February 2021 Investor Forum

AAZ is a highly cash-generative miner of gold, silver and copper from three mines in Azerbaijan, where it has a track record of close cooperation with the government. The company listed on AIM in 2005, produced its first gold in 2009, paid a maiden dividend in 2018 and produced 69,091 Gold Equivalent Ounces (GEOs) in 2020 (at budgeted metal prices). AAZ is progressing multiple projects to expand production at its flagship Gedabek and others (see below) in Azerbaijan and (potentially) Ireland. We will review our DCF valuation of 181p per share following AAZ’s production guidance update expected in March 2021.

•  2020 challenges negotiated: Despite the combination of COVID-19, the July-November hostilities with Armenia and lower mining activity at the nearly exhausted Ugur deposit, AAZ achieved an 8% shortfall versus the lower end of its 75k-80k GEOs production guidance in 2020.
• Production upside: There are a potential underground mine and five exploration targets at Gedabek, the first of which could come onstream as early as 2022. Behind these are the Ordubad contract area, three licence areas in the restored territories after the conflict, and a potential joint venture in Ireland.
• Potential for two major mineral “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, and operational risks in successfully executing the mining plan and operating downstream processing facilities.
• Investment summary: Our current DCF-based valuation of 181p per share (8% discount rate) is under review, pending upcoming guidance on the production and operational outlook in the wake of last year’s challenges. While the near-term production outlook may be slightly lower than our previous forecasts, our valuation is currently based on a conservative long-term gold price of $1,600/oz.