Chaarat Gold Share Discussion Threads

[jc2706] 11/4/2020 11:26

As with all miners (and all companies for that matter but especially miners given their track record), the cash is the most important thing. I am not that bothered with most non-cash items. The EBITDA figures for Kapan are pretty good to be honest and provided it stays open then this year will be considerably better. However, I think that we have to be realistic that Kapan, like pretty much all other companies, will be hit at some point.

I actually think that CGH has a pretty good risk/reward. Kapan is as likely as anywhere to stay open, is very cash generative at this gold price and the chairman should now be in a position to begin his support exercise. That said, I do think that we are approaching the next market correction and it may be that oil is the trigger again. The market reaction was negative towards the deal and this could well infect he rest of the market. The economic damage from this shutdown across the globe is WAY bigger than 2008. Should relaxing lockdowns result in further spread of the virus (which seems inevitable) and result in further lockdowns I think that the potential for extreme damage to the stock markets is very high indeed, irrespective of the FED desperately propping up share prices.

Whichever way it goes, the backdrop for gold does seem extremely favourable. That doesn't mean that gold miners won't be dragged down with the rest of the market but they should recover first and strongest.

[casual47] 11/4/2020 10:05

I think it takes about 18-24 months for an ADR to be completed.

[casual47] 11/4/2020 09:50

LSTK means lump sum turn key.

Basically it means they have agreed a fixed price which cannot be increased, so all the risk is with the contractor to deliver from scratch a fully operational ADR plant (Chaarat just need to "turn the key"). The incentive for the contractor is to deliver it faster than agreed and that way improve their margins or benefit from an early delivery bonus.

[casual47] 11/4/2020 09:41

Tulkubash – 4t ADR Plant & Reagents

In Q4, 2019 AZMET has been awarded a LSTK contract for the detail design & engineering of a 4 ton Carbon Batch, Gold Adsorption, Desorption and Recovery Plant (ADR Plant) for the CHAARAT Tulkubash Gold Heap Leach operation in Kyrgyzstan, with the following key features:

Trash Removal prior adsorption
Gold Adsorption in Carbon Columns in a carousel configuration.
Fresh carbon attritioning
Acid wash with nitric acid
Elution (SPLIT AARL)
Electrowinning in sludge cells
Gold room (civil building) & Security with future Mercury Retort & Mercury Scrubber System.
Carbon Regeneration
Carbon Fines Handling System
All related Reagent Make-up & Dosing Systems.

[casual47] 10/4/2020 22:43

See RNS:


"In respect of the above, 21,585,108 new ordinary shares in the Company of US$ 0.01 per share have been issued to the Company's employee benefit trust to enable the settlement of share awards and options under the Company's share plans as well any other obligations of the Company to its employees/directors and application has been made to the London Stock Exchange for such shares to be admitted to trading on AIM on or about 25 September 2019."

[casual47] 10/4/2020 22:40

Pabs, the options are part of the package. The incentive package also had restricted shares in lieu of cash bonuses and shares given in lieu of options at 15p.

This entry in the major shareholder list is the employee incentive scheme:

Sanne Fiduciary Services Limited 21,585,108 4.60%

As to how all of this is worked into the accounts - I'm not an accountant. But the point I was making is that it is a fair incentive scheme.

[2pablo] 10/4/2020 22:07

Casual, how does giving mgmt Options to buy new shares @ 42p cost the Company anything? Maybe if the share price was higher than 42p perhaps

[casual47] 10/4/2020 13:03

We should get:

Q1 operational results around the 20th

FY2019 report and AGM form by 24th

The loan extension mentioned "45 days" twice for either $5m conversion into shares or prepayment to extend loan to 31st March 2021. Plus it mentioned re. Kapan refinancing. It seems to me that the plan is to get Kapan refinanced within q2. I also think they may look for an equity raise. We will know soon enough if Labro will be pushing the shareprice up with their 3m waiver.

[oli12] 10/4/2020 11:26

Pabs for me there are better risk / rewards currently out there due to the unexpected market turbulence. Chaarat is very reliant on Mr A, he could pull the plug (unlikely) or mothball development of the mine until financing prospects improve. One thing is for sure, when the chips are down Mr A will act in his own interests. The market cap for me is kinda in the right ball park based on debt, profits and the uncertainty. That’s only my opinion. Purchased some APF last week - seen a good return, I will keep watching here, my view could change. I need to understand the numbers more.

[casual47] 10/4/2020 11:08

Pabs, the incentive scheme includes options at 42p. They don't get cash bonuses so a share incentive seems reasonable. This was a three year share incentive - covering 2018, 2019 and 2020 plus it replaced historic options at 15p dating back from 2017 etc.

Also, don't forget during 2019 they paid down $4m of the Kapan loan plus interest (~$3.5-4m?). This gets deducted from the gross profit and EBITDA as well.

[2pablo] 10/4/2020 11:03

I don't feel worried unlik, it appears, Oli. Our debt is not a worry but Covid-19 is. If we can keep going, as the govt of Armenia is desperate we do, we'll be fine. If we have to stop for 5 or 6 weeks or so, we'll have to get some mergency package sorted quick but even that should not be a problem. Cannot, in any circumstance, see us going under, except perhaps Martin A croaking it and his widow wanting out

[2pablo] 10/4/2020 10:59

Thanks but still not too clear.

I saw that $9.8m for employee incentive scheme - a very large set aside for themselves

[casual47] 10/4/2020 10:07

Based on the 2019 year EBITDA results for Kapan as a standalone business:

Debt/EBITDA is 2.71
Acquisition price / EBITDA is 3.9

And that is for only 11 months and was achieved in a transition year which didn't get to full operational performance until Q4.

It's also based on an average realised gold price of $1413/oz...

If you just look at the numbers alone without taking into account Covid etc then a refinancing of Kapan of $40m-$50m should be straightforward as the standalone business is sound.

Based on projected $20m EBITDA we get:

Debt/EBITDA is 1.74
Acquisition price / EBITDA is 2.5

[casual47] 10/4/2020 09:30

From an investor point of view, for a company at the stage Chaarat is in, the fact that they are now cash flow positive is far more important, imo.

[casual47] 10/4/2020 09:22

Note: "Achieved an EBITDA, at the standalone Kapan Company level before Group accounting and non-cash adjustments, of US$12.7 million for the full twelve-month period"

[casual47] 10/4/2020 09:14

It may be explained in the actual report that they will send within the next two weeks but could be due to group accounting and apportionment of the non-cash charge of US$9.8 million?

The non-cash charge is from the employee incentive scheme, so it's all shares not cash.

[2pablo] 10/4/2020 08:59

There's an awful lot in those results which even if we knew most of it anyway, is a lot to take in.

As a bit of an accounting novice here, please advise :

"For the full 2019 year, the Kapan Mine produced approximately 60,252 oz of gold equivalent, revenue of US$73 million, gross profit of US$13.5 million, loss before tax of US$0.2 million and generated an Earnings Before Tax, Interest, Depreciation and Amortisation (EBITDA) of US$10.5 million."

So, Kapan : gross profit $13.5m, loss before tax $0.2m yet EBITDA $10.5m


Does that mean we made a Loss there or is that $0.2m part of it all, ie an allowable loss, but we still made a profit? Was just rather surprised to see Loss in the Kapan section.

[casual47] 09/4/2020 16:27

This is why they bought Kapan - Chaarat as a whole now is operating cash flow positive:

"During the year 2019, the Group generated operating cash flows of US$2.6 million, compared with an operating cash flow consumed of US$8.8 million in 2018. The positive cash generation mainly represented the positive EBITDA contribution from Kapan and favourable working capital movements, partly offset by expenditure on corporate overheads and development costs."

[oli12] 09/4/2020 16:19

For me the risk / reward was out of kilter especially when several stocks have seen + 40% gains in the last week. I will keep an eye here, I have been in and out of Chaarat for many many years. Apart from Mr A buying I don’t see any transformational news in the coming weeks. If I’m wrong then it’s my mistake.

[casual47] 09/4/2020 16:19

JC - quite surprised that they can support a whole month of downtime in Kapan before things get difficult. That's a lot of slack.

[jc2706] 09/4/2020 16:14

I don't think any of that going concern note is unknown and I would be extremely surprised if a breach of the covenant owing to Covid-19 would result in any action when the Armenian banks are being quite accommodating. I actually find now a strange time to sell as our chairman is now free to buy 3m shares in the market and it has been clear that he is targeting high 30s. Doesn't mean that it is going to get there of course but at least there should be some buying pressure.

[casual47] 09/4/2020 16:12

Not sure there is much to read into the timing.

I noted that they didn't schedule a conference call. Presumably they will just do a proactive interview and have a Q1 operational results conference call instead?

We will know soon whether Mr. A will be using his 3m waiver.

The main takeaway from the results for me:

1. They are cash flow positive. They should be on track for $20m EBITDA this year given the gold price.
2. It doesn't need much jiggery pokery to sort the debt out and funding in Q3, assuming they can refinance Kapan
3. The reason to be invested in Chaarat is still Tulkubash. Kapan is just the cash flow cow.