21st Apr 2016 08:25
LONDON (Alliance News) - Chaarat Gold Holdings Ltd Thursday said the economics of the company's flagship project in the Kyrgyz Republic have significantly improved after an internal review of the feasibility study was completed.
The original feasibility study covering the Chaarat gold project was carried out by NERIN Engineering and NFC, but has now been reviewed by the company and its advisers.
"We were impressed with the technical quality of the [original] work but the cost calculations, especially relating to the quantity and costs of civil works during construction left considerable scope for optimisation. Our optimisation therefore concentrated principally on adapting designs to local conditions and seeking quotes from Kyrgyz companies," said Chief Executive Dekel Golan.
The first stage review has increased the current value of the project by over 75% whilst the capital cost needed to get the project off the ground has fallen by almost a third.
Chaarat said the post-tax net present value of the project has risen to USD615.0 million following its internal review whilst the internal rate of return has increased to 25%. That can be compared to the USD351.0 million that was published within the original feasibility study carried out by NERIN and NFC.
Building on that, Chaarat said its review has suggested the initial capital expenditure needed to reach production is 31% less than the USD684.0 million outlined in the original feasibility study. Chaarat now thinks it will only need USD470.0 million of capital to get the gold project up and running.
The company also believes the all-in sustaining cash cost for the project would be around 5% less than what the original study implied, as the company estimated an AISC of only USD605 per ounce.
The study is based on a gold price of USD1,250 per ounce, implying a gross margin of USD645 per ounce. Spot gold was trading even higher on Thursday morning at USD1,257 per ounce.
The reserve base of the project, unsurprisingly, has remained unchanged at 4.7 million ounces and the company still plans on constructing an operation capable of producing around 211,000 ounces per year.
"Your management is reviewing a number of options targeting value generation whilst minimising dilution for our shareholders. We hope to deliver news on our progress in the coming months. We commend the patience of our shareholders who will appreciate that it is important to take our time to maximise the value of the Chaarat Project for their benefit," said Golan.
Chaarat shares were trading down 1.5% to 6.65 pence per share on Thursday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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