Ariana Resources (LON:AAU) , the gold exploration and development company operating in Turkey, said this morning that it had finalised a resource estimate and scoping study report for the Kiziltepe sector of its flagship Red Rabbit project. The assessment was carried out by mining industry consultancy Wardrop and will eventually form part of a wider, ongoing pre-feasibility study of Kiziltepe. Red Rabbit is a in currently 89% held by Ariana in a joint venture with Turkish engineering company Proccea Construction.

The new report has concluded that the combined resource in preliminary optimised pits is approximately 1 million tonnes at an average grade of 3.6 grams per tonne (g/t) of gold and 41.6 g/t of silver. Output rates are expected to reach 150,000 tonnes ore per year, corresponding to an average production of approximately 20,000 ounces of gold equivalent per year over a mine life of 6.9 years. Based on a gold price of US$1350/oz and a silver price of US$20/oz, the net present value of the project (including an 8% discount) is US$56.2 million. The internal rate of return would be 75.9%, with payback secured in 1.2 years. The expected capital cost has been estimated at US$25.1 million. Cash costs for production are estimated in the region of US$441 to US$472 per ounce.

Dr Kerim Sener, Ariana’s managing director, said: “The completion of this report is an important part of our ongoing work programmes at Kiziltepe. The JORC resource estimate is now provided in parallel with the results of our scoping study, to better define the direction being taken by the company on this project. We have demonstrated the economic potential of the project using base case gold and silver prices that may now be considered conservative. The pit optimisation currently being considered for the PFS will inevitably be using higher base case metal prices (approximately US$1,100/oz for gold). We have now demonstrated that there is little downside to this project and we are fully engaged with our partners, Proccea and consulting teams to ensure we remain on track with the feasibility and environmental studies.” Click here to read a Stockopedia interview with Kerim Sener.

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