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Even worse!!
3.7M oz John, the 2.7 is additional to the current 1M oz
Ash
Great post. Duly ticked up and surprised not a load more support. Don't think questioning this deal is very popular.
I agree with what you say, I am probably a bit more anti than you but similar ideas - Red Rabbit should not be part of the deal, there should be a separate JV for Salinbas. We are about to gain significant cashflow from the current JV at RR (from which we benefit 51% not 23.5%) so are not desperate.
Its not as if the Salinbas deal knocks your socks off if, as you and I suspect, construction at Salinbas will be a loan to the JV not purely financed by the New Partner. Then they will have a 53% interest of a (prospective) 2.7 million oz deposit for $13m (call it 10m quid). Nice work if you can get it. And that's without the considerable sweetener at RR thrown in.
For me AAU would still be investable if I were not already, but is not in my view as investable as it was. Bid price currently 2.15p, down to a similar level prior to pre MoU announcement levels, so I am not selling at the moment.
I agree with that Benji. If most of the money is to be spent on exploration then we would be just as well to progress Salinbas on our own using the profits from Kiziltepe and retain 100% for longer. Either way all of our money will go into exploration. The deal only makes sense for shareholders if they are going to benefit. I like the idea of a generous but not excessive special dividend and a modest ongoing dividend to help underpin the share price.
Hi Ash
If Ariana get $30m from the deal then I would support it and I think the share price would rally north of 3.5p up to the date of the deal being completed. It would have to.
The key thing for me is would I stay invested thereafter. If say they only distributed a small (say £3m) special dividend then what are their plans for our money? They are still a small team so can’t do everything. Maybe they’ll sink it all into prospecting for copper in Cyprus. Would you be happy with that? Or maybe they have their eyes on something else that’s outstanding . Or maybe they will become a lifestyle business for the directors. So what they plan to do with the money (if they don’t return it to shareholders) is the key point for me and hopefully that will become clear before the deal is completed, if it isn’t then I’ll sell near that time! Cheers ash
Evening all, tick up from me today on Stangerstill’s post and a lot of others recently, including yours John, because I think there is still much to debate.
I’m still going to play Devil’s Advocate on this as I still don’t see a straightforward path given the current options. Obviously, I have looked at the numbers, highlighted reasons why a JV on Salinbas is advantageous, how the company can mitigate the risks of having a partner with a controlling interest, but for me and, no doubt for everyone else, it comes down to a decision on whether they think the deal is right for Ariana and each shareholder’s investment - whether to vote for or against, whether to buy, hold or sell.
I agree that the proposed deal puts Ariana at a crossroads with two choices. The question I want to put is whether these are/should be the only two options? In other words, is this the best deal Ariana could get? Is it the only deal they will get? Or, is it a possibility that a better deal could be reached, either with the proposed partner or a new potential partner on Salinbas.
I would prefer Ariana to retain more of Red Rabbit with protection built into any agreement to ring fence it from the potential risks with Salinbas, but recognise that a JV agreement on Salinbas is the right way forward.
Ultimately, how much pressure is there to commit to a deal right now? If LOM at Kiziltepe can be extended for a further 10 years together with a similar LOM from Tavsan, is there any rush to accept the first deal that is put on the table?
Answers on a postcard.......
Cheers, Ash
Strangerstill:- would you object if I copied your excellent post over to ADVFN?
I'm with Paul 280i on this
The only observation I would make would be that the impression I got from the Proactive/BRR interviews ( I may be wrong) is that the 'windfall' special dividend will be a proportion of the $5 paid for the 17% interest in Salinbas. There was no implication that any of the Red Rabbit 'windfall' of $25m will be used for special divi. The over 50% loss of interest in Red Rabbit revenues will limit the ability to pay a regular dividend in future imo, at least until Tavsan is in the mix.
Very well put Strangerstill, sums it up nicely. I'm for option 2 provided the agreement provides safeguards for Ariana and it's shareholders.
Good post strangerstill. Nicely put. Based on our current understanding, I think that summarises it very well.
Ariana is at a crossroads with two distinct strategic paths.
1) Ariana goes it alone to prospect Salinbas to the point of a FS, this will cost about $11 million (the combined amount that the new partner and Procea plan to invest). Ariana will have to sink most of its profits for the next 4 years into Salinbas and during this time is unlikely to pay a dividend which will keep the share price depressed. Even if Ariana develops Salinbas to the point where a mine and processing plant will be built then about $60 million (for 50oz pa) will have to be found necessitating a JV, loan funding and potential equity raise with corresponding dilution. There is always the risk that Salinbas is not commercial. Going it alone means that Ariana will have a larger share of the final profits but at a greater risk. The share price in 10 years time may be greater but at the risk of a lower share price in the near and medium term with the JV.
2) Ariana enters the JV, gets $30 million up front (which is the current market cap) and ends up with only 23.5% of the resulting JV. The future risks are considerably diminished as there are no costs for Ariana in developing Salinbas if it is proved to be commercially viable. The upside is that Ariana can pay a windfall dividend from the $30 million and start paying regular dividends which should improve the current share price also Ariana will have a 23.5% share in the potential profits of Salinbas without having to make any financial commitment. The downside is that Ariana will lose 50% of the current and future Zenit profits and will have a smaller share of the potential profits of Salinbas (depending on how the capital to build the mine is raised if Ariana goes it alone). Even with the JV Ariana is likely to have a considerably higher share price in 10 years time than the current share price and will have a higher short and medium term share price.
The question is do you want higher risk and potentially higher reward in the distant future or much lower risk with potentially lower reward in the distant future but a higher near and medium term reward?