TIDMAAZ
RNS Number : 4983Z
Anglo Asian Mining PLC
16 May 2023
16 May 2023
Anglo Asian Mining PLC
2022 Full year results
Turnover of $84.7 million with profit before tax of $7.5
million
Full year 2022 dividend maintained at US 8 cents per share
Guidance met and significant progress with development of
portfolio
Anglo Asian Mining PLC ("Anglo Asian" or the "Company"), the AIM
listed gold, copper and silver producer focused in Azerbaijan, is
pleased to announce its final audited results for the year ended 31
December 2022 ("FY 2022").
Khosrow Zamani, Chairman of Anglo Asian, commented:
"This was another important year for Anglo Asian as it
transitions to a mid-tier, multi-asset copper producer. We met
production guidance, whilst making significant progress with our
new mines in accordance with our growth strategy to bring them into
production in the short to medium term. The Company has a strong
balance sheet and is well-positioned to meet our upcoming capital
expenditure requirements. We remain committed to delivering
shareholder value and are therefore pleased to declare a final
dividend of US 4 cents per share, maintaining the total dividend
for the year of US 8 cents per share."
Financial highlights
-- Revenues of $84.7 million (2021: $92.5 million)
o Lower production due to lower gold grades of ore mined at
Gedabek
-- Profit before taxation of $7.5 million (2021: $12.6 million)
-- Operating cash flow before movements in working capital of
$27.2 million (2021: $29.3 million)
-- All-in sustaining cost ("AISC") of gold production increased
to $1,064 per ounce (2021: $843 per ounce) due to lower
production
-- Cash of $20.4 million at 31 December 2022 (31 December 2021: $37.5 million)
o $10.2 million and $7.2 million spent on capital expenditure
and geological exploration respectively
o Dividends paid totalling $8.6 million
-- Final dividend declared in respect of FY 2022 of US 4 cents per ordinary share
o Total dividend for the year maintained at the same level as
2021
o Payable on 27 July 2023, subject to approval at the Annual
General Meeting, giving a FY 2022 total dividend of US 8 cents per
ordinary share (FY 2021: $0.08)
o Total dividends of $8.6 million paid in 2022 demonstrating the
Company's ongoing commitment to provide attractive returns to its
shareholders
Operational and production highlights:
-- Total production of 57,618 gold equivalent ounces ("GEOs"),
in line with guidance and reflecting falling grades of ore at
Gedabek
o Gold production of 43,114 ounces (FY 2021: 48,680 ounces)
o Copper production of 2,516 tonnes (FY 2021: 2,649 tonnes)
o Silver production of 182,046 ounces (FY 2021: 154,515
ounces)
-- Gold bullion sales of 34,918 ounces (FY 2021: 39,563 ounces)
completed at an average of $1,783 per ounce (FY 2021: $1,799 per
ounce), with copper concentrate shipments totalling 12,443 dry
metric tonnes ("dmt") with a sales value of $22.3 million
(excluding Government of Azerbaijan production share) (FY 2021:
11,148 dmt with a sales value of $23.7 million)
-- The acquisition of three new contract areas - Xarxar, Garadag and Demirli
-- Considerable progress made across the asset portfolio
o A new vein, "Hasan", discovered at Gosha
o Final JORC mineral resource completed for Zafar
o Geological camp established and exploration activity ramped up
at Vejnaly
o Preliminary non-JORC mineral resource for the Gilar mine
completed
o Exploration commenced at Xarxar
-- Expansion of the flotation plant to increase capacity and
provide additional operational flexibility
-- Investment completed in an associate company - Libero Copper & Gold Corporation
Outlook
In March 2023, Anglo Asian released its medium-term growth
strategy that outlined its pathway to become a mid-tier,
multi-asset producer by 2028. This will see copper become the
Company's principal product by 2026, with copper equivalent
production targeted at circa 36,000 tonnes by 2028.
In line with Company's growth strategy, guidance for 2023 is
total production of circa 50,000 to 54,000 gold equivalent ounces
that includes 10,300 to 11,200 tonnes of copper.
Note that all references to "$" are to United States dollars,
"CAN$" are to Canadian dollars, " GBP " and "pence" are to the
United Kingdom pound sterling and AZN are to the Azerbaijan New
Manat.
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:
Anglo Asian Mining plc
Reza Vaziri, Chief Executive Officer Tel: +994 12 596 3350
Bill Morgan, Chief Financial Officer Tel: +994 502 910 400
Stephen Westhead, Vice President Tel: +994 502 916 894
SP Angel Corporate Finance LLP (Nominated Adviser and Broker) Tel: +44 (0) 20 3470 0470
Ewan Leggat
Adam Cowl
Hudson Sandler (Financial PR) Tel: +44 (0) 20 7796 4133
Charlie Jack
Harry Griffiths
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'. Stephen Westhead consents to the inclusion in the
announcement of the matters based on his information in the form
and context in which it appears.
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 mineral resources included in this announcement. For the
avoidance of doubt, resources and economically extractable copper
figures in this notification are not based on a Standard for the
reporting of reserves and resources, such as JORC, as defined in
the AIM Rules for Companies.
Chairman's statement
I am delighted to present our annual report for 2022. It was a
pivotal year for Anglo Asian Mining, during which time the Company
made substantial progress with its existing operations and in
developing its business. This was done whilst maintaining its track
record of operating profitably and generating value for all
stakeholders.
Operational overview
The Company produced 57,618 gold equivalent ounces ("GEOs") in
2022, towards the top end of our guidance range. This was achieved
despite declining grades of ore at our Gedabek mine, our core
asset. Our production guidance for 2023 is 50,000 to 54,000
GEOs.
Our long-standing assets continue to offer considerable
potential. In 2022, we announced the discovery of a new
sub-vertical vein at Gosha and published a JORC mineral resource of
6.8 million tonnes of mineralisation at Zafar, with average copper
grades of 0.50 per cent. At Gilar, we completed a maiden mineral
resource of over 135,000 ounces of gold, 21,500 tonnes of copper
and 23,000 tonnes of zinc; this has since been increased following
further drilling in 2023. Construction of the Gilar and Zafar
underground mines commenced in early 2023, and their development
will provide a long-term supply of ore to support our future growth
prospects.
A substantial geological exploration programme at Vejnaly was
established in 2022 and exploration restarted at Ordubad in early
2023. These areas both have very encouraging prospectivity for
significant mineral discoveries.
In light of the considerable increase in the amount of copper
ore we will mine in the coming years, we have expanded our
flotation plant. Its capacity has been doubled and the installation
of additional flotation cells later in 2023 will provide further
operational flexibility to our portfolio of mining assets.
New contract areas and strategic growth plan
We were delighted that, in July 2022, amendments to the
Company's Production Sharing Agreement ("PSA") were ratified by the
Parliament of the Republic of Azerbaijan, granting the Company the
three new contract areas of Xarxar, Demirli and Garadag. In August
2022, the Company acquired historical exploration data, drill core,
geological studies and other reports in respect of Xarxar and
Garadag from AzerGold CJSC, the previous owner of these contract
areas. This allowed our exploration and development team to
immediately begin an extensive analysis of the new contract areas.
This work, together with our geological fieldwork undertaken since
July 2022, culminated in the Company announcing its growth strategy
in March 2023. This outlines how we will transition to a mid-tier,
multi-asset copper and gold producer. By 2026, the Company expects
copper to become its principal product, a commodity vital for the
transition to a future powered by clean energy.
Kyzlbulag and Demirli contract areas
Kyzlbulag, together with the newly acquired Demirli contract
area, form a continuous territory of approximately 536 square
kilometres in the Karabakh economic region. They host the Demirli
copper and molybdemun mine and processing plant. The mine was
operating until recently, but we now believe it is idled. We
estimate the Demirli mine and plant has the potential to produce
around 10,000 tonnes of copper per annum. However, the level of
investment that will be required to restart the mine and plant is
currently unknown.
The area is claimed by Azerbaijan but Russian peacekeepers, who
are scheduled to leave in November 2025, are currently occupying
the territory. Once the Government of Azerbaijan grants the Company
access, the mine and processing plant will become our property at
no cost. However, the situation in the Karabakh economic region is
very fluid with no firm date when the Government of Azerbaijan will
grant the Company access. We are continuing to closely monitor
events.
Libero Copper & Gold Corporation
In January 2022, we were delighted to complete our investment in
Libero Copper & Gold Corporation ("Libero"), following which
Anglo Asian Mining owns approximately 19.8 per cent. of Libero.
Michael Sununu now serves on the board of Libero. Farhang Hedjazi
was appointed to the technical committee of Libero and visited
Libero's properties in Argentina and Colombia. 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. The Company made further
investments in 2022 and early 2023 to maintain its approximate 19.8
per cent. ownership.
Financial overview and dividend
Despite facing inflationary headwinds, the Company continued to
manage its cost base tightly and deliver pre-tax profits of $7.5
million. All-in sustaining cost increased to $1,064 per ounce
mainly due to lower production and the Company finished the year
with cash of $20.4 million and no bank debt. Accordingly, the board
is pleased to recommend a final dividend of US 4 cents per share
for 2022, which gives a total dividend for the year of US 8 cents
per share. This maintains the dividend at the same level of US 8
cents per share in 2021 while ensuring that the Group retains
sufficient capital to pursue its development plans.
The Company bought back 150,000 of its ordinary shares in 2022
at an average price of 81 pence per share at a total cost of
$145,000. The board believed the shares were undervalued at that
price. The shares are held in treasury and could be sold in the
future to an appropriate investor.
The Company entered into an AZN 55 million ($32 million),
unsecured revolving credit facility with the International Bank of
Azerbaijan in early 2023. This shows the confidence of local Azeri
banks in the strength of our business.
Sustainability
The long-term development of the Company must be achieved in
alignment with the interests all our stakeholders. As set out in
our last annual report, the Company established its ESG criteria
and reporting practices in 2021. It is now focused on ensuring it
continues to enhance its disclosure. To this effect, we are pleased
that in 2022 we continued to make important progress in this area
with a stakeholder assessment survey and further ESG policy
development.
Health and safety
It was with great sadness and regret that the Company
experienced its first employee fatality in 2022. An employee lost
control of a loader he was driving up a hill at Xarxar and was
killed in the resulting accident. An external investigation cleared
the Company of any blame for the incident. Anglo Asian Mining
offered its full support to the family of the bereaved, to whom we
extend our deepest condolences . Anglo Asian Mining continues to
review and strengthen its health and safety policies.
Annual General Meeting ("AGM")
We encourage all shareholders to attend our AGM, the details of
which are set out below. The directors welcome all shareholders to
attend and look forward to meeting as many of you as possible.
Summary
The board is extremely excited by Anglo Asian's future growth
prospects. The awarding of the new contract areas is a testament to
our reputation of successfully bringing assets into production on
time and within budget for the benefit of all stakeholders.
Importantly, these assets will generate meaningful growth whilst
the Company will not deviate from its commitment to generate strong
returns for its shareholders. Our existing production assets
continue to show excellent development potential and underpin the
Company's strong position as a cash-generative business with a
clear path for growth.
Appreciation
I would like to take this opportunity to thank the employees of
Anglo Asian Mining, our partners, the Government of Azerbaijan and
our advisers for their continued support. I would also like to
sincerely thank the shareholders for their continued investment and
support in the Company. I look forward to an exciting year and to
sharing our future successes with you all.
Khosrow Zamani
Non-executive chairman
15 May 2023
President and chief executive's review
2022 was another solid year for Anglo Asian Mining, despite the
challenges the Company and the wider mining sector face due to
global macroeconomic events that continue to exert significant
inflationary pressure on the industry. Against this backdrop, the
Company continued to operate its mines efficiently and
profitably.
Operational review
We are pleased with the performance of our ongoing operations.
Our total production of 57,618 gold equivalent ounces ("GEOs") was
at the upper end of our stated guidance range and comprised 43,114
ounces of gold, 2,516 tonnes of copper and 182,046 ounces of
silver. Production was lower than in 2021 mainly due to the lower
grades of ore taken from the Gedabek mine.
During the year, we took several important steps towards
increasing our future production by starting the development of
Zafar and Gilar, two new underground mines. In parallel, the
Company worked extensively on evolving its medium-term growth
strategy. This combines the development of our existing and
newly-acquired assets into a clear and defined plan to enable the
Company to achieve its growth ambitions.
In July 2022, our amended Production Sharing Agreement was
passed into law, awarding us the three new contract areas of
Garadag, Xarxar and Demirli, which have a combined area of 882
square kilometres. In August 2022, we acquired historical
geological data regarding Garadag and Xarxar from AzerGold CJSC,
which comprised core drill assay results and geochemical and
geophysical data including maps and interpretative reports. We also
acquired 23 kilometres of AzerGold CJSC drill core. Subsequently,
we conducted an in-depth analysis of all the historical geological
data supplemented by our ongoing geological fieldwork. These data
reinforced our confidence that we can establish a significant
copper-gold mining district in the Gedabek region of
Azerbaijan.
Throughout the year, we also made considerable progress with the
existing assets within our portfolio, starting with the completion
of a JORC mineral resource of the Zafar deposit. The mineral
resource showed 28,000 tonnes of copper, 73,000 ounces of gold, and
36,000 tonnes of zinc, supported by over 302 metres of continuous
mineralisation in the thickest intersection.
We are extremely pleased with the progress of Gilar, which is
expected to commence production in late 2023. Towards the end of
2022, the Company announced a non-JORC preliminary maiden mineral
resource for the Gilar deposit, with over 135,000 ounces of gold,
21,500 tonnes of copper and 23,000 tonnes of zinc. In early 2023,
the Company announced an update which further increased the mineral
resource at Gilar, as discussed in the outlook section below.
We restarted exploration work in early 2023 at Ordubad in the
Nakhchivan exclave. We now have one drill rig operating there. The
drill results will be combined with data from satellite imaging and
geochemical sampling to better understand the geology of the
region. We are also encouraged that the Government of Azerbaijan
continues to strongly support the construction of a road between
Zangilan and Nakhchivan to greatly improve access to the exclave
from Azerbaijan.
We have established an active exploration programme at Vejnaly.
A substantial team of geologists are now based there. Following the
decision in late 2022 to fast-track development of the Gilar mine,
recommencing gold production from Vejnaly is now less of a
priority. However, we expect some minor production in 2023 from
Vejnaly from ore brought to the surface as our geologists clean out
the existing underground tunnels. The ore will be transported to
Gedabek for processing. At Gosha, we discovered a new sub-vertical
gold vein to the south of the Gosha mine with some bonanza gold
grades. However, gold production from Gosha is now also less of a
priority, given the development of Gilar.
Our growth plan includes a significant increase in copper and,
as a first step, we initiated an expansion programme of our
existing flotation plant which doubled its processing capacity.
Furthermore, seven additional flotation cells will be installed
later in 2023 to provide extra flexibility and establish a line to
produce zinc concentrate.
The Company has now obtained the necessary permit to build a new
tailings dam in the valley adjoining the current dam. Detailed
planning for the construction of the new dam, together with further
geotechnical investigations, has commenced. The current dam is
nearing full capacity, and to ensure sufficient tailings storage
capacity is available until the new dam is completed, an auxiliary
tailings storage dam is being constructed close to the Zafar mine
portal. This will be completed in the third quarter of the year and
will provide enough capacity for 12 to 18 months. The possibility
of a further raise of the wall of the existing dam is being
assessed in conjunction with Knight Piésold, a leading firm of
geotechnical and environmental consulting engineers.
Sustainability initiatives
The long-term growth and profitability of our business must be
sustainable and comply with all relevant and necessary best
practice standards. We employ almost 1,000 people which makes us a
large and significant employer in Azerbaijan. We run multiple
community outreach programmes, including carpet-making to provide
homework for family members of our staff and teaching Taekwondo to
children and young adults at Gedabek. Benefitting the communities
in which we operate is critical to ensuring that we remain a
responsible employer and a respected member of the business
community in Azerbaijan.
Financial performance
The Company had a turnover in 2022 of $84.7 million and a profit
before tax of $7.5 million. The Company ended the year with cash of
$20.4 million and no bank debt. Cash generation remained good, and
the Company generated cash of $17.0 million from its operations.
The Company spent $10.2 million on capital expenditure and $7.2
million on geological exploration.
The war in Ukraine has resulted in considerable geopolitical
uncertainty and widespread economic disruption. However, the
Company was unaffected directly by the war and the international
sanctions levied against various Russian entities. Like all
companies in the mining sector, the Company had to deal with
inflation. Most notably, we saw increases in the price of reagents
and other consumables, such as grinding balls. However, the Company
was insulated to some extent from increases in the cost of energy
as Azerbaijan is a significant energy producer. For example, diesel
fuel remained at US 47 cents per litre throughout 2022. Our focus
on tight cost control ensured that the cost of our inputs was
managed to minimise the impact on the Company's profitability.
Revenues 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 until at least the end 2025, with further details set
out in the financial review below.
The price of gold in 2022 averaged $1,801 per ounce for the
year, helping deliver a solid market into which sell our gold. The
Company continued not to hedge gold sales in 2022. However, given
the gold price of over $2,000 per ounce in early 2023, this policy
is kept under review.
Health and Safety
The Company's record on health and safety performance, which has
undergone a big improvement over the last few years, unfortunately
suffered a reversal in 2022. The Company tragically suffered the
first fatality in its history when the driver of a loader was
killed in an accident. The Company also incurred two incidents
where the injured employee had to take time off work (2021: nil).
As a result, the LTI (Lost Time Incident) frequency rate increased
to 2.18. Anglo Asian Mining remains committed to the highest
standards of health and safety for all our employees and is
strengthening its safety policies and practices in light of the
accidents in 2022.
A detailed report on health and safety will be included in our
annual report and accounts for 2022.
Growth strategy
We were delighted to release our medium-term growth strategy in
March 2023 which provides a clear pathway for the Company's growth
to mid-tier status. The strategy is ambitious but achievable and
will see Anglo Asian Mining more than double its production in the
next five years. Critically, our transition towards copper as our
primary product is in line with the global clean energy agenda and
the shift to renewable sources. The strategy will establish the
Company as a multi-asset, mid-tier mining company.
The Company forecasts total production increasing by 30 to 50
per cent. to 70,000 to 75,000 GEOs for 2024 and 2025 driven by
production from the Gilar mine. Copper production is targeted to
grow to more than 36,000 tonnes per annum (175,000 GEOs) from 2028,
as Xarxar and Garadag are brought into production.
Our core Gedabek mine remains an important asset which we expect
to continue in production until at least 2028. Alongside this, we
expect strong production from Gilar, where drilling in 2023 has led
to the discovery of increased mineral resources, now estimated to
contain over 249,000 ounces of gold, 46,000 tonnes of copper, and
48,000 tonnes of zinc. Recently, additional encouraging drill
results have revealed further increases in the deposit's size and
provided added confidence regarding the extent of the
mineralisation. This underpins the decision to start construction
of an underground tunnel at Gilar for further exploration and early
production.
Zafar is progressing well, with the completion of the mine
design and commencement of the construction of two parallel
declines. The Company is currently procuring an underground mining
fleet and related equipment. This fleet can be deployed in either
the Zafar or Gilar mine.
An initial assessment of data relating to the Garadag porphyry
copper deposit has also confirmed the potential to produce over
300,000 tonnes of copper.
We remain committed to Libero Copper & Gold Corporation
("Libero"). The investment in Libero reflects portfolio
diversification, and we continue to seek opportunities beyond
Azerbaijan. Libero also complements our growth strategy well, and
we look forward to seeing its world-class copper assets developed
in the coming years.
Looking ahead
2023 will be a pivotal year as we focus on the implementation of
our growth strategy, with Anglo Asian continuing to benefit from
commodity prices which have started strongly in 2023, with gold
hitting its all-time high since August 2020, at $2,048 per ounce.
We remain focused on delivering value to all our stakeholders and
strengthening our commitments to safety, sustainability and
community engagement. We are excited with our portfolio of current
and future assets which we will develop to transition to mid-tier
status. I would like to thank all our employees for their fantastic
work and support.
We continue to prioritise ensuring attractive shareholder
returns and are proud of our position as one of AIM's reliable
dividend payers. I am pleased to note that the board is
recommending a final dividend of US 4 cents per ordinary share,
which gives a full year dividend for 2022 of US 8 cents per
ordinary share.
Reza Vaziri
President and chief executive
15 May 2023
Dividend
A final dividend of US$0.04 per share will be paid gross in
respect of the year ended 31 December 2022 to shareholders on 27
July 2023 that are on the shareholders record at the record date of
30 June 2023, subject to approval of the shareholders at the
Company's Annual General Meeting on 22 June 2023. The shares will
go ex-dividend on 29 June 2023. All dividends will be paid gross
and in cash. A scrip dividend or any other dividend reinvestment
plan will not be offered by the Company.
The dividend will be payable in pounds sterling. The dividend
will be converted to pounds sterling using the average of the
sterling closing mid-price using the exchange rate published by the
Bank of England at 4pm each day from the 3 to 7 July 2023.
Annual General Meeting for 2023
The Annual General Meeting of the Company for 2023 will be held
on 22 June 2023 at 11:00am at 33 St James's Square, London SW1Y
4JS, United Kingdom. All shareholders are warmly invited to
attend.
Corporate governance and Section 172 (1) Statement
A statement of the Company's compliance with the ten principles
of corporate governance in the Quoted Companies Alliance Corporate
Governance Code ('QCA Code') will be included in the Company's
annual report and accounts for 2022.
The Company's Section 172 (1) Statement is included within the
strategic report below.
Sustainability at Anglo Asian Mining
A report on sustainability, including a detailed report on
health and safety, will be included in the Company's annual report
and accounts for 2022.
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 19.8 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.
Ø Garadag and Xarxar are situated 4.0 and 1.5 kilometres
respectively from the northern boundary of the Gedabek Contract
Area. They infill the territory between Gedabek and Gosha and
create a contiguous territory totalling 1,408 square
kilometres.
Ø Demirli is in the Karabakh economic region and expands the
Kyzlbulag Contract Area to the north-east. There is currently no
access to Kyzlbulag and Demirli. The PSA will only commence in
respect of these two Contract Areas upon notification by the
Government of Azerbaijan to the Group of the cessation of all
hostilities and that it is safe to access the district.
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. A new vein "Hasan" was
discovered at Gosha in 2022.
Ø Ordubad. An early-stage gold and copper exploration project
located in the Nakhchivan exclave.
Ø Garadag. Located to the north of Gedabek and which hosts the
large Garadag copper deposit.
Ø Xarxar. Another copper deposit, adjacent to Garadag, which
shows significant potential as it is likely part of the same
mineral system.
Ø Kyzlbulag. Situated in the Karabakh economic region. Hosts the
Demirli deposit, a copper/molybdenum mine and a processing
plant.
Ø Demirli. Adjacent to Kyzlbulag and expands the Kyzlbulag
Contract Area to the north-east.
Ø Vejnaly. Situated in the Zangilan district of Azerbaijan and
hosts the Vejnaly deposit.
Overview of 2022
The Company's strategy is to transition into a mid-tier
copper-focused producer, which will be achieved through developing
its significant assets. This will favourably position Anglo Asian
for the upcoming era of electrification and decarbonisation to
create considerable shareholder value.
In January 2022, the Group completed the remaining 10 per cent.
of its initial investment in Libero, taking it to 19.8 per cent.
Michael Sununu was appointed to Libero's board of directors and a
technical committee was established to which Farhang Hedjazi was
appointed as Anglo Asian's representative. Anglo Asian made three
further follow-on investments in Libero via private placements in
August 2022, January 2023 and February 2023 to maintain its
interest at approximately 19.8 per cent.
In March 2022, the Group announced the discovery of a
significant new sub-vertical gold vein, "Hasan", at Gosha.
In March 2022, the final mineral resource estimate for the Zafar
deposit was published. Mine planning continued throughout 2022 with
development started in early 2023. Underground equipment was
selected with the major drilling equipment to be supplied by Epiroc
and the mining and loading equipment by Caterpillar. Initial down
payments were made for the equipment in late 2022 and 2023.
Construction of the Zafar mine started in early 2023.
Activity was increased at Vejnaly during 2022 following access
being obtained in late 2021. A camp has been established and staff
are now permanently located at Vejnaly. The staff are mainly
geologists exploring in the existing mine and its vicinity.
In July 2022, the Group acquired three additional Contract
Areas: Garadag, Xarxar and Demirli and relinquished the Soutely
Contract Area. This was following amendments to the Group's PSA
being passed into law.
In November 2022, the Group commenced an expansion of its
flotation processing plant. The expansion will double the capacity
of the plant and cost approximately $3.0 million. It will also add
an additional flotation line which will increase the flexibility of
the plant and enable it to produce a zinc concentrate. The
expansion is expected to be completed in the second half of
2023.
In December 2022, a preliminary maiden non-JORC mineral resource
for the Gilar deposit was published, following exceptional drilling
results. This was updated in March 2023. Development of an
underground mine commenced with the opening of a portal and
commencement of the construction of an underground tunnel suitable
for exploration and production in early 2023.
Production target for 2023
The Group's production guidance for the year ended 31 December
2023 is as follows:
Full year
2023
Full year
2022 Production
Metal Unit Actual production guidance
------------------- -----------------
Gold ounce 43,114 30,000 to 32,000
------- ------------------- -----------------
Copper tonne 2,516 4,100 to 4,300
------- ------------------- -----------------
Total gold and
copper GEO* 57,618 50,000 to 54,000
------- ------------------- -----------------
The Company does not forecast silver production as it is not
material.
* Gold equivalent ounce
The gold equivalent ounces were computed using the following
budget rates:
Gold equivalent
Price of metal ounces of metal
Actual Actual Budget
31 December 31 December
2022 Budget 2023 2022 2023
Metal Unit $ $ Ounces Ounces
------- -------------- -------------- ---------
Gold ounce 1,797.55 1,800.00 1.000 1.000
------- -------------- -------------- -------------- ---------
Silver ounce 23.97 20.00 0.013 0.011
------- -------------- -------------- -------------- ---------
Copper tonne 8,387.00 8,500.00 4.666 4.722
------- -------------- -------------- -------------- ---------
The Company's production profile will change significantly in
2023 as copper becomes a greater proportion of its production:
-- The agitation leaching plant will operate on a "campaign
basis" during the year processing mainly gold rich ore from the
Gedabek open pit and underground mines. There is a diminishing
amount of ore suitable for agitation leaching at Gedabek.
Additionally, it is more commercially advantageous to use the
plant's crushing and grinding circuit to treat ore for the expanded
flotation plant.
-- The capacity of the flotation plant will double in 2023 as a
result of the investment of approximately $3 million.
-- Copper rich ore from the Gedabek open pit will be used as
feedstock for the flotation plant during 2023. From the fourth
quarter of 2023, it is planned that Gilar ore will also be
processed by flotation and its gold content extracted by agitation
leaching. There will be no production of Zafar ore in 2023.
-- Only a very minimal amount of ore will be processed from the
Vejnaly and Gosha mines in 2023. The recent decision to fast-track
the Gilar mine into production has required redeployment of
resources away from these two projects.
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 estimates are produced both in
accordance with the JORC (2012) code ("JORC") and as
non-JORC-compliant estimates.
The Group's most recent mineral resources and ore reserves
estimates 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 resource for the Vejnaly
deposit and Table 8 shows the Soviet C1 and C2 copper resource 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
-------- ---------------------------------- -----------------------------------
Tonnage Gold Copper Silver Zinc Gold Copper Silver Zinc
Mineral grade grade grade grade
Resources (Mt) (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 Gold Copper Silver Zinc
grade 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 Stockpile grades Contained metal
Resources
-------- ------------------------- -------------------------
Tonnage Gold Copper Silver Gold Copper Silver
grade grade grade
(Mt) (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 Gold Copper Silver Gold Copper Silver
grade grade grade
(Mt) (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
-------- ---------------------------------- -------------------------------------
Tonnage Gold Copper Silver Zinc Gold Copper Silver Zinc
Mineral grade grade grade grade
Resources (kt) (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 Gold Copper Silver Gold Copper Silver
grade grade grade
(Mt) (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
-------------------- ------ ------ -------------
Thousands of
Copper 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 31 December 2022, approximately 787 thousand
ounces of gold and 19 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.
The Group also mined ore in 2022 from the Gadir and Gedabek
underground mines. Table 9 shows all the ore mined by the Group in
the year ended 31 December 2022.
Table 9 - Ore mined at Gedabek for the year ended 31 December
2022
Total ore mined
for the year ended
31 December 2022
Average
gold
Ore mined grade
Mine (tonnes) (g/t)
------------ --------
Gedabek open pit 1,705,337 0.47
Gadir - underground 136,715 1.41
Gedabek - underground 373,915 1.30
------------ --------
Total for the
year 2,215,967 0.67
----------------------- ------------ --------
Zafar and Gilar mine development
The Group is developing two new underground mines at Gedabek -
Zafar and Gilar.
The Zafar deposit was discovered in 2021 and is close to the
Gedabek processing facilities. Its final mineral resources estimate
was published in March 2022 and is set out in Table 5 - "Zafar
mineral resources estimate at 30 November 2021". Two declines will
be constructed to access the mineralisation, a haulage decline and
a parallel ventilation decline. T he two portals for the declines
have been constructed close to the existing Gedabek processing
facilities and about 1,000 metres from the mineralisation. Mining
will be by sub-level caving supplemented by sub-level open stoping.
The necessary underground machinery has been contracted for with
drilling equipment manufactured by Epiroc and the mining and
loading equipment manufactured by Caterpillar.
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 was
published in March 2023 and 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.
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. In
this plant, a synthetic resin is used to selectively absorb the
gold and silver from the slurry. The metal-loaded resin is then
"stripped" of its gold and silver by desorption into another
solution, from which the metals are recovered by electrolysis,
followed by smelting to produce the doré metal, which comprises 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 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 and the new flotation line will
be installed in the second half of 2023.
Table 10 summarises the ore processed by leaching at Gedabek for
the year ended 31 December 2022.
Table 10 - Ore processed by leaching at Gedabek for the year
ended 31 December 2022
Ore processed (tonnes) Gold grade of ore processed
Quarter ended (g/t)
--------------------------------- --------------------------------
Heap Heap Agitation Heap Heap Agitation
leach leach leach leach
pad pad pad pad
crushed ROM ore leaching crushed ROM ore leaching
ore plant ore plant
-------- ---------- ----------- --------- --------- ----------
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
-------- ---------- ----------- --------- --------- ----------
Total for the
year 314,991 1,089,173 625,468 0.77 0.56 1.51
------------------ -------- ---------- ----------- --------- --------- ----------
Table 11 summarises ore processed by flotation for the year
ended 31 December 2022.
Table 11 - Ore processed by flotation for the year ended 31
December 2022
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
-------------- ------------- --------------- ---------------
Total for the
year 482,231 5,917 100,316 2,716
------------------ -------------- ------------- --------------- ---------------
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 2022.
Table 12 - Amount of previously heap leached ore processed in
2022
In-situ material Average gold
(t) grade
(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
---------------- ----------------- -------------
Production and sales
For the year ended 31 December 2022, gold production totalled
43,114 ounces, which was a decrease of 5,566 ounces in comparison
to the production of 48,680 ounces for the year ended 31 December
2021.
Table 13 summarises the gold and silver bullion produced from
doré bars and sales of gold bullion for the year ended 31 December
2022.
Table 13 - Gold and silver bullion produced from doré bars and
sales of gold bullion for the year ended 31 December 2022
Quarter ended Gold produced* Silver Gold Gold sales
ounces produced* sales** price
ounces ounces $/ounce
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
-------------- ----------- --------- ----------
Total for the
year 40,010 26,963 34,918 1,783
-------------- -------------- ----------- --------- ----------
*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.
Table 14 - Total copper, gold and silver produced as concentrate
by both SART and flotation processing for the year ended 31
December 2022
Copper (tonnes) Gold (ounces) Silver (ounces)
------------------------- ------------------------- -----------------------------
Quarter ended SART Flotation Total SART Flotation Total SART Flotation Total
----- ---------- ------ ----- ---------- ------ ------- ---------- --------
31 March 2022 188 380 568 12 1,065 1,077 25,114 17,986 43,100
30 June 2022 168 547 715 14 715 729 25,582 15,672 41,254
30 September
2022 208 401 609 33 581 614 24,077 14,094 38,171
31 December
2022 244 380 624 39 645 684 20,833 11,725 32,558
----- ---------- ------ ----- ---------- ------ ------- ---------- --------
Total for
the year 808 1,708 2,516 98 3,006 3,104 95,606 59,477 155,083
--------------- ----- ---------- ------ ----- ---------- ------ ------- ---------- --------
Table 15 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.
Table 15 - Total copper concentrate (including gold and silver)
production and sales from both SART and flotation processing for
the year ended 31 December 2022
Concentrate Copper Gold Silver Concentrate Concentrate
production* content* content* content* sales sales**
Quarter ended (dmt) (tonnes) (ounces) (ounces) (dmt) ($000)
------------- ---------- ---------- ------------
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
------------- ---------- ---------- ---------- ------------ ------------
Total for the
year 13,301 2,516 3,104 155,083 12,443 22,240
--------------- ------------- ---------- ---------- ---------- ------------ ------------
*Including the Government of Azerbaijan's share.
** These are invoiced sales of the Group's share of production
before any accounting adjustments in respect of IFRS 15. The total
for the year does not therefore agree to the revenue disclosed in
note 6 - "Revenue" to the Group 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 a good tarmacadam road to the regional capital of
Ganja. Baku, the capital of Azerbaijan to the south, and the
country's border with Georgia to the north, are each approximately
a four to five hour drive over good quality roads. The site is
connected to the Azeri national power grid.
Water management
The Gedabek site has its own water treatment plant which was
constructed in 2017 and which uses the latest reverse osmosis
technology. In the last few years, Gedabek town has experienced
water shortages in the summer and this plant reduces to the
absolute minimum the consumption of fresh water required by the
Company. Wastewater evaporation equipment is also deployed in the
tailings dam.
Tailings (waste) storage
Tailings are stored in a purpose-built dam approximately seven
kilometres from the Group's processing facilities, topographically
at a lower level than the processing plant, thus allowing gravity
assistance of tailings flow in the slurry pipeline. Immediately
downstream of the tailings dam is a reed bed biological treatment
system to purify any seepage from the dam before discharge into the
nearby Shamkir river. The tailings dam has a final capacity of 6.0
million cubic metres which is sufficient to approximately the end
of 2023.
A site has been identified for a new tailings dam in the
vicinity of the existing dam. The necessary investigations to
determine the competency of the bedrock at the proposed site have
been successfully completed. The design for the tailings dam has
also been finalised. Construction of the new tailings dam was
delayed due to an additional Government permit which was required.
However, this has now been obtained and detailed planning for the
construction of the new dam is underway, together with further
geotechnical investigation of the site. To provide tailings storage
until the new dam is completed, an auxiliary tailings dam is being
constructed close to the new Zafar mine. This is a downstream
tailings dam with a 45 metre dam wall and which will be fully lined
with a capacity of 1.5 million tonnes. It will be completed around
July 2023 and will provide sufficient storage capacity for the next
12 to 18 months. The possibility of a further five metre raise of
the wall of the existing dam is being assessed in conjunction with
Knight Piésold, a leading firm of geotechnical and environmental
consulting engineers.
Gosha
The Gosha Contract Area is 300 square kilometres in size and is
situated in western Azerbaijan, 50 kilometres north-west of
Gedabek. Gosha is the location of a high grade, underground gold
mine. Ore mined at Gosha is transported by road to Gedabek for
processing. No mining was carried out in the Gosha mine in the year
ended 31 December 2022.
Geological field work in 2021 resulted in the discovery of a new
sub-vertical high gold grade mineralised vein ("Hasan") immediately
south of the existing Gosha mine. The new gold vein can be accessed
via a short tunnel from the existing tunnelling at Gosha.
Ordubad
The 462 square kilometre Ordubad Contract Area is located in
Nakhchivan, south-west Azerbaijan, and contains numerous targets.
The Company carried out only very limited geological exploration
work at Ordubad in 2022 due to the COVID-19 pandemic, details of
which are set out in the report on geological exploration below.
Drilling has resumed in 2023 targeting copper porphyry potential.
The first stage of the programme is to drill five core drill holes
with a total depth of 2,250 metres.
Garadag
The 340 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 is set out in Table 8 - "Soviet copper
resource for the Garadag deposit" . 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 out and is included in
the Data. Since acquisition, the Group has started an extensive
exercise to index, analyse, interpret and verify the Data.
Xarxar
The 464 square kilometre Contract Area is located immediately
north of Gedabek which it borders. Xarxar hosts a portal and
exploration tunnel constructed in Soviet times. However, the tunnel
had 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 to give access to it. 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.
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.
Russian peacekeepers are currently present in the area. The
Government of Azerbaijan 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 2022 as the Group had no access to
the Contract Areas.
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. It hosts the Vejnaly deposit. Access
was obtained in 2021 and in 2022, the Azerbaijan National Agency
for Mine Action ('ANAMA') completed its inspection of Vejnaly and
certified access to the site and underground mine as safe. In
accordance with our PSA, the Government of Azerbaijan transferred
all site assets to the Company at nil cost.
A camp is now established at Vejnaly for Group employees. An
extensive 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. Approximately 35 full time employees are
based at the site who are mainly geologists exploring in the
vicinity of the existing mine. There was no mining or production at
Vejnaly in 2022. 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 during 2023.
Geological exploration
Summary
-- New mineral deposit discovery "Zafar" at Gedabek
o Final mineral resource published on 21 March 2022
o In-situ JORC mineral resource of 28,000 tonnes of copper,
73,000 ounces of gold and 36,000 tonnes of zinc
o Additional exploration and geotechnical drilling carried out
in 2022
-- New mineral deposit discovery "Gilar" at Gedabek
o Preliminary non-JORC mineral resource published on 19 December
2022
o In-situ non-JORC mineral resource of over 135,000 ounces of
gold, 21,500 tonnes of copper, and 23,000 tonnes of zinc
o Considerable exploration activity carried out in 2022 with
"bonanza" gold grades returned
-- Exploration continued throughout 2022 in the Gedabek open pit
and the Gedabek and Gadir underground mines to define ore zones and
extensions.
-- New sub-vertical gold vein, "Hasan", discovered at Gosha
o Located to the immediate south of the existing Gosha mine
o Vein can be accessed from existing underground mine
workings
-- Extensive historic exploration data acquired for the Garadag and Xarxar deposits
-- Exploration work commenced at Xarxar in 2022
o 10 surface core drill holes were completed with a total length
of 3,479 metres
o New portal constructed and 470 metres of underground
tunnelling completed
-- Very limited geological field work was carried out at Ordubad
during 2022 due to COVID-19 travel restrictions
-- Exploration work commenced at the Vejnaly deposit
o Soviet mineral resources of the Vejnaly deposit shows 142,000
ounces of gold and 2,942 tonnes of copper
o Existing galleries have been mapped and vein sampling and ore
modelling is now being carried out
Gedabek
Zafar deposit
Zafar is a new discovery located 1.5 kilometres north-west of
the existing Gedabek processing plant.
The geology of the area is structurally complex, comprising
mainly of Upper Bajocian-aged volcanics. The mineralisation seems
to be associated with a main north-west to south-east trending
structure, which is interpreted as post-dating smaller north-east
to south-west structures. In the south-west area, outcrops with
tourmaline have been mapped, which can be indicative of the
potential for porphyry-style mineral formation. The exploration
area is located along the regional Gedabek-Shekarbek fault system,
with Shekarbek being another target area known to host copper
mineralisation, situated in the north-west of the zone.
19 core drill holes with a total length of 5,045 metres were
completed at Zafar in 2022. Four drill holes returned grades above
reportable limits. 14 drill holes were for the purpose of
geotechnical and metallurgical test work. Grades of up to 1.5
grammes per tonne of gold and 3.95 per cent. copper were reported.
Bench scale X-ray diffraction ("XRD") analysis of drill core
samples was routinely used during 2022. This uses a portable XRD
machine to undertake mineralogical analyses of core samples. The
results are obtained in "real time" without the need to wait for
laboratory analysis, which enables a better focused drill
programme.
The final mineral resource estimate for the Zafar deposit was
published on 21 March 2022 and is shown in table 5 - "Zafar mineral
resources estimate at 30 November 2021".
Gilar
Gilar is a mineral occurrence located in the Gedabek contract
area, approximately seven kilometres from the Company's processing
facilities and approximately two kilometres south of Avshancli-1.
The area hosts two styles of mineralisation, gold in quartz veins
and hydrothermal gold-copper.
The maiden Non-JORC mineral resources estimate was published in
March 2023 which contained over 249,000 ounces of gold, 46,000
tonnes of copper, and 49,000 tonnes of zinc. The mineral resource
estimate (which is not a JORC resource) was compiled by an
independent consultant and was 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 resource
estimate is contained in Table 6 - "Latest Non-JORC mineral
resources estimate of the Gilar deposit".
Extensive exploration drilling was carried out at Gilar in 2022.
48 surface core drill holes were completed with a total length of
16,577 metres. Four geotechnical surface core drill holes totalling
930 metres were also drilled for underground mine development
purposes. The drilling demarcated six zones of mineralisation with
drilling in the second half of 2022 extending and confirming the
deeper zone of continuous mineralisation hosting significant gold,
copper and zinc with an intercept thickness of over 65 metres as
follows:
Borehole 22GLDD127: 68.35m @ 2.40g/t gold, 2.89% copper and
1.58% zinc from 320.00m, including:
-- 55.4m @ 2.7g/t Au, 3.5% Cu and 1.4% zinc at 1.5g/t gold
cut-off from 331.00m, including at a 2.0 g/t Au cut-off
o 33.3m @ 3.0g/t Au, 5.4% Cu and 2.0% zinc from 333.00m
o 14.4m @ 2.8 g/t Au, 0.4% Cu and 0.2% zinc from 372.00m
One drill hole in the centre of Gilar also intersected
significant mineralisation.
The Group acquired the technology to make and microscopically
examine thin sections of ore in 2022 using SystemAbele(R). This
system identified the free gold in the Gilar deposit.
Gedabek open pit
14 surface core drill holes were completed in 2022 with a total
length of 2,938 metres and 139 reverse circulation drill holes
completed with a total length of 20,258 metres to define the ore
zone and extensions. The majority of the gold grades returned were
in the range 0.01 to 0.99 grammes of gold per tonne and copper
grades of 0.01 to 0.49 per cent. of copper.
Gedabek open pit - underground
The Gedabek and Gadir underground mines are connected, and form
one continuous underground network of tunnels, accessible from both
the Gadir and Gedabek portals. However, a significant fault
structure separates the two mines. In 2022, tunnelling of 742
metres was completed from the existing Gadir underground mine to
underneath the northern end of the Gedabek main open pit. Nine core
drill holes (HQ/NQ size) totalling 1,125 metres were completed,
along the length of the tunnel, which showed significant
mineralisation. The tunnelling provides access to the
mineralisation between Gadir and the main open pit.
Gadir underground mine
During 2022, six underground exploration core drill holes (HQ/NQ
size) were completed with a total length of 944 metres. 1,140
metres of underground sidewall and tunnel roof mapping were
completed. This defined zones for continuation of mining and
extended the down dip footprint of the mineralisation. As part of
the mining activity, 15 core drill holes (HQ/NQ size) with a total
length of 2,056 metres were completed for ore zone definition. 100
metres of underground development tunelling was also completed.
Avshancli
Avshancli is a mineral district which is 10.5 kilometres
north-east of the Gedabek open pit. In 2022, four core drill holes
were completed totalling 1,316 metres. The geological work to date
at Avshancli-1 shows discontinuous surface mineralisation with gold
grades dropping off from the surface as the structures narrow with
depth. Given the distribution of mineralisation, economic volumes
of ore are likely to be small.
Ugur open pit and Ugur Deeps
The Ugur pit has now been fully exhausted. In 2022, drilling was
carried out in the vicinity of the depleted open pit (Ugur Deeps
region) to locate possible extensions to the deposit. Two core
drill holes were completed with a total length of 515 metres
targeting high-grade copper-silver mineralisation. Five trenches of
length 65 metres were sampled, and 250,000 square metres of
lithological-alteration structural mapping was completed. No
significant results were obtained.
Gosha
The Gosha contract area, which hosts the Gosha mine, is located
next to the Armenian border. Surface core drilling which commenced
in 2021, resulted in the discovery of a new sub-vertical high gold
grade mineralised vein ("Hasan"), after surface mapping suggested
the presence of gold at the location. The discovery was announced
in March 2022. The new gold vein can be accessed via a short tunnel
from the existing tunnelling at Gosha.
The Gosha mine was previously thought to consist of two narrow
gold veins, zone 13 and zone 5 to the south. Mining has previously
taken place from both veins. Hasan is located immediately south of
the zone 5 and intersects it at one point. The host rock mostly
exhibits silicification and kaolinisation alteration, which changes
to quartz-haematite alteration in andesite.
68 metres of underground mapping and 204 metres of channel
samples were taken from the Gosha mine in 2022. Five underground
core drill holes totalling 1,144 metres were also drilled in
2022.
The Group is also carrying out surface magnetometry geophysical
exploration work at Asrikchay. The work is to determine the
mineralisation potential for planning the next stage of
exploration. Asrikchay is a copper-gold target in the Gosha
Contract Area which was discovered in 2018.
Xarxar
Xarxar is a known area of copper mineralisation which had been
explored in the Soviet era. Exploration by the Group began in the
second half of 2022 immediately upon acquisition of the Contract
Area. The area contains a portal and exploration tunnel constructed
during the Soviet era. However, the tunnel was found to be of very
limited length and collapsed in places. A new portal has therefore
been constructed and 470 metres of underground tunnelling completed
in 2022.
Ten surface core drill holes totalling 3,479 metres were drilled
and 147 channel samples were collected. These returned copper
grades of around an average of 0.6 per cent. Structural mapping and
a geotechnical study of the deposit was also completed by an
independent contractor. The Group also acquired historic
exploration results as set out above in "Xarxar".
Garadag
No field exploration work was carried out at Garadag in 2022.
However, the Group acquired considerable geological data about the
deposit as described above in "Garadag". 538 metres of drill core
from the Azergold CJSC was geologically logged and assayed in the
Group's laboratory.
Ordubad
Due to COVID-19 restrictions, drill access was proscribed during
2022 and therefore very limited geological field work was
completed. To better understand the geology of the region, 3,397
metres of drill core previously drilled by the Group were relogged
and some intervals resampled.
Vejnaly
The Vejnaly deposit is located within the volcanic-plutonic
structure of the Kafan structure formation and incorporates
twenty-five gold-bearing vein zones. Ore veins and zones of the
deposit are mainly represented by quartz-sulphide and, rarely, by
quartz-carbonate-sulphide veins and hydrothermally altered,
disintegrated and brecciated rocks. Sulphides are dominated by
pyrite with subordinate chalcopyrite. There are prospects for
porphyry, epithermal and skarn type deposits.
A Soviet mineral resource estimate for the Vejnaly deposit is
contained within Table 7 - "Soviet resource of the Vejnaly deposit"
and shows a total C1 and C1 resource of 141,000 ounces of gold and
2,942 tonnes of copper. However, the Vejnaly deposit has been
extensively mined whilst under Armenian occupation.
A geological team was established at Vejnaly in early 2022 and
commenced vein sampling and ore modelling. The logging of historic
drill holes of the deposit was also carried out throughout 2022.
Vein sampling assays of the deposit show significant high gold
grades. The rebuilding and cleaning of collapsed areas of the
underground gallery is also ongoing to allow assessment of
previously mined areas.
Sale of the Group's products
Important to the Group's success is its ability to transport its
products to market and sell them without disruption.
In 2022, the Group shipped all its gold doré to Switzerland for
refining by MKS Finance SA. The Group also sold gold bullion
inventory at 31 December 2021 to Argor-Heraeus SA in 2022. 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 Group shipped all its gold doré to Switzerland in
2022 by scheduled airflights.
The Gedabek mine site has good road transportation links, and
our 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 6 to the
Group financial statements. 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
The Group acquired 19.8 per cent. of Libero Copper & Gold
Corporation ("Libero") in January 2022. Further follow-on
investments to maintain its investment at approximately 19.8 per
cent have been made since January 2022 as detailed in the Group
financial statements in note 11 - "Investment in associate company"
and note 33 - "Subsequent events".
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.
Mocoa
Extensive geological exploration was carried out in 2022.
-- Core drilling commenced in February 2022. The first drill
hole intercepted 840 metres containing 0.72 per cent. copper.
-- Interpretation of data obtained from an airborne survey in
2021 identified nine additional porphyry targets in the vicinity of
Mocoa.
-- Soil sampling identified a large 2 kilometre long by 800 -
1,000 metre wide multi-element soil geochemical anomaly
coincidental with the Mocoa deposit. This significantly expands the
footprint and potential size of the deposit outside of the forest
reserve.
In November 2022, Libero entered into a "Cooperation Framework
Agreement for Participation and Generation of Shared Benefits" with
the local community of Montclar. This agreement is to share the
benefits of mine development.
In November 2022, Libero together with the National University
of Colombia, extracted metallic copper from pulp from Mocoa ore.
This was the first copper produced in Colombia from a deposit in
Colombia.
Esperanza
Permitting is ongoing and in late 2022, representatives from the
Ministry of Mines of San Juan visited the project to confirm
conditions at the site before restart of activities. The visit
complimented the latest water quality work carried out by the
Institute of Hydraulic Investigation of the National University of
San Juan for the water baseline study.
Big Red
Four core drill holes were completed at Big Red between August
and October 2022. The drilling tested a large, 4 by 4 by 4
kilometre triangular-shaped area with strong potassic alteration
immediately southeast of, and continuous with, the Terry porphyry
copper and gold discovery. One hole intersected 0.24 per cent.
copper, and 0.03 grammes per tonne of gold over 100.5 metres and
confirmed the down dip extension of previous drilling. The other
three drill holes yielded no significant results.
Further information about Libero can be found at
https://www.liberocopper.com/.
Section 172(1) Statement
Introduction
The board of directors of Anglo Asian Mining PLC (the "Board")
considers that it has adhered to the requirements of section 172 of
the Companies Act 2006 (the "Act") and, in good faith, acted in a
way that it considers would be most likely to promote the success
of the Company for the benefit of its shareholders as a whole. In
acting this way, the Board has recognised the importance of
considering all stakeholders and other matters as set out in
section 172(1) (a to f) of the Act in its decision-making.
The Board members are directors of Anglo Asian Mining PLC, a
holding company for the Group. The Group carries out its business
of mineral exploration and mining in Azerbaijan and elsewhere
through its wholly-owned subsidiaries and other investments. Given
the nature and size of the Group, the Board considers it reasonable
that executive decision making for the entire Group, including its
subsidiaries in Azerbaijan, is the responsibility of the Board. The
section 172(1) statement has accordingly been prepared for the
entire Group.
The commentary and table below sets out the Company's section
172(1) statement. This statement provides details of key
stakeholder engagement undertaken by the Board during the year and
how this helps the Board to factor in potential impacts on
stakeholders in the decision-making process.
General
The Group promotes the highest standards of governance as set
out in Corporate Governance in the Group's annual report. The
principles of Corporate Governance underpin how the Board conducts
itself. The Board is very conscious of the impact that the Group's
business and decisions has on its direct stakeholders as well as
its societal impact. The Company operates to the highest ethical
standards as discussed in the Corporate Governance Section of the
annual report.
Principal decisions and other key factors in maintaining
shareholder value
For the year ended 31 December 2022, the Board considers that
the following are examples of the principal decisions that it made
in the year:
-- consideration and agreement of the Group's budget together
with the associated production guidance for the year ended 31
December 2022;
-- consideration of the final dividend payable for the year
ended 31 December 2021 and the interim dividend payable for the
year ending 31 December 2022;
-- consideration of the mineral resources estimate of the Gilar
mine and to undertake the development of the resource;
-- agreeing to follow on investments in Libero Copper & Gold
Corporation ("Libero") to maintain the Group's interest at 19.8 per
cent.;
-- agreeing to put in place a programme to buy back the
Company's own shares and then buying back certain shares in the
market place;
-- agreeing to purchase historical geological data in respect of
the Xarxar and Garadag contract areas from AzerGold CJSC for a
total of $4 million following the acquisition of the two new
Contract Areas;
-- agreeing to purchase new equipment to increase the capacity
of its existing flotation plant; and
-- agreeing to the purchase of a mining fleet, drilling
equipment and other underground equipment for its new Zafar mine
and agreeing to obtain vendor financing for certain of the
equipment.
-- The establishment of a long-term strategy and business plan
to become a mid-tier producer of copper.
The Group, like all companies operating in the extractive
industries, is required to continually replace and increase its
mineral reserves to maintain and improve the sustainability of its
business. This concern is a high priority of the Board. To address
this priority, the Company has an active geological exploration
campaign at its Contract Areas to which it has access. The Board
monitors the campaign through regular reports and site visits by
directors whenever possible. The Company is also looking at other
opportunities and the Board receive regular updates on progress in
this area.
The Board and senior managers of the Company hold in total
approximately 42 per cent. of the shares of the Company with the
remainder held by a wide range of individual and institutional
shareholders. The Board are extremely mindful that all shareholders
must be treated equally. This is reflected in the Board's behaviour
to ensure decisions do not disadvantage external shareholders
compared to the interests of directors and senior management and
that external shareholders are fully informed of all Company
developments in a timely manner.
Engagement with key stakeholders
The table below sets out the Board's key stakeholders and
provides examples of how the Board engaged with them in the year as
well as demonstrating stakeholder consideration in the
decision-making process. However, the Board recognises that,
depending on the nature of an issue, the interests of each
stakeholder group may differ. The Board seeks to understand the
relative interests and priorities of each stakeholder and to have
regard to these, as appropriate, in its decision making. However,
the Board acknowledges that not every decision it makes will
necessarily result in a positive outcome for all stakeholders.
Stakeholder How the Board has approached How the Board has taken
their engagement their interests into
account
Shareholders The Board aims to provide The Board maintains a
clear and timely information dialogue with external
to its shareholders which shareholders and keeps
gives an honest and transparent them informed in a variety
view of the performance of ways as set out in
of the business. the Corporate Governance
section of the annual
report.
------------------------------------------------------------- --------------------------------
Customers The Board aims to maintain Visits to its customers
a mutually beneficial by senior staff are undertaken
relationship based on and visits are made by
trust through a continuous customers to the Company
dialogue with each of in Azerbaijan to show
its customers. them the Group's production
facilities.
The Company maintains
a continuous dialogue
with its customers regarding
the technical specifications
of its products to ensure
the most beneficial sales
terms are obtained for
both parties.
------------------------------------------------------------- --------------------------------
Suppliers The Board has ensured All significant purchases
an appropriately qualified are discussed with suppliers
and professional procurement and prices and delivery
department is in place terms agreed which are
which maintains close mutually beneficial to
contact with all suppliers. both parties.
All procurement is carried
out via a transparent Technical staff work
tender process. in close collaboration
with suppliers of specialist
For specialised goods services to ensure the
and services, senior supplier provides the
management will maintain highest quality service
a dialogue with the supplier to the Company within
and report their engagement the commercial terms
to the Board. of the contract.
------------------------------------------------------------- --------------------------------
Employees The Board has mandated The results of the employee
a mainly informal approach survey have been reviewed
to engage with employees and action taken to implement
in light of their number suggestions where appropriate.
and to ensure appropriate
upward communication The health and safety
channels exist for employees. committee considered
all reportable safety
Directors and senior incidents during the
management regularly year in consultation
visit Gedabek where the with employee representatives
majority of the employees and all appropriate actions
are located. were taken to prevent
further occurrences in
There are also two formal the future.
mechanisms for engaging
with employees:
* An employee survey is carried out once a year and the
results are circulated to directors.
* The health and safety committee meet twice a year and
the meetings are attended by directors. Face-to-face
meetings resumed at Gedabek during 2022.
------------------------------------------------------------- --------------------------------
Community and The Board aims to build The Group has carried
environment trust and conduct its out significant community
operations in partnership and social development
with the communities in the region.
at all locations where
the Group operates whilst Comprehensive environmental
minimising any adverse monitoring was continuously
effect on the environment. carried out at Gedabek
throughout 2022.
Board members regularly
visit Gedabek and other
locations and meet with
the local administration
and other community leaders
to hear their views on
community relations.
------------------------------------------------------------- --------------------------------
Government of The Board has set up The Company has promptly
Azerbaijan a formal mechanism for complied with all requests
engaging with the Government from the Government for
of Azerbaijan as set information about the
out in the Corporate Company's business.
Governance section of
the annual report. An open relationship
based on trust has been
Directors also meet with formed with the Government.
high level Government
officials on a regular
basis.
------------------------------------------------------------- --------------------------------
Principal risks and uncertainties
Country risk in Azerbaijan
The Group's wholly owned operations are solely in Azerbaijan and
are therefore naturally 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
production on a daily basis 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 the business. The Group has previously
hedged against the future movement in the price of gold. The
directors keep under review the potential benefit of hedging.
Foreign currency risk
The Group reports in United States Dollars and a large
proportion of its costs are incurred in United States Dollars. It
also conducts business in Australian Dollars, Azerbaijan Manats and
United Kingdom Sterling. The Group does not currently hedge its
exposure to other currencies, although it will review this
periodically if the volume of non-United States Dollar transactions
increases significantly. Information on the carrying value of
monetary assets and liabilities denominated in foreign currency and
the sensitivity analysis of foreign currency is disclosed in note
24 - "Financial Instruments" to the Group financial statements.
Liquidity and interest rate risk
During 2022, the Group had no bank debt and only occasional
minor borrowings in connection with providing letters of credit to
suppliers. The Group did therefore not have any significant
interest rate risk during the year.
The Group had significant surplus cash deposits during 2022. The
Group places these on deposit in United States Dollars with a range
of banks to both ensure it obtains the best return on these
deposits and to minimise counterparty risk. The amount of interest
received on these deposits is not material to the financial results
of the Company and therefore any decrease in interest rates would
not have any adverse effect.
Russian invasion of Ukraine
The Company is unaffected directly by the Russian invasion of
Ukraine or the international sanctions levied against various
private and governmental Russian entities.
COVID-19 pandemic
The COVID-19 pandemic continued into 2022 but its intensity
decreased significantly compared to prior years. By the start of
2022, the majority of the COVID-19 restrictions had been lifted in
Azerbaijan. The board monitored the COVID-19 pandemic throughout
2022 but did not notice that it resulted in any significant effect
on its business.
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
15 May 2023
Financial review
Currency of financial review
References to "$" and "cents" are to United States dollars and
cents. References to "CAN$" and "CAN cents" are to Canadian dollars
and cents. References to "GBP" and "p" are to United Kingdom
Sterling pounds and pence. References to AZN are to the Azerbaijan
New Manat.
Group statement of income
The Group generated revenues in 2022 of $84.7m (2021: $92.5m)
from the sales of gold and silver bullion and copper and precious
metal concentrate.
The revenues in 2022 included $62.8m (2021: $71.6m) generated
from the sales of gold and silver bullion from the Group's share of
the production of doré bars. Bullion sales in 2022 were 34,918
(2021: 39,563) ounces of gold and 23,763 (2021: 18,023) ounces of
silver at an average price of $1,783 (2021: $1,799) per ounce and
$22 (2021: $25) per ounce respectively. In addition, the Group
generated revenue in 2022 of $21.9m (2021: $20.9m) from the sale of
12,443 (2021: 11,124) dry metric tonnes of copper and precious
metal concentrate. The Group's revenue benefited in the year from a
slightly higher average price of gold at $1,801 (2021: $1,799) per
ounce but the average price of copper was lower at $8,797 (2021:
$9,294) per metric tonne.
The Group did not hedge any metal sales during 2021 or 2022.
The Group incurred cost of sales in 2022 of $69.0m (2021:
$74.5m) as follows:
2022 2021 B/(W)
$m $m $m
Cash cost of sales 57.1 55.6 (1.5)
Depreciation 16.4 16.1 (0.3)
------- ------- --------
Cash costs and depreciation 73.5 71.7 (1.8)
Capitalised costs (3.0) (3.4) (0.4)
------- ------- --------
Cost of sales before
inventory movement 70.5 68.3 (2.2)
Inventory movement (1.5) 6.2 7.7
------- ------- --------
Total cost of sales 69.0 74.5 5.5
======= ======= ========
The cash costs in 2022 compared to 2021 were higher due to
increased material and haulage costs.
Depreciation and amortisation in 2022 were higher at $16.4m
compared to $16.1m in 2021. 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
depreciation and amortisation were higher in 2022 due to the lower
economically recoverable reserves of the mines concerned used to
calculate the depreciation and the amortisation.
Other operating income was $0.4m (2021: $0.2m) and included
$0.3m which was the recovery of previously expensed United Kingdom
value added tax. Administration expenses in 2022 were $5.9m (2021:
$5.2m). Administration expenses comprise the cost of the
administrative staff and associated costs at the Gedabek mine site,
the Baku office and maintaining the Group's listing on AIM. The
majority of the administration costs are incurred in either
Azerbaijan New Manats, the United States dollar or United Kingdom
pounds sterling. The Azerbaijan New Manat was stable against the US
dollar in 2022 compared to 2021 at an exchange rate of $1 = AZN1.7.
The United States dollar to the United Kingdom pounds Sterling rate
was volatile in 2022 with a high of GBP1 = $1.37 to a low of GBP1 =
$1.07. Administration costs in 2022 were higher than 2021 due to an
increased share-based payment charge of $0.4m (2021: $0.1m) due to
an increase in the number of share options outstanding and employee
costs increasing by $0.3m due to higher staff numbers in
Azerbaijan.
Finance costs in 2022 were $0.8m (2021: $0.7m). Finance costs in
2022 and 2021 were mainly the interest expense of finance leases
and interest on the unwinding of provisions. These remained at a
similar level in both 2022 and 2021. The finance costs for 2022
also included $0.1m (2021: $nil) in respect of the long-term trade
creditor for the purchase of historical geological data from
AzerGold CJSC. The other expense in 2022 of $0.6m (2021: $nil)
arose from the Libero Copper & Gold Corporation ("Libero")
transaction ("Libero Copper & Gold Corporation transaction"
below).
The Group recorded a profit before taxation in 2022 of $7.5m
compared to $12.6m in 2021. This reduction was mainly due to a
lower gross margin of $15.8m (2021: $18.0m) due to lower metal
sales and the share of the loss of the associate company of $0.5m
(2021: $nil).
The Group had a taxation charge in 2022 of $3.8m (2021: $5.2m).
This comprised a current income tax charge of $0.6m (2021: $5.5m)
and a deferred tax charge of $3.2m (2021: credit of $0.3m). The
current income tax charge of $0.6m was incurred by R.V. Investment
Group Services ("RVIG") in Azerbaijan. RVIG generated taxable
profits in 2022 of $1.7m (2021: $17.1m) which were taxed at 32 per
cent. (the corporation tax rate stipulated in the Group's
production sharing agreement).
The Group's overall tax rate in 2022 was 51 per cent. (2021: 42
per cent.). The higher tax charge than 32 per cent. arose as
several significant expenses of the Group are not deductible for
tax. These are mainly the United Kingdom administration costs,
amortisation of mining property and the loss of the associate
company.
The Group had an Other comprehensive loss in 2022 of $0.2m
(2021: $nil). This was mainly a translation loss on the translation
of Libero's financial statements into United States dollars at 31
December 2022. This arose as the Canadian dollar depreciated
against the United States dollar in 2022.
All-in sustaining cost of gold production
The Group produced gold at an all-in sustaining cost ("AISC")
per ounce of $1,064 in 2022 compared to $843 in 2021. The Group
reports its cash cost as an AISC calculated in accordance with the
World Gold Council's guidance which is a standardised metric in the
industry. The reason for the increase in 2022 compared to 2021 was
a combination of the lower production as most of the Group's
production costs are fixed or semi-fixed and higher cash costs.
Group statement of financial position
Assets and liabilities
Non-current assets increased from $95.0m at the end of 2021 to
$102.2m at the end of 2022. Intangible assets increased from $30.3m
at the end of 2021 to $38.6m at the end of 2022 due to expenditure
on geological exploration and evaluation of $9.4m (2021: $7.6m)
offset by amortisation of $1.1m (2021: $1.2m) in the year.
Property, plant and equipment were lower by $2.7m due to
depreciation of $15.5m mainly offset by additions of $9.1m and an
increase in the provision for rehabilitation of $3.7m. Leased
assets were $0.7m lower due to lower modifications to leased assets
of $0.5m and depreciation of $0.5m offset by $0.3m additions.
Net current assets were $60.5m at the end of 2022 compared to
$62.8m at the end of 2021. The main reason for the decrease in net
current assets was a reduction in cash of $17.0m partially offset
by a decrease in trade and other payables of $10.0m and income tax
payable of $3.0m. Trade and other payables were lower due to a
decrease of $8.8m in gold held due to the Government of Azerbaijan.
The Group's cash balances at 31 December 2022 were $20.4m (2021:
$37.5m). Surplus cash is maintained in US dollars and was placed on
fixed deposit with banks in Azerbaijan at tenors of between one to
three months at interest rates of around 1.5 to 4.0 per cent.
Non-current liabilities included trade and other payables of
$2.9m (2021: $nil). This was in respect of the purchase of
historical exploration data of Xarxar and Garadag. The total cost
of the purchase was $4.0m of which $1.0m was paid in 2022. The
remaining creditor of $3.0m was discounted over 2.5 years using an
interest rate of 8 per cent. and includes attributable VAT of
$0.6m.
Net assets of the Group at the end of 2022 were $113.5m (2021:
$118.4m). The net assets were lower due to a decrease in retained
earnings following dividend payments which were higher than profits
after taxation and the purchase of Company shares for treasury.
There were no shares issued in 2022.
Equity
The Group was financed entirely by equity and had no bank debt
or other borrowings throughout 2022.
There were no movements of the Group's share capital, merger
reserve and share premium account in 2022. The Group's holding
company bought back certain of its ordinary shares for the first
time in 2022. 150,000 ordinary shares were bought in the open
market at an average price of 81.42 pence at a total cost of
$145,000. The ordinary shares have not been cancelled and are held
in treasury. The cost of buying back the shares is included in
equity as a negative reserve.
The Group's holding company received an intercompany dividend in
2022 of $10m (2021: $10.0) which gives it the capacity to pay
dividends of $1.2m during 2023. Further dividends by the Group's
holding company will require additional dividends to be paid by its
subsidiaries.
Libero Copper & Gold Corporation transaction
On 26 January 2022, the Company acquired a further 10 per cent.
of Libero which was then reclassified as an associate company of
the Group. A reconciliation of its cost of acquisition to its
carrying value at 31 December 2022 is as follows:
$000
Market value of the Company's existing 9.8 per
cent. trade investment at 26 January 2022 2,168
Close out of forward contract established at 31
December 2021 214
--------
Transfer from financial assets to associate company 2,382
Cost of the 10 per cent. investment (7m shares
at CAD$0.50 per share) 2,781
--------
Total acquisition cost of Libero as an associate
Company 5,163
Further investment (2.9m shares at CAD$0.33 per
share) 710
Our share of its loss - 27 January to 31 December
2022 (476)
Currency translation (225)
--------
Carrying value of associate company at 31 December
2022 5,172
--------
The cost of the two investments in Libero during the year is as
follows:
$000
------
Cost of the 10 per cent. investment (7m shares
at CAD$0.50 per share) 2,781
Further investment (2.9m shares at CAD$0.33 per
share) 710
------------------------------------------------- ------
Total investment in the year 3,491
------------------------------------------------- ------
A reconciliation of the acquisition cost to the net assets of
Libero is as follow:
$000
------
Company's share of the net assets of Libero 1,417
Goodwill on acquisition 3,746
-------------------------------------------------- ------
Total acquisition cost of Libero as an associate
company 5,163
-------------------------------------------------- ------
The acquisition of Libero also resulted in a loss of $221,000,
being a loss on the revaluation to market price of the Company's
initial investment between 31 December 2021 and 26 January 2022.
The Company also revalued its warrants in Libero to market value at
31 December 2022, resulting in a loss of $349,000 due to the share
price of Libero decreasing from CAD$0.54 at 31 December 2021 to
CAD$0.16 at 31 December 2022. The total of the loss on the
revaluation of the investment and warrants of $570,000 has been
included in other expense in the profit and loss account.
The Group's percentage ownership of Libero fluctuated during
2022 as Libero issued shares throughout the year. Our share of its
loss has been calculated using our average ownership for each
quarterly period for which Libero publishes its results.
Group cash flow statement
Operating cash inflow before movements in working capital for
2022 was $27.2m (2021: $29.3m). The main source of operating cash
was operating profit before the non-cash charges of depreciation
and amortisation in 2022 of $24.6m (2021: $29.2m).
Working capital movements absorbed cash of $10.1m (2021:
generated cash of $5.4m) mainly due to trade receivables which were
higher by $5.9m (2021: $0.4m) and inventory which was $3.4m higher
(2021: $4.5m lower).
Cash from operations in 2022 was $17.0m compared to $34.7m in
2021 due to the lower operating cash flow and cash absorbed by
working capital.
The Company paid corporation tax in 2022 of $3.6m (2021: $8.7m)
in Azerbaijan in accordance with local requirements. This payment
was the final payment of its liability for 2021 and payments on
account of its liability for the year ended 31 December 2022.
Expenditure on property, plant and equipment and mine
development was $9.1m (2021: $7.4m). The main items of expenditure
in 2022 were capitalised stripping costs of $2.9m, mine development
costs of $2.8m and equipment of $1.9m.
Expenditure on intangible assets was $9.4m which was mainly
expenditure on exploration and evaluation of $9.2m. The main
expenditure on exploration and evaluation expenditure was $3.6m
(2021: $6.8m), $1.6m (2021: $nil) and $2.8m (2021: $nil) at
Gedabek, Xarxar and Garadag respectively. The expenditure for
Xarxar and Garadag include $0.6m and $2.7m respectively for the
purchase of historical geological data from AzerGold CJSC.
The Group spent $3.5m (2021: $2.2m) on acquiring shares in
Libero during 2022.
COVID-19 pandemic
The majority of the travel and other restrictions arising from
the COVID-19 pandemic were lifted by the end of 2021. The Group
monitored the COVID-19 pandemic throughout the year but did not
detect any noticeable effect on its business. T he Group considers
the risks from the pandemic are very minimal. Further details
regarding the risks are set out in the Strategic Report.
Dividends
In respect of 2022, the Group paid an interim dividend of $0.04
per share and has proposed a final dividend of $0.04 per share
giving a total for the year of $0.08 per share (2021: total for the
year of $0.08 per share). Dividends are declared in United States
dollars but paid in United Kingdom pounds sterling. The total cash
cost of dividends paid in respect of 2021 was $9.2m and the
estimated total cost of the dividends in respect of 2022 is $9.2m.
The proposed final dividend for 2022 is subject to the approval of
the shareholders and has not been accrued in the 2022 financial
statements.
To ensure the Company retains sufficient capital to its growth
strategy, the board has decided to maintain the dividend at the
same level as 2021 of $0.08 per share.
Production Sharing Agreement
Under the terms of the Production Sharing Agreement ("PSA") with
the Government of Azerbaijan ("Government"), the Group and the
Government share the commercial products of each mine. The
Government's share is 51 per cent. of "Profit Production". Profit
Production is defined as the value of production, less all capital
and operating cash costs incurred during the period when the
production took place. Profit Production for any period is subject
to a minimum of 25 per cent. of the value of the production. This
is to ensure the Government always receives a share of production.
The minimum Profit Production is applied when the total capital and
operating cash costs (including any unrecovered costs from previous
periods) are greater than 75 per cent. of the value of production.
All operating and capital cash costs in excess of 75 per cent. of
the value of production can be carried forward indefinitely and set
off against the value of future production.
Profit Production for the Group has been subject to the minimum
25 per cent. for all years since commencement of production
including 2022. The Government's share of production in 2022 (as in
all previous years) was therefore 12.75 per cent. being 51 per
cent. of 25 per cent. with the Group entitled to the remaining
87.25 per cent. The Group was therefore subject to an effective
royalty on its revenues in 2022 of 12.75 per cent. (2021: 12.75 per
cent.) of the value of its production.
The Group can recover the following costs in accordance with the
PSA for its Gedabek contract area (currently its main operating
site):
-- all direct operating expenses of the Gedabek mines;
-- all exploration expenses incurred on the Gedabek contract
area;
-- all capital expenditure incurred on the Gedabek mines;
-- 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 SOFR + 4 per
cent. per annum on any unrecovered costs.
Unrecovered costs are calculated separately for each individual
contract area and can only be recovered against production from
that respective contract area. The total unrecovered costs for the
Gedabek and Gosha contract areas at 31 December 2022 were $37.5m
and $31.4m respectively (2021: $29.7m and $19.7m respectively). The
Group's current business plans indicate that these costs will not
be fully recovered until at least the end of 2025 and the effective
royalty of 12.75 per cent. will therefore continue until then for
the Gedabek and Gosha contract areas. The unrecovered costs at 31
December 2022 for the Garadag and Xarxar contract areas are $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.
The Group produced gold and copper for the first time in 2021
from its Vejnaly contract area and the metal produced will be sold
in 2023. The Government's share of this production in 2021 may be
higher than 12.75 per cent. This is because the mine and other
facilities were acquired at no cost and the only costs available to
offset the production will be the administration costs of the site,
minor refurbishment capital expenditure, the cost of geological
exploration and Gedabek production costs. There will be no mining
costs available for offset as the metal was produced from ore
stockpiled at Vejnaly by the previous owner. Vejnaly had
unrecovered costs at 31 December 2022 of $0.8m.
Calculation of non-IFRS financial indicators
Net debt / cash
Calculated as the cash and cash equivalents minus current and
non-current interest-bearing loans and borrowings.
Free cash flow
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.
All-in sustaining cost ("AISC") per ounce .
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.
Going concern
The directors have prepared the Group financial statements on a
going concern basis after reviewing the Group's forecast cash
position for the period to 30 June 2024 (the 'going concern review
period') and satisfying themselves that the Group will have
sufficient funds on hand to meet its obligations as and when they
fall due over the period of their assessment. Appropriate rigour
and diligence have been applied by the directors who believe the
assumptions are prepared on a realistic basis using the best
available information.
The Group had cash balances of $10.7 million (31 December 2022:
$20.4 million) and no bank debt at 31 March 2023. The directors
have prepared a base case cash flow forecast that assumes
production is consistent with the business plan and a gold price of
between $1,675 and $1,850 for 2023 and 2024. A copper price of
$8,500 per tonne has been used for 2023 and $8,000 per tonne for
2024. The base case cash flow forecast shows the Group is able to
fund its working capital requirements from cash generated from its
operations at Gedabek.
The Group is currently building two new mines, Gilar and Zafar.
These mines will require significant capital expenditure to bring
into production. The Group estimates this capital expenditure will
be around $17 million to $20 million in the 18 months to 30 June
2024. The Group is also incurring capital expenditure on
maintaining its current operations and geological exploration. The
base case cash flow shows that the Group is able to finance this
expenditure from existing operating cash flow and current undrawn
debt facilities.
The Group has access to local sources of both short and
long-term finance and has an AZN55 million ($32.3 million)
revolving credit facility with International Bank of Azerbaijan
which is available until 31 December 2030 with no conditions on
drawdown. The Group is also utilising vendor financing for certain
of its equipment purchases.
The majority of the restrictions imposed by the Government of
Azerbaijan to combat the COVID-19 pandemic have now been lifted.
The directors believe the COVID-19 pandemic is not now having any
effect on the business.
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 president and
chief executive'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. In addition, note 24 to the Group financial statements
below includes the Group's financial management risk objectives and
details of its financial instrument exposures to credit risk and
liquidity risk.
After making due enquiry, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, the directors continue to adopt the going concern
basis in preparing the annual report and financial statements.
William Morgan
Chief financial officer
15 May 2023
Directors emoluments
Consultancy Fees Benefits Total
Year ended 31 December 2022 $ $ $ $
----------------------------- ------------ -------- --------- --------
John Monhemius 5,362 51,436 - 56,798
John Sununu - 74,211 - 74,211
Michael Sununu - 51,613 - 51,613
Reza Vaziri 578,483 51,613 33,166 663,262
Khosrow Zamani - 123,888 - 123,888
----------------------------- ------------ -------- --------- --------
583,845 352,761 33,166 969,772
----------------------------- ------------ -------- --------- --------
Consultancy Fees Benefits Total
Year ended 31 December 2021 $ $ $ $
----------------------------- ------------ -------- --------- --------
John Monhemius - 55,019 - 55,019
John Sununu - 80,877 - 80,877
Michael Sununu - 55,019 - 55,019
Reza Vaziri 575,077 55,019 32,813 662,909
Khosrow Zamani - 135,346 - 136,346
----------------------------- ------------ -------- --------- --------
575,077 381,280 32,813 989,170
----------------------------- ------------ -------- --------- --------
Directors' fees and consultancy for 2021 and 2022 were paid in
cash.
No director held or exercised any share options during the years
ended 31 December 2021 and 31 December 2022.
Group statement of income
year ended 31 December 2022
2022 2021
Continuing operations Notes $000 $000
--------------------------------------------- ------ --------- ---------
Revenue 6 84,719 92,494
Cost of sales (68,958) (74,473)
--------------------------------------------- ------ --------- ---------
Gross profit 15,761 18,021
Other operating income 7 420 228
Administrative expenses (5,930) (5,126)
Other operating expenses 7 (971) (741)
--------------------------------------------- ------ --------- ---------
Operating profit 8 9,280 12,382
Finance costs 10 (814) (652)
Finance income 84 114
Other income 7 - 748
Other expense 7 (570) -
Share of loss of an associate company 11 (476) -
--------------------------------------------- ------ --------- ---------
Profit before tax 7,504 12,592
Income tax expense 12 (3,844) (5,231)
--------------------------------------------- ------ --------- ---------
Profit attributable to the equity holders
of the parent 3,660 7,361
--------------------------------------------- ------ --------- ---------
Profit per share attributable to the equity
holders of the parent
Basic (US cents per share) 13 3.20 6.43
Diluted (US cents per share) 13 3.20 6.43
--------------------------------------------- ------ --------- ---------
Group statement of comprehensive income
year ended 31 December 2022
2022 2021
Notes $000 $000
------------------------------------------------ ----- ------------- ------
Profit for the year 3,660 7,361
Other comprehensive income
Other comprehensive income that may be
reclassified to profit and loss in subsequent
years*:
Exchange differences on translation of foreign
associate company 11 (233) -
Share of comprehensive profit of an associate
company 11 8 -
------------------------------------------------ ----- ------------- ------
Net other comprehensive loss that may be
reclassified to profit and loss in
subsequent year (225) -
------------------------------------------------ ----- ------------- ------
Total comprehensive income for the year* 3,435 7,361
------------------------------------------------ ----- ------------- ------
* These are gross amounts and the tax effect is $nil
Group statement of financial position
31 December 2022
2022 2021
Notes $000 $000
-------------------------------------- ------ --------- ---------
Non-current assets
Intangible assets 14 38,616 30,347
Property, plant and equipment 15 56,045 58,710
Leased assets 16 2,363 3,066
Investment in an associate company 11 5,172 -
Non-current financial assets 17 39 2,777
Other receivables 18 - 185
-------------------------------------- ------ --------- ---------
102,235 95,085
-------------------------------------- ------ --------- ---------
Current assets
Inventory 19 40,202 36,912
Trade and other receivables 18 18,331 19,752
Other current financial assets 17 - 214
Cash and cash equivalents 20 20,410 37,453
-------------------------------------- ------ --------- ---------
78,943 94,331
-------------------------------------- ------ --------- ---------
Total assets 181,178 189,416
-------------------------------------- ------ --------- ---------
Current liabilities
Trade and other payables 21 (18,022) (28,024)
Income tax payable (46) (3,061)
Lease liabilities 16 (419) (403)
-------------------------------------- ------ --------- ---------
(18,487) (31,488)
-------------------------------------- ------ --------- ---------
Net current assets 60,456 62,843
-------------------------------------- ------ --------- ---------
Non-current liabilities
Trade and other payables 21 (2,897) -
Provision for rehabilitation 23 (16,006) (11,922)
Lease liabilities 16 (2,289) (2,890)
Deferred tax liability 12 (27,992) (24,699)
-------------------------------------- ------ --------- ---------
(49,184) (39,511)
-------------------------------------- ------ --------- ---------
Total liabilities (67,671) (70,999)
-------------------------------------- ------ --------- ---------
Net assets 113,507 118,417
-------------------------------------- ------ --------- ---------
Equity
Share capital 25 2,016 2,016
Share premium 26 33 33
Treasury shares 27 (145) -
Share-based payment reserve 28 424 12
Merger reserve 25 46,206 46,206
Foreign currency translation reserve (233) -
Retained earnings 65,206 70,150
-------------------------------------- ------ --------- ---------
Total equity 113,507 118,417
-------------------------------------- ------ --------- ---------
Group statement of cash flows
year ended 31 December 2022
2022 2021
Notes $000 $000
----------------------------------------------- ------ --------- ---------
Cash flows from operating activities
Profit before tax 7,504 12,592
Adjustments to reconcile profit before
tax to net cash flows:
Finance costs 10 814 652
Finance income (84) (114)
Unrealised loss /(gain) on financial
instruments 572 (749)
Gain on the modification of lease liabilities (65) -
Write down of unrecoverable inventory 108 -
Depreciation of owned assets 15 15,443 15,075
Depreciation of leased assets 16 540 523
Amortisation of mining rights and other
intangible assets 14 1,131 1,206
Share-based payment expense 28 412 12
Share of loss of an associate company 11 476 -
Foreign exchange loss 317 72
Operating cash flow before movement
in working capital 27,168 29,269
Increase in trade and other receivables (5,933) (381)
(Increase) / decrease in inventories (3,399) 4,545
(Decrease) / increase in trade and
other payables (779) 1,274
----------------------------------------------- ------ --------- ---------
Cash from operations 17,057 34,707
Income taxes paid (3,566) (8,682)
----------------------------------------------- ------ --------- ---------
Net cash flow from operating activities 13,491 26,025
----------------------------------------------- ------ --------- ---------
Cash flows from investing activities
Expenditure on property, plant and
equipment and mine development (10,158) (6,199)
Investment in exploration and evaluation
assets including other
intangible assets (7,162) (7,587)
Proceeds from sale of financial instruments - 110
Purchase of financial instruments - (2,168)
Acquisition of an associate company 11 (3,491) -
Interest received - 114
Net cash used in investing activities (20,811) (15,730)
----------------------------------------------- ------ --------- ---------
Cash flows from financing activities
Purchase of treasury shares 27 (145) -
Dividends paid 29 (8,612) (10,918)
Interest paid - lease liabilities 16 (291) (266)
Repayment of lease liabilities 16 (358) (434)
----------------------------------------------- ------ --------- ---------
Net cash used in financing activities (9,406) (11,618)
----------------------------------------------- ------ --------- ---------
Net decrease in cash and cash equivalents (16,726) (1,323)
Net foreign exchange difference (317) (72)
Cash and cash equivalents at the beginning
of the year 20 37,453 38,848
----------------------------------------------- ------ --------- ---------
Cash and cash equivalents at the end
of the year 20 20,410 37,453
----------------------------------------------- ------ --------- ---------
Group statement of changes in equity
year ended 31 December 2022
Share-based Foreign
payment currency
Share Share Treasury reserve Merger translation Retained Total
capital premium shares $000 reserve reserve earnings equity
Notes $000 $000 $000 $000 $000 $000 $000
--------------- ------ -------- --------- --------- ------------ --------- ------------ ----------- ---------
1 January
2021 2,016 33 - - 46,206 - 73,707 121,962
Profit for
the year - - - - - - 7,361 7,361
Cash dividends
paid 29 - - - - - - (10,918) (10,918)
Share-based
payment 28 - - - 12 - - - 12
--------------- ------ -------- --------- --------- ------------ --------- ------------ ----------- ---------
31 December
2021 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 29 - - - - - - (8,612) (8,612)
Share-based
payment 28 - - - 412 - - - 412
Purchase of
shares for
treasury 27 - - (145) - - - - (145)
--------------- ------ -------- --------- --------- ------------ --------- ------------ ----------- ---------
31 December
2022 2,016 33 (145) 424 46,206 (233) 65,206 113,507
--------------- ------ -------- --------- --------- ------------ --------- ------------ ----------- ---------
Notes to the Group financial statements
year ended 31 December 2022
1 General information
Anglo Asian Mining PLC (the "Company") is a company incorporated
and limited by shares 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. The Company is a holding company. The
principal activities and place of business of the Company and its
subsidiaries (the "Group") are set out in note 30 below and the
chairman's statement, the president and chief executive's review
and the strategic report above.
2 Basis of preparation
The financial information for the year ended 31 December 2022
was approved by the board of directors on 15 May 2023. The
financial information has been prepared in accordance with
International accounting standards in accordance with UK-adopted
International accounting standards.
The financial information has been prepared using accounting
policies set out in note 4 which are consistent with all applicable
IFRSs and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRSs. For these purposes, IFRSs
comprises the standards issued by the International Accounting
Standards Board and interpretations issued by the International
Financial Reporting Interpretations Committee that have been
endorsed by the UK Endorsement Board.
The financial information has 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 financial information is presented in United
States Dollars ("$") and all values are rounded to the nearest
thousand except where otherwise stated. In the financial
information "GBP" and "pence" are references to the United Kingdom
pound sterling and "CAN$" and "CAN cents" are references to
Canadian dollars and cents.
The directors have prepared the Group financial statements on a
going concern basis after reviewing the Group's forecast cash
position for the period to 30 June 2024 (the 'going concern review
period') and satisfying themselves that the Group will have
sufficient funds on hand to meet its obligations as and when they
fall due over the period of their assessment. Appropriate rigour
and diligence have been applied by the directors who believe the
assumptions are prepared on a realistic basis using the best
available information.
The Group had cash balances of $10.7 million (31 December 2022:
$20.4 million) and no bank debt at 31 March 2023. The directors
have prepared a base case cash flow forecast that assumes
production is consistent with the business plan and a gold price of
between $1,675 and $1,850 for 2023 and 2024. A copper price of
$8,500 per tonne has been used for 2023 and $8,000 per tonne for
2024. The base case cash flow forecast shows the Group is able to
fund its working capital requirements from cash generated from its
operations at Gedabek.
The Group is currently building two new mines, Gilar and Zafar.
These mines will require significant capital expenditure to bring
into production. The Group estimates this capital expenditure will
be around $17 million to $20 million in the 18 months to 30 June
2024. The Group is also incurring capital expenditure on
maintaining its current operations and geological exploration. The
base case cash flow shows that the Group is able to finance this
expenditure from existing operating cash flow and current undrawn
debt facilities.
The Group has access to local sources of both short and
long-term finance and has an AZN55 million ($32.3 million)
revolving credit facility with International Bank of Azerbaijan
which is available until 31 December 2030 with no conditions on
drawdown. The Group is also utilising vendor financing for certain
of its equipment purchases.
The majority of the restrictions imposed by the Government of
Azerbaijan to combat the COVID-19 pandemic have now been lifted.
The directors believe the COVID-19 pandemic is not now having any
effect on the business.
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 president and
chief executive'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. In addition, note 24 to the Group financial statements below
includes the Group's financial management risk objectives and
details of its financial instrument exposures to credit risk and
liquidity risk.
After making due enquiry, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, the directors continue to adopt the going concern
basis in preparing the annual report and financial statements.
3 Adoption of new and revised standards
3.1 New and amended standards and interpretations
The following standards and amendments were applicable for
annual financial statements beginning on or after 1 January
2022:
-- Amendments to IAS 37, IFRS 3, IAS 16, IFRS 1, IFRS 9 and IAS 41.
The above amendments had no impact on the consolidated financial
statements of the Group.
3.2 Standards issued but not yet effective
The new and amended standards and interpretations that are
issued, but not yet effective, up to the date of issuance of the
Group's financial statements are disclosed below. The Group intends
to adopt these new and amended standards and interpretations, if
applicable, when they become effective.
-- IFRS 17 Insurance Contracts
In May 2017, the IASB issued IFRS 17 'Insurance Contracts', a
comprehensive new accounting standard for insurance contracts
covering recognition and measurement, presentation and
disclosure.
The Group is currently reviewing this standard but believes it
will have no impact as the Group does not issue insurance
contracts.
-- Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to
76 of IAS 1 to specify the requirements for classifying liabilities
as current or non-current.
The amendments are effective for annual reporting periods
beginning on or after 1 January 2023 and must be applied
retrospectively. The Group is currently assessing the impact the
amendments will have on its current practice.
-- Definition of Accounting Estimates - Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which
it introduces a definition of 'accounting estimates'. The
amendments clarify the distinction between changes in accounting
estimates and changes in accounting policies and the correction of
errors.
The amendments are effective for annual reporting periods
beginning on or after 1 January 2023 and are not expected to have a
material impact on the Group's financial statements.
-- Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS
Practice Statement 2 Making Materiality Judgements, in which it
provides guidance and examples to help entities apply materiality
judgements to accounting policy disclosures.
The Group is currently revisiting their accounting policy
information disclosures to ensure consistency with the amended
requirements.
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12
In May 2021, the Board issued amendments to IAS 12, which narrow
the scope of the initial recognition exception under IAS 12, so
that it no longer applies to transactions that give rise to equal
taxable and deductible temporary differences.
There is no impact to the Group financial statements of the
amendments.
4 Significant accounting policies
4.1 Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Group and its subsidiaries as at 31 December 2022
. Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if, and only
if, the Group has:
-- power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee);
-- exposure, or rights, to variable returns from its involvement with the investee; and
-- the ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting
rights result in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- the contractual arrangement with the other vote holders of the investee;
-- rights arising from other contractual arrangements; and
-- the Group's voting rights and potential voting rights.
The Group reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the
subsidiary.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
The financial statements of the subsidiaries are prepared for
the same reporting period as the parent company, using consistent
accounting policies.
4.2 Revenue
The Group is principally engaged in the business of producing
gold and silver bullion and gold and copper concentrate. Revenue
from contracts with customers is recognised when control of the
goods is transferred to the customer at an amount that reflects the
consideration to which the Group expects to be entitled in exchange
for those goods.
The Group has generally concluded that it is the principal in
its revenue contracts because it typically controls the goods
before transferring them to the customer.
i Contract balances
a Contract assets
A contract asset is the right to consideration in exchange for
goods transferred to the customer. If the Group performs by
transferring goods to a customer before the customer pays
consideration or before payment is due, a contract asset is
recognised for the earned consideration that is conditional. The
Group does not have any contract assets as performance and a right
to consideration occurs within a short period of time and all
rights to consideration are unconditional.
b Trade receivables
A trade receivable represents the Group's right to an amount of
consideration that is unconditional (i.e., only the passage of time
is required before payment of the consideration is due). Refer to
accounting policy 4.13 for the accounting policies for financial
assets and accounting policy 4.14 for the accounting policy for
trade receivables.
c Contract liabilities
A contract liability is the obligation to transfer goods to a
customer for which the Group has received consideration (or an
amount of consideration is due) from the customer. If a customer
pays consideration before the Group transfers goods to the
customer, a contract liability is recognised when the payment is
made or the payment is due (whichever is earlier). Contract
liabilities are recognised as revenue w hen the Group performs
under the contract.
ii Gold and silver sales to the refiner
For gold sales, these are sold under spot sales contracts with
the Company's gold refiners. The Group initially sends its
unrefined doré to the refiner. The refiner is contracted by the
Company to perform two separate and distinct functions, to process
the doré into gold and silver bullion and to purchase gold and
silver. The gold contained in the doré may be purchased at two
different times at the discretion of the Company and instruction is
given to the refiner as to the method of sale on a
shipment-by-shipment basis:
-- Upon receipt of the doré. In this circumstance, the refiner
will purchase 90 per cent. of the estimated gold content of the
doré. The balance of the gold will be sold to the refiner as gold
bullion following refining and agreement of final gold content of
the doré with the refiner.
-- Following production of gold bullion by the refining process.
During the refining process ownership ( i.e., control of the gold)
does not pass to the refiner, it is simply providing refining
services to the Group.
There is no formal sales agreement for each sale of gold.
Instead, there is a deal confirmation, which sets out the terms of
the sale including the applicable spot price and this is considered
to be the enforceable contract. The only performance obligation is
the sale of gold within the doré or as bullion.
Silver is only sold to the refiner as silver bullion following
the refining process. The process of sale of the silver bullion is
the same as for gold bullion. Revenue is recognised at a point in
time when control passes to the refiner. As the gold and silver is
at this time already on the premises of the refiner, physical
delivery has already taken place when the sales are made. There are
no advance payments received from the refiner and therefore no
conditional rights to consideration.
A trade receivable is recognised at the date of sale and there
are only several days between recognition of revenue and payment.
The contract is entered into and the transaction price is
determined at outturn by virtue of the deal confirmation and there
are no further adjustments to this price. Also, given each spot
sale represents the enforceable contract and all performance
obligations are satisfied at that time, there are no remaining
performance obligations (unsatisfied or partially unsatisfied)
requiring disclosure. Refer to note 18 - 'Trade and other
receivables' f or details of payment terms.
iii) Gold and copper in concentrate (metal in concentrate) sal
es
For gold and copper in concentrate (metal in concentrate) sales,
the enforceable contract is each purchase order, which is an
individual, short-term contract. The performance obligation is the
delivery of the concentrate to the customer.
The Group's sales of metal in concentrate allow for price
adjustments based on the market price at the end of the relevant
quotational period ("QP") stipulated in the contract. These are
referred to as provisional pricing arrangements and are such that
the selling price for metal in concentrate is based on prevailing
spot prices on a specified future date (or average of future spot
prices over a defined period, usually a week) after shipment to the
customer. Adjustments to the sales price occur based on movements
in quoted market prices up to the end of the QP. The period between
provisional invoicing and the end of the QP can be bet ween one and
four months.
R evenue is recognised when control passes to the customer,
which occurs at a point in time when the metal in concentrate is
physically delivered to the customer at the mine site. The revenue
is measured at the amount to which the Group expects to be
entitled, being the estimate of the price expected to be received
at the end of the QP, i.e., the forward price, and a corresponding
trade receivable is recognised.
For these provisional pricing arrangements, any future change
that occur over the QP is an embedded derivative within the
provisionally priced trade receivables and are, therefore, within
the scope of IFRS 9 and not within the scope of IFRS 15. The Group
does not separately account for the embedded derivative in each
transaction as the short transaction cycle of one to four months
would result in any changes to the Group's financial statements
being immaterial. Any difference between the provisional and final
price is adjusted through revenue from contracts with customers.
Changes in fair value over, and until the end of, the QP, are
estimated by reference to updated for ward market prices for gold
and copper as well as taking into account relevant other fair value
considerations as set out in IFRS 13, including interest rate and
credit risk adjustments. See accounting policy 4.11 f or further
discussion on fair value. Refer to note 18 for details of payments
terms for trade receivables.
As noted above, as the enforceable contract for most
arrangements is the purchase order, the transaction price is
determined at the date of each sale (i.e., for each separate
contract) and, therefore, there is no future variability within
scope of IFRS 15 and no further remaining performance obligations
under those contracts.
v Interest revenue
Interest revenue is recognised as it accrues, using the
effective interest rate method.
4.3 Leases
The Group assesses at contract inception, all arrangements to
determine whether they are, or contain, a lease. That is, if the
contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration. The Group
is not a lessor in any transactions, it is only a lessee.
i) Group as a lessee
The Group applies a single recognition and measurement approach
for all leases, except for short term leases. The Group recognises
lease liabilities to make lease payments and right of use assets
representing the right to use the underlying assets.
a) Right of use assets
The Group recognises right of use assets at the commencement
date of the lease (i.e., the date when the underlying asset is
available for use). Right of use assets are measured at cost, less
any accumulated depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost of right of
use assets includes the amount of lease liabilities recognised,
initial direct costs incurred, and lease payments made at or before
the commencement date less any lease incentives received. Right of
use assets are depreciated on a straight line basis over the
shorter of the lease term and the estimated useful lives of the
assets, as follows:
-- Plant and equipment - six years
-- Motor vehicles - four years
-- Land and buildings - eight years
If ownership of the leased asset transfers to the Group at the
end of the lease term or the cost reflects the exercise of a
purchase option, depreciation is calculated using the estimated
useful life of the asset.
The right of use assets are also subject to impairment. Refer to
the accounting policies in note 4.10 - "Impairment of tangible and
intangible assets".
b) Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to
be paid under residual value guarantees.
In calculating the present value of lease payments, the Group
uses its incremental borrowing rate at the lease commencement date
because the interest rate implicit in the lease is generally not
readily determinable. After the commencement date, the amount of
lease liabilities is increased to reflect the accretion of interest
and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term or a change in the lease
payments.
The Group's lease liabilities are separately disclosed in the
Group statement of financial position.
(c) Short-term leases
The Group applies the short term lease recognition exemption to
its short term leases of equipment and other assets (i.e., those
leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). Lease
payments on short term leases are recognised as an expense on a
straight line basis over the lease term.
(d) Lease modifications
Where the terms of a lease are varied during its term which
results in a revised carrying amount of the lease, the change to
the carrying amount is accounted for as "Lease Modifications".
4.4 Taxation
i) Current and deferred income taxes
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the Group financial statements and the corresponding tax bases
used in the computation of taxable profit and is accounted for
using the balance sheet liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences and
deferred tax assets are recognised for all deductible temporary
differences, carry forward of unused tax assets and unused tax
losses. Deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences and the carry forward of unused
tax credits and unused tax losses can be utilised.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised, based on tax rates (and tax laws) that have been enacted
or substantively enacted at the reporting date. Deferred tax
relating to items recognised in the Group income statement is
charged or credited in the Group income statement. Deferred tax
relating to items recognised outside the Group income statement is
recognised outside the Group income statement and items are
recognised in correlation to the underlying transaction either in
the Group statement of comprehensive income or directly in
equity.
Deferred tax assets are not recognised in respect of temporary
differences relating to tax losses where there is insufficient
evidence that the asset will be recovered. Unrecognised deferred
tax assets are reassessed at each reporting date and are recognised
to the extent that it has become probable that future taxable
profits will allow the deferred tax asset to be recovered. Deferred
tax assets and liabilities are classified as non-current assets and
liabilities.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
Group income statement because it excludes items of income or
expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted at the reporting
date.
The tax expense represents the sum of the tax currently payable
and deferred tax.
ii) Value-added taxes ("VAT")
The Group pays VAT on purchases made in both the Republic of
Azerbaijan and the United Kingdom. Under both jurisdictions, VAT
paid is refundable. Azerbaijani jurisdiction permits offset of an
Azerbaijani VAT credit against other taxes payable to the state
budget.
4.5 Transactions with related parties
For the purposes of these Group financial statements, parties
are considered to be related:
-- where one party has the ability to control the other party or
exercise significant influence over the other party in making
financial or operational decisions;
-- entities under common control; and
-- key management personnel
In considering each possible related party relationship,
attention is directed to the substance of the relationship, not
merely the legal form.
Related parties may enter into transactions which unrelated
parties might not and transactions between related parties may not
be effected on the same terms, conditions and amounts as
transactions between unrelated parties.
It is the nature of transactions with related parties that they
cannot be presumed to be carried out on an arm's length basis.
4.6 Borrowing costs
Borrowing costs directly relating to the acquisition,
construction or production of a qualifying capital project under
construction are capitalised and added to the project cost during
construction until such time the assets are considered
substantially ready for their intended use i.e. when they are
capable of commercial production. Where funds are borrowed
specifically to finance a project, the amount capitalised
represents the actual borrowing costs incurred. Where surplus funds
are available for a short term out of money borrowed specifically
to finance a project, the income generated from the temporary
investment of such amounts is also capitalised and deducted from
the total capitalised borrowing cost. Where the funds used to
finance a project form part of general borrowings, the amount
capitalised is calculated using a weighted average of rates
applicable to relevant general borrowings of the Group during the
period. All other borrowing costs are recognised in the Group
income statement in the period in which they are incurred.
Even though exploration and evaluation assets can be qualifying
assets, they generally do not meet the 'probable economic benefits'
test. Any related borrowing costs are therefore generally
recognised in the Group income statement in the period they are
incurred.
4.7 Intangible assets
i) Exploration and evaluation assets
The costs of exploration properties and leases, which include
the cost of acquiring prospective properties and exploration rights
and costs incurred in exploration and evaluation activities, are
capitalised as intangible assets as part of exploration and
evaluation assets.
Exploration and evaluation assets are carried forward during the
exploration and evaluation stage and are assessed for impairment in
accordance with the indicators of impairment as set out in IFRS 6 -
'Exploration for and Evaluation of Mineral Resources'.
In circumstances where a property is abandoned, the cumulative
capitalised costs relating to the property are written off in the
period. No amortisation is charged prior to the commencement of
production.
Once commercially viable reserves are established and
development is sanctioned, exploration and evaluation assets are
transferred to assets under construction.
Upon transfer of Exploration and evaluation costs into Assets
under construction, all subsequent expenditure on the construction,
installation or completion of infrastructure facilities is
capitalised within Assets under construction.
When commercial production commences, exploration, evaluation
and development costs previously capitalised are amortised over the
commercial reserves of the mining property on a units-of-production
basis.
Exploration and evaluation costs incurred after commercial
production start date in relation to evaluation of potential
mineral reserves and resources that are expected to result in
increase of reserves are capitalised as Evaluation and exploration
assets within intangible assets. Once there is evidence that
reserves are increased, such costs are tested for impairment and
transferred to Producing mines.
ii) Mining rights
Mining rights are carried at cost to the Group less any
provisions for impairments which result from evaluations and
assessments of potential mineral recoveries and accumulated
depletion. Mining rights are depleted on the units-of-production
basis over the total reserves of the relevant area.
iii) Other intangible assets
Other intangible assets mainly represent the cost paid to
landowners for the use of land ancillary to our mining operations.
They are depreciated over the respective terms of right to use the
land.
Intangible assets with finite lives are amortised over the
useful economic life and assessed for impairment whenever there is
an indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an intangible
asset with a finite useful life is reviewed at least at each
reporting date. Changes in the expected useful life or the expected
pattern of consumption of future economic benefits embodied in the
asset are accounted for by changing the amortisation period or
method, as appropriate, and are treated as changes in accounting
estimates. The amortisation expense on intangible assets with
finite lives is recognised in the Group income statement in the
expense category consistent with the function of the intangible
asset.
Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
the Group income statement when the asset is derecognised.
4.8 Property, plant and equipment and mine properties
Development expenditure is net of proceeds from all but the
incidental sale of ore extracted during the development phase.
Upon completion of mine construction, the assets initially
charged to 'Assets under construction' are transferred into 'Plant
and equipment and motor vehicles' or 'Producing mines'. Items of
'Plant and equipment and motor vehicles' and 'Producing mines' are
stated at cost, less accumulated depreciation and accumulated
impairment losses.
During the production period expenditures directly attributable
to the construction of each individual asset are capitalised as
'Assets under construction' up to the period when asset is ready to
be put into operation. When an asset is put into operation it is
transferred to 'Plant and equipment and motor vehicles' or
'Producing mines'. Additional capital costs incurred subsequent to
the date of commencement of operation of the asset are charged
directly to 'Plant and equipment and motor vehicles' or 'Producing
mines', i.e. where the asset itself was transferred.
The initial cost of an asset comprises its purchase price or
construction cost, any costs directly attributable to bringing the
asset into operation, the initial estimate of the rehabilitation
obligation and, for qualifying assets, borrowing costs. The
purchase price or construction cost is the aggregate amount paid
and the fair value of any other consideration given to acquire the
asset.
When a mine construction project moves into the production
stage, the capitalisation of certain mine construction costs ceases
and costs are either regarded as inventory or expensed, except for
costs which qualify for capitalisation relating to mining asset
additions or improvements, underground mine development or mineable
reserve development.
i) Depreciation and amortisation
Accumulated mine development costs within producing mines are
depreciated and amortised on a units-of-production basis over the
economically recoverable reserves of the mine concerned, except in
the case of assets whose useful life is shorter than the life of
the mine, in which case the straight line method is applied. The
unit of account for run of mine ("ROM") costs and for post-ROM
costs is recoverable ounces of gold. The units-of-production rate
for the depreciation and amortisation of mine development costs
takes into account expenditures incurred to date plus future field
development costs required to recover the commercial reserves
remaining. Changes in the estimates of commercial reserves or
future field development costs are dealt with prospectively.
The premium paid in excess of the intrinsic value of land to
gain access is amortised over the life of the mine on a
units-of-production basis.
Other plant and equipment such as mobile mine equipment is
generally depreciated on a straight line basis over their estimated
useful lives as follows:
-- Temporary buildings - eight years (2021: eight years)
-- Plant and equipment - eight years (2021: eight years)
-- Motor vehicles - four years (2021: four years)
-- Office equipment - four years (2021: four years)
-- Leasehold improvements - the lower of eight years (2021:
eight years) and the remaining term of the relevant lease
An item of property, plant and equipment, and any significant
part initially recognised, is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any
gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the Group income statement when
the asset is derecognised.
The asset's residual values, useful lives and methods of
depreciation and amortisation are reviewed at each reporting date
and adjusted prospectively if appropriate.
ii) Major maintenance and repairs
Expenditure on major maintenance refits or repairs comprises the
cost of replacement assets or parts of assets and overhaul costs.
Where an asset or part of an asset that was separately depreciated
and is now written off is replaced, and it is probable that future
economic benefits associated with the item will flow to the Group
through an extended life, the expenditure is capitalised.
Where part of the asset was not separately considered as a
component, the replacement value is used to estimate the carrying
amount of the replaced assets which is immediately written off. All
other day-to-day maintenance costs are expensed as incurred.
4.9 Investment in associate companies and joint ventures
The Group acquired an interest in an associate company in the
year ended 31 December 2022. Accordingly, the Group has adopted the
following accounting policy for associate companies from 1 January
2022:
An a s s oci a te is an e n t i ty over w h i ch t he G r o up
has s i g n i f i c a nt i n f l ue n c e. S i g n i f i c a nt i n
f l u e nce is t he p o w er to p a r t i ci p a te in t he f i na
n c i al a nd o p e r a t i ng p o l icy d e c i s i ons of t he i
n ve s t e e b ut is n ot co n t r ol or j o i nt co n t r ol o ve
r t h o se p o l i c i e s.
T h e c o n s i d e r a t i ons m a de in d e t e r m i n ing s
i g n i f i c a nt i n f l u e n ce a re s i mil ar to t h o se n e
c e s s a ry t o d e t e r mi ne c o n t r ol o ver s u b s i di a
r i e s. T he G r ou p's i n ve s t m e nt in i ts a s s oci a te
company is a c cou n t ed f or u s i ng t he e q u i ty m e t h o
d.
Un d er t he e q u i ty m e t h o d, t he i n v e s t m e nt in
an a s s oci a te company is i n i t i a lly r e c o g n i s ed at
co s t. T he c a r r y i ng a m o u nt of t he i nve s t m e nt is
a d j u s t ed to r e c o g n i se c h a n g es in t he Gro u p's s
ha re of n et a s s e ts of t he a s s oci a te company s i n ce t
he acq u i s i t i on d a t e. Go o d w i ll r e l a t i ng to t he
a s s o c i a te company, that existed at the initial recognition
date, is i n c l u d ed in t he c a r r y i ng a m o u nt of t he i
nv e s t m e nt a nd is n ot t e s t ed f or i m p a i r m e nt s e
p a r a t e ly as subsequent goodwill is treated differently.
T h e s t a t e m e nt of pr o fit or l o ss r e f l ects t he G
r o u p's s h a re of t he r e s u l ts of o p e r a t i o ns of t
he a ss o c i a te company. A ny cha n ge in other comprehensive
income of t h o se i n v e s t e es is p r e s e n t ed as p a rt
of t he G r o u p's comprehensive income. In a dd i t i o n, w he n
t h e re h as b een a cha n ge r e c o g n i s ed d ir ect ly in t
he e q u i ty of t he a s s o c i a te company, t he G r o up r e c
o g n i s e s i ts s h a re of a ny c h a n g e s, w h en a p p l i
c a bl e, in t he s t a t e m e nt of c h a n g es in e q u i
ty.
T h e a ggr e g a te of the Gro u p's s h a re of p r o f it or
l o ss of the a s s oci a te company is s h o wn on t he f ace o f
t he s t a t e m e nt of p r o f it or l o ss ou t si de o p e r a
t i ng p r o f it and r e p r e s e n ts p r o f it or l o ss a f t
er t ax a nd no n- co n t r o l l i ng i n t e r e s ts in t he s u
b s id i a r i es of t he a s s o c i a te company.
T h e fi n anci al s t a t e m e n ts of t he a s s oci a te
company a re p r e p a r ed f or t he s a me r e p o r t ing p e r
i od as t h e G r ou p. W h en n e c e ss a r y, a d j u s t m e n
ts a re m a de to b r i ng t he acc ou n t i ng p o l ici es in l i
ne wi th t ho se of the Group.
After application of the equity method, the Group determines
whether it is necessary to recognise an impairment loss on its
investment in its associate or company. At each reporting date, the
Group determines whether there is objective evidence that the
investment in the associate company is impaired. If there is such
evidence, the Group calculates the amount of impairment as the
difference between the recoverable amount of the associate company
and its carrying value, and then recognises the loss within 'Share
of profit of an associate company' in the statement of profit or
loss.
Up on l o ss of s i g n i f ica nt i n fl u ence, t he G r o up
m e a s u r e s a nd r e c o g n i s es a ny r e t a i n ed i n v e
s t m e nt at i ts f a ir va l u e. Any di f f e r e n ce b e t w e
en t he c a r r y i ng a m o u n t of t he a ss o c i a te company
u p on l o ss of si g n i fica nt i n f l ue n ce or j o i nt c o n
t r ol a nd t he f a ir va l ue of t he r e t a i n ed i n ve s t m
e nt a nd p r o c e e ds fr om d is p o s al is r e c o g n i s ed
in p r o f it or l o s s.
4.10 Impairment of tangible and intangible assets
The Group conducts annual internal assessments of the carrying
values of tangible and intangible assets. The carrying values of
capitalised exploration and evaluation expenditure, mine properties
and property, plant and equipment are assessed for impairment when
indicators of such impairment exist or at least annually. In such
cases an estimate of the asset's recoverable amount is calculated.
The recoverable amount is determined as the higher of the fair
value less costs to sell for the asset and the asset's value in
use. This is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of
those from other assets or groups of assets. If this is the case,
the individual assets are grouped together into cash-generating
units ("CGUs") for impairment purposes. Such CGUs represent the
lowest level for which there are separately identifiable cash
inflows that are largely independent of the cash flows from other
assets or other groups of assets. This generally results in the
Group evaluating its non--financial assets on a geographical or
licence basis.
If the carrying amount of the asset exceeds its recoverable
amount, the asset is impaired and an impairment loss is charged to
the Group income statement so as to reduce the carrying amount to
its recoverable amount (i.e. the higher of fair value less cost to
sell and value in use).
Impairment losses related to continuing operations are
recognised in the Group income statement in those expense
categories consistent with the function of the impaired asset.
For assets excluding the intangibles referred to above, an
assessment is made at each reporting date as to whether there is
any indication that previously recognised impairment losses may no
longer exist or may have decreased. If such indication exists, the
Group makes an estimate of the recoverable amount.
A previously recognised impairment loss is reversed only if
there has been a change in the estimates used to determine the
asset's recoverable amount since the last impairment loss was
recognised. If this is the case, the carrying amount of the asset
is increased to its recoverable amount. The increased amount cannot
exceed the carrying amount that would have been determined, net of
depreciation or amortisation, had no impairment loss been
recognised for the asset in prior years. Such reversal is
recognised in the consolidated statement of other comprehensive
income. Impairment losses recognised in relation to indefinite life
intangibles are not reversed for subsequent increases in its
recoverable amount.
4.11 Fair value measurement
The Group measures financial instruments at fair value at each
balance sheet date. Fair value disclosures for financial
instruments measured at fair value, or where fair value is
disclosed, are summarised in the following notes:
-- Note 18 - 'Trade and other receivables'
-- Note 20 - 'Cash and cash equivalents'
-- Note 17 - 'Financial assets'; and
-- Note 21 - 'Trade and other payables'
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either:
-- in the principal market place for the asset or the liability; or
-- in the absence of a principal market, the most advantageous market for the asset or liability.
The fair value of an asset or liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and
minimising the unobservable inputs.
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a
whole.
-- Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities.
-- Level 2 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable.
-- Level 3 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by
re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end
of each reporting period.
For the purpose of fair value disclosures, the Group has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy as set out above.
4.12 Provisions
i) General
Provisions are recognised when (a) the Group has a present
obligation (legal or constructive) as a result of a past event and
(b) it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. If the effect
of the time value of money is material, provisions are discounted
using a current pre-tax rate that reflects, where appropriate, the
risks specific to the liability. Where discounting is used, the
increase in the provision due to the passage of time is recognised
as a finance cost.
ii) Rehabilitation provision
The Group records the present value of estimated costs of legal
and constructive obligations required to restore operating
locations in the period in which the obligation is incurred. The
nature of these restoration activities includes dismantling and
removing structures, rehabilitating mines and tailings dams,
dismantling operating facilities, closure of plant and waste sites
and restoration, reclamation and revegetation of affected
areas.
The obligation generally arises when the asset is installed or
the ground or environment is disturbed at the production location.
When the liability is initially recognised, the present value of
the estimated cost is capitalised by increasing the carrying amount
of the related mining assets to the extent that it was incurred
prior to the production of related ore. Over time, the discounted
liability is increased for the change in present value based on the
discount rates that reflect current market assessments and the
risks specific to the liability.
The periodic unwinding of the discount is recognised in the
Group income statement as a finance cost. Additional disturbances
or changes in rehabilitation costs will be recognised as additions
or charges to the corresponding assets and rehabilitation liability
when they occur. Any reduction in the rehabilitation liability and
therefore any deduction from the rehabilitation asset may not
exceed the carrying amount of that asset. If it does, any excess
over the carrying value is taken immediately to the Group income
statement.
If the change in estimate results in an increase in the
rehabilitation liability and therefore an addition to the carrying
value of the asset, the Group is required to consider whether this
is an indication of impairment of the asset as a whole and test for
impairment in accordance with IAS 36. If, for mature mines, the
revised mine assets net of rehabilitation provisions exceeds the
recoverable value, that portion of the increase is charged directly
to expense.
For closed sites, changes to estimated costs are recognised
immediately in the Group income statement. Also, rehabilitation
obligations that arose as a result of the production phase of a
mine should be expensed as incurred.
4.13 Financial instruments - initial recognition and subsequent
measurement
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
a) Financial assets
i) Initial recognition and measurement
Financial assets are classified, at initial recognition, a nd
subsequently measured at amortised cost, fair value through other
comprehensive income ("OCI"), or fair value through profit or
loss.
The classification of financial assets at initial recognition
that are debt instruments depends on the financial asset's
contractual cash flow characteristics and the Group's business
model for managing them. With the exception of trade receivables
that do not contain a significant financing component or for which
the Group has applied the practical expedient, the Group initially
measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss,
transaction costs. Trade receivables that do not contain a
significant financing component or for which the Group has applied
the practical expedient for contracts that have a maturity of one
year or less, are measured at the transaction price determined
under IFRS 15. Refer to the accounting policy 4.2 - 'Revenue from
contracts with customers'
In order for a financial asset to be classified and measured at
amortised cost or fair value through OCI, it needs to give rise to
cash flows that are 'solely payments of principal and interest
("SPPI") on the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an instrument
level. Financial assets with cash flows that are not SPPI are
classified and measured at fair value through profit or loss,
irrespective of the business model.
The Group's business model for managing financial assets refers
to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial
assets, or both.
ii) Subsequent measurement
For purposes of subsequent measurement, financial assets are
classified in four categories:
-- Financial assets at amortised cost (debt instruments);
-- Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments);
-- Financial assets designated at fair value through OCI with no
recycling of cumulative gains and losses upon derecognition (equity
instruments); and
-- Financial assets at fair value through profit or loss.
iii) Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group
measures financial assets at amortised cost if both of the
following conditions are met:
-- The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured
using the effective interest rate ("EIR") method and are subject to
impairment. Interest received is recognised as part of finance
income in the statement of profit or loss and other comprehensive
income. Gains and losses are recognised in profit or loss when the
asset is derecognised, modified or impaired.
The Group's financial assets at amortised cost include trade
receivables (not subject to provisional pricing) and other
receivables. Refer below to 'Financial assets at fair value through
profit or loss' for a discussion of trade receivables (subject to
provisional pricing).
iv) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include
financial assets held for tradin g, e.g., derivative instruments,
financial assets designated upon initial recognition at fair value
through profit or loss, e .g., debt or equity instruments, or
financial assets mandatorily required to be measured at fair value,
i.e., where they fail the SPPI test. Financial assets are
classified as held for trading if they are acquired for the purpose
of selling or repurchasing in the near term. Derivatives, including
separated embedded derivatives, are also classified as held for
trading unless they are designated as effective hedging
instruments. Financial assets with cash flows that do not pass the
SPPI test are required to be classified and measured at fair value
through profit or loss, irrespective of the business model.
Notwithstanding the criteria for debt instruments to be classified
at amortised cost or at fair value through OCI, as described above,
debt instruments may be designated at fair value through profit or
loss on initial recognition if doing so eliminates, or
significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss are
carried in the statement of financial position at fair value w ith
net changes in fair value recognised in the profit or loss
account.
A derivative embedded in a hybrid contract with a financial
liability or non -financial host, is separated from the host and
accounted for as a separate derivative if: the economic
characteristics and risks are not closely related to the host; a
separate instrument with the same terms as the embedded derivative
would meet the definition of a derivative; and the hybrid contract
is not measured at fair value through profit or loss. Embedded
derivatives are measured at fair value w ith changes in fair value
recognised in profit or loss. Reassessment only occurs if there is
either a change in the terms of the contract that significantly
modifies the cash flows that would otherwise be required or a
reclassification of a financial asset out of the fair value through
profit or loss category.
As IFRS 9 now has the SPPI test for financial assets, the
requirements relating to the separation of embedded derivatives is
no longer needed for financial assets. An embedded derivative will
often make a financial asset fail the SPPI test thereby requiring
the instrument to be measured at fair value through profit or loss
in its entirety. This is applicable to the Group's trade
receivables (subject to provisional pricing). These receivables
relate to sales contracts where the selling price is determined
after delivery to the customer, based on the market price at the
relevant QP stipulated in the contract. This exposure to the
commodity price causes such trade receivables to fail the SPPI
test. As a result, these receivables are measured at fair value
through profit or loss from the date of recognition of the
corresponding sale, with subsequent movements where material being
recognised in 'fair value gains/losses on provisionally priced
trade receivables' in the statement of profit or loss and other
comprehensive income.
The Group does not currently account separately for embedded
derivatives in its trade receivables subject to provisional
pricing. The short one to four month transaction cycle would result
in any change to the Group's financial statements being immaterial.
Any adjustment to the trade receivable subsequent to initial
recording is adjusted through revenue.
v) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group's consolidated statement
of financial position) when:
-- The rights to receive cash flows from the asset have expired; or
-- The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass -through' arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset.
When the Group has transferred its rights to receive cash flows
from an asset or has entered into a pas s -through fttransferred
nor retained substantially all of the risks and rewards of the
asset, nor transferred control of the asset, the Group continues to
recognise the transferred asset to the extent of its continuing
involvement. In that case, the Group also recognises an associated
liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that
the Group has retained.
Continuing involvement that takes the form of a guarantee over
the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay.
vi) Impairment of financial assets
Further disclosures relating to impairment of financial assets
are also provided in the following notes:
-- Disclosure of significant assumptions: accounting policy 4.22
-- Trade and other receivables: accounting policy 4.14 and note 18
The Group recognises an allo wance for expected credit loss
("ECL") for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flo ws that the Group expects to receive, discounted at an
approximation of the original E IR. The expected cash flows will
include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for
which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next
12-months (a 12-month ECL). For those credit exposures for which
there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of
the timing of the default (a lifetime ECL).
For trade receivables (not subject to provisional pricing) and
other receivables due in less than 12 months, the Group applies the
simplified approach in calculating ECLs, as permitted by IFRS 9.
Therefore, the Group does not track changes in credit risk, but
instead, recognises a loss allowance based on the financial asset's
lifetime ECL at each reporting date. For any other financial assets
carried at amortised cost (which are due in more than 12 months),
the ECL is based on the 12-month ECL. The 12-month ECL is the
proportion of lifetime ECLs that results from default events on a
financial instrument that are possible within 12 months after the
reporting date. However, when there has been a significant increase
in credit risk since origination, t he allowance will be based on
the lifetime ECL. When determining whether the credit risk of a
financial asset has increased significantly since initial
recognition and when estimating ECLs, the Group considers
reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on the
Group's historical experience and informed credit assessment
including forward -looking information.
The Group considers a financial asset in def ault when
contractual payments are 90 days past due. However, in certain
cases, the Group may also consider a financial asset to be in def
ault when internal or external information indicates that the Group
is un likely to receive the outstanding contractual amounts in full
before taking into account any credit enhancements held by the
Group. A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows and usually
occurs when past due for more than one year and not subject to
enforcement activity.
At each reporting date, the Group assesses whether financial
assets carried at amortised cost are credit- impaired. A financial
asset is credit -impaired when one or more events that have a
detrimental impact on the estimated future cash flows of the
financial asset have occurred.
b) Financial liabilities
i) Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
The Group's financial liabilities include trade and other
payables and loans and borrowings including bank overdrafts.
ii) Subsequent measurement
The measurement of financial liabilities depends on their
classification, as described below:
Financial liabilities at fair value through p rofit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value
through profit or loss.
Financial liabilities are classified as held for trading if they
are incurred for the purpose of repurchasing in the near term. This
category also includes derivative financial instruments entered
into by the Group that are not designated as hedging instruments in
hedge relationships as defined by IFRS 9.
Gains or losses on liabilities held for trading are recognised
in the statement of profit or loss and other comprehensive
income.
Loans and borrowings and trade and other payables
After initial recognition, interest-bearing loans and borrowings
and trade and other payables are subsequently measured at amortised
cost using the EIR method. Gains and losses are recognised in the
statement of profit or loss and other comprehensive income when the
liabilities are derecognised, as well as through the EIR
amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EI R. The EIR amortisation is included as finance costs
in the statement of profit or loss and other comprehensive
income.
This category generally applies to interest-bearing loans and
borrowings and trade and other payab l es
iii) Derecognition of financial liabilities
A financial liability is derecognised when the associated
obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in profit or loss and
other comprehensive income.
c) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount is reported in the consolidated statement of financial
position if there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to settle on a net
basis, to realise the assets and settle the liabilities
simultaneously.
d) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position
comprise cash at banks and on hand and short- term deposits with an
original maturity of three months or less.
For the purpose of the consolidated statement of cash flows,
cash and cash equivalents consist of cash and short- term deposits
as defined above.
4.14 Trade and other receivables
The Group presents trade and other receivables in the statement
of financial position based on a current or non-current
classification. A trade and other receivable is classified as
current as follows:
-- expected to be realised or intended to be sold or consumed in
the normal operating cycle;
-- held primarily for the purpose of trading; and
-- expected to be realised within 12 months after the date of
the statement of financial position.
Gold bullion held on behalf of the Government of Azerbaijan is
classified as a current asset and valued at the current market
price of gold at the statement of financial position date. A
current liability of equal amount representing the liability of the
gold bullion to the Government of Azerbaijan is also
established.
Advances made to suppliers for fixed asset purchases are
recognised as non-current prepayments until the fixed asset is
delivered when they are capitalised as part of the cost of the
fixed asset.
4.15 Inventories
Metal in circuit consists of in-circuit material at properties
with milling or processing operations and doré awaiting refinement,
all valued at the lower of average cost and net realisable value.
In-process inventory costs consist of direct production costs
(including mining, crushing and processing and site administration
costs) and allocated indirect costs (including depreciation,
depletion and amortisation of producing mines and mining
interests).
Ore stockpiles consist of stockpiled ore, ore on surface and
crushed ore, all valued at the lower of average cost and net
realisable value. Ore stockpile costs consist of direct production
costs (including mining, crushing and site administration costs)
and allocated indirect costs (including depreciation, depletion and
amortisation of producing mines and mining interests).
Inventory costs are charged to operations on the basis of ounces
of gold sold. The Group regularly evaluates and refines estimates
used in determining the costs charged to operations and costs
absorbed into inventory carrying values based upon actual gold
recoveries and operating plans.
Finished goods consist of doré bars that have been refined and
assayed and are in a form that allows them to be sold on
international bullion markets and metal in concentrate . Finished
goods are valued at the lower of average cost and net realisable
value. Finished goods costs consist of direct production costs
(including mining, crushing and processing; site administration
costs; and allocated indirect costs, including depreciation,
depletion and amortisation of producing mines and mining
interests).
Spare parts and consumables consist of consumables used in
operations, such as fuel, chemicals, reagents and spare parts,
valued at the lower of average cost and replacement cost and, where
appropriate, less a provision for obsolescence.
4.16 Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs, or value of services
received net of any issue costs.
4.16 Treasury shares
Own equity instruments that are reacquired (treasury shares) are
recognised at cost and deducted from equity. No gain or loss is
recognised in profit or loss on the purchase, sale, issue or
cancellation of the Group's own equity instruments. Any difference
between the carrying amount and the consideration, if reissued, is
recognised in the share premium.
4.18 Deferred stripping costs
The removal of overburden and other mine waste materials is
often necessary during the initial development of a mine site, in
order to access the mineral ore deposit. The directly attributable
cost of this activity is capitalised in full within mining
properties and leases, until the point at which the mine is
considered to be capable of commercial production. This is
classified as expansionary capital expenditure, within investing
cash flows.
The removal of waste material after the point at which a mine is
capable of commercial production is referred to as production
stripping.
When the waste removal activity improves access to ore extracted
in the current period, the costs of production stripping are
accounted for as part of the cost of producing those
inventories.
Where production stripping activity both produces inventory and
improves access to ore in future periods the associated costs of
waste removal are allocated between the two elements. The portion
which benefits future ore extraction is capitalised within
stripping and development capital expenditure. If the amount to be
capitalised cannot be specifically identified it is determined
based on the volume of waste extracted compared with expected
volume for the identified component of the orebody. Components are
specific volumes of a mine's orebody that are determined by
reference to the life of mine plan.
In certain instances significant levels of waste removal may
occur during the production phase with little or no associated
production.
All amounts capitalised in respect of waste removal are
depreciated using the unit of production method based on the ore
reserves of the component of the orebody to which they relate.
The effects of changes to the life of mine plan on the expected
cost of waste removal or remaining reserves for a component are
accounted for prospectively as a change in estimate.
4.19 Employee leave benefits
Liabilities for wages and salaries, including non-monetary
benefits and accrued but unused annual leave, are recognised in
respect of employees' services up to the reporting date. They are
measured at the amounts expected to be paid when the liabilities
are settled.
4.20 Retirement benefit costs
The Group does not operate a pension scheme for the benefit of
its employees but instead makes contributions to their personal
pension policies. The contributions due for the period are charged
to the Group income statement.
4.21 Share-based payments
The Group has applied the requirements of IFRS 2 - 'Share-based
Payment'. IFRS 2 has been applied to all grants of equity
instruments.
The Group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair
value (excluding the effect of non market-based vesting conditions)
at the date of grant. The fair value determined at the grant date
of the equity-settled share-based payments is expensed on a
straight line basis over the vesting period, based on the Group's
estimate of shares that will eventually vest and adjusted for the
effect of non market-based vesting conditions.
The fair value of share options is calculated using the
assumption that they will only be exercised if the share price
prevailing at the date of exercise is equal to, or above, the price
at which the options were granted. This methodology approximates to
valuing the share options using a Black-Scholes model. The expected
life used in the model has been calculated using management's best
estimate of the effects of non-transferability, exercise
restrictions and behavioural considerations. The vesting condition
assumptions are reviewed during each reporting period to ensure
they reflect current expectations.
4.22 Significant accounting judgements
The preparation of the Group financial statements in conformity
with IFRS requires management to make judgements that affect the
reported amounts of assets, liabilities and contingent liabilities
at the date of the Group financial statements and reported amounts
of revenues and expenses during the reporting period.
i) Exploration and evaluation expenditure (note 14)
The application of the Group's accounting policy for exploration
and evaluation expenditure requires judgement in determining
whether it is likely that future economic benefits are likely from
future exploitation. If information becomes available suggesting
that the recovery of expenditure is unlikely, the amount
capitalised is written off in the consolidated statement of profit
or loss in the period when the new information becomes
available.
ii) Impairment of intangible and tangible assets (notes 14,15
and 16)
The assessment of tangible and intangible assets for any
internal and external indications of impairment involves judgement.
Each reporting period, the Group assesses whether there are
indicators of impairment, if indicated then a formal estimate of
the recoverable amount is performed and an impairment loss
recognised to the extent that the carrying amount exceeds
recoverable amount. Recoverable amount is determined as the value
in use. Determining whether the projects are impaired requires an
estimation of the recoverable value of the individual areas to
which value has been ascribed. The value in use calculation
requires the entity to estimate the future cash flows expected to
arise from the projects in order to calculate present value.
The Group has calculated the value in use of its only operating
cash generating unit ("CGU") which are its mines together with
their associated processing facilities at Gedabek ("Mining
Operations") to assess whether any impairment provision is
required. The significant accounting judgements made to perform
this calculation are: production volumes, precious metal and copper
prices, discount rates and exchange rates.
iii) Production start date (note 15)
The Group assesses the stage of each mine under construction to
determine when a mine moves into the production stage. The criteria
used to assess the start date are determined based on the unique
nature of each mine construction project, such as the complexity of
a plant and its location. The Group considers various relevant
criteria to assess when the mine is substantially complete, ready
for its intended use and is reclassified from Assets under
construction to Producing mines and Property, plant and equipment.
Some of the criteria will include, but are not limited to, the
following:
-- the level of capital expenditure compared to the construction cost estimates;
-- completion of a reasonable period of testing of the mine plant and equipment;
-- ability to produce metal in saleable form (within specifications); and
-- ability to sustain ongoing production of metal.
When a mine construction project moves into the production
stage, the capitalisation of certain mine construction costs ceases
and costs are either regarded as inventory or expensed, except for
costs that qualify for capitalisation relating to mining asset
additions or improvements, underground mine development or mineable
reserve development. This is also the point at which the
depreciation/amortisation recognition commences.
iv) Leases (note 16)
The implementation of IFRS 16 requires the Group to make
judgements as to whether any contract entered into by the Group
contains a lease. In making this judgement, the Group looks at a
number of factors including the broader economics of each contract.
Once a contract has been determined to contain a lease, the Group
is required to make judgements and estimates that affect the
measurement of right to use assets and lease liabilities. In
determining the lease term, the Group considers all facts and
circumstances that determine the likely total length of time the
asset will be leased. Estimates are required to determine the
appropriate discount rates used to measure lease liabilities.
v) Renewal of Production Sharing Agreement ("PSA") (note 31)
The Group operates its mines and processing facilities on
contract areas licenced under a PSA with the Government of
Azerbaijan. The majority of the Group's fixed assets, including its
processing facilities and its main producing mines, are located on
the Gedabek contract area which initially had a mining licence
expiring in March 2022. The PSA contains an option to extend the
Gedabek licence for a further ten years from March 2022,
conditional upon satisfaction of certain requirements stipulated in
the PSA, and the first of the two five-year extensions allowed
under the PSA to March 2027 has been obtained. The directors have
judged that the requirements to renew the licence for the second
five-year extension from March 2027 to March 2032 will be
satisfied. The Group depreciates each tangible fixed asset over its
estimated useful life subject to no asset having a life extending
beyond March 2032.
4.23) Significant accounting estimates
The preparation of the Group financial statements in conformity
with IFRS requires management to make estimates that affect the
reported amounts of assets, liabilities and contingent liabilities
at the date of the Group financial statements and reported amounts
of revenues and expenses during the reporting period. Estimates are
continuously evaluated and are based on management's experience and
other factors, including expectations of future events that are
believed to be reasonable under the circumstances. However, actual
outcomes can differ from these estimates. In particular,
information about significant areas of estimation uncertainty
considered by management in preparing the Group financial
statements is described below.
i) Impairment of intangible and tangible assets (notes 14,15 and
16)
Once an intangible or tangible asset has been judged as
impaired, an estimate is made of its recoverable amount.
Recoverable amount is determined as the higher of fair value less
costs to sell and value in use. Determining whether the projects
are impaired requires an estimation of the recoverable value of the
individual areas to which value has been ascribed. The value in use
calculation requires the entity to estimate the future cash flows
expected to arise from the projects and a suitable discount rate in
order to calculate present value.
ii) Ore reserves and resources (notes 14 and 15)
Ore reserves are estimates of the amount of ore that can be
economically and legally extracted from the Group's mining
properties. The Group estimates its ore reserves and mineral
resources, based on information compiled by appropriately qualified
persons relating to the geological data on the size, depth and
shape of the ore body and requires complex geological judgements to
interpret the data. The estimation of recoverable reserves is based
upon factors such as estimates of foreign exchange rates, commodity
prices, future capital requirements and production costs along with
geological assumptions and judgements made in estimating the size
and grade of the ore body. Changes in the reserve or resource
estimates may impact upon the carrying value of exploration and
evaluation assets, mine properties, property, plant and equipment,
provision for rehabilitation and depreciation and amortisation
charges.
iii) Inventory (note 19)
Net realisable value tests are performed at least annually and
represent the estimated future sales price of the product based on
prevailing spot metals prices at the reporting date, less estimated
costs to complete production and bring the product to sale.
Stockpiles are measured by estimating the number of tonnes added
and removed from the stockpile, the number of contained gold ounces
based on assay data and the estimated recovery percentage based on
the expected processing method. Stockpile tonnages are verified by
periodic surveys. The ounces of gold sold are compared to the
remaining reserves of gold for the purpose of charging inventory
costs to operations.
iv) Mine rehabilitation provision (note 23)
The Group assesses its mine rehabilitation provision annually.
Significant estimates and assumptions are made in determining the
provision for mine rehabilitation as there are numerous factors
that will affect the ultimate liability payable. These factors
include estimates of the extent and costs of rehabilitation
activities, technological changes, regulatory changes and changes
in discount rates. Those uncertainties may result in future actual
expenditure differing from the amounts currently provided. The
provision at the reporting date represents management's best
estimate of the present value of the future rehabilitation costs
required. Changes to estimated future costs are recognised in the
Group statement of financial position by either increasing or
decreasing the rehabilitation liability and rehabilitation asset if
the initial estimate was originally recognised as part of an asset
measured in accordance with IAS 16 'Property, Plant and Equipment'.
Expenditure on mine rehabilitation is expected to take place
between 2028 and 2030.
v) Recovery of deferred tax assets (note 12)
Judgement is required in determining whether deferred tax assets
are recognised within the Group statement of financial position.
Deferred tax assets, including those arising from unutilised tax
losses, require management to assess the likelihood that the Group
will generate taxable earnings in future periods, in order to
utilise recognised deferred tax assets. Estimates of future taxable
income are based on forecast cash flows from operations and the
application of existing tax laws in each jurisdiction. To the
extent that future cash flows and taxable income differ
significantly from estimates, the ability of the Group to realise
the net deferred tax assets recorded at the reporting date could be
impacted.
vi) Leases (note 16)
The implementation of IFRS 16 requires the Group to make
estimates that affect the measurement of right to use assets and
lease liabilities. In determining the lease term, the Group
considers all facts and circumstances that determine the likely
total length of time the asset will be leased. Estimates are
required to determine the appropriate discount rates used to
measure lease liabilities.
5 Segment information
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 statement of income and Group
statement of financial position on this basis. Accordingly, the
Group has only one operating segment, mining operations. The
Group's mining operations mainly comprise its producing assets, the
Gedabek and Gadir mines and related exploration and development at
its Gedabek mining concession. The majority of the Group's revenues
and its cost of sales, depreciation and amortisation are generated
at Gedabek.
The majority of the Group's exploration and all of its
development and production activities are carried out by its
wholly-owned subsidiaries in Azerbaijan. The Group's associate
company, Libero Copper & Gold Corporation ("Libero") explores
for minerals in North and South America. Libero has no revenue and
is accounted for by the equity method. The Group's share of
Libero's loss and its assets are disclosed in the Group statement
of income and statement of financial position.
6 Revenue
The Group's revenue consists of sales to third parties of:
-- gold contained within doré and gold and silver bullion to the Group's refiners; and
-- gold and copper concentrate.
2022 2021
$000 $000
---------------------------------------- ------- -------
Gold within doré and gold bullion 62,258 71,175
Silver bullion 515 449
Gold and copper concentrate 21,946 20,870
---------------------------------------- ------- -------
84,719 92,494
---------------------------------------- ------- -------
All revenue from sales of gold within doré and gold and silver
bullion and gold and copper concentrate is recognised at the time
when control passes to the customer.
Sales of gold within doré and gold and silver bullion in 2022
and 2021 were made to two customers, the Group's gold refiners, MKS
Finance S.A., and Argor-Heraeus SA, both based in Switzerland.
The gold and copper concentrate was sold in 2022 and 2021 to
Industrial Minerals SA, Trafigura PTE Ltd and Metal-Kim Metalurgi
Ve Kimya Tarim Sanayi Tic Ltd Sti.
7 Other operating income and expenses and other income
Other operating income
2022 2021
$000 $000
------------------------------------------------ ------- ------
Gain from insurance proceeds - 52
Gain on the modifications of lease liabilities 65 -
Gain on cancellation of trade payables - 176
Reversal of previously written off receivables 355 -
420 228
------------------------------------------------ ------- ------
Other operating expenses
2022 2021
$000 $000
------------------------------------ ------- ------
Transportation and refining costs 351 308
Foreign exchange loss 317 186
Advances and inventory written off - 126
Research costs 303 121
971 741
------------------------------------ ------- ------
Other income
2022 2021
$000 $000
----------------------------------------------- -------- ------
Fair value gain on derivatives not designated
as hedging instruments - 597
Fair value gain on financial assets at fair
value through profit and loss - 151
- 748
-------------------------------------------------------- ------
Other expense
2022 2021
$000 $000
------------------------------------ ------- ------
Fair value loss on financial assets 570 -
------------------------------------ ------- ------
2022 2021
Notes $000 $000
----------------------------------------------- ------ ------- -------
Operating profit is stated after charging:
Depreciation on property, plant and equipment
- owned 15 15,443 15,075
Depreciation on property plant and equipment
- right of use assets 16 540 523
Amortisation of mining rights and other
intangible assets 14 1,131 1,206
Employee benefits and expenses 9 11,359 11,571
Foreign currency exchange net loss 317 186
Inventory expensed during the year 30,776 30,987
Fees payable to the Company's auditor
for:
The audit of the Group's annual accounts 243 191
The audit of the Group's subsidiaries
pursuant to legislation 134 119
Audit related assurance services - half
year review 3 3
Total audit services 380 313
----------------------------------------------- ------ ------- -------
Amounts paid to auditor for other services:
Tax compliance services 10 10
----------------------------------------------- ------ ------- -------
Total non-audit services 10 10
----------------------------------------------- ------ ------- -------
Total 390 323
----------------------------------------------- ------ ------- -------
The audit fees for the parent company were $160,000 (2021:
$148,000).
9 Staff numbers and costs
The average number of staff employed by the Group (including
directors) during the year, analysed by category, was as
follows:
2022 2021
------------------------------- ----- -----
Management and administration 46 44
Exploration 61 57
Mine operations 838 817
------------------------------- ----- -----
945 918
------------------------------- ----- -----
The aggregate payroll costs of these persons were as
follows:
2022 2021
$000 $000
---------------------------------- -------- -------
Wages and salaries 10,154 10,158
Social security costs 2,250 2,094
Costs capitalised as exploration (1,045) (681)
---------------------------------- -------- -------
11,359 11,571
---------------------------------- -------- -------
The Group does not make any contributions to either individual
or collective staff pension plans.
Remuneration of key management personnel
The remuneration of the key management personnel of the Group,
is set out below in aggregate:
2022 2021
$ $
------------------------------ ---------- ----------
Short-term employee benefits 1,742,750 1,826,118
------------------------------ ---------- ----------
The key management personnel of the Group comprise the chief
executive officer, the vice president of government affairs, the
vice president of technical services, the vice president Azerbaijan
International Mining Company and the chief financial officer. The
disclosure of the remuneration of the directors as required by the
Companies Act 2006 is given above.
10 Finance costs
2022 2021
$000 $000
-------------------------------------------- ------- ------
Finance charges on letters of credit 11 9
Interest expense on lease liabilities 291 266
Unwinding of discount on provisions 425 377
Interest on long term creditor: geological 87 -
data
-------------------------------------------- ------- ------
814 652
-------------------------------------------- ------- ------
11 Associate company
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 a further 10 per cent.
interest in Libero taking its total interest to 19.8 per cent. From
this date, Libero is accounted for using the equity method of
accounting in the Group's consolidated financial statements. The
Group took the market value of its 9.8 per cent. holding (fair
value), the cost of its additional 10 per cent. investment and the
close out value of the forward contract established at 31 December
2021 as the acquisition cost of Libero as an associate company.
Prior to 26 January 2022, the Group had a 9.8 per cent. interest in
Libero and accounted for the investment as a financial asset. The
Group's interest was subsequently reduced in the period to 19.6 per
cent. following an issue of shares by Libero in which the Group did
not participate. The Group made a further investment in August 2022
to acquire 2.9 million new shares at CAN 33 cents per share for a
total consideration of CAN$957,000 ($748,000).
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 December
2022 was $1,830,000. 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.
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 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
reduction in the Group's interest in Libero at 31 December 2022 of
1.5 per cent. has been treated as part disposal of its investment.
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 were
assessed for impairment and no impairment charge was considered
necessary.
Balance sheet of Libero at 31 December
2022 2021
$000 $000
------------------------------------------ ------------ ---------
Current assets 338 3,184
Non-current assets 2,579 2,734
Current liabilities (639) (627)
Non-current liabilities (139) (88)
------------------------------------------ ------------ ---------
Equity 2,139 5,203
------------------------------------------ ------------ ---------
Reconciliation to carrying value in the Group balance
sheet at 31 December 2022
2022
$000
----------------------------------------- ------------
Equity of Libero 2,139
Share based payment expense (874)
Exploration expense 6,531
Equity recognised by
the Group 7,796
------------------------------------------ ------------
Group's share in equity - 18.3
per cent. (2021: nil) 1,426
Goodwill 3,746
------------------------------------------ ------------
Group carrying value
of associate company 5,172
------------------------------------------ ------------
Profit and loss account of Libero for
the year ended 31 December
2022 2021
$000 $000
------------------------------ ---------- ----------
Expenses 10,205 9,061
Other expenses / (income) 638 (579)
------------------------------ ---------- ----------
Loss before taxation 10,843 8,482
Taxation (278) (396)
------------------------------ ---------- ----------
Loss for the year 10,565 8,086
Other comprehensive income (44) (4)
------------------------------ ---------- ----------
Total comprehensive loss for
the year 10,521 8,082
------------------------------ ---------- ----------
Libero has no revenue and all losses are from continuing
operations.
Reconciliation to loss of associate in the Group profit and loss
account
2022
$000
------------------------------------ -----------
Loss for the period 10,565
Pre-acquisition loss to 25 January
2022 (659)
Exploration expense (6,802)
------------------------------------ -----------
Post acquisition loss for the
year 3,104
------------------------------------ -----------
Group's share of the loss at
19.6 and 19.8 per cent. 611
Profit on deemed disposal of
1.5 per cent. of Libero (135)
------------------------------------ -----------
Loss recognised as an associate 476
------------------------------------ -----------
Reconciliation of the movement in associate company in the year
ended 31 December 2022
2022
$000
-------------------------------- -----------
1 January 2022 -
Transfer from other financial
assets 2,382
Additions 3,491
Share of loss of the associate (476)
Foreign exchange loss (225)
-------------------------------- -----------
31 December 2022 5,172
-------------------------------- -----------
Libero had no contingent liabilities or capital commitments on
31 December 2022 and 2021. The Group had no contingent liabilities
relating to Libero.
12 Taxation
Corporation tax is calculated at 32 per cent. (as stipulated in
the production sharing agreement for R.V. Investment Group Services
LLC ("RVIG")) in the Republic of Azerbaijan, the entity that
contributes the most significant portion of profit before tax in
the Group financial statements of the estimated assessable profit
for the year. Taxation for other jurisdictions is calculated at the
rates prevailing in the respective jurisdictions. Deferred income
taxes arising in RVIG are recognised and fully disclosed in these
Group financial statements. RVIG's unutilised tax losses at 31
December 2022 were $nil (2021: $nil).
The major components of the income tax charge for the year ended
31 December are:
2022 2021
$000 $000
------------------------------------------- ------- ------
Current income tax
Current income tax charge 551 5,479
Deferred tax
Charge /(benefit) relating to origination
and reversal of temporary differences 3,293 (248)
------------------------------------------- ------- ------
Income tax charge for the year 3,844 5,231
------------------------------------------- ------- ------
Deferred income tax at 31 December relates to the following:
Statement
of financial
position Income statement
-------------------- --------------------
2022 2021 2022 2021
$000 $000 $000 $000
----------------------------------- --------- --------- ----------- -------
Deferred income tax liability
Property, plant and equipment
- accelerated depreciation (22,377) (19,978) (2,399) (929)
Right of use assets - accelerated
depreciation (756) (981) 225 (402)
Non-current prepayments - (59) 59 (59)
Trade and other receivables (2,507) (954) (1,553) (338)
Inventories (11,426) (10,374) (1,052) 1,454
----------------------------------- --------- ---------
Deferred income tax liability (37,066) (32,346)
----------------------------------- --------- ---------
Deferred income tax asset
Trade and other payables
and provisions * 3,085 2,778 307 62
Lease liabilities 867 1,054 (187) 431
Asset retirement obligation
* 5,122 3,815 1,307 29
----------------------------------- --------- ---------
Deferred income tax asset 9,074 7,647
----------------------------------- --------- --------- ----------- -------
Deferred income tax benefit (3,293) 248
----------------------------------- --------- --------- ----------- -------
Net deferred tax liability (27,922) (24,699)
----------------------------------- --------- ---------
* Deferred income tax assets have been recognised for the trade
and other payables and provisions, asset retirement obligation and
lease liabilities based on local tax basis differences expected to
be utilised against future taxable profits.
A reconciliation between the accounting profit and the total
taxation charge for the year ended 31 December is as follows:
2022 2021
$000 $000
---------------------------------------------- ------- -------
Profit before tax 7,504 12,592
---------------------------------------------- ------- -------
Theoretical tax charge at statutory rate
of 32 per cent. for RVIG* 2,401 4,029
Effects of different tax rates for certain
Group entities (20 per cent.) 179 185
Tax effect of items which are not deductible
or assessable for taxation purposes:
- Items not deductible or assessable 1,264 1,017
Income tax charge for the year 3,844 5,231
---------------------------------------------- ------- -------
* This is the tax rate stipulated in RVIG's production sharing
agreement.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised.
Deferred tax assets and liabilities have been offset for
deferred taxes recognised for RVIG since there is a legally
enforceable right to set off current tax assets against current tax
liabilities and they relate to income taxes levied by the same
taxation authority. The Group intends to settle its current tax
assets and liabilities on a net basis in the Republic of
Azerbaijan.
At 31 December 2022, the Group had unused tax losses available
for offset against future profits of $28,354,000 (2021:
$22,332,000). Unused tax losses in the Republic of Azerbaijan at 31
December 2022 were $nil (2021: $nil). No deferred tax assets have
been recognised in respect of jurisdictions other than the Republic
of Azerbaijan due to the uncertainty of future profit streams.
13 Profit per share
The calculation of basic and diluted profit per share is based
upon the retained profit for the financial year of $3,660,000
(2021: $7,361,000).
The weighted average number of ordinary shares for calculating
the basic profit and diluted profit per share after adjusting for
the effects of all dilutive potential ordinary shares relating to
share options and treasury shares are as follows:
2022 2021
--------- ------------ -----------
Basic 114,335,175 114,392,024
--------- ------------ -----------
Diluted 114,335,175 114,392,024
--------- ------------ -----------
At 31 December 2022 there were no unexercised share options that
could potentially dilute basic earnings per share (2021: nil).
14 Intangible assets
Exploration Exploration Exploration Exploration Exploration Exploration
and and and and and and Other
evaluation evaluation evaluation evaluation evaluation evaluation Mining intangible
Gedabek Gosha Ordubad Vejnaly Xarxar Garadag rights assets Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
-------------- ----------- ----------- ----------- ----------- ----------- ----------- -------- ------------ -------
Cost
1 January
2021 10,514 1,642 5,751 - - - 41,925 562 60,394
Additions 6,842 556 190 - - - 7,588
-------------- ----------- ----------- ----------- ----------- ----------- ----------- -------- ------------ -------
31 December
2021 17,356 2,198 5,941 - - - 41,925 562 67,982
Additions 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
-------------- ----------- ----------- ----------- ----------- ----------- ----------- -------- ------------ -------
Amortisation
and
impairment*
1 January
2021 - - - - - - 35,966 463 36,429
Charge for
the year - - - - - - 1,176 30 1,206
-------------- ----------- ----------- ----------- ----------- ----------- ----------- -------- ------------ -------
31 December
2021 - - - - - - 37,142 493 37,635
Charge for
the year - - - - - - 1,107 24 1,131
-------------- ----------- ----------- ----------- ----------- ----------- ----------- -------- ------------ -------
31 December
2022 - - - - - - 38,249 517 38,766
-------------- ----------- ----------- ----------- ----------- ----------- ----------- -------- ------------ -------
Net book
value
31 December
2021 17,356 2,198 5,941 - - - 4,783 69 30,347
-------------- ----------- ----------- ----------- ----------- ----------- ----------- -------- ------------ -------
31 December
2022 21,010 2,713 6,106 517 1,613 2,772 3,676 209 38,616
-------------- ----------- ----------- ----------- ----------- ----------- ----------- -------- ------------ -------
During the year the Company spent $13,000 and $23,000
respectively for obtaining geological data for the Demirli and
Kyzlbulag contract areas. These contract areas are within the
region controlled by the Russian peacekeeping force. The amounts
are included in other intangible assets.
*186,000 ounces of gold at 1 January 2022 were used to determine
depreciation of producing mines, mining rights and other intangible
assets (2021: 232,000 ounces). A 5 per cent. increase or decrease
in the ounces of gold used to compute the amortisation of
intangible assets would result in a decrease in amortisation of
$52,000 (2021: $56,000) and an increase in amortisation of $58,000
(2021: $61,000) respectively.
15 Property, plant and equipment
Plant and
equipment Producing Assets
and mines under Total
motor vehicles construction
$000 $000 $000 $000
----------------------- ---------------- ------------ --------------- --------
Cost
1 January 2021 25,207 220,421 1,590 247,218
Additions 1,974 4,782 637 7,393
Decrease in provision
for rehabilitation - (288) - (288)
----------------------- ---------------- ------------ --------------- --------
31 December 2021 27,181 224,915 2,227 254,323
Additions 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
----------------------- ---------------- ------------ --------------- --------
Depreciation and
impairment*
1 January 2021 21,766 158,772 - 180,538
Charge for the
year 1,427 13,648 - 15,075
----------------------- ---------------- ------------ --------------- --------
31 December 2021 23,193 172,420 - 195,613
Charge for the
year 1,002 14,441 - 15,443
----------------------- ---------------- ------------ --------------- --------
31 December 2022 24,195 186,861 - 211,056
----------------------- ---------------- ------------ --------------- --------
Net book value
31 December 2021 3,988 52,495 2,227 58,710
----------------------- ---------------- ------------ --------------- --------
31 December 2022 4,395 49,469 2,181 56,045
----------------------- ---------------- ------------ --------------- --------
*186,000 ounces of gold at 1 January 2022 were used to determine
depreciation of producing mines, mining rights and other intangible
assets (2021: 232,000 ounces). A 5 per cent. increase or decrease
in the ounces of gold used to compute the depreciation of property
plant and equipment would result in a decrease in depreciation of
$863,000 (2021: $717,000) and an increase in depreciation of
$994,000 (2021: $793,000) respectively.
Impairment assessment of the Group's fixed assets
The Group assesses at each balance sheet date whether any
indicators of impairment exist for each asset or cash generating
unit ("CGU"). The Group has only one operating CGU. This is the
Group's mines together with their associated processing facilities
at Gedabek ("Mining Operations"). If any such indications of
impairment exist, a formal estimate of the recoverable amount is
performed.
In assessing whether an impairment is required, the carrying
value of Mining Operations is compared with its recoverable amount.
The recoverable amount is the higher of the fair value less costs
of disposal ("FVLCD") and value in use ("VIU"). Given the nature of
the Group's activities, information on the fair value less costs to
disposal of Mining Operations is difficult to obtain unless
negotiations with potential purchasers or similar transactions are
taking place. Consequently, the VIU recoverable amount for Mining
Operations is estimated based on the discounted future estimated
cash flows (expressed in nominal terms) expected to be generated
from its continued use using market-based commodity price
assumptions, estimated quantities of recoverable minerals,
production levels, operating costs and capital requirements based
on the Group's strategic growth plan and life of mine plan. The
cash flows are discounted using a nominal discount rate before
taxation that reflects current market assessments of the time value
of money and the risks specific to Mining Operations.
Indication of impairment during the year ended 31 December
2022
In the year ended 31 December 2022, future operating cost
forecasts were prepared for the Group's Gedabek open pit mine and
Gedabek and Gadir underground mines. These showed an increase in
future operating costs compared to historic operating costs which
was considered an indication of impairment. Accordingly, the
recoverable amount of Mining Operations was calculated and compared
to its carrying value. The results of the analysis are as
follows:
$M
Recoverable amount of Mining Operations 71.7
Carrying value of Mining Operations (60.7)
----------
Excess of carrying value over recoverable
amount 11.0
----------
As the recoverable amount of Mining Operations was in excess of
its carrying value, no impairment charge was made during 2022.
Key assumptions in calculating recoverable amount of Mining
Operations
The determination of the recoverable amount of Mining Operations
is most sensitive to the following key assumptions:
-- Production volumes
-- Precious metal and copper prices
-- Discount rates
-- Operating and capital expenditure
Production volumes
In calculating the recoverable amount, the following production
volumes were incorporated into the cash flow model for the years
2023 to 2028 ("Cash Flow Model"):
Gold: 219,000 ounces
Silver: 429,000 ounces
Copper: 38,861 tonnes
Estimated production volumes are based on the Group's forecasts
contained within its Strategic Growth plan which was published by
the Company on 30 March 2023. Production volumes are dependent on a
number of variables, including: the recoverable quantities; the
production profile; the cost to maintain the infrastructure
necessary to extract the reserves; the production costs and the
selling price of the precious metal and copper extracted.
The volumes used for the production profile are consistent with
the latest JORC and non-JORC resource and reserves statements
published by the Company for its Zafar and Gilar ore deposits. The
detailed information on these reserves and resources can be found
in the following Company announcements (a) "Increased Mineral
Resource Estimate at Gilar" dated 21 March 2023 (b) "Zafar JORC
Mineral Resource completed - 6.8 million tonnes of mineralisation
with average copper grade of 0.50 per cent." dated 21 March
2022.
Precious metal and copper prices
The precious metal and copper prices used in the Cash Flow Model
are the best estimates by management based on all readily available
sources of internal and external information. These prices are
reviewed annually. The estimated gold, silver and copper prices
used for the Cash Flow Model are as follows:
Year
Metal Unit 2023 2024 2025 2026 2027 2028 Average
--------- --------- --------- --------- --------- --------- -----------
Gold $/ounce 1,800 1,720 1,700 1,700 1,700 1,700 1,720
------------ --------- --------- --------- --------- --------- --------- -----------
Silver $/ounce 21 21 21 21 21 21 21
------------ --------- --------- --------- --------- --------- --------- -----------
Copper $/tonne 8,400 8,000 8,000 8,000 8,000 8,000 8,067
------------ --------- --------- --------- --------- --------- --------- -----------
Discount rate
In calculating the recoverable amount, a nominal pre-tax
discount rate of 10.27 per cent. was applied to the pre-tax cash
flows expressed in nominal terms. This is the Group's estimated
pre-tax average weighted cost of capital ("WACC"). The cost of the
Group's equity is derived from the expected return on investment by
the Group's investors.
Operating and capital expenditure
Operating expenditures are based on actual costs and budgets.
Capital expenditures are based on budgets and the Group's strategic
growth plan.
Sensitivity analysis
The directors believe there are no reasonably possible changes
in any of the assumptions, except the commodity price and
production volumes and operating costs, which would lead to an
impairment in Mining Operations. It is estimated that a 10 per
cent. decrease in the gold and silver prices and an average 10 per
cent. decrease in copper price together used in the Cash Flow Model
would result in an impairment of $15.7 million. It is estimated
that a 10 per cent. decrease in the production used in the Cash
Flow Model would result in an impairment of $15.7 million. It is
estimated that a 10 per cent. increase in operating costs would
result in an impairment of $13.1 million.
Indication of impairment during the year ended 31 December
2021
In the year ended 31 December 2021, revised JORC ore reserve
estimates were prepared and published for the Group's Gedabek open
pit mine and Gadir underground mine. These showed decreased ore
reserves compared to previous estimates which was considered an
indication of impairment. Accordingly, the recoverable amount of
Mining Operations was calculated and compared to its carrying
value. The results of the analysis are as follows:
$M
Recoverable amount of Mining Operations 67.2
Carrying value of Mining Operations (65.2)
----------
Excess of carrying value over recoverable
amount 2.0
----------
As the recoverable amount of Mining Operations was in excess of
its carrying value, no impairment charge was made during 2021.
Key assumptions in calculating recoverable amount of Mining
Operations
The determination of the recoverable amount of Mining Operations
is most sensitive to the following key assumptions:
-- Production volumes
-- Precious metal and copper prices
-- Discount rates
-- Operating and capital expenditure
Production volumes
In calculating the recoverable amount, the following production
volumes were incorporated into the cash flow model for the years
2022 to 2025 ("Cash Flow Model"):
Gold: 186,000 ounces
Silver: 373,000 ounces
Copper: 9,856 tonnes
Estimated production volumes are based on the Group's latest ore
reserve estimates and internal budgets and forecasts and the
Group's five-year plan. Production volumes are dependent on a
number of variables, including: the recoverable quantities; the
production profile; the cost to maintain the infrastructure
necessary to extract the reserves; the production costs and the
selling price of the precious metal and copper extracted.
The volumes used for the production profile are consistent with
the latest revised JORC resource and reserves statements published
in 2020 adjusted by production in 2021. The Cash Flow Model also
includes production from approximately 1.6 million tonnes of
previously crushed heap-leached ore with an estimated average grade
of 1.25 grammes of gold. This is high grade ore which was processed
prior to construction of the Group's agitation leaching plant and
has remained in-situ since heap leaching. As heap leaching only
recovers around 30 per cent. to 60 per cent. of the gold and silver
content, this material contains a sufficiently high grade of gold
to be economic to process and recover by agitation leaching.
Precious metal and copper prices
The precious metal and copper prices used in the Cash Flow Model
are the best estimates by management based on all readily available
sources of internal and external information. These prices are
reviewed annually. The estimated gold, silver and copper prices
used for the Cash Flow Model are as follows:
Year
Metal Unit 2022 2023 2024 2025 Average
------------ --------- --------- --------- --------- -----------
Gold $/ounce 1,830 1,800 1,750 1,750 1,770
------------ --------- --------- --------- --------- -----------
Silver $/ounce 22 21 21 21 21
------------ --------- --------- --------- --------- -----------
Copper $/tonne 9,000 9,100 9,000 9,000 9,025
------------ --------- --------- --------- --------- -----------
Discount rate
In calculating the recoverable amount, a nominal pre-tax
discount rate of 8.71 per cent. was applied to the pre-tax cash
flows expressed in nominal terms. This is the Group's estimated
pre-tax average weighted cost of capital ("WACC"). The cost of the
Group's equity is derived from the expected return on investment by
the Group's investors.
Sensitivity analysis
The directors believe there are no reasonably possible changes
in any of the assumptions, except the commodity price and
production volumes and operating costs which would lead to an
impairment in Mining Operations. It is estimated that a 10 per
cent. decrease in the gold and silver prices and an average 10 per
cent. decrease in copper price together used in the Cash Flow Model
would result in an impairment of $10.8 million. It is estimated
that a 10 per cent. decrease in production used in the Cash Flow
Model would result in an impairment of $10.8 million. It is
estimated that a 10 per cent. increase in operating costs would
result in an impairment of $6.1 million.
Capital commitments
The capital commitments by the Group have been disclosed in note
31.
16 Leases
Right of use assets
Plant and
equipment Land and Total
and buildings
motor vehicles
$000 $000 $000
--------------------- --------------- ------------ --------
Cost
1 January 2021 2,357 553 2,910
Additions 166 541 707
Lease modifications 957 116 1,073
--------------------- --------------- ------------ --------
31 December 2021 3,480 1,210 4,690
Additions 337 - 337
Lease modifications (743) (57) (800)
--------------------- --------------- ------------ --------
31 December 2022 3,074 1,153 4,227
--------------------- --------------- ------------ --------
Depreciation
1 January 2021 813 288 1,101
Charge for the year 410 113 523
--------------- ------------ --------
31 December 2021 1,223 401 1,624
Charge for the year 386 154 540
Lease modifications (264) (36) (300)
31 December 2022 1,345 519 1,864
--------------------- --------------- ------------ --------
Net book value
31 December 2021 2,257 809 3,066
--------------------- --------------- ------------ --------
31 December 2022 1,729 634 2,363
--------------------- --------------- ------------ --------
Lease liabilities
2022 2021
$000 $000
------------------------- ----- ------
1 January 3,293 1,947
Additions 337 707
Lease modifications (565) 1,073
Interest expense 291 266
Repayment (648) (700)
31 December 2,708 3,293
------------------------- ----- ------
Current liabilities 419 403
Non-current liabilities 2,289 2,890
------------------------- ----- ------
2,708 3,293
------------------------- ----- ------
Amount recognised in the profit and loss account
2022 2021
$000 $000
--------------------------------------------- ------- -----
Depreciation expense of right of use assets 540 523
Gain on lease modifications (65) -
Interest expense 291 266
Expenses relating to short term leases 347 413
1,113 1,202
--------------------------------------------- ------- -----
The amount of future lease commitments for short-term leases at
31 December 2021 and 2022 are similar to the amounts expensed in
2021 and 2022 respectively as the level of leasing activity has not
changed. As these amounts are not dissimilar to the expense for the
respective years, the amounts of the lease commitments have not
been disclosed.
17 Financial assets
2022 2021
Non-current $000 $000
---------------------------------------- ------ ---------
Derivatives not designated as hedging
instruments
Share warrants 39 384
Financial assets at fair value through
profit or loss
Listed equity investments - 2,393
39 2,777
---------------------------------------- ------ ---------
2022 2021
Current $000 $000
--------------------------------------- ------ ------
Derivatives not designated as hedging
instruments
Forward contract for the purchase of
shares - 214
--------------------------------------- ------ ------
Derivatives not designated as hedging instruments
Share warrants
Each of the 12,600,000 shares purchased in total in Libero in
December 2021 and January 2022 had a half a warrant attached
totalling 6,300,000 warrants. The 2,900,000 shares acquired in
August 2022 had no warrants attached. The 6,300,000 (2021:
6,300,000) share warrants are valued using a risk-neutral binomial
tree. Quantitative information about the fair value measurement of
the warrants using significant directly or indirectly observable
inputs is as follows:
Assumption 31 December 31 December 2021
2022
----------------------------------- ------------------ ------------------
Share price of Libero CAD$0.16 CAD$0.54
Option exercise price CAD$0.75 CAD$0.75
Acceleration condition CAD$1.00 CAD$1.00
Lapse date
2,800,000 warrants issued 21 December 21 December 2023
22 December 2021 2023
3,500,000 warrants issued 25 January 2024 Not applicable
26 January 2022
Risk free rate 4.6 per cent. 0.51 per cent.
Expected volatility - daily 6.88 per cent. 7.64 per cent.
Expected volatility - annualised 109.26 per cent. 121.25 per cent.
Probability of regulatory Not applicable 95 per cent.
approval
Discount for lack of marketability 13.97 per cent. 15.36 per cent.
Exchange rate US$1 = CAD$1.3549 US$1 = CAD$1.2634
------------------ ------------------
Forward contract for the purchase of shares
In December 2021, the Group subscribed for 12,600,000 shares in
Libero Copper & Gold Corporation ("Libero"). 5,600,000 shares
were purchased in December 2021, with the remaining 7,000,000
shares purchased in January 2022. Accordingly, the 7,000,000 shares
purchased in January 2022 is a forward contract for the purchase of
shares at 31 December 2021. The forward contract is measured at
fair value at 31 December 2021. The carrying value of the forward
contract of $214,000 was added to the acquisition cost of the
associate company following the acquisition of the 7,000,000 shares
in January 2022.
`
Financial assets at fair value through profit or loss
Listed equity investments
At 31 December 2021, these were 5,600,000 shares in Libero, a
company which is listed on the Toronto Ventures Stock Exchange in
Canada. On 26 January 2022, the Group purchased a further 7,000,000
shares and Libero became an associate company of the Group (note 11
- 'Investment in an associate company').
18 Trade and other receivables
Other receivables
2022 2021
Non-current $000 $000
----------------------------------------------- ------- -------
Advances for purchases - 185
----------------------------------------------- ------- -------
Trade receivables
Current
----------------------------------------------- ------- -------
Gold held due to the Government of Azerbaijan 7,274 16,094
VAT refund due 1,562 390
Loan to an employee* 510 -
Other tax receivable 1,038 182
Trade receivables - fair value** 2,716 718
Prepayments and advances 5,231 2,368
18,331 19,752
----------------------------------------------- ------- -------
*See note 32 - "Related party transactions"
**Trade receivables subject to provisional pricing.
Trade receivables (not subject to provisional pricing) are for
sales of gold and silver to the refiner and are non
interest-bearing and payment is usually received one to two days
after the date of sale.
Trade receivables (subject to provisional pricing) are for sales
of gold and copper concentrate and are non interest-bearing, but as
discussed in accounting policy 4.2, 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. Refer to accounting policy 4.11 for details of fair
value measurement.
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 in 2021 or 2022.
The VAT refund due at 31 December 2022 and 2021 relates to VAT
paid on purchases.
Gold bullion held and transferable to the Government is bullion
held by the Group due to the Government of Azerbaijan. The Group
holds the Government's share of the product from its mining
activities and from time to time transfers that product to the
Government. A corresponding liability to the Government is included
in trade and other payables as disclosed in note 21 "Trade and
other payables".
19 Inventory
2022 2021
Current assets $000 $000
-------------------------------------------- ------- -------
Cost
0Finished goods - bullion 2,243 2,001
Finished goods - metal in concentrate 1,128 1,079
Metal in circuit 12,140 12,026
Ore stockpiles 8,299 7,107
Spare parts and consumables 16,392 14,699
-------------------------------------------- ------- -------
Total current inventories 40,202 36,912
-------------------------------------------- ------- -------
Total inventories at the lower of cost and
net realisable value 40,202 36,912
-------------------------------------------- ------- -------
The Group has capitalised mining costs related to high grade
sulphide ore stockpiled during the year. Such stockpiles are
expected to be utilised as part of the flotation processing.
Inventory is recognised at lower of cost or net realisable
value.
20 Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and held by
the Group within financial institutions that are available
immediately. The carrying amount of these assets approximates their
fair value.
The Group's cash on hand and cash held within financial
institutions at 31 December 2022 (including short-term cash
deposits) comprised $17,000 and $20,393,000 respectively (2021:
$11,000 and $37,442,000).
The Group's cash and cash equivalents are mostly held in United
States Dollars.
21 Trade and other payables
2022 2021
Current $000 $000
----------------------------------------------- ------- -------
Accruals and other payables 4,912 5,999
Trade creditors 3,311 3,629
Gold held due to the Government of Azerbaijan 7,274 16,094
Payable to the Government of Azerbaijan
from copper concentrate joint sale 2,525 2,302
18,022 28,024
----------------------------------------------- ------- -------
2022 2021
Non-current $000 $000
---------------------------- ------- ------
Accruals and other payables 2,897 -
---------------------------- ------- ------
Trade creditors primarily comprise amounts outstanding for trade
purchases and ongoing costs. Trade creditors are non-interest
bearing and the creditor days were 33 (2021: 18). Accruals and
other payables mainly consist of accruals made for accrued but not
paid salaries, bonuses, related payroll taxes and social
contributions, 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 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 31 December 2022 is $3.0 million (2021: nil).
The $1.0 million payment made in 2022 has been included in the
Group cash flow statement as investment in exploration and
evaluation assets. The full amount of $4.0 million less the
discount of $0.7 million has been capitalised in the Group balance
sheet as an intangible asset - exploration and evaluation.
22 Changes in liabilities arising from financing activities
2022
---------------------------------------------
1 January Cash flows Other 31 December
$000 $000 $000 $000
------------------------ ---------- ----------- ------ ------------
Lease liabilities 3,293 (648) 63 2,708
------------------------ ---------- ----------- ------ ------------
Total liabilities from
financing activities 3,293 (648) 63 2,708
------------------------ ---------- ----------- ------ ------------
2021
---------------------------------------------
1 January Cash flows Other 31 December
$000 $000 $000 $000
------------------------ ---------- ----------- ------ ------------
Lease liabilities 1,947 (700) 2,046 3,293
------------------------ ---------- ----------- ------ ------------
Total liabilities from
financing activities 1,947 (700) 2,046 3,293
------------------------ ---------- ----------- ------ ------------
Other in 2021 results mainly from a change in the estimate of
the mine life.
23 Provision for rehabilitation
2022 2021
$000 $000
----------------------------------------- -------- -------
1 January 11,922 11,833
Additions 5,704 614
Accretion expense 425 377
Effect of passage of time and change in
discount rate (2,045) (902)
----------------------------------------- -------- -------
31 December 16,006 11,922
----------------------------------------- -------- -------
The Group has a liability for restoration, rehabilitation and
environmental costs arising from its mining operations. Estimates
of the cost of this work including reclamation costs, close down
and pollution control are made on an ongoing basis, based on the
estimated life of the mine. This provision represents the net
present value of the best estimate of the expenditure required to
settle the obligation to rehabilitate any environmental
disturbances caused by mining operations. The undiscounted
liability for rehabilitation at 31 December 2022 was $24,235,000
(2021: $15,883,000). The undiscounted liability was discounted
using a risk-free rate of 5.99 per cent. (2021: 3.57 per cent.).
Expenditures on restoration and rehabilitation works are expected
between 2028 and 2030 (2021: between 2028 and 2030).
24 Financial instruments
Financial risk management objectives and policies
The Group's principal financial instruments at 31 December 2022
comprised cash and cash equivalents. The Group also had letters of
credit outstanding during the year ended 31 December 2022 but these
were all settled during the year. The Group may enter into bank and
other loans and letters of credit in the future. The main purpose
of these financial instruments is to finance the Group operations.
The Group has other financial instruments, such as trade and other
receivables and trade and other payables, which arise directly from
its operations. Surplus cash within the Group is put on deposit,
the objective being to maximise returns on such funds whilst
ensuring that the short-term cash flow requirements of the Group
are met.
The main risks that could adversely affect the Group's financial
assets, liabilities or future cash flows are capital risk, market
risk, interest rate risk, foreign currency risk, liquidity risk and
credit risk. Management reviews and agrees policies for managing
each of these risks which are summarised below.
The following discussion also includes a sensitivity analysis
that is intended to illustrate the sensitivity to changes in market
variables on the Group's financial instruments and show the impact
on profit or loss and shareholders' equity, where applicable.
Financial instruments affected by market risk include bank loans
and overdrafts, accounts receivable, accounts payable and accrued
liabilities.
The sensitivity has been prepared for the years ended 31
December 2022 and 2021 using the amounts of debt and other
financial assets and liabilities held as at those reporting
dates.
Capital risk management
The capital structure of the Group at 31 December 2022 consists
of lease liabilities, cash and cash equivalents and equity
attributable to equity holders of the parent, comprising issued
share capital, reserves and retained earnings as disclosed in the
consolidated statement of changes in equity. The Group also had
letters of credit outstanding during the year ended 31 December
2022 but these were all settled during the year. The Group may
enter into bank and other loans and letters of credit in the
future. The Group has sufficient capital to fund ongoing production
and exploration activities, with capital requirements reviewed by
the Board on a regular basis. Capital has been sourced through
share issues on the AIM, part of the London Stock Exchange, and
loans from banks in Azerbaijan and elsewhere. In managing its
capital, the Group's primary objective is to ensure its continued
ability to provide a consistent return for its equity shareholders
through capital growth. In order to achieve this objective, the
Group seeks to maintain a gearing ratio that balances risk and
returns at an acceptable level and also to maintain a sufficient
funding base to enable the Group to meet its working capital and
strategic investment needs.
The Group is not subject to externally imposed capital
requirements and monitors capital using a gearing ratio, which is
net debt divided by total capital plus net debt. The Group's policy
is to keep the gearing ratio below 70 per cent.
Interest rate risk
The Group's cash deposits are at a fixed rate of interest. The
Group's letters of credit outstanding during the year ended 31
December 2022 were also at a fixed rate of interest. The Group
would expect any future bank and other borrowings and letters of
credit to be at a fixed rate of interest.
The Group manages the risk by maintaining fixed rate
instruments, with approval from the directors required for all new
borrowing facilities.
The Group has not used any interest rate swaps or other
instruments to manage its interest rate profile during 2022 and
2021.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with
the board of directors, which has built an appropriate liquidity
risk management framework for the management of the Group's short,
medium and long-term funding and liquidity management requirements.
The Group manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities by continuously
monitoring forecast and actual cash flows and matching the maturity
profiles of financial liabilities. The Group has access to local
sources of both short and long-term finance should this be
required.
The table below summarises the maturity profile of the Group's
financial liabilities based on their contractual payment amounts as
disclosed in the Group balance sheet.
Year ended 31 December 2022
On Less 3 to 1 to >5 Total
demand than 12 5 years $000
$000 3 months months years $000
$000 $000 $000
--------------------------- --------- ---------- -------- ------- ------ ---------
Lease liabilities - 105 314 2,289 - 2,708
Trade and other payables - 18,022 - 2,897 - 20,919
-------------------------- ---------- ---------- -------- ------- ------ -------
- 18,127 314 5,186 - 23,627
---------- ---------- -------- ------- ------ -------
Year ended 31 December 2021
On Less 3 to 1 to >5 Total
demand than 12 5 years $000
$000 3 months months years $000
$000 $000 $000
-------------------------- --------- ---------- -------- ------- ------ -------
Lease liabilities - 182 547 2,916 122 3,767
Trade and other payables - 28,024 - - - 28,024
-------------------------- --------- ---------- -------- ------- ------ -------
- 28,206 547 2,916 122 31,791
------------------------------------ ---------- -------- ------- ------ -------
Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group. The maximum credit risk exposure relating to financial
assets is represented by their carrying value as at the
consolidated statement of financial position date.
The Group has adopted a policy of only dealing with creditworthy
banks and has cash deposits held with reputable financial
institutions. These usually have a lower to upper medium grade
credit rating. Trade receivables consist of amounts due to the
Group from sales of gold and silver and copper and precious metal
concentrates. Sales of gold and silver bullion are made to MKS
Finance SA and Argor Heraeus SA, Switzerland-based gold refineries,
and copper concentrate is sold to Industrial Minerals SA, Trafigura
PTE Ltd and Metal-Kim Metalurgi Ve Kimya Tarim Sanayi Tic Ltd Sti.
Due to the nature of the customers, the board of directors does not
consider that a significant credit risk exists for receipt of
revenues. The board of directors continually reviews the
possibilities of selling gold to alternative customers and also the
requirement for additional measures to mitigate any potential
credit risk.
Foreign currency risk
The presentational currency of the Group is United States
Dollars. The Group is exposed to currency risk due to movements in
foreign currencies relative to the US Dollar affecting foreign
currency transactions and balances.
The carrying amounts of the Group's foreign currency denominated
monetary assets and monetary liabilities at 31 December are as
follows:
Liabilities Assets
--------------- ---------------
2022 2021 2022 2021
$000 $000 $000 $000
------------------- ------- ------ --- ------- ------
UK Sterling 253 277 473 2
Azerbaijan Manats 9,503 7,448 2,300 1,474
Other 698 377 65 152
------------------- ------- ------ --- ------- ------
Foreign currency sensitivity analysis
The Group is mainly exposed to the currency of the United
Kingdom (UK Sterling), the currency of the European Union (Euro)
and the currency of the Republic of Azerbaijan (Azerbaijan
Manat).
The following table details the Group's sensitivity to a 10.6
per cent., 10.6 per cent. and 0.14 per cent. (2021: 9 per cent., 9
per cent. and 20 per cent.) increase and a 10.6 per cent., 10.6 per
cent., and 0.14 per cent. (2021: 9 per cent., 9 per cent., and 3
per cent.) decrease in the United States Dollar against United
Kingdom Sterling, Euro and Azerbaijan Manat, respectively. These
are the sensitivity rates used when reporting foreign currency risk
internally to key management personnel and represents management's
assessment of the reasonably possible change in foreign exchange
rates. The sensitivity analysis includes only outstanding foreign
currency denominated monetary items and adjusts their translation
at the period end for respective change in foreign currency rates.
A positive number below indicates an increase in profit and other
equity where the United States Dollar strengthens by the mentioned
rates against the relevant currency. Weakening of the United States
Dollar against the relevant currency, there would be an equal and
opposite impact on the profit and other equity, and the balances
below would be reversed.
UK Sterling Azerbaijan Euro Impact
impact Manat impact
-------------- ---------------- --------------
2022 2021 2022 2021 2022 2021
$000 $000 $000 $000 $000 $000
----------------------------- ------ ------ ------- ------- ------ ------
Increase - effect on profit
before tax (23) 23 10 1,171 67 20
Decrease - effect on profit
before tax 23 (23) (10) (176) (67) (21)
----------------------------- ------ ------ ------- ------- ------ ------
Market risk
The Group's activities primarily expose it to the financial
risks of changes in gold, silver and copper prices which have a
direct impact on revenues. The management and board of directors
continuously monitor the spot price of these commodities. The
forward prices for these commodities are also regularly monitored.
The majority of the Group's production is sold by reference to the
spot price on the date of sale. However, the board of directors
will enter into forward and option contracts for the purchase and
sale of commodities when it is commercially advantageous.
A 10 per cent. decrease in gold price in the year ended 31
December 2022 would result in a reduction in revenue of $6.7
million and a 10 per cent. increase in gold price would have the
equal and opposite effect. A 10 per cent. decrease in silver price
would result in a reduction in revenue of $0.02 million and a 10
per cent. increase in silver price would have an equal and opposite
effect. A 10 per cent. decrease in copper price would result in a
reduction in revenue of $1.6 million and a 10 per cent. increase in
copper price would have an equal and opposite effect.
25 Share capital and merger reserve
2022 2021
---------------------------- ----------------------------
Number GBP Number GBP
----------------------------- -------------- ------------ -------------- ------------
Authorised
Ordinary shares of 1 pence
each 600,000,000 6,000,000 600,000,000 6,000,000
----------------------------- -------------- ------------ -------------- ------------
Shares $000 Shares $000
----------------------------- -------------- ------------ -------------- ------------
Ordinary shares issued
and fully paid
1 January and 31 December 114,392,024 2,016 114,392,024 2,016
----------------------------- -------------- ------------ -------------- ------------
Fully paid ordinary shares carry one vote per share and carry
the right to dividends. 150,000 ordinary shares were bought back
during the year ended 31 December 2022 and are now held in treasury
(note 27 - 'Treasury shares').
Share options
The Group has share option scheme under which options to
subscribe for the Company's shares have been granted to certain
executives and senior employees (note 28 - 'Share based
payment').
Merger reserve
The merger reserve was created in accordance with the merger
relief provisions under Section 612 of the Companies Act 2006 (as
amended) relating to accounting for Group reconstructions involving
the issue of shares at a premium. In preparing Group consolidated
financial statements, the amount by which the base value of the
consideration for the shares allotted exceeded the aggregate
nominal value of those shares was recorded within a merger reserve
on consolidation, rather than in the share premium account.
26 Share premium
2022 2021
$000 $000
--------------------------- ------- ------
1 January and 31 December 33 33
--------------------------- ------- ------
27 Treasury shares
2022 2021
------------- ------------
Number $000 Number $000
-------------------------- ------- ---- ------ ----
1 January - - - -
Shares bought back during
the year 150,000 145 - -
-------------------------- ------- ---- ------ ----
31 December 150,000 145 - -
-------------------------- ------- ---- ------ ----
The Company bought back the following ordinary shares in the
year ended 31 December 2022:
Price per Total cost Total cost
Date of buyback Number of share pence GBP $000
shares
------------------- ------------ ------------- ----------- -----------
21 July 2022 50,000 81.75 40,875 49
10 August
2022 50,000 89.50 44,750 54
16 September
2022 50,000 73.00 36,500 42
------------------- ------------ ------------- ----------- -----------
Total 150,000 81.42* 122,125 145
------------------- ------------ ------------- ----------- -----------
* Average cost
28 Share-based payment
The Group operates a share option scheme for directors and
senior employees of the Group. The period during which share
options can be exercised is determined by the board of directors
for each individual grant of share options subject to exercise not
taking place later than the tenth anniversary of their issue.
Options are exercisable at a price equal to the closing quoted
market price of the Group's shares on the date of the board of
directors approval to grant options. Options are forfeited if the
employee leaves the Group and the options are not exercised within
three months from leaving date.
The number and weighted average exercise prices ("WAEP") of, and
movements in, share options during the year were as follows:
2022 2021
------------------ -------------------
WAEP WAEP
Number pence Number pence
---------------------------- --------- ------- --------- --------
I January 220,000 115 - -
Granted during the year 160,000 111 220,000 115
---------------------------- --------- ------- --------- --------
Outstanding at 31 December 380,000 115 220,000 115
---------------------------- --------- ------- --------- --------
Exercisable at 31 December 110,000 115 - -
---------------------------- --------- ------- --------- --------
The weighted average remaining contractual life of the share
options outstanding at 31 December 2022 was 4.4 years (2021: 6
years) and their exercise price was 113 pence.
On 2 February 2022, 160,000 share options were granted at a
price of GBP 1.11.
Share options are valued using the assumption that they will
only be exercised if the share price prevailing at the date of
exercise is equal to, or above, the price at which the options were
granted. This methodology approximates to valuing the share options
using a Black-Scholes model.
The Group recognised total expense related to equity-settled
share-based payment transactions for the year ended 31 December
2022 of $412,000 (2021: $12,000).
29 Distributions paid and proposed
2022 2021
$000 $000
-------------------------------------------- ------- -------
Cash dividends on ordinary shares declared
and paid
Special dividend for 2020: 1.5 US cents
per share - 1,711
Final dividend for 2020: 3.5 US cents per
share - 4,010
Interim dividend for 2021: 4.5 US cents
per share - 5,197
Final dividend for 2021: 3.5 US cents per 3,995 -
share
Interim dividend for 2022: 4.0 US cents 4,617 -
per share
-------------------------------------------- ------- -------
8,612 10,918
-------------------------------------------- ------- -------
Proposed dividends on ordinary shares
Final dividend for 2022: 4.0 US cents per 4,570 -
share*
-------------------------------------------- ------- -------
Cash dividends are declared in US dollars but paid in pounds
Sterling. Dividends are converted into pounds Sterling using a
five-day average of the sterling closing mid-price published by the
Bank of England at 4pm each day for a specified week prior to
payment of the dividend.
The rates used to convert the dividends from US dollars into
pounds Sterling for the dividends above which have been paid and
the corresponding sterling amount of dividend are as follows:
Conversion Dividend
rate pence
------------------------------------------- ----------- ---------
Special dividend for 2020: 1.5 US cents
per share 1.3932 1.0767
Final dividend for 2020: 3.5 US cents per
share 1.3805 2.5354
Interim dividend for 2021: 4.5 US cents
per share 1.3662 3.2937
Final dividend for 2021: 3.5 U S cents
per share 1.1994 2.9181
Interim dividend for 2022: 4.0 US cents
per share 1.1249 3.5559
------------------------------------------- ----------- ---------
*The proposed final dividend for the year ending 31 December
2022 is subject to approval by shareholders at the annual general
meeting for 2023 at a rate to be announced. It has not been
recognised as a liability in the Group statement of financial
position at 31 December 2022.
30 Subsidiary undertakings and associate company
Anglo Asian Mining PLC is the parent and ultimate parent of the
Group.
The Company's subsidiaries included in the Group financial
statements at 31 December 2022 are as follows:
Percentage
Primary of holding
Country of place of per
Name incorporation business cent.
-------------------------------- ---------------- ---------------- ------------
England and
Anglo Asian Operations Limited Wales United Kingdom 100
British Virgin
Holance Holdings Limited Islands Azerbaijan 100
Anglo Asian Cayman Limited Cayman Islands Azerbaijan 100
R.V. Investment Group Services Delaware,
LLC USA Azerbaijan 100
Azerbaijan International
Mining Company Limited Cayman Islands Azerbaijan 100
-------------------------------- ---------------- ---------------- ------------
There has been no change in subsidiary undertakings since 1
January 2022.
The Company's associate company included in the Group financial
statements at 31 December 2022 is as follows:
Percentage
Registered Primary place of holding
Name address of business per cent.
--------------------------------- -------------------- -------------- -----------
Suite 905 -
111 West Hastings,
Vancouver
British Columbia,
Canada, V6E
Libero Copper & Gold Corporation 2JE The Americas 18.3
--------------------------------- -------------------- -------------- -----------
The associate company was acquired in the year ended 31 December
2022.
31 Contingencies and commitments
The Group undertakes its mining operations in the Republic of
Azerbaijan pursuant to the provisions of an Agreement on the
Exploration, Development and Production Sharing for Prospective
Gold Mining Areas ("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 granting
the Group three new contract areas with a combined area of 882
square kilometres and which 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 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 is now 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 in compliance with the environmental clauses contained in
the PSA.
32 Related party transactions
Trading transactions
During the years ended 31 December 2021 and 2022, there were no
trading transactions between Group companies.
Other 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.
a) Remuneration paid to directors is disclosed above.
b) During the year ended 31 December 2022, total payments of
$3,533,000 (2021: $715,000) were made for processing equipment and
supplies purchased from Proses Muhendislik Danismanlik Inshaat ve
Tasarim Anonim Shirket, an entity in which the Vice President of
technical services of Azerbaijan International Mining Company has a
direct ownership interest.
At 31 December 2022 there is a payable in relation to the above
related party transaction of $250,000 (2021: $157,000).
c) During the year ended 31 December 2022, total payments of
$1,609,000 (2021: $1,489,000) were made for processing equipment
and supplies 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.
At 31 December 2022 there is a payable in relation to the above
related party transaction of $nil (2021: $862,000).
(d) 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.
All of the above transactions were made on arm's length
terms.
31 Subsequent events
Libero Copper & Gold Corporation ("Libero")
On 6 January 2023, the Company made its second follow-on
investment in Libero by way of a subscription agreement. The
subscription agreement was for 2,600,000 new shares at CAN 15 cents
per share totalling CAN$390,000 ($289,000). The Company also
acquired 2,600,000 warrants at CAN 22 cents per share. The shares
were admitted to the TSXV following issue. Following the
subscription, the Company held 18.1 million common shares in
Libero, as well as a total of 2.6 million warrants exercisable at
CAN 22 cents and 6.3 million warrants exercisable at CAN 75 cents
per share. The investment maintained the Company's 19.8 per cent.
shareholding in Libero.
On 17 February 2023, the Company made its third follow-on
investment in Libero by way of a subscription agreement. The
subscription agreement was for 3,200,000 new shares at CAN 15 cents
per share totalling CAN$480,000 ($355,000). The Company also
acquired 3,200,000 warrants at CAN 22 cents per share. The shares
were admitted to the TSXV following issue. Following the
subscription, the Company held 21.3 million common shares in
Libero, as well as a total of 5.8 million warrants exercisable at
CAN 22 cents and 6.3 million warrants exercisable at CAN 75 cents
per share. The investment maintained the Company's 19.8 per cent.
shareholding in Libero.
**ENDS**
Notes to editors:
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 19.8 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.
https://www.angloasianmining.com/
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END
FR AAMJTMTMBTJJ
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May 16, 2023 02:00 ET (06:00 GMT)
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