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Ariana Resources PLC (AAU)

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Wednesday 14 July, 2021

Ariana Resources PLC

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020

RNS Number : 1362F
Ariana Resources PLC
14 July 2021
 

 

 

 

 

14 July 2021

AIM: AAU

FINAL AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020

NOTICE OF ANNUAL GENERAL MEETING ("AGM")

Ariana Resources plc ("Ariana" or "the Company"), the AIM-listed exploration and development company operating in Europe, announces its final audited results for the year ended 31 December 2020.

The Report and Accounts will be posted to shareholders as applicable, and are available on the Company's website ( www.arianaresources.com ) , and extracts are set out below.

The AGM will be held at the East India Club, 16 St James's Square, London, SW1Y 4LH on Wednesday, 18 August 2021 at 11:00 am.

The Company also announces that Dr. Kerim Sener, Managing Director, and Michael de Villiers, Chairman, will provide an investor webinar on Tuesday, 20 July 2021 at 10:00 am.

The webinar is open to all existing and potential investors and will consist of a brief update on the final results followed by Q&A session, held on the Investor Meet Company platform.

Investors can sign up to Investor Meet Company for free and then click "Add to meet" Ariana Resources via the following link to join the webinar:

https://www.investormeetcompany.com/ariana-resources-plc/register-investor  .

Investors who have already registered and clicked "Add to meet" Ariana Resources, will be automatically invited.

· Investors are encouraged to submit questions pre-event via the Investor Meet Company Platform, once registered.

· Questions can be submitted pre-event via the "Ask a Question" function located on your Investor Meet Company dashboard, in addition questions can be submitted during the live event.

· Whilst the Company will not be in a position to answer every question it receives, it will address the most prominent within the confines of information already disclosed to the market through regulatory notifications.

· Responses to the Q&A will be published at the earliest opportunity on the Investor Meet Company platform.

· Investor feedback can also be submitted directly to management post the event to ensure the Company can understand the views of all elements of its shareholder base.

Chairman's Statement

 

Fellow shareholders,

 

I am pleased to report that Ariana has again had an outstanding year with gold production at 18,645 ounces, at an average life of mine cash cost less than US$500 per ounce, alongside a most successful ongoing exploration programme.  This set the stage for a transformational transaction concluded after the year end, whereby Ariana sold a significant portion of its Turkish assets for a cash consideration, whilst still maintaining a sizeable share of the cash-generating operations, enabling Ariana to continue to implement its successful exploration and development strategy.

 

During the period, the Kiziltepe Mine continued to perform well above feasibility rates.  This has been the case since the commencement of operations and is testament to the determination and professionalism of the operating team.  Despite the challenges of the COVID-19 pandemic, they have managed to advance production, exploration drilling and plant expansion work simultaneously.  The plant expansion, which is expected to be commissioned during the second half of 2021, allows for a doubling of the current level of mill throughput.  This will enable a lower unit cost, as lower grade ore is brought on stream. Excellent exploration and development work has identified extensive additional mineral resources in the immediate vicinity of the plant, which have the potential to extend the life of mine significantly.

 

The mine continued to produce gold in the lowest cost quartile internationally.  This has enabled both the repayment of the original construction loan and an ongoing profit distribution to the Joint Venture ("JV") shareholders.  This quality of operation enabled the original JV partners to attract a highly regarded third JV partner, namely Özaltin Holding A.S., which bought a 53% stake in Zenit Madencilik San. ve Tic. A.S., now incorporating the Salinbaş Gold Project, in addition to the Kiziltepe Mine and the Tavşan Gold Project.  We now have a three-way partnership working on our Turkish portfolio of assets and we are looking forward to the accelerated development of these projects.

 

Over the last year, the delays and obstacles arising from the ongoing pandemic naturally led to the direction of available manpower predominantly to the Kiziltepe Mine.  Fewer resources were physically deployed on the other Company assets, though project work continued across the portfolio, leading significantly to several important resource updates.  Currently the Tavşan Project is awaiting its Environmental Impact Assessment approvals and various provisional permitting applications are in process.  At the present rate of progress, we are expecting production at Tavşan to be achieved from late 2022.  Meanwhile, further work is ongoing at the Salinbaş Project, with a new drilling programme scheduled to commence later in 2021. 

 

While presenting some challenges, this new operating environment has also introduced a number of new opportunities, which, along with the successful completion of the Özaltin JV transaction, will allow Ariana to pursue more ambitious exploration programmes.  This is being pursued predominantly through the use of freely available information and databases integrated with data held by Ariana.  This is a highly technical process of data interpretation and target definition, which our exploration team is particularly skilled in.  We use this information to develop partnerships with carefully chosen collaborators who then go on to develop assets.  This approach has yielded success many times in the past.

 

The Ariana team has never been afraid of drilling up a "duster".  Yet in my 16 years of recollection there have not been many, if any at all.  When undertaking new exploration, one must allow for the occasional "miss" when aiming at a new target.  It takes a lot of courage and determination to launch into a new territory and most definitely needs the support of a close team to undertake such new ventures.  It seems appropriate to take inspiration from one of the most prolific goal scorers, Wayne Gretzky, whose mantra was "you missed 100% of the shots you don't take".  With that in mind, I am encouraging our very talented and dedicated exploration teams to carry on with their excellent work, with the assurance that there is 100% support, and the understanding that we are all in this for the long game, for that next mega discovery which is just over the next hill.

 

What Ariana is particularly good at is seeing the big picture: where to look next and with whom to collaborate to achieve the best outcome.  To this end, we have taken a global view of the Tethyan Metallogenic Belt ("TMB"), our area of expertise, then delved into our extensive database of potential targets and pulled in our best partners for collaboration in these areas to form a number of new exploration opportunities.  This is now taking the form of Western Tethyan Resources Ltd, a company which is focused on the Eastern European end of the TMB, while we continue to support the successful work of Venus Minerals Ltd on the island of Cyprus.  Meanwhile, further exploration and development will continue in Turkey via our well-established operations hub in Ankara, where Ariana is establishing a dedicated office and technical centre.  This is allowing a full multidisciplinary team to work on both data and material samples under one roof.  This is both an effective and efficient operation in a very well-resourced location.  Via these regional partnerships, Ariana has reach over 2,500km of some of the most prospective territory for gold, silver and copper deposits in the world.

 

Any company's annual review would be incomplete without some discussion and comment on "the herd of elephants in the room" in our sector.  To mention just a few of these: the magnitude of the pandemic has probably taken most of us by surprise and left many of us considering what are the most important things to us in our working and private lives.  To that end, it is probably worth thinking of what one's core values are and what we deliver in our day-to-day work.  I can honestly say that the Ariana team are focused on delivering the most professional job possible despite the challenges of the moment.  The dedication and focus of our team is admirable and the Company is especially grateful.

 

The other elephant in the room, and an important subject undergoing continual internal review, is Environmental, Social and Governance ("ESG").  I see this subject as being largely about one's core values and how we interact with our stakeholders and the environment.  In the broader sense, stakeholders are as wide ranging as the environment in which we operate, the communities located around our exploration prospects, the Kiziltepe mine community and the ultimate beneficiaries of our commercial endeavours, our staff and shareholders, in addition to local and national economies.  In all areas this range of stakeholders must be treated with fairness and respect, as well as being kept informed about aspects of the Company's affairs that materially affect them.  This relationship is inevitably a two-way street of communication with both sides practising active listening and respect for one another's point of view.  It is through this process that I think we learn the most. 

 

Of course, the one stakeholder which does not have a voice of its own needs special mention here.  I think the environment and climate change should be discussed as a broader and integrated topic.  While the extractive industries continue to get the blunt edge of media attention, it is plainly obvious that human civilisation cannot exist without incurring an impact on the Earth.  All primary industries, whether it is fishing, farming, forestry or mining, leave a physical and lasting impact, altering the environment through their presence.  One only has to view Google Earth to see the massive physical evidence of sea pollution, farming, forestry and the odd mining or tailings dam site.  However, of all industries in my opinion, mining delivers significantly more permanent benefit relative to its physical impact on the Earth.  We cannot change the fact that our industry has already had a significant impact and made many mistakes.  Nevertheless, we can positively affect the future and our overall environmental impact going forwards.

 

With this in mind, Ariana aims to continue to explore for our natural assets in a constructive and sustainable manner, very conscious of our legacy.  Mining for resources predates farming and probably followed mankind's first hunting and fishing activities.  As we now try to live in closer harmony with our natural world and take steps towards living in the least polluting way, we will also need to continue to explore for the minerals that will allow for greater electrification and pollution-scrubbing of fossil fuels.  Ariana will continue along this theme, to look for sizeable deposits in the copper, gold and silver space along with other elements, set against the backdrop of the requirement for a cleaner environment.  The mining industry has been the leader in dealing with the ESG agenda for decades, ahead of many other industries.  It has been at the top of the agenda on all the mining projects I have ever been involved with during my working life. This will continue to be the case.  A lot more thought and resources should be invested in mineral exploration to deliver our ongoing needs for new minerals and the clean and effective use of remaining resources.

 

We cannot leave the discussion of "elephants in the room" without considering the largest destination for much of what is mined, that being Asia, in particular China.  China is by far the largest consumer of coal and iron and is consequentially the largest producer of industrial pollution by some margin.  China has made very clear steps towards disinvesting out of polluting industries and increasing investment in cleaner energy alternatives.  It is a very well publicised fact that there are simply not enough of the required battery and electrification metals available to meet the forecast demand for a significant switch to broader electrification.  This trend, along with worldwide government stimulus and post-pandemic investment, further supports the view that whilst we have been in a commodities super-cycle for some time, this is likely to continue with the help of Chinese demand, placing Ariana in the right place at the right time to continue to enjoy this growing trend.

 

With Ariana now looking at a wider field of potential exploration, it is appropriate that we have a wider spread of our team and partners across our theatres of operation.  This currently ranges across Australia, Cyprus, Kosovo, Turkey and the UK.  Our team is consequently able to cover nine time zones and a multitude of prospective geological regions simultaneously.  This strategy allows for "boots on the ground" and "the eyeball mark one" to be deployed without any need for international air travel, which in itself satisfies a significant part of our ESG commitment going forward.

 

Last but not least, we intend to reward our shareholders who have remained invested over the long haul through the payment of dividends.  Court approval of our capital reorganisation has been received and this will enable the declaration of a dividend which the Board will announce in due course.  As current guidance on AGM regimes is returning to face-to-face meetings, with social distancing, it may again be possible to meet you in person to present our results and provide a company update.  We would however still encourage you to exercise your proxy votes well in advance of the AGM date as you did last year. I would like to close by thanking our corporate advisors and growing clan of strategic partners for their dedication and support in helping Ariana achieve its ongoing success.

Financial Review

 

The Group recorded a profit before tax for the year of £5 million, compared to £7 million in the prior year. The key driver of this was the decline in profitability of our Joint Venture company, Zenit Madencilik San. ve Tic. A.S. ("Zenit"), where our share of their profit for the year reduced by £1.4 million, as set out in note 6 to the accounts.  Despite the price of gold being strong over the period, and operationally the Company remaining very robust, the decline in performance was in part due to the lower grade ore being processed through the plant.  However, the JV company remains in a very strong position, having paid off all its original capital loans, and the plant is currently being expanded to increase throughput to match the expanding resource base.

 

Otherwise on the Group Income Statement front, there are few surprises - costs remain broadly constant year on year, with no write downs of previously capitalised exploration expenditure.  Within Other Comprehensive Income, there continues to be a large charge recorded in respect of the foreign exchange loss due to the weakening Turkish Lira.  This represents the revaluation of Group assets denominated in Lira, so does not directly impact us operationally.  Fortunately, our implicit revenue stream from Zenit's gold production is directly linked to the US dollar denominated price of gold.

 

As far as the Statement of Financial Position is concerned, our primary assets are our aforementioned investment in Zenit, which increased in value due to our share of the company's net assets increasing year on year, along with our investment in Salinbaş.  As referenced in note 25, the Group concluded the disposal of both these assets in February 2021, and so we have transferred the cost of Salinbaş to current assets at the year end to reflect this.  In the future we will continue to record our ongoing investment in 23.5% of the share capital of the enlarged Zenit by way of equity accounting, i.e. our share of that company's profits and net assets, in our published accounts.

 

The Statement of Financial Position also reflects our earn-in to our Cyprus venture - at the year end we had spent £1.2 million, which is being converted to share capital as we earn into our full 50% stake in due course.  In cash terms the Group performed strongly with a net increase in cash of £2.5 million, arising mainly from repayment of loans and dividends from Zenit.

 

The disposal of part of our interests in Turkey for a consideration before costs and taxation of US$35.75 million (with a further US$2 million due to be paid in instalments following the transfer of the Satellite Projects), approved by shareholders prior to the year end but concluded in February of this year, together with the capital reorganisation finalised through the Courts in June of this year, has put the Group firmly on a path towards payment of dividends going forward; a suitable return for our loyal shareholders.

Outlook

 

With some of the difficulties of 2020 behind us, we are now looking strategically and operationally to the horizon of the next decade.  Since our IPO in 2005, we have transformed the Company from a junior gold explorer to one which is sustainably self-financing, holding a diverse portfolio of mineral exploration, development and mining project investments.  Most importantly of all from an investor perspective, the Company can demonstrate a robust track-record across several metrics which, among others, includes our industry-leading discovery cost per ounce of gold and our operational cash-costs which are in the lower quartile internationally.  From an environmental stand-point, our joint venture operations produce gold at a CO2 per ounce level which significantly beats the international average.

 

Having diligently built these solid foundations for our future business during the best part of the past two decades, we very much look forward to the new "Roaring 20s".  As it was 100 years ago, with the world having emerged from a catastrophic pandemic, so will it be today. While the 1920s were marked by the development of technologies which enabled commercial flight, liquid-fuelled rockets, energy distribution and television, the 2020s will be marked by the development of commercial space-flight, renewable energy, artificial intelligence and virtual reality, amongst other technological advances.  With the global population having increased by 430% over the past century, the increased requirements of these and other industries on the mining sector are unprecedented.  Your Company finds itself at the dawn of this new age with the capability and financial resources to meet these demands head on.

 

Stated simply, our reinvigorated purpose is to discover the mineral resources needed by mankind faster, better and cheaper than our competitors.  We will continue to achieve this by mitigating risks, mobilising cutting-edge technologies, minimising environmental impact and maximising partnerships with local communities.  In addition, very unusually for a mineral exploration and development company, we are advancing a strategy to enable the Company to pay dividends over the long-term.  This is in recognition of the important role played by our shareholders, who provided the risk-capital we required during our formative period and in the expectation of facilitating a virtuous circle of future investment in our Company.

 

Michael de Villiers

Chairman

13 July 2021

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2020

Continuing operations

Note

2020

£'000

2019

£'000

Administrative costs


(1,360)

(1,242)

General exploration expenditure


(35)

(18)

Intangible exploration assets - written off

11a

-

(364)

Other gains

4

-

627

Other income


-

61

Operating loss

5

(1,395)

(936)

 

Profit/(loss) on disposal of equity securities at FVOCI


-

20

 

Share of profit of Joint Venture accounted for using the equity method

6

6,478

7,891

 

Investment income


7

5

 

Profit before tax


5,090

6,980

 

Taxation

8

(327)

(46)

 

Profit for the year from continuing operations


4,763

6,934

 

Earnings per share (pence) attributable to equity holders of the company




 

Basic and diluted

10

0.45

0.65

 

 

Other comprehensive income




 

Items that are or may be reclassified subsequently to profit or loss:




 

Exchange differences on translating foreign operations


(3,647)

(1,774)

 

Items that will not be classified subsequently to profit or loss:




 

Net change in fair value of equity securities at FVOCI

13

-

49

 

Other comprehensive loss for the year net of income tax


(3,647)

(1,725)

 

Total comprehensive profit for the year


1,116

5,209

 

 

The accompanying notes form part of these financial statements.

 

Consolidated Statement of Financial Position

For the year ended 31 December 2020

 


Note

2020

£'000

2019

£'000

Assets

Non-current assets




Trade and other receivables

15

100

93

Intangible exploration assets

11a

-

16,404

Intangible assets

11b

168

187

Land, property, plant and equipment

12

41

50

Earn-In advances

13

1,206

-

Investment in Joint Venture accounted for using the equity method

6

11,213

7,768

Total non-current assets


12,728

24,502

Current assets




Trade and other receivables

16

298

4,574

Cash and cash equivalents


2,978

453

Assets classified as held for sale 

18

16,002

-

Total current assets


19,278

5,027

Total assets


32,006

29,529

Equity




Called up share capital

19

6,070

6,054

Share premium

19

12,053

11,821

Other reserves


720

720

Share based payments

19

307

364

Translation reserve


(9,617)

(5,970)

Retained earnings


17,164

12,298

Total equity attributable to equity holders of the parent


26,697

25,287

Total equity


26,697

25,287

Liabilities




Non-current liabilities




Deferred tax liabilities

20

-

2,273

Other financial liabilities

21

-

1,651

Total non-current liabilities


-

3,924

Current liabilities




Trade and other payables

17

1,385

318

Liabilities directly associated with classified as held for resale

18

3,924

-

Total current liabilities


5,309

318

Total equity and liabilities


32,006

29,529

 

The accompanying notes form part of these financial statements.

 



 

Company Statement of Financial Position

For the year ended 31 December 2020

 

 


Note

2020

£'000

2019

£'000

Assets

Non-current assets




Trade and other receivables

15

7,027

8,508

Investments in group undertakings

14

377

365

Earn-In advances

13

1,206

-

Total non-current assets


8,610

8,873

Current assets




Trade and other receivables

16

-

534

Cash and cash equivalents


-

-

Total current assets


-

534

Total assets


8,610

9,407

Equity




Called up share capital

19

6,070

6,054

Share premium

19

12,053

11,821

Share based payments reserve

19

307

364

Retained earnings


(9,826)

(8,838)

Total equity


8,604

9,401

Liabilities

Current liabilities




Trade and other payables

17

6

6

Total current liabilities


6

6

Total equity and liabilities


8,610

9,407

 

The accompanying notes form part of these financial statements.



 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2020

 


Share

capital

£'000

Share

premium

£'000

Other

reserves

£'000

Share

based

payments

reserve

£'000

Translation reserve

£'000

Retained

earnings

£'000

Total attributable to equity holders of parent

£'000

Changes in equity to 31 December 2019








Balance at 1 January 2019

6,054

11,821

720

250

5,315

19,964

Profit for the year

-

-

-

-

-

6,934

6,934

Other comprehensive income

-

-

-

-

49

(1,725)

Total comprehensive income

-

-

-

-

6,983

5,209

Share options

-

-

-

114

-

114

Transactions with owners

-

-

-

114

-

114

Balance at 31 December 2019

6,054

11,821

720

364

12,298

25,287

Changes in equity to 31 December 2020








Profit for the year

-

-

-

-

-

4,763

4,763

Other comprehensive income

-

-

-

-

-

(3,647)

Total comprehensive income

-

-

-

-

4,763

1,116

Issue of ordinary shares

16

232

-

-

-

-

248

Share options

-

-

-

46

-

-

46

Transfer between reserves

-

-

-

(103)

103

-

Transactions with owners

16

232

-

(57)

103

294

Balance at 31 December 2020

6,070

12,053

720

307

17,164

26,697

 

The accompanying notes form part of these financial statements.



 

Company Statement of Changes in Equity

For the year ended 31 December 2020

 


Share

capital

£'000

Share

premium

£'000

Share

based

payments

reserve

£'000

Retained

earnings

£'000

Total

£'000

Changes in equity to

31 December 2019






Balance at 1 January 2019

6,054

11,821

250

(8,010)

10,115

Loss for the year

-

-

-

(828)

(828)

Other comprehensive income

-

-

-

-

-

Total comprehensive income

-

-

-

(828)

(828)

Share options

-

-

114

-

114

Transactions with owners

-

-

114

-

114

Balance at 31 December 2019

6,054

11,821

364

(8,838)

9,401

Changes in equity to

31 December 2020






Loss for the year

-

-

-

(1.091)

(1,091)

Other comprehensive income

-

-

-

-

-

Total comprehensive income

-

-

-

(1,091)

(1,091)

Issue of ordinary shares

16

232



248

Share options

-

-

46

-

46

Transfer between reserves

-

-

(103)

103

-

Transactions with owners

16

232

(57)

103

294

Balance at 31 December 2020

6,070

12,053

307

(9,826)

8,604

 

The accompanying notes form part of these financial statements.

 

 

 

 

Consolidated Statement of Cash Flows

For the year ended 31 December 2020


2020

£'000

2019

£'000

Cash flows from operating activities



Profit for the year

4,763

6,934

Adjustments for:



Profit on disposal of subsidiary undertaking, net of tax

-

(627)

(Profit)/loss on disposal of equity securities at FVOCI

-

(20)

(Profit) on disposal of equipment

-

(53)

Depreciation of non-current assets

20

20

Write down of intangible exploration assets

-

364

Fair value adjustments

-

(49)

Share of profit in Joint Venture

(6,478)

(7,891)

Share based payments charge

45

114

Investment income

(7)

(5)

Income tax expense

327

Movement in working capital

(1,330)

(1,167)

Decrease in trade and other receivables

3,056

918

Increase in trade and other payables

1,021

Cash inflow from operating activities

2,747

4

Taxation paid

(282)

Net cash from operating activities

2,465

Cash flows from investing activities



Earn-In Advances

(672)

-

Purchase of land, property, plant and equipment

(3)

(12)

Payments for intangible assets

(262)

(516)

Proceeds from disposal of equity securities at FVOCI

-

104

Proceeds from disposal of equipment

-

55

Dividends from Joint Venture

776

-

Investment income

7

5

Net cash used in investing activities

(154)

(364)

Cash flows from financing activities



Issue of share capital

248

Net cash generated from financing activities

248

Net increase/(decrease) in cash and cash equivalents

2,559

(368)

Cash and cash equivalents at beginning of year

453

Exchange adjustment on cash and cash equivalents

(34)

Cash and cash equivalents at end of year

2,978

 



 

Selected Notes to the Consolidated Financial Statements for the year ended 31 December 2020

 

1. General Information

 

Ariana Resources PLC (the "Company") is a public limited company incorporated, domiciled and registered in the UK. The registered number is 05403426 and the registered address is
2nd Floor, Regis House, 45 King William Street, London, EC4R 9AN.

 

The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange. The principal activities of the Company and its subsidiaries (together the "Group") are related to the exploration for and development of gold and technology-metals, principally in Turkey.

 

The consolidated financial statements are presented in Pounds Sterling (£), which is the parent company's functional and presentation currency, and all values are rounded to the nearest thousand except where otherwise indicated. The financial information has been prepared on the historical cost basis modified to include revaluation to fair value of certain financial instruments and the recognition of net assets acquired including contingent liabilities assumed through business combinations at their fair value on the acquisition date modified by the revaluation of certain items, as stated in the accounting policies.

 

Basis of Preparation

 

The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs") and effective for the Group's reporting for the year ended 31 December 2020.

 

The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the separate financial statements have been prepared in accordance with IFRS. These financial statements have been prepared under the historical cost convention (except for financial assets at FVOCI) and the accounting policies have been applied consistently throughout the period.

 

Going Concern

 

These financial statements have been prepared on the going concern basis.

 

The Directors are mindful that there is an ongoing need to monitor overheads and costs associated with delivering on its strategy and certain exploration programmes being undertaken across its portfolio.  The Group is not expecting to raise additional capital at this time, but may do so to support its strategy and specific activities on occasion. The Group has no bank facilities and has been meeting its working capital requirements from cash resources. At the year end the Group had cash and cash equivalents amounting to £2.953 million (2019: £453,000).

 

As set out in note 26, subsequent to the year end the Group partly disposed of its interests in Zenit Madencilik San. Ve Tic. A.S. ("Zenit") and Pontid Madencilik San. Ve Tic. Limited for a gross consideration before costs and taxation of US$37.75 million.

 

The Directors have prepared cash flow forecasts for the Group for the period to 31 July 2022 based on their assessment of the prospects of the Group's operations. The cash flow forecasts include expected future cash flows from our Joint Venture investment in Zenit along with the normal operating costs for the Group over the period together with the discretionary and non-discretionary exploration and development expenditure. The forecasts indicate that on the basis of existing cash and other resources, and expected future dividend payments from Zenit, the Group will have adequate resources to meet all its expected obligations in delivering its work programme for the forthcoming year.

 

The Group believes there should be no significant material disruption to the mining operations in Zenit from COVID-19, but the Board continues to monitor these risks and Zenit's business continuity plans.

 

In preparing these financial statements the Directors have given consideration to the above matters and on this basis they believe that it remains appropriate to prepare the financial statements on a going concern basis.

 

6. Share of profit of interest in Joint Venture

 

In July 2010 the Group entered into an agreement with Proccea Construction Co. ("Proccea") such that Galata Madencilik San. ve Tic. Ltd. ("Galata") would transfer its principal assets at Kiziltepe and Tavşan, collectively known as the "Red Rabbit Gold Project" into a wholly owned subsidiary, Zenit Madencilik San. ve Tic. A.S. ("Zenit"). Proccea earned their 50% share in Zenit by investing US$8 million in the capital of Zenit, US$1.4 million of such funds having been spent on a Feasibility Study and an Environmental Impact Assessment ("EIA"), with the balance on initial mine construction, once the Feasibility Study and EIA were completed satisfactorily. Shareholdings in Zenit represents the ratio of 50% the Group and 50% to Proccea, with Proccea in management control, but with key decisions requiring approval from both the Group and Proccea.

 

Zenit entered production during March 2017, with commercial production declared from 1 July 2017. Operational revenues and costs arising from pre-commercial production were capitalised in 2017 along with any new capital expenditure incurred during 2018 including the construction of the district road diversion necessary for the full development of the Arzu South open pit. Total revenue for the year was c. US$37.5 million (2019: US$45.1 million) in gold and silver sales.

 

The liability of the Joint Venture includes current and non-current portions of a bank loan repayable to Turkiye Finans Katilim Bankasi A.S. and Garanti Bankasi A.S.. Management does not foresee any significant restrictions on the ability of the Joint Venture to repay these loans.

 

The Group accounts for its Joint Venture with Proccea in Zenit using the equity method in accordance with IAS 28 (revised). At 31 December 2020 the Group has a 50% (2019: 50%) interest in Zenit. Ultimately profits from Zenit are shared in the ratio of 50:50 between Group and Proccea.

 

Principal place of business for Zenit is Ankara, Turkey.  Zenit was also incorporated in Ankara, Turkey.

 

Financial information of the Joint Venture, based on its translated financial statements, and reconciliations with the carrying amount of the investment in the consolidated financial statements are set out below:

 

Statement of Comprehensive Income

For the year ended 31 December 2020

2020

£'000

2019

£'000

Revenue

29,145

35,337

Cost of sales

(13,335)

(15,444)

Gross Profit

15,810

19,893

Administrative expenses

(1,750)

(1,636)

Operating profit

14,060

18,257

Finance expenses including foreign exchange losses

(3,143)

(4,762)

Finance income including foreign exchange gains

2,262

2,667

Profit before tax

13,179

16,162

Taxation charge

(223)

(380)

Profit for the year

12,956

15,782

Proportion of the Group's profit share

50%

50%

Group's share of profit for the year

6,478

7,891

 

 

Statement of financial position

As at 31 December 2020

2020

£'000

2019

£'000

Assets

Non-current assets



Other receivables and deferred tax asset

1,244

440

Intangible exploration assets

670

837

Kiziltepe Gold Mine (including capitalised mining costs, land, property, plant and equipment)

18,817

23,275

Total non-current assets

20,731

24,552

Current assets



Cash and cash equivalents

8,031

7,184

Trade and other receivables

286

752

Inventories

2,598

1,745

Other receivables, VAT and prepayments

2,004

2,187

Total current assets

12,919

11,868

Total assets

33,650

36,420

Liabilities



Non-current liabilities



Borrowings

2,126

3,241

Asset retirement obligation

924

1,000

Total non-current liabilities

3,050

4,241

Current liabilities



Borrowings

4,881

5,776

Trade payables

1,544

1,883

Other payables

1,749

8,984

Total current liabilities

8,174

16,643

Total liabilities

11,224

20,884

Equity

22,426

15,536

Proportion of the Group's profit share

50%

50%

Carrying amount of investment in Joint Venture

11,213

7,768

Movement in Equity - our share



Opening balance

7,768

3,968

Profit for the year

6,478

7,891

Translation and other reserves

(2,257)

(1,049)

Dividend receivable

(776)

(3,042)

Closing balance

11,213

7,768

 

 

10. Earnings per share on continuing operations

 

The calculation of basic profit per share is based on the profit attributable to ordinary shareholders of £4,763,000 (2019: £6,934,000) divided by the weighted average number of shares in issue during the year being 1,062,538,317 shares (2019: 1,059,677,953). There is no material effect on the basic earnings per share for the dilution provided by the share options.

 

11a. Intangible exploration assets

 


Deferred exploration expenditure

£'000

Cost


At 1 January 2019

16,975

Additions and capitalised depreciation

516

Reclassification of expenditure

(206)

Exchange movements

(517)

Expenditure written off

(364)

At 31 December 2019

16,404

Additions and capitalised depreciation

263

Exchange movements

(665)

Expenditure reclassified to assets held for sale (note 18)

(16,002)

At 31 December 2020

-

Net book value


At 1 January 2019

16,975

At 31 December 2019

16,404

At 31 December 2020

-

 

None of the Group's intangible assets are owned by the Company.

 

The technical feasibility and commercial viability of extracting a mineral resource are not yet fully demonstrable in the above intangible exploration assets. These assets are not amortised, until technical feasibility and commercial viability is established. Intangible exploration costs written off represent costs relating to certain projects that are no longer considered economically viable or where exploration licences have been relinquished.

 

15. Non-current trade and other receivables

 


Group

Company


2020

£'000

 2019

£'000

2020

£'000

 2019

£'000

Amounts owed by Group undertakings

-

-

7,027

8,508

Other receivables

100

93

-

-


100

93

7,027

8,508

 

Other receivables falling due after more than one year represent amounts due from the government of Turkey in respect of VAT relating to the Group's exploration projects. The amounts owed to the Company by Group undertakings are interest free and repayable on demand.

 

 

16. Trade and other receivables

 


Group

Company


2020

£'000

 2019

£'000

2020

£'000

 2019

£'000

Amounts owed by Joint Venture Company

-

3,383

-

-

Other receivables

183

598

-

-

Earn-In advances reclassified to Non-current assets

-

534

-

534

Prepayments

115

59

-

-


298

4,574

-

534

 

The carrying values of other receivables approximate their fair values because these balances are expected to be cash settled in the near future.

 

17. Trade and other payables


  Group

  Company


2020

£'000

2019

£'000

2020

£'000

2019

£'000

Trade and other payables

147

109

-

-

Social security and other taxes

14

66

-

-

Other creditors and advances

1,099

7

-

-

Accruals and deferred income

125

136

6

6


1,385

318

6

6

 

The above listed payables are all unsecured. Due to the short-term nature of current payables, their carrying values approximate their fair value.

 

18. Assets and liabilities classified as held for sale

 


Group

Company


2020

£'000

2019

£'000

2020

£'000

2019

£'000

Assets classified as held for sale





Intangible Exploration assets

16,002

-

-

-

Total assets of group held for sale

16,002

-

-

-






Liabilities directly associated with assets classified as held for sale





  Deferred tax liabilities

2,273

-

-

-

  Contingent consideration payable

1,651

-

-

-

Total liabilities of group held for sale

3,924

-

-

-

 

The above assets and liabilities held for sale were reclassified from non-current assets and non-current liabilities due to the Group concluding the disposal, since the year end, of its interests in its Salinbas and all other exploration projects, held through its subsidiary companies based in Turkey. Further details are disclosed in note 26.

 

19. Called up share capital and premium

 

Allotted, issued and fully paid ordinary 0.1p shares

Number

Ordinary Shares

£'000

Deferred shares

£'000

Called up
 Share capital

£'000

Share
Premium

£'000

In issue at 1

January 2020

1,059,677,943

1,059

4,995

6,054

11,821

Share options exercised

16,000,000

16

-

16

232

In issue at 31 December 2020

1,075,677,943

1,075

4,995

6,070

12,053

 

 

During 2013 the existing ordinary shares were sub-divided into one new ordinary share of 0.1 pence ("New Ordinary Share") and one deferred share of 0.9 pence ("Deferred Share"). The New Ordinary Shares have a nominal value of 0.1 pence. The percentage of New Ordinary Shares held by each shareholder following the subdivision is the same as the percentage of existing ordinary shares held by the shareholder before the change.

 

Fully paid Ordinary Shares carry one vote per share and carry the right to dividends. Deferred Shares have attached to them the following rights and restrictions:

· they do not entitle the holders to receive any dividends and distributions;

· they do not entitle the holders to receive notice or to attend or vote at General Meetings of the Company;

· on return of capital on a winding up the holders of the Deferred Shares are only entitled to receive the amount paid up on such shares after the holders of the Ordinary Shares have received the sum of 0.1p for each ordinary share held by them and do not have any other right to participate in the assets of the Company.

 

Potential issue of ordinary shares

Share options

 

The Company issued 64,000,000 new options to Directors and staff at an exercise price of 1.55 pence, vesting over 3 years, commencing on 1 January 2018. At 31 December 2020 the Company had options outstanding for the issue of ordinary shares as follows:

 

Date options granted

Exercisable from

Exercisable
to

Exercise price

Number
granted

Options exercised during the year

Number at
31 December 2020

1 January 2018

1 January 2018

31 December 2023

1.55p

64,000,000

(16,000,000)

48,000,000

Total




64,000,000

(16,000,000)

48,000,000

 

 

The fair value of services received in return for share options are measured by reference to the fair value of share options granted. The fair value of employee share options is measured using the Black-Scholes model. Measurement inputs and assumptions are as follows:

 

Costs associated with options issued on the 1 January 2018 and exercisable by 2023

 


Share price when options issued

1.25p

 

Expected volatility (based on closing prices over the last 7 years)

67.84%

 

Expected life

5 years

 

Risk free rate

0.75%

 

Expected dividends

0%

 

 

 

The expected volatility is wholly based on the historic volatility (calculated based on the weighted average of the last 7 years of quotation).

 


Group and Company

 

Share based payments reserve

2020

£'000

At 1 January 2020

364

Charge during the year

46

Transfer to retained earnings for options exercised during the year

(103)

At 31 December 2020

307

 

As set out in note 2 the Group recognised an expense of £46,000 (2019: £114,000) relating to equity share based payment transactions in the year.

 

20. Deferred tax liabilities


Group

Company


2020

£'000

2019

£'000

2020

£'000

2019

£'000

 

Opening and closing deferred tax liability

-

2,273

-

-

 

 

Deferred tax has been provided against the fair value uplift of intangible exploration assets that resulted from a previous business combination. This liability has been reclassified under liabilities directly associated with assets held for sale, as set out in note 18.

 

21. Other financial liabilities


Group

Company


2020

£'000

2019

£'000

2020

£'000

2019

£'000

Contingent consideration payable

-

1,651

-

-

 

The consideration above relates to a 2% net smelter returns royalty on the future production revenue at Salinbaş. This liability arose as a result of the business combination as noted in note 20. This liability has been reclassified under liabilities directly associated with assets held for sale, as set out in note 18.

 

26. Post year end events

 

In February 2021 the Group concluded the disposal of its interests in Salinbaş held through its subsidiary company Pontid Madencilik San ve Tic. Ltd to Zenit, and the subsequent disposal of 53% of its existing shareholding in Zenit to Özaltin Holding A.S. for an overall consideration of US$35.75 million before costs and taxation, retaining a 23.5% interest in the ongoing joint venture. A further US$2 million is to be paid in instalments to the Group by Zenit following the transfer of three remaining Satellite Projects by Galata Madenicilik San. ve Tic. Ltd. to Zenit.

 

In June 2021 the Company was successful in its application to the Court for permission to reduce its share capital via the cancellation of its share premium account and historical deferred shares in issue.

 

Note to the announcement

 

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2020, or year ended 31 December 2019, but is derived from those accounts. Statutory accounts for 2019 have been delivered to the Registrar of Companies and those for 2020 on which the auditors have provided an unqualified report will be delivered following the AGM.

 

Contacts:

 

Ariana Resources plc

Tel: +44 (0) 20 7407 3616

Michael de Villiers, Chairman


Kerim Sener, Managing Director


Beaumont Cornish Limited

Tel: +44 (0) 20 7628 3396

Roland Cornish / Felicity Geidt


Panmure Gordon (UK) Limited

Tel: +44 (0) 20 7886 2500

John Prior / Hugh Rich / Atholl Tweedie


Yellow Jersey PR Limited

Tel: +44 (0) 7951 402 336

Dom Barretto / Joe Burgess / Henry Wilkinson

[email protected]

 

About Ariana Resources:

Ariana is an AIM-listed mineral exploration and development company with an exceptional track-record of creating value for its shareholders through its interests in active mining projects and investments in exploration companies. Its current interests include gold production in Turkey and copper-gold exploration and development projects in Cyprus and Kosovo. 

The Company holds 23.5% interest in Zenit Madencilik San. ve Tic. A.S. a joint venture with Ozaltin Holding A.S. and Proccea Construction Co. in Turkey which contains a depleted total of c. 2.1 million ounces of gold and other metals (as at July 2020). The joint venture comprises the Kiziltepe Mine and the Tavsan and Salinbas projects. 

The Kiziltepe Gold-Silver Mine is located in western Turkey and contains a depleted JORC Measured, Indicated and Inferred Resource of 227,000 ounces gold and 0.7 million ounces silver (as at April 2020). The mine has been in profitable production since 2017 and is expected to produce at a rate of c.20,000 ounces of gold per annum to at least the mid-2020s. A Net Smelter Return ("NSR") royalty of 2.5% on production is being paid to Franco-Nevada Corporation.

The Tavsan Gold Project is located in western Turkey and contains a JORC Measured, Indicated and Inferred Resource of 253,000 ounces gold and 3.7 million ounces silver (as at June 2020). The project is being progressed through permitting and an Environmental Impact Assessment, with the intention of developing the site to become the second joint venture gold mining operation. A NSR royalty of up to 2% on future production is payable to Sandstorm Gold. 

The Salinbas Gold Project is located in north-eastern Turkey and contains a JORC Measured, Indicated and Inferred Resource of 1.5 million ounces of gold (as at July 2020). It is located within the multi-million ounce Artvin Goldfield, which contains the "Hot Gold Corridor" comprising several significant gold-copper projects including the 4 million ounce Hot Maden project, which lies 16km to the south of Salinbas. A NSR royalty of up to 2% on future production is payable to Eldorado Gold Corporation.

Ariana is earning-in to 75% of Western Tethyan Resources Ltd ("WTR"), which operates across Eastern Europe and is based in Pristina, Republic of Kosovo. The company is targeting its exploration on major copper-gold deposits across the porphyry-epithermal transition.

Ariana is also earning-in to 50% of UK-registered Venus Minerals Ltd ("Venus") and has to date been earning into an entitlement to 37.5%. Venus is focused on the exploration and development of copper-gold assets in Cyprus which contain a combined JORC Inferred Resource of 9.5Mt @ 0.65% copper (excluding additional gold, silver and zinc).

Panmure Gordon (UK) Limited is broker to the Company and Beaumont Cornish Limited is the Company's Nominated Adviser and Broker.

For further information on Ariana you are invited to visit the Company's website at www.arianaresources.com .

 

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