Anglo Asian Mining PLC Annual Report 2016

FY2016 Annual Report · Anglo Asian Mining PLC

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Gold, copper and silver
production in Azerbaijan

Anglo Asian Mining PLC
Annual report and accounts 2016

Anglo Asian Mining PLC is listed on AIM
and has a portfolio of gold, copper and silver
production and exploration assets in Azerbaijan.

The Company’s extensive portfolio is located on the Tethyan Tectonic Belt,
one of the world’s most significant gold and copper bearing trends, which
extends from Pakistan to the Balkans passing through Iran, Azerbaijan,
Georgia and Turkey.

The Company’s key operations span three contract areas in Azerbaijan
covering 1,062 square kilometres. Three additional contract areas covering
900 square kilometres are held in territories occupied by Armenia which it
hopes to develop once access is obtained.

The properties are held under a Production Sharing Agreement with
the Government of Azerbaijan.

Contents

Anglo Asian Mining PLC
1 Highlights
2 Anglo Asian Mining
4 Strategy and exploration

Chairman’s statement
5 Chairman’s statement

Strategic report
7 Strategic report
14 Sustainability and cost reduction

Financial review
15 Financial review

Group financial statements
27 Independent auditor’s report
28 Group income statement
28 Group statement of comprehensive income
29 Group statement of financial position
30 Group cash flow statement
31 Group statement of changes in equity
32 Notes to the Group financial statements

Company financial statements
57 Company statement of financial position
58 Company statement of changes in equity
59 Notes to the Company financial statements

Corporate governance
18 Board of directors
19 Corporate governance
20 Directors’ report
24 Report on directors’ remuneration
26 Statement of directors’ responsibilities

Annual general meeting
62 Letter to shareholders
63 Notice of annual general meeting

of shareholders

Company information
65 Company information

Discover more online

For the latest news and
investor information, visit
the Company’s website at
www.angloasianmining.com

Cover photo: Panoramic view
of the Ugur gold deposit
showing the exploration
area. The boundaries of
the new open pit mine
will be approximately
the same as the current
exploration area.

Highlights
year ended 31 December 2016

Financial highlights

Operational highlights

Revenue

$79.2m

(2015: $78.1m)

All in sustaining cost (“AISC”)* per ounce

$616 per oz

(2015: $858 per oz)

Profit before taxation

$6.8m

(2015: loss of $8.9m)

Operating cash flow before
movements in working capital

$33.9m

(2015: $18.6m)

Net debt calculated as aggregate
of loans and borrowings

$34.6m

(2015: $49.0m)

• Total gold production for 2016 of 65,394 ounces, a
9 per cent. decrease compared to 72,032 ounces
produced in 2015

• Gold sales in 2016 of 53,281 ounces (2015: 63,924 ounces)

completed at an average of $1,253 per ounce
(2015: $1,161 per ounce)

• Gold produced in 2016 at an all in sustaining cost*
net of by-product credits of $616 per ounce (2015:
$858 per ounce). Lower cash operating cost due
to increase in flotation production and cost
reduction initiatives

• Copper production for 2016 was 1,941 tonnes, a
100 per cent. increase compared to 969 tonnes
produced in 2015

• Silver production for 2016 totalled 165,131 ounces, a

5.8 times increase over 2015 production of 28,626 ounces

• First full year of production from flotation plant –

6,339 dry metric tonnes of concentrate containing
1,121 tonnes of copper, 4,430 ounces of gold and
122,965 ounces of silver were produced in 2016

• Gedabek site connected to the Azerbaijan national

power grid

• Extensive exploration programme carried out with

the discovery of the Ugur gold deposit

• Total production target of between 64,000 and 72,000
gold equivalent ounces for full year 2017 compared to
72,304 gold equivalent ounces in 2016

Profit/(loss) before
taxation ($m)

Operating cash flow
before movements in
working capital ($m)

Net debt ($m)

AISC* ($ per ounce)

9
3
3

4
2
5

0
9
4

0
5
0
1

8
5
8

6
1
6

6
4
3

6
8
1

8
6

6
0
1

2016

2014

2015

2016

2014

2015

2016

2014

2015

2016

2014

2015

)
4
.
4
1
(

)
9
.
8
(

*see definition on page 13.

www.angloasianmining.com Annual report and accounts 2016Anglo Asian Mining PLCChairman’s statementStrategic reportFinancial reviewCorporate governanceGroup financial statementsCompany financial statementsAnnual general meetingAnglo Asian Mining

A profitable mining business combining mature assets
and a pipeline of highly prospective new mining targets.

• Established – produced first gold in 2009

• Profitable – profit before taxation of $6.8 million for 2016

• Low cost of production – all in sustaining cost of $616 per ounce of gold for 2016

• Stable financial position – 29 per cent. reduction in net debt achieved in 2016

• Exploration – extensive exploration programme underway

• Experienced – highly qualified board and management team who are aligned

with the Company’s shareholders to deliver value and growth

Azerbaijan

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.

Azerbaijan 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.
Low cost labour is also available.

View of the processing facilities and the main open pit from
the Ugur gold deposit.

Anglo Asian Mining PLC Annual report and accounts 2016Gedabek contract area

Gosha contract area

Ordubad contract area

• 300 square kilometre contract area

• 462 square kilometre contract area

• Mining and exploration rights until

March 2022

• Currently the location of a small,
high grade, underground mine

• 65,394 ounces of gold and

• Ore mined at Gosha is transported

• Notice of discovery disclosed

for one project area comprising
several targets

to Gedabek for processing

• Exploration underway

• Non-JORC resource of about

40,000 ounces of gold

1,941 tonnes of copper produced
in 2016

• Gadir underground mine situated
700 metres from the existing main
open pit mine

• All processing of ore carried out

at Gedabek

Georgia

Russia

Azerbaijan

6
1
6

Caspian Sea

Armenia

Turkey

Nakhchivan

Iran

Contract area locations

Gosha

Gedabek

Ordubad

Occupied territories (grey area)

Gyzilbulakh

Soutely

Vejnali

Anglo Asian plans to carry out extensive exploration and production optimisation in 2017
with the aim of creating future flexibility and growth.

• Ugur discovery. Ore body will be brought into production in 2017.

• Ore stockpiles to be processed. Approximately one million tonnes of ore stockpiles will be processed

during the remainder of 2017.

• Mining from the open pit will be temporarily suspended in Q2 2017. Exploration and ore

delineation will be carried out until the end of 2017. Ore production will be resumed in Q1 2018.

• Ore production is temporarily suspended at the Gadir underground mine. Extensive underground

exploration and ore delineation programme is underway.

Ugur gold deposit

Ugur is a significant gold ore deposit located only
three kilometres from the main processing facilities
at Gedabek. A JORC resource for the deposit is
currently being prepared and will be available in
Q3 2017. Open pit mining is expected to start in
Q4 2017.

View of the Ugur deposit showing the exploration
area. The boundaries of the new open pit mine will be
approximately the same as the current exploration area.
Production will commence in Q4 2017.

Gadir underground mine

Ore production from the Gadir underground
mine has ceased but mining is continuing during
an exploration phase. Any ore extracted during
this period will be stockpiled for future processing.
Extensive drilling is being carried out underground
to delineate the ore body for future mining.

Over one
million tonnes

of ore stockpiles available for processing
in the remainder of 2017

Core drilling taking place in the Gadir mine.

Core drill samples from the Gadir mine.

Anglo Asian Mining PLC

Annual report and accounts 2016

Chairman’s statement
Khosrow Zamani

Review of 2016 and 2017 to date
Anglo Asian produced a total of
65,394 ounces of gold in 2016, a 9 per cent.
decrease over production of 72,032 ounces
in 2015; copper production in 2016 was
1,941 tonnes, a 100 per cent. increase over
the 2015 total of 969 tonnes. Production of
silver totalled 165,131 ounces for 2016,
which was almost a six times increase
over 2015 of 28,628 ounces. The reduced
gold production resulted from decreased
gold ore grades in the fourth quarter of
2016, whilst copper and silver production
increased significantly due to a full year
of production from the flotation plant
in 2016. The Company benefited from
increased precious metal prices and the
average gold price in 2016 was $1,253
per ounce, which was 8 per cent. higher
than in 2015.

The increase in copper and silver production,
together with improved precious metal
prices, beneficially impacted our financial
results for the year and as a result revenues
increased slightly in 2016 to $79.2 million
from $78.1 million in 2015.

The Company’s all in sustaining cost
(“AISC”) per ounce of gold produced
reduced to $616 in 2016 compared to
$858 in 2015. This resulted in an operating
profit of $11.7 million in 2016 compared
to an operating loss of $3.2 million in 2015.
The Company has decided to report
its cash cost as an AISC calculated in
accordance with the World Gold Council’s
guidance. This is a standardised metric in
the industry and will aid comparability
with other gold producers.

Cash provided by operating activities
increased in the year to $29.6 million
from $23.0 million in 2015. We serviced
our debts on time and net debt reduced
from $49.0 million at the end of 2015 to
$34.6 million at the end of 2016.

The Company’s new flotation plant
operated throughout 2016, processing
tailings from the agitation leaching
plant. Commissioning encountered a few
teething problems, which are not unusual
for such projects, but these were quickly
overcome. The plant produced 6,331
dry metric tonnes of concentrate in 2016
containing 1,121 tonnes of copper and
4,430 and 122,965 ounces of gold and
silver respectively. Since early February
2017, the flotation and agitation leaching
plants have been reconfigured with ore
now initially being treated by flotation.
This reconfiguration was carried out due
to the increasing copper content of the
ore feedstock. A second semi-autogenous
(“SAG”) mill was installed in the agitation
leaching plant in 2016 which has increased
the capacity of the agitation leaching and
flotation plants and enables the plants to
treat harder ore.

In order to reduce costs and improve the
sustainability of Anglo Asian, the Company
undertook a number of major initiatives
in 2016. The key achievement was the
connection of the Gedabek site to
the Azerbaijan national power grid
in November 2016. This involved the
construction of an electrical substation
and the installation of approximately
12 kilometres of overhead power cable.

It gives me great
pleasure to report the
return of Anglo Asian
to profitability.

It gives me great pleasure to
report the return of Anglo Asian
to profitability. I commented in my
statement last year that 2015 was
an important year in turning around
your Company. The profit recorded
for 2016 shows that this optimism
was justified and we will continue
to put in place the foundations for
sustainable profitability and cash
generation. A major contributor to
the success in 2016 is the continuing
evolution of Anglo Asian into
a company for which copper is
increasingly a significant proportion
of its production. Copper production
doubled to 1,941 tonnes due to
a full year of production from the
flotation plant. This increased copper
production offset the lower level of
gold production of 65,394 ounces.
The Company is also increasingly
focusing on the long term future
development of Gedabek and in
2016 started a major programme
of geological exploration. This is
already delivering results and we were
pleased to announce the discovery
of Ugur, an important new gold ore
deposit in October 2016. The start
of mining from a new open pit at
Ugur in late 2017, together with the
other exploration and production
optimisation initiatives currently
underway, will act to further advance
the delivery of long-term value
to shareholders.

Newly installed tanks at the water treatment plant.

In early 2017, the Company completed a
wide-ranging strategic review of Gedabek
in response to the discovery of the Ugur
gold deposit and the decreasing gold
grade of ore mined in the main open
pit. As a result of this strategic review,
Anglo Asian is now implementing several
initiatives to ensure sustainable long-term
production at Gedabek. These include
temporarily suspending ore production
from both the main open pit and Gadir
underground mines, where exploration,
ore zone definition and production
optimisation are now being carried out.
Any ancillary ore mined will be stockpiled
for later processing. The Ugur deposit
will be developed so that mining can
commence from an open pit before the
end of 2017. Whilst mining is suspended,
the Company will process its extensive
stockpiles of ore and the flotation and
agitation leaching plants have been
reconfigured to treat the high copper
content of the stockpiled ore to
maintain production.

Outlook
It is with continued optimism that I look
forward to 2017 and beyond. During the
course of 2016, we have demonstrated
that we can operate the Group profitably.
This return to profitability, together with
the initiatives currently underway, provide
a strong platform for sustained growth
in production and development. These
initiatives will inevitably result in a temporary
reduction of the level of gold production
in 2017 compared to the past two years,

which has been reflected in our gold
production target for the year. However,
this will be offset by increased production
of copper.

The Group has a production target
for 2017 of between 52,000 ounces and
58,000 ounces of gold and 2,000 tonnes
and 2,400 tonnes of copper. Given the
increasing proportion of copper in its
production, the Group will from now on
also present its total production target
in gold equivalent ounces (“GEOs”).
The total production target in GEOs
for 2017 is between 64,000 ounces and
72,000 ounces compared to 72,304 ounces
in 2016. I look forward to updating our
shareholders on our progress over
the remainder of 2017.

Appreciation
I would like to take this opportunity to thank
our Anglo Asian employees, our partners,
the Government of Azerbaijan, advisers
and fellow directors for their continued
support as we continue to build the
Company into a leading and profitable
gold, copper and silver producer in
Azerbaijan and Caucasia. I would also
like to especially thank our shareholders
for their invaluable support as we look
forward to a successful 2017.

Khosrow Zamani
Non-executive chairman
24 May 2017

Review of 2016 and 2017
to date continued
The connection of the Gedabek site to the
power grid will substantially reduce the
cost of electrical power and the amount
of diesel consumed. The expansion of the
site will also no longer be constrained by
the lack of availability of electrical power.
Additionally, a water purification plant is
being constructed at Gedabek which is
expected to be operational in the third
quarter of 2017. This plant will produce
potable (drinking quality) water for discharge
into the environment. Water evaporation
equipment is now operational at the
tailings dam to improve the water balance
at Gedabek.

The Gadir underground mine which
commenced production in 2015 continued
in operation throughout 2016. During
the year, 123,732 tonnes of ore grading
5.40 grammes per tonne of gold were
extracted and processed. This ore is
very amenable to leaching by our
agitation leaching plant and is therefore
prolonging the useful life of the plant.
Mining from Gadir was temporarily
suspended in February 2017 and
extensive underground exploration and
development tunnelling is now currently
being undertaken. Any ore extracted
during this period is being stockpiled
for future processing. It is expected that
approximately 5,000 metres of drilling
will be carried out during this exploration
programme and mining from Gadir is
expected to recommence in the first
quarter of 2018.

The Company embarked on a significant
programme of exploration at prospective
targets within the Gedabek contract area
in 2016. Several initiatives were undertaken
including surface and geological mapping
of various prospective areas. Drilling
of several prospective areas was also
undertaken. As a result of this work, the
Company was very pleased to announce
in October 2016, the discovery of the
Ugur gold deposit located three kilometres
north-west from its agitation leaching
plant and heap leach facilities at Gedabek.
The Company also undertook exploration
work at the Bittibulag mineral occurrence.
These new deposits, which are potentially
rich sources of ore, are important to the
future sustainable operation of Anglo Asian.
Further details regarding these deposits
can be found on page 4 and in the
strategic report.

Core drilling at Ugur.

Anglo Asian Mining PLC Annual report and accounts 2016Strategic report

The total production target for the year to 31 December 2017
expressed as gold equivalent ounces (“GEOs”) is between 64,000 GEOs
and 72,000 GEOs compared to total production for the year to
31 December 2016 of 72,304 GEOs.

The directors present their
strategic report for the year
ended 31 December 2016.

Principal activities
The principal activity of Anglo Asian
Mining PLC (the “Company”) is that
of a holding company and a provider
of support and management services
to its main operating subsidiary
R.V. Investment Group Services LLC.
The Company, together with its subsidiaries
(the “Group”), owns and operates gold,
silver and copper producing properties in
the Republic of Azerbaijan (“Azerbaijan”).
It also explores for and develops other
potential gold and copper deposits
in Azerbaijan.

The Group has a 1,962 square kilometre
portfolio of gold, silver and copper
properties in western Azerbaijan and
territories occupied by Armenia, at
various stages of the development cycle.

The Group’s primary operating site is
Gedabek, which is the location of the
Group’s main gold, silver and copper open
pit mine and Gadir, an underground mine.
The Group’s processing facilities to produce
gold doré and copper, silver and gold
concentrates are also located at Gedabek.
The Group announced in 2016 the discovery
of Ugur, a gold deposit also located at
Gedabek. Gosha, the Group’s second
underground gold and silver mine, is
located 50 kilometres away from Gedabek.
Ordubad, the Group’s early stage gold
and copper exploration project is located
in the Nakhchivan region of Azerbaijan.

During the period under review, the
Group’s main focus has been on several
key areas to increase its gold, copper and
silver production and ensure the future
success of its operations as follows:

• continued optimisation of the agitation
leaching and flotation plants to ensure
maximum production at lowest
possible cost;

• increasing the efficiency of our mining
operations and pursuing initiatives
to reduce costs and increase the
sustainability of the Group’s
operations; and

• exploration of our Gedabek site to both
increase the production of our existing
open pit and underground mines and
to discover new ore deposits.

The Group has a production target for the
year to 31 December 2017 of 52,000 ounces
to 58,000 ounces of gold and 2,000 tonnes
to 2,400 tonnes of copper. The total
production target for the year to
31 December 2017 expressed as gold
equivalent ounces (“GEOs”) is between
64,000 GEOs and 72,000 GEOs compared
to total production for the year to
31 December 2016 of 72,304 GEOs.

Inside view of the flotation plant showing the flotation cells to the right. The plant achieved
its first full year of production in 2016.

Gedabek
Introduction
The Gedabek mining operation is located
in a 300 square kilometre contract area in
the Lower Caucasus mountains in western
Azerbaijan on the Tethyan Tectonic Belt,
one of the world’s most significant copper
and gold-bearing geological structures.
Gedabek is the location of the Group’s
main open pit and underground mines
and its processing facilities.

Gold was first poured from ore mined
from the open pit mine and processed by
heap leaching in May 2009. Copper and
precious metal concentrate production
began in 2010 when the Sulphidisation,
Acidification, Recycling and Thickening
plant was commissioned. The Group’s
agitation leaching plant commenced
production in 2013 and its flotation plant
in 2015. Underground extraction of ore at
Gedabek started in June 2015 when the
Gadir mine was opened. During 2016, the
Group discovered Ugur, a new gold
deposit, three kilometres north-west of
its agitation leaching plant.

Mineral resources
Key to the future development of the
Gedabek site is our knowledge of the
mineral resources and ore reserves within
the contract area. The Group’s latest
ore reserve estimate was carried out as
of 1 September 2014. This ore reserve
estimate showed an increase of
approximately 3.9 million tonnes of
ore, after allowing for depletion due

Core drill samples obtained from the Ugur gold deposit.

to mining since the previous estimate.
It also showed a significantly higher
copper content than the previous
estimate. Table 1 shows the ore reserve
estimate as at 1 September 2014.

Mining operations
The principal mining operation at Gedabek
is conventional open cast mining from
several contiguous open pits. Ore is first
drilled and blasted and then transported
either to a processing facility or to a
stockpile for storage. The major mining

activities of drilling and blasting and
subsequent transportation of ore are
carried out by contractors. Table 2
summarises the ore mined from the
open pit at Gedabek for the year
ended 31 December 2016.

Ore is also mined from the Gadir
underground mine which is situated
approximately one kilometre from the
main open pit at the Gedabek site. The
mine started producing ore in June 2015.
Table 3 summarises the ore mined from
the Gadir underground mine for the year
ended 31 December 2016.

Table 1 – ore reserve estimate as at 1 September 2014

Ore reserve

In situ grades

Contained metal

Recoverable metal

Reserve
category

In situ
(tonnes)

Au
(g/t)

Cu
(per cent.)

Ag
(g/t)

Au
(ounces)

Cu
(tonnes)

Ag
(ounces)

Au
(ounces)

Cu
(tonnes)

Ag
(ounces)

Proven

16,733,000

Probable

3,761,000

1.12

0.68

0.61

0.40

7.63

603,000

87,000 4,105,000

447,000

65,000 1,346,000

6.12

82,000

15,000

740,000

58,000

11,000

268,000

Total

20,494,000

1.03

0.50

7.35

685,000

102,000 4,845,000

505,000

76,000 1,614,000

Table 2 – ore mined from the open pit at Gedabek for the year ended 31 December 2016

Quarter ended

31 March 2016

30 June 2016

30 September 2016

31 December 2016

Total for the year

Ore mined (tonnes)

High grade

Low grade

Sulphide

Total

Waste
mined
(tonnes)

93,839

87,597

99,280

224,641

402,903

302,958

25,691

344,171 1,316,490

709

491,209 1,357,896

7,333

409,571 1,375,983

116,923

181,778

— 298,701 1,454,752

397,639 1,112,280

33,733 1,543,652 5,505,121

Anglo Asian Mining PLC Annual report and accounts 2016Processing operations
Ore is processed at Gedabek to produce
either gold doré (an alloy of gold and
silver with small amounts of impurities) or
a copper and precious metal concentrate.

Gold doré is produced by cyanide leaching.
Initial processing is to leach (i.e. dissolve)
the precious metal (and some copper) in
a cyanide solution. This is done by
various methods:

1 Heap leaching of crushed ore.

Crushed ore is heaped into permeable
“pads” onto which is sprayed a solution
of cyanide. The solution dissolves the
metals as it percolates through the
ore by gravity and it is then collected.

2 Heap leaching of run of mine

(“ROM”) ore. The process is similar to
heap leaching for crushed ore except
the ore is not crushed and is heaped
into pads as received from the mine
(ROM) without further treatment
or crushing.

3 Agitation leaching. Prior to the

construction of the flotation plant,
ore was crushed and then processed
through a grinding circuit. The finely
ground ore is then placed in stirred
tanks containing a cyanide solution
and the contained metal is dissolved
in the solution. Subsequent to the
construction of the flotation plant, a
further option is available to treat ore
in the agitation leaching plant. This is
to process the finely ground ore through
the flotation plant prior to treatment
by the agitation leaching plant.

Slurries produced by the above processes
with dissolved metal in solution are then
transferred to a resin in pulp (“RIP”) plant.
A synthetic resin, in the form of small
spherical plastic beads designed to
absorb gold selectively over copper and
silver, is placed in contact with the leach
slurry or “pulp”. After separation from the
pulp, the gold-loaded resin is treated with
a second solution, which “strips”

(i.e. desorbs) the gold, plus the small
amounts of absorbed copper and silver,
transferring the metals from the resin
back into solution. The gold and silver
dissolved in this final solution are
recovered by electrolysis and are then
smelted to produce the doré metal,
containing gold and silver.

Copper and precious metal concentrates
are produced by two processes, SART
processing and flotation.

1 Sulphidisation, Acidification,

Recycling and Thickening (“SART”).
The cyanide solution after gold
absorption by resin in pulp processing
is transferred to the SART plant. The
pH of the solution is then changed by
the addition of reagents. This recovers
the copper from the solution in the
form of a precipitated copper sulphide
concentrate containing silver and
minor amounts of gold. The process
also recovers cyanide from the solution
which is recycled back to leaching.

2 Flotation. Flotation is carried out in

a separate flotation plant. Feedstock,
which can be either tailings from the
agitation leaching plant or freshly
crushed and milled ore, is mixed with
water to produce a slurry called “pulp”
and other reagents are then added.
This pulp is processed in flotation cells
(tanks). The flotation cells are agitated
and air introduced as small bubbles.
The sulphide minerals attach to the air
bubbles and float to the surface where
they form a froth which is collected.
This froth is dewatered to form a
concentrate containing copper,
gold and silver.

Initially, gold doré was produced at
Gedabek only by heap leaching crushed
ore. Heap leaching is a low capital cost
method of production traditionally used
by mines when they first move into
production. However, heap leaching has
limitations with regards to the minimum
size of the ore being leached limited to

around 25 millimetres. This limitation
results in only approximately 60 per cent.
to 70 per cent. of the gold within the
ore being recovered with leaching
cycles typically extending up to one
year, depending on the detailed
composition of the ore.

To increase gold recoveries and production,
in 2013 the Group constructed an agitation
leaching plant. Compared to heap leaching,
agitation leaching can deliver higher
recoveries of gold without long leaching
cycles. Heap leach pads also require
considerable space for their construction
and due to the topology of the Gedabek
site, this was a constraint. The capacity of
the agitation leaching plant was increased
in 2016 by the installation of a second
semi-autogenous grinding (“SAG”) mill.

The ore at Gedabek is polymetallic
containing significant amounts of copper.
Initially, the SART processing plant was
constructed to recover some of the
copper as a copper and precious metal
concentrate. However, to further exploit
the high copper content of the Group’s
ore reserves, the Group constructed
a flotation plant whose function is
primarily to produce copper concentrate
containing gold and silver as by-products.
The flotation plant commenced
production in November 2015.
It operated throughout 2016 processing
tailings from the agitation leaching plant.
In February 2017, it was reconfigured
to treat freshly crushed and milled ore.

The flotation plant has the flexibility
to be configured for various methods
of operation. It is able to process the
Company’s stockpiles of high copper
content ore. It can also treat ore feed
to, or tailings from, the agitation leaching
plant. In such configurations, the plant
will be an integral part of the agitation
leaching plant.

Table 3 – ore mined from the Gadir underground mine for the year ended 31 December 2016

Quarter ended

31 March 2016

30 June 2016

30 September 2016

31 December 2016

Total for the year

Ore mined
(tonnes)

Average
gold grade
(g/t)

17,756

37,732

27,581

40,663

5.04

6.43

5.13

4.79

123,732

5.40

Tailings (waste) storage
The Company is very mindful of
the importance of proper storage
of tailings both for efficient operation
of its processing plants and to fulfil its
environmental responsibilities. The
Company stores its tailings in a purpose
built dam approximately seven kilometres
from its processing operations. The
tailings dam currently has a capacity of
approximately 3.2 million cubic metres.
Immediately downstream of the tailings
dam is a reed bed biological treatment
system to process any seepage from the
dam. This will purify any seepage from the
dam before discharge into the Shamkir
river. The pipes from the agitation leaching
plant to the tailings dam are located in
a fully lined trench designed to capture
any spillage should any pipe rupture.

Sustainability and cost control
The Group embarked on several initiatives
during 2016 to improve sustainability
and which also have the benefit of
lowering costs.

Electricity supply
During 2016, the Gedabek site was
connected to the Azerbaijan national
power grid. The following were constructed:

• seven kilometres of 35 kilovolt overhead
power cable and five kilometres of
6.3 kilovolt overhead distribution line;

Reverse circulation drilling at the Ugur deposit.

Gedabek continued
Production and sales
For the year ended 31 December 2016,
total gold production as doré bars and as
a constituent of the copper and precious
metal concentrate totalled 65,394 ounces,
which was a decrease of 6,638 ounces
in comparison to the production of
72,032 ounces for the year ended
31 December 2015.

Table 4 summarises the amount of ore
and its gold grade processed by heap
and agitation leaching for the year
ended 31 December 2016.

Table 5 summarises the gold and silver
bullion produced as doré bars and sales
of gold bullion for the year ended
31 December 2016.

Table 6 summarises the total copper,
gold and silver produced as concentrate
by both SART processing and flotation
processing for the year ended
31 December 2016.

Table 7 summarises the total copper and
precious metal concentrate production
and sales from both SART processing
and flotation processing for the year
ended 31 December 2016.

Table 4 – amount of ore and its gold grade processed at Gedabek for the year ended 31 December 2016

Quarter ended

31 March 2016

30 June 2016

30 September 2016

31 December 2016

Total for the year

Amount of ore processed (tonnes)

Gold grade of ore processed (g/t)

Heap
leach pad
(crushed ore)

Heap
leach pad
(ROM ore)

Agitation
leaching
plant

Heap
leach pad
(crushed ore)

Heap
leach pad
(ROM ore)

Agitation
leaching
plant

91,450

114,508

138,873

110,202

263,432

156,846

92,437

190,185

164,492

74,978

90,310

192,508

1.46

1.32

1.21

0.87

0.76

0.81

0.85

2.94

3.59

2.45

2.26

369,067

658,435

652,719

1.32

0.80

2.78

Table 5 – gold and silver produced as doré bars and sales of gold bullion for the year ended 31 December 2016

Quarter ended

31 March 2016

30 June 2016

30 September 2016

31 December 2016

Total for the year

* Including Government of Azerbaijan’s share.

** Excluding Government of Azerbaijan’s share.

Gold
produced*
(ounces)

Silver
produced
(ounces)

Gold
sales**

(ounces)

Gold
sales price
($ per ounce)

13,383

17,926

15,407

14,221

1,958

2,983

2,502

12,058

15,661

12,567

2,845

12,995

1,184

1,265

1,332

1,227

60,937

10,288 53,281

1,253

Anglo Asian Mining PLC Annual report and accounts 2016 • two main and five auxiliary electricity

transformers; and

• an electrical power house comprising

two sets of 6.3 and 35 kilovolt
electrical panels and ancillary
measuring equipment.

The total cost of the installation was
$2.1 million. As a result of the connection
to the grid, the Gedabek site will no
longer consume around 11 million litres
of diesel fuel per annum to generate
electrical power. This will result in
considerable cost savings and the capital
cost of the installation will be recovered
in around one year. The reduction in
fuel usage substantially reduces fuel
management at the site and the consequent
environmental risk. The Company’s nine
existing diesel generators are not now
used but kept as a standby power supply.

Water management
Due to the high rainfall in the Gedabek
region, there is a positive water balance
over the mine property, which accumulates
water at a rate of about 300,000 cubic metres
per year. In 2016, two water management
projects were undertaken, the construction
of a water treatment plant and the purchase
of wastewater evaporation equipment.
These projects will reduce the amount of
water that needs to be stored in the tailings
dam, thereby reducing the capacity required.

In April 2016, the Group contracted with
Nanoretech Systems (Pty) Limited for the
construction of a reverse osmosis water

treatment plant to treat process water.
The plant will produce water of sufficient
purity that can be discharged into the
nearby Shamkir river. The plant was built
in South Africa and is expected to be
operational in the third quarter of 2017.
The plant has the capacity to treat
50 cubic metres of water per hour and
will also produce a concentrate solution
which can be further processed to recover
the contained metals. The cost of the
plant was $1.4 million.

In August 2016, the Group contracted for
the purchase of wastewater evaporation
equipment for the tailings dam. This is
mobile, skid mounted equipment into
which water is pumped without treatment
direct from the tailings dam. The equipment
then evaporates the water by jetting it into
the atmosphere as a fine spray. It can
evaporate approximately 25 litres per
second of water depending upon climatic
conditions. The equipment is expected
to be operational by the end of the
third quarter of 2017. The cost of the
equipment was approximately $300,000.
As an interim measure until the equipment
is operational, water is being evaporated
via a sprinkler system.

Health, safety and environmental
The health and safety of our employees
and the protection of the environment in
and around our mine properties are prime
concerns for the Company’s board and
senior management team. The health,
safety and environmental (“HSE”)

department at Gedabek has a qualified
HSE manager, who is assisted by three
HSE officers. The recruitment of additional
HSE officers is planned given the increasing
size and complexity of the operation. Overall
strategy for HSE matters in the Company
is overseen by the HSE and technical
committee, which is chaired by a board
director, Professor John Monhemius. The
HSE and technical committee meets twice
a year at the Gedabek site.

During 2016, there were 58 (2015: 78)
reportable safety incidents, of which five
(2015: ten) were lost time incidents (“LTI”),
where the casualty had to take time off
work. All people injured with the exception
of one employee made a full recovery.

Several initiatives were undertaken to
improve health and safety at the Gedabek
site in 2016. A comprehensive strategic
plan for safety of the Gedabek site was
completed and approved. Health screening
of over 500 employees was carried out by
external medical consultants. Employees
identified with health issues, such as
high blood pressure or poor vision, were
provided follow-up treatment for their
condition. This health screening will be
carried out biannually. Firefighting and
ancillary safety equipment such as
breathing apparatus is being procured
for the site. The Company’s growing
experience of underground mining is
resulting in increased safety underground
with fewer incidents occurring.

Table 6 – total copper and precious metal production as concentrate for the year ended 31 December 2016

Copper (tonnes)

Gold (ounces)

Silver (ounces)

Quarter ended

SART

Flotation

Total

SART

Flotation

Total

SART

Flotation

Total

31 March 2016

30 June 2016

30 September 2016

31 December 2016

181

195

225

219

200

302

260

359

381

497

485

578

607

1,445

1,123

1,255

619

1,449

1,127

1,262

7,789

10,047

7,291

6,751

19,055

39,184

24,106

40,620

26,844

49,231

31,397

47,371

Total for the year

820

1,121

1,941

4,430

4,457

31,878

122,965

154,843

Table 7 – total copper concentrate production and sales during the year ended 31 December 2016

Quarter ended

31 March 2016

30 June 2016

30 September 2016

31 December 2016

Total for the year

* Including Government of Azerbaijan’s share.

** Excluding Government of Azerbaijan’s share.

Concentrate
production*
(dmt)

Copper
content*
(tonnes)

Gold
content*
(ounces)

Silver
content*
(ounces)

Concentrate

sales**
(dmt)

sales**

($000)

1,821

2,361

1,844

2,504

381

497

485

578

619

1,449

1,127

1,262

26,844

49,231

31,397

47,371

1,319

1,582

1,782

2,147

2,043

3,019

3,577

3,615

8,830

1,941

4,457

154,843

6,830

12,254

Gedabek continued
Exploration at Gedabek site
The Group embarked on a significant
programme of exploration at the Gedabek
site in 2016 which has continued into 2017.

Area adjacent to the current
operational mine
In 2016, geological mapping was carried
out over 0.7 square kilometres from which
290 outcrop samples were taken and
20 metres of follow-up trenching was
carried out. In addition, two drill holes
with a total of 530 metres of diamond
drilling were completed.

Gadir underground mine
In 2016 and 2017 to date, efforts were
focused on underground mapping and
channel sampling. Mineral resource
delineation core drilling continued with
the aim of assessing the down dip and
lateral extensions of the known ore
bodies. These drill holes were designed
to confirm and extend mineralisation at
Gadir. Additional drill holes (BQ size core)
were drilled to define ore zone geometry.

Ugur discovery
Ugur is a significant gold ore deposit
which was discovered by the Group in
2016. It is located only three kilometres
from the processing facilities at the main
Gedabek site which highlights the clear
strategic value of the deposit. The Ugur
deposit area is a significant surface
alteration rock assemblage with the
presence of barite, barite-haematite and
limonite in gossan-style zones along with
vuggy silica in brecciated volcanic rocks.
Initial exploration comprised stream
sediment sampling, soil geochemistry,
geological mapping and outcrop
sampling and trenching and shallow pits.

55 vertical reverse circulation drill holes
totalling 1,842 metres and 39 core drill
holes totalling 5,472 metres have now been
drilled at Ugur to the end of April 2017
which completed the core drilling of the
central area of the Ugur deposit. The area
covered by this drilling and proposed open
pit outline is 350 metres (east-north-east)
by 250 metres (north-north-west).

The assay results of the 39 core drill holes
resulted in confirmation of an oxide gold-rich
zone to a depth varying between 50 and
60 metres. On receipt of the assays from
the final four core drill holes, a sectional
resource and reserve estimate will be made
by the Company for the Government of
Azerbaijan. Independent check assaying
of 515 samples and full multi-element
analysis are underway by external
consultants and it is planned that an

Reverse circulation drill samples obtained from the Ugur gold deposit.

independent JORC resource estimate
and reserve calculation will be compiled
which will be available in the third quarter
of 2017.

Work has started to commercially develop
the deposit. The design of the haul road
has been finalised following completion
of a detailed topographic survey of the
area between the Ugur gold deposit
and the Gedabek processing facilities.
Independent geotechnical studies to
assess rock mass strength and structural
geology relationships for mine design
parameters have been completed.
Independent environmental impact
assessments have been completed and
hydrogeological baseline monitoring
is being established.

The Bittibulag mineral occurrence
In 2016, a surface mapping exercise was
completed covering an area of 1.1 square
kilometres that included taking 190 outcrop
samples for analysis. Preparation and analysis
of 648 samples is ongoing from the soil
geochemistry sampling programme
conducted earlier in 2016. A total of
40 metres of trenches were excavated
and mapped from which 54 samples
were taken.

Gosha
The Group’s second mining project, the
300 square kilometre Gosha contract
area, is located in western Azerbaijan,
50 kilometres north-west of Gedabek.
Gosha is being operated as a small,
high grade, underground gold mine.

A total of 10,627 tonnes of ore of average
gold grade 5.10 grammes per tonne were
mined at Gosha in the year ended
31 December 2016.

Ordubad
Our 462 square kilometre 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 kilometre
radius of each other. Development
at Ordubad forms part of the Group’s
longer-term development portfolio as
a mid-tier gold, copper and silver
mining company.

Sale of the Group’s products
Important to the Group’s success is the
ability to transport its products to market
and sell them without disruption.

The Group ships all of its gold doré to
MKS Finance SA in Switzerland. The
logistics of transport and sale are well
established and gold doré shipped
from Gedabek arrives in Switzerland
within three to five days. The proceeds
of the estimated 90 per cent. of the
gold content of the doré is settled
within one to two days of receipt of the
doré. The Group has not experienced
any disruptions to its sale of metal due
to logistics or delays in customs clearance.
MKS Finance SA both refines and then
purchases our precious metal; all assays
and a full accounting of all metal are
agreed with them.

The Gedabek mine site has good road
transportation links and our copper and
precious metal concentrate is collected
from the Gedabek site by the purchaser.
The Group was pleased to announce in
May 2014 that it had signed an exclusive
three year contract with Industrial
Minerals SA, a Swiss-based integrated

Anglo Asian Mining PLC Annual report and accounts 2016trading, mining and logistics group, for
the sale of its SART copper concentrate.
The Group has again experienced no delays
in the sale of its copper concentrate in the
period under review. In March 2016, the
Group signed an additional contract with
Industrial Minerals SA for the sale of the
concentrate produced by its flotation plant
which had improved terms. The second
contract is valid for the period to
31 December 2018. Prior to March 2016,
sales of concentrate produced by the
flotation plant were made under the
original contract.

Principal risks and uncertainties
Country risk in Azerbaijan
The Group currently operates solely in
Azerbaijan and is therefore naturally at
risk of adverse changes to the regulatory
or fiscal regime within the country. However,
Azerbaijan is outward looking and desirous
of attracting direct foreign investment
and the Company believes the country
will be sensitive to the adverse effect
of any proposed changes in the future.
In addition, Azerbaijan has historically
had a stable operating environment and
the Company maintains very close links
with all relevant authorities.

Operational risk
The Company currently produces all its
products for sale at Gedabek. Planned
production may not be achieved as a
result of unforeseen operational problems,
machinery malfunction or other disruptions.
Operating costs and profits for commercial
production therefore remain subject to
variation. The Group monitors production
on a daily basis and has robust procedures
in place to effectively manage these risks.

Commodity price risk
The Group’s revenues are exposed to
fluctuations in the price of gold, silver and
copper and all fluctuations have a direct
impact on the operating profit and cash
flow of the Group. Whilst the Group has
no control over the selling price of its
commodities, it has very robust cost
controls to minimise costs to ensure
it can withstand any prolonged period
of commodity price weakness.

The Group actively monitors all changes
in commodity prices to understand the
impact on the business. The Group hedges
future sales of gold bullion when the
directors believe it is beneficial to
the Company. The directors periodically
review the requirement for hedging.

Foreign currency risk
The Group reports in United States Dollars
and a large proportion of its costs are
incurred in United States Dollars. It also
conducts business in Australian Dollars,
Azerbaijan Manats and United Kingdom
Sterling. The Group does not currently
hedge its exposure to other currencies,
although it will review this periodically if
the volume of non-United States Dollar
transactions increases significantly. Also,
the fact that both revenue of the Group
and the Group’s interest-bearing debt are
settled in United States Dollars is a key
mitigating factor that helps to avoid
significant exposure to foreign currency
risk. Information on the carrying value
of monetary assets and liabilities
denominated in foreign currency
and the sensitivity analysis of foreign
currency is disclosed in note 22 to the
financial statements.

Liquidity and interest rate risk
Interest rates on current loans are fixed
except for three month LIBOR embedded
in the terms of the Amsterdam Trade Bank
loan. Part of the bank loan from Amsterdam
Trade Bank was transferred to Gazprombank
(Switzerland) Ltd in 2017, see note 27 –
“Post balance sheet event” on page 56.
The Group has not used any interest rate
swaps or other instruments to manage its
interest rate profile during 2016, but this
requirement is reviewed on a periodic
basis. Information on the exposure
to changing interest rates is disclosed
in note 22 to the financial statements.
The approval of the board of directors
is required for all new borrowing facilities.
At the year end, the Group’s only interest
rate exposure was on the interest rate
charged on the Amsterdam Trade
Bank loan.

The levels of deposits held by the Group
have also been low, therefore, any impact
of changing rates on interest receivable
is minimal.

Key performance indicators
The Group has adopted certain key
performance indicators (“KPIs”) which
enable it to measure its financial
performance. These KPIs are as follows:

1. Profit before taxation. This is the
key performance indicator used by
the Group. It gives insight into cost
management, production growth
and performance efficiency.

2. Net cash provided by operating
activities. This is a complementary
measure to profit before taxation and
demonstrates conversion of underlying
earnings into cash. It provides additional
insight into how we are managing
costs and increasing efficiency and
productivity across the business in
order to deliver increasing returns.

3. All in sustaining cost (“AISC“) per

ounce. AISC is a widely used,
standardised industry metric and
is a measure of how our operation
compares to other producers in
the industry. AISC is calculated in
accordance with the World Gold
Council’s Guidance Note on
Non-GAAP Metrics dated 27 June 2013.
The AISC calculation includes a credit
for the revenue generated from the
sale of copper and silver which are
classified by the Group as by-products.
There are no royalty costs included
in the Company’s AISC calculation
as the Production Sharing Agreement
with the Government of Azerbaijan
is structured as a revenue sharing
arrangement. Therefore, the Company’s
AISC is calculated using a cost of sales
which is the cost of producing 100 per
cent. of the gold and such costs are
allocated to total gold production
including the Government of
Azerbaijan’s share.

Reza Vaziri
President and chief executive
24 May 2017

Anglo Asian has been focused during 2016 on initiatives to reduce cost and ensure the
sustainability of its operations to enhance the Group’s long term production.

Connection of the Gedabek
site to the Azerbaijan
national power grid

The Gedabek site was connected to the national
power grid in November 2016. It is anticipated that this
will result in cost savings of approximately $1.8 million
to $2.0 million per annum. Diesel generators will no
longer be required to generate electrical power.

Anticipated approximate cost savings per annum
as a result of connection to national power grid

$1.8–$2.0 million

The new electrical power house and the two main
electricity transformers.

Seven kilometres of 35 kilovolt overhead power
cable were constructed.

Waste water disposal

A reverse osmosis water purification plant is
nearing completion at Gedabek. This plant will
improve the water balance at the Gedabek site
and reduce the required capacity of the tailings
dam. It is expected to be operational in the third
quarter of 2017. It will also enable the partial recovery
of metal currently present in the contents of the
tailings dam.

Installation of second
semi-autogenous (“SAG”) mill

A second SAG mill was installed in 2016. This ensures
sustainable production from the agitation leaching
and flotation plants. It can be redeployed in an
expanded flotation plant.

The new water treatment plant. The water filtration
equipment is in the containers and the water tanks (yellow)
can be seen. The gantry for the pipes between the water
and processing plants can also be seen.

The second SAG mill in operation at the plant.

Anglo Asian Mining PLC

Annual report and accounts 2016

Financial review
Reza Vaziri and William Morgan

The Group recorded a profit before taxation in 2016
of $6,779k. This was due to a lower all in sustaining cost
(“AISC”) of production of $616 per ounce in 2016
compared to $858 per ounce in 2015.

The directors present their
financial review for the year ended
31 December 2016. This financial
review forms part of the strategic
report on pages 7 to 13.

Group income statement
The Group generated revenues of
$79,184k (2015: $78,057k) from sales
of gold and silver bullion and copper
and precious metal concentrate.

$66,930k of the revenues (2015: $74,279k)
were generated from sales of gold and
silver bullion from the Group’s share
of the production of doré bars in 2016.
Bullion sales in 2016 were 53,281 ounces
of gold and 9,512 ounces of silver
(2015: 63,924 ounces of gold and 3,754
ounces of silver) at an average price of
$1,253 per ounce and $17 per ounce
respectively (2015: $1,161 per ounce and
$15 per ounce respectively). In addition,
the Group generated revenue from the
sale of copper and precious metal
concentrate of $12,254k (2015: $3,778k).

The Group hedged future gold bullion sales
for the first time in 2016. On 29 June 2016,
the Group entered into a series of net zero
cost options with a lower (PUT option) sales
price of $1,200 per ounce and an upper
(CALL option) sales price of $1,426 per
ounce. The pairs of options matured in
lots of 1,500 ounces of gold every two
weeks from the transaction date with the
final lot maturing on 13 December 2016.
The final two lots of PUT options expired
in November and December and on both
expiry dates the spot price of gold was
below the PUT option price of $1,200 per
ounce. These options were exercised
generating additional revenue of $80,400.
There were no options outstanding at
31 December 2016.

The Group incurred cost of sales of $62,770k
(2015: $75,234k). The cash cost of mining
and processing in 2016 decreased by
$8,749k from $55,323k in 2015 to $46,574k
in 2016. This was due to improving
operational efficiency, cost control and
the devaluation of the Azerbaijan Manat
against the United States Dollar.

The Group recorded a profit before taxation
in 2016 of $6,779k compared to a loss
before taxation of $8,910k in 2015. This
was due to a lower all in sustaining cost
(“AISC”) of production of $616 per ounce
in 2016 compared to $858 per ounce in 2015
and also finance costs reduced by $786k
due to lower levels of borrowing.

The Group had a taxation charge for the
year of $2,795k (2015: credit of $1,529k).
This comprised a current income tax charge
of $nil and a deferred tax charge of $2,795k
(2015: taxation credit of $1,529k comprising
a current income taxation charge of $nil
and a deferred taxation credit of $1,529k).
The Group had no current taxation charge
in 2016 as the taxable profits incurred by
its main operating company were offset
against taxable losses brought forward
from previous years. The deferred
taxation charge in 2016 arose primarily
due the utilisation of tax losses in 2016
brought forward from previous years.

Cash cost of total gold production
The Group produced gold at an all in
sustaining cost (“AISC”) per ounce of
$616 in 2016 compared to $858 in 2015.
The Group decided in 2016 to report
its cash cost as an AISC calculated in
accordance with the World Gold Council’s
guidance. This is a standardised metric in
the industry. The reason for the decrease
in 2016 compared to 2015 was due to the
decrease in cash operating costs and the
increase in production from the flotation
plant which has a higher margin than
production from agitation leaching.

Depreciation and amortisation in 2016 was
marginally higher at $21,964k compared
to $21,857k in 2015. Accumulated mine
development costs within producing
mines are depreciated and 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 mine (“ROM”) costs
and for post-ROM costs is recoverable
ounces of gold.

The Group had other income in 2016
of $1,375k (2015: $714k) which was interest
receivable on a loan to a former employee,
consultancy income, release of provisions
and foreign currency exchange gains. The
Group incurred administration expenses
in 2016 of $4,931k (2015: $5,415k) and
finance costs of $4,935k (2015: $5,721k).
The Group’s administration expenses
comprise the cost of the administrative
staff and associated costs at the Gedabek
mine site, the Baku office and maintaining
the Group’s listing on AIM. The Group’s
administration costs reduced in 2016
compared to 2015 due to the devaluation
of the Azerbaijan Manat and cost reduction
measures. The finance costs for the year
comprise interest on the credit facilities
and loans, interest on letters of credit
and accretion expenses on the
rehabilitation provision.

Group cash flow statement
Operating cash inflow before
movements in working capital was
$33,911k (2015: $18,581k). The main
source of operating cash flow was the
profit before taxation, after adding back
finance costs and amortisation and
depreciation which totalled $33,678k
(2015: $18,668k).

Working capital movements absorbed cash
of $4,332k (2015: generation of $4,382k)
due to an increase in inventories of $5,278k
(2015: decrease of $6,285k) mainly driven
by an increase in ore stockpiles of $2,606k
and spare parts and consumables of
$2,953k and an increase in trade and other
receivables of $2,805k (2015: $1,110k). This
was partially offset by an increase in trade
and other payables of $3,751k
(2015: decrease of $793k).

Income tax paid was $nil (2015: $nil). The
Group generated taxable profits for 2016
due to its return to profitability but these
were relieved by taxable losses brought
forward from previous years.

Net cash provided by operating activities
in 2016 was $29,579k compared to $22,963k
in 2015. This higher cash generation from
operating activities in the year was due to
the turnaround of the Group from loss to
profit partially offset by cash absorbed by
working capital.

Expenditure on property, plant and
equipment and mine development was
$10,679k (2015: $14,279k). The main items
of expenditure in 2016 were capitalisation
of deferred stripping costs of $4,091k,
underground mining equipment of
$1,323k, the new SAG mill of $1,500k and
the cost of the new electricity substation
and related equipment and power lines
of $2,098k.

Exploration and evaluation expenditure
of $359k (2015: $377k) was incurred and
capitalised. This arose on exploration
at the Gedabek and Ordubad
mining properties.

• $4.8m was repaid to the International

Bank of Azerbaijan (“IBA”) in accordance
with the loan notes to finance the
construction of the agitation leaching
plant. The credit facility outstanding of
$1.5m at 1 January 2016 was repaid in
2016. The Group entered into two
further credit facilities in 2016 with IBA
for AZN1m and $1m with interest rates
respectively of 18 and 12 per cent.
The loans are repayable on a reducing
balance basis over periods of one and
two years respectively. The Group also
entered into a letter of credit facility
with IBA of $1.4m to finance the
purchase of its water treatment facility.

• The Group entered into credit facilities
totalling $5.9m from Pasha Bank in 2016.
These were for the purchase of
consumables and capital equipment.
The loans for consumables purchase
were short term loans of two months
maturity and totalled $2.5m at
31 December 2016 with interest rates
of 14 and 18 per cent. The loans for
the purchase of capital equipment
totalled $2.4m at 31 December 2016
and carried interest rates of between
7 and 9 per cent. with maturities of
12 to 24 months. The letter of credit
facility with $4.6m outstanding at
1 January 2016 for the purchase of the
flotation plant was repaid in 2016.

• The Group entered into short term

credit facilities with Yapi Credit Bank
and Kapital Bank in 2016. The facilities
are all denominated in United States
Dollars with interest rates of between
7 and 11 per cent. The facilities are all
for one year and interest is repayable
either on a reducing balance basis or
by equal quarterly instalments. The
total of these loans outstanding at
31 December 2016 was $1.6m.

• The $3.9m loan from a director was not
repaid during 2016 and was extended
until 8 January 2018. The loan carries
interest at 10 per cent. and $nil of
interest was paid in respect of the
loan in 2016.

The Group had a deferred taxation
liability at 31 December 2016 of $18,230k
(2015: $15,435k).

Group statement of financial position
Non-current assets decreased from
$129,464k at the end of 2015 to $116,408k
at the end of 2016. The main reasons
for the decrease were intangible assets
lower by $1,525k and property, plant
and equipment lower by $9,952k.
These decreases were mainly driven
by depreciation and amortisation in the
year. There was no non-current inventory
at the end of 2016 as all ore stockpiles
at 31 December 2016 are forecast to
be processed within 12 months of the
balance sheet date.

There were net current assets of $3,649k
at the end of 2016 compared to net current
liabilities of $4,243k at the end of 2015.
The main reason for the increase in current
assets was an increase in current inventories
of $7,821k in 2016. Current liabilities
comprising trade and other payables and
current portion of borrowings remained
approximately level, increasing from
$46,820k at end of 2015 to $47,998k
at the end of 2016. The Group’s cash
balances at 31 December 2016 were
$1,379k (2015: $249k).

Net assets of the Group were $82,646k
(2015: $78,644k). The increase was due
to the profit earned in 2016 as there
were no shares issued in the year.

The Group is financed by a mixture of equity
and debt. The Group’s total debt at
31 December 2016 was $35,930k as shown
in note 20 to the financial statements
on pages 50 and 51. The significant
changes to the Group’s debt financing
for the year ended 31 December 2016
and to date are as follows:

• $9.8m was repaid to the Amsterdam

Trade Bank (“ATB”) in accordance with
the loan agreement and the effective
interest rate payable on the loan in the
year was 9.01 per cent. The Group
met the required debt service coverage
ratio (“DSCR”) covenant of 1:1.25 for
the six months ended 30 June 2016 but
for the year ended 31 December 2016
the DSCR was 1:1.07. A waiver of the
DSCR covenant for the year ended
31 December 2016 was obtained from
ATB. In February 2017, 50 per cent.
of the balance of the loan being $8.6m,
was transferred to Gazprombank
(Switzerland) Ltd (“GPBS”). The terms
of the loan and security remained
unchanged with ATB acting as agent
to administer the loan on behalf of
ATB and GPBS.

Anglo Asian Mining PLC Annual report and accounts 2016Production Sharing Agreement (“PSA”)
Under the terms of the PSA in place with
the Government of Azerbaijan, the Group
and the Government of Azerbaijan share
commercial products of each mine. Until
the time the Group has recovered all its
carried forward, unrecovered costs, the
Government of Azerbaijan effectively takes
12.75 per cent. of commercial products
of each mine, with the Group taking
87.25 per cent. (being 75 per cent. for
capital and operating costs plus 49 per cent.
of the remaining 25 per cent. balance).
The Group will not have recovered all its
costs incurred by the end of 2016 and the
ratio of sharing commercial products for
the Gedabek mine of 87.25 per cent. for
the Group and 12.75 per cent. for the
Government of Azerbaijan will continue
throughout 2017.

Once all prior year costs are recovered, the
Group can continue with cost recovery of
up to 75 per cent. of the value of commercial
products, before the remaining product
revenues are shared between the Company
and the Government of Azerbaijan in a
49 per cent. to 51 per cent. ratio. The
Group can recover the following costs:

• all direct operating expenses of the

Gedabek mine;

• all exploration expenses incurred on

the Gedabek contract area;

• all capital expenditure incurred on the

Gedabek mine;

• an allocation of corporate overheads

– currently, overheads are apportioned
to Gedabek according to the ratio of
direct capital and operating expenditure
at the Gedabek contract area compared
with direct capital and operational
expenditure at the Gosha and Ordubad
contract areas; and

• an imputed interest rate of United

States Dollar LIBOR + 4 per cent. per
annum on any unrecovered costs.

Going concern
The directors have prepared the Group
financial statements on a going concern
basis after reviewing the Group’s forecast
cash position for the period to 30 June 2018
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.

In making this assessment, the directors
have acknowledged the challenging and
uncertain market conditions in which the
Group is operating. In 2016, the price of

gold averaged $1,253 per ounce with a
high of $1,366 per ounce and a low of
$1,077 per ounce. The Group has
substantially reduced its net debt during
2016 from $49.0 million at 1 January to
$34.6 million at 31 December. However,
total production is forecast to be lower
in 2017 compared to 2016.

The Group commenced making payments
on the principal of its debt in 2015. Until
the date of this annual report, the Group
has made all payments of interest and
principal on time other than by advance
agreement with certain banks to
defer payment.

Key to achieving the Group’s forecast
cash position, and therefore its going
concern assumption are the following:

• achieving the forecast production of gold

doré from its heap and agitation
leaching facilities.

• achieving its forecast production of
precious metal concentrates from its
SART and flotation processing.

• its metal (principally gold and copper)

price assumptions being met or bettered.

The Group’s cash flow forecasts assume
that the newly discovered Ugur gold
deposit will commence production as an
open pit mine in the fourth quarter of
2017. If the start-up of the mine is delayed,
the cash flow forecast will be adversely
affected in the absence of any further
actions being taken. In the event of a
production delay from Ugur, the Group
has several options to maintain production
to cover any cash flow deficit including
recommencing mining in the main open
pit, further processing of stockpiled ores
and processing underground ores from
the Gadir underground mine which have
been extracted ancillary to the current
exploration programme.

The Group’s loan agreement with the
Amsterdam Trade Bank (“ATB”) and
Gazprombank (Switzerland) Ltd (“GPBS”)
contains a debt service cover ratio
(“DSCR”) covenant of at least 1.25. This
ratio is calculated twice a year from the
Group’s published financial statements.
The Group has received waivers of the
DSCR covenant from ATB for the full year
to 31 December 2016 and from ATB and
GPBS for the half year to 30 June 2017.
Based on current forecasts, the directors
believe that the Group will be compliant
with the DSCR covenant for the full year
to 31 December 2017.

Should there be a moderate and sustained
decrease in either the production or metal
price assumptions, significant doubt would
be cast over the Group’s short term cash
position. Under this circumstance, the
Group would look to defer all non-essential
capital expenditure and administrative
costs in order to preserve cash. The Group
also has access to local sources of short
term finance to meet any shortfalls.

The Group’s assumptions are neither
overly aggressive or overly conservative
and appropriate rigour and diligence has
been performed by the directors in approving
the assumptions. The directors believe all
assumptions are prepared on a realistic
basis using the best available information.

The Group’s business activities, together
with the factors likely to affect its future
development, performance and position,
can be found in the Group’s annual report
and accounts within the chairman’s
statement on pages 5 and 6 and within
the strategic report on pages 7 to 13. The
financial position of the Group, its cash
flow, liquidity position and borrowing
facilities are discussed in the financial
review. In addition, note 22 to the Group
financial statements includes the Group’s
objectives, details of its financial instrument
exposures to credit risk and liquidity risk.

After making due enquiry, 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 financial statements.

Reza Vaziri
President and chief executive
24 May 2017

William Morgan
Chief financial officer
24 May 2017

Anglo Asian Mining PLCChairman’s statementStrategic reportFinancial reviewCorporate governanceGroup financial statementsCompany financial statementsAnnual general meetingwww.angloasianmining.com Annual report and accounts 2016Mr Reza Vaziri
President and chief executive, age 64
Reza Vaziri has been actively involved in business in the
Republic of Azerbaijan since just after its independence.
Since R.V. Investment Group Services LLC, now Anglo Asian’s
subsidiary, signed a Production Sharing Agreement with the
Government of the Republic of Azerbaijan, Reza has been
focused on developing Anglo Asian Mining PLC into 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 the 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
Brzezinski, Governor John Sununu and Henry Kissinger.
Reza resides in Baku, London and Washington, DC.

Governor John Sununu
Non-executive director, age 77
Governor John Sununu received a PhD from Massachusetts
Institute of Technology and taught engineering at Tufts University
for 16 years. He served three terms as the Governor of New
Hampshire before President George H W Bush appointed him
chief of staff in 1989, a position that he held until March 1992.
After his tenure as chief of staff, he co-hosted CNN’s Crossfire,
ran an engineering firm and then, in 2004, served as the visiting
Roy M and Barbara Goodman family professor of practice in public
service at the Kennedy School of Government at Harvard University.
John is a former partner in Trinity International Partners, a private
financial firm, and currently serves as president of JHS Associates Ltd.

Board of directors

Mr Khosrow Zamani*
Non-executive chairman, age 74
Khosrow Zamani was director of the southern Europe and central
Asia department of the International Finance Corporation (“IFC”),
the private sector lending arm of the World Bank, from March
2000 to July 2005. He was responsible for the IFC investment
programme and strategy in 15 countries across the region.
Whilst a director at IFC, Khosrow was instrumental in building
the IFC investment portfolio in the region with several new initiatives,
particularly in central Asia and Caucasia. He oversaw the IFC
portfolio of more than $2 billion, diversified across the financial,
oil and gas, mining and manufacturing sectors. Khosrow has
over 30 years of experience in investment and project finance
and banking in emerging markets. He holds an MSc in Engineering
from the United States of America and a master of business
operations and management from the United Kingdom. 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 Richard Round*
Non-executive director, age 59
Richard Round has held senior finance and leadership roles in
a range of quoted and private companies. Richard now maintains
a portfolio of non-executive director and board advisory positions
in the energy, mining and technology development sectors.
Most recently, Richard led the strategy and ultimate sale of hydro
developer Green Highland Renewables prior to which he successfully
secured around £70 million of funding for the development of the
Oyster wave power technology for Aquamarine Power. Prior to
joining Aquamarine Power, Richard was acting chief executive
at the quoted group, Novera Energy plc where he led the sale
of the landfill gas, wind and hydro group. Richard has also held a
number of finance director roles in the renewable, oil and gas service,
coal and mining sectors with companies including Mining Scotland,
Consolidated Supply Management and Cambrian Mining plc.
Richard was also finance director of Anglo Asian Mining PLC
where he stepped down in July 2008 and was appointed a
non-executive director.

Professor John Monhemius*
Non-executive director, age 74
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. John 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.

* Independent non-executive director.

Anglo Asian Mining PLC Annual report and accounts 2016Corporate governance

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 in fulfilling
its oversight responsibilities in the
following areas:

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

• 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

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

Shareholder relations
The Company meets with its shareholders
and analysts as appropriate and
encourages communication with private
shareholders via the annual general
meeting. In addition, the Company uses
the annual report and financial statements,
the interim statements and its 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.

Introduction
Although the rules of AIM do not require
the Company to comply with the United
Kingdom 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. The principal constituents
of the Group’s corporate governance are
detailed below. However, this is not a
statement of compliance with the Code.

The board of directors
The board of directors (the “Board”)
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
the chief financial officer are invited. 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.

Annual report and financial statements
The directors present their annual report together with the audited Group financial statements on pages 28 to 56.

Principal activities
The Group’s principal activity during the year was the production of gold and silver doré and precious metal concentrate from the
Gedabek and Gosha mines in western Azerbaijan.

Business review and future prospects
A review of the activities of the business throughout the year and up to 24 May 2017 is set out in the chairman’s statement on pages
5 and 6 and the strategic report on pages 7 to 13 which includes information on the Group’s risks, uncertainties and key performance
indicators. These sections are incorporated in this directors’ report by reference.

Dividends
The directors do not recommend a dividend for the year (2015: $nil).

Capital structure
Details of the Company’s authorised and issued share capital, together with the movements for the years ended 31 December 2015
and 2016 are disclosed in note 23 – ‘Equity’ to the Group financial statements. The Company has one class of ordinary share and they
carry no right to fixed income. Each ordinary share carries the right to one vote at general meetings of the Company. All issued
ordinary shares are fully paid.

There are no specific restrictions on the size of a holding or on the transfer of the ordinary shares, which are both governed by the
general provisions of the articles of association and prevailing legislation. The directors are not aware of any agreements between
holders of the Company’s ordinary shares that may result in restrictions on the transfer of securities or on voting rights.

Certain directors own ordinary shares in the Company and certain parties own 3 per cent. or more of the ordinary shares in the
Company. These holdings are set out in the ‘Directors’ interests’ and ‘Substantial shareholders’ sections of this directors’ report.
No person has any special rights of control over the Company’s share capital.

There is no scheme in place for employees to acquire ordinary shares in the Company. Certain employees and directors have been
granted options to acquire ordinary shares. Details of the share options granted are disclosed in note 24 – ‘Share-based payment’
to the Group financial statements.

With regard to the appointment and replacement of directors, the Company is governed by its articles of association, the
Companies Act 2006 and related legislation. It also complies with the United Kingdom Corporate Governance Code as far as
practicable. The articles of association themselves may be amended by special resolution of the shareholders. The powers
of the directors are described in the corporate governance report on page 19.

Under its articles of association, the Company has authority to issue 600 million ordinary shares.

There are no agreements to which the Company is a party that take effect, alter or terminate upon a change of control of the
Company following a takeover bid. There are also no agreements to which the Company is a party which provide for compensation
for loss of office or employment that occurs because of a takeover bid.

Directors
The directors who served throughout the year and up to 24 May 2017 are set out on page 18.

Khosrow Zamani retires by rotation at the next annual general meeting and, being eligible, offers himself for re-election.

Secretary
Fisher Secretaries Limited
Acre House
11/15 William Road
London NW1 3ER
United Kingdom

Registered office
7 Devonshire Square
Cutlers Gardens
London EC2M 4YH
United Kingdom

Registration of the Company
The Company is registered in England and Wales. Its registered number is 5227012.

Anglo Asian Mining PLC Annual report and accounts 2016Directors’ interests
The beneficial interests of the directors who held office at 31 December 2016 and their connected parties in the share capital
of the Company at 31 December were as follows:

John Monhemius
Richard Round
John Sununu
Reza Vaziri
Khosrow Zamani

All directors’ interests are beneficially held.

2016
Number of
ordinary shares

2015
Number of
ordinary shares

341,890
306,759
10,734,540
32,796,830
1,259,590

Directors’ insurance
The Company has made qualifying third-party provision for the benefit of its directors during the year which remains in force at the
date of this report.

Substantial shareholders
The Company has been notified of the following interests of 3 per cent. or more in its issued share capital as at 23 May 2017:

Reza Vaziri
John Sununu
Limelight Industrial Developments

Number of
ordinary shares

32,796,830
10,734,540
4,038,600

Per cent.

29.1
9.5
3.6

Going concern
The directors have prepared the Group financial statements on a going concern basis after reviewing the Group’s forecast cash
position for the period to 30 June 2018 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.

In making this assessment, the directors have acknowledged the challenging and uncertain market conditions in which the Group is
operating. In 2016, the price of gold averaged $1,253 per ounce with a high of $1,366 per ounce and a low of $1,077 per ounce. The
Group has substantially reduced its net debt during 2016 from $49.0 million at 1 January to $34.6 million at 31 December. However,
total production is forecast to be lower in 2017 compared to 2016.

The Group commenced making payments on the principal of its debt in 2015. Until the date of this annual report, the Group has
made all payments of interest and principal on time other than by advance agreement with certain banks to defer payment.

Key to achieving the Group’s forecast cash position, and therefore its going concern assumption are the following:

• achieving the forecast production of gold doré from its heap and agitation leaching facilities.

• achieving its forecast production of precious metal concentrates from its SART and flotation processing.

• its metal (principally gold and copper) price assumptions being met or bettered.

The Group’s cash flow forecasts assume that the newly discovered Ugur gold deposit will commence production as an open pit mine
in the fourth quarter of 2017. If the start-up of the mine is delayed, the cash flow forecast will be adversely affected in the absence of
any further actions being taken. In the event of a production delay from Ugur, the Group has several options to maintain production
to cover any cash flow deficit including recommencing mining in the main open pit, further processing of stockpiled ores and
processing underground ores from the Gadir underground mine which have been extracted ancillary to the current exploration
programme.

The Group’s loan agreement with the Amsterdam Trade Bank (“ATB”) and Gazprombank (Switzerland) Ltd (“GPBS”) contains a debt
service cover ratio (“DSCR”) covenant of at least 1.25. This ratio is calculated twice a year from the Group’s published financial statements.
The Group has received waivers of the DSCR covenant from ATB for the full year to 31 December 2016 and from ATB and GPBS for
the half year to 30 June 2017. Based on current forecasts, the directors believe that the Group will be compliant with the DSCR
covenant for the full year to 31 December 2017.

Should there be a moderate and sustained decrease in either the production or metal price assumptions, significant doubt would be
cast over the Group’s short term cash position. Under this circumstance, the Group would look to defer all non-essential capital expenditure
and administrative costs in order to preserve cash. The Group also has access to local sources of short term finance to meet any shortfalls.

The Group’s assumptions are neither overly aggressive or overly conservative and appropriate rigour and diligence has been performed
by the directors in approving the assumptions. The directors believe all assumptions are prepared on a realistic basis using the best
available information.

Going concern continued
The Group’s business activities, together with the factors likely to affect its future development, performance and position, can be
found in the Group’s annual report and accounts within the chairman’s statement on pages 5 and 6 and within the strategic report
on pages 7 to 13. The financial position of the Group, its cash flow, liquidity position and borrowing facilities are discussed in the
financial review. In addition, note 22 to the Group financial statements includes the Group’s objectives, details of its financial
instrument exposures to credit risk and liquidity risk.

After making due enquiry, 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 financial statements.

Auditors
Each of the persons who is a director at the date of approval of this report confirms that:

1 so far as the director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and

the director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant
audit information and to establish that the Company’s auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of s418(2) of the Companies Act 2006.

Ernst & Young LLP have expressed their willingness to continue in office as auditors and a resolution to reappoint them
will be proposed at the forthcoming annual general meeting.

Corporate governance
A report on corporate governance is set out on page 19.

Annual general meeting
The Company will hold its annual general meeting for 2017 on 30 June 2017. Notification of the meeting has been included
in this annual report.

Listing
The Company’s ordinary shares have been traded on London’s AIM since 29 July 2005. SP Angel Corporate Finance LLP is the
Company’s nominated adviser and broker. The closing mid-market share price at 30 December 2016 was 24.00p (2015: 5.5p).

Relations with shareholders
Communications with shareholders are considered important by the directors. The directors regularly speak to investors and analysts
during the year. Press releases have been issued throughout the year and since the balance sheet date in relation to the progress
of the Group. A website, www.angloasianmining.com, is regularly updated and contains a wide range of information about the Group.

Employee consultation
The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters
affecting them as employees and on the relevant matters affecting the performance of the Group. This is mainly achieved through
informal meetings which the directors believe is the most appropriate method given the current number of Group employees.

Anglo Asian Mining PLC Annual report and accounts 2016Internal controls
The board of directors acknowledges that it is responsible for establishing and maintaining the Group’s system of internal controls
and for reviewing its effectiveness. The procedures which include, inter alia, financial, operational and compliance matters and risk
management are reviewed on an ongoing basis. The internal control system can only provide reasonable and not absolute assurance
against material misstatement or loss. The directors do not believe an internal audit function is practicable in a company of this size.

Donations
The Group has made charitable donations during the year of $nil (2015: $nil). Political donations of $nil (2015: $nil) were made.

Research and development
There was no expenditure on research and development during the year (2015: $nil).

Related party transactions
Related party transactions are disclosed in note 26 – ‘Related party transactions’ to the Group financial statements.

Financial risk management
The Group’s operations expose it to financial risks that include liquidity risk, credit risk, foreign exchange risk and interest rate risk.
The Group does not enter into any derivative transactions, and it is the Group’s policy that no trading in such financial instruments
shall be undertaken.

The main risks arising from the Group’s financial instruments are liquidity risk, credit risk, foreign exchange risk and interest rate risk.
Further details are disclosed in note 22 – ‘Financial instruments’ to the Group financial statements.

By order of the board of directors

Fisher Secretaries Limited
Company secretary
24 May 2017

Unaudited information
Policy on the executive director’s remuneration
The Company operates within a competitive environment and its performance depends on the individual contributions of the directors
and employees.

The executive director’s remuneration package may include:

i) basic annual salary; and

ii) health insurance for the executive and his family.

The Group does not make any contribution to any pension plan of any of the directors.

The executive director’s remuneration is reviewed once per year. In deciding upon appropriate levels of remuneration the remuneration
committee has regard to rates of pay for similar jobs in comparable companies as well as internal factors such as performance.

Directors’ contracts
The executive director currently has an employment contract which may be terminated by the Company with up to 12 months’ notice.
No other payments are made for compensation for loss of office.

The remuneration of the non-executive directors is determined by the board of directors within the limits set out in the articles of
association. Non-executive directors currently have employment contracts which may be terminated by the director or the Company
with three months’ notice. No other payments are made for compensation for loss of office.

Audited information
Directors’ emoluments
Amounts paid by the Group in respect of directors’ services are as follows:

Year ended 31 December 2016

John Monhemius
Richard Round
John Sununu
Reza Vaziri
Khosrow Zamani

Directors’ fees and consultancy fees for 2016 were paid in cash.

Year ended 31 December 2015

John Monhemius
Richard Round
John Sununu
Reza Vaziri
Khosrow Zamani

Consultancy
$

6,422
—
—
586,392
—

592,814

Consultancy
$

6,145
—
—
577,597
—

583,742

Fees
$

43,704
43,704
64,007
43,704
107,801

302,920

Fees
$

50,252
50,252
72,486
50,252
124,446

347,688

Benefits
$

—
—
—
40,862
—

40,862

Benefits
$

—
—
—
42,283
—

42,283

Total
$

50,126
43,704
64,007
670,958
107,801

936,596

Total
$

56,397
50,252
72,486
670,132
124,446

973,713

Certain fees and expenses of the directors for the year ended 31 December 2015 were settled by issuing shares to those directors.
The number of shares issued, and the gross fees (before deduction of taxes) and expenses in which they were in respect of, are
as follows:

Director

John Monhemius
Richard Round
Khosrow Zamani

The shares were issued on 22 July 2015 at a price of 6.19p per share.

Number of
shares issued

157,845
152,801
666,406

Fees
$

25,554
25,554
63,946

Expenses
$

—
—
1,962

Anglo Asian Mining PLC Annual report and accounts 2016Audited information continued
Share option scheme
The Group has initiated a share option scheme for its employees. This was set up in order to reward employees for the performance
of the Company on a long-term basis and to enable the Company to continue to attract a high calibre of management and operational
personnel. Details of share options issued under the scheme are disclosed in note 24 – ‘Share-based payment’ to the Group
financial statements.

Details of share options for directors who served during the year are as follows:

Khosrow Zamani

Richard Round

Exercise
price
(pence)

16.5
12.0
42.5
12.0

Latest
exercise
date

1 June 2017
27 July 2017
12 April 2016
27 July 2017

1 January
2016

100,000
500,000
495,859
600,000

Lapsed
during
the year

31 December
2016

— 100,000
— 500,000
—
— 600,000

(495,859)

The Company’s share price has ranged from 5.5p at 31 December 2015 to a high of 33.75p and a low of 3.875p during the year ended
31 December 2016 with a closing price of 24.00p at 30 December 2016.

By order of the board of directors

Fisher Secretaries Limited
Company secretary
24 May 2017

The directors are responsible for
preparing the annual report and the
financial statements in accordance
with applicable law and regulations.
Company law requires the directors
to prepare financial statements
for each financial year. Under that
law the directors have, as required
by the rules of AIM 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. The directors have also elected
to prepare the financial statements of
the parent company (the “Company”)
in accordance with United Kingdom
Generally Accepted Accounting Practice
(United Kingdom Accounting Standards
and applicable law), including FRS 101
‘Reduced Disclosure Framework’.
The directors are also responsible
for preparing the directors’ report
in accordance with the Companies
Act 2006 and applicable regulations.

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:

• the financial statements, prepared
in accordance with the applicable
accounting frameworks, give a true
and fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken
as a whole; and

• the management report, which is

incorporated into the strategic report
and 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 of directors

Khosrow Zamani
Non-executive chairman
24 May 2017

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:

• 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;

• present information, including

accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information;

• 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;

• state whether they have been

prepared in accordance with IFRS;

• 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 has no realistic
alternative but to do so; and

• 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:

• select suitable accounting policies and

then apply them consistently;

• make judgements and estimates that

are reasonable and prudent;

• state whether applicable UK Accounting
Standards have been followed, subject
to any material departures disclosed
and explained in the financial
statements; and

• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.

Anglo Asian Mining PLC Annual report and accounts 2016Independent auditor’s report
to the members of Anglo Asian Mining PLC

We have audited the financial statements of Anglo Asian Mining PLC for the year ended 31 December 2016 which comprise the
Group income statement, Group statement of comprehensive income, Group statement of financial position, Group cash flow
statement, Group statement of changes in equity, Company balance sheet and the related notes set out on pages 28 to 61.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law
and International Financial Reporting Standards (“IFRSs”) as adopted by the European Union. The financial reporting framework that
has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 101 “Reduced Disclosure Framework”.

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 Statement of directors’ responsibilities set out on page 26, the directors are responsible for the preparation
of the 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 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 and 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 strategic report and
directors’ report to identify material inconsistencies with the audited financial statements and to identify any information that
is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the
audit. 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 financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2016

and of the Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice; and

• the financial statements 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:
• based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors’ report for the financial year for which the financial statements

are prepared is consistent with the financial statements; and

• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have
identified no material misstatements in the strategic report or directors’ report.

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:
• 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

• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Andrew Smyth (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
24 May 2017

Notes:
1.

The maintenance and integrity of the Anglo Asian Mining PLC website is the responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept 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.

Revenue

Cost of sales

Gross profit

Other income

Administrative expenses

Other operating expense

Operating profit/(loss)

Finance costs

Profit/(loss) before tax

Income tax

Profit/(loss) attributable to the equity holders of the parent

Profit/(loss) per share attributable to the equity holders of the parent

Basic (US cents per share)

Diluted (US cents per share)

Notes

2016
$000

79,184

(62,770)

16,414

1,375

(4,931)

(1,144)

11,714

(4,935)

6,779

(2,795)

3,984

3.55

2015
$000

78,057

(75,234)

2,823

714

(5,415)

(1,311)

(3,189)

(5,721)

(8,910)

1,529

(7,381)

(6.58)

Group statement of comprehensive income
year ended 31 December 2016

Profit/(loss) for the year

Total comprehensive profit/(loss)

Attributable to the equity holders of the parent

2016
$000

3,984

2015
$000

(7,381)

Anglo Asian Mining PLC Annual report and accounts 2016

Group statement of financial position
31 December 2016

Non-current assets

Intangible assets

Property, plant and equipment

Inventory

Other receivables

Current assets

Inventory

Trade and other receivables

Cash and cash equivalents

Total assets

Current liabilities

Trade and other payables

Interest-bearing loans and borrowings

Net current assets/(liabilities)

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/(loss)

Total equity

Notes

2016
$000

2015
$000

16,848

98,476

—

1,084

18,373

108,428

2,543

120

116,408

129,464

34,018

16,250

1,379

51,647

26,197

16,131

249

42,577

168,055

172,041

(21,833)

(26,165)

(20,112)

(26,708)

(47,998)

(46,820)

3,649

(4,243)

(9,416)

(9,765)

(18,230)

(8,554)

(22,588)

(15,435)

(37,411)

(46,577)

(85,409)

(93,397)

82,646

78,644

1,993

32,325

154

46,206

1,968

1,993

32,325

283

46,206

(2,163)

82,646

78,644

The Group financial statements were approved by the board of directors and authorised for issue on 24 May 2017. They were signed
on its behalf by:

Reza Vaziri
Chief executive

Profit/(loss) before tax

Adjustments for:

Finance costs

Depreciation of property, plant and equipment

Amortisation of mining rights and other intangible assets

Share-based payment expense

Shares issued in lieu of cash payment

Foreign exchange gain, net

Write down of advances paid

Operating cash flow before movements in working capital

Increase in trade and other receivables

(Increase)/decrease in inventories

Increase/(decrease) in trade and other payables

Cash provided by operations

Income taxes paid

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

Net cash used in investing activities

Financing activities

Proceeds from borrowings

Repayments of borrowings

Interest paid

Net cash outflow used in financing activities

Net increase/(decrease) 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

Notes

2016
$000

6,779

4,935

20,080

1,884

—

(138)

353

33,911

(2,805)

(5,278)

3,751

29,579

—

29,579

2015
$000

(8,910)

5,721

19,808

2,049

(380)

184

18,581

(1,110)

6,285

(793)

22,963

—

22,963

(10,679)

(14,279)

(359)

(377)

(11,038)

(14,656)

14,083

(27,544)

(3,950)

14,793

(18,314)

(4,859)

(17,411)

(8,380)

1,130

249

1,379

(73)

322

249

Anglo Asian Mining PLC Annual report and accounts 2016Group statement of changes in equity
year ended 31 December 2016

Notes

1 January 2015

Loss for the year

Shares issued

Fair value of expired options

Share-based payment

31 December 2015

Profit for the year

Fair value of expired options

Share-based payment

Share
capital
$000

1,978

—

Share
premium
$000

32,246

—

1,993

32,325

—

31 December 2016

1,993

32,325

Share-based
payment
reserve
$000

670

—

(402)

283

—

(147)

154

Merger
reserve
$000

46,206

—

46,206

—

Retained
earnings/
(loss)
$000

4,816

(7,381)

—

402

—

(2,163)

3,984

147

—

Total
equity
$000

85,916

(7,381)

—

78,644

3,984

—

46,206

1,968

82,646

General information
Anglo Asian Mining PLC (the “Company”) is a company incorporated and limited by shares in England and Wales under the
Companies Act 2006. The address of its registered office is set out in Company information on page 65 of this annual report.
The Company’s ordinary shares are traded on the AIM exchange of the London Stock Exchange. The Company is a holding
company. The principal activities and place of business of the Company and its subsidiaries (the “Group”) are set out in note
15, the chairman’s statement on pages 5 and 6 and the strategic report on pages 7 to 13 of this annual report.

Basis of preparation
The Group’s annual report is for the year ended 31 December 2016 and includes the consolidated financial statements of the
Group prepared in accordance with International Financial Reporting Standards (“IFRS”) adopted by the European Union and
therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.

The Group financial statements have been prepared using accounting policies set out in note 4 which are consistent with
all applicable IFRSs and with those parts of the Companies Act 2006 applicable to companies reporting under IFRSs. For these
purposes, IFRSs comprises the standards issued by the International Accounting Standards Board and interpretations issued
by the International Financial Reporting Interpretations Committee that have been endorsed by the European Union.

The Group financial statements have been prepared under the historical cost convention except for the treatment of
share-based payments. The Group financial statements are presented in United States Dollars (“$”) and all values are
rounded to the nearest thousand except where otherwise stated. In the Group financial statements “£” and “pence”
are references to the United Kingdom pound sterling.

As set out in the directors’ report on page 21, the board of directors assessed the ability of the Group to continue as a going
concern and these financial statements have been prepared on a going concern basis.

The directors have prepared the Group financial statements on a going concern basis after reviewing the Group’s forecast cash
position for the period to 30 June 2018 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.

In making this assessment, the directors have acknowledged the challenging and uncertain market conditions in which the Group
is operating. In 2016, the price of gold averaged $1,253 per ounce with a high of $1,366 per ounce and a low of $1,077 per ounce.
The Group has substantially reduced its net debt during 2016 from $49.0 million at 1 January to $34.6 million at 31 December.
However, total production is forecast to be lower in 2017 compared to 2016.

The Group commenced making payments on the principal of its debt in 2015. Until the date of this annual report, the Group
has made all payments of interest and principal on time other than by advance agreement with certain banks to defer payment.

Key to achieving the Group’s forecast cash position, and therefore its going concern assumption are the following:

• achieving the forecast production of gold doré from its heap and agitation leaching facilities.

• achieving its forecast production of precious metal concentrates from its SART and flotation processing.

• its metal (principally gold and copper) price assumptions being met or bettered.

The Group’s cash flow forecasts assume that the newly discovered Ugur gold deposit will commence production as an open
pit mine in the fourth quarter of 2017. If the start-up of the mine is delayed, the cash flow forecast will be adversely affected in
the absence of any further actions being taken. In the event of a production delay from Ugur, the Group has several options to
maintain production to cover any cash flow deficit including recommencing mining in the main open pit, further processing of
stockpiled ores and processing underground ores from the Gadir underground mine which have been extracted ancillary to
the current exploration programme.

The Group’s loan agreement with the Amsterdam Trade Bank (“ATB”) and Gazprombank (Switzerland) Ltd (“GPBS”) contains a
debt service cover ratio (“DSCR”) covenant of at least 1.25. This ratio is calculated twice a year from the Group’s published
financial statements. The Group has received waivers of the DSCR covenant from ATB for the full year to 31 December 2016
and from ATB and GPBS for the half year to 30 June 2017. Based on current forecasts, the directors believe that the Group will
be compliant with the DSCR covenant for the full year to 31 December 2017.

Should there be a moderate and sustained decrease in either the production or metal price assumptions, significant doubt
would be cast over the Group’s short term cash position. Under this circumstance, the Group would look to defer all non-essential
capital expenditure and administrative costs in order to preserve cash. The Group also has access to local sources of short
term finance to meet any shortfalls.

The Group’s assumptions are neither overly aggressive or overly conservative and appropriate rigour and diligence has been
performed by the directors in approving the assumptions. The directors believe all assumptions are prepared on a realistic basis
using the best available information.

The Group’s business activities, together with the factors likely to affect its future development, performance and position, can
be found in the Group’s annual report and accounts within the chairman’s statement on pages 5 and 6 and within the strategic
report on pages 7 to 13. The financial position of the Group, its cash flow, liquidity position and borrowing facilities are discussed
in the financial review. In addition, note 22 to the Group financial statements includes the Group’s objectives, details of its financial
instrument exposures to credit risk and liquidity risk.

Anglo Asian Mining PLC Annual report and accounts 20162

Basis of preparation continued
After making due enquiry, 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 financial statements.

Adoption of new and revised standards
a) New and amended standards and interpretations
The Group applied those minor amendments, including annual improvements, which are effective for annual periods beginning
on or after 1 January 2016. However, they do not impact the annual consolidated financial statements of the Group or the
interim financial statements and, hence, have not been disclosed.

b) Standards issued but not yet effective
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the financial statements
that the Group reasonably expects will have an impact on its disclosures, financial position or performance when applied at a
future date are disclosed below. The Group intends to adopt these standards when they become effective. The standards and
interpretations that are issued, but not yet effective, up to the date of issuance of the financial statements that are not expected
to impact the Group have not been listed below.

• IFRS 9 ‘Financial Instruments’

In July 2014, the IASB issued the final version of IFRS 9 ‘Financial Instruments’ that replaces IAS 39 and all previous versions
of IFRS 9. IFRS 9 brings together all three aspects of the accounting for the financial instruments project: classification and
measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January
2018, with early adoption permitted. Except for hedge accounting, retrospective application is required, but the provision
of comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively,
with some limited exceptions.

The Group plans to adopt the new standard on the required effective date. The Group is assessing the impact of the
changes required by the final version of IFRS 9, but these are not expected to be materially significant.

• IFRS 15 ‘Revenue from Contracts with Customers’

IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers.
Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled
in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue
recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required
for annual periods beginning on or after 1 January 2018. Early adoption is permitted.

The Group plans to adopt the new standard on the required effective date using the full retrospective method. The Group
is assessing the impact of the changes of IFRS 15, but these are not expected to be materially significant.

• IAS 7 ‘Statement of Cash Flows’

The amendments to IAS 7 ‘Statement of Cash Flows’ are part of the IASB’s Disclosure Initiative and help users of financial
statements better understand changes in an entity’s debt. The amendments require entities to provide disclosures about
changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash
changes (such as foreign exchange gains or losses).

The Group plans to implement the new standard on the effective date for implementation which is for annual periods
beginning on or after 1 January 2017. Comparative information for preceding annual periods is not required to be restated.
The Group does not expect these additional disclosures to be materially significant.

• IAS 12 ‘Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12’

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against
which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide
guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profits
may include the recovery of some assets for more than their carrying amount.

These amendments are effective for annual periods beginning on or after 1 January 2017 with early application permitted.
If an entity applies the amendments for an earlier period, it must disclose that fact. These amendments are not expected
to have any impact on the Group.

Adoption of new and revised standards continued
b) Standards issued but not yet effective continued
• IFRS 16 ‘Leases’

IFRS 16 was issued in January 2016 and it replaces IAS 17 ‘Leases’, IFRIC 4 ‘Determining whether an Arrangement contains
a Lease,’ SIC-15 ‘Operating Leases-Incentives’ and SIC-27 ‘Evaluating the Substance of Transactions Involving the Legal Form
of a Lease.’ IFRS 16 sets out the principles for the recognition measurement, presentation and disclosure of leases and requires
lessees to account for all leases under a single on balance sheet model similar to the accounting for finance leases under
IAS 17. The standard includes two recognition exemptions for lessees – leases of ‘low-value’ assets (e.g. personal computers)
and short-term leases (i.e. leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee
will recognise a liability to make lease payments (i.e. the lease liability) and an asset representing the right to use the
underlying asset during the lease term (i.e. the right-of-use asset). Lessees will be required to separately recognise the
interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g. a change in the
lease term or a change in future lease payments resulting from a change in an index or rate used to determine those payments).
The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the
right-of-use asset.

Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue to
classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating
and finance leases.

IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17.

IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before
an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified
retrospective approach. The standard’s transition provisions permit certain reliefs.

In 2017, the Group plans to assess the potential effect of IFRS 16 on its consolidated financial statements. However, as
disclosed in note 25, the Group has no significant leases.

Significant accounting policies

4
4.1 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2016.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and
has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and
only if, the Group has:

• power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

• exposure, or rights, to variable returns from its involvement with the investee; and

• the ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when
the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee, including:

• the contractual arrangement with the other vote holders of the investee;

• rights arising from other contractual arrangements; and

• the Group’s voting rights and potential voting rights.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to
one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the subsidiary.

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.

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 2016

Significant accounting policies continued

4
4.2 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 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:

i) Gold bullion and copper concentrate sales
Revenue from gold bullion sales is recognised 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 the content
of gold and silver in doré, the price of which is determined based on market quotations of each metal. Silver in doré, which
is produced together with gold, is treated as a by-product and recognised in sales revenue.

Contractual 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.

Contractual terms with third parties for the sale of metal in concentrate specify a provisional selling price based on the average
prevailing spot prices at date of shipment to the customer. Final selling price is based on average prevailing spot prices during a
specified future period after shipment to the customer (the “quotation period”). Sales revenue for the sale of metal in concentrate
is recognised at final selling price.

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

4.3 Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception
date and 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 Group income statement on a straight line basis over the lease term.

The Group had no finance leases during 2016 and 2015.

4.4 Taxation

i) 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 Group 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, the 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 reporting date. Deferred
tax relating to items recognised in the Group income statement is charged or credited in the Group income statement.
Deferred tax relating to items recognised outside the Group income statement is recognised outside the Group income
statement and items are recognised in correlation to the underlying transaction either in the Group statement of
comprehensive income or directly 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 reporting 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. Deferred
tax assets and liabilities are classified as non-current assets and liabilities.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Group
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 reporting date.

The tax expense represents the sum of the tax currently payable and deferred tax.

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

4
4.5 Transactions with related parties

For the purposes of these Group financial statements, the following parties are considered to be related:

• where one party has the ability to control the other party or exercise significant influence over the other party in making

financial or operational decisions;

• entities under common control; and

• key management personnel.

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.

4.6 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 Group 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 Group income statement in the period
they are incurred.

4.7

Intangible assets
i) 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.

ii) 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.

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 20164
4.7

Significant accounting policies continued
Intangible assets continued
iii) Other intangible assets
Other intangible assets are mainly the costs of agricultural compensation paid to landowners for the use of land ancillary to
the Group’s mining operations. These costs are depreciated over the respective terms of right to use the land.

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 reporting date. Changes in the expected useful life or the expected
pattern of consumption of future economic benefits embodied in the asset are 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 Group income statement in the expense category consistent with the function of the
intangible asset.

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 Group income statement when the asset is derecognised.

4.8 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 the course of construction are transferred into
‘Plant and equipment, motor vehicles and leasehold improvements’ or ‘Producing mines’. Items of ‘Plant and equipment,
motor vehicles and leasehold improvements’ 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 under construction’ up to the period when the asset is ready to be put into operation. When an asset is put
into operation it is transferred to ‘Plant and equipment, motor vehicles and leasehold improvements’ 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, motor vehicles and leasehold improvements’ or ‘Producing mines’, 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.

i) Depreciation and amortisation
Accumulated mine development costs within producing mines are depreciated and 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 mine (“ROM”) costs
and for post-ROM costs is recoverable ounces of gold. The units-of-production rate for the depreciation and 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 the mine on a
units-of-production basis.

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

• Temporary buildings

• Plant and equipment

• Motor vehicles

• Office equipment

• Leasehold improvements

–

eight years (2015: eight years)

four years (2015: four years)

eight years (2015: 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 Group income
statement when the asset is derecognised.

The assets’ residual values, useful lives and methods of depreciation and amortisation are reviewed at each reporting date
and adjusted prospectively if appropriate.

4
4.8 Property, plant and equipment and mine properties continued

ii) 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.

4.9

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 Group 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).

Impairment losses related to continuing operations are recognised in the Group 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 Group statement of comprehensive income. Impairment losses recognised in relation to indefinite life
intangibles are not reversed for subsequent increases in its recoverable amount.

4.10 Fair value measurement

The Group measures financial instruments such as bank borrowings at fair value at each balance sheet date. Fair value disclosures
for financial instruments measured at fair value, or where fair value is disclosed, are summarised in the following notes:

• Note 17 – ‘Trade and other receivables’;

• Note 18 – ‘Cash and cash equivalents’;

• Note 19 – ‘Trade and other payables’; and

• Note 20 – ‘Interest-bearing loans and borrowings’.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either:

• in the principal marketplace for the asset or the liability; or
• in the absence of a principal market, the most advantageous market for the asset or liability.
The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in their economic best interest.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available
to measure fair value, maximising the use of relevant observable inputs and minimising the unobservable inputs.

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 2016Significant accounting policies continued

4
4.10 Fair value measurement continued

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement
as a whole.

• Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
• Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly

or indirectly observable.

• Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a reoccurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature,
characteristics and risks of the asset or liability and the level of the fair value hierarchy as set out above.

4.11 Provisions
i) 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 risk-free 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.

ii) 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 revegetation of affected areas.

The obligation generally arises when the asset is installed or the ground or 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 Group 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. 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 Group 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 Group 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 exceed
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 Group income statement. Rehabilitation
obligations that arise as a result of the standard production activities of a mine are expensed as incurred.

4.12 Financial instruments – initial recognition and subsequent measurement

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument
of another entity.

a) Financial assets
i) Initial recognition and measurement
Financial assets 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 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 and trade and other receivables.

4
4.12 Financial instruments – initial recognition and subsequent measurement continued

a) Financial assets continued
ii) Subsequent measurement
The subsequent measurement of financial assets depends on their classification:

• financial assets at fair value through profit and loss;

• loans and receivables;

• held-to-maturity investments; and

• available for sale financial assets.

The only category of financial assets of the Group is currently loans and receivables.

Loans and 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
fees 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 Group income statement. The losses arising from impairment are recognised in the Group
income statement.

iii) Derecognition
A financial asset (or, where applicable, a part of a financial asset) is derecognised when:

• the rights to receive cash flows from the asset have expired; and

• 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.

iv) Impairment of financial assets
The Group assesses at each reporting 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 indicates that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

v) 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.

b) Financial liabilities
i) Initial recognition and measurement
Financial liabilities are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or 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.

ii) Subsequent measurement
The measurement of financial liabilities depends on their classification:

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.

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 2016Significant accounting policies continued

4
4.12 Financial instruments – initial recognition and subsequent measurement continued

b) Financial liabilities continued
ii) Subsequent measurement continued
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 Group 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 Group income statement 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 fees or costs that are an integral
part of the effective interest rate method. The effective interest rate method amortisation is included in finance costs in the
Group income statement.

iii) 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
Group income statement.

c) Derivative financial instruments
The Group uses derivative financial instruments such as forward commodity and option contracts to hedge its commodity
price risks. Such contracts are not designated as hedges or accounted for as such in accordance with IAS 39. Such derivative
financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are
subsequently remeasured at fair value. Derivative financial instruments are accounted for as financial assets when their fair
value is positive and as financial liabilities when their fair value is negative. Any gains or losses arising from changes in the fair
value of derivative financial instruments are included in the Group income statement.

4.13 Trade and other receivables

The Group presents trade and other receivables in the statement of financial position based on a current or non-current
classification. A trade and other receivable is classified as current as follows:

• expected to be realised or intended to be sold or consumed in the normal operating cycle;

• held primarily for the purpose of trading; and

• expected to be realised within 12 months after the date of the statement of financial position.

Gold bullion held on behalf of the Government of Azerbaijan is classified as a current asset and valued at the current market
price of gold at the statement of financial position date. A current liability of equal amount representing the liability of the
gold bullion to the Government of Azerbaijan is also established.

Advances made to suppliers for fixed asset purchases are recognised as non-current prepayments until the fixed asset is
delivered when they are capitalised as part of the cost of the fixed asset.

4.14 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 and 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 production 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 consist of doré bars that have been refined and assayed and are in a form that allows them to be sold on international
bullion markets and metal in concentrate. 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 consist of consumables used in operations, such as fuel, chemicals, reagents and spare parts,
valued at the lower of average cost and replacement cost and, where appropriate, less a provision for obsolescence.

4
4.15 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.

4.16 Deferred stripping costs

The removal of overburden and other mine waste materials is often necessary during the initial development of a mine site,
in order to access the mineral ore deposit. The directly attributable cost of this activity is capitalised in full within mining
properties and leases, until the point at which the mine is considered to be capable of commercial production. This is classified
as expansionary capital expenditure, within investing cash flows.

The removal of waste material after the point at which a mine is capable of commercial production is referred to as
production stripping.

When the waste removal activity improves access to ore extracted in the current period, the costs of production stripping
are accounted for as part of the cost of producing those inventories.

Where production stripping activity both produces inventory and improves access to ore in future periods the associated costs
of waste removal are allocated between the two elements. The portion which benefits future ore extraction is capitalised as
deferred stripping capital expenditure within producing mines. If the amount to be capitalised cannot be specifically identified
it is determined based on the volume of waste extracted compared with expected volume for the identified component of the
ore body. Components are specific volumes of a mine’s ore body that are determined by reference to the life of mine plan.

In certain instances significant levels of waste removal may occur during the production phase with little or no associated production.

All amounts capitalised in respect of waste removal are depreciated using the unit-of-production method based on the
ore reserves of the component of the ore body to which they relate.

The effects of changes to the life of mine plan on the expected cost of waste removal or remaining reserves for a component
are accounted for prospectively as a change in estimate.

4.17 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.

4.18 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 Group income statement.

4.19 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 calculated using
management’s best estimate of the effects of non-transferability, exercise restrictions and behavioural considerations.
The vesting condition assumptions are reviewed during each reporting period to ensure they reflect current expectations.

4.20 Significant accounting judgements, estimates and assumptions

The preparation of the Group 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
Group 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 Group financial statements is described below.

i) 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.

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 2016Significant accounting policies continued

4
4.20 Significant accounting judgements, estimates and assumptions continued

ii) 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 Group income statement in the period when the new information becomes available.

iii) Inventory (note 16)
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.

The ounces of gold sold are compared to the remaining reserves of gold for the purpose of charging inventory costs to operations.

iv) Impairment of tangible and intangible assets (notes 13 and 14)
The assessment of tangible and intangible assets for any internal and external indications of impairment involves judgement.
Each reporting period, the Group assesses whether there are indicators of impairment; if indicated then a formal estimate
of the 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 recoverable value 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.

v) 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:

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

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

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

• ability to sustain ongoing 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.

vi) Mine rehabilitation provision (note 21)
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 reporting 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 Group 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’.

vii) Recovery of deferred tax assets (note 11)
Judgement is required in determining whether deferred tax assets are recognised within the Group 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.

Segment information
The Group determines 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. The board of directors currently
considers consolidated financial information for the entire Group and reviews the business based on the Group income statement
and Group statement of financial position on this basis. Accordingly, the Group has only one operating segment, mining operations.
The mining operations comprise the Group’s major producing asset, the Gedabek mine, which accounts for all the Group’s
revenues and the majority of its cost of sales, depreciation and amortisation. The Group’s mining operations are all located
within Azerbaijan and therefore all within one geographic segment.

All sales of gold and silver bullion are made to one customer, the Group’s gold refinery, MKS Finance SA, based in Switzerland.
Copper concentrate is sold to Industrial Minerals SA.

Revenue
The Group’s revenue consists of gold and silver bullion and copper concentrate sold to third-party customers. Revenue from
sales of gold and silver bullion was $66,766,000 and $164,000 respectively (2015: $74,221,000 and $58,000). Revenue from sales
of precious metal concentrate was $12,254,000 (2015: $3,778,000).

Other income and operating expense
Other income
Other income comprises loan interest receivable in respect of a loan to a former employee, release of provisions no longer
required and foreign exchange gains for the years ended 31 December 2015 and 2016. Foreign exchange gain for the year
ended 31 December 2016 was $138,000 (2015: $629,000).

Other operating expense
Other operating expense comprises metal refining costs, foreign currency exchange losses, write down of advances paid
and other miscellaneous operating expenses for the years ended 31 December 2015 and 2016.

Operating profit/(loss)

Operating profit/(loss) is stated after charging:
Depreciation on property, plant and equipment – owned
Amortisation of mining rights and other intangible assets
Employee benefits and expenses
Foreign currency exchange gain
Inventory expensed during the year
Operating lease expenses

Fees payable to the Company’s auditor for:
The audit of the Group’s annual accounts
The audit of the Group’s subsidiaries pursuant to legislation
Audit related assurance services – half year review

Total audit services

Amounts paid to auditor for other services:
Tax compliance services

Total non-audit services

Total

Notes

14
13
9

2016
$000

20,080
1,884
7,471
138
28,520
730

132
114
2

248

257

2015
$000

19,808
2,049
9,614
629
35,592
616

138
119
—

257

267

There were no non-cancellable operating lease and sublease arrangements during 2016 and 2015.

The audit fees for the parent company were $107,000 (2015: $107,000).

Staff numbers and costs
The average number of staff employed by the Group (including directors) during the year, analysed by category, was as follows:

Management and administration
Exploration
Mine operations

2016
Number

2015
Number

51
20
580

651

51
19
545

615

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 2016

Staff numbers and costs continued
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

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

Short-term employee benefits
Share-based payment

2016
$000

6,109
18
1,343

7,470

—

7,470

2015
$000

8,172
15
1,609

9,796

(182)

9,614

2016
$

2015
$

1,750,094
18,705

1,541,245
109,658

1,768,799

1,650,903

The key management personnel of the Group comprise the chief executive officer, the vice president of government affairs,
the senior vice president, Azerbaijan International Mining Company Limited, the vice president of technical services, the
director of geology and the chief financial officer. The disclosure of the remuneration of the directors as required by the
Companies Act 2006 is given in the report on directors’ remuneration on pages 24 and 25.

Finance costs

Interest charged on interest-bearing loans and borrowings
Finance charges on letters of credit
Unwinding of discount on provisions

2016
$000

4,344
98
493

4,935

2015
$000

5,177
130
414

5,721

Interest on interest-bearing loans and borrowings represents charges incurred on those credit facilities as set out in note 20
– ”Interest-bearing loans and borrowings”.

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.
For the year ended 31 December 2016, $nil (2015: $nil) interest was capitalised.

Taxation
Corporation tax is calculated at 32 per cent. (as stipulated in the production sharing agreement for R.V. Investment Group Services
LLC (“RVIG”) in the Republic of Azerbaijan, the entity that contributes the most significant portion of profit or loss before tax
in the Group financial statements) of the estimated assessable profit or loss 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 Group financial statements. RVIG’s unutilised tax losses at 31 December 2016 were $19,162,000
(2015: $27,990,000).

The major components of the income tax (charge)/credit for the year ended 31 December are:

Current income tax
Current income tax charge
Deferred tax
(Charge)/credit relating to origination and reversal of temporary differences

Income tax (charge)/credit for the year

2016
$000

—

(2,795)

2015
$000

—

1,529

Taxation continued
Deferred income tax at 31 December relates to the following:

Statement of financial position

Income statement

2016
$000

2015
$000

2016
$000

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

Deferred income tax liability

Deferred income tax asset
Trade and other payables and provisions*
Asset retirement obligation*
Interest-bearing loans and borrowings*
Carry forward losses**

Deferred income tax asset

Deferred income tax (charge)/credit

Net deferred income tax liability

(19,453)
(347)
(1,466)
(9,447)

(30,713)

3,489
3,013
(151)
6,132

(20,791)
(158)
(694)
(7,759)

(29,402)

2,298
2,737
(25)
8,957

12,483

13,967

(18,230)

(15,435)

2015
$000

(538)
260
(334)
2,011

(654)
(23)
(186)
993

1,338
(189)
(772)
(1,688)

1,191
276
(126)
(2,825)

(2,795)

1,529

* Deferred income tax assets have been recognised for the trade and other payables and provisions, asset retirement obligation and interest-bearing

loans and borrowings based on local tax basis differences expected to be utilised against future taxable profits.

** Deferred income tax assets have been recognised for the carry forward of unused tax losses to the extent that it is probable that taxable profits will
be available in the future against which the unused tax losses can be utilised. The probability that taxable profits will be available in the future is based
on forward looking budgets and business plans of the Group.

A reconciliation between the accounting profit/(loss) and the total taxation charge/(credit) for the years ended 31 December
is as follows:

Profit/(loss) before tax

Theoretical tax charge/(credit) at statutory rate of 32 per cent. for RVIG*
Effects of different tax rates for certain Group entities (20 per cent.)
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

Income tax charge/(credit) for the year

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

2016
$000

6,779

2,169
127

2
867
(370)

2,795

2015
$000

(8,910)

(2,851)
173

1
1,175
(27)

(1,529)

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. The Group intends to settle its current tax assets and liabilities on a net basis in the Republic of Azerbaijan.

At 31 December 2016, the Group had unused tax losses available for offset against future profits of $22,877,000 (2015: $30,762,000).
Unused tax losses in the Republic of Azerbaijan at 31 December 2016 were $19,162,000 (2015: $27,990,000). 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 Profit/(loss) per share

The calculation of basic and diluted profit per share is based upon the retained profit for the financial year of $3,984,000
(2015: loss of $7,381,000).

The weighted average number of ordinary shares for calculating the basic profit (2015: loss) and diluted profit (2015: loss)
per share after adjusting for the effects of all dilutive ordinary shares relating to share options are as follows:

2016

2015

Basic

Diluted

112,117,622

112,295,664

112,117,622

At 31 December 2016 there were 1,100,000 unexercised share options that could potentially dilute basic earnings per share (2015: nil).

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 2016

Total
$000

45,906
377

46,283
359

46,642

25,861
2,049

27,910
1,884

29,794

18,373

16,848

Total
$000

181,400
14,289
—
(484)

195,205
9,759
—
369

Intangible assets

Exploration and
evaluation
Gedabek
$000

Exploration and
evaluation
Ordubad
$000

Cost
1 January 2015
Additions

31 December 2015
Additions

31 December 2016

Amortisation and impairment*
1 January 2015
Charge for the year

31 December 2015
Charge for the year

31 December 2016

Net book value
31 December 2015

31 December 2016

—
—

—
191

191

—
—

—

191

Mining
rights
$000

41,925
—

3,513
347

3,860
168

4,028

41,925

—
—

—

3,860

4,028

25,606
2,020

27,626
1,843

29,469

14,299

12,456

Other
intangible
assets
$000

468
30

498
—

498

255
29

284
41

325

214

173

* 507,000 ounces of gold at 1 January 2016 were used to determine depreciation of producing mines, mining rights and other intangible assets

(2015: 579,000 ounces).

14 Property, plant and equipment

Cost
1 January 2015
Additions
Transfer to producing mines
Increase in provision for rehabilitation

31 December 2015
Additions
Transfer to producing mines
Decrease in provision for rehabilitation

31 December 2016

Depreciation and impairment*
1 January 2015
Charge for the year

31 December 2015
Charge for the year

31 December 2016

Net book value
31 December 2015

31 December 2016

Plant and
equipment and
motor vehicles
$000

Producing
mines
$000

Assets under
construction
$000

19,409
257
—
—

19,666
1,799
—
—

159,898
6,810
8,838
(484)

175,062
4,404
3,598
369

2,093
7,222
(8,838)
—

477
3,556
(3,598)
—

21,465

183,433

435

205,333

10,761
1,881

12,642
2,014

56,208
17,927

74,135
18,066

14,656

92,201

7,024

6,809

100,927

91,232

—
—

—

477

435

66,969
19,808

86,777
20,080

106,857

108,428

98,476

* 507,000 ounces of gold at 1 January 2016 were used to determine depreciation of producing mines, mining rights and other intangible assets

(2015: 579,000 ounces).

Upon completion of construction and commencement of operation, SAG mill construction costs of $1,500,000 and electricity
substation construction costs of $2,098,000, were transferred to the category of producing mines.

As a result of the recoverable amount analysis performed during the year, no impairment losses were recognised by the Group.

The capital commitments by the Group have been disclosed in note 25.

The Group performs an impairment analysis at each balance sheet date to ascertain that the carrying value of the Group’s
property plant and equipment is in excess of its fair value less cost to dispose (“FVLCD”). The determination of FVLCD is most
sensitive to the following key assumptions:

• production volumes;

• commodity prices;

• discount rates;

• foreign exchange rates; and

• capital and operating costs.

Production volumes: In calculating the FVLCD, the production volumes incorporated into the cash flow models were 453,000 ounces
of gold and 58,000 tonnes of copper. Estimated production volumes are based on detailed life of mine plans. Production volumes
are dependent on a number of variables such as the recoverable quantities, the cost of the necessary infrastructure to recover
the reserves, the production costs, the contractual duration of the mining rights and the selling prices of the quantities extracted.
These production volumes are based on the mine being operational until the end of 2027.

Commodity prices: Forecast precious metal and commodity prices are based on management estimates. Estimated long-term
gold prices of between $1,400 and $1,535 per ounce (2015: $1,284 per ounce) and estimated long-term copper prices of between
$6,146 and $6,739 per tonne (2015: $6,600 per tonne) have been used to estimate future revenue.

Discount rates: In calculating the FVLCD, a post-tax discount rate of 10.53 per cent. (2015: 13.5 per cent.) was applied to the
post-tax cash flows expressed in real terms. This discount rate is derived from the Group’s post-tax weighted average cost
of capital (“WACC”), which takes into account both equity and debt, and is then adjusted to reflect the Group’s assessment
of a discount rate that other market participants would consider when evaluating the assets.

Foreign exchange rates: The only significant foreign exchange rate in the cash flow model is the United States Dollar to
Azerbaijan Manat rate. A rate of $1 equals 1.84 Manat (2015: $1 equals 1.55 Manat) has been used in the cash flow model.

Capital and operating costs: In calculating the cash flow model, the significant capital and operating costs are the additional
future capital cost to be incurred over the life of the mine of $459 million and the cash cost per ounce of producing gold. Cash costs
per ounce of producing gold were used of $650 to $750 per ounce.

Management believes that, other than the volume of gold production, there are no changes which are reasonably possible
in any of the other assumptions discussed above, which would lead to impairment. At 31 December 2016, the recoverable
amount of the Group’s assets exceeded its carrying amount by $29 million. It is estimated that a 10 per cent. reduction in gold
production and copper production, after incorporating any consequential effects of changes on the other variables used to
measure the recoverable amount, would result in the recoverable amount of the Group’s assets still exceeding its carrying amount
by approximately $8 million.

Subsidiary undertakings
Anglo Asian Mining PLC is the parent and ultimate parent of the Group.

The Company’s subsidiaries included in the Group financial statements at 31 December 2016 are as follows:

Name

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

Registered address*

England and Wales
British Virgin Islands
Cayman Islands
Delaware, USA
Cayman Islands

There has been no change in subsidiary undertakings since 1 January 2016.

* see note 5 – “Subsidiaries” of notes to the Company financial statements.

Primary place
of business

Percentage
of holding
per cent.

United Kingdom
Azerbaijan
Azerbaijan
Azerbaijan
Azerbaijan

100
100
100
100
100

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 201616

Inventory

Non-current assets

Cost
Ore stockpiles

Current assets

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

Total current inventories

Total inventories at the lower of cost and net realisable value

2016
$000

2015
$000

—

2,543

903
240
12,119
9,784
10,972

34,018

1,441
203
11,899
4,635
8,019

26,197

28,740

The Group has capitalised mining costs related to high grade sulphide ore stockpiled during the year. Such stockpiles are
expected to be utilised as part of flotation processing. Inventory is recognised at the lower of cost or net realisable value.

Trade and other receivables

Non-current assets

Advances for fixed asset purchases
Loans

Current assets

Gold held due to the Government of Azerbaijan
VAT refund due
Other tax receivable
Trade receivables
Prepayments and advances
Loans

2016
$000

989
95

1,084

10,078
339
926
639
4,218
50

16,250

2015
$000

—
120

120

12,412
186
720
642
2,121
50

16,131

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

The VAT refund due at 31 December 2016 and 2015 relates to VAT paid on purchases.

Gold bullion held and transferable to the Government is bullion held by the Group due to the Government of Azerbaijan.
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 as disclosed in note 19.

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

18 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 at 31 December 2016 (including short-term cash deposits)
comprised $118,000 and $1,261,000, respectively (2015: $98,000 and $151,000).

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

Trade and other payables

Accruals and other payables
Trade creditors
Gold held due to the Government of Azerbaijan
Payable to the Government of Azerbaijan from copper concentrate joint sale

2016
$000

3,111
7,815
10,078
829

21,833

2015
$000

4,861
2,302
12,412
537

20,112

Trade creditors primarily comprise amounts outstanding for trade purchases and ongoing costs. Trade creditors are non-interest
bearing and the creditor days were 42 (2015: 11). Accruals and other payables mainly consist of accruals made for accrued but not
paid salaries, bonuses, related payroll taxes and social contributions, accrued interest on borrowings, and services
provided but not billed to the Group by the end of the reporting period. The directors consider that the carrying amount of
trade and other payables approximates to their fair value.

The amount payable to the Government of Azerbaijan 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.

Interest-bearing loans and borrowings

International Bank of Azerbaijan – agitation leaching plant loan
International Bank of Azerbaijan – loan facilities
Amsterdam Trade Bank
Atlas Copco
Yapi Kredi Bank
Pasha Bank – letters of credit
Pasha Bank – loans
Kapital Bank
Director

Loans repayable in less than one year
Loans repayable in more than one year

2016
$000

5,385
970
17,307
801
672
—
5,935
1,000
3,860

35,930

26,165
9,765

35,930

2015
$000

10,209
1,500
27,096
355
1,659
4,617
—
—
3,860

49,296

26,708
22,588

49,296

The directors consider that the carrying amount of interest-bearing loans and borrowings approximates to their fair value.

International Bank of Azerbaijan (“IBA”)
Agitation leaching plant loan
In 2012 and 2013, the Group borrowed $49.5 million under a series of loan agreements to finance the construction of its
agitation leaching plant. The annual interest rate for each agreement is 12 per cent. The repayment of principal begins two
years from the withdrawal date for each agreement. The loans were partially repaid by the proceeds of a refinancing loan from
Amsterdam Trade Bank. The loans are repayable commencing from 31 March 2015 and finishing on 30 June 2018. The total
gross amount outstanding under the loan agreements at 31 December 2016 was $5.4 million (31 December 2015: $10.2 million).

Loan facilities
During 2014, the Group entered into a credit facility for $1.5 million for a period of one year at an annual interest rate of 12 per cent.
The repayment date of the credit facility was extended in 2015 and the loan was repaid in 2016.

In 2016, the Group entered into two further credit facilities with IBA:

• AZN1 million at an annual interest rate of 18 per cent. The interest and principal are repayable on a reducing balance basis

in 12 equal monthly instalments of AZN92,000 and the final instalment is payable in January 2017.

• $1.5 million at an annual interest rate of 12 per cent. The interest and principal are repayable on a reducing balance basis in

24 equal monthly instalments of $71,000 and the final instalment is payable in February 2018.

Amsterdam Trade Bank (“ATB”)
During 2013, the Group entered into a loan agreement for $37.0 million to refinance its agitation leaching plant loan from IBA.
The annual interest rate is 8.25 per cent. plus LIBOR. Principal is repayable in 15 equal quarterly instalments of $2,467,000. The
first payment of principal commenced in February 2015 with the final instalment payable in August 2018. The Group has pledged
to ATB its present and future claims against MKS Finance SA, the Group’s sole buyer of gold doré until termination of the loan
agreement. The total gross amount outstanding at 31 December 2016 was $17.3 million (31 December 2015: $27.1 million).
Part of the bank loan from Amsterdam Trade Bank was transferred to Gazprombank (Switzerland) Ltd in 2017, see note 27 –
“Post balance sheet event” on page 56.

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 2016
20

Interest-bearing loans and borrowings continued
Atlas Copco
The amounts outstanding are in respect of vendor equipment financing. The amount outstanding at 31 December 2015 was
repaid in 2016. In 2016, the Group entered into further vendor equipment financing for Euro 1.1 million at an annual interest
rate of 8.14 per cent. The principal is repayable quarterly in eight equal instalments which commenced on 31 August 2016 with
the final instalment payable on 31 May 2018. Interest is payable quarterly with the principal.

Yapi Credit Bank, Azerbaijan (“YCBA”)
The Group has entered into several credit facilities with YCBA. The annual interest rate for each facility is 10 to 11 per cent.
and each facility is repayable in 12 equal monthly instalments on a reducing balance basis starting one month after drawdown.
In 2016, new credit facilities were entered into totalling $1,488,000 (2015: $1,929,000).

Pasha Bank
Letters of credit for flotation plant construction
In 2014, the Group entered into a facility for $2.5 million to finance a letter of credit for the construction of its flotation plant.
The facility carried an annual interest rate of 6 per cent. for the unused portion and 6.8 per cent. plus one month LIBOR for the
used portion of the credit facility. In 2016, an additional facility was entered into for $1.2 million which carried an annual interest
rate of 6.2 per cent. for the unused portion and 7.05 per cent. plus one month LIBOR for the used portion of the credit facility.
The facilities were repaid in 2016.

On 4 July 2014, the Group entered into a credit facility to finance letters of credit with a total amount of $3,059,000 (AZN 2.4 million)
for the purchase of cyanide. This facility was extended in 2015 to 7 July 2017 for a total amount of $3 million at an annual
interest rate of 3 per cent. The letters of credit were repaid in 2016.

Loans
The Group entered into loans with Pasha Bank in 2016 at annual interest rates and maturities as in the following table. No
principal repayment had been made in respect of any of these loans in 2016.

Loan value
$000

Term
(months)

Interest rate
(per cent.)

1,000
1,500
916
2,100
416

18
12
24
2
2

7
9
7
14
18

Principal repayment

2 equal instalments in March and September 2017
November 2017
7 equal instalments, 2017 – $525,000; 2018 – $391,000
2 equal instalments January and February 2017
2 equal instalments January and February 2017

Kapital Bank
In December 2016, the Group entered into a working capital credit facility for $1 million with Kapital Bank. The facility is for
one year with an annual interest rate of 7 per cent. Interest is payable monthly and the principal is repayable by four equal
quarterly monthly instalments commencing March 2017.

Director
On 20 May 2015, the chief executive of Anglo Asian Mining PLC provided a $4 million loan facility to the Group. Any loan from
the facility was repayable on 8 January 2016 at an interest rate of 10 per cent. The loan has been extended during 2016 on the
same terms until 8 January 2018.

Unused credit facilities
The Group had no credit facilities at 31 December 2016 which were not utilised (2015: $nil).

21 Provision for rehabilitation

1 January
Change in estimate
Accretion expense
Change in discount rate

31 December

2016
$000

8,554
—
493
369

9,416

2015
$000

8,624
(747)
414
263

8,554

The Group has a liability for restoration, rehabilitation and environmental costs arising from its mining operations. Estimates
of the cost of this work including reclamation costs, close down and pollution control are made on an ongoing basis, based
on the estimated life of the mine. The provision 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. The undiscounted
liability for rehabilitation at 31 December 2016 was $15,314,000 (2015: $14,294,000). The undiscounted liability was discounted
using a risk-free rate of 4.88 per cent. (2015: 5.73 per cent.). Expenditures on restoration and rehabilitation works are expected
between 2025 and 2027 (2015: between 2023 and 2025).

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 2016 and 2015 using the amounts of debt and other financial
assets and liabilities held as at those reporting dates.

Capital risk management
The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 20, cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as
disclosed in the consolidated statement of changes in equity. The Group has sufficient capital to fund ongoing 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 International Bank of Azerbaijan, Amsterdam Trade Bank
(“ATB”) and other banks in Azerbaijan. In managing its capital, the Group’s primary objective 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 other than the limit for financial indebtedness with ATB which is
that the Group will not incur financial indebtedness of more than $30,000,000 without written prior approval from ATB. 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 per cent. The Group defines net debt as interest-bearing loans and borrowings less cash and cash equivalents.

Interest-bearing loans and borrowings (note 20)
Less cash and cash equivalents (note 18)

Net debt
Equity

Capital and net debt

Gearing ratio (per cent.)

2016
$000

35,930
(1,379)

34,551
82,646

2015
$000

49,296
(249)

49,047
78,644

117,197

127,691

Interest rate risk
The Group’s cash deposits, letters of credit, borrowings and interest-bearing loans are at a fixed rate of interest except
for three month LIBOR embedded in the interest rate on the borrowings with ATB.

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 2016 and 2015.

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 2016

Financial instruments continued
Interest rate sensitivity analysis
Interest rate sensitivity of the Group from a reasonable possible movement in the three month LIBOR rate is limited to a negative
$137,000 or a positive $18,000 impact on the Group’s profit before taxation. Assumed impact is based on a 0.6 per cent. increase
or a 0.08 per cent. decrease respectively in the three month LIBOR rate (2015: $203,000 negative or positive impact based on a
0.5 per cent. increase or decrease respectively) on interest bearing loans from ATB.

Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk
management framework for the management of the Group’s short, medium and long-term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities
by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial liabilities. Included
in note 20 is a description of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk.

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

Year ended 31 December 2016

Interest-bearing loans and borrowings
Trade and other payables

Year ended 31 December 2015

Interest-bearing loans and borrowings
Trade and other payables

On
demand
$000

—
—

—

On
demand
$000

—
—

—

Less than
3 months
$000

7,319
21,833

29,152

Less than
3 months
$000

6,574
20,112

26,686

3 to 12
months
$000

20,575
—

20,575

3 to 12
months
$000

23,235
—

23,235

1 to 5
years
$000

10,142
—

10,142

1 to 5
years
$000

24,734
—

24,734

Total
$000

38,036
21,833

59,869

Total
$000

54,543
20,112

74,655

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 and has cash deposits held with reputable financial
institutions. Trade receivables consist of amounts due to the Group from sales of gold and silver bullion and copper and
precious metal concentrates. All sales of gold and silver bullion are made to MKS Finance SA, a Switzerland-based gold
refinery, and copper concentrate to Industrial Minerals SA. Due to the nature of the customers, the board of directors does not
consider that a significant credit risk exists for receipt of revenues. The board of directors 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 United States Dollars. The Group is exposed to currency risk due to movements
in foreign currencies relative to the United States Dollar affecting foreign currency transactions and balances.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at 31 December
are as follows:

UK Sterling
Azerbaijan Manats
Other

Liabilities

Assets

2016
$000

33
4,379
434

2015
$000

187
3,416
317

2016
$000

2
1,390
152

2015
$000

2
1,003
—

Financial instruments continued
Foreign currency sensitivity analysis
The Group is mainly exposed to the currency of the United Kingdom (UK Sterling), the currency of the European Union (Euro)
and the currency of the Republic of Azerbaijan (Azerbaijan Manat).

The following table details the Group’s sensitivity to a 6 per cent., 10 per cent. and 20 per cent. (2015: 13 per cent., 12.5 per cent.
and 15 per cent.) increase and an 18 per cent., 10 per cent. and 20 per cent. (2015: 4.5 per cent., 12.5 per cent. and 60 per cent.)
decrease in the United States Dollar against United Kingdom Sterling, Euro and Azerbaijan 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 United States Dollar strengthens
by the mentioned rates against the relevant currency. Weakening of the United States 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.

Increase – effect on profit/(loss)
before tax
Decrease – effect on profit/(loss)
before tax

UK Sterling impact

Azerbaijan Manat impact

Euro impact

2016
$000

(6)

2015
$000

(8)

2016
$000

598

(598)

2015
$000

1,447

(362)

2016
$000

(28)

2015
$000

(40)

Market risk
The Group’s activities are exposed to the financial risk of changes in the price of gold, silver and copper. These changes have a
direct impact on the Group’s revenues. The management and board of directors continuously monitor the spot price of these
commodities. The forward prices for these commodities are also regularly monitored. The majority of the Group’s production
is sold by reference to the spot price of the commodity on the date of sale. However, the board of directors will enter into
forward and option contracts for the purchase and sale of commodities when it is commercially advantageous.

A 10 per cent. decrease in gold price in the year ended 31 December 2016 would result in a reduction in revenue of $6,677,000
and a 10 per cent. increase in gold price would have the equal and opposite effect. A 10 per cent. decrease in silver price would
result in a reduction in revenue of $217,000 and a 10 per cent. increase in silver price would have an equal and opposite effect.
A 10 per cent. decrease in copper price would result in a reduction in revenue of $655,000 and a 10 per cent. increase in copper
price would have an equal and opposite effect.

23 Equity

Authorised
Ordinary shares of 1 pence each

Ordinary shares issued and fully paid
1 January and 31 December 2016

2016

2015

Number

600,000,000

6,000,000

600,000,000

6,000,000

$000

112,661,024

1,993

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

Share options
The Group has a share option scheme under which options to subscribe for the Company’s shares have been granted to
certain executives and senior employees (note 24).

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.

Retained earnings/(loss)
Retained earnings/(loss) represent the cumulative earnings/(loss) of the Group attributable to the equity shareholders.

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 2016

Share-based payment
The Group operates a share option scheme for directors and senior employees of the Group. 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
the board of directors give 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.

The number and weighted average exercise prices (“WAEP”) of, and movements in, share options during the year were
as follows:

1 January
Granted during the year
Expired during the year

31 December

The following share options were exercisable at 31 December:

2016

2015

Number

2,120,859
120,000
(495,859)

1,745,000

WAEP
pence

21
10
42

Number

2,801,684
—
(680,825)

2,120,859

2016

2015

Number

1,665,000

WAEP
pence

Number

1,970,859

WAEP
pence

36
—
84

WAEP
pence

The weighted average remaining contractual life of the share options outstanding at 31 December 2016 was 3 years (2015: 3 years)
and the range of their exercise prices was 10 pence to 35 pence (2015: 12 pence to 43 pence).

On 11 November 2016, 120,000 share options were granted with a weighted average fair value of £0.09.

Share options are valued using the Black-Scholes model. The assumptions used to value the share options issued in the year
ended 31 December are as follows:

Weighted average share price (pence)
Weighted average exercise price (pence)
Expected volatility for six months’ vesting period option (per cent.)
Expected volatility for one year’s vesting period option (per cent.)
Expected volatility for two years’ vesting period option (per cent.)
Expected life for six months’ vesting period option (years)
Risk-free rate (per cent.)

* Not applicable as no options issued in 2015.

2016

26
9.88
—
70
70
2
2.23

2015 *

n/a
n/a
n/a
n/a
n/a
n/a
n/a

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 year 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 Group recognised total expense related to equity-settled share-based payment transactions for the year ended
31 December 2016 of $18,000 (2015: $15,000).

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 (Piyazbashi, Agyurt, Shakardara, Kiliyaki), Soutely, Kyzilbulag and Vejnali Deposits dated year ended 20 August 1997 (the
“PSA”). The PSA contains various provisions relating to the obligations of R.V. Investment Group Services LLC (“RVIG”), a wholly
owned subsidiary of the Company. The principal provisions are regarding the exploration and development programme,
preparation and timely submission of reports to the Government, compliance with environmental and ecological requirements.
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. In April 2012 the Group announced a discovery on the Ordubad Group of
Mining Properties and submitted the development programme to the Government for review and approval 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 in compliance with the environmental clauses contained in the PSA.

In accordance with a pledge agreement signed on 24 July 2013, the Group is a guarantor for one of its suppliers, Azerinterpartlayish-X
MMC, for a loan from the International Bank of Azerbaijan in the amount of Azerbaijan New Manat (“AZN”) 500,000 for an
initial 36 months. The pledge agreement was extended in 2016 till 1 July 2018. The amount of the loan outstanding at
31 December 2016 was AZN364,026.

There were no significant operating lease and no capital lease commitments at 31 December 2016 (2015: $nil).

26 Related party transactions
Trading transactions
During the years ended 31 December 2015 and 2016, there were no trading transactions between Group companies.

Other 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.

a Shares issued to directors are disclosed in the report on directors’ remuneration on pages 24 and 25.

b Remuneration paid to directors is disclosed in the report on directors’ remuneration on pages 24 and 25.

c During the year ended 31 December 2016, total payments of $1,522,000 (2015: $1,018,000) 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.

At 31 December 2016 there is an advance payment in relation to the above related party transaction of $34,000 (2015: $59,000).

d On 20 May 2015, the chief executive made a $4 million loan facility available to the Group. The interest accrued and unpaid
at 31 December 2016 was $385,000 (2015: $195,000). Details of the loan facility are disclosed in note 20 – ‘Interest-bearing
loans and borrowings’ on page 51.

All of the above transactions were made on arm’s length terms.

27 Post balance sheet event

Partial transfer of loan from Amsterdam Trade Bank N.V. to Gazprombank (Switzerland) Ltd
In October 2013, the Group entered into a loan with Amsterdam Trade Bank N.V. (“ATB N.V.”) for $37 million for the purpose
of constructing its agitation leaching plant. The balance of the loan at 31 December 2016 was $17.3 million. On 15 February 2017,
a transaction was finalised to transfer 50 per cent. of the balance of the loan, being $8.6 million, to Gazprombank (Switzerland)
Ltd (“GPBS”). The terms of the loan and security remained unchanged and ATB N.V. will act as agent to administer the loan on
behalf of ATB N.V. and GPBS.

Notes to the Group financial statements continuedyear ended 31 December 2016Anglo Asian Mining PLC Annual report and accounts 2016

Company statement of financial position
31 December 2016

Non-current assets

Property, plant and equipment

Investments

Other receivables

Current assets

Other receivables

Cash and cash equivalents

Total assets

Current liabilities

Trade and other payables

Net current assets

Total liabilities

Net assets

Equity

Share capital

Share premium account

Retained loss

Total equity

Notes

2016
$000

219

1,325

1,614

15,500

424

15,924

17,538

2015
$000

241

1,325

119

1,685

17,193

17,261

18,946

(355)

(724)

15,569

16,537

(355)

(724)

17,183

18,222

1,993

32,325

1,993

32,325

(17,135)

(16,096)

17,183

18,222

The loss dealt with in the financial statements of the Company is $1,058,000 (2015: $1,418,000).

These Company financial statements were approved by the board of directors and authorised for issue on 24 May 2017. They were
signed on its behalf by:

Reza Vaziri
Chief executive

Company statement of changes in equity
year ended 31 December 2016

1 January 2015

Loss for the year

Shares issued

Share-based payment

31 December 2015

Loss for the year

Share-based payment

31 December 2016

Share
capital
$000

1,978

—

Share
premium
$000

32,246

—

1,993

32,325

—

Accumulated
loss
$000

(14,693)

(1,418)

—

(16,096)

(1,058)

Total
equity
$000

19,531

(1,418)

18,222

(1,058)

1,993

32,325

(17,135)

17,183

Anglo Asian Mining PLC Annual report and accounts 2016Notes to the Company financial statements
year ended 31 December 2016

Basis of preparation
The parent company financial statements of Anglo Asian Mining PLC are presented as required by the Companies Act 2006
and were approved for issue on 24 May 2017.

The parent company financial statements have been prepared using the accounting policies set out in note 2 which are consistent
with all applicable International Financial Reporting Standards (“IFRS”) and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRSs and in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’,
(“FRS 101”). FRS 101 enables the financial statements of the parent company to be prepared in accordance with EU-adopted IFRS
but with certain disclosure exemptions. The main areas of reduced disclosure are in respect of equity settled share-based payments,
financial instruments, the cash flow statement and related party transactions with Group companies.

The parent company financial statements have been prepared under the historical cost convention except for the treatment
of share based payments. The parent company financial statements are presented in United States Dollars (“$”) and all values
are rounded to the nearest thousand except where otherwise stated. In the parent company financial statements “£” and “pence”
are references to the United Kingdom pound sterling. As permitted by section 408 of the Companies Act 2006, the income
statement of the parent company is not presented as part of the parent company financial statements.

Significant accounting policies
2
2.1 Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. The initial
cost includes 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.
Property, plant and equipment is mainly office and computer equipment which are depreciated on a straight line basis over
four years.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances
indicate that the carrying amount may not be recoverable.

2.2

Investments
Investments in subsidiaries are stated at cost, and where appropriate, less any provision for impairment. Impairment is tested
annually by comparing the recoverable amount of the underlying subsidiary to the carrying value of the investment, with any
shortfall provided for during the period.

2.3 Other receivables

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 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 fees and costs
that are an integral part of the effective interest rate method. The losses arising from impairment are recognised in the profit
and loss account.

2.4 Deferred taxation

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax assets are not recognised in respect of temporary differences where there is insufficient evidence that the asset will
be recovered.

2.5 Share-based payments

The Company has applied the requirements of IFRS 2 ‘Share-based Payment’. IFRS 2 has been applied to all grants
of equity instruments.

The Company 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 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 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 have been adjusted, based
on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
The vesting condition assumptions are reviewed during each reporting period to ensure they reflect current expectations.

Property, plant and equipment

Cost
1 January 2015
Additions

31 December 2015
Additions

31 December 2016

Depreciation
1 January 2015
Charge for the year

31 December 2015
Charge for the year

31 December 2016

Net book value
31 December 2015

31 December 2016

Investments

Shares in subsidiary undertakings
Anglo Asian Operations Limited

Office
equipment
$000

166
183

349
3

352

95
13

108
25

133

241

219

2015
$000

2016
$000

1,325

Subsidiaries
Anglo Asian Mining PLC is the parent and ultimate parent of the Group.

The Company’s subsidiaries at 31 December 2016 are set out in the table below. All subsidiaries are 100 per cent. owned and
their financial statements are included in the consolidated group financial statements:
Registered office address
Name

Primary activity

Anglo Asian Operations Limited

Holance Holdings Limited

Anglo Asian Cayman Limited

R.V. Investment Group Services LLC

Azerbaijan International Mining Company Limited

7 Devonshire Square
Cutlers Gardens
London EC2 4YH
United Kingdom

P.O. Box 3136
Akara Building
Main Street
Road Town
British Virgin Islands

Zephyr House
P.O. Box 709
122 Mary Street
Grand Cayman KY1 1107
Cayman Islands

15 East North Street
Dover
Kent
Delaware
United States of America

Zephyr House
P.O. Box 709
122 Mary Street
Grand Cayman KY1 1107
Cayman Islands

Holding company

Mineral development

Mining

There has been no change in subsidiary undertakings since 1 January 2016.

Anglo Asian Mining PLC Annual report and accounts 2016

Other receivables

Non-current assets
Loans

Current assets
Prepayments
Loans
Advances
HMRC
Amounts owed by subsidiary undertakings

2016
$000

33
68
51
—
15,348

15,500

Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Company and short-term bank deposits with an original maturity
of three months or less.

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.

Trade and other payables

Trade creditors
Accruals
HMRC

Deferred taxation

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

Unrecognised deferred tax asset

2016
$000

75
272
8

355

2016
$000

3,715

743

2015
$000

119

2015
$000

29
74
46
26
17,018

17,193

2015
$000

47
677
—

724

2015
$000

2,772

554

A deferred tax asset has not been recognised in respect of temporary 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.

Share capital

Authorised
Ordinary shares of 1 pence each

Ordinary shares issued and fully paid
1 January and 31 December 2016

2016

2015

Number

600,000,000

6,000,000

600,000,000

6,000,000

$000

112,661,024

1,993

Share-based payments
Equity-settled share option scheme
Details of the Company’s equity-settled share option scheme are given in note 24 to the Group financial statements.

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

13 Auditor’s remuneration

The Company paid $107,000 (2015: $107,000) to its auditor in respect of the audit of the financial statements of the Company.
Fees paid to Ernst & Young LLP and its associates for non-audit services to the Company itself are not disclosed in the individual
accounts of Anglo Asian Mining PLC because Group financial statements are prepared which are required to disclose such fees
on a consolidated basis.

Letter to shareholders

Anglo Asian Mining PLC
(Incorporated and registered in England and Wales under the Companies Act 1985 with registered number 5227012)

Directors
Khosrow Zamani
John Monhemius
Richard Round
John Sununu
Reza Vaziri

1 June 2017

Registered office
7 Devonshire Square
Cutlers Gardens
London EC2M 4YH

To the holders of ordinary shares and, for information only, to the holders of share options of Anglo Asian Mining PLC
(the “Company”).

Dear shareholder
Accompanying this letter you will find the Company’s annual report and accounts for the year to 31 December 2016 together with
the attached notice of the annual general meeting to be held on 30 June 2017 (the “Meeting”) and a form of proxy. This letter
is to explain the background to some of the resolutions to be put to shareholders at the Meeting.

Resolution 3 – Re-election of the Director retiring by rotation
Under the Company’s articles of association, one third of the directors of the board of directors (or, if the number of directors is not
three or a multiple of three, the number nearest to and not exceeding one third) must retire at each annual general meeting and
may offer themselves for re-election to the board of directors. This year Khosrow Zamani is retiring in accordance with the
Company’s articles of association and is seeking re-election at the Meeting.

Resolution 4 – Authority to allot shares
This ordinary resolution deals with the renewal of the directors’ authority to allot new ordinary shares during the course of the year
in order to facilitate the business of the Company and renews the equivalent authority granted at last year’s annual general meeting
which expires at the end of the Meeting.

The current Investment Association guidelines state that Investment Association members will permit, and treat as routine, resolutions
seeking authority to allot shares representing up to two-thirds of the Company’s issued share capital, but on the basis that any
authority to allot shares exceeding one-third of the Company’s issued share capital can only be used to allot shares pursuant to a
fully pre-emptive rights issue.

In accordance with these guidelines, resolution 4 proposes that directors be granted authority to allot shares in the capital of the Company up
to a maximum amount representing the guideline limit of two-thirds of the Company’s issued ordinary share capital as at 24 May 2017
(the latest practicable date prior to publication of this letter). Of this amount, half can only be allotted pursuant to a rights issue.

The authority will expire on the earlier of: (i) the conclusion of the next annual general meeting; and (ii) 30 June 2018 (being six months
after the Company’s accounting reference date).

Resolution 5 – Disapplication of statutory pre-emption rights
This resolution is a special resolution that renews the authority given at last year’s Annual General Meeting and which seeks to give
the directors the authority to allot securities for cash on a pre-emptive basis within the limits of the authority set out in resolution
4 and on a non pre-emptive basis up to a maximum of 10 per cent. of the issued ordinary share capital of the Company.
The directors believe that it is in the best interests of the shareholders that the directors should have the right to allot relevant
securities for cash on a pre-emptive basis and a limited authority to allot relevant securities for cash on a non-pre-emptive basis.

Action to be taken
Whether or not you intend to be present at the Meeting, you are requested to complete the reply-paid form of proxy in accordance
with its instructions and return it to the address given on the form of proxy.

Recommendation
The directors consider all the resolutions to be put to the Meeting to be in the best interests of the Company and its shareholders
as a whole and are most likely to promote the success of the Company for the benefit of its shareholders as a whole. Accordingly
the directors unanimously recommend that you vote in favour of the proposed resolutions, as they intend to do in respect of
their own beneficial shareholdings.

We look forward to as many of you as possible attending the Meeting.

Yours faithfully

Khosrow Zamani
Non-executive chairman
62

Anglo Asian Mining PLC Annual report and accounts 2016
Notice of annual general meeting of shareholders

NOTICE IS HEREBY GIVEN that the annual general meeting (“AGM”) of the shareholders of Anglo Asian Mining PLC
(the “Company”) will be held on 30 June 2017 at 10.30am at The Washington Mayfair Hotel, 5 Curzon Street, Mayfair, London W1J 5HE
for the purpose of considering and, if thought fit, passing the following resolutions, of which resolutions 1 to 4 (inclusive) will
be proposed as ordinary resolutions and resolution 5 will be proposed as a special resolution:

Ordinary resolutions
1

THAT the consolidated financial statements and the reports of the board of directors and of the auditors for the year ended
31 December 2016 be received.

THAT Ernst & Young LLP be re-appointed as the auditors of the Company and that the board of directors be authorised
to fix their remuneration.

THAT Khosrow Zamani be re-elected as a director, having retired by rotation in accordance with the Company’s articles
of association.

THAT the directors be hereby authorised generally and unconditionally pursuant to Section 551 of the Companies Act 2006
(the “Act”) to exercise all powers of the Company to allot equity securities (as defined in Section 560 of the Act):

(a) up to an aggregate nominal amount of £375,537*; and

(b) up to an aggregate nominal amount of £751,073** (including within such limit any equity securities issued under paragraph

(a) above) in connection with an offer by way of a rights issue:

(i) to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and

(ii)

to holders of other equity securities as required by the rights of those securities or as the directors otherwise consider necessary,
and so that the directors may impose any limits or restrictions and make any arrangements which they consider necessary
or appropriate to deal with any treasury shares, fractional entitlements, record dates, legal, regulatory or practical
problems in, or under the laws of, any territory or any matter.

The authority granted by this resolution shall (unless previously revoked, varied or extended by the Company in general meeting)
expire on the conclusion of the next AGM of the Company after the passing of this resolution or, if earlier, on 30 June 2018, save
that the Company may at any time before such expiry make an offer or agreement which would or might require equity securities to
be allotted after such expiry and the directors may allot equity securities in pursuance of such an offer or agreement as if this
authority had not expired.

Special resolution
5

THAT subject to the passing of resolution 4 above the directors be hereby empowered pursuant to Section 570 and Section 573
of the Act to allot equity securities (as defined by Section 560 of the Act) wholly for cash and/or to sell or transfer shares held by
the Company in treasury (“Treasury Shares”) as the directors deem appropriate (in the case of allotments, pursuant to the
authority conferred by resolution 4 above) as if Section 561(1) of the Act did not apply to any such allotment, provided that
this power shall be limited to the allotment (or, in the case of Treasury Shares, the sale or transfer) of equity securities:

(a) in connection with an offer of such securities by way of rights to holders of ordinary shares in proportion (as nearly as may be
practicable) to their respective holdings of such shares, but subject to such exclusions or other arrangements as the directors
may deem necessary or expedient in relation to fractional entitlements or any legal or practical problems under the laws of
any territory, or the requirements of any regulatory body or stock exchange or otherwise; and

(b) otherwise than pursuant to sub-paragraph (a) of this resolution up to an aggregate nominal amount of £112,661†,

and provided that this authority shall (unless previously revoked, varied or extended by the Company in general meeting) expire
on the conclusion of the Company’s next annual general meeting or, if earlier, 30 June 2018 save that the Company may, at any time
before such expiry make an offer or agreement which would or might require equity securities to be allotted (or in the case of Treasury
Shares, sold or transferred) after such expiry and the directors may allot (or in the case of Treasury Shares, sell or transfer) equity
securities in pursuance of any such offer or agreement notwithstanding that the power conferred hereby has expired.

By order of the board of directors

Fisher Secretaries Limited
Acre House
11/15 William Road
London NW1 3ER
United Kingdom
1 June 2017

* Calculated as one third of the nominal value of the total issued ordinary share capital (i.e. 112,661,024 shares of nominal value £1,126,610.24).
** Calculated as two thirds of the nominal value of the total issued ordinary share capital (£1,126,610.24).
† 10 per cent. of the ordinary issued share capital of the Company (£1,126,610.24).

Notice of annual general meeting of shareholders
continued

Notes
1

A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to exercise any of their rights to
attend, speak and vote on their behalf at the AGM. A proxy need not be a member of the Company. Where more than one proxy
is appointed, each proxy must be appointed for different shares. A proxy form is enclosed. Completion and return of a proxy
form will not preclude a member from attending and voting at the AGM should he subsequently decide to do so. To be effective,
the proxy form and any power of attorney or other such instrument (if any) under which it is signed or a notarially certified copy of
such power of attorney must be deposited at the offices Capita Asset Services, PXS, 34 Beckenham Road, Kent BR3 4TU not later
than 10.30am on 28 June 2017.

In accordance with Regulation 41 of the Uncertificated Securities Regulations 2001, only those members entered on the register
of members of the Company at close of business on 28 June 2017 shall be entitled to vote in respect of shares registered in their
name at that time. Changes to the register of members after close of business on 28 June 2017 shall be disregarded in
determining the rights of any person to attend or vote at the AGM.

Anglo Asian Mining PLC Annual report and accounts 2016Company information

Azerbaijan office (principal place of business)
20, Block 520
Huseyn Javid Avenue
Baku, AZ 1073
The Republic of Azerbaijan
Tel +994 12 596 3350
Fax +994 12 596 3354

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

Secretary
Fisher Secretaries Limited
Acre House
11/15 William Road
London NW1 3ER
United Kingdom

Registered office
7 Devonshire Square
Cutlers Gardens
London EC2M 4YH
United Kingdom

Website
www.angloasianmining.com

Company number
5227012
Registered in England and Wales

VAT registration number
872 3197 09

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

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

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

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

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 Partners Limited
3 St. Michael’s Alley
London EC3V 9DS
United Kingdom

Registrar
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom

www.angloasianmining.com Annual report and accounts 2016Anglo Asian Mining PLC
20, Block 520
Huseyn Javid Avenue
Baku, AZ 1073
The Republic of Azerbaijan
Tel +994 12 596 3350
Fax +994 12 596 3354
www.angloasianmining.com