Tulkubash Feasibility Study Results

RNS Number : 4758M

Chaarat Gold Holdings Ltd

30 April 2018

 

Chaarat Gold Holdings Limited

("Chaarat" or the "Company")

Tulkubash Feasibility Study Results

Road Town, Tortola, British Virgin Islands (30 April 2018)

Chaarat (AIM - CGH), the AIM quoted gold exploration and development company developing the Chaarat Gold Project in the Kyrgyz Republic, is pleased to announce the results of the JORC compliant feasibility study for its 100% owned Tulkubash Oxide Gold Project ("Tulkubash").  The feasibility study was independently prepared by the UK office of Tetra Tech, Inc.

Overview

The feasibility study is based on mining a 16.0 million tonne reserve at an average grade of 0.91 g/t gold over an initial 3.75 year mine life.  Ongoing exploration will be carried out in parallel with the project development.  The Company is confident that future exploration results will add significantly to the initial mine life ahead of first production, to enable Tulkubash to become a long-term cash generator to sustain the organic growth of Chaarat.

Highlights

·    Initial reserve base of 16.0 Mt ore grading 0.91 g/t gold containing 470,000 ounces of gold with 76.5% recovery via heap leaching

·    Average gold production of 95,200 ounces per annum, with peak production during steady state operations in excess of 100,000 ounces per annum

·    Annual post tax free cash flow of US$58.6 million during steady state operational period

·    Average cash operating cost of US$726 per ounce

·    All-in sustaining cost of US$831 per ounce, including all taxes

·    Initial capital expenditure of US$132 million paid back over 3.2 years

The initial post-tax net present value for Tulkubash, using a 5.0% discount rate and a long-term gold price of US$1,300 per ounce, totals US$12.1 million with an undiscounted total cash flow of US$36.7 million.  These metrics are expected to be significantly enhanced as ongoing exploration extends the reserve base along strike. 

Significant Potential to Extend Oxide Resource Base

The reserve and resource for the current mine life is derived from approximately 2.2km of a defined 24 km strike length for the Tulkubash trend, with mineralisation remaining open along strike.  Numerous occurrences of outcropping ore-grade gold mineralisation and high-grade gold in soil anomalies have been defined along this trend within the existing Chaarat mining and exploration licences.

During 2017 a total of 17,240m of drilling was completed, adding 287,000 ounces of gold to Measured and Indicated Resources, over a strike length extension of 1km, at an average all-in discovery cost of under US$20 per ounce.  Extensive exploration is planned in 2018 and 2019, with a total budget for 60,000m of drilling over the next two drill seasons.  The Company anticipates an ongoing drill budget of 15,000m to 20,000m per year after that.

The Company sees the potential to more than double the existing Tulkubash resources prior to the first gold pour in 2020 and believes that exploration success will continue to add gold resources for years after that.  The Company's upcoming and ongoing drill programs will be designed with the intent to maximise the ratio of Resources converted to Reserves, using enhanced understanding of the geologic controls on mineralisation and economic constraints on Reserve classification as defined by the Feasibility Study.

Martin Andersson, Non-Executive Chairman, commented:

"We are very pleased to have completed this key step in implementing our strategy to make Chaarat Gold the leading gold company in Central Asia.  The feasibility study has confirmed our belief that the Tulkubash project has the potential to deliver strong operational cash flow over several years.  With ongoing exploration, Tulkubash can help fund Chaarat's organic growth through the development of the 5.4 million ounce high-grade Kyzyltash Resource.

"We are confident that the strong operational cash flow delivered from the Tulkubash feasibility study justifies proceeding with the construction of Tulkubash.  We firmly believe that the intensive exploration that is planned for the 2018 and 2019 field seasons will add significantly to the Tulkubash mine life ahead of the first gold pour in 2020.  Our objective during the two upcoming drill seasons is to add at least 100% to 150% to the existing Tulkubash resources, which we consider a conservative objective.  This would be expected to significantly enhance mine life and therefore the project economics."

Tetra Tech, Inc. is preparing internal technical reports illustrating the project economics of Tulkubash based on continued exploration success.  The Tulkubash report is expected to be completed by late April 2018.  In addition, Tetra Tech, Inc is completing an internal technical report on the development plans for Kyzyltash based on optimal refractory ore processing options.  The Kyzyltash report is expected to be completed before the end of May 2018.  As the reports will not be JORC compliant they will not be released publicly but will be available for review by select parties under the terms of a Confidentiality Agreement and will form a key part of the Company's financing strategy.

The executive summary of the feasibility study will be published on the Company's website once available.

Key findings of the Feasibility Study

The following paragraphs summarise key aspects of the feasibility study.  The Company emphasises that it expects significant optimisation of project economics following completion of the proposed 2018 and 2019 exploration drilling programmes.

The key finding of the feasibility study is that it is technically feasible and generates positive free cash flow of approximately US$59 million per annum during full year operations.

Reserves

The mineable reserve is 16.0Mt ore at a grade of 0.91 g/t gold containing 470,000 ounces of gold.  The reserve also contains 582,000 ounces of silver at a grade of 1.13 g/t silver.  This material has been identified as being highly amenable to heap leaching containing virtually no organic carbon and total sulphur of less than 0.5%.  The mineralisation occurs in a highly fractured, brittle host rock which lends itself to crushing without the generation of excess fines and need for agglomeration.

Metallurgical Testing

The metallurgical test work supporting the feasibility study is based on bottle roll and column leach testing.  The samples were selected to assess general amenability to heap leaching, spatial variability and recovery as a function of grade.  Wardell Armstrong International and McClelland Laboratories Inc performed the test work in 2017 and 2018 respectively.  The final estimated metallurgical recoveries for gold and silver, adjusted for operating conditions, were determined to be 76.5% for gold and 61.8% for silver, respectively.

Mining

The deposit will be developed by a mining contractor using conventional open pit mining methods.  Waste and ore will be drilled and blasted on 10m benches and excavated by 5m³ excavators on 5m lifts.  Highway-type haul trucks of 30 tonne capacity will haul waste to a near pit storage facility and ore 5 km to the process facility.  Mining will be conducted at an average rate of 50,000 tpd and a strip ratio of 4.2:1 over the life of mine is expected.

Processing

Ore hauled to the run-of-mine pad will be subject to three-stage crushing to produce a 12.5mm product at a rate of 13,500 tpd.  Crushed ore dosed with lime will be hauled to the heap by truck and dumped in 7m lifts.  Stacked ore will be heap leached for an average of 60 days.  Pregnant leach solution is collected and transferred to carbon columns at the ADR plant.  Gold and silver will be desorbed from carbon into a concentrated solution using a modified Zadra strip process.  The concentrated solution will be subjected to electrowinning and smelting to produce doré suitable for refining offsite.

Heap Leach Facility

The heap leach pad covers an area of approximately 360,000m².  It will be constructed to international standards for safety and environmental protection including a double-layered HDPE/LLDPE liner system.  The solution distribution and collection systems are internal to the heap to allow uninterrupted operation during winter operations.  The pad has a capacity of 16.0Mt and has been designed to be expandable to allow the project to take advantage of future expansion.

Infrastructure

Personnel on site will be housed in a camp with a nominal capacity of 400 people.  Workshop and warehouse facilities located in the mining and process areas will serve the needs of each respective activity.  Diesel-generated power totalling 4MW will serve process and support facilities.  Roads and infrastructure have been designed and sited to respect regulatory requirements, minimise risk, and promote efficient operation.

Construction

Subject to financing, construction will begin in Q3 2018 and continue until the end of Q1 2020, a period of 21 months.  Construction management will be organised as an integrated team composed of both owner's and EPC contractor's personnel.  Bulk earthworks and pre-stripping activities will predominate through the first winter with most facility construction occurring in 2019.  Ore stacking will begin in Q4 2019 with first gold forecast for Q2 2020.

Production

Production is planned to start in Q2 2020 and continues for 3.75 years to the end of 2023.  Operations will process 4.93Mt of ore annually once ramp-up is complete in 2020.  Over the life of mine, the project produces 360,000 ounces of gold from 16.0Mt of feed grading 0.91 g/t.  Average annual gold production is 95,200 ounces with peak production exceeding 100,000 ounces per annum.  Silver totalling 360,000 ounces is also produced over the life of the project.

Initial Capital Cost

The capital cost for the plant and infrastructure is estimated at US$100.0 million with an additional US$19.7 million for pre-production stripping.  Contingency for the project is US$12.3 million giving a total estimated initial capital cost of US$132.0 million.  All figures include VAT and import duties where applicable.

The table below shows the breakdown of the capital costs.

	US$ million
Pre-production operating costs	19.7
Mining mobilisation and development	2.5
Crushing	27.8
Indirect costs	16.5
Camp	3.1
Site utilities	8.8
Processing	26.2
Site infrastructure	11.0
Offsite infrastructure	4.1
Contingency	12.3
GRAND TOTAL	132.0

Operating Costs

The life of mine average mining cost for the project is US$1.88 per tonne mined.  This cost covers both ore and waste as well as ex-pit haulage of 5 km from the mine to the run-of-mine pad.  Life of mine process costs are US$4.75 per tonne processed.  General and administrative costs total US$1.55 per tonne processed over the life of mine including the owner's cost for mining management, technical support, and grade control.  All costs are inclusive of 12% VAT where appropriate.  This leads to a life of mine average operating cash cost of US$726 per ounce.

Project Economics

After-tax NPV, discounted at 5.0%, for the project is US$12.1 million with an IRR of 8.2% and a modest payback period of 3.2 years.  During the three years of steady state operation from 2021 to 2023 the average annual free cash flow is US$58.6 million, with a total undiscounted life of mine cashflow of US$36.7 million.

Competent Person

The Competent Person (CP) for the Company on technical aspects of this Press Release is Dorian L. (Dusty) Nicol, FAussIMM, a Non-Executive Director of the Company and Chair of the Company's Technical Committee.  Mr Nicol consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

Enquiries:

Chaarat Gold Holdings Limited                                             + 44 (0) 20 7499 2612

Martin Andersson - Chairman                                                 [e-mail]

Robert Benbow - Chief Executive Officer

Numis Securities Limited                                                       [phone]

John Prior, Paul Gillam (NOMAD)

James Black (Corporate Broking)

BMO Capital Markets Limited                                               [phone]

Jeffrey Couch, Neil Haycock,
Thomas Rider (Joint Broker)

Blytheweigh (Financial PR)                                                    [phone]

Tim Blythe

Camilla Horsfall

NOTES TO EDITORS:

About Chaarat Gold

Chaarat Gold is an exploration and development company operating in the Kyrgyz Republic with a large, high grade resource - the Chaarat Gold Project.  The Company's key objective is to become a long term, low-cost gold producer focused in Central Asia and the former Soviet Union.

Chaarat aims to create value for its shareholders, employees and communities in the Kyrgyz Republic by building relationships based on trust and operating to the best environmental, social and employment standards.

Further information is available at www.chaarat.com

Glossary of Technical Terms

"g/t"	grammes per tonne, equivalent to parts per million
"Inferred Resource"	that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence.  It is inferred from geological evidence and assumed but not verified geological and/or grade continuity.  It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability
"Indicated Resource"	that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence.  It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.  The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed
"JORC"	The Australasian Joint Ore Reserves Committee Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2012 (the "JORC Code" or "the Code").  The Code sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves
"Measured Resource"	that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence.  It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.  The locations are spaced closely enough to confirm geological and grade continuity
"Mineral Resource"	a concentration or occurrence of material of intrinsic economic interest in or on the Earth's crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction.  The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories when reporting under JORC
"Mt"	million tonnes
"oz"	troy ounce (= 31.1035 grammes)
"Reserve"	the economically mineable part of a Measured and/or Indicated Mineral Resource
"t"	tonne (= 1 million grammes)
"tpd"	tonnes per day

 

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