Results Relating To Ariana Resources Interim Feasibility Study

Ariana Resources (AAU.L) has made considerable progress in 2012 towards achieving its aggregate 1Moz gold equivalent (AuE) resource target while, along with other Turkish companies, it tries to obtain permitting approvals held up by the government. These permitting delays are a result of an ambiguous prime ministerial decree released on 16 June 2012, and first production at Kiziltepe is now considered likely in 2014. Revising for this, our long-term gold and silver prices of US$1,676/oz and US$28.15/oz and results of Ariana’s interim feasibility, our base case valuation is now 5.23p per share (at a 10% discount rate).


Increasing probability of Kiziltepe resource expansion
Ariana’s exploration programmes at Kiziltepe and surrounding assets continue to return very favourable gold-silver assay results from most drill holes completed. Ariana intends to further its exploration programmes alongside developing Red Rabbit to increase its global 448koz Au resource to 1Moz and extend the current eight-year mine life at Kiziltepe.

Ardala JV: Salinbas proving up well
While it is located in the far north-east of Turkey, Ariana’s 49% stake in the Ardala JV with partners Eldorado Gold is showing promise as a further economic gold-silver resource. The Artvin province is the sole focus of the JV and the Salinbas project the current focus of exploration. Drill results so far have already indicated repeated high-grade gold-silver intercepts of over 10s of metres.

Valuation: Permitting key to de-risking valuation
We adjust our dividend discount valuation to reflect the changes in the mining schedule and the 17% increase in estimated capex stated within the interim feasibility study. We also apply our revised long-term gold price of US$1,676/oz and long-term silver price of US$28.15/oz. This results in Ariana’s eventual 50% share of Red Rabbit being valued at 5.23p per share (vs 3.45p previously at a 10% discount rate) on our revised metal prices and more than offsets the delay to first production. Based on current positive exploration news, we believe Ariana will successfully expand its resource base and replenish depleted reserves once in production. So we consider a further 2.91p could be attributed for a potential value of 8.15p (both valuations are undiluted due to Ariana stating a likely 100% debt funding of the project and do not reflect equity dilution for working capital purposes).

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