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Ariana’s Asgard Fund Lists Panther Metals

Tim Worstall
Tim Worstall trader
Updated 10 Dec 2021

Ariana Resources PLC (LON: AAU) shares are up slightly on the news that Panther Metals Ltd has listed on the ASX. This is taken as the first step in proving the concept of the Asgard Metals Fund.

The full announcement is here. The simple explanation is that Ariana has developed a number of capabilities as a result of its own mining activities. These include evaluation of interesting prospects, the ability to mobilise interest in them and the listing of those projects and companies that will benefit from the process. So, why not capitalise upon the knowledge of how to do these things? 

The Asgard Metals Fund is the outcome of that idea. There are multiple interesting exploration projects around the world, filtering out those that are worth taking to the next stage is a value add proposition. 

The news today about Panther Metals is not, in and of itself, hugely material to Ariana’s prospects. But as an initial validation of the strategy is can be seen as important. Being able to list on the ASX one of those interesting prospects does indeed test the idea.

There are a number of projects in the pipeline at Ariana and as those explorations report in their prospects we can imagine more such listings and announcements.

As to Ariana’s more direct prospects, there’s a play here on Erdogan’s Turkish economics. The main revenue source is the income from gold mining inside Turkey at present. This is what is then deployed to finance explorations and projects elsewhere. The importance here is that gold sells at a global price while prices inside Turkey are rather more volatile.

Macroeconomists are looking at Erdogan’s insistence about monetary management of the economy and rather scratching their heads. He has stated that it is high interest rates that cause inflation for example – entirely contrary to what everyone else believes which is that they’re the cure. 

Turkey actually has a very loose monetary policy, a high inflation rate and the lira is – as would be expected – declining substantially. Leave the macroeconomics to the theorists and consider though what this means for a gold miner. The product, the gold, is sold into the global market at the global price. Costs, in global currency, fall with the foreign exchange rate. Costs in Turkish lira rise with inflation. 

It’s possible to expect a certain balancing out of those, the inflation will make the costs rise to match the lira’s fall. But that’s often not how it does happen. The FX changes can predate and also be higher than the internal inflation rate. This means gold revenues move ahead of the cost base – or, equally, the cost base falls against those globally determined revenues.

Being a producer of a hard currency priced resource inside an inflationary economy can produce rising margins that is. 

Ariana Resources share price can be expected to move along these two axes and influences. The success of the strategy being followed through the Asgard Fund like Panther Metals. And then the more direct influence of Erdogan’s interesting economics on the margins at the Turkish gold operations.

Should you invest in Ariana Resources shares?

Ariana Resources shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. But are AAU shares the best buy? Our stock market analysts regularly review the market and share their picks for high growth companies

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.