Chaarat Gold (LON:CGH) today told investors that parts the Tulkubash development programme have been put on hold as it enters talks with the government of the Kyrgyz Republic.

The firm believes that the mine development programme will take place ‘only a few months’ later than planned. And the project will still start gold production next year, it says.

The talks come as the Kyrgyz Republic put the fiscal regime governing mining companies under review. And Chaarat says it is aware that the fiscal regime is likely to change.

So to mitigate any uncertainty concerning the impact on the Chaarat project, comprising the proposed Tulkubash and Kiziltash mines, direct negotiations are being held. 

Chaarat said it aims to establish a mutually agreed Investment Agreement which would secure long term stability for the project. This would include a ‘stabilisation clause’ protecting the company from changes to taxation, ownership structure and royalties, it added.

The government supports this approach and the company believes it is the most responsible way to ensure ‘economic predictability’, Chaarat explained.

Permitting activities will continue in the meantime and they will not be interrupted by the negotiations.

"Many countries have recently changed their mining fiscal regime and others are likely to follow,” said chief executive Dekel Golan. 

“This situation creates uncertainty which makes financial planning harder, especially for junior companies.

"The Board of Chaarat is taking a proactive approach and is entering into negotiations with the Kyrgyz Government with a view to establishing an agreement in law that is both satisfactory for the Government and provides greater certainty over the financial planning horizon for the company.”

He adds: “We have confidence that these discussions will yield a positive long term benefit for shareholders.”

The company also said today that it is satisfied that the Tulkubash mine development budget remains adequate and it has completed the design and engineering part of the project.

The firm also says that an option to upgrade the design so that output capacity is doubled would be viable and within budget. And it is currently considering this option.

It said it would use the ‘suspension period’ to attempt to increase the Tulkubash reserves with further drilling. The drill results would be used to complete a definitive feasibility study based on the higher production rate.

Chaarat says it will seek additional investment to help it achieve this higher production rate as well as source a lower power source, which would in both cases improve the projects economics and value.

It said that a number of funding options are available to it. And any equity based funding would only be considered if the funding price is at least equal the 50p price it raised £51 million at last March, Chaarat added.

The Chaarat resource has increased by 27 per cent to 5.59 million ounces of gold.

The upgrade is based on the findings of last year’s drill programme which tested the group’s three main project areas - the Tulkubash pit area, and the Contact and Main underground project areas.

Tulkbash will be the first part of the Chaarat project to come online, with mining starting up this summer and production following next year once the processing plant is complete. 

Today’s resource update saw the Tulkubash resource grow 56 per cent to 501,000 ounces, from 321,000.

Chief executive Dekel Golan said: "2011 was another excellent year during which we added over a million ounces of gold to our resource. 

“I believe that the tremendous potential of Chaarat is being demonstrated by successful, rigorous exploration activity and the development of the infrastructure needed to support a large-scale operation.”

He adds: “The significantly improved political climate in the Kyrgyz Republic is giving a welcome added impetus to our operations during this development phase, whilst the Tulkubash Project, the non-refractory section of the deposit, is being fast tracked to development in order to stimulate early cash flow for the company. 

“These are exciting times for us at Chaarat."

Last year, Chaarat carried out a total of around 29,000 metres of drilling in 171 new drill holes.

As well as increasing the non-refractory resource, at Tulkubash, the company also increased the resources in the two underground refractory resources – Contact and Main.

In total the refractory resource increased 25 per cent to 5.09 million ounces of gold.

The ‘Contact’ resource increased 39 per cent from last year and it is now estimated to contain 2.78 million ounces of gold, while the resource at the ‘Main’ area increased 17 per cent to 1.51 million ounces.

Chaarat said that it expects the size of the ‘Main’ deposit to increase significantly in the future, once it has carried out underground drilling.

The options are exercisable between one and eight years from now and they can be exercised at a price of 27p.

Chief executive Dekel Golan was granted around 900,000 options, while finance director Linda Naylor and non executive director Alex Novak were issued 555,556 and 500,000 respectively. 

Also chairman Christopher Palmer-Tomkinson and non executive director Rob Weinberg were each granted around 100,000 options each. Then a further 1.5 million options were given to other employees.

Chaarat is currently developing the Tulkubash open pit and the underground  Kiziltash mines in the Tien Shan mountains in the Kyrgyz Republic.

Chaarat, whose projects are located on the highly-prospective Tien Shan Gold Belt area of Central Asia, added that significant potential to further upgrade its resource and reserve at Tulkubash had been identified.

Chaarat said that during the 2011 exploration season work was focused on improving the resource and generating reserves from the “open pittable” section of the Central Tulkubash section of the ore body, yielding encouraging results.

According to the firm, this work helped improve its understanding of the Tulkubash project to the extent that it now believes that the resource may have the capability of supporting production at a rate of 2,500 tonnes per day.

A total of 15,413 metres of drilling generated an open pittable resource of 404,000 ounces (from a total of 501,000 ounces) at a grade of 2.92 grams per tonne. Chaarat said that further drill results to the south and north of the zone indicate that the reserve can be increased significantly.

Meanwhile, the firm is waiting on approval of to convert the Tulkubash permit to a mining permit after submitting a report that shows it has defined sufficient reserves to justify its grant.

After the grant of the mining permit, Chaarat will be required to prepare a detailed preliminary project design, and the firm is already working on this. In the absence of unforeseen delays, said Chaarat, it expects permitting will be complete in time for it to begin production in the second quarter of 2013.

Chaarat Gold (LON:CGH) has reported a positive result from its ongoing drilling programme in the Tulkubash Project in north western Kyrgyzstan.

The Kyrgyz - focused gold group said its Tulkubash mineralisation had extended from a previous strike of 360 metres to 920 metres and is still open towards the northeast.

Dekel Golan, chief executive, said the group was “very encouraged” by the results as they demonstrated the significant extension, potential and actual, of the Tulkubash zone.

“The prospect of extended strike, as well as improved predictability and continuity, which is effectively confirmed by this drilling, will potentially enable Chaarat to increase production from this low cost ore body and further improve its profit potential for the early years of operation,” he added.

Chaarat said that 19 out of 20 holes drilled in the north west extension and 9 holes in the south eastern extension intersected mineralisation at the predicted depth. The range of results included 6.25m at 8.58 g/t gold and 11.25m at 8.21 g/t gold at the top end to 11.25m at 2.19 g/t gold.

Mr Golan added: “We are confident that the scenario should improve further with drilling along strike, especially to the north east of the zone; drilling which will commence during the spring of next year.  An updated resource and reserve estimate based on the 2011 drilling will be released early in 2012."

A previous resource estimate based on 2010 drilling showed indicated and inferred resources of 321,000 ounces at a grade of 4.00 g/t in a portion of the Tulkubash zone. The Tulkubash Zone is one of three major zones of mineralisation within the Chaarat Gold Project.

Following the update, analyst Yuen Low of broker Shore Capital, highlighted that an updated resource and reserve estimate was expected in early 2012.

"The extended strike should have a positive impact on project economics. Although too early to quantify, we expect a positive impact on the share price," he said.

As at 2.52 pm, the firm's shares were up 2.88 per cent, to trade at 26.75 pence.

The Kyrgyz - focused gold group said its Tulkubash mineralisation had extended from a previous strike of 360 metres to 920 metres and is still open towards the northeast. 

Dekel Golan, chief executive, said the group was “very encouraged” by the results as they demonstrated the significant extension, potential and actual, of the Tulkubash zone.

“The prospect of extended strike, as well as improved predictability and continuity, which is effectively confirmed by this drilling, will potentially enable Chaarat to increase production from this low cost ore body and further improve its profit potential for the early years of operation,” he added.

Chaarat said that 19 out of 20 holes drilled in the north west extension and 9 holes in the south eastern extension intersected mineralisation at the predicted depth. The range of results included 6.25m at 8.58 g/t and 11.25m at 8.21 g/t at the top end to 11.25m at 2.19 g/t.

Mr Golan added: “We are confident that the scenario should improve further with drilling along strike, especially to the north east of the zone; drilling which will commence during the spring of next year.  An updated resource and reserve estimate based on the 2011 drilling will be released early in 2012."

A previous resource estimate based on 2010 drilling showed indicated and inferred resources of 321,000 ounces at a grade of 4.00 g/t in a portion of the Tulkubash zone. The Tulkubash Zone is one of three major zones of mineralisation within the Chaarat Gold Project.

Chaarat Gold (LON:CGH) this afternoon told investors that its chairman Christopher Palmer-Tomkinson has increased his stake in the company by acquiring an additional 100,000 shares.

Palmer-Tomkinson bought through separate deals shares on Friday and today. He paid an average price of 27p a share.

The chairman now owns 10.1 million shares, which represents around 4 per cent of the company.

Last month, the Kyrgyzstan-focused firm revealed its half year results, saying it had made steady progress in its bid to begin production late next year or early in 2013.

Its flagship Chaarat project is split between two main deposits - the Kiziltash underground mine (also referred to as the ‘contact zone’), and the Tulkubash open-pit project.

The project contains 4.736 million ounces of gold in total indicated and inferred resources and the firm aims to become a low cost gold producer - with first production coming from the Tulkubash project.

When the Kiziltash project comes on stream too, the company is targeting combined annual production of more than 200,000 ounces per year.

The holes were drilled on the  'Contact Zone’ and the resource for this part of the Chaarat project has increased by 16 percent, from 2.001 million ounces to 2.331 million ounces.

The flagship Chaarat project is split between two main deposits, known as the ‘contact zone’ and the ‘Tulkubash zone’. After today's upgrade the combined project now has a 4.736 million ounce gold resource. 

“During the winter season the Company continued drilling from underground drill chambers in order to increase and improve the resource of the Contact Project,” said chief executive Dekel Golan.

“The increase in the size of the resource estimate is particularly pleasing as is the general increase in grade at depth.”  

Crucially Chaarat said that the ongoing drilling is providing encouragement that gold mineralisation continues both along strike and down dip. The Contact Zone is proving to be a significant mineralised body and it could support a major mining operation by itself, it said.

The best results from the six hole winter drill programme had intersections with widths between 4.5 and 27 metres grading from 3.6 to 11.6 grams per tonne gold.

Golan added: “The company intends to continue drilling the Contact Project during the current summer season and increase drilling underground during the winter season after the drilling in the Tulkubash zone has been completed.”

"We believe the Contact Project has significant unlocked potential which can be improved with our better understanding of grade distribution and zoning."

At the moment the contact zone has 2 million ounces in JORC resource - as part of the larger 4 million ounce resource - and drilling is ongoing. 

The latest drill results are from the first batch that was not included in the recent resource update. The results comprise 10 drill holes and the highlight intersections range between 4.55 and 22 metres with grades ranging from 4.14 to 11.21 grams per tonne gold.

"The results and the increase in strike and down dip continuity will not only add to the delineated resource in the deposit, but also have a positive impact on the potential mining rate of the Kiziltash project,” chief executive Dekel Golan said. 

He adds: “The results help to identify the higher grade trends in the mineralised body and focus exploration efforts on those areas which will increase the average grade of the whole deposit."

So far the Contact project has mineralisation over a 1.16 kilometre strike length, with a maximum depth of 900 metres.  It is open both along strike and down dip.

The Contact zone is one portion of the Chaarat project in the Tien Shan Mountains of the Kyrgyz Republic.

The flagship project is split between two distinct areas, the Tulkubash open-pit project and the Kiziltash underground mine development project.  

This two-pronged approach, which is targeting first production by mid-2012, will see Chaarat fast-track an open-pit mine at Tulkubash, while it continues the feasibility work on the much the larger Kiziltash underground mine development project.

The Kiziltash part of the project has most of the resources that have been defined to date. It comprises two separate areas, the 2 million ounce Contact zone and the 1.9 million ounce Main zone.