London-listed Chaarat has had a challenging start to ownership of the Kapan mine, which it acquired on January 30, with the asset presenting more operational challenges than what were anticipated, resulting in medium-term pressure on the Armenia mine’s performance.

In a project update on Monday, Chaarat said that the profitability of the mine, which it bought from fellow London-listed Polymetal, had fallen short of its expectations, mostly owing to lower grades in the ore.

In the five months of new ownership, Kapan delivered an 8% year-on-year increase in run-of-mine (RoM) ore production, but RoM grade in gold-equivalent terms declined by 14% year-on-year to 3.25 g/t, resulting in a 6% decline in contained RoM metal to 28 909 oz.

Mill throughput increased by 23% in the first five months compared with the same period for 2018.

The production of copper concentrate is 12% up to 3 952 t on the same period last year. Operational improvements have resulted in a 16% increase in gold-equivalent ounces (GEOs) being recovered to copper concentrates. Improved recovery of precious metals to copper concentrates has also, in turn, improved profitability, owing to the higher payable levels for gold and silver.

Zinc concentrate production is down 10% year-on-year to 4 689 t, owing to lower zinc grades in mined ore and slightly lower recoveries.

Chaarat said that actions were under way to replace one of the cyclone packs on the mill circuit to resolve this issue. GEOs in concentrate were also down 8%, mostly owing to the improvements in the copper circuit, which have resulted in higher metal pulls to the copper concentrate.

“Although this year has seen a challenging start to ownership due to a number of legacy issues, our experienced management and mine-site team identified these early and began remedial work immediately with encouraging results.

“As we continue to streamline operations and drive other improvements, we are confident that Kapan will achieve our targeted operational results in the third quarter of this year,” said CEO Artem Volynets.

The mine’s target for the year is to produce 65 000 GEOs.

Chaarat traded 1.35% down at 29.20p a share at 11:20 GMT.