Gedabek

The principal mining operation at Gedabek is conventional open-cast mining using trucks and shovels from the Gedabek open pit (which comprises several contiguous smaller open pits). Ore is also mined from the Gadir and Gedabek underground mines. These two underground mines are connected, and form one continuous underground network of tunnels, accessible from both the Gadir and Gedabek portals. However, a significant fault structure separates the two mines.

Ore mined during 2023 compared to 2022 was markedly reduced as mining was suspended during August to December 2023 whilst the Micon Review was carried out. Table 1 sets out all the ore mined by the Group in the year ended 31 December 2023.

Table 1 – Ore mined at Gedabek from all mines for the year ended 31 December 2023

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. 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. This plant selectively absorbs then de-absorbs the gold and silver. The gold and silver dissolved in the solution which is produced are then 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 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 which precipitates the copper and any remaining silver from the solution. 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 is mixed with water to produce a slurry called “pulp” and other reagents are then added. This pulp is processed in flotation cells (tanks), where the pulp is stirred 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.

During 2023, the capacity of the flotation plant was increased from approximately 80 to 160 tonnes per hour. This was achieved by installing new pumps and other equipment and “debottlenecking” the plant. An additional seven cells for the flotation plant have also been acquired together with a new thickener and filter press at a total cost of approximately $3 million. The seven new cells use “Imhoflot” pneumatic flotation technology, which require less energy and offers better recoveries than traditional stirred tank cells and flotation columns. These new flotation cells and ancillary equipment will increase the versatility of the flotation plant and enable the production of a zinc concentrate. The installation of the new flotation cells has been postponed until 2024.

Table 2 summarises the ore processed by leaching at Gedabek for the year ended 31 December 2023.

Table 2 – Ore processed by leaching at Gedabek for the year ended 31 December 2023

Table 3 summarises the ore processed by flotation for at Gedabek for the year ended 31 December 2023.

Table 3 – Ore processed by flotation at Gedabek for the year ended 31 December 2023

Previously heaped leached ore

Gold production at Gedabek from 2009 to 2013 was by heap leaching crushed ore until the start-up of the agitation leaching plant in 2013. The heaps remain in-situ and given the high grade of ore processed prior to the commencement of agitation leaching, and the lower recovery rates, much of the previously heap leached ore contains significant amounts of gold. This is now being processed by agitation leaching. Table 4 sets out the amount of previously heap leached ore processed for the year ended 31 December 2023.

Table 4 – Amount of previously heap leached ore processed for the year ended 31 December 2023

Gold doré was produced by agitation and heap leaching and copper concentrate by flotation and SART processing until the end of July 2023. Agitation leaching, flotation processing and mining were suspended from August 2023 whilst the Micon Review was carried out. However, production of gold doré and copper concentrate continued until the end of December by heap leaching and SART processing, although no new fresh ore was placed on the heaps. Production during 2023 therefore decreased significantly compared to 2022 due to declining ore grades from the Gedabek open pit and the partial suspension of mining and processing from August to December 2023.

For the year ended 31 December 2023, gold production totalled 21,758 ounces, which was a decrease of 21,356 ounces in comparison to the production of 43,114 ounces for the year ended 31 December 2022.

Table 5 summarises the gold and silver bullion produced from doré bars and sales of gold bullion for the year ended 31 December 2023.

Table 5 – Gold and silver bullion produced from doré bars and sales of gold bullion for the year ended 31 December 2023

* 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 and flotation processing for the year ended 31 December 2023.

Table 6 – Total copper, gold and silver produced as concentrate by both SART and flotation processing for the year ended 31 December 2023

Table 7 summarises the total copper concentrate (including gold and silver) production and sales from both SART and flotation processing for the year ended 31 December 2023.

Table 7 – Total copper concentrate (including gold and silver) production and sales from both SART and flotation processing for the year ended 31 December 2023

* including Government of Azerbaijan’s share.
** These are invoiced sales of the Group’s share of production 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.

The Gedabek Contract Area benefits from excellent infrastructure and access. The site is located at the town 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 each approximately a four to five hour drive over good quality roads. The site is connected to the Azeri national power grid.

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 town has experienced water shortages in the summer and this plant reduces to the absolute minimum the consumption of fresh water required by the Company.

Tailings are stored in a purpose built downstream, rock-built dam approximately seven kilometres from the Group’s 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 being discharged safely into the nearby Shamkir river. The current tailings dam has the capacity for approximately three months of production once production restarts.

Knight Piésold, a leading firm of geotechnical and consulting engineers, has determined that the wall of the existing tailings dam has a maximum height of 90 metres. This means the current wall can be raised by an average of approximately 7.5 metres to give enough capacity for production for the next two to three years. The Company is proposing to do this wall raise in two stages of 2.5 metres followed by 5.0 metres. It is anticipated that it will take approximately three months to raise the wall by 2.5 metres. The Group submitted an application to the Government of Azerbaijan on 14 March 2024 to raise the wall of the tailings dam. This included a third party report by Knight Piésold confirming the stability of the wall of the dam. The Group has satisfactorily clarified all technical aspects of the application requested by the Government of Azerbaijan. The Company and the Government of Azerbaijan are now working through the administrative steps required by the Government of Azerbaijan to grant the permission.

A site has been identified for a new tailings dam in the close vicinity of the existing dam and permission for land use has been obtained. However, following protests against its proposed location by local communities, the suitability of the site is being reevaluated in conjunction with the Government of Azerbaijan. Alternative sites for the location of a second tailings dam will also be considered.