Member Info for Strangerstill

Last night I had a dream.

Ariana went ahead with the merger. Current shareholders now own only 62.5% of Ariana

Ariana raised a further £10 million to undertake further prospecting through a share issue at 2.5p per share (400 million shares). Current shareholders now own only 51% of Ariana. There are now 2,234 million shares in Ariana.

Ariana spent another year of intensive prospecting of Dokwe and up the reserves to 2,000,000 oz of gold (after a substantial resource find in Dokwe South and substantial upgrades of Dokwe North and Central). The gold seams are open and subject to further prospecting.

Ariana goes into a JV with another miner on a 50-50 basis with the mine build costs covered by the other miner to build a mine of 100,000 oz with a 20 year life. Current shareholders now own 25% of the project. The mine makes $120 million a year profit. Ariana’s share is $60 million (£48 million) and the P/E is 8. The share price goes to 16 pence and I have shares worth $640,000.

I then woke up.

Assessment of what current Ariana shareholders will get from the merger.

Looking at it with just the present projects it would appear that Ariana current shareholders get 62.5% of $330 = $206 million but lose 37.5% of current projects to give a net of $160 million

My instinct is that this is a good deal for both parties, on paper it appears that Rockover could get a better price selling out to another miner right now. The directors of Rockover are very experienced, and I believe that they see that a future with Ariana will give the best long term returns through Ariana’s holdings in Zenit, Venus, WTR, etc.

I believe that this is a win-win for both parties depending on how Ariana funds the future exploration and the building of the mine and processing plant at Dokwe and how much more gold there is at Dokwe.

How will Ariana proceed if the merger goes ahead?

I do not believe that Ariana would build and operate the mine but would look for a JV.

The current JV could be used by selling Dokwe into Zenit and getting 23.5% of the profit or by partnering with someone like Newmont. I don’t believe that Zenit could afford to pay cash for Dokwe although it could give Ariana more shares in the JV. I suspect that Ariana will look for a JV with a company like Newmont whereby Ariana gives the JV the asset of Dokwe and the other company funds the build of the mine and processing plant.

We need much more information as to how Ariana is going to proceed with Dokwe if the merger goes ahead and how much dilution there might be in the future after the merger.

Pros

We get 100% of a large gold reserve (which might be very large) that will provide a considerable amount of profit in the future.

If played right, despite the share dilution, existing shareholders should benefit both from increased capital value of shares and, with a bit of a delay, an increased ability to pay dividends.

Cons

Current shareholders suffer a large dilution of shares.

The development of Dokwe might result in further share dilution.

Dividends are probably delayed by a couple of years.

Before we start some truths about Ariana.

Ariana is not a gold miner/producer it is a very good exploration company.

Ariana does not control what happens with the assets of Zenit although it does have influence.

Ariana cannot sell Salinbas nor does it have to raise money for the future development of Salinbas, that is entirely up to Zenit.

How much is Dokwe worth?

Dokwe North has 1.2 million oz gold which will be mined using open cast. The current projection is to mine 100,000 oz for 10 years which should give about $1,000 million profit of which current Ariana shareholders would (if it built and operated the mine) get 62.5% or $625 million. The mine will be opencast and relatively inexpensive to mine. This is the profit that Ariana would receive if it developed the mine by itself, however I think that it will develop the mine as a JV and thus the profit would be lower. I will not use this valuation in the assessments (see below).

Dokwe central has had minimal exploration drilling but is currently showing a resource of 80,000 oz.

Dokwe South is outcropping (with no overburden)and the Ariana team are very excited about it although no prospecting results are available.

Mariana Resources received £166 million for 30% of Hot Maden in 2017 (gold price then $1,350 per oz) with gold reserves of 2,000,000 oz (high grade and deep mined). On that basis, Dokwe could be worth as a straight sell, to another gold miner, about $330 million not taking into account that Dokwe central has not been fully explored, Dokwe south has not been explored and that gold is at an all-time high price. I will use this figure as the current value of Dokwe in the assessments below.

I am not discounting future profits as both the assessments are at current value.

All the calculations are rough and ready.

Assessment of what Rockover shareholders will get from the merger.

The Rockover share holders will get about 37.5% of the future profits that accrue to Ariana. This is the 23.5% of the profits of Zenit in the future. I am going to be quite generous with the assessment of the future profit.

Current projects Kiziltepe and Tavsan should produce 50,000 oz of gold for the next ten years. Thus the future profit at $2,000 per oz gold (assume $1000 per oz profit) is about $500 million of which Rockover shareholders will get about $44 million. The other bits and pieces that Ariana owns may be worth about $6 million at present (although Ariana’s current shareholders think they are worth $0), so add $2 million giving a value of $46 million.

Rockover shareholders get 37.5% of Ariana’s current projects plus 37.5% of Dokwe ($330 million) to give $168 million.

The latest RNS states that there is a Global JORC Resource of 10.9Mt @ 1.37g/t Au + 12.65g/t Ag for 483koz Au + 4.45Moz Ag, with opportunities identified for further resource growth. So, at a profit of at least $1000 per oz that would mean a profit for Kiziltepe and Tavsan of $483 million or £382 million. Ariana is entitled to 23.5% of this or about £89 million.

If I read the RNS correctly, which is difficult, then it looks like Kiziltepe is expected to produce 25,000 oz gold per year for the next ten years using ore from the local and satellite pits as well as high grade ore from Tavsan. There is about 90,000 oz Au in the high grade ore at Tavsan. Tavsan will go into production using heap leach and the lower grade ore to produce 30,000 oz of gold per annum as planned.

It also appears that Ariana is confident of significant increases to the resources following further exploration work.

If I am right then the JV will be producing over 50,000 oz of gold each year for the next ten years.

This looks like game changing news.

The following is the list of registered market makers for Ariana shares

Joh. Berenberg, Gossler & Co. KG

Marex Financial

Panmure Gordon (UK) Limited

Peel Hunt LLP

Shore Capital Stockbrokers Limited

Singer Capital Markets Securities Limited

Stifel Nicolaus Europe Limited

W H Ireland Limited

Winterflood Securities Ltd

Winterflood Securities Ltd

I have commented on the fact that there has been no TR1 forms for Ariana which suggests that the sellers of the apparent large tranches of shares are probably, not in themselves, large share holders. For every sale there must be a buyer and if a ‘person’ is building up a holding then that person must submit a TR1 form when the holdings move past the holding limits so someone building up a holding in a company must report as below.

A person must notify the issuer of the percentage of its voting rights he holds as shareholder or holds or is deemed to hold through his direct or indirect holding of financial instruments falling within DTR 5.3.1R (1) (or a combination of such holdings) if the percentage of those voting rights:

(1) reaches, exceeds or falls below 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10% and each 1% threshold thereafter up to 100% (or in the case of a non-UK issuer on the basis of thresholds at 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%) as a result of an acquisition or disposal of shares or financial instruments falling within DTR 5.3.1 R;

The only exception to this is for a market maker who can hold up to 10% of issued share capital before the holding has to be reported.

A lot of the large trades are reported under the deferred reporting rules which allow for transactions to be packaged with a delay in the publication if one or more of its components are transactions in financial instruments that are large in scale compared with the normal market size.

What if a market maker is manipulating the market and purchasing the shares, it wouldn’t have to report the holding if it is under 10%. The market maker could make a killing if they believe that the share price is likely to increase substantially over the price paid.

Hi Claret and Blue

I was brought up in Blackburn and for a long time was a Rovers fan. Unfortunately (or is it fortunately) I now live too far away to go and see them. I feel for the Claret and Blues this year but, if you go down, you may get straight back up, not so for the Rovers mid table Championship is the best we could hope for, it might be the first division for us.

Back to Ariana if the share price stays as it is then in 2025 we could easily be in the absurd situation of having a P/E of less than two, and if the Board declares a dividend of having a dividend yield of perhaps 18% (assuming 30% of profit returned as dividend).

On the other hand KS might just spend it all in some far flung part of the globe and we will have SFA.

I have given the recent Kizilcukur drilling results a rough analysis and it looks good.

The results from the 25 holes where data is given shows that there are 47 intercepts with a weighted average grade of 2.7 g per tonne Au and 92 g per tonne Ag. The average intercept was 2.7 metres in length from a strike depth average of 32 metres. The actual depth of the srikes will be less as the drill holes were angled.

The combined length of Zeki, Ziya and Zafer appears to be about 800 metres so Kizilcukur could be a reasonable resource and keep the Kiziltepe plant running for at least a couple of additional years.

What I cannot understand is, if there is only one big seller, why has the selling never triggered the production of a TR1 when the shareholding passes the reporting percentages.

If this happened then at least we would know who the seller is.

The last interims gave the value of the following assets:

Investments in Associates (Zenit, Venus, etc.) £13.6 million

Financial assets (Asgard) £0.8 million

Current assets £7 million

So the total of these is £21.4 million

Knock of £2 million (estimated) for expenditure since interims and we get the value of the main assets as £19.4 million. (The other assets are about £0.7 million more than all the liabilities and have been ignored)

This is more than the market capitalisation of £18.6 million therefore the value of all the future income streams from Kiziltepe, Tavsan, Salinbas, Venus, etc. is currently £-0.8 million which is obviously rubbish as the total profit over the next ten years that will be attributable to Ariana from Kiziltepe and Tavsan alone should be in the region of $360 million * 0.235 or $84.6 million (£67 million).

When the good news on the reserves, Tavsan and hopefully a dividend policy comes in then the share price will have a large positive correction.

It is counterproductive to talk of a buy out as shareholders would not receive anywhere near the true value of Ariana.

I will be honest I drive a MG5 and would not go back to and ICE car. I love the fact that I get home and flip the front port plug her in and next morning there you are 240 miles range and very cheap motoring. I really love the fact that when I am at the lights and some idiot decides that they can burn of an ordinary looking estate car they find that they cannot.

If you want to watch the considered review of an auto mechanic who runs a fleet of MG5s to provide a mobile repair/servicing service on one of his MG5s that has done over 100,000 miles then this is the video to watch, listen to what he says at the end.

https://www.youtube.com/watch?app=desktop&v=Kj7fJ5JI-yI

https://m.youtube.com/watch?v=Kj7fJ5JI-yI

Expected major RNS announcements in 2024.

Kiziltepe – Announcements expected on the ongoing prospecting with updated reserves for Kiziltepe and the satellite pits. This should give an indication of how long the Kiziltepe plant will keep on producing gold.

Tavsan – Announcements as to the completion and commissioning of the plant. This will give an indication of the amount of production and profitability of the plant.

Salinbas, Ardala and Hizarliyayla - Announcements expected on the ongoing prospecting with updated reserves for Salinbas. We should get news as to when a feasibility study will be produced for building a mine at Salinbas.

Rockover – Announcements of further prospecting results and firming up of reserves plus further investment and plans to build a mine.

Dividend – Announcement as to a dividend policy and the payment of regular dividends. This is the one we are all waiting for and the one that will lift the share price the most.

Western Tethyan Resources (75%) – separate legal entity

WTR is prospecting in Eastern Europe, notably in Kosovo. There are two prospects Slivova and Hertica.

Slivova has a positive PEA of $100 million but needs $33.4 million of investment to bring into production. Newmont has put an initial $2.5 million into WTR. At the successful identification of project Newmont will put another £1 million to gain 60% of the project and a further $15 million to produce a feasibility report and have 75% of the project. If the project then goes ahead the project development funding will be pro rata but if one party then drops out before the development stage it will only get 2% NSR.

With Silvova having a positive PEA and a modest amount of investment a return from Western Tethyan Resources could be seen in the medium to long term depending on whether Newmont wish to progress with its development.

Hertica still being prospected and we are waiting for drilling results.

The risk for Ariana from WTR is low but if a project is developed a significant amount of capital will need to be found. However, if Newmont are finding 75% of the capital it should be relatively easy for WTR to raise debt funding for its share. KS has said that the Kiziltepe plant may be used in Kosovo which might then involve Zenit and reduce the risk to Ariana.

Asgard (100%) - separate legal entity

Asgard has investment in five prospecting companies;

Panther 3.1% - Australia

Annamite Resources 6.3% - Laos (Rio Tinto is investing $810,000)

Pallas Resources 6.0% - Kazakhstan

Altai Resources 8.4% - Kazakhstan

Rockover 2.1% - Zimbabwe

The feasibilty-stage Dokwe Project was discovered under Kalahari cover containing 1.3Moz gold (JORC Measured, Indicated and Inferred)*, comprising Dokwe North and Dokwe Central. A positive pre-feasibility study has been completed which provides for gold production of 60,000 ounces per annum over 12 years from a single open pit,

Asgard is committed to invest up to £260,000 into each of the companies in terms of capital and time making a total investment of £1,300,000. From the recent RNS it appears that Ariana is preparing to invest more funds in Rockover and is in talks to involve Zenit or one or other of the JV partners in the development of the Dokwe project.

The risk from Asgard is relatively low and will depend on Ariana’s exposure to Rockover. The potential return is only there in the long term.

Zenit (23.5%) – separate legal entity

Kiziltepe will be producing gold for next 3-4 years probably generating another $60 million profit.

Tavsan will be in production this year producing for at least 10 years Probably generating $300 million profit over the next ten years. The mine build is being funded from the Kiziltepe cash flow reducing the amount of debt that will need to be raised and saving money albeit reducing profit in Zenit and the ability to pay dividends to the JV partners. Probably generating $300 million profit.

Salinbas is not yet at feasibility stage, and we are waiting for more drilling results and a reserve update. Salinbas will need considerable capital investment to bring into production, but this will be raised by the JV not Ariana.

Zenit has a long-term future and will continue to generate good profit and cash flows. The big question is how much profit will be distributed to the JV partners as dividend payments (cash). If the profit is not distributed to the JV partners but stays in Zenit then the asset value of Zenit will increase and the carrying value in Ariana’s balance sheet will also increase but Ariana will not have the cash to pay its own shareholders a dividend.

Venus Minerals (58%) – separate legal entity

Waiting for the IPO market and copper market to improve, this will depend on the decrease in interest rates, growth in world markets and the market for EVs.

Interest rates should start to fall by the middle of 2024 but economic growth will not really start in Europe for at least twelve months until the economic shock of high energy prices works out of the economy.

EV sales will start to grow again in 2025 as manufacturers have to sell a greater percentage of zero emission vehicles in the UK and EU or face government tariffs. The US has voluntary ZEV percentages which should result in the growth of EV sales, but this could be derailed by a Trump administration. Consumers have been put off EVs by very negative coverage in the right-wing press. Consumers are waiting for the introduction of solid-state batteries which promise lower cost, greater perceived safety and greater range. It is a fact that, from available information on worldwide EVs, EVs are much less likely to catch fire than IC engine cars, but when they do it can be spectacular. China will continue to grow its production of EVs as it sells more into the world markets.

The risk is that, even though Venus is a separate legal entity, Ariana will have to invest more cash into Venus for the IPO and to get Venus into production.

From the Ariana website on the process at Tavsan.

Preliminary metallurgical test-work conducted in 2008 by SGS Lakefield Research Limited confirmed that processing using heap-leach methods would be suitable for the Tavsan mineralisation. Recovery rates on average grade gold mineralisation (1.4 g/t Au) of 80% for gold and 26% for silver are expected based on column-leach test-work, although further test work is required, particularly for higher than average grade gold mineralisation (4.2 g/t Au). Initial test-work showed that higher grade mineralisation demonstrated lower recoveries (67% for gold and 22% for silver), though the limited distribution of such mineralisation is not considered extensive enough to be a metallurgical concern at this stage.

We are now told that there is higher grade ore at Tavsan, the only hope is that the recovery rates are better than 67%.

The figure of $800 comes from pure pessimism. I know that Zenit currently makes $1,000 per oz but costs keep going up and we do not know the long term profitability of Tavsan.

Heap leaching can take anything from a couple of months to several years. In the case of gold recovery, heap leaching generally requires 60 to 90 days to leach the ore, compared to the 24 hours required by a conventional agitated leach process. Gold recovery is also usually only 70% compared with 90% recovery in an agitated leach plant.

Ariana’s share price is somewhat below its real value because investors have lost hope of seeing a return on their investments in the medium term and worry that all the profit from Zenit will continue to be ‘invested’ in multiple prospecting companies throughout the world and that these prospects will only give returns on the long-term.

Assume that Zenit makes $800 per oz profit after tax and that Kiziltepe produces another 60,000 oz gold and that Tavsan produces 300,000 oz gold over the next ten years then the total profit for Zenit would be $288,000,000 (£228,570,000) of which Ariana will be entitled to £53,714,000.

Now this seems to be a large amount of profit, however it does depend on Zenit declaring and paying 100% of the profit as dividends payable to the three partners.

Assuming that all Zenit’s profit is distributed then the next question is how much of Ariana’s share of the profit would be taken by administration costs, tax etc. I have used £750,000 admin per year and a tax rate of 20% to give a total net profit of £36,970,000 over the ten years. The real question is what percentage of Ariana’s net profit would it return to shareholders as a dividend.

I hope that a large proportion of the net profit (at least 50%) is returned as a dividend to shareholders with the remainder being split between a strategic reserve fund and some funds to keep Kerim happy investing in prospects all over the world.

I fear that the share price will continue to languish and will never reflect the true value of the company if Ariana does not come up with a definitive policy to return value to shareholders via dividends.

Even more shares dumped today. How long is this seller going to remain active? The plant at Kiziltepe is probably going to carry on producing for another 5 years and Tavsan will come on stream this year (they are already mining and stockpiling the ore). It is apparent that Ariana is very undervalued. I suspect (hope) when this seller exits the market the share price will recover very quickly.

Hi

Lively debate on the future of powering EVs.

I have owned a MG5 for two years and would not go back to petrol. I also own a reasonable chunk of LAC and LAAC.

I researched the electric car market before the purchase my car and LAC LAAC and am reasonably happy that the future is BEV.

As for the MG5, positives are cheap fuel costs (about 50% of running a petrol engine car, cheap servicing as there is no messy oil change, love the regenerative braking (almost one pedal driving) and not having to fill up at a garage on a regular basis. Down sides are insurance is about 20% more expensive, long journeys have to be planned for recharge however only once in 16 public chargings have I had to wait longer than it took me to have a comfort break and a cup of coffee (it once took me longer to get served a coffee than actually charge the car). As for car fires research in Sweden shows that EVs are less likely to catch fire than petrol or diesel engine cars but when they do it is spectacular. https://theconversation.com/electric-vehicle-fires-are-very-rare-the-risk-for-petrol-and-diesel-vehicles-is-at-least-20-times-higher-213468

Lets agree to disagree. There is plenty to talk/moan about with Ariana and I have always enjoyed the discussion about Ariana. One must admit it is a love/hate relationship, maybe one day we will all be, if not rich, at least ahead of the game!!

Part 2

EV Battery Health - What 6,000 Batteries Tell Us | Geotab

Key takeaways

High levels of sustained battery health observed.

First and foremost, based on data from over 6,000 electric vehicles, spanning all the major makes and models, batteries are exhibiting high levels of sustained health. If the observed degradation rates are maintained, the vast majority of batteries will outlast the usable life of the vehicle.

NIO ET7 has nearly 650 miles range with game-changing battery (electrek.co)

NIO’s ET7 electric car has over 1,000 km CLTC range with its new 150 kWh battery. To put its new ultra-long-range battery to the test, NIO’s CEO William Li drove the ET7 for over 14 hours, covering 1,044 km (~650 miles) with some charge left to spare.

The future of E fuels

E-fuels: how big a niche can they carve out for cars? | Automotive industry | The Guardian

As for e fuels they are likely to find a small niche at most, experts predict. In their way stand fundamental constraints of physics, which would require even more green energy. They are made in stages: first by splitting water using electricity to create hydrogen, and then combining it with carbon from CO2 in a process that requires high pressure and a catalyst. Every stage wastes some energy, and all the electricity used must be zero-carbon.

“You’re basically trying to unburn petrol,” said Michael Liebreich, a consultant on clean energy technologies. “You need an insane amount of solar to do that.”

A question

How many of the people contributing to the discussion around the future fuel for cars actually owns or drives an EV?