Tulkubash Project Update

RNS Number : 1761A

Chaarat Gold Holdings Ltd

18 March 2013

 



Chaarat Gold Holdings Limited

("Chaarat" or the "Company")

Tulkubash project update

Road Town, Tortola, British Virgin Islands (18 March 2013)

Chaarat (AIM - CGH), the AIM quoted gold exploration and development company with assets in the Kyrgyz Republic is pleased to provide a project update on the Tulkubash project, which is part of the Chaarat project area located in the north west of the Kyrgyz Republic.

Highlights

·     Production to commence with heap leach operation - reducing capital cost and power requirements

·     Production timing unchanged, targeting second half of 2013

·     Funding needs contained due to tight control of capital expenditure and change in development strategy

·     Increase in gold resource to 5.76M ounces following 2012 drilling season

Dekel Golan CEO commented: "We have maintained the momentum towards production. Our project team has submitted designs for approval and made significant progress with permitting.

Following the successful exploration programme at the Tulkubash project, we remain on track to start production in the second half of this year using heap leaching, rather than the CIL method we originally anticipated. Chaarat will benefit from the lower upfront investment and lower power requirements of heap leach processing, having identified both a significant amount of shallow material in the Tulkubash which is amenable to heap leaching and established the greater than expected open pit potential of the deposit.

Through our strict control of capital expenditure and the revised approach to production, the Company's cost of reaching production is going to be lower than we previously estimated. These savings have been mitigated by the effect of the changes in the new tax regime which have a negative effect of about $15 million on our cash flow prior to becoming net cash generative. The final revised requirement for working capital will be confirmed once we have completed our detailed work on the revised mine plan and operating budget. The Board remains confident that these funds will be available to us."

Project update

Background and development strategy

As a junior company with a large deposit capable of supporting a significant production base, the development strategy of the Company has attempted to strike a balance between raising funds to achieve the appropriate pace of development and shareholders' resulting dilution. Chaarat's management aims to unlock the value of the Chaarat deposit in stages by constructing a production facility, initially with limited capacity, which could be expanded as additional funding options became available such as by way of cash from operations, project finance or the introduction of a partner. Once in production, the execution risk profile of the project will have been decreased and raising additional funds or finding the partners to increase production capacity should be more straightforward and reflect a higher value for the Company.

The first stage development of the Tulkubash project involves the processing of low-sulphur clean ore.  During the 2012 exploration season the Company identified that the open pit potential of the Tulkubash deposit was greater than previously estimated and, in addition, that the shallow material of the Tulkubash and Kiziltash deposits is amenable to processing by heap leaching.

Further drilling was therefore undertaken in the top layers of the Tulkubash and Kiziltash deposits to delineate the heap leachable material.  In the Tulkubash deposit, it is estimated that approximately 2.7 Mt of resource at a grade of 2.06 g/t are suitable for heap leaching. The Tulkubash deposit is open towards the north so the Company considers that significantly more heap leachable material may be available.    

In addition, potential heap leachable material in the Kiziltash section of the deposit has been identified. Metallurgical tests of this material are currently being conducted and initial results have been encouraging. If the results are confirmed, the open pit mineable heap leachable resource may increase by up to an additional 4.8Mt at a grade of 3.29 g/t.

Having established the feasibility of the heap leach processing method, theCompany has decided to commence operations by establishing a Heap Leach Plant (HLP), which has two major advantages over the originally planned conventional Carbon in Leach (CIL) plant; namely a lower capital cost and a reduced power requirement. The lower power requirement will reduce the cost of production while power is still supplied by diesel generators.

The production capacity will initially be constrained by the size of the mining fleet. In addition, the lower head grade caused by a lower cutoff grade and the lower recovery from a HLP operation means the Directors anticipate an initial production capacity of about 21,000 ounces of gold per year. However production capacity, which is effectively only a matter of upgrading the mining fleet, and some relatively minor modifications to the processing circuit, can be increased quickly and is expected to reach 50,000 ounces per annum during 2014. The Directors believe this number can be increased if the Kiziltash metallurgical work yields positive results.

The Company has already invested in the design of the proposed final layout of a CIL production facility capable of supporting production of approximately 200,000 ounces of gold per annum. As far as possible, elements of the HLP will be located in their final location, within the envelope of the full size plant, so as to allow the expansion plan to be implemented as smoothly as possible and to avoid unnecessary expenditure.

Work will continue in parallel with production to develop the configuration of the entire Chaarat deposit.  The optimisation of the plant configuration may result in some changes to the plant design. However the general layout and design of the plant is considered to be flexible enough to allow the incorporation of any resulting changes.

Infrastructure

 

During 2012 the access road to the project was brought to the necessary operational standard. The road comprises three parts: the Chatkal flats, the Eastern slope and the Western slope. The Chatkal flats and the Western slope sections will be required throughout the life of the project and have been completed to a high standard. The Eastern slope section will be abandoned within a couple of years when a new route will replace the existing one. Accordingly, this section of the road has been reworked but at a minimal cost. The replacement Eastern slope section is being designed and the Company plans to build it as soon as practicable from a permitting as well as financial perspective.

Following agreement with the national power company, and as announced on 19 November 2012, the Company has retained Xinjiang Electric Power Design Institute to design a connection from the Company's site to the grid. Survey and geotechnical works are complete and currently the final desk work is in progress. Once permitting and land allocation are finalised the Company will review its financial options for construction of the line.

Construction of the bridge over the Sandalash River and the operational roads has been suspended for the winter and will be finished in the spring of 2013.  All necessary materials and equipment have been delivered to site. Upgrading of the operational roads can take place as necessary during mining operations.

The temporary camp and workshop are in place as is the mining fleet for the first stage of mining. The drill-blast rigs and excavators are expected to arrive in the country before the beginning of the operational season.

The mine design for the initial Tulkubash production has been completed and is now in the process of regulatory 'expertise' and submission to the relevant Kyrgyz authorities for permitting.

Good progress has been made by BGRIMM (a Chinese institute) with the completion of the draft design of the HLP expected at the end of March.  This will then be submitted for approval by the Kyrgyz authorities after adaptation for local requirements. 

Funding

The Company has previously referred to its intention to raise a working capital facility of $20 million to cover initial mining costs.

Savings have been identified from the original project budget as the capital required to build a HLP is lower than a CIL plant and Chaarat also identified savings in the construction of the access road to the site.

However there have been unforeseen increases in other costs, which offset the savings in capital expenditure. The principal increase in costs arises from the change in the Kyrgyz tax regime.  Tax payments are now accelerated as they are revenue based rather than profit based. An unbudgeted payment of tax was also due on the registration of the Kiziltash project resource with the Kyrgyz Government.

The working capital requirement has been reduced as the operating costs of a HLP are lower than a CIL plant (mainly due to the lower power requirement). The final working capital requirement will be confirmed once work on the operating budget and revised mine plan has been completed. 

If the initial encouraging results of the Kiziltash testing are confirmed, the potential to further increase production capacity from heap leaching will have been established.  The size of the mining fleet will be a constraint on the Company's ability to achieve increased production capacity.

Chaarat continues to review a number of options to provide further funding and will, in due course, select the one which is in the best interests of shareholders.

Increased Resource

Minimal exploration drilling was conducted during 2012 as drilling focused on ensuring the high quality resource and reserve definition of the Tulkubash project. The limited strike extension drilling in the Tulkubash and the drilling to ensure the existence of shallow resource in the Main Zone suitable for heap leach has resulted in an increase in the JORC compliant resource (estimate compiled by the Company) of Chaarat to 5.76 million ounces, an increase of 3% from the 5.59 million ounces announced on 5 March 2012. The grade has reduced slightly to 4.03 g/t from 4.08 g/t.

Competent Person

The Competent Person with overall responsibility for this press release, and who has reviewed the information contained herein, is Sunit Patel, M.Sc. (Geology), FGS, GSSA, who is an employee of Chaarat. Sunit is an exploration geologist with more than 24 years of experience in the resource industry who has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves' and he was supervisor to the work which is the subject of this release.  Mr. Patel 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	[phone]
c/o Central Asia Services Limited
Dekel Golan   CEO	[e-mail]
Linda Naylor  FD	[e-mail]
Numis Securities Limited	[phone]
Alastair Stratton, Stuart Skinner (NOMAD)
James Black (Broker)
College Hill	[phone]
Matthew Tyler	[e-mail]
Anca Spiridon
Ali Roper

Further information is available at www.chaarat.com

 

NOTES TO EDITORS:

About Chaarat Gold

Chaarat Gold is an exploration and development company operating in the Kyrgyz Republic. Situated in the highly prospective Tien Shan gold belt the Company's principal strategy is the development of the Chaarat Gold Project with first gold production targeted during 2013. Chaarat's key objective is to become a low cost gold producer targeting annual production of 200,000 ounces.

In addition to the Chaarat Gold Project, the Company has several other promising prospects also located within the Kyrgyz Republic. An exploration programme is underway at both the Company's Chontash project, located in the Akshirak range of mountains, as well as at the Mironovskoye asset.

 

 

END

 

 

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