Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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I found it,
This is a useful discussion and highlights some good points about our strategy in Zim
We looked at Dokwe (Rockover’s project) and passed on it
There is true genius in Nick Graham’s work but the problem is Dokwe is in the wrong jurisdiction. If it were in Botswana it would make sense but in Zim it doesn’t when there is so much more conventional and lower cost opportunity elsewhere
Dokwe has been around for 20 years and had $20m spent on it. The deposit sits underneath deep Kalahari sand cover and has a very large cap-ex requirement ($75m from memory)
The discovery of Dokwe was amazing. Nick and his team found it using a sophisticated fine fraction soil sampling method that was able to identify minuscule variations in gold levels relative to background
The problem is it’s too sophisticated a project for the stage Zimbabwe is at. A possible positive is that Rockover has large exploration permits in virgin ground, but its virgin because of the sand cover. Again, in Botswana this would be attractive but in Zim why go to the trouble of such complex and expensive exploration when there is so much untested potential, near surface that has been scouted by the small-scale miners?
I don’t know what Ariana’s plan is. They did well in Turkey. I imagine they must have finance lined up, otherwise this makes no sense at all. Perhaps, the gold price has changed the economics of Dokwe favourably, I don’t know but we wish them luck. The more international companies in Zimbabwe the better.
Coming back to Kavango and our strategy is to focus on near-surface, open pit, bulk mine opportunities. This is completely different from Dokwe so a comparison between the two doesn’t hold up
The path we are on is more conventional. I expect it might take the market a little while to grasp what we are doing, but once we have more demonstrable success the market will see the scale and realisable potential of our business
The Dokwe project is technically demanding, has taken a very long time and hasn’t yet been able to raise the finance it needs
We have simpler targets, are moving extremely quickly and are raising what we need to build on that momentum. By growing Kavango Mining in parallel with our exploration, we will be well positioned to bring open pit mines into production relatively quickly once they are defined
Sadly the share price is what it is. I don't know what the basis was for the rather precise 687,817,998 number. I guess it gives an exact % in AAU or to equate to a particular sum based on an assumed AAU share price. Dunno haven't thought. I suppose we have to look at what assets each company brings to the table to decide it the (roughly) 1/3, 2/3 split is fair. Somehow you have to adjust each prospect for the stage of development. Dokwe is big, and compare surely to out paltry share of Salinbas after the giveaway JV. Don't know, lets reconvene tomorrow and hope the presentation and Q&A doesn't send the SP any closer to 2p yet again.
I don't know Van. The Dokwe resource is big and effectively AAU gets 2/3 of it. Its a lot of gold, more than I think we will get from anywhere else. The obvious red flags are how does the development get financed while we own 100% and can we trust Zimbabwe? I'm not sure about it as I've always avoided African 'investments' (quotes intentional), as I think we discussed before.
So finance for Dokwe development, as far as I can tell, is by massive equity dilution, debt (lots if tragic stories on AIM about those providing loans wiping out equity holders) or a JV. And after todays RNS we know who that will be with, nailed on - I'm no clairvoyant but I'll bet they will want 51% at least.
I reckon we would all be better selling AAU and buying Ozaltin shares. That way we can benefit from all the things AAU s good at, because directly holding AAU equity certainly isn't doing it.
Three weeks ago AAU had a 3p share price. Now after releasing big news about a deposit some shareholders have been excited about for months and a delayed 2024 production announcement its down to 2.45p. Wasn't news like this supposed to excite shareholders?
PS Is it me or is the Tavsan heap leach plant looking increasingly delayed, vague references onlynow to 2024? Maybe all will be clearer tomorrow. Wont hold my breath for a concise answer.
Agreed John. That is why I believe we need to know they have sought outside advice to protect our interests. Yes he might be a good Geologist, but that doesn't make him a good Corporate analysts capable of securing the most appropriate deal. I think the outcome of the Ozaltin JV after 5 years is proving that point, as you say. I believe they sort no help at that time either. But Zimbabwe. Not my cup of tea. If we wait for the HizHizarliyayla and Salinbas results ( over due?) then perhaps our share price would be higher and we could negotiate from a stronger position. Issuing all these 687,817,998 shares, diluting our current core assets (including assets producing hard cash) doesn't seem right to me. But I need help to understand why this is a good deal as I expect many others do. We can't take it on face value.
It was on a public Telegraph Group apparently . I believe it was mentioned by Ben the CEO who said they passed over on Dowke, but I haven't seen it myself. They might have passed over due to lack of funds of course and now are now just a bit jealous. Who knows? I have no idea how you find these Telegraph Groups.
Well Van in my defence I was against the Ozaltin from day 1. Just work out the value of the lost 26.5% production since the completion of the JV (early 2021?) and very single gram of gold that Tavsan will ever produce. I have and its massively more than AAU received by selling. As for Salinbas where we gave up 76.5%, just don't get me started,
‘ It seems to me that Kerim has a great deal to do tomorrow morning to convince us this isn't riddled with red flags. ’
It certainly is not SP accretive just more SP dilution and diversified risk!
‘it has been suggested by Kavango that Dowke is technically demanding and costly, so they need a fairy godmother. Apparently it is under deep Kalahari sand and this may be one of the reason it hasn't been developed todate. Perhaps we will learn more tomorrow.’
When did Kavango state this, do you have a link?
C&B
They will only answer the questions they feel like answering, that always happens. I bet someone will have tabled a question relating to when Dokwe will realistically be developed rather than the following mentioned as part of the RNS the other day, and I'll also bet there will be no concrete reply:
'.....we anticipate advancing the Dokwe project towards production within the next three years'.
What the hell does that mean? AAU may advance towards production but it doesn't say a plant will be there and shovels in the ground.
Sener seems to forget that we have been exposed to ambiguous waffle like that for too long. I would remind people that in presentations in April and December 2022 there was an anticipated production from Salinbas in 2025. Truth is that we aren't a day closer than we were at the time of the wonderful new JV proposed in 2019. To me that is deception at best, outright lies at worst. Does anyone fall for it anymore?
Hi John,
Weren't we expecting a lot more than 20,000 ozs; certainly not that long ago it was c. 50,000 ozs from the two with a further 50000 ozs from Salinbas by 2027 I believe. As it has taken so long to bring Tavsan into production, Kiziltepe is being run down and will now rely on ore being trucked in. So the numbers will never be achieved, but perhaps it is all just spread out over a longer period.
But even though we have given away half of these core, cash generating tangible assets to the JV (for no benefit in our Mkt Cap over nearly 5 years - in fact we've gone backwards) we now want apparently to give even more away to Rockover and its shareholders, who are perhaps looking for an out. The Director's are retirement age and it has been suggested by Kavango that Dowke is technically demanding and costly, so they need a fairy godmother. Apparently it is under deep Kalahari sand and this may be one of the reason it hasn't been developed todate. Perhaps we will learn more tomorrow.
But on top of all that, we have talk of needing finance (how much and from where?) and or existing partners joining the pot. Does anyone consider the AAU shareholders and potential depletion of our assets, or are we expected to forego our promised dividends for a capital return in 3 but more likely 5 years? And during that period I believe Zimbabwe has an election. Would Ariana shareholders choose to invest in Zimbabwe if they were starting from a clean piece of paper?
It seems to me that Kerim has a great deal to do tomorrow morning to convince us this isn't riddled with red flags.
I would be interested to hear what Panmure Gordon make of it. Has the Co. had outside Independent Financial Consultants helping them ensure this is a fair deal. If they had done so with the Ozaltin JV deal perhaps we wouldn't have seen such a poor outcome. So I hear to be convinced, but Zimbabwe is a no no for me.
I am in agreement about divis. There is East Turkey to develop with the JV funds and Dokwe to develop as well. AAU will be 100% owner there so no sharing the costs. Unless of course there is a JV in Zimbabwe with someone well funded. And I sincerely hope that someone is not Ozaltin who as far as I am concerned gave very little cash for their huge interest in AAUs Turkish interest and haven't 'enabled' or delivered anything - in Africa they cant even try to put a value on political influence which many seem to think was the reason for them being chosen in Turkey. Beginning to this Ozaltin are effectively the Turkish mafia.
There's not been too many RNS's that have gone down well John. I'm not sure the Q & A tomorrow will give us any answers either, as they usually end up with us scratching our heads at their answers. I'm still not particularly happy at getting involved in Zimbabwe, but it looks like Kerim wants some of the action there. I want to know whats happening in Turkey and Cyprus and whats he going to do to get the SP moving upwards as you can forget any dividends now for a few years.
Well that RNS went down well. Again.
So the current JV partners are interested?
'we are encouraged to note the significant interest that this has generated amongst our existing partners, and we look forward in conjunction with our partners to explore opportunities by which they may become involved in the development of Dokwe'.
What does that mean, another huge giveaway present to Ozaltin? Yes, a JV partner will be needed at Dokwe to fund the plant etc. without loading the balance sheet with debt or unnacceptable equity dilution, but not on the appalling terms achieved for Kiziltepe, Tavsan and Salinbas. Hopefully the Rockover shareholders have sufficient business ability to compensate for the current AAU BoD.
And if Operational cash cost is maintained circa US$650/675 per troy oz. then £1,650 is the Gross Profit per oz. Not many operations manage that these days........just need to get the overall ounces up next year!
"we are also pleased to report that the average gross revenue per ounce produced during Q1 2024 is US$2,328"
Deano,
I too have an expectation/hope that we will see significant returns over the next 6 years or so.
I agree that a good time to top up would be after dilution but is it dilution if the new asset is valued at the same value of the shares traded?
Also, would Ariana not trade at the same value on ASX as it does on LSE (accounting for the exchange rate)?
If so, once the ASX listing has happened, would it not be the same to buy the 'diluted shares on the LSE?
Or, is it likely that existing Ariana shareholders would be offered a discount to participate in the listing?
I'm keen to hear your (or any other poster's) take on my questions.
I agree with your viewpoint, but I want to understand the details (have I understood the mechanics of a second listing?)
slig
I’m considering, there might be further retraces in this SP, but when this launches in the ASX I’m going to take a risk gamble.
I am going to buy the same amount on there and wait for them to both hopefully raise in tandem. When we hit 4p on AIM I may consider selling here and just holding on the ASX onto 2030. On the ASX I will have bought in on the diluted amount too, so in effect a fresh start.
Still kicking at not selling out at sub 6p the dividend wrong footed me.
Stranger, I am hopeful that your dream about the JV may happen, with construction costs met by the partner. The Rockover shareholders will be keen to get this nto production due to age and given their influence in AAu they will.have some clout. Maybe not 3 years but hopefully they won't be satisfied with a Salonbas style.crawl. Most know I was critical of the current JV from day 1, but political/ Zimbabwe apprehension excepted I see the potential here
Last night I had a dream.
Ariana went ahead with the merger. Current shareholders now own only 62.5% of Ariana
Ariana raised a further £10 million to undertake further prospecting through a share issue at 2.5p per share (400 million shares). Current shareholders now own only 51% of Ariana. There are now 2,234 million shares in Ariana.
Ariana spent another year of intensive prospecting of Dokwe and up the reserves to 2,000,000 oz of gold (after a substantial resource find in Dokwe South and substantial upgrades of Dokwe North and Central). The gold seams are open and subject to further prospecting.
Ariana goes into a JV with another miner on a 50-50 basis with the mine build costs covered by the other miner to build a mine of 100,000 oz with a 20 year life. Current shareholders now own 25% of the project. The mine makes $120 million a year profit. Ariana’s share is $60 million (£48 million) and the P/E is 8. The share price goes to 16 pence and I have shares worth $640,000.
I then woke up.
Thanks, Stranger. Good thoughts. At a quick skim read I think you are being hopeful that the current JV will produce 50k for 10 years although I may have missed something. I'd put the average over 10 year lower by 5-10 K given that Kiziltepe is nearing end of its lifetime. The production at Tavasan is maybe 300K total, no matter where it is processed? The only other thing is the prospect of Newmont as a JV partner. They have put their share of Greatlands Haviaron project up for sale as it is too small for them so can't imagine them getting involved at Docwe as a partner.
Thumbs up.
"In which case I want to hit a silly SP of 25p or dare I say 50p or more" - SHG shareholders thought the same, but they got a premium of less than 25%.
Should AAU get back to 4p, a 25% premium would give us 5p. Let's be generous and optimistic and say AAU gets to 8p and we get a 25% premium - so 10p a share. There is your wildest dream.
However, SHG was on the AIM. Is the ASX a marketplace that doesn't allow takeovers where the PIs get robbed? I don't know. * "robbed" is my word based on feelings about the SHG takeover, feelings that virtually every small investor in SHG had.
A very good write up SS, for some reason I feel we have taken a very big bite but can we properly masticate it, let alone digest it?
I am fearing AAU is a share, like most on AIM, will trade within a very narrow range for a very long time. We seem to give a lot away to move onto other projects, fingers crossed WTR-Kosovo & Venus pull through soon, but will the benefits of them be traded away to go somewhere else, again and again ad-finitum.
Ariana have become very successful and are becoming established but the trading away of value to achieve this has been detrimental to the SP. I am exercising patience here and I am a very long term holder, but not being rewarded with dividends!
In which case I want to hit a silly SP of 25p or dare I say 50p or more in my wildest dreams, but if we keep divesting away to pursue other projects, then the board are making these decisions in that what they are doing is not SP accretive and very risky.
One wonders why they have never took a look at Uranium?
Assessment of what current Ariana shareholders will get from the merger.
Looking at it with just the present projects it would appear that Ariana current shareholders get 62.5% of $330 = $206 million but lose 37.5% of current projects to give a net of $160 million
My instinct is that this is a good deal for both parties, on paper it appears that Rockover could get a better price selling out to another miner right now. The directors of Rockover are very experienced, and I believe that they see that a future with Ariana will give the best long term returns through Ariana’s holdings in Zenit, Venus, WTR, etc.
I believe that this is a win-win for both parties depending on how Ariana funds the future exploration and the building of the mine and processing plant at Dokwe and how much more gold there is at Dokwe.
How will Ariana proceed if the merger goes ahead?
I do not believe that Ariana would build and operate the mine but would look for a JV.
The current JV could be used by selling Dokwe into Zenit and getting 23.5% of the profit or by partnering with someone like Newmont. I don’t believe that Zenit could afford to pay cash for Dokwe although it could give Ariana more shares in the JV. I suspect that Ariana will look for a JV with a company like Newmont whereby Ariana gives the JV the asset of Dokwe and the other company funds the build of the mine and processing plant.
We need much more information as to how Ariana is going to proceed with Dokwe if the merger goes ahead and how much dilution there might be in the future after the merger.
Pros
We get 100% of a large gold reserve (which might be very large) that will provide a considerable amount of profit in the future.
If played right, despite the share dilution, existing shareholders should benefit both from increased capital value of shares and, with a bit of a delay, an increased ability to pay dividends.
Cons
Current shareholders suffer a large dilution of shares.
The development of Dokwe might result in further share dilution.
Dividends are probably delayed by a couple of years.
Before we start some truths about Ariana.
Ariana is not a gold miner/producer it is a very good exploration company.
Ariana does not control what happens with the assets of Zenit although it does have influence.
Ariana cannot sell Salinbas nor does it have to raise money for the future development of Salinbas, that is entirely up to Zenit.
How much is Dokwe worth?
Dokwe North has 1.2 million oz gold which will be mined using open cast. The current projection is to mine 100,000 oz for 10 years which should give about $1,000 million profit of which current Ariana shareholders would (if it built and operated the mine) get 62.5% or $625 million. The mine will be opencast and relatively inexpensive to mine. This is the profit that Ariana would receive if it developed the mine by itself, however I think that it will develop the mine as a JV and thus the profit would be lower. I will not use this valuation in the assessments (see below).
Dokwe central has had minimal exploration drilling but is currently showing a resource of 80,000 oz.
Dokwe South is outcropping (with no overburden)and the Ariana team are very excited about it although no prospecting results are available.
Mariana Resources received £166 million for 30% of Hot Maden in 2017 (gold price then $1,350 per oz) with gold reserves of 2,000,000 oz (high grade and deep mined). On that basis, Dokwe could be worth as a straight sell, to another gold miner, about $330 million not taking into account that Dokwe central has not been fully explored, Dokwe south has not been explored and that gold is at an all-time high price. I will use this figure as the current value of Dokwe in the assessments below.
I am not discounting future profits as both the assessments are at current value.
All the calculations are rough and ready.
Assessment of what Rockover shareholders will get from the merger.
The Rockover share holders will get about 37.5% of the future profits that accrue to Ariana. This is the 23.5% of the profits of Zenit in the future. I am going to be quite generous with the assessment of the future profit.
Current projects Kiziltepe and Tavsan should produce 50,000 oz of gold for the next ten years. Thus the future profit at $2,000 per oz gold (assume $1000 per oz profit) is about $500 million of which Rockover shareholders will get about $44 million. The other bits and pieces that Ariana owns may be worth about $6 million at present (although Ariana’s current shareholders think they are worth $0), so add $2 million giving a value of $46 million.
Rockover shareholders get 37.5% of Ariana’s current projects plus 37.5% of Dokwe ($330 million) to give $168 million.
Interesting comments DVH. Personally I've never had any faith in TW's "forecasts". There have been frequent comments from folk generally disappointed with AIM-listed companies. Often " market makers" have been blamed or there is some "elephant in the room" bringing the share price down with huge sums of money until it chooses to move on..
I'm not going to point fingers specifically but I feel that this article (from my brokers) might well offer some cause for thought about AIM. The Australian & Toronto stock exchanges are specifically mentioned for mining but I thought the suggested downturn of AIM (historically) is an "eye opener". To me it supports DYOR and " Buyer Beware" before one leaps therein.
https://www.ii.co.uk/analysis-commentary/future-aim-will-co
Enjoy a Great Weekend, Ya'all. DJ