Chaarat Gold Share Discussion Threads

[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.

[casual47] 20/2/2020 20:10

Presumably the FY2019 being moved to April rather than the more typical June is all part of this process. This way they can have fully audited disclosure with the lenders.

[casual47] 20/2/2020 19:57

Pabs - re. Project finance: I think it's still under discussion but they did say most of it would be debt and most of the equity was sorted with the JV. Conceivably there may be a further equity element, either JV or placing, which I imagine would be at or above the previous arrangements, I.e. on the same valuation basis of $252m for Kyrgyz assets as the JV was or if it is a placing, the same or higher as the most recent placing which was 35p.

I suppose the reason this is still under discussion is because of the way it is being arranged: Chaarat is dealing directly only with one sole lender (EBRD?) who in its turn is dealing with a consortium of smaller outfits. If they can get everyone signed up it may be all debt. If they want to hedge themselves more risk wise then they might insist on some more equity release.

I imagine some of this may depend on the updated BFS - potentially the initial capex will be lower (or higher) than the $110m, though I can't imagine it to change much at all (e.g. I'd be surprised if it was more than $5m difference)

[casual47] 20/2/2020 19:36

Pabs, in terms of reserves, more *recoverable* reserves were added this year (96k oz) than the previous year (~94k oz), so in that sense they did better.

If the total resource including reserves is 1693k oz then they did really well on the resources considering that 640k oz were downgraded following the pit design decision (meaning that without the $1600/oz pit shell constraint the total resources would have been 2.3m oz which is in line with what Dusty said it would be)

If the total resource is 917k oz including reserves then I have no idea what is going on as I can't make head nor tail of it math-wise.

[2pablo] 20/2/2020 19:22

JC2706 - that's a pretty chaotic few changes of direction in the drilling objectives. They will say anything imo if it gives the right impression, think Artem is most keen on that. Think the reduction in resource sounded very reasonable but perhaps they haven't hit with the drill as big as they were hoping in 2019.

Main thing is get that funding done and dusted. was it stated in the conf call it would be all debt funding but that entailed some giving away of equity like the Ciftay deal? I'd listen to it again but seems to be unavailable. Not sure they've ever made a conf call available after the event but they state in the rns they will

[casual47] 20/2/2020 16:56

. (Ignore: Brain fart)

[jc2706] 20/2/2020 16:29

Indeed. I think that we know that it is at least 1693k oz based on the latest presentation (as this was update from a previous presentation which showed 1657k oz) with the 900 being that constrained within the pit wall. The question mark is over whether there is indeed more or whether the drilling was insufficient ultimately to define a resource.

I think priorities changed here.

In the 18th June RNS we were informed that "of the planned 20,000 metres of drilling this year, the large majority (c.16,000 metres) will comprise exploration and step-out drilling from the current resource boundary." and that one of the objectives was to "exceed 2 million ounces of gold in Measured and Indicated JORC Resource categories".

In the 28th August RNS they indicated that "the primary objective of this drilling programme is to identify shallow mineralisation within and near the current pit designs".

We then got nothing until the 15th October RNS informing us of the completion of the drilling and that since the 28th August RNS drilling "has focused on the prospective Shir Canyon area" but we have received little information about this as yet.

Another change appears to have been around the Karator and Ishakuldy targets which are further from the current pit shell. These areas were going to attract 3000 metres of drilling according to the 28th August RNS but ended up with only 1000 metres.

As such, I suspect that the potential and location of Shir Canyon persuaded them to change the focus of the drilling campaign. It would be good to get a better view of the results of this campaign though!

[casual47] 20/2/2020 16:08

It's fair to say that currently it is not clear whether the M&I resource is:

900-odd,
1600-odd or
2.2m odd (unconstrained)

So yes, a bit shoddy