COMPANY UPDATE AND US$2 MILLION LOAN FACILITY
26 January 2011
AIM / PLUS Markets: AAU
COMPANY UPDATE AND US$2 MILLION LOAN FACILITY
Ariana Resources plc ("Ariana" or "the Company"), the gold exploration and development company focused on Turkey, announces an update on the development and current financing status of the Red Rabbit Gold Project in Western Turkey.
Highlights:
Remaining components of the Feasibility Study for the Kiziltepe Sector of the Red Rabbit Gold Project are being compiled, with work now having commenced on the Tailings Storage Facility ("TSF") design and engineering plans.
TSF design and engineering study expected ahead of receiving permits for construction start-up, targeted during H2 2012. Accordingly, first production is now projected for 2013.
Following Proccea Construction Co.'s ("Proccea") current US$1.4 million investment in the Red Rabbit JV, Ariana has agreed to make available a short-term loan of US$600,000 to be shared on a 50:50 basis with Proccea to cover any shortfall in the development budget for phase one.
Acquisition of strategic freehold land has commenced in the vicinity of Arzu South - a key hurdle for the permitting of the project ahead of production.
US$2 million loan agreement completed with YA Global Master SPV Ltd ("YA Global") to assist with the funding of Red Rabbit Project development.
Dr. Kerim Sener, Managing Director, commented:
"The development of our flagship Red Rabbit Gold Project continues to progress as we achieve key operational and corporate milestones. In line with this, our current focus is on the publication of our Feasibility Study, which is now nearing completion, with current work concentrating on minimising strip ratio and reviewing process engineering designs to ensure capital and operational efficiencies.
"I am also delighted to announce the initiation of strategic freehold land acquisitions in the vicinity of the planned Arzu South pit, which is one of the last major hurdles for the permitting of the project. In addition, the Company's has secured an agreement for a US$2 million loan to cover current funding requirements for the development of the Red Rabbit Project. However, due to some delays relating to new environmental regulations, first production from the project is now projected in 2013, and we will keep investors abreast of developments in this regard over the course of 2012.
"Encouragingly, we keep an active dialogue with all of the appropriate government departments and they remain highly supportive of the onward development of the project. Our aim now is to finalise all of the permitting and study work in order to expedite the advancement of Red Rabbit into production."
Red Rabbit Project Update
Feasibility Study
The Company is pleased to announce that its consultants Tetra Tech WEI ("Tetra Tech") is proceeding with the recommended remaining work on the Feasibility Study ("FS"), following the completion last year of its Pre-Feasibility Study ("PFS") on the Kiziltepe Sector of its Red Rabbit Gold Project in western Turkey ("Red Rabbit" or "the Project"). The feasibility work is currently focusing on certain modifications to the design of the open pits to minimise the strip ratio and reviewing the process engineering designs, OPEX and CAPEX. It is currently expected that this work will be completed in Q2 2012.
Tetra Tech has also advised that it is now utilising a base case price model of US$1,200/oz and US$23/oz for gold and silver respectively, using the forecast long-term prices obtained from the Energy and Metals Consensus Forecast.
Tailings Storage Facility
Due to certain changes to Turkish environmental regulations in 2011, the Company is now advancing its critical Tailings Storage Facility ("TSF") design and engineering work with EKASU-IMC Co. consultants in Turkey, rather than with Tetra Tech as originally conceived. As a consequence of delays receiving consents from certain government departments for additional geotechnical and hydrological drilling in the designated area for the TSF, the Company has not been able to progress this aspect of its FS at the rate initially envisaged. However, progress on the first of two stages of the TSF study is well underway with EKASU-IMC Co. and the final engineering designs are expected in advance of the commencement of permitting for construction. The permitting for construction start-up is targeted during H2 2012.
Project Financing
The financing of Phase 1 of the Red Rabbit Joint Venture ("JV") has now been completed by Proccea Construction Co. ("Proccea"). Following the investment of US$1.4 million, Proccea currently holds 13% of the JV subsidiary, Zenit Madencilik San. ve Tic. A.S. ("Zenit"), as contemplated in the JV shareholders agreement. Ahead of receiving funding for the mine start-up, Ariana and Proccea have agreed to fund any shortfall in the budget for completion of Phase 1 of the JV by providing equal loans to Zenit, which will be repayable once finance for the mine start-up is secured. The projected shortfall in the Phase 1 budget is now estimated at US$600,000, which will be shared by Ariana on a 50:50 basis with Proccea. This will ensure that the funds to be made available to Zenit in Phase 2 of the JV by Proccea remain fixed at US$6.6 million to enable Proccea to complete its earn-in to 50% of the JV. Management control of the JV company currently remains the responsibility of Ariana.
Following receipt of the formal PFS report from Tetra Tech, discussions have been initiated with various financial institutions concerning the future financing of the project. Based on the current capital cost estimate of US$28.4 million, Zenit will seek a financing facility of approximately US$22 million to fund the development of the mine. It is expected that these discussions will be advanced in parallel with the completion of the FS such that final permitting for construction can commence during the second half of 2012.
Land Acquisitions
Ariana has agreed with Proccea to provide the initial funding for the acquisition of key strategic freehold land in the vicinity of the planned Arzu South pit. This is being managed by a new subsidiary of Ariana known as Camyol Gayrimenkul, Madencilik, Turizm, Tarim ve Hayvancilik Ltd ("Camyol"). The company is 99% held by Ariana's Turkish subsidiary, Galata Madencilik San. ve Tic. Ltd. with the remaining 1% of Camyol held by Zenit. To date Camyol has purchased approximately 83,830m2 of land at a fixed price negotiated with and accepted by the local landholders. Approximately three-quarters of the freehold land in the Arzu South area now belongs to Camyol, with further acquisitions planned in Q1 2012. The acquisition of this freehold land is one of the last major hurdles for the permitting of the project. Any land acquired by Camyol in this manner will either be sold in to or leased to Zenit for the duration of the project.
Financing
Ariana has completed a US$2 million loan agreement with YA Global Master SPV Ltd ("YA Global" or "the Lender"), which is advised by Yorkville Advisors LLC ("the Loan"). The Loan will be made available in two tranches, the first for US$750,000, which will be repaid in ten instalments, with the final instalment due in January 2013. The second tranche will be made available following repayment of the first tranche and subject to the mutual agreement of Ariana and YA Global. The loan will be utilised specifically on the current funding requirements for the development of the Red Rabbit Project, as referred to above.
Interest at a rate of 10% per annum on the outstanding loan amount, together with an implementation fee of 10% on each advance, is payable with each instalment.
YA Global has the right to convert the outstanding loan amount at any time into ordinary shares of the Company of 1p ("Ordinary Shares") at a price of 6.65p, being the 150% of the volume weighted average price (VWAP) for the five trading days prior to 23 January 2012.
In the event that the Company defaults on its obligations under the loan agreement, then the Lender may repay the Loan by draw down under the Standby Equity Distribution Agreement ("SEDA") entered into by the Company with YA Global on 20 January 2011.
Yorkville Advisors LLC is an investment manager headquartered in Jersey City, New Jersey. Yorkville is active across North America, Europe and the Asia-Pacific region, and operates in the UK through its affiliated entity Yorkville Advisors UK LLP.
Contacts:
| Ariana Resources plc | Tel: +44 (0) 20 7407 3616 |
| Michael Spriggs, Chairman | |
| Kerim Sener, Managing Director | |
| Beaumont Cornish Limited | Tel: +44 (0) 20 7628 3396 |
| Roland Cornish / Felicity Geidt | |
| Fairfax I.S. PLC | Tel: +44 (0) 20 7598 5368 |
| Ewan Leggat / Laura Littley | |
| St Brides Media & Finance Ltd | Tel: +44 (0) 20 7236 1177 |
| Susie Geliher / Hugo de Salis | |
Editors' note:
Dr Kerim Sener, BSc (Hons), MSc, PhD, is the Managing Director of Ariana Resources plc. A graduate of the University of Southampton in Geology, he also holds a Master's degree from the Royal School of Mines (Imperial College, London) in Mineral Exploration and a doctorate from the University of Western Australia. He is a Fellow of The Geological Society of London and has worked in geological research and mineral consultancy in Southern Africa and Australia. He has read and approved the technical disclosure in this regulatory announcement.
About Ariana Resources:
Ariana is an exploration and development company focused on epithermal gold-silver and porphyry copper-gold deposits in Turkey. The Company is developing a portfolio of prospective licences selected on the basis of its in-house geological and remote-sensing database, on its own in western Turkey and in Joint Venture with European Goldfields Limited in north-eastern Turkey. European Goldfields owns 51% of this joint venture and, as the operator, is fully funding all exploration work on the JV properties until delivery of a feasibility study.
The Company's flagship assets are its Sindirgi and Tavsan gold projects which form the Red Rabbit Gold Project. Both contain a series of prospects, within two prolific mineralised districts in the Western Anatolian Volcanic and Extensional (WAVE) Province in western Turkey. This Province hosts the largest operating gold mines in Turkey and remains highly prospective for new porphyry and epithermal deposits. These core projects, which are separated by a distance of 75km, are presently being assessed as to their economic merits and now form part of a Joint Venture with Proccea Construction Co. The total resource inventory of the Company stands at 448,000 ounces of gold equivalent.
Ariana also has a strategic investment in Tigris Resources Limited (www.tigrisresources.com), a private Jersey-based exploration company, which is focused on the exploration of copper and gold deposits in southeastern Turkey. Ariana retains approximately 13% of Tigris Resources Limited.
Fairfax I.S. PLC are brokers to the Company and Beaumont Cornish Limited is the Company's Nominated Adviser.
For further information on Ariana you are invited to visit the Company's website at www.arianaresources.com.
Ends
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Ariana Resources plc via Thomson Reuters ONE
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