Anglo Asian's final results see record gold production

Review of the year

We were pleased to report total gold production for 2014 of 60,285 ounces, a 16 per cent. increase over 2013 production of 52,107 ounces and copper production of 784 tonnes, a 140 per cent. increase over the 2013 production of 327 tonnes. Production of silver totalled 31,177 ounces for 2014, however this was a 53 per cent. decrease over 2013 production of 65,939 ounces due to changes in the mineralogy of the ore.

Whilst gold and copper production for the year increased substantially, the environment for mining companies globally remained poor with the effects still being felt of the sustained low gold and copper prices. Despite a strong performance in terms of production, the low global metals prices throughout the year, together with the first full year’s operational cost of the agitation leach plant at Gedabek, have adversely impacted profitability for 2014. Whilst we achieved solid revenues of $68.0 million, we are disappointed to report a loss before tax of $14.4 million for the year.

To improve production and lower operating costs during 2014, the Company has been exploring a number of options to overcome the lower than expected metal recoveries from the agitation leach plant and to decrease the large cyanide usage and associated costs resulting from the high copper sulphide content of its high grade ore. A Knelson concentrator was installed in March 2014 and the use of ammonia as a reagent to improve recoveries has been introduced. The Company has also commenced heap leaching uncrushed (Run of Mine or ROM) ore during 2014. This is a low cost method to treat low grade ore which would otherwise not be economic to process.

The Gosha underground mine commenced production in the year. In 2014, it produced 28,891 tonnes of ore grading 4.15 grammes of gold per tonne. The development of the mine has been hampered due to the very narrow ore veins which make mining difficult. Ore mined at Gosha is transported to Gedabek for processing. The Gosha mine will continue to form an important although small part of the Company’s portfolio of properties. We are also developing a new underground mine, Gadir, at our Gedabek site. It is expected ore will be extracted from Gadir in the second half of 2015.

We continue to develop the greater Gedabek area with the aim of delineating further resources and reserves to increase the life of mine of the operation. We were therefore delighted to announce a revised JORC reserve report of 20.5 million tonnes of ore grading 1.03 grammes per tonne of gold (682,000 ounces); 0.50 per cent. copper (102,000 tonnes); and 7.35 grammes per tonne of silver (4.84 million ounces). Notably this demonstrated a 96 per cent. increase of copper with recoverable copper increasing by over 500 per cent. to 68,000 tonnes compared to our May 2012 ore reserve statement.

Whilst we are still focused on increasing the production of gold of which we have 682,000 ounces in ore reserves, we are now aiming to take advantage of the significant copper content of the ore we are encountering at Gedabek. Consequently, we initiated the construction of a small scale flotation plant suited to process the high copper content ore to help increase our copper production, in tandem with gold and silver. Flotation typically has lower costs than cyanide leaching as it does not use expensive cyanide as a reagent.

In order to demonstrate how the flotation process can be used to enhance recoveries, in-house test work has shown that by applying the flotation process to the agitation leaching plant tailings, overall recoveries can be increased to approximately 80 per cent. for copper, 70 per cent. for silver and 90 per cent. for gold. The flotation process can produce a saleable copper concentrate with approximately 20 per cent. copper content.

The construction of the small scale flotation plant is due to be completed in quarter three, 2015 and if completed on target should see an additional 5,000 ounces of gold and 1,200 tonnes of copper produced for the full year 2015. This production will be from stockpiles of ore which have already been mined and therefore will incur no additional mining costs.

The Company places the highest priority on its environmental responsibilities. A key responsibility is secure storage of tailings produced at Gebabek. Accordingly in 2014, the Company embarked upon a project to approximately double the capacity of its tailing dam by raising the wall of the dam and to increase security by building a reed bed biological treatment system immediately downstream of the dam to process any seepage. This project is nearing completion and will provide adequate and secure capacity for tailings storage for the next few years.

The Company sells its product in US dollars, however it has a significant portion of costs denominated in Azerbaijan Manats. The recent 34 per cent. devaluation of the Azerbaijan Manat against the US dollar is obviously unwelcome for Azerbaijan and its people. However, we believe this will have a considerable beneficial effect for us in 2015 by reducing our operating cost by around $6.5 million in the 2015 financial year at the current US dollar to Azerbaijan Manat exchange rate.

Outlook

2015 is an important year for our Company and a time which we believe marks the start of our turnaround strategy to restore profitability. The year has started well and we were delighted to report quarter one, 2015 production figures of 17,053 ounces of gold, marking a 52 per cent. increase in gold production from quarter one 2014. This highly credible performance for quarter one, 2015 demonstrates that the initiatives undertaken during 2014 to improve production are beginning to take effect. Accordingly, we have announced a gold production target of between 70,000 to 75,000 ounces for the year to 31 December 2015, which if achieved, will mark an increase of around 16 to 24 per cent. from the full year 2014.

The construction of our small scale flotation pilot plant continues to plan with commissioning scheduled for quarter three, 2015. The successful commissioning of this plant, which will enable us to fully exploit the sulphide ore reserves at Gedabek, will add an important new source of production and revenues for Anglo Asian.

Given the improved start to 2015, and the commencement of flotation later in the year, we believe the outlook for the rest of the year is a significant improvement over 2014 and look forward to updating shareholders on our progress.

Appreciation

I would like to take this opportunity to thank our Anglo Asian employees, partners, the Government of Azerbaijan, advisers, fellow directors and shareholders for their continued support as we continue to build Anglo Asian into a leading and profitable mid-tier gold, copper and silver producer in Azerbaijan and Caucasia.

Khosrow Zamani