TIDMCGH
RNS Number : 5351O
Chaarat Gold Holdings Ltd
30 January 2019
30 January 2019
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
Not for release, publication or distribution to United States
newswire services or for release, publication or dissemination in
the United States and does not constitute an offer of the
securities herein.
This press release does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in the United States or
any other jurisdiction. Any securities described in this press
release have not been, and will not be, registered under the US
Securities Act of 1933, as amended, and may not be offered or sold
in the United States absent registration except in transactions
exempt from, or not subject to, registration under the US
Securities Act and applicable US state securities laws. There is no
public offering of the securities in the United States
expected.
Chaarat Gold Holdings Limited
("Chaarat" or the "Company")
Kapan Acquisition Completion
Further to the Company's announcement on 16 January 2019,
Chaarat is pleased to confirm that it and its subsidiary Chaarat
Gold International Limited ("CGIL") have completed the acquisition
of Kapan Mining and Processing Company CJSC ("Kapan") from PMTL
Holding Ltd ("PMTL"), a subsidiary of Polymetal International
Plc.
Of the total consideration of US$ 55 million (subject to net
debt and working capital adjustments), US$ 10 million was settled
on completion in Convertible Loan Notes and US$5 million was
previously paid as a deposit in November 2018. The remaining US$ 40
million is payable in cash following the execution of certain
settlement procedures associated with the Kapan Acquisition
Financing. Payment is secured by a pledge over the Kapan shares in
favour of PMTL, which will be released upon receipt of payment by
PMTL anticipated on 1 February 2019. As a result, trading in the
Company's shares has been suspended with immediate effect with
re-admission to AIM expected to take place on 4-5 February
2019.
Documentation has been finalised for the Kapan Acquisition
Financing, which has been syndicated with Ameriabank CJSC (US$32m),
HSBC Bank Armenia CJSC (US$5m) and Ararat Bank OJSC (US$3m) on
substantially the same terms as the term sheet summarised at
paragraph 7.24 of Part VI of the Company's Readmission Document
published on 14 December 2018 ("Readmission Document") (updated
terms are summarised in the appendix of this announcement). In
addition, the Kapan Offtake Agreements (paragraph 7.21 of Part VI
of the Readmission Document) have been renewed and certain Kapan
Drilling Agreements (paragraphs 7.22 (a) (ii) and (iii) of Part VI
of the Readmission Document) have been extended, as disclosed in
the Appendix to this announcement.
In 2017, the Kapan mine produced c.50 koz Au Eq. generating more
than US$20 mm EBITDA and had gross assets of US$96 mm. The
acquisition strengthens the Company's portfolio of assets, with an
anticipated group production of approximately 65 Koz Au Eq in
2019.
Artem Volynets, Chief Executive Officer of Chaarat, said: "We
are very pleased to announce completion of the Kapan transaction.
Securing this high-quality, cash-generative asset under attractive
terms bears testament to the strength of our M&A consolidation
strategy. This acquisition is an excellent and complementary
addition to Chaarat's portfolio, transforming the Company from a
developer to producer with three solid assets in two
jurisdictions."
Enquiries
Chaarat Gold Holdings Limited
Martin Andersson (Executive
Chairman) +44 (0)20 7499 2612
Artem Volynets (CEO) info@chaarat.com
Numis Securities Limited
John Prior, Paul Gillam (NOMAD) +44 (0) 20 7260 1000
James Black (Corporate Broking)
Powerscourt
Conal Walsh +44 (0)20 7250 1446
Matthew Attwood chaarat@powerscourt-group.com
Isabelle Saber
About Chaarat Gold
Chaarat Gold is an exploration and development company with a
large, high grade resource - the Chaarat Gold Project. The Company
has a clear strategy to build a leading emerging markets gold
company with an initial focus on Central Asia and the FSU through
organic growth and selective M&A.
On 30 October 2018, Chaarat announced that it had entered into a
binding sale and purchase agreement to acquire the Kapan mine in
Armenia from Polymetal, for a consideration of US$55 million,
subject to adjustments (the "Kapan Acquisition"). On 14 December
2018, the Company issued the Readmission Document relating to the
Kapan Acquisition ("Readmission Document").
Chaarat is engaged in an 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 by
building relationships based on trust and operating to the best
environmental, social and employment standards.
Further information is available at www.chaarat.com.
NOTICE
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "envisages",
"estimates", "anticipates", "projects", "expects", "intends",
"may", "will", "could", "seeks" or "should" or, in each case, their
negative or other variations or comparable terminology, or by
discussions of strategy plans, objectives, goals, future events or
intentions. These forward-looking statements include statements
regarding the Company's and the Directors' current intentions,
beliefs or expectations concerning, amongst other things,
investment strategy, financing strategy, performance, results of
operations, financial condition, liquidity, prospects, growth,
strategies and the industry in which the Group (which, where used
in this announcement, shall have the meaning given to that term in
the Readmission Document) will operate.
By their nature, forward-looking statements involve risks
(including unknown risks) and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. Forward-looking statements are not an assurance of future
performance. The Company's actual performance, results of
operations, financial condition, liquidity and dividend policy and
the development of the business sector in which the Group will
operate, may differ materially from those suggested by the
forward-looking statements contained in this announcement. In
addition, even if the Company's performance, results of operations,
financial condition, liquidity and dividend policy and the
development of the industry in which the Group will operate, are
consistent with the forward-looking statements contained in this
document, those results or developments may not be indicative of
results or developments in subsequent periods.
Any forward-looking statements in this announcement reflect the
Company's and the Directors' current view with respect to future
events and are subject to risks relating to future events and other
risks, uncertainties and assumptions relating to the matters
referred to above. Other than in accordance with the Company's
obligations under the AIM Rules for Companies, the Company does not
undertake to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise.
APPIX
Terms used in this appendix have the same meanings as in the
Company's Readmission Document.
Kapan Acquisition Financing
The documentation for the Kapan Acquisition Financing has been
finalized on substantially the same terms as described in the
summary of the terms of the definitive term sheet (the "Ameriabank
TS") at paragraph 7.24 of Part VI of the Company's Admission
Document, published on 14 December 2018. All references to the
Kapan Acquisition Financing and the Ameriabank TS in the
Readmission Document should be interpreted accordingly.
The Company has now agreed definitive terms for the term loan
agreement (the "Ameriabank TLA") with Ameriabank CJSC
("Ameriabank") in respect of the proposed US$40 million term loan
facility (the "Ameriabank Term Loan"). Ameriabank will be acting as
agent in respect of the loan and will be lending US$32 million. The
other banks in the syndicate comprise HSBC Bank Armenia CJSC (whose
commitments comprise US$5 million) ("HSBC") and Araratbank OJSC
(whose commitments comprise US$3 million) ("Araratbank" and
together with HSBC and Ameriabank being together the "Banks").
The obligations of the Borrower (as defined below) under the
Ameriabank TLA will be guaranteed by (i) the Company and CGIL (the
"Guarantors") and (ii) for a limited period of time ending on the
first anniversary of the Utilization Date (as defined below) with a
guarantee limit of US$5 million only, Labro Investments Ltd (the
Company shall issue 250,000 shares to Labro as remuneration for
issuance of the guarantee).
The main terms of the Ameriabank TLA are the same as those of
the Ameriabank TS summarised in the Company's Admission Document,
save for the following, which can be substituted for the
corresponding paragraphs in the Admission Document:
Purpose & Use of Proceeds: Subject to execution and
satisfaction of the remaining conditions precedent, the Banks agree
to make available to the Borrower the Ameriabank Term Loan to
finance the Kapan Acquisition. The Borrower shall be required to
apply all amounts borrowed under the Ameriabank Term Loan to
finance the Kapan Acquisition.
Principal Repayment: Principal will be repaid in quarterly
instalments increasing over the term of the debt based on the
amortization schedule set out in the Ameriabank TLA. The Borrower
shall repay the outstanding Ameriabank Term Loan in full on the
Maturity Date and in instalments in accordance with the repayment
schedule set out in the Ameriabank TLA. The Borrower may not
reborrow any part of the Ameriabank Term Loan which is repaid.
Cash Sweep: The Borrower shall, not later than 45 days after
each 31 March, 30 June, 30 September and 31 December (or, if
earlier, the date which is 10 days after the submission of the cash
flow statement relating to such period) make a mandatory repayment
of the Ameriabank Term Loan then outstanding in a principal amount
equal to the cash sweep percentage of the cash flow available for
debt service less debt service for such cash sweep calculation
period. For the purposes of this summary, "Cash Sweep Percentage"
means: (i) 60% for the period starting on the utilization date to
the relevant date following 12 months after the utilization date;
(ii) 50% for the period starting on the second anniversary of the
utilization date to the relevant date following 24 months after the
utilization date; (iii) 35% for period starting on the third
anniversary of the utilization date to the relevant date following
36 months after the utilization date; and (iv) 0% thereafter, as
long as any portion of the Ameriabank Term Loan's principal remains
outstanding.
Financial Covenants: The Ameriabank TLA includes the following
financial covenants:
(i) the Borrower shall ensure the leverage ratio does not exceed 2.5:1;
(ii) the Borrower shall ensure the maximum financial
indebtedness of the Borrower cannot exceed US$ 41,000,000 (save
where the same arises as a result of ordinary course short term
trade payables);
(iii) the Borrower shall ensure the interest cover shall not be less than 1.2:1;
(iv) reserves of copper/zinc ore will not be, on any date before
the fourth anniversary of the Ameriabank TLA (and will not, at any
date prior to the termination date be scheduled to be) less than
30% of the reserves as at the date of the Ameriabank TLA;
(v) the Borrower has agreed to maintain certain minimum cash
balances consistent with its expected cash flow profile.
(vi) the aggregate amount expended by the Borrower in respect of
social spending and donations commencing on the date of the
Ameriabank TLA shall not exceed the lesser of AMD 150 million or
US$ 300,000 each year; and
(vii) from the beginning of 2019 onwards, the Borrower shall use
its reasonable endeavors to reduce social spending and
donations.
Financial covenants i), ii) and iii) are to be tested twice a
year starting from 30 June 2019 based on semi-annual financial
statements and audited annual financial statements. Financial
covenants iv) and vi) are to be tested on an annual basis starting
from 31 December 2019. Financial covenant vii) is to be tested on a
semi annual basis
Mandatory Prepayment: Mandatory pre-payment requirements
standard for a facility of this type, including proceeds from
liquidated damages, termination of material project contracts,
compensation proceeds, insurance proceeds, illegality and change of
control.
Conditions Precedent: The Ameriabank TLA contains a number
standard conditions precedent for a facility of this type (and
Ameriabank has confirmed that these have been satisfied or waived,
save for any that can only be satisfied following completion of the
Kapan Acquisition), including:
-- full suite of transaction documents, including:
(i) the Ameriabank TLA;
(ii) security documents, comprising (subject to local law): (A)
real estate mortgage over specific assets of the Borrower; (B) a
moveable assets pledge agreement; (C) Borrower share pledge; (D)
Buyer share pledge; and (E) Borrower's cash flow pledge
agreement;
(iii) a fee letter;
(iv) all notices required under the security documents referred to above;
(v) a guarantee to be entered into by the Guarantors, Ameriabank
as security agent, each of the Banks and the Borrower; and
(vi) a guarantee to be entered into by Labro Investments Ltd as
guarantor, Ameriabank as security agent, each of the Banks and the
Borrower.
-- complete funding for the Kapan Acquisition being in place (see below at the end of this section "Conditions
Precedent").
-- execution of the first hedge transaction by the Borrower with an Acceptable Hedge Counterparty in accordance with
the Hedging Requirement;
-- various legal opinions;
-- payment of fees, costs and expenses;
-- receipt of the Kapan Mine Action Plan to follow up on the CSA Fatal Flaw Analysis Report;
-- air emission permits;
-- valid technical and technological safety expertize positive conclusions on all mining facilities (including
tailing dams and pipes and related facilities) as required under applicable law;
-- all construction permits for the current construction activities (including land works) underway; and
-- all related other permits required for the operation of the Kapan Mine and main activities of Kapan.
The Borrower and CGIL warrant to Ameriabank that the purchase
price for the Kapan Acquisition is US$55,000,000, funded by
US$40,000,000 of acquisition financing to be arranged by Ameriabank
on a best effort basis, US$5,000,000 of cash from the Buyer (which
was paid to PMTL as a deposit on or around 12 November 2018), and
the remaining US$10,000,000 to be settled through PMTL subscribing
for US$10,000,000 of Convertible Loan Notes.
The Ameriabank TLA notes that the Company and/or the Buyer have
provided documentation to Ameriabank evidencing that US$15,000,000
of funding has been fully and irrevocably committed to finance the
Kapan Acquisition (comprising the US$5,000,000 deposit paid to PMTL
on/around 12 November 2018 and US$10,000,000 of Convertible Loan
Notes to be subscribed by PMTL)
Conditions subsequent: The Ameriabank TLA contains a number of
conditions subsequent, including as follows:
-- a requirement on the Borrower to provide Ameriabank with an updated mine plan by no later than 1 June 2019,
including detailed design, development plan and production schedule.
-- various requirements as regards a tailings management facility.
-- certain requirements relating to an environmental management program report.
-- a requirement on the Borrower to, no later than 1 January 2020, submit a Kapan Mine
closure and reclamation plan for the Kapan Mine developed by a qualified consultant acceptable to Ameriabank.
-- a requirement that the Borrower shall, on a best effort basis, seek to arrange refinancing of the Ameriabank
TLA and Kapan Acquisition Financing by local banks by negotiating a prepayment offtake facility with a commodity
trader(s) and/or via increasing the Borrower's equity and/or arranging debt financing by a Guarantor.
-- a requirement that the Borrower shall, within 3 months, take all action necessary to pledge the 189 plots of land
in favor of the Banks.
-- a requirement that, by 28 February 2019, the Borrower shall ensure that all the Banks are named as beneficiaries
under the relevant insurances maintained by the Borrower.
-- A requirement that the Borrower shall, within 2 months, provide all water usage permits and wastewater discharge
permits in relation to the Kapan Mine.
-- A requirement that the Borrower shall, within 6 months, provide the following in relation to the Kapan Mine:
o valid EIA expertize positive conclusions (including when such
conclusions are conditional upon existence of certain circumstances
or conduct of certain activities, the proof that such actions where
conducted and circumstances occurred); and
o technical safety declaration signed off by the State Water
Committee for the Geghanush tailing dam hydro-technical facility as
required under applicable law.
Governing Law & Dispute Resolution: The governing law shall
be the laws of the Republic of Armenia save that the guarantees are
subject to English law. Any dispute shall be referred to, and
finally resolved by, the First Instance Court of Yerevan, Republic
of Armenia, save that under the guarantees dispute resolution is
arbitration under the Arbitration Rules of the London Court of
International Arbitration.
Kapan Offtake Agreements (paragraph 7.21 of Part VI of the
Readmission Document)
These agreements have been renewed on the following terms:
(i) On 21 January 2019, Kapan (as the seller) entered into an
offtake agreement with Trafigura Pte. Ltd. (as the buyer) for the
purchase of 15,000 wet metric tonnes +/-5% in Kapan's option of
zinc concentrate. Shipments are to be made throughout 2019 in
shipments of 650/800metric tonnes and the contract price for each
shipment of concentrate is based on certain quoted prices for zinc,
silver and gold less deductions for treatment charges and the
presence of cadmium in the concentrate. This agreement is governed
by English law.
(ii) On 7 December 2018, Kapan (as the seller) entered into an offtake agreement with Glencore International AG (as the buyer) for the purchase of 10,000 wet metric tonnes +/-10% in Kapan's option of Kapan copper concentrates. Shipments are to be made from January 2019 to December 2019 in monthly shipments of 500/650 metric tonnes. The contract price for each shipment is based on certain quoted prices for copper, silver and gold less deductions for treatment and refining charges and penalties for the presence of arsenic, lead and zinc combined or fluorine. This agreement is governed by Swiss law.
Kapan Drilling Agreements (paragraphs 7.22 (a) (ii) and (iii) of
Part VI of the Readmission Document)
Certain drilling agreements have been extended on the following
terms.
(a) Drilling Agreements
(ii) Kapan is party to a further drilling agreement with AGRP
dated 21 February 2017, which was amended on 11 January 2018, 15
January 2018 and 18 December 2018. The effective date of this
agreement is 1 February 2017. Under this agreement, AGRP is to
perform drilling works at the Kapan Mine and the services are to be
completed by 31 December 2019. The consideration payable by Kapan
is payable in monthly instalments based on the amount of works
conducted by AGRP in the previous month. AGRP indemnifies Kapan on
the same basis as under the first agreement and Kapan can terminate
the agreement on the same terms as those set out in the agreement.
The agreement is governed by Armenian law and subject to the
jurisdiction of the Armenian courts.
(iii) Kapan is party to a drilling agreement with S&A Mining
LLC ("S&A") dated 20 May 2018 and amended on 25 October 2018
and 20 December 2018. The effective date of this agreement is 10
May 2018. Under this agreement, S&A is to perform underground
works at the Kapan Mine (side no. 62 and no. 58) and the services
are to be completed by 31 December 2020. The consideration payable
by Kapan is payable in instalments and subject to changes based on
the works actually performed by S&A during the term of the
agreement. Under the agreement, Kapan has a right to terminate at
any time and pay only for the works actually performed by S&A
prior to the receipt of the relevant termination notice. The
agreement is governed by Armenian law and subject to the
jurisdiction of the Armenian courts.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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