TIDMCGH
RNS Number : 0828B
Chaarat Gold Holdings Ltd
09 February 2022
9 February 2022
Chaarat Gold Holdings Limited
("Chaarat" or "the Company")
FY 2021 Production, Operational and Financial 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, is pleased to announce its
production and operational results for the full year ended 31
December 2021 (the "Year", "2021" or the "Period").
The Company has exceeded its 2021 production guidance at its
Kapan Mine ("Kapan") in Armenia, however the development of the
Tulkubash project was impacted by the events around Centerra Gold's
Kumtor mine and ongoing COVID-19 pandemic in the Kyrgyz
Republic.
2021 Highlights
Kapan Mine
-- Finished the year with production of 63 thousand gold
equivalent ounces ("koz"(1) ) including 14 koz from third-party ore
production vs 2021 guidance of 57 koz (+10.5%).
-- Exceeded processing target of 50 thousand tonnes ("kt") for
third-party ore by 95 kt (+189%) in 2021, contributing to exceeding
the production guidance of 57 koz.
-- All-in-sustaining cost ("AISC"(2) ) of USD 1,205/oz was
higher than the USD 1,034/oz for 2020 (+16.5%) due to higher mining
costs related to more selective mining and costs associated to
processing a higher portion of third-party ore feed.
-- A 19.5% increase in unaudited preliminary standalone
EBITDA(3) contribution of approximately USD 22.7 million at Kapan
level in 2021 before group accounting adjustments and non-cash
items (2020: USD 19 million).
Tulkubash Development Project
* Updated bankable feasibility study ("BFS") released
in May 2021 confirming robust project economics which
will be updated once the updated reserve model is
completed and full construction resumes.
* Successfully completed a 4,835-metre drilling
programme including infill drilling and initial
exploration drilling on new target areas.
JORC-compliant resource and reserve estimates are
being updated to reflect the infill drill results.
* Advanced camp construction, main construction
preparation work and the exploration programme with
approximately USD8.5 million invested in 2021 despite
the Kumtor events and the ongoing COVID-19 impact.
Kyzyltash Development Project
* Successfully completed a 3,508-metre drilling
programme to obtain representative core of the
Kyzyltash deposit ready for metallurgical testing.
The core is being sent to SGS Lakefield in Canada for
a full suite of metallurgical test work as part of
assessing the preferred processing route for the
project.
Corporate Activities
* Funding package of USD52.2 million closed in February
2021.
* Extension of the convertible loan notes by one year
to 31st October 2022.
* Tulkubash debt financing delayed to 2022 due to
ongoing market cautiousness pending a resolution of
the Kumtor mine situation.
* Reduced interest-bearing debt(4) from USD70.5 million
as at 31(st) December 2020 to USD38.7 million as at
31(st) December 2021 (-45.1%), primarily as result of
converting investor and Labro loans into equity in
February 2021 and reducing the Kapan acquisition loan
by USD9 million from Kapan cash flows.
Outlook 2022
* Kapan - Mine production guidance of 50-53 koz(5) of
own-ore production and additional 6-9 koz(5) of
third-party ore production based on 100 kt milled
during the year.
* East Flank - Resource definition drilling ongoing as
part of preparing an initial mineral resource
estimate expected towards the end of 2022.
* Tulkubash - Subject to a resolution of Centerra's
Kumtor situation, debt financing expected to close in
H2 2022. Ongoing project work will focus on
engineering completion and appropriate construction
activities to optimise full activities once debt
financing is secured.
* Kyzyltash - Metallurgical test results expected from
SGS Lakefields late Q2 2022 to enable the Company to
perform an economic assessment on the best processing
route in the beginning of 2023.
* Corporate - Chaarat will continue to review its
existing balance sheet structure with a view to
further reducing its interest cost and improving the
balance sheet structure.
(1 Gold equivalent ounces for 2020 recalculated on 2021 budget
prices with Au at USD1,700/oz and gold ratios of 68 for silver,
7,287 for copper and 21,862 for zinc. In last year's FY 2020
operations update, 2020 oz were based on gold ratios of 83 for
silver, 7,778 for copper and 20,968 for zinc leading to a lower
AuEq number reported in that previous year. Includes third-party
ore production.)
(2 AISC on a gold oz produced basis exclude smelter TC/RC
charges, others which add c. USD 148/oz. Sustaining capex of c.
USD6 million p.a. is included in the AISC.)
(3) 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.
(4 Excluding lease liabilities, contract liabilities and accrued
interest on the convertible loan note.)
(5 Gold equivalent ounces for 2022 calculated based on Au at
USD1,775/oz and gold ratios of 75 for silver, 6,597 for copper and
20,381 for zinc.)
Martin Andersson, Executive Chairman, commented:
"I am pleased to report that we exceeded our 2021 production
guidance at Kapan. The difficulties of the COVID pandemic and
global supply chain issues created an ongoing set of challenges for
the Company, but the team found ways to manage the conditions.
The Company benefitted significantly from the increased
commodity prices seen in 2021. At the same time though we are
seeing inflationary prices flowing through due to that same price
environment. As has been the case since taking over Kapan, the team
will continue to look for improvements and new methods of operating
to minimise these impacts on the business.
Construction progress at Tulkubash was negatively impacted by
the delay in our debt financing efforts. The Kumtor / Centerra
situation led to cautiousness in the market and until this issue is
resolved, funding remains a challenge. We expect the situation will
be resolved shortly and investor confidence will be re-established.
The emphasis for 2022 will be to conclude the debt financing for
Tulkubash to achieve our first gold pour in 2024 target but also to
progress work on Kyzyltash with a processing route decision in the
beginning of 2023 to create substantial long-term value for Chaarat
shareholders.
Chaarat will continue placing significant importance on
sustainable development and social investment programmes in the
countries in which we operate. We genuinely believe that respectful
and open dialogue and partnership with local stakeholders is
essential for the long-term success of our operations."
Detailed Update on our Operations
Kapan Mine ("Kapan")
-- There was one fatality at our Kapan site on 4(th) March 2021.
The fatality occurred in the underground mining operations to a
supervisor of our contract mining company while he was inspecting a
blockage in an ore chute. Extensive awareness refresher training
and discussions related to the importance of planning and executing
work safely has taken place. In addition, there was also one lost
time injury, in the mining area when a contractor was injured in a
fall. Lost time injury frequency rate ("LTIFR") was 0.74 (per one
million hours worked) versus 0.37 in 2020.
Operational Summary
Kapan 2021 2020 % Change
Production (oz AuEq) 63,038 58,661 +7.5%
-------- -------- ---------
All-in sustaining
cost (USD/oz) (1) 1 ,205 1,034 +1 6 .5%
-------- -------- ---------
Sales (oz) incl.
third-party ore 57,212 48,387 +18%
-------- -------- ---------
Sales (oz) excl.
third-party ore 44,567 42,902 +4%
-------- -------- ---------
Gold production (oz) 35,405 29,770 +18.9%
-------- -------- ---------
Silver production
(oz) 610,322 587,718 +3.8%
-------- -------- ---------
Copper production
(t) 2,284 2,154 +6%
-------- -------- ---------
Zinc production (t) 5,836 7,641 -23.6%
-------- -------- ---------
Realised gold price
(USD/oz) 1,784 1,773 +1%
-------- -------- ---------
Realised silver price
(USD/oz) 25 20.4 +22.5%
-------- -------- ---------
Realised copper price
(USD/t) 9,157 6,117 +50%
-------- -------- ---------
Realised zinc price
(USD/t) 3,001 2,222 +35%
-------- -------- ---------
-- Total tonnes mined were 600,246t down from 684,156t (-12.3%)
in 2020. Mine head grade was 3.3g/t oz versus 3.0/t oz (+10%) in
2020. The decreased tonnes mined, and increased mine head grade are
the result in a shift in mining method during 2021 to be able to
better mine some of the narrower areas of the ore body.
-- Mill throughput was stable at 729,473t compared to 744,705t
(-2%) in 2020. Lower own-ore production was compensated by
third-party ore feed. Throughput included 144,632t of third-party
ore vs 54,637t (+165%) in 2020.
-- Kapan ore recoveries were 79.1% compared 79.9% (-1%) in 2020.
Higher degrees of oxidation and finer grind size in the areas mined
in H2 impacted mill performance. Mineralogy work is being conducted
to identify improved ways of treating this type of material going
forward.
-- This resulted in gold-equivalent production of 63,038 oz vs
58,178 oz in 2020 (+7.5%) due to the higher grades mined and the
significant increase in third-party ore.
-- Underground development was 23,823 metres, above the 21,985 metres in 2020 (+8.4%).
-- All-in-sustaining cost of USD 1,205/oz was 16.5% higher than
the USD 1,034/oz for 2020 due to higher mining costs. Supply side
constraints and inflationary impacts are being seen across the
supply chain and we expect this to have inflationary pressure on
the cost base during 2022.
-- The unaudited preliminary standalone EBITDA(3) contribution
at Kapan has improved from USD 19 million in 2020 to c. USD 22.7
million in 2021.
-- The increase in EBITDA was mainly driven by a strong Q4 2021
where delayed concentrate shipments from Q3 2021 were sold after
the conclusion with the Armenian Government that the new metals
export regulation is not applicable to Kapan concentrates.
Tulkubash
Construction Update
Construction activities in 2021 were slowed down due to the
delay in the debt financing caused by the dispute around the Kumtor
mine. The construction season focused on detailed engineering
advancements and preparation works on the heap leach facility and
haul road as well as the installation of the first modules of the
new employee accommodation units. Overall, a number of activities
were completed in 2021 which will support a quick ramp up of
construction activities once debt financing is secured. Main
activities included progressing detailed engineering on multiple
fronts (mainly Principal Engineering, ADR Engineering, Crushing
Facility Engineering), finishing part of the camp and related
infrastructure, constructing the haul road 2 and ordering important
long lead items for the 2022 construction season.
The 2021 infill drilling programme, comprising 4,835 metres,
targeted the Inferred and unclassified areas in the mid and east
areas. The drill holes intersected consistent oxide gold intercepts
as expected. The current Tulkubash Mineral Resource Estimate is in
the process of being updated to include the results of the 2021
programme.
The revision to the BFS was completed in May 2021 and confirmed
the robust economics of the project. The update to the
Environmental and Social Impact Assessment was also completed in
June 2021.
Debt Financing
The Company continues to progress with potential funding
solutions for the development of the Tulkubash project. Despite
having no direct impact on the Company's operations, the situation
around the Kumtor mine has affected the debt financing timeline
significantly pushing it into H2 2022. Based on recent press
releases by Centerra and the Kyrgyz Government, Chaarat expects a
resolution of the situation shortly. This should enable the Company
to continue discussions around a standalone financing or a
comprehensive refinancing of its current debt outstanding and
financing of the Tulkubash project.
Corporate Finance Update
In 2021, Chaarat focused on improving the balance sheet with
successful initiatives to increase liquidity and an overall
reduction in debt.
-- The Kapan acquisition loan of initially USD40 million was
reduced by another USD9 million to USD19 million at the end of 2021
in accordance with the amortisation schedule.
-- The Company completed a funding package in February 2021 for
a total of USD52.2 million which included issuing USD30.0 million
in equity to new investors and conversion of debt into equity of
USD22.2 million.
-- Chaarat also extended the maturity of its USD 19.68 million
plus accrued interest of USD6.68 million secured convertible loan
notes from 31 October 2021 to 31 October 2022.
Overall, the interest-bearing debt(4) outstanding was reduced to
USD38.7 million as at 31st December 2021 from USD70.5 million as of
31(st) December 2020 (-45.1%).
In 2022, the Company is planning to further optimise its balance
sheet, retaining an opportunistic approach to refinancing on
favourable terms and funding the Tulkubash project and Kapan East
Flank extension in order to maximise shareholder value.
Interim Chief Financial Officer
Pending the identification of a permanent successor to the role
of Chief Financial Officer, the Company has appointed Chaarat's
Group Financial Controller, David Mackenzie, as Interim Chief
Financial Officer ("Interim CFO"), assuming responsibility for all
financial planning and control processes. The Interim CFO will be a
non-board position.
Notice of audited Full Year Results
Any numbers mentioned in this press release are subject to
year-end closing process and audit. The Company will be announcing
its audited full year results for the period ended 31 December 2021
in the first half of April 2022.
Enquiries
+44 (0)20 7499
Chaarat Gold Holdings Limited 2612
Patrick Henze (VP CorpDev & IR) IR@chaarat.com
Canaccord Genuity Limited (NOMAD + 44 (0)20
and Joint Broker) 7523 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 with an initial focus on the
FSU 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/ .
2021 PRODUCTION & OPERATIONAL SUMMARY
2021 2020
Tonnes ore mined (Kapan) 600,246 684,156
AuEq Grade (g/t)(3) (Kapan) 3.1 3.0
Tonnes ore milled (Total) 729,473 744,705
Tonnes ore milled (Kapan) 584,841 676,867
Tonnes ore milled (Third-Party
Ore) 144,632 54,637
AuEq Recovery Kapan (%) 79.1 79.9
Gold equivalent (oz)
Production(,4) 63,039 58,661
Incl. from Third-Party
Ore 14,438 4,446
Sales(4) 57,212 48,387
Incl. from Third-Party
Ore 12,645 5,485
Gold production (oz) 35,405 29,770
Silver production (oz) 610,322 587,718
Copper production (t) 2,284 2,154
Zinc production (t) 5,836 7,641
Realised gold price (USD/oz) 1,784 1,773
AISC (USD/oz) 1,205 1,034
END
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