Anglo Asian Mining PLC Annual Report 2018

FY2018 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 2018

Delivering
returns to
shareholders

Anglo Asian Mining PLC is building a long-term
and sustainable mining business in Azerbaijan
which is both growing and cash generative.

Gold, copper and silver are produced at Gedabek in north-western Azerbaijan.
Ore is mined from open pit and underground mines and processed by both leaching
and flotation. The Company reported record production of over 83,000 gold
equivalent ounces in 2018 and has forecast that this will be sustained in 2019.
The Company will pay a total of US 7 cents per share dividend in respect of 2018.

The Company has two other operating concessions in Azerbaijan, which together
with Gedabek, cover 1,062 square kilometres. These concessions are all located on
the Tethyan Tectonic Belt, one of the world’s most significant gold and copper-bearing
trends. A three-year programme of geological exploration is currently underway
to exploit their extensive potential.

The Company’s properties are held under a Production Sharing Agreement with the
Government of Azerbaijan and the Company has been listed on AIM since 2005.

Contents

Anglo Asian Mining

1 Highlights and dividends

2 Anglo Asian Mining

Chairman’s statement

4 Chairman’s statement

7 2018 – a year of record production

Strategic report

8 Strategy and exploration

10 Strategic report

20 Ordubad

Financial review

21 Financial review

Corporate governance

24 Board of directors

25 Corporate governance

28 Directors’ report

31 Report on directors’ remuneration

32 Statement of directors’ responsibilities

Group financial statements

33 Independent auditor’s report

38 Group statement of income

38 Group statement of

comprehensive income

Company financial statements

71 Company statement

of financial position

72 Company statement of changes

in equity

73 Notes to the Company
financial statements

Annual general meeting

77 Letter to shareholders from

the Chairman

78 Notice of annual general meeting

of shareholders

39 Group statement of financial position

40 Group statement of cash flows

41 Group statement of changes in equity

Company information

80 Company information

42 Notes to the Group
financial statements

Discover more online

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

Cover photo: Aerial view
of the Group’s production
facilities at Gedabek. The
leach and thickener tanks
of the agitation leaching
plant are in the foreground
with the flotation plant
behind them.

Highlights
year ended 31 December 2018

Operational highlights

Financial highlights

Revenue ($m)

$90.4m

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

79.2

2016

71.8

2017

90.4

2018

$541 per oz

616

2016

604

2017

541

2018

Profit before taxation ($m)

$25.2m

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

$50.1m

Free cash flow ($m)

$28.9m

Net (debt)/cash ($m)

$6.1m

6.8

5.7

2016

2017

25.2

2018

33.9

2016

32.2

2017

50.1

2018

28.9

2018

6.1
2018

18.5

2016

19.4

2017

2016

2017

(18.1)

(34.6)

• Total production for 2018 was 83,736 gold

equivalent ounces (“GEOs”) compared to 71,461
GEOs in 2017

• Gold production for 2018 of 72,798 ounces,

a 22 per cent. increase compared to 59,617 ounces
produced in 2017

• Gold bullion sales in 2018 of 59,481 ounces

(2017: 43,496 ounces) completed at an average
of $1,265 per ounce (2017: $1,265 per ounce)

• Gold produced in 2018 at an all-in sustaining

cost* net of by-product credits of $541 per ounce
(2017: $604 per ounce). Lower all-in sustaining cost
due to higher production

• Copper production for 2018 was 1,645 tonnes
compared to 1,991 tonnes produced in 2017

• Silver production for 2018 totalled 210,184 ounces
compared to 2017 production of 172,853 ounces

• Second crusher line for the flotation plant allowing
processing independent of the agitation leaching
plant commenced operation in July 2018

• Total production target of between 82,000

and 86,000 GEOs for 2019

* See definition on page 19.

Dividends per share for 2018 (2017: $nil):

• Interim dividend of 2.2864 pence (US$ 3 cents)

paid on 8 November 2018

• Final dividend of US$ 4 cents will be paid on

25 July 2019*

Maiden (interim) paid

• Shareholders’ record date of 28 June 2019

and shares will go ex-dividend on 27 June 2019

Final proposed*

• Payable in sterling at the average US dollar
to pounds sterling rate on the 5 days from
1 to 5 July 2019

Total for 2018

* Subject to approval at the annual general meeting.

US$ cents

3.0
4.0
7.0

Anglo Asian Mining has a portfolio of gold,
copper and silver production and exploration
assets in Azerbaijan. It combines both mature
assets and a pipeline of highly prospective new
mining targets. An extensive programme of
geological exploration is currently underway.

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.

The historical centre of Baku

2009

Established – produced first gold
in May 2009

41 per cent.

Experienced – highly qualified team
with decades of experience in the
industry – directors own 41 per cent.
of the Company, fully aligning them
with shareholders

First

First mover advantage – only listed
miner in Azerbaijan

Cash generative – highly cash generative
with net cash at the end of 2018

Fast track ability – Ugur mine brought
into production in one year from discovery

Exploration potential – extensive
geological exploration underway

Gosha contract area

300 square

kilometre contract area

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

Ore mined at Gosha is
transported to Gedabek
for processing

New discovery at the
Asrikchay target area in 2018

Gedabek contract area

300 square

kilometre contract area

Mining and exploration rights
until March 2022 which can
be extended by ten years

Gedabek open pit mine life
based on current JORC
reserves until 2024

Gadir underground mine
situated 700 metres from
the existing Gedabek open
pit mine

New Ugur mine started
in September 2017

All processing of ore
carried out at Gedabek

Anglo Asian Mining PLC Annual report and accounts 2018Baku

Occupied territories (grey area)

Vejnali

Gyzilbulakh

Soutely

Ordubad contract area

462 square

kilometre contract area

Notice of discovery
submitted for one project area
comprising several targets

Main target is copper-gold
mineralisation of epithermal
and porphyry style

Expanded exploration
programme planned in 2019
with budget of over $1.8 million

See page 20 for
further information

Anglo Asian Mining PLC Annual report and accounts 2018Anglo Asian MiningChairman’s statementStrategic reportFinancial reviewCorporate governanceGroup financial statementsCompany financial statementsAnnual general meetingChairman’s statement
Khosrow Zamani

“ It is a great pleasure to report on a truly transformational year

for Anglo Asian. All our hard work in previous years came to fruition
and this delivered both record production and an outstanding
financial performance.”

It is a great pleasure to report
on a truly transformational year
for Anglo Asian. All our hard work
in previous years came to fruition
and this delivered both record
production and an outstanding
financial performance. I am also
delighted that the Company paid
its maiden dividend in 2018 and
to announce a final dividend of
US 4 cents per share. This gives
a total dividend for the year of
US 7 cents per share and means
our shareholders share in
our success.

Our main site at Gedabek is
now a well-developed operation
although we continue to invest
to ensure it operates to the
highest possible level of safety
and efficiency. Gedabek produces
gold at one of the lowest costs
in the industry, and we are
determined to maintain this
position as we continue to extend
its production life. The evaluation
of the mineral resources and ore
reserves of Gedabek’s three mines
in accordance with the JORC code
is now also complete, which has
extended the combined mine life
until 2024.

We embarked upon an extensive
three-year geological exploration
programme in 2018 to further
develop and grow the Company.
Our goal is to open further mines
which we can do rapidly and
efficiently as demonstrated by
the fast development of Ugur.
The aerial geophysical survey
identified many exciting targets
at Gedabek and a new discovery
has been made at Gosha.

We have also substantially
increased our efforts at Ordubad
which is a highly prospective
region with great promise.
Whilst still relatively early days,
Ordubad has the potential to
significantly grow the Company
in future years.

Operational review
A total of 83,736 gold equivalent ounces
was produced in 2018, a 17 per cent.
increase compared to 2017 and a record
for the Company. Gold production was
72,798 ounces compared to 59,617 ounces
in 2017, which was a 22 per cent. increase
largely due to gold doré production from
processing Ugur ore throughout the year.
Silver production also increased to
210,184 ounces, an increase of 22 per cent.
compared to 2017.

Copper production decreased in 2018 to
1,645 tonnes. The flotation plant was mostly
on planned care and maintenance in the
first half of the year due to limited feedstock
as the agitation leaching plant was
processing Ugur ore which does not contain
copper. A new, dedicated jaw crusher for
the flotation plant commenced operation
in July 2018. As a result, copper production
increased significantly in the second half of
the year as this capital investment enabled
the independent operation of the flotation
plant processing copper rich ore. As well
as allowing the independent operation of
the agitation leaching and flotation plants,
the new jaw crusher increases the overall
flexibility of our processing plants.

Gedabek’s operational performance was
strengthened in the year by the
recruitment of several highly experienced
managers in key areas which included
blasting, transportation logistics and ore
handling and equipment maintenance.

Centre of Gedabek

Anglo Asian Mining PLC Annual report and accounts 2018A key milestone for the Company was
payment of a maiden dividend of US 3 cents
per share in November 2018. In accordance
with the Company’s target of distributing
approximately 25 per cent. of free cash
flow to shareholders each year, I am
delighted to announce a final dividend
for the year ended 31 December 2018
of an additional US 4 cents per share.
This makes a total dividend for 2018 of
US 7 cents per share.

Mineral resources and geological
exploration
The Company completed its goal of
formalising mineral resource and ore
reserves for its three mines at Gedabek by
early 2019. In September 2018, an updated
mineral resource and ore reserve estimate
for the Gedabek open pit was published
in accordance with the JORC code. The
total mineral resource was around one
million ounces of gold, which at this point
in time has extended the life of mine of
the Gedabek open pit by up to six years.
In early 2019, a maiden mineral resource
and ore reserve estimate for the Gadir
underground mine was published in
accordance with the JORC code which
established an initial five-year life of mine.

In accordance with our commitment to be
a long-term producer of precious metal
and copper, a comprehensive three-year
geological exploration programme
commenced in the year. In the final

quarter of 2018, a helicopter-borne
electromagnetic survey was carried out
over the entire Gedabek contract area
which successfully identified many new
targets for follow-up exploration work.
This was the first such survey in Azerbaijan
and was carried out with the assistance of
the Azeri Government. Other on-going
geological work has identified further
copper and gold mineralisation beneath,
and extending from, the Gedabek open
pit that has the potential to further
increase its life of mine.

We substantially increased our exploration
efforts at Ordubad during 2018. Soviet era
data indicate extensive mineralisation
and the region is adjacent to significant
copper deposits in neighbouring
countries. We have identified several
exciting targets all within a five kilometre
radius. Extensive surface geological work
was carried out in the year and core
drilling has started. We were also pleased
that a geological team from the Natural
History Museum of London assisted our
work as part of their “FAMOS” research
programme. It is clear from its location
and both the Soviet era and current work
that Ordubad is a very promising region
with widespread mineralisation.

We recently announced a new discovery
within Gosha at the Asrikchay target area.
This polymetallic discovery is exciting as it is
the first indication of copper in the region.

Many opportunities to improve working
practices were actioned and these
initiatives are all contributing to a more
professional and efficient working
environment. The Company also signed
an off-take agreement in late 2018 for
flotation concentrate with Trafigura PTE
Ltd. on improved commercial terms.

The tragic collapse of the Brumadinho
tailings dam in Brazil was unfortunately
not an isolated incident in the last ten years.
Safety is our number one priority and the
Company’s tailing dam has been constructed
to the highest possible specification. The
dam is constructed from hard rock and
not tailings material, as is common in the
industry, and the building and
maintenance of the dam has been
continuously supervised by one
environmental and geotechnical
consultancy. However, in light of the
Brumadinho collapse, the Company has
commissioned an inspection of the dam
this summer by Knight Piésold, a leading
environmental engineering company.
Any actions highlighted by the inspection
will be carried out immediately.

Financial results and dividend
Our financial performance in the year
was exceptional and revenues increased
by $18.6 million to $90.4 million. This
improvement arose from increased gold
doré production together with higher gold
and copper prices. Revenues continued
to be subject to an effective royalty of
12.75 per cent. in 2018. We anticipate this
effective royalty rate will continue until at
least 2023 and further details are in the
financial review on pages 21 and 23. The
all-in sustaining cost (“AISC”) per ounce
of gold produced decreased in the year
to $541 from $604 in 2017. The Company’s
AISC has steadily reduced for the past
five years and is considered to now be
amongst the lowest in the industry.

The Company’s balance sheet has been
transformed in 2018 with increased cash
flow. Cash from operations was $50.7 million
and free cash flow was $28.9 million. The
Company refinanced $13.5 million of its
debt and repaid the remainder outstanding
from internally generated funds during
the year. At 7 per cent. fixed rate, the
refinancing loan has a lower rate of interest
than previous borrowings, has no covenants
and is unsecured. The loan from the chief
executive was repaid in full in March 2018
and I would like to take this opportunity to
emphatically thank Reza for his confidence
and commitment to the Company which
has proven to be amply justified.

Blast in the centre of the Gedabek open pit

Anglo Asian Mining PLC Annual report and accounts 2018Strategic reportFinancial reviewCorporate governanceGroup financial statementsCompany financial statementsAnnual general meetingAnglo Asian MiningChairman’s statementChairman’s statement continued

We have set a production target of
between 82,000 and 86,000 gold
equivalent ounces for 2019, which is an
increase from 2018. This includes up to
67,500 ounces of gold and up to 3,300
tonnes of copper. We are on track to
achieve this production target and I look
forward to updating shareholders with our
progress in the coming months.

I would like to conclude by saying that
Anglo Asian accomplished a tremendous
amount in 2018. We plan to build on our
now very solid foundations to develop
your Company into a mid-tier gold,
copper and silver producer. It is therefore
with continued optimism that I look
forward to 2019 and beyond.

Appreciation
I would like to take this opportunity to
thank the employees of Anglo Asian, our
partners, the Government of Azerbaijan
and our advisors for their continued
support as we deliver on our strategy of
becoming a leading gold, copper and
silver producer. Finally, I wish to sincerely
thank our shareholders for their continued
investment and support in Anglo Asian.
I look forward to sharing the successes
of 2019 with you.

Khosrow Zamani
Non-executive chairman
15 May 2019

Mineral resources and geological
exploration continued
We have a track record of rapidly
advancing discoveries as evidenced by
Ugur, which progressed from discovery to
production in just over a year, and we are
confident that we can replicate this
approach with any future discoveries.

Outlook
The success achieved in 2018 has placed
Anglo Asian in an enviable position to
move forward. Gedabek is now generating
stable cash flow which provides funds for
both investment and to pay dividends.
The Company’s solid balance sheet and
excellent relationships with banks in
Azerbaijan and elsewhere means loan
finance can be easily obtained if required.
Together, this means the Company has
ample financial resources to seize any
suitable opportunities that may arise.

The Company has over 1,000 square
kilometers of land within its contract areas.
As set out above and elsewhere in this
annual report, the Company has a
comprehensive exploration programme
underway to extensively explore this
land for new deposits. This programme
is starting to yield results with the
identification of several major targets at
Gedabek and Gosha. We regard Ordubad
as an untapped value opportunity and
work there is now being ramped up.
The Company will also aggressively
pursue any suitable opportunities
outside Azerbaijan which it believes
can be made commercially successful.

During 2018, Anglo Asian made a
concerted effort to meet with many existing
and potential investors including organised
roadshows, investor presentations and
conferences. Our reputation as an attractive
investment opportunity was evidenced by
the press coverage received in 2018 with
articles published both in trade publications
and mainstream national newspapers in the
United Kingdom. As the Company develops
and grows, we firmly intend to maintain
this reputation and increase the profile of
the Company. We also intend to increase
the Company’s social media presence.

Anglo Asian Mining PLC Annual report and accounts 20182018 – a year of record production

The Company achieved record production in 2018. Various initiatives
undertaken in previous years came to fruition; however, two factors
were key. A full year’s production from the Ugur open pit mine and
independent operation of the flotation plant. The Company also
continued to invest in mining equipment and infrastructure to ensure
safe, efficient and low cost operation.

Ugur open pit mine
2018 was the first full year of production from Ugur. 1.2 million tonnes of ore were mined containing on average 1.27 grammes
per tonne of gold. Ugur ore does not contain copper and is a free-dig operation. This makes it low cost to both mine and process
by leaching.

Record production in 2018

83,736

gold equivalent ounces

Investment in mining equipment
Significant investments were made in the year in mining and
other equipment. This included excavators and other earth
moving equipment.

Independent operation of the flotation plant
Until mid-2018, the flotation plant either treated ore prior to agitation leaching or processed the agitation leaching plant’s tailings.
In mid-2018, a second jaw crusher was installed for the flotation plant at a cost of US$2.8 million which enabled the flotation plant to treat
ore independently of the agitation leaching plant. 357,497 tonnes of ore were treated by the flotation plant in 2018 producing 1,246
tonnes of copper with the majority of the production in the second half of the year following installation of the second jaw crusher.

The Company continues to ensure the sustainability of its business
through both formalising its existing resources and reserves and
a programme of geological exploration.

• Objectives to replace existing mined ounces, extend mine life and increase the Company’s resources

• Combined mine life from existing reserves now extended until 2024

• Further mineable copper and gold extensions confirmed at the northern and southern margins of the Gedabek open pit

• Additional mineralisation confirmed beneath the Gedabek open pit

• A helicopter-borne electromagnetic and magnetic survey completed over Gedabek in the fourth quarter of 2018 – many exciting

targets identified

• A new discovery of polymetallic mineralisation within Gosha at the Asrikchay target area

Gedabek open pit
The revised JORC (2012) mineral resources and reserves
estimates were published in 2018 (page 11). Geological work
in 2018 included 58 surface diamond core drill-holes totalling
5,947 metres, 208 surface reverse circulation drill-holes totalling
11,340 metres and 7 underground diamond core drill-holes
totalling 654 metres.

Gadir underground mine
A maiden JORC (2012) mineral resources and reserves estimates
were published in March 2019 (page 12 and 13 ). Geological work in
2018 included 19 surface diamond core drill-holes totalling 8,953
metres, 43 underground diamond core drill-holes totalling 4,735
metres and 105 BQ-size underground core drill-holes totalling
2,838 metres.

Combined mine life extended to

2024

Gosha
A new discovery was made of polymetallic mineralisation at the
Asrikchay target area. Significant polymetallic drill-hole intersection
was found with weighted grade averages from 228.70 metres to
233.00 metres (4.30 metre downhole thickness) of 4.11 grammes
per tonne of gold, 112.23 grammes per tonne of silver, 3.07 per cent.
copper and 3.0 per cent. zinc.

Ugur open pit
Geological work carried out in 2018 included 12 surface diamond
core drill-holes totalling 3,875 metres, collection of 650 outcrop
samples, 250 linear metres of trenching with 215 samples obtained
and 40,000 square metres of detailed geological (lithological,
alteration and structural) mapping.

Anglo Asian Mining PLC Annual report and accounts 2018“ A helicopter-borne electromagnetic and magnetic survey was

completed over Gedabek in the fourth quarter of 2018. The survey
utilised the Z-Axis Tipper Electromagnetic system (“ZTEM”) and a
high sensitivity magnetometer.”

• The survey was carried out with the co-operation and assistance of the Government of Azerbaijan

and was the first of its kind in the country.

• This method employed is especially suitable for porphyry copper-gold and epithermal

copper-gold-silver exploration.

• A total of 3,385 linear kilometres were flown over Gedabek.

• Results identified multiple promising and prospective mineral targets including:

• 25 targets favourable for epithermal and porphyry mineralisation; and

• Six magnetic targets consistent with porphyry systems.

• Planning for detailed investigation of targets identified now underway.

Anglo Asian Mining PLC Annual report and accounts 2018Financial reviewCorporate governanceGroup financial statementsCompany financial statementsAnnual general meetingAnglo Asian MiningStrategic reportChairman’s statementStrategic report
Reza Vaziri

“ The total production target for the year to 31 December 2019 is

65,000 ounces to 67,500 ounces of gold and 3,100 tonnes to 3,300
tonnes of copper. This total production target expressed as gold
equivalent ounces (“GEOs”) is between 82,000 GEOs and 86,000
GEOs, compared to total production for the year to 31 December 2018
of 83,736 GEOs.”

The directors present their
strategic report for the year
ended 31 December 2018.

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, 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, the Ugur 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.
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 Nakhchivan, South
West Azerbaijan.

Overview of 2018 and 2019 to date
and 2019 production target
In 2018, the Group built upon the successful
results of the wide-ranging strategic review
carried out in 2017 to ensure long term
sustainable production at Gedabek:

• Mining was carried out throughout
2018 from the Ugur open pit which
commenced operations in September
2017. 1.2 million tonnes of ore grading
an average of 1.27 grammes of gold
per tonne were mined from the Ugur
open pit in 2018. A second jaw crusher
line was installed for the flotation plant
which commenced operation in July
2018. This enabled the agitation
leaching plant and the flotation plant to
operate independently.

• The Group continued to formalise
all its resources and JORC mineral
resources and ore reserves estimates
were published for both the Gedabek
open pit mine and the Gadir
underground mine.

• A three-year geological exploration

programme was commenced in 2018
which includes near mine, brownfield
and greenfield exploration. As part of
this programme, an airborne geophysical
survey of the entire Gedabek contract
area was carried out in quarter four 2018.

The Group has a production target for the
year to 31 December 2019 of 65,000 ounces
to 67,500 ounces of gold and 3,100 tonnes
to 3,300 tonnes of copper. The total
production target for the year to
31 December 2019 expressed as gold
equivalent ounces (“GEOs”) is between
82,000 GEOs and 86,000 GEOs, compared
to total production for the year to
31 December 2018 of 83,736 GEOs.

Gedabek
Introduction
The Gedabek mining operation is located
in a 300 square kilometre contract area in
the Lesser 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
open pits and underground mines and
its processing facilities.

Gold was first poured from ore mined from
the Gedabek open pit and processed by
heap leaching in May 2009, with production
fully commencing in September 2009.
Copper and precious metal concentrate
production began in 2010 when the
Sulphidisation, Acidification, Recycling
and Thickening (SART) 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 2017, the
Group brought Ugur, a newly discovered
gold deposit three kilometres north-west
of its processing facilities, into production
as an open pit mine. In July 2018, a
second crusher line was added to the
flotation plant to enable independent
operation and processing by the agitation
leaching plant and the flotation plant.

Mineral resources and ore reserves
Key to the future development of the
Gedabek site is our knowledge of the
mineral resources and ore reserves within
our contract areas. The Group’s most recent
mineral resources and ore reserves estimates
for the Gedabek open pit were published
as of 18 September 2018. Full JORC
(2012) reporting with unchanged mineral
resources and ore reserves estimates was
subsequently released on 14 March 2019.
The mineral resource showed a total
resource (at a cut-off grade of 0.3 grammes
per tonne of gold) of approximately 986
thousand ounces of gold, 63.4 thousand
tonnes of copper and 8,172 thousand
ounces of silver. The economically mineable
ore reserves are over 343,000 ounces
of gold and more than 36,000 tonnes
of copper, which has extended the current
life of the Gedabek open pit until 2024.
Table 1 shows the Gedabek open pit mineral
resources estimate at 14 March 2019 and
Table 2 shows the Gedabek open pit ore
reserves estimate at 14 March 2019.

Anglo Asian Mining PLC Annual report and accounts 2018Table 1 – Gedabek open pit mineral resources estimate at 14 March 2019

Mineral resources

Measured

Indicated

Measured and Indicated

Inferred

Total

Gold (and Copper) Mineral Resources
(cut-off grade ≥ 0.3g/t gold)

Contained metal

In situ
(million
of tonnes)

Gold
grade
(g/t)

Copper
grade
(per cent.)

Silver
grade
(g/t)

Gold
(thousand
of ounces)

Copper
(thousand
of tonnes)

Silver
(thousand
of ounces)

18.0

11.1

29.1

8.5

37.6

0.9

0.7

0.9

0.7

0.8

0.2

0.1

0.2

0.1

0.2

8.3

5.6

7.3

5.0

6.8

532

264

38.0

15.7

4,800

2,011

796

53.7

6,811

189

9.7

1,361

986

63.4

8,172

Some of the totals in the above table do not sum due to rounding.

Mineral resources

Measured

Indicated

Measured and Indicated

Inferred

Total

Copper Mineral Resources (additional to gold mineral resource)
(cut-off grade gold <0.3g/t and copper ≥ 0.3 per cent.)

In situ
(million
of tonnes)

Gold
grade
(g/t)

Copper
grade
(per cent.)

Silver
grade
(g/t)

Gold
(thousand
of ounces)

Copper
(thousand
of tonnes)

Silver
(thousand
of ounces)

5.3

0.9

6.2

0.5

6.7

0.1

0.5

0.4

0.5

2.1

1.6

2.0

1.5

2.0

26.3

4.4

30.7

1.9

356

404

32.6

426

Some of the totals in the above table do not sum due to rounding.

Table 2 – Gedabek open pit ore reserves estimate at 14 March 2019

Ore reserves

Proved

Probable

Ore reserves

Tonnage
(thousand
of tonnes)

10.9

1.2

In situ grades

Copper
grade
(per cent.)

0.29

0.34

Gold
grade
(g/t)

0.89

0.82

Silver
grade
(g/t)

8.83

9.52

Contained metal

Gold
(thousand
of ounces)

Copper
(thousand
of tonnes)

Silver
(thousand
of ounces)

311

31.9

3,084

4.1

373

Proved and Probable

12.1

0.88

0.30

8.90

343

36.0

3,457

Some of the totals in the above table do not sum due to rounding.

The above proved and probable ore reserves estimate is based on that portion of the Measured and Indicated Mineral Resource of the
deposit within the scheduled mine designs that may be economically extracted, considering all “Modifying Factors” in accordance
with the JORC (2012) Code.

The latest JORC (2012) mineral resources and ore reserves statements for the Ugur deposit were completed in 2017. Table 3 shows
the Ugur open pit mineral resources estimate at 1 August, 2017 and Table 4 shows the Ugur open pit ore reserves estimate at
1 August, 2017.

Gedabek continued
Mineral resources and ore reserves continued
Table 3 – Ugur open pit mineral resources estimate at 1 August 2017

Mineral resources

Measured

Indicated

Measured and Indicated

Inferred

Total

Some of the totals in the above table do not sum due to rounding.

Table 4 – Ugur open pit ore reserves estimate at 1 August 2017

Ore reserves

Proved

Probable

Proved and Probable

Mineral resources
(cut-off grade ≥ 0.2g/t gold)

In situ grades

Contained metal

In situ.
(million of
tonnes)

Gold
grade
(g/t)

4.12

0.34

4.46

2.50

6.96

1.2

0.8

1.2

0.3

0.9

Silver
grade
(g/t)

6.3

3.9

Gold
(ounces)

Silver
(ounces)

164,000

841,000

8,000

44,000

6.2

172,000 884,000

2.1

27,000

165,000

4.7

199,000 1,049,000

Ore reserves

In situ grades

Contained metal

Gold
grade
(g/t)

1.3

0.8

1.3

Silver
grade
(g/t)

7.2

4.1

Gold
(ounces)

Silver
(ounces)

142,000

779,000

5,000

29,000

7.0

147,000 808,000

In situ.
(million of
tonnes)

3.37

0.22

3.59

The above proved and probable ore reserves estimate is based on that portion of the Measured and Indicated Mineral Resource of
the deposit within the scheduled mine designs that may be economically extracted, considering all “Modifying Factors” in accordance
with the JORC (2012) Code.

In March 2019, the Group published the JORC (2012) mineral resources statement and ore reserves estimate for its Gadir underground
mine. The mineral resources statement showed measured plus indicated mineral resources (at a cut-off grade of 0.5 grammes
per tonne of gold) of 1,775,000 tonnes containing 145,200 ounces of gold, 736,100 ounces of silver, 3,295 tonnes of copper and
14,470 tonnes of zinc. Table 5 shows the Gadir underground mine mineral resources estimate as at 20 August 2018. Table 6 shows
the Gadir underground mine ore reserves estimate as at 20 August 2018.

Table 5 – Gadir underground mine mineral resources estimate at 20 August 2018

Mineral Resources
(cut-off grade ≥ 0.5g/t gold)

Mineral resources

Measured

Indicated

In situ
(thousand of
tonnes)

540

1,235

Gold

Silver

Copper

Zinc

(thousand of
ounces)

(g/t)

(thousand of
ounces)

(g/t)

(per cent.)

(tonnes)

(per cent.)

(tonnes)

3.70

2.04

64.2

81.0

17.49

303.6

0.29

1,566

1.01

5,454

10.89

432.4

0.14

1,729

0.73

9,016

Measured and Indicated

1,775

2.54

145.2

12.90

736.1

0.21

3,295

0.84 14,470

Inferred

Total

571

1.48

27.2

5.68

104.4

0.10

571

0.52

2,972

2,347

2.29

172.4

11.14

840.4

0.19

3,866

0.78 17,442

Some of the totals in the above table do not sum due to rounding.

Anglo Asian Mining PLC Annual report and accounts 2018Table 6 – Gadir underground mine ore reserves estimate at 20 August 2018

One reserves

Proved

Probable

Proved and Probable

Ore reserves

Gold

Silver

Copper

(thousand
of ounces)

(g/t)

(per cent.)

(tonnes)

14.13

10.99

101

203

0.24

0.15

535

852

11.86

304

0.17

1,387

(g/t)

2.81

2.41

2.73

In situ
(thousand
of tonnes)

222

575

797

Some of the totals in the above table do not sum due to rounding.

The above proved and probable ore reserves estimate is based on that portion of the Measured and Indicated Mineral Resource of
the deposit within the scheduled mine designs that may be economically extracted, considering all “Modifying Factors” in accordance
with the JORC (2012) Code. Zinc was not estimated as part of this reserve as is under study as resource level currently.

Mining operations
The principal mining operation at the Gedabek contract area is conventional open-cast mining using truck and shovel from the
Gedabek open pit (which comprises several contiguous smaller open pits) and the Ugur open pit. 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 blast-hole drilling and
haulage of ore and waste rock are carried out by contractors, while blasting and mining activities are carried out by the Company.

Production commenced from the new Ugur open pit mine in September 2017. To enable production, a 4.6 kilometre road was
constructed between the mine and the Company’s processing facilities. All necessary surface infrastructure, including geology,
medical and HSE offices, hygiene facilities, a mechanical workshop, lubricants and spares stores, a weighbridge and a diesel store
was also constructed at the mine site. Due to the composition of the Ugur ore, mining of ore in the first few months of operation was
by free digging, with drilling and blasting not required. Ore was mined from the Ugur open pit mine throughout 2018.

Ore is also mined from the Gadir underground mine which is situated approximately one kilometre from the Gedabek open pit.
Table 7 shows the ore mined in 2018 from all the Company’s mines at Gedabek and Gosha.

Table 7 – Ore mined at Gedabek from all mines (including Gosha) for the year ended 31 December 2018

Mine

Gedabek open pit

Ugur – open pit

Gadir – underground

Gosha – underground

Total

Total ore mined
(12 months to
31 December 2018)

Ore mined
(tonnes)

362,412

1,245,104

125,806

10,988

Average
gold grade
(g/t)

1.06

1.27

4.53

3.44

1,744,310

1.47

Various initiatives were undertaken at Gedabek during 2018 to improve efficiency and working practices of its mining operations. These
included the following:

• The Company reconfigured its ROM stockpile pads. This is to enable more efficient (and therefore lower cost) handling of

plant feed as well as optimising ore blending.

• Transportation logistics were improved with a new spur road link constructed between the Gedabek open pit mine and processing

plant. This new road reduces haulage distances between the mine and the processing plant.

• An expansion of the on-site maintenance facilities and workshop commenced.

• Several specialist managers were recruited to improve working practices in the areas of mining, drill and blast, equipment

operation and maintenance.

• A diesel filtration system has been installed to improve the quality of fuel used which improves the efficient operation of equipment.

• A new solution sprinkling system has been installed which better distributes cyanide on heaps that are being leached.

Gedabek continued
Processing operations
Ore is processed at Gedabek to produce either gold doré (an alloy of gold and silver with small amounts of impurities, mainly
copper) 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 by the impervious base
under the pad.

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,
instead it is heaped into pads as received from the mine (ROM) without further treatment or crushing. This process is used for
very low grade ores.

3 Agitation leaching. Ore is crushed and then milled in a grinding circuit. The finely ground ore is placed in stirred (agitation) tanks
containing cyanide solution and the contained metal is dissolved in the solution. Depending on the composition of the ore, an
option is available to process the finely ground ore through the flotation plant prior to, or after treatment by, the agitation
leaching plant. However, since installation of the second crusher line for the flotation plant in 2018, the two plants have been
operating independently. Any coarse, free gold is separated using a centrifugal type Knelson concentrator.

Slurries produced by the above processes with dissolved metal in solution are then transferred to a resin-in-pulp (“RIP”) plant. A
synthetic ion exchange resin, in the form of small spherical plastic beads designed to absorb gold selectively over copper and silver, is
mixed 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, comprising an alloy of 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 metal 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 precipitates the
copper from the solution in the form of a finely divided 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
mineral particles 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 mineral concentrate containing copper, gold and silver.

Initially, gold doré was produced at Gedabek only by heap leaching crushed and agglomerated ore. Heap leaching is a low capital
cost method of production commonly used by mines when they first move into production. Ore at Gedabek is being crushed to less
than 25mm in size and the resultant gold recovery is approximately 60 per cent. to 70 per cent. of the contained gold over leaching
cycles which extend typically beyond one year.

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 topography of the Gedabek site, this is 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 chemical 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 a copper-rich
mineral concentrate, containing gold and silver as by-products. The flotation plant commenced production in November 2015. The
flotation plant has the flexibility to be configured for various methods of operation.

In 2018, a second crusher line was installed for the flotation plant. This has a budgeted capacity of 95 tonnes per hour compared to
the original crusher of up to 120 tonnes per hour. This removed a large bottleneck and enabled independent operation of the
agitation leaching and flotation plants from separate sources of feedstock. The addition of this second crusher not only significantly
increases the capacity of our processing plants, but also their flexibility.

Production and sales
For the year ended 31 December 2018, total gold production as doré bars and as a constituent of the copper and precious metal
concentrate totalled 72,798 ounces, which was an increase of 13,181 ounces in comparison to the production of 59,617 ounces for
the year ended 31 December 2017.

Table 8 summarises the amount of ore and its gold grade processed by leaching at Gedabek for the year ended 31 December 2018.

Anglo Asian Mining PLC Annual report and accounts 2018Table 8 – Ore and its gold grade processed by leaching at Gedabek for the year ended 31 December 2018

Quarter ended

31 March 2018

30 June 2018

30 September 2018

31 December 2018

Total for the year

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

170,655

188,364

184,846

150,573

77,493

196,107

195,957

136,595

196,700

154,901

131,861

173,332

0.92

0.91

0.81

0.51

0.40

0.48

2.07

2.19

2.39

2.26

672,086 534,313 750,985

0.89

0.47

2.23

Table 9 summarises the amount of ore and its gold, silver and copper content processed by flotation for the year ended
31 December 2018.

Table 9 – Ore and its gold, silver and copper content processed by flotation for the year ended 31 December 2018

Quarter ended

31 March 2018*

30 June 2018*

30 September 2018**

31 December 2018**

Total for the year

Ore
processed
(tonnes)

Gold
content
(ounces)

Silver
content
(ounces)

Copper
content
(tonnes)

43,159

54,134

131,102

129,102

1,790

2,415

4,818

4,625

21,979

29,236

62,472

70,292

199

237

587

690

357,497

13,648 183,979

1,713

During this time the flotation plant was operated in series with the agitation leaching plant processing its tailings.

** During this time the flotation plant was operated independently in parallel to the agitation leaching plant following installation of the second jaw crusher.

Table 10 summarises the gold and silver bullion produced from doré bars and sales of gold bullion for the year ended 31 December 2018.

Table 10 – Gold and silver bullion produced from doré bars and sales of gold bullion for the year ended 31 December 2018

Quarter ended

31 March 2018

30 June 2018

30 September 2018

31 December 2018

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
($/ounce)

15,750

15,537

18,885

15,444

7,110

6,014

7,416

5,646

14,956

10,822

18,637

15,066

1,328

1,307

1,216

1,231

65,616

26,186

59,481

1,265

Table 11 summarises the total copper, gold and silver produced as concentrate by both SART and flotation processing for the year
ended 31 December 2018.

Table 11 – Total copper, gold and silver produced as concentrate by both SART and flotation processing for the year ended
31 December 2018

Quarter ended

31 March 2018

30 June 2018

30 September 2018

31 December 2018

Copper (tonnes)

Gold (ounces)

Silver (ounces)

SART

Flotation

Total

SART

Flotation

114

137

141

195

389

521

255

332

470

588

735

1,226

2,437

2,752

Total

741

1,232

2,444

2,765

SART

Flotation

Total

22,118

11,587

21,800

16,387

17,357

34,573

14,229

45,947

33,705

38,187

51,930

60,176

Total for the year

399

1,246

1,645

7,150

7,182

75,504 108,494 183,998

Gedabek continued
Production and sales continued
Table 12 summarises the total copper concentrate (including gold and silver) production and sales from both SART and flotation
processing for the year ended 31 December 2018.

Table 12 – Total copper concentrate (including gold and silver) production and sales from both SART and flotation processing
for the year ended 31 December 2018

Quarter ended

31 March 2018

30 June 2018

30 September 2018

31 December 2018

Total for the year

Concentrate
production*
(dmt)

Copper
content*
(tonnes)

Gold
content*
(ounces)

Silver
content*
(ounces)

Concentrate
sales
(dmt)

Concentrate

sales**
($000)

1,042

1,396

2,663

3,706

255

332

470

588

741

1,232

2,444

2,765

33,705

38,187

51,930

60,176

608

1,736

1,557

3,774

1,715

4,221

3,368

6,131

8,807

1,645

7,182

183,998

7,675

15,435

Including the Government of Azerbaijan’s share.

** These are invoiced sales before any accounting adjustments in respect of IFRS 15. The total for the year does not therefore agree to the revenue disclosed

in note 6 – “Revenue” to the Group financial statements.

Infrastructure
The Gedabek contract area is served by excellent infrastructure. The main site is located at the village of Gedabek which
is connected by a good tarmacadam road to the regional capital of Ganja. Baku, the capital of Azerbaijan to the south and the
country’s border with Georgia to the north, are both approximately a four to five hour drive over excellent roads. The site is
connected to the Azeri national power grid and there is a dedicated sub-station located at the main Gedabek processing facilities.

Water management
The Gedabek site has its own water treatment plant which was constructed in 2017 and which uses the latest reverse osmosis
technology. In the last few years, Gedabek village has experienced water shortages in the summer and this plant reduces to the
absolute minimum the consumption of fresh water required by the Company. The plant is now producing around 200,000 litres of
pure water per day using water from the tailings dam, which is being used in Gedabek’s processing facilities.

Wastewater evaporation equipment is also deployed in 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.

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 facilities, topographically at a lower level than the processing plant, thus allowing gravity assistance of tailings flow in the
slurry pipeline. Immediately downstream of the tailings dam is a reed bed biological treatment system to purify any seepage from the
dam before discharge into the nearby Shamkir river.

During 2017, the wall of the tailings dam was raised by six metres. This has increased the capacity of the tailings dam from 3.2 million
cubic metres to 4.3 million cubic metres. There are two pipelines from the Company’s processing facilities to the tailings dam to
increase capacity and provide redundancy.

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 a team of HSE officers. 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 2018, there were 44 reportable safety incidents (2017: 45), of which nine involved injuries to personnel. Five of these cases
were minor injuries, but four (2017: two) were lost time incidents (LTI), where the casualty had to take time off work. A formal
Permit-to-Work system has now been fully implemented for all maintenance activities carried out in high-risk areas, to ensure the
safety of the personnel engaged in these activities, which are closely monitored by staff from the Health and Safety department.

An HSE encouragement programme has been introduced, which awards bonuses to members of the workforce for outstanding HSE or
housekeeping activities, on the recommendation of HSE or supervisory staff. Good HSE performance is publicly recognised on
posters in the canteen and other public places.

Training for the HSE staff is on-going. In 2018, all the department’s staff successfully passed the “IOSH Managing Safely” training
course provided by the Institution of Occupational Safety and Health from the United Kingdom.

Anglo Asian Mining PLC Annual report and accounts 2018Geological exploration activity
The Group’s geological programme at
Gedabek in 2018 formed part of a rolling
three-year exploration plan and was
designed to achieve the following
main objectives:

• To establish the gold and copper-gold
distribution of the Gedabek open
pit to update the resource and
reserve estimate.

• To assess the extent of the further

mineralisation of the Gadir underground
mine and confirm ongoing mineable
ore through the publication of a resource
and reserve estimate, in accordance
with the JORC (2012) Code.

• To commence exploration of the

mineral potential below the Gedabek
main open pit from underground.

• To bring new mineral occurrence targets
into the resource and reserve pipeline.

• To identify new areas of mineralisation
and targets which can be fast tracked
into production as standalone mines.

The major results of geological exploration
for the year ended 31 December 2018 are
as follows:

• A clear understanding was obtained
of the combined production profile
of all operating mines that gave a mine
life until the end of 2024 from the
current reserves.

• A helicopter-borne electromagnetic
and magnetic survey was completed
over Gedabek. The initial results
indicated several targets for follow-up
exploration activity.

• Drilling at the northern and southern
margins of the Gedabek open pit
confirmed the existence of further
mineable copper and gold extensions.
Additional mineralisation was also
confirmed beneath the Gedabek
open pit.

The detailed work carried out at Gedabek
in 2018 by location is as follows:

Gedabek regional
• 3,385 metres of airborne ZTEM and

magnetic geophysics were completed
on a 200 metre line spacing. Twenty five
targets favourable for epithermal and
porphyry mineralisation and six
magnetic targets consistent with
porphyry systems were identified for
more detailed exploration.

• 2 surface diamond core drill-holes
over the Umid area (located about
1.5 kilometres west of the Company's
heap leach processing area) (“Umid”)
were completed totalling 1,177 metres.

• 3 surface reverse circulation drill-holes

were drilled over Umid totalling
587 metres.

• 25 outcrop samples were collected

over the Duzyurd area.

Gedabek open pit (and underground)
• 58 surface diamond core drill-holes

were completed totalling 5,947 metres.

• 208 surface reverse circulation drill-holes
were completed totalling 11,340 metres.

• 7 underground diamond core drill-holes
were completed totalling 655 metres.

• 718 metres of tunnel development were
completed from the Gadir decline to
below Gedabek ‘Pit 4’. This will create
drilling platforms to better assess the
potential for underground development
of the Gedabek deposit.

Gadir
• 19 surface diamond core drill-holes were

completed totalling 8,953 metres.

• 43 underground diamond core drill-holes

(HQ/NQ in size) were completed
totalling 4,735 metres.

• An additional 105 BQ-size underground

core drill-holes were completed
totalling 2,838 metres.

• 2,703 metres of underground

geological mapping from the mine
tunnels were completed.

• Surface induced polarisation (“IP”)
and ground magnetics over the
Gadir footprint completed covering
3.7 square kilometres (results are
expected shortly).

Ugur
• 12 surface diamond core drill-holes

were completed totalling 3,875 metres.

• 650 outcrop samples were collected.

• 250 linear metres of trenching, with 215

samples obtained.

• 40,000 square metres of detailed

geological (lithological, alteration and
structural) mapping were completed.

Söydülü
• 146 outcrop samples were collected.

• 8 stream sediment samples

were collected.

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.

Production
A total of 10,988 tonnes of ore of
average gold grade 3.44 grammes per
tonne were mined at Gosha in the year
ended 31 December 2018.

Exploration activity
A new discovery of polymetallic
mineralisation was made at the Asrikchay
target area 7 kilometres north from the
Gosha underground mine. A significant
polymetallic drill-hole intersection was
found with weighted grade averages from
228.70 metres to 233.00 meters (4.30
metre downhole thickness) of 4.11
grammes per tonne of gold, 112.23
grammes per tonne of silver, 3.07 per
cent. copper and 3.0 per cent. zinc.
Preliminary follow-up surface geophysics
has been completed over Asrikchay to
identify the deposit geometry and the
results are awaited.

Ordubad
The 462 square kilometre Ordubad
contract area is located in Nakhchivan,
South West Azerbaijan and contains
numerous targets including Shakardara,
Piyazbashi, Misdag, Agyurt, Shalala and
Diakchay, all of which are located within
a five-kilometre radius of each other.

The presence of gold was first discovered
at Shakardara around 1956 to 1958. Soviet
geologists estimated resources for the
main vein zone of 2.6 million tonnes
of ore containing approximately 120,000
ounces of gold, 280,000 ounces of silver
and 4.01 tonnes of copper, but these
estimates have never been substantiated.

The geological exploration programme
at Ordubad was significantly expanded
in 2018, compared to previous years. The
work was to assess the extent of the copper,
gold and associated mineralisation and to
verify the Soviet era data which indicates
extensive potential mineralisation.

Ordubad continued
A summary of the work carried out in 2018
is as follows:

• Completion of a surface geochemical
sampling programme covering the
Shakardara and Dirnis areas, for a total
area of 26.7 square kilometres, following
up on porphyry-style alteration zones
and surface outcrops of malachite
mineralisation. A total of 5,504 samples
were collected and sent for analysis to
ALS Minerals ‘OMAC’ (ALS Loughrea)
in Ireland; results are expected in the
second quarter of 2019.

• A geological research team from the
Natural History Museum (‘NHM’) of
London worked with the Company at
Ordubad for two weeks in November
2018, collecting 83 samples for X-Ray
Diffraction analysis (‘XRD’) and
petrographic studies, among others.

• 1,488 metres of linear trenching were
completed at Shakardara, with 916
trench samples collected and over
989 metres sampled.

• 42 stream sediment samples were

collected at Piyazbashi.

• Detailed geological (lithological,

alteration and structural) mapping
was completed over the 26.7 square
kilometre Shakardara geochemical
study area.

• 5,500 metres of road clearing was
completed by bulldozer to access
mineral occurrences and deposits.

• Preliminary review of primary

historical geological reports and
initial target selection.

• Drill-hole planning for 2019 at the

copper target of Dirnis and the gold
targets at Keleki.

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 the majority 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 can be settled within one to two
days of receipt of the doré or the Group,

at its discretion, can sell the resulting
refined gold bullion to MKS Finance SA
following refining of the doré. The Group
has not experienced in 2018 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. One trial
shipment was made in 2018 to an alternative
refiner in Switzerland as the refiner was
offering better commercial terms than
MKS Finance SA.

The Gedabek mine site has good road
transportation links and our copper and
precious metal concentrate is collected
by truck from the Gedabek site by the
purchaser. In 2014, the Group
commenced selling its copper
concentrate produced by SART
processing to Industrial Minerals SA, a
Swiss-based integrated trading, mining
and logistics group under an exclusive
three year contract. This contract has
been subsequently renewed and
expanded to include copper concentrate
produced by flotation, in addition to the
SART concentrate. The latest renewal of
the contract was signed on 1 January
2019 for a period of one year, but the
contract will automatically extend unless
terminated by either party.

In June 2018, the Group signed a contract
with Trafigura Pte. Limited (“Trafigura”)
for the sale of copper concentrates
produced by flotation processing. The
contract has no expiry date unless
terminated by either party and the first
shipment of concentrate was made under
the contract in September 2018.

It is intended that Trafigura will purchase
all concentrate produced by flotation and
Industrial Minerals SA those produced
by SART processing. The Group has
experienced no delays in the shipment
of copper concentrates in 2018.

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 expenditure 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 23 to the Group financial statements.

Anglo Asian Mining PLC Annual report and accounts 2018Tailing dam
Aeriel view of the tailings dam showing its wall and the reed bed at the bottom of the wall. Following the Brumadinho dam collapse,
independent environmental consultants have been appointed to inspect the dam.

Liquidity and interest rate risk
During 2018, interest rates on loans
payable were fixed, except for the three
month LIBOR embedded in the terms of
the Amsterdam Trade Bank (“ATB”) and
Gazprombank (Switzerland) Ltd (“GPBS”)
loans. The loans from ATB and GPBS were
repaid in March 2018 and since then the
interest rates on all loans have been fixed.
The Group has not used any interest rate
swaps or other instruments to manage its
interest rate profile during 2018, but this
recourse is reviewed on a periodic basis.
Information on the exposure to changing
interest rates is disclosed in note 23 to the
Group financial statements. The approval
of the board of directors is required for all
new borrowing facilities.

The Group’s surplus cash deposits have
been steadily increasing since the
beginning of 2018. The Group places
these on deposit with a range of banks to
both ensure it obtains the best return on
these deposits and to minimise
counterparty risk. The amount of interest
received on these deposits is not material
to the financial results of the Company
and therefore any decrease in interest
rates would not have any adverse effect.

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 production 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
15 May 2019

“ We have also substantially increased our efforts at Ordubad which is
a highly prospective region with great promise. Whilst still relatively
early days, Ordubad has the potential to significantly grow the
Company in future years.”

Misdag, Agyurt and Shalala
Ordubad contains numerous mineral deposits all located within a five-kilometre radius. This is a view of the Misdag, Agyurt and
Shalala region.

Exploration budget for 2019

over $1.8m

Budget includes satellite and geological
mapping, surface geological sampling and
around 6,000 metres of core drilling.

Piyazbashi
View of the Piyazbashi target. In the bottom centre of the picture
is a portal to an adit which was driven during the Soviet era.

Dirnis and Keleki
Drilling has now started at the Dirnis copper target and Keleki
gold target.

Anglo Asian Mining PLC Annual report and accounts 2018Financial review
Reza Vaziri and William Morgan

“ The Group recorded a profit before taxation in 2018 of $25.2m

compared to $5.7m in 2017. This was due to higher revenues, a lower
all-in sustaining cost of gold production and lower finance costs.”

The directors present their
financial review for the year
ended 31 December 2018.
This financial review forms
part of the strategic report
on pages 10 to 19.

Group statement of income
The Group generated revenues in 2018 of
$90.4m (2017: $71.8m) from the sales of
gold and silver bullion and copper and
precious metal concentrate.

The revenues in 2018 included $75.5m
(2017: $55.4m) generated from the sales
of gold and silver bullion from the Group’s
share of the production of doré bars.
Bullion sales in 2018 were 59,481 ounces
of gold and 25,394 ounces of silver (2017:
43,496 ounces of gold and 18,442 ounces
of silver) at an average price of $1,265 per
ounce and $16 per ounce respectively
(2017: $1,265 per ounce and $17 per
ounce respectively). In addition, the
Group generated revenue of $14.9m
(2017: $16.4m) from the sale of 7,675
(2017: 8,497) dry metric tonnes of copper
and precious metal concentrate. The
Group’s revenue benefited in the year
from both a higher average price of gold
at $1,269 per ounce (2017: $1,258 per
ounce) and a higher average price of
copper at $6,527 per metric tonne
(2017: $6,200 per metric tonne).

The Group did not hedge any metal sales
during 2017 or 2018.

The Group incurred cost of sales in 2018
of $56.5m (2017: $56.8m). Higher cash
costs, depreciation and stockpile
movement were offset by an increased
credit in respect of deferred stripping
costs which in 2018 were $4.7m compared
to $0.5m in 2017. The cash cost of mining
and processing increased marginally by
$1.4m from $39.1m in 2017 to $40.5m in
2018 despite the increase in production.
The cost of reagents decreased by $2.8m

due to operational efficiencies and the
processing of Ugur ores which do not
contain copper. Excavation and haulage
costs increased by $2.1m and employee
costs by $0.9m following the recruitment
of specialised managers in the year.

Depreciation and amortisation in 2018
was slightly higher at $22.9m compared
to $22.8m in 2017. 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
impact of the higher production of gold
in 2018 was offset by an increase in the
amount of economically recoverable
reserves used to determine the
depreciation and amortisation.

The Group had other income in 2018 of
$0.1m (2017: $0.6m). The Group incurred
administration expenses in 2018 of $5.3m
(2017: $4.7m). 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 majority of the administration
costs are incurred in either Azerbaijan
New Manats or United Kingdom pounds
sterling. United Kingdom pounds sterling
strengthened against the US dollar in 2018
compared to 2017 whilst the Azerbaijan
New Manat was relatively stable. This
resulted in higher administration costs
when the costs were translated into
United States dollars. Finance costs in
2018 were $1.6m (2017: $3.5m) and
comprise interest on the credit facilities
and loans, interest on letters of credit and
accretion expenses on the rehabilitation
provision. The costs reduced in the year
due to both a significant reduction in the
average debt in 2018 and a reduction in
the average interest rate on the debt.

The Group recorded a profit before
taxation in 2018 of $25.2m compared to
$5.7m in 2017. This was due to higher
revenues, a lower all-in sustaining cost of
gold production and lower finance costs.

The Group had a taxation charge in 2018
of $8.9m (2017: $3.2m). This comprised a
current income tax charge of $7.3m
(2017: $nil) and a deferred tax charge of
$1.6m (2017: $3.2m). The current income
tax charge of $7.3m was incurred by R.V.
Investment Group Services (“RVIG”) in
Azerbaijan. RVIG generated taxable profits
in 2018 of $27.5m of which $4.7m were
offset against tax losses brought forward.
The balance of the taxable profits of
$22.8m were taxed at 32 per cent. (the
corporation tax rate stipulated in the
Group’s production sharing agreement)
resulting in the income tax charge of
$7.3m. RVIG had no tax losses carried
forward at 31 December 2018.

The taxable profits of the operating
company in Azerbaijan are taxed at 32 per
cent. However, the Group’s overall tax rate
in 2018 was 35 per cent. (2017: 56 per cent.).
The overall tax rate is higher than 32 per
cent. because the UK administrative costs
and depreciation of mining rights in
Azerbaijan cannot be offset against the
taxable profits arising in Azerbaijan. These
costs in 2018 totalled $3.3m (2017: $3.1m).

All-in sustaining cost of gold production
The Group produced gold at an all-in
sustaining cost (“AISC”) per ounce of
$541 in 2018 compared to $604 in 2017.
The Group reports its cash cost as an
AISC calculated in accordance with the
World Gold Council’s guidance which is a
standardised metric in the industry. The
reason for the decrease in 2018 compared
to 2017 was the higher level of production.
Although total costs increased, many of
the Company’s costs are fixed or semi-
fixed and did not increase in direct
proportion to the revenue.

Anglo Asian Mining PLC Annual report and accounts 2018Corporate governanceGroup financial statementsCompany financial statementsAnnual general meetingAnglo Asian MiningChairman’s statementFinancial reviewStrategic reportFinancial review continued

Group statement of financial position
Non-current assets decreased from $104.4m
at the end of 2017 to $98.6m at the end of
2018. The main reason for the decrease
was property, plant and equipment being
lower by $6.2m due to depreciation in the
year. Intangible assets increased from
$16.2m at the end of 2017 to $17.0m at
the end of 2018 due to expenditure on
geological exploration and evaluation of
$2.9m offset by amortisation.

There were net current assets of $33.5m
at the end of 2018 compared to $12.6m at
the end of 2017. The main reason for the
increase in net current assets was an
increase in cash of $12.0m and a decrease
in the current portion of loans payable of
$13.3m. The Group’s cash balances at
31 December 2018 were $14.5m (2017:
$2.5m). Surplus cash is maintained in US
dollars and placed on fixed deposit with
several banks at tenors of between one to
three months at interest rates of around
2.5 to 3.0 per cent.

Net assets of the Group at the end of 2018
were $98.4m (2017: $85.4m). The increase
was due to the retained earnings increasing
and the issue of shares during the year.
During 2018, 631,000 ordinary shares were
issued in respect of share options that
were held by employees at prices between
9.9 pence and 35.5 pence per share.
This increased the net assets of the Group
by $0.1m.

The Group is financed by a mixture of
equity and debt. The Group’s total debt
at 31 December 2018 was $8.4m, a
significant reduction from $20.7m in 2017
following strong cash generation in the
year. The Group also refinanced $13.5m
of its outstanding debt during 2018 with
a 3 year refinancing loan. This loan carries
a fixed interest rate of 7 per cent. and is
unsecured and contains no covenants.
The refinancing loan is the only outstanding
borrowing at 31 December 2018.

The Group continues to reduce the
interest rate payable on its borrowings
through either refinancing debt at lower
interest rates or negotiating lower interest
rates with banks in respect of existing
loans. The interest rate on its only
outstanding loan at 31 December 2018
was 7 per cent. (2017: weighted average
interest rate on debt of 8 per cent.).

The Group’s holding company, Anglo
Asian Mining PLC, reduced its share
premium account to $nil in 2018.
Accordingly, the reduction of $32.6m
was transferred to retained earnings.
The reduction was approved by the Court
and was to create distributable reserves
to allow the holding company to pay
dividends. This gave the Group the capacity
to pay dividends to its shareholders of
up to a total of $13.5m. This amount can
be increased by operating profits in
subsidiaries being transferred to Anglo
Asian Mining PLC by way of dividend. The
share premium account had a balance at
the end of 2018 of $33,000. This was in
respect of the premium on 75,000 shares
issued at 35.44 pence subsequent to the
reduction in the share premium account.

Group cash flow statement
Operating cash inflow before movements
in working capital for 2018 was $50.1m
(2017: $32.2m). The main source of
operating cash flow was operating
profit before the non-cash charges of
depreciation and amortisation in 2018
of $49.8m (2017: $32.0m) after adding
back finance cost.

Working capital movements generated
cash of $0.6m (2017: absorbed cash of
$2.4m) largely due to an increase in
trade and other payables of $2.7m
(2017: decrease of $4.6m).

Cash from operations in 2018 was $50.7m
compared to $29.8m in 2017 due to
higher operating cash inflow before
movements in working capital.

The Company paid corporation tax in
2018 of $3.6m (2017: $nil) in Azerbaijan
in accordance with local requirements.
These were payments on account of its
liability for the year ended 31 December
2018 which is discussed above.

Expenditure on property, plant and
equipment and mine development was
$15.3m (2017: $9.4m). The main items of
expenditure in 2018 were capitalisation of
deferred stripping costs of the main open
pit and the Ugur open pit of $7.2m, the
Jaw crusher and associated equipment
for the flotation plant of $2.8m, Gadir and
Gedabek development of $3.0m and
mining and other equipment of $2.3m.

Exploration and evaluation expenditure in
2018 of $2.9m (2017: $1.0m) was incurred
and capitalised. This arose on exploration
at the Gedabek, Gosha and Ordubad
contract areas.

Dividends
The Group paid its first dividend in 2018
of $0.03 per share. The dividend was
declared in United States dollars but paid
in United Kingdom pounds sterling in the
amount of 2.2864 pence. The dividend
was converted to United Kingdom pounds
sterling using the average of the sterling
closing mid-price using the exchange rate
published by the Bank of England at 4pm
each day from the 15 to 19 October 2018.
The total cost of the dividend was $3.4m.
The directors have announced a final
dividend of $0.04 per share in respect
of the financial year ended 31 December
2018. This is subject to the approval of
the shareholders and will cost $4.6m
but has not been accrued in the 2018
financial statements.

The directors have announced a policy to
target a distribution to shareholders each
year comprising approximately 25 per
cent. of the Group’s free cash flow.
This distribution will be made in two
approximately equal installments
comprising an interim and final dividend.
The amounts and timing of payment of
the interim and final dividends will be
announced each year along with the
Group’s interim and final results respectively.
The board will review this policy each year
taking into account the financing needs of
the business at that time. Free cash flow is
defined as net cash flow from operating
activities less capital expenditure and in
2018 was $28.9m (2017: $19.4m).

Production Sharing Agreement
Under the terms of the Production
Sharing Agreement (“PSA”) with the
Government of Azerbaijan (“Government”),
the Group and the Government share the
commercial products of each mine. The
Government’s share is 51 per cent. of
“Profit Production”. Profit Production is
defined as the value of production, less all
capital and operating cash costs incurred
during the period when the production
took place. Profit Production for any
period is subject to a minimum of 25 per
cent. of the value of the production.

Anglo Asian Mining PLC Annual report and accounts 2018Accordingly, the directors continue to
adopt the going concern basis in preparing
the annual report and financial statements.

Reza Vaziri
President and chief executive
15 May 2019

William Morgan
Chief financial officer
15 May 2019

This is to ensure the Government always
receives a share of production. The
minimum Profit Production is applied when
the total capital and operating cash costs
(including any unrecovered costs from
previous periods) are greater than 75 per
cent. of the value of production. All
operating and capital cash costs in excess
of 75 per cent. of the value of production
can be carried forward indefinitely and set
off against the value of future production.

Profit Production for the Group has been
subject to the minimum 25 per cent. for all
years since commencement of production
including 2018. The Government’s share
of production in 2018 (as in all previous
years) was therefore 12.75 per cent. being
51 per cent. of 25 per cent. with the Group
entitled to the remaining 87.25 per cent.
The Group was therefore subject to an
effective royalty on its revenues in 2018
of 12.75 per cent. (2017: 12.75 per cent.)
of the value of its production.

The Group can recover the following
costs in accordance with the PSA:

• 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.

Unrecovered costs are calculated separately
for the three contract areas of Gedabek,
Gosha and Ordubad and can only be
recovered against production from their
respective contract areas. The total
unrecovered costs for the Gedabek and
Gosha contract areas at 31 December
2018 were $76.9m and $23.3m respectively
(2017: $94.6m and $21.8m respectively).

The Group’s current business plans
indicate that these costs will not be fully
recovered until at least 2023 and the
effective royalty of 12.75 per cent. will
therefore continue until then.

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
2020 and satisfying themselves that the
Group will have sufficient funds on hand
to meet its obligations as and when they
fall due over the period of their
assessment. Appropriate rigour and
diligence has been applied by the
directors who believe the assumptions are
prepared on a realistic basis using the
best available information.

The Group had cash balances of
$17.7 million and debt of $6.9 million
at 31 March 2019. The Group is able to
fund its working capital requirements and
service its borrowings from cash generated
from its operations at Gedabek. The
Group’s borrowings are unsecured and
without any financial covenants and all
payments of interest and principal in 2018
and 2019 to date have been made in
accordance with the terms of the relevant
loan agreements. The Group has access
to local sources of both short and long
term finance should this be required.

The Group’s business activities, together
with the factors likely to affect its future
development, performance and position,
can be found within the chairman’s
statement on pages 4 to 6 and within the
strategic report on pages 10 to 19. The
financial position of the Group, its cash
flow, liquidity position and borrowing
facilities are discussed within this financial
review. In addition, note 23 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.

Mr Khosrow Zamani*
Non-executive chairman, age 76
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 was formerly a non-executive board member
and chairman of the corporate governance committee of
Sekerbank A.S., a publicly listed commercial bank in Turkey,
and a non-executive board member and a member of the
compensation committee of Komercijalna Bank, Serbia.

Mr Reza Vaziri
President and chief executive, age 66
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 79
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.

Mr Richard Round*
Non-executive director, age 61
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 76
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 to 1996, 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 2018Corporate governance

Introduction
Prior to 2018, the rules of AIM did not
require the Company to comply with the
United Kingdom Corporate Governance
Code (the “Code”). However, the
Company fully supported the principles
set out in the Code and complied
wherever possible given both the size and
the resources available to the Company.

In 2018, the board of directors (the “Board”)
adopted the principles of the 2018
Quoted Companies Alliance Corporate
Governance Code (the “QCA Code”)
to support the Company’s corporate
governance framework. The directors
acknowledge the importance of the
ten principles set out in the QCA Code.
The QCA Code is a code of best
practice for AIM companies.

Set out below are the ten principles of
corporate governance in the QCA Code,
the Company’s compliance with each of
the ten principles and the required annual
report and accounts disclosure. A table
of the ten principles is also available
on the Company website (http://www.
angloasianmining.com/media/pdf/
CORPORATE_GOVERNANCE.pdf) which
also sets out the Company’s compliance,
or an explanation for any non-compliance,
with the QCA Code.

Compliance with the principles
of the QCA code

1 Establish a strategy and business
model which promote long-term
value for shareholders
The Company has a portfolio of gold,
copper and silver exploration and
production assets in Azerbaijan. The
Company has a clear strategy of growing a
sustainable mining business in Azerbaijan
which is fully set out in the chairman’s
statement, strategic report and other
sections of this annual report. As with any
other company in the extractive industries,
a key challenge is to replace the mineral
resources mined. This is being addressed
by the Company commencing in 2018
a three-year programme of geological
exploration for new mineral resources.
A further key challenge is the safe working
of its operations and this annual report sets
out measures adopted by the Company
in 2018 to address this challenge.

2 Seek to understand and meet

shareholders’ needs and expectations
The Board maintains an extensive two-way
dialogue with its shareholders. The Board
meets shareholders at its annual general
meeting each year. Directors and senior
management regularly meet shareholders
at investor events and other forums.

Individual meetings are held with larger
shareholders who occasionally visit the
Company’s operations in Azerbaijan.
The Company also regularly updates
shareholders on its activities through press
releases via the LSE RNS system. Podcasts
and video interviews by senior management
are also disseminated via well-known
investor websites such as Proactive and
Vox. The Company has an active and
effective investor relations programme
that includes institutional roadshows and
presentations. The Company website is
monitored and regularly updated to be
a current and comprehensive source of
information to stakeholders.

3 Take into account wider stakeholder
and social responsibilities and their
implications for long term success
The Company takes its wider
responsibilities for corporate and social
responsibilities very seriously and has
contributed to the economic and social
development of the local communities in
which it operates. This includes refurbishing
schools and building infrastructure in the
region and assisting local agriculture.
The Company regularly meets with
community leaders in the areas in which
it operates. 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 and wider stakeholders.

4 Embed effective risk management,
considering both opportunities and
threats, throughout the organisation
The Company and its directors have
identified and keep under consideration
the risks facing the Company. It has an
established framework of internal financial
controls including an audit committee
to address financial risks. The Company
does not have a formal corporate risk
management programme for non-financial
risks although the Board regularly discuss
and review exposure and management of
all risks. The requirement for a formal risk
management programme is kept under
review and the Company may reassess
the need to establish such a programme
in the future.

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 Group and the Board review the
adequacy of the cover regularly.

The principal risks and uncertainties
section of this annual report details a
number of other risks which the Company
is subject to and how these are addressed.
In particular:

a. country risk;

b. operational risk;

c. commodity price risk;

d. foreign currency risk; and

e. liquidity and interest rate risk.

One of the main corporate risks is the safe
operation of its mines and processing
operations. To address this specific risk,
the Company has a well-developed and
adequately staffed Health, Safety and
Environment (“HSE”) department to ensure
safe and clean working at its mines and
processing sites. The Company also
has a Health, Safety, Environment and
Technology (“HSET”) committee
comprising John Monhemius and
Reza Vaziri. The committee’s primary
function is to assist the Board in fulfilling
its HSE oversight responsibilities. Its
oversight responsibilities are set out in
section 9 below.

The HSET committee, chaired by
John Monhemius, convened twice during
2018 at the Company’s main Gedabek
operating site. The committee discussed all
aspects of the safe operation of its mines
and processing plants and any reportable
safety incidents together with
recommendations and follow-up
actions from previous meetings.

balanced team led by the chair
The Board is a well-balanced team
including specialists of the major
technical disciplines required in the
mining industry. Their names and
biographies are set out in this annual
report on page 24. Three of the five
directors, being Khosrow Zamani,
Richard Round and Professor John
Monhemius are independent. Anglo
Asian’s board composition complies with
the QCA Code and each independent
director has been assessed and is
considered to be independent by the
Board. The biographies of Board
members of the Company are also
available on the Company website at
http://www.angloasianmining.com/
about_us/board_of_directors/.

All directors are expected to devote the
necessary time commitments required by
their position and are expected to attend
at least six board meetings each year.

5 Maintain the Board as a well-functioning,

Compliance with the principles of the QCA code continued

5 Maintain the Board as a well-functioning, balanced team led by the chair continued

The number of board meetings held during 2018 and the attendance of the directors
are as follows:

Number of board meetings each director attended

Number of board
meetings in 2018

John
Monhemius

Richard
Round

John
Sununu

Reza
Vaziri

Khosrow
Zamani

The role and duties of the audit,
nomination and remuneration committees
are set out in the respective reports of
the committees in section 10 below. The
respective reports also set out the number
of times the committees met in the year
and the attendance of the directors.

The meetings of the health, safety,
environmental and technological
committee are set out in section 4 above.

6 Ensure that between them the

directors have the necessary up-to-date
experience, skills and capabilities
The directors are all highly experienced
with a total over 200 years of experience
in all areas of business, particularly the
natural resource industries. All directors are
able to seek outside advice wherever
necessary. Throughout the majority of
2018, the Company had an external
company secretary. The Board has a
nominations committee which reviews
and considers the Board structure and
composition. The nominations committee
meets as required to consider and make
recommendations on the appointment of
directors to the Board and senior
management as well as recommendations
in relation to professional training and
development. The biographies of the
directors can be found on page 24 of this
annual report and on the Company
website at http://www.angloasianmining.
com/about_us/board_of_directors.

There is no formal process to keep
directors’ skill sets up-to-date given
their wealth of experience.

The Board obtained tax advice from Ernst
& Young LLP and was advised by its
solicitors (Squire Patton Boggs (UK) LLP)
on the financial and legal aspects of the
Company paying its maiden dividend in
2018. The external company secretary
also provided advice on this matter.
The Company’s broker and NOMAD
(S P Angel Corporate Finance LLP) also
advised the Board on various regulatory
and commercial matters during 2018.

7 Evaluate board performance based
on clear and relevant objectives,
seeking continuous improvement
The Board believes its clear objective
is the financial performance of the
business whilst closely ensuring the
interests of all other stakeholders
are properly upheld. The financial
performance of the business is closely
monitored. The Company reviews board,
committee and individual director
performance on an on-going basis in
the context of their contribution to the
Company’s financial performance. The
chairperson will normally take leadership
of the performance assessment process
and allows for feedback from other board
members about their performance.

8 Promote a corporate culture

that is based on ethical values
and behaviours
The Company operates to the highest
ethical standards. The Board is very mindful
that it operates in the extractive industries
in an emerging market economy.
Accordingly, the Board takes every
opportunity, including the induction process
of senior management, to reinforce its high
ethical standards. A large part of the
Company’s activities is centred upon
what needs to be an open and respectful
dialogue with employees, clients and other
stakeholders. Therefore, the importance
of sound ethical values and behaviour is
crucial to the ability of the Company to
successfully achieve its corporate objectives.
The Company is also aware that the safe
operation of its mines and processing
plants is determined in large part by a
culture which is highly “safety conscious”.
The Board has taken actions during the
year to promote this culture of safe
working such as strengthening its HSE
department and regular safety reviews.

There is no formal mechanism to monitor
the Company’s corporate culture which
the Board believes is appropriate given
the size of the business. However, the
Board investigates very thoroughly any
instance of serious malpractice etc. which
is brought to its attention. There were
no instances during 2018 of any failing
of the Company due to poor culture brought
to the attention of the Board.

The effectiveness of the “safety
conscious” culture can be monitored
directly by the HSET committee and
indirectly through the number of reported
safety incidents etc. These showed that
the safe working of its operations had
improved during the year.

The Company has adopted, with effect
from the date on which its shares were
admitted to AIM, a code for directors’
and employees’ dealings in securities
which is appropriate for a company
whose securities are traded on AIM
and is in accordance with AIM Rule 21
of the requirements of the Market Abuse
Regulation which came into effect in 2016.

9 Maintain governance structures

and processes that are fit for purpose
and support good decision-making
by the board
The Company’s governance structures are
appropriate for a company of its size and
all necessary committees such as audit and
remuneration regularly meet. The Board
also meets regularly and the directors
continuously maintain an informal dialogue
between themselves.

The Board has audit, nomination and
remuneration committees. The role and
duties of the audit, nomination and
remuneration committees are set out in
the respective reports of the committees
in section 10 below.

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.

Anglo Asian Mining PLC Annual report and accounts 201810 Communicate how the Company

is governed by maintaining a dialogue
with shareholders and other
relevant stakeholders
The Company maintains an adequate
dialogue with its shareholders as set
out in section 2 above. Anglo Asian
is committed to providing full and
transparent disclosure of its activities,
via the RNS system of the London Stock
Exchange. Furthermore the historical
annual reports and interim accounts are
available on the Company website at
http://www.angloasianmining.com.

Details of all shareholder communications
are provided on the Company website.
The Board holds meetings with larger
shareholders and regards the annual
general meeting as a good opportunity
to communicate directly with all
shareholders, including presentations on
current business that are subsequently
made available on the website.

The outcome of each vote in the annual
general meeting is always reported to
shareholders and released as an RNS
on the market announcements platform. It
can also be obtained on the
Company website.

Role of the audit committee
The main duties of the audit committee
are as follows:

• provide formal and transparent

arrangements for considering the
application of all applicable financial
reporting standards;

10.2 Report of the remuneration committee
The remuneration committee 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.

• ensure the interim and full year

financial statements are properly
prepared in accordance with all
applicable accounting standards,
legal and all other requirements
and reflect best practice;

• review the findings of any management
letter or other communication from
the external auditor regarding
internal controls;

• ensure the full year financial

statements are audited by the
external auditor in accordance with
all applicable audit standards, legal
and other requirements;

• assessment of the need for an internal

audit function; and

• ensure the independence and objectivity
of the external auditor and approve all
non-audit work by the external auditor.

There were no changes in senior
management or directors or to their
remuneration in 2018 and therefore
the committee did not meet in the year.

10.3 Report of the nomination committee
The nomination committee comprises
Khosrow Zamani and John Sununu and
meets as required. It is the role of the
nomination committee to review and
consider the Board structure and
composition and to consider and
make recommendations on the
appointment of directors to the Board.

There were no changes to directors in
2018 and therefore the committee did
not meet in the year.

There is a formal process of maintaining
the relationship between the Company
and the Government of Azerbaijan led
by the Company’s Vice President for
Government affairs who regularly
meets Government officials.

10.1 Report of the audit committee

Members of the audit committee
The audit committee comprises
Richard Round and John Sununu.
The non-executive chairman and
the chief financial officer are invited
to all meetings.

Non-audit work

The external auditor performed certain
tax compliance work and gave tax advice
as set out in section 6 above and note 8
to the Group financial statements. This
work was approved by the audit committee
as it did not affect the independence or
objectivity of the external auditor.

Internal audit
The Group does not currently have an
internal audit function due to the small
size of the Group and limited resources
available. The requirement for an internal
audit function is kept under review.

Whistleblowing

Meetings of the audit committee
held in 2018
The audit committee met twice in 2018,
to approve the financial statements for
the year ended 31 December 2017 and
to approve the financial statements for
the six months ended 30 June 2018.
Richard Round, John Sununu,
Khosrow Zamani and William Morgan
attended both meetings. The external
auditor attended the meeting approving
the financial statements for the year
ended 31 December 2017.

The Group does not currently have a
formal whistleblowing policy due to the
small size of the Group. The Group
maintains a very open dialogue with all its
employees which gives every opportunity
for employees to raise concerns about
possible improprieties in financial
reporting or other matters.

Annual report and financial statements
The directors present their annual report together with the audited Group financial statements on pages 38 to 70.

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

Business review and future prospects
A review of the activities of the business throughout the year and up to 15 May 2019 is set out in the chairman’s statement on pages
4 to 6 and the strategic report on pages 10 to 19 which includes information on the Group’s risks, uncertainties and key performance
indicators. These sections are incorporated in this directors’ report by reference.

Dividends
Full details of the Company’s dividend policy and dividend payments paid and proposed for the year ended 31 December 2018 are
set out in the chairman’s statement on pages 4 to 6, the financial review on pages 21 to 23 and note 27 to the Group financial statements.

Capital structure
Details of the Company’s authorised and issued share capital, together with the movements for the years ended 31 December 2017
and 2018 are disclosed in note 24 – ‘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.

During the year ended 31 December 2018, the Company’s share premium account was reduced and the amount of the reduction
transferred to retained earnings. Full details of the reduction are set out in note 26 to the Group financial statements.

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.

Each director owns 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 25 – ‘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 Quoted Companies Alliance Corporate Governance Code.
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 pages 25 to 27.

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 15 May 2019 are set out on page 24.

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

Company secretary
William Morgan
7 Devonshire Square
Cutlers Gardens
London EC2M 4YH
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 2018Directors’ interests
The beneficial interests of the directors who held office at 31 December 2018 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.

2018
Number of
ordinary shares

2017
Number of
ordinary shares

341,890
361,680
10,734,540
32,796,830
1,418,352

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 14 May 2019:

Reza Vaziri
John Sununu
Limelight Industrial Developments

Number of
ordinary shares

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

Per cent.

28.7
9.4
3.5

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 2020 and satisfying themselves that the Group will have sufficient funds on hand to meet its
obligations as and when they fall due over the period of their assessment. Appropriate rigour and diligence has been applied
by the directors who believe the assumptions are prepared on a realistic basis using the best available information.

The Group had cash balances of $17.7 million and debt of $6.9 million at 31 March 2019. The Group is able to fund its working
capital requirements and service its borrowings from cash generated from its operations at Gedabek. The Group’s borrowings are
unsecured and without any financial covenants and all payments of interest and principal in 2018 and 2019 to date have been made
in accordance with the terms of the relevant loan agreements. The Group has access to local sources of both short and long term
finance should this be required.

The Group’s business activities, together with the factors likely to affect its future development, performance and position, can
be found within the chairman’s statement on pages 4 to 6 and within the strategic report on pages 10 to 19. The financial position of
the Group, its cash flow, liquidity position and borrowing facilities are discussed in the financial review on pages 21 to 23. In addition,
note 23 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 directors continue 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 pages 25 to 27.

Annual general meeting
The Company will hold its annual general meeting for 2019 on 20 June 2019. 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 31 December 2018 was 90.18 pence (2017: 32.00 pence).

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. The Company 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.

Internal 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 (2017: $nil). Political donations of $nil (2017: $nil) were made.

Research and development
There was no expenditure on research and development during the year (2017: $nil).

Related party transactions
Related party transactions are disclosed in note 29 – ‘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 23 – ‘Financial instruments’ to the Group financial statements.

By order of the board of directors

William Morgan
Company secretary
15 May 2019

Anglo Asian Mining PLC Annual report and accounts 2018Report on directors’ remuneration
year ended 31 December 2018

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.

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

Year ended 31 December 2018

John Monhemius
Richard Round
John Sununu
Reza Vaziri
Khosrow Zamani

Year ended 31 December 2017

John Monhemius
Richard Round
John Sununu
Reza Vaziri
Khosrow Zamani

Consultancy
$

10,329
—
—
576,913
—

587,242

Consultancy
$

13,750
—
—
578,126
—

591,876

Fees
$

53,183
53,183
78,224
53,183
130,906

368,679

Fees
$

51,970
51,970
76,342
51,970
127,761

360,013

Benefits
$

—
—
—
33,095
—

33,095

Benefits
$

—
—
—
32,471
—

32,471

Total
$

63,512
53,183
78,224
663,191
130,906

989,016

Total
$

65,720
51,970
76,342
662,567
127,761

984,360

Directors’ fees and consultancy fees for 2017 and 2018 were paid in cash.

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 25 – ‘Share-based payment’ to the
Group financial statements.

No director held or exercised any share options during the year ended 31 December 2018.

The Company’s share price has ranged from 32.00 pence at 29 December 2017 to a high of 95.50 pence and a low of 32.50 pence
during the year ended 31 December 2018 with a closing price of 90.18 pence at 28 December 2018.

By order of the board of directors

William Morgan
Company secretary
15 May 2019

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.

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:

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.

• select suitable accounting policies and

By order of the board of directors

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.

Khosrow Zamani
Non-executive chairman
15 May 2019

Anglo Asian Mining PLC Annual report and accounts 2018Independent auditor’s report
to the members of Anglo Asian Mining PLC

Our opinion on the financial statements
In our opinion:

• Anglo Asian Mining PLC Group financial statements and Parent company financial statements (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 2018 and of the Group’s profit
and loss for the year then ended;

• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards

(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.

We have audited the financial statements of Anglo Asian Mining PLC which comprise:

Group

Parent company

Consolidated balance sheet as at 31 December 2018

Balance sheet as at 31 December 2018

Consolidated income statement for the year then ended

Statement of changes in equity for the year then ended

Consolidated statement of comprehensive income for the year then ended Related notes 1 to 15 to the financial statements

including a summary of significant accounting policies

Consolidated statement of changes in equity for the year then ended

Consolidated statement of cash flows for the year then ended

Related notes 1 to 29 to the financial statements, including a summary
of significant accounting policies

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, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our
report below. We are independent of the Group and Parent company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the Group’s or the Parent company’s ability to continue to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are authorised for issue.

Overview of our audit approach

Key audit matters

• Improper revenue recognition

Audit scope

• We performed an audit of the complete financial information of 2 components.

• Impairment of mining assets – management override risk.

Materiality

• Overall Group materiality of $1.3m which represents 5% of Profit before tax.

• The components where we performed full audit procedures accounted for 100% of Profit

before tax, 100% of Revenue and 100% of Total assets.

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

Key observations communicated to the
Audit Committee

As a result of the procedures performed,
we reported to the Audit Committee that
the Group’s revenue transactions have been
properly recognised and the government’s
portion of production has been appropriately
accounted for in accordance with IFRS.

Risk

Our response to the risk

Improper revenue recognition

Our approach focused on the following procedures:

Refer to the accounting policies (pages 46
and 47); and note 6 of the consolidated
financial statements (page 57)

For the year ended 31 December 2018 the
Group recognised revenue from operations of
US$90.4m (2017: US$71.8m).

In accordance with ISAs (UK) there is a presumed
fraud risk relating to revenue recognition and
management override. We consider the fraud
risk relating to revenue recognition to relate to:

• Sales cut-off; and

• Accounting for the government’s portion

of production

The risk relating to revenue recognition has
remained stable in comparison to the prior year
as no significant changes were noted in sales
agreements.

• Obtained an understanding of the key controls
over revenue recognition and assessed their
design effectiveness in supporting the prevention,
detection or correction of material errors in the
financial statements;

• Performed detailed substantive audit procedures
on sales revenues to ensure appropriate cut off,
including testing underlying evidence to ensure
revenue is recognised in the correct period;

• For all the sales transactions taking place during

the year, we agreed the main inputs to supporting
evidence, such as bill of lading, invoices and cash
receipts;

• Reconciled the Group’s records with the amount
of revenue recalculated based on approved gold
alloys shipment documentation, lab results of
gold content in those alloys and respective market
prices for each date of sale;

• Obtained confirmation of outstanding receivables
with the counterparty, which includes the portion
related to the government’s gold; and

• Read the disclosures in the financial statements to
ensure that all disclosure requirements in respect
of revenue have been met, including any relevant
impacts from the implementation of IFRS 15.

The audit procedures over this risk area were performed
by the component team in one full scope audit
component, covering 100% of the reported revenues.

Anglo Asian Mining PLC Annual report and accounts 2018Key audit matters continued
Risk

Impairment of mining assets-
management override risk

Refer to the accounting policies (page 50);
and notes 13 and 14 of the consolidated
financial statements (pages 60 and 61)

At 31 December 2018 the carrying value of the
Group’s mining assets were:

• Property, plant and equipment: US$81.2m

(2017: US$87.4m);

•

Intangible assets: US$17.0m (2017: US$16.1m).

IFRS requires impairment testing to be undertaken
when there are indicators that an impairment
may exist. There is a risk that management will
not identify impairment indicators when they
exist, and/or use assumptions, as part of their
impairment assessment, that are not
appropriate.

Consistent with prior year, the Group’s CGUs are:

• Operating mines (property, plant and
equipment): one CGU that combines
Gedabek, Gadir, Gosha and Ugur; and

• Exploration asset (intangible asset): Ordubad

This risk has not changed as compared to prior
year as there have been no adverse operational
or other relevant factors impacting the Group’s
mining assets.

Our response to the risk

Key observations communicated to the
Audit Committee

Our approach focused on the following procedures:

• Obtained an understanding of management’s
process and key controls over the impairment
evaluation for mining assets;

As a result of the audit procedures performed,
we are satisfied with management’s conclusion
that there are no impairment indicators in
relation to the Group’s mining assets as of
31 December 2018.

• Verified through discussions with management and
review of supporting evidence, the appropriateness
of management’s determination of CGUs;

• Searched for any indicators of impairment for

operating mines and exploration assets during
2018, following the requirements of IAS 36 and
IFRS 6. Our work included the following procedures:

• We examined macro-economic factors

including market interest rates and both spot
and future gold, silver and copper prices to
identify potential impairment indicators;

• For the operating mines, we evaluated the
performance of the CGU during 2018 by
comparing against management’s budget and
prior year actuals, and evaluate the existence
of any significant changes to the expected
performance through studying the updated
mine plans; and

• For Ordubad we assessed the project for
impairment indicators through inquiries of
management and obtained supporting
evidence for management’s plans to develop
the asset in future periods.

The audit procedures over this risk area were
performed by the primary and component teams,
covering 100% of the risk amounts.

As part of our audit, we also addressed the risk of management override of internal controls over other accounting estimates,
including evaluating whether there is evidence of bias by the Directors that may represent a risk of material misstatement due
to fraud.

An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope
for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We
take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business
environment and any other relevant factors when assessing the level of work to be performed at each entity.

In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage
of significant accounts in the financial statements, of the 6 reporting components of the Group, we selected 2 components covering
entities within the United Kingdom and Azerbaijan, which represent the principal business units within the Group.

We performed an audit of the complete financial information of those 2 components (“full scope components”) which were selected
based on their size or risk characteristics.

The reporting components where we performed audit procedures accounted for 100% (2017: 99%) of the Group’s Profit before tax,
100% (2017: 100%) of the Group’s Revenue and 100% (2017: 100%) of the Group’s Total assets.

The remaining 4 components together and individually represent less than 1% of the Group’s Profit before tax. For these components,
we performed other procedures, including analytical reviews, testing of consolidation journals and intercompany eliminations and
inquiries of management about unusual transactions in these components, to respond to any potential risks of material misstatement
to the Group financial statements.

Changes from the prior year
The scoping is consistent with the prior year audit.

An overview of the scope of our audit continued
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of
the components by us, as the primary audit engagement team, or by component auditors from other EY global network firms
operating under our instruction. Of the two full scope components, audit procedures were performed on one of these directly by the
primary audit team.

The primary audit team continued to follow a programme of planned visits that has been designed to ensure that the Senior Statutory
Auditor visits the client site once a year. During the current year’s audit cycle, a visit was undertaken by the primary audit team to the
component team in Azerbaijan. This visit involved discussing the audit approach with the component team and any issues arising
from their work, meeting with local management, undertaking a mine visit and reviewing key audit working papers on the identified
risk areas. The primary team interacted regularly with the component teams where appropriate during various stages of the audit,
reviewed key working papers and were responsible for the scope and direction of the audit process. This, together with the
additional procedures performed at Group level, gave us appropriate evidence for our opinion on the Group financial statements.

Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the
audit and in forming our audit opinion.

Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our
audit procedures.

We determined materiality for the Group to be $1.3 million (2017: $540k), which is 5% of Profit before tax (2017: 0.75% of the Group’s
Revenue). We believe that Profit before tax provides us with a reliable measure that is significant to users since it is one of the main key
performance indicators for operating entities. Materiality has increased in 2018 following the improved operating results of the Group.

We determined materiality for the Parent Company to be $110k (2017: $160k), which is 1% (2017: 1%) of Equity.

During the course of our audit, we reassessed initial materiality and no changes were required to our initial assessment.

Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
performance materiality was 50% (2017: 50%) of our planning materiality, namely $630k (2017: $270k). We have set performance materiality
at this percentage based on our assessment of the likelihood of misstatements based on our review of prior year audit adjustments.

Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken
based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative
scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the
current year, the range of performance materiality allocated to components was $245k to $630k (2017: $105k to $270k).

Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $63k (2017: $27k),
which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.

Other information
The other information comprises the information included in the annual report set out on pages 1 to 32, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in
this report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information,
we are required to report that fact.

We have nothing to report in this regard.

Anglo Asian Mining PLC Annual report and accounts 2018Opinions 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 directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the directors’ report.

We have nothing to report in respect of the following matters in relation to which 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 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.

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 32, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group and Parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the Group or the Parent company or to cease operations, or have no realistic
alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report
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.

Andrew Smyth (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
15 May 2019

Continuing operations

Revenue

Cost of sales

Gross profit

Other income

Administrative expenses

Other operating expenses

Operating profit

Finance costs

Finance income

Profit before tax

Income tax expense

Profit attributable to the equity holders of the parent

Profit per share attributable to the equity holders of the parent

Basic (US cents per share)

Diluted (US cents per share)

Notes

2018
$000

90,354

(56,530)

33,824

(5,291)

(1,777)

26,824

(1,642)

25,246

(8,911)

16,335

14.32

2017
$000

71,806

(56,825)

14,981

584

(4,745)

(1,598)

9,222

(3,538)

—

5,684

(3,164)

2,520

2.23

2.22

Group statement of comprehensive income
year ended 31 December 2018

Profit for the year

Total comprehensive profit

Attributable to the equity holders of the parent

2018
$000

16,335

2017
$000

2,520

Anglo Asian Mining PLC Annual report and accounts 2018Group statement of financial position
31 December 2018

Non-current assets

Intangible assets

Property, plant and equipment

Other receivables

Current assets

Inventory

Trade and other receivables

Cash and cash equivalents

Total assets

Current liabilities

Trade and other payables

Income tax payable

Interest-bearing loans and borrowings

Net current assets

Non-current liabilities

Provision for rehabilitation

Interest-bearing loans and borrowings

Deferred tax liability

Total liabilities

Net assets

Equity

Share capital

Share premium account

Share-based payment reserve

Merger reserve

Retained earnings

Total equity

Notes

2018
$000

17,031

81,150

436

2017
$000

16,145

87,387

875

98,617

104,407

34,159

8,496

14,540

57,195

33,980

11,276

2,534

47,790

155,812

152,197

(13,224)

(15,170)

(3,700)

(6,750)

—

(20,051)

(23,674)

(35,221)

33,521

12,569

(9,028)

(1,688)

(9,629)

(600)

(23,017)

(21,394)

(33,733)

(31,623)

(57,407)

(66,844)

98,405

85,353

2,016

—

46,206

50,150

98,405

2,008

32,484

46,206

4,581

85,353

The Group financial statements were approved by the board of directors and authorised for issue on 15 May 2019. They were signed
on its behalf by:

Reza Vaziri
Chief executive

Cash flows from operating activities

Profit before tax

Adjustments to reconcile profit before tax to net cash flows:

Finance costs

Finance income

Depreciation of property, plant and equipment

Amortisation of mining rights and other intangible assets

Share-based payment expense

Disposal of obsolete equipment

Write down of unrecoverable inventory

Operating cash flow before movements in working capital

(Increase)/decrease in trade and other receivables

Increase in inventories

Increase/(decrease) in trade and other payables

Cash from operations

Income taxes paid

Net cash flow from operating activities

Cash flows from investing activities

Expenditure on property, plant and equipment and mine development

Investment in exploration and evaluation assets including other intangible assets

Interest received

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issue of shares

Dividend paid

Proceeds from borrowings

Repayments of borrowings

Interest paid

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year

Notes

2018
$000

2017
$000

25,246

5,684

1,642

(64)

20,957

1,990

—

209

136

50,116

(1,767)

(314)

2,670

50,705

(3,588)

47,117

(15,324)

(2,875)

3,538

—

21,008

1,778

—

179

32,200

2,342

(142)

(4,565)

29,835

—

29,835

(9,397)

(1,075)

—

(18,135)

(10,472)

149

(3,432)

13,995

(26,208)

(1,480)

174

—

8,796

(24,116)

(3,062)

(16,976)

(18,208)

12,006

2,534

14,540

1,155

1,379

2,534

Anglo Asian Mining PLC Annual report and accounts 2018Group statement of changes in equity
year ended 31 December 2018

1 January 2017

Profit for the year

Shares issued

Share options exercised

Fair value of expired options

Share-based payment

31 December 2017

Profit for the year

Shares issued

Share options exercised

Share premium reduction

Cash dividends paid

Notes

24 & 26

31 December 2018

2,016

Share
capital
$000

1,993

—

Share
premium
$000

32,325

—

159

—

2,008

32,484

—

141

—

(32,592)

—

Share-based
payment
reserve
$000

154

—

(82)

(11)

—

(74)

—

Merger
reserve
$000

46,206

—

46,206

—

Retained
earnings
$000

1,968

2,520

—

4,581

16,335

—

32,592

(3,432)

Total
equity
$000

82,646

2,520

174

—

85,353

16,335

149

—

(3,432)

46,206

50,150

98,405

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 80 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 4 to 6 and the strategic report on pages 10 to 19 of this annual report.

Basis of preparation
The Group’s annual report is for the year ended 31 December 2018 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 and trade receivables at fair value. 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 29, 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 2020 and satisfying themselves that the Group will have sufficient funds on hand to meet its
obligations as and when they fall due over the period of their assessment. Appropriate rigour and diligence has been applied
by the directors who believe the assumptions are prepared on a realistic basis using the best available information.

The Group had cash balances of $17.7 million and debt of $6.9 million at 31 March 2019. The Group is able to fund its working
capital requirements and service its borrowings from cash generated from its operations at Gedabek. The Group’s borrowings
are unsecured and without any financial covenants and all payments of interest and principal in 2018 and 2019 to date have
been made in accordance with the terms of the relevant loan agreements. The Group has access to local sources of both short
and long term finance should this be required.

The Group’s business activities, together with the factors likely to affect its future development, performance and position,
can be found within the chairman’s statement on pages 4 to 6 and within the strategic report on pages 10 to 19. The financial
position of the Group, its cash flow, liquidity position and borrowing facilities are discussed in the financial review on pages
21 to 23. In addition, note 23 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 directors continue to adopt the
going concern basis in preparing the annual report and financial statements.

Adoption of new and revised standards

3
3.1 New and amended standards and interpretations

The Group applied IFRS 9 – ‘Financial Instruments’ and IFRS 15 – ‘Revenue from contracts with customers’ for the first time
from 1 January 2018. The nature and effect of the changes on the consolidated financial statements of the Group as a result of
the adoption of these two new standards are described below. Other than the changes described below, the accounting
policies adopted are consistent with those of the previous financial year.

Several other amendments and interpretations applied for the first time in 2018. However, they do not impact the annual
consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group and,
hence, have not been disclosed. The Group has not early adopted any standards, interpretations or amendments that have
been issued but are not yet effective.

Anglo Asian Mining PLC Annual report and accounts 2018Adoption of new and revised standards continued

3
3.1 New and amended standards and interpretations continued

i) IFRS 9 ‘Financial Instruments’
IFRS 9 – ‘Financial Instruments’ replaces IAS 39 – ‘Financial Instruments: Recognition and Measurement’ for annual periods
beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments:
classification and measurement, impairment and hedge accounting.

The Group has applied IFRS 9 retrospectively, with the initial application date of 1 January 2018 and has adjusted the
comparative information for the period beginning 1 January 2017. There were no material impacts on the comparative
balances other than a change in classification and separate disclosure of some trade receivables. There was no impact on
hedging as the Group did not hedge in 2017 and 2018 or apply hedge accounting.

The effects of adopting IFRS 9 are set out below.

a) Classification and measurement
Under IFRS 9, there is a change in the classification and measurement requirements relating to financial assets. Previously,
there were four categories of financial assets: loans and receivables, fair value through profit or loss, held to maturity and
available for sale. Under IFRS 9, financial assets are either classified as amortised cost, fair value through profit or loss or fair
value through other comprehensive income.

For debt instruments, the classification is based on two criteria: the Group’s business model for managing the assets and
whether the contractual cash flows of the financial instruments represent ‘solely payments of principal and interest’ (“SPPI”) on
the principal amount outstanding. A financial asset can only be measured at amortised cost if both of the following are satisfied:

• Business model: the objective of the business model is to hold the financial asset for the collection of the contractual cash flows.

• Contractual cash flows: the contractual cash flows under the instrument relate solely to payments of principal and interest.

The assessment of the Group’s business model was made as of the date of initial application, 1 January 2018, and then applied
retrospectively to those financial assets that were not derecognised before 1 January 2018. The assessment of whether
contractual cash flows on debt instruments are SPPI was made based on the facts and circumstances as at the initial
recognition of the assets.

The classification and measurement requirements of IFRS 9 did not have a significant impact on the Group other than to
change the presentation of trade debtors relating to provisionally priced sales (explained in more detail below).

Financial assets
The Group continued measuring at fair value all financial assets previously held at fair value under IAS 39. The following are the
changes in the classification of the Group’s financial assets:

• Trade receivables (not subject to provisional pricing) and other current financial assets (i.e., other receivables and

loans) previously classified as loans and receivables: these were assessed as being held to collect contractual cash flows
and give rise to cash flows representing SPPI. Although now classified as debt instruments at amortised cost, their
measurement has not changed.

• Trade receivables (subject to provisional pricing) and quotational period (“QP”) derivatives: prior to the adoption
of IFRS 9, the exposure of provisionally priced sales to commodity price movements over the QP, required embedded
derivatives to be separated from the host trade receivable and accounted for separately. Under IFRS 9, embedded
derivatives are no longer separated from financial assets. Instead, the exposure of the trade receivable to future commodity
price movements will cause the trade receivable to fail the SPPI test. Therefore, the entire receivable is now required to be
measured at fair value through profit or loss, with subsequent changes in fair value recognised in the statement of profit or
loss and other comprehensive income each period until final settlement. The Group did not previously account separately
for the embedded derivative in each transaction as the short one to four month transaction cycle would result in any
change to the Group’s financial statements being immaterial and this policy continued to be applied from 1 January 2018.
The key impact of IFRS 9 was to require the separate disclosure of trade receivables between those classified at amortised
cost and those at fair value in the Group’s balance sheets at 31 December 2016, 2017 and 2018.

Financial liabilities
The Group has not designated any financial liabilities as at fair value through profit or loss. There are no changes in
classification and measurement of the Group’s financial liabilities.

3
3.1 New and amended standards and interpretations continued

i) IFRS 9 ‘Financial Instruments’ continued
b) Other impacts
The change did not have any impact on the Group’s statement of cash flows and the basic and diluted EPS.

c) Impairment
The adoption of IFRS 9 has changed accounting for impairment losses for financial assets by replacing IAS 39’s incurred loss
approach with a forward-looking expected credit loss (“ECL”) approach. IFRS 9 requires the Group to recognise an allowance
for ECLs for all debt instruments not held at fair value through profit or loss and contract assets in the scope of IFRS 15.

All of the Group’s trade receivables (not subject to provisional pricing) and other current receivables which the Group measures at
amortised cost are short term (i.e., less than 12 months) and the Group does not consider that any impairment provision is required.
The change to a forward-looking ECL approach did therefore not have any impact on any amount in the financial statements.

d) Hedge accounting
The Group has elected to adopt the new general hedge accounting model in IFRS 9. However, the changes introduced by
IFRS 9 relating to hedge accounting currently have no impact, as the Group does not carry out any hedge transactions in 2017
and 2018 or apply hedge accounting.

ii) IFRS 15 – ‘Revenue from contracts with customers’
IFRS 15 – ‘Revenue from contracts with customers’ and its related amendments supersede IAS 11 – ‘Construction Contracts’
and IAS 18 – ‘Revenue’ and related Interpretations. It applies to all revenue arising from contracts with its customers and
became effective for annual periods beginning on or after 1 January 2018. IFRS 15 establishes a five-step model to account for
revenue arising from contracts with customers. It requires revenue to be recognised when (or as) control of a good or service
transfers to a customer 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.

IFRS 15 requires entities to exercise judgment, taking into consideration all of the relevant facts and circumstances when
applying each step of the model to contracts with their customers. The standard also specifies the accounting for the
incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires
enhanced and extensive disclosures about revenue to help investors better understand the nature, amount, timing and
uncertainty of revenue and cash flows from contracts with customers.

The Group adopted IFRS 15 using the modified retrospective method of adoption and, therefore, has not restated its comparative
information which is prepared using the accounting policies applicable in the prior year. Modified retrospective adoption of IFRS 15
does not give rise to any material changes to the consolidated financial statements for the years ended 31 December 2017
and 2018. The Group has not applied any practical expedients to effect the transition to IFRS 15.

a) Overall impact
The Group’s revenue from contracts with customers comprises two streams being the sale of gold (contained within gold doré
and refined bullion) and silver bullion to its refiner and sale of gold and copper concentrates. The Group undertook a
comprehensive analysis of the impact of the new revenue standard based on a review of the contractual terms of its two
revenue streams with the primary focus being to understand whether the timing and amount of revenue recognised could
differ under IFRS 15. For both of the Group’s revenue streams, the nature and timing of satisfaction of the performance
obligations, and, hence, the amount and timing of revenue recognised under IFRS 15, is the same as that under IAS 18.

b) Impact on statement of profit or loss and other comprehensive income
Gold and silver sales to its refiner
There were no changes identified with respect to the timing or amount of revenue recognition. This was because all of the
Group’s gold and silver sold to its refiner are sold under a spot sale arrangement and the timing between contract inception
and the satisfaction of the performance obligation (being delivery of gold and silver) is very short, i.e., several days, and the
pricing is determined based on the gold price on the London Metal Exchange at the date specified in each spot contract.

Gold and copper concentrate (metal in concentrate) sales
There were no changes identified with respect to the timing of revenue recognition in relation to metal in concentrate, as
control transfers to customers at the date at which the customer takes delivery of the concentrate at the mine site, which is
consistent with the point in time when risks and rewards passed under IAS 18.

The Group’s sales of metal in concentrate to customers contain terms which allow for price adjustments based on the market
price at the end of a quotational period (“QP”) stipulated in the contract – these are referred to as “provisionally priced sales”.

Under previous accounting standards (IAS 18 and IAS 39), provisionally priced sales were considered to contain an embedded
derivative (“ED”), which was required to be separated from the host contract for accounting purposes at the date the customer
collected the metal concentrate from the mine site (“Shipment Date”). Revenue was initially recognised for these sales at the
Shipment Date (which was when the risks and rewards passed) and was based on the most recently determined estimate of
metal in concentrate (based on initial assay results) and the estimated forward price which the entity expected to receive at the
end of the QP, determined at the Shipment Date. Subsequent changes in the fair value of the ED were recognised in the
statement of profit or loss and other comprehensive income each period until the end of the QP, and were included within,
and presented as, gold and copper concentrate revenue.

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 2018Adoption of new and revised standards continued

3
3.1 New and amended standards and interpretations continued

ii) IFRS 15 – ‘Revenue from contracts with customers’ continued
b) Impact on statement of profit or loss and other comprehensive income continued
Gold and copper concentrate (metal in concentrate) sales continued
Under IFRS 15, the accounting for this revenue will remain unchanged in that revenue will be recognised when control passes
to the customer (which will continue to be the Shipment Date) and will be measured at the amount to which the Group expects
to be entitled. This will be the estimate of the price expected to be received at the end of the QP, i.e., the forward price. It will
be the impact of the requirements of IFRS 9 that will lead to a change to the Group’s accounting (see IFRS 9 note above and
accounting policy 4.12 for further discussion).

While the Group will be able to continue to present such movements as part of consolidated revenue on the face of the statement
of profit or loss and other comprehensive income, IFRS 15 requires separate disclosure of sales of metal concentrate. This is because
the movements throughout the QP are not within the scope of IFRS 15, and therefore this revenue is required to be disclosed
separately from revenue from contracts with customers within the scope of IFRS 15 in the notes to the accounts. The Group
already separately discloses these amounts and will continue to do so and there will therefore be no change to the disclosures
of the Group. There will be no impact on the net profit or loss of the Group arising from this change.

3.2 Standards issued but not yet effective

i) IFRS 16 ‘Leases’
IFRS 16 – ‘Leases’ 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 ‘Evaluation 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. Ieases 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.

The Group has various operating leases. These are the rental of light vehicles, industrial and residential land, buildings and
office accommodation and working animals. The total annual rental of the operating leases is approximately $600,000 per
annum of which the majority is land and buildings and vehicles. The Group will account for these leases in accordance with
IFRS 16 from 1 January 2019. However, the amounts of the leases are not material, and the change of policy will therefore not
result in a material difference to the Group financial statements or additional disclosures.

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 2018.
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.

4
4.1 Basis of consolidation continued

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.

4.2 Revenue

The Group is principally engaged in the business of producing gold and silver bullion and gold and copper concentrate.
Revenue from contracts with customers is recognised when control of the goods is transferred to the customer at an amount
that reflects the consideration to which the Group expects to be entitled in exchange for those goods.

The Group has generally concluded that it is the principal in its revenue contracts because it typically controls the goods
before transferring them to the customer.

i) Contract balances
a) Contract assets
A contract asset is the right to consideration in exchange for goods transferred to the customer. If the Group performs by
transferring goods to a customer before the customer pays consideration or before payment is due, a contract asset is
recognised for the earned consideration that is conditional. The Group does not have any contract assets as performance and
a right to consideration occurs within a short period of time and all rights to consideration are unconditional.

b) Trade receivables
A trade receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage of
time is required before payment of the consideration is due). Refer to accounting policy 4.12 for the accounting policies for
financial assets and accounting policy 4.13 for the accounting policy for trade receivables.

c) Contract liabilities
A contract liability is the obligation to transfer goods to a customer for which the Group has received consideration (or an
amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods to the
customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract
liabilities are recognised as revenue when the Group performs under the contract.

ii) Gold and silver sales to the refiner
For gold sales, these are sold under spot sales contracts with the Company’s gold refiner. The Group initially sends its unrefined doré
to the refiner. The refiner is contracted by the Company to perform two separate and distinct functions, to process the doré into
gold and silver bullion and to purchase gold and silver. The gold contained in the doré may be purchased at two different times
at the discretion of the Company and instruction is given to the refiner as to the method of sale on a shipment-by-shipment basis:

• Upon receipt of the doré. In this circumstance, the refiner will purchase 90 per cent. of the estimated gold content of the
doré. The balance of the gold will be sold to the refiner as gold bullion following refining and agreement of final gold
content of the doré with the refiner.

• Following production of gold bullion by the refining process. During the refining process ownership (i.e., control of the

gold) does not pass to the refiner, it is simply providing refining services to the Group.

There is no formal sales agreement for each sale of gold. Instead, there is a deal confirmation, which sets out the terms of the
sale including the applicable spot price and this is considered to be the enforceable contract. The only performance obligation
is the sale of gold within the doré or as bullion.

Silver is only sold to the refiner as silver bullion following the refining process. The process of sale of the silver bullion is the
same as for gold bullion.

Revenue is recognised at a point in time when control passes to the refiner. As the gold and silver is at this time already on
the premises of the refiner, physical delivery has already taken place when the sales are made.

With these arrangements, there are no advance payments received from the refiner, no conditional rights to consideration,
i.e., no contract assets are recognised. A trade receivable is recognised at the date of sale and there are only several days between
recognition of revenue and payment. The contract is entered into and the transaction price is determined at outturn by virtue
of the deal confirmation and there are no further adjustments to this price. Also, given each spot sale represents the enforceable
contract and all performance obligations are satisfied at that time, there are no remaining performance obligations (unsatisfied
or partially unsatisfied) requiring disclosure. Refer to note 16 – ‘Trade and other receivables’ for details of payment terms.

iii) Gold and copper in concentrate (metal in concentrate) sales
For gold and copper in concentrate (metal in concentrate) sales, the enforceable contract is each purchase order, which is an
individual, short-term contract. The performance obligation is the delivery of the concentrate to the customer.

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 2018Significant accounting policies continued

4
4.2 Revenue from contracts with customers continued

iii) Gold and copper in concentrate (metal in concentrate) sales continued
The Group’s sales of metal in concentrate allow for price adjustments based on the market price at the end of the relevant
quotational period (“QP”) stipulated in the contract. These are referred to as provisional pricing arrangements and are such
that the selling price for metal in concentrate is based on prevailing spot prices on a specified future date (or average of future
spot prices over a defined period, usually a week) after shipment to the customer. Adjustments to the sales price occur based
on movements in quoted market prices up to the end of the QP. The period between provisional invoicing and the end of the
QP can be between one and four months.

Revenue is recognised when control passes to the customer, which occurs at a point in time when the metal in concentrate is
physically delivered to the customer at the mine site. The revenue is measured at the amount to which the Group expects to
be entitled, being the estimate of the price expected to be received at the end of the QP, i.e., the forward price, and a
corresponding trade receivable is recognised.

For these provisional pricing arrangements, any future change that occur over the QP is an embedded derivative within the
provisionally priced trade receivables and are, therefore, within the scope of IFRS 9 and not within the scope of IFRS 15. The
Group does not separately account for the embedded derivative in each transaction as the short transaction cycle of one to
four months would result in any changes to the Group’s financial statements being immaterial. Any difference between the
provisional and final price is adjusted through revenue from from contracts with customers. Changes in fair value over, and
until the end of, the QP, are estimated by reference to updated forward market prices for gold and copper as well as taking
into account relevant other fair value considerations as set out in IFRS 13, including interest rate and credit risk adjustments.
See accounting policy 4.10 for further discussion on fair value. Refer to note 16 for details of payments terms for trade receivables.

As noted above, as the enforceable contract for most arrangements is the purchase order, the transaction price is determined
at the date of each sale (i.e., for each separate contract) and, therefore, there is no future variability within scope of IFRS 15
and no further remaining performance obligations under those contracts.

iv) 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 2018 and 2017.

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
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 are 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.

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

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 20184
4.7

Significant accounting policies continued
Intangible assets continued
iii) Other intangible assets continued
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 (2017: eight years)

four years (2017: four years)

eight years (2017: 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.

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.

Significant accounting policies continued
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 16 – ‘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.

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.

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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, at initial recognition, and subsequently measured at amortised cost, fair value through other
comprehensive income (“OCI”), or fair value through profit or loss.

The classification of financial assets at initial recognition that are debt instruments depends on the financial asset’s contractual
cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do
not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially
measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction
costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical
expedient for contracts that have a maturity of one year or less, are measured at the transaction price determined under IFRS 15.
Refer to the accounting policy 4.2 – ‘Revenue from contracts with customers’.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to
cash flows that are ‘solely payments of principal and interest’ (“SPPI”) on the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an instrument level.

The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate
cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the
financial assets, or both.

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

ii) Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:

• Financial assets at amortised cost (debt instruments).

• Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments).

• Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition

(equity instruments).

• Financial assets at fair value through profit or loss.

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4.12 Financial instruments – initial recognition and subsequent measurement continued

a) Financial assets continued
iii) Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following
conditions are met:

• the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual

cash flows; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal

and interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the ‘effective interest rate’ (“EIR”) method and are subject to
impairment. Interest received is recognised as part of finance income in the statement of profit or loss and other comprehensive
income. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Group’s financial assets at amortised cost include trade receivables (not subject to provisional pricing) and other
receivables. Refer below to ‘Financial assets at fair value through profit or loss’ for a discussion of trade receivables (subject to
provisional pricing).

iv) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading, e.g., derivative instruments, financial
assets designated upon initial recognition at fair value through profit or loss, e.g., debt or equity instruments, or financial assets
mandatorily required to be measured at fair value, i.e., where they fail the SPPI test. Financial assets are classified as held for
trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated
embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments.
Financial assets with cash flows that do not pass the SPPI test are required to be classified and measured at fair value through
profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at
amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through
profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net
changes in fair value recognised in the profit or loss account.

A derivative embedded in a hybrid contract with a financial liability or non-financial host, is separated from the host and
accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate
instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract
is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value
recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly
modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through
profit or loss category.

As IFRS 9 now has the SPPI test for financial assets, the requirements relating to the separation of embedded derivatives is no
longer needed for financial assets. An embedded derivative will often make a financial asset fail the SPPI test thereby requiring
the instrument to be measured at fair value through profit or loss in its entirety. This is applicable to the Group’s trade receivables
(subject to provisional pricing). These receivables relate to sales contracts where the selling price is determined after delivery
to the customer, based on the market price at the relevant QP stipulated in the contract. This exposure to the commodity price
causes such trade receivables to fail the SPPI test. As a result, these receivables are measured at fair value through profit or
loss from the date of recognition of the corresponding sale, with subsequent movements being recognised in ‘fair value gains/
losses on provisionally priced trade receivables’ in the statement of profit or loss and other comprehensive income.

The Group does not currently account separately for embedded derivatives in its trade receivables subject to provisional
pricing. The short one to four month transaction cycle would result in any change to the Group’s financial statements being
immaterial. Any adjustment to the trade receivable subsequent to initial recording is adjusted through revenue.

v) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:

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

• 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.

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 2018Significant accounting policies continued

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4.12 Financial instruments – initial recognition and subsequent measurement continued

a) Financial assets continued
v) Derecognition of financial assets continued
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it
evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained
substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the
transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The
transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

vi) Impairment of financial assets
Further disclosures relating to impairment of financial assets are also provided in the following notes:

• Disclosure of significant assumptions: accounting policy 4.20

• Trade and other receivables:

accounting policy 4.13 and note 16

The Group recognises an allowance for expected credit loss (“ECL”) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. The expected cash flows
will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since
initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next
12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since
initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective
of the timing of the default (a lifetime ECL).

For trade receivables (not subject to provisional pricing) and other receivables due in less than 12 months, the Group applies
the simplified approach in calculating ECLs, as permitted by IFRS 9. Therefore, the Group does not track changes in credit risk,
but instead, recognises a loss allowance based on the financial asset’s lifetime ECL at each reporting date. For any other financial
assets carried at amortised cost (which are due in more than 12 months), the ECL is based on the 12-month ECL. The 12-month
ECL is the proportion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months
after the reporting date. However, when there has been a significant increase in credit risk since origination, the allowance will
be based on the lifetime ECL. When determining whether the credit risk of a financial asset has increased significantly since
initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the
Group’s historical experience and informed credit assessment including forward-looking information.

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases,
the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is
unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the
Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and
usually occurs when past due for more than one year and not subject to enforcement activity.

At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit- impaired. A financial
asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the
financial asset have occurred.

b) Financial liabilities
i) Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss,loans and
borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly
attributable transaction costs.

The Group’s financial liabilities include trade and other payables and loans and borrowings including bank overdrafts.

ii) Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
This category also includes derivative financial instruments entered into by the Group that are not designated as hedging
instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for
trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income.
53

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4.12 Financial instruments – initial recognition and subsequent measurement continued

b) Financial liabilities continued
ii) Subsequent measurement continued
Loans and borrowings and trade and other payables
After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at
amortised cost using the EIR method. Gains and losses are recognised in the statement of profit or loss and other
comprehensive income when the liabilities are derecognised, as well as through the EIR 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 EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other
comprehensive income.

This category generally applies to interest-bearing loans and borrowings and trade and other payables.

iii) Derecognition of financial liabilities
A financial liability is derecognised when the associated obligation 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 the derecognition of the original
liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss
and other comprehensive income.

c) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial
position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a
net basis, to realise the assets and settle the liabilities simultaneously.

d) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term deposits
with an original maturity of three months or less, but exclude any restricted cash. Restricted cash is not available for use by the
Group and therefore is not considered highly liquid, for example, cash set aside to cover rehabilitation obligations.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term
deposits as defined above, net of outstanding bank overdrafts.

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.

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 2018Significant accounting policies continued

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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

The preparation of the Group financial statements in conformity with IFRS requires management to make judgements 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.

i) 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.

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 from future exploitation. If information becomes available
suggesting that the recovery of expenditure is unlikely, the amount capitalised is written off in the consolidated statement
of profit or loss in the period when the new information becomes available.

iii) Impairment of intangible and tangible 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 cost to dispose (“FVLCD”) 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 FVLCD 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.

iv) Production start date (note 14)
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.

v) Renewal of Production Sharing Agreement (“PSA”) (note 28)
The Group operates its mines and processing facilities on contract areas licenced under a PSA with the Government of Azerbaijan.
The majority of the Group’s fixed assets, including its processing facilities and its main producing mines, are located on the Gedabek
contract area which has a mining licence expiring in March 2022. The Group depreciates each tangible fixed asset over its estimated
useful life regardless of whether or not the end of its useful life is later than March 2022. There is an option to extend the Gedabek
licence for a further ten years conditional upon satisfaction of certain requirements stipulated in the PSA. The directors have
judged that the requirements to renew the licence for a further 10 years will be satisfied and therefore it is valid to depreciate
assets over useful lives which end later than the end date of the current Gedabek licence.

4.21 Significant accounting estimates

The preparation of the Group financial statements in conformity with IFRS requires management to make estimates 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 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) Impairment of intangible and tangible assets (notes 13 and 14)
Once an intangible or tangible asset has been judged as impaired, an estimate is made of its 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.

ii) Ore reserves and resources (notes 13 and 14)
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.

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 2018Significant accounting policies continued

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4.21 Significant accounting estimates continued

iii) Inventory (note 17)
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) Mine rehabilitation provision (note 22)
The Group assesses its mine rehabilitation provision annually. Significant estimates and assumptions are made in determining the
provision for mine rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include
estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes and changes in discount rates.
Those uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision at the 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’. Expenditure on mine rehabilitation is expected to take place between 2023 and 2025.

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.

Revenue
The Group’s revenue consists of sales to third parties of:

• gold contained within doré and gold and silver bullion to the Group’s refiner; and

• gold and copper concentrate.

Gold within doré and gold bullion
Silver bullion
Gold and copper concentrate

2018
$000

75,078
403
14,873

90,354

2017
$000

55,099
311
16,396

71,806

All revenue from sales of gold within doré and gold and silver bullion and gold and copper concentrate is recognised at the
time when control passes to the customer.

The majority of sales of gold within doré and gold and silver bullion were made to one customer, the Group’s gold refiner, MKS
Finance SA, based in Switzerland. One trial shipment of gold doré was made to a second refiner in 2018 but the sale amount
was immaterial.

The gold and copper concentrate was sold in 2018 to Industrial Minerals SA and Trafigura PTE Ltd. (2017: Industrial Minerals SA).

Other income and operating expenses

Other income
Interest receivable
Recovery of advances previously written off
Provisions no longer required

Other operating expenses
Transportation and refining costs
Foreign exchange loss
Advances and inventory written off
Disposal of obsolete equipment

2018
$000

5
—
63

647
704
217
209

2017
$000

13
175
396

584

754
484
360
—

1,777

1,598

Operating profit

Operating profit is stated after charging:
Depreciation on property, plant and equipment – owned
Amortisation of mining rights and other intangible assets
Employee benefits and expenses
Foreign currency exchange net loss
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
Tax advice regarding dividend and share premium reduction

Total non-audit services

Total

Notes

14
13
9

2018
$000

20,957
1,990
8,708
704
19,270
1,058

135
119
2

256

13
39

308

2017
$000

21,008
1,778
7,305
484
21,502
591

135
119
2

256

14
—

270

There were no non-cancellable operating lease and no sublease arrangements during 2018 and 2017.

The audit fees for the parent company were $107,000 (2017: $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:
2017

2018

Management and administration
Exploration
Mine operations

The aggregate payroll costs of these persons were as follows:

Wages and salaries
Share-based payments
Social security costs
Costs capitalised as exploration

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

47
42
656

745

2018
$000

7,559
—
1,580
(431)

8,708

2018
$

49
19
626

694

2017
$000

6,043
13
1,249
—

7,305

2017
$

1,943,329
—

1,861,343
13,399

1,943,329

1,874,742

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 page 31.

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 2018
10

Finance costs

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

2018
$000

1,150
3
489

1,642

2017
$000

3,043
33
462

3,538

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 2018, $nil (2017: $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 2018
were $nil (2017: $4,697,000).

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

Current income tax
Current income tax charge
Deferred tax
Charge relating to origination and reversal of temporary differences

Income tax charge for the year

Deferred income tax at 31 December relates to the following:

2018
$000

7,288

1,623

8,911

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

Statement of financial position

Income statement

2018
$000

2017
$000

(18,165)
(139)
(1,280)
(9,493)

(29,077)

3,171
2,889
—
—

6,060

(17,834)
(280)
(796)
(9,435)

(28,345)

2,367
3,081
—
1,503

6,951

2018
$000

(331)
141
(484)
(58)

804
(192)
—
(1,503)

(1,623)

(3,164)

Net deferred income tax liability

(23,017)

(21,394)

* 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.

2017
$000

—

3,164

2017
$000

1,619
67
670
12

(1,122)
68
151
(4,629)

Taxation continued
A reconciliation between the accounting profit and the total taxation charge for the years ended 31 December is as follows:

Profit before tax

Theoretical tax charge 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 for the year

* This is the tax rate stipulated in RVIG’s production sharing agreement.

2018
$000

25,246

8,079
161

—
732
(61)

8,911

2017
$000

5,684

1,819
164

1
1,231
(51)

3,164

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 2018, the Group had unused tax losses available for offset against future profits of $18,648,000 (2017: $22,032,000).
Unused tax losses in the Republic of Azerbaijan at 31 December 2018 were $nil (2017: $4,697,000). 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 per share

The calculation of basic and diluted profit per share is based upon the retained profit for the financial year of $16,335,000
(2017: $2,520,000).

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

2018

2017

Basic

Diluted

114,047,503

113,134,175

114,047,503

113,322,046

At 31 December 2018 there were no unexercised share options that could potentially dilute basic earnings per share (2017: 631,000).

Intangible assets

Exploration and
evaluation
Gedabek
$000

Exploration and
evaluation
Gosha
$000

Exploration and
evaluation
Ordubad
$000

Cost
1 January 2017
Additions

31 December 2017
Additions

31 December 2018

Amortisation and impairment*
1 January 2017
Charge for the year

31 December 2017
Charge for the year

31 December 2018

Net book value
31 December 2017

31 December 2018

191
919

1,110
2,326

3,436

—
—

—

1,110

3,436

—
—

—
350

350

—
—

—

350

Mining
rights
$000

41,925
—

4,028
125

4,153
192

4,345

41,925

—
—

—

4,153

4,345

29,469
1,738

31,207
1,948

33,155

10,718

8,770

Other
intangible
assets
$000

498
31

529
8

537

325
40

365
42

407

164

130

Total
$000

46,642
1,075

47,717
2,876

50,593

29,794
1,778

31,572
1,990

33,562

16,145

17,031

* 367,000 ounces of gold at 1 January 2018 were used to determine amortisation of producing mines, mining rights and other intangible assets

(2017: 427,000 ounces). A 5 per cent. increase or decreased in the ounces of gold used to compute the amortisation of intangible assets would result
in a decrease in amortisation of $57,000 and an increase in amortisation of $61,000 respectively.

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 201814 Property, plant and equipment

Cost
1 January 2017
Additions
Transfer to producing mines
Decrease in provision for rehabilitation

31 December 2017
Additions
Transfer to producing mines
Disposal
Decrease in provision for rehabilitation

31 December 2018

Depreciation and impairment*
1 January 2017
Charge for the year

31 December 2017
Charge for the year

31 December 2018

Net book value
31 December 2017

31 December 2018

Plant and
equipment and
motor vehicles
$000

Producing
mines
$000

Assets under
construction
$000

21,465
434
—
—

21,899
2,205
—
—
—

183,433
4,559
1,229
(249)

188,972
10,091
7,581
—
(1,089)

435
5,175
(1,229)
—

4,381
3,722
(7,581)
(209)
—

Total
$000

205,333
10,168
—
(249)

215,252
16,018
—
(209)
(1,089)

24,104

205,555

313

229,972

14,656
1,765

16,421
1,751

92,201
19,243

111,444
19,206

18,172

130,650

—
—

—

5,478

5,932

77,528

74,905

4,381

313

106,857
21,008

127,865
20,957

148,822

87,387

81,150

* 367,000 ounces of gold at 1 January 2018 were used to determine depreciation of producing mines, mining rights and other intangible assets

(2017: 427,000 ounces). A 5 per cent. increase or decreased in the ounces of gold used to compute the depreciation of property plant and equipment
would result in a decrease in depreciation of $461,000 and an increase in depreciation of $510,000 respectively.

The Ugur new open pit commenced production in 2017 with the development cost transferred to producing mines on
1 September 2017 with depreciation commencing from this date. Initial mining from the Ugur open pit was by free digging and
September 2017 was the first month in which significant amounts of ore were extracted from the Ugur open pit. Gold doré from
Ugur ore also commenced in September 2017. The development cost of Ugur was $1.1 million and the cost will be amortised
using the unit of production method with 137,000 ounces of gold as the total resource to determine the amortisation.

No impairment losses were recognised by the Group at 31 December 2018 or 31 December 2017.

The Group assesses at each balance sheet date whether any indicators exist of impairment of its fixed assets. Should any
indicators exist, the Group will perform an impairment analysis at that 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.

The management assessed that there were no indicators of impairment at 31 December 2017 and 31 December 2018.
Accordingly, no impairment analysis was performed for the balance sheet at 31 December 2017 and 31 December 2018.

The capital commitments by the Group have been disclosed in note 28.

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 2018 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 2018.

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

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 – amortised cost*
Trade receivables – fair value**
Prepayments and advances
Loans

Trade receivables not subject to provisional pricing.

** Trade receivables subject to provisional pricing.

Primary place
of business

Percentage
of holding
per cent.

United Kingdom
Azerbaijan
Azerbaijan
Azerbaijan
Azerbaijan

100
100
100
100
100

2018
$000

436
—

436

2,898
312
1,016
250
1,988
1,927
105

8,496

2017
$000

860
15

875

7,445
206
891
440
—
2,187
107

11,276

1 January
2017
$000

989
95

1,084

10,078
339
926
—
639
4,218
50

16,250

Trade receivables (not subject to provisional pricing) are for sales of gold and silver to the refiner and are non interest-bearing
and payment is usually received one to two days after the date of sale.

Trade receivables (subject to provisional pricing) are for sales of gold and copper concentrate and are non interest-bearing,
but as discussed in accounting policy 4.2, are exposed to future commodity price movements over the ‘quotational period’ (“QP”)
and, hence, fail the ‘solely payments of principal and interest’ test and are measured at fair value up until the date of settlement.
These trade receivables are initially measured at the amount which the Group expects to be entitled, being the estimate of
the price expected to be received at the end of the QP. Approximately 90 per cent. of the provisional invoice (based on the
provisional price) is received in cash within one to two weeks from when the concentrate is collected from site, which reduces
the initial receivable recognised under IFRS 15. The QPs can range between one and four months post shipment and final
payment is due between 30-90 days from the end of the QP. Refer to accounting policy 4.10 for details of fair value measurement.

The Group does not consider any trade or other receivable as past due or impaired. All receivables at amortised cost have
been received shortly after the balance sheet date and therefore the Group does not consider that there is any credit risk
exposure. No provision for any expected credit loss has therefore been established in 2017 or 2018.

The VAT refund due at 31 December 2018, 2017 and 2016 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.

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 2018

Inventory

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

2018
$000

319
458
14,105
6,371
12,906

34,159

2017
$000

2,059
489
13,476
6,753
11,203

33,980

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.

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 2018 (including short-term cash deposits)
comprised $39,000 and $14,501,000 respectively (2017: $117,000 and $2,417,000).

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

2018
$000

5,581
3,065
2,898
1,680

2017
$000

3,979
3,431
7,445
315

13,224

15,170

Trade creditors primarily comprise amounts outstanding for trade purchases and ongoing costs. Trade creditors are non-interest
bearing and the creditor days were 18 (2017: 22). 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 increase of accruals in 2018 mainly relate to the increase in
exploration activity. 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
Gazprombank (Switzerland)
Atlas Copco
Yapi Kredi Bank
Pasha Bank – loans
Kapital Bank
Director
Pasha Bank – refinancing loan

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

2018
$000

—
—
—
—
—
—
—
—
—
8,438

8,438

6,750
1,688

8,438

2017
$000

1,640
481
3,700
3,700
303
2,254
3,713
1,000
3,860
—

20,651

20,051
600

20,651

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

Interest-bearing loans and borrowings continued
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 was 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 interest rate on the
outstanding loan agreements at 6 November 2017 was reduced to 7 per cent. from that date. The loans were fully repaid during
the year ended 31 December 2018.

Loan facilities
During 2016, the Group entered into three 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 was 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 was payable in February 2018. The loan was fully repaid
during the year ended 31 December 2018.

• $1.4 million at an annual interest rate of 12 per cent. for the purchase of the water treatment plant. $1.1 million of the loan was
drawn down in 2017 and the amount of the loan outstanding at 31 December 2017 was $0.4 million. The balance of the loan at
31 December 2017 together with interest is repayable in equal monthly instalments on an annuity basis with the final payment
in June 2018. The interest rate was reduced to 10 per cent. in September 2017 and to 7 per cent. on 6 November 2017.
The loan was fully repaid during the year ended 31 December 2018.

Amsterdam Trade Bank (“ATB”) and Gazprombank (Switzerland) Ltd
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 was 8.25 per cent. plus LIBOR. Principal was 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
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. In February 2017, a transaction was finalised to transfer 50 per cent. of the balance of the loan with ATB,
being $8.6 million, to Gazprombank (Switzerland) Ltd (“GPBS”). The terms of the loan and security remained unchanged and
ATB acted as agent to administer the loan on behalf of ATB and GPBS. In February 2018, the loans from ATB and GPBS were
repaid from the proceeds of the Pasha Bank refinancing loan.

Atlas Copco
The amounts outstanding are in respect of vendor equipment financing. During 2016, the Group entered into a 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. The vendor financing was fully repaid during the year ended 31 December 2018.

Yapi Credit Bank, Azerbaijan (“YCBA”)
In 2016 and 2017, the Group entered into several credit facilities with YCBA. The annual interest rate for each facility was 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 February 2018, the total outstanding balance of the loans of $2.2 million was repaid from the proceeds of
the Pasha Bank refinancing loan.

Pasha Bank
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
419

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

All of the above loans were repaid in 2017 with the exception of the loan for $916,000 of which $713,000 was outstanding at
31 December 2017.

In 2017, the Group entered into a $3.0 million loan agreement with Pasha Bank at an interest rate of 8.5 per cent. The interest
is payable monthly and the principal is repayable in 5 equal instalments of $600,000 payable in April, July, August and October
2018 and January 2019.

All of the above loans were fully repaid in the year ended 31 December 2018.

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 2018

Interest-bearing loans and borrowings continued
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. The loan was fully repaid by 31 December 2017. On 17 May 2017,
the Group entered into a further $1 million loan facility with Kapital Bank. The term of the loan was for 18 months at an
interest rate of 8 per cent. with the principal repayable at the end of the term. The loan was fully repaid during the year
ended 31 December 2018.

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 was extended during 2016
and 2017 on the same terms until 8 January 2018. On 8 January 2018, the term of the loan was extended for one year until
8 January 2019. The interest rate on the loan was reduced to 7 per cent., and all other terms of the loan remained unchanged.
In March 2018, the loan was repaid from the proceeds of the Pasha Bank refinancing loan.

Pasha Bank – refinancing loan
In 2018, the Group entered into a refinancing agreement with Pasha Bank OJSC, as arranger, for a syndicated loan facility for
up to $15 million to refinance the majority of the Group’s existing loans. The facility is for two years with a fixed interest rate of
7 per cent. and early repayment is permitted. Loan principal is repayable in 8 equal, quarterly instalments. The loan facility is
unsecured and there are no financial covenants.

A total of $13.5 million of the facility was drawn-down in February 2018 and used to repay the following loans:

• $2.2 million to Yapi Credit Bank;

• $3.7 million to Amsterdam Trade Bank N. V.;

• $3.7 million to Gazprombank (Switzerland) Ltd; and

• $3.9 million to the Chief Executive.

The loan refinancing was completed by the end of March 2018.

Unused credit facilities
The Group had a $2.0 million credit facility from Yapi Credit Bank at 31 December 2018 which was not utilised (2017: $nil).

21 Changes in liabilities arising from financing activities

Current interest-bearing loans and borrowings
Non-current interest-bearing loans and borrowings

Total liabilities from financing activities

Current interest-bearing loans and borrowings
Non-current interest-bearing loans and borrowings

Total liabilities from financing activities

1 January
$000

20,051
600

20,651

1 January
$000

26,165
9,765

35,930

2018

Cash flows
$000

(13,301)
1,088

(12,213)

2017

Cash flows
$000

(15,879)
600

(15,279)

Other
$000

31 December
$000

—
—

—

6,750
1,688

8,438

Other
$000

9,765
(9,765)

—

31 December
$000

20,051
600

20,651

Other is the effect of reclassification of the non-current portion of interest-bearing loans and borrowings to current at the end
of the year due to the passage of time, the effect of accrued but not yet paid interest on interest-bearing loans and borrowings
and other adjustments.

22 Provision for rehabilitation

1 January
Change in estimate
Additions
Accretion expense
Effect of passage of time and change in discount rate

31 December

2018
$000

9,629
—
654
489
(1,744)

9,028

2017
$000

9,416
—
557
462
(806)

9,629

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 2018 was $12,100,000 (2017: $13,736,000). The undiscounted liability was discounted
using a risk-free rate of 4.83 per cent. (2017: 5.05 per cent.). Expenditures on restoration and rehabilitation works are expected
between 2023 and 2025 (2017: 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 2018 and 2017 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 banks in Azerbaijan and elsewhere. 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 and 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.

Interest rate risk
The Group’s cash deposits, letters of credit, borrowings and interest-bearing loans subsequent to the loan refinancing by
Pasha Bank in 2018 are at a fixed rate of interest.

The Group manages the risk by maintaining fixed rate instruments, with approval from the directors required for all new
borrowing facilities.

The Group has not used any interest rate swaps or other instruments to manage its interest rate profile during 2018 and 2017.

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 2018

Financial instruments continued
Interest rate sensitivity analysis
The Group had no sensitivity to any movement in LIBOR rates in 2018 and 2017.

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 2018

Interest-bearing loans and borrowings
Trade and other payables

Year ended 31 December 2017

Interest-bearing loans and borrowings
Trade and other payables

On
demand
$000

—
—

—

On
demand
$000

—
—

—

Less than
3 months
$000

1,688
13,224

14,912

Less than
3 months
$000

9,962
15,170

25,132

3 to 12
months
$000

5,062
—

5,062

3 to 12
months
$000

10,089
—

10,089

1 to 5
years
$000

1,688
—

1,688

1 to 5
years
$000

600
—

600

Total
$000

8,438
13,224

21,662

Total
$000

20,651
15,170

35,821

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. These usually have a lower to upper medium grade credit rating. Trade receivables consist of amounts due to the
Group from sales of gold and silver bullion and copper and precious metal concentrates. The majority of the sales of gold and
silver bullion are made to MKS Finance SA, a Switzerland-based gold refinery, and copper concentrate is sold to Industrial
Minerals SA and Trafigura PTE Ltd. 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

2018
$000

1
3,228
297

2017
$000

1
3,909
151

2018
$000

334
1,784
3

2017
$000

2
1,342
4

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 8 per cent., 7 per cent. and 12 per cent. (2017: 11 per cent., 12.5 per cent.
and 11.3 per cent.) increase and a 11 per cent., 11 per cent. and 3 per cent. (2017: 7 per cent., 7.5 per cent. and 11.3 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
before tax
Decrease – effect on profit
before tax

UK Sterling impact

Azerbaijan Manat impact

Euro impact

2018
$000

(27)

2017
$000

—

2018
$000

173

(43)

2017
$000

290

(290)

2018
$000

(32)

2017
$000

(11)

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 2018 would result in a reduction in revenue of $8.1 million
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 $0.3 million 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 $0.7 million and a 10 per cent. increase
in copper price would have an equal and opposite effect.

24 Equity

Authorised
Ordinary shares of 1 pence each

Ordinary shares issued and fully paid
1 January
Exercise of share options

31 December

2018

2017

Number

600,000,000

6,000,000

600,000,000

6,000,000

$000

113,761,024
631,000

114,392,024

2,008
8

2,016

112,661,024
1,100,000

113,761,024

1,993
15

2,008

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 25).

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.

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 2018

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 prior to 2017
Exercised during the year
Expired during the year

31 December

The following share options were exercisable at 31 December:

2018

2017

Number

631,000
—
(631,000)
—

—

2018

Number

—

WAEP
pence

17
—
17
—

—

WAEP
pence

—

Number

1,745,000
86,000
(1,100,000)
(100,000)

631,000

2017

Number

631,000

WAEP
pence

14
22
12
16

WAEP
pence

The weighted average remaining contractual life of the share options outstanding at 31 December 2017 was 7 years and the
range of their exercise prices was 10 pence to 35 pence.

There were no share options issued in 2017 or 2018.

The Group recognised total expense related to equity-settled share-based payment transactions for the year ended
31 December 2018 of $nil (2017: $13,000).

Share premium account

1 January
Issue of shares
Court approved reduction

31 December

2018
$000

32,484
141
(32,592)

2017
$000

32,325
159
—

32,484

On 13 July 2018, the Company issued a circular to its shareholders proposing a resolution to reduce its share premium account
to $nil. This resolution was passed by its shareholders at a meeting of its shareholders on 30 July 2018.

The reduction in the share premium account to $nil was approved by the court on 28 August 2018. The share premium account
of $33,000 at 31 December 2018 is the share premium on shares issued subsequent to the court approved reduction.

27 Distributions made and proposed

Cash dividends on ordinary shares declared and paid:
Interim dividend for 2018: 3 US cents* per share

Proposed dividends on ordinary shares:
Final dividend for 2018: 4 US cents** per share

2018
$000

3,432

4,576

2017
$000

—

The dividend was declared in United States dollars but paid in Sterling in the amount of 2.2864 pence per ordinary share. The dividend was converted
into Sterling at the rate of £1 = $1.3121 being the average of the sterling closing mid-price using the exchange rate published by the Bank of England
at 4pm each day from the 15 to 19 October 2018.

** To be paid in Sterling at a rate to be announced.

The proposed final dividend on ordinary shares is subject to the approval by shareholders at the annual general meeting
for 2019 and not recognised as a liability in the Group statement of financial position at 31 December 2018.

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 Group and the Government are still discussing the formal approval of the development programme.

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.

There were no significant operating lease and no capital lease commitments at 31 December 2018 (2017: $nil).

29 Related party transactions
Trading transactions
During the years ended 31 December 2017 and 2018, 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 Remuneration paid to directors is disclosed in the report on directors’ remuneration on page 31.

b During the year ended 31 December 2018, total payments of $2,563,000 (2017: $1,400,000) 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 2018 there is a payable in relation to the above related party transaction of $51,000 (2017: $267,000).

On 20 May 2015, the chief executive made a $4 million loan facility available to the Group. The principle of the loan was
fully repaid during the year ended 31 December 2018. The interest accrued and unpaid at 31 December 2018 was $325,000
(2017: $655,000). Details of the loan facility are disclosed in note 20 – ‘Interest-bearing loans and borrowings’.

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

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Group financial statements continuedyear ended 31 December 2018

Company statement of financial position
31 December 2018

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 profit/(loss)

Total equity

Notes

2018
$000

168

1,325

—

1,493

270

13,428

13,698

15,191

2017
$000

193

1,325

1,534

14,768

14,847

16,381

(3,821)

(389)

9,877

14,458

(3,821)

(389)

11,370

15,992

2,016

9,321

2,008

32,484

(18,500)

11,370

15,992

The loss dealt with in the financial statements of the Company is $1,339,000 (2017: $1,378,000).

These Company financial statements were approved by the board of directors and authorised for issue on 15 May 2019. They were
signed on its behalf by:

Reza Vaziri
Chief executive

Company statement of changes in equity
year ended 31 December 2018

1 January 2017

Loss for the year

Shares issued

Share-based payment

31 December 2017

Loss for the year

Share premium reduction

Cash dividends paid

Shares issued

31 December 2018

Notes

Share
capital
$000

1,993

—

2,008

—

2,016

Share
premium
$000

32,325

—

159

—

32,484

—

(32,592)

—

141

Accumulated
profit/(loss)
$000

(17,135)

(1,378)

—

(18,500)

(1,339)

32,592

(3,432)

—

Total
equity
$000

17,183

(1,378)

174

15,992

(1,339)

—

(3,432)

149

9,321

11,370

Anglo Asian Mining PLC Annual report and accounts 2018Notes to the Company financial statements
year ended 31 December 2018

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 15 May 2019.

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
31 December 2017 and 2018

Depreciation
1 January 2017
Charge for the year

31 December 2017
Charge for the year

31 December 2018

Net book value
31 December 2017

31 December 2018

Investments

Shares in subsidiary undertakings
Anglo Asian Operations Limited

Office
equipment
$000

352

133
26

159
25

184

193

168

2017
$000

2018
$000

1,325

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

The Company’s subsidiaries at 31 December 2018 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 2018.

Anglo Asian Mining PLC Annual report and accounts 2018

Other receivables

Non-current assets
Loans

Current assets
Prepayments
Loans
Advances
Amounts owed by subsidiary undertakings

2018
$000

—

23
105
142
—

270

2017
$000

35
107
91
14,535

14,768

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
Amounts owed to subsidiary undertakings

Deferred taxation

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

Unrecognised deferred tax asset

2018
$000

97
335
30
3,359

3,821

2018
$000

2017
$000

48
310
31
—

389

2017
$000

18,648

3,730

17,335

3,467

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
Exercise of share options

31 December

2018

2017

Number

600,000,000

6,000,000

600,000,000

6,000,000

$000

113,761,024
631,000

114,392,024

2,008
8

2,016

112,661,024
1,100,000

113,761,024

1,993
15

2,008

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

Share-based payments
Equity-settled share option scheme
Details of the Company’s equity-settled share option scheme are given in note 25 to the Group financial statements.

Notes to the Company financial statements continued
year ended 31 December 2018

Share premium account

1 January
Issue of shares
Court approved reduction

31 December

2018
$000

32,484
141
(32,592)

2017
$000

32,325
159
—

32,484

13 Distributions made and proposed

Cash dividends on ordinary shares declared and paid:
Interim dividend for 2018: 3 US cents* per share

Proposed dividends on ordinary shares:
Final dividend for 2018: 4 US cents** per share

2018
$000

3,432

4,576

2017
$000

—

** To be paid in Sterling at a rate to be announced.

The proposed final dividend on ordinary shares is subject to the approval by shareholders at the annual general meeting for
2019 and not recognised as a liability in the Group statement of financial position at 31 December 2018.

Subsequent events

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

15 Auditor’s remuneration

The Company paid $107,000 (2017: $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.

Anglo Asian Mining PLC Annual report and accounts 2018

Letter to shareholders from the Chairman

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

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

28 May 2019

To the holders of ordinary shares 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 2018 together with
the attached notice of the annual general meeting to be held on 20 June 2019 (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 Richard Round is retiring in accordance with the Company’s
articles of association and is seeking re-election at the Meeting.

Resolution 4 – Declaration of a Dividend
This is an ordinary resolution to declare a dividend as recommended by the directors. The payment of a dividend is payable is out
of distributable profits available for the purpose and set aside by the Company for the payment of a dividend. The directors have a
responsibility to examine the accounts of the Company to ensure that a distribution can be made to the shareholders without placing
the Company into any difficulties.

Resolution 5 – 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 5 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 15 May 2019
(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; or (ii) 30 June 2020 (being six months
after the Company’s accounting reference date).

Resolution 6 – 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 5
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

NOTICE IS HEREBY GIVEN that the annual general meeting (“AGM”) of the shareholders of Anglo Asian Mining PLC (the “Company”)
will be held on 20 June 2019 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 5 (inclusive) will be proposed as ordinary
resolutions and resolution 6 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 2018 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 Richard Round be re-elected as a director, having retired by rotation in accordance with the Company’s articles of association.

THAT a dividend shall be declared of 4 US cents per issued share to the ordinary shareholders on the registrar of members on
the 28 June 2019.

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 £381,307*; and

(b) up to an aggregate nominal amount of £762,613** (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 2020, 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
6

THAT subject to the passing of resolution 5 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 5 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

Anglo Asian Mining PLC Annual report and accounts 2018

Special resolution continued

(b) otherwise than pursuant to sub-paragraph (a) of this resolution up to an aggregate nominal amount of £114,392†,

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 2020 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

William Morgan
7 Devonshire Square
Culters Gardens
London EC2M 4YH
United Kingdom
28 May 2019

* Calculated as one third of the nominal value of the total issued ordinary share capital (i.e. 114,392,024 shares of nominal value £1,143,920.24).
** Calculated as two thirds of the nominal value of the total issued ordinary share capital (£1,143,920.24).
† 10 per cent. of the ordinary issued share capital of the Company (£1,143,920.24).

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 Link Asset Services, PXS, 34 Beckenham Road, Kent BR3 4TU not later
than 10.30am on 18 June 2019.

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 18 June 2019 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 18 June 2019 shall be disregarded in
determining the rights of any person to attend or vote at the AGM.

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

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

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
Salisbury House
London Wall
London EC2M 5QQ
United Kingdom

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