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Scoping study update from Ariana Resources plc

RNS Number : 1393J
Metal Tiger PLC
01 April 2015

Metal Tiger Plc

("Metal Tiger" or the "Company")


Scoping study update from Ariana Resources plc


Metal Tiger (LON: MTR), the natural resources investing company is pleased to note the announcement today by Ariana Resources plc ("Ariana") (LON:AAU) noting the positive results of a scoping-level assessment of its Salinbas Project.  An extract of the Ariana announcement is provided below.  The full text can be found at: http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/12302411.html 


Extract of the Ariana announcement:





Ariana Resources plc ("Ariana" or "the Company"), the Anglo-Turkish gold exploration and development company focused on Turkey, is pleased to announce the completion of a scoping-level assessment for the Salinbas Project* ("Salinbas" or "the Project") undertaken by independent geological, metallurgical and mining consultants. 



·      Scoping-study based on an approximately 650,000 ounce Indicated and Inferred JORC gold resource, with an average grade of 2.0 g/t Au and 10.2 g/t Ag.

·      Results show potential for strong financial returns, with NPV (8%) at US$108M, with payback secured within approximately 3.3 years over the Life of Mine ("LoM") at a gold price of US$1,250/oz.

·      Average LoM production of approximately 50,000 ounces of gold and 100,000 ounces of silver per annum over 10 years.

·      Capital expenditure estimated at US$53.3 million.

·      LoM C1 gold equivalent cash-cost of US$768/oz, with a pre-tax IRR of 28%.

·      Data room being established to enable qualified parties, which have expressed interest in acquiring the project, to assess the technical data.


Dr. Kerim Sener, Managing Director, commented:

"This is an excellent result which fully underpins the value of our Joint Venture strategy in Turkey.  The scoping work demonstrates the significant development potential of the project, in parallel with the considerable additional exploration upside that exists in the region.


"Salinbas demonstrates potential for the development of a low-cost mine, with up to 10 years of production, assuming the current resources can be converted eventually to the Indicated and Measured categories through further drilling.  Ample exploration opportunity exists in the vicinity to identify further resources, which could materially add to the current project.


"Our focus now is on translating this highly compelling and commercial asset into tangible value for the Company.  Ariana holds a 49% interest in the Project through its joint venture, and considering the potential value of this asset in comparison to Ariana's current market capitalisation of ~£5.6 million, the upside to the Company is clearly evident."  

* All figures relating to Mineral Resources, including the financial model, are quoted gross with respect to the Joint Venture; Ariana holds 49% of the project through a JV company.


Scoping Summary

Ariana and its consultants have completed a scoping-level assessment for the development of the Company's JV project at Salinbas, in Artvin Province, north-eastern Turkey.  The scoping study provides initial estimates for costs and financial returns, based on the current Mineral Resource base, which includes JORC Indicated and Inferred resources.  The Company has completed this work in advance of entering further discussions with third parties that have expressed interest in acquiring the Project from the Joint Venture. 

Project scoping was conducted independently by mining consultancy Auralia Mining Consulting Pty. Ltd. ("Auralia"), which has extensive experience in gold mining project development and assessment worldwide.  For more information visit www.auralia.net.au.


Mineral Resource Estimate

A revised in-situ, undiluted Mineral Resource was estimated independently by Odessa Resources Pty. Ltd. for the Salinbas gold-silver deposit (Table 1) for the purposes of project scoping.  The estimate is constrained by 3D wireframes that were interpreted using a nominal 0.5 g/t Au cut-off.  A total of 86 drill-holes (11,709m) were used to construct the wireframes.  The resource dips towards the east at 25 degrees over a vertical extent of approximately 540m.  Mineral Resource grades have been estimated using an inverse distance squared interpolation of assay data within each wireframe composited to 1m intervals.  Several geological controls were noted during the construction of the resource model.  However, apart from an interpreted cross-cutting mafic dyke, the geology was not modelled in detail.  A topographic surface was constructed from the available surveyed drill-hole collars and combined with a larger regional digital terrain model that was corrected to match the surveyed collars.  An average bulk density of 2.6 g/cm3, based on 178 determinations, was used to determine tonnages.  A top cut of 12.5 g/t Au was applied to the gold estimate.  No top cut was applied to the silver grades.


Table 1:  JORC Mineral Resource estimate for Salinbas, modelled on the basis of geology and a lower cut-off of 0.5 g/t Au.  Numbers may not sum due to rounding.


JORC Classification

Tonnage (Mt)

Grade Au (g/t)

Grade Ag (g/t)

Ounces Au

Ounces Ag




















Mine Scoping Works

A base case and set of range runs were carried out on the Salinbas project utilising the Whittle optimisation software package.  The base case inputs applied to the Whittle works are outlined below:

·      Overall Slope Angle:               45 Degrees

·      Reference Mining Cost:          US$2.20/t

·      Mining Losses:                        5%

·      Mining Dilution:                       10%

·      Sell Price Gold:                       US$1,250/oz

·      Sell Price Silver:                     US$17/oz

·      Sell Costs:                               Royalties as required

·      Discount Rate:                        8%

·      Mill Constraint:                        1Mpta

Although 1Mtpa mill constraint was applied, the Whittle runs indicated the project to be mill constrained when applying a standard 90 tonne rigid-body truck fleet.  Given this constraint, further conceptual design and high-level schedule work was completed based on a smaller mill capacity of 0.85Mtpa.


This base-case run resulted in a single continuous Whittle shell for the Revenue Factor (RF) 1 output, the summary of which is displayed in Table 2 below.


Table 2: Summary outputs of the Whittle base case optimisation.



Total Rock

87.9 Mt


8 Mt

Strip Ratio


Average gold grade

2.0 g/t

Average silver grade

9.8 g/t

Gold ounces recovered

481,900 ounces


For the purposes of determining mining inputs into the Whittle base-case run, the study assumed conventional drill, blast and haul methods with excavation planned to be carried out by a single 90 tonne rigid body truck fleet.  Due to the geometry of the mineralisation in relation to the topography, a flat US$/t unit rate mining cost was applied; to allow for future contingency, the mining cost was inflated by approximately 25% of actual costs tendered for Ariana's Red Rabbit Gold Project from US$1.75/t (all inclusive) to US$2.20/t (all inclusive) for the purposes of this study. 


Whittle range runs were carried out as part of the study.  They displayed standard expected linear movement and sensitivities to altering input parameters.  Although only at a scoping level, the resulting runs indicate the project is most sensitive to sell price fluctuations, but is physically robust to change on variance away from key base-case parameters.  This can be seen in Table 3 below. 


Table 3 (please see attachment): Whittle range run outputs, RF 1 worst-case shells used for comparison purposes. 


Mine Design

The topography at the Salinbas Project is dominated by a depression between two hill-tops (Figure 1).  Substantial vertical relief exists between the top of the mineralisation at Salinbas Peak (1,320m above sea level) to the lower limits of the current resource (780m above sea level) in the vicinity of the Ardala porphyry (Figure 1).  As the topography runs sub-parallel to the gently dipping mineralised structure, the bulk of the current resource varies in depth from 0m to 70m below the surface. 


Figure 1 (please see attachment): Conceptual open-pit design at Salinbas, looking south-west.  The Salinbas mineralised zone is shown in yellow, sitting within the conceptual pit design shown in brown.  The Ardala porphyry, which was the primary geological driver of the mineralised systems in the vicinity, is shown in red.


This topographic setting would potentially enable the development of an open-pit which would be initiated from the lowest most point, with mining progressing sequentially up the mountain-side with side-casting of waste behind the working face (Figure 2).  The open-pit could essentially be back-filled as mining progresses minimising environmental impact and eliminating the requirement for a large permanent waste rock dump, which would also keep capital costs to a minimum.  The overall strip ratio for the project is approximately 10:1, so reduction of waste movement via this method would be highly beneficial.


Figure 2 (please see attachment): Conceptual open-pit design at Salinbas, created for the purposes of high level scheduling carried out during the study.  The conceptual design was based upon the side casting and back-filling premise as discussed above.  Resources at >0.5g/t gold are displayed in pink in the diagram on the right.


Mine Schedule

A high-level mining schedule has been constructed as part of the scoping study.  The mining schedule assumed a bottom-up waste backfill scenario of the conceptual mine design, and has a 10 year Life of Mine ("LoM").  The schedule confirmed that after an initial first year ramp up, a the 0.85Mtpa mill could be kept running at full capacity for a further 7 years, over the 10 year LoM period.


Figure 3 (please see attachment): High level mining schedule including tonnes processed, input gold and silver grades and stockpile balance.


Process Route

An independent review of processing options including Carbon-in-Leach ("CIL") and Heap Leach, based on preliminary metallurgical data, was undertaken by Independent Metallurgical Operations Pty. Ltd. ("IMO").  Assessments were completed for both 1Mt and 0.5Mt per annum Heap Leach options in addition to a 0.85Mt per annum CIL option.  Scoping-level processing inputs and costs were derived for the final scoping-level mining study based on the 0.85Mt per annum CIL option.  The latter option was selected because the project development risks associated with CIL are considered to be somewhat lower than either of the two Heap Leach options, due primarily to topographic and climatic factors, in addition to established processing precedent for this style of mineralisation in Turkey. 


Preliminary metallurgical test-work confirmed that conventional processing using CIL leach methods would be suitable for the Salinbas mineralisation.  Recovery rates of 91% for gold and approximately 30-45% for silver are expected, although further test work is required.  The scoping study projected a 10 year milling schedule, with the life of mine gold:silver ratio being 1:5 (based on an all-materials schedule).  At this point, the silver contained in the Mineral Resource is not economic on its own, but adds credits as an output given the requirement to mine and process it along with the gold recovered (where the gold grade exceeds the economic cut-off).  Of approximately 530,000 ounces of gold input to the planned CIL mill, approximately 482,000 ounces of gold is recovered at a 91% gold recovery rate.



The Salinbas project benefits from well-developed infrastructure and an established mining culture in the vicinity of the proposed mine.  A combination of sealed and un-sealed roads provide access to the project from the nearby towns of Artvin (12km away) and Ardanuc (11km away).  These towns and nearby villages provide a source of both skilled and un-skilled labour for the project.  Labour costs are significantly lower in Turkey than in comparable jurisdictions.


Power would be supplied from the grid, though there is scope for some power to be derived from the nearby Deriner hydro-electric dam.  Grid power costs are expected to be approximately 11 c/kWh.  High-voltage overhead power lines pass through the project licences and are located 1.5km from Salinbas.  Water supply would likely be derived from a lake nearby.


Project Costs

Capital costs have been estimated by both Auralia and IMO for the mining and processing components of the operation, respectively.  The cost estimates have been compiled based on metrics demonstrated by similar mining operations in Turkey and elsewhere.  The capital cost for the process plant plus tailings dam is US$48.3 million including a 20% contingency and at an estimated accuracy of ±30%.  The capital cost for the mine and ancillary infrastructure is estimated at US$5.0 million. 


Operating costs for the CIL plant are estimated at US$17.31/t.  It should be noted that the mine optimisation work utilised a processing cost of US$23/t ore based upon initial expectations and in comparison with the Red Rabbit Feasibility Study; this price difference entails a potential US$5.69/t in additional recovered revenue per ore tonne processed.


C1 gold equivalent cash costs are expected at US$768/oz for the (averaged) LoM.


Financial Model

A pre-tax financial evaluation showing sensitivity to gold price (Table 4) was prepared on the basis of the Whittle outputs for the NPV (8%) scenario and the modelled NPV (10%) based on the RF1 Whittle shell derived at NPV (8%).  Total capital expenditure on the project has been deducted from the NPV figures.  All values were derived pre-tax due to the complexity and variability of tax on mining projects in Turkey that are subject to investment incentives provided by the Government of Turkey. 


Table 4: Summary model and sensitivity of the project to gold price.  The NPV at 8% and 10% discount rates are shown after deduction of the total capital expenditure.


Gold Price

NPV (US$M) Pre-Tax inc. CAPEX

(Pre Tax)

Approx. Ave. Payback (Years)

8% D/R

10% D/R

US $1,000/oz





US $1,125/oz





US $1,250/oz





US $1,375/oz





US $1,500/oz






Approvals and Incentives

The Joint Venture holds the relevant mining licences for the project through Pontid Madencilik San. ve Tic. Ltd., but would require an Environmental Impact Assessment ("EIA") to be completed, in addition to other permits required for mining, in order for the project to be developed.  Preliminary EIAs are already in place for additional exploration.


Turkey has adopted policies aimed at encouraging development of the mining sector through specific incentives.  Corporate tax rates are competitive, with a headline rate of 20% but with various tax incentives potentially reducing effective rates to 4% or less for initial periods of production.


Data Room

A virtual data room is now being set up in order to house all of the Company's technical data relating the Salinbas project and to assess the expressions of interest we have received from third parties.  Access will be limited to qualified interested parties, following a screening process and the signing of Confidentiality Agreements.  Based on their examination of the technical data, interested parties may wish to engage the Company in further discussions with a view to acquiring the Project from the Joint Venture.





For further information on the Company, visit: www.metaltigerplc.com:


Cameron Parry


Tel: +44 (0)207 099 0738

Paul Johnson

(Executive Director)

Tel: +44 (0)7766 465 617

Sean Wyndham-Quin

Neil Baldwin

Spark Advisory Partners Limited

(Nominated Adviser)

Tel: +44 (0) 2033 683 555

Notes to Editors:


Metal Tiger Plc is a natural resources focused investing company listed on the London Stock Exchange AIM Market ("AIM") with the trading code MTR and two investment divisions, Direct Equities and Direct Projects. 


The Direct Equities division invests in listed natural resource explorers and developers, with a combination of shares and warrants providing a potential non-debt financing instrument and enhanced return potential.  The Direct Projects division invests in operational mineral exploration projects with current investments in Spanish Gold & Tungsten, Thai Gold, Copper & Antimony, and Tanzanian Gold and Uranium.  The Direct Projects investment division also has working collaborations to identify new investment opportunities in Russia (platinum focus) and Turkey (gold focus), in association with experienced in-country partners.


Metal Tiger's target is to deliver a high return for shareholders by investing in significantly undervalued and/or high potential opportunities in the mineral exploration and development sector timed to coincide where possible, with a cyclical recovery in the exploration and mining markets.

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