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Chaarat Gold Hlgs Ld (CGH)


Wednesday 28 October, 2020

Chaarat Gold Hlgs Ld

Q3 2020 Production and Operational Update

RNS Number : 4065D
Chaarat Gold Holdings Ltd
28 October 2020

28 October 2020

Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

Q3 2020 Production and 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 30 September 2020 (the "Quarter", "Q3" or the "Period") for its Kapan Gold Mine ("Kapan"), in Armenia, progress at the Tulkubash Project and a general corporate update.




International powers continue to facilitate talks between Armenia and Azerbaijan to end the current escalation of hostilities in the region.

Political situation in Kyrgyz Republic stabilised with acting president and prime minister appointed.  Presidential and Parliamentary elections scheduled for early 2021.

Proactive COVID-19 management being applied at all of Chaarat's operations to minimise impact on operations.

Q3 operational results demonstrate stable production at Kapan since last year.

Quarterly production of 15,175 gold equivalent ounces (+8.7% vs Q2 2020). Chaarat remains on track to achieve full-year guidance.

Full-year guidance of AuEq 55koz maintained but kept under regular review given the ongoing COVID-19 pandemic and the current situation in Armenia.

Tulkubash bankable feasibility study and environmental and social impact assessment update expected before year end, incorporated to include significant drilling, construction, and environmental progress since last versions.

Tulkubash project finance continuing with further interest from banks received.



Update on our countries of operation



International powers continue to broker talks aimed at cessation of hostilities in the region.  Although the size of our workforce has been temporarily reduced as a consequence of the hostilities, overall operational impact has been limited thus far thanks to the efforts of our dedicated employees which have allowed the continued stability of, and minimal disruption to, our operations in the short term.  However, output in Q4 2020 could be affected should hostilities and its demand on our employees continue.


Kyrgyz Republic

The political unrest following the recent parliamentary elections in the country have not had any material impact on our operations. An interim government is in place, with Presidential and Parliamentary elections scheduled for early 2021.

The 2020 drilling programme was completed in September as planned. All assay results are expected by the end of October.



COVID-19 update


COVID-19 prevention measures remain in place at all Chaarat offices and sites. The Company is continuing to follow best practice to prevent our employees contracting or spreading COVID-19 in the workplace. These measures have been successful to date in minimising the number of cases at our sites, and operations were not impacted due to illness as a result. We will continue these practices to ensure we will be prepared for the winter season. We are continuing to work with our local communities to help them with their preparations for the upcoming season.



Q3 2020 Kapan Operational Highlights


Q3 had a total recordable injury frequency rate (TRIFR) per one million hours worked of zero (zero in Q3 2019). YTD there has been one lost time injury. TRIFR year to date is 0.47 which is comparable to the same period in 2019.

Production of 15,175 gold equivalent ounces1 ("oz"), in line with our forecast and also with Q3 2019 production of 15,240 oz1 (-0.4%) and continuing the positive trend since beginning of the year with an increase of 8.65% over Q2 2020 (13,967 oz).

Production consisted of:


8,177 ounces of gold;


150,767 ounces of silver;


578 tonnes of copper; and


1,825 tonnes of zinc.

Realised commodity prices in Q3 2020 were significantly higher compared to Q3 2019 positively impacting revenues and EBITDA.


Realised gold price of USD 1,937 /oz vs USD 1,484/oz in Q3 2019 (+30.5%)


Realised silver price of USD 24.6/oz vs USD 17.6/oz in Q3 2019 (+40%)


Realised copper price of USD 6,560/t vs USD 5,748/t in Q3 2019 (+14.1%)


Realised zinc price of USD 2,372/t vs USD 2,300/t in Q3 2019 (+3.1%)

All-in-sustaining cost ("AISC"2) of USD 1,192/oz was 7.8% higher compared to USD 1,106/oz for Q3 2019 due to timing effects in the capital expenditure programme.

Total tonnes mined were 171,107t versus 175,182t (-2.3%) in Q3 2019. The decrease was the result of higher tonnes mined in Q2 2020 which was a record period for Kapan.

Mine head grade was 2.81g/t AuEq versus 3.10g/t AuEq (-9.3%) in Q3 2019. Q3 2019 was exceptionally positive for mine head grade and was the highest since Chaarat has operated the asset. Q3 2020 grade is however consistent with performance for the last four quarters.

Mill throughput was 193,487t in compared to 182,521t (+6%) in Q3 2019. Throughput included 24,345t of 3rd party ore vs 4,350t (+560%) in Q3 2019.

Mill feed grade for Kapan ore was 2.84g/t AuEq vs 3.09 g/t (-8.1%) in Q3 2019.

AuEq recoveries were 79.5% compared 80.9% (-1.7%) in Q3 2019. Lower recovery was due to the lower feed grade and increased levels of oxidation in the ore treated in the quarter.

Underground development was 5,857 metres, similar to the 5,883 metres in Q3 2019(-0.4%).

Higher degrees of oxidation and pyrite levels in the areas mined impacted milling performance. Mineralogy work is being conducted to identify improved ways of treating this type of material going forward.

Copper concentrate sales were up 16.6% with 2,923 dry metric tonnes ("dmt") vs 2,507 dmt in Q3 2019. Zinc concentrate sales of 2,738 dmt for the quarter were down 4.4% vs 2,863 dmt in Q3 2019. Approximately 900 dmt of zinc concentrate is in transit to customers but is yet to be booked as sold.


1   Gold equivalent ounces based on gold price of USD 1,500/oz and gold ratios of 83 for silver (Au/Ag), 7,778 for copper (Au/Cu) and 20,968 for zinc (Au/Zn). Includes production of 24,345 t from third-party ore. Please note difference in price assumptions used to calculate gold equivalent ounces may lead to different numbers compared with those reported in the Q3 2019 press release.


2   AISC on a gold oz produced basis exclude smelter TC/RC charges, others which add c. USD 136/oz. Sustaining capex of c. USD 1,7 million in Q3 2020 is included in the AISC.



Kapan Outlook


Chaarat's YTD performance is on track to deliver on its AuEq 55koz guidance for the year, as previously set out in its FY 2019 Production, Operational and Financial Update on 19 February 2020. However, ability to meet guidance is dependent on the developments in country and the COVID-19 pandemic.

Q4 could be negatively affected if hostilities continue beyond the short term, and COVID-19 cases continue to increase at rates similar to those currently being seen in Europe.

Management is currently targeting higher grade areas in Q4 to offset potential lower capacity on the mining and milling circuits, should the hostilities continue.

Transport routes and concentrate shipments have seen no impact to date.

In terms of third-party ore, the mine has already achieved its 2020 target of treating 20,000t.  We anticipate that a minimum of 10,000t will be treated in Q4 2020, a 50% increase versus target, as of a result of the contracts secured earlier this year.



Tulkubash Construction Update


The 2020 drilling programme was completed in Q3 with assay results expected by the end of this month. This additional drilling will be included in this year's planned mineral resource estimate ("MRE") and ore reserves ("OR") updates. This year's construction season is now coming to an end.  Preparation works on the heap leach facility ("HLF") and haul road were undertaken, as well as the installation of first modules of the new employee accommodation units.


As well as revising the MRE and OR, Chaarat will be issuing updates to the Environmental and Social Impact Assessment ("ESIA") and bankable feasibility study ("BFS") to reflect the advances in detailed engineering, design construction, and the comprehensive environmental and social studies that have been carried out since the last reports were finalised (2017 and 2019 respectively).


The updated BFS and ESIA document are expected to be completed before year end based on the latest detailed engineering work completed and results from the updated 2020 MRE and OR reports. This will allow for a faster due diligence process on the project finance side as it reflects the current status of the project. Based on the information available to date, the conclusions of the updated BFS are expected to be similar to the 2019 BFS.



Tulkubash Project Financing


D espite the COVID-19 and the recent political events, the Company is further advancing project financing discussions with several international groups. Chaarat received two further non-binding term sheets in Q3 and is seeking to achieve the best solution to maximise shareholder value. Given the political situation in country, closing is expected in H1 2021.



Corporate Finance


As announced on 6 October 2020 (RNS 2680B), Chaarat has extended and refinanced its US$19.4 million investor loan plus US$1.1 million of accrued interest (the "Investor Loan"). As part of this debt refinancing, US$13.5 million of the Investor Loan has been assumed and extended to 31 December 2024 at 9.5% interest by Labro Investments Limited via a new facility with the Company. The US$7.0 million remaining under the Investor Loan continues with similar terms to the existing Investor Loan but with an option of being extended at Chaarat's discretion to 31 December 2021. However, it is Chaarat's intention to redeem the US$7.0 million by year end as it is in discussions with financing parties in order to repay this loan.


This successful refinancing has reduced Chaarat's funding cost until Tulkubash is expected to be producing significantly.

Chaarat has further reduced the Kapan acquisition financing by US$ 2 million with US$ 28 million now outstanding and the consolidated corporate debt reduced to US$ 67 million.


As part of Chaarat's overall finance strategy and as announced in the Company's interim results on 11 September 2020, the Company continues to evaluate all financing options in order to fund its corporate expenses and strategic initiatives, optimise the Company's capital structure, refinance existing facilities and/or reduce its overall cost of capital.



Artem Volynets, Chief Executive Officer, commented:

"The ongoing COVID-19 pandemic and events in our countries of operation have presented unprecedented challenges for Chaarat during this quarter. The safety of our employees, their families, and the communities in which we operate, remain our key focus during these difficult times. As well as this, we have been actively pursuing a number of measures with regard to the operational and financial stability of the business, to ensure we are in a robust position. In preparation for any possible operational disruptions during this quarter we are targeting higher grade ore at Kapan to offset potential lower capacity through the plant and to ensure that full-year guidance is met. In addition, we are continuing our advanced-stage discussions with financiers for our Tulkubash Project and during the current quarter we were successful in refinancing our Investor Loan. 


"I would also like to thank all of our employees for their outstanding efforts, which have been critical in keeping our operations as stable and successful as they have been to date.


Given the circumstances, it is an even more recognisable achievement that we were able to achieve a strong Q3 operational result and continued progress at our Tulkubash project allowing us to remain on track with our targets."





Chaarat Gold Holdings Limited

+44 (0)20 7499 2612

Artem Volynets (CEO)

[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

SP Angel Corporate Finance LLP (Joint Broker)

+44 (0)20 3470 0470

Ewan Leggat



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 Former Soviet Union through organic growth and selective M&A.

Chaarat is engaged in active community engagement programmes 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 by building relationships based on trust and operating to the best environmental, social and employment standards. Further information is available at .





Production Summary

Q3 2020

Q3 2019

Q3 2020

Q2 2020

Q1 2020

Tonnes ore mined (Kapan)






Tonnes ore milled (Kapan)






AuEq Grade (g/t)3 (Kapan)






Tonnes ore milled (3rd Party Ore)






Au Grade (g/t) (3rd Party Ore)






AuEq Recovery (%)






Gold equivalent (oz)













Gold production (oz)






Silver production (oz)






Copper production (t)






Zinc production (t)






Realised gold price (USD/oz)














3 AuEq calculated on 2020 budget prices based on gold price of USD 1,500/oz and gold ratios of 83 for silver (Au/Ag), 7,778 for copper (Au/Cu) and 20,968 for zinc (Au/Zn). Please note difference in price assumptions used in Q3 2019 press release may lead to different numbers.



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