# Anglo Asian Mining Small-cap gold miner with bigger-cap prospects

- Link: https://www.directorstalkinterviews.com/anglo-asian-mining-small-cap-gold-miner-with-bigger-cap-prospects/412830540
- Published: 2020-06-09T10:31:44+01:00
- Author: Amilia Stone

**Anglo Asian Mining Plc** (LON:AAZ) is a highly cash-generative gold miner from
four mines in Azerbaijan, where it enjoys close ties to the government. We estimate
current-year free cashflow and dividend yields of 19.3% and 6.8%, respectively. 
The estimated aggregate free cashflow of $248.5m in 2020-30 should comfortably exceed
the current market cap. In 2020, we expect AAZ to announce resource upgrades for
its Gedabek open pit, Gadir and (potentially) Ugur mines, with a maiden estimate
for the Gedabek underground mine in 2021. Behind them come five fast-track production
targets (including Avshancli – a “significant mineral district”) at Gedabek and 
the Ordubad Contract Area (AAZ’s primary asset at the 2005 listing).

 * **First-quartile costs:** AAZ’s latest reported figure (FY’19) for All-In Sustaining
   Costs (AISC) was $591/oz, putting it in the first quartile of the gold mining
   cost curve. This is due to its Azerbaijani jurisdiction, predominance of open
   pit mining, access to the power grid and efficient downstream processing.
 * **Production upgrade and upside:** Exploration success and upcoming resource 
   upgrades give us confidence that production can be extended beyond remaining 
   Proved and Probable reserves. We are assuming that 100% of the additional 553,000
   oz of Measured & Indicated Resources are mined during 2026-30 – which excludes
   all five fast-track production targets and Ordubad.
 * **Potential for two major mineralised “systems”:** We believe that AAZ’s flagship
   Gedabek Contract Area could be part of a much bigger epithermal-porphyry system
   of gold-silver-copper mineralisation. Exploration work is accelerating at the
   untapped Ordubad project – potentially a significant copper-gold porphyry.
 * **Risks:** AAZ faces the normal risks for a junior miner, albeit without the 
   funding risk faced by explorers/developers. These include volatility in gold 
   prices, political risks (albeit mitigated), environmental risks, operational 
   risks in successfully executing the mining plan and operating downstream processing
   facilities.
 * **Investment summary:** The outstanding aspect of Anglo Asian Mining’s financial
   performance is its cash generation, which is reflected in our DCF valuation of
   181p per share, using a discount rate of 8% and long-term gold price of $1,600/
   oz. We expect the company to pay a $0.105 dividend in 2020, implying a dividend
   yield of 6.8%.

[DOWNLOAD THE FULL REPORT](https://www.hardmanandco.com/wp-content/uploads/2020/06/Hardman-Research-Anglo-Asian-June-2020.pdf)

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