Sapan Gai, CCO at Sovereign Metals, discusses their superior graphite test results. Watch the video here.
What a poor week for Ariana. The fundamentals have not changed and the company remains under valued for the assets and potential it has irrespective of whether or not the proposed JV enables some of those assets to be 'cashed' sooner rather than later. But for Kerim to put out the RNSs and an interview this week that glossed over his very large share sales (taking new options is irrelevant) and not mention the JV at all knowing that the 'intended deadline', he gave a month ago, to arrange a general meeting for shareholders to agree the JV, is going to be missed beggars belief and of course creates a great opportunity for sentiment to turn negative and MMs to make hay! Kerim has performed wonders with Ariana but that's why I would have expected so much more from him in terms of communication, clarity and transparency this week of any week. I'm sure over the long-term and hopefully still in the short-term the true value of the company will be reflected in the share price but a lot of investors will have lost money this week for no good reason and probably totally unnecessarily and will have been put off from investing again in Ariana and certainly won't be buying the polo shirts!
Back to trying to have the patience of a saint!
Paul1Deano, I'm sure your right about market concerns over the geopolitics in Turkey but in 2019 the World Bank ranked Turkey 43 out of 190 countries in their 'Doing Business index' which isn't too bad !
An 8% rise is not to be sniffed at but I still feel that the market doesn't understand the opportunity/Asset Salinbas is and why the progress on the deal hugely derisks the feasibility of exploiting that asset. 1.5M oz gold identified already, possibility of 4m oz of gold to be proven up and mined. At today's prices (that I think will likely rise over the coming months/years) that's between c. $3 billion and $8 billion of revenue. If the profit on that was just a half (before cost of building the mine) that's between $1.5 billion and $4 billion. Assume the mine cost $900 million ($20,000 per tonne) that leaves a minimum profit before interest and tax of £600 million and Ariana would own 23.5% of it plus its other assets and cash. Ozaltin has the capacity and ability to finance and build the mine with Proccea. The ducks are now lined up. Ariana's share price/mcap should be at least twice what it is currently in my opinion.
Thanks VanVan, our posts crossed. On that basis the deal is worth at least £200M to us, as you would hope for, for 53% of 1.5M oz of gold. Seems hard to believe that that is the case simply because our mcap remains so low - does Kerim need to spell it out in words of one syllable?
But with a non-dilutive deal and a 'free-carry' on future costs of development, so do Ozaltin build the mine, at no cost or future share dilution to Ariana, in return for 53% of future profits from mining at least 1.5M oz of gold? That mine cost would have been in the 100s of millions to Ariana of course. So in very simple terms: Ozaltin pay a lot of up front, $30M dollars now plus another $8M soon, plus, lets say £200M to build the mine and infrastructure and can then earn, say, a minimum of £500 net profit per oz in return - 1.5m oz x £500 x .53 = £397.5M. If Salinbas eventually ends up having 4M oz, they can multiply that profit by 2.7! Ariana would receive a minimum of 1.5M oz x £500 x 23.5% = £176.25M but with no development/build cost in the first place. If that is accurate our share price should be re-rating so I assume I'm wrong on something. Can anyone put me right?
The update on the disposal and restructuring of the Joint Venture and the special dividend is transformational news for Ariana and the shareholders. The imminent receipt of cash that is the equivalent of c.25% of the market cap of the company is great news and shareholders will receive 50% of that less tax and costs. Most importantly Ozaltin ,the new majority partner, has the finance , assets, capacity and political standing in Turkey to build the mine at Salinbas where there is at least 1.5M Oz of gold.
That is fantastic! The line in the RNS that I really need to understand is shown below:
Ariana will be free-carried on further costs associated with the development of the Salinbas Project;
Does that really mean that Ozaltin could build the Salinbas mine at no cost to Ariana and subsequently Ariana will own 23.5% of all profits from that mine? I.e 23.5% at say minimum net profit of £500 per Oz x 1.5M Oz = £176.25M?
Thanks Ash, the important point will be how the Turkish treasury determine the price they pay in Lira, I.e. is it based on the US dollar price/value at the time of purchase? And if so do AAU immediately exchange the Lira (they are paid in) for dollars to avoid the Lira devaluation that is occurring?
Andrew Taylor, my view has always been that AAU is protected from the lira weakening and the Turkish economy failing because it is paid in US dollars for its gold and silver. On that basis its costs become cheaper relative to the dollar as the lira weakens so AAU actually profits. I'd welcome the views of others.
The gold price had to take a correction at some point and profit taking was inevitable both on gold and on AAU by short term investors. The gold rally will recommence soon enough and AAU is extremely well placed to continue to improve its fundamentals whilst the gold and silver price trajectories continue to point upwards. The medium and long term opportunities for AAU to increase its profitability look very encouraging to me.
RD2U, Coincidentally, I work as a CFO and my organisation's auditors are PwC. They, like KPMG and the other members of the big 4 auditing firms have, despite existing contracts at agreed fee levels, massively hiked their proposed fees for their next audit, a few months post them being appointed again to undertake the audit. They are blaming the external climate and the greater legal expectations they now face. Whilst that is true I genuinely believe I can get just as good an audit from one of the firms in the next tier of organisations down who do not pay their Directors and partners quite as much and will therefore charge my firm considerably less. PKF Littlejohn are the sort of firm I will be looking for. I think there is a very high likelihood that Ariana are simply doing what I am planning to do most probably for the same reason.