Update on the Tulkubash Project & COO appointment

RNS Number : 6699W

Chaarat Gold Holdings Ltd

13 February 2017

 

Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

KYRGYZ GOVERNMENT SUPPORT FOR THE TULKUBASH PROJECT

UPDATE ON BANKABLE FEASIBILITY STUDY

APPOINTMENT OF CHIEF OPERATING OFFICER

PROGRESS ON FINANCING DISCUSSIONS AND APPOINTMENT OF A FINANCIAL ADVISER

INTRODUCTION OF NEW SHAREHOLDER ALIGNED INCENTIVE SCHEME    

Road Town, Tortola, British Virgin Islands (13th February 2017)

Chaarat (AIM - CGH), the AIM quoted exploration and development company with assets in the Kyrgyz Republic, today provides an update on progress on its strategy to achieve production from the Tulkubash Heap Leach Project (the Tulkubash Project). The Tulkubash Project is the first stage in developing Chaarat. With a deposit of 7 million ounces of a high grade gold resource, Chaarat represents a world class resource.

Highlights:

·     The Chairman of Chaarat, Martin Andersson, receives unanimous expressions of support for Chaarat's operations in the country and its investment plans from senior political leaders in the Kyrgyz Republic, including Prime Minister Jeenbekov, during a recent visit to Bishkek

·     Bankable Feasibility Study (BFS) for the Tulkubash Heap Leach Project on schedule for completion by the end of H1 2017

·     Robert (Bob) Benbow appointed as Chief Operating Officer. He brings many years of operating experience to the Chaarat team and a solid track record of successful mine development (including Alacer's Çöpler Gold Mine)

·     The Chairman to lead the financing workstream of the Tulkubash Project with  financial advisers appointed  

·     Recruitment of construction and operating team underway

·     Introduction of new share option plan for the Board and senior management team, linked to achievement of milestones to production

Martin Andersson, Chairman, comments: "I have just returned from a visit to the Kyrgyz Republic during which I met the Prime Minister, the Speaker of the Parliament and two previous Prime Ministers. I was pleased to see the general interest in attracting foreign direct investment into the country and the support for developing Chaarat in particular.

Chaarat's significant investment to date as well as its socially and environmentally responsible approach to developing the project is recognised and widely respected.  I am confident, and recognise as a significant achievement, that the Company's founders and long-standing management team have positioned the Company well for the next stage of development.

With Bob, a seasoned and experienced mine builder and operator, joining the team and the feedback we are receiving from financial institutions and the teams preparing the BFS, the development of the Tulkubash Project is progressing according to plan."

Bob Benbow, COO, comments: "I am excited to have this opportunity to bring another green field mine to life.  I believe this mine has tremendous potential to benefit the local communities, the Kyrgyz Republic and the shareholders for years to come." 

Visit to the Kyrgyz Republic

On a recent visit to the Kyrgyz Republic the Chairman met the senior political leadership of the Republic including Mr. Jeenbekov, the Prime Minister, Mr. Tursunbekov, the Speaker of the Parliament, and two former Prime Ministers, Mr. Sariev and Mr. Kulov. Unanimous expressions of support were voiced for Chaarat's operations in the country and its investment plans. In addition, Chaarat was asked to work with the government on a strategy to improve the international investor perception of the country's operating environment. 

Alexander Novak, the Chaarat director based in Bishkek, was invited by the Speaker to join the council which has recently been set up by Parliament to promote foreign investment.   As part of this group, Chaarat will have the ability to comment on proposed changes to legislation affecting, for example, mining regulations and the foreign investment climate.

In the last 12 months three new mines have been brought into production in the country and a fourth is in construction. The government has initiated plans to construct a smelter near Chaarat. The smelter is to be built by a recently announced JV between Eti Bakir (www.etibakir.com.tr ) from Turkey (80%) and KyrgyzAltyn, the Kyrgyz Republic state-owned gold company (20%).  This initiative, a priority project as emphasised by the Chairman of the State Committee of Industry, Energy and Geology in the meeting with the Prime Minister, will enable the processing of concentrate in the country. This could materially benefit Chaarat by reducing its capex requirements in the second stage processing of refractory ore.

BFS update

The BFS is on schedule for completion by the end of H1 2017 as previously announced. Further metallurgical work is currently underway to establish an optimal mine plan. The work on the Environmental and Social Impact Analysis is progressing and all identified information gaps have been filled. This includes a renewed comprehensive household survey of the villages in the Chatkal valley. All geotechnical investigation works have been completed to enable the design of the leach pad, the waste dump, roads, plant and other elements of the Project. Fleet design criteria have been agreed and quotes for equipment and other items are being pursued.

The Company is investigating the impact on the Project of a number of different processing options including increasing the processing capacity by up to 50% to 12,000 tonnes per day, which would increase production to approximately 100,000 ounces of gold per year. The Board believes this option could add significant value to shareholders and is confident the reserve base can be increased to support a satisfactory life of mine (LOM) at this revised rate.

In parallel with the BFS, local permitting is progressing in-country.  The permit for construction of the new access road to site has been secured. The new route, identified by a local designer, has fewer serpentines and points at risk from avalanches, facilitating maintenance and ensuring its use by heavier traffic which is expected during construction and operation.

Recruitment of Chief Operating Officer

Since September 2016 Bob Benbow has been working with the existing Chaarat team to supervise and drive the work of GBM Minerals Engineering Consultants Ltd (www.gbmmec.com) and Wardell Armstrong (www.wardell-armstrong.com) on the BFS. The Board of Chaarat is delighted to announce that he has now accepted our offer to join the Company as Chief Operating Officer. Bob's primary responsibility will be to develop and build the Tulkubash Project and he will oversee mining operations once in production.

During his 30 year career Bob has worked with junior exploration companies to bring them into production and transform them into operating companies. He has taken three green field gold developments into production and from 2007 he served as the Vice President and Country Manager of Alacer Gold Corp.'s (www.alacergold.com) Çöpler Gold Mine in Eastern Turkey which has produced over 1 million ounces as one of the lowest cost producers in the world. 

Bob built a team of expatriates and Turkish nationals to execute the successful start-up of Çöpler, which was initially developed as an open pit heap leach operation.  The Çöpler mine is now moving into development of the refractory ore contained within the deposit. The two similar stages in Chaarat's development will benefit directly from Bob's relevant experience. 

Update on financing the Tulkubash Project

The Chairman, supported by the full Board and management team, has assumed primary responsibility for the financing workstream of the Project, leveraging his experience of raising finance for projects in the region and elsewhere.  

Several options with potential providers are being analysed to optimise finance for construction. The Board remains of the view that the current share price does not reflect the underlying value of the Chaarat deposit. Consequently, the Board's primary criteria in evaluating financing options will be added shareholder value on a risk adjusted basis.

Endeavour Financial Limited (Cayman) has been appointed to assist the Board in assessing the available options and build on the feedback received to date.  The team will identify and help implement various financing options for the Tulkubash Project, assist in review of all project work and project contracts to ensure bankability and work with Chaarat to meet its production strategy.

Recruitment and new share option plan

The Board is focussed on the importance of building a team with the right skills to bring the Tulkubash Project into production and maintain a successful operation thereafter.  At Board level this has meant the Chairman assuming the additional role of leading the finance effort.  The search for an additional independent Board member with significant mining experience is underway. Work continues on building the team to execute the strategy and deliver value to shareholders.

Given the importance of recruiting, retaining and motivating the right team, the Board has decided that now is an appropriate time to review the incentive scheme of the Company.  

The Board is committed to an incentive scheme that is fully aligned with the interests of shareholders.  In the Company's new share option plan part of the vesting of options has been linked to the achievement of specific milestones on the road to production. Furthermore, the Chairman has waived his fee and any entitlement to options for the current year, Martin Wiwen-Nilsson has waived his cash compensation entirely in lieu of options and Richard Rae has also waived a portion of his fee in lieu of options. 

Following Board approval, options have been granted to directors and certain employees at an exercise price of 15p. They will be exercisable between 1 and 8 years from the date of grant.  Half of the awarded options will vest over three years with the remainder vesting on the achievement of milestones including the completion of the BFS, completion of financing for the Tulkubash Project and, most importantly, the first gold pour.

The following options have been awarded to directors:

Dekel Golan                                                                       4 million

Alexander Novak                                                             3 million

Linda Naylor                                                                      3 million

Richard Rae                                                                        300,000

Martin Wiwen-Nilsson                                                  200,000

Bob Benbow has been granted 3.5 million options and 4.9 million options have been granted to certain key group employees based in Bishkek whose knowledge, commitment and loyalty are critical to delivering the Project.

Enquiries:  

Chaarat Gold Holdings Limited	+ 44 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) James Black (Broker)

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

About Endeavour Financial

Endeavour Financial is a private independent merchant banking company focused on providing expert and unbiased financial advisory services to the global natural resources sector.  Endeavour Financial has a history of achieving success for clients based on resource industry focus, innovative transaction skills and the diverse professional backgrounds of its award-winning team.  Offering advice in project, corporate and debt capital markets; equity-linked financings; mergers and acquisitions; and strategic business development over more than two decades, Endeavour Financial has established itself as a leading financial advisor in the natural resources sector.  Specific to the mining sector, in the last ten years the firm has closed in excess of US$ 4 billion of development financings for single-asset emerging producers.   

 

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