Chaarat Gold Share Discussion Threads

[jc2706] 19/2/2020 14:30

I think that you need to get out more richgit!

[jc2706] 19/2/2020 14:28

Thanks casual47. As I recall the resource also rose substantially on the last update.

[jc2706] 19/2/2020 14:27

One thing I would say about Kapan - they are certainly demonstrating that they can run a mining operation effectively. The improvements that have been made appear to have been very successful and we should see this continue to be reflected in the EBITDA which looks on track for the target, especially considering the rise in the gold price (which from a first pass looks like the major contributory factor for the increase).

I am unclear about the stockpiles at Kapan. If you look at the report in 2018 they mined 637,441t at a feed grade of 3.44g/t and milled 635,501t whereas in 2019 they mined 678,382t at a feed grade of 3.23 g/t and milled 733,860t which implies some form of stockpile but I am not aware of the availability of this.

Any thoughts anyone?

[casual47] 19/2/2020 14:22

JC - fyi:

In 2020: increased by 96k oz the *recoverable reserves* tally compared to 2019 update

In 2019: increased by ~94k oz the *recoverable reserves* tally compared to 2018 update

[jc2706] 19/2/2020 14:16

I believe that it is reasonably positive (particularly as regards funding which I certainly do get the impression is close to being finalised) but the story at Tulkubash is far bigger than current pit design. I am expecting there to ultimately be at least 3 (and probably more) largish pits along the strike with the potential for smaller satellite pits as the deposit appears to be a continuous strike with areas of somewhat higher grade that are amenable to mining economically. This does mean that we are likely to see this situation repeated as the total amount of gold within the property is substantially higher than can be reasonably mined.

Whilst I am having a bit of a moan, I also don't like gold equivalent production figures (when AAZ started reporting that way I find it a bit off putting) for precisely the reason we see here - when gold outstrips the price of copper and zinc the number of gold equivalent ounces gets restated downwards so that it looks like the production is decreasing next year whereas in fact it is just flat. I prefer credits against production costs but will readily admit that they are a large part of the production itself here.

[casual47] 19/2/2020 13:27

Another way of looking at things:

91k oz was added to the reserves.

Yet, 96k oz was added to the *recoverable* reserves (compared to 2019).

Under the old model with its 68.93% recovery that would be the equivalent of adding 139k oz to the previously calculated reserves.

[avsome1968] 19/2/2020 12:43

Thanks for the information digesting it all, looks like in two years time all being well, could be churning serious amounts of gold up to 150k

[casual47] 19/2/2020 12:39

JC - when you consider the above and Dusty's remarks then I think you'll see that the big picture is all very positive.

I too hope there will be a more in-depth review of the results of the 2019 drill campaign. They mentioned briefly that new ounces were added within Shir Canyon with a hint of many more ounces there awaiting a little more definition through new drilling to make it into resource category.

[casual47] 19/2/2020 12:29

According to last year's BFS (old model) the average LoM recovery was 68.93%. That meant of the 658k oz reserves 453k oz was recoverable. So at 95k oz per annum that gives a LoM of 4.77 (rounded up to 5 years in the BFS).

The new model provides for a much higher recovery (6% increase - should have a big impact in lowering costs):

"Reserve has an average recovery of 73.3% representing 549,000 oz Au recovered."

At 95k oz pa this would deliver a LoM of 5.78 years - so an increase of 1 year (Chaarat will be able to say that LoM is 6 years)

(it's not as simple as this, need to wait for the updated BFS but I think it will be in this ballpark)

[casual47] 19/2/2020 11:54

A very readable write-up from share price Angel:

Chaarat Gold* (LON:CGH) 37.0p, Mkt Cap £174m – Kapan EBITDA grows while Tulkubash construction works progress for first gold in 2021

At Kapan, FY19 production amounted to 60.3koz GE (FY18: 56.4koz) with gold sales of 55.3koz (FY18: 50.9koz).

Stronger production is attributed to higher throughput rates helped by better mining rates and an improvement in recoveries in the grinding and flotation circuits more than compensating for slightly lower gold grades.

Mining fleet availability improved through H2/19 while retendering of all services and goods that brought previously outsourced contracts in-house yielded cost efficiencies.

Underground development meters climbed to 23,136m in 2019, up from 19,868m in 2018, improving mining flexibility increasing availability of the number of faces underground.

H2/19 EBITDA amounted to $7.7m implying $4.1m generated in Q4/19 and demonstrating an increasing trajectory towards the targeted $20m pa run rate.

AISC (per oz produced) averaged 1,040/oz in FY19 (FY18: $1,183/oz) with realised gold price of $1,413/oz (FY18: $1,268/oz).

2020 production guidance has been revised to 55koz GE from 60koz accounting for higher than budgeted gold prices reducing conversion rates for by-product metals.

At Tulkubash, construction works continued with first gold remaining on target for late 2021.

Access road was upgraded, earthworks equipment mobilised, 360-man camp installation commenced for completion in Q3/20, ore haul road and stockpiling platform construction finished and detailed design of leaching heaps, crushing circuit and ADR started.

20,000m programme completed at Tulkubash in 2019 comprised of both infill and step out drilling updating mineral resources and reserves.

Infill drilling demonstrated increased continuity in and between the ore zones providing more data for pit design optimisation.

Mineral reserves increased to 25mt at 0.95g/t for 749koz, up from 22.2mt at 0.92g/t from 658koz (using unchanged $1,300/oz gold price).

The previous reserve estimate was prepared in Apr/19 based on Dec/18 mineral resource and did not account for the latest round of drilling programme.

The team is planning to update the mine plan using new reserves that would support a revision of the project FS.

Mineral resources estimate has been revised to account for constrained pit shell parameters that a drop in tonnages and contained ounces, but no effect on the Reserve.

Resources stood at 24.3mt at 1.21g/t for 944koz (v 44.3mt at 1.16g/t for 1,657koz estimated previously) including:

23.3mt at 1.22g/t for 918koz in the Measured & Indicated category (42.0mt at 1.20g/t for 1,624koz); and

0.9mt at 0.90g/t for 26koz in the Inferred category (2.3mt at 0.44g/t for 33koz).

New mineral resource used $1,600/oz gold price.

New ounces were added to the Resource long strike to the NE of the previous resource outline, mainly in the Shir Canyon area.

Drilling in the NE part of the license area has also returned good grades that will be drill tested in the future to be included in mineral resources.

Scope for expanding the MRE remains as only around 5.5km of a prospective 24km trend has been drilled.

On project funding, one project financing group is carrying a due diligence with the Company in discussion to attract other lenders to form a lending syndicate.

Chaarat is expecting the Tulkubash $110m capex to be covered by the project funding package after accounting for $31.5m project-level equity investment by Ciftay.

The facility is expected to be closed in Q2/20.

On corporate level, the team is in discussions to refinance the $17m loan maturing in Q1/20 including increasing debt capacity at Kapan in the view of its improved operating performance.

The team is in active dialogue on potential M&A opportunities in the FSU region with details to be announced once a structure and path to closing is confirmed.

Conclusion: Kapan delivered production growth and stronger earnings helped by operating and cost optimisations as well as a more favourable gold price environment. Tulkubash is progressing towards funding package closure in Q2/20 and ultimately first gold in 2021. While mineral resource showed a drop in tonnages and contained ounces, new mineral inventory offers a more robust estimate allowing for higher conversion rates and leading to an increase in mineral reserves extending the life of mine and improving Tulkubash economics. The scope to improve on the latest estimate remains with more than 70% of the prospective geological trend remaining untested.

[jc2706] 19/2/2020 11:39

Casual47,

Unfortunately I was unable to listen in this morning but will do do if it is uploaded to the website.

[casual47] 19/2/2020 11:36

Oli, Kapan is more than just Chaarat being able to show it can run a mine.

Not only is there the free cash flow but also, they should be able to refinance and even upsize the loan.

If they can refinance Kapan so that repayments on principal can be reduced or changed to e.g. interest only then that together with any upsizing could add a lot of cash for G&A and drilling this year - cash they won't need to raise.

Add in the refinancing and upsizing of the $17m and we could see the whole of 2020's working capital needs covered, imo (~$20m, I think)

[casual47] 19/2/2020 11:08

I do hope they will upload the conf call this time. I listened to it but it would be good to have a few more listens.

[casual47] 19/2/2020 11:05

It will be interesting to see what the effect on total initial capex will be from the new model approach.

On one hand there is more waste ore and a higher stripping ratio but on the other the average grade is higher and recovery is significantly higher too - my guess is that the latter two will outweigh, by a big margin, the others.

[casual47] 19/2/2020 10:44

JC -- did you hear Dusty's explanation on the call around this?

[oli12] 19/2/2020 10:40

All pretty much as expected. Kapan won’t make us rich, that’s not its purpose IMO, one of the primary reasons we purchased Kapan was to demonstrate we are able to run a mining operation - this is key in order to nail down the funding. IF / WHEN the funding is announced we should see a re rate here. Not long to wait now.

[2pablo] 19/2/2020 10:27

Nice, 3 followers including the gorgeous chess player @ChaaratG

[jc2706] 19/2/2020 10:26

I confess that I am slightly disappointed by the resource update. Whilst the confidence is increasing there has been a marked decrease in resource and only a slight increase in reserve which still does not yet get to the magic 7 year number. At the same time there is very little update on the rest of the exploration.

I suppose that this was to be expected as they focus more and more on the actual pit development and raising funding around this. As such, I suppose that I am going to have to modify my expectations for a while. Which is a shame as the thing that I find most interesting here is the district scale of the deposit and watching it unfold.

[casual47] 19/2/2020 09:30

In case you missed this:

"The Company will be announcing its audited Full Year Results for the period ended 31 December 2019 in April 2020."

First time ever they released the annual results this early. Usually it's in June.

[casual47] 19/2/2020 09:25

Pabs will be pleased

They have set up a new corporate Twitter for the parent company:

Take a look at Chaarat Gold (@ChaaratG):

[casual47] 19/2/2020 08:29

So, news on corporate debt ($17m) refinancing in the next week?.....QRC?

[casual47] 19/2/2020 08:26

From the slides:

Current Financial Priorities

Tulkubash Project Financing further advanced
◼ A bank in detailed due diligence stage with other banks studying situation
◼ Indicative term of 5-6 years at attractive cost of capital
◼ Customary conditions precedent to closing, representations and warranties
◼ Typical project finance security package over Tulkubash with parent company guarantees
◼ Very attractive debt / equity terms indicated, with most of the required equity funded via Ciftay contribution
◼ Targeting close by Q2 2020 and announce the proposed lending syndicate in the coming months

Corporate debt maturing in Q1 2020
◼ Advanced discussions with multiple parties
◼ On track with negotiations to implement the solution in the next week
◼ Targeting close by March 2020

Potential Kapan refinancing
◼ Advanced discussions with multiple parties
◼ Options for increasing the quantum of debt secured against Kapan, made possible by the improved operating performance at the mine
◼ Targeting close by Q1 2020

Chaarat benefits from ample liquidity as a result of Labro working capital facility, Cash on hand and free cash flow from Kapan

[casual47] 19/2/2020 08:17

Debt has gone down by $4m since the Q3 webcast: Kapan debt repayment on the *principal* has reduced it by $2m (to $34m) and Labro principal has been reduced by $2m (to $3.5m).

Kapan has now been paid down by a total $6m in cash and another additional $10m through the Polymetal settlement.