Chaarat Gold Suffers A Heavy Regional Discount, But Not For Very Much Longer
By Alastair Ford
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According to Dekel Golan, chief executive of Chaarat Gold, Kyrgyzstan is “a part of the world that’s been a little bit discounted”. That’s putting it mildly when one considers that on a ball-park basis junior gold companies are currently generally valued at around US$35 per resource ounce of gold in the ground. Chaarat’s £32 million market capitalisation implies a valuation per ounce of gold in the ground of just US$17, a discount of roughly 50 per cent. Still, it’s understandable, given the press that Kyrgyzstan has received over the past few years. Both Oxus and Centerra have come unstuck there in different ways. Oxus was extremely vocal about its Kyrgyz issues, partly because the then chief, Bill Trew, was struggling to meet a promise he made to market to get more mines operational. Despite the intervention of Tony Blair on Oxus’s side, there’s a strong body of opinion - at least among those with a knowledge of the Central Asian scene - that says that Oxus did in fact have a case to answer. But the Kyrgyz government’s cause wasn’t helped by its own reticence. It didn’t really bother trying to put its case across, and its reputation as a place to do business has consequently been trashed.
But that’s something that may shortly be put right. Mr Golan is organising for the Kyrgyz minister of mines to visit London. “I’ve told him to expect tough questions”, says Mr Golan, “we don’t control the press. And he’s looking forward to it”. This visit forms a small part of what Mr Golan sees as a wider trend operating right across the former Soviet Union. “The robber barons are trying to dignify themselves and become respectable human beings”, he says. If true, and there’s every reason to suspect it might be, it would mirror the pattern set by the robber barons in the USA at the end of the 19th century. Back then railroad and oil barons, like John D Rockefeller, JP Morgan, Andrew Carnegie, Andrew Mellon and George Hurst had buccaneered their way across the country, hoovering up assets often at huge discounts and then selling them on to the stock market in New York. Sound familiar? Think Kordokovsky, Abramovitch, and a host of others that emerged in the Yeltsin era.
But there’s only so long that conducting business along these semi-legal lines makes any sense. Sooner or later robber barons, just like everybody else, want to cash in their wealth. And to do that safely, and in their own country, there needs to be a stable legal system and well-established property rights. To put it in a context that suits the former Soviet Union, Mr Golan phrases the development of this line of thinking very nicely: “The way to deal with each other is with bankers and lawyers and not the tax police”. And at the vanguard of this move to legality and respectability? – the robber barons. Ironic, but good for the development of functioning capitalism. In tangible terms, as the Americans, most notably Carnegie and Rockefeller, bought respectability by establishing charitable foundations. The Russians thus far have been buying respectability with the repurchase and donation to the state of hundreds of millions of dollars worth of art treasures looted at the time of the Russian revolution.
What’s this all got to do with Chaarat? Well apart from the fact that a raid from the tax police is less likely – and in the 1990s it really was a scourge across the entire region – as Mr Golan succinctly puts it: “the region offers a discount which is going to disappear”. So roll up, roll up, get your discounted gold ounces while stocks last! It sounds like a classic promote, and in a way it is, but Mr Golan is about as far from the traditional image of a promoter as you can get. With a laconic and heavily lilting Israeli accent, and soulful eyes that speak of 12 years on the ground in Kyrgyzstan and much else besides, his delivery is gentle, almost to the point of take it or leave it. Chaarat looks well on course to prove up 4 million JORC ounces by the end of this year, from three big targets on its licenses “smack in the middle” of the Tien Shan gold belt. All the projects look amenable to bulk mining, and bear some striking resemblance to Polyus’s giant Olympiada project in Russia.
Certainly Mr Golan is confident in his location. “This place will see a few mines,” he says, “although I’m not sure all of them will be drilled by us”. But on the main Chaarat property a scoping study undertaken by Behre Dolbear will be complete within the month. A pre-feasibility will be ready by the first quarter of 2009 and first production is then scheduled for 2012. Initial metallurgical tests have further underlined the similarity of the orebody to Olympiada, delivering recoveries of between 94 and 96 per cent. “I wouldn’t say we have a process, but at least we know we can do it,” says Mr Golan. It would go a long way to rehabilitating Kyrgyzstan if he’s proved right, and might mark a tiny further step away for the former Soviet Union from the age of the robber barons. |
