This report is an updated version of the report published on 11^th April 2022 at 08:58 AM GMT+1.

Ariana Resources PLC

Ariana Resources PLC (LON: AAU) is an FTSE AIM All-Share listed gold exploration and development company focused on precious and technology metals. The primary area of operations is in Turkey and across the wider European & Eastern Mediterranean regions.

Growth Prospects

• Mine Development: The Company has shown accelerated progress regarding the Tavsan mine development programme. The construction of the mine is expected to begin during the second quarter of 2022. Moreover, AAU targets the production of up to 30,000 oz of gold per annum over eight years.
• Impressive Joint Venture Production Guidance: AAU has shown significant gold mining interest in its joint venture Kiziltepe Mine as it held approximately 23.5% of the shareholding. Meanwhile, the gold production is expected to increase from 20,737 ounces of gold in FY21 to 25,000 ounces of gold for FY22.
• Diamond Drilling: The Company had managed to commence diamond drilling at Salinbas and Tavsan mines during the second half of 2021.

Key Risks

• Failure to Discover Substantial Reserves: The failure in discovering substantial reserves could adversely affect the AAU’s future performance as exploration and development are capital-intensive activities.
• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.
• FOMC Meeting Minutes: The Federal Open Market Committee's meeting minutes indicated that the Federal Reserve is preparing to move aggressively to head off inflation.

Gold Industry Dynamics

• Growth Catalysts: The Russia-Ukraine war and rising inflation worldwide lent support to Gold price over the near term.
• Key Events: The rising Treasury yields and strengthening of the US Dollar index firmed on prospects of aggressive interest rate hikes by the U.S. Federal Reserve may put pressure on yellow metal price. Furthermore, several Central Bank meeting lined up during mid-April 2022 may further dent gold prices.
• Gold ETF: Gold ETF witnessed a net inflow of 35.3 tonnes (equivalent to USD 2.1 billion representing around 1% of AuM) in February 2022 amid high inflation and geopolitical risk.

 (Source: REFINITIV; Analysis done by Kalkine Group)

On a daily chart, COMEX Gold Futures' price (USD 1,946.50) is sustaining above the 20-days exponential moving average of USD 1,932.63, indicating an upside direction for the commodity. At the same time, the MACD line has given the bullish crossover against the signal line.

Key Fundamental and Shareholders Statistics of Ariana Resources PLC. 

 De'Villiers (Michael John) is the most significant shareholder as it holds nearly 63.00 million shares as of 31 March 2022.       

Production Highlights (for the year ended 31 December 2021 as on 18 January 2022)

(Source: Company Filings)

• Decent Growth in Production: The Kiziltepe mine has produced a total of 104,937 ounces of gold and 1,154,805 ounces of silver during FY21.
• Revenue: The mine has achieved full-year revenue of USD 42.9 million at an average realised gold price of USD 1,763 per ounce.
  

Financial and Operational Highlights (for the six months ended 30 June 2021 as on 30 September 2021)

(Source: Company Filings)

• Net profit: The profit realised on the restructuring of group activities drove net profit higher from £1.9 million in H1 FY20 to £5.0 million during H1 FY21.
• Balance Sheet: The cash & cash equivalents stood at £22.43 million as of 30 June 2021.
  

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 11 April 2022 at 08:03 AM GMT+1, AAU’s shares were trading at GBX 4.30, down by around 3.37% from the previous day closing price. Stock 52-week High and Low were 5.45 and GBX 3.20, respectively.

From a technical perspective, the stock price is hovering above the 20-days exponential moving average of GBX 3.98, indicating an upside potential in the stock price. Moreover, the MACD line has given a bullish crossover against the signal line.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Business Outlook

The Company had achieved significant year-on-year growth in profitability because of the restructuring activities as it had reduced the shareholding in the Kiziltepe mine from 50% to 23%. On an optimistic note, the Kiziltepe mine production went ahead of the guidance by around 9% during FY21. Meanwhile, the investments made across the Eastern Hemisphere in line with the Project Catalyst Strategy had resulted in enhancing the operational reach. In a nutshell, AAU remains focused on generating increased returns for the shareholders with an impressive pipeline of Greenfield and Brownfield projects.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the decent financial ratios, accelerated operational progress, strong balance sheet, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Ariana Resources at the current market price of GBX 4.30 (as on 11 April 2022 at 08:03 AM GMT+1), with lower-double digit upside potential based on 17.25x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.). 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.  

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

---

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.