Member Info for M20ASH

Hi all, flying back from Rome this afternoon, but may need confirmed sales rather than production numbers. Will take a look over the next few days.
Cheers, Ash

News this week is all positive and agree with Biggles on ADVFN that resource upgrade, extended LOM will follow in due course when all results are finalised.
Sanctions so far seem way short of anything that could directly impact Ariana. Await with interest the outcome of talks on Tuesday in Sochi between Erdogan and Putin. Hopefully, this will settle things down.
Off to Rome for six days after a hectic week so switching off for a few days. Fingers crossed...
Cheers, Ash

Hi John, excellent well-balanced post. I was going to post today on the energy risks, but what with watching the rugby and some more research into the potential currency exchange risks, rustling up a steak & kidney pie filling and a couple of hours in the pub, I seem to have run out of time!
If I’m totally honest, my initial thoughts on the currency exchange risks may need some revision. I know the Turkish Central Bank has USD reserves as do other banks, but how these will hold up should the Central Bank continue to intervene in the currency markets to support the lira and sanctions restrict exports and future payments in USD with a requirement to pay for imports of oil and gas, etc in USD, I am not certain right now.
The conversion of TL to USD to repay the loan(s) should not be an issue as the lender can exchange TL for USD, receive loan repayments in USD & maintain the ratio of TL to foreign currency reserves as set out by the Central Bank. The issue may be whether Ariana can exchange all it’s revenue from sales into USD or another currency. Right now there will be options, but the imposition of sanctions will presumably affect this.
I also read that Iranian banks no longer have access to the SWIFT system because of sanctions, which restricts international money transfers. Not the end of the world, if the same thing happens to Turkish banks, it just means that to remit funds back to the U.K. requires a work around.
What with Putin and the Arab League all denouncing the current situation (pot & kettle), it’s all a bloody mess right now and a sensible solution is what is required for the sake of everyone, particularly the people who are suffering right now or who may suffer the consequences of sanctions.
I just hope that this all ends with the downfall of Erdogan and the AKP and some normality returns to Turkey.
Sorry if that’s a bit gloomier than my usual posts, but there it is, warts ‘n’ all.
Cheers, Ash

Evening all, just chilling out with Mrs A and enjoying a glass or two of wine whilst watching the Da Vinci Code (again!),and doing a bit more research.
As John said, thoughts at the moment concern the current situation regarding Turkey's invasion of Syria and I know that it doesn't sit well with some investors. My immediate thoughts are for the innocent people - Kurds, Syrians and Turkish, who will inevitably suffer the consequences of this action and the possible sanctions that may be put in place. It's a bloody mess and I have no idea how it will be resolved, but I hope sense will prevail at some point.
I have been in contact with friends in Turkey, both British expats and Turkish and they are all unhappy with the current situation, but they have never been fans of Erdogan and his Islamist policies as they are counter to the more Western attitudes that prevail on the Aegean and Mediterranean coasts.
I think it is important that we try and put some perspective on events and try and rationalize the situation taking into account the risks to our investment, so I want to try and raise the issue by trying to highlight the risks and encourage some debate. At the end of the day, the market will assess the risks and determine the sp, so this is not an effort to influence anyone - I have no more knowledge of how the sp will react from day to day than anyone else. All I can do is research and share information that may help in your investment decision.
So...firstly to the sale of gold production and the potential risks. The Turkish Govt has first option to purchase gold at prevailing market rates, which they they are currently exercising. Turkey is a net importer of gold - gold reserves increased from 320.69 tonnes in the third quarter of 2019, a record high, from 314.10 tonnes in the second quarter of 2019. Ariana's contribution to this is a mere drop in the ocean, but clearly the policy is in place and sales seem to be assured.
The market price of gold is set in US$, but the price in other currencies rises as they depreciate against the $ so whilst the current market price is not at the record levels of $1900, it has achieved record levels in other currencies, including the Turkish Lira. The fact that Ariana receives TL for it's sales to the Turkish treasury is not an issue as it converts this immediately to US$ to pay the US$ denominated loan and then converts holdings back to TL as required.
That then leads to the subject of currency risk and the ability to exchange TL for US$. I personally believe you only have to read a bit more about Iran and how both the Govt and the people have been able to surmount any issues, whether it be through currency traders, Russia or alternatives. The risk to Turkey is devaluation of TL, but as we know this presents a opportunity benefit to Ariana because contracted costs for the extraction of gold become cheaper.
Running out of space here and could do with some kip, so more tomorrow on energy supplies.
Cheers

Interesting that EMED Mining (now Atalya) considered the Klirou resouce in Cyprus as a priority back in 2010, but is now on the back burner with projects in Spain taking priority. Also interesting that the deposit extends from surface to 200m below surface and was considered as potentially mineable by open pit methods. A further fit with Ariana's approach.
https://s3-us-west-2.amazonaws.com/prd-wret/assets/palladium/production/mineral-pubs/country/2010/myb3-2010-cy.pdf
Just a shot in the dark, but you never know...
Cheers, Ash

Evening all, a bit quieter on the Board today, but taking the lead from DJ's last post, back to all things Ariana. Chanced upon a thesis submitted last month by Berkin Ugurlu, the Exploration Manager for Ariana, for his masters degree, which studies the geology at the Kiziltepe project. Note the credits, which acknowledge the support of Kerim, Zack and the Ariana team. Clearly, the thesis contains an understanding of how the deposits were created, the geology, the potential resource and the basis of how the team sets about targeting where to drill.
http://etd.lib.metu.edu.tr/upload/12624444/index.pdf
Unfortunately, as I am not a geologist, I reckon no matter how many times I read it, I will never fully comprehend the detail, but for any geologists out there or if you know someone who is, I am sure it would be of benefit, if you could provide some interpretation of the information and shed some light for us mere mortals.
Here's hoping...
Cheers, Ash

Hi John & VanVan, it would make perfect sense for Kerim to be in Turkey at this time to review all the data prior to the RNS release of drilling results and Q3 production numbers.
I am still hopeful of an update on the Q&A session, but all in good time. Some positive news would not go amiss right now. The current situation is clearly causing some consternation among shareholders, not least of which is the potential international reaction and it's impact on Turkey and Ariana's operations there and I will expound some thoughts on the potential risks and possible benefits when I have a bit more time.
Lastly, I have been researching the history of mining in Cyprus and current operators/licence holders. Most comments I have read seem to think it would be natural for the project to be based in the North, but historically, most mining has taken place on the Greek Cypriot side on the northern slopes of the Troodos mountains.
My research led me to Atalya Mining, previously EMED Mining, which is AIM/TSX listed, is incorporated in Cyprus and whilst currently focused on operations in Andalusia and Galicia, has licences around Klirou. Interestingly their website gives some information on the licences they hold, which they are not currently developing, but does indicate they are currently in joint venture discussions with interested parties - Ariana perhaps?
https://atalayamining.com/cyprus/
Food for thought....
Cheers, Ash

Hi Paul, yes there could be costs associated with bringing the lab in house. Sourcing and relocating a specialist team would be costs over and above normal expenditure levels and the ongoing costs might be higher than the fees paid previously with the benefit of speed and greater capacity to analyse drill results, etc.
Even with this, I still find the level of increase a bit mystifying. It would certainly be good to know as any projections will be difficult without a good understanding of this and other notable variances such as the considerable drop in finance costs. Hopefully, we might yet get some answers or at least another opportunity in the near term to ask the questions again.
Cheers, Ash

Hi John, you may well be correct in terms of production, but the key for me will be the uplift in the average revenue per gold oz, including the silver credit. I would not be surprised, if this were closer to $1,700 per oz than the average of just under $1,500 per oz for H1.
Cheers, Ash

I'll bear that in mind. In the meantime, kendine iyi bak arkadasim.
Cheers, Ash

Hi VanVan, when it comes to playing a musical instrument, i am pretty much what Ronnie Corbett was to basketball, can't sing for toffee, far too old now to run a marathon and more often than not, a grumpy old man, but as Hercule Poirot used to say, it's all about the little grey cells plus a little help these days from Google!
I have owned an apartment in Turkey in Altinkum, south of Izmir, for 15 years so we visit at least once a year, which is perhaps why I had an affinity with Ariana when I initially invested. The Turks are very gracious people and the phrase is one you always hear when you express gratitude towards them. For them it is all about hospitality and friendship.
Unfortunately, even though I copied the phrase to try and apply the Turkish alphabet with the accents and cedillas, etc, it did not work and neither will this, but here is my usual sign off in Turkish, just not as it should be correctly written. The first 's' should have a cedilla and is pronounced 'sh' as in Tavsan and Salinbas.
Serefe, Ash

Hi DJ, pleased to hear you’re a bit more back on board and appreciate the kind words. I am thoroughly enjoying the research and testing the brain cells - the day job is not quite so stimulating most of the time!
I think the BoD are very open and appreciative of their shareholders. The conference call & following Q&A session were a bit of a disaster, but I lay the blame for that squarely on Yellow Jersey in not really understanding the issues and what we, as shareholders, wanted to know.
However, that is bygones now and we need to move forward.
My expectations for this month are optimistic with drill results from below the pit floor at Arzu South plus Arzu North & Derya, including further investigation of the ‘bonanza’ grades together with the initial quarterly production results. POG holding steady as well. Not sure I need much more right now to justify my investment in the great potential here, but I recognise that my timelines allow for a few more years yet for it all to come to fruition and others may be a bit more impatient. Each to their own.
Cheers, Ash

Hi Van Van, as they say in Turkish, bir sey degil.
Cheers, Ash

3. The change in equity in the 6 months - b/wd £7.936m plus profit for the period of £6.058m less c/fwd of £7.41m gives a reduction of £6.953m, which is made up of translation losses as a result of depreciation of the lira from 7.16 at 31/12/18 to 7.36 at 30/06/19, but the larger part will be dividends, say, c. £6m of which 50% is due to Ariana, which is further supported by the increase in amounts due from the JV to group less any prior loan repayments made and confirmed by Kerim’s answer to my question at the Q&A session and is also reflected in the increase in current liabilities in the JV accounts. I would expect these to be paid from cash before the end of the year and passed through group to the Plc. The receipt of the dividend will increase cash in the Plc, but more importantly, it is income that reduces the value of retained losses. A few more dividends of this magnitude in the next couple of years should eradicate the retained losses and open the way for the Plc to pay a maiden dividend to shareholders, notwithstanding any possibility of a capital reorganisation to allow this to happen earlier.
So, all seems fairly positive and this analysis hopefully allays a few concerns with the proviso that this is based purely on my own research and conclusions and relies on a number of assumptions that I have highlighted. Ultimately, a lot of things can and will change in the future, but my aim is to continue to evaluate the information and share my thoughts, for better or worse.
Cheers, Ash

Morning all
The following link should hopefully allow you to view the cash flow statements I have cobbled together for the last 2 years for the joint venture.
https://1drv.ms/x/s!Art3fOvTbZE8sXgnPUDczfcS9Eai?e=DelA33
Things to note:
1. The detailed information in the Financial Report is insufficient for the exercise to be 100% accurate. For example, the movement in fixed assets is not detailed in a supporting note allowing me to separate the purchases, amortisation and any write off of intangible exploration assets so I have used a net movement figure and assumed it is principally amortisation, but it may be that there are additional purchases in which case the cash flow should show these separately as a negative cash flow with a compensating increase to the amortisation value.
2. The decrease in borrowings in each year is less than the b/fwd value of borrowings in current liabilities i.e. amounts repayable in less than one year - the value at 31/12/16 was £6.665m, but the amount repaid in 2017 was £4.437m and the value at 31/12/17 was £6.615m yet the reduction in borrowings in 2018 is £4.361m. This leads me to conclude that working capital loans have increased by the difference each year, unless there is some other factor I am unaware of.
3. These increases in working capital loans (assuming that is correct) seem to have been principally used to fund increases in inventories (unsold gold/silver and unprocessed ore), debtors (receipts from the sale of gold/silver) and exploration costs given the values of their movements in each year, although it is conceivable that some funds were used to purchase plant & equipment, etc in 2017.
4. It would be reasonable to conclude that dividends paid in 2018 were paid from cash generated from operations.
Unfortunately, there is even less detail in the interim numbers, particularly the cash balance, which restricts my ability to produce something for the 6 months to 30th June. However, there are some points that can be made:
1. The value of current assets has increased from £7.216m at 31/12/18 to £8.506m, which is most likely to be an increase in cash held. I would expect inventories to be managed and kept at a similar level and amounts due from the sale of gold/silver from the Turkish treasury are a timing issue and more likely to be similar or lower, than higher.
2. The Q2 operational update highlighted an increase in cash costs due to the payment of the 2% State Right in the quarter. This would have been a payment for the previous 12 months, which is payable by 30th June each year. Revenues in the 12 months to 30th June were £32.782m so the State Right paid just prior to the balance sheet date would have been c. £0.655m meaning that cash balance at 30th June will have been at a relative low point in the cycle.
To be continued....

Hi John, indeed. My understanding that the environmental regulations in Turkey conform to EU legislation. Interesting that a further EIA would need to be conducted for any increase in capacity, which means that the addition of a second ball mill to increase production capacity at Kiziltepe would require a further EIA. Each separate operation, such as Tavsan, requires an EIA to be carried out.
Cheers, Ash

A bit of light reading (not) for anyone requiring a bit more understanding about the red tape that Ariana have to wade through to bring a mine into production in Turkey. It does give greater insight into why it takes the time it takes.
It also clarifies what the Turkish State Rights with respect to the mining and sale of gold, which falls into group 4 of the minerals classification and, if my understanding is correct, carries a State Right of 2% of sales.
https://uk.practicallaw.thomsonreuters.com/4-616-5262?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1
http://www.lawsturkey.com/law/3213-turkish-mining-law
Cheers, Ash

Hi Rd2u, as an addendum to my previous post, the NSR was bought from Teck Cominco Ltd by Sandstorm Gold in January 2016. See the following link https://www.sandstormgold.com/news/press-releases/sandstorm-gold-announces-agreement-to-acquire-56-royalties-for-us22-million
Both the press release and the Scoping Study Summary on page 14 of the Ariana 2018 Financial Report indicate a 2% NSR, but I suspect the original terms [er the RNS remain in place and 2% is used for simplification.
Cheers, Ash

Morning Raredragon, a quick summary of the Tavsan deal. Ariana paid Odyssey Resources $500k for the licences plus £150k in shares in Ariana at an issue price of 5p plus 6 licences in the Canakkale region. NSR to Teck Cominco Limited, who had a previous earn-back right agreement with Odyssey, is 1% on the first 100k oz of gold/silver, 1.5% on the next 100k oz and 2% thereafter plus 2% on any other metal produced and sold. Source: RNS dated 4 April 2008.
Cheers, Ash

Evening Raredragon, happy to do a bit of research i.e. a trawl back through the related RNS releases on the website, but I am more interested in future revenues, costs and profit.
I guess it would be relatively simple to calculate a value for the royalty based on revenues in isolation. The problem for me is that the cost then sits within cost of sales and without knowing all the elements that make up the total cost of sales number, it is hard to then break this down into it's constituent parts to then build up a forecast going forwards, including a specific royalty cost element. So right now, I have to resort to a more simple estimate based on previous years' cost per oz sold, including the royalty, which is far from perfect, especially as gold grades decline over time and the cost to produce each oz increases. We only have information on the total resource and the average grades so estimating how these costs will increase over time is difficult without making some very broad assumptions.
Ariana, of course, have all the geological information and can design a mine production plan to ensure that they mine the resource in order to maximize recovery and optimize revenue v cost.
I aim to have a go at the cash flow statement for the JV, but without having looked at it in-depth yet and knowing that certain detail is not there, I may be over-estimating my ability to piece it together and it could be like trying to complete a Sudoko puzzle with a couple of the numbers missing! Still, nothing like a challenge, eh?
Cheers, Ash