The share price of Ariana Resources rose sharply in London on Monday, after the company announced that it had entered into a nonbinding memorandum of understanding (MoU) with a major Turkish construction and engineering company.

Ariana’s share price spiked 42% to a high of 2.98p each by 13:00, before trading at 2.69p a share in the afternoon.

The MoU proposes a series of interlinked transactions, which will enable the company partially to monetise its successful development of the Kiziltepe mine, held via a 50:50 JV with Proccea Construction through Zenit, and its earlier-stage Salinbas gold project, targeting the funding of the Salinbas asset to production.

MD Kerim Sener commented in a statement that the MoU represented a “major” development in the evolution of Ariana, once the definitive agreements were implemented.

“The contemplated joint partnership between Ariana, Proccea and the new partner, will create a formidable exploration, development and production group focused on Turkey. This will combine the unique skill-sets of each partner in a mutually beneficial and synergistic manner,” he said.

Sener added that the partnership would also target the development of a future pipeline of high-value production projects.

“It is the goal of the partners to become one of the premier gold mining companies operating in Turkey.”

The MoU contemplates the disposal of various interests to the proposed partner, including 17% of the Salinbas project for $5-million and jointly with Proccea, 53% of Zenit for $50-million.

Further, the proposed partner would then inject $8-million of equity into the Salinbas project through an earn-in arrangement and organise the bank finance to enable this project to be brought into production. 

The proposed JV would be subject to due diligence, entering into binding agreements and shareholder approval no later than the end of February 2020.

Ariana currently holds 50% of Zenit, which operates the Kiziltepe mine and its associated exploration and development properties, notably the Tavsan project, and 100% of Greater Pontides Exploration, which holds the Salinbas project.

Under the terms of the MoU, once the proposed partner has acquired 17% of Greater Pontides a further budget of $8-million will be made available by way of earn-in to take the proposed partner to a total 53% to achieve the completion of a feasibility study and environmental impact assessment of the Salinbas project and its associated works.

In parallel to the earn-in arrangements, the proposed partner would acquire 53% of Zenit, which would at the appropriate time, absorb Greater Pontides, such that on the successful completion of the earn-in on Salinbas by the proposed partner, Ariana would hold 23.5% of Zenit, which would hold the Kiziltepe mine, associated exploration and development properties and the Salinbas project.

The proposed partner will ultimately hold 53% of Zenit, with Ariana and Proccea holding 23.5% each.