TIDMCGH
RNS Number : 0058J
Chaarat Gold Holdings Ltd
11 August 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014 AS IT
FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION
(WITHDRAWAL) ACT 2018 ("MAR"), AND IS DISCLOSED IN ACCORDANCE WITH
THE COMPANY'S OBLIGATIONS UNDER ARTICLE 17 OF MAR
11 August 2023
Chaarat Gold Holdings Limited
("Chaarat" or "the Company")
H1 2023 Operational Update
Chaarat (AIM:CGH), the AIM-quoted gold mining Company with an
operating mine in Armenia and assets at various stages of
development in the Kyrgyz Republic, announces its production and
operational results for the half year ended 30 June 2023 ("H1" or
the "Period") for its Kapan Mine ("Kapan") in Armenia as well as
providing a general corporate update.
Kapan
-- Recordable injury frequency review ("RIFR") (per one million
hours worked) in the Period was 0.38 compared to 0.74 in H1 2022.
No serious injuries or incidents were recorded in the second
quarter of 2023.
-- The 2022 Kapan Ore Reserve Estimate was completed during H1
2023. The resource drilling programme replaced depletion and added
an additional 2 years of life to the previous Life of Mine. Full
details are available on the Chaarat website.
-- Kapan production of 26,523 gold equivalent ounces(1) ("oz")
vs 30,022 oz in H1 2022 (-11.7%) consisting of 21,410 oz from own
ore and 5,113 oz from third-party ore (vs 23,458 oz from own ore
and 6,564 oz from third-party ore in H1 2022). Lower gold
production was mainly due to lower stope availability in H1.
-- All-in-sustaining cash cost for own ore production ("AISC"(2)
) of USD1,556/oz was higher than the USD1,420/oz for H1 2022
(+9.5%). This increase is mainly due to the adverse impacts from
the United States Dollar and Armenian Dram foreign exchange rate
("USD/AMD FX rate") and an 8.7% decrease in gold equivalent
("AuEq") own-ore production compared to H1 2022.
-- Preliminary unaudited standalone Kapan EBITDA (4)
contribution of USD2.3 million vs USD8.1 million in H1 2023 (-72%).
This is mainly due a decrease in volumes milled (own ore and third
party) and the continued adverse impact of USD/AMD FX rate.
-- Since H1 2022, the Armenian dram has appreciated by almost
17% (average rate to the US Dollar for the period was 389.71 in H1
2023, appreciated from 467.78 in H1 2022). This created significant
impact on the business. The Company has pivoted to new suppliers to
mitigate the impact of the strong Armenian dram, however the
adverse impact on costs remains.
-- Ore mined of 270.2 thousand tonnes ("kt") vs 321.1 kt in H1
2022 represents a year-on-year decrease of 15.9%. Mine grade was
unchanged at 2.9 g/t AuEq.
-- Mill throughput was lower at 345.0 kt year on year (-7.6%, H1
2022 373.3 kt), and mill AuEq recovery for own ore was slightly
lower at 78.6% in H1 2023 compared with 79.5% in H1 2022.
East Flank Update
-- Following the completion of the first four drilling chambers,
exploration drilling has commenced as part of the East Flank
exploration programme. Seven NQ diameter drill holes were completed
in H1 2022 totalling 1,764 metres. The complete programme consists
of accessing 6 underground drilling chambers and drilling 40 drill
holes, totalling approximately 13,370 metres of core-oriented
diamond drilling. Drilling is on 100 by 100 metres spaced centres.
The currently defined programme is expected to continue until the
end of 2024. The East Flank area lies approximately 100 metres to
the east of the current Shahumyan ore body and has an anticipated
strike length of approximately 600 metres.
-- The East Flank exploration target is based on old historic
exploration data and Dundee Precious Metals diamond drilling
results from 2011. The Chaarat review of the historic drilling has
outlined 8 potentially economically significant mineralized vein
zones which are the target of this exploration campaign. This
drilling campaign is designed to provide an inferred level of
certainty.
Outlook for Kapan
-- Kapan Mine production guidance remains at 50-55 koz of
own-ore production and additional 5-10 koz of third-party ore
production. A newly installed crushing unit which increases
capacity available by roughly 30% is expected to drive a stronger
H2 2023. Third-party ore supply is expected to remain in line with
H1 2023 for the remainder of 2023.
-- East Flank drilling campaign is ongoing as part of a 2-year
programme to develop an initial JORC resource and reserve
statement. The drill results will be included in the 2023 Kapan MRE
update. Further infill drilling will be carried out as appropriate
in future years to convert this mineralisation to measured and
indicated.
Tulkubash & Kyzyltash
-- The Tulkubash project remains ready for final investment
decision ("FID") once project financing is secured.
-- In addition to progressing financing discussions, Chaarat is
reviewing all strategic options on its Kyrgyz assets. The current
discussions with Xiwang International envisage a capital allocation
for the Kyrgyz Assets to develop Tulkubash. Other discussions are
advancing in parallel.
Corporate Finance
-- Chaarat reduced the principal outstanding on the Kapan
acquisition loan by a further USD1.5 million in Q2 2023, reducing
the balance to USD13.0 million outstanding. The unaudited Group Net
Debt(5) as of 30 June 2023 was USD51.6 million. Chaarat continues
to evaluate balance sheet optimisation opportunities.
-- As previously announced, working capital facility
arrangements are in place with a short-term loan provider. As at 30
June 2023 USD 3 million had been drawn under those arrangements
with a further USD 1 million available for drawdown. Cash and cash
equivalents as at 30 June 2023 were USD 0.8 million .
-- The loan from Ameriabank, which now includes both the
remaining portion of the acquisition loan and the working capital
facility, was successfully refinanced in H1 2023. The USD13 million
loan principal has had its repayment schedule extended from 2H 2023
to 1H 2025 with terms remaining materially the same.
-- The Company has agreed an extension to the maturity date of
the convertible loan notes, details of the terms of which are set
out in a separate announcement being issued simultaneously with
this one.
-- As previously outlined, in order to proceed with the
development in Kyrgyz Republic and to sustain corporate activities,
further financing will also be required by the end of Q3 2023. The
board is evaluating all possible financing options including the
previously announced potential Xiwang investment and other
initiatives such as asset sales which include the potential sale of
Kapan. Discussions are ongoing with regard to the potential sale of
Kapan. Under the currently envisaged structure this would likely
constitute a transaction which results in a fundamental change of
business, and in accordance with AIM Rule 15, the transaction would
require shareholder approval. Further details will be provided as
and when appropriate. There are currently no binding agreements in
place with regard to additional funding or the sale of Kapan and
there is no guarantee at this stage that a sale of Kapan will be
completed or that any additional funding will proceed.
Potential Xiwang investment
-- Further to the update announcement made on 31 July 2023 ,
Xiwang and Chaarat have discussed an extension to the previously
targeted timeline for completion of the potential investment of up
to four months from 30 July to satisfy its internal process
requirements and those of its partners. The Company and Xiwang are
currently in discussions about potential changes to the appropriate
amount and structure of an investment as noted in the Tulkubash and
Kyzyltash section above. Xiwang have confirmed their continued
interest in proceeding with an investment which will allow the
development of the Tulkubash project but there is no guarantee at
this stage that the proposed Investment will be completed. A
further update will be provided in due course.
(1 Gold equivalent ounces for 2021 recalculated on 2022 budget
prices with Au at USD1,775/oz and gold ratios of 75 for
silver,6,9597 for copper and 20,381 for zinc. Includes third-party
ore production.)
(2 AISC on a gold oz produced basis exclude smelter TC/RC charge
and other costs which add c. USD217/oz. Sustaining capex of c.
USD3.65 million p.a. is included in the AISC.)
(3 Gold equivalent ounces for 2023 guidance calculated on 2023
budget prices with Au at USD1,850/oz and gold ratios of 84 for
silver, 6,998 for copper and 19,826 for zinc. Includes third-party
ore production.)
4 In reporting financial information, the Group presents 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. EBITDA is calculated by adjusting profit/(loss) for
depreciation and amortisation, income tax charges and any finance
related transactions. The amount reported is unaudited and
preliminary in nature given it may be subject to adjustments in the
audit process
(54 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.)
Mike Fraser, Chief Executive Officer, commented:
"Whilst it is pleasing to see the improved safety outcomes at
Kapan, the financial performance of Kapan continues to be adversely
impacted by the stronger Armenian Dram. The outlook for the second
half of the year is for an improvement in AuEq, on 1H due to
forecast improvement in plant capacity. Drilling at East Flank
continues with initial drill results expected in the 2023 MRE.
The board is currently evaluating a number of financing options
for both corporate and asset purposes, which include a potential
sale of Kapan. In addition, discussions continue with Xiwang
International on a potential investment that will enable the
further development of Chaarat's internal and external growth
options . We look forward to updating shareholders in due
course.
In the meantime, efforts continue to improve the balance sheet,
with the loan from Ameriabank successfully refinanced with
outstanding principal repayment extended to 2025."
Enquiries
+44 (0)20 7499
Chaarat Gold Holdings Limited 2612
Mike Fraser, Chief Executive Officer IR@chaarat.com
Canaccord Genuity Limited (NOMAD and + 44 (0)20 7523
Joint Broker) 8000
Henry Fitzgerald-O'Connor
James Asensio
+44 (0)20 7220
finnCap Limited (Joint Broker) 0500
Christopher Raggett
Panmure Gordon (UK) Limited (Joint +44 (0)20 7886
Broker) 2500
John Prior
Hugh Rich
About Chaarat
Chaarat is a gold mining company which owns the Kapan operating
mine in Armenia as well as Tulkubash and Kyzyltash Gold Projects in
the Kyrgyz Republic. The Company has a clear strategy to build a
leading emerging markets gold company through organic growth and
selective M&A.
Chaarat aims to create value for its shareholders, employees and
communities from its high-quality gold and mineral deposits by
building relationships based on trust and operating to the best
environmental, social and employment standards. Further information
is available at www.chaarat.com/ .
H1 2023 PRODUCTION & OPERATIONAL SUMMARY
H1 2023 H1 2022
================================ ======== ========
Tonnes ore mined 270,174 321,136
AuEq Grade (g/t) 2.9 2.9
Tonnes ore milled 344,961 373,323
Tonnes ore milled (Third-Party
Ore) 58,810 63,511
AuEq Recovery Kapan (%) 78.6 79.5
Gold equivalent production
(oz) 26,523 30,022
-------------------------------- -------- --------
Gold equivalent production
(own ore) 21,410 23,458
Gold equivalent production
(third party ore) 5,114 6,564
Gold production (oz) 14,885 17,944
Silver production (oz) 266,100 269,687
Copper production (t) 954 941
Zinc production (t) 2,522 2,804
-------------------------------- -------- --------
AuEq Sales 18,937 25,118
Realised gold price (USD/oz) 1,959 1,858
AISC (USD/oz) 1,556 1,420
ENDS
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