CHAARAT GOLD HOLDINGS LIMITED RNS Number : 7565U
Chaarat Gold Holdings Ltd
08 April 2021
8 April 2021
Chaarat Gold Holdings Limited ("Chaarat" or the "Company")
PRELIMINARY ANNOUNCEMENT OF AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
Chaarat (AIM:CGH), the AIM-quoted gold mining company with assets in the Kyrgyz Republic and Armenia, today publishes its audited financial results for the year ended 31 December 2020.
Highlights for the year
2020 Group Financial Results
- Revenue up 12.5% in 2020 to US$76.0 million (2019: US$68.1 million), reflecting increased production and the recovery in commodity prices in the second half of the year.
- Group EBITDA of US$9.3 million in 2020 (2019: loss of US$12.8 million), reflecting the significantly improved operating performance at Kapan and lower overhead costs at both corporate and Kyrgyz Republic level. The Group achieved an operating profit of US$1.9 million (2019: loss of US$18.4 million).
- Cash and cash equivalents at the end of 2020 were US$6.9 million (2019: US$3.6 million). At 1 March 2021, the Group had cash and cash equivalents of approximately US$31.2 million, following the successful equity raise in February 2021 described below.
Kapan Producing Mine
- 2020 production of 58.2koz 1 AuEq exceeding guidance by 6%, despite the ongoing COVID-19 situation and border hostilities in H2 of 2020.
- All-in-sustainingcost2 ("AISC") of US$1,034/oz was in line with US$1,040/oz for 2019.
- A 126% increase in stand-alone EBITDA contribution of US$ 19.4 million at Kapan level in 2020 (2019: US$8.6 million). EBITDA contribution at Kapan in H2 2020 was US$15.3 million compared with US$4.1 million in 2020 H1, reflecting continued improvement in operations and the recovery in commodity prices in the second half of the year.
- Limited impact from the COVID-19 pandemic with effective management protocols in place since February 2020.
Tulkubash Construction Project
- Advanced the construction preparation work and detailed engineering with close to US$10 million invested in 2020 despite the COVID-19 restrictions and political unrest in Q4.
- Successfully completed a 2,000-metre confirmatory drilling programme which is currently being included in an updated JORC-compliant resources and reserve statement.
- First full winter of year-round construction activity completed at site (2019-20), without incident.
- Tulkubash project finance discussions further advanced with several banks awaiting the Tulkubash Bankable Feasibility Study ("BFS") and ESIA updates before proceeding to documentation stage.
Kyzyltash Development Project
- Comprehensive internal review completed, and external expert opinions received in June 2020 for the next stages and overall timeline to production, confirming the current preliminary timeline to 2026.
- Independent assessment on metallurgy completed to help define the ideal processing route.
Corporate Activities
- Strengthened balance sheet in 2020 through a US$13.8 million equity capital raise during the first wave of the COVID-19 pandemic, extended liabilities, decreased interest cost and reduced gross debt.
- Continued strong support from major shareholder Labro Investments Ltd. ("Labro") through participation in the equity raise and the refinancing of the investor loan into a new US$22 million facility maturing on 31 December 2024.
Post-period highlights
- In February 2021 , the Group completed a financing package of US$52.2 million, comprising cash of US$30.0 million and a debt-to-equity conversion of the US$22.2 million Labro loan mentioned above,
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significantly reducing gearing.
- Key financing targets for 2021 will include securing debt finance for the Tulkubash project and repaying or refinancing the convertible loan notes to the extent these are not converted. The Company anticipates publishing an updated bank feasibility study for Tulkubash by May.
1AISC on an oz produced basis exclude smelter TC/RC charges, others which add c.US$ 130/oz. Sustaining capex of c. US$ 6.9 million included in the AISC.
2Gold equivalent ounces for 2019 recalculated on 2020 budget prices with Au at$1,500/oz and gold ratios of 83 for silver, 7,778 for copper and 20,968 for zinc. In last years' FY 2019 operations update, 2019 oz were based on gold ratios of 81 for silver, 6,698 for copper and 16,075 for zinc leading to a higher AuEq number reported in that previous year.
Martin Andersson, Executive Chairman of Chaarat, commented:
"Considering the adverse conditions we faced last year, the strength of our people shone through and enabled a strong performance at Kapan, and flexibility in dealing with the various challenges we faced regarding our Tulkubash construction project.
From an ESG perspective, Chaarat has certainly proven its strong ties and commitment within its communities in 2020, not only supporting where measures against the pandemic were required but also ensuring that lives and business continue. The development in accordance with the best international standards has been documented in the Environmental and Social Impact Assessment update for our Tulkubash project and we have continued to improve the environmental footprint with several projects at our Kapan site. The independent board and management team have proven efficient in terms of setting a high governance standard.
Chaarat has seen strong shareholder support during the last two equity capital raises which shows that we are taking the right steps to lift Chaarat to the next level. I look forward to the next year which should see Tulkubash fully funded, Kapan in steady state production and Kyzyltash with a clear view on the optimal processing route to create a new feasibility study to international standards. We continue to build an industry-leading FSU focused low-cost gold producer with a sound organic growth strategy supported by value accretive M&A."
Enquiries | |||
Chaarat Gold Holdings Limited | +44 | (0)20 | 7499 |
Artem Volynets (CEO) | 2612 | ||
info@chaarat.com | |||
Canaccord Genuity Limited (NOMAD and | +44 | (0)20 | 7523 |
Joint Broker) | 8000 | ||
Henry Fitzgerald-O'Connor | |||
James Asensio | |||
finnCap Limited (Joint Broker) | +44 | (0)20 | 7220 |
Christopher Raggett | 0500 | ||
Panmure Gordon (UK) Limited (Joint Broker) | +44 | (0)20 | 7886 |
2500 |
John Prior
Hugh Rich
Executive Chairman's Statement
Overview
The past 12 months have been unlike any other period in the Company's history as the COVID-19 pandemic has disrupted the world and impeded the normal course of business activity.
This year we have demonstrated that we are a resilient business. I am pleased to be able to announce that the team at our Kapan mine exceeded our 55koz AuEq production guidance despite the dual impact of the pandemic and the hostilities in the neighbouring Nagorno-Karabakh region during the final quarter of the year.
The COVID-19 pandemic impacted the ability of potential funders to conduct due diligence on our assets and it was unfortunate that we had to postpone the date for first gold pour from Tulkubash due to material and personnel movement restrictions. However, we have made progress on the early construction, engineering and updates of our studies I am hopeful that we will secure project finance during the first half of 2021.
Our people
First and foremost, on behalf of the Board, I would like to extend my sincere thanks to all our employees, but in particular those at our Kapan mine. The team at Kapan met each new challenge it faced with agility and dedication to ensure that the mine remained operational. The hard work that they put in every day made the difference. Our employees at Kapan continued to work throughout the COVID-19 crisis, highlighting their commitment, dedication, and loyalty. It was their outstanding resilience and hard work that enabled us to exceed our production guidance.
2020 progress
Despite the disruption caused by the COVID-19 pandemic, we have made progress during the year in relation to each of the pillars of our strategy and details of that progress are included in our annual report which will be published shortly.
Health and safety
The health and safety of our employees and host communities remains one of our key values. Our lost time injury frequency rate at Kapan for the year was 0.37 per one million hours worked (2019: 0.39). Over 850,000 hours at Tulkubash were worked in 2020 with no lost time injuries.
Last month we reported the loss of life of an employee of our mining contracting company on 4 March 2021. Learnings from this tragic event will be used to further develop and improve the safety culture and performance not only at Kapan but throughout all areas of the Company.
During the year we implemented measures to minimise the risk of our employees contracting COVID-19 as a result of their work activities. Additionally, we supported hospitals and communities local to our operations to help contain the virus and to assist with medical treatment.
Sustainability
As a responsible business we are committed to treating people well, managing environmental issues and working with integrity. In keeping with our ESG guidance principles, our main areas of focus in our host communities continue to be health, education, and sustainable development opportunities.
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Corporate governance
My Board colleagues and I are firmly of the view that strong and functioning corporate governance and risk management are essential to the success of the Company. Chaarat has adopted the Quoted Companies Alliance Corporate Governance Code. The role of the Board remains that of setting strategy, ensuring the right resources are in place to deliver it, promoting long-term success, generating value, and contributing to wider society.
Investors
I n April 2020 we raised US$13.8 million via a share placement, welcoming new individual and institutional investors to the shareholder register. I was pleased to see that existing shareholders, the Company's directors, and senior management participated and showed strong belief in our story. I would like to take this opportunity to thank our loyal shareholders for their patience over the course of the year.
2021 and beyond
I was delighted with the response to our share subscription in February 2021 , which raised US$30.0 million of new cash and reduced our indebtedness by US$22.2 million. Now that we have raised the equity portion of the funds required for our Tulkubash project, we will focus our efforts on raising the debt finance element of the project. I would like to thank our existing and new investors for their support in our recent fundraise.
Against the backdrop of a challenging and uncertain world, in the coming year our priorities will be to secure project finance for Tulkubash to take advantage of the full 2021 construction season, to progress Kyzyltash by conducting metallurgical testing to enable Chaarat to choose the appropriate technology for project development.
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Chief Executive Officer's Review
Overview
2020 was a challenging year in many respects. In addition to the pandemic, we had to operate during an active military conflict in one country and the political unrest in the other. However, we are pleased to report that Chaarat emerged as a much stronger company, outperforming on our operational and financial targets at Kapan in Armenia and continuing development of our prospective cluster in the Kyrgyz Republic . These achievements were made possible through proactive engagement with our host communities in both countries, strong Chaarat culture, lean set up and seamless integration between the teams in various countries.
Our team
I would like to reiterate the comments made by our Chairman in relation to our outstanding employees, whose hard work, dedication, and mutual support have contributed to our performance during the year by exceeding our production guidance of 55koz by 6%. I am proud of how our team has responded to the extreme circumstances of the past year.
Our impact
Health and safety - The health and safety of our employees and communities has been our main priority during the COVID-19 pandemic and we continue to monitor the situation daily in all our countries of operation. We have restricted travel by our employees, and limited visitors to our facilities. Our employees continue to work from home where possible and additional measures to protect our employees are in place for those still working at our operating sites. The team's proactive precautionary measures reduced the impact of COVID-19 to the minimum possible and continue during the current second wave of the pandemic. In the wake of the tragic fatal incident at our Kapan mine last month, we have been focused on reinforcing Chaarat's standards regarding attitudes and behaviours across the entire workforce, including employees of our contractors.
Environment - During the year COVID-19 did not get in the way of us continuing proactively to manage and improve environmental aspects at our operations
Community - We have strengthened community relations in our two countries of operation with our continued support during the COVID-19 pandemic and, in the final quarter of the year, with support in Kapan during the hostilities in the neighbouring Nagorno- Karabakh region, and in the Kyrgyz Republic during the political unrest.
Our strategy
In our strategic report, an extract from which is copied below, I outline the progress we have made during the year towards achieving our vision of building a leading emerging markets gold company with a focus on the former Soviet Union and which delivers value to all our stakeholders by adhering to the highest ESG standards. Whilst the COVID-19 pandemic has meant that we have not made as much progress as we would have liked, I am confident that, once that is behind us, we will be able to make significantly more progress.
Our performance
Kapan - We ended the year achieving production of 58.2koz AuEq, exceeding our production guidance by 6% and with revenues o f US$76.0 million (2019: US$68.1 million) due to operational improvements, supported by strong commodity prices. Accordingly, EBITDA contribution from Kapan increased significantly to US$19.4 million in 2020 compared with US$8.6 million in 2019.
Tulkubash - Good progress has been made on the permitting and design/engineering fronts and the project is fully permitted now to produce. We are in the process of undertaking a full update of the 2019 bankable feasibility study ("BFS"). Pending the results of the updated BFS and completion of the debt financing, we continue to target the start of production in Q4 2022.
Kyzyltash - We completed a preliminary metallurgical assessment in April, and we have defined a metallurgical test programme for 2021 to identify the optimal processing method.
Funding and liquidity
In April, during the first wave of the COVID-19 pandemic, we raised US$13.8 million via an equity placement, US$6.3 million of which was used to reduce borrowings and interest accrued under our working capital facility to zero. We also extended the maturity of US$22.0 million of the Group's indebtedness; this was subsequently converted into equity in early 2021. We also repaid a further US$8.0 million of our Kapan loan in accordance with its planned repayment schedule. Additionally, during the year, we undertook an efficiency review and were successful in reducing our overheads.
Commodity prices
Given the polymetallic nature of our Kapan mining operation we are affected not only by gold prices but also by movements in copper, zinc, and silver. Copper and Zinc prices were strong in H2 2020 and have remained so into 2021. While the COVID-19 pandemic caused a significantly lower than expected base and precious metals environment in the first half of 2020, the recovery seen in the second half of 2020 has been stronger than expected resulting in a marginally better price environment for our Kapan operation compared to our forecast.
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Since year end
In February of 2021 we were delighted with the results of our US$52.2 million financing, comprising an equity raise and loan conversion which has further strengthened our institutional, high net worth, and retail investor base and significantly reduced our gearing.
Our focus for 2021
Our key areas of focus for 2021 include the raising of project finance for Tulkubash and refinancing of the convertible loan notes. Chaarat has good quality assets with a highly skilled workforce. I have every confidence in the actions that we are taking to progress our strategy to realise our full potential in the current gold price environment.
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Our Strategy
• | ESG | We will work responsibly to: | ||||||
• provide a safe work environment built on the | ||||||||
highest standards of safety management | ||||||||
• operate to the highest standards of environmental | ||||||||
stewardship | ||||||||
• enhance the infrastructure, education, and | ||||||||
healthcare in our host communities and to improve | ||||||||
the living standards and opportunities for those | ||||||||
communities | ||||||||
• | Organic growth | We will maximise our production via: | ||||||
• operational improvements, mine life extension, and | ||||||||
brownfield development at our Kapan mine in | ||||||||
• | Armenia | |||||||
staged development of the assets at our Kyrgyz | ||||||||
Republic operations (Tulkubash and Kyzyltash) | ||||||||
• | Non-organic | We | will | selectively | identify | value-accretive | ||
growth | opportunities | in our | target region which will deliver | |||||
value to shareholders in both the short term and | ||||||||
through longer-term exploration and development | ||||||||
potential | ||||||||
• | People | We | will attract, retain, | and develop | a skilled and | |||
diverse workforce across all levels of our organisation | ||||||||
with a focus on developing local talent in our host | ||||||||
communities and creating an environment in which | ||||||||
those employees can thrive and learn | ||||||||
• | Finance | We will identify opportunities to secure funding and | ||||||
reduce the cost of capital with the main objective of | ||||||||
maximising value for shareholders with appropriate | ||||||||
consideration to levels of shareholder dilution | ||||||||
Our ESG Strategy | ||||||||
ESG | 2020 progress | 2021 priorities | ||||||
Implementation of a revised | A review by the Board's HSEC | |||||||
comprehensive health and | Committee of the HSEC plans and | |||||||
safety policy, a vehicle | procedures for Kapan | |||||||
safety policy, unified health | ||||||||
Safety | and safety protocols, and | |||||||
integrated reporting | ||||||||
Development and | Improved reporting to include | |||||||
implementation of COVID-19 | leading as well as lagging | |||||||
emergency response plan | indicators | |||||||
Buttressing of the tailings | Development and implementation | |||||||
storage facility (TSF) and | of a groupwide environmental | |||||||
raise of the north wall of the | policy | |||||||
TSF completed | ||||||||
Review of avalanche | Tailings management improvement | |||||||
controls | measures with a view to | |||||||
demonstrating a pathway to | ||||||||
compliance with new global | ||||||||
industry standard on tailings | ||||||||
management | ||||||||
Environmental | Acid rock drainage (ARD) - | Review of how to incorporate solar | ||||||
acid-base accounting (ABA) | power at Tulkubash, and | |||||||
testing carried out to assist | consideration of green water | |||||||
in the development of | purification technology | |||||||
mitigation measures | ||||||||
Installation of low energy | ||||||||
lightbulbs throughout Kapan | ||||||||
Near completion of the | ||||||||
environmental and social | ||||||||
impact assessment (ESIA) | ||||||||
for Tulkubash | ||||||||
Community | New kindergarten at Kapan | |||||||
COVID-19 community | ||||||||
support initiatives | ||||||||
Organic | 2020 progress | 2021 priorities | ||||||
growth | ||||||||
Identified potential solutions | Continued actions to improve grade | |||||||
to grade issues | and reduce dilution | |||||||
Optimise capacity at the mill |
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Kapan | Concluded contracts for | Treat more third-party ore |
treatment of third-party ore | ||
Work started on further | Commence East Flank development | |
developing the exploration | ||
of the area adjacent to the | ||
existing mine (East Flank) | ||
Advancement of | ||
construction, permitting, and | Finalisation of engineering work | |
design and completed | Continued advancement of | |
detailed pre-construction | ||
construction: commencement of | ||
engineering | ||
construction of major structures | ||
and purchase of long lead line | ||
items | ||
Completion of DFS level study of | ||
the project | ||
Update Mineral Resource and Ore | ||
Reserves estimates | ||
Tulkubash | Progress in updating the | Further drilling programme to |
2019 bankable feasibility | extend mine life | |
study to confirm the existing | Finalise joint venture arrangements | |
resource and exploration | with Çiftay, our construction | |
potential, cost estimates, | partner in the Kyrgyz Republic | |
and sound economics of the | ||
project | ||
Completed a 2,000-metre | ||
confirmatory drilling | ||
programme and identified | ||
continuation of the | ||
mineralisation outside the | ||
pit boundaries and at depth | ||
Completion of metallurgical | Drill a representative sample and | |
assessment | test for optimal processing route | |
Kyzyltash | Metallurgical drilling campaign | |
Assessment of optimal processing | ||
route | ||
Non-organic | 2020 progress | 2021 priorities |
growth | ||
M&A | Identified, evaluated, and | Continue to identify and evaluate |
progressed various | value enhancing acquisition | |
opportunities | opportunities and, if appropriate, | |
execute one or more | ||
People | Safe and attractive work | Continued focus on cultural change |
environment for all | including empowerment of | |
employees | employees to take decisions locally | |
where appropriate | ||
Continued efforts to secure best in | ||
class people, deliver excellent | ||
training programmes, and act | ||
proactively in relation to changing | ||
environment | ||
Finance | Raised US$13.8 million via | Secure project finance for |
an equity placement | Tulkubash | |
Raise equity - US$30m of new cash | ||
was raised in February 2021 and | ||
US$22.2m of debt was converted | ||
into equity | ||
Continued to reduce Kapan | Repay or refinance 2021 | |
loan with a further US$8.0m | convertible loan notes | |
repaid in accordance with | ||
planned schedule | ||
Extended the maturity of | ||
US$22.0 million of the | ||
Group's indebtedness to 31 | ||
December 2024 | ||
Strengthened institutional, | ||
high net worth and retail | ||
investor base |
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Chief Operating Officer's Review
Kapan
2020 Kapan highlights
- Lost time injury frequency rate ('LTIFR') of 0.37 (per one million hours worked) versus 0.39 in 2019 (-5.1%). Lost Time Injuries ('LTI') remain too high and further improvement of the safety performance at Kapan remains a continuous focus for the organisation.
- An improved standalone EBITDA contribution of US$19.4 million for Kapan (2019: US$8.6 million, 11-month period).
- 2020 production of 58.2koz AuEq exceeding guidance by 6%, despite the ongoing COVID-19 situation and border hostilities in H2 of 2020.
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Chaarat Gold Holdings Ltd. published this content on 08 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 April 2021 06:07:03 UTC.
