Member Info for M20ASH

As a footnote, I very much doubt that the Turkish people are bothered one way or another. It is a country whose people are primarily focused on their day to day lives. Next time I’m there I will ask, but I’m fairly sure that it will be of no concern to anyone I speak to.

Evening all, I still have doubts as to whether this is a concern to Ariana. The issues are localised and are more about how it affects the population in that particular area.
Joe, think in terms of mining in Nevada or Northern California. Red Rabbit is in a region comparable to Nevada and the Alamos mine at KirazlI near Çanakkale is near the Dardanelles, a much more populated and greener part of Turkey and comparable to Northern California around Sacramento. Now, are we comparing apples with apples?

Hi Paul, I understand the reasons for the protests against the Alamos mine in Kirazli are down to the large de-forestation and fears of cyanide pollution to the local rivers on which the surrounding villages and population are highly dependant.
I am not sure you are comparing apples with apples, if you perceive this to be a threat to the Red Rabbit gold project.
Besides which, rightly or wrongly, it is highly unlikely that the Turkish govt will take much notice of 5,000 or so protesters, whatever the merits of their protest, unless there is an actual pollution issue.

I have updated the projection by pushing Tavsan production out to H2 2021 for now and added lines for loan repayments, mine development costs and dividends to parent so the effect on cash can be seen more clearly. Loan repayments in 2019 & 2020 are per the Financial Statements < 1 year & > 1 year. Mine development assumes £16.5m from cash over 12 months build without a need for a loan as a later build start with the cash flows from Kiziltepe would comfortably allow this and a minimum annual dividend payment of £3m to Ariana/Proccea, which can be increased from 2021 onwards.
I have also factored in acquisition of Kizilcukur by the JV at £3m as this will form part of the rationale for extension of LOM beyond 2023 when Kiziltepe reaches initial target production of 160k oz.

To clarify again, double output of 20,000 oz at $400 margin compared to $200 margin,
Going to bed now!

Point 2, got that wrong! Shouldn’t post after drinking, Not per oz, but total production given the same level of administration costs, the total profit generated will be greater!

I’m fairly sure that someone raised this before, but if not, it may be that Ariana is not so much under the radar, but a victim of it’s own success. Let me explain...
In a rising gold market, an increase in the price will have a greater impact on the operating profit margin of a high cost producer than a low cost producer - if you sell at $1,000 and your cost is $800 as opposed to $600, if the price rises to $1,100 giving you a margin of $300, a 50% increase, it is better than an increase from $400 to $500, which is only a 25% increase. It follows that this % increase falls to the bottom line, given comparable administration costs.
The advantages for Ariana are that 1) the opposite will apply as the price falls, less upside, but a safer bet should the price of gold fall.
2) if Ariana doubles production, which will happen when Tavsan comes on stream, the price of gold at the time is not the key factor. Instead, it is the differential between the selling price & the costs of production - if you double $400 profit per oz to $800, the improvement on the bottom line far outweighs an improvement of $200 to $400.
3) Ariana is also a silver play, which currently has more potential upside.
Again, these numbers are for illustration only. It might be that other producers are a better short term play given the increasing price of gold, but as a medium to long term play, I feel that Ariana has the greater potential imo.
Have a good weekend, Ash

Hi John, the 2018 Financial Report indicates an initial capital cost for Tavsan of $20m, which is currently about TL110m and converts back to GBP when re-stated as £16.5m. Obviously current exchange rates and a lot could happen, but £10m from cash and a loan of £6.5m could be repaid comfortably within 6-12 months. Lower interest costs/higher profit than my projection.
Cheers, Ash

No problem at all

Hi Joe, it seems my link works so you can view/edit/download the spreadsheet and play around with the numbers. The model still has a loan and related finance costs and repayments built in, but the JV cash profile at the foot suggests that the Tavsan mine development can be financed from cash with maybe a much smaller loan.
The key for me to filling the 'gap' is the build up of cash and the potential that unlocks for acquisition/farm-in/share buy-back/dividends.
Any questions, please shout.
Cheers, Ash

https://1drv.ms/x/s!Art3fOvTbZE8sGeqMq033yl2Op0l

Not sure if this will work, but worth a try!

Hi John, forgive me for asking, but what are your timescales here. I agree that Q2 will be the low point of the year given the drop in production and the lower POG compared to now and production may well be lower in H2, but given the current POG/POS, revenues and profits should improve and moving into next year, assuming prices are maintained, even with lower output of say 24k oz of gold, there should be a further uplift in profits. Share of JV profit should increase from £3.7m last year to £5.5-6m next year, which seems reasonable if you're happy to sit tight and hold and/or do a bit of trading as opportunities arise. I'm sure the value will be reflected in the sp along the way so I'm not too worried that there's been no significant increase yet.
My main concern would be how they fill the gap between Kiziltepe/Tavsan/Kizilcukur and Salinbas, but I'm sure the Ariana team have that in mind and efforts are already focused on that objective.
Cheers, Ash

Hi Dibs, not sure about Ivrindi. Relatively small compared to other targets and the furthest away from Kiziltepe compared to Kizilcukur and Tavsan. Maybe on the back burner for now as exploration funds seem to be used expediently to exploit targets with the most potential and lowest production costs.

BTW with current gold prices and guidance production levels, the JV should comfortably have sufficient funding for the Tavsan mine development without the need for a loan. Once we are producing 50K oz per annum, we should see some real fireworks. Sorry, if that sounds a bit rampy, but I've had a cr*p week with SXX as well.

Hi Benjie, my thoughts are that an increase of $100 on 25k oz of production gives $2.5m additional revenue = profit before tax with all costs remaining the same (I am ignoring the 2% net smelters return as it messes up the maths). Less tax of 20% = $2m. Reported JV profit at an exchange rate of $1.25 gives £1.6m with 50% share to Ariana (improves as the exchange rate moves closer to parity).
If the starting point is £2.4m Ariana profit and you add an additional £800k to get £3.2m with a PE of 10 that will increase the market cap by 33% from £24m to £32m. I'll leave you to work out the effect on the sp.
Obviously the above is for illustration only, but that's the reality in my opinion. I have no intention of checking what the effect will be on other gold producers as I am more than happy with my investment here right now.

This is Bill
O
- I -
/\
Bill is a shorter.
Bill is not betting that the bonds will not be sold.
Bill is betting that the sp will be dropped and you will sell so he can buy shares cheaper and close his short.
Stick 2 fingers up at Bill....

Trinityman, that made me smile, but I imagine there's quite a few shareholders here, myself included, who could probably afford to buy a new Porsche using their investment in SXX, but why choose to buy something that is guaranteed to lose money when there is such an opportunity here.
I have only posted a few times, but take the time to read most of the posts, both informative or otherwise. A bit quieter today, which has been great because it has allowed a few posters to share some very thoughtful insight. Tbh I have no idea where the sp will be in one year, two years or five years, but I am not particularly worried whether it is 30p, 60p, 75p, £1 or any other number that is put forward because I am not staking my future on this investment alone and if anyone is, then perhaps that is a little foolhardy.
However, if there is a coupon of 13.5% on the high yield bonds as reported, then that makes them very attractive and it would be reasonable to think that they will be sold. I understand that there are further conditions to be met before the RCF can be put in place some of which I believe relate to off-take agreements, which I assume are more about the security of the mine as an asset and perhaps require amendments to the agreements to ensure that the off-take agreements remain in place in the event of a default. I also understand that the commitment from Han**** to purchase a further $50m of shares is a deal-breaker, but I would hope that given the commitment already, this will be honoured.
Assuming that the initial bonds are sold and the RCF is in place, there still remains the issue of selling further tranches of $500m high-yield bonds to repay the RCF and I am finding it a little hard to understand, giving the timing of these further capital raises, and the proximity to cash generation, which will comfortably allow these to be repaid, why they present a greater issue than this initial raising of debt.
Perhaps my optimism is misplaced, but I will stick to my beliefs for now.
Hoping for a good week. GLA

Might be better with a few geese, golden eggs and all that...

Meant to type ‘rise’!

Spoke too soon John, nice little ride going on now after the earlier sell off - presumably some were hoping for a half point cut in the Fed overnight lending rate.
Let’s see what tomorrow brings...