Anglo Asian Regulatory News (AAZ)

16 May 2024

Anglo Asian Mining PLC

2023 Full year results

Anglo Asian Mining PLC ("Anglo Asian", the "Company" or the "Group"), the AIM listed gold, copper and silver producer focused in Azerbaijan, announces its final audited results for the year ended 31 December 2023 ("FY 2023"). 

Financial overview

· Revenues of $45.9 million (2022: $84.7 million) due to lower production 

o agitation leaching and flotation processing suspended from August to December 2023 and into 2024

o lower grades of gold ore processed as mining was only from the Gedabek open pit and Gadir underground mines which are both nearing the end of their lives

· Loss before taxation of $32.0 million (2022: profit of $7.5 million) and an operating loss of $24.8 million (2022: profit of $9.3 million)

o non-cash impairment charges of $18.0 million

§ $5.0 million relating to Libero Copper & Gold Corporation Limited to reflect its value recoverable at year-end

§ $13.0 million relating to previously capitalised geological exploration expenditure on secondary and minor prospects

· Operating cash outflow before movements in working capital of $1.0 million (2022: inflow of $27.2 million)

· All-in sustaining cost ("AISC") of gold production increased to $1,510 per ounce (2022: $1,064 per ounce) due to lower production

· Net debt of $10.3 million at 31 December 2023 (31 December 2022: cash of $20.4 million)

Operational and production overview

· Total production of 31,821 gold equivalent ounces, in line with revised guidance

· Gold bullion sales of 15,822 ounces (FY 2022: 34,918 ounces) completed at an average of $1,951 per ounce (FY 2022: $1,783 per ounce)

· Copper concentrate shipments totalling 11,192 dry metric tonnes with a sales value of $15.8 million (excluding Government of Azerbaijan production share) (FY 2022: 12,443 dmt with a sales value of $22.3 million)

· Considerable progress made with assets under development

o JORC mineral resource estimates now completed for Zafar, Gilar and Xarxar which confirm significant mineralisation

o the Group now has a total of JORC standard mineral resources of over 200,000 tonnes of copper and 328,000 ounces of gold

o Garadag contains a non-JORC resource of over 324,000 tonnes of copper, with a JORC mineral resource due to be published later in 2024

· Development of Gilar mine commenced in 2023, with first ore expected to be extracted by the end of 2024

· Environmental audit confirmed that the Company was not in breach of any international guidelines and permission to restart operations was given within three months

· Permission from the Government of Azerbaijan to raise the tailings dam wall now awaited

· Capacity of the flotation plant doubled to 160 tonnes per hour in anticipation of processing richer ores from Gilar

Outlook

Despite the adversity, good progress was achieved in 2023. Anglo Asian remains confident in delivering its medium-term growth strategy to become a mid-tier copper-focused miner by 2028. Gilar is due to commence production this year and the Group remains focused on bringing Xarxar into production in the next 2 to 3 years. Garadag is planned to enter production in 2028 and the Company is now in discussion with the Government of Azerbaijan (the "Government") regarding access to Demirli. These two mines will both provide a meaningful boost to production.

In 2024, the Company published a JORC mineral resource estimate for the Xarxar deposit, confirming 25 million tonnes of copper mineralisation at average grades of 0.48 per cent. We reaffirmed our commitment to ESG by establishing a Sustainability Committee and committing to implement the Global Industry Standard on Tailings Management ("GISTM") at our Gedabek operations.

The Company continues to work with the Government regarding raising the tailings dam wall, having submitted the application on 14 March 2024. A third-party report by the international geotechnical consultants, Knight Piésold confirmed the stability of the tailings dam wall, and the Government is now undertaking the required administrative procedures before granting permission for the raise of the wall of the tailings dam. Although it has taken longer than anticipated, the directors are very confident permission will be granted shortly.

Reza Vaziri, Chief Executive Officer of Anglo Asian, commented:

"2023 was an important year for Anglo Asian in pursuit of our medium-term growth strategy as we made considerable progress across our assets under development and confirmed significant resources at our Gilar, Xarxar and Garadag mineral deposits. Additional operational milestones were achieved including purchasing a Cat® underground mining fleet and expanding the capacity of our flotation plant.

"We achieved production in line with our revised full-year guidance and completed the environmental assessment of our tailings operations. Governmental approval to raise the wall of the tailings dam is expected to be received shortly.

"I remain confident that the future is bright for Anglo Asian Mining, underpinned by a strong portfolio of assets with considerable growth potential, buoyant commodity prices and a highly experienced and talented management team."

Note that all references to "$" are to United States dollars, "CAN$" are to Canadian dollars, "£" and "pence" are to the United Kingdom pound sterling and AZN are to the Azerbaijan New Manat.

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014, which was incorporated into UK law by the European Union (Withdrawal) Act 2018, until the release of this announcement.

For further information please contact:

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 the Group with the position of Vice-President, who is a Fellow of The Geological Society of London, a Chartered Geologist, Fellow of the Society of Economic Geologists, Fellow of the Institute of Materials, Minerals and Mining and a Member of the Institute of Directors.

Stephen Westhead has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Stephen Westhead consents to the inclusion in the announcement of the matters based on his information in the form and context in which it appears.

Stephen Westhead has sufficient experience, relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking, to qualify as a "competent person" as defined by the AIM rules. Stephen Westhead has reviewed the mineral resources included in this announcement. For the avoidance of doubt, resources and economically extractable copper figures in this notification are not based on a Standard for the reporting of reserves and resources, such as JORC, as defined in the AIM Rules for Companies.

Chairman's statement

Undoubtedly 2023 was a challenging year for Anglo Asian Mining, with production partially suspended for the last four months of the year due to the environmental audit of our Gedabek tailings dam and whilst we were waiting for the approval of the Government of Azerbaijan (the "Government") to raise the tailings dam wall. However, the Board remains confident that the underlying business is strong, with a seasoned and highly motivated team and a blue-chip portfolio of assets with the capability to achieve our ambitious medium-term strategy of transitioning to a mid-tier copper-focused producer.

Production

During the year, the Company produced 31,821 gold equivalent ounces ("GEOs"), which was in the mid-range of the revised production guidance of 30,000 to 34,000 GEOs. Production was expected to decline in 2023 as the Company was only mining from its Gedabek open pit and Gedabek and Gadir underground mines, which all have falling grades as they approach the end of their lives. However, the decrease was more than anticipated due to the lost production caused by the suspension of flotation and agitation leaching from August to December 2023. The Group will not issue production guidance for 2024 until it receives approval to raise the tailings dam wall.

Progress of our strategic growth plan

In March, we announced our medium-term growth strategy, which envisages Anglo Asian Mining more than doubling its production within the next five years as we transition to a multi-asset, mid-tier producer, with a portfolio dominated by copper. The completion of this strategy was a significant achievement, and I would like to thank the entire management team for their hard work and dedication in developing it. The environmental audit and partial suspension of processing has led to certain implementation delays to the growth strategy. However, we are entirely focused on, and confident of, still achieving mid-tier production in the medium term and delivering the associated considerable shareholder value.

A key pillar of our strategic plan is the preparation of mineral resource estimates for our mineral deposits to the JORC standard. We have been successful in this regard and have now published JORC mineral resource estimates for three of our assets under development, Gilar, Zafar and Xarxar. We will be publishing the JORC mineral resource estimate for Garadag later in the year. These mineral resources guarantee the long-term future of the Company and provide increased insights regarding the development plans for these assets.

Another key pillar of the growth strategy is commencement of production from the Gilar mine. Development is well underway with production due to start by the end of 2024. We have also procured, with vendor finance, a Caterpillar underground mining fleet. The delivery of the fleet to Gedabek was a significant milestone, and was Caterpillar's first delivery of this type of underground equipment to Azerbaijan and the broader Caucasus region.

Micon environmental audit

Following protests by local residents at our tailings dam, at the request of the Government, Micon International Co Limited ("Micon") carried out a health, safety and environmental review of tailings management at the Gedabek site in late July. The review was carried out under the auspices of the Ministry of Ecology and Natural Resources of Azerbaijan. The Company's local environmental engineers, CQA International, and its independent tailings management consultant Knight Piésold, assisted in the review. The environmental audit, which measured multiple environmental factors in detail, including water samples, soil samples, and air quality, confirmed there were no issues, with our operations operating well within international guidelines. Following the finalisation of the report, the Government gave us permission to restart operations in September. 

We are fully implementing the report's recommendations, including improving our emergency response capabilities, strengthening our environmental monitoring and documentation, and enhancing how we engage and communicate with local communities.

Kyzlbulag and Demirli contract areas

Azerbaijan resumed full sovereignty over Karabakh in 2023 and the Russian peacekeepers have recently left the territory. The Company has not yet been granted access to its contract areas in Karabakh. However, preliminary discussions have started with the Government regarding access and commencing production from the assets situated in the contract areas. The Company has started obtaining and collating various documentation regarding the assets in our contract areas in Karabakh and a technical team have recently visited the Demirli processing plant.

Sustainability and climate reporting

Sustainability and upholding the best principles of Environmental, Social and Governance ("ESG") are of the utmost importance to the Company and are fundamental to how we operate and make key decisions.

During early 2024, we established a Sustainability Committee, which will oversee activities related to sustainable development and social responsibility and is chaired by Non-Executive Director, Professor John Monhemius. This committee will also be responsible for overseeing the Company's activities with respect to mitigating climate risks. We are determined to deliver real progress in this area and the committee will help spearhead our efforts as we continue to uphold industry best practice standards. For example, the Company has recently committed to full compliance with the Global Industry Standard on Tailings Management ('GISTM') and we are currently in the process of collating the required information and putting in place the necessary requirements, and we aim to achieve full GISTM compliance by 2026. We are also pleased to disclose our climate related risks and opportunities in line with the Task Force on Climate-Related Financial Disclosures ("TCFD") reporting framework for the first time this year.

Libero Copper & Gold Corporation ("Libero")

Libero had a poor year as it struggled to raise finance without drilling permission for its Mocoa property. After two follow-on investments in January and February, we decided not to invest further in Libero. An impairment provision of $5 million was recorded against our investment at the end of 2023. In early 2024, our interest fell to approximately 5.7 per cent. Libero has so far proved a disappointing investment. However, Libero has recently been restructured and refinanced and is under new management. We believe Libero still has the ability to create material shareholder value.

Dividend and going concern

The partial suspension of processing has, as you would expect, put a strain on the finances of the Company. However, the Company still continues to generate revenue from its heap leach and SART operations and is exercising extremely stringent cost control to weather this difficult period.

Given the partial suspension of production and the loss for the year, the Company does not intend to pay a dividend for 2023. However, the Company's reputation as a reliable dividend payer is important to the directors, who fully intend to resume dividend payments once conditions allow.

The Group's financial statements contain two material uncertainties as to going concern; whether permission will be obtained from the Government to raise the wall of the tailings dam; and obtaining further finance from banks in Azerbaijan. These uncertainties have arisen because these exercises had not yet been completed at the date of signing the financial statements. Work on completing these tasks is ongoing and progressing well and the Government and banks in Azerbaijan are being supportive. We are also actively exploring other sources of non-equity finance. We are therefore confident that the permission to raise the tailings dam wall and further finance will both be obtained in the short term.

UN Climate Change Conference in Baku in November 2024 ("COP 29")

As I am sure everyone is aware, COP 29 will be held in Baku in November 2024. Preparations for the conference are well underway with some governments already establishing staff resources in Baku in advance of the conference. The Company welcomes this opportunity for Azerbaijan to showcase its capital city and, as a significant business in Azerbaijan, it intends to fully participate in the conference where appropriate.

Annual General Meeting

We encourage shareholders to attend our Annual General Meeting, the details of which are given below, and are also in our annual report for 2023 and available on our website. The directors welcome all shareholders to attend and look forward to meeting as many of you as possible.

Summary

Despite a very challenging year, the Board remains excited by Anglo Asian's growth prospects. The resilience displayed during the year is a testament to the strength of the business, and we look forward to returning to full production and continuing to generate value for our stakeholders.

Appreciation

I would like to take this opportunity to thank the employees of Anglo Asian Mining, our partners, the Government of Azerbaijan, and our advisers for their continued support. I would also like to sincerely thank our shareholders for their continued commitment to the Company. I look forward to a better 2024 and to sharing our future successes with you all.

Khosrow Zamani

Non-executive chairman

15 May 2024

President and chief executive's review

2023 was a year of resilience for Anglo Asian Mining with many unforeseen challenges. However, despite the adversity, we continued throughout the year to lay the foundations for our future growth. We are confident that we have now largely overcome these challenges and the underlying business remains robust. We own an excellent portfolio of mineral deposits with significant growth potential and have a well-defined strategy to bring them into production.

Operational review

The year was pivotal in developing our asset portfolio and positioning Anglo Asian Mining for growth. We announced our medium-term growth strategy in March and have already achieved several milestones in its implementation. However, the Micon environmental audit and the new requirement to obtain the permission of the Government of Azerbaijan (the "Government") to raise the tailings dam wall slowed our progress. One benefit of the positive outcome of the environmental audit is that our credentials are now fully established as a safe operator that does not pollute the environment. This will greatly assist us should we need to arrange external financing for our new mines.

One major achievement was the development of the Gilar mine. We have completed construction of the portals to the mine and underground tunnelling to reach the mineralisation is currently underway. Unfortunately, progress has been slower than anticipated due to softer rock and water encountered underground. However, we remain on track to commence production by the end of this year from Gilar and have also published its maiden JORC mineral resource estimate. This confirmed 6.10 million tonnes of mineralisation, with average grades of 0.88 per cent. copper and 1.30 grams per tonne of gold, containing over 255,000 ounces of gold and nearly 54,000 tonnes of copper.

We completed a mining scoping study for Zafar and have commenced development work, including the construction of one of the two planned portals. A JORC mineral resource estimate confirmed 6.8 million tonnes of mineralisation at average grades of 0.5 per cent. copper, 0.4 grammes per tonne of gold and 0.6 per cent. zinc, containing 73,000 ounces of gold, 28,000 tonnes of copper and 36,000 tonnes of zinc. This anticipates an ore production rate of 700,000 tonnes per annum. Development of the Zafar mine was put on hold during 2023 in order to deploy all our resources to developing Gilar, which became our priority due to its excellent drilling results early in the year. Gilar will prove key to achieving our production ambitions, supported in the longer term by production from Zafar, while our larger copper mines are developed.

We published the maiden JORC mineral resource estimate for Xarxar in 2024, confirming 22.4 million tonnes of indicated and inferred mineralisation at an average grade of 0.48 per cent. of copper, containing over 110,000 tonnes of copper, making it a significant copper deposit. An initial assessment of the Garadag porphyry copper deposit suggests that it has the potential to produce over 300,000 tonnes of copper. Garadag is another key asset in the implementation of our growth strategy and we will publish its JORC mineral resource estimate later in 2024.

We are now prioritising our geological exploration programme around our larger mineral deposits and plan to carry out less work at our secondary and smaller prospects. This required the Company to make a provision against historic exploration expense of $13 million. However, we are maintaining some activity at Gosha and in the Ordubad area of Nakchivan, targeting both gold and copper mineralisation. We are also still exploring in the vicinity of the Vejnaly mine in the Zangilan district of Azerbaijan.

The Government regained full sovereignty over Karabakh in 2023 and the Russian peacekeepers have recently left the region. Karabakh hosts the Demirli copper and molybdenum porphyry mine, which is an exciting brownfield project that lies within our Demirli contract area. The Company is currently discussing obtaining full access to Demirli with the Government and a technical team from the Company visited the property in March 2024 for an initial assessment of the assets.

Another operational milestone in 2023 was taking delivery of a Caterpillar underground mining fleet for the Gilar mine, the first time this type of equipment of has been deployed in Azerbaijan, or the wider Caucasus region. Part of the purchase price is being refinanced with vendor financing in 2024. This fleet will significantly advance our operational capabilities and reflects our strong partnership with Caterpillar.

We have also taken the opportunity to increase production capacity at Gedabek by upgrading the flotation plant during the environmental shutdown, enhancing its performance in anticipation of increased production volumes in the years ahead.

Financial review

Revenues were $45.9 million compared to $84.7 million in 2022. This includes gold bullion sales of 15,822 ounces at an average price of $1,951 per ounce and total copper concentrate sales of 11,192 dry metric tonnes valued at $15.8 million. 

The Group hedged part of its gold bullion production in 2023, as the price of gold appeared to plateau earlier in the year. In June, monthly forward sales of gold bullion were made of approximately 25 to 30 per cent. of budgeted production for the remainder of 2023. A total of 4,600 ounces were sold at prices between $1,950 to $1,979 per ounce. 3,000 ounces of gold were sold in 2023 under the hedge programme for an average price of $1,969.97 per ounce with the remaining 1,600 ounces rolled forward to 2024. The hedging programme generated additional revenue of approximately $75,000.

The Company incurred a loss before tax of $32.0 million compared with a profit in 2022 of $7.5 million. Part of this loss arose due to the lower production and the cost of the environmental audit and partial suspension of production. However, the Company also incurred non-cash impairment charges of $5.0 million in respect of Libero Copper & Gold Corporation ("Libero") and $13.0 million in respect of historical geological exploration expenditure.

An impairment provision was made in 2023 to write down Libero to reflect its recoverable value. Subsequently, following a refinancing by Libero in early 2024, in which Anglo Asian did not participate, our holding in Libero fell to 5.7 per cent. It ceased to be an associate company from that date and going forward will be accounted for as an equity investment. The Group's strategy changed in 2023 following the discovery and development of the Zafar and Gilar mines and the acquisition of Xarxar and Garadag. The Group's focus has now moved away significantly from Ordubad and our other secondary and smaller exploration prospects. Accordingly, the Company wrote down the value of previously capitalised exploration expenditure of $13.0 million.

The Company had net debt of $10.3 million at 31 December 2023 and saleable inventory of 3,296 ounces of gold with a market value of approximately $6.8 million and copper concentrate with a market value of $0.2 million.

Revenues from production at Gedabek continued to be subject to an effective royalty of 12.75 per cent. through our production sharing agreement with the Government of Azerbaijan. We anticipate that this same royalty rate will continue to apply to at least the end of 2025. The gold and silver produced from the ore stockpile at Vejnaly in 2021 was sold in 2023 for $1.6 million. This was subject to an effective royalty of 32 per cent. because the ore stockpile was acquired at zero cost.

Environmental audit and community relations

In July 2023, local residents protested against the Company's preferred site for the construction of its second Gedabek tailings dam and many entirely untrue assertions were made regarding our existing tailings dam. Anglo Asian Mining has been operating at Gedabek since 2009 and is proud of its long-standing environmental and health and safety track record. Historically, it has enjoyed excellent community relations, particularly given its significant social and economic contribution to the local area. Gedabek was an impoverished region with low levels of employment before the arrival of the Company and is now one of the most prosperous regions in Azerbaijan. Accordingly, the unrest over the location of the second tailings dam was entirely unexpected.

Following the unrest, a comprehensive environmental audit by Micon International Co Ltd ("Micon"), was jointly commissioned by the Government and Anglo Asian Mining, which confirmed our operations were operating well within international environmental guidelines. The Government gave permission for the Company to restart operations in September. We regard obtaining permission to restart our operations within only a few months as a major achievement and it is a credit to the team for their hard work. There are many examples in the industry of mines taking years to restart, if at all, following environmental shutdowns.

In early 2024, various media organisations published a number of unfounded allegations regarding the Company's operations. The publications wholly ignored the comprehensive independent audit that cleared the Company of any environmental breach and the multiple public statements the Company had made in 2023 about its operations. Anglo Asian Mining maintains excellent relations with the Government and wholly supports its commitment and approach to developing the country's natural resources in a sustainable manner for the benefit of all stakeholders. 

As we continue to advance our sustainability agenda, we remain dedicated to responsible mining practices that benefit not only our Company, but also the communities and environments in which we operate.

Tailings storage at Gedabek and the restart of production

The current tailings dam is almost full and the Company has submitted plans to the Government for a further 7.5 metre raise of the wall to its final design height, which will give sufficient capacity for two to three more years of production. This raise will be carried out in two stages, with the first raise of 2.5 metres being completed approximately three months after permission is obtained. All necessary documents to obtain permission were submitted to the Government in March 2024, including a report by Knight Piésold confirming the stability of the dam. We are very confident that we will receive the permission shortly. Once permission to raise the tailings dam is received, full production will restart.

Commitment to Global Standards and Sustainability

Our commitment to sustainability was further consolidated by our pledge in January 2024 to implement the Global Industry Standard on Tailings Management ('GISTM') at our Gedabek operations, aiming for full compliance by 2026. This initiative reflects our zero-tolerance policy towards environmental risk and guides our management of tailings facilities throughout their lifecycle.

Our sustainability efforts are deeply embedded in every aspect of our operations, guided by a long-term vision of creating enduring value. We remain one of the largest employers in Azerbaijan, with over 1,600 employees, and we actively participate in community development through various outreach programs, including medical assistance, food aid and environmental initiatives, such as tree planting. In March 2024, we furthered our commitment by establishing a sustainability committee that will oversee the development of the Company's strategy and activities related to its sustainable development and social responsibility.

Anglo Asian Mining is undertaking a significant step in climate transparency by aligning its reporting with the Task Force on Climate-Related Financial Disclosures (TCFD) framework and adhering to the climate-related disclosure standards of the United Kingdom. This initiative signifies a crucial phase in enhancing environmental accountability and transparency and working within the IFRS framework in the future.

Looking Ahead

We remain an exciting growth company despite the many challenges of 2023. We have a portfolio of assets hosting significant mineralisation and a talented, highly experienced and motivated team. Our extensive portfolio of assets, including Gilar, Zafar, and Xarxar, host significant ore deposits, with total JORC mineral resources (measured, indicated, and inferred) amounting to over 200,000 tonnes of copper and over 328,000 ounces of gold. In addition, Garadag reportedly hosts over 300,000 tonnes of copper. In total, our resource base is over 500,000 tonnes of copper and 400,000 ounces of gold.

We are well positioned to execute our medium-term growth strategy, transitioning the Company into a multi-asset, mid-tier, copper and gold producer. Underpinned by increasingly attractive metal prices and with the foundations for growth firmly in place, we look forward to continuing to deliver meaningful value for all our stakeholders and attractive shareholder returns.

Reza Vaziri

President and chief executive

15 May 2024

Annual General Meeting for 2024

The Annual General Meeting of the Company for 2024 will be held on 20 June 2024 at 11:00am at 33 St James's Square, London SW1Y 4JS, United Kingdom. All shareholders are warmly invited to attend.

Corporate governance and Section 172 (1) Statement

A statement of the Company's compliance with the ten principles of corporate governance in the Quoted Companies Alliance Corporate Governance Code ('QCA Code') will be included in the Company's annual report and accounts for 2023.

The Company's Section 172 (1) Statement is included within the strategic report below.

Sustainability and TCFD climate related financial disclosures at Anglo Asian Mining

A report on sustainability, including a detailed report on health and safety, will be included in the Company's annual report and accounts for 2023. The TCFD climate related financial disclosures will also be included in the Company's annual report and accounts for 2023.

Strategic report

Principal activities

Anglo Asian Mining PLC (the "Company"), together with its subsidiaries (the "Group"), owns and operates gold, silver and copper producing properties in the Republic of Azerbaijan ("Azerbaijan"). It also explores for, and develops, gold and copper deposits in Azerbaijan.

The Group has a substantial portfolio of greenfield assets that lay the foundation for future growth of the business. Gilar, Zafar, Xarxar and Garadag all host significant ore deposits. The Gilar, Zafar and Xarxar deposits contain total JORC mineral resources (measured, indicated and inferred) of over 200,000 tonnes of copper and 328,000 ounces of gold. A non-JORC Company estimate for the Garadag deposit contains an "indicated" and "inferred" mineral resource of over 324,000 tonnes of copper.

Production Sharing Agreement with the Government of Azerbaijan

The Group's mining concessions ("Contract Areas") in Azerbaijan are held under a Production Sharing Agreement ("PSA") with the Government of Azerbaijan dated 20 August 1997. Amendments to the PSA were passed into law in Azerbaijan on 5 July 2022.

Contract Areas in Azerbaijan

The Group has eight Contract Areas covering a total of 2,544 square kilometres in western Azerbaijan:

Ø Gedabek. The location of the Group's primary gold, silver and copper open pit mine and the Gadir and Gedabek underground mines. The Group has two new underground mines in development at Gedabek - Zafar and Gilar. The Group's processing facilities are also located at Gedabek.

Ø Xarxar. Located adjacent to Gedabek and Garadag and hosts the Xarxar deposit. It is likely part of the same mineral system.

Ø Garadag. Located to the north of Gedabek and Xarxar and hosts the large Garadag copper deposit.

Ø Gosha. Located approximately 50 kilometres from Gedabek and hosts a narrow vein gold and silver mine.

Ø Vejnaly. Situated in the Zangilan district of Azerbaijan and hosts the Vejnaly deposit.

Ø Ordubad. An early-stage gold and copper exploration area located in Azerbaijan's Nakhchivan exclave.

Ø Kyzlbulag. Situated in Karabakh. It hosts the Kyzlbulag mine.

Ø Demirli. Adjacent to Kyzlbulag and expands the Kyzlbulag Contract Area to the northeast. It hosts a copper and molybdenum mine and a processing plant.

The Gedabek, Xarxar, Garadag and Gosha Contract Areas form a contiguous territory totalling 1,408 square kilometres. The Group currently has no access to its Kyzlbulag and Demirli Contract Areas which are situated in Karabakh. The PSA will only commence in respect of these latter two Contract Areas upon notification by the Government of Azerbaijan to the Group that it is safe to access the district in which the Contract Areas are located.

Overview of 2023 

The Group's strategy is to transition into a mid-tier copper-focused producer which will be achieved through developing its considerable assets. The Group made significant progress towards becoming a mid-tier copper producer in the year ended 31 December 2023. However, production in 2023 declined significantly compared to 2022 due to declining ore grades from its existing mines and the partial suspension of processing at Gedabek from August to December 2023.

Strategic growth plan

On 30 March 2023, the Group announced its strategic growth plan. Production is to more than double in the next five years with the Group transitioning to a multi-asset, mid-tier copper and gold producer by 2029. Copper equivalent production is targeted to increase to approximately 36,000 plus tonnes per annum (gold equivalent of 175,000 ounces) from 2028 to 2029. The production growth will be delivered through the sequential opening of four new mines in Azerbaijan.

Production

Total production in 2023 was 31,821 gold equivalent ounces ("GEOs") compared to 57,618 GEOs in 2022. The decrease in production was caused by the suspension of agitation leaching and flotation processing at Gedabek from August to December 2023 and decreasing grades in ore mined from the Gedabek open pit. Agitation leaching and flotation processing were suspended from August till December. Although permission to restart production was given by the Government of Azerbaijan in September 2023, the Group did not restart processing due to the capacity constraint of its tailings dam.

Gilar mineral resources and mine development

The Gilar deposit was extensively drilled throughout 2023 which steadily extended its mineralisation. The maiden JORC mineral resources estimate for the Gilar deposit was published on 11 December 2023 as set out in Table 5.

Development of the Gilar mine commenced in January 2023, with the completion of a portal and the start of the construction of the main production tunnel. A second tunnel for ventilation is also being constructed and infrastructure development around the mine is ongoing. The Group also took delivery of a new underground mining fleet from Caterpillar in December 2023.

Zafar mine development

A mining scoping study was completed for the Zafar underground mine in February 2023. One of the two portals required for the Zafar mine was also constructed.

Xarxar

Extensive geological surface and underground exploration was carried out at Xarxar in 2023. Analysis of the data acquired in 2022 also continued. Subsequent to the year ended 31 December 2023, a maiden JORC mineral resources estimate was published for the Xarxar deposit on 20 February 2024 as set out in Table 6.

Garadag

An initial assessment of data acquired in 2022 relating to the Garadag porphyry copper deposit confirmed the potential of the deposit to produce over 300,000 tonnes of copper.

Vejnaly

Geological exploration continued until August 2023. In early August 2023, the Company was advised by the Government of Azerbaijan to evacuate the area. This was following the Demining Agency of the Government of Azerbaijan finding additional landmines at the location. The Company was not allowed access to the area for the remainder of 2023.

Flotation processing facilities

The capacity of the Group's flotation plant was increased in 2023 from approximately 80 tonnes to 160 tonnes per hour by reconfiguring the plant. New equipment was installed and the plant "de-bottlenecked" However, the installation of an additional seven cells using "Imhoflot" pneumatic flotation technology was postponed to 2024. Extensive maintenance was carried out of the processing facilities during the suspension of processing from August to December 2023.

Micon environmental study

Micon International Co Limited ("Micon") was jointly commissioned in July 2023 by the Group and the Government of Azerbaijan to undertake a health, safety and environmental due diligence review (the "Review") of tailings management at Gedabek. No environmental contamination was found. In December 2023, the Group agreed an action plan with the Government of Azerbaijan to address various operational recommendations contained in Micon's report on the Review.

Libero Copper & Gold Corporation ("Libero")

Two further follow-on investments were made in Libero in January and February 2023 totalling $646,000. The Company did not participate in further share placements and a rights issue carried out by Libero subsequently in 2023.

Production target for 2024

The Group has not issued production guidance for 2024. It will issue production guidance upon receipt of permission from the Government to raise the wall of the tailings dam.

Mineral resources and ore reserves

Key to the future development of the Group are the mineral resources and ore reserves within its Contract Areas. Mineral resource and ore reserve estimates are produced both in accordance with the JORC (2012) code ("JORC") and as non-JORC compliant internal estimates.

Internal Group estimates have been prepared, in accordance with JORC procedures, of the remaining mineralisation of the Gedabek open pit, the Gedabek underground mine and the Gilar underground mine as at 1 March 2024. These are set out in Tables 1 to 3 respectively.

A final JORC mineral resources estimate for the Zafar deposit at 30 November 2021 is set out in Table 4. A maiden JORC mineral resources estimate for the Gilar deposit was published on 11 December 2023 and is set out in Table 5. A maiden JORC mineral resources estimate for the Xarxar deposit was published on 20 February 2024 and is set out in Table 6.

Table 7 sets out the Soviet C1 and C2 copper resource for the Garadag deposit and Table 8 sets out the Soviet mineral resources estimate for the Vejnaly deposit.

Table 1 - Internal Group estimate of the remaining mineralisation of the Gedabek open pit in accordance with JORC at 1 March 2024

Some of the totals in the above table may not sum due to rounding

Note that all tonnages reported are dry metric tonnes.

Table 2 - Internal Group estimate of the remaining mineralisation of the Gedabek underground mine in accordance with JORC at 1 March 2024

Some of the totals in the above table may not sum due to rounding

Note that all tonnages reported are dry metric tonnes.

Table 3 - Internal Group estimate of the remaining mineralisation of the Gadir underground mine in accordance with JORC at 1 March 2024

Some of the totals in the above table may not sum due to rounding

Note that all tonnages reported are dry metric tonnes.

Table 4 - Final JORC mineral resources estimate of the Zafar deposit at 30 November 2021

Copper > 0.3 per cent. copper equivalent

Some of the totals in the above table may not sum due to rounding

Note that all tonnages reported are dry metric tonnes.

Table 5 - Maiden JORC mineral resources estimate of the Gilar deposit at 30 November 2023

Reporting cut-off >= 0.5 grammes per tonne of gold equivalent*

Some of the totals in the above table may not sum due to rounding

Note that all tonnages reported are dry metric tonnes.

*Gold equivalent calculation = Gold g/t plus (copper %*1.49) plus (zinc*0.46). The metal price assumptions used were Gold - $1,675 per ounce; Copper - $8,000 per tonne; Zinc - $2,500 per tonne.

Table 6 - Maiden JORC mineral resources estimate of the Xarxar deposit at January 2024

Reporting cut-off >= 0.2 per cent. copper

Some of the totals in the above table may not sum due to rounding

Note that all tonnages reported are dry metric tonnes.

*Measured resources were nil due to insufficient third-party quality assurance and quality control ("QAQC") drill core assays being carried out. Further QAQC drill core assays will be carried out.

Table 7 - Soviet copper resources for the Garadag deposit

Some of the totals in the above table may not sum due to rounding

Table 8 - Soviet mineral resources estimate of the Vejnaly deposit

Some of the totals in the above table may not sum due to rounding

Gedabek

Introduction

The Gedabek mining operation is located in a 300 square kilometre Contract Area in the Lesser Caucasus mountains in western Azerbaijan on the Tethyan Tectonic Belt, one of the world's most significant copper and gold-bearing geological structures. Gedabek is the location of the Group's Gedabek open pit mine, the Gadir and Gedabek underground mines and the Group's processing facilities. The new Zafar and Gilar underground mines are both being developed at Gedabek.

Gold production at Gedabek commenced in September 2009. Ore was initially mined from an open pit, with underground mining commencing in 2015 when the Gadir mine was opened. In 2020, underground mining commenced beneath the main open pit (the "Gedabek underground mine"). The Gedabek and Gadir underground mines now form one continuous underground system of tunnels.

Initial gold production was by heap leaching, with copper production beginning in 2010 with the Sulphidisation, Acidification, Recycling and Thickening ("SART") plant. The Group's agitation leaching plant commenced production in 2013 and its flotation plant in 2015. From the start of production to 31 December 2023, approximately 810 thousand ounces of gold and 21 thousand tonnes of copper have been produced at Gedabek.

Environmental study and Micon report

Micon International Co Limited ("Micon") was jointly commissioned in July 2023 by the Group and the Government of Azerbaijan to undertake a health, safety and environmental due diligence review (the "Micon Review") of tailings management at Gedabek. The Micon Review was commissioned following protests in July 2023 by local residents against the proposed construction of a second tailings dam close to the location of the existing tailings dam. The Micon Review also included soil and water sampling and the testing of air quality in the vicinity of Gedabek. A summary of the results of the Micon Review (the "Micon Report") was published in September 2023. No significant environmental contamination was found. The Micon Report contained various recommendations to improve some operational, social and safety aspects of the Gedabek operations. In December 2023, the Group agreed an action plan with the Government of Azerbaijan to address these recommendations. The recommendations of the Action Plan included improving our emergency response capabilities, strengthening our environmental monitoring and documentation and how we engage and communicate with local communities. None of the recommendations affect the safe operation of Gedabek. These recommendations are being implemented with the Government of Azerbaijan receiving frequent updates on their status.

Gedabek open pit and Gedabek and Gadir underground mines

The principal mining operation at Gedabek is conventional open-cast mining using trucks and shovels from the Gedabek open pit (which comprises several contiguous smaller open pits). Ore is also mined from the Gadir and Gedabek underground mines. These two underground mines are connected, and form one continuous underground network of tunnels, accessible from both the Gadir and Gedabek portals. However, a significant fault structure separates the two mines.

Ore mined during 2023 compared to 2022 was markedly reduced as mining was suspended during August to December 2023 whilst the Micon Review was carried out. Table 9 sets out all the ore mined by the Group in the year ended 31 December 2023.

Table 9 - Ore mined at Gedabek for the year ended 31 December 2023

Processing operations

Ore is processed at Gedabek to produce either gold doré (an alloy of gold and silver with small amounts of impurities, mainly copper) or a copper and precious metal concentrate.

Gold doré is produced by cyanide leaching. Initial processing is to leach (i.e. dissolve) the precious metal (and some copper) in a cyanide solution. This is done by various methods:

1. Heap leaching of crushed ore. Crushed ore is heaped into permeable "pads" onto which is sprayed a solution of cyanide. The solution dissolves the metals as it percolates through the ore by gravity and it is then collected by the impervious base under the pad.

2. Heap leaching of run of mine ("ROM") ore. The process is similar to heap leaching for crushed ore, except the ore is not crushed, instead it is heaped into pads as received from the mine (ROM) without further treatment or crushing. This process is used for very low-grade ores.

3. Agitation leaching. Ore is crushed and then milled in a grinding circuit. The finely ground ore is placed in stirred (agitation) tanks containing cyanide solution and the contained metal is dissolved in the solution. Any coarse, free gold is separated using a centrifugal-type Knelson concentrator.

Slurries produced by the above processes with dissolved metal in solution are then transferred to a resin-in-pulp ("RIP") plant. In this plant, a synthetic resin is used to selectively absorb the gold and silver from the slurry. The metal-loaded resin is then "stripped" of its gold and silver by desorption into another solution, from which the metals are recovered by electrolysis, followed by smelting to produce the doré metal, which comprises an alloy of gold and silver.

Copper and precious metal concentrates are produced by two processes, SART processing and flotation.

1. Sulphidisation, Acidification, Recycling and Thickening ("SART"). The cyanide solution after gold absorption by resin-in-pulp processing is transferred to the SART plant. The pH of the solution is then changed by the addition of reagents which precipitates the copper and any remaining silver from the solution. The process also recovers cyanide from the solution, which is recycled back to leaching.

2. Flotation. Finely-ground ore is mixed with water to produce a slurry called "pulp" and reagents are then added. This pulp is processed in flotation cells (tanks), where the pulp is stirred and air introduced as small bubbles. The sulphide mineral particles attach to the air bubbles and float to the surface where they form a froth which is collected. This froth is dewatered to form a mineral concentrate containing copper, gold and silver.

During 2023, the capacity of the flotation plant was increased from approximately 80 to 160 tonnes per hour. This was achieved by installing new pumps and other equipment and "debottlenecking" the plant. An additional seven cells for the flotation plant have also been acquired together with a new thickener and filter press at a total cost of approximately $3 million. The seven new cells use "Imhoflot" pneumatic flotation technology, which require less energy and offers better recoveries than traditional stirred tank cells and flotation columns. These new flotation cells and ancillary equipment will increase the versatility of the flotation plant and enable the production of a zinc concentrate. The installation of the new flotation cells has been postponed until 2024.

Table 10 summarises the ore processed by leaching at Gedabek for the year ended 31 December 2023.

Table 10 - Ore processed by leaching at Gedabek for the year ended 31 December 2023

Table 11 summarises the ore processed by flotation for at Gedabek for the year ended 31 December 2023.

Table 11 - Ore processed by flotation at Gedabek for the year ended 31 December 2023

Previously heap leached ore

Gold production at Gedabek from 2009 to 2013 was by heap leaching crushed ore until the start-up of the agitation leaching plant in 2013. The heaps remain in-situ and given the high grade of ore processed prior to the commencement of agitation leaching, and the lower recovery rates, much of the previously heap leached ore contains significant amounts of gold. This is now being processed by agitation leaching. Table 12 sets out the amount of previously heap leached ore processed for the year ended 31 December 2023.

Table 12 - Amount of previously heap leached ore processed for the year ended 31 December 2023

Production and sales

Gold doré was produced by agitation and heap leaching and copper concentrate by flotation and SART processing until the end of July 2023. Agitation leaching, flotation processing and mining were suspended from August 2023 whilst the Micon Review was carried out. However, production of gold doré and copper concentrate continued until the end of December by heap leaching and SART processing, although no new fresh ore was placed on the heaps. Production during 2023 therefore decreased significantly compared to 2022 due to declining ore grades from the Gedabek open pit and the partial suspension of mining and processing from August to December 2023.

For the year ended 31 December 2023, gold production totalled 21,758 ounces, which was a decrease of 21,356 ounces in comparison to the production of 43,114 ounces for the year ended 31 December 2022. 

Table 13 summarises the gold and silver bullion produced from doré bars and sales of gold bullion for the year ended 31 December 2023.

Table 13 - Gold and silver bullion produced from doré bars and sales of gold bullion for the year ended 31 December 2023

* Including Government of Azerbaijan's share

** Excluding Government of Azerbaijan's share

Table 14 summarises the total copper, gold and silver produced as concentrate by both SART and flotation processing for the year ended 31 December 2023.

Table 14 - Total copper, gold and silver produced as concentrate by both SART and flotation processing for the year ended 31 December 2023 

Table 15 summarises the total copper concentrate (including gold and silver) production and sales from both SART and flotation processing for the year ended 31 December 2023.

Table 15 - Total copper concentrate (including gold and silver) production and sales from both SART and flotation processing for the year ended 31 December 2023

*Including the Government of Azerbaijan's share.

** These are invoiced sales of the Group's share of production before any accounting adjustments in respect of IFRS 15. The total for the year does not therefore agree to the revenue disclosed in note 6 - "Revenue" to the Group financial statements.

Infrastructure

The Gedabek Contract Area benefits from excellent infrastructure and access. The site is located at the town of Gedabek, which is connected by a good tarmacadam road to the regional capital of Ganja. Baku, the capital of Azerbaijan to the south, and the country's border with Georgia to the north, are each approximately a four to five hour drive over good quality roads. The site is connected to the Azeri national power grid.

Water management

The Gedabek site has its own water treatment plant which was constructed in 2017 and which uses the latest reverse osmosis technology. In the last few years, Gedabek town has experienced water shortages in the summer and this plant reduces to the absolute minimum the consumption of fresh water required by the Company.

Tailings (waste) storage

Tailings are stored in a purpose built dam approximately seven kilometres from the Group's processing facilities, topographically at a lower level than the processing plant, thus allowing gravity assistance of tailings flow in the slurry pipeline. Immediately downstream of the tailings dam is a reed bed biological treatment system to purify any seepage from the dam before being discharged safely into the nearby Shamkir river. The current tailings dam has the capacity for approximately three months of production once production restarts.

Knight Piésold, a leading firm of geotechnical and consulting engineers, has determined that the wall of the existing tailings dam has a maximum height of 90 metres. This means the current wall can be raised by an average of approximately 7.5 metres to give enough capacity for production for the next two to three years. The Company is proposing to do this wall raise in two stages of 2.5 metres followed by 5.0 metres. It is anticipated that it will take approximately three months to raise the wall by 2.5 metres. The Group submitted an application to the Government of Azerbaijan on 14 March 2024 to raise the wall of the tailings dam. This included a third party report by Knight Piésold confirming the stability of the wall of the dam. The Group has satisfactorily clarified all technical aspects of the application requested by the Government of Azerbaijan. The Company and the Government of Azerbaijan are now working through the administrative steps required by the Government of Azerbaijan to grant the permission.

A site has been identified for a new tailings dam in the close vicinity of the existing dam and permission for land use has been obtained. However, following protests against its proposed location by local communities, the suitability of the site is being reevaluated in conjunction with the Government of Azerbaijan. Alternative sites for the location of a second tailings dam will also be considered.

The construction of an auxiliary tailings dam close to the Zafar mine commenced in 2022. However, following a re-evaluation of the site, it was decided not to complete its construction. The storage space already constructed at the location will be used for alternative purposes.

Zafar mine development

The Zafar deposit was discovered in 2021 and is located 1.5 kilometres northwest of the existing Gedabek processing plant. Its final mineral resources estimate was published in March 2022 and is set out in Table 4.

A mining scoping study for the Zafar mine was completed in February 2023 and development commenced. Two tunnels are planned, one for haulage and a parallel ventilation tunnel. One of the two portals required for the tunnels has been constructed close to the existing Gedabek processing facilities and about one kilometre from the mineralisation. Five metres of haulage tunnel and 6.6 metres of ventilation tunnel were completed in 2023.

Development of the Zafar mine was suspended in mid-2023 and resources diverted to development of the Gilar mine, following exceptional drill results from Gilar.

Gilar mine development

Gilar is a mineral occurrence located approximately seven kilometres from the Company's processing facilities and close to the northern boundary of the Gedabek Contract Area. The Group commenced developing the Gilar underground mine in late 2022 following exceptional drilling results in the south of the area.

A maiden JORC mineral resources estimate was published on 11 December 2023 and is set out in Table 5.

A portal has been constructed and construction of the main production tunnel has started. A second tunnel for ventilation is also being constructed. At 29 February 2024, 723 metres of the production tunnel and 254 metres of the ventilation tunnel had been completed. The planned length of the production and ventilation tunnels are 1,461 metres and 777 metres respectively. The walls of the tunnels are supported by steel arches and shotcrete where necessary due to soft rock.

Infrastructure development is ongoing with the construction of a heavy earthworks equipment workshop, mine office facilities and technical support and services offices. Security and safety fencing, a mine entrance area and power generator set foundations have also been constructed.

In December 2023, the Company took delivery of a new underground mining fleet supplied by Caterpillar for the mine. The fleet comprised three R1700 and two 980UMA underground loaders. This is the first time this type of underground equipment has been deployed in Azerbaijan.

Xarxar

The 464 square kilometre Contract Area is located immediately north of the Gedabek Contract Area which it borders. The Xarxar Contract Area was acquired in 2022 together with historical geological and other data owned by AzerGold CJSC, its previous owner.

The Xarxar Contract Area hosts the Xarxar copper deposit. The mineralisation of the deposit is copper-dominant and comprises mainly oxides and secondary sulphides, with minerals such as malachite, azurite, pyrite, chalcocite and bornite, together with some primary chalcopyrite, as common minerals in the deposit, and minor barite and magnetite minerals are also recorded. The main copper mineralisation lenses are located in the central part of the Xarxar deposit, with approximate eastwest orientations.

An extensive geological exploration programme continued during 2023 at Xarxar. Surface core and reverse circulation drilling were carried out. A portal and a 500 metre long exploration tunnel have been constructed and underground core drilling also completed. The drill holes intercepted significant high-grade and continuous grades of copper mineralisation. Analysis of the historical data acquired from AzerGold CJSC also continued. On 20 February 2024, a Maiden JORC mineral resources estimate was published for the Xarxar deposit and is set out in Table 6.

Gilar is situated close to the northern boundary of the Gedabek Contract Area. Geological exploration indicates that this deposit trends to the north. The Xarxar Contract Area extends the Gedabek Contract Area to the north and will therefore enable the Gilar deposit to be fully mined.

Garadag

The 340 square kilometre Garadag Contract Area is situated four kilometres north of Gedabek alongside the road from Gedabek to Shamkir. Garadag was explored during the Soviet era and a Soviet resource estimate for the deposit is set out in Table 7. Garadag has been extensively explored since the end of the Soviet era, most recently by AzerGold CJSC, its previous owner. The roads built for drill access are still accessible and serviceable on Garadag.

In 2022, the Group acquired historical geological and other data and associated reports (the "Data") in respect of Garadag from by AzerGold CJSC for $3.3 million. The Data includes geochemical and geophysical data including maps and interpretative reports. Substantial core drilling and data interpretations were carried out by Azergold CJSC and the Data includes 9,645 chemical assays taken from 23,454 metres of drill core which have been transferred to the Group. The Data also includes an initial mining scoping study based on a preliminary mineral resource estimate with various options for mine development including open pit designs, initial mining schedules and an outline metallurgical flow sheet. An environmental and socio-economic baseline assessment has also been carried out and is included in the Data.

No drilling or other geological fieldwork was carried at Garadag out in 2023. However, the Company continued to analyse and log the data and a database is being developed for the deposit. The database needs to be validated and check drilling and confirmation of the data will be carried out.

The Company announced a non-JORC mineral resources estimate during 2023 based on geostatistical techniques and three-dimensional modelling of the Data. This shows an "indicated" plus "inferred" mineral resource of over 66.3 million tonnes of ore at 0.49 per cent. copper, containing some 324,688 tonnes of copper.

Gosha

The Gosha Contract Area is 300 square kilometres in size and is situated in western Azerbaijan, 50 kilometres northwest of Gedabek. Gosha is regarded as under explored. Gosha is the location of a high grade, underground gold mine. Ore mined at Gosha is transported by road to Gedabek for processing. No mining was carried out in the Gosha mine in the year ended 31 December 2023.

Geological fieldwork has resulted in the recent discovery of additional mineralisation adjacent to the existing underground mine. This includes "Hasan", a new sub-vertical high gold grade mineralised vein, immediately south of the existing Gosha mine. Hasan can be accessed via a short tunnel from the existing tunnelling at Gosha. A further vein close to Hasan called "Akir" is also showing promising mineralisation.

The Group is also carrying out geological fieldwork at Asrikchay, a copper and gold target situated within the Gosha Contract Area. Asrikchay is located in the northeast corner of the Contract Area, about 7 kilometres from the Gosha mine, within the Asrikchay valley.

Vejnaly

Vejnaly is a 300 square kilometre Contract Area located in the Zangilan district in southwest Azerbaijan. It borders Iran to the south and Armenia to the west and hosts the Vejnaly deposit.

A camp is now established at Vejnaly for Group employees. A thorough survey of the site has been carried out, which has found that the main ore body was extensively mined during the Armenian occupation. There are both open pit and underground workings at the location. There is also an existing crusher and flotation processing plant at the mine, which will need extensive renovation to recommence operations.

Approximately 30 full-time employees are based at the site, who are mainly geologists exploring in the vicinity of the existing mine. During 2023, development of a ventilation tunnel commenced. Minor amounts of ore are being extracted from the underground mine as the geologists clean out and rehabilitate the tunnels as part of their exploration. No ore was transported during 2023 to Gedabek for processing.

From 3 August to 31 December 2023, staff were not allowed to be present at Vejnay on the instructions of the Government of Azerbaijan.

Ordubad

The 462 square kilometre Ordubad Contract Area is located in the Nakhchivan exclave, southwest Azerbaijan, and contains numerous targets. Very limited geological fieldwork was carried out in 2021 and 2022, as access was restricted due to the COVID-19 pandemic. However, drilling resumed in 2023 targeting potential copper porphyry deposits.

Kyzlbulag and Demirli

The Kyzlbulag Contract Area is 462 square kilometres and is located in Karabakh. It contains several mines and has excellent potential for exploration, as indicated by the presence of many mineral deposits and known targets in the region. The Demirli Contract Area is 74 square kilometres that extends to the northeast by about 10 kilometres from the Kyzlbulag Contract Area and contains the Demirli mining property. There are indications that up to 35,000 ounces of gold per year were extracted from the Kyzlbulag copper-gold mine, before the mine was closed several years ago, indicating the presence of a gold mineralising system.

The Government of Azerbaijan restored full sovereignty over Karabakh in 2023 and will use all reasonable endeavours to ensure that the Company has physical access to the region to undertake mineral exploration and production. No work was carried out at Kyzlbulag and Demirli in 2023 as the Group had no access to the Contract Areas.

Libero Copper & Gold Corporation ("Libero")

Two further follow-on investments were made in Libero in January and February 2023 totalling $646,000. The Company did not participate in further share placements and a rights issue carried out by Libero later in 2023. As a result, the percentage ownership of Libero reduced to 13.1 per cent. at 31 December 2023.

Libero suffered from a shortage of funding and lack of drilling permission for its Mocoa property in Colombia. As a result, it disposed of its option to its Big Bulk property in Canada and terminated its option to the Esperanza property in Argentina as it was unable to meet its payment obligations.

The Company's shareholding in Libero reduced to approximately 5 per cent. in February 2024 following a refinancing in which the Company did not participate. Michael Sununu also resigned from the Libero board in February 2024.

Further information about Libero can be found at https://www.liberocopper.com/.

Geological exploration

Summary

· Surface core and reverse circulation drilling continued to define the Gedabek open pit ore zone

o Four surface core drill holes completed with a total length of 600 metres

o 35 reverse circulation drill holes completed with a total length of 2,939 metres

o Additional resource of approximately two million tonnes of ore defined

· Mineralisation significantly extended at Gilar and a maiden JORC mineral resources estimate published

o 21 surface core drill holes completed with a total length of 8,650 metres

o Maiden JORC mineral resources estimate published on 11 December 2023 containing 255,000 ounces of gold, 54,000 tonnes of copper and 46,000 tonnes of zinc

· Significant copper deposit at Xarxar

o 24 surface core drill holes completed with a total length of 10,795 metres

o Six underground core drill holes completed with a total length of 1,149 metres

o Maiden JORC mineral resources estimate published on 20 February 2024 containing approximately 25 million tonnes of copper ore

· Over 300,000 tonnes of copper identified at Garadag

o Comprehensive assessment of historical geological data continued

o Initial non-JORC assessment showed potential of deposit to produce over 300,000 tonnes of copper

· Drilling recommenced at Ordubad

o Five core drill holes were completed for a total length of 2,684 metres

o Trenching continued at the Dirnis-Dastabashi area

Gedabek

Gedabek open pit mine

Four surface core drill holes were completed with a total length of 600 metres and 35 reverse circulation drill holes completed with a total length of 2,939 metres to further define the ore zone. The drilling was mostly located in Pits 6, 8, 9, 10 and 11. Based on the reverse circulation drilling, a new mineral resource of about two million tonnes was defined as a northernly continuation of pits 10 and 11. This is currently being explored.

Gedabek underground mine

177 metres of underground development below pit 4 was completed. No underground drilling was carried out.

Gadir underground mine

53 metres of exploration tunnelling was completed. No underground drilling was carried out.

Gilar

The area hosts two styles of mineralisation, gold in quartz veins and hydrothermal gold-copper. Three mineralisation bodies have been discovered at the occurrence.

Extensive geological exploration was carried out at Gilar in 2023. This significantly extended the mineralisation. 21 surface core drill holes were completed with a total length of 8,560 metres. A magnetometry geophysical programme was completed and a surface Induction Polarisation ("IP") survey was carried out which was in its completion stage by the end of 2023. This survey will be used to define the mineralisation footprint of the deposit and any extensions.

A maiden JORC mineral resources estimate was published on 11 December 2023 which contained 255,000 ounces of gold, 54,000 tonnes of copper and 46,000 tonnes of zinc. This mineral resources estimate is set out in Table 5.

Zafar deposit

The geology of the area is structurally complex, comprising mainly of Upper Bajocian-aged volcanics. The mineralisation seems to be associated with a main northwest to southeast trending structure, which is interpreted as post-dating smaller northeast to southwest structures. In the southwest area, outcrops with tourmaline have been mapped, which can be indicative of the potential for porphyry-style mineral formation.

There was no geological exploration carried out at Zafar in 2023.

Gosha

The Gosha mine was previously thought to consist of two narrow gold veins, zone 13 and zone 5 to the south. Mining has previously taken place from both veins. However, the recent discovery, the Hasan vein, is located immediately south of the zone 5 and intersects it at one point. The host rock mostly exhibits silicification and kaolinisation alteration, which changes to quartz-haematite alteration in andesite.

Four underground core drill holes totalling 551 metres were drilled in the Gosha mine in 2023. A detailed underground sampling programme was also completed in the "Akir" high gold grade zone. 37 metres of channel samples were taken from "vein 3" from underground which shows high gold grades. 95 field samples were collected and 8.4 metres of trenching completed in the vicinity of the Gosha mine and the Shamliq exploration area.

Surface magnetometry geophysical exploration work was carried out at Asrikchay in 2023, a highly prospective area separate in the Gosha Contract Area. A second stage magnetometry programme was completed and a data interpretation was received from Reid Geophysics Limited. The advice from Reid was to carry out an Induction Polarisation ("IP") geophysical programme to try and identify massive sulphide bodies for future exploration.

Xarxar

Xarxar deposit

Tunnelling from the new portal continued during the year with a total of 465 metres developed. 24 surface core drill holes were completed for a total length of 10,795 metres. These drill holes targeted the central copper mineralisation zone and intercepted significantly high and continuous grades of copper with intercepts of continuous copper for up to 380 metres. These drill holes defined high and low grade zones within the copper mineralisation zone. Six underground core drill holes were completed for a total length of 1,149 metres.

Analysis of the historical geological data acquired in 2022 continued throughout 2023. From these data, together with Company exploration data, an initial geological block model and open pit optimisation study were completed during the year.

A maiden JORC mineral resources estimate was published on 20 February 2024 and is set out in Table 6. This shows the deposit contains approximately 25 million tonnes of copper ore.

Uluxanli

This is a new exploration area where a high-grade quartz gold vein has been discovered. Field exploration of the area took place in the second half of 2023. A magnetometry survey was carried out using 68 profiles. The total length of the profiles was 235 kilometres and covered an area of 24 square kilometres.

Garadag

No geological field work was carried out at Garadag in 2023. However, assessment of the acquired historical geological data continued throughout the year. Geological re-logging of six core drill holes was completed which will assist in understanding the porphyry copper potential of the deposit. A photographic unit was established to photograph all 23,000 metres of drill core acquired as part of the historic data.

A mineral resource estimation based on geostatistical techniques and three-dimensional modelling of data received from AzerGold CJSC was completed in 2023. This showed an "Indicated" plus "Inferred" mineral resource of over 66.3 million tonnes of ore at 0.49 per cent. copper, containing some 324,688 tonnes of copper, which further confirmed the copper potential of the Garadag deposit.

Vejnaly

The Vejnaly deposit is located within the volcanic-plutonic structure of the Kafan structure formation and incorporates 25 gold-bearing vein zones. Ore veins and zones of the deposit are mainly represented by quartz-sulphide and, rarely, by quartz-carbonate-sulphide veins and hydrothermally altered, disintegrated and brecciated rocks. Sulphides are dominated by pyrite with subordinate chalcopyrite. There are prospects for porphyry, epithermal and skarn type deposits.

A geological exploration team and fire assay laboratory was established at Vejnaly in 2023. Underground sampling in Zone 2 and logging of historic drill holes was carried out during the year. Some assays of historic core samples show high grade gold. Vein sampling assays of the deposits also show significant high-grade gold.

"World View 3" satellite image data for the entire Vejnaly Contract Area was obtained in 2023. A geological map of the Vejnaly deposit and Contract Area was completed in 2023. These data are currently being analysed to identify potential exploration targets.

Ordubad

The COVID-19 restrictions, which had prevented access to Ordubad, were lifted during 2023 and the Company recommenced its drilling programme. Five core drill holes were completed for a total length of 2,684 metres on the flank of the Kalaky mineral occurrence targeting porphyry copper potential. The drill holes mainly intercepted weak altered intrusive rocks within a silica halo. One of the drill holes at intercepted high gold grades at three intervals of 7.2, 11.3 and 13.8 grammes per tonne at depth. These will be further explored. Trenching was also conducted in the Dirnis-Dastabashi area. A high potential copper vein was detected.

Based on our latest understanding of porphyry mineralisation, a reassessment of the Shakardara deposit commenced in 2023. 2,908 metres of previously drilled core were relogged and some intervals were resampled.

Dr. Robin N. Armstrong, mining sector leader of the Natural History Museum, London, visited Ordubad during 2023. During his visit, geological logging of the last phase of the core drill holes was carried out. Samples were also selected for a pathfinder geochemistry study which will assist in identifying possible copper porphyry mineral targets.

The Company is awaiting results from the samples collected by the geological team from the Natural History Museum London as part of their ongoing "From Arc Magmas to Ores" ("FAMOS") international research project. This study is being carried out to determine whether there are any indications of a porphyry system within the Ordubad Contract Area.

Expansion of laboratory facilities at Gedabek

An extensive geological laboratory has been established at Gedabek. This enables samples to be analysed by various techniques including X-Ray diffraction. The laboratory has a capacity to analyse 200 to 220 samples per day and identify 81 different chemical elements.

Sale of the Group's products

Important to the Group's success is its ability to transport its products to market and sell them without disruption.

In 2023, the Group shipped all its gold doré to Switzerland for refining by MKS Finance SA. The logistics of transport and sale are well established and gold doré shipped from Gedabek arrives in Switzerland within three to five days. The proceeds of the estimated 90 per cent. of the gold content of the doré can be settled within one to two days of receipt of the doré. The Group, at its discretion, can sell the resulting refined gold bullion to the refiner. The Group shipped all its gold doré to Switzerland in 2023 by scheduled airflights.

The Gedabek mine site has good road transportation links, and the Group's copper and precious metal concentrate is collected by truck from the Gedabek site by the purchaser. The Group sells its copper concentrate to three metal traders as detailed in note 6 to the Group financial statements. The contracts with each metal trader are periodically renewed and each new contract requires the approval of the Government of Azerbaijan.

Section 172(1) Statement

Introduction

The board of directors of Anglo Asian Mining PLC (the "Board") considers that it has adhered to the requirements of section 172 of the Companies Act 2006 (the "Act") and, in good faith, acted in a way that it considers would be most likely to promote the success of the Company for the benefit of its shareholders as a whole. In acting this way, the Board has recognised the importance of considering all stakeholders and other matters as set out in section 172(1) (a to f) of the Act in its decision making.

The Board members are directors of Anglo Asian Mining PLC, a holding company for the Group. The Group carries out its business of mineral exploration and mining in Azerbaijan and elsewhere through its wholly owned subsidiaries and other investments. Given the nature and size of the Group, the Board considers it reasonable that executive decision making for the entire Group, including its subsidiaries in Azerbaijan, is the responsibility of the Board. The section 172(1) statement has accordingly been prepared for the entire Group.

The commentary and table below sets out the Company's section 172(1) statement. This statement provides details of key stakeholder engagement undertaken by the Board during the year and how this helps the Board to factor in potential impacts on stakeholders in the decision making process.

General

The Group promotes the highest standards of governance as set out in Corporate Governance in the Group's annual report. The principles of Corporate Governance underpin how the Board conducts itself. The Board is very conscious of the impact that the Group's business and decisions has on its direct stakeholders as well as its societal impact. The Company operates to the highest ethical standards as discussed in the Corporate Governance Section of the Group's annual report.

Principal decisions and other key factors in maintaining shareholder value

For the year ended 31 December 2023, the Board considers that the following are examples of the principal decisions that it made in the year:

· consideration and agreement of the Group's budget together with the associated production guidance for the year ended 31 December 2023;

· consideration of the final dividend payable for the year ended 31 December 2022 and the interim dividend payable for the year ended 31 December 2023;

· agreeing to two follow-on investments in Libero Copper & Gold Corporation ("Libero") and deciding not to make further investments in the second half of 2023;

· undertaking a gold hedging programme by making forward sales of gold in the second half of 2023;

· entering into a AZN 55 million credit line with the International Bank of Azerbaijan;

· commencing the development of the Gilar underground mine and publication of its JORC mineral resources estimate;

· purchase of a Caterpillar underground mining fleet for the new Gilar mine and its financing by vendor financing;

· continuing extensive geological exploration at Xarxar and the publication of a JORC mineral resources estimate in early 2024;

· the establishment of a long-term strategy and business plan to become a mid-tier producer of copper;

· agreeing to a request by the Government of Azerbaijan for a third-party environmental audit to be conducted at Gedabek; and

· agreeing to partially suspend processing operations between August and December 2023 whilst a third-party environmental audit was carried out and the results agreed.

The Group, like all companies operating in the extractive industries, is required to continually replace and increase its mineral reserves to maintain and improve the sustainability of its business. This concern is a high priority of the Board. To address this priority, the Company has an active geological exploration campaign at its Contract Areas to which it has access. The Board monitors the campaign through regular reports and site visits by directors whenever possible. The Company has also recently acquired additional Contract Areas in Azerbaijan to increase its mineral reserves.

The Board, together with their immediate families, and senior managers of the Company hold in total approximately 44 per cent. of the shares of the Company with the remainder held by a wide range of individual and institutional shareholders. The Board are extremely mindful that all shareholders must be treated equally. This is reflected in the Board's behaviour to ensure decisions do not disadvantage external shareholders compared to the interests of directors and senior management and that external shareholders are fully informed of all Company developments in a timely manner.

Engagement with key stakeholders

The table below sets out the Board's key stakeholders and provides examples of how the Board engaged with them in the year as well as demonstrating stakeholder consideration in the decision-making process. However, the Board recognises that, depending on the nature of an issue, the interests of each stakeholder group may differ. The Board seeks to understand the relative interests and priorities of each stakeholder and to have regard to these, as appropriate, in its decision making. However, the Board acknowledges that not every decision it makes will necessarily result in a positive outcome for all stakeholders.

Non-financial and sustainability information statement

The Group's climate change and task force on climate-related financial disclosures ("TCFD") are set in the Group's annual report for 2023.

Principal risks and uncertainties

Country risk in Azerbaijan

The Group's wholly owned operations are solely in Azerbaijan and are therefore naturally at risk of adverse changes to the regulatory or fiscal regime within the country. However, Azerbaijan is outward looking and desirous of attracting direct foreign investment and the Group 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 Group 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 directors keep under review the potential benefit of hedging which it carries out from time to time. During 2023, the Group established a hedging programme for the forward sales of gold bullion of a proportion of its production. Further details of the hedging programme are set out in the financial review below.

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 25 - "Financial Instruments" to the Group financial statements.

Liquidity and interest rate risk

The Group had no bank debt at 1 January 2023 but during 2023 utilised various credit lines from several banks in Azerbaijan. This was primarily to provide working capital from August to December 2023 during the partial suspension of the Group's operations and to finance the purchase of the underground mining fleet for the new Gilar mine. The banks loans were all at a fixed rate of interest and therefore the Group had no interest rate risk during 2023.

The Group maintained cash deposits during 2023. The Group places these on deposit in United States Dollars with a range of banks to both ensure it obtains the best return on these deposits and to minimise counterparty risk. The amount of interest received on these deposits is not material to the financial results of the Company and therefore any decrease in interest rates would not have any adverse effect.

Russian invasion of Ukraine

The Company is unaffected directly by the Russian invasion of Ukraine or the international sanctions levied against various private and governmental Russian entities.

Key performance indicators

The Group has adopted certain key performance indicators ("KPIs") which enable it to measure its financial performance. These KPIs are as follows:

1. Profit before taxation. This is the key performance indicator used by the Group. It gives insight into cost management, production growth and performance efficiency.

2. Net cash provided by operating activities. This is a complementary measure to profit before taxation and demonstrates conversion of underlying earnings into cash. It provides additional insight into how we are managing costs and increasing efficiency and productivity across the business in order to deliver increasing returns.

3. Free cash flow ("FCF"). FCF is calculated as net cash from operating activities less expenditure on property, plant and equipment and mine development and, investment in exploration and evaluation assets including other intangible assets.

4. All-in sustaining cost ("AISC") per ounce. AISC is a widely used, standardised industry metric and is a measure of how our operation compares to other producers in the industry. AISC is calculated in accordance with the World Gold Council's Guidance Note on Non-GAAP Metrics dated 27 June 2013. The AISC calculation includes a credit for the revenue generated from the sale of copper and silver, which are classified by the Group as by-products. There are no royalty costs included in the Company's AISC calculation as the Production Sharing Agreement with the Government of Azerbaijan is structured as a physical production sharing arrangement. Therefore, the Company's AISC is calculated using a cost of sales, which is the cost of producing 100 per cent. of the gold and such costs are allocated to total gold production including the Government of Azerbaijan's share.

Reza Vaziri

President and chief executive

15 May 2024

Financial review

Currency of financial review

References to "$" and "cents" are to United States dollars and cents. References to "CAN$" and "CAN cents" are to Canadian dollars and cents. References to "£" and "p" are to United Kingdom Sterling pounds and pence. References to AZN are to the Azerbaijan New Manat.

Group statement of income

The Group generated revenues in 2023 of $45.9m (2022: $84.7m) from the sales of gold and silver bullion and copper and precious metal concentrate.

The revenues in 2023 included $31.0m (2022: $62.8m) generated from the sales of gold and silver bullion from the Group's share of the production of doré bars. Bullion sales in 2023 were 15,822 (2022: 34,918) ounces of gold and 7,080 (2022: 23,763) ounces of silver at an average price of $1,951 (2022: $1,783) per ounce and $23 (2022: $22) per ounce respectively. In addition, the Group generated revenue in 2023 of $14.8m (2022: $21.9m) from the sale of 11,192 (2022: 12,443) 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 $1,943 (2022: $1,801) per ounce but the average price of copper was lower at $8,523 (2022: $8,797) per metric tonne.

A gold sales hedging programme was established in 2023. Monthly forward sales of gold bullion were made equivalent to approximately 25 to 30 per cent. of the Group's share of budgeted gold bullion production for the months of June to December 2023. The contracts matured at the end of each respective month and a total of 4,600 ounces of gold bullion was forward sold. The forward sales were made at prices between $1,949.75 to $1,979.25 per ounce of gold. The spot price of gold at the time of contracting the forward sales was $1,947.50. 3,000 ounces of gold were sold in 2023 under the hedging programme for an average price of $1,969.97 per ounce with the remaining 1,600 ounces rolled forward to 2024. The Group generated additional revenue of $75,000 from the hedging programme calculated by comparing the hedged sale price with the spot price at each date of sale. The Group did not hedge gold sales in 2022.

The Group incurred cost of sales in 2023 of $50.3m (2022: $69.0m) as follows:

The cost of sales in 2023 of $50.3m were $18.7m lower than the $69.0m in 2022. This was because agitation leaching and flotation processing and mining were suspended from August to December 2023. Reagent costs, materials and consumables including spare parts and fuel oil, and haulage and excavation services were $7.0m, $3.2m and $4.7m respectively lower in 2023 compared to 2022.

Depreciation in 2023 was lower at $9.8m compared to $16.4m in 2022. Accumulated mine development costs within producing mines are depreciated and amortised on a unit-of-production basis over the economically recoverable reserves of the mine concerned or by the straight-line method. The depreciation and amortisation were lower in 2023 due to the lower production in the year.

Other operating income was $0.4m (2022: $0.4m) which was primarily the cancellation of an amount payable to a contractor. Administration expenses in 2023 were $7.0m (2022: $5.9m). Administration expenses comprise the cost of the administrative staff and associated costs at the Gedabek mine site, the Baku office and maintaining the Group's listing on AIM. The majority of the administration costs are incurred in either Azerbaijan New Manats, the United States dollar or United Kingdom pounds sterling. The Azerbaijan New Manat was stable against the US dollar in 2023 compared to 2022 at an exchange rate of $1 = AZN1.7. The United States dollar to the United Kingdom pounds Sterling exchange rate was volatile in 2023 with a high of £1 = $1.31 to a low of £1 = $1.18. Administration costs in 2023 were higher than 2022 primarily due to higher legal costs and higher audit fees.

Finance costs in 2023 were $1.8m (2022: $0.8m). Finance costs comprise interest on borrowings and lease liabilities, interest on the unwinding of the discount of provisions and interest on the long term AzerGold CJSC creditor. Finance costs increased in 2023 compared to 2022 due to the Group's increase in borrowings in 2023, a higher discount rate used to unwind the discount on provisions and a full year's interest charge in respect of the long-term trade creditor for the purchase of historical geological data from AzerGold CJSC.

The Group incurred an impairment charge of $5.0m (2022: $nil) in respect of its investment in Libero Copper & Gold Corporation ("Libero"). Libero was an associate company at 31 December 2023 but in 2024 will be reclassified as a financial asset as the Group's interest has reduced to 5.7 per cent. in January 2024 and Michael Sununu resigned from the board of Libero. The fair value of the Group's investment in Libero at 31 December 2023 is therefore estimated as the value of Libero as a financial asset at 31 December 2023. The market value of the Group's shares in Libero at 31 December 2023 were $242,000 and the investment was accordingly written down to reflect this value.

The Group recorded a total impairment charge in respect of historical geological exploration expense of $13.0 million. This was $5.0m, $3.0m and $5.0m for Gedabek, Gosha and Ordubad respectively. The impairment charges are specifically against secondary and smaller prospects in these Contract Areas. Following the discovery and development of the Zafar and Gilar mines and the acquisition of Xarxar and Garadag, the Group's focus has moved away significantly from Ordubad and our other smaller exploration prospects. It is unlikely that the Group will expend significant resources into bringing any of these areas into production in the next five years.

The Group recorded a loss before taxation in 2023 of $32.0m compared to a profit in 2022 of $7.5m. The loss was due to the gross loss of $4.5m (before impairment of geological expenditure of $13.0m) resulting from the partial shut-down of Gedabek processing from August 2023, the provision against geological exploration cost of $13.0m and the impairment charge for Libero of $5.0m.

The Group had a taxation benefit in 2023 of $7.7m (2022: charge of $3.8m). This comprised a current income tax charge of $nil (2022: $0.6m) and a deferred tax benefit of $7.7m (2022: charge of $3.2m). $4.2m of the deferred tax credit arose from a reversal of the deferred tax creditor in respect of the impairment of the capitalised geological exploration expenditure. The geological exploration expenditure had already been deducted for taxation. R.V. Investment Group Services ("RVIG") in Azerbaijan generated taxable losses in 2023 of $17.3m (2022: profits of $1.7m). RVIG's taxable profits are taxed at 32 per cent. (the corporation tax rate stipulated in the Group's production sharing agreement). RVIG had tax losses available for carry forward of $17.3m at 31 December 2023 (2022: $nil).

All-in sustaining cost of gold production

All-in sustaining cost ("AISC") of gold production is a widely used, standardised industry metric and is a measure of how our operation compares to other producers in the industry. AISC is calculated in accordance with the World Gold Council's Guidance Note on Non-GAAP Metrics dated 27 June 2013. The AISC calculation includes a credit for the revenue generated from the sale of copper and silver, which are classified by the Group as by-products. There are no royalty costs included in the Company's AISC calculation as the Production Sharing Agreement with the Government of Azerbaijan is structured as a physical production sharing arrangement. Therefore, the Company's AISC is calculated using a cost of sales, which is the cost of producing 100 per cent. of the gold and such costs are allocated to total gold production including the Government of Azerbaijan's share.

The Group produced gold at an AISC" per ounce of $1,510 in 2023 compared to $1,064 in 2022. The reason for the increase in 2023 compared to 2022 was due to the much lower production as the majority of the Group's production costs are fixed or semi-fixed.

Group statement of financial position

Assets and liabilities

Non-current assets decreased from $102.2m at the end of 2022 to $95.2m at the end of 2023. Intangible assets decreased from $38.6m at the end of 2022 to $27.1m at the end of 2023 due to additions to geological exploration and evaluation of $5.9m (2022: $9.4m) offset by transfer to assets under construction of $3.8m (2022: $nil), amortisation of $0.6m (2022: $1.1m) and impairment of $13.0m (2022: $nil) in the year. Property, plant and equipment were higher by $8.7m due to additions of $22.5m partially offset by depreciation of $9.7m and a decrease in the provision for rehabilitation of $4.0m. Leased assets were $0.2m lower due to modifications to leased assets of $0.3m and depreciation of $0.6m offset by $0.7m of additions.

Net current assets were $36.1m at the end of 2023 compared to $60.5m at the end of 2022. The main reasons for the decrease in net current assets were a reduction in cash equivalents and restricted cash of $9.9m and an increase in current liabilities of $5.0m which in 2023 include $13.6m (2022: $nil) of bank debt due within 12 months. The Group's cash balances at 31 December 2023 were $4.5m (2022: $20.4m) and there is restricted cash of $6.0m (2022: $nil) which is not available for use by the Company as it is security for a loan. Surplus cash is maintained in US dollars and was placed on fixed deposit with banks in Azerbaijan at tenors of between one to three months at interest rates of around 1.5 to 4.0 per cent.

Non-current liabilities included trade and other payables of $4.2m (2022: $2.9m). This includes $3.1m (2022: $2.9m) in respect of the purchase of historical exploration data of Xarxar and Garadag. The total cost of the purchase was $4.0m of which $1.0m was paid in 2022. The remaining creditor of $3.0m was discounted over 2.5 years using an interest rate of 8 per cent. and includes attributable VAT of $0.6m.

The Group commenced borrowing in 2023 to finance the capital expenditure of developing its assets and the partial shutdown of processing operations from August 2023. Total bank borrowings (including accrued interest) at 31 December were $20.7m (2022: $nil). The Group borrowed from two banks in Azerbaijan during 2023, International Bank of Azerbaijan and Access Bank. The principal amounts outstanding were $15.0m and $5.6m respectively at interest rates of between 5.5 and 6.5 per cent per annum. The loan from Access Bank was secured against a $6.0m cash deposit.

Net assets of the Group at the end of 2023 were $84.8m (2022: $113.5m). The net assets were lower due to a decrease in retained earnings as a result of the loss and the dividend payment in 2023. There were no shares issued or bought back in 2023.

Equity

The Group was financed entirely by equity and had no bank debt or other borrowings other than lease liabilities throughout 2022. In 2023, the Group commenced borrowing from banks and the Group's gearing ratio at 31 December 2023 was 24.4 per cent.

There were no movements of the Group's share capital, merger reserve and share premium account in 2023. The Group's holding company did not buy back any ordinary shares in 2023. 150,000 ordinary shares were bought back in 2022 which have not been cancelled and are held in treasury.

Group cash flow statement

Operating cash outflow before movements in working capital for 2023 was $1.0m (2022: inflow of $27.2m). Operating cash was severely reduced in the year due to the lower production arising from the suspension of processing. Operating profit before the non-cash charges of depreciation, amortisation and impairment in 2023 was an outflow $3.0m (2022: inflow of $24.6m).

Working capital movements generated cash of $2.0m (2022: absorbed cash of $10.1m) due to trade receivables which were lower by $4.6m (2022: higher by $5.9m). Inventory was $0.1m higher (2022: $3.4m) and trade and other receivables were lower by $2.4m (2022: $0.8m).

Cash from operations in 2023 was $1.0m compared to $17.0m in 2022 due to the operating cash outflow in 2023.

The Company paid corporation tax in 2023 of $0.1m (2022: $3.6m) in Azerbaijan in accordance with local requirements. This payment was the final payment of its liability for the year ended 31 December 2022.

Expenditure on property, plant and equipment and mine development were $18.0m (2022: $10.1m). The main additions in 2023 were capitalised stripping costs of $0.7m, mine development costs of $8.3m, a Caterpillar underground mining fleet and associated equipment of $5.2m and an underground drilling machine of $1.6m.

Expenditure on intangible assets in 2023 was $7.2m (2022: $7.2m) which was expenditure on exploration and evaluation. The main expenditure on exploration and evaluation expenditure was $2.1m (2022: $3.6m), $1.9m (2022: $1.6m) and $1.0m (2022: $0.5m) at Gedabek, Xarxar and Vejnaly respectively. 

The Group spent $0.7m (2022: $3.5m) on acquiring shares in Libero during 2023.

Dividends

In respect of the year ended 31 December 2023, the Group did not pay an interim dividend and no final dividend is proposed. A total dividend of 8 US cents per share was paid in respect of the year ended 31 December 2022. Dividends are declared in United States dollars but paid in United Kingdom pounds sterling. The total cash cost of dividends paid in respect of 2022 was $4.6m.

Production Sharing Agreement

Under the terms of the Production Sharing Agreement (the "PSA") with the Government of Azerbaijan (the "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 carried forward from previous periods) are greater than 75 per cent. of the value of production. All operating and capital cash costs in excess of 75 per cent. of the value of production can be carried forward indefinitely and set off against the value of future production.

Profit Production and unrecovered costs are calculated separately for each Contract Area from the total production and total costs for each Contract Area. Costs incurred in one Contract Area cannot be offset against production of a different Contract Area. Unrecovered costs can only be recovered against future production from their respective contract area.

Profit Production for the Group has been subject to the minimum 25 per cent. for all years since commencement of production including 2023 for the Gedabek Contract Area. The Government's share of production in 2023 (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 2023 of 12.75 per cent. (2022: 12.75 per cent.) of the value of its production at Gedabek.

The Group produced gold and silver for the first time in 2021 from its Vejnaly Contract Area and the metal produced was sold for a total of $1.6m in 2023. The Government's share of this production was 32.0 per cent. This is because the mine and other facilities were acquired at no cost and the only costs available to offset the production were the administration costs of the site, minor refurbishment capital expenditure, the cost of geological exploration and Gedabek transport and processing costs. Mining costs were not available for offset as the metal was produced from ore stockpiled at Vejnaly by the previous owner.

The Group can recover the following costs in accordance with the PSA for each Contract Area as follows:

· all direct operating expenses of the mine;

· all exploration expenses;

· all capital expenditure incurred on the mine;

· an allocation of corporate overheads - currently, overheads are apportioned to Gedabek according to the ratio of direct capital and operating expenditure at the Gedabek contract area compared with direct capital and operational expenditure at the Gosha and Ordubad contract areas; and

· an imputed interest rate of United States Dollar LIBOR + 4 per cent. per annum on any unrecovered costs.

The total unrecovered costs for the Gedabek, Gosha and Vejnaly contract areas at 31 December 2023 were $64.6m, $34.8m and $1.9m respectively (2022: $37.5m, $31.4m and $0.8 respectively).

The unrecovered costs at 31 December 2023 for the Garadag and Xarxar contract areas were $1.2m and $3.4m respectively (2022: $0.9m and $1.0m respectively). The unrecovered costs include cash payments in 2022 for historical geological data of $0.8m and $0.2m in respect of Garadag and Xarxar respectively.

Foreign currency exposure

The Group reports in US dollars and a substantial proportion of its business is conducted in either US dollars or the Azerbaijan Manat ("AZN") which has been stable at AZN 1 equalling approximately $0.58 during the year ended 31 December 2023. The Company's revenues and its debt facility are also denominated in US dollars. The Company does not currently have any significant exposure to foreign exchange fluctuations and the situation is kept under review.

Calculation of non-IFRS financial indicators

Net debt / cash

Calculated as the cash and cash equivalents minus current and non-current interest-bearing loans and borrowings.

Free cash flow

Calculated as net cash from operating activities less expenditure on property, plant and equipment and mine development and, Investment in exploration and evaluation assets including other intangible assets.

All-in sustaining cost ("AISC") per ounce.

AISC is calculated in accordance with the World Gold Council's Guidance Note on Non-GAAP Metrics dated 27 June 2013. The AISC calculation includes a credit for the revenue generated from the sale of copper and silver, which are classified by the Group as by-products.

Going concern

Main business of the Group

The Group produces primarily gold and copper at its Gedabek mining concession in northwestern Azerbaijan. Ore mined at Gedabek produces gold doré by heap and agitation leaching and copper concentrate (which also contains gold and silver) from SART and flotation processing. When processing operations are fully operational, production is cash generative at current and forecast metal prices. Historically, the Group has funded all its operational costs (including Azerbaijan and London overheads) from cash generated from the sale of precious metal and copper concentrates produced at Gedabek.

Suspension of agitation leaching and flotation processing and interim results to 30 June 2023

The Group suspended agitation leaching and flotation processing from the beginning of August 2023 whilst an environmental audit of its Gedabek site was carried out.

The Group published its six months interim results to 30 June 2023 ("Interim Results") on 26 September 2023. The Group reported in its Interim Results the following material uncertainties regarding its going concern:

1. The Group will be able to fully restart agitation leaching and flotation processing.

2. IBA will agree to restart lending to the Group under its revolving credit facility.

3. The Government will not impose any conditions or fines etc. on the Group which will be so onerous as to make it impossible for the Group to continue in commercial operation.

4. Permission will be obtained to further raise the wall of the tailings dam and this wall raise will be completed by April 2024

The results of the environmental audit were satisfactory and, subsequent to the release of the Interim Results, the Group was given permission by the Government of Azerbaijan (the "Government") on 26 September 2023 to fully restart operations and did not impose any conditions or fines etc. on the Group which were so onerous as to make it impossible for the Group to continue in commercial operation. This removed material uncertainties (1) and (3) above. Material uncertainties (2) and (4) are discussed further below.

One recommendation arising from the environmental audit was that Government permission is required for any further raises of the wall of the Group's tailings dam.

Permission to raise wall of the tailings dam

The Group's agitation leaching and flotation processing produce waste as a slurry called tailings. These tailings are stored in a dam approximately seven kilometres from the Group's processing plants. The tailings dam only has sufficient capacity for another 2 to 3 months of agitation leaching and flotation production. The Group has therefore applied to the Government to increase the height of the wall by an average of 7.5 metres to its final design height, which will give the tailings dam sufficient capacity for an additional two to three years of production. This raise of the dam wall will be carried out in two stages with the first stage being a raise of approximately 2.5 metres.

The Group submitted to the Government an application to raise the wall of the tailings dam on 14 March 2024. The application included a third-party report by the geotechnical consultants, Knight Piésold, which confirmed the stability of the tailings dam. The Group subsequently clarified certain aspects of the Knight Piésold report and other documentation submitted with the Government. The Government is now in the process of reviewing the Company's application.

The Group will not restart agitation leaching and flotation until permission is obtained from the Government to raise the wall of its tailing dam. The tailings dam has sufficient capacity for agitation leaching and flotation processing to begin whilst the raise of the wall is carried out. This will avoid the need to restart and then stop agitation and flotation processing, due to the tailings dam reaching full capacity. To commence production and then stop within a three month period is not operationally desirable.

Financial condition and credit facilities available to the Group

The Group had cash reserves of $9.8 million (including $6.0 million restricted cash) and debt of $20.7 million at 31 March 2024. The current cost of maintaining the Group's operations, including mining, Gilar development, heap leaching, SART processing and administrative overheads in Azerbaijan and London, is estimated at $3.5 million to $4.0 million per month. The Group is currently generating revenue of approximately $2.0 million per month from precious metal and concentrate sales.

The Group has in place an AZN 55 million ($32.3 million) General credit agreement ("GCA") with the International Bank of Azerbaijan ("IBA"). The Group has borrowed $15 million under this facility to date, of which $10 million is repayable between May 2024 to 2026, and $5 million was repayable in May 2024. The $5 million loan repayable in May 2024 was recently extended for one year and is now repayable in May 2025. The Group is currently negotiating a further $10 million loan under the GCA which the directors believe is subject to receiving permission to raise the wall of the tailings dam.

The Group recently signed a vendor refinancing of part of the purchase price of its Caterpillar mining fleet of $3.7 million and is completing the conditions precedent in the loan agreement to enable the proceeds to be disbursed. It is anticipated these proceeds will be received by 31 May 2024.

12 Month cash flow forecast

The Group has prepared a 12 month cash flow forecast until 30 June 2025. It has been prepared under the following major assumptions:

- The permission for raising the wall of the tailings dam will be obtained by 31 May 2024.

- The Group will close the $10 million loan and receive the proceeds from IBA by 31 May 2024.

- The Group will borrow a further $3 million from IBA under the GCA in September 2024, discussions for which have not yet commenced.

This cash flow uses gold prices of $1,900 to $2,300 per ounce and copper prices of $8,500 to $8,900 per tonne. This cash flow shows that the Group is able to finance its operations till the end of the going concern period being 30 June 2025.

The Group has also prepared a 12 month cash flow forecast until 30 June 2025 ("Sensitivity Case") using the following major assumptions:

- The permission for raising the wall of the tailings dam will be obtained by 30 June 2024.

- The Gilar mine will commence production in the first quarter of 2025.

- The Group will close the $10 million loan from IBA by 30 June 2024.

- The Group will borrow a further $7m from IBA under the GCA in August 2024, discussions for which have not yet commenced.

This Sensitivity Case cash flow shows that the Group is able to finance its operations till the end of the going concern period being 30 June 2025.

Material uncertainties over going concern

At the time of approving the issuance of the financial statements, there exist the following material uncertainties which are outside of management's control:

1. Whether the Group will receive permission from the Government to raise the wall of the tailings dam. 

2. Once permission is received, whether the Group will close the loan of $10 million from IBA which remains subject to their approval, and the further loans forecast to be taken with IBA in the going concern period, for which discussion have not yet commenced, ($3 million in the base case and $7m in the Sensitivity Case) from IBA.

Should the permission not be obtained and the additional loans not be advanced, the Group and Company is forecast to exhaust its available liquidity during the going concern period.

These material uncertainties may cast significant doubt on the Group's and Company's ability to continue as a going concern. It may therefore be unable to realise its assets and discharge its liabilities in the normal course of business.

The directors are confident that the permission to raise the wall of the tailings dam will be received. The application is technically competent and is currently being progressed by the appropriate ministries and departments of the Government. The Group has a successful record of obtaining all necessary approvals from the Government, which has provided the Directors with confidence that permission will be granted. The Board considers that the Government is also very desirous that the Group undertakes other business opportunities in Azerbaijan. These are dependent on restarting full production at Gedabek.

The cash flow contains certain discretionary expenditure on capital expenditure and geological exploration totalling $7.2 million. Should the permission to raise the wall of the tailings dam be delayed beyond 31 May 2024, this expenditure can be deferred. This will enable the Group to have sufficient working capital to continue producing from only heap leaching and SART till the end of 2024.

The directors are confident that it will be granted a further loan of $10 million because of the strong existing relationship with IBA, the history of completing loans and the advanced stage of the current approvals process. However, the required IBA approvals for the $10 million loan are not yet completed and are contingent on the tailings dam approval. The Group is also negotiating with other banks in Azerbaijan. If the $10 million loan from IBA is not completed, the Board will seek alternative sources of bank financing from a Bank with which it currently has other borrowings. The directors believe that the banks in Azerbaijan are likely to require that the Group has the permission from the Government to raise the tailings dam wall before advancing any further funds. Following the loan of $10 million, there will be $7.3 million remaining of the GCA from which the $3 million loan can be made ($7 million in the Sensitivity Case). The directors are confident that it will be granted the additional loan forecast in the base case and Sensitivity Case because of the strong existing relationship with IBA and the history of completing loans with IBA. The Group is also actively exploring other sources of non-equity financing.

Accordingly, the directors believe it is appropriate to prepare these financial statements on a going concern basis.

The Group's business activities, together with the factors likely to affect its future development, performance and position, can be found within the chairman's statement, the Chief Executive Officer's review, and the strategic report above. The financial position of the Group, its cash flow, liquidity position and borrowing facilities are discussed within this financial review.

William Morgan

Chief financial officer

15 May 2023

Directors emoluments

Directors' fees and consultancy for 2022 and 2023 were paid in cash.

No director held or exercised any share options during the years ended 31 December 2022 and 31 December 2023.

Group statement of income

year ended 31 December 2023

Group statement of comprehensive income

year ended 31 December 2023

* These are gross amounts and the tax effect is $nil

Group statement of financial position

31 December 2023

Group statement of cash flows

year ended 31 December 2023

Group statement of changes in equity

year ended 31 December 2023

Notes to the Group financial statements

year ended 31 December 2023

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 31 below and the chairman's statement, the president and chief executive's review and the strategic report above.