TIDMCGH
RNS Number : 6865Y
Chaarat Gold Holdings Ltd
08 September 2022
8 September 2022
Chaarat Gold Holdings Limited
("Chaarat" or "the Company")
Interim results for the six months ended 30 June 2022
Chaarat Gold Holdings Limited (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, today
publishes its unaudited results for the six-month period ended 30
June 2022 ("H1 2022").
Highlights for interim period ended 30 June 2022
Group Financial Results
Revenue up 5% in H1 2022 (US$50.4 million) compared to H1 2021
(US$48.1 million), reflecting stronger commodity prices and a
higher volume of own ore sales (25,118 ounces of AuEq in H1 2022 vs
22,909 ounces in H1 2021).
Positive adjusted Group EBITDA (1) in H1 2022 of US$4.9 million
(H1 2021: US$10.4 million), reflecting cost inflation and the
adverse AMD/USD exchange rate during the period.
Cash and cash equivalents as at 30 June 2022 of US$6.2 million
(31 December 2021: US$11.1 million) as a result of continued
expenditure on development activities.
Group net debt(2) increased from US$39.6 million at 31 December
2021 to US$44.4 million at 30 June 2022 mainly reflecting
utilisation of cash balances.
Kapan
Full-year guidance of 56-62koz of total own-ore and third-party
ore production remains unchanged for 2022. This comprises 50-53koz
own ore and 6-9koz third-party ore.
Own ore all-in-sustaining cost ("AISC" (3) ) of US$1,420 /oz in
H1 2022 vs US$1,063 /oz in H1 2021 (+33.6%) due to the
strengthening of the Armenian Dram in Q2 2022 (AMD/USD + 10.3% vs
H1 2021 average) and cost increases experienced in energy prices
and raw materials in line with inflation seen across the mining
sector globally.
Standalone Kapan adjusted EBITDA contribution of US$8.1 million
in H1 2022, a 41% decrease compared to H1 2021 adjusted EBITDA
contribution of US$13.8 million due to the above stated
reasons.
Production was 30,562 gold equivalent ounces ("oz"), 23,877 oz
from own ore vs 33,248 oz (-28.2%) in H1 2021, and 6,685 oz vs from
third party ore versus 6,982 in H1 2021(-4.3%).
Third-party ore treatment of 63.5kt for H1 2022 vs 70kt for H1
2021 (-9.3%) was in line with budget and contributed US$1.7 million
to EBITDA for H1 2022.
Exploration of the East Flank area adjacent to the existing
Kapan mine is progressing according to schedule.
Tulkubash, Kyzyltash and Kyrgyz Exploration
Chaarat issued updated Resource and Reserve estimates in May
2022 that showed a 13% increase in Ore Reserves (571koz to 647koz)
based on the 2021 drilling programme results and a $1,600/oz gold
price.
2022 Exploration commenced in June 2022 and is progressing as
per budget and schedule. The scope of this year's work is to
determine the exploration potential of the wider licence area to
help identify potential targets for the future.
Metallurgical test work on the Kyzyltash core drilled in 2021
continues as planned. Full results are expected in Q3 2022. Initial
findings indicate strong gold recovering across alternative
processing routes.
Outlook for 2022
Kapan remains on track to deliver on its full-year guidance of
56-62koz, comprising of 50-53koz from own ore and 6-9koz from
third-party ore.
Discussions with potential project finance providers for
Tulkubash are ongoing. The Company expects these to be assisted by
the resolution of the dispute between the Kyrgyz Government and
Centerra Gold. An update will be provided on the revised project
schedule once a Final Investment Decision (FID) is made, which is
expected in 2023.
The Company continues discussions with various parties and the
loan noteholders on proposals in relation to the convertible loan
notes due on 31 October 2022 and will provide an update on the
status of these discussions in due course. The Company also
continues to investigate cost saving initiatives at corporate
level. Please refer to Note 2 of the Financial Statements, the
Going Concern Statement, for further information on the Company's
financing requirements.
(1) In reporting financial information, the Group presents
adjusted EBITDA as an alternative performance measure, "APM",
which is not defined or specified under the requirements
of IFRS. The Group believes that this measure provides stakeholders
with additional useful information on the performance of
the business and, within that, Kapan. Adjusted EBITDA is
calculated by adjusting profit/(loss) for depreciation and
amortisation, net finance costs, unrealised foreign exchange
gain/(loss), fair value gain on warrant, change in provisions
and share-based payment charges.
(2) In reporting financial information, the Group presents
Net debt as an alternative performance measure, "APM", which
is not defined or specified under the requirements of IFRS.
The Group Net debt comprises convertible loan notes, other
loans, contract liabilities, lease liabilities and warrant
financial liabilities, net of cash and cash equivalents.
3 AISC on a gold oz produced basis exclude smelter TC/RC
charges, which in H1 2022 add c. USD 160/oz of cost. The
H1 2022 AISC includes sustaining capex of c. USD3.1 million
incurred during the period (which excludes non-sustaining
capex i.e., development capex).
Gold equivalent ounces for 2021 recalculated on 2022 budget
prices with Au at $1,775/oz and gold ratios of 75 for silver,
6,597 for copper and 20,381 for zinc. In last years' Q1
2021 operations update, 2021 oz were based on gold ratios
of 68 for silver, 7,287 for copper and 21,862 for zinc leading
to a lower AuEq number reported in that previous year.
Mike Fraser , Chief Executive Officer, commented:
"Kapan made good operational progress in the first half of 2022
despite mining in narrower vein areas which had an impact on grade.
Financial performance was impacted by lower realised commodity
prices, higher energy and raw materials cost and a higher Armenian
Dram compared to the US Dollar. We are monitoring the exchange rate
development closely and are working on various initiatives to
counter the cost increases and exchange rate impact.
We are pleased to note the final resolution of the dispute
between Centerra and the Kyrgyz government. This was a material
condition to progressing funding of our Tulkubash project.
Engagement on all financing alternatives is ongoing.
Discussions for a solution on the convertible bond maturing at
the end of October this year are in progress and we expect to
update the market in due course."
Analyst and Investor conference call and presentation
Chaarat will host an analyst and investor conference call and
presentation on Thursday, 8th September, at 9:00 BST. Participants
can register via the link below and will receive a link to the Zoom
presentation and dial-in numbers in their inbox.
https://www.investormeetcompany.com/chaarat-gold-holdings-ltd/register-investor
Participants are invited to submit questions prior to the
presentation to IR@chaarat.com .
The presentation will be available for download from the
Company's website two hours before the call at
https://www.chaarat.com/report_category/presentations/ .
A recording of the conference call will subsequently be
available on the Company's website.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014 (which forms part of
domestic UK law pursuant to the European Union (Withdrawal) Act
2018).
Enquiries
Chaarat Gold Holdings Limited +44 (0)20 7499 2612
Mike Fraser (Chief Executive Officer) info@chaarat.com
Canaccord Genuity Limited (NOMAD and Joint Broker) +44 (0)20 7523 8000
Henry Fitzgerald-O'Connor
James Asensio
finnCap Limited (Joint Broker) +44 (0)20 7220 0500
Christopher Raggett
Panmure Gordon (UK) Limited (Joint Broker) +44 (0)20 7886
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 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 .
Forward-looking statements
This announcement may include or incorporate by reference
statements that may constitute "forward-looking statements" in
respect of Chaarat's operations, performance, prospects, and/or
financial condition. Forward-looking statements are sometimes, but
not always, identified by their use of a date in the future or such
words and words of similar meaning as "anticipates", "aims", "due",
"could", "may", "will", "should", "expects", "believes", "intends",
"plans", "potential", "targets", "goal" or "estimates". By their
nature, forward-looking statements involve a number of risks,
uncertainties and assumptions and actual results or events may
differ materially from those expressed or implied by those
statements. Accordingly, no assurance can be given that any
particular expectation will be met, and reliance should not be
placed on any forward-looking statement. Additionally,
forward-looking statements regarding past trends or activities
should not be taken as a representation that such trends or
activities will continue in the future. No responsibility or
obligation is accepted to update or revise any forward-looking
statement resulting from new information, future events or
otherwise. Nothing in this announcement should be construed as a
profit forecast. This announcement does not constitute or form part
of any offer or invitation to sell, or any solicitation of any
offer to purchase any shares or other securities in the Company,
nor shall it or any part of it or the fact of its distribution form
the basis of, or be relied on in connection with, any contract or
commitment or investment decisions relating thereto, nor does it
constitute a recommendation regarding the shares or other
securities of the Company. Past performance cannot be relied upon
as a guide to future performance and persons needing advice should
consult an independent financial adviser. Statements in this
announcement reflect the knowledge and information available at the
time of its preparation. Liability arising from anything in this
announcement shall be governed by English law. Nothing in this
announcement shall exclude any liability under applicable laws that
cannot be excluded in accordance with such laws.
OPERATIONAL REVIEW
Kapan
As previously disclosed, Kapan experienced a fatal workplace
injury in May 2022. This was the first recordable injury in over 14
months at the mine. Recordable injury frequency rate ("RIFR") per
one million hours worked is 0.74 for H1 2022 compared to 1.4 in H1
2021. Regrettably, since the period end, another fatal injury
involving a Chaarat employee occurred which is currently being
investigated. An update to the market may be provided after the
investigation is completed. Further improvement actions are being
implemented and awareness trainings are being held.
A total of 30,562 gold equivalent ounces was produced in the
period, consisting of:
23,877 AuEq ounces produced from Kapan ore which represents an
8.1% decrease on H1 2021 (33,248 oz).
6,685 AuEq ounces from Third-party AuEq which represents a 4.3%
decrease from H1 2021 (6,982 oz).
Own-ore production contained the following for H1 2022 and H1
2021:
H1 2022 H1 2021
Gold (oz) 12,815 13,466
-------- --------
Silver (oz) 226,129 272,635
-------- --------
Copper (tonnes) 741.5 852.1
-------- --------
Zinc (tonnes) 2,804 3,169
-------- --------
Own-ore All-in-sustaining cost ("AISC") of US$1,420 /oz has
increased year on year due to inflationary pressure and lower gold
production compared to US$1,063 /oz in H1 2021 (+33.6%).
Third-party ore treated was 63.5kt for H1 2022 vs 70.0kt for H1
2021 (-9.3%). This is in line with plan of 120kt for the year.
Realised gold price for the half was US$1,858 /oz versus
US$1,783 /oz in H1 2021 (+4%).
Tonnes mined was up year on year by 6.5%. Ore mined was 321.1
thousand tonnes ("kt") vs 303.7 kt in H1 2021. Mine grade was 12.2%
lower at 2.94 g/t AuEq in H1 2022 compared to 3.35 g/t AuEq in H1
2021. Focus for H2 2022 remains on reducing dilution and developing
areas of the mine with wider veins.
Mill throughput was stable at 373.3 kt year on year (-0.5%, H1
2021 374.8 kt).
Mill AuEq recovery for own ore was 79.5% compared with 79.4% in
H1 2021. This is despite a 12% decrease in head grade.
Kapan has experienced significant price challenges during H1
related to increasing global inflation, the strengthening of the
Dram and the flow through of higher commodity prices impacting
reagents and consumables. Sourcing initiatives and cost reduction
initiatives have managed to mitigate some of the impact and have
kept costs in line with the 2022 plan.
Resource drilling was 33,772m in H1 2022 vs 30,796m in H1 2021
(+9.7%). Development metres were 12,919m in 2022 vs 11,783m in H1
2021 (9.6%).
Capital expenditure ("CAPEX"), including development expenditure
of $0.4 million, was US$3.5 million in line with budget for the
year. Annual CAPEX is still expected to be ca. US$8 million.
Development of the exploration drive has been progressing and
diamond drilling is planned to commence in H2 2022. Work will
continue throughout 2023. Available results are expected to be
incorporated into the 2023 resource model for inclusion in the
annual resource and reserve update.
Outlook
Kapan remains on track to deliver on its full-year guidance of
56-62koz, comprising of 50-53koz from own ore and 6-9koz from
third-party ore.
Third-party ore supply is expected to be in line with H1.
Development of the East Flank is progressing with first drill
results expected by year end.
The Company is assessing several changes to the mining methods
utilised at Kapan. The broad areas of mineralisation experiences
initially at the Shahumyan deposit are progressively giving way to
narrower and more variable veins. These require new methods to be
adopted to manage the increasing dilution being experienced. Trial
areas are being developed in several parts of the mine to assess
the relative cost savings and ease of operability of the various
methods. Smaller loaders and trucks previously retired from service
are being overhauled and returned to operation to allow the test
work to be carried out.
The Company is also looking to transition its fleet to electric
vehicles over the next few years. This will reduce carbon intensity
and improve working conditions in the mine due to the reduction of
vehicle exhaust. Initial trials to retrofit existing equipment is
underway and the focus for new equipment purchases will target
electric vehicles whenever suitable.
Performance for the 2022 financial year is being impacted by the
increases in energy prices and cost of other raw materials in line
with inflation seen across the mining sector globally. The
strengthening of the Armenian Dram in late Q2 2022 is also putting
additional pressure on costs. The Dram strengthened 20% in late Q2
vs 2021 levels. Higher commodity prices have also adversely
impacted reagents, fuel, explosives and consumables costs. Sourcing
and cost reduction initiatives have managed to mitigate some of the
impact and are helping to keep close to the 2022 plan.
Tulkubash, Kyzyltash and Kyrgyz Exploration Update
The updated mineral resource and ore reserve estimates were
released in May 2022. The full reports are available on Chaarat's
website. Highlights include:
Contained gold ounces in the Ore Reserves increased by 13% to
647 thousand ounces ("koz") compared to 571 koz in the 2021
bankable feasibility study (BFS).
Proven & Probable Reserves increased from 20.9Mt to 23.1Mt
(+11%) with a slightly increased grade of 0.87 g/t compared to 0.85
g/t (+2%) in the BFS;
The pit shell optimisation for the Ore Reserve was based on a
US$1,600/oz gold price vs US$1,450/oz gold price in the 2021 BFS as
per latest long term gold price forecasts. 2022 Exploration
programmes for Tulkubash commenced in June 2022 and is progressing
as per budget and schedule.
Metallurgical test work on the Kyzyltash core drilled in 2021
continues as planned. Full results are expected in Q3 2022. To date
the results, support the findings of the previous Kyzyltash
studies. The results of the metallurgical study will be used to
determine the most appropriate processing route for the refractory
sulphide ore and to develop an initial prefeasibility level study
in 2023-24.
2022 Exploration commenced in June 2022. The scope of this
years' work is to assess the exploration potential of the wider
license area and identify potential targets for further
exploration. Work consists of aerial reconnaissance using drone
technology and targeting trenching of high prospectivity areas.
Work is progressing as per budget and schedule.
Site infrastructure and construction works were limited pending
completion of the debt financing.
Corporate
Mike Fraser joined the company as Chief Executive Officer and
member of the Board on 17 January 2022 bringing over 20 years of
extensive experience in the global mining and metals industry.
Warren Gilman retired from the Board on 17 May 2022 following
his decision not to seek re-election at the Company's 2022 annual
general meeting due to other business commitments.
FINANCIAL REVIEW
Income statement
Revenue in the period amounted to US$50.4 million (H1 2021:
US$48.1 million), comprising US$41.4 million of own-ore revenue and
US$9.0 million of third-party revenue (H1 2021: US$37.1 million own
ore and US$11.0 million third-party revenue). During this period,
Kapan sold 25,118 ounces of AuEq (H1 2021: 22,909 ounces),
including third-party sales, with a realised gold price per ounce
of US$1,858 (H1 2021: US$1,783), a realised silver price per ounce
of US$23 (H1 2021: US$26), a realised copper price per tonne of
US$9,816 (H1 2021: US$8,752) and a realised zinc price per tonne of
US$3,807 (H1 2021: US$2,890).
The Group operating profit for the period was US$1.4 million (H1
2021: US$7.8 million) and the Group adjusted EBITDA (1) was US$4.9
million (H1 2021: US$10.4 million). The decrease in adjusted EBITDA
was mainly driven by cost inflation seen across the mining sector
globally as well as the adverse AMD/USD exchange rate during the
period which increased costs further (AMD/USD + 10.3% vs H1 2021
average).
2022 Armenia 2022 2022 2021 2021 2021
Kyrgyz Republic & Total Armenia Kyrgyz Republic & Total
Corporate Corporate
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------------- ------------- ---------------------- -------- --------- ----------------------- --------
Adjusted EBITDA(1) 8,134 (3,197) 4,937 13,788 (3,375) 10,413
Depreciation and
amortisation (5,396) (249) (5,645) (2,385) (252) (2,637)
Net finance costs (1,412) (1,839) (3,251) (1,580) (2,856) (4,436)
Unrealised foreign
exchange gain 2,568 - 2,568 1,293 - 1,293
Fair value gain on
warrant - 319 319 - 163 163
Change in provisions (74) - (74) - - -
Share-based payment
charge - (373) (373) - (1,251) (1,251)
Profit/(loss) before
tax 3,820 (5,339) (1,519) 11,116 (7,571) 3,545
----------------------- ------------- ---------------------- -------- --------- ----------------------- --------
Income tax charge (1,177) - (1,177) (2,173) - (2,173)
----------------------- ------------- ---------------------- -------- --------- ----------------------- --------
Profit/(loss) after
tax 2,643 (5,339) (2,696) 8,943 (7,571) 1,372
----------------------- ------------- ---------------------- -------- --------- ----------------------- --------
(1) Adjusted EBITDA has been calculated as basic EBITDA,
adjusted for unrealised foreign exchange gains, fair value gain on
warrant, change in provisions and share-based payment charges, all
of which are non-cash items.
Finance costs in H1 2022 were US$3.3 million (non-cash US$2.5
million) compared to US$4.4 million (non-cash US$3.3 million) in
the comparable period. The variance related mainly to financing
costs of US$0.9 million that were incurred in H1 2021 in connection
with the Labro Facility. As this Facility expired on 30 June 2021,
no further financing costs were incurred beyond this date.
Income taxes in H1 2022 were US$1.2 million compared to US$2.2
million in H1 2021, reflecting the lower profit achieved at Kapan.
Consequently, the Group made a loss after tax of US$2.7 million in
H1 2022 compared to a profit after tax of US$1.4 million in the
comparative 2021 period.
Balance sheet
The borrowings at the balance sheet date of US$50.6 million (31
December 2021: US$50.7 million) comprised US$27.5 million of
convertible loan notes due in October 2022 (31 December 2021:
US$25.6 million), US$16.3 million of other loans (31 December 2021:
US$21.3 million), US$5.4 million of contract liabilities (31
December 2021: US$2.4 million), US$1.3 million of lease liabilities
(31 December 2021: US$1.0 million) and US$0.1 million of warrant
financial liabilities (31 December 2021: US$0.4 million).
The Group's net debt increased from US$39.6 million at 31
December 2021 to US$44.4 million at 30 June 2022, primarily as a
result of the lower cash and cash equivalents balance on hand at 30
June 2022.
Non-current assets increased from US$119.7 million at 31
December 2021 to US$131.1 million at 30 June 2022. The increase was
mainly due to the purchase of property, plant, and equipment at
Kapan. Additionally, exploration and evaluation costs of US$1.8
million were capitalised relating to the asset in the Kyrgyz
Republic.
Current assets were US$39.1 million at 30 June 2022 compared to
US$51.8 million at 31 December 2021. The decrease was mainly due to
final receipts from Kapan's customers for sales before the 2021
year-end. Current assets at 30 June 2022 included cash and cash
equivalents of US$6.2 million (31 December 2021: US$11.1
million).
Total liabilities at 30 June 2022 were US$92.2 million compared
to US$94.7 million at 31 December 2021. This reduction was mainly
due to repayments of bank debt in the amount of US$5.7 million
(including interest), offset by accrued interest on borrowings for
the H1 2022 period (US$2.7 million) and a prepayment from Kapan's
customer of $3.0 million. The movement in liabilities is set out in
more detail in Note 9 to the interim financial statements,
including the split between long-term and short-term components. In
addition, liabilities at 30 June 2022 included a provision for
environmental obligations at Kapan of US$13.7 million (31 December
2021: US$10.5 million). The increase mainly related to foreign
currency translation effects at 30 June 2022 due to the movement in
the AMD/USD exchange rate.
Total equity was US$78.0 million at 30 June 2022 compared to
US$76.9 million at 31 December 2021.
Cash flow
Cash and cash equivalents decreased from US$11.1 million at 1
January 2022 to US$6.2 million at 30 June 2022. The movement
comprised of:
net operating cash flows of US$7.7 million (H1 2021: US$3.0
million), reflecting the EBITDA contribution from Kapan offset by
working capital movements
net cash used in investing activities of US$5.7 million (H1
2021: US$8.7 million) relating to the purchase of property, plant,
and equipment at Kapan and in the Kyrgyz Republic together with
capitalised exploration and development spend in the Kyrgyz
Republic
cash outflows from financing activities of US$6.1 million (H1
2021: inflows of US$22.9 million) relating to external debt
repayments, including interest, of US$5.7 million
At 1 September 2022, the Group had approximately US$3.3 million
of cash and cash equivalents on hand.
Going concern
In order to achieve the planned future capital developments of
assets, to sustain corporate activities and to refinance the
convertible loan notes due on 31 October 2022, management will need
to raise financing. There are currently no binding agreements in
place in respect of any additional funding and there is no
guarantee that any course of funding will proceed such that the
ability to refinance the convertible loan notes prior to 31 October
2022 represents a material uncertainty. However, management is
committed to raising additional funds and has an established track
record of successfully achieving this in the past as demonstrated
by the fundraising activities in 2020 and 2021. Accordingly, the
Directors have adopted the going concern basis of accounting in
preparing the interim financial statements. Further details of the
Group's status as a going concern and expected future financing
plans are set out below in Note 2 to these financial
statements.
Mike Fraser David Mackenzie
Chief Executive Officer Interim Chief Financial Officer
7 September 2022
Consolidated Income Statement
For the six months ended 30 June 2022
6 months ended 6 months ended
30 June 2022 30 June 2021
(Unaudited) (Unaudited)
US$'000 US$'000
Revenue 5 0,391 48,095
Cost of Sales ( 42,617) (33,385)
---------------------------------------------------------------------------------- ------------------ --------------
Gross profit 7 ,774 14,710
Selling expenses ( 1,149) (956)
Administrative expenses (5,212) (5,958)
Other income - 22
Operating profit 1,413 7,818
Finance income 15 9
Finance costs (3,266) (4,445)
Fair value gain on warrant 319 163
( L oss)/profit before tax for the period, attributable to equity shareholders
of the parent (1,519) 3,545
Income tax charge (1,177) (2,173)
( L oss)/profit after tax for the period, attributable to equity shareholders of
the parent (2,696) 1,372
( Loss)/e arnings per share (basic and diluted) - US$ cents (0.39) 0.21
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2022
6 months ended 6 months ended
30 June 2022 30 June 2021
(Unaudited) (Unaudited)
US$'000 US$'000
( Loss)/profit for the period, attributable to equity shareholders of the parent (2,696) 1,372
Items which may subsequently be reclassified to profit and loss
Exchange differences on translating foreign operations and investments 3,387 687
Other comprehensive income for the period, net of tax 3,387 687
Total comprehensive profit for the period attributable to equity shareholders of
the parent 691 2,059
------------------------------------------------------------------------------------ -------------- --------------
Consolidated Balance Sheet
As at 30 June 2022
As at As at
30 June 2022 (Unaudited) 31 December 2021 (Audited)
Note US$'000 US$'000
-------------------------------------------------- --------- ---------------- ---------------------------
Assets
Non-current assets
Exploration and evaluation costs 8 68,148 6 6,305
Other Intangible assets 1,326 1 ,213
Property, plant, and equipment 56,223 4 7,306
Prepayments for non-current assets 743 530
Deferred income tax assets 4,682 4,381
Total non - current assets 131,122 119,735
-------------------------------------------------- --------- ---------------- ---------------------------
Current assets
Inventories 1 9,173 1 8,442
Trade and other receivables 1 3,737 2 2,247
Cash and cash equivalents 6 ,202 1 1,134
Total current assets 39,112 5 1,823
Total assets 1 70,234 171,558
-------------------------------------------------- --------- ---------------- ---------------------------
Equity and liabilities
Equity attributable to shareholders
Share capital 6,897 6,894
Share premium 242,757 242,695
Own shares reserve (123) (132)
Convertible loan note reserve 1,420 1,420
Merger reserve 10,885 10,885
Share option reserve 10,292 11,383
Translation reserve (11,046) (14,433)
Accumulated losses (183,078) (181,836)
-------------------------------------------------- --------- ---------------- ---------------------------
Total equity 78,004 76,876
-------------------------------------------------- --------- ---------------- ---------------------------
Liabilities
Non-current liabilities
Provision for environmental obligations 13,670 10,521
Lease liabilities 9 795 732
Other loans 9 5,500 9,688
-------------------------------------------------- --------- ---------------- ---------------------------
Total non-current liabilities 19,965 20,941
-------------------------------------------------- --------- ---------------- ---------------------------
Current liabilities
Trade and other payables 25,645 30,717
Contract liabilities 9 5,354 2,379
Lease liabilities 9 552 246
Other loans 9 10,832 11,640
Warrant financial liability 61 380
Convertible loan notes 9 27,464 25,625
Other provisions for liabilities and charges 2,357 2,754
Total current liabilities 72,265 73,741
-------------------------------------------------- --------- ---------------- ---------------------------
Total liabilities 92,230 94,682
-------------------------------------------------- --------- ---------------- ---------------------------
Total liabilities and equity 170,234 171,558
-------------------------------------------------- --------- ---------------- ---------------------------
Consolidated Statement
of Changes in Equity
For the six
months ended
30 June 2022
Share Share Own Convertible Merger Share Translation Accumulated Total
Capital Premium Shares loan note Reserve Option Reserve Losses
Reserve Reserve Reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- -------- -------- -------- ------------ -------- -------- ------------ ------------ --------
As at 31
December 2020
(Audited) 5,401 191,594 (216) 2,493 10,885 14,103 (15,282) (184,527) 24,451
--------------- -------- -------- -------- ------------ -------- -------- ------------ ------------ --------
Loss for the
year - - - - - - - (3,588) (3,588)
Translation
losses for
the year - - - - - - 849 - 849
--------------- -------- -------- -------- ------------ -------- -------- ------------ ------------ --------
Total
comprehensive
loss for the
year - - - - - - 849 (3,588) (2,739)
--------------- -------- -------- -------- ------------ -------- -------- ------------ ------------ --------
Share options
lapsed - - - - - (715) - 715 -
Share-based
payments
charge - - - - - 1,251 - - 1,251
Issuance of
shares for
cash 841 28,711 - - - - - - 29,552
Issuance of
shares for
settlement of
liabilities 652 22,390 - - - - - (101) 22,941
Transfer of
treasury
shares - - 84 - - (3,256) - 3,172 -
Modification
of
convertible
loan notes - - - (1,073) - - - 2,493 1,420
As at 31
December 2021
(Audited) 6,894 242,695 (132) 1,420 10,885 11,383 (14,433) (181,836) 76,876
--------------- -------- -------- -------- ------------ -------- -------- ------------ ------------ --------
Loss for the
period - - - - - - - (2,696) (2,696)
Translation
gains for the
period - - - - - - 3,387 - 3,387
---------------
Total
comprehensive
income for
the period - - - - - - 3,387 (2,696) 691
--------------- -------- -------- -------- ------------ -------- -------- ------------ ------------ --------
Share options
lapsed - - - - - (1,092) - 1,092 -
Share-based
payment
charge - - - - - 373 - - 373
Issuance of
shares for
settlement of
liabilities 3 62 - - - - - - 65
Transfer of
treasury
shares - - 9 - - (371) - 362 -
As at 30 June
2022
(Unaudited) 6,897 242,757 (123) 1,420 10,885 10,292 (11,046) (183,078) 78,004
--------------- -------- -------- -------- ------------ -------- -------- ------------ ------------ --------
Consolidated Cash Flow Statement
For the six months ended 30 June 2022 6 months ended 30 June 2022 6 months ended 30 June 2021
(Unaudited) (Unaudited)
US$'000 US$'000
--------------------------------------------------------- --------------------------- ---------------------------
Cash flows from operating activities
Operating profit 1,413 7,818
Depreciation and amortisation 5,645 2,637
( Gain)/ Loss on disposal of property, plant, and
equipment (11) 4
Non-cash expenses - 59
Change in provisions (618) -
Unrealised foreign exchange gains (1,989) (1,339)
Share-based payments 373 1,251
D ecrease/ (increase) in inventories 2,572 (2,806)
Decrease/(increase) in trade and other receivables 12,863 (5,967)
(Decrease)/increase in trade and other payables (12,321) 4,026
Increase/(decrease) in contract liabilities 2,167 (1,583)
Cash generated in operations 10,093 4,100
---------------------------------------------------------- --------------------------- ---------------------------
Income taxes (paid)/refunded (2,372) (1,107)
Net cash generated in operations 7,721 2,993
Investing activities
Purchase of property, plant & equipment (4,177) (6,533)
Exploration and evaluation costs (1,524) (2,003)
Purchase of intangible assets (10) (144)
Proceeds from sale of property, plant & equipment 13 -
Interest received 15 3
---------------------------------------------------------- --------------------------- ---------------------------
Net cash used in investing activities (5,683) (8,677)
---------------------------------------------------------- --------------------------- ---------------------------
Financing activities
Proceeds from issue of share capital - 29,983
Share issue costs paid - (432)
Repayments of principal portion of lease liabilities (374) (334)
Finance costs paid for modifications of other loans - (104)
Repayments of principal amount of loan (4,938) (5,050)
Payments of interest (790) (1,193)
Net cash from financing activities (6,102) 22,870
---------------------------------------------------------- --------------------------- ---------------------------
Net change in cash and cash equivalents (4,063) 17,186
Cash and cash equivalents at beginning of the period 11,134 6,928
Effect of changes in foreign exchange rates (869) 494
---------------------------------------------------------- --------------------------- ---------------------------
Cash and cash equivalents at end of the period 6,202 24,608
---------------------------------------------------------- --------------------------- ---------------------------
Notes to the Financial Statements
1. General information and group structure
Chaarat Gold Holdings Limited (the "Company") (registration
number 1420336) is incorporated in the British Virgin Islands (BVI)
and is the ultimate holding company for the companies set out below
(the "Group"). The Company's shares are admitted to trading on the
Alternative Investment Market of the London Stock Exchange
(AIM:CGH). The registered address of the Company is: Palm Grove
House, PO Box 438, Road Town, Tortola, British Virgin Islands,
VG1110.
As at 30 June 2022 the Group consisted of the following
companies all of which are wholly owned:
Group company Country of incorporation Principal activity
Chaarat Gold Holdings BVI Ultimate holding company
Limited
Zaav Holdings Limited BVI Holding company
Chon-tash Holdings Limited BVI Holding company
At-Bashi Holdings Limited BVI Holding company
Akshirak Holdings Limited BVI Holding company
Goldex Asia Holdings Limited BVI Holding company
Chon-tash Mining LLC* Kyrgyz Republic Exploration
At-Bashi Mining LLC* Kyrgyz Republic Exploration
Akshirak Mining LLC* Kyrgyz Republic Exploration
Goldex Asia LLC* Kyrgyz Republic Exploration
Chaarat Zaav CJSC* Kyrgyz Republic Exploration
Chaarat Gold International Cyprus Holding company
Limited
Chaarat Gold Services England & Wales Services company
Limited Armenia Production company
Chaarat Kapan CJSC*
*Companies owned indirectly by the Company.
2. Going concern
As at 1 September 2022 the Group had approximately US$3.3
million of cash and cash equivalents and US$42.2 million of debt
(excluding lease liabilities and contract liabilities) comprising
the following:
US$28.1 million convertible loan notes, including accrued
interest to 1 September 2022
US$14.1 million borrowings outstanding
Kyrgyz Republic and corporate activities
In order to achieve the planned (though as yet uncommitted)
capital developments of assets in the Kyrgyz Republic and to
sustain corporate activities, future financing will need to be
secured.
Kapan
The Board has based the cash flow forecasts for Kapan on the
most recent budgets which show that Kapan is expected to generate
sufficient revenue to cover its operating costs and principal and
interest payments and meet its covenants. Based on current
forecasts, covenants will be met, however, performance of Kapan is
sensitive to commodity prices and production. If these were to
decrease, there is a risk that covenants will be breached.
Convertible Loan Notes
By 31 October 2022, the convertible loan notes are due to be
redeemed by conversion into equity, at the holders' option, or will
be repaid in cash for a total of up to US$28.8 million (which
includes accrued interest).
Conclusion
The convertible loan notes will need to be refinanced with cash
or alternative funding, to the extent that loan note holders do not
choose to convert to equity, prior to 31 October 2022. To proceed
with the development in Kyrgyz Republic and to sustain corporate
activities further financing will also be required. A number of
workstreams are underway to secure financing for the Company for
these purposes.
However, there are currently no binding agreements in place in
respect of any additional funding and there is no guarantee that
any course of funding will proceed. Therefore, this indicates the
existence of a material uncertainty which may cast significant
doubt over the Group's ability to continue as a going concern and,
therefore, 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 were unable to continue as a going concern.
Notwithstanding the above, the directors consider there is a
reasonable expectation that sufficient funding will be raised and
therefore have continued to adopt the going concern basis.
3. Accounting policies
The significant accounting policies which have been consistently
applied in the preparation of these interim financial statements
are summarised below:
Basis of preparation
The consolidated interim financial information has been prepared
using policies based on International Financial Reporting Standards
(IFRS and IFRIC interpretations) issued by the International
Accounting Standards Board ("IASB"). It does not include all
disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the
2021 Annual Report. The results for the period are derived from
continuing activities. The figures for the year ended 31 December
2021 have been extracted from the statutory financial statements,
prepared in accordance with United Kingdom adopted international
accounting standards and International Financial Reporting
Standards (IFRSs) as issued by the International Accounting
Standards Board (IASB) and on a historical cost basis, which are
available on the Group's website www.chaarat.com. The auditor's
report on those financial statements was unqualified and noted a
material uncertainty in respect of the Group's ability to continue
as a going concern.
The consolidated interim financial information for the six
months ended 30 June 2022 and 30 June 2021 (unaudited) does not
constitute statutory accounts as defined in Section 435 of the
Companies Act 2006.
New standards, interpretations and amendments adopted by the
Group
The accounting policies adopted in the preparation of the
consolidated interim financial information are consistent with
those adopted in the preparation of the Group's annual consolidated
financial statements for the year ended 31 December 2021. There
were no new applicable standards that became effective on 1 January
2022 and the Group has not early adopted any amendment, standard or
interpretation that has been issued but is not yet effective. It is
expected that where applicable, these standards and amendments will
be adopted on each respective effective date.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of interim financial information requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income, and expenses. Actual
results may differ from these estimates.
In preparing the consolidated interim financial information, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the consolidated financial
statements for the year ended 31 December 2021.
4. Revenue
The revenue recognised from contracts with customers for the 6
months ended 30 June 2022 and 30 June 2021 consisted of the
following:
2022 2021
US$'000 US$'000
-------------------------- -------- --------
Copper concentrate 39,692 40,294
Zinc concentrate 9,897 7,198
Zinc concentrate freight 802 603
Total 50,391 48,095
-------------------------- -------- --------
The Group's sales of copper and zinc concentrate are based on
provisional 1-3-month commodity forward prices and as such, contain
an embedded derivative which is marked-to-market at each month
end.
The Group's sales are to internationally well-established
commodity traders under standard offtake terms.
In 2022, Copper concentrate sales are made on an Ex Works-basis
meaning that control passes to the buyer when the concentrate is
loaded on the truck at the Kapan mine. Zinc concentrate sales are
made on a cost, insurance, and freight ("CIF") basis meaning that
control passes to the buyer when the concentrate is loaded on the
vessel in the port of shipment (e.g., port of Poti, Georgia).
In addition to the Group's own concentrates, it processes third
party ore into concentrate and sells it to customers. Of the
US$50.4 million generated from concentrate sales in H1 2022,
US$41.4 million relates to own concentrate sales and US$9.0 million
relates to third-party concentrate sales (2021: US$37.1 million and
US$11.0 million).
In 2022, the Group has continued to recognise contract
liabilities in relation to its contracts with customers for
prepayments received for the future transfer of concentrates, as
set out in Note 9.
5. Segmental analysis
Operating segments are identified based on internal reports
about components of the Group that are regularly reviewed by the
Board, in order to allocate resources to the segments and to assess
their performance.
Based on the proportion of revenue and profit within the Group's
operations and on the differences in principal activities, the
Board considers there to be two operating segments:
Exploration for mineral deposits in the Kyrgyz Republic ("Kyrgyz
Republic")
Exploration and production of copper and zinc concentrates at
Kapan in Armenia ("Armenia")
Kyrgyz Republic Armenia Corporate Total
30 June 2022 US$'000 US$'000 US$'000 US$'000
Revenue
Sales to external customers - 50,391 - 50,391
Total segment revenue - 50,391 - 50,391
---------------- -------- ---------- --------
Operating profit/(loss) (1,068) 5,232 (2,751) 1,413
Finance income - 15 - 15
Finance costs - (1,427) (1,839) (3,266)
Fair value gain on warrant - - 319 319
---------------- -------- ---------- --------
Profit/(loss) before income tax (1,068) 3,820 (4,271) (1,519)
---------------- -------- ---------- --------
Income tax charge - (1,177) - (1,177)
---------------- -------- ---------- --------
Profit/(loss) after income tax (1,068) 2,643 (4,271) (2,696)
---------------- -------- ---------- --------
Assets
Segment assets - non-current 81,419 49,702 - 131,121
Segment assets - current 551 34,340 4,221 39,112
Total assets 81,970 84,042 4,221 170,233
---------------- -------- ---------- --------
Liabilities
Segment liabilities 2,707 61,805 27,718 92,230
Total liabilities 2,707 61,805 27,718 92,230
---------------- -------- ---------- --------
Kyrgyz Republic Armenia Corporate Total
30 June 2021 US$'000 US$'000 US$'000 US$'000
Revenue
Sales to external customers - 48,095 - 48,095
Total segment revenue - 48,095 - 48,095
---------------- -------- ---------- --------
Operating profit/(loss) (995) 12,695 (3,882) 7,818
Finance income - 3 6 9
Finance costs - (1,583) (2,862) (4,445)
Fair value gain on warrant - - 163 163
---------------- -------- ---------- --------
Profit/(loss) before income tax (995) 11,115 (6,575) 3,545
---------------- -------- ---------- --------
Income tax charge - (2,173) - (2,173)
---------------- -------- ---------- --------
Profit/(loss) after income tax (995) 8,942 (6,577) 1,372
---------------- -------- ---------- --------
Assets
Segment assets - non-current 73,495 39,158 - 112,653
Segment assets - current 267 30,348 21,168 51,783
Total assets 73,762 69,506 21,168 164,436
---------------- -------- ---------- --------
Liabilities
Segment liabilities 2,063 55,993 26,927 84,983
Total liabilities 2,063 55,993 26,927 84,983
---------------- -------- ---------- --------
6. Finance costs
The finance costs for the 6 months ended 30 June consisted of
the following:
2022 2021
US$'000 US$'000
------------------------------------------------------ -------- --------
Interest on convertible loan notes 1,839 1,802
Interest on other loans 724 1,266
Interest on lease liabilities 71 69
Interest on contract liabilities 77 128
Unwinding of discount - provision for rehabilitation 554 315
Financing costs - 865
Total 3,266 4,445
------------------------------------------------------- -------- --------
Interest on the convertible loan notes amounted to US$1.8
million in H1 2022, in line with the comparable period.
The interest on other loans of US$0.7 million includes interest
on the Kapan acquisition loan of US$0.6 million and interest on
other borrowings of US$0.1 million. The interest charge in the
comparative period was higher as it included interest on the Labro
Term Loan of US$0.2 million (which was extinguished in H1 2021) and
interest on the Kapan acquisition loan of US$1.0 million due to a
higher outstanding principal balance.
The financing costs of US$0.9 million in H1 2021, a non-cash
cost, related to the amortisation of the Labro Facility commitment
fee. As this Facility expired on 30 June 2021, no further financing
costs were incurred beyond this date.
7. Loss per share
Loss per share is calculated by reference to the loss for the 6
months ended 30 June 2022 of US$2.7 million (2021: profit of US$1.4
million) and the weighted average number of ordinary shares in
issue during the period of 689,654,696 (2021: 657,425,878).
At 30 June 2022, 8,920,341 (2021: 8,920,341) warrants,
41,541,933 (2021: 55,027,006) share options and convertible loan
notes have been excluded from the diluted weighted average number
of ordinary shares calculation because their effect would have been
anti-dilutive.
8. Exploration and evaluation costs
Tulkubash Kyzyltash Total
US$'000 US$'000 US$'000
------------------- ---------- ---------- --------
At 1 January 2022 56,204 10,101 66,305
Additions 1,788 55 1,843
At 30 June 2022 57,992 10,156 68,148
------------------- ---------- ---------- --------
Exploration and evaluation assets comprise costs associated with
exploration for, and evaluation of, mineral resources together with
costs to maintain mining and exploration licences for mining
properties that are considered by the Directors to meet the
requirements for capitalisation under the Group's accounting
policies. As at 30 June 2022, management does not consider there to
be any indicators of impairment in respect of these assets.
9. Liabilities
Reconciliation of liabilities
Convertible loans Contract liabilities Lease liabilities Other loans Total
Liabilities from financing US$'000 US$'000 US$'000
activities US$'000 US$'000
--------------------------- ------------------ --------------------- ------------------ ------------ ------------
At 1 January 2022 25,625 2,379 978 21,328 50,310
--------------------------- ------------------ --------------------- ------------------ ------------ ------------
Cash flows:
Cash proceeds - 3,000 - - 3,000
Payment of interest - - - (790) (790)
Payment of principal
amount - - - (4,938) (4,938)
Lease payments - - (374) - (374)
Net proceeds - 3,000 (374) (5,728) (3,102)
Non-cash items:
Additions - - 537 - 537
Interest accrued 1,839 77 71 724 2,711
Settlement of interest
against receivables - (16) - - (16)
Reversal of lease
liability - - (66) - (66)
Amounts recognised as
revenue - (833) - - (833)
Effect of currency
translation - 747 201 8 956
--------------------------- ------------------ --------------------- ------------------ ------------ ------------
Total liabilities from
financing activities at
30 June 2022 27,464 5,354 1,347 16,332 50,497
--------------------------- ------------------ --------------------- ------------------ ------------ ------------
Non-current - - 795 5,500 6,295
Current 27,464 5,354 552 10,832 44,202
--------------------------- ------------------ --------------------- ------------------ ------------ ------------
Convertible loan notes
During the period there were no new issues of convertible loan
notes. The only movement in the period was accrued interest of
US$1.8 million (2021: US$1.8 million).
2 021 Notes U S$'000
----------------------------- ---------
At 1 January 2022 25,625
Cash proceeds -
Transaction costs -
----------------------------- ---------
Net proceeds -
----------------------------- ---------
Amount classified as equity -
Accrued interest 1,839
At 30 June 2022 27,464
-------------------------------- ---------
N on-current -
C urrent 27,464
-------------------------------- ---------
The number of shares to be issued on conversion is fixed. There
are no covenants attached to the convertible loan notes.
The 2021 notes accrued interest at 10% p.a. until 30 April 2020
and then at a rate of 12% p.a. until 31 October 2022. The notes are
secured on the shares of the Group's principal operating
subsidiary, Chaarat Zaav CJSC via the intermediate holding company
Zaav Holdings Limited. The notes are repayable on 31 October 2022
and can be redeemed by the Company at any time subject to paying a
minimum of 5% interest. The notes, including accrued interest, can
be converted into shares at any time at the holder's option. If not
converted, the notes will be repaid in cash for a total of US$28.8
million in October 2022, as disclosed in Note 2.
On 21 October 2021, the maturity date of the convertible loan
notes was extended from 31 October 2021 to 31 October 2022 and the
conversion price reduced, which was treated as a substantial
modification for accounting purposes. The coupon interest rate
remains at 12% p.a.
The value of the liability and equity conversion component was
reassessed at the date of modification. The fair value of the
liability component was calculated using a market interest rate of
15% for an equivalent instrument without conversion option.
As the notes fall due in October 2022, they have been classified
as current liabilities at 30 June 2022.
Contract liabilities
The movements in the Group's contract liabilities for the period
are presented below:
US$'000
------------------------------------------------ --------
At 1 January 2022 2,379
C ash received in advance of performance 3,000
Interest on contract liabilities 77
Settlement of interest against receivables (16)
Amounts offset against receipts from customers (833)
Effect of currency translation 747
At 30 June 2022 5,354
------------------------------------------------- --------
Non-current -
Current 5,354
------------------------------------------------- --------
The contract liabilities balance relates to prepayments received
from one of Chaarat Kapan's customers for the sale of concentrates.
The prepayments accrue interest at a rate defined in the sales
contract of 6-month LIBOR plus 5% p.a. and are settled by way of
deduction against future outstanding invoices.
Lease liabilities
The Group's leases are accounted for by recognising a
right-of-use asset and a lease liability except for leases of low
value assets and leases with a duration of 12 months or less.
The Group leases equipment and land in the jurisdictions from
which it operates, the most notable being the land that is leased
in Armenia. Certain items of property, plant and equipment are also
leased in the Kyrgyz Republic which contain variable payments over
the lease terms, therefore these leases do not fall within the
scope of IFRS 16, and right-of-use assets and lease liabilities are
not recognised as a result.
The movements in the Group's right-of-use assets and lease
liabilities for the period are presented below:
Right-of-use assets
Land Equipment Total
US$'000 US$'000 US$'000
------------------------------- -------- ---------- --------
At 1 January 2022 760 3 763
Additions - 537 537
Depreciation charge (61) (270) (331)
Effect of currency translation 127 40 167
At 30 June 2022 826 310 1,136
-------------------------------- -------- ---------- --------
Lease liabilities
Land Equipment Total
US$'000 US$'000 US$'000
------------------------------- -------- ---------- --------
At 1 January 2022 839 139 978
Additions - 537 537
Interest expense 47 24 71
Lease payments (87) (287) (374)
Reversal of lease liability - (66) (66)
Effect of currency translation 144 57 201
At 30 June 2022 943 404 1,347
-------------------------------- -------- ---------- --------
Non-current 795 - 795
Current 148 404 552
-------------------------------- -------- ---------- --------
The maturity of the gross contractual undiscounted cash flows
due on the Group's lease liabilities is set out below based on the
period between 30 June 2022 and the contractual maturity date:
Within 6 months 6 months to 1 year 1 to 5 years Over 5 years Total at 30 June 2022
US$'000 US$'000 US$'000 US$'000 US$'000
------------------ ---------------- ------------------- ------------- ------------- ----------------------
Land leases 131 117 908 112 1,268
Equipment leases 414 - - - 414
------------------ ---------------- ------------------- ------------- ------------- ----------------------
Total 545 117 908 112 1,682
------------------ ---------------- ------------------- ------------- ------------- ----------------------
As at 30 June 2022, the contractual discounted cash flows due on
the Group's lease liabilities amounts to US$1.4 million (31
December 2021: US$1.0 million).
The discount rate used in calculating the lease liabilities is
the rate implicit in the lease, unless this cannot readily be
determined, in which case the Group's incremental rate of borrowing
is used instead. In 2022, a discount rate of 12% per annum has been
used to calculate the Group's lease liabilities for its land and
equipment leases.
Other loans
The movements in the Group's other loans for the period are
presented below:
Borrowings Other Borrowings Total
US$'000 US$'000 US$'000
--------------------------------- ------------ ------------------ ---------
At 1 January 2022 19,286 2,042 21,328
Interest accrued 655 69 724
Payment of interest in cash (721) (69) (790)
Payment of principal in cash (4,938) - (4,938)
Effect of currency translation 8 - 8
----------------------------------- ------------ ------------------ ---------
At 30 June 2022 14,290 2,042 16,332
----------------------------------- ------------ ------------------ ---------
Non-current 5,500 - 5,500
Current 8,790 2,042 10,832
----------------------------------- ------------ ------------------ ---------
Borrowings
On 30 January 2019, the documentation was finalised for the
Kapan Acquisition Financing totalling US$40 million, which is
syndicated with Ameriabank CJSC (US$32 million), HSBC Bank Armenia
CJSC (US$5 million) and Ararat Bank OJSC (US$3 million). The loan
incurs interest at Libor plus 8% and was originally repayable
through quarterly payments over a four-year period however in July
2021, the maturity date of the facility was extended from 31
January 2023 to 2 October 2023.
This bank financing has certain covenants attached to it that
the Group needs to adhere to. All covenants were met as at 30 June
2022 and as such the Group remains in full compliance with the
loan.
Other Borrowings
Other borrowings include an amount owing to one of Chaarat
Kapan's customers in respect of prepayments for the future sale of
concentrates. The prepayments accrue interest at 1-month LIBOR plus
6% p.a. and are expected to be settled in cash in accordance with a
repayment schedule defined in the sales contract. The prepayments
can be requested upon notice and therefore are repayable on
demand.
10. Other provisions
Other provisions for liabilities and charges relate mainly to
employment disputes in Armenia ("Legal Claims Provision") of US$0.7
million at 30 June 2022 (31 December 2021: US$1.2 million) and a
legal claim of US$1.4 million at 30 June 2022 (31 December 2021:
US$1.3 million) that was charged against Chaarat in the Kyrgyz
Republic whereby compensation for agricultural losses was demanded
("Land Provision").
US$0.8 million of the employment dispute provision was covered
by an indemnity included in the original Kapan acquisition
agreement. At 31 December 2021, the Directors considered
recoverability virtually certain and accordingly recognised a
corresponding within other receivables, however this has
subsequently been provided against at 30 June 2022 as
recoverability is no longer virtually certain.
The provisions have been recognised as, based on the Group's
legal views, it is considered probable that an outflow of resources
will be required to settle the disputes, however there is
uncertainty around the timing of payments to be made. There are no
expected reimbursements relating to these provisions.
The movement in provisions in 2022 is as follows:
Legal Land Other Total
Claims Provision Provision
Provision
US$'000 US $'000 US$'000 US$'000
------------------------- ----------- ----------- ----------- --------
At 1 January 2022 1,207 1,342 205 2,754
Change in provision (98) - - (98)
Settlement of provision
in cash (520) - - (520)
Foreign exchange
on conversion 124 89 9 221
---------------------------------- ----------- ----------- ----------- --------
At 30 June 2022 713 1,432 214 2,357
---------------------------------- ----------- ----------- ----------- --------
11. Related party transactions
Remuneration of key management personnel
Remuneration of key management personnel for the 6 months ended
30 June 2022 and 30 June 2021 is as follows:
2022 2021
US$'000 US$'000
Short term employee benefits 9 07 904
Share-based payments charge 3 73 856
Total 1 ,280 1,760
----------------------------- -------------- -------------
Included in the above key management personnel are 8 directors
(one of whom retired on 17 May 2022) and 2 key managers (2021: 8
and 2).
Regarding the share-based payments charge, in January 2022, the
Company granted options over five million ordinary shares of
US$0.01 each in the Company to the newly appointed Chief Executive
Officer, Mr. Michael Fraser, under the Chaarat Gold Holdings
Limited Management Incentive Plan 2019 (the "MIP"). The options are
exercisable at a price of GBP0.42 per share between 18 January 2022
and 18 January 2027 subject to the rules of the MIP.
No further share awards have been granted for 2022, however
should any such awards be made later this year, they will be
accounted for in H2 2022.
Entities with significant influence over the Group
At 30 June 2022, Labro Investments Limited, Chaarat's largest
shareholder, owned 44.51% (31 December 2021: 44.17%) of the
ordinary US$0.01 shares in Chaarat ("Ordinary Shares") and US$1.0
million of 10% secured 2021 convertible loan notes which, assuming
full conversion of principal and interest to maturity on 31 October
2022, are convertible into 3,579,088 Ordinary Shares.
12. Post balance sheet events
A fatal incident involving an employee occurred on 3rd September
2022. This followed injuries sustained at the Kapan mining
operation. The area where the incident occurred was closed
immediately and an internal investigation is underway. Chaarat is
currently working with the authorities to facilitate their
investigation of this tragic incident. Following a safety stop,
mining operations are continuing in all other areas. Production
guidance for the year from the Kapan mine remains unaffected
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