More good news from AIM-listed Turkish gold-miner Ariana Resources (AAU) in the form of Q3 numbers from the Kiziltepe joint venture. The gold price may still be in a correction, but Ariana’s shares are showing some strength and it is not hard to see why...
The maths are that Kiziltepe has posted an average revenue per gold ounce produced (including silver) of $2,219 against operating costs of just $352 per ounce. Having sold 5,125 oz of gold, that means the plant has brought in $9.6 million in just three months. There are a few reasons for the apparent margin being so high, but this is a stellar performance. Firstly, the Turkish Lira has been weak which reduces the cost of local workers against the gold and silver being swapped for dollars. The second reason is that the silver which had been held back when prices were low has been sold - at a much higher price - so it is hats off to CEO Kerim Sener and his team for that. And, of course, the gold price was far higher in Q3 than before, with the average gold price realised coming in at $1916 per ounce as opposed to $1717 in Q2. Does this mean that future revenues will drop? Well short term, maybe, but I am expecting a further bull-run for gold which will help and we are also told that work is now underway to increase the operational capacity of Kiziltepe to about 500,000 tonnes of ore per annum. Kerim Sener tells us: This will be particularly important as we look to lower grade sources of ore for the plant. The potential at Kiziltepe for larger tonnage, lower grade orebodies is evident already based on our experience of exploring and now mining of the Arzu North and Derya areas. The mine is currently producing over 200% more gold in these areas than was projected in the mine plan. We are confident that further ore will be defined in this area with future drilling programmes.
Whilst the higher grade deposit as Arzu South has been cleared out - although there remains the strong possibility of a further resource being defined there - the expansion means that production will at the very least be maintained and, I suspect, increased in the future. So it is all good news. We are also told that the final stage installation of tailings dam liners has been completed – the last piece of the mine site development plan has now been finished. As for mining at Arzu North and Derya, which is now supplying the Kiziltepe plant, we are told that although gold grades are slightly below the modelled grades, production during the quarter showed a >200% increase in mined gold over the Reserve block-model – a trend which is continuing in to the current quarter. In short, what’s not to like for this £57 million company? With developments at Salinbas still to come, not to mention a go-ahead for Ariana’s second mining plant at Tavsan still to come, there is plenty to get excited about.
The only fly in the ointment is the proposed corporate action to bring in Ozaltin to the joint venture and net Ariana $36.5 million in cash, allowing a tasty special dividend to be paid to we loyal shareholders. The process has been annoyingly slow, mainly due to Covid restrictions, but I am convinced we will get there in the end, and that confirmation will bring another re-rate to Ariana’s shares. Of course, every cloud has a silver lining and the longer this takes to complete the more cash will end up in Ariana's coffers. Judging by the Q3 numbers, Ozaltin will be champing at the bit! Pro tem, with the shares sitting at 5.35p and at up to 5.5p, I am sticking with my BUY stance, with a short term target of 7.5p. But with all the ducks lined up in the gold market for another bull-run, I still think 10p is very possible and if Kerim Sener and his team continue to perform, there will be yet more upside to come.
Filed under: Ariana Resources, Sulnox, Versarien, Union Jack Oil, Lekoil, Chamberlin
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