In December Ariana Resources (LON:AAU) announced that, through its 86%-owned Australian subsidiary Asgard Metals Pty. Ltd, it had completed a joint agreement to vend a package of Lithium tenements in the Pilbara region of Western Australia to Dakota Minerals Limited (ASX:DKO). Broader details of the transaction can be seen in this Dakota Minerals presentation . Consideration for the transaction involves an initial cash payment to Asgard of A$147,000 and 22,500,000 fully paid ordinary shares in Dakota (worth around A$1.1m at the current share price of 5c) at which point Ariana will own approximately 8% of Dakota. Asgard will also benefit from up to 29,400,000 performance shares which will be issued on the achievement of certain project milestones. Dakota will also pay a fixed consulting fee of $98,000 to Asgard over the course of 12 months and Ariana’s Exploration Manager Dr. Francis Wedin, will join the Dakota board as Executive Technical Director.
Lithium was one of the best, if not the best performing metal of 2015 with a price increase in the period of over 100%. This transaction not only provides Ariana with a strategic investment stake in one of the brightest spots in the commodity spectrum, it also crystallises significant value for the Company and investors.
As shareholders in Ariana ourselves, we are extremely excited by this deal. The Company is already on the cusp of gold production in Turkey and now, with this transaction, Ariana is adding another exciting dimension to its business. We put some investor focused questions to Ariana’s MD Dr. Kerim Sener. You can read his answers below.
Wishing all our readers a healthy and prosperous 2016!
KS: I think that the answer to this question ultimately comes down to people. People are key to any business and we were fortunate to have been able to attract Dr. Francis Wedin back in to the Ariana fold, and to have developed the lithium strategy jointly with him. Francis had previously worked with Ariana in Turkey, also funding his PhD at Cardiff University some years ago. We like working with great people who entertain good commercial ideas, and in this case this approach is paying off for Ariana and its shareholders very significantly.
KS: The Dakota Minerals transaction was the culmination of a relationship that we had initiated earlier in the year with the Slipstream Group, one of the principals of which had been following the Asgard story for some time and with whom we had a good relationship. Following a site visit in October 2015, and together with Slipstream, we determined that there was a route to rapid commercialisation of the project. Following an evaluation of a number of listed "shell" companies and in liaising with the brokers, Argonaut, we selected Dakota as a suitable vehicle with which to complete a transaction. Argonaut we have known from our early days; receiving pre-IPO seed funding for Ariana from one of their principals.
KS: The project we are vending in to Dakota is located adjacent to and in the immediate vicinity of both the Pilbara Minerals and Altura Mining lithium resource areas. One of the principal licences contains a known outcropping lithium pegmatite occurrence which has not yet been drill-tested. This pegmatite lies on the same trend of lithium pegmatite mineralisation that Pilbara Minerals have recently been drill-testing and contains rock-chip grades in the range of 1-5% LiO2. These are good grades for a lithium pegmatite and provides confidence that the lithium potential continues in to the licences we are interested in.
KS: The long-term outlook on lithium is very sound. It is an essential component of lithium batteries which are being used more and more extensively for technological applications. The big growth area is in batteries for electric vehicles, a market that is going to witness pronounced development in the coming years, particularly in the light of significant improvements in performance of electric vehicles and as a result of increasing pressure to reduce carbon emissions globally. I think that the interest Dakota has received is a direct result of this situation and recognition that there are significant growth opportunities for lithium resource explorers and developers.
KS:The potential for lithium in Turkey was first recognised by our team in 2013 as a result of the exploration we were undertaking for gold in the vicinity of the Bigadic Borates Basin, which is one of the largest borate reserves in the world. This basin lies adjacent to our Red Rabbit Project and we recognised the potential for this region to host lithium deposits of both the Jadar (Serbia, Rio Tinto) and Sonora (Mexico, Bacanora) styles. Initial work undertaken by our team has confirmed this view and we are eager to secure ground in this region to support a broader lithium exploration strategy which complements our existing gold strategy in the region. In the longer term there is scope to vend any discovery in this area through to Dakota and our relationship with them is particularly significant in this regard.
KS: Ariana identified lithium as a commodity of interest in late 2013, identified the Pilgangoora area in early 2014 and established Asgard jointly with Dr. Francis Wedin as the vehicle to house the assets in mid-2014. In terms of direct cash expenditure by Ariana to secure the assets, this was deliberately capped at A$35,000.
KS: It is exactly that - an investment, providing exposure to a different commodity and country. The strategy behind Asgard has been carefully structured to ensure that we do not get distracted from our core business interests in Turkey. However, through our agreement with Dakota, we will be assisting them identify other lithium project opportunities globally during the next 12 months for which we will be paid an additional A$98,000. Turkey will obviously be a focus area for this, though we are also prepared to look elsewhere if we cannot secure the licences that we need in Turkey.
KS: Mine construction at Red Rabbit is proceeding well and Proccea and their sub-contractors are doing an extremely professional job. Much of the basic infrastructure is now in place and work has already commenced on the process plant site and major earthworks. At this stage we remain on target for an H2 2016 start-up of operations. We will be providing further updates and detail on progress soon through formal announcements to market.