Ariana Resources (LSE:AAU) enjoyed an 8.6pc boost to 2.1p on Wednesday following the release of a robust set of 2018 results that saw it reveal enhanced gold production and profits. The £22.2m business revealed that gold output from its flagship Kiziltepe gold mine in Turkey reached more than 27,100oz over the period, 36pc ahead of guidance. What’s more, the mine achieved an average cash cost of $415/oz, placing it within the lowest cash-cost quartile for mines globally.
Alongside a project called Tavsan, Kiziltepe is part of Ariana’s 50:50 Red Rabbit JV with Proccea Construction. Both sites contain a series of prospects within two prolific mineralised districts in the Western Anatolian Volcanic and Extensional Province of western Turkey. This province hosts the largest operating gold mines in Turkey and remains highly prospective for new porphyry and epithermal deposits. The total resource inventory of the Red Rabbit Project and wider project area stands at c.605,000oz of gold equivalent.
In Wednesday’s results, Ariana said that Kiziltepe’s improved production had helped to push profit before tax up to £2.2m from £400,000 in 2017. Meanwhile, the company said that its income statement remained broadly consistent with the prior year, with administration expenses largely unchanged. It added that while a depreciation in the value of the Turkish lira led to some foreign exchange translation losses, the decline could, in fact, be beneficial as it would lead to a reduced cost base.
Elsewhere, Ariana said that the Red Rabbit JV’s financial strength had allowed it to progress Tavsan to the next stage of development. The JV is on track to complete a formal environmental impact assessment submission to the authorities for the asset in late 2019. This will precede the conclusion of a feasibility study in line with the requirements of project financing and final permitting. According to Ariana, getting Tavsan to this stage will enable Red Rabbit to increase its annual gold production rate from 25,000oz – where it currently stands – to 50,000oz. The company believes this will, in turn, influence a positive re-rating of its market valuation.
Elsewhere, Ariana said that exploration is continuing ‘apace’ across all of its project areas, with 2019 expected to come in as its business year of exploration to date. At just $15/oz, the company places within the lowest international cost quartile for prospecting. The firm added that it is also being boosted by ‘encouraging support’ from both the local community and government authorities in this area.
‘This support is essential for Ariana to continue to build upon current exploration opportunities in addition to making the necessary investments to grow our portfolio and increase the life of mine of the producing operation and in the development of new mines,’ said chairman Michael de Villiers. ‘We are encouraged to see fellow gold producers operating in Turkey announcing new mine development plans and major investments. We look forward to continuing working closely with both the local and national government offices to ensure we can contribute to this growth potential for the Turkish gold mining industry.’
Finally, Ariana said it was boosted by favourable macro conditions throughout 2018, with gold production from Kiziltepe being sold at a substantial $1,269/oz, and silver at $15/oz. The organisation said it would continue to monitor new opportunities in the energy storage and electrification of transport sectors moving forward:
‘It is encouraging to see such a seismic shift away from carbon-based polluting fuels to renewable- energy based electrification of vehicles. I personally have been a long-time adopter and advocate of this technology,’ de Villiers added. ‘This trend has opened new opportunities for exploration companies as demand increases for all the minerals required to sustain the growth expected in this new sector.
‘Industry demand for copper in this sector is obvious, but so too is the requirement for more esoteric metals including those across the full spectrum of rare earth elements and others too numerous to mention. Ariana has an extensive exploration database covering the whole of Turkey and extending into various surrounding countries within the Tethyan Metallogenic Belt. Ariana has had prior success in this sector through the discovery of various lithium prospects in Western Australia and the Northern Territory, which were successfully vended in to two separate ASX-listed companies for significant profit.
Wednesday’s results follow the news last month that low operating cash costs at Ariana’s Kiziltepe mine have continued into 2019. In a quarterly update for the Turkey-based asset, Ariana said operating cash costs for the period came in at just c.$399/oz of gold, a slight increase on the $349/oz achieved in Q4 2018.
Managing director Kerim Sener said this figure remains low in spite of the high strip ratios incurred during the pushback of the southern pit wall at an area of Kiziltepe called Arzu South. ‘This was helped by the planned draw down on stockpiles, maintenance of significant by-product silver credit and high grades through the plant during the period,’ he added.
Elsewhere, Ariana revealed that its gross income from the asset came in at $10.86m for the quarter based on an average realised gold price of $1,311/oz. This represents a slight increase of the $10.62m turnover generated by the mine in the previous quarter. Finally, gold production came in a 7,296oz over the period while silver output reached 84,109oz.
Looking forward, Ariana said that ore production from Kiziltepe’s open pit will remain restricted during Q2 and Q3 due to the continuation of work on the pushback of the southern wall of the Arzu South pit. However, the firm said this is not expected to impact output significantly.
Author: Daniel Flynn
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