Ariana Resources (LSE:AAU) enjoyed a 10% lift on Thursday morning after announcing a watershed dividend payment from one of its subsidiaries.

The Turkey-focused gold firm, which currently has a £28.1 million market cap, said it has been transferred a total of £1.6 million by its operating subsidiary Galata. Since early 2018, Galata has received a total of $7.3 million from another organisation called Zenit, which is in turn a 50:50 joint venture between Ariana and a construction company called Proccea.

Zenit owns the Kiziltepe gold project in western Turkey, where commercial production began in July 2017. Until its March 2020 AGM, Zenit had paid all its outstanding dividends from profitable operations at Kiziltepe to Galata to cover loans made for the project’s initial exploration and development. These profits are now being repatriated by Galata to its parent company Ariana in the form of dividends.

Once all loans have been repaid by Zenit – which expects to pay off its remaining $33 million bank loan this month – all Kiziltepe profits will be shared on a 51:49 basis between Ariana and Proccea respectively.

Ariana’s managing director Dr. Kerim Sener said Thursday’s dividend payment represents the “culmination of many years of effort” at Kiziltepe, adding that Galata is now his company’s “cash-generative engine of growth”.

Kiziltepe currently spans four main pits and is expected to deliver an average of 20,000 ounces of gold equivalent per year over an initial eight-year mine life. However, Zenit is completing expansion work with the aim of extending this mine life to a minimum of ten years – something that will require the addition of a further 40,000 ounces of gold equivalent. The JV has completed a new resource estimate based on recent drilling and geological interpretation, and technical and economic assessments are scheduled for several satellite vein systems not currently in the mining plan.

Earlier in March, Ariana announced that 2020 gold production from Kiziltepe is expected to come in at around 18,000 ounces – nearly a third ahead of the project’s feasibility plan for this stage of mine life. Meanwhile, ore throughput to the project’s mill this year is expected to be c.205,000 tonnes – a 37% higher than estimated – while gold recovery is expected to exceed 90% at an average grade of 2.5 grams per tonne.

Elsewhere, Ariana offered investors some reassuring words in respect of the global market pandemonium currently being driven by crashing oil prices and the spread of COVID-19.

Sener said weak oil prices will have a positive effect of the firm’s processing costs, also highlighting the benefits of a strong rise in gold prices as investors flee to safe haven assets. Despite a sharp fall in recent days as investors shifted into cash in response to stimulus measure by the US federal reserve, the metal remains close to the £1,300 an ounce mark.

“These, along with other positive trends including the declining value of the Turkish Lira, reinforce the economics of the Kiziltepe operation,” said Sener.

Finally, the chief executive said that Ariana is not anticipating disruption to its production schedule as a result of coronavirus. “If this situation changes then we will inform the market," he added.

Author: Daniel Flynn

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