Chaarat Gold Share Discussion Threads

[casual47] 11/7/2018 14:29

An acquisition that is reasonable (e.g. not crazy dilutive, good enough cash flow to service debt and afford more drills) would be a considerable milestone as it would demonstrate they can achieve stuff.

[casual47] 11/7/2018 14:16

They said 15m but possibly 20m based on interest from investors. If they would get 20m they would ramp up drilling more this year, if not then scale that back.

But yes, having that as the only concrete financial achievement is not great.

That said, they have a written undertaking from one of Russia's biggest banks to help finance the purchase of Kumtor.

[gorsuch] 11/7/2018 14:05

I thought they originally wanted to get 20mil, but as it turned out just getting hold of the 15mil was a mammoth task for the BOD.

[casual47] 11/7/2018 13:53

Talk of finance for bringing Tulkubash into production was a lot more bullish and prominent last year, though with every presentation the target got pushed back to then be quietly pushed in the long grass and completely be subordinated to the M&A talks.

I think Martin may have adjusted his strategy based on the realities he was faced with.

E.g. the hiring of top notch mining executives could have been because of feedback from Endeavour project financing folk saying it would help with the financing piece.

Then, when the BFS was finalised he was faced with the 3.75yr LOM and reduced reserves so he may have been advised nobody would invest based on that so he looked into how to proceed.

For sure Artem must have been operating in the background for a while and maybe they even knew each other. Artem is a purebred salesman and may have done a bit of a sales job on Martin which could explain his increasing prominence even while still a director.

All this boils down to my one worry, often shared here: since Martin joined there has been no lack of bullish optimism, so much that they even went for Kumtor. Yet, unless they actually do something all this bullish stuff is just an -ish from bull.

The only actual bankable achievement under Martin's stewardship has been the $15m secured loan, which pays for the drills this year but not much more. A $15m secured loan is not a huge milestone achievement and does not prove they can really pull this off.

[jc2706] 11/7/2018 13:26

casual47,

It is unclear to me whether the spacing on the drill holes is adequate for upgrading the reserve. If you look at the drill map, the numbering seems to coincide with metres, which suggests that the new resource drilling (i.e. outside the current resource area) is spaced at 80m. From other reserve delineation drilling I have come across, the suggestion has been that 50m spacing is more normal. The spacing inside the resource area appears to be more tightly spaced (40m spacing?), which suggests that this is the area that they are converting to reserves.

So, from this I would expect the existing resource area to see some upgrade in reserves whilst the new areas will only define resources. The current reserve is 470k oz. This needs to increase by at least 50% I believe. The existing resource could manage this but it is unclear whether the 2018 drilling programme is sufficient for that. From what I have seen of the planned drilling I would suspect not but that may not be all the drill holes undertaken and I am sure they understand the importance of getting there.

Whilst I think that the M&A process has been a part of our Chairman's thinking for some time, I suspect that the approach has been ignited by the new CEO. It is a goal of itself but there is little doubt that the potential for advancing Tulkubash is significant.

[casual47] 11/7/2018 12:41

JC - yes, though with the drilling planned this year should be soon?

When do you see us reaching 7yr LOM? By end of September, Q1 2019, or only after 2019 drilling season?

Having an M&A done and dusted by Q3 this year will of course remove any short term pressure on financing and give them enough time to shore up the Tulkubash reserves to elephantine proportions.

[jc2706] 11/7/2018 12:19

casual47,

In my experience of gold miners, 7 years is usually the key figure. Beyond this and the figures make less and less impact on the NPV and IRR figures. Below this and the impact on these figures is so great that it suggests an uneconomic project, such as we have seen with Tulkubash. This project is undoubtedly worth way more than was suggested in the recent study but the reserves did not support this. In comparison, HUM had a preferable reserve for LOM.

[casual47] 11/7/2018 11:07

No update yet. Could be few months yet.

[eentweedrie] 11/7/2018 11:02

any update as to when the suspension is over here

[casual47] 11/7/2018 10:23

That said, it seems an M&A which will provide cash flow to bootstrap Tulkubash would be the most cost-effective and least dilutive approach?

[casual47] 11/7/2018 10:04

Another share I'm in, HUM, managed to get into production (~110k oz/pa) off the back of a LOM of less than 10 years but with confidence they can quickly increase that with more drilling.

So....while unusual, having a short LOM is not necessarily a barrier to funding if the confidence and management is there.

[jc2706] 11/7/2018 09:27

The scale of this is incredible. 8 drill rigs on site and 30km of drilling this year. Look at what they are drilling - it is as large an area as the existing resource boundary and, judging by the results (and, not insignificantly, their confidence), it is clear that this will increase the resource substantially just based on this year's drilling. I would not be at all surprised to see that resource upgrade in Q4 of this year but you suspect that it will depend on what comes out of segment V which they are so optimistic about.

As usual with these things, it is what is alluded to that peaks the greatest interest - segment VI cannot even be seen on the map provided but sounds as though it is more of the same as segment V. It will be interesting to see whether they get to do some drilling at segment VI as well. If that is available for inclusion in the resource upgrade then linear growth would project a more than doubling.

Of course, in terms of financing the project we need to see the reserves upgraded. Are these drill holes suitable? If they could double reserves now that would be a very material thing indeed in terms of the viability of Tulkubash as a stand alone project.

[casual47] 10/7/2018 08:00

Excellent update

[sparkyboy1] 08/7/2018 13:55

This time 2 yearz ago the price was about 5_6p so much has happened things was not looking good but now so mich is going on with all the new faces on the board.
I just hope and im confident that when suspension is lifted that this company is only going one way onwards and upwards

[casual47] 08/7/2018 12:17

One of the articles I shared recently, post 5682, mentioned that CGH had given the government a deadline of end of this year for its current Kumtor offer. If that is the case then it could be there is at least one other acquisition target in the works given the end of q3 M&A target mentioned in the most recent presentation.

Even if CGH goes on to acquire another mine or even several mines, the acquisition of Kumtor will remain compelling, so I think it will have financial backers in the wings ready for it whatever else happens.

I cannot see CGH paying off the secured loans due in October and also already the 2019 loan just for the sake of paying off debt. That's just not how healthy business is done. A healthy company uses debt and debt refinancing as a springboard to expand.

Diluting for the sake of debt reduction is a major red flag - imo. If this happened and the share would no longer be suspended I would reduce my holding or even sell out.

The CGH BOD have made some surprising 180° changes to their strategy in the last few month so I don't rule out further twists and turns but I would bet that there will be an acquisition by September.

Given the timelines involved my bet would also be that it is an acquisition of a privately held company because for publicly listed companies it would just take too long to finalise before end of q3.

[casual47] 06/7/2018 15:02

If they are completing an M&A by end of September then we should see things happening very soon. Perhaps an unexpected RNS in time for the AGM?

Meanwhile - Centerra getting a further trouncing.

[jc2706] 06/7/2018 14:54

I am sure that you are right but the phrasing is ambiguous. It would not be completely onerous moving lock stock and barrel to HK if that was better valuation-wise. With the RTO we are in a re-IPO situation anyway but you are right, this is likely to be with additional shares to fund whatever M&A deal is in the offing. Whether this is a rights issue remains to be seen. I was given some assurances that the opportunity would be there to participate but this is not the same thing. I doubt that we have the pedigree to move to a full listing. Off the top of my head I can't remember the criteria but they are more stringent than AIM requirements.

Whatever else happens, things are unlikely to be dull once the M&A activity gets into full swing. Should be fun.

[casual47] 06/7/2018 14:43

JC, my reading of it was that in the 'or' scenario it would just be an additional listing in HK, rather than moving wholesale to HK.

A re-IPO would probably be the equivalent of a (new shares for old?) rights issue with prospectus etc? So a move up to list on FTSE with possibly e.g. 1 new FTSE share for every X AIM share?

[jc2706] 06/7/2018 14:30

Curiouser and curiouser. Not sure I like the 'or' suggestion or the 'when the time is right' one. The inevitable conclusion is that they see little benefit from listing on AIM. Actually, they are probably not wrong but an AIM listing makes it much easier to buy or sell. However, if a HK listing resulted in a better valuation then I would not complain.

[casual47] 06/7/2018 12:48

The September deadline naturally coincides neatly with the secured loan notes maturation....

[casual47] 06/7/2018 12:23

Does the suggested HK listing reveal anything?

E.g. one of their major backers ready to take up equity predominantly operates in China/HK?

[jc2706] 06/7/2018 12:09

That is some list. POG as well I notice, which is undergoing something of a battle for control at the moment so I suspect that this will not be in play this quarter unless CGH see this as an opportunity (it is cheap based on assets). Nordgold is (too?) big and privately owned so I suspect is not on the agenda. It also has assets outside the region (could target at a project level of course).

[casual47] 06/7/2018 11:48

HGM has a market cap of about $650m. Less than Kumtor would cost *AND* it has more diversified multi-asset and multi-stage mines.

Would be quite a coup if they bought it.

[casual47] 06/7/2018 11:33

No probs Rhuvaal. Wish I had more news to bring.

The presentations of the Kyrgyzstan Investment Forum are on the Chaarat website.

Some interesting points I spotted:

1. As part of the transformation of the company they are planning to re-IPO on LSE and/or Hong Kong "when the time is right"

I always thought they would go for a dual listing in North America especially as their second broker is Canadian, but Hong Kong is interesting.

2. "M&A strategy is well advanced – first transaction targeted to close in Q3 2018" - that's by end of September!

3. There is a chart which lists the miners for which there is consolidation potential. This is the, surprising, list:

Kupol+Dvoinoye
AMMC
Kumtor (Centerra Gold)
Petropavlovsk plc
Yuzhuralzoloto
Nordgold NV
Altyntau (Kazzinc)
Highland Gold Mining
Susuman Zoloto
GV Gold (Vysochaishiy)
Seligdar
Zapadnaya GRK
Arbat Group
LLC Poisk (Yakutia)
Priisk Solovyevskiy
Kamchatka Gold
Vitim
Pustynnoye
Kazakhaltyn
Kurilgeo
Karalveyem
Vasilyevsky mine
Oina coop.
Oimyakonye
Mayksaya MC
Tal coop.
Druza
Trans-Siberian Gold
Priamurye MC
Oimyakonskaya GMC
Pavlik
Mangazeya Mining
Bozymchak
Ishtamberdy

Are we to conclude they are speaking to some of these and that one or more of these is targeted to be acquired by end of September??

[rhuvaal2] 05/7/2018 16:48

Thanks for the continuing updates, casual