Çiftay and the Chaarat have replaced an existing joint venture agreement with the investment agreement to simplify the structure of the partnership and further align the interests of both parties.
The new agreement follows a recently published 2021 bankable feasibility study which showed the construction contract works attributable to Çiftay have been reduced compared with a 2019 bankable feasibility study.
Under the investment agreement, Chaarat will retain 100% ownership of the Tulkubash and Kyzyltash projects, both in the Kyrgyz Republic, with Çiftay becoming a strategic investor in Chaarat. Çiftay will receive a maximum of US$25mln in cash and up to US$17.3mln in new Chaarat shares.
The updated bankable feasibility study and the conclusion of the investment agreement with Çiftay were two key milestones to secure the Tulkubash debt financing. All workstreams on the debt financing continue to progress towards signing in mid-2021, said AIM-quoted Chaarat.
Chaarat said it is in advanced talks with potential financing counterparties who have completed their due diligence requirements and are finalising the financing documentation. The company is favouring a comprehensive refinancing through a fixed income debt instrument to simplify the balance sheet.
The proceeds from this potential financing would be used to fully fund the construction costs related to the Tulkubash project, refinance all of the existing debt for Kapan (Chaarat’s operating mine in Armenia) and to partially repay the outstanding convertible bond maturing in October 2021.
It cautioned that the current situation with regards to the Kumtor mine in the Kyrgyz Republic may defer the financing process.
"I am very pleased with the outcome of the positive dialogue and the resulting strengthened cooperation with our partner Çiftay,” said Martin Andersson, Chaarat’s executive chairman. “The simplified agreement confirms the confidence in the Chaarat management team and the Tulkubash project.
“Tulkubash is a high-quality asset with robust economics and further potential with our second development project Kyzyltash sitting just beneath.
“We fully expect Tulkubash to become a long-term cash generator capable of sustaining organic growth at Chaarat, and in due course facilitating the development of Kyzyltash," he added.