Ariana Resources (LON: AAU): Momentum Building?

Ariana Resources (LON:AAU) announced  on 16th March that it had signed Heads of Agreement with fellow  explorer KEFI Minerals (LON:KEFI) for the acquisition of four key exploration properties in western Turkey.  The deal certainly seems to make sense for both parties. KEFI's exploration focus having now moved away from Turkey and on to Saudi Arabia; so these licenses look to provide a nice "bold on" for Ariana who, through its joint venture with Proccea, have all the required attributes to exploit their potential. The payment is by way of a nominal consideration and the 2% net smelter royalty leaves KEFI with some "skin in the game" should Ariana be able to bring any of the projects into production.

We were particularly interested to note that the Kizilcukur license (referred to by KEFI as "Derinin Tepe") is also included in the proposed acquisition. There was a lot of promise shown here in particular, when Kefi were first progressing this project back in 2007.

Much was made of the discovery of ancient workings – it was mined in Roman times and Kefi carried-out two drilling campaigns in 07' and 08' in the hope that modern exploration techniques would be able to uncover something the Romans may have left behind. However as KEFI's attention moved on to Saudi Arabia, the work done here was never followed up.

We therefore contacted Ariana Resources Managing Director Kerim Sener and ask if he could give us a bit of background on the agreement and also expand on its significance for the company: here is what he had to say:

MM: Could you explain why you decided to acquire the licences from Kefi Minerals and how they complement Ariana's existing portfolio in Western Turkey?

KS: The licences owned by KEFI in western Turkey complement our regional focus, specifically in the Red Rabbit project area.  There is scope, particularly at Kizilcukur, to define a satellite resource that is within truckable distance to our proposed plant at Kiziltepe.  The drilling undertaken by KEFI was focused primarily in areas dotted with old workings, and much of this drilling was consequently focused on identifying a deeper target that was not touched by previous mining activity.  While there is still the possibility of defining such targets at depth, this would not be our priority.  We are particularly interested in the potential at this site to identify a shallow open-pittable resource based on multiple parallel quartz vein systems.  The beauty of this is that the grade of such a resource would not need to be very high for it to be economic, following the establishment of a plant at Kiziltepe.  It is an exciting addition to our portfolio that should add some additional resources to our Red Rabbit project development.

MM: Overall how significant is the Sindirgi Gold Corridor and, specifically, how much potential is there for the development of a material gold resource?

KS: The Sindirgi Gold Corridor, is now a very well defined trend of gold mineralisation, that is unique in the district.  We have developed a much better understanding of the geological controls on the formation of prospects along this corridor and there is scope to identify further resources along its length of some 20km (between Kiziltepe and Kizilcukur).  We now have all of the relevant licences that sit across this corridor, so we have access to some of the most prospective ground for low-sulphidation quartz vein type mineralisation in western Turkey.  There is good potential to grow our resource in this area and we will be working with our partners, Proccea over the coming years to add to our resource base in this region.

MM: Subject to the acquisition going ahead, how do you plan to move forward with these licences and how does this additional work fit with your existing commitments?

KS: We plan to commit to a drilling programme on Kizilcukur during this year.   This fits perfectly within our existing commitments, as we had budgeted for such an event earlier on in the year.  The timing of the acquisition sits well with our Red Rabbit project development timelines and we have the resources in place to undertake this and indeed other exploration programmes during the course of the year.

MM: Will you continue to look at acquisition opportunities and is it your plan to remain Turkey focussed, or will you consider non-Turkish projects?

KS: We are always on the look out for new opportunities and we are evaluating others at this time also.  We are still awaiting licence auctions in Turkey, but the situation on these is not yet clear (they were to commence in March, but the month is now coming to an end).  Through our regional exploration activities we have identified a number of key areas in which we intend to build up licence portfolios, but our ability to gain access to this ground under licence is entirely dependent on the auctions.  At this point we are still waiting for the auctions to commence.  In terms of other areas, outside of Turkey, all I can say is that from time to time we are asked to look at projects in the region (Eastern Europe and the Middle East).  Being a junior company, any project of merit within this region would need to provide a very compelling reason to diversify our Turkish focus.  At this time we are satisfied that Turkey will provide us with many more years of exploration success.

ENDS:

MiningMaven View:

Over the past years or so, whenever we have spoken with other Ariana shareholders, the conversation inevitably returns to the share price, so the question; "When will the market wake up to this Company's potential?" is understandably always in the forefront of investors' minds.

We first made this point in our Value Proposition back in January 2010, so it is with some degree of consternation (putting it mildly!) that we have sat and watched as the company continue to make solid progress on the ground, yet without the accompanied follow through in the share price.

The successful completion of their scoping study, the finalisation of the most significant JV with Proccea Construction, the solid progress towards gold production, in addition to countless other milestones achieved, continue to demonstrate to us the Company's impressive investable credentials.

And this is not just MiningMaven's view. Share Magazine tipped the company in their "Midas Touch" feature - 2nd in their top 10 Gold shares. And more recently, quoting from a research note from Growth Equities;

"During the past twelve months gold mining stocks have been driven sharply higher on the back of a rising gold price but for no apparent reason Ariana seems to have been left behind and now begs the attention of investors." 

If you were at "The Counting House" for last week's investor networking event, you would have met many private investors holding shares in Ariana; and sure enough, the conversation inevitably came round to the share price! So it's rather gratifying to see the recent market action - which seem positively timely! Could this finally mark the start of the long awaited push to a more sensible valuation? Well after all the false dawns over the past year or so, it would take a brave soul to call the timing on this one!

Our simple view is that we have waited so long for Ariana to gain recognition, another month or so is not going to make a whole heap of difference. The process has clearly started and with the pace now picking up on the ground, we are also looking forward to a healthy newsflow from the Company over the course of 2011.

Disclosure: The Authors hold shares in Ariana Resources  

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