H1 2023 Operational Update

Chaarat Gold Holdings Ltd

11 August 2023

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR"), AND IS DISCLOSED IN ACCORDANCE WITH THE COMPANY'S OBLIGATIONS UNDER ARTICLE 17 OF MAR

11 August 2023

Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

H1 2023 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 2023 ("H1" or the "Period") for its Kapan Mine ("Kapan") in Armenia as well as providing a general corporate update.

Kapan

·      Recordable injury frequency review ("RIFR") (per one million hours worked) in the Period was 0.38 compared to 0.74 in H1 2022. No serious injuries or incidents were recorded in the second quarter of 2023.

·     The 2022 Kapan Ore Reserve Estimate was completed during H1 2023. The resource drilling programme replaced depletion and added an additional 2 years of life to the previous Life of Mine. Full details are available on the Chaarat website.

·      Kapan production of 26,523 gold equivalent ounces¹ ("oz") vs 30,022 oz in H1 2022 (-11.7%) consisting of 21,410 oz from own ore and 5,113 oz from third-party ore (vs 23,458 oz from own ore and 6,564 oz from third-party ore in H1 2022). Lower gold production was mainly due to lower stope availability in H1.

·      All-in-sustaining cash cost for own ore production ("AISC"²) of USD1,556/oz was higher than the USD1,420/oz for H1 2022 (+9.5%). This increase is mainly due to the adverse impacts from the United States Dollar and Armenian Dram foreign exchange rate ("USD/AMD FX rate") and an 8.7% decrease in gold equivalent ("AuEq") own-ore production compared to H1 2022.

·    Preliminary unaudited standalone Kapan EBITDA⁴ contribution of USD2.3 million vs USD8.1 million in H1 2023 (-72%). This is mainly due a decrease in volumes milled (own ore and third party) and the continued adverse impact of USD/AMD FX rate.

·      Since H1 2022, the Armenian dram has appreciated by almost 17% (average rate to the US Dollar for the period was 389.71 in H1 2023, appreciated from 467.78 in H1 2022). This created significant impact on the business. The Company has pivoted to new suppliers to mitigate  the impact of the strong Armenian dram, however the adverse impact on costs remains.

·      Ore mined of 270.2 thousand tonnes ("kt") vs 321.1 kt in H1 2022 represents a year-on-year decrease of 15.9%. Mine grade was unchanged at 2.9 g/t AuEq.

·      Mill throughput was lower at 345.0 kt year on year (-7.6%, H1 2022 373.3 kt), and mill AuEq recovery for own ore was slightly lower at 78.6% in H1 2023 compared with 79.5% in H1 2022.

East Flank Update

•     Following the completion of the first four drilling chambers, exploration drilling has commenced as part of the East Flank exploration programme. Seven NQ diameter drill holes were completed in H1 2022 totalling 1,764 metres. The complete programme consists of accessing 6 underground drilling chambers and drilling 40 drill holes, totalling approximately 13,370 metres of core-oriented diamond drilling. Drilling is on 100 by 100 metres spaced centres.  The currently defined programme is expected to continue until the end of 2024. The East Flank area lies approximately 100 metres to the east of the current Shahumyan ore body and has an anticipated strike length of approximately 600 metres.

·     The East Flank exploration target is based on old historic exploration data and Dundee Precious Metals diamond drilling results from 2011.  The Chaarat review of the historic drilling has outlined 8 potentially economically significant mineralized vein zones which are the target of this exploration campaign. This drilling campaign is designed to provide an inferred level of certainty.

Outlook for Kapan

·    Kapan Mine production guidance remains at 50-55 koz of own-ore production and additional 5-10 koz of third-party ore production. A newly installed crushing unit which increases capacity available by roughly 30% is expected to drive a stronger H2 2023. Third-party ore supply is expected to remain in line with H1 2023 for the remainder of 2023.

·    East Flank drilling campaign is ongoing as part of a 2-year programme to develop an initial JORC resource and reserve statement. The drill results will be included in the 2023 Kapan MRE update. Further infill drilling will be carried out as appropriate in future years to convert this mineralisation to measured and indicated.

Tulkubash & Kyzyltash

·    The Tulkubash project remains ready for final investment decision ("FID") once project financing is secured.

·    In addition to progressing financing discussions, Chaarat is reviewing all strategic options on its Kyrgyz assets. The current discussions with Xiwang International envisage a capital allocation for the Kyrgyz Assets to develop Tulkubash. Other discussions are advancing in parallel.

Corporate Finance

·    Chaarat reduced the principal outstanding on the Kapan acquisition loan by a further USD1.5 million in Q2 2023, reducing the balance to USD13.0 million outstanding. The unaudited Group Net Debt⁵ as of 30 June 2023 was USD51.6 million. Chaarat continues to evaluate balance sheet optimisation opportunities.

·    As previously announced, working capital facility arrangements are in place with a short-term loan provider.  As at 30 June 2023 USD 3 million had been drawn under those arrangements with a further USD 1 million available for drawdown.  Cash and cash equivalents as at 30 June 2023 were USD 0.8 million.

·    The loan from Ameriabank, which now includes both the remaining portion of the acquisition loan and the working capital facility, was successfully refinanced in H1 2023. The USD13 million loan principal has had its repayment schedule extended from 2H 2023 to 1H 2025 with terms remaining materially the same.

·    The Company has agreed an extension to the maturity date of the convertible loan notes, details of the terms of which are set out in a separate announcement being issued simultaneously with this one.

·    As previously outlined, in order to proceed with the development in Kyrgyz Republic and to sustain corporate activities, further financing will also be required by the end of Q3 2023. The board is evaluating all possible financing options including the previously announced potential Xiwang investment and other initiatives such as asset sales which include the potential sale of Kapan.  Discussions are ongoing with regard to the potential sale of Kapan.  Under the currently envisaged structure this would likely constitute a transaction which results in a fundamental change of business, and in accordance with AIM Rule 15, the transaction would require shareholder approval.  Further details will be provided as and when appropriate.  There are currently no binding agreements in place with regard to additional funding or the sale of Kapan and there is no guarantee at this stage that a sale of Kapan will be completed or that any additional funding will proceed.

Potential Xiwang investment

•     Further to the update announcement made on 31 July 2023, Xiwang and Chaarat have discussed an extension to the previously targeted timeline for completion of the potential  investment  of up to four months from 30 July to satisfy its internal process requirements and those of its partners.  The Company and Xiwang are currently in discussions about potential changes to the appropriate amount and structure of an investment as noted in the Tulkubash and Kyzyltash section above.  Xiwang have confirmed their continued interest in proceeding with an investment which will allow the development of the Tulkubash project but there is no guarantee at this stage that the proposed Investment will be completed.  A further update will be provided in due course.

^{1 Gold equivalent ounces for 2021 recalculated on 2022 budget prices with Au at USD1,775/oz and gold ratios of 75 for silver,6,9597 for copper and 20,381 for zinc. Includes third-party ore production.}

^{2 AISC on a gold oz produced basis exclude smelter TC/RC charge and  other costs which add c. USD217/oz. Sustaining capex of c. USD3.65 million p.a. is included in the AISC.}

^{3 Gold equivalent ounces for 2023 guidance calculated on 2023 budget prices with Au at USD1,850/oz and gold ratios of 84 for silver, 6,998 for copper and 19,826 for zinc. Includes third-party ore production.}

^{4 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, income tax charges and any finance related transactions. The amount reported is unaudited and preliminary in nature given it may be subject to adjustments in the audit process}

^{54 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.}

Mike Fraser, Chief Executive Officer, commented:

"Whilst it is pleasing to see the improved safety outcomes at Kapan, the financial performance of Kapan continues to be adversely impacted by the stronger Armenian Dram. The outlook for the second half of the year is for an improvement in AuEq, on 1H due to forecast improvement in plant capacity. Drilling at East Flank continues with initial drill results expected in the 2023 MRE.

The board is currently evaluating a number of financing options for both corporate and asset purposes, which include a potential sale of Kapan. In addition, discussions continue with Xiwang International on a potential investment that will enable the further development of Chaarat's internal and external growth options. We look forward to updating shareholders in due course.

In the meantime, efforts continue to improve the balance sheet, with the loan from Ameriabank successfully refinanced with outstanding principal repayment extended to 2025."

Enquiries
Chaarat Gold Holdings Limited	[phone]
Mike Fraser, Chief Executive Officer	[e-mail]
Canaccord Genuity Limited (NOMAD and Joint Broker)	[phone]
Henry Fitzgerald-O'Connor
James Asensio
finnCap Limited (Joint Broker)	[phone]
Christopher Raggett
Panmure Gordon (UK) Limited (Joint Broker)	[phone]
John Prior Hugh Rich

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 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/.

H1 2023 PRODUCTION & OPERATIONAL SUMMARY

	H1 2023	H1 2022
Tonnes ore mined	270,174	321,136
AuEq Grade (g/t)	2.9	2.9
Tonnes ore milled	344,961	373,323
Tonnes ore milled (Third-Party Ore)	58,810	63,511
AuEq Recovery Kapan (%)	78.6	79.5
Gold equivalent production (oz)	26,523	30,022
Gold equivalent production (own ore)	21,410	23,458
Gold equivalent production (third party ore)	5,114	6,564
Gold production (oz)	14,885	17,944
Silver production (oz)	266,100	269,687
Copper production (t)	954	941
Zinc production (t)	2,522	2,804
AuEq Sales	18,937	25,118
Realised gold price (USD/oz)	1,959	1,858
AISC (USD/oz)	1,556	1,420

ENDS

 

END