REG - Chaarat Gold Hlgs Ld - Q1 2022 Operational Update

Chaarat Gold HoldingsAnnouncement

29/04/2022 07:00

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RNS Number : 7842J  Chaarat Gold Holdings Ltd  29 April 2022

29 April 2022

Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

Q1 2022 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 quarter ended 31
March 2022 (the "Quarter", "Q1" or the "Period") for its Kapan Mine ("Kapan"),
in Armenia and a general corporate update.

 

 

Q1 2022 Highlights

 

Macro

 

·      The conflict in Ukraine and associated sanctions against Russia
have had minimal impact on the Company's operations in Armenia and Kyrgyz
Republic in Q1 2022. The Company is continuing to monitor the developments
closely.

 

Kapan

 

·      Chaarat Kapan has achieved a 12-month recordable injury frequency
rate ("RIFR") of zero for the first time in its history. The RIFR for Q1 2022
was zero vs 0.78 in Q1 2021.

 

·      Ore mined of 163,652 tonnes vs 149,102 tonnes for Q1 2021
(+9.8%). Strong mine production has resulted in 41kt of own ore on stock ready
for processing during the remainder of 2022.

 

·    Total production of 15,266 gold equivalent ounces(1) ("oz") vs
16,174 oz in Q1 2021 (-6.9%) consisting of 12,381 oz from own ore and 2,885 oz
from third-party ore. Production was lower due to reduced third-party
processing and lower grade ore currently being mined. Performance was in line
with the Company's plan based on the areas currently being mined.

 

·     All-in-sustaining cost ("AISC"(2)) of USD1,352 /oz vs USD1,024 /oz
in Q1 2021 (+32.0%) due to increases in energy prices, other raw materials
costs and increased development work.

 

·     Preliminary unaudited standalone Kapan EBITDA contribution of
USD7.6 million vs USD6.9 million in Q1 2021 (+10.1%).

 

Tulkubash & Kyzyltash

 

·    Resolution of the dispute between the government of Kyrgyz Republic
and Centerra Gold regarding the Kumtor mine was announced on 4 April 2022 and
allowed Chaarat to recommence financing discussions on the Tulkubash project.

 

·      Updated mineral resource and reserve statements on the Tulkubash
project are on track to be released in Q2 2022.

 

·    Ongoing project work will focus on engineering completion and
appropriate construction activities to optimise full activities once debt
financing is secured.

 

·      Metallurgical test work on the Kyzyltash drill core is underway
at SGS Lakefield and results are on track for Q3 2022. The results will enable
the Company to undertake an economic assessment to determine the optimum
processing route in 2023.

 

Corporate

 

·     Mike Fraser joined the company as Chief Executive Officer and
member of the Board on 17 January and has had the chance to familiarize
himself with the Company, its people, and the assets in Q1 2022.

 

·      The Company has started discussions on various solutions for the
convertible bond due in October 2022. A variety of options are being assessed.

 

·    Chaarat reduced the principal outstanding for the Kapan acquisition
loan by another USD2.8 million to USD16.3 million outstanding resulting in an
unaudited Net Debt(3) at group level of USD42.5 million.

 

(1 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 year's 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.)

(2  AISC on a gold oz produced basis exclude smelter TC/RC charges, others
which add c. USD$ 142/oz. Sustaining capex of c. USD6.6 million p.a. is
included in the AISC, of which capex of USD1.9 million was spent in Q1 2022.)

(3  )(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:

 

"Kapan continues to operate on a steady state basis with the team focusing on
value, not just volume, and managed to increase utilisation of equipment and
efficiency. The on-site stockpile will give us improved operational
flexibility in the coming quarters.

 

The continued strong price environment has offset the pressures of anticipated
increased energy and raw materials costs which enabled us to increase our
Kapan Q1 EBITDA by 10.1% vs Q1 last year.

 

At Tulkubash, the resource and reserve update including the 2021 drilling
results will be available this quarter and feed into an updated economic model
for the project."

 

 

Kapan Polymetallic Mine - Q1 Highlights and Outlook

 

Chaarat Kapan has achieved a 12-month recordable injury frequency rate (RIFR)
of zero for the first time in its history. The RIFR for Q1 2022 was zero vs
0.78 in Q1 2021.

 

Production of 15,266 oz represents a 6.9% decrease on Q1 2021 (16,174 oz).
Production was lower due to reduced third-party processing and lower grade ore
currently being mined. Performance was in line with plan based on the areas
currently being mined.

 

Ore hauled of 163,652t vs 149,101 in Q1 2021 (9.8%) while grade was 3.09 g/t
vs 3.30 g/t (-6.4%) in Q1 2021.

 

Total ore milled was flat with 178,117 tonnes vs 180,507 tonnes in Q1 2021.
This is despite 4 days of mill downtime during March due to national grid
outages. Such outages are very unusual with national power supply normally
being very stable.

 

Own ore milled of 151,429 tonnes vs 146,482 tonnes in Q1 2021. Third-party ore
treated was 27kt for Q1 2022 vs 34kt for Q1 2021 (-20.6%). Own ore run-of-mine
stockpile has accumulated to 41kt. This will allow for strong milling rates
for the remainder of 2022.

 

Own ore contained gold equivalent ("AuEq") was 12,382 oz in Q1 2022 compared
with 12,575 oz in Q1 2021 (-1.5%).

 

Q1 2022 production consisted of:

o  8,721 ounces of gold;

o  138,257 ounces of silver;

o  481 tonnes of copper; and

o  1,492 tonnes of zinc;

 

AuEq recoveries were flat at 79.5% in Q1 2022 compared with 79.8% in Q1 2021.

 

Resource development metres drilled were 17,181 in Q1 2022 compared with
11,234 in Q1 2021 (+52.9%).

 

Underground development of 6,474 metres achieved in the quarter, compared to
5,755 metres in Q1 2021 (12.5%).

 

Capital expenditure was USD1.9 million compared to USD1 million last year in
line with budget.

 

Realised gold price for the quarter of USD1,853 /oz versus USD1,762 /oz in Q1
2021 (+5.1%) in line with the average gold price for Q1 2022. Continuing
strong price environment, especially with realised copper prices of USD9,891/t
vs USD8,590 in Q1 2021 (+15.1 % vs Q1 2021) above budgeted prices.

 

All-in-sustaining cost ("AISC" (2)) of USD1,352 /oz was higher compared to Q1
2021 (USD1,024 /oz, +32.0%). AISC has started to decrease in March compared to
January and February 2022 and the Company sees this trend continuing. The team
is working on its sourcing and cost planning in order to optimise the cost
structure.

 

Unaudited Q1 2022 Kapan standalone EBITDA contribution of USD7.6 million vs
USD6.9 million in Q1 2021 (+10.1%).

 

Outlook for Kapan

 

Chaarat remains on track to deliver on its AuEq 56-62koz guidance for the year
including third-party ore production, as previously set out in its FY 2021
Production, Operational and Financial Update on 9 February 2022.

Third-party ore supply and mill throughput is expected to remain stable for
the remainder of 2022 with the approximately 41 kt stockpile of own ore
available for processing in the next quarters.

 

East Flank 2022 drilling campaign is ongoing as part of a 2-year programme to
develop a JORC-compliant resource and reserve for this potential new ore body.

 

Tulkubash and Kyzyltash Project Update

 

A resolution of the dispute around the Kumtor mine was announced on 4 April
which was perceived as a positive signal by several institutional investors.
Chaarat has started to reengage on its previous debt financing discussions and
also opened new debt financing discussions in April and is still expecting to
close the project financing in H2 2022.

 

The 2022 focus on site will be to conclude the detailed engineering work of
the remaining items and ensure a full construction ramp up once debt financing
is in place.

 

A revised Mineral Resource Estimate ("MRE") and Ore Reserve Estimate ("ORE")
including the results of the 2021 programme is being developed and will be
released in Q2 2022 which will feed into an updated economic model for the
project.

Metallurgical test work on the Kyzyltash ore samples is continuing at SGS
Lakefields laboratories and on track for results in Q3 2022.

 

Corporate Finance

 

The Kapan acquisition facility was reduced by a further USD2.8 million in
January 2022 and stands now at USD16.3 million (principal only).

 

Chaarat is assessing different options for the convertible loan notes due in
October 2022 in order to find a solution in a timely manner.

 

Corporate debt position comprising of convertible loan notes is USD26.5
million, including accrued interest of USD6.8 million, with the group cash at
the 31 March 2022 at USD6.6 million.

 

 

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/) .

 

 

Q1 2021 PRODUCTION SUMMARY

                                      Q1 2022  Q1 2021
 Tonnes ore mined                     163,652  149,102
 AuEq Grade (g/t)                     3.1      3.25
 Tonnes own ore milled                151,429  146,482
 Tonnes ore milled (Third-Party Ore)  26,688   34,025
 AuEq Recovery Kapan (%)              79.5     79.8
 Gold equivalent production (oz)      15,266   16,403
 from Third-Party Ore                 2,885    3,792
    Gold production (oz)              8,721    8,893
    Silver production (oz)            138,257  160,945
    Copper production (t)             481      605
    Zinc production (t)               1,492    1,527
 AuEq Sales                           12,333   12,775
 Realised gold price (USD/oz)         1,853    1,762
 AISC (USD/oz)                        1,352    1,024

 

 

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