(MENAFN - ProactiveInvestors - UK) The recent receipt of the final environmental approval for Ariana Resources' (LON:AAU) Kiziltepe gold-silver mine fires the starting gun to first production at the project.
It also consolidates the firm's ambitions to mature into a major mining player in Turkey.
Speaking at the London Mines & Money event in December, managing director Kerim Sener told Proactive how the firm was leveraging local partner Proccea's expertise to build the mine and will partly use the cash flow to fund further exploration - hunting for precious metals being Ariana's area of expertise.
"We want to keep up that focus on the exploration side of the equation but at the same time we need to see cash flow," he said.
"We've been very keen to develop a part of the business that is focused on getting our first site up and running as a mine and to do that in partnership."
Kiziltepe is part of the firm's most advanced project - Red Rabbit - and is a joint venture with Proccea, which is earning into a 50% stake.
The 21,000 ounce a year carbon in leach (CIL) operation, which Sener hopes will be in production by December 2014, requires final construction permitting and some forestry permitting.
There have been some delays with forestry issues in Turkey, but Sener is confident the firm will see the necessary documents come through.
Proccea is currently working through funding options for constructing the project with two Turkish banks and Sener added that a deal was "close".
The mine will be small but with robust economics, having cash costs of around US600 per ounce. The reserve has a grade of over 3g/t gold and almost 40 g/t silver.
Based on the feasibility study, Kiziltepe has a life of eight years based on current resources with payback of 2.4 years based on a price of US 1,304/oz gold and US 22.6/oz silver and an initial capital spend of US31.1mln.
Sener notes that the Kiziltepe pits have also been designed for a gold price of approximately US1,000 an ounce - so they can tolerate further negativity on the price of the yellow metal.
At gold's current levels, however, Ariana can expect annual free cash flow of around US5 mln when Kiziltepe is in production.
Sener explains this cash will be used to pay off outstanding debt but also to potentially offer a dividend for shareholders.
"We think that's an important part of becoming a more mature company in this space," he says, adding however, that the firm, as yet, has no firm dividend policy in place.
The money from producing gold will also go towards funding further exploration at Red Rabbit and the nearby region, but also in Turkey as a whole.
At Red Rabbit there is upside to the current 448,000-ounce mineable resource, the firm has previously reported. It has also outlined plans in November to double resources at the Kiziltepe sector following on from desk studies which suggested that this was a realistic objective.
Sener also highlighted that the firm has access to the US20mln Newmont Mining database, allowing it to investigate further underexplored areas.
"We know exactly where we need to go next," Sener said, adding that the firm, as well as making discoveries, would also like to acquire projects with potential.
But Ariana is not just about Red Rabbit. It also has the Ivrindi, Demirci, Kizilcukur exploration projects in Turkey and a joint venture with Eldorado Gold, which is focused on the Artvin province in the north-east of the country.
Indeed, the company was buoyed on January 20 with "encouraging" results from the Ardala project, which confirmed last year's drilling had confirmed the continuity of mineralisation in the area between the Ardala Au-Cu-Mo (gold, copper, moly) porphyry and the Salinbas Au-Ag Zone (gold-silver) and the latest results suggest the potential to increase the resource.
Additional drilling is now required to test for additional porphyry and limestone-hosted mineralisation, the company said.
So there is plenty of potential newsflow from the company in 2013. Finally, it is worth noting too Turkey's pro-mining stance and the fact the government there has identified the industry as high priority.
There are also certain tax advantages, which have come into force, one of which will see Ariana benefit from incentives and rebates as a gold and silver producer.
Sener also highlights that operating in Turkey is in general easier than other areas - it has a well educated work force and excellent infrastructure.