NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES NOT FOR DISTRIBUTION IN THE
UNITED STATES.
Arian Silver Corporation ("Arian" or the "Company") (TSX
VENTURE:AGQ)(AIM:AGQ)(FRANKFURT:I3A), a silver exploration, development and
production company with a focus on projects in the silver belt of Mexico, today
announced the release of its Management's Discussion and Analysis ("MD&A") and
unaudited Financial Statements ("Financials") for the three months and six
months ended 30 June 2013.
The MD&A and Financials are available at SEDAR at www.sedar.com and on the
Company's website at www.ariansilver.com. These documents can also be obtained
on application to the Company. The following information has been extracted from
the MD&A and Financials. The financial information in this announcement does not
constitute full statutory accounts.
Arian's Chief Executive Officer, Jim Williams, commented today, "Today's results
come at a time of significant potential change for Arian. Arrangements to
finance the acquisition of the Company's own mill continue to progress, and I
hope to be able to provide a full update on this very soon."
OVERVIEW OF SECOND QUARTER 2013
Financial
Second Quarter 2013 Second Quarter 2012 Change
$000s $000s $000s
-------------------------------------------------------
Revenue 129 2,104 (1,975)
Gross (loss)/profit (284) (138) (146)
Net (loss)/profit for
the period (947) (1,133) 186
Six Months ended Year ended
30 Jun 2013 31 Dec 2012 Change
$000s $000s $000s
--------------------------------------------------
Cash and cash equivalents 635 491 144
Total assets 14,582 14,119 463
Trial production resumed in February 2013 at the Beneficiadora de Jales y
Minerales Juan Reyes SA de CV ("Juan Reyes") processing plant albeit on a small
scale. However, following the recent volatility in the silver price, an
agreement has been reached by mutual consent with the owner of Juan Reyes to
cease operations in June 2013. The decrease in revenues is due partly to the
silver price being significantly lower, but mainly due to the production being
much less than the equivalent quarter in 2012.
Cash balances at Q2 2013 were higher as further drawdowns on the Standby Equity
Distribution Agreement ("SEDA") facility have contributed to working capital and
other costs in the short-term.
Operations
Second Quarter 2013 Second Quarter 2012 Change
------------------------------------------------------
Head grade - Ag grams
per tonne 191 181 6%
Tonnes mined 4,628 26,268 (82%)
Tonnes milled 3,221 28,903 (89%)
Silver concentrate
tonnes produced 43 298 (86%)
Silver ounces produced 9,294 98,616 (91%)
Silver ounces per
concentrate tonne
produced 216 331 (35%)
Silver ounces sold 9,058 93,112 (90%)
Silver concentrate
tonnes sold 37 286 (87%)
Trial production ceased during the quarter at the Juan Reyes plant.
Exploration
The preparation and exploring of mining blocks continued in order to verify the
continuity of mineralisation. Level 150 was dewatered and rehabilitated, and
sampling took place obtaining new accessible mining blocks that were included in
the resource estimate. The preparation and exploring of mining blocks continued
in order to verify the continuity of mineralisation.
Subsequent Events
The Company announced on 23rd August 2013 the positive advancement of
negotiations regarding future financing. The private placement debt financing of
US$15,585,000 (the "Private Placement") comprises a senior secured convertible
note (the "Note"), which would mature at a premium of 5% if not otherwise
converted, twelve months from its date of issuance and will bear interest at an
annual rate of 14% to be prepaid in full upon closing of the Private Placement.
It remains expected the Note will be convertible, in whole or in part, at the
option of the holder, at any time following the closing date and up to and
including the maturity date into fully paid and non-assessable common shares
("Common Shares") in the capital of the Company (collectively the "Note Shares")
at price of CAD$0.11 per Note Share (the "Conversion Price"). If at the time of
sending a conversion notice the Common Shares are then listed on the TSX Venture
Exchange ("TSXV"), not more than 96% in aggregate (including prior conversions,
if any) of the principal amount may be converted at the Conversion Price, and in
the event that all or any part of the remaining 4% is to be converted, it shall
be converted based on the last closing price of the Common Shares on the TSXV
immediately prior to the date of sending the applicable conversion notice. The
Note is expected to be secured on all or substantially all of the Company's and
its subsidiaries' assets.
In connection with the Private Placement, the subscriber will receive a 4%
arrangement fee from the gross proceeds. The TSXV has conditionally approved the
Private Placement, subject to the Company fulfilling all of the listing
requirements of the TSXV.
Assuming that all the regulatory conditions are satisfied, the proceeds from the
private placement are intended to be used to acquire the El Bote processing
plant, including transportation of plant to new site, refurbishment of plant,
and new ground works at the site, mine expansion as well as for working capital
and corporate purposes.
This processing plant has the capacity for processing up to 1,500 tonnes per day
and is expected to provide significant cost savings from toll milling.
Since 30 June 2013, the Company has issued 5,293,499 common shares at an average
price of GBP 0.043 in relation to the drawdown of the SEDA, generating funding
of GBP 225,655.
Following this share issue the Company has in issue 328,088,286 common shares
with voting rights.
The Company sold all of its shareholding (of 1,089,318 shares) in Geologix
Explorations Inc. ("Geologix") for proceeds of $143,603 (CAD 148,916). This
shareholding was reported with a fair value of $104,000 at 30 June 2013.
THE STRATEGY
-- Obtain advanced and low-cost (acquisition cost) silver projects and
rapidly build up resources in the ground. Arian is focusing its
exploration efforts in one of the richest known silver-bearing districts
in the world - the Zacatecas State of Mexico.
-- Focus on projects with prior exploration and production history, thereby
reducing risks and capital costs.
-- Develop projects towards production through a combination of company
development and/or Joint Venture (JV) and acquisition opportunities.
-- Build shareholder value by expanding silver resources and reserves, and
increasingly efficient production.
REVIEW OF OPERATING PERFORMANCE
----------------------------------------------------------------------------
Q2 Q1 Q4 Q3 Q2 Q1
2013 2013 2012 2012 2012 2012
----------------------------------------------------------------------------
Head grade - Ag grams per tonne
(g/t) 191 174 - - 181 173
Tonnes mined 4,628 - - 4,072 26,268 21,553
Tonnes milled 3,221 258 - - 28,903 24,394
Silver concentrate tonnes produced 43 4 - - 298 302
Recovery % 47.05 60.90 - - 58.74 49.01
Silver ounces produced 9,294 878 - - 98,616 66,688
Silver ounces per concentrate
tonne produced 216 251 - - 331 221
Silver ounces sold 9,058 - - 8,937 93,112 75,911
Silver concentrate tonnes sold 37 - - 32 286 330
Quarter end inventory balances
Mined tonnes stockpile 17,142 17,935 18,192 18,204 15,003 17,637
Silver concentrate inventory
tonnes 4 4 - - 36 24
Silver ounces included in
concentrate inventory 1,114 878 - - 11,276 5,772
----------------------------------------------------------------------------
Head Grade
The head grade of 191 is an increase on previous quarters.
Tonnes mined
4,628 tonnes were mined in the quarter.
Tonnes milled
3,221 tonnes of stockpiled ore were milled during Q2 2013 as processing
commenced at the Juan Reyes mill.
Silver concentrate produced
9,294 ounces of silver concentrate were produced during Q2 2013 compared to 878
ounces during Q1 2013.
% Recovery
The recovery rate of 47.05% is a reduction from the 61.90% reported for Q1 2013,
and is attributable to low and discontinuous throughput.
Mined tonnes stockpile
The stockpile of mined ore was 17,142 tonnes at the end of Q2 2013 compared to
17,935 tonnes at the end of Q1 2013.
Mining Operations
----------------------------------------------------------------------------
All figures in this table are
quoted in metres 2013 2012
Q2 Q1 Q4 Q3 Q2 Q1
Exploration Drilling 44 - - 12 121 120
Ramp development 67 107 81 68 242 98
Preparation 25 - - 8 151 179
Raises 70 - - 33 31 32
----------------------------------------------------------------------------
Total 206 107 81 121 545 429
----------------------------------------------------------------------------
Mining focussed on the Ramal Norte/Sur, San Jose 75 m Level Central Zone and
Santa Ana resource blocks. These were selected from several delineated resource
blocks to support an initial pilot scale mining operation with the potential to
increase the mining rate to circa 1,500 tpd subject to milling capacity
availability.
During Q2 2013 the Company developed 206 metres. The preparation and exploring
of mining blocks continued in order to verify the continuity of mineralisation.
Level 150 was dewatered and rehabilitated, and sampling took place obtaining new
accessible mining blocks that were included in the resource estimate.
Development continues at the mine, but on a reduced scale to meet obligations to
keep the mine operational until mining is resumed.
Milling Operations
The Company played an important role in managing and completing the
commissioning of the Juan Reyes plant during Q2 2013. This included the
identification of milestones, critical paths, task management, supervision and
the completion of the Lead circuit and testing of the crushing section.
Water had been scarce owing to low levels of rainfall in Zacatecas state,
although heavy rainfall during summer 2013 has alleviated this somewhat. Efforts
were made to ensure a reliable source of water for the Juan Reyes processing
plant, including sourcing water from the Calicanto mine, less than 1km away.
This had the advantage of reducing the water levels in the mine, which will
improve access to mining blocks.
During Q2 2013 a total of 3,221 tonnes were processed at Juan Reyes. This was
more conservative than initial estimates, and reflects on-going adjustments to
refine the operations and processes.
Following the recent volatility in the silver price, an agreement has been
reached by mutual consent with the owner of Juan Reyes to cease operations in
June 2013. The decrease in revenues is due partly to the silver price being
significantly lower, but mainly due to the production being much less than the
equivalent quarter in 2012.
Exploration Drilling
The phase 5 exploration drilling program has been prepared and it is anticipated
that it will begin once additional funding has been secured.
Laboratory
The independent on-site laboratory was operated by the Stewart Group (a
subsidiary of the ALS Chemex Group) until June 2013. Thereafter the Company
assumed responsibility for laboratory operations in order to reduce expenditure.
This valuable facility which provides timely analysis of samples and critical
information to improve the decision making process of mining and milling staff.
In addition the laboratory provides an invaluable tool during drilling
programmes which has significantly decreased the turnaround times for analysis
of Arian's sampled drill cores.
MINERAL RESOURCE
Three of the Company's concessions representing 145 hectares, which were not
considered to hold any mineralisation and which were outside the mineralisation
trend, have been cancelled. The cancellation of these concessions does not
impact the Company's NI 43-101 mineral resource estimate and the Company now
holds 28 mineral concessions in Mexico totalling 7,755 hectares as set out
below.
---------------------------------------------------------------------------
Project Name No. of Concessions Area in hectares ("ha")
---------------------------------------------------------------------------
San Jose 8 6,134
---------------------------------------------------------------------------
Calicanto 7 84
---------------------------------------------------------------------------
Others 13 1,537
---------------------------------------------------------------------------
Qualified Person
Mr. Jim Williams, Eur Ing, Eur Geol, BSc, MSc, DIC, FIMMM, the Chief Executive
Officer of Arian, a "Qualified Person" as defined in the AIM guidelines of the
London Stock Exchange, and a "Qualified Person" as such term is defined in
Canadian National Instrument 43-101 ("NI 43-101"), has reviewed and approved the
technical information in this Review of Operations other than the mineral
resource estimates referred to below.
San Jose Project, Zacatecas State
The 100%-owned San Jose property is located approximately 55 kilometres ("km")
to the southeast of Zacatecas City and comprises 8 mining concessions totalling
approximately 6,134 ha. The property has significant infrastructure, including a
4.5 x 5 metre ("m") main haulage ramp extending more than 4.0km along the San
Jose vein ("SJV") system, and a 350m deep, 500 tonne per day ("tpd") vertical
shaft with operational hoist. In addition, a number of shallower vertical shafts
are located along the SJV.
A 2% NSR (net smelter royalty) on SJV revenue is payable to the vendor of the
San Jose property.
Mineral Resource
Arian's resource estimate includes all drilling programmes from 2006 along the
SJV which has a delineated NI 43-101 and a JORC-compliant resource estimate of
approximately 30.61 million ounces of silver, 67.02 million pounds of lead and
149.91 million pounds of zinc in the "indicated" mineral resource category, and
88.65 million ounces of silver, 205.25 million pounds of lead and 410.50 million
pounds of zinc in the "inferred" mineral resource category. These NI 43-101 and
JORC-compliant mineral resources are summarised in the table below:
----------------------------------------------------------------------------
Average Grade Contained Metal
------------------------------------------
Resource Category Tonnes Ag Pb Zn Ag Pb Zn
----------------------------------------------------------------------------
(t) (g/t) % % (Moz) (Mlb) (Mlb)
----------------------------------------------------------------------------
Indicated 8,000,000 119 0.38 0.85 30.61 67.02 149.91
----------------------------------------------------------------------------
Inferred 24,500,000 110 0.38 0.76 86.65 205.25 410.50
----------------------------------------------------------------------------
1. Geological characteristics and +30 ppm grade envelopes used to define
resource volumes.
2. Each mineral resource estimate is in accordance with CIM standards.
3. The effective date of each mineral resource estimate is 12 March 2012.
4. The estimates are based on geological, statistical and geostatistical
data assessment and computerised IDW3, Ag grade wireframe restricted,
linear block modelling.
5. The resource was estimated using 188 drill holes and more than 38,000
metres.
6. Resource figures were prepared under the supervision of Malcolm Titley
who is a Qualified Person (as defined in Canadian National Instrument
43-101).
7. Tonnage figures have been rounded to reflect this as an estimate.
8. Ag (silver) ounces have been calculated using 31.1035 g = 1 oz.
9. Pb (lead) and Zn (zinc) tonnes have been calculated using 2204.622 lbs =
1 tonne.
10. The mineral resource is 100% owned by Arian.
The following reports prepared by A.C.A. Howe International Limited relating to
the San Jose project are available on the Company's website www.ariansilver.com
or on SEDAR at www.sedar.com:
a. Report dated 22 September 2009 and entitled "Preliminary Economic
Assessment Report (PEAR) on the San Jose Silver-Lead-Zinc Deposit,
Zacatecas, Mexico"; and
b. Report dated 15 August 2008 and entitled "Resource Estimation Update for
the San Jose Silver-Lead-Zinc Deposit, Zacatecas, Mexico".
Readers are reminded that mineral "resources" are not mineral "reserves" as they
have not yet demonstrated economic viability. There is no certainty that mineral
resources can be upgraded to mineral reserves through continued exploration.
On 24 May 2013 the Company filed an updated technical report entitled 'NI43-101
Technical Report Update - San Jose Project, Zacatecas, Mexico'.
REVIEW OF FINANCIAL PERFORMANCE
SUMMARY OF QUARTERLY RESULTS
Milling re-commenced in February 2013. However, in June 2013, following downward
volatility in the silver price, an agreement was reached with the owner of the
mill to cease operations at the Juan Reyes plant. These factors have had a
significant impact on the comparability of quarter-on-quarter figures set out
below:
Unaudited 2013 2012
Q2 Q1 Q4 Q3 Q2 Q1
$'000 $'000 $'000 $'000 $'000 $'000
------------------------------------------------------
Revenue 129 - 34 136 2,104 2,314
Cost of sales 413 206 256 475 2,242 2,379
Gross (loss)/profit (284) (206) (222) (339) (138) (65)
Operating
(loss)/profit (879) (935) (1,072) (1,025) (1,006) (855)
Net investment
(loss)/profit (68) (21) (84) 57 (127) 81
Net (loss)/profit for
the period (947) (956) (1,156) (968) (1,133) (774)
Basic and diluted loss
per share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Total assets 14,582 15,154 14,119 14,409 15,021 16,732
Total non-current
financial liabilities 182 186 177 175 172 171
Shareholders' equity 13,414 13,971 13,003 13,464 13,647 15,370
Unaudited 2011
Q4 Q3
$'000 $'000
------------------
Revenue 2,367 2,434
Cost of sales 1,921 1,914
Gross (loss)/profit 446 520
Operating
(loss)/profit (393) (486)
Net investment
(loss)/profit (50) (116)
Net (loss)/profit for
the period (443) (602)
Basic and diluted loss
per share $ 0.00 $ 0.00
Total assets 16,250 16,894
Total non-current
financial liabilities 170 168
Shareholders' equity 14,909 15,806
LIQUIDITY, CAPITAL RESOURCES AND WORKING CAPITAL
As announced on 27 September 2012, the Company entered into a 3 year GBP 5
million SEDA with YA Global Master SPV Ltd ("Yorkville"), an investment fund
managed by YA Global LP. The SEDA allows the company to draw down funds in
exchange for the issue of shares in the Company.
Under the terms of the SEDA, any equity issued shall be priced at 95 per cent of
the prevailing market price over a pricing period of between 5 and 20 days, in
accordance with the agreement. The amount of each advance may not exceed, an
amount not more than 400 per cent of the average daily trading volume of shares
multiplied by the volume weighted average price on AIM for the five trading days
prior to the drawdown request.
Use of the facility is entirely at the discretion of the Company and there are
no penalties for not drawing down on the facility.
The following share purchase options were outstanding as of 28 August, 2013,
each entitling the holder to acquire one common share of the Company: 22,310,000
share purchase options with exercise prices ranging from GBP 0.055 to GBP 0.4925
(Cdn$0.10 to Cdn$0.79) and expiring on various dates up to May 2018.
Working Capital - 30 June 2013
As at 30 June 2013, the Company has working capital of approximately $1.4m (31
December, 2012: $1.6m). The items of working capital and changes compared to 31
December 2012 are as follows:
Current assets
-- cash and cash equivalents of $0.6m (31 December 2012: $0.5m);
-- trade and other receivables of $1.0m (31 December 2012: $1.2m). $0.9m of
the outstanding balance relates to the IVA (government sales tax) debtor
owed to Arian which is in the process of being recouped as well as $0.1m
for the concentrate sold;
-- inventories of $0.7m (31 December 2012: $0.6m) relates to stockpile held
at cost relating to production at the San Jose mine, this includes an
inventory adjustment of $41,000 to write down to net realisable value;
and
-- financial assets held at fair value through profit or loss of $0.1m (31
December 2012: $0.2m) relates to the Geologix shares received as part
consideration for the final instalment for the sale of the Tepal
project.
Current liabilities
-- trade payables of $1.0 million (31 December 2012: $0.9 million).
Off-balance sheet arrangements
The Company has no off-balance sheet arrangements.
FUTURE OUTLOOK
On 15 March 2013 the Company announced the signing of a provisional agreement
with Sandy Hill Ltd, a company incorporated in the British Virgin Islands, to
acquire a processing plant currently located close to Zacatecas City, with a
capacity to treat up to 1,500 tonnes per day of silver-lead-zinc ore ("EL Bote
Mill").
In March 2013 the Company paid an initial $100,000 to secure a 120 day due
diligence period, which has been extended into August 2013. On acquisition, the
El Bote Mill would be reassembled in modular fashion on-site at San Jose, and
once operating will enable production efficiencies and increased revenue
potential.
The final purchase price for the El Bote Mill was agreed at $3.12 million.
Forward-Looking Information:
This press release contains certain "forward-looking information". All
statements, other than statements of historical fact, that address activities,
events or developments that the Company believes, expects or anticipates will or
may occur in the future. This forward-looking information reflects the current
expectations or beliefs of the Company based on information currently available
to the Company as well as certain assumptions (including that the Company will
be able to obtain the necessary financing and that the proposed subscriber will
complete the Private Placement). Forward-looking information is subject to a
number of significant risks and uncertainties and other factors that may cause
the actual results of the Company to differ materially from those discussed in
the forward-looking information, and even if such actual results are realized or
substantially realized, there can be no assurance that they will have the
expected consequences to, or effects on the Company. Factors that could cause
actual results or events to differ materially from current expectations include,
but are not limited to, the failure to close the Private Placement and obtain
the necessary financing to acquire the El Bote processing plant or to satisfy
the other conditions precedent to the transaction as well as unexpected delays
in completing the transportation and refurbishment of the El Bote processing
plant which could lead to unexpected delays in the start of operations and
delays in the Company's mine expansion plans.
Any forward-looking information speaks only as of the date on which it is made
and, except as may be required by applicable securities laws, the Company
disclaims any intent or obligation to update any forward-looking information,
whether as a result of new information, future events or results or otherwise.
Although the Company believes that the assumptions inherent in the
forward-looking information are reasonable, forward-looking information is not a
guarantee of future performance and accordingly undue reliance should not be put
on such information due to the inherent uncertainty therein.
This press release does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities of the Company in the United Sates. The
securities of the Company have not been and will not be registered under the
United States Securities Act of 1933, as amended (the "U.S. Securities Act") or
any state securities laws and may not be offered or sold within the United
States or to U.S. persons unless registered under the U.S. Securities Act and
applicable state securities laws or an exemption from such registration is
available.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) and no stock
exchange, securities commission or other regulatory authority accepts
responsibility for the adequacy or accuracy of this release nor approved or
disapproved of the information contained herein.
FOR FURTHER INFORMATION PLEASE CONTACT:
Arian Silver Corporation
Jim Williams
CEO
+44 (0)20 7887 6599
jwilliams@ariansilver.com
Arian Silver Corporation
David Taylor
Company Secretary
+44 (0)20 7887 6599
dtaylor@ariansilver.com
www.ariansilver.com
Grant Thornton UK LLP
Philip Secrett
+44 (0)20 7383 5100
Grant Thornton UK LLP
David Hignell
+44 (0)20 7383 5100
Philip.J.Secrett@uk.gt.com
Yellow Jersey PR Limited
Dominic Barretto
+44 (0)77 6853 7739
dominic@yellowjerseypr.com
XCAP Securities PLC
Jon Belliss
+44 (0)20 7101 7070
jon.belliss@xcapgroup.com
CHF Investor Relations
Juliet Heading
+1 416 868 1079 x 239
juliet@chfir.com
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