FINAL RESULTS FOR THE YEAR 31 DECEMBER 2018

5 June 2019

AIM: AAU

FINAL AUDITED RESULTS FOR THE YEAR 31 DECEMBER 2018

NOTICE OF ANNUAL GENERAL MEETING ("AGM")

Ariana Resources plc ("Ariana" or "the Company"), the exploration and development company operating in Turkey, announces its final audited results for the year ended 31 December 2018.    

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 the East India Club, 16 St James's Square, London, SW1Y 4LH on 28th June 2019 at 11.00 am.

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
Atholl Tweedie / James Stearns
Yellow Jersey PR Limited	Tel: +44 (0) 20 3004 9512
Felicity Winkles / Tim Thompson / Harriet Jackson / Henry Wilkinson	[email protected]

 

Chairman's Statement

Ariana continues to deliver outstanding results from year to year and 2018 has been no exception. Gold production from our joint venture Kiziltepe Mine, in excess of 27,100 ounces was 36% above guidance for the year. The mine has achieved an average cash-cost of US$415 per ounce which is half of the current international average, placing the mine within the lowest cash-cost quartile.

 

Meanwhile exploration is continuing apace across all project areas and the coming year is on target to be our busiest year of exploration activity to date. Exploration has delivered excellent results with a Company average discovery cost of US$15 per ounce, placing Ariana within the lowest international cost quartile.

 

Both the production and exploration teams must be commended for maintaining their focus on both the job at hand as well as looking ahead to take advantage of new opportunities. To this end, our strategy of having a pipeline of projects at the production, development and exploration phases is being rewarded. The Kiziltepe Mine has been paying cash dividends to both joint venture partners while maintaining debt repayments to the project finance bank, Turkiye Finans Katilim Bankasi A.S. This financial strength has allowed progress of the Tavşan Project to the next stage of development. We remain on schedule at the Tavşan Project to complete the formal Environmental Impact Assessment ("EIA") submission to the authorities during late 2019, following which the feasibility study will be concluded in line with the requirements of project finance and final permitting. This will potentially lead towards the commencement of mine development during 2020. This will enable the Red Rabbit Joint Venture to increase its current annual production rate of 25,000 ounces to an expected 50,000 ounces of gold per annum, which in turn will influence a positive re-rating of the Company's market valuation.

 

Ariana continues to receive encouraging support from both the local community and government authorities in our various operating areas, as well as at the national government level. This support is essential for Ariana to continue to build upon current exploration opportunities in addition to making the necessary investments to grow our portfolio and increase the life of mine of the producing operation and in the development of new mines. We are encouraged to see fellow gold producers operating in Turkey announcing new mine development plans and major investments. We look forward to continuing working closely with both the local and national government offices to ensure we can contribute to this growth potential for the Turkish gold mining industry.

 

Part of Ariana's success must also be attributed to the positive precious metal price environment; both gold and silver have performed well over the last year. Production from Kiziltepe was sold at an average gold price of US$1,269 per ounce and silver price of US$15 per ounce. While the majority of the mine revenue comes from its gold sales, it is encouraging to see that both gold and silver continue to be buoyed by positive market sentiment. Demand in the major gold consuming markets of India and China has not abated, along with an increasing trend for central banks to add to their gold holdings, boding well for both Turkey and Ariana.

 

Hardly a day goes by when we do not see several news items relating to the discussion of energy storage and the electrification of the transport sector; replacing the internal combustion engine with electric motors. It is encouraging to see such a seismic shift away from carbon-based polluting fuels to renewable- energy based electrification of vehicles. I personally have been a long-time adopter and advocate of this technology. This trend has opened new opportunities for exploration companies as demand increases for all the minerals required to sustain the growth expected in this new sector. Industry demand for copper in this sector is obvious, but so too is the requirement for more esoteric metals including those across the full spectrum of rare earth elements and others too numerous to mention. Ariana has an extensive exploration database covering the whole of Turkey and extending into various surrounding countries within the Tethyan Metallogenic Belt. Ariana has had prior success in this sector through the discovery of various lithium prospects in Western Australia and the Northern Territory, which were successfully vended in to two separate ASX-listed companies for significant profit. The Ariana team continues to monitor this sector with an eye on new opportunities and with a view to repeating these previous successes in this exciting sector of mineral exploration.

 

As with all development industries you are only as good as the people and the tools you deploy across your operations. Ariana has excelled at attracting and developing an excellent geological team and this is further reinforced by the long-term relationship with several universities which are associated with our team in Australia, Turkey and the UK. In the UK, Dr. Kerim Sener helped to establish the highly prestigious Richard Osman Memorial Fund at the Camborne School of Mines, along with other industry partners to encourage and support the young talent our industry must nurture over the next generation. We are an active supporter in mentoring and cultivating young geologists and we have been well rewarded with several outstanding students who have joined us for work experience with our field teams every summer.

 

Ariana has also been a pathfinder in adopting and enhancing new technology, data analysis and equipment in the mineral exploration field. We were an early adopter of field portable X-ray Fluorescence ("pXRF") technology for soil geochemistry and in the enhancement of geological mapping. This has been successfully used for quickly delineating altered and mineralised trends in addition to reducing the time and cost of sample analysis. The use of pXRF technology is currently being trialled at our Kiziltepe Mine to assist the production team to analyse quickly and cheaply a variety of production and processing samples. Our geological team have also taken to the air, making extensive use of Unmanned Aerial Vehicle ("UAV") technology to conduct rapid surveys of prospective exploration ground.

 

At the heart of the Company is a rigorous approach to the compilation and interrogation of data. It is for this reason that much praise must be delivered; Ariana was founded on disciplined distillation and analysis of geoscientific information, resulting in the selection of the Kiziltepe Project as the Company's first focus, later becoming its first producing mine. The Company has since selected what can only be described as an excellent portfolio of pipeline projects. It is through this creative use of technology, brains and tenacity that Ariana will make its greatest discoveries in the future.

 

Like all other companies, Ariana exists for the ultimate benefit of all its stakeholders and in particular its shareholders. This is ultimately rewarding the shareholders through an increase in market capitalisation and, in future, the potential for the payment of dividends. Your board of directors are focused on balancing the requirement of new exploration and development expenditure versus the return of profits to shareholders via dividends. This cost-benefit analysis is being reviewed constantly and your board is looking at mechanisms by which distributions to shareholders can occur, as and when practicable.

 

Last but not least I would like to thank our shareholders, employees and our joint venture partners for their dedication and support in helping Ariana achieving its ongoing success.

 

Financial Review

The Group reported a profit before tax of £2.2m (2017: £0.4m), this improved performance being underpinned by our share of the overall improvement in Zenit's financial position. Zenit itself made a profit after tax for the year of £7.4m and our share of this amounted to £3.7m. Otherwise the Income Statement remained broadly consistent with the prior year in terms of both administrative expenses and more general exploration expenditure where it is not appropriate to capitalise within our intangible exploration assets. Foreign exchange translation losses within other comprehensive income reflect the continued decline in the Lira as it effects the cost of our Turkish denominated assets, but this is not an operating cost we can either influence or change. In many ways we are the beneficiaries of having a business which is US dollar denominated in terms of revenue, with a reduced cost base in terms of our Lira expenditure.

 

As far as the balance sheet is concerned, there is little change from 2017 in so far as the fair value cost of Salinbaş continues to dominate the intangible exploration asset category, albeit this also includes our exploration spend on Salinbaş since then and also our work around the Red Rabbit area and environs. Our overall cash position has improved as our loan to Zenit has been partially repaid and dividends have been received. Current liabilities are consistent with the prior year and there has been no change in the long-term liabilities, both of which relate to Salinbaş, being the notional deferred tax arising on its valuation and the potential net smelter royalty payable on any ultimate gold production there.

 

Overall this has been a positive year for the Group financially. The strategic plan which had been set many years ago, which aimed to enable the Company to become self-financing, is now being realised.

 

Outlook

The past year has helped to lay the foundations of a sustainable mineral exploration and development business towards which we have strived for many years. Our JV operation at Kiziltepe continues to produce gold and silver at high margins due to the low-cost operating environment. This has resulted in sufficient cashflow to support ongoing exploration and development activity, not only at the JV level but also at the level of Ariana itself.

 

This is enabling the promotion of a self-sustaining investment cycle of mineral exploration, development and production, which must lie at the core of any successful mining company over the medium-to long-term.

 

We are fortunate to have been able to develop over the years a robust portfolio of assets within the Company, which reflect this overall strategy and represent projects at every stage of this self-sustaining investment cycle. Kiziltepe represents our producing asset, Tavşan our near-term development asset, various satellites representing potential additions for the JV and Salinbaş as our large-scale exploration asset. In addition, we are continually appraising new project opportunities and have continued to build on our "Special Projects" division, now headed specifically by Mr. Zack van Coller, with the goal of continuing to deliver new projects in to the pipeline as appropriate.

 

Ariana's exploration costs remain in the lowest quartile worldwide at approximately US$15 per ounce. While this is in part a result of operating in the low-cost environment of Turkey (4th lowest cost gold producing country in the world), it is also significantly a function of our measured and focused approach to exploration which we have developed over the past 15 years. At the core of this approach lies a principled geoscientific methodology which is tempered by a healthy dose of project risk assessment. Consequently, projects within the portfolio are advanced in a manner that takes into account not only the geological opportunity but with due consideration given to relevant operating, financial and statutory conditions.

 

Furthermore, there are two broad principles which we have adhered to in order to maintain this approach. The first is knowledge-based resource targeting, which is in large part influenced by our understanding of structural geology and the evolution of hydrothermal systems over time. Secondly, our innovative use of technologies including remote-sensing, UAV's, track-mounted mobile drilling and extensive use of pXRF technology. All these technologies are united by their low relative cost and their direct application to the discovery of mineralisation. It is our intention to continue to drive the use of cutting- edge technology in our sector, with a view to increasing the success rates of discovery as the highest risk but absolutely necessary precursor to our self-sustaining investment cycle.

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2018

 

Note		2018 £'000	2017 £'000
Administrative costs General exploration expenditure Exploration costs - written off	10	(1,355) (153) (181)	(1,311) (40) (352)
Operating loss	4	(1,689)	(1,703)
(Loss)/profit on disposal of available for sale investments	12	(2)	117
Share of profit of Joint Venture	5	3,710	1,834
Investment income		158	176
Profit before tax		2,177	424
Taxation	7	-	-
Profit for the year		2,177	424
Earnings per share (pence)
Basic and diluted	9	0.21	0.04
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations		(2,162)	(1,363)
Fair value adjustment on available for sale investments		-	(53)
Items that will not be classified to profit and loss
Net change in fair value of equity securities at FVOCI	12	(26)	-
Other comprehensive loss for the year net of income tax		(2,188)	(1,416)
Total comprehensive loss for the year		(11)	(992)

 

Continuing operations

None of the Group's activities discontinued during the current previous year.
 

Consolidated Statement of Financial Position

For the year ended 31 December 2018

 

 

			Restated
		2018	2017
Note		£'000	£'000
Assets
Non-current assets
Trade and other receivables	14	83	1,445
Intangible exploration assets	10	16,975	17,527
Land, property, plant and equipment	11	278	289
Investment in Joint Venture	5	3,968	2,467
Total non-current assets		21,304	21,728
Current assets
Trade and other receivables	15	1,860	1,195
Equity securities at FVOCI/Available for sale investments	12	35	218
Cash and cash equivalents		938	773
Total current assets		2,833	2,186
Total assets		24,137	23,914
Equity
Called up share capital		6,054	6,054
Share premium	17	11,821	11,821
Other reserves		720	720
Share based payments	17	250	93
Translation reserve		(4,196)	(2,034)
Retained earnings		5,315	3,071
Total equity attributable to equity holders of the parent		19,964	19,725
Total equity		19,964	19,725
Liabilities
Non-current liabilities
Deferred tax liabilities	18	2,273	2,273
Other financial liabilities	19	1,651	1,651
Total non-current liabilities		3,924	3,924
Current liabilities Trade and other payables	16	249	265
Total current liabilities		249	265
Total equity and liabilities		24,137	23,914

 

 

 

Company Statement of Financial Position

For the year ended 31 December 2018

 

Note		2018 £'000	Restated 2017 £'000
Assets Non-current assets Trade and other receivables Investments in group undertakings	14 13	9,749 337	10,421 274
Total non-current assets		10,086	10,695
Current assets
Trade and other receivables	15	-	20
Equity securities at FVOCI/Available for sale investments	12	35	63
Cash and cash equivalents		-	-
Total current assets		35	83
Total assets		10,121	10,778
Equity
Called up share capital		6,054	6,054
Share premium	17	11,821	11,821
Share based payments reserve	17	250	93
Retained earnings		(8,010)	(7,196)
Total equity		10,115	10,772
Liabilities Current liabilities
Trade and other payables	16	6	6
Total current liabilities		6	6
Total equity and liabilities		10,121	10,778
Company's loss for the financial year		907	876

 

 

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2018

 

				Share			Total attributable
	Share	Share	Other	based payments	Translation	Retained	to equity holders of
	capital	premium	reserves	reserve	on reserve	earnings	parent
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Changes in equity to 31 December 2017
Balance at 1 January 2017	5,836	9,241	720	571	(671)	2,222	17,919
Profit for the year	-	-	-	-	-	424	424
Other comprehensive income	-	-	-	-	(1,363)	(53)	(1,416)
Total comprehensive income	-	-	-	-	(1,363)	371	(992)
Issue of share capital	218	2,782	-	-	-	-	3,000
Share issue costs	-	(202)	-	-	-	-	(202)
Cancellation of share options	-	-	-	(478)	-	478	-
Transactions with owners	218	2,580	-	(478)	-	478	2,798
Balance at 31 December 2017	6,054	11,821	720	93	(2,034)	3,071	19,725
Changes in equity to 31 December 2018
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

 

The accompanying notes form part of these financial statements.

 

 

 

 

Company Statement of Changes in Equity

For the year ended 31 December 2018

 

	Share capital	Share premium	Share based payments reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000
Changes in equity to 31 December 2017
Balance at 1 January 2017	5,836	9,241	571	(6,815)	8,833
Loss for the year	-	-	-	(876)	(876)
Other comprehensive income	-	-	-	17	17
Total comprehensive income	-	-	-	(859)	(859)
Issue of share capital	218	2,782	-	-	3,000
Share issue costs	-	(202)	-	-	(202)
Cancellation of share options	-	-	(478)	478	-
Transactions with owners	218	2,580	(478)	478	2,798
Balance at 31 December 2017	6,054	11,821	93	(7,196)	10,772
Changes in equity to 31 December 2018
Loss for the year	-	-	-	(907)	(907)
Other comprehensive income	-	-	-	-	-
Total comprehensive income	-	-	-	(907)	(907)
Share options	-	-	250	-	250
Cancellation 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

The accompanying notes form part of these financial statements.
 

Consolidated Statement of Cash Flows

For the year ended 31 December 2018

 

	2018 £'000	2017 £'000
Cash flows from operating activities
Profit before tax	2,177	424
Adjustments for:
Loss/(profit) on disposal of available for sale investments	2	(117)
Depreciation of non-current assets	1	1
Directors and staff remuneration paid in shares	-	191
Write down of intangible exploration assets	181	352
Fair value adjustments	26	53
Share of profit in Joint Venture	(3,710)	(1,834)
Share based payments charge	250	-
Investment income	(158)	(176)
Movement in working capital	(1,231)	(1,106)
Decrease/(increase) in trade and other receivables	183	(950)
(Decrease) in trade and other payables	(49)	(112)
Foreign exchange differences on retranslation of assets and liabilities	-	(159)
Cash outflow from operating activities	(1,097)	(2,327)
Taxation paid	-	(403)
Net cash from operating activities	(1,097)	(2,730)
Cash flows from investing activities
Purchase of land, property, plant and equipment	(36)	(20)
Payments for intangible assets	(353)	(390)
Proceeds from disposal of available for sale investments	146	700
Dividends from Joint Venture	1,369	-
Investment income	158	176
Net cash from investing activities	1,284	466
Cash flows from financing activities Proceeds from issue of share capital	-	2,608
Net cash proceeds from financing activities	-	2,608
Net increase in cash and cash equivalents	187	344
Cash and cash equivalents at beginning of year	773	440
Exchange adjustment	(22)	(11)
Cash and cash equivalents at end of year	938	773

 

 

 

Notes to the Consolidated Financial Statements

For the year ended 31 December 2018

 

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 AIM, a market operated by 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 (£), 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 2018.

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 available for sale financial assets) and the accounting policies have been applied consistently throughout the Group.

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 £938,000 (2017: £773,000), together with available for sale investments with a market value of £35,000 (2017: £218,000).

The Directors have prepared cash flow forecasts for the Group for the period to 30 June 2020 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 Madencilick 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, along with the ability to liquidate the available for sale investments in order to assist the Group meet its financial obligations as they fall due.

If either of these alternatives 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.

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.

 

 

 

Selected Notes to the Consolidated Financial Statements continued for the year ended 31 December 2018

 

5. 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 Tavşan, 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% 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$37.8 million 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 2018 the Group has a 50% (2017: 50%) interest in Zenit. Ultimately profits from Zenit are shared in the ratio of 51:49 between Group and Proccea.

 

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	2018 £'000	2017 £'000
Revenue	29,254	8,854
Cost of sales	(13,548)	(4,808)
Gross Profit	15,706	4,046
Administrative expenses	(969)	(423)
Operating profit	14,737	3,623
Finance expenses	(12,196)	(2,646)
Finance income	4,552	2,690
Profit on ordinary activities before tax	7,093	3,667
Taxation	327	-
Profit for the year after tax	7,420	3,667
Proportion of the Group's profit share	50%	50%
Group's share of profit for the year	3,710	1,834

 

 

 

Notes to the Consolidated Financial Statements continued for the year ended 31 December 2018

 

5.    Share of profit of interest in Joint Venture continued

 

Statement of financial position	2018 £'000	2017 £'000
Assets
Non-current assets
Other receivables	513	-
Intangible exploration assets	370	94
Kiziltepe Gold Mine (Including capitalized mining costs, property, plant and equipment)	24,538	31,085
Advances to contractors	-	915
Total non-current assets	25,421	32,094
Current assets
Cash and cash equivalents	3,570	505
Trade and other receivables	1,098	127
Inventories	1,474	941
Other receivables, VAT and prepayments	1,074	936
Total current assets	7,216	2,509
Total assets	32,637	34,603
Liabilities
Non-current liabilities
Borrowings	8,959	15,977
Asset retirement obligation	978	1,088
Total non-current liabilities	9,937	17,065
Current liabilities
Borrowings	9,272	6,615
Trade payables	2,081	2,484
Other payables (including shareholder loans)	3,411	3,504
Total current liabilities	14,764	12,603
Total liabilities	24,701	29,668
Equity	7,936	4,935
Proportion of the Group's profit share	50%	50%
Carrying amount of investment in Joint Venture	3,968	2,467
Movement in Equity - our share
Opening balance	2,467	1,251
Profit for the year	3,710	1,834
Translation reserve	(840)	(618)
Dividend receivable	(1,369)	-
Closing balance	3,968	2,467

 

 

Notes to the Consolidated Financial Statements continued for the year ended 31 December 2018

9. Earnings per share

The calculation of basic profit per share is based on the profit attributable to ordinary shareholders of £2,177,000 (2017: £424,000) divided by the weighted average number of shares in issue during the year being 1,059,677,953 shares (2017: 978,200,347). The weighted- average number of shares for diluted earnings excludes out-of-the-money options and warrants as their effect would be anti-dilutive.

 

10. Intangible exploration assets

	Deferred exploration expenditure £'000
Cost
At 1 January 2017	17,965
Additions and capitalised depreciation	412
Exchange movements	(498)
Expenditure written off	(352)
At 31 December 2017	17,527
Additions and capitalised depreciation	369
Exchange movements	(740)
Expenditure written off	(181)
At 31 December 2018	16,975
Net book value
At 1 January 2017	17,965
At 31 December 2017	17,527
At 31 December 2018	16,975

None of the Group's intangible assets are owned by the Company.

 

In the year, management has reviewed the recovery of the costs capitalised as intangible exploration assets and determined that £181,000 is not recoverable and hence management had taken the decision to write off these costs.

 

The technical feasibility and commercial viability of extracting a mineral resource are not yet 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.

 

14.  Non-current trade and other receivables

 

Group                                          Company

 

		Restated		Restated
	2018	2017	2018	2017
	£'000	£'000	£'000	£'000
Amounts owed by Group undertakings	-	-	9,749	10,421
Amounts owed by Joint Venture Company	-	1,352	-	-
Other receivables	83	93	-	-
	83	1,445	9,749	10,421

 

The Directors have reassessed the presentation of Amounts owed by Group undertakings and Amounts owned by Joint Venture Company and reclassified part of the balances to Non-current assets to reflect the expectation the Directors had at 31 December 2017 as to when they would receive the balances.

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.

 

 

Notes to the Consolidated Financial Statements for the year ended 31 December 2018

 

15. Trade and other receivables

                                                                                                                                                             Group                                Company

	2018 £'000	Restated 2017 £'000	2018 £'000	Restated 2017 £'000
Amounts owed by Joint Venture Company	1,402	677	-	-
Other receivables	442	474	-	-
Prepayments	16	44	-	20
	1,860	1,195	-	20

 

The Directors have reassessed the presentation of Amounts owed by Group undertakings and Amounts owed by Joint Venture Company and reclassified part of the balances to Non-current assets to reflect the expectation the Directors had at 31 December 2017 as to when they would receive the balances.

 

The carrying values of trade receivables approximate their fair values because these balances are expected to be cash settled in the near future unless a provision is made.

 

The loan repayable by the Joint Venture Company has no scheduled repayment terms and is repayable on demand. The loan is subject to quarterly interest charges by Galata Madencilik San. ve Tic. Ltd at a rate of 19.50% p.a. (2017: 9.75% p.a.)

 

16. Trade and other payables

 

	2018 £'000	2017 £'000	2018 £'000	2017 £'000
Trade and other payables	104	113	-	-
Social security and other taxes	22	28	-	-
Other creditors and advances	10	25	-	-
Accruals and deferred income	113	99	6	6
	249	265	6	6

 

The above listed payables were all unsecured. Due to the short-term nature of current payables, their carrying values approximates their fair value.

 

17.  Share capital and premium
Allotted, issued and fully paid ordinary 0.1p shares	Number	Ordinary Shares £'000	Deferred shares £'000	Share Premium £'000
In issue at 1 January 2018 and 31 December 2018	1,059,677,953	1,059	4,995	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:

a)   they do not entitle the holders to receive any dividends and distributions;

b)   they do not entitle the holders to receive notice or to attend or vote at General Meetings of the Company;

c)   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

(a)  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 2018 the Company had options outstanding for the issue of ordinary shares as follows:

Date of grant	Exercise from	Exercise to	Exercise price	Number granted	Options cancelled during the year	Number at 31 December 2018
Options
1 January 2018	1 January 2018	31 December 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:

 

 

 

Notes to the Consolidated Financial Statements continued For the year ended 31 December 2018

 

17. Share capital and premium continued

 

Share price when options issues	2018
Expected volatility (based on closing prices over the last 7 years)	1.25p
Expected life	67.84%
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) The group recognised the following expenses relating to equity settled based payment transactions: -

 

Staff costs note 2 - £250,000 (2017: £nil).

 

(b) Share warrants   Date of grant	Exercisable from	Exercisable to	Exercise price	Number granted	Warrants lapsed during the year	Number at 31 December 2018
Warrants
19 April 2013	19 April 2013	19 April 2018	2p	5,000,000	(5,000,000)	-
4 February 2015	4 February 2015	4 February 2018	1.8p	8,333,333	(8,333,333)	-
7 April 2015	7 April 2015	7 April 2018	1.8p	11,111,111	(11,111,111)	-
30 June 2015	30 June 2015	30 June 2018	1.8p	8,333,333	(8,333,333)	-
Total				32,777,777	(32,777,777)	-

 

No warrants were exercised in the year.

 

18.      Deferred tax liabilities

	2018 £'000	2017 £'000	2018 £'000	2017 £'000
Opening and closing deferred tax liability	2,273	2,273	-	-

Deferred tax has been provided at 17% of the fair value uplift of intangible exploration assets that resulted from the business combination that happened in 2016.

 

19.        Other financial liabilities

	2018 £'000	2017 £'000	2018 £'000	2017 £'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 Salinbaş. This liability arose as a result of the business combination as noted in note 18 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 (level 3 in the fair value hierarchy).

 

 

Note to the announcement

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2018, or year ended 31 December 2017, but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 on which the auditors have provided an unqualified report will be delivered following the AGM.

 

Editors' Note

 

About Ariana Resources:

 

Ariana is an exploration and development company with mining operations focused on epithermal gold-silver and porphyry copper-gold deposits in Turkey, the largest gold producing country in Europe. The Company is developing a portfolio of prospective licences originally selected on the basis of its in-house geological and remote-sensing database, which now contain a total of 1.6 million ounces of gold and other metals (as at end-2017). Ariana's objective is to cost-effectively add value to its projects through focused exploration and to develop its operations, primarily through well-financed joint ventures. 

 

The Company's flagship assets are its Kiziltepe and Tavsan gold projects which form the Red Rabbit Gold Project. Both contain a series of prospects, within two prolific mineralised districts in the Western Anatolian Volcanic and Extensional (WAVE) Province in western Turkey. This Province hosts the largest operating gold mines in Turkey and remains highly prospective for new porphyry and epithermal deposits. These core projects, which are separated by a distance of 75km, form part of a 50:50 Joint Venture with Proccea Construction Co. The Kiziltepe Sector of the Red Rabbit Project is fully-permitted and is currently in production. The total resource inventory at the Red Rabbit Project and wider project area stands at c. 605,000 ounces of gold equivalent (as at end-2017). 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.

 

In north-eastern Turkey, Ariana owns 100% of the Salinbas Gold Project, comprising the Salinbas gold-silver deposit and the Ardala copper-gold-molybdenum porphyry among other prospects. The total resource inventory of the Salinbas project area is c. 1 million ounces of gold equivalent. An NSR royalty of up to 2% on future production is payable to Eldorado Gold Corporation.

 

Panmure Gordon (UK) Limited are broker to the Company and Beaumont Cornish Limited is the Company's Nominated Adviser.

 

For further information on Ariana you are invited to visit the Company's website at www.arianaresources.com.

 

Glossary of Technical Terms:

 

"Au" chemical symbol for gold;

 

"g/t" grams per tonne;

 

"oz" Troy ounces.

 

 

Ends.