Ariana Resources forecasts 47pc gold production jump at key mine, are shares due to re-rate? (AAU)

By Patricia Miller


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Mining firm Ariana Resources (LSE:AAU) has forecast a 47pc jump in gold production at its 50pc owned Kiziltepe Mine in Turkey. The company reported gold production guidance of 20,000oz for 2018, up from 10,191oz in 2017 and around 21pc above the feasibility plan for the second year of the mine’s operations.

Alongside this forecast increase in production, the business also confirmed that it is making preparations to commence mining on satellite pits at Kiziltepe from early 2019. Ariana also reported that Gold recovery is expected to exceed 90pc at an average grade 4g/t. Kiziltepe’s mine plan forecasts monthly production of between 15,500t and 17,000t ore in 2018, increasing during Q2 and Q3.

Ore throughput to the mine’s mill during 2018 is expected to reach around 180,000t, a 20pc increase over the feasibility plans. Shares rose 1.3pc, or 0.02p, to 1.32p following the news, bringing its market cap up to £13.7m.

Kiziltepe is part of Ariana’s Red Rabbit joint venture with Proccea Construction company and is 50pc owned by Ariana through its shareholding in a business called Zenit.

Dr. Kerim Sener, managing director, said: ‘We are very pleased to have reported in early February a strong operational finish to 2017. The Kiziltepe mine continued to perform very well and maintained positive operational momentum throughout Q4 and into Q1 2018.  With our gold production guidance for the JV indicating circa 20,000 oz for the year, we look forward to delivering further towards our solid growth trajectory as a company benefitting from JV operations.  In particular, we are pleased to note that repayments of loans made by the company to the JV for the purposes of exploration and development since 2010, commenced in instalments during Q1 2018.

‘As a low-cost open pit operator, ranked in the lowest 30% of cash costs globally, the JV continues to target increases in production and life of mine.  In due course, the JV will provide a mineral reserve update, to reinforce our expectations for expanding the current open pits or possibly towards developing underground operations in the future.’

Ariana’s portfolio of prospective licences focused on epithermal gold-silver and porphyry copper-gold deposits in Turkey currently contain a total of 1.6Moz of gold and other metals. The firm’s flagship assets are Kiziltepe and Tavsan, which together form the Red Rabbit Gold Project. As a whole, the project area contains a total resource inventory of around 605,000oz of gold equivalent.

The business also owns 100pc of the Salinbas Gold Project in north-eastern Turkey, which contains a total resource inventory of around 1MOZ of gold equivalent. Salinbas is located in the Hot Gold Corridor, a multi-million-ounce goldfield. It is just 15km north of the 4Moz Hot Maden Project, 30pc owned by Sandstrom Gold after a $175m deal.

As of last month, Ariana had no debt, had cash on its balance sheet and around $500,000 worth of liquid investments. At between $570-$585px in Q3/Q4 2017, the business’s production costs are also in the lowest 30pc globally. Ariana is yet to make a profit, but these factors combined with today’s upgrade and the firm’s $14m revenues between April and December 2017, could mean its 1.3p share price is well overdue a re-rate.

Chart-wise, support appears to be building around the 1.25p zone and the share price looks likely to work its way into a triangle formation over the next few months. If this latest price dip can form a ‘higher low’, it would follow a recent ‘higher high’ and that could prove to be bullish as it moves closer to tackling resistance.

The Gold price obviously has a strong effect on future revenue streams and any further advances could assist Ariana’s share price in breaking resistance.

Authors: Daniel Flynn & Stuart Langelaan


The authors of this piece do not own shares in the company mentioned


In this article:

Author: Patricia Miller

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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