TIDMCGH
RNS Number : 8577J
Chaarat Gold Holdings Ltd
18 June 2014
Chaarat Gold Holdings Limited
("Chaarat" or the "Company")
Update on Definitive Feasibility Study
Road Town, Tortola, British Virgin Islands (18(th) June
2014)
Chaarat (AIM - CGH), the AIM quoted exploration and development
company with assets in the Kyrgyz Republic, is pleased to provide a
further progress update on the Definitive Feasibility Study ("DFS")
for the Chaarat Project ("the Project").
Highlights
-- Projected production expected to be increased significantly
to at least 250,000 ounces of gold per annum - a level appropriate
to the size of the Chaarat deposit
-- Two stage option to implement the Project identified which
would enable production to commence with a lower up-front capital
cost
-- Heap leach operation estimated to generate circa 120,000 ounces of gold per year
-- Production rate from sulphide ore yet to be determined but
likely to be higher than the heap leach level of production
-- Layout of whole Project revised to improve efficiency, reduce
possible environmental impact and eliminate access issues
-- Small amount of additional drilling underway to support the
implementation strategy and secure more geotechnical
information
-- Cheaper processing option for refractory ore under investigation
-- Timing for completion of DFS revised to early 2015,
reflecting the assessment of the enlarged heap leach
opportunity
As announced in March 2014, the team of DFS consultants visited
the Chaarat site when it opened at the end of April. Their findings
have now been evaluated. The first stage of the work involved
studying various alternatives and options to conclude on an optimal
scope for the development of the Chaarat Project. The DFS will then
be prepared in accordance with the agreed scope.
Strategic development of the deposit
The optimal strategic development of the deposit has been
identified as two production lines which share elements of the
infrastructure, but are economically feasible as standalone
Projects. The decision whether to implement the two lines
sequentially or in parallel will be based on the likely financing
options available to the Company, for example, whether Chaarat will
self-develop the deposit or whether it will be developed by a JV
with a large operating partner or a strategic investor.
The Chaarat deposit hosts two types of ore which can be treated
by different processes. One zone (the Tulkubash Project) is
predominantly low sulphur and amenable for heap leaching. The other
part of the deposit is more refractory and requires oxidation
before gold can be leached out of the ore.
The involvement and provision of financing from a joint venture
partner or strategic investor should enable both stages of the
process to be undertaken at once. If this involvement does not
materialise, the processes can be undertaken sequentially,
dependent on the availability of finance to Chaarat.
The DFS will evaluate the heap leach and refractory options as
separate standalone Projects.
Layout of the Project
The Chaarat deposit is located in a narrow valley which could
inhibit the expansion of the Project once in production. As part of
the DFS, the consultants reviewed other options for the location of
the processing plant and associated infrastructure. A trade off
study has concluded that there are considerable economic,
environmental and operational benefits to locating the production
facility in an adjacent valley.
In order to connect the plant to the mine site a 10km tunnel
will need to be constructed through the mountain. The preliminary
results of the trade off study have demonstrated that the reduction
in haulage and other operating costs will significantly outweigh
the capital cost of the tunnel, while also delivering major
environmental benefits. Further work is now underway to finalise
the design and costs of the tunnel construction.
Scale considerations
A staged development will mean that the heap leach option, which
requires significantly less capital investment and is less complex
to operate, will be built initially. The indicative capital cost of
the tunnel and power line necessary to take the first stage heap
leach Project into production will have an impact on the economics
of this Project on a standalone basis, but the anticipated
increased level of production to 120,000 ounces of gold per annum
should support the attractive return on this investment.
Conversely, the economics of the second larger refractory Project
will benefit very considerably from the capital expenditure carried
by the heap leach Project.
Heap leach operational scale
The main feed of ore for the heap leach operation is from the
Tulkubash zone. A preliminary mine design of the Tulkubash pit has
indicated the economic benefits of processing not only the material
grading above 1 g/t cut-off but also the lower grade material
situated inside the pit envelope. This early plan shows reserves
included in the initial pit will be about 17 million tonnes of ore
at a grade of 0.93 g/t being 523,000 ounces of heap leachable
reserves. The strip ratio is currently estimated at about 2:1. The
low strip ratio, with the consequent reduction in the mining costs
of diesel and labour (which are in any case relatively low in the
Kyrgyz Republic), will increase the returns generated from the heap
leach operation. It has therefore been decided that the heap leach
operation will be designed to process 5 million tonnes per annum or
15,000 tonnes per day and produce approximately 120,000 ounces of
gold per annum.
As this revised production level is significantly higher than
previously expected, additional drilling of about 4-5,000 metres is
required to support a sustainable standalone heap leach operation.
This drilling has commenced and is expected to be concluded in
September. The mineralised zone very clearly extends towards the
north which gives us confidence that the required resource can be
added.
Scale of the refractory operation
The mine design of both the refractory open pit and underground
operation is also in progress. The optimal scale of the operation
can only be determined once the mine design is complete. However,
the results of the DFS to date indicate that the scale of the
Project can be significantly larger than the originally anticipated
production of 200,000 ounces per year included in the
Prefeasibility Study prepared in 2011. The heap leach Project alone
is being designed for 5 million tonnes of ore annually or
production of about 120,000 ounces of gold per year. The refractory
operation (which will be fed from both the open pit and
underground) can support a greater production profile.
Process update
We initially considered that the refractory ore, due to its
sulphur content, would need to be processed by oxidation which
would probably take the form of flotation followed by pressure
oxidation. The capital cost of this process is significant.
Initial work on bio-oxidation of the crushed refractory ore has
shown promising results by using a simpler process of heap
bio-oxidation followed by heap leaching. The results were achieved
following a short oxidation period by a generic culture. More work
has been commissioned to develop a tailor made culture and to run
larger scale tests. If this process proves to be suitable there
will be considerable positive effects on the economics of the
Project, by the reduction of both capital and operating costs.
Timing
The results to date of the DFS have exciting implications for
the economics of the Project. However in order to complete the work
and analyse the results we now expect to complete the DFS in early
2015. The Board firmly believes that the additional work will add
value to the Chaarat Project by increasing production, reducing
operating costs and reducing the environmental impact.
The Board has carefully reviewed the revised budget and cash
flow for the group and is taking measures to source additional
funding from the sale of equipment (originally purchased for small
scale production so not immediately needed following the revision
to the strategy) and other exploration assets to cover the impact
of the additional work and enlargement of scope of the DFS. Some
equipment has already been sold and further advanced negotiations
are in progress. In addition, we have already received expressions
of interest in acquiring some of our exploration assets.
Dekel Golan CEO of Chaarat commented: "As the Project starts to
take shape we are all excited by the emerging initial results. The
purpose of the study is not merely to develop a "spreadsheet"
Project but to demonstrate how project risk can be mitigated and
the Project as a whole simplified and made more robust.
The decision to build a tunnel removes almost entirely issues of
access to site and concerns about environmental protection in a
restricted location; considerations which more than outweigh the
increase in upfront costs and the delay to production caused by the
construction of the tunnel. Having a heap leach operation that, in
itself, underpins the economics of all the development- whether or
not a second stage is built - is another major positive.
A projected production capacity of 250,000 ounces per annum
confirms Chaarat's potential as a top gold producer, and the two
stage option delivers flexibility, while not compromising overall
returns.
We continue to be of the belief that Chaarat is one of the
largest and best undeveloped Projects in the world and the
uncompromising objectives of the DFS are to demonstrate both the
economic merit of the Project as well as to chart a clear route for
its development. On this basis the increased scope of the DFS and
additional data collection now underway is more than justified.
Updates will be issued once we have further results to report. I
will be giving a presentation at the Proactive Investors event on
26 June and in the meantime the Annual Report will reflect on our
progress to date."
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, Stuart Skinner
(NOMAD)
James Black (Broker)
Further information is available at www.chaarat.com
NOTES 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 (DFS) and continuing its active
community engagement programme to optimise the value of the Chaarat
investment proposition. Chaarat has several other promising
prospects also located within the Kyrgyz Republic.
This information is provided by RNS
The company news service from the London Stock Exchange
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