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Site visit: Ariana Resources going for gold at Kiziltepe

Ariana, led by Kerim Sener, is now transitioning into a gold producer

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Construction of Ariana's mine site is well under way in Western Turkey

Standing high in the foothills around the small Turkish town of Sindirgi, Kerim Sener shows a group of analysts the progress and potential for his gold company, Ariana Resources (LON:AAU).

In the distance an area of scrubland has been cleared to make way for the planned Arzu South open-pit, located within the Kiziltepe sector of the firm’s wider Red Rabbit Project.

Here, all the necessary land has been acquired, perimeter security fencing has gone up and foundations for the mine buildings have been laid.

Joint venture partner Proccea – an expert in mine construction – is doing the work and will see Kiziltepe through to production in the second half of 2016, earning a 50% interest in the process.

Pointing out the work to the site visitors, Sener then explains that the initial target is 20,000 ounces of gold over eight years, with costs close to US$600 per ounce.

It all adds up to a payback of two-and-a-half years  based on a US$1,304 per ounce gold price.

Just beyond the Arzu South open pit, areas which will eventually house a waste dump, tailings dam and plant are pointed out.

It’s the underground picture though that Sener paints best.

“We’re standing on what’s known as the Sindirgi Gold Corridor,” says the trained geologist and former understudy of Bob Foster, head of fellow Turkish gold explorer Stratex (LON:STI).

“European and Arabian tectonic plates have been crunching together below the surface for 90 million years.

“The result is a highly prospective metallogenic belt and a multitude of gold assays we can go after.”

In other words, the region’s geologically is highly prospective and there’s significant exploration upside.

Prolific gold-bearing vein systems were always the target for Sener, himself half Turkish, when he got the ball rolling back in 2006.

Since then, a revised mining code, environmental legislation and supportive tax regime has strengthened Turkey’s case for inward investment.

Ariana, now transitioning into a gold producer, has taken advantage.

It hasn’t been easy though, given the gold price.

Trading around US$1,172 a troy ounce – the precious metal remains well off the US$1,800 levels seen three years ago.

Funds are hard to find in this bear market and the weak price environment is the main reason Ariana chose to go with Proccea.

“We’re in good hands with our partners,” says the CEO, whose father was instrumental in building Ariana’s foundations and remains general manager.

Ariana also has a US$33mln credit line with a local Turkish bank.

That means it can go over further resource discoveries in the vicinity, like Arzu North, Central and Derya – easy opportunities for smaller, higher grade resources that can feed into the main plant.

Further afield, Kepez West and Karakavak - located 12km and 27km by road from Kiziltepe - represent high priority resource development areas.

"The goal is to increase our resource base, extend both the life of mine and the gold output from Kiziltepe.

“It’s a natural step to in terms of adding shareholder value.”

Meanwhile, the Ariana camp has been encouraged by the discovery of the 3 million ounce gold equivalent Hot Maden deposit by Mariana Resources (LON:MARL).

That sits on the doorstep of Salinbas/Ardala – Ariana’s other joint venture project with Eldorado Gold Corp (TSE:ELD).

“It’s reinforced our view that this area has the potential to host multi-million ounce gold deposits,” he says.

The added potential has been key to attracting several investors including AIM-listed Metal Tiger (LON:MTR), which has pumped £250,000 into Ariana so far.

“It’s the upside we like,” says Metal Tiger’s Paul Johnson, visiting the mine for the first time.

“It’s a strong value proposition, which includes impending gold production at Kiziltepe and the possibility of a high value disposal of their interest in the Salinbas/Ardala asset."

Metal Tiger is a good name to have on board, given that it’s developed something of a Midas touch with its mining investments.

Earlier this year, the vehicle invested £150,000 in Kibo Mining at 1.5p. Within days it was trading up to an intraday price of 12p.

Ariana’s shares trade at 0.81p giving it market cap of £7mln – a similar level seen in mid-2013.

“First cash-flows are just around the corner and there’s significant potential to increase both output and mine life,” says Johnson. “Both will be catalysts for the shares.”

Sener though, is far more focused on delivery than the share price.

“Cost-efficient, focused exploration and a solid development strategy are key for us.

“That way we can continue to advance and develop prospects rapidly while we enter the ranks of the world’s gold producers for the first time.”

Quick facts: Ariana Resources PLC

Price: 6.1 GBX

AIM:AAU
Market: AIM
Market Cap: £64.82 m
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