TIDMCGH
RNS Number : 3891M
Chaarat Gold Holdings Ltd
21 January 2021
21 January 2021
Chaarat Gold Holdings Limited
("Chaarat" or "the Company")
FY 2020 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 2020 (the "Year", "2020" or the "Period").
The Company has exceeded its production guidance at its Kapan
Mine ("Kapan") in Armenia and made good progress on the development
of the business despite the COVID-19 pandemic, and earlier
cross-border hostilities in Armenia and protests in the Kyrgyz
Republic.
Highlights
Kapan Gold Mine
-- FY 2020 production guidance of 55 thousand gold ounces
equivalent ("koz") exceeded by 6%, finishing the year at 58.2 koz
despite the ongoing COVID-19 situation and hostilities in H2 of
2020.
-- Exceeded processing target of 50 thousand tonnes ("kt") for
third party ore by 17.8 kt (+36%) in 2020, contributing
significantly to exceeding the production guidance of 55 koz.
-- All-in-sustaining cost ("AISC"(2) ) of USD 1,034/oz was in line with USD 1,040/oz for 2019.
-- A 50% increase in unaudited preliminary stand-alone EBITDA
contribution of approximately USD 19 million at Kapan level in 2020
before group accounting adjustments and non-cash items (2019: USD
12.7 million).
-- Peace deal signed in November 2020 between Armenia and
Azerbaijan led to stabilisation in country resuming sooner than
expected.
-- Limited impact from the COVID-19 pandemic with effective
management protocols in place since February 2020 continuing at all
of Chaarat's assets.
Tulkubash Development Project
* Advanced the construction preparation work and
detailed engineering with close to USD10 million
invested in 2020 despite the COVID-19 restrictions
and political unrest in Q4.
* Successfully completed a 2,000-metre confirmatory
drilling programme which is currently being
implemented in an updated JORC-compliant resources
and reserve statement.
* Tulkubash bankable feasibility study ("BFS") and
environmental and social impact assessment ("ESIA")
updates are now expected in Q1 2021 and the Kyzyltash
planned drilling programme later in 2021 due to
prevailing COVID-19 constraints.
* Tulkubash project finance discussions further
advanced with several banks awaiting the Tulkubash
BFS and ESIA updates before proceeding to
documentation stage.
Kyzyltash Development Project
* Comprehensive internal review completed, and external
expert opinions received in June 2020 for the next
stages and overall timeline to production, confirming
the current preliminary timeline to 2026.
* Independent assessment on metallurgy completed to
help define the ideal processing route.
Corporate Activities
* Strengthened balance sheet in 2020 through a capital
raise, extension of liabilities, decrease of interest
cost and reduction in debt.
* Raised USD13.8 million of equity in April 2020 in the
midst of the first COVID-19 pandemic.
* Continued strong support from major shareholder Labro
Investments Ltd. ("Labro") through participation in
the equity raise and the refinancing of the investor
loan into a new USD22 million facility maturing on 31
December 2024.
* Decreased average interest cost from 10.9% to 9.7% as
a result of refinancing and reduction in debt going
forward.
* Diversified the shareholder base with further
high-net-worth-individuals and retail shareholders.
* Reduced total debt from USD76.2 million as at 31(st)
December 2019 to USD70.5 million as at 31(st)
December 2020, primarily as result of reducing the
Kapan acquisition loan by USD8 million from Kapan
cash flows.
Outlook 2021
* Kapan - mine production guidance of 57 koz(3)
including treated third-party ore of 50 kt during the
year.
* Tulkubash - subject to further COVID-19 delays,
project financing expected to close in H1 2021
enabling the Company to utilise some of the 2021
construction season.
* Kyzyltash - drilling programme with metallurgical
test work during 2021 for the optimal processing
route decision by end of the year.
* Corporate - Chaarat will continue to appraise M&A
opportunities matching the target criteria and review
its existing balance sheet structure with a view to
further reducing its interest cost and improving the
balance sheet structure.
Update on our countries of operation
Armenia
On 27(th) September military action started in the
Nagorno-Karabakh region, 150km away from our Kapan operation and
lasted for more than a month. On 9(th) November, a peace deal
brokered by Russia was agreed between Azerbaijan and Armenia in
relation to the Nagorno-Karabakh region and Russia deployed
resources to keep the peace in the region for an initial period of
five years.
The situation in country is stable and people are back to their
normal lives following the cessation of hostilities in November.
The Company's precautionary measures in relation to the situation
and actions taken resulted in a limited operational impact on the
2020 performance but reduced the required development in the mine
that will impact Q1 2021 production. As a result, it is expected
that the output in Q1 2021 will be lower than previous quarters'
due to development lead times at the mine, although full-year
production is expected to be 57 koz Au Eq.
Kyrgyz Republic
In early October 2020 democratic elections were held in the
Kyrgyz Republic followed by protests concerning the election
results. Fortunately, these political disruptions following the
elections have not had any material impact on our operations. The
political situation in Kyrgyz Republic stabilised rapidly
culminating in a new president being elected in January 2021 and a
new government to be formed within the coming weeks.
COVID-19 update
COVID-19 prevention measures were implemented in February 2020
and 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 significantly
impacted due to illness as a result. We will continue these
practices to ensure preparedness during this 20/21 winter season
and any future surges in cases in our countries of operation. We
are continuing to work with our local communities to help them with
their activities.
Kapan Mine ("Kapan")
-- Lost time injury frequency rate ('LTIFR') of 0.37 (per
one million hours worked) versus 0.39 in 2019 (-5.1%).
Since taking ownership in January 2019, there have been
two Lost Time Injuries ('LTI'), still significantly below
the 4.17 five-year average LTIFR of the 27 members of the
International Council of Metals and Mining (ICMM); Kapan 2020 2019 % Change
Production (oz AuEq) 58,178 56,513 +3
-------- -------- ---------
All-in sustaining
cost (USD/oz) (1) 1,034 1,040 -0.6%
-------- -------- ---------
55,255
Sales (oz) 48,387 oz -12%
-------- -------- ---------
Gold production (oz) 30,837 32,791 -6
-------- -------- ---------
Silver production
(oz) 587,718 557,001 +6
-------- -------- ---------
Copper production
(t) 2,154 1,719 +25
-------- -------- ---------
Zinc production (t) 7,625 6,476 +18%
-------- -------- ---------
Realised gold price
(USD/oz) 1,773 1,413 25%
-------- -------- ---------
Realised silver price
(USD/oz) 20.4 16.4 24%
-------- -------- ---------
Realised copper price
(USD/t) 6,117 6,008 +2%
-------- -------- ---------
Realised zinc price
(USD/t) 2,222 2,444 -9%
-------- -------- ---------
-- Gold equivalent production up 3% to 58,178 gold equivalent
ounces ("oz") from 56,513 oz in 2019 and above the 2020
guidance of 55,000 oz (+6%) due to improved grades in Q4
2020 and more third-party ore treated than budgeted.
-- All-in-sustaining cost ("AISC" (2) ) of USD 1,034/oz was
in line with USD 1,040/oz for 2019.
-- Total tonnes mined were 684,156t in line with 678,382t
(+0.8%) in 2019.
-- Mine head grade was 3.03g/t oz versus 2.93/t oz (+3%) in
2019. Mine schedule and shift changes were made to mining
in Q4 to adjust for the number of people called up for
military service. Lower tonnes were mined but with higher
grade.
-- Mill throughput was consistent at 744,705t compared to
742,402t (+0.3%) in 2019. Throughput included 67,838t of
third-party ore vs 8,543t (+794%) in 2019.
-- Mill feed grade for Kapan ore was 3.03g/t oz vs 2.92g/t
oz (+ 3.8%) in 2019.
-- Kapan ore recoveries were 79.9% compared 81.4% (-1.8%)
in 2019. Higher degrees of oxidation and pyrite levels
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.
-- Underground development was 21,985 metres, slightly lower
than the 23,136 metres in 2019 (-5%) as a result of the
hostilities in Q4 temporarily reducing the workforce.
-- A 50% increase in unaudited preliminary stand-alone EBITDA
contribution of c. USD19 million at Kapan level in 2020
before group accounting adjustments and non-cash items
(2019: USD 12.7 million).
-- The unaudited preliminary stand-alone EBITDA contribution
at Kapan has improved from USD 4.2 million in H1 2020 to
c. USD 14.8 million in H2 2020. The strong second half
performance was supported by the strong gains in precious
and base metals prices realising an average gold price
of USD 1,905/oz in H2 2020 versus USD1,665/oz in H1 2020
(+14%).
(1) AISC on an oz produced basis exclude smelter TC/RC charges,
others which add c. USD$ 130/oz. Sustaining capex of c. USD$ 6.9
million included in the AISC.
(2) Gold equivalent ounces for 2019 recalculated on 2020 budget
prices with Au at $1,500/oz and gold ratios of 83 for silver, 7,778
for copper and 20,968 for zinc. In last years' FY 2019 operations
update, 2019 oz were based on gold ratios of 81 for silver, 6,698
for copper and 16,075 for zinc leading to a higher AuEq number
reported in that previous year.
(3) Gold equivalent ounces for 2021 calculated on 2020 budget
prices with Au at $1,500/oz and gold ratios of 83 for silver, 7,778
for copper and 20,968 for zinc for comparison. 2021 AuEq based on
2021 budgeted prices will be 55.8 koz based on gold ratios of 88
for silver, 8,656 for copper and 23,443 for zinc.
Tulkubash
Construction Update
Construction in 2020 was slowed down due to the COVID-19
pandemic and from October 2020 onwards due to the political
disruptions in the country. Nevertheless, early construction led by
equity and construction partner Çiftay progressed to the extent
possible with approximately USD10 million of investment made
progressing project engineering and initial construction. Overall,
a number of activities were completed in 2020 which will support a
quick resumption of construction activity in 2021:
-- Completion of additional 80 bed temporary construction camp facilities
-- Continuation of ore haul road and platforms construction
-- Construction of bridge (from concrete culverts) over Kumbeltash stream
-- Finalisation of Issued for Construction (IFC) Detailed Design
Drawings for heap leach facility ("HLF")
-- Tree cutting in Dry Valley (HLF and process facilities)
-- Partial delivery of Phase 1 of shift camp
-- Delivery and storage of waste-water treatment plant ("WWTP")
The shortened 2020 drilling programme, comprising 2,000 meters,
started in July, and was successfully completed in October. This
additional infill drilling targeted increasing confidence in the
ore body and follows more conservative international best practice.
The results will be included in the upcoming mineral resource
estimate ("MRE") and ore reserves ("OR") updates. The construction
season focused on planned preparation works on the HLF and haul
road as well as the installation of first modules of the new
employee accommodation units.
The updates to the Environmental and Social Impact Assessment
("ESIA") and bankable feasibility study ("BFS") have been delayed
due to COVID restrictions mainly driven by delays caused by
external parties affected by COVID-19 related travel policies and
office restrictions. The studies will 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).
Preparations are underway to optimise work for the 2021 season
dependent on the project finance timing. The updated BFS and ESIA
documents are expected to be completed in Q1 2021 and are the key
outstandings for the project finance discussions. Based on the
information available to date, the conclusions of the updated BFS
are expected to be similar to the 2019 BFS.
Project Financing
While the COVID-19 situation impacted the decision-making
process for all banking groups earlier in the year, the Company has
managed to further advance its project financing efforts in 2020
having received three non-binding term sheets. As of year end,
discussions were in detailed due diligence stage awaiting the BFS
and ESIA update to complete due diligence efforts.
Chaarat is working to implement a debt facility that will fully
fund construction and bring the asset into production. It is
envisioned that the debt facility will comprise standard project
finance clauses regarding customary conditions precedent to
closing, including the requirement for the Company to contribute an
amount of equity to the project. This equity amount will be funded
through a combination of resources provided through the Çiftay
partnership, together with other funding alternatives the Company
is exploring.
The Tulkubash construction Capex of USD110 million will be fully
funded once the project finance is closed and based on discussions
with potential lenders it is expected that the financing facilities
will be concluded in H1 2021.
Corporate Finance Update
In 2020, Chaarat focused on improving the balance sheet with
successful initiatives to increase liquidity, refinancing of and an
overall reduction in debt.
In the midst of the COVID-19 pandemic first wave, Chaarat
completed an equity raise of USD13.8 million within the target
range of USD13-14 million and with confirmed support from existing
shareholder including Labro and other significant shareholders
committing further funds but also attracting new
high-net-worth-individuals and retail investors to the shareholder
register.
On the debt side, Chaarat successfully refinanced its maturing
investor loan of USD19 million with Labro at a reduced interest
cost of 9.5% versus the 14% on the investor loan. The overall
interest cost of the business was reduced from 10.9% to 9.7% in
2020 going forward. At the same time the maturity on the loan was
extended to 2024, when the Tulkubash project is expected to be in
full production. This refinancing further simplified the debt and
security profile outstanding providing further flexibility on the
balance sheet for the next years. In 2021, the only maturing debt
is the convertible loan with a conversion price of GBP 37 (October
2021).
Overall, the principal debt outstanding was reduced to USD70.5
million as of 31(st) December 2020 from USD76.2 million as of
31(st) December 2019. The Kapan acquisition loan of initially USD40
million was reduced to USD28 million outstanding, of which USD8
million was repaid in 2020, delivering on the agreed amortisation
schedule with AmeriaBank.
In 2021, the Company is planning to further optimise its balance
sheet, retaining an opportunistic approach to refinancing at
favourable terms and funding the Tulkubash project and Kapan East
Flank extension in order to maximise shareholder value.
Environmental, Social and Governance ("ESG")
Due to COVID-19, 2020 was in many ways a very different year to
those before. It was about putting the welfare of our employees,
our communities, and our key stakeholders first and foremost. As a
priority over other ESG initiatives, we worked with local health
care professionals and community groups to target providing
COVID-19 support to the most needed areas and also implemented
strict guidelines and measures to protect our employees,
communities, and other stakeholder from getting infected.
During the cross-border unrest in Armenia, Kapan's social aid
program was adjusted to provide support to various charities
carrying out humanitarian work such as providing food and shelter
to people displaced by the hostilities. A welcome initiative with
presents to the children arriving from the Nagorno-Karabakh region
to Kapan helped to integrate them into the community despite the
COVID-19 restrictions.
In financial terms, Chaarat has spent approximately USD 0.7
million for social and community support in 2020.
Chaarat will provide a more comprehensive update on our ESG
activities in our ESG report expected to be published around the
same time as the annual report.
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 2020
in April 2021.
Artem Volynets, Chief Executive Officer, commented:
"I am pleased to report that we exceeded our 2020 production
guidance at Kapan despite the challenges presented during the
year.
The ongoing COVID-19 pandemic and events in our countries of
operation have presented unprecedented challenges for Chaarat in
the period under review. In addition, a low commodity price
environment in H1 2020 had its impact on our first half performance
but the strong rebound in prices in H2 2020 supported the strong
performance overall despite the unrest in Armenia.
Thanks to the outstanding efforts of our employees, we continue
to deliver on our Kapan development plan and the mine has shown
stable production levels for almost two years running.
Construction progress at Tulkubash was heavily impacted by the
COVID-19 movement restrictions leading to a shift in first gold
pour date as previously reported. The hiatus did provide time to
carefully and conservatively assess the project to ensure its
robustness. The emphasis of 2021 will be to ramp up construction on
Tulkubash but also be to progress work on Kyzyltash to create
substantial long-term value for Chaarat shareholders.
Chaarat will continue placing great importance on sustainable
development and social investment programmes in the countries in
which we operate. We truly believe that respectful and open
dialogue and partnership with local communities is essential for
the long terms success of our operations."
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
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
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/ .
2020 PRODUCTION & OPERATIONAL SUMMARY
Production Summary
2020 2019
Tonnes ore mined (Kapan) 684,156 678,382
Tonnes ore milled (Kapan) 676,867 733,859
AuEq Grade (g/t)(3) (Kapan) 3.03 3.23
Tonnes ore milled (Third-Party
Ore) 67,838 8,543
Au Grade (g/t) (Third-Party
Ore) 5.86 4.70
AuEq Recovery Kapan (%) 79.9 81.4
Gold equivalent (oz)
Production(,4) 58,178 56,513
Incl. from Third-Party
Ore 5,512 650
Sales(4) 48,387 55,255
Gold production (oz) 30,837 32,791
Silver production (oz) 587,718 557,001
Copper production (t) 2,154 1,719
Zinc production (t) 7,625 6,476
Realised gold price (USD/oz) 1,773 1,413
AISC (USD/oz) 1,034 1,040
(4) 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 2019 press release may lead to
different numbers.
END
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