Chaarat Gold Goes Hunting in Elephant Country

THE Chaarat Gold (LON:CGH) corporate logo features an animal that probably has a greater significance than many suppose.
You don’t have to look too closely to see the outline of an elephant.
Yet for a company whose mining interests are based exclusively in the remote former Soviet republic of Kyrgyzstan it seems a very odd choice of emblem.

After all you won’t see the giant mammals wandering the country’s barren and mountainous landscape.

It would be too easy if the place was crawling with the beasts.
Instead the elephant is a cryptic allusion to the location of Chaarat’s gold project, which lies on the Tien Shan Gold Belt. The belt cuts a swathe through central Asia from China in the east and almost reaches the Black Sea at its western-most extremity.
It is known to geologists and gold prospectors as Elephant Country. On this continuum sit some of the world’s biggest gold finds.
Truly elephantine are the Daugyztau and Kumptor deposits, which each boasts a resource base of 18 million ounces of gold. In between the two are more modest finds – though still significant nonetheless at 6-11 million ounces.
And smack bang in the middle lies the Chaarat prospect, which at 4 million ounces at a grade of just over 4 ounces per tonne rates towards to the bottom end of the really big finds on the Tien Shan belt.
But according to Dekel Golan, chief executive, exploration of the Chaarat central target has ‘only just scratched the surface’.
‘The potential is very large,’ he tells Proactive Investors.
‘It is a huge system. It’s not terribly professional to throw out numbers.
‘I have a very good feeling, but not a good estimate. There is certainly much more than double or triple. We are always amazed when we drill. There is a feeling we have only just scratched the surface.’
It is a bullish assessment of prospects from Golan, who has set an ambitious target of getting Chaarat into production in the final months of next year. To do this he will split the project in two, focusing first on the Tulkubash zone, which has a resource of 366,000 ounces, but has the advantage of potentially being worked at least in part as an open pit.
The results of the pre-feasibility study are likely to be published in late September, or failing that early October.
Beyond this Chaarat will need a hefty injection of funds with analysts estimating it may cost as much as $50-$60 million to take this smaller part of the project into full production.
The good news for investors at least is that Golan wants to avoid as far as possible to issuing new equity to fund the run through to production.
Instead one of the options it is anticipated is that  much of the finance will come from the China Non-Fferrous Metals and Mining (CNFMIM), one of the biggest miners in the People’s Republic and the largest shareholder in Chaarat with almost 20 per cent of the company.
‘With finance you never know until you sign on the dotted line, but the intention is not to dilute the shareholders,’ Golan says.
‘I think there is going to be good support from the Chinese to lend us the money via some sort of financial instrument.’
Getting into production in this way changes the whole way the company is perceived, the chief executive says.
And it will make the task of developing the remainder of the central Chaarat target that much easier.
‘It not only creates cashflow, but puts you in a different category as a gold producer with all the implications for the share price,’ Golan explains.
‘And if we are going to finance a big project it is much easier as a producer. We will have good US$20 million of cashflows by that time.
‘So it is much easier for banks to say yes “we will give you money” when they see you are generating cash.’
The time-line for production on the contact and main zones of the project is mid-2013.
The investment from China raises the prospect that Chaarat might be taken over at some point. Golan is realistic about the prospect, but points out he has an agreement that prevents CNFMIM ‘crawling to a higher position’.
‘So they pretty much stay where they are until we agree with them changing,’ the Chaarat boss adds.  ‘I’m sure eventually something will happen. If not them then with someone else. There’s no shortage of interest out there.’