H1 2020 Production and Operational Update

RNS Number : 0025V

Chaarat Gold Holdings Ltd

04 August 2020

 

4 August 2020

Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

H1 2020 Production and Operational Update

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, announces its production and operational results for the half year ended 30 June 2020 (the "half year", "H1" or the "Period") for its Kapan Gold Mine ("Kapan"), in Armenia, progress at the Tulkubash project and a general corporate update.

COVID-19 update
	•	COVID-19 prevention measures have been successfully implemented at all Chaarat offices and sites since mid-February leading to no cases on record within the group during H1.
	•	We have also worked closely with our communities to provide support and assistance via medical supplies and infrastructure to help with preventive measures. These measures are not limited to but include the following
			o	Kapan/Armenia
					§	Donated beds and equipment to the medical centre of Kapan
					§	Provided diagnostic test kits and masks to the Kapan regional hospital
					§	Provided computers to help school children attend remote classes
					§	Sent gifts to the nurses of Kapan for their contribution during this pandemic
			o	Tulkubash - Chatkal/Kyrgyz Republic
					§	Delivered flour, masks, and disinfectant to communities in the Chatkal region
					§	Donated masks and hand sanitisers to hospitals
					§	Donated PCR thermocycler and PCR tests for COVID-19 to the Kyrgyz Ministry of Health
			o	Chaarat is continuing to follow best practice to prevent our employees from contracting COVID-19 and supporting the communities on an ongoing basis.
			o	In mid-July, Chaarat provided oxygen concentrators to the local hospitals in Chatkal, Kyrgyz Republic.
H1 Kapan Update
	H1 H ighlights
	•	H1 2020 had a total recordable injury case rate (per one million hours worked) of 0.7. The Company had one Lost Time Injury ('LTI') in Q1 2020 at its Kapan Operation. There were no recordable injuries in Q2 2020.
	•	Gold equivalent production of 26,960 ounces ("oz") including 543 ounces produced from third-party ore - compared to 29,607 oz produced in H1 2019 (- 9%) but slightly up from 26,906 in H2 2019 - consisting of:
			o	13,179ounces of gold;
			o	261,551ounces of silver;
			o	960 tonnes of copper; and
			o	3,997tonnes of zinc.
	•	Realised gold price increased by 25.5% compared to previous period but is offset by comparable decreases in copper and zinc prices. The mine achieved an average gold price for the Period of USD1,665 /oz versus USD1,327 /oz in H1 2019 in line with the average gold price for the six months to end June. However, base metals saw significant declines in prices in Q1, before improving in late Q2:
			o	Realised gold price of USD 1,665/oz vs USD 1,327/oz in H1 2019 (+ 25.5%)
			o	Realised silver price of USD 16.4/oz vs USD 15.2/oz in H1 2019 (+ 7.9%)
			o	Realised copper price of USD 5,400/t vs USD 6,123/t in H1 2019 (- 11.8%)
			o	Realised zinc price of USD 1,959/t vs USD 2,568/t in H1 2019 (- 23.7%)
	•	Total tonnes mined in H1 2020 was 360,957t showing a trend of increasing output from the mine from H1 2019 with 326,278t (+ 10.6%) and H2 2019 with 352,104t (+ 2.5%).
	•	Gold equivalent grades mined in H1 2020 were 2.87 g/t versus 3.02 g/t in H1 2019 (- 5%) and 2.84 g/t in H2 2019 (+ 1%). The grades in H1 2020 were still impacted by mining in lower-grade areas and we are now in the process of developing towards higher-grade areas.
	•	Grades are expected to improve in the next quarters as a result of the targeted development work carried out year to date and the ongoing review of the mine by the new geology team focusing on identifying high grade that requires minimal development mining.
	•	Copper and zinc recoveries increased year on year (by 1% and 2% respectively), but gold to Cu concentrate was down as a result of the lower gold head grade in ore. Third-party ore recovery is tracked separately due to it being of a completely different nature to our own polymetallic ore.
	•	Unit costs improved quarter on quarter with efficiency gains throughout the operation.  This has not as yet materialised in the all-in-sustaining cost ("AISC" 2) due to lower production of gold in H1 2020 and mining in the lower-grade areas. AISC were at USD1,076 /oz compared to H2 2019 (USD1,108 /oz) but higher compared to H1 2019 (USD972/oz).
	•	Underground development of 11,216 metres for the half year is comparable to both H1 and H2 2019.
	•	Two new cyclone clusters were installed in late Q2 to replace old inefficient units and are showing improved results thus far. More improvements are expected in H2 2020.
	•	Chaarat was able to sign two new contracts with third-party ore providers in Q2 2020 and started to receive continuous feed from June 2020. These additional feeds will help increase economics in the mill and support Chaarat in achieving its annual targets.
	•	The Chaarat technical team has identified a mineralised area with excellent exploration potential ("East Flank") adjacent to the existing Kapan mine. This target is based on an historic drilling database of 62 drill holes comprising 22 km of drilling. The East Flank Exploration Target, indicates a  potential 5-6 million tonnes with Au grades of 2.25 - 2.75 g/t. Resource definition drilling will be required, and evaluation, followed by access development in order to increase throughput in the mill currently expected by H2 2022.
	Outlook
	•	Chaarat remains on track to deliver on its AuEq 55koz guidance for the year, as previously set out in the FY 2019 Production, Operational and Financial Update release on 19 February 2020.
	•	A portion of the copper concentrate and third-party concentrate produced in June was not financially recognised in H1 2020 due to late shipment. This led to lower AuEq sold in H1 2020 but will contribute positively to results in July 2020. Further, a stronger H2 is expected with improved economic performance as new higher-grade zones are mined from development in H1 2020.
	•	Chaarat's focus is on access to more "value adding" areas of the mine for the rest of 2020. The technical team is making good progress on updating the mining plan for H2 2020 and the years to come.
	•	New mine equipment will provide immediate operational improvements along with mill circuit upgrades This, with third-party ore will increase operational efficiency in H2 2020.
	•	Chaarat's 2020 half-year results will be published in September 2020.

¹ Gold equivalent ounces based on gold price of USD 1,500/oz and gold ratios of 83 for silver (Au/Ag), 7,778 for copper (Au/Cu) and 20,968 for zinc (Au/Zn).

²   AISC on a gold oz produced basis exclude smelter TC/RC charges, others which add c. USD 234/oz. Sustaining capex of c. USD 2.3 million in H1 2020 is included in the AISC.

Tulkubash Construction Update

Chaarat is continuing with detailed engineering, and current works are being completed on time despite precautionary measures taken in response to the COVID-19 situation. Design on the Heap Leach Facility (HLF) and Adsorption-Desorption Recovery Facilities (ADR) is almost complete, and work on the crushing circuit and final equipment selection is ongoing. Further equipment mobilisation is on hold, as previously announced, due to the ongoing international travel and border restrictions .

General Corporate Update

The Company is continuing its discussions with several parties and is working to finalise the project financing by the end of 2020. Interest from newly contacted banks has led to a thorough review of additional proposals to further optimise the financing structure for the Tulkubash asset.

As announced on 27 April, the Company completed an equity capital raise of USD13.8m reducing its working capital facility to zero and the overall debt outstanding.

Since then Chaarat has further reduced the Kapan acquisition financing by USD2 million with USD30 million now outstanding and the consolidated corporate debt reduced to USD69 million.

Artem Volynets, Chief Executive Officer, commented:

"Before discussing our operational performance, I would like to talk first about the ongoing COVID-19 pandemic. I am very proud of the team and their proactive approach to managing the safety of our employees as well as actively contributing to community efforts during this difficult period. Through these efforts the impact on our business was minimal in H1. Unfortunately, in July we have had our first cases at our Tulkubash site. This outbreak was effectively managed and brought under control quickly with minimal disruption to ongoing works or plans. The overall situation in the Kyrgyz Republic worsened significantly in July which impacted the extended families of several employees. Our heartfelt condolences go out to them and their loved ones.

At Kapan, we are pleased to report that we are still on track for our operational guidance of 55koz for 2020, despite some challenges. The continuous improvements in the AISC and the benefits of higher utilisation and the new equipment have already shown improvements in June which bodes well for a strong second half of the year.

At Tulkubash the current works are being completed in accordance with the schedule and budget. The restrictions on people and equipment mobilisation, as well as precautionary measures undertaken for contractors and employees at this time, will delay first gold pour until the end of 2022, as previously announced. However, the time will be used wisely as it allows us to optimise critical aspects of this first stage of our existing Kyrgyz operations."

Enquiries
Chaarat Gold Holdings Limited	[phone]
Artem Volynets (CEO)	[e-mail]
Numis Securities Limited
Paul Gillam (NOMAD)	[phone]
SP Angel Corporate Finance LLP	+ 44 (0) 20 3470 0470
Ewan Leggat (Joint Broker)
finnCap Limited	[phone]
Christopher Raggett (Joint Broker)
Camille Gochez (Joint Broker)

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 Central Asia and the FSU through organic growth and selective M&A.

Chaarat is engaged in active community engagement programmes to optimise the value of the Chaarat investment proposition.

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

H1 2020 PRODUCTION & OPERATIONAL SUMMARY

	H1 2020	H1 2019
Tonnes ore mined (Kapan)	360,957	326,922
AuEq Grade mined (Kapan)	2.84	3.02
Tonnes ore milled (Kapan)	355,523	381,313*
AuEq Grade milled (g/t)	2.89	2.97
Tonnes ore milled (3rd Party Ore)	10,127	0
Au Grade (g/t) (3rd Party Ore)	3.43	0
AuEq Recovery (%)	79.2	81.3
Gold equivalent production (oz)**	26,960	29,607
Gold production (oz)	13,179	17,706
Silver production (oz)	261,551	275,302
Copper production (t)	960	896
Zinc production (t)	3,997	3,191
Realised gold price (USD/oz)	1,665	1,327
AuEq sold	20,882	28,882
AISC (USD/oz)***	1,076	972

* Higher throughput due to stockpile

** Including 543oz of Au production from 3^rd Party Ore

*** AISC on a gold oz produced basis exclude smelter TC/RC charges and others which add c. USD 234/oz. Sustaining capex of c. USD 2.3 million for H1 2020 is included in the AISC.

ENDS

 

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