Ariana Resources 2008 annual report

At Ariana Resources we pride ourselves on our ability to differentiate our Company's activities from those of similar-sized AIM exploration companies. 

We place great emphasis on our ability to deliver on our stated objectives. Ariana's near term objective is to establish a profitable gold mining operation in Turkey. This will create a platform for achieving our longer term goal of establishing a gold resource of at least one million ounces through further exploration. 

CORPORATE DEVELOPMENTS 

2008 saw major advances for the Company. Among a number of key areas of progress, which I highlight below, Ariana has made the all-important transition from exploration to mine development. At the same time, the Company has continued to develop its clearly defined regional strategy in western Turkey and established an exploration Joint Venture with European Goldfields Limited in northeastern Turkey. Ariana is developing two principal projects in western Turkey, Sindirgi and Tavşan, and is exploring several other advanced project areas. Between these two principal projects, our resource inventory now contains 401,000 ounces gold equivalent (gold plus silver), representing a 35% increase in our resource base since last year. This was achieved through further exploration at Kiziltepe and the acquisition of Tavşan. 

At the Sindirgi Project, the additional drilling completed during the year at Kiziltepe resulted in an increased JORC-compliant resource of 186,000 oz gold equivalent. Geophysical work on Kiziltepe, completed in September, identified several strong anomalies suggesting vein continuity beneath an area of surface cover located between the Arzu South and Arzu North vein systems. In November, mine permitting at Kiziltepe was completed, paving the way for trial mining. 

At the Tavşan Project, acquired from Odyssey Resources Limited, a JORC-compliant resource of 215,000 oz gold equivalent was established: representing an acquisition cost of US$ 3.7 per ounce. Metallurgical testwork undertaken on the ore from Tavşan demonstrated its amenability to heapleach processing. Meanwhile, exploration undertaken in northeastern Turkey by the European Goldfields Joint Venture identified promising new porphyry-type targets at the Ardala Project. Some of these targets are scheduled to be drilled in 2009. 

Post year-end, in January 2009, the Company completed a placing for £500,000 (gross of share issue costs). The placing was supported by the board and by our major shareholders, including European Goldfields Limited, which maintained its position in Ariana at approximately 20%. In March 2009, the Company finalised a trial processing agreement for the Kiziltepe deposit with local mining group Eti Gümüş A.Ş. 

In April 2009, Ariana acquired the Muratdağ Gold Project from Newmont Mining Corp. The addition to Ariana's portfolio of this advanced exploration asset has further increased the value of the Company's project pipeline in western Turkey. Consistent with our medium term strategy, we intend to carry out the work necessary to advance this project up the project value curve. 

OUTLOOK

In my report last year, I promised a year of exciting developments. I had not intended this as a euphemism to describe the trying market conditions which then unfolded. As it turned out, Ariana was obliged to take several tough measures towards the latter part of the year in order to maintain our strategic course. To conserve funds, we reduced exploration expenditure in 2008, a decision which regrettably meant we had to reduce our professional workforce in Turkey. Work continued on Sindirgi, but we were obliged temporarily to curtail work at Tavşan, and on our broader exploration programme. 

Having weathered a difficult period for the AIM market, we believe the outlook is now substantially brighter. Since late 2008, the gold price has progressively risen and is maintaining levels around US$900 per ounce. This strength reflects in large part continuing concerns about the global economy, and it is significant that Western governments have sought to repair their financial systems via increased spending. A corollary of this is that greater funding is becoming available for the AIM mining sector, particularly for those companies able to demonstrate near-term production. 

The improvement in Ariana's share price this year reflects this and it is a gratifying development. The funding secured from our January 2009 placing has provided additional support and given us the flexibility to proceed with our plans for trial mining at Kiziltepe. In this context, our exploration team is assessing other opportunities for near-term cash-flow in the vicinity of Kiziltepe and, at the time of writing, we had reported very encouraging sampling results from the nearby Kepez prospect. Provided trial mining at Kiziltepe proceeds to plan, Ariana can expect initial cash flows from this operation in the near future. We are also aiming to determine the optimum route for turning the Tavşan project to account. In terms of future exploration we will continue to concentrate our efforts on the Western Anatolian Volcanic and Extensional (WAVE) Province in western Turkey, which remains highly prospective for the discovery of large epithermal and porphyry deposits. This is an area in which we have developed unique expertise, accumulated an enormous amount of technical data, established invaluable local relationships, and where we have already had considerable exploration success. 

As I have demonstrated above, Ariana is now entering an exciting stage of its development, and the coming year will see the pace of these activities maintained. We offer our sincere thanks to our loyal shareholders who have continued to support us through a challenging period. In recognition of this support, we are offering all shareholders the opportunity to subscribe for one warrant for every five shares currently held. I want also to express the gratitude of the Board for the sterling efforts of our exploration and administrative teams in Turkey. They have borne the brunt of our cost-cutting measures, and their enthusiastic dedication to achieving successful outcomes for our Company is a source of great pride for us. Finally, I thank my fellow Board members for their tireless support, encouragement and wise advice.