Anglo Asian Regulatory News (AAZ)

28 Sep 2007 07:04

Anglo Asian Mining PLC28 September 2007 28 September 2007 AIM:AAZ ANGLO ASIAN MINING PLC ('Anglo Asian' or 'the Company') INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2007 AND UPDATE Highlights for the period • Following completion of the scoping study on Gedabek a Notice of Discovery was submitted to the Ministry of Ecology and Natural Resources in February • Gedabek feasibility study was completed in June showing the property to be economically viable • Minasco appointed as agent for sale of the CIL plant located in Singapore • Khosrow Zamani appointed as a non executive Director Subsequent events • Khosrow Zamani appointed as Chairman • Production and Development Programme approved • Environmental Impact Study approved by the Ministry of Ecology and Natural Resources • International Bank of Azerbaijan agree to establish $5m loan facility Khosrow Zamani, Chairman of Anglo Asian, commented: 'The feasibility on theGedabek project demonstrates viability and the possibility of a prompt return oninvestment and gives the Company a unique opportunity to secure it's foothold inAzerbaijan by becoming the first operating gold mine in the country. Successfuldevelopment of this mine will enable Anglo Asian to self fund furtherexploration in the highly prospective Caucasus mineralised belt and generatesufficient cashflow to take advantage of other opportunities in the region.' Mr Zamani continued: 'The operating loss of $12.4m for the 6 month period to 30June 2007 arose from charging $2.2m of administrative expenses, $0.2m ofexploration expenses and $10.0m of impairment provisions. The provisions relateto previously capitalised exploration and evaluation expenditure on some of theOrdubad properties, mining rights in the Ordubad contract area and the carryingvalue of the CIL plant. Whilst the Directors are working to extract greatervalue from these assets, it is considered appropriate to make these provisionsat the current time.' For further details, please contact: Anglo Asian Mining PLC Numis Securities Limited Parkgreen CommunicationsGordon Lewis, CEO John Harrison Justine Howarth+994 12 499 3350 +44 20 7260 1000 Bex Sanders-HewettRichard Round, FD +44 20 7851 7480+44 1525 211988 INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2007 AND UPDATE Chairman's statement General It is a pleasure to deliver my first Chairman's Statement covering what has beena very important period for Anglo Asian. A Feasibility Study completed by theCompany in June, established the viability of the Gedabek heap leach project.The Company submitted a 'Notice of Discovery and its Commerciality' for theGedabek property to the Azerbaijan Ministry of Ecology and Natural Resources atthe end of February 2007. This notice initiated the fifteen year Development andProduction Period, with the potential for two five year extensions. Subsequentapprovals of the Work Plan and Production and Development Programme enable theCompany to proceed to construction. The Company is now going through the process of obtaining finance, acquiring therequired land, detailed design work on the pad, pit and treatment plants andobtaining the necessary approvals to commence the mining activities. A fullupdate on all of these areas is provided below. Gedabek The Company completed the Feasibility Study on Gedabek in June, which showed thedevelopment of the property to be economically viable. The study identifies amining reserve of 7.7 million tonnes of ore at grades of 1.80 grams per tonne('g/t') gold, 15.9 g/t silver and 0.29% copper. Gold, silver and copperproduction over the mine life has been conservatively estimated to be 311,154 ozof gold, 1,959,109 oz of silver and 17,424,960 lbs of copper respectively. Underthe JORC code the mining reserve is in the "probable" mineral reserve category.Additional ore is expected to be found from the inferred ore within the currentpit boundaries, extensions of the mineralisation already identified outside thepit and from old mine stockpiles produced from previous underground mining ofthe Gedabek deposit. Capital costs are estimated at US$30.7 million, including US$3.1 million ofworking capital. The cash operating costs are estimated as US$283 per oz of gold(US$147 per oz net of copper and silver credits, at a gold price of US$600/oz,Cu price at US$1.80/lb and silver price at US$10/oz). At current metal prices,cash costs reduce to well below US$100 per oz of gold and the project isexpected to payback the capital investment within one year of commencingproduction. The Company receives 49% of the cashflows after capital andoperating cost recovery with interest, under its Production Sharing Agreementwith the Azerbaijan government. This equates to approximately 63% of the pre-taxcashflows. As described in earlier announcements, the application of heap leach technologyfrom a low strip open pit mine, combined with the SART(Sulphidation-Acidification-Recycle-Thickening) copper precipitation process isthe intended treatment method for the project. This is a simple, one stepleaching process which has been demonstrated in the laboratory to workeffectively on Gedabek ore. SART copper recovery has been applied successfullyat an Australian mining operation and is particularly suited to Gedabek orebecause of the high cyanide solubility of the copper minerals present. Since completing the Feasibility Study for Gedabek, the Company has continued toprepare for construction of the mine. The Environmental Base-line Study wasapproved by the Ministry of Ecology and Natural Resources in March and theEnvironmental Impact Study was approved in August. These were significantmilestones for the Company, the latter involving direct consultation with thecitizens of Gedabek town, who strongly supported the mine development. In August, the Company also received approval for its Production and DevelopmentProgramme from the project Steering Committee, enabling it to proceed withconstruction work subject to the transfer of land, some of which is currentlyheld under agricultural title. The land transfer must undergo a legal process,which is currently in progress. Meanwhile, the Company has applied for a MiningLicence to start pre-stripping during the construction of the leach pad,treatment plant and associated facilities. At Gedabek, company personnel have occupied a local hotel building during theexploration phase. The hotel has since been modified to accommodate up to 60contractors and a new camp is under construction adjacent to the mine site.Accommodation units initially assembled at the Ordubad exploration camp havebeen moved to Gedabek and the camp construction has been making good progressduring the dry months of August and September. Final design work for the leach pad and treatment plants continues in Australia.Once completed, the Company will be able to move forward with fabrication andequipment ordering. It is expected most of the plant fabrication will be donewithin Azerbaijan. It was planned to start earthworks on the leach pad at Gedabek during the finalquarter of 2007. With the approach of winter, and allowing sufficient time tofinalise the land transfer process, this has now been postponed until the springof 2008. This revised construction programme should still enable production tocommence during the last quarter of 2008. Mining pre-strip, leach pad earthworksand plant construction will now be carried out in parallel, commencing as soonas possible in the second quarter of 2008 Exploration After an unusually wet spring restricting access to some areas, the explorationteam have since covered some significant territory in the three main Contractareas at Gedabek, Gosha and Ordubad. The emphasis during 2007 has changed fromadit re-sampling to a broader look at the Company's prospect areas, through rockchip sampling, stream sediment sampling and applying a wide grid soils programmein areas of known or likely mineralisation. Soviet exploration efforts usedoutcrops and adits only for exploration guidance. Applying western geochemicalmethods, the exploration team is targeting both new prospects without anysurface expression and extensions to existing deposits within the contractboundaries. From the results of this work, targets will be identified for the next phase ofdrilling. Preliminary results show the soils sampling programme near Gedabek iseffective and a closer grid sampling programme has already been established overone anomalous zone. Nearly 2,000 samples have been collected from all threecontract areas and results will be carefully analysed over coming months.Previous sampling programmes in the Gedabek region have identified at least fivegold and gold/copper exploration targets within trucking distance of the mine. Exploration work has been slowed down at Ordubad in order to direct more of theCompany's resources to the development and construction of Gedabek. The Companyhas until April 2009 to provide the MENR with a Notice of Discovery on theresources within the other contract areas. Due to the short timeframe to complete exploration and the appropriate scopingstudy to prove economic viability at Ordubad, it has been decided to direct theCompany's resources towards the development and construction at Gedabek. TheDirectors have decided to make provisions against the carrying value ofpreviously capitalised exploration expenditures and mining rights at Ordubadtotalling $6.7million to reflect the current status of exploration there. AngloAsian will continue to look for ways to extract value from the Ordubad contractarea, which could be achieved by either a joint venture or through negotiationwith the Azerbaijan Government. Check sampling carried out at the principal Gosha prospect supports previousRussian data. The upper and thicker E-W ore zone is being considered forsupplementary feed to Gedabek. This orebody is near surface and may be amenableto open pit mining. Further delineation of this oxide resource and a feasibilitystudy to truck ore to Gedabek is planned for completion during 2008. CIL plant On completion of the scoping study in late February a decision was made to sellthe CIL plant, which is containerised and located at Jurong port in Singapore,as it was no longer required. Immediately following the announcement of thisdecision a number of parties approached the Company expressing interest in theplant. It became clear following discussions that the parties either did nothave the appropriate funding or their projects were not sufficiently advanced tocomplete the acquisition. A decision was therefore made to put the sale in thehands of Minasco, an experienced specialist in gold plant sales. Visits havealready been made to Singapore by a number of interested buyers who haveconfirmed that the plant is in good condition and suitable for their particularapplication. The Company is very encouraged by the recent level of interestgenerated. In light of the delayed timing of the plant sale the Company believes it isprudent to make a provision against the CIL plant carrying value of $3.3million,reducing the carrying value to $7million. Financing Discussions have been held with a number of financial institutions in Azerbaijanregarding the financing of the Gedabek project. There has been interest from anumber of parties, but in particular the International Bank of Azerbaijan('IBA') last week agreed to establish a US$5 million credit facility, for theGedabek project, extending for three years with interest payable at up to 15%.The Company will be in a position to drawdown on the credit line from 1 October2007 for the Gedabek project and the IBA has also confirmed that it is willingto entertain further loans to Anglo Asian. We have also held discussions with other potential regional strategic partners. Our cash balance at the time of this release is $1.1m and Reza Vaziri, amajority shareholder and director, has also provided a $0.6m unsecured loanfacility to the Company which is currently not drawn. The facility is repayable,if drawn, from the proceeds of the sale of the plant or an appropriate financingand accrues interest at a rate of 9% per annum. The non executive directors have agreed that their fees, with effect from 1August 2007, will be paid in shares. Financial results The Group reported an unaudited operating loss of $12,378,630 ($2,141,020) forthe six months to 30 June 2007 (six months to 30 June 2006). The operating lossresulted from the charging of administrative expenses of $2,214,560 ($2,141,020)and other operating expenses of $10,164,070 ($nil), which incorporatesprovisions for impairment of $9,966,105 ($nil) on intangible assets and thefixed asset for resale. The net interest credit in the period of $117,580 ($370,391) arose from interestreceived on deposits. Exploration and evaluation expenditures of $1,336,517 ($2,973,376) werecapitalised in the period. Capital expenditure was incurred of $90,560($5,808,526). At the period end the Group retained cash balances of $2,478,864 ($11,750,911). Directors and management I joined Anglo Asian as a non executive Director on 1 June 2007 and wassubsequently appointed Chairman on 17 July, taking over from Graham Mascall wholeft to pursue other business interests. I would like to take this opportunityto thank Graham for his contribution to the restructuring of the Company. We have continued to reduce our cost base and significant savings have beenachieved through the closure of our London office in February. We intend to makefurther savings to the overhead by reducing our presence in the capital Baku bymoving all operating functions to Gedabek, following the completion of thestudies and construction commencing. This will result in cost savings, improvedcontrol and increase in local employment. It has also been agreed that Richard Round (Finance Director/Company Secretary)will make a further reduction on his time commitment to Anglo Asian, which willbe achieved by the appointment of Jan Davies as Company Secretary on a basis oftime worked and a combination of investor relations and finance control beingtaken up by Gordon Lewis and Nigel Jenner (Group Financial Controller)respectively. The future The Group is poised to transform as it moves towards the development of theGedabek project. This will be the starting point for further growth inAzerbaijan and the greater Asian region. I look forward to updating the shareholders with progress over the comingmonths. Khosrow Zamani Chairman 27 September 2007 Interim financial statements for the 6 month period to 30 June 2007 Group Income Statement Unaudited Unaudited Audited 6 months to 6 months to Year to 30-Jun-07 30-Jun-06 31-Dec-06 Restated (Note 2) Note US$ US$ US$ ------ --------- --------- -------- Administrativeexpenses 2 (2,214,560) (2,141,020) (4,824,096) Other operatingexpenses 3 (10,164,070) - (185,103) --------- --------- -------- OPERATING LOSS (12,378,630) (2,141,020) (5,009,199) Interest andinvestment income 117,580 370,391 581,152 Finance costs - (13) (26) --------- --------- --------LOSS ON ORDINARYACTIVITIES BEFORE TAX (12,261,050) (1,770,642) (4,428,073) Tax on loss on ordinary activities - - - --------- --------- --------LOSS FOR THE PERIOD (12,261,050) (1,770,642) (4,428,073) --------- --------- -------- Basic and dilutedloss per ordinaryshare (cents) 4 (12.36) (1.79) (4.47) Group statement of total recognised income and expenses Unaudited Unaudited Audited 6 months to 6 months to Year to 30-Jun-07 30-Jun-06 31-Dec-06 Restated (Note 2) US$ US$ US$ --------- --------- --------LOSS FOR THE PERIOD (1,450,183)Share-based payment charge (320,459) --------- --------- --------LOSS FOR THE PERIODRESTATED (12,261,050) (1,770,642) (4,428,073)Exchange differences - (73,172) (175,616) --------- --------- --------TOTAL RECOGNISED INCOMEAND EXPENSE (12,261,050) (1,843,814) (4,603,689) --------- --------- -------- Group balance sheet Unaudited Unaudited Audited 30.06.07 30.06.06 31.12.06 Note US$ US$ US$ --------- --------- --------ASSETS Non current assets Intangible assets 5 49,028,247 51,525,289 54,383,948 Property, plant andequipment 1,027,853 10,562,016 11,303,637 Fixed asset held forresale 6 7,000,000 - - --------- --------- ---------TOTAL NON CURRENTASSETS 57,056,100 62,087,305 65,687,585 Current assets Receivables 516,283 372,897 170,607 Cash and cashequivalents 2,478,864 11,750,911 6,354,102 --------- --------- ---------TOTAL CURRENT ASSETS 2,995,147 12,123,808 6,524,709 --------- --------- ---------TOTAL ASSETS 60,051,247 74,211,113 72,212,294 LIABILITIES Current liabilities Trade and otherpayables (1,107,217) (935,606) (1,240,453) --------- --------- ---------TOTAL LIABILITIES (1,107,217) (935,606) (1,240,453) --------- --------- ---------NET ASSETS 58,944,030 73,275,507 70,971,841 --------- --------- --------- EQUITY Called up sharecapital 1,782,605 1,782,605 1,782,605 Share premiumaccount 30,279,301 30,279,301 30,279,301 Merger reserve 46,206,390 46,206,390 46,206,390 Profit and lossaccount (19,324,266) (4,992,789) (7,296,455) --------- --------- ---------TOTAL EQUITY 58,944,030 73,275,507 70,971,841 --------- --------- --------- Group cash flow statement Unaudited Unaudited Audited 6 months to 6 months to Year to 30-Jun-07 30-Jun-06 31-Dec-06 Restated Note US$ US$ US$ --------- --------- --------- NET CASH OUTFLOW FROMOPERATING ACTIVITIES 7 (2,565,741) (1,183,268) (2,906,521) Investing activities Purchases of property,plant and equipment (90,560) (5,808,526) (6,649,068) Exploration andevaluation expenditure (1,336,517) (2,973,376) (6,017,138) --------- --------- ---------NET CASH USED ININVESTING ACTIVITIES (1,427,077) (8,781,902) (12,666,206) Financing activities Interest received 117,580 370,391 581,152 Interest paid - (13) (26) --------- --------- ---------NET CASH PROVIDED BYFINANCING ACTIVITIES 117,580 370,378 581,126 --------- --------- ---------NET DECREASE IN CASHAND CASH EQUIVALENTS (3,875,238) (9,594,792) (14,991,601) --------- --------- --------- --------- --------- ---------CASH AND CASHEQUIVALENTS AT START OFPERIOD 6,354,102 21,345,703 21,345,703 --------- --------- --------- --------- --------- ---------CASH AND CASHEQUIVALENTS AT END OFPERIOD 2,478,864 11,750,911 6,354,102 -------- --------- --------- Notes to the financial statements 1. Basis of preparation In 2006 the Group prepared its consolidated financial statements under UKgenerally accepted accounting principles ('UK GAAP'). The full accounts for theyear ended 31 December 2006, which received an unqualified report from theauditors and did not contain a statement under section 237(2) or (3) of theCompanies Act 1985, have been filed with the Registrar of Companies. On 1 January 2007 the Group adopted International Financial Reporting Standards('IFRS') as adopted by the European Union. This interim financial report hastherefore been prepared using accounting policies that the Group believes willcomply with IFRS. There were no adjustments arising from the restatement of the 30 June 2006 and31 December 2006 financial statements resulting from the application of IFRS andthere is no material difference between the new accounting policies under IFRSand those previously adopted under UK GAAP. The interim financial information for the six months ended 30 June 2006 and 30June 2007 is unaudited and does not constitute statutory accounts as defined insection 240 of the Companies Act 1985. The interim report was approved by the Board of Directors on 27 September 2007. 2. Restatement of share based payment charge The Group applied the requirements of FRS 20 Share-based Payment from 1 January2006. The impact of this standard in the year ended 2006 was a charge of$776,668 to the profit and loss. The Interim Statements for the 6 month periodto 30 June 2006 did not include a charge relating to FRS 20 and the comparativestatements have been restated to include the appropriate charge of $223,824. Theadoption of FRS 20 had no impact on total reserves as there is a correspondingentry to retained earnings. 3. Other expenses Unaudited Unaudited Audited 6 months to 6 months to Year to 30-Jun-07 30-Jun-06 31-Dec-06 US$ US$ US$ Provision forimpairment ofcapitalisedexploration andevaluationexpenditure (1,692,218) - (185,103) Provision forimpairment ofmining rights (5,000,000) - - Exploration andevaluationexpenses (197,965) - - Provision forimpairment offixed asset forresale (3,273,887) - - --------- --------- --------Total otherexpenses (10,164,070) - (185,103) --------- --------- -------- 4. Earnings per ordinary share Unaudited Unaudited Audited 6 months to 6 months to Year to 30-Jun-07 30-Jun-06 31-Dec-06 US$ US$ US$ Restated (Note 2)Earnings per ordinary shareLossBasic and dilutedearnings per share (12,261,050) (1,770,642) (4,428,073) --------- --------- -------- Number Number NumberWeighted average number of shares:For basic anddiluted earnings per share 99,171,800 99,171,800 99,171,800 Basic and diluted Earnings per Share are the same because the only outstanding share options are anti-dilutiveas the Group has made a loss. 5.Intangible Assets Exploration and Mining Rights Total Evaluation US$ US$ US$ As at 31December 2006 7,458,686 46,925,262 54,383,948 Additionsduring theperiod 1,336,517 - 1,336,517 Provision forimpairment (1,692,218) (5,000,000) (6,692,218) -------- --------- ---------As at 30 June2006 7,102,985 41,925,262 49,028,247 -------- --------- --------- The additions during the period relate to Gedabek and Gosha. The directors have decided tomake a provision for impairment against the carrying value of capitalised exploration andevaluation expenditure relating to Piyazbashi $1,111,286, reducing the carrying value to$1,000,000 and Misdag/Agyurt of $580,932 reducing the carrying value to $nil. In addition aprovision for impairment has been raised against mining rights relating to Ordubad of$5,000,000, reducing the carrying value of all properties to $41,925,262. 6. Fixed asset held for resale In February 2007 the Company made the decision to sell the CIL plant which iscontainerised and located in Singapore. As a result the book value of$10,273,887 has been transferred from Property, plant and equipment to Fixedasset held for resale. Due to the protracted sales process the Directors havedecided to make a provision for impairment against this carrying value of$3,273,887, reducing the carrying value to $7,000,000. 7. Reconciliation of operating loss to the cash outflow from operations Unaudited Unaudited Audited 6 months to 6 months to Year to 30-Jun-07 30-Jun-06 31-Dec-06 Restated (Note 2) US$ US$ US$ Operating loss (12,378,630) (2,141,020) (5,009,199) Depreciation 92,457 49,694 148,615 Provision forImpairment 9,966,105 - 185,103 (Increase)/Decrease indebtors andprepayments (345,676) 523,378 725,668 (Decrease)/Increase increditors andaccruals (133,236) 137,393 442,240 Share Basedpayments 233,239 320,459 776,668 Exchangedifferences - (73,172) (175,616) --------- --------- --------Net cashoutflow fromoperatingactivities (2,565,741) (1,183,268) (2,906,521) --------- --------- -------- This information is provided by RNS The company news service from the London Stock Exchange