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Chaarat Gold Hlgs Ld - Final results for year ended 31 December 2019

RNS Number : 4239J
Chaarat Gold Holdings Ltd
09 April 2020
 



Consolidated Statement of Changes in Equity

For the Year Ended 31 December 2019

Share Capital

Share Premium

 

Own Shares Reserve

Share Warrant Reserve

Convertible Loan Note Reserve

Merger Reserve

Share Option Reserve

Shares To Be Issued

Translation Reserve

Accumulated Losses

Total


Note

US$'000

US$'000

  US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

As at 1 January 2018


3,569

138,184

-

1,352

867

10,885

2,912

1,926

(15,472)

(118,952)

25,271

Loss for the year


-

-

-

-

-

-

-

-

-

(17,042)

(17,042)

Translation gains for liquidated subsidiary


-

-

-

-

-

-

-

-

74

-

74

Total comprehensive income for the year


-

-

-

-

-

-

-

-

74

(17,042)

(16,968)

Share options lapsed


-

-

-

-

-

-

(1,857)

-

-

1,857

-

Share options expense


-

-

-

-

-

-

377

-

-

-

377

Share options exercised


2

63

-

-

-

-

(18)

-

-

-

47

Issuance of shares for cash

20 (b)

145

4,738

-

-

-

-

-

(1,926)

-

-

2,957

Conversion of loan notes

20 (f)

230

8,858

-

-

(1,153)

-

-

-

-

1,153

9,088

Equity element of convertible loan note


-

-

-

-

2,646

-

-

-

-

-

2,646

Issuance of shares for a fee


5

220

-

-

-

-

-

-

-

-

225

As at 31 December 2018


3,951

152,063

-

1,352

2,360

10,885

1,414

-

(15,398)

(132,984)

23,643

Loss for the year


          -

-

-

-

-

-

-

-

-

(29,405)

(29,405)

Translation gains for the year


         -

-

-

-

-

-

-

-

523

-

523

Total comprehensive income for the year


        -

-

-

-

-

-

-

-

523

(29,405)

(28,882)

Share options lapsed


       -

-

-

-

-

-

(204)

-

-

136

(68)

Share options expense


      -

-

-

-

-

-

9,847

-

-

-

9,847

Share options exercised


        3

95

-

-

-

-

(20)

-

-

-

78

Share scheme modification


-

-

-

-

-

-

(413)

-

-

-

(413)

Issuance of shares for cash

20 (b)

157

6,387

-

-

-

-

-

-

-

-

6,544

Issuance of shares for settlement of liabilities

20 (b)

69

3,043

-

-

-

-

-

-

-

-

3,112

Issuance of treasury shares

20 (g)

216

-

(216)

-

-

-

-

-

-

-

-

Issuance of shares for acquisition of Kapan

20 (b)

146

5,109

-

-

-

-

-

-

-

-

5,255

Equity element of convertible loan note

20 (f)

-

-

-

-

133

-

-

-

-

-

133

Warrants exercised

20 (b)

146

1,921

-

(1,352)

-

-

-

217

-

-

932

As at 31 December 2019


4,688

168,616

(216)

-

2,493

10,885

10,624

217

(14,875)

(162,253)

20,179


Consolidated Cash Flow Statement




For the Year Ended 31 December 2019


2019

2018


Note

US$'000

US$'000

Cash flows from operating activities




Operating loss


(18,422)

(13,681)





Depreciation and amortisation

5

5,079

326

Loss/(gain) on disposal of property, plant and equipment

5

185

(7)

Non-cash transactions - expenses


496

-

Change in provisions

18, 27

297

-

Foreign exchange gain/loss

5

(45)

-

Translation losses for liquidated subsidiary


-

74

Reversal of provision


-

(50)

Share based payments

5

9,780

377

Increase in interest payable on loans


-

239

(Increase)/decrease in inventories


7,828

-

(Increase)/decrease in trade and other receivables


(5,218)

4

Increase/(decrease) in trade and other payables


4,036

3,875

Cash generated/(used) in operations


4,016

(8,843)

Income taxes paid


(1,034)

-

Cash payments for RSUs replaced


(413)

-

Net cash generated/(used) in operations


2,569

(8,843)





Investing activities




Acquisition of subsidiary, net of cash acquired

31, 32

(38,479)

-

Purchase of property, plant & equipment

15

(3,970)

(2,165)

Purchase of intangible assets

14

(1,385)

-

Exploration and evaluation costs

13

(10,482)

(12,142)

Payment on acquisition of Kapan


-

(5,000)

Proceeds from sale of property, plant & equipment


31

8

Interest received


-

11

Net cash used in investing activities


(54,285)

(19,288)





Financing activities




Proceeds from issue of share capital, net of costs

20

6,622

3,004

Receipt of funds for shares to be issued

20

161

-

Receipt of funds for warrants exercised

20

49

-

Repayments of principal portion of lease liabilities

22

(120)

-

Proceeds from convertible loan notes issued, net of costs

22

1,072

13,554

Payment of funds for redemption of convertible loans

22

-

(4,620)

Repayments of principal amount of loan

23

(4,000)

-

Repayments of interest

23

(2,727)

-

Proceeds from loans, net of costs

22

53,000

9,924

Net cash from financing activities


54,057

21,862





Net change in cash and cash equivalents


2,341

(6,269)

Cash and cash equivalents at beginning of the year


1,168

7,461

Effect of changes in foreign exchange rates


76

(24)

Cash and cash equivalents at end of the year

19

3,585

1,168

 



 

Notes:

1. Preparation of accounts

The financial information set out in this announcement does not constitute the Company's annual accounts for the years ended 31 December 2019 and 31 December 2018.

The consolidated balance sheet at 31 December 2019, the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated cash flow statement and associated notes for the year then ended have been extracted from the Group's 2019 annual financial statements upon which the auditors' opinion is unqualified and includes a material uncertainty statement relating to going concern.

2. Significant accounting policies

The accounting policies and presentation followed in the preparation of these final results have been consistently applied to all periods in these financial statements and are the same as those applied by the Group in the preparation of its annual accounts for the year ended 31 December 2018. 

3. Loss per share

Loss per share is calculated by reference to the loss for the year of US$29.4 million (2018: loss of US$17 million) and the weighted average number of ordinary shares in issue during the year of 416,466,724 (2018: 377,347,795).

At 31 December 2019 nil (2018: 22,367,521) warrants, 56,805,258 (2018: 18,922,066) share options and convertible loan notes have been excluded from the diluted weighted average number of ordinary shares calculation because their effect would have been anti-dilutive.

4. Going concern

As at 30 March 2020 the Group had approximately US$2.2 million of cash and cash equivalents and US$86.8 million of debt (including accrued interest to the date of maturity, the terms of which are disclosed in the notes) comprising the following:

-       US$26.4 million Convertible loan note, repayable on 31 October 2021, including accrued interest to 31 October 2021 (Note 18)

-       US$19.4 million loan including interest to 31 March 2020 (note 17). On 9 April 2020 the loan terms were amended, and the maturity date was extended to December 31,2020 (Note 33).

-       Term loan for US$34.8 million entered into in connection with the acquisition of Kapan in January 2019. The loan is repayable through quarterly instalments over a period of four years, the final payment being January 2023 (Note 23)

-       The  revolving term loan facility agreement with Labro for a total amount of US$15 million. To date US$8.0 million has been drawn down, US$2.5 million has subsequently been repaid, US$6.1 million is outstanding and a further US$7.0 million remains available to the Group. The facility is due for repayment on 14 July 2020 (Note 19).

The Board has reviewed the Group's cash flow forecast for the period to 31 December 2021. The cash flow forecasts reviewed by the Board exclude cash inflows from funding which is not contractually committed. The forecasts show that the Labro loan will need to be extended or refinanced before 14 July 2020, the $19.4m loan will need to be extended or refinanced by 31 December 2020, and in addition the Group forecasts it will require further funding before Q3 to meet operational commitments and overheads. The forecasts also show that if COVID 19 had an adverse impact on the Kapan mine then a covenant on the Kapan term loan may be breached, and in addition to that the Group would require further funding if the mine was temporarily suspended for more than one month.

Kyrgyzstan

The significant global restrictions on the movement of people will impact our workforce mobilisation for the summer construction period at our Tulkubash Project. This delay will likely cause the first gold pour to be moved by six months from late 2021 to Q3 2022. For the purpose of making an assessment of going concern, the cash flow forecasts do not include discretionary expenditure in relation to the Kyrgyzstan projects, taking into account the delay to the Project. The forecasts include minimum commitments in respect overheads and, based on a non-binding agreement, exclude payments to the mining contractor until further funding is raised.

Kapan

The Board has reviewed the Group's cash flow forecast for the period to 31 December 2021. For the purpose of making an assessment of going concern, the cash flow forecasts reviewed by the Board exclude additional funding which is not contractually committed and also exclude discretionary expenditure in relation to the Kyrgysztan projects and take into account the delay of the Project.

The Board have based the cash flow forecasts for Kapan on the most recent budgets. Chaarat Kapan has experienced minimal disruptions to supply chains and shipment as a result of COVID-19. However, if there was an unexpected adverse combination of factors or the temporary closure of Kapan for more than one month, then a covenant on the Kapan loan may be breached and the Group would require further additional funding.

US$ 19.4 million loan

On 9 April 2020, the Group entered into an agreement with the lender to extend the maturity date of the US$19.4 million loan to 31 December 2020. The terms of the loan include a requirement to repay the loan prior to or in conjunction with any additional debt financing that the Group may raise with limited exceptions.

Labro loan

Matures in July. The Group is in advanced negotiations in respect of extending the Labro loan and has a reasonable expectation that an extension agreement will be agreed in due course. However, there is no guarantee that an extension will be received. Depending on the terms of the extension, the Labro loan may need to be refinanced within the going concern period.

 

The Board has a reasonable expectation that the Group will be able to raise additional funds as demonstrated by the Group's established track record in historical fund raisings and refinancing events. Since June 2018 or when the new management joined the Company, the management team has successfully raised over US$115 million through equity, debt or debt like instruments and has established strong relationships with key stakeholders.  As a result of historical and ongoing proactive discussions with stakeholders, the Board  has a reasonable expectation that the Group will be able to raise further funds in order to meet its obligations. Notwithstanding this, COVID-19 has had a significant negative impact on the global economy which may mean it is harder to secure additional funding than has historically been the case.

Subject to the above, which the Board has a reasonable expectation can be achieved the Directors have concluded that it is appropriate to prepare the financial statements on a going concern basis. However, there are currently no binding agreements in place in respect of any additional funding and there is no guarantee that any course of funding will proceed.  Therefore, as set out above, this indicates the existence of a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern and, therefore, it may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

5. Post balance sheet events

Breach of loan covenant

This bank financing has certain covenants attached to it that the Group needs to adhere to, one of which is the Net debt to last twelve months ('LTM') EBITDA of 2.5x as at 31 December 2019. The Company did not meet this covenant as at 31 December 2019 and as such the full bank debt has been disclosed as a current liability.  The LTM EBITDA calculation is based on EBITDA from 1 January 2019 to 31 December 2019.  Chaarat ownership of Kapan commenced on 30 January 2019 and as such one month of the LTM calculation, is based on Kapan whilst being operated by Polymetal International Plc. 

A waiver was received in April 2020, with regards to the relevant covenant not being met on 31 December 2019 and therefore the Group remains in full compliance of the loan.

US$ 19.4 million loan

On 9 April 2020, the Group entered into an agreement with the lender to extend the maturity date of the US$19.4 million loan to 31 December 2020. The terms of the Loan remain significantly unchanged, including the interest charge of 13% per annum and the requirement to repay the loan prior to or in conjunction with any additional debt financing that the Group may raise with limited exceptions. A fee of 150 basis points of the outstanding loan amount will be paid in cash at closing of the extension agreement to the Loan provider.

Labro, who has provided a guarantee and security package to the lender, has agreed to extend and increase the guarantee and security package directly to the lender for the full amount of the Loan.  As part of the extension agreement, Chaarat will compensate Labro for providing an increased security package to the Loan provider and is in advanced discussions to agree the respective terms for such compensation.

COVID-19

Since 31 December 2019, the spread of COVID-19 has severely impacted many local economies around the globe. In many countries, businesses are being forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown. Global stock markets have also experienced great volatility and a significant weakening. Governments and central banks have responded with monetary and fiscal interventions to stabilise economic conditions.

COVID-19 has created a series of unprecedented challenges with regards to future fundraising. We expect the timelines for fundraisings to be impacted by, the uncertainty and market turbulence stemming from the pandemic, liquidity constraints on investors resulting in a reduced appetites to enter into new long-term capital commitments and the challenges for investors to undertake their due diligence (in particular, face-to-face meetings), receive appropriate internal approvals and obtain relevant signatories.

The Company however has determined that COVID-19 is a non-adjusting post-balance sheet event. Accordingly, the financial position and results of operations as of and for the year ended 31 December 2019 have not been adjusted to reflect its impact. The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remains unclear at this time. It is not possible to reliably estimate the duration and severity of these consequences, as well as their impact on the financial position and results of the Company for future periods.

6. Timetable and distribution of accounts

The Annual General Meeting ("AGM") will be held on Wednesday, 20 May 2020 at 11am at 9-10 Savile Row, London W1S 3PF.  The Board has noted the guidance issued by the UK Government on 23 March 2020 restricting social gatherings due to the ongoing Covid-19 pandemic and the fact that, if such guidance remains in place, shareholders will be prohibited from attending the AGM.  Given the current guidance and the general uncertainty as to what additional and/or alternative measures may be put in place, whilst it is the Company's intention to proceed with holding an AGM, the Board requests that shareholders do not attend the AGM but instead appoint a proxy and provide voting instructions in advance of the AGM.  Given the current UK Government restrictions, the Board will put in place a dial-in facility for shareholders to listen to the AGM proceedings details of which will be provided in due course.  The Board will keep these AGM arrangements under review and will update shareholders via a RNS.

Copies of the Annual Report and Notice of the Annual General Meeting will be sent to shareholders by 24 April 2020.

Additional copies of the Annual Report and Accounts will be available for inspection at the registered office of the Company from the date of this notice until the conclusion of the Annual General Meeting and will be posted on the Company's website - www.chaarat.com

About Chaarat Gold

Chaarat is a gold mining company which owns the Kapan operating mine in Armenia as well as Tulkubash and Kyzyltash Gold Projects in the Kyrgyz Republic. The Company has a clear strategy to build a leading emerging markets gold company with an initial focus on Central Asia and the FSU through organic growth and selective M&A.

Chaarat is engaged in active community engagement programmes to optimise the value of the Chaarat investment proposition.

Chaarat aims to create value for its shareholders, employees and communities from its high-quality gold and mineral deposits by building relationships based on trust and operating to the best environmental, social and employment standards. Further information is available at www.chaarat.com.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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Quick facts: Chaarat Gold Holdings Ltd

Price: 32

Market: AIM
Market Cap: £167.86 m
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