KIZILTEPE QUARTERLY OPERATIONAL UPDATE

RNS Number : 2448X

Ariana Resources PLC

27 August 2020

 

27 August 2020

AIM: AAU

KIZILTEPE QUARTERLY OPERATIONAL UPDATE

Ariana Resources plc ("Ariana" or "the Company"), the AIM-listed exploration and development company operating in Europe, is pleased to announce its operating results for the quarter ended 30 June 2020 for the Kiziltepe Mine ("Kiziltepe" or "the Project") in Turkey.  Kiziltepe is part of the Red Rabbit Joint Venture ("JV") with Proccea Construction Co., and is 50% owned by Ariana through its shareholding in Zenit Madencilik San. ve Tic. A.S. ("Zenit").

Highlights:

·   Gross quarterly income of US$9.90 million at an average realised gold price of US$1,717 per ounce, against an average revenue per gold ounce of US$2,116 (due to silver credit)*; higher revenue in Q2 compared to Q1 in part due to silver produced and kept in stock during Q1 being sold during Q2.

· Production and sale of 4,679 ounces of gold during the quarter ended 30 June 2020.

· Operating cash costs for the quarter are estimated at US$492 per ounce^#; the annual State Right ordinarily due to be paid in Q2 2020 will instead be reflected by Q4 2020, as a result of a payment dispensation introduced due to COVID-19.

· Operational mill availability running at 100% and utilisation at 99% during the period.

· 54,862 tonnes of ore milled during the period ended 30 June 2020 at an average head grade of 3.02 g/t Au.

· Process recovery of gold remains high at 91.8%.

* All figures are given gross with respect to the JV.

Dr. Kerim Sener, Managing Director, commented:

"The second quarter of 2020 marked the peak of uncertainty during the current pandemic.  Despite this, Kiziltepe maintained production according to plan and delivered very strong revenue at an operational cost below US$500 per ounce. This stands as testament to the focus of the whole team and their ability to remain calm under a period of unusual pressure. 

"With the gold and silver price increasing steadily throughout the quarter, following an initial sentiment-driven drop during March, corresponding to the initiation of lockdowns around the world, production from Kiziltepe was consistently sold in to an ever more positive precious metals price environment. In fact, over 30,000 ounces of silver production that had been held back from sale from late February was successfully sold at a much better price in early June.

"We are now looking forward to delivering upon another strong quarter at Kiziltepe, with July and August production in line with operational expectations. While the mine site is continuing to observe strict COVID-19 mitigation measures, we are now largely back to full staffing levels on site and operations are proceeding under far more normal conditions."

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Current Developments:

· Production of ore from the open-pits achieved an average rate of 25,726 tonnes per month over the period, with a peak rate of over 33,805 tonnes achieved in June.

· Operations in the Arzu North and Derya areas are continuing as planned, with mining undertaken primarily from Arzu North during the period; operations at Arzu South came to a close in August following the completion of the pit plan.

· Following the repayment of the US$33 million construction capital loan to Turkiye Finans Katilim Bankasi A.S., the JV is largely free of debt but maintains a separate working capital loan balance with the bank of approximately US$7.0 million which is expected to be repaid in full by October 2021.

* All production figures are quoted gross with respect to the JV in this announcement.

^# Operating cash costs are inclusive of on-site costs, off-site charges and royalties specific to the project. It also includes adjustments for stockpile balances at the end of each quarter, in addition to an adjustment for by-product silver. They exclude finance costs, taxes and development capital. The definition used to derive the cash costs is essentially the same as that used within the feasibility study. This cash cost was calculated based on unaudited figures obtained from Zenit.

Table 1: Production statistics for the Kiziltepe Mine in Q2 2020. 

Measure	Unit	Q2 2020	Q1 2020
Plant feed grade	g/t Au	3.02	3.22
Gold produced	Troy Ounces	4,679	5,129
Silver produced	Troy Ounces	61,986	67,459
Gross income	US$'000	9,901	8,844
Operating cash cost of production	US$/oz	492	533
Average revenue per gold ounce(1)	US$/oz	2,116.12	1,724.24
Average realised gold price	US$/oz	1,717.16	1,598.90

(1)  Average revenue per gold ounce accounts for both the gold and silver sold during the period and is calculated by dividing the gross income by only the gold ounces sold in the period. 

Summary of Project

The Kiziltepe operation is currently expected to deliver approximately an average of 20,000 oz* gold equivalent per annum over eight years of initial mine life, for a total of up to 160,000 oz* gold equivalent based on current resources. The operating company, Zenit Madencilik San. ve Tic. A.S. (50:50 JV between Ariana and Proccea) is making remaining repayments against a working capital loan from Turkiye Finans Katilim Bankasi A.S. based on a contractual schedule. Construction capital loan repayments totalling US$33 million were completed in April 2020, with excess cash-flow from the operation used to make proportional repayments of loans provided by Ariana and Proccea jointly to the JV for exploration and development respectively. After the repayment of all loans, profits from the operation will be shared on a 51:49 basis between Ariana and Proccea respectively.

Commercial production was initiated at Kiziltepe during July 2017 and formal quarterly production reporting commenced. The Company has also completed a new resource estimate for the project based on recent drilling and geological interpretation. Detailed technical and economic assessments will be completed on several satellite vein systems which are not currently in the mining plan, in anticipation of these being developed in future years. The Company is currently targeting a minimum ten-year mine life, which will require the addition of a further 40,000 oz* gold equivalent in reserves outside of the four main pits (Arzu South, Arzu North, Banu and Derya) that are currently scheduled to be mined. Management is confident that this can be achieved assuming the conversion of existing resources to reserves.

Contacts:

Ariana Resources plc	Tel: [phone]
Michael de Villiers, Chairman
Kerim Sener, Managing Director
Beaumont Cornish Limited	Tel: [phone]
Roland Cornish / Felicity Geidt
Panmure Gordon (UK) Limited	Tel: [phone]
James Stearns / Atholl Tweedie
Yellow Jersey PR Limited	Tel: [phone]
Dom Barretto / Joe Burgess / Henry Wilkinson	[e-mail]

Editors' Note

About Ariana Resources:

Ariana is an AIM-listed mineral exploration and development company operating in Europe.  It has interests in gold production in Turkey and copper-gold assets in Cyprus.  The Company is developing a portfolio of prospective licences in Turkey, which contain a depleted total of 1.5 million ounces of gold and other metals (as at April 2020). 

The Red Rabbit Project is comprised of the Company's flagship assets, the Kiziltepe and Tavsan gold projects, and is part of a 50:50 Joint Venture with Proccea Construction Co.  Both assets are located in western Turkey, which hosts some of the largest operating gold mines in the country and remains highly prospective for new porphyry and epithermal deposits.  The Kiziltepe Sector of the Red Rabbit Project is fully permitted and is currently in production.  The total depleted resource inventory at the Project and its wider area is c. 500,000 ounces of gold equivalent (as at April 2020).  At Kiziltepe a Net Smelter Return ("NSR") royalty of up to 2.5% on production is payable to Franco-Nevada Corporation. At Tavsan an NSR royalty of up to 2% on future production is payable to Sandstorm Gold.

The 100% owned Salinbas Gold Project is located in north-eastern Turkey and has a total resource inventory of c. 1 million ounces of gold equivalent.  The project comprises three notable licence areas: Salinbas, Ardala and Hizarliyayla, all of which are located within a multi-million ounce Artvin Goldfield.  The "Hot Gold Corridor" contains several significant gold-copper projects including the 4Moz Hot Maden project, which lies 16km to the south of Salinbas and 7km south of Hizarliyayla.  A NSR royalty of up to 2% on future production is payable to Eldorado Gold Corporation on the Salinbas Gold Project.

Ariana is also earning-in to 50% of UK-registered Venus Minerals Ltd ("Venus").  Venus is focused on the exploration and development of copper-gold assets in Cyprus.

Panmure Gordon (UK) Limited are broker 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 .

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