TIDMCGH
RNS Number : 2580K
Chaarat Gold Holdings Ltd
20 September 2016
Chaarat Gold Holdings Limited
("Chaarat" or "the Company")
NEW CHAIRMAN TO BE APPOINTED
DEVELOPMENT OF HEAP LEACH PROJECT CONFIRMED
INTERIM STATEMENT FOR THE SIX MONTHSED 30 JUNE 2016
Road Town, Tortola, British Virgin Islands (20 September
2016)
Chaarat (AIM - CGH), the AIM quoted exploration and development
company with assets in the Kyrgyz Republic, today announces the
intention to appoint a new non-executive Chairman, a refreshed
strategic focus to achieve production and publishes its unaudited
results for the period ended 30 June 2016.
HIGHLIGHTS
-- Largest shareholder affirms his support for Chaarat by
agreeing to join as non-executive Chairman
-- Development of Tulkubash Heap Leach Project (the "Tulkubash Project") confirmed
-- Tulkubash Project expected to process approximately 8,000
tonnes of ore per day to produce approximately 60-70,000 ounces of
gold per annum
-- GBM and WAI contracted and working on preparation of Bankable
Feasibility Study for Tulkubash Project
-- Metallurgical and geotechnical drilling underway on site and
due for completion by the end of the 2016 season
-- During the period to 30 June 2016 the results and initial
optimisation of the NERIN Feasibility Study for the whole Chaarat
Project were published
2016 has already seen significant developments in our progress
towards the crystallisation of value from the Chaarat Project with
the publication of the NERIN Feasibility Study.
Your Board has previously referred to the twin track strategy of
seeking potential acquirers or joint venture partners whilst at the
same time working on our own development plan for the Chaarat
deposit. The Board is now focussed on taking the Chaarat Project
into production as it believes that this route will deliver greater
value to shareholders.
The first stage on the road to production will be the Tulkubash
Project. An internal study based on the results of the recently
completed NERIN Feasibility Study demonstrates this first stage
will generate an acceptable return as well as minimising the
initial capital outlay required to reach production. This will
establish the foundations for the development of the second much
larger project in due course.
Board update
Our largest shareholder Martin Andersson (who holds his shares
through Labro Investments) is fully supportive of this strategy and
we are delighted that he has agreed to lead the Board as
non-executive Chairman. Martin has significant experience of Russia
and the region. He is a private investor with a wide range of
interests, predominantly in real estate and technology.
Martin will be joined on the Board by his associate Martin
Wiwen-Nilsson, who will also be a non-executive director. Martin
spent 21 years at Goldman Sachs, where he was a Partner from 2008
to 2015. During his time there he held leadership positions in,
amongst others, the emerging markets, commodities and sovereign
wealth fund businesses.
Both new directors will provide guidance, knowledge and
introductions to contacts from their extensive networks to inform
Chaarat's strategy. Both the appointment of Martin Andersson as
non-executive Chairman and Martin Wiwen-Nilsson as non-executive
director are subject to Board approval which is anticipated
shortly.
On the appointment of Martin Andersson to the Board, Christopher
Palmer-Tomkinson will step down as Chairman. The Board is very
grateful for his wisdom and guidance since Chaarat's admission to
AIM in 2007.
Background to staged development approach
Our decision to pursue a staged development for the large
Chaarat deposit was determined by two factors. The first is the
type of ore contained in the deposit and the available processing
options for gold extraction. The second is the proposed future
developments to processing infrastructure in the Kyrgyz Republic
which will have a positive effect on the economics of the Chaarat
Project.
1. Ore and processing options
Large gold deposits in the belt from Turkey in the west, via
Russia and through China in the east, also contain the combination
of free milling and refractory ores found at Chaarat where both
types of ore are contained within Chaarat's three Zones (Tulkubash,
Contact and Main).
The Tulkubash Zone contains "free milling" ore from which gold
can be recovered by conventional cyanide leaching. The Contact and
Main Zones contain refractory sulfide ore which requires a more
capital intensive process to extract the gold, either by producing
concentrate, which then needs to be smelted, or by oxidising the
ore before leaching.
2. In country development
The Kyrgyz Government is seeking to retain the added value from
processing refractory ore in country which is lost if concentrate
is transported abroad for smelting. It has therefore recently
signed a binding agreement with a Turkish company to build a
smelter near the Chaarat deposit. Once the smelter is built Chaarat
will have the option to produce concentrate from its refractory ore
and have it processed locally. This processing option means that
the construction of our own oxidation unit can be postponed.
Whilst awaiting developments in the processing options for
refractory ore, Chaarat will be able to achieve production from the
Tulkubash Project.
Previous small scale production plan
Shareholders will recall our plan in 2011 to move to small scale
production by building a standard Carbon in Leach ("CIL") plant to
process the free milling ore from the Tulkubash deposit. We
originally estimated there was enough ore for three years of
processing (to achieve production of 20-30,000 ounces of gold per
year) and the capital costs involved included a mill, a power line
and tailings dam.
Once in production we intended to add either a flotation unit
(to generate and sell concentrate) or increase the size of the
plant and add an oxidation unit to oxidize the refractory ore which
would then be treated by the same CIL unit. The general design of
the plant and the more detailed engineering and tender for
construction of the first phase were completed.
Further metallurgical testing of the ore from the Tulkubash
deposit then established that it is amenable to heap leaching. This
is a relatively low cost processing method (both in terms of
capital and operating costs) and uses a well-established and
uncomplicated technology. Extracting gold via a heap leach reduces
the capital requirements as a mill and tailings dam are not
required. Generators can initially provide sufficient power and a
power line can be constructed at a later date.
By 2013 we were aware that uncertainty in the market conditions
could have made our production plans uneconomic. We therefore put
production on hold pending completion of the NERIN Feasibility
Study for the whole Chaarat Project. This decision proved to be
wise, as evidenced by the demise of a number of our peers who,
whilst reaching production, were unable to develop sustainable
businesses.
Why a Chinese Feasibility Study?
In February 2016 we announced the results of the Feasibility
Study prepared by NERIN for the Chaarat Project and in April the
results of the initial optimisation. One rationale for seeking a
Chinese prepared Feasibility Study was to set a benchmark valuation
for negotiations with potential Chinese acquirers. This benchmark
was duly set at in excess of 20 times the market capitalisation of
Chaarat shares at that time. The Chaarat share price has continued
to trade at a substantial discount to the value of the ounces of
gold in the ground as set out in the NERIN Feasibility Study. The
Board has therefore concluded that it is not possible to sell the
Company at this developmental stage for a sensible price.
Interest in the Chaarat Project from Chinese companies is still
in evidence but there is, more generally, a noticeable bias towards
acquisitions of assets which are already in production and
therefore substantially derisked.
What next for the Tulkubash Project?
We took the opportunity of the suspension of our previous
production strategy to invest funds in infrastructure and further
exploration to increase the size of the Tulkubash resource. Based
on this work we announced a revised JORC resource of just over 7
million ounces in June 2016 (an increase of 15%). The Tulkubash
Zone resource itself was increased by 26% to 912,000 ounces and
therefore comprises 13% of the total resource.
Our plan now envisages a processing capacity of 2.8 million
tonnes of ore per year which (based on the recovery achieved in
previous metallurgical testing) would result in production of
60-70,000 ounces of gold per year with a mine life slightly in
excess of five years. This triples the production capacity from the
Tulkubash Project as originally estimated in 2011 from a three year
life of mine.
We believe that the Tulkubash resource can be increased by
further drilling as we have identified that it continues along
strike and at depth. Our internal studies, prepared on the basis of
the NERIN Feasibility Study work, show that the returns generated
within five years from the Tulkubash Project will comfortably
exceed the estimated capital investment required for its
development.
A Feasibility Study for the Tulkubash Project
In order to optimise the results of the work undertaken by NERIN
on the Tulkubash Project within their Feasibility Study and to
ensure the level of reliance on those results is at a "bankable"
level, we have commissioned GBM and Wardell Armstrong International
("WAI") to prepare a Bankable Feasibility Study for the standalone
stage one Tulkubash Project.
This Bankable Feasibility Study will provide the basis for us to
raise funds for construction and production, establish the most
efficient layout for the Tulkubash Project, provide confirmation on
the metallurgy and recoveries from the free milling ore and assist
with the tendering for equipment.
One of the key determinants of the economics of the Tulkubash
Project is the recovery of gold achieved from the heap leach
process. We are therefore planning to verify previous test results
by reperforming the work on new ore samples. Consequently drilling
is now underway on site to extract large samples for metallurgical
testing. We are also undertaking further geotechnical drilling to
confirm the suitability of the proposed layout of the Project.
We are well placed to capitalise on our work over the last three
years.
-- We have completed additional drilling within the Tulkubash
Zone to increase the resource and therefore prospective gold
production;
-- We have achieved the social licence to operate a heap leach
project - the first in the country;
-- We have a mining licence until 2032;
-- All payments to the Government in respect of the delineated
resource to obtain the mining licence have been made;
-- A significant portion of the Project infrastructure is in
place - roads, bridge, camps, a workshop and a fuel tank farm;
-- The access road has been designed;
-- The land needed to cover the whole footprint of the Project
has been identified and the formal allocation is in progress;
and
-- The site has been "sterilised" of alluvial gold deposits in
preparation for construction of the mine.
The provisional timetable to production is now:
-- Completion of the Bankable Feasibility Study for the
Tulkubash Heap Leach Project in the first half of 2017;
-- Completion of the local approvals process for the Project -
aiming for the third quarter of 2017;
-- Work on the financing to continue during 2017 with the aim of
raising finance for construction in the third quarter of 2017;
and
-- Subject to completion of the local approvals process and
financing, construction is to begin in the first quarter of 2018,
provisionally targeting the first gold pour in 2019.
What about the second stage?
We have by no means overlooked the fact that the Contact and
Main Zones contain 87% of the ore at Chaarat. Currently only two
main options exist to develop this section of the deposit. The
first is to process the refractory ore in order to produce
concentrate which requires a smelter to produce gold from the
concentrate. We have looked at the option of sending concentrate to
China for processing and this approach would be uneconomic. The
construction of a smelter near Chaarat would accelerate the
possibility of building a second stage project based on the
refractory ore in the Main and Contact Zones by generating a
smeltable concentrate.
The second processing option is to build an oxidation unit for
the pre-treatment of the ore prior to cyanidation. The type of
oxidation unit needed to achieve the highest recoveries from the
Chaarat refractory ore would require a very high capital cost based
on current technologies.
Hence the first option, to produce concentrate, would be
preferable since it is a less technically complex and has a much
lower capital cost.
Given the technical developments which are being made to achieve
more efficient processing of refractory ore, we consider that the
economics of the second stage development of the Chaarat Project
could become significantly more attractive in the short term. In
the meantime we have the prospect of extending the production life
of the Tulkubash Project.
Funding and corporate update
During the period under review we realised USD 1.2 million from
the sale of fixed assets and reduced headcount to a permanent staff
of 27, supplemented by approximately 70 temporary staff during the
season, most of whom are based on site. As at 30 June 2016, the
Company had cash and cash equivalents of USD 2.06 million.
We will be working with our largest shareholder to review our
options for additional funding in the light of our renewed
production strategy.
The Board is also taking the opportunity of the renewed focus on
production to align the interests of the management with
shareholders by cancelling all existing share options held by
directors and certain key members of staff in Bishkek, which are
significantly out of the money. New options will be issued at a
price to be determined by the Board in due course.
Dekel Golan CEO commented: "I am delighted to welcome our new
Chairman and director to the Board at this pivotal time in the
Chaarat story and look forward to working with them. The whole
Board is hugely appreciative of the patience and support shown by
our loyal shareholders. I know it may have seemed to them that
nothing was happening at the Chaarat Project but, as we have now
demonstrated, we have implemented concrete plans to achieve
production in the near future.
I am also very grateful for the wise counsel of Christopher, our
outgoing Chairman, which I am sure, will still be available to me
and the rest of the Board."
Dekel Golan
Chief Executive Officer
Enquiries:
Chaarat Gold Holdings
Limited + 44 20 7499 2612
c/o Central Asia Services info@chaarat.com
Limited
Dekel Golan CEO
Linda Naylor FD
Numis Securities Limited +44 (0) 20 7260 1000
John Prior, Paul Gillam
(NOMAD)
James Black (Broker)
About Chaarat Gold
Chaarat Gold is an exploration and development company operating
in the Kyrgyz Republic with a large, high grade resource - the
Chaarat Gold Project. The Company's key objective is to become a
low cost gold producer generating significant production from the
development of the Chaarat Gold Project. Chaarat is engaged in an
active community engagement programme to optimise the value of the
Chaarat investment proposition.
Chaarat aims to create value for its shareholders, employees and
communities from its high quality gold and mineral deposits in the
Kyrgyz Republic by building relationships based on trust and
operating to the best environmental, social and employment
standards.
Further information is available at www.chaarat.com
Consolidated income
statement
For the six months
ended 30 June
6 months 6 months 12 months
to to to
30 June 30 June 31 December
2016 2015 2015
(unaudited) (unaudited) (audited)
USD USD USD
Exploration expenses (991,276) (787,523) (2,115,164)
Administrative expenses (1,568,432) (1,379,582) (2,551,262)
- Share options expense (981) (45,436) (90,869)
- Foreign exchange
gain/(loss) 3,808 (24,798) 20,187
-------------------------------------- ------------ ------------ -------------
Total administrative
expenses (1,565,605) (1,449,816) (2,621,944)
Other operating income/(expense) 589,327 65,449 -
-------------------------------------- ------------ ------------ -------------
(4,737,
Operating loss (1,967,554) (2,171,890) 108)
Finance income 17,312 26,529 132,752
Taxation - - -
-------------------------------------- ------------ -------------
Loss for the period,
attributable to equity
shareholders of the
parent (1,950,242) (2,145,361) (4,604,356)
-------------------------------------- ------------ ------------ -------------
Loss per share (basic
and diluted) - USD
cents (0.71) (0.79) (1.69)
-------------------------------------- ------------ ------------ -------------
Consolidated statement
of comprehensive income
For the six months
ended 30 June
6 months 6 months 12 months
to to to
30 June 30 June 31 December
2016 2015 2015
(unaudited) (unaudited) (audited)
USD USD USD
Loss for the period,
attributable to equity
shareholders of the
parent (1,950,242) (2,145,361) (4,604,356)
Other comprehensive
income:
Items which may subsequently
be reclassified to
profit and loss
Exchange differences
on translating foreign
operations and investments 2,689,088 (1,311,157) (7,708,129)
Other comprehensive
income for the period,
net of tax 2,689,088 (1,311,157) (7,708,129)
Total comprehensive
loss for the period
attributable to equity
shareholders of the
parent 738,846 (3,456,518) (12,312,485)
----------------------------------- ------------ ------------ --------------
Consolidated balance
sheet
At 30 June
30 June 30 June 31 December
2016 2015 2015
(unaudited) (unaudited) (audited)
USD USD USD
Assets
Non-current assets
Intangible assets 31,042 41,399 29,505
Mine properties 21,764,870 22,268,925 19,797,277
Property, plant and
equipment 906,746 3,129,417 2,174,678
Assets in construction 10,185,681 11,964,950 9,259,089
32,888,339 37,404,691 31,260,549
------------------------------------ ------------------ ------------------ ------------------
Current assets
Inventories 360,134 763,523 306,111
Trade and other receivables 254,165 728,884 212,845
Cash and cash equivalents 2,063,517 5,156,510 2,839,159
2,677,816 6,648,917 3,358,115
Total assets 35,566,155 44,053,608 34,618,664
------------------------------------- ------------------ ------------------ ------------------
Equity and liabilities
Equity attributable
to shareholders
Share capital 2,729,353 2,729,353 2,729,353
Share premium 132,108,746 132,108,746 132,108,746
Share warrant reserve 1,358,351 1,358,351 1,358,351
Other reserves 14,926,889 15,038,993 14,952,340
Translation reserve (15,839,768) (12,131,884) (18,528,856)
Accumulated losses (100,328,935) (96,078,216) (98,405,125)
------------------------------------- ------------------ ------------------ ------------------
34,954,636 43,025,343 34,214,809
------------------------------------ ------------------ ------------------ ------------------
Current liabilities
Trade payables 132,663 386,181 176,641
Accrued liabilities 478,856 642,084 227,214
------------------------------------- ------------------ ------------------ ------------------
611,519 1,028,265 403,855
------------------------------------ ------------------ ------------------ ------------------
Total liabilities 611,519 1,028,265 403,855
------------------------------------- ------------------ ------------------ ------------------
Total liabilities
and equity 35,566,155 44,053,608 34,618,664
------------------------------------- ------------------ ------------------ ------------------
Consolidated statement of changes in equity
For the six months ended 30 June
Share Share Share Accumulated Other Translation
capital premium warrant losses reserves reserve Total
USD USD reserve USD USD USD USD
USD
Balance at
31 December
2014 2,729,353 132,108,746 1,358,351 (94,144,808) 15,205,510 (10,820,727) 46,436,425
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Currency
translation - - - - - (1,311,157) (1,311,157)
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Other
comprehensive
income - - - - - (1,311,157) (1,311,157)
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Loss for the
six months
ended
30 June 2014 - - - (2,145,361) - - (2,145,361)
Total
comprehensive
income for
the six
months
ended
30 June 2014 - - - (2,145,361) - (1,311,157) (3,456,518)
Share options
lapsed - - - 211,953 (211,953) - -
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Share options
expense - - - - 45,436 - 45,436
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Balance at
30 June 2015 2,729,353 132,108,746 1,358,351 (96,078,216) 15,038,993 (12,131,884) 43,025,343
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Currency
translation (6,396,972) (6,396,972)
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Other
comprehensive
income (6,396,972) (6,396,972)
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Loss for the
six months
ended
31 December
2015 (2,458,995) (2,458,995)
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Total
comprehensive
income for
the six
months
ended
31 December
2015 ( 2,458,995) (6,396,972) (8,855,967)
Share options
lapsed 132,086 (132,086)
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Share options
expense 45,433 45,433
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Warrant
expense
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Issuance of
shares for
cash
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Share issue
cost
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Balance at
31 December
2015 2,729,353 132,108,746 1,358,351 (98,405,125) 14,952,340 (18,528,856) 34,214,809
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Currency
translation 2,689,088 2,689,088
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Other
comprehensive
income 2,689,088 2,689,088
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Loss for the
six months
ended
30 June 2016 (1,950,242) (1,950,242)
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Total
comprehensive
income for
the six
months
ended
30 June 2016 (1,950,242) 2,689,088 738,846
Share options
lapsed 26,432 (26,432)
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Share options
expense 981 981
Balance at
30 June 2016 2,729,353 132,108,746 1,358,351 (100,328,935) 14,926,889 (15,839,768) 34,954,636
-------------- --------- ----------- ---------- ------------- ---------- ------------ -----------
Consolidated cash
flow statement
For the 6 months ended
30 June
6 months 6 months 12 months
to to to
30 June 30 June 31 December
2016 2015 2015
(unaudited) (unaudited) (audited)
USD USD USD
Operating activities
Loss for the period (1,950,242) (2,145,361) (4,604,356)
Adjustments:
Amortisation expense
- intangible assets 3,580 6,953 11,400
Depreciation expense
- property, plant
and equipment 197,905 293,314 578,096
(Profit)/loss on disposal
of property, plant
and equipment (154,700) 45,227 (86,580)
Provision for inventories - - 268,692
Finance income (17,312) (51,327) (132,752)
Share based payments 981 45,436 90,869
Decrease in inventories (15,557) 84,295 147,538
(Increase)/Decrease
in accounts receivable (1,688) (2,498) 153,680
Increase/(Decrease)in
accounts payable 291,999 (384,173) (322,778)
Net cash flow used
in operations (1,645,034) (2,108,134) (3,896,191)
--------------------------------------------------- ---------- --------------- --------------- ----------------
Investing activities
Purchase of tangible
fixed assets (28,351) (8,836) (220,711)
Capitalisation of
development activities (181,138) (487,568) (1,213,724)
Proceeds from sale
of equipment 1,224,585 326,601 449,801
Interest received 17,312 26,529 132,752
--------------------------------------------------- ---------- --------------- --------------- ----------------
Net cash used in investing
activities 1,032,408 (143,274) (851,882)
--------------------------------------------------- ---------- --------------- --------------- ----------------
Financing activities
Proceeds from issue - - -
of share capital
Issue costs - - -
Net change from financing - - -
activities
Net change in cash
and cash equivalents (612,626) (2,251,408) (4,748,073)
Cash and cash equivalents
at beginning of the
period 2,839,159 7,608,865 7,608,865
Effect of changes
in foreign exchange
rates (163,016) (200,947) (21,633)
-------------------------------------------------- ----------- --------------- --------------- ----------------
Cash and cash equivalents
at end of the period 2,063,517 5,156,510 2,839,159
-------------------------------------------------- ----------- --------------- --------------- ----------------
Notes to the financial statements
1 Loss per share
The loss per share is calculated by reference to the loss of USD
1,950,242 for the six months ended 30 June 2016 and the weighted
average number of shares in issue of 272,935,389 during the period.
There is no dilutive effect of share options.
2 Basis of preparation of financial statements
The financial information set out in this interim statement does
not constitute statutory accounts.
The unaudited results for the period ended 30 June 2016 have
been prepared on the basis of the accounting policies adopted in
the audited accounts for the year ended 31 December 2015. The
results for the period are derived from continuing activities. The
figures for the period ended 31 December 2015 have been extracted
from the statutory financial statements, prepared under IFRS, which
are available on the Group's website www.chaarat.com. The auditor's
report on those financial statements was unqualified.
The Group had cash and cash equivalents of USD 2.06 million and
no borrowings at 30 June 2016. The Board is in the process of
identifying sources of additional funding and has a reasonable
expectation that additional funds will be made available from
existing and new shareholders. Other sources of funds include
selling equipment and other assets of the Group, cutting
discretionary expenditure, reducing headcount, reviewing the timing
of other expenditure and pursuing other fund raising options.
Subject to the successful realisation of these expectations, the
Board is satisfied that it has sufficient funds to maintain the
Group as a going concern and therefore considers it appropriate to
prepare these unaudited results on a going concern basis.
However, in the absence of such arrangements being in place,
these conditions indicate the existence of a material uncertainty
which may cast significant doubt over the Group's ability to
continue as a going concern and, therefore, that it may be unable
to realise its assets and discharge its liabilities in the normal
course of business. The financial statements do not include the
adjustments that would result if the Group was unable to continue
as a going concern.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGURGBUPQGBB
(END) Dow Jones Newswires
September 20, 2016 02:01 ET (06:01 GMT)