CGH.L Regulatory News (CGH)

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").

4 June 2019

Chaarat Gold Holdings Limited

("Chaarat" or the "Company")

Tulkubash Feasibility Study Update

Significant increase in reserves and mine life

Chaarat (AIM:CGH), the AIM-quoted gold mining company with assets in the Kyrgyz Republic and Armenia, is pleased to provide an update of the JORC compliant bankable feasibility study for its majority owned Tulkubash Oxide Gold Project ("Tulkubash"). The bankable feasibility study ("BFS") update was independently prepared by LogiProc (Pty) Ltd in South Africa.

Overview

The feasibility study produced a 22.2Mt reserve, an increase of 39%, at an average grade of 0.92 g/t gold over an initial mine life of 5.3 years. Ongoing exploration will be carried out in parallel with the project development and the Company is confident that future exploration results will add significantly to the initial mine life ahead of first production, to enable Tulkubash to become a long-term cash generator to sustain the organic growth of Chaarat.

Highlights

- Initial reserve base of 22.2Mt ore grading 0.92g/t gold containing 658koz ounces of gold, an increase of 39%

- Average gold production of 94,000 ounces per annum, with peak production during steady state operations in excess of 111,000 ounces per annum

- Average cash operating cost of US$678 per ounce

- All-in sustaining cost of US$819 per ounce, including all taxes

- Ongoing exploration in 2019 and beyond expected to significantly add to existing reserves

- Tulkubash is now seen as an emerging gold district, with potential to host multiple gold deposits

Financial highlights

- Significant capital expenditure optimisation, which has resulted in an overall reduction from $132M to $110M

- Improved post tax NPV of $70M (at 5% discount rate) and IRR of 20%

- Projected annual post tax free cash flow of US$44M during steady state operational period

The initial post-tax net present value for Tulkubash, using a 5% discount rate and a long-term gold price of US$1,300 per ounce, is projected to increase to US$70M with an undiscounted total cash flow of US$114M. These metrics are expected to be significantly enhanced as ongoing exploration extends the reserve base along strike.

Chaarat has developed a new recovery model based on the relationship between gold recovery and the oxidation state of the ore. This relationship allows the recovery estimate to better fit results from two major metallurgical test programs. As a result, the recovery has decreased from the original feasibility study to 69% from 75%. Nevertheless, the new estimate of recoverable ounces is far more robust, significantly reducing project risk.

The Tulkubash resource and reserve, as currently defined, remain open along strike to the northeast. The 2019 drilling programme, which has already begun, will be focused on extending mineralization along strike and on infill drilling within the current resource footprint with the objective of further enhancing project economics. The 2018 exploration programme added over 650,000 ounces of gold to Measured and Indicated Resource. The Company has every reason to expect similar results in 2019.

Full text of the BFS can be found on: https://www.chaarat.com/investors/reports/agm-notices-and-other/. 

A press release providing an update on the Company's ongoing exploration programme will be issued during the next few weeks.

Future funding plans

In March 2019, Chaarat signed a binding term sheet to enter into a Joint Venture with Çiftay İnsaat Tahhüt ve Ticaret A.S. ("Çiftay"), the Turkish mining and mine construction contractor, to collaborate on the Tulkubash project, providing a significant amount of the required equity for the Tulkubash project. Under the agreement, based on an agreed valuation of US$252M (post money) for the Tulkubash and Kyzyltash projects, Çiftay would progressively invest US$31.5M for a 12.5% equity stake in both projects.

The vast majority of the remaining capital expenditure is expected to be debt funded, thus avoiding substantial dilution to Chaarat's shareholders, a key strategic objective for the Company. Chaarat is in the process of securing the remaining project financing which is targeted to close in Q3 2019.

Construction is ongoing at Tulkubash and the first gold production remains on schedule for 2021.

Artem Volynets, Chief Executive Officer, commented:

"An almost 40% year-on-year increase in Tulkubash's gold reserves demonstrates the remarkable future growth potential of the Tulkubash Project. To achieve this whilst also reducing the level of capital expenditure required to bring the mine into production again illustrates the quality of this asset.

"The project team's highly successful optimization of the project improves the value of the project and decreases the risks associated with its delivery. We plan to immediately advance the project development and are confident that our 2019 drilling programme will deliver similar results, further adding to the mine life of the project."

Tulkubash Mineral Resource Statement (effective 31st December 2018)

Tulkubash Ore Reserve Estimate - Effective Date 1st April 2019

Competent Person

The Competent Person with overall responsibility for this press release for the Company, and who has reviewed the information contained herein, is Dorian L. (Dusty) Nicol (FAussIMM), the Company's Senior Vice President, Exploration. He is a geologist with more than 40 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 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. He has supervised the work which is the subject of this release. Mr. Nicol consents to the inclusion in this announcement of the matters based on this information in the form and context in which it appears.

Enquiries

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 with an initial focus on Central Asia and the FSU through organic growth and selective M&A.

Chaarat is engaged in active community engagement programmes 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 by building relationships based on trust and operating to the best environmental, social and employment standards. Further information is available at www.chaarat.com.

Glossary of Technical Terms