May is a special month for Azerbaijan. Not only will it host the Eurovision Song Contest for the first time in the nation’s capital, Baku, but the only listed gold miner operating there,
Anglo Asian produced 57,068 ounces of gold at its three-year-old Gedabek mine in 2011, down slightly on the year before as the company worked through lower-grade ore zones in line with the mine plan. Nevertheless, revenues and profits soared as costs stayed low and a higher gold price boosted margins.
To further capitalise on higher metals prices – Gedabek also produces some silver and copper – Anglo Asian plans to build a new $52m (£33m) leaching plant to help boost metal recoveries. Further tests are required, but the company hopes to commission the plant in late 2013. Anglo Asian is also embarking on another significant drilling programme at Gedabek to extend the mine life. An extensive drill campaign started in the first quarter following a successful earlier programme that increased gold resources by 50 per cent to just over 1 million ounces.
Broker Fairfax is forecasting EPS of 15.6¢ for 2012 as the company looks to maintain production while advancing the new plant and other properties.
|ANGLO ASIAN MINING (AAZ)|
|ORD PRICE:||34.5p||MARKET VALUE:||£39m|
|TOUCH:||34-35p||12-MONTH HIGH:||62.5p||LOW: 28.5p|
|DIVIDEND YIELD:||nil||PE RATIO:||3|
|NET ASSET VALUE:||69¢*||NET DEBT:||4%|
Even factoring in the Azerbaijan discount, Anglo Asian Mining shares look significantly undervalued priced on a miserly 3.5 times earnings estimates and 50 per cent below analyst fair value estimates. Buy.
Last IC view: Good value, 42p, 21 September 2011