In May, Equities.com profiled Arian Resources Corp. (ARC:CA) , an exceptionally intriguing value prospect in the junior resource space uniquely positioned for significant growth with limited downside risk. At the time, Arian’s CEO Zahir (Zip) Dhanani discussed that the major near-term catalyst for the company would materialize within a timeframe of about 30 to 60 days. With that development expected anytime now, we felt it was a good idea to check back in on Arian.
To recap, what sets Arian distinctly apart from virtually every other junior resource company in the space is that, in addition to its valuable Perlat copper project in business-friendly Albania that possesses enormous upside potential, the company has also lined up a well-capitalized partner in China-based Sinomine Resource Exploration Co., Ltd. that could potentially finance its entire operation and future operations going forward. The major catalyst Arian is waiting for a Sinomine’s feasibility study on the Perlat project. You can learn more about this at the company’s website at www.arianresources.com.
“Perlat has approximately 5 million tons of very high-grade copper deposits with an average grade of 2.12%, along with gold and silver and zinc credits, as defined by a NI 43-101 report,” Dhanani said. “As you know, our contract with Sinomine was for them to complete just a pre-feasibility study on Perlat,” Dhanani said. “On their own accord, Sinomine upgraded to a full feasibility study on the project, which obviously requires more of their time and money. Nobody would upgrade from a pre-feasibility to a full feasibility study unless they felt confidence in the deposits. So that was very promising for us.”
According to the company, Sinomine has informally indicated to Arian that it will take the project to production. What’s left to be discussed upon the completion of the feasibility study is the size of Arian’s stake, which could range anywhere from 30% to 49% of the project.
Now given that Perlat is a past-producing mine—meaning much lower capex requirements since the infrastructure is already in place—the process to ramp to production can be expedited much more easily.
“In this environment, where the resource sector is completely dead—there’s no financing available in North America or in Europe—the logical partners to have are from China,” Dhanani said. “It’s not only for the funding aspect of it, but when you consider what markets have the highest demand for resources, it’s most likely going to end up in China. So having a Chinese partner fund the project means we benefit from additional market advantages. We will have no issues selling our copper, gold, and silver concentrate into China.”
Meanwhile, it does seem as though the investment community is starting to catch wind of the Arian’s developments. Trading volume in Arian’s shares have spiked recently to as much as four times above its average, coinciding with the timing of the anticipated release of the feasibility study.
“There does seem to be more liquidity into our stock lately,” Dhanani said. “We have been meeting with different investors, including a recent trip to China, and the feedback we’ve received has been overwhelming positive. They see the value proposition, so I believe that the significant uptick we’re seeing in trading volume is a result of more investors understanding our unique opportunity and seeing the value of Arian.”
Key Catalysts for Arian Resources:
Perlat’s High Quality Deposits: Arian currently owns 100% of Perlat, a world-class high-grade copper project in Albania. Perlat holds 5 million tons of copper at 2.12%, which is significantly higher than the 0.6% average grade of copper ores in the 21st century. It is also former producing mine.
Funding from Sinomine Partnership: As one of the largest exploration mining companies in China, Sinomine went public in December 2014 on the Shenzhen Stock Exchange, raising US$37 million. Sinomine has virtually committed to financing Perlat to production, and has expressed interest in similar opportunities with Arian going forward. Once the production decision has been finalized, it would take about 18 months to go into commercial production.
Business-Friendly Albania: According to Dhanani, the largest investors in Albania are Canadian companies. The Canadian government has an agreement with Albania where all Canadian company investments are protected. “I am very comfortable operating in Albania simply because it’s a small country and the government is very friendly,” he said. “The mining ministry is unbelievably cooperative and helpful. They have been extremely fair in making sure that our progress has been smooth and efficient.”
While Arian’s immediate focus is on moving forward with Perlat and the completion of Sinomine’s feasibility study—which, again, should be expected any day now based on the original timeline—the company’s long-term prospects are equally promising. Leveraging strategic partnerships such as the one with Sinomine gives Arian an overwhelmingly favorable model to replicate successes. As long as Arian can successfully identify promising projects, partners like Sinomine will willingly step up to provide the financial muscle needed to bring them to commercial production. This arrangement creates an enviable position where Arian benefits from enormous upside potential with limited downside risk.
“I want to emphasize that we’re always looking for more acquisitions,” Dhanani said. “Because we have such strong partners, we do get approached all the time, and with our connections in China, they feel that we can bring a lot of value in an acquisition. Sinomine, too, has expressed interests in other projects in other jurisdictions that we are actively pursuing. So we are in the process of identifying potential targets that we can joint venture with partners like Sinomine where they will be providing all of the financing to bring the projects to production. We feel that this really sets us apart from the rest of the competition, especially in the junior resource market.”
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