Q&A with DR Kerim Sener of Ariana Resources
Ellis Davies speaks with Dr Kerim Sener, MD of Ariana Resources, about the challenges of establishing a gold mining company in Turkey.
Can you tell me a bit about the company?
Ariana Resources is an AIM-listed exploration and development company with gold mining operations in Turkey, the largest gold-producing country in Europe, capable of producing more than 30 tonnes of gold per annum. There are 13 operating gold mines in Turkey, which includes our Kiziltepe Gold Mine.
And your own career?
I received a first-class BSc (Hons) degree in geology from the University of Southampton, UK, in 1997 and an MSc in mineral exploration from Imperial College London, UK, in 1998. Following this, I worked for Lonmin in gold exploration and mining in Zimbabwe. I then completed a PhD in gold metallogenesis at the University of Western Australia in 2004, during which I worked on a variety of projects in Western Australia and the Northern Territory. It was in the midst of my PhD that I helped establish Ariana Resources in Turkey.
In parallel with my exploration colleagues, during the past 10 years, I have been responsible for the discovery and definition of over 3.8Moz of gold in Eastern Europe, in Turkey (c.1.5Moz gold and gold equivalent) but also in FYRO Macedonia (c.2.3Moz gold and gold equivalent).
I am a Fellow of the Geological Society of London, Member of the Institute of Materials, Minerals and Mining, Member of the Chamber of Geological Engineers in Turkey, and Member of the Society of Economic Geologists.
You’ve announced that the Kiziltepe Gold Mine will produce 20,000oz of gold this year – how much of an achievement is that?
The first calendar year of production saw more than 10,000oz gold produced, which is a major achievement, particularly for a project that was in ramp-up for part of that period, having achieved commercial production in July 2017. Kiziltepe continues to exceed feasibility expectations, with an 8% quarter on quarter increase for Q1 2018 being another indication of a positive trend in performance. Being able to maintain the 20,000oz of gold target for the year is very important to the company and with a fair wind we should do somewhat better than that too.
When did the Kiziltepe Gold Mine first go into production?
First gold production was achieved in March 2017, after a six-year period comprising project feasibility, environmental impact assessment work, associated permitting and mine construction. Although about three years of this period was unfortunately lost by permitting delays and associated uncertainty brought about by a new permitting regime and changes to legislation, together with our partners we successfully navigated all of these hurdles. Consequently, we have established a very successful track-record for mine development in Turkey, which is widely recognised in the industry.
What are the core challenges you face day to day?
In this business we are faced by challenges at every turn. No two days are ever the same, which always makes the job interesting and engaging. I typically try to focus my attention at a high level on how we can conduct meaningful exploration and development work as cost efficiently as possible. On a more practical level, I provide management input, both technical and operational, across our project portfolio. Cash-flow management is also another significant part of my operational input. Beyond this there is also shareholder liaison and the important job of promoting the company regularly in the market. In addition, there is always work going on in the background concerning new business development and project evaluation.
You also have several other gold projects in Turkey – some in the exploration stage and some close to production. Can you briefly outline these?
We have a 50/50 joint venture in place with Proccea Construction Co for the Red Rabbit Gold project. The Red Rabbit Gold project is made up of the Kiziltepe mine and the Tavsan project, which is 75km from the Kiziltepe mine. We recently updated the global resource for the Tavsan project, which substantially de-risked the project.
The new classification for Tavsan will enable us to proceed with a feasibility study and EIA, without further resource drilling. We expect to initiate the remaining feasibility work and the EIA during this year.
Two other prospect areas are contained within the Red Rabbit Gold project area, Kepez and Karakavak, however, these are still in the exploration and resource development stages. Two further projects, Ivrindi and Kizilcukur, are held 100% by Ariana outside of the JV. These could potentially be sold in to the JV at three times the exploration cost. These projects contain combined resources of 44,000oz gold currently, with scope to grow further.
Separately, in northeastern Turkey, we own 100% of the Salinbas Gold project, comprising the Salinbas gold-silver deposit and the Ardala copper-gold-molybdenum-porphyry, among others. This project is the largest in our portfolio. The total resource inventory of the Salinbas project area is c.1Moz of gold equivalent. The project has a net smelter return – revenue of a mining property from the sale of the mine’s products, minus transportation – royalty of up to 2% of future production, payable to Eldorado Gold.
What is the state of the gold market generally?
The current gold price is very favourable, with largely geopolitical uncertainties maintaining prices above US$1,300/oz since late December 2017. The feasibility studies for our mines were conducted at a gold price of c.US$1,050/oz for the design of the open pits, so our current operations are economically very robust. At a local level, it is important to note that Turkey continues to import and export gold at a heady pace. Gold imports in to Turkey last year reached a record of 370 tonnes.
What forces do you see on the horizon that could destabilise the market?
Gold price is perhaps the most critical input to our operations, though in recent times the price has been holding at a level that is very good for us. We expect that the gold price will continue to maintain these levels during the rest of this year, which, if it eventuates, will have a marked positive cash-flow impact as we increase output during the summer months.
The political/geographical risk presented by our location is, however, not particularly significant overall, as we are working in a part of Turkey that is operationally very benign. There are far riskier jurisdictions than Turkey – most of Africa, for instance.
The oil price primarily affects our contractor mining cost, which increases in line with a factor of the oil price. Other cost inflation is less significant as the Turkish lira has devalued, unless we are considering components, which are bought from overseas.
Any new project development in Turkey comes with some permitting risks but these are, from experience, largely resolved in time. With the right team, such issues can be handled but patience is often key.
What are the pros and cons of operating in Turkey?
Turkey is a low-cost jurisdiction in which to operate. Permitting gold mines, though often a fairly lengthy process, is not only possible but actively encouraged and mining as a sector is well-supported by government incentive schemes. This is in stark contrast with most of Europe, which has either effectively banned gold mining through poorly thought out policies on the use of cyanide in gold extraction – despite cyanide being used more widely in other industrial processes globally – or impeded the development of gold mines for other environmental reasons. This is largely why Turkey leads gold production in Europe.
Geologically, Turkey is perhaps one of the best jurisdictions in which to explore for gold within the Tethyan Metallogenic Belt, which runs through Europe and in to Asia. In our licence areas, there are many zones of mineralisation identified in close vicinity to the company’s projects. Salinbas is also located in the Hot Gold Corridor, named after the 4Moz Hot Maden deposit located approximately 4km south of the Salinbas project.
However, exploration in Turkey is becoming harder due to the government limiting access to new ground.
A whole generation of potential exploration activity is in the process of being lost through this situation. It is worth remembering that the gold mines of today are the legacy of the exploration activity that occurred in the country from the late 1980s to early 2000s, under much freer conditions, particularly with respect to access to exploration ground and associated permitting. If new discoveries today are being impeded by policies that limit access to new ground, then it is likely that the next generation of gold mines will not be discovered. This is a matter that needs to be addressed urgently by the government.
It has long been speculated that Turkey will join the EU – how would that affect the Turkish gold market?
Turkey is highly unlikely to join the EU under present circumstances. This was not always the case, the country having been an early applicant to join the EU and after serious effort in the early 2000s through to about 2013 to achieve EU membership. However, Turkey currently feels somewhat let down by and cut-off from Europe in a political sense.
There is also a fair degree of political turmoil in Turkey – how conducive is that atmosphere to successful business?
The Turkish government, in a broad sense, is continuing to provide a stable operating environment and has been instrumental in providing incentives to the mining industry in particular. Other political developments and the geographical location of Turkey do, from time to time, suggest that the operating environment may not be so conducive, but this really is more an external perception than a reality for us.
What are your plans for the company, moving forward?
We aim to be a leading exploration, development and production company operating in Turkey. To date, we have predominantly focused on the discovery of sizeable mineral systems, mainly focusing on the Western Anatolian Volcanic and Extensional (WAVE) Province in Western Turkey.
With Kiziltepe now producing, we expect to maintain the 20,000oz gold target for this year. There is potential for this target to be increased, however, this would require further investment. We are also working with our JV company to develop the Tavsan project further, ultimately with the target of bringing this on stream as our next operation, producing at a rate of 30,000oz gold per annum.
In the meantime, we will look to deliver value to our shareholders by continuing to bring highly prospective exploration assets toward the production stage.