GOLDMINE

As is known, Azerbaijan, anciently famous in the world for its "black gold", is not deprived of real gold either. We also know that the country does not have the ability to fully develop its fields, because fairly large gold mines are located on the Armenian-occupied territories. Information occasionally gets through that the invaders brazenly plunder our resources. However, more recently, two operating companies have started mining gold in the available fields and precious metals already figure as a separate column in the country's exports.

Moreover, according to the state budget for 2013 and the next three years, Azerbaijan forecasts an the annual increase in gold production in the range of 1 per cent until 2017. Thus, if the volume of gold production in 2013 is expected at 1,810.7 kg, they will grow to 1,865.5 kg in 2016.

Azerbaijani Klondike

It must be said that the interest in the revival and development of the gold-mining industry in Azerbaijan is not accidental. It is whipped up by a steady growth in world gold prices observed in recent years. Besides, the gold reserves in the major producing countries - South Africa, the USA and Australia, are depleting, leading investors to seek new sources for replenishing precious metals. Therefore, a certain stagnation in this field in Azerbaijan in the early 2000s has been replaced by a desire to use all available means to start production, which was achieved by Anglo Asian Mining plc in May 2009. The second gold miner, the Azerbaijan International Mineral Resources Operating Co. Ltd - AIMROC), got its first "crop" in the autumn of last year. And both companies have ambitious plans for the current year.

Under the terms of a production sharing agreement with the government of Azerbaijan (PSA), Anglo Asian Mining has rights for exploration and extraction of mineral resources on an area of about 2,000 sq. km, including three contract areas (Gosa, Gadabay and Ordubad). The resource base of the company exceeds 36 tons of gold, 292 tons of silver and 94,000 tons of copper. The largest of the fields developed by Anglo Asian Mining is the Gadabay mine. First gold and silver were mined on it in May 2009, while production of copper concentrate began in 2010.

Anglo Asian Mining is reassessing the mine now. The evaluation of the deposit reserves is carried out using the classification of the Joint Ore Reserves Committee and will be completed in the second half of 2013.

But last year proved bad for the deposit. The adverse weather conditions earlier in the year caused a decline in total production of gold to 1.42 tons against 1.62 tons and silver to 0.57 tons against 1.33 tons in 2011.

However, the company looks to the future with optimism. In 2013, Anglo Asian Mining plans to increase production from Gadabay to 67,000-70,000 ounces, which will be possible after the launch in March 2013 of a vat leaching plant whose construction has already begun in Gadabay. The plant will process rich ore and supplies not suitable for heap leaching - the method of obtaining gold from the ore that is currently used on the field. In principle, technologically it is a significant step forward for the country's gold mining industry, because the vat bleaching technology enables the extraction of over 90 per cent of the gold contained in the ore, whereas heap leaching can produce about 70 per cent.

The new plant is designed to process 100 tons of ore. the company is confident that the future gold production at Gadabay will justify the investment in its construction, which, by the way, has been made on the account of a loan from the International Bank of Azerbaijan worth $43.5 million. The total cost of construction is $52-54 million.

Also by the end of this year, Anglo Asian Mining expects to complete exploration of the contract area of Gosa covering 300 sq. km. and even to produce about 15,000-20,000 ounces of gold (about half a ton) there. In general, based on the preliminary results of exploration, the company expects to produce up to 25 million ounces per year (over 0.7 tons) in this field. The company also intends to develop the field and turn it into a profitable underground mine.

Another major advancement in the field of gold production in Azerbaijan is going to be the Ordubad mine, which was discovered on a contract area of 462 sq. km. in the Naxcivan Autonomous Republic in early 2012. Anglo Asian Mining expects to produce the first gold here in 2014.

So, summarizing all these plans, Anglo Asian Mining plans to double gold production by 2015, bringing it to 80,000-85,000 ounces (about 2.3 tons) in 2013 and to 95,000-100,000 ounces of gold (about 2.7 tons) in 2014. This will earn the company the status of a medium-sized mining business. In other words, the company will improve its own business image and enhance the gold producing status of the country as a whole.

Incidentally, the gold produced in the field is sent for cleaning to Switzerland, while ingots are brought to Azerbaijan and stored by the Government. Under the PSA, from 2009 to the end of last year, the company surrendered 21,413.4 troy ounces of gold (666 kg) to the Central Bank with the market value of $37.9 million.

Made in Azerbaijan 

Equally successful have been the "colleagues" of Anglo Asian Mining - the AIMROC (a consortium comprised of Londex Resources SA, Willy & Meyris SA, Fargate Mining Corporation, Globex International LLP, and Mitsui Mineral Development Engineering Co. Ltd). In late September and early October 2012, the first bar of gold was produced from the Covdar mining field. The field is currently in a start-up phase and the company expects to reach full production in the near future. The reserves are estimated at around 40 tons, which the company expects to produce within eight to 10 years.

In parallel with the start of production, a heap leaching plant is being tested. Its capacity enables the company to process all the available and future ore - 3,000 of ore per day. Along with producing gold from this field, the company will also extract different volumes of lead, copper, silver and other metals.

In addition, AIMROC has started to prepare a feasibility study for the development of two more gold deposits - Kohnamadan and Goydag. Geological exploration is now under way there.

We recall that the government of Azerbaijan will receive 30 per cent of income from the development of the Qaradag, Covdar, Goydag and Dagkasaman deposits, the Kohnamadan and Kurakcay basin.

In other words, the day is near when jewelry stores will offer products of precious metals mined in Azerbaijan, which will squeeze out competitors from Turkey, Iran and the UAE. Given the fact that manufacturers of Azerbaijani gold are promising that their products will be cheater and their quality will be no inferior to foreign analogues, products from local precious metals will become accessible to larger segments of the population than now.

On a global scale, gold mining can become an important component of the non-oil economy, fetching considerable financial benefits due to high gold prices on world markets. If we look at the dynamics of the gold price over the last 11 years, from 2000 to 2011, it has risen from $281 to $1,572. So growth constitutes 560 per cent. Such growth has not been achieved by any other commodity. This has given gold the status of a "safe haven" in times of a global economic crisis and increased its protective function in times of inflation and depreciation of the dollar.

Based on this, Azerbaijan, like many other countries, is paying close attention to increasing its gold reserves. In particular, since the end of last year the State Oil Fund began buying gold at the London market of precious metals by acquiring 14.934 tons of gold (480,146 ounces). The first batch of one ton was delivered to Baku in early January. In total, the Fund plans to purchase 30 tons of gold over two years due to the risk of price fluctuations. If we add to this the already existing and anticipated local resources, we can say that gold reserves in the country will be provided at the appropriate level.