CGH Chaarat Gold Holdings Ltd

TIDMCGH

RNS Number : 1811P

Chaarat Gold Holdings Ltd

30 September 2013

Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2013

Road Town, Tortola, British Virgin Islands (30 September 2013)

HIGHLIGHTS

   --     Preparation of the Definitive Feasibility Study (DFS) for the Chaarat Project in progress 
   --     Data collection for the DFS well advanced 

-- Infill drilling supports increase in open pit potential and reduction of upfront project cost

   --     Negotiations with parties interested in the Chaarat Project continue 
   --     Community Consultation Group established 

Dekel Golan, Chief Executive Officer of Chaarat, commented:

"I am pleased to report that our strategy to optimise the return from the Chaarat Project is proceeding to plan. Good progress has been made in appointing consultants for the Definitive Feasibility Study and collecting the data they need. We continue to explore all options at a corporate level with encouraging results. We are fully funded to complete the DFS and continue our active community engagement programme to optimise the value of the Chaarat investment proposition.

Over the coming months we will report on progress and as ever we are grateful for the continued support of our loyal shareholders."

Enquiries:

Chaarat Gold Holdings +44 23 800 11747 / +44 20 7499 2612

   c/o Central Asia Services Limited                             info@chaarat.com 

Dekel Golan CEO

Linda Naylor FD

   Numis Securities Limited                                             +44 (0) 20 7260 1000 

John Prior, Stuart Skinner (NOMAD)

James Black (Broker)

Further information is available at www.chaarat.com

Strategic focus

During 2012 all efforts were focused on establishing a small scale production base for the Tulkubash area within the Chaarat Project. However, after a thorough review of conditions in the financial markets, the Board decided not to commit any further funds to this strategy for the following reasons:

1. The increased volatility of the gold price made it more difficult to forecast the expected revenue from small scale gold production. In addition, the cost of borrowing the required $20 million working capital had increased so the Company was unlikely to generate significant surplus cash flow from such production.

2. It has become clear that a low share price and the absence of an up-to-date DFS are obstacles in negotiations with potential strategic investors. A DFS prepared by reputable third parties will underpin the project layout, its expected production capacity, its cost and as a consequence its value. Clearly the choice was either moving to production or preparing a DFS.

3. As reported in May 2013, the Board of Chaarat decided that the completion of a DFS will substantiate the value and potential of the Chaarat deposit. It will provide the Board with a stronger negotiating position with potential strategic investors, who have already approached Chaarat, as well as increasing the options available for adding value for shareholders.

Corporate activities

There are two basic options for us to ensure that the value of the Chaarat Project is optimised. These are either to introduce a partner (operating or passive) to the Project company and develop the project as a joint venture, or to sell the Project altogether.

The Board considers that the sale of the Project may take away any future "upside" from shareholders and the preference of the Board is therefore to introduce a significant partner or partners to the Project company. We are pursuing several avenues to achieve this outcome.

Negotiations with Shandong Gold

During March we announced that the discussions with Shandong Gold Mineral Resources Group (SGMR) had been delayed due to a change in the senior personnel at the holding company level of the SGMR group. In May we reported that the new management team had scheduled a site visit for later in the summer. We are pleased to report that following the site visit the new management team has reiterated SGMR's interest in the Chaarat Project. A Hong Kong based investment bank has been appointed by SGMR to oversee the process of engaging with Chaarat.

Progress on Definitive Feasibility Study

The work on the DFS will be divided into two stages:

   1.   Between now and the end of 2013, the following activities will be completed: 
   a.   Data collection 
   i.   Exploration and infill drilling of about 11,000 metres including the related road 

development

ii. Hydrological and geotechnical drilling of about 4,500 metres

iii. Preparing a number of trade off studies to determine the best solutions for

different engineering aspects of the Project

b. Scoping the Project - defining the size, set-up and other general characteristics of the Project (process, capacity, location of main facilities on site) so as to ensure the scope of work of the DFS study is clearly defined

c. Selection of Lead Consultant to head the project as well as the consultants to execute specific sections such as environmental and social, metallurgy, engineering, resource and reserve calculation, tailings and waste management etc.

2. The engineering and design work of all the consultants will be compiled into a single report by the Lead Consultant. The DFS should then be completed by late 2014.

Mac DeGuire is responsible for coordinating and managing the DFS. His experience includes the San Cristobal project in Bolivia which is an $800 million 40,000 tpd open pit silver, zinc lead deposit and in the top 6 world-wide producers of each metal. He managed the project development and initial operations of Newmont's $225 million gold heap leach project in Uzbekistan and the feasibility study for the Yanacocha gold heap leach project in Peru.

Exploration

As previously reported, we focused on infill drilling to increase the open pit potential of the deposit during the period. We have achieved better results than anticipated as announced on 23 September.

Further drilling as outlined above will be undertaken up to the end of the season while underground drilling will continue during the winter. An updated JORC resource will be available in early 2014.

Power

The design of the power line from site to the grid has been completed. The Company has renewed and extended its agreement with the national electricity company to allocate and reserve a quota of 25 MW from the Kristal sub-station. This allocation removes the need to build another substation and will support production of 200,000 ounces of gold per annum.

The Kyrgyz Republic is well endowed with hydropower capacity and potential and is a net power exporter. The low cost and ready availability of power in the Kyrgyz Republic is a competitive advantage to all those involved in the country's mining industry.

Community relations

During the year the Company continued to engage with the residents of the Chatkal valley, the adjacent valley to the deposit. A Community Consultation Group has been established which includes representatives of all local stakeholders. This group will be the community representative body to discuss the Project with Chaarat and the conduit to air the concerns and wishes of the local population. Chaarat is committed to work according to the IFC and Equator principles and to ensure its activities in the region are undertaken in consultation with the local stakeholders.

Chaarat has developed a proactive sensitivity to the concerns and interests of the local communities and the preparation of the Definitive Feasibility Study will build on this engagement. We believe that the long history of cooperation and mutual respect will result in a fruitful consultation process.

Finance

During the period since the announcement of the change in strategic focus a review of our staff headcount has been undertaken and we have reduced our operating team. All costs continue to be closely scrutinised and overheads cut. During the six month period we made large payments to the government. We paid $5.77 million to obtain a mining licence over the whole Chaarat deposit area and we wrote off $3.3 million of irrecoverable VAT in the six month period.

We are fully funded to complete the DFS, to continue our active community engagement programme and cover our reduced overheads until mid 2015.

Dekel Golan

Chief Executive Officer

About Chaarat Gold

Chaarat Gold is an exploration and development company operating in the Kyrgyz Republic with a large, high grade resource which is capable of generating low cost gold production - the Chaarat Gold Project. Situated in the highly prospective Tien Shan gold belt, a JORC compliant resource of 5.76Moz at a grade of 4.03g/t has so far been delineated and recent infill drilling shows the potential to increase the resource base. The Company's key objective is to become a low cost gold producer targeting annual production of 200,000 ounces from the development of the Chaarat Gold Project.

The Pre-feasibility Study published in 2011 indicated that the Chaarat deposit is capable of supporting gold production of approximately 200,000 ounces of gold per year, at a cash cost of production below $600 per ounce. The study also identified areas which could be improved with further work.

We are fully funded to complete a Definitive Feasibility Study (DFS) and continue our active community engagement programme to optimise the value of the Chaarat investment proposition.