Aim-listed gold miner Chaarat Gold, which operates the Kapan mine, in Armenia, and is developing the Tulkubash project in the Kyrgyz Republic, sees potential to increase its production to 500 000 oz/y of gold from its existing asset base.
The company also continues to pursue other opportunities in its chosen geographic region – the former Soviet Union.
Considering that this territory is “unloved” by larger Western gold mining companies, and on the back of continued currency decline against the dollar, he explains that the margins for Chaarat to generate value is “relatively high”.
However, while there are opportunities to pursue value-accretive deals, Volynets says Chaarat will only enter into transactions that bring value to the company, as is demonstrated by the Kapan acquisition.
Chaarat’s production is set to grow from 65 000 oz/y to 160 000 oz/y within the next three years following its acquisition of the Kapan mine and the Tulkubash project.
Kapan, a producing asset with upside potential, was acquired from precious metals miner Polymetal in January for $50-million.
The Tulkubash asset is an oxide gold project that neighbours the original Chaarat asset, Kyzltash, a five-million-ounce gold deposit in Kyrgyzstan. It is a low-cost heap-leach project, with a resource and reserve that has been built up over time and continues to increase with further drilling, Volynets elaborates.
Despite Chaarat’s positive growth prospects and the fact that its market capitalisation has increased by 100% over the past year, Volynets laments that the company remains “massively undervalued”.
“We’re still trading below our net asset value and other metrics,” he says, adding that while this has spurred the management on to “move the company along”, the market “hasn’t caught up” to the company yet.
The reason for this, Volynets explains, could be owing to the company not “being well known” because it has, in the past, chosen to remain below the radar of mainstream investors and continue focussing on drilling at the larger scale Kyzltash project, also located in in the Kyrgyz Republic.
It is because of Kyzltash that the company will likely be able to achieve potential production volumes of 500 000 oz/y in the next five to six years but will likely be able to bring it on line once it is generating cash flow from Tulkubash nearby.
Chaarat intends to update the market on Kapan’s life-of-mine, which currently extends until 2023, in due course.
Since acquiring the mine, Chaarat has managed to streamline the Kapan operation and improve its exploration performance, marking the company’s journey to achieving a run rate of $20-million in annualised earnings before interest, taxes, depreciation and amortisation (Ebitda) by the end of this year.
Volynets also refers to its Tulkubash project, where district-scale exploration continues to identify and validate new gold targets, supporting the company’s hypothesis that the 24 km Tulkubash exploration licence is an emerging gold district with the potential to host numerous gold deposits.
Current drilling, which will continue into 2020, includes an initial 1 000 m programme in the Karator and Ishakuldy areas. This programme was designed to begin testing drill targets identified along strike and to validate the district-scale potential of Tulkubash.
To date this year, 120 holes – totalling 19 500 m – have been drilled, with the remaining five holes of this year’s campaign in progress and expected to be completed by the end of October. This will bring total drilling for this year to about 20 000 m, in line with previous guidance.
Volynets says that, by drilling about 20 000 m in 2018, the company had been able to increase its resource base by 67%.
Despite this increase, he tells Mining Weekly Online that the company is “still under 20% of what is available to be drilled in the licence area”.
The current Tulkubash resource estimate stands at about 1.6-million ounces of gold, based on drilling in 2018.
Tulkubash will become the company’s second operating gold mine and is scheduled to start production in the fourth quarter of 2021, with the full run rate to be achieved in the year thereafter.