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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
BRR media interview with Kerim Sener today:
https://www.brrmedia.co.uk/broadcasts/662b8ac2f8692959dffee8da/ariana-resources-merger-with-rockover-holdings/
This does feel like the MM have artificially brought this down to this level. The deal seems to be a very good one and I expect that the share will get a re-rating in due course.
I hear that Tom W has also added to his holding today after talking to the MD about the latest announcement!
Interesting how the 'bigger' trades get delayed before showing on the LSE site. My latest purchase not yet showing....maybe later
Just done a duckduckgo search on Turkish Sovereign Wealth funds and found this little gem.
https://en.wikipedia.org/wiki/Turkey_Wealth_Fund
I notice they invest in big players and former state run companies, however there is a lack of mining in the mix. Who at Ariana is going to representatives of this fund and making them aware of the opportunities in smaller players. Maybe the Turkish Wealth fund could set up a division strictly for helping the smaller players establish themselves within their territory like the Saudi's have with POW?
Looks like I got it a bit wrong with my Saudi comments, as it is finance for exploration within their own territory.
https://www.lse.co.uk/rns/POW/power-arabia-limited-2268364339power-arabia2268364157-update-54fws2zcnsjyxxr.html
However I remember the Oman Sovereign Wealth fund strategically investing in BKY.
https://timesofoman.com/article/116363/Business/Oman-sovereign-wealth-fund-to-invest-120m-in-Berkeley-Energia
I think they had to pay them back as targets had not been hit due to a solitary permitting issue.
https://www.lse.co.uk/rns/BKY/settlement-of-oia-claim-py1l8ov97al8flw.html
However this dual listing in Australia may give us the boost we require and I would consider buying on their exchange to.
I dislike the concept of all these short term hold and churn AIM players. Unfortunately there are not enough investors who buy and hold for the long term anymore.
Another thing that I wonder about when we compare ourselves to POW where Rick Rule has invested and they have gone to the Saudi's why we have not come onto Rick's radar? If we get players like Rick involved and the Sovereign Wealth funds it sends out all the right messages. Who at AAU is responsible for courting these types of 'money'?
Ever since TW 'tipped' an investment in this company (target 4p+ for 'quick' return lol) the share price has gone in reverse. Nobody really knows what is going happen when investing/trading AIM shares.....
Interesting shake up here with Ariana dipping their toes in Zimbabwe. Caledonia Mining have been mining there for a decade or so and regularly pay dividends. As with most small caps in this part of the world valuations will be heavily discounted. With that said Ariana are effectively borrowing £19.4m interest free to gobble up a 1.2 million ounce gold project with two thirds proven reserves which equates to a mine life of more than 10 years using the previously announced PFS calculations. Given the PFS model uses an outdated base gold price of $1,650/oz it's immediately apparent the NPV of $72 million does not reflect the current gold price environment. A conservative jump to $1,950/oz base would probably increase the NPV to around $110 million overnight.
You may be right John, KS is very conservative with his gold figures, but not so good with his mine building timings. I won't hold my breath that the mine will be finished in 5 years, never mind 3. I wanted big news news on Salinbas, but obviously now all efforts are going to be on Zimbabwe, and that's another issue for me, as I still think this country is a massive risk. Looking at the SP today, my date for 3p on the ADVFN site looks promising.
I share his enthusiasm. I am pleased about the dual listing.
The City of London spivs don't care about supporting businesses, all they are interested in is lining their own pockets - but you didn't need me to tell you that.
About a week ago, on the business section of Radio Four's Today programme, the topic under discussion was how the London market under-values stocks. They spoke to a business analyst who said so, and to the boss of a biotech company that de-listed from the AIM and listed in Amsterdam. He said how the AIM didn't value his company fairly. He said that companies like his had moved to other markets and they were valued at 10 times, 20 times or even 50 times what they were in London.
Hopefully a listing elsewhere will see the company valued fairly. However it isn't guaranteed. On the SRB board. someone commented that on the TSX, the CAD$ price was the equivalent of 84p, but in London, SRB was priced at only about 62p or whatever the price was at the time, but it was somewhere in the 60p - 64p range.
It's a hard one Claret. I think today's news could have had a positive effect except that estimates of 3 years have everyone saying 'yes right'. I wasn't too happy about the location originally but a bit of research suggests that Zimbabwe is not the basket case it was under Mugabe. if the resources are as reported, and in fairness AAU usually put a consevative spin on them , then it could be very positive indeed. Unusual.for me to be positive !
Once again, left feeling like KS has't done any favours to the SP with the news this morning. Why is it with KS that every RNS seems to ask more questions than give us answers. When it comes to timelines AAU aren't very consistent, and are instead consistently late, so take the 3 years with a pinch of salt. I like the idea of not having all their eggs in one basket and diversifying from Turkey, but not to Zimbabwe, and surely it would have made sense to get Tavsan up and running first. All in all, not very happy, and looking at the SP, not too many people are.
Well it has now become evident where they have been focusing for the last six months.
I’m looking forward to reading some updated brokers reports.
He turns 67 on May 14 that should narrow it down a lot!
Nobody sharing the MD's enthusiasm?
Dr. Kerim Sener, Managing Director, commented:
'We are thrilled to announce a significant milestone in Ariana's history......'
Hi John. Seeking your further thought on an aviation matter ( since it is not relevant here and I no longer have the same interest in this blog) I contacted Cosford but they were not able to recognize you from the somewhat " guarded" description I had submitted.