TIDMAAZ
RNS Number : 2070Z
Anglo Asian Mining PLC
20 May 2021
Anglo Asian Mining plc / Ticker: AAZ / Index: AIM / Sector:
Mining
20 May 2021
Anglo Asian Mining PLC
2020 Full year results
Record turnover of $102.1 million and an increase in profit
before tax to $35.7 million
Cash of $38.8 million and no bank debt at 31 December 2020
Final dividend of $0.035 per ordinary share giving a total
dividend of $0.095 per ordinary share for 2020 (2019: $0.08 per
share)
Anglo Asian Mining PLC ("Anglo Asian" or the "Company"), the AIM
listed gold, copper and silver producer focused in Azerbaijan, is
pleased to announce its final audited results for the year ended 31
December 2020 ("FY 2020"). Note that all references to "$" are to
United States dollars and " GBP " to United Kingdom pounds
sterling.
Financial Highlights
Record total revenues
-- Record total revenues in 2020 of $102.1 million representing
an 11 per cent. year-on-year ("y-o-y") increase (2019: $92.1
million)
-- Profit before taxation for 2020 of $35.7 million (2019: $30.1
million) representing a y-o-y increase of 19 per cent.
-- Strong operating cash flow before movements in working
capital of $52.8 million (2019: $50.5 million) driven by increased
metal prices and the low cost of production
-- Cash of $38.8 million at 31 December 2020 (31 December 2019: net cash of $21.2 million)
o Company became bank debt free in early 2020
o Company paid dividends of $10.3 million in 2020
-- Final dividend declared in respect of FY 2020 of $0.035 per
ordinary share payable on 29 July 2021 subject to approval at the
Annual General Meeting giving a FY 2020 total dividend of $0.095
per ordinary share (FY 2019: $0.08 per ordinary share)
o Dividend maintained at the same level as 2019 (excluding
special dividend of $0.015 paid in 2020) to retain capital given
the exceptional development opportunities in its six contract
areas
Operational Highlights
Gedabek licence extended for a further five years
-- First of the two five-year permitted extensions of the
production sharing agreement for Gedabek granted in April 2021
FY 2020 production in line with expectations
-- 67,249 gold equivalent ounces ("GEOs") produced:
o Gold production for FY 2020 of 56,864 ounces (FY 2019: 70,098
ounces)
o Copper production for FY 2020 increased by 17 per cent. y-o-y
to 2,591 tonnes (FY 2019: 2,210 tonnes)
o Silver production for FY 2020 of 122,962 ounces (FY 2019:
159,356 ounces)
-- FY 2020 gold bullion sales of 48,650 ounces (FY 2019: 53,992
ounces) completed at an average of $1,777 per ounce (FY 2019:
$1,410 per ounce)
-- FY 2020 copper concentrate shipments to the customer totalled
11,839 dry metric tonnes ("dmt") with a sales value of $17.7
million (excluding Government of Azerbaijan production share) (FY
2019: 10,281 dmt with a sales value of $16.7 million)
-- All-in sustaining cost ("AISC") of gold production increased
to $702 per ounce (2019: $591 per ounce) due to lower production -
AISC remains in the lowest quartile
-- Total production target for FY 2021 between 64,000 and 72,000 GEOs
Chairman's statement
The year under review has been without precedent for Anglo
Asian. It commenced with the COVID-19 pandemic and ended with the
conflict between Azerbaijan and Armenia. The Company's highest
priority throughout the year continued to be the safety and welfare
of our employees. Despite the many challenges, I am very pleased to
report that the Company demonstrated its resilience by ending this
exceptionally difficult year financially stronger and better
positioned for growth than at the beginning.
The Group's cash generation during the year was excellent and
the Company ended 2020 with cash of $39 million and no bank debt.
To ensure the Company retains sufficient capital to pursue its
exciting development opportunities in all six contract areas, the
board has decided to maintain the dividend (excluding the special
dividend for 2020) at the same level as 2019 of US 8.0 cents per
share. Accordingly, I am very pleased to declare a final dividend
in respect of 2020 of US 3.5 cents per share. This will give a
total dividend for the year (including the special dividend for
2020) of US 9.5 cents per share.
I am also very pleased to report that in April 2021, the first
of the two five-year permitted extensions of the production sharing
agreement for Gedabek was granted. This extension demonstrates the
Company's excellent relations with the Government of
Azerbaijan.
COVID-19 pandemic and the conflict between Azerbaijan and
Armenia
The COVID-19 pandemic, commencing from March 2020, severely
restricted our operations in Azerbaijan. Restrictions included
either curtailing or suspending domestic and international travel
which affected our supply chain and movement of staff. The
operations of many local businesses were suspended for much of the
year. Our gold refiners in Switzerland also halted operations for a
short period.
In September 2020, conflict broke out between Azerbaijan and
Armenia, which thankfully ended in November with a ceasefire
agreement. Martial law was imposed throughout Azerbaijan during the
period of the conflict together with a night-time curfew. Many
social media and other internet services were either restricted or
blocked completely. Some company employees were also conscripted
for military service.
The COVID-19 pandemic and the conflict with Armenia were
extremely demanding for employees of the Company, many of whom
faced new challenges, often daily. Extra health and safety measures
had to be quickly put in place and many actions taken to secure our
operations. It is a tribute to our employees' endeavours that the
Company's operations were maintained throughout the year with only
limited disruption.
The restrictions arising from COVID-19 have remained in various
forms throughout the year. They have been slowly eased from
February 2021 and most restrictions within Azerbaijan have been
lifted by now. However, international travel to and from Azerbaijan
is still limited, but shipping gold dor é to Switzerland by
scheduled flights was recommenced in autumn 2020.
Financial results and dividend
The Company's financial performance in the year was highly
satisfactory, with revenues of $102 million, compared to $92
million in 2019. Revenues were boosted by increased metal prices,
with gold sales averaging $1,777 per ounce over the year, compared
to $1,410 per ounce in 2019. The all-in sustaining cost of gold
produced increased to $702 per ounce compared to $591 per ounce in
2019 due to the lower production as many costs are either fixed or
semi-fixed. The Company ended the year with a very strong balance
sheet with cash of $39 million and no bank debt after having paid
$10 million of dividends in the year.
The Company is committed to delivering returns to its
shareholders and is proud to be one of the few mining companies
listed on the London Alternative Investment Market which pays
dividends. I am therefore delighted to announce a final dividend
for the year ended 31 December 2020 of US 3.5 cents per share,
giving a total dividend for 2020 of US 9.5 cents per share. This
maintains the dividend at the same level as 2019, excluding the
special dividend of US 1.5 cents per share paid in March 2021.
Gedabek site - operational review and production in 2020
In 2020, a total of 67,249 gold equivalent ounces were produced
at Gedabek. Production was lower than 2019 because the Ugur open
pit mine, which was providing higher grade ore, was mined out
during the year. The COVID-19 pandemic and the conflict between
Azerbaijan and Armenia also affected our production, due to
difficulties in rotating site employees and disruptions to our
supply chains. It is not feasible to quantify accurately the
production lost but the directors believe it was not very
significant.
The health and safety of all of our employees and contractors is
of the highest importance to Anglo Asian Mining and testament to
this was reaching in July the significant milestone of one million
man hours worked without a lost time injury (" LTI") . We are
extremely proud of this achievement and will continue to improve
our safety procedures as we work towards the target of two million
LTI-free man hours. COVID-19 testing is freely available in
Azerbaijan and employees and contractors are regularly tested.
Social distancing and other measures are in place in line with best
practice to endeavour to keep all our employees safe. A new,
purpose built, staff canteen was also opened in the year to improve
the wellbeing of our employees at Gedabek.
During the year, a new portal was opened and a decline was
developed into the ore body below the Gedabek main open pit.
Underground mining of the richer ore below the open pit is now
being carried out. The decline was also connected to the Gadir
underground mine tunnelling to provide the required number of
egresses for safe mining.
An application for the first of the two, contractually allowed,
five-year extensions of the production sharing agreement for the
Gedabek contract area was submitted during the year. The extension
was granted by the Government of Azerbaijan in April 2021.
The Company increased the capacity of its tailings dam by 1.4
million cubic metres by raising the wall of the dam by six metres.
It now has sufficient capacity until the end of 2022. This will be
the last raise of the wall as the dam has reached its maximum
design height. A potential site for a new tailings dam has been
identified and geotechnical investigations are on-going.
Mineral resources and geological exploration
Sustainable production is an essential part of the Company's
strategy, together with a comprehensive exploration programme to
identify growth opportunities. We are now in the third year of our
internally-funded, three-year exploration programme, which has been
a notable success. In 2020, we reported updated JORC statements for
our mines, and exploration resulted in the discovery of Zafer, an
exciting copper-gold mineral occurrence within the Gedabek contract
area.
The updated resources and reserves for the Gedabek open pit
showed 284,000 ounces of gold and 26,000 tonnes of copper, of ore
reserves remaining. The ore reserves of the Gadir underground mine
are 49,000 ounces of gold and 191 tonnes of copper. Exploration is
continuing across the Gedabek contract area to increase resources
and reserves.
The Zafer copper-gold deposit, conveniently located only 1.5
kilometres from the Gedabek processing plant, is an exciting
discovery. The thickness and style of its mineralisation is
consistent with porphyry-type mineralisation and a preliminary
estimate of the deposit size is about six million tonnes of
mineralised rock. An intensive drilling programme is currently
underway at Zafer to produce JORC resource and reserve estimates,
with a maiden resource expected to be available in June 2021.
Exploration work at the Avshancli mineral district indicates a
free-digging central zone with the possibility of mining from an
open pit, beginning late this year or early 2022. At Gosha,
drilling continued close to the existing underground mine and
significant gold grades were encountered. It was not possible to
drill at Ordubad in 2020 due to COVID-19 restrictions, although
some trench sampling was carried out. It is planned to ramp up
exploration in 2021 at Ordubad.
Newly restored contract areas
The restoration of the three contract areas in the formerly
occupied territories and Karabakh opens up further opportunities
for the Company. The contract areas cover a total of 900 square
kilometers and contain existing mines and have exceptional
exploration potential. Our production sharing agreement is in good
standing and will be reset to "year zero" for each of these
contract areas once access has been granted. The political
situation is still developing and the Company is closely monitoring
events. The Government of Azerbaijan has also commenced building
infrastructure in the areas such as roads, railways and
airports.
A limited site visit to the Vejnaly contract area has been
undertaken. However, due to safety and security concerns, access to
Vejnaly and the other restored areas by Company personnel remains
somewhat restricted. The determination of their final status
continues to be reviewed by the Government of Azerbaijan.
Production guidance for 2021
In 2021, the Company will only be mining from its existing mines
and production is forecast to decrease, mainly due to the
exhaustion of the Ugur open pit in 2020. We have therefore set a
production target of 64,000 to 72,000 gold equivalent ounces for
2021. This includes up to 54,000 ounces of gold and between 2,500
and 2,800 tonnes of copper. We believe our continued exploration
programme and other initiatives will result in increased in
production in future years.
This 2021 guidance does not include any production from the
restored contract areas. Whilst the situation is currently unclear,
the Company believes there may be potential for a small amount of
production from ore stockpiled at Vejnaly.
Growth strategy
The Group is now vigorously pursuing various opportunities for
future growth. We are planning to start production from our new
discoveries, possibly commencing with a small open pit mine in the
central area of Avshancli-1 which may commence late this year, or
early next year. Slightly longer term, Zafer has the potential for
a major new underground mine at Gedabek. We are also currently in
discussions with the Government of Azerbaijan regarding acquisition
of new concessions in the country and we hope to be able to update
our shareholders about these in the near future.
Negotiations with Conroy Gold and Natural Resources plc for a
joint venture were terminated in early 2021. It had become apparent
during the negotiations that the Company had a very different
vision for the joint venture to that of Conroy. We still have
ambitions to develop mines outside of Azerbaijan and continue to
look at other opportunities which will add value for our
shareholders.
We believe the restored contract areas and any additional
concessions in Azerbaijan offer potential for growth. In addition
to resuming operation of the existing mines, significant
exploration potential exists on known geological trends in the
restored contract areas.
Board of Director changes
Michael Sununu was appointed as a non-executive director in
December 2020 following the departure from the board of Richard
Round. I warmly welcome Michael to the board and would also like to
thank Richard for his work and commitment to the Company over many
years.
Annual General Meeting for 2021
The directors have very reluctantly taken the decision to again
convene the annual general meeting for 2021 as a "closed meeting"
with only the necessary quorum of two members. Whilst all United
Kingdom COVID-19 restrictions are planned to end shortly before our
annual general meeting, there is a possibility this could be
postponed. Further, four out of five directors and the company
secretary would need to travel to the United Kingdom for the
meeting, which may still not be possible in late June.
The Company has given serious consideration to holding a virtual
"hybrid" annual general meeting. However, these are prone to
technical problems due to the variable reliability of the internet
and they do not offer face to face interaction with shareholders.
The directors have therefore decided such a meeting would not offer
sufficient benefits to be worthwhile.
In accordance with the latest guidance and to ensure best
practice, all voting will be by proxy and the chairman of the
meeting should be appointed as the proxy. As last year, a facility
will be established for shareholders to submit questions to the
board prior to the annual general meeting via the Company's
website. The Company will publish all relevant questions together
with the Company's response, prior to the closing date for
submission of proxy voting cards.
Shareholders are strongly encouraged to vote by proxy. However,
shareholders should ensure they appoint the chairman of the meeting
as their proxy as other individuals will not be allowed to attend
the meeting.
Outlook
The Company's performance in 2020 has been a considerable
achievement. Our operational competence and financial discipline
leaves the Company in an excellent situation. A strong balance
sheet and available capital ensures the continued future
development of Anglo Asian Mining.
Geological exploration is expected to yield further positive
results with a focus on our five discoveries, particularly the
exciting Zafer discovery. We have also begun to evaluate our
restored contract areas with a site visit to Vejnaly. We are also
in discussions to acquire new concessions in Azerbaijan.
As a part of our plan for sustained growth and longevity, we
continue to assess expansion opportunities both in Azerbaijan and
other countries that will complement our existing operations and
deliver substantial shareholder value.
Anglo Asian Mining is a very well-established, low cost, debt
free, dividend paying, gold, copper and silver producer in the
junior mining sector. The past year has more than amply
demonstrated the Company's resilience and financial performance
whilst pursuing growth opportunities.
Appreciation
The COVID-19 pandemic and conflict with Armenia provided great
challenges to all our staff in 2020. I would like to take this
opportunity to thank the employees of Anglo Asian Mining, our
partners, the Government of Azerbaijan and our advisors for their
continued support. Our thoughts are also with the family of our
employee who lost his life in the conflict. 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
sharing our future successes with you all.
Khosrow Zamani
Non-executive chairman
19 May 2021
Dividend
A final dividend of US$0.035 per share will be paid gross in
respect of the year ended 31 December 2020 to shareholders on 29
July 2021 that are on the shareholders record at the record date of
2 July 2021 subject to approval of the shareholders at the
Company's Annual General Meeting on 29 June 2021. The shares will
go ex-dividend on 1 July 2021. 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 5 to 9 July 2021.
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 2020.
The Company's Section 172 (1) Statement is included within the
strategic report below.
Market Abuse (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 until the release of this
announcement.
For further information please visit www.angloasianmining.com or
contact:
Reza Vaziri Anglo Asian Mining plc Tel: +994 12 596 3350
Bill Morgan Anglo Asian Mining plc Tel: +994 502 910 400
--------------------------- ----------------------
Stephen Westhead Anglo Asian Mining plc Tel: +994 502 916 894
--------------------------- ----------------------
Ewan Leggat SP Angel Corporate Finance Tel: +44 (0) 20 3470
LLP 0470
Nominated Adviser and
Broker
--------------------------- ----------------------
Adam Cowl SP Angel Corporate Finance Tel + 44 (0) 20 3470
LLP 0470
--------------------------- ----------------------
Megan Ray Blytheweigh Financial Tel: +44 (0) 20 7138
3224
--------------------------- ----------------------
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 Director of
Geology & Mining, who is a Fellow of The Geological Society of
London, a Chartered Geologist, Fellow of the Society of Economic
Geologists, Member 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 resources and reserves included in this announcement.
Strategic report
Principal activities
The principal activity of Anglo Asian Mining PLC (the "Company")
is that of a holding company and a provider of support and
management services to its main operating subsidiary R.V.
Investment Group Services LLC. 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 other potential
gold and copper deposits in Azerbaijan.
The Group has 1,962 square kilometres of land in western
Azerbaijan including Karabakh under concession divided into six
separate parcels of land called contract areas. This is
approximately 2.5 per cent. of the territory of Azerbaijan. Three
of the contract areas ("Active Contract Areas") have been exploited
since inception of the business and are at various stages of
development:
-- Gedabek contract area ("Gedabek") . This is the location of
the Group's main gold, silver and copper open pit mine and the
Gadir and Gedabek underground mines. The Group's processing
facilities to produce gold doré and copper, silver and gold
concentrates are also located at Gedabek.
-- Gosha contract area ("Gosha") . This is located approximately
50 kilometres from Gedabek and is the location of a small, narrow
vein gold and silver mine.
-- Ordubad contract area ("Ordubad"). An early-stage gold and
copper exploration project located in Nakhchivan, south-west
Azerbaijan.
In addition to the Active Contract Areas, the Group has three
contract areas ("Restored Contract Areas") which were restored to
the Group following the cessation of the conflict between
Azerbaijan and Armenia in 2020. The Group will commence exploiting
these contract areas as soon as access is obtained and other
conditions permit.
-- Soutely contract area ("Soutely"). Situated in the Kalbajar
district of Azerbaijan and location of the Soyudlu (formerly "Zod")
gold and silver mine.
-- Kyzlbulag contract area ("Kyzlbulag"). Situated in Karabakh.
-- Vejnaly contract area ("Vejnaly"). Situated in the Zangilan
district of Azerbaijan and hosts the Vejnaly deposit.
Overview of 2020 and 2021 production target
In 2020, the Company continued its strategy to increase
shareholder value by progressing the development of Anglo Asian
into a mid-tier gold, copper and silver miner. The key pillars of
the strategy are as follows:
Add production in the medium term
-- Increase production from new discoveries at Gedabek with
potential production scheduled to start in late 2021 or 2022.
-- Commence production from mines in the Restored Contract Areas.
Longer-term development
-- Develop the large amount of exploration territory under
concession including Gosha, Ordubad and the Restored Contract
Areas.
-- Obtain new concessions in Azerbaijan.
-- Pursue any opportunities outside of Azerbaijan which it
believes can be made commercially successful.
In November 2020, the ore resource and reserve statements in
accordance with the JORC Code (2012) were published for all Company
mines. The Company's three-year geological exploration programme,
which commenced in 2018, has yielded very positive results with
many new targets and potential deposits identified. In early 2021,
the Group announced the discovery of "Zafer" at Gedabek. This is a
significant copper-gold mineral occurrence.
The Group has a production target for the year to 31 December
2021 of 48,000 ounces to 54,000 ounces of gold and 2,500 tonnes to
2,800 tonnes of copper. The total production target for the year to
31 December 2021 expressed as gold equivalent ounces ("GEOs") is
between 64,000 GEOs and 72,000 GEOs, compared to total production
for the year to 31 December 2020 of 67,249 GEOs. Silver and copper
production were converted into GEOs using the following budget
metal prices:
Price of metal Gold equivalent ounces
of metal
Metal Unit Actual Budget 2021 Actual Budget
31 December 31 December 2021
2020 2020
$ Ounces Ounces
$
----------- ------------- --------------- --------
Gold per ounce 1,893.66 1,650.00 1.000 1.000
----------- ------------- ------------ --------------- --------
Silver per ounce 26.30 25.00 0.014 0.015
----------- ------------- ------------ --------------- --------
Copper per tonne 7,741.50 8,700.00 4.088 5.273
----------- ------------- ------------ --------------- --------
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, its Gadir and
Gedabek underground mines and the Company's processing facilities.
Ore was also mined in 2020 from the Ugur mine, which is now nearing
depletion.
Gold was first poured from ore mined from the Gedabek open pit
and processed by heap leaching in May 2009, with production
commencing fully in September 2009. Copper and precious metal
concentrate production began 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.
Underground extraction of ore at Gedabek started in June 2015
when the Gadir mine was opened. In July 2018, a second crusher line
was added to enable independent operation of the agitation leaching
plant and the flotation plant. In 2020, a decline was developed
into the ore body beneath the Gedabek open pit and underground
mining was commenced (the "Gedabek underground mine").
Mineral resources and ore reserves
Key to the future development of the Company is our knowledge of
the mineral resources within the Company's contract areas. The
Group's most recent mineral resources and ore reserves estimates
were published on 2 November 2020. A summary of these estimates is
as follows (amounts are in-situ before recovery):
-- Mineral resources for Gedabek open pit:
o Total mineral resources of 735,000 ounces of gold and 41,200
tonnes of copper.
o Mineral resources now include material contained in
stockpiles.
o Zinc mineral resources now also estimated to enable the
technical implications of higher zinc grades at depth to be
understood.
-- Revised mineral resources for Gadir underground mine:
o Total mineral resources of 267,000 ounces of gold and 2,183
tonnes of copper.
-- Combined mineable ore reserves for the Gedabek open pit and Gadir underground mine:
o Gedabek open pit of 284,000 ounces of gold and 26,000 tonnes
of copper.
o Gadir underground mine of 49,000 ounces of gold and 191 tonnes
of copper.
-- Mine life for the Gedabek open pit of eight years:
o Mine life based on only surface mining from the Gedabek open
pit.
o Underground mining from beneath the Gedabek open pit will
shorten the mine life.
-- A residual mineral study of the Ugur open pit showed that, as
expected, the mine is nearing depletion.
Table 1 shows the Gedabek open pit mineral resources estimate at
30 June 2020 and table 2 shows the Gedabek open pit ore reserves
estimate at 30 June 2020. Table 3 shows the Gadir underground mine
mineral resources estimate at 30 September 2020 and table 4 shows
the Gadir underground mine ore reserves estimate at 30 September
2020 . Table 5 shows the amount of remaining mineable material for
the Ugur open pit at 30 June 2020.
Table 1 - Gedabek open pit mineral resources estimate at 30 June
2020
MINERAL RESOURCES (cut-off grade of 0.2 g/t gold)
Mineral Tonnage In-situ grades Contained metal
Resources (Mt)
-------- ---------------------------------- ---------------------------------
Gold Copper Silver Zinc Gold Copper Silver Zinc
grade grade grade grade (koz) (kt) (koz) (kt)
(g/t) (%) (g/t) (%)
-------- ------- ------- ------- ------- ------- ------- ------- ------
Measured 15.8 0.66 0.12 2.58 0.24 335 19.0 1,311 37.9
-------- ------- ------- ------- ------- ------- ------- ------- ------
Indicated 12.0 0.56 0.12 2.31 0.16 216 14.4 891 19.2
-------- ------- ------- ------- ------- ------- ------- ------- ------
Measured
and
Indicated 27.8 0.62 0.12 2.46 0.21 551 33.4 2,202 57.1
------------ -------- ------- ------- ------- ------- ------- ------- ------- ------
Inferred 13.0 0.44 0.06 0.61 0.15 184 7.8 255 19.5
-------- ------- ------- ------- ------- ------- ------- ------- ------
TOTAL 40.8 0.56 0.10 1.87 0.19 735 41.2 2,457 76.6
------------ -------- ------- ------- ------- ------- ------- ------- ------- ------
Some of the totals above may not add due to rounding
ADDITIONAL MINERAL RESOURCES (additional to gold mineral resource)
(gold cut-off < 0.2 g/t and copper > 0.3 %
Gold Copper Silver Zinc Contained metal
------------------ ----------------- ----------------- ---------------- --------------------------------
Tonnage Gold Tonnage Copper Tonnage Silver Tonnage Zinc Gold Copper Silver Zinc
(Mt) grade (Mt) grade (Mt) grade (Mt) grade (koz) (kt) (koz) (kt)
(g/t) (%) (g/t) (%)
--------- ------- -------- ------- -------- ------- -------- ------ ------ ------- ------- ------
Measured - - 2.15 0.43 0.08 16.4 1.86 0.53 - 9.2 42 9.9
--------- ------- -------- ------- -------- ------- -------- ------ ------ ------- ------- ------
Indicated - - 2.13 0.34 0.28 13.9 2.03 0.51 - 7.2 125 10.4
--------- ------- -------- ------- -------- ------- -------- ------ ------ ------- ------- ------
Measured
and
Indicated - - 4.28 0.39 0.36 14.5 3.89 0.52 - 16.5 167 20.2
----------- --------- ------- -------- ------- -------- ------- -------- ------ ------ ------- ------- ------
Inferred - - 2.85 0.40 0.15 19.4 7.04 0.54 - 11.4 94 38.0
--------- ------- -------- ------- -------- ------- -------- ------ ------ ------- ------- ------
TOTAL - - 7.10 0.39 0.51 15.9 10.9 0.50 - 27.9 261 58.2
----------- --------- ------- -------- ------- -------- ------- -------- ------ ------ ------- ------- ------
Some of the totals above may not add due to rounding
Mineral resource classifications are based on the gold
estimation confidence. Copper, silver, and zinc are reported within
these classifications.
Stockpiles included in Measured Resources and Ore Reserves
Measured Mineral Tonnage Stockpile grades Contained metal
Resources (Mt)
-------- ------------------------- -------------------------
Gold Copper Silver Gold Copper Silver
grade grade grade (koz) (kt) (koz)
(g/t) (%) (g/t)
-------- ------- ------- ------- ------- ------- -------
Agitation leach 0.02 1.87 0.24 17.79 1 0 10
-------- ------- ------- ------- ------- ------- -------
Flotation 0.14 0.90 0.53 11.71 4 0.7 53
-------- ------- ------- ------- ------- ------- -------
Heap leach (crushed) 0.06 0.81 0.11 7.71 2 0.1 16
-------- ------- ------- ------- ------- ------- -------
Heap leach (ROM) 0.61 0.73 0.21 10.23 14 4.3 201
-------- ------- ------- ------- ------- ------- -------
Stockpile Mineral
Resources 0.83 0.79 0.26 10.44 21 2.2 279
---------------------- -------- ------- ------- ------- ------- ------- -------
Some of the totals above may not add due to rounding
Table 2 - Gedabek open pit ore reserves estimate at 30 June
2020.
Tonnage In-situ grades Contained metal
(Mt)
Gold Copper Silver Gold Copper Silver
grade grade grade (koz) (kt) (koz)
(g/t) (%) (g/t)
------- ------- ------- ------- ------- -------
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 0 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 RESERVE 12.55 0.70 0.21 4.34 284 26.0 1,754
---------------------- -------- ------- ------- ------- ------- ------- -------
Some of the totals above may not add due to rounding
Proved and probable ore reserves estimate is based on that
portion of the measured and indicated mineral resources of the
deposit within the scheduled mine designs that may be economically
extracted, considering all "Modifying Factors" in accordance with
the JORC (2012) Code .
Table 3 - Gadir underground mine mineral resources estimate at
30 September 2020
MINERAL RESOURCES (cut-off grade of 0.5 g/t gold)
Mineral Tonnage In-situ grades Contained metal
Resources (kt)
-------- ---------------------------------- -----------------------------------
Gold Copper Silver Zinc Gold Copper Silver Zinc
grade grade grade grade (koz) (kt) (koz) (kt)
(g/t) (%) (g/t) (%)
-------- ------- ------- ------- ------- ------- ------- ------- --------
Measured 2,035 2.47 0.09 4.69 0.61 162 1,831 307 12,407
-------- ------- ------- ------- ------- ------- ------- ------- --------
Indicated 966 1.59 0.02 0.63 0.33 49 193 20 3,188
-------- ------- ------- ------- ------- ------- ------- ------- --------
Measured
and
Indicated 3,001 2.19 0.07 3.40 0.52 211 2,024 326 15,595
------------ -------- ------- ------- ------- ------- ------- ------- ------- --------
Inferred 1,594 1.10 0.01 0.03 0.10 56 159 2 1,594
-------- ------- ------- ------- ------- ------- ------- ------- --------
TOTAL 4,595 1.81 0.05 2.22 0.37 267 2,183 328 17,189
------------ -------- ------- ------- ------- ------- ------- ------- ------- --------
Some of the totals above may not add due to rounding
Table 4 - Gadir underground mine ore reserves estimate at 30
September 2020
Tonnage In-situ grades Contained metal
(Mt)
Gold Copper Silver Gold Copper Silver
grade grade grade (koz) (kt) (koz)
(g/t) (%) (g/t)
------- ------- ------- ------- ------- -------
Proven 0.47 2.32 0.04 3.38 35 173 51
-------- ------- ------- ------- ------- ------- -------
Probable 0.19 2.20 0.01 0.74 14 18 5
-------- ------- ------- ------- ------- ------- -------
TOTAL ORE RESERVE 0.66 2.28 0.03 2.60 49 191 56
------------------- -------- ------- ------- ------- ------- ------- -------
Some of the totals in the above table do not sum due to
rounding
The above proved and probable ore reserves estimate is based on
that portion of the measured and indicated mineral resource of the
deposit within the scheduled mine designs that may be economically
extracted, considering all "Modifying Factors" in accordance with
the JORC (2012) Code. Zinc was not estimated as part of this
reserve as it is under study at resource level currently.
Table 5 - remaining mineable material of the Ugur open pit at 30
June 2020
MINEABLE MATERIAL (gold cut-off grade of > = 0.3 g/t)
In-situ grades Contained metal
---------- ------------------ ------------------
Tonnage Gold Silver Gold Silver
grade grade
(Mt) (g/t) (g/t) (koz) (koz)
---------- -------- -------- -------- --------
Mineable
Material 0.28 0.8 3.59 7.15 32.3
---------- -------- -------- -------- --------
MINEABLE MATERIAL (gold cut-off grade of > = 0.2 g/t)
Mineable
Material 0.38 0.65 3.33 7.94 40.7
---------- -------- -------- -------- --------
Some of the totals above may not add due to rounding
Previously heap leached ore
Initial gold production at Gedabek from 2009 to 2013 was only by
heap leaching crushed ore as the agitation leaching of ore only
commenced following completion 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 material
contains significant amounts of gold. The Company estimates it has
about 1.7 million tonnes of previously heap leached material with
an estimated average grade of 1.35 grammes of gold per tonne at the
end of 2020.
Mining operations
The principal mining operation at the Gedabek contract area is
conventional open-cast mining using truck and shovel from the
Gedabek open pit (which comprises several contiguous smaller open
pits). Ore is first drilled and blasted and then transported either
to a processing facility or to a stockpile for storage. The mining
activities of blast-hole drilling, and haulage of ore and waste
rock, are carried out by contractors. Blasting and other mining
activities are carried out by the Company.
Ore is also mined from the Gadir and Gedabek underground mines.
Table 6 shows the ore mined in the year ended 31 December 2020 from
all the Company's mines at Gedabek and Gosha.
Table 6 - Ore mined at Gedabek from all mines (including Gosha)
for the year ended 31 December 2020
Total ore mined
12 months to
31 December 2020
Average
Ore mined gold grade
Mine (tonnes) (g/t)
---------- ------------
Gedabek open pit 1,303,956 0.94
Ugur - open pit 505,426 0.95
Gadir - underground 125,001 2.53
Gosha - underground 6,024 2.58
Gedabek - underground 16,376 2.37
---------- ------------
Total 1,956,783 1.06
======================= ========== ============
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. Depending on the composition of
the ore, an option is available to process the finely ground ore
through the flotation plant prior to, or after treatment by the
agitation leaching plant. However, since installation of the second
crusher line for the flotation plant in 2018, the two plants have
been operating independently. 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. A
synthetic ion exchange resin, in the form of small spherical
plastic beads designed to absorb gold selectively over copper and
silver, is mixed with the leach slurry or "pulp". After separation
from the pulp, the gold-loaded resin is treated with a second
solution, which "strips" (i.e. desorbs) the gold, plus the small
amounts of absorbed copper and silver, transferring the metals from
the resin back into solution. The gold and silver dissolved in this
final solution are recovered by electrolysis and are then smelted
to produce the doré metal, comprising an alloy of gold and silver.
The stripped resin is recycled back to the RIP plant, to be
reloaded with gold.
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. This
precipitates the copper from the solution in the form of a finely
divided copper sulphide concentrate containing silver and minor
amounts of gold. The process also recovers cyanide from the
solution, which is recycled back to leaching.
2 Flotation. Flotation is carried out in a separate flotation
plant. Feedstock, which can be either tailings from the agitation
leaching plant or freshly crushed and milled ore, is mixed with
water to produce a slurry called "pulp" and other reagents are then
added. This pulp is processed in flotation cells (tanks) where the
pulp is stirred and air introduced as small bubbles. The sulphide
mineral particles attach to the air bubbles and float to the
surface where they form a froth which is collected. This froth is
dewatered to form a mineral concentrate containing copper, gold and
silver.
In the early years of the mine's life, gold doré was produced at
Gedabek only by heap leaching crushed and agglomerated ore. Heap
leaching is a low capital cost method of production commonly used
by mines when they first move into production. Currently, heap
leaching at Gedabek is being carried out with ore crushed to less
than 25mm in size and the resultant gold recovery is approximately
60 per cent. to 70 per cent. of the contained gold over leaching
cycles which extend typically beyond one year.
To increase gold recoveries and production, in 2013 the Group
constructed an agitation leaching plant. Compared to heap leaching,
agitation leaching can deliver higher recoveries of gold without
long leaching cycles. Heap leach pads also require considerable
space for their construction and due to the topography of the
Gedabek site, this is a constraint. The capacity of the agitation
leaching plant was increased in 2016 by the installation of a
second semi-autogenous grinding ("SAG") mill.
The ore at Gedabek is polymetallic containing significant
amounts of copper. Initially, the SART processing plant was
constructed to recover some of the copper as a copper and precious
metal chemical concentrate. However, to further exploit the high
copper content of the Group's ore reserves, the Group constructed a
flotation plant whose function is primarily to produce a
copper-rich mineral concentrate, containing gold and silver as
by-products. The flotation plant commenced production in November
2015. The flotation plant has the flexibility to be configured for
various methods of operation.
In 2018, a second crusher line was installed for the flotation
plant. This has a budgeted capacity of 95 tonnes per hour compared
to the original crusher of up to 120 tonnes per hour. This removed
a large bottleneck and enabled independent operation of the
agitation leaching and flotation plants using separate sources of
feedstock. The addition of this second crusher not only
significantly increases the capacity of our processing plants, but
also their flexibility.
Production and sales
For the year ended 31 December 2020, total gold production as
doré bars and as a constituent of the copper and precious metal
concentrates totalled 56,864 ounces, which was a decrease of 13,234
ounces in comparison to the production of 70,098 ounces for the
year ended 31 December 2019.
Table 7 summarises the amount of ore and its gold grade
processed by leaching at Gedabek for the year ended 31 December
2020.
Table 7 - Ore and its gold grade processed by leaching at
Gedabek for the year ended 31 December 2020
Ore processed (tonnes) Gold grade of ore processed
Quarter ended (g/t)
------------------------------------- ------------------------------------
Heap leach Heap leach Agitation Heap leach Heap leach Agitation
pad pad pad pad
crushed ROM ore leaching crushed ROM ore leaching
ore plant ore plant
----------- ----------- ----------- ----------- ----------- ----------
31 March 2020 132,731 258,121 163,379 0.84 0.49 2.53
30 June 2020 139,752 134,675 161,079 0.79 0.44 1.95
30 September
2020 168,945 149,031 181,200 0.87 0.50 2.09
31 December 2020 107,852 172,206 177,487 0.89 0.59 1.81
----------- ----------- ----------- ----------- ----------- ----------
Total for the
year 549,280 714,033 683,145 0.85 0.51 2.17
================== =========== =========== =========== =========== =========== ==========
Table 8 summarises the amount of ore and its gold, silver and
copper content processed by flotation for the year ended 31
December 2020.
Table 8 - Ore and its gold, silver and copper content processed
by flotation for the year ended 31 December 2020
Quarter ended Ore processed Gold content Silver content Copper content
(tonnes) (ounces) (ounces) (tonnes)
-------------- ------------- --------------- ---------------
31 March 2020 126,354 1,860 28,831 622
30 June 2020 132,848 1,459 18,354 762
30 September
2020 123,440 1,565 15,530 741
31 December 2020 110,772 859 8,660 693
-------------- ------------- --------------- ---------------
Total for the
year 493,414 5,743 71,375 2,818
================== ============== ============= =============== ===============
Table 9 summarises the gold and silver bullion produced as doré
bars and sales of gold bullion for the year ended 31 December
2020.
Table 9 - Gold and silver bullion produced as doré bars and
sales of gold bullion for the year ended 31 December 2020
Quarter ended Gold produced* Silver Gold sales** Gold sales
ounces produced* ounces price
ounces $/ounce
31 March 2020 15,034 3,852 11,236 1,577
30 June 2020 11,455 3,562 12,743 1,713
30 September
2020 14,945 5,487 6,599 1,947
31 December
2020 13,276 4,614 18,072 1,884
-------------- ----------- ------------- ----------
Total for the
year 54,710 17,515 48,650 1,777
============== ============== =========== ============= ==========
*Including Government of Azerbaijan's share.
** Excluding Government of Azerbaijan's share.
Table 10 summarises the total copper, gold and silver produced
as concentrate by both SART and flotation processing for the year
ended 31 December 2020.
Table 10 - Total copper, gold and silver produced as concentrate
by both SART and flotation processing for the year ended 31
December 2020
Copper (tonnes) Gold (ounces) Silver (ounces)
------------------------- ------------------------- -----------------------------
Quarter ended SART Flotation Total SART Flotation Total SART Flotation Total
----- ---------- ------ ----- ---------- ------ ------- ---------- --------
31 March 2020 114 445 559 8 825 833 12,895 17,895 30,790
30 June 2020 151 497 648 7 573 580 10,857 9,542 20,399
30 September
2020 165 523 688 7 476 483 17,148 8,416 25,564
31 December
2020 196 500 696 15 243 258 21,279 7,086 28,365
----- ---------- ------ ----- ---------- ------ ------- ---------- --------
Total for the
year 626 1,965 2,591 37 2,117 2,154 62,179 42,939 105,118
=============== ===== ========== ====== ===== ========== ====== ======= ========== ========
Table 11 summarises the total copper concentrate (including gold
and silver) production and sales from both SART and flotation
processing for the year ended 31 December 2020.
Table 11 - Total copper concentrate (including gold and silver)
production and sales from both SART and flotation processing for
the year ended 31 December 2020
Concentrate Copper Gold Silver Concentrate Concentrate
production* content* content* content* sales sales**
Quarter ended (dmt) (tonnes) (ounces) (ounces) (dmt) ($000)
------------- ---------- ---------- ------------
31 March 2020 2,994 559 833 30,790 2,018 2,863
30 June 2020 3,171 648 580 20,499 3,526 4,707
30 September
2020 3,266 688 483 25,745 2,084 3,377
31 December
2020 3,350 696 258 28,413 4,211 6,763
------------- ---------- ---------- ---------- ------------ ------------
Total for the
year 12,781 2,591 2,154 105,447 11,839 17,710
=============== ============= ========== ========== ========== ============ ============
*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 is served by excellent infrastructure.
The main 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 excellent roads. The site is connected to the Azeri
national power grid and there is a dedicated sub-station located at
the main Gedabek processing facilities.
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. This is mobile, skid mounted equipment into which
water is pumped without treatment direct from the tailings dam. The
equipment then evaporates the water by jetting it into the
atmosphere as a fine spray. It can evaporate approximately 25
litres per second of water depending upon climatic conditions. This
is a stand-by facility, which is used to remove excess water from
the dam after periods of excessive rainfall.
Tailings (waste) storage
The Company is very mindful of the importance of proper storage
of tailings both for efficient operation of its processing plants
and to fulfil its environmental responsibilities. The Company
stores its tailings in a purpose-built dam approximately seven
kilometres from its 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 wall of the tailings dam was raised by seven metres in 2020
increasing the capacity of the tailings dam to 6.0 million cubic
metres. This is the final raise of the tailings dam wall and the
dam now has sufficient capacity for tailings to approximately the
end of 2022. There are two pipelines from the Company's processing
facilities to the tailings dam to increase capacity and provide
redundancy.
A site for the construction of a new tailings dam has been
identified. Planning is at a preliminary stage with geotechnical
assessment being carried out.
Health, safety and environmental
The health and safety of our employees and the protection of the
environment in and around our mine properties are prime concerns
for the Company's board and senior management team. The health,
safety and environmental ("HSE") department at Gedabek has a
qualified HSE manager, who is assisted by a team of HSE officers.
Overall strategy for HSE matters in the Company is overseen by the
HSE and Technical committee ("HSET"), which is chaired by a board
director, Professor John Monhemius. The HSET committee meets twice
a year usually at the Gedabek site, but in 2020, both meetings were
held by videoconferencing due to the COVID-19 pandemic.
During 2020, there were 13 reportable safety incidents (2019:
21) but no major accidents occurred. Two (2019: seven) were lost
time incidents (LTI), where the casualty had to take time off work.
The Company was also very pleased to report that on 24 July 2020,
one million man-hours working without any lost time injury was
achieved during the previous 170 days.
Gosha
The Gosha contract area is 300 square kilometres in size and is
located in western Azerbaijan, 50 kilometres north-west of Gedabek.
Gosha is currently the location of a small, high grade, underground
gold mine. Ore mined at Gosha is transported by road to Gedabek for
processing.
A total of 6,024 tonnes of ore of average gold grade 2.58
grammes per tonne were mined at Gosha in the year ended 31 December
2020.
The Company carried out considerable geological exploration work
at Gosha in 2020, details of which are set out in the report on
geological exploration below.
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 2020 due to the COVID-19 pandemic, details of
which are set out in the report on geological exploration
below.
Restored Contract Areas
Karabakh is a mountainous enclave wholly within the borders of
Azerbaijan. It is bordered by seven districts of Azerbaijan which
were occupied by Armenia in 1994 (the "Occupied Territories").
With the cessation of the hostilities over Karabakh and the
Occupied Territories in November, 2020, the seven districts which
surround Karabakh, which have always been recognised by
international bodies as being part of Azerbaijan, have been
returned to Azeri administration. These districts of Azerbaijan had
been occupied by Armenia since the end of the first Karabakh war in
1994 and were the subject of four United Nations Security Council
Resolutions (822, 853, 874 and 884), each calling for the
withdrawal of Armenian forces.
In 1997, Anglo Asian obtained six mineral resource contract
areas under a Production Sharing Agreement ("PSA") with the
Government of Azerbaijan. Two of the contract areas (Soutely and
Vejnaly) are located in the formerly Occupied Territories. The
Soutely contract area is in the mountainous Kalbajar district and
the Vejnaly contract area in the Zangilan district in the
south-west of Azerbaijan. The third contract area Kyzlbulag, is
located in Karabakh.
The Restored Contract Areas in the formerly Occupied Territories
and Karabakh were part of Anglo Asian's original Production Sharing
Agreement, along with the Active Contract Areas. All contract areas
were reaffirmed to the Company by the Azerbaijan Government in 2006
and continue in good standing.
The Restored Contract Areas have continued to be held under the
Company's existing PSA. However, the PSA will only commence in
respect of each of these contract areas upon notification by the
Government of Azerbaijan to the Company of the cessation of all
hostilities and that it is safe to access the district. This
notification will therefore "reset" the PSA to year zero for that
contract area. Accordingly, the Company then has the right to
explore the contract area for up to five years and then develop and
produce for 15 years, with two five-year extensions allowed.
The Company has always stated its intention to develop its
contract areas in the formerly Occupied Territories and Karabakh
upon settlement of the conflict over Karabakh and surrounding
regions. The Company therefore plans to pursue its legal rights
under the PSA to develop these mineral resources. Development will
commence when the Company receives notice in accordance with its
PSA that the Organisation on Security and Cooperation in Europe
("OSCE") (or comparable international organisation) has
acknowledged a liberation of the previously occupied territories
and the Company is satisfied the districts are secure.
An initial limited visit has been made to the Vejnaly deposit
which is located in the Zangilan district of south-western
Azerbaijan. There has been some mining and small scale processing
was carried out at the deposit during the Armenian occupation but
this has now stopped. The potential for exploration and further
production is currently unknown. The region has been secured by the
Government of Azerbaijan and Anglo Asian is waiting for permission
to permanently access the area further to evaluate its resources
and infrastructure as with the Soutely and Kyzlbulag contract
areas.
Geological exploration
Summary
Gedabek
-- New mineral discovery "Zafer" at Gedabek.
-- Initial models of gold and copper mineralisation completed
and substantial drilling undertaken in the Avshancli mineral
district.
-- Initial drill programme commenced and surface Induction
Polarisation ("IP") survey conducted at Gilar.
-- Substantial drilling completed at the Gadir and Gedabek underground mines0
-- Core drilling undertake at Ugur Deeps, targeting the
high-grade copper and silver mineralisation.
Gosha
-- Infrastructure to support sustained geological exploration
was completed in 2020 including a geological camp.
-- Drilling undertaken close to the Gosha underground mine
targeting areas of extension to "Zone 5" and in the "New Zone" (the
area between "Zone 5" and "Zone 13").
Ordubad
-- Due to the access restrictions as a result of COVID-19, no drilling was carried out in 2020.
-- A limited trenching programme continued at the Uchurdag and Unus targets.
Gedabek
Gedabek open pit and Duzyurd
Exploration in and around the operating Gedabek open pit and
Duzyurd was limited in the year due to production priorities. Only
two core drill holes and three reverse circulation drill holes were
completed, both types designed to explore the geology at depth and
test for sub-pit and adjacent mineralisation . The results from
Gedabek yielded gold intersections, while the Duzyurd drill hole
was not successful in intersecting mineralisation, but did identify
alteration. Some reverse circulation drilling was also carried out
for grade control and mine planning purposes.
Gadir and Gedabek underground mines
A considerable amount of exploration activity was completed at
Gadir during 2020, comprising underground drilling and mapping.
Interpretation was completed for the ground-based induced
polarisation ("IP") geophysical survey. This work has resulted in
defining ore zones that extend the current Gadir mineralisation
footprint both laterally and down-dip. Additionally, the drilling
continues to help constrain ore body models around production
stoping fronts, so that tonnages and grade can be more accurately
determined. In 2020, 106 core drill holes (77 in BQ diameter and 29
in HQ/NQ diameter) were completed for a total of 4,831 metres. Gold
grades of up to 33 g/t of gold were reported. These positive
results demonstrate the expansion potential of the underground mine
at Gadir.
Considerable exploration activity was completed at Gedabek
underground during H2 2020. Various platforms were utilised to
complete 23 core drill holes (16 in BQ diameter and 7 HQ/NQ
diameter) for a total of 1,371 metres. Gold grades of up to 6.2 g/t
of gold were reported.
Ugur Deeps
Exploration in 2020 was focused on and around the Ugur open pit
to assess the potential extensions to the Ugur deposit. Thirteen
core drill holes were completed to the south-east of, and around,
the Ugur open pit. These holes targeted deeper extents of
high-grade copper-silver mineralisation. Intersections assaying
more than two per cent. copper were encountered at depths of around
300 metres. Drilling is continuing in 2021.
Zafer
Zafer is a new discovery which was announced 19 January 2021.
Zafer was found by Anglo Asian's in-house exploration group and is
a new mineral occurrence approximately 1.5 kilometres north-west of
the Company's Gedabek processing facilities. The mineralisation was
identified by geological exploration follow-up of field mapping
between ZTEM targets. Geological, structural and alteration mapping
was used to target the initial drilling, which commenced in August
2020. A series of drill holes demonstrated that the geology
progressively moved from altered rock into weakly mineralised rocks
and finally into the zone of significant mineralisation.
Once the scale of the mineralisation was understood,
ground-based IP and resistivity electrical geophysics was employed
to define the potential extent of the mineralisation. In total, 10
profile lines covering an overall length of nearly 25 kilometres
were completed. The 2-D and 3-D interpretations resulted in the
identification of a number of "hot spot" anomalies that are being
followed up with further drilling.
The geology of the area is structurally complex, comprising
mainly of Upper Bajocian-aged volcanics. The mineralisation seems
to be associated with a main northwest-southeast trending
structure, which is interpreted as post-dating smaller
northeast-southwest 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.
In 2020, 12 drill holes were completed totalling 7,675 metres.
The deposit is currently being drilled with four core drill
machines and further geophysical work will be carried out if
required. A mineralogical study is also underway to assess the
textural relations between the metallic minerals and gangue
mineralogy. This will establish the associations between the copper
and gold mineralisation (grain size and liberation
characteristics), which will be used to determine the grind sizes
and processing options.
Based on the work in 2020, a preliminary estimate of the size of
the Zafer deposit is about six million tonnes of mineralised
rock.
Avshancli district
Avshancli is a significant mineral district which is 10.5
kilometres north-east of the Gedabek open pit. Avshancli is a
gold-copper occurrence comprising three defined areas, Avshancli 1,
2 and 3. In 2020, detailed mapping continued over the region. Both
core and reverse circulation drilling, as well as outcrop and
trench sampling, were carried out. Twenty seven core drill holes
totalling 6,629 metres and seventy nine reverse circulation drill
holes totalling 5,349 metres were completed. Significant intercepts
of up to 16.7 g/t of gold were reported. Outcrop and trench
sampling reported notable surface grades of up to 19.9 g/t of
gold.
Initial models of gold (at > 0.3 g/t gold) and copper (at
> 0.2 per cent.) mineralisation have been prepared for Avshancli
1. The mineral concentrations exhibit a central zone about 200 by
300 metres surrounded by satellite concentrations that are
currently disconnected from the main central zone. The central area
contains gold mineralisation near surface in a substrate that is
free digging. The thickness of the zone seems restricted and work
is continuing to assess geological controls on the continuity both
laterally and at depth. Exploration continues in 2021 with further
work planned to test the continuity from the central area to the
satellite zones.
Gilar
Gilar is a new mineral occurrence located approximately two
kilometres south of Avshancli 1. A considerable amount of
exploration was completed during 2020 comprising core drilling and
outcrop mapping. A ground-based Induction IP survey was also
carried out in the year.
To commence the initial drill programme, 26 core drill holes
were completed at Gilar during 2020 totalling 7,994 metres.
Significant intercepts were reported of up to 14.1 g/t of gold. An
additional three core drill holes were drilled in the flank of
Gilar for the evaluation of ZTEM shallow targets ZS14 and ZS15.
Interpretation of the ZTEM drill holes will be reported in
2021.
BLASTO LLC were contracted to conduct an IP survey over the
Gilar mineralisation area, which was carried out between 19 August
to 1 September 2020. The target depth of exploration was 400
metres. Six profile lines (including one test profile) were run.
Interpretation of the IP data is currently being undertaken by both
an external consultant and the Company. The preliminary
interpretation shows the main anomalies are located in the
south-east and north-east part of the mineralisation area.
Gosha
Preliminary infrastructure was constructed in 2020 at Gosha to
support exploration efforts. In 2020, twenty core drill holes were
completed for a total of 4,616 metres. These were drilled around
"Zone 5" and the "New Zone" between "Zone 5" and "Zone 13", which
is approximately 500 metres from "Zone 5". The aim of this drill
programme continues to be to test the Gosha vein system at depth,
below the current "Zone 5" and to further assess the "New Zone".
Significant gold grades of up to 15 g/t of gold were encountered.
These assay results confirm that gold mineralisation exists at
depth below "Zone 5" and "New Zone".
Surface exploration was also carried out at the Gocdere and
Khatinca regions of Gosha. In the second half of 2020, 145 outcrop
samples were collected and 14 trenches completed totalling 301
metres were from which 190 samples were taken.
A new geological map of Gosha has been compiled from all
previous data. This was the first stage of a desktop study to
consolidate historical and new geological data and to better
understand the regional geology. From this map, 15 porphyry and 13
gold/lead/zinc mineralisation targets have been identified.
Ordubad
Due to COVID-19 restrictions, drill access was restricted during
2020 and therefore no drilling was able to be undertaken in the
year. Trench work was carried out during the second half of 2020 on
the Unus and Uchurdag gold vein systems. A total of 149 trenches
were dug amounting to 561 linear metres. 560 samples were obtained
at one metre intervals unless geological constraints warranted
adjustment in sample length. Assay results for these samples have
not yet been received and will be reported in the first half of
2021.
The Company is still awaiting results from the samples collected
by the geological team from the Natural History Museum London as
part of their ongoing "From Arc Magmas to Ores" ("FAMOS")
international research project. This study is being carried out to
determine whether there are any indications of a porphyry system
within Ordubad. The results of this investigation should have been
available by now, but unfortunately they have been delayed by the
COVID-19 pandemic.
Detailed reports on geological exploration
Detailed reports on all exploration activities in 2020 can be
found on the Group's website at:
https://www.angloasianmining.com/operations/exploration-and-development/
Sale of the Group's products
Important to the Group's success is the ability to transport its
products to market and sell them without disruption.
In 2020, the Group shipped all its gold doré for refining to
either MKS Finance SA or Argor-Heraeus SA. Both refiners are
situated in Switzerland. The Group continually reviews which
refiner offers the best commercial terms, and based on these,
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 usually ships its gold doré to
Switzerland by scheduled airflights, which were temporarily
suspended in mid-2020. The Group made three shipments by chartered
aircraft during this period which resulted in minor delays to the
export of gold doré. In March 2020, the refiners suspended their
operations due to the COVID-19 pandemic as the Swiss authorities
closed all non-essential industry. However, the refiners restarted
operations in April. Neither the temporary closure of the refiners
nor the requirement to ship by chartered aircraft, had any material
effect on the Group's operations.
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 below. The contracts with each metal
trader are periodically renewed and each new contract requires the
approval of the Government of Azerbaijan. Some minor delays in
selling concentrate have been experienced whilst waiting for
Government approval of new contracts.
Section 172(1) Statement
Introduction
The board of directors of Anglo Asian Mining PLC (the "Board")
consider that they have adhered to the requirements of section 172
of the Companies Act 2006 (the "Act") and have, in good faith,
acted in a way that they consider 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 have had regard to and
recognise 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 which
is a holding company. The Group carries out its business of mining
in Azerbaijan through its wholly owned subsidiaries. Given the
nature and size of the Group, the Board consider 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 Corporate Governance Section of the
annual report.
Principal decisions and other key factors in maintaining
shareholder value
For the year ended 31 December 2020, the Board consider 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 2020;
-- consideration of the final dividend payable for the year
ended 31 December 2019 and the interim dividend payable for the
year ended 31 December 2020;
-- agreeing the actions required in response to the COVID-19
health emergency. The Board considered all aspects of the health
emergency with its principal focus to ensure the health and safety
of its employees. The Board also addressed measures required to
ensure continuity of production and selling of its production.
Given it was unknown how the health emergency would develop,
contingency plans were made for various possible outcomes of the
pandemic;
-- agreeing to a potential investment in Ireland by way of a
joint venture with Conroy Gold and Natural Resources PLC ("Conroy")
which resulted in the signing of the Heads of Terms with Conroy.
The Board considered all aspects of the investment and, in
particular, to ensure that any downside risk to the investment was
limited. The joint venture ultimately did not proceed; and
-- agreeing the actions required in response to the conflict
between Azerbaijan and Armenia. The focus of the Board was on
ensuring the health and safety of its employees.
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, a three-year geological exploration campaign of its
existing mining concessions was started in 2018, which the Board
monitor through regular reports and site visits by directors. 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 all decisions do not disadvantage external shareholders
compared to the interests of directors and senior management and
that external shareholders are fully and timely informed of all
Company developments.
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 recognise 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
relationship based on undertaken
trust through a continuous and visits are made by
dialogue with each of customers to the Company
its customers. in Azerbaijan to show
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.
The Company also assisted
its customers in fulfilling
their responsibilities
under the LBMA Responsible
Sourcing Programme.
------------------------------------------------------------ -----------------------------
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
in light of their number implement
and to ensure appropriate suggestions where
upward communication appropriate.
channels exist for employees.
The health and safety
Directors and senior committee considered
management regularly all reportable safety
visit Gedabek where the incidents during the
majority of the employees year in consultation
are located. with employee
representatives
There are also two formal and all appropriate actions
mechanisms for engaging were taken to prevent
with employees: further occurrences in
the future.
* 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. The meetings
are usually held at Gedabek but in 2020 were held by
video conference due to COVID-19.
------------------------------------------------------------ -----------------------------
Community Board members regularly The Group has carried
visit Gedabek and meet out significant community
with the local administration and social development
and other community leaders in the region.
to hear their views on
community relations.
------------------------------------------------------------ -----------------------------
Government of Azerbaijan The Board has set up The Company has promptly
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 Corporate Governance Company's business.
section of the annual
report. An open relationship
based on trust has been
Directors also meet with formed with the Government.
high level Government This enabled the Company
officials on a regular to quickly start agreeing
basis. access to the restored
contract areas following
the resolution of the
conflict with Armenia.
------------------------------------------------------------ -----------------------------
Principal risks and uncertainties
Country risk in Azerbaijan
The Group currently operates solely in Azerbaijan and is
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 to the Group financial statements below.
Liquidity and interest rate risk
During 2020, the only material borrowing of the Group was the
Pasha Bank refinancing loan which had a fixed rate of interest.
This loan was fully repaid in early 2020 and the Group became debt
free. The Group has therefore not used any interest rate swaps or
other instruments to manage its interest rate profile during 2020.
The approval of the board of directors is required for all new
borrowing facilities. The Group occasionally has minor borrowings
in connection with providing letters of credit to suppliers.
The Group's surplus cash deposits have steadily increased since
the beginning of 2020. 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.
COVID-19 pandemic
The COVID-19 pandemic resulted in restrictions being put in
place on the ability of the Group to operate starting in early
March 2020. Domestic travel in Azerbaijan and international travel
generally was either suspended or curtailed. The operations of many
businesses in Azerbaijan were suspended and the Group's gold
refiners in Switzerland were closed for a period in March and April
2020.
The measures taken by the board of directors (the "Board") to
manage the risk of the COVID-19 pandemic are set out in the
Corporate Governance section of the Group's annual report . These
included informally convening weekly Board meetings at the start of
the pandemic to ensure all possible actions were put in place to
protect the health and safety of its staff and to maintain
production .
Despite the COVID-19 restrictions, the Company continued in
operation and to sell its products throughout 2020. It also put in
place actions to safeguard the health of its employees at Gedabek.
These included many hygiene measures such as the provision of hand
disinfectants, deep cleaning of work areas and key employee homes
and the provision of take away food to avoid the close gathering of
people in canteens. An education programme for employees was
carried out and the Gosha accommodation camp was redeployed as a
quarantine facility. The Group also chartered aircraft in mid-2020
to ship its gold dor é to Switzerland whilst scheduled flights were
suspended.
The Government of Azerbaijan maintained restrictions throughout
most of 2020 and into early 2001. However, starting from February
2021 these restrictions were gradually lifted.
The main risk to the Group from the COVID-19 pandemic would be a
lower level, or a complete cessation, of production. This could
occur due to an outbreak of COVID-19 at Gedabek or action by the
Government of Azerbaijan to prevent the spread of the coronavirus.
The Group may also be required to operate at a lower level of
production or cease production altogether due to its inability to
obtain necessary supplies and services or to adequately staff or
maintain its operations. There is also the risk that the Group can
continue in production but will be unable to ship and sell its
finished products. However, given that the Group was able to
operate throughout 2020 and that the COVID-19 pandemic is easing in
2021, the Group considers that these risks are minimal.
Conflict between Azerbaijan and Armenia in 2020
In late September 2020, an armed conflict started between
Azerbaijan and Armenia over the occupied territories and Karabakh.
The conflict ended in early November with the signing of a peace
agreement. During the conflict, martial law was imposed in
Azerbaijan which included a night-time curfew, blocking of many
social media and other internet applications and additional travel
restrictions. Various staff members of the Group were required to
perform military service. However, the majority have now returned
to work. The conflict did not have a significant effect on the
ability of the Group to continue in operation.
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 flow
from operating activities less capital expenditure. This is a
measure of the amount of cash generated which can either be
distributed to investors or used for expansion of the business.
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
19 May 2021
Financial review
Group statement of income
The Group generated revenues in 2020 of $102.1m (2019: $92.1m)
from the sales of gold and silver bullion and copper and precious
metal concentrate.
The revenues in 2020 included $86.8m (2019: $76.4m) generated
from the sales of gold and silver bullion from the Group's share of
the production of doré bars. Bullion sales in 2020 were 48,650
ounces of gold and 15,759 ounces of silver (2019: 53,992 ounces of
gold and 16,471 ounces of silver) at an average price of $1,777 per
ounce and $21 per ounce respectively (2019: $1,410 per ounce and
$16 per ounce respectively). In addition, the Group generated
revenue in 2020 of $15.3m (2019: $15.7m) from the sale of 11,839
(2019: 10,281) dry metric tonnes of copper and precious metal
concentrate. The Group's revenue benefited in the year from a
higher average price of gold at $1,772 per ounce (2019: $1,404 per
ounce) and a higher average price of copper at $6,190 per metric
tonne (2019: $6,015 per metric tonne).
The Group did not hedge any metal sales during 2019 or 2020.
The Group incurred cost of sales in 2020 of $60.3m (2019:
$54.6m) as follows:
2020 2019 B/W
$m $m $m
Cash cost of sales 48.0 48.0 -
Depreciation 16.2 18.4 2.2
------- ------- -------
Cash costs and depreciation 64.2 66.4 2.2
Capitalised costs (5.8) (2.7) 3.1
------- ------- -------
Cost of sales before
inventory movement 58.4 63.7 5.3
Inventory movement 1.9 (9.1) (11.0)
------- ------- -------
Total cost of sales 60.3 54.6 (5.7)
======= ======= =======
The lower depreciation in 2020 was due to the lower amount of
gold produced. The inventory credit in 2019 of $9.1m arose due to
an increase of inventory in that year, mainly an increase in
stockpiled ore of 267k tonnes and gold in leach pads of 4,509
ounces.
Depreciation and amortisation in 2020 were lower at $16.8m
compared to $19.2m in 2019. Accumulated mine development costs
within producing mines are depreciated and amortised on a
unit-of-production basis over the economically recoverable reserves
of the mine concerned, except in the case of assets whose useful
life is shorter than the life of the mine, in which case the
straight-line method is applied. The depreciation and amortisation
were lower in 2020 due to the lower amount of gold produced.
The Group incurred administration expenses in 2020 of $5.0m
(2019: $5.2m). The Group's 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. Both the United Kingdom pounds
sterling and the Azerbaijan New Manat were stable against the US
dollar in 2020 compared to 2019. Administration costs in 2020 were
lower than 2019 due to lower travel costs resulting from the
COVID-19 pandemic. Finance costs in 2020 were $0.6m compared to
$1.3m in 2019. Finance costs were lower in 2020 compared to 2019
due to lower interest charged on bank loans, lower interest expense
on finance leases and lower interest on the unwinding of
provisions. The final instalment of the refinancing loan was
settled in February 2020 resulting in lower bank interest payable.
The interest expense on lease liabilities was $0.2m (2019: $0.4m)
and the interest expense on the unwinding of the discount of
provisions was $0.3m (2019: $0.4m). Other income in 2020 of $0.1m
(2019: $nil) was the unrealised profit on the revaluation of the
shares in Conroy Gold and Natural Resources PLC acquired in 2020 to
their market price at 31 December 2020.
The Group recorded a profit before taxation in 2020 of $35.7m
compared to $30.1m in 2019. This was due to higher revenues
partially offset by higher cost of sales and other operating
expenses with lower administration and finance costs. Other
operating expenses in 2020 were higher at $1.3m (2019: $0.9m) due
the cost in 2020 of chartering aircraft to fly gold doré to
Switzerland as a result of the COVID-19 pandemic.
The Group had a taxation charge in 2020 of $12.5m (2019:
$10.8m). This comprised a current income tax charge of $14.2m
(2019: $7.2m) offset by a deferred tax credit of $1.7m (2019:
charge of $3.6m). The current income tax charge of $14.2m was
incurred by R.V. Investment Group Services ("RVIG") in Azerbaijan.
RVIG generated taxable profits in 2020 of $44.3m (2019: $22.6m)
which were taxed at 32 per cent. (the corporation tax rate
stipulated in the Group's production sharing agreement). The
taxable profits in 2020 were higher due to higher taxable profits
being earned in 2020.
The taxable profits of the operating company in Azerbaijan are
taxed at 32 per cent. However, the Group's overall tax rate in 2020
was 35 per cent. (2019: 36 per cent.). The overall tax rate is
higher than 32 per cent. because the UK administrative costs and
depreciation of mining rights in Azerbaijan cannot be offset
against the taxable profits arising in Azerbaijan. These costs in
2020 totalled $2.8m (2019: $3.6m).
All-in sustaining cost of gold production
The Group produced gold at an all-in sustaining cost ("AISC")
per ounce of $702 in 2020 compared to $591 in 2019. 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 2020 compared to 2019 was
the lower production as many of the Group's costs are fixed or
semi-fixed.
Group statement of financial position
Non-current assets decreased from $93.4m at the end of 2019 to
$92.5m at the end of 2020. Property, plant and equipment were lower
by $3.0m due to depreciation of $15.0m offset by additions of
$12.0m and leased assets were $1.8m lower due to lease
modifications of $1.3m. The lease modifications arose from the
variation in the terms of 2 drilling contracts which reduced their
IFRS 16 carrying amount. Intangible assets increased from $20.0m at
the end of 2019 to $24.0m at the end of 2020 due to expenditure on
geological exploration and evaluation of $5.3m offset by
amortisation of $1.3m in the year. The main item of expenditure was
$4.2m of exploration and evaluation expenditure at Gedabek. The
Group's lower JORC ore reserve estimates, which were published in
2020, were considered an indication of fixed asset impairment.
Accordingly, the value in use was calculated of its mines and
associated processing facilities at Gedabek ("Mining Operations).
The calculated value in use amount was higher than the carrying
value of Mining Operations and therefore no impairment charge was
made.
Net current assets were $67.8m at the end of 2020 compared to
$55.5m at the end of 2019. The main reasons for the increase in net
current assets were an increase in cash during 2020 compared to net
cash (cash and cash in transit less bank borrowings) at 31 December
of 2019 of $17.6m; inventory lower by $2.4m and income tax payable
higher by $3.5m. Other current assets also included $0.2m (2019:
$nil) being 325,000 shares acquired in Conroy Gold and Natural
Resources PLC at 16 pence per share revalued to their market value
at 31 December 2020. These were classified as a current asset as
the Group sold the shares in early 2021. The Group's cash balances
at 31 December 2020 were $38.8m (2019: $22.9m including cash in
transit). Surplus cash is maintained in US dollars and was placed
on fixed deposit with several banks at tenors of between one to
three months at interest rates of around 0.5 per cent.
Net assets of the Group at the end of 2020 were $122.0m (2019:
$109.0m). The net assets were higher due to the increase in
retained earnings. There were no shares issued in 2020.
At 1 January 2020, the Group was financed by a mixture of equity
and debt with outstanding bank debt of $1.7m. The bank debt was the
final instalment of the $13.5m, 3-year refinancing loan entered
into during 2018 with an interest rate of 7 per cent. This final
instalment was settled in February 2020 and the Group had no bank
debt for the remainder of 2020. Group debt at 31 December 2020 was
$1.9m (2019: $3.8m) in respect of lease liabilities due to the
adoption in 2019 of IFRS 16 - "Leases".
There were no movements of the Group's share capital or share
premium account in 2020. The Group's holding company, Anglo Asian
Mining PLC received an intercompany dividend in 2020 of $10.0m
(2019: $10.0) which gives it the capacity to pay dividends of $7.4m
at 31 December 2020.
Group cash flow statement
Operating cash inflow before movements in working capital for
2020 was $52.8m (2019: $50.5m). The main source of operating cash
was operating profit before the non-cash charges of depreciation
and amortisation in 2020 of $52.8m (2019: $50.5m).
Working capital movements generated cash of $7.4m (2019:
absorbed cash of $7.6m) largely due to a cash generation from trade
and other receivables of $4.9m (2019: usage of $2.5m). Inventories
were also lower by $2.4m (2019: increase of $9.7m). This was due to
reduced inventory of finished goods, ore stockpiles and spare parts
and consumables at the end of 2020.
Cash flow from operations in 2020 was $60.2m compared to $37.8m
in 2019 due to the higher operating cash flow and funds generated
by the movements in working capital.
The Company paid corporation tax in 2020 of $10.7m (2019: $8.2m)
in Azerbaijan in accordance with local requirements. This payment
was the final payment of its liability for 2019 and payments on
account of its liability for the year ended 31 December 2020.
Expenditure on property, plant and equipment and mine
development was $10.5m (2019: $4.7m). The main items of expenditure
in 2020 were capitalised stripping costs of $3.8m; a raise of the
wall of the tailings dam of $2.6m; mine development costs of $2.0m
and an ore sorting machine of $1.2m.
Exploration and evaluation expenditure in 2020 of $5.3m (2019:
$4.5m) was incurred and capitalised. This arose on exploration and
evaluation at the Gedabek, Gosha and Ordubad contract areas with
costs of $4.3m, $0.8m and $0.2m respectively.
COVID-19 pandemic and the conflict between Armenia and
Azerbaijan in 2020
The Group has operated since early 2020 under restrictions
imposed by governments around the world to combat the spread of the
coronavirus. Azerbaijan was also subject to martial law between
late September to early November 2020 due to the conflict with
Armenia. The restrictions were slowly eased in Azerbaijan starting
in February 2021.
The Group managed to maintain production and ship and sell its
products throughout 2020. It was estimated that the Group incurred
additional direct operating costs of approximately $0.1m per month
at the peak of the restrictions in the summer 2020. These included
the cost of chartering aircraft to ship its gold doré to
Switzerland, staff overtime due to reorganisation of staff shifts
to prevent the spread of the coronavirus and additional logistical
costs. In addition to the direct costs of the pandemic, there were
indirect costs such inefficient operation of the Gedabek production
facilities due to the inability to rotate staff and other working
restrictions due to the cornovirus. It is not considered feasible
to calculate the total financial effect on the results of the
Company for 2020 due to lost production and increased costs.
The evolution and duration of the emergency is not known but
should the Group be required to temporarily suspend its operations
it would incur costs of approximately $1.0m per month to place the
operation on care and maintenance. It currently costs approximately
$4.0m to $5.0m a month to maintain full production.
The Group has entered into a $15m standby credit facility with a
bank in Azerbaijan as a precautionary measure. It is for 3 years at
an interest rate of 4.5 per cent. It has not been utilised.
As a result of the peace agreement in 2020 following the
conflict between Azerbaijan and Armenia, three contract areas were
restored to the Group. The Group incurred no expenditure in respect
of these three restored contract areas in 2020.
Dividends
In respect of 2020, the Group paid an interim dividend of $0.045
per share, a special dividend of $0.015 per share and has proposed
a final dividend of $0.035 per share giving a total for the year of
$0.095 per share (2019: 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 cost of the 2019 dividends was
$9.2m (GBP7.4m) and the estimated total cost of the dividends for
2020 is $10.9m (GBP8.1m). The proposed final dividend for 2020 is
subject to the approval of the shareholders and has not been
accrued in the 2020 financial statements.
The directors have announced a policy to target a distribution
to shareholders each year comprising approximately 25 per cent. of
the Group's free cash flow. This distribution will be made in two
approximately equal instalments comprising an interim and final
dividend. The board will also declare special dividends if the
circumstances dictate. The amounts and timing of payment of the
interim and final dividends will be announced each year along with
the Group's interim and final results respectively. The board will
review this policy each year taking into account the financing
needs of the business at that time. Free cash flow is defined as
net cash flow from operating activities less capital expenditure
and for 2020 was $28.7m (2019: $25.5m). Both the free cash flow for
2019 and 2020 have been adjusted for cash in transit of $5.1m at 31
December 2019.
To ensure the Company retains sufficient capital to pursue
excellent development opportunities across all contract areas, the
board has decided to maintain the dividend (excluding the special
dividend for 2020) at the same level as 2019 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 2020. The Government's share of production in 2020 (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 2020 of 12.75 per cent. (2019: 12.75 per
cent.) of the value of its production.
The Group can recover the following costs in accordance with the
PSA:
-- all direct operating expenses of the Gedabek mine;
-- all exploration expenses incurred on the Gedabek contract
area;
-- all capital expenditure incurred on the Gedabek mine;
-- an allocation of corporate overheads - currently, overheads
are apportioned to Gedabek according to the ratio of direct capital
and operating expenditure at the Gedabek contract area compared
with direct capital and operational expenditure at the Gosha and
Ordubad contract areas; and
-- an imputed interest rate of United States Dollar LIBOR + 4
per cent. per annum on any unrecovered costs.
Unrecovered costs are calculated separately for the three
contract areas of Gedabek, Gosha and Ordubad and can only be
recovered against production from their respective contract areas.
The total unrecovered costs for the Gedabek and Gosha contract
areas at 31 December 2020 were $36.9m and $27.3m respectively
(2019: $60.8m and $25.5m respectively). The Group's current
business plans indicate that these costs will not be fully
recovered until at least 2023 and the effective royalty of 12.75
per cent. will therefore continue until then.
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 2022 (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 has 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 $22.9 million (31 December 2020:
$38.8 million) and no bank debt at 31 March 2021. The directors
have prepared a base case cash flow forecast that assumes
production is consistent with the business plan and gold prices of
$1,650 and $1,700 for 2021 and $1,750 for 2022. The gold prices are
lower than that used for the impairment testing to add further
conservatism to the forecast. The base case cash flow forecast
shows the Group is able to fund its working capital requirements
from cash generated from its operations at Gedabek provided
production is maintained and finished products sold. The Group has
access to local sources of both short and long-term finance should
this be required and has a $15 million standby credit facility with
Pasha Bank as a contingency measure which is available until April
2023 with no conditions on drawdown.
Despite the restrictions imposed by the COVID-19 pandemic and
martial law in September to November 2020 due to the conflict
between Azerbaijan and Armenia, the Company continued production
throughout 2020 at Gedabek and to ship and sell gold doré and
copper concentrate.
From February 2021, the Government of Azerbaijan started lifting
many of the restrictions imposed to restrict the spread of the
coronavirus. In the second quarter of 2021, the remaining
restrictions were not having any material effect on the ability of
the business to operate. The directors believe that the ability of
the Company to operate throughout 2020 demonstrates the resilience
of the business should further restrictions be imposed due to any
future intensification of the COVID-19 pandemic.
In the current period the directors reviewed various severe
downside scenarios under which the business may in future be
required to operate. These downside scenarios are six months of
continuing production but having to stockpile finished product for
later sale and secondly the full going concern period where
production is either disrupted or shut down and the business placed
on care and maintenance. No revenue is assumed in both downside
scenarios. It is currently costing approximately $5.0 million per
month to continue in production and estimated it would cost
approximately $1.0 million per month to place the business on care
and maintenance. The directors will manage any disruption to, or
cessation of, production or inability to sell the Company's
products as circumstances dictate. Under the downside scenarios the
Group's forecasts to have the financial resources to continue as a
going concern , utilising the standby credit facility where
necessary. The directors believe the likelihood of both downside
scenarios to be remote given the resilience demonstrated in
2020.
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 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.
Reza Vaziri
President and chief executive
William Morgan
Chief Financial Officer
19 May 2021
Directors Emoluments
Consultancy Fees Benefits Total
Year ended 31 December 2020 $ $ $ $
------------------------------------ ------------ -------- --------- --------
John Monhemius - 51,154 - 59,154
Richard Round (resigned 7 December
2020) - 47,971 - 47,971
John Sununu - 75,707 - 75,707
Michael Sununu (appointed 7
December 2020) - 3,665 - 3,665
Reza Vaziri 578,942 51,154 32,952 663,048
Khosrow Zamani - 126,694 - 126,694
------------------------------------ ------------ -------- --------- --------
578,942 356,345 32,952 968,239
------------------------------------ ------------ -------- --------- --------
Consultancy Fees Benefits Total
Year ended 31 December 2019 $ $ $ $
------------------------------------ ------------ -------- --------- --------
John Monhemius 8,452 51,134 - 59,586
Richard Round - 51,134 - 51,134
John Sununu 19,344 75,129 - 94,473
Reza Vaziri 578,962 51,134 32,891 662,987
Khosrow Zamani - 125,726 - 125,726
------------------------------------ ------------ -------- --------- --------
606,758 354,257 32,891 993,906
------------------------------------ ------------ -------- --------- --------
Directors' fees and consultancy fees for 2019 and 2020 were paid
in cash.
No director held or exercised any share options during the years
ended 31 December 2019 and 31 December 2020.
Group statement of income
year ended 31 December 2020
2020 2019
Continuing operations Notes $000 $000
--------------------------------------------- ------ --------- ---------
Revenue 6 102,054 92,052
Cost of sales 8 (60,325) (54,576)
--------------------------------------------- ------ --------- ---------
Gross profit 41,729 37,476
Other operating income 7 646 1
Administrative expenses (5,033) (5,208)
Other operating expenses 7 (1,278) (943)
--------------------------------------------- ------ --------- ---------
Operating profit 8 36,064 31,326
Finance costs 10 (564) (1,269)
Finance income 121 73
Other income 7 116 -
--------------------------------------------- ------ --------- ---------
Profit before tax 35,737 30,130
Income tax expense 11 (12,516) (10,787)
--------------------------------------------- ------ --------- ---------
Profit attributable to the equity holders
of the parent 23,221 19,343
--------------------------------------------- ------ --------- ---------
Profit per share attributable to the equity
holders of the parent
Basic (US cents per share) 12 20.30 16.91
Diluted (US cents per share) 12 20.30 16.91
--------------------------------------------- ------ --------- ---------
Group statement of comprehensive income
year ended 31 December 2020
2020 2019
$000 $000
Profit for the year 23,221 19,343
-------------------------------------------------- ------- -------
Total comprehensive profit 23,221 19,343
-------------------------------------------------- ------- -------
Attributable to the equity holders of the parent 23,221 19,343
-------------------------------------------------- ------- -------
Group statement of financial position
31 December 2020
2020 2019
Notes $000 $000
--------------------------------------- ------ --------- ---------
Non-current assets
Intangible assets 13 23,965 19,965
Property, plant and equipment 14 66,680 69,728
Leased assets 15 1,809 3,622
Other receivables 16 - 67
--------------------------------------- ------ --------- ---------
92,454 93,382
--------------------------------------- ------ --------- ---------
Current assets
Inventory 17 41,457 43,881
Trade and other receivables 16 6,830 26,783
Other current financial assets 18 185 -
Cash and cash equivalents 19 38,848 17,801
--------------------------------------- ------ --------- ---------
87,320 88,465
--------------------------------------- ------ --------- ---------
Total assets 179,774 181,847
--------------------------------------- ------ --------- ---------
Current liabilities
Trade and other payables 20 (12,820) (27,510)
Income tax payable (6,265) (2,760)
Interest-bearing loans and borrowings 21 - (1,688)
Lease liabilities 15 (465) (1,015)
--------------------------------------- ------ --------- ---------
(19,550) (32,973)
--------------------------------------- ------ --------- ---------
Net current assets 67,770 55,492
--------------------------------------- ------ --------- ---------
Non-current liabilities
Provision for rehabilitation 23 (11,833) (10,485)
Lease liabilities 15 (1,482) (2,741)
Deferred tax liability 11 (24,947) (26,596)
--------------------------------------- ------ --------- ---------
(38,262) (39,822)
--------------------------------------- ------ --------- ---------
Total liabilities (57,812) (72,795)
--------------------------------------- ------ --------- ---------
Net assets 121,962 109,052
--------------------------------------- ------ --------- ---------
Equity
Share capital 25 2,016 2,016
Share premium account 27 33 33
Merger reserve 25 46,206 46,206
Retained earnings 73,707 60,797
--------------------------------------- ------ --------- ---------
Total equity 121,962 109,052
--------------------------------------- ------ --------- ---------
Group statement of cash flows
year ended 31 December 2020
2020 2019
Notes $000 $000
----------------------------------------------- ------ --------- ---------
Cash flows from operating activities
Profit before tax 35,737 30,130
Adjustments to reconcile profit before
tax to net cash flows:
Finance costs 10 564 1,269
Finance income (121) (73)
Unrealised gain on financial instruments (116) -
Gain on the modification of lease liabilities (72) -
Depreciation of owned assets 14 14,949 16,767
Depreciation of leased assets 15 627 795
Amortisation of mining rights and other
intangible assets 13 1,267 1,600
Operating cash flow before movement
in working capital 52,835 50,488
Decrease / (increase) in trade and
other receivables 4,939 (2,502)
Decrease / (increase) in inventories 2,422 (9,722)
Increase / (decrease) in trade and
other payables 2 (462)
----------------------------------------------- ------ --------- ---------
Cash from operations 60,198 37,802
Income taxes paid (10,660) (8,147)
----------------------------------------------- ------ --------- ---------
Net cash flow from operating activities 49,538 29,655
----------------------------------------------- ------ --------- ---------
Cash flows from investing activities
Expenditure on property, plant and
equipment and mine development (10,476) (4,703)
Investment in exploration and evaluation
assets including other
intangible assets (5,267) (4,499)
Purchase of financial instruments (69) -
Interest received 121 73
Net cash used in investing activities (15,691) (9,129)
----------------------------------------------- ------ --------- ---------
Cash flows from financing activities
Dividends paid 28 (10,311) (8,696)
Proceeds from borrowings 22 - 536
Repayments of borrowings 22 (1,688) (7,287)
Interest paid - borrowings (20) (804)
Interest paid - lease liabilities 15 (230) (353)
Repayment of lease liabilities 15 (551) (661)
----------------------------------------------- ------ --------- ---------
Net cash used in financing activities (12,800) (17,265)
----------------------------------------------- ------ --------- ---------
Net increase in cash and cash equivalents 21,047 3,261
Cash and cash equivalents at the beginning
of the year 19 17,801 14,540
----------------------------------------------- ------ --------- ---------
Cash and cash equivalents at the end
of the year 19 38,848 17,801
----------------------------------------------- ------ --------- ---------
Group statement of changes in equity
year ended 31 December 2020
Share Share Merger Retained Total
capital premium reserve earnings equity
Notes $000 $000 $000 $000 $000
---------------- ------ --------- --------- --------- ----------- ---------
1 January 2019 2,016 33 46,206 50,150 98,405
Profit for the
year - - - 19,343 19,343
Cash dividends
paid 28 - - - (8,696) (8,696)
---------------- ------ --------- --------- --------- ----------- ---------
31 December
2019 2,016 33 46,206 60,797 109,052
Profit for the
year - - - 23,221 23,221
Cash dividends
paid 28 - - - (10,311) (10,311)
---------------- ------ --------- --------- --------- ----------- ---------
31 December
2020 2,016 33 46,206 73,707 121,962
---------------- ------ --------- --------- --------- ----------- ---------
Notes
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 29, the chairman's
statement and the strategic report above.
2 Basis of preparation
The financial information for the year ended 31 December 2020
was approved by the board of directors on 19 May 2021. The
financial information has been prepared in accordance with
International accounting standards in conformity with the
requirements of the Companies Act 2006.
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 European Union.
The financial information set out above has been prepared under
the historical cost convention except for the treatment of
share-based payments and trade receivables at fair value. The Group
financial statements are presented in United States Dollars ("$")
and all values are rounded to the nearest thousand except where
otherwise stated. In the Group financial statements "GBP" and
"pence" are references to the United Kingdom pound sterling.
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 2022 (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 has 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 $22.9 million (31 December 2020:
$38.8 million) and no bank debt at 31 March 2021. The directors
have prepared a base case cash flow forecast that assumes
production is consistent with the business plan and gold prices of
$1,650 and $1,700 for 2021 and $1,750 for 2022. The gold prices are
lower than that used for the impairment testing to add further
conservatism to the forecast. The base case cash flow forecast
shows the Group is able to fund its working capital requirements
from cash generated from its operations at Gedabek provided
production is maintained and finished products sold. The Group has
access to local sources of both short and long-term finance should
this be required and has a $15 million standby credit facility with
Pasha Bank as a contingency measure which is available until April
2023 with no conditions on drawdown.
Despite the restrictions imposed by the COVID-19 pandemic and
martial law in September to November 2020 due to the conflict
between Azerbaijan and Armenia, the Company continued production
throughout 2020 at Gedabek and to ship and sell gold doré and
copper concentrate.
From February 2021, the Government of Azerbaijan started lifting
many of the restrictions imposed to restrict the spread of the
coronavirus. In the second quarter of 2021, the remaining
restrictions were not having any material effect on the ability of
the business to operate. The directors believe that the ability of
the Company to operate throughout 2020 demonstrates the resilience
of the business should further restrictions be imposed due to any
future intensification of the COVID-19 pandemic.
In the current period the directors reviewed various severe
downside scenarios under which the business may in future be
required to operate. These downside scenarios are six months of
continuing production but having to stockpile finished product for
later sale and secondly the full going concern period where
production is either disrupted or shut down and the business placed
on care and maintenance. No revenue is assumed in both downside
scenarios. It is currently costing approximately $5.0 million per
month to continue in production and estimated it would cost
approximately $1.0 million per month to place the business on care
and maintenance. The directors will manage any disruption to, or
cessation of, production or inability to sell the Company's
products as circumstances dictate. Under the downside scenarios the
Group's forecasts to have the financial resources to continue as a
going concern , utilising the standby credit facility where
necessary. The directors believe the likelihood of both downside
scenarios to be remote given the resilience demonstrated in
2020.
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 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.
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
2020:
-- Amendments to IFRS 3: Definition of a business
-- Amendments to IAS 1 and IAS 8: Definition of material
-- Conceptual Framework for Financial Reporting Issued on 29 March 2018
-- Amendments to IFRS 16: Covid-19 Related Rent Concessions
The above standards and 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
-- Amendments to IAS 1: Classification of Liabilities as Current or Non-current
-- Amendments to IFRS 3: Reference to the Conceptual Framework
-- Amendments to IAS 16: Property, Plant and Equipment: proceeds before intended use
-- Amendments to IAS 37: Onerous contracts - costs of Fulfilling a Contract
-- IFRS 1: First-time adoption of International Financial
Reporting Standards: subsidiary as a first-time adopter
-- IFRS 9 Financial Instruments: Fees in the "10 per cent." test
for derecognition of financial liabilities
-- IAS 41: Agriculture - Taxation in fair value measurements
The above standards and amendments are not expected to have any
impact on the consolidated financial statements of the Group.
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
2020. 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 4.12 for the accounting policies for financial
assets and accounting policy 4.13 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 when 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.
With these arrangements, there are no advance payments received
from the refiner, no conditional rights to consideration, i.e., no
contract assets are recognised. 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 16 -
'Trade and other receivables' for details of payment terms.
iii) Gold and copper in concentrate (metal in concentrate)
sales
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 between one and
four months.
Revenue 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 forward 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 4.10 for further
discussion on fair value. Refer to note 16 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.
Iv 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 - 6 years
-- Motor vehicles - 4 years
-- Land and buildings - 8 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 4.9 - "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 is
charged or credited in the Group income statement, except when it
relates to items charged or credited directly to equity, in which
case the deferred tax is also dealt with 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 ans
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 (2019: eight years)
-- Plant and equipment - eight years (2019: eight years)
-- Motor vehicles - four years (2019: four years)
-- Office equipment - four years (2019: four years)
-- Leasehold improvements - the lower of eight years (2019:
eight years) and the remaining term of the 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 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.
4.10 Fair value measurement
The Group measures financial instruments such as bank borrowings
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 16 - 'Trade and other receivables'
-- Note 19 - 'Cash and cash equivalents'
-- Note 20 - 'Trade and other payables'; and
-- Note 21 - 'Interest-bearing loans and borrowings'
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 re-occurring 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.
4.11 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.
4.12 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, and
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.
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.
Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or convention
in the market place (regular way trades) are recognised on the
trade date, i.e., the date that the Group commits to purchase or
sell the asset.
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).
-- 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 trading, 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 with
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 with 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 pass-through arrangement, it
evaluates if, and to what extent, it has retained the risks and
rewards of ownership. When it has neither transferred 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 4.20
-- Trade and other receivables:accounting policy 4.13 and note 16
The Group recognises an allowance 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 flows that the Group expects to receive, discounted at an
approximation of the original EIR. 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, the 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 default when
contractual payments are 90 days past due. However, in certain
cases, the Group may also consider a financial asset to be in
default when internal or external information indicates that the
Group is unlikely 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 profit 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. Separated embedded
derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
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 EIR. 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 payables
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, but exclude any
restricted cash. Restricted cash is not available for use by the
Group and therefore is not considered highly liquid, for example,
cash set aside to cover rehabilitation obligations.
For the purpose of the consolidated statement of cash flows,
cash and cash equivalents consist of cash and short- term deposits
as defined above, net of outstanding bank overdrafts.
4.13 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.
4.14 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.
4.15 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 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.
4.17 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.
4.18 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.
4.19 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.
Fair value is measured by use of the Black-Scholes model. The
expected life used in the model has been applied based on
management's best-estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations. The vesting
conditions assumptions are reviewed during each reporting period to
ensure they reflect current expectations.
4.20 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 13)
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 13,14
and 15)
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 14)
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 15)
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 30)
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 Group depreciates each tangible fixed
asset over its estimated useful life regardless of whether or not
the end of its useful life is later than March 2022. There is an
option to extend the Gedabek licence for a further ten years
conditional upon satisfaction of certain requirements stipulated in
the PSA and the first of the two five-year extensions allowed under
the PSA has now been obtained. The directors have judged that the
requirements to renew the licence for the second five year
extension will be satisfied and therefore it is valid to depreciate
assets over useful lives which end later than March 2027.
4.21) 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 13,14 and
15)
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 13 and 14)
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 17)
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 2023 and 2025.
v) Recovery of deferred tax assets (note 11)
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.
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 income statement and Group
statement of financial position on this basis. Accordingly, the
Group has only one operating segment, mining operations. The mining
operations comprise the Group's major producing asset, the Gedabek
mine which accounts for all the Group's revenues and the majority
of its cost of sales, depreciation and amortisation. The Group's
mining operations are all located within Azerbaijan and therefore
all within one geographic segment.
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.
2020 2019
$000 $000
---------------------------------------- -------- -------
Gold within doré and gold bullion 86,441 76,123
Silver bullion 337 264
Gold and copper concentrate 15,276 15,665
---------------------------------------- -------- -------
102,054 92,052
---------------------------------------- -------- -------
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 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 2020 and 2019 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
2020 2019
$000 $000
----------------------------------------------- ------ ------
Interest receivable - 1
Gain on the modification of lease liabilities 72 -
Gain on cancellation of trade payables 574 -
646 1
----------------------------------------------- ------ ------
Other operating expenses
2020 2019
$000 $000
------------------------------------ ------ ------
Transportation and refining costs 782 399
Foreign exchange loss 130 139
Advances and inventory written off 366 405
1,278 943
------------------------------------ ------ ------
Other income
2020 2019
$000 $000
---------------------------------------------- ------ ------
Fair value gain on equity instruments at fair 116 -
value through profit or loss
---------------------------------------------- ------ ------
8 Operating profit
2020 2019
Notes $000 $000
----------------------------------------------- ------ ------- -------
Operating profit is stated after charging:
Depreciation on property, plant and equipment
- owned 15 14,949 16,767
Depreciation on property plant and equipment
- right of use assets 16 627 795
Amortisation of mining rights and other
intangible assets 14 1,267 1,600
Employee benefits and expenses 10 10,021 8,026
Foreign currency exchange net loss 130 139
Inventory expensed during the year 24,240 24,470
Fees payable to the Company's auditor
for:
The audit of the Group's annual accounts 154 155
The audit of the Group's subsidiaries
pursuant to legislation 119 119
Audit related assurance services - half
year review 3 2
Total audit services 276 276
----------------------------------------------- ------ ------- -------
Amounts paid to auditor for other services:
Tax compliance services 13 13
Tax advice regarding dividend and share
premium reduction 34 48
Total non-audit services 47 61
----------------------------------------------- ------ ------- -------
Total 323 337
----------------------------------------------- ------ ------- -------
The audit fees for the parent company were $111,000 (2019:
$107,000).
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:
2020 2019
------------------------------- ----- -----
Management and administration 45 44
Exploration 47 29
Mine operations 767 705
------------------------------- ----- -----
859 778
------------------------------- ----- -----
The aggregate payroll costs of these persons were as
follows:
2020 2019
$000 $000
---------------------------------- ------- ------
Wages and salaries 8,732 6,750
Social security costs 1,706 1,701
Costs capitalised as exploration (417) (425)
---------------------------------- ------- ------
10,012 8,026
---------------------------------- ------- ------
Remuneration of key management personnel
The remuneration of the key management personnel of the Group,
is set out below in aggregate:
2020 2019
$ $
------------------------------ ---------- ----------
Short-term employee benefits 1,713,791 1,674,133
------------------------------ ---------- ----------
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 director of geology and
mining 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
2020 2019
$000 $000
-------------------------------------------- ------ ------
Interest charged on interest-bearing loans
and borrowings 20 466
Finance charges on letters of credit 4 12
Interest expense on lease liabilities 230 353
Unwinding of discount on provisions 310 438
-------------------------------------------- ------ ------
564 1,269
-------------------------------------------- ------ ------
Interest on interest-bearing loans and borrowings represents
charges on those credit facilities as set out in note 21 -
"Interest-bearing loans and borrowings" below.
11 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 2020 were $nil (2019: $nil).
The major components of the income tax charge for the year ended
31 December are:
2020 2019
$000 $000
-------------------------------------------- -------- -------
Current income tax
Current income tax charge 14,165 7,208
Deferred tax
(Benefit) / charge relating to origination
and reversal of temporary differences (1,649) 3,579
-------------------------------------------- -------- -------
Income tax charge for the year 12,516 10,787
-------------------------------------------- -------- -------
Deferred income tax at 31 December relates to the following:
Statement
of financial
position Income statement
-------------------- -------------------
2020 2019 2020 2019
$000 $000 $000 $000
----------------------------------- --------- --------- -------- ---------
Deferred income tax liability
Property, plant and equipment
- accelerated depreciation (19,049) (18,072) (977) 93
Right of use assets - accelerated
depreciation (579) (1,159) 580 (1,159)
Non-current prepayments - (21) 21 118
Trade and other receivables (616) (2,062) 1,446 (782)
Inventories (11,828) (12,604) 776 (3,111)
----------------------------------- --------- ---------
Deferred tax liability (32,072) (33,918)
----------------------------------- --------- ---------
Deferred income tax asset
Trade and other payables
and provisions * 2,716 2,765 (49) (406)
Lease liabilities 623 1,202 (579) 1,202
Asset retirement obligation
* 3,786 3,355 431 466
----------------------------------- --------- ---------
Deferred tax asset 7,125 7,322
----------------------------------- --------- --------- -------- ---------
Deferred income tax benefit
/ (charge) 1,649 (3,579)
----------------------------------- --------- --------- -------- ---------
Net deferred tax liability (24,947) (26,596)
----------------------------------- --------- --------- -------- ---------
* 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:
2020 2019
$000 $000
---------------------------------------------- ------- -------
Profit before tax 35,737 30,130
---------------------------------------------- ------- -------
Theoretical tax charge at statutory rate
of 32 per cent. for RVIG* 11,436 9,642
Effects of different tax rates for certain
Group entities (20 per cent.) 171 198
Tax effect of items which are not deductible
or assessable for taxation purposes:
- non-deductible expenses 909 947
Income tax charge for the year 12,516 10,787
---------------------------------------------- ------- -------
* 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 2020, the Group had unused tax losses available
for offset against future profits of $21,599,000 (2019:
$20,181,000). Unused tax losses in the Republic of Azerbaijan at 31
December 2020 were $nil (2019: $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.
12 Profit per share
The calculation of basic and diluted profit per share is based
upon the retained profit for the financial year of $23,221,000
(2019: $19,343,000).
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 are as follows:
2020 2019
--------- ------------ -----------
Basic 114,392,024 114,392,024
--------- ------------ -----------
Diluted 114,392,024 114,392,024
--------- ------------ -----------
At 31 December 2020 there were no unexercised share options that
could potentially dilute basic earnings per share (2019: nil).
13 Intangible assets
Exploration Exploration Exploration Other
and evaluation and evaluation and evaluation Mining intangible
Gedabek Gosha Ordubad rights assets Total
$000 $000 $000 $000 $000 $000
--------------------- --------------- --------------- --------------- --------- ------------ --------
Cost
1 January 2019 3,436 350 4,345 41,925 537 50,593
Additions 2,838 480 1,191 - 25 4,534
--------------------- --------------- --------------- --------------- --------- ------------ --------
31 December 2019 6,274 830 5,536 41,925 562 55,127
Additions 4,240 812 215 - - 5,267
--------------------- --------------- --------------- --------------- --------- ------------ --------
31 December 2020 10,514 1,642 5,751 41,925 562 60,394
--------------------- --------------- --------------- --------------- --------- ------------ --------
Amortisation and
impairment*
1 January 2019 - - - 33,155 407 33,562
Charge for the year - - - 1,578 22 1,600
--------------------- --------------- --------------- --------------- --------- ------------ --------
31 December 2019 - - - 34,733 429 35,162
Charge for the year - - - 1,233 34 1,267
--------------------- --------------- --------------- --------------- --------- ------------ --------
31 December 2020 - - - 35,966 463 36,429
--------------------- --------------- --------------- --------------- --------- ------------ --------
Net book value
31 December 2019 6,274 830 5,536 7,192 133 19,965
--------------------- --------------- --------------- --------------- --------- ------------ --------
31 December 2020 10,514 1,642 5,751 5,959 99 23,965
--------------------- --------------- --------------- --------------- --------- ------------ --------
*290,000 ounces of gold at 1 January 2020 were used to determine
depreciation of producing mines, mining rights and other intangible
assets (2019: 355,000 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
$55,000 and an increase in amortisation of $61,000
respectively.
14 Property, plant and equipment
Plant and
equipment Producing Assets Total
and mines under
motor vehicles construction
$000 $000 $000 $000
----------------------- ---------------- ------------ --------------- --------
Cost
1 January 2019 24,104 205,555 313 229,972
Additions 484 3,835 8 4,327
Transfer to producing
mines - 241 (241) -
Increase in provision
for rehabilitation - 1,018 - 1,018
----------------------- ---------------- ------------ --------------- --------
31 December 2019 24,588 210,649 80 235,317
Additions 619 8,734 1,510 10,863
Increase in provision
for rehabilitation - 1,038 - 1,038
----------------------- ---------------- ------------ --------------- --------
31 December 2020 25,207 220,421 1,590 247,218
----------------------- ---------------- ------------ --------------- --------
Depreciation and
impairment*
1 January 2019 18,172 130,650 - 148,822
Charge for the
year 1,851 14,916 - 16,767
----------------------- ---------------- ------------ --------------- --------
31 December 2019 20,023 145,566 - 165,589
Charge for the
year 1,743 13,206 - 14,949
----------------------- ---------------- ------------ --------------- --------
31 December 2020 21,766 158,772 - 180,538
----------------------- ---------------- ------------ --------------- --------
Net book value
31 December 2019 4,565 65,083 80 69,728
----------------------- ---------------- ------------ --------------- --------
31 December 2020 3,441 61,649 1,590 66,680
----------------------- ---------------- ------------ --------------- --------
*290,000 ounces of gold at 1 January 2020 were used to determine
depreciation of producing mines, mining rights and other intangible
assets (2019: 355,000 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
$149,000 and an increase in depreciation of $166,000
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 and
exchange rate assumptions, estimated quantities of recoverable
minerals, production levels, operating costs and capital
requirements based on the Group's latest five-year 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
2020
In the year ended 31 December 2020, 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 90.7
Carrying value of Mining Operations (76.0)
--------------
Excess of carrying value over recoverable
amount 14.7
--------------
As the recoverable amount of Mining Operations was in excess of
its carrying value, no impairment charge was made during 2020.
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
-- Exchange 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
2021 to 2025 ("Cash Flow Model"):
Gold: 231,000 ounces
Silver: 536,321 ounces
Copper: 12,517 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. The Cash Flow Model also includes production from
approximately 1.5 million tonnes of previously crushed heap-leached
ore with an estimated average grade of 1.35 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 2021 2022 2023 2024 2025 Average
-------------- ---------
Gold $/ounce 1,895 1,830 1,800 1,750 1,700 1,795
-------------- --------- --------- --------- --------- --------- -----------
Silver $/ ounce 25 22 21 21 20 22
-------------- --------- --------- --------- --------- --------- -----------
Copper $ / tonne 7,202 7,200 7,100 7,000 7,000 7,100
-------------- --------- --------- --------- --------- --------- -----------
Discount rate
In calculating the recoverable amount, a nominal pre-tax
discount rate of 12.34 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.
Exchange rates
The only exchange rate significant to the Cash Flow Model is the
United State dollar ("US$") to Azeri New Manat ("AZN") exchange
rate. The rate used is US$1 equals AZN1.7. This exchange rate has
been stable following the devaluation in 2015 of the Azeri New
Manat.
Sensitivity analysis
The directors believe there are no reasonably possible changes
in any of the assumptions, except the commodity price and
production volumes, which would lead to an impairment in Mining
Operations. It is estimated that a 11 per cent. decrease in the
gold and silver prices and an average 19 per cent. decrease in
copper price together used in the Cash Flow Model would result in
an impairment of $12.8 million. It is estimated that a 10 per cent.
decrease in production volumes would result in an impairment of
$2.2 million.
The capital commitments by the Group have been disclosed in note
30.
15 Leases
Right of use assets
Plant and
equipment Land and Total
and buildings
motor vehicles
$000 $000 $000
-------------------------------- --------------- ------------ --------
Cost
1 January and 31 December 2019 3,934 483 4,417
Additions - 70 70
Lease modifications (1,577) - (1,577)
-------------------------------- --------------- ------------ --------
31 December 2020 2,357 553 2,910
-------------------------------- --------------- ------------ --------
Depreciation
1 January 2019 - - -
Charge for the year 657 138 795
-------------------------------- --------------- ------------ --------
31 December 2019 657 138 795
Charge for the year 477 150 627
Lease modifications (321) - (321)
-------------------------------- --------------- ------------ --------
31 December 2020 813 288 1,101
-------------------------------- --------------- ------------ --------
Net book value
31 December 2019 3,277 345 3,622
-------------------------------- --------------- ------------ --------
31 December 2020 1,544 265 1,809
-------------------------------- --------------- ------------ --------
Lease liabilities
2020 2019
$000 $000
------------------------- ------- --------
1 January 3,756 4,417
Additions 70 -
Lease modifications (1,328) -
Interest expense 230 353
Repayment (781) (1,014)
31 December 1,947 3,756
------------------------- ------- --------
Current liabilities 465 1,015
Non-current liabilities 1,482 2,741
------------------------- ------- --------
1,947 3,756
------------------------- ------- --------
Amount recognised in the profit and loss account
2020 2019
$000 $000
--------------------------------------------- ------ -----
Depreciation expense of right of use assets 627 795
Gain on lease modifications (72) -
Interest expense 230 353
Expenses relating to short term leases 202 200
987 1,348
--------------------------------------------- ------ -----
The amount of future lease commitments for short-term leases at
31 December 2019 and 2020 are similar to the amounts expensed in
2019 and 2020 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.
16 Trade and other receivables
2020 2019
Non-current assets $000 $000
----------------------------------------------- ------ -------
Advances for fixed asset purchases - 67
Current assets
----------------------------------------------- ------ -------
Gold held due to the Government of Azerbaijan 3,664 18,684
VAT refund due 671 735
Other tax receivable 256 207
Trade receivables - fair value* 614 -
Prepayments and advances 1,625 2,012
Loans - 60
Cash in transit** - 5,085
----------------------------------------------- ------ -------
6,830 26,783
----------------------------------------------- ------ -------
*Trade receivables subject to provisional pricing
** This was a payment from a customer prior to the year end
which was not received until early January due to a delay by the
bank.
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 4.10 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 2019 or 2020.
The VAT refund due at 31 December 2020 and 2019 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 20.
17 Inventory
2020 2019
Current assets $000 $000
-------------------------------------------- ------- -------
Cost
Finished goods - bullion 1,313 1,973
Finished goods - metal in concentrate 456 863
Metal in circuit 17,226 17,041
Ore stockpiles 9,464 10,615
Spare parts and consumables 12,998 13,389
-------------------------------------------- ------- -------
Total current inventories 41,457 43,881
-------------------------------------------- ------- -------
Total inventories at the lower of cost and
net realisable value 41,457 43,881
-------------------------------------------- ------- -------
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.
18 Other current financial assets
2020 2019
$000 $000
--------------------------------------- ------ ------
Financial assets at fair value through
profit and loss
Listed equity investment 185 -
--------------------------------------- ------ ------
The listed equity investment are equity shares which were listed
on the AIM market of the London Stock Exchange at 31 December 2020.
Their value is determined by reference to published price
quotations of the AIM market.
19 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 2020 (including short-term cash
deposits) comprised $21,000 and $38,827,000 respectively (2019:
$8,000 and $17,793,000).
The Group's cash and cash equivalents are mostly held in United
States Dollars.
20 Trade and other payables
2020 2019
$000 $000
----------------------------------------------- ------- -------
Accruals and other payables 4,570 4,950
Trade creditors 3,369 2,544
Gold held due to the Government of Azerbaijan 3,664 18,684
Payable to the Government of Azerbaijan
from copper concentrate joint sale 1,217 1,332
12,820 27,510
----------------------------------------------- ------- -------
Trade creditors primarily comprise amounts outstanding for trade
purchases and ongoing costs. Trade creditors are non
interest--bearing and the creditor days were 20 (2019: 16).
Accruals and other payables mainly consist of accruals made for
accrued but not paid salaries, bonuses, related payroll taxes and
social contributions, accrued interest on borrowings and services
provided but not billed to the Group by the end of the reporting
period. The directors consider that the carrying amount of trade
and other payables approximates to their fair value.
The amount payable to the Government of Azerbaijan from copper
concentrate joint sale represents the portion of cash received from
the customer for the Government's portion from the joint sale of
copper concentrate.
21 Interest-bearing loans and borrowings
2020 2019
$000 $000
--------------------------------------- ------- ------
Pasha Bank - refinancing loan - 1,688
--------------------------------------- ------- ------
Loans repayable in less than one year - 1,688
--------------------------------------- ------- ------
The directors consider that the carrying amount of
interest-bearing loans and borrowings approximates to their fair
value.
Pasha Bank - refinancing loan
In 2018, entered into a refinancing agreement with Pasha Bank
OJSC, as arranger, for a syndicated loan facility for up to $15
million to refinance the majority of the Group's existing loans.
The facility is for two years with a fixed interest rate of 7 per
cent. and early repayment is permitted. Loan principal is repayable
in 8 equal quarterly instalments. The loan facility is unsecured
and there are no financial covenants.
A total of $13.5 million of the facility was drawn-down on the 9
and 12 of February 2018 and used to repay the following loans:
-- $2.2 million to Yapi Credit Bank;
-- $3.7 million to Amsterdam Trade Bank N. V.;
-- $3.7 million to Gazprombank (Switzerland) Ltd; and
-- $3.9 million to the Chief Executive.
The loan refinancing was completed by the end of March 2018 and
in accordance with the terms of the loan, fully repaid in March
2020.
Unused credit facilities
The Group had a $2 million credit facility from Yapi Credit Bank
and a $18 million credit facility from Pasha Bank at 31 December
2020 which were not utilised (2019: $2 million credit facility from
Yapi Credit Bank).
22 Changes in liabilities arising from financing activities
2020
-------------------------- -----------------------------------------------
1 January Cash flows Other 31 December
$000 $000 $000 $000
-------------------------- ---------- ----------- -------- ------------
Current interest-bearing
loans and borrowings 1,688 (1,688) - -
Lease liabilities 3,756 (781) (1,028) 1,947
-------------------------- ---------- ----------- -------- ------------
Total liabilities from
financing activities 5,444 (2,469) (1,028) 1,947
-------------------------- ---------- ----------- -------- ------------
2019
---------------------------------------------
1 January Cash flows Other 31 December
$000 $000 $000 $000
------------------------------- ---------- ----------- ------ ------------
Current interest-bearing
loans and borrowings 6,750 (5,062) - 1,688
Non-current interest-
bearing loans and borrowings 1,688 (1,688) - -
Lease liabilities - (1,014) 4,770 3,756
------------------------------- ---------- ----------- ------ ------------
Total liabilities from
financing activities 8,438 (7,764) 4,770 5,444
------------------------------- ---------- ----------- ------ ------------
Other in 2019 results from the implementation of IFRS 16 -
"Leases" (note 15). Other in 2020 results mainly from lease
modifications.
23 Provision for rehabilitation
2020 2019
$000 $000
----------------------------------------- ------- -------
1 January 10,485 9,028
Additions 1,330 292
Accretion expense 310 438
Effect of passage of time and change in
discount rate (292) 727
----------------------------------------- ------- -------
31 December 11,833 10,485
----------------------------------------- ------- -------
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 2020 was $13,497,000
(2019: $12,211,000). The undiscounted liability was discounted
using a risk-free rate of 3.19 per cent. (2019: 2.94 per cent.).
Expenditures on restoration and rehabilitation works are expected
between 2023 and 2025 (2019: between 2023 and 2025).
24 Financial instruments
Financial risk management objectives and policies
The Group's principal financial instruments at 31 December 2020
comprised cash and cash equivalents. The Group also had bank loans
and letters of credit outstanding during the year ended 31 December
2020 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 2020 and 2019 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 2020 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
bank loans and letters of credit outstanding during the year ended
31 December 2020 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 the International Bank of Azerbaijan, Amsterdam
Trade Bank ("ATB") and other banks in Azerbaijan. 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. The Group defines
net debt as interest-bearing loans and borrowings less cash and
cash equivalents.
Interest rate risk
The Group's cash deposits are at a fixed rate of interest. The
Group's bank debt and letters of credit outstanding during the year
ended 31 December 2020 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 2019 and
2018.
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. Included in note 21 is a
description of additional undrawn facilities that the Group has at
its disposal to further reduce liquidity risk.
The table below summarises the maturity profile of the Group's
financial liabilities based on contractual undiscounted
payments.
Year ended 31 December 2020
On Less 3 to 1 to Total
demand than 12 5 $000
$000 3 months months years
$000 $000 $000
-------------------------- --------- ---------- -------- ------- -------
Lease liabilities - 220 440 1,980 2,640
Trade and other payables - 12,820 - - 12,820
-------------------------- --------- ---------- -------- ------- -------
- 13,040 440 1,980 15,460
------------------------------------ ---------- -------- ------- -------
Year ended 31 December 2019
On Less 3 to 1 to Total
demand than 12 5 $000
$000 3 months months years
$000 $000 $000
-------------------------- --------- ---------- -------- ------- -------
Interest-bearing loans
and borrowings - 1,688 - - 1,688
Lease liabilities - 170 846 2,740 3,756
Trade and other payables - 27,510 - - 27,510
-------------------------- --------- ---------- -------- ------- -------
- 29,368 846 2,740 32,954
------------------------------------ ---------- -------- ------- -------
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 and
Trafigura PTE Ltd. 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
-------------- --------------
2020 2019 2020 2019
$000 $000 $000 $000
------------------- ------ ------ ------ ------
UK Sterling 157 - 195 130
Azerbaijan Manats 6,045 5,226 1,085 1,044
Other 525 139 402 -
------------------- ------ ------ ------ ------
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 per
cent., 9 per cent. and 20 per cent. (2019: 9 per cent., 10 per
cent. and 10 per cent.) increase and a 10 per cent., 10 per cent.,
and 3 per cent. (2019: 9 per cent., 8 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
-------------- ---------------- --------------
2020 2019 2020 2019 2020 2019
$000 $000 $000 $000 $000 $000
----------------------------- ------ ------ ------- ------- ------ ------
Increase - effect on profit
before tax (4) (12) 992 418 11 11
Decrease - effect on profit
before tax 4 12 (149) (125) (12) (11)
----------------------------- ------ ------ ------- ------- ------ ------
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 2020 would result in a reduction in revenue of $8.9
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 $0.1 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 $1.2 million and a 10 per cent. increase in
copper price would have an equal and opposite effect.
25 Equity
2020 2019
---------------------------- ----------------------------
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.
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. There were no share options
outstanding at 31 December 2019 and 2020 (note 26).
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-based payment
The Group operates a share option scheme for directors and
senior employees of the Group. The vesting periods are up to three
years. 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.
There were no share options issued, exercised or outstanding
during the years ending 2019 or 2020.
27 Share premium account
2020 2019
$000 $000
--------------------------- ------ ------
1 January and 31 December 33 33
--------------------------- ------ ------
28 Distributions made and proposed
2020 2019
$000 $000
---------------------------------------------- -------- ------
Cash dividends on ordinary shares declared
and paid
Final dividend for 2018: 4.0 US cents per
share - 4,592
Interim dividend for 2019: 3.5 US cents
per share - 4,104
Final dividend for 2019: 4.5 US cents per 5,153 -
share
Interim dividend for 2020: 4.5 US cents 5,158 -
per share
---------------------------------------------- -------- ------
10,311 8,696
---------------------------------------------- -------- ------
Cash dividends on ordinary shares declared
and paid subsequent to balance sheet date
Special dividend of 2020: 1.5 US cents per 1,716 -
share
---------------------------------------------- -------- ------
Proposed dividends on ordinary shares
Final dividend for 2020: 3.5 US cents per 4,004 -
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
------------------------------------------- ----------- ---------
Final dividend for 2018: 4.0 US cents per
share 1.2580 3.1797
Interim dividend for 2019: 3.5 US cents
per share 1.2344 3.5739
Final dividend for 2019: 4.5 US cents per
share 1.2591 3.5739
Interim dividend for 2020: 4.5 US cents
per share 1.2987 3.4651
Special dividend for 2020: 1.5 U S cents
per share 1.3932 1.0767
------------------------------------------- ----------- ---------
*The proposed final dividend for the year ending 31 December
2020 is subject to approval by shareholders at the annual general
meeting for 2021 at a rate to be announced. It has not been
recognised as a liability in the Group statement of financial
position at 31 December 2020.
29 Subsidiary undertakings
Anglo Asian Mining PLC is the parent and ultimate parent of the
Group.
The Company's subsidiaries at 31 December 2020 are as
follows:
Percentage
Registered Primary of holding
Name address place of business per 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 2020.
30 Contingencies and commitments
The Group undertakes its mining operations in the Republic of
Azerbaijan pursuant to the provisions of the Agreement on the
Exploration, Development and Production Sharing for the Prospective
Gold Mining Areas: Gedabek, Gosha, Ordubad Group (Piazbashi,
Agyurt, Shakardara, Kiliyaki), Soutely, Kyzilbulag and Vejnali
deposits dated year ended 20 August 1997 (the "PSA"). The PSA
contains various provisions relating to the obligations of the R.V.
Investment Group Services LLC ("RVIG"), a wholly owned subsidiary
of the Company. The principal provisions are regarding the
exploration and development programme, preparation and timely
submission of reports to the Government, compliance with
environmental and ecological requirements. The Directors believe
that RVIG is in compliance with the requirements of the PSA. The
Group has announced a discovery on Gosha Mining Property in
February 2011 and submitted the development programme to the
Government according to the PSA requirements, which was approved in
2012. In April 2012 the Group announced a discovery on the Ordubad
Group of Mining Properties and submitted the development programme
to the Government for review and approval according to the PSA
requirements. The Group and the Government are still discussing the
formal approval of the development programme.
The initial period of the mining licence for Gedabek was until
March 2022. The Company has the option to extend the licence for
two five-year periods (ten years in total) conditional upon
satisfaction of certain requirements in the PSA. The first of the
five year extensions was obtained by the Company in April 2021 and
accordingly the mining licence 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.
31 Related party transactions
Trading transactions
During the years ended 31 December 2019 and 2020, 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 2020, total payments of
$658,000 (2019: $887,000) 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 2020 there is a payable in relation to the above
related party transaction of $39,000 (2019: $nil).
c) During the year ended 31 December 2020, total payments of
$2,244,000 (2019: $1,865,000 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 2020 there is a payable in relation to the above
related party transaction of $249,000 (2019: $134,000).
d) On 20 May 2015, the chief executive of the Company made a $4
million loan facility available to the Group. The principal amount
of the loan was fully repaid during the year ended 31 December
2018. The interest accrued and unpaid at 31 December 2018 was
$325,000 (2017: $655,000). The Group made a payment of $333,000 in
April 2019 to the chief executive to settle the interest
outstanding at 31 December 2018 together with the additional
interest accrued in 2019.
All of the above transactions were made on arm's length
terms.
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 until the release of this
announcement.
**S**
Notes:
Anglo Asian Mining plc (AIM:AAZ) is a gold, copper and silver
producer in Central Asia with a broad portfolio of production and
exploration assets in Azerbaijan. The Company has a 1,962 square
kilometre portfolio at its active Gedabek, Gosha and Ordubad
contract areas assembled from analysis of historic Soviet
geological data and held under a Production Sharing Agreement
("PSA") modelled on the Azeri oil industry. The Company also has
three recently restored contract areas in the formerly Occupied
Territories and Karabakh under its PSA and which the Company has
started to preliminary evaluate.
The Company's main operating location is the Gedabek contract
area ("Gedabek") which is a 300 square kilometre area in the Lesser
Caucasus mountains in western Azerbaijan. The Company developed
Azerbaijan's first operating gold/copper/silver mine at Gedabek
which commenced gold production in May 2009. Mining at Gedabek was
initially from its main open pit which is an open cast mine with a
series of interconnected pits. The Company also operates the high
grade Gadir underground mine which is co-located at the Gedabek
site. The Company has a second underground mine, Gosha, which is 50
kilometres from Gedabek. Ore mined at Gosha is processed at Anglo
Asian's Gedabek plant.
The Company produced 67,249 gold equivalent ounces ("GEOs") for
the year ended 31 December 2020. Gedabek is a polymetallic ore
deposit that has gold together with significant concentrations of
copper in the main open pit mine. The Company therefore employs a
series of flexible processing routes to optimise metal recoveries
and efficiencies. The Company produces gold doré through agitation
and heap leaching operations, copper concentrate from its
Sulphidisation, Acidification, Recycling, and Thickening (SART)
plant and also a copper and precious metal concentrate from its
flotation plant.
The Company has a production target for the year to 31 December
2021 of 48,000 ounces to 54,000 ounces of gold and 2,500 tonnes to
2,800 tonnes of copper. This total production target expressed as
gold equivalent ounces ("GEOs") at budgeted prices is between
64,000 GEOs and 72,000 GEOs.
Anglo Asian is also actively seeking to exploit its first mover
advantage in Azerbaijan to identify additional projects, as well as
looking for properties in other jurisdictions in order to fulfil
its expansion ambitions and become a mid-tier gold and copper metal
production company.
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END
FR UKABRANUVAAR
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