Chaarat Gold - a review from HotStockRockets...

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Chaarat Gold (CGH) describes itself as an “AIM-quoted gold mining company with an operating mine in Armenia and assets at various stages of development in the Kyrgyz Republic”. The shares commenced 2020 at 35.2p, with the gold price then below $1,550. The gold price is now above $1,950, but the shares are still available at a 38.9p offer price – with the company most recently updating earlier this month...

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From its Kapan mine in Armenia for the first half of 2020, it noted “gold equivalent production of 26,960 ounces including 543 ounces produced from third-party ore - compared to 29,607 oz produced in H1 2019 (- 9%) but slightly up from 26,906 in H2 2019” and “the mine achieved an average gold price for the period of USD1,665 /oz versus USD1,327 /oz in H1 2019 in line with the average gold price for the six months to end June”. However, the production consisted of 13,179 ounces of gold, 261,551 ounces of silver, 960 tonnes of copper and 3,997 tonnes of zinc – and saw “realised silver price of USD 16.4/oz vs USD 15.2/oz in H1 2019… Realised copper price of USD 5,400/t vs USD 6,123/t… Realised zinc price of USD 1,959/t vs USD 2,568/t”. However, silver is now around $27.5/oz, copper $6,600/t and zinc $2,450/t and additionally noted is;

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• “Grades are expected to improve in the next quarters as a result of the targeted development work carried out year to date and the ongoing review of the mine”;

• “Unit costs improved quarter on quarter with efficiency gains throughout the operation”;

• “New mine equipment will provide immediate operational improvements along with mill circuit upgrades. This, with third-party ore will increase operational efficiency in H2 2020”;

• “Chaarat remains on track to deliver on its AuEq 55koz guidance for the year… A portion of the copper concentrate and third-party concentrate produced in June was not financially recognised in H1 2020 due to late shipment. This led to lower AuEq sold in H1 2020 but will contribute positively to results in July”.

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There are clear risks, including the COVID-19 situation (“is continuing to follow best practice to prevent our employees from contracting COVID-19 and supporting the communities on an ongoing basis”) and “consolidated corporate debt… USD69 million”. However, EBITDA of more than $17 million is forecast for the full-year, with earnings rising (we suggest potentially very significantly indeed) and there are further potential flagship Kyrgyz project catalysts – particularly Tulkubash “continuing… discussions with several parties and is working to finalise the project financing by the end of 2020” and “working towards an update of Kyzyltash's standalone 2016 feasibility study… next to the construction of the first phase Tulkubash development. The 2016 feasibility study valued the project stand alone at a net present value of US$309 million based on an 8% discount rate and an underlying gold price of US$1,250/oz” (current market cap here £204 million). We look for this combination to see the shares around 50p by the end of the year and therefore at 38.9p and up to 40p, targeting 50p+, buy.

This article first appeared on HotStockRockets - to catch the latest red hot share tip from the HotStockRockets team out just last Friday afternoon for just £5.50 click HERE

Filed under: Chaarat Gold, Amigo, James Benamor, CloudCoCo, Verditek, Revolution Bars, HotStockRockets

2020-09-07 14:14:50

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