Last checked at 27 Nov 2009 07:00
Anglo Asian Mining plc / Ticker: AAZ / Index: AIM / Sector: Mining
27 November 2009
Anglo Asian Mining plc ('Anglo Asian' or 'the Company')
Operations and Corporate Update
Anglo Asian Mining plc, the AIM listed emerging gold producer, provides an operations update at its Gedabek gold/copper mine ('Gedabek') in Azerbaijan and announces a further US$3 million loan agreement with the International Bank of Azerbaijan ('the IBA') to provide working capital for the Company.
The Company produced and refined 1,562 ounces ('oz') of gold ('Au') and sold 1,332 oz Au during September 2009 and produced 2,875 oz Au and sold 2,508 oz Au during October 2009. Production was below management expectations due to difficulties encountered installing two new cone crushers and continued issues with the stacker that subsequently affected levels of ore on the leach pad. These difficulties were principally the result of unexpectedly high moisture content within the ore fed to the crushers; the Company is confident that, having identified this issue, the new stacker and crusher plant facilities as described below will enable more efficient operation of the plant in future.
Anglo Asian anticipates producing 2,030 oz Au and selling 1,770 oz Au for the month ending 30 November 2009, which is broadly inline with management expectations. As a result, the Board is now forecasting Gedabek to produce 25,000 oz Au in its first full year of production to June 2010, the Company's first gold sales having been made in July 2009. This is below the Company's previous forecast of 50,000 oz Au. New initiatives to improve the processing plant's performance have and are being implemented, which the Board anticipates will increase the plant's running rate to an annualised 50,000 oz Au with effect from March 2010.
Importantly, gold sales were completed at an average of US$997 per oz for September 2009 and US$1,037 per oz for October 2009, which were ahead of Anglo Asian's forecast projections. Given the current favourable gold market conditions, the Company believes that this trend will continue into 2010.
During September and October 2009, 17,000 tonnes and 40,000 tonnes of dry ore with an average gold content of 3.25 g/t were crushed and transferred to the leach pad respectively. The aggregate 57,000 tonnes for these two months (gross of the 12.75% of production attributable under the profit sharing agreement with the Government of Azerbaijan) was below the forecast of a total 100,000 tonnes at 3.0 g/t. In light of this, the Company is purchasing a new stacker with a view to expanding production and improving efficiencies, which it hopes to install in January 2010. This will enable Anglo Asian to ramp up gradually levels of dry ore transferred to the leach pad to 62,000 tonnes per month by February 2010 and the Company will seek to make further increases during 2010.
The two new cone crushers purchased in August 2009 to improve the plant's performance were installed during September 2009. Due to initial technical difficulties, resulting in interruptions to operations and reduced volumes of ore being crushed, the cone crushers required modifications which were undertaken by the suppliers; subsequently they are now fully operational. The Company is also installing an additional tertiary cone crusher and is sourcing a reconditioned cone crusher that will be introduced as a standby for the secondary cone crusher to increase the plant's operational flexibility.
Additionally, Anglo Asian has signed a further loan agreement ('the Agreement') with the IBA for US$3 million. The proceeds of this facility have been received by the Company and have been used to settle certain interest payments that have accrued on existing loans from the IBA. Under the terms of the Agreement, an all inclusive annual interest rate of 15% will apply on funds drawn. Repayment is scheduled in six monthly instalments of US$500,000 beginning from April 2010. There is no penalty for early repayment. The Agreement is in addition to other loan agreements with the IBA totalling US$40.9 million, which will be repaid from cash generated from production at Gedabek.
As previously stated in the Company's interim results 25 September 2009, should operating costs increase significantly, ramp-up be delayed further or revenues otherwise fall short of expectations, there may be insufficient cash flow for the Group to sustain its day to day operations without seeking and relying on further financing. Accordingly, the Company continues to monitor the situation carefully and is working on various contingency plans, including seeking major shareholder support if cash flow is at insufficient levels.
**ENDS**
For further information please visit www.aamining.com or contact:
| Reza Vaziri | Anglo Asian Mining plc | Tel: +994 12 596 3350 |
| Andrew Herbert | Anglo Asian Mining plc | Tel: +994 12 596 3350 |
| John Harrison | Numis Securities Limited, as Nominated Adviser | Tel: +44 (0) 20 7260 1000 |
| James Black | Numis Securities Limited, as Corporate Broker | Tel: +44 (0) 20 7260 1000 |
| Hugo de Salis | St Brides Media & Finance Ltd | Tel: +44 (0) 20 7236 1177 |
| Felicity Edwards | St Brides Media & Finance Ltd | Tel: +44 (0) 20 7236 1177 |
Notes:
Anglo Asian Mining plc (AIM:AAZ) is an emerging gold producer in Central Asia with a broad portfolio of production and exploration assets in Azerbaijan. The Company has a 1,962 sq km prospective exploration portfolio, assembled on the back of analysis of historic Soviet geological data and held under a Production Sharing Agreement ('PSA') based on the Azeri oil industry. The Company developed Azerbaijan's first operating gold/copper mine, Gedabek, which commenced gold production in May 2009 and is targeted to produce in excess of 300,000 oz gold in the first six years of production.
Anglo Asian is actively looking to exploit its first mover advantage in Azerbaijan to identify additional projects, as well as looking for other properties in Central Asia and Caucasia in order to fulfil its expansion ambitions and become a mid-tier gold and base metal production company focussed in these regions.