Anglo Asian Mining PLC

The cash-generative 
gold producer

Anglo Asian Mining PLC
Annual report and accounts 2012

Anglo Asian Mining PLC is an AIM-listed, gold, copper 
and silver mining company with a portfolio of production 
and exploration assets in Azerbaijan.

The Company’s extensive portfolio covers 
1,962 sq km of prospective exploration 
assets held under a Production Sharing 
Agreement with the Government of 
Azerbaijan including the producing 
Gedabek mine, the country’s first gold 
mine in modern times.

In this report

Overview
01  Highlights
02  At a glance
04  Chairman’s statement
07  Chief Executive’s review
11  Our new agitation leaching plant
12  Financial review

Corporate governance
14  Board of Directors
15  Directors’ report
18  Corporate governance

Financial statements
19  Independent auditor’s report
20  Consolidated income statement
20  Consolidated statement of comprehensive income
21  Consolidated statement of financial position
22  Consolidated cash flow statement
23  Consolidated statement of changes in equity
24  Notes to the consolidated financial statements
47  Independent auditor’s report 
48  Company balance sheet
49  Notes to the Company financial statements
52  Corporate information

Anglo Asian Mining PLC 

Annual report and accounts 2012

Highlights
For the year ended 31 December 2012

Overview

Corporate governance

Financial statements

Overview

 E Profit before tax of US$28.6 million (2011: US$31.6 million) on revenue 

of US$73.5 million (2011: US$83.8 million)

 E Gross profit of US$36.1 million (2011: US$43.0 million) 

 E Operating cash flow before movement in working capital of US$40.3 million 

(2011: US$55.8 million)

 E Solid production performance at flagship Gedabek gold-copper-silver mine 

in Azerbaijan in FY 2012

Profit before tax (million)

US$28.6

Gross profit (million)

US$36.1

Operating cash flow before movement 
in working capital (million)

US$40.3

 > Total gold production of 50,215 ounces (2011: 57,068 ounces)

 > Gold sales of 42,557 ounces (2011: 49,304 ounces) completed at an average 

of US$1,666 per ounce (2011: US$1,573 per ounce)

 > Gold produced at an average cash operating cost of US$668 per ounce 

(2011: US$448 per ounce) 

 > Silver doré production totalled 20,133 ounces (2011: 39,086 ounces)

 > Total copper concentrate produced 502 tonnes of copper, 98,158 ounces 

of silver and 86 ounces of gold (2011: 611 tonnes of copper, 134,240 ounces 
of silver and 200 ounces of gold)

 > Commenced development of new agitation leaching plant to improve gold 

recoveries which at the time of writing is in status of full operational commissioning

 > New agitation plant has been delivered on schedule and is expected to be 

US$7 million under the US$52 million budget and US$15 million below the 
available funding facility

 > Post year end, Q1 2013 gold production totalled 8,585 ounces – on target 

to produce circa 60,000 ounces for FY 2013

 E Continuing defined exploration and development programme to increase life 

of mine at Gedabek

 > Upgraded JORC resource by 50% at Gedabek to over 1 million ounces in the 

Measured and Indicated categories in April 2012

 > Defined maiden JORC reserve estimate of 744,038 ounces of gold in June 2012

 > Focused on exploration upside potential at Gedabek: 28,872 metres of drilling 
completed – a JORC compliant ore reserve update report is planned to be 
completed in Q2 2013

 E Continuing to develop Gosha Contract Area in Azerbaijan into a small, high 

grade underground gold mine – first production anticipated H1 2014

 E Notice of Discovery for gold in 462 sq km Ordubad Contract Area – further 

exploration planned to advance project

 E Net debt of US$28.3 million at 31 December 2012 (2011: US$3.2 million) 

www.angloasianmining.com 

Annual report and accounts 2012

01

Discover more online

For the latest news and investor 
information, visit our website at 
www.angloasianmining.com

At a glance
Our operations

Our gold-copper-silver operations are located in Azerbaijan, 
which lies within the Tethyan Tectonic Belt, one of the world’s 
most significant gold and copper bearing trends that extends 
from Pakistan to the Balkans, passing through Iran, Azerbaijan, 
Georgia and Turkey.

Anglo Asian’s key operations span three Contract Areas in Azerbaijan covering 
1,062 sq km. The Company also holds three additional Contract Areas covering 
900 sq km in territories occupied by Armenia, which it hopes to develop when 
access is obtained.

Gedabek operations

The Company operates a gold, copper and 
silver mine in western Azerbaijan, which 
produced 50,215 ounces of gold in FY 2012. 

Anglo Asian is currently building a new 
agitation leaching plant at Gedabek, which 
will complement the existing heap leach 
processing operation to help further improve 
the gold recoveries and production rates of the 
mine. Gedabek also has a SART processing 
facility which produces a copper concentrate. 

Gosha operations

The 300 sq km Gosha Contract Area is 
situated 50 km north-west of Gedabek and 
contains at least nine mineralised zones.

Exploration work at Gosha is on-going aimed 
at defining new resources and developing a 
small underground mining operation by 2014.

Ordubad operations

The 462 sq km Ordubad Contract Area 
is in the Nakhchivan region and contains 
numerous targets.

Exploration activities are on-going at the 
Contract Area including a preliminary remote 
sensing study, adit cleaning and re-sampling 
of adits in two regions, Piyazbashi and Agyurt, 
and trenching and sampling in the Daste 
Bashi region.

02

Anglo Asian Mining PLC 

Annual report and accounts 2012

Overview

Corporate governance

Financial statements

Georgia

Russia

Azerbaijan

Armenia

Turkey

Contract area 
locations
Gosha
Gedabek
Ordubad

Occupied territories 
(grey area)
Soutely
Gyzilbulakh
Vejnali

  Azerbaijan is situated in south-western Asia, bordering the 

Caspian Sea between Iran and Russia, with a small European 
portion north of the Caucasus range. 

It borders Armenia, Georgia, Iran, Russia and Turkey and is 
split into two parts by Armenia; the smaller part is called the 
Autonomous Republic of Nakhchivan.

The country has an established democratic government, 
which is fully supportive of international investment initiatives. 
Infrastructure is reasonably extensive and as Azerbaijan is an oil 
producing country, diesel is cheap, which also results in low costs 
for explosives. Low cost labour is also available.

Nakhchivan

Caspian Sea

Iran

300 sq km
licence area

50,215 oz
of gold produced

 E Mining and exploration rights until March 2022

 E Gedabek gold/copper/silver open pit mine

 E US$52 million new agitation leaching plant in full scale 
commissioning stage - expected to be US$7 million 
under budget at US$45 million

502 tonnes
of copper produced

1,276,422 oz
of gold resource

98,158 oz
of silver produced

744,038 oz
of gold reserves 

300 sq km
licence area

 E In November 2011 we submitted a development and 

production programme which was approved in April 2012

 E Plans to start development of a small, high grade 

underground gold mine in H2 2013

 E Production projected to be 15–20,000 ounces of gold 

per annum for five years

3,000 metres
of drilling

300 metres
of audit and sample work

462 sq km
licence area

 E Early stage exploration underway

 E In April 2012 we submitted a Notice of Discovery

3,000 metres
re-sampling of adits

2,500 metres
of surface drilling

1,400 metres

of underground drilling

www.angloasianmining.com 

Annual report and accounts 2012

03

Chairman’s statement
Khosrow Zamani, Non-executive Chairman

“ In terms of financial performance, we have enjoyed 

another period of profitability, driven by our gold doré 
and copper concentrate production at Gedabek.”

Khosrow Zamani
Non-executive Chairman
24 May 2013

In summary

 E We have been highly active 

developing and implementing 
plans to ensure the future 
growth of Anglo Asian

 E We announced our intention to 
construct an agitation leaching 
plant at Gedabek, which is 
expected to both increase gold 
production and recovery and 
also reduce cash operating 
costs per ounce

 E We have signed a sales agreement 
with Glencore International in 
Q4 2012, which will continue to 
positively impact our bottom line 
in FY 2013 when copper sales 
are realised

 E At Gosha, exploration works 

at our Ordubad Contract Area 
resulted in the issuance of a 
notice of discovery for two gold 
deposits, Piyazbashi and Agyurt 

 E Work is currently under way 

to develop a second gold mine 
which is expected to produce 
circa 15–20,000 ounces of gold 
per annum

It gives me great pleasure to report on the 
progress Anglo Asian has made during this 
pivotal time in its development as a leading 
gold-copper-silver production company in 
Azerbaijan and indeed Caucasia. In FY 2012, 
we have continued to perform well as a highly 
profitable, low cost mining company, with a 
progressive portfolio of assets that includes 
our flagship Gedabek gold, copper and silver 
mine in western Azerbaijan (‘Gedabek’), 
which produced 50,215 ounces of gold in 
FY 2012, a second development gold project, 
Gosha only 50 km away from Gedabek and a 
third gold exploration/development project, 
Ordubad, located in the Nakhchivan region 
of Azerbaijan.

In terms of financial performance, we 
have enjoyed another period of profitability, 
driven by our gold, silver doré and copper 
concentrate production at Gedabek. 
To this end, I am pleased to report that 
the Company recorded a profit before tax 
of US$28.6 million (2011: US$31.6 million) 
on revenues of US$73.5 million (2011: 
US$83.8 million) and a gross profit of 
US$36.1 million (2011: US$43.0 million).

During the period we have been highly 
active developing and implementing plans 
to ensure the future growth of Anglo Asian. 
These plans have been centred on: increasing 
the production at Gedabek to return gold 
production levels to 60,000 ounces for 
FY 2013, whilst lowering the production 
cash costs, which for the FY 2012 stand at 
US$668 per ounce of gold, to US$450–500 
per ounce; increasing the life of mine of 
Gedabek through defined exploration and 
development programmes to increase 
the reserve and resource base, which 
currently stands at 744,038 ounces and 
1,276,422 ounces of gold respectively; and 
establishing a secondary mining project, 
Gosha, which we are currently developing 
to increase our production by the end of 

2014 to 80,000 to 90,000 ounces of gold. 
I believe the Anglo Asian team has delivered 
on numerous key objectives during 2012 
with respect to these initiatives and it has 
laid the foundations for a transformational 
year for the Company in 2013 and beyond.

Gedabek, which is located in western 
Azerbaijan on the Tethyan Tectonic Belt, 
one of the world’s significant copper and 
gold bearing belts, is currently an open 
pit, heap leach operation. In terms of gold 
and silver production for the reporting 
period, we were pleased to report figures 
in line with management’s expectations 
of 50,215 ounces of gold and 20,133 ounces 
of silver in doré from the heap leach 
processing. From this we made gold 
sales of 42,557 ounces at an average 
price of US$1,666 per ounce and silver sales 
of 16,342 ounces at an average price of 
US$32 per ounce. The difference between 
sales and production is for two reasons. 
Firstly the Government of Azerbaijan 
takes title to 12.75% of all metals produced, 
according to the Product Sharing Agreement 
in place on Anglo Asian’s operating licences 
(as outlined later in this statement), and 
secondly there is a time lag from production 
to sales. In terms of production in FY 2013, 
Q1 2013 gold production for the three months 
ending 31 March totalled 8,585 ounces 
with gold sales of 8,725 ounces at an 
average price of US$1,638 per ounce.

Importantly we also produce copper in 
the form of a precipitated copper sulphide 
concentrate by-product, which also contains 
silver and a small amount of gold, from 
our Sulphidisation, Acidification, Recycling 
and Thickening (‘SART’) plant at Gedabek. 
Interestingly this plant is one of the largest 
of its kind to be used on a commercial basis. 
Production from the plant for FY 2012 totalled 
502 tonnes of copper, 98,158 ounces of 
silver and 86 ounces of gold. Income from 

04

Anglo Asian Mining PLC 

Annual report and accounts 2012

Overview

Corporate governance

Financial statements

sales of this copper concentrate totalled 
US$2.1 million in FY 2012. Towards the 
end of 2012, we entered into a sales 
contract with Glencore International plc 
(‘Glencore’) for the sale of 2,500 wet 
metric tonnes (‘WMT’) and 550 dry metric 
tonnes of copper concentrate and we also 
sent an additional trial shipment of 200 WMT 
of copper concentrate to Seagate Minerals 
and Metals Inc. At the end of 2012 stocks 
were 2,900 WMT. These sales will see our 
copper concentrate product continuing to 
add to our bottom line and in turn increasing 
our profitability for FY 2013. In Q1 2013 
production from SART totalled 93 tonnes 
of copper, 9,875 ounces of silver and 
16 ounces of gold and we had stockpiles of 
2,535 WMT of copper concentrate product. 
We hope to arrange further sales contracts 
for copper concentrate in 2013 and look 
forward to providing future updates on this.

As mentioned, a key focus of 2012 for the 
Company was the review of Gedabek’s 
operations with a view to implementing 
initiatives and development plans to improve 
the production profile of the mine both in 
the near-term, and increasing the life of 
mine to ensure its future production 
success. As highlighted, gold production 
for FY 2012 was 50,215 ounces, which was 
in line with management’s expectations, 
but this was a drop from the previous 
year’s production levels of 57,068 ounces 
in 2011. This decrease in production was 
anticipated in the 2012 Company mine 
plan, which took into consideration the 
reducing gold grade in the ore-body and 
the need for longer leaching cycles in the 
existing heap leaching process.

Having identified the key factors, the 
Company assessed different processing 
routes to improve the recovery of gold 
from the ore, over that achieved by the 
conventional heap leach process currently 
in use, in order to maximise the economic 
return. In May 2012, following a pre-feasibility 
study carried out by mining consultants, 
Arcadis Chile Limited, we announced our 
intention to construct an agitation leaching 
plant at Gedabek, which is expected to both 
increase gold production and recovery and 
also reduce cash operating costs per ounce. 
Construction of the new agitation leaching 
plant, which had a forecast CAPEX of 
US$52 million, began in August last year 
and the plant is now in the process of full 
scale commissioning and is expected to 
come in US$7 million under budget. The 
new plant will initially treat 100 tonnes of 
ore per hour and it will increase both gold 
oxide and sulphide recovery to 85% and 
69% respectively. This is expected to positively 
impact gold production for the second half 

of 2013 to allow us to meet our 60,000 ounce 
production target (which represents a 20% 
increase over FY 2012). Gold production 
thereafter will improve on an on-going basis 
and the lower grade ore will continue to be 
heap leached.

In addition to improving processing 
efficiencies at Gedabek, we also continue 
to explore the greater Gedabek area with 
the aim of delineating further resources 
and reserves to increase the life of mine 
of the operation. In April 2012 we were 
delighted to announce a JORC compliant 
resource upgrade to 48,138,979 tonnes 
at 0.825 g/t gold for 1,276,422 ounces 
of gold in the Measured and Indicated 
categories. In addition, we also announced 
a maiden JORC compliant ore reserve 
report, which significantly exceeded our 
previous internal estimate of recoverable 
ounces of gold at Gedabek. A total mineable 
reserve of 20,312,879 tonnes at 1.139 g/t gold 
for 744,038 ounce, 0.293% copper for 
59,479 tonnes and 9.456 g/t silver for 
6,175,531 ounces as at 30 December 2011 
was calculated, of which 532,607 ounces 
of gold are recoverable, a significant increase 
over the previous internal estimate of 
311,000 ounces announced in 2007, prior 
to the construction of the Gedabek mine. 
Importantly, in addition to the 532,607 ounces 
of recoverable gold in the ground, we have 
an estimated 90,000 ounces of gold that 
was not recovered by the heap leach 
process, in the spent ore that is currently 
stacked on the leach pads. This ore will 
be reprocessed through the new agitation 
leach plant to recover the major part of 
this ‘lost’ gold and further boost production 
flow for FY 2013/4.

Since the announcement of our maiden 
reserve, an extensive 28,872 metre drilling 
programme has been completed, targeting 
an extension of the existing mine at Gedabek 
with the aim of further increasing the mineral 
resources and reserves as part of our 
on-going exploration and development 
programme. Early indications from the 
recent drilling indicates the potential to 
continue increasing the size of the Gedabek 
deposit in Q2 2013, and we look forward to 
updating the market on these results in 
due course.

Looking ahead, the Company is committed 
to establishing a second mining operation 
in Azerbaijan. As mentioned, Gosha is located 
50 km away from Gedabek and work is 
currently under way to develop a small, 
high-grade, underground gold mine, which is 
expected to produce circa 15-20,000 ounces 
of gold per annum. Mining development 
at Gosha is targeted to begin in H2 2013 
with the intention being to start production 

in 2014. Due to the close proximity of Gosha 
and Gedabek, it is intended that gold ore 
produced at Gosha will be sent by truck 
to Gedabek for processing through the 
new agitation leach plant. The input of ore 
from Gosha, in addition to the increased 
recoveries from the Gedabek ore achieved 
in the new plant, is expected to see Anglo 
Asian’s total gold production rising to 
between 80,000 and 90,000 ounces by the 
end of 2014, subject to both the Gosha 
mine and the Gedabek Agitation Leaching 
Plant operating as expected. 

Further exploration works at our Ordubad 
Contract Area, located in the Nakhchivan 
region of Azerbaijan, resulted in the issuance 
of a notice of discovery for two gold deposits, 
Piyazbashi and Agyurt. The Company will 
continue the exploration works to seek 
more mineral potential in the area.

In terms of our corporate activity for the 
period, we continue to work closely with 
the Government of Azerbaijan. As noted 
above, we have a Production Sharing 
Agreement in place with the Government 
of Azerbaijan, which is based on the 
established Azeri oil industry model. 
Up until the time we have recovered all 
of our carried-forward, unrecovered costs, 
the Government of Azerbaijan effectively 
takes 12.75% of commercial products of 
any mine we bring into production, with 
Anglo Asian taking 87.25%. We expect to 
continue retaining 87.25% of the commercial 
products until at least the end of 2014 based 
on costs incurred to date and with the 
construction of the agitation leaching plant.

In addition, we have strong relations with 
the International Bank of Azerbaijan, which 
is majority owned by the Government of 
Azerbaijan, and we have various financing 
agreements in place with the bank. As at 
31 December 2012, the Company’s net 
debt totalled US$28.3 million (2011: 
US$3.2 million) after taking into account cash 
of US$2.4 million (2011: US$9.9 million). 
This increase in net debt was due to an 
additional loan agreement undertaken with 
the IBA by the Company to finance the 
new agitation leaching plant at Gedabek, 
which as mentioned had an estimated 
CAPEX of US$52 million and an expected 
actual cost of US$45 million. In May 2012, 
the IBA provided a US$7.5 million loan and 
agreed a further US$10.5 million loan with 
a letter of intent stating that, subject to 
internal consideration and approval, it would 
provide up to an additional US$42 million 
to the Company for the construction of the 
new agitation leaching plant. Including the 
US$18 million already agreed in May 2012, 
this brought the total funding available to 
the Company by the IBA to US$60 million. 

www.angloasianmining.com 

Annual report and accounts 2012

05

Chairman’s statement continued

The loans agreed during 2012 have an annual 
interest rate of 12% and can be drawn 
down in tranches of up to US$1,500,000. 
Repayment will be within 36 months in 
equal quarterly instalments starting two 
years from the date that each tranche of 
funds is drawn down. There is no penalty 
for early repayment. 

As at 31 March 2013, the total funds drawn 
down from the IBA for the Agitation Leaching 
Plant from the $60 million facility were 
US$40.1 million. The remaining amount 
outstanding of the first loan with the IBA 
was US$0.8 million and cash in the bank 
was US$3.4 million. Net debt, being interest 
bearing loans and borrowings less cash 
and cash equivalents, therefore stood at 
US$37.5 million at 31 March 2013.

As a Company we are committed to 
maintaining high health, safety, social and 
environmental standards. We have a Health, 
Safety, Environment and Technology 
Committee (‘HSET’) established at Board 
level, which is under the chairmanship 
of Professor John Monhemius, one of our 
Non-executive Directors. This committee 
has the responsibility to oversee all aspects 
of the HSET of the Company and to make 
recommendations to the Board. Operational 
control of HSE is the responsibility of our 
Sustainability Manager, Mr Angel Vega, who 
has a team of HSE officers to police and 
encourage all safety aspects of day-to-day 
working practices on the mine.

During 2012 there were no serious work 
related injuries or reportable environmental 
incidents, and numerous safety and 
environmental initiatives were undertaken. 
We have approximately 566 personnel 
working in the Company. We achieved a 
landmark in our safety-at-work record by 
surpassing for the first time one million 
man-hours worked without a Lost Time 
Incident (LTI). Despite this achievement 
we recognise that mining is a hazardous 
environment and we will continue to strive 
for further improvements. In May 2012, 
we introduced a penalty scheme whereby 
infringements of safety regulations or codes 
of practice are penalised by fines that are 
deducted from offenders’ wages. The scheme 
applies equally to Company employees 
and to contractors working on site.

Since becoming signatories to the 
International Cyanide Management Code 
in 2010, we have been working towards 
achieving the required safety standards 
in our working practices for the handling 
and management of cyanide, which is the 
principal chemical used for the leaching of 
gold ores. This has involved the preparation 
and translation of documentation and 
training courses for employees. We have 

appointed external auditors, who will 
assess our performance under the auspices 
of the International Cyanide Management 
Institute (‘ICMI’). In September 2012, 
the auditor-carried out a pre-audit gap 
analysis, which highlighted areas that 
require further attention to achieve the 
required standards. The full audit will 
take place shortly, after which we expect 
to be granted full certification by the ICMI.

On the environmental side, we have 
undertaken a full Environmental and 
Social Assessment (‘ESA’) of our operations 
during this year. We appointed AMEC, a 
leading international engineering consultancy 
(http://www.amec.com), to perform this 
work for us. The ESA was a major exercise 
carried out over several months by a team 
of specialists from AMEC. We received 
their final report in December 2012, which 
comprised a main volume and 12 substantial 
appendices, and the task for the coming 
year is to incorporate the consultants’ 
recommendations into our working 
practices and to develop a comprehensive 
environmental management plan for the 
life of the mine.

Looking at Anglo Asian in the wider market 
context, despite the economic turmoil in 
the market that all resource companies 
are facing at present, I remain positive 
about the longer term fundamentals for 
gold mining companies and indeed Anglo 
Asian. Gold has enjoyed a spectacular 
bull market over the past 13 years, growing 
at a compound annual growth rate of 
approximately 13% since the low gold 
price circa US$278 in 1999. In spite of 
recent gold pricing developments, which 
have seen gold price levels drop to circa 
US$1,350, I believe that there remains a 
convincing case for sustainable upside in 
the gold price based on gold as a hedge 
against inflation/currency depreciation, 
a ‘safe haven’ and store of value, and with 
continued robust physical demand from 
China and India projected. Moreover, 
similar corrections both mid-2006 and 
again in late-2008 when the gold price 
was hit, down more than 25% and 33% 
respectively, build a positive case for this 
recent drop being a ‘correction’ rather than 
a bearish gold market. At current levels 
gold equities do not seem to reflect current 
gold prices and mining companies are at 
their cheapest level in decades. I consider 
that gold equities, especially Anglo Asian, 
as a low cost producer still represent a 
compelling investment opportunity.

In conclusion, the past year has been one 
of significant progress for Anglo Asian on 
many fronts. We are delighted to report a 
strong financial performance with a profit 

before tax of US$28.6 million. This is thanks 
to reliable gold production from Gedabek, 
which has achieved our production target 
for FY 2012 by producing 50,215 ounces 
of gold and also 502 tonnes of copper 
concentrate for the year. 

Looking ahead to 2013, we are committed 
to increasing Gedabek’s gold production 
and we are in the final stages of constructing 
a new Agitation Leaching Plant, estimated 
to be US$7 million under budget at 
US$45 million, which will improve 
production from the mine substantially 
once commissioned and enable us to 
achieve FY 2013 production of 60,000 ounces. 
In terms of our copper production, we 
produced 93 tonnes of copper in Q1 2013 
and expect to produce 700 tonnes by 
year-end in line with the 2013 production 
plan. Importantly we have signed a sales 
agreement with Glencore International in 
Q4 2012, which will continue to positively 
impact our bottom line in FY 2013 when 
copper sales are realised. 

Furthermore, we remain dedicated to 
establishing our second mining project in 
Azerbaijan, Gosha, with a view to production 
in 2014, which will be another significant 
step for Anglo Asian as we look to ramp 
up our annual gold production output to 
80,000–90,000 ounces by the end of 2014.

I believe that this development strategy, 
coupled with our low gold production 
cost forecasts for FY 2013, highlights 
our commitment to achieving significant 
growth and increasing value over the 
coming year. 

I would like to take this opportunity to thank 
our Anglo Asian employees, partners, the 
Government of Azerbaijan, the IBA, advisers, 
fellow Directors and shareholders for their 
continued support as we continue to build 
ourselves into a leading gold, copper, 
silver mid-tier production company in 
Azerbaijan and Caucasia. 

Khosrow Zamani
Non-executive Chairman

06

Anglo Asian Mining PLC 

Annual report and accounts 2012

Chief Executive’s review

Overview

Corporate governance

Financial statements

“ 2012 has been a highly active year for Anglo Asian 
with gold production of 50,215 ounces and sales of 
42,557 ounces, copper production 502 tonnes and 
copper concentrate sales of US$2.1 million and 
significant profitability of US$28.6 million for the year.”

Reza Vaziri
President and Chief Executive
24 May 2013

In summary

 E Gedabek’s heap leach operation 
totalled 50,215 ounces (in gold 
doré) with an average cash 
operating cost of US$668 
per ounce

 E Silver production from the plant’s 
heap leach operations, production 
totalled 20,133 ounces with 
16,342 ounces of silver sold 
at an average price of US$32

 E In terms of copper concentrate 
production, for FY 2012 we 
produced 502 tonnes of copper, 
98,158 ounces of silver and 
86 ounces of gold 

 E In June 2012, we announced 

a maiden JORC compliant ore 
reserve report, which showed 
a total mineable reserve of 
20,312,879 tonnes of which 
532,607 ounces of gold 
are recoverable

 E A development work programme 
and budget was submitted to 
the Government of Azerbaijan 
on 4 December 2012 aiming 
to commence development work 
at Gosha in H2 2013 with a view 
to moving to production by 2014

During the course of 2012 we continued 
to focus on developing and implementing 
plans to ensure the future growth of Anglo 
Asian in line with our long term strategy of 
building a multi-site gold, copper and silver 
mining company in Caucasia and in turn 
unlocking the Company’s intrinsic value. 

Our 1,962 sq km portfolio of prospective 
gold/copper/silver assets in Azerbaijan 
includes our flagship Gedabek mine, which 
produced 50,215 ounces of gold in FY 2012, 
our Gosha Contract Area, which is located 
50 km away from Gedabek, and Ordubad, 
which is located in the Nakchivan Republic 
region of Azerbaijan. 

Mining operations
Gedabek
Gedabek is currently an open pit heap leach 
gold-copper-silver mining operation located 
in a 300 sq km Contract Area in western 
Azerbaijan on the Tethyan Tectonic Belt, 
one of the world’s significant copper and 
gold bearing regions. 

For the 12 month period to 31 December 2012, 
gold production from Gedabek’s heap leach 
operation totalled 50,215 ounces (in gold 
doré) with an average cash operating cost 
of US$668 per ounce. In terms of gold 

sales, 42,557 ounces of gold were sold 
at an average of US$1,666 per ounce in 
FY 2012. It should be noted that 6,246 ounces 
of gold were transferred to the Government 
of Azerbaijan as part of the Company’s 
Product Sharing Agreement in FY 2012.

Table 1 below is a summary table of gold 
production and prices which outlines 
quarter-on-quarter gold production at 
Gedabek for FY 2012. 

With regards to silver production from the 
plant’s heap leach operations, production 
totalled 20,133 ounces with 16,342 ounces 
of silver sold at an average price of US$32.

In terms of processing, Gedabek’s heap 
leach stacking operation has performed 
in line with management’s expectations 
in FY 2012 with 753,601 tonnes of dry ore 
having been transferred to the leach pads 
with an average gold content of 3.03 g/t 
(2011: 842,751 tonnes of dry ore with an 
average gold content of 4.33 g/t). The 
reduced grade for the period was in line 
with our mining plan. Table 2 summaries 
the levels of dry ore that have been 
transferred to the leach pads at Gedabek 
on a quarterly basis from 1 January 2012 
to 31 December 2012.

Table 1

Quarter ended

31 March 2012

30 June 2012

30 September 2012

31 December 2012

Total for FY 2012

Gold produced
(including Govt. of 
Azerbaijan’s share) 
 (oz)

Weighted average
gold sale price
(US$)

9,925

11,716

14,044

14,530

 50,215

1,679

1,609

1,655

1,694

 1,666

07

www.angloasianmining.com 

Annual report and accounts 2012

Chief Executive’s review continued

Mining operations continued
Gedabek continued
Gedabek is currently an open pit mining 
operation, which utilises a conventional 
heap leach process and a resin adsorption 
recovery plant. Heap leach operations are 
traditionally a low-cost processing route 
that many mining operations, including 
Gedabek, adopt when they first move 
into production due to the low-capital 
construction costs. Whilst our heap leach 
operation has seen steady gold production 
at Gedabek from the first gold pour in 
May 2009 (to end of FY 2012 185,912 ounces 
have been produced), heap leaching has 
limitations with regards to the size of ore 
being leached (-25 mm). This limitation 
results in gold recoveries of circa 70%, with 
leaching cycles extending typically up to 
a year, depending on the ore mineralogy. 

With the above in mind, we conducted a 
review to best ascertain how to improve 
the gold production profile of Gedabek. 
In May 2012, following a Pre-Feasibility 
Study carried out by mining consultants, 
Arcadis Chile Limited, we announced our 
intention to construct an agitation leaching 
plant at Gedabek. In comparison to heap 
leaching, agitation leaching of milled ore 
can deliver higher recoveries, with the 
immediate production of gold. The new 
agitation leaching plant will process high 
grade oxide ore and additional sulphidic 
ore resources that are not suitable for 
Gedabek’s current heap leaching operation; 
together with spent ore from the leach heaps 
to further improve total gold recoveries. 
Agitation leaching recovery rates have 
been initially estimated at 85% for oxide 
material and 69% for sulphide material, 
although we are carrying out additional 
testing to see if these recovery rates can 
be further improved. The plant, which 
will have a capacity to treat 100 tonnes 
per hour of ore, is anticipated to be 
commissioned in H1 2013 and had an 
estimated capital cost of US$52 million, 

including construction of the tailings 
dam and all related infrastructure. It is 
believed that the cost of construction of 
the agitation leaching plant is circa 
US$7 million under budget.

In addition to gold and silver, our 
Gedabek operation also produces a 
copper concentrate from a Sulphidisation, 
Acidification, Recycling and Thickening 
(‘SART’) process, which recovers copper in 
the form of a precipitated copper sulphide 
concentrate containing silver and minor 
amounts of gold. The recovery of copper 
and silver through SART is in the region 
of 90% and 96%, respectively, and the 
process also has the economic benefit 
of recovering cyanide from the leach 
solutions. In terms of copper concentrate 
production, for FY 2012 we produced 
502 tonnes of copper, 98,158 ounces of 
silver and 86 ounces of gold (2010: 611 tonnes 
of copper, 134,240 ounces of silver and 
200 ounces of gold).

See table 3 overleaf for a full quarterly 
breakdown of copper concentrate 
production through SART. 

During FY 2012 total sales of copper 
concentrate were US$2.1 million. We also 
signed a sales contract in Q4 2012 with 
Glencore International plc (‘Glencore’) 
for the sale of 2,500 wet metric tonnes 
(‘WMT’) and 550 dry metric tonnes of 
copper concentrate. Under the terms of 
the agreement, which is already underway, 
Glencore is committed to purchase 250 WMT 
per month of copper concentrate product 
with an option to stop buying at 1,500 WMT. 
Anglo Asian is now intending to arrange 
further sales contracts for its copper 
concentrate stockpiles, which totalled 
2,900 WMT at 31 December 2012. 

Gedabek Exploration 
Increasing Gedabek’s production profile and 
life of mine through defined exploration 
programmes continued to be a priority for 

the Company during 2012. At the beginning 
of the year Gedabek’s resource stood at 
791,000 ounces of gold, 49,300 tonnes 
of copper and 7,597,000 ounces of silver 
for all categories. After completing 
14,510 metres of drilling (2010–2011 
two-phased drilling programme) in 
April 2012, we were delighted to announce 
a JORC resource upgrade of 48,138,979 
tonnes at 0.825 g/t gold for 1,276,422 ounces 
of gold in the Measured, Indicated and 
Inferred categories (a 61% increase from 
the previous JORC resource estimate 
dated October 2010); 0.197% copper for 
94,890 tonnes (a 93% increase); and 6.66 g/t 
silver for 10,305,653 ounces (a 36% increase) 
at a cut-off grade of 0.3 g/t gold. The 
new resource statement also took into 
consideration the information of the 
2006 exploration drilling campaign, which 
consisted of an additional 20,426 metres 
of drilling at Gedabek. 

Using these new resource figures, we 
instructed our mining consultants, CAE 
Mining International Ltd, to update the ore 
reserves estimation of the Gedabek Mineral 
Deposit. In June 2012, we announced a 
maiden JORC compliant ore reserve report, 
which showed a total mineable reserve 
of 20,312,879 tonnes at 1.139 g/t gold 
for 744,038 ounces, 0.293% copper for 
59,479 tonnes and 9.456 g/t silver for 
6,175,531 ounces as at 30 December 2011, 
of which 532,607 ounces of gold are 
recoverable, a significant increase over the 
previous internal estimate of 311,000 ounces 
announced in 2007, prior to the start of 
construction of the Gedabek mine.

The ultimate optimal open pit ore reserve 
was estimated by applying the Lerchs-
Grossman open pit optimisation algorithm 
and taking into consideration an extensive 
sensitivity analysis of several technical 
and economic scenarios. 

The updated ore reserves estimation was 
based on a cut-off grade of 0.3 g/t of gold 

Table 2

Quarter ended

31 March 2012

30 June 2012

30 September 2012

31 December 2012

Total for FY 2012

Dry ore transferred to
the leach pad
(tonnes)

Average grade
 (g/t)

144,526

194,969

204,720

209,386

753,601

2.83

3.25

2.93

3.07

3.03

08

Anglo Asian Mining PLC 

Annual report and accounts 2012

Overview

Corporate governance

Financial statements

and considered the following mineral 
processing options for the extraction of gold, 
copper and silver from the mineral resource: 
heap leaching for oxide mineralisation 
at 0.3 ≤ Au g/t < 1.0; agitation leaching for 
oxide mineralisation at 1.0 ≤ Au g/t < ∞ and 
sulphide mineralisation at 1.0 ≤ Au g/t < ∞; 
and flotation for sulphide mineralisation at 
0.3 ≤ Au g/t < 1.0. In addition, the updated ore 
reserves were constrained with the open pit 
surface topography as on 30 December 2011. 

The updated Proved and Probable ore 
reserves estimations are described in 
table 4 below. 

The ore will be recovered through a 
combination of the existing heap leaching 
operation at Gedabek, the new agitation 
leaching plant and a flotation plant which 
we plan to construct later in the life of 
the mine. 

It must also be noted that the total ore 
reserve statement accounts for ore in 
the ground at 30 December 2011 and does 
not account for ore that has already been 
mined and which is currently stacked on 
the leach pads. The ore on the leach pads 
still contains circa 90,000 ounces of gold, 
which the Company will either recover 
through the on-going heap leaching process, 
or by reprocessing the spent ore in the heaps 
through the agitation leaching plant.

An additional 28,872 metre drilling 
programme has also been completed in 
2012 which has targeted an extension of the 
existing mine at Gedabek with the aim of 

further increasing the mineral reserves and 
resources in 2013, as part of our on-going 
exploration and development programme. 
Recent drilling indicates significant 
potential to continue increasing the size of 
the Gedabek resource and we look forward 
to updating the market on these results in 
due course.

Gosha
The 300 sq km Gosha Contract Area 
is located in western Azerbaijan, 50 km 
north-west of Gedabek, and contains 
three prospects: Gosha, Itkirlan and 
Munduglu. Following the Government of 
Azerbaijan’s approval of the Development 
and Production Programme in May 2012, 
it is our intention to develop a small, high 
grade, underground gold mine at Gosha 
producing gold at an average rate of 15,000 
to 20,000 ounces per annum for a period 
of at least five years.

A development work programme and 
budget was submitted to the Government 
of Azerbaijan on 4 December 2012 aiming 
to commence development work at Gosha 
in H2 2013 with a view to moving to 
production by 2014, whilst at the same time 
implementing further drilling campaigns 
in order to increase the economics 
of the proposed mine at Gosha. Mining 
equipment has been ordered and service 
and infrastructure building work is to 
commence in H2 2013, including access 
roads, workshop, offices, a laboratory 
and building upgrade work. The mine 
production programme starting in H2 2013 

will develop 1,975 metres of production 
and haulage galleries to produce 30,000 
tonnes of ore, with an average grade of 
15.6 g/t of gold and 38.6 g/t of silver, 
together with 35,500 tonnes of waste. 

Studies have been conducted to determine 
different mining plan alternatives and these 
have shown that high grade ore can be 
produced from the mine and transported 
and treated in the agitation leach plant 
at Gedabek until 2015. It is envisaged that 
from 2016 onwards, the ore from Gosha 
mine may be processed in a flotation plant 
at Gosha.

Ordubad
Our 462 sq km Ordubad Contract Area 
is located in the Nakhchivan region of 
Azerbaijan and contains numerous targets 
including Shakardara, Piyazbashi, Misdag, 
Agyurt, Shalala and Diakchay, which are all 
located within a 5 km radius of each other.

We were pleased to report a Notice of 
Discovery for gold at Ordubad in April 2012. 
The Notice of Discovery is a requirement 
set out in the Company’s Production Share 
Agreement (‘PSA’), which needs to be in 
place before the technical and economical 
evaluation of a deposit in terms of a 
Development and Production Programme 
can take place. We plan to release further 
information concerning the results of the 
studies and exploration work in due course 
and further exploration work is now planned 
with a view to confirming a small gold 
deposit with production potential. 

Table 3

Quarter ended

31 March 2012

30 June 2012

30 September 2012

31 December 2012

Total for FY 2012

Table 4

Classification

Proved ore reserves

Probable ore reserves

Copper concentrate 
produced
(dry tonnes)

Copper recovered 
(tonnes)

Silver produced 
(oz)

Gold produced 
(oz)

239

162

199

181

781

148

106

132

116

502

34,666

25,853

23,397

14,242

98,158

27

9

36

14

86

Tonnage

Grades

Ore 
t

Au 
g/t

Cu 
%

Ag 
g/t

Products

Au 
oz

Cu 
t

Recovered products

Au 
oz

Au 
oz

Cu 
t

Ag 
oz

15,586,952

1.172 0.285 9.203

587,099 44,389 4,611,806

410,623

8,560 1,089,474

4,725,928

1.033 0.319 10.292

156,939 15,091 1,563,725

121,984

2,745

621,601

Proved and probable ore reserves

20,312,879

1.139 0.293 9.456

744,038 59,479 6,175,531

532,607 11,305 1,711,075

www.angloasianmining.com 

Annual report and accounts 2012

09

Chief Executive’s review continued

“ With mining development at Gosha due to begin in H2 2013 
and production targeted for 2014, we envisage we should 
become an 80,000–90,000 ounces per annum gold producer 
by the end of 2014.”

Gosha gold project, which provides us with 
further exploration upside and, importantly, 
production potential for the future. With 
mining development at Gosha due to begin 
in H2 2013 and production targeted for 
2014, we envisage we should become an 
80,000–90,000 ounces per annum gold 
producer by the end of 2014. With the 
above in mind we look forward to the 
coming year at this exciting time in the 
Company’s development as a mid-tier 
gold, copper and silver mining company.

Reza Vaziri 
President and Chief Executive

Outlook
2012 has been a highly active year for 
Anglo Asian with gold production of 
50,215 ounces and sales of 42,557 ounces, 
copper production 502 tonnes and copper 
concentrate sales of US$2.1 million and 
significant profitability of US$28.6 million 
for the year. Gold production at the beginning 
of 2013 remains on target and with the 
agitation leaching plant near completion 
and due to be commissioned in H1 2013 
(on time and US$7 million under budget), 
gold production for FY 2013 is targeted for 
60,000 ounces, a 20% increase from FY 2012. 
Not only will the agitation leaching plant help 
to improve gold recoveries and production, 
it will also lead to decreased cash operating 
costs of around US$450–500, which would 
place Anglo Asian in the lower quartile 
of gold mining companies in terms 
of operating costs. In the meantime, 
exploration at Gedabek has been on-going 
and significant progress in terms of extending 
the life of mine at Gedabek by increasing 
the resource and reserve base has been 
made. We also remain highly active at our 

10

Anglo Asian Mining PLC 

Annual report and accounts 2012

Our new agitation leaching plant
At Gedabek

Overview

Corporate governance

Financial statements

“ Substantially increasing gold production at Gedabek 

with a capital reduction.”

Strategy: Improving gold production profile of Gedabek

Continuing to improve the gold production profile of the Company’s flagship Gedabek 
mine in western Azerbaijan remains a key focus for Anglo Asian. In FY 2012, gold 
production from this open pit mine totalled 50,215 ounces which was achieved by 
processing ore through its conventional heap leach processing unit. Whilst gold 
production was in line with management’s expectations for 2012, gold production 
had in fact reduced from 2011 production levels of 57,068 ounces, largely due to the 
reducing gold grade in the ore-body, which was anticipated, and the need for longer 
leaching cycles in the existing heap leaching process at Gedabek. 

Gedabek is currently an open pit mining operation, which utilises a conventional 
heap leach process and a resin adsorption recovery plant. Heap leach operations 
are traditionally a low-cost processing route that many mining operations, including 
Gedabek, adopt when they first move into production due to the low-capital 
construction costs. 

In order to help maximise the gold recovery of the lowering grade ore and in turn 
increase the economic return of Gedabek over that achieved by only utilising the 
conventional heap leach process, the Company undertook a review of its mining 
operations at the beginning of 2012 and assessed different processing routes.

Agitation leaching plant – Pre-Feasibility Study

Construction process and future capabilities

In May 2012, following a Pre-Feasibility Study carried out 
by mining consultants, Arcadis Chile Limited, Anglo Asian 
announced its intention to construct an agitation leaching 
plant which is expected to increase gold production and 
recovery and also reduce cash operating costs to circa 
US$450 per ounce of gold. In comparison to heap leaching, 
agitation leaching of milled ore can deliver higher recoveries 
with the immediate production of gold. 

The new agitation leaching plant will process high grade 
oxide ore and additional sulphidic ore resources that are not 
suitable for Gedabek’s current heap leaching processing 
operation, together with spent ore from the leach heaps 
to further improve total gold recoveries. Agitation leaching 
recovery rates have been initially estimated at 85% for 
oxide material and 69% for sulphide material, although the 
Company has been carrying out additional testing to see 
if these recovery rates can be further improved. The plant, 
which will have a capacity to treat 100 tonnes per hour of 
ore, is currently being commissioned. This should positively 
impact gold production for the second half of 2013 to allow 
us to meet our 60,000 ounces production target (which 
represents a 20% increase from FY 2012). Gold production 
thereafter will improve on an on-going basis and the lower 
grade ore will continue to be heap leached.

Construction of the new agitation leaching plant, which had 
a forecast CAPEX of US$52 million, began in August 2012 
and the plant is now in full scale commissioning and is 
expected to be US$7 million under budget. 

Looking ahead, the Company is committed to establishing 
a second mining operation in Azerbaijan. Gosha, Anglo Asian’s 
second gold project, is located 50 km away from Gedabek and 
work is currently under way to develop a small, high-grade, 
underground gold mine, which is expected to produce circa 
15–20,000 ounces of gold per annum. Mining development 
at Gosha is targeted to begin in H2 2013 with the intention 
being to start production in 2014. Due to the close proximity 
of Gosha and Gedabek, it is intended that gold ore produced 
at Gosha will be sent by truck to Gedabek for processing 
through the new agitation leach plant. The input of ore from 
Gosha, in addition to the increased recoveries from the 
Gedabek ore achieved in the new plant, is expected to see 
Anglo Asian’s total gold production rising to between 80,000 
and 90,000 ounces by the end of 2014, subject to both the 
Gosha mine and the Gedabek agitation leaching plant 
operating as expected.

www.angloasianmining.com 

Annual report and accounts 2012

11

Financial review
Sean Duffy, Chief Financial Officer

“ I am pleased to report that in 2012 Anglo Asian generated 
revenues of US$73,521,389 (2011: $83,753,311) as a result 
of gold, silver and copper concentrate sales from the 
Gedabek mine.”

  Sean Duffy
  Chief Financial Officer

24 May 2013

In summary

 E US$71,446,844 of the revenues 
(2011: US$78,756,649) were 
generated from the sale of 
Anglo Asian’s share of the 
production of doré bars for 
the year

 E Net assets of the Group 
were US$96,369,154 
(2011: US$76,867,936)

 E The Group reported a gross 

profit of US$36,076,012 for 2012 
(2011: US$43,036,199)

 E During 2012, the Group reduced 
its original loan with IBA from 
US$13.1 million to US$1.8 million

Introduction
I am pleased to report that in 2012 Anglo 
Asian generated revenues of US$73,521,389 
(2011: $83,753,311) as a result of gold, 
silver and copper concentrate sales from 
the Gedabek mine. 

US$71,446,844 of the revenues (2011: 
US$78,756,649) were generated from the 
sale of Anglo Asian’s share of the production 
of doré bars for the year, which comprised 
42,557 ounces of gold and 16,342 ounces 
of silver (2011: 49,304 ounces of gold and 
34,593 ounces of silver) at an average price 
of US$1,666 per ounce and US$32 per ounce 
respectively (2011: US$1,573 per ounce 
and US$35 per ounce). In addition, Anglo 
Asian generated revenue from the sale 
of copper concentrate of US$2,074,545 
(2011: US$4,996,662). 

The Group incurred mining cost of sales 
of US$37,445,377 (2011: US$40,717,112) 
and therefore reported a gross profit of 
US$36,076,012 for 2012 (2011: US$43,036,199). 

The Group incurred administration expenses 
of US$5,915,352 (2011: US$6,021,274) and 
finance costs for the year of US$1,510,085 
(2011: US$3,270,909). The Group recorded 
profit before tax for the year of US$28,550,979 
(2011: US$31,623,383). The finance costs 
for the year comprises interest on the credit 
facilities and loans, interest on letters of 
credit and accretion expenses on the 
rehabilitation provision. 

During 2012, the Group reduced its original 
loan with IBA from US$13.1 million to 
US$1.8 million. 

During 2012, additional funds drawn down 
from the IBA for the Agitation Leaching Plant 
were US$29.3 million at 31 December 2012.

Total debt at 31 December 2012 stands at 
US$30,759,749 (2011: US$13,041,000) all 
due to IBA. 

The Group held cash balances at 
31 December 2012 of US$2,410,730 (2011: 
US$9,938,594) and inventories at cost of 
US$36,427,632 (2011: US$27,301,183). 

Net assets of the Group were US$96,369,154 
(2011: US$76,867,936).

During the year exploration and evaluation 
expenditure of US$1,415,766 (2011: 
US$4,956,336) was incurred and capitalised. 

The Group paid corporation tax during the 
year of US$2,593,713 (2011: US$4,834,145). 
The Company has booked a deferred tax 
liability of US$6,883,330 in 2012 (2011: 
US$7,900,635) bringing the total deferred 
tax liability provision to US$19,344,899 
(2011: US$12,461,569).

Production Sharing Agreement (‘PSA’)
Under the terms of the PSA in place with 
the Government of Azerbaijan, the Company 
and the Government of Azerbaijan share 
commercial products of each mine. Until 
the time Anglo Asian has recovered all its 
carried forward, unrecovered costs, the 
Government of Azerbaijan effectively takes 
12.75% of commercial products of each 
mine, with the Company taking 87.25% 
(being 75% for capital and operating costs 
plus 49% of the remaining 25% balance). 
The Company expects that it will not have 
recovered all its brought forward capital 
and operating costs by the end of 2013 
and that the ratio of sharing commercial 
products for Gedabek mine of 87.25% to 
Anglo Asian and 12.75% to the Government 
of Azerbaijan will continue throughout 
2013 and 2014.

12

Anglo Asian Mining PLC 

Annual report and accounts 2012

 
Overview

Corporate governance

Financial statements

The Company can continue with prior and 
current period cost recovery of up to 75% 
of the value of commercial products, before 
the remaining product revenues are shared 
between the Company and the Government 
of Azerbaijan in a 49% to 51% ratio. The 
Company can recover the following costs:

 E All direct operating expenses 

of Gedabek mine

 E All exploration expenses incurred 
on the Gedabek Contract Area

 E All capital expenditure incurred 

on the Gedabek mine

 E An allocation of corporate 

overheads – currently, overheads 
are apportioned to Gedabek 
according to the ratio of direct 
capital and operating expenditure 
at Gedabek Contract Area 
compared with direct capital and 
operational expenditure at Gosha 
and Ordubad Contract Areas

 E An imputed interest rate of 

USD LIBOR + 4% per annum 
on any unrecovered costs

Once Gosha is operating and producing 
revenue, all Gosha specific costs can 
also be recovered. 

Going concern
The Directors have prepared the consolidated 
financial statements on a going concern 
basis after reviewing the Group’s forecast 
cash position for the period to 30 June 2014 
and satisfying themselves that the Group 
will have sufficient funds on hand to realise 
its assets and meet its obligations as and 
when they fall due. 

Depreciation/amortisation
As described in note 3 of the annual report, 
the accumulated mine development costs 
within producing mines are depreciated/
amortised on a unit-of-production basis 
over the economically recoverable reserves 
of the mine concerned, except in the case 
of assets whose useful life is shorter than 
the life of the mine, in which case the straight 
line method is applied. The unit of account 
for run of mines (‘ROM’) costs and for 
post-ROM costs are recoverable ounces 
of gold. An amount of 608,956 ounces of 
recoverable gold has been used to 
determine depreciation/amortisation on 
accumulated mine development costs. 
It is expected that as a result of the JORC 
compliant reserve report that is expected 
to be published in Q2 2013, the Group then 
will revise its estimate of recoverable gold 
which it uses to determine depreciation/
amortisation on accumulated mine 
development costs.

Commodity price risk
The Group’s revenues are exposed to 
fluctuations in the price of gold, silver and 
copper. Anglo Asian currently does not 
hold any financial instruments to hedge 
the commodity price risk on its expected 
future production; however the Board reviews 
this exposure and the requirement for 
hedging activities on an on-going 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.

Liquidity/interest rate risk
The Group has not used any interest rate 
swaps or other instruments to manage its 
interest rate profile during 2012 but will 
review this requirement on a periodic 
basis. Interest rates on current loans are 
fixed and there is no floating rate debt.

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 
at historic lows during the current year. 
The levels of deposits held by the Group 
have also been low therefore any impact 
of changing rates is minimal. The Group 
is exposed to fluctuations in commodity 
prices now that production has commenced.

Operational risk
There is exposure to levels of production 
risk as a result of unforeseen operational 
problems or machinery malfunction and 
therefore operating costs for commercial 
production may remain subject to variation 
from those forecast by the Directors. The 
Group will monitor progress on delays and 
costs on a regular basis.

Sean Duffy
Chief Financial Officer

www.angloasianmining.com 

Annual report and accounts 2012

13

Board of Directors

Mr. Khosrow Zamani
Non-executive Chairman, Age 70
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 US$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 an MSc in Engineering from the USA 
and a Master of Business Operations and Management from the 
UK. He is currently a non-executive board member and chairman 
of the Corporate Governance Committee of Sekerbank A.S., a publicly 
listed commercial bank in Turkey, a non-executive board member 
and chairman of the compensation committee of Komercijalna 
Bank, Serbia and a non-executive board member of Borusan 
Makina in Turkey.

Mr. Reza Vaziri
President and Chief Executive, Age 60
Reza Vaziri has been actively involved in business in the Republic 
of Azerbaijan since just after its independence. Since RVIG, now 
Anglo Asian’s subsidiary, signed a Production Sharing Agreement 
with the Government of the Republic of Azerbaijan (the ‘Government’), 
Reza has been focused on developing Anglo Asian Mining plc 
(the ‘Company’) 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 alongside such Directors 
as James Baker III, Zbigniew Brezinski, Governor John Sununu and 
Henry Kissinger. Reza resides in Baku, London and Washington, DC.

Mr. Richard Round FCCA
Non-executive Director, Age 55
Richard Round (FCCA) began his career with British Coal in 
1977. Richard has since held a number of Finance Director 
roles in various public and private mining, energy, engineering 
and oil and gas service groups including Ferrum Holdings plc, 
Consolidated Supply Management Limited, Mining (Scotland) 
Group, Cambrian Mining PLC, Lubel Coal Company Limited, 
Novera Energy plc and also Anglo Asian Mining plc where 
he stepped down in July 2008 and took up the position of 
Non-executive Director. Richard is now Chief Financial Officer 
of Aquamarine Power, a wave power developer in Scotland.

Governor John H Sununu
Non-executive Director, Age 73
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.

Professor John Monhemius
Non-executive Director, Age 70
Emeritus Professor John Monhemius held the Roy Wright Chair 
in Mineral and Environmental Engineering at the Royal School 
of Mines, Imperial College, London until 2004, when he retired 
from full-time academic work. From 2000 to 2004, he was Dean 
of the Royal School of Mines. He has more than 40 years of 
experience of academic and industrial research and development 
in hydrometallurgy and environmental control in mining and 
metallurgical processes, particularly in the management of toxic 
wastes and effluents, and he has acted as a consultant to many 
large mining and chemical companies. Professor Monhemius 
has published over 130 papers of scientific literature and he has 
supervised more than 30 PhD students. From 1986–96, he was a 
co-founder and Director of Consort Research Ltd, a consultancy 
specialising in gold and base metal ore processing, and he is a 
former Director of Obtala Resources plc. 

14

Anglo Asian Mining PLC 

Annual report and accounts 2012

Directors’ report

Overview

Corporate governance

Financial statements

The Directors submit their report and the consolidated financial statements of Anglo Asian Mining PLC for the year ended 31 December 2012.

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 R.V. Investment Group Services LLC (‘RVIG’). The Company together with its subsidiaries (together referred 
to as the ‘Group’, see also note 16 on page 39) is involved in the exploration and development of gold and copper projects in the 
Republic of Azerbaijan and the operation of the Gedabek mine in the Republic of Azerbaijan. 

Review of developments and future prospects
The record of the business during the year and an indication of likely further developments can be found in the Chairman’s Statement 
on pages 4 to 6, the Chief Executive’s Review on pages 7 to 10 and the Finance Review on pages 12 to 13.

The Group’s net profit after taxation for the year ended 31 December 2012 amounted to US$19,367,245 (2011: US$18,772,459).

Business Review
A business overview is discussed on pages 4 and 6 of the Chairman’s Statement. Other risks are discussed in the Finance Review on 
page 13.

Share capital
Details of the movements in share capital during the period are set out in the consolidated statement of changes in equity in the 
consolidated financial statements.

Directors
The current Directors and their biographies are set out on page 14.

Directors’ interests
The Directors in office during the year and their interests in ordinary shares of the Company at 31 December 2012 and 31 December 2011 were:

Directors

Khosrow Zamani 
Reza Vaziri
Richard Round 
John Sununu
John Monhemius 

31 December 
2012 
Number of 
shares

793,184
32,796,830
153,958
10,674,540
55,556

31 December
2011
Number of
shares

793,184
32,796,830
153,958
10,674,540
55,556

A total of 350,000 (2011: 100,000) shares were issued during the year to the employees and nil (2011: 550,000) shares were issued to Directors 
as a result of options exercised, bringing the total number of ordinary shares with voting rights to 111,397,307 at 31 December 2012 
(2011: 111,047,307).

The interests of the Directors, financial advisers and staff in options to subscribe for ordinary shares of the Company were:

Exercise 
price 
(p)

Latest 
exercise 
date

As at 
1 January
2012

Granted
during
the year 

Exercised
during
the year 

Forfeited
in the
year

Lapsed 
in the
year

As at
31 December
2012

Directors
Khosrow Zamani

Richard Round

John Monhemius

Others

16.5
12.0
 77.0
42.5
12.0
11.5

97.0
8.9
4.8
35.4
45.5

1 June 2017
27 July 2017
26 July 2015
12 April 2016
27 July 2017
14 August 2019

11 August 2015
1 August 2018
4 December 2018
19 October 2021
27 September 2022

100,000
500,000
432,900
495,859
600,000
150,000

247,925
200,000
150,000
225,000
—

—
— 
— 
—
—
— 

—
— 
— 
—
—
— 

—
—
—
—
350,000

—
(200,000)
(150,000)
— 
— 

3,101,684

350,000

(350,000)

—
— 
— 
—
—
— 

—
—
—
—
—

—

—
— 
— 
—
—
— 

—
—
—
—
—

—

100,000
500,000
432,900
495,859
600,000
150,000

247,925
—
—
225,000
350,000

3,101,684

All options can be exercised at various dates up to 27 September 2022.

www.angloasianmining.com 

Annual report and accounts 2012

15

Directors’ report continued

Directors’ indemnities
The Group 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 Directors have prepared the consolidated financial statements on a going concern basis after reviewing the Group’s cash position 
for the period to 31 December 2014 and satisfying themselves that the Group will have sufficient funds on hand to realise its assets 
and meet its obligations as and when they fall due. 

The Group’s business activities, together with the factors likely to affect its future development, performance and position, can be found 
in the Chairman’s Statement on pages 4 to 6 and the Chief Executive’s Review on pages 7 to 10. The financial position of the Group, its 
cash flows, liquidity position and borrowing facilities are described in the Finance Review on pages 12 to 13. In addition, note 23 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 its exposures to credit risk and liquidity risk.

Though the gold prices dropped significantly after 31 December 2012, the Group is still operating in favourable market conditions and 
the Group is able to produce gold at a comparatively low unit cost, ensuring a large margin is achieved on production. Loans have been 
paid ahead of their scheduled repayment dates in 2011 and 2012 and for the purpose of the new production plant construction the 
Group has an available credit line with the same financial institution. As a consequence, the Directors believe that the Group is well 
placed to manage its business risks successfully under the current uncertain economic outlook.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to 
continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in 
preparing the annual report and accounts.

Charitable and political contributions
There were no charitable or political contributions made during the year (2011: US$nil).

Research and development
There were no research and development expenses incurred during the year (2011: US$nil).

All exploration related activities are disclosed in note 13 to the consolidated financial statements.

Substantial and significant shareholdings
As at 23 May 2013 the following shareholders held substantial and significant holdings in the issued ordinary shares of the Company:

Shareholders

Reza Vaziri
Khagani Bashirov
John Sununu
Limelight Industrial Developments Limited

The number of shares in issue at this date was 111,397,307.

Number of
ordinary shares

32,796,830
18,087,758
10,674,540
4,038,600

Holding
%

29.44
16.24
9.58
3.63

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 24 (2011: 15).

Financial instruments
Financial instruments are disclosed in note 23 to the consolidated financial statements.

Disclosure of information to auditor
Having made enquiries of fellow Directors, each Director confirms that so far as each Director is aware, there is no relevant audit 
information of which our auditor is unaware and each Director has taken all the steps that he ought to have taken in order to make 
himself aware of any relevant audit information and to establish that our auditor is aware of that information.

Annual General Meeting
The Company will hold its next Annual General Meeting on 28 June 2013 at which this report and consolidated financial statements 
will be presented. Notification of the meeting has been sent along with this report.

Related party transactions
Related party transactions are disclosed in note 28 to the consolidated financial statements.

Auditor
Ernst & Young LLP were appointed as auditor of the Company for the year ended 31 December 2012. Ernst & Young LLP have expressed their 
willingness to continue in office as auditor and a resolution to re-appoint them will be proposed at the forthcoming Annual General Meeting.

16

Anglo Asian Mining PLC 

Annual report and accounts 2012

Overview

Corporate governance

Financial statements

Corporate governance
A report on corporate governance and compliance with provisions of the UK Corporate Governance code is set out on page 18. 

Subsequent events 
Subsequent events are disclosed in note 29 to the consolidated financial statements.

Statement of Directors’ responsibilities
The Directors are responsible for preparing the Directors’ Report and the consolidated financial statements in accordance with applicable 
law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the 
Directors have, as required by the AIM Rules of the London Stock Exchange, elected to prepare the Group financial statements in 
accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union and have elected to prepare the 
financial statements of the Company (the parent company) in accordance with UK Generally Accepted Accounting Principles (‘UK GAAP’).

In the case of the Group’s IFRS financial statements, the Directors are required to prepare Group financial statements for each 
financial year which present fairly the financial position of the Group and the financial performance and cash flows of the Group 
for that period. In preparing the Group financial statements the Directors are required to: 

 E select suitable accounting policies in accordance with International Accounting Standard (IAS) 8 ‘Accounting Policies, 

Changes in Accounting Estimates and Errors’ and then apply them consistently; 

 E present information, including accounting policies, in a manner that provides relevant, reliable, comparable and 

understandable information; 

 E provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand 
the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance;

 E state whether they have been prepared in accordance with IFRS; 

 E prepare the accounts on a going concern basis unless, having assessed the ability of the Group to continue as a going concern, 

management either intends to liquidate the entity or to cease trading, or have no realistic alternative but to do so; and

 E make judgements and estimates that are reasonable and prudent.

In the case of the Company’s UK GAAP financial statements, the Directors are required to prepare financial statements for each 
financial year which give a true and fair view of the state of affairs of the Company. In preparing these financial statements, the 
Directors are required to: 

 E select suitable accounting policies and then apply them consistently;

 E make judgements and estimates that are reasonable and prudent;

 E state whether they have been prepared in accordance with UK GAAP; and 

 E 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 adequate accounting records that are sufficient to show and explain the Company’s transactions 
and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure 
that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for 
safeguarding the assets of the Company and the Group 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 the financial statements and other information 
included in annual reports may differ from legislation in other jurisdictions.

Responsibility statement
We confirm that to the best of our knowledge:

 E the financial statements, prepared in accordance with IFRS, 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

 E 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.

By order of the Board

Sean Duffy
Company Secretary
24 May 2013

www.angloasianmining.com 

Annual report and accounts 2012

17

Corporate governance

Introduction
Although the rules of AIM do not require the Company to comply with the UK Corporate Governance Code (‘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 complies with 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 the 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 arise which require Board attention. 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 the 
implementation by the Executive team.

The Board considers two of the Non-executive Directors other than the Chairman to be independent.

Audit Committee
The Board has an Audit Committee which comprises Richard Round and John Sununu and is scheduled to meet at least twice a year. 
The external auditor attends 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 auditor of the Group.

Remuneration Committee
The Board has a Remuneration Committee which 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 Board has a Nomination Committee which 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.

Health, Safety, Environment and Technology Committee
The Board has a Health, Safety, Environment and Technology Committee which comprises John Monhemius and Reza Vaziri and 
meets as required. The Committee’s primary function is to assist the Board of Directors of the Company in fulfilling its oversight 
responsibilities in the following areas:

 E the health, safety, environmental and technological issues relating to the Company; 

 E the Company’s compliance with corporate policies that provide processes, procedures and standards to follow in accomplishing 
the Company’s goals and objectives relating to health, safety and environmental issues, to ensure that the Company’s operations 
and work practices comply as far as is practicable with the best international standards; and 

 E the management of risk related to health, safety, environmental and technological issues.

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.angloasianmining.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 auditor.

The Group does not currently have an internal audit function due to the small size of the Group and limited resources available.

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.

18

Anglo Asian Mining PLC 

Annual report and accounts 2012

Independent auditor’s report
to the members of Anglo Asian Mining PLC

Overview

Corporate governance

Financial statements

We have audited the Group financial statements of Anglo Asian Mining PLC for the year ended 31 December 2012 which comprise the 
consolidated statement of financial position as at 31 December 2012 and the consolidated income statement, consolidated statement 
of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows for the year then ended 
and the related notes 1 to 29. The financial reporting framework that has been applied in their preparation is applicable law and 
International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 
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 Auditor’s 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 auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 17, the Directors are responsible for the preparation 
of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express 
an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). 
Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable 
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an 
assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied 
and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation 
of the financial statements. In addition, we read all the financial and non-financial information in the Directors’ Report to identify 
material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or 
inconsistencies we consider the implications for our report.

Opinion on financial statements
In our opinion the Group financial statements:

 E give a true and fair view of the state of the Group’s affairs as at 31 December 2012 and of its profit for the year then ended;

 E have been properly prepared in accordance with IFRSs as adopted by the European Union; and

 E have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the Group financial statements are 
prepared is consistent with the Group financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, 
in our opinion:

 E certain disclosures of Directors’ remuneration specified by law are not made; or

 E we have not received all the information and explanations we require for our audit.

Other matter
We have reported separately on the parent company financial statements of Anglo Asian Mining PLC for the year ended 31 December 2012. 

Steven Dobson (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
24 May 2013

1. The maintenance and integrity of the Anglo Asian Mining PLC website is the responsibility of the Directors; the work carried out by the auditor does not involve 
consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial statements since 
they were initially presented on the website.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 

www.angloasianmining.com 

Annual report and accounts 2012

19

Consolidated income statement
for the year ended 31 December 2012

Revenue

Cost of sales

Gross profit

Other income

Administrative expenses

Other operating expense

Operating profit

Finance income

Finance costs

Profit before tax

Income tax expense

Year ended
31 December
2012
US$

Year ended
31 December
2011
US$

Notes

5

73,521,389

83,753,311

(37,445,377) 

(40,717,112) 

36,076,012

43,036,199

423,386 

1,049,579 

(5,915,352)

(6,021,274)

(759,420)

(3,221,212)

29,824,626 

34,843,292 

236,438

51,000

6

6

7

5

10

(1,510,085)

(3,270,909)

28,550,979 

31,623,383 

11

(9,183,734)

(12,850,924)

Profit for the period attributable to the equity holders of the parent

19,367,245 

18,772,459 

Earnings per share for the period attributable to the equity holders of the parent

Basic earnings per share (cents per share)

Diluted earnings per share (cents per share)

12

12

17.41

17.26

16.91

16.47

Consolidated statement of comprehensive income
for the year ended 31 December 2012 

Profit for the year

Total comprehensive income for the year

Attributable to the equity holders of the parent

Year ended
31 December
2012
US$

Year ended
31 December
2011
US$

19,367,245

18,772,459 

19,367,245 

18,772,459 

19,367,245

18,772,459 

20

Anglo Asian Mining PLC 

Annual report and accounts 2012

 
Consolidated statement of financial position
as at 31 December 2012

Overview

Corporate governance

Financial statements

Non-current assets

Intangible assets

Property, plant and equipment

Non-current prepayments

Current assets

Trade receivables and other assets

Inventories

Cash and cash equivalents

Total assets

Current liabilities

Trade and other payables

Interest-bearing loans and borrowings

Net current assets

Non-current liabilities

Provision for rehabilitation

Interest-bearing loans and borrowings

Deferred tax liability

Total liabilities

Net assets

Equity

Share capital

Share premium account

Share-based payment reserve 

Merger reserve

Retained earnings/accumulated loss

Total equity

As at
31 December
2012
US$

As at
31 December
2011
US$

Notes

13

14

15

17

18

19

20

21

22

21

11

22,828,092

28,837,939

87,877,035

43,549,670

2,683,673

292,290

113,388,800

72,679,899

10,482,147

3,770,996

36,427,632

27,301,183

2,410,730

9,938,594

49,320,509 

41,010,773 

162,709,309 

113,690,672 

(11,612,591)

(8,807,760)

(1,820,999)

(11,307,412)

(13,433,590)

(20,115,172)

35,886,919 

20,895,601 

(4,622,916)

(2,424,995)

(28,938,750)

(1,821,000)

(19,344,899)

(12,461,569)

(52,906,565)

(16,707,564)

(66,340,155)

(36,822,736)

96,369,154

76,867,936

24

1,973,129

1,967,704

32,172,575

32,139,674

731,870

648,789

24

46,206,390

46,206,390

15,285,190

(4,094,621)

96,369,154 

76,867,936 

The consolidated financial statements were approved by the Board of Directors and authorised for issue on 24 May 2013. They were 
signed on its behalf by:

Reza Vaziri
Chief Executive

www.angloasianmining.com 

Annual report and accounts 2012

21

Consolidated cash flow statement
for the year ended 31 December 2012

Net cash provided by operating activities

Investing activities

Expenditure on property, plant and equipment and mine development

Investment in exploration and evaluation assets including other intangible assets

Interest received

Net cash used in investing activities

Financing activities

Purchase of share options

Proceeds from borrowings

Repayments of borrowings

Interest paid

Net cash provided/(used) in financing activities

Net decrease/(increase) in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year

Year ended
31 December
2012
US$

Year ended
31 December
2011
US$

Notes

25

24,917,609 

38,024,397 

(46,918,313)

(7,739,793)

(1,645,147) 

(5,069,388) 

147,400

51,000

(48,416,060)

(12,758,181)

38,326

29,326,689

65,028

—

(11,220,000)

(17,586,663)

(2,174,428)

(2,916,838)

15,970,587

(20,438,473)

(7,527,864)

4,827,743

9,938,594

5,110,851

2,410,730

9,938,594

21

21

19

19

22

Anglo Asian Mining PLC 

Annual report and accounts 2012

Consolidated statement of changes in equity
for the year ended 31 December 2012

Overview

Corporate governance

Financial statements

Notes

Share
capital
US$

Share
premium
US$

Share-based
payment
reserve
US$

Retained 
earnings/
accumulated
loss
US$

Merger
reserve
US$

Total
equity
US$

1,957,424

32,101,124

638,377

46,206,390

(22,884,862)

58,018,453

—

—

—

—

10,280

38,550

—

—

—

—

—

—

—

(17,782)

28,194

—

—

—

—

—

18,772,459

18,772,459 

18,772,459

18,772,459

—

48,830

17,782

—

—

28,194

1,967,704

32,139,674

648,789

46,206,390

(4,094,621)

76,867,936 

—

—

—

—

5,425

32,901

—

—

—

—

—

—

—

(12,566)

95,647

—

—

—

—

—

19,367,245

19,367,245

19,367,245

19,367,245

—

38,326

12,566

—

—

95,647

24

26

26

24

26

26

At 1 January 2011

Profit for the year

Total comprehensive income

Shares issued

Options exercised during 
the year

Share-based payment 
charge during the year

At 31 December 2011

Profit for the year

Total comprehensive income

Shares issued

Options exercised during 
the year

Share-based payment 
charge during the year

At 31 December 2012

1,973,129

32,172,575

731,870

46,206,390

15,285,190

96,369,154

www.angloasianmining.com 

Annual report and accounts 2012

23

Notes to the consolidated financial statements
for the year ended 31 December 2012

1. Going concern
The Directors have prepared the consolidated financial statements on a going concern basis after reviewing the Group’s cash position 
for the period to 30 June 2014 and satisfying themselves the Group will have sufficient funds on hand to realise their assets and meet 
their obligations as and when they fall due. 

More details in relation to the Group’s going concern assessment are given in the respective section of the Directors’ Report.

2. General information
Anglo Asian Mining PLC (the ‘Company’) is a public limited company incorporated and operating in the UK under the Companies Act 2006. 
The Group’s ordinary shares are traded on the Alternative Investment Market (‘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 15 to 17.

These consolidated 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
The consolidated financial statements of the Group are presented as required by the Companies Act 2006 and were approved for issue 
on 24 May 2013. These consolidated financial statements, for the year ended 31 December 2012 and 31 December 2011, are prepared 
in accordance with the International Financial Reporting Standards (‘IFRS’) as adopted by the EU. The consolidated financial statements 
have also been prepared in accordance with International Financial Reporting Interpretations Committee (‘IFRIC’) interpretations and 
with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. 

The consolidated financial statements have been prepared under the historical cost convention unless described otherwise in the 
accounting policy below.

Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Group made up to 31 December each year. Control 
is achieved where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from 
its activities.

All intra-group transactions, balances, income and expenses are eliminated on consolidation. 

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent 
accounting policies.

Changes in accounting policies, new standards and interpretations 
The accounting policies adopted are consistent with those of the previous financial year except for the following new amendment 
to the standards adopted by the Group on 1 January 2012:

IAS 12 ‘Income Taxes’ (Amendment) – Deferred Taxes: Recovery of Underlying Assets
The amendment clarified the determination of deferred tax on investment property measured at fair value and introduces a rebuttable 
presumption that deferred tax on investment property measured using the fair value model in IAS 40 should be determined on the basis 
that its carrying amount will be recovered through sale. It includes the requirement that deferred tax on non-depreciable assets that 
are measured using the revaluation model in IAS 16 should always be measured on a sale basis. The amendment is effective for annual 
periods beginning on or after 1 January 2012 and has been no effect on the Group’s financial position, performance or its disclosures.

Other amendments resulting from improvements to IFRSs to the following standards did not have any impact on the accounting 
policies, financial position or performance of the Group:

 E IFRS 1 ‘First-Time Adoption of International Financial Reporting Standards’ (Amendment) – Severe Hyperinflation and Removal 

of Fixed Dates for First-Time Adopters; and

 E IFRS 7 ‘Financial Instruments: Disclosures – Enhanced Derecognition Disclosure Requirements’.

New standards and amendments issued, but not yet effective
The standards and interpretations that are issued but not yet effective up to the date of issuance of the Group’s consolidated financial 
statements are listed below are those that the Group reasonably expects will have an impact on disclosures, financial position or 
performance when applied at a future date. The Group intends to adopt these standards when they become effective.

IAS 28 ‘Investments in Associates and Joint Ventures’ (as revised in 2011)
As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 ‘Investments in Associates and Joint Ventures’ 
and describes the application of the equity method to investments in joint ventures in addition to associates. This amendment will 
have no impact on the Group. The revised standard is effective for annual periods beginning on or after 1 January 2013. 

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Corporate governance

Financial statements

3. Significant accounting policies continued
New standards and amendments issued, but not yet effective continued
IFRS 10 ‘Consolidated Financial Statements’, IAS 27 ‘Separate Financial Statements’
IFRS 10 replaces the portion of IAS 27 ‘Consolidated and Separate Financial Statements’ that addresses the accounting for 
consolidated financial statements. It also addresses the issues covered in SIC-12 Consolidation – Special Purpose Entities.

IFRS 10 establishes a single control model that applies to all entities including structured entities (previously referred to as special 
purpose entities). The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which 
entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. 
Based on the preliminary analysis performed, IFRS 10 is not expected to have any impact on the investments currently held by the 
Group. This standard is effective for annual periods beginning on or after 1 January 2014. 

IFRS 11 ‘Joint Arrangements’, IAS 28 ‘Investments in Associates and Joint Ventures’
IFRS 11 replaces IAS 31 ‘Interests in Joint Ventures’ and SIC-13 Jointly-controlled Entities – Non-monetary Contributions by Venturers. 
IFRS 11 changes the accounting for joint arrangements by moving the old three categories to two new categories: joint venture and 
joint operations. Under this new classification, the structure of the joint arrangement is not the only factor considered when classifying 
the joint arrangement as either a joint operation or a joint venture, which is a change from IAS 31. The parties are required to considered 
whether a separate vehicle exists and, if so, the legal form of the separate vehicle, the contractual terms and conditions and other 
facts and circumstances. In addition, IAS 28 was amended to include the application of the equity method to investments in joint ventures. 
The new standards will be applied using a modified retrospective approach and will be effective for annual periods beginning on or after 
1 January 2014. The adoption of new standards does not have significant impact on the Group’s financial position or performance. 

IFRS 12 ‘Disclosure of Interests in Other Entities’ 
IFRS 12 includes all of the disclosures that were previously in IAS 27 relating to consolidated financial statements, as well as all 
of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, 
joint arrangements, associates and structured entities. A number of new disclosures are also required, but will have no impact on 
the Group’s financial position or performance. This standard is effective for annual periods beginning on or after 1 January 2014. 

IFRS 13 ‘Fair Value Measurement’
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity 
is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or 
permitted. The Group is currently assessing the impact that this standard will have on the financial position and performance, but 
based on the preliminary analyses, no material impact is expected. This standard becomes effective for annual periods beginning 
on or after 1 January 2013.

IFRIC 20 ‘Stripping Costs in the Production Phase of a Surface Mine’
This interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the 
mine. The interpretation addresses the accounting for the benefit from the stripping activity. The Group is currently assessing the 
impact that this standard will have on the financial position and performance. This interpretation is effective for annual periods 
beginning on or after 1 January 2013.

Annual improvements May 2012
These improvements include:

IAS 1 ‘Presentation of Financial Statements’: clarifies the difference between voluntary additional comparative information and the 
minimum required comparative information. Generally, the minimum required comparative period is the previous period.

IAS 16 ‘Property Plant and Equipment’: clarifies that major spare parts and servicing equipment that meet the definition of property, 
plant and equipment are not inventory.

IAS 32 ‘Financial Instruments’: Presentation: clarifies that income taxes arising from distributions to equity holders are accounted 
for in accordance with IAS 12 ‘Income Taxes’.

The Group expects no impact on its financial position, performance, disclosures or stated accounting policies from the adoption 
of these amendments. The improvements are effective for annual periods beginning on or after 1 January 2013.

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Annual report and accounts 2012

25

Notes to the consolidated financial statements continued
for the year ended 31 December 2012

3. Significant accounting policies continued
Significant accounting judgements, estimates and assumptions
The preparation of the Group’s consolidated financial statements in conformity with IFRS requires management to make judgements, 
estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the consolidated 
financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are 
continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are 
believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. In particular, information 
about significant areas of estimation uncertainty considered by management in preparing the consolidated financial statements is 
described below.

Ore reserves and resources
Ore reserves are estimates of the amount of ore that can be economically and legally extracted from the Group’s mining properties. 
The Group estimates its ore reserves and mineral resources, based on information compiled by appropriately qualified persons relating 
to the geological data on the size, depth and shape of the ore body and requires complex geological judgements to interpret the data. 
The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future 
capital requirements and production costs along with geological assumptions and judgements made in estimating the size and grade 
of the ore body. Changes in the reserve or resource estimates may impact upon the carrying value of exploration and evaluation assets, 
mine properties, property, plant and equipment, provision for rehabilitation and depreciation and amortisation charges.

The estimates of recoverable reserves have been revised from 1 January 2012 and resulted in an increase of the recoverable gold 
reserves to 609,000 ounces (2011: 244,000 ounces). Including stockpiles and gold in process.

Exploration and evaluation expenditure (note 13)
The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgement in determining whether 
it is likely that future economic benefits are likely either from future exploitation or sale or where activities have not reached a stage 
which permits a reasonable assessment of the existence of reserves. The determination of a Joint Ore Reserves Committee (‘JORC’) 
resource is itself an estimation process that requires varying degrees of uncertainty depending on sub-classification and these estimates 
directly impact the point of deferral of exploration and evaluation expenditure. The deferral policy requires management to make certain 
estimates and assumptions about future events or circumstances, in particular whether an economically viable extraction operation 
can be established. Estimates and assumptions made may change if new information becomes available. If, after expenditure is capitalised, 
information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalised is written off in the 
consolidated income statement in the period when the new information becomes available.

Inventories (note 18)
Net realisable value tests are performed at least annually and represent the estimated future sales price of the product based 
on prevailing spot metals prices at the reporting date, less estimated costs to complete production and bring the product to sale.

Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of contained 
gold ounces based on assay data and the estimated recovery percentage based on the expected processing method.

Stockpile tonnages are verified by periodic surveys.

Impairment of tangible and intangible assets (note 13 and 14)
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 the carrying amount 
exceeds recoverable amount. Recoverable amount is determined as the higher of fair value less costs to sell and 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. 

Production start date 
The Group assesses the stage of each mine under construction to determine when a mine moves into the production stage. The criteria 
used to assess the start date are determined based on the unique nature of each mine construction project, such as the complexity of 
a plant and its location. The Group considers various relevant criteria to assess when the mine is substantially complete, ready for its 
intended use and is reclassified from ‘Assets under construction’ to ‘Producing mines’ and ‘Property, plant and equipment’. Some of 
the criteria will include, but are not limited to, the following: 

 E the level of capital expenditure compared to the construction cost estimates; 

 E completion of a reasonable period of testing of the mine plant and equipment; 

 E ability to produce metal in saleable form (within specifications); and 

 E ability to sustain on-going production of metal.

When a mine construction project moves into the production stage, the capitalisation of certain mine construction costs ceases and 
costs are either regarded as inventory or expensed, except for costs that qualify for capitalisation relating to mining asset additions 
or improvements, underground mine development or mineable reserve development. This is also the point at which the depreciation/
amortisation recognition commences. 

26

Anglo Asian Mining PLC 

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Overview

Corporate governance

Financial statements

3. Significant accounting policies continued
Significant accounting judgements, estimates and assumptions continued
Contingencies 
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment 
of contingencies inherently involves the exercise of significant judgement and estimates of the outcome of future events. 

Mine rehabilitation provision (note 22) 
The Group assesses its mine rehabilitation provision annually. Significant estimates and assumptions are made in determining the 
provision for mine rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include 
estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes and changes in discount 
rates. Those uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision 
at the consolidated statement of financial position date represents management’s best estimate of the present value of the future 
rehabilitation costs required. Changes to estimated future costs are recognised in the consolidated statement of financial position 
by either increasing or decreasing the rehabilitation liability and rehabilitation asset if the initial estimate was originally recognised 
as part of an asset measured in accordance with IAS 16 ‘Property, Plant and Equipment’. Any reduction in the rehabilitation liability 
and therefore any deduction from the rehabilitation asset may not exceed the carrying amount of that asset. If it does, any excess 
over the carrying value is taken immediately to the consolidated income statement. 

If the change in estimate results in an increase in the rehabilitation liability and therefore an addition to the carrying value of the 
asset, the entity is required to consider whether this is an indication of impairment of the asset as a whole and test for impairment 
in accordance with IAS 36. If, for mature mines, the revised mine assets net of rehabilitation provisions exceeds the recoverable value, 
that portion of the increase is charged directly to expense. For closed sites, changes to estimated costs are recognised immediately 
in the consolidated income statement. Also, rehabilitation obligations that arose as a result of the production phase of a mine should 
be expensed as incurred. 

Recovery of deferred tax assets (note 11)
Judgement is required in determining whether deferred tax assets are recognised on the consolidated statement of financial position. 
Deferred tax assets, including those arising from unutilised tax losses, require management to assess the likelihood that the Group 
will generate taxable earnings in future periods, in order to utilise recognised deferred tax assets. Estimates of future taxable income 
are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future 
cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded 
at the reporting date could be impacted.

Revenue recognition 
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably 
measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and sales taxes or duty. 

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred, which is 
considered to occur when title passes to the customer. This generally occurs when product is physically transferred to the buyer. 

The following criteria are also met in specific revenue transactions: 

Gold bullion sales 
Revenue from gold bullion sales is brought to account when the significant risks and rewards of ownership have transferred to the 
buyer and selling prices and assay results are known or can be reasonably estimated. Assay results determine content of metal in 
doré (gold and silver), the price of which is determined based on market quotations of each metal. Silver in doré bullions is treated 
as a by-product and is produced together with gold, which is the intended product and is recognised in sales revenue.

Copper concentrate sales
Contract terms for the Group’s sale of gold, silver and copper in concentrate (metal in concentrate) allow for a price adjustment based 
on final assay results of the metal in concentrate to determine the final content. Recognition of sales revenue for these commodities 
is based on the most recently determined estimate of metal in concentrate (based on initial assay results) and the spot price at the 
date of shipment, with a subsequent adjustment made upon final determination and presented as part of ‘Other Income’.

The terms of metal in concentrate sales contracts with third-parties contain provisional pricing arrangements whereby the selling 
price for metal in concentrate is based on average prevailing spot prices during a specified future period after shipment to the 
customer (the ‘quotation period’). 

The provisionally priced sales of metal in concentrate contain an embedded derivative, which is required to be separated from the host 
contract for accounting purposes. The host contract is the sale of metals in concentrate and the embedded derivative is the forward 
contract for which the provisional sale is subsequently adjusted. Accordingly the embedded derivative, which does not qualify for hedge 
accounting, is recognised at fair value, with subsequent changes in the fair value recognised in profit or loss each period until final 
settlement, and presented as ‘Other income’. Changes in fair value over the quotation period and up until final settlement are 
estimated by reference to forward market prices for gold and copper.

Interest revenue 
Interest revenue is recognised as it accrues, using the effective interest rate method. 

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Annual report and accounts 2012

27

Notes to the consolidated financial statements continued
for the year ended 31 December 2012

3. Significant accounting policies continued
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date: 
whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use 
the asset. 

Operating lease payments are recognised as an expense in the consolidated income statement on a straight line basis over the lease term. 

Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are 
capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum 
lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant 
rate of interest on the remaining balance of the liability. Finance charges are recognised in the consolidated income statement. Leased 
assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership 
by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

The Group had no significant finance leases during 2012 and 2011.

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 consolidated statement 
of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates 
prevailing on the consolidated statement of financial position 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 
consolidated income statement for the period. 

Taxation
Current and deferred income taxes
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in 
the consolidated 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 consolidated statement of financial position 
date. Deferred tax is charged or credited in the consolidated 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 temporary differences relating to tax losses where there is insufficient evidence 
that the asset will be recovered. Unrecognised deferred tax assets are reassessed at each consolidated statement of financial position 
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 Group recognises neither the deferred tax asset regarding the temporary difference on the rehabilitation liability, nor the corresponding 
deferred tax liability regarding the temporary difference on the rehabilitation asset.

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 consolidated 
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 at the consolidated statement of financial position date.

Value-added taxes (‘VAT’)
The Group pays VAT on purchases made in both the Republic of Azerbaijan and the UK. Under both jurisdictions, VAT paid is 
refundable. Azerbaijani jurisdiction permits offset of Azerbaijani VAT credit against other taxes payable to the state budget.

Transactions with related parties
For the purposes of these financial statements, parties are considered to be related if one party has the ability to control the other 
party or exercise significant influence over the other party in making financial or operational decisions. In considering each possible 
related party relationship, attention is directed to the substance of the relationship, not merely the legal form.

Related parties may enter into transactions which unrelated parties might not and transactions between related parties may not 
be effected on the same terms, conditions and amounts as transactions between unrelated parties.

It is the nature of transactions with related parties that they cannot be presumed to be carried out on an arm’s length basis.

28

Anglo Asian Mining PLC 

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Overview

Corporate governance

Financial statements

3. Significant accounting policies continued
Borrowing costs 
Borrowing costs directly relating to the acquisition, construction or production of a qualifying capital project under construction are 
capitalised and added to the project cost during construction until such time the assets are considered substantially ready for their 
intended use i.e. when they are capable of commercial production. Where funds are borrowed specifically to finance a project, the 
amount capitalised represents the actual borrowing costs incurred. Where surplus funds are available for a short term out of money 
borrowed specifically to finance a project, the income generated from the temporary investment of such amounts is also capitalised 
and deducted from the total capitalised borrowing cost. Where the funds used to finance a project form part of general borrowings, 
the amount capitalised is calculated using a weighted average of rates applicable to relevant general borrowings of the Group during 
the period. All other borrowing costs are recognised in the consolidated income statement in the period in which they are incurred. 

Even though exploration and evaluation assets can be qualifying assets, they generally do not meet the ‘probable economic benefits’ 
test. Any related borrowing costs are therefore generally recognised in the consolidated income statement in the period 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’. 

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. 

Once commercially viable reserves are established and development is sanctioned, exploration and evaluation assets are tested for 
impairment and transferred to ‘Assets under construction’.

Upon transfer of ‘Exploration and evaluation costs’ into ‘Assets under construction’, all subsequent expenditure on the construction, 
installation or completion of infrastructure facilities is capitalised within ‘Assets under construction’. 

When commercial production commences, exploration, evaluation and development costs previously capitalised are amortised over 
the commercial reserves of the mining property on a units-of-production basis.

‘Exploration and evaluation costs’ incurred after commercial production start date in relation to evaluation of potential mineral reserves 
and resources that is expected to result in increase of reserves are capitalised as ‘Evaluation and exploration assets’ within ‘intangible 
assets’. Once there is evidence that reserves are increased, such costs are tested for impairment and transferred to ‘Producing mines’. 

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 and accumulated depletion. Mining rights are depleted on the units-of-production basis over the 
total reserves of the relevant area.

Other intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business 
combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any 
accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised 
development costs, are not capitalised and expenditure is reflected in the consolidated income statement in the year in which the 
expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an 
indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset 
with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern 
of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, 
as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives 
is recognised in the consolidated income statement in the expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the 
cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues 
to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. 

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds 
and the carrying amount of the asset and are recognised in the consolidated income statement when the asset is derecognised.

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Annual report and accounts 2012

29

Notes to the consolidated financial statements continued
for the year ended 31 December 2012

3. Significant accounting policies continued
Property, plant and equipment and mine properties 
Development expenditure is net of proceeds from all but the incidental sale of ore extracted during the development phase. 

Upon completion of mine construction, the assets initially charged to assets in course of construction are transferred into ‘Plant and 
equipment’ or ‘Producing mines’. Items of ‘Plant and equipment’ and ‘Producing mines’ are stated at cost, less accumulated depreciation 
and accumulated impairment losses. 

During the production period expenditures directly attributable to the construction of each individual asset are capitalised as ‘Assets’ 
in course of construction up to the period when asset is ready to be put into operation. When an asset is put into operation it is transferred 
to ‘Plant and equipment’ or ‘Producing mines’. Additional capitalised costs performed subsequent to the date of commencement of 
operation of the asset are charged directly to ‘Plant and equipment’ or ‘Producing mine’ i.e. where the asset itself was transferred.

The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into 
operation, the initial estimate of the rehabilitation obligation and, for qualifying assets, borrowing costs. The purchase price or construction 
cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. 

When a mine construction project moves into the production stage, the capitalisation of certain mine construction costs ceases and 
costs are either regarded as inventory or expensed, except for costs which qualify for capitalisation relating to mining asset additions 
or improvements, underground mine development or mineable reserve development. 

Depreciation/amortisation 
Accumulated mine development costs within producing mines are depreciated/amortised on a units-of-production basis over the 
economically recoverable reserves of the mine concerned, except in the case of assets whose useful life is shorter than the life of the 
mine, in which case the straight line method is applied. The unit of account for run of mines (‘ROM’) costs and for post-ROM costs are 
recoverable ounces of gold. The units-of-production rate for the depreciation/amortisation of mine development costs takes into 
account expenditures incurred to date. 

The premium paid in excess of the intrinsic value of land to gain access is amortised over the life of mine. 

Other plant and equipment such as mobile mine equipment is generally depreciated on a straight line basis over their estimated 
useful lives as follows: 

 E Temporary buildings 

–   eight years 

 E Plant and equipment 

–   eight years 

 E Motor vehicles 

 E Office equipment 

–  four years 

–   four years 

 E Leasehold improvements  –   eight years 

An item of property, plant and equipment, and any significant part initially recognised, is derecognised upon disposal or when no future 
economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference 
between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement when the 
asset is derecognised. 

The asset’s residual values, useful lives and methods of depreciation/amortisation are reviewed at each reporting period and adjusted 
prospectively if appropriate. 

Major maintenance and repairs 
Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets and overhaul costs. 
Where an asset or part of an asset that was separately depreciated and is now written off is replaced, and it is probable that future 
economic benefits associated with the item will flow to the Group through an extended life, the expenditure is capitalised. 

Where part of the asset was not separately considered as a component, the replacement value is used to estimate the carrying 
amount of the replaced assets which is immediately written off. All other day-to-day maintenance costs are expensed as incurred.

Impairment of tangible and intangible assets 
The Group conducts annual internal assessments of the carrying values of tangible and intangible assets. The carrying values of 
capitalised exploration and evaluation expenditure, mine properties and property, plant and equipment are assessed for impairment 
when indicators of such impairment exist or at least annually. In such cases an estimate of the asset’s recoverable amount is calculated. 
The recoverable amount is determined as the higher of the fair value less costs to sell for the asset and the asset’s value in use. This 
is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other 
assets or groups of assets. If this is the case, the individual assets are grouped together into cash-generating units (‘CGUs’) for impairment 
purposes. Such CGUs represent the lowest level for which there are separately identifiable cash inflows that are largely independent 
of the cash flows from other assets or other groups of assets. This generally results in the Group evaluating its non-financial assets 
on a geographical or licence basis. 

If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged to the 
consolidated income statement so as to reduce the carrying amount to its recoverable amount (i.e. the higher of fair value less cost 
to sell and value in use). 

30

Anglo Asian Mining PLC 

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Overview

Corporate governance

Financial statements

3. Significant accounting policies continued
Impairment of tangible and intangible assets continued
Impairment losses related to continuing operations are recognised in the consolidated income statement in those expense categories 
consistent with the function of the impaired asset. 

For assets excluding the intangibles referred to above, an assessment is made at each reporting date as to whether there is any 
indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the 
Group makes an estimate of the recoverable amount. 

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s 
recoverable amount since the last impairment loss was recognised. If this is the case, the carrying amount of the asset is increased 
to its recoverable amount. The increased amount cannot exceed the carrying amount that would have been determined, net of depreciation 
or amortisation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of 
comprehensive income. Impairment losses recognised in relation to indefinite life intangibles are not reversed for subsequent increases 
in its recoverable amount. 

Provisions
General
Provisions are recognised when (a) the Group has a present obligation (legal or constructive) as a result of a past event and (b) it is probable 
that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of 
the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate 
that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the 
passage of time is recognised as a finance cost.

Rehabilitation provision
The Group records the present value of estimated costs of legal and constructive obligations required to restore operating locations in 
the period in which the obligation is incurred. The nature of these restoration activities includes dismantling and removing structures, 
rehabilitating mines and tailings dams, dismantling operating facilities, closure of plant and waste sites and restoration, reclamation 
and re-vegetation of affected areas. 

The obligation generally arises when the asset is installed or the ground/environment is disturbed at the production location. When 
the liability is initially recognised, the present value of the estimated cost is capitalised by increasing the carrying amount of the 
related mining assets to the extent that it was incurred prior to the production of related ore. Over time, the discounted liability is 
increased for the change in present value based on the discount rates that reflect current market assessments and the risks specific 
to the liability. 

The periodic unwinding of the discount is recognised in the consolidated income statement as a finance cost. Additional disturbances 
or changes in rehabilitation costs will be recognised as additions or charges to the corresponding assets and rehabilitation liability 
when they occur. 

For closed sites, changes to estimated costs are recognised immediately in the consolidated income statement. 

Financial assets
Initial recognition and measurement
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, 
held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective 
hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition. All financial assets are 
recognised initially at fair value.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the 
marketplace (regular way trades) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset.

The Group’s financial assets include cash and short-term deposits as well as trade and other receivables.

Subsequent measurement
The subsequent measurement of financial assets depends on their classification:

Trade and other receivables
Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active 
market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate 
method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs 
that are an integral part of the effective interest rate method. The effective interest rate method amortisation is included in finance income 
in the consolidated income statement. The losses arising from impairment are recognised in the consolidated income statement.

www.angloasianmining.com 

Annual report and accounts 2012

31

Notes to the consolidated financial statements continued
for the year ended 31 December 2012

3. Significant accounting policies continued
Financial assets continued
Derecognition
A financial asset (or, where applicable a part of a financial asset) is derecognised when:

 E The rights to receive cash flows from the asset have expired;

 E The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows 
in full without material delay to a third-party under a ‘pass-through’ arrangement; and either (a) the Group has transferred 
substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the 
risks and rewards of the asset, but has transferred control of the asset.

Impairment of financial assets
The Group assesses at each consolidated statement of financial position date whether there is any objective evidence that a financial 
asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, 
there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset 
(an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of 
financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors 
is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will 
enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the 
estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses individually whether objective evidence of impairment exists 
individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. 
If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant 
or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for 
impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised 
are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has incurred, the amount of the loss is measured as the difference between the 
asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet 
been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate.

Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, 
or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification 
of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value and in the case of loans and 
borrowings, plus directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, contractual 
provisions and loans and borrowings.

Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:

Trade and other payables and contractual provisions
Trade and other payables are initially measured at fair value and are subsequently measured at amortised cost using the effective 
interest rate method.

Loans and borrowings
Interest-bearing 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 accrual basis and charged to the 
consolidated 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.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest 
rate method. Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised as well 
as through the effective interest rate method amortisation process. 

Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part 
of the effective interest rate method. The effective interest rate method amortisation is included in finance cost in the consolidated 
income statement.

Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing 
liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition 
of a new liability and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.

32

Anglo Asian Mining PLC 

Annual report and accounts 2012

Overview

Corporate governance

Financial statements

3. Significant accounting policies continued
Non-current prepayments
Advances made to suppliers for fixed asset purchases are recognised as non-current prepayments until the time when fixed assets 
are supplied. 

Inventories 
Metal in circuit consists of in-circuit material at properties with milling or processing operations and doré awaiting refinement, all 
valued at the lower of average cost and net realisable value. In-process inventory costs consist of direct production costs, including 
mining, crushing and processing; site administration costs; and allocated indirect costs, including depreciation, depletion and 
amortisation of producing mines and mining interests. 

Ore stockpiles consist of stockpiled ore, ore on surface and crushed ore, all valued at the lower of average cost and net realisable value. 
Ore stockpile costs consist of direct costs, including mining, crushing and site administration costs; and allocated indirect costs, 
including depreciation, depletion and amortisation of producing mines and mining interests.

Inventory costs are charged to operations on the basis of ounces of gold sold. The Group regularly evaluates and refines estimates 
used in determining the costs charged to operations and costs absorbed into inventory carrying values based upon actual gold recoveries 
and operating plans. 

Finished goods consists of doré bars and metal in concentrate that have been refined and assayed and are in a form that allows them 
to be sold on international bullion markets. Finished goods are valued at the lower of average cost and net realisable value. Finished 
goods costs consist of direct production costs, including mining, crushing and processing; site administration costs; and allocated 
indirect costs, including depreciation, depletion and amortisation of producing mines and mining interests. 

Spare parts and consumables consists of consumables used in operations, such as fuel, chemicals, re-agents and spare parts, valued 
at the lower of average cost and replacement cost and, where appropriate, less a provision for obsolescence. 

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. 

Deferred stripping costs 
Stripping costs incurred in the development of a mine before production commences are capitalised as part of the cost of constructing 
the mine and subsequently amortised over the life of the mine on a units-of-production basis. 

Stripping costs incurred subsequently during the production stage of its operation are deferred for those operations where this is the 
most appropriate basis for matching the cost against the related economic benefits and the effect is material. This is generally the 
case where there are fluctuations in stripping costs over the life of the mine. The amount of stripping costs deferred is based on the 
strip ratio obtained by dividing the tonnage of waste mined either by the quantity of ore mined or by the quantity of minerals contained 
in the ore. Stripping costs incurred in the period are deferred to the extent that the current period ratio exceeds the life of the mine strip 
ratio. Such deferred costs are then charged to the consolidated income statement to the extent that, in subsequent periods, the current 
period ratio falls short of the life of mine (or pit) ratio. The life of mine (or pit) ratio is based on economically recoverable reserves of 
the mine (or pit). Changes are accounted for prospectively, from the date of the change. 

Deferred stripping costs are included as part of ‘producing mines’. These form part of the total investment in the relevant cash-generating 
units, which are reviewed for impairment if events or changes of circumstances indicate that the carrying value may not be recoverable. 

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 consolidated 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 applied 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. 

Reclassifications
Certain reclassifications have been made to the amounts disclosed in prior year consolidated financial statements. There was no impact 
on the Group’s financial position, results of operations and equity as a result of these reclassifications.

www.angloasianmining.com 

Annual report and accounts 2012

33

Notes to the consolidated financial statements continued
for the year ended 31 December 2012

4. Segment information
The Group determines and presents operating segments based on the information that is internally provided to the Group’s chief operating 
decision maker. The chief operating decision maker has been identified as the Board of Directors that makes the strategic decisions. 
The Board currently considers the business from a consolidated perspective and reviews the business based on the operating and 
exploration assets of the Group.

Based on how the business is reviewed the Group has two segments: mining operations and exploration sites. Both segments are 
located within the Republic of Azerbaijan. The mining operations segment is made of the Group’s only producing asset, Gedabek, 
which accounts for all the Group’s revenues, cost of sales and depreciation/amortisation. 

All sales of gold and silver bullions are made to one customer, the Group’s gold refinery, MKS Finance SA, based in Switzerland. 
Copper concentrate is sold to two customers: Seagate Minerals & Metals Inc and Glencore Xstrata International AG.

Year ended 31 December 2012

Sales
Cost of sales

Gross profit
Other income
Administration expenses
Other operating expenses

Operating profit
Finance income
Finance costs

Profit before tax
Income tax expense

Profit for the period attributable to the equity holders of the parent

Mining 
operations
US$

Exploration 
sites
US$

Other/
corporate
US$

Total
US$

73,521,389
(37,445,377)

36,076,012
146,830
(33,399)
(512,530)

—

(1,510,085) 

—
—

—
—
—
—

—
—

—
276,556
(5,881,953)
(246,890)

236,438
—

(9,851,999)

(453,045)

1,121,310

—
—

73,521,389
(37,445,377) 

36,076,012
423,386 
(5,915,352)
(759,420)

29,824,626 
236,438
(1,510,085)

28,550,979 
(9,183,734)

19,367,245 

Total assets

157,615,070

2,683,589

2,410,650

162,709,309

Liabilities are reviewed on a consolidated basis and therefore not reviewed separately.

5. Revenue
The Group’s revenue consists of gold bullion and copper concentrate sold to the third-party customers. Revenue from sales of gold 
and silver content in gold bullion was US$70,931,739 and US$515,105 respectively (2011: US$77,561,807 and US$1,194,842). Revenue 
from sales of copper concentrate was US$2,074,545 (2011: US$4,996,662). 

Finance income of US$236,438 in 2012 represents cash deposit interest received during the year (2011: US$51,000).

6. Other operating expenses and income
Other operating income relates to the income generated as a result of release of accruals during 2012 and 2011.

Other operating expenses consist of metal processing costs, foreign currency exchange net loss and miscellaneous operating 
expenses. No expenses were incurred during 2012 for impairment of inventory and unrecoverable taxes (2011: US$1,141,758 
and US$620,075, respectively).

34

Anglo Asian Mining PLC 

Annual report and accounts 2012

Overview

Corporate governance

Financial statements

Notes

14
13
9

Year ended
31 December
2012
US$

Year ended
31 December
2011
US$

8,533,526
1,802,647
8,504,967
264,851
12,620,014
328,491

12,524,389
6,587,910
7,577,918
201,522
13,031,962
311,098

139,625
118,800

258,425

9,000
5,000

14,000

Benefits
US$

—
—
—
42,000
—

42,000

112,500
118,800

233,300

28,482
5,000

32,482

Total
US$

51,620
75,425
127,032
464,731
66,020

784,828

7. Operating profit

Operating profit is stated after charging:
Depreciation on property, plant and equipment – owned 
Amortisation of mining rights and other intangible assets
Employee benefits and expenses
Net foreign currency exchange loss
Inventory expensed during the year
Operating lease expenses
The analysis of auditor’s remuneration is as follows:
Fees payable to the Group’s auditor for the audit of the Group’s annual accounts
The audit of the Group’s subsidiaries pursuant to legislation 

Total audit fees

Amounts paid to auditor for other services:
Tax services
Audit related assurance services

Total non-audit services

There were no non-cancellable operating lease and sublease arrangements during 2012 and 2011.

The audit fees for the parent company were US$40,300 (2011: US$40,300).

8. Remuneration of Directors 

Year ended 31 December 2012

Richard Round 
John Sununu
Khosrow Zamani
Reza Vaziri
John Monhemius

Total

Consultancy
US$

—
—
—
371,111
14,400

385,511

Fees
US$

51,620
75,425
127,032
51,620
51,620

357,317

Directors’ fees and consultancy fees for 2012 included above were paid in cash. No gain was realised by Directors as a result of options 
exercising during 2012 (2011: $481,512).

Year ended 31 December 2011

Richard Round 
John Sununu
Khosrow Zamani
Reza Vaziri
John Monhemius

Total

Consultancy
US$

— 
— 
— 
308,137
17,158

325,295

Fees
US$

52,159
76,232
128,390
52,159
52,159

361,099

Benefits
US$

— 
— 
— 
42,000
— 

42,000

Total
US$

52,159
76,232
128,390
402,296
69,317

728,394

Directors’ fees and consultancy fees for 2011 included above were paid in cash. 

www.angloasianmining.com 

Annual report and accounts 2012

35

 
Notes to the consolidated financial statements continued
for the year ended 31 December 2012

9. Staff numbers and costs
The average number 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

Less: salary costs capitalised as exploration, evaluation development, fixed asset and inventory expenditure

Total employee costs

Year ended
31 December
2012
Number

Year ended
31 December
2011
Number

54
95
417

566 

50
65
393

508

Year ended
31 December
2012
US$

7,989,312
95,647
1,861,739

Year ended
31 December
2011
US$

7,617,726
28,194
1,763,767

9,946,698
(1,441,731)

9,409,687
(1,831,769)

8,504,967

7,577,918

Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate:

Short-term employee benefits
Share-based payment

10. Finance costs

Interest charged on interest-bearing loans and borrowings
Finance charges on letters of credit and accretion expenses 
Interest capitalised during the period

Total finance cost

Year ended
31 December
2012
US$

Year ended
31 December
2011
US$

784,828
—

784,828

728,394
5,953

734,347

Year ended
31 December
2012
US$

1,786,596
243,265
(519,776)

Year ended
31 December
2011
US$

3,006,243
264,666
—

1,510,085

3,270,909

Interest on interest-bearing loans and borrowings represents charges incurred on credit facilities with the International Bank 
of Azerbaijan (‘IBA’).

Where a portion of the loans has been used to finance the construction and purchase of assets of the Group (‘qualifying assets’), the 
interest on that portion of the loans has been capitalised up until the time the assets were substantially ready for use. US$519,776 
of interest on new loans from IBA obtained for construction of new plant in Gedabek was capitalised in 2012 (2011: $nil) (note 14). 

36

Anglo Asian Mining PLC 

Annual report and accounts 2012

Overview

Corporate governance

Financial statements

11. Taxation
Corporation tax is calculated at 32% (as stipulated in the PSA for RVIG in the Republic of Azerbaijan, the entity that contributes most 
significant portion of profit before tax in the Group consolidated financial statements) of the estimated assessable profit for the year. 
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. Deferred income taxes arising in 
RVIG are recognised and fully disclosed in these consolidated financial statements. The Group has no unutilised tax losses in 2012. 

The major components of the income tax expenses for the year ended 31 December are: 

Current income tax:
Current income tax charge
Deferred tax:
Relating to origination and reversal of temporary differences

Income tax expense reported in the consolidated income statement 

Deferred income tax at 31 December relates to the following: 

Deferred income tax liability:
Property, plant and equipment
Non-current prepayments
Trade and other receivables
Inventories

Deferred tax liability

Deferred income tax asset:
Trade and other payables and provisions
Asset retirement obligation
Carry forward losses

Deferred tax asset

Deferred income tax expense

Net deferred tax liability

Year ended
31 December
2012
US$

Year ended
31 December
2011
US$

2,300,404

4,950,289

6,883,330

7,900,635

9,183,734

12,850,924

Consolidated statement  
of financial position

Consolidated income statement

As at
31 December 
2012
US$

As at 
31 December
2011
US$

Year ended
31 December 
2012
US$

Year ended
31 December
2011
US$

(10,635,606)
(878,554)
(1,305,818)
(10,458,306)

(6,546,680)
(93,533)
(493,324)
(7,553,692)

(4,088,926)
(785,021)
(812,494)
(2,904,614)

(712,118)
(2,505)
(90,632)
(3,049,589)

(23,278,284)

(14,687,229)

2,454,052
1,479,333
—

1,449,662
775,998
—

1,004,390
703,335
—

240,583
—
(4,286,374)

3,933,385

2,225,660

(19,344,899)

(12,461,569)

Profit before tax
Theoretical tax charge at statutory rate of 32% for RVIG*
Effects of different tax rates for certain Group entities (28%)
Tax effect of items which are not deductible or assessable for taxation purposes:
– losses in jurisdictions that are exempt from taxation 
– non-deductible expenses
– non-taxable income
Unrecognised deferred tax assets
Benefit from unrecognised deferred tax assets of previous years

Income tax expense for the year

* This is the local tax rate applicable in accordance with local legislation

(6,883,330)

(7,900,635)

Year ended
31 December
2012
US$

28,550,979
9,136,313
44,170 

3,768
456,120
(163,976)
—
(292,661)

Year ended
31 December
2011
US$

31,623,383
10,119,483
65,062 

3,271
2,365,088
—
298,020 
—

9,183,734

12,850,924

www.angloasianmining.com 

Annual report and accounts 2012

37

 
 
 
Notes to the consolidated financial statements continued
for the year ended 31 December 2012

11. Taxation continued
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 assets and liabilities have been offset for deferred taxes recognised for RVIG since there is a legally enforceable right 
to set off current tax assets against current tax liabilities and 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 in the Republic of Azerbaijan.

At the balance sheet date, the Group has unused tax losses of US$7,913,323 (2011: US$6,813,064) available for offset against future 
profits. There were no unused tax losses in the Republic of Azerbaijan in 2012. No deferred tax assets have been recognised in respect 
of jurisdictions other than the Republic of Azerbaijan due to the uncertainty of future profit streams. 

12. Earnings per share
The basic earnings per share of 17.41 cents (2011: 16.91 cents) has been based on a weighted average number of shares in issue 
of 111,238,129 (2011: 110,993,882) and a net income of US$19,367,245 (2011: US$18,772,459).

Dilutive earnings per share are 17.26 cents for 2012 (2011: 16.47 cents). Dilutive earnings per share have been based on 112,219,871 
(2011: 113,970,224), the weighted average number of shares determined based on the dilutive effects of 981,742 (2011: 2,976,342) 
share options exercisable as of 31 December 2012.

13. Intangible assets 
Exploration and evaluation assets

Cost
As at 1 January 2011
Additions
Transfer to property, plant and equipment (note 14)

As at 31 December 2011
Additions
Transfer to property, plant and equipment (note 14)

As at 31 December 2012

Mining rights and other intangible assets

Cost
As at 1 January 2011
Additions

As at 31 December 2011 
Additions

As at 31 December 2012

Amortisation and impairment*
As at 1 January 2011
Charge for the year

As at 31 December 2011 
Charge for the year

As at 31 December 2012

Net book value
As at 31 December 2011

As at 31 December 2012

Gedabek
US$

Gosha
US$

Ordubad
US$

Total
US$

2,032,275 
2,914,644
—

4,946,919
905,817
(5,852,736)

—

2,524,719
1,576,621
(4,101,340)

—
—
—

—

Mining
rights
US$

41,925,262
—

41,925,262
—

1,708,569
465,071
—

2,173,640
509,949
—

6,265,563 
4,956,336
(4,101,340)

7,120,559
1,415,766
(5,852,736)

2,683,589

2,683,589

Other
intangible
assets
US$

341,789
101,412

443,201
229,770

Total
US$

42,267,051
101,412

42,368,463
229,770

41,925,262

672,971

42,598,233

(13,975,498)
(6,517,353)

(20,492,851)
(1,767,344)

(87,675)
(70,557)

(158,232)
(35,303)

(14,063,173)
(6,587,910)

(20,651,083)
(1,802,647)

(22,260,195)

(193,535)

(22,453,730)

21,432,411

284,969

21,717,380

19,665,067

479,436

20,144,503

*  An amount of 609,000 ounces of recoverable gold has been used during 2012 (2011: 244,000 ounces) to determine depreciation on accumulated mining rights and 

other intangible assets.

38

Anglo Asian Mining PLC 

Annual report and accounts 2012

Overview

Corporate governance

Financial statements

14. Property, plant and equipment

Temporary
buildings
US$

Plant and
equipment
US$

Producing
mines
US$

Motor
vehicles
US$

Office
equipment
US$

Leasehold
improvements
US$

Assets under
construction
US$

Total
US$

Cost
As at 1 January 2011 
Additions
Transfer to producing mines
Transfer from evaluation and 
exploration assets (note 13)
Increase in provision for 
rehabilitation

As at 31 December 2011 
Capitalisation of 
interest (note 10)
Additions
Transfer to producing mines
Transfer from evaluation and 
exploration assets (note 13)
Increase in provision 
for rehabilitation 

302,757
13,600
—

6,842,503
427,426

48,254,378
—
— 4,921,316

555,145
201,801
—

1,851,032
729,893
—

450,095
5,010

2,945,705
6,336,454

— (4,921,316) 

61,201,615
7,714,184
—

—

—

—

—

—

967,865

—

—

—

—

— 4,101,340

4,101,340

—

—

967,865

316,357

7,269,929

54,143,559

756,946

2,580,925

455,105

8,462,183

73,985,004

—
7,377
—

—
1,202,315

—
882,683
— 18,581,802

—
222,109
—

—
225,246
—

519,776
—
— 41,936,354
— (18,581,802)

519,776
44,476,084
—

—

—

—

—

— 2,012,295

—

—

—

—

— 5,852,736

5,852,736

—

— 2,012,295

As at 31 December 2012

323,734 8,472,244

75,620,339

979,055

2,806,171

455,105

38,189,247 126,845,895

Depreciation and impairment*
As at 1 January 2011 
Charge for the year

(190,447)
(38,745)

(2,035,022)
(981,598)

(14,258,275)
(10,962,382)

(317,103)
(135,999)

(803,349)
(349,181)

As at 31 December 2011 
Charge for the year

(229,192)
(40,005)

(3,016,620)
(1,080,732)

(25,220,657)
(6,863,214)

(453,102)
(166,939)

(1,152,530)
(355,294)

(306,749)
(56,484)

(363,233)
(47,342)

— (17,910,945)
— (12,524,389)

— (30,435,334)
— (8,533,526)

As at 31 December 2012

(269,197)

(4,097,352) (32,083,871)

(620,041)

(1,507,824)

(410,575)

— (38,968,860)

Net book value
As at 31 December 2011 

87,165

4,253,309

28,922,902

303,844

1,428,395

91,872

8,462,183

43,549,670

As at 31 December 2012

54,537

4,374,892

43,536,468

359,014

1,298,347

44,530

38,189,247

87,877,035

*  An amount of 609,000 ounces of recoverable gold has been used during 2012 (2011: 244,000 ounces) to determine depreciation on accumulated mine development 

costs based on a new JORC-compliant reserve report.

The capital commitments by the Group have been disclosed in note 27. 

15. Non-current prepayments
Non-current prepayments represent advances made to suppliers for fixed asset purchases. 

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.

www.angloasianmining.com 

Annual report and accounts 2012

39

Notes to the consolidated financial statements continued
for the year ended 31 December 2012

17. Trade receivables and other assets

Gold held and transferable to the Government to satisfy obligations
VAT refund due
Other tax receivable
Trade receivables
Prepayments and advances

As at
31 December
2012
US$

As at
31 December
2011
US$

3,831,200
1,706,233
462,462
1,055,058
3,427,194

1,168,185
978,442
—
93,330
1,531,039

10,482,147

3,770,996

The carrying amount of trade and other receivables approximates to their fair value.

The VAT refund due at 31 December 2012 and 2011 relates to VAT paid on purchases. 

The gold bullion held and transferable to the Government relates to bullion held by the Group for which it owes to the Government. 
The Group holds the Government’s share of the product from its mining activities and from time to time transfers that product to the 
Government. A corresponding liability to the Government is included in trade and other payables shown in note 20.

The Group does not consider any stated trade and other receivables as past due or impaired.

18. Inventories

At cost
Finished goods – bullion
Finished goods – metal in concentrate
Metal in circuit
Ore stockpiles
Spare parts and consumables

As at
31 December
2012
US$

As at
31 December
2011
US$

2,030,670
4,363,560
17,976,010
7,457,165 
4,600,227 

1,151,566
3,258,156
18,434,070
— 
4,457,391 

36,427,632

27,301,183

The Group has capitalised mining costs related to low grade oxide and high grade sulphide ore stacked during the year. Such stockpiles 
are expected to be utilised as part of heap leaching and agitation leaching process accordingly. Inventory is recognised at lower of cost 
or net realisable value. 

19. Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and held by the Group within financial institutions that are available immediately. 
The carrying amount of these assets approximates their fair value.

The Group’s cash on hand and cash held within financial institutions comprised US$197,842 and US$2,212,888, respectively (2011: US$127,117 
and US$9,811,477). 

The Group’s cash and cash equivalents are mostly held in US Dollars.

20. Trade and other payables 

Accruals and other payables
Trade creditors 
Gold held and transferable to the Government to satisfy obligations
Payable to the Government from copper concentrate joint sale
Current income tax payable

As at
31 December
2012
US$

As at
31 December
2011
US$

6,273,853
1,279,438
3,831,200
228,100
—

5,104,558
1,904,655
1,168,185
519,872
110,490

11,612,591

8,807,760

Trade creditors primarily comprise amounts outstanding for trade purchases and ongoing costs. Trade creditors are non-interest-bearing 
and the creditor days were 24 (2011: 15). Accruals and other payables mainly consist of accruals made for accrued but not paid salaries, 
bonuses, related payroll taxes and social contributions, as well as services provided but not billed to the Group by the end of reported 
period. The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

Amount payable to the Government from copper concentrate joint sale represents the portion of cash received from the customer for 
the Government’s portion from the joint sale of copper concentrate. 

40

Anglo Asian Mining PLC 

Annual report and accounts 2012

21. Interest-bearing loans and borrowings

Loans from IBA
Total interest-bearing loans and borrowings
Loans repayable in less than one year
Loans repayable in more than one year 

Overview

Corporate governance

Financial statements

As at
31 December
2012
US$

30,759,749
30,759,749
1,820,999
28,938,750

As at
31 December
2011
US$

13,128,412
13,128,412
11,307,412
1,821,000

IBA has agreed to finance construction of the new plant in Gedabek and the Group has signed new loan agreements with IBA for total 
amount of US$43,500,000 in 2012. During 2012 the Group has drawndown US$29,326,689 from total facilities available under the agreement. 
Interest rate per the agreements is 12% per annum. Repayment of the principal loan starts after two years from the withdrawal date 
for each contract. According to the terms of the new loan agreement, all the assets purchased using funds provided under the loan 
agreement shall be treated as collateral until full settlement of the loan. As of 31 December 2012 the Group has pledged the assets 
under construction in amount of US$29,326,689 for the loan from IBA (2011: nil).

The Group has repaid to IBA US$11,220,000 (2011: US$16,588,000) of loan balance during the year. 

As at 31 December 2012 the Group had undrawn facilities of US$14,173,311 (2011: US$227,000) after consideration of the letters 
of credit which are guaranteed by the IBA.

22. Provision for rehabilitation

Carrying amount as at 1 January 
Change in estimate
Accretion expense
Effect of change in discount rate

Carrying amount as at 31 December 

2012
US$

2,424,995
1,937,331
165,627
94,963

2011
US$

1,363,970
1,327,033
93,160
(359,168)

4,622,916

2,424,995

The Group is exposed to restoration, rehabilitation and environmental liabilities relating to its mining operations. Estimates of the cost 
of this work including reclamation costs, close down and pollution control are made on an on-going basis, based on the estimated life 
of the mine. A new estimation was made as a result of change of expected rehabilitation works due to new plant and certain changes 
in production process as a result of new agitation plant. This represents the net present value of the best estimate of the expenditure 
required to settle the obligation to rehabilitate any environmental disturbances caused by mining operations (US$9,064,875 undiscounted 
liability for 2012 and US$4,043,836 undiscounted liability for 2011, discounted using a risk-free rate of 6.62% and 6.83% for 2012 and 
2011, respectively).

Expenditures on restoration and rehabilitation works are expected between 2022–2023. 

23. 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 main risks that could adversely affect the Group’s financial assets, liabilities or future cash flows are capital risk, market risk, 
interest rate risk, foreign currency risk, liquidity risk and credit risk. Management reviews and agrees policies for managing each 
of these risks which are summarised below.

The following discussion also includes a sensitivity analysis that is intended to illustrate the sensitivity to changes in market variables 
on the Group’s financial instruments and show the impact on profit or loss and shareholders’ equity, where applicable. Financial 
instruments affected by market risk include bank loans and overdrafts, accounts receivable, accounts payable and accrued liabilities.

The sensitivity has been prepared for the years ended 31 December 2012 and 2011 using the amounts of debt and other financial 
assets and liabilities held as at those reporting dates.

www.angloasianmining.com 

Annual report and accounts 2012

41

Notes to the consolidated financial statements continued
for the year ended 31 December 2012

23. Financial instruments continued
Capital risk management
The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 21, cash and cash equivalents and 
equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in the 
consolidated statement of changes in equity. 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 AIM, part of the 
London Stock Exchange, and loans from the IBA and other Azerbaijani banks. 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. The Group monitors capital using a gearing ratio, which is net 
debt divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio below 70%. The Group includes within net 
debt interest-bearing loans and borrowings, less cash and cash equivalents.

Interest-bearing loans and borrowings (note 21)
Less cash and cash equivalents (note 19)

Net debt
Equity

Capital and net debt

Gearing ratio

As at
31 December
2012
US$

30,759,749
(2,410,730)

28,349,019
97,163,197

As at
31 December
2011
US$

13,128,412
(9,938,594)

3,189,818
76,867,936

125,512,216

80,057,754

23%

4%

Interest rate risk
The Group’s cash deposits, letters of credit, borrowings and interest-bearing loans are at a fixed rate of interest. The Group manages 
the risk by maintaining fixed rate instruments, with approval from the Directors 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 2012 and 2011.

Interest rate sensitivity analysis
The Group’s financial instruments are at fixed interest rates, therefore, there is no impact from changes in interest rates (2011: nil).

Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board, 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 21 is a description 
of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk. 

The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:

Year ended 31 December 2012

On
demand
US$

Interest-bearing loans and borrowings
Trade and other payables 

—
1,638,557

Less than
3 months
US$

1,985,053
9,974,034

3 to 12
months
US$

1 to 5
years
US$

1,729,570
—

50,879,905
—

1,638,557

11,959,087

1,729,570

50,879,905

Year ended 31 December 2011

On
demand
US$

Less than
3 months
US$

3 to 12
months
US$

1 to 5
years
US$

Interest-bearing loans and borrowings
Trade and other payables 

—
1,777,515

336,600
4,857,387 

12,148,624
484,800

1,875,630
—

1,777,515

5,193,987

12,633,424

1,875,630

> 5 years
US$

Total
US$

—
—

—

54,594,528
11,612,591 

66,207,119

> 5 years
US$

Total
US$

—
—

—

14,360,854
7,119,702 

21,480,556

42

Anglo Asian Mining PLC 

Annual report and accounts 2012

Overview

Corporate governance

Financial statements

23. Financial instruments continued
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. 
The maximum credit risk exposure relating to financial assets is represented by their carrying value as at the consolidated statement 
of financial position date. 

The Group has adopted a policy of only dealing with creditworthy banks. Trade receivables consist of amounts due to the Group from 
sales of gold and silver. All sales of gold-silver bullions are made to MKS Finance SA, a Switzerland based gold refinery, and copper 
concentrates to Seagate Minerals and Metals and Glencore International AG. Due to the nature of the customers, the Board does not 
feel that a significant credit risk exists for receipt of revenues. The Board continually reviews the possibilities of selling gold to alternative 
customers and also the requirement for additional measures to mitigate any potential credit risk. 

Foreign currency risk
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

2012
US$

52,000
6,039,496
131,794

2011
US$

54,496
4,812,429
154,226

Assets

2012
US$

66,140
2,526,079
2,716

2011
US$

31,525
1,310,806
8,126

Foreign currency sensitivity analysis
The Group is mainly exposed to the currency of the United Kingdom (UK Sterling) and the currency of the Republic of Azerbaijan 
(Azerbaijan Manats).

The following table details the Group’s sensitivity to a 8.85% and 3.82% (2011: 12.5% and 5.09%) increase and decrease in the US Dollar 
against UK Sterling and Azerbaijani Manat, respectively. These are the sensitivity rates 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 respective change in foreign currency rates. A positive number below indicates an increase in profit 
and other equity where the US Dollar strengthens by mentioned rates against the relevant currency. 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:

Effect on profit before tax

UK Sterling impact

Azerbaijan Manat impact

2012
US$

1,251 

2011
US$

2,871

2012
US$

2011
US$

134,213

178,233

Market risk
The Group’s activities primarily expose it to the financial risks of changes in gold, silver and copper prices which have a direct impact 
on revenues. The Board monitors both the spot and forward price of these regularly and now that production is becoming more reliable 
will review the possibility of using forward contracts and derivative financial instruments to manage this risk. 

A 10% decrease in gold price would result in a reduction in revenue of US$7,098,505 and a 10% increase in gold prices would have the 
equal and opposite effect. A 10% decrease in silver price would result in a reduction in revenue of US$137,219 and a 10% increase in 
silver prices would have an equal and opposite effect. A 10% decrease in copper price would result in a reduction in revenue of US$118,065 
and a 10% increase in copper prices would have an equal and opposite effect.

www.angloasianmining.com 

Annual report and accounts 2012

43

Notes to the consolidated financial statements continued
for the year ended 31 December 2012

24. Equity

Authorised:
600,000,000 ordinary shares of 1 pence each

Issued and fully paid:
111,397,307 ordinary shares of 1 pence each (2011: 111,047,307 ordinary shares of 1 pence each)

Fully paid ordinary shares carry one vote per share and carry the right to dividends. 

Ordinary shares issued and fully paid:
At 1 January 2011
Exercise of stock options

At 31 December 2011
Exercise of stock options

At 31 December 2012

As at
31 December
2012
British Pound

As at
31 December
2011
British Pound

6,000,000

6,000,000

US$

US$

1,973,129

1,967,704

Shares

US$

110,397,307
650,000

111,047,307
350,000

1,957,424
10,280

1,967,704
5,425

111,397,307

1,973,129

Share options
The Group has share option scheme under which options to subscribe for the Company’s shares have been granted to certain Executives 
and senior employees (note 26). 

Merger reserve
The merger reserve was created in accordance with the merger relief provisions under Section 612 of the Companies Act 2006 (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. 

25. Notes to the cash flow statement

Profit before tax
Adjustments for:
Finance income
Finance costs (note 10)
Depreciation of property, plant and equipment (note 14)
Amortisation of mining rights and other intangible assets (note 13)
Share-based payment expense (note 26)
Write down of taxes receivable (note 17)
Write down of unrecoverable inventory (note 18)

Operating cash flows before movements in working capital
Increase in trade and other receivables
Increase in inventories
Increase/(decrease) in trade and other payables

Cash provided by operations
Income taxes paid

Net cash provided by operating activities

Year ended
31 December
2012
US$

Year ended
31 December
2011
US$

28, 550,979

31,623,383

(236,438)
1,510,085
8,533,526
1,802,647
95,647
—
—

40,256,446
(3,870,981)
(9,126,449)
252,306

27,511,322
(2,593,713)

(51,000)
3,270,909
12,524,389
6,587,910
28,194
620,075
1,141,758

55,745,618
(434,195)
(12,087,973)
(364,908)

42,858,542
(4,834,145)

24,917,609

38,024,397

44

Anglo Asian Mining PLC 

Annual report and accounts 2012

Overview

Corporate governance

Financial statements

26. Share-based payments
Equity-settled share options
The Group operates a share option scheme for Directors and senior employees of the Group. 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 Group’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 the beginning of the 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

2012

2011

Number of
share
options

3,101,684
350,000
—
—
(350,000)

3,101,684

2,851,684

Weighted
average
exercise price
Pence

34
46
—
—
7

38

38

Number of
share
options

3,526,684
225,000
—
—
(650,000)

3,101,684

2,826,684

Weighted
average
exercise price 
Pence

29
35
—
—
5

34

34

The options outstanding at 31 December 2012 had a weighted average exercise price of 38 pence (ranging from 11.5 pence to 97 pence) 
and a weighted average remaining contractual life of five years. 350,000 options (2011: 225,000 options) were granted in 2012. The 
aggregate of the estimated fair values of the options granted during 2012 is £46,943 (US$76,107) (2011: £40,306 or US$63,685).

The inputs into the Black-Scholes model are as follows:

Granted on 27 September 2012

Weighted average share price
Weighted average exercise price
Expected volatility for one year vesting period options
Expected volatility for two years vesting period options
Expected life for one year vesting period option
Expected life for two years vesting period option
Risk-free rate

£0.46
£0.46
49%
61%
One year
Two year
0.20%

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous one and two 
years for share options with one and two years vesting periods, respectively. 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 27 September 2012 is £0.13 (US$0.22).

Total share-based payment expense recognised by the Group
The Group recognised total expenses of US$95,647 and US$28,194 related to equity-settled share-based payment transactions 
in 2012 and 2011, respectively.

Shared-based payment charges for options executed during 2012 of the amount of US$12,566 (2011: US$17,782) were reclassified 
from share-based payment reserve to accumulated loss.

The cumulative amount recognised in equity relating to share-based payments at the consolidated statement of financial position 
date was US$731,870 (2011: US$648,789).

www.angloasianmining.com 

Annual report and accounts 2012

45

 
Notes to the consolidated financial statements continued
for the year ended 31 December 2012

27. Contingencies and commitments
The Group undertakes its mining operations in the Republic of Azerbaijan pursuant to the provisions of the Agreement on the Exploration, 
Development and Production Sharing for the Prospective Gold Mining Areas: Gedabek, Gosha, Ordubad Group (Piyazashi, Agyurt, 
Shakardara, Kiliyaki), Soutely, Kyzilbulag and Vejnali Deposits dated 20 August 1997 (the ‘PSA’). The PSA contains various provisions 
relating to the obligations of the R.V. Investment Group Services LLC (‘RVIG’), a wholly owned subsidiary of the Company, with regards 
to the exploration and development programme, preparation and timely submission of reports to the Government, compliance with 
environmental and ecological requirements, etc. The Directors believe that RVIG is in compliance with the requirements of the PSA. 
The Group has announced a discovery on Gosha mining property in February 2011 and submitted the development programme to the 
Government according to the PSA requirements, which was approved in 2012. Additionally the Group has announced a discovery on 
the Ordubad group of mining properties in April 2012 and submitted the development programme to the Government according to the 
PSA requirements. 

The mining licence on Gedabek expires in March 2022, with the option to extend the licence by ten years conditional upon satisfaction 
of certain requirements stipulated in the PSA.

RVIG is also 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 2012.

There were no capital commitments at 31 December 2012.

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 2012 and 2011, there were no trading transactions between Group companies.

Other related party transactions
a)   Reza Vaziri retains an indirect interest in the lease of the office in Baku, the Republic of Azerbaijan. The cost of the lease in the year 

was US$93,616 (2011: US$93,135).

b)  Shares issued to Directors are disclosed in the Directors’ Report.

c)  Remunerations paid to Directors are disclosed in note 8.

d)   350,000 shares were issued to Andrew Herbert, the former Chief Financial Officer of the Group, from exercise of stock options 

during 2012.

e)   Total payments in amount of US$786,181 (2011: US$317,000) were made for equipment and spare parts purchased from Proses 

Muhendislik Danismanlik Inshaat ve Tasarim Anonim Shirket, the entity in which the Chief Technical Officer of Azerbaijan 
International Mining Company has a direct ownership interest.

There is $319,906 advance payment at year end in relation to the above related party transaction (2011: $106,495).

All of the above transactions were made on arm’s length terms and during the normal course of business.

29. Subsequent events 
The following subsequent events relate to the period from 31 December 2012 to the date of approval of the consolidated financial 
statements on 24 May 2013.

The Group has signed a new loan agreement for total amount of US$3,000,000 and US$12,300,000 was withdrawn from unused 
facilities available at IBA for the purposes of construction of the new plant in Gedabek. 

The Group has substantially completed construction of new plant in Gedabek and started trial operations in May 2013. 

46

Anglo Asian Mining PLC 

Annual report and accounts 2012

Independent auditor’s report 
to the members of Anglo Asian Mining PLC

Overview

Corporate governance

Financial statements

We have audited the parent company financial statements of for the year ended 31 December 2012 which comprise the Company balance 
sheet and the related notes 1 to 14. The financial reporting framework that has been applied in their preparation is applicable law and 
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 
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 auditor’s 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
As explained more fully in the statement of Directors’ responsibilities set out on page 17, the Directors are responsible for the 
preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is 
to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards 
on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance 
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment 
of: whether the accounting policies are appropriate to the parent Company’s circumstances and have been consistently applied and 
adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation 
of the financial statements. In addition, we read all the financial and non-financial information in the Directors’ Report to identify 
material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or 
inconsistencies we consider the implications for our report.

Opinion on financial statements
In our opinion the parent company financial statements:

 E give a true and fair view of the state of the Company’s affairs as at 31 December 2012;

 E have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

 E have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared 
is consistent with the parent company financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, 
in our opinion:

 E adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been 

received from branches not visited by us; or

 E the parent company financial statements are not in agreement with the accounting records and returns; or

 E certain disclosures of Directors’ remuneration specified by law are not made; or

 E we have not received all the information and explanations we require for our audit.

Other matter
We have reported separately on the Group financial statements of Anglo Asian Mining plc for the year ended 31 December 2012.

Steven Dobson (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
24 May 2013

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Annual report and accounts 2012

47

Company balance sheet
as at 31 December 2012

Non-current assets

Tangible assets

Investments

Current assets

Debtors – amounts falling due within one year

Cash at bank and in hand

Creditors: trade creditors and accruals

Net current assets

Net assets 

Share capital and reserves

Called up share capital

Share premium account

Accumulated loss

Capital employed

Notes

2012
US$

2011
US$

3

4

6

7

8

14,217

34,490

1,325,007

1,325,007

1,339,224

1,359,497

20,501,869

21,967,675

1,100,301

726,195

21,602,170

22,693,870

(937,660)

(987,700)

20,664,510

21,706,170

22,003,734

23,065,667

10,11

1,973,129

1,967,704

11

11

32,172,575

32,139,674

(12,141,970)

(11,041,711)

22,003,734

23,065,667

These financial statements were approved by the Board of Directors on 24 May 2013 and were signed on its behalf by:

Reza Vaziri
Chief Executive

48

Anglo Asian Mining PLC 

Annual report and accounts 2012

Notes to the Company financial statements
for the year ended 31 December 2012

Overview

Corporate governance

Financial statements

1. Significant accounting policies and going concern
1a. Going concern
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 
2006 and were approved for issue on 24 May 2013.

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 408 of the Companies Act 2006 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 under FRS 8 not to disclose transactions with wholly owned subsidiaries.

Tangible assets
Tangible 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. 

Depreciation is provided on cost in annual instalments over the estimated useful lives of assets which are reviewed annually. 
The tangible assets mainly represented by office and computer equipment are depreciated on a straight line basis over four years.

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.

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 US$1,100,259 (2011: US$1,064,083).

www.angloasianmining.com 

Annual report and accounts 2012

49

Notes to the Company financial statements continued
for the year ended 31 December 2012

3. Tangible assets

Cost
As at 1 January 2012
Additions

As at 31 December 2012

Accumulated depreciation
As at 1 January 2012
Charge for year

As at 31 December 2012

Net book value
As at 31 December 2011

As at 31 December 2012

4. Investments

Shares in subsidiary undertakings
Anglo Asian Operations Limited

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 2012 are as follows:

Office
equipment
US$

94,885
—

94,885

(60,395)
(20,273)

(80,668)

34,490

14,217

Year ended
31 December
2012
US$

Year ended
31 December
2011
US$

1,325,007

1,325,007

Name

Anglo Asian Operations Limited
Holance Holdings Limited
Anglo Asian Cayman Limited
R.V. Investment Group Services LLC
Azerbaijan International Mining Company Limited

6. Debtors

Amounts falling due within one year
Prepayments
Advances paid
HMRC
Amounts owed by subsidiary undertakings

Country of
incorporation

Great Britain
British Virgin Islands
Cayman Islands
Delaware, USA
Cayman Islands

Primary
activity

Percentage
of holding
%

Holding company
Holding company
Holding company
Mineral development
Mineral development

100
100
100
100
100

Year ended
31 December
2012
US$

Year ended
31 December
2011
US$

25,578
385,624
43,031
20,047,636 

73,968
—
12,907
21,880,800

20,501,869

21,967,675

7. Cash
Cash and cash equivalents comprise cash held by the Company 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.

50

Anglo Asian Mining PLC 

Annual report and accounts 2012

8. Creditors

Amounts falling due within one year
Trade creditors
Accruals

9. Deferred taxation

The elements of unrecognised deferred taxation are as follows:
Tax losses

Unrecognised deferred tax asset

Overview

Corporate governance

Financial statements

Year ended
31 December
2012
US$

Year ended
31 December
2011
US$

9,346
928,314

937,660

24,715
962,985

987,700

Year ended
31 December
2012
US$

Year ended
31 December
2011
US$

1,681,605

1,373,532

1,681,605

1,373,532

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 1 pence each

Allotted and fully paid
At the beginning of the year

At the end of the year

11. Reconciliation of shareholders’ funds and movements on reserves

As at 1 January 2012
Loss for the year
Share issue
Share-based payment

As at 31 December 2012

2012

2011

Number

£

Number

£

600,000,000

6,000,000

600,000,000

6,000,000

Number

US$

Number

US$

111,047,307

1,967,704

110,397,307

1,957,424

111,397,307

1,973,129

111,047,307

1,967,704

Share
capital
US$

1,967,704
—
5,425
—

Share
premium
account
US$

32,139,674
—
32,901
—

Accumulated
loss
US$

Shareholders’
funds
US$

(11,041,711)
(1,195,906)
—
95,647

23,065,667
(1,195,906)
38,326
95,647

1,973,129

32,172,575

(12,141,970)

22,003,734

Shares issued during the year relate to those issued as a result of options exercise.

12. Share-based payments
Equity-settled share option scheme
Details in relation to the Company’s equity-settled share option scheme are given in note 26 to the consolidated financial statements.

13. Subsequent events
No significant events took place during the period after the balance sheet date.

14. Auditor’s remuneration
The Company paid US$40,300 (2011: US$40,300) to its auditor in respect of the audit of the financial statements of the Company. Fees 
paid to Ernst & Young LLP and their associates for non-audit services to the Company itself are not disclosed in the individual accounts 
of Anglo Asian Mining PLC because consolidated financial statements are prepared which are required to disclose such fees on a 
consolidated basis. 

www.angloasianmining.com 

Annual report and accounts 2012

51

Corporate information

Azerbaijan Office (principal place of business)
16 H. Aleskerov Str. 
Baku 
The Republic of Azerbaijan

Auditor
Ernst & Young LLP
1 More London Place 
London SE1 2AF 
United Kingdom

Secretary and Registered Office
Sean Duffy
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
HSBC
79 Piccadilly 
London W1J 8EU 
United Kingdom

Bankers – Azerbaijan
International Bank of Azerbaijan
67 Nizami Str. 
Baku 
The Republic of Azerbaijan

Bankers – Azerbaijan
Yapi Kredi Bank Azerbaijan JSC
32 J. Jabbarly Str. 
Baku  
The Republic of Azerbaijan

Solicitors – United Kingdom
Squire Sanders (UK) LLP 
7 Devonshire Square 
Cutlers Gardens 
London EC2M 4YH 
United Kingdom

Solicitors – Azerbaijan
Nazal Consulting LLC
36 Islam Safarly Str. 
Baku 
The Republic of Azerbaijan

Nominated Adviser and Broker
SP Angel Corporate Finance LLP
Prince Frederick House 
35–39 Maddox Street 
London W1S 2PP 
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.angloasianmining.com or contact:

Reza Vaziri 

Anglo Asian Mining PLC 

Tel: +994 12 596 3350

Sean Duffy 

Anglo Asian Mining PLC 

Tel: +994 12 596 3350

Ewan Leggat 

Laura Littley 

SP Angel Corporate Finance,  
as Nominated Adviser 

SP Angel Corporate Finance,  
as Corporate Broker 

Tel: +44 (0)20 3463 2260 

Tel: +44 (0)20 3463 2260

Felicity Edwards  St Brides Media & Finance Ltd 

Tel: +44 (0)20 7236 1177

Hugo de Salis 

St Brides Media & Finance Ltd 

Tel: +44 (0)20 7236 1177

52

Anglo Asian Mining PLC 

Annual report and accounts 2012

 
 
 
 
 
 
Anglo Asian Mining PLC
16 H. Aleskerov Str. 
Baku 
Republic of Azerbaijan 
Tel +994 12 596 3350 
Fax +994 12 596 3354 
www.angloasianmining.com