Anglo Asian Mining Q2 Update

11 July 2011
Anglo Asian Mining Q2 Update

Anglo Asian Mining plc has released an update on operations at its Gedabek gold/copper mine in Azerbaijan

Anglo Asian Mining plc, the AIM listed gold producer, is pleased to provide an update for the quarter ended 30 June 2011 on operations at its flagship Gedabek gold/copper mine ('Gedabek') in Azerbaijan.

Overview

  • Gold production of 14,582 ounces at Gedabek for Q2 2011 (Q1 2011: 14,028 ounces)
  • Production target of a minimum of 60,000 ounces of gold for the year to 31 December 2011 from heap leach operations - target does not include additional SART copper, silver and gold production
  • Transferred 210,526 tonnes of dry ore onto the leach pad with an average gold content of 3.35 g/t.
  • Feasibility study underway for new agitation leaching plant at Gedabek to improve total gold recovery and increase life of mine
  • Copper, silver and gold production from SART operations for Q2 2011 totalled 157 tonnes of copper, 26,254 ounces of silver and 49 ounces of gold
  • Further US$4 million of loan repaid to the IBA and ahead of schedule - debt to 30 June 2011 totals US$18 million

Anglo Asian CEO Reza Vaziri said, "We are on track to achieve our production target for the year of 60,000 oz of gold and 525 tonnes of copper and remain committed to ensuring the success of our flagship Gedabek mine.  With this in mind, we are actively assessing initiatives which will improve the operational efficiency of Gedabek and in turn, production.  We appointed mining consultants Arcardis Chile in June 2011 to undertake a feasibility study for a new agitation leaching plant, which we believe would improve total gold recovery rates and increase the life of mine currently standing at 300,000 ounces of gold over a six year period.  Results from the feasibility study are due in October 2011 and we look forward to updating shareholders on this.  In tandem, we continue to advance our resource development programme which includes a 17,500m drilling programme over the Gedabek Contract Area and hope to issue a new JORC compliant reserve report by the first half of 2012."

During the quarter ended 30 June 2011, the Company produced 14,582 ounces ('oz') of gold at Gedabek, bringing the total production for H1 2011 to 28,605 oz of gold, which is in line with the Company's production target for FY 2011 of a minimum of 60,000 oz Au.  It must be noted that due to seasonal harsh weather conditions over the winter months, Q3 and Q4 are expected to be stronger in terms of production levels.  In terms of gold sales completed for the three months to 30 June 2011, Anglo Asian sold 13,317 oz at an average of US$1,506 per oz.

The following summary table of gold production and prices highlights the quarter-on-quarter gold production at Gedabek over the past year. 

Quarter Ended

Gold Produced (including Govt. of Azerbaijan's share)

(oz)

Weighted Average Gold Sale Price

(US$)

30 Sept 2010

19,214

1,229

31 Dec 2010

19,555

1,371

31 March 2011

14,028

1,385

30 June 2011

14,582

1,506

In terms of processing, Gebabek's operations have been performing in line with management's expectations.  During the quarter the Company transferred 210,526 tonnes of dry ore onto the leach pad with an average gold content of 3.35 g/t. 

A change in the physical characteristics of the ore, whereby a significant change in density and structure associated more with the transitional ore zone, is affecting the leaching rate and in turn gold recovery and production.  Channelling has also occurred in one of the cells as a result of harsh winter conditions rendering the reaction of cement in agglomeration inactive.  With this in mind, the Company has implemented an initiative to accelerate waste removal to open up areas of oxide ore, which in turn, will deliver the leaching characteristics more suitable to the heap leach process.  Additionally the Company is crushing the ore more finely to become more accessible to cyanide leaching.  These initiatives should see leach recoveries improve for the second half of the year.

As previously announced, to improve gold recoveries, the Company has entered into an agreement with mining consultants Arcardis Chile with regards to undertaking a feasibility study to build a new agitation leaching plant.  This plant would process high grade ore and additional resources that are not suitable for heap leaching, thereby improving total gold recoveries at Gedabek.  Agitation leaching recovery rates for mineral extraction are typically measured at over 90% compared to circa 70% typically achieved in heap leaching.  Additionally, residual gold in high grade ore that has been processed by heap leaching and left on the heap leach pad during 2009 through to the end of 2011 could be processed through agitation leaching, again improving total metal extraction from Gedabek's orebody.    The Company expects the feasibility study to be completed by October 2011 and a new JORC compliant reserve report to be available by early 2012.

The Company's Sulphidisation, Acidification, Recycling, and Thickening ('SART') process for the recovery of copper and silver dissolved in the leaching solution for the three months to 30 June 2011 produced copper concentrate that contained approximately 157 tonnes of copper, 26,254 oz of silver and 49 oz of gold, which in terms of copper is a significant increase to the previous quarter (Q1 2011:  104 tonnes of copper, 762 kg/26,879 oz of silver and 2.3 kg/81 oz of gold). The SART plant is currently running at 65% capacity.  The plant's designed capacity is calculated to produce 1,800 tonnes of copper concentrate per year with copper recoveries projected to be 50-70% and silver recoveries of 4,000 to 6,000 g/t. 

A sales protocol was agreed with government partners for the sale of 900 wet tonnes of copper concentrate.  The first sale of copper concentrate is to be concluded imminently and revenues received from this will positively impact profits for the second half of the 2011 financial year.  There has been a delay in the final settlement due to differences in assays between Anglo Asian and the buyer, leading to the need to send assays to an umpire before a final settlement can be agreed.  In terms of future copper sales contracts, Anglo Asian is currently in discussions with government partners and the Company looks forward to updating the market on this development in due course.

During Q2 2011, the Company repaid US$4.0 million of its loan with the International Bank of Azerbaijan ('IBA') bringing the outstanding loan balance with IBA to US$17.0 million as at 30 June 2011.  Including  Anglo Asian's loan of $1.0m with its CEO Reza Vaziri, the value of total outstanding loans at 30 June 2011 is US$18.0m, (30 June 2010: $42.1 million).