TIDMCGH
RNS Number : 1825Y
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 EBITDA(4) 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
Debt (5) 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 50-55 (3) 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."
Enquir e s
+44 (0)20 7499
Chaarat Gold Holdings Limited 2612
Mike Fraser, Chief Executive Officer IR@chaarat.com
Canaccord Genuity Limited (NOMAD + 44 (0)20
and Joint Broker) 7523 8000
Henry Fitzgerald-O'Connor
James Asensio
+44 (0)20 7220
finnCap Limited (Joint Broker) 0500
Christopher Raggett
Panmure Gordon (UK) Limited (Joint +44 (0)20 7886
Broker) 2500
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
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