AIM-listed Turkish gold-producer Ariana Resources (AAU) has released Q2 results from its first Turkish gold mine at Kiziltepe, and the numbers look excellent. Of course, the real news I am awaiting is progress on the proposed corporate action to bring in Ozaltin and sell off chunks of its Turkish assets for $30 million, but the latest news does no harm to the proposition.
We already knew that Kiziltepe had produced 4,679 oz of gold, and the average sale price of $1717 per oz was no surprise. But the operating cash costs, which include royalities, came in at just $492 per ounce – a storming effort, given the disruption caused by the coronavirus. And better still was the news that 30,000 oz of silver which had been previously stockpiled when prices hit rock bottom were sold during June at better prices, to bring average revenue per ounce of gold produced and sold up to $2,116. So the maths from Kiziltepe works out that costs came in at $2.3 million and gross income was $9.9 million: a very useful $7.6 million in the kitty. Against that, there is a working capital bank loan which stood at $8.5 million in the Q1 report and now stands at $7 million, which means that $1.5 million went to the banksters. Even so, $6.1 million left over is certainly not to be sneezed at.
Indeed, it implies $12.2 million to Ariana on an annualised basis, or around £9.2 million, which is just over six times’ Ariana’s market cap. In another year and a month, the bank will have gone and Ariana’s earnings from Kiziltepe will increase further, but for the proposed corporate action. Even on Kiziltepe alone, Ariana hardly looks massively over-priced – especially if drilling eventually brings the mine life up to 10 years and beyond. Of course, the big news I am waiting for regards the proposed corporate action, in which Ariana will drop its ownership of Red Rabbit (including Kiziltepe) and Salinbas to 23.5% in return for $30 million, plus whatever deal is done with existing partner Proccea for it to buy into Salinbas, which is currently wholly-owned by Ariana. It would be nice to see progress on that – especially the special dividend which is pencilled in alongside the deal, but in the meantime shareholders can comfort themselves with the thought that Kiziltepe is throwing off a good deal of cash.
Gold and gold stocks may continue to wobble in this corrective phase, but Ariana’s share price has put on 7% on the news, leaving the shares at 5.45p – a price at which I am holding tightly. If the stock drops below 5p I will be unable to resist temptation to buy a few extra (despite my still overly-large holding). At above 6p I will offload a small parcel (around 10%), as harsh experience has taught me that you can have too much of a good thing on the AIM Casino. But if all goes to plan and the gold price resumes its run northwards, I reckon we could easily see 10p per share in the months ahead, so my advice is to hold strongly to the bulk of your shares for a good while yet.
Filed under: Ariana, Versarien, Innovate UK, Hummingbird Resources, Amigo, Tandem Group, David Scott
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