Gold prices grow in Azerbaijan’s favour

Gold prices grow in Azerbaijan’s favour

Azerbaijan, Baku, Feb. 9 / Trend /

Ellada Khankishiyeva, Trend Analytical Centre Head

Gold continues to be in the focus of investors' attention and judging by the current state of the world economy, will not lose its lustre during the coming years. Excess demand for gold as a safe haven asset has provoked a rise in prices. The April gold futures trading at the New York Stock Exchange on the Comex on the basis of trading amounted to $1731.3 per troy ounce. A day earlier, gold has risen in price to $1,748.4.

And if a couple of years ago Azerbaijan was worried about such a trend in gold price growth, today the trend serves our economy's purpose. As it is now, Azerbaijan, which started commercial production of gold in July 2009, produced 1,775 kg of gold in 2011. At present, gold mining in Azerbaijan is carried only in one field, Gedabey, by Anglo-Asian Mining plc. In total, Azerbaijani has produced 2408 kg of gold in less than three years.

Gold production in Azerbaijan, kg

2009 (July-December)

333

2010

1900

2011

1775

Source: Azerbaijani State Statistics Committee

In troy ounces in 2011, Azerbaijan produced 57,068 ounces of gold. During the same period the country sold 49,304 ounces of gold at an average price at $1,573 dollars per ounce on the world market. In particular, in the fourth quarter of last year 13,376 ounces of gold at an average of 1688 dollars per ounce were sold. It will be recalled that the first batch of gold worth $977 per ounce was shipped to world markets through the European stock exchanges. Exports began with a volume of 1,200 - 2,000 ounces of gold under the Ayrim brand.

It should be noted that the cost of gold produced in Azerbaijan, including taking into account the share of the Government of Azerbaijan amounted to $ 450 per ounce in 2011 and costs, except for the government's share, is estimated at $535 per ounce. And this at a time when the gold price in world markets today is almost four times more than its cost.

Thus, the Anglo Asian Mining Company at a profit sells its stake in the global market, and the Azerbaijani side returns its share to the country and stores in the form of gold reserves. The Azerbaijani government will receive 51 per cent of profits after the investors are compensated for their expenses. If the current high price of gold is preserved in the world market, investment costs may be reimbursed during three to four years, instead of seven to nine years mentioned in the contract.

The Anglo Asian Mining company's revenues amounted to 38.5 million dollars during the first half of 2011, or 35.6 per cent more compared to the first half of 2011. Net profit before tax increased by 129 per cent to hit $14.2 million compared to the same period in 2010. Gross profit increased by 6.5 per cent to hit $19.8 million.

Revenues were received from the sale of the company 24,586 ounces of gold (in 2010 - 24,360 ounces) at an average price of $1,450 per ounce (1,155 dollars in 2010), silver - $0.8 million ($0.3 million) and copper concentrate on the $2.1 million. In 2010 there were no copper sales.

Today, the total amount of gold in Azerbaijan held by the Central Bank amounts to 16,512.9 troy ounces (513.6 kilograms). Its market value is $28.4 million.

Consequently, it's not difficult to understand that high gold prices, as well as high oil prices yield additional dividends to Azerbaijan.

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