Chaarat Gold Share Discussion Threads

[casual47] 21/2/2020 22:18

This is why EBRD can unlock investment:

"In most emerging markets or economies, commercial banks can be expected to have initial concerns relating to country risk. This risk might embrace, among other things, risks such as debt rescheduling, nationalisation of assets, currency convertibility and hard currency transfer.

The country risk, while taken into account in the pricing, is to a degree mitigated by the EBRD's status as a preferred creditor. The EBRD's status as a preferred creditor does not mean that the EBRD guarantees against country risks.

Articles 21 and 49 of the Agreement Establishing the Bank, strengthen the case for preferred creditor status of loans made by the EBRD. All of the EBRD's shareholders are signatories to this Agreement, including the countries of operations."

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Every lender in the syndicate benefits from the EBRD's preferred creditor status:

"our preferred creditor status excludes us from sovereign debt reschedulings where the borrower’s inability to service their debt is due to a general foreign exchange shortage in their country. These legal privileges are also extended to other banks participating in EBRD loans, incentivising local investors to co-finance projects."

[casual47] 21/2/2020 20:35

Apropos of nothing:

[casual47] 21/2/2020 19:37

Some of my notes from the webcast call:

Kapan
2020 new exploration at the East flank target with potential to add significantly to LOM but more importantly add possibility to open up additional working faces allowing for increased flexibility of production and tonnage. Darin compared the current Central Zone mining area to a big underground car park which with only one portal restricts the possibilities to be flexible re. getting the tonnage out. So he's keen this year to get a second access into the mine which will debottleneck tonnage.

Tulkubash
The constrained resources are more akin to mineral resources rather than simply geological resources. (Casual: this basically means they are underpinned by a confidence in economical mineability)

Any ounces added latterally to strike will further open the width of the pit and give access to the currently excluded ounces which sit not much deeper. More than 80% of the 640k oz is situated at depth with less than 20% sitting around the satellite pits.

Finance
Chris seemed to expect most of the loan notes to flip into equity this year

Expects to announce the comprehensive syndicate for Tulkubash project finance within the next month and close by q2

Chris' comments re. Kapan refinance seemed to indicate to me that talks around it are less advanced / of lesser priority

The higher gold price will increase EBITDA but it seems from Chris's comments that they are happy to stick to $20m and e.g. invest more back into the Kapan mine through e.g. fleet upgrades etc.

[jc2706] 21/2/2020 19:19

I don't have a problem with it if they explain it effectively as it is not industry standard (it is actually more 'gold plated' than standard).

I don't know how long they would be able to extend the LOM based on this one pit. The strategy is likely to bring on new pits every few years. If you had three of these operating then the mine life increases enormously if the production profile is maintained.

[casual47] 21/2/2020 17:06

JC - what they have done with this constrained pit thing is basically provide a second tier of reserves - "if gold remains at or above $1600/oz then we can almost guaranteed deliver 917k oz"

Note that 917k oz at 70% recovery provides ~ 7 years of LOM

[jc2706] 21/2/2020 17:00

Casual47,

It may be that they have added ounces at Shir Canyon but it is not in the resource statement in the RNS as, according to the RNS, the "Tulkubash December 2019 Resource at 0.3 g/t Au cut-off grade constrained by USD$1,600/oz pit shell".

I think that it is all rather unclear at the moment but you are right - the money men want to know the ounces available to mine in the pit currently. This should have been explained much more clearly.

[casual47] 21/2/2020 16:29

(It would be good for Dusty to be a little more cryptic in future - between his forecasting the 2.2m oz and delivering the resource statement by end of December latest and a few other such statements he builds expectations which turn out to be baseless. Makes it hard to take him for his word on anything that isn't already nailed down)

[casual47] 21/2/2020 16:18

Presumably the resources they will find which are outside of the current BFS / production pit designs will still remain unconstrained as they will lack the data to constrain them.

It only makes sense to constrain resources which are directly underneath and around the finalised reserve pit models calculated through the BFS.

But clearly, as JC pointed out, they appear to have changed approach between June and October, which is fair enough - the approach must always be data driven and the modelling of the data must support the desired outcome of increasing LOM while keeping costs in check.

[2pablo] 21/2/2020 15:44

Link provided on the LSE BB site

[max244] 21/2/2020 15:12

[...]

Dusty on the tapes....

[casual47] 21/2/2020 13:34

The bottom line is that they outperformed last year in terms of recoverable reserves and added another year of LOM. That's the bit the money people care about, this close to production.

They should have done better explaining how they went from a projected 2.2m oz resource to less than half of that at 944k oz.

[casual47] 21/2/2020 13:27

"In addition, the programme was successful in adding new ounces to the Resource along strike to the northeast of the prior Resource footprint, principally in the Shir Canyon area."

[casual47] 21/2/2020 13:25

"The current resource only covers the existing pit shell."

The RNS stated that they added ounces in Shir Canyon, which is not part of any pit shell or BFS, AFAIK.

[jc2706] 21/2/2020 13:19

So I see. It actually makes a lot of sense. The entire strike appears to be mineralised. However, it is only at certain locations where the grade is sufficient to be economically viable (via open pits). The current resource only covers the existing pit shell.

The thing that is curious is that the figure in the new presentation was a little higher than the previous figure. Where did it come from? What was the result of all of the drilling away from the defined pit shell?

Interesting times to come I believe.

[casual47] 21/2/2020 11:33

The slides have been updated - the resource *is* inclusive of the reserves. (Total resource including reserves is 944koz)

We await Dusty's clarification....

[casual47] 21/2/2020 11:16

Dusty is also on Twitter, btw. But it's very much a personal account. Mostly the odd eruption against Donald Trump. He's defo a proper 60's Californian hippy :)

[2pablo] 21/2/2020 11:13

Thanks JC, thought probably not.

I've emailed Dusty to give some more insight into the resource/reserve update. His email seems to have changed from [e-mail] to [e-mail]. Artem has kindly forwarded my email on to Dusty after I informed Artem the email's gone astray

[2pablo] 21/2/2020 07:25

lennyhall - I clicked on your link and it links through to @smallcappick on Twitter - is it worth following this 'guru' ?

[casual47] 20/2/2020 20:25

Kapan's EBITDA for 2019 was $11.5m. This was based on only 11 months and with not achieving full steam until q4.

The average gold price achieved was $1413/oz.

If the average gold price achieved this year would be $1600/oz then even with 55k oz pa they should be able to more than double last year's EBITDA.

[casual47] 20/2/2020 20:12

My expectation of news flow:

This month - refinancing of the $17m loan. Upsized to $20-$25m?

March - Kapan refinancing, upsized to $40-$50m?

April - Tulkubash project finance

From the call it was clear to me that the $19.68m loan notes were likely not going to be refinanced (contrary to what I thought). Chris Eger seemed happy to leave them as is and expected the majority of them to convert over the next year or two.