TIDMCGH
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.
Highlights
-- 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
Armenia
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 ounces (1) ("oz"),
in line with our forecast and also with Q3 2019 production
of 15,240 oz(1) (-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."
Enquiries
+44 (0)20 7499
Chaarat Gold Holdings Limited 2612
Artem Volynets (CEO) info@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
SP Angel Corporate Finance LLP (Joint +44 (0)20 3470
Broker) 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 www.chaarat.com .
Q3 2020 PRODUCTION & OPERATIONAL SUMMARY
Production Summary
Q3 2020 Q3 2019 Q3 2020 Q2 2020 Q1 2020
Tonnes ore mined (Kapan) 171,107 175,182 171,107 182,813 178,144
Tonnes ore milled (Kapan) 193,487 182,521 193,487 189,702 175,948
AuEq Grade (g/t)(3) (Kapan) 2.84 3.09 2.84 2.87 2.89
Tonnes ore milled (3(rd)
Party Ore) 24,345 4,350 24,345 10,127 0
Au Grade (g/t) (3(rd)
Party Ore) 5.86 4.70 5.86 3.43 0
AuEq Recovery (%) 79.4 83.1 79.4 81.0 79.5
Gold equivalent (oz)
Productium(3) 15,175 15,240 15,175 13,967 12,992
Sale(3) 13,227 14,617 13,227 10,814 15,672
Gold production (oz) 8,177 8,849 8,177 7,067 6,656
Silver production (oz) 150,767 163,174 150,767 131,185 130,366
Copper production (t) 578 468 578 506 455
Zinc production (t) 1,825 1,629 1,825 2,111 1,886
Realised gold price (USD/oz) 1,932 1,472 1,932 1,736 1,565
AISC (USD/oz) 1,192 1,106 1,192 1,148 1,061
(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.
ENDS
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