THE draft results of a feasibility study for Chaarat Gold’s project in the Kyrgyz Republic shows the Chaarat project has a very low cost of production of US$635.20 per ounce and values it at US$351 million based on a US$1250 gold price. The study is based on an estimated 53 million tonne reserve, grading 2.79 grams/tonne for a total of 4.7 million contained ounces of gold.

Initial capital costs to the start of full production are estimated at US$684 million, although the AIM-listed company says there is potential for this to be considerably lower. It also says there is significant potential for improved economic returns from optimisation. Annual production is forecast at 211,000 ounces at full capacity, and the mine is estimated to have an 18-year life.

The study requires approval from Chinese regulatory authorities and Chaarat says the timing of this cannot be determined at present. CEO Dekel Golan said, “We consider that the outcome of the study is sufficiently certain that there is no merit in further delaying the announcement of the final draft results.”

Chaarat decided to have Chinese company NERIN conduct the feasibility study to Chinese standards because it anticipates that it will source project financing, contractors and equipment from China.

Dekel Golan said that due to the more conservative nature of the Chinese study it was expected that there would be further upside to the actual economics as the project advanced.

“The preparation of a study by a Chinese company is very different from a similar process in the West and studies tend to be overly conservative.

“The board considers that the value of the Chaarat project has been reduced by certain economic assumptions which were based on ‘indices’ rather than actual quotes. There is therefore significant scope for optimisation and improvement.”

With the US$684 million capital cost, Chaarat is considering options for development while also trying to prevent shareholder dilution. “I question whether there is going to be enough value for our shareholders left at the end of the process,” said Dekel Golan. “The objective is not build a big operation, the objective is to create value for shareholders.”

While securing funding from the Chinese is still an option, the company is looking at three other options: sale of the project, low-cost toll milling or a more modest mine based around the Tulkubash deposit.