Anglo Asian (LON:AAZ) is on the cusp.
That’s the clear underlying message presented by Mehrdad Etemad, as he outlines specific improvements the company has been making on site at its Gedabek project in Azerbaijan.
“We started operating our agitation plant there in 2013,” he says. “The first three months were great, but then we ran into mineralogy issues.”
It wasn’t that the plant couldn’t produce the gold that was required of it, but rather that in the new straitened gold pricing environment the levels of efficiency required to make the production economic were no longer being met.
A re-think was required, and at a very fundamental level.
“We started to look at our reserve estimate again,” says Etemad.
“Based on new drilling - on surface drilling, on deep drilling - it was established that this was actually a polymetallic mine, and so a new mine plan was developed.”
The plan took into account new metals: silver, and in particular, copper.
“The value of the copper turned out to be as much as the value of the gold,” says Etemad, “and that prompted us to contract for a flotation plant which is now being commissioned.”
It’s this new flotation plant which is expected to transform the company’s finances.
“It started off as a pilot plant,” says Etemad. “But at 80 tonnes per hour it’s really a full scale production plant.”
The plan for its deployment is simple.
“We expect to start full production from the flotation plant soon,” says Etemad. “The idea is to process the tailings from the agitation plant and recover most of the copper and silver and gold that’s currently left in the tailings.”
The additional operating costs for this undertaking will be fairly minimal, as the slurry will already have been crushed and milled in any case.
As it stands, the recovery rate for gold from the agitation plant stands at around 75%. But it’s not recovering any of the copper at all, except limited amounts of copper and silver in the SART plant.
The new flotation plant will take overall recoveries of gold to between 85% and 90% with recovery of substantial amounts of silver and copper. “This is really the main point,” says Etemad emphatically.
Precisely what the financial impact will be remains to be released to the public. Bill Morgan, the company’s chief financial officer, plans to sit down with analysts at UK broker SP Angel shortly after which an updated forecast for the year will be released.
But at this stage, he will say this. “The contribution from the flotation plant will be enough to return the company to profitability at current metals prices.”
That will be welcome news, given that the company was still showing losses at its last set of interims, released on 22 September.
These showed that for the six months to June Anglo Asian produced a record 35,938 ounces of gold and 689 dry metric tonnes of copper concentrate.
Cash costs per ounce of gold produced rang in at an encouraging US$736 per ounce, significantly down on the costs of US$1,014 per ounce that the company incurred in the comparable period in 2014.
Even so, losses still clocked in at just over US$4mln, and it’s this bottom line number that the new flotation plant should have the biggest impact on.
“From a cash perspective the business is holding its own,” says Morgan.
That’s clear from the increased revenue if US$41.8mln that was delivered during the period, which in turn led to a gross profit of US$1.9mln and operating cash flow before movements in working capital of US$10.7mln.
Debt is also falling.
So, all the pieces of the puzzle are falling into place. It just remains for the new flotation plant to take efficiencies and recoveries up towards that 90% mark to take the company into the black overall.
“We’ve managed to turn around substantially the business,” says Etemad.
The fruits of that work are now beginning to become apparent, and the results for the current period will make for extremely interesting reading when they come in next year.