REG - Chaarat Gold Hlgs Ld - Q1 2023 Operational Update

Chaarat Gold HoldingsAnnouncement

03/05/2023 07:00

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RNS Number : 1825Y  Chaarat Gold Holdings Ltd  03 May 2023

3 May 2023

Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

Q1 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 quarter ended 31
March 2023 (the "Quarter", "Q1" or the "Period") for its Kapan Mine ("Kapan"),
in Armenia and a general corporate update.

 

Kapan Mine

 

Sadly, there was a fatal incident on March 19(th) when a development drill
operator from our contract company, S&A, was injured while carrying our
work on a new decline. The investigation has highlighted weaknesses in the
identification of risks associated with more complex tasks. A programme has
been initiated to conduct a full review of all tasks on site to help identify
such non-routine tasks and improve the controls at site. Independent
consultants have also been retained to help advance the safety culture at
Kapan to ensure the best safety conditions for our and contractors' employees.

 

Gold equivalent Ounces ("AuEq"(1)) in concentrate consisted of 12,371 thousand
ounces ("koz") from own ore vs 12,164 koz in Q1 2022 (+1.7%) and 1,496 koz
from third-party ore production vs 2,828 koz in Q1 22 (-47%). Total AuEq was
down 7.3% year on year due to the timing of treatment of the higher-grade
third-party ore, with tonnage expected to be higher in Q2.

 

All-in-sustaining cash cost for own ore production ("AISC"(2)) of USD 1,397/oz
was higher than the USD 1,352/oz for Q1 2022 (+3%). This increase is mainly
due to the adverse impacts from the United States Dollar and Armenian Dram
foreign exchange rate ("USD/AMD FX rate").

 

Preliminary unaudited standalone Kapan EBITDA(4) contribution of USD3.2
million vs USD7.6 million in Q1 2022 (-58%). Since Q1 2022, the Armenian
dram has appreciated by almost 20% (392.46 from 486.81 in Q1, 2022). This has
had a significant impact on the Company's cost base since Q2 2022. This impact
is now starting to flow through the local supply chain and price improvements
are being seen. In addition, the Company has established new sources of supply
to lessen the impact of the strong dram.

 

The 2022 Kapan Ore Reserve Estimate, published on 27 April 2023, confirmed a
25% increase in reserves and a corresponding two-year increase in the mine
life. Full details are available on the Chaarat website.

 

Ore mined was 133,972t for the quarter, down from 163,652t in Q1, 2022 (-18%).
The focus for the quarter was decline and cross-cut development to access new
areas of the mine. There was sufficient stockpile of ore on surface to feed
the mill while the development was prioritised.

 

Own ore milled was 162,046t vs 151,429t in Q1, 2022 (+7%). Grade was 3.03 g/t,
similar to the prior year.

 

Recovery from own ore was down 2.4% to 77.1% year over year due to the
treatment of lower grade and partially oxidised ore from stockpile.

 

Third-party ore treatment was 20,321t vs 26,688t in Q1 2022. This is related
to the timing of third- party campaigns, with tonnage expected to be higher in
Q2. Grade of third party was down 19% yoy (3.4 g/t vs 4.2 g/t in Q1 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. Four
HQ diameter drill holes were completed in Q1 totalling 800 metres. The
complete programme consists of accessing six underground drilling chambers and
drilling 40 drill holes, totalling approximately 13,370 metres of
core-oriented diamond drilling. Drilling is on 100 by 100 meters spaced
centres.  The currently defined programme is expected  to take until the end
of 2024 at the earliest. 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 assessment is based on old historical exploration data and
Dundee Precious Metals diamond drilling results from 2011. The Chaarat review
of the historical drilling has outlined eight potentially mineralised vein
zones which are the target of this exploration campaign. This drilling is
designed to provide an inferred level of certainty.

 

Initial intercepts and assays confirm the presence of mineralisation in line
with expectations, but further drilling is needed to provide a resource level
estimate of the East Flank potential.

 

Tulkubash & Kyzyltash Projects

 

The Tulkubash project remains ready for final investment decision ("FID") once
project financing is secured. In parallel to progressing potential financing
discussions, Chaarat is reviewing all strategic options on its Kyrgyz assets.

 

Corporate Finance

 

Chaarat reduced the principal outstanding on the Kapan acquisition loan by a
further USD1.0 million in Q1 2023, reducing the balance to USD14.5 million
outstanding. The unaudited Group Net Debt(5) as of 31 March 2023 was USD49.7
million. Chaarat continues to evaluate balance sheet optimisation
opportunities.

 

The Company continues discussions with various parties, including existing
bondholders, regarding proposals in relation to the convertible bond due at
the end of July 2023 and will provide an update on the status of these
discussions in due course.

 

Outlook 2023

 

Kapan Mine production guidance remains at 50-55(3) koz of own-ore production
and additional 5-10 koz of third-party ore production.

 

Cost pressures continue at Kapan due to both exchange rate and inflationary
pressures. The Company is continuing to work on ways to offset these
increases. Improvements are being realised as new supply options are sourced
and as supply chain inventory is renewed allowing more favourable pricing to
flow through.

 

Exploration work on East Flank is continuing.

 

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 charges, others which
add c. USD145/oz. Sustaining capex of c. USD 2.0 million is included in the
Q1 2023 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.

5 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:

 "Tragically there was a fatal injury to a contractor employee at Kapan in
the quarter. Work is underway to extensively review the design and controls of
all high-risk work.

Kapan continues to operate on a steady state basis with the team focusing on
value, not just volume. Milling performance improved in the quarter which
allowed for a draw-down of the on-site ore stocks., The continued strong price
environment has partially offset the cost impact of the higher Armenian Dram
compared to the US Dollar. Since Q2/Q3 2022 EBITDA has steadily improved
upwards, towards the steady state EBITDA target as cost savings from supply
chain improvements are being realised at current AMD/USD FX rate.

The first drill results on the East Flank are  encouraging and we are looking
forward to further results in the coming months."

 

Enquires

 

 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 2023 PRODUCTION SUMMARY

                                      Q1 2023  Q1 2022
 Tonnes ore mined                     133,972  163,652
 AuEq Grade (g/t)                     3.03     3.04
 Tonnes own ore milled                162,046  151,429
 Tonnes ore milled (Third-Party Ore)  20,321   26,688
 AuEq Recovery Kapan (%)              77.1     79.5
 Gold equivalent production (oz)      13,867   14,992
 from Own Ore                         12,371   12,164
 from Third-Party Ore                 1,496    2,828
    Gold production (oz)              7,434    8,721
    Silver production (oz)            140,288  138,257
    Copper production (t)             518      481
    Zinc production (t)               1,471    1,492
 AuEq Sales (Own Ore)                 11,205   12,333
 Realised gold price (USD/oz)         1,898    1,853
 AISC (USD/oz)                        1,397    1,352

 

 

ENDS

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