TIDMCGH
Chaarat Gold Holdings Limited
("Chaarat" or "the Company")
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011
Road Town, Tortola, British Virgin Islands (27 September 2011)
HIGHLIGHTS
* Progress in exploration and implementation of the Tulkubash project
throughout the period
* Work commenced on access road and power line
* Initial start up phases delineated: targeted production late 2012 early
2013 dependent on seasonal considerations
Dekel Golan, Chief Executive of Chaarat, commented:
"The Company has sustained progress with both exploration and on planning and
initiating the infrastructure for the mining operation; the proceeds of the
placing completed in February are starting to be deployed, whilst our resource
base continues to grow as expected.
"As we make the preparations for production, a particularly pleasing feature of
our exploration programme is the increasing predictability of the resource and
the continued high grades delineated."
For further information about the Company please contact:
Chaarat Gold Holdings Limited +44 (0) 20 7499 2612
c/o Central Asia Services Limited dekel@chaarat.com
Dekel Golan CEO linda.naylor@chaarat.com
Linda Naylor FD
Westhouse Securities Limited +44 (0) 20 7601 6100
Tom Price tom.price@westhousesecurities.com
Richard Baty richard.baty@westhousesecurities.com
Bankside Consultants +44 (0) 20 7367 8888
Simon Rothschild simon.rothschild@bankside.com
About Chaarat Gold
Chaarat Gold is an exploration and development company operating in the Kyrgyz
Republic. The Company's main activity is the development of the Kiziltash
Project (comprising the Contact Project and the Main Zone) and the Tulkubash
project situated within the Middle Tien Shan Mountains of Kyrgyzstan, which form
part of the Tien Shan gold belt. The Company has delineated a JORC compliant
mineral resource of 4.736Moz at a grade of 4.28g/t gold across both projects.
Chaarat's key objective is to become a low cost gold producer; with initial
production from the Tulkubash project, targeting combined annual production of
over 200,000 ounces per annum as the Kiziltash Project comes on stream.
Disclaimer
This press release includes forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties and other important
factors beyond Chaarat's control that would cause the actual results,
performance or achievements of Chaarat to be materially different from future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements are based on numerous
assumptions regarding Chaarat's present and future business strategies and the
environment in which Chaarat will operate in the future. Any forward-looking
statements speak only as at the date of this document. Chaarat expressly
disclaims any obligation or undertaking to disseminate any updates or revisions
to any forward-looking statements contained in this document to reflect any
change in Chaarat's expectations with regard to these or any change in events,
conditions or circumstances on which any such statements are based. As a result
of these factors, the events described in the forward-looking statements in this
press release may not occur either partially or at all.
Operational Review
During the period the Company has started the implementation of the Tulkubash
project, the first part of the Chaarat project to be brought into production,
and continued its exploration activities elsewhere on both the Chaarat project
and on other projects within its portfolio of assets. The early stages of the
implementation of the Tulkubash project have primarily involved the
organisation and infrastructure aspects, such as the negotiation and signing of
contracts for the access road, power line and work camps.
Infill drilling at the Tulkubash open pit section has continued in order to
provide further data for the preparation of a detailed mining plan and to enable
the inclusion in our resources of lower grade ore at between 1 and 2 g/t. This
change to the cut off grade will increase the open pit resource of the Central
Tulkubash Zone significantly as well as reducing the strip ratio. The inclusion
of recent drill results in the resource estimate and refining the pit design
should improve the economics of the project by further reducing the strip ratio
and improving grade. An updated resource estimate will be announced as soon as
is practicable. Encouraging exploration results from the deeper underground
zones confirm that underground mining will take precedence over open pit
operations in mine planning.
The Engineering, Procurement, Construction Management ("EPCM") phase of the
Tulkubash project implementation is well underway. The Company will manage the
project. Progress with permitting, engineering and construction is described
below. The Company is actively recruiting to fill a few key positions as it
prepares to become fully operational.
Although the political climate in the country is somewhat tense at present with
the presidential election expected in late October, overall Chaarat has operated
normally over the period and our relationships with the authorities have
remained positive.
Progress and Strategy
The six month period since the completion of the GBP51.6 million fund raising,
announced in February 2011, has been dedicated to completing and refining the
project scope and establishing the foundations on which a successful mine can
be built and operated.
Work has focused on seven areas:
1. Project scope and configuration definition - important modifications to the
project configuration have been identified and made.
2. Permitting - a permitting strategy has been initiated and implemented to
ensure both the development of the oxide portion of the deposit (Tulkubash)
as well as continuing the exploration of the sulphide section of the Chaarat
target area (Kiziltash).
3. Engineering - the project configuration and Front End Engineering Design has
been completed to facilitate the tender for the detailed engineering of the
process plant and other elements of the project (tailings facility, waste
dump site etc.) scheduled to take place in 2012.
4. Geology - our knowledge and understanding of the oxide section has been
improved and this will help to achieve an increase in the open-pit oxide
resource.
5. Construction - infrastructure elements have been developed; primarily road
improvement, power line construction and building of work camps for our
personnel.
6. Development of operational plans and procedures are being implemented ready
for the take over from the project construction team.
7. Organisation - the necessary support functions such as HSE, logistics and
compliance processes are being established. The HR needs of the company have
been identified and a strategy developed to ensure they are met.
Additional exploration activity has also been undertaken at our other
properties, Mironovskoye, Chontash and Kyzil Ompul, although the Company's
current focus is firmly on the Chaarat project.
Project Scope and configuration
The original strategy was to build a small scale 700-1,000 tonnes per day (tpd)
modular plant which would later be replaced by a larger plant with two 2,500 tpd
lines to be built in two stages.
Engineering and financial analysis has highlighted operational improvements
which management believe could have distinct financial and operational
advantages. It is now envisaged that the first 2,500 tpd line will be built in
the final location but certain aspects of the line will initially be scaled
down. The same elements can later be expanded with minimal cost and
interruption to activity so as to enable the full 2,500 tpd capacity. Although
the plant will cost slightly more than the modular plant originally planned, it
will provide greater expansion flexibility and, management believes, prove more
economical in the long run.
The current plan is to build the plant in the following phases:
Phase 1 (2,500t Run Of Mine (ROM)/day) - As originally envisaged, this involves
a simple flow-sheet with crushing, grinding and carbon-in-leach, which has a low
capital cost, is simple to design, construct and operate. A flotation
concentrator is added to allow for separate cyanidation of concentrate and
flotation tailings. The flow-sheet is flexible for the varied pyrite content in
the feed ore and able to achieve high recoveries on Tulkubash ores.
Further analysis has led to the definition of "Start-up Phase-1" for the
Tulkubash which will use the original flow-sheet described above, but with
capacity reduced to 1,000 tpd. The major cost saving items are the permanent
crushing circuit and the aerial rope way which are to be delayed until the mine
capacity is increased to 2,500 tpd which will be referred to as "Final Phase-1".
Phase 2 (2,500t ROM/day) - This comprises a complete single train refractory
gold treatment plant with crushing, milling, pressure oxidation, slurry wash and
carbon-in-leach circuit. The Phase 2 flow-sheet is similar to the final flow-
sheet but with only one mill and autoclave.
Phase 3 (2,500 - 4,000t ROM/day) - An additional mill is installed which
increases the potential plant feed to 5,000t ROM/day. The flotation concentrator
is re-commissioned and some of the plant feed is beneficiated in this phase to
allow for the operation of the single autoclave. This flow-sheet has maximum
flexibility with high recoveries at low throughputs and the ability to increase
throughput as the mining is developed. Recoveries will be lower at the higher
throughput.
Phase 4 (5,000t ROM/day) - The final plant with two autoclaves, able to treat
the total 5,000t ROM/day and achieving the maximum gold recovery.
Permitting and Engineering
The infrastructure will be used for the whole project so our permitting strategy
is to seek permits both for the Kiziltash, the large exploration project on the
rest of the Chaarat target area, as well as the Tulkubash project. The required
permits have been issued and the work on the infrastructure projects has begun
as described below.
In order to fast track the development at Tulkubash, the smaller first phase
project, we are in the process of filing for the mining permit which we expect
to be granted early next year. Based on our recent application experience, we
have no reason to believe that the granting of this permit will pose any serious
problems.
Geology
A total of 18,961 metres were drilled during the first half of the year, mostly
in the Tulkubash project, and in the deeper zones of the Contact Project (CP)
5,516 metres were drilled to the end of August.
Our understanding of the geology of the Tulkubash project has improved
considerably, and we await the preparation of a formal independent
resource/reserve calculation by our advisers. Since most of the lower grade
material will need to be mined in order to develop the open pit, work undertaken
suggests that it will be more economic to process rather than discard this lower
grade material. The Company is considering the option of stockpiling the lower
grade ore (between 1g/t-2g/t) to ensure that the cash flow from initial
production will be maximised.
The results of drilling along strike in the north and south sections are
encouraging. We are in the early stages of investigating whether it is possible
that the lower strip ratio sections of the pit can be extended on strike, thus
improving the economics of the operation significantly.
We have continued to drill the deeper parts of the deposit in the CP and initial
indications are that there is a correlation between the widening of the ore body
and higher grade. The result is more ounces per vertical metre in this body,
which is still open on strike, both towards the north and south as well as down
dip. The continuity, predictability and consistent grade of this deposit
underline our belief that this is a world class ore body.
Construction
Our strategy has been to achieve as much as possible on the infrastructure front
in 2011, leaving us to complete the construction of the specific elements such
as process plant, workshops etc. next season.
Work on the two major infrastructure items has begun. Road construction
commenced in June. We are concentrating on the more complex areas for road
construction, as well as the critical areas which need to be completed first, in
order to ensure easier logistics for next year. Currently two contractors are
working on the road and a third may be added in due course.
The power line project has been given to a large Kazakh company (ASPMK-519) and
is progressing as expected.
Additional preliminary works including the start of earthworks in the plant area
and the construction of two camps (miners' camp and plant camp) are also
underway. Work on the former has started, whereas the latter is due to be built
next year.
Orders for long lead items such as the mill are to be placed in the near future
in order to minimise the potential for delays.
Operations
The mining and operations team is being recruited, training plans are being
drawn up and implemented, mining equipment is being sourced and plans and
procedures are being established.
As operations will begin with the Tulkubash open pit, production can be ramped
up with a relatively small work force and a simple operation.
Organisation
The various support functions, such as logistics and procurement, are being
strengthened and expanded. The finance function is preparing for the significant
shift from being an exploration company to a mine builder and producer. The
buildup of staff and systems is progressing satisfactorily, albeit more slowly
than we would have liked.
Financial Results
As expected, the loss for the period at US$7,665,382 reflects the increased
expenditure on operations in particular on the drilling activity on site, where
12 drill rigs are in operation, 2 underground and 10 on surface.
Other assets
In addition to the Chaarat project, the Company progressed work on its other
exploration assets acquired last year. Drilling was carried out in the Tunduk
section of the Kyzil Ompul licence area. Geophysical work was done in Chontash
to identify the best location for additional drilling in this promising
property. A local company has been retained to conduct a Feasibility Study on
Mironovskoye in order to facilitate the sale or introduction of a partner to
this project. With copper and gold prices at historic highs this "ready to mine"
deposit is attractive to prospective partners.
Summary
The Company has made good progress in the period, both on exploration and
planning as well as initiating the infrastructure for first production at the
Chaarat project. The proceeds of the placing completed in March are being
deployed, whilst our resource base continues to grow as expected.
As we prepare for production, a particularly pleasing feature of our exploration
programme is the increasing predictability of the resource and the continued
high grades delineated.
Dekel Golan
Chief Executive Officer
Consolidated income statement
For the six months ended 30 June
6 months to 6 months to 12 months to
30 June 30 June 31 December
2011 2010 2010
(unaudited) (unaudited) (audited)
Note USD USD USD
Exploration expenses (5,158,736) (2,519,529) (7,242,318)
Administrative expenses (2,427,264) (1,558,026) (3,432,711)
Administrative expenses - Share 5 (488,062) (221,594) (588,587)
options expense
Administrative expenses - Other (179,171) (11,673) (18,514)
Administrative expenses - Foreign (219,044) (61,935) (168,336)
exchange loss
Operating loss (8,472,277) (4,372,757) (11,450,466)
Financial income 806,895 8,270 14,363
Loss for the period, attributable (7,665,382) (4,364,487) (11,436,103)
to equity shareholders of the
parent
Loss per share (basic and diluted) 2 (3.38)c (3.87)c (9.12)c
- USD cents
Consolidated statement of comprehensive income
For the six months ended 30 June
6 months to 6 months to 12 months to
30 June 30 June 31 December
2011 2010 2010
(unaudited) (unaudited) (audited)
USD USD USD
Loss for the period, attributable to (7,665,382) (4,364,487) (11,436,103)
equity shareholders of the parent
Other comprehensive income:
Exchange differences on translating (22,869) (102,621) (143,478)
foreign operations
Total comprehensive loss for the (7,688,251) (4,467,108) (11,579,581)
period attributable to equity
shareholders of the parent
Consolidated balance sheet
At 30 June
30 June 30 June 31 December
2011 2010 2010
(unaudited) (unaudited) (audited)
USD USD USD
Assets
Non-current assets
Intangible assets 11,658 30,010 20,082
Mining exploration assets 8,349,367 - 8,349,367
Property, plant and equipment 1,291,003 720,759 596,502
Other receivables 359,989 - 50,456
10,012,017 750,769 9,016,407
Current assets
Inventories 594,102 146,430 150,035
Trade and other receivables 2,088,481 903,874 1,619,590
Cash and cash equivalents 82,432,362 3,007,319 10,124,977
85,114,945 4,057,623 11,894,602
Total assets 95,126,962 4,808,392 20,911,009
Equity and liabilities
Equity attributable to shareholders
Share capital 2,503,562 1,129,110 1,470,339
Share premium 128,501,973 27,499,843 48,949,592
Other reserves 14,196,746 13,529,935 13,839,590
Translation reserve (1,106,203) (1,042,477) (1,083,334)
Accumulated losses (51,708,236) (37,159,481) (44,173,760)
92,387,842 3,956,930 19,002,427
Non- current liabilities
Deferred tax 487,000 - 487,000
487,000 487,000
Current liabilities
Trade payables 1,431,876 527,360 646,788
Accrued liabilities 820,244 324,102 774,794
2,252,120 851,462 1,421,582
Total liabilities 2,739,120 851,462 1,908,582
Total liabilities and equity 95,126,962 4,808,392 20,911,009
Consolidated statement of changes in equity
For the six months ended 30 June
Share Share Accumulated Other Translation Total
capital premium losses reserves reserve USD
USD USD USD USD USD
Balance at 1,129,110 27,499,843 (32,798,843) 13,312,190 (939,856) 8,202,444
31 December
2009
Currency - - - - (102,621) (102,621)
translation
Net income - - - - (102,621) (102,621)
recognised
directly in
equity
Loss for the - - (4,364,487) - - (4,364,487)
six months
ended
30 June 2010
Total - - (4,364,487) - (102,621) (4,467,108)
comprehensive
income for
the six
months
Share options - - 3,849 (3,849) - -
lapsed
Share options - - 221,594 - 221,594
expense
Balance at 1,129,110 27,499,843 (37,159,481) 13,529,935 (1,042,477) 3,956,930
30 June 2010
Currency - - - - (40,857) (40,857)
translation
Net income - - - - (40,857) (40,857)
recognised
directly in
equity
Loss for the - - (7,071,616) - - (7,071,616)
six months
ended
31 December
2010
Total - - (7,071,616) - (40,857) (7,112,473)
comprehensive
income for
the six
months
Share options - - 57,337 (57,337) - -
lapsed
Share options - - - 366,992 - 366,992
expense
Issuance of 119,282 7,500,134 7,619,416
shares for
acquisition
Issuance of 221,947 14,386,364 - - - 14,608,311
shares for
cash
Share issue - (436,749) - - - (436,749)
costs
Balance at 1,470,339 48,949,592 (44,173,760) 13,839,590 (1,083,334) 19,002,427
31 December
2010
Currency - - - - (22,869) (22,869)
translation
Net income - - - - (22,869) (22,869)
recognised
directly in
equity
Loss for the - - (7,665,382) - - (7,665,382)
six months
ended
30 June 2011
Total - - (7,665,382) - (22,869) (7,688,251)
comprehensive
income for
the six
months
Share options - - 130,906 (130,906) - -
lapsed
Share options - - - 488,062 - 488,062
expense
Issuance of 1,033,223 82,986,647 - - - 84,019,870
shares for
cash
Share issue - (3,434,266) - - - (3,434,266)
costs
Balance at 2,503,562 128,501,973 (51,708,236) 14,196,746 (1,106,203) 92,387,842
30 June 2011
Consolidated cash flow statement
For the 6 months ended 30 June
6 months to 6 months to 12 months to
30 June 30 June 31 December
2011 2010 2010
(unaudited) (unaudited) (audited)
USD USD
Operating activities
Loss for the period (7,665,382) (4,364,487) (11,436,103)
Adjustments:
Amortisation expense - intangible 12,292 13,107 25,520
assets
Depreciation expense - property, 227,399 312,944 490,024
plant and equipment
(Profit)/loss on disposal of (218,606) 3,052 5,094
property, plant and equipment
Finance income (20,050) (8,270) (14,363)
Share based payments 488,062 221,594 588,587
Foreign exchange (gains)/losses (219,044) 2,909 (42,590)
(Increase)/Decrease in inventories (444,067) 10,261 8,553
(Increase)/Decrease in accounts (468,891) (294,386) (1,080,142)
receivable
Increase in accounts payable 343,538 380,200 688,041
Net cash flow used in operations (7,964,749) (3,723,076) (10,767,379)
Investing activities
Purchase of computer software (8,953) - (3,664)
Purchase of property, plant and (1,099,976) (40,299) (98,445)
equipment
Acquisition of subsidiary (net of - - 5,865
cash acquired)
Proceeds from sale of equipment 389,090 - -
Loans repaid - 4,407 4,407
Interest received 276,710 8,270 14,363
Net cash used in investing activities (443,129) (27,622) (77,474)
Financing activities
Proceeds from issue of share capital 84,019,870 - 14,608,310
Issue costs (3,434,266) - (436,749)
Net cash from financing activities 80,585,604 - 14,171,561
Net change in cash and cash 72,177,726 (3,750,698) 3,326,708
equivalents
Cash and cash equivalents at 10,124,977 6,812,046 6,812,046
beginning of the period
Effect of changes in foreign exchange 129,659 (54,029) (13,777)
rates
Cash and cash equivalents at end of 82,432,362 3,007,319 10,124,977
the period
Notes to the financial statements
1 Dividend
No dividend is proposed in respect of the period.
2 Loss per share
The loss per share is calculated by reference to the loss of USD 7,665,382 for
the six months ended 30 June 2011 and the weighted average number of shares in
issue of 226,931,389 during the period. There is no dilutive effect of share
options.
3 Basis of preparation of financial statements
The unaudited results have been prepared on a going concern basis and on the
basis of the accounting policies adopted in the audited accounts for the year
ended 31 December 2010. The results for the period are derived from continuing
activities.
The financial information set out in this half-yearly report does not constitute
statutory accounts. The figures for the period ended 31 December 2010 have been
extracted from the statutory financial statements, prepared under IFRS, which
are available on the Group's website www.chaarat.com. The auditor's report on
those financial statements was unqualified.
4 Mining exploration and development costs
During the exploration phase of operations, all costs are expensed in the Income
Statement as incurred.
A subsequent decision to develop a mine property within an area of interest is
based on the exploration results, an assessment of the commercial viability of
the property, the availability of financing and the existence of markets for the
product. Once the decision to proceed to development is made, exploration,
development and other expenditures relating to the project are capitalised and
carried at cost with the intention that these will be depreciated by charges
against earnings from future mining operations over the relevant life of mine on
a unit of production basis.
5 Intangible assets - acquired mining exploration assets
Mining exploration assets acquired on the acquisition of subsidiaries are
carried in the balance sheet at their fair value at the date of acquisition less
any impairment losses, pending determination of technical feasibility and
commercial viability of those projects.
When such a project is deemed to no longer have technical or commercially viable
prospects to the Group, acquired mining exploration costs in respect of that
project are deemed to be impaired and written off to the statement of total
comprehensive income.
Subsequent mining exploration costs incurred on those projects are expensed in
accordance with the Group's accounting policy below.
6 Share options
During the period the Company issued the following share options:
+----------------+-----------+----------+
| Exercise price | Number | Date |
+----------------+-----------+----------+
| GBP0.70- GBP1.50 | 5,400,000 | 07/03/11 |
+----------------+-----------+----------+
| GBP1.00 | 400,000 | 10/03/11 |
+----------------+-----------+----------+
| GBP0.70- GBP1.50 | 2,700,000 | 21/03/11 |
+----------------+-----------+----------+
| GBP0.60- GBP1.00 | 100,000 | 04/04/11 |
+----------------+-----------+----------+
| GBP0.60- GBP1.00 | 100,000 | 18/04/11 |
+----------------+-----------+----------+
| | 8,700,000 | |
+----------------+-----------+----------+
The total number of share options outstanding was:
At 31 December 2010 11,125,253
Awarded 8,700,000
Lapsed in period (734,757)
Exercised in period (26,000)
At 30 June 2011 19,064,496
An amount of USD 488,062 was recognised as share based payment expense during
the six month period ended 30 June 2011 (six months ended 30 June 2010: USD
221,594; 12 months ended 31 December 2010: USD 588,587).
7 Post Balance Sheet Events
As a result of the exercise of share options 127,500 ordinary shares were issued
and admitted to AIM on 26 July 2011.
Directors and Advisers
Directors
C Palmer-Tomkinson Non-Executive Chairman
L Tao Non-Executive Deputy Chairman
D Golan Chief Executive Officer
A Novak Executive Director
L Naylor Finance Director
R Weinberg Non-Executive Director
D Tang Non-Executive Director
Company Secretary Auditors Solicitors (UK)
Linda Naylor PKF (UK) LLP Watson, Farley & Williams
LLP
c/o Central Asia Services Farringdon Place 15 Appold Street
Limited
6 Conduit Street 20 Farringdon Road London EC2A 2HB
London W1S 2XE London EC1M 3AP
Maclay Murray & Spens LLP
T. +44 20 7499 2612 Registrars One London Wall
E. admin@caserve.co.uk Capita Registrars London EC2Y 5AB
(Guernsey) Ltd
Longue Hougue House
Registered Office St Sampson Solicitors (Kyrgyz
Republic)
Palm Grove House Guernsey GY1 4JN Kalikova & Associates
PO Box 438 71 Erkindik Boulevard
Road Town, Tortola Depositary Bishkek, 720040
British Virgin Islands, VG1110 Capita IRG Trustees Kyrgyz Republic
Limited
Registered Number 1420336 The Registry
34 Beckenham Road Solicitors (Switzerland)
Kyrgyz Republic Office Beckenham Pestalozzi Attorneys At
Law Ltd.
Chaarat Zaav CJSC Kent BR3 4TU Lowenstrasse 1
15th floor 19 Razzakov Street 8001 Zurich
720040 Bishkek Principal Bankers Switzerland
Kyrgyz Republic Royal Bank of Scotland
International
Royal Bank Place Web Site
Investor Relations 1 Glategny Esplanade www.chaarat.com
Smith`s Corporate Advisory Ltd St Peter Port
One Angel Court Guernsey GY1 4BQ
London EC2R 7HJ
Nominated Advisor and
Broker
Financial Public Relations Westhouse Securities
Ltd
Bankside One Angel Court
1 Frederick's Place London EC2R 7HJ
London EC2R 8AE
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Chaarat Gold Holdings Ltd via Thomson Reuters ONE
[HUG#1550051]
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