Tulkubash Heap Leach Project - 1st Stage Financing

RNS Number : 2769B

Chaarat Gold Holdings Ltd

03 April 2017

 

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Chaarat Gold Holdings Limited

("Chaarat" or the "Company")

First Stage Financing of Tulkubash Heap Leach Project

Road Town, Tortola, British Virgin Islands (3^rd April 2017)

Chaarat (AIM - CGH), the AIM quoted exploration and development company with assets in the Kyrgyz Republic, announces its plans for first stage financing of the Tulkubash Heap Leach Project by raising approximately US$15 million by means of short term senior secured convertible loan notes. It is proposed that the loan notes be refinanced or converted in 2018 as part of the general project financing process.

Highlights

·     The first stage financing of the Tulkubash Heap Leach Project to be facilitated by raising approximately US$15 million

·     Intensive drilling program to be implemented to increase the heap leachable reserve base and extend life of mine

·     On completion of drilling program, potential for reduction of pre-stripping, and therefore capital expenditure, by re-design of pit and mine area

·     Access road building works to commence

·     Engineering of the completed sections of the Bankable Feasibility Study to be concluded in parallel with local permitting progress

·     Recruitment of construction and operational team to continue

·     Bankable Feasibility Study and construction finance package for enlarged project planned to be available by end of Q1 2018

Background

Chaarat completed a Feasibility Study in 2016 for the Chaarat deposit, a 7.04 million ounce resource (JORC compliant, Measured, Indicated and Inferred), in the Kyrgyz Republic.  The first lower risk start-up phase of the development of the deposit will be a mid-size heap leach operation on which a Bankable Feasibility Study (BFS) is now underway. The BFS forms the basis upon which the Company intends to raise project finance and commence construction. The resource underpinning the Tulkubash Heap Leach Project currently comprises only 13% of the total Chaarat resource, which has a total Measured and Indicated (M&I) Resource of 6.03 million ounces.

The Directors believe that there is significant upside beyond this initial phase including additional exploration along strike in order to extend the life of the heap leach operation and, in due course, the development of the larger refractory resource.

As reported in the Company's update on the BFS dated 13 February 2017, Chaarat has been investigating the impact of different processing capacities to increase production from the Project, whilst being cognisant that this will reduce the life of mine with the Project's current resource.  In parallel, preliminary negotiations with various potential project finance providers have resulted in a recommendation from Endeavour Financial, Chaarat's financial advisors, that the Tulkubash reserve base be enlarged in order to significantly extend the life of mine beyond the period required to pay back the project finance. This is expected to satisfy the requirements of project finance institutions and increase the pool of providers, and should ensure an optimal project finance process and package.

The Chaarat team has therefore planned a drilling program to increase the heap leachable reserve base, which will take place throughout the 2017 season. Based on this increased reserve, the mine plan will be updated and it is expected that the pre-stripping required before mining can commence will be considerably reduced. Accordingly, this is expected to reduce the capital expenditure required for the Project with an anticipated consequent positive impact on the economic return of the Project (thereby also assisting the financing process).  The drilling companies that will carry out the program have been selected and will start work in early May.

As previously reported, the permit for construction of the new portion of the access road has already been obtained and construction will begin in early May as soon as the weather improves.  Tenders are now underway to select the contractors to build the road.

The design of a significant proportion of the Project, such as the crusher and the plant, is well underway as part of the BFS.  On completion of this work, basic and detailed engineering will begin and commitments will be made for long lead items. 

The completion of the access road and the anticipated reduction in pre-stripping is expected to accelerate the construction of the Project.  Local permitting has reached the stage of submission to the authorities for review and approval.  The drilling campaign will begin in May with the updated resource available by the end of 2017.  It is therefore anticipated that the BFS can be updated to include the revised reserve by the end of Q1 2018. Based on the ability to work in parallel on a number of elements of the Project and to accelerate some areas as described above, the Board reiterates its intention to achieve the first gold pour from the Tulkubash Heap Leach Project in 2019.

In addition, the Company and its advisors are engaged in discussions with certain international finance institutions to finance some aspects of the Project such as the road, the power-generating unit and possibly the transport equipment, which constitutes the majority of the mine fleet.  A site visit is to be arranged to progress these discussions in May 2017.

Fundraising

In order to start the construction process of the Tulkubash Heap Leach Project as outlined, the Board of Chaarat has decided to raise approximately a total of US$15 million, which will be invested in activities that are intended to increase the Project's value. These activities include:

·     A drill program of approximately 12,000 metres aimed at increasing the reserve base of the Tulkubash Heap Leach Project

·     Constructing a new section of the access road which will considerably improve the access to site

·     Commencing the basic and  detailed engineering design of the project

·     Continued recruitment of the construction and operating teams

The Board considers that an equity raise of US$15 million would be too dilutive at the current share price level. Furthermore, certain investors have indicated that they want exposure to the stock but are unable to purchase in sufficient quantities due to the lack of liquidity. The Board believes that, by issuing a senior secured convertible loan note, the funds necessary for the acceleration of the Project would be raised and potential exposure to Chaarat's shares provided. During our pre-soundings, we have been pleased by investor feedback and interest to fund our business plan, both in terms of the financing at hand, and the longer term support for the direction of the company and its strategy.

The Company is therefore conducting a private placing to selected investors of senior secured convertible loan notes with the following characteristics:

1.    Senior Secured Convertible Loan Note

2.    Short term - 18 months maximum

3.    High yield - a minimum of 10%, US$ denominated

4.    Conversion price of 30p

5.    Placing to be completed by 28 April 2017

6.    Minimum investment size US$ 250,000

The Board believes that it is reasonable for the activities summarised in this announcement, as well as the completion of the BFS and securing of project financing, to be concluded by the end of March 2018, at which time the loan notes would be refinanced or converted and the construction work continued to production.  As previously announced, Endeavour Financial has been retained to manage the project financing process and has advised on the timetable to conclusion of the project financing.

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

Enquiries:  

Chaarat Gold Holdings Limited	+ 44 (0) 20 7499 2612
c/o Central Asia Services Limited	[e-mail]
Dekel Golan   CEO                   Linda Naylor  FD
Numis Securities Limited	[phone]
John Prior, Paul Gillam (NOMAD)

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 low cost gold producer generating significant production from the development of the Chaarat Gold Project. Chaarat is engaged in an active community engagement programme 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 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.

 

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