Chaarat Gold, an exploration and development company with assets in the Kyrgyz Republic, said that it has closed the first phase of up to $100m of a convertible debt placement with existing convertible investors, and also select new investors.


Image: A gold mineral. Photo: courtesy of carlos aguilar/

In addition, Chaarat is pleased to announce that it has signed a non-binding term sheet for the acquisition of a medium-sized polymetallic asset (the “Acquisition”) in the Commonwealth of Independent States (the “CIS”), which, for the year ended December 2017, produced approximately 50,000 ounces of gold equivalent and generated approximately US$19m* profit before tax with gross assets of approximately US$100m*.

The Fundraise

The Fundraise comprises the issue of secured convertible notes 2021 (“2021 Notes”) with a conversion price of £0.37 / share and a 10% interest rate per year which increases to 12% per year for the last 18 months.

A single interest payment is due on the final repayment date (31 October 2021) provided that no conversion has occurred. The notes can be repaid early in cash upon 10 business days’ notice provided that the minimum accrued interest payable on early repayment is 5% of the nominal amount.

The first round of fundraising is expected to close in approximately two weeks (or possibly sooner) and Chaarat is targeting a further closing in late September 2018.

The Company has received strong support from its long-term convertible investors holding the existing convertible notes maturing in 2018 and 2019 (“Existing Notes”), substantially all of whom have in this first round converted into new ordinary shares in the Company (“Ordinary Shares”) at strike prices of £0.30/share or £0.33/share, and/or rolled their convertible proceeds and subscribed to the new instrument, providing incremental growth capital to the company.

Both the Existing Notes will therefore be redeemed, and security released.

The first round of the Fundraise to refinance the existing bonds has resulted in irrevocable commitments totalling US$26m from holders of Existing Notes and a select few new investors.

These orders have come either from investment in the new convertible bond (US$17m) or through the conversion of the principal and accrued interest of the Existing Notes into Ordinary Shares (US$9m).

The Company intends to raise additional growth capital in a second fundraising round and is targeting a further closing in late September 2018. The gross proceeds of up to US$100m from the Fundraise are anticipated to be used as follows:

  • Funding of the Acquisition: c.$20m (including associated fees and expenses)
  • Tulkubash development: c.US$40m
  • General corporate purposes, future acquisitions, and reserves: c.US$26m
  • Refinance of Existing Notes: c.US$14m (c.US$20m of notional and c.US$3m of accrued interest; net c.US$9m converted to Ordinary Shares)

The Acquisition

The Acquisition represents an important milestone for Chaarat in executing on its previously announced consolidation strategy for the regional gold sector.

Acquisition Highlights:

  • Transforms the Company from a developer into a cash-flow generating producer with a significant growth profile
  • Enhances the Company’s portfolio of assets and significantly improves its financial strength
  • Demonstrates the Company’s ability to execute its consolidation strategy
  • Strengthens the Company’s financial base for the development of Tulkubash
  • Highly accretive transaction metrics

The cash consideration agreed for the Acquisition asset under the term sheet is US$75m (subject to working capital and other adjustments) which is expected to be funded by a combination of debt and the Fundraising proceeds.

Chaarat is ideally placed to take advantage of the opportunities presented by this cash-generative asset, which is estimated to grow production by nearly 25% per annum in 2018 and 2019, following significant investment in the asset over the last two years.

The transaction remains subject to final and confirmatory due diligence. However, substantial diligence work has already taken place and the transaction is at an advanced stage, with the signature of definitive documents expected in late September 2018 and completion in early November 2018.

The proposed Acquisition is categorised as a reverse takeover under the AIM Rules and will be subject to shareholder approval at a General Meeting, which is due to take place in early November 2018 (“Shareholder Approval”), following the publication of an AIM Admission Document.

It is currently anticipated that the AIM Admission Document will be posted to shareholders in mid-October 2018.

Chaarat CEO Artem Volynets said: “This first round of fundraising is a clear expression of confidence in Chaarat’s management and growth strategy. We are grateful that nearly all of Chaarat’s long-term investors have taken their opportunity to increase their exposure to our Company’s bright future, and we thank them for their ongoing support.

“The first asset we are acquiring will be an excellent addition to Chaarat’s portfolio and accelerates our strategic aim of building a leading emerging markets gold company.

“It turns the Company cashflow-generative in a single step, and demonstrates Chaarat Gold’s ability to execute deals quickly, diligently and on accretive terms.

“M&A is a vital component of our growth strategy and we are delighted to be in the process of securing this asset at what management believe is a very attractive price for Chaarat and its shareholders.”

Update on Kumtor and Other M&A

Chaarat explored and carefully considered three other acquisition opportunities before deciding to pursue the Acquisition.  In addition, the Company continues to make progress on other M&A opportunities in its deal pipeline and intends to update markets accordingly on the milestones reached.

As well as the Acquisition asset, Chaarat has developed a pipeline of highly attractive acquisition targets in Central Asia, Russia and the Caucasus region.

As stated in Chaarat’s announcements dated 24 April 2018 and 1 May 2018, the Company has also made a proposal in relation to the potential acquisition of the Kumtor mine from Centerra Gold Inc. (“Centerra”).

Chaarat 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. The Company is awaiting decisions regarding the future of Kumtor from the Government of the Kyrgyz Republic.

Chaarat remains committed to completing the Kumtor deal, and financing partners have expressed continued interest and commitments in supporting the transaction. Management strongly believes that its Kumtor proposal is attractive to all stakeholders – including the people and government of the Kyrgyz Republic, and Centerra and its shareholders.

Source: Company Press Release