Q1 2023 Operational Update

Chaarat Gold Holdings Ltd

03 May 2023

 

3 May 2023

Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

Q1 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 quarter ended 31 March 2023 (the "Quarter", "Q1" or the "Period") for its Kapan Mine ("Kapan"), in Armenia and a general corporate update.

Kapan Mine

Sadly, there was a fatal incident on March 19^th when a development drill operator from our contract company, S&A, was injured while carrying our work on a new decline. The investigation has highlighted weaknesses in the identification of risks associated with more complex tasks. A programme has been initiated to conduct a full review of all tasks on site to help identify such non-routine tasks and improve the controls at site. Independent consultants have also been retained to help advance the safety culture at Kapan to ensure the best safety conditions for our and contractors' employees.

Gold equivalent Ounces ("AuEq"¹) in concentrate consisted of 12,371 thousand ounces ("koz") from own ore vs 12,164 koz in Q1 2022 (+1.7%) and 1,496 koz from third-party ore production vs 2,828 koz in Q1 22 (-47%). Total AuEq was down 7.3% year on year due to the timing of treatment of the higher-grade third-party ore, with tonnage expected to be higher in Q2.

All-in-sustaining cash cost for own ore production ("AISC"²) of USD 1,397/oz was higher than the USD 1,352/oz for Q1 2022 (+3%). This increase is mainly due to the adverse impacts from the United States Dollar and Armenian Dram foreign exchange rate ("USD/AMD FX rate").

Preliminary unaudited standalone Kapan EBITDA⁴ contribution of USD3.2 million vs USD7.6 million in Q1 2022 (-58%). Since Q1 2022, the Armenian dram has appreciated by almost 20% (392.46 from 486.81 in Q1, 2022). This has had a significant impact on the Company's cost base since Q2 2022. This impact is now starting to flow through the local supply chain and price improvements are being seen. In addition, the Company has established new sources of supply to lessen the impact of the strong dram.

The 2022 Kapan Ore Reserve Estimate, published on 27 April 2023, confirmed a 25% increase in reserves and a corresponding two-year increase in the mine life. Full details are available on the Chaarat website.

Ore mined was 133,972t for the quarter, down from 163,652t in Q1, 2022 (-18%). The focus for the quarter was decline and cross-cut development to access new areas of the mine. There was sufficient stockpile of ore on surface to feed the mill while the development was prioritised.

Own ore milled was 162,046t vs 151,429t in Q1, 2022 (+7%). Grade was 3.03 g/t, similar to the prior year.

Recovery from own ore was down 2.4% to 77.1% year over year due to the treatment of lower grade and partially oxidised ore from stockpile.

Third-party ore treatment was 20,321t vs 26,688t in Q1 2022. This is related to the timing of third- party campaigns, with tonnage expected to be higher in Q2. Grade of third party was down 19% yoy (3.4 g/t vs 4.2 g/t in Q1 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. Four HQ diameter drill holes were completed in Q1 totalling 800 metres. The complete programme consists of accessing six underground drilling chambers and drilling 40 drill holes, totalling approximately 13,370 metres of core-oriented diamond drilling. Drilling is on 100 by 100 meters spaced centres.  The currently defined programme is expected  to take until the end of 2024 at the earliest. 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 assessment is based on old historical exploration data and Dundee Precious Metals diamond drilling results from 2011. The Chaarat review of the historical drilling has outlined eight potentially mineralised vein zones which are the target of this exploration campaign. This drilling is designed to provide an inferred level of certainty.

Initial intercepts and assays confirm the presence of mineralisation in line with expectations, but further drilling is needed to provide a resource level estimate of the East Flank potential.

Tulkubash & Kyzyltash Projects

The Tulkubash project remains ready for final investment decision ("FID") once project financing is secured. In parallel to progressing potential financing discussions, Chaarat is reviewing all strategic options on its Kyrgyz assets.

Corporate Finance

Chaarat reduced the principal outstanding on the Kapan acquisition loan by a further USD1.0 million in Q1 2023, reducing the balance to USD14.5 million outstanding. The unaudited Group Net Debt⁵ as of 31 March 2023 was USD49.7 million. Chaarat continues to evaluate balance sheet optimisation opportunities.

The Company continues discussions with various parties, including existing bondholders, regarding proposals in relation to the convertible bond due at the end of July 2023 and will provide an update on the status of these discussions in due course.

Outlook 2023

Kapan Mine production guidance remains at 50-55³ koz of own-ore production and additional 5-10 koz of third-party ore production.

Cost pressures continue at Kapan due to both exchange rate and inflationary pressures. The Company is continuing to work on ways to offset these increases. Improvements are being realised as new supply options are sourced and as supply chain inventory is renewed allowing more favourable pricing to flow through.

Exploration work on East Flank is continuing.

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 charges, others which add c. USD145/oz. Sustaining capex of c. USD 2.0 million is included in the Q1 2023 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.

5 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:

 "Tragically there was a fatal injury to a contractor employee at Kapan in the quarter. Work is underway to extensively review the design and controls of all high-risk work.

Kapan continues to operate on a steady state basis with the team focusing on value, not just volume. Milling performance improved in the quarter which allowed for a draw-down of the on-site ore stocks., The continued strong price environment has partially offset the cost impact of the higher Armenian Dram compared to the US Dollar. Since Q2/Q3 2022 EBITDA has steadily improved upwards, towards the steady state EBITDA target as cost savings from supply chain improvements are being realised at current AMD/USD FX rate.

The first drill results on the East Flank are  encouraging and we are looking forward to further results in the coming months."

Enquires

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/.

Q1 2023 PRODUCTION SUMMARY

	Q1 2023	Q1 2022
Tonnes ore mined	133,972	163,652
AuEq Grade (g/t)	3.03	3.04
Tonnes own ore milled	162,046	151,429
Tonnes ore milled (Third-Party Ore)	20,321	26,688
AuEq Recovery Kapan (%)	77.1	79.5
Gold equivalent production (oz)	13,867	14,992
from Own Ore	12,371	12,164
from Third-Party Ore	1,496	2,828
Gold production (oz)	7,434	8,721
Silver production (oz)	140,288	138,257
Copper production (t)	518	481
Zinc production (t)	1,471	1,492
AuEq Sales (Own Ore)	11,205	12,333
Realised gold price (USD/oz)	1,898	1,853
AISC (USD/oz)	1,397	1,352

ENDS

 

END