Gedabek contract area

Gedabek Contract Area

1. Introduction

The Company holds mining and exploration rights for a minimum period of 15 years from 26 February 2007 over the 300 square kilometres Gedabek Contract Area, which is 55 kilometres from Azerbaijan's second biggest city, Ganja. The area includes Azerbaijan's first operating gold mine as well as a number of exploration targets.

Mining activity at Gedabek is reported to have started as long as 2,000 years ago. More recent activity began around 1849 when the Mekhor Brothers, followed by the German Siemens Bros Company, developed and operated a copper mine at Gedabek. At least five large (>100,000 tonne) and numerous smaller sulphide lenses were mined during the period between 1849 and 1917. Mining activity ceased in 1917 with the onset of the Russian Revolution.

Mining activity commenced once more when Anglo Asian began construction of an open pit mine and a conventional heap leach and processing facility for the recovery of gold, copper and silver in 2008. The Company poured its first gold in May 2009, making it the first gold/copper producer in Azerbaijan in modern times. Since that time it has seen steady gold production as efficiencies of the mine continue to improve. In addition, in 2015 the Group commenced production from Gadir, an underground mine co-located at Gedabek.

2. Mining operations

The principal mining operation at Gedabek is conventional open cast mining from several contiguous open pits. Ore is first drilled and blasted and then transported either to a processing facility or to a stockpile for storage. The major mining activities of drilling and blasting and subsequent transportation of ore are carried out by contractors.

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

Table 2 - Ore mined from the open pit at Gedabek for the year ended 31 December 2016
Quarter ended Ore mined (tonnes) Waste mined
High Grade Low Grade Sulphide Total
31 March 2016 93,839 224,641 25,691 344,171 1,316,490
30 June 2016 87,597 402,903 709 491,209 1,357,896
30 September 2016 99,280 302,958 7,333 409,571 1,375,983
31 December 2016 116,923 181,778 - 298,701 1,454,752
Total for the year 397,639 1,112,280 33,733 1,543,652 5,505,121

Ore is also mined from the Gadir underground mine which is situated approximately one kilometre from the main open pit at the Gedabek site. The mine started producing ore in June 2015.

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

Table 3 - ore mined from the Gadir underground mine for the year ended 31 December 2016
Quarter ended Ore mined (tonnes)
Ore mined (tonnes) Average gold grade (g/t)
31 March 2016 17,756 5.04
30 June 2016 37,732 6.43
30 September 2016 27,581 5.13
31 December 2016 40,663 4.79
Total for the year 123,732 5.40

3. Processing operations

Ore is processed at Gedabek to produce either gold doré (an alloy of gold and silver with small amounts of impurities) or a copper and precious metal concentrate.

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

  1. Heap leaching of crushed ore. Crushed ore is heaped into permeable "pads" onto which is sprayed a solution of cyanide. The solution dissolves the metals as it percolates through the ore by gravity and it is then collected.
  2. Heap leaching of run of mine (“ROM”) ore. The process is similar to heap leaching for crushed ore except the ore is not crushed and is heaped into pads as received from the mine (ROM) without further treatment or crushing.
  3. Agitation leaching. Prior to the construction of the flotation plant, ore was crushed and then processed through a grinding circuit. The finely ground ore is then placed in stirred tanks containing a cyanide solution and the contained metal is dissolved in the solution. Subsequent to the construction of the flotation plant, a further option is available to treat ore in the agitation leaching plant. This is to process the finely ground ore through the flotation plant prior to treatment by the agitation leaching plant. 

Slurries produced by the above processes with dissolved metal in solution are then transferred to a resin in pulp ("RIP") plant. A synthetic resin, in the form of small spherical plastic beads designed to absorb gold selectively over copper and silver, is placed in contact with the leach slurry or "pulp". After separation from the pulp, the gold-loaded resin is treated with a second solution, which "strips" (i.e. desorbs) the gold, plus the small amounts of absorbed copper and silver, transferring the metals from the resin back into solution.  The gold and silver dissolved in this final solution are recovered by electrolysis and are then smelted to produce the doré metal, containing gold and silver.

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

  1. Sulphidisation, Acidification, Recycling and Thickening (“SART”). The cyanide solution after gold absorption by resin in pulp processing is transferred to the SART plant. The pH of the solution is then changed by the addition of reagents. This recovers the copper from the solution in the form of a precipitated copper sulphide concentrate containing silver and minor amounts of gold. The process also recovers cyanide from the solution which is recycled back to leaching.
  2. Flotation. Flotation is carried out in a separate flotation plant. Feedstock, which can be either tailings from the agitation leaching plant or freshly crushed and milled ore, is mixed with water to produce a slurry called "pulp" and other reagents are then added. This pulp is processed in flotation cells (tanks). The flotation cells are agitated and air introduced as small bubbles. The sulphide minerals attach to the air bubbles and float to the surface where they form a froth which is collected. This froth is dewatered to form a concentrate containing copper, gold and silver.

Initially, gold doré was produced at Gedabek only by heap leaching crushed ore. Heap leaching is a low capital cost method of production traditionally used by mines when they first move into production. However, heap leaching has limitations with regards to the minimum size of the ore being leached limited to around 25 millimetres. This limitation results in only approximately 60 per cent. to 70 per cent. of the gold within the ore being recovered with leaching cycles typically extending up to one year, depending on the detailed composition of the ore.

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

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

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

4. Production and sales

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

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

Table 4 – amount of ore and its grade processed at Gedabek for the year ended 31 December 2016
Quarter ended Amount of ore processed (tonnes) Gold grade of ore processed (g/t)
Heap leach pad (Crushed ore) Heap leach pad (ROM ore) Agitation leaching plant Heap leach pad (Crushed ore) Heap leach pad (ROM ore) Agitation leaching plant
31 Mar 2016 91,450 114,508 138,873 1.46 0.87 2.94
30 Jun 2016 110,202 263,432 156,846 1.32 0.76 3.59
30 Sep 2016 92,437 190,185 164,492 1.21 0.81 2.45
31 Dec 2016 74,978 90,310 192,508 1.21 0.85 2.26
Total for the year 369,067 658,435 652,719 1.32 0.80 2.78

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

Table 5 - gold and silver bullion produced from doré bars and sales of gold bullion for the year ended 31 December 2016.
Quarter ended Gold produced (ounces) * Silver produced (ounces) Gold Sales (ounces) ** Gold sales price ($/ounce)
31 Mar 2016 13,383 1,958 12,058 1,184
30 Jun 2016 17,926 2,983 15,661 1,265
30 Sept 2016 15,407 2,502 12,567 1,332
31 Dec 2016 14,221 2,845 12,995 1,227
Total for the year 60,937 10,288 53,281 1,253
* including Government of Azerbaijan’s share.
** excluding Government of Azerbaijan’s share.

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

Table 6 - Total copper and precious metal produced as concentrate for the year ended 31 December 2016.
Quarter ended Copper (tonnes) Gold (ounces) Silver (ounces)
SART Flotation Total SART Flotation Total SART Flotation Total
31 March 2016 181 200 381 12 607 619 7,789 19,055 26,844
30 June 2016 195 302 497 4 1,445 1,449 10,047 39,184 49,231
30 September 2016 255 260 485 4 1,123 1,127 7,291 24,106 31,397
31 December 2016 219 359 578 7 1,255 1,262 6,751 40,620 47,371
Total for the year 820 1,121 1,941 27 4,430 4,457 31,878 122,965 154,843

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

Table 7 - Total copper concentrate production and sales during the year ended 31 December 2016
Quarter ended Concentrate production* (dmt) Copper content* (tonnes) Gold content* (ounces) Silver content* (ounces) Concentrate sales** (dmt) Concentrate sales** ($000)
31 March 2016 1,821 381 619 26,844 1,319 2,043
30 June 2016 2,361 497 1,449 49,231 1,582 3,019
30 September 2016 1,844 485 1,127 31,397 1,782 3,577
31 December 2016 2,504 578 1,262 47,371 2,147 3,615
Total for the year 8,830 1,941 4,457 154,843 6,830 12,254
* including Government of Azerbaijan share
** excluding the Government of Azerbaijan share

5. Tailings (waste) storage

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

6. Sustainability and cost control

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

Electricity supply

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

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

Water management

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

In April 2016, the Group contracted with Nanoretech Systems (Pty) Limited for the construction of a reverse osmosis water treatment plant to treat process water. The plant will produce water of sufficient purity that can be discharged into the nearby Shamkir river. The plant was built in South Africa and is expected to be operational in the third quarter of 2017. The plant has the capacity to treat 50 cubic metres of water per hour and will also produce a concentrate solution which can be further processed to recover the contained metals. The cost of the plant was $1.4 million.

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

7. Health, safety and environmental

The health and safety of our employees and the protection of the environment in and around our mine properties are prime concerns for the Company's board and senior management team. The health, safety and environmental ("HSE") department at Gedabek has a qualified HSE manager, who is assisted by three HSE officers. The recruitment of additional HSE officers is planned given the increasing size and complexity of the operation. Overall strategy for HSE matters in the Company is overseen by the HSE and technical committee, which is chaired by a board director, Professor John Monhemius. The HSE and technical committee meets twice a year at the Gedabek site.

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

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

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