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Ariana Resources – back on the elephant’s spoor

One of the first explorers to enter Turkey seeking elephants was AIM-listed Ariana Resources, which since 2005 has been developing the Sindirgi gold project in western Turkey.
Ariana Resources – back on the elephant’s spoor

Turkey is a country where gold can still be discovered for less than $10 an ounce, if you know where to look. Situated on the prolific Tethyan mineralised belt, it has become a favoured destination for explorers keen to exploit an officially-estimated potential of 6,500 tons of yellow metal – more than 200 million ounces: elephant country indeed.

Although the history of gold mining in Turkey predates the Romans, the country remains largely unexplored and production of gold in modern times only began in 2001 when Newmont Mining (NYSE: NEM) started up the Ovacik Mine – now owned by Koza Gold – which was later joined by Eldorado’s (TSX:ELD) Kisladag. Today, whilst some thirty companies are actively exploring throughout Turkey, and there are several projects in advanced development, these two remain the only major producers in the country.

One of the first explorers to enter Turkey seeking elephants was AIM-listed Ariana Resources (AIM:AAU), which since 2005 has been developing the Sindirgi gold project in western Turkey. The key prospect at Sindirgi is Kiziltepe, which lies at the western end of the Sindirgi Gold Corridor, whilst further east along strike lie Kepez, Karakavak and Kizilcukur. In total, more than 40 km of partially outcropping gold-bearing epithermal quartz vein systems have been mapped in the project area. Kiziltepe alone hosts 13 separate veins - largely NW-trending and dipping to the NE - the most important being at Arzu South and Arzu North, where grades peaking at 21 g/t Au over 6.9 metres have been drilled since 2006.

A JORC compliant resource comprising 138,000 ounces of gold and 2,425,000 ounces of silver has been defined, of which more than 75% is in the measured and indicated categories, with the majority thus far lying in the high grade Arzu South vein. It must be emphasised that this resource takes in only four of the existing vein systems identified at Kiziltepe, and there is enormous potential for further discovery, particularly of buried systems such as may lie in the untested area between Arzu North and Arzu South.

And Kiziltepe has already proved its worth, though only partially explored, by generating its first gold. Last June a trial mining programme intended to further test the Arzu South model and to confirm metallurgy and the best process route culminated in the production by Ariana’s trial processing partner Eti Gumus AS of 387 ounces of gold.

Meanwhile, the Kepez prospect some 6.5km to the north east of Kiziltepe has also produced promising results. Historic drilling had revealed high grades close to surface along the Karakaya vein which appears to have been previously worked, and sampling by Ariana in 2006 of a 100m stretch of this vein also discovered grades peaking at over 23 g/t. A systematic rock/float sampling programme last Spring confirmed the high grade nature of the mineralisation, which appears to be hosted in broken rock and fractured ground over a 90m by 60m area, and turned up grades as high as 41 g/t. Subsequent metallurgical testing at Eti Gumus of two bulk samples demonstrated excellent gold recovery and the company believe that Kepez will serve admirably as a satellite pit to Kiziltepe. 

One more prospect, Karakavak – where several veins have been mapped by surface work and a geophysical programme is plannedlying at the centre of the Sindirgi Gold Corridor remain to be tested, and the company are confident that the Sindirgi resources will increase with further exploration.

75km east of Sindirgi lies a second project at Tavsan, where gold is hosted as quartz veinlets by a partially outcropping, shallowly-dipping sheet of jasperoid identified within a 4km square area. Further occurrences of jasperoid have been identified at Caldibi where 2km of outcropping jasperoid has been identified and Evciler, where 2km of anomalous geochemistry also indicates the presence of mineralised jasperoid. Acquired from Odyssey Resources in April 2008, Tavsan’s current resource of 204,000 ounces of gold is low grade at 1.36 g/t, but is expected to be viable as a low-cost heap leach operation.

Last summer, it was decided to roll these two projects up into a new operation, to be known henceforth as Red Rabbit. Easy to remember and even easier to spell, the new name is derived from the Turkish: Kitziltepe means “red hill” and Tavsan translates as “rabbit”. CEO Kerim Sener explained the rationale: “…we automatically go from a situation where we have two smallish deposits now combined into a project that, on paper at least, shows some potential.”

Within weeks, Red Rabbit’s new name had attracted interest. By October Ariana were able to conclude a Memorandum of Understanding with Proccea Construction Co, a prominent Turkish company whose CH Engineering & Consultancy division has considerable international experience in designing and commissioning gold and silver processing plants. In return for an up-front goodwill payment of US$500,000 and the expenditure of US$8 million to fund an Environmental Impact Assessment (EIA) and Feasibility Study, Proccea will earn a 50% stake in a new joint venture company to be set up to hold and manage Red Rabbit.

The partners have moved fast. By December, Wardrop Engineering had been engaged to undertake a new NI 43-101 resource statement, and SGS Mineral Services had begun metallurgical testing to establish the best extraction and processing parameters.  In parallel, SRK Consulting had commenced work on environmental scoping in preparation for the EIA, which has a planned completion date of September 2010.

In the past, the company have considered mining Kiziltepe and Tavsan concurrently but a recently completed scoping study focuses first on Kiziltepe. It envisages a main pit on the Arzu South vein, where the process plant will be situated, complemented by satellite pits at Arzu North, Kepez and the Derya and Banu veins - where further RC drilling is about to commence to upgrade their resources to indicated status.

Under a revised geological resource model, Ariana now forsee a total resource at Kiziltepe of between 1.4 Mt and 1.7 Mt grading 2.5 -3.5 g/t gold with silver grades of 50-70 g/t, whilst the optimised pit shells indicate a mining grade of  3.5-4.5 g/t Au and 50-70 g/t Ag. At a mining rate of 150,000 pa, mine life will be at least five years, and will generate up to 30,000 ounces of gold pa at cash costs of between $350 and $400 per ounce. A preliminary site plan has been prepared, and Proccea have completed initial design drawings for the gold recovery plant, part of which will be a mobile unit capable of being moved to Tavsan once Kiziltepe is exhausted. Proccea are also setting up an in-house laboratory for advanced testwork.

During the rest of this year, the partners will be working towards completion of the EIA and the feasibility study for the Kiziltepe sector, and hope then to secure the remaining project finance and move into construction by early 2011. The formal aspects of the joint venture are expected to be complete by the end of the first quarter, but the alacrity with which the partners have embarked upon their joint development plans implies a smooth transition to shared ownership!

Meanwhile, the company is active on several additional fronts. The Greater Pontides JV, in partnership with and fully funded by European Goldfields (TSX:EGU), is exploring in the north-east coastal area of Turkey, with two current prospects under close investigation at Ardala – a copper-gold porphyry – and at Salinbas – a newly discovered south-westerly extension to  the Ardala system, where trenching has recently produced excellent results including 46m at 8.3 g/t and 33m at 9.6 g/t.

With Red Rabbit on the fast track to production in the capable hands of Proccea, and the north east under the management of European Goldfields, Ariana are now able to re-focus on their core business - elephant hunting. A multi million ounce discovery within the coming years is their self-imposed target, and – given that Kisladag was merely an insignificant soil anomaly when first explored – they are in the best place in Europe to make that kill.

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