MM: Kerim we have quite a lot to talk about so we’ve got to cram this in to what hopefully will be a concise interview, but you’ve come out with some news yesterday with regards to drilling results from Kizilcukur and we’ve got various other things we would like to discuss with you and update investors on. So if we can just kick off and congratulate you on the great results at Kizilcukur and perhaps if you can run over the significance of these results and we’ll talk about where the project stands in the overall portfolio of Ariana’s operations – as this is 100% owned by Ariana – the significance of that in terms of the proximity of this project to the Red Rabbit mine.

KS: OK yes happy to answer that in almost reverse order there. So in terms of proximity to Red Rabbit we’re approximately 22 kilometres to the North East of the Kiziltepe mine which is currently in construction. By road its about 50 kilometres from Kiziltepe; we’re expecting to identify a potentially open-pittable resource up on the hilltop there at Kizilcukur. At some point during the process of our mine schedule at Kiziltepe we may be able to sell that project, which is currently 100% held by Ariana, into the Red Rabbit joint venture directly to our joint venture company Zenit Madencilik. We can do that under the terms of our existing joint venture relationship with Proccea at three times the exploration cost. So that’s where we want to take things strategically on this project going forward, because we see this as being a potentially neat satellite operation to Kiziltepe.

Just running through the results of the first drilling programme that we’ve completed on the project, you know they were a very pleasing set of results; they largely matched our expectations, in particular, the understanding that we developed, based on seventeen historic drill holes that the high grade gold and silver zone is very close to surface. So some of the historic drilling was actually quite deep into the vein system and intercepted significantly lower grades that we’ve intercepted in our own programme and this is the result of, we believe, a level of surface enrichment that we’re seeing right at the top of the vein system with some quite exceptional gold and silver grades. And the silver there interestingly running at 450gpt over a 2 metre interval in channel sampling for instance and other high grade intercepts. So I think that the work we have undertaken now has confirmed the historic data and indeed has added to that and we will be able to develop a much better geological model now and we’ll be able to move into the new resource estimate on this project.

MM: So all things being equal, if this proves up to have the potential that it is demonstrating, strategically for the joint venture and the mine, how significant is this project in relation to the extended mine life of increased production?

KS: Well based on the current inferred resource we’d add another year of mine life at least to Kiziltepe from this area alone. But this is one of many areas across the wider Red Rabbit project in which we’re identifying satellite resource potential, so I have great confidence that we’ll be able to confirm and indeed expand on the Kizilcukur resource in time as we continue to drill the project, but also to identify other satellite resources in the vicinity of the Kiziltepe mine that we can then feed into a greater length mine schedule for the Kiziltepe operation, so taking our current plan for production from 8 years to 10 years plus.

MM: Cana we move now on to the Letter to Shareholders which you put out on 13th January, a very upbeat summary of the company’s achievements in 2015 and also looking ahead to 2016, one quote which I was intrigued by and I would like you to expand on the meaning of, and I’ll read the line “…as this will require more lateral thinking and a wider reaching strategy, we expect 2016 to mark the birth of ‘Ariana with Attitude’. Can you elaborate on what you actually mean when you refer to ‘Ariana with Attitude’?

KS: I think ‘Ariana with Attitude, it’s a function of where we find ourselves in the market cycle. The last few years have proven to be a very difficult period for the mining sector in general. The gold sector in particular has been quite adversely affected, and I think the future projections for the gold price, although broadly positive and I think there is a broad understanding that the gold price will start to see an increase in coming years, it’s a very very uncertain time for the market and ‘Ariana with Attitude’ really is about us taking the bull by the horns, recognising that we are in unprecedented times, uncharted waters and really seeking our own way to drive the company forward and to make a success of the assets that we have and indeed with future plans other projects that we may be able to secure to really push the business forward. 

MM: Thank you for that, if we can move on to the subject matter and move on to your lithium transaction which took the market somewhat by surprise when you announced it at the beginning of the year (end of last year). We’ve asked some questions on this and I think the Q&A that you provided covers a lot of the detail, but perhaps we can just touch on a couple of aspects in terms of  what this signifies financially to the company. My reckoning is that you’ve got initially an entitlement to 22.5m shares which by my reckoning is A$1,125m or £550k at current exchange rate and current valuation of Dakota (ASX:DKO) shares and another A$147k in cash that comes into Asgard. What is the significance of this to the company?

KS: I think in terms of the significance of the transaction and actually this relates to your earlier question about ‘Ariana with Attitude’, this is really an example of us thinking outside the box somewhat. Our entry into the lithium space is a direct result of our recognition that Western Turkey holds potential for Lithium and this is a result of exploration work that we were undertaking in that region for gold but we recognised that actually we are on the doorstep of what might be a significant lithium province as well. The only difficulty was in terms of our ability to access ground in Western Turkey to drive that particular arm of the strategy forward. But by then we’d understood that lithium was a sector that we ought to be exposed to and that we needed to develop experience of. And because of our links to Western Australia and in particular links to a colleague of ours, Dr Francis Wedin, we brought Francis back on board to help drive the lithium strategy forward and in particular getting our foot on some assets in eh far northern part of Western Australia, which became the subject of the Dakota transaction.

So that transaction is in the process of concluding, they’ve got an EGM in mid-February to conclude that process and then, you’re right, in terms of shares to be issued to Asgard, our lithium focused subsidiary, and cash, A$147 of cash we’d start to receive all of that at that point in time. So in terms of value to Ariana and its shareholders, it’s highly significant because this was developed off a very conceptual understanding of the lithium geological environment and that geological thinking has helped create significant value for the company.

MM: And as a majority owned subsidiary of Ariana, I presume Asgard’s holdings in Dakota will be reflected on Ariana’s balance sheet?

KS: That’s correct, yes

MM: Ok, so just moving on now to another area where investors are looking for clarification which you gave in the Letter (to Shareholders) was the process of value crystallisation at Salinbas and originally your intention was to dispose of this or certainly put it up for sale with your joint venture partners Eldorado. But there’s been a change of view from Eldorado or the joint venture, brought about by Mariana’s Hot Maden 3 million ounce discovery. I think there was a lot of expectation in the market that you were going to be able to achieve a way of selling that project, with the change in focus, what’s the significance of that and also perhaps if you can just give us some idea,  you did you were evaluating suitable opportunities to crystallise value from the project in the shorter term. If you can’t sell it, what other ways are there of crystallising value there?

KS: Yes I think the first thing to say there is that neither Ariana nor Eldorado have a rigid approach to how we enhance the value of the Salinbas project. Earlier in the course of last year we’d received a lot of interest primarily from a number of Turkish conglomerates to potentially acquire the project. And it was with that in mind that we decided to take a serious look at the option of potentially selling the asset outright into a Turkish conglomerate. But as you know the Turkish political environment, as a result of two elections that we went through last year, entered a period of uncertainty during the course of the summer into autumn. It was around that time that in fact Mariana made the announcement to say that they’d discovered the Hot Maden 3 million ounces virtually on the doorstep of the (Salinbas) joint venture licenses and the uncertainty in the Turkish environment coupled with the realisation that this was shaping up to be a highly significant gold province in Turkey, slightly changed the emphasis perhaps on our view of the project and from Eldorado’s perspective they wanted to be completely sure of what it is that we might potentially sell, before selling it and as a result of that what we’d like to do now during the course of this year is to focus certain geological work on understanding whether we have continuity of the geology that hosts Hot Maden into our own licenses. Now we suspect that’s there’s a structural trend there; there are certain indications that the trend is mineralised, but there’s a certain amount of work we need to do now to determine its real potential. And while we’re doing that of course we’re not completely blinkered to approaches and in fact a number of the approaches that we had during the course of last year, they’ve retained interest in continuing to look at the project, so all of that is still happening in the background, and were not saying that we won’t sell it, but we need to know what it is that we fundamentally have and we’ve already got a valuable asset in the form of Salinbas which is already 1 million ounces we’ve undertaken a scoping study to demonstrate it is potentially a viable mining situation but we also need to understand what else could be sitting out there in that highly prospective geological environment. So we’re keeping our options open at the moment and that’s really the bottom line there.

MM: So given that exploration is the key to this then presumably under the terms of the joint venture, Eldorado continue to be responsible for all exploration costs?

KS: Well that’s exactly right and that’s why in many ways we’re actually quite happy to sit back so to speak and watch that exploration unfold because it’s of no financial  risk to us, you know Eldorado will have to continue funding the exploration and undertaking that work; we will have some input on that during the course of the year but its fundamentally driven by Eldorado and, you know, we can just watch events unfold and hopefully we are successful and we do identify the potential for other Hot Maden type opportunities within the joint venture licenses. So we’re quite happy to sit back at this stage and see value being created.

MM: OK, a couple of questions come to mind. Is this the kind of project that you could potentially spin out into a discreet vehicle to demonstrate its valuation in a similar fashion to the way you crystallised value in the lithium projects with Dakota as the vehicle. Could this be something that would be viable? Secondly can you as a company actually afford to sit back and allow this to play out with Eldorado funding exploration to see it gain its maximum potential?

KS: I think in terms of can we afford to sit back the answer to that is most certainly yes, because our main focus obviously remains on Red Rabbit and the ability for Red Rabbit to continue funding our core business moving forward has been demonstrated. And that will lead on I’m sure you are going to ask me other questions on Red Rabbit so I won’t dwell on that, that’s really the cash generative core of our business activities in Turkey going forward. In terms of what we can potentially do with Salinbas if it’s not a direct sale of an asset and could we look at things like a transaction similar to the one we’ve completed with Dakota the answer is yes, I’m sure there would be companies out there that are interested in potentially taking on an asset of this nature and you know we’re certainly open to explore opportunities like that.

MM: I think we can now move on to the company’s main focus which is Red Rabbit and if you can just give us a bit of an idea on how things are progressing there as you move towards hopefully first gold pour in H2 this year.

KS: Sure, so we started construction late last year in September so where several months in to the construction schedule now, by all accounts we are moving on target in terms of the construction schedule. The weather has been treating us fantastically up until very recently but I’m getting reports of snowfall the previous week and also some heavy snowfall during the course of yesterday. So that might slow things down a little bit, usually February, March becomes very wet in that part of Turkey so that’s something that could have an effect on the construction schedule but at this stage we have experienced no delays. The other thing is a lot of the work in the foundations area for the process plant, we’ve actually put some photographs up on our website and on Instagram to show those areas and all of that work proceeded bang on time, we’re now waiting for shipment of some of the long lead equipment orders during the course of late this month we should be receiving those in Turkey and on site late February for the construction of the process plant to proceed. So we’re quite satisfied with the way that Proccea is managing that whole construction process, there doing it very professionally. We’ve had a number of site visits from government representatives in recent times and the feedback that we’re getting is overwhelmingly positive so that’s really good to see. In terms of other work in the vicinity, obviously the exploration program, the drilling work, we actually announced some drilling in December, we’ve got further drilling to announce in the coming weeks relating to drilling that we’ve undertaken across the Arzu South Arzu North area, you know all of that work has gone well. You know we’re moving now towards refining the resource model at Kiziltepe so that we can then relate that and refine our mining plan, our mining schedule, and also –and this comes back to your first question relating to Kizilcukur and other satellite prospects, you know, how those could be integrated into the mining schedule going forward, but I think we’re in a very good place at this point in time.

MM: Great and so just to clarify in terms of progress of the joint venture, there are milestones that have to be met and then the shareholding changes in favour of your joint venture partners on Zenit. Where are you at, at the moment in that process and what’s the next milestone to hit?

KS: So the next milestone that we’ll see is in late March, the shareholding position within Zenit Madencilik , the joint venture company, changes from March to March, so every time we hold an AGM for the joint venture company. I would imagine that Proccea would be largely spent on their commitments by that time and we’ll see a shift eventually to 50% of the joint venture, so it doesn’t shift in favour of Proccea, we’ll end up with a 50/50 joint venture but Ariana will retain a 51% profit share on the gold and silver produced. So up until last March Proccea had spent over half their total commitment so they’d need to spend another $4m or so to get to 50%.

MM: Right, ok. Just to clarify, there are certain loans that have been made and certain monies due to Ariana from the joint venture as you went through the process of acquiring land. Can you explain what the status of that is at the moment and when the repayment of that could happen? 

KS: Sure. We’re expecting the repayments on the loans associated with the land acquisition to occur during the course of construction, particularly the later stages of construction as we are moving into commissioning of the project. So essentially after all the harder work associated, the ‘heavy lifting’ shall we say, has been undertaken on the construction side of things and the project is starting to settle into steady state construction. So in terms of total quantum there it would be in the order of about £300k. But in addition to that we’ve also got an exploration loan in effect into the joint venture company and that relates to exploration work that we’ve undertaken on the joint venture licenses since the joint venture was founded, so going back to mid-2010. So with the most recent drilling work that we’ve undertaken the total there would be exceeding $1m in loans to the joint venture company and the agreement we have with Proccea is that we’ll see that aspect of loans, so relating to exploration being paid down over time as we’re in production. So I wouldn’t expect to see that until 2017.But in terms of the land acquisition that we’d undertaken I would expect to see those payments during the course of this year.

MM: Well that’s a small near term windfall, but obviously within your structure as a sort of low cost operation, £300k is a significant amount of money to come back.

KS: It is yes, very significant

MM: So 2016 is set to be a big year for Ariana Resources as reflected in your Letter to Shareholders. If we summarise everything you’ve got going on across the board, how are you viewing this going forward operationally and in terms of your enthusiasm?

KS: Well I’m very positive about 2016 and I hope everybody got that impression from the Shareholder Letter. It’s quite a different start to the year and I must say, to the last couple of years and I think most importantly you know to see all the activity on the ground at Red Rabbit, the construction of our Kiziltepe mine, the effort being put in by our joint venture partners to stay on time and on budget there its fantastic progress that’s being made. And in terms of the work that we’ve done late last year and into this year on the exploration side of things, the announcements that we’ve had out during the course of December and this month, you know very positive indeed, these are exactly the sort of results that we were expecting from the drilling program and they really will continue to lead into resource growth going forward. There’s certainly more work that needs to be done. In an ideal world we’d be drilling round the clock but we have to remain diligent and we have to cut our cloth to fit because these are unusual times for the industry so we’re continuing to maintain an element of caution and realism, as we’ve always done, but at the same time feeling quite buoyant now about the opportunities in front of the company and the very solid foundations that we’ve built over ten years and we feel that this very much is the platform for considerable further growth for the Company moving forward.

MM: And final question. Your share price is currently around .8 of a penny and that gives you a market cap of around £6.4m. Do you think that’s a fair reflection of all the company’s assets and investments and all its got going for it at the moment?

KS: Ha! Is it fair? That’s a very difficult question and if you look at the wider market, so many other companies in our position and you know the mining majors themselves are  significantly down on where they were a few years ago. In terms of fundamental value, in terms of the asset base that we hold, the opportunities for growth of the company that that asset base represents, I think there’s definitely a disconnect there between our current market cap and fundamental, let’s say asset value, project value. I think that, and I feel very strongly about this, that we’re in a very, very good position now to see considerable growth for the company moving forward and I think that if the environment for the mining sector changes to he positive we’ll be able to capitalise on that.

MM: Well I think that’s a way of saying you don’t think it’s fair, but that’s fir me to say! Kerim, thank you very much for giving MiningMaven your time, much appreciated and best of luck for 2016, we’ll be following you closely and obviously speaking to you very soon.

KS: Very good, thanks very much Malcolm, thanks for our time.