Ariana Resources (AIM:AAU) the near term Turkish gold mining company, today posted a fantastic letter to shareholders. Details are listed below
If anybody needed reminding of just what a good investment prospect Ariana is then please read the letter below carefully.
But just one reminder. The all in cash per ounce production costs of gold at the near term Kiziltepe Mine are circa $600 per pounce.
That means had Kiziltepe been in production for the last 12 months where the price of gold has averaged $1,240 per ounce
would have meant Ariana / Kiziltepe would have enjoyed a cash cost average operating
of circa $641 per ounce over the period. The prognosis for the gold price remains bullish
as market uncertainty continues.
LETTER TO SHAREHOLDERS
Ariana Resources plc ("Ariana" or "the Company"), the gold exploration
and development company focused on Turkey, is pleased to announce an
open letter to shareholders, which will be posted today on the Company's
website at www.arianaresources.com.
Dear Shareholder,
As we progress into 2015, I would like to take this opportunity to
discuss the advances made by the Company towards production in Turkey
and also to reflect on 2014, which, despite the challenging conditions
prevailing in the market, was a year of significant development for
Ariana.
Amongst the significant milestones achieved during the year were the
following:
-- EIA approval: By the end of 2013 we had successfully completed the
permitting required by the Turkish Ministry of Environment and Urban
Planning as part of the Environmental Impact Assessment ("EIA") reporting
process.
-- 20-year licence extension: Successful completion of the EIA enabled us
to apply for a 20-year extension to our primary operating licence, which
we were granted in April.
-- Tax incentives: An application to the Ministry of Economy for a series
of tax incentives and other government support mechanisms was also
approved in June. These incentives amount to an immediate US$2.2 million
saving over the eight-year life of the mine.
-- Bank loan for mine construction: On obtaining these incentives from the
Turkish Government, we successfully finalised arrangements with a Turkish
bank, Turkiye Finans Katilim Bankasi A.S., to provide a US$33 million
debt facility to fund the development of the Kiziltepe mine.
-- Surface rights obtained: 100% of the land rights were also purchased over
our primary Reserve at Kiziltepe
We are now on the cusp of moving into mine construction at Kiziltepe as
we await the delivery of the final permit for access to government-owned
land, which in our case relates to an area of forest. We are also
mindful of the frustration our shareholders may have felt concerning the
time taken for this final component to be signed off and for
construction to commence. Whilst it has not been easy to estimate
timescales in this regard, it is important to appreciate that with our
mine finance facility now in place, such permitting is very much viewed
as a procedural process, rather than an area of undue uncertainty for
the Company or its stakeholders.
In a recent development, we are now most encouraged to begin 2015 in the
knowledge that several revisions to the Turkish Mining Law have been
submitted to the Turkish parliament and are currently with the
Parliamentary Commission. We expect that these revisions, once accepted,
will help to catalyse the permitting process for the mining sector in
the near term.
Enhancing our Resource Base
As we move nearer to mine construction and production, we are also
mindful of the fact that going forward, a key area of value enhancement
for the Company will be our ability to build on and expand the size and
scale of the mineable resource at Kiziltepe through our on-going
exploration in and around the Red Rabbit Project. The results of these
efforts to date have been announced during the course of the past year
and point to considerable additional resource potential. In particular,
we see immediate along-strike and down-plunge resource potential at
Kiziltepe, in addition to resource growth opportunities at several
prospects such as Kizilcukur and Kepez. Once the Kiziltepe mine becomes
operational, we expect to convert this potential into further mineable
reserves, enhancing mine life as well as the long-term economics of the
mine. We have now advanced certain exploration targets in the vicinity
of Kiziltepe to the point of drill-testing and will be looking to
progress to the drilling stage.
Ardala-Salinbas Project Developments
Outside of our operations in western Turkey we continue to advance our
exciting Ardala-Salinbas JV project with Eldorado Gold Corp.
Shareholders will be aware that this joint venture is fully funded by
Eldorado and whilst Ariana continues to retain a 49% stake in the
project under the terms of the original JV, we also maintain a
free-carry to the feasibility study stage. Over the life of the JV,
Eldorado has spent approximately $7M for almost 19,000 metres drilled,
and we have identified a gross Indicated and Inferred JORC resource of
over 1.1 million oz gold equivalent, with approximately 569,000 of this
net attributable to Ariana.
We indicated in November last year that it was our intention to
explicitly demonstrate the value of this project to the market and we
have since been working with Eldorado to define several parameters
required for a scoping level assessment of the project. Independent
reviews of geological, metallurgical and mining data were completed and
the JV is now in the process of compiling this data as part of an
internal scoping study which will be used to gauge the potential value
of the project.
Tigris Resources IPO
We are also very pleased to see that Tigris Resources Ltd is continuing
to progress towards an IPO on the TSX-V following a capital pool
transaction with Kirkcaldy Capital Corp. and an associated fundraising
of C$1.3 million. Significantly, this transaction was supported by
Sprott Global Resource Investments Ltd. Ariana currently holds 1.75
million shares in Tigris, which will be rebranded as Royal Road Minerals
Ltd.
Special Thanks
On a more personal note, I would like to express my greatest
appreciation to my father and our founding General Manager in Turkey,
Erhan Sener, who as of year-end 2014 has retired from a full-time role
within the Company. In late 2003, Erhan was instrumental in the
establishment of Ariana's operations in Turkey; as General Manager he
brought to bear his considerable experience and expertise of the Turkish
business sector on the way we managed our operations. Erhan will now be
replaced by Fatma Yildiz, who was our licence manager and has a strong
background in mining engineering. We welcome Fatma to her new role and
wish her much success. Meanwhile, Erhan will continue with the Company
in a part-time consulting capacity.
Moving in to 2015
We are encouraged to note the resilience and renewed strength in the
gold price of late. Whilst the gold market and demand for physical gold
in Turkey has continued to remain robust throughout the down-cycle of
the last three years, a more positive global gold price environment can
only enhance overall sector sentiment. Importantly, production costs in
Turkey have remained amongst the lowest in the world and the recent
reduction in energy costs will further reduce operational costs in the
country. Considering our Kiziltepe feasibility study was completed at a
time when a barrel of oil was approximately $100, the current price
environment, if sustained, will make a considerable positive impact on
the economics of our operation, which has a current forecast operating
cost of $600/oz.
Whilst considerable advances have been made during the course of 2014,
we are acutely aware that the Company remains valued by the Market at
approximately GBP5.5 million at the current share price. In contrast,
internal estimates of the value of our assets and the resource ounces
currently attributable to the Company (based on the comparable
transaction methodology), provides hope that the Market value will
eventually begin to converge with the combined valuation of our assets,
as sentiment towards the sector improves once more.
2015 is set to be a transformational year for Ariana Resources, as we
move towards mine development, leading to maiden production and revenues
at Kiziltepe, in addition to the numerous positive developments and
expected news flow as outlined above. We believe it would be hard for
the market to overlook these positive developments and we will ensure
that the Market is aware of the significance of our news in this regard.
We look forward to updating shareholders on our developments at this
exciting time for Ariana.
Yours faithfully,
Dr. Kerim Sener
Managing Director
