TIDMCGH
RNS Number : 6318L
Chaarat Gold Holdings Ltd
07 September 2023
7 September 2023
Chaarat Gold Holdings Limited
("Chaarat" or "the Company")
Interim results for the six months ended 30 June 2023
Chaarat Gold Holdings Limited (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, today
publishes its unaudited results for the six-month period ended 30
June 2023 ("H1 2023").
Highlights for interim period ended 30 June 2023
Group Financial Results
-- Revenue reduction of 30% in H1 2023 (US$35.3 million)
compared to H1 2022 (US$50.4 million), reflecting lower volume of
own-ore sales at Kapan (18,937 ounces of gold equivalent ("AuEq")
in H1 2023 vs 25,118 ounces in H1 2022) and treatment of
third-party ore for a processing fee during H1 2023 (US$2.2
million) rather than purchase of ore and onward sale to customers
as was the case in H1 2022 and generated US$9.0 million.
-- Group adjusted EBITDA in H1 2023 of US$-0.2 million (H1 2022:
US$4.9 million) reflecting lower adjusted EBITDA contribution from
Kapan of US$2.3 million (H1 2022: US$8.1 million) and corporate and
Kyrgyz Republic costs of US$2.5 million (H1 2022: US$3.2
million).
-- US$16.4 million non-cash impairment provision of Kapan asset,
as to align book value to fair value. The fair value is based on
the consideration for the recently announced conditional agreement
to sell the Kapan mine.
-- Cash and cash equivalents as at 30 June 2023 of US$0.8
million (31 December 2022: US$0.6 million).
-- Group net debt(1) increased from US$51.3 million at 31
December 2022 to US$51.6 million at 30 June 2023 mainly reflecting
utilisation of cash balances.
Corporate
-- Conditional agreement to sell the Kapan mine
On 16 August 2023, the Company announced it had entered into a
binding conditional sale and purchase agreement with Gold Mining
LLC to sell its 100% owned Armenian subsidiary, Chaarat Kapan CJSC,
which owns the Kapan mining operation in Armenia. The consideration
for the proposed sale is US$55.4 million which comprises US$5.0
million payable in cash and US$50.4m being satisfied by way of the
buyer taking an assignment of intra-group payables due to Chaarat
Kapan. It is anticipated that, subject to shareholder approval and
other conditions being met, the sale will complete by the end of
September 2023.
-- Xiwang International Company Limited ("Xiwang") Status
Discussions continue with Xiwang with regard to a potential
investment. The current proposal under discussion is for a first
phase investment of $150 million into the Company's wholly-owned
subsidiary, Chaarat Zaav CJSC, in the form of a joint venture
focused solely on the Tulkubash project (now excluding Kyzyltash).
The currently discussed structure envisages that approximately
US$35 million invested would be used to repay the convertible loan
notes with the remaining US$115 million to be used to develop
Tulkubash. As part of the potential investment, Chaarat and Xiwang
have been working together to identify contractors for Tulkubash.
Quotes for Engineering Procurement Construction ("EPC"), Mining,
and Operations & Maintenance ("O&M") have been received
from a number of potential contractors and are in the final stages
of review by Chaarat and Xiwang. Proposals received indicate
similar pricing to the 2021 Bankable Feasibility Study update
report. Further updates will be provided as appropriate.
-- Extension of Convertible Loan Notes
On 11 August 2023, the maturity date of the convertible loan
notes was extended by a further three months from 31 July 2023 to
31 October 2023 and accrued interest and extension fees of US$2.8
million were capitalised as at 31 July 2023, which increased the
principal value of the notes to US$31.7 million.
-- Cash position
Cash and cash equivalents as at 30 June were US$0.8 million.
Working capital facility arrangements are in place with a
short-term loan provider. As at 30 June 2023 US$3.0 million had
been drawn under those arrangements with the remaining US$1.0
million drawn down since H1 2023. As at 31 August 2023, the Group's
cash and cash equivalents were US$0.5 million. The working capital
facilities are due for repayment on 30 September 2023. The Company
is currently in discussions with the lender to repay, part repay or
extend the facilities.
Going concern
As explained in Note 2 to the financial statements, additional
funding will be required during Q4 2023 to achieve the planned
future capital developments of assets, to sustain corporate
activities, to repay the corporate working capital facilities, to
refinance the convertible loan notes due on 31 October 2023 and,
should the conditional agreement to sell Kapan not be completed, to
fund investment into the Kapan mine. The steps being taken by the
Group to address these requirements are set out in the Operational
Review below and in Note 2 to the financial statements below.
Kapan
-- As previously disclosed, Kapan experienced a fatal workplace
injury in March 2023. A programme of work has been initiated to
conduct a full review of high risk and non-routine tasks and to
review effectiveness of 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.
-- Kapan production guidance remains at 50-55 koz of own-ore
production and additional 5-10 koz of third-party ore production
though the full year guidance will depend on whether the
conditional agreement to sell the Kapan mine is completed and the
timing of such completion.
-- All-in-sustaining cash cost for own-ore production ("AISC"
(2) ) of US$1,556/oz was higher than the US$1,420/oz for H1 2022
(+9.5%). This increase is mainly due to the adverse impacts from
the United States Dollar and Armenian Dram foreign exchange rate
("USD/AMD FX rate") and an 8.7% decrease in AuEq own-ore production
compared to H1 2022.
-- Standalone Kapan EBITDA contribution was US$2.3 million vs
US$8.1 million in H1 2022 (-72%). This is mainly due a decrease in
volumes milled (own ore and third party) and the continued adverse
impact of USD/AMD FX rate.
-- Production was 26,523 gold equivalent ounces (3) ("oz"), vs
30,022 oz in H1 2022 (-11.7%) consisting of 21,410 oz from own ore
and 5,113 oz from third-party ore (vs 23,458 oz from own ore and
6,564 oz from third-party ore in H1 2022). Lower gold production
was mainly due to lower stope availability in H1 2022.
-- Exploration of the East Flank area adjacent to the existing
Kapan mine is progressing according to schedule.
Tulkubash, Kyzyltash and Kyrgyz Exploration
-- 2023 Exploration commenced in May 2023 and is progressing as
per budget and schedule. The scope of this year's work is to
determine the exploration potential of the wider licence area to
help identify potential targets for the future.
Outlook for 2023
The Company is focused on the following for the balance of
2023:
-- Completion of the sale of Kapan by the end of September 2023;
-- Progressing the potential Xiwang investment;
-- Reviewing strategic options for Kyzyltash and Tulkubash; and
-- Ensuring the Company's working capital requirements are met,
and sufficient funding is secured during Q4.
(1) 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.
(2) AISC on a gold oz produced basis exclude smelter TC/RC
charge and other costs which add c. US$217/oz. Sustaining capex
of c. US$3.65 million p.a. is included in the AISC.
(3) Gold equivalent ounces for 2023 guidance calculated on
2023 budget prices with Au at US$1,850/oz and gold ratios of
84 for silver, 6,998 for copper and 19,826 for zinc. Includes
third-party ore production
Mike Fraser , Chief Executive Officer, commented:
"Tragically on 23 March a fatal accident occurred during mining
activities at Kapan. Remedial actions have focussed on the design
of non-routine work and associated control. The financial
performance of Kapan continues to be adversely impacted by the
stronger Armenian Dram. The outlook for the second half of the year
is for an improvement in AuEq, on H1 due to forecast improvement in
plant capacity. Drilling at East Flank continues with initial drill
results expected in the 2023 MRE.
The previously announced proposed sale of Kapan is progressing
well with shareholder vote planned for 7 September 2023. Subject to
completion of the remaining conditions completion is expected by
the end of September 2023.
Proceeds from the sale of Kapan will be used for general
corporate purposes. Discussions continue with Xiwang on a potential
investment that will enable the further development of Tulkubash as
well as for external growth options. We look forward to updating
shareholders in due course.
In the meantime, efforts continue to improve the balance sheet,
with the loan from Ameriabank successfully refinanced with
outstanding principal repayment extended to 2025."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014 (which forms part of
domestic UK law pursuant to the European Union (Withdrawal) Act
2018).
Enquiries
+44 (0)20 7499
Chaarat Gold Holdings Limited 2612
Mike Fraser (Chief Executive Officer) info@chaarat.com
Canaccord Genuity Limited (NOMAD and + 44 (0)20 7523
Joint Broker) 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 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 .
Forward-looking statements
This announcement may include or incorporate by reference
statements that may constitute "forward-looking statements" in
respect of Chaarat's operations, performance, prospects, and/or
financial condition. Forward-looking statements are sometimes, but
not always, identified by their use of a date in the future or such
words and words of similar meaning as "anticipates", "aims", "due",
"could", "may", "will", "should", "expects", "believes", "intends",
"plans", "potential", "targets", "goal" or "estimates". By their
nature, forward-looking statements involve a number of risks,
uncertainties and assumptions and actual results or events may
differ materially from those expressed or implied by those
statements. Accordingly, no assurance can be given that any
particular expectation will be met, and reliance should not be
placed on any forward-looking statement. Additionally,
forward-looking statements regarding past trends or activities
should not be taken as a representation that such trends or
activities will continue in the future. No responsibility or
obligation is accepted to update or revise any forward-looking
statement resulting from new information, future events or
otherwise. Nothing in this announcement should be construed as a
profit forecast. This announcement does not constitute or form part
of any offer or invitation to sell, or any solicitation of any
offer to purchase any shares or other securities in the Company,
nor shall it or any part of it or the fact of its distribution form
the basis of, or be relied on in connection with, any contract or
commitment or investment decisions relating thereto, nor does it
constitute a recommendation regarding the shares or other
securities of the Company. Past performance cannot be relied upon
as a guide to future performance and persons needing advice should
consult an independent financial adviser. Statements in this
announcement reflect the knowledge and information available at the
time of its preparation. Liability arising from anything in this
announcement shall be governed by English law. Nothing in this
announcement shall exclude any liability under applicable laws that
cannot be excluded in accordance with such laws.
OPERATIONAL REVIEW
Kapan
-- As previously disclosed, Kapan experienced a fatal workplace
injury in March 2023. Recordable injury frequency review ("RIFR")
(per one million hours worked) in the period was 0.38 compared to
0.74 in H1 2022.
-- The 2022 Kapan Ore Reserve Estimate was completed during H1
2023. The resource drilling programme replaced depletion and added
an additional 2 years of life to the previous Life of Mine. Full
details are available on the Chaarat website.
-- A total of 26,523 gold equivalent ounces was produced in the period, consisting of:
o 21,410 AuEq ounces produced from Kapan ore which represents an
8.7% decrease on H1 2022 (23,458 oz).
o 5,113 AuEq ounces from third-party AuEq which represents a
22.1% decrease from H1 2022 (6,564 oz).
-- Own-ore production contained the following for H1 2023 and H1 2022:
H1 2023 H1 2022
Gold (oz) 11,155 12,815
-------- --------
Silver (oz) 222,463 226,129
-------- --------
Copper (tonnes) 765.9 741.5
-------- --------
Zinc (tonnes) 2,522 2,804
-------- --------
-- Own-ore All-in-sustaining cost ("AISC") of US$1,556/oz has
increased year on year due to inflationary pressure and lower gold
production compared to US$1,420 /oz in H1 2022 (+9.5%).
-- Third-party ore treated was 58.8kt for H1 2023 vs 63.5kt for H1 2022 (-7.4%).
-- Realised gold price for H1 2023 was US$1,959 /oz versus US$1,858 /oz in H1 2022 (+5.4%).
-- Tonnes mined was down period on period by 15.9%. Ore mined
was 270.2 thousand tonnes ("kt") vs 321.1 kt in H1 2022. Mine grade
was unchanged at 2.9 g/t AuEq.
-- Mill throughput was lower at 345.0 kt vs 373.4kt in H1 2022 (-7.6%).
-- Mill AuEq recovery for own ore was 78.6% compared with 79.5% in H1 2022.
-- Since H1 2022, the Armenian dram has appreciated by almost
17% (average rate to the US Dollar for the period was 389.71 in H1
2023, appreciated from 467.78 in H1 2022). This created significant
impact on the business. The Company has pivoted to new suppliers to
mitigate the impact of the strong Armenian dram, however the
adverse impact on costs remains.
-- Resource drilling was 21,023m in H1 2023 vs 33,772m in H1
2022 (-37.8%). Development metres were 12,809m in 2023 vs 12,919m
in H1 2022 (-0.9%).
-- Following the completion of the first four drilling chambers,
exploration drilling has commenced as part of the East Flank
exploration programme. Seven NQ diameter drill holes were completed
in H1 2022 totalling 1,764 metres. The complete programme consists
of accessing 6 underground drilling chambers and drilling 40 drill
holes, totalling approximately 13,370 metres of core-oriented
diamond drilling. Drilling is on 100 by 100 metres spaced centres.
The currently defined programme is expected to continue until the
end of 2024. 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 exploration target is based on old historic
exploration data and Dundee Precious Metals diamond drilling
results from 2011. The Chaarat review of the historic drilling has
outlined 8 potentially economically significant mineralized vein
zones which are the target of this exploration campaign. This
drilling campaign is designed to provide an inferred level of
certainty.
Outlook
-- Kapan Mine production guidance remains at 50-55 koz of
own-ore production and additional 5-10 koz of third-party ore
production though the full year guidance will depend on whether the
conditional agreement to sell the Kapan mine is completed and the
timing of such completion as noted above. A newly-installed
crushing unit which increases capacity available by roughly 30% is
expected to drive a stronger H2 2023. Third-party ore supply is
expected to remain in line with H1 2023 for the remainder of
2023.
-- East Flank drilling campaign is ongoing as part of a 2-year
programme to develop an initial JORC resource and reserve
statement. The drill results will be included in the 2023 Kapan MRE
update. Further infill drilling will be carried out as appropriate
in future years to convert this mineralisation to measured and
indicated.
Tulkubash, Kyzyltash and Kyrgyz Exploration Update
-- The Tulkubash project remains ready for final investment
decision ("FID") once project financing is secured.
-- In addition to progressing financing discussions, Chaarat is
reviewing all strategic options on its Kyrgyz assets. The current
discussions with Xiwang envisage a capital allocation for the
Kyrgyz Assets to develop Tulkubash through a joint venture with
Chaarat. Other discussions are advancing in parallel.
Corporate
-- On 11 August 2023, the maturity date of the convertible loan
notes (the "Notes") was extended by a further three months from 31
July 2023 to 31 October 2023 and accrued interest and extension
fees of US$2.8 million were capitalised as at 31 July 2023, which
increased the principal value of the Notes to US$31.7 million. With
effect from 1 August 2023 the interest rate is 20% p.a. Further, a
one-off extension fee of US$1.0 million (being 5% of the original
principal amount of the Notes) will be payable to noteholders as
remuneration for the extension.
-- Chaarat reduced the principal outstanding on the Kapan
acquisition loan and Kapan working capital facility by US$2.5
million in H1 2023, reducing the balance to US$13.0 million
outstanding. The loan from Ameriabank, which now includes both the
remaining portion of the acquisition loan and the working capital
facility, was successfully refinanced in August 2023. The US$13
million loan principal has had its repayment schedule extended from
H2 2023 to H2 2025 with terms remaining materially the same.
-- As previously announced, working capital facility
arrangements are in place with a short-term loan provider. As at 30
June 2023 US$3.0 million had been drawn under those arrangements
with the remaining US$1.0 million drawdown since the half year. The
working capital facilities are due for repayment on 30 September
2023. The Company is currently in discussions with the lender to
repay, part repay or extend these facilities. Cash and cash
equivalents as at 30 June 2023 were US$0.8 million.
-- The unaudited Group Net Debt as of 30 June 2023 was US$51.6
million. Should the conditional agreement to sell the Kapan mine be
completed, group net debt would be reduced by the amount of the
remaining Ameriabank loan, lease liabilities and contract
liabilities held within the Kapan entity which is to be sold to the
Buyer. Chaarat continues to evaluate further balance sheet
optimisation opportunities.
-- David Mackenzie was appointed Chief Financial Officer of the
Company on 15 June 2023. David has been acting as the interim Chief
Financial Officer since 1 February 2022. Darin Cooper, Chief
Operating Officer, left the Company on 14 June 2023 to pursue other
opportunities.
FINANCIAL REVIEW
Income statement
Revenue in the period amounted to US$35.3 million (H1 2022:
US$50.4 million), comprising US$33.1 million of own-ore revenue and
US$2.2 million of third-party revenue (H1 2022: US$41.4 million own
ore and US$9.0 million third-party revenue). Third-party revenue
consisted of a processing fee for treatment of third-party ore
(US$2.2 million) rather than the purchase of ore and onward sale to
customers as was the case in H1 2022 (US$9.0 million)
The Group operating loss for the period was US$22.0 million (H1
2022: profit of US$1.4 million) and the Group EBITDA was US$-0.2
million (H1 2022: US$4.9 million) reflecting lower adjusted EBITDA
contribution from Kapan of US$2.3 million (H1 2022 US$8.1 million)
and corporate and Kyrgyz Republic costs of US$2.5 million (H1 2022
US$3.2 million).
The Group operating loss for the period included a US$16.4
million non-cash impairment charge of the Kapan asset, as to align
book value to the fair value price. This fair value price is based
on the consideration for the recently announced conditional
agreement to sell the Kapan mine.
Kyrgyz Republic Armenia Corporate Total
EBITDA to Profit before tax US$'000 US$'000 US$'000 US$'000
1H 2023
--------------------------------- ---------------- --------- ---------- ---------
EBITDA (580) 2,339 (1,915) (-155)
Change in provisions - non cash - 298 - 298
Unrealised FX gain on borrowings - 115 - 115
Depreciation and amortisation (233) (5,629) - (5,862)
Impairment charges - (16,366) - (16,366)
Finance income - 1 - 1
Finance costs - (1,673) (2,173) (3,846)
Fair value gain on warrant - - 13 13
--------------------------------- ---------------- --------- ---------- ---------
Loss before income tax expense (813) (20,915) (4,075) (25,802)
--------------------------------- ---------------- --------- ---------- ---------
Finance costs in H1 2023 were US$3.8 million (of which US$2.9
million was non-cash) compared to US$3.3 million (of which US$2.5
million was non-cash) in the comparable period. Increase attributed
to interest on extended convertible loan notes, Ameriabank and
corporate working capital facilities.
Balance sheet
The borrowings at the balance sheet date of US$52.3 million (31
December 2022: US$51.9 million) comprised US$31.3 million of
convertible loan notes due in July 2023 (31 December 2022: US$29.2
million), US$16.9 million of other loans (31 December 2022: US$17.8
million), US$3.1 million of contract liabilities (31 December 2022:
US$3.7 million) and US$1.0 million of lease liabilities (31
December 2022: US$1.2 million).
The Group's net debt increased from US$51.3 million at 31
December 2022 to US$51.6 million at 30 June 2023, primarily as a
result of the increased convertible loan note balance at 30 June
2023.
Non-current assets decreased from US$130.7 million at 31
December 2022 to US$119.5 million at 30 June 2023. The decrease was
mainly due to an impairment charge of US$9.5 million recognised
against property, plant, and equipment at Kapan and US$3.7M against
deferred tax asset. Additionally, exploration and evaluation costs
of US$0.6 million were capitalised relating to the asset in the
Kyrgyz Republic.
Current assets were US$18.9 million at 30 June 2023 compared to
US$27.5 million at 31 December 2022. The decrease was mainly due to
an impairment charge of US$3.1 million recognised against
inventories at Kapan. Current assets at 30 June 2023 included cash
and cash equivalents of US$0.8 million (31 December 2022: US$0.6
million).
Total liabilities at 30 June 2023 were US$91.1 million compared
to US$85.6 million at 31 December 2022. This was mainly due to an
increase in trade payables at Kapan in the amount of US$3.5 million
at 30 June 2023. The movement in liabilities is set out in more
detail in Note 9 to the interim financial statements, including the
split between long-term and short-term components. In addition,
liabilities at 30 June 2023 included a provision for environmental
obligations at Kapan of US$12.4 million (31 December 2022: US$11.7
million).
Total equity was US$47.3 million at 30 June 2023 compared to
US$72.6 million at 31 December 2022.
Cash flow
Cash and cash equivalents increased from US$0.6 million at 1
January 2023 to US$0.8 million at 30 June 2023. The movement
comprised of:
-- net operating cash flows of US$7.5 million (H1 2022: US$7.7
million), reflecting the EBITDA contribution from Kapan offset by
costs incurred in the Kyrgyz Republic and at corporate level and
adjusted by working capital movements
-- net cash used in investing activities of US$5.1 million (H1
2022: US$5.7 million) relating to the purchase of property, plant,
and equipment at Kapan and in the Kyrgyz Republic together with
capitalised exploration and development spend in the Kyrgyz
Republic
-- cash outflows from financing activities of US$2.2 million (H1
2022: outflows of US$6.1 million) relating to external debt
repayments, including interest, of US$5.2 million offset by US$3.0
million inflow from draw down of corporate working capital
facilities.
At 31 August 2023, the Group had approximately US$0.5 million of
cash and cash equivalents on hand.
Basis of Preparation including Going concern
As set out in Notes 2 and 3 to the financial statements, the
consolidated interim financial information has been prepared using
policies based on International Financial Reporting Standards (IFRS
and IFRIC interpretations) issued by the International Accounting
Standards Board ("IASB") and on a going concern basis. It does not
include all disclosures that would otherwise be required in a
complete set of financial statements and should be read in
conjunction with the 2022 Annual Report.
As explained in Note 2, additional funding will be required
during Q4 2023 to achieve the planned future capital developments
of assets, to sustain corporate activities, to repay the corporate
working capital facilities, to refinance the convertible loan notes
due on 31 October 2023 and should the conditional agreement to sell
Kapan not be completed to fund investment into the Kapan mine. The
steps being taken by the Group to address these requirements are
set out in the Operational Review above and in Note 2 to the
financial statements below.
There are currently no binding agreements in place in respect of
any additional funding and there is no guarantee that any course of
funding will proceed such that the funding requirements set out
above represents a material uncertainty. However, management is
committed to raising additional funds and has an established track
record of successfully achieving this in the past as demonstrated
by the fundraising activities in 2020 and 2021. Accordingly, the
Directors have adopted the going concern basis of accounting in
preparing the interim financial statements. Further details of the
Group's status as a going concern and expected future financing
plans are set out below in Note 2 to these financial
statements.
Mike Fraser David Mackenzie
Chief Executive Officer Chief Financial Officer
6 September 2023
Consolidated Income Statement
For the six months ended 30 June 2023
6 months ended 6 months ended
30 June 2023 30 June 2022
(Unaudited) (Unaudited)
US$'000 US$'000
Revenue 35,250 5 0,391
Cost of Sales (35,321) (42,617)
---------------------------------------------------------------------------------- ------------------ --------------
Gross (loss)/profit (71) 7 ,774
Selling expenses ( 1,019) ( 1,149)
Administrative expenses (4,514) (5,212)
Impairment charges (16,366) -
Other income - -
Operating (loss)/profit (21,970) 1,413
Finance income 1 15
Finance costs (3,846) (3,266)
Fair value gain on warrant 13 319
L oss before tax for the period, attributable to equity shareholders of the
parent (25,802) (1,519)
Income tax credit/(charge) 148 (1,177)
L oss after tax for the period, attributable to equity shareholders of the
parent (25,654) (2,696)
Loss per share (basic and diluted) - US$ cents (3.72) (0.39)
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2023
6 months ended 6 months ended
30 June 2023 30 June 2022
(Unaudited) (Unaudited)
US$'000 US$'000
Loss for the period, attributable to equity shareholders of the parent (25,654) (2,696)
Items which may subsequently be reclassified to profit and loss
Exchange differences on translating foreign operations and investments 381 3,387
Other comprehensive income for the period, net of tax 381 3,387
Total comprehensive profit for the period attributable to equity shareholders of
the parent (25,274) 691
------------------------------------------------------------------------------------ -------------- --------------
Consolidated Balance Sheet
As at 30 June 2023
As at As at
30 June 2023 (Unaudited) 31 December 2022 (Audited)
Note US$'000 US$'000
-------------------------------------------------- --------- ---------------- ---------------------------
Assets
Non-current assets
Exploration and evaluation costs 9 69,801 69,182
Other Intangible assets 1,247 1,260
Property, plant and equipment 47,3 41 55,401
Prepayments for non-current assets 1 373
Deferred income tax assets 1,144 4,489
Total non - current assets 119,533 130,705
-------------------------------------------------- --------- ---------------- ---------------------------
Current assets
Inventories 11,267 16,208
Trade and other receivables 6,833 10 ,666
Cash and cash equivalents 753 616
Total current assets 18,854 27,490
Total assets 138,387 158,195
-------------------------------------------------- --------- ---------------- ---------------------------
Equity and liabilities
Equity attributable to shareholders
Share capital 6,897 6,897
Share premium 242,757 242,757
Own shares reserve (104) (104)
Convertible loan note reserve 1,420 1,420
Merger reserve 10,885 10,885
Share option reserve 7,769 9,259
Translation reserve (10,179) (10,560)
Accumulated losses (212,109) (187,944)
-------------------------------------------------- --------- ---------------- ---------------------------
Total equity 47,334 72,608
-------------------------------------------------- --------- ---------------- ---------------------------
Liabilities
Non-current liabilities
Provision for environmental obligations 12,392 11,707
Lease liabilities 10 831 885
Other loans 10 - -
-------------------------------------------------- --------- ---------------- ---------------------------
Total non-current liabilities 13,223 12,592
-------------------------------------------------- --------- ---------------- ---------------------------
Current liabilities
Trade and other payables 24,080 19,714
Contract liabilities 10 3,108 3,720
Lease liabilities 10 183 300
Other loans 10 16,908 17,806
Warrant financial liability - 13
Convertible loan notes 10 31,298 29,203
Other provisions for liabilities and charges 2,253 2,239
Total current liabilities 77,830 72,995
-------------------------------------------------- --------- ---------------- ---------------------------
Total liabilities 91,052 85,587
-------------------------------------------------- --------- ---------------- ---------------------------
Total liabilities and equity 138,387 158,195
-------------------------------------------------- --------- ---------------- ---------------------------
Consolidated Statement
of Changes in Equity
For the six
months ended
30 June 2023
Share Share Own Convertible Merger Share Translation Accumulated Total
Capital Premium Shares loan note Reserve Option Reserve Losses
Reserve Reserve Reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- -------- -------- -------- ------------ -------- ---------- ------------ ------------- ----------
As at 31
December 2021
(Audited) 6,894 242,695 (132) 1,420 10,885 11,383 (14,433) (181,836) 76,876
--------------- -------- -------- -------- ------------ -------- ---------- ------------ ------------- ----------
Loss for the
year - - - - - - - (8,5 77 ) (8,5 77 )
Translation
gains for the
year - - - - - - 3,8 73 - 3,8 73
--------------- -------- -------- -------- ------------ -------- ---------- ------------ ------------- ----------
Total
comprehensive
loss for the
year - - - - - - 3,8 73 (8,5 77 ) ( 4,704)
--------------- -------- -------- -------- ------------ -------- ---------- ------------ ------------- ----------
Share options
lapsed - - - - - (2 ,126 ) - 2,126 -
Share-based
payments
charge - - - - - 373 - - 373
Issuance of
shares for
settlement of
liabilities 3 62 - - - - - - 65
Transfer of
treasury
shares - - 2 8 - - (371) - 34 3 -
As at 31
December 2022
(Audited) 6,897 242,757 (10 4 ) 1,420 10,885 9,25 9 (10,5 60 ) (187,9 44 ) 72,6 08
--------------- -------- -------- -------- ------------ -------- ---------- ------------ ------------- ----------
Loss for the
period - - - - - - - (2 5 ,6 54 ) (25,654)
Translation
gains for the
period - - - - - - 38 1 - 38 1
---------------
Total
comprehensive
l oss for the
period - - - - - - 38 1 (25,654) (25 ,274)
--------------- -------- -------- -------- ------------ -------- ---------- ------------ ------------- ----------
Share options
lapsed - - - - - (1,4 90 ) - 1,490 -
Share-based
payment charge - - - - - - - - -
Transfer of
treasury
shares - - - - - - - - -
As at 30 June
2023
(Unaudited) 6,897 242,757 (10 4 ) 1,420 10,885 7,7 69 (10,1 79 ) (212,109) 47,334
--------------- -------- -------- -------- ------------ -------- ---------- ------------ ------------- ----------
Consolidated Cash Flow Statement
For the six months ended 30 June 2023 6 months ended 30 June 2023 6 months ended 30 June 2022
(Unaudited) (Unaudited)
US$'000 US$'000
----------------------------------------------------- --------------------------- ---------------------------
Cash flows from operating activities
Operating profit (21,970) 1,413
Depreciation and amortisation 4,933 5,645
Loss on disposal of property, plant, and equipment - (11)
Change in provisions (218) (618)
Impairment charges 16,366 -
Unrealised foreign exchange gains (301) (1,989)
Share-based payments - 373
D ecrease in inventories 2,810 2,572
Decrease in trade and other receivables 4,173 12,863
Increase/(decrease) in trade and other payables 2,333 (12,321)
Increase in contract liabilities 610 2,167
Cash generated in operations 7,515 10,093
------------------------------------------------------ --------------------------- ---------------------------
Income taxes paid - (2,372)
Net cash generated in operations 7,515 7,721
Investing activities
Purchase of property, plant & equipment (4,470) (4,177)
Exploration and evaluation costs (654) (1,524)
Purchase of intangible assets (6) (10)
Proceeds from sale of property, plant & equipment - 13
Interest received 1 15
------------------------------------------------------ --------------------------- ---------------------------
Net cash used in investing activities (5,130) (5,683)
------------------------------------------------------ --------------------------- ---------------------------
Financing activities
Repayments of principal portion of lease liabilities (248) (374)
Proceeds from loan 3,000 -
Repayments of principal amount of loan (4,045) (4,938)
Payments of interest (859) (790)
Net cash from financing activities (2,152) (6,102)
------------------------------------------------------ --------------------------- ---------------------------
Net change in cash and cash equivalents 232 (4,063)
Cash and cash equivalents at beginning of the period 616 11,134
Effect of changes in foreign exchange rates (96) (869)
------------------------------------------------------ --------------------------- ---------------------------
Cash and cash equivalents at end of the period 753 6,202
------------------------------------------------------ --------------------------- ---------------------------
Notes to the Financial Statements
1. General information and group structure
Chaarat Gold Holdings Limited (the "Company") (registration
number 1420336) is incorporated in the British Virgin Islands (BVI)
and is the ultimate holding company for the companies set out below
(the "Group"). The Company's shares are admitted to trading on the
Alternative Investment Market of the London Stock Exchange
(AIM:CGH). The registered address of the Company is: Palm Grove
House, PO Box 438, Road Town, Tortola, British Virgin Islands,
VG1110.
As at 30 June 2023 the Group consisted of the following
companies all of which are wholly owned:
Group company Country of incorporation Principal activity
Chaarat Gold Holdings BVI Ultimate holding company
Limited
Zaav Holdings Limited BVI Holding company
Chon-tash Holdings Limited BVI Holding company
At-Bashi Holdings Limited BVI Holding company
Akshirak Holdings Limited BVI Holding company
Goldex Asia Holdings Limited BVI Holding company
Chon-tash Mining LLC* Kyrgyz Republic Exploration
At-Bashi Mining LLC* Kyrgyz Republic Exploration
Akshirak Mining LLC* Kyrgyz Republic Exploration
Goldex Asia LLC* Kyrgyz Republic Exploration
Chaarat Zaav CJSC* Kyrgyz Republic Exploration
Chaarat Gold International Cyprus Holding company
Limited
Chaarat Gold Services England & Wales Services company
Limited Armenia Production company
Chaarat Kapan CJSC*
*Companies owned indirectly by the Company.
2. Going concern
As at 31 August 2023 the Group had approximately US$0.5 million
of cash and cash equivalents and US$49.9 million of debt (excluding
lease liabilities and contract liabilities and warrants) comprising
the following:
US$33.2 million convertible loan notes, including accrued
interest to 31 August 2023
US$16.7 million borrowings outstanding
Kyrgyz Republic
In order to achieve the planned (though as yet uncommitted)
capital developments of assets in the Kyrgyz Republic, future
financing will need to be secured. The Group's current discussions
with Xiwang International envisage a capital allocation for the
Kyrgyz Assets to develop Tulkubash through a joint venture with
Chaarat. Other discussions are advancing in parallel.
Corporate working capital facilities and corporate
activities
The corporate working capital facilities including accrued
interest amounted to US$4.1 million at 31 August 2023 and are due
for repayment on 30 September 2023. The Company is currently in
discussions with the lender to repay, part repay or extend the
facilities. Funding will also be required during Q4 2023 to allow
the Group to sustain corporate activities.
Kapan
As noted above, the Company has entered into a conditional to
sell the Kapan mine. The US$5.0 million cash component of the
consideration would provide funds which could assist towards
repayment of the corporate working capital facilities and also
corporate activities, although as previously stated further
additional funding will be required.
Additionally, if the sale is completed, group net debt would be
reduced by the amount of the remaining Ameriabank loan, lease
liabilities and contract liabilities held within the Kapan entity
which is being sold to the buyer. If the sale is not completed,
further investment would be required to implement efficiency
operations in Kapan in the immediate future and potentially in the
longer term given the persistently adverse USD/AMD foreign exchange
environment.
Convertible Loan Notes
By 31 October 2023, the convertible loan notes ("Notes") are due
to be redeemed by conversion into equity at approximately GBP0.30
(#) per ordinary share, at the holder's option, or will be repaid
in cash for a total of US$34.3 million (which includes accrued
interest and fees). The Company is assessing its options for
securing the funding to repay the Notes, both through the potential
Xiwang transaction and through other routes.
(#) Note: The conversion price is, for each US$250,000 of Loan
Notes, 611,290 Ordinary Shares (and pro rata for any amounts less
than US$250,000). This equated to GBP0.30 per share at the
prevailing exchange rate of US$1.36 / GBP1 in October 2021 when an
adjustment to the conversion price was agreed with loan
noteholders.
Conclusion
As noted above, further financing will be required to service
the debt obligations set out above as they fall due, achieve the
planned capital development of the assets in the Kyrgyz Republic
and to sustain corporate activities.
The directors consider there is a reasonable expectation that
sufficient funding will be raised and therefore have continued to
adopt the going concern basis. However, there are currently no
binding agreements in place in respect of any additional funding
and there is no guarantee that any course of funding will proceed.
Therefore, this indicates the existence of a material uncertainty
which may cast significant doubt over the Group's ability to
continue as a going concern and, therefore, it may be unable to
realise its assets and discharge its liabilities in the normal
course of business. Should the project funding not be available for
the Kyrgyz Republic development projects or should other strategic
options including potential monetisation of the assets not prove to
be viable, there may be a material impairment of the US$82 million
carrying value of the related assets. The financial statements do
not include the adjustments that would result if the Group were
unable to continue as a going concern.
3. Accounting policies
The significant accounting policies which have been consistently
applied in the preparation of these interim financial statements
are summarised below:
Basis of preparation
The consolidated interim financial information has been prepared
using policies based on International Financial Reporting Standards
(IFRS and IFRIC interpretations) issued by the International
Accounting Standards Board ("IASB"). It does not include all
disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the
2022 Annual Report. The results for the period are derived from
continuing activities. The figures for the year ended 31 December
2022 have been extracted from the statutory financial statements,
prepared in accordance with United Kingdom adopted international
accounting standards and International Financial Reporting
Standards (IFRSs) as issued by the International Accounting
Standards Board (IASB) and on a historical cost basis, which are
available on the Group's website www.chaarat.com. The auditor's
report on those financial statements was unqualified and noted a
material uncertainty in respect of the Group's ability to continue
as a going concern.
The consolidated interim financial information for the six
months ended 30 June 2023 and 30 June 2022 (unaudited) does not
constitute statutory accounts as defined in Section 435 of the
Companies Act 2006.
New standards, interpretations and amendments adopted by the
Group
The accounting policies adopted in the preparation of the
consolidated interim financial information are consistent with
those adopted in the preparation of the Group's annual consolidated
financial statements for the year ended 31 December 2022. There
were no new applicable standards that became effective on 1 January
2023 and the Group has not early adopted any amendment, standard or
interpretation that has been issued but is not yet effective. It is
expected that where applicable, these standards and amendments will
be adopted on each respective effective date.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of interim financial information requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income, and expenses. Actual
results may differ from these estimates.
In preparing the consolidated interim financial information, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the consolidated financial
statements for the year ended 31 December 2022.
4. Revenue
The revenue recognised from contracts with customers for the 6
months ended 30 June 2023 and 30 June 2022 consisted of the
following:
2023 2022
US$'000 US$'000
-------------------------- -------- --------
Copper concentrate 27,164 39,692
Zinc concentrate 5,191 9,897
3rd party ore processing 2,175 -
Zinc concentrate freight 720 802
Total 35,250 50,391
-------------------------- -------- --------
The Group's sales of copper and zinc concentrate are based on
provisional 1-3-month commodity forward prices and as such, contain
an embedded derivative which is marked-to-market at each month
end.
The Group's sales are to internationally well-established
commodity traders under standard offtake terms.
Copper concentrate sales are made on an Ex Works-basis meaning
that control passes to the buyer when the concentrate is loaded on
the truck at the Kapan mine. Zinc concentrate sales are made on a
cost, insurance, and freight ("CIF") basis meaning that control
passes to the buyer when the concentrate is loaded on the vessel in
the port of shipment (e.g., port of Poti, Georgia).
Of the US$35.3 million revenue generated H1 2023, US$33.1
million relates to own concentrate sales and US$2.2 million relates
to third-party ore processing.
During H1 2023, the Group provided a processing service for
third-party ore. The processing fee amounted to US$2.2 million and
is included as 3rd party ore processing in the revenue split in the
table above. During H1 2022, the Group purchased third-party ore
which it processed into concentrate and sold to its customers as
principal. The revenue amounted to US$9.0 million and is included
within copper concentrate and zinc concentrate in the table above,
with the cost of ore purchased and processing costs included in
cost of sales.
In 2023, the Group has continued to recognise contract
liabilities in relation to its contracts with customers for
prepayments received for the future transfer of concentrates, as
set out in Note 10.
5. Segmental analysis
Operating segments are identified based on internal reports
about components of the Group that are regularly reviewed by the
Board, in order to allocate resources to the segments and to assess
their performance.
Based on the proportion of revenue and profit within the Group's
operations and on the differences in principal activities, the
Board considers there to be two operating segments:
Exploration for mineral deposits in the Kyrgyz Republic ("Kyrgyz
Republic")
Exploration and production of copper and zinc concentrates at
Kapan in Armenia ("Armenia")
Kyrgyz Republic Armenia Corporate Total
30 June 2023 US$'000 US$'000 US$'000 US$'000
Revenue
Sales to external customers - 35,250 - 35,250
Total segment revenue - 35,250 - 35,250
---------------- --------- ---------- ---------
Operating loss before impairment charges (813) (2,877) (1,915) (5,604)
Impairment charges - (16,366) - (16,366)
---------------- --------- ---------- ---------
Operating loss (813) (19,243) (1,915) (21,970)
---------------- --------- ---------- ---------
Finance income - 1 - 1
Finance costs - (1,673) (2,173) (3,846)
Fair value gain on warrant - - 13 13
---------------- --------- ---------- ---------
Loss before income tax (813) (20,915) (4,075) (25,802)
---------------- --------- ---------- ---------
Income tax charge - 148 - 148
---------------- --------- ---------- ---------
Loss after income tax (813) (20,767) (4,075) (25,654)
---------------- --------- ---------- ---------
Assets
Segment assets - non-current 82,910 36,623 - 120,456
Segment assets - current 142 18,133 578 17,931
Total assets 83,053 54,756 578 138,387
---------------- --------- ---------- ---------
Liabilities
Segment liabilities 2,423 53,229 35,401 91,052
Total liabilities 2,423 53,229 35,401 91,052
---------------- --------- ---------- ---------
Kyrgyz Republic Armenia Corporate Total
30 June 2022 US$'000 US$'000 US$'000 US$'000
Revenue
Sales to external customers - 50,391 - 50,391
Total segment revenue - 50,391 - 50,391
---------------- -------- ---------- --------
Operating profit/(loss) (1,068) 5,232 (2,751) 1,413
Finance income - 15 - 15
Finance costs - (1,427) (1,839) (3,266)
Fair value gain on warrant - - 319 319
---------------- -------- ---------- --------
Profit/(loss) before income tax (1,068) 3,820 (4,271) (1,519)
---------------- -------- ---------- --------
Income tax charge - (1,177) - (1,177)
---------------- -------- ---------- --------
Profit/(loss) after income tax (1,068) 2,643 (4,271) (2,696)
---------------- -------- ---------- --------
Assets
Segment assets - non-current 81,419 49,702 - 131,121
Segment assets - current 551 34,340 4,221 39,112
Total assets 81,970 84,042 4,221 170,233
---------------- -------- ---------- --------
Liabilities
Segment liabilities 2,707 61,805 27,718 92,230
Total liabilities 2,707 61,805 27,718 92,230
---------------- -------- ---------- --------
6. Impairment provision
The Kapan mine is a separate cash generating unit for impairment
review purposes under IAS 36. Based on the recently announced
conditional agreement to sell the Kapan mine, the Company has
recorded a US$16.4 million impairment provision in order to align
the book value of the Kapan asset to fair value. The provision
comprises an impairment of US$9.5 million against plant, property
and equipment, an impairment of US$3.7 million against deferred
income tax asset and an impairment of US$3.2 million against
inventories.
The impairment assessment has been conducted internally using
provisional values at 30 June 2023, based on the consideration
included with the conditional agreement. The quantum of the
impairment provision is contingent on the sale going ahead and its
timing and will be revised in H2 2023.
7. Finance costs
The finance costs for the 6 months ended 30 June consisted of
the following:
2023 2022
US$'000 US$'000
------------------------------------------------------ -------- --------
Interest on convertible loan notes 2,096 1,839
Interest on other loans 1,023 724
Interest on lease liabilities 56 71
Interest on contract liabilities - 77
Unwinding of discount - provision for rehabilitation 671 554
Total 3,846 3,266
------------------------------------------------------- -------- --------
Interest on the convertible loan notes amounted to US$2.1
million in H1 2023.
The interest on other loans of US$1.0 million includes interest
on the Kapan acquisition loan of US$0.5 million, working capital
facility loans of US$0.4 million and interest on other borrowings
of US$0.1 million. The interest charge in the current period is
higher as it includes the Kapan working capital facility that was
drawn in the second half of the prior period in addition to the
corporate facility that was drawn in the current period.
8. Loss per share
Loss per share is calculated by reference to the loss for the 6
months ended 30 June 2023 of US$25.7 million (2022: loss of US$2.7
million) and the weighted average number of ordinary shares in
issue during the period of 689,668,088 (2022: 689,654,696).
At 30 June 2023, 8,920,341 (2022: 8,920,341) warrants,
33,056,858 (2022: 41,541,933) share options and convertible loan
notes have been excluded from the diluted weighted average number
of ordinary shares calculation because their effect would have been
anti-dilutive.
9. Exploration and evaluation costs
Tulkubash Kyzyltash Total
US$'000 US$'000 US$'000
------------------- ---------- ---------- --------
At 1 January 2023 58,796 10,386 69,182
Additions 613 5 619
At 30 June 2023 59,409 10,391 69,801
------------------- ---------- ---------- --------
Exploration and evaluation assets comprise costs associated with
exploration for, and evaluation of, mineral resources together with
costs to maintain mining and exploration licences for mining
properties that are considered by the Directors to meet the
requirements for capitalisation under the Group's accounting
policies. As at 30 June 2023, management does not consider there to
be any indicators of impairment in respect of these assets.
10. Liabilities
Reconciliation of liabilities
Convertible loans Contract liabilities Lease liabilities Other loans Total
Liabilities from financing US$'000 US$'000 US$'000
activities US$'000 US$'000
--------------------------- ------------------ --------------------- ------------------ ------------ ------------
At 1 January 2023 29,203 3,720 1,186 17,807 51,916
--------------------------- ------------------ --------------------- ------------------ ------------ ------------
Cash flows:
Cash proceeds - - - 3,000 3,000
Payment of interest - - - (859) (859)
Payment of principal
amount - - - (4,045) (4,045)
Lease payments - - (249) - (249)
Net proceeds - - (249) (1,904) (2,153)
Non-cash items:
Additions - - - - -
Interest accrued 2,096 - 56 1,005 3,157
Settlement of interest
against receivables - (79) - - (79)
Reversal of lease - - - - -
liability
Amounts recognised as
revenue - (610) - - (610)
Effect of currency
translation - 76 21 - 97
--------------------------- ------------------ --------------------- ------------------ ------------ ------------
Total liabilities from
financing activities at
30 June 2023 31,299 3,107 1,014 16,908 52,328
--------------------------- ------------------ --------------------- ------------------ ------------ ------------
Non-current - - 831 - 831
Current 31,299 3,107 184 16,908 51,498
--------------------------- ------------------ --------------------- ------------------ ------------ ------------
Convertible loan notes
During the period there were no new issues of convertible loan
notes (the "Notes"). The only movement in the period was accrued
interest of US$2.1 million (2022: US$1.8 million).
2 023 Notes U S$'000
----------------------------- ---------
At 1 January 2023 29,203
Cash proceeds -
Transaction costs -
----------------------------- ---------
Net proceeds -
----------------------------- ---------
Amount classified as equity -
Accrued interest 2,096
At 30 June 2023 31,299
-------------------------------- ---------
N on-current -
C urrent 31,299
-------------------------------- ---------
The number of shares to be issued on conversion of the Notes is
fixed. There are no covenants attached to the Notes.
The Notes accrued interest at 10% p.a. until 30 April 2020 and
then at a rate of 12% p.a. until 31 October 2021. The Notes are
secured on the shares of the Company's wholly-owned direct
subsidiary, Zaav Holdings Limited, which is the immediate holding
company of the Group's principal operating subsidiary, Chaarat Zaav
CJSC.
On 21 October 2021, the maturity date of the Notes was extended
from 31 October 2021 to 31 October 2022 and the conversion price
reduced from GBP0.37 to GBP0.30 per share (#) , which was treated
as a substantial modification for accounting purposes. The coupon
interest rate remained at 12% p.a.
The value of the liability and equity conversion component was
reassessed at the date of the modification. The fair value of the
liability component was calculated using a market interest rate of
15% for an equivalent instrument without conversion option.
On 6 October 2022, the maturity date of the Notes was extended
by a further 9 months from 31 October 2022 to 31 July 2023 and
accrued interest of US$9.2 million was capitalised as at 31 October
2022, which increased the principal value of the Notes to US$28.9
million. The extension was treated as a non-substantial
modification for accounting purposes. The coupon interest rate
remained at 12% p.a. Further, a one-off extension fee equal to 1%
of the original principal amount of the notes became payable to the
holders at this date.
On 11 August 2023, the maturity date of the convertible loan
notes (the "Notes") was extended by a further 3 months from 31 July
2023 to 31 October 2023 and accrued interest and extension fees of
US$2.8 million were capitalised as at 31 July 2023, which increased
the principal value of the Notes to US$31.7 million. With effect
from 1 August 2023 the interest rate is 20% p.a. Further, a one-off
extension fee of US$1.0 million (being 5% of the original principal
amount of the Notes) will be payable to noteholders as remuneration
for the extension. As the Notes fell due on 31 July 2023, they have
been classified as current liabilities at 30 June 2023.
(#) Note: The original conversion price was, for each US$250,000
of Notes, 527,871 Ordinary Shares (and pro rata for any amounts
less than US$250,000). This equated to GBP0.37 per share at the
then prevailing exchange rate of US$1.28 / GBP1. The amended
conversion price was, for each US$250,000 of Notes, 611,290
Ordinary Shares (and pro rata for any amounts less than
US$250,000). This equated to GBP0.30 per share at the prevailing
exchange rate of US$1.36 / GBP1 in October 2021.
Contract liabilities
The movements in the Group's contract liabilities for the period
are presented below:
US$'000
------------------------------------------------ --------
At 1 January 2023 3,720
C ash received in advance of performance -
Interest on contract liabilities -
Settlement of interest against receivables (79)
Amounts offset against receipts from customers (610)
Effect of currency translation 76
At 30 June 2023 3,107
------------------------------------------------- --------
Non-current -
Current 3,107
------------------------------------------------- --------
The contract liabilities balance relates to prepayments received
from one of Chaarat Kapan's customers for the sale of concentrates.
The prepayments accrue interest at a rate defined in the sales
contract of 6-month SOFR plus 5% p.a. and are settled by way of
deduction against future outstanding invoices.
Lease liabilities
The Group's leases are accounted for by recognising a
right-of-use asset and a lease liability except for leases of low
value assets and leases with a duration of 12 months or less.
The Group leases equipment and land in the jurisdictions from
which it operates, the most notable being the land that is leased
in Armenia. Certain items of property, plant and equipment are also
leased in the Kyrgyz Republic which contain variable payments over
the lease terms, therefore these leases do not fall within the
scope of IFRS 16, and right-of-use assets and lease liabilities are
not recognised as a result.
The movements in the Group's right-of-use assets and lease
liabilities for the period are presented below:
Right-of-use assets
Land Equipment Total
US$'000 US$'000 US$'000
------------------------------- -------- ---------- --------
At 1 January 2023 889 - 889
Additions - - -
Depreciation charge (77) - (77)
Effect of currency translation 17 - 17
At 30 June 2023 829 - 829
-------------------------------- -------- ---------- --------
Lease liabilities
Land Equipment Total
US$'000 US$'000 US$'000
------------------------------- -------- ---------- --------
At 1 January 2023 1,017 169 1,186
Additions - - -
Interest expense 56 - 56
Lease payments (79) (170) (249)
Reversal of lease liability - - -
Effect of currency translation 19 1 21
At 30 June 2023 1,014 - 1,014
-------------------------------- -------- ---------- --------
Non-current 184 - 184
Current 831 - 831
-------------------------------- -------- ---------- --------
The maturity of the gross contractual undiscounted cash flows
due on the Group's lease liabilities is set out below based on the
period between 30 June 2023 and the contractual maturity date:
Within 6 months 6 months to 1 year 1 to 5 years Over 5 years Total at 30 June 2023
US$'000 US$'000 US$'000 US$'000 US$'000
------------- ---------------- ------------------- ------------- ------------- ----------------------
Land leases 166 121 947 118 1,351
Total 166 121 947 118 1,351
------------- ---------------- ------------------- ------------- ------------- ----------------------
As at 30 June 2023, the contractual discounted cash flows due on
the Group's lease liabilities amounts to US$1.4 million (31
December 2022: US$1.6 million).
The discount rate used in calculating the lease liabilities is
the rate implicit in the lease, unless this cannot readily be
determined, in which case the Group's incremental rate of borrowing
is used instead. In 2023, a discount rate of 12% per annum has been
used to calculate the Group's lease liabilities for its land
leases.
Other loans
The movements in the Group's other loans for the period are
presented below:
Borrowings Kapan WC facility Corporate facility Other Borrowings Total
US$'000 US$'000 US$'000 US$'000
----------------------- ------------ -------------------- -------------------- ------------------ ---------
At 1 January 2023 9,643 6,108 - 2,056 17,807
Borrowing attracted in
cash - - 3,000 - 3,000
Interest accrued 510 340 60 95 1,005
Payment of interest in
cash (421) (379) - (60) (859)
Payment of principal in
cash (1,500) (1,000) - (1,545) (4,045)
Effect of currency - - - 1 -
translation
----------------------- ------------ -------------------- -------------------- ------------------ ---------
At 30 June 2023 8,232 5,069 3,060 547 16,908
------------------------- ------------ -------------------- -------------------- ------------------ ---------
Non-current - - - - -
Current 8,232 5,069 3,060 547 16,908
------------------------- ------------ -------------------- -------------------- ------------------ ---------
Borrowings
On 30 January 2019, the documentation was finalised for the
Kapan Acquisition Financing totalling US$40 million, which is
syndicated with Ameriabank CJSC (US$32 million), HSBC Bank Armenia
CJSC (US$5 million) and Ararat Bank OJSC (US$3 million). The loan
incurs interest at LIBOR plus 8% and was originally repayable
through quarterly payments over a four-year period however in July
2021, the maturity date of the facility was extended from 31
January 2023 to 2 October 2023.
This bank financing has certain covenants attached to it that
the Group needs to adhere to. Two covenants of the loan were not
met as at 30 June 2023. The leverage ratio should not exceed 2.4:1
with the ratio being 3.30:1 at 30 June 2023. In addition to this,
the minimum cash balance at 30 June 2023 should not be less than
US$1.0 million with cash on hand totalling US$0.1 million. As
explained below, the loan was successfully refinanced together with
the working capital facility in August 2023 with a new loan
agreement, thereby effectively extinguishing the non-compliance at
30 June 2023.
Ameriabank working capital facility
In 2022, the Company entered into two new agreements with
Ameriabank CJSC totalling US$6.0 million. This included a line of
credit agreement with a maximum limit of US$4.0 million on 12
August 2022. The loan incurs interest at an annual floating
interest rate of 11% and is repayable through quarterly instalments
starting from 20 January 2023. An additional loan agreement was
entered on 11 November 2022 for US$2.0 million. The loan interest
rate is 12.5% per annum and the principal is repayable through two
equal instalments on 17 July 2023 and 2 October 2023.
The outstanding principal on the Ameriabank acquisition loan and
working capital facility was successfully refinanced in August
2023. The US$13.0 million principal has had its repayment schedule
extended from H2 2023 to H1 2025 with terms remaining materially
the same.
Corporate facilities
In 2023, corporate working capital facility arrangements were
put in place with a short-term loan provider. As at 30 June 2023,
US$3.0 million had been drawn down with the remaining US$1.0
million drawn down since the half year. The working capital
facility is incurring interest at 12% per annum and is repayable by
30 September 2023, unless otherwise agreed by both parties.
Other Borrowings
Other borrowings include an amount owing to one of Chaarat
Kapan's customers in respect of prepayments for the future sale of
concentrates. The prepayments accrue interest at 1-month LIBOR plus
6% p.a. and are expected to be settled in cash in accordance with a
repayment schedule defined in the sales contract. The prepayments
can be requested upon notice and therefore are repayable on
demand.
11. Other provisions
Other provisions for liabilities and charges relate mainly to
employment disputes in Armenia ("Legal Claims Provision") of US$0.7
million at 30 June 2023 (31 December 2022: US$0.7 million) and a
legal claim of US$1.3 million at 30 June 2023 (31 December 2022:
US$1.3 million) that was charged against Chaarat in the Kyrgyz
Republic whereby compensation for agricultural losses was demanded
("Land Provision").
The provisions have been recognised as, based on the Group's
legal views, it is considered probable that an outflow of resources
will be required to settle the disputes, however there is
uncertainty around the timing of payments to be made. There are no
expected reimbursements relating to these provisions.
The movement in provisions in 2023 is as follows:
Legal Land Other Total
Claims Provision Provision
Provision
US$'000 US $'000 US$'000 US$'000
------------------------- ----------- ----------- ----------- --------
At 1 January 2023 708 1,327 204 2,239
Change in provision - - - -
Settlement of provision - - - -
in cash
Foreign exchange
on conversion 14 - - 14
---------------------------------- ----------- ----------- ----------- --------
At 30 June 2023 722 1,327 204 2,253
---------------------------------- ----------- ----------- ----------- --------
12. Related party transactions
Remuneration of key management personnel
Remuneration of key management personnel for the 6 months ended
30 June 2023 and 30 June 2022 is as follows:
2023 2022
US$'000 US$'000
Short-term employee benefits 926 9 07
Share-based payments charge - 3 73
Total 926 1 ,280
----------------------------- ----------- --------------
Included in the above key management personnel are 7 directors
and 2 key managers (2022: 8 and 2).
Short-term employee benefits totalling US$793,125 at 30 June
2023 have not yet been paid to key management personnel. This
consists of US$275,000 to Mr Andersson, US$450,625 to Mr Fraser and
$67,500 to non-executive directors.
No further share awards have been granted for 2023, however
should any such awards be made later this year, they will be
accounted for in H2 2023.
Entities with significant influence over the Group
At 30 June 2023, Labro Investments Limited, Chaarat's largest
shareholder, owned 44.77 % (31 December 2022: 44.77%) of the
ordinary US$0.01 shares in Chaarat ("Ordinary Shares") and US$1. 47
million of 12% secured convertible loan notes which, assuming full
conversion of principal and interest to maturity on 31 July 2023,
are convertible into 3,947,260 Ordinary Shares . Upon extension of
the convertible loan notes to 31 October 2023, Labro Investments
Limited owned US$1.61 million of 20% secured convertible loan notes
which, assuming full conversion of principal and interest to
maturity on 31 October 2023, are convertible into 4,271,267
Ordinary Shares.
13. Post balance sheet events
Convertible loan notes
On 11 August 2023, the maturity date of the convertible loan
notes (the "Notes") was extended by a further 3 months from 31 July
2023 to 31 October 2023 and accrued interest and restructuring fees
of US$2.8 million were capitalised as at 31 July 2023, which
increased the principal value of the Notes to US$31.7 million. With
effect from 1 August 2023 the interest rate is 20% p.a. Further, a
one-off extension fee of US$1.0 million (being 5% of the original
principal amount of the Notes) will be payable to Noteholders as
remuneration for the extension.
Ameriabank financing
The outstanding principal on the Ameriabank acquisition loan and
working capital facility was successfully refinanced in August
2023. The US$13.0 million principal has had its repayment schedule
extended from H2 2023 to H1 2025 with terms remaining materially
the same.
Conditional agreement to sell the Kapan mine
On 15 August 2023 the Company's wholly-owned subsidiary, Chaarat
Gold International Limited ("CGI"), entered into a conditional sale
and purchase agreement with Gold Mining Company LLC ("GMC") to sell
the entire issued share capital of Chaarat Kapan CJSC ("CK") which
owns the polymetallic Kapan mine in the Republic of Armenia. The
consideration is US$55.4 million, which comprises US$5.0 million
payable in cash and US$50.4 million being satisfied by way of GMC
taking an assignment of intra-group payables due from CGI to CK(#)
. The Proposed Sale is conditional upon Chaarat shareholder
approval, Ameriabank CJSC agreeing to release its existing security
and guarantees from members of the Chaarat group of companies,
approval of the Armenian Competition Protection Commission and
Buyer shareholder approval. A general meeting of the Company is to
convene at 4pm on Thursday, 7 September 2023.
(#) Note: The intra-group payables due by CGI to CK of US$ 50.4
million are eliminated on consolidation when preparing the accounts
of Chaarat and its subsidiaries (the "Group"). When the sale is
accounted for, the Group accounts will therefore show disposal
proceeds of US$ 5 million. Further details will be provided in the
Group's 2023 full-year financial statements in due course.
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END
IR EAXNKELPDEFA
(END) Dow Jones Newswires
September 07, 2023 02:00 ET (06:00 GMT)
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