Chaarat enters new investment deal with Turkish mining contractor

Armenia and Kyrgyz Republic-focussed gold mining company Chaarat has entered into a new investment agreement with Turkish mining construction and contract company Çiftay İnşaat Taahhüt ve Ticaret, it was announced on Monday.

The AIM-traded firm said the agreement superseded the joint venture agreement executed with Çiftay, as announced in September 2019.

It said the two companies had decided to replace the joint venture deal with an investment agreement to simplify the structure of the partnership, and further align the interests of both parties.

Under the new agreement, Chaarat would retain 100% ownership of the Tulkubash and Kyzyltash projects, with Çiftay becoming a “strategic investor” at company level, through the issue of new ordinary shares.

As per the recently-published 2021 bankable feasibility study, Chaarat said the construction contract works attributable to Çiftay were reduced compared to the 2019 bankable feasibility study.

The consideration for those contract works had been agreed under the investment agreement at a maximum cash consideration of $25m (£18.02m), with Chaarat also agreeing to issue up to $17.3m in shares to Çiftay.

Chaarat’s board said it believed that it would strengthen the long-term partnership between both parties, adding that it remained subject to conditions.

The equity consideration would be issued in three conditional tranches, with the first being $5m to be issued in closing of the investment agreement.

It said the second tranche of $10.3m would be issued in 2023 after $20m worth of construction capital expenditure attributable to Çiftay was paid in cash.

Those shares would be subject to a lockup between issue and first gold pour.

The final, third tranche of $2m would be issued based on schedule and budget performance criteria.

In addition, as part of the investment agreement, Çiftay and Chaarat had agreed to settle some of the accrued expenses incurred during the construction activities to date by issuing a total of 2,800,000 shares at the same time as the first tranche, or on 30 July at the latest.

Those shares would not be subject to any lock-up period.

The conditions for closing the investment agreement were the signing of the debt financing to fully fund the Tulkubash project, and the signing of an amendment to the existing construction contract based on the updated bankable feasibility study and the investment agreement.

“I am very pleased with the outcome of the positive dialogue and the resulting strengthened cooperation with our partner Çiftay,” said executive chairman Martin Andersson.

“The simplified agreement confirms the confidence in the Chaarat management team and the Tulkubash project.

“The team at Çiftay worked with Chaarat representatives in the past and has worked on our Tulkubash site for some time now and mutual trust has been established.”

Andersson said that, with experience as a construction and mining contractor, Çiftay was “well-placed” to perform the agreed construction and mining services.

“Tulkubash is a high-quality asset with robust economics and further potential with our second development project Kyzyltash sitting just beneath.

“We fully expect Tulkubash to become a long-term cash generator capable of sustaining organic growth at Chaarat, and in due course facilitating the development of Kyzyltash.”

At 1417 BST, shares in Chaarat Gold were down 14.29% at 24p.