Monday saw Ariana Resources (LON: AAU) reveal impressive 2021 gold mine production guidance figures for its Kiziltepe project in western Turkey.

At around 19,000 ounces (“oz”), the miner’s forecasted gold output for the year is nearly double Kiziltepe’s feasibility plan for this approximate mine life stage. Indeed, production is expected to reach 20,000 oz of gold per year over mine life, and is almost there already.

Elsewhere, average monthly production is forecast at around 27,000 tonnes of ore, peaking in the second 2021 quarter. It’s also worth remembering that, at more than 240,000 tonnes, Ariana’s current gold stockpile at Kiziltepe represents “well over a year of current production capacity”.

Ariana has 23.5% ownership of Kiziltepe though its shareholding in Zenit Madencilik, a joint venture between Ariana, Proccea and Ozaltin.

Other key figures for Kiziltepe include an expected throughput to the mill of around 325,000 tonnes, once operating capacity rises as planned – a sizeable 115% increase on feasibility plans.

Kiziltepe is located in the Red Rabbit project area of Turkey and is made up of the Kiziltepe and Tavsan sectors – both of which are joint ventures. Ariana holds a number of 100%-owned exploration licences in Red Rabbit, including the Kizilcukur project.

The average grade set to be mined in 2021 is approximately 2.1 grams of gold per ton of ore, while gold recovery is forecast at more than 90%.

Kiziltepe expansion

Ariana said plant expansion at Kiziltepe, boosting operating capacity to 500,000 tonnes of ore per year, is “well underway”. This is set to complete early in the third quarter despite Covid-related supply issues and a new mill has already been installed.

Kerim Sener, managing director at Ariana, said: “With the enhanced JV now formally underway, we are pleased to report on JV plans to increase the operational capacity at Kiziltepe. This will see a marked positive impact on production output and will continue to ensure the lowest possible unit costs.”

The exploration plan is being funded through a $6.6 million capital loan to Zenit from Turkiye Garanti Bankasi, with 25% of the loan already repaid and just nine quarterly payments left to go.

This comes after a previous $33 million capital development loan was repaid to Turkiye Finans Katilim Bankasi in early 2020, while its remaining working capital loan with the same bank is about 70% complete, with $3.1 million still requiring payment.

Open pit mining in 2021 is set to continue mostly in the Arzu North pit, though some mining will take place at the Derya pit at the same time.

Sener said work on Arzu North has already identified “significant additional gold mineralisation” outside the original mine reserve. The managing director added that this could positively impact Ariana and its partners’ mining schedule, “which is nominally targeting circa 19,000 oz gold in 2021”.

Positive macro economics

According to Sener “the continued positive economic environment for gold and silver” is what underpins Kiziltepe, with both trading as almost five-year highs as the coronavirus drove investors towards safe haven assets.

The gold price has come under pressure of late, with investors looking to a post-pandemic world. However, there is good cause to believe gold will pick up again when investors wake up to reality. Notably, the US issued more debt in the two weeks following the 2020 pandemic crisis than in the previous five recessions combined.

Sener specifically highlighted concerns around “over unsustainable levels of debt within major economies” as a reason why gold and silver are likely to keep “their time-honoured position in the minds of investors”.

The managing director acknowledged that, while oil prices are “somewhat” higher than they were at the end of 2020, the Turkish Lira’s decline relative to the US dollar has continued. This, he said, has led to “lower dollar-based unit costs”.

Big plans

Now the joint venture is in place, Sener noted, the goal is to advance its collective interest in Turkey, including continued exploration and development on the joint venture’s behalf.

Elsewhere, Ariana is hoping to make progress on its Cyprus-based earn-in and exploration programmes for Venus Minerals, where it has acquired an up to 50% stake though an earn-in agreement. The firm is also “pursuing separate opportunities elsewhere in Eastern Europe”.

Sener concluded that: “2021 is set to be an exciting year for the company and we look forward to updating the market on these activities in due course.”

Author: Anna Farley

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