Anglo Asian Mining PLC Q2 & H1 2016, Production Update, Operations Review (1338E)

TIDMAAZ

RNS Number : 1338E

Anglo Asian Mining PLC

14 July 2016

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

14 July 2016

Anglo Asian Mining plc

Q2 and H1 2016, Production Update and Operations Review

Gedabek gold, copper and silver mine, Azerbaijan

Anglo Asian Mining plc ("Anglo Asian" or "the Company"), the AIM listed gold, copper and silver producer focused in Azerbaijan, is pleased to provide an operations and production update for its Gedabek gold, copper and silver mine ("Gedabek") in western Azerbaijan for the three months to 30 June 2016 ("Q2 2016") and the six months to 30 June 2016 ("HY1 2016"). Note that all references to "$" are to United States dollars.

Production overview

Q2 2016

-- Gold production for Q2 2016 increased to 19,665 ounces with 17,926 ounces contained within gold doré, 4 ounces from SART processing and 1,735 ounces from flotation (Q1 2016: total 14,172 ounces)

-- Copper production for Q2 2016 totalled 537 tonnes, 195 tonnes from SART processing and 342 tonnes from flotation (Q1 2016: total 432 tonnes)

-- Silver production for Q2 2016 totalled 56,440 ounces with 2,983 ounces contained within gold doré, 8,979 ounces from SART processing and 44,478 ounces from flotation (Q1 2016: total 34,342 ounces)

H1 2016

   --    Gold production for HY1 2016 totalled 33,837 ounces (HY1 2015: total 35,938 ounces) 
   --    Copper production for HY1 2016 totalled 969 tonnes (HY1 2015: 418 tonnes) 
   --    Silver production for HY1 2016 totalled 90,782 ounces (HY1 2015: total 6,477 ounces) 

FY 2016 target production

-- Target production for the year to 31 December 2016 ("FY 2016") remains at between 73,000 ounces and 77,000 ounces of gold and 1,700 to 2,100 tonnes of copper

Sales

-- Q2 2016 gold doré sales of 15,661 ounces of gold at an average of $1,265 per ounce (Q1 2016: 12,058 ounces at an average of $1,184 per ounce)

-- Q2 2016 copper concentrate shipments to the customer totalled 1,582 dry metric tonnes ("dmt") with a sales value of $3 million (excluding Government of Azerbaijan profit share) (Q1 2016: 1,330 dmt with a sales value of $2.1 million)

-- 18,000 ounces of gold sales in HY2 2016 now hedged at no cost with a minimum and maximum sales price per ounce of $1,200 and $1,426 respectively

Operational update

   --    Second SAG mill expected to be operational by early August 
   --    Contracts for water treatment plant and evaporation equipment now executed 

-- Contract to build electrical sub-station and associated overhead power lines executed with completion expected by end of 2016 - anticipated annual savings of $1.8 to $2.0 million from 2017 onwards

   --    New underground equipment now fully deployed 

Company financials

-- Net debt, being interest-bearing loans and borrowings less cash and cash equivalents, totaled $40.8 million at 30 June 2016 ($47.5 million at 31 March 2016)

Anglo Asian CEO Reza Vaziri said, "We are delighted to report these highly encouraging second quarter production numbers which show a substantial increase over the first quarter. The second half of the year has historically been our best performing half due to the seasonally better weather and our production will also benefit from the second SAG mill which is due to start operating next month. We are therefore confident of meeting our production target for 2016 of between 73,000 and 77,000 ounces of gold and 1,700 to 2,100 tonnes of copper.

"The Company continues to invest at Gedabek both to improve the sustainability of the operation and to lower costs to further enhance our operational and financial performance. In addition to the second SAG mill, two other major initiatives were undertaken in the first half. The first initiative is to purify water from the tailings dam so it can be released into the environment and the second is to use cleaner and cheaper electric power from the grid. These will both be highly beneficial for your company and also lower costs. The new underground equipment which is now in full time use at Gadir is also improving our productivity. That these investments have been undertaken whilst we have also significantly reduced the Company's net debt shows that the Company's financial position is improving as we work towards our goal of returning the Company towards profitability.

"The Company also took the opportunity to hedge some future gold sales due to the recent strength in the gold price resulting from the uncertainty of the UK's EU referendum decision. This protects the Company against any significant downside in the price of gold whilst still giving us considerable exposure to any further increases in this volatile gold market. This is the first time Anglo Asian has hedged gold sales and this transaction therefore marks another stage in the development of your Company.

"I look forward to providing further updates in due course as we continue to improve our production performance and lower costs in order to deliver the utmost value for shareholders."

Production and sales details

During Q2 2016, the Company mined 491,210 tonnes of ore from its Gedabek open pit (Q1 2016: 344,171 tonnes). In Q2 2016, 37,732 tonnes of ore with an average grade of 9.29 grammes per tonne was mined from its Gadir underground mine (Q1 2016: 17,756 tonnes with an average grade of 7.91 grammes per tonne).

As previously reported, low grade ore (less than 1.5 grammes per tonne of gold) is being treated by heap leaching, whilst higher grade ore (more than 1.5 grammes per tonne of gold) is being processed through the agitation leaching plant.

During Q2 2016, Anglo Asian stacked 110,202 tonnes of dry crushed ore on to heap leach pads with an average gold content of 1.36 grammes per tonne (Q1 2016: 91,450 tonnes with an average gold grade of 1.46 grammes per tonne). The Company also heap leached uncrushed (Run of Mine - "ROM") ore. During Q2 2016, Anglo Asian stacked 263,432 tonnes of ROM ore on to heap leach pads with an average gold content of 0.76 grammes per tonne (Q1 2016: 114,508 tonnes with an average gold grade of 0.88 grammes per tonne).

During the quarter, the Company processed 151,649 tonnes of ore with an average gold content of 3.59 grammes per tonne through the agitation leaching plant (Q1 2016: 131,930 tonnes with an average gold grade of 2.93 grammes per tonne).

There was a 74 per cent. gold recovery in agitation leaching for Q2 2016, an increase from 70 per cent. seen in the previous quarter. The increased gold recovery was as a result of the higher grade of ore processed. Gold doré is produced from both heap and agitated leach intermediate solutions, which are combined for final processing and also recirculated around the plant, heap leach pads and tailings dam. Heap leaching is a long term process and recoveries are therefore only estimates calculated from available metallurgical statistics.

During Q2 2016, the Company produced gold doré containing 17,926 ounces of gold and 2,983 ounces of silver at Gedabek (Q1 2016: 13,383 ounces of gold and 1,958 ounces of silver). The agitation leach plant produced 12,928 and 2,122 ounces of gold and silver, respectively, and the heap leach operations produced 4,998 and 869 ounces of gold and silver, respectively. The increased gold doré production from agitation leaching was due to the higher amount of crushed ore feedstock processed by the plant, the higher grade of ore and the increased recoveries.

During Q2 2016, 140,570 dmt of agitation leach plant tailings were processed by the flotation plant. The gross metal contained within this feed-stock was 5,724 ounce of gold, 99,416 ounces of silver and 606 tonnes of copper. Copper concentrate totaling 1,988 dmt was produced containing 342 tonnes of copper and 1,735 ounces of gold.

The following table summarises gold doré production and sales at Gedabek for FY 2015 and Q1 and Q2 2016:

 
                Gold produced*       Silver   Gold sales**  Gold Sales 
                      (ounces)    Produced*       (ounces)       price 
                                   (ounces)                  ($/ounce) 
Quarter ended 
31 March 2015           17,185          597         17,206       1,214 
30 June 2015            18,739          900         16,088       1,193 
30 Sept 2015            18,158          907         14,871       1,123 
31 Dec 2015             17,588        1,858         15,759       1,108 
 
FY 2015 - 
 total                  71,670        4,262         63,924       1,161 
 
31 March 2016           13,383        1,958         12,058       1,184 
30 June 2016            17,926        2,983         15,661       1,265 
--------------  --------------  -----------  -------------  ---------- 
 
 
 

* including Government of Azerbaijan's share

** excludes Government of Azerbaijan's share

The following table summarises copper concentrate production from both its SART and flotation plants for Q1 and Q2 2016:

 
                    Concentrate     Copper       Gold     Silver 
                    production*   content*   content*   content* 
                          (dmt)   (tonnes)   (ounces)   (ounces) 
 
 Quarter ending 
  31 March 2016 
 SART processing            363        181         12      7,789 
 Flotation                1,458        251        777     24,595 
    Sub - total           1,821        432        789     32,384 
 Quarter ending 
  30 June 2016 
 SART processing            373        195          4      8,979 
 Flotation                1,988        342      1,735     44,478 
    Sub - total           2,361        537      1,739     53,457 
 6 months ending 
  30 June 2016 
 SART processing            736        376         16     16,768 
 Flotation                3,446        593      2,512     69,073 
    Total                 4,182        969      2,528     85,841 
-----------------  ------------  ---------  ---------  --------- 
 

* including Government of Azerbaijan's share

The following table summarises total copper concentrate production and sales at Gedabek for FY 2015 and H1 2016. Note that sales of concentrate are initially recorded at provisional amounts until agreement of final assay:

 
 
             Concentrate     Copper       Gold     Silver    Concentrate     Concentrate 
             production*   content*   content*   content*        sales**         sales** 
                   (dmt)   (tonnes)   (ounces)   (ounces)          (dmt)          ($000) 
 Quarter 
  ended 
 31 March 
  2015               298        182          8      1,354            234             660 
 30 June 
  2015               391        236          6      3,627            372           1,076 
 30 Sept 
  2015               406        216          7      3,532            279             661 
 31 Dec 
  2015               955        335        341     15,851            817           1,285 
 
 FY 2015 
  - total          2,050        969        362     24,364          1,702           3,682 
 
 31 March 
  2016             1,821        432        789     32,384          1,330           2,137 
 30 June 
  2016             2,361        537      1,739     53,457          1,582           3,019 
----------  ------------  ---------  ---------  ---------  -------------  -------------- 
 

* including Government of Azerbaijan's share

** excludes Government of Azerbaijan's share

Operational update

The agitation leaching plant's second semi-autogenous grinding ("SAG") mill is now in place at Gedabek and is being commissioned. It is expected that commissioning will be completed by early August. Once in operation, it will ensure sustainable production and assist in achieving our 2016 annual production target.

The Company has started on several initiatives to improve the sustainability and lower costs at Gedabek. Contracts totalling $1.7 million have been signed to purify, and dispose of, waste water. A membrane filtration plant will produce water of sufficient purity from water in the tailings dam that it can be discharged into the environment. Further water can also be disposed of by the ancillary evaporation equipment which is also being installed. A by-product concentrate will also be produced from which metal and cyanide can be recovered. This will improve the water balance of the site and save costs as it will reduce the tailings dam capacity required. It will also enable the recovery of metal currently in the tailings dam. The system is estimated to be installed and in operation by Q4 2016.

The Company has also contracted for $2 million to construct and install a 35/6 kV 2x16 MVA electrical sub-station and associated overhead power lines to connect the site to the electricity grid. This will result in cleaner and cheaper electrical power at Gedabek. It is expected that the work will be completed and power will be available from the electricity grid by the end of 2016. Once in operation, purchasing electricity from the grid compared to generating electricity using diesel generators will result in cost savings of approximately $1.8 to $2.0 million per annum.

The new underground equipment which was purchased from Atlas Copco comprising an underground drill machine, loader and truck is now fully deployed in the Gadir underground mine.

Company financial details

On 27 June 2016, the Company entered into a series of net zero cost options with a lower (PUT option) sales price of US$1,200 per ounce and an upper (CALL option) sales price of US$1,426 per ounce. The options mature in lots of 1,500 ounces of gold with the first lot maturing on 12 July 2016. The remainder of the lots mature every two weeks from this date with the final lot maturing on 13 December 2016. The PUT options give the right to the Company (but not the obligation) to sell gold at the option price. The CALL options give the right to the holder (but not the obligation) to buy gold at the option price. The 18,000 ounces will therefore have a minimum and maximum sales price per ounce of $1,200 and $1,426 respectively. Where the spot price on date of sale is between $1,200 and $1,426, sales will take place at spot price and the options will expire without exercise.

The Company had net debt at 30 June 2016 of $40.8 million, a reduction of $8.2 million since 31 December 2015. The net debt at 30 June 2016 was as follows:

 
                                                $m 
Amsterdam Trade Bank - Agitation plant 
 loan                                         22.2 
International Bank of Azerbaijan - loan        8.7 
 International Bank of Azerbaijan - credit     2.8 
  line 
Atlas Copco equipment finance loan             1.5 
 YapiKredit                                    1.4 
 Pasha Bank                                    3.3 
 Director                                      3.9 
Total Loans                                   43.8 
Cash on hand and at bank                     (3.0) 
Net debt                                      40.8 
 

**ENDS**

For further information please visit www.angloasianmining.com or contact:

 
                       Anglo Asian Mining   Tel: [phone] 
 Reza Vaziri            plc                  3350 
--------------------  -------------------  ------------------ 
                       Anglo Asian Mining   Tel: [phone] 
 Bill Morgan            plc                  400 
--------------------  -------------------  ------------------ 
 Ewan Leggat           SP Angel Corporate   Tel: +44 (0) 20 
                        Finance LLP          3470 0470 
                        Nominated Adviser 
                        and Broker 
--------------------  -------------------  ------------------ 
 Laura Harrison        SP Angel Corporate   Tel + 44 (0) 20 
                        Finance LLP          3470 0470 
--------------------  -------------------  ------------------ 
 Lottie Brocklehurst   St Brides Partners   Tel: +44 (0) 20 
                        Ltd                  7236 1177 
--------------------  -------------------  ------------------ 
 Susie Geliher         St Brides Partners   Tel: +44 (0) 20 
                        Ltd                  7236 1177 
--------------------  -------------------  ------------------ 
 

Notes:

Anglo Asian Mining plc (AIM:AAZ) is a gold, copper and silver producer in Central Asia with a broad portfolio of production and exploration assets in Azerbaijan. The Company has a 1,962 square kilometre portfolio, assembled from analysis of historic Soviet geological data and held under a Production Sharing Agreement modelled on the Azeri oil industry.

The Company developed Azerbaijan's first operating gold/copper/silver mine, Gedabek, which commenced gold production in May 2009. Gedabek is an open cast mine with a series of interconnected pits. The Company is also mines high grade ore from the Gadir underground mine which is co-located at the Gedabek site. The Company has a second underground mine, Gosha, which is 50 kilometres from Gedabek. Ore mined at Gosha is processed at Anglo Asian's Gedabek plant.

Gold production for the year ended 31 December 2015 from Gedabek totaled 72,032 ounces with 969 tonnes of copper also produced. Gedabek is a polymetallic deposit and its ore has a high copper content, and as a result the Company produces copper concentrate from its Sulphidisation, Acidification, Recycling, and Thickening (SART) plant. Anglo Asian also produces a copper and precious metal concentrate from its flotation plant, which commenced production in the last quarter of 2015. This is initially processing tailings from the agitation leach plant.

Anglo Asian is also actively seeking to exploit its first mover advantage in Azerbaijan to identify additional projects, as well as looking for other properties in order to fulfil its expansion ambitions and become a mid-tier gold and copper metal production company.

This information is provided by RNS

The company news service from the London Stock Exchange

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July 14, 2016 02:00 ET (06:00 GMT)