Final Results

RNS Number : 5930F

Anglo Asian Mining PLC

28 May 2013

 



Anglo Asian Mining plc / Ticker: AAZ / Index: AIM / Sector: Mining

28 May 2013

Anglo Asian Mining plc ('Anglo Asian' or 'the Company')

Final Results

Anglo Asian Mining plc, the AIM listed gold producer in Azerbaijan, is pleased to announce its final results for the year ended 31 December 2012 ('FY 2012'). 

Overview

·    Profit before tax of US$28.6 million (2011: US$31.6 million) on revenue of US$73.5 million (2011: US$83.8 million)

·    Gross profit of US$36.1 million (2011: US$43.0 million)

·    Operating cash flow before movement in working capital of US$40.3 million (2011: US$55.8 million)

·    Solid production performance at flagship Gedabek gold-copper-silver mine in Azerbaijan in FY 2012

o Total gold production of 50,215 ounces (2011: 57,068 ounces)

o Gold sales of 42,557 ounces (2011: 49,304 ounces) completed at an average of US$1,666 per ounce (2011: US$1,573 per ounce)

o Gold produced at an average cash operating cost of US$668per ounce (2011: US$448 per ounce)

o Silver doré production totalled 20,133 ounces (2011: 39,086 ounces)

o Total copper concentrate produced 502 tonnes of copper, 98,158 ounces of silver and 86 ounces of gold (2011: 611 tonnes of copper, 134,240 ounces of silver and 200 ounces of gold)

o Commenced development of new agitation leaching plant to improve gold recoveries  which at the time of writing, is in status of full operational commissioning

o New agitation plant has been delivered on schedule and is expected to be US$7m under the US$52 million budget and US$15 million below the available funding facility

o Post year end, Q1 2013 gold production totalled 8,585 ounces - on target to produce circa 60,000 ounces for FY 2013

·    Continuing defined exploration and development programme to increase life of mine at Gedabek

o Upgraded JORC resource by 50% at Gedabekto over 1 million ounces in the Measured and Indicated categories in April 2012

o Defined maiden JORC reserve estimate of744,038 ounces of gold in June 2012

o Focused on exploration upside potential at Gedabek: 28,872 metres of drilling completed - a JORC compliant ore reserve update report is planned to be completed in Q2 2013

·    Continuing to develop Gosha Contract Area in Azerbaijan into a small, high grade underground gold mine - first production anticipated H1 2014

·    Notice of Discovery for gold in 462 sq km Ordubad Contract Area - further exploration planned to advance project

·    Net debt of US$28.3 million at 31 December 2012 (2011: US$3.2 million)

Chairman's Statement

It gives me great pleasure to report on the progress Anglo Asian has made during this pivotal time in its development as a leading gold-copper-silver production company in Azerbaijan and indeed Caucasia.  In FY 2012, we have continued to perform well as a highly profitable, low cost mining company, with a progressive portfolio of assets that includes our flagship Gedabek gold, copper and silver mine in western Azerbaijan ('Gedabek'), which produced 50,215 ounces of gold in FY 2012, a second development gold project, Gosha only 50km away from Gedabek and a third gold exploration/development project, Ordubad, located in the Nakhchivan region of Azerbaijan.

In terms of financial performance, we have enjoyed another period of profitability, driven by our gold, silver doré and copper concentrate production at Gedabek. To this end, I am pleased to report that the Company recorded a profit before tax of US$28.6 million (2011:US$31.6 million), on revenues of US$73.5 million (2011: US$83.8 million), and a gross profit of US$36.1 million (2011: US$43.0 million).

During the period we have been highly active developing and implementing plans to ensure the future growth of Anglo Asian.  These plans have been centred on: increasing the production at Gedabekto return gold production levels to 60,000 ounces for FY 2013, whilst lowering the production cash costs, which for the FY2012 stand at US$668 per ounce of gold, to US$450-500 per ounce; increasing the life of mine of Gedabek through defined exploration and development programmes to increase the reserve and resource base, which currently stands at 744,038 ounces and 1,276,422 ounces of gold respectively; and establishing a secondary mining project,Gosha,which we are currently developing to increase our production by the end of 2014 to 80,000 to 90,000 ounces of gold.I believe the Anglo Asian team has delivered on numerous key objectives during 2012 with respect to these initiativesand it has laid the foundations for a transformational year for the Company in 2013 and beyond.

Gedabek, which is located in western Azerbaijan on the Tethyan Tectonic Belt, one of the world's significant copper and gold bearing belts, is currently an open pit, heap leach operation. In terms of gold and silver production for the reporting period, we were pleased to report figures in line with management's expectations of 50,215 ounces of gold and 20,133 ounces of silver in doré from the heap leach processing. From this we made gold sales of 42,557 ounces at an average price of US$1,666 per ounce and silver sales of 16,342ounces at an average price of US$32 per ounce.  The difference between sales and production is for two reasons. Firstly the Government of Azerbaijan takes title to 12.75% of all metals produced,according to the Product Sharing Agreementin place on Anglo Asian's operating licences (as outlined later in this statement), and secondly there is a time lag from production to sales. In terms of production in FY 2013, Q1 2013 gold production for the three months ending 31 March totalled 8,585ounces with gold sales of 8,725ounces at an average price of US$1,638 per ounce.

Importantly we also produce copper in the form of a precipitated copper sulphide concentrate by-product, which also contains silver and a small amount of gold, from our Sulphidisation, Acidification, Recycling and Thickening ('SART') plant at Gedabek.  Interestingly this plant is one of the largest of its kind to be used on a commercial basis. Production from the plant for FY 2012 totalled 502 tonnes of copper, 98,158 ounces of silver and 86 ounces of gold. Income from sales of this copper concentrate totalled US$2.1 million in FY 2012.  Towards the end of 2012, we entered into a sales contract with Glencore International plc ('Glencore') for the sale of 2,500 wet metric tonnes ('WMT') and 550 dry metric tonnes of copper concentrate and we also sent an additional trial shipment of 200 WMT of copper concentrate to Seagate Minerals and Metals Inc.At the end of 2012 stocks were2,900 WMT.  These sales will see our copper concentrate product continuing to add to our bottom line and in turn increasing our profitability for FY 2013. In Q1 2013 production from SART totalled 93 tonnes of copper, 9,875 ounces of silver and 16 ounces of gold and we had stockpiles of 2,535 WMT of copper concentrate product.  Wehope to arrange further sales contracts for copper concentrate in 2013 and look forward to providing future updates on this.

As mentioned, a key focus of 2012 for the Company was the review of Gedabek'soperations with a view to implementing initiatives and development plans to improve the production profile of the mine both in the near-term, and increasing the life of mine to ensure its future production success.  As highlighted, gold production for FY 2012 was 50,215 ounces, which was in line with management's expectations, but this was a drop from the previous year's production levels of 57,068 ounces in 2011.  This decrease in production wasanticipated in the 2012 Company mine plan, which took into consideration the reducing gold grade in the ore-body and the need forlonger leaching cycles in the existing heap leaching process.

Having identified the key factors, the Company assessed different processing routes to improve the recovery of gold from the ore, over that achieved by the conventional heap leach process currently in use, in order to maximise the economic return.  In May 2012, following a pre-feasibility study carried out by mining consultants, Arcadis Chile Limited, we announced our intention to construct an agitation leaching plant at Gedabek, which is expected to both increase goldproduction and recovery and also reduce cash operating costs per ounce.Construction of the new agitation leaching plant, which had a forecast CAPEX of US$52 million, began in August last year and the plant is now in the process of full scale commissioning and is expected to come in US$7 million under budget. The new plant will initially treat 100 tonnes of ore per hour and it will increase both gold oxide and sulphide recovery to 85% and 69% respectively. This is expected to positively impact gold production for the second half of 2013 to allow us to meet our 60,000 ounces production target(which represents a 20% increase over FY 2012).Gold production thereafter will improve on an on-going basis and the lower grade orewill continue to be heap leached.

In addition to improving processing efficiencies at Gedabek, we also continue to explore the greater Gedabek area with the aim of delineating further resources and reserves to increase the life of mine of the operation.  In April 2012 we were delighted to announce a JORC compliant resource upgrade to 48,138,979 tonnes at 0.825 g/t gold for 1,276,422 ounces of gold in the Measured andIndicated categories.  In addition, we also announced a maiden JORC compliant ore reserve report, which significantly exceeded our previous internal estimate of recoverable ounces of gold at Gedabek. A total mineable reserve of 20,312,879 tonnes at 1.139 g/t gold for 744,038 ounces, 0.293% copper for 59,479 tonnes and 9.456 g/t silver for 6,175,531 ounces as at 30 December 2011 was calculated, of which 532,607 ounces of gold are recoverable, a significant increase over the previous internal estimate of 311,000 ounces announced in 2007, prior to the construction of the Gedabek mine. Importantly, in addition to the 532,607 ounces of recoverable gold in the ground, we have an estimated 90,000 ounces of gold that was not recovered by the heap leach process in the spent ore that is currently stacked on the leach pads. This ore will be reprocessed through the new agitation leach plant to recover the major part of this "lost" gold and further boost production flow for FY 2013/4.

Since the announcement of our maiden reserve, an extensive 28,872metre drilling programme has been completed, targeting an extension of the existing mine at Gedabek with the aim of further increasing the mineral resources and reserves as part of our on-going exploration and development programme.  Early indications from the recent drilling indicates the potential to continue increasing the size of the Gedabek deposit in Q2 2013, and we look forward to updating the market on these results in due course.

Looking ahead, the Company is committed to establishing a second mining operation in Azerbaijan. As mentioned, Gosha is located 50km away from Gedabek and work is currently under way to develop a small, high-grade, underground gold mine, which is expected to produce circa 15-20,000 ounces of gold per annum. Mining development at Gosha is targeted to begin in H2 2013 with the intention being to start production in 2014. Due to the close proximity of Goshaand Gedabek,it is intended that gold oreproduced atGoshawill be sent by truck to Gedabekfor processing through the new agitation leach plant.The input of ore from Gosha, in addition to the increased recoveries from the Gedabek ore achieved in the new plant, is expected to see Anglo Asian's total gold production rising to between 80,000 and 90,000 ounces by the end of 2014, subject to both the Gosha mine and the Gedabek Agitation Leaching Plant operating as expected.

Further exploration works at our Ordubad Contract Area, located in the Nakhchivan region of Azerbaijan, resulted in the issuance of a notice of discovery for two gold deposits, Piyazbashi and Agyurt.  The Company will continue the exploration works to seek more mineral potential in the area.

In terms of our corporate activity for the period, we continue to work closely with the Government of Azerbaijan. As noted above, we have a Production Sharing Agreement in place with the Government of Azerbaijan, which is based on the established Azeri oil industry model.  Up until the time we have recovered all of our carried-forward, unrecovered costs, the Government of Azerbaijan effectively takes 12.75% of commercial products of any mine we bring into production, with Anglo Asian taking 87.25%. We expect to continue retaining 87.25% of the commercial products until at least the end of 2014 based on costs incurred to date and with the construction of the agitation leaching plant.

In addition, we have strong relations with theInternational Bank of Azerbaijan, which is majority owned by the Government of Azerbaijan, and we have various financing agreements in place with the bank. As at 31 December 2012, the Company's net debt totalled US$28.3million (2011: US$3.2 million) after taking into account cashof US$2.4 million (2011: US$9.9 million).  This increase in net debt was due to an additional loan agreement undertaken with the IBA by the Company to finance the new agitation leaching plant at Gedabek, which as mentioned had an estimated CAPEX of US$52 million and an expected actual cost of US$45 million.  In May 2012, the IBA provided a US$7.5 million loan and agreed a further US$10.5 million loan with a letter of intent stating that, subject to internal consideration and approval, it would provide up to an additional US$42 million to the Company for the construction of the new agitation leaching plant. Including the US$18 million already agreed in May 2012, this brought the total funding available to the Company by the IBA to US$60m.  The loans agreed during 2012 have an annual interest rate of 12% and can be drawn down in tranches of up to US$1,500,000. Repayment will be within 36 months in equal quarterly instalmentsstarting two years from the date that each tranche of funds is drawn down.  There is no penalty for early repayment.

As at 31 March 2013, the total funds drawn down from the IBAfor the Agitation Leaching Plant from the $60m facility were US$40.1 million. The remaining amount outstanding of the first loan with the IBA was US$0.8 million and cash in the bank was US$3.4 million. Net debt, being interest bearing loans and borrowings less cash and cash equivalents, therefore stood at US$37.5 million at 31 March 2013.

As a Company we are committed to maintaining highhealth, safety, social and environmental standards. We have a Health, Safety, Environment and Technology Committee ('HSET') established at Board level, which is under the chairmanship of Professor John Monhemius, one of our Non-executive Directors.  This committee has the responsibility to oversee all aspects of the HSET of the Company and to make recommendations to the Board.   Operational control of HSE is the responsibility of our Sustainability Manager, Mr Angel Vega, who has a team of HSE officers to police and encourage all safety aspects of day-to-day working practices on the mine.

During 2012 there were no serious work related injuries or reportable environmental incidents, and numerous safety and environmental initiatives were undertaken. We have approximately 566 personnel working in the Company.  We achieved a landmark in our safety-at-work record by surpassing for the first time one million man-hours worked without a Lost Time Incident (LTI). Despite this achievement we recognise that mining is a hazardous environment and we will continue to strive for further improvements. In May 2012, we introduced a penalty scheme whereby infringements of safety regulations or codes of practice are penalised by fines that are deducted from offenders' wages.  The scheme applies equally to Company employees and to contractors working on site.

Since becoming signatories to the International Cyanide Management Code in 2010, we have been working towards achieving the required safety standards in our working practices for the handling and management of cyanide, which is the principal chemical used for the leaching of gold ores.  This has involved the preparation and translation of documentation and training courses for employees.  We have appointed external auditors, who will assess our performance under the auspices of the International Cyanide Management Institute ('ICMI').  In September 2012, the auditors carried out a pre-audit gap analysis, which highlighted areas that require further attention to achieve the required standards.  The full audit will take place in shortly after which we expect to be granted full certification by the ICMI.

On the environmental side, we have undertaken a full Environmental and Social Assessment (ESA) of our operationsduring this year. We appointed AMEC, a leading international engineering consultancy (http://www.amec.com), to perform this work for us.  The ESA was a major exercise carried out over several months by a team of specialists from AMEC.   We received their final report in December 2012, which comprised a main volume and 12substantial appendixes, and the task for the coming year is to incorporate the consultants' recommendations into our working practices and to develop a comprehensive environmental management plan for the life of the mine.

Looking at Anglo Asian in the wider market context, despite the economic turmoil in the market that all resource companies are facing at present, I remain positive about the longer term fundamentals for gold mining companies and indeed Anglo Asian. Gold has enjoyed a spectacular bull market over the past 13 years, growing at a compound annual growth rate of approximately 13% since the low gold price circa US$278 in 1999. In spite of recent gold pricing developments, which have seen gold price levels drop to circa US$1,350, I believe that there remains a convincing case for sustainable upside in the gold price based on gold as a hedge against inflation/currency depreciation, a 'safe haven' and store of value, and with continued robust physical demand from China and India projected.  Moreover, similar corrections both mid-2006 and again in late-2008 when the gold price was hit, down more than 25% and 33%respectively, build a positive case for this recent drop being a 'correction' rather than a bearish gold market. At current levels gold equities do not seem to reflect current gold prices and mining companies are at their cheapest level in decades. I consider that gold equities, especially Anglo Asian as a low cost producer, still represent a compelling investment opportunity.

In conclusion, the past year has been one of significant progress for Anglo Asian on many fronts. We are delighted to report a strong financial performance with a profit before tax of US$28.6 million.  This is thanks to reliable gold production from Gedabek, which has achieved our production target for FY 2012 by producing 50,215 ounces of gold and also 502 tonnes of copper concentrate for the year.

Looking ahead to 2013, we are committed to increasing Gedabek's gold production and we are in the final stages of constructing a new Agitation Leaching Plant, estimated to be US$7 million under budget at US$45 million, which will improve production from the mine substantially once commissioned and enable us to achieve FY 2013 production of 60,000 ounces. In terms of our copper production, we produced 93 tonnes of copper in Q1 2013 and expect to produce700 tonnes by year-end in line with the 2013 production plan.Importantly we have signed a sales agreement with Glencore International in Q4 2012, which will continue to positively impact our bottom line in FY 2013 when copper sales are realised.

Furthermore, we remain dedicated to establishing our second mining project in Azerbaijan, Gosha, with a view to production in 2014, which will be another significant step for Anglo Asian as we look to ramp up our annual gold production output to 80,000-90,000 ounces by the end of 2014.

I believe that this development strategy, coupled with our low gold production cost forecasts for FY 2013, highlights our commitment to achieving significant growth and increasing value over the coming year. 

I would like to take this opportunity to thank our Anglo Asian employees, partners, the Government of Azerbaijan, the IBA, advisers, fellow Directors and shareholders for their continued support as we continue to build ourselves into a leading gold, copper, silver mid-tier production company in Azerbaijan and Caucasia.

Khosrow Zamani

Non-executive Chairman

Chief Executive Review

During the course of 2012 we continued to focus on developing and implementing plans to ensure the future growth of Anglo Asian in line with our long term strategy of building a multi-site gold, copper, and silver mine company in Caucasia, and inturn unlocking the Company's intrinsic value.

Our 1,962 sq km portfolio of prospective gold/copper/silver assets in Azerbaijan includes our flagship Gedabek mine, which produced 50,215ounces of gold in FY 2012, our Gosha Contract Area which is located 50 km away from Gedabek, and Ordubad, which is located in the Nakchivan Republic region of Azerbaijan. 

Mining Operations

Gedabek

Gedabek is currently an open pit heap leach gold-copper-silver mining operation located in a 300 sq km Contract Area in western Azerbaijan on the Tethyan Tectonic Belt, one of the world's significant copper and gold bearing regions.

For the 12 month period to 31 December 2012, goldproduction from Gedabek's heap leach operation totalled 50,215 ounces (in gold doré) with an average cash operating cost of US$668 per ounce.  In terms of gold sales, 42,557 ounces of gold were sold at an average of US$1,666 per ounce in FY 2012.  It should be noted that 6,246 ounces of gold were transferred to the Government of Azerbaijan as part of the Company's Product Sharing Agreement in FY 2012.

The following summary table of gold production and prices outlines quarter-on-quarter gold production at Gedabek for FY 2012. 

Table 1

Quarter Ended		Gold Produced (including Govt. of Azerbaijan's share) (oz)	Weighted Average Gold Sale Price (US$)
31 March 2012	9,925		1,679
30 June 2012	11,716		1,609
30 September 2012	14,044		1,655
31 December 2012	14,530		1,694
Total for FY 2012	50,215		1,666

With regards to silver production from the plant's heap leach operations, production totalled 20,133 ounces with 16,342 ounces of silver sold at an average price of US$32.

In terms of processing, Gedabek'sheap leach stacking operation has performed in line with management's expectations in FY 2012 with 753,601 tonnes of dry ore having been transferred to the leach padswith an average gold content of 3.03 g/t. (2011: 842,751 tonnes of dry ore with an average gold content of 4.33g/t). The reduced grade for the period was in line with our mining plan. Table 2 summaries the levels of dry ore that have been transferred to the leach pads at Gedabek on a quarterly basis from 1 January 2012 to 31 December 2012.

Table 2

Quarter ended	Dry ore transferred to the leach pad (tonnes)	Average grade (g/t)
31 March 2012	144,526	2.83
30 June 2012	194,969	3.25
30 September 2012	204,720	2.93
31 December 2012	209,386	3.07
Total for FY 2012	753,601	3.03

Gedabek is currently an open pit mining operation, which utilises a conventional heap leach process and a resin adsorption recovery plant. Heap leach operations are traditionally a low-cost processing route that many mining operations, including Gedabek, adopt when they first move into production due to the low-capital construction costs. Whilst our heap leach operation has seen steady gold production at Gedabek from the first gold pour in May 2009 (to end of FY 2012 185,912ounces have been produced), heap leaching has limitations with regards to the size of ore being leached (-25mm).  This limitation results in gold recoveries of circa 70%, with leaching cycles extending typically up to a year, depending on the ore mineralogy. 

With the above in mind, we conducted a review to best ascertain how to improve the gold production profile of Gedabek.  In May 2012, following a Pre-Feasibility Study carried out by mining consultants, Arcadis Chile Limited, we announced our intention to construct an agitation leaching plant at Gedabek.In comparison to heap leaching, agitation leaching of milled ore can deliver higher recoveries, with the immediate production of gold.The new agitation leaching plant will process high grade oxide ore and additional sulphidic ore resources that are not suitable forGedabek's current heap leachingoperation; together with spent ore from the leach heaps to further improve total gold recoveries.  Agitation leaching recovery rates have been initially estimated at 85% for oxide material and 69% for sulphide material, although we are carrying out additional testing to see if these recovery rates can be further improved. The plant, which will have a capacity to treat 100 tonnes per hour of ore, is anticipated to be commissioned in H1 2013, and had an estimated capital cost of US$52 million, including construction of the tailings dam and all related infrastructure. It is believed that the cost of construction of the agitation leaching plant is circa US$7 million under budget.

In addition to gold and silver, our Gedabek operation also produces a copper concentrate from a Sulphidisation, Acidification, Recycling and Thickening ('SART') process, which recovers copper in the form of a precipitated copper sulphide concentrate containing silverand minor amounts of gold. The recovery of copper and silver through SART is in the region of 90% and 96%, respectively, and the process also has the economic benefit of recovering cyanide from the leach solutions. In terms of copper concentrate production, for FY 2012 we produced 502 tonnes of copper, 98,158 ounces of silver and 86 ounces of gold (2010: 611 tonnes of copper, 134,240 ounces of silverand 200 ounces of gold).

See table3 for a full quarterly breakdown of copper concentrate production through SART.

Table 3 - Copper concentrate production through SART

Quarter ended	Copper Concentrate Produced (Dry Tonnes)	Copper recovered (Tonnes)	Silver Produced (ounce)	Gold Produced (ounce)
31 Mar 2012	239	148	34,666	27
30 Jun 2012	162	106	25,853	9
30 Sep 2012	199	132	23,397	36
31 Dec 2012	181	116	14,242	14
Total for FY 2012	781	502	98,158	86

During FY 2012 total sales of copper concentrate were US$2.1 million.We also signed a sales contract in Q4 2012 with Glencore International plc ('Glencore') for the sale of 2,500 wet metric tonnes ('WMT') and 550 dry metric tonnes of copper concentrate.  Under the terms of the agreement, which is already underway, Glencoreis committed to purchase 250 WMT per month of copper concentrate product with an option to stop buying at 1,500 WMT.Anglo Asian is now intending to arrange further sales contracts for its copper concentrate stockpiles, which totalled 2,900 WMTat 31 December 2012.

Gedabek Exploration

Increasing Gedabek's production profile and life of mine through defined exploration programmes continued to be a priority for the Company during 2012.  At the beginning of the year Gedabek's resource stood at 791,000 ounces of gold, 49,300 tonnes of copper and 7,597,000 ounces of silver for all categories.  After completing 14,510 metres of drilling (2010-2011 two-phased drilling programme) in April 2012, we were delighted to announce a JORC resource upgrade of 48,138,979 tonnes at 0.825 g/t gold for 1,276,422 ounces of gold in the Measured, Indicated and Inferred categories (a 61% increase from the previous JORC resource estimate dated October 2010); 0.197% copper for 94,890 tonnes (a 93% increase); and 6.66 g/t silver for 10,305,653 ounces (a 36% increase) at a cut-off grade of 0.3 g/t gold.  The new resource statement also took into consideration the information of the 2006exploration drilling campaign, which consisted of an additional 20,426metres of drilling at Gedabek.

Using these new resource figures, we instructed our mining consultants, CAE Mining International Ltd, to update the ore reserves estimation of the Gedabek Mineral Deposit. In June 2012, we announced a maiden JORC compliant ore reserve report, which showed a total mineable reserve of 20,312,879 tonnes at 1.139 g/t gold for 744,038 ounces, 0.293% copper for 59,479 tonnes and 9.456 g/t silver for 6,175,531 ounces as at 30 December 2011, of which 532,607 ounces of gold are recoverable, a significant increase over the previous internal estimate of 311,000 ounces announced in 2007, prior to the start of construction of the Gedabek mine.

The ultimate optimal open pit ore reserve was estimated by applying the Lerchs-Grossman open pit optimisation algorithm and taking into consideration an extensive sensitivity analysis of several technical and economic scenarios. 

The updated ore reserves estimation was based on a cut-off grade of 0.3 g/t of gold and considered the following mineral processing options for the extraction of gold, copper and silver from the mineral resource: heap leaching for oxide mineralisation at 0.3 ≤ Au g/t < 1.0; agitation leaching for oxide mineralisation at 1.0 ≤ Au g/t <∞ and sulphide mineralisation at 1.0 ≤ Au g/t <∞; and flotation for sulphide mineralisation at 0.3 ≤ Au g/t < 1.0. In addition, the updated ore reserves were constrained with the open pit surface topography as on 30 December 2011.

The updated Proved and Probable ore reserves estimations are described in the table below.

	Tonnage	Grades			Products			Recovered Products
	Ore T	Au g/t	Cu %	Ag g/t	Au oz	Cu t	Ag oz	Au oz	Cu t	Ag oz
Proved ore reserves	15,586,952	1.172	0.285	9.203	587,099	44,389	4,611,806	410,623	8,560	1,089,474
Probable Ore Reserves	4,725,928	1.033	0.319	10.292	156,939	15,091	1,563,725	121,984	2,745	621,601
Proved and Probable Ore Reserves	20,312,879	1.139	0.293	9.456	744,038	59,479	6,175,531	532,607	11,305	1,711,075

The ore will be recovered through a combination of the existing heap leaching operation at Gedabek, thenew agitation leaching plant and a flotation plant which we plan to construct later in the life of the mine.

It must also be noted that the total ore reserve statement accounts for ore in the ground at 30 December 2011 and does not account for ore that has already been mined and which is currently stacked on the leach pads.The ore on the leach pads still contains circa 90,000 ounces of gold, which the Company will either recover through the on-going heap leaching process, or by reprocessing the spent ore in the heaps through the agitation leaching plant.

An additional 28,872metre drilling programme has also been completed in 2012 which has targetedan extension of the existing mine at Gedabek with the aim of further increasing the mineral reserves and resources in 2013, as part of our on-going exploration and development programme.  Recent drilling indicatessignificant potential to continue increasing the size of the Gedabek resource and we look forward to updating the market on these results in due course.

Gosha

The 300 sq km Gosha Contract Area is located in western Azerbaijan, 50 km north-west of Gedabek, and contains three prospects: Gosha, Itkirlan and Munduglu. Following the Government of Azerbaijan's approval of the Development and Production Programme in May 2012, it is our intention to develop a small, high grade, underground gold mine at Goshaproducing gold at an average rate of 15,000 to 20,000 ounces per annum for a period of at least five years.

A development work programme and budget was submitted to the Government of Azerbaijan on 4 December 2012 aiming to commence development work at Gosha in H2 2013 with a view to moving to production by 2014, whilst at the same time implementing further drilling campaigns in order to increase the economics of the proposed mine at Gosha.Mining equipment has been ordered and service and infrastructure building work is to commence in H2 2013, including access roads, workshop, offices, a laboratory and building upgrade work. The mine production programme starting in H2 2013 will develop 1,975 metres of production and haulage galleries to produce 30,000 tonnes of ore, with an average grade of 15.6g/t of gold and 38.6g/t of silver, together with 35,500 tonnes of waste.

Studies have been conducted to determine different mining plan alternatives and these have shown that high grade ore can be produced from the mine and transported and treated in the agitation leach plant at Gedabek until 2015. It is envisaged that from 2016 onwards, the ore from Gosha mine may be processed in a flotation plant at Gosha.

Ordubad

Our 462 sq km Ordubad Contract Area is located in the Nakhchivan region of Azerbaijan and contains numerous targets including Shakardara,Piyazbashi, Misdag, Agyurt, Shalala and Diakchay, which are all located within a 5 km radius of each other.

We were pleased to report a Notice of Discovery for gold at Ordubadin April 2012. The Notice of Discovery is a requirement set out in the Company's Production Share Agreement ('PSA'), which needs to be in place before the technical and economical evaluation of a deposit in terms of a Development and Production Programme can take place.  We plan to release further information concerning the results of the studies and exploration work in due course and further exploration work is now planned with a view to confirming a small gold deposit with production potential.

Outlook

2012 has been a highly active year for Anglo Asian with gold production of 50,215 ounces and sales of 42,557 ounces, copper production 502 tonnes and copper concentrate salesof US$2.1 million, and significant profitability of US$28.6 million for the year.  Gold production at the beginning of 2013 remainson target, and with the agitation leaching plant near completionand due to be commissioned in H1 2013(on time and US$7 million under budget), gold production for FY 2013 is targeted for 60,000 ounces, a 20% increase from FY 2012.  Not only will the agitation leaching plant help to improve gold recoveries and production, it will alsolead to decreased cash operating costsof around US$450-500, which would place Anglo Asian in the lower quartile of gold mining companies in terms of operating costs.  In the meantime, exploration at Gedabek has been on-going and significant progress in terms of extending the life of mine at Gedabekby increasing the resource and reserve base has been made.  We also remain highly active at our Goshagold project, which provides us with further exploration upside and, importantly, production potential for the future. With mining development at Gosha due to begin in H2 2013 and production targeted for 2014, we envisage we should become an 80,000-90,000 ounces per annum gold producer by the end of 2014.  With the above in mind we look forward to the coming year at this exciting time in the Company's development as a mid-tier gold, copper and silver mining company.

Reza Vaziri

President and Chief Executive

For further information please visit www.angloasianmining.com or contact:

Reza Vaziri	Anglo Asian Mining plc	Tel: [phone]
Sean Duffy	Anglo Asian Mining plc	Tel: [phone]
Ewan Leggat	SP Angel Corporate Finance LLP	Tel: [phone]
Laura Littley	SP Angel Corporate Finance LLP	Tel: [phone]
Felicity Edwards	St Brides Media & Finance Ltd	Tel: [phone]
Lottie Brocklehurst	St Brides Media & Finance Ltd	Tel: [phone]

Consolidated income statement

for the year ended 31 December 2012

		Year	Year
		Ended	ended
		31 December	31 December
		2012	2011
		US$	US$
Revenue		73,521,389	83,753,311
Cost of sales		(37,445,377)	(40,717,112)
Gross profit		36,076,012	43,036,199
Other income		423,386	1,049,579
Administrative expenses		(5,915,352)	(6,021,274)
Other operating expense		(759,420)	(3,221,212)
Operating profit		29,824,626	34,843,292
Finance income		236,438	51,000
Finance costs		(1,510,085)	(3,270,909)
Profit before tax		28,550,979	31,623,383
Income tax expense		(9,183,734)	(12,850,924)
Profit for the period attributable to the equity holders of the parent		19,367,245	18,772,459
Earnings per share for the period attributable to the equity holders of the parent
Basic earnings per share (cents per share)		17.41	16.91
Diluted earnings per share (cents per share)		17.26	16.47

Consolidated statement of comprehensive income

for the year ended 31 December 2012

	Year	Year
	Ended	ended
	31 December	31 December
	2012	2011
	US$	US$
Profit for the year	19,367,245	18,772,459
Total comprehensive income for the year	19,367,245	18,772,459
Attributable to the equity holders of the parent	19,367,245	18,772,459

Consolidated statement of financial position

as at 31 December 2012

		As at	As at
		31 December	31 December
		2012	2011
		US$	US$
Non-current assets
Intangible assets		22,828,092	28,837,939
Property, plant and equipment		87,877,035	43,549,670
Non-current prepayments		2,683,673	292,290
		113,388,800	72,679,899
Current assets
Trade receivables and other assets		10,482,147	3,770,996
Inventories		36,427,632	27,301,183
Cash and cash equivalents		2,410,730	9,938,594
		49,320,509	41,010,773
Total assets		162,709,309	113,690,672
Current liabilities
Trade and other payables		(11,612,591)	(8,807,760)
Interest-bearing loans and borrowings		(1,820,999)	(11,307,412)
		(13,433,590)	(20,115,172)
Net current assets		35,886,919	20,895,601
Non-current liabilities
Provision for rehabilitation		(4,622,916)	(2,424,995)
Interest-bearing loans and borrowings		(28,938,750)	(1,821,000)
Deferred tax liability		(19,344,899)	(12,461,569)
		(52,906,565)	(16,707,564)
Total liabilities		(66,340,155)	(36,822,736)
Net assets		96,369,154	76,867,936
Equity
Share capital		1,973,129	1,967,704
Share premium account		32,172,575	32,139,674
Share-based payment reserve		731,870	648,789
Merger reserve		46,206,390	46,206,390
Retained earnings/accumulated loss		15,285,190	(4,094,621)
Total equity		96,369,154	76,867,936

Consolidated statement of cash flows

For the year ended 31 December 2012

		Year	Year
		ended	ended
		31 December	31 December
		2012	2011
		US$	US$
Net cash provided by operating activities		24,917,609	38,024,397
Investing activities
Expenditure on property, plant and equipment and mine development		(46,918,313)	(7,739,793)
Investment in exploration and evaluation assets including other intangible assets		(1,645,147)	(5,069,388)
Interest received		147,400	51,000
Net cash used in investing activities		(48,416,060)	(12,758,181)
Financing activities
Purchase of share options		38,326	65,028
Proceeds from borrowings		29,326,689	-
Repayments of borrowings		(11,220,000)	(17,586,663)
Interest paid		(2,174,428)	(2,916,838)
Net cash provided/(used) in financing activities		15,970,587	(20,438,473)
Net (decrease)/increase in cash and cash equivalents		(7,527,864)	4,827,743
Cash and cash equivalents at the beginning of the year		9,938,594	5,110,851
Cash and cash equivalents at the end of the year		2,410,730	9,938,594

Consolidated statement of changes in equity

For the year ended 31 December 2012

				Share-based
		Share	Share	payment	Merger	Retained earnings/ Accumulated	Total
		capital	premium	reserve	reserve	loss	equity
	Notes	US$	US$	US$	US$	US$	US$
At 1 January 2011		1,957,424	32,101,124	638,377	46,206,390	(22,884,862)	58,018,453
Profit  for the year		-	-	-	-	18,772,459	18,772,459
Total comprehensive income		-	-	-	-	18,772,459	18,772,459
Shares issued	24	10,280	38,550	-	-	-	48,830
Options exercised during  the year	26	-	-	(17,782)	-	17,782	-
Share-based payment charge during the year	26	-	-	28,194	-	-	28,194
At 31 December 2011		1,967,704	32,139,674	648,789	46,206,390	(4,094,621)	76,867,936
Profit for the year		-	-	-	-	19,367,245	19,367,245
Total comprehensive income		-	-	-	-	19,367,245	19,367,245
Shares issued	24	5,425	32,901	-	-	-	38,326
Options exercised during  the year	26	-	-	(12,566)	-	12,566	-
Share-based payment charge during the year	26	-	-	95,647	-	-	95,647
At 31 December 2012		1,973,129	32,172,575	731,870	46,206,390	15,285,190	96,369,154

**ENDS**

 

END

 

 

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