30th Jun 2016 07:00
Central Rand Gold Limited (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 2007/019223/10) ISIN: GG00B92NXM24 LSE share code: CRND JSE share code: CRD ("Central Rand Gold" or the "Company" or the "Group")
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Annual Results and Annual Report Release |
Central Rand Gold today announces its annual results for the year ended 31 December 2015.
Full copies of the Company's Annual Report and Accounts, including the Company Profile, Chairman's Report, Corporate Governance, Sustainable Development Report, Company Secretarial Confirmation, Remuneration Committee Report, Directors' Report, Auditor's Report and full Financial Statements, will be available on the Company's website www.centralrandgold.com on 30 June 2016.
For further information, please contact:
Central Rand Gold +27(0) 87 310 4400
Lola Trollip / Nathan Taylor
Panmure Gordon (UK) Limited - Nominated Adviser +44 (0) 20 7886 2977
& Broker
Adam James / James Greenwood
Merchantec Capital - JSE Sponsor +27 (0) 11 325 6363
Marcel Goncalves / Monique Martinez
Jenni Newman Public Relations +27 (0) 11 506 7351
Proprietary Limited
Jenni Newman
Chairman's report
The year 2015 was a challenging year for the Company, with a number of key events occurring, such as:
· further improvement works carried out on the metallurgical plant;
· on-going suspension of underground mining due to the water table level;
· initial stabilisation of the water table followed by modest water table level reductions;
· a change of senior management with the resignation of Johan du Toit; and
· unsuccessful conclusion of the proposed sale of Central Rand Gold (Netherlands Antilles) N.V. ("CRGNV").
All of these events are over and above the ordinary course of business activities at Central Rand Gold and have required significant focus and attention from the Company's board of directors ("the Board") and management. I believe that all those involved with Central Rand Gold have done an excellent job in managing these extraordinary events whilst maintaining their focus on day-to-day operations.
POTENTIAL SALE OF CENTRAL RAND GOLD (NETHERLANDS ANTILLES) N.V.
The Board and Executive Committee spent significant effort engaging with four Asian companies, Hiria Group Company Limited ("Hiria"), Beijing Ankong Investment ("Ankong"), Shengbang Jiabo (Beijing) Consulting Company Limited ("Shengbang") and Huili Resources Group Limited ("Huili"), regarding the proposed sale of CRGNV. The four Asian investor groups ("Asian Investors") all performed due diligence with significant focus on the Company's operations and the performance of the Water Treatment Facility operated by the Trans Caledon Tunnel Authority ("TCTA").
In June 2015, the Company discontinued discussions with Ankong and Shengbang, and focussed its attention and resources on progressing discussions and negotiations with Huili and Hiria. The negotiations with Huili and Hiria progressed slowly during the second half of 2015 driven by significant uncertainty caused by volatile commodity prices and difficult market conditions across the junior mining sector, along with company specific factors such as the continued dewatering of the Central Basin. Notwithstanding the Company's significant efforts, neither Huili nor Hiria presented an appropriately valued proposal free of conditions. Consequently, in December 2015, the Company formally terminated the discussions with Huili and Hiria. Given the time, effort and costs expended on the sale process, it was extremely disappointing for all those involved that a successful sale of CRGNV could not be achieved.
Nevertheless, the Company will continue to informally engage with Huili, Hiria and other parties interested in investment opportunities involving the Company and its operations. 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. The discussions contemplate a strategic investment into the Company rather than a sale of the Company's shareholding in CRGNV. The negotiation is progressing and is benefiting from the significant level of due diligence and negotiation which was conducted with the Asian Investor throughout 2015.
"UPS AND DOWNS"
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. Indeed, amongst the challenges facing Central Rand Gold, there are a number of positive developments occurring with regard to the Company. Some of the more notable developments which occurred during the year, and into 2016, included:
· Continued dewatering of the Central Basin by the High Density Sludge ("HDS") plant operating by the Trans Caledon Tunnel Authority ("TCTA"). However, there were repeated instances of 'down time' and we expect 2016 to show a marked improvement in terms of pace of dewatering of the basin. Further, we were delighted by the unveiling of the long-term solution for AMD (the "Long Term AMD Solution") as announced by the Minister of Water and Sanitation, Nomvula Mokonyane. The Long Term AMD Solution will most likely see the installation of a reverse osmosis circuit to reduce the salt content of the treated AMD water to a level where it can be sold for safe commercial use as either industrial or potable water.
· The metallurgical plant, having long been the Company's 'Achilles heel', performed at or around expectation in terms of recovery and throughput in 2015. However, we need to remind ourselves that the metallurgical plant requires continued investment to ensure operating performance remains of a high standard. To this end, the Company has recently replaced Mill 1 with a newly installed and fully refurbished mill, which was acquired from Jet Demolition Proprietary Limited in February 2016. The Company will continue to replace, repair and improve the components of the metallurgical plant over the medium term.
· With the flooding and consequential closure of the underground mine in 2014, pending the dewatering programme, the Company embarked on an intense and systematic exploration and evaluation programme to identify and secure sufficient surface material to sustain operations across the short- to mid-term. The Company has identified numerous surface opportunities including open pit deposits, shallow underground deposits as well as gold bearing sand and slime material. The Company continues to progress feasibility test work and advancing commercial negotiations regarding these opportunities. However, it must be said that the identification and sourcing of reliable and economic gold bearing ore is a difficult and time intensive process.
· The negotiation and execution in 2016 of a Joint Venture Tolling Agreement (the "Tolling Venture") with a third party supplier of ore for the processing of gold-bearing material through the Company's metallurgical plant has been positive. The Tolling Venture will enable the Company to maintain operations with a steady and reliable feedstock whilst it continues to pursue other growth opportunities and awaits the dewatering of the central basin. In light of the Tolling Venture, the Company elected to temporarily suspend mining at its open pit operations, and will focus on rehabilitation in 2016.
· The continued engagement with Zhejiang Golden Machinery Plant ("ZGMP") to optimise and potentially expand the metallurgical plant is a significant positive for the Company. ZGMP have recently visited the Company's metallurgical plant and we will seek their involvement in assessing optimisation and expansion options relating to the metallurgical plant. The Group have entered a non-binding Letter of Understanding for a share placement of up to US$4.0 million with Zhejiang Golden Machinery Plant ("ZGMP") with due diligence currently being undertaken.
· The Board completed a bridge funding (the "Bridge Funding") through a combined convertible securities and warrant issuance with Bergen Global Opportunity Fund, LP. The Bridge Funding raised US$598,000, with the potential for an increase of up to US$4,098,000.
· The Company is also pursuing a variety of acquisition opportunities across a number of commodities including but not limited to precious metals and precious stones. The Board will continue to advance these with a view to expanding and diversifying the Company's asset portfolio.
PUNO
As I commented last year, the situation with Puno Gold Investments Proprietary Limited ("Puno"), our Black Economic Empowerment partner, remains a work in progress. The Company was successful in its appeal of the 2013 decision and we now look forward to the relevant issues being fully considered by the Courts and eagerly await the judgement which we hope will fully resolve the dispute with Puno.
After the successful appeal of the 2013 decision, Puno applied to the High Court to wind-up Central Rand Gold South Africa Proprietary Limited ("Central Rand Gold SA"), a subsidiary of Central Rand Gold, on grounds of Sections 344(f) and 345 of the SA Company's Act. The Board considers the Application to be without merit and has filed the necessary paperwork with the High Court to defend Puno's application. The Board believes this to be the latest strategy from Puno to frustrate the operations of Central Rand Gold SA and the Board remains firm in its resolve to defend the assets of the Company from Puno's actions.
It is with optimism and enthusiasm that the Board looks forward to the finalisation of the above disputes with Puno which will allow the Board and senior executives to direct their full energies towards the growth of the business.
SAFETY
Our safety record improved in 2015 with only three lost time injuries being reported. This progress is welcomed after implementing improvements to our already rigorous and diligent safety protocols following the Company's first fatality in 2014.
ACID MINE DRAINAGE ("AMD")
During the last quarter of 2015, the HDS plant underwent a process of upgrading the two thickeners. The thickener upgrades to the HDS plant were completed in December 2015 and the pumping rate has now increased from 72 million litres per day to 84 million litres per day.
At 25 May 2016, the water table measured at Central Rand Gold's operations was at approximately 148 vertical metres below surface ("vmbs"). We anticipate that we will be able to access Central Rand Gold's underground mining areas when the water table is approximately 185 vmbs which, following a period of rehabilitation, should enable Central Rand Gold's re-equipping and stabilising of the underground mining operations to re-commence during 2019.
MINING UPDATE
Highlights
• Underground production on the Main and North Reefs has not recommenced since it was halted in October 2014 as a result of the rising water level in the Central Basin.
• Open Pit production was 204,916 tonnes at an average grade of 1.89g/t.
Production
The following table shows key mining statistics for 2015, comparing the actual statistics with those achieved in 2014.
2015 | 2014 | Difference | ||||
Activity | Metres (m) Tonnes (t) | Grade (g/t) | Metres (m) Tonnes (t) | Grade (g/t) | Metres (m) Tonnes (t) | Grade (g/t) |
Waste Development (m) | - | 313 | (313) | |||
Reef Development (m) | - | 200 | (200) | |||
Total (m) | - | 513 | (513) | |||
Stoping (t) | - | - | 99,546 | 3.14 | (99,546) | (3.14) |
Open Pits (t) | 204,916 | 1.89 | 69,747 | 2.41 | 135,169 | (0.52) |
Total Tonnes | 204,916 | 169,293 | 35,623 | |||
No underground mining took place during the 2015 financial year. Monitoring of pumps, fans and water levels takes place on a daily basis, with the water levels not subsiding to the levels required for the recommencement of underground mining.
Mining in 2015 consisted of open pit mining, mainly concentrating on Slots 5 and 7, in and around the Johannesburg area.
The in-situ grades are approximately 33% lower than that of the underground operations, but can still be mined economically at a cut-off stripping ratio of approximately 7:1. The open pits were mined using contracted yellow machines, with Central Rand Gold SA mining personnel overseeing the operations.
Several tonnes from redundant slimes dams and sands were also trammed to Central Rand Gold SA for processing.
METALLURGICAL UPDATE
Production
The Mill 3, which was purchased in 2014, came on line during 2015 and this enhanced the production throughput. Unfortunately, as previously mentioned, other factors such as the temporary cessation of underground mining, which reduced the availability of quality ore, as well as the inconsistent feed of mined slimes and sands, lessened the expected impact of the new mill.
Plant production | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
Surface (Open Pit) (tonnes) | 10,416 | 13,918 | 10,670 | 5,199 | 9,682 | 5,137 | 9,007 | 8,315 | 8,563 | 14,345 | 15,746 | 11,546 |
Slimes Dams (tonnes) | 86 | 1 | 3,432 | 8,666 | 5,652 | 6,930 | 5,530 | 6,582 | 5,802 | 1,919 | 638 | 3,571 |
Other (tonnes) | 1,257 | 1,469 | 203 | 769 | 253 | 4,243 | 327 | 1,800 | 320 | - | 455 | 1,312 |
Total tonnes processed | 11,759 | 15,388 | 14,305 | 14,634 | 15,587 | 16,310 | 14,864 | 16,697 | 14,685 | 16,264 | 16,839 | 16,429 |
Plant Availability (%) | 99 | 94 | 91 | 80 | 83 | 87 | 82 | 86 | 81 | 91 | 84 | 74 |
Gold recovery throughout the year was somewhat variable, largely due to the changing nature of the feedstock. The move from Main Reef to North Reef to sands and slimes and open pit oxides placed the equilibrium of the plant under strain, delivering an average recovery for the year of 64%.
Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | |
Plant recovery (%) | 76 | 64 | 74 | 65 | 71 | 51 | 54 | 63 | 52 | 63 | 71 | 66 |
The leach tank installation was completed by July 2015. The thickener project has not yet commenced and is still on hold, as the sale of CRGNV was still being negotiated late in November 2015. This project will be scheduled for the future.
GEOLOGICAL UPDATE
Resources
The SAMREC compliant resource base of the Company was updated in 2014 to 9.90 Moz of contained gold. There were no further changes during the 2015 financial year.
FINANCIAL REVIEW
Results
The net profit for 2015 financial year amounted to US$1.4 million (1.58 cents per share) against a loss of US$15.3 million (17.51 cents per share) in 2014. The loss before interest, tax and depreciation totalled US$3.0 million, a significant reduction against the US$8.2 million for 2014. This net profit is largely attributed to the following factors:
· Revenue in Rand terms increased 21% due to a 15% higher gold sale volume at 7,017 ounces (2014: 6,146 ounces) from surface pits, improved plant availability and a stronger average realised Rand equivalent gold price. However, in US dollar terms, revenues reduced by 1.5% given the devaluation of the Rand;
· Reduction in operating and overhead costs reflecting both cost savings and the effect of the Rand devaluation on costs in US Dollar terms;
· Reduction in labour hire (Sekgwa Mining Services Proprietary Limited contract terminated in 2014) and reduction in salary cost by 17.6%; and
· Gain on fair value of convertible loan note derivatives of US$7.1 million compared to a loss of US$5.1 million in 2014.
As a consequence of the increased ounces and cost reduction, all-in cash operating costs per ounce decreased to US$1,643 per ounce against the prior year's US$2,521 per ounce.
Cash and cash equivalents and funding
The cash and cash equivalent balance is reported at US$0.56 million as at 31 December 2015 (2014: US$0.91 million). The lower cash balance is a result of operating cash outflows of US$1.42 million reflecting operating losses, foreign currency losses on translation of cash balances of US$0.15 million, partly offset by equity share issues of US$1.20 million in 2015.
On 18 June 2015, the Company issued 6,015,000 new Ordinary Shares of £0.01 each at a price of 10 pence per Ordinary Share, which raised approximately US$0.94 million (£0.60 million).
On 24 June 2015, the Company issued a further 2,000,000 new Ordinary Shares of £0.01 each at a price of 10 pence per Ordinary Share, which raised approximately US$0.32 million (£0.20 million).
There remains a material uncertainty in respect of the Company's ability to continue as a going concern. For further consideration, please refer to the basis of preparation set out in note 2 of the annual financial statements.
Post Balance Sheet Events
Operating
The Mill 1 experienced mechanical performance issues and subsequent to year-end failed. Central Rand Gold SA has identified, purchased and is currently installing another mill in its place. This project should be completed in mid-July 2016.
Central Rand Gold SA has entered into an agreement with a third party to toll treat their material for a period of 12 months. To this end, open pit mining has been halted in the interim and focus will be on the rehabilitation, drilling and sampling of other areas within the Mining Rights of Central Rand Gold SA, as well as identification and negotiations for third party owned pits.
Central Rand Gold SA will also address the backlog of rehabilitation of the open pit areas that have been mined out and are uneconomical to mine at further depths. To this end, various interactions have taken place with the landowners. Central Rand Gold SA has a test site for the backfilling of one of their pits and has entered into a Joint Venture with D & H Recycling in order to do so. Should this be successful, the methodology can be duplicated throughout South Africa for all other mined out areas.
Funding
In order to strengthen its cash balances, the Company has in February 2016, subsequent to the year-end, completed a fundraising of US$1.7 million.
The Board has completed a Bridge Funding through a combined convertible securities and warrant issuance with Bergen Global Opportunity Fund, LP, a New York based institutional fund. The Bridge Funding raised US$598,000, with the potential for an increase to up to US$4,098,000 should both parties agree. In addition, the Company undertook a subscription on 13 June 2016 to raise US$200,000 through the subscription of 4,620,005 new ordinary shares at an issue price of 3 pence each.
The Group have entered a non-binding Letter of Understanding for a share placement of up to US$4.0 million with Zhejiang Golden Machinery Plant ("ZGMP") with due diligence currently being undertaken.
The Redstone Convertible Loan Notes mature in August 2016. Redstone have provided a written undertaking to extend the maturity of the Notes to at least July 2017 subject to concluding negotiations regarding revisions to the terms of conversion in the coming months. The Directors, based on discussions with representatives of Redstone, fully expect that the Notes will ultimately be converted rather than called for payment.
Puno dispute
As already mentioned in this Report, Puno lodged an application in terms of Section 344(f) and 345 of the Companies Act against Central Rand Gold SA, which, upon advice from our legal advisors, we are opposing. Answering affidavits have been lodged. The time period for Puno to file their replying affidavit lapsed on 22 June 2016. Puno's opportunity to file further affidavits has now lapsed and the Company awaits Puno's confirmation whether they intend to persist in their application.
APPRECIATION
I would like to thank Johan du Toit, who resigned as Chief Executive Officer and Director in December 2015. Johan played a significant role in the shaping of the Company during his seven year tenure, firstly in the role of Chief Financial Officer and in latter years as the Chief Executive Officer.
Lola Trollip has now assumed the role of Chief Executive Officer of Central Rand Gold SA and she will be joining the Board of Central Rand Gold as an Executive Director as soon as all the necessary regulatory paperwork has been processed. We look forward to the energy and focus she will bring to the role. Lola has over 30 years' experience in the African mining industry and deep financial skills which will be valuable for the Company in its quest to become profitable.
I also express my appreciation to Allen Phillips, who recently resigned in June 2016, for his valuable guidance during his tenure as Non-executive Director.
Further, I welcome to the Board a new Non-executive Director, Mark Austin. Mark is a geologist with extensive experience in exploration and mining geology as well as considerable management experience having managed various gold and diamond mines across Africa. Mark was appointed on 15 December 2015.
Finally, I thank the shareholders of Central Rand Gold for their continued support and believe the Company is in a strong position to embark upon the 2016 financial year.
Nathan Taylor
Chairman
Statement of Financial Position |
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as at 31 December 2015 |
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Group |
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2015 | 2014 | ||||||||||||
Notes | US$'000 | US$'000 | |||||||||||
ASSETS | |||||||||||||
Non-current assets | |||||||||||||
Property, plant and equipment | 2,271 | 3,592 | |||||||||||
Intangible assets | 2,114 | 2,830 | |||||||||||
Security deposits and guarantees | 46 | 191 | |||||||||||
Environmental guarantee investment | 2,584 | 3,177 | |||||||||||
Loans receivable | 7,236 | 8,646 | |||||||||||
14,251 | 18,436 | ||||||||||||
Current assets | |||||||||||||
Security deposits and guarantees | 26 | 65 | |||||||||||
Prepayments and other receivables | 480 | 1,239 | |||||||||||
Inventories | 120 | 76 | |||||||||||
Cash and cash equivalents | 556 | 914 | |||||||||||
Derivative asset | - | 720 | |||||||||||
1,182 | 3,014 | ||||||||||||
Total assets | 15,433 | 21,450 | |||||||||||
EQUITY | |||||||||||||
Attributable to equity holders of the parent | |||||||||||||
Share capital | 9 | 26,617 | 26,490 | ||||||||||
Share premium | 9 | 224,037 | 222,963 | ||||||||||
Share-based compensation reserve | 28,238 | 28,238 | |||||||||||
Treasury shares | (6) | (6) | |||||||||||
Foreign currency translation reserve | (28,993) | (29,534) | |||||||||||
Accumulated losses | (260,117) | (261,559) | |||||||||||
(10,224) | (13,408) | ||||||||||||
Non-controlling interest | - | - | |||||||||||
Total equity | (10,224) | (13,408) | |||||||||||
LIABILITIES | |||||||||||||
Non-current liabilities | |||||||||||||
Environmental rehabilitation | 3,676 | 4,904 | |||||||||||
Loan payable | 7,236 | 14,418 | |||||||||||
10,912 | 19,322 | ||||||||||||
Current liabilities | |||||||||||||
Trade and other payables | 6,999 | 6,911 | |||||||||||
Royalties taxation payable | 140 | 177 | |||||||||||
Loan payable | 6 | 6,959 | - | ||||||||||
Derivative liability | 6 | 647 | 8,448 | ||||||||||
14,745 | 15,536 | ||||||||||||
Total liabilities | 25,657 | 34,858 | |||||||||||
Total equity and liabilities | 15,433 | 21,450 | |||||||||||
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Statement of Profit or Loss |
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for the year ended 31 December 2015 |
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Group |
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2015 | 2014 | ||||||
Notes | US$'000 | US$'000 | |||||
Revenue | 8,093 | 8,212 | |||||
Production costs | (6,079) | (9,438) | |||||
Employee benefits expense | (2,252) | (3,223) | |||||
Directors' emoluments | (468) | (717) | |||||
Inventory write down | - | (705) | |||||
Operating lease expense | (872) | (787) | |||||
Operational expenses | (505) | (502) | |||||
Other expenses | (1,098) | (1,702) | |||||
Other income and gains | 305 | 543 | |||||
Foreign exchange transaction (losses)/gains | (75) | 129 | |||||
Loss before interest, tax and depreciation | (2,951) | (8,190) | |||||
Depreciation | (425) | (460) | |||||
Impairment of assets | (346) | (158) | |||||
Fair value movement in embedded derivative | 6 | 7,081 | (5,108) | ||||
Finance income and investment income | 1,149 | 1,233 | |||||
Finance costs | (3,066) | (2,585) | |||||
Profit/(loss) before income tax | 1,442 | (15,268) | |||||
Income tax expense | - | - | |||||
Profit/(loss) for the year | 1,442 | (15,268) | |||||
Profit/(loss) is attributable to: | |||||||
Non-controlling interest | - | - | |||||
Equity holders of the parent | 1,442 | (15,268) | |||||
1,442 | (15,268) | ||||||
Earnings/(loss) per share for loss attributable to the equity holders during the year (expressed in US cents per share) | |||||||
Basic earnings/(loss) per share | 1.58 | (17.51) | |||||
Diluted loss per share | (2.23) | (17.51) | |||||
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Statement of Comprehensive Income | |||||
for the year ended 31 December 2015 | |||||
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Group | |||||
2015 | 2014 | ||||
US$'000 | US$'000 | ||||
Profit/(loss) for the year | 1,442 | (15,268) | |||
Other comprehensive income/(loss): | |||||
Item that may be reclassified subsequently to profit or loss | |||||
Exchange differences on translating foreign operations | 541 | (92) | |||
Other comprehensive income/(loss) for the period, net of tax | 541 | (92) | |||
Total comprehensive income/(loss) for the period | 1,983 | (15,360) | |||
Total comprehensive income/(loss) is attributable to: | |||||
Non-controlling interest | - | - | |||
Equity holders of the parent | 1,983 | (15,360) | |||
1,983 | (15,360) | ||||
Attributable to equity holders of the Group | |||||||||||||||||
Ordinary share capital | Share premium | Share-based compensa-tion reserve | Treasury shares | Foreign currency transla-tion reserve | Accumula-ted losses | Total | Non-controll-ing interest | Total equity | |||||||||
US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | |||||||||
Balance at 31 December 2013 | 25,604 | 213,377 | 28,224 | (6) | (29,442) | (246,291) | (8,534) | - | (8,534) | ||||||||
Total comprehensive income for the year | |||||||||||||||||
Loss for the year | - | - | - | - | - | (15,268) | (15,268) | - | (15,268) | ||||||||
Other comprehensive income | |||||||||||||||||
Foreign currency adjustments | - | - | - | - | (92) | - | (92) | - | (92) | ||||||||
Transactions with owners, recorded directly in equity | |||||||||||||||||
Issue of shares: | |||||||||||||||||
Capital raising | 886 | 9,586 | - | - | - | - | 10,472 | - | 10,472 | ||||||||
Employees' and Directors' share-based payments and options | - | - | 14 | - | - | - | 14 | - | 14 | ||||||||
Balance at 31 December 2014 | 26,490 | 222,963 | 28,238 | (6) | (29,534) | (261,559) | (13,408) | - | (13,408) | ||||||||
Attributable to equity holders of the Group |
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Ordinary share capital | Share premium | Share-based compensa-tion reserve | Treasury shares | Foreign currency transla-tion reserve | Accumula-ted losses | Total | Non-controll-ing 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 2014 | 26,490 | 222,963 | 28,238 | (6) | (29,534) | (261,559) | (13,408) | - | (13,408) | ||||||||||||||||||||||||||
Total comprehensive income for the year | |||||||||||||||||||||||||||||||||||
Profit for the year | - | - | - | - | - | 1,442 | 1,442 | - | 1,442 | ||||||||||||||||||||||||||
Other comprehensive income | |||||||||||||||||||||||||||||||||||
Foreign currency adjustments | - | - | - | - | 541 | - | 541 | - | 541 | ||||||||||||||||||||||||||
Transactions with owners, recorded directly in equity | |||||||||||||||||||||||||||||||||||
Issue of shares: | |||||||||||||||||||||||||||||||||||
Capital raising | 127 | 1,074 | - | - | - | - | 1,201 | - | 1,201 | ||||||||||||||||||||||||||
Balance at 31 December 2015 | 26,617 | 224,037 | 28,238 | (6) | (28,993) | (260,117) | (10,224) | - | (10,224) | ||||||||||||||||||||||||||
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Statement of Cash Flow |
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for the year ended 31 December 2015 |
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Group |
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2015 | 2014 | |||||||||
Notes | US$'000 | US$'000 | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
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Profit/(loss) before tax | 1,442 | (15,268) |
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Adjusted for : |
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Depreciation | 425 | 460 |
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Employment benefit expenditure (share-based payments) | - | 14 |
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Profit on disposal of property, plant and equipment | (146) | (17) |
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Impairment of inventory | - | 705 |
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Impairment of assets | 346 | 158 |
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Net loss/(gain) on foreign exchange | 75 | (129) |
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Finance income | (1,149) | (1,233) |
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Finance costs | 3,066 | 2,585 |
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Fair value movement in embedded derivative | 6 | (7,081) | 5,108 |
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Changes in working capital |
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Decrease/(increase) in prepayments and other receivables | 689 | (325) |
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(Increase)/decrease in inventory | (44) | 129 |
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Increase/(decrease) in trade and other payables | 173 | (60) |
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(Decrease)/increase in provisions | - | 809 |
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Cash flows used in operations | (2,204) | (7,064) |
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Finance income | 203 | 273 |
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Finance costs | 580 | - |
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Sundry income | - | (1,610) |
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Net cash used in operating activities | (1,421) | (8,401) |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchases of property, plant and equipment | (92) | (1,049) |
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Proceeds from disposal of property, plant and equipment | 180 | 186 |
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Increase in environmental guarantee deposit | 65 | (53) |
| |||||||
Net cash from/(used) in investing activities | 153 | (916) |
| |||||||
| ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
| |||||||||
Proceeds from issue of shares for cash | 9 | 1,261 | 4,254 |
| ||||||
Cost relating to the issue of shares | 9 | (60) | (257) |
| ||||||
Net proceeds from exercise of share options | - | 3,732 |
| |||||||
Net cash from financing activities | 1,201 | 7,729 |
| |||||||
| ||||||||||
Net decrease in cash and cash equivalents | (67) | (1,588) |
| |||||||
Cash and cash equivalents at 1 January | 914 | 2,475 |
| |||||||
Effects of exchange rate fluctuations on cash balances | (291) | 27 |
| |||||||
Cash and cash equivalents at 31 December | 556 | 914 |
| |||||||
| Notes to the Annual Financial Statements | ||||||||||||||
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| 1. General information | ||||||||||||||
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| Central Rand Gold Limited ("Central Rand Gold") is a Guernsey incorporated company and it is also registered in South Africa as an external company. One of its subsidiaries, Central Rand Gold (Netherland Antilles) N.V. ("CRGNV"), was incorporated in the Netherlands Antilles. Central Rand Gold's operating subsidiary is Central Rand Gold South Africa Proprietary Limited ("Central Rand Gold SA"). Central Rand Gold has a primary listing on the London Stock Exchange ("LSE") and a secondary listing on JSE Limited ("JSE"). | ||||||||||||||
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| Central Rand Gold complies with the company laws of its place of incorporation being Guernsey and the company laws of the place of its external registration being South Africa. One of its subsidiaries, CRGNV, is incorporated in the Netherlands Antilles, therefore the Group is also impacted by the company laws of the Netherlands Antilles. | ||||||||||||||
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| The financial information for the year ended 31 December 2015 set out in this announcement does not constitute the Company's statutory accounts. These financial statements included in the announcement have been extracted from the Group annual financial statements for the year ended 31 December 2015. The financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards adopted for use in the European Union. However, this announcement does not itself contain sufficient information to comply with IFRS. | ||||||||||||||
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| The auditor has issued his opinion on the Group's financial statements for the year ended 31 December 2015 which is unmodified but does contain an emphasis of matter paragraph in respect of the matters referred to under note 2 'Going concern' and is available for inspection at the Company's registered address and will be posted to the Group's website. The emphasis of matter paragraph is presented below: | ||||||||||||||
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| Emphasis of matter - Going concern In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures set out in note 2 to the financial statements concerning the Group's ability to continue as a going concern. As explained in note 2, the ability of the Group to continue as a going concern is dependent on the Group securing access to sufficient additional funding and extending the repayment terms of existing loan notes or the loan note holders converting the loan notes into equity, to support the Group's cash flow projections. Although the Directors remain confident that the necessary funding will be secured and that the existing loan note holders will exercise their conversion rights or extend the loan note maturity date to at least July 2017, there are no binding agreements currently in place. These factors, together with the other matters explained in note 2, indicate the existence of a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern. | ||||||||||||||
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| 2. Basis of preparation | ||||||||||||||
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| The consolidated financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards and Interpretations (collectively "IFRS") issued by the International Accounting Standards Board ("IASB") as adopted by the European Union ("EU"). However, this announcement does not itself contain sufficient information to comply with IFRS. The Company will publish full financial statements that comply with IFRS on 30 June 2016. | ||||||||||||||
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| The consolidated financial statements are presented in United States Dollars ("US$" or "US Dollar") and rounded to the nearest thousand. The functional currency of the parent company is the US Dollar. The functional currency of its principal subsidiary, Central Rand Gold SA is the South African Rand ("ZAR" or "Rand"). | ||||||||||||||
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| Going concern | ||||||||||||||
| The Group had net current liabilities at 31 December 2015 of US$13.6 million, including US$7.2 million of loan notes with Redstone Capital Limited which mature in August 2016 and US$7.0 million of trade and other payables which include amounts that are overdue and are being settled over the next 12 months under formal and informal arrangements with creditors. The ability of the Group to continue as a going concern is dependent on the Group securing access to sufficient additional funding and extending the repayment terms of existing loan notes or the loan note holders converting the loan notes into equity, to support the Group's cash flow projections. | ||||||||||||||
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| In April 2016, following the decision of the High Court of South Africa to uphold the Company's appeal with costs in relation the dispute with Puno Gold Investments Proprietary Limited ("Puno"), Puno submitted an application to wind up the Group's South African operating subsidiary. As previously announced, the Board believes this to be the latest strategy from Puno to frustrate the operations of the Company and considers the application to be without merit, has engaged legal advisers to defend the action and has submitted its legal rejection of the application. The time period for Puno to file their replying affidavit lapsed on 22 June 2016. Puno's opportunity to file further affidavits has now lapsed and the Company awaits Puno's confirmation whether they intend to persist in their application. | ||||||||||||||
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| In May 2016, the Group ceased open pit mining operations and will instead temporarily focus on toll treatment operations under a binding tolling agreement with a third party which is expected to be cash flow generative. Underground mining is expected to recommence in 2019 following the dewatering program. As part of the reorganisation of operations, the Group has initiated a number of cost reduction measures. | ||||||||||||||
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| Since the year end, the Group has raised US$1.6 million (net) through share placements and drawn down US$0.6 million of bridge finance under a convertible loan note facility ('CLN') with Bergen Global Opportunity Fund, LP ('Bergen') for working capital purposes. Under the terms of the agreement, the Group can draw down up to US$4.0 million subject to agreement by both parties. In addition, the Group have entered a non-binding Letter of Understanding for a share placement of up to US$4.0 million with Zhejiang Golden Machinery Plant ("ZGMP") with due diligence currently being undertaken. The investment by ZGMP remains subject to final agreements being concluded and shareholder approval. The Company has also re-entered discussions, which are still in an early stage, with one of the Asian Investors regarding a potential investment into the Company. The recent funding, together with further draw downs under the Bergen CLN or ZGMP investment, if concluded, would provide the Group with funding to normalize its working capital position and in conjunction with the tolling arrangement provide future working capital. In addition, the Directors are progressing negotiations with another third party for additional funding and remain confident that such funding can be concluded on terms acceptable to both parties. | ||||||||||||||
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| The Group's Senior Secured Loan Notes of US$7.25 million principal ('the Notes'), held by the Group's largest shareholder Redstone Capital Limited ('Redstone'), fall due for maturity in September 2016. Redstone have provided a written undertaking to extend the maturity of the Notes to at least July 2017 subject to concluding negotiations regarding revisions to the terms of conversion in the coming months. The Directors, based on discussions with representatives of Redstone, fully expect that the Notes will ultimately be converted rather than called for payment. | ||||||||||||||
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| The Directors have prepared cash flow forecasts for a period of at least 12 months from the date these financial statements were approved, which show that the Group is able to meet its liabilities as they fall due. However, the cash flow forecasts are dependent upon the Group successfully concluding the ZGMP investment or Bergen advancing further funds under the CLN and the tolling arrangement being concluded. The Group's ability to meet liabilities as they fall due also remains dependent upon the Group being able to manage its creditor relationships and make necessary payments to trade creditors until the funding is concluded. The cash flow forecasts are further dependent upon Redstone electing to convert its Loan Notes or concluding the renegotiation of terms such that the maturity date is deferred until at least July 2017. In addition, the Group's ability to trade remains dependent upon the South African Courts rejecting Puno's application to place the Group's operating subsidiary into liquidation. | ||||||||||||||
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| Although the Directors remain confident that the necessary funding will be secured and that the existing loan note holders will exercise their conversion rights or extend the loan note maturity date to at least July 2017, there are no binding agreements currently in place. Whilst the Board remains confident that, having assessed each of these factors, the Group will be able to address each of these matters satisfactorily to meet its liabilities as they fall due, the Directors have concluded that the above circumstances give rise to a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern and it may therefore be unable to realise its assets and discharge its liabilities in the normal course of business. Nevertheless, after taking account of the Group's funding position and its cash flow projections, and having considered the risks and uncertainties associated with the forecasts, the Directors have a realistic expectation that the Group will 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, the Directors continue to prepare the financial statements on a going concern basis, and the financial statements do not include any adjustments that would result in the going concern basis of preparation being inappropriate. | ||||||||||||||
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3. Accounting policies |
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| These results have been prepared on a basis that is consistent with the accounting policies applied by the Group in its audited consolidated financial statements for the year ended 31 December 2014 and which will form the basis of the 2015 annual report. | ||||||||||||||
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| (a) New and amended standards adopted by the Group
| ||||||||||||||
| In 2015 the Group adopted the amendments to IFRS 2 'Share-based Payment', IFRS 3 'Business Combinations', IFRS 8 'Operating Segments', IFRS 13 'Fair Value Measurement', IAS 16 'Property, Plant and Equipment, IAS 19 'Defined Benefit Plans: Employee Contributions, IAS 24 'Related Party Disclosures, IAS 38 'Intangible Assets' and IAS 40 'Investment Property'. These have had no significant impact on the Group's results. | ||||||||||||||
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| (b) New standards, amendments and interpretations not yet adopted
| ||||||||||||||
| A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2015, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early. | ||||||||||||||
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| The amendments to IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations', 'IFRS 7 'Financial Instruments: Disclosures', IFRS 10 'Consolidated Financial Statements', IFRS 11 'Joint Arrangements', IFRS 12 'Disclosure of Interests in Other Entities', IFRS 15 'Revenue from Contracts with Customers', IFRS 16 'Leases', IAS 1 'Presentation of Financial Statements', IAS 12 'Recognition of Deferred Tax Assets for Unrealised Losses', IAS 16 'Property, Plant and Equipment', IAS 19 'Employee Benefits', IAS 27 'Separate Financial Statements', IAS 28 'Investments in Associates and Joint Ventures', IAS 34 'Interim Financial Reporting', IAS 38 'Intangible Assets' and the Disclosure Initiative: Amendments to IAS 7 are effective for accounting periods beginning on or after 1 January 2016 but with early adoption permitted. The adoption is not expected to have a significant impact upon the Group's net results, net assets or disclosures. | ||||||||||||||
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| IFRS 9 'Financial Instruments' replaces IAS 39 Financial Instruments: Recognition and Measurement. The standard includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting. It uses a single approach, based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets, to determine whether a financial asset is measured at amortised cost or at fair value. It requires a single impairment method to be used, replacing the numerous impairment methods in IAS 39 that arose from the different classification categories. It also removes the requirement to separate embedded derivatives from financial asset hosts. The standard introduces new requirements for an entity choosing to measure a liability at fair value to present the portion of the change in its fair value due to changes in the entity's own credit risk in the other comprehensive income section of the statement of comprehensive income, rather than within profit or loss. This new standard may impact the classification and measurement of financial assets and the Group is in the process of assessing the impact. The standard is effective for year ends beginning on or after 1 January 2018. | ||||||||||||||
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4. Directorate |
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During the financial period under review, the composition of the Board of Directors was as follows: |
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|
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| 1 Mr Johan du Toit resigned from the Board on 31 December 2015. | ||||||||||||||
| 2 Mr Allen Phillips resigned from the Board and its committees on 6 June 2016. | ||||||||||||||
| 3 Mr Mark Austin was appointed to the Board on 15 December 2015. | ||||||||||||||
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| 5. Segment reporting | ||||||||||||||
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| An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The entity's chief operating decision maker reviews information in one operating segment, being the acquisition of mineral rights and data gathering in the Central Rand Goldfield of South Africa, therefore management has determined that there is only one reportable segment. Accordingly, no analysis of segment revenue, results or net assets has been presented. No corporate or other assets are excluded from this segment. | ||||||||||||||
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6. Loans payable - Redstone Capital Limited |
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Debt | Warrant | Option | Redstone's debt conversion option | Central Rand Gold's debt conversion option | Total |
| ||||||||
US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
| ||||||||
At 1 January 2014 | 5,148 | 1,434 | 1,189 | 2,749 | - | 10,520 |
| |||||||
Fair value loss/(gain) | - | 1,043 | 1,469 | 3,316 | (720) | 5,108 |
| |||||||
Derivative exercise | - | (94) | (2,658) | - | - | (2,752) |
| |||||||
Interest | 1,204 | - | - | - | - | 1,204 |
| |||||||
Cash paid | (580) | - | - | - | - | (580) |
| |||||||
At 31 December 2014 | 5,772 | 2,383 | - | 6,065 | (720) | 13,500 |
| |||||||
Fair value loss/(gain) | - | (1,905) | - | (5,896) | 720 | (7,081) |
| |||||||
Interest | 1,767 | - | - | - | - | 1,767 |
| |||||||
Cash paid | (580) | - | - | - | - | (580) |
| |||||||
At 31 December 2015 | 6,959 | 478 | - | 169 | - | 7,606 |
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\* The prior year loan balance of $5,772,000 was shown in non-current loans payable in the statement of financial position. |
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7. Related party transactions |
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On 19 August 2013, shareholders of the Company approved the issue to Redstone, of US$7.25 million convertible loan note instruments bearing 8%p.a. coupon interest payable on a quarterly basis with a maturity date of August 2016 ("the Convertible Loan Note"). In addition to this, the Company entered into an agreement to issue Redstone warrants equivalent to 50% of the Convertible Loan Note ("the Warrant") and an option agreement (the "Option Agreement") that, in the event that the Company undertook an open offer, Redstone will have an option to subscribe for such additional number of Ordinary Shares to ensure that its percentage holding of the issued share capital of the Company would remain unchanged (assuming the full conversion of the Convertible Loan Notes) following any such open offer. |
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8. Share-based payments |
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During the year, no further share options were granted to employees. |
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9. Share capital and share premium |
| |||||||||||||
| ||||||||||||||
| Number of shares | Issued and fully paid up shares | Share premium | Total |
| |||||||||
| US$ '000 | US$ '000 | US$ '000 |
| ||||||||||
| At 1 January 2014 | 31,993,443 | 25,604 | 213,377 | 238,981 |
| ||||||||
| Issue of shares for cash | 29,396,065 | 462 | 3,792 | 4,254 |
| ||||||||
| Exercise of share options | 23,991,300 | 396 | 5,737 | 6,133 |
| ||||||||
| Exercise of warrants | 1,800,000 | 28 | 314 | 342 |
| ||||||||
| Cost of share issue | - | - | (257) | (257) |
| ||||||||
| At 31 December 2014 | 87,180,808 | 26,490 | 222,963 | 249,453 |
| ||||||||
| Issue of shares for cash | 8,015,000 | 127 | 1,134 | 1,261 |
| ||||||||
| Cost of share issue | - | - | (60) | (60) |
| ||||||||
| At 31 December 2015 | 95,195,808 | 26,617 | 224,037 | 250,654 |
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| ||||||||||||||
On 18 June 2015, the Company issued 6,015,000 new Ordinary Shares of £0.01 each at a price of 10 pence per Ordinary Share, which raised approximately US$0.94 million (£0.60 million). |
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On 24 June 2015, the Company issued a further 2,000,000 new Ordinary Shares of £0.01 each at a price of 10 pence per Ordinary Share, which raised approximately US$0.32 million (£0.20 million). |
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10. Dividends |
| |||||||||||||
| ||||||||||||||
No dividends were declared or paid during the year under review. |
| |||||||||||||
11. Reconciliation between loss and headline loss attributable to equity holders of the Group | ||||
Headline earnings/(loss) are specific disclosures defined and required by the Johannesburg Stock Exchange and are non-GAAP financial measures. | ||||
Group | ||||
2015 | 2014 | |||
US$'000 | US$'000 | |||
Profit/(loss) attributable to equity holders of the Group | 1,442 | (15,268) | ||
Less: Profit on disposal of property, plant and equipment | (146) | (17) | ||
Headline earnings/(loss) | 1,296 | (15,285) | ||
12. Contingent liability | ||||
Thin capitalisation | ||||
The tax legislation with regards to thin capitalisation changed with effect from 1 April 2012 and applicable in respect of years of assessment commencing on or after that date. The safe harbour ratio of 3:1 included in the previous legislation was replaced with the concept of "arm's length." In instances where the loans are considered not to be on an arm's length basis all or part of the interest charged could be disallowed as a deduction. Any interest not allowed as a deduction will be treated as an adjustment in terms of Section 31 of the Income Tax Act. In terms of Section 31(3) of the Income Tax Act, any adjusted amount for transfer pricing and thin capitalisation purposes, prior to 1 January 2015, constituted a deemed loan. As per the amended law, should this amount, plus interest deemed to have accrued on it, not have been repaid to the taxpayer by the relevant non-resident connected person by 31 December 2014, the outstanding "deemed loan" must "be deemed to be a dividend consisting of a distribution of an asset in specie, that was declared and paid by that resident to that other person on 1 January 2015". Such deemed dividend will be subject to Dividends Withholding Tax ("DWT"), at a rate of 15%. | ||||
In prior years, management obtained legal opinion based on which they concluded that there is no deemed loan. In further assessing the impact of the amendments on its intercompany loans, management concluded that due to the lack in industry guidance pertaining to the application of the "arm's length" concept, management will be unable to confirm their conclusion without finalising a full Transfer Pricing benchmarking study applying OECD (Organisation for Economic Co-operation and Development) principles. | ||||
13. Events occurring after reporting date | ||||
Operating | ||||
The Company negotiated and executed a Tolling Agreement (the "Tolling Agreement") in 2016 with a third party supplier of ore for the processing of gold-bearing material through the Company's metallurgical plant. The Tolling Agreement will enable the Company to maintain operations with a steady and reliable feedstock whilst it continues to pursue other growth opportunities and awaits the dewatering of the central basin. In light of the Tolling Agreement, the Company elected to temporarily suspend mining at its open pit operations. | ||||
The Mill 1 experienced mechanical performance issues and subsequent to year end failed. Central Rand Gold SA has identified, purchased and is currently installing another mill in its place. This project should be completed in mid-July 2016. | ||||
Fundraising | ||||
In order to strengthen its balance sheet and provide working capital in order to undertake continued surface mining operations, identify and source further plant feed material and carry out a programme of plant upgrades and efficiency processes to further improve plant availability and recovery rates, the Company has subsequent to year-end completed the following fundraising: | ||||
· A first share placement on 9 February 2016 of 14,279,371 new ordinary shares at 3.5 pence, which raised £0.50 million. | ||||
· A second share placement on 9 March 2016 of 20,719,644 new ordinary shares at 3.5 pence, which raised £0.73 million. | ||||
· A bridge funding (the "Bridge Funding") through a combined convertible securities and warrant issuance with Bergen Global Opportunity Fund, LP, a New York based institutional fund. The Bridge Funding raised US$598,000, with the potential for an increase to up to US$4,098,000 should both parties agree. | ||||
· A subscription raised US$200,000 through the subscription of 4,620,005 new ordinary shares at an issue price of 3 pence each. | ||||
· Given the continued engagement with ZGMP to optimise and potentially expand the metallurgical plant, the Group entered a non-binding Letter of Understanding for a share placement of up to US$4.0 million with ZGMP with due diligence currently being undertaken. | ||||
Puno dispute | ||||
Puno lodged an application in terms of Section 344(f) and 345 of the Companies Act against Central Rand Gold SA, which, upon advice from the Company's legal advisors, Central Rand Gold SA is opposing. Answering affidavits have been lodged. The time period for Puno to file their replying affidavit lapsed on 22 June 2016. Puno's opportunity to file further affidavits has now lapsed and the Company awaits Puno's confirmation whether they intend to persist in their application. | ||||
Issued on behalf of: Central Rand Gold Limited |
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Date: 30 June 2016 |
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Related Shares:
Central Rand Gold