2010 Annual Report Release

Central Rand Gold Limited

("CRG" or the "Company" or the "Group")

(Incorporated as a company with limited liability under the laws of Guernsey,

Company Number 45108)

(Incorporated as an external company with limited liability under the laws of

South Africa, registration number 2007/0192231/10)

ISIN: GG00B24HM601

Share code on LSE: CRND

Share code on JSE: CRD

2010 Annual Report Release

For full copies of the Company's Annual Report and Accounts, including the Company Profile, Directors' Report, Corporate Governance and Sustainable Development Report, Directors' Responsibility Statement, Company Secretarial Confirmation, Auditor's Report and full Financial Statements, please refer to the Company's website: www.centralrandgold.com.

In addition, the notice of the 2011 annual general meeting to be held on 24 June 2011 ("AGM") has now been released using electronic means. Shareholders should, therefore, download copies of the circular, notice and forms of proxy at www.centralrandgold.com.

Shareholders are advised that the AGM of the Company is to be held at the offices of Carey Olsen, Carey House, Les Banques, St Peter Port, Guernsey, GY1 4BZ at 11.00 a.m. UK time on 24 June 2011. Shareholders wishing to participate in the AGM, in Guernsey via video link from London may do so at the offices of K&L Gates, One New Change,, London EC4M 9AF and Shareholders wishing to participate in the AGM via video link from Johannesburg may do so at the offices of Rudolph, Bernstein & Associates, Block B, 7 Eton Road, Sandhurst, Johannesburg.

Highlights

2010:

·; US$5.7 million (£3.7 million) raised in a cashbox placing on 22 January.

·; US$36.8 million (£24.2 million) raised in a Firm Placing and Placing and Open Offer on 5 July.

·; Completed a Competent Person's Report ("CPR") on 12 April, indicating an increased Joint Ore Reserves Committees ("JORC") probable reserve base of 482,000 ounces of gold.

·; 9,321 ounces of gold produced in 2010.

·; No fatalities

·; Discussions progressed with South African Government regarding Acid Mine Drainage ("AMD") and the rising water table in the Central Rand Basin.

·; Order placed for submersible pumps (delivery expected in August 2011).

Post year-end:

·; On 7 February 2011, announced an urgent need for South African Government commitment to the AMD project.

·; On 24 February 2011, South African Government issued its report on AMD.

·; On 29 March 2011, announced suspension of underground mining.

Chairman's Report

In late 2007, CRG raised £75 million in support of the concept of reopening the gold mines of the Central Rand Basin and accessing gold reefs left behind by the "old-timers". The key factors supporting the implementation of this concept were:

·; the threefold rise in the real gold price since closure of the original mines;

·; painstaking and visionary evaluation of the resource by the Viljoen brothers;

·; the liberalisation of mineral rights legislation with new "use it or lose it" conditions;

·; the Australian-led entrepreneurial initiative of CRG's originators, RQS; and

·; a receptive capital market at that time.

Since then, the share price history of your Company has made for sorry reading and now, as I write, it has been further impacted by the decision announced on 29 March 2011 to suspend underground mining operations.

Central Rand Gold vs FTSE 350 Mining index

(For the release with pictures and schematics, please refer to the Company's website: www.centralrandgold.com)

I am very aware of the pain that our shareholders have endured. The Company and its officers have come in for some criticism in terms of the gap between historical expectations and performance, so in reflecting on the current position, I will consider the extent to which we have overpromised or under delivered.

Much of this is history, but the issues of the moment which threaten our very existence are:

·; Acid Mine Drainage (AMD) in the Central Rand Basin and the rising water table;

·; the higher than expected occurrence of "double-voids", i.e. stopes where not only has the original Main Reef Leader been extracted but also the Main Reef, contrary to the historical mining plans; and

·; disappointingly high dilution in the reef currently being mined on the upper levels.

Acid mine drainage

The rising tide of contaminated underground water from 120 years of mining activity in the three geological compartments of the Witwatersrand, and the spillage to surface that is already occurring on the far East and far West Rand, is a well documented phenomenon.

The Central Rand Basin (in which CRG is located) has, until recently, been dewatered almost on a "last-man-standing" basis, by the South West Vertical shaft of East Rand Proprietary Mines ("ERPM"). CRG's founding premise was that this would continue under the sponsorship of a coalition of interested and affected parties, sharing capital and operating expenses into the future.

The parties were:

·; Current and new mining companies - interested in the maintaining the water at a certain level below surface;

·; A commercial operator of a water processing plant; and

·; The South African Government - interested in the prevention of pollution.

In view of the lack of clarity and commitment to future funding - essentially by the South African Government - ERPM declined to soldier on alone, closed and allowed its South West Vertical operations to flood in 2009.

The urgency of the moment is that, despite strong words of encouragement by the South African Government over time , , by the end of 2010 there was no formal commitment to participate in the re engineered solution proposed by the industrial parties.

The crisis for CRG is that while other parties are mainly interested in maintaining water levels below environmentally prudent levels, there is still some time before these are reached. CRG's current and future workings are below that level and are already threatened.

There is much to be done to close the gap between the general commitments of the South African Government and the Company's specific needs. Whilst there is no doubt that this will all be resolved, everything depends on the timing, which is disappointingly uncertain. In the face of these uncertainties concerning depth, the normal response of a mining Company would be to maximise development and mining in the upper levels.

Mine development

In developing ahead of future stopes on the upper levels, some 30% of those accessed have revealed unexpected "double-voids", ie not only has the original Main Reef Leader been extracted but also the Main Reef, contrary to the historical mining plans. Mine planning, based on the trial-mining programme of early 2009, included only for the loss, for value and "void" reasons, of some 10% of the ore.

The frequency with which the double voids have been encountered have the effect of slowing down the rate of access to mineable stopes, increasing the cost of development per tonne of accessible ore, and most significantly, dramatically reducing immediate revenues. This has unsustainable consequences for the Company's cash reserves.

Development on lower levels suggest that the double-void phenomenon decreases with depth, leading to the interpretation that these voids are a result of unmapped remnant mining on retreat by the previous mining operations.

In the face of these double voids at shallow levels, standard mining practice would be to go deeper. However, as a result of the rising water table this is not an option available to the Company in the interim.

Gold production

The first two footwall-accessed stopes were mined in March 2011. Comparison between expected head-grades and a "built- up" head- grade, back calculated from in-plant and tails sampling, indicated a Mine Call Factor of approximately 65%, compared to budgeted values of around 75%. Since the Main Reef is breaking cleanly on the footwall, the only conclusion is that a considerable proportion of vintage hanging wall (over and above the planned-for "middling") is diluting the mined ore.

A programme to refine the blasting and ore- handling techniques, including trial testing of "split-firing" of middlings plus old hanging from reef is the next stage.

The "empty tonnes" associated with this dilution severely impact the cost per ounce of gold produced and the short-term cash flows while this gap between planned and actual mine call factor is being closed.

The dilemma

Current development is sub-economic because of the double voids, deeper and more promising development is not possible because of lack of definition on AMD, and current stoping costs are prohibitive at present levels of dilution.

On 29 March, the Company announced the following:

·; The suspension of underground capital development effective 30 April 2011, i.e. after opening up the next stoping level which appears to have fewer "double-voids";

·; The mining out of all available stopes over the next three months. The prime purpose of this programme is to develop and refine blasting and waste separation techniques to establish the profitable basis for future mining;

·; A study into the feasibility of selectively mining appropriate areas by conventional hand-held in-stope drilling in order to reduce dilution and improve grade selectivity as an additional methodology is currently underway;

·; To the extent affordable, a programme of surface and underground drilling to verify the presence of Main Reef (ie to define the "double-void" issue) in near-term mining reserves will be undertaken;

·; Except for underground exploration work, underground operations will be placed on a "care and maintenance" basis following extraction of the immediately available stopes;

·; Surface mining of currently defined South African Mineral Resources Committee ("SAMREC") and JORC Exploration Target Material (between 63,000 tonnes and 76,000 tonnes at an expected head-grade of approximately 3.2 g/t) will continue until exhausted. This is expected to occur around September 2011;

·; The commercial viability of treating all existing ore through a third-party toll treating agreement will be reviewed.

·; A financial feasibility study of processing high-grade tailings will be completed; and

·; In the interim CRG's, metallurgical operations will continue to process all surface and underground ore. If a decision is made to toll treat, or if all stockpiles have been depleted, the metallurgical plant will be cleaned out to recover all in-process stock.

The Company has commenced the process of reducing its staff complement to ensure alignment with the above business plan.

As at 30 March 2011, the Company had cash and near cash resources of US$10 million, which should meet all outstanding commitments until mid-2012.

Overpromised or underdelivered?

Perhaps, with hindsight, the Company's plans at the time of its Initial Public Offering ("IPO") could be seen as overly ambitious in:

·; an apparently reasonable (as supported by Independent Competent Persons), but ultimately simplistic approach to the mine plan and design;

·; a presumption that Australian leadership would import Australian mining technology and methodologies, and achieve Australian efficiencies in the South African environment with South African contractors and labour; and

·; a seductively simplistic approach to the merits of underground metallurgical processing, with hugely inefficient performance on surface by plants seriously compromised by their geometric constraints.

Between mid-2008 and the end of 2009, as these many nettles were grasped, the Company:

·; replaced the Chief Financial Officer ("CFO"), the Company Secretary, the heads of Geology and Metallurgy and the Chief Executive Officer ("CEO") by promoting the new CFO to Chief Executive and recruited another CFO;

·; replaced the entire Senior Mining and Mine Planning Team;

·; reduced the number of Board members by two;

·; reassessed production methodologies, targets and costs based upon underground realities and actual metallurgical performance; and

·; most significantly, concluded that it could not fund itself through to a cash-positive position.

This last realisation defined the 2010 year as follows:

·; In January 2010, there was a cashbox placing of US$5.7 million (£3.7 million) to provide interim funding until trial mining was completed and mine plans of sufficient integrity to support a formal fund-raising exercise, were completed;

·; A coherent mine plan was completed and approved by independent third-party appraisers (Snowden) in April 2010;

·; The Board was restructured and further reduced in size and a new Chairman was appointed;

·; Head office staffing was dramatically reduced in order to cut costs;

·; The Killarney head office was closed and all its functions and personnel we re moved to the Rand Leases (Roodepoort) technical offices, close to the Company's mine site;

·; A prospectus was issued and US$36.8 million (£24.2 million) was raised in July 2010;

·; The requisite additional mining equipment, as laid out in the prospectus, was ordered;

·; Metallurgical problems were finally understood and addressed - cutting losses on historical mistakes and embarking on substantial re- engineering and the disposal of suboptimal equipment;

·; An alternative Acid Mine Drainage System was engineered and costed (as discussed above);

·; The pumping equipment to handle these pumping arrangements was ordered; and

·; A "gap analysis" on governance compliance with both the UK Combined Code and South Africa's new King III Code was conducted, and levels of governance awareness and financial controls all round were raised.

Following the maxim that no battle plan survives first contact there were two major changes in the second half of 2010 to the expectations of the prospectus, namely:

·; Finalisation of the CPR for the prospectus delayed the capital-raising process by approximately six weeks. This squeezed the Company's cash resources, stopped underground production and delayed the placement of orders for new mining equipment. The cumulative effect, particularly of the late placement of equipment orders in an ever-tightening resources market, was essentially a six - month delay to the recommencement of underground stoping. A conscious decision to then apply all the Company's resources towards increased underground development and open-cast mining, while awaiting stoping equipment, has meant the Company incurred 120% of the planned expenditure, but received only 57% of the planned revenue. Primarily as a result of these two variances, cash balances at year-end were a significant US$10.4 million lower than tabled in the prospectus. The Trial Mining project completed in March 2010 concluded that the "vintage" hanging wall above the mined-out Main Reef Leader was competent and, with due care, could be successfully undermined. Subsequent on-reef development to open ground for future stoping has, in some areas, struggled to cope with "self-mining" of the old hanging wall. The dangers, costs and inefficiencies of trying to support this incompetent hanging wall, triggered a search for alternatives.

An alternative plan to access reef from footwall drives and crosscuts, and then to long-hole stope from the crosscut-reef intersection points, has been developed and looks set to overcome the problems, albeit at slightly higher unit costs. The practicality of this concept has been proven, but its economics, particularly in terms of grade and dilution control, still have some way to go.

In terms of whether we have overpromised or underdelivered, I conclude that until the start of 2009

it was largely the former. Since then, for all kinds of good reasons, we have failed to deliver on a set of concrete, testing, but not unreasonable, plans.

CRG cannot deliver on the promises of its IPO wherein it aspired to be the largest single gold mine in the world, but it does have the potential to be a most impressive "string of pearls", with many similar operations (some bigger, some richer) to the one we are now developing.

The Company's very substantial gold resource base remains intact and its short-term reserves have recently been reconfirmed. Work to demonstrate economically viable extraction has progressively eliminated certain approaches and has highlighted the keys to success - which future planning intends to deliver. A combination of this focus, plus much clearer direction from South African Government on dealing with AMD pumping and treatment, together with the consequent ability to physically access the relatively "double-void" free deeper levels, should allow the Company to show its real value.

Given resolution and progress on the above-listed uncertainties, the Company expects to be able to reassess its prospects by the end of October 2011. Part of this reassessment will be the question of further funding and possible other corporate actions.

In the interim, given the continued difficulties and uncertainties faced by the Company the Board continues to look at all strategic options for the Company, one of which could lead to an offer for the entire issued share capital of the Company. However, this option is at an early stage and there can be no certainty that an offer for the Company will be forthcoming.

The Directors have resolved to reduce the Board to the minimum size stipulated in the Articles, and the remaining two Non-Executive Directors have volunteered a 20% reduction in their fees.

I will not dwell in this report on the ongoing and unfortunate dispute with CRGSA's broad-based black economic empowerment partner - Puno. This dispute is a distraction and a cost, but it is not Company- threatening. It was comprehensively covered in the 2010 prospectus and the current status is dealt with in the body of this report.

I extend my thanks to my fellow directors and the Executive Team, who have laboured mightily this year.

Michael McMahon

Chairman

Chief Executive Officer's Report

Introduction

The past year has been significant for Central Rand Gold . CRG's initial focus in 2010 was to complete trial mining and metallurgical testing with the following specific objectives:

·; To process ore parcels from underground and surface activities as bulk samples to test gold grades and recoveries.

·; To allow the conversion of Mineral Resources into Ore Reserves after confirming mining and metallurgical processes.

·; To physically test mining and backfilling techniques.

These objectives were all achieved in March 2010. On the completion of the Competent Person's Report, the Company engaged in a fund-raising exercise and received US$36.8 million in July 2010. The Company continued underground development with the aim of commencing underground production during the latter part of 2010, which was delayed until 2011 due to lack of equipment availability.

However, as is evident from the Chairman's Report above 2010 and 2011 have had their challenges. While by no means glossing over or ignoring these, in order to avoid repetition, I have mainly concentrated in my report on activities in 2010. My reporting of progress and achievements in early to mid 2010 clearly need to be seen in the context of the issues around AMD, the double-voids discovered, our announcement made on 29 March 2011 and our funding position ( Explained in detail in note 1.1 to the financial statements ). Together with my fellow directors , I am working hard to find resolution to the serious we face.

Exploration and geological update

Resources and reserves

The completion of the trial mining exercise in March by Snowden Mining Industry Consultants allowed for the upgrade of the existing JORC/SAMREC Reserve statement to 0.48 million ounces.

Note: Resources are quoted inclusive of reserves.

During the latter part of 2010 it be came apparent that areas of undocumented reef extraction exist in the immediate mining area. It is believed that these uncharted voids are limited to shallow areas of the mine close to the vicinity of historical shafts and mining progresses deeper beyond 250 metres below surface their frequency will diminish.

The close monitoring of unexpected underground voids continues with the establishment of footwall access drawpoints. As this area of uncharted mining voids represents a very small portion of the total project area, it is not considered necessary at the point to adjust the Resource statement.

Surface

Surface exploration target

Exploration through systematic mechanical trenching and geological mapping and sampling continued throughout 2010, resulting in the identification and delineation of several significant open pit "Exploration Target" areas within the New Order Mining Right. The table below details the Exploration Target Inventory as of December 2010.

Note: The potential quantity and grade described by the term "Exploration Target" is conceptual in nature and there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result in the definition of a Resource. Further exploration work is ongoing and includes trial mining and processing of this shallow target to establish grade and orebody continuity, mineability, dilution and throughput characteristics. Further exploration during 2011 will focus on improving confidence in exploration target material and identifying additional surface mining potential to supplement underground production.

Underground grade verification and grade control

The correlation between underground Reef Drive sampling and the JORC/SAMREC resource model continues to be very strong.

The table below portrays the expected grades in the reef drives excavated so far (Theoretical Resource) and compares them to the actual grades measured through drive sampling. It can be seen that while there is some degree of variation between the expected grades and the actual sampled grades, this variation is generally in CRG's favour and overall a small positive increase in grade from 5.13 g/t to 5.27 g/t is observed.

Underground

In areas of poor ground conditions where the adoption of an alternative reef access method (footwall drive) is indicated, it is noted that the ability to selectively mine to a cut-off may be somewhat compromised. With this in mind, test work to evaluate the use of underground diamond drilling as a potential replacement for reef drive sampling was undertaken during the second half of 2010.

To this end, a 20-metre-long stretch of previously sampled reef development was drill targeted from the footwall tunnels immediately below the sampled reef at a depth of approximately 110m below surface. Previous face sampling of the 1581 reef development returned an average grade of 16 g/t over 55cm over the length of the reef development. The drill evaluation returned a very similar grade of 13.74 g/t over 48cm. Details are tabulated below:

Additional studies and financial models have further been undertaken to gauge the impact of mining using limited grade control with face sampling occurring at draw points only.

Expansion projects

There was considerable focus during the latter half of 2010 on the development and optimisation of the significant JORC/SAMREC resource base available to the Company.

Independent scoping studies into the feasibility of developing CMR East have been completed and suggest that CMR East is economically viable at a scoping level. Further work is now anticipated to increase this confidence to a prefeasibility / feasibility level, which will allow for a full capitalisation decision to be made.

CRG has also commenced initial planning and scheduling studies to investigate the economics of the City Deep and Village mining propositions.

A comprehensive tender process for the planned resource drilling at the new Crown Mines site has been completed and a detailed programme of diamond drilling has been designed to upgrade a substantial block of Main Reef in the Crown Mines West target area from Inferred Resources to Indicated Resources.

(The information in this statement relating to Mineral Resources and geology has been reviewed and approved by Mr Keith Matier, BSc (Hons), GDE, Pr Sci Nat, who is a Competent Person in terms of the SAMREC and JORC codes. Mr Matier is the Geology Manager of Central Rand Gold South Africa (Pty) Limited and has over 17 years' experience in exploration, mineral resource management and mineral evaluation.)

Completion of trial mining

Trial mining, which began in September 2009 and was completed in April 2010, effectively and meaningfully demonstrated at that time , that the Main Reef can be safely and efficiently mined, although the issues faced since then have surpassed this view

The successful trial mining process has also provided confidence that the reserve modifying factors are reasonable.

Operational update

Underground mining

Following the success of trial mining, underground mining operations commenced in May 2010.

With effect from August 2010, underground mining efforts were focused on footwall development due to reef access development being changed from reef development to footwall development, as a result of poor ground conditions experienced when developing on-reef.

Mine development

Monthly development progressed at an improved rate with 434.5 metres being achieved in December, compared to 407.5 metres in November and 371.6 metres in October.

In developing ahead of the next planned stopes, between 120 metres below surface to 180 metres below surface, some 30% of the stopes accessed in the current mining area have been found to have unexpected "double-voids". As the Chairman has explained in his report, this is an unexpected problem for which a workable and sustainable solution needs to be found as soon as possible.

In the face of these "voids" at shallow levels standard mining practice would be to go deeper, however, as a result of the rising water table, this is not an option available to the Company in the interim.

The long-hole drilling rig (required for stoping) was delivered in December 2010 and immediately commissioned, enabling stoping operations to commence in January 2011.

The December delivery of the long-hole drilling rig had short-term production implications in that the production forecast contained in the prospectus, published by the Company on 2 June 2010, anticipated significantly higher grade ore to be available by the end of 2010. However, the delay in the supply of underground ore has been partially mitigated by the extension of surface exploration and surface mining to supplement gold production.

The following table shows key underground mining statistics for 2010, comparing actual statistics and those included in the June Prospectus (some surface mining statistics are also included in the table):

Surface mining

All safety and production targets for surface mining in 2010 were achieved with no injuries to personnel occurring during the year.

During 2010, 155,452 tonnes of surface ore was mined from the following pits:

·; Central Pit - 51,147 reef tonnes at a (trammed) grade of 3.25 grams/tonne.

·; New Unified Pit - 69,690 reef tonnes at a grade of 2.67 grams/tonne.

·; New Unified Extension Pit - 18,366 reef tonnes at a grade of 4.88 grams/tonne.

·; Main Pit - 16,249 reef tonnes at a grade of 5.80 grams/tonne.

(The grades presented are diluted, trammed to stockpile grades.)

Metallurgical update

After listing in 2007, CRG commenced with the concept of metallurgical concentrators being placed underground in the mining vicinity to produce a concentrate that could be transported to surface for gold extraction, thereby eliminating significant haulage and surface operations. These concentrators and a small Carbon-in-Leach ("CIL") plant required to treat low-volume high-grade concentrate, were procured in 2008 and 2009. Trial mining highlighted that this concept was sub-economic at shallow depths and the plant was commissioned on surface at the Consolidated Main Reef ("CMR") portal. This shift from a low-volume high-grade operation to a high-volume medium/low-grade operation during the trial mining and resource to reserve conversion process, necessitated improved metallurgical recovery to be economically viable.

Following the principle of utilising the existing plant already capitalised, optimisation initiatives were commenced to increase direct whole ore leach capacity and also to improve overall recovery. During early 2010, the metallurgical plant was reconfigured to ensure a steady feed into the plant, increase gravity gold recovery and convert the CIL into a Carbon-in-Pulp ("CIP") plant with increased direct leaching capacity. These changes were successfully completed in March, after which production capacity increased to 23 kilotonnes per month with associated gold production of around 1,200 ounces per month.

To date, crushing capacity and availability have been limiting factors to plant throughput. An independent design review has assessed that this would be addressed by the incorporation of two appropriately sized cone crushers to replace the original Horizontal Shaft Impactor ("HSI") and Vertical Shaft Impactor ("VSI") units and increase the crushing circuit capacity to the required 45 kilotonnes per month. Increased milling capacity will also be needed to achieve the 45 kilotonnes capacity on the harder underground sulphide ore and would most likely incorporate a further shift towards whole ore leach processing, with added recovery benefits. Optimal design and costing options for additional milling capacity are being evaluated as this expenditure is only budgeted in 2012. The implementation of the comminution upgrade will be evaluated following clarity on the rising water issue. The intention would be to increase crushing capacity to 45 kilotonnes per month and further streamline our process, eliminating intermediary stockpiles with associated material handling costs and gold losses. The CIP will also require changes, particularly to the elution circuit, to accommodate the increased gold production.

The supplementation of surface oxide ore into the plant to mitigate the delayed underground production also needed to be accommodated in terms of material handling, and particularly processing, due to varying chemical compositions affecting acidity and organic material which "robbed" the gold prior to leaching. Surface oxide ore remains a significant portion of the intended plant feed in 2011. Recovery (R+R - recovered and residue) averaged 75% for 2010 on predominantly oxide material.

2010 was extremely beneficial in terms of establishing rhythm in the plant with associated metal accounting, feedback and reporting, so that future increased capacity can be fully utilised.

Our current focus on site is to commission the Optical Ore Sorter, which is key to addressing dilution and economically remove waste prior to processing, with the added benefit of being able to sell the waste as washed and screened aggregate.

Gold production of 9,321 ounces was achieved in 2010. This is within the range projected in September 2010 following the fund-raising.

Despite the positive trend in recovery rates and plant availability, the mined surface oxide grades reporting to the plant from the newly opened surface slots were within the lower end of the expected range.

The proportion of underground sulphides being processed versus surface oxides, was around 15/85 in 2010.. Confirmation of grade, dilution and possible old workings contaminants, will also be evaluated in assessing gold output.

Safety

Throughout 2010, CRG continued to place major emphasis on safety in the workplace, resulting in the Company yet again being able to ensure that no fatalities took place at our operations.

Under the leadership of Australian Contract Mining, the underground workforce maintained its focus on meeting and achieving world-class safety standards and outcomes. There is no room for complacency and safety will continue to receive priority attention from management and staff.

The following table shows overall safety statistics for 2010 (a more comprehensive safety overview is contained in the Sustainable development section of this report):

Water

Background

Since 2008, when the East Rand Proprietary Mines (part of the DRD Gold Limited Group) ceased pumping water from its SWV shaft due to a double fatality, the water table in the Central Basin area continued to rise at an average rate of 0.54 metres per day and, as at the end of December 2010, the water table was just over 500 metres below surface at the SWV shaft.

CRG, along with other affected industry stakeholders, has since early 2009 been engaged in discussions with the South African Government in an attempt to resolve this problem.

On 24 February 2011, the Department of Water Affairs of the South African Government published its report on Acid Mine Drainage (AMD) to the Inter-Ministerial Committee. Our team has attended two meetings with the South African Government in pursuit of further clarity. The Company has now evaluated its prospects in terms of the AMD risks as they now stand and its short-term production situation and concludes as follows:

Whilst the publication by the South African Government of the AMD report has been very welcome in that it crosses the first hurdle of a commitment towards resolution of this major environmental issue, there remains insufficient clarity on key issues such as targeted minimum water levels, project engineering and technology, the role and responsibilities of the interested parties, cost allocation between interested and affected parties and timing to meet the degree of definition needed by the Company to continue development and mining at the present rate.

The submersible pumps, ordered and paid for by the Company at a cost of €3.5 million, and due for delivery in August 2011, have a capacity to pump 72 million litres of water per day compared to the average daily ingress of 55 million litres. Should it be decided to utilise these pumps and the engineering already completed for the ERPM South West Vertical shaft dewatering station, these pumps have the capability to dewater the Central Rand Basin and restore CRG's reserves. In the event that these pumps are not utilised for this purpose, the Company will sell them.

The need to have this (or some alternative equivalent) capacity installed by December 2011 in order to protect the 250 metres below surface level and enable gradual dewatering thereafter, and the timelines inherent in the Western Utility Corporation's technical proposals informed the previously published need for definition by the end of March 2011.

Based on studies completed by Western Utilities Corporation, an engineering plan was developed to stop and partially treat AMD in the Central Basin by the establishment of a submersible pump station that would be constructed at the South West Vertical ("SWV") shaft. Based on the above engineering study, the capital cost was estimated to be R178 million at 400 metres below surface, which included R91 million for the pump station and R87 million for the refurbishment of the High Density Sludge ("HDS") plant. This proposal was presented to South African Government in 2009 and 2010 for consideration.

Due to receiving strong indications of support from the South African Government with regard to providing support and funding for the rising AMD problem, CRG unilaterally ordered the longest lead item, ie the submersible pumps, in August of last year at a cost of US$4 million. This was done to ensure that once agreement was reached with the South African Government, the solution could be implemented without any delays, ultimately protecting as much of the resource base as possible.

Current situation

In late 2010, the South African Government established an Inter-Ministerial Commission tasked with the responsibility of identifying how the AMD problem could be resolved in the Witwatersrand area. The task team issued its report in February 2011 and focused on three key strategies in dealing with AMD, namely:

·; Decant prevention and management.

·; Reduction in ingress of water into the various basins (Central, Eastern, Western).

·; Water quality management in each of the basins, treated separately through their own water treatment plants.

An amount of R225 million was set aside in the 2011/12 South African Government budget to solve this problem.

It is encouraging to note that the above proposal was at concept level aligned with the proposal presented by the mining industry. The report was, however, silent on the location and final design for the pump station. CRG therefore remains concerned about the time it will take to implement the above project and has held two meetings with the Department of Water Affairs ("DWA") to stress the importance of speedy action. The matters that still require clarification from the DWA include:

·; targeted minimum water levels;

·; project engineering and technology;

·; the role and responsibilities of the interested parties;

·; cost allocation between interested and affected parties; and

·; timing to meet the degree of definition needed by the Company to continue development and mining at the current rate.

Broad-based black economic empowerment ("BBBEE")

Significant activity took place during 2010 regarding the Company's black economic empowerment ("BEE") shareholding. Events that took place over this last year can be summarised in the table below:

Financial update

Capital raising

On 22 January 2010, the Company successfully placed a total of 24,691,964 new ordinary shares of £0.01 each in the capital of the Company (the "Placing Shares") at a price of £0.15 per share to raise net proceeds of US$5.7 million (£3.7 million) (the "Placing"). The Placing was supported by the Directors, senior management and certain existing substantial shareholders. 23,781,964 Placing Shares were placed using a cashbox structure with investors and 910,000 Placing Shares were placed with Directors and senior management of the Company.

After completing this US$5.7 million cashbox placing on 22 January 2010 to enable trial mining to be completed, CRG placed a total of 1,328,071,380 new ordinary shares ("Firm Placing" of 649,042,355 new shares and "Placing and Open Offer" of 679,029,025 new shares) of £0.01 each in the capital of the Company at a price of £0.02, to successfully raise net proceeds of US$36.8 million (£24.2 million) on 5 July 2010, which was fully underwritten by Evolution Securities.

Cash position

Cash held by the Company as at end December 2010 totalled US$14.6 million. This compares with the estimated closing cash in the prospectus of US$25.1 million to support the Placing and Open Offer. The lower than expected cash position is attributed to:

·; production of 9,321 ounces against a target of 19,308 ounces in the year ended 31 December 2010, due to delayed underground stoping caused by longer equipment lead times and adverse ground conditions;

·; higher mine development costs due to poor ground conditions and unexpected "double voids" necessitating the implementation of an alternative mining method requiring increased materials and services for safe mining;

·; higher plant processing expenditure for repairs and upgrades to improve capacity, availability and recovery rates;

·; the funding of mining equipment whilst the Company investigates alternate debt financing options. The prospectus assumed a level of debt financing; and

·; delay in receiving value-added tax refunds of US$2.5 million.

Set out below is an abridged cash flow statement:

Note 1 - Includes water pump security deposit of US$3.5million as analysed in note 9 of the financial statements.

Impairment

The uncertainty on the rising water table solution implementation plan and the initial unexpected "double voids" encountered underground which existed at the year-end which ultimately triggered the suspension of further underground development had an adverse impact on projected cash flows. In the light of this, management performed a review of asset values and where relevant obtained advise of an independent expert valuer, Reinertsen Valuation Services, a division of Marsh (Pty) Ltd. On the basis of this review it was considered appropriate and prudent to recognise an impairment loss of US$44.45million as set out below ( Refer to Note 21 of financial statements):

Further details on the impairment of property, plant and equipment can be found in note 3 of the annual financial statements.

Results

Loss for the year is reported at US$72.1 million (4.51 US$ cents per share) against prior year of US$46.3 million (18.77 US$ cents per share). This increased loss is mainly attributed to:

·; Higher mining costs due to poor ground conditions and unexpected "double voids" resulting in increased material and services consumption per metre advanced;

·; Higher process plant costs due to repairs and reconfiguration to improve capacity , efficiency, availability and recoveries;

·; Impairment of capitalised mine development costs and asset write down to fair value; and

·; Mitigated by higher gold production sourced mainly from nearby open pits, which also compensated for loss of underground production due to longer than expected lead time for the long hole drill rig.

Going Concern

The Directors have prepared the financial statements on the going concern basis having considered the current operations, the current funding position and the projected funding requirements of the business for at least 12 months from the date of approval of the financial statements.

The continued uncertainty around the resolution of the rising water table and the continued difficulty in finding a viable mining method, together with the need for additional fund raising if the water table and viable mining method issues are satisfactorily resolved, are material uncertainties that may cast significant doubt on the Group's and Company's ability to continue as a going concern and they may therefore be unable to realise their assets and discharge their liabilities in the normal course of business.

Nevertheless, after taking account of the Group's funding position and its cash flow projections which show that available cash will not run out until July 2012, and having considered the following:

·; the risks and uncertainties associated with these projections;

·; the current trading position which has not provided the Directors with any evidence that their assumptions are not achievable; and ,

·; the strategic options available to the Directors,

The Directors have a realistic expectation that the Group and Company have adequate resources to continue in operational existence for at least 12 months from the date of approval of these financial statements. For these reasons, they continue to prepare the financial statements on a going concern basis. These financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate. Further consideration of the basis of preparation is set out in note 2.

Prospects

The Company's future prospects will be impacted by how it resolves the following three major challenges:

1. Stopping the rising water table within the Central Basin remains a top priority. The Company remains confident that the water table will be stopped, but it remains unclear at what level it will be stopped and managed on an ongoing basis. A programme of lowering the water level of the Central Basin will commence once the pump station is operational. However, short-term production could be impacted whilst the resource base is being "dewatered".

2. The Company needs to have a better understanding and an improved ability to predict the occurrence of double-voids within its direct mining area. To the extent that it is affordable, a programme of surface and underground drilling to verify the presence of Main Reef (ie to define the "double-void" issue) in near-term mining reserves will be undertaken.

3. The major focus of mining during the first half of 2011 will be the further investigation of viable methods to reduce dilution in the currently available stopes.

Given resolution and progress on the above-listed uncertainties, the Company expects to be able to reassess its prospects by the end of October 2011. Part of this reassessment will be the question of further funding and the possibility of other corporate actions taking place.

Thanks

On behalf of Central Rand Gold's Executive Team, I would like to thank all management and staff for their tireless efforts over the past year and during the first quarter of 2011. Whatever we do is a team effort, but this also requires exceptional effort and commitment from individuals. My thanks to all of our shareholders, suppliers, other stakeholders and the members of the communities in which we operate.

Johan du Toit

Chief Executive Officer

Statements of Financial Performance for the year ended 31 December 2010

Group

Company

2010

2009

2010

2009

Notes

US$'000

US$'000

US$'000

US$'000

Other income and gains

11,681

1,666

-

 -

Employee benefits expense

(10,875)

 (9,688)

(8)

 (61)

Directors' emoluments

12

(1,237)

 (1,676)

(631)

(874)

Depreciation and amortisation

(2,524)

 (2,479)

-

 -

Inventory write-down

(263)

 (1,947)

-

 -

Impairment of assets

(44,455)

(4,476)

(300,467)

 -

Operating lease expense

(1,045)

(833)

-

 (47)

Surface mining costs

(17,099)

 -

-

 -

Operational expenses

(718)

-

(405)

-

Exploration expenditure

-

(30,884)

-

 (393)

Other expenses

(6,578)

 (5,956)

(836)

 (1,582)

Operating (loss)

(73,113)

(56,273)

(302,347)

(2,957)

Interest receivable

1,512

 3,996

29,078

23,029

Finance costs

(1,015)

 (1,108)

-

-

Foreign exchange transaction gains

1,384

 7,596

37,373

32,177

(Loss)/Profit before income tax

(71,232)

(45,789)

(235,896)

52,249

Income tax expense

(840)

 (546)

-

-

(Loss)/Profitfor the year

(72,072)

(46,335)

(235,896)

52,249

Loss is attributable to:

Non-controlling interest

 -

-

Equity holders of the parent

(72,072)

 (46,335)

(72,072)

 (46,335)

Loss per share for loss attributable to the equity holders during the year (expressed in US cents per share)

Basic loss per share

(4.51)

 (18.77)

Diluted loss per share

(4.51)

 (18.77)

Statements of Comprehensive Income for the year ended 31 December 2010

Group

Company

2010

2009

2010

2009

US$'000

US$'000

US$'000

US$'000

(Loss)/Profit for the year

(72,072)

(46,335)

(235,896)

52,249

Other comprehensive income:

Exchange differences on translating foreign operations

1,445 (34,447)

14,500

(6,263)

16,799

Income tax relating to components of other comprehensive income

-

-

-

-

Other comprehensive income/(Loss) for the period, net of tax

1,445 (34,447)

14,500

(6,623)

16,799

Total comprehensive (Loss)/income for the period

(70,627)

(31,835)

(242,159)

69,048

Total comprehensive (Loss)/income is attributable to:

Non-controlling interest

-

-

-

-

Equity holders of the parent

(70,627)

(31,835) (31,835)

(242,159)

69,048

(70,627)

(31,835) (31,835)

(242,159)

69,048

Statements of Financial Position as at 31 December 2010

Group

Company

2010

2009

2010

2009

Notes

US$'000

 US$ '000

US$'000

 US$ '000

NON-CURRENT ASSETS

Property, plant and equipment

6

10,022

34,298

-

-

Intangible assets

8

-

1,316

-

-

Investment in subsidiaries

-

-

9,809

9,776

Security deposits and guarantees

6,498

5,806

226

203

Loans receivable

9

9,830

7,818

9,830

209,936

26,350

49,238

19,865

219,915

CURRENT ASSETS

Security deposits and guarantees

4,069

510

62

382

Prepayments and other receivables

6,626

5,272

220

164

Inventories

10

207

1,574

-

-

Cash and cash equivalents

14,624

15,899

9,906

8,847

Non-current assets held for sale

7

4,074

2,750

-

-

29,600

26,005

10,188

9,393

TOTAL ASSETS

55,950

75,243

30,053

229,308

EQUITY

Attributable to equity holders of the parent

Share capital

11

25,604

5,023

25,604

5,023

Share premium

11

213,377

191,406

213,377

191,406

Share-based compensation reserve

27,925

27,482

27,925

27,482

Treasury shares

(6)

(2)

-

-

Foreign currency translation reserve

(26,955)

(28,400)

(55,667)

(49,404)

Accumulated (losses)/profit

(210,897)

(138,825)

(181,256)

54,640

29,048

56,684

29,983

229,147

Non-controlling interest

-

-

-

-

TOTAL EQUITY

29,048

56,684

29,983

229,147

NON-CURRENT LIABILITIES

Environmental rehabilitation and other provisions

6,474

1,434

-

-

Loan payable

9,830

7,818

-

-

Operating lease liability

4

26

-

-

Borrowings

-

12

-

-

16,308

9,290

-

-

CURRENT LIABILITIES

Trade and other payables

8,884

7,620

70

161

Environmental rehabilitation and other provisions

-

701

-

-

Taxation payable

1,704

895

-

-

Operating lease liability

-

26

-

-

Borrowings

6

27

-

-

10,594

9,269

70

161

TOTAL LIABILITIES

26,902

18,559

70

161

TOTAL EQUITY AND LIABILITIES

55,950

75,243

30,053

229,308

Statements of Changes in Equity for the year ended 31 December 2010

Attributable to equity holders of the Parent Company

Group

Ordinary Share Capital

Share Premium

Share-Based Compensation Reserve

Treasury Shares

Foreign Currency Translation Reserve

Accumulated Losses

Total

Non-Controlling Interest

Total Equity

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Balance at 31 December 2008

5,023

191,406

26,429

(4)

(42,900)

(92,490)

87,464

-

87,464

Total comprehensive income for the year

Loss for the year

-

-

-

-

-

(46,335)

(46,335) (46,335)

-

(46,335)

Other comprehensive income

Foreign currency adjustments

-

-

-

-

14,500

-

14,500

-

14,500

Transactions with owners, recorded directly in equity

Employee Share Option Scheme:

Share-based payments: Employees and Directors shares and options

-

-

1,053

2

-

-

1,055

-

1,055

Balance at 31 December 2009

5,023

191,406

27,482

(2)

(28,400)

(138,825)

56,684

-

56,684

Total comprehensive income for the year

Loss for the year

-

-

-

-

-

(72,072)

(72,072)

-

(72,072)

Other comprehensive income

Foreign currency adjustments

-

-

-

-

1,445

-

1,445 (34,447)

-

1,445

Transactions with owners, recorded directly in equity

Issue of shares:

Capital raising

20,581

21,971

-

-

-

-

42,552

-

42,552

Employee Share Option Scheme:

Share-based payments: Employees and Directors shares and options

-

-

443

(4)

-

-

439

-

439

Balance at 31 December 2010

25,604

213,377

27,925

(6)

(26,955)

(210,897)

29,048

-

29,048

Company

Ordinary Share Capital

Share Premium

Share Based Compensation Reserve

Foreign Currency Translation Reserve

Accumulated Losses

Total Equity

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Balance at 31 December 2008

5,023

191,406

26,429

(66,203)

2,391

159,046

Total comprehensive income for the year

Profit for the year

-

-

-

-

52,249

52,249

Other comprehensive income

Foreign currency adjustments

-

-

-

16,799

-

16,799

Transactions with owners, recorded directly in equity

Employee Share Option Scheme:

Share-based payments: Employees and Directors shares and options

-

-

1,053

-

-

1,053

Balance at 31 December 2009

5,023

191,406

27,482

(49,404)

54,640

229,147

Total comprehensive income for the year

Loss for the year

-

-

-

-

(235,896)

(235,896)

Other comprehensive income

Foreign currency adjustments

-

-

-

(6,263)

-

(6,263)

Transactions with owners, recorded directly in equity

Issue of Shares:

Capital raising

20,581

21,971

-

-

-

42,552

Employee Share Option Scheme:

Transfer of forfeited share options

Share-based payments: Employees and Directors shares and options

-

-

443

-

-

443

Balance at 31 December 2010

25,604

213,377

27,925

(55,667)

(181,256)

29,983

Statements of Cash Flow for the year ended 31 December 2010

Group

Company

2010

2009

2010

2009

US$'000

US$'000

US$'000

US$'000

CASH FLOWS FROM OPERATING ACTIVITIES

(Loss)/Profit before tax

(71,232)

(45,789)

(235,896)

52,249

Adjusted for :

Depreciation and amortisation

2,524

2,479

-

-

Bad debts written off

11

-

-

-

Employment benefit expenditure (Share-based payments)

443

1,053

78

280

Loss on disposal and scrapping of property, plant and equipment

24

501

-

-

Impairment of inventory

578

1,947

-

-

Dr/(Cr)

USD'000

Impairment of assets

44,455

4,476

300,467

-

-13,627,240

-1,870