Ariana Resources plc (AAU) Earnings Call Transcript & Summary

Very good afternoon to you. Welcome back to our Uncovering Hidden Gems Investor Series. I'm your host, Rachel Jones. And today, we'll hear from 3 compelling companies focused on mining, biotech and workforce solutions. Now please feel free to enter any questions you may have for our guest presenters today into the Q&A box throughout the webinar. And please put your name on the question. If we don't get to them in the live presentation today, we will pass them on to the presenter. Okay. So first up, we're joined now by Ariana Resources. That's a mineral exploration development and production company dual listed on AIM with ticker code AAU and on the ASX with ticker code AA2. They have a track record of creating value through interests in active mining projects and investments in exploration companies. The portfolio includes a gold development project in Zimbabwe, gold, silver production in Turkey and copper, gold, silver projects in Kosovo and Cyprus. To tell us more, please welcome Dr. Kerim Sener, Managing Director at Ariana Resources. Kerim, over to you.

Thank you very much for that introduction, Rachel, and it's a pleasure to be here. I'd be happy to take people through what is a whirlwind introduction to the company. So this presentation is largely put together for the basis of the updated pre-feasibility study that we completed and announced on the ASX and AIM a couple of weeks ago. And just to recap, we have been an AIM-listed company for over 20 years now, and we've successfully executed on our Turkish exploration development strategy over much of that time, eventually developing 2 mines, the gold-silver operations mentioned just a moment ago in Turkey. And more recently, we've entered into the Zimbabwean space with the Dokwe gold asset, which is at feasibility stage. So we're working this asset through ultimately to construction and production. The updated pre-feasibility study that we announced a couple of weeks back included a 1.13 million ounce gold reserve at the Dokwe North part of the project. The project comprises both Dokwe North and Central. I'll come on to talk about the relevance of each of those in more detail later in the presentation. But we have developed a very compelling opportunity at Dokwe with the opportunity to see that through to the feasibility stage by the end of the first quarter of next year and then we'd be planning to move into a project financing stage and ultimately into construction and production thereafter. We're very well funded with a clear pathway through to production. We recently completed a partial divestment of some of our interests in Turkey. We sold 13.6% of our Turkish interest for USD 19.5 million that we completed about a month or so ago. So we're very cash rich at this point in time as we see the company through the feasibility part of the Dokwe project delivery. I'll quickly move on because we don't have a huge amount of time. This is where we're located in Zimbabwe in the southern part of the country, about 110 kilometers to the west of Bulawayo. Bulawayo hosts an international airport. There's good infrastructure around the town, an asphalt road that takes us pretty much all the way out to the project and graded road and track thereafter. The Turkish interest located under B there on the global map, the Tavsan gold-silver mine currently producing through its heap leach, the Kiziltepe gold-silver mine, which is reaching the end of its life now through its CIL. And also, we have interest, as mentioned, in Kosovo, a strategic exploration alliance that is being run with Newmont Mining. Newmont injected USD 3.3 million into the company in recent years to conduct an exploration program there. And we also have interest in a copper-gold portfolio in Cyprus. This is a snapshot of Zimbabwe. I won't go through this slide in any detail. This presentation is available on our website and through the ASX. The one thing that I will stress is that Zimbabwe is very much a mining jurisdiction, has been since its foundation. And gold is a very important part of the Zimbabwean mining space. And the Zimbabwean mining industry accounts for a significant part of GDP. So a huge amount of expertise and capability in country. We also have a partnership in Zimbabwe, a Chinese firm, Xinhai. They are an EPCM provider. They have been involved in a number of project builds in country. They maintain a permanent Zimbabwe workforce, and they're involved in a number of projects. They injected AUD 8 million into Ariana just before Christmas. They're also conducting work with us through the metallurgical test work program for Dokwe and indeed into the feasibility study itself. So coming on to the shareholding. There, you can see Xinhai Mining now accounting for about 11% of the company, Newmont just shy of 3% and the share price and volume graph shown there since our ASX IPO, which we completed in September of last year. This is the Board. I won't go through each individual in detail here, but just stress the importance of our Zimbabwe-based directors. Nick Graham, a very prolific exploration geologist that has been involved in a number of discoveries in Zimbabwe and surrounding countries and seen a number of those into production, including the Freda Rebecca Gold Mine, which was their discovery back in the 1980s, still Zimbabwe's largest open pit mining operation. And Andrew du Toit, also based in Harare, an industry veteran there, both in the gold space and in -- with Zimplats on the Great Dyke for the PGE operations there. The directors and the Board in total has a huge amount of African experience, including our Chairman, Michael Atkins, who is based in Perth. Moving on to a quick snapshot of the Dokwe project PFS. I won't run through each of these items in detail. Suffice to say that this is a relatively low capital cost development, $164 million as costed by Xinhai as part of the PFS work, but high margin with fast payback, so just over a year of payback on that capital. This is the Dokwe project in outline there in red, made up of a series of mining claims, each shown with the gray outline within that red border. The Dokwe North and Dokwe Central deposits shown there separated by 2 kilometers. What we're showing in this map is the gold geochemistry at surface. So Dokwe North and Central have been very well drill tested to date with just under 50,000 meters of drilling, largely diamond. Areas such as Siduli Pan and Dokwe South that we see on the southern part of that map, those are essentially not tested by drilling at this stage. There's one deep drill hole on Siduli Pan that yielded a high-grade intercept at depth. That has not been followed up. That whole southern part of the Dokwe project area requires a lot more exploration work. The point being is that there's a huge amount of exploration upside on the project and the resources and reserves that we've identified and shown in that table in this slide comprise Dokwe North and Central only. So Dokwe North resource and reserve. Dokwe Central at this stage, resource only. We're in the process of converting that to reserve also once we've completed the geotechnical and metallurgical test work associated with that part of the deposit. But we're very satisfied with these initial results for both the resource and reserve. So 1.6 million ounce resource and about 1.1 million ounce reserve, just to recap there. I won't spend too much time on this slide. The point here is that we'll be producing on average about 80,000 ounces per annum over a life of mine stage. So that's mining and processing in that graph at the top right there, with a peak production of about 100,000 ounces per annum. Thereafter, we go into an 8-year stockpile-only processing stage. So that's low-grade material that's been moved during the course of mining. That will be stockpiled and only processed at the end of the project. So the project itself will run for 20 years in total. We ran the sensitivity analysis on a base case gold price of USD 4,250 per ounce gold, yielding an NPV at a 10% discount of over USD 1 billion and an IRR of over 90%. This is the mine schedule as envisaged for Dokwe North, a 4-stage pit. So the various colors there and the gray showing the Dokwe North development. And then the Dokwe Central development pushed out to the tail end of mine life, shown in black there. In reality, it's quite likely that once we've converted Dokwe Central to reserve because it's somewhat higher grade and closer to surface, that will come closer to the beginning of mine life. That will also impact NPV significantly to the positive. So once we're running through the feasibility study and we've updated the resource and reserve, we'll then provide a revised mining schedule. The key aspect to this is the strip ratio. It's a very low strip ratio, ore body, 3.7. So it's very easily accessed material. This is a footprint as currently envisaged of the process and related infrastructure around the Dokwe project site, showing the position of the open pits here at Dokwe North and Central and the prospective corridors. These are shear zones that require further drill testing. And in time with further exploration, we'll continue to drill both to the Northeast and Southwest of Dokwe North and East and West of Dokwe Central. The mine footprint will then occupy a space between those that is deemed to be relatively unprospective at this time based on the sterilization drilling that we've undertaken. This is a rough project development timeline that we're working to. Currently, we're on schedule for this. We've completed the metallurgical test work drilling program, actually 20 days ahead of schedule. We're now waiting for those samples to be shipped to China, where it will undergo metallurgical test work through the Xinhai laboratory in Yantai. A sample split will be taken in China and then that material shipped to Perth for further analysis with IMO. We will then be working through to complete the DFS as indicated by the end of the first quarter and then moving into project financing and ultimately into construction thereafter. As I'm running shy of time now, I will skip through the remaining slides, but just to emphasize the significance of the work that we've completed to date, yielding a very substantial project in Zimbabwe. We're very well supported by the various consulting groups that are supporting the program as a whole and particularly with Xinhai providing that engineering skill set and ultimately carrying us through into the development of the Dokwe asset thereafter. So I'm happy to end there and take questions. Thank you.

Thank you so much, Kerim. That was a very insightful presentation there. Now we have had some questions in from interested parties. If I can start with the first question for you. Now someone says, what are your perceptions of Zimbabwe as a mining jurisdiction versus the market perhaps less informed and pessimistic views on it?

Yes. So Zimbabwe, as I mentioned, has always been a mining jurisdiction. And the past 25 years or so, the country, unfortunately, has not covered itself in glory in a more general sense. But mining has always been ticking over there in the background and it is a very substantial contributor to the economy. I mentioned very briefly the PGE operations on the Great Dyke. Now a number of the world's largest producers, so Anglo being one of them as an ASX company, there's Zimplats associated with those first world operations really on the Great Dyke. They're a very significant indicator of what's possible in country. In the gold space, one of the -- our competitors, Caledonia Mining have been successfully producing in Zimbabwe for very many years and successfully paying a dividend every quarter out to their shareholders for very many years. And there are a number of other companies, foreign companies that are listed entities that are also operating both in the gold space and indeed in lithium as well. So it's a very active space. And in the last couple of years, we've seen more and more foreign companies entering Zimbabwe. There's certainly -- from the Zimbabwean government perspective, they're opening out their arms to the world. They're attracting finance to the country to develop operations. And we're starting to see that now and it's very encouraging.

It's great that you've got a stronghold there in that country. Now what work is planned to unlock further value at Dokwe?

So the key focus for us now is on completing the feasibility study. In parallel with that, we've also got some additional exploration work underway. So we have some further drilling that we've been planning. That will be diamond drilling to follow up on the RC program that we completed earlier this year, and we've announced the results of. The results of that program are very encouraging, demonstrating continuity of mineralization at Dokwe Central and also to the northeast of Dokwe North. But as I said, there are other areas such as Siduli Pan, Dokwe South that have essentially not got the exploration completed on them at all. So we want to undertake further work on those areas as well in due course. But run that program in parallel with the technical work that's underway on the feasibility itself.

Absolutely. And just finally there, Kerim, you did mention that Ariana has a strong cash position with no debt. How important is that financial flexibility as you move towards completing the definitive feasibility study and ultimately production?

Well, it's very important to us, and we've been blessed. And strategically, I think we've taken the right moves with respect to our Turkish interest through the partial divestment that we completed to put ourselves into a cash-rich situation as we continue to advance the Dokwe project feasibility. Dokwe is the flagship of the company. We hold 100% of the Dokwe asset, whereas the Turkish interest were a minority interest, and we were nonoperating partners. But those operations in Turkey are being run very well. We're very happy with the performance of those. But there is a strategic realignment of our interests onto a project that yields a -- in terms of financial return, USD 1 billion NPV is obviously somewhere where we want to be focusing our attention. And so that realignment was part and parcel of that.

Absolutely fantastic. Thank you so much for your time today there, Kerim Sener.

It's a pleasure. Thank you very much for your time.