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Chaarat Gold continues to build scale in Central Asia

Snapshot

  • Plans to act as consolidator of Central Asian gold projects
  • Pushing Tulkubash towards two million ounces
  • Kapan gold mine should deliver 65,000 ounces of production
gold and dollars

Quick facts: Chaarat Gold Holdings Ltd

Price: 38.1 GBX

AIM:CGH
Market: AIM
Market Cap: £207.2 m
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What Chaarat Gold Holdings does:

Chaarat Gold Holdings Ltd (LON:CGH) is rapidly emerging as a key mid-tier player in Central Asia’s gold space.

The company is actively seeking to consolidate the disparate Central Asian gold market through judicious acquisitions of projects.

It raised US$5.8mln of new cash in November to support various growth initiatives and strengthen the balance sheet.

 

What Chaarat Gold Holdings owns:

Chaarat Gold was built around the Tulkubash project in Kyrgyzstan. The company is currently drilling Tulkubash with a view to pushing the resource up towards the two million ounce mark.

A recent feasibility study envisioned mining an average of 94,000 ounces per year at Tulkubash, at all-in sustain costs of US$819 per ounce.

The project is estimated to require US$110mln to get it up and running, and has an internal rate of return of 20%. Total undiscounted cash flow is likely to be US$114mln.

Chaarat said in December that construction continues to progress well, with the first gold production on track for late 2021.

The company also owns significant exploration acreage around Tulkubash, and recent drilling has demonstrated the likelihood of adding to the resource soon.

It also acquired the Kapan mine in Armenia. This mine boasts a measured and indicated resource of 1.6mln gold equivalent ounces, with a mine life of seven years, with gold equivalent production averaging 60,000 per year.

 

How it's doing

In its results for the year ended December 31, 2019, Chaarat said it achieved underlying earnings (EBITDA) at the standalone Kapan Company level, before group accounting and non-cash adjustments, of US$12.7mln for the period.

In late April, the company also said it had closed its US$13.8mln fundraising following the issue of 42mln shares at 26p per share, more money than was originally anticipated.

 

What the boss says: chief executive Artem Volynets

"We are delighted to see continued support from our keys shareholders as well as welcome new investors into the exciting Chaarat story”.

“Raising US$13.8mln, beyond the previously announced US$12mln, in the current challenging market environment shows the attractiveness of Chaarat's value proposition. The prime motivation behind this placing was to strengthen the balance sheet and allow the company to continue its strategy amidst the current macro-economic factors.

"We believe that continuous stability of the Kapan operation in Armenia, along with progress on the Tulkubash construction programme in the Kyrgyz Republic, and the deleveraging of the business allows us to progress with our strategic plans and take advantage of the opportunities presented".

 

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Broker view - finnCap

"[Chaarat] is one of the few London gold companies pursuing an M&A strategy with actions rather than just words. 2019 saw the beginning of Chaarat’s new trajectory with the acquisition of the Kapan operation in Armenia and the start of construction at Tulkubash, its heap leach mine in the Kyrgyz Republic", the broker said in a note on 22 April.

"In the medium term this will be followed by development of its 4.5Moz Kyzyltash Project, and most likely supported by further M&A activity. Momentum has been slightly affected by COVID-19; however, we anticipate this to be a six-month slowdown with no lasting negative effect. For investors seeking gold company exposure with a consolidation strategy, Chaarat has Resources of >9Moz and a risked NAV of £279mln".

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