By Nigel Somerville, the Deputy Sheriff of AIM | Saturday 13 January 2018
Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
There has been a fair amount of noise coming out of AIM-listed Ariana (AAU) lately. The back end of last year saw news from its self-styled Hot Gold Corridor and now the focus seems to be raising the flag for its Kiziltepe site, which has been in production for 9 months or so – and we are due the next quarterly report from that in the next week or two. Meanwhile the gold price has been strong of late, and Ariana’s share price has benefitted – although there is a way to go to get to the target of 2p.
The gold price has marched to its highest weekly close for quite a while, notching up $1337 last night (according to www.Kitco.com). We were last at these sorts of levels back in September, and before that July 2016 and then way back in early 2014. I make no prediction of what comes next, but it does look encouragingly as though a bottom has been put in place at the very end of 2015. Let’s hope so.
Kerim Senner, Ariana’s boss, is on record as saying that a gold price above $1250 per ounce leaves Kiziltepe comfortable. The quarterly figures (to end Dec) won’t have benefitted all that much from the recent gains of gold, but what will be interesting will be the production figures, and an indication of what lies ahead: last we heard the company was expecting improved production from use of higher grade ore and better throughput than expected. It will be interesting to see whether both of these factors will continue in the months ahead.
We should also be given production costs. Having set a target of $600 per oz, the last quarter weighed in at $570 and we might hope for further improvement there.
The company has been quite cagey over Kiziltepe’s finances and some clarity would be welcomed. I gather that Kerim has indicated that Ariana itself will see some cash flowing back in to it this year, although I haven’t seen it first hand. However, we have already been told in an RNS (on 7 December):
Ample funds available for follow-up work during 2018, with other exploration and development spend across the portfolio expected to be supported from cash-flow.
I would like to have a bit more meat on the bone in that regard: how much cash-flow (and based on what gold price)? And are we being guided here not to expect any placings during 2018? Given Ariana’s recent history in that regard, some clarity on that point would be very welcome. Of course, after April 2020 the bank lending to Kiziltepe will have been paid off. At that point Ariana’s share of the spoils will increase dramatically to perhaps $6 million a year.
Meanwhile, the news of further gold discoveries at Hot Gold Corridor looks very promising. At this stage I’m not hanging my hat on big value there (yet) but it certainly adds some speculative interest which could lead to some major value. Whether the company decides to sell it, do another joint venture or go it alone I don’t know - but first there is more drilling to do.
Finally, I see that Ariana has been making a bit of noise on Twitter (see HERE) about the high grades of ore coming out of both the north west and south ends of Arzu (which feeds Kiziltepe). I would imagine that this (and the apparently good weather) all helps.
The last Kiziltepe quarterly report came out on 23 October for the period to the end of September. That was an advance of a week and a half on the previous one. Companies don't hold back on good news, so if we see a report this coming week I think we can assume it will be good. Otherwise it will be the week after.
All in all, things look to be coming together very nicely. To my mind it is still, at 1.6p offer, a buy – target remains 2p (for now).
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