Turkey-based gold exploration and development company Ariana Resources’ profit after tax grew threefold in the year ended December 31, 2019, to £6.9-million, compared with the £2.2-million reported for 2018.

The miner attributes the increase primarily to the “excellent operational performance” of its joint venture investment in Zenit, whose turnover grew by 21% year-on-year, reflecting the favourable movement in the gold price and increased production.

Zenit’s profits after tax rose from £7.4-million, to £15.8-million, of which Ariana’s 50% share amounted to £7.9-million, up from the £3.7-million in 2018.

The Kiziltepe mine produced 27 985 oz of gold − 12% above production guidance − at an average cash cost of $507/oz.

The profitability of Ariana’s Turkish operations enabled the miner to report a significant improvement in earnings a share to 0.65p and a price to earnings ratio of six.

Ariana chairperson Michael de Villiers says production at the Kiziltepe mine has remained well above the planned feasibility rates since startup in 2017, resulting in accelerated depletion of the Arzu south openpit.

“Post-period end, this enabled timely completion of repayments against the $33-million capital expenditure loan, in addition to the joint venture partners receiving a return of capital invested and their respective share of profits.”

This enabled the payment of a maiden dividend of £1.6-million from Ariana’s Turkish operating subsidiary to Ariana Resources, representing the first profit cash flow in the company's history.

At Kiziltepe, resource extension work was completed earlier this year, while an extension of the life-of-mine to a total of ten years is currently targeted.

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 openpit potential.

Similar resource extension and other project development work has been completed at Tavsan with a view to bringing this project into production in 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.

Meanwhile, while the past financial year has been particularly good for gold, De Villiers says it has not been quite as good for silver. As the bulk of Ariana's production revenue (more than 85%) comes from gold, the lacklustre silver price in response to market sentiment has not had a material impact on the company’s overall revenue.

“Interestingly, the gold-silver ratio has for most of modern history been around 1:50, while the current ratio is closer 1:100 – a marked departure from the norm, which is an indication that the silver price is overdue for a positive correction.”

Ariana’s 2019 performance also benefited from the disposal of Ariana’s Kiziltepe property-owning subsidiary Camyol, which was sold to Zenit at a book profit of £600 000.

Ariana’s 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, Ariana’s results are generally consistent with those achieved in 2018, with administrative costs slightly improved at £1.2-million, and net exploration costs written off also broadly consistent amounting to £400 000.

In addition, the effect of the declining value of the Turkish lira on the underlying value of Ariana’s subsidiaries in Turkey is £400 000, which is better than those achieved in 2018.

Nonetheless, Ariana’s earnings a share increased from 0.21p apiece in 2018, to 0.65p apiece in 2019.

The company’s net assets, as recorded in the statement of financial position, have increased by £5.3-million, primarily on account of Ariana’s share of the net assets of Zenit increasing by £3.8-million.

The company also capitalised a further £500 000 of expenditure within intangible exploration assets, being its Turkish exploration work, as well as incurring a further £500 000 of expenditure included within debtors on Ariana’s Cypriot project, ahead of it being converted into shares under its earn-in agreement with Venus Minerals in May.