Decline in gold prices affects profitability of precious metals producer in Azerbaijan

Baku, Azerbaijan, Sept.23

By Azad Hasanli - Trend:

Anglo-Asian Mining PLC (AAM), the producer of gold in Azerbaijan, produced 27,054 ounces of gold extracted in the "Gadabay" complex ore in the first half of 2014.

For comparison, the AAM produced 17,497 ounces of gold in the first half of 2013.

The company sold 23,545 ounces at an average price of $1,297 per ounce, during the reported period. For comparison - the figure was 14,229 ounces at an average price of $1,561 per ounce in the first half of 2013.

Some 21,924 ounces of silver were produced in the first half of 2014. For comparison, some 10,661 ounces of silver were produced in the same period last year.

Some 62,000 ounces of gold are planned to be produced by the end of the year on the "Gadabay" and "Gosha" mines, according to the report. Also, some 750 metric tons of copper are planned to be produced for this fiscal year using SART method.

In the first half of 2014 revenues of AAM amounted to $32.7 million, which is a 18.5 percent increase compared to the same period last year.

The company completed the first half of the year with a loss of $7.5 million, while in the same period last year it earned a profit of $4.2 million.

"It should be noted that it was a difficult period for the gold companies. Decline in gold prices had an impact for AAM on its revenues and profitability in the first half of this year. Although our revenues amounted to $32.7 million, the loss before tax was $7.5 million," the president of the company Khosrov Zamani said.

He added that in the first half of 2014, the company sold 23,545 ounces of gold at an average price of $1,297 per ounce. The difference between the produced and sold gold in the first 6 months is due to the fact that the Azerbaijani government owns 12.75 percent of all metals and a waiting period between production and sales in terms of the Production Sharing Agreement.

The gross loss of the company amounted to $ 0.8 million for the first 6 months. Whereas the gross profit of AAM amounted to $9.3 million for the same period last year.

Cash flow from operating activity before transfer to working capital amounted to $2.1 million ($10.5 million in the first half of 2013). Cost of sales amounted to $33.5 million in the first half of the year ($18.3 million in the first half).

The company Anglo Asian Mining PLC has the right to develop 6 fields in the south-west of Azerbaijan - "Gadabay", "Ordubad", "Gosha Bulag", "Gizil Bulag", "Vejnali" and "Soyutlu" based on the agreement of PSA type signed with Azerbaijani government August 1997.

The resource base of the company exceeds 36 metric tons of gold, 292 metric tons of silver and 94.000 metric tons of copper. The largest field developed by Anglo-Asian Mining is the Gadabay complex ore. The first gold and silver were mined there in May 2009 and the production of copper concentrate has been carried out since 2010.

The gold produced at the mines is sent for treatment in Switzerland. The ingots are brought to Azerbaijan and stored on the government's account.

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