My buy tip for 2019 - AIM-listed Ariana Resources (AAU) – has made the 2p to sell target price: time to take some profits, then - and where’s the ouzo? This is on the back of cracking news of a £3.8 million return of capital to the parent. The implications are that Kiziltepe is throwing off plenty of cash – way more than had been previously disclosed...
Having suggested buying at 1.55p (and up to 1.6p) I should be pretty pleased with that after about 7 weeks, but of course I first tipped it almost exactly two years ago – at 1.85p, and watched with smug satisfaction as the shares rose and rose to around 2.25p…..and then BANG – a placing at just 1.25p. That was very disappointing, but in hindsight it looks to me to have been an inevitable consequence of the late start-up at Kiziltepe which was caused by unusually severe weather. After all, the bank still needed repaying on time. My view was to hold firm (and indeed to carry on picking up more shares), although I did reduce the target to 2p from 2.25p. Well, we are there now - and my holding has got a little too big for my liking. I still believe there is quite a way for the shares to go (upwards), but you can’t take it with you and Ariana now represents too much of my share portfolio. Those who picked up shares at prices below 1.6p (and as low at 1.1p) should follow suit, in my view. It is time to enjoy some profits – which should keep me in Ouzo for a fair while! The reasons for holding on to most of my shares are that JV Kiziltepe mine will have paid off the bank in just over a year, the gold price appears set – at least at the moment – for a pretty sharp rise and Ariana has a bunch of satellite deposits to bring into the JV. Officially, I think we are still at around an 8-year mine life (with two down) and Ariana hasn’t been in a huge hurry to add to that life in the short term. I am pretty sure the life will be extended toward 15 years in the fullness of time. Then there is Salinbas, where we can hope for a decent resource to be found. Nothing guaranteed, mind, but it would be a nice bonus if it came off – and Ariana already has a million ounces of gold proved up.
I have been saying for ages that Kiziltepe should be throwing off stacks of cash once the bank has been sent packing next April, but the latest news shows that the cashflow has been far more substantial than Ariana has let on until now. We knew that Ariana has been receiving around US$ 200,000 per month in loan repayments via its subsidiary Galata Madencilik San. Ve Tic Ltd. That should have provided Ariana with enough cash to keep the plc lights on and pay for a bit of exploration and so on. But now we are told that the plc parent had received £1 million from Galata, and a capital reduction is to allow £3.79 million to be released. Better than that, the reason given is that the flow of funds from Zenit (derived from revenue achieved from the Kiziltepe Mine) will exceed the working capital requirements of Galata in the future, enabling the direct return of funds to Ariana. In other words, no further capital requirement is expected at Galata. It also means that the cashpile has been growing far faster than the US$ 200,000 per month previously disclosed, and the joint venture partners are obviously confident that the bank loans still remaining to be paid off should be secure.
So Ariana now has a cashpile of around £4.8 million, less a few plc costs. I think that puts any last lingering worries about a dilutive placing well and truly to bed. The company tells us that the cash will be used for exploration and development of the project portfolio (including the Salinbas Project) and to fund the general working capital requirements of the Group which suggests that exploration at Salinbas is well covered for some time to come. And from April 2020 the cashflow will increase substantially as the bank will have been settled. This is all tremendous news – and we still have the full quarterly report for Q4 last year to come (any day now) and production guidance for this year (probably next month). That should, I hope, give the shares a further lift even before we consider exploration news from the satellite projects around Kiziltepe which I have high hopes for, and the potential bonus of good (or even spectacular) results from Salinbas. At the current 2.025p, Ariana is still only capitalised at £21.5 million so I see plenty of reasons for further share price appreciation and I want to enjoy the ride. So I’m holding on to most of my shares even if it is time to take a bit of cash off the table. My next target is 2.5p in the absence of news – let’s hope for that in quick order. But in the longer term, if Ariana can bring in, say, £10 million a year from Kiziltepe (ie around half its current market cap) once the bank has been settled and the mine life hits 15 years (as I expect in due course), what are the shares actually worth? Surely more than 2p!
If you think £10 million is pie in the sky, consider the Q3 numbers: gross income (to the JV) $10.12 million, costs of $330 per ounce means cash generated of $7.6 million – which annualises at $30.4 million – or around £23.4 million. That leaves £3.4 million for costs and £10 million each to the joint venture partners. Of course, gold could fall or the plant may need fixing, but you get the idea – and we could see a production upgrade. So whilst I shall enjoy taking some cash off the table, there are plenty of good reasons to hold on for more with the balance of my shares. Now, where’s that ouzo?!
Filed under: Ariana, Bearcast, US market, Finncap, Dunelm, Countrywide, Norman Broadbent, Alba Mineral
RISK WARNING & DISCLAIMER - FiveFreeShareTips.com tips are provided by independent authors via a common carrier platform and do not represent the opinions of FiveFreeShareTips.com. FiveFreeShareTips.com does not accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at FiveFreeShareTips.com and via emails you receive from [email protected] are for your general information and use and are not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by the tipsters or FiveFreeShareTips.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Trading shares involves the risk of loss. The tipsters and FiveFreeShareTips.com shall not be liable for any losses or other damages incurred. The value of investments can go up or down and the past is not necessarily a guide of future performance.
Well actually it will be six. One every week day and one on Sunday, each landing with you at 11 AM sharp.
Unlike other services (which may always have a vested interest) we pride ourselves on our impartiality and cover all small caps including AIM. the Standard List, The Wider Main Market and NEX.
We cover small caps, penny shares, FTSE 350 stocks and blue chips. We look for red hot penny shares, Warren Buffett style value investments with yield and growth stocks. There is no technical analysis in our work just solid fundamental analysis from a team of experts with decades of stockmarket experience.
You will not agree with all we publish but if you are interested in small caps you cannot afford to ignore it either. Yo'll never be charged for the free share tips from Five Free Share Tips and given the star writers involved you know that they will move share prices.
There's no telephone number or postal address required and there is no charge, ever, for your Five Free Share Tips membership. Just free shares tips every day apart from Saturday And each day's share tip will not just be a few thoughts cobbled together but will be detailed analysis from experts.
Our experts do not just earn their living from writing. All own shares. If they own shares in a stock they cover they will declare it and will not sell until after advising a sell to our readers. And why not our tips are so good that why shouldn't our readers put their money where their mouth is?
Don't just take our word for it! Judge us on the calibre of our free share tips and join today to start receiving them from September 1 2017. If you don't like what you get delivered to your inbox unsubscribe and you will never hear from us again. So why not give it a go? Sign Up Now
We've put together a panel of top tipsters, including:
Tom Winnifrith, in his 27th year writing about shares, noted fraudbuster & dubbed "The maverick Tipster"
Chris Bailey, City whizz kid turned financial guru, rated as one of the top 50 commentators on shares on twitter, founder of Financial Orbit
Steve Moore, has worked with Tom Winnifrith for all bar 3 weeks of his working life - a noted commentator on value stocks
Malcolm Stacey, The Grandfather of Share Blogging, the founder of ShareCrazy & a best selling autthor of stockmarket books
Lucian Miers, the Bard of the Boleyn, one of the UK's best known short sellers
Gary Newman, writes about value investing on AIM, speciality is in share tips on oil and mining companies
Nigel Somerville, The Deputy Sheriff of AIM, an expert in forensic analysis a skill used to bust frauds but also to tip true value investments
The team from HotStockRockets, specialising in AIM and small cap shares which will fly on a three month view
Remember to book your place at the UK Investor Show 2018. The UK’s top investment show taking place on Saturday 21 April 2018 at the Queen Elizabeth II Conference Centre in Westminster, London. The show will feature a unique line-up of top speakers including Nigel Wray, tech queen Vin Murria, Dave Lenigas, Mark Slater, Tom Winnifrith, Adam Reynolds, Ed, Croft, Nick Leslau Luke Johnson and Dr Johnny Hon as well as 135 exhibiting small cap companies.
The hot share tips given here are of necessity, general. They cannot relate to the individual circumstances of investors. Anyone considering following the share tips contained here should seek independent advice from a Financial Conduct Authority authorised Stockbroker or Financial Adviser. We cannot be held liable if individuals suffer losses through following share tips contained on this site or emailed out as free share tips. The value of investments can go down as well as up. The past is not necessarily a guide to future performance. Investing in shares can lose you part or all of your capital although the potential returns are theoretically unlimited. The difference between the buy share price and the sell share price for smaller company shares (penny shares) can be significant. Profits from dealing in shares may be liable to tax - the level of tax and bases of relief from tax are subject to change. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Some of the shares recommended on this site will be smaller company shares. By their nature such investments can be relatively illiquid and thus hard to trade. And that makes such investments more of a high risk than larger company shares (or 'small caps'/'penny shares'). FiveFreeShareTips.com & its sister site ShareProphets.com defines a smaller company share as any stock traded on AIM or NEX or which has a market capitalisation of less than £300 million.