Preliminary Results

RNS Number : 7750G

Chaarat Gold Holdings Ltd

01 June 2017

 

Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

PRELIMINARY ANNOUNCEMENT OF AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

Road Town, Tortola, British Virgin Islands (1^st June 2017)

Chaarat (AIM - CGH), the AIM quoted exploration and development company with assets in the Kyrgyz Republic, today publishes its preliminary results for the year ended 31 December 2016.

Highlights for the year

·    Implementation of the strategy to reach production from the Tulkubash Heap Leach Project in progress

·    Feasibility Study to be completed in Q1 2018 will include updated resource and reserve to extend the life of mine

·    Fund raise of USD15 million convertible loan notes completed in April 2017

·    Chief Operating Officer and Project Manager recruited

·    Kyrgyz Investment Forum co-hosted with EBRD and Kyrgyz Embassy in May 2017 raises profile of Kyrgyz Republic in London

Dekel Golan, CEO of Chaarat, commented: "The Board remains convinced that the decision to proceed to production from the Chaarat Project by means of the stage one Tulkubash Heap Leach Project is the best way to unlock the value of the Chaarat deposit. Work is progressing on the Feasibility Study which is substantially complete subject to the results of this summer's drilling.  The local permitting process is well advanced.

We were very pleased with the reaction to the Kyrgyz Investment Forum and look forward to being one of the next mines in production in the Kyrgyz Republic." 

Enquiries:

Chaarat Gold Holdings Limited	+ 44 20 7499 2612
c/o Central Asia Services Limited	[e-mail]
Dekel Golan   CEO                   Linda Naylor  FD
Numis Securities Limited	[phone]
John Prior, Paul Gillam (NOMAD) James Black (Broker)

Chairman's report                        

Dear Shareholder

This is my first letter to you since I became Chairman of Chaarat Gold in October 2016.  I am pleased to have this opportunity to share my vision and expectations for the company.

Chaarat is an exceptional asset with the potential to become one of the world's leading independent gold producers.  An extensive drilling program and feasibility studies carried out over many years have revealed a rich deposit of high-grade ore in the Tulkubash, Contact and Main zones of the deposit, and our licence area offers ample opportunities for future exploration.

Our current objective is to reach production as quickly and efficiently as possible.  As you know, we declined an offer to purchase the company last year which did not reflect the underlying value of the Chaarat deposit. Instead, we have decided to develop the mine ourselves.  We are confident that we can achieve the highest value for our shareholders by becoming a significant producer, which, in the long term, will serve as a platform for further acquisitions and generate significant and stable dividends.

In April 2017, we placed US$15 million in convertible loan notes, a success that reinforced Chaarat's credibility on the capital markets.  This milestone financing allows Chaarat to proceed on an accelerated basis towards our objective of bringing the mine to production. We expect the convertible bond to be repaid early next year from a traditional project financing package being arranged by Endeavour Financial or be converted into equity in the company.

In February, Robert Benbow joined us as Chief Operating Officer with a mandate to build a strong execution team with delivery experience.  As Vice President and later Country Manager, Bob developed and managed Alacer Gold Corp.'s Çöpler heap leach project in Turkey and, prior to that, brought three more greenfield gold mines to production.  Like Chaarat, the Çöpler Mine is a large deposit with a heap leach section (which is operating successfully) and a larger refractory element.  Alacer, the project owner, is now building a pressure oxidation unit, a project planned by Bob, to process the refractory section of the deposit. We are delighted to welcome Bob to the Chaarat project.

We expect to celebrate our first gold pour from the Tulkubash open pit in the first half of 2019.  Once we have a proven track record in bringing this first production stage to fruition, we will be looking to raise financial support for the second stage of development of the Chaarat deposit.  From there, we aim to grow organically and assimilate additional value-accretive assets.

In January, I had the honour of meeting with the Kyrgyz Republic's Prime Minister Sooronbay Zheenbekov, Speaker of the Parliament Chynybai Tursunbekov and Chairman of the State Committee for Industry, Energy and Mining Duyshenbek Zilaliev.  Based on their knowledge of the Company and its operating history in the country, our future plans for Chaarat were received with support and enthusiasm.  I also offered to work together with them to educate the market and raise the profile of the Kyrgyz Republic with global investors.  As the first step in this initiative, we were pleased to co-host with the EBRD a Kyrgyz Republic Government conference in London in May.

A few words about myself by way of a brief introduction.  I started investing in Chaarat in 2011 and, since then, have been gradually building my holding.  I believe that gold will maintain its status as a reserve of wealth in the future.  From my regular visits to the Chaarat site, I am also confident that our team is well on the way to building a modern, sustainable and environmentally-friendly mine that will be to the benefit of all its stakeholders over the long term.

I am especially happy to be involved in a project in the CIS, as I have longstanding ties to this region.  The first decade of my career was spent building Brunswick Brokerage (Brunswick UBS), one of Russia's first investment banks and my seven years as a Board member and shareholder of Siberian Coal Energy Company (SUEK), one of the world's largest coal companies and the leading coal producer in Russia, are particularly relevant to my role within Chaarat.  With over twenty five years' experience in the CIS building companies and serving as a Board member and shareholder of various organisations within the region, it is my sincere hope that my experience will contribute to the success of Chaarat in the future.

Finally, I would like to thank my predecessor Christopher Palmer-Tomkinson for chairing Chaarat for the last 10 years.  I would also like to express my gratitude on behalf of all shareholders to the team in Bishkek for their hard work and loyalty.

Yours sincerely

Martin Andersson

Chairman

Chief Executive Officer's Report

Dear Shareholder

Your company has undergone significant changes during 2016.  With a refreshed Board of Directors in place our sole focus is now on preparing Chaarat to build its first mine by itself. Accordingly, we are currently working on two priorities:  building management capacity and performing the necessary engineering work to underpin the construction and arranging the financial package for the project.

Bob Benbow, our Chief Operating Officer, has been working with Chaarat as a consultant since June 2016. He has already begun recruiting staff for the engineering and construction effort and the preparation for the next stage of development is underway.  I am looking forward to working with him on our tight but achievable timeline.

As we started to contemplate project financing, it became clear that we needed to increase our reserve base in order to achieve optimal debt/equity ratios, without which our shareholders would face unnecessary dilution. With that in mind, and in order to adhere to the production timetable, we have implemented a work program which is now underway in five streams.

1.     We are concluding those chapters of the Bankable Feasibility Study for which sufficient information is available. These include the crushing plant, gold plant, leach pad and ponds, access road, camp and other civil aspects of the project, as well as preparation of a draft Environmental and Social Impact Assessment report.  Most chapters will be completed soon and we expect the full study, including the newly added resource from this summer's drilling campaign, to be available in the first quarter of 2018.

2.     We are developing the local documents required for permitting the project. This process has progressed well and most documents have been submitted and are undergoing appraisal.

3.     We are implementing an intensive drill program in order to increase the resource and reserve available for the project.

4.     We have started the process of securing project finance in parallel with preparing the feasibility study so that these can be completed at the same time.

5.     We have undertaken certain construction activities which include upgrading the access road, advancing detailed engineering on certain project elements, and commencing initial procurement and contracting related to these elements.

We expect to be able to deliver on our promise to be in production during the first half of 2019 and we will continue to update you as we make progress.

With best regards

Dekel Golan

CHIEF OPERATING OFFICER'S REPORT

Dear Shareholder

I am excited to be providing you with my first shareholder report. I am also excited about the prospect of bringing the Chaarat Mine into production.

I believe the core to any organization that sets out on a journey to build and operate a mine is the people it brings to the endeavour.  Mining projects require diverse skills to carry out the complexities of safe, efficient operations.  We will seek to employ high quality experienced people in building and operating the mine. I will be helped considerably in this task by Davron Vakhabov, a former colleague from the Çöpler Mine, who joined the team in May as Project Manager.  Health, safety and environmental stewardship will be based on best practices worldwide.  Our goal in the operation of the mine will be efficient and productive practices seeking continuous improvement throughout.

The Company's decision to develop the Tulkubash Gold Project as a heap leach oxide operation in the first phase of the project means that we start with an industry standard gold processing method that is relatively easy to build and to operate, the least capital intensive gold processing plant and a highly proven technology. This approach minimizes the startup risk and allows us to train a core team of operators, get into production quickly, and put the company on a solid financial standing.

The drilling program currently underway for the Tulkubash deposit is designed to add oxide resources and reserves to the project thus providing further de-risking.  While the completion of the feasibility study will come after the results of the drilling program are available, so that the increased resources and reserves can be included, the work on finalizing the facility designs will continue.  This will allow the Company to prepare for project financing and begin initial construction in a timely manner.

The feasibility study we are currently working on extracts the oxide portion of the previous feasibility study and builds on that body of work to provide more project definition to the heap leach operation. Oxide ores in the Tulkubash deposit are undergoing diligent metallurgical testing to verify metal recoveries, identify consumption of reagents and determine operating costs.  Equipment and construction will be costed to AACE International (the internationally recognized provider of best practices in cost estimating) Class 3 standards.

The Chaarat holdings in the Sandalash Valley represent one of the world's premier untapped gold opportunities.  With resources of at least 7 million ounces, the project has the potential to provide gold production providing economic benefits to the local population, the Republic of Kyrgyzstan and the Chaarat shareholders for years to come.

I thank the local Chaarat team, Chaarat management, Board of Directors and shareholders for the faith they have afforded me in this journey.  I look forward to reporting our progress to you in the future.

With Highest Regards

Robert D. Benbow

Consolidated income statement For the years ended 31 December 2016 2015 USD USD Exploration expenses (1,060,180) (2,071,070) Administrative expenses - other (3,297,786) (2,595,356) Administrative expenses- share options expense (1,962) (90,869) Administrative expenses- foreign exchange gain/(loss) (334,185) 20,187 Total administrative expenses (3,633,933) (2,666,038) Other operating income 220,784 113,107 Operating loss (4,473,329) (4,624,001) Finance income 18,453 19,645 Taxation - - Loss for the year, attributable to equity shareholders of the parent (4,454,876) (4,604,356) Loss per share (basic and diluted) - USD cents (1.52) (1.69) Consolidated statement of comprehensive income
For the years ended 31 December
		2016	2015
		USD	USD
Loss for the year, attributable to equity shareholders of the parent		(4,454,876)	(4,604,356)
Other comprehensive income: Items which may subsequently be reclassified to profit and loss
Exchange differences on translating foreign operations		2,601,427	(7,708,129)
Other comprehensive income for the year, net of tax
		2,601,427	(7,708,129)
Total comprehensive income for the year attributable to equity shareholders of the parent		(1,853,449)	(12,312,485)

Consolidated Balance Sheet
At 31 December
		2016 USD	2015 USD
Assets
Non-current assets
Intangible assets		26,572	29,505
Mine properties		23,424,508	19,797,277
Property, plant and equipment		840,682	2,174,678
Assets in construction		10,008,201	9,259,089
		34,299,963	31,260,549
Current assets
Inventories		208,955	306,111
Trade and other receivables		365,944	212,845
Cash and cash equivalents		3,284,929	2,839,159
		3,859,828	3,358,115
Total assets		38,159,791	34,618,664
Equity and liabilities
Equity attributable to shareholders
Share capital		3,517,757	2,729,353
Share premium		136,553,470	132,108,746
Share warrant reserve		1,358,351	1,358,351
Other reserves		14,848,878	14,952,340
Translation reserve		(15,927,429)	(18,528,856)
Accumulated  losses		(102,754,577)	(98,405,125)
Total equity		37,596,450	34,214,809
Current liabilities
Trade and other payables		401,096	176,641
Accrued liabilities		162,245	227,214
		563,341	403,855
Total liabilities		563,341	403,855
Total liabilities and equity		38,159,791	34,618,664

		Consolidated Statement of Changes in Equity
	For the Years Ended 31 December
			Share Capital USD	Share Premium USD	Share warrant reserve USD	Accumulated Losses USD	Other Reserves USD	Translation Reserve USD	Total USD
Balance at 31 December 2014			2,729,353	132,108,746	1,358,351	(94,144,808)	15,205,510	(10,820,727)	46,436,425
Currency translation			-	-	-	-	-	(7,708,129)	(7,708,129)
Other comprehensive income			-	-	-	-	-	(7,708,129)	(7,708,129)
Loss for the year ended 31 December 2015			-	-	-	(4,604,356)	-	-	(4,604,356)
Total comprehensive income for the year			-	-	-	(4,604,356)	-	(7,708,129)	(12,312,485)
Share options lapsed			-	-	-	344,039	(344,039)	-	-
Share options expense			-	-	-	-	90,869	-	90,869
Balance at 31 December 2015			2,729,353	132,108,746	1,358,351	(98,405,125)	14,952,340	(18,528,856)	34,214,809
Currency translation			-	-	-	-	-	2,601,427	2,601,427
Other comprehensive income			-	-	-	-	-	2,601,427	2,601,427
Loss for the year ended 31 December 2016			-	-	-	(4,454,876)	-	-	(4,454,876)
Total comprehensive income for the year			-	-	-	(4,454,876)	-	2,601,427	(1,853,449)
Share options lapsed			-	-	-	105,424	(105,424)	-	-
Share options expense			-	-	-	-	1,962	-	1,962
Issuance of shares for cash			788,404	4,587,757	-	-	-	-	5,376,161
Share issue cost			-	(143,033)	-	-	-	-	(143,033)
Balance at 31 December 2016			3,517,757	136,553,470	1,358,351	(102,754,577)	14,848,878	(15,927,429)	37,596,450

Consolidated Cash Flow Statement
For the Years Ended 31 December
		2016 USD	2015 USD
Operating activities
Loss for the year		(4,454,876)	(4,604,356)
Adjustments:
Amortisation expense - intangible assets		7,287	11,400
Depreciation expense - property, plant and equipment		332,698	578,096
Loss/(gain) on disposal of property, plant and equipment		40,074	(86,580)
Provision for inventories		(22,660)	268,692
Finance income		(18,453)	(19,645)
Other operating income		(220,784)	(113,107)
Share based payments		1,962	90,869
Decrease in inventories		147,423	147,538
(Increase)/decrease in accounts receivable		(590)	153,680
Increase/(decrease) in accounts payable		(58,507)	(209,671)
Net cash flow used in operations		(4,246,426)	(3,783,084)
Investing activities
Purchase of tangible fixed assets		(68,812)	(220,711)
Capitalisation of development activities		(2,052,669)	(1,213,724)
Sale of subsidiary		200,000	-
Proceeds from sale of equipment		1,106,055	449,801
Interest received		18,453	19,645
Net cash used in investing activities		(796,973)	(964,989)
Financing activities
Proceeds from issue of share capital		5,376,162	-
Issue costs		(143,033)	-
Net cash from financing activities		5,233,129	-
Net change in cash and cash equivalents		189,730	(4,748,073)
Cash and cash equivalents at beginning of the year		2,839,159	7,608,865
Effect of changes in foreign exchange rates		256,040	(21,633)
Cash and cash equivalents at end of the year		3,284,929	2,839,159

Notes:

1. Preparation of accounts

The financial information set out in this announcement does not constitute the Company's annual accounts for the years ended 31 December 2016 or 2015.

The consolidated balance sheet at 31 December 2016, the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and associated notes for the year then ended have been extracted from the Group's 2016 annual financial statements upon which the auditors' opinion is unqualified.

2. Significant accounting policies

The accounting policies and presentation followed in the preparation of these final results have been consistently applied to all periods in these financial statements and are the same as those applied by the Group in the preparation of its annual accounts for the year ended 31 December 2015. 

3. Loss per share

Loss per share is calculated by reference to the loss for the year of USD 4,454,876 (2015: USD 4,604,356) and the weighted number of shares in issue during the year of 293,310,960 (2015: 272,935,389). There is no dilutive effect of share options or warrants.

4. Timetable and distribution of accounts

The Annual General Meeting will be held at 10 am on 6 July 2017 at the offices of BDO, 55 Baker Street, London W1U 7EU.

Copies of the Annual Report and Notice of the Annual General Meeting will be sent to shareholders by 12 June 2017.

Additional copies of the Annual Report and Accounts will be available, free of charge, from Central Asia Services Limited, 12 West Links, Tollgate, Chandler's Ford, SO53 3TG, for a period of 14 days from the date of posting and will be available on the Company's website - www.chaarat.com

Note to Editors:

About Chaarat Gold

Chaarat Gold is an exploration and development company operating in the Kyrgyz Republic with a large, high grade resource - the Chaarat Gold Project. The Company's key objective is to become a low cost gold producer generating significant production from the development of the Chaarat Gold Project. Chaarat is engaged in an active community engagement programme to optimise the value of the Chaarat investment proposition. 

Chaarat aims to create value for its shareholders, employees and communities from its high quality gold and mineral deposits in the Kyrgyz Republic by building relationships based on trust and operating to the best environmental, social and employment standards.

Further information is available at www.chaarat.com

 

END

 

 

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