Chaarat Gold Hlgs Ld

Q1 2022 Operational Update

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 ounces1 ("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 Debt3 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.

  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:

8,721 ounces of gold;

138,257 ounces of silver;

481 tonnes of copper; and

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

[email protected]

 

 

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/ .

 

 

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

 

 

ENDS

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