30th Jun 2016 11:23
LONDON (Alliance News) - Central Rand Gold Ltd Thursday said it turned to a profit in 2015 after booking a substantial gain on the value of convertible loan note derivatives, but said there is a real chance that the company could struggle to keep going as cash is dwindling.
Central Rand shares were down 19% to 1.60 pence per share on Thursday.
The miner raised around GBP800,000 in 2015 through two placings, both priced at 10.0 pence each, but by the end of the year the miner only had USD560,000 in the bank.
Central Rand admitted it not only needs funds for working capital but will also need to either extend the repayment terms of existing loan notes or get the holders to convert the loan notes into equity.
Net current liabilities at the end of 2015 stood at USD13.6 million, including USD7.2 million worth of loan notes with Redstone Capital Ltd. Importantly, those notes expire in August this year. Those liabilities also include USD7.0 million of payables that are "overdue".
The miner reported a pretax profit of USD1.4 million in 2015, swinging from the USD15.3 million loss recorded in 2014 despite revenue experiencing a slight dip in the year to USD8.1 million from USD8.2 million.
Notably, operations turned profitable at a gross level, delivering a USD2.0 million gross profit compared to the USD1.2 million gross loss last year as production costs were brought down significantly to USD6.1 million from USD9.4 million.
However, that was not enough to push the company out of the red and into the black and Central Rand Gold delivered a loss before interest, tax and depreciation of USD3.0 million compared to the USD8.2 million loss last year.
The bottom-line profit was caused by a USD7.1 million gain on the value of convertible loan note derivatives, compared to a USD5.1 million loss last year.
The main event for the miner in 2015 was the collapse of a deal that would have seen the London-listed company sold to one of four potential Asian companies. Despite conducting lengthy talks and narrowing down the potential buyer pool to two from four, the entire prospect fell apart in December as the offers were not acceptable.
Central Rand is continuing talks with the two companies, Huili Resources Group Ltd and Hiria Group Co Ltd, on an informal basis and Central Rand is now in talks about securing an investment in the business rather than a sale.
"The company's significant gold resource remains attractive to potential investors and partners, particularly from the Asian region, and the board is focused on extracting value where possible for shareholders. In this regard, the company has re-entered discussions with one of the Asian investors regarding a potential investment into the company," it said.
"It must be said that whilst we are yet to achieve one of our stated goals which is to be a profitable gold producer, the board is pleased with progress being made at the company's operations," the company added.
Central Rand mined 204,916 tonnes of ore in 2015 graded at 1.89 grammes of gold per tonne of ore, meaning the miner mined significantly more ore in the year but the grade declined.
In 2014, Central Rand only mined 169,293 tonnes of ore but the grade was a lot higher. Stoping grades averaged 3.14 grammes and open pit grades averaged 2.41 grammes.
Importantly, underground operations are currently suspended, meaning all ore is currently coming from the open pit operation.
By Joshua Warner; [email protected]; @JoshAlliance
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