Member Info for M20ASH

Evening John, the gold price is definitely on the up and I would agree that it's difficult to know when to sell and take profit. A poster on the SXX board said that it is easier to sell on the way down than it is to sell on the way up, which may well be true. However, if you top slice, even if you time it badly and the price continues to rise, as I may have, it's not the end of the world! There will be further opportunities. At the end of the day, it's not about playing the perfect game, it's the winning that counts and if you can come out on top with your strategy, that's all that counts....

Evening Joe, I have built a relatively simple spreadsheet to forecast the potential over the next 7 years, which will no doubt change as events take their course and it remains to be seen how Tavsan is financed and whether it receives similar govt support to Kiziltepe, but a combined output of c. 50k oz gold in 2-3 years with a relatively modest increase in admin costs will be a game changer in terms of sp - think in terms of JV profit of c. £20m pa at today's prices with a 51% share to Ariana. Well capable of supporting dividends. Perfect for a long term holder, but there will also be plenty of opportunities along the way to profit from sp rises and falls. My own approach is a combination of long-term dividends from a target shareholding in 2-3 shares on top of fairly safe pension funds with a good spread of risk and if I can buy and sell from time to time to take advantage of sp movements, then I hope to retire in 5-6 years with enough income for a reasonably comfortable life allowing time to travel or just sit back with Mrs A and enjoy what we have with a bit of capital to fall back on just in case. I'm quite happy to look at other people's yachts! Patience is often the key and I cannot say I am fully up to speed with that yet with the shares, but I also buy and sell British Commonwealth stamps on eBay and that has taught me a lot about waiting for the right opportunity as the first one is not always the best one and their will invariably be another one. Set your targets and stick to them as much as you can, avoid the spikes and try to get ahead of the herd, if you can. Best of luck to you!

See what I mean!

Sorry, I meant late 2020, early 2021. Not fully awake yet!

Sorry, I meant late 2020, early 2021. Not fully awake yet!

Sorry, I meant late 2020, early 2021. Not fully awake yet!

I think that is a question to put to the Board next week. We cannot fully understand what their own motivations are and I see no reason to speculate when a simple question would suffice. Besides which, given a possible timeline of 10 years until Salinbas comes into production, it would be fair to say that anything could happen.
I do however feel that the key to a significant share price increase, apart from an increasing gold price, will be when Tavsan starts production either in late 2019 or early 2020. With the output from both mines, even at today's gold price, the effect on profit will be considerable, which should in turn have a pronounced effect on the share price, but until then we may have to be a little more patient.

Paul, you have strange idea of fun.

Some thoughts on the current share price. My gut feel is that it has very little to do with fundamentals, but as a few posters have suggested it is riding the wave of this week's gold price increase. Nothing wrong with that as long as the trend continues, but once it falters and levels off or drops, then I would expect the hot money to leave as quickly as it arrived, looking for the next wave.
Because the sp has already exceeded my short-term expectations, I have sold some of my holdings to bank some profit. If the gold price continues to rise and the sp moves with it, all well and good, but remember we are already half way through the year and even if the gold price rises to say $1500 over the remainder of the year, the average realised price over the year will be considerably lower, given where it started.
Interesting to read the PG note from Kieron Hodgeson, but I still have questions re outstanding borrowings, finance costs and investment support.
The company continues to report on the repayment of the construction loan of $33m, which it states will be repaid by early 2020. No issue with this, but remember that the amount borrowed was $24m with a $9m fixed 'profit' or borrowing cost (it is a Sharia loan). So the accounts reflect the capital cost of the loan and not the gross repayment amount - the difference is expensed as finance costs as incurred. At year end the gross outstanding amount was $16.6m, but how much was the liability on the balance sheet? For simplicity, if we multiply $16.6m by 24/33 and then convert to sterling at an exchange rate of 1.27, we get an outstanding balance of £9.5m, but the balance sheet of the JV has total borrowings of £18.2m so what are the other borrowings and why is there no mention? Of the total, £9.3m is repayable after more than one year so if you think that the company will be debt-free in early 2020, I suggest you think again.
I also wonder, what the net finance costs will be in 2019 because up to the end of 2018, the finance costs have been supported, hence the finance income in the JV profit and loss. By my reckoning, finance support for the last 3 years has totalled £7.75m. If you apply an average exchange rate to the income for each year, I reckon that the support so far is around TL44m. As I understand it the support is restricted to TL50m, so the remainder has probably been utilised in Q1 2019.
The upshot is, if you estimate production at 27,500oz at an avg revenue per gold ounce of $1500, cost of sales at £500 per ounce (in line with prior years), admin costs of £1m, amortisation of the mine asset at £5.5m (27.5K/160k x £32m), finance costs of £4.7m (based on borrowings) and finance income of £0.8m (TL6m at YTD exchange rates), you get PBT of £8.3m, corpn tax of £0.6m and JV profit after tax of £7.7m, which is £0.3m more than 2018.
Please feel free to point any flaws or apply your own estimates. I certainly think questions should be asked and would urge caution on excessive sp predictions.

Paul, I believe that rising unemployment is a key issue for the CHP. I see no reason why productive activity in Turkey creating jobs for Turkish people should be at odds with CHP policy.

First post on this board so please don't laugh. Got to thinking about the BNP short position this evening and did a little research on the basis that someone mentioned recently that quite a few shorts are simply hedges against a convertible bond position rather than a speculative short.
I found the following information and thought that the investment strategy and risk profile fits fairly well with an investment in Sirius and taking out a hedge by short selling to cover any fall below 15p, which I believe is the minimum conversion price for the recent convertible bond issue should the SP fall below the initial conversion price of 18.75p in the next 12 months.
www.bnpparibas-am.com/en/sustainability/as-an-investor/
Having read through this, I am inclined to think that BNP may well have subscribed for convertible bonds and are simply hedging to protect their position in line with their stated risk profile. Unfortunately, this may well have exacerbated the SP drop today resulting in a lot of panic selling rather than rational thinking of where this project is heading and where the SP will ultimately be.
Of course, I may be completely wrong, but if I'm correct, then Sirius has another significant investor on board whose investment strategy aligns with the aims of the company.
Food for thought.....

Hello Mabbs, interesting article, but a little misleading to say there is no net debt. The writer is looking at the accounts of Ariana, which uses the equity method to account for the joint venture, which correctly includes the carrying value of the share of the JV as a non-current asset in accordance with IAS28. However, if the proportional consolidation method were to be used, each element of the JV balance sheet would be shown separately e.g. 50% share of non-current assets, current assets, current liabilities and non-current liabilities. Combined with the other values within the consolidated balance sheet, the current assets less the current liabilities and non-current liabilities would be negative indicating there is in fact net debt, which I think we were all aware of anyway, It doesn't change the investment case for me, but makes me wary of believing everything I read without checking facts first!

Hello Dibs, yes I do. Been holding since 2016 and recently doubled to a tad over 1m shares.

Paul, yes the loan was taken out in US dollars. Since January 2018 all output has had to be sold to the Turkish govt and they buy in Turkish lira, which Ariana immediately converts to US dollars, which they use either to pay back the loan or as a hedge against depreciation of the lira. They then convert back to lira as and when required to pay the operating costs.
Whether Turkey then uses the gold to buy oil from Iran is a bit off-topic, but it would certainly be a way round the current predicament that Turkey, along with China, India, etc find themselves in with having to source oil elsewhere at a higher cost and also necessitating changes required at the refineries to process different sources and grades of oil.Ultimately, this will impact fuel costs and inflation in Turkey, which will impact Ariana's operating costs, but further depreciation of the lira will offset this.
Back to my original post and I have concluded that the reason for the relatively high amortisation of mine assets in 2018 was down to the fact that there was no amortisation in 2017 and finance costs were purely borrowing costs. If you divide the total production for 2017 and 2018 of 37,301 ounces by the initial target of 160,000 ounces and multiply by the capital investment of £32m you get £7.46m which is near as dammit the write down of the intangible asset cost.
On this basis with a targeted level of production of 25,000 oz, the expected amortisation to be taken into account when calculating the JV profits would be £5m pa, which is less than 2018 because of the catch up element.
I have also spent some time today looking into Turkish investment incentives as clearly these have been offsetting costs to date. I believe the mine development has been classified as a strategic investment by the Turkish authorities given the level of interest support received to date. However, I also believe that this is restricted to a maximum of 50m lira. Assuming that Ariana qualifies for the maximum, I think it is highly likely, based on finance income to date, that this support will cease shortly and the full borrowing costs for the remainder of the loan period will impact JV profit.
I also believe that if this has been classed as a strategic investment that the CT breaks offered are a reduction in taxable profit of 90% up to a maximum of 50% of the capital investment, which means that once the JV exceeds £16m taxable profit after utilising b/fwd losses, they will start to pay CT at 20%.
I am currently modelling the effects of all this over the next 7 years, taking into account that Tavsan will potentially come on stream in 2020. My initial thoughts, however, are that the JV will generate sufficient profit and cash to pay dividends that will support Ariana's own costs plus development costs, negating the need for further fundraising, but it is almost certain that a further loan will be required to finance the development of the Tavsan operation.
I will update in due course.

First chance today to have an in-depth look at the 2018 financial statements particularly the results of the JV as it the source of profit. First thoughts are that £7.4m profit after tax from £29.3m sales is impressive, but you can hardly fail to notice the finance costs of £12.2m, up from £2.7m the previous year, which then had me digging around trying to ascertain what these relate to.
Borrowing costs? Presumably. Amortisation/impairment of intangible and tangible exploration and mine development costs? Definitely. NSR? No, included in cost of sales I believe as it is used in the calculation of operating cash costs.
Because I wanted to estimate what these costs are likely to be in subsequent years and how that will impact profit from the JV, I then tried to ascertain what the split is likely to be. Reduction in mine costs and advances to contractors from £32m plus the cost of the road diversion incurred this year to £24.5m clearly account for bulk of this and I understand that this cost is amortised on unit of production basis, but seems high given that production in the year was 27k ounces out of the current estimated total production of 160k ounces.
So I tried to work out at the borrowing costs using the available information and ended up with more questions than answers. The original loan agreement announced at the end of July 2014 indicated a loan of $24m with a total repayment of $33m over 5 years with a capital repayment holiday of 2 years from first draw down. At first I thought if the initial draw down had already been made at that time, the loan should be repaid in 2019 and not 2020, but what it actually goes on to say is that the timing of repayments will be calculated at the time of each draw down so the last 3 years runs from the date of the final draw down.
So on to the repayments in 2018. The amount repaid as at the end of the year was $16.4m compared to $7.7m the previous year - $8.7m in the year, which should split 24:9 between capital and borrowing costs - $6.3m & $2.4m respectively - with $16.6m outstanding at the end of 2018. Converting these to sterling @ $1.27 gives £5m capital, £1.9m borrowing cost and £13.1m outstanding, but I cannot tie any of these amounts back to the financial statements as the reduction in borrowings is lower and the closing balance is higher at £18.2m. Ok, so there are loans from Galata and Proccea, but I assume these are within Other Payables (including shareholder loans) and we can see the amount outstanding to the Group from the JV in note 15 to the accounts is only £1.4m. So I somewhat baffled as to what these other borrowings are.
Also, I am not clear as to what the finance income is, but assume that this is interest payment support from the Turkish govt, which at £4.6m suggests that the borrowing costs in the year are actually around the same mark as in 2017.
I will not be able to attend the AGM, but if anyone can shed any light or ask some questions, it would be much appreciated.

VanVan & Johnpwh thank you. I take my hat off to the 2 gentlemen who managed to visit the mine. I normally fly from Bristol into Bodrum-Milas and have an hour's travel up to Didim, but Izmir is a further 2-2.5 hours on from there and I am guessing, but would imagine the journey from Izmir to the mine is around 5-6 hours. Might be easier to get a direct flight from Gatwick, Birmingham or Manchester. Roads are generally a lot better now than when I first visited Turkey so I may be over-estimating the actual travel time.
With regard to the AGM and your invitation VanVan, it would very much depend on the timing as work commitments immediately prior to month end and the ensuing 2 weeks are usually full on and I have further work to do later this month to supply information requested for a VAT compliance check, which is a somewhat depressing thought!
Nevertheless, if I can make it, it would be good to glean more information and meet fellow investors.
Must go as I have about 12 minutes to eat before heading out for a few beers!

Hello Desertjoe, thank you for the warm welcome. I had to smile when I read a recent post of yours about how you came to invest in Ariana. My story is a bit more straightforward as I read Tom Winnifrith and Nigel Somerville as an antidote to much of the hype around share investing and following their tip and after some research, decided to invest. I also own property in Turkey about 3-4 hours south of the Red Rabbit project and having spent time travelling there and around Turkey over the last 15 years as well as buying the end product from time to time, I feel there is a fit with my criteria for investing. However, at the end of the day, we are all here to make money and I welcome all approaches to investment, whether you be long term holders waiting for fruition or seek to maximise your profit opportunity through successful trading. Any advice to add to my fairly novice approach would be welcome!

Hello Shareminator, my first post on this board. Holder since Feb 2016, but I've reduced and bought back as finances have dictated. Now in a better financial position and looking for positive news from Salinbas so doubled up today - my buy of £10k at 1.92 and I suspect the trade after that was a buy as well. Look forward to your contributions alongside existing posters as you seem to know your stuff.

I have been doing a bit of reading and my understanding is that Stratex receive the balance of 20% of free cash flow until the construction costs of $39M are recovered at which point the split reverts to 55:45. You also base your calculations on the minimum production per annum of 30,000 oz rather than the anticipated recovery of 110,000 oz over the 34 months of stage 1. Re-working your numbers in a slightly different way, the 110,000 oz at $640 profit generates $70.4M. The construction costs are paid off at the point that the project generates $48.75M profit of which Stratex gets $9.75M. Thereafter, Stratex earns 45% of the balance of $21.65M of @ $9.75M giving an overall total of @ $19.5M over 34 months. Seems reasonable to me.