Ariana Resources: Timing is everything

Ariana Resources seems to have a knack for good timing. The company not only got itself established and listed on AIM at a time that was relatively favourable for exploration juniors but also came back for a second tranche of cash at 13p per share back in May - just before a big cooling off in the resource sector. By slipping away with a quick £2 million in the Spring, Ariana was able to secure a drill rig ahead of its original schedule and get on with drilling its most advanced prospects on its Sindrigi gold project, which was acquired along with historical data from Newmont Mining, again well timed, in early 2005.

Speaking with dozens of CEO?s in November at the annual Mines & Money Conference in London, I found strong agreement that many of the mining companies which listed on AIM in the last twelve to eighteen months may struggle to raise further equity finance unless they can satisfy the brokers current demand for ?near-term production?. It is quite disconcerting to hear this from so many mining company executives, but there is a real worry that with a backdrop of some notable disappointments, the recent rush of junior companies to the AIM market has exceeded demand, and it won?t be so easy to collect contributions next time the plate is passed around.

Ariana for its part has managed to secure funding that should last at least another twelve months, and in that time Ariana should make considerable progress at Kilziltepe, the most advanced prospect in the company?s Sindirgi Project in Western Turkey. This will be crucial if the market does switch emphasis away from exploration plays and towards near term production plays that will be more able cash in quickly on high commodity prices and some encouraging results are already starting to emerge from Ariana.

Whilst most of the London mining community was preparing for Mines & Money, Ariana announced the results from the first 18 holes drilled along a 530 metre section of the Arzu south gold vein at the Kilziltepe prospect. Intersections included 13 g/t of gold over 6.6 meters, 7.49 g/t over 10.5 meters, and 6.52 g/t over 6.3 meters ? only one of the holes did not intersect mineralisation of one form or another and high silver grades (up to 245 g/t over 4m) were also intersected - all encouraging enough to warrant additional attention and, potentially, encouraging enough to warrant a move towards a JORC compliant resource calculation.

The primary task of this drilling programme is to confirm previous work carried out at Arzu south and also back up the channel sampling programmes carried out by Ariana. The drilling campaign targeted 5 holes in the southern section, 7 holes in the central section and 6 holes in the northern section, generally with spacing ranging from 20m to 50m between holes. Arzu is one of many known gold-silver epithermal quartz veins, which total an impressive 19km in length, that make up the Kilziltepe prospect, and further drilling at Arzu will be required to test the extension of the gold zones already intersected. Fortunately for investors, Ariana also have a second drill rig beavering away 5km to the north east at the Kepez vein prospect, then there is the exploration on-going at the prospects of Kinik and Demirci (also in western Turkey). Continued news flow can therefore be expected over the winter.

The targets at Kilziltepe and Kepez do not yet fall into the world class deposit category but for a company the size of Ariana, they still offer plenty of upside for investors. The grades from drilling at Arzu are good and the width of the vein adequate, and one could hypothesise that a small open pit type of project could be in the offing with underground potential yet to be tested. Arzu is unlikely to be a multi million ounce deposit, but it could be a multi hundred thousand ounce deposit that could develop into a small operation. With many other veins in the vicinity to be drilled, a picture of several small pits feeding one mill looks the likely avenue of development. Perhaps most encouraging of all is that the share price is still sitting below the last fundraising price, yet investors now have the added bonus of having to hand some drill core data to mull over plus the knowledge that Ariana still has approximately £1.7 million in the kitty to continue advancing its projects - which means there will be plenty of news flow before funds will be required again.

Ariana have also announced an MoU with a Turkish partner with experience in Eastern Turkey, which due to recent politics is relatively under explored and therefore offers advantage to companies that get on the ground in the first wave. A second broker, King & Shaxson Capital Ltd (private client brokers) has been appointed - hopefully they will help bring some much needed liquidity into the stock and help tighten the spread still further.

As we go to press the gold price is showing signs of renewed support and Ariana has a pipeline of expected news flow ahead. Timing, as they say, is everything.

Jargon Buster

Epithermal quartz veins: veins containing gold or silver formed by hot solutions ascending from within the earth's crust, if they host minerals of commercial interest the veins define the areas the company needs to work on, the host rock (quartz) has implications for extracting and processing ore. In general near-surface quartz veins are relatively easy to work and the extracted ore is relatively easy to process.

g/t: grams per tonne

JORC: Joint Ore Reserve Committee of the Australasian Institute of Mining and Metallurgy, a code of practice widely accepted for developing models of mineral resources and reserves ? a resource model being lower in credibility than a reserve model.

Memorandum of Understanding (MOU): a legal document outlining the basis of an agreement between parties, including each parties? requirements and responsibilities, often the first stage in the formation of a formal contract.