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financial year and to date lots totaling 7,500 ounces have all matured within the put and call

range.

Total cost of sales for the six months ended 30 June 2016 decreased by $9.9 million to $30.0

million compared to $39.9 million in 2015. Cash cost of sales decreased by $5.5 million to $22.6

million compared to $28.1 million in 2015. Major contributors to these cost reductions were

reagents lower by $4.3 million at $7.3 million; fuel lower by $0.9 million at $2.9 million and

spare parts lower by $0.7 million at $0.9 million. These reductions were as a result of continued

plant optimisation, good cost control and the weakening of the Azerbaijan Manat against the

US dollar. Depreciation decreased by $1.0 million from $10.9 million in 2015 to $9.9 million in

2016 due to lower gold production.

Administrative expenses for the six months ended 30 June 2016 decreased to $2.5 million

compared to $2.8 million in 2015. The decrease in the administrative expenses was mainly due

to the depreciation of the Azerbaijan Manat. Administrative expenses comprise the cost of the

Company’s office in Baku, directors and other administrative staff salaries, professional fees

and the cost of maintaining the Company’s public quotation on the AIM market.

The finance costs for the six months ended 30 June 2016 of $2.5 million comprise interest on

loans and letters of credit of $2.3 million and accretion expense on the rehabilitation provision

of $0.2 million. There were no borrowing costs capitalised in the six months ended 30 June

2016.

The income tax charge for the six months ended 30 June 2016 of $3.1 million was a deferred

taxation charge in respect of the Azerbaijan operations. The Company's Azerbaijan operations

are expected to produce taxable profits for the full year ending 31 December 2016.

The Group produced gold bullion at an average cash operating cost of production in the six

months ended 30 June 2016 of $546 per ounce compared to $736 per ounce in the six months

ended 2015 and $724 for the full year 2015. Average cash operating cost of production for H1

2016 compared to H1 2015 was lower due to total mining, processing and selling costs lower by

$5.5 million and copper and silver by-product credits higher by $3.9 million. Average cash

operating cost of production is calculated by reference to mining and processing costs (before

depreciation) plus precious metal selling costs less revenue (including the Government of

Azerbaijan’s share) from the sale of copper concentrate and silver bullion.

The Company had cash and cash equivalents at 30 June 2016 of $3.3 million and total debt at

amortised cost of $44.0 million, giving net debt of $40.7 million. The Amsterdam Trade Bank

loan has a debt service cover ratio ("DSCR") covenant of 1.25, and for the six months ended 30

June 2016, the DSCR was 1.44. The Company had no unutilised credit facilities at 30 June 2016.