Ariana Resources PLC FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021 (5539Q)

TIDMAAU

RNS Number : 5539Q

Ariana Resources PLC

29 June 2022

AIM: AAU

FINAL AUDITED RESULTS FOR THE YEARED 31 DECEMBER 2021

NOTICE OF ANNUAL GENERAL MEETING ("AGM")

Ariana Resources plc ("Ariana" or the "Company"), an AIM-listed mineral exploration and development company with gold mining interests in Europe, announces its final audited results for the year ended 31 December 2021.

The Report and Accounts will be posted to shareholders as applicable, and are available on the Company's website ( www.arianaresources.com ) , 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 Wednesday, 10 August 2022 at 12:00 noon.

Chairman's Statement

Looking at our world in 2022 is a daunting prospect. Collectively we face a perfect storm: the aftermath of a pandemic, war in Ukraine, geo-strategic realignment, inflation, the challenges of de-carbonisation and looming shortages of critical technology metals. However, this world of escalating risks is also one of burgeoning opportunities, particularly for explorers and miners of precious and technology metals.

During 2020 and into 2021, instead of allowing ourselves to be consumed with pandemic related crisis management, we undertook a deep-rooted strategic review of our business. Our aim was to ensure we built the foundations of a sustainable business, fit to meet the challenges and grasp the opportunities of the future. We were also unanimous that Ariana must play its part in helping shape a world fit for future generations to inhabit.

The rapid acceleration of global risks since we first undertook our review has vindicated the vision of our approach. There are three core elements in reshaping Ariana's business: strategic reach through early-stage catalytic investments right through to mature development and production partnerships, geographical diversification across the Eastern Hemisphere, and commodity diversification across both precious and technology metals. The extended reach and range have the benefit of mitigating risks and increasing opportunities.

Reinforcing our strategy is the backstop of a successful producing mine at Kiziltepe. This has provided US$177 million of revenue to our investee company, Zenit Madencilik, to the end of 2021 and has exceeded production guidance for the fifth year running (since inception of operations in 2017). Profitable operations and strong cash flow capabilities are necessary in the long-term to sustain our business, and will enable us to grow and maintain an ongoing dividend stream.

Now that we have received a positive Environmental Impact Assessment for our gold project at Tavsan in western Turkey, we are progressing this project to develop our second gold mine, targeting a production rate of circa 30,000 ounces of gold per annum. At the Salinba project in eastern Turkey we have already established a resource of 1.5Moz gold. This has been the focus of an extensive drilling programme, which is still underway, to develop our understanding of this major resource within the multi-million ounce Artvin goldfield.

In line with our broader strategy, we have also successfully enhanced our asset base through our 50% earn in to Venus Minerals Ltd and the associated JV development of the fully permitted Apliki copper gold mine in Cyprus. In south-eastern Europe, we hold a 75% stake in Western Tethyan Resources Ltd, which is developing licences in Kosovo and using the newly acquired Newmont database to target significant opportunities in the wider region. In Australia, our Asgard Metals Fund has made investments in Australia-focused Panther Metals and Kazakhstan-focused Pallas Resources, in addition to Indochina-focused Annamite Resources post-period end. This strategy of leveraging our exploration knowledge and skills underpins our ability to differentiate solid opportunities from the myriad that we review. Our ability to generate a range of prospective targets across a wider geography also has the benefit of allowing us to have an 'evergreen' approach to exploration throughout the year.

We have also focused on ensuring Ariana's core strengths remain the bedrock of our strategy. Developing a successful exploration and mining company over the past 20 years meant we had to learn to turn adversity into an advantage. This has made Ariana a lean and agile company, well used to operating with tight financial constraints and low management overheads. A perfect illustration of the benefits of our lean approach is that Ariana has one of the lowest gold discovery costs in the business - a fifth of the industry average. We are confident that a strategy of broadening our opportunities, while mitigating our risks and leveraging our strengths will ensure we continue to build a resilient and agile company.

Whilst conducting our strategic review, we recognised that at the heart of Ariana's ability to survive and thrive is the quality of our team. From Ariana's inception, we understood the need to build and develop a diverse, distributed and multi-skilled team. We also recognised the need to work together cohesively, despite the challenges of field conditions and remote locations. As in many instances of Ariana's history, hardships drove adaptation. Thus, long before the company had to face the challenges of the recent pandemic, we had harnessed technology to enable collaborative team working, even from the remotest locations. Indeed, the capabilities we built into the company enabled us to operate successfully without disruption throughout the past two years.

Furthermore, the Ariana team has grown significantly over the last year and I would like to extend a warm welcome to all the new members and acknowledge how fortunate we are to have you on board. We are proud of our ability to attract and retain great people, as well as our ability to form alliances with academia and established mining experts across many countries. It is this diversity of skills, talents and experience which is constantly enriching Ariana's working environment. We also recognise the importance of giving our teams freedom to experiment without fear of failure. We depend on their innovations and their boldness. We find that younger team members often teach and reinvigorate older ones. In doing so they refresh the DNA of the organisation.

In the context of such skills sharing and collaboration, we are especially pleased to open our new Ankara head office as a regional hub for our geoscientific skills and analytical capabilities. We know that the active collaboration of great people can achieve extraordinary things. A textbook example of the power of collaborative teamwork was the famous 'Skunk Works', developed by Lockheed Martin under the brilliant and legendary leadership of Kelly Johnson. Using an agile approach to teamwork, where teams were given great autonomy, unhindered by bureaucracy, Lockheed achieved seemingly impossible timescales in the development of new aerospace technologies. There are consequently three cornerstones underpinning Ariana's strategy: targeting, technology and teamwork, and these drive everything that we do. Our recent collaboration with Newmont (post-period end) brings into sharp focus our objective to hunt for world-class mineral deposits, as Newmont is itself specifically focused on Tier One Assets. Newmont has undertaken not only to collaborate with Ariana in exploration across south-eastern Europe but has also invested US$2.5 million in Ariana. I would like to take this opportunity to thank Newmont for this statement of confidence and encouragement. Newmont's investment in Ariana also demonstrates their alignment with our view that it is within the under-explored Tethyan Metallogenic Belt that the next Tier One Assets will be discovered.

It is worth reflecting on Newmont's achievements over their 100 years' existence and where they came from. As a fledgling mining company, Newmont made its first major gold investment with a 25% founding stake in Anglo American Corporation in South Africa. This is a good example of how a part investment stake can lead to great things. Newmont has since gone on to become the largest gold producer in the world, as well as owning a host of other mineral producing mines globally. We have a long history of working with the Newmont team and have had access to their regional database in Turkey for some time. We view it as a powerful endorsement that they have chosen us to be their eyes and boots on the ground in south-eastern Europe. Their own stable of Tier One assets shows us what they will be looking for in this new theatre of operations and I have no doubt we will not disappoint them.

Having boots on the ground in prospective geological territory is all well and good but one must also be mindful of the broader picture. As the renowned geologist Terry Grammar was noted for saying, you have to look at all aspects of a project. This includes the business model, legal title, operating environment and financing. In summary, you must have sharp situational awareness. It is only then that you can achieve a successful mineral discovery. With this in mind, we have gone to great lengths to ensure we are well informed on all aspects of our prospective investments, not only for the projects we undertake directly but also for our target investment companies, where we maintain an ongoing dialog. This background work behind a sound business strategy is so often unseen and unsung and yet it is a vital cornerstone of success. Ariana would not have a successful operational gold mine today were it not for the patient hours and indeed years of quiet diplomacy with communities, business partners and government organisations.

A critical part of our approach relates to shared values, built both within and outside the company, linking our teams and our partners. There is a shared moral compass at the heart of this approach, with our emphasis on trying to take the responsible course of action, even if this is often not the easiest route. A diligent approach to environmental, social and governance responsibilities is as relevant to the external actions of a company as it is in the internal arrangements of a company.

As we continue to seek our core strategic metals - gold, silver and copper - we remain confident of their long-term value. We are also confident that their prices will continue to trend upwards, despite the odd dip following a recent rise in interest rates. In the context of geostrategic realignment, it is interesting to note that the Pentagon has recently asked Congress to extend funding to mineral projects in other jurisdictions, namely the UK and Australia. This demonstrates that our exploration strategy is well positioned and that there are great opportunities for agile explorers and developers like Ariana.

Despite an exceptionally challenging world environment, after our first 20 years we stride into Ariana's future confident we have reshaped our business to meet the challenges and grasp the opportunities of the future. Ariana has three inherent advantages that we will draw on to drive the next 20 years: our clear strategic direction, the intelligence and agility of our youthful team and the passion for exploration and mining that guides our endeavours. Ariana has also demonstrated it is adroit at forging strong relationships with able business partners to further our strategy. We now have a pipeline of projects at varying stages of maturity to extend the reach and range of our business across new geographies and commodities. This new reach and range encompasses south-eastern Europe copper/gold, Cyprus copper, Central Asian copper/gold and Australian gold/nickel-cobalt. We are also poised to leap further into uncharted territory in the Tethyan Metallogenic Belt with our newly conceived Project Leopard in Eastern Turkey. The mighty Anatolian Leopard may be an elusive creature but we intend to unleash not only two decades of exploration expertise but also the youthful eyes and energy of our team on this vast under-explored territory. Empowered by the robust finances of our Kiziltepe mine, a clear strategy and a proven team, we look out from the crow's nest over the horizons of the next years with confidence.

As I look back at my nearly two decades of investment with Ariana there are many highlights that I can reflect on. I think the ones that stand out amongst the many include the AIM listing of a fledgling exploration company with a prospective gold asset, and seeing that asset being developed into a core profitable producing gold mine following its first gold pour. The latter, without doubt, takes the top slot of all my highlights, followed by the receipt of our first ever dividend cheque in the post, which itself is probably one of the most rewarding things any exploration investor can experience. As I look forward to the next decade, with such a wide distribution of capable team members, from Australia as far as Turkey and Zimbabwe, and having the tools and resources available, we are better placed than we have ever been to make a major gold discovery.

As a team, we look forward to welcoming our shareholders at our next Annual General Meeting where we will follow the formal business by updating you with a presentation on our current developments. The notice of AGM includes all the resolutions proposed including the proposed dividend payment. I would like to encourage shareholders to exercise your proxy votes in favour of these resolutions even if you are planning to attend the AGM. I would also like to round off by thanking our team and stakeholders and in particular those new partnership members who have demonstrated their confidence in the Ariana success story.

Michael de Villiers

Chairman

28 June 2022

Financial Review

Profits before tax increased to GBP7.7m up from GBP5.1m in the previous year. The principal driver of this was the partial disposal of our interests in Turkey in February 2021 as we reduced our 50% interest in the Kiziltepe mine and 100% interest in the Salinba project to a collective 23.5% interest in both, for net proceeds of GBP27m giving rise to profit of GBP6.4m, as set out in note 5 to the accounts. Administrative costs increased by GBP1.5m due in part to increased staff costs of GBP0.4m on account of less being capitalised within intangible exploration assets this year, and in part due to increased costs associated with management of our interests in Zenit by Proccea of GBP1.1m following our reduced involvement in the mine itself. These latter costs are expected to run until Q1 2023.

Otherwise our profits are primarily determined by the performance of our interests in our investments in our associated undertakings, being our 23.5% ownership in our aforementioned Turkish interests, and our interest in our Cypriot copper gold projects though our 50% interest in Venus, showing an aggregated net share of profit this year of GBP4m.

Other points of note are the increased tax charge arising in part due to the tax arising on the partial disposal of our interests and also withholding tax on dividends subsequently returned to the UK. The Turkish Lira declined significantly against Sterling towards the end of the year which has given rise to a translation loss on the revaluation of our foreign entity opening balances of GBP2.9m, recorded through other comprehensive income as usual.

As far as the Group Statement of Financial Position is concerned, our interest in Zenit is now treated as an associate rather than joint venture investment, albeit the equity method of accounting for it remains the same, but now our interests in Salinba via Pontid and Cyprus via Venus are also accounted for as associates using the equity method of accounting too, reporting a combined value at the year end of GBP11.4m.

Another significant change this year arose from our capital reduction in July 2021 when we applied via the Courts to cancel our historical deferred ordinary shares and share premium and set them against retained losses to create a distributable capital reduction reserve of GBP7.2m, thereby facilitating the payment of the first tranche of our Special Dividend of GBP3.8m from the proceeds of our reduction of our Turkish interests. Since the year end another tranche of GBP1.8m has been paid, with another such dividend planned for October 2022.

At the year end the Directors were pleased to report a healthy cash balance of GBP16.4m, and we will continue to strive to deliver value from this position, with a view to further dividends in future.

Outlook

As predicted in our outlook of last year, 2021 marked the dawn of a new age for Ariana Resources. During 2020, we set up the Company in a strategically powerful position and then acted systematically in line with this strategy throughout the past year. This is exemplified by the culmination, post-period end, of a strategic investment by Newmont Corporation into our business, with the intention of developing the exploration opportunities we had created through the establishment of Western Tethyan Resources last year.

In addition to advancing our long-term interests in south-eastern Europe, the Company also commenced investing in high-impact early-stage exploration opportunities via the Asgard Metals Fund. By year end, the Company was invested in gold and nickel-cobalt exploration in Western Australia and the Northern Territory, and in gold-copper exploration in Kazakhstan. Post-period end, these were joined by an investment in gold-copper exploration in Laos. As part of this investment strategy, we are actively engaged with our investee companies and provide regular input into their exploration programmes, while their teams in turn provide in-country experience and leverage.

Such activities corresponded with a significant increase in news-flow, which will be sustained in the years ahead given the wider geographic spread of projects in which we are now invested. These projects are in part selected across various climatic zones to maximise the potential for seasonal exploration activity, resulting in a more even spread of work throughout the year for our project evaluation team and enabling steady emphasis to be sustained year-round across our investee projects. This further builds on our already notable operational efficiencies as a business, particularly in this new world of reduced travel and remote-working; further advantages of this approach are the marked benefits to our corporate ESG commitments.

The Company presently has the capability and financial resources to hold a structurally more diverse portfolio of mineral exploration, development and mining project investments across a broader geography. With the significantly increased demand in commodities, particularly those which contribute to technological development, we find ourselves on the brink of profound changes in perception and awareness of the industry and a consequent marked realignment of investment portfolios globally. Not only will the mining sector need to find and mine more at an accelerating rate but it will also need to do this without the environmental and social impacts of the past. This presents several fundamental challenges and an opportunity for agile companies capable of advancing their exploration strategies in new search spaces. We have spent the past year positioning the Company accordingly.

This year also represents 20 years since the foundation of the original Ariana Resources in Australia and we are consequently very proud of what has been achieved by our team during the past decades. There is a strong sense among us of the Company now having come full-circle, particularly given my own relocation to Perth during 2020. This is especially relevant given the significance of Perth to the global mining and exploration industry in terms of the development of world-leading exploration models, techniques and operational practices, in addition to its particularly dynamic and vibrant deal-making scene. Accordingly, the Company is very well positioned for the future and we look forward to continuing to action our unique strategy.

Dr Kerim Sener

Managing Director

28 June 2022

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2021

 
 Continuing operations                          Note       2021       2020 
                                                        GBP'000    GBP'000 
---------------------------------------------  -----  ---------  --------- 
 Administrative costs                                   (2,917)    (1,360) 
 General exploration expenditure                           (67)       (35) 
---------------------------------------------  -----  ---------  --------- 
 Operating loss                                 4       (2,984)    (1,395) 
---------------------------------------------  -----  ---------  --------- 
 Profit on restructuring of group activities    5         6,423          - 
 Share of profit of associate accounted 
  for using the equity method                   6         4,260          - 
 Share of profit of joint venture accounted 
  for using the equity method                                 -      6,478 
 Share of loss of associate accounted 
  for using the equity method                   6         (213)          - 
 Investment income                                          202          7 
---------------------------------------------  -----  ---------  --------- 
 Profit before tax                                        7,688      5,090 
---------------------------------------------  -----  ---------  --------- 
 Taxation                                       8       (3,832)      (327) 
---------------------------------------------  -----  ---------  --------- 
 Profit for the year from continuing 
  operations                                              3,856      4,763 
---------------------------------------------  -----  ---------  --------- 
 Earnings per share (pence) attributable 
  to equity holders of the company 
 Basic and diluted                              10         0.36       0.45 
 
   Other comprehensive income 
 Items that are or may be reclassified 
  subsequently to profit or loss: 
 Exchange differences on translating 
  foreign operations                                    (2,948)    (3,647) 
 Other comprehensive loss for the year 
  net of income tax                                     (2,948)    (3,647) 
---------------------------------------------  -----  ---------  --------- 
 Total comprehensive profit for the 
  year                                                      908      1,116 
---------------------------------------------  -----  ---------  ---------