London-listed Chaarat Gold’s offer to take over Kyrgyzstan’s largest gold mine, Kumtor, is only “one of a number of potential deals” that the company is considering in former Soviet Union countries, chairperson Martin Andersson said on Monday, reaffirming the junior’s strategy of selective mergers and acquisitions to attain midtier gold miner status.

Andersson said that large and smaller gold assets in the Commonwealth of Independent States (CIS) region traded at a significant discount to similar assets in other emerging markets, owing to perceived risk, which created an opportunity for industry consolidation.

In April, Chaarat announced its offer to buy the Kumtor mine from Canada’s Centerra Gold in a three-way transaction between the companies and the Kyrgyz State consortium, Kyrgyzaltyn. Centerra, which has repeatedly clashed with the Kyrgyz government over the sharing of Kumtor’s profits, has indicated that it is not interested in the proposed transaction.

Andersson said that the offer for Kumtor would align the interests of Kyrgyzstan with investors, noting that the government would benefit from a 50% interest in the post-tax cash flow from the mine.

“Significant amounts from the ongoing cash flow from Kumtor will be re-invested in the country to further extend the Kumtor mine life and develop the Chaarat project, whilst the existing owners of the project can realise the value of their asset for investment in other regions,” he said in a chairman’s statement accompanying Chaarat’s 2017 financial statements.

TULKUBASH
The company is currently developing the six-million-ounce Chaarat resource, which has the potential of producing 300 000 oz/y to 400 000 oz/y, in several phases. The Tulkubash heap leach project is the initial focus with the design based on processing 13 500 t/d of ore to produce 100 000 oz/y of gold.

Chaarat has already started building a new access road and bridge over the Sandalash river for the Tulkubash project and CEO Robert Benbow said that project construction would start in earnest, once sufficient financing is raised. The April feasibility study estimated initial capital expenditure at $132-million.

“Our fundraising process is well under way, with potential term sheets for debt, equity and alternative financing solutions having been received. We are encouraged by the relationships and quality dialogues we have had with both local and global institutions,” he said.

The company would also employ capital raised for ongoing exploration, to repay existing debt due by September and to allow for corporate activity to advance, Benbow indicated.

At the beginning of 2017 a total of $$15-million was raised by way of convertible debt and at year-end, an ongoing fundraising exercise was in process with commitments received totalling a further $15-million, including $5-million of further convertible loan notes.

Chaarat ended 2017 with $7.5-million in cash and cash equivalents.