Chris Eger, CFO of Chaarat Gold Holdings Limited (CGH.L) Interview

Final results for year ended 31 December 2020

Chaarat (AIM: CGH), the AIM-quoted gold mining company with assets in the Kyrgyz Republic and Armenia,  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 58.2koz1 AuEq exceeding guidance by 6%, despite the ongoing COVID-19 situation and border hostilities in H2 of 2020.

• All-in-sustaining cost2 (“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, 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.

1 AISC 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.

2 Gold 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.”

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