Turkey-focused exploration and development firm Ariana Resources (LSE:AAU) is currently sitting at its highest level in nearly eight years following a strong period for newsflow.
The copper/gold firm, whose interests include the Red Rabbit joint venture (“JV”) with Proccea Construction and the 100%-owned Salinbas project, was up 6.4% at 3.5p on Friday with a £35 million market cap. The latest trigger was a bullish update for the Kiziltepe gold mine in western Turkey, which forms part of the Red Rabbit joint venture.
Ariana revealed that gross income from the mine in 2019 came in at $45.1 million following record gross quarterly income of $12.78 million in the final quarter. Alongside a sustained increase in gold prices throughout the period, the mine was boosted by gold production of 27,985 ounces, which exceed its full-year guidance by around 12%.
Moving forward, Ariana’s managing director Kerim Sener said the firm was excited by resource growth opportunities identified at Kiziltepe as well as progress at Tavsan – the second property in the Red Rabbit JV. Work here, according to Sener, provides an opportunity to deliver an additional 30,000 ounces of gold a year to the JV as a whole, which could push total output to 50,000 ounces annually.
The latest results and outlook for the Red Rabbit JV paint a very bright picture for Ariana’s future when combined with activity across the remainder of the firm’s portfolio.
The organisation is currently in talks with a “major Turkish construction and engineering company” interested in taking a 17% stake in its Salinbas mine for $5 million. The third-party, which is currently completing extensive due diligence at the gold/silver project, would then inject a further $8 million and organise bank financing to expedite the process of developing a producing mine.
The partner is also looking to take on 53% of Zenit, the operating company for the Red Rabbit JV, in exchange for a $50 million payment that would be split between Ariana and Proccea. Under the terms, Zenit would absorb Salinbas’ operating company Greater Pontides “at the appropriate time”.
Meanwhile, Ariana announced in December that it would earn-in to up to a 50% position in a selection of Cyprus-based copper and gold assets owned by Venus Minerals.
The bottom line is that the market is responding well to the narrative that Ariana is developing. This is not surprising, given that production remains in place, things seem to be moving forward at all of the company’s existing projects, and new opportunities are being created.
A significant milestone will be the outcome of JV talks with the as-yet-unnamed third party, who recently extended its due diligence efforts at Salinbas. Although the proposed terms of the JV would see loosen Ariana’s hold over many of its assets, it would also see a vast amount of capital injected into its fantastic opportunities. Over the long-term, this could be for the greater good for both Ariana and its shareholders.
If the company can complement this new opportunity with a steady stream of positive production updates and progress in Cyprus, then it will be interesting to see where its £34.9 million market goes from here.