Ariana could be worth 6.31p says Edison - shares now 1.425p

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I have always had a soft spot for AIM listed Turkish explorer Ariana Resources (LSE:AAU). Its management team do not take the piss on salaries and battle on showing grim determination to deliver and perhaps things are starting to go the way of Kerim Sener and his team. The newsflow of late has been positive. I reprint below a research report from Edison. Okay, this is commissioned research but it stacks up.

For my own take on Ariana click HERE

And now to Edison which writes:

Ariana recently announced its JV partner Proccea will continue to earn into its 50% share of the Red Rabbit JV by spending US$6.6m. We assume the majority of this will be contributed to Red Rabbit’s c US$29.5m mine development cost. The remaining c US$23m needed to complete Red Rabbit’s construction is currently being pursued via purely debt funded routes with Turkish institutions. However, any debt funding agreement reached will be contingent on Ariana receiving positive Environmental Impact Assessment certification from the Turkish Authorities. Ariana currently envisages construction to start in Q413 with first production during H214. 

On 28 February Ariana raised £588,500 (excluding costs) via issue of 46.4m shares at a price of 1.2675p. This should allow Ariana to meet its current expenditures until debt funding for Red Rabbit is sourced, therefore avoiding further dilution to shareholders.

Access to Newmont’s Turkish exploration database Ariana has increased its ability to reach its goal of a 1Moz AuE resource base by gaining access to Newmont Mining’s exploration database. Access is in return for first refusal on any discovery made and a 1% Net Smelter Royalty on any discovery found within 5km of any point data used. 

Final DFS needed to update cost inputs. Our current valuation is based on cost inputs detailed by Ariana in its 2010 Scoping Study. We await final clarification on the cost of mining and processing Kiziltepe ores to update our valuation. This will be provided in a final DFS, due May 2013. 

Valuation: Forecasting first revenues in 2015: We revise our valuation to reflect the total equity raisings of £1.2m, and an eight month construction period, starting during Q413. Therefore, we assume first gold production to occur H214 such that c 3.5koz Au and 28.5koz Ag is produced by the end of the year (i.e. a quarter of planned steady state production). On this basis we revise our valuation of Ariana’s eventual 50% share of Red Rabbit to 3.73p (previously 5.23p, both using a 10% discount rate and our long-term US$1,676/oz Au & US$28.15/oz Ag prices). Based on its ongoing positive exploration news and newly announced access to Newmont’s exploration database, we believe Ariana will successfully expand its resource base and replenish depleted reserves once in production. We consider a further 2.97p could be attributed for a potential value of 6.31p (our valuation assumes 100% debt funding of the Red Rabbit project, though due to lack of detail we have not been able to model repayments, interest costs etc.).


6.31p would be nice. I think that anyone buying today would be happy with a base case of c3p. That is still 100% upside. Sentiment towards small cap miners is dire. They have fewer friends than there are members of the Cyprus branch of the Angela Merkel fan club. But sentiment will turn and those mining juniors that are delivering as Ariana is will be rewarded.

You can meet Ariana and its management on April 13th in London. It is one of the dozens of small and mid-cap companies presenting at the UK Investor Show where there are also 25 big name speakers including Nigel Wray, Mark Slater and Evil Knievil. For more details go to

For more thoughts from Tom Winnifrith go to or follow him on twitter @tomwinnifrith


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