Anglo Asian Mining PLC
Annual report and accounts 2008
Logo is 129 U on uncoated (above)
143 C on coated. (below)
l
A
n
g
o
A
s
i
a
n
M
n
n
g
i
i
P
L
C
A
n
n
u
a
l
r
e
p
o
r
t
a
n
d
a
c
c
o
u
n
t
s
2
0
0
9
Anglo Asian Mining PLC
16 H. Aleskerov Str. Baku
Logo is 129 U on uncoated (above)
Republic of Azerbaijan
143 C on coated. (below)
TEL +994 (12) 596 3350
FAX +994 (12) 596 3354
www.aamining.com
Production
and Exploration
_cover.indd 1
22/06/2009 16:19:37
Anglo Asian Mining PLC is
a Caucasia and central Asian
focused emerging gold producer
with a broad portfolio of
production and exploration
assets in Azerbaijan.
The Company’s portfolio covers 1,962 sq km of prospective
exploration assets held under a Production Sharing Agreement
with the Government of Azerbaijan including the newly
producing Gedabek mine, the country’s first ever gold mine.
The Republic of Azerbaijan is a democratic
country situated in south‑western Asia.
Contract Area locations
Gosha
Gedabek
Ordubad
Occupied territories (hatched area)
Soutely
Gyzilbulakh
Vejnali
Corporate information
AZERBAIJAN OFFICE (PRINCIPAL PLACE OF BUSINESS)
16 H.Aleskerov str.
Baku
Republic of Azerbaijan
SECRETARY AND REGISTERED OFFICE
Mr Andrew Herbert
7 Devonshire Square
Cutlers Gardens
London EC2M 4YH
United Kingdom
COMPANY NUMBER
05227012
Registered in England and Wales
VAT REGISTRATION NUMBER
872 3197 09
BANKERS – UNITED KINGDOM
Anglo Irish Bank
10 Old Jewry
London EC2R 8DN
United Kingdom
BANKERS – AZERBAIJAN
International Bank of Azerbaijan
Street 67
Nizami
Baku
Azerbaijan
SOLICITORS – UNITED KINGDOM
Hammonds
7 Devonshire Square
Cutlers Gardens
London EC2M 4YH
United Kingdom
SOLICITORS – AZERBAIJAN
MGB Law Offices
340 Nizami Street
ISR Plaze, 3rd Floor
Baku
Azerbaijan
AZ1000
AUDITORS
Deloitte LLP
2 New Street Square
London EC4A 3BZ
United Kingdom
NOMINATED ADVISER AND BROKER
Numis Securities Limited
10 Paternoster Square
London EC4M 7LT
United Kingdom
FINANCIAL PR ADVISERS
St Brides Media and Finance Limited
Chaucer House
38 Bow Lane
London EC4M 9AY
United Kingdom
REGISTRAR
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
For further information please visit www.aamining.com or contact:
Reza Vaziri
Andrew Herbert
John Harrison
James Black
Hugo de Salis
Felicity Edwards
Anglo Asian Mining PLC
Anglo Asian Mining PLC
Numis Securities Limited,
as Nominated Adviser
Numis Securities Limited,
as Corporate Broker
St Brides Media & Finance Ltd
St Brides Media & Finance Ltd
Tel: +994 12 596 3350
Tel: +994 12 596 3350
Tel: +44 (0)20 7260 1000
Tel: +44 (0)20 7260 1000
Tel: +44 (0)20 7236 1177
Tel: +44 (0)20 7236 1177
_cover.indd 2
22/06/2009 16:19:37
IFC Corporate statement
01 Occupied territories
01 Key contract areas
02 Chairman’s statement
04 Chief Executive’s review
07 Finance review
09 Board of Directors
10 Directors’ report
13 Corporate governance
Independent auditors’ report
14
16 Consolidated income statement
16
Consolidated statement of recognised
income and expense
17 Consolidated balance sheet
18 Consolidated cash flow statement
19
Notes to the consolidated
financial statements
Independent auditors’ report
34
35 Company balance sheet
Notes to the Company
36
financial statements
IBC Corporate information
Occupied Territories:
} Three concessions located within the disputed Nagorno‑Karabakh region
} No value attributed to these concessions due to the geo‑political situation
Key Contract Areas:
Gedabek
Gosha
Ordubad
Progress
Progress
Progress
Located 25 km northwest
of Gedabek
Exploration permit for
precious and base metals
until April 2011
Exploration
programme underway
Contains six exploration targets
Exploration permits until
April 2011
Exploration
programme underway
Commenced production
in May 2009
First producing gold mine
in Azerbaijan
Targeting 70,000 oz of gold in
the first year of production
Initial six year mine life
JORC compliant resource
of 702,000 oz of gold
Exploration ongoing to extend
life of mine
Estimated resource
1.081m oz
gold equivalent
(702,000 oz of gold, 37,500 t of
copper and 6,100,000 oz of silver)
01
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_front.indd 1
22/06/2009 16:18:50
Chairman’s statement
We believe Gedabek, as the first operating gold mine in the country,
represents a significant step for both the Company and Azerbaijan.
We are actively looking to build on our first‑mover advantage and
create a mid‑tier gold and base metal production company focused
in Caucasia and central Asia.
Summary
}
Development of the Gedabek gold/copper
mine completed in May 2009 and opened
by The President of Azerbaijan
} First gold and silver poured at the opening
ceremony and first sales anticipated at the
end of June 2009
} Strategy to build on first‑mover advantage
in the region and consolidate already
strong ground position
} Full support of the Government
of Azerbaijan
This is a transformational period for our Company and
it gives me great pleasure to report on progress as we
enter the production phase of our development cycle
and consolidate our position as an emerging gold
producer in Caucasia and central Asia.
We have a defined strategy in place focused on utilising our expertise
and first‑mover position within Azerbaijan to generate shareholder
value. We have a portfolio of assets over six Contract Areas totalling
1,962 sq km (including the Contract Areas in the Occupied Territories),
at various stages of development, from production to grass roots
exploration. These are being advanced with the full support of the
Government of Azerbaijan with funding primarily obtained from
the International Bank of Azerbaijan.
Our aims are driven by a phased approach starting with the
commencement of production at the Gedabek gold/copper
mine in May 2009, which will create cash flow for further project
development and the repayment of the debt which was raised to
finance the construction of the mine and processing plant. Secondly,
in tandem with gold production, we anticipate increasing the mine
life and reserve figures at Gedabek by identifying additional resources
within the mine’s proximity. Thirdly, we plan to develop the rest of
our portfolio with the aim of replicating our success at Gedabek and
developing additional mining operations in Azerbaijan. Finally, we also
hope to identify additional opportunities in Caucasia and central Asia
to add to our existing portfolio.
Our focus during 2008 was the construction of the Gedabek gold/copper
mine, which we completed in May 2009. This entailed building
infrastructure and developing an open pit mine, as well as designing
and building a conventional heap leach pad and processing facility
for the recovery of gold, copper and silver, more details of which
are in the Chief Executive’s Review.
Whilst we ran slightly behind schedule due to various factors including
prolonged rain in May and June 2008, which slowed activities, and the
need to re‑evaluate the leach pad area due to technical and geological
reasons, we were delighted to announce that the President of Azerbaijan
opened the mine on 26 May 2009 and first gold and silver was poured
at the ceremony. The level of ore on the leach pad was less than we
anticipated in May, however, we hope to gradually ramp this up to
full capacity by the fourth quarter of 2009. Using the Sulphidisation,
Acidification, Recycling, and Thickening (‘SART’) process, we expect
to deliver our first copper production during the third quarter of 2009.
The open pit, heap leach operation is expected to be relatively low cost
when compared to other gold mining operations. Our target is to produce
in excess of 300,000 oz of gold over the current six year mine life, but we
anticipate that further exploration in the proximity of the mine will increase
its life. Production for the first full year is expected to be approximately
70,000 oz of gold and the current SRK published JORC compliant resource
is 702,000 oz of gold, 37,500 tonnes of copper and 6,100,000 oz
of silver. The combined estimate results in a gold equivalent resource
of 1,081,000 oz. Capital costs for the mine totalled $28.1 million up
until 31 December 2008. Further capital expenditure and developments
costs were incurred during 2009 and costs incurred at Gedabek will
continue to be capitalised up until the point that the mine achieves first
commercial production, expected to be in the third quarter of 2009.
In the announcement on 10 April 2008 it was stated that capital and
working capital costs were unlikely to exceed $40 million; it is possible
that due to the delayed start up that this figure may be exceeded but
not materially.
Initially, our focus will remain on production at Gedabek, which
will facilitate the repayment of our outstanding debt, amounting
to $34.4 million of loans from the International Bank of Azerbaijan.
Repayment of the debt will be carried out in tandem with our
payments to the Government of Azerbaijan under the Production
Sharing Agreement (‘PSA’), which is described below.
While we are obviously pleased to become a producing entity,
we are also aware that exploration is key to our long‑term future.
In line with this, we believe our portfolio contains some exciting
exploration tenements which need additional evaluation to confirm
existing Soviet‑era data. The Tethyan belt running through Iran,
Azerbaijan, Georgia and Turkey is expected to produce additional
development opportunities, particularly as this area remains
underexplored compared to similar copper/gold districts around
the world. Accordingly, in April 2009 the Government of Azerbaijan
granted the Company an extension to continue exploration for precious
and base metals until 13 April 2011 on the 300 sq km Gosha and
462 sq km Ordubad Contract Areas. Exploration programmes are
now planned for 2010 through which we aim to define additional
resources and assess the production potential of these areas, funded
out of cash flow from the Gedabek gold/copper mine.
Our relationship with the Government of Azerbaijan plays an
important role in our success; its support was crucial in bringing
the Gedabek project into production. We look forward to continuing
to work with the Government and to realising our joint ambition of
supporting the economic growth of the country. Azerbaijan is keen
to attract foreign companies. Over 15 international oil companies
are working in the country, including the likes of BP and Exxon Mobil
which operate under similar production sharing agreements to ours,
and the Government now wants to step up foreign investment in
non‑energy sectors. With this background, we are pleased to be
amongst the first international companies to commence mining
operations in the country and hope that this position will stand
us in good stead for future opportunities.
02
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_front.indd 2
22/06/2009 16:18:50
1 Stacker conveying ore to the
recently completed leach pad
at Gedabek gold/copper mine
2 View of Gedabek village in
the vicinity of Gedabek mine
With regards to our commodity focus, in the short term our attention
will primarily be on gold. We believe that our financial modelling for
the Gedabek project is conservative and with a competitive margin
expected on production, strong cash generation is anticipated.
The sale of both silver and copper will also contribute to our overall
financial performance in the years to come.
There were a number of changes to the Board and management during
the period. Reza Vaziri assumed the position of acting Chief Executive
in October 2008, replacing Gordon Lewis who returned home to Australia
to join his family. Tim Eggar stepped down from the Board in July 2008 at
the same time as Richard Round stepped down from his executive duties
as Finance Director to take up a position as a Non‑executive Director,
whilst also filling the vacancy of Chairman of the Audit Committee.
Additionally, Ross Bhappu has announced his intention to step down
from the 23 July 2009, the date of our Annual General Meeting.
We will be looking to strengthen the Board in the near future to accelerate
the development of the business and provide additional expertise.
On the technical management side, Farhang Hedjazi, our Chief Technical
Officer, joined in July 2008. Farhang has over 23 years of experience
in mining and processing, which includes several new projects in the
region including providing management services to gold and base
metal projects in Turkey and Iran. His strong metallurgical background
has proved to be invaluable during the start up and commissioning
phases of the mine.
Furthermore, on the management side, during 2008 the Company
strengthened the team with the recruitment to our operating subsidiary,
Azerbaijan International Mining Company, of Mehrdad Etemad as
Senior Vice President and Abduljabbar Ahmadov as Vice President.
Both Mehrdad and Abduljabbar bring a wealth of experience in the
fields of general management and organisation, human resources
management, procurement and public and government relations.
Additionally, Andrew Herbert joined in August 2008 as Chief Financial
Officer and is now based in Azerbaijan. Andrew spent nearly three years
with the TSX listed junior gold producer Avnel Gold Mining Limited,
which has operations in Mali, prior to which he gained substantial
international experience in other industries in Africa and Asia. We are
delighted to welcome him to the team.
Having moved into production, we now employ approximately
250 personnel including local contractors and experienced operators
from surrounding countries. Maintaining excellent health, social and
environmental standards is a high priority for the Company. All employees
have received technical and safety training and our track record in this
respect remains exemplary. The Company is fully committed to working
with its host community and is involved with a wide range of projects,
described more fully in the Chief Executive’s Review.
We report a pre‑tax loss of $4,471,434 (2007: loss of $14,683,306)
for the year ended 31 December 2008. However, if production at
Gedabek goes to plan, we expect to announce significant turnover
for the year ended 31 December 2009 and future years.
The Group continues to be faced with a number of material
uncertainties that cast significant doubt over the Group’s ability
to continue as a going concern. These uncertainties and the
Directors’ considerations thereof are discussed below and
in the following paragraph as well as in the Finance Review,
Director’s Report and in note 1 to the financial statements.
Our cash position remains constrained in the short term due to
the delayed start of production and lower than anticipated levels
of processed ore at this stage. The current forecasts demonstrate
that the existing cash resources and available debt facilities provide
sufficient funding to allow Anglo Asian to get through the period to
full production and to meet all of its obligations. The Board is aware
that there is the risk of further delays and technical problems which
give rise to uncertainty relating to going concern. Consequently, if there
are either cost overruns or delays to the production ramp up the Board
will have to take steps to ensure that there is adequate funding.
The International Bank of Azerbaijan has confirmed that it will provide
a further $1.5 million through a working capital facility, subject to
documentation, if required and Reza Vaziri (a Director and significant
shareholder) has also confirmed that he would be willing to provide
additional funding in such an event. Assuming no delays or technical
problems, the projected cash flows in the fourth quarter of 2009 will
put the Company in a strong position to pay back the debt quickly
and generate further cash.
When I look back at 2008, I am very pleased at the progress our
Company has made. Having taken the decision to move Gedabek
into production, the team’s energy and commitment has enabled
Anglo Asian to make the transition into a producing company.
We believe that there is significant potential to discover more
reserves within and beyond the Gedabek Contract Area, with the
Gosha and Ordubad Contract Areas being of particular interest due
to their perceived prospectivity. We want to build on our first‑mover
advantage in the region and consolidate our already strong
ground position.
Finally, I would like to thank all those involved with the Company for
their efforts and support and I look forward to updating shareholders
regularly on the progress of what is now a producing entity.
Khosrow Zamani
Non‑executive Chairman
22 June 2009
03
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_front.indd 3
22/06/2009 16:18:54
Chief Executive’s review
We reached a major milestone at the end of May 2009, becoming a new
gold producer, having completed the construction of the Gedabek gold/
copper mine and processing plant. Our next step is to reinforce our
early success by extending the mine life at Gedabek and developing
additional resources within the Gedabek Contract Area and our other
two key Contract Areas, Gosha and Ordubad, using cash generated
from the mine.
Summary
}
Production at Gedabek for the first
full year expected to be approximately
70,000 oz of gold
} Anticipate increasing the mine life
and reserve figures at Gedabek by
identifying additional resources
within the mine’s proximity
} Focused on developing 1,962 sq km
gold/copper exploration portfolio
with the aim of replicating success
at Gedabek and developing additional
mining operations
Our key operations span three Contract Areas covering
1,062 sq km: Gedabek, Ordubad and Gosha. We also hold
three additional Contract Areas covering 900 sq km in
territories occupied by Armenia which we hope to develop
when access is obtained.
Gedabek
The Company holds mining and exploration rights for a minimum
period of 15 years from 26 February 2007 in the Gedabek Contract
Area, which is 55 km from Azerbaijan’s second biggest city, Ganja.
In addition to Gedabek, the area contains eight other prospective
properties: Gyzildzhadag, Bittibulag, Maarif, Ertep, Geyer, Shekerbey,
Gumlu and Aitalin.
Our focus during 2008 has been the construction of the open pit mine
at Gedabek, as well as a conventional heap leach pad and processing
facility for the recovery of gold, copper and silver. The current JORC
compliant resource base stands at 15.6 million tonnes of ore grading
1.4 g/t gold, 0.24% copper and 12.2 g/t silver in the indicated and
inferred categories, of which there are JORC compliant probable reserves
of 311,000 oz of gold, 1,959,000 oz of silver and 17,425,000 lbs of
copper. The current mine life is based on the JORC compliant probable
reserves. Importantly, the ore body remains open in several directions.
With approximately 130,000 tonnes of ore derived from historical
workings at the site stockpiled at the plant, representing one and a
half months of production, we were able to commence the first feed to
the leach pad in March 2009 and the first gold was poured at the end
of May 2009, as well as silver as a by‑product of the process. Commercial
production is expected to commence in the third quarter of 2009.
are expected to alleviate these problems and enable us to ramp up
production to full capacity by the end of the fourth quarter.
The mine will initially process higher grade ore, the grade being
expected to decrease over the life of the mine. Importantly the
stripping ratio is low (1.5:1) as the ore body is fairly horizontal
and shallow. During its initial six year life, we expect to produce
310,000 oz of gold. However, with additional exploration we
anticipate increasing the mining reserve, which currently stands
at 7.7Mt at 1.8g/t gold, 0.29% copper and 15.91g/t silver, and
potentially process additional high grade material as the geology
of the deposit becomes better understood. In the longer term we
may move to an underground mining operation, utilising some
of the existing infrastructure and adits, if our exploration activities
demonstrate the resource to increase at depth. As it currently stands,
we believe the open pit design only exploits half the total resource.
In terms of processing, the plant consists of a heap leach pad which
is used to dissolve the gold, copper and silver after the ore has been
crushed in the crusher at the processing plant. Gold and some silver
will be recovered conventionally to produce gold dore, after which
copper will be recovered using the SART process. The leach pad,
Barren Leach Solution (‘BLS’) pond and Pregnant Leach Solution (‘PLS’)
pond were completed in January 2009. The Adsorption, Desorption,
Refinery (‘ADR’) and SART building and covering were completed
in mid February 2009. The installation of the remaining equipment,
piping and electronics for the ADR and SART plants is near completion.
We expect copper to be produced in the near future.
The Company is planning to export its gold and approximately half
its silver output to Switzerland to be processed and refined. Under
the terms of the PSA, the revenue is shared between the Company
and the Government of Azerbaijan at the processing point. In the
near term, the Company anticipates selling gold and silver at spot
rates but will consider and evaluate hedging strategies once we are
confident of stable and consistent production from the Gedabek
mine. Options for how the remaining silver and the copper will be
sold are still being evaluated.
In order to accommodate the volume of ore to be leached over the
projected mine life and to cater for any future extension, the Company
and its consultant CQA commenced studies for the expansion of the
heap leach operations at Gedabek. Expansion of the current leach pad
location is constrained by the potential for land slip in the area and
the Company considers that its capacity will not be adequate for
the ultimate life of mine. Investigations of other locations in the
immediate vicinity of the mine are underway.
We are using our own diesel‑powered generators for power.
Water supply is readily available from nearby streams. The mine
is constructed to the highest environmental standards and we have
a highly active community policy aimed at enfranchising the local
community and assisting in their economic advancement.
Our aim is to produce approximately 70,000 oz of gold in the 12 months
to June 2010, with additional credits for the copper and silver. This remains
our target, despite levels of processed ore during May 2009 being lower
than we hoped due to teething problems with the materials handling
machinery. New parts for the machinery have been ordered, which
We will be continuing exploration work at Maarif, one of the mining
properties on the Gedabek Contract Area. This will include further
drilling as well as geological and geophysical testing followed by
analysis and interpretation of the results. It is expected that we will
be able to give an update of our progress by the end of 2009.
04
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_front.indd 4
22/06/2009 16:18:54
1 SART and ADR buildings
at the recently completed
Gedabek mine
2 Heap leach pad
at Gedabek mine
PSA
Anglo Asian has a PSA with the Government of Azerbaijan, which
gives the Company exclusive rights to explore and extract all minerals
from a number of Contract Areas. The PSA also provides exclusive
rights to the Soviet‑era data covering these Contact Areas. Under the
terms of the PSA, which is modelled on Azerbaijan’s internationally
recognised oil industry practices, the Government is entitled to 51%
of profits. One of our subsidiaries, RV Investment Group Services LLC,
is entitled to recover costs (capital, operational and financing costs)
up to the value of 75% of the revenue. Up until the time we have
recovered all our costs, the Government of Azerbaijan effectively
takes 12.75% (being 51% of the balancing 25%) of revenue.
Following this its share depends on profitability.
Gosha
The 300 sq km Gosha Contract Area represents exciting upside
potential for the Company. We were therefore very pleased to
be granted a two year extension by the Government of Azerbaijan
to continue exploration in this area, together with Ordubad,
for precious and base metals until 13 April 2011.
Through our original Contract Area deal, we have access to a
significant amount of data generated in the Soviet‑era from these
Contract Areas. Using this in tandem with additional data collected
by ourselves, we have planned extensive exploration programmes
through which we aim to define new resources.
The Gosha Contract Area, situated 50 km north‑west of Gedabek,
contains the Gosha prospect as well as the Itkirlan and Munduglu
prospects. Previous plans envisaged that the Gosha prospect would
be exploited by open pit mining. However recent studies indicate
that any development at this property is now likely to be by way
of underground mining.
During 2008, preliminary investigation work was carried out at Gosha
to outline a comprehensive exploration strategy that will be carried
out during 2009. This will include further drilling work and some
underground tunnelling. It is expected that the Company will be in
a position to announce an update on progress and results at Gosha
by the end of 2009.
Ordubad
The 462 sq km Ordubad Contract Area in the Nakhchivan region
contains numerous targets including Shakardara, Piyazbashi, Misdag,
Agyurt, Shalala and Diakchay, which are all located within a 5 km
radius. Exploration work will be centred primarily on the three copper
prospects at Agyurt, Shalala and Diakchay, which we believe also have
the potential to contain gold and molybdenum. The remaining
properties in the Contract Area are Yashiling, Goyhundur, Keleki
and Kotam. As noted above, we were recently granted a two year
extension to continue exploration in this area for precious and base
metals until 13 April 2011.
May 2009
First gold pour
at Gedabek
What we achieved
On 26 May 2009, His Excellency Ilham Aliyev,
President of Azerbaijan, formerly opened the
Gedabek gold/copper mine at a ceremony
where the first gold and silver was poured.
The Company expects that copper production
will commence in the near future.
The mine is a low‑cost open pit, heap leach
operation targeting 300,000 oz of gold in the
first six years of mine life. Anglo Asian intends
to expand on this mine life through further
exploration programmes.
The opening of the mine was a historic moment
as Gedabek is Azerbaijan’s first ever producing
gold/copper mine.
05
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_front.indd 5
22/06/2009 16:19:00
Chief Executive’s review continued
I believe that Anglo Asian has many advantages including the low‑cost
nature of the mine, which should enable us to pay off our debt in a
relatively short timeframe, and our excellent relationship with the
Government of Azerbaijan, which we hope will help us advance
our leading position in the country. Our strategy is to exploit our
first‑mover advantage in the region and build a mid‑tier gold and
base metal production company focused on Caucasia and central Asia.
2009–2010
Looking forward
Exploration and development
It is the Company’s intention to target the
surrounding areas around the Gedabek mine
in order to extend the current six year mine
life and resource base. In particular, targeted
exploration activity will be undertaken in Maarif,
a prospective mining property within the Gedabek
contract area. Further exploration at the Gosha
and Ordubad contract areas is underway.
Anglo Asian is placed in the enviable position
of being the country’s only producing mining
company, therefore enabling it to exploit its
first mover advantage in terms of identifying
additional projects.
During 2008, work undertaken at Ordubad included a limited drilling
programme at Diakchay mining property. The programme and analysis
of results is ongoing. The Company plans to make an update on the
results of the drilling programme by the end of 2009.
Occupied Territories
Access to the three Contract Areas within the Occupied Territories
awaits the resolution of the dispute with Armenia.
Labour and safety
We have good relationships with our labour force. As well
as employing a local management team and Azeri mining and
earthworks contractors, we also employ experienced operations
personnel from surrounding countries including Turkey and Iran.
In order to accommodate our staff of approximately 250 we have
built a permanent mine camp at Gedabek using local labourers.
We adhere to very strict health and safety guidelines and accordingly
our health and safety record remains excellent. We recognise that
safe operations depend not only on technically sound plant and
equipment, but also on each employee’s competence and their strict
compliance with all requirements in the area of health, safety and
public health regulations, and on ensuring conditions are such that
the Company’s operations are performed safely. We can report that
there were no major or serious accidents during 2008 and to date
in 2009.
Training, welfare and environment
The Company maintains high environmental standards. It has
carried out several community development projects during the year.
In conjunction with USAID, we have provided seminars and training
on beekeeping and have a pilot programme in place to give soft loans
to beekeeping families to start in business. The Company has also set
up an internet café in Gedabek and provided training to local people
on how to use the internet. This facility is free of charge to the local
population. In addition, Anglo Asian has provided the expertise and
material to enable two villages local to the Gedabek mine to obtain
fresh water, as well as repairing a bridge in one of the villages.
The Company remains committed to the welfare of the local
community and will continue to work closely with the local
population to identify worthwhile development projects.
Reza Vaziri
President and Chief Executive
22 June 2009
06
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_front.indd 6
22/06/2009 16:19:02
Finance review
1 View of Gedabek
surrounding area
Summary
}
Pre‑tax loss of $4,471,434
(2007: loss of $14,683,306)
} Anticipate full repayment of current
debt, amounting to $34.4 million
of loans from the International Bank
of Azerbaijan, by the second quarter
of 2013
} If required by the Company, the
International Bank of Azerbaijan
has agreed to provide an additional
$1.5 million working capital facility
subject to official approval by the
Board of the Group
Introduction
The Group reported a loss for 2008 of $4,471,434 (2007: loss of
$14,683,306). The operating loss resulted from administration expenses
of $4,526,090 (2007: loss of $4,935,566) offset by net interest income
of $54,656 (2007: $218,365). The net interest income in the period
arose from the interest received on deposits. There were no impairment
write downs on tangible or intangible assets in the year (2007: $6,692,218).
The administrative expenses have been incurred solely in Azerbaijan,
although a portion of these relate to costs associated with maintaining
a listing in London. The London office was closed during 2007 to reduce
the cost base.
The Group has prepared its consolidated accounts for 2008 in accordance
with International Financial Reporting Standards (‘IFRS’) adopted by the EU.
As there was no operating income generated by the Group, the tax charge
for the period was $nil and an additional deferred tax asset was created
in the form of losses to carry forward in both the UK and Azerbaijan.
Following the pouring of first gold in May 2009 the Company now
expects to generate revenue over the coming months. The deferred
tax assets are not recognised in the balance sheet.
Exploration and evaluation expenditures of $352,344 (2007: $2,035,970)
were incurred and capitalised in the year.
The Group retained cash balances of $738,722 (2007: $6,810,902)
at the year end.
The Board reviews and agrees policies for managing financial risks.
During the year the Group drew down $16,084,353 (2007: $nil)
to fund capital expenditure and continued operating costs and
$3,251,869 (2007: $nil) in the form of letters of credit to fund
further capital expenditure from its $25 million agreed credit
facility with the International Bank of Azerbaijan.
At 31 December 2008 the Group had undrawn credit facilities of
$5,663,778 (2007: $nil) and on 20 May 2009 it agreed a further
$9.4 million facility with the International Bank of Azerbaijan which
the Company has now fully utilised. The International Bank of Azerbaijan
has confirmed that it will provide a further $1.5 million through a working
capital facility subject to documentation, should this be required by
the Company.
Going concern
The Directors’ assumption over the projected gold, copper and silver
prices, discount rates, mine operating costs, levels of production and
date of commencement of production from the Gedabek development
are crucial to the Group meeting its forecast cash flows for period to
30 June 2010. Due to the advanced nature of the development there
is a significant reduction in the risk of cost overruns compared with the
prior year, but should the operating costs increase significantly, production
be delayed or the revenues fall short of expectations, there may be
insufficient cash flows for the Group to sustain its day‑to‑day operations
without seeking and relying on further financing, which may or may
not be available.
07
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_front.indd 7
22/06/2009 16:19:05
Finance review continued
Liquidity/interest rate risk
During the year the Group obtained new credit facilities totalling $25 million
from the International Bank of Azerbaijan, with a fixed rate interest of 15%.
In addition the Group obtained letters of credit totalling $3,251,869.
The interest on each of the letters of credit was a combination of a
fixed portion of 5% and a variable portion which was based on either
US Dollar LIBOR or Euro LIBOR, dependent on the currency of the
letter of credit, and a mark‑up of between 2% and 2.5%. The Group
has not used any interest rate swaps or other instruments to manage
its interest rate profile during 2008 but will review this requirement
on a periodic basis.
Board approval is required for all new borrowing facilities.
At the year end the Group’s only interest rate exposure was on cash held
in the bank. During the year it had entered into short‑term deposits
which included overnight, weekly and monthly up to 12 months,
however it held no short‑term deposits as at the year end.
Market risk
Exposure to interest rate fluctuations is minimal as the Group currently
has no floating rate debt. Interest rates on UK Sterling and US Dollar
deposits have been volatile in the current year however the deposits
held by the Group have been low during the year and so any impact
is minimal. The Group is exposed to fluctuations in commodity prices
now that production has commenced.
Operational risk
There is exposure to delay in the construction programme and the
resulting timing of production and sale of minerals. Operating costs
for commercial production are not yet known and remain subject to
variation from those forecast by the Directors. The Group will monitor
progress on delays and costs on a regular basis.
Andrew Herbert
Chief Financial Officer
22 June 2009
For these reasons a material uncertainty exists which may cast significant
doubt on the entity’s ability to continue as a going concern and that
it may be unable to realise its assets and discharge its liabilities in the
normal course of business.
After making enquiries, the Directors have formed a judgement,
which assumes at the time of approving the financial statements, that
there is a reasonable expectation that the Group can access adequate
resources to continue in operation and continue as a going concern
for the foreseeable future. These resources include: the anticipated
revenues from the projected gold, silver and copper production at
Gedabek; existing cash balances; existing debt facilities; and the
Group’s ability to raise further funds through either debt or equity
should market prices for gold fall, production levels fall or be delayed
or if operating costs increase.
The current forecasts demonstrate that the existing cash resources
and available debt provide sufficient funds to complete the construction
of the mine at Gedabek and to commence production. The Board
is aware of the difficulties involved in accurately forecasting mine
operating costs, the price of gold and levels of production, as well
as the risk of delays in production. If there are either cost overruns,
reduced revenues or delays which result in a funding shortfall then
the Board will have to take steps to ensure that there is adequate
funding for the 12 month period subsequent to the date of the
approval of these financial statements. The major shareholders on
the Board have confirmed that they would be willing to provide
additional funding in such an event. As detailed in note 27, the
Group has obtained written confirmation from the International Bank
of Azerbaijan regarding an increase in funding. If required the Board
also consider that further working capital facilities could be negotiated
with the International Bank of Azerbaijan in the future.
For these reasons the Directors continue to adopt the going concern
basis of preparing the financial statements.
Commodity price risk
Since the year end the Company has commenced production but has
yet to enter commercial production. Anglo Asian currently does not
hold any financial instruments to hedge the commodity price risk on
its expected future production, however anticipates that it will do so
once production increases. The Board will review this exposure and
the requirement for hedging activities on an ongoing basis.
Foreign currency risk
The Group reports in US Dollars and a large proportion of its business
is conducted in US Dollars. It also conducts business in Australian Dollars,
Azerbaijan Manats and UK Sterling. The Group does not currently hedge
its exposure to other currencies although it will review this periodically
if the volume of non US Dollar transactions increases significantly.
08
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_front.indd 8
22/06/2009 16:19:05
Dr Ross Bhappu
NON‑EXECUTIVE DIRECTOR, AGE 49
Dr Ross Bhappu is a partner with Resource Capital Funds with
extensive experience in the mining industry working for both senior
and junior mining companies. Prior to joining Resource Capital Funds
in early 2001, he served as Chief Executive Officer of GTN Copper
Corporation, Director of business development for Newmont Mining
Corporation and held various technical and commercial roles with
Cyprus Minerals Company. Ross holds a PhD in Mineral Economics
from the Colorado School of Mines and BS and MS degrees in
Metallurgical Engineering from the University of Arizona.
Governor John H Sununu
NON‑EXECUTIVE DIRECTOR, AGE 69
Governor John Sununu received a PhD from Massachusetts Institute
of Technology and taught engineering at Tufts University for 16 years.
He served three terms as the Governor of New Hampshire before
President George H.W. Bush appointed him Chief of Staff in 1989,
a position that he held until March 1992. After his tenure as
Chief of Staff, he co‑hosted CNN’s Crossfire, ran an engineering firm,
and then in 2004 served as the visiting Roy M. and Barbara Goodman
Family Professor of Practice in Public Service at the Kennedy School
of Government at Harvard University. John is a former partner in Trinity
International Partners, a private financial firm, and currently serves as
President of JHS Associates Ltd.
Board of Directors
Mr Khosrow Zamani
NON‑EXECUTIVE CHAIRMAN, AGE 66 Appointed 1 June 2007
Khosrow Zamani was Director of the southern Europe and central
Asia Department of the International Finance Corporation (IFC),
the private sector lending arm of the World Bank, from March 2000
to July 2005. He was responsible for the IFC investment programme
and strategy in 15 countries across the region. Whilst a Director at IFC,
Khosrow was instrumental in building the IFC investment portfolio
in the region with several new initiatives, particularly in central Asia
and Caucasia. He oversaw the IFC portfolio of more than $2 billion,
diversified across the financial, oil and gas, mining and manufacturing
sectors. Mr Zamani has over 30 years of experience in investment and
project finance and banking in emerging markets. He holds a MSc
in Engineering from the USA and a Master of Business Operations
and Management from the UK. He is currently a member of the
Board of Directors of several banks and financial services and
private equity funds active in CIS, central Asia and Caucasia.
Mr Reza Vaziri
PRESIDENT
CHIEF EXECUTIVE, AGE 56 Appointed 29 September 2008
Reza Vaziri has been actively involved in business in Azerbaijan since
just after its independence. Since RVIG, now Anglo Asian’s subsidiary,
signed a Production Sharing Agreement with the Government of
Azerbaijan, Reza has been focused on developing the Company’s key
gold/copper/silver resources with the objective of establishing Anglo
Asian as a significant gold producer in the Caucasia and central Asia
region. Prior to his business career, Reza held a number of high‑ranking
positions in the pre‑revolutionary Iranian Government. He was the
Head of the Foreign Relations Office at the Ministry of the Imperial
Court of Iran. At the time of the revolution, he was Chief of Office
of Political and International Affairs. Reza holds a law degree from
the National University of Iran. As founder and Co‑Chairman for life
of the Board of Directors of the US – Azerbaijan Chamber of Commerce
with James A. Baker IV, Reza dedicates much of his time furthering
business relations between the two countries. Reza serves along side
such Directors as: James Baker III, Jahangir Hajiyev and Henry Kissinger.
Reza resides in Baku, London and Washington, DC.
Mr Richard Round FCCA
FINANCE DIRECTOR, AGE 51 Resigned 23 July 2008
NON‑EXECUTIVE DIRECTOR Appointed 23 July 2008
Richard Round is a fellow of the Chartered Association of Certified
Accountants. He began his career with British Coal in 1977. In 1987
Richard joined Ferrum Holdings plc, becoming group Finance Director
in 1993. In 1995 Richard became Finance Director of Consolidated
Supply Management Limited, an international oilfield logistics group
operating primarily in Latin America and the Former Soviet Union,
including Azerbaijan and Kazakhstan. In 2001, Richard became
Financial Director for the Mining (Scotland) Group, the largest
opencast coal mining company in the UK, before joining Anglo Asian
as Finance Director in September 2005. Richard has also been Finance
Director for Cambrian Mining PLC and is now Chief Financial Officer
of Lubel Coal Company Limited.
09
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_front.indd 9
22/06/2009 16:19:06
Directors’ report
The Directors submit their report and the financial statements of Anglo Asian Mining PLC for the year ended 31 December 2008.
Principal activities
The principal activity of Anglo Asian Mining PLC is that of a holding Company and a provider of support and management
services to its operating subsidiary. Together with its subsidiaries (see note 16 on page 28) it is involved in the exploration
and development of gold and copper projects in Azerbaijan and the operation of the Gedabek mine in Azerbaijan.
Review of developments and future prospects
The Group’s financial performance for the year was in line with Directors’ expectations. The Group loss after taxation for the year
ended 31 December 2008 amounted to $4,471,434 (2007: $14,683,306).
In future when the mine is operational, relevant Key Performance Indicators (“KPIs”) will be given for the business, as currently
it is still in the development phase with no applicable KPIs except expenditure on the mine.
The record of the business during the year and an indication of likely further developments may be found in the Chairman’s
Statement, (page 2) the Chief Executive’s Review (page 4) and the Finance Review (page 7).
On 20 April 2009 the Group was granted two‑year extensions for the exploration licences at both Gosha and Ordubad to enable
the continued development at these two projects until 13 April 2011.
Business review
The financing risks are discussed on pages 2 and 3 of the Chairman’s Statement. Other risks are discussed in the Finance Review
on pages 7 and 8.
Share capital
Details of the movements in share capital during the period are set out in note 22 to the consolidated financial statements.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial statements for each financial year. The Directors are required by the
IAS Regulation to prepare the Group financial statements under IFRS as adopted by the EU. The Group financial statements are
also required by law to be properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation.
International Accounting Standard 1 requires that IFRS financial statements present fairly for each financial year the Group’s
financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions,
other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses
set out in the International Accounting Standards Board’s “Framework for the preparation and presentation of financial statements”.
In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. However, Directors are also
required to:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information; and
• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users
to understand the impact of particular transactions, other events and conditions on the entity’s financial position and
financial performance.
The Directors have elected to prepare the parent company financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The parent company financial
statements are required by law to give a true and fair view of the state of affairs of the Company. In preparing these financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the
financial position of the Company and to enable them to ensure that the parent company financial statements comply with the
Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
10
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 1
22/06/2009 16:18:17
Responsibility statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
• the management report, which is incorporated into the Directors’ Report, includes a fair review of the development and
performance of the business and the position of the Company and the undertakings included in the consolidation taken
as a whole, together with a description of the principal risks and uncertainties that they face.
Directors
The current Directors and their biographies are set out on page 9.
Directors’ interests
The Directors in office during the year and their interests in ordinary shares of the Company at 31 December 2008 and
31 December 2007 were:
Directors
Khosrow Zamani (appointed 1 June 2007)
Reza Vaziri
Gordon Lewis (resigned 30 September 2008)
Richard Round
Ross Bhappu
Tim Eggar (resigned 23 July 2008)
John Sununu
31 December
2008
number of
shares
133,834
31 December
2007
number of
shares
20,000
30,689,278 29,111,208
— —
132,872 —
— —
—
9,836,300
45,564
9,631,400
A total of 3,100,041 shares were issued during the year to the Directors, Resource Capital Fund III L.P. and Numis Securities Limited
in lieu of salaries and fees, bringing the total number of ordinary shares with voting rights to 102,721,921 at 31 December 2008.
The interests of the Directors, financial advisers and staff in options to subscribe for ordinary shares of the Company were:
Directors
Khosrow Zamani
Gordon Lewis
Richard Round
Ross Bhappu
Tim Eggar
Others
Exercise
price
(p)
16.5
12.0
4.8
42.5
12.0
77.0
42.5
12.0
42.5
77.0
77.0
77.0
97.0
42.5
8.9
4.8
Latest
exercise
date
As at
1 January
2008
Granted
during
the year
Forfeited
in the
year
Lapsed
in the
year
As at
31 December
2008
1 June 2017
27 July 2017
4 December 2018
1 July 2016
27 July 2017
26 July 2015
12 April 2016
27 July 2017
12 April 2016
26 July 2015
26 July 2008
26 July 2008
11 August 2015
12 April 2016
1 August 2018
4 December 2018
100,000
500,000
—
1,487,577
1,400,000
432,900
495,859
600,000
123,965
743,788
991,718
991,718
247,925
59,503
—
—
8,174,953
—
—
550,000
—
—
—
—
—
—
—
—
—
—
(1,487,577)
(1,400,000)
—
—
—
—
(743,788)
—
—
—
—
—
—
—
—
—
—
100,000
500,000
550,000
—
—
432,900
495,859
600,000
123,965
—
—
—
—
—
200,000
1,300,000
2,050,000
—
—
—
—
—
(3,631,365)
(991,718)
(991,718)
—
—
—
—
(1,983,436)
—
—
247,925
59,503
200,000
1,300,000
4,610,152
All options can be exercised at various dates up to 4 December 2018.
Directors indemnities
The Company has made qualifying third party indemnity provision for the benefit of its Directors which were made during the
year and remain in force at the date of this report.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are
set out in the Chairman’s Statement and Chief Executive Officer’s Review on pages 2 to 6. The financial position of the Group,
its cash flows, liquidity position, and borrowing facilities are described in the Finance Review on pages 7 and 8. In addition note 21
to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.
As highlighted in note 21 to the financial statements, the Group meets its day‑to‑day working capital requirements through a
loan from the International Bank of Azerbaijan. The current economic conditions create uncertainty, particularly the availability
of bank finance in the foreseeable future.
The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should
be able to operate within the level of its current facility. As detailed in note 27 the Group has obtained written confirmation of an increase
in funding from the International Bank of Azerbaijan subject to Anglo Asian Mining PLC Board approval. If necessary the Group will open
negotiations regarding a further increase in the credit facility with the bank in due course, but at this stage has not deemed this necessary.
11
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 2
22/06/2009 16:18:17
Directors’ report continued
Going concern continued
However, the Group has held discussions with its bankers about its future borrowing needs and no matters have been drawn
to its attention to suggest that a new facility or extension to existing facility may not be forthcoming on acceptable terms.
The Directors’ assumption over the projected gold and silver prices, discount rates, mine operating costs, levels of production
and date of commencement of production from the Gedabek development are crucial to the Group meeting its forecast cash flows
for the 12 month period subsequent to the date of the approval of these financial statements. Due to the advanced nature of the
development there is a significant reduction in the risk of cost overruns compared with the prior year but, should the operating costs
increase significantly, production be delayed or the revenues fall short of expectations, there may be insufficient cash flows for the
Group to sustain its day‑to‑day operations without seeking and relying on further financing, which may or may not be available.
For these reasons a material uncertainty exists which may cast significant doubt on the entity’s ability to continue as a going
concern and that it may be unable to realise its assets and discharge its liabilities in the normal course of business.
After making enquiries, the Directors have formed a judgement which assumes, at the time of approving the financial statements,
that there is a reasonable expectation that the Group can access adequate resources to continue in operation and remain in existence
for the foreseeable future. These resources include the anticipated revenues from the projected gold, silver and copper production
at Gedabek, existing cash balances, existing debt facilities and the Group’s ability to raise further funds through either debt or equity,
should market prices for gold fall, production levels fall or be delayed or if operating costs increase. The current forecasts demonstrate
that the existing cash resources and available debt facilities provide sufficient funds to complete the construction of the mine at Gedabek
and to commence production. The Board is aware of the difficulties involved in accurately forecasting mine operating costs, the price
of gold and levels of production, as well as the risk of delays in production. If there are either cost overruns, reduced revenues or delays
which result in a funding shortfall, then the Board will have to take steps to ensure that there is adequate funding for the 12 month period
subsequent to the date of the approval of these financial statements. The major shareholders on the Board have confirmed that
they would be willing to provide additional funding in such an event. As detailed in note 27 the Group has obtained written
confirmation from the International Bank of Azerbaijan regarding an increase in funding. If required the Board also consider that
further working capital facilities could be negotiated with the International Bank of Azerbaijan in the future.
For these reasons the Directors continue to adopt the going concern basis of preparing the financial statements.
Charitable and political contributions
There were no charitable or political contributions made during the year.
Substantial shareholdings
The Company has been informed that on 10 June 2009 the following shareholders held substantial holdings in the issued
ordinary shares of the Company:
Shareholders
Reza Vaziri
Khagani Bashirov
John Sununu
Resource Capital Fund III L.P.
Limelight Industrial Developments Limited
The number of shares in issue at this date was 102,839,002.
Number of
ordinary
shares
30,689,278
18,087,758
9,875,430
6,417,856
4,038,600
Holding
%
29.84
17.61
9.60
6.24
3.93
Payment policy
It is the Group’s policy to pay suppliers in accordance with agreed terms, provided the supplier has also complied with agreed
terms and conditions. The average creditor days is 35 (2007: 30).
Disclosure of information to auditors
Each of the persons who is a Director at the date of approval of this annual report confirms that:
• so far as the Director is aware there is no relevant audit information of which the Company’s auditors are unaware; and
• the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant
audit information and to establish that the Company’s auditors are aware of that information.
This information is given and should be interpreted in accordance with the provisions of Section 234ZA of the Companies Act 1985.
Annual General Meeting
The Company will hold its next Annual General Meeting on 23 July 2009 at which this report and financial statements will
be presented. Notification of the meeting has been sent along with this report.
Auditors
Deloitte LLP have expressed their willingness to continue in office as auditors and a resolution to re‑appoint them will be proposed
at the forthcoming Annual General Meeting.
By order of the Board
Andrew Herbert
Company Secretary
22 June 2009
12
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 3
22/06/2009 16:18:17
Corporate governance
Introduction
Although the rules of AIM do not require the Company to comply with the Combined Code on Corporate Governance
(“the Code”), the Company fully supports the principles set out in the Code and will attempt to comply wherever possible,
given both the size and resources available to the Company. Details are provided below of how the Company applies the Code.
The Board
The Board of Directors currently comprises one Executive Director and four Non‑executive Directors, one of whom is the Chairman.
The roles of Chairman and Chief Executive are split in line with recommended policy.
The Board meets regularly throughout the year and receives a Board pack comprising individual reports from the Executive Director
together with any other material deemed necessary for the Board to discharge its duties. The Board also conducts telephone
Board meetings as issues which require Board attention arise. It is the Board’s responsibility to formulate, review and approve
the Group’s strategy, budgets and major items of expenditure. The Board sets the Group’s objectives and policies and monitors
their implementation by the Executive team.
The Board considers one of the Non‑executive Directors other than the Chairman to be independent.
Audit Committee
The Audit Committee comprises Richard Round and John Sununu and is scheduled to meet at least twice a year. The external
auditors attend the meetings and the Chief Executive and Chief Financial Officer attend by invitation. It is the Audit Committee’s
role to provide formal and transparent arrangements for considering how to apply the financial reporting and internal control
requirements of the Code, whilst maintaining an appropriate relationship with the independent auditors of the Group.
Remuneration Committee
The Remuneration Committee currently comprises Khosrow Zamani and John Sununu and meets as required. It is the
Remuneration Committee’s role to establish a formal and transparent policy on executive remuneration and to set remuneration
packages for individual Directors.
Nomination Committee
The Nomination Committee currently comprises Khosrow Zamani and John Sununu. It is the role of the Nomination Committee
to review and consider the Board structure and composition and it meets as required to consider and make recommendations
on the appointment of Directors to the Board.
Shareholder relations
The Company meets with its institutional shareholders and analysts as appropriate and encourages communication with private
shareholders via the Annual General Meeting (“AGM”). In addition, the Company uses the annual report and accounts, interim
statement and website (www.aamining.com) to provide further information to shareholders.
Internal control and risk management
The Board is responsible for the system of internal control and for reviewing its effectiveness. Such systems are designed to
manage rather than eliminate risks and can provide only reasonable and not absolute assurance against material misstatement
or loss. For each year, on behalf of the Board, the Audit Committee reviews the effectiveness of these systems. This is achieved
primarily by considering the risks potentially affecting the Group and discussions with the external auditors.
The Group does not currently have an internal audit function due to the small size of the administrative function.
A comprehensive budgeting process is completed once a year and is reviewed by the Board and where appropriate revised forecasts
are prepared and also reviewed by the Board. The Group’s results, as compared against budget, are reported to the Board
on a monthly basis and discussed in detail at each meeting of the Board.
The Group maintains appropriate insurance cover in respect of legal actions against the Directors as well as against material loss
or claims against the Group and the Board reviews the adequacy of the cover regularly.
13
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 4
22/06/2009 16:18:17
Independent auditors’ report
To the members of Anglo Asian Mining PLC
We have audited the Group financial statements of Anglo Asian Mining PLC for the year ended 31 December 2008 which
comprise the consolidated income statement, the consolidated statement of recognised income and expense, the consolidated
balance sheet, the consolidated cash flow statement, and the related notes 1 to 28. These Group financial statements have been
prepared under the accounting policies set out therein.
We have reported separately on the parent company financial statements of Anglo Asian Mining PLC for the year ended
31 December 2008. That report is modified by the inclusion of an emphasis of matter.
This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state
to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Respective responsibilities of Directors and auditors
The Directors’ responsibilities for preparing the annual report and the Group financial statements in accordance with
applicable law and International Financial Reporting Standards (“IFRS”) as adopted by the EU are set out in the statement
of Directors’ responsibilities.
Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the Group financial statements give a true and fair view, whether the Group financial
statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion
the information given in the Directors’ Report is consistent with the Group financial statements. The information given in the Directors’
Report includes that specific information presented in the Business Review that is cross referred from the Principal Activity and
Business Review section of the Directors’ Report.
In addition we report to you if, in our opinion, the Group has not kept proper accounting records, if we have not received all
the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration
and other transactions is not disclosed.
We read the other information contained in the annual report as described in the contents section and consider whether it is
consistent with the audited Group financial statements. We consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the Group financial statements. Our responsibilities do not extend to
any further information outside the annual report.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Group financial
statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation
of the Group financial statements, and of whether the accounting policies are appropriate to the Group’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance that the Group financial statements are free from material
misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy
of the presentation of information in the Group financial statements.
Opinion
In our opinion:
• the Group financial statements give a true and fair view, in accordance with IFRS as adopted by the EU, of the state of the
Group’s affairs as at 31 December 2008 and of its loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with the Companies Act 1985; and
• the information given in the Directors’ Report is consistent with the Group financial statements.
14
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 5
22/06/2009 16:18:17
Emphasis of matter – going concern
Without qualifying our opinion we draw attention to the disclosures made in note 1 of the financial statements concerning the
Group’s ability to continue as a going concern which would depend upon the Gedabek development being completed to budget
and on time, production continuing through 2009 and revenues meeting expectations, or alternatively, on obtaining additional
financing, which may or may not be available. These considerations, together with the other matters set out in note 1, indicate
the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.
The financial statements do not include the adjustments that would result if the Group was unable to continue as a going
concern as it is not practicable to determine or quantify them.
Deloitte LLP
Chartered Accountants and Registered Auditors
London, United Kingdom
22 June 2009
15
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 6
22/06/2009 16:18:17
Consolidated income statement
For the year ended 31 December 2008
Administrative expenses
Write down of capitalised intangible assets
Write down of assets held for sale
Operating loss
Finance income
Finance costs
Loss before tax
Income tax expense
Loss for the year
Loss per share
Basic (cents per share)
Diluted (cents per share)
The Group’s loss relates to continuing operations in both years.
Consolidated statement of recognised
income and expense
For the year ended 31 December 2008
Loss for the year
Total recognised income and expense for the year
Year
ended
31 December
2008
US$
Year
ended
31 December
2007
US$
(4,526,090)
(4,935,566)
—
—
(6,692,218)
(3,273,887)
(4,526,090) (14,901,671)
54,656
218,365
— —
(4,471,434) (14,683,306)
— —
(4,471,434) (14,683,306)
(4.41)
(4.41)
(14.80)
(14.80)
Notes
8
9
5
10
11
12
13
13
Year
ended
31 December
2008
US$
Year
ended
31 December
2007
US$
(4,471,434) (14,683,306)
(4,471,434) (14,683,306)
16
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 7
22/06/2009 16:18:18
Consolidated balance sheet
As at 31 December 2008
Non‑current assets
Intangible assets
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Net current (liabilities)/assets
Non‑current liabilities
Borrowings
Total liabilities
Net assets
Equity
Share capital
Share premium account
Share‑based payment reserve
Merger reserve
Accumulated loss
Total equity
Notes
2008
US$
2007
US$
14
15
17
18
50,080,034 49,727,700
28,927,611
1,242,048
79,007,645 50,969,748
2,161,494
444,514
738,722
6,810,902
2,900,216
7,255,416
81,907,861 58,225,164
19
(11,370,718)
(1,332,491)
(11,370,718)
(1,332,491)
(8,470,502)
5,922,925
20
(17,396,890) —
(17,396,890) —
(28,767,608)
(1,332,491)
53,140,253 56,892,673
22
23
23
23
1,851,516
1,792,015
30,911,013 30,387,514
1,321,840
1,852,752
46,206,390 46,206,390
23
(27,150,506) (23,345,998)
53,140,253 56,892,673
The financial statements were approved by the Board of Directors and authorised for issue on 22 June 2009. They were signed
on its behalf by:
Reza Vaziri
Chief Executive
17
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 8
22/06/2009 16:18:18
Consolidated cash flow statement
For the year ended 31 December 2008
Net cash used in operating activities
Investing activities
Interest received
Purchase of property, plant and equipment
Expenditure on intangible assets
Net proceeds from sale of property, plant and equipment
Net cash (used in)/generated from investing activities
Financing activities
Proceeds from borrowings
Proceeds from long‑term letters of credit
Interest paid
Net cash generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year
ended
31 December
2008
US$
Year
ended
31 December
2007
US$
Notes
24
(2,159,826)
(4,308,710)
54,656
218,365
(20,672,394)
(421,470)
(212,900)
(2,035,970)
—
7,004,585
(20,830,638)
4,765,510
16,084,353 —
1,312,537 —
(478,606) —
16,918,284 —
(6,072,180)
456,800
6,810,902
6,354,102
738,722
6,810,902
18
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 9
22/06/2009 16:18:18
Notes to the consolidated financial statements
For the year ended 31 December 2008
1. Going concern
The Directors’ assumption over the projected gold and silver prices, discount rates, mine operating costs, levels of production
and date of commencement of production from the Gedabek development are crucial to the Group meeting its forecast cash flows
for period to 30 June 2010. Due to the advanced nature of the development there is a significant reduction in the risk of cost overruns
compared with the prior year, but should the operating costs increase significantly, production be delayed or the revenues fall short
of expectations, there may be insufficient cash flows for the Group to sustain its day‑to‑day operations without seeking and relying
on further financing, which may or may not be available.
For these reasons a material uncertainty exists which may cast significant doubt on the entity’s ability to continue as a going concern
and that it may be unable to realise its assets and discharge its liabilities in the normal course of business.
After making enquiries, the Directors have formed a judgement, which assumes at the time of approving the financial statements,
that there is a reasonable expectation that the Group can access adequate resources to continue in operation and remain in existence
for the foreseeable future. These resources include the anticipated revenues from the projected gold, silver and copper production
at Gedabek, existing cash balances, existing debt facilities and the Group’s ability to raise further funds through either debt or equity,
should market prices for gold fall, production levels fall or be delayed or if operating costs increase. The current forecasts demonstrate
that the existing cash resources and available debt provide sufficient funds to complete the construction of the mine at Gedabek
and to commence production. The Board is aware of the difficulties involved in accurately forecasting mine operating costs, the
price of gold and levels of production, as well as the risk of delays in production. If there are either cost overruns, reduced revenues
or delays which result in a funding shortfall then the Board will have to take steps to ensure that there is adequate funding for
the 12 month period subsequent to the date of the approval of these financial statements. The major shareholders on the Board
have confirmed that they would be willing to provide additional funding in such an event. As detailed in note 27 the Group has
obtained written confirmation from the International Bank of Azerbaijan regarding an increase in funding. If required the Board
also consider that further working capital facilities could be negotiated with the International Bank of Azerbaijan in the future.
For these reasons the Directors continue to adopt the going concern basis of preparing the financial statements.
2. General information
Anglo Asian Mining PLC is a public limited Company incorporated in the UK under the Companies Act 1985. The address of the
registered office and principal place of business are given on the inside back cover. The Company’s ordinary shares are traded on
the AIM of the London Stock Exchange. The nature of the Group’s operations and its principal activities are set out in the
Directors’ Report on pages 10 to 12.
These financial statements are presented in US Dollars. Foreign operations are included in accordance with the policies set out
in note 3.
3. Significant accounting policies
Basis of preparation
These financial statements, for the year ended 31 December 2008 and 31 December 2007, are prepared in accordance with
IFRS as adopted by the EU. The financial statements have also been prepared in accordance with International Financial Reporting
Interpretations Committee (“IFRIC”) interpretations and with those parts of the Companies Act 1985 applicable to companies
reporting under IFRS.
The financial statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best
knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The principal accounting
policies are set out below.
New standards and interpretations not applied
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been
applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
IFRS 1 (amended)/IAS 27 (amended)
IFRS 2 (amended)
IFRS 3 (revised 2008)
IFRS 8
IAS 1 (revised 2007)
IAS 23 (revised 2007)
IAS 27 (revised 2008)
IAS 32 (amended)/IAS 1 (amended)
IFRIC 12
IFRIC 15
IFRIC 16
“Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate”
“Share‑based Payment – Vesting Conditions and Cancellations”
“Business Combinations”
“Operating Segments”
“Presentation of Financial Statements”
“Borrowing Costs”
“Consolidated and Separate Financial Statements”
“Puttable Financial Instruments and Obligations Arising on Liquidation”
“Service Concession Arrangements”
“Agreements for the Construction of Real Estate”
“Hedges of a Net Investment in a Foreign Operation”
Improvements to IFRS (May 2008)
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact
on the financial statements of the Group.
19
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 10
22/06/2009 16:18:18
Notes to the consolidated financial statements continued
For the year ended 31 December 2008
3. Significant accounting policies continued
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
All intra‑group transactions, balances, income and expenses are eliminated on consolidation.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
Rentals payable under operating leases are charged to income on a straight line basis over the term of the relevant lease.
Foreign currencies
The individual financial statements of each group company are maintained in the currency of the primary economic environment
in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial
position of each group company are expressed in US Dollars, the functional currency of the Company and the presentation
currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional
currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance
sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Non‑monetary items that are measured in terms of historical cost in a foreign currency are
not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included
in the income statement for the period.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations
are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates
at the date of transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s
translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation
is disposed of.
Taxation
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for
using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets and unused tax
losses. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is
realised, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred
tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which
case the deferred tax is also dealt with in equity.
Deferred tax assets are not recognised in respect of timing differences relating to tax losses where there is insufficient evidence
that the asset will be recovered. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised
to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets
is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Intangible assets
Exploration and evaluation assets
The costs of exploration properties and leases, which include the cost of acquiring prospective properties and exploration
rights and costs incurred in exploration and evaluation activities, are capitalised as intangible assets as part of exploration and
evaluation assets.
Exploration and evaluation assets are carried forward during the exploration and evaluation stage and are assessed for impairment
in accordance with the indicators of impairment as set out in IFRS 6 “Exploration for and Evaluation of Mineral Resources”.
20
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 11
22/06/2009 16:18:18
3. Significant accounting policies continued
Intangible assets continued
Exploration and evaluation assets continued
In circumstances where a property is abandoned, the cumulative capitalised costs relating to the property are written off in the
period. No amortisation is charged prior to the commencement of production.
When commercial production commences, exploration, evaluation and development costs previously capitalised are amortised
over the commercial reserves of the mining property on a unit of production basis.
Mining rights
Mining rights are carried at cost to the Group less any provisions for impairments which result from evaluations and assessments
of potential mineral recoveries.
Tangible assets
Mining properties and leases include the cost of acquiring and developing mining properties and mineral rights.
Mining properties are depreciated down to their residual values using the unit of production method based on proven
and probable reserves. Depreciation is charged on new mining ventures from the date that the mining property is capable of
commercial production. When there is little likelihood of a mineral right being exploited, or the value of the exploitable mineral
right has diminished below cost, a write down to the recoverable amount is charged to the income statement.
Land and properties in the course of construction are carried at cost, less any recognised impairment. Depreciation commences
when the assets are ready for their intended use. Buildings and plant and equipment are depreciated down to their residual values
at varying rates, on a straight line basis over their estimated useful lives or the life of mine, whichever is shorter. Estimated useful
lives normally vary from up to 20 years for items of plant and equipment to a maximum of 50 years for buildings. Residual values
and estimated useful lives are reviewed at least annually.
Assets held under finance leases are depreciated over the shorter of the lease term and the estimated useful lives of the assets.
Property, plant and equipment
Buildings and plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is provided on all depreciable property, plant and equipment at rates calculated to write off the cost of each asset
over its expected useful life as follows:
Leasehold improvements
Plant, equipment and motor vehicles
Office and computer equipment
Temporary buildings
Over the life of lease
25% decreasing balance
25% decreasing balance
25% decreasing balance
The cost of maintenance, repairs and replacement of minor items of property, plant and equipment are charged to the income
statement as incurred. Renewals and asset improvements are capitalised.
An item of property, plant and equipment is derecognised upon disposal or when no further economic benefits are expected from
its use or disposal. Upon sale or retirement of property, plant and equipment, the cost and related accumulated depreciation are
eliminated from the financial statements. Any resulting gains or losses are included in the income statement.
Impairment of tangible and intangible assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which
the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre‑tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an
expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (cash generating unit) in prior years.
A reversal of an impairment loss is recognised as income immediately.
Restoration, rehabilitation and environmental costs
An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the
development or ongoing production of a mining property. Such costs arising from the decommissioning of plant and other site
preparation work, discounted to their net present value, are provided for and capitalised at the start of each project, as soon
as the obligation to incur such costs arises. These costs are charged against profits over the life of the operation, through the
depreciation of the asset and the unwinding of the discount on the provision. Costs for restoration of subsequent site damage
which is created on an ongoing basis during production are provided for at their net present values and charged against profits
as extraction progresses.
21
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 12
22/06/2009 16:18:18
Notes to the consolidated financial statements continued
For the year ended 31 December 2008
3. Significant accounting policies continued
Restoration, rehabilitation and environmental costs continued
Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work that result
from changes in the estimated timing or amount of the cash flow, or a change in the discount rate, are added to, or deducted
from, the cost of the related asset in the current period. If a decrease in the liability exceeds the carrying amount of the asset, the
excess is recognised immediately in the income statement. If the asset value is increased and there is an indication that the revised
carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy set out on page 21.
Assets classified as held for sale
Non‑current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell and
are not depreciated.
Non‑current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather
than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available
for immediate sale in its present condition. Management must be committed to the sale and completion should be expected
within one year from the date of classification.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value, and are subsequently carried at cost. Appropriate
allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that
the asset is impaired.
Cash and cash equivalents
Cash and cash equivalents comprise cash at banks and in hand and short‑term deposits with an original maturity of three months
or less.
For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as
defined above.
Trade and other payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest
rate method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs, or value of services
received net of any issue costs.
Bank borrowings
Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct transaction costs. Finance charges,
including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis and
charged to the income statement using the effective interest method. They are added to the carrying amount of the instrument
to the extent that they are not settled in the period in which they arise.
Employee leave benefits
Liabilities for wages and salaries, including non‑monetary benefits and accrued but unused annual leave are recognised in
respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the
liabilities are settled.
Retirement benefit costs
The Group does not operate a pension scheme for the benefit of its employees but instead makes contributions to their personal
pension policies. The contributions due for the period are charged to the income statement.
Share‑based payments
The Group has applied the requirements of IFRS 2 Share‑based Payment. IFRS 2 has been applied to all grants of equity instruments.
The Group issues equity‑settled share‑based payments to certain employees. Equity‑settled share‑based payments are measured
at fair value (excluding the effect of non market‑based vesting conditions) at the date of grant. The fair value determined at the
grant date of the equity‑settled share‑based payments is expensed on a straight line basis over the vesting period, based on the
Group’s estimate of shares that will eventually vest and adjusted for the effect of non market‑based vesting conditions.
Fair value is measured by use of the Black‑Scholes model. The expected life used in the model has been adjusted, based
on management’s best estimate, for the effects of non‑transferability, exercise restrictions and behavioural considerations.
The vesting conditions assumptions are reviewed during each reporting period to ensure they reflect current expectations.
Critical judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, which are described in note 3, management has made the following
judgements that have the most significant effect on the amounts recognised in the financial statements (apart from those
involving estimations, which are dealt with below).
Impairment of tangible and intangible assets
The assessment of tangible and intangible assets for any internal and external indications of impairment involves judgement.
Each reporting period, a formal estimate of recoverable amount is performed and an impairment loss recognised to the extent
that carrying amount exceeds recoverable amount. Recoverable amount is determined as the higher of fair value less costs to
sell and value in use.
22
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 13
22/06/2009 16:18:18
3. Significant accounting policies continued
Deferred tax assets
The assessment of availability of future taxable profits involves judgement. A deferred tax asset is recognised to the extent that it
is probable that taxable profits will be available against which deductible temporary differences and the carry forward of unused
tax credits and unused tax losses can be utilised.
Commercial production
The evaluation and expenditure and mining rights are to be written off over the life of mine using a unit of production basis
once it has been determined that the date of commercial production has been reached. The Directors will use judgement in
determining the full capacity of the mine and the current production levels to determine when it is close to full capacity and
therefore classified as in commercial production.
Key sources of estimation uncertainty
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts
reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during
the year. The nature of estimation means that actual outcomes could differ from those estimates. The key sources of estimation
uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Impairment value in use
Determining whether the projects are impaired requires an estimation of the value in use of the individual areas to which value
has been ascribed. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the
projects and a suitable discount rate in order to calculate present value.
Share‑based payments
The estimation of share‑based payment costs requires the selection of an appropriate valuation model and consideration as to the
inputs necessary for the valuation model chosen. The Group has made estimates as to the volatility of its own shares, the probable
life of options granted and the time of exercise of those options. The model used by the Group is the Black‑Scholes pricing model.
Provision for restoration, rehabilitation and environmental costs
Costs arising from site restoration works, and the decommissioning of plant, discounted to their present value, are provided
for and capitalised at the start of each project, as soon as the obligation to incur such costs arises. The provision is based
on estimates prepared by external consultants. Management uses its judgement and experience to provide for these costs.
The ultimate costs of site restoration and decommissioning are uncertain, and cost estimates can vary in response to many factors
including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites.
The expected timing and extent of expenditure can also change, for example in response to changes in ore reserves or processing
levels. As a result, there could be significant adjustments to the provisions established which would affect future financial results.
4. Segment information
The operations of the Group comprise one reportable segment with the primary and secondary segments identical, being the
exploration and development of gold and copper projects in Azerbaijan.
Operations in Azerbaijan comprise of exploration and development projects for gold and copper at eight development properties
in three separate mining areas.
The unallocated entries in the segment note relate to activities in the UK which comprise of administration and treasury functions
carrying out general expense processing, remuneration of Directors and monitoring and placing of Group deposits.
23
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 14
22/06/2009 16:18:18
Notes to the consolidated financial statements continued
For the year ended 31 December 2008
4. Segment information continued
The following table presents losses and certain asset and liability information regarding the Group’s reportable segment for the
years ended 31 December 2008 and 2007:
2008
2007
Segment result
Unallocated expenses
Group operating loss
Net interest income
Loss before taxation
Tax expense
Loss for the year
Assets and liabilities
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Other segment information
Capital expenditure:
Property, plant and equipment
Intangible assets
Depreciation
Write down of intangible assets
Share‑based payment expense
Write down of assets held for sale
(Loss)/gain on disposal of non‑current assets
5. Operating loss
Azerbaijan
US$
(2,320,438)
81,241,018
27,321,600
Azerbaijan
US$
Consolidated
US$
Consolidated
US$
(2,320,438) (10,935,400) (10,935,400)
(3,966,271)
(2,205,652)
(14,901,671)
(4,526,090)
218,365
54,656
(4,471,434)
(14,683,306)
—
—
(4,471,434)
(14,683,306)
81,241,018 51,159,754 51,159,754
7,065,410
58,225,164
68,958
1,263,533
1,332,491
666,843
81,907,861
27,321,600
1,446,009
28,767,609
68,958
28,283,097
352,334
634,745
—
—
—
(1,829)
28,323,869
352,334
636,477
—
136,014
—
(1,829)
421,470
2,035,970
205,340
6,692,210
—
—
—
421,470
2,035,970
209,172
6,692,210
486,515
3,273,887
4,575
Year
ended
31 December
2008
US$
Year
ended
31 December
2007
US$
636,477
—
136,014
209,172
6,692,218
486,515
1,829 —
Notes
15
8, 14
25
15
107,050
4,000
111,050
28,305
28,305
93,746
4,000
97,746
23,700
23,700
Total
US$
—
22,683
435,216
66,651
33,033
91,758
311,978
961,319
Operating loss is stated after charging:
Depreciation on property, plant and equipment – owned
Impairment of intangible assets
Share‑based payment charge
Loss on disposal of fixed assets
The analysis of auditors’ remuneration is as follows:
Fees payable to the Company’s auditors for the audit of the Group’s annual accounts
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Tax services
Total non‑audit services
The audit fees for the parent company were $22,210 (2007: $19,856).
6. Remuneration of Directors
Year ended 31 December 2008
Ross Bhappu(a)
Tim Eggar(b)
Gordon Lewis(c)
Richard Round
John Sununu
Khosrow Zamani
Reza Vaziri
Total
(a) Fees of $25,692 in relation to the services of Ross Bhappu as a Non‑executive Director for the period ended 31 December 2008 are payable to
Consultancy
US$
—
—
—
—
—
—
286,286
286,286
Salary
US$
—
—
251,456
48,716
—
—
—
300,172
Bonus
US$
—
—
110,110
—
—
—
—
110,110
Fees
US$
—
22,683
—
16,047
33,033
91,758
25,692
189,213
Pension
US$
—
—
20,646
1,888
—
—
—
22,534
Benefits
US$
—
—
53,004
—
—
—
—
53,004
RCF Management LLC, a Company related to but not controlled by Ross Bhappu.
(b) The fees payable to Tim Eggar have terminated from 23 July 2008, the date of his resignation.
(c) Pension fees payable to Gordon Lewis were accrued but not paid in to a scheme. Mr Lewis resigned from his position on 30 September 2008.
Directors’ fees, pensions and bonuses amounting to $443,382 included above were paid in shares.
24
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 15
22/06/2009 16:18:18
6. Remuneration of Directors continued
Year ended 31 December 2007
Ross Bhappu(a)
Tim Eggar
Gordon Lewis(b)
Graham Mascall(c)
Richard Round(b)
John Sununu
Khosrow Zamani
Reza Vaziri
Total
(a) Fees of $28,025 in relation to the services of Ross Bhappu as a Non‑executive Director for the period ended 31 December 2007 are payable to
Consultancy
US$
—
—
—
—
—
—
—
308,042
308,042
Salary
US$
—
—
389,072
—
113,572
—
—
—
502,644
Bonus
US$
—
—
97,915
—
40,036
—
—
—
137,951
Fees
US$
—
44,040
—
60,192
—
36,072
49,358
28,025
217,687
Benefits
US$
—
—
40,097
—
4,525
—
—
—
44,622
Pension
US$
—
—
30,000
—
19,733
—
—
—
49,733
Total
US$
—
44,040
557,084
60,192
177,866
36,072
49,358
336,067
1,260,679
RCF Management LLC, a Company related to but not controlled by Ross Bhappu.
(b) There were two Directors in a defined contribution scheme during the period (2006: three).
(c) The fees payable to Graham Mascall have now terminated.
Directors’ fees amounting to $191,503 included above were paid in shares.
7. Staff numbers and costs
The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:
Management and administration
Processing and exploration
Mine operations
Total
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Share‑based payments
Social security costs
Pension costs
Less: salary costs capitalised as exploration, evaluation development and fixed asset expenditure
Total employee costs
Year
ended
31 December
2008
number
35
37
171 —
243
Year
ended
31 December
2007
number
31
82
113
Year
ended
31 December
2008
US$
3,067,930
136,014
547,412
48,575
3,799,931
(1,840,445)
1,959,486
Year
ended
31 December
2007
US$
2,890,828
486,515
243,695
49,733
3,670,771
(799,318)
2,871,453
8. Other expenses
There were no impairment charges taken against capitalised intangible expenditure during the current year. However an analysis
of the expenses taken in the prior year is provided below:
Write down of capitalised exploration and evaluation expenditure
Write down of mining rights
Year
ended
31 December
2008
US$
—
—
—
Year
ended
31 December
2007
US$
1,692,218
5,000,000
6,692,218
9. Assets classified as held for sale
In its 2007 interim results, the Group announced a write down of the CIL plant of $3,273,887 as discussions with interested
parties showed that the full carrying value of the plant ($10,273,887) was unlikely to be recovered through a sale.
On 15 October 2007 the Group entered into an agreement with Celtic Resources Holdings PLC, a gold producer, to dispose
of its CIL plant for a gross consideration of $7,500,000 (less expenses) previously being classified under assets held for sale.
The CIL plant constituted a processing plant, including crushing equipment, three grinding mills and carbon in leach gold
treatment equipment.
25
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 16
22/06/2009 16:18:19
Notes to the consolidated financial statements continued
For the year ended 31 December 2008
10. Finance income
Interest receivable from short‑term bank deposits
11. Finance costs
Bank interest
Interest capitalised during period
Interest expense
Year
ended
31 December
2008
US$
54,656
Year
ended
31 December
2007
US$
218,365
Year
ended
31 December
2007
US$
Year
ended
31 December
2008
US$
825,910 —
(825,910) —
— —
Interest costs of $825,910 were incurred on two credit facilities with the International Bank of Azerbaijan of up to $5 million and
$20 million respectively. The interest levied on both of the credit facilities is 15% per annum. The credit facilities were provided
for the purpose of constructing and developing the Gedabek gold mine. The Group has capitalised all of the interest paid during
the year as the loan facility was used solely for the financing of capital expenditure (refer note 15).
12. Taxation
UK corporation tax
– current year
– prior year
Foreign tax
– current year
– prior year
Total current income tax
Deferred tax
Total tax
Year
ended
31 December
2008
US$
Year
ended
31 December
2007
US$
— —
— —
— —
— —
— —
— —
— —
Corporation tax is calculated at 28.5% (which represents a weighted average for the year) (2007: 30%) of the estimated
assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
The Group tax charge for the year can be reconciled to the loss per the income statement as follows:
Loss before tax
Tax at the UK corporation tax rate of 28.5% (2007: 30%)
Expenses not deductible for tax purposes
Unrecognised tax losses
Other
Total tax
Year
ended
31 December
2008
US$
Year
ended
31 December
2007
US$
(4,471,434) (14,683,306)
4,404,991
1,274,359
(2,804,154)
(126,103)
(1,685,700)
(1,148,256)
—
84,863
— —
Deferred taxation
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity,
in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
At the balance sheet date, the Group has unused tax losses of $18,220,551 (2007: $4,369,449) available for offset against future
profits. No deferred tax asset has been recognised in respect of such losses due to the unpredictability of future profit streams.
Unused tax losses may be carried forward indefinitely.
Factors that may affect future current and total tax charges
The unrecognised deferred tax asset may affect the future current and total tax charges if the recoverability of the deferred tax
assets is considered likely in future periods.
26
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 17
22/06/2009 16:18:19
13. Loss per share
The statutory loss per share of 4.41 cents (2007: 14.80 cents) has been based on a weighted average number of shares in issue
of 101,280,008 (2007: 99,224,823) and a loss of $4,471,434 (2007: loss of $14,683,306).
Basic and dilutive EPS are the same because the only outstanding share options are anti‑dilutive as the Group has made a loss.
14. Intangible assets
Evaluation and exploration expenditure
Piyazbashi
US$
Maarif
US$
Misdag/
Agyurt
US$
Shalala
US$
Diakchay
US$
Gedabek
US$
Gosha
US$
Total
US$
—
2,111,286
—
(1,111,286)
1,000,000
—
Cost
As at 1 January
2007
Additions
Provision for
impairment
As at 31 December
2007
Additions
Provision for
impairment
As at 31 December
2008
Mining rights
Cost
As at 1 January 2007
Provision for impairment
As at 31 December 2007
Provision for impairment
As at 31 December 2008
Total intangible assets
As at 31 December 2007
As at 31 December 2008
1,000,000
—
—
—
580,932
—
58,663
—
39,264
—
4,310,114
1,940,527
358,427
95,443
7,458,686
2,035,970
(580,932)
—
—
—
—
(1,692,218)
—
160,328
—
25,039
58,663
11,915
39,264
—
6,250,641
—
453,870
155,052
7,802,438
352,334
—
—
—
—
—
—
—
160,328
25,039
70,578
39,264
6,250,641
608,922
8,154,772
46,925,262
(5,000,000)
41,925,262
—
41,925,262
49,727, 700
50,080,034
Intangible assets are deemed to have a useful economic life equivalent to that of the life of the mine.
On the 20 April 2009 the Group was granted two year extensions for the exploration licences at both Gosha and Ordubad
to enable the continued exploration at these two Contract Areas until 13 April 2011.
15. Property, plant and equipment
Temporary
buildings
US$
Plant and
equipment
US$
Motor
vehicles
US$
Office
equipment
US$
Leasehold
improvements
US$
Assets
under
construction
US$
Total
US$
Cost
As at 1 January 2007
Additions
As at 31 December 2007
Development – Gedabek
Capitalisation of interest
Additions
Disposals
As at 31 December 2008
Accumulated depreciation
and impairment
As at 1 January 2007
Charge for year
As at 31 December 2007
Charge for year
Depreciation on disposals
As at 31 December 2008
Carrying amount
As at 31 December 2007
As at 31 December 2008
84,286
215,521
299,807
—
—
116,452
19,028
135,480
—
—
2,723 10,477,866
—
10,613,346
—
302,530
127,852
290
128,142
—
—
260,201
—
388,343
361,502
44,961
406,463
—
—
613,072
(4,850)
1,014,685
364,628
73,080
437,708
—
—
161,649
68,590
230,239
3,841,318
825,910
1,216,369
421,470
1,637,839
3,841,318
825,910
649 12,302,130 23,656,641
(4,850)
—
29,956,858
17,199,597
—
438,357
(8,429)
(25,449)
(33,878)
(80,887)
—
(114,765)
(32,580)
(23,345)
(55,925)
(251,659)
—
(307,584)
(49,254)
(13,064)
(62,318)
(53,948)
—
(116,266)
(84,202)
(65,371)
(149,573)
(147,740)
3,021
(294,292)
(12,154)
(81,943)
(94,097)
(102,243)
—
(196,340)
—
—
—
—
—
—
(186,619)
(209,172)
(395,791)
(636,477)
3,021
(1,029,247)
265,929
187,765
79,555
10,305,762
65,824
272,077
256,890
720,393
343,611
242,017
230,239
17,199,597
1,242,048
28,927,611
The capital commitments by the Group have been disclosed in note 26.
27
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 18
22/06/2009 16:18:19
Notes to the consolidated financial statements continued
For the year ended 31 December 2008
16. Subsidiary undertakings
A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership
interest is given in note 5 in the Company’s financial statements.
17. Trade and other receivables
Prepayments
Advances
VAT refund due
Other receivables
The carrying amount of trade and other receivables approximates to their fair value.
18. Cash and cash equivalents and short term deposits
Cash and cash equivalents
As at
31 December
2008
US$
480,376
1,051,173 —
629,945
—
2,161,494
As at
31 December
2007
US$
332,203
1,554
110,757
444,514
As at
31 December
2008
US$
738,722
As at
31 December
2007
US$
6,810,902
Cash and cash equivalents comprise cash held by the Group and short term bank deposits with an original maturity of three months
or less. The carrying amount of these assets approximates to their fair value.
19. Trade and other payables
Trade creditors
Letters of credit due in less than one year
Other payables and accruals
As at
31 December
2008
US$
2,514,042
1,939,332 —
6,917,345
11,370,719
As at
31 December
2007
US$
76,263
1,256,228
1,332,491
Trade creditors and other payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
Trade creditors are non‑interest bearing and the creditor days were 35 (2007: 30). The Directors consider that the carrying amount
of trade and other payables approximates to their fair value.
Letters of credit totalling $3,251,869 were obtained from several European banks and guaranteed by the International Bank
of Azerbaijan during the year to finance fixed asset additions. Interest is payable at 5% fixed to the International Bank of Azerbaijan
on the notional amounts as well as the European banks charging floating rates of USD or EURO LIBOR plus 2% to 2.5%.
20. Borrowings
Loans repayable in more than one year
Letters of credit due in more than one year
As at
31 December
2008
US$
As at
31 December
2007
US$
16,084,353 —
1,312,537 —
17,396,890 —
During the year the Group obtained a credit facility with the International Bank of Azerbaijan of $5 million repayable after
three years, expiring on 14 January 2011, with an interest rate of 15%. Repayments in equal monthly instalments are due
from February 2010.
The International Bank of Azerbaijan has also agreed a credit facility of $20 million at an all inclusive interest rate of 15%.
The facility agreement is four years from 15 February 2008 with a two year grace period to repay the monies loaned. In 2010
$8 million is due to be repaid in equal quarterly instalments, and $5 million and $7 million are repayable in March and June 2011
respectively. There is no penalty for early repayment.
As at 31 December 2008 the Group had undrawn facilities of $5,663,778 (2007: $nil) after consideration of the letters of credit
which are guaranteed by the International Bank of Azerbaijan (see note 19).
On the 20 May 2009 the Group obtained further funding from the International Bank of Azerbaijan for the amount of $9.4 million
at an interest rate of 15%. Repayment is scheduled in nine quarterly instalments (first eight tranches of US$1,044,000 and a ninth
tranche of US$1,048,000) with the first instalment due in March 2011 and then every three months to March 2013.
On 12 June 2009 written confirmation was received from the International Bank of Azerbaijan that it was willing to lend the Group
an additional $1.5 million subject to official approval by the Board of the Group.
Letters of credit totalling $1,312,537 are due after more than year (see note 19).
28
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 19
22/06/2009 16:18:19
21. Financial instruments
Financial risk management objectives and policies
The Group’s principal financial instruments comprise cash and cash equivalents, loans and letters of credit. The main purpose
of these financial instruments is to finance the Group operations. The Group has other financial instruments, such as trade and
other receivables and trade and other payables, which arise directly from its operations. Surplus cash within the Group is put
on deposit, the objective being to maximise returns on such funds whilst ensuring that the short term cash flow requirements
of the Group are met.
The Group has not used derivative financial instruments during 2008 or the prior year. The Board will review the need for the use
of derivative financial instruments in the future.
Capital risk management
The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 20, cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed
in note 23. The Group has sufficient capital to fund on‑going production and exploration activities, with capital requirements reviewed
by the Board on a regular basis. Capital has been sourced through share issues on the AIM, part of the London Stock Exchange
and loans from the International Bank of Azerbaijan. In managing its capital, the Group’s primary objective once production has
commenced is to ensure its continued ability to provide a consistent return for its equity shareholders through capital growth.
In order to achieve this objective the Group seeks to maintain a gearing ratio that balances risk and returns at an acceptable level
and also to maintain a sufficient funding base to enable the Group to meet its working capital and strategic investment needs.
The Group is not subject to externally imposed capital requirements.
Interest rate risk management
The Group is exposed to interest rate risk as funds have been borrowed by the Group at both fixed and floating interest rates.
The Group also has cash and cash equivalents which earn interest. The risk is managed by the Group by maintaining an appropriate
mix between fixed and floating rate borrowings, with approval from the Board required for all new borrowing facilities.
The Group has not used any interest rate swaps or other instruments to manage its interest rate profile during 2008.
Interest rate risk profile of financial assets
The following table sets out the carrying amount, by maturity of the Group’s financial instruments that are exposed to interest
rate risk:
Year ended 31 December 2008
Floating rate
Cash and cash equivalents
Year ended 31 December 2007
Floating rate
Cash and cash equivalents
Within
1 year
738,722
Within
1 year
6,810,902
More
than
1 year
—
More
than
1 year
—
Total
738,722
Total
6,810,902
Interest rate risk profile of financial liabilities
The following table sets out the carrying amount, by maturity of the Group’s financial liabilities. All loans are at a fixed rate
of interest:
Year ended 31 December 2008
Fixed rate
Borrowings
Letters of credit
Floating rate
Letters of credit
Within
1 year
—
76,998
More
than
1 year
16,084,353
—
Total
16,084,353
76,998
1,862,334
1,312,537
3,174,871
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for financial instruments at the balance
sheet date. For floating rate cash deposits, the analysis is prepared assuming the amount of deposits outstanding at the balance sheet
date was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to
key management personnel and represents management’s assessment of the reasonably possible change in interest rates.
If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s loss for the year
ended 31 December 2008 would decrease/increase by $12,180 (2007: decrease/increase by $20,825). This is mainly attributable
to the Group’s exposure to interest rates on its floating rate letters of credit.
All borrowings have been made at fixed interest rates other than the letters of credit which carry interest based on USD and EURO
LIBOR. All interest payable has been capitalised (see note 11) and as such the effect of the interest expense of $15,874 (2007: $nil)
included in the above sensitivity will have a direct effect on the carrying value of fixed assets within the balance sheet rather than
expense through the income statement.
29
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 20
22/06/2009 16:18:19
Notes to the consolidated financial statements continued
For the year ended 31 December 2008
21. Financial instruments continued
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk
management framework for the management of the Group’s short, medium and long‑term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities
by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial liabilities. Included in
note 20 is a description of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
There are no significant concentrations of credit risk within the Group as currently the Group has yet to commence commercial
production. The maximum credit risk exposure relating to financial assets is represented by their carrying value as at the balance
sheet date.
The Group has adopted a policy of only dealing with creditworthy banks. Trade receivables consist of a large number of advances
spread across diverse industries and geographical areas. Once commercial production commences the Board will regularly review
the creditworthiness of customers and assess the need for mitigating actions such as insurance or hedging if deemed necessary.
Foreign currency risk management
The presentational currency of the Group is US Dollars. The Group is exposed to currency risk due to movements in foreign
currencies relative to the US Dollar affecting foreign currency transactions and balances.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date
are as follows:
UK Sterling
Azerbaijan Manats
Other
Liabilities
2008
US$
108,350
1,587,612
120,842
2007
US$
223,308
17,108
3,867
Assets
2008
US$
52,543
1,000,944
37,857 —
2007
US$
162,009
67,451
Foreign currency sensitivity analysis
The Group is mainly exposed to the currency of United Kingdom (UK Sterling) and the currency of Azerbaijan (Azerbaijan Manats).
The following table details the Group’s sensitivity to a 20% (2007: 10%) increase and decrease in the US Dollar against the relevant
foreign currencies. 20% (2007: 10%) is the sensitivity rate used when reporting foreign currency risk internally to key management
personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity
analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end
for a 20% (2007: 10%) change in foreign currency rates. A positive number below indicates an increase in profit and other equity
where the US Dollar strengthens 20% (2007: 10%) against the relevant currency. For a 20% (2007: 10%) weakening of the US Dollar
against the relevant currency, there would be an equal and opposite impact on the profit and other equity, and the balances below
would be reversed.
Profit/(loss)
UK Sterling impact
Azerbaijan Manats impact
2008
US$
11,161
2007
US$
6,132
2008
US$
117,334
2007
US$
(5,034)
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.
Interest rates on UK Sterling and US Dollar deposits are relatively low and the impact of a fluctuation in the interest rate on
interest earned on the Group’s short term deposits is likely to be minimal.
Once commercial production commences and the Group begins to generate revenues it will be exposed to fluctuations in the
market price of gold, silver and copper. The Board monitor both the spot and forward price of these regularly and once production
commences will review the requirement to enter into derivative financial instruments in order to manage its exposure to such
commodity price risk.
22. Share capital
Authorised:
600,000,000 ordinary shares of 1p each
Issued and fully paid:
102,721,921 ordinary shares of 1p each (2007: 99,621,880 ordinary shares of 1p each)
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
As at
31 December
2008
As at
31 December
2007
£ £
6,000,000
6,000,000
US$
US$
1,851,516
1,792,015
30
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 21
22/06/2009 16:18:19
22. Share capital continued
Share options
The Group has granted options to subscribe for the Company’s shares (note 25).
23. Reconciliation of changes in equity
At 1 January 2007
Shares issued
Share‑based payment
Loss for the year
At 31 December 2007
Shares issued
Share‑based payment charge for period
Forfeited share options reserve transfer
Loss for the year
At 31 December 2008
Share
capital
US$
9,410
—
—
Share
Premium
US$
1,782,605 30,279,301
108,213
—
—
1,792,015 30,387,514
523,499
—
—
—
30,911,013
59,501
—
—
—
1,851,516
Share‑based
payment
reserve
US$
—
486,515
—
Merger
reserve
US$
1,366,237 46,206,390
—
—
—
1,852,752 46,206,390
—
—
—
—
46,206,390
—
136,014
(666,926)
—
1,321,840
—
—
Accumulated
loss
US$
Total
equity
US$
(8,662,692) 70,971,841
117,623
486,515
(14,683,306) (14,683,306)
(23,345,998) 56,892,673
—
583,000
—
136,014
666,926
—
(4,471,434)
(4,471,434)
(27,150,506) 53,140,253
Share capital
This represents the amount subscribed for shares at nominal value including those shares issued in respect of services received.
Share premium
The excess of the amount subscribed for share capital over the nominal value of these shares, including those issued in respect
of services received net of share issue expenses constitutes the share premium.
Share‑based payment reserve
This reserve is used to record the value of equity benefits provided to Directors and senior employees of the Group from time
to time as part of the consideration paid. See note 25 for further details.
Merger reserve
The merger reserve was created in accordance with the merger relief provisions under Section 131 of the Companies Act 1985
(as amended) relating to accounting for Group reconstructions involving the issue of shares at a premium. In preparing Group
consolidated financial statements, the amount by which the base value of the consideration for the shares allotted exceeded
the aggregate nominal value of those shares was recorded within a merger reserve on consolidation, rather than in the share
premium account.
Accumulated loss
Accumulated loss represents the cumulative loss of the Group attributable to the equity shareholders.
24. Notes to the cash flow statement
Operating loss
Adjustments for:
Depreciation of property, plant and equipment
Gain on disposal of property, plant and equipment
Share‑based payment expense
Write down of fixed asset held for sale
Shares issued in exchange for salaries and fees
Impairment of intangible asset
Operating cash flows before movements in working capital
Increase in trade and other receivables
Increase in trade and other payables
Cash used in operations
Income taxes paid
Net cash used in operating activities
Year
ended
31 December
2008
US$
Year
ended
31 December
2007
US$
(4,526,090) (14,901,671)
636,477
—
136,014
—
583,000
—
(3,170,598)
(1,716,980)
2,727,752
(2,159,826)
209,172
(4,585)
486,515
3,273,887
117,623
6,692,218
(4,126,841)
(273,907)
92,038
(4,308,710)
— —
(2,159,826)
(4,308,710)
Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank
and short term deposits with a maturity of three months or less.
31
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 22
22/06/2009 16:18:19
Notes to the consolidated financial statements continued
For the year ended 31 December 2008
25. Share‑based payments
Equity‑settled share options
The Company operates a share option scheme for Directors and senior employees of the Company as well as its financial adviser
and nominated adviser and broker from the listing in 2005. Options are granted at a price agreed at the time of the grant.
The vesting periods are up to three years. Options are exercisable at a price equal to the closing quoted market price of the
Company’s shares on the date of the Board approval to grant options. Options are forfeited if the employee leaves the Group
and the options are not exercised within three months from leaving date. Details of the share options outstanding during the
year are as follows.
Outstanding at beginning of year
Granted during the year
Lapsed during the year
Forfeited during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
2008
2007
Number of
Share
Options
8,174,953
2,050,000
(1,983,436)
(3,631,365)
—
4,610,152
1,967,045
Weighted
average
exercise price
pence
48
5
77
35
—
23
42
Number of
share
options
7,888,961
2,600,000
—
(2,314,008)
—
8,174,953
3,882,423
Weighted
average
exercise price
pence
60
12
—
48
—
48
72
The options outstanding at 31 December 2008 had a weighted average exercise price of 0.23 pence and a weighted average
remaining contractual life of nine years. In the year ended 31 December 2008, options were granted on 31 July and 2 December.
The aggregate of the estimated fair values of the options granted on those dates is £38,185 ($76,840). In 2007 options
were granted on 1 June and 27 July. The aggregate of the estimated fair values of the options granted on those dates
is £612,700 ($1,115,113).
The inputs into the Black‑Scholes model are as follows:
Granted on 1 August 2008
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
0.09
0.09
49%
2 years
4.75%
Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous two years.
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non‑transferability,
exercise restrictions, and behavioural considerations.
The weighted average fair value of options granted on 1 August 2008 is £0.03.
Granted on 4 December 2008
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
0.05
0.05
63%
2 years
4.25%
Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous two years.
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non‑transferability,
exercise restrictions, and behavioural considerations.
The weighted average fair value of options granted on 4 December 2008 is £0.02.
Granted on 21 July 2007
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
0.12
0.12
64%
2 years
4.50%
Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous two years.
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non‑transferability,
exercise restrictions, and behavioural considerations.
The weighted average fair value of options granted on 21 July 2007 is £0.05.
Granted on 1 June 2007
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
0.16
0.16
64%
2 years
4.50%
32
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 23
22/06/2009 16:18:20
25. Share‑based payments continued
Equity‑settled share options continued
Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous two years.
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non‑transferability,
exercise restrictions, and behavioural considerations.
The weighted average fair value of options granted on 1 June 2007 is £0.06.
Total share‑based payment expense recognised by the Group
The Group recognised total expenses of $136,014 and $486,515 related to equity‑settled share‑based payment transactions
in 2008 and 2007 respectively.
The cumulative amount recognised in equity relating to share‑based payments at the balance sheet date was $1,321,840
(2007: $1,852,752).
26. Contingencies and commitments
Obligations under the PSA (“Production Sharing Arrangement”) – the PSA contains various provisions relating to the obligations
of the R.V. Investment Group Services LLC (“RVIG”) including carrying out certain tasks by certain dates.
The Directors believe that RVIG is in compliance with the requirements of the PSA.
Environmental liability – RVIG is required to comply with the clauses contained in the PSA relating to environmental damage.
The Directors believe RVIG is substantially in compliance with the environmental clauses contained in the PSA.
There were no operating lease commitments at 31 December 2008.
There were no capital commitments at 31 December 2008.
27. Events after the balance sheet date
The following subsequent events relate to the period from 31 December 2008 to the date of approval of the financial statements
on 22 June 2009.
On the 20 May 2009 the Group obtained further funding from the International Bank of Azerbaijan for the amount of $9.4 million
at an interest rate of 15% repayable. Repayment is scheduled in nine quarterly instalments (first eight tranches of $1,044,000
and a ninth tranche of $1,048,000) with the first instalment due in March 2011 and then every three months to March 2013.
On the 12 June 2009 written confirmation was received from the International Bank of Azerbaijan that it was willing to lend
the Group an additional $1.5 million subject to official approval by the Board of the Group.
On the 20 April 2009 the Group was granted two year extensions for the exploration licences at both Gosha and Ordubad
to enable the continued exploration at these two Contract Areas until 13 April 2011.
28. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are
not disclosed in this note. Transactions between the Group and other related parties are disclosed below.
Trading transactions
During the years 2008 and 2007, there were no trading transactions between group companies and related parties who are not
members of the Group.
Other related party transactions
a) Mr Reza Vaziri retains an indirect interest in the lease of the office in Baku, Azerbaijan. The cost of the lease in the year was
$89,438 (2007: $93,904).
b) Shares issued to Directors are disclosed in the Directors’ Report.
c) During the year $286,286 was paid to Mr Reza Vaziri for consultancy services.
Remuneration of key management personnel
The remuneration of the Directors, who are the only key management personnel of the Group, is set out below in aggregate
for each of the categories specified in IAS 24 Related Party Disclosures:
Short term employee benefits
Post‑employment benefits
Share‑based payment
Year
ended
31 December
2008
US$
920,943
20,646
122,850
1,064,439
Year
ended
31 December
2007
US$
1,210,946
49,733
482,998
1,743,677
33
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 24
22/06/2009 16:18:20
Independent auditors’ report
To the members of Anglo Asian Mining PLC
We have audited the parent company financial statements of Anglo Asian Mining PLC for the year ended 31 December 2008
which comprise the balance sheet and the related notes 1 to 16. These parent company financial statements have been prepared
under the accounting policies set out therein.
We have reported separately on the Group financial statements of Anglo Asian Mining PLC for the year ended 31 December 2008.
That report is modified by the inclusion of an emphasis of matter.
This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state
to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Respective responsibilities of Directors and auditors
The Directors’ responsibilities for preparing the annual report and the parent company financial statements in accordance with
applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out
in the statement of Directors’ responsibilities.
Our responsibility is to audit the parent company financial statements in accordance with relevant legal and regulatory
requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the parent company financial statements give a true and fair view and whether the
parent company financial statements have been properly prepared in accordance with the Companies Act 1985. We also report
to you whether in our opinion the Directors’ Report is consistent with the parent company financial statements.
In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all
the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration
and other transactions is not disclosed.
We read the other information contained in the annual report as described in the contents section and consider whether it is
consistent with the audited parent company financial statements. We consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with the parent company financial statements. Our responsibilities do
not extend to any further information outside the annual report.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the parent company
financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the
preparation of the parent company financial statements, and of whether the accounting policies are appropriate to the
Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance that the parent company financial statements are free from
material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the parent company financial statements.
Opinion
In our opinion:
• the parent company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted
Accounting Practice, of the state of the Company’s affairs as at 31 December 2008;
• the parent company financial statements have been properly prepared in accordance with the Companies Act 1985; and
• the information given in the Directors’ Report is consistent with the parent company financial statements.
Emphasis of matter – going concern and amounts owed by subsidiary undertakings
Without qualifying our opinion we draw attention to the disclosures made in note 1 of the financial statements concerning the
Company’s ability to continue as a going concern and the recoverability of amounts owed by subsidiary undertakings, which are
both dependent on the performance of the Gedabek mine and consequently on the ability of the Group to continue as a going
concern. These conditions along with other matters set out in note 1 indicate the existence of a material uncertainty which may
cast significant doubt about the Company’s ability to continue as a going concern and the recoverability of amounts owed by
subsidiary undertakings. The financial statements do not include the adjustments that would result if the Company was unable
to continue as a going concern as it is not practicable to determine or quantify them.
Deloitte LLP
Chartered Accountants and Registered Auditors
London, United Kingdom
22 June 2009
34
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 25
22/06/2009 16:18:20
Company balance sheet
As at 31 December 2008
Fixed assets
Tangible assets
Investments
Current assets
Debtors – amounts falling due within one year
Cash at bank and in hand
Notes
2008
US$
2007
US$
3
4
6
7
200,587
164,801
1,325,007
1,325,007
1,525,594
1,489,808
24,383,365 18,615,802
379,252
6,750,721
24,762,617 25,366,523
Creditors – amounts falling due within one year
8
(1,440,194)
(1,248,559)
Net current assets
Net assets
Capital and reserves
Called up share capital
Share premium account
Accumulated loss
Capital employed
23,322,424 24,117,964
24,848,017 25,607,772
10
11
11
1,851,516
1,792,015
30,911,013 30,387,514
(7,914,512)
(6,571,757)
24,848,017 25,607,772
These financial statements were approved by the Board of Directors on 22 June 2009 and were signed on its behalf by:
Reza Vaziri
Chief Executive
35
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 26
22/06/2009 16:18:20
Notes to the Company financial statements
For the year ended 31 December 2008
1. Significant accounting policies and going concern
1a. Going concern
As detailed in note 1 to the Group accounts on page 19, there is a material uncertainty which may cast significant doubt on the
Group’s, and therefore the Company’s, ability to continue as a going concern. As a consequence the Company may be unable
to realise its assets and discharge its liabilities in the normal course of business. In addition, these uncertainties could result in the
subsidiaries being unable to discharge their liabilities to the Company which at 31 December 2008 amounted to $24,296,487.
For the reasons set out in note 1 to the Group accounts, the Directors have formed a judgement which assumes at the time
of approving these financial statements that the amounts owed by the subsidiary undertakings will be recoverable and that
it is appropriate to continue to adopt the going concern basis.
1b. Significant accounting policies
Basis of preparation
The parent company financial statements of Anglo Asian Mining PLC (the “Company”) are presented as required by the
Companies Act 1985 and were approved for issue on 22 June 2009.
The financial statements are prepared under the historical cost convention and are prepared in accordance with United Kingdom
Generally Accepted Accounting Practice.
No profit and loss account is presented by the Company as permitted by Section 230 of the Companies Act 1985 and the
Company has taken the exemption under FRS 1 not to present a cash flow statement.
The Company has taken advantage of the exemption in paragraph 2D of FRS 29 “Financial Instruments: Disclosures” and has
not disclosed information required by that standard, as the Group’s consolidated financial statements, in which the Company
is included, provide equivalent disclosures for the Group under IFRS 7 “Financial Instruments: Disclosures”.
The Company has taken advantage of the exemption in paragraph 36 of FRS 8 “Related Party Disclosures” and has not disclosed
information required by that standard, as the Group’s consolidated financial statements in which the Company is included,
provide equivalent disclosures for the Group.
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses. Such cost included
costs directly attributable to making the asset capable of operating as intended. Borrowing costs attributable to assets under
construction are recognised as an expense when incurred.
Depreciation is provided on cost in annual instalments over the estimated useful lives of assets which are reviewed annually.
The rates of depreciation are as follows:
Office and computer equipment
25% decreasing balance
The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate that
the carrying amount may not be recoverable.
Investments
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment. Impairment is tested annually
by comparing the net assets of the underlying subsidiary to the carrying value of the investment, with any short fall provided
for during the period.
Leased assets
Rentals where substantially all of the benefits and risks of ownership remain with the lessor are charged to the profit and loss
account on a straight line basis over the period of the lease.
Debtors
Debtors are recognised and carried at the lower of their original invoiced value and recoverable amount. Provision is made when
there is objective evidence that the Company will not be able to recover the balances in full.
36
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 27
22/06/2009 16:18:20
1. Significant accounting policies and going concern continued
1b. Significant accounting policies continued
Deferred taxation
Deferred tax assets are not recognised in respect of timing differences relating to tax losses where there is insufficient evidence
that the asset will be recovered.
Share‑based payments
The Company has applied the requirements of FRS 20 “Share‑based Payment” from 1 January 2006. In accordance with the
transitional provisions, FRS 20 has been applied to all grants of equity instruments after 7 November 2002 that were unvested
as of 1 January 2006. Application of this standard has been applied retrospectively.
The Company issues equity‑settled share‑based payments to certain employees. Equity‑settled share‑based payments are
measured at fair value at the date of grant. The fair value determined at the date of the equity‑settled share‑based payments is
expensed on a straight line basis over the vesting period, based on the Company’s estimate of shares that will eventually vest.
Fair value is measured by use of the Black‑Scholes pricing model. The expected lives used in the model have been adjusted,
based on management’s best estimate, for the effects of non‑transferability, exercise restrictions and behavioural considerations.
2. Loss attributable to members of the parent company
The loss dealt with in the financial statements of the parent company is $1,478,769 (2007: $5,429,807).
3. Tangible fixed assets
Cost
As at 1 January 2008
Additions
Disposals
As at 31 December 2008
Accumulated depreciation
As at 1 January 2008
Charge for year
Accumulated depreciation on disposals
As at 31 December 2008
Net book value
As at 31 December 2007
As at 31 December 2008
4. Investments
Shares in subsidiary undertakings
Anglo Asian Operations Limited
Office
equipment
US$
Assets under
construction
US$
Total
US$
20,070
40,772
(6,275)
54,567
(9,884)
(1,732)
3,021
(8,595)
154,615
—
—
154,615
174,685
40,772
(6,275)
209,182
—
—
—
—
(9,884)
(1,732)
3,021
(8,595)
10,186
45,972
154,615
154,615
164,801
200,587
Year
ended
31 December
2008
US$
Year
ended
31 December
2007
US$
1,325,007
1,325,007
37
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 28
22/06/2009 16:18:20
Notes to the Company financial statements continued
For the year ended 31 December 2008
5. List of subsidiaries
Anglo Asian Mining PLC is the parent and ultimate parent of the Group.
Details of the Company’s subsidiaries at 31 December 2008 are as follows:
Name
Anglo Asian Operations Limited
Holance Holdings Limited
Anglo Asian Cayman Limited
R.V. Investment Group Services LLC
Azerbaijan International Mining Company Limited
Country of
incorporation
Great Britain
British Virgin Islands
Cayman Islands
Delaware, USA
Cayman Islands
Primary
activity
Holding Company
Holding Company
Holding Company
Mineral development
Mineral development
6. Debtors
Amounts falling due within one year
Prepayments
HMRC
Other debtors
Amounts owed by subsidiary undertakings
Percentage
of holding
%
100
100
100
100
100
Year
ended
31 December
2008
US$
Year
ended
31 December
2007
US$
85,877
1,001
—
89,694
1,544
24,048
24,296,487 18,500,516
24,383,365 18,615,802
7. Cash
Cash and cash equivalents comprise cash held by the Group and short term bank deposits with an original maturity of three months
or less. The carrying amount of these assets approximates to their fair value.
There are no restrictions over the access to, and use of, the Company’s bank and cash balances, other than those that customarily
relate to periodic short term deposits.
8. Creditors
Amounts falling due within one year
Trade creditors
Other creditors
Accruals
Year
ended
31 December
2008
US$
Year
ended
31 December
2007
US$
99,514
—
1,340,680
1,440,194
61,422
22,738
1,164,399
1,248,559
38
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 29
22/06/2009 16:18:20
9. Deferred taxation
The elements of unrecognised deferred taxation are as follows:
Tax losses
Unrecognised deferred tax asset
Year
ended
31 December
2008
US$
Year
ended
31 December
2007
US$
1,204,961
1,204,961
896,407
896,407
A deferred tax asset has not been recognised in respect of timing differences relating to tax losses as there is insufficient evidence
that the asset will be recovered. None of the assets are recognised. The asset would be recovered if suitable taxable profits were
generated in future periods.
10. Share capital
Authorised
Ordinary shares of 1p each
Allotted and fully paid
At the beginning of the year
At the end of the year
2008
2007
Number
£
Number
£
600,000,000
6,000,000 600,000,000
6,000,000
Number
US$
Number
US$
99,621,880
102,721,921
1,792,015 99,171,800
1,851,516 99,621,880
1,782,605
1,792,015
11. Reconciliation of shareholders’ funds and movements on reserves
As at 1 January 2008
Loss for the year
Share issues
Share‑based payment
As at 31 December 2008
Share
capital
US$
Share
premium
account
US$
1,792,015 30,387,514
—
523,499
—
30,911,013
—
59,501
—
1,851,516
Accumulated
loss
US$
Shareholders’
funds
US$
(6,571,757) 25,607,772
(1,478,769)
(1,478,769)
583,000
—
136,014
136,014
(7,914,512) 24,848,017
12. Share‑based payments
Equity‑settled share option scheme
Details in relation to the Company’s equity‑settled share option scheme is given in note 25 to the consolidated financial statements.
13. Subsequent events
There were no subsequent events in the period from 31 December 2008 to the date of approval of these financial statements
on 22 June 2009.
39
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 30
22/06/2009 16:18:20
Notes to the Company financial statements continued
For the year ended 31 December 2008
14. Auditor’s remuneration
The Company paid $22,210 (2007: $19,856) to its auditors in respect of the audit of the financial statements of the Company.
Fees paid to Deloitte LLP and its associates for non‑audit services to the Company itself are not disclosed in the individual accounts
of Anglo Asian Mining PLC because Group financial statements are prepared which are required to disclose such fees on a
consolidated basis.
15. Related parties
Information in relation to related parties is given in note 28 to the consolidated financial statements.
16. Staff numbers and costs
The average numbers of persons employed by the Company (including Directors) during the year analysed by category was
as follows:
Management and administration
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Pension costs
Total employee costs
Year
ended
31 December
2008
number
Year
ended
31 December
2007
number
2 5
Year
ended
31 December
2008
US$
844,815
9,100
48,574
902,489
Year
ended
31 December
2007
US$
311,691
31,122
19,733
362,546
40
Anglo Asian Mining PLC
Annual report and accounts 2008
_0_AAM_ar08_back.indd 31
22/06/2009 16:18:20
Corporate information
AZERBAIJAN OFFICE (PRINCIPAL PLACE OF BUSINESS)
16 H.Aleskerov str.
Baku
Republic of Azerbaijan
SECRETARY AND REGISTERED OFFICE
Mr Andrew Herbert
7 Devonshire Square
Cutlers Gardens
London EC2M 4YH
United Kingdom
COMPANY NUMBER
05227012
Registered in England and Wales
VAT REGISTRATION NUMBER
872 3197 09
BANKERS – UNITED KINGDOM
Anglo Irish Bank
10 Old Jewry
London EC2R 8DN
United Kingdom
BANKERS – AZERBAIJAN
International Bank of Azerbaijan
Street 67
Nizami
Baku
Azerbaijan
SOLICITORS – UNITED KINGDOM
Hammonds
7 Devonshire Square
Cutlers Gardens
London EC2M 4YH
United Kingdom
SOLICITORS – AZERBAIJAN
MGB Law Offices
340 Nizami Street
ISR Plaze, 3rd Floor
Baku
Azerbaijan
AZ1000
AUDITORS
Deloitte LLP
2 New Street Square
London EC4A 3BZ
United Kingdom
NOMINATED ADVISER AND BROKER
Numis Securities Limited
10 Paternoster Square
London EC4M 7LT
United Kingdom
FINANCIAL PR ADVISERS
St Brides Media and Finance Limited
Chaucer House
38 Bow Lane
London EC4M 9AY
United Kingdom
REGISTRAR
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
For further information please visit www.aamining.com or contact:
Reza Vaziri
Andrew Herbert
John Harrison
James Black
Hugo de Salis
Felicity Edwards
Anglo Asian Mining PLC
Anglo Asian Mining PLC
Numis Securities Limited,
as Nominated Adviser
Numis Securities Limited,
as Corporate Broker
St Brides Media & Finance Ltd
St Brides Media & Finance Ltd
Tel: +994 12 596 3350
Tel: +994 12 596 3350
Tel: +44 (0)20 7260 1000
Tel: +44 (0)20 7260 1000
Tel: +44 (0)20 7236 1177
Tel: +44 (0)20 7236 1177
_cover.indd 2
22/06/2009 16:19:37
Logo is 129 U on uncoated (above)
143 C on coated. (below)
l
A
n
g
o
A
s
i
a
n
M
n
n
g
i
i
P
L
C
A
n
n
u
a
l
r
e
p
o
r
t
a
n
d
a
c
c
o
u
n
t
s
2
0
0
9
Anglo Asian Mining PLC
16 H. Aleskerov Str. Baku
Logo is 129 U on uncoated (above)
Republic of Azerbaijan
143 C on coated. (below)
TEL +994 (12) 596 3350
FAX +994 (12) 596 3354
www.aamining.com
Production
and Exploration
_cover.indd 1
22/06/2009 16:19:37