REG - Chaarat Gold Hlgs Ld - H1 2023 Operational Update

Chaarat Gold HoldingsAnnouncement

11/08/2023 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230811:nRSK0058Ja&default-theme=true

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

 Chaarat Gold Holdings Limited                       +44 (0)20 7499 2612
 Mike Fraser, Chief Executive Officer                IR@chaarat.com (mailto:IR@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 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/
(http://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

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 (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  UPDDGGDICUBDGXG