TIDMCGH
RNS Number : 8289P
Chaarat Gold Holdings Ltd
11 June 2015
Chaarat Gold Holdings Limited
("Chaarat" or "the Company")
PRELIMINARY ANNOUNCEMENT OF AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
Road Town, Tortola, British Virgin Islands (11 June 2015)
Chaarat (AIM - CGH), the AIM quoted exploration and development
company with assets in the Kyrgyz Republic, today publishes its
preliminary results for the year ended 31 December 2014.
Highlights for the year
-- Definitive Feasibility Study (DFS) nearing completion on schedule
-- Upfront capital cost of Project reduced by removal of requirement for a tunnel
-- Resource base confirmed at 6.1 million ounces of gold (JORC compliant)
-- Public hearings proceeding smoothly
Dekel Golan, CEO of Chaarat, commented:
"The Annual Report is our opportunity to consolidate into a
single document the progress made in 2014. We identified China as
the primary source forboth machinery and finance and therefore we
agreed it would be logical to use a Chinese company to prepare the
feasibility study for the Chaarat Project. NERIN is nearing the
completion of the feasibility study which will assist in
underpinning the value of the deposit. Working together we have
removed the need to construct a tunnel at an early stage of the
project which will contribute significantly to NPV as well as
reducing the upfront capital cost and project risk.
Additional drilling has allowed us to increase the resource to
6.1 Million ounces (JORC Compliant) and maintained the status of
Chaarat amongst the world's largest and highest gradeundeveloped
deposits.
We continue to work with the local communities, contributing to
their development and the maintenance of local infrastructure.
2015 will be a milestone year for Chaarat."
Enquiries:
Chaarat Gold Holdings
Limited + 44 23 800 11747
c/o Central Asia Services info@chaarat.com
Limited
Dekel Golan CEO
Linda Naylor FD
Numis Securities Limited +44 (0) 20 7260 1000
John Prior, Paul Gillam
(NOMAD)
James Black (Broker)
Chairman's statement
Dear shareholder
Last year was not an easy year for our sector. The gold price
plunged during 2013 from above USD1700 per ounce to USD1200 and
during 2014 it seems to have been accepted that USD1200-USD1250 per
ounce is the new "long term gold price". That realisation, to the
great dismay of investors, meant that a large number of projects
which were marginally profitable, or not profitable at all, had to
be written down. The sector as a whole became less interesting to
shareholders and as a result share prices dropped to multi-year
lows. Your company share price was not an exception.
The Board had therefore to consider the best way to tackle the
new reality and make sure the value hidden in the Chaarat deposit
is optimally unlocked and more importantly not diminished.
It became clear to us that whilst the mining sector has become
unattractive to many western investors that is not the case in
other regions of the world. We have seen a keen interest from many
regions in Asia be it China, Japan, Korea and the Arab Gulf. Such
interest is shown both by the private sector as well as state owned
enterprises and sovereign wealth funds.
That situation forced us to consider carefully consider our
options and make sure that whatever effort we are making will be
effective and productive.
The decision of the Board was to "look East". We had to
recognize that the investment environment both of our sector, the
mining industry,as well as the infrastructure development in
general,has changed and is dominated more and more by Asian
companies. This dominationexists in the provision of finance,
construction and operational services such as contract mining.
It became apparent that in order to finance a project from China
one has to have a Chinese compliant Bankable Feasibility Study. To
ensure the interface between feasibility study towards basic
engineering, detailed engineering and construction is seamless and
effective it seemed best to work with Chinese engineering, so a
decision presented itself: let us finish the relevant preparatory
chapters by the current advisors and seek to consolidate this by a
first class Chinese engineering company.
This was not an easy decision: we were aware of the cultural
differences and in some cases different technical approaches. It
was clearly going to be a challenge and indeed it has been. Having
said that, we believe that we are marching towards the completion
ofa robust and bankable study;which will both demonstrate the value
of the Chaarat deposit as well as allow us to finance the
construction of the first stage. I would like to extend my thanks
to the patient investors who have been supporting us and assure you
all we are doing our best to cross these turbulent times
safely.
Christopher Palmer-Tomkinson
Chairman
Chief Executive Officer's Report
Dear shareholder
2014 was dedicated to consolidating the knowledge and data
collected over the years in order to produce a "Definitive
Feasibility Study" (DFS), identifying gaps in the information and
filling them. This is the final stage before securing finance and
starting the detailed engineering and construction of the
Project.
We had started work on the DFS with a team of consultants, but
at a certain point, it became clear that there have been
fundamental changes in the mining sector and strategically we had
to consider where we could most successfully obtain finance and
engineering. After much deliberation we decided to entrust the
completion of the DFS to a Chinese engineering company, China Nerin
Engineering Co,. Ltd. (NERIN). One should never underestimate the
challenge of bridging cultural differences. However we are
convinced that our efforts to overcome the challenges of the early
stage of the process will be rewarded as we move to the more
advanced stages of engineering, finance and construction.
Infrastructure
Our previous team of DFS advisers recommended that, due to the
location of the deposit in a narrow valley, the production facility
should be located in an adjacent valley. This would necessitate the
construction of a tunnel to connect the plant to the mine site.
NERIN, together with local Kyrgyz companies, studied the
alternatives and identified a layout which will eliminate the need
to construct a tunnel for at least the first ten years of
operation. The elimination of the immediate requirement for a
tunnel will reduce the upfront cost of the project considerably, as
well as reducing the uncertainty involved in developing a tunnel
and the lead time to production. This is a major breakthrough in
minimizing risks and adding value to the Chaarat Project.
On the electric supply front we have secured an extension to the
power supply quota. Most of the power in the Kyrgyz Republic is
generated from hydroelectric power stations which makes the cost of
power amongst the cheapest on earth at less than USD0.03/kWh. More
capacity is being added now and the country is effectively a net
power exporter. This is a significant positive for a large future
power consumer such as the Chaarat Project.
Access by road to site has improved after our work to widen the
state road to the south of Chaarat's site in order to enable the
transport of larger cargoes. The state road from Bishkek and Osh to
Chatkal is now open throughout the year. The access road from the
main road to Chaarat needs improvement. The design of the required
upgrade has been completed and it is awaiting approval now by the
relevant authorities.
Geology
Initially we focussed on a lengthy and meticulous process of
verification and due diligence to ensure that the geological
database (which includes millions of items of data) is as error
free as possible. Once that was completed a new Resource Estimation
was calculated. 6,000 metres of additional drilling and some
trenching were undertaken in 2014 to provide missing data. The
additional results were incorporated into the resource calculation
by a team experienced with Asian deposits.
We were very pleased to report that the resource base of Chaarat
now comprises 6.1 million ounces of gold. The resource is composed
of two different types of ore, free milling and refractory, so an
average grade for the whole deposit is not very informative. The
full analysis can be seen in the resource table. The refractory
section should also be divided into the open pittable section and
the underground section as a different cut-off grade will be
applied.
This work confirms Chaarat as one of the world's largest gold
finds of the 21(st) century and as one of the largest high grade
undeveloped gold deposits in the world.
Mining
TetraTech, from our previous team of advisers, had already
completed extensive work on the rock mechanics and hydrology
profile of the areas where the open pit is to be situated. This has
enabled our mine designersfrom NERIN to complete the preliminary
pit design and determine the "potential mill feed" (the quantity
and grade of ore available for delivery to the mill). This is not
yet a determination of reserves but is an approximation which is
optimized from the detailed pit design.
Metallurgy
We were encouraged by metallurgical reports from a leading
metallurgical institute in China (IMME) that their proprietary
version of the bioxidation process was found to be suitable for
processing the Chaarat ore. Bioxidation produces marginally better
gold recovery results than the previously recommended Pressure
Oxidation process (POX) and underpins a lower capital requirement
for Chaarat and certainly a much lower technological challenge.
Bioxidationis used in many operating mines in Central and Northern
Asia such as Olimpiada (Russia - Polyus Gold), Jinfeng (China-
Eldorado Gold) andKokpatas (Uzbekistan - Navoi Mining and
Metallurgical Combinat (NMMC), the largest in the world).
Chaarat will not begin processing refractory ore before its
third year of operation so there is still plenty of time to
optimize the technology to ensure maximum recovery at the lowest
operating costs. NERIN (the engineering company working on our
DFS)were joint designers of the Jinfeng BIOX plant which achieves
recoveries of about 85% of gold, according to information provided
by El Dorado Gold.
Operations
We have decided that as a junior company it is best to employ an
experienced mining contractor to take full responsibility for the
mining. This approach will reduce upfront capital expenditure and
more importantly reduce the operational challenge. Requests for
proposals have been sent to a number of contractors with suitable
experience in the region.
Your management team has continuedto pursue completion of a DFS
which will both underpin financing of the first stage of the
Project and determine a valuation benchmark for the Company. The
DFS remains on track for delivery imminently.
Funding and financial accounting
The price of Chaarat shares has continued to disappoint us all
but we were very encouraged by the support of our shareholders who
enabled us to complete a fundraising of USD5.1 million at the end
of 2014. This will finance us into 2016. We have continued to
dispose of assets and equipment which are not immediately required
to progress the project. By the end of 2014 we had raised USD1.64
million and further sales are ongoing.
As well as generating income from sales we have cut costs. The
main burden has fallen on our staff in Bishkek and we have had to
part company with many loyal employees and friends. I wish to thank
them for all their efforts and those of our remaining
employees.
As we near completion of the DFS for our flagship Chaarat
project we have to recognise that we do not currently have the
funds to progress our other three projects namely Chontash,
Mironovskoye and Kyzil Ompul. We have therefore, with regret, made
the decision to make a full impairment against these assets, in
compliance with international accounting standards, and released
the related deferred tax provision. Your Board is convinced that
these assets have an underlying value and we remain hopeful that we
will be able to find buyers who recognise this inherent value.
The Kyrgyz Republic
I would like to set the development of the Chaarat Project in
the context of the mining sector in the Kyrgyz Republic whichis
undergoing significant change and development. Until very recently
the country hosted only a single large operating mine and a few
large exploration projects. Gold equivalent production is likely to
triple in the next fiveyearswith the development of a number of new
mines.
Two new mines are now close to production: Taldybulak (owned and
operated by Zijin Gold) and Bozymchak (owned and operated by Kaz
Minerals). The sentiment in the industry and the approach of the
government is changing. The political saga of Centerra is drawing
to a close with the ultimate reassurance for investors that the
promise of the government not to nationalise the Kumtor has been
maintained.
Two new entities entered the Kyrgyz mining scenein 2014, a
Russian company bought the Jerooy project for over USD100 million
in cash and an Indonesian conglomerate purchased Goldfield's Kyrgyz
asset and combined it with some other assets to establish Tengri
Resources.
Highland Gold has reported the delineation of a large (3.7
million ounces JORC compliant) resource, second only to Chaarat's
6.1million ounces JORC compliant resource.
The Kyrgyz Republicis gradually learning to balance the
expectations of the different stakeholders in the mining industry.
Balancing the needs of state, communities,environment and investors
is a delicate ongoing undertakingthat is also in the interest of
all those stakeholders. There are promising signs that the Kyrgyz
Republicis moving in the right direction. We, the management of
Chaarat,hope that with the change of sentiment in-country,investor
sentiment will also change and will be reflected in the share price
of all Central Asian mining companies which are currently tradingat
a significant discount.
Dekel Golan
Chief Executive Officer
Consolidated income statement
For the years ended 31 December
2014 2013
USD USD
Exploration expenses (4,251,623) (4,780,317)
Impairment of assets (6,023,622) (4,061,949)
Administrative expenses (3,868,516) (4,962,471)
Administrative expenses- Share
options expense (256,613) (756,356)
Administrative expenses- Foreign
exchange gain (45,242) 8,309
Total administrative expenses (4,170,371) (5,710,518)
Other operating expense (81,257) (43,027)
-------------------------------------- -------------- --------------
Operating loss (14,039,998) (14,595,811)
Finance income 476,536 219,601
Taxation 486,875 -
------------------------------------- -------------- --------------
Loss for the year, attributable
to equity shareholders of the
parent (13,563,462) (14,376,210)
-------------------------------------- -------------- --------------
Loss per share (basic and diluted)
- USD cents (4.97) (5.74)
--------------
Consolidated statement of comprehensive income
For the years ended 31 December
2014 2013
USD USD
Loss for the year, attributable
to equity shareholders of the
parent (13,563,462) (14,376,210)
Other comprehensive income:
Items which may subsequently
be reclassified to profit and
loss
Exchange differences on translating
foreign operations (8,302,919) (528,755)
Other comprehensive income
for the year, net of tax (8,302,919) (528,755)
Total comprehensive income
for the year attributable to
equity shareholders of the
parent (21,866,381) (14,904,965)
-------------------------------------- ------------- -------------
Consolidated Balance
Sheet
At 31 December
2014 2013
USD USD
----------------------------- ------------- -------------
Assets
Non-current assets
Intangible assets 50,197 103,718
Mining exploration
assets - 7,192,913
Mine properties 22,653,950 21,657,042
Property, plant and
equipment 3,622,423 7,691,266
Assets in construction 12,339,224 14,477,613
Other receivables - -
38,665,794 51,122,552
----------------------------- ------------- -------------
Current assets
Inventories 847,818 1,753,802
Trade and other receivables 726,386 857,903
Cash and cash equivalents 7,608,865 11,163,079
9,183,069 13,774,784
Total assets 47,848,863 64,897,336
------------------------------ ------------- -------------
Equity and liabilities
Equity attributable
to shareholders
Share capital 2,729,353 2,504,778
Share premium 132,108,746 128,551,662
Share warrant reserve 1,358,351 -
Other reserves 15,205,510 15,013,806
Translation reserve (10,820,727) (2,517,808)
Accumulated losses (94,144,808) (80,646,255)
------------------------------ ------------- -------------
Total equity 46,436,425 62,906,183
------------------------------ ------------- -------------
Non-current liabilities
Deferred tax - 475,772
------------------------------ ------------- -------------
- 475,772
----------------------------- ------------- -------------
Current liabilities
Trade and other payables 561,916 617,181
Accrued liabilities 850,522 898,200
------------------------------ ------------- -------------
1,412,438 1,515,381
----------------------------- ------------- -------------
Total liabilities 1,412,438 1,991,153
------------------------------ ------------- -------------
Total liabilities
and equity 47,848,863 64,897,336
------------------------------ ------------- -------------
Consolidated Statement of Changes in Equity
For the Years Ended 31 December
Share Share Share Accumulated Other Translation
Capital Premium warrant Losses Reserves Reserve Total
USD USD reserve USD USD USD USD
USD
-------------------- --------- ----------- ----------- ------------ ---------- ------------ ------------
Balance at
31 December
2012 2,504,778 128,551,662 - (66,631,199) 14,618,604 (1,989,053) 77,054,792
-------------------- --------- ----------- ----------- ------------ ---------- ------------ ------------
Currency
translation - - - - - (528,755) (528,755)
Other comprehensive
income - - - - - (528,755) (528,755)
Loss for the
year ended
31 December
2013 - - - (14,376,210) - - (14,376,210)
Total comprehensive
income for
the year - - - (14,376,210) - (528,755) (14,904,965)
Share options
lapsed - - - 361,154 (361,154) - -
Share options
expense - - - - 756,356 - 756,356
Balance at
31 December
2013 2,504,778 128,551,662 - (80,646,255) 15,013,806 (2,517,808) 62,906,183
-------------------- --------- ----------- ----------- ------------ ---------- ------------ ------------
Currency
translation - - - - - (8,302,919) (8,302,919)
Other comprehensive
income - - - - - (8,302,919) (8,302,919)
Loss for the
year ended
31 December
2014 - - - (13,563,462) - - (13,563,462)
Total comprehensive
income for
the year - - - (13,563,462) - (8,302,919) (21,866,381)
Share options
lapsed - - - 64,909 (64,909) -
Share options
expense - - - - 256,613 256,613
Warrant expense - - 1,358,351 - - - 1,358,351
Issuance of
shares for
cash 224,575 3,672,495 - - - - 3,897,070
Share issue
costs - (115,411) - - - - (115,411)
Balance at
31 December
2014 2,729,353 132,108,746 1,358,351 (94,144,808) 15,205,510 (10,820,727) 46,436,425
-------------------- --------- ----------- ----------- ------------ ---------- ------------ ------------
Consolidated Cash Flow
Statement
For the Years Ended 31
December
2014 2013
USD USD
--------------------------------- ---------------------- ------------
Operating activities
--------------------------------- ---------------------- ------------
Loss for the year (13,563,462) (14,376,210)
Adjustments:
Amortisation expense -
intangible assets 45,230 50,914
Depreciation expense -
property, plant and equipment 1,622,409 1,076,025
Loss on disposal of property,
plant and equipment 500,319 9,349
Impairment of assets 6,023,622 4,416,403
Finance income (476,536) (219,601)
Share based payments 256,613 756,356
Loss/(gain) on foreign
exchange 45,242 (8,309)
Decrease in inventories 905,984 1,029,521
Decrease in accounts receivable 131,517 2,285,494
(Decrease) in accounts
payable (578,714) (988,359)
---------------------------------- ---------------------- ------------
Net cash flow used in operations (5,087,776) (5,968,327)
---------------------------------- ---------------------- ------------
Investing activities
--------------------------------- ---------------------- ------------
Purchase of computer software (6,777) (24,892)
Purchase of tangible assets (4,898,050) (19,486,920)
Proceeds from sale of equipment 1,029,472 -
Interest received 476,536 219,601
---------------------------------- ---------------------- ------------
Net cash used in investing
activities (3,398,819) (19,292,211)
---------------------------------- ---------------------- ------------
Financing activities
--------------------------------- ---------------------- ------------
Proceeds from issue of
share capital 5,255,420 -
Issue costs (115,411) -
---------------------------------- ---------------------- ------------
Net cash from financing
activities 5,140,009
---------------------------------- ---------------------- ------------
Net change in cash and
cash equivalents (3,346,586) (25,260,538)
Cash and cash equivalents
at beginning of the year 11,163,079 36,944,060
Effect of changes in foreign
exchange rates (207,628) (520,443)
---------------------------------- ---------------------- ------------
Cash and cash equivalents
at end of the year 7,608,865 11,163,079
---------------------------------- ---------------------- ------------
Notes:
1. Preparation of accounts
The financial information set out in this announcement does not
constitute the Company's annual accounts for the years ended 31
December 2014 or 2013.
The consolidated balance sheet at 31 December 2014, the
consolidated income statement, consolidated statement of changes in
equity, consolidated cash flow statement and associated notes for
the year then ended have been extracted from the Group's 2014
annual financial statements upon which the auditors' opinion is
unqualified.
2. Significant accounting policies
The accounting policies and presentation followed in the
preparation of these final results have been consistently applied
to all periods in these financial statements and are the same as
those applied by the Group in the preparation of its annual
accounts for the year ended 31 December 2014.
Going concern and project funding requirements
Following a placing which raised USD 5.1 million, the Group had
cash and cash equivalents of USD 7.6 million and no borrowings at
31 December 2014. The fundsare expected to finance the Company into
the first quarter of 2016.
The Board has reviewed the Group's cash flow forecast for the
period to 30 June 2016, and is satisfied that it has sufficient
funds to complete the DFS and to maintain the Group as a going
concern for a period of over twelve months from the date of signing
the annual report and accounts, subject to the successful
realisation of its reasonable expectation that additional funds
will be made available by selling certain equipment and other
assets of the Group, cutting discretionary expenditure, reducing
headcount where this does not compromise safety at site or impede
the progress of the DFS, reviewing the timing of other expenditure
and pursuing other fund raising options. As at 31 December 2014 USD
1.64 million hadbeen realised from the disposal of equipment and
other assets.
However, in the absence of such arrangements being in place
these conditions indicate the existence of a material uncertainty
which may cast significant doubt over the Group's ability to
continue as a going concern and, therefore, that it may be unable
to realise its assets and discharge its liabilities in the normal
course of business. The financial statements do not include the
adjustments that would result if the Group was unable to continue
as a going concern.
After completion of the DFS further funding will be required to
bring the Chaarat Project into production. The timeframe and costs
of engaging a contractor for mining and construction, as well as
securing finance for the Project, are difficult to estimate. The
Company has a reasonable expectation that existing funds, as well
as the funds to be raised from selling equipment, should be
sufficient to complete the above process.
If this funding cannot be secured the Group may not be able to
fully develop the Project and the carrying values of the mine
properties, related plant and equipment and assets in construction,
which at 31 December 2014 amounted to approximately USD 39 million,
may become impaired.
3. Loss per share
Loss per share is calculated by reference to the loss for the
year of USD 13,563,462 (2013: USD 14,367,210) and the weighted
number of shares in issue during the year of 272,935,389 (2013:
250,477,868)
There is no dilutive effect of share options.
4. Timetable and distribution of accounts
The Annual General Meeting will be held at 9 am on 22 July 2015
at the offices of BDO, 55 Baker Street, London W1U 7EU.
Copies of the Annual Report and Notice of the Annual General
Meeting will be sent to shareholders by 18 June 2015.
Additional copies of the Annual Report and Accounts will be
available, free of charge, from Central Asia Services Limited, 12
West Links, Tollgate, Chandler's Ford, SO53 3TG, for a period of 14
days from the date of posting and will be available on the
Company's website - www.chaarat.com
Note to Editors:
About Chaarat Gold
Chaarat Gold is an exploration and development company operating
in the Kyrgyz Republic with a large, high grade resource - the
Chaarat Gold Project. The Company's key objective is to become a
low cost gold producer generating significant production from the
development of the Chaarat Gold Project. Chaarat is preparing a
Definitive Feasibility Study and continuing its active community
engagement programme to optimise the value of the Chaarat
investment proposition.
Chaarat aims to create value for its shareholders, employees and
communities from its high quality gold and mineral deposits in the
Kyrgyz Republic by building relationships based on trust and
operating to the best environmental, social and employment
standards.
Further information is available at www.chaarat.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAKKEFFNSEFF
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