Full year results for year ended 31 December 2021

RNS Number : 5538H

Chaarat Gold Holdings Ltd

07 April 2022

7 April 2022

Chaarat Gold Holdings Limited

("Chaarat" or the "Company")

ANNOUNCEMENT OF FULL YEAR RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2021

Chaarat (AIM:CGH), the AIM-quoted gold mining company with an operating mine in Armenia, and assets at various stages of development in the Kyrgyz Republic, is pleased to announce its audited full-year results for the 12 months ended 31 December 2021.

The Company will provide a live presentation relating to 2021 Annual Results via the Investor Meet Company platform today at 10:00am BST. If you wish to listen to the presentation, please register via

https://www.investormeetcompany.com/chaarat-gold-holdings-ltd/register-investor

Highlights

Group Financial Highlights

• US$92.4 million generated revenues from concentrate sales in 2021, US$72.8 million relates to own ore revenue (+4%) and US$19.6 million relates to third-party ore revenue (+221%) (2020: US$69.9 million and US$6.1 million) with increases driven by more favourable commodity prices and higher third-party ore throughput.

• The Group EBITDA³ was US$13.5 million, 45% higher compared to last year (2020: US$9.3 million).

• The Group loss after tax was US$3.6 million, an improvement of 84% from a loss after tax of US$22.4 million in 2020.

• Cash and cash equivalents increased from US$6.9 million to US$11.1 million year over year (+61%).

• The Group's net debt⁴ decreased from US$77.2 million to US$39.6 million (-49%) due to a debt-to-equity conversion and equity raise in February 2021 as well as the ongoing repayment of the Kapan acquisition loan.

ESG Highlights

• Further development of a fully integrated health and safety system inclusive of all contractors

• Improved hazard identification, risk assessment and procedural controls across the operation

• Completed sections of buttressing of the tailings storage facility ("TSF") as part of a multiyear improvement programme to improve seismic stability

• Updated the environmental and social impact assessment ("ESIA") for the Tulkubash project

• Ongoing reviews assessing best available technologies for the project regarding environment control and energy savings

• Strengthened community relations in both countries further through personal and financial support in various activities and for various stakeholders.

Kapan Operating Highlights

• Finished the year with production of 63 thousand gold equivalent ounces ("koz"¹) including 14 koz from third party ore production vs 2021 guidance of 57 koz (+10.5%).

• Exceeded processing target of 50 thousand tonnes ("kt") for third-party ore by 95 kt (+189%) in 2021, contributing to exceeding the production guidance of 57 koz.

• Kapan sold 57,212 ounces of AuEq (2020: 48,387 ounces), including third-party sales, with a realised gold price per ounce of US$1,784 (2020: US$1,773).

• All-in-sustaining cost ("AISC"²) of USD 1,205/oz was higher than the USD 1,034/oz for 2020 (+16.5%) due to higher mining costs related to more selective mining, increases to energy costs and costs associated to processing a higher portion of third-party ore feed.

• A 17% increase in standalone EBITDA³ contribution to approximately US$22.7 million at Kapan level in 2021 (2020: US$19.4 million).

Tulkubash Construction Project

• Updated bankable feasibility study ("BFS") released in May 2021 confirming robust project economics.

• Successfully completed a 4,835-metre drilling programme including infill drilling and initial exploration drilling on new target areas. JORC-compliant resource and reserve estimates are being updated to reflect the infill drill results.

• Advanced camp construction, main construction preparation work and the exploration programme with approximately US$8.5 million invested in 2021 despite the Kumtor events and the ongoing COVID-19 impact.

Kyzyltash Development Project

• Successfully completed a 3,508-metre drilling programme to obtain representative core of the Kyzyltash deposit ready for metallurgical testing. The core has been sent to SGS Lakefield in Canada for a full suite of metallurgical test work as part of assessing the preferred processing route for the project.

Corporate Activities

• Funding package of US$52.2 million closed in February 2021.

• Extension of the convertible loan notes by one year to 31st October 2022.

• Tulkubash debt financing delayed to 2022 due to ongoing market cautiousness related to the resolution of the Kumtor mine situation.

• Reduced Group net debt⁴ from US$77.2 million as at 31st December 2020 to US$39.6 million as at 31st December 2021 (-49%), primarily as a result of converting the Labro Term Loan into equity in February 2021 and reducing the Kapan acquisition loan from Kapan cash flows.

Post-year end

• Mike Fraser started as new Chief Executive Officer and member of the Board on 17^th January and since then completed a comprehensive strategic and operational review. Key elements of the strategy will be implemented within 2022.

• The Kapan Mineral Resource Estimate ("MRE") and Ore Reserves ("OR") were updated in 2021 and signed off in April 2022. The 2022 MRE was developed on a constrained basis. The application of the constraining factors and a 2.0 g/t cut-off grade limits any direct comparison to the previously reported unconstrained resource in 2019.

o The overall contained koz in the Measured and Indicated Resource ("M&I") is 579koz at 9.03 g/t AuEq applying a 2.0 g/t cut-off grade.

o Updated Ore Reserves comprise of 2.55 Mt of Proven and Probable ore at grades of 1.66g/t Au, 33.17g/t Ag, 0.34% Cu and 1.25% Zn with contained metal of 264koz at a cut-off of 2.0g/t AuEq.

• A resolution of the Kumtor mine situation was announced on the 4^th of April 2022 and Chaarat is re-entering financing discussions on the Tulkubash project as planned.

Outlook for 2022

· Macro - The conflict in Ukraine and associated sanctions against Russia have the potential to impact the supply chain, costs, and commodity prices in our region and we are monitoring the developments closely. So far, the conflict has had no direct impact on our operations, and we do not expect a material impact in 2022.

· Kapan - Confirmed mine production guidance of 50-53 koz⁵ of own-ore production and additional 6-9 koz⁵ of third-party ore production based on 100 kt milled during the year.

· East Flank - Resource definition drilling ongoing as part of preparing an initial mineral resource estimate expected in 2023.

· Tulkubash - Updated mineral resource and reserve statements are expected to be released in H1 2022. Given the resolution of Centerra's Kumtor situation, debt financing is expected to close in H2 2022. Ongoing project work will focus on engineering completion and appropriate construction activities to optimise full activities once debt financing is secured.

· Kyzyltash - Metallurgical test results expected from SGS Lakefield in Q3 2022 to enable the Company to perform an economic assessment on the best processing route in 2023.

· Corporate - Chaarat will continue to review its existing balance sheet structure with a view to further reducing its interest cost and improving the balance sheet structure.

^{1 Gold equivalent ounces for 2020 recalculated on 2021 budget prices with Au at USD1,700/oz and gold ratios of 68 for silver, 7,287 for copper and 21,862 for zinc. In last year's FY 2020 operations update, 2020 oz were based on gold ratios of 83 for silver, 7,778 for copper and 20,968 for zinc leading to a lower AuEq number reported in that previous year. Includes third party ore production.}

^{2 AISC on a gold oz produced basis exclude smelter TC/RC charges, others which add c. USD 148/oz. Sustaining capex of c. USD6 million p.a. is included in the AISC.}

³ ^{In reporting financial information, the Group presents EBITDA as an alternative performance measure, "APM", which is not defined or specified under the requirements of IFRS. The Group believes that this measure provides stakeholders with additional useful information on the performance of the business and, within that, Kapan. EBITDA is calculated by adjusting profit/(loss) for depreciation and amortisation, net finance costs, unrealised foreign exchange gain/(loss), fair value gain on warrant and change in provisions. A reconciliation is provid} ^{ed in the Financial Review section below.}

^{4 In reporting financial information, the Group presents Net debt as an alternative performance measure, "APM", which is not defined or specified under the requirements of IFRS. The Group Net debt comprises convertible loan notes, other loans, contract liabilities, lease liabilities and warrant financial liabilities, net of cash and cash equivalents. Further detail is provided in the Financial Review section below.}

^{5 Gold equivalent ounces for 2022 calculated based on Au at USD1,775/oz and gold ratios of 75 for silver, 6,597 for copper and 20,381 for zinc.}

Martin Andersson, Executive Chairman of Chaarat, commented:

"I am pleased to report that we exceeded our 2021 production guidance at Kapan as well as achieved another set of strong financial results for the Company.

The difficulties of the COVID pandemic and global supply chain issues created an ongoing set of challenges for the Company, but the continued strong macro-economic environment and an excellent job by our team helped manage these conditions.

The year 2022 started with a good steady operational performance but we are seeing more and more inflationary pressure flowing through due to the strong price environment. As has been the case since taking over Kapan, the team will continue to look for improvements and new methods of operating to minimise these impacts on the business.

On 4^th April 2022, Centerra and the Kyrgyz Government announced an agreement on the Kumtor mine had been reached. We were pleased to see this situation being resolved and are re-engaging with potential lenders on our Tulkubash financing efforts. We will update the market as soon as further progress has been made."

Forward-looking Statements

This announcement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the Company's business. Whilst the Company believes the expectations reflected herein to be reasonable considering the information available to them at this time, the actual outcome may be materially different owing to factors beyond the Company's control or within the Company's control where, for example, the Company decides on a change of plan or strategy. Accordingly, no reliance may be placed on the figures contained in such forward-looking statements. The forward-looking statements contained in this document speak only as of the date of this announcement, and Biffa does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Publication of Annual Report

The Company will publish its Annual Report and Financial Statements 2021 on 22 April 2022. This document will be available to view on the Company's website at www.chaarat.com/investors and will be posted to shareholders who have elected to receive hard copies on 22 April 2022.

Annual General Meeting

The Annual General Meeting ("AGM") will be held on Tuesday, 17 May 2022 at 10am at the offices of Watson Farley & Williams LLP, 15 Appold Street, London EC2A 2HB, United Kingdom .

About Chaarat

Chaarat is a gold mining company which owns the Kapan operating mine in Armenia as well as Tulkubash and Kyzyltash Gold Projects in the Kyrgyz Republic. The Company has a clear strategy to build a leading emerging markets gold company with an initial focus on the FSU through organic growth and selective M&A.

Chaarat aims to create value for its shareholders, employees and communities from its high-quality gold and mineral deposits by building relationships based on trust and operating to the best environmental, social and employment standards. Further information is available at www.chaarat.com/ .

Enquiries

Chaarat Gold Holdings Limited	+44 (0)20 7499 2612
Michael Fraser (CEO)	info@chaarat.com

Canaccord Genuity Limited (NOMAD and Joint Broker)	+ 44 (0)20 7523 8000
Henry Fitzgerald-O'Connor
James Asensio

finnCap Limited (Joint Broker)	+44 (0)20 7220 0500
Christopher Raggett

Panmure Gordon (UK) Limited (Joint Broker)	+44 (0)20 7886 2500
John Prior Hugh Rich

Executive Chairman ' s Statement

Two years have now passed since the beginning of the pandemic. Like the rest of the world, Chaarat has had to adapt to doing business differently. This year we have continued to demonstrate that we are a resilient business that can withstand external factors as we continue on our path towards becoming a mid-tier producer.

Safety and health

The safety and health of our employees and host communities remains one of our key values. Learnings from the tragic loss of life of an employee of our mining contracting company in March 2021 that we reported last year have been used to further develop and improve the already high standards we have and further emphasise the safety culture and performance throughout Chaarat.

Our lost time injury frequency rate at Kapan for the year was 0.74 per one million hours worked (2020: 0.37). 392,000 hours were worked at Tulkubash in 2021 with no lost time injuries.

Sustainability

We place significant importance on sustainable development and social investment programmes in the countries in which we operate. We genuinely believe that respectful and open dialogue and partnership with local stakeholders is essential for the long-term success of our operations. In keeping with our ESG guidance principles, our main areas of focus in our host communities continue to be health, education, and sustainable development opportunities.

2021 progress

I am pleased to be able to announce that the team at our Kapan mine has again exceeded production guidance, this year by 11 %, achieving 63koz AuEq production guidance (including 14koz from third-party ore).

During the year we continued our efforts to progress a potential funding solution for our Tulkubash development project. Despite having no direct impact on our own operations, ongoing market cautiousness pending a resolution of the ongoing issues at the Kumtor gold mine in Kyrgyz Republic have led to a further delay in securing the project funding required and a consequential delay to the date for first gold pour. Given the recent resolution of the Kumtor issues, I am hopeful that we will secure project finance during 2022. Nevertheless, we have made progress with camp construction, main construction preparation, and exploration.

We have also progressed our Kyzyltash development project with completion of a drilling programme to obtain representative core of the deposit ready for metallurgical testing. This testing will provide us with the information necessary to progress to the stage of determining the optimum processing route during 2023.

2021 results

Our 2021 Financial Results reflect the increase in commodity prices, with an increase in Group EBITDA of 45% compared to 2020. EBITDA in the last months of 2021 were impacted by increasing inflationary pressure as a result of the strong commodity price environment. The team is renewing its efforts with regards to finding mitigations to these new cost pressures.

While the majority of equity raised was utilised for ongoing exploration and construction preparation for our Tulkubash project, the metallurgical drill programme on our Kyzyltash project and overhead expenses, the year-end cash balance increased from US$6.9 million in 2020 to US$11.1 million in 2021.

Together with our existing shareholder and debtholder base and a number of new investors to Chaarat, we managed to significantly improve our balance sheet in 2021. Our net debt decreased by almost 50% from US$77.2 million to US$39.6 million as a result of continued debt repayments, debt conversion and equity commitments.

Board and senior management changes

I would like to welcome Mike Fraser who joined our Board as Chief Executive Officer in January 2022. Mike brings over 20 years of extensive experience in the global mining and metals industry and I am delighted that he has joined Chaarat. His impressive track record for driving operational performance and culture will mean that he is well-equipped to drive our performance going forward.

It is also my pleasure to welcome Sandy Stash, who joined the Board in May 2021 as an independent non-executive director. Sandy brings decades of experience in the energy and hard rock mining industries, particularly in ESG matters.

Our former Chief Executive Officer, Artem Volynets, resigned from that role and as a member of the Board in August 2021. Chris Eger also resigned as Chief Financial Officer in November 2021. I would like to thank them both for their service throughout their respective three-year tenures. I am grateful to our Group Financial Controller, David Mackenzie, for agreeing to act as Interim Chief Financial Officer.

Our people

On behalf of the Board, I would like to extend my sincere thanks to all our employees for their commitment, dedication, and loyalty. I would especially like to thank our senior management team for their unfaltering support and flexibility during the period whilst I served as interim Chief Executive Officer. I would also like to extend a special thanks to all employees at our Kapan mine who, despite the operational challenges posed by the ongoing pandemic, enabled us again to exceed our production guidance.

Corporate governance

As Chair, I am responsible for leading and ensuring an effective Board. The role of the Board remains that of setting strategy, ensuring the right resources are in place to deliver it, promoting long-term success, generating value, and contributing to wider society. I believe that the Board has the right balance of skills and expertise to continue to support and challenge management as Chaarat enters a new chapter of its history under Mike Fraser's leadership.

Investors

I was delighted that, in February 2021, we were able to raise US$30.0 million of new cash for our Tulkubash project and reduce our indebtedness by US$22.2 million.

In October 2021 we extended the maturity of our convertible loan notes by one year to 31 October 2022 and I am very grateful to our noteholders for their patience and understanding.

2022 and beyond

In the coming year, our development priorities will be to secure project finance for Tulkubash, to progress Kyzyltash by determining the optimal processing route, and preparing an initial mineral resource estimate for the East Flank of our Kapan mine. Our financing priority is to address the upcoming convertible bond, due in October 2022, in a timely manner.

On 4^th April, Centerra and the Kyrgyz Government announced an agreement on the Kumtor mine had been reached. We were pleased to see this situation being resolved and are re-engaging with potential lenders on our Tulkubash financing efforts. We will update the market as soon as further progress has been made.

The conflict in Ukraine and the associated sanctions against Russia have not impacted our operations, and given our focus on local sourcing, any impact would be minimal. We are continuously monitoring the situation and will take the necessary steps to ensure any impact on our operations is minimised.

Finally, I would like to take this opportunity again to thank our loyal investors for their patience and steadfast and continuing support.

Chief Executive Officer's Review

I was drawn to Chaarat by the potential of where it could go in the future. Whilst there are a number of challenges to be faced there are also significant opportunities, and a very capable Board and management team well placed to embrace these opportunities. Many assets in the gold sector are mispriced and we believe that the sector is overdue for further consolidation.

I have been with Chaarat almost three months now and I am impressed by the dedication and commitment of its employees. As with any company, Chaarat needs to embrace change and evolve. What has been encouraging so far is that there is a real appetite for reflection on how we do things and organise ourselves. A willingness and desire to reflect on areas for improvement is a great base from which to start.

Setting the right strategic focus for the Group is paramount. I am keen to ensure that everyone in the business knows where we are heading, what is important to us, and what we are trying to achieve. During the coming year, the immediate priorities will be to continue to drive reliable and safe operating performance at Kapan, secure project financing for Chaarat's Tulkubash development project, and progress the studies of our Kyzyltash project. We will be uncompromising on safety, and this will be a key area of focus for me, particularly following the tragic fatal incident last year to which Martin refers to in his letter.

Chaarat's vision is to build a leading emerging markets gold company which delivers value to all our stakeholders by adhering to the highest environmental, social, and governance standards. Creating a shared purpose and unifying around aligned objectives, values and behaviours will be vital to the successful delivery of that vision. To this end I will also be focusing on our organisational capabilities and priorities to ensure strategic alignment.

Finally, I would like to thank Chaarat's employees for their support to me in my early months with the Company.

Our Strategy

•	ESG	We will work responsibly to: · provide a safe work environment built on the highest standards of safety management · operate to the highest standards of environmental stewardship · enhance the infrastructure, education, and healthcare in our host communities and to improve the living standards and opportunities for those communities
•	Organic growth	We will maximise our production via: · operational improvements, mine life extension, and brownfield development at our Kapan mine in Armenia · staged development of the assets at our Kyrgyz Republic operations (Tulkubash and Kyzyltash)
•	Inorganic growth	We will selectively identify value-accretive opportunities in our target regions if we see the potential for those to deliver value to shareholders by utilising Chaarat's experience and skillsets in both the short term and through longer-term exploration and development potential
•	People	We will attract, retain, and develop a skilled and diverse workforce across all levels of our organisation with a focus on developing local talent in our host communities and creating an environment in which those employees can thrive and learn
•	Finance	We will identify opportunities to secure funding and reduce the cost of capital with the main objective of maximising value for shareholders with appropriate consideration to levels of shareholder dilution

Strategy Progress and Priorities for 2022

ESG	2021 progress		2022 priorities
Safety	Further development of a fully integrated health and safety system inclusive of all contract companies Improved hazard identification, risk assessment and procedural controls across the operation		Increased focus on the management of health-related risks such as hearing loss and particulate exposure through the use of baseline assessments, personal monitoring, and area surveys
Safety
Environmental	Ongoing Buttressing of the tailings storage facility (TSF) as part of a multiyear improvement programme		Completion of internal assessment of performance against global industry standard on tailings management


	Completion of revised Environmental & Social Impact Assessment (ESIA) for the Tulkubash project Ongoing energy reduction upgrades via switch gear renewal and Installation of low energy lightbulbs throughout Kapan		Ongoing dialogue with the regulatory bodies regarding approvals of new proven technologies
	Ongoing reviews assessing best available technologies for the project regarding environment control and energy savings
Community	Strengthened community relations in the countries and regions we operate in further through personal and financial support in various activities and for various stakeholders. Initiatives are coordinated and approved with the stakeholders in the beginning of the year and then acted upon to create alignment and commitment. Key activities can be reviewed on https://www.chaarat.com/esg-sustainability/ There was no opposition to our operations in 2021.		The 2022 activities will be in line with 2021 and targeted towards the community needs. The strong relations with our communities allow an open and honest dialogue on required initiatives.
Community
Organic growth	2021 progress		2022 priorities
Kapan	Increased treatment of third-party ore		Optimise mill throughput via increasing own production and sourcing additional third-party ore supply
	Increased treatment of third-party ore
	East Flank infill drilling commenced		Start of multiyear drill programme to develop a JORC compliant resource, reserve, and mine plan for East Flank (subject to funding)
Tulkubash	Advancement of construction equipment selection and design engineering Completion of 2021 exploration programme targeting those areas referred to as mid and East zones to convert additional tonnage to M&I Initial exploration of Karator and Ishakuldy areas to confirm their attractiveness for further exploration		Maximise execution preparedness ready for funding availability and updating capital estimates
	Completion of BFS update incorporating the 2020 drilling results, revising cost estimates, and demonstrating the sound economics of the project Completion of contract discussions with Çiftay

Kyzyltash	Completion of metallurgical drill program		Metallurgical test work programme to be carried out to assess performance of flotation and various oxidation processes on representative samples of Kyzyltash ore. Key step in optimizing project economics
Inorganic growth	2021 progress		2022 priorities
M&A	Identified, evaluated, and progressed various opportunities through due diligence via a systematic staged gate approach. Some opportunity reviews and the underlying assessment and engagement processes are ongoing.		Continue to identify and evaluate value enhancing acquisition opportunities and, if appropriate, execute one or more
People	On a group level restructured the executive team to account for the required skillset for the next stages of the company with strong construction and operational skills being required during the construction of Tulkubash and development of Kyzyltash as well as the potential integration of M&A targets. Enhanced measures to ensure a safe and attractive work environment for all employees, with additional measures performed at Kapan level after the fatality accident. Ongoing COVID precaution measures throughout the year.		Continued focus on local empowerment of employees to take decisions where appropriate Continued efforts to secure the required skillsets, deliver top training programmes, and act proactively in relation to improving the work environment
Finance	2021 progress	Page	2022 priorities
	Funding package of US$52.2 million closed in February 2021 which included issuing US$30.0 million in equity to new investors and conversion of debt into equity of US$22.2 million		Secure project finance for Tulkubash
			Repay or refinance convertible loan notes due on 31 October 2022
	Extended the maturity of the convertible loan notes by one year to 31 October 2022
	Reduced principal interest-bearing debt from US$70.5 million as at 31 December 2020 to US$38.7 million at 31 December 2021, primarily as a result of converting the Labro Term Loan into equity in February 2021 and reducing the Kapan acquisition loan by US$9.0 million from Kapan cash flows		Ensure existing debt financing is efficiently structured

Environmental, Social, and Governance ("ESG")

Safety and Health

On 4 March 2021, a tragic fatal incident occurred at Chaarat's Kapan operation. The event occurred during activities to clear a blocked ore pass. A management review of the incident identified that despite recognizing the hazards of the activity and effectively communicating the required control measures, the supervisor overseeing the work took actions that sadly led to the loss of his life. Independent investigations by the Armenian labour authority and police came to the same conclusion.

Despite ongoing activities to improve risk identification and risk management on site, this event highlighted that there were still elements of the safety culture that had an inappropriate level of risk tolerance. Companywide safety meetings were held with all employees and contractors immediately after the incident to discuss the issue of unacceptable risk tolerance and the need for improvement in the business. The incident has acted as a catalyst for change within the company and has enabled us to make good progress on improving the underlying safety culture at Kapan.

There was one lost time injury in March at Kapan related to an employee who suffered a medical condition while accessing a work platform. The employee suffered serious injuries when he fell and landed in an awkward position.

Since March, the safety record at Kapan has been good with no serious incidents occurring for the last 11 months. Lost time Injury Frequency for 2021 was 0.70 compared to 0.37 for 2020 due to two incidents in 2021 compared to one in 2020.

As a result of the fatality, our ongoing cultural change at Kapan refocused slightly to build on responsibility for each other, as well as focusing on a sense of local ownership, entrepreneurship, and decentralized assessment and decision making. Since our acquisition of the mine, we have been working to create a unified approach to health and safety where no difference exists regarding values, standards, and practices whether direct or contract employee. The tragic incident refocused everyone on this essential transformation. It allowed us to challenge the cultural barriers that existed in Kapan and to rethink how everyone that goes to work at our sites has the same rights regarding being able to go to home to their families safe and healthy at the end of their workday.

Safety at our Kyrgyz operations remains strong with no lost time injuries or high potential incidents for the year.

As a group, we worked approximately 3.25M hours in 2021 with an overall lost time injury frequency rate of 0.61 per million hours. Lessons learnt from the Kapan fatality were shared with in our Kyrgyz operations to ensure the key lessons could be proactively incorporated.

Environment and Cultural Resource Protection

Work on the Tailings Storage Facility (TSF) buttressing has been ongoing throughout 2021. The known areas of highest risk have been reinforced and the work of adding compacted fill to the slope of the north dam wall has progressed well. The risk of any failure of the TSF due to seismic activity has been reduced as a result of these actions.

Our focus has been on using appropriate fill from our mining operations rather than mining new material from somewhere else in Armenia. Suitable waste material is hauled direct from the mine to the TSF. In this way we avoid the need to quarry new materials, minimize transportation distances, reduce fuel consumption and greenhouse gas emissions. Onsite waste dumps of appropriate material have been emptied and the rock moved to the TSF as well. Our approach requires longer to complete, but is significantly more environmentally responsible, while at the same time managing the risks associated with the historical legacy issues of the TSF. Approximately 366 thousand tonnes of rock have been piled and compacted to design specifications as part of the buttress construction to date.

The third-party assessment against the Global Industry Standards on Tailings Management was not completed in 2021 as travel restrictions related to COVID-19 made such work difficult. As a first step, Chaarat will undertake a more detailed internal assessment in 2022 and determine what additional activities need to be undertaken on a priority basis.

In Kapan we continue to operate our annual reforestation program in conjunction with the local community. Each year staff and volunteers from the community spend time planting seedling in suitable areas and to address past environmental damage from a long history of mining in the area. To date, approximately 1,300 trees have been planted as part of this initiative.

In the Kyrgyz Republic we work with the regional and national government to offset the impact of our project development. A licence needs to be obtained and a fee paid based on the type and age of the trees and bushes that need to be removed during the development of the mine and processing areas. This fee is then used by the Government for reforestation projects across the country on a prioritized basis.

During the original Environmental and Social Impact Assessment ("ESIA") process it was determined that there was one species of plant that needed to be relocated due to our activities. Government representatives visited the site and in conjunction with our environmental team relocated the Kaufman's tulip bulbs identified to suitable locations outside of the area affected by our activities.

Work was also undertaken to stabilize and protect an area of archaeological interest that was close to our proposed heap leach area. Members of the archaeological team from the government came to site to supervise stabilization and fencing works. This work is not only intended to protect the area from our operations but also visitors to the area during the year. Herders move through the valley to suitable vegetation in other areas, and many people from the local community come at various times of the year to pick herbs and medicinal roots and leaves. The work carried out helps protect the area from inadvertent contact or disturbance of any kind.

Climate change

Work has been ongoing throughout the year to replace the old energy-intensive lights in use both underground and in the processing plant with modern low-intensity lights. We have also been replacing some of the old switchgear and wiring on site with new equipment. This new equipment includes the latest technology regarding energy saving technologies. They also offer improved safety for our electrical teams regarding arc flash risk.

As part of every capital project, we assess what improvements are possible with regard to the reduction in energy use and of GHG emissions.

Further work will be undertaken in 2022 to better understand and define the physical and transition risks to the company from climate change.

Community Relations

Operations throughout 2021 continued to be impacted by the various waves of COVID-19 infection travelling around the globe.

The various control and mitigation measures we implemented at the start of the pandemic remained in place throughout the year. In general, our controls proved to be effective, especially when supported by general societal controls such as mask wearing and social distances. As societal controls reduced, the challenges faced by the operations became more challenging. At our Tulkubash site, pre travel testing continued to prove effective, but for our town and city-based activities they proved less so. With almost no controls in place outside of the workplace, employee infection rates increased significantly. Infection rates peaked in the Kyrgyz republic in the summer and in Armenia in late 2021. Vaccination levels amongst our staff are significantly above the national averages for both countries. We encouraged vaccination through educational programs and worked with the local health authority in Kapan to provide access to vaccinations via the onsite health clinic. Thankfully, severity levels were low in workforce and in our local communities.

Throughout the year we maintained our social programs in conjunction with the local authorities and community groups.

As a border town, Kapan's focus was assisting local Armenian families affected by the war in 2020. We have provided funds that have been used to purchase family dwellings and livestock for displaced families. Our focus on education continued with support provided to various school and educational groups in the greater Kapan area.

Normal face to face activities resumed in late Q3 in Chatkal when Chaarat was able to resume their sponsorship of the Chaarat Cup games. After last year's absence the regional communities were very happy to resume the event.

The revised ESIA for the Tulkubash project was published in May 2021 and is available on our website.

Government Relations

For the second year in a row, Chaarat, the Government of the Kyrgyz Republic and the European Bank for Reconstruction and Development were unable to hold the Kyrgyz British Investment Forum. COVID travel restrictions prevented travel and in person events in London.

Relations with the governments in both countries remains positive. The government of the Kyrgyz Republic continues to support the development of the Tulkubash project, and our Chairman has had several constructive in-country discussions at Ministerial and Presidential level during the year.

In Armenia, relations with the government at the local, regional, and national level continue to be strong. Our support of the local community, assistance in encouraging COVID vaccination in the region and other ongoing activities were recognized and rewarded at the highest levels. Our Country Director received several commendations and rewards from both the regional and national governments.

Chief Operating Officer's Review

Kapan

2021 is the third year of operation for Chaarat of the Kapan mine.

The Kapan ore body is made up of a network of narrow variable steeply dipping polymetallic veins. The ore body is currently worked using a combination of mechanized and handheld mining techniques to optimize the geology of the mine.

The Mill produces 2 flotation concentrates. One high in gold, copper, and silver, the second is a zinc concentrate with some contained gold and silver. The mine has a capacity of approximately 600-700kt pa depending on mining method used. The milling and flotation circuits have a capacity of approximately 800kt pa expandable to 1Mt per year with minor capital investment.

Kapan Operational Highlights

· Tonnes mined for 2021 were 600,246t compared to 684,156t in 2020. The 12% reduction in tonnage was the result of a change in mining method. Many areas of the mine currently being worked do not lend themselves to fully mechanized mining methods due to the size and nature of the veins. Trial work on different methods including shrinkage method, started at the end of 2020 and is now in use in many parts of the mine.

· Mine head grade increased to 3.3 g/t as a result of the changes, from 3.0 g/t in 2019 and 2020. Mill grade for own ore was in line with mine production.

· Mill throughput was relatively constant at 729,473t compared to 744,705t in 2020. Own ore treated was lower due to the reduction in mine output, but third-party ore increased. 144,632t of third-party ore were treated in the year compared to only 67,838t in 2020.

· Supply of third-party ore is expected to remain at the current levels in 2022. The mill still has additional capacity, and this can be filled by additional third-party ore while internal growth projects work on ways to fill the mill with higher value own ores.

· Recoveries from own ore declined slightly in 2021 to 79.1% compared to 79.9% in 2020. The reduction was due to a combination of higher oxidation and ﬁner grain size in some of the areas mined during the year. As Kapan is a polymetallic mine, increased oxidation of the sphalerite and chalcopyrite alter the potential of the minerals to float in the mill circuit. In some areas of the mine, the grain size of the minerals has reduced from the historical norm. Despite the mill circuits improvements made in 2020, it was not possible to achieve the grind size necessary to fully liberate sphalerite from the chalcopyrite and zinc levels in the gold/copper concentrate increased.

· In Q3 the government of Armenia introduced a new sales tax on copper concentrates to allow the country to benefit from the highest prices seen since 2011. Due to the nature of the polymetallic mineralogy at the Kapan mine, the concentrate produced is not a classic copper or gold concentrate but a mixed gold/copper concentrate. After lengthy discussions with the government, they issued an exemption to Kapan and one other mine related to the new tax. Sales of gold/copper concentrate were put on hold by the company during Q3 pending final resolution of the tax issue. All concentrates accumulated during the period were shipped before year end, but the delay did impact cash flow to the business during that period. Kapan management did an excellent job of working with its suppliers and lenders to minimize impacts across the supply chain.

· Kapan experienced issues during the year related to logistics and supply chain challenges that affected global trade. Delivery costs for incoming goods increased as did the costs of shipping our concentrated. Although commodity price increases helped revenue, they did adversely affect operating costs. The costs of consumables and reagents based on steel, copper, and zinc all increased. This had a negative effect of all in sustaining costs. Initiatives are ongoing to minimise the impact of these inflationary pressures on the business.

2021 full-year production consists of:

Kapan	2021	2020
Production (oz AuEq)	63,039	58,661 ¹
Own ore (oz AuEq)	48,601	54,215
Third-Party ore (oz AuEq)	14,438	4,446
All-in sustaining cost (USD/oz)	1,205	1,034
Sales (AuEq oz)	57,212	48,387
Gold production (oz)	35,405	30,837
Silver production (oz)	610,322	587,718
Copper production (t)	2,284	2,154
Zinc production (t)	5,836	7,641

Realised gold price (USD/oz)	1,784	1,773
Realised silver price (USD/oz)	25	20.4
Realised copper price (USD/t)	9,157	6,117
Realised zinc price (USD/t)	3,001	2,222

¹ Not adjusted for changes in price desk, as per reported in 2020.

Kapan - Exploration Potential

Work is continuing on the East Flank target area adjacent to the current Kapan mine. An underground development drive has been mined to provide access to the East Flank from the current mine workings. Diamond drilling will start in 2022 from several drilling chambers installed off the development drive. A total of 13,400m metres of drilling are planned over the next 2 years with almost 15,000 core and channel samples to be tested. The East Flank area is currently developed to a P2 resource level, and the new drill program is designed to bring the most prospective area of the East Flank to an inferred level of certainty under JORC classifications.

Work is also ongoing to assess additional exploration and development opportunities in the region around the Kapan mine. Our first priority is to look if additional tonnage suitable for treatment in the Kapan mine can be identified and developed. Second priority is to identify new growth opportunities in Armenia suitable for future development.

Ore Resources and Reserves

Resource drilling increased significantly in 2021 to help improve resource modelling. Drilling increased from 37,400 metres in 2020 to 69,300 metres in 2021.

The work has improved the accuracy of the resource model, and mine reconciliation is now much closer to mill production. This helps improve accuracy of budgeting and forecasting of grade and tonnes compared to the old model, which is always a challenging activity in a narrow vein, variable underground mine.

The mineralised areas at Kapan are well understood from many years of drilling. Exploration drilling has defined extensive mineralisation, but in certain areas this cannot be converted into a resource estimate at this time as drill hole density is not sufficient to classify mineralisation as inferred. To be effective, all resource drilling needs to be carried out underground preferentially perpendicular to the vein orientation.

Resource development drives and drilling occurs in advance of mining to ensure sufficient areas are converted to Measured and Indicated and sufficient new inferred tonnage is added for future infill drilling. This is the case with all such narrow vein mining operations. This type of resource development effectively limits the size of the reserve that can be sensibly developed to a much shorter horizon than is the case with large more homogeneous ore bodies, either open pit or underground.

The Company updated its Mineral Resources and Ore Reserves in June 2021 which was signed off by independent consultant AMC and the Chaarat board in March 2022. The Mineral Resources and Ore Reserves, detailed in this press release, have been reported following the guidelines and requirements of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves ('the JORC Code'), 2012 (JORC 2012).

The following table summarises the updated 2021 Mineral Resource Estimate:

			Grade					Metal
Classification	Tonnes (Mt)	Density	Au (g/t)	Ag (g/t)	Cu (%)	Zn (%)	AuEq (g/t)	Au (Koz)	Ag (Koz)	Cu (Kt)	Zn (Kt)	AuEq (Koz)
Measured	0.24	2.72	6.55	107.9	1.24	5.10	12.17	50	826	2.95	12.1	93
Indicated	1.76	2.76	4.43	88.31	0.92	3.51	8.60	250	4,989	16.2	61.6	486
M & I	2.00	2.76	4.69	90.65	0.96	3.70	9.03	301	5,815	19.2	73.7	579
Inferred	3.50	2.80	3.37	76.46	0.79	2.71	6.89	379	8,596	27.6	94.8	775

· The effective date of the resource is 1st June, 2021. The Mineral Resources that are not Mineral reserve do not demonstrate economic viability. Numbers may not sum due to rounding.

· The gold equivalency formula is: Au Eq = Au + (Ag g/t * ($25 / $1,700) + (Cu % * ($8,000 * 31.1035 / $1,700) / 100) + (Zn % * ($2,500 * 31.1035 / $1,700) / 100

· Wireframes defined by a mineralized cut-off with a parent block size of 4 m x 4 m x 4 m, Grades interpolation is by Ordinary Kriging method.

· MSO applied assuming: minimum width 2.2m; COG 2.0g/t Au Eq

· Mineral Resources are with applied depletion and inclusive of Ore Reserves.

· The resource estimate and classification is according the JORC Code (2012) reporting code.

This update of the Mineral Resource estimate from 2019 is reflecting the mining depletion and mine development and grade control drilling conducted in the subsequent 2020-2021 period.

It is the CP's opinion that the Measured and Indicated Mineral resource herein is a reliable basis for the Ore Reserve Estimate update.

The following table summarises the 2021 Ore Reserves:

		Grade					Metal
Classification	Tonnes (Mt)	Au (g/t)	Ag (g/t)	Cu (%)	Zn (%)	AuEq (g/t)	Au (Koz)	Ag (Koz)	Cu (Kt)	Zn (Kt)	AuEq (Koz)
Proven	0.15	2.21	37.55	0.45	1.60	4.07	10.4	184.1	0.7	2.4	19.9
Probable	2.39	1.63	32.90	0.33	1.23	3.17	125.6	2,531.7	8.0	29.5	243.8
Total Proven and Probable	2.55	1.66	33.17	0.34	1.25	3.22	136.0	2,715.9	8.7	31.9	263.7

· Ore Reserves, fulfilling the requirement of the JORC Code (2012), are contingent on completion of a formal Mineral Resource report and application of reasonable prospects for eventual economic extraction to Mineral Resource statement.

· Ore Reserves are based on long-term metal prices of USD1,700/oz Au, USD25/oz Ag, USD8,000/t Cu, and USD2,500 Zn.

· Ore Reserves are based on a gold equivalent cut-off of 2.0g/t Au.

· Mineral Resources which are not Ore Reserves do not have demonstrated economic viability.

· Table is subject to rounding errors.

· The average density of Measured and Indicated Resources is 2.67 t/m3. A density of 2.64 t/m3 was used for unmodelled diluting waste material.

· Tones reported are in situ, dry tonnes.

The historical upgrade of Inferred Resource to M&I Resource that can be converted to reserves suggests that the life of mine can be further extended from the anticipated upgrading of a portion of the current Inferred Resource. Ongoing exploration is expected to continue adding to this inventory.

Outlook for 2022

Kapan Mine production guidance for 2022 is 50-53 koz of own-ore production with an additional 6-9 koz of third-party ore production. This is based on 100,000t of third-party ore treated during 2022.

East Flank resource definition drilling is planned, as part of preparing an initial mineral resource estimate and results are expected in 2023.

Tulkubash

Introduction

Tulkubash is an oxide gold deposit suitable for open pit mining, and extraction using standard heap leach gold extraction technology. It has a well drilled JORC compliant proven and probable reserve which has been reviewed by external parties as part of the funding initiatives carried out to date. The 2021 reserve showed an estimated life of mine of five years. Additional drilling in 2021 was carried out to add additional ounces to this reserve. Further potential exists to the northeast along strike. Initial exploration was carried out in 2021 to start defining the potential of these extension areas.

2021 Tulkubash Project Highlights

There were no lost time injuries or major safety incidents during the year. The project has worked 1.38M hours since 2018 without a lost time injury.

Logiproc, an engineering consultancy from South Africa, completed the revision of the project bankable feasibility study ("BFS") in May. An update of the Environmental and Social Impact Assessment (ESIA) was completed in June. Both reports are available on the Chaarat website.

Construction activities in 2021 were slowed due to the delay in project funding. Activities focused on furthering detailed engineering of the process plant (Absorption / Desorption / Recovery plant, Reagent Storages, Crushing and Conveying Circuit) and infrastructure including in-country legalization of detailed design documentation. Construction focused on the installation of camp modules, haul road and process platforms construction. The full project team remains in place ready for a quick ramp up of activities once project ﬁnancing is secured.

Studies were carried this year on the geotechnical and hydrogeological elements of the proposed pits. The reports are being finalized but results were as anticipated from prior assessment of the area.

Resource and Reserves

The Tulkubash Mineral Resource Estimate (MRE) and Ore Reserves Estimate (ORE) were updated as part of the BFS update. As the project remains in the construction phase, these estimates accurately reflect the current estimates for the Tulkubash project.

Tulkubash Mineral Resource Statement (Effective 7 November 2020)

Classification	Quantity (kt)	Grade Au (g/t)	Contained metal Au (koz)
Measured	-	0	-
Indicated	28,505	0.86	789
Inferred	21,412	0.56	388

Tulkubash Ore Reserves (at Year end 2020)

Category	Quantity (Mt)	Grade (g/t)	Metal Au (kg)	Metal Au (koz)
Proven	-	-	-	-
Probable	20.9	0.85	17,760	571
Total P&P	20.9	0.85	17,760	571

A revised MRE and ORE including the results of the 2021 programme is being developed and will be released in Q2 2022.

Exploration Highlights

The 2021 exploration programme was completed on schedule. 4,835 metres of inﬁll drilling was carried out in the Mid and East areas aimed at reclassifying Inferred and unclassiﬁed areas to Indicated. The drill holes intersected consistent oxide gold intercepts as expected.

Additional drilling and trenching were carried out in areas to the northeast of the current reserve in the Karator and Ishakuldy areas. The work is early-stage exploration to assess the potential of the continuation of the Tulkubash mineralization on strike. The early work returned some positive intercepts and encouraging results. Further exploration will be carried out in these areas in the future. The full 2021 exploration results are available on the Chaarat web page.

The wide area potential work planned for 2021 could not be completed as planned. This work is now being arranged for the 2022 season. The work will consist of an aerial drone based magnetic survey of the entire exploration licence area. The survey will target delineation of prospective anomalies related to Tulkubash and Kyzyltash style mineralisation along approximately 8km of strike, as well as potential porphyry/scarn systems further northeast. Further reconnaissance trenching and scout drill testing of structurally most prospective Kyzyltash style targets are also planned.

Kyzyltash

The Kyzyltash sulphide ore body has an unconstrained Measured and Indicated resource of 4.6M ounces of gold. As the next step in progressing towards the development of this high potential project, over 3,500 metres of large diameter diamond drilling comprising 16 holes was carried out to obtain core from across the deposit. This core will be used to develop representative composite samples on which to undertake suitable metallurgical testing to develop a detailed process understanding of how best to treat and recover the gold contained in the Kyzyltash deposit.

The core has been sent to SGS Lakefield in Canada for a full suite of metallurgical tests. SGS Lakefield was selected due to their expertise in metallurgical testing and the fact they were able to undertake testing on pressure oxidation (POX), biological oxidation (BIOX) and Albion oxidation of refractory sulphide gold ores in the same facility. Results from this comprehensive test programme are expected around mid 2022. The results will enable assessment of which technologies are suitable to take to the next stage of project assessment for an initial determination of operating and capital costs.

Kyzyltash Mineral Resource Estimate

The Kyzyltash Unconstrained Resource was prepared in accordance with JORC standard as of 19 October 2014

Resource statement JORC 2014 (cut-off grade 2g/t)	Tonnes (mt)	Au (g/t)	Metal (koz)
Measured	6.72	3.26	700
Indicated	32.79	3.79	3,900
Measured and Indicated	39.52	3.70	4,600
Inferred	6.61	4.05	800

Principal Risks and Uncertainties

Risk

Existing mitigating actions

Liquidity

The Group requires significant additional financing in the future to develop projects and to meet ongoing financial needs. The Group's £25.6m convertible loan notes fall due on 31 October 2022. There can be no assurance that additional financing will be available, or if available, that it will be on acceptable or favourable terms. The failure to obtain additional financing as needed on reasonable terms, or at all, may require the Group to reduce the scope of its operations or anticipated expansion, dispose of or forfeit its interest in some or all of its properties and licences, incur financial penalties or reduce or terminate its operations.

Maintain discussions with existing lenders and potential finance providers.

Address potential gating items to securing project finance.

Looking for new funding options.

Jurisdiction

The existence of Armenia and the Kyrgyz Republic as independent states resulted from the break-up of the FSU. As such, they have relatively short histories as independent nations and there remains potential for social, political, economic, legal, and fiscal instability. The laws and regulations in Chaarat's areas of operation are still developing in some areas and some provide regulators and officials with substantial discretion in their application, interpretation, and enforcement.

In 2011, a Kyrgyz Government decree transformed land categorised as 'highly protected territory' into 'industrial territory' but mistakenly omitted a small part of Chaarat's licence area from the transformed 'industrial territory'.

The Kyrgyz Government continues to progress activities to rectify this administrative error. The final decree is with Government Ministers for approval and UNESCO is aware of the that the decree is reaching the final stages of approval. Chaarat's mining licence agreement remains compliant with Kyrgyz law and Chaarat has all permits and licences necessary for the construction and operation of the Tulkubash project within its entire licensed area, including the land that is in the process of being correctly reclassified.

Process in place to monitor prospective legislative changes, discuss them with competent state bodies and make suggestions.

Participation in working groups with other mining companies.

Stabilisation agreement in place in respect of the Kyrgyz Republic.

Regular dialogue with ministerial departments.

Operation of an ethics and compliance programme with annual refresher training.

Ensuring that all permits and licences necessary for the construction and operation of the Tulkubash project are complied with.

Ensuring that all laws an regulations of the Kyrgyz Republic are complied with.

Environmental

Effective environmental management is critical to maintain regulatory approvals and social license to operate. Key risk area at Kapan is related to the historical upstream construction tailings storage facility. Active mitigation measures are in place. Risks for Tulkubash currently relate to construction activities. Management plans are developed related to operations as per project ESIA.

Implementation of proper geohazard mitigation measures and maintenance of a proper hazard management programme, including engineering hazard mitigation measures.

Monitoring of tailings storage facility (TSF), pipelines, emergency pools, and treatment facilities, and analysis of monitoring data.

Annual identification of environmental hazards and planned internal reviews of hazard management.

Kapan is ISO 14000 certified with successful recertification carried out in 2021

Employee training on environmental issues, in particular on waste control methods.

Safety and health ("S&H")

Chaarat's operations have inherent S&H risks to our employees and contractors. Failure to manage these risks may result in occupational illness, injuries, and loss of life. Management systems

Chaarat's business is exposed to pandemics and national and/or regional epidemics which can impact its organic and inorganic growth strategy.

Embedding of policies, standards, and procedures in place across Chaarat for systematic control of significant S&H risks.

Purchase of high quality personal protective equipment (PPE).

Conduct of planned preventative maintenance of equipment and upgrade equipment in a timely manner.

Targeted recruitment of experienced specialists and regular training of employees and contractors

Continuous monitoring of highest risk workplace areas.

Employee training.

Implementation of extensive mitigation measures during the ongoing COVID-19 pandemic to ensure that our operations could continue whilst at the same time ensuring the safety of our employees and contractors.

In 2022, Chaarat will continue to monitor World Health Organisation and local government advice regarding precautionary measures and ensure that we implement all measures necessary to ensure the safety of our people.

Construction and development

Depending on the timing of completion of project financing, there is a possibility of delays to the start of production and cost overruns relating to Chaarat's development of its Tulkubash project.

Operation of a proper contractor, supplier, expert and other adviser selection and management process to ensure that they are reliable and meet required performance standards.

Commodity price volatility

Adverse movements in precious metals prices could materially impact the Group in various ways beyond a reduction in the financial results of operations. These include the feasibility of projects and the economics of mineral resources.

Hedging strategies are periodically considered.

Conservative long-term prices are used to evaluate projects.

AISC at Kapan remains below gold prices.

Financial Review

Income statement

Revenue during 2021 amounted to US$92.4 million (2020: US$76.0 million), comprising US$72.8 million of own ore revenue and US$19.6 million third-party revenue (2020: US$69.9 million own ore and US$6.1 million third-party revenue). During the year, Kapan sold 57,212 ounces of AuEq (2020: 48,387 ounces), including third-party sales, with a realised gold price per ounce of US$1,784 (2020: US$1,773), a realised silver price per ounce of US$25 (2020: US$20), a realised copper price per tonne of US$9,157 (2020: US$6,117) and a realised zinc price per tonne of US$3,001 (2020: US$2,222).

The Group operating profit for the year was US$7.8 million (2020: US$1.9 million) and the Group EBITDA¹ was US$13.5 million (2020: US$9.3 million). The increase in EBITDA was mainly due to a more favourable commodity price environment.

	2021 Armenia	2021 Kyrgyz Republic & Corporate	2021 Total	2020 Armenia	2020 Kyrgyz Republic & Corporate	2020 Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
EBITDA¹	22,653	(9,167)	13,486	19,429	(10,126)	9,303
Depreciation and amortisation	(6,621)	(494)	(7,115)	(5,232)	(727)	(5,959)
Net finance costs	(3,026)	(4,847)	(7,873)	(3,130)	(17,628)	(20,758)
Unrealised foreign exchange gain/(loss)	2,090	-	2,090	(2,649)	-	(2,649)
Fair value gain on warrant	-	434	434	-	595	595
Change in provisions	(673)	-	(673)	545	-	545
Profit/(loss) before tax	14,423	(14,074)	349	8,963	(27,886)	(18,923)
Income tax charge	(3,937)	-	(3,937)	(3,520)	-	(3,520)
Profit/(loss) after tax	10,486	(14,074)	(3,588)	5,443	(27,886)	(22,443)

The adjusted Group EBITDA, excluding the share-based payment expense, which is a non-cash item, was as follows:

	2021	2020
	US$'000	US$'000
Kapan EBITDA	22,653	19,429
Kyrgyz Republic & Corporate EBITDA	(9,167)	(10,126)
Group EBITDA¹	13,486	9,303
Corporate share-based payment expense	1,251	3,612
Unwinding of discount - provision for environmental obligations	-	655
Adjusted Group EBITDA¹	14,737	13,570

Finance costs in 2021 were US$7.9 million (of which US$5.6 million was non-cash) compared to US$21.4 million in 2020 (of which US$18.7 million was non-cash). The decrease in costs was mainly due to the refinancing of the Investor Loan at the end of 2020, which resulted in increased financing costs that year, and settlement of the Labro working capital facility and Labro Term Loan in early 2021 resulting in less accrued interest in 2021.

Income taxes in 2021 were US$3.9 million compared to US$3.5 million in 2020. Consequently, the Group made a loss after tax of US$3.6 million compared to a loss after tax of US$22.4 million in the 2020 financial year.

Balance sheet

The borrowings at the balance sheet date comprised US$25.6 million of convertible loan notes due in October 2022 (2020: US$23.3 million), US$21.3 million of other loans (US$53.3 million), US$2.4 million of contract liabilities (2020: US$5.3 million), US$1.0 million of lease liabilities (2020: US$1.4 million) and US$0.4 million of warrant financial liabilities (2020: US$0.8 million).

The Group's net debt² decreased from US$77.2 million at 31 December 2020 to US$39.6 million at 31 December 2021, primarily as a result of converting the Labro Term Loan into equity in February 2021 and reducing the Kapan acquisition loan from Kapan cash flows. The Kapan acquisition loan has certain covenants attached to it. All covenants were met as at 31 December 2021 and as such the Group remains in full compliance.

Non-current assets increased from US$109.3 million at 31 December 2020 to US$119.7 million at 31 December 2021. The increase was mainly due to the purchase of property, plant, and equipment at Kapan. Additionally, exploration and evaluation costs of US$5.7 million were capitalised relating to the asset in the Kyrgyz Republic.

Current assets were US$51.8 million at 31 December 2021 compared to US$25.8 million at 31 December 2020. The increase mainly related to trade receivables from Kapan's customers due to the timing of sales close to year-end. Current assets at 31 December 2021 included cash and cash equivalents of US$11.1 million (2020: US$6.9 million).

Total liabilities at 31 December 2021 were US$94.7 million compared to US$110.7 million at 31 December 2020. This reduction was mainly due to repayments of bank debt and the Labro Facility in the amount of US$12.1 million (including interest) and settlement of the Labro Term Loan in the amount of US$22.1 million through shares issued, offset by accrued interest on loans during the year. Further, on 21 October 2021, the maturity date of the convertible loan notes was extended from 31 October 2021 to 31 October 2022 and the conversion price reduced from £0.37 to £0.30 per share. In addition, liabilities at 31 December 2021 included a provision for environmental obligations at Kapan of US$10.5 million (2020: US$7.5 million). This increase was as a result of a reassessment of the Company's obligations under international legislation requirements that took place in 2021 by an independent third party.

Total equity was US$76.9 million at 31 December 2021 compared to US$24.5 million at 31 December 2020. This mainly reflects the increase in share capital and premium of US$52.6 million as a result of the equity raise in February 2021 and other share issues.

Cash flow

Cash and cash equivalents increased from US$6.9 million at 1 January 2021 to US$11.1 million at 31 December 2021. The movement comprised of:

· net operating cash flows of US$3.3 million (2020: US$15.9 million), mainly due to improved operating performance offset by working capital movements at Kapan (e.g. increase in trade receivables due to the timing of sales close to year-end) and expenditure on corporate overheads

· net cash used in investing activities of US$15.5 million (2020: US$11.9 million) relating to the purchase of property, plant, and equipment at Kapan and in the Kyrgyz Republic together with capitalised exploration and development spend in the Kyrgyz Republic

· cash inflows from financing activities of US$16.7 million (2020: cash used of US$0.9 million) mainly relating to the funds received from the equity raise of US$29.6 million offset by external debt repayments, including interest, of US$12.1 million

Going concern

In order to achieve the planned future capital developments of the assets and to repay the convertible loan notes due on 31 October 2022, management will need to raise future financing. There are currently no binding agreements in place in respect of any additional funding and there is no guarantee that any course of funding will proceed such that the ability to refinance the US$25.6 million of convertible loan notes prior to 31 October 2022 represents a material uncertainty. However, management is committed to raising additional funds and has an established track record of successfully achieving this in the past as demonstrated by the fundraising activities in early 2021. Accordingly, the Directors have adopted the going concern basis of accounting in preparing the consolidated financial statements.

¹ ^{In reporting financial information, the Group presents EBITDA and adjusted EBITDA as alternative performance measures, "APMs", which are not defined or specified under the requirements of IFRS. The Group believes that these measures provide stakeholders with additional useful information on the performance of the business.}

^{2 In reporting financial information, the Group presents Net debt as an alternative performance measure, "APM", which is not defined or specified under the requirements of IFRS. The Group Net debt comprises convertible loan notes, other loans, contract liabilities, lease liabilities and warrant financial liabilities, net of cash and cash equivalents.}

Financial Statements

Consolidated Income Statement

For the year ended 31 December 2021

	2021	2020
	US$'000	US$'000

Revenue	92,434	75,994
Cost of sales	(69,258)	(55,286)
Gross profit	23,176	20,708
Selling expenses	(2,444)	(1,864)
Administrative expenses	(12,966)	(16,970)
Other income	22	21
Operating profit	7,788	1,895
Finance income	23	19
Finance costs	(7,896)	(21,432)
Fair value gain on warrant	434	595
Profit/(loss) before tax for the year	349	(18,923)
Income tax charge	(3,937)	(3,520)
Loss for the year	(3,588)	(22,443)
Loss per share (basic and diluted) - US$ cents	(0.53)	(4.40)

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2021

	2021	2020
	US$'000	US$'000
Loss for the year	(3,588)	(22,443)

Items which have been reclassified to the income statement
Exchange differences on translating foreign operations disposed of during the year	-	73
Items which may subsequently be reclassified to the income statement
Exchange differences on translating foreign operations and investments	849	(480)
Other comprehensive income/(loss) for the year, net of tax	849	(407)
Total comprehensive loss for the year	(2,739)	(28,850)

Consolidated Balance Sheet
As at 31 December 2021	2021	2020
	US$'000	US$'000
Assets
Non-current assets
Exploration and evaluation costs	66,305	61,359
Other intangible assets	1,213	1,221
Property, plant and equipment	47,306	40,538
Prepayments for non-current assets	530	563
Deferred tax assets	4,381	5,631
Total non - current assets	119,735	109,312
Current assets
Inventories	18,442	12,251
Trade and other receivables	22,247	6,646
Cash and cash equivalents	11,134	6,928
Total current assets	51,823	25,825

Total assets	171,558	135,137
Equity and liabilities
· Equity attributable to shareholders
Share capital	6,894	5,401
Share premium	242,695	191,594
Own shares reserve	(132)	(216)
Convertible loan note reserve	1,420	2,493
Merger reserve	10,885	10,885
Share option reserve	11,383	14,103
Translation reserve	(14,433)	(15,282)
Accumulated losses	(181,836)	(184,527)
Total equity	76,876	24,451
Liabilities
Non-current liabilities
Provision for environmental obligations	10,521	7,479
Lease liabilities	732	771
Other loans	9,688	21,947
Total non-current liabilities	20,941	30,197
Current liabilities
Trade and other payables	30,717	17,400
Contract liabilities	2,379	5,328
Lease liabilities	246	654
Other loans	11,640	31,400
Warrant financial liability	380	814
Convertible loan notes	25,625	23,252
Other provisions for liabilities and charges	2,754	1,641
Total current liabilities	73,741	80,489
Total liabilities	94,682	110,686

Total liabilities and equity	171,558	135,137

Consolidated Statement of Changes in Equity

For the Year Ended 31 December 2021
		Share Capital		Share Premium		Own Shares		Convertible Loan Note		Merger Reserve		Share Option		Shares To Be Issued		Translation Reserve		Accumulated Losses	Total
						Reserve		Reserve				Reserve
		US$'000		US$'000		US$'000		US$'000		US$'000		US$'000		US$'000		US$'000		US$'000	US$'000
As at 1 January 2020	4,688		168,616		(216)		2,493		10,885		10,624		217		(14,875)		(162,253)		20,179
Loss for the year		-		-		-		-		-		-		-		-		(22,443)	(22,443)
Translation losses for the year		-		-		-		-		-		-		-		(407)		-	(407)
Total comprehensive loss for the year		-		-		-		-		-		-		-		(407)		(22,443)	(22,850)
Share options lapsed		-		-		-		-		-		(159)		-		-		159	-
Share options expense		-		-		-		-		-		3,612		-		-		-	3,612
Share options exercised		1		21		-		-		-		(10)		-		-		10	22
Share scheme modification		-		-		-		-		-		36		-		-		-	36
Issuance of shares for cash		191		6,041		-		-		-		-		-		-		-	6,232
Issuance of shares for settlement of liabilities		513		16,707		-		-		-		-		-		-		-	17,220
Issuance of shares for exercised warrants		8		209		-		-		-		-		(217)		-		-	-
As at 31 December 2020		5,401		191,594		(216)		2,493		10,885		14,103		-		(15,282)		(184,527)	24,451
Loss for the year		-		-		-		-		-		-		-		-		(3,588)	(3,588)
Translation gains for the year		-		-		-		-		-		-		-		8 49		-	849
Total comprehensive loss for the year		-		-		-		-		-		-		-		8 49		(3,588)	(2,739)
Share options lapsed		-		-		-		-		-		(715)		-		-		715	-
Share-based payment charge		-		-		-		-		-		1,251		-		-		-	1,251
Issuance of shares for cash		841		28,711		-		-		-		-		-		-		-	29,552
Issuance of shares for settlement of liabilities		652		22,390		-		-		-		-		-		-		(101)	22,941
Transfer of treasury shares		-		-		84		-		-		(3,256)		-		-		3,172	-
Modification of convertible loan notes		-		-		-		( 1,073)		-		-		-		-		2,493	1,420
As at 31 December 2021		6,894		242,695		(132)		1,420		10,885		11,383		-		(14,4 33 )		( 181,836)	76,876

Consolidated Cash Flow Statement
For the Year Ended 31 December 2021	2021	2020
	US$'000	US$'000
Cash flows from operating activities
Operating profit	7,788	1,895

Depreciation and amortisation	7,115	5,959
Loss on disposal of property, plant and equipment	4	66
Non-cash expenses	87	335
Gain on disposal of subsidiary	-	(7)
Change in provisions	75	(897)
Unrealised foreign exchange (gains) /losses	(1,475)	2,456
Share-based payments	1,251	3,612
Increase in inventories	(6,507)	(3,263)
(Increase)/decrease in trade and other receivables	(15,915)	2,330
Increase/(decrease) in trade and other payables	15,920	(1,682)
(Decrease)/Increase in contract liabilities	(3,250)	5,334
Cash generated in operations	5,093	16,138
Income taxes paid	(1,806)	(205)
Net cash generated in operations	3,287	15,933

Investing activities
Purchase of property, plant & equipment	(9,117)	(7,417)
Purchase of intangible assets	(152)	(155)
Exploration and evaluation costs	(6,212)	(4,389)
Proceeds from sale of property, plant & equipment	1	51
Disposal of subsidiary	-	(5)
Interest received	17	19
Net cash used in investing activities	(15,463)	(11,896)

Financing activities
Proceeds from issue of share capital	29,983	6,255
Share issue costs paid	(431)	-
Repayments of principal portion of lease liabilities	(674)	(573)
Finance costs paid for modifications of other loans	(104)	(686)
Repayments of principal amount of loan	(9,800)	(8,000)
Payments of interest	(2,295)	(3,185)
Proceeds from loans	-	5,300
Net cash from/(used in) financing activities	16,679	(889)

Net change in cash and cash equivalents	4,503	3,148
Cash and cash equivalents at beginning of the year	6,928	3,585
Effect of changes in foreign exchange rates	(297)	195
Cash and cash equivalents at end of the year	11,134	6,928

Notes:

1. General information and group structure

Chaarat Gold Holdings Limited (the "Company") (registration number 1420336) was incorporated in the British Virgin Islands (BVI) and is the ultimate holding company for the companies set out below (the "Group"). The Company's shares are admitted to trading on the Alternative Investment Market of the London Stock Exchange (AIM:CGH).

The registered address of the Company is: Palm Grove House, PO Box 438, Road Town, Tortola, British Virgin Islands, VG1110.

As at 31 December 2021 the Group consisted of the following companies all of which are wholly owned:

Group company	Country of incorporation	Principal activity
Chaarat Gold Holdings Limited	BVI	Ultimate holding company
Zaav Holdings Limited	BVI	Holding company
Chon-tash Holdings Limited	BVI	Holding company
At-Bashi Holdings Limited	BVI	Holding company
Akshirak Holdings Limited	BVI	Holding company
Goldex Asia Holdings Limited	BVI	Holding company
Chon-tash Mining LLC*	Kyrgyz Republic	Exploration
At-Bashi Mining LLC*	Kyrgyz Republic	Exploration
Akshirak Mining LLC*	Kyrgyz Republic	Exploration
Goldex Asia LLC*	Kyrgyz Republic	Exploration
Chaarat Zaav CJSC*	Kyrgyz Republic	Exploration
Chaarat Gold International Limited	Cyprus	Holding company
Chaarat Gold Services Limited Chaarat Kapan CJSC*	England and Wales Armenia	Services company Production company

*Companies owned indirectly by the Company.

2. Going concern

As at 31 March 2022 the Group had approximately US$6.6 million of cash and cash equivalents and US$45.1 million of debt (excluding lease liabilities, contract liabilities and warrants) comprising the following:

· US$26.5 million convertible loan notes including accrued interest to 31 March 2022

· US$18.6 million other loans outstanding, including accrued interest to 31 March 2022

Kyrgyz Republic

In order to achieve the planned (though as yet uncommitted) capital developments of assets in the Kyrgyz Republic, future financing will need to be raised.

Kapan

The Board has based the cash flow forecasts for Kapan on the most recent budgets which show that Kapan is expected to generate sufficient revenue to cover its operating costs and principal and interest payments and meet its covenants. Based on current forecasts, covenants will be met, however, performance of Kapan is sensitive to commodity prices and production.

Convertible Loan Notes

By 31 October 2022, the convertible loan notes are due to be redeemed by conversion into equity at approximately £0.30 per ordinary share, at the holder's option, or will be repaid in cash for a total of US$28.8 million (which includes accrued interest).

Conclusion (including material uncertainty)

The convertible loan notes will need to be refinanced with cash or alternative funding, to the extent that loan note holders do not choose to convert to equity, prior to 31 October 2022. To proceed with the development in Kyrgyz Republic further financing will also be required.

Notwithstanding the above, the directors consider there is a reasonable expectation that sufficient funding will be raised and therefore have continued to adopt the going concern basis.

However, there are currently no binding agreements in place in respect of any additional funding and there is no guarantee that any course of funding will proceed. Therefore, this indicates the existence of a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern and, therefore, it may be unable to realise its assets and discharge its liabilities in the normal course of business. Should the project funding not be available for the Kyrgyz Republic development projects there may be a material impairment of the US$78 million carrying value of the related assets. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

3. Accounting policies

The significant accounting policies which have been consistently applied in the preparation of these consolidated financial statements are summarised below:

Basis of preparation

The consolidated financial information has been prepared in accordance with United Kingdom adopted international accounting standards and International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB) and on a historical cost basis.

New standards, interpretations and amendments adopted by the Group

Adoption of new and revised Standards

In the current year, the Company has adopted all new and revised IFRS standards that became effective as of 1 January 2021, the changes being:

(i) Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) The amendments introduce a practical expedient for modifications required by the reform, provide an exception that hedge accounting is not discontinued solely because of the IBOR reform, and introduces disclosures that allow users to understand the nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages those risks as well as the entity's progress in transitioning from IBOR's to alternative benchmark rates, and how the entity is managing this transition;

(ii) Amendments to IFRS 4 Insurance Contracts - Extension of the Temporary Exemption from Applying IFRS 9; and

(iii) Amendments to IFRS 16 Leases - Covid-19-Related Rent Concessions beyond 30 June 2021.

These amendments did not have a material impact on the Company. It is expected that where applicable, these standards and amendments will be adopted on each respective effective date.

Revised standards not yet effective

At the date of the authorisation of these consolidated financial statements, the following revised IFRS standards, which are applicable to the Company, were issued but not yet effective:

(i) Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) - effective for year ends beginning on or after 1 January 2022

The amendments specify that the 'cost of fulfilling' a contract comprises the 'costs that relate directly to the contract'. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to fulfilling contracts. The Company will apply the amendments to contracts for which the Company has not yet fulfilled all its obligations at the beginning of the annual reporting period in which the entity first applies the amendments. Comparatives will not be restated.

(ii) Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) - effective for year ends beginning on or after 1 January 2023

The amendments specify how companies should account for deferred tax on transactions such as leases and decommissioning obligations, and clarify that the initial recognition exception does not apply to transactions where both an asset and a liability are recognised in a single transaction. Accordingly, deferred tax is required to be recognised on such transactions.

(iii) Definition of Accounting Estimates (Amendments to IAS 8) - effective for year ends beginning on or after 1 January 2023

The amendments introduce the definition of accounting estimates and include other amendments to IAS 8 to help entities distinguish changes in accounting estimates from changes in accounting policies.

(iv) Materiality of Accounting Policy Disclosure (Amendments to IAS 1) - effective for year ends beginning on or after 1 January 2023

The amendments require companies to disclose their material accounting policy information rather than their significant accounting policies.

No significant changes to presentation or disclosures within these financial statements are expected following the adoption of these amendments.

Basis of consolidation

The consolidated financial statements of the Group include the financial statements of the Company and its subsidiaries, from the date that control effectively commenced until the date that control effectively ceased. Control is achieved where the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition and up to the effective date of disposal, as appropriate.

When the Group loses control of a subsidiary, the gain or loss on disposal recognised in the income statement is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), less liabilities of the subsidiary and any non-controlling interests.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group.

All intra-group balances, transactions and any unrealised profits or losses arising from intra-group transactions are eliminated on consolidation.

Business Combinations

IFRS 3 Business Combinations applies to a transaction or other event that meets the definition of a business combination. When acquiring new entities or assets, the Group applies judgement to assess whether the assets acquired and liabilities assumed constitute an integrated set of activities, whether the integrated set is capable of being conducted and managed as a business by a market participant, and thus whether the transaction constitutes a business combination, using the guidance provided in the standard. Acquisitions of businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the consolidated income statement as incurred. Transaction costs incurred in connection with the business combination are expensed. Provisional fair values are finalised within 12 months of the acquisition date.

Where applicable, the consideration for the acquisition may include an asset or liability resulting from a contingent consideration arrangement. Contingent consideration is measured at its acquisition date fair value and included as part of the consideration transferred in a business combination. Subsequent changes in such fair values are adjusted against the cost of acquisition retrospectively with the corresponding adjustment against the fair value of the assets and liabilities acquired. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period about facts and circumstances that existed at the acquisition date. The measurement period may not exceed one year from the effective date of the acquisition. The subsequent accounting for contingent consideration that does not qualify for as a measurement period adjustment is based on how the contingent consideration is classified. Contingent consideration that is classified as equity is not subsequently remeasured. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRS 9 Financial Instruments with the corresponding amount being recognised in profit or loss.

The identifiable assets acquired, and the liabilities assumed are recognised at their fair value at the acquisition date, except that:

• Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits, respectively;
• Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and
• Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

Revenue recognition

Revenue is recognised in a manner that depicts the pattern of the transfer of goods and services to customers. The amount recognised reflects the amount to which the Group expects to be entitled in exchange for those goods and services. Sales contracts are evaluated to determine the performance obligations, the transaction price and the point at which there is transfer of control. The transactional price is the amount of consideration due in exchange for transferring the promised goods or services to the customer and is allocated against the performance obligations and recognised in accordance with whether control is recognised over a defined period or a specific point in time.

Performance obligation and timing of revenue recognition

The revenue arises from extraction of complex ore as well as ore purchased from third parties and production of copper and zinc concentrates to wholesale customers. Though in all contracts the total transaction value mainly depends on the market prices of the metals based on the preliminarily estimated contents in the concentrates, those separate materials are not distinct but represent a bundle of materials. As there are no other significant promises, each contract contains one performance obligation to which the total transaction value is allocated.

The control passes to the customers and the revenue is recognized either on a Cost, Insurance and Freight "CIF" basis meaning that control passes to the buyer when the concentrate is loaded on the vessel in the port of shipment (e.g., port of Poti, Georgia) or on the Ex Works basis meaning that control passes to the buyer at the point the concentrate is loaded on the truck at the Kapan mine. In respect of freight revenues, these are recognised over time.

Determining the transaction price

Consideration is variable and depends on the fluctuations of metal prices for the quotation period (usually one or three months) and the changes in estimated metal contents and price deductions.

At the date the concentrate is loaded on the truck at the Kapan mine or the vessels at the specified port the provisional invoice is issued based on the estimates of the amount of consideration.

Sales are based on provisional 1-3 month commodity forward prices on the London Metal Exchange (LME) and as such, contain an embedded derivative which is marked-to-market at each month end using the forward price for the month of price finalisation. The estimated transaction price is updated for the quotational period (usually one or three months) and any changes in the estimates of the metal content. The change is recognised as an increase in revenue, or as a reduction of revenue, in the period in which the estimated transaction price is finalised.

Final prices of copper and zinc concentrates are determined at the contract settlement date based on the LME commodity market prices at that date and final adjustments for weighting, sampling, or moisture determination changes.

Third-party revenue

In addition to own concentrates, the Group also processes third party ore into concentrate and sells it to customers. The revenue from these sales is recognised in accordance with the revenue recognition principles above.

Advance payments from customers

The Group receives advance payments from its customers which represent prepayments for the future transfer of concentrate. These are either classified as contract liabilities or financial liabilities under IFRS 15 and IFRS 9, respectively, depending on the terms of the customer agreements and how the prepayments are settled. If settled in cash, they are classified as financial liabilities and if offset against final invoices, they are classified as contract liabilities. The contract liabilities are unwound, and revenue is recognised when shipments take place and control passes to the customers. The advance payments accrue interest which is separately recognised from revenue in the Consolidated Income Statement.

Royalties

Under Armenian law a royalty is payable to the state, the base of which is driven by the revenue earned from the supply of concentrates. Royalty expense is included in cost of sales.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Government grants are presented as "other income" in the Statement of Comprehensive Income and cash inflows from operating activities in the Statement of Cash Flows.

Interest

Interest is recognised using the effective interest method which calculates the amortised cost of a financial asset or liability and allocates the interest income or payments over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability to the net carrying amount of the financial asset or liability.

Taxation

The income tax expense includes the current tax and deferred tax charge recognised in the income statement.

The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate. The Group is not subject to corporate tax in the British Virgin Islands, therefore as at 31 December 2021 the Group's operations in this region have an effective tax rate of 0%. Companies engaged in the production and sale of gold in the Kyrgyz Republic pay a revenue-based tax on the sales of gold rather than tax on profit. The remaining Group's operations are subject to income tax at a rate of 18% in Armenia, 19% in the United Kingdom and 12.5% in Cyprus (Note 13). Non-profit based taxes are included within administrative expenses and Kapan's royalty taxes are included within cost of sales.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Probable taxable profits are based on evidence of historical profitability and taxable profit forecasts limited by reference to the criteria set out in IAS 12 Income Taxes. Such assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or of an asset or liability in a transaction (other than a business combination) that affects neither taxable profit nor accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, joint arrangements, and associates except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also taken directly to equity.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis with that taxation authority.

Non-current Assets

Intangible Assets

Exploration and evaluation costs

During the initial stage of a project, exploration costs are expensed in the income statement as incurred.

Exploration expenditure incurred in relation to those projects where such expenditure is considered likely to be recoverable through future extraction activity or sale or where the exploration activities have not reached a stage that permits a reasonable assessment of the existence of reserves, are capitalised and recorded on the balance sheet within exploration and evaluation assets for mining projects at the exploration stage. Capitalised evaluation and exploration costs are classified as intangible assets.

Exploration and evaluation expenditure comprise costs directly attributable to:

· Researching and analysing existing exploration data;

· Conducting geological studies, exploratory drilling, and sampling;

· Examining and testing extraction and treatment methods;

· Compiling pre-feasibility and feasibility studies; and

· Costs incurred in acquiring mineral rights, the entry premiums paid to gain access to areas of interest and amounts payable to third parties to acquire interests in existing projects.

Exploration and evaluation assets are subsequently valued at cost less impairment. In circumstances where a project is abandoned, the cumulative capitalised costs related to the project are written off in the period when such decision is made.

Exploration and evaluation assets are not depreciated. These assets are transferred to mine development costs within property, plant and equipment when a decision is taken to proceed with the development of the project which is when a bankable feasibility study is obtained, and project finance is in place.

Other intangible assets (excluding goodwill)

Intangible assets acquired by the Group are measured on initial recognition at cost or at fair value when acquired as part of a business combination. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets are amortised over the estimated useful lives using the straight-line-basis and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Other intangible assets comprise computer software and other intangible assets, which are initially capitalised at cost. Amortisation is provided on a straight-line basis over a period of 1 to 10 years.

Property, plant and equipment

Property, plant and equipment is stated at cost, excluding the costs of day-to-day servicing, less any subsequent accumulated depreciation and impairment losses. The historical cost of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the assets to their working condition and location for their intended use. Depreciation of these assets commences when the assets are ready for their intended use.

Depreciation is charged on each part of an item of property, plant and equipment so as to write off the cost or valuation of assets over their estimated useful lives, using the straight-line method. Depreciation is charged to the income statement, unless it is considered to relate to the construction of another asset, in which case it is capitalised as part of the cost of that asset. Land and assets in the course of construction are not depreciated. The estimated useful lives are as follows:

· Land and buildings 5 to 20 years

· Mining Properties Mining properties that are used in production are depreciated under the unit of production basis, and other physical assets depreciated over their useful lives which are 5 to 20 years

· Fixtures and fittings 2 to 20 years

· Motor vehicles 2 to 7 years

· Right-of-use assets 5 to 20 years

Residual values, remaining useful lives and depreciation methods are reviewed annually and adjusted if appropriate.

Expenses incurred in respect of the maintenance and repair of property, plant and equipment are charged against income when incurred. Refurbishments and improvements expenditure, where the benefit enhances the capabilities or extends the useful life of an asset, is capitalised as part of the appropriate asset.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised.

Mining properties

Mining properties include the cost of acquiring and developing mining assets and mineral rights. Mining properties, which include development structures, are depreciated to their residual values using the unit-of-production method based on proven and probable ore reserves according to the JORC Code, which is the basis on which the Group's mine plans are prepared. Changes in proven and probable reserves are dealt with prospectively. Depreciation is charged on new mining ventures from the date that the mining asset is capable of commercial production.

Mineral rights for the assets not ready for production are included within Exploration and evaluation costs. When a production phase is started, mineral rights are transferred into Mining assets and are depreciated as described above.

Assets under construction

Assets under construction are measured at cost less any recognised impairment. Depreciation commences when the assets are ready for their intended use.

Assets under construction include costs incurred for the development of tangible assets that will form part of a category of property, plant and equipment which is not yet complete. Once the project ready for use capitalisation will cease (other than for large development programmes), the asset will be reclassified to the respective property, plant and equipment category it relates to from assets under construction, and depreciation will commence.

Estimated ore reserves

Estimated proven and probable ore reserves reflect the economically recoverable quantities which can be legally recovered in the future from known mineral deposits. The Group's reserves are estimated in accordance with JORC Code.

Impairment of exploration and evaluation assets

All capitalised exploration and evaluation assets and other intangible assets are monitored for indications of impairment. Where a potential impairment is indicated, assessment is made for the group of assets representing a cash generating unit ("CGU"). Indicators of impairment include:

· the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed;

· substantive expenditure on further exploration of mineral resources in the specific area is nether budgeted nor planned;

· exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and

· sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

If any indication of impairment exists, the recoverable amount of the asset is estimated, being the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. Such impairment losses are recognised in profit or loss for the year.

Impairment of property, plant and equipment

An impairment review of property, plant and equipment is carried out when there is an indication that those assets have suffered an impairment loss or there are impairment reversal indicators. If any such indication exists, the carrying amount of the asset is compared to the estimate recoverable amount of the asset in order to determine the extent of the impairment loss or reversal (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit ("CGU") to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. The carrying amounts of all cash-generating units are assessed against their recoverable amounts determined on a fair value less costs to sell calculation. Fair value is based on the applicable Discounted Cash Flow ("DCF") method using post-tax cash flows. The DCF method is attributable to the development of proved and probable reserves.

If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately in the consolidated income statement.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the original carrying amount that would have been determined had no impairment loss been recognised in prior periods. Impairment loss may be subsequently reversed if there has been significant change in estimates used to determine the asset's recoverable amount since the last impairment loss was recognised.

A reversal of impairment loss is recognised in the consolidated income statement immediately.

Leases

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognised a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less), leases of low value assets and leases for the purposes of mining and exploration activities, which qualify for an exemption under IFRS 16 which the Group has applied. For these leases, the Group recognises the lease payments as operating expenses on a straight-line basis over the term of the lease.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate.

The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability based on the effective interest method and by reducing the carrying amount to reflect the lease payments made. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses and are presented as a separate line in the consolidated financial statements.

Right-of-use assets are depreciated over shorter period lease term and useful life of the underlying asset. The Group applies IAS 36 to determine whether the right-of use asset is impaired and accounts for any identifiable impairment loss as described above.

When the Group revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. An equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. Any gain or loss relating to the partial or full termination of any lease is recognised in profit or loss.

Inventories

Copper and zinc concentrates

Inventories including metals in concentrate and in process are stated at the lower of production cost or net realisable value.

Cost of finished goods and work in progress are determined on the first-in-first-out (FIFO) method. The cost comprises raw material, direct labour, other direct costs, and related production overheads (based on normal operating capacity), excluding borrowing costs.

Consumables and spare parts

Consumables and spare parts are stated at the lower of cost or net realisable value. Costs are determined on the first-in-first-out (FIFO) method.

The Company's policy is to write-down to nil the items that have not been utilised for more than two years. This is done on a quarterly basis.

Inventory items used in the production process are recognised as cost of sales when the related sale of concentrate takes place. This includes the cost of purchased ore and consumables and spare parts.

Cost of purchased ore

The Group purchases ore from third parties which is processed and sold to Kapan's customers. The amount expensed in cost of sales is equal to the price paid to third parties in line with the purchase agreements.

Cost of purchased concentrate

The Group processes third party ore into concentrate and then purchases the concentrate to sell to Kapan's customers. The substance and accounting for these transactions is that of an ore purchase agreement with the amount expensed in cost of sales equal to the price paid to third parties in line with the purchase agreements, which is net of a processing fee charged by Kapan.

Cash and cash equivalents

Cash includes petty cash and cash held in current bank accounts. Cash equivalents include short-term investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

Equity

Equity comprises the following:

· ''Share capital'' represents the nominal value of equity shares.

· ''Share premium'' represents the excess over nominal value of the fair value of consideration received for equity shares, net of transactions costs directly related to the share issue.

· "Own shares reserve" represents the nominal value of equity shares that have been repurchased by the company.

· "Convertible loan note reserve" represents the equity component of convertible loan notes issued by the Company.

· "Merger reserve'' represents the difference between the issued share capital and share premium of the Company and its former subsidiary Chaarat Gold Limited arising as a result of the reverse acquisition.

· "Share option reserve" represents the equity component of share options issued.

· ''Translation reserve'' represents the differences arising from translation of investments in overseas subsidiaries.

· ''Accumulated losses'' includes all current and prior period results as disclosed in the income statement.

Functional and presentational currency

The functional currency for each entity in the Group is determined as the currency of the primary economic environment in which it operates. The functional currency of the Group's entities located in the Kyrgyz Republic, Cyprus and BVI is US Dollars (US$) as the current exploration and evaluation expenditure is currently primarily in USD. The functional currency of the subsidiary located and operating in Armenia is the Armenian Dram (AMD). The functional currency of the parent company Chaarat Gold Holdings Limited is the US Dollar.

The Group has chosen to present its consolidated financial statements in US Dollars (US$), as management believe it is a more comparable presentation currency for international users of consolidated financial statements of the Group as it is a common presentation currency in the mining industry. The translation of the financial statements of the Group entities from their functional currencies to the presentation currency is performed as follows:

• All assets and liabilities are translated at closing exchange rates at each reporting period end date;
• All income and expenses are translated at the average exchange rates for the periods presented, except for significant transactions that are translated at rates on the date of such transactions;
• Resulting exchange differences are recognised in other comprehensive income and presented as movements relating to the effect of translation to the Group's presentation currency within the Translation reserve in equity; and

• In the consolidated statement of cash flows, cash balances at the beginning and end of each reporting period presented are translated using exchange rates prevalent at those respective dates. All cash flows in the period are translated at the average exchange rates for the period presented, except for significant transactions that are translated at rates on the date of the transaction.

Foreign currency transactions

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (the ''functional currency'') are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in the income statement.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

On consolidation, the assets and liabilities of the Group's foreign operations are translated into the presentation currency of the Group at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period where these approximate the rates at the dates of the transactions. Any exchange differences arising are classified within the statement of comprehensive income and transferred to the Group's cumulative translation adjustment reserve. Cumulative translation differences are recycled from equity and recognised as income or expense on disposal of the operation to which they relate.

Share-based payments

The Company operates equity-settled share-based remuneration plans for directors and some employees. The Company awards share options to certain Company directors and employees to acquire shares of the Company.

The fair value is appraised at the grant date and excludes the impact of non-market vesting conditions. Fair value of restricted stock units is measured by reference to the share price at the date of grant. Fair value of options is measured by use of the Black Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

All equity-settled share-based payments are ultimately recognised as an expense in the income statement with a corresponding credit to ''other reserves''.

If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if the number of share options ultimately exercised are different to that estimated on vesting.

Upon exercise of share options and through settlement of the issue of new shares, the proceeds received net of attributable transaction costs are credited to share capital and, where appropriate, share premium.

After the vesting date, no subsequent adjustments are made to total equity. In the year when the share options lapse the total accumulated charge to the share-based payment reserve is transferred to retained earnings.

When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions (the "original fair value") and under the modified terms and conditions (the "modified fair value") are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.

In certain instances, the Company issues shares to satisfy outstanding financial liabilities. The measurement of these equity-settled share-based payment transactions is outlined below. Shares are also issued to satisfy obligations under warrant agreements whereby the estimated fair value of the warrants issued is measured by use of the Black Scholes model as detailed in Note 30.

The Company operates an Employee Benefit Trust ("the Trust") and has de facto control of the shares held by the Trust and bears their benefits and risks. The Trust is consolidated into the group accounts with a debit to equity for the cost of shares acquired. Finance costs and administrative expenses are charged as they accrue.

Exchange of financial liabilities for equity

When equity instruments are issued to extinguish all or part of a financial liability, the Group measures them at the fair value of the equity instruments issued, unless that fair value cannot be reliably measured. The difference between the carrying amount of the financial liability (or part of a financial liability) extinguished, and the consideration paid, is recognised in profit or loss. The equity instruments are recognised initially and measured at the date the financial liability (or part of that liability) is extinguished. This does not include transactions with a creditor who is also a direct or indirect shareholder and is acting in its capacity as a direct or indirect shareholder, in accordance with IFRIC 19.

Retirement and Other Benefit Obligations

The Group offers pension arrangements in the United Kingdom as well as under the State pension system of the Kyrgyz Republic, which requires current contributions by the employer, calculated as a percentage of current gross salary payments. Such expense is charged in the period the related salaries are earned. The Group does not have any obligations in respect of post-retirement or other significant compensation benefits.

Financial Instruments

Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. Financial assets are classified as either financial assets at amortised cost, at fair value through other comprehensive income (FVTOCI) or at fair value through profit or loss (FVTPL) depending upon the business model for managing the financial assets and the nature of the contractual cash flow characteristics of the financial asset.

Trade receivables without provisional pricing that do not contain provisional price features, loans and other receivables are held to collect the contractual cash flows and therefore are carried at amortised cost adjusted for any loss allowance. The loss allowance is calculated in accordance with the impairment of financial assets policy described below.

Trade receivables arising from sales of copper and zinc concentrates with provisional pricing features are exposed to future movements in market prices and have contractual cash flow characteristics that are not solely payments of principal and interest and are therefore measured at fair value through profit or loss and do not fall under the expected credit losses model (ECL) described below.

Effective interest rate method

The effective interest rate method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash receipts or payments (including all commitment, drawdown and other fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Impairment of financial assets

The Group recognises a loss allowance for expected credit losses on investments in debt instruments that are measured at amortised cost, trade and other receivables and contract assets, except for trade accounts receivable with provisional pricing. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

The Group always recognises lifetime ECL for trade receivables and other receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions, and assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.

For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Group writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g., when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over two years past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under the Group's recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.

Derivative financial instruments

Derivatives embedded in the Group's sale contracts are accounted for at fair value with gains or losses reported in the statement of comprehensive income. These embedded derivatives are not separated from the sale contracts and therefore any gains or losses are included in the lines of sale of concentrates in the year.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Financial liabilities

The Group's financial liabilities consist of financial liabilities measured subsequently at amortised cost using the effective interest rate method (including trade payables, other loans, and borrowings) and financial liabilities at fair value through profit or loss.

Warrant financial liability

The Group's warrant financial liability relates to warrants to purchase ordinary shares. The warrants are recognised initially at their fair value using the Black-Scholes model and subsequently remeasured at each reporting date with the corresponding fair value gains or losses recognised through profit or loss.

Convertible loan notes

The convertible loan notes are compound financial instruments that can be converted to ordinary shares at the option of the holder.

The liability component of convertible loan notes is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between the fair value of the convertible loan note as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

The modification of a standard loan is considered substantial where a conversion option is included. Upon modification, the original liability is extinguished, new liability and equity components are recognised at the fair values with a difference attributed to profit or loss.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a convertible loan note is not remeasured.

Interest related to the financial liability is recognised in profit and loss. On conversion at maturity, the financial liability is reclassified to equity and no gain or loss is recognised. When conversion option is not exercised, the equity element is transferred to accumulated losses.

Derecognition of financial liabilities

A financial liability is removed from the balance sheet when it is extinguished, being when the obligation is discharged, cancelled, or expired. On extinguishment of a financial liability, any difference between the carrying amount of the liability and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

A modification or exchange of a financial liability is either accounted for as an extinguishment of the original financial liability or a renegotiation of the original financial liability. An extinguishment or substantial modification of a financial liability results in de-recognition of the original financial liability and any unamortised transaction costs associated with the original financial liability are immediately expensed to the profit and loss account. Where the change in the terms of the modified financial liability is not substantial, it is accounted for as a modification of the original liability, with the modified financial liability measured at amortised cost using the original effective interest rate. Part of the assessment includes consideration whether the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability.

If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the consolidated income statement in the period in which they are incurred.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

Contingent liability

Contingent liabilities are recognised when the Group has a probable obligation that may arise from an event that has not yet occurred. A contingent liability which is not probable is not recognised in the Group's financial statements however disclosure within the notes to the financial statements will be included unless the possibility of payment is remote.

Provision for environmental obligations

An obligation to incur environmental restoration, rehabilitation and decommissioning costs arises when disturbance is caused by the development or ongoing production of mining assets. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present value using a risk-free rate applicable to the future cash flows, are provided for and capitalised at the start of each project, as soon as the obligation to incur such costs arises. These decommissioning costs are recognised in the consolidated income statement over the life of the operation, through the depreciation of the asset in the cost of sales line and the unwinding of the discount on the provision in the finance costs line.

Changes in the measurement of a liability relating to the decommissioning of plant or other costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at their net present values and recognised in the consolidated income statement as extraction progresses . If a decrease in the liability exceeds the carrying amount of the asset, the excess is recognised immediately as a reduction in the consolidated income statement.

The provision for closure cost obligations is remeasured at the end of each reporting period for changes in estimates and circumstances. Changes in estimates and circumstances include changes in legal or regulatory requirements, increased obligations arising from additional mining and exploration activities, changes to cost estimates and changes in risk free interest rate.

Value Added Tax

Output value added tax (VAT) related to sales generated in Armenia is payable to tax authorities on the delivery of goods and services to customers. The standard rate of VAT on domestic sales of goods and services and the importation of goods is 20%. Input VAT is recoverable against output VAT upon receipt of the VAT invoice. VAT related to sales and purchases is recognised in the statement of financial position on a gross basis and disclosed separately as an asset and liability. The VAT assets and liabilities are short term and will be settled within 12 months and are therefore not discounted.

Under the Kyrgyz Republic Tax Code, the supply and export of metal-containing ores, concentrates, alloys, and refined metals are considered to be a VAT exempt supply and therefore all VAT is expensed as incurred.

Critical accounting judgements and key sources of estimation uncertainty

In the course of preparing the financial statements, management necessarily makes judgements and estimates that can have significant impact on those financial statements. The determination of estimates requires judgements which are based on historical experience, current and expected economic conditions, and all other available information.

Estimated and underlying assumptions are reviewed on an ongoing basis, with revisions recognised in the period in which the estimates are revised and in the future periods affected. The judgements involving a higher degree of estimation or complexity are set out below.

Critical accounting judgements

The following are the critical accounting judgements (apart from judgements involving estimation which are dealt with separately below), made in the process of applying the Group's accounting policies during the year that have the most significant effect on the amounts recognized in the financial statements.

Recoverability of exploration and evaluation assets

Exploration and evaluation assets include mineral rights and exploration costs, including geophysical, topographical, geological, and similar types of costs. Exploration and evaluation costs are capitalised if management concludes that future economic benefits are likely to be realised and determines that economically viable extraction operation can be established as a result of exploration activities and internal assessment of mineral resources.

According to IFRS 6 Exploration for and evaluation of mineral resources, the potential indicators of impairment include: management's plans to discontinue the exploration activities, lack of further substantial exploration expenditure planned, expiry of exploration licences in the period or in the nearest future, or existence of other data indicating the expenditure capitalised is not recoverable. At the end of each reporting period, management assesses whether such indicators exist for the exploration and evaluation assets capitalised, which requires significant judgement.

At 31 December 2021, the capitalised costs of the exploration and evaluation assets amounted to US$66.3 million, details of which are set out in Note 15.

The assets relate to the Chaarat Gold Project in the Kyrgyz Republic, which comprises two distinct mineralised zones: Tulkubash and Kyzyltash, which will be developed separately. Both zones are located on a single mining licence and are therefore not capable of being independently sold.

At 31 December 2021, management does not consider there to be any indications of impairment in respect of the assets included in the Chaarat Gold Project CGU. Management has budgeted the costs for further development of these assets however their recoverability is dependent on future funding.

As set out in the Going concern conclusion per Note 2, a material uncertainty exists in relation to the Group's ability to obtain the additional funding needed to develop the Kyrgyz Republic development projects as there are currently no binding agreements in place in respect of any additional funding and there is no guarantee that any course of funding will proceed. Should that funding not be available there would be an indication of impairment which could result in a material provision against the carrying value of the related exploration and evaluation assets and assets under construction.

Costs capitalised to exploration and evaluation assets

The costs capitalised to exploration and evaluation assets in 2021 was US$5.7 million (2020: US$6.3 million). Judgement is applied in the determination of the type of costs that are capitalised to exploration and evaluation assets as described in the accounting policy note above. Payroll costs that are directly attributable to exploration and evaluation related activities are capitalised.

Costs capitalised to property, plant and equipment (mining properties)

The costs capitalised to mining properties in 2021 was US$7.9 million (2020: US$5.9 million). Judgement is applied in the determination of the type of costs that are capitalised to mining properties as described in the accounting policy note above.

Functional currency of Kapan

The functional currency of the subsidiary located and operating in Armenia is the Armenian Dram (AMD), as this is the currency of the primary economic environment in which it operates.

Treatment of royalty expense

Royalties paid in Armenia of US$5.7 million (2020: US$6.5 million) are included in cost of sales as they are calculated on the basis of revenue earned from the supply of concentrates. As the royalties expense is not a charge on profit or loss before tax, management does not consider it to be an income tax expense within the scope of IAS 12 Income Taxes. Whilst the royalty rate is applied to revenue, the formula to determine this rate can be split into two components, a base amount applied to revenue, and a further amount based on the level of profit in the period. In these circumstances, an accounting policy choice is required to determine whether the entire amount will be classified as a royalty expense, or a component separately recognised as an income tax expense within the scope of IAS 12. If the Group had elected to recognise a component of this royalty within the scope of IAS 12, the royalty expense would have been reduced and EBITDA for the year would have been increased by US$2.5 million (2020: US$3.1 million) with a corresponding increase in the income tax charge, and the deferred tax asset recognized at 31 December 2021 would have increased by US$1.3 million (2020: US$1.5 million).

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Accounting for the concentrate purchase agreement

In 2021 the Group entered into a new contractual arrangement under which third party ore has been received, processed, purchased and sold to the customer.

The substance of this arrangement was considered to be an ore purchase agreement such that inventory recognition occurs from that point and the processing fee recoverable is deducted from the cost of the material purchased.

Ore reserves

An ore reserve estimate is an estimate of the amount of product that can be economically and legally extracted from the Group's properties. Ore reserve estimates are used by the Group in the calculation of depreciation of mining assets using the units-of-production method; impairment charges and in forecasting the timing of the payment of decommissioning and land restoration costs. Also, for the purpose of impairment review and the assessment of the timing of the payment of decommissioning and land restoration costs, management may take into account mineral resources in addition to ore reserves where there is a high degree of confidence that such resources will be extracted.

In order to calculate ore reserves, estimates and assumptions are required about geological, technical, and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices, discount rates and exchange rates. Estimating the quantity and/or grade of ore reserves requires the size, shape, and depth of ore bodies to be determined by analysing geological data such as the logging and assaying of drill samples. This process may require complex and difficult geological judgements and calculations to interpret the data.

Ore reserve estimates may change from period to period as additional geological data becomes available during the course of operations or if there are changes in any of the aforementioned assumptions. Such changes in estimated reserves may affect the Group's financial results and financial position in a number of ways, including the following:

• Assets' carrying values due to changes in estimated future cash flows;

• Depreciation charged in the consolidated income statement where such charges are determined by using the units-of-production method;

• Provisions for decommissioning and land restoration costs where changes in estimated reserves affect expectations about the timing of the payment of such costs; and

• Carrying value of deferred tax assets and liabilities where changes in estimated reserves affect the carrying value of the relevant assets and liabilities.

Inventory impairment policy and estimate

For concentrate and ore stockpiles the net realisable value represents the estimated selling price for that product based on forward metal prices according to the applicable contract terms, less the estimated costs to complete production and selling costs, including royalty. Production cost is determined as the sum of the applicable expenditures incurred directly or indirectly in bringing inventories to their existing condition and location. The estimated costs to complete and selling costs are obtained from the current production budgets, approved for the reporting year. The carrying value of inventory at 31 December 2021 was US$16.2 million (2020: US$12.3 million) and the inventory write-down provision to net realisable value amounted to US$1.9 million as at 31 December 2021 (2020: US$0.8 million), relating mainly to consumables and spare parts.

Provision for environmental obligations

A provision for the costs to restore working areas on the Kapan mine, including decommissioning of plant and securing of the tailings dam, requires estimates and assumptions to be made. These include estimates and assumptions around the relevant environmental and regulatory requirements, inflation, the magnitude of the possible disturbance and the timing, extent, and costs of the required decommissioning activities.

In calculating the provision, cost estimates of the future potential cash outflows based on current assessments of the expected decommissioning activities and timing thereof, are prepared. These forecasts are then discounted to their present value using a discount rate of 9.91% as disclosed in Note 23. The works and technical studies are continuing and as the actual future costs can differ from the estimates due to changes in regulations, technology, costs and timing, the provision including the estimates and assumptions contained therein are regularly reviewed by management. The current estimate reviewed by management is based on a new estimate completed in 2021. The provision at 31 December 2021 is US$10.5 million (2020: US$7.5 million). A 25% increase or decrease in the potential cash flows would increase or decrease the provision by US$2.6 million. The basis of the provision recognised is an assumed mine closure date of 2026 with rehabilitation being primarily completed in the subsequent year. An acceleration or deferral of this expenditure by one year would increase/decrease the provision by US$1 million.

Legal claim provisions

As disclosed in Note 31, legal claim provisions totalling US$2.8 million have been recognised as the Group has a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the disputes, a reliable estimate can be made of the amount of the obligation however there is uncertainty around the timing of payments to be made. US$0.8 million of the employment dispute provision is covered by an indemnity included in the original Kapan acquisition agreement. The directors consider recoverability virtually certain and accordingly have recognised a corresponding contingent asset within other receivables as shown within note 20.

4. Revenue

The revenue recognised from contracts with customers consisted of the following:

	2021	2020
	US$'000	US$'000
Copper concentrate	77,134	61,827
Zinc concentrate	13,114	14,167
Zinc concentrate freight	2,186	-
Total	92,434	75,994

The Group's sales of copper and zinc concentrate are based on provisional 1-3 month commodity forward prices and as such, contain an embedded derivative which is marked-to-market at each month end.

The Group's sales are to internationally well-established commodity traders under standard offtake terms.

In 2021, Copper concentrate sales were made on an Ex Works basis meaning that control passes to the buyer when the concentrate is loaded on the truck at the Kapan mine. Zinc concentrate sales were made on a cost, insurance, and freight ("CIF") basis meaning that control passes to the buyer when the concentrate is loaded on the vessel in the port of shipment (e.g., port of Poti, Georgia).

In addition to the Group's own concentrates, it processes third party ore into concentrate and sells it to customers. Of the US$92.4 million generated from concentrate sales in 2021, US$72.8 million relates to own concentrate sales and US$19.6 million relates to third-party concentrate sales (2020: US$69.9 million and US$6.1 million).

In 2021, the Group has continued to recognise contract liabilities in relation to its contracts with customers for prepayments received for the future transfer of concentrates, as set out in Note 26.

5. Cost of sales

	2021		2020
	US$'000		US$'000
Depreciation and amortisation	5,941	4,851
Employee benefit expenses	8,817		9,467
Materials	12,973		10,183
Services	14,616		13,566
Royalties	5,665		6,473
Energy and fuel	4,103		4,169
Cost of purchased ore and concentrate*	16,143		5,451
Short-term lease charges	951		1,075
Other	49		51
Total	69,258		55,286

*In 2021, the Group started processing third party ore into concentrate for a fee. The Group purchases the processed concentrate and sells it to customers, resulting in third-party revenue, which is recognised in addition to own ore revenue, as disclosed in note 4. The amount expensed in cost of sales is equal to the price paid to the third party, which is net of the processing fee charged by the Group on the basis the substance of these arrangements is that of an ore purchase agreement. on the basis that the substance of these arrangements is that of an ore purchase agreement.

6. Operating profit

The operating profit is stated after charging/(crediting):

	2021	2020
	US$'000	US$'000
Depreciation of property, plant and equipment	6,841	5,693
Amortisation of intangible assets	274	266
Short-term/low value lease charges	1,083	1,219
Share based payment charges	1,251	3,612
Loss on the sale of fixed assets	4	66
(Gain)/loss on foreign exchange	(1,475)	2,456
Fees payable to Group auditors for the audit of the Group financial statements	234	162
Fees payable to associated firms of the auditor for the audit of subsidiaries	83	48
Change in legal provision	75	(29)
Change in provision for environmental obligations (income) - Note 23	-	(1,088)
Selling expenses	2,444	1,864
Loss on termination of lease	-	22

7. Selling expenses

Selling expenses consisted of the following:

	2021	2020
	US$'000	US$'000
Transportation expenses	1,099	1,214
Sampling and inspection	125	125
Staff costs	246	233
Customs clearance	675	36
Utilities	30	28
Depreciation and amortisation	6	13
Material	77	180
Services	27	-
Other	159	35
Total	2,444	1,864

8. Administrative expenses

The administrative expenses consisted of the following:

	2021	2020
	US$'000	US$'000
Readmission and acquisition costs	242	65
Legal and compliance	422	128
Regulatory	359	263
Investor relations	363	382
Salaries	6,383	6,274
Change in provision for environmental obligations (income) - Note 23	-	(1,088)
Corporate support	3,787	7,171
Travel and subsistence	159	163
Share-based payment charges	1,251	3,612
Total	12,966	16,970

9. Segmental analysis

Operating segments are identified based on internal reports about components of the Group that are regularly reviewed by the Board, in order to allocate resources to the segments and to assess their performance.

Based on the proportion of revenue and profit within the Group's operations and on the differences in principal activities, the Board considers there to be two operating segments:

· Exploration for mineral deposits in the Kyrgyz Republic with support provided from the British Virgin Islands ('Kyrgyz Republic')

· Exploration and production of copper and zinc concentrates at Kapan in Armenia ('Armenia')

	Kyrgyz Republic	Armenia	Corporate	Total
31 December 2021	US$'000	US$'000	US$'000	US$'000

Revenue
Sales to external customers	-	92,434	-	92,434
Total segment revenue	-	92,434	-	92,434

Operating profit/(loss)	(2,299)	17,448	(7,361)	7,788
Finance income	-	17	6	23
Finance costs	-	(3,043)	(4,853)	(7,896)
Fair value gain on warrant	-	-	434	434
Profit/(loss) before income tax	(2,299)	14,422	(11,774)	349
Income tax charge	-	(3,937)	-	(3,937)
Profit/(loss) after income tax	(2,299)	10,485	(11,774)	(3,588)

Assets
Segment assets - non-current	78,562	41,173	-	119,735
Segment assets - current	277	43,797	7,749	51,823
Total assets	78,839	84,970	7,749	171,558

Liabilities
Segment liabilities	2,253	65,753	26,675	94,682
Total liabilities	2,253	65,753	26,675	94,682

	Kyrgyz Republic	Armenia	Corporate	Total
31 December 2020	US$'000	US$'000	US$'000	US$'000

Revenue
Sales to external customers	-	75,994	-	75,994
Total segment revenue	-	75,994	-	75,994

Operating profit/(loss)	(2,277)	12,747	(8,575)	1,895
Finance income	-	19	-	19
Finance costs	-	(3,804)	(17,628)	(21,432)
Fair value gain on warrant	-	-	595	595
Loss before income tax	(2,277)	8,962	(25,608)	(18,923)
Income tax charge	-	(3,520)	-	(3,520)
Loss after income tax	(2,277)	5,442	(25,608)	(22,443)

Assets
Segment assets - non-current	71,604	37,708	-	109,312
Segment assets - current	135	24,544	1,146	25,825
Total assets	71,739	62,252	1,146	135,137

Liabilities
Segment liabilities	5,571	56,860	48,255	110,686
Total liabilities	5,571	56,860	48,255	110,686

10. Staff numbers and costs

	2021	2020
	Number	Number
Management and administration	167	169
Exploration and evaluation	54	45
Production and service	948	980
Total	1,169	1,194

The aggregate payroll costs of these persons were as follows:	US$'000	US$'000
Staff wages and salaries	17,725	17,032
Employee share-based payment charges	966	1,354

Directors' remuneration as detailed in the Remuneration Report
Wages and salaries	880	1,097
Termination benefits	575	-
Share-based payment charges	285	2,258
Total	20,431	21,741

The share-based payment charges relate to the remaining fair value attributed to restricted stock units ("RSUs") granted under the Management Incentive Plan ("MIP") in 2019. The vesting of the tranche 3 RSUs took place in April 2021 following final determination by the remuneration committee of the extent to which performance criteria had been achieved, in the case of awards subject to performance conditions. Tranche 3 RSUs not subject to performance conditions vested at the same time.

The staff wages and salaries include amounts capitalised to exploration and evaluation assets of US$3.1 million (2020: US$2.2 million).

11. Directors' remuneration

The costs of certain Directors' services were charged to the Company via consultancy companies, as separately detailed below and in the related party transactions Note 32, rather than directly as short-term employment costs. These arrangements are in place purely for administrative convenience and are not methods to mitigate, reduce or remove liabilities to taxation in the respective Director's country of residence. Details of Directors' remuneration are provided in the Remuneration Report.

Total remuneration	2021	2020
	US$'000	US$'000
Salary and fees paid directly	830	1,041
Salary and fees paid via related party consultancy companies	50	56
Termination benefits	575	-
Share-based payment charges	285	2,258
Total	1,740	3,355

The share-based payment charge in 2021 relates to the fair value charge attributed to tranche 3 RSUs which vested in April 2021.

12. Finance costs

		2021	2020
		US$'000	US$'000
Interest on convertible loan notes	25	3,793	3,258
Interest on other loans	29	2,184	5,763
Interest on lease liabilities	28	128	169
Interest on contract liabilities	26	204	102
Unwinding of discount - provision for environmental obligations	23	705	655
Financing costs	29	867	11,485
Other		15	-
Total		7,896	21,432

The interest on other loans of US$2.2 million includes interest on borrowings of US$1.9 million, interest on other borrowings of US$0.1 million and interest on the Labro Term Loan of US$0.2 million. The interest charge in the comparative year was higher as it included interest on the Investor Loan and the Labro Facility of US$2.6 million. Both of these loans were extinguished in 2021.

The financing costs of US$0.9 million, a non-cash cost, relates to the amortisation of the Labro Facility commitment fee as disclosed in Note 29. In 2020, the financing costs of US$11.5 million related to the refinance of the Investor Loan and the Labro Term Loan, which were expensed as part of the substantial modification of these loans.

13. Taxation

The Group is not subject to corporate tax in the British Virgin Islands. Companies engaged in the production and sale of gold in the Kyrgyz Republic pay a revenue-based tax on the sales of gold rather than tax on profit. Accordingly, the Group has an effective rate of tax on profit of 0% in these jurisdictions. In the remaining jurisdictions in which the Group operates, being Armenia, Cyprus and the United Kingdom, profits are subject to corporate income tax at a rate of 18%, 12.5% and 19%, respectively.

Within Armenia, the rate of corporate income tax is 18% for resident companies (with a worldwide tax base) for 2021. The tax period of corporate income tax is one calendar year (1 January - 31 December). Advance payments of corporate income tax are required to be made quarterly by the 20^th day of the third month of each quarter. The advance payment is equal to 20% of the corporate income tax reported in the previous tax year. The balance of tax due must be paid by 20 April of the year following the reporting year. Corporate income tax is determined based on rules and principles of accounting defined by the law or other legal acts.

Within the Kyrgyz Republic, a fixed royalty is payable on the sale of gold. In 2021, the fixed royalty percentage remained at 8%, comprising a royalty of 5% and a contribution to local infrastructure of 3% (2020: 5% and 3%). However, due to the Stabilisation Agreement that was signed in 2019 which entitled the Company's local subsidiary, Chaarat Zaav, to benefit from any future changes in direct taxes during the 10 years from the date of the agreement, the fixed royalty percentage is capped at 7%. A further percentage rate of tax is based on the average monthly international gold price, being 1% if the gold price is below US$1,300 per ounce and up to 20% when the gold price exceeds US$2,501 per ounce. The maximum royalty payable when the gold price is above US$2,501 per ounce is therefore 27%. However, as the Group's assets in the Kyrgyz Republic are at an exploration stage, the Group has no royalty payable in respect of these assets for the years ended 31 December 2021 or 31 December 2020.

Further, under the Article 301 of the Tax Code of the Kyrgyz Republic, an entity is subject to a taxation in payment of the right to use subsoil, including for the purpose of developing a mineral deposit. The tax base for calculating this is the amount of geological reserves and forecast resources taken into account by the State Balance of deposits of mineral resources of the Kyrgyz Republic.

At the balance sheet date, the Group has received no tax claims and the Directors believe that the Group is in compliance with the tax laws affecting its operations.

The Group has recognised deferred tax assets which relate to temporary differences arising at the Kapan mine in Armenia, as detailed in Note 18.

Analysis of tax charge for the year

		2021	2020
		US$'000	US$'000
Armenian tax		2,269	1,979
Current tax		2,269	1,979
Origination and reversal of temporary differences		1,668	1,541
Deferred tax	18	1,668	1,541
Income tax expense		3,937	3,520

Reconciliation of tax charge for the year

	2021	2020
	US$'000	US$'000
Profit/(loss) before tax	349	(18,923)
Tax calculated at applicable corporation tax rate:
Armenian corporation tax at 18% (2020:18%)	63	3,406

Tax effects of:
Items non-deductible/(non-taxable) for tax purposes	127	(696)
Income eliminated on consolidation	(566)	(614)
Different tax rates applied in overseas jurisdictions	(2,188)	(4,468)
Current tax losses not recognised	(345)	(551)
Write-down of previously recognised deferred tax assets	(1,028)	(597)
Income tax expense	(3,937)	(3,520)

Tax losses

	2021	2020
	US$'000	US$'000
Unused tax losses for which no deferred tax asset has been recognized
United Kingdom	278	313
Tax benefit at 19%	53	59

Deferred tax assets are only recognised to the extent that it is probable that taxable profits will be available against which unused tax losses and unused tax credits can be utilised.

14. Loss per share

Loss per share is calculated by reference to the loss for the year of US$3.6 million (2020: loss of US$22.4 million) and the weighted average number of ordinary shares in issue during the year of 673,320,329 (2020: 510,466,838).

At 31 December 2021, 8,920,341 (2020: 8,920,341) warrants, 49,692,252 (2020: 55,027,006) share options and convertible loan notes have been excluded from the diluted weighted average number of ordinary shares calculation because their effect would have been anti-dilutive.

15. Exploration and evaluation costs

	Tulkubash	Kyzyltash	Total
	US$'000	US$'000	US$'000
At 1 January 2020	45,868	9,202	55,070
Additions	6,289	-	6,289
At 31 December 2020	52,157	9,202	61,359
Additions	4,775	899	5,674
Reclassification to property, plant & equipment	(728)	-	(728)
At 31 December 2021	56,204	10,101	66,305

Exploration and evaluation assets comprise costs associated with exploration for, and evaluation of, mineral resources together with costs to maintain mining and exploration licences for mining properties that are considered by the Directors to meet the requirements for capitalisation under the Group's accounting policies as disclosed in Note 3. As at 31 December 2021, management does not consider there to be any indicators of impairment in respect of these assets.

In 2021, the Company entered into a new investment agreement ("The Investment Agreement") with Çiftay which supersedes the previous agreement that was signed in September 2019. Çiftay and the Company decided to replace the previous agreement with the Investment Agreement, in order to simplify the structure of the partnership and further align the interests of both parties. Under the Investment Agreement, Chaarat retains 100% ownership of the Tulkubash and Kyzyltash projects with Çiftay becoming a strategic investor at the Company level, through the issuance of new ordinary shares. In July 2021, the Company issued 2.8 million new ordinary shares to Çiftay with a fair value of US$0.8 million in settlement of accrued expenses relating to Tulkubash construction activities. Further shares issues will only take place once certain terms of the agreement are triggered by securing project finance.

16. Intangible assets

		Computer Software		Other intangible assets			Total
		US$'000		US$'000			US$'000
Cost
At 1 January 2020		1,405		480			1,885
Additions		155		44			199
Disposals		-		(214)			(214)
Effect of translation to presentation currency		(109)		(29)			(138)
At 31 December 2020		1,451		281			1,732
Prior year reclassification from PPE	18		-		18
Additions		152		-			152
Effect of translation to presentation currency		120		26			146
At 31 December 2021		1,741		307		2,048
Accumulated amortisation
At 1 January 2020		276		-			276
Charge for the year		245		21			266
Effect of translation to presentation currency		(30)		(1)			(31)
At 31 December 2020		491		20			511
Charge for the year		246		28			274
Effect of translation to presentation currency		45		5			50
At 31 December 2021		782		53			835

Net book value
At 31 December 2021		959		254			1,213
At 31 December 2020		960		261			1,221
At 1 January 2020		1,129		480			1,609

17. Property, plant and equipment

	Land and buildings	Mining properties	Fixtures and fittings	Motor vehicles	Assets under construction	Right-of-use Assets	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Cost
At 1 January 2020	9,144	29,931	1,597	663	2,755	616	44,706
Additions	6	4,789	10	39	4,570	1,565	10,979
Transfers	203	666	-	-	(869)	-	-
Changes in estimates of provision for environmental obligations	-	(29)	-	-	-	-	(29)
Disposals	-	(916)	(34)	(35)	-	(272)	(1,257)
Reclassification from inventories	-	418	-	-	57	-	475
Effect of translation to presentation currency	(339)	(2,636)	(106)	(19)	(66)	(128)	(3,294)
At 31 December 2020	9,014	32,223	1,467	648	6,447	1,781	51,580
Additions	-	4,35 8	16	-	2,955	-	7,32 9
Transfers	32	510	1	-	(543)	-	-
Changes in estimates of provision for environmental obligations	-	1,566	-	-	-	-	1,566
Disposals	-	(508)	(2)	-	-	-	(510)
Reclassification f rom inventories	-	1,499	-	-	165	-	1,6 64
Reclassification from exploration and evaluation asset	-	-	-	-	728	-	728
Effect of translation to presentation currency	330	3,05 5	105	19	120	157	3,78 6
At 31 December 2021	9,376	42, 703	1,587	667	9,872	1,938	66 ,143

Accumulated depreciation
At 1 January 2020	1,231	4,428	403	271	-	104	6,437
Charge for the year	1,078	4,229	319	116	-	608	6,350
Disposals	-	(915)	(27)	(35)	-	(164)	(1,141)
Effect of translation to presentation currency	(67)	(461)	(32)	(9)	-	(35)	(604)
At 31 December 2020	2,242	7,281	663	343	-	513	11,042
Charge for the year	802	5 ,431	375	109	-	590	7 ,307
Disposals	-	(503)	(2)	-	-	-	(505)
Effect of translation to presentation currency	100	75 4	54	11	-	74	99 3
At 31 December 2021	3,144	12 ,963	1,090	463	-	1,177	18 ,837

Net book value
At 31 December 2021	6,232	2 9,740	497	204	9,872	761	47,3 06
At 31 December 2020	6,772	24,942	804	305	6,447	1,268	40,538
At 1 January 2020	7,913	25,503	1,194	392	2,755	512	38,269

The Group's property, plant and equipment relating to the operations in Armenia, Kapan, are pledged as security to the respective banks that have supplied bank debt to the Group.

As at 31 December 2021, management does not consider there to be any indicators of impairment in respect of the Group's property, plant and equipment.

18. Deferred Tax

Deferred tax assets have been recognized as a result of temporary differences where the directors believe it is probable that these assets will be recovered. The Group's deferred tax balance relates to the Kapan mine in Armenia. No deferred tax has been recognized in respect of the Group's operations in the Kyrgyz Republic. As disclosed in Note 13, unused tax losses for which no deferred tax asset has been recognised amounts to US$0.3 million (2020: US$0.3 million).

The movement in net deferred tax assets during the year is as follows:

	2021	2020
	US$'000	US$'000
At 1 January	5,631	7,652
Charged to the income statement	(1,668)	(1,541)
Effect of currency translation	418	(480)
At 31 December	4,381	5,631
Comprising:
Deferred tax assets	4,381	5,631
Deferred tax liabilities	-	-

Movements in temporary differences during the years ended 31 December are presented as follows:

2021	At 1 January	Charged to the income statement	Effect of currency translation	Total
	US$'000	US$'000	US$'000	US$'000
Property, plant and equipment	4,516	(706)	365	4,175
Trade and other receivables	49	119	9		177
Inventories	684	(892)	18		(190)
Other provisions	48	2	4		54
Trade and other payables	108	(61)	7		54
Lease liabilities	226	(130)	15		111
Total	5,631	(1,668)	418		4,381


2020	At 1 January	Charged to the income statement	Effect of currency translation	Total
	US$'000	US$'000	US$'000	US$'000
Property, plant and equipment	5,760	(885)	(359)	4,516
Trade and other receivables	35	18	(4)		49
Inventories	1,402	(637)	(81)		684
Other provisions	57	(5)	(4)		48
Trade and other payables	101	17	(10)		108
Lease liabilities	297	(49)	(22)		226
Total	7,652	(1,541)	(480)		5,631

19. Inventories

Inventories represent goods held for sale in the ordinary course of business (copper and zinc concentrate), ore being processed into a saleable condition (ore stockpiles) and consumables and spares to be used in the production process.

	2021	2020
	US$'000	US$'000
Consumables and spare parts	8,861	7,211
Copper and zinc concentrate in stock	5,984	3,844
Copper and zinc concentrate in transit	1,432	-
Ore stockpiles extracted	2,157	749
Other	8	447
At 31 December	18,442	12,251

The cost of inventories recognised as an expense and included in cost of sales amounted to US$13.2 million (2020: US$10.2 million) for raw materials and consumables and spare parts and US$16.1 million (2020: US$5.5 million) for purchased ore and concentrate. The inventory write-down provision to net realisable value amounted to US$1.9 million as at 31 December 2021 (2020: US$0.8 million), relating mainly to consumables and spare parts.

20. Trade and other receivables

	2021	2020
	US$'000	US$'000
Trade receivables	18,620	3,447
Other receivables	2,856	1,055
Unpaid shares issued*	6	122
Prepayments	766	2,293
Less: expected credit losses	(1)	(271)
At 31 December	22,247	6,646

*Shares were issued to key management personnel ("KMPs") and other employees in April 2020 upon terms that the subscription price would be satisfied by way of set-off against a proportion of fees and salaries due and to become due until such time as the subscription price was fully paid. The total amount set-off against fees and salaries during the year was US$0.1 million (2020: US$0.5 million). Amounts relating to KMPs are disclosed in Note 32.

The movement in the loss allowance for expected credit losses is detailed below:

	2021	2020
	US$'000	US$'000
At 1 January	271	101
Movement during the year	(270)	191
Effect of currency translation	-	(21)
At 31 December	1	271

21. Cash and cash equivalents

	2021	2020
	US$'000	US$'000
Cash on hand	2	5
Current accounts in UK	7,646	132
Current accounts in the Kyrgyz Republic	264	118
Current accounts in Armenia	3,222	6,673
At 31 December	11,134	6,928

There are no amounts of cash and cash equivalents which are not available for use by the Group. All amounts held in current accounts can be drawn on demand if required.

22. Capital and reserves

The share capital of the Company consists of shares of US$0.01 par value of a single class. All shares have equal rights to receive dividends or capital repayments and all shares represent one vote at meetings of shareholders of the Company.

22(a) Capital management policies and procedures

The Group's objectives for the management of capital have not changed in the year. The Directors seek to ensure that the Group will continue to operate as a going concern in order to pursue the development of its mineral properties, to sustain future development and growth as well as to maintain a flexible capital structure which optimises the cost of capital at an acceptable risk. The Company manages the capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may issue shares, seek debt financing, or acquire or dispose of assets. The Company, following approval from the Board of Directors, will make changes to its capital structure as deemed appropriate under specific circumstances.

The Group considers equity to be all components included in shareholders' funds and net debt to be short and long-term borrowings including convertible loan notes less cash and cash equivalents. The Group's net debt to equity ratio at 31 December was as follows:

	2021	2020
	US$'000	US$'000
Total Equity	76,876	24,449

Convertible loan notes	25,625	23,252
Other loans	21,328	53,347
Contract liabilities	2,379	5,328
Lease liabilities	978	1,425
Warrant financial liability	380	814
Less: cash and cash equivalents	(11,134)	(6,928)
Net debt	39,556	77,238
Net debt to equity ratio	51%	316%

Other loans include borrowings which relate to external bank financing obtained for the acquisition of Kapan. This bank financing has certain covenants attached to it that the Group needs to adhere to, all of which were met as at 31 December 2021.

The convertible loan notes, as disclosed in Note 25, respectively, do not have covenants attached to them. As the convertible loan notes are repayable within the next 12 months, they have been disclosed as a current liability as at 31 December 2021.

22 (b) Share capital

	2021		2020
Ordinary shares of US$0.01 each	Number of Shares ('000)	Nominal Value US$'000	Number of Shares ('000)	Nominal Value US$'000
Authorised	1,395,167	13,952	1,395,167	13,952
Issued and fully paid
At 1 January	540,061	5,401	468,811	4,688
Issued for cash	84,115	841	19,046	191
Issued to settle liabilities	65,235	652	51,259	513
Exercise of warrants	-	-	825	8
Exercise of share options	-	-	120	1
At 31 December	689,411	6,894	540,061	5,401

On 5 February 2021, the Company issued 55,240 ordinary shares to Labro to satisfy outstanding drawdown fees under the Labro Facility agreement. On the same day, a further 62,380,154 ordinary shares were issued to Labro to set off the outstanding amount owed by the Company on the Labro Term Loan.

Later in February 2021, as part of an equity fundraise the Company issued a further 84,114,549 ordinary shares of US$0.01 each to new and existing investors for cash (US$30.0 million).

On 30 July 2021, the Company issued 2.8 million new ordinary shares of US$0.01 each in the Company to Çiftay under the new investment agreement entered into on 21 June 2021 (see note 15).

22 (c) Share options and share-based payments

Share options

The Group operates a share option plan under which directors, employees, consultants, and advisers have been granted options to subscribe for ordinary shares. All options are share settled. The number and weighted average exercise price of share options are as follows:

	2021		2020
	Number of Options	Weighted average exercise price (US$)	Number of Options	Weighted average exercise price (US$)
Outstanding at 1 January	55,027,006	0.523	56,925,258	0.522
Exercised during the year	-	-	(120,000)	0.187
Granted during the year	-	-	-	-
Replaced during the year	-	-	-	-
Lapsed during the year	(5,334,754)	0.578	(1,778,252)	0.523
Outstanding at 31 December	49,692,252	0.567	55,027,006	0.523
Exercisable at 31 December	49,692,252	0.567	55,027,006	0.523

The share options outstanding at 31 December 2021 had a weighted average remaining contractual life of 2.7 years (2020: 3.7 years). Maximum term of the options granted was 5 years from the grant date. The share options outstanding at 31 December 2021 had an exercise price of £0.42 (2020: £0.42).

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee. This estimate is based on a Black-Scholes model which is considered most appropriate considering the effects of the vesting conditions and expected exercise period.

The total number of options over ordinary shares outstanding at 31 December 2021 was as follows:

Exercise period	Number	Exercise price
18 September 2019 to 18 September 2024	49,692,252	£0.42
Total	49,692,252	£0.42

Management Incentive Plan

On 18 September 2019, the Group adopted a new Management Incentive Plan ("MIP") whereby 56,805,258 share options exercisable at £0.42 per share and 21,494,198 restricted stock units ("RSUs") were granted to key management personnel ("KMPs") and other employees (subject to performance conditions for executives in the case of the RSUs). 33% of the share options and RSUs vested on 15 October 2019 (Tranche 1), 33% on 31 December 2019 and (in the case of RSUs subject to performance conditions) on 21 February 2020 (Tranche 2), and the remaining 33% of share options vested on 31 December 2020 subject to a vesting condition of continued employment by the Group. On 15 April 2021, 5,308,640 RSUs (Tranche 3) vested following final determination by the remuneration committee of the extent to which performance criteria had been achieved, in the case of awards subject to performance conditions. RSUs not subject to performance conditions in Tranche 3 vested at the same time.

On 22 April 2021, a further 2,122,466 RSUs were granted to KMPs and other employees which vested immediately on this date. As a result, a total share-based payment charge of US$1.3 million was recognised during 2021, US$0.5 million of which related to the remaining Tranche 3 RSUs and US$0.8 million to the additional RSUs granted on 22 April 2021.

There was no exercise of share options during 2021, however 5,334,754 share options lapsed due to two employees leaving the Company during the year.

No further share awards were granted in 2021, however as disclosed in Note 35, a further 5 million share options were granted under the MIP to the Company's new Chief Executive Officer on joining in January 2022.

Trust

On 7 October 2019, the Group established the Chaarat Gold Holdings Limited Employee Benefit Trust in order to acquire and hold sufficient shares to satisfy the awards under the new Plan. The Company has control over the Trust and therefore the results of the Trust were consolidated within these financial statements. During the year, expenses of US$0.05 million were incurred by the Trust (2020: US$0.1 million). At 31 December 2021, the Trust held 1,070,194 shares (2020: 8,504,596 shares).

22 (d) Convertible loan note reserve

The convertible loan note reserve represents the equity component of convertible loan notes issued by the Company. Refer to Note 25 for further information.

	2021	2020
	US$'000	US$'000
At 1 January	2,493	2,493
Modification of convertible loan notes	(1,073)	-
At 31 December	1,420	2,493

22 (e) Own shares reserve

The own shares reserve represents the nominal value of equity shares that have been repurchased by the company. The movement in the reserve is as follows:

	2021	2020
	US$'000	US$'000
At 1 January	(216)	(216)
Transfer of treasury shares	84	-
At 31 December	(132)	(216)

23. Provision for environmental obligations

The provision for environmental obligations relates to the Kapan mine in Armenia. According to Armenian legislation and licence agreements, the Company is committed to restoring working areas on the mine, including decommissioning of plant and securing of the tailings dam. Movements in the provision are as follows:

	2021	2020
	US$'000	US$'000
At 1 January	7,479	8,638
Change in provision	1,566	(1,088)
Unwinding of discount	705	655
Reclassification to deferred expenses	-	(44)
Effect of currency translation	771	(682)
At 31 December	10,521	7,479

The change in provision of US$1.6 million in 2021 was as a result of a reassessment of the Company's obligations under international good practice requirements that took place in 2021 by an independent third party.

Further details relating to the calculation of the balance as at 31 December 2021 are as follows:

	31/12/2021	31/12/2020
Discount rates	9 .91%	8.63%
Provision settlement date	3 1/12/2027	31/12/2027
Estimated undiscounted cash flow required to settle the provision	U S$14.1 million	US$9.6 million

24. Reconciliation of liabilities

	Convertible loans	Contract liabilities	Lease liabilities	Other loans	Total
Li abilities from financing activities	US$'000	US$'000	US$'000	US$'000	US$'000
At 1 January 2020	19,994	-	578	59,258	79,830
Cash flows:
Cash proceeds	-	7,000	-	5,300	12,300
Transaction costs paid	-	-	-	(209)	(209)
Payment of interest	-	-	-	(3,185)	(3,185)
Payment of principal amount	-	-	-	(8,000)	(8,000)
Lease payments	-	-	(573)	-	(573)
Net proceeds	-	7,000	(573)	(6,094)	333
Non-cash items:
Loan modification	-	-	-	(20,665)	(20,665)
Interest capitalised	-	-	-	587	587
Interest accrued	3,258	102	169	5,176	8,705
Additions	-	-	1,565	21,788	23,353
Reclassification	-	-	(126)	-	(126)
Lease termination	-	-	(80)	-	(80)
Converted to equity	-	-	-	(6,338)	(6,338)
Settlement of interest against receivables	-	(71)	-	-	(71)
Transaction costs	-			(361)	(361)
Amounts recognised as revenue during the year	-	(1,667)	-	-	(1,667)
Effect of currency translation	-	(36)	(108)	(4)	(148)
Total liabilities from financing activities at 31 December 2020	23,252	5,328	1,425	53,347	83,352
Non-current	-	-	771	21,947	22,718
Current	23,252	5,328	654	31,400	60,634
Cash flows:
Cash proceeds	-	-	-	-	-
Payment of interest	-	-	-	(2,295)	(2,295)
Payment of principal amount	-	-	-	(9,800)	(9,800)
Lease payments	-	-	(674)	-	(674)
Net proceeds	-	-	(674)	(12,095)	(12,769)
Non-cash items:
Loan modification	(1,420)	-	-	8	(1,412)
Converted to equity	-	-	-	(22,117)	(22,117)
Interest accrued	3,793	204	128	2,184	6,309
Settlement of interest against receivables	-	(120)	-	-	(120)
Amounts recognised as revenue during the year	-	(3,250)	-	-	(3,250)
Effect of currency translation		217	99	1	317
Total liabilities from financing activities at 31 December 2021	25,625	2,379	978	21,328	50,310
Non-current	-	-	732	9,688	10,420
Current	25,625	2,379	246	11,640	39,890

25. Convertible loan notes

During the year no new convertible loan notes were issued, however the maturity date was extended by one year from 31 October 2021 to 31 October 2022 and the conversion price of the notes was decreased from £0.37 per share to £0.30 per share. The only other transaction during the year was accrued interest of US$3.8 million (2020: US$3.3 million).

2021 Notes	US$'000
At 31 December 2019	19,994
Cash proceeds	-
Transaction costs	-
Net proceeds	-
Amount classified as equity	-
Accrued interest	3,258
At 31 December 2020	23,252
Cash proceeds	-
Transaction costs	-
Net proceeds	-
Loan modification	(1,420)
Accrued interest	3,793
At 31 December 2021	25,625

The number of shares to be issued on conversion is fixed. There are no covenants attached to the convertible loan notes.

The 2021 notes accrued interest at 10% p.a. until 30 April 2020 and then at a rate of 12% p.a. until 31 October 2021. The notes are secured on the shares of the Group's principal operating subsidiary, Chaarat Zaav CJSC via the intermediate holding company Zaav Holdings Limited. The notes are repayable on 31 October 2022 and can be redeemed by the Company at any time subject to paying a minimum of 5% interest. The notes, including accrued interest, can be converted at any time at the holder's option at a price of £0.30 per ordinary share. If not converted, the notes will be repaid in cash for a total of US$28.8 million in October 2022, as disclosed in Note 2.

On 21 October 2021, the maturity date of the convertible loan notes was extended from 31 October 2021 to 31 October 2022 and the conversion price reduced from £0.37 to £0.30 per share, which was treated as a substantial modification for accounting purposes. The coupon interest rate remains at 12% p.a.

The value of the liability and equity conversion component was reassessed at the date of the modification. The fair value of the liability component was calculated using a market interest rate of 15% for an equivalent instrument without conversion option.

As the notes fall due in October 2022, they have been classified as current liabilities at 31 December 2021.

26. Contract liabilities

The movements in the Group's contract liabilities for the year are presented below:

		2021
		US$'000
At 1 January 2021		5,328
Interest on contract liabilities		204
Settlement of interest against receivables		(120)
Amounts recognised as revenue during the year		(3,250)
Effect of currency translation		217
At 31 December 2021		2,379
Non-current		-
Current		2,379

The contract liabilities balance relates to prepayments received from one of Chaarat Kapan's customers for the future sale of concentrates. The prepayments accrue interest at a rate defined in the sales contract of 6-month LIBOR plus 5% p.a. and are settled by way of deduction against future outstanding invoices.

7. Trade and other payables

Trade and other payables at 31 December consisted of the following:

	2021	2020
	US$'000	US$'000
Trade payables	27,799	11,414
Social security and employee taxes	1,951	1,698
Accruals	967	4,288
As at 31 December	30,717	17,400

Trade and other payables are all unsecured.

28. Leases

The Group's leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets and leases with a duration of 12 months or less.

The Group leases equipment and land in the jurisdictions from which it operates, the most notable being the land that is leased in Armenia. Certain items of property, plant and equipment are also leased in the Kyrgyz Republic which contain variable payments over the lease terms, therefore these leases do not fall within the scope of IFRS 16, and right-of-use assets and lease liabilities are not recognised as a result.

The movements in the Group's right-of-use assets and lease liabilities for the year are presented below:

Right-of-use assets
	Land	Property	Equipment	Total
	US$'000	US$'000	US$'000	US$'000
At 1 January 2020	315	197	-	512
Additions	666	-	899	1,565
Depreciation charge	(111)	(89)	(408)	(608)
Lease termination	-	(102)	-	(102)
Effect of translation to presentation currency	(62)	(6)	(31)	(99)
At 31 December 2020	808	-	460	1,268


	Land	Property	Equipment	Total
	US$'000	US$'000	US$'000	US$'000
At 1 January 2021	808	-	460	1,268
Depreciation charge	(114)	-	(476)	(590)
Effect of translation to presentation currency	66		19	85
At 31 December 2021	760	-	3	763
Lease liabilities
	Land	Property	Equipment	Total
	US$'000	US$'000	US$'000	US$'000
At 1 January 2020	302	276	-	578
Additions	666	-	899	1,565
Reclassification	29	(155)	-	(126)
Interest expense	98	2	69	169
Lease payments	(171)	(38)	(364)	(573)
Lease termination	-	(80)	-	(80)
Effect of translation to presentation currency	(65)	(5)	(38)	(108)
At 31 December 2020	859	-	566	1,425


	Land	Property	Equipment	Total
	US$'000	US$'000	US$'000	US$'000
At 1 January 2021	859	-	566	1,425
Interest expense	97	-	31	128
Lease payments	(189)	-	(485)	(674)
Effect of translation to presentation currency	72	-	27	99
At 31 December 2021	839	-	139	978

The maturity of the gross contractual undiscounted cash flows due on the Group's lease liabilities is set out below based on the period between 31 December and the contractual maturity date.

	Within 6 months	6 months to 1 year	1 to 5 years	Over 5 years	Total at 31 December 2021
	US$'000	US$'000	US$'000	US$'000	US$'000
Land leases	98	99	774	189	1,160
Equipment leases	139	-	-	-	139
Total	237	99	774	189	1,299

	Within 6 months	6 months to 1 year	1 to 5 years	Over 5 years	Total at 31 December 2020
	US$'000	US$'000	US$'000	US$'000	US$'000
Property leases	90	91	719	347	1,247
Land leases	3 41	2 55	-	-	5 96
Total	431	346	719	347	1, 843

As at 31 December 2021, the gross contractual discounted cash flows due on the Group's lease liabilities amounts to US$1.0 million (2020: US$1.4 million).

The discount rate used in calculating the lease liabilities is the rate implicit in the lease, unless this cannot readily be determined, in which case the Group's incremental rate of borrowing is used instead. In 2021, a discount rate of 12% per annum has been used to calculate the Group's lease liabilities for its land and equipment leases.

29. Other loans

Other loans at 31 December consisted of the following:

	Labro Facility	Labro Term Loan	Borrowings	Other Borrowings	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
At 1 January 2021	791	21,947	28,583	2,026	53,347
Interest accrued	17	177	1,857	133	2,184
Loan modification	14	(6)	-	-	8
C onverted to equity	-	(22,117)	-	-	(22,117)
P ayment of interest in cash	(22)	-	(2,154)	(119)	(2,295)
P ayment of principal amount in cash	(800)	-	(9,000)	-	(9,800)
Effect of currency translation	-	-	-	2	2
At 31 December 2021	-	-	19,286	2,042	21,328
Non-current	-	-	9,688	-	9,688
Current	-	-	9,598	2,042	11,640

Labro Facility

In February 2021, the Company repaid the outstanding US$0.8 million on the Labro Facility. The consideration paid exceeded the carrying amount extinguished and therefore a loss of US$13,900 was recognised in profit or loss as a financing cost under IFRS 9. No further drawdowns took place from this point until the maturity date of the facility on 30 June 2021. The remaining commitment fee of US$0.9 million was amortised and recognised as a financing cost in profit or loss on this date.

Labro Term Loan

In February 2021, the outstanding US$22 million on the Labro Term Loan as well as the US$0.2 million of accrued interest was converted into equity. Labro subscribed for 62,380,154 ordinary shares of US$0.01 each in the Company at the issue price of £0.26 per share.

Borrowings

On 30 January 2019, the documentation was finalised for the Kapan Acquisition Financing totalling US$40 million, which is syndicated with Ameriabank CJSC (US$32 million), HSBC Bank Armenia CJSC (US$5 million) and Ararat Bank OJSC (US$3 million). The loan incurs interest at LIBOR plus 8% and was originally repayable through quarterly payments over a four-year period however in July 2021, the maturity date of the facility was extended from 31 January 2023 to 2 October 2023.

This bank financing has certain covenants attached to it that the Group needs to adhere to. All covenants were met as at 31 December 2021 and as such the Group remains in full compliance with the loan.

Other borrowings

Other borrowings include an amount owing to one of Chaarat Kapan's customers in respect of prepayments for the future sale of concentrates. The prepayments accrue interest at 1-month LIBOR plus 6% p.a. and are expected to be settled in cash in accordance with a repayment schedule defined in the sales contract. The prepayments can be requested upon notice and therefore are repayable on demand.

The contractual maturities of other loans (representing undiscounted cash-flows) are disclosed in Note 34.

30. Warrant financial liability

In October 2020, as compensation for the extension option of the Investor Loan, 8,920,341 warrants were issued with an exercise price of £0.26, expiring on 5 October 2023. The warrants are revalued at each reporting date. In 2021, a fair value gain of US$0.4 million was recognised in profit or loss due to a decline in the share price. The movement in the balance is set out below:

	2021	2020
	US$'000	US$'000
At 1 January	814	-
Issue of warrants	-	1,409
Fair value gain	(434)	(595)
As at 31 December	380	814

The warrants to purchase ordinary shares remain outstanding at 31 December 2021 as follows:

	2021		2020
Expiry date	Number of Warrants	Exercise price (£)	Number of Warrants	Exercise price (£)
5 October 2023	8,920,342	0.26	8,920,342	0.26
Total	8,920,342	0.26	8,920,342	0.26

The estimated fair value of the warrants was measured based on the Black-Scholes model. The inputs used in the calculation of the fair value of the warrants at 31 December 2021, using an exchange rate of 1.35, were as follows:

	31 December 2021
Fair value	US$0.04
Share price	US$0.26
Weighted average exercise price	US$0.35
Expected volatility	57.20%
Expected life	1.38 years
Expected dividend yield	0.00%
Risk-free interest rate	0.52%

The expected volatility is based on the historical share price of the Company.

31. Other provisions for liabilities and charges

Other provisions for liabilities and charges relate mainly to employment disputes in Armenia ("Legal Claims Provision") of US$1.2 million at 31 December 2021 (2020: US$0.3 million) and a legal claim of US$1.3 million at 31 December 2021 (2020: US$1.4 million) that was charged against Chaarat in the Kyrgyz Republic whereby compensation for agricultural losses was demanded ("Land Provision"). US$0.8 million of the employment dispute provision is covered by an indemnity included in the original Kapan acquisition agreement. The Directors consider recoverability virtually certain and accordingly have recognised a corresponding within other receivables as shown within Note 20.

The provisions have been recognised as, based on the Group's legal views, it is considered probable that an outflow of resources will be required to settle the disputes, however there is uncertainty around the timing of payments to be made. There are no expected reimbursements relating to these provisions.

The movement in provisions in 2021 is as follows:

	Legal Claims Provision	Land Provision	Other Provision	Total
	US$'000	US $'000	US$'000	US$'000
At 1 January 2021	266	1,375	-	1,641
Change in provision	875	-	205	1,080
Foreign exchange on conversion	66	(33)	-	33
At 31 December 2021	1,207	1,342	205	2,754

32. Related party transactions

Remuneration of key management personnel

Remuneration of key management personnel is as follows:

	2021	2020
	US$'000	US$'000
Short term employee benefits	1,618	1,684
Termination benefits	575	-
Share-based payments charge	856	2,970
Total	3,049	4,654

Included in the above key management personnel are 8 directors and 2 key managers (2020: 7 and 2).

Entities with significant influence over the Group

At 31 December 2021, Labro Investments Limited, Chaarat's largest shareholder, owned 44.17% (2020: 40.57%) of the ordinary US$0.01 shares in Chaarat ("Ordinary Shares") and US$1.0 million of 10% secured convertible loan notes 2021 which, assuming full conversion of principal and interest to maturity on 31 October 2022, are convertible into 3,579,088 Ordinary Shares. If converted, Labro's ownership would increase to 44.46% of the ordinary shares in Chaarat at 31 December 2021.

For all share issues to Labro, the independent directors of the Company considered, having consulted with the Company's nominated adviser at the time of the transactions, that the terms were fair and reasonable insofar as the Company's shareholders are concerned.

Labro Facility Agreement

The Company has issued the following Ordinary Shares in the Company to Labro, payment for which was offset against commitment and drawdown fees incurred under the Labro Facility and reduction of indebtedness under the Labro Term Loan:

Date payment due	Amount to be paid under Labro Loan Agreement		Type of payment under Labro Loan Agreement	№ of shares issued to Labro in satisfaction	Date shares issued to Labro
30 June 2021	US$	24,000	Drawdown fee	55,240	5 February 2021
n/a	US$	22,123,195	Indebtedness reduction	62,380,154	5 February 2021

Refer to Note 29 above for a reconciliation of the Labro Facility during the year, showing a nil balance as at 31 December 2021.

On 5 February 2021, the Company issued 55,240 Ordinary Shares at £0.33 per share to Labro to settle the drawdown fees that were incurred on the US$0.8 million drawdown that took place in November 2020.

On the same date, the Company issued 62,380,154 Ordinary shares at £0.26 per share to Labro. Labro's obligation to deliver cash in respect of these shares was offset against the Company's indebtedness under the Labro Term Loan with the consequence that the Company's obligations under the Labro Term Loan decreased by US$22.1 million to nil, as disclosed in Note 29.

Shares issued to Key Management Personnel

In April 2020, 1,286,839 Ordinary Shares were subscribed for by, and issued to, key management personnel ("KMPs") at a price of £0.26 per Ordinary Share upon terms that the subscription price would be satisfied by way of set-off against a proportion of fees and salaries due and to become due until such time as the subscription price was fully paid. As at 31 December 2021, the subscription price of these shares was fully repaid as outlined below:

Category	Total No. of Placing Shares issued		Total amount	Total repayments	Outstanding balance at 31 December 2021
Directors (including the Executive Chair)		1,073,635	US$ 352,500	US$ 352,500	US$ nil
Other KMPs		213,204	US$ 70,000	US$ 70,000	US$ nil
Total		1,286,839	US$ 422,500	US$ 422,500	US$ nil

33. Commitments and contingencies

Capital expenditure commitments

The Company had a commitment of US$4.9 million at 31 December 2021 (2020: US$6.3 million) in respect of capital expenditure contracted for but not provided for in these financial statements.

Lease liability commitments

Details of lease liability commitments are set out in Note 28.

Licence retention fee commitments

The Company has calculated a commitment of US$0.10 million at 31 December 2021 (2020: US$0.10 million) in respect of licence retention fees not provided in these financial statements. The amount to be paid will be determined by the Kyrgyz authorities and is not payable until a demand for payment is received by the Company. No demand in respect of extant licences had been received at the date of these financial statements.

Licence agreements

There are minimum expenditure commitments under the exploration and mining licence agreements. These minimum levels of investment have always been achieved. The commitment recognised in 2021 is US$0.06 million (2020: US$0.02 million).

34. Financial instruments and financial risk management

The Group is exposed to a variety of financial risks which result from its operating activities. The Group's risk management is coordinated by the executive Directors, in close co-operation with the Board of Directors, and focuses on actively securing the Group's short to medium term cash flows by minimising the exposure to financial markets. The Group does not actively engage in the trading of financial assets for speculative purposes. The most significant financial risks to which the Group is exposed are described below.

Categories of financial instruments

	2021	2020
Financial assets measured at fair value	US$'000	US$'000
Trade and other receivables	22,247	6,646
Cash and cash equivalents	11,134	6,928
Total financial assets	33,381	13,574

Financial liabilities measured at amortised cost
Trade and other payables	28,766	15,703
Contract liabilities	2,379	5,328
Lease liabilities	978	1,425
Other loans	21,328	53,347
Convertible loan notes	25,625	23,252
Financial liabilities measured at fair value through profit or loss
Warrant financial liability	380	814
Total financial liabilities	79,456	99,869

Credit risk

Credit risk is the risk that a customer may default or not meet its obligations to the Group on a timely basis, leading to financial losses to the Group. The Group's financial instruments that are potentially exposed to concentration of credit risk consist primarily of cash and cash equivalents and loans and receivables.

Trade accounts receivable at 31 December 2021 are represented by provisional copper and zinc concentrate sales transactions. A significant portion of the Group's trade accounts receivable is due from reputable export trading companies. With regard to other loans and receivables the procedures of accepting a new customer include checks by a security department and responsible on-site management for business reputation, licences and certification, creditworthiness, and liquidity. Generally, the Group does not require any collateral to be pledged in connection with itg cs investments in the above financial instruments. Credit limits for the Group as a whole are not set up. In line with 2020, COVID-19 did not significantly impact the credit risk of the Group's customers in 2021 and therefore no changes were required to the Group's credit risk management in response to the pandemic.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit rating agencies. The major financial assets at the balance sheet date other than trade accounts receivable presented in Note 21 are cash and cash equivalents at 31 December 2021 of US$11.1 million (2020: US$6.9 million).

Market risk

Market risk arises from the Group's use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) or foreign exchange rates (currency risk). The Group's financial instruments affected by market risk include bank deposits, trade and other receivables and trade payables.

The Group holds short term bank deposits on which short term fluctuations in the interest rate receivable are to be expected but are not deemed to be material.

Foreign currency risk

The Group carries out expenditure transactions substantially in US dollars (USD), Armenian Dram (AMD), British Pounds (GBP) and Kyrgyz Som (KGS). Equity fund-raising has taken place mainly in US dollars, with debt denominated in US dollars as well. Any resulting gains or losses are recognised in the income statement.

Foreign currency risk arises principally from the Group's holdings of cash in GBP.

The Group's presentation and subsidiary's functional currency is the US dollar, except for Chaarat Kapan, which has a functional currency of AMD.

To mitigate the Group's exposure to foreign currency risk, cash holdings are maintained to closely represent the expected short-term profile of expenditure by currency. Apart from these resultant offsets, no further hedging activity is undertaken.

As at 31 December the Group's net exposure to foreign exchange risk was as follows:

Net foreign currency financial assets/(liabilities)
	2021	2020
	US$'000	US$'000
GBP	5,866	(1 51)
AMD	(3)	( 883)
KGS	268	(5 8)
Other	(7)	(1 )
Total net exposure	6,124	(1 ,093)

The table below sets out the impact of changes in exchange rates on the financial assets of the Group due to monetary assets denominated in GBP, AMD, and KGS, with all other variables held constant:

US$ '000	2021 Move (%)	Income statement Profit/(loss)	Equity	2020 Move (%)	Income statement Profit/(loss)	Equity
Fall in value of GBP vs US$	5	309	309	5	8	8
Increase in value of GBP vs US$	5	(279)	(279)	5	(7)	(7)
Fall in value of AMD vs US$	5	-	-	5	(42)	(42)
Increase in value of AMD vs US$	5	-	-	5	46	46
Fall in value of KGS vs US$	10	30	30	10	5	5
Increase in value of KGS vs US$	10	(24)	(24)	10	(6)	(6)

The percentage change for each currency represents management's assessment of the reasonable possible exposure given the current level of exchange rates and the volatility observed both on a historical basis and market expectations for the future.

Fair value of financial instruments

The fair value of the Group's financial instruments at 31 December 2021 and 2020 did not differ materially from their carrying values.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to settle its liabilities as they fall due.

The Group's liquidity position is carefully monitored and managed. The Group manages liquidity risk by maintaining detailed budgeting, cash forecasting processes and matching the maturity profiles of financial assets and liabilities to help ensure that it has adequate cash available to meet its payment obligations.

The Group, at its present stage, generates sales revenue from the mining operations in Armenia. The Company still relies on financing its operations through the issue of equity share capital and debt in order to ensure sufficient cash resources are maintained to meet short-term liabilities. The Group aims to mitigate liquidity risk by monitoring availability of funds in relation to forecast expenditures in order to ensure timely fundraising. Funds are raised in discrete tranches to finance activities for limited periods. Funds surplus to immediate requirements are placed in liquid, low risk investments. The Group has prepared financial forecasts for the foreseeable future, and these indicate that the Group should be able to operate and continue to grow within the level of its current working capital availability.

The Group's ability to raise finance is partially subject to the price of gold, from which sales revenues are derived. There can be no certainty as to the future gold price.

The following table details the Group's remaining contractual maturity for its financial liabilities with agreed repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Group may be required to pay.

At 31 December 2021	Up to 3 months	Between 3 and 12 months	Between 1 and 2 years	Between 2 and 5 years	Over 5 years
	US$'000	US$'000	US$'000	US$'000	US$'000
Trade and other payables	30,717	-	-	-	-
Contract liabilities	-	2 ,379	-	-	-
Lease liabilities	175	162	196	577	189
Other loans	3 ,072	9 ,425	1 0,223	-	-
Convertible loan notes	-	2 8,777	-	-	-
Total	3 3,964	40,743	10,419	577	189

At 31 December 2020	Up to 3 months	Between 3 and 12 months	Between 1 and 2 years	Between 2 and 5 years	Over 5 years
	US$'000	US$'000	US$'000	US$'000	US$'000
Trade and other payables	17,400	-	-	-	-
Contract liabilities	-	5,328	-	-	-
Lease liabilities	259	519	208	509	347
Other loans	2 ,684	1 1,025	1 4,000	34,127	-
Convertible loan notes	-	26,357	-	-	-
Total	2 0,343	43,229	14,208	3 4,636	347

As a result of the maturity date extension that took place in 2021, the Group's convertible loan notes are repayable on 31 October 2022.

35. Post balance sheet events

Share options and shares issued to the Company's Chief Executive Officer, Mr. Michael Fraser

In January 2022, the Company granted options over five million ordinary shares of US$0.01 each in the Company to the newly appointed Chief Executive Officer, Mr. Michael Fraser, under the Chaarat Gold Holdings Limited Management Incentive Plan 2019 (the "MIP"). The options are exercisable at a price of £0.42 per share between 18 January 2022 and 18 January 2027 subject to the rules of the MIP.

The Company also agreed to pay Mr Fraser a sign-on bonus of US$62,500. It was agreed that this would be satisfied by the issue of ordinary shares of US$0.01 each in the capital of the Company at £0.185 per share, being the average middle market quotation (MMQ) over the three dealing days immediately prior to the issue of the shares. Due to human error, one of the MMQs used to calculate the three-day average MMQ was incorrect which resulted in 255,935 shares being issued to Mr Fraser rather than 247,368 shares. Mr Fraser rectified this by paying the Company a cash subscription price for the additional 8,567 shares at the three-day average MMQ.

Ukraine conflict and Russian sanctions

The conflict in Ukraine and the associated sanctions against Russia have had no material impact on our operations so far, and therefore no impact on these financial statements.

36. Timetable and distribution of accounts

The Annual General Meeting ("AGM") will be held on Tuesday, 17 May 2022 at 10am at the offices of Watson Farley & Williams LLP, 15 Appold Street, London EC2A 2HB, United Kingdom .

Copies of the Annual Report and Notice of the Annual General Meeting will be sent to shareholders by 22 April 2022.

Additional copies of the Annual Report and Accounts will be available for inspection at the registered office of the Company from the date of this notice until the conclusion of the Annual General Meeting and will be posted on the Company's website - www.chaarat.com

Kapan Resources and Reserves Update

The following table summarises the 2021 Constrained Mineral Resource Estimate:

			Grade					Metal
Classification	Tonnes (Mt)	Density	Au (g/t)	Ag (g/t)	Cu (%)	Zn (%)	AuEq (g/t)	Au (Koz)	Ag (Koz)	Cu (Kt)	Zn (Kt)	AuEq (Koz)
Measured	0.24	2.72	6.55	107.9	1.24	5.10	12.17	50	826	2.95	12.1	93
Indicated	1.76	2.76	4.43	88.31	0.92	3.51	8.60	250	4,989	16.2	61.6	486
M & I	2.00	2.76	4.69	90.65	0.96	3.70	9.03	301	5,815	19.2	73.7	579
Inferred	3.50	2.80	3.37	76.46	0.79	2.71	6.89	379	8,596	27.6	94.8	775