Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

Update on the development strategy for the Tulkubash Project

Road Town, Tortola, British Virgin Islands (16 April 2012)

Chaarat (AIM-CGH), the gold exploration and development company operating in the Kyrgyz Republic, announces an update on, and a change in strategy of, the development of the Tulkubash Project, which is part of the Chaarat project area in the north west of the Kyrgyz Republic.

Highlights

•  Design and engineering of the Tulkubash Project completed confirming sufficiency of funds 

•  Infrastructure development and construction recommenced after winter closure 

• Development strategy reviewed in light of direct negotiations with the Kyrgyz Government to conclude an Investment Agreement which includes a "stabilisation clause"   

Chaarat has completed the design and engineering of its Tulkubash Project and is in the process of completing the infrastructure elements. The Company is satisfied that the original budget, as presented when the funds were raised in March 2011, remains adequate.  The possibility of building a larger capacity operation than planned (increasing expected capacity from 1,000-1,200 tonnes per day to possibly double that or more) within the original budget framework, has been established as viable  and is under consideration.

The Company has been examining the strategic choices available to it in the light of the worldwide changes to fiscal regimes under which mining companies operate, changes that have been brought on in part by a more challenging economic climate.  Chaarat's Board is likewise aware that the fiscal regime governing mining companies in the Kyrgyz Republic is currently under review by the newly formed Government and, in the Board's opinion, is likely to change.  In order to mitigate any uncertainty concerning the possible impact on the phased development of the Chaarat Project, the Company has decided to enter into direct negotiations with the Government.  The aim of these is to secure long term stability for the Chaarat Project by the development of a mutually agreed Investment Agreement, containing a "stabilisation clause", protecting the Company from changes to taxation, ownership structure and royalties.  Such a commitment embodied within the Agreement would require that it is ratified by the Kyrgyz Parliament.  The Government has confirmed its support of this approach which the Board believes is the most responsible way to ensure economic predictability.

In light of this decision, and pending negotiations with the Government, further capital investment activities (other than the infrastructure projects relating to power and roads which have already commenced) will be suspended until agreement is reached.  Drilling aimed at increasing the free milling open pittable reserve base of the Tulkubash Project will continue.  The Company believes that, subject to no unforeseen delays in the negotiation process, the implementation of the Tulkubash Project will take place only a few months later than originally planned and that gold production will still be achieved in 2013.

The permitting process outlined in the Tulkubash Project update of 7 December 2011 is unchanged and the Company will have the necessary documents ready to be reviewed as planned.  Negotiations with the Government will not interrupt the preparation of documents for the permitting process.

Based on recent encouraging drilling results (reported on 20 September and 22 November 2011) Chaarat will, during the suspension period, seek to increase its Tulkubash mostly free milling open pittable reserve base by further drilling and, if the results of the drilling are as expected, develop a Definitive Feasibility Study underpinning a significantly higher production rate. The processing plant has already been designed to be capable of expansion to accommodate a larger production rate with minimal disruption.  

The strategy of the Company was to reach production with the funds raised during 2011, which will be achieved at the lower production rate.  Additional investment will be required to achieve both an increased production rate and access a lower cost source of power, both of which are expected to further improve the Project's NPV.  The Board will consider the options available to it when the results of the Definitive Feasibility Study are known.  A number of alternative financing options are available to the Company, should the Board decide to pursue the upgraded Project, and an equity fundraising will only be considered if it is at least equal to the March 2011 fundraising price of 50p.

Dekel Golan CEO comments:

"Many countries have recently changed their mining fiscal regime and others are likely to follow. This situation creates uncertainty which makes financial planning harder, especially for junior companies.

"The Board of Chaarat is taking a proactive approach and is entering into negotiations with the Kyrgyz Government with a view to establishing an agreement in law that is both satisfactory for the Government and provides greater certainty over the financial planning horizon for the Company.

"The Chaarat Project is significant in scale and requires long term planning. It is a Project which will bring enormous benefits to the Kyrgyz Republic, to the communities neighbouring the Project and to Chaarat shareholders.  A large-scale Project of this nature must be based on firm foundations, which will have to be ratified by the Kyrgyz Parliament, in order to ensure its undisputed long tenure.

"The Board of directors of Chaarat has decided that prudence requires the temporary suspension of further capital investment while the negotiations with the Government about the long term agreement are undertaken. We have confidence that these discussions will yield a positive long term benefit for shareholders.

"We are pleased that the completion of engineering and design work has verified the reliability of the original estimated costs of the Project.  During the period of negotiations with the Government, our team will continue adding value to the Project."

The Chaarat Project

Chaarat is a large gold province within which the Company has, to date, delineated 5.59 Million ounces of gold (as announced on 6 March 2012). The Pre Feasibility Study (as announced on 30 June 2011) established the economic viability of the Project and its ability to produce over 200,000 ounces of gold per annum. The deposit has two principal sections; the Tulkubash mostly free milling ore zone and the Kiziltash refractory ore zones, both of which are economically viable and with significant additional upside.

Current efforts are focused on developing a modest size production unit fed from the mostly free milling open pit section of the Tulkubash mineralised zone.

The Tulkubash Project

The Tulkubash Project is the development phase in which the mostly free milling, open pittable section of the Chaarat Project will be developed.  It was originally considered to be comparatively limited but drilling in the 2011 season established that the Tulkubash mineralisation is more extensive than previously believed. The potential of this mostly free milling open pittable section of the deposit is much larger than originally estimated.

Chaarat believes that the potential exists to significantly increase production from this section at a marginal incremental investment.  During the early part of the 2012 season, a 6,500 metre drilling campaign will demonstrate whether production can be increased.  If so, a Definitive Feasibility Study will be prepared to demonstrate the revised IRR and NPV of the additional investment.  The delivery of the Project as originally planned is not conditional on the success of this drilling programme and any additional investment will only be undertaken if there is a strong economic argument to do so.

Enquiries:  

About Chaarat Gold

Chaarat Gold is an exploration and development company operating in the Kyrgyz Republic. The Company's main activity is the development of the Chaarat Gold Project situated within the Middle Tien Shan Mountains, which form part of the Tien Shan gold belt. The Company has delineated a JORC compliant mineral resource of 5.590Moz at a grade of 4.08g/t gold. Chaarat's key objective is to become a low cost gold producer; with initial production from the Tulkubash project, targeting increased combined annual production of over 200,000 ounces as the full project comes on stream.

Further information is available at www.chaarat.com

Disclaimer

This press release includes forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Chaarat's control that would cause the actual results, performance or achievements of Chaarat to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding Chaarat's present and future business strategies and the environment in which Chaarat will operate in the future. Any forward-looking statements speak only as at the date of this document. Chaarat expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this document to reflect any change in Chaarat's expectations with regard to these or any change in events, conditions or circumstances on which any such statements are based. As a result of these factors, the events described in the forward-looking statements in this press release may not occur either partially or at all.