Chaarat Gold has signed a non-binding term sheet agreement to acquire a polymetallic asset in the Commonwealth of Independent States (CIS) region for $75m.
The proposed acquisition is part of the company’s strategy to consolidate gold assets in the region.
For the year ending December last year, the asset produced around 50,000oz of gold equivalent and generated profit before tax of $19m.
The asset is expected to grow production at an annual rate of 25% in 2018 and 2019 after investments over the last two years.
The deal is subject to confirmatory due diligence although significant diligence work has already been conducted.
Chaarat expects to sign definitive documents next month and close the transaction in November.
Chaarat Gold CEO Artem Volynets said: “The first asset we are acquiring will be an excellent addition to Chaarat’s portfolio and accelerates our strategic aim of building a leading emerging markets gold company.
“It turns the company cash flow-generative in a single step and demonstrates Chaarat Gold’s ability to execute deals quickly, diligently and on accretive terms.
“M&A is a vital component of our growth strategy and we are delighted to be in the process of securing this asset at what management believes is a very attractive price for Chaarat and its shareholders.”
The company is raising up to $100m through a convertible debt placement to fund the acquisition.
It has completed the first phase of the placement, which saw participation from existing and new investors. It raised $26m through this round.
Around $20m of the $100m will be allocated for the acquisition, $40m to fund the development of the Tulkubash in Kyrgyzstan, while the remaining amount will be used for meeting general corporate needs and other expenses.
The firm plans to raise additional growth capital through a second round and targets a closing in late September.
Chaarat is interested in buying the Kumtor gold mine in Kyrgyzstan from Centerra Gold, having made an $800m offer in May.