Member Info for Strangerstill

The reaction to the Annual Report and Accounts is crazy, the information contained is six months out of date and has been superseded by further information such as the commissioning of Tavsan and yet everyone is panicking.

I believe that Ariana will survive but that there will be some more share dilution. I think that dividends will start to flow out of the JV in the near future as Tavsan and Kiziltepe start producing a healthy profit. Salinbas is not even at the stage of a PFS never mind being built, there is no logic in not distributing the profit.

I believe that the WTR tie up with Nemont is good for Ariana, WTR is not a big drain on resources.

I believe that Dokwe will eventually be a good asset as the Zimbabwe government will have to reach a reasonable settlement with inward investors or there will be no investment, I also believe that Dokwe will not deliver for at least five years.

Venus looks like a crock of brown stuff and a poor investment choice.

The Ariana board have done something that not many boards manage to do and that is reduce the market capitalisation to a fraction of the book value of the assets of the company never mind the real value of the assets.

I have voted against the re-election of MdV as he, as the Chairman, must take full responsibility for destroying so much shareholder value.

Don’t panic but be concerned. The market has reacted very badly to the release of the annual report and accounts, but remember, the figures in there are six months old and Ariana is still afloat (just about). Ariana owns a lot of valuable assets but, due to the poor and overconfident decisions of the management, now finds itself in a cash flow crisis. I suspect that the management were banking on Tavsan being completed sooner than it actually will be and cash coming from the JV once Tavsan was complete. As it is the cash will be coming twelve months late which is giving Ariana cash flow problems exacerbated by heavy expenditure on prospecting at Dokwe. The next six to 12 months will be make or break, once the cash starts flowing from the JV things will settle down, it depends on how much damage to the share price happens until then.

In the meantime, I would urge the management to curtail expenditure at Dokwe until the cash from the JV starts flowing, in any case I am concerned that a substantial amount of cash is still being spent prospecting at Dokwe with no resolution concerning the proposed 26% free carry by the Zimbabwe government.

I will vote no to ordinary resolution 2 – ‘To re-elect Michael de Villiers who is retiring pursuant to Article 41.1.3 of the Articles of Association as a Director of the Company.’

This will be our first heap-leach operation in Türkiye, which, by operating in parallel with the Kiziltepe CIL processing plant, provides Zenit with a large degree of operational flexibility.

I suspect that the Kiziltepe CIL plant will be operating at 20 k oz per year for several years yet processing local ore and high grade ore from Tavsan. This will be in parallel with the Tavsan heap leach plant which will produce 50 k oz per year. This should give several years of profit from 50k oz of gold which will be a lot of profit.

It is notable that Newmont bought into the last share issue where the whole purpose was the progression of Dokwe, Newmont believes in Dokwe!

Okay, so Ariana are going to issue more shares when they list on the ASX, this was always going to happen as the ASX investors will need new shares to buy, it is merely part of the listing process. At least we are being given good warning and told what the funds raised will be used for.

I suspect that a lot of news will be reported before the listing, Tavsan is scheduled to start production June/July time, there will be more news about Dokwe, hopefully some good news about reserves in the JV (Kiz, Tavsan and maybe Salinbas) and I suspect that the JV may declare a dividend for payment later in the year. The final accounts for Ariana are due in June, these will contain a summary of the final accounts for the JV, I am hoping for a fair bit of profit in the JV (gold at above $3,000) and thus a dividend declaration by the JV. Ariana is entitled to 23.5% of the profit by Turkish law.

The directors have now bought £140,217 worth of shares in Ariana in the last week. what do the investors think is the reason?

a) The directors believe that Ariana is going to go bust or will need to sell out at a massive loss and want to lose their money, or

b) The directors, knowing a lot more about the future prospects of Ariana than the ordinary investor, are filling their boots with the anticipation of making a good profit in the future

Answers on a postcard to Ariana investors.

There is an old adage that when directors in a company start buying then you should buy into that company. In the last two weeks the directors of Ariana have purchased a total of 8,890,388 shares at a cost of £130,317 and yet the share price keeps going down. Surely the directors would not purchase a total or £130 k of new shares if they had the slightest concern about the future of Ariana.

Kiziltepe will be in full production next year as will Kiziltepe. I suspect that there will be enough additional reserves found at Kiziltepe and the satellite pits to keep Kiziltepe going through 2027 with some high grade ore from Tavsan. So the JV should make at profit of at least $100 million in 2026 and 2027 and a further £$90 million in 2028 to 2030. This is a total of $190 million of which Ariana's share is $44 million. If only half is paid as dividend then this would amount to $22 million in the next five years with the value of the holding in Zenit going up by the value of the undistributed profit. Ariana should not run out of money. When Ariana looks to develop the mine at Dokwe I suspect that it will be through a JV but not necessarily with Zenit.

They say the darkest hour is just before dawn. There is so much doom and gloom but it is not all bad news (even though most of it seems to be). There is some good news there.

The placing, which is seen as a disaster by most people posting in the share chat pages, was to new investors. The placing was announced at 7:00 am but by 10:15 am the RNS to announce that the placing was complete was published, the placing was a done deal before it was even announced and had the intention of getting new investors on board. The directors and management paid £347k through the issue of 6,666,667 new Ordinary Shares. Would the directors and management put in such a large amount of money if the company was really in dire straits?

The company has announced that Tavsan will be in production May/June and producing gold at full capacity in Q4. 2026 should see both Kiziltepe and Tavsan producing gold at full capacity. More prospecting is being carried out at Kiziltepe and surrounding pits with the expectation of extending the life of the Kiziltepe plant.

Ariana expects dividends to be paid but it might by after July when Tavsan is in production. Ariana’s full year results should be published in June and will contain a summary P&L and Balance Sheet for Zenit, I suspect that the dividend from Zenit will be announced soon after that.

Ariana still has an undrawn facility of $3 million that it can access until the dividends from Zenit start flowing.

All the while gold is above $3,000 per oz.

I read a lot of very negative speculation from some contributors to the chat sites and it is just speculation.

I have thought about why the Zimbabwe government wants a 26% free carry and not some other figure such as 20% or 25%. If the government has 26% of the voting rights of a company set up in Zimbabwe then this is the minimum to have an effective veto on special resolutions and thus a level of strategic control. If the government is seeking to rip the shareholders off then this is a real problem and would put any investors off, however, if it is to enable the government an element of control over strategic issues (such as selling the company to another) then this can be achieved without shareholders losing any profit or dividends. The answer is to issue a separate class of share which has voting rights but no rights to capital, dividends or profit and then issue an amount of shares that gives the government a 26% share of voting rights and thus a veto over special resolutions.

In December 2024 Ariana stated the following;

. Kosovo: Initial earn-in up to 51%* of the Slivova Project is underway, through the completion of trenching and a separate 1,000m drilling programme; other generative exploration is in progress via the Exploration Alliance Agreement with Newmont.

· Cyprus: Over 9,000m of drilling is planned to increase confidence in currently defined resources and to test other targets. Discussions are underway to potentially advance the projects in partnership with other groups.

· Türkiye: Three contiguous exploration licences are being explored in the Project Leopard area in eastern Türkiye, with broader generative exploration also underway.

As I have stated before I think that it is vital that Ariana decides which projects are strategically important to deliver profit and cash flow in the near to mid term and should divest itself of any projects that will need cash in the short to mid term and will not give a return except in the long term.

I would advise that Ariana concentrates on Zenit, Dokwe and WTR.

Zenit because it is already generating profit and cash and will produce even more next year when Tavsan is in production.

Dokwe because it has the potential to be a very big mine and in production within five years. Here the focus should be on further prospecting to increase reserves, making a deal with the government over a reasonable tax environment and determining how the mine is going to be financed.

WTR because Slivova is looking promising for production within five years, the tie in with Newmont is very good strategically and it is helping with the funding of the prospecting. The 51% earn in for Slivova by WTR has already happened and is a sunk cost.

I would sell off the investments in Asgard Metals as they are going to require cash and management time when this would be better off spent on more strategically important projects.

I would also look to sell off Venus Minerals unless a clear path to production is currently there, one which does not entail cash input from Ariana. If no clear path to production is currently available, then sell Venus Minerals. Ariana appears to be committed to further exploration in Cyprus and does appear to be seeking a partnership with other groups to progress Venus.

Zenit should be in a position to pay a dividend to its partners. As at Sept 2024 Zenit had the following on its balance sheet;

Current assets including cash and cash equivalents £26.2 million

Current liabilities (including proportion of bank loan) £(12.6) million

Net current assets £13.6 million

Since then Kiziltepe has been generating profit and cash at a minimum of $1,000 per oz for 10,000 oz(6 months production) so $10 million (£7.7 million). This should give a about £ 23 million in net current assets so you would thing it not difficult for Zenit to pay a dividend of £10 million at the present time. If this was the case Ariana would get £2.3 million which should tide it over for at least six months beyond July, giving the company time to sort out a proper funding strategy for the future. This strategy should include divesting investments that are not going to give shareholders any return in the near future and should ensure that the primary assets of the investments in the JV, WTR and Dokwe can become profit providers in the short and medium term.

There are two reasons that Ariana has got into the mess that it is in.

The first reason is that the Board have been too optimistic about the completion of Tavsan. Ariana’s management have always said the dividends may be paid once Tavsan is in operation and the JV is paying a dividend to the partners. I suspect that the partners agreed that whilst Tavsan was being built there would be no disbursement of dividends or cash to the partners. Tavsan is about a year later than forecast in completion and thus the dividend and cash payment to Ariana are about a year later that originally forecast and this has left a big hole in the cash flow for Ariana. As a management accountant one of the things I was always conscious of was that if it can go wrong it will go wrong and one should always consider the effect of the worse case scenario even if it is a remote possibility. Ariana’s management do not appear to have considered the effect of a delay in cash from the JV.

The second reason is that Ariana has invested in too many prospecting companies that will not generate cash for some years yet and all of which require cash inputs into the future. Ariana has a long list of investments; Zenit (23.5%), Dokwe (100%), Western Tethyan Resources (75%), Venus Minerals (61%), Altai Resources (8.4%), Annamite Resource Holdings(6.5%), Pallas Resources Limited (6.0%) and Panther Metals Ltd (3.1%). The only investment that will generate profit and cash for Ariana in the short term is Zenit and even that will probably not be until next year. Dokwe and Western Tethyan Resources may produce profit and cash flow within the next five years and all the rest are not near development and are consuming cash.

Ariana needs to divest its investments to raise cash to keep itself going until dividends are paid by Zenit. I believe that the only investments that should be kept if possible are Zenit, Western Tethyan Resources (with its link to Newmont) and Dokwe (a major gold resource), all the other investments could be sold to keep Ariana solvent until the dividends and cash are flowing from Zenit. Next year (2026) it is probable that Zenit will produce 50,000 oz of gold generating at least $50 million profit of which Ariana will have 23.5%. Going forward Zenit should produce at least $30 million profit per year.

The only other thing that might keep things on track is if Ariana can pursued Zenit to declare a dividend in the next couple of months.

The JV agreement does have certain safeguards and there is recourse to the courts if there is evidence of unfair practice by any of the partners, how this would pan out in the Turkish courts is anyone's guess.

Ariana has a cash flow crisis. It is burning through cash as a result of its exploration program particularly at Dokwe and its ongoing management costs. The next twelve months are crucial and the actions by management may seriously reduce shareholder value.

There are two big issues that are not helping;

Dokwe

Ariana is investing a large sum of money in the prospecting of Dokwe, whilst Dokwe has the potential to be a very large gold reserve it is currently worth very little as the threat of a 26% free carry by the government of Zimbabwe on the project going forward will result in no one, in their right mind, investing in the project. The shareholders have currently invested over £16 million into Dokwe and we need urgent clarification of the future business environment in Zimbabwe before we invest more into the prospecting of Dokwe. It feels like throwing good money after bad.

Zenit

The main shareholder in Zenit is Ozaltin and it has control over what dividends are declared and paid to the JV members. Zenit reported the following in the interims to 30 June 2024:

£8.5 million profit

Current assets including cash and cash equivalents £26.2 million

Current liabilities - due in the next year (including proportion of bank loan) (£12.6 million)

Net current assets £13.6 million some of which could be available for distribution.

Even with only Kiziltepe in operation Zenit should be generating about $20 million profit and net cash each year so should be able to pay a dividend from 2024 profits.

The issue is that Ozaltin holds the purse strings and if, for its own reasons, Ozaltin prefers to hold the profit and cash in Zenit then Ariana will have a real problem going forward.

It is a very worrying time for Ariana shareholders, the company has assets worth, in theory, much more than the market capitalisation but could end up selling assets at well below their true value because of its cash flow problems.

Ariana announced today that it expected to produce 25,000 oz of gold from the JV and that;

"Construction of the Tavsan mine is now largely drawing to a close, with the completion of the heap-leach pads the only major outstanding task. The processing plant automation works are very much advanced, and the remaining work on the electrification of the heap-leach area and associated substation installation are complete. With better weather conditions expected through the spring, we expect completion of the heap-leach pads thereafter.

"A substantial stockpile of already mined ore is awaiting stacking onto the heap-leach pads at Tavsan, which means there will be minimal delay between the completion of the pads and the commencement of leaching operations."

This is a positive announcement .

The heap leach construction is weather dependent, and Ariana indicates that the heap leach will be operational by the end of spring, probably July. Take three to four months to commission the Tavsan plant and full production should be started about October/November. So 20,000 oz full year production from Kiziltepe plus 1/6 year from Tavsan (5,000 oz) gives 25,000 oz. Kiziltepe will be in production next year and, hopefully, beyond “Further exploration and resource development work remains underway in the expectation that further extensions to mine life are possible”.

There is a good possibility the production over the next two years will be in the region of 50,000 oz by which time other prospects will be two years further down the line.

This from the ‘New Zimbabwe’ newspaper.

A 2025 Post-Budget Analysis Paper prepared by the Zimbabwe Congress of Trade of Unions (ZCTU) says the business environment remains challenging with the cost of doing business relatively high.

“According to UNCTAD, FDI inflows into Zimbabwe increased from US$250 million in 2021 to US$395 million in 2022 and US$588 million in 2023. However, FDI inflows were US$5.2 billion in South Africa; US$2.5 billion in Mozambique; US$2.3 billion in Namibia; US$208 million in Malawi; US$198 million in Botswana; and US$108 million in Zambia,” the analysis said.

The labour organ blamed the country’s huge tax burden as chief among the causes prompting limited revenue flows.

The paper argues that no country can prosper with high taxes (Ireland-in 2015 Ireland grew by 26%). It says high taxation results in high informality and low confidence. We need lesser and lower taxes.

According to the Chamber of Mines of Zimbabwe (CoMZ), the country’s effective tax rate on miners — 69% in 2024 — has already surpassed those of Zambia (60%), the Democratic Republic of the Congo (61%), Ghana (56%), and South Africa (44%), placing a significant strain on Zimbabwean firms’ competitiveness.

The mining sector faces a complex plethora of 157 separate charges, ranging from US$4,000 to US$15,000, imposed by Rural District Councils, government ministries and agencies.

This comes on the back of yet another wave of high taxation measures imposed by Finance Minister Mthuli Ncube in the 2025 National Budget.

“Overall, all these challenges have left the local economy with a huge competitiveness gap implying that Zimbabwean businesses and products are not able to effectively and successfully compete with businesses and products from other countries,” the report said.

The labour organ contends that such an economic structure hurts job creation as well as the quality of employment on offer.

And now the government wants at 26% free carry as well. No sane person or company will want to invest in Zimbabwe unless the government makes the economy more investment friendly.

Ariana have effectively delayed the listing on the ASX with several consequences.

The recent loan funding is affected if the ASX listing is not completed by 31st March 2025

The Investor will subscribe for a minimum of A$350,000 and up to A$500,000 of equity in the Company as part of the ASX IPO. This is subject to the ASX IPO being completed by no later than 31 March 2025.

No later than 31 July 2025, and subject to shareholder approval, the Company will either: a) issue 25 million options over Ordinary Shares with a 4-year maturity and exercise price at a 50% premium to the dual-listing placing price; or b) pay a compensation fee representing the aggregate value of the exercise price of the 25 million options. This exercise price is subject to the ASX IPO completing by 31 March 2025, otherwise the exercise price will be 150% of the Reference Price.

The delay gives more time for good news to come through on Tavsan and updated resources at Dokwe. It also gives the company time to agree the future terms with the Zimbabwe government of doing business in Zimbabwe. The company will need to do this to put out a prospectus otherwise it will have to assume the worst in the prospectus as the news of the proposed 26% free carry is already in the public domain.

The 26% free carry (i.e. not paid for) proposed by the Zimbabwe government not only is an effective extra 26% tax on profit making an overall effective tax rate of 50.8% (including royalties) but it is a grab of any money raised through share issues. If investors are asked to raise £100 million through a share issue at £1 per share then the number of shares issued would actually be 135 million giving the shareholders 100 million shares and the government 35 million shares for which it has not paid anything. The capital owned by the non-government shareholders is now worth only £74 million meaning that the government has effectively taken 26% of the shareholder value straight off the shareholders. Who would want to invest in a share issue if 26% of the value of the share issue is going to disappear straight away?

Once again Ariana’s shares are plummeting for no good reason.

Investors may be spooked by the reports of the Zimbabwe government wanting a 26% free-carry on future mining investments but let’s look at the reality.

The government wants investment in gold mining in Zimbabwe and wants the amount of gold mined each year to increase. The government, whilst wanting more local ownership of the mining industry in Zimbabwe, does not want to put investors of investing in Zimbabwe.

The government wants the investment in mining to be by responsible miners who will invest in the locality, employ local workers on reasonable terms and take care of the environment. The government wants investment by companies like Ariana rather than having lots of artisanal and small-scale gold mines which are responsible for a lot of environmental damage and poor working conditions. The government will not risk putting off inward investment by responsible mining companies by making the fiscal environment too demanding.

The government has already stated that it will take negotiations to reach agreements. “Obviously when you have decisions which were made some years back and decisions were made on the basis of a certain framework, you cannot just willy-nilly go and change that,” Kunaka said.

Even without the threatened 26% free carry the Zimbabwe government would (assuming a 100,000 oz operation) make about $36 million a year from Dokwe in direct taxes (corporation tax and royalties), it would also make a lot in indirect taxation (boosted by the multiplier effect) on income tax on workers wages, VAT on purchases, etc. The amount of tax revenue from all the direct and indirect taxes will be at least the amount that investors get back and the government does not have to take any investment risk. I do not think that the government will risk the Dokwe project by imposing punitive measures.

I suspect that the situation for Ariana will be much better than a lot of the investors seem to think and that even if the worst scenario of a 26% free carry was to happen then my calculations show that Ariana would still make considerable profit from the Dokwe gold mine.

In the past I have calculated that with its current operations and mineral resources Ariana is worth at least 5p per share and I am not going to sell out at the ridiculous current share price.

I just wish that the Ariana management would be more proactive with the market and take action to boost the share price.

If Zimbabwe goes ahead with the proposed 26% share capital fee carry on mining companies then the effective taxes on a company operating in Zimbabwe would be 1) a royalty of 5% on the sales value of the gold, 2) a corporation tax of 24% on the profit before tax and 3) a 26% effective tax on the profit after tax as 26% of the profit will go to the government. For a company mining 100,000 oz of gold with a C1 cash cost of $1,500 per oz and gold price of $2,500 per oz the net profit before royalties and taxes would be $100,000,000 with the royalty being $12,500,000 (5% of $250,000,000) giving a net profit before tax of $£87,5000,000, tax would be $21,000,000 giving a net profit after tax of $66,500,000 of which $49,210,000 would be attributable to shareholders. The shareholders would get 49.21% of the profit with the government getting 50.71% of the profit so effectively a 50.71% tax rate. This would make Zimbabwe one of the worst jurisdictions for tax in the world, never mind being a relatively high-risk country. There would also be a grab of 26% of the capital value of the mine by the government from the companies investors. Who in their right mind would invest in Zimbabwe when there are much better options elsewhere?

If there was no free-carry then the effective tax rate with royalties and corporation tax would be 33.5% which is average for the world.

Zimbabwe does not have much to attract outside investors apart from its mineral reserves. Bearing in mind that Zimbabwe would benefit from mining investment and the fact that most of the mining and processing expenses would be from local employment (giving income tax receipts) and the purchase of local supplies then surely Zimbabwe would be better to encourage inward investment in mining rather than frighten it off. It looks like the uncertainty has already started to have an effect. It was reported on 12th December that Marula mining had announced its decision to cease exploration and project acquisition activities in Zimbabwe. The company stated “However, while Zimbabwe’s mining sector has some highly attractive and advanced project opportunities, the company was not able to secure projects that met its high internal criteria in terms of grade, cost and ability to advance to development in a relatively short time period.

This will affect the planned ASX listing as Ariana will have to show the effect of the proposed 26% free carry proposal in its BFS in advance of the ASX listing unless it has come to a guaranteed agreement with the Zimbabwe government about the future fiscal environment. I would rather Ariana stop its exploration expenditure in Zimbabwe until such time as the company has a guarantee from the Zimbabwe government about the future mining environment in Zimbabwe

Zimbabwe wants to encourage outside investment in mining, it also wants to have some local involvement/ownership in the mining operations. Zimbabwe will not be able to have conditions that are too onerous otherwise investors will go and invest in jurisdictions that offer better returns. It is alright to have scare stories but scare the investors away and Zimbabwe will have 26% of nothing.