Gold mining company Chaarat Gold has agreed to sell its Kapan mine in Armenia to Gold Mining Company for $55.4m.

Under the binding conditional sale and purchase agreement (SPA), Gold Mining Company will acquire Chaarat Gold’s 100%-owned Armenian subsidiary Chaarat Kapan CJSC.

Chaarat Kapan owns the Kapan mine located in the south of Armenia.

The deal consideration includes $5m payable in cash. The remaining $50.4m is being offset by Gold Mining Company accepting an assignment of intra-group payables of Chaarat Kapan.

Operational since the 1960s, the mine hosts a polymetallic ore body and produces copper and zinc concentrates with gold and silver byproducts.

In a press statement, Chaarat said: “Chaarat acquired the Kapan Mine in 2019.  During this time, mine life has been extended, operational performance has been improved, delivering on production guidance between 50koz-65koz AuEq in each year under Chaarat’s ownership.”

With the sale, Chaarat intends to develop its assets in Kyrgyzstan, which include the Tulkubash and Kyzyltash projects. These assets have the potential to produce more than 350,000oz of gold per annum.

The proposed sale, however, is subject to approval from Chaarat shareholders and the Armenian Competition Protection Commission, among others.

Chaarat said in a statement: “Chaarat sees the proposed sale as a beneficial exit opportunity at a time when the asset sees increasing all-in sustaining cash cost (AISC), potential losses and further funding requirements following several years of profitable operation.” 

Proceeds from the sale will be used by Chaarat to significantly improve its balance sheet and for working capital.