TIDMAAU
RNS Number : 2060U
Ariana Resources PLC
28 July 2020
28 July 2020
AIM: AAU
FINAL AUDITED RESULTS FOR THE YEAR 31 DECEMBER 2019
NOTICE OF ANNUAL GENERAL MEETING ("AGM")
Ariana Resources plc ("Ariana" or "the Company"), the AIM-listed
exploration and development company operating in Europe, announces
its final audited results for the year ended 31 December 2019.
The Report and Accounts will be posted to shareholders as
applicable, and are available on the Company's website
www.arianaresources.com , together with the Notice of AGM, and
extracts are set out below.
The AGM will be held at 2nd Floor, Regis House, 45 King William
Street, London, EC4R 9AN on 28 August 2020 at 12.00 noon.
Chairman's Statement
Fellow shareholders,
I am pleased to report on the Company's audited results for the
year ended 31 December 2019. This has been another outstanding year
for Ariana, which has delivered production and profitability well
above its plans. The Kiziltepe Mine, which is held within Zenit
Madencilik San. ve Tic. A.S. (a 50:50 JV with Proccea Construction
Co.), achieved gold production of 27,985 ounces, 12% above
production guidance at an average cash cost of just US$507/oz.
This, once again, places the Kiziltepe Mine comfortably amongst the
lowest-cost gold producers in the world. The profitability from our
Turkish operations has enabled Ariana to report a significant
improved earnings per share of 0.65 pence and a price earnings
ratio of 6, which is a respectable position in the junior gold
mining sector.
Production at the Kiziltepe Mine has remained well above the
planned feasibility rates since start-up in 2017, resulting in
accelerated depletion of the Arzu South open-pit. Post-period end,
this enabled timely completion of repayments against the US$33
million capital expenditure loan, in addition to the JV partners
receiving a return of capital invested and their respective share
of profits. This allowed for the payment of a maiden dividend of
GBP1.6 million from our Turkish operating subsidiary to Ariana
Resources plc, representing the first profit cash-flow in the
Company's history. This places Ariana in a particularly strong
position in a time of general uncertainty. We are, therefore,
well-placed to deploy our resources to the ongoing development of
our existing portfolio of wholly-owned projects in Turkey,
particularly Salinbas, as well as our new earn-in on Cyprus-focused
Venus Minerals.
At Kiziltepe, resource extension work was completed earlier this
year, which is currently targeting an extension of the life of mine
to a total of 10 years. In addition, further drilling and resource
work is currently being undertaken at Kiziltepe to test down-dip
extensions of the Arzu South vein with a view to assessing possible
underground or additional open-pit potential. Similar resource
extension and other project development work has been completed at
Tavsan with a view to bringing this project into production from
2022. Salinbas has also seen extensive work during the year,
achieving proof of concept on both the origin and potential extent
of this very large mineral system. The area has attracted
significant international interest following the spectacular recent
drilling results from the nearby Hot Maden project, validating the
perceptive decision by Ariana to continue investing in this
region.
The new year started positively for the Company, with management
able to report excellent first quarter production results and
guidance for the year well above the feasibility plan. This sound
start to the year has, however, been overshadowed by the scale and
significance of the COVID-19 pandemic sweeping across the world,
touching all of our lives. Having seen, early on in my mining
career in Namibia, some of the gruesome consequences of the 1918
Spanish Flu epidemic, I am well aware of the serious impact this
could have on both our personal and business lives. The Ariana and
Zenit management teams have put in place all the recommended
procedures for the well-being and safety of our employees and
contractors at both exploration and mining sites, allowing
operations to continue unhindered. I must pay tribute to all the
people working for Ariana and those at the Kiziltepe Mine for their
prompt and no-nonsense approach in adjusting to the required
precautionary steps and then just getting on with life. By facing
these challenges head on and adopting new working practices we have
been able to operate much as we did before. Thus far, we have not
had any incidence of COVID-19 in any of our spheres of
operations.
The business of mineral exploration is well versed in the
process of defining uncertainty and risk and is also adept at
managing these factors, evidenced by the way in which both current
exploration and mining operations have adapted to this current
climate of uncertainty. Our industry has been a long-term adopter
of remote work and distributed working teams, and for a while it
has been the norm for our work to be carried out in the field on
one continent and be collated and analysed on another. Despite
international travel restrictions, it is a great credit to our
dedicated team that they have been able to carry on with normal
work commitments, enabling us to meet all our ongoing work and
reporting requirements within a reasonable timeframe. We will
continue to review ways we might need to adapt in response to this
worldwide crisis in order to mitigate risks and to continue working
effectively.
The last financial year has been particularly good for gold but
not quite so for silver. As the bulk of Ariana's production revenue
(>85%) comes from gold, the lacklustre silver price in response
to market sentiment has not had a material impact on overall
revenue. Interestingly, the gold-silver ratio has for most of
modern history been around 1 to 50, while the current ratio is
closer 1 to 100; a marked departure from the norm, which is an
indication that the silver price is overdue for a positive
correction. The diverse industrial usage of silver is an additional
driver for the market price firming, including the requirement for
silver in medical and anti-viral/microbial settings. Copper, while
not yet part of our current revenue stream, but part of our
exploration portfolio, is also likely to see a price improvement
following a post-pandemic price correction. It already has a broad
base of demand in the evolving electrification of vehicles and
other low-carbon technological developments, but is now being
mooted as having anti-viral/microbial uses where it could be
applied to frequently touched surfaces. This may well become an
industry standard following the experience of our current
crisis.
Meanwhile, the long-term trend for gold has been upwards for
much of the last two decades and there is little to detract from
this trajectory. Increasing levels of global uncertainty, marked
differences between the paper and physical prices of precious
metals, physical accumulation by hoarders, central banks and
exchange-traded funds ('ETFs'), and the expansive nature of
government spending will all undoubtedly result in hard currency
inflation, all of which support the long-term price of our primary
product, gold. Gold is, after all, a currency without a government.
Ariana is well placed, both in terms of its balance sheet and its
project portfolio of the correct metals, to prosper through the
coming years.
With this long-term perspective in mind across our commodities
of prime interest, the Company has been exceptionally busy on the
exploration and development front during the past year. We have
made significant progress across our pipeline of strategic projects
in Turkey and for our new earn-in focused on Cyprus. For the
latter, we are not alone in recognising the potential of this
ancient source of copper, which also appears to host significant
and previously unrecognised gold potential. Consequently, Ariana is
very well positioned to deploy existing resources and attract other
industry partners to contribute to the development of an attractive
portfolio of prospective development assets. With the shake-up in
the resources sector, it is probable that we will see other
industry sectors, such as energy, starting to look at the minerals
sector to progress their long-term green development objectives,
given that the decarbonisation agenda requires the identification
and consumption of substantial mineral resources.
Exploration like all other frontier industries is only as
successful as its philosophy will allow it to be. It is on
reflection of this that I think of how the legendary geologist J
David Lowell, the world's best mine finder, expressed himself. He
was noted for saying he was good at being wrong and was never
afraid of that. Drilling out a 'duster' was nothing to be afraid
of, as the mistake would have been not to try. You had to ignore
existing dogma in order to have a chance of success. Above all else
he was successful at finding some of the best mines in the world
today, over one of the longest careers in our industry. It is
particularly poignant that such a legendary man should pass at the
ripe old age of 92 in the very year that we need such courage and
inspiration. I think that we should all take a leaf out of his book
as we step out into this changed new world to find the materials we
need to build our future.
Like all companies, Ariana exists for the benefit of its
stakeholders and in particular its shareholders, who must be
rewarded through increasing market capitalisation and a potential
dividend stream. Your Board remains focused on these outcomes and
we are particularly pleased to see that the market price of Ariana
shares is substantially higher than it was this time last year. The
Board would particularly like to thank its shareholders for the
close and personal interest you have shown in the Company over the
last few years. We appreciate your support and we look forward to
meeting you on future occasions. It seems unlikely we will be able
to hold face-to-face meetings or the AGM as we have done before,
and we are instead looking at participating in virtual events
accordingly. Either way, we would like to ask you all to exercise
your proxy votes well in advance of the AGM date, as it is unlikely
that we will be able to accommodate online voting at this stage. We
look forward to the day when we are all able to meet in the same
room as before.
Last but not least I would like to thank our employees,
professional advisors and our joint venture partners for their
dedication and support in helping Ariana achieve its ongoing
success.
Michael de Villiers
Chairman
Financial Review
The Group's profit after tax grew by more than threefold in the
year under review rising to GBP6.9m (2018: GBP2.2m) primarily due
to the excellent operational performance of our Joint Venture
investment in Zenit. This company's turnover grew by 21% reflecting
the favourable movement in the gold price and increased production
year on year, with their profits after tax rising from GBP7.4m to
GBP15.8m, our 50% share of which amounted to GBP7.9m (2018:
GBP3.7m). The year's performance also benefited from the disposal
of our Kiziltepe property owning subsidiary, Camyol, being sold to
Zenit at a book profit of GBP0.6m. The Directors are confident that
Zenit will continue to finance the Group's operations for the
foreseeable future through dividends declared and paid over the
course of the year.
Aside from the performance of Zenit, the results are generally
consistent with the prior year, with administrative costs slightly
improved at GBP1.2m, and net exploration costs written off also
broadly consistent amounting to GBP0.4m (2018: GBP0.3m). The effect
of the declining value of the Turkish Lira on the underlying value
of our subsidiaries in Turkey is GBP0.4m better than the previous
year, but still a significant cost reflected though Other
Comprehensive Income at GBP1.8m. Nonetheless, our earnings per
share has shown a very healthy increase from 0.21 pence per share
in 2018 to 0.65 pence per share in 2019.
Our net assets as recorded in the Statement of Financial
Position have increased by GBP5.3m primarily on account of our
share of the net assets of Zenit increasing by GBP3.8m. The Company
also capitalised a further GBP0.5m of expenditure within intangible
exploration assets, being our Turkish exploration work, as well as
incurring a further GBP0.5m of expenditure included within debtors
on our Cypriot project, ahead of it being converted into shares
under our earn in agreement with Venus Minerals Limited in May
2020.
Overall this was a very satisfactory year for the Group from a
financial perspective, and we look forward to building on these
foundations to enhance our performance for our shareholders going
forward.
Outlook
During 2019, Ariana consolidated its position as a sustainable
mineral exploration and development enterprise. This has
established a solid platform on which Ariana can develop its
strategy, which is all the more important given the current global
challenges.
We have started 2020 facing several new and unexpected
circumstances. The developing trade-war between the USA and China,
coupled with decadal lows in the oil price, have now been
compounded by the COVID-19 virus pandemic originating in China. At
the time of writing, the pandemic has sadly had a significant cost
in human lives and is creating a profound global economic shock in
its wake. Factories in China, which are attempting to gear-up
following a reduction in output in the early phase of the pandemic,
are now producing for a market that no longer exists; the rest of
the world economy is in the process of severe contraction. As the
consumer-producer dynamic becomes strained, supply lines are
becoming choked. Meanwhile, to try and save the day, governments
are scrambling to apply a band-aid to systemic problems with an
obscenely leveraged and derivatives driven global financial system
based on the US dollar.
What this will mean for commodity markets and producers is, as
yet, unknown. However, as a gold producer, we are expecting that
demand for the ultimate form of money will continue unabated.
Unlike paper money, gold does not represent debt (a consequence of
fractional-reserve banking), it presents no counterparty risk and
acts as the only real hedge against inflation in the long term. It
is no surprise that central banks around the world, particularly
those which wish to maintain some resilience and independence
outside of the US dollar denominated global order (including
Turkey), have been buying gold in ever increasing amounts during
recent years. In fact, central bank gold purchases in 2018 and 2019
were at 50-year highs as part of this effort to spread risks away
from the US dollar, with some 650 tons of gold added to central
bank reserves in 2019. Consequently, we are in the fortunate
position of producing the only commodity which represents the
ultimate final form of payment for the international banking
system. Whatever the headwinds, this financial demand will
remain.
Operationally we are well-positioned to take advantage of these
unusual circumstances. Despite the current crisis, we have been
fortunate in the commitment of our staff in the UK and Turkey at a
time when families and communities have been under great strain. We
have also seen a very supportive approach to our business at both
local and national government levels in Turkey. Our JV operation at
Kiziltepe is continuing to produce gold and silver at high margins
due to the low-cost operating environment. This has resulted in
sufficient cashflow to satisfy our operational requirements and has
created opportunities to diversify and make new investments, such
as Venus Minerals. Our portfolio of assets and investments
represents projects at every stage of a self-sustaining investment
cycle, which we have spent the past 15 years developing
methodically as part of our long-term strategy. In addition to an
operating mine, this includes near-term development assets, a major
large-scale exploration asset, and is supported by both current and
nascent investments.
We are a unique exploration and development company, with a
strategy geared toward longevity, sustainability and the growth of
value in the long-term, which is ultimately underpinned and driven
by our exploration success. At the beginning of a new and uncertain
decade, we look forward to the future and remain resolved on
delivering upon the immutable certainty of pure gold.
Dr Kerim Sener
Managing Director
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
Continuing operations Note 2019 2018
GBP'000 GBP'000
-------------------------------------------------------- ----- --------- ---------
Administrative costs (1,242) (1,355)
General exploration expenditure (18) (153)
Intangible exploration assets - written off 11 (364) (181)
Other gains 4 627 -
Other income 61 -
-------------------------------------------------------- ----- --------- ---------
Operating loss 5 (936) (1,689)
-------------------------------------------------------- ----- --------- ---------
Profit/(loss) on disposal of equity securities
at FVOCI 13 20 (2)
Share of profit of Joint Venture accounted for
using the equity method 6 7,891 3,710
Investment income 5 158
-------------------------------------------------------- ----- --------- ---------
Profit before tax 6,980 2,177
-------------------------------------------------------- ----- --------- ---------
Taxation 8 (46) -
-------------------------------------------------------- ----- --------- ---------
Profit for the year from continuing operations 6,934 2,177
Earnings per share (pence) attributable to equity
holders of the company
Basic and diluted 10 0.65 0.21
-------------------------------------------------------- ----- --------- ---------
Other comprehensive income
Items that are or may be reclassified subsequently
to profit or loss:
Exchange differences on translating foreign operations (1,774) (2,162)
Items that will not be classified subsequently
to profit or loss:
Net change in fair value of equity securities
at FVOCI 13 49 (26)
-------------------------------------------------------- ----- --------- ---------
Other comprehensive loss for the year net of
income tax (1,725) (2,188)
-------------------------------------------------------- ----- --------- ---------
Total comprehensive profit/(loss) for the year 5,209 (11)
-------------------------------------------------------- ----- --------- ---------
The accompanying notes form part of these financial
statements.
Consolidated Statement of Financial Position
For the year ended 31 December 2019
Note 2019 2018
GBP'000 GBP'000
------------------------------------------------- ----- --------- ---------
Assets
Non-current assets
Trade and other receivables 15 93 83
Intangible exploration assets 11a 16,404 16,975
Intangible assets 11b 187 -
Land, property, plant and equipment 12 50 278
Investment in Joint Venture accounted for using
the equity method 6 7,768 3,968
------------------------------------------------- ----- --------- ---------
Total non-current assets 24,502 21,304
------------------------------------------------- ----- --------- ---------
Current assets
Trade and other receivables 16 4,574 1,860
Equity securities at FVOCI 13 - 35
Cash and cash equivalents 453 938
------------------------------------------------- ----- --------- ---------
Total current assets 5,027 2,833
------------------------------------------------- ----- --------- ---------
Total assets 29,529 24,137
------------------------------------------------- ----- --------- ---------
Equity
Called up share capital 18 6,054 6,054
Share premium 18 11,821 11,821
Other reserves 720 720
Share based payments 18 364 250
Translation reserve (5,970) (4,196)
Retained earnings 12,298 5,315
------------------------------------------------- ----- --------- ---------
Total equity attributable to equity holders of
the parent 25,287 19,964
------------------------------------------------- ----- --------- ---------
Total equity 25,287 19,964
------------------------------------------------- ----- --------- ---------
Liabilities
Non-current liabilities
Deferred tax liabilities 19 2,273 2,273
Other financial liabilities 20 1,651 1,651
------------------------------------------------- ----- --------- ---------
Total non-current liabilities 3,924 3,924
------------------------------------------------- ----- --------- ---------
Current liabilities
Trade and other payables 17 318 249
------------------------------------------------- ----- --------- ---------
Total current liabilities 318 249
------------------------------------------------- ----- --------- ---------
Total equity and liabilities 29,529 24,137
------------------------------------------------- ----- --------- ---------
The accompanying notes form part of these financial
statements.
Company Statement of Financial Position
For the year ended 31 December 2019
Note 2019 2018
GBP'000 GBP'000
--------------------------------------- ----- --------- ---------
Assets
Non-current assets
Trade and other receivables 15 8,508 9,749
Investments in group undertakings 14 365 337
--------------------------------------- ----- --------- ---------
Total non-current assets 8,873 10,086
--------------------------------------- ----- --------- ---------
Current assets
Trade and other receivables 16 534 -
Equity securities at FVOCI 13 - 35
Cash and cash equivalents - -
--------------------------------------- ----- --------- ---------
Total current assets 534 35
--------------------------------------- ----- --------- ---------
Total assets 9,407 10,121
--------------------------------------- ----- --------- ---------
Equity
Called up share capital 18 6,054 6,054
Share premium 18 11,821 11,821
Share based payments reserve 18 364 250
Retained earnings (8,838) (8,010)
--------------------------------------- ----- --------- ---------
Total equity 9,401 10,115
Liabilities
Current liabilities
Trade and other payables 17 6 6
Total current liabilities 6 6
--------------------------------------- ----- --------- ---------
Total equity and liabilities 9,407 10,121
--------------------------------------- ----- --------- ---------
Company's loss for the financial year 828 907
--------------------------------------- ----- --------- ---------
The accompanying notes form part of these financial
statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Share Total attributable
based to equity
Share Share Other payments Translation Retained holders
capital premium reserves reserve reserve earnings of parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- --------- --------- ----------- --------- --------------------
Changes in equity
to
31 December 2018
Balance at 1 January
2018 6,054 11,821 720 93 (2,034) 3,071 19,725
----------------------- -------- -------- --------- --------- ----------- --------- ------------------
Profit for the year - - - - - 2,177 2,177
Other comprehensive
income - - - - (2,162) (26) (2,188)
----------------------- -------- -------- --------- --------- ----------- --------- ------------------
Total comprehensive
income - - - - (2,162) 2,151 (11)
----------------------- -------- -------- --------- --------- ----------- --------- ------------------
Share options - - - 250 - - 250
Transfer of share
options - - - (93) - 93 -
----------------------- -------- -------- --------- --------- ----------- --------- ------------------
Transactions with
owners - - - 157 - 93 250
----------------------- -------- -------- --------- --------- ----------- --------- ------------------
Balance at 31 December
2018 6,054 11,821 720 250 (4,196) 5,315 19,964
----------------------- -------- -------- --------- --------- ----------- --------- ------------------
Changes in equity
to
31 December 2019
Profit for the year - - - - - 6,934 6,934
Other comprehensive
income - - - - (1,774) 49 (1,725)
----------------------- -------- -------- --------- --------- ----------- --------- ------------------
Total comprehensive
income - - - - (1,774) 6,983 5,209
----------------------- -------- -------- --------- --------- ----------- --------- ------------------
Share options - - - 114 - - 114
----------------------- -------- -------- --------- --------- ----------- --------- ------------------
Transactions with
owners - - - 114 - - 114
----------------------- -------- -------- --------- --------- ----------- --------- ------------------
Balance at 31 December
2019 6,054 11,821 720 364 (5,970) 12,298 25,287
----------------------- -------- -------- --------- --------- ----------- --------- ------------------
The accompanying notes form part of these financial
statements.
Company Statement of Changes in Equity
For the year ended 31 December 2019
Share Share Share Retained Total
capital premium based earnings GBP'000
GBP'000 GBP'000 payments GBP'000
reserve
GBP'000
----------------------------- --------- --------- ---------- ---------- ---------
Changes in equity to
31 December 2018
Balance at 1 January 2018 6,054 11,821 93 (7,196) 10,772
----------------------------- --------- --------- ---------- ---------- ---------
Loss for the year - - - (907) (907)
Other comprehensive income - - - - -
----------------------------- --------- --------- ---------- ---------- ---------
Total comprehensive income - - - (907) (907)
----------------------------- --------- --------- ---------- ---------- ---------
Share options - - 250 - 250
Transfer of share options - - (93) 93 -
----------------------------- --------- --------- ---------- ---------- ---------
Transactions with owners - - 157 93 250
----------------------------- --------- --------- ---------- ---------- ---------
Balance at 31 December 2018 6,054 11,821 250 (8,010) 10,115
----------------------------- --------- --------- ---------- ---------- ---------
Changes in equity to
31 December 2019
Loss for the year - - - (828) (828)
Other comprehensive income - - - - -
----------------------------- --------- --------- ---------- ---------- ---------
Total comprehensive income - - - (828) (828)
----------------------------- --------- --------- ---------- ---------- ---------
Share options - - 114 - 114
----------------------------- --------- --------- ---------- ---------- ---------
Transactions with owners - - 114 - 114
----------------------------- --------- --------- ---------- ---------- ---------
Balance at 31 December 2019 6,054 11,821 364 (8,838) 9,401
----------------------------- --------- --------- ---------- ---------- ---------
Consolidated Statement of Cash Flows
For the year ended 31 December 2019
2019 2018
GBP'000 GBP'000
--------------------------------------------------------- --------- ---------
Cash flows from operating activities
Profit for the year 6,934 2,177
Adjustments for:
Profit on disposal of land owning operations (627) -
(Profit)/loss on disposal of equity securities at FVOCI (20) 2
(Profit) on disposal of equipment (53) -
Depreciation of non-current assets 20 1
Write down of intangible exploration assets 364 181
Fair value adjustments (49) 26
Share of profit in Joint Venture (7,891) (3,710)
Share based payments charge 114 250
Investment income (5) (158)
Income tax expense 46 -
--------------------------------------------------------- --------- ---------
Movement in working capital (1,167) (1,231)
Decrease in trade and other receivables 918 183
Increase/(decrease) in trade and other payables 253 (49)
--------------------------------------------------------- --------- ---------
Cash outflow from operating activities 4 (1,097)
Taxation paid (8) -
--------------------------------------------------------- --------- ---------
Net cash from operating activities (4) (1,097)
--------------------------------------------------------- --------- ---------
Cash flows from investing activities
--------------------------------------------------------- --------- ---------
Purchase of land, property, plant and equipment (12) (36)
Payments for intangible assets (516) (353)
Proceeds from disposal of equity securities at FVOCI 104 146
Proceeds from disposal of equipment 55 -
Dividends from Joint Venture - 1,369
Investment income 5 158
--------------------------------------------------------- --------- ---------
Net cash used in investing activities (364) 1,284
--------------------------------------------------------- --------- ---------
Net (decrease)/increase in cash and cash equivalents (368) 187
--------------------------------------------------------- --------- ---------
Cash and cash equivalents at beginning of year 938 773
Exchange adjustment on cash and cash equivalents (117) (22)
--------------------------------------------------------- --------- ---------
Cash and cash equivalents at end of year 453 938
--------------------------------------------------------- --------- ---------
Company statement of cash flows
For the year ended 31 December 2019
All bank transactions are undertaken by Ariana Exploration &
Development Limited on behalf of Ariana Resources PLC and recharged
accordingly. As such the Company had no cash transactions directly,
as was the case in 2018.
The accompanying selected notes form part of these financial
statements. The full financial statements are being posted to
shareholders and being made available as a digital document on the
Company's website: www.arianaresources.com
Selected Notes to the Consolidated Financial Statements for the
year ended 31 December 2019
1. General Information
Ariana Resources PLC (the "Company") is a public limited company
incorporated, domiciled and registered in the UK. The registered
number is 05403426 and the registered address is 2nd Floor, Regis
House, 45 King William Street, London, EC4R 9AN.
The Company's shares are listed on the Alternative Investment
Market of the London Stock Exchange. The principal activities of
the Company and its subsidiaries (together the "Group") are related
to the exploration for and development of gold and
technology-metals, principally in Turkey.
The consolidated financial statements are presented in Pounds
Sterling (GBP), which is the parent company's functional and
presentation currency, and all values are rounded to the nearest
thousand except where otherwise indicated. The financial
information has been prepared on the historical cost basis modified
to include revaluation to fair value of certain financial
instruments and the recognition of net assets acquired including
contingent liabilities assumed through business combinations at
their fair value on the acquisition date modified by the
revaluation of certain items, as stated in the accounting
policies.
Basis of Preparation
The Group financial statements have been prepared and approved
by the Directors in accordance with International Financial
Reporting Standards as adopted by the EU ("Adopted IFRSs") and
effective for the Group's reporting for the year ended 31 December
2019.
The separate financial statements of the Company are presented
as required by the Companies Act 2006. As permitted by that Act,
the separate financial statements have been prepared in accordance
with IFRS. These financial statements have been prepared under the
historical cost convention (except for financial assets at FVOCI)
and the accounting policies have been applied consistently
throughout the period.
Going Concern
These financial statements have been prepared on the going
concern basis.
The Directors are mindful that there is an ongoing need to
monitor overheads and costs associated with delivering the
exploration programme and to raise additional working capital to
support the Group's specific activities on occasion. The Group has
no bank facilities and has been meeting its working capital
requirements from cash resources. At the year end the Group had
cash and cash equivalents amounting to GBP453,000 (2018:
GBP938,000). Since the year end the Group has received the
outstanding consideration owed for the sale of its land owning
subsidiary and the part repayment of a loan from Zenit, amounting
in total to GBP3.3m.
The Directors have prepared cash flow forecasts for the Group
for the period to 31 July 2021 based on their assessment of the
prospects of the Group's operations. The cash flow forecasts
include expected future cash flows from our Joint Venture
investment in Zenit Madencilik San. ve Tic. A.S. ("Zenit"), be they
loan repayments or dividends paid, along with the normal operating
costs for the Group over the period together with the discretionary
and non-discretionary exploration and development expenditure. The
forecasts indicate that on the basis of existing cash and other
resources, and expected future repayments of loans and dividend
payments from Zenit, the Group will have adequate resources to meet
all its expected obligations in delivering its work programme for
the forthcoming year. In the event that the forecast cash flow from
Zenit is not forthcoming, the Group has the ability to reduce its
operating expenditure and in particular its discretionary
exploration expenditure, in order to assist the Group to meet its
financial obligations as they fall due.
If this should not prove adequate to meet the Group's financial
obligations, the Directors would be obliged to consider a variety
of options as regards to the financing of the Group going forward,
and this may include an equity raise via an open-offer if thought
appropriate. Despite challenging capital markets for junior
exploration and mining companies, the Company and Group have been
successful historically in raising equity finance and in light of
this, the directors have a reasonable expectation of securing
sufficient funding to continue in operational existence for the
foreseeable future. For these reasons, they continue to adopt the
going concern basis in preparing the consolidated financial
statements.
The Group believes there should be no significant material
disruption to the mining operations in Zenit from COVID-19, but the
Board continues to monitor these risks and Zenit's business
continuity plans.
In preparing these financial statements the Directors have given
consideration to the above matters and on this basis they believe
that it remains appropriate to prepare the financial statements on
a going concern basis.
6. Share of profit of interest in Joint Venture
In July 2010 the Group entered into an agreement with Proccea
Construction Co. ("Proccea") such that Galata Madencilik San. ve
Tic. Ltd. ("Galata") would transfer its principal assets at
Kiziltepe and Tav an, collectively known as the "Red Rabbit Gold
Project" into a new wholly owned subsidiary, Zenit Madencilik San.
ve Tic. A.S. ("Zenit"). Proccea earned their 50% share in Zenit by
investing US$8 million in the capital of Zenit, US$1.4 million of
such funds having been spent on a Feasibility Study and an
Environmental Impact Assessment ("EIA"), with the balance on
initial mine construction, once the Feasibility Study and EIA were
completed satisfactorily. Shareholdings in Zenit represents the
ratio of 50% to the Group and 50% to Proccea, with Proccea in
management control, but with key decisions requiring approval from
both the Group and Proccea.
Zenit entered production during March 2017, with commercial
production declared from 1 July 2017. Operational revenues and
costs arising from pre-commercial production were capitalised in
2017 along with any new capital expenditure incurred during 2018
including the construction of the district road diversion necessary
for the full development of the Arzu South open pit. Total revenue
for the year was c. US$45.1m (2018: US$37.8 m) in gold and silver
sales.
The liability of the Joint Venture includes current and
non-current portions of a bank loan repayable to Turkiye Finans
Katilim Bankasi A.S. Management does not foresee any significant
restrictions on the ability of the Joint Venture to repay this
loan.
The Group accounts for its Joint Venture with Proccea in Zenit
using the equity method in accordance with IAS 28 (revised). At 31
December 2019 the Group has a 50% (2018: 50%) interest in Zenit.
Ultimately profits from Zenit are shared in the ratio of 50:50
between the Group and Proccea.
Principal place of business for Zenit is Ankara, Turkey. Zenit
was also incorporated in Ankara, Turkey.
Financial information of the Joint Venture, based on its
translated financial statements, and reconciliations with the
carrying amount of the investment in the consolidated financial
statements are set out below:
Statement of Comprehensive Income 2019 2018
For the year ended 31 December 2019 GBP'000 GBP'000
---------------------------------------------------- --------- ---------
Revenue 35,337 29,254
Cost of sales (15,444) (13,548)
---------------------------------------------------- --------- ---------
Gross Profit 19,893 15,706
Administrative expenses (1,636) (969)
---------------------------------------------------- --------- ---------
Operating profit 18,257 14,737
Finance expenses including foreign exchange losses (4,762) (12,196)
Finance income including foreign exchange gains 2,667 4,552
---------------------------------------------------- --------- ---------
Profit before tax 16,162 7,093
Taxation charge/(credit) (380) 327
---------------------------------------------------- --------- ---------
Profit for the year 15,782 7,420
---------------------------------------------------- --------- ---------
Proportion of the Group's profit share 50% 50%
Group's share of profit for the year 7,891 3,710
---------------------------------------------------- --------- ---------
Statement of financial position 2019 2018
As at 31 December 2019 GBP'000 GBP'000
---------------------------------------------------------- --------- ---------
Assets
Non-current assets
Other receivables 440 513
Intangible exploration assets 837 370
Kiziltepe Gold Mine (including capitalised mining costs,
land, property, plant and equipment) 23,275 24,538
---------------------------------------------------------- --------- ---------
Total non-current assets 24,552 25,421
---------------------------------------------------------- --------- ---------
Current assets
Cash and cash equivalents 7,184 3,570
Trade and other receivables 752 1,098
Inventories 1,745 1,474
Other receivables, VAT and prepayments 2,187 1,074
---------------------------------------------------------- --------- ---------
Total current assets 11,868 7,216
---------------------------------------------------------- --------- ---------
Total assets 36,420 32,637
---------------------------------------------------------- --------- ---------
Liabilities
Non-current liabilities
Borrowings 3,241 8,959
Asset retirement obligation 1,000 978
---------------------------------------------------------- --------- ---------
Total non-current liabilities 4,241 9,937
---------------------------------------------------------- --------- ---------
Current liabilities
Borrowings 5,776 9,272
Trade payables 1,883 2,081
Other payables (including shareholder loans) 8,984 3,411
---------------------------------------------------------- --------- ---------
Total current liabilities 16,643 14,764
---------------------------------------------------------- --------- ---------
Total liabilities 20,884 24,701
---------------------------------------------------------- --------- ---------
Equity 15,536 7,936
Proportion of the Group's profit share 50% 50%
Carrying amount of investment in Joint Venture 7,768 3,968
---------------------------------------------------------- --------- ---------
Movement in Equity - our share
Opening balance 3,968 2,467
Profit for the year 7,891 3,710
Translation and other reserves (1,049) (840)
Dividend receivable (3,042) (1,369)
---------------------------------------------------------- --------- ---------
Closing balance 7,768 3,968
---------------------------------------------------------- --------- ---------
10. Earnings per share on continuing operations
The calculation of basic profit per share is based on the profit
attributable to ordinary shareholders of GBP6,934,000 (2018:
GBP2,177,000) divided by the weighted average number of shares in
issue during the year being 1,059,677,953 shares (2018:
1,059,677,953). There is no material effect on the basic earnings
per share for the dilution provided by the share options.
11a. Intangible exploration assets
Deferred exploration
expenditure
GBP'000
---------------------------------------- ---------------------
Cost
At 1 January 2018 17,527
Additions and capitalised depreciation 369
Exchange movements (740)
Expenditure written off (181)
---------------------------------------- ---------------------
At 31 December 2018 16,975
---------------------------------------- ---------------------
Additions and capitalised depreciation 516
Reclassification of expenditure (206)
Exchange movements (517)
Expenditure written off (364)
---------------------------------------- ---------------------
At 31 December 2019 16,404
---------------------------------------- ---------------------
Net book value
At 1 January 2018 17,527
At 31 December 2018 16,975
---------------------------------------- ---------------------
At 31 December 2019 16,404
---------------------------------------- ---------------------
None of the Group's intangible assets are owned by the
Company.
On review of the likely recovery of the costs capitalised as
intangible exploration assets management has determined that
GBP364,000 (2018: GBP181,000) is not recoverable and hence written
off these costs.
The technical feasibility and commercial viability of extracting
a mineral resource are not yet fully demonstrable in the above
intangible exploration assets. These assets are not amortised,
until technical feasibility and commercial viability is
established. Intangible exploration costs written off represent
costs relating to certain projects that are no longer considered
economically viable or where exploration licences have been
relinquished.
15. Non-current trade and other receivables
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ --------- ---------- --------- ----------
Amounts owed by Group undertakings - - 8,508 9,749
------------------------------------ --------- ---------- --------- ----------
Other receivables 93 83 - -
------------------------------------ --------- ---------- --------- ----------
93 83 8,508 9,749
------------------------------------ --------- ---------- --------- ----------
Other receivables falling due after more than one year represent
amounts due from the government of Turkey in respect of VAT
relating to the Group's exploration projects. The amounts owed to
the Company by Group undertakings are interest free and repayable
on demand.
16. Trade and other receivables
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- --------- ---------- --------- ----------
Amounts owed by Joint Venture Company 3,383 1,402 - -
Other receivables 598 442 - -
Earn-In advances 534 - 534 -
Prepayments 59 16 - -
--------------------------------------- --------- ---------- --------- ----------
4,574 1,860 534 -
--------------------------------------- --------- ---------- --------- ----------
The amount repayable to Galata Madencilik San. ve Tic. Ltd. by
the Joint Venture Company ("Zenit") has no scheduled repayment
terms and is repayable on demand. The prior year loan amounting to
GBP1,402,000 was settled by Zenit in full during the year. Interest
is not charged by Galata Madencilik San. ve Tic. Ltd. on dividends
declared, but unpaid by Zenit.
Trade and other receivables include Earn-In advances of
GBP534,000 which relate to Venus Minerals Ltd ("Venus"), an entity
focused on the exploration and development of copper and gold on
the island of Cyprus. Ariana Resources PLC has the option to
acquire up to 50% of Venus through an earn-in agreement, requiring
total expenditure of 3.0M Euro over five years. Investment rights
continue to accrue as at 31 December 2019 on expenditure of 0.6M
Euros. This capital expenditure has been carried forward under
other receivables as at 31 December 2019, pending conversion into
ordinary shares in Venus (post-period end, in May 2020, total
expenditure to date of 0.92M Euros was converted to shares
comprising 9.24% of Venus). Additional capital support has been
agreed, in principal under the terms of the earn-in agreement, by
the Board of up to a further 2.08M Euros over the next three years.
Ariana has the option to cease funding unilaterally at any point in
time but is committed under the terms of the earn-in agreement to a
minimum expenditure per annum of 0.5M Euros during the option
exercise period from October 2019 to October 2022, such that the
minimum total expenditure commitment is greater than 1.0M
Euros.
The carrying values of other receivables approximate their fair
values because these balances are expected to be cash settled in
the near future.
17. Trade and other payables
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- --------- --------- --------- ---------
Trade and other payables 109 104 - -
Social security and other taxes 66 22 - -
Other creditors and advances 7 10 - -
Accruals and deferred income 136 113 6 6
--------------------------------- --------- --------- --------- ---------
318 249 6 6
--------------------------------- --------- --------- --------- ---------
The above listed payables are all unsecured. Due to the
short-term nature of current payables, their carrying values
approximate their fair value.
18. Called up share capital and premium
Allotted, issued and fully Number Ordinary Deferred Called up Share
paid ordinary 0.1p shares Shares shares Share capital Premium
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------------- --------- --------- --------------- ---------
In issue at 1 January 2019
and 31 December 2019 1,059,677,953 1,059 4,995 6,054 11,821
---------------------------- -------------- --------- --------- --------------- ---------
During 2013 the existing ordinary shares were sub-divided into
one new ordinary share of 0.1 pence ("New Ordinary Share") and one
deferred share of 0.9 pence ("Deferred Share"). The New Ordinary
Shares have a nominal value of 0.1 pence. The percentage of New
Ordinary Shares held by each shareholder following the subdivision
is the same as the percentage of existing ordinary shares held by
the shareholder before the change.
Fully paid Ordinary Shares carry one vote per share and carry
the right to dividends. Deferred Shares have attached to them the
following rights and restrictions:
they do not entitle the holders to receive any dividends and
distributions;
they do not entitle the holders to receive notice or to attend
or vote at General Meetings of the Company;
on return of capital on a winding up the holders of the Deferred
Shares are only entitled to receive the amount paid up on such
shares after the holders of the Ordinary Shares have received the
sum of 0.1p for each ordinary share held by them and do not have
any other right to participate in the assets of the Company.
Potential issue of ordinary shares
Share options
The Company issued 64,000,000 new options to directors and staff
at an exercise price of 1.55 pence, vesting over 3 years,
commencing on 1 January 2018. At 31 December 2019 the Company had
options outstanding for the issue of ordinary shares as
follows:
Date of grant Exercisable Exercisable Exercise Number Options cancelled Number at
from to price granted during the 31
year December
2019
--------------- ------------- ------------- --------- ----------- ------------------ -----------
Options
1 January 1 January 31 December
2018 2018 2023 1.55p 64,000,000 - 64,000,000
--------------- ------------- ------------- --------- ----------- ------------------ -----------
Total 64,000,000 64,000,000
--------------------------------------------- --------- ----------- ------------------ -----------
No options were exercised in the year. The fair value of
services received in return for share options are measured by
reference to the fair value of share options granted. The fair
value of employee share options is measured using the Black-Scholes
model. Measurement inputs and assumptions are as follows:
Costs associated with options issued on the 1 January 2018 and exercisable
by 2023
Share price when options issued 1.25p
Expected volatility (based on closing prices over
the last 7 years) 67.84%
Expected life 5 years
Risk free rate 0.75%
Expected dividends 0%
The expected volatility is wholly based on the historic
volatility (calculated based on the weighted average of the last 7
years of quotation).
Group and Company
Share based payments reserve 2019
GBP'000
------------------------------- ------------------
At 1 January 2019 250
Charge during the year 114
------------------------------- ------------------
At 31 December 2019 364
------------------------------- ------------------
As set out in note 2 the Group recognised an expense of
GBP114,000 (2018: GBP250,000) relating to equity share based
payment transactions in the year.
19. Deferred tax liabilities
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- --------- --------- --------- ---------
Opening and closing deferred tax liability 2,273 2,273 - -
-------------------------------------------- --------- --------- --------- ---------
Deferred tax has been provided against the fair value uplift of
intangible exploration assets that resulted from the business
combination that happened in 2016.
20. Other financial liabilities
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- --------- --------- ---------
Contingent consideration payable 1,651 1,651 - -
---------------------------------- --------- --------- --------- ---------
The consideration above relates to a 2% net smelter returns
royalty on the future production revenue at Salinba . This
liability arose as a result of the business combination as noted in
note 19 and will be remeasured at each reporting date and any gain
or loss will be charged/(credited) through the income
statement.
Given this provision is based on future production revenue,
there are uncertainties relating to the timing and amount of this
liability.
Note to the announcement
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 December 2019,
or year ended 31 December 2018, but is derived from those accounts.
Statutory accounts for 2018 have been delivered to the Registrar of
Companies and those for 2019 on which the auditors have provided an
unqualified report will be delivered following the AGM.
Contacts:
Ariana Resources plc Tel: +44 (0) 20 7407 3616
Michael de Villiers, Chairman
Kerim Sener, Managing Director
Beaumont Cornish Limited Tel: +44 (0) 20 7628 3396
Roland Cornish / Felicity Geidt
Panmure Gordon (UK) Limited Tel: +44 (0) 20 7886 2500
James Stearns / Atholl Tweedie
Yellow Jersey PR Limited Tel: +44 (0) 20 3004 9512
Dom Barretto / Joe Burgess / Henry arianaresources@yellowjerseypr.com
Wilkinson
Editors' Note:
About Ariana Resources:
Ariana is an AIM-listed mineral exploration and development
company operating in Europe. It has interests in gold production in
Turkey and copper-gold assets in Cyprus. The Company is developing
a portfolio of prospective licences in Turkey, which contain a
depleted total of 1.5 million ounces of gold and other metals (as
at April 2020).
The Red Rabbit Project is comprised of the Company's flagship
assets, the Kiziltepe and Tavsan gold projects, and is part of a
50:50 Joint Venture with Proccea Construction Co. Both assets are
located in western Turkey, which hosts some of the largest
operating gold mines in the country and remains highly prospective
for new porphyry and epithermal deposits. The Kiziltepe Sector of
the Red Rabbit Project is fully permitted and is currently in
production. The total gross depleted resource inventory at the
Project and its wider area is c. 500,000 ounces of gold equivalent
(as at April 2020). At Kiziltepe a Net Smelter Return ("NSR")
royalty of up to 2.5% on production is payable to Franco-Nevada
Corporation. At Tavsan an NSR royalty of up to 2% on future
production is payable to Sandstorm Gold.
The 100% owned Salinbas Gold Project is located in north-eastern
Turkey and has a total resource inventory of c. 1 million ounces of
gold equivalent. The project comprises three notable licence areas:
Salinbas, Ardala and Hizarliyayla, all of which are located within
a multi-million ounce Artvin Goldfield. The "Hot Gold Corridor"
contains several significant gold-copper projects including the
4Moz Hot Maden project, which lies 16km to the south of Salinbas
and 7km south of Hizarliyayla. A NSR royalty of up to 2% on future
production is payable to Eldorado Gold Corporation on the Salinbas
Gold Project.
Ariana is also earning-in to 50% of UK-registered Venus Minerals
Ltd ("Venus"); currently c. 10% held by Ariana. Venus is focused on
the exploration and development of copper-gold assets in
Cyprus.
Panmure Gordon (UK) Limited are broker to the Company and
Beaumont Cornish Limited is the Company's Nominated Adviser and
joint broker.
For further information on Ariana you are invited to visit the
Company's website at www.arianaresources.com.
Ends.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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