Flotation Plant Construction and Production Update

RNS Number : 6025X

Anglo Asian Mining PLC

20 November 2014

 



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

20 November 2014

Anglo Asian Mining plc

Construction of a flotation plant at the Gedabek mine and Production update for 12 Months to 31 December 2014

Anglo Asian Mining plc ("Anglo Asian" or the "Company"), the AIM listed gold, copper and silver producer focused in Azerbaijan is pleased to announce that it has contracted to construct a small-scale flotation plant at its Gedabek gold, copper and silver mine in western Azerbaijan to assess the opportunity to increase its copper production following an increase of over 500 per cent. in recoverable copper announced in the recently updated ore reserves statement (19 November 2014). The Company has also revised its targeted gold production for the 12 months ending 31 December 2014 ("FY 2014") from circa 62,000 ounces to circa 60,000 ounces.

Flotation plant

·    Planned flotation plant will act as a pilot plant to assess future full-scale copper production and will initially process 379,000 tonnes of stockpiled high copper content sulphide ore to produce a copper and precious metal concentrate

·    Flotation plant will operate alongside Gedabek's existing agitation and heap leaching operations which produce gold and silver; and the SART plant which produces copper concentrate

·    Contract placed for up to US$2.7 million for the turnkey construction of a small-scale flotation plant with a capacity of 20 tonnes per hour of ore

·    Scheduled total capital cost including capital works and ancillary equipment estimated at US$3.5 million

·    Negotiations with Pasha Bank, Azerbaijan to finance the turnkey construction contract of US$2.7 million are being concluded. It is expected the financing will be repaid from sales of concentrate of copper and precious metal produced by the plant processing existing stockpiles of high sulphide ore

·    Turkish construction company YPT appointed to construct the flotation plant - strong track record with Anglo Asian. They were a contractor for the construction of the agitation leaching plant at Gedabek which was built for US$7 million under budget in 2013

·    Flotation plant scheduled to be operational in Q3 2015

·    CAE Mining, UK are developing a new detailed life of mine plan for Gedabek to assess both the copper and gold cut-off grades - expected to be finalised January 2015

Production update

·    Targeted gold production for FY 2014 revised from circa 62,000 ounces to circa 60,000 ounces due to the continuing high copper content of the ore mined

Anglo Asian CEO Reza Vaziri said "The construction of this small-scale flotation plant is an exciting new development in the growth of Anglo Asian as we look to exploit the full potential of the copper resource at Gedabek, in conjunction with increasing our precious metal production. We believe this will be an important first step in Anglo Asian's transition into becoming a major producer of copper, in addition to producing precious metals."

"The plant will be built under a turnkey construction contract and we are delighted that Pasha Bank in Azerbaijan has agreed to finance this construction.  The successful operation of this small-scale plant will establish the feasibility of constructing a full-scale plant, with the potential to add significant copper production to our current levels.  At present we have 379,000 tonnes of sulphide ore with a high copper content in stockpile at Gedabek which is suitable for processing by flotation."

"With our established copper concentrate production from our SART plant and having secured a three year copper sales contract, we have already demonstrated that we can successfully sell copper and precious metals concentrates. We anticipate repeating this process with the commissioning of our small-scale flotation plant, and are already in discussions with our sales partner, Industrial Minerals, with regard to purchasing future copper production from the flotation plant."

"Conversely, the reduction in our targeted gold production from Gedabek for FY 2014 is a disappointment. However, we expect to produce circa 60,000 ounces of gold and this, together with our recently increased ore reserves statement and the construction of the flotation plant to transition Gedabek into a poly-metallic mine producing gold, copper and silver, provide a firm basis for the future development of the Company"

Flotation plant

During 2014, gold recovery at the Gedabek mine has been adversely affected by the high copper content of the ore mined. This unexpectedly high copper content of the ore has resulted in the Company reappraising its business plans for the Gedabek mine and the Company now believes there is an attractive opportunity to produce commercially significant amounts of copper using flotation to process the sulphide ore. This will add a further production stream to enhance Anglo Asian's production profile as a leading precious metals and copper producer in Caucasia.

To realise this opportunity, the Anglo Asian has contracted the construction of a small-scale, semi-commercial flotation plant at its Gedabek mine site. The plant will have a capacity to process 20 tonnes of ore per hour and it will serve as a pilot plant for a future full-scale flotation production plant. It will be used to test the suitability of various types of ore to flotation and verify the design of the main flotation plant. It will also process Anglo Asian's existing stockpiles of sulphide ore.

The total estimated capital cost of the small-scale flotation plant is US$3.5 million including capital works and ancillary equipment. Yilmaz Proses Teknolojileri Detay Muhendislik Madencilik Danismanlik Insaat Limited STI ("YPT") of Ankara, Turkey has been contracted by the Company to manufacture and construct the plant under an engineering, procurement, construction and installation ("EPCI") contract for up to US$2.7 million. YPT has a proven track record of working with Anglo Asian where it was a contractor for the Company's agitation leaching plant, which was built US$7 million under budget in 2013. The contract also provides for YPT to supervise the commissioning of the flotation plant and to initially operate it.

The YPT contract will be settled by stage payments upon contractual milestones. These will be made by way of an irrevocable and confirmed letter of credit of US$2.75 million opened in favour of YPT. Negotiations are being concluded with Pasha Bank, Azerbaijan to provide financing for this letter of credit for US$2.75 million over a period of one to two years.

The Company currently has a stockpile of sulphide ore with a high copper content totalling 379,000 tonnes. The ore has an estimated average metal content of 2.12 grammes per tonne of gold, 20.2 grammes per tonne of silver and 0.61 per cent. copper. This ore is suitable for concentration by flotation and it will be processed in the new flotation plant after crushing in the existing crusher plant. The Company estimates that the incremental cash flow generated from the processing of this ore in the first year will be sufficient to repay the financing from Pasha Bank.

The Company currently has a contract with Industrial Minerals SA, Switzerland for the purchase of the copper concentrate that is produced as a process by-product in the SART plant.  Preliminary discussions with Industrial Minerals confirm that they are prepared to purchase the production of the flotation plant.

To fully exploit the potential of the copper resource, in addition to the gold resource, CAE Mining, UK is developing a new, detailed life-of-mine plan based on the most recent JORC resource model, dated April 2014, and the mining overview contained within the ore reserves statement. This detailed, tactical mine plan will take account of both the copper and gold cut-off grades. The new mine plan is expected to be finalised by January 2015.

Revised target for gold production for FY 2014

The reduction in targeted gold production is a result of lower than forecast production since the beginning of November 2014. Production has been adversely affected by lower than anticipated agitated leach plant throughput due to ore feed being harder than predicted and lower recoveries due to the high copper content of the ore continuing longer than expected.

As a result of the decreased production target and the recent decline in gold price, the Board of Directors of Anglo Asian expects the Company's loss after tax for the year ending 31 December 2014 to be materially higher than market expectations.

**ENDS**

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

Reza Vaziri	Anglo Asian Mining plc	Tel: [phone]
Bill Morgan	Anglo Asian Mining plc	Tel: [phone]
Ewan Leggat	SP Angel Corporate Finance LLP Nominated Adviser and Broker	Tel: [phone]
Stuart Gledhill	SP Angel Corporate Finance LLP	Tel + 44 (0) 20 3463 2260
Felicity Winkles	St Brides Media & Finance Ltd	Tel: [phone]
Lottie Brocklehurst	St Brides Media & Finance Ltd	Tel: [phone]

Notes:

Anglo Asian Mining plc (AIM:AAZ) is a gold producer in Central Asia with a broad portfolio of production and exploration assets in Azerbaijan.  The Company has a 1,962 square kilometre prospective exploration portfolio, assembled from analysis of historic Soviet geological data and held under a Production Sharing Agreement based on the Azeri oil industry.  The Company developed Azerbaijan's first operating gold/copper/silver mine, Gedabek, which commenced gold production in May 2009.  Gold production for the year ended 31 December 2013 from Gedabek totalled 52,068 ounces. The Company is also developing a second resource area, Gosha, which is 50 kilometres from Gedabek.  Gosha is being advanced with a view to developing a high-grade underground gold mine. Due to the proximity of Gosha to Gedabek, gold ore produced at Gosha is processed at Anglo Asian's Gedabek plant.  In addition, Gedabek is a polymetalic deposit and its ore has a high copper content, and as a result the Company produces copper concentrate through its Sulphidisation, Acidification, Recycling, and Thickening plant.

Anglo Asian is also actively looking to exploit its first mover advantage in Azerbaijan to identify additional projects, as well as looking for other properties in order to fulfil its expansion ambitions and become a mid-tier gold and copper metal production company.

 

END

 

 

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