Chaarat Gold Share Discussion Threads

[jc2706] 25/5/2018 11:26

All possible and I agree that Tulkubash is currently challenging as a standalone mine even though I am pretty confident it would be a very good one! The main issue is that they shifted from 60K oz production to 100k oz. This meant that the capex went up considerably whilst the reserves were insufficient to cover this for many years. Ergo the FS projected a very poor NPV and IRR. The 100k oz production rate, however, is the longer term 'right' level for the ore body (ultimately I suspect it could even produce more) so, again long term, the capex would be well spent. However, no financier is going to accept a wink and a nod on this, hence the extensive exploration programme.

So, I think that we are agreed that Tulkubash will be delayed either because they can't raise finance on the current BFS and need a substantial amount of drilling to increase the resource/reserves (the aim of the current drill campaign) OR they will be engaged in M&A activity that will ultimately fund Tulkubash but will be the focus of attention for some time before Tulkubash can be initiated.

You suspect that what they would like to do is take Kumtor on, bed it down whilst the drilling campaign doubles/triples the reserves at Tulkubash (I am confident it will) and then use the cash flows of Kumtor to support development and further M&A both directly and through leveraging the asset.

All depends on the attitude of the financial backers but I suspect that they would want a producing asset and/or increased reserves at Tulkubash before supporting the project.

[casual47] 25/5/2018 10:28

The fairly recently (and suddenly?) announced M&A startegy, which emerged around the time of the BFS being finalised and just before they were expected to announce project financing for Tulkubash, seems to me to be pointing to a realisation that Tulkubash on its own is not viable at the moment -- this possibly was the feedback from their financing advisor, Endeavour Finance.

While Tulkubash is perhaps a liability as a single mine, it becomes an asset if you have enough free cash flow from solid assets to (1) secure and service any debt and (2) bootstrap Tulkubash into development and production (not forgetting in addition to FCF: the important backup of a shareholder base to be able to call upon if needs be).

Clearly they now have an A* management team with stunning contacts within the industry, finance and government and as Artem Volynets keeps saying: the whole region is screaming for consolidation.

But this is my thinking atm: I cannot see Tulkubash being brought into production without accretive M&As. Mgt has projected starting Tulkubash Q1 2019, if they miss that target it could seriously deflate the balloon they have so skillfully filled with hot air recently. This is why I think we will see action sooner than later. If not Kumtor then other mines.

I'm thinking weeks from now.

If I was on the BOD and I knew Kumtor would not happen then I would want to have something concrete to announce plan B-wise before the suspension is lifted.

[casual47] 25/5/2018 08:55

If CGH doesn't win Kumtor and then proceeds to just raise funding 100% for Tulkubash then wouldn't that make an M&A at a later time more difficult as they may already be quite heavily leveraged/diluted, not to mention at a very high risk phase of mine development?

[jc2706] 25/5/2018 07:59

I don't think that this is necessarily the case although access to cash flows would make the whole process much easier. I agree that a Kumtor deal has many steps to complete and will take some time. The same is true of other M&A targets, depending on the share structure (e.g. publicly quoted, subsidiary, part government ownership).

CGH have the management bandwidth to advance Tulkubash and will continue doing so. The issue is finance and it will be interesting if they can raise the necessary capital to bring it into production based on the BFS alone. I suspect not as it was extremely limited, the problem being reserves. This is where they need to focus efforts to improve mine life.

Of course, you could argue that Tulkubash may be delayed in either case. If Kumtor succeeds that will be the priority (obviously!) and Tulkubash will likely get less attention and progress reduced. If Kumtor doesn't go ahead then they will need finance for a project that most financial companies will consider marginal and too great a risk.

Whatever the case, there is no doubt that CGH have moved onto a new path and will be perceived differently from the market from here on.

[casual47] 24/5/2018 13:36

I think in any case it appears starting on Tulkubash is contingent on CGH completing a first M&A which will give them cash flow?

No M&A = No Tulkubash?

[casual47] 24/5/2018 13:29

If CGH wanted to complete an M&A, either the Kumtor deal or whatever plan B is (a string of smaller mines?), by end of this year then I presume they need to get started on it soon-ish?

E.g.
-There'll be a need for an EGM for CGH and probably Centerra to give "go"
-possibly similar process in Kyrgyzstan e.g. vote in parliament?
-Due diligence and formal contract negotiations
-Share issue, possibly via the lengthy-ish rights issue process? Possibly listing on TSX and the whole process that comes with that.
-Raising debt

The whole process could easily take up to 6 months?

Fair to say if no progress by end of June either the Kumtor deal is dead or it will carry on until q1 2019 or plan B kicks in?

[jc2706] 24/5/2018 10:33

Wow! That's pretty hard hitting stuff.

[casual47] 24/5/2018 09:52

Yikes, a hit piece on Centerra in today's local press:



It ends with:

"The strategy of "Centerra" is understandable: to tighten negotiations and continue to pump money from Kyrgyzstan on unfair terms. Does the people and the government of Kyrgyzstan want this?"

[casual47] 23/5/2018 19:37

Another charm offensive by the Chaarat team, this time for the locals, published today:

"Davron Vahabov, General Director of Chaarat Gold Holdings Limited, told "April" TV channel about difficulties in starting work, successes achieved and plans for the future."



There is a 12 minute video of the interview -- in Russian. You can use Youtube's auto subtitle+translate function to get the gist of things.

Here's a direct link to the video:

[juju44] 23/5/2018 12:22

Well it certainly is developing into a dream .Gone are the Golen days of failure

[casual47] 23/5/2018 11:01

Business often is about selling the dream. The Chaarat team seem to be good at it. There's excitement and a certain frisson surrounding the company now. With some luck this will snowball into something pretty good.

[casual47] 23/5/2018 10:51

The Chaarat team are turning it up to 11 news wise:

(replace the zeroes with o's)

Chaarat Gold has ambitious plans to become a major regional player in Central Asia
4-5 minutes

“The idea is to consolidate the fragmented gold sector in Central Asia,” says Artem Volynets, the man tasked with directing the M&A strategy of Chaarat Gold Holdings Ltd (LON:CGH).

He’s fairly new on to the board of Chaarat, appointed earlier this year, and the latest arrival in the clean sweep that’s been initiated by chairman Martin Andersson.

Over the past year or so, change at the top has seen the appointment of Rob Benbow as chief executive officer, of Dusty Nicol as non-executive director with a brief for exploration, of Peter Carter as chief operating officer and Pete Gardner as chief financial officer.

Volynet’s arrival as chief deal-maker completes the set, and it hasn’t taken him long to make his first move.

In April Chaarat tabled an unsolicited offer for the Kumtor gold mine, a major producer in Kyrgyzstan owned by Centerra Gold (TSE:CG).

Centerra didn’t exactly rush to engage with Chaarat once the offer was announced, but that may not be the deciding factor.

Much more important is the attitude of the authorities in Kyrgyzstan, and here Volynets and Chaarat bring something extra to the table.

The plan isn’t just to get hold of Kumtor and its large cashflows. The plan also involves reinvesting those cashflows into the Kyrgyzstan gold mining sector to acquire and build new mines. That type of inward investment for a country that isn’t overflowing with foreign capital has major attractions to legislators, and may trump any resistance that Centerra cares to put up.

It’s noteworthy, for example, that a Kyrgyz investment forum to be held in London next week is to be jointly hosted by the Kyrgyz embassy and Chaarat.

Why is Volynets confident that Chaarat, capitalised at around £90mln in London, can effect the takeover of the flagship asset of a C$2bn Canadian company/

The answer lies in his background as a financier working for, amongst others, Rusal.

“I’ve done a number of big transactions,” he says.

“I’ve closed US$30bn worth of deals. I was head of strategy at Rusal when we listed it on the Hong Kong stock exchange. I established key relationships while I was working for these large companies we borrowed maybe US$18bn from banks.”

This is not your standard modus operandi for the director of a junior mining company, and clearly to speaks to where Chaarat is going rather than where it’s been.

No wonder Pete Gardner, widely recognised as one of the leading up and comers in the UK mining sector, was so quick to jump on board. Before Andersson had completed his board restructuring Gardner’s move looked slightly odd. Now, it makes complete sense.

Chaarat is no longer focussed on convincing investors it can make a go of the Tulkubash project, often cited as being in difficult terrain. Rob Benbow put paid to those doubts with a simple comparison to British Columbia, which is also mountainous and also plays host to several major gold mines.

With this new board of directors the challenges of Tulkubash look much more manageable.

But Volynets’ play for Kumtor in any case transforms the outlook for Chaarat. Tulkubash still looks good, but next to Kumtor it will definitely be playing second fiddle. And Volynets doesn’t plan to stop with the acquisition of Kumtor either. He plans a string of deals right across central Asia.

“The sector is very large, probably the second largest in regional terms.”

Even so, no major gold miner is, yet, centred in Central Asia. Even the Russian challengers are second rank.

“Polyus production is 1.8mln ounces,” says Volynets. “Polymetal is 1.4mln ounces. Compared to the western giants these are mid-sized.”

So there’s an opportunity to create something significant, and at a decent price. The thirty or so smaller companies and projects that are in the region are all making money, as Volynets explains.

“They have their sales in dollars and their costs in local currencies,” he says.

“But most are priced on equity markets at a discount because of the perceived political risk. The idea is to use this window of opportunity, because there are a lot of assets around and not many buyers.”

Kumtor is the first move. It won’t be the last.

“We have a thick deal pipeline,” says Volynets. “Kumtor is just one that became public. There are plenty of other assets in the pipeline.”

[greenlane1] 23/5/2018 09:55

Here we go;
The Prime Minister met with the executive director of the company "Centerra Gold Inc." Scott Perry
Muhammadkaly Abylgaziev today, May 22, met with the executive director of the company "Centerra Gold Inc." Scott Perry.

During the meeting, the parties discussed issues related to the Strategic Agreement signed on September 11, 2017.

The head of the government Muhammadkaliy Abylgaziev noted that thanks to the Kumtor project, which forms the core of the assets of Centerra Gold Inc., it is one of the world's largest mining companies.

"The government realizes the significant role of the Kumtor project in the country's economy. It is also worth noting that this project attracts public attention and all the negotiations of the parties and the decisions made should be transparent and in the public interest. And we welcome the steps taken by the management of Centerra Company to create a transparent project management system for Kumtor and expand the scope of environmental protection financing. At the same time, it is necessary to achieve certain progress in the issues of environmental protection and social partnership within the framework of the investment project, "Muhammadkaliy Abylgaziev emphasized.

In turn, the executive director of the company "Centerra Gold Inc." Scott Perry said that he will make every effort to bring the position of the Kyrgyz Republic and the Board of Directors closer together.

[gorsuch] 22/5/2018 23:08

Apparently the prime minister of Kyrgyzstan met with Scott Perry CEO of Centerra on 16th May.

Unfortunately I can't read the article because you need to subscribe first.
hxxps://akipress.com/news:606762

[jc2706] 22/5/2018 21:58

More than likely owing to the price of gold than the offer. If anything the initial reaction was positive.

[casual47] 22/5/2018 17:35

Centerra is down about 8% since the Chaarat offer was first leaked.

[casual47] 22/5/2018 12:11

This is basically the same article but it has a paragraph on the backdrop of the deal:



"Kyrgyzstan and Centerra Gold Inc. signed the Strategic Agreement on Environmental Protection and Development of Investments. Under the agreement, Kumtor will annually transfer $ 6 million to the recultivation fund. The minimum amount of these funds should reach $ 69 million, and in the future the funds should be transferred from a British bank to Kyrgyzstan. However, the public was displeased with this agreement, it was said that the former prime minister Sapar Isakov , who signed the agreement, should be brought to criminal responsibility."

The government will have to take into account the disquiet about the deal when (if?) they reach the conclusion to this.

Centerra may have to make an extra effort to assist in this.

All of this doesn't do the Chaarat proposal any harm: a 'white knight' without any controversial history who is ready to give the country 50% of their asset and who is asking for a transparent discussion at all levels so that the people can come to the right decision.

[casual47] 22/5/2018 10:33

A first tidbit regarding the 31st May deadline:



Interesting to note the president's comment about need for transparency - somewhat echoing what Chaarat said re. Kumtor bid. But this has possibly more to do with the general dissatisfaction of how things were done previously with the president keen to at least be seen to be acting transparently.

I don't know what exactly still needs to be agreed between the Kyrgyz government and Centerra but thanks to Chaarat you'd think the government has a lot more leverage now than it had before the Chaarat bid.

Even if Chaarat doesn't pull off the Kumtor deal then you'd think they might nevertheless have earned themselves a few brownie points?

[casual47] 21/5/2018 17:25

There are certainly things being orchestrated. For example, the 'source' of today's article was an anonymous post on which is a site anyone can post things on. So, someone went to the effort of doing that and then that prompted various news sites to pick it up, e.g. vesti.kg

It almost has something amateurish about it. Let's hope behind the scenes Chaarat is busy talking to Blackrock and Kyrgyzaltyn as those are the folk that need to be convinced.

As to why Centerra BOD hasn't given a further update: perhaps this is shaping up to be a hostile takeover?

A first sign of things to come could be what happens to the deadline that Centerra has (31st of May).

[retirement_fund] 21/5/2018 16:53

Great finds! There certainly seems to be a lot of activity and influencing going on behind the scenes and I am becoming increasingly confident that Chaarat can pull this off. The only worry I have is the lack of formal update from Centerra (since their initial statement that they weren't interested).

[casual47] 21/5/2018 16:26

Not sure if coincidence but the Kumtor Twitter account tweeted the below a couple of hours after the news article that I posted earlier was published. I see from their Twitter "following" that they are following the news outlet which had a link to the article so could be a reaction.

The image is in Russian but it seems a snapshot of what Kumtor is contributing to the Kyrgyz economy. The big number top left is Kyrgyzaltyn's shareholding.

Check out @KumtorKG’s Tweet:

I don't know who owns this Twitter handle but could be Centerra PR.

[casual47] 21/5/2018 14:35

If Chaarat can pull this off and not mess it up down the line then I imagine they will get loads of goodwill from the locals for "bringing home" Kumtor to them. Successive governments talked about it and never delivered. Whatever the rights and wrongs of it the perception that Kumtor was stolen from them, aided and abetted by government officials, has only gained in strength.

[casual47] 21/5/2018 12:01

Note: this agreement was done by the previous administration and was even at the time pretty controversial.

[casual47] 21/5/2018 11:41

Van Eck is the third biggest shareholder of Centerra at around 8.65%. (According to morningstar)

Surely if both Kyrgyzaltyn and Blackrock (together 39%) are in favour of the deal then it is game over for Centerra?

Another thing to keep an eye on: May 31st is a deadline for Centerra to fulfil an agreement with Kyrgyz government:

TORONTO, April 20, 2018 (GLOBE NEWSWIRE) -- Centerra Gold Inc. (TSX:CG) announced today that it has agreed with the Government of the Kyrgyz Republic to extend the First Longstop Date under the Strategic Agreement for Environmental Protection and Investment Promotion previously entered into with the Government of the Kyrgyz Republic on September 11, 2017. The First Longstop Date is the date by which all conditions precedent to the completion of the Strategic Agreement are required to be satisfied and it has been extended by agreement of the parties from April 20, 2018 to May 31, 2018.

More here:

[pjackson2] 21/5/2018 11:39

Still suspended is a positive
in my opinion.something must
be happening.