Last checked at 29 Jun 2022 07:00
29 June 2022
AIM: AAU
FINAL AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021
NOTICE OF ANNUAL GENERAL MEETING ("AGM")
Ariana Resources plc ("Ariana" or the "Company"), an AIM-listed mineral exploration and development company with gold mining interests in Europe, announces its final audited results for the year ended 31 December 2021.
The Report and Accounts will be posted to shareholders as applicable, and are available on the Company's website (www.arianaresources.com), and extracts are set out below.
The AGM will be held at the East India Club, 16 St James's Square, London, SW1Y 4LH on Wednesday, 10 August 2022 at 12:00 noon.
Chairman's Statement
Looking at our world in 2022 is a daunting prospect. Collectively we face a perfect storm: the aftermath of a pandemic, war in Ukraine, geo-strategic realignment, inflation, the challenges of de-carbonisation and looming shortages of critical technology metals. However, this world of escalating risks is also one of burgeoning opportunities, particularly for explorers and miners of precious and technology metals.
During 2020 and into 2021, instead of allowing ourselves to be consumed with pandemic related crisis management, we undertook a deep-rooted strategic review of our business. Our aim was to ensure we built the foundations of a sustainable business, fit to meet the challenges and grasp the opportunities of the future. We were also unanimous that Ariana must play its part in helping shape a world fit for future generations to inhabit.
The rapid acceleration of global risks since we first undertook our review has vindicated the vision of our approach. There are three core elements in reshaping Ariana's business: strategic reach through early-stage catalytic investments right through to mature development and production partnerships, geographical diversification across the Eastern Hemisphere, and commodity diversification across both precious and technology metals. The extended reach and range have the benefit of mitigating risks and increasing opportunities.
Reinforcing our strategy is the backstop of a successful producing mine at Kiziltepe. This has provided US$177 million of revenue to our investee company, Zenit Madencilik, to the end of 2021 and has exceeded production guidance for the fifth year running (since inception of operations in 2017). Profitable operations and strong cash flow capabilities are necessary in the long-term to sustain our business, and will enable us to grow and maintain an ongoing dividend stream.
Now that we have received a positive Environmental Impact Assessment for our gold project at Tavsan in western Turkey, we are progressing this project to develop our second gold mine, targeting a production rate of circa 30,000 ounces of gold per annum. At the Salinbaş project in eastern Turkey we have already established a resource of 1.5Moz gold. This has been the focus of an extensive drilling programme, which is still underway, to develop our understanding of this major resource within the multi-million ounce Artvin goldfield.
In line with our broader strategy, we have also successfully enhanced our asset base through our 50% earn in to Venus Minerals Ltd and the associated JV development of the fully permitted Apliki copper gold mine in Cyprus. In south-eastern Europe, we hold a 75% stake in Western Tethyan Resources Ltd, which is developing licences in Kosovo and using the newly acquired Newmont database to target significant opportunities in the wider region. In Australia, our Asgard Metals Fund has made investments in Australia-focused Panther Metals and Kazakhstan-focused Pallas Resources, in addition to Indochina-focused Annamite Resources post-period end. This strategy of leveraging our exploration knowledge and skills underpins our ability to differentiate solid opportunities from the myriad that we review. Our ability to generate a range of prospective targets across a wider geography also has the benefit of allowing us to have an 'evergreen' approach to exploration throughout the year.
We have also focused on ensuring Ariana's core strengths remain the bedrock of our strategy. Developing a successful exploration and mining company over the past 20 years meant we had to learn to turn adversity into an advantage. This has made Ariana a lean and agile company, well used to operating with tight financial constraints and low management overheads. A perfect illustration of the benefits of our lean approach is that Ariana has one of the lowest gold discovery costs in the business - a fifth of the industry average. We are confident that a strategy of broadening our opportunities, while mitigating our risks and leveraging our strengths will ensure we continue to build a resilient and agile company.
Whilst conducting our strategic review, we recognised that at the heart of Ariana's ability to survive and thrive is the quality of our team. From Ariana's inception, we understood the need to build and develop a diverse, distributed and multi-skilled team. We also recognised the need to work together cohesively, despite the challenges of field conditions and remote locations. As in many instances of Ariana's history, hardships drove adaptation. Thus, long before the company had to face the challenges of the recent pandemic, we had harnessed technology to enable collaborative team working, even from the remotest locations. Indeed, the capabilities we built into the company enabled us to operate successfully without disruption throughout the past two years.
Furthermore, the Ariana team has grown significantly over the last year and I would like to extend a warm welcome to all the new members and acknowledge how fortunate we are to have you on board. We are proud of our ability to attract and retain great people, as well as our ability to form alliances with academia and established mining experts across many countries. It is this diversity of skills, talents and experience which is constantly enriching Ariana's working environment. We also recognise the importance of giving our teams freedom to experiment without fear of failure. We depend on their innovations and their boldness. We find that younger team members often teach and reinvigorate older ones. In doing so they refresh the DNA of the organisation.
In the context of such skills sharing and collaboration, we are especially pleased to open our new Ankara head office as a regional hub for our geoscientific skills and analytical capabilities. We know that the active collaboration of great people can achieve extraordinary things. A textbook example of the power of collaborative teamwork was the famous 'Skunk Works', developed by Lockheed Martin under the brilliant and legendary leadership of Kelly Johnson. Using an agile approach to teamwork, where teams were given great autonomy, unhindered by bureaucracy, Lockheed achieved seemingly impossible timescales in the development of new aerospace technologies. There are consequently three cornerstones underpinning Ariana's strategy: targeting, technology and teamwork, and these drive everything that we do. Our recent collaboration with Newmont (post-period end) brings into sharp focus our objective to hunt for world-class mineral deposits, as Newmont is itself specifically focused on Tier One Assets. Newmont has undertaken not only to collaborate with Ariana in exploration across south-eastern Europe but has also invested US$2.5 million in Ariana. I would like to take this opportunity to thank Newmont for this statement of confidence and encouragement. Newmont's investment in Ariana also demonstrates their alignment with our view that it is within the under-explored Tethyan Metallogenic Belt that the next Tier One Assets will be discovered.
It is worth reflecting on Newmont's achievements over their 100 years' existence and where they came from. As a fledgling mining company, Newmont made its first major gold investment with a 25% founding stake in Anglo American Corporation in South Africa. This is a good example of how a part investment stake can lead to great things. Newmont has since gone on to become the largest gold producer in the world, as well as owning a host of other mineral producing mines globally. We have a long history of working with the Newmont team and have had access to their regional database in Turkey for some time. We view it as a powerful endorsement that they have chosen us to be their eyes and boots on the ground in south-eastern Europe. Their own stable of Tier One assets shows us what they will be looking for in this new theatre of operations and I have no doubt we will not disappoint them.
Having boots on the ground in prospective geological territory is all well and good but one must also be mindful of the broader picture. As the renowned geologist Terry Grammar was noted for saying, you have to look at all aspects of a project. This includes the business model, legal title, operating environment and financing. In summary, you must have sharp situational awareness. It is only then that you can achieve a successful mineral discovery. With this in mind, we have gone to great lengths to ensure we are well informed on all aspects of our prospective investments, not only for the projects we undertake directly but also for our target investment companies, where we maintain an ongoing dialog. This background work behind a sound business strategy is so often unseen and unsung and yet it is a vital cornerstone of success. Ariana would not have a successful operational gold mine today were it not for the patient hours and indeed years of quiet diplomacy with communities, business partners and government organisations.
A critical part of our approach relates to shared values, built both within and outside the company, linking our teams and our partners. There is a shared moral compass at the heart of this approach, with our emphasis on trying to take the responsible course of action, even if this is often not the easiest route. A diligent approach to environmental, social and governance responsibilities is as relevant to the external actions of a company as it is in the internal arrangements of a company.
As we continue to seek our core strategic metals - gold, silver and copper - we remain confident of their long-term value. We are also confident that their prices will continue to trend upwards, despite the odd dip following a recent rise in interest rates. In the context of geostrategic realignment, it is interesting to note that the Pentagon has recently asked Congress to extend funding to mineral projects in other jurisdictions, namely the UK and Australia. This demonstrates that our exploration strategy is well positioned and that there are great opportunities for agile explorers and developers like Ariana.
Despite an exceptionally challenging world environment, after our first 20 years we stride into Ariana's future confident we have reshaped our business to meet the challenges and grasp the opportunities of the future. Ariana has three inherent advantages that we will draw on to drive the next 20 years: our clear strategic direction, the intelligence and agility of our youthful team and the passion for exploration and mining that guides our endeavours. Ariana has also demonstrated it is adroit at forging strong relationships with able business partners to further our strategy. We now have a pipeline of projects at varying stages of maturity to extend the reach and range of our business across new geographies and commodities. This new reach and range encompasses south-eastern Europe copper/gold, Cyprus copper, Central Asian copper/gold and Australian gold/nickel-cobalt. We are also poised to leap further into uncharted territory in the Tethyan Metallogenic Belt with our newly conceived Project Leopard in Eastern Turkey. The mighty Anatolian Leopard may be an elusive creature but we intend to unleash not only two decades of exploration expertise but also the youthful eyes and energy of our team on this vast under-explored territory. Empowered by the robust finances of our Kiziltepe mine, a clear strategy and a proven team, we look out from the crow's nest over the horizons of the next years with confidence.
As I look back at my nearly two decades of investment with Ariana there are many highlights that I can reflect on. I think the ones that stand out amongst the many include the AIM listing of a fledgling exploration company with a prospective gold asset, and seeing that asset being developed into a core profitable producing gold mine following its first gold pour. The latter, without doubt, takes the top slot of all my highlights, followed by the receipt of our first ever dividend cheque in the post, which itself is probably one of the most rewarding things any exploration investor can experience. As I look forward to the next decade, with such a wide distribution of capable team members, from Australia as far as Turkey and Zimbabwe, and having the tools and resources available, we are better placed than we have ever been to make a major gold discovery.
As a team, we look forward to welcoming our shareholders at our next Annual General Meeting where we will follow the formal business by updating you with a presentation on our current developments. The notice of AGM includes all the resolutions proposed including the proposed dividend payment. I would like to encourage shareholders to exercise your proxy votes in favour of these resolutions even if you are planning to attend the AGM. I would also like to round off by thanking our team and stakeholders and in particular those new partnership members who have demonstrated their confidence in the Ariana success story.
Michael de Villiers
Chairman
28 June 2022
Financial Review
Profits before tax increased to £7.7m up from £5.1m in the previous year. The principal driver of this was the partial disposal of our interests in Turkey in February 2021 as we reduced our 50% interest in the Kiziltepe mine and 100% interest in the Salinbaş project to a collective 23.5% interest in both, for net proceeds of £27m giving rise to profit of £6.4m, as set out in note 5 to the accounts. Administrative costs increased by £1.5m due in part to increased staff costs of £0.4m on account of less being capitalised within intangible exploration assets this year, and in part due to increased costs associated with management of our interests in Zenit by Proccea of £1.1m following our reduced involvement in the mine itself. These latter costs are expected to run until Q1 2023.
Otherwise our profits are primarily determined by the performance of our interests in our investments in our associated undertakings, being our 23.5% ownership in our aforementioned Turkish interests, and our interest in our Cypriot copper gold projects though our 50% interest in Venus, showing an aggregated net share of profit this year of £4m.
Other points of note are the increased tax charge arising in part due to the tax arising on the partial disposal of our interests and also withholding tax on dividends subsequently returned to the UK. The Turkish Lira declined significantly against Sterling towards the end of the year which has given rise to a translation loss on the revaluation of our foreign entity opening balances of £2.9m, recorded through other comprehensive income as usual.
As far as the Group Statement of Financial Position is concerned, our interest in Zenit is now treated as an associate rather than joint venture investment, albeit the equity method of accounting for it remains the same, but now our interests in Salinbaş via Pontid and Cyprus via Venus are also accounted for as associates using the equity method of accounting too, reporting a combined value at the year end of £11.4m.
Another significant change this year arose from our capital reduction in July 2021 when we applied via the Courts to cancel our historical deferred ordinary shares and share premium and set them against retained losses to create a distributable capital reduction reserve of £7.2m, thereby facilitating the payment of the first tranche of our Special Dividend of £3.8m from the proceeds of our reduction of our Turkish interests. Since the year end another tranche of £1.8m has been paid, with another such dividend planned for October 2022.
At the year end the Directors were pleased to report a healthy cash balance of £16.4m, and we will continue to strive to deliver value from this position, with a view to further dividends in future.
Outlook
As predicted in our outlook of last year, 2021 marked the dawn of a new age for Ariana Resources. During 2020, we set up the Company in a strategically powerful position and then acted systematically in line with this strategy throughout the past year. This is exemplified by the culmination, post-period end, of a strategic investment by Newmont Corporation into our business, with the intention of developing the exploration opportunities we had created through the establishment of Western Tethyan Resources last year.
In addition to advancing our long-term interests in south-eastern Europe, the Company also commenced investing in high-impact early-stage exploration opportunities via the Asgard Metals Fund. By year end, the Company was invested in gold and nickel-cobalt exploration in Western Australia and the Northern Territory, and in gold-copper exploration in Kazakhstan. Post-period end, these were joined by an investment in gold-copper exploration in Laos. As part of this investment strategy, we are actively engaged with our investee companies and provide regular input into their exploration programmes, while their teams in turn provide in-country experience and leverage.
Such activities corresponded with a significant increase in news-flow, which will be sustained in the years ahead given the wider geographic spread of projects in which we are now invested. These projects are in part selected across various climatic zones to maximise the potential for seasonal exploration activity, resulting in a more even spread of work throughout the year for our project evaluation team and enabling steady emphasis to be sustained year-round across our investee projects. This further builds on our already notable operational efficiencies as a business, particularly in this new world of reduced travel and remote-working; further advantages of this approach are the marked benefits to our corporate ESG commitments.The Company presently has the capability and financial resources to hold a structurally more diverse portfolio of mineral exploration, development and mining project investments across a broader geography. With the significantly increased demand in commodities, particularly those which contribute to technological development, we find ourselves on the brink of profound changes in perception and awareness of the industry and a consequent marked realignment of investment portfolios globally. Not only will the mining sector need to find and mine more at an accelerating rate but it will also need to do this without the environmental and social impacts of the past. This presents several fundamental challenges and an opportunity for agile companies capable of advancing their exploration strategies in new search spaces. We have spent the past year positioning the Company accordingly.
This year also represents 20 years since the foundation of the original Ariana Resources in Australia and we are consequently very proud of what has been achieved by our team during the past decades. There is a strong sense among us of the Company now having come full-circle, particularly given my own relocation to Perth during 2020. This is especially relevant given the significance of Perth to the global mining and exploration industry in terms of the development of world-leading exploration models, techniques and operational practices, in addition to its particularly dynamic and vibrant deal-making scene. Accordingly, the Company is very well positioned for the future and we look forward to continuing to action our unique strategy.
Dr Kerim Sener
Managing Director
28 June 2022
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
Continuing operations | Note | 2021 £'000 | 2020 £'000 |
Administrative costs | (2,917) | (1,360) | |
General exploration expenditure | (67) | (35) | |
Operating loss | 4 | (2,984) | (1,395) |
Profit on restructuring of group activities | 5 | 6,423 | - |
Share of profit of associate accounted for using the equity method | 6 | 4,260 | - |
Share of profit of joint venture accounted for using the equity method | - | 6,478 | |
Share of loss of associate accounted for using the equity method | 6 | (213) | - |
Investment income | 202 | 7 | |
Profit before tax |
| 7,688 | 5,090 |
Taxation | 8 | (3,832) | (327) |
Profit for the year from continuing operations |
| 3,856 | 4,763 |
Earnings per share (pence) attributable to equity holders of the company | |||
Basic and diluted | 10 | 0.36 | 0.45 |
Other comprehensive income | |||
Items that are or may be reclassified subsequently to profit or loss: | |||
Exchange differences on translating foreign operations | (2,948) | (3,647) | |
Other comprehensive loss for the year net of income tax |
| (2,948) | (3,647) |
Total comprehensive profit for the year |
| 908 | 1,116 |
The accompanying notes form part of these financial statements.
Consolidated Statement of Financial Position
For the year ended 31 December 2021
Note | 2021 £'000 | 2020 £'000 | |
Assets Non-current assets | |||
Trade and other receivables | 15 | 815 | 100 |
Financial assets at fair value through profit or loss | 13 | 461 | - |
Intangible assets | 11 | 149 | 168 |
Land, property, plant and equipment | 12 | 238 | 41 |
Investment in associates accounted for using the equity method | 6 | 11,402 | - |
Investment in Joint Venture accounted for using the equity method | 6 | - | 11,213 |
Earn-In advances | 6 | - | 1,206 |
Total non-current assets | 13,065 | 12,728 | |
Current assets | |||
Trade and other receivables | 16 | 1,136 | 298 |
Cash and cash equivalents | 16,389 | 2,978 | |
Assets classified as held for sale | 18 | - | 16,002 |
Total current assets | 17,525 | 19,278 | |
Total assets |
| 30,590 | 32,006 |
Equity |
|
|
|
Called up share capital | 19 | 1,097 | 6,070 |
Share premium | 19 | 305 | 12,053 |
Capital reduction reserve | 19 | 7,222 | - |
Other reserves | 720 | 720 | |
Share based payments | 19 | 173 | 307 |
Translation reserve | (8,178) | (9,617) | |
Retained earnings | 27,160 | 17,164 | |
Total equity attributable to equity holders of the parent | 28,499 | 26,697 | |
Non-controlling interest | 30 | - | |
Total equity |
| 28,529 | 26,697 |
Liabilities |
|
|
|
Current liabilities | |||
Trade and other payables | 17 | 2,061 | 1,385 |
Liabilities directly associated with classified as held for resale | 18 | - | 3,924 |
Total current liabilities | 2,061 | 5,309 | |
Total equity and liabilities |
| 30,590 | 32,006 |
The accompanying notes form part of these financial statements.
Company Statement of Financial Position
For the year ended 31 December 2021
Note | 2021 £'000 | 2020 £'000 | |
Assets Non-current assets | |||
Trade and other receivables | 15 | 5,942 | 7,027 |
Investments in group undertakings | 14 | 377 | 377 |
Investment in associate accounted for using the equity method | 6 | 2,612 | - |
Earn-In advances | 6 | - | 1,206 |
Total non-current assets | 8,931 | 8,610 | |
Current assets | |||
Trade and other receivables | 16 | 132 | - |
Cash and cash equivalents | - | - | |
Total current assets | 132 | - | |
Total assets |
| 9,063 | 8,610 |
Equity |
|
|
|
Called up share capital | 19 | 1,097 | 6,070 |
Share premium | 19 | 305 | 12,053 |
Capital reduction reserve | 19 | 7,222 | - |
Share based payments reserve | 19 | 173 | 307 |
Retained earnings | 34 | (9,826) | |
Total equity |
| 8,831 | 8,604 |
Liabilities Current liabilities | |||
Trade and other payables | 17 | 232 | 6 |
Total current liabilities | 232 | 6 | |
Total equity and liabilities |
| 9,063 | 8,610 |
The accompanying notes form part of these financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Share capital £'000 | Share premium £'000 | Other reserves £'000 | Share based payments reserve £'000 | Capital Reduction reserve £'000 | Translation reserve £'000 | Retained earnings £'000 | Total attributable to equity holders of parent £'000 | Non- controlling interest £'000 | Total £'000 | |
Changes in equity to 31 December 2020 | ||||||||||
Balance at1 January 2020 | 6,054 | 11,821 | 720 | 364 | - | (5,970) | 12,298 | 25,287 | - | 25,287 |
Profit for the year | - | - | - | - | - | - | 4,763 | 4,763 | - | 4,763 |
Othercomprehensive income | - | - | - | - | - | (3,647) | - | (3,647) | - | (3,647) |
Totalcomprehensive income | - | - | - | - | - | (3,647) | 4,763 | 1,116 | - | 1,116 |
Issue of ordinary shares | 16 | 232 | - | - | - | - | - | 248 | - | 248 |
Share options | - | - | - | 46 | - | - | - | 46 | - | 46 |
Transfer between reserves | - | - | - | (103) | - | - | 103 | - | - | - |
Transactionswith owners | 16 | 232 | - | (57) | - | - | 103 | 294 | - | 294 |
Balance at31 December 2020 | 6,070 | 12,053 | 720 | 307 | - | (9,617) | 17,164 | 26,697 | - | 26,697 |
Changes in equity to 31 December 2021 |
|
|
|
|
|
|
|
|
|
|
Profit for the year | - | - | - | - | - | - | 3,856 | 3,856 | - | 3,856 |
Othercomprehensive income | - | - | - | - | - | (2,948) | - | (2,948) | - | (2,948) |
Totalcomprehensive income | - | - | - | - | - | (2,948) | 3,856 | 908 | - | 908 |
Issue of ordinary shares | 22 | 305 | - | - | - | - | - | 327 | - | 327 |
Court order -reduction in capital | (4,995) | (12,053) | - | - | 7,222 | - | 9,826 | - | - | - |
Dividend paidto shareholders | - | - | - | - | - | - | (3,820) | (3,820) | - | (3,820) |
Recycle oftranslation losses | - | - | - | - | - | 4,387 | - | 4,387 | - | 4,387 |
Transactionsbetween shareholders | - | - | - | - | - | - | - | - | 30 | 30 |
Transfer between reserves | - | - | - | (134) | - | - | 134 | - | - | - |
Transactionswith owners | (4,973) | (11,748) | - | (134) | 7,222 | 4,387 | 6,140 | 894 | 30 | 924 |
Balance at31 December 2021 | 1,097 | 305 | 720 | 173 | 7,222 | (8,178) | 27,160 | 28,499 | 30 | 28,529 |
The accompanying notes form part of these financial statements.
Company Statement of Changes in Equity
For the year ended 31 December 2021
Share capital £'000 | Share premium £'000 | Capital Reduction Reserve £'000 | Share based payments reserve £'000 | Retained earnings £'000 | Total £'000 | |
Changes in equity to 31 December 2020 |
|
|
|
|
|
|
Balance at 1 January 2020 | 6,054 | 11,821 | - | 364 | (8,838) | 9,401 |
Loss for the year | - | - | - | - | (1,091) | (1,091) |
Other comprehensive income | - | - | - | - | - | - |
Total comprehensive income | - | - | - | - | (1,091) | (1,091) |
Issue of ordinary shares | 16 | 232 | - | - | - | 248 |
Share options | - | - | - | 46 | - | 46 |
Transfer between reserves | - | - | - | (103) | 103 | - |
Transactions with owners | 16 | 232 | - | (57) | 103 | 294 |
Balance at 31 December 2020 | 6,070 | 12,053 | - | 307 | (9,826) | 8,604 |
Changes in equity to 31 December 2021 |
|
|
|
|
|
|
Profit for the year | - | - | - | - | 3,720 | 3,720 |
Other comprehensive income | - | - | - | - | - | - |
Total comprehensive income | - | - | - | - | 3.720 | 3,720 |
Issue of ordinary shares | 22 | 305 | - | - | - | 327 |
Court order - reduction in capital | (4,995) | (12,053) | 7,222 | - | 9,826 | - |
Dividend paid to shareholders | - | - | - | - | (3,820) | (3,820) |
Transfer between reserves | - | - | - | (134) | 134 | - |
Transactions with owners | (4,973) | (11,748) | 7,222 | (134) | 6,140 | (3,493) |
Balance at 31 December 2021 | 1,097 | 305 | 7,222 | 173 | 34 | 8,831 |
The accompanying notes form part of these financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
2021 £'000 | 2020 £'000 | |
Cash flows from operating activities | ||
Profit for the year | 3,856 | 4,763 |
Adjustments for: | ||
Profit on restructuring of group activities | (6,423) | - |
Depreciation of non-current assets | 44 | 20 |
Share of profit in equity accounted associate | (4,260) | - |
Share of profit in joint venture | - | (6,478) |
Share of loss in equity accounted associate | 213 | - |
Share based payments charge | - | 45 |
Investment income | (202) | (7) |
Income tax expense | 3,832 | 327 |
(2,940) | (1,330) | |
Movement in working capital | ||
Decrease in trade and other receivables | 62 | 3,056 |
(Decrease)/increase in trade and other payables | (271) | 1,021 |
Cash (outflow)/inflow from operating activities | (3,149) | 2,747 |
Taxation paid | (2,923) | (282) |
Net cash (used in)/generated from operating activities | (6,072) | 2,465 |
Cash flows from investing activities |
|
|
Earn-In Advances | (1,406) | (672) |
Purchase of land, property, plant and equipment | (241) | (3) |
Payments for intangible assets | - | (262) |
Proceeds from restructuring of group activities | 28,951 | - |
Purchase of associate investment | (4,139) | - |
Purchase of financial assets at fair value through profit or loss | (461) | - |
Dividends from associate | 705 | - |
Dividends from joint venture | - | 776 |
Investment income | 202 | 7 |
Net cash generated from/(used in) investing activities | 23,611 | (154) |
Cash flows from financing activities |
|
|
Issue of share capital | 326 | 248 |
Proceeds from non-controlling interest | 30 | - |
Payment of shareholder dividend (excluding uncashed) | (3,689) | - |
Net cash (used in)/generated from financing activities | (3,333) | 248 |
Net increase in cash and cash equivalents | 14,206 | 2,559 |
Cash and cash equivalents at beginning of year | 2,978 | 453 |
Exchange adjustment on cash and cash equivalents | (795) | (34) |
Cash and cash equivalents at end of year | 16,389 | 2,978 |
The accompanying notes form part of these financial statements.
Selected Notes to the Consolidated Financial Statements for the year ended 31 December 2021
1. General Information
Ariana Resources PLC (the "Company") is a public limited company incorporated, domiciled and registered in the UK. The registered number is 05403426 and the registered address is 2nd Floor, Regis House, 45 King William Street, London, EC4R 9AN.
The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange. The principal activities of the Company and its subsidiaries (together the "Group") are related to the exploration for and development of gold and technology-metals, principally in south-eastern Europe.
The consolidated financial statements are presented in Pounds Sterling (£), which is the parent company's functional and presentation currency, and all values are rounded to the nearest thousand except where otherwise indicated. The financial information has been prepared on the historical cost basis modified to include revaluation to fair value of certain financial instruments and the recognition of net assets acquired including contingent liabilities assumed through business combinations at their fair value on the acquisition date modified by the revaluation of certain items, as stated in the accounting policies.
Basis of Preparation
The Group financial statements have been prepared and approved by the Directors in accordance with UK-adopted International Accounting Standards and effective for the Group's reporting for the year ended 31 December 2021.
The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the separate financial statements have been prepared in accordance with UK-adopted International Accounting Standards. These financial statements have been prepared under the historical cost convention (except for financial assets at FVOCI) and the accounting policies have been applied consistently throughout the period.
Going Concern
These financial statements have been prepared on the going concern basis.
The Directors are mindful that there is an ongoing need to monitor overheads and costs associated with delivering on its strategy and certain exploration programmes being undertaken across its portfolio. The Group is not expecting to raise additional capital at this time, but may do so to support its strategy and specific activities on occasion. The Group has no bank facilities and has been meeting its working capital requirements from cash resources. At the year end the Group had cash and cash equivalents amounting to £16.389 million (2020: £2.978 million).
The Directors have prepared cash flow forecasts for the Group for the period to 31 December 2023 based on their assessment of the prospects of the Group's operations. The cash flow forecasts include expected future cash flows from our equity accounted associate (formerly Joint Venture) investment in Zenit along with the normal operating costs for the Group over the period together with the discretionary and non-discretionary exploration and development expenditure.
The forecasts indicate that on the basis of existing cash and other resources, and expected future dividend payments from Zenit, the Group will have adequate resources to meet all its expected obligations in delivering its work programme for the forthcoming year.
The Group believes there should be no significant material disruption to the mining operations in Zenit from COVID-19, but the Board continues to monitor these risks and Zenit's business continuity plans.
In preparing these financial statements the Directors have given consideration to the above matters and on this basis they believe that it remains appropriate to prepare the financial statements on a going concern basis.
5. Profit on restructuring of group activities
During February 2021, the Group concluded its restructuring programme. This comprised the part-disposal of its interest in Zenit Madencilik San.ve Tic. A.S. ("Zenit") and Pontid Madencilik San.ve Tic. A.S. ("Pontid") to Ozaltin Insaat, Ticaret and Sanayi A.S. ("Ozaltin") and Proccea Construction Co ("Proccea") for a total consideration of US$35.75m. Under the terms of the Pontid sale agreement and during the year, Ozaltin completed its equity commitment to invest a further US$8m in the development of the Salinbaş project. A further US$2m is to be paid in instalments to the Group by Zenit following the transfer of the three-remaining satellite remain projects held by the Group's wholly owned subsidiary, Galata Mineral Madencilik San. ve Tic. A.S.
2021 £'000 | 2020 £'000 | |
Disposal proceeds receivable (net of group transactions) Less:- | 26,976 | - |
Cost of Investment and other incidental costs incurred on disposal | (4,684) | - |
Reversal of fair value transactions associated with the Salinbaş acquisition | (9,466) | - |
Increase in valuation of associate following acquisition | 2,197 | - |
Reduction in valuation of JV following part disposal (excluding translation losses) | (4,234) | - |
Recycled translation losses | (4,386) | - |
Profit on restructuring of Group's activities | 6,423 | - |
6. Equity accounted Investments
The Group and Company's investments comprise the following: -
Associates and joint ventures companies | Note | Group 2021 £'000 | Company 2021 £'000 | Group 2020 £'000 | Company 2020 £'000 |
Associate Interest in Pontid Madencilik San. ve Tic. A.S. ("Pontid") | 6a | 4,139 | - | - | - |
Associate Interest in Venus Minerals Ltd ("Venus") | 6b | 2,399 | 2,612 | - | - |
Associate Interest in Zenit Madencilik San. Ve Tic. A.S. ("Zenit") | 6c | 4,864 | - | - | - |
Joint venture Interest in Zenit Madencilik San. Ve Tic. A.S. ("Zenit") | 6c | - | - | 11,213 | - |
Carrying amount of investment at 31 December | 11,402 | 2,612 | 11,213 | - |
6a Associate Interest in Pontid.
Following the disposal by Greater Pontid Exploration B.V. (holding company) of its entire interest in Pontid Madencilik San. ve Tic. A.S. ("Pontid") to Ozaltin Holding A.S and Proccea Construction Co, the Group reinvested US$5.75m for a 23.5% shareholding in Pontid. This investment is currently valued at £4.139m and represents the Group's share of Pontid's net assets and goodwill paid on acquisition. Since the date of acquisition, Pontid continues to benefit from new capital funding of US$8m into its Salinbaş project.
Financial information based on Pontid's translated financial statements, and reconciliations with the carrying amount of the investment in the consolidated financial statements are set out below:
Statement of financial position As at 31 December 2021 | 2021 £'000 | 2020 £'000 |
Assets Non-current assets | ||
Other receivables | 10 | - |
Intangible exploration assets | 1,120 | - |
Land, property, plant and machinery | 96 | - |
Total non-current assets | 1,226 | - |
Current assets |
| |
Cash and cash equivalents | 5,230 | - |
Trade and other receivables | 86 | - |
Total current assets | 5,316 | - |
Total assets | 6,542 | - |
Current liabilities |
|
|
Other payables | 229 | - |
Total current liabilities | 229 | - |
Equity | 6,313 | - |
Proportion of the Group's ownership | 23.5% | - |
Share of net assets per above analysis | 1,483 | - |
Goodwill on acquisition and share of interest post acquisition | 2,656 | - |
Carrying amount of investment in Pontid | 4,139 | - |
6b Share of loss of associate interest in Venus Minerals Ltd
The Company and group acquired 50% of Venus Minerals Ltd through an earn-in agreement on 5 November 2021.
The results set out below includes the Group`s share of loss for the period from significant influence to 31 December 2021.
Group 2021 £'000 | Company 2021 £'000 | Group and Company 2021 £'000 | |
Equity accounted Associate interest | Equity accounted Associate interest | Earn-In Advances | |
At 1 January 2021 | - | - | 1,206 |
Advances paid during the year | - | - | 1,406 |
Reclassification following conversion of rights | 2,612 | 2,612 | (2,612) |
Share of loss since significant influence recognised by Group | (213) | - | - |
At 31 December 2021 | 2,399 | 2,612 | - |
6c Share of profit of associate interest in Zenit
The Group accounts for its associate interest in Zenit using the equity method in accordance with IAS 28 (revised). In prior years Zenit was also accounted for using the equity method of accounting, albeit the company was then classified as a joint venture, until part disposal by the Group in February 2021. At 31 December 2021 the Group has a 23.5% (2020: 50%) interest in Zenit, and, profits from Zenit are shared in the ratio of 23.5% (2020: 50%) the Group, 23.5% (2020: 50%) Proccea and the remaining 53% (2020: nil) interest to Ozaltin Holding A.S.
Zenit was incorporated in, and has its principal place of business in Ankara, Turkey.
Financial information based on Zenit`s translated financial statements, and reconciliations with the carrying amount of the investment in the consolidated financial statements are set out below:
Statement of Comprehensive Income For the year ended 31 December 2021 | 2021 £'000 | 2020 £'000 |
Revenue | 32,784 | 29,145 |
Cost of sales | (14,586) | (13,335) |
Gross Profit | 18,198 | 15,810 |
Administrative expenses | (2,344) | (1,750) |
Operating profit | 15,854 | 14,060 |
Other income | 124 | - |
Finance expenses including foreign exchange losses | (1,171) | (3,143) |
Finance income including foreign exchange gains | 5,213 | 2,262 |
Profit before tax | 20,020 | 13,179 |
Taxation charge | (1,890) | (223) |
Profit for the year | 18,130 | 12,956 |
Proportion of the Group's profit share | 23.5% | 50% |
Group's share of profit for the year | 4,260 | 6,478 |
6c Share of profit of interest in associate in Zenit
Statement of financial position As at 31 December 2021 | 2021 £'000 | 2020 £'000 |
Assets Non-current assets | ||
Other receivables and deferred tax asset | 295 | 1,244 |
Intangible exploration assets | 70 | 670 |
Kiziltepe Gold Mine (including capitalised mining costs, land, property, plant and equipment) | 15,804 | 18,817 |
Total non-current assets | 16,169 | 20,731 |
Current assets |
|
|
Cash and cash equivalents | 6,680 | 8,031 |
Trade and other receivables | 650 | 286 |
Inventories | 2,033 | 2,598 |
Other receivables, VAT and prepayments | 2,521 | 2,004 |
Total current assets | 11,884 | 12,919 |
Total assets | 28,053 | 33,650 |
Liabilities |
|
|
Non-current liabilities | ||
Borrowings | 412 | 2,126 |
Deferred tax | 367 | - |
Asset retirement obligation | 616 | 924 |
Total non-current liabilities | 1,395 | 3,050 |
Current liabilities |
|
|
Borrowings | 884 | 4,881 |
Trade payables | 1,406 | 1,544 |
Other payables | 3,671 | 1,749 |
Total current liabilities | 5,961 | 8,174 |
Total liabilities | 7,356 | 11,224 |
Equity | 20,697 | 22,426 |
Proportion of the Group's ownership | 23.5% | 50% |
Carrying amount of investment in associate | 4,864 | - |
Carrying amount of investment in joint venture | - | 11,213 |
Movement in Equity - our share |
| |
Opening balance | 11,213 | 7,768 |
Profit for the year | 4,260 | 6,478 |
Part disposal of Interest | (5,943) | - |
Translation and other reserves | (3,613) | (2,257) |
Dividend receivable | (1,053) | (776) |
Closing balance | 4,864 | 11,213 |
9. Profit and distributable reserves of parent Company
(a) Profit of parent company
As permitted by Section 408 of the Companies Act 2006, the statement of comprehensive income of the parent Company is not presented as part of these financial statements. The parent Company's Profit for the financial year was £3,720,000 (2020: Loss - £1,091,000).
(b) Distributable reserves of parent company
The Company paid its first shareholder dividend on 24 September 2021 amounting to £3,820,873. To facilitate this distribution the Company gained shareholder approval during February 2021 and applied to the High Court of Justice of England and Wales to reduce its share capital. This application was granted by the High Court during July 2021 and the share capital reduction scheme resulted in generating distributable reserves of £7.22m, as set out in the Company's Statement of Changes in Equity and note 19.
(c) Dividends
An interim dividend was paid during the year ended 31 December 2021 of 0.35 pence per ordinary share amounting to £3,820,000 (2020: £nil).
10. Earnings per share on continuing operations
The calculation of basic profit per share is based on the profit attributable to ordinary shareholders of £3,856,000 (2020: £4,763,000) divided by the weighted average number of shares in issue during the year being shares 1,085,894,966 (2020: 1,062,538,317). There is no material effect on the basic earnings per share for the dilution provided by the share options.
13. Financial assets at fair value through profit or loss
Group and Company | Group 2021 £'000 |
At 1 January 2021 | - |
Addition in Panther Metals Ltd | 188 |
Addition in Pallas Resources Ltd | 273 |
At 31 December 2021 | 461 |
Net book value |
|
At 31 December 2020 | - |
At 31 December 2021 | 461 |
During the year, the Group's wholly owned subsidiary Asgard Metals Pty. Ltd. acquired shares in the following companies as set out below:
Panther Metals Ltd is listed on the Australian Stock Exchange, incorporated and domiciled in Australia. At the balance sheet date, its listed price exceeded its acquisition cost by £35,000. This increase has not been reflected in profit or loss.
Pallas Resources Ltd is a private company limited by shares, incorporated and registered in the United Kingdom. At the balance sheet date as an unlisted company, its fair value cannot be reliably measured and approximates to historical cost.
15. Non-current other receivables
Group | Company | |||
2021 £'000 | 2020 £'000 | 2021 £'000 | 2020 £'000 | |
Amounts owed by Group undertakings | - | - | 5,942 | 7,027 |
Amounts owed by associate interest | 815 | - | - | - |
Other receivables | - | 100 | - | - |
815 | 100 | 5,942 | 7,027 | |
The amount owed to the Group relate to an instalment based interest free loan agreed upon following the disposal by Galata of its three remaining satellite projects to Zenit at a rate of US$50,000 per calendar month. The directors have assessed that the future fair value return on settlement of this debt is not materially different from the carrying value shown above.
16. Other receivables
Group | Company | |||
2021 £'000 | 2020 £'000 | 2021 £'000 | 2020 £'000 | |
Other receivables | 219 | 183 | 132 | - |
Amounts owed by associate interest | 792 | - | - | - |
Prepayments | 125 | 115 | - | - |
1,136 | 298 | 132 | - | |
The carrying values of other receivables and amounts owed by associate interest approximate their fair values as these balances are expected to be cash settled in the near future.
17. Trade and other payables
Group | Company | |||
2021 £'000 | 2020 £'000 | 2021 £'000 | 2020 £'000 | |
Trade and other payables | 203 | 147 | 94 | - |
Social security and other taxes | 1,380 | 14 | - | - |
Other creditors and advances | 343 | 1,099 | 132 | - |
Accruals and deferred income | 135 | 125 | 6 | 6 |
2,061 | 1,385 | 232 | 6 | |
The above listed payables are all unsecured. Due to the short-term nature of current payables, their carrying values approximate their fair value.
18. Assets and liabilities classified as held for sale
Group | Company | |||
2021 £'000 | 2020 £'000 | 2021 £'000 | 2020 £'000 | |
Assets classified as held for sale | ||||
Intangible Exploration assets | - | 16,002 | - | - |
Total assets of group held for sale | - | 16,002 | - | - |
Liabilities directly associated with assets classified as held for sale | ||||
Deferred tax liabilities | - | 2,273 | - | - |
Contingent consideration payable | - | 1,651 | - | - |
Total liabilities of group held for sale | - | 3,924 | - | - |
The above assets and liabilities held for sale were reclassified from non-current assets and non-current liabilities as at 31 December 2020 due to the Group concluding the disposal of its interests in its Salinbaş and all other exploration projects, held through its subsidiary companies based in Turkey.
19. Called up share capital, share premium and capital reduction reserve
Allotted, issued and fully paid ordinary 0.1p shares | Number | Ordinary Shares £'000 | Deferred shares £'000 | SharePremium £'000 | Capital reduction reserve £'000 |
In issue at 1 January 2021 | 1,075,677,943 | 1,075 | 4,995 | 12,053 | - |
Share capital reduction scheme | - | (4,995) | (12,053) | 17,048 | |
Retained losses utilised | - | - | - | (9,826) | |
Share options exercised | 21,000,000 | 22 | - | 305 | - |
In issue at 31 December 2021 | 1,096,677,943 | 1,097 | - | 305 | 7,222 |
During July 2021, the Company was granted permission by the High Court of Justice in England and Wales to reduce its share capital by the cancellation of its share premium and its sub-divided deferred shares. This allowed the Company to extinguish retained losses bought forward from the prior year amounting to £9,826,000.
22. Contingent liabilities
Following the restructuring of the Group and the part disposal by Galata Mineral Madencilik San. ve Tic. A.S. of 26.5% of its interest in Zenit Madencilik San. ve Tic. A.S., 75% of the resulting gain on disposal is exempt from Turkish corporation tax provided the gain is retained under equity by Galata for a period of 5 years. This potentially exempt taxable gain, including the previously reported gain during 2019 on Çamyol Gayrimenkul, Madencilik, Turizm, Tarim ve Hayvancilik Ltd ("Camyol") is as follows:
Contracting parties | Shareholding | Taxable gain in Lira | Contingent liability in Lira | Contingent Liability in GBP |
Galata | 26.5% | 127,766,456 | 31,941,614 | 1,779,606 |
Çamyol | 99% | 4,529,343 | 996,455 | 55,516 |
24. Post year end events
During March 2022 the Company issued 46,185,387 new ordinary shares at 4.11 pence per share to Newmont Corporation in connection with a five-year exploration and alliance agreement focused on copper and gold exploration within Bosnia and Herzegovina, Bulgaria, Greece, Kosovo, North Macedonia and Serbia, utilising the exploration teams established within the Group.
Note to the announcement
The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2021 or year ended 31 December 2020, but is derived from those accounts. Statutory accounts for 2020 have been delivered to the Registrar of Companies and those for 2021 on which the auditors have provided an unqualified report will be delivered following the AGM.
Contacts:
Ariana Resources plc | Tel: +44 (0) 20 3476 2080 |
Michael de Villiers, Chairman | |
Kerim Sener, Managing Director | |
Beaumont Cornish Limited | Tel: +44 (0) 20 7628 3396 |
Roland Cornish / Felicity Geidt | |
Panmure Gordon (UK) Limited | Tel: +44 (0) 20 7886 2500 |
John Prior / Hugh Rich / Atholl Tweedie | |
Yellow Jersey PR Limited | Tel: +44 (0) 20 3004 9512 |
Dominic Barretto / Henry Wilkinson | arianaresources@yellowjerseypr.com |
Editors' Note:
About Ariana Resources:
Ariana is an AIM-listed mineral exploration and development company with an exceptional track-record of creating value for its shareholders through its interests in active mining projects and investments in exploration companies. Its current interests include gold production in Turkey and copper-gold exploration and development projects in Cyprus and Kosovo.
The Company holds 23.5% interest in Zenit Madencilik San. ve Tic. A.S. a joint venture with Ozaltin Holding A.S. and Proccea Construction Co. in Turkey which contains a depleted total of c. 2.1 million ounces of gold and other metals (as at February 2022). The joint venture comprises the Kiziltepe Mine and the Tavsan and Salinbas projects.
The Kiziltepe Gold-Silver Mine is located in western Turkey and contains a depleted JORC Measured, Indicated and Inferred Resource of 222,000 ounces gold and 3.8 million ounces silver (as at February 2022). The mine has been in profitable production since 2017 and is expected to produce at a rate of c.20,000 ounces of gold per annum to at least the mid-2020s. A Net Smelter Return ("NSR") royalty of 2.5% on production is being paid to Franco-Nevada Corporation.
The Tavsan Gold Project is located in western Turkey and contains a JORC Measured, Indicated and Inferred Resource of 253,000 ounces gold and 0.7 million ounces silver (as at June 2020). Following the approval of its Environmental Impact Assessment, resulting permitting work is ongoing to develop Tavsan as the second joint venture gold mining operation in Turkey. A NSR royalty of up to 2% on future production is payable to Sandstorm Gold.
The Salinbas Gold Project is located in north-eastern Turkey and contains a JORC Measured, Indicated and Inferred Resource of 1.5 million ounces of gold (as at July 2020). It is located within the multi-million ounce Artvin Goldfield, which contains the "Hot Gold Corridor" comprising several significant gold-copper projects including the 4 million ounce Hot Maden project, which lies 16km to the south of Salinbas. A NSR royalty of up to 2% on future production is payable to Eldorado Gold Corporation.
Ariana owns 100% of Australia-registered Asgard Metals Fund ("Asgard"), as part of the Company's proprietary Project Catalyst Strategy. The Fund is focused on investments in high-value potential, discovery-stage mineral exploration companies located across the Eastern Hemisphere and within easy reach of Ariana's operational hubs in Australia, Turkey and the UK.
Ariana owns 75% of UK-registered Western Tethyan Resources Ltd ("WTR"), which operates across south-eastern Europe and is based in Pristina, Republic of Kosovo. The company is targeting its exploration on major copper-gold deposits across the porphyry-epithermal transition. WTR is being funded through a five-year Alliance Agreement with Newmont Corporation (www.newmont.com).
Ariana owns 50% of UK-registered Venus Minerals Ltd ("Venus") which is focused on the exploration and development of copper-gold assets in Cyprus which contain a combined JORC Indicated and Inferred Resource of 17Mt @ 0.45% to 1.10% copper (excluding additional gold, silver and zinc), in addition to pursuing a separate 50:50 JV on Hellenic Apliki Mines, which owns the Hellenic SX-EW processing plant and the 11Mt @ 0.25% to 0.69% Cu Apliki mine development project.
Panmure Gordon (UK) Limited is broker to the Company and Beaumont Cornish Limited is the Company's Nominated Adviser and Broker.
For further information on Ariana you are invited to visit the Company's website at www.arianaresources.com.
Ends.