🕐12.04.12 - 12:27 Uhr

ANGLO ASIAN MINING -FAIRFAX BUY RECOMMENDATION 72P - Q1 2012 GEDABEK GOLD/COPPER OPERATIONS UPDATE



[cid:image001.jpg@01CD189B.86BB45F0] FAIRFAX I.S.

PLC, 46 Berkeley Square, Mayfair, London W1J 5AT, United Kingdom www.fairfaxplc.com
Anglo Asian Mining* (AAZ LN) 35 p/s, Mkt cap �38.9m - Q1 2012 Gedabek gold/copper operations update BUY - Target price 72p * Anglo Asian has announced its gold/copper production results for the 3 months to 31 March 2012. * The company processed 176kt (Q1 2011: 208kt) of ore with an average grade of 2.83g/t (2011: 3.32g/t) producing 9,925oz (2011: 14,028oz) of gold and 7,670oz (2011: 12,357oz) of silver. * Gold and silver output is slightly below our forecasts of 11koz and 9koz for the period, respectively. * Lower production is attributed to an unexpectedly long and cold winter this year that slowed the leaching of gold heaps and led to a drop throughput into the processing plant. * The decline in grades of the processed ore is in line with an updated 2012 mining plan. * For 2012, management are confident production should gain pace through the year to target 54koz of gold. * Earlier this month the company announced a 50% increase in its JORC compliant Measured and Indicated (M&I) resource to 1.054moz of gold at the Gedabek (no change in a cut off grade).

In addition the mine hosts silver and copper totalling around 150koz in gold equivalent in M&I resource which should help the company reduce operating cash costs. * The team started a new 28,000m drilling programme, with 3,420m already completed, to expand the scale of the Gedabek mine significantly extending the mine life mine far beyond the previously estimated 6 years. * A JORC reserve report is expected in H2 this year on the basis of which the company will assess the viability of the construction of new agitation leaching plant.

We would expect to see a 70-80% conversion of resources to reserve in this case. * Copper concentrate production at the SART plant performed consistently well highlighting the validity of the process.

Q1 output contained 148t of copper (Q1 2011: 104t), 34,666oz of silver (2011:26.9koz) and 27oz of gold (2011: 81oz). * A dryer to reduce the moisture in the concentrate has been ordered and should be operational by July this year. * The SART copper/silver/gold concentrate produced is currently being stockpiled pending signature of a long term sales contract. * The company sold 8,252oz of gold at an average price of US$1,680/oz. * Cash balances at the end of March 2012 held steady at US$9.8m. * Net debt at US$3.2m.

US$13m in total debt remains with the International Bank of Azerbaijan. Conclusion: Seasonal factors will always affect operations at Gedabek due to severe weather conditions in the mountains (1,500-2,000m above sea level) during the winter.

We believe the drop in the output in Q1 should be balanced by increased production in the following quarters as leach rates return to normal.

A recently expanded resource base should increase the life of the project and justify the construction of the agitation leaching plant.

In the long term we forecast lower grades to be more than compensated by an increased throughput and improved recoveries (90% versus current 60-70%) should the company build a new processing plant.

Either way, production and sales should grow from 2013. December year end
2010A 2011E 2012E 2013E 2014E 2015E
Gold price
US$/oz 1,226 1,571 1,800 1,700 1,500 1,250 Gold produced (incl the Government share)
koz 67.3 57.1 54.1 50.9 82.2 82.2 Cash costs (net of byproducts)
US$/oz 412 535 510 637 463 580 Revenue
US$m 72.0 83.5 101.6 84.8 112.0 80.8 EBITDA
US$m 47.0 49.0 56.0 40.0 68.8 37.6 PBT
US$m 19.8 30.1 39.9 22.9 50.2 19.1 PAT
US$m 15.2 17.8 24.4 13.0 32.1 11.0
Diluted EPS
cents 13.4 15.6 21.4 11.4 28.2 9.7
Diluted PER
x 2.79 4.98 2.76 5.20 2.10 6.11
Net cash flow
US$m 4.3 4.7 19.8 25.6 47.1 20.9
*Fairfax acts as Nomad and broker to Anglo Asian Mining **Fairfax analysts braved freezing temperatures to visit the Gedabek mine in Azerbaijan this winter!
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