Ariana Resources is An early stage gold play with promising prospects

Before I met with Steven Poulton, Chief Executive of Ariana Resources last week, I asked a few contacts in the City for their impressions of the company.

Slightly surprising to me, only one of them had even heard of Ariana. Part of the trouble of being a new and very small capitalised gold explorer on the Alternative Investment Market [AIM] is lack of exposure. Yet not entirely the company's fault; they are working on a small budget with a large amount of acreage to explore in Turkey, so it's only natural that the Public and Investor Relations budget is somewhat small in comparison to larger companies. A company like Ariana is also competing with hundreds of other small cap companies for investor awareness who think they are equally interesting and warrant the attention of savvy investors.

Perhaps the only time companies like Ariana receive attention is when they release positive news about progress. That's exactly what happened this morning just as I sat down to write this article. The shares are up approximately 29% on the back of more exploration results at Ariana's lead project, the Kiziltepe Prospect, 19km's of potentially significant narrow low sulphidation gold-silver veins accompanied by a much wider, lower grade bulk tonnage type targets which make up one part of the 100% owned Sindirgi Gold Prospect Project that the company acquired from Newmont Mining [NYSE:NEM] one year ago. Ariana believes that the Kiziltepe Prospect has sufficient near surface gold to justify the creation of several small open pit operations fed into one mill. When your market capitalisation is under £5 million, and you have a project that shows early potential, it is a huge achievement.

Kiziltepe, one of five prospects defined to date on Sindirgi is an interesting target too. The veins tend to be either higher grade and narrow jand outcropping at surface, which allows Ariana to carry out a lot of field work on the veins at relative low cost. As the veins are typically well exposed at surface, any trenching (which is literally digging down,sawing the rock, and sending if for analysis) can be taken with the same confidence as vertical drilling, because each regular sample has not been concentrated or diluted and therefore are representitive samples of the vein structure. What you can't say for sure at this stage is the depth of the vein which may increase the size of the resource. For Ariana though, this isn't a huge problem as the immediate goal is to define a shallow, near surface resource of 250,000 ounces which could justify the building of a small operation perhaps producing 20,000 ounces gold per annum. For the moment, as today's update suggests, Ariana are concentrating on rock chip sampling and trenching with hopes of drilling towards the end of 2006. This schedule could be brought forward if the company can either secure further financing or a bring in a partner who could drive Kiziltepe forward quicker. Either way, Steve Poulton of Ariana is keen not to dilute shareholders unnecessarily and will only consider options that he and the board think are in the best interests of the company and would create better long term benefit for all stakeholders. When speaking to Steven, we got the clear impression that the board of Ariana are very excited about their prospects in Turkey and are keen to drive forward as efficiently as possible. With the current climate for gold explorers, it wouldn't be all that suprising to see Ariana JV out some of their projects, to other larger players and perhaps with mine development expertise. There is a distinct shortage of good ground in many parts of the world right now created by an explosion in juniors looking to capitalise on the current commodity boom.

Ariana surprisingly was the first AIM listed mining junior to move into Turkey; a region which has a long history of mineral discoveries The decision to focus on Turkey came after extensive research of a number of regions across the globe, but in the end Turkey offered the most compelling mix of low country risk combined with a good mining climate and plenty of under explored potential. The company listed in July 2005, which turned out to be quite a difficult endeavour as the IPO atmosphere mid last year was less than favourable; a lot of companies postponed listing until November/December or cancelled altogether. Ariana decided however to push ahead with the listing and accepted a lower IPO price pershare and also raised slightly less money. The company raised money from some of the usual suspects, including RAB Capital, JP Morgan and Golden Prospect at 12p per share. Since listing the shares haven't really done that much and today is the first time the shares have traded significantly up on the listing price. Not that Ariana have had any problems.

Thus far Ariana's game plan has gone smoothly. In addition to the more advanced Sindirgi project, Ariana has built up a large portfolio of exploration licences. The company has and ethos of using the latest exploration techniques and applications to identify high priority targets. The board and in fact a great part of the companies staff are geologist's and there is a strong explorationist undertone to the compnay. Ariana since moving into Turkey have stuck to a very well defined model: to rapidly process vast amounts of exploration data, and then gradually apply small budgets to many targets to eke out the ones which appear to have the most potential. The success of this technique has been demonstrated at the company's Kinik project - the first licence it acquired in Turkey and quikcly developed into a significant drill target more than 750m in length. A look at Ariana's website, [link above] gives one an understanding of just how vast an area this company has already looked at and continues to explore. Their theory is to spend more and more money on the highest priority targets and also continually add new grassroots acreage. If a target doesn't meet up to criteria, then it is quickly dropped and the company moves the budget to other prospects. By sticking to this strict model, Ariana can actually cover a lot of ground at minimal expense by relying on the experience of their geological team. The Sindirgi Gold Prospect is the only exception to this model. The area was first explored by Newmont, and a small resource (non JORC compliant) was identified by independent consultants SRK on behalf of Ariana. As with all the majors, many projects are evaluated and dropped each year, of which Sindirgi was one. What is unattractive to a major however can be a potential company maker for a junior. Ariana saw the potential of Sindirgi and negotiated a deal to pick the project up from Newmont, who will retain a royalty up to a maximum of 2.5% depending on the prevailing gold price.

So far Ariana have only explored a minuscule part of the Sindirgi Gold Project, and there is are guarentees that a economic deposit will be forthcoming, but to date results have been encouraging.

One other distinct difference about Ariana is the youthfulness of the company's directors. We often talk about the importance of management and their ability to act diligently on behalf of investors. Ariana has a young face to it, but after meeting Steven Poulton and Matthew Grainger, I realised that this could be a unique advantage as the company appears quite nimble and fresh, while at the same time there is a maturity about their methodology.

Potentially a powerful combination.