A scoping study at Tavsan has just come back very favourably and if numbers continue to impress will add a further 30,000 ounces a year to the 20,000 oz expected from the first mine at Kiziltepe.
The scoping study at Tavsan showed production at that level would cost between US$559-630/oz over the expected four-year mine life and generate a net present value of US$41.9mln at a gold price of US$1,250.
That is a return of 80% on the expected US$20mln build cost plus operating expenses.
First mine at Kiziltepe 75km away
Kiziltepe is just 75km away and the plan will be for Tavsan to use a lot of its infrastructure for processing.
Kerim Sener, Ariana’s managing director, said it will look at fast-tracking further exploration and development work with completion of a more detailed ore-feasibility study (PFS) in 2017 the aim.
"This is an excellent result which reinforces our view that the Tavsan Sector will become a valuable additional source of revenue
''We've got a very robust project ... we have a very good internal rate of return across the model range varying from 23% at the very bottom end, all the way up to 80% at the top of the range, with very fast payback within 1-2 years'', Sener said.
Kiziltepe, meanwhile, is at the commissioning stage with first gold scheduled for this quarter, as mining has already begun and low-grade ore is now being stockpiled.
Turkey's unpredictable weather has been the undoing of more than one development schedule but most of Ariana’s work is now done.
In October, it said 95% of the tailings landscaping was complete, the dam wall and concrete drainage channel under construction, the mine-site laboratory near completion; testing of leach tanks and thickeners done; and back-up tailings pumps are on site ready for installation.
Brokers impressed by progress
Even before today’s announcement, brokers said Ariana was looking undervalued.
Panmure Gordon notes Ariana is operating within the Western Anatolian Volcanic and Extensional (WAVE) Province in western Turkey, which contains some of the country’s largest operating gold mines and is a region renowned for porphyry and epithermal deposits.
An original target to produce 20,000 oz of gold and 100,000 oz of silver from the Kiziltepe mine over eight years also looks conservative, the broker said in September, with 22,000 oz of gold and 150,000 oz for at least ten years likely.
At that time, the broker had a price target of 2.71p per share but that reflected nothing for grade increment and little for the potentially highly prospective Salinbas project.
Shares were 1.74p in November.