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Ariana Resources PLC: DEEP DIVE
OVERVIEW

Ariana Resources in confident mood as Turkish operations ramp up

The company is currently exploring and developing one million ounce Salinbas Gold Project in north-eastern Turkey
gold
OVERVIEW: AAU The Big Picture
Ariana makes progress on all fronts

 

  • Ariana Resources PLC is an AIM-listed gold-silver exploration and development Company with operations in Turkey

  • Gold and silver production started in July 2017 at Kiziltepe, part of the wider Red Rabbit Gold Project in joint venture with Proccea.

  • The Company is currently exploring and developing one million ounce Salinbas Gold Project in north-eastern Turkey, where the 4mln oz Hot Maden project is 16km to the south

  • Wholly-owned Australian subsidiary Asgard Metals has investments in a number of lithium/antimony projects in that country

 

How is it doing

Turkey-focused gold miner Ariana Resources PLC (LON:AAU) reported a much increased annual profit and said 2019 was likely to be its busiest ever year of further mineral exploration.

Profits were £2.2mln compared to £0.4mln in the previous year, thanks to a £3.7mln profit from its 50% share of the Kiziltepe Mine in western Turkey, which is owned via its Red Rabbit joint venture.

The 27,100 ounces produced by Kiziltepe in 2018 were extracted at an average cash-cost of US$415 per oz and sold at an average gold price of US$1,269 per oz and silver price of US$15 per oz.

A weak Turkish lira led to £2.2mln of foreign exchange translation losses.

At the end of December, Ariana had £0.9mln of cash in the bank, up from £0.77mln a year before.

 

What’s next

Red Rabbit’s nearby Tavşan Project is the next project off the rank.

Tavşan remains “on schedule” to complete formal environmental impact assessment submission late this year 2019, with a feasibility study to follow and, subject to financing and permits, potentially leading to the mine’s starting to be developed some time in 2020.

Development of the Tavsan project would increase the output of the Red Rabbit joint-venture from annual production of 25,000 ounces to 50,000.

2019 is also is on target to be the busiest year of exploration activity to date.

Ariana has also eyed the deposit at Kizilcukur as a potential satellite for Kiziltepe.

Drilling uncovered high grades near the surface, which would make it amenable to a straightforward open pit operation.

 

What the boss says:  Michael de Villiers, chairman

“Exploration has delivered excellent results with a Company average discovery cost of US$15 per ounce, placing Ariana within the lowest international cost quartile”.

 

Video

 

Inflexion points

  • In March, Ariana said that repayments of the Red Rabbit JV loan were “over half completed”, with the balance to be “largely” paid down by end 2019. That has now risen to 70%
  • Annual production rises to to 50koz/year (from 25koz/year) following the hoped-for commencement of mine development at Tavsan during 2020.
  • Initial drilling results at Ardala/Salinbas.

What the brokers say

In a note published on 12 June, Panmure Gordon increased its target price for Ariana to 3.18p from 2.82p and reiterated its 'buy' rating on the stock. Ariana is currently the only small cap miner to hold a 'buy' rating from the broker.

Panmure said the company’s shares were currently trading at an “excessive” discount given the low-cost and profitable nature of its operations at the Kiziltepe project in Turkey.

“Ariana offers investors something not often seen in the small cap precious metals mining space: a profitable, cash generative precious metals production company with a realistic and achievable growth profile”, they added.

With the shares trading at around 2p as of 13 June 2019, Ariana carries a market cap of £20.4mln.

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