Chaarat Gold to buy polymetallic project as part of acquisition spree

Chaarat Gold Holdings (LON:CGH), the company trying to buy Centerra's Kumtor mine in Kyrgyzstan, said Tuesday it would raise up to $100 million to help fund the acquisition of a producing polymetallic mine in Central Asia.

While the Kyrgyz Republic-focused explorer and developer did not reveal what project it was pursuing, it did say the acquisition was part of its consolidation strategy for the regional gold sector. It also noted it would transform the company from a developer onto a cash-flow generating producer.

Last year, the undisclosed asset produced around 50,000 ounces of gold equivalent and generated around $19 million profit before tax with gross assets of around $100 million.

Undisclosed project produced 50,000 gold ounces last year and that figure is set to grow by 25% in 2018 and 2019.

Production from the project is expected to grow by almost 25% per annum in 2018 and 2019, Chaarat said, thanks to significant investment over the past two years.

The company, which is developing the Tulkubash deposit at its Chaarat project in Kyrgyzstan, intends to fund the $75 million-deal by a combination of debt and fundraising proceeds.

Expanding footprint

Chaarat seems far from being done with its intended acquisitions in Central Asia Russia and the Caucasus region. The junior noted it continued “to make progress” with its pipeline of “highly attractive” targets in those jurisdictions.

It also referred to its touted, but so far unsuccessful intention to add Centerra Gold’s Kumtor mine to its portfolio.

Chaarat noted it was still interested in buying Kyrgyzstan’s largest gold mine and that it remained committed to completing the proposed $800-million deal, as its financing continue to support the transaction.

“[The company] has sought a productive dialogue with Centerra's management but has yet to receive any engagement from Centerra’s board and management team with respect to its proposal,” it said in the statement.

Chaarat said it had yet to receive any engagement from Centerra's board and management team concerning its intended acquisition of Kumtor mine.

Centerra rejected the unsolicited bid in April, but state-owned miner Kyrgyzaltyn, which holds $400 million in Centerra shares, said later it had not seen the offer, refusing to comment on whether or not the deal seemed attractive.

Under the proposal, Chaarat and Kyrgyzaltyn would acquire Kumtor from Centerra. Chaarat would then operate the mine, while Kyrgyzaltyn would own Kumtor’s preferred equity and be entitled to 50% of the economic benefits of Kumtor.

Centerra’s mine is located in the southern Tien Shan Metallogenic belt, in which Chaarat owns a namesake project, comprising the Tulkubash and Kyzyltash deposits, which are set to yield 300,000 to 400,000 ounces of gold a year when in full production.

The gold junior is awaiting decisions regarding the future of Kumtor from the Kyrgyzstan’s government. Last week, the parties extended for the fifth time the deadline to fulfill all conditions included in a deal they signed in September, which was supposed to end long-dragged environmental and economic disputes over Kumtor mine.

The announcement came only two months after MINING.com reported the country’s new Prime Minister, Muhammadkaliy Abylgaziev, was reviewing the agreement signed by his predecessor, adding his administration planned to submit to parliament its own proposals regarding the document. The authority, however, didn’t elaborate on when or how radical those suggested changes might be.