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Shares in Anglo Asian Mining (LON:AAZ) advanced today after it told investors it had delineated more than 1 million ounces of measured and indicated gold at Azerbaijan's first operating gold and copper mine.
A new JORC- compliant resource estimate for the Gedabek mine was unveiled.
As at 2 pm, the company's shares were up 5.06 per cent, or 2 pence, to change hands at 41.50 pence.
The new estimate - a major milestone - represents a 50 per cent increase in the gold resource at the project, which now stands at 1.054 million ounces measured and indicated at a grade of 0.884 grammes per tonne.
The firm's chief executive Reza Vaziri said this morning: "Reaching over one million ounces of gold in the measured and indicated resource category is a significant milestone for the company, underpinning the production potential and the inherent value of Gedabek that we first saw when we commenced mining in 2009.
He added that with gold, copper and silver production at the mine steady, along with continuing strong metal prices, the company's position as a profitable and cash generative production company was "strengthening".
In 2011, the firm produced 57,068 ounces of gold, 611, 611 tonnes of copper and 46,940 ounces of silver.
In summary, the total new JORC resource for the mine, including the lesser inferred category, as well as the higher measured and indicated, now stands at 48.14 million tonnes.
This includes 1.27 million tonnes at 0.825 g/t gold - a 67 per cent increase and 94,890 tonnes at 0.197 per cent copper - a 93 per cent increase.
There was also a 36 per cent increase in the silver resource and it now stands at 10.3 million ounces at 6.66 g/t.
Moreover, further drilling since this estimate has shown significant potential to further upgrade and increase the size of the resource, Vaziri told investors.
"In line with this, we are now planning to conduct a further 24,567 metre drilling programme with the aim of further increasing the mineral resources of the Gedabek deposit," he said.
In addition, he said, the company planned to complete a JORC compliant ore reserves estimate in the second half of this year.
"This will help us to assess mineral processing options for the proposed agitation leaching plant at Gedabek, which would potentially enable an increase in Gedabek's mine life and thereby further improve the economic fundamentals of the mine."
Vaziri added that on top of all this, the company was also establishing its second mining project in the Republic of Azerbaijan - Gosha.
Gosha is 50 km away from Gedabek and will be another significant step for the company as it hopes to become a leading mid-tier gold producer in Caucasia and Central Asia, said the company boss.
Today's updated resource estimate took almost 35,000 metres of drilling at Gedabek into consideration, and increased the geological knowledge of the quality of the resource.
Another aim of this drilling was to assess the technical and economic feasibility of processing methods to increase recovery of the gold, copper and silver.
The company said it was now assessing the possibility of building a new agitation leaching plant at Gedabek.
"The plant, if commissioned, will process high grade ore and additional reserves that are not suitable for heap leaching, together with spent ore from the leach heaps to further improve total gold recoveries.
"Agitation leaching recovery rates are typically over 90 per cent compared to circa 70 per cent normally achieved in heap leaching," it said in today's statement.
"The company will announce a full update containing the pre-feasibility results and the board's review of the suitability of a new agitation leaching plant at Gedabek in due course," it added.
City broker Fairfax, which today initiated coverage on Anglo Asian, highlighted that the use of the agitation leach process should raise gold recovery rates to more than 90 per cent, with silver to more than 93 per cent and copper, to over 85 per cent.
"The new JORC resource is significantly beyond our previous estimation and indicates to us that the Gedabek gold mine resource should easily extend to over 1.5 million ounces of gold and 2moz gold equivalent by the time of the next JORC resource update," said analyst John Meyer in a note.
"We look forward to a new ‘reserve figure in the next few months."
The broker begins coverage with a 'buy' rating and a 72 pence-a-share price target.
Gedabek - the first gold/copper mine in post-soviet Azerbaijan - is forecast in 2012 to produce 55,000 ounces, ramping up to 75-80,000 ounces from 2014, said Fairfax.
It estimates the mine's net present value at 89 pence a share assuming a long term gold price of US$1,250 per ounce and that the company will construct a new processing plant that should improve recoveries and boost output.
Anglo Asian Mining delineates more than 1 million ounces of measured and indicated gold at Gedabek - UPDATE
Shares in Anglo Asian Mining advanced today after it told investors it had delineated more than 1 million ounces of measured and indicated gold at Azerbaijan's first operating gold and copper mine.
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Quick facts: Anglo Asian Mining PLC
Price: 125 GBX
Market Cap: £142.99 m
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