Ariana Resources : Panmure

Flash Note

6 June 2023

(Remains unchanged)

Target Price: 5.49p (unchanged)

Share Price: 2.40p

(Price at close 5 June 2023)

Edward Gooden	Kieron Hodgson
[phone]	[phone]
[e-mail]	[e-mail]

Ariana Resources

Strong FY2022 results

Ariana has announced another year of profit, unsurprising after previously announcing record gold production for FY2022. Cash is being held within the operation Zenit joint venture to fund construction of the JV's second gold project, Tavsan. Ariana expects to resolve the ongoing forestry permitting delay at Tavsan shortly and anticipates first gold production in H1 FY2024.

Key Data

Market Cap	£28m
Sector	Mining
Stock Codes	ARNR.L / AAU LN
Last Published Research:	25 January 2023

Absolute & Relative Performance

• Strong FY2022 profit driven by record gold production - Ariana's EPS for the year was
  0.36p/share, the same as FY2021. This was achieved by record gold production at Kiziltepe. Comparison with FY2021 is not appropriate as that year benefited from the profits from the sale of mine ownership. The weak Turkish Lira continues to reduce the accounting value of in country subsidiaries, skewing the comprehensive profit down, but this loss would only be realised on sale, which is not in Ariana's plan.

5.7	
5.2
4.7
4.2
3.7
3.2
2.7
2.2
Jun-21Sep-21Dec-21Mar-22Jun-22Sep-22Dec-22Mar-23Jun-23

Absolute

Relative to DS Mining

Cash is available for Tavsan construction - While Ariana had negative overall cash flow for FY2022, this is no cause for concern as operational cashflows are being retained within the Zenit JV in order to finance capex for Tavsan. Ariana also paid over £4m in dividend payments during FY2022, associated with the dividend for FY2021. Unsurprisingly there is no dividend for FY2022 as cashflow is required to fund construction capex for Tavsan. It is exceptionally positive that Zenit's second gold mine can be funded entirely from cash flows from the Kiziltepe mine, especially given the prevailing market conditions and high interest rates, which mean raising equity or finding affordable debt is difficult.

	Source Datastream
Analysts
Edward Gooden	[phone]
[e-mail]
Kieron Hodgson	[phone]

[e-mail]

Investment Research

• Tavsan construction paused - Due to an ongoing permitting delay associated within forestry permissions, construction has been halted for ~three months. The company expect this to be resolved quickly, given the JV is majority owned by Özaltin, a Turkish construction firm with important political clout. In fact, part of the logic in bringing Özaltin into the project level Zenit joint venture was to ensure permitting resolutions could be reached quickly. The recent re-election of Erdogan is a positive outcome for certainty in the relevant government departments, and so helps Tavsan. Hopefully, the forestry issue is nearing a resolution and heap leach pad construction can be completed during the most optimal, driest part of the year.

Year End	Sales	PBTA	EPS	DPS ord	P/E	EV/EBITDA	Yield
Dec	(£m)	(£m)	(p)	(p)	(x)	(x)	(%)
2021A	4.3	8.3	0.5	0.5	5.0	2.6	19.7
2022E	5.8	4.4	0.4	0.4	5.8	4.1	18.4
2023E	5.3	2.5	0.2	0.0	10.6	4.0	0.0
2024E	6.8	3.3	0.3	0.0	8.2	1.8	0.0
						Source Company Data, Panmure Gordon

6 June 2023 1

Flash Note

• Retain Buy recommendation and 5.49p target price - We retain our Buy recommendation and 5.49p target price following another strong year for Ariana. Kiziltepe continues to perform well, processing a lower average grade and production at
  Tavsan will facilitate a transition of the Zenit JV's flagship asset. Having said this, we can see a pathway to ongoing mine life extension at Kiziltepe through mining and processing of smaller high-grade vein areas in the vicinity of the mine. Finally, we expect the prevailing high-gold price environment to continue to drive excellent profitability.

Panmure Gordon is a market maker in this company, has in the previous 12 months made agreements with this company for investment banking services and will be compensated by the company for these services.

6 June 2023 2

Distribution of investment ratings for equity research (as of 3 May 23)

Overall Global Distribution (Banking Client*)

Buy	Hold	Sell
78% (39%)	18% (4%)	4% (0%)

Rating: GUIDELINE (return targets may be modified by risk or liquidity issues)

Buy	Total return of >10% in next 12 months
Hold	Total return >-10% and <+10% in next 12 months
Sell

* Indicates the percentage of each category in the overall distribution that were banking and/or corporate broking clients

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