copper
· Drilling recommenced at Ordubad
o One drill rig now in operation on the flank of the Kalaky mineral
occurrence
o 5 core drill holes were completed for a total length of 2,684 metres
· Surface core and reverse circulation drilling continued to define the
Gedabek open pit ore zone
o Two surface core drill holes completed with a total length of 267 metres
o 14 reverse circulation drill holes completed with a total length of 1,230
metres
o Additional resource of approximately two million tonnes defined
Gedabek
Gedabek open pit
Two surface core drill holes were completed with a total length of 267 metres
and 14 reverse circulation drill holes completed with a total length of 1,230
metres to further define the ore zone. The drilling was mostly located in Pits
9, 10 and 11. Based on the reverse circulation drilling, a new mineral
resource of about two million tonnes was defined as a northernly continuation
of pits 10 and 11. This will be further explored.
Gedabek open pit - underground
82 metres of underground development below pit 4 was completed. No underground
drilling was carried out.
Gadir underground mine
28 metres of exploration tunnelling was completed. No underground drilling was
carried out.
Zafar deposit
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.
There was no geological exploration carried out in H1 2023.
Gilar
The area hosts two styles of mineralisation, gold in quartz veins and
hydrothermal gold-copper. Three mineralisation bodies have been discovered at
the occurrence.
Extensive geological exploration was carried out at Gilar in H1 2023. This
significantly extended the mineralisation. 21 surface core drill holes were
completed with a total length of 8,560 metres. A magnetometry geophysical
programme was completed and a surface Induction Polarisation ("IP") survey
continued throughout H1 2023. One significant drill hole in H1 2023 with an
intercept of over 50 metres is as follows:
Borehole 22GLDD133: 51.00m @ 1.9g/t gold, 1.4% copper and
0.5% zinc from 333.00m, including:
· 34.50m @ 2.6g/t Au, 2.0% Cu and 0.7% zinc at 1.0g/t gold cut-off from
342.50m, including at a 2.0 g/t Au cut-off
· 6.80m @ 4.0g/t Au, 6.3% Cu and 3.2% zinc from 345.50m
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. However, the recent discovery, 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.
Four underground core drill holes totalling 551 metres were drilled in the
Gosha mine in H1 2023. A detailed underground sampling programme was also
completed in the "Akir" high gold grade zone. 37 metres of channel samples
were taken from "vein 3" from underground which shows high gold grades.
The Company also carried out surface magnetometry geophysical exploration work
at Asrikchay in H1 2023. A second stage magnetometry programme was completed
and a data interpretation will be received from Reid Geophysics
Limited.
Xarxar
Tunnelling from the new portal continued during the Period. 23 surface core
drill holes were completed for a total length of 10,245 metres. These drill
holes targeted the central copper mineralisation zone and intercepted
significantly high and continuous grades of copper. These drill holes defined
high and low grade zones within the copper mineralisation zone. Six
underground core drill holes were completed for a total length of 1,149
metres.
Analysis of the historical geological data acquired in 2022 continued
throughout H1 2023. From these data, together with Company exploration data,
an initial geological block model and open pit optimisation study were
completed during H1 2023.
The initial geological block model shows that copper mineralisation exhibits
encouraging continuity. Mineralisation modelling was carried out within a 0.1
per cent. copper shell and grade-tonnage estimates were made using various
cut-off grades. The range of the contained amounts of copper, based on
mineralisation above certain depths, is as follows:
Above level 1,200 metres Above level 1,000 metres
Cut-off (Cu %) Mineralisation (tonnes) Resultant (Cu %) Metal (Cu tonnes) Cut-off (Cu %) Mineralisation (tonnes) Resultant (Cu %) Metal (Cu tonnes)
0.15 41,394,352 0.34 140,741 0.15 64,915,146 0.32 207,728
0.30 17,095,640 0.53 90,607 0.30 23,428,520 0.51 119,485
0.45 8,150,558 0.72 58,684 0.45 10,212,706 0.71 72,510
The base case for the open pit optimisation used a copper price of $8,000.
Copper metal prices within the range of $5,000 - $20,000 per tonne were
used to test the sensitivity of the open pit to copper metal prices and
mineral zone geometry. Two pit depths were used as a "minimum" and "maximum"
elevation to establish the amount of mineralisation located beneath the
various intervening pit floors. Significant mineralisation is located below
the open pit floor in the base case. This will allow for the optimisation of
the combined open pit and underground mining approach.
The results of the initial open pit optimisation study (Base Case 'OP 3' using
a copper price of $8,000) and sensitivities are shown in the following
table:
OPTION ORE (tonnes) WASTE (tonnes) STRIPPING RATIO COPPER (tonnes) COPPER (per cent.) BOTTOM DEPTH (metres)
(copper price/tonne)
OP1 - $5,000 7,362,221 21,685,157 2.9 51,513 0.70 150
OP2 - $7,500 17,334,016 29,376,561 1.7 85,573 0.49 190
Base Case OP3 - $8000 20,116,723 31,982,108 1.6 93,408 0.46 205
OP4 - $10,000 29,176,251 39,932,179 1.4 114,732 0.39 240
OP5 - $12,000 36,224,004 52,831,917 1.5 130,876 0.36 270
OP6 - $15,000 43,739,585 76,392,038 1.7 147,663 0.34 310
OP7 - $20,000 53,028,965 131,403,872 2.5 169,064 0.32 360
Garadag
No geological field work was carried out. However, assessment of the acquired
historical geological data continued throughout H1 2023. Geological re-logging
of six core drill holes was completed. This will assist in understanding the
porphyry copper potential of the deposit. A photographic unit was established
to photograph all 23,000 metres of drill core acquired along with the historic
data.
A mineral resource estimation based on geostatistical techniques and
three-dimensional modelling on data received from AzerGold CJSC was completed
in H1 2023. This showed an "Indicated" plus "Inferred" mineral resource of
over 66.3 million tonnes of ore at 0.49 per cent. copper, containing some
324,688 tonnes of copper, which further confirmed the copper potential of the
Garadag deposit.
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 geological exploration team and fire assay laboratory has been established
at Vejnaly. In H1 2023, underground sampling in Zone 2 and logging of historic
drill holes continued. Some assays of historic core samples show high grade
gold. Vein sampling assays of the deposits also show significant high-grade
gold.
"World View 3" satellite image data for the entire Vejnaly Contract Area was
obtained in H1` 2023. This is currently being analysed to identify potential
exploration targets.
Ordubad
The COVID-19 restrictions, which have prevented access to Ordubad, were lifted
during H1 2023 and the Company recommenced its drilling programme. During H1
2023, 5 core drill holes were completed for a total length of 2,684 metres on
the flank of the Kalaky mineral occurrence targeting porphyry copper
potential. The drill holes mainly intercepted weak altered intrusive rocks
within a silica halo.
Based on our latest understanding of porphyry mineralisation, a reassessment
of the Shakardara deposit commenced in H1 2023. 2,908 metres of previously
drilled core were relogged and some intervals were resampled.
Dr. Robin N. Armstrong, mining sector leader of the Natural History Museum,
London, visited Ordubad during H1 2023. During his visit, geological logging
of the last phase of the core drill holes was carried out. Samples were also
selected for a pathfinder geochemistry study which will assist in identifying
possible copper porphyry mineral targets.
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.
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 2023, 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 owned approximately 20 per cent. of Libero
throughout H1 2023. Michael Sununu was a board member of Libero throughout H1
2023 and Farhang Hedjazi served as the Company's representative on Libero's
technical committee.
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.
In January 2023 Libero announced the results of its 2022 summer drill
programme at its Terry porphyry copper and gold project. One drill hole
returned 0.24 per cent. copper and 0.03 grammes per tonne of gold. The drill
hole successfully intersected the extension of the Terry porphyry
mineralisation.
No drilling was carried out at Mocoa in H1 2023 as Libero is awaiting permits
to drill. However, the new San Jose access to the Mocoa project was completed.
This access is 2.1 kilometres in length and is for the transport of drills and
ancillary supplies. It eliminates expensive helicopter support for drilling
activities. Libero also collaborated with national universities and
communities on a Colombian Government initiative called the "Green Route".
This initiative is to develop an in-country copper supply chain which is
sustainable. Libero also participated in the first ever Colombia Green Energy
Summit.
At Ezperanza, Libero continued the required consultations to finalise the
permitting process and advance the project.
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 directors keep under review the
potential benefit of hedging which it carries out from time to time.
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 2023, the Group had only occasional minor bank borrowings and
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 surplus cash deposits during H1 2023. 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.
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
25 September 2023
Financial Review
Group statement of income
The Group generated revenues in the six months ended 30 June 2023 ("H1 2023")
of $30.8 million ("m") (H1 2022: $31.5m) from the sales of gold and silver
bullion and copper and precious metal concentrate.
The revenues in H1 2023 included $20.4m (H1 2022: $21.7m) generated from the
sales of gold and silver bullion from the Group's share of the production of
gold doré bars. Bullion sales in H1 2023 were 10,506 ounces of gold and 5,480
ounces of silver (H1 2022: 11,273 ounces of gold and 11,169 ounces of silver)
at an average price of gold of $1,939 per ounce and an average price of silver
of $23 per ounce (H1 2022: $1,901 per ounce and $24 per ounce respectively).
In addition, the Group generated revenue in H1 2023 of $10.4m (H1 2022: $9.8m)
from the sale of 6,648 dry metric tonnes (H1 2022: 6,119 dry metric tonnes) of
copper and precious metal concentrate.
A gold sales hedging programme was established in H1 2023. Monthly forward
sales of gold bullion were made equivalent to approximately 25 to 30 per cent.
of the Group's share of budgeted gold bullion production for the months of
June to December 2023. The contracts mature at the end of each respective
month and a total of 4,600 ounces of gold bullion was forward sold. The
forward sales were made at prices between $1,949.75 to $1,979.25 per ounce
of gold. The spot price of gold at the time of contracting the forward sales
was $1,947.50. 1,000 ounces of gold were sold on 30 June 2023 under the
hedge programme for $1,947.50 per ounce when the LBMA PM gold price
was $1,912.25.
The Group incurred cost of sales in H1 2023 of $25.2m (H1 2022: $20.4m) as
follows:
H1 2023 H1 2022 B/(W)*
($m) ($m) ($m)
Cash cost of sales** 26.3 27.4 1.1
Depreciation and amortisation 6.0 6.4 0.4
Cash costs, depreciation and amortisation 32.3 33.8 1.5
Capitalised costs (1.8) (1.2) 0.6
Cost of sales before inventory movement and leases 30.5 32.6 2.1
Lease adjustments 0.1 - (0.1)
Inventory movement (5.4) (12.2) (6.8)
Cost of sales per the Group statement of income 25.2 20.4 (4.8)
*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 2023 compared to H1 2022 were largely due
to lower reagent costs partially offset by higher consumable costs. Reagent
costs decreased by $1.3m due to lower cyanide costs due to less cyanide
leaching carried out in H1 2023. Materials and consumables increased by a
total of $0.6m due to increased production by flotation in H1 2023.
Depreciation decreased by $0.4m from $6.4m in H1 2022 to $6.0m in H1 2023 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 or by the straight
line method. The unit of account for run of mine ("ROM") costs and for
post-ROM costs are recoverable ounces of gold.
The $5.4m inventory movement arose due to increased gold doré and copper
concentrate stocks at 30 June 2023 compared to 30 December 2022 as discussed
in 'Group statement of financial position'.
Administrative expenses in H1 2023 were $3.2m compared to $3.1m in H1 2022.
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.
Finance costs in H1 2023 were $0.7m (H1 2022: $0.4m) and comprise interest on
bank debt and letters of credit, interest on lease liabilities and interest
accretion expense on the rehabilitation provision. The finance costs were
mainly higher due to higher interest accretion expense on the rehabilitation
provision due to higher US dollar interest rates.
Other expense in H1 2023 was $nil (H1 2022: $710,000). The expense in H1 2022
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 Group had a taxation charge in H1 2023 of $0.6m (H1 2022: $2.2m). This
comprised a current income tax charge of $nil (H1 2022: $nil) and a deferred
tax charge of $0.6m (H1 2022: $2.2m). R.V. Investment Group Services ("RVIG")
in Azerbaijan incurred a taxable loss of $8.3m in H1 2023 (2022: $9.4m) 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.
The Group had an Other comprehensive profit in H1 2023 of $126,000 (H1 2022:
loss of $34,000). This was a translation gain on the translation of Libero's
financial statements into United States dollars at 30 June 2023. This arose as
the Canadian dollar strengthened against the United States dollar in H1 2023
as discussed in 'Libero Copper & Gold Corporation'.
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
$1,357 in H1 2023 compared to $983 in H1 2022. 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 2023 compared to H1
2022 as many of the costs are fixed or semi-fixed. However, the AISC cost per
ounce increased due to the significantly lower gold production in the Period.
Group statement of financial position
Non-current assets increased from $102.2m at 31 December 2022 to $106.6m at 30
June 2023. Intangible assets increased from $38.6m at 31 December 2022 to
$42.5m at 30 June 2023 due to expenditure on geological exploration and
evaluation of $4.3m partially offset by amortisation of $0.4m mainly in
respect of mining rights. Property, plant and equipment (including leased
assets) were lower by $0.1m due to additions to fixed and leased assets offset
by depreciation in the period. The rehabilitation provision also decreased.
Net current assets were $57.6m at 30 June 2023 compared to $60.5m at 31
December 2022. The main reason for the decrease was a decrease of cash of
$10.6m partially offset by an increase in inventories of $8.3m. Inventories
increased by $8.3 due to an increase in stock of finished goods of $6.2m and
spare parts and consumables of $3.0m. There were 2,553 ounces of unsold gold
and 3,332 tonnes of unsold concentrate at 30 June 2023 compared to 1,448
ounces of unsold gold and 583 tonnes of unsold concentrate respectively at 31
December 2022. These were offset by a decrease of metal in circuit of $1.4m.
Trade and other receivables (excluding the amount owed to the Government of
Azerbaijan) increased by $1.5m. The Group's cash balances at 30 June 2023 were
$9.6m (31 December 2022: $20.4m). Surplus cash is mostly maintained in US
dollars which is placed on deposit with banks at interest rates of around 4
per cent.
Shareholders' equity of the Group at 30 June 2023 was $114.5m (31 December
2022: $113.5m). The increase was primarily due to the profit retained in the
Period of $0.8m and share based payment expense credited to reserves of $0.1m.
There were no shares issued or bought back in H1 2023.
The Group was financed only by equity at 31 December 2022 and 30 June 2023 as
there was no bank debt outstanding. The Group did have an insignificant amount
of very short-term bank borrowing in H1 2023 which was all repaid by 30 June
2023.
Libero Copper & Gold Corporation
Libero Copper and Gold Corporation ("Libero") remained an associate company of
the Group throughout H1 2023. The Group made two further investments in Libero
in H1 2023 as follows:
· 6 January 2023: 2.6 million shares at CAD 15 cents per share for a
total of $294,000
· 19 February 2023: 3.2 million shares at CAD 15 cents per share for a
total of $362,000
Libero's loss after taxation in H1 2023 was CAD$3.6m and the Group's share of
this loss was $213,000. The Group also included a foreign exchange gain on
revaluation of its investment in Libero of $126,000 as the Canadian dollar
strengthened from $1 equalled CAD$1.3544 at 1 January 2023 to $1 equalled
CAD$1.3255 at 30 June 2023.
A reconciliation of the carrying cost of Libero to its net assets at 30 June
2023 is as follows:
Company's share of the net assets of Libero 1,819
Goodwill 3,912
Carrying value of Libero at 30 June 2023 5,731
Group statement of cash flow
Operating cash inflow before movements in working capital for H1 2023 was
$8.6m (H1 2022: $14.6m).
Working capital movements in H1 2023 absorbed cash of $8.0m (H1 2022: $17.2m)
mainly due to an increase in inventories of $8.3m (H1 2022: $12.1m). The
increase in inventories was due to an increase of unsold gold bullion and
copper concentrate as described in 'Group statement of financial position'.
There was a cash inflow from operating activities in H1 2023 of $0.6m compared
to a cash outflow in H1 2022 of $6.0m. The cash inflow resulted from less cash
absorbed by working capital and lower income tax paid of $nil (H1 2022: $3.7m)
The Group paid corporation tax in H1 2023 of $nil (H1 2022: $3.4m)
in Azerbaijan as RVIG was incurring taxable losses.
Expenditure on property, plant and equipment in H1 2023 was $6.6m (H1 2022:
$4.8m). The main items of expenditure in H1 2023 were deferred stripping costs
of $1.3m, mine development costs $3.1m, miscellaneous plant and equipment of
$0.6m and tailing dam development of $0.6m.
Exploration and evaluation expenditure incurred and capitalised in H1 2023 was
$3.8m (H1 2022: $2.4m). This arose on exploration and evaluation of all the
Group's contract areas.
Dividends
The Group paid an interim and final dividend in respect of the year ended 31
December 2022 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. No interim dividend was declared
in respect of the year ending 31 December 2023.
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 Gedabek Contract Area has been subject to the
minimum 25 per cent. since commencement of production including both the year
to 31 December 2022 and the 6 months to 30 June 2023. The Government's share
of production in the six months to 30 June 2023 (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 from the Gedabek Contract Area
in the six months to 30 June 2023 of 12.75 per cent. (six months to 30 June
2022: 12.75 per cent.) of the value of its production.
The Group produced gold and copper for the first time in 2021 from its Vejnaly
Contract Area and part of the metal produced was sold in H1 2023. The
Government's share of this production was 32.0 per cent. This is because the
mine and other facilities were acquired at no cost and the only costs
available to offset the production were the administration costs of the site,
minor refurbishment capital expenditure, the cost of geological exploration
and Gedabek processing costs. Mining costs were not available for offset as
the metal was produced from ore stockpiled at Vejnaly by the previous owner.
The revenues from the Vejnaly Contract Area in H1 2023 were not material to
the Group's revnues.
The Group can recover the following costs in accordance with the PSA for each
Contract Area as follows:
· 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 2023 were $47.6m, $33.0m and $1.4m respectively (31 December 2022:
$29.7m, $19.7m and $0.8 respectively).
The unrecovered costs at 30 June 2023 for the Garadag and Xarxar contract
areas were $1.0m and $2.9m respectively (31 December 2022: $0.9m and $1.0m
respectively). The unrecovered costs include cash payments for historical
geological data of $0.8m and $0.2m in respect of Garadag and Xarxar
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 2023. 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
Main business of the Group
The Group produces primarily gold and copper at its Gedabek mining concession
in north-western Azerbaijan. Ore mined at Gedabek produces gold doré by heap
and agitation leaching and copper concentrate (which also contains gold and
silver) from SART and flotation processing. When processing operations are
fully operational, production is cash generative at current metal prices.
Historically, the Group has funded all its operational costs (including its
Baku and London overheads) from cash generated from the sale of precious metal
and copper produced at Gedabek.
Curtailment of agitation leaching and flotation processing and current
operations
The Group's agitation leaching and flotation processing produces waste as a
slurry called tailings. These tailings are stored in a dam approximately seven
kilometres from the Group's processing plants. Cyanide is used as a reagent in
agitation leaching processing and there are strict controls in place to
prevent the cyanide from contaminating the tailings. The tailings dam is
nearing full capacity and the Group had identified a valley next to its
existing tailings dam as a possible site for the location of a second tailings
dam. The Government of the Republic of Azerbaijan (the "Government") has given
the Group land use permission for the second dam.
In June 2023, inhabitants of Soyudlu village, which is close to the proposed
site of the second tailings dam, protested against its construction. The Group
has generally very good relations with communities in the local area around
Gedabek and these protests were wholly unexpected. The protesters claimed that
the existing tailings dam contains cyanide contamination which is polluting
the environment in its vicinity. It could therefore be a danger to the health
of local residents and the flora and fauna in the surrounding area.
As a result of the protests, the Government and the Company, jointly
commissioned Micon International Co Limited ("Micon") to carry out a health,
safety and environmental review of tailings management at Gedabek in late July
2023. The review included sampling soil, ground water and surface water for
cyanide. Samples were assayed at an accredited laboratory in Azerbaijan. The
Group also arranged for its own environmental consultants to accompany Micon
and for parallel sampling and check assays to be performed. The discharge of
tailings into the tailings dam was stopped from the beginning of August 2023
in conjunction with the environmental study. This required the staged
curtailment of agitation leaching and flotation processing. The Group also
suspended blasting and mining from the beginning of August 2023 to conserve
funds.
The Group is currently only producing gold doré from heap leaching and copper
concentrate from SART processing. There is currently no mining of ore and the
development of the Gilar and Zafar mines has been stopped.
Micon report and restart of full production
The Group will only restart agitation leaching and flotation processing after
issuance of the Micon report by the Government. It is anticipated that the
Group, in conjunction with the Government, will implement changes to its
operations to rectify any issues raised in the Micon report. The Group will
work with the Government to address any issues and identify a time for
resumption of its curtailed operations. The Company is still awaiting the
issue of the final Micon report.
Should agitation leaching and flotation processing restart, the existing
tailings dam currently only has sufficient capacity for approximately three
months further production. The capacity of the tailings dam has been increased
several times in the past by increasing the height of its wall. The Group now
wishes to further increase the height of the wall by an average of 7.5 metres
to give the tailings dam sufficient capacity for an additional two to three
years of production. This raise of the dam wall will be carried out in stages
with the first stage being a raise of approximately 2.5 metres. The Group has
applied to the Government for permission to raise the wall and the
environmental engineers, Shinyei Kaisha are being commissioned to carry out a
study to ensure it has sufficient structural stability for a further raise. It
is expected the study will take approximately four months and be completed by
January 2024. Upon receiving permission, the first raise of approximately 2.5
metres of the tailings dam wall is expected to take approximately four months
to complete. Given that the current tailings dam only has three months
capacity, and it may take up to eight months in total to obtain permission and
then carry the raise of the wall, further interruptions to full production
will be necessary once production resumes.
Financial condition of the Group and forecast till end of September 2024
The Group has in place an ANZ 55 million ($32.3 million) revolving credit
facility with the International Bank of Azerbaijan ("IBA") with no conditions
on drawdown. Under the terms of the revolving credit facility, there is a
general obligation on the Group that there should be no significant
deterioration in its financial position. The partial curtailment of processing
operations means the Group can no longer meet this obligation. Accordingly,
IBA have informally advised the Group that they have suspended lending under
the revolving credit facility.
The Group has cash reserves of $10.4 million at 25 September 2023. The current
costs of maintaining the Group's operations on a "care and maintenance" basis
including administrative overheads in Baku and London is estimated at $1.5
million per month. Cash forecasts show that if the Group only continues to
heap leach gold and cannot resume borrowing from IBA, it will exhaust its
current cash reserves in the first quarter of 2024. To finance its operations
from the first quarter of 2024 onwards, the Group will need to have restarted
full operations and agreed to a resumption of lending from IBA under its
revolving credit facility.
The Group has prepared a 12 month cash flow forecast until the end of
September 2024, assuming resumption of its processing operations and
availability of its IBA credit line. It also assumes the first 2.5 metre raise
of the tailing will be completed by May 2024. This cash flow uses a gold price
of $1,900 per ounce, a copper price of $8,200 per tonne. This base case cash
flow shows that the Group is able to finance its operations till 30 September
2024.
Material uncertainties over going concern
At the time of approving the issuance of the financial statements, there exist
several material uncertainties related to future events that may cast doubt on
the Group's ability to continue as a going concern. It may therefore be unable
to realise its assets and discharge its liabilities in the normal course of
business.
These material uncertainties are as follows:
1 The Group will be able to fully restart agitation leaching
and flotation processing.
2 IBA will agree to restart lending to the Group under its
revolving credit facility.
3 The Government will not impose any conditions or fines etc. on the
Group which will be so onerous as to make it impossible for the Group to
continue in commercial operation.
4 Permission will be obtained to further raise the wall of
the tailings dam and this wall raise will be completed by April 2023.
The Group operates its Gedabek site using best environmental practice. The
directors therefore have an expectation that Micon report will not contain any
adverse findings that will prevent it from resuming operations.
The Group's tailing dam has been subject to regular inspections by both CQA
and Knight Piésold. These two firms of environmental engineers have both
reported no issues with the structural stability of the wall of the tailings
dam. In addition, Knight Piésold have recommended that a further raise of the
wall presents no danger of structural failure. The directors therefore also
have an expectation that approval will be obtained for a further raise of its
existing tailings dam wall and that the raise can be carried in sufficient
time to enable the Group to meet its 12 month cash flow forecast until the end
of September 2024.
Accordingly, but recognising the degree of uncertainty in a dynamic situation,
the directors believe it is appropriate to prepare these financial statements
on a going concern basis. The financial statements do not contain any
adjustments that would be required to be made if they were prepared on a basis
other than the going concern basis.
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.
William Morgan
Chief financial officer
25 September 2023
Anglo Asian Mining plc
Condensed group statement of income
Six months ended 30 June 2023
6 months to 6 months to
30 June 2023 30 June 2022
(unaudited) (unaudited)
Continuing operations Notes $000 $000
Revenue 2 30,785 31,548
Cost of sales (25,214) (20,426)
Gross profit 5,571 11,122
Other operating income 119 -
Administrative expenses (3,171) (3,058)
Other operating expenses (343) (511)
Operating profit 2,176 7,553
Finance costs (731) (359)
Finance income 127 39
Other expense - (710)
Share of loss of an associate company 3 (213) (866)
Profit before tax 1,359 5,657
Income tax expense 4 (546) (2,182)
Profit attributable to the equity holders of the parent 813 3,475
813 3,475
Profit per share attributable to the equity holders of the parent
Basic (US cents per share) 5 0.71 3.04
Diluted (US cents per share) 5 0.71 3.04
Anglo Asian Mining plc
Condensed group statement of comprehensive income
Six months ended 30 June 2023
6 months to 6 months to
30 June 2023 30 June 2022
(unaudited) (unaudited)
$000 $000
Profit for the period 813 3,475
Other comprehensive income
Other comprehensive income that may be reclassified to profit or loss in
subsequent periods*:
Exchange differences on translation of foreign associate company
Share of comprehensive (loss) / profit of an associate company 132 (37)
(6) 3
Net other comprehensive profit / (loss) that may be reclassified to profit or
loss in subsequent periods
126 (34)
Total comprehensive income for the period, net of tax*
939 3,441
* These are gross amounts and the tax effect is $nil.
Anglo Asian Mining plc
Condensed group statement of financial position
30 June 2023
30 June 2022
30 June 2023 (unaudited) 31 December 2022
(unaudited) (audited)
Notes $000 $000 $000
Non-current assets
Intangible assets 6 42,492 32,200 38,616
Property, plant and equipment 7 56,140 56,853 56,045
Leased assets 8 2,171 2,814 2,363
Investment in an associate company 3 5,731 4,049 5,172
Non-current financial assets 9 39 80 39
106,573 95,996 102,235
Current assets
Inventory 10 48,493 49,019 40,202
Trade and other receivables 11 15,640 29,784 18,331
Current income tax asset - 300 -
Cash and cash equivalents 9,556 21,152 20,410
73,689 100,255 78,943
Total assets 180,262 196,251 181,178
Current liabilities
Trade and other payables 12 (15,673) (32,131) (18,022)
Income taxes payable - - (46)
Lease liabilities 8 (449) (429) (419)
(16,122) (32,560) (18,487)
Net current assets 57,567 67,695 60,456
Non-current liabilities
Trade and other payables (3,009) - (2,897)
Provision for rehabilitation (16,006) (12,026) (16,006)
Lease liabilities 8 (2,059) (2,715) (2,289)
Deferred tax liability 4 (28,538) (26,881) (27,992)
(49,612) (41,622) (49,184)
Total liabilities (65,734) (74,182) (67,671)
Net assets 114,528 122,069 113,507
Equity
Share capital 13 2,016 2,016 2,016
Share premium 14 33 33 33
Treasury shares (145) - (145)
Share-based payment reserve 506 223 424
Merger reserve 46,206 46,206 46,206
Foreign currency translation reserve (101) (34) (233)
Retained earnings 66,013 73,625 65,206
Total equity 114,528 122,069 113,507
Anglo Asian Mining plc
Condensed group statement of cash flows
Six months ended 30 June 2023
6 months to 6 months to
30 June 2023 30 June 2022
(unaudited) (unaudited)
$000 $000
Cash flows from operating activities
Profit before tax 1,359 5,657
Adjustments to reconcile profit before tax to net cash flows:
Finance costs 731 359
Finance income (127) (39)
Unrealised loss on financial instruments - 743
Gain on the modification of lease liabilities (28) -
Depreciation of owned assets 5,689 5,945
Depreciation of leased assets 229 306
Share based payment 82 211
Share of loss of an associated company 214 866
Amortisation of mining rights and other intangible assets 399 550
Foreign exchange loss 88 -
Operating cash flow before movements in working capital 8,636 14,598
Increase in trade and other receivables (515) (3,666)
Increase in inventories (8,291) (12,107)
Increase / (decrease) in trade and other payables 852 (1,461)
Cash generated from / (absorbed by) operations 682 (2,636)
Income taxes paid (46) (3,363)
Net cash provided by / (used by) operating activities 636 (5,999)
Cash flows from investing activities
Expenditure on property, plant and equipment and mine development (6,623) (4,794)
Investment in exploration and evaluation activities (3,784) (2,403)
Acquisition of an associated company - (2,776)
Further investment in an associated company (646) -
Interest received - 38
Net cash used in investing activities (11,053) (9,935)
Cash flows from financing activities
Interest paid - lease liabilities (140) (164)
Repayment of lease liabilities (209) (203)
Net cash used in financing activities (349) (367)
Net decrease in cash and cash equivalents (10,766) (16,301)
Net foreign exchange difference (88) -
Cash and cash equivalents at beginning of period 20,410 37,453
Cash and cash equivalents at end of the period 9,556 21,152
Anglo Asian Mining plc
Condensed group statement of changes in equity
Six months ended 30 June 2023
(unaudited)
Foreign currency translation
Share-based reserve
Share Share Treasury payment Merger $000 Retained Total
capital premium shares reserve reserve earnings equity
$000 $000 $000 $000 $000 $000 $000
1 January 2023 2,016 33 (145) 424 46,206 (233) 65,206 113,507
Profit for the period - - - - - - 813 813
Other comprehensive income for the period - - - - - 132 (6) 126
Total comprehensive income for the period - - - - - 132 807 939
Share based payment - - - 82 - - - 82
30 June 2023 2,016 33 (145) 506 46,206 (101) 66,013 114,528
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
$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
Year ended 31 December 2022
(audited)
Share Share Merger Total
capital premium reserve equity
$000 $000 Share-based $000 Foreign Retained $000
payment currency earnings
Treasury reserve translation $000
shares $000 reserve
$000 $000
1 January 2022 2,016 33 - 12 46,206 - 70,150 118,417
Profit for the year - - - - - - 3,660 3,660
Other comprehensive loss for the year
- - - - - (233) 8 (225)
Total comprehensive income for the year
- - - - - (233) 3,668 3,435
Cash dividends paid - - - - - - (8,612) (8,612)
Share-based payment
- - - 412 - - - 412
Purchase of shares for treasury
- - (145) - - - - (145)
31 December 2022 2,016 33 (145) 424 46,206 (233) 65,206 113,507
Anglo Asian Mining plc
Notes to the condensed Group interim financial statements
Six months ended 30 June 2023
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 2023 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 2023 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 2022 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 2023 are consistent with
those followed in the preparation of the Group's annual report and accounts
for 2022, except for the adoption of new standards that became effective from
1 January 2023. 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 2023, but
do not have an impact on the condensed Group interim financial statements.
Going concern
Main business of the Group
The Group produces primarily gold and copper at its Gedabek mining concession
in north-western Azerbaijan. Ore mined at Gedabek produces gold doré by heap
and agitation leaching and copper concentrate (which also contains gold and
silver) from SART and flotation processing. When processing operations are
fully operational, production is cash generative at current metal prices.
Historically, the Group has funded all its operational costs (including its
Baku and London overheads) from cash generated from the sale of precious metal
and copper produced at Gedabek.
Curtailment of agitation leaching and flotation processing and current
operations
The Group's agitation leaching and flotation processing produces waste as a
slurry called tailings. These tailings are stored in a dam approximately seven
kilometres from the Group's processing plants. Cyanide is used as a reagent in
agitation leaching processing and there are strict controls in place to
prevent the cyanide from contaminating the tailings. The tailings dam is
nearing full capacity and the Group had identified a valley next to its
existing tailings dam as a possible site for the location of a second tailings
dam. The Government of the Republic of Azerbaijan (the "Government") has given
the Group land use permission for the second dam.
In June 2023, inhabitants of Soyudlu village, which is close to the proposed
site of the second tailings dam, protested against its construction. The Group
has generally very good relations with communities in the local area around
Gedabek and these protests were wholly unexpected. The protesters claimed that
the existing tailings dam contains cyanide contamination which is polluting
the environment in its vicinity. It could therefore be a danger to the health
of local residents and the flora and fauna in the surrounding area.
As a result of the protests, the Government and the Company, jointly
commissioned Micon International Co Limited ("Micon") to carry out a health,
safety and environmental review of tailings management at Gedabek in late July
2023. The review included sampling soil, ground water and surface water for
cyanide. Samples were assayed at an accredited laboratory in Azerbaijan. The
Group also arranged for its own environmental consultants to accompany Micon
and for parallel sampling and check assays to be performed. The discharge of
tailings into the tailings dam was stopped from the beginning of August 2023
in conjunction with the environmental study. This required the staged
curtailment of agitation leaching and flotation processing. The Group also
suspended blasting and mining from the beginning of August 2023 to conserve
funds.
The Group is currently only producing gold doré from heap leaching and copper
concentrate from SART processing. There is currently no mining of ore and the
development of the Gilar and Zafar mines has been stopped.
Micon report and restart of full production
The Group will only restart agitation leaching and flotation processing after
issuance of the Micon report by the Government. It is anticipated that the
Group, in conjunction with the Government, will implement changes to its
operations to rectify any issues raised in the Micon report. The Group will
work with the Government to address any issues and identify a time for
resumption of its curtailed operations. The Company is still awaiting the
issue of the final Micon report.
Should agitation leaching and flotation processing restart, the existing
tailings dam currently only has sufficient capacity for approximately three
months further production. The capacity of the tailings dam has been increased
several times in the past by increasing the height of its wall. The Group now
wishes to further increase the height of the wall by an average of 7.5 metres
to give the tailings dam sufficient capacity for an additional two to three
years of production. This raise of the dam wall will be carried out in stages
with the first stage being a raise of approximately 2.5 metres. The Group has
applied to the Government for permission to raise the wall and the
environmental engineers, Shinyei Kaisha are being commissioned to carry out a
study to ensure it has sufficient structural stability for a further raise. It
is expected the study will take approximately four months and be completed by
January 2024. Upon receiving permission, the first raise of approximately 2.5
metres of the tailings dam wall is expected to take approximately four months
to complete. Given that the current tailings dam only has three months
capacity, and it may take up to eight months in total to obtain permission and
then carry the raise of the wall, further interruptions to full production
will be necessary once production resumes.
Financial condition of the Group and forecast till end of September 2024
The Group has in place an ANZ 55 million ($32.3 million) revolving credit
facility with the International Bank of Azerbaijan ("IBA") with no conditions
on drawdown. Under the terms of the revolving credit facility, there is a
general obligation on the Group that there should be no significant
deterioration in its financial position. The partial curtailment of processing
operations means the Group can no longer meet this obligation. Accordingly,
IBA have informally advised the Group that they have suspended lending under
the revolving credit facility.
The Group has cash reserves of $10.4 million at 25 September 2023. The current
costs of maintaining the Group's operations on a "care and maintenance" basis
including administrative overheads in Baku and London is estimated at $1.5
million per month. Cash forecasts show that if the Group only continues to
heap leach gold and cannot resume borrowing from IBA, it will exhaust its
current cash reserves in the first quarter of 2024. To finance its operations
from the first quarter of 2024 onwards, the Group will need to have restarted
full operations and agreed to a resumption of lending from IBA under its
revolving credit facility.
The Group has prepared a 12 month cash flow forecast until the end of
September 2024, assuming resumption of its processing operations and
availability of its IBA credit line. It also assumes the first 2.5 metre raise
of the tailing will be completed by May 2024. This cash flow uses a gold price
of $1,900 per ounce, a copper price of $8,200 per tonne. This base case cash
flow shows that the Group is able to finance its operations till 30 September
2024.
Material uncertainties over going concern
At the time of approving the issuance of the financial statements, there exist
several material uncertainties related to future events that may cast doubt on
the Group's ability to continue as a going concern. It may therefore be unable
to realise its assets and discharge its liabilities in the normal course of
business.
These material uncertainties are as follows:
1 The Group will be able to fully restart agitation leaching and
flotation processing.
2 IBA will agree to restart lending to the Group under its revolving
credit facility.
3 The Government will not impose any conditions or fines etc. on the
Group which will be so onerous as to make it impossible for the Group to
continue in commercial operation.
4 Permission will be obtained to further raise the wall of the
tailings dam and this wall raise will be completed by April 2023.
The Group operates its Gedabek site using best environmental practice. The
directors therefore have an expectation that Micon report will not contain any
adverse findings that will prevent it from resuming operations.
The Group's tailing dam has been subject to regular inspections by both CQA
and Knight Piésold. These two firms of environmental engineers have both
reported no issues with the structural stability of the wall of the tailings
dam. In addition, Knight Piésold have recommended that a further raise of the
wall presents no danger of structural failure. The directors therefore also
have an expectation that approval will be obtained for a further raise of its
existing tailings dam wall and that the raise can be carried in sufficient
time to enable the Group to meet its 12 month cash flow forecast until the end
of September 2024.
Accordingly, but recognising the degree of uncertainty in a dynamic situation,
the directors believe it is appropriate to prepare these financial statements
on a going concern basis. The financial statements do not contain any
adjustments that would be required to be made if they were prepared on a basis
other than the going concern basis.
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.
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 in 2022 and 2023 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 2022 and 2023 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 a 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 an additional 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 has significant influence over Libero as it has a shareholding of
approximately 20 per cent. in Libero, a Group director is also a director of
Libero and the Group's Vice president, technical services is a member of the
technical committee of Libero. The market value of the Libero shares held by
the Group, which corresponds to their fair value, on 30 June 2023 was
$1,125,000. There are no restrictions on the ability of the Group to transfer
funds to Libero and for Libero to transfer funds to the Group. The financial
statements of Libero are made up to 31 December of each year. The financial
information about Libero, included in these Group financial statements, has
been taken from their audited financial statements for the year ended 31
December 2022 dated 25 April 2023 and their unaudited financial statements for
the six months ended 30 June 2023 dated 24 August 2023.
The Group's interest in Libero at 31 December 2022 was 18.29 per cent. Libero
carried out a placement of 6,747,000 shares on 30 December 2022. The Group
subscribed for 2.6 million shares at CAD 15 cents per share for a total of
$294,000 as part of this placement to maintain its interest in Libero at 19.8
per cent. The Group completed its placement on 8 January 2023. The Group's
interest in Libero was therefore temporarily 18.29 per cent. in the period 31
December 2022 to 7 January 2023. The Group also subscribed for 3.2 million
shares at CAD 15 per share for a total of $362,000 in February 2023.
The following tables illustrates the summarised financial information of the
Group's investment in Libero:
The goodwill and other assets of Libero at 31 December 2022 and 30 June 2023
were assessed for impairment and no impairment charge was considered
necessary.
Balance sheet of Libero at 30 June 2023, 30 June 2022 and 31 December 2022
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (unaudited) (Audited)
$000 $000 $000
Current assets 436 1,684 338
Non-current assets 2,940 2,908 2,579
Current liabilities (1,128) (961) (639)
Non-current liabilities (143) (209) (139)
Equity 2,105 3,422 2,139
Reconciliation to carrying value in Group balance sheet
Equity of Libero 2,105 3,422 2,139
Share based payment expense (972) (582) (874)
Exploration expense 8,299 - 6,531
Equity recognised by the Group 9,432 2,840 7,796
Group's share in equity - 19.3% and 19.6% (2022: 18.3%)
1,819 556 1,426
Goodwill 3,912 3,493 3,746
Carrying value of associate company 5,731 4,049 5,172
Profit and loss account of Libero for the 6 months to 30 June 2023
6 months to 6 months to
30 June 2023 30 June 2022
(Unaudited) (Unaudited)
$000 $000
Expenses 2,618 5,169
Other expenses 75 314
Loss before taxation 2,693 5,483
Taxation (10) -
Loss for the period 2,683 5,483
Reconciliation to loss of associate company in the Group profit and loss
account
Loss for the period 2,683 5,483
Pre-acquisition loss to 25 January 2022 - (659)
Exploration expense (1,596) -
Post acquisition loss 1,087 4,824
Group's share of the loss at 19.7 and 19.6 per cent. 213 949
Profit on deemed disposal of 0.2 per cent. of Libero - (83)
Loss recognised as an associate 213 866
Reconciliation of the movement in associate company for the year ended 31
December 2022
and the 6 months to 30 June 2023
$000
1 January 2022 -
Transfer from other financial assets 2,382
Additions 3,491
Share of loss of the associated company (476)
Foreign exchange loss (225)
31 December 2022 5,172
Additions 646
Share of loss of the associated company (213)
Foreign exchange gain 126
30 June 2023 5,731
Libero had no contingent liabilities or capital commitments at 31 December
2022 and 30 June 2023.
4 Income tax
The income taxation charge for the 6 months ended 30 June 2023 represents a
current income tax charge of $nil (2022: $nil) and a deferred taxation charge
of $0.6m (2022: $2.2m). 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 2023, RVIG had unused taxation losses available for offset against
future profits of $8.3m and a deferred taxation asset of $2.7m 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 2023 30 June 2022
(unaudited) (unaudited)
$000 $000
Profit after tax for the period 813 3,475
Basic profit per share (US cents) 0.71 3.04
Diluted profit per share (US cents) 0.71 3.04
Weighted average number of shares Number Number
For basic earnings per share 114,242,024 114,392,024
For diluted earnings per share 114,242,024 114,392,024
6 Intangible assets
Exploration and evaluation Other
Mining Intangible
rights assets Total
(unaudited) (unaudited) (unaudited)
$000 $000 $000
Gedabek Gosha Ordubad Vejnaly Xarxar Garadag
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
$000 $000 $000 $000 $000 $000
Cost
I January 2022 17,356 2,198 5,941 - - - 41,925 562 67,982
Additions 3,654 515 165 517 1,613 2,772 - 164 9,400
31 December 2022 21,010 2,713 6,106 517 1,613 2,772 41,925 726 77,382
Additions 1,117 203 478 635 1,815 27 - - 4,275
30 June 2023 22,127 2,916 6,584 1,152 3,428 2,799 41,925 726 81,657
Amortisation and impairment
1 January 2022 - - - - - - 37,142 493 37,635
Charge for the year - - - - - - 1,107 24 1,131
31 December 2022 - - - - - - 38,249 517 38,766
Charge for the period - - - - - - 374 25 399
30 June 2023 - - - - - - 38,623 542 39,165
Net book value
31 December 2022 21,010 2,713 6,106 517 1,613 2,772 3,676 209 38,616
30 June 2023 22,127 2,916 6,584 1,152 3,428 2,799 3,302 184 42,492
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 2022 27,181 224,915 2,227 254,323
Additions 1,409 7,106 601 9,116
Transfer to producing mines
- 647 (647) -
Increase in provision for
rehabilitation - 3,662 - 3,662
31 December 2022 28,590 236,330 2,181 267,101
Additions 800 4,538 925 6,263
Decrease in provision for rehabilitation
- (479) - (479)
30 June 2023 29,390 240,389 3,106 272,885
Depreciation and impairment
1 January 2022 23,193 172,420 - 195,613
Charge for year 1,002 14,441 - 15,443
31 December 2022 24,195 186,861 - 211,056
Charge for period 403 5,286 - 5,689
30 June 2023 24,598 192,147 - 216,745
Net book value
31 December 2022 4,395 49,469 2,181 56,045
30 June 2023 4,792 48,242 3,106 56,140
8 Leases
Right of use assets
Plant and equipment Producing mines Total
and motor vehicles (unaudited) (unaudited)
(unaudited)
$000 $000 $000
Cost
1 January 2022 3,480 1,210 4,690
Additions 337 - 337
Lease modifications (743) (57) (800)
31 December 2022 3,074 1,153 4,227
Additions 168 - 168
Lease modifications (254) - (254)
30 June 2023 2,988 1,153 4,141
Depreciation and impairment
1 January 2022 1,223 401 1,624
Charge for year 386 154 540
Lease modifications (264) (36) (300)
31 December 2022 1,345 519 1,864
Charge for period 166 63 166
Lease modifications (123) - (123)
30 June 2023 1,388 582 1,970
Net book value
31 December 2022 1,729 634 2,363
30 June 2023 1,600 571 2,171
Lease liabilities
Total
$000
1 January 2022 3,293
Additions 337
Lease modifications (565)
Interest expense 291
Repayment (648)
31 December 2022 2,708
Addition 168
Lease modifications (159)
Interest expense 140
Repayment (349)
30 June 2023 2,508
30 June 2023 30 June 2022 (unaudited) 31 December 2022
(unaudited) $000 (audited)
$000 $000
Current liabilities 449 429 419
Non-current liabilities 2,059 2,715 2,289
Total lease liabilities 2,508 3,144 2,708
Amount recognised in the profit and loss account
6 months to 6 months to
30 June 2023 30 June 2022
(unaudited) (unaudited)
$000 $000
Depreciation expense of right to use assets 229 306
Interest expense 140 165
Expense relating to short leases 129 131
Gain on lease modifications (28) -
470 602
9 Other financial assets
30 June 2023 (unaudited) 30 June 2022 31 December 2022
Non - current $000 (unaudited) (audited)
$000 $000
Derivatives not designated as hedging instruments
Share warrants 39 80 39
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 2023 30 June 2022 31 December 2022
Share price of Libero CAD$0.07 CAD$0.24 CAD$0.16
Option exercise price CAD$0.75 CAD$0.75 CAD$0.75
Acceleration condition CAD$1.00 CAD$1.00 CAD$1.00
Lapse date
2.8m warrants issued 22 December 2021 21 December 2023 21 December 2023 21 December 2023
3.5m warrants issued 26 January 2022 25 January 2024 25 January 2024 25 January 2024
Risk free rate 4.6 per cent. 3.09 per cent. 4.6 per cent.
Expected volatility - daily 6.88 per cent. 5.64 per cent. 6.88 per cent.
Expected volatility - annualised 109.26 per cent. 89.58 per cent. 109.26 per cent.
Discount for lack of marketability 13.97 per cent. 11.61 per cent. 13.97 per cent.
Exchange rate US$1 = CAD$1.3255 US$1 = CAD$1.2872 US$1 = CAD$1.3549
10 Inventory
30 June 2023 (unaudited) 30 June 2022 31 December 2022
$000 (unaudited) (audited)
$000 $000
Cost
Finished goods - bullion 4,834 10,500 2,243
Finished goods - metal in concentrate 4,701 3,843 1,128
Metal in circuit 10,726 12,391 12,140
Ore stockpiles 8,813 7,138 8,299
Spare parts and consumables 19,419 15,147 16,392
Total current inventories 48,493 49,019 40,202
Total inventories at the lower of cost and net realisable value 48,493 49,019 40,202
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.
11 Trade and other receivables
30 June 2023 (unaudited) 30 June 2022 31 December 2022
Current $000 (unaudited) (audited)
$000 $000
Gold held due to the Government of Azerbaijan
3,045 22,488 7,274
VAT refund due 792 25 1,562
Loan to employee 520 500 510
Other tax receivable 1,713 1,432 1,038
Trade receivables - fair value* 3,569 1,441 2,716
Prepayments and advances 6,001 3,898 5,231
15,640 29,784 18,331
*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 2022 and 2023 and 31 December 2022.
The VAT refund due at 30 June 2022 and 2023 and 31 December 2022 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.
12 Trade and other payables
Current assets 30 June 2022 (unaudited) 31 December 2022
30 June 2023 $000 (audited)
(unaudited) $000
$000
Accruals and other payables 5,736 4,868 4,912
Trade creditors 4,992 3,075 3,211
Gold held due to the Government of Azerbaijan 7,274
3,045 22,488
Payable to the Government of Azerbaijan from copper concentrate joint sale 2,525
1,900 1,700
15,673 32,131 18,022
Non-current assets 30 June 2022 (unaudited) 31 December 2022
30 June 2023 $000 (audited)
(unaudited) $000
$000
Geological data 3,009 - 2,897
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.
In the year ended 31 December 2022, the Group contracted with AzerGold CJSC to
pay $4.0 million for the historical geological data Azergold CJSC owned in
respect of the Garadag and Xarxar Contract Areas. The consideration was
apportioned as $3.3 million for Garadag data and $0.7 million for Xarxar data.
$1.0 million (25 per cent.) was paid in 2022 with the remaining $3.0 million
(75 per cent.) payable after three years, or if earlier for each respective
deposit, the balance of the purchase price on the approval of the Group's
development and production programme for the deposit in accordance with the
Group's Production Sharing Agreement. The amount outstanding under the
contract at 30 June 2023 and 31 December 2022 has been classified as a
non-current liability. The long-term creditor has been discounted at a rate of
8 per cent. being the risk-free rate. The repayment dates of the creditor are
the directors' best estimation of when repayment will occur. The undiscounted
amount of the creditor at 30 June 2023 and 31 December 2022 is $3.0 million
(30 June 2022: $nil).
13 Share capital
Ordinary shares of 1 pence each $000
Ordinary shares issued and fully paid:
30 June 2023 and 2022 and 31 December 2022 114,392,024 2,016
150,000 ordinary shares were brought back during the year ended 31 December
2022 and are now held in treasury.
14 Share premium account
$000
30 June 2023 and 2022 and 31 December 2022 33
15 Distributions made and proposed
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
$000 $000 $000
Cash dividends on ordinary shares declared and paid
Final dividend for 2021: 3.5 US cents* per share - - 3,995
Interim dividend for 2022: 4.0 US cents* per share - - 4,617
- - 8,612
Cash dividends proposed on ordinary shares
Final dividend for 2022: 4.0 US cents***per share - - 4,570
* 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 was declared in United States dollars but paid
in Sterling in the amount of 3.5559 pence per ordinary share on 3 November
2022.
***the final dividend for 2022 was declared in United States dollars but paid
in Sterling in the amount of 3.1421 pence per ordinary share on 27 July 2023.
The proposed but not paid final and interim dividends for the year ending 31
December 2022 and the 6 months ended 30 June 2023 respectively 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 original
agreement was dated 20 August 1997 and granted the Group mining rights over
the following contract areas containing mineral deposits: Gedabek, Gosha,
Ordubad Group (Piyazbashi, Agyurt, Shakardara, Kiliyaki), Soutely, Kyzilbulag
and Vejnali. On 5 July 2022, amendments to the PSA were ratified by the
Parliament of the Republic of Azerbaijan which granted the Group three new
contract areas with a combined area of 882 square kilometres and relinquished
the Soutely contract area. The parliamentary ratification was signed into law
on 5 July 2022 by the President of the Republic of Azerbaijan
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.
Forward sales of gold bullion and commitment to physical deliver gold bullion
As part of its risk management procedures, the Group from time to time,
contracts for forward sales of gold bullion to hedge the gold price at which a
proportion of its gold bullion is sold. At 30 June 2023 (31 December 2022 and
30 June 2022: nil), the Group had the following forward sales contracts
outstanding.
Amount of gold bullion sold Contracted gold sale price per ounce
Delivery date and sale of gold bullion (ounces) ($) Value of forward sales
($000)
31 July 2023 400 1,954.75 782
31 August 2023 300 1,959.75 588
29 September 2023 300 1,964.50 589
31 October 2023 1,000 1,969.50 1,970
30 November 2023 800 1,974.50 1,580
29 December 2023 800 1,979.25 1,583
The gold forward sales contracts disclosed above did not meet the criteria of
financial instruments for accounting purposes on the basis that they meet the
normal purchase and sale exemption because physical gold will be delivered to
settle the contract. Accordingly, the contracts will be accounted for as sale
contracts with revenue recognition in the period in which the gold bullion is
made. The balances in the table above relate to the value of the contracts to
be delivered into by transfer of physical gold.
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 2023 of $2,755,000 (6
months to 30 June 2022: $1,809,000) 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 $458,000 at 30 June 2023
(30 June 2022: $nil and 31 December 2022: $250,000).
b) No payment in the 6 months to 30 June 2023 (6 months to 30 June
2022: $1,033,000) was 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 not a payable to F&H at 30 June 2023 (30
June 2022: $576,000 and 31 December 2022: $nil).
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. The loan was renewed for a
further a year to 30 June 2024.
18 Post balance sheet events
Temporary curtailment of operations at Gedabek mine
In June 2023, protests took place by local communities against the location of
a second tailings dam in the vicinity of the Company's existing tailings dam.
To give assurances to local communities that the existing dam does not present
any danger to health, the Government of Azerbaijan (the "Government") and the
Company agreed that an independent health, safety and environmental review of
tailings dam management at Gedabek be carried out. The Company also agreed to
stop discharging tailings whilst the results of the review were being
collated. Accordingly, the Company suspended agitation leaching and flotation
processing and blasting from the beginning of August 2023. Micon International
Limited ("Micon") were commissioned to carry out the review.
The Company is still awaiting the results of the environmental review by
Micon. Until the results are obtained, it is not possible to quantify the
financial effects of the suspension of operations.
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 2023 were authorised
for issue in accordance with a resolution of the directors on 25 September
2023.
**ENDS**
Notes:
Anglo Asian Mining plc (AIM:AAZ) is a gold, copper and silver producer with a
high-quality portfolio of production and exploration assets in Azerbaijan.
The Company produced 57,618 gold equivalent ounces ("GEOs") for the year
ended 31 December 2022.
On 30 March 2023, the Company published its strategic plan for growth which
shows a clearly defined path for the Company to transition to a multi-asset,
mid-tier copper and gold producer by 2028. By 2028, copper will be the
principal product of the Company, with forecast production of around 36,000
copper equivalent tonnes. It plans to achieve this growth by bringing into
production four new mines during 2023 to 2028 at Zafar, Gilar, Xarxar and
Garadag.
The Company owns approximately 17.4 per cent. of Libero Copper & Gold
Corporation ("Libero"). 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.
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