Investment Agreement with Çiftay

RNS Number : 4660C

Chaarat Gold Holdings Ltd

21 June 2021

 

21 June 2021

Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

Investment Agreement with Çiftay

Chaarat (AIM:CGH), the AIM-quoted gold mining Company with an operating mine in Armenia and the Tulkubash construction and Kyzyltash development assets in the Kyrgyz Republic, is pleased to announce it has entered into a new investment agreement with Çiftay İnşaat Taahhüt ve Ticaret A.Ş ("Çiftay"), the Turkish mining construction and mining contractor for the Tulkubash project (the "Investment Agreement"). The Investment Agreement supersedes the joint venture agreement executed with Çiftay announced on 13th of September 2019 (the "JVA").

Çiftay and the Company have decided to replace the JVA 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 will retain 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.

Highlights of the Investment Agreement

-  As per the recently published 2021 bankable feasibility study, the construction contract works attributable to Çiftay have been reduced compared to the 2019 bankable feasibility study.

-  The consideration for these construction contract works has been agreed as follows under the Investment Agreement:

o  A maximum cash consideration of USD 25 million.

o  In addition, Chaarat has agreed to issue up to USD 17.3 million in ordinary shares in the Company ("Equity Consideration") to Çiftay. The Company believes this will strengthen the long-term partnership between both parties and is subject to conditions.

-  The Equity Consideration will be issued in three conditional tranches.

o  Tranche 1 - USD 5 million to be issued upon closing of the Investment Agreement which is subject to the below conditions precedent and includes a lockup period to 1^st January 2022.

o  Tranche 2 - USD 10.3 million will be issued in 2023 after USD 20 million worth of construction capital expenditure (Capex) attributable to Çiftay has been paid in cash. Tranche 2 shares will be subject to a lockup between issue and first gold pour.

o  Tranche 3 - USD 2 million to be issued based on schedule and budget performance criteria.

-  In addition, as part of the Investment Agreement, Çiftay and Chaarat have agreed to settle some of the accrued expenses incurred during the construction activities to date by issuing a total of 2,800,000 ordinary shares at the same time as Tranche 1 or latest on 30^th July 2021. These shares will not be subject to any lock-up period.

-  Conditions for closing of the Investment Agreement

o  Signing of the debt financing to fully fund the Tulkubash project

o  Signing of an amendment to the existing construction contract based on the updated bankable feasibility study and the Investment Agreement

-  Pricing mechanism for the Equity Consideration is as follows:

o  Number of shares to be issued under Tranche 1 will be calculated based on the 20-day volume weighted average price ("VWAP") prior to an announcement by Chaarat on the successful completion of the Tulkubash debt financing.

o  Number of shares to be issued under Tranche 2 will be calculated based on the 20-day VWAP prior to the completion of the condition for USD 20 million worth of construction works being completed by Çiftay.

o  Number of shares to be issued under Tranche 3 will be based on a 20-day VWAP prior to achieving first gold pour. Shares will be issued with no lock-up period.

Tulkubash Debt Financing Update

The updated bankable feasibility study and the conclusion of the Investment Agreement with Çiftay were two key milestones to secure the Tulkubash debt financing. All workstreams on the debt financing continue to progress towards signing in mid-2021.

Chaarat is in advanced discussions with potential financing counterparties who have completed their due diligence requirements and are finalising the financing documentation. The Company is favouring a comprehensive refinancing through a fixed income debt instrument to simplify the balance sheet. The proceeds from this potential financing would be used to fully fund the construction costs related to the Tulkubash project, refinance all of the existing Kapan debt and to partially repay the outstanding convertible bond maturing in October 2021.

Whilst workstreams are advancing, the debt financing is subject to market conditions and the current situation with regards to the Kumtor mine in the Kyrgyz Republic may defer the financing process.

The Company continues to receive ongoing support from the Government of the Kyrgyz Republic including being asked to attend the recent Kyrgyz - Turkish forum along with Çiftay.

Martin Andersson, Executive Chairman of the Board, commented:

"I am very pleased with the outcome of the positive dialogue and the resulting strengthened cooperation with our partner Çiftay. The simplified agreement confirms the confidence in the Chaarat management team and the Tulkubash project. The team at Çiftay worked with Chaarat representatives in the past and has worked on our Tulkubash site for some time now and mutual trust has been established. With their experience as a construction and mining contractor, Çiftay is well placed to perform the agreed construction and mining services.

Tulkubash is a high-quality asset with robust economics and further potential with our second development project Kyzyltash sitting just beneath. We fully expect Tulkubash to become a long-term cash generator capable of sustaining organic growth at Chaarat, and in due course facilitating the development of Kyzyltash."

Enquiries
Chaarat Gold Holdings Limited	[phone]
Patrick Henze	[e-mail]
Canaccord Genuity Limited (NOMAD and Joint Broker)	+ 44 (0)20 7523 8000
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 the 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 former Soviet Union 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/ .

About Çiftay

Çiftay has extensive experience as a mining and civil engineering contractor at multiple mine sites in Turkey including two major gold mines. Additional information about Çiftay can be found at http://www.Çiftay.com.tr/en/about.html .

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