TIDMCGH
RNS Number : 5217G
Chaarat Gold Holdings Ltd
27 July 2021
27 July 2021
Chaarat Gold Holdings Limited
("Chaarat" or "the Company")
H1 2021 Operational Update
Chaarat (AIM:CGH), the AIM-quoted gold mining Company with an
operating mine in Armenia and assets at various stages of
development in the Kyrgyz Republic, announces its production and
operational results for the half year ended 30 June 2021 ("H1" or
the "Period") for its Kapan Mine ("Kapan") in Armenia and a general
corporate update.
H1 2021 Highlights
Kapan
-- Shahumyan mine production of 25,896 gold equivalent ounces(1)
("oz") vs 27,140 oz in H1 2020 (-4.6%) in line with the mine plan
and more than offset by third-party ore treatment
-- Improved all-in-sustaining cost ("AISC"(2) ) of USD1,063 /oz
vs USD1,076 /oz in H1 2020 (1%)
-- Strong financial performance with preliminary unaudited
standalone EBITDA contribution of USD13.5 million vs USD4.1 million
in H1 2020 (+229%)
-- Significantly increased third-party ore production of 70kt
for H1 2021 vs 10kt for H1 2020 (+600%), in turn contributing
USD1.8 million to the above-mentioned EBITDA for H1 2021. This
compares with a contribution of USD0 million for H1 2020 and is a
result of management delivering on a key target of optimised plant
utilisation
Tulkubash & Kyzyltash
-- Updated bankable feasibility study ("BFS") released in May
2021 confirming robust project economics
-- Exploration drilling programmes for Tulkubash and Kyzyltash
commenced in May. Results of the drilling on Tulkubash are expected
for Q4 2021 and should lead to a revised resource and reserve
update prior to year-end
Corporate Finance
-- Funding package of USD52.2 million closed in February 2020
reducing the net debt position from USD64.5 million as of 31
December 2020 to USD18.5 million as of 30 June 2021 (-71%).
-- Simplified partnership structure with Çiftay İn aat Taahhüt
ve Ticaret A. ("Çiftay") where they become a strategic investor at
Chaarat level and Chaarat maintains 100% ownership in Tulkubash and
Kyzyltash.
-- Debt financing is progressing with ongoing discussions with
potential fixed income investors to provide a comprehensive
financing solution for Chaarat. The Company is targeting signing in
Q3 2021
Kapan Polymetallic Mine - H1 Highlights and Outlook
-- As previously disclosed, Kapan experienced a fatal workplace
injury in early March. Recordable injury case rate (per one million
hours worked) is 1.43 compared to 0.7 in H1 2020.
-- COVID 19 measures remain in place throughout the site. The
last wave in 2020 had minimal impact on operations. Despite the
country wide lifting of restrictions, Chaarat Kapan continues to
adhere to the COVID 19 protocols successfully used to date.
-- Shahumyan mine ore production of 25,896 oz represents a 4.6%
decrease on H1 2020 (27,140 oz). Fewer Shahumyan tonnes were
treated as a result of delayed development work in Q4 2020 caused
by last year's hostilities.
-- Third-party ore treated was 70kt for H1 2021 vs 10kt for H1
2020 (+600%). Treatment was approximately 45kt above target as
management was able to contract more material in order to maximize
mill throughput for the period(2) .
-- H1 2021 production consisted of:
o 13,466 ounces of gold;
o 272,635 ounces of silver;
o 852 tonnes of copper; and
o 3,170 tonnes of zinc;
-- All-in-sustaining cost ("AISC" (3) ) of USD1,063 /oz slightly
improved compared to H1 2020 (USD1,076 /oz, 1%).
-- Realised gold price for the quarter of USD1,783 /oz versus
USD1,665 /oz in H1 2020 (+7%) in line with the average gold price
for H1 2021. Especially realised copper prices of USD9,230/t vs
USD5,400 in H1 2020 (+71 % vs H1 2020) had a significant positive
impact.
-- Tonnes mined were down year on year by 16.4%. This was partly
due to lower development mining during the hostilities, and changes
in mining method that are reducing overall dilution resulting in a
grade improvement of 13.3% with 3.33 g/t AuEq in H1 2021 vs 2.94
g/t AuEq in H1 2020.
-- Mill throughput increased year on year by 2.5% as the reduced
mining volumes were more than compensated by additional third-party
ore treatment.
-- AuEq recoveries were at 79.4% in H1 2021 compared with 79.2% in H1 2020.
-- Despite the above-mentioned reduced development work, the
team was able to return to the planned development schedule in H1
2021. 11,783 metres were achieved in the period compared to 11,216
metres in H1 2020 (+5%).
-- Capital expenditure ("CAPEX") was USD2.5 million, 40% lower
than expected due to timing of capital decisions in relation to the
initial plan. Annual CAPEX is still expected to be in line with the
original guidance of ca. USD8 million.
-- The exploration work on the East flank started in May and is
progressing well. First results are expected by year end. If
positive, development of a decline and ordering of equipment will
occur in 2022 with an expected increase in production from
2023.
-- Unaudited H1 2021 Kapan standalone EBITDA contribution of
USD13.5 million vs USD4.2 million in H1 2020 (+229%) of which
third-party ore treatment contributed USD1.8 million vs USD0
million in H1 2020. The increase in EBITDA is mainly based on a
more favourable commodity price environment and further
improvements to the operational efficiency, especially on the
transition period between own ore and third-party ore
treatment.
Outlook for Kapan
-- Chaarat remains on track to deliver on its AuEq 57koz guidance for the year(4) .
-- Third-party ore supply is expected to remain in line with H1 for the remainder of 2021.
-- An update to the current resource and reserve statement is in
progress with completion and release of the new Life of Mine
targeted for Q4 2021.
-- East Flank drilling campaign is expected to deliver results
leading to an initial JORC resource statement expected by end of
year.
-- The Company expects improved financial performance for the
2021 financial year vs 2020 due to increased commodity prices,
higher-grade mining, and a consistent third-party ore supply.
(1) Gold equivalent ounces for 2020 recalculated on 2021 budget
prices with Au at USD1,700/oz and gold ratios of 68 for silver,
7,287 for copper and 21,862 for zinc. In last year's H1 2020
operations update, 2020 oz were based on gold ratios of 83 for
silver, 7,778 for copper and 20,968 for zinc leading to a lower
AuEq number reported in that previous year.
(2) Production from third-party ore is excluded from the
production numbers in this release as this source of third-party
ore was treated on a tolling basis whereas last year's source was
purchased and sold by Kapan to the international markets.
(3) AISC on a gold oz produced basis exclude smelter TC/RC,
penalty, MTM charges, others which add c. USD164/oz. Sustaining
capex of c. USD 8 million p.a. is included in the AISC, of which
capex of USD2.5 million was spent in H1 2021.
(4) 57koz AuEq guidance includes third-party ore production
based on the assumption that purchased ore was sold by Kapan,
whereas in 2021 third-party ore is treated on a tolling basis.
Tulkubash and Kyzyltash Project Update
The updated BFS for the Tulkubash project was published along
with revised mineral resource and ore reserve estimates summarising
the progress achieved since the previous 2019 BFS. The full study
is available on Chaarat's homepage.
Site infrastructure works and early construction works are
limited pending completion of the debt financing.
The 2021 exploration programme commenced at the end of May with
results expected late 2021 to early 2022. The focus is infill
drilling of areas currently classified as inferred, as well as new
exploration of nearby areas with high potential. By the end of
June, 10 drill holes (out of 62 holes, 16%) and 1,633 metres (out
of 9,540 metres, 17%) were completed. Out of the 4,000-metre
trenching programme 2,484 metres were completed (62%).
Geotechnical drilling of the Tulkubash ore body is also being
carried out this year to improve the final pit designs ahead of
production.
Drilling to obtain core for metallurgical testing of Kyzyltash
ore has also commenced.
Debt Financing
The Company continues to progress with a potential funding
solution for the development of the Tulkubash project. As
previously announced, the Company completed an equity fundraise in
February 2021 which included USD30 million of new capital with the
majority to be allocated to the construction of the Tulkubash
project. In addition, Chaarat is exploring a comprehensive
refinancing of its current debt outstanding and financing of the
Tulkubash project through a fixed income debt instrument.
The debt financing is progressing with ongoing discussions with
potential fixed income investors. Chaarat has received healthy
interest in subscribing to a fixed income solution. The proceeds
from this financing would be used for the refinancing of existing
corporate debt and to finance the costs related to the Tulkubash
gold project.
As previously indicated, the debt financing timeline has been
impacted by external factors. Despite having no direct impact on
our operations in the Kyrgyz Republic and continued support from
the government for Chaarat and its development assets, the
situation around the Kumtor mine has impacted the process timeline.
The delay on the debt financing schedule has not materially delayed
the project timeline.
As a result, first gold pour is still expected for H2 2023 while
the debt financing is targeted to be signed in Q3 2021.
Corporate Finance
The Company received strong demand for a funding package in
February 2021 for a total of USD52.2 million which included issuing
USD30.0 million in equity to new institutional investors and family
offices as well as existing shareholders and conversion of debt
into equity of USD22.2 million.
The financing led to a significant improvement in the Company's
debt position, reducing it from USD70.5 million as of 31 December
2020 to USD43.5 million on 30 June 2021, a reduction of 38%(3) .
The net debt position has been reduced from USD64.5 million as of
31 December 2020 to USD18.5million in June 2021, a reduction of
71%. With the debt-to-equity conversion, the Labro Term Loan has
been extinguished, saving the Company USD2.1 million a year in
interest payments from 2021 to 2024.
The Kapan acquisition loan facility was reduced by USD4 million
to USD24 million during H1 2021.
As announced on 21 June 2021, Çiftay and the Company have agreed
a new investment agreement, in order to simplify the structure of
the partnership and further align the interests of both parties.
Chaarat will retain 100% ownership of the Tulkubash and Kyzyltash
projects with Çiftay becoming a strategic investor at the Company
level, through the issuance of new ordinary shares.
Chaarat continues to evaluate capital opportunities to either
refinance existing financing facilities and/or reduce its overall
cost of capital. One of the key priorities for the next months is
to evaluate options to refinance the convertible bond due in
October 2021.
(3) Excluding lease liabilities, contract liabilities and
accrued interest on the convertible loan note.
Artem Volynets, Chief Executive Officer, commented:
"I am pleased to report another strong half year with a
significantly higher EBITDA and slightly improved AISC at Kapan
supporting our deleveraging of the asset and supporting our East
Flank extension plans. I am very happy with the performance of the
Kapan team in delivering production and financial results ahead of
budget to achieve our targets for 2021. The team did very well this
period in reducing dilution and optimising grade, as well as
pushing tonnage through the mill from third party supplies.
The slight delay in the Tulkubash debt financing process was
caused by external factors, despite our strong support in country
and the confirmation of strong project economics in the updated BFS
2021 but we target signing of this financing in Q3 2021. Operations
in country are progressing well and we are on time with our
exploration and construction timeline."
Enquiries
+44 (0)20 7499
Chaarat Gold Holdings Limited 2612
Artem Volynets (CEO) info@chaarat.com
Canaccord Genuity Limited (NOMAD and + 44 (0)20 7523
Joint Broker) 8000
Henry Fitzgerald-O'Connor
James Asensio
+44 (0)20 7220
finnCap Limited (Joint Broker) 0500
Christopher Raggett
Panmure Gordon (UK) Limited (Joint +44 (0)20 7886
Broker) 2500
John Prior
Hugh Rich
About Chaarat
Chaarat is a gold mining company which owns the Kapan operating
mine in Armenia as well as Tulkubash and Kyzyltash Gold Projects in
the Kyrgyz Republic. The Company has a clear strategy to build a
leading emerging markets gold company with an initial focus on the
FSU through organic growth and selective M&A.
Chaarat is engaged in active community engagement programmes 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 by
building relationships based on trust and operating to the best
environmental, social and employment standards. Further information
is available at www.chaarat.com/ .
H1 2021 PRODUCTION & OPERATIONAL SUMMARY
H1 2021 H1 2020
Tonnes ore mined 301,658 360,957
AuEq Grade (g/t) 3.33 2.94
Tonnes ore milled 374,794 365,650
Tonnes ore milled (Third-Party
Ore) 70,005 10,127
AuEq Recovery Kapan (%) 79.4 79.2
Gold equivalent production
(oz) 25,896 27,140
Gold production (oz) 13,466 13,179
Silver production (oz) 272,635 261,551
Copper production (t) 852 960
Zinc production (t) 3,170 3,997
AuEq Sales 22,909 25,825
Realised gold price
(USD/oz) 1,783 1,665
AISC (USD/oz) 1,063 1,076
ENDS
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END
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