LONDON (ShareCast) - (Sharecast News) - Armenia and Kyrgyz Republic-focussed mining company Chaarat Gold updated the market on first-half operations for the Kapan Mine in Armenia on Friday.
The AIM-traded firm said the recordable injury frequency rate for the period was 0.38 per million hours, down from 0.74 in the first six months of 2022, with no serious injuries reported in the second quarter.

It said it finalised the Kapan ore reserve estimate for 2022 in the first half, with resource drilling replacing depletion and adding two years to the mine's life.

Kapan produced 26,523 gold equivalent ounces, down 11.7% from 30,022 ounces a year earlier, primarily due to decreased stope availability.

The all-in-sustaining cash cost of production rose 9.5% to $1,556 per ounce, driven by the Armenian dram's appreciation and reduced gold production.

Preliminary unaudited EBITDA for Kapan stood at $2.3m - a 72% decline from $8.1m in the first half of last year, largely due to decreased milled volumes and USD/AMD exchange rate impacts.

Since the first half of 2022, the Armenian dram had appreciated by nearly 17%, which Chaarat said had considerably impacted the business.

As a result, it was seeking new suppliers to counteract that.

Looking at mining and milling, Chaarat said there was a 15.9% year-on-year decrease in ore mined, with mine grade remaining at 2.9 grams of gold equivalent per tonne.

Mill throughput also decreased, by 7.6% on the year.

On the exploration front, drilling had started in the East Flank area, and by the first half, seven NQ diameter drill holes were completed, with the full programme expected to run until the end of 2024.

The exploration target was based on historic data, and was aiming to identify economically-viable mineralized vein zones.

Looking ahead, Chaarat left the mine's production guidance unchanged.

It said a new crushing unit, increasing capacity by about 30%, was anticipated to boost performance in the second half.

Drilling at East Flank was continuing, aiming to produce a JORC resource and reserve statement, which would be integrated into the 2023 Kapan mineral resource estimate update.

The Tulkubash project meanwhile was awaiting a final investment decision, with Chaarat reporting that it was evaluating all strategic options, including potential capital allocation discussions with Xiwang International.

On the financial front, Chaarat reduced its Kapan acquisition loan by $1.5m in the second quarter, with net debt as at 30 June standing at $51.6m.

The company refinanced its loan from Ameriabank, extending the repayment schedule, with an extension to the convertible loan notes' maturity date also agreed on.

Further financing would be needed by the end of the third quarter.

The board said it was considering all financing options, including potential investments from Xiwang and asset sales like the possible sale of Kapan.

Chaarat and Xiwang were said to be discussing an extension to the timeline for the potential investment, with Chaarat saying that although Xiwang remained interested in the Tulkubash project, no guarantee existed that the investment would finalise.

"Whilst it is pleasing to see the improved safety outcomes at Kapan, the financial performance of Kapan continues to be adversely impacted by the stronger Armenian Dram," said chief executive officer Mike Fraser.

"The outlook for the second half of the year is for an improvement in gold equivalent, on the first-half due to forecast improvement in plant capacity.

"Drilling at East Flank continues with initial drill results expected in the 2023 mineral resource estimate."

Fraser said the board was currently evaluating a number of financing options for both corporate and asset purposes, which include a potential sale of Kapan.

"In addition, discussions continue with Xiwang International on a potential investment that will enable the further development of Chaarat's internal and 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."

At 0802 BST, shares in Chaarat Gold Holdings were up 4.56% at 7.45p.

Reporting by Josh White for Sharecast.com.

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